<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 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 001-13559
FRESH'N LITE, INC.
(Name of small business issuer in its charter)
TEXAS 75-2337102
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
1705 E. WHALEY, LONGVIEW, TEXAS 75605
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (903) 758-2811
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[ ]
Number of shares outstanding of each of the issuer's classes of common stock,
as of August 10, 1998: 6,356,852 shares of common stock, par value $.01.
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FRESH'N LITE, INC.
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I FINANCIAL INFORMATION.......................................................... 2
Item 1. Financial Statements........................................................... 2
Condensed Balance Sheet for the Six Month Period
Ended June 30, 1998............................................................ 2
Condensed Income Statement For Three Month and
Six Month Periods Ended June 30, 1997 and June 30, 1998........................ 4
Condensed Statement of Cash Flows for the Six Month
Periods Ended June 30, 1997 and June 30, 1998.................................. 5
Notes to Interim Condensed Financial Statements (Unaudited).................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................. 8
PART II OTHER INFORMATION.............................................................. 11
Item 2. Changes in Securities.......................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders............................ 11
Item 6. Exhibits and Reports on Form 8-K............................................... 12
Signatures ............................................................................... 13
Exhibit Index ............................................................................... 14
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FRESH'N LITE, INC.
CONDENSED BALANCE SHEET
FOR THE SIX MONTH PERIOD ENDED
JUNE 30, 1998
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ------------
(Restated Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash ............................................................ $ 20,373 $ 1,789,639
Inventory ....................................................... 26,571 40,270
----------- -----------
Total Current Assets ................................... 46,944 1,829,909
----------- -----------
PROPERTY AND EQUIPMENT (Pledged)
Buildings ....................................................... 3,774,141 5,347,868
Land ............................................................ 135,000 385,000
Leasehold Improvements .......................................... 30,113 30,113
Vehicles and Equipment .......................................... 1,250,302 2,518,525
----------- -----------
Total Property and Equipment ........................... 5,189,556 8,281,506
Accumulated Depreciation ........................................ (430,325) (479,132)
----------- -----------
Property and Equipment - Net............................ 4,759,231 7,802,374
----------- -----------
OTHER ASSETS
Assets Held for Sale, Net of Accumulated Depreciation ........... 909,835 241,413
Corporate Organizational Costs and Other Assets,
Net of Accumulated Amortization ............................... 32,651 26,299
Notes Receivable - Related Parties .............................. 164,543 75,000
----------- -----------
Total Other Assets ..................................... 1,107,029 342,712
----------- -----------
TOTAL ASSETS ........................................... 5,913,204 9,974,995
=========== ===========
</TABLE>
See accompanying notes.
2
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FRESH'N LITE, INC.
CONDENSED BALANCE SHEET
FOR THE SIX MONTH PERIOD ENDED
JUNE 30, 1998
(Continued)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ------------
(Restated (Unaudited)
Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Accrued Expenses .......................................... $ 340,635 $ 44,715
Accounts Payable .......................................... 52,864 67,547
Bank Overdraft ............................................ 48,104 --
Note Payable - Short Term ................................. 10,249 --
Income Tax Payable ........................................ 8,800 8,800
Current Portion of Capital Lease Obligations .............. 6,175 6,175
Current Portion of Notes Payable - Long Term .............. 465,015 292,604
----------- -----------
Total Current Liabilities ........................ 931,842 419,841
OTHER LIABILITIES
Capital Lease Obligations, Net of Current Portion ......... 165,504 165,000
Notes Payable - Long Term, Net of Current Portion ......... 1,101,437 2,206,874
Deferred Income Tax Liability ............................. 121,200 121,200
----------- -----------
Total Other Liabilities........................... 1,388,141 2,493,074
----------- -----------
Total Liabilities ................................ 2,319,983 2,912,915
----------- -----------
SHAREHOLDERS EQUITY
Common Stock, $.01 Par Value; 50,000,000 Shares Authorized;
6,356,852 Shares Issued and Outstanding.................. 61,585 63,568
Additional Paid In Capital ................................ 3,278,499 6,244,071
Retained Earnings - Prior ................................. 135,001 254,387
Retained Earnings - Current ............................... 119,386 501,304
Less Treasury Stock, at Cost .............................. (1,250) (1,250)
----------- -----------
Total Shareholders Equity ........................ 3,593,221 7,062,080
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY ................. 5,913,204 9,974,995
=========== ===========
</TABLE>
See accompanying notes.
