SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended April 30, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 0-26454
PL BRANDS, INC.
(Exact name of small business issuer in its charter)
Delaware 98-0142664
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
10 Planchet Road, Unit 6
Concord, Ontario, Canada L4K 2C8
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (905) 761-0888
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $.001 par value
Indicate by check mark whether the registrant (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 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
NO X
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K
or any amendment to this Form 10-K. [X]
State issuer's revenues for its most recent fiscal year:
$2,218,219
The aggregate market value of the voting stock held by non-
<PAGE>
affiliates of the registrant was $20,592,000. based upon the
average of the bid and asked price of the Common Stock of $5.00 as
of April 30, 1996.
The number of shares outstanding of the issuer's classes of Common
Stock as of April 30, 1996:
Common Stock, $.001 Par Value 4,120,000 shares
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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Item 1. Description of Business
Background
PL Brands, Inc. (the "Company") was originally incorporated under the
name "Malone Road Investments, Ltd." on August 6, 1990 in the Isle of Man. The
Company was redomesticated in the Turks and Caicos Islands on April 21, 1992,
and subsequently domesticated as a Delaware corporation on May 12, 1994.
Pursuant to Delaware law the Company is deemed to have been incorporated in
Delaware as of August 6, 1990. The Company changed its name to PL Brands, Inc.
on June 6, 1994 to conform to the name under which it had been doing business.
The Company's principal business is in development, production and
marketing of private label prepared foods. Prior to January 1, 1994 the
Company's activities were primarily limited to research and development of its
business plan and recruitment of personnel. Full-time operations began in March
1994. On August 19, 1994 the Company purchased 100% of the outstanding shares of
Alma Pack Bottling Corporation. Alma Pack's bottling business has comprised the
Company's principal operation since August 1994. Unless otherwise noted, all
information herein is given in U.S. dollars.
The Private Label Food Industry
All major North American grocery chains have introduced private label
house brands in recent years as a method of improving gross margins. In
recessionary economic periods, these chains typically increase emphasis on house
brands for two principal reasons. First, the house brand is typically priced
less expensively than national brands, which in a recessionary economy is
usually important for consumers. Second, in the observation of management,
during the current economic conditions most grocery chains have been obliged to
maintain low prices, leading to low margins, to maintain market share.
Management believes that house brands contribute an increasing percentage of a
grocery chain's grocery profits.
The grocery chains develop many house brands internally, but have
always involved outside suppliers to assist them in developing new house brands.
Management believes that the grocery chains are currently experiencing
historically low profitability, which in order to maintain levels of
profitability (or avoid increasing losses, as the case may be) management
believes that these chains are relying more and more on outside contractors
(such as the Company) to develop their house brands.
The Private Label Food Business
The process of developing and distributing a private label food product
requires the coordination of efforts in a variety of business areas.
In the commencement of each project, market research is critical in
determining not only those products which are purchased in high volumes by
consumers, but also those products within this group which are most likely to be
accepted as private label products. The Company, working with a major
supermarket chain, is focusing on new products to introduce in the near future.
The Company intends to concentrate on products with higher margins that have all
natural ingredients and are low in artificial flavorings and colorings, and more
economical in price.
Labeling and packaging must not only be attractive and appropriate for
the specific product, but must meet applicable governmental regulations. These
regulations are subject to change by the governments of North America and even
by individual provinces and states, and primarily involve disclosure of nutrient
content and ingredients.
Products must be formulated to appeal to a broad range of consumer
tastes. The formulation must be economically and practically feasible, and
appropriate sources of supply must be secured.
3
<PAGE>
Products
The Company's principal products are concentrated on spring water
products. Spring-water based products including drinking water, flavored or
unflavored, and spring water teas. Projects under development include specialty
popcorn lines. The Company has also brokered snack products and expects to
continue to engage in food brokerage activities in the future.
In August 1994, the Company acquired bottling equipment and related
assets for a total consideration of cash and debt of $825,000 (Canadian) to use
for bottling spring water products.
The raw materials for the Company's products are readily available from
a wide source of suppliers, and the Company is not dependant upon any one
supplier or group of suppliers. The Company's current customers include
Flemming, Co., Winn-Dixie, A & P, Bi-Lo, Red Food Stores, Wakefern Food Company,
Topco and Health For Life Brands of Arizona, Inc. The Company is negotiating
additional contracts with other supermarket chains.
