<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 JANUARY 31, 1997
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, NEW YORK 10022
(Address of principal executive office, zip code, telephone number)
(212) 486-1425
(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 January 31, 1997, 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, 1996 and January
31, 1997.
Statements of Operations for the three months ended
January 31, 1996 and January 31, 1997.
Statements of Cash Flows for the three months ended
January 31, 1996 and 1997.
Notes to Financial Statements
Item 2. PLAN OF OPERATION
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Item 2. CHANGES IN SECURITIES
Item 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 4. OTHER INFORMATION
Item 5. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
<PAGE> 3
FOOD INTEGRATED TECHNOLOGIES, INC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1996 1997
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 206,205 $ 101,085
Accounts receivable from former officers, net of reserves
of $25,000 175,000 175,000
Note receivable from officer 0 5,981
Prepaid expenses
11,707 13,061
------------ ------------
Total current assets
392,912 295,127
------------ ------------
OTHER ASSETS
288,700 288,700
------------ ------------
681,612 583,827
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 12,267 $ 11,562
Accrued expenses
343,597 303,427
------------ ------------
Total current liabilities
355,864 314,989
------------ ------------
Total liabilities 355,864 314,989
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value
Authorized - 2,500,000 shares
Issued and outstanding-900,000 shares at October 31, 1996
and January 31, 1997 9,000 9,000
Common stock, $.01 par value
Authorized - 15,000,000 shares
Issued - 2,514,432 at October 31, 1996 and January 31, 1997
25,144 25,144
Additional paid in capital 10,402,526 10,402,526
Deficit accumulated during the development stage
(9,786,579) (9,843,489)
------------ ------------
650,091 593,181
Less: Treasury stock at cost - 10,000 shares at October
31, 1996 and January 31, 1997
(324,343) (324,343)
------------ ------------
Total stockholders equity(deficit)
325,748 268,838
------------ ------------
$ 681,612 $ 583,827
============ ============
</TABLE>
The accompanying notes are and integral part of these statements.
3
<PAGE> 4
FOOD INTEGRATED TECHNOLOGIES, INC
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
Three Months Ended Cumulative from
January 31, Inception
------------------------------ (June 6, 1989) to
1996 1997 January 31, 1997
------------ ----------- ------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
REVENUE: $ 1,013 $ 0 $ 27,671
COST OF GOODS SOLD
6,545 0 18,227
----------- ----------- ------------
Gross Profit
(5,532) 0 9,444
----------- ----------- ------------
EXPENSES:
Research and development -- -- 1,898,568
General and administrative 247,017 57,886 5,325,465
Marketing -- -- 1,862,354
Interest and financing, net (9,136) (976) 925,545
----------- ----------- ------------
Net Loss $ (243,413) $ (56,910) $(10,002,488)
=========== =========== ============
Net Loss per Common Share $ (0.12) $ (.03)
=========== ============
Weighed Average Number of Common
Shares Outstanding 2,062,323 2,062,323
</TABLE>
The accompanying notes are and integral part of these statements.
4
<PAGE> 5
FOOD INTEGRATED TECHNOLOGIES, INC
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
Three Months Ended Cumulative from
January 31, Inception
----------- (June 6, 1989) to
1996 1997 January 31, 1997
---- ---- ----------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (243,413) $ (56,910) $(10,002,489)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization 3,610 -- 209,723
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:
Loss on sale of property -- -- 18,917
Gain on retirement of long term debt -- -- (21,441)
Accounts receivable from former officer -- -- (175,000)
Accounts receivable 4,831 -- --
Prepaid expenses -- (1,354) (13,061)
Other current assets -- -- (38,700)
Accounts payable (7,698) (705) 11,562
Accrued expenses 71,169 (40,170) 251,900
Accrued interest on notes payable and
bridge financing 6,575 -- --
----------- --------- ------------
Net cash used in operating
activities (164,926) (99,139) (8,859,817)
----------- --------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,300) -- (93,571)
Note receivable from a related party -- -- (579,219)
Increase in notes receivable 75,937 (5,981) (5,981)
Principal repayments from a related party
-- -- 100,000
----------- --------- ------------
Net cash used in investing
activities 74,637 (5,981) (578,771)
----------- --------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable -- -- 655,769
Payment of notes payable -- -- (653,769)
Proceeds from notes payable to stockholders -- -- 347,500
Payments of notes payable to stockholders -- -- (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 -- -- (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 0 0 9,539,673
----------- --------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (90,289) (105,120) 101,085
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD
1,115,715 206,205 --
----------- --------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,025,426 $ 101,085 $ 101,085
=========== ========= ============
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 and 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, 1997
6
<PAGE> 7
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. The Company made strides during 1995 in the commercialization of
its products.
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 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.
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
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 the 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 next fiscal quarter ending April 30, 1997. 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 January 31,
1997, the Company had approximately $101,085 of cash and cash equivalents.
8
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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
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 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
None
ITEM 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 4. OTHER INFORMATION
None
10
<PAGE> 11
ITEM 5. 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
SIGNATURE
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: May 21, 1997 /s/ Jeffrey L. Lewis
------------------
Jeffrey L. Lewis
Chairman of the Board of Directors and
Chief Executive Officer
<PAGE> 1
FOOD INTEGRATED TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
EXHIBIT 11
JANUARY 31, 1997
<TABLE>
<CAPTION>
Three months ended
January 31,
1996 1997
---- ----
<S> <C> <C>
Weighted average common shares
outstanding 2,062,323 2,062,323
Weighted average common shares
issued -- --
Treasury shares purchased -- --
Treasury shares sold -- --
--------- ---------
Weighted average common shares
outstanding 2,062,323 2,062,323
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000888952
<NAME> FOOD INTEGRATED TECHNOLOGIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 101,085
<SECURITIES> 0
<RECEIVABLES> 175,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 295,127
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 583,827
<CURRENT-LIABILITIES> (314,989)
<BONDS> 0
0
(9,000)
<COMMON> (25,144)
<OTHER-SE> (234,694)
<TOTAL-LIABILITY-AND-EQUITY> (583,827)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 57,886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (976)
<INCOME-PRETAX> (56,910)
<INCOME-TAX> 0
<INCOME-CONTINUING> (56,910)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (56,910)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
