<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 APRIL 30, 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.)
17 STATION STREET, 2ND FLOOR
BROOKLINE, MASSACHUSETTES 02146
(Address of principal executive office, zip code, telephone number)
(617) 232-4131
(Issuer's telephone number, including area code)
Shares of Beneficial Interest, Par Value $1.00 per share as registered on the
Boston Stock Exchange
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 June 10, 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 April 30, 1996.
Statements of Operations for the three months ended April
30, 1995 and April 30, 1996, the six months ended April 30,
1995 and April 30, 1996 and the period from inception (June
6, 1989) to April 30, 1996.
Statements of Cash Flows for the six months ended April 30,
1995 and 1996 and the period from inception (June 6, 1989)
to April 30, 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
<PAGE> 3
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
OCTOBER 31, APRIL 30,
1995 1996
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,115,715 $ 735,685
Accounts receivable 57,665 51,819
Accounts receivable from former officers, net of reserves
of $25,000 200,000 200,000
Inventory -- 5,630
Notes receivable 75,937 --
Prepaid expenses 177,749 177,749
----------- -----------
Total current assets 1,627,066 1,170,883
----------- -----------
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 68,724
----------- -----------
33,389 27,898
OTHER ASSETS 288,700 288,700
----------- -----------
$ 1,949,155 $ 1,487,481
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 87,331 $ 43,012
Accrued expenses 282,578 364,700
Current portion of notes and interest payable to
stockholders 307,941 243,190
----------- -----------
Total current liabilities 677,850 650,902
----------- -----------
Total liabilities 677,850 650,902
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,
1996 25,144 25,144
Additional paid in capital 10,402,526 10,402,526
Deficit accumulated during the development stage (8,841,022) (9,275,748)
----------- -----------
Less: Treasury stock at cost - 10,000 shares at October
31, 1995 and April 30, 1996 (324,343) (324,343)
----------- -----------
Total stockholders equity (deficit) 1,271,305 836,579
----------- -----------
$ 1,949,155 $ 1,487,481
=========== ===========
</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 Six Months Ended Cumulative from
April 30, April 30, Inception
--------- --------- (June 6, 1989) to
1995 1996 1995 1996 April 30, 1996
---- ---- ---- ---- --------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE (net): $ -- $ 3,783 $ -- $ 4,796 $ 27,671
COST OF GOODS SOLD 1,377 2,109 18,227
---------- ---------- ----------
Gross Profit 2,406 2,687 9,444
---------- ---------- ----------
EXPENSES:
Research and development 34,053 1,809 85,409 1,809 1,897,749
General and administrative (68,976) 241,104 118,692 467,658 4,733,032
Marketing (92,643) -- (67,230) -- 1,862,354
Interest and financing, net (23,540) (22,918) (40,500) (32,054) 951,057
---------- ---------- ---------- ---------- ----------
Net Income (Loss) $ 151,106 $ (217,589) $ (96,371) $ (434,726) $9,434,748
========== ========== ========== ========== ==========
Net Income (Loss) per Common
Share $ 0.08 $ (0.10) $ (0.05) $ (0.21)
========== ========== ========== ==========
Weighed Average Number of
Common Shares Outstanding 1,952,497 2,062,323 2,096,095 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>
Six Months Ended Cumulative from
April 30, Inception
--------- (June 6, 1989) to
1995 1996 April 30, 1996
---- ---- --------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (247,477) $ (434,726) $(9,434,748)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 4,940 6,791 203,793
Compensation and financing expense related
to issuance of common stock and warrants -- -- 889,772
Compensation expense related to issuance of
preferred stock -- -- 9,000
Changes in assets and liabilities:
Inventory -- (5,630) (5,630)
Gain on retirement of long term debt (15,101) (15,101)
Accounts receivable from former officer -- -- (446,000)
Accounts receivable -- 5,846 (51,819)
Prepaid expenses 6,539 -- (177,749)
Other current assets -- -- (38,700)
Accounts payable 64,130 (44,319) 43,012
Accrued expenses (69,002) 82,122 420,700
Accrued interest on notes payable and bridge
financing 15,077 10,350 208,823
---------- ---------- -----------
Net cash used in operating activities (225,793) (394,667) (8,394,647)
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment -- (1,300) (96,622)
Note receivable from a related party (4,118) -- (579,219)
(Increase) decrease in notes receivable -- 75,937 --
Principal repayments from a related party
-- -- 100,000
---------- ---------- -----------
Net cash used in investing activities (4,118) 74,637 (575,841)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable -- 655,769
Payment of notes payable -- (60,000) (713,769)
Proceeds from notes payable to stockholders -- -- 347,500
Payments of notes payable to stockholders -- -- (124,677)
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 -- -- (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 -- (60,000) 9,706,173
---------- ---------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (229,911) (380,030) 735,685
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 1,885,017 1,115,715 --
---------- ---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,655,106 $ 735,685 $ 735,685
========== ========== ===========
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 -- -- 464,518
Conversion of notes payable into common stock -- -- 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 has approximately $243,190 of long-term debt outstanding as
of April 30, 1996. The Company did not make a required repayments due on
December 31, 1994 and has been attempting to renegotiate the repayment of the
debt.