3
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FRESH'N LITE, INC.
CONDENSED INCOME STATEMENT
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND JUNE 30, 1998
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- -------------------------------
1997 1998 1997 1998
----------- ----------- ----------- -----------
(Restated (Unaudited) (Restated (Unaudited)
Unaudited) Unaudited)
<S> <C> <C> <C> <C>
SALES ....................................... $ 809,930 $ 942,635 $ 1,522,822 $ 1,740,854
EXPENSES
Food and Beverage Costs ..................... 221,410 268,455 426,377 473,611
Salaries and Contract Labor ................. 209,736 208,857 418,572 436,879
Payroll and other Taxes ..................... 32,126 34,389 64,690 74,271
Professional Fees ........................... 27,927 19,087 81,819 27,515
Advertising and Promotional ................. 20,138 27,155 38,706 42,440
Rent ........................................ 34,308 57,984 69,952 108,563
Insurance ................................... 8,963 17,588 22,767 34,709
Telephone ................................... 9,962 5,983 17,820 11,292
Travel ...................................... 4,325 3,657 8,075 6,888
Utilities ................................... 21,208 23,357 46,253 46,949
Depreciation ................................ 51,701 34,618 90,165 70,768
Amortization ................................ 19,472 16,567 211,766 31,417
Interest .................................... 36,841 43,888 56,585 77,734
Linen and Laundry ........................... 10,946 12,042 16,230 23,617
Repairs and Maintenance ..................... 16,765 15,595 34,483 35,654
Supplies .................................... 6,833 11,535 13,351 20,842
Miscellaneous ............................... 6,375 6,080 8,875 6,080
----------- ----------- ----------- -----------
Total Expenses .......................... 739,036 806,837 1,626,486 1,529,229
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) ................. 70,894 135,798 (103,664) 211,625
OTHER INCOME/(EXPENSE)
Profit / (Loss) on Sale of Assets ........... -- 150,000 -- 261,593
Rental Income ............................... -- -- -- 28,086
Income Tax (Expense) Benefit:
Current ................................. -- -- -- --
Deferred ................................ -- -- -- --
----------- ----------- ----------- -----------
NET INCOME .............................. 70,894 285,868 (103,664) 501,304
Basic Earnings Per Share .................... $ .012 $ .045 $ (.017) $ .079
Diluted Earnings Per Share .................. $ .012 $ .045 $ (.017) $ .079
</TABLE>
See accompanying notes.
4
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FRESH'N LITE, INC.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND JUNE 30, 1998
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1998
------------- -------------
(Restated Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) ............................. $ (103,653) $ 501,304
----------- -----------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation ................................. 90,165 70,768
Amortization ................................. 211,766 31,417
Net Change in Assets and Liabilities:
Decrease / (Increase) in Inventory ....... (28,215) (13,699)
(Decrease) / Increase in Accounts Payable (6,537) 14,683
(Decrease) / Increase in Accrued Expenses (114,277) (295,920)
----------- -----------
Total Adjustments ............................ 152,902 (192,751)
----------- -----------
Net Cash Provided by Operating Activities (49,249) 308,553
----------- -----------
Cash Flows from Investing Activities:
Capital Expenditures ......................... (612,822) (3,091,950)
Expenditures for Preopening/Remodel Costs
and other Assets ........................... (24,020) 0
(Increase) / Decrease in Notes Receivable .... (25,521) 89,543
Increase in Deferred Franchise System Costs .. (39,969) 0
Net Proceeds from Sale of Assets ............. 11 562,539
----------- -----------
Net Cash Used in Investing Activities .... (702,321) (2,439,868)
----------- -----------
Cash Flows from Financing Activities:
Sale of Common Stock ......................... 959,500 2,967,555
Borrowing on Notes Payable ................... 0 1,433,026
Principal Payments on Notes Payable .......... (166,585) (500,000)
----------- -----------
Net Cash Provided by Financing Activities 792,915 3,900,581
----------- -----------
NET INCREASE / (DECREASE) IN CASH ............ 41,345 1,769,266
CASH AT BEGINNING OF YEAR .................... 18,967 20,373
----------- -----------
CASH AT END OF PERIOD ........................ 60,312 1,789,639
=========== ===========
</TABLE>
See accompanying notes.
