<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 1998
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ____________ to ____________
Commission file number: 33-93982-LA
ANNIE'S HOMEGROWN, INC.
______________________________________________________________________________
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1258214
_______________________________ ______________________
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
395 MAIN STREET
WAKEFIELD, MA 01880
____________________________________________________
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
781-224-1172
________________________________________________________
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
__________________________________________________________________
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
CHECK WHETHER THE ISSUER: (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO ___
---
AS OF SEPTEMBER 30, 1998, THERE WERE ISSUED AND OUTSTANDING 4,548,168 SHARES OF
THE ISSUER'S COMMON STOCK, $.001 PAR VALUE.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES _____ NO X
------
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ANNIE'S HOMEGROWN, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED BALANCE SHEET AS OF
SEPTEMBER 30, 1998 (UNAUDITED) 3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND
SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION 7-11
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ANNIE'S HOMEGROWN, INC.
CONSOLIDATED BALANCE SHEET
UNAUDITED
SEPTEMBER 30, 1998
-------------------------------------
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 84,614
ACCOUNTS RECEIVABLE
TRADE 88,568
RELATED PARTIES 29,815
INVENTORY 981,440
OTHER CURRENT ASSETS 40,834
----------
TOTAL CURRENT ASSETS 1,225,271
OFFICE EQUIPMENT 178,077
ACCUMULATED DEPRECIATION (69,980)
----------
OFFICE EQUIPMENT, NET 108,097
DUE FROM OFFICER 75,000
GOODWILL, NET OF AMORTIZATION 586,558
OTHER ASSETS 182,061
----------
TOTAL ASSETS $2,176,987
==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES
NOTES PAYABLE $ 232,885
CURRENT MATURITIES OF LONG TERM DEBT 180,000
ACCOUNTS PAYABLE, TRADE 905,458
ADVANCES FROM DISTRIBUTOR 40,840
ACCRUED EXPENSES 41,352
DUE TO EMPLOYEES 25,307
-----------
TOTAL CURRENT LIABILITIES 1,425,842
LONG TERM DEBT 120,000
COMMITMENTS
STOCKHOLDERS' EQUITY
COMMON STOCK, $.001 PAR VALUE.
AUTHORIZED 10,000,000 SHARES
ISSUED 4,660,074 SHARES 4,660
ADDITIONAL PAID IN CAPITAL 2,306,659
ACCUMULATED DEFICIT (1,403,406)
NOTES RECEIVABLE STOCKHOLDERS (186,768)
TREASURY STOCK, 111,906 COMMON SHARES AT COST (90,000)
-----------
TOTAL STOCKHOLDERS EQUITY 631,145
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,176,987
===========
</TABLE>
3
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ANNIE'S HOMEGROWN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ------------------------------
1997 1998 1997 1998
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
NET SALES $1,771,348 $1,976,958 $2,873,533 $3,197,124
COST OF SALES 1,006,822 1,130,956 1,706,319 1,839,525
---------- ---------- ---------- ----------
GROSS PROFIT 764,526 846,002 1,167,214 1,357,599
OPERATING EXPENSES:
SELLING 470,091 649,303 779,433 1,004,534
GENERAL AND ADMINISTRATIVE 249,501 357,423 461,136 682,388
SLOTTING FEES 1,501 23,094 41,593 63,316
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 721,093 1,029,820 1,282,162 1,750,238
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) 43,433 (183,818) (114,948) (392,639)
OTHER INCOME (LOSS)
INTEREST EXPENSE AND OTHER CHARGES (10,081) (34,225) (23,368) (67,833)
INTEREST AND OTHER INCOME 2,882 2,000 4,791 4,287
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAX 36,234 (216,043) (133,525) (456,185)
INCOME TAX EXPENSE 255 - 505 1,119
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 35,979 $ (216,043) $ (134,030) $ (457,304)
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (IN 000'S):
BASIC 4,298 4,548 4,278 4,548
DILUTED 5,031 4,548 4,278 4,548
NET INCOME (LOSS) PER SHARE:
BASIC .01 (.05) (.03) (.10)
DILUTED .01 (.05) (.03) (.10)
</TABLE>
4
<PAGE>
ANNIE'S HOMEGROWN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
------------------------
1997 1998
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $(134,030) $(457,304)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 13,134 21,002
CHANGES IN
ACCOUNTS RECEIVABLE, TRADE (131,052) (21,394)
AFFILIATE ACCOUNTS, NET 10,840 (9,274)
