<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1996
COMMISSION FILE NUMBER 0-22896
FOOD INTEGRATED TECHNOLOGIES, INC.
Delaware 04-3138947
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
415 EAST 52ND STREET
NEW YORK, N.Y. 10022
(Address of principal executive office, zip code, telephone number)
(212) 486-1425
(Issuer's telephone number, including area code)
Indicate by check mark whether the Issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
-------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
As of September 9, 1996, 2,062,323 shares of the registrant's Common Stock, $.01
par value, were outstanding, and 900,000 shares of Preferred Stock, $.01 par
value..
Traditional Small Business Disclosure Format (check one)
Yes No X
------ ------
<PAGE> 2
FOOD INTEGRATED TECHNOLOGIES, INC.
(A Development Stage Company)
Index
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENT INFORMATION
Balance Sheets as of October 31, 1995 and July 31,
1996.
Statements of Operations for the three months ended
July 31, 1995 and July 31, 1996, the nine months
ended July 31, 1995 and July 31, 1996 and the
period from inception (June 6, 1989) to July 31,
1996.
Statements of Cash Flows for the nine months ended
July 31, 1995 and 1996 and the period from
inception (June 6, 1989) to July 31, 1996.
Notes to Financial Statements
Item 2. PLAN OF OPERATION
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Item 2. CHANGES IN SECURITIES
Item 3. DEFAULTS UPON SENIOR SECURITIES
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
2
<PAGE> 3
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
October 31, July 31,
1995 1996
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,115,715 $ 281,020
Accounts receivable 57,665 48,000
Accounts receivable from former officers, net of reserves
of $25,000 200,000 200,000
Notes receivable 75,937 --
Prepaid expenses 177,749 187,319
------------ ------------
Total current assets 1,627,066 716,339
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Leasehold improvements 26,709 26,709
Equipment 68,613 69,913
------------ ------------
95,322 96,622
Less: Accumulated depreciation and amortization 61,933 71,904
------------ ------------
33,389 24,718
OTHER ASSETS 288,700 288,700
------------ ------------
$ 1,949,155 $ 1,029,757
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 87,331 $ 12,608
Accrued expenses 282,578 403,609
Current portion of notes and interest payable to
stockholders 307,941 3,239
------------ ------------
Total current liabilities 677,850 419,456
------------ ------------
Total liabilities 677,850 419,456
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value
Authorized - 2,500,000 shares
Issued and outstanding-900,000 shares at October 31,
1995 and April 30, 1996 9,000 9,000
Common stock, $.01 par value
Authorized - 15,000,000 shares
Issued - 2,514,435 at October 31, 1995 and April 30, 25,144 25,144
1996
Additional paid in capital 10,402,526 10,402,526
Deficit accumulated during the development stage (8,841,022) (9,502,026)
------------ ------------
Less: Treasury stock at cost - 10,000 shares at October
31, 1995 and April 30, 1996 (324,343) (324,343)
------------ ------------
Total stockholders equity(deficit) 1,271,305 610,301
------------ ------------
$ 1,949,155 $ 1,029,757
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Cumulative from
July 31, July 31, Inception
------------- --------------------- (June 6, 1989) to
1995 1996 1995 1996 July 31, 1996
------ ---- ---- ---- --------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE(net): $ 16,466 $ 0 $ 16,466 $ 4,796 $ 27,671
COST OF GOODS SOLD 12,088 0 12,088 2,109 18,227
----------- ----------- ----------- ----------- -----------
Gross Profit 4,378 0 4,378 2,687 9,444
----------- ----------- ----------- ----------- -----------
EXPENSES:
Research and development 34,825 819 118,339 2,628 1,898,568
General and administrative 174,052 248,084 292,744 715,742 4,981,116
Marketing 25,716 -- (39,922) -- 1,862,354
Interest and financing, net (24,165) (22,626) (64,665) (54,680) 928,431
----------- ----------- ----------- ----------- -----------
Net Income (Loss) $ (206,050) $ (226,277) $ (302,118) $ (661,003) $(9,661,025)
=========== =========== =========== =========== ===========
Net Income (Loss) per Common
Share $ (0.10) $ (0.11) $ (0.15) $ (0.32)
=========== =========== =========== ===========
Weighted Average Number of
Common Shares
Outstanding 2,055,790 2,062,323 2,082,660 2,062,323