5
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FRESH'N LITE, INC.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED
JUNE 30, 1998
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The condensed financial statements of Fresh'n Lite, Inc. (the
"Company") as of June 30, 1997 and June 30, 1998 have been prepared
by the Company, pursuant to the rules and regulations of the
Securities and Exchange Commission. The Company owns and operates
four restaurants under the names of "Fresh'n Lite Cafe & Grill" and
"Street Talk Cafe."
The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments) which are,
in the opinion of management, necessary to fairly state the
operating results for the respective periods. However, these
operating results are not necessarily indicative of the results
expected for the full fiscal year. Certain information and footnote
disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principals
have been omitted pursuant to such rules and regulations. The notes
to the condensed financial statements should be read in conjunction
with the notes to the financial statements contained in the Form
10-SB/A-3 filed on August 14, 1998. Company management believes that
the disclosures are sufficient for interim financial reporting
purposes.
NOTE 2. SALE OF RESTAURANT FACILITY
On March 17, 1998, the Company sold its facility in Nacogdoches,
Texas. The Company realized a gain of $111,593 on the sale of this
facility which was previously classified as "assets held for sale."
On June 29, 1998, the Company sold its facility in Texarkana, Texas.
The Company realized a gain of $150,000 on the sale of this facility
which was previously classified as "assets held for sale."
NOTE 3. OTHER EVENTS
On April 3, 1998, the Board of Directors approved a plan to
repurchase up to 100,000 shares of the Company's common stock.
Repurchases will be made from time to time in open market
transactions. All repurchases will be made in accordance with
applicable securities regulations, and the timing of the repurchases
will be dependent upon market conditions, share price and other
factors. The repurchased common stock may be used by the Company to
meet the needs of its various stock option plans or for other
corporate purposes.
On April 8, 1998, the Board of Directors approved an increase in the
previously approved stock repurchase plan from 100,000 to 150,000
shares.
On May 29, 1998, the Company issued $1,500,000 of 6% Convertible
Debentures due May 29, 2000 (the "A Debentures"), in a private
placement to three accredited investors (the "Investors"). The
private placement yielded $1,335,000 in net proceeds to the Company
(after deduction of the placement agent's fees and fees of counsel
for the Investors). In connection with the private
6
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FRESH'N LITE, INC.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED
JUNE 30, 1998
(Unaudited)
placement, the Company also issued to the Investors, warrants to
purchase up to an aggregate of 75,000 shares of the Company's common
stock (the "Warrants"). The Company issued to the placement agent a
Warrant to purchase up to 50,000 shares of the Company's common
stock. The exercise price for the Warrants is $4.40 per share, which
is equal to 110% of the average closing bid prices of the Company's
common stock for the five trading days immediately preceding May 29,
1998.
The A Debentures can be converted into shares of the Company's
common stock. The number of shares of common stock to be issued upon
any such conversion will be determined based upon the lesser of (a)
$4.00 per share (the closing bid price of the common stock on May
28, 1998), or (b) the average closing bid prices of the Company's
common stock for the five trading day period ending on the trading
day immediately preceding the date on which such A Debenture is
converted, multiplied by a discount ranging from 25% to 17.5%. The
Company granted to the Investors certain registration rights with
respect to the shares of common stock underlying the A Debentures
and the Warrants.