INVENTORY 277,205 (160,585)
OTHER ASSETS (25,619) (25,343)
ACCOUNTS PAYABLE, TRADE 137,184 473,916
ACCRUED EXPENSES (42,279) (6,453)
ADVANCES FROM DISTRIBUTOR (424,224) 34,364
DUE TO EMPLOYEES (822) ( 8,811)
--------- ---------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (319,663) (159,882)
CASH FLOWS FROM INVESTING ACTIVITIES:
ACQUISITION OF TAMARIND TREE BRAND - (209,712)
ACQUISITION OF RAW MATERIALS FOOD CO. (19,946) -
PURCHASES OF EQUIPMENT (11,518) (48,948)
--------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (31,464) (258,660)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET PAYMENTS ON LINE OF CREDIT -- (46,513)
BORROWING ON TERM LOAN -- 300,000
--------- ---------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES -- 253,487
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (351,127) (165,055)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 484,464 249,669
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 133,337 $ 84,614
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID FOR INTEREST $ 23,368 $ 67,833
========= =========
CASH PAID FOR INCOME TAXES $ 505 $ 1,119
========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES - SEE NOTE 2
5
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ANNIE'S HOMEGROWN, INC. NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (which include only normal recurring
adjustments) necessary to present fairly the Company's financial position at
September 30, 1998, its results of operations for the three and six month
periods ended September 30, 1998 and 1997, and its cash flows for the six month
periods ended September 30, 1998 and 1997. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
from the accompanying consolidated financial statements. For further
information, reference should be made to the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1998, on file with the Securities and Exchange
Commission.
NOTE 2-- SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES ARE AS FOLLOWS:
On July 31, 1997, the Company issued 60,000 shares of common stock ($6.00 per
share) in exchange for the outstanding common stock of Raw Materials Food
Company.
On October 1, 1997, three Officers of the Company exercised stock options for an
aggregate of 231,273 shares by issuing notes to the Company for $185,018.
NOTE 3 - EARNINGS PER SHARE RECONCILIATION
The reconciliation of the numerators and denominators of the basic and diluted
income/(loss) per common share of the Company's reported net income/(loss) is as
follows (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended Sept 30,1997 Net Income Weighted Average Shares Per Share Data
- -------------------------------------
<S> <C> <C> <C>
Basic income per common share $36 4,298 $.01
Stock options --- 733 ---
Diluted income per common share $36 5,031 $.01
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Sept 30, 1998 Net Loss Weighted Average Shares Per Share Data
- -------------------------------------
<S> <C> <C> <C>
Basic loss per common share $(216) 4,548 $(.05)
Stock options --- --- ---
Diluted loss per common share $(216) 4,548* $(.05)
</TABLE>
*For the quarter ended September 30, 1998, stock options for shares of common
stock totaling 249 thousand were outstanding but were not included in the
calculation of diluted loss per common share because the effect was anti-
dilutive.
<TABLE>
<CAPTION>
Six Months Ended Sept 30,1997 Net Loss Weighted Average Shares Per Share Data
- -------------------------------------
<S> <C> <C> <C>
Basic loss per common share $(134) 4,278 $(.03)
Stock options --- --- ---
Diluted loss per common share $(134) 4,278 $(.03)
</TABLE>
*For the six months ended September 30, 1997, stock options for shares of common
stock totaling 733 thousand were outstanding but were not included in the
calculation of diluted loss per common share because the effect was anti-
dilutive.
<TABLE>
<CAPTION>
Six Months Ended Sept 30, 1998 Net Loss Weighted Average Shares Per Share Data
- -------------------------------------
<S> <C> <C> <C>
Basic loss per common share $(457) 4,548 $(.10)
Stock options --- --- ---
Diluted loss per common share $(457) 4,548* $(.10)
</TABLE>
6
<PAGE>
*For the quarter ended September 30, 1998, stock options for shares of common
stock totaling 249 thousand were outstanding but were not included in the
calculation of diluted loss per common share because the effect was anti-
dilutive.