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Cumulative from
July 31, Inception
------------------------------- (June 6, 1989) to
1995 1996 July 31, 1996
---- ---- -------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (302,118) $ (661,003) $(9,661,025)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 15,034 9,971 206,973
Compensation and financing expense related
to issuance of common stock and warrants -- -- 889,772
Compensation expense related to issuance of
preferred stock 9,000 -- 9,000
Changes in assets and liabilities:
Inventory -- -- --
Gain on retirement of long term debt (21,441) (21,441)
Accounts receivable from former officer (97,000) -- (446,000)
Accounts receivable (12,013) 9,665 (48,000)
Prepaid expenses (207,504) -- (177,749)
Other assets 7,100 66,367 27,667
Other current assets (48,000) -- 0
Accounts payable (45,532) (74,723) 12,608
Accrued expenses 39,443 121,031 459,609
Accrued interest on notes payable and bridge
financing 12,591 -- 198,473
----------- ----------- -----------
Net cash used in operating activities (628,999) (550,133) (8,550,113)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,720) (1,300) (96,622)
(75,937)
Note receivable from a related party (4,118) -- (579,219)
(Increase) decrease in notes receivable (101,250) -- --
Principal repayments from a related party -- -- 100,000
----------- ----------- -----------
Net cash used in investing activities (107,088) (1,300) (651,778)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable -- 655,769
Payment of notes payable -- (56,762) (710,531)
Proceeds from notes payable to stockholders -- -- 347,500
Payments of notes payable to stockholders (14,595) (226,500) (351,177)
Amounts payable to affiliate -- -- 1,329,849
Proceeds form bridge financing -- -- 600,000
Payment of bridge financing -- -- (600,000)
Proceeds from the sale of treasury stock 175,000 -- (45,903)
Payment to purchase treasury stock -- -- 175,000
Proceeds from sale of common stock and redeemable
common stock warrants -- -- 8,082,404
----------- ----------- -----------
Net cash provided by financing activities 160,405 (283,262) 9,482,911
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (575,682) (834,695) 281,020
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 1,885,017 1,115,715 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,309,335 $ 281,020 $ 281,020
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
FINANCING ACTIVITY
Issuance of warrants in connection with notes payable -- -- 484,091
Accounts Receivable repaid in Common Stock 349,000 -- 349,000
Increase in Additional paid-in capital due to debt
settlements 403,550 -- 464,518
Conversion of notes payable into common stock 57,909 -- 250,000
CASH PAID FOR INTEREST -- -- 132,493
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Food Integrated Technologies, Inc. (the "Company")
believes that the quarterly information presented includes all adjustments
(consisting only of normal, recurring adjustments) that the Company considered
necessary for a fair presentation in accordance with generally accepted
accounting principles. The results of operations for the interim periods shown
in this report are not necessarily indicative of results for any future interim
period or for the entire fiscal year. The accompanying financial statements and
notes should be read in conjunction with the Company's Form 10-KSB, which was
filed with the Securities and Exchange Commission on January 31, 1996
(2) NOTES PAYABLE
The Company had approximately $243,190 of long-term debt outstanding as
of April 30, 1996. On July 31, 1996, the Company reached a settlement agreement
with the four noteholders whereby $226,500 of principal and accrued interest was
paid and the Company was released from all further obligations.
6
<PAGE> 7
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
ITEM 2: PLAN OF OPERATION
Since inception, the Company has been engaged principally in research
and development, product commercialization, various organization activities,
establishing test kitchen facilities, and raising capital. In November 1993, the
Company realized approximately $7,900,000 in net proceeds from its initial
public offering of Common Stock and Redeemable Common Stock Purchase Warrants
("IPO") and has used the proceeds of this offering for continued product
commercialization and development, products marketing, debt repayment, and
general corporate purposes.