Products are intended to be of high, upscale quality, equal or better
in quality than competing national brands.
Plan of Operation
The Company has acquired, in August 1994, additional production
equipment which has enabled the Company to produce additional products. The
Company intends to seek out contracts for additional products concentrating on
major U.S. and Canadian grocery chains.
Competition
The market for the Company's products is highly competitive, and the
Company expects competition to become more intense. The Company faces
competition from a multitude of different companies in the private label food
industry and also competes with branded products. Almost all of the Company's
existing and potential competitors have greater name recognition, more extensive
marketing capabilities and substantially greater financial, technological and
personal resources than those available to the Company. There can be no
assurance that the Company will be able to compete successfully in the future or
that competitive pressures will not result in price reductions or delays or
cancellations of customer orders which would adversely affect the Company's
results of operations.
Many of the Company's customers are food retailers who have in-house
private label organizations. These retailers are often not able to develop new
products as timely as the Company or as cost effectively. Management believes
that the Company's competitive advantage lies in its expertise in market
research and in its relationships with suppliers and potential suppliers.
Employees
As of April 30 1996, the Company had 16 employees other than its
officers.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion regarding the financial statements of the
Company should be read in conjunction with the financial statements and notes
thereto.
Operations
Net sales for the year ended April 30, 1996 were $2,218,219, or
slightly less than for the year ended April
4
<PAGE>
30, 1995 of $2,221,726. Gross margin decreased from $251,489 or 11.3% of net
sales in the year ended April 30, 1995 to $166,965 or 7.5% of net sales in the
year ended April 30, 1996. The reason for the decrease was a combination of
continued pressure on selling prices and increased material costs.
Operating expenses decrease from $983,074, or 44.3% of net sales in
fiscal 1995 to $681,309, or 30.7% of net sales, primarily or as a result of cost
cutting measures implemented by management.
Loss from operations decreased from $731,585 to $514,344 from fiscal
1995 to 1996 primarily as the result of the decrease in operating expenses. In
1996 the Company wrote off investments in two proposed acquisitions and wrote
off acquisition good will in 1995, resulting in net losses of $800,009 in fiscal
1996 and $1,113,287 in fiscal 1995.
Liquidity
As of April 30, 1996, the Company's working capital deficit was
$1,115,937 and its shareholder's deficit was $1,033,670. The Company received
$648,796 from the proceeds of a private offering of debentures in August 1994
and an additional $180,390 in September 1994. In September 1995 the Company and
the debenture holders agreed to convert the convertible debentures into
3,000,000 shares of common stock in January 1996 and the Company sold 960,000
shares of common stock at a price of $.05 per share. The Company intends to sell
additional debentures or preferred stock in the future.
The Company anticipates its need for cash over the next 12 months for
general and administrative expenses to be $90,000 per month. This amount is
expected to be from operations and provided by private placements of debt or
equity. The Company also desires to purchase additional manufacturing and
packaging equipment to manufacture and package food products, up to
approximately $5,000,000 in value, over the next twelve months. Although the
Company's business does not require the purchase of this equipment since it can
contract with other parties for these services, Management believes that the
ownership of its own equipment will result in better profit margins. The Company
has no specific plans for any placement of its securities.
Item 2. Description of Property
The Company rented office space in downtown Mississauga, in Ontario,
Canada until December 1995.
The Company acquired certain bottling equipment in Toronto in August
1994. The equipment is operated at a location with 24,000 square feet, at
$11,400 Canadian per month. The lease expires on January 31, 1999. The current
executive officers were moved to this location in January 1996.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) Market Information
The Common Stock has traded infrequently and sporadically on
the Electronic Bulletin Board under <PAGE>
the symbol "PLBC" from October 28, 1994 to September 15, 1995 and thereafter
under the symbol "PLCB." As of July 15, 1996, the bid and ask prices of the
Common Stock was $5.00.
(b) Holders
As of April 30, 1996, there were approximately 496 holders of
Company common stock.
(c) Dividends
The Company has not paid any dividends on its common stock.