NOTE 4 - TAMARIND TREE ACQUISITION
On August 27, 1998, the Company acquired certain assets of The Tamarind Tree
Ltd. ("Tamarind Tree"). Tamarind Tree produces and markets an ethnic line of
heat and serve vegetarian food entrees. The assets acquired consisted of the
Tamarind Tree brand, including the registered trademark, "The Taste of India,"
intellectual property relating to the brand and other tangible and intangible
assets which are used in Tamarind Tree's business.
The purchase price was comprised of cash in the amount of $200,000, an advance
against royalties in the amount of $75,000, and future royalties and overrides.
The royalties are payable by the Company to Tamarind Tree for five years at the
rate of 6% annually on "adjusted net sales." Additionally, overrides are
payable by the Company to Tamarind Tree for five years at the rate of 2% of all
sales of certain products and sales in excess of a certain minimum amount of
other products. The royalty payments will be accounted for as additional
consideration for the purchase of the assets and will be recorded as additional
goodwill as the future royalties are earned. The Company has capitalized the
$200,000 payment as goodwill. After a valuation of the assets acquired has been
completed, the Company will allocate the purchase price to the intangible assets
acquired.
The Company financed the acquisition of Tamarind Tree by entering into a
$300,000 term loan with Fremont Financial Corporation. The interest rate on the
loan is prime rate plus 3% (11.5% at September 30, 1998) and calls for 20
monthly principal payments of $15,000 commencing October 1, 1998. The loan is
secured by all of the assets of the Company including a security interest in the
Tamarind Tree Brand as well as guaranteed by the two largest stockholders of the
Company.
NOTE 5 - LINE OF CREDIT
On August 27, 1998, the Company signed an amendment to its Line of Credit
agreement with Fremont Financial Corporation increasing its line of credit from
$600,000 to $900,000. Amounts available under this agreement are either 75% or
90% of certain categories of the Company's accounts receivable and 50% of a
certain category of inventory. The note is secured by all the assets of the
Company as well as guaranteed by the two largest stockholders of the Company.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Overview
Annie's Homegrown, Inc. sells premium totally natural pasta products to the
natural food, specialty food and supermarket trades. The pasta products include
eight macaroni and cheese dinners under the Annie's brand name, two canned pasta
meals under the brand names Bernio's and All-Stars and five Annie's Pasta Meals
which combine different pasta shapes with five sauce recipes. The Company also
has an agreement with a specialty retailer to provide a private label house
brand using the Company's all natural white cheddar cheese formula together with
elbow macaroni.
Most of the Company's products are distributed in the continental United States
by Liberty Richter, Inc. ("Liberty"). Pursuant to a master distribution
agreement, the Company sells its products to Liberty who in turn resells the
products to the natural and specialty food stores and supermarket chains via
distributors or directly to the supermarkets.
7
<PAGE>
On July 31, 1997, the Company acquired Raw Materials Food Company ("RMFC"). The
consolidated financial statements reflect the results of operations and cash
flows of RMFC from the date of acquisition. All intercompany balances and
transactions have been eliminated.
On August 27, 1998, Annie's Homegrown, Inc. acquired certain assets of The
Tamarind Tree Ltd. Tamarind Tree produces and markets an ethnic line of heat
and serve vegetarian food entrees. The assets consist of the Tamarind Tree
brand, including the registered trademark, "The Taste of India," intellectual
property relating to the brand and other tangible and intangible assets which is
used in Tamarind Tree's business. The consolidated financial statements reflect
the results of operations and cash flows of the Tamarind Tree brand from the
date of acquisition.
