SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended August 2, 1997 Commission File No. 1-6914
SUN CITY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-0950777
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5545 N.W. 35 Ave. Fort Lauderdale, FL 33309
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (954) 730-3333
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 X No_____
<PAGE>
FINANCIAL INFORMATION
The consolidated financial statements included herein have been
prepared by the Company, without audit, according to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such
rules and regulations. The financial statements reflect, in the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to represent fairly the financial
position and results of operations as of and for the periods
indicated. The statements should be read in conjunction with the
financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended February
1, 1997.
The results of operations for the six month period ended August 2,
1997, are not necessarily indicative of results to be expected for
the entire year ending January 31, 1998.
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 2, February 1,
ASSETS 1997 1997
CURRENT ASSETS:
Accounts and trade notes receivable,
less allowance for doubtful accounts
of approximately $543,000 and $460,000
in 1997 and 1996, respectively $5,233,960 $5,521,144
Inventories 2,242,399 2,334,987
Notes receivable - current portion 16,950 18,927
Prepaid expenses 183,630 218,838
TOTAL CURRENT ASSETS 7,676,939 8,093,896
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 108,133 108,133
Buildings and improvements 555,951 499,917
Machinery and equipment 2,254,159 2,243,175
2,918,243 2,851,225
Less accumulated depreciation (1,503,210) (1,319,437)
1,415,033 1,531,788
Properties held for sale 512,148 504,849
Long-term notes receivable 81,060 88,308
Excess of purchase price over fair value
of net assets acquired 1,735,039 1,780,836
OTHER ASSETS 390,244 447,340
TOTAL $11,810,463 $12,447,017
August 2, February 1,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1997
CURRENT LIABILITIES:
Cash Overdraft $ 154,364 214,744
Accounts payable 4,997,092 5,003,332
Accrued expenses 1,236,189 734,354
Current portion of long-term debt 2,064,746 1,720,129
TOTAL CURRENT LIABILITIES 8,452,391 7,672,559
DEFERRED COMPENSATION PAYABLE - 123,106
LONG-TERM DEBT 4,612,545 5,409,828
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value 3,000,000
shares authorized; 2,276,116 shared
issued in 1997 and 1996 227,612 227,612
Capital in excess of par value 1,041,721 1,041,721
Retained earnings 301,754 837,751
1,571,087 2,107,084
Less: Treasury stock at cost, 828,214
shares in 1997 and 1996, respectively (2,653,560) (2,653,560)
Less: Receivable for common stock sold
to ESOP (172,000) (212,000)
TOTAL STOCKHOLDERS' EQUITY (1,254,473) (758,476)
TOTAL $11,810,463 $12,447,017
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED THREE MONTHS ENDED
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
Sales $34,326,102 $34,532,847 $15,005,833 $15,177,943
Costs and Expenses
Cost of goods sold 29,650,798 29,343,376 13,007,924 12,931,538
Operating expenses 2,396,385 2,496,561 1,045,673 1,066,217
Selling, general and
administrative
expenses 2,331,218 2,150,080 1,187,905 964,029
Interest expense 467,362 418,041 228,925 201,784
Other (income), net 16,336 8,024 15,042 14,154
Total Cost and Expenses 34,862,099 34,416,082 15,485,469 15,177,722
Earnings (Loss)
From Operations
Before Income Taxes (535,997) 116,765 (479,636) 221
Provision For
Income Taxes -0- -0- -0- -0-
Net (Loss) Earnings $(535,997) $ 116,765 $(479,636) $ 221
Net (Loss) Earnings Per
Common Share $( .37) $ .08 $(.33) -
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
August 2, August 3,
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
Net earnings $(535,997) $ 116,765
Adjustments To Reconcile Net Earnings
To Net Cash (Used In) Or Provided By
Operating Activities:
Depreciation 206,652 184,797
Amortization of excess of purchase price
over fair market value of net assets
acquired 45,797 83,213
Provision for losses on accounts receivable123,898 118,980
Change in assets and liabilities:
Decrease (increase) in trade accts receivable 163,286 2,392,042
Decrease (increase) in inventories 92,588 22,281
Decrease (increase) in prepaid expenses 35,208 (147,319)
Decrease (increase) in other assets 57,096 (302,026)
(Decrease) increase in accounts payable (6,240) (1,183,108)
Increase (decrease) in accrued expenses 501,835 (286,760)
(Decrease) increase in deferred comp payable (123,106) 12,000
Total Adjustments 1,097,014 894,100
Net Cash Provided By Or (Used In)
Operating Activities $ 561,017 $1,101,865
Cash Flows From Investing Activities:
Capital expenditures (97,196) 5,950
Cash Provided By Or (Used In)
Investing Activities (97,196) 5,950
Cash Flows From Financing Activities:
Proceeds from notes payable 307,352 60,000
Repayments on notes receivable 9,225 5,148
Principal payments on notes payable (760,018) (1,468,890)
Proceeds from receivable from ESOP 40,000 53,000
Proceeds from exercise of options - 75
Net Cash (Used In) Or Provided By
Financing Activities (403,441) (1,350,667)
Net Increase (Decrease) In Cash
and Equivalents 60,380 (333,852)
Cash and Equivalents, Beginning of Year (214,744) 760,885
Cash and Equivalents, End of Year $(154,364) $ 427,033
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion provides information which management
believes is relevant to an assessment and understanding of the
Company's operations and financial condition. This discussion
should be read in conjunction with the financial statements.