The Company currently intends to retain any earnings for use in its business,
and therefore does not anticipate paying cash dividends in the foreseeable
future. The Company is under no contractual restrictions on the payment of
dividends.
Item 7. Financial Statements and Supplementary Data
Financial Statements
The following financial statements are included herein.
Report of Independent Auditors--Deloitte & Touche Chartered Accountants
Report of Independent Auditors--Armando Ibarra CPA
Balance Sheet at April 30, 1996 and 1995
Statement of Income for the years ended April 30, 1996, 1995 and 1994
Statement of Stockholders' Equity Statement of Cash Flows for the years
ended April 30, 1996, 1995 and 1994 Notes to Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
1. (i) The Registrant's former independent
accountant Armando C. Ibarra ("Ibarra") resigned
from that capacity on July 3, 1996.
(ii) The report by Ibarra on the financial statements of the
Registrant dated September 9, 1995, including balance sheets as of April 30,
1995 and 1994 and the statements of income, cash flows and statement of
stockholders' equity for the years ended April 30, 1995 and 1994 did not contain
an adverse opinion or a disclaimer of opinion, or was qualified or modified as
to uncertainty, audit scope or accounting principles.
(iii) During the period covered by the financial statements
through the date of resignation of the former accountant, there were no
disagreements with the former accountant on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
A letter from the former independent accountant for the
Registrant will be filed by amendment as Exhibit 16.1 to this annual report in
which the resignation of Ibarra was reported.
2. On July 3, 1996 the Registrant engaged Deloitte & Touche,
Chartered Accountants, as its new
independent accountants.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the
Exchange Act.
The members of the Board of Directors of the Company serve until the
next annual meeting of stockholders, or until their successors have been
elected. The officers serve at the pleasure of the Board of Directors.
Information as to the directors and executive officers of the Company is as
follows:
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Name Age Office
Andre Corbeil 52 President and Director
Robert Brown 36 Vice President -
Finance, Secretary,
Treasurer and Director
John W. Martin 52 Director
Edward I. Willis 72 Director
Frank Marrocco 49 Director
Fred Procopio 40 Vice President
- Operations and
Director
Andre Corbeil, has been Chief Executive Officer of the Company since
September 1995. Mr. Corbeil has over 20 years experience as a business executive
for various entities. Since 1978, Mr. Corbeil has been President/Owner of A.
Corbeil and Associates Ltd., providing business consulting services. From 1989
to 1991, Mr. Corbeil was the Co-founder and Chief Executive Officer of the
Canadian Arctic Beverage Corporation, the producer of the beverage "Arctic
Twist". As CEO, Mr. Corbeil was responsible for generating the initial start-up
financing and also negotiated the sale of the corporation. He was the co-founder
and Chief Executive Officer from 1991 to 1992 of Spring Cola Beverage
Corporation which provides private label products to supermarket chains.
Robert Brown, has been Secretary, Treasurer and Director of the
Company since May 1994. Mr. Brown was controller of Trafficon Holdings, Inc., a
transportation company, from 1986 to 1990. Mr. Brown was Vice President of
Finance of Colonial Export Corporation from 1990 to 1991, of Resource Food and
Beverage Corporation from 1991 to 1994, and of Spring Cola Beverage Corporation
from 1991 to 1994.
John W. Martin, Director - Mr. Martin has been president of Mann
Testing Laboratories, Ltd. since 1984 and was employed by that Company as Vice
President and Operations Manager from 1975 to 1984. He has been Director and
Chief Executive Officer of Equitest, Inc. since 1986, and of Acres Analytical
Limited since 1989. He is also a director of Spring Cola Beverage Corp. In
1988 Mr. Martin was President of the International Association of Official
Racing Chemists. Mr. Martin is a published author, as well as a guest lecturer.
He has published numerous scientific and technical articles. Mr. Martin is a
member of the Association of Chemical Professionals of
Ontario and the Association of Professional Engineers of Ontario.
Edward I. Willis, Director - Mr. Willis is a retired business
executive. He has been President and Chief
Executive Officer of Ireton International Barter since 1982. Ireton is engaged
in the export of Canadian products
to Southeast Asia, with offices in Hong Kong, Beijing, Manila, Singapore,
Bangkok and Kuala Lumpor. Mr. Willis
is a former naval officer in the Royal Canadian Navy.