Forward Looking Statements
From time to time, information provided by the Company, statements made by its
employees or information included in its filings with the Securities and
Exchange Commission (including this Form 10-QSB) may contain statements which
are not historical facts, so called "forward looking statements", which involve
risks and uncertainties. Forward looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
When used in this form 10-QSB, the terms "anticipates", "expects", "estimates",
"believes" and other similar terms as they relate to the Company or its
management are intended to identify such forward looking statements. In
particular, statements made in Item 2., Management's Discussion and Analysis or
Plan of Operation, relating to the sufficiency of funds for the Company's
working capital requirements during 1998 and the Company's expectation that
future cash flow will continue to be provided from operations are forward
looking statements. The Company's actual future results may differ significantly
from those stated in any forward looking statements. Factors that may cause such
differences include, but are not limited to: (i) competitive factors in the
market place; (ii) reliance on the master distributor agreement with Liberty and
relative mix of sales through distributors and direct to supermarkets; (iii)
fluctuation in quarterly and annual operating results due to seasonality
(macaroni and cheese are consumed mostly during colder months of the year) and
based on the Company's promotional schedule; (iv) dependence on key personnel;
(v) availability and cost of capital; (vi) consumers' tastes and preferences on
current products as well as acceptance of new product introductions; and (vii)
general economic conditions, among others. These factors, and others, are
discussed from time to time in the Company's filings with the Securities and
Exchange Commission including the Company's annual report on Form 10-KSB for the
year ended March 31, 1998.
Results of Operations
Six Months Ended September 30, 1998 Compared to Six Months Ended September 30,
1997
Net sales. Net sales increased by $323,591 or 11.26% from $2,873,533 in 1997 to
$3,197,124 in 1998. The net sales increase was the result of new product sales
and RMFC sales netted against continuing product sales which decreased due to
running a spring promotion in the previous quarter and a fall promotion running
in the next quarter. The increase (decrease) in sales is as follows: same
product sales are (9.10)%; new products are 16.87%; private label sales are
(0.90)%; Tamarind Tree sales are 0.26%; and RMFC is 4.13%.
Gross profit. As a percentage of net sales, gross profit increased from 40.62%
in 1997 to 42.46% in 1998. This increase was a result of the product mix as
well as lower raw material costs than last year.
Selling expenses. Selling expenses increased by $225,101 or 28.88% from $779,433
in 1997 to $1,004,534 in 1998 and increased as a percentage of net sales from
27.12% in 1997 to 31.42% in 1998. The increase in selling expenses as a
percentage of net sales reflected promotions on new product introductions;
promotions on the RMFC line of products; and a consumer awareness promotion in
the greater Boston area in the quarter ending September 30, 1998.
General and administrative expenses. General and administrative expenses
increased by $221,252 or 47.98% from $461,136 in 1997 to $682,388 in 1998 and
increased as a percentage of net sales from 16.05% in 1997 to 21.34% in 1998.
The increase in general and administrative expenses is primarily a result of
increased spending in
8
<PAGE>
four areas: (i) increase in expenses from RMFC that are
new this year; (ii) increased payroll costs and related benefits; (iii) increase
in professional fees due to a change of year end at March 31, 1997 which
required extra charges this year but not last year and hiring an investment
banker; and (iv) charges attributable to previously deferred organizational and
offering expenses incurred by the Company in connection with a planned secondary
offering of the Company's Common Stock.
Slotting fees. Slotting expenses increased by $21,723 or 52.23% from $41,593
in 1997 to $63,316 in 1998, and increased as a percentage of net sales from
1.45% in 1997 to 1.98% in 1998. According to the Company's plan, a modest amount
of slotting fees was spent to expand the Company's distribution into new
markets. These slotting fees are required by most supermarkets and are expensed
at the time of product introduction.
Interest expense and other charges. Interest expense and other charges increased
by $44,465 from $23,368 in 1997 to $67,833 in 1998 and increased as a percentage
of sales from 0.81% in 1997 to 2.12% in 1998. The increase in interest expense
and other charges is the result of higher borrowings under the Line of Credit
from a financial institution as well as borrowings from the term loan entered
into during August 1998.