COMPANY PROFILE:
Sun City Industries, Inc. (the "Company"), which began in 1949 as
an egg processing and marketing company, has now moved its focus
to the foodservice marketing and distribution business throughout
parts of the eastern seaboard of the United States with a heavy
concentration in the state of Florida.
In 1990, the Company began its expansion as a foodservice
distributor that now includes five centers in Florida covering the
West Coast of Florida, Central Florida and Southeast Florida. In
addition, the Company has operations that distribute to markets in
Atlanta, Georgia, Baltimore, Maryland, Philadelphia, Pennsylvania
and throughout New Jersey.
The Company's clientele includes hotels, restaurants, airline
caterers, country clubs and cruiseship lines.
The Company's current goal is to finalize its pending merger to
take full advantage of the broad based business that currently
exists throughout the heavily populated eastern seaboard of the
United States.
RESULT OF OPERATIONS:
FOR THE SIX MONTHS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996
SALES:
During the six months, consolidated sales were off compared to a
year ago.
Six Total Foodservice % of Egg % of
Months Sales Division Total Division Total
1997 $34,326,102 $31,776,041 92.6% $2,550,061 7.4%
1996 34,532,847 31,541,839 91.3 2,991,008 8.7
Net change $( 206,745) $ 234,202 $( 440,947)
<PAGE>
Explanation:
Foodservice:
Increased sales at the Produce division were $234,202 greater than
sales decreases in the other foodservice divisions.
Eggs:
The decrease in sales of $440,947 results from a decrease of units
sold and lower selling prices on 3.4 million dozens sold.
COST OF GOODS SOLD:
Cost of goods sold include product cost and freight in costs.
During the six months, cost of goods sold increased $307,422. This
increase was generally in line with the Company's business but
especially from the extremely negative impact on costs at the Gulf
Coast division. The rate of change is influenced by the Company's
overall customer and product mix, as well as the changes in market
prices which fluctuate from year to year.
OPERATING EXPENSES:
Operating expenses include warehousing and distribution costs.
During the six months operating expenses decreased $100,176
reflecting minor changes in the Company's business as compared to
the same period of the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
During the six months, selling, general and administrative expenses
were up $181,138. The change reflects minor changes in all
divisions plus costs associated with the Congress default.
INTEREST EXPENSE:
Interest expense increased by $49,321 during the first six months.
This increase reflects a 2% greater cost for borrowing, offset by
reduced borrowing levels incurred with the Company's primary
lender.
INCOME TAXES:
The Company accounts for income taxes in accordance with SFAS 109,
under which deferred tax liabilities are recognized for future
taxable amounts and deferred tax assets are recognized for future
deductions and operating loss carryforwards. A valuation
allowance is recognized to reduce net deferred tax assets to the
amounts that are more likely than not to be realized.
The Company estimates that, after filing its fiscal 1997 tax
return, it will have tax loss carryforwards of approximately
$5,500,000 expiring in the years 2009 through 2012.
NET (LOSS) EARNINGS:
For the six months the net loss amounted to $535,997 as compared to
net earnings of $116,765 for the same six months a year ago. The
loss per share is $.37 versus a profit of $.08 per share reported
for the same period a year ago.
Comparisons To The Prior Year:
Explanations
Foodservice $(524,532) The impact of a 30% decline in six
month sales at Gulf Coast resulted in a loss of $236,679 compared to
a profit of $42,036 for the same period a year ago. The remainder
results from decreases in earnings of $96,000 in Georgia, Orlando and
Fort Lauderdale, $86,000 in New Jersey and $63,000 at Auburndale, all
resulting from the Company's lack of capital that put added pressure
on its ability to buy competitively and its inability to discount its
invoices.