The beneficial conversion feature attached to the A Debentures is
valued at $500,000. The value is calculated at the date of issue as
the difference between the conversion price most beneficial to the
investor and the fair value of the common stock into which the
security is convertible, multiplied by the number of shares into
which the security is convertible. This amount will be amortized into
interest expense during the period between issuance of the debt and
the date the securities can be converted at the highest discount.
On June 30, 1998, the Company issued a second tranche of $1,500,000
of its 6% Convertible Debentures due June 30, 2000 (the "B
Debentures"), in a private placement to two of the Investors. The
private placement yielded $1,335,000 in net proceeds to the Company
(after deduction of the placement agent's fees and fees of counsel
for two of the Investors). In connection with the private placement,
the Company also issued to two of the Investors Warrants to purchase
up to an aggregate of 75,000 shares of the Company's common stock.
The Company issued to the placement agent a Warrant to purchase up
to 50,000 shares of the Company's common stock. The exercise price
for the Warrants is $4.30 per share, which is equal to 110% of the
average closing bid prices of the Company's common stock for the
five trading days immediately preceding June 30, 1998.
The B Debentures can be converted into shares of the Company's
common stock. The number of shares of common stock to be issued upon
any such conversion will be determined based upon the lesser of (a)
$3.9062 per share (the closing bid price of the common stock on June
29, 1998), or (b) the average closing bid prices of the Company's
common stock for the five trading day period ending on the trading
day immediately preceding the date on which such B Debenture is
converted, multiplied by a discount ranging from 25% to 17.5%. The
Company granted to two of the Investors certain registration rights
with respect to the shares of common stock underlying the B
Debentures and the Warrants.
The beneficial conversion feature attached to the B Debentures is
valued at $500,000. The value is calculated at the date of issue as
the difference between the conversion price most beneficial to the
investor and the fair value of the common stock into which the
security is convertible, multiplied by the number of shares into
which the security is convertible. This amount will be amortized into
interest expense during the period between issuance of the debt and
the date the securities can be converted at the highest discount.
7
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), which can be identified by the use of
forward-looking terminology such as, "may," "believe," "expect," "intend,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. All statements other than
statements of historical fact included in this Form 10-QSB, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors with
respect to any such forward-looking statements, including certain risks and
uncertainties that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") are disclosed in this Form
10-QSB, including, without limitation, in conjunction with the forward-looking
statements included in this Form 10-QSB, and in the Company's Annual Report on
Form 10-KSB/A-1 for the year ended December 31, 1997. Important factors that
could cause actual results to differ materially from those in the
forward-looking statements herein include, but are not limited to, the newness
of the Company, the need for additional capital and additional financing, the
Company's limited restaurant base, lack of geographic diversification, the
risks associated with expansion, a lack of marketing experience and activities,
risks of franchising, seasonability, the choice of site locations, development
and construction delays, need for additional personnel, increases in operating
and food costs and availability of supplies, significant industry competition,
government regulation, insurance claims and the ability of the Company to meet
its stated business goals. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements.
The following discussion of the results of operations and financial
condition should be read in conjunction with the Financial Statements and
related Notes thereto included herein.
OVERVIEW
The Company was organized in June of 1990 as Bosko's, Inc. under the
laws of the State of Delaware. In November of 1992 the Company changed its name
to Fresh'n Lite, Inc., and in November of 1995 the Company merged into a Texas
corporation also bearing the name Fresh'n Lite, Inc. The Company currently owns
and operates 3 Fresh'n Lite Cafe & Grill restaurants, in Dallas, Irving (Valley
Ranch), and The Colony, Texas. The Company's prototype Street Talk Cafe
restaurant opened May 7, 1998 in Richardson, Texas. The Company plans to expand
by opening additional Street Talk Cafe restaurants on a Company owned basis in
the Dallas/Ft. Worth demographic market area.