Three Months Ended September 30, 1998 Compared to Three Months Ended September
30, 1997
Net sales. Net sales increased by $205,610 or 11.61% from $1,771,348 in 1997 to
$1,976,958 in 1998. The net sales increase was the result of new product sales
and RMFC sales netted against continuing product sales which decreased due to
running a fall promotion in the following quarter. The increase (decrease) in
sales is as follows: same product sales are (10.04)%; new products are 19.41% ;
Tamarind Tree sales are 0.43%; and RMFC is 1.81%.
Gross profit. As a percentage of net sales, gross profit decreased from 43.16%
in 1997 to 42.79% in 1998. This decrease was a result of the product mix netted
against lower raw material costs than last year.
Selling expenses. Selling expenses increased by $179,212 or 38.12% from $470,091
in 1997 to $649,303 in 1998 and increased as a percentage of net sales from
26.54% in 1997 to 32.84% in 1998. The increase in selling expenses as a
percentage of net sales reflected promotions on new product introductions;
promotions on the RMFC line of products; and a consumer awareness promotion in
the greater Boston area in the quarter ending September 30, 1998.
General and administrative expenses. General and administrative expenses
increased by $107,922 or 43.26% from $249,501 in 1997 to $357,423 in 1998 and
increased as a percentage of net sales from 14.09% in 1997 to 18.08% in 1998.
The increase in general and administrative expenses is primarily a result of
increased spending in three areas: (i) increase in expenses from RMFC that are
new this year; (ii) increased payroll costs and related benefits; and (iii)
increase in professional fees due to a change of year end at March 31, 1997
which required extra charges this year but not last year and hiring an
investment banker.
Slotting fees. Slotting expenses increased by $21,593 or 1438.57% from $1,501
in 1997 and $23,094 in 1998, and increased as a percentage of net sales from
0.08% in 1997 to 1.17% in 1998. According to the Company's plan, a modest amount
of slotting fees was spent to expand the Company's distribution into new
markets. These slotting fees are required by most supermarkets and are expensed
at the time of product introduction.
Interest expense and other charges. Interest expense and other charges increased
by $24,144 from $10,081 in 1997 to $34,225 in 1998 and increased as a percentage
of sales from 0.57% in 1997 to 1.73% in 1998. The increase in interest expense
and other charges is the result of higher borrowings under the Line of Credit
from a financial institution as well as borrowings from the term loan entered
into during August 1998.
9
<PAGE>
Liquidity and Capital Resources
The Company has financed its operations to date through a public offering of
Common Stock, private sale of equity and convertible debt securities, a line of
credit and term loan from a financial institution and cash generated from
operations. At September 30, 1998, the Company had working capital deficit of
$200,571, which is a decrease of $664,367 from a working capital balance of
$443,796 at March 31, 1998. The net decrease in working capital was primarily
attributable to funding operating losses for the current period as well as the
acquisition of the Tamarind Tree Brand.
Most of the Company's sales are made to Liberty under contract terms allowing
certain rights of return on unsold product held by Liberty. The contract calls
for Liberty to pay the Company based on terms relating to the receipt of the
Company's products by Liberty. The Company defers recognition of such sales
until the product is sold by Liberty to distributors or supermarket chains. As a
result, if Liberty pays the Company before Liberty sells the products to a third
party, the Company has an advance from Liberty. If Liberty sells the products to
a third party before it pays the Company, the Company has a receivable from
Liberty.
Net cash used by operating activities for the six months ended September 30,
1998 was $159,882 consisting primarily of funding operating losses for the
period and increasing inventory offset by an increase in accounts payable.
Net cash used in investing activities consisted of capital expenditures totaling
$258,660 which related to the purchase of the Tamarind Tree Brand and the
purchase of plates and dies for the new products as well as office equipment.
The Company negotiated a line of credit with a financial institution for
$600,000, which closed on February 3, 1998 ("Line of Credit"). The Line of
Credit is for a term of two years and is secured by all of the assets of the
Company and guaranteed by the two largest stockholders of the Company. In August
1998, the Company increased the Line of Credit to $900,000 and signed a Term
Loan for an additional $300,000 to purchase the Tamarind Tree Brand.
The Company's primary capital needs are for promoting newly developed products
to sell to its existing consumer base, purchase existing all natural brands, or
expansion into national supermarket distribution.