Egg Marketing (27,573) This decrease results from a decline of
307,000 units sold.
Interest Expense (49,321) Interest expense increased due to
higher rates during the six months compared to a year ago.
All Other (51,336)
Net Difference $(652,762)
(LOSS) EARNINGS PER COMMON SHARE:
August 2, August 3,
Six Months Ended 1997 1996
(Loss) earnings per common share $ (.37) $ .08
Average shares used in the computation 1,447,902 1,528,397
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business.
As shown in the accompanying financial statements, during the
years ended February 1, 1997 and February 3, 1996, the Company
incurred net losses of $1,167,087 and $2,761,305, respectively,
and as of February 1, 1997 the Company had a stockholders' deficit
of $758,476. These factors among others may indicate that the
Company will be unable to continue as a going concern for a
reasonable period of time.
The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts
and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. As
described in Note F of Form 10K for fiscal 1997, the Company is
not in compliance with several provisions of its line of credit
agreement and the lender has placed significant operating and
financing restrictions on the Company pursuant to a forbearance
agreement. The Company's continuation as a going concern is
dependent upon its ability to generate sufficient cash flow to
meet its obligations on a timely basis, to comply with the terms
and covenants of its financing agreements, to obtain additional
financing or refinancing as may be required, and ultimately to
attain successful operations. Management is continuing its
efforts to obtain additional funds from investors so that the
Company can meet its obligations and sustain operations.
There can be no assurance, however, that management's efforts will
ultimately be successful.
During fiscal 1997, The Company:
Was placed in default by its major lender as a result of over-
advances the lender made to the Company which were not secured by
assets of the Company. As a result of the default, the Company's
stated interest rate on this debt increased from 2.25% over the
prime rate in fiscal 1996 to 4.25% over the prime rate in fiscal
1997.
On December 16, 1996, signed a Forbearance Agreement which extends
the existing line of credit until March 30, 1998, agrees to a
repayment schedule that permits the Company to operate and fund
its business under certain limitations and conditions and provides
the lender additional collateral in the form of its North Carolina
and Virginia real estate.
Failed to make its regular semi-annual interest payments on the
Senior Subordinated Convertible Debentures. Although the Company
is in monetary default, its Bondholders have not indicated they
will place the Company in default. On the contrary, the
Bondholders are cooperating with the Company in the Company's
attempt to finalize the contemplated merger with SeaSpecialties,
Inc.
Did not fully satisfy the American Stock Exchange's guidelines for
continued listing. Accordingly, there can be no assurance that
the listing will be continued.
On May 20, 1997, mortgaged the Hawthorne, Florida property for
$251,500 and signed an option agreement to sell its New Jersey
operations if certain conditions were not met.
On May 29, 1997, the Company announced that it had entered into
preliminary merger discussions with a privately owned Miami based
specialty seafood producer and distributor SeaSpecialties Inc. If
the merger were to be consummated, the combination would create a
food processing and distribution entity with sales in excess of
$100 million per year.
On June 17, 1997, signed a definitive merger agreement with
SeaSpecialties Inc. If the merger should be consummated, Mr.
Oxenberg, Chairman and C.E.O. of SeaSpecialties, in a stock for
stock transaction, will own 80% of the stock and SeaSpecialties
Inc. will assume control of the combined company. The definitive
merger agreement is subject to approval of the shareholders of
both Companies. It is anticipated that if consummated the
transaction will close by the end of 1997.
On August 31, 1997 the Company closed its Gulf Coast operations,
sold its inventory and personal property and paid down its lender
holding a secured interest with the proceeds. The Company intends
to collect its accounts receivables and use the net proceeds to
retire debt secured by the receivables.
COMMITMENTS:
As of February 1, 1997, the Company had no commitments for capital
expenditures.
8-K FILING:
On August 7, 1996, From 8-K was filed with the Securities and
Exchange Commission and the American Stock Exchange.
SALES OF UNREGISTERED SECURITIES (DEBT OR EQUITY): None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUN CITY INDUSTRIES, INC.
REGISTRANT
Date: September 16, 1997 Malvin Avchen
Malvin Avchen, C.E.O.
Date: September 16, 1997 Syed Jafri
Syed Jafri, Treasurer
The financial statements for the six months ended August 2, 1997 and
August 3, 1996, respectively, are unaudited but are prepared in conformity
with accounting principles used at our last fiscal year end and include
all adjustments which the Company considers necessary for a fair
presentation.