The Company has developed all natural foods, including cookies, bread,
other bakery products, beef, turkey and vegetarian burgers, sausage, vegetable
and seafood lasagnas, soups and condiments, such as salad dressings, sauces and
dairy spreads. No significant revenue has been realized to date by the Company.
The Company's marketing strategy had been to commercialize its
technologies and products, principally through license, joint venture, or other
similar arrangements, with companies such as leading food manufacturers and
distributors, supermarket chains with private labels, food service companies and
restaurant chains having widespread distribution channels and access to
supermarket shelf space. The Company believed that its success would depend on
its ability to convince these entities that the Company's proprietary technology
and products offer a "natural" solution to the consumer demand for good tasting
healthy foods. The Company has not been successful to date in its endeavors and
given its limited funds, the likelihood that it will succeed is remote.
However management is continuing its efforts in this regard.
There can be no assurance that any of these entities or consumers will
regard the Company's products as good-tasting, that substantially equivalent
products will not be introduced by the Company's competitors or that the Company
will ultimately generate significant revenue or be able to compete successfully.
There can be no assurance that the Company will successfully develop a
product formulation to the satisfaction of any third party manufacturers,
licensees or distributors, or that any of its remaining uncommercialized
products or technologies will successfully be commercialized.
Management has closed the Boston office and laboratory and consolidated
the entire operations in the New York office in an effort to minimize costs.
Currently the only employees are the President and the Chief Executive Officer.
7
<PAGE> 8
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
During fiscal 1995, the Company and Topco Associates, Inc. ("TAI"), a
leading supermarket cooperative, signed a two year licensing agreement pursuant
to which TAI has agreed to distribute Company's all-natural, low fat cookies to
member supermarkets nationally under TAI's private label. Under the Agreement,
the Company is to receive a royalty from TAI for each sale of cookies sold.
However, TAI has ceased shipping product pending a strategic review of their
healthy products line which included the Company's product. There can be no
guarantee that TAI will resume shipping, and if it does, there can be no
guarantee that they will include the Company's product.
The Company is still pursuing potential customers for its existing
technology. There can be no assurance that the Company will be able to
successfully implement its business plan or that unanticipated expenses,
problems or difficulties will not result in material delays in its
implementation.
The Company is also pursuing various strategic alternatives such as a
merger or business combination although it is not currently in discussion with
any third party for such a transaction.
The Company believes that the current cash and cash equivalents on
hand may be sufficient to fund the Company's operations and foreseeable cash
requirements through the end of fiscal 1996 although there can be no assurance
that such funds will be sufficient. The Company recognizes that unless it begins
generating significant and sustainable revenue within this time frame, it will
have to seek alternative sources of financing in order to fund its operations.
There can be no assurances that such financing will be available on terms
favorable to the Company or at all. As of July 31, 1996, the Company had
approximately $281,020 of cash and cash equivalents.
8
<PAGE> 9
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about October 31, 1994, Marie A. Zanco, a former employee of the
Company filed a suit against the Company alleging breach of her employment
contract by the Company (Zanco v. Food Integrated Technologies, Inc. Norfolk
Superior Court Civil Action No. 94-04499). Ms. Zanco has sought damages in the
amount of approximately $35,000 plus attorneys' fees and expenses. The Company
settled this claim for $10,000 and both parties have given each other reciprocal
unconditional releases.
On or about October 21, 1994, John Goodhue, a former employee of the
Company, filed a complaint with the Commonwealth of Massachusetts for
non-payment of certain wages owed to him upon his termination by the Company on
October 17, 1994. Mr. Goodhue also alleges that certain other amounts are owed
to him, but these amounts are not due under this complaint and the Company
disputes any further amounts are owed Mr. Goodhue. The Company has responded to
the complaint and the action is pending. The Company has sued Mr. Goodhue on a
note for monies received and unpaid in the amount of $25,000. It is the
Company's intent to amend the complaint to allege the dissipation of corporate
assets, the use of corporate assets for personal reasons and other claims which
will total in excess of $100,000 (Food Integrated Technologies, Inc. v.