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 1997 and 1998
Revenues. For the three months ended June 30, 1998, the Company has
generated revenues of $942,635 compared to revenues in the same period of 1997
of $809,930, a 16.4% gain. The increase in revenues was due to the fact that
the Valley Ranch location only operated for 4 1/2 months of the same period in
1997 and The Colony facility was not operating during the same period of 1997.
The Company attributes the increase to increased promotion associated with Chad
Hennings' involvement with the
8
<PAGE> 10
Company. The Fresh'n Lite restaurant at Preston and Frankford which would have
been able to demonstrate same store sales was closed for 45 days during the
period in order to convert it to a Street Talk Cafe concept.
Costs and Expenses. Costs and expenses for the three month period
ended June 30, 1998 increased by $67,801, or 9.2% to $806,837 as compared to
$739,036 for the corresponding period of 1997. This was primarily due to higher
volume stores in the Dallas market. Other variances between the costs and
expenses for the three month periods are minimal.
Net Income. The Company had a net income for the three months ended
June 30, 1998 of $285,868 compared to net income of $70,894 for the
corresponding three months of 1997, representing $.045 and $.012 per share,
respectively. Earnings per share figures are based on basic and diluted earnings
per share.
Comparison of Six Months Ended June 30, 1997 and 1998
Revenues. For the six months ended June 30, 1998, the Company has
generated revenues of $1,740,854 compared to revenues in the same period 1997
of $1,522,282, a 14.4% gain, a gross profit of $491,304 compared to a loss in
the same period of 1997 of $103,653. The increase in revenues was due to the
fact that the Valley Ranch location only operated for 4 1/2 months of the same
period in 1997 and The Colony facility was not operating during the same period
of 1997. The Company attributes the increase to increased promotion associated
with Chad Hennings' involvement with the Company. The Fresh'n Lite restaurant
at Preston and Frankford which would have been able to demonstrate same store
sales was closed for 45 days during the period in order to convert it to a
Street Talk Cafe concept.
Costs and Expenses. Costs and expenses for the six month period ended
June 30, 1998 decreased by $96,647, or 6.4% to $1,529,229 as compared to
$1,626,486 for the corresponding period of 1997. This was primarily due to
accelerated amortization costs associated with the closing of the Nacogdoches,
Texas, facilities in the first quarter of 1997. Other variances between the
costs and expenses for the first six months of 1998 and 1997 are minimal.
Net Income. The Company had a net income for the six months ended June
30, 1998 of $501,304 compared to a net loss of $103,664 for the corresponding
six months of 1997, representing $.079 and $(.017) per share, respectively.
Earnings per share figures are based on basic and diluted earnings per share.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has required capital to fund the operations
and capital expenditure requirements of its Company-owned restaurants.
From January 4, 1995 through December 12, 1997, the Company received
gross proceeds from an intra-state offering of $2,219,500.00. Approximately
$287,600.00 of the proceeds were used to cover offering related costs,
including underwriting discounts and commissions. The net proceeds were used
primarily for the acquisition of the Company's corporate offices. The remaining
proceeds were used to develop additional restaurants and for general corporate
purposes.
The Company met fiscal 1997 capital requirements with cash generated
by operations, the proceeds from the intra-state offering and borrowing on
notes payable. In fiscal 1997 the Company's operations generated approximately
$644,352 in cash, as compared to $551,804 in fiscal 1996 and
9
<PAGE> 11
$461,811 in fiscal 1995. The Company's restaurant operations are labor
intensive and do not have significant receivables or inventory. The Company
receives trade credit based upon negotiated terms in purchasing food and
supplies and ordinarily operates with a relatively small level of working
capital.
The Company's principal capital requirements are the funding of new
restaurant development or acquisitions and remodeling of existing units. During
fiscal 1997, the Company constructed and opened one unit in The Colony, Texas,
and began construction of a second unit in Richardson, Texas, and purchased its
corporate offices facility. The total capital outlay for the year was
$2,288,392. Opening additional Company-owned restaurants is a key component of
its expansion strategy.