Frank N. Marrocco, Director - Mr. Marrocco has engaged in the practice
of law for 22 years specializing in immigration and litigation. He is a partner
at the firm of Smith, Lyons, Torrance, Stevenson & Mayer; prior thereto, he was
a partner of the firm of Marrocco, David and Trudell. He has published over 20
legal articles. He was reelected to the Board in July 1995 after his resignation
in February 1995.
Fred Procopio, has been Vice President - Operations and Director of
the Company since July 1995. Prior to that time he was employed by Alma Pack
Bottling Corporation, acquired by the Company in August 1994. In April 1989, Mr.
Procopio and a partner incorporated Alma Pack Bottling Corporation. Alma Pack
Customers were first local and then expanded over the years to the U.S. Over the
last year sales have expanded to Asia and Africa.
Item 10. Executive Compensation
No compensation was paid by the Company to any executive officer prior
to April 30, 1994. Directors are reimbursed for expenses incurred in connection
with performance of their duties as directors. In fiscal 1995, Brian Munholland,
Chief Executive Officer, was paid $60,000 and Robert Brown, Chief Financial
Officer was paid $42,000. In Fiscal 1996 there are no other forms of long term
or other compensation.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information relating to the beneficial
ownership of Company common stock
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by those persons beneficially holding more than 5% of the Company common stock,
by the Company's directors and executive officers, and by all of the Company's
directors and executive officers as a group. The address of each person is care
of the Company unless noted.
Percentage
Name of Number of of Outstanding
Stockholder Shares Owned Common Stock
Andre Corbeil 0 *
Fred Procopio 0 *
Rob Brown 500 *
John W. Martin 300 *
Edward I. Willis 300 *
Frank Morocco 500
All officers and directors
as a group (5 persons) 1600 *
* less than 1%
Item 12. Certain Relationships and Related Transactions
Not Applicable.
PART IV
Item 13. Exhibits
Sequential
Exhibit No. Document Description Page No.
The following exhibits required by Item 601 of Regulation S-B are
filed herewith:
3. Certificate of Incorporation and Bylaws
3.1. Certificate of Incorporation(1)
3.2 Amendment to Certificate of Incorporation(1)
3.3 Bylaws(1)
4. Instruments Defining Rights of Security holders
4.1 Form of Convertible Debenture(1)
16. Change in Auditors-- to be filed by amendment
21. Subsidiaries of the Registrant - PL Brands Canada,
Alma Pack Bottling Corporation and
PLBC (NRO), Inc. are incorporated in Ontario.
(1) Incorporated by reference to the exhibits filed with the Company's
Registration Statement on Form 10-SB,
File No. 0-24888.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized.
Dated: September 20, 1996 PL BRANDS, INC.
By:
Andre Corbeil
Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on September 20, 1996..
By:
Andre Corbeil
Chief Executive Officer (principal executive officer) and Director
By:
Robert Brown
Vice President - Finance, Secretary, Treasurer (principal accounting and
financial officer) and Director
By:
Frank Marrocco
Director
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AUDITORS' REPORT
To the Shareholders of
PL Brands, Inc.
We have audited the consolidated balance sheet of PL Brands, Inc. and
subsidiaries as at April 30, 1996 and the related consolidated statements of
earnings, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of PL Brands, Inc. and subsidiaries as
of April 30, 1996 and the results of their operations and their cash flows for
the year ended, in conformity with generally accepted accounting principles in
the United States of America.
The April 30, 1995 and April 30, 1994 consolidated financial statements were
audited by another firm of auditors who expressed an opinion on those statements
and the April 30, 1995 financial statements contained, in their report dated
September 9, 1995, a reservation pertaining to the opening inventories.
Deloitte & Touche
Chartered Accountants
North York, Ontario,
July 3, 1996.