The Company anticipates that the funds available from the Line of Credit,
together with funds generated from operations, will be sufficient to meet its
liquidity needs for the next twelve months. However, the Company needs
additional capital in the future to fully implement its business strategy as set
forth herein. If such capital is unavailable either because of general market
conditions or the results of the Company's operations, the Company will have to
continue to scale back either its investments in new products, or its national
supermarket expansion, or both.
In September 1998, the Company hired an investment banker to explore strategic
opportunities to maximize stockholder value.
Management is aware of the potential software anomalies associated with the year
2000 date change. The Company has been evaluating the potential issues that need
to be addressed in connection with its operations. An inventory of the Company's
computer systems and software has been made and assessment and testing of the
systems and software is largely complete. The Company is not aware at this time
of any significant year 2000 issues in its own systems. Formal communications
have begun with Liberty, the Company's master distributor, to ensure that
Liberty has appropriate plans in place to properly address the year 2000 issue.
Based upon these communications, Liberty has informed the Company that its
systems are year 2000 compliant. The Company has also begun preliminary
communications with its principal suppliers to assess their year 2000
compliance. Based on the results of these communications, the Company will make
a decision on whether to seek alternative suppliers. Based on preliminary
information, costs of addressing the year 2000 issue are not expected to have a
material
10
<PAGE>
effect upon the Company's financial position, results of operations, or cash
flows in future periods. The Company believes it has adequate plans in place to
address the year 2000 issue. However, there can be no assurance that the systems
of other companies, on which the Company's systems and operations rely, will be
converted on a timely basis and will not have a material effect on the Company.
In June 1997, the FASB issued Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" and No. 131, "Disclosure about Segments of an Enterprise
and Related Information", which are effective for fiscal years beginning after
December 15, 1997. The Company adopted the required presentation of SFAS No. 130
for the fiscal year beginning April 1, 1998. The Company has no other components
of comprehensive income other than its net loss.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer
Software Developed and Obtained for Internal Use". The statement is effective
for fiscal years beginning after December 15, 1998. Earlier application is
encouraged in fiscal years for which annual financial statements have not been
issued. The statement defines which costs of computer software developed or
obtained for internal use are capitalized and which costs are expensed. The
Company adopted SOP 98-1 effective April 1, 1998. The adoption of SOP 98-1 has
no impact on the consolidated financial statements.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-Up
Activities". The statement is effective for fiscal years beginning after
December 15, 1998. The statement requires costs of start-up activities and
organization costs to be expensed as incurred. The Company will adopt SOP 98-5
for the fiscal year beginning April 1, 1999. The adoption of SOP 98-5 will not
materially affect the consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). The
statement requires companies to recognize all derivatives as either assets or
liabilities with the instruments measured at fair value. The accounting for
changes in fair value gains and losses depends on the intended use of the
derivative and its resulting designation. The statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. The Company will
adopt SFAS 133 by April 1, 2000. Adoption of SFAS 133 is not expected to have a
material impact on the consolidated financial statements.
11
<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of the stockholders of the
Company at the Annual Meeting of Stockholders held on September 14, 1998. The
holders of 3,664,840 shares of Common Stock were present or represented by
proxy, and accordingly, a quorum was present and matters were voted on as
follows:
(a) The following persons were elected as directors:
<TABLE>
<CAPTION>
Votes for Votes withheld
------------------- -------------------
<S> <C> <C>
Ann E. Withey 3,663,535 1,305
Andrew M. Martin 3,662,785 2,055
Deborah Churchill Luster 3,663,585 1,255
Brady Bevis 3,663,585 1,255
Ronald L. Cheney 3,663,535 1,305
Patrick DeTemple 3,663,135 1,705
</TABLE>
(b) The following resolution was submitted to a vote of the
shareholders at the meeting:
To ratify the designation of KPMG Peat Marwick L.L.P. as independent
accountants. The resolution was passed; 3,660,882 shares voting in
favor, 650 shares voting against, 3,368 shares abstaining, and 0
broker non-votes.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Number
--------------
11 Statement re: computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed two reports on Form 8-K during the quarter for which this
report is being filed. On September 11, 1998, the Company reported the Tamarind
Tree Brand acquisition and on September 24, 1998 the Company reported the hiring
of McCabe, Mintz & Company LLC as investment bankers.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANNIE'S HOMEGROWN, INC.