The Company is currently operating out of cash flow from operations.
The Company did two private placements of the A Debentures and the B Debentures
on May 29, 1998 and June 29, 1998 providing net proceeds to the Company of
$2,670,000. The proceeds will be used to fund the Company's expansion strategy
of opening additional Street Talk Cafe restaurants in the Dallas/Ft. Worth
market area. (See Note 3 to interim condensed financial statements "Other
Events").
PLAN OF OPERATIONS
The Company has planned the following operations for the 1998 calendar
year, including:
(i) Open three additional Street Talk Cafe restaurants at locations
still to be negotiated.
(ii) Convert the Fresh'n Lite Cafe & Grill located in The Colony,
Texas to a Street Talk Cafe.
EMPLOYEES
The Company expects to hire three full time management personnel and
thirty part time hourly personnel with the opening of each new restaurant
operation. The cost of these personnel should be 25% of the annual operating
revenue to be generated by each operation. The initial cost of hiring and
training of all personnel is covered in the store start up costs.
YEAR 2000 COMPLIANCE
The Company uses current versions of widely used, publicly available
software for its accounting, data processing, and point of sale computer
requirements. The providers of the software utilized by the Company have stated
that there will be no failures in the programs used by the Company resulting
from the year 2000. The Company does not utilize any customized software. The
Company has not yet determined the impact, if any, that year 2000 issued may
have on its vendors. However, the Company believes there are adequate
alternative vendors that can supply products and services to the Company if
necessary. Finally, the Company's business is not highly dependent upon
electronic data processing. In conclusion, the Company does not believe it is
at a material risk from year 2000 issues.
10
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On May 29,1998, the Company issued $1,500,000 of the A Debentures to
the Investors. The private placement yielded $1,335,000 in net proceeds to the
Company (after deduction for the payment of the placement agent's fees and fees
of counsel for the Investors). In connection with the private placement, the
Company also issued to the Investors, Warrants to purchase up to an aggregate
of 75,000 shares of the Company's common stock. The Company issued to the
placement agent a Warrant to purchase up to 50,000 shares of the Company's
common stock. The exercise price for the Warrants is $4.43, which is equal to
110% of the average closing bid prices of the Company's common stock for the
five trading days immediately preceding May 29, 1998.
The A Debentures can be converted into shares of the Company's common
stock. The number of shares of common stock to be issued upon any such
conversion will be determined based upon the lesser of (a) $4.00 per share (the
closing bid price of the common stock on May 28, 1998), or (b) the average
closing bid prices of the Company's common stock for the five trading day
period ending on the trading day immediately preceding the date on which such A
Debenture is converted, multiplied by a discount ranging from 25% to 17.5%. The
Company granted to the Investors certain registration rights with respect to
the shares of common stock underlying the A Debentures and the Warrants.
The beneficial conversion feature attached to the A Debentures is
valued at $500,000. The value is calculated at the date of issue as the
difference between the conversion price most beneficial to the investor and the
fair value of the common stock into which the security is convertible,
multiplied by the number of shares into which the security is convertible. This
amount will be amortized into interest expense during the period between
issuance of the debt and the date the securities can be converted at the highest
discount.
On June 30, 1998, the Company issued $1,500,000 of the B Debentures to
two of the Investors. The private placement yielded $1,335,000 in net proceeds
to the Company (after deduction for the payment of the placement agent's fees
and fees of counsel for two of the Investors). In connection with the private
placement, the Company also issued to two of the Investors, Warrants to
purchase up to an aggregate of 75,000 shares of the Company's common stock. The
Company issued to the placement agent a Warrant to purchase up to 50,000 shares
of the Company's common stock. The exercise price for the Warrants is $4.43,
which is equal to 110% of the average closing bid prices of the Company's
common stock for the five trading days immediately preceding May 29, 1998.