<PAGE>
ARMANDO C. IBARRA
CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Stockholders of
P. L. Brands, Inc.
1 City Centre Drive, Suite 700
Mississauga, Ontario, Canada
We have audited the accompanying consolidated balance sheets of P. L. Brands,
Inc. (a Delaware corporation) and subsidiaries as of April 30,1 995, and 1994
and the related consolidated statements of income, retained earnings, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility it to express an
opinion on these consolidated financial statements based on our audits. We did
not audit the financial statements of Alma Pack Bottling Company, a wholly owned
subsidiary, which statements reflect total assets of $570,482 and $630,307 as of
April 30, 1995 and 1994, respectively, and total revenues of $2,221,726 and
$1.084,490, respectively, for the years then ended. Except as explained in the
third paragraph, those statements were audited by other auditors whose report
has been furnished to us, and out opinion, insofar as it relates to the amounts
included for Alma Pack Bottling Company, is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit and the report of other auditors provide
a reasonable basis for our opinion.
The opinion of the auditors on the 1995 and 1994 financial statements of Alma
Pack Bottling Company was qualified because they were not able to observe the
counting of the physical inventories of Alma Pack Bottling Company as of April
30, 1994 (stated at $180,299), nor were they able to satisfy themselves about
inventory quantities by means of other auditing procedures.
In our opinion, based on our audits and the report of other auditors, except for
the effects of such adjustments, if any, that might have been determined to be
necessary had the other auditors been able to observe the counting of the
physical inventories of Alma Pack Bottling company, the consolidated financial
statements referred to in the first paragraph present fairly, in all material
respects, the financial position of Private Label Brands, Inc. and subsidiaries
as of April 30, 1995 and 1994, and the results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles.
ARMANDO C. IBARRA, CPA
Chula Vista, California
September 9, 1995
<PAGE>
<TABLE>
<CAPTION>
PL BRANDS, INC.
Consolidated Balance Sheets
As of April 30, 1996 and April 30, 1995
1996 1995
ASSETS
CURRENT
<S> <C> <C>
Cash in bank and on hand $ 4,047 $ 41,559
Accounts receivable (less allowance for doubtful
accounts of $13,800 on April 30, 1996) 386,811 218,576
Inventory 143,907 132,055
Prepaids 8,429 3,725
Current deferred tax asset -- 35,929
543,194 431,844
FIXED ASSETS (Note 5) 255,996 250,913
OTHER ASSETS
Non-current deferred tax asset -- 76,186
Deposits (Note 8) -- 167,126
-- 243,312
$ 799,190 $ 926,069
LIABILITIES
CURRENT
Bank Indebtedness (Note 9) $ 146,843 $ 110,483
Accounts payable - trade 564,332 318,870
Shareholders' loan (Note 10) 702,978 346,053
Current portion of long-term debt (Note 9) 41,128 14,720
Due to former shareholders -- 233,123
Payroll taxes -- 1,744
Amounts received for the issuance of convertible
debentures and capital stock (Note 7) 203,850 --
1,659,131 1,024,993
NET LONG-TERM DEBT (Note 9) 173,729 1,046,155
1,832,860 2,071,148
STOCKHOLDERS' EQUITY
CAPITAL STOCK (Note 3) 4,120 160
ADDITIONAL PAID-IN CAPITAL 889,066 15,840
ACCUMULATED DEFICIT (1,957,998) (1,157,989)
CUMULATIVE TRANSLATION ADJUSTMENT 31,142 (3,090)
(1,033,670) (1,145,079)
$ 799,190 $ 926,069
</TABLE>
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<TABLE>
<CAPTION>
PL BRANDS, INC.
Consolidated Statement of Earnings For the years ended April
30, 1996, April 30, 1995, and April 30, 1994
1996 1995 1994
<S> <C> <C> <C>
NET SALES $ 2,218,219 $ 2,221,726 $ --
COST OF SALES 2,051,254 1,970,237 --
GROSS PROFIT 166,965 251,489
OPERATING EXPENSES
Consulting fees and commissions 228,459 174,933 17,263
Salaries 107,239 200,308 --
Office expense 88,902 160,187 15,150
Accounting and legal 60,271 160,077 10,025
Automobile 39,168 28,254 --
Interest 34,549 75,525 --
Bank charges 34,410 5,793 --
Telephone 28,390 19,727 4,674
Travel 25,028 14,344 --
Insurance 17,516 6,909 --
Business taxes 10,936 6,113 --
Entertainment 3,904 5,506 --
Marketing 2,537 125,398 4,444
681,309 983,074 51,556
LOSS FROM OPERATIONS (514,344) (731,585) (51,556)
OTHER INCOME (EXPENSES)
Interest income 546 3,156 --
Gain on foreign exchange transactions 4,098 3,046 3,169
Depreciation and amortization (11,068) (9,309) (4,204)
(6,424) (3,107) (1,035)
LOSS BEFORE INVESTMENT
WRITEOFF AND TAXES (520,768) (734,692) (52,591)
INVESTMENT WRITEOFF (Note 8) 167,126 -- --
GOODWILL ON ACQUISITION
WRITEOFF (Note 11) -- (482,983) --
LOSS BEFORE TAXES (687,894) (1,217,675) (52,591)
INCOME TAX BENEFIT (NOTE 4) (112,115) 104,388 7,889
NET LOSS FOR THE YEAR $ (800,009) $ (1,113,287) $ (44,702)
NET LOSS PER SHARE OF
COMMON STOCK $ (0.543) $ (6.958) $ (0.298)
WEIGHTED AVERAGE SHARES
OUTSTANDING (Note 3) 1,472,438 160,000 150,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PL BRANDS, INC.