In February 1996, the Company reached a settlement agreement with one noteholder
whereby $60,000 of principal was paid and the Company was released from paying
$15,101 of accrued interest.
All unpaid and unsettled principal and accrued interest remaining under these
notes have been classified as current liabilities in the accompanying balance
sheet at April 30, 1996. The Company has received notices from those noteholders
demanding payment. The Company is in the process of negotiating terms or
settlement of these amounts.
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 is 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 believes that its success will 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. Management believes that by leveraging the existing distribution,
marketing and manufacturing capabilities of these and other similar entities,
together with name recognition, the Company can expand its presence in the
growing market for healthy foods without expending significant resources of
dramatically increasing staff levels.
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 generated 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.
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. TAI is one of the
nation's largest food cooperatives, whose members include over 3,000
supermarkets that account for over 14% of all supermarket sales in the United
States. Under the Agreement, the Company will receive a royalty from TAI for
each sale of cookies sold. The Company and TAI continue to explore the
possibility of TAI licensing other products developed by the Company. The
results of the Topco Agreement have been a major disappointment as no
significant revenues have resulted from this Agreement and there can be no
assurance that any such sales will materialize.
The Company is still seeking to enter into arrangements with third
parties for the licensing of its products. 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 April 30, 1996, the Company had approximately $735,685 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).
9
<PAGE> 10
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
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 issued by the Company, plus costs, attorneys' fees and
additional interest. The Company has answered, denying the allegations of the
Complaint, and has interposed several affirmative defenses. The case is at an
early stage and no prediction of the eventual outcome can be made. Management
believes that the Company has adequately reserved for these claims (Schnure et
al v. Food Integrated Technologies, Inc. Mass. Superior Court Civil Action No.
96-00003).
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. The parties are currently engaged in settlement discussions,
which would result in no payment by either party. Food Integrated Technologies,
Inc. v. Richard Salter, Norfolk (MA) Superior Court Civil Action No. 95-4884).
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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company did not make the required December 31, 1994, principal and
interest payment due under certain notes. The Company is attempting to
renegotiate the repayment of the remaining notes. The total principal and
interest in default is approximately $243,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. 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: June 10, 1996 /s/ William F. O'Connor
-----------------------
William F. O'Connor
President and COO
Chief Financial Officer and Treasurer
12
<PAGE> 13
EXHIBIT INDEX
-------------
Exhibit 11 Statement re: Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule
<PAGE> 1
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
EXHIBIT 11
APRIL 30, 1996
<TABLE>
<CAPTION>
Three Six
Months ended Months ended
April 30, April 30,
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding 1,950,323 2,062,323 2,225,912 2,062,323
Weighted average common shares
issued -- --
Treasury shares purchased -- (130,916) --
Treasury shares sold 2,174 -- 1,099 --
--------- ---------- --------- ---------
Weighted average common shares
outstanding 1,952,497 2,062,323 2,096,095 2,062,323
========= ========== ========= =========
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 735,685
<SECURITIES> 0
<RECEIVABLES> 251,819
<ALLOWANCES> 0
<INVENTORY> 5,630
<CURRENT-ASSETS> 1,170,883
<PP&E> 96,622
<DEPRECIATION> (68,724)
<TOTAL-ASSETS> 1,487,481
<CURRENT-LIABILITIES> 650,902
<BONDS> 0
0
9,000
<COMMON> 25,144
<OTHER-SE> 802,435
<TOTAL-LIABILITY-AND-EQUITY> 1,487,481
<SALES> 4,796
<TOTAL-REVENUES> 4,796
<CGS> 2,109
<TOTAL-COSTS> 2,109
<OTHER-EXPENSES> 469,467
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (32,054)
<INCOME-PRETAX> (434,726)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (434,726)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> 0
</TABLE>