-----------------------
(Registrant)
Date: March 16, 1999 /s/ Paul B. Nardone
----------------------------
Paul B. Nardone
President and Chief Operating Officer
Date: March 16, 1999 /s/ Neil Raiff
----------------------------
Neil Raiff
Chief Financial Officer & Treasurer
13
<PAGE>
Exhibit 11
Statement re: computation of per share earnings
Annie's Homegrown, Inc.
Computation of Earnings Per Common Share
(in 000s except for per share data)
Three months ended September 30, 1997
<TABLE>
<CAPTION>
Basic Computation
- -----------------
<S> <C>
Net income per statement of operations $ 36
======
Weighted average number of common
shares outstanding 4,298
======
Basic income per common share $.01
======
Diluted Computation
- -------------------
Net income per statement of operations $ 36
======
Weighted average number of common
shares outstanding 4,298
Stock options 733
------
Weighted average number of common
shares as adjusted 5,031
======
Diluted income per common share $ .01
======
</TABLE>
<PAGE>
Annie's Homegrown, Inc.
Computation of Earnings Per Common Share (Continued)
(in 000s except for per share data)
Three months ended September 30, 1998
<TABLE>
<CAPTION>
Basic Computation
- -----------------
<S> <C>
Net loss per statement of operations $ (216)
======
Weighted average number of common
shares outstanding 4,548
======
Basic loss per common share $ (.05)
======
Diluted Computation
- -------------------
Net loss per statement of operations $ (216)
======
Weighted average number of common
shares outstanding 4,548
Stock options 249
------
Weighted average number of common
shares as adjusted 4,797
======
Diluted loss per common share $ (.05)
======
</TABLE>
<PAGE>
Annie's Homegrown, Inc.
Computation of Earnings Per Common Share
(in 000s except for per share data)
Six months ended September 30, 1997
<TABLE>
<CAPTION>
Basic Computation
- -----------------
<S> <C>
Net loss per statement of operations $ (134)
======
Weighted average number of common
shares outstanding 4,278
======
Basic loss per common share $ (.03)
======
Diluted Computation
- -------------------
Net loss per statement of operations $ (134)
======
Weighted average number of common
shares outstanding 4,278
Stock options 733
------
Weighted average number of common
shares as adjusted 5,011
======
Diluted loss per common share $ (.03)
======
</TABLE>
<PAGE>
Annie's Homegrown, Inc.
Computation of Earnings Per Common Share (Continued)
(in 000s except for per share data)
Six months ended September 30, 1998
<TABLE>
<CAPTION>
Basic Computation
- -----------------
<S> <C>
Net loss per statement of operations $ (457)
======
Weighted average number of common
shares outstanding 4,548
======
Basic loss per common share $ (.10)
======
Diluted Computation
- -------------------
Net loss per statement of operations $ (457)
======
Weighted average number of common
shares outstanding 4,548
Stock options 249
------
Weighted average number of common
shares as adjusted 4,797
======
Diluted loss per common share $ (.10)
======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 84,614
<SECURITIES> 0
<RECEIVABLES> 118,383
<ALLOWANCES> 0
<INVENTORY> 981,440
<CURRENT-ASSETS> 1,225,271
<PP&E> 178,077
<DEPRECIATION> 69,980
<TOTAL-ASSETS> 2,176,987
<CURRENT-LIABILITIES> 1,425,842
<BONDS> 120,000
0
0
<COMMON> 4,660
<OTHER-SE> 626,485
<TOTAL-LIABILITY-AND-EQUITY> 2,176,987
<SALES> 3,197,124
<TOTAL-REVENUES> 3,197,124
<CGS> 1,839,525
<TOTAL-COSTS> 1,750,238
<OTHER-EXPENSES> (4,287)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,833
<INCOME-PRETAX> (456,185)
<INCOME-TAX> 1,119
<INCOME-CONTINUING> (457,304)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (457,304)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