Consolidated Statements of Cash Flows For the years ended April
30, 1996, April 30, 1995 and April 30, 1994
1996 1995 1994
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss for the year $ (800,009) $ (1,113,287) $ (44,702)
Adjustment to reconcile:
Depreciation 51,766 60,045 4,204
Investment writeoff 167,126 -- --
Goodwill on acquisition writeoff -- 482,983 --
Gain in foreign transactions (4,098) (3,046) (3,169)
Change in assets and liabilities affecting cash flows:
Accounts receivable (168,235) (218,576) --
Inventory (11,852) (132,055) --
Prepaids (4,704) (3,304) (792)
Deferred taxes 112,115 (104,388) (7,889)
Accounts payable 245,462 306,144 14,470
Bank Indebtedness 36,360 110,483 --
Payroll taxes (1,744) -- --
Net cash provided by operating activities (377,813) (615,001) (37,878)
INVESTING ACTIVITIES
Purchase of fixed assets (56,849) (18,315) (42,039)
Deposits on companies -- (167,126) --
Net cash provided by investing activities (56,849) (185,441) (42,039)
FINANCING ACTIVITIES
Stock issuance 48,000 1,000 14,000
Amounts received for the issuance of
convertible debentures and capital stock 203,850 -- --
Foreign exchange gain 4,098 3,046 3,169
Decrease in tax benefit -- 104,388 --
Proceeds from shareholders' loan 356,925 161,620 184,433
Payments to former shareholders (233,123) -- --
Payments of bank loans payable (16,832) (399,776) --
Proceeds from debentures -- 829,186 --
Net cash provided by financing activities 362,918 699,464 201,602
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 34,232 19,852 --
NET INCREASE (DECREASE) IN CASH (37,512) (81,126) 121,685
CASH AT BEGINNING OF YEAR 41,559 122,685 1,000
CASH AT END OF YEAR $ 4,047 $ 41,559 $ 122,685
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PL BRANDS, INC.
Consolidated Statement of Stockholders' Equity
For the period April 30, 1993 to April 30, 1996
Common Stock Additional Cumulative
Number Paid-In Accumulated Translation
of Shares Amount Capital Deficit Adjustment Total
(see Note 3)
<S> <C> <C> <C> <C> <C> <C>
BALANCE - April 30, 1993 10,000 $ 10 $ 990 $ -- $ -- $ 1,000
Stock Issuance 140,000 140 13,860 -- -- 14,000
Net loss for the year ended
April 30, 1994 -- -- -- (44,702) -- (44,702)
BALANCE - April 30, 1994 150,000 150 14,850 (44,702) -- (29,702)
Stock Issuance 10,000 10 990 -- -- 1,000
Foreign currency translation
effect -- -- -- -- (3,090) (3,090)
Net loss for the year ended
April 30, 1995 -- -- -- (1,113,287) -- (1,113,287)
BALANCE - April 30, 1995 160,000 160 15,840 (1,157,989) (3,090) (1,145,079)
Debenture conversion 3,000,000 3,000 826,186 -- -- 829,186
Stock Issuance 960,000 960 47,040 48,000
Foreign currency translation
effect -- -- -- -- 34,232 34,232
Net loss for the year ended
April 30, 1996 -- -- -- (800,009) -- (800,009)
BALANCE - April 30, 1996 4,120,000 $ 4,120 $ 889,066 $(1,957,998) $ 31,142 $(1,033,670)
</TABLE>
<PAGE>
PL BRANDS, INC.