Goodhue, Suffolk Superior Court Civil Action No. 95-4293).
John Plexico, a former officer of the Company, has brought a claim for
breach of contract of an employment agreement, with damages in excess of
$150,000. The Company filed an answer denying Plaintiff's allegations and a
counterclaim against Plaintiff for breach of his fiduciary duty as an officer of
the Company, causing damages in excess of $1,000,000. Counsel for the Company
believes that the Plaintiff's case is very defensible and that the counterclaim
has a good likelihood of success, although at this time it is not clear what
damages can be attributed directly to Mr. Plexico (Plexico v. Food Integrated
Technologies, Inc. Suffolk Superior Court Action No. 95-1009).
George Krasner, a former officer of the Company, has commenced a
lawsuit alleging a breach of an oral employment agreement and is seeking damages
in the amount of $108,315.50. The Company has denied the allegations and had
filed a counterclaim alleging that the Plaintiff breached his fiduciary duties
as an officer of the Company in allowing assets of the Company to be
misappropriated and dissipated and for failure to seek recovery of said
corporate assets. The counterclaim seeks damages against the Plaintiff of at
least $1,000,000. Counsel for the Company believes that the Plaintiff's case is
very defensible, and that the Company has meritorious claims, but it is not
clear at this time what total damages will be recoverable against Plaintiff
(Krasner v. Food Integrated Technologies, Inc. Suffolk Superior Court Civil
Action No. 95-01823).
In January 1996, four individuals instituted an action against the
Company claiming to be due an aggregate of $362,920 (including interest) under
promissory notes
9
<PAGE> 10
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
issued by the Company, plus costs, attorneys' fees and additional interest. The
Company settled this debt in July of 1996 with a payment of $226,500.
The Company filed a suit against Mr. Salter, a former employee of the
Company, seeking monies in excess of $26,000 it alleges were improperly paid to
the Defendant. Mr. Salter counterclaimed against FIT and Jeffrey B. Lewis, FIT's
Chairman and CEO, seeking damages in excess of $2.1 million for breach of
contract, abuse of process, and treble damages under the Consumer Protection
Act, M.G.L. c.93A. All parties have settled this matter by giving all others
unconditional releases.
ITEM 2. CHANGES IN SECURITIES
On April 17, 1996 the Company's stock was delisted from trading on
NASDAQ for failure to maintain the required minimum asset level. The Company's
stock has commenced trading on the electronic bulletin board.
.
ITEM 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 4. OTHER INFORMATION
None
10
<PAGE> 11
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
11 Statement re: Computation of Per Share Earnings
b. Reports on Form 8-K
None
11
<PAGE> 12
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FOOD INTEGRATED TECHNOLOGIES, INC.
(Registrant)
Date: September 9, 1996 /s/ William F. O'Connor
-----------------------
William F. O'Connor
President and COO
Chief Financial Officer and Treasurer
13
<PAGE> 13
EXHIBIT INDEX
Exhibit No. Description
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE> 1
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
EXHIBIT 11
<TABLE>
<CAPTION>
JULY 31, 1996
Three Nine
Months ended Months ended
July 31, July 31,
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding 2,050,323 2,062,323 2,171,976 2,062,323
Weighted average common shares
issued -- -- -- --
Treasury shares purchased -- -- (125,461) --
Treasury shares sold 5,467 -- 36,145 --
--------- ---------- --------- ---------
Weighted average common shares
outstanding 2,055,790 2,062,323 2,082,660 2,062,323
========= ========== ========= =========
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 281,020
<SECURITIES> 0
<RECEIVABLES> 200,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 716,339
<PP&E> 96,622
<DEPRECIATION> (71,904)
<TOTAL-ASSETS> 1,029,757
<CURRENT-LIABILITIES> (419,456)
<BONDS> 0
0
(9,000)
<COMMON> (25,144)
<OTHER-SE> (576,157)
<TOTAL-LIABILITY-AND-EQUITY> (1,029,757)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 248,903
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (22,626)
<INCOME-PRETAX> (226,277)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (226,277)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> 0
</TABLE>