The B Debentures can be converted into shares of the Company's common
stock. The number of shares of common stock to be issued upon any such
conversion will be determined based upon the lesser of (a) $4.00 per share (the
closing bid price of the common stock on May 28, 1998), or (b) the average
closing bid prices of the Company's common stock for the five trading day
period ending on the trading day immediately preceding the date on which such B
Debenture is converted, multiplied by a discount ranging from 25% to 17.5%. The
Company granted to two of the Investors certain registration rights with
respect to the shares of common stock underlying the B Debentures and the
Warrants.
The beneficial conversion feature attached to the B Debentures is
valued at $500,000. The value is calculated at the date of issue as the
difference between the conversion price most beneficial to the investor and the
fair value of the common stock into which the security is convertible,
multiplied by the number of shares into which the security is convertible. This
amount will be amortized into interest expense during the period between
issuance of the debt and the date the securities can be converted at the highest
discount.
If the A Debentures and the B Debentures are converted and the
Warrants are exercised, then the ownership positions of the shareholders who
own the Company's common stock will be diluted.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders was held on May 1, 1998.
(b) Each of the management's nominees, as described below, was
elected a director to hold office until the next annual
meeting of shareholders or until his or her successor is
elected and qualified.
11
<PAGE> 13
Stanley L. Swanson, Curtis A. Swanson, Henry Leonard, Ed
Dmytryk and Bob Lilly.
<TABLE>
<CAPTION>
Number of Affirmative Number of Withhold
Votes Cast Authority Votes Cast
--------------------- --------------------
<S> <C> <C>
4,567,896 0
</TABLE>
(c) The following matter was also voted upon at the meeting and
approved by the following shareholders:
(i) approval of the Company's 1997 Incentive Stock Option Plan
authorizing the issuance of up to 300,000 options to
purchase the Company's common stock at a price equal to the
bid price of the common stock as quoted by the NASDAQ OTC-BB
or other applicable market on the day of issuance. Said
options are exercisable for a period of 5 years from the
date of issuance.
<TABLE>
<CAPTION>
Number of Affirmative Number of Negative
Votes Cast Votes Cast
--------------------- ------------------
<S> <C> <C>
4,567,896 0
</TABLE>
<TABLE>
<CAPTION>
Number of Abstain Votes Cast
----------------------------
<S> <C>
0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Hereafter set forth as an exhibit to the Form 10-QSB of Fresh'n
Lite, Inc. is the following exhibit:
<TABLE>
<CAPTION>
No. Description of Exhibit
--- ----------------------
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
(b) Current Reports on Form 8-K:
1. Current Report on Form 8-K dated May 29, 1998 pursuant to
Item 5.
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FRESH'N LITE, INC.
(Registrant)
Date: August 14, 1998 By: /s/ Stanley L. Swanson
------------------------------------
Stanley L. Swanson, Chief
Executive Officer
(Duly Authorized Signatory)
Date: August 14, 1998 By: /s/ Curtis A. Swanson
------------------------------------
Curtis A. Swanson, Chief Financial
Officer and Executive Vice
President
(Duly Authorized Signatory)
13
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Description of Exhibit
- --- ----------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,789,639
<SECURITIES> 0
<RECEIVABLES> 75,000
<ALLOWANCES> 0
<INVENTORY> 40,270
<CURRENT-ASSETS> 1,829,909
<PP&E> 8,281,506
<DEPRECIATION> (479,132)
<TOTAL-ASSETS> 9,974,995
<CURRENT-LIABILITIES> 419,841
<BONDS> 2,206,874
0
0
<COMMON> 63,568
<OTHER-SE> 6,998,512
<TOTAL-LIABILITY-AND-EQUITY> 9,974,995
<SALES> 1,740,854
<TOTAL-REVENUES> 2,030,533
<CGS> 473,611
<TOTAL-COSTS> 977,884
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77,734
<INCOME-PRETAX> 501,304
<INCOME-TAX> 0
<INCOME-CONTINUING> 501,304
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 501,304
<EPS-PRIMARY> .079
<EPS-DILUTED> .079
</TABLE>