Notes to Consolidated Financial Statements
1. FUTURE OPERATIONS
As shown in the accompanying financial statements, the Company incurred a
significant net loss for the years ended April 30, 1996 and April 30,
1995, and the continued stockholders' deficiency raises substantial doubt
about its ability to continue as a going concern.
Management has instituted a plan to obtain financing to purchase other
companies and feels this will contribute toward achieving profitability
and positive cash flows. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue
as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
PL Brands, Inc. (the "Company") was incorporated under the laws of the
State of Delaware on May 12, 1994 concurrently with the filing of a
Certificate of Domestication by its predecessor, Malone Road Investments,
Ltd., which was incorporated in the Isle of Man on August 6, 1990.
Pursuant to Delaware corporate law, the Company is declared to have been
incorporated in Delaware as of August 6, 1990.
The Company is a holding company that owns and operates a bottling
company in the greater Toronto area, Canada.
Segment information
The business operations of the Company are concentrated in one segment.
Major customers
The Company's largest customer in 1996 accounted for 20% of 1996
revenues, 20% of 1995 revenues and 25% of 1994 revenues. No other
customer accounted for more than 10% of total revenues in any of the
three years in the period ended April 30, 1996.
Basis of consolidation
These consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, PL Brands Canada Inc., Alma
Pack Bottling Corporation and PLBC (NRO), Inc. All significant
intercompany transactions and accounts have been eliminated in
consolidation.
Income taxes
The Company and its subsidiaries file separate tax returns. Deferred
income taxes are provided for the tax effects of differences between the
financial and tax basis of assets and liabilities and for operating
losses that are available to offset future taxable income.
<PAGE>
PL BRANDS, INC.
Notes to Consolidated Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fixed assets
Fixed assets are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful life of the asset. Useful
life of fixed assets is five years.
Functional currency
The functional currency of the subsidiaries is the Canadian dollar. All
amounts in the balance sheet have been converted to U.S. dollars using
the exchange rate as of the end of period and using a weighted average
rate of exchange for income statement accounts. The translation gain from
foreign currency transactions is recorded on a separate line item of
income. Furthermore, the translation gain or loss is reflected in the
equity section.
Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues, expenses,
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements during the reported
period. Actual results could differ from those estimates.
Earnings per share
Earnings per share are based on the weighted average number of shares of
common stock outstanding during the respective years. Outstanding stock
options have been considered in the earnings per share calculation when
their effect is dilutive.
COMMON AND PREFERRED STOCK
Common stock
The Company is authorized to issue 20,000,000 shares of $.001 par value
common stock. At April 30, 1996 and April 30, 1995 there were 4,120,000
and 160,000 shares issued and outstanding respectively. When voting each
share equals one vote.
Preferred stock
The Company is authorized to issued 1,000,000 shares of preferred stock
of $.001 par value. Currently the Company has no shares outstanding. The
Company's Board of Directors has authority to issue all or any of the
authorized but unissued preferred stock in one or more series and to
determine voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of such series.
<PAGE>
PL BRANDS, INC.
Notes to Consolidated Financial Statements
3. COMMON AND PREFERRED STOCK (Continued)
Reverse stock split/earnings per share
On September 15, 1995, the Company effected a 1 for 100 reverse stock
split of the common stock which reduced the number of common shares
outstanding from 16,000,000 to 160,000, 15,000,000 to 150,000 and
1,000,000 to 10,000 as at April 30, 1995, April 30, 1994 and April 30,
1993 respectively. Stockholders' equity has been restated to give
retroactive recognition to the reverse stock split for all periods
presented by reclassifying from common stock to additional paid-in
capital, the par value of the shares consolidated from the reverse split.
In addition, all share and per share information has been restated to
reflect the reverse stock split.
Stock issuance
Effective December 28, 1995, the Company issued 960,000 common shares for
a cash consideration of $48,000.
Debenture conversion
Effective January 1, 1996, in connection with the Debt Restructuring
Agreement with the holders of the debentures, the outstanding convertible
debentures amounting to $829,186 were converted into 3,000,000 common
shares.
4. INCOME TAXES
<TABLE>
<CAPTION>
The deferred tax asset consists of the following:
1996 1995
<S> <C> <C>
Deferred tax asset $ 560,567 $ 249,406
Deferred tax asset valuation allowance (560,567) (137,291)
Net deferred tax asset $ -- $ 112,115
</TABLE>
The tax benefit is the result of operation losses which will be
deductible against future income.
<PAGE>
PL BRANDS, INC.
Notes to Consolidated Financial Statements
5. FIXED ASSETS
<TABLE>
<CAPTION>
1996 1995
Accumulated Net Book Net Book
Cost Amortization Value Value
<S> <C> <C> <C> <C>
Machinery and equipment $ 709,369 $ 468,428 $ 240,941 $ 212,104
Office equipment 35,882 24,578 11,304 34,115
Leasehold improvements 58,572 54,821 3,751 4,694
$ 803,823 $ 547,827 $ 255,996 $ 250,913
</TABLE>
6. LEASE COMMITMENTS
A wholly owned subsidiary is obligated under long-term leases to make the
following minimum annual lease payments:
1997 $ 50,200
1998 50,200
1999 33,500
7. AMOUNTS RECEIVED FOR THE ISSUANCE OF CONVERTIBLE DEBENTURES AND CAPITAL
STOCK
Shortly before April 30, 1996, the Company received $52,000 for the
issuance of convertible debentures, and $151,850 for the issuance of
3,037,000 common shares. The issuance of these convertible debentures and
common shares are not reflected on these financial statements and are not
included in the earnings per share calculation because the terms have not
been finalized and the certificates have not been issued.
8. DEPOSITS
The Company had deposited $73,421 and $93,705 with Graphic Workshop
Studios Ltd. and Golden Mayan Foods Ltd., respectively, for the purpose
of acquiring these companies. During the current year, the Company
abandoned its plans to acquire these companies and wrote off the
deposits.
<PAGE>
PL BRANDS, INC.
Notes to Consolidated Financial Statements
9. BANK INDEBTEDNESS AND LONG-TERM DEBT
Bank indebtedness
A general assignment of accounts receivable, inventory and certain fixed
assets has been provided as security for the bank indebtedness. The
Company is allowed to draw on this account as a form of credit.
<TABLE>
<CAPTION>
Long-term debt
1996 1995
<S> <C> <C>
Bank loan due August 15, 2000, payable $41,000 annually
plus interest
(7.75% at April 30, 1996)
at 1.25% over prime $ 214,857 $ --
Bank loan due October 21, 1998, payable $4,400
annually plus interest
(7.75% at April 30, 1996)
at 1.25% over prime -- 195,660
Bank loan due October 21, 1998, payable $10,300
annually plus interest
(7.75% at April 30, 1996)
at 1.25% over prime -- 36,029
214,857 231,689
Convertible debentures (Note 6) -- 829,186
214,857 1,060,875
Less: current portion of bank loan 41,128 14,720
Net long-term debt $ 173,729 $ 1,046,155
</TABLE>
Certain of the Company's fixed assets have been pledged as security for
the long-term debt.
10. SHAREHOLDERS' LOAN
The amount of $702,978 due to shareholders, is non-interest bearing and
payable on demand.
<PAGE>
PL BRANDS, INC.
Notes to Consolidated Financial Statements
11. ACQUISITION
On August 19, 1994, a subsidiary of the Company purchased 100% of the
outstanding shares of Alma Pack Bottling Corporation for $220 in cash.
The acquisition was accounted for using the purchased method. The
purchase price was allocated to assets and liabilities based on the
following estimated fair values at the date of acquisition as determined
by management:
Net tangible assets $ 681,075
Liabilities (1,163,838)
Goodwill 482,983
$ 220
For the year ended April 30, 1995, the write-off of goodwill was not
reflected in the Consolidated Statement of Earnings. The net income for
the year ended April 30, 1995 has been restated to retroactively
recognize the writeoff of the $482,983 of goodwill resulting from the
above acquisition. The earnings per share calculation has also been
restated.
12. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the
current year's presentation.
<PAGE>
