-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rbo0kLSqeXpgP3s2Cuvyuf0fe/wQOlpz4CYFDzqBfRR+IO8ci+6IfpGfa4xKAYxU OQFoZHlajLlHflxobXiazg== 0001000096-98-000357.txt : 19980518 0001000096-98-000357.hdr.sgml : 19980518 ACCESSION NUMBER: 0001000096-98-000357 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORGANIC FOOD PRODUCTS INC CENTRAL INDEX KEY: 0001034992 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FRUITS, VEG & PRESERVES, JAMS & JELLIES [2033] IRS NUMBER: 973076294 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-22231 FILM NUMBER: 98625894 BUSINESS ADDRESS: STREET 1: 550 MONTEREY RD CITY: MORGAN HILL STATE: CA ZIP: 95037 BUSINESS PHONE: 4087821133 MAIL ADDRESS: STREET 1: 550 MONTEREY RD CITY: MORGAN HILL STATE: CA ZIP: 95037 10QSB 1 FORM 10-QSB 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 MARCH 31, 1998 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ________________ Commission File No. 333-22997 ORGANIC FOOD PRODUCTS, INC. --------------------------- (Exact name of small business issuer as specified in its Charter) California 94-3076294 ---------- ---------- (State or other jurisdiction of incorporation (I.R.S. Employer Identification or organization) Number) 550 Monterey Road, Suite B Morgan Hill, California 95037 - ----------------------- ----- (Address of principal executive offices) (Zip Code) (408) 782-1133 ------------------------- Issuer's telephone number Check whether the registrant (1) has 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 [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan conformed by court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: Common Stock, no par value, 7,235,113 shares as of March 31, 1998. Transitional Small Business Disclosure Format: Yes [ ] No [ X ] ORGANIC FOOD PRODUCTS, INC. BALANCE SHEETS ASSETS March 31, June 30, 1998 1997 ------------ ------------ (Unaudited) Current Assets: Cash $ 201 $ 62,925 Accounts receivable, net 1,397,617 1,343,891 Inventory - Trade 4,076,849 3,451,698 Inventory - Other (Note 6) 508,031 -- Prepaid expenses 111,531 35,447 Advances to shareholder 147,000 84,000 Income tax refund receivable -- 167,694 Deferred tax asset 86,000 86,000 ------------ ------------ Total Current Assets 6,327,229 5,231,655 ------------ ------------ Property and Equipment: Computer software 105,035 71,008 Leasehold improvements 162,392 151,668 Machinery and equipment 1,354,457 884,240 Office equipment 68,837 61,256 Printing plates 24,784 12,997 Vehicles 19,542 13,314 ------------ ------------ 1,735,047 1,194,483 Less: accumulated depreciation (333,294) (182,057) ------------ ------------ 1,401,753 1,012,426 ------------ ------------ Other Assets: Deposits and other 268,600 8,378 Deferred offering costs -- 421,338 Goodwill, net 3,900,456 2,277,288 ------------ ------------ 4,169,056 2,707,004 ------------ ------------ Total Assets $ 11,898,038 $ 8,951,085 ============ ============ The Accompanying Notes are an Integral Part of the Financial Statements ORGANIC FOOD PRODUCTS, INC. BALANCE SHEETS (Continued) LIABILITIES AND SHAREHOLDERS' EQUITY March 31, June 30, 1998 1997 ----------- ------------ (Unaudited) Current Liabilities: Notes payable - current portion $ 1,109,309 $ 1,824,938 Notes payable - related parties - current portion 459,925 1,749,323 Capital lease obligations - current portion 4,396 6,033 Accounts payable 1,851,017 2,074,506 Accrued wages and taxes 73,274 22,867 Accrued commissions 32,000 40,610 ------------ ------------ Total Current Liabilities 3,529,921 5,718,277 ------------ ------------ Long-Term Liabilities: Notes payable - related parties - long-term portion 230,669 497,237 Capital lease obligations - long-term portion 14,401 17,094 Deferred income taxes payable -- 102,000 ------------ ------------ 245,070 616,331 ------------ ------------ Shareholders' Equity: (Note 2) Common stock 10,201,146 3,971,720 Accumulated deficit from S Corporation (1,410,410) (1,410,410) Retained earnings (667,689) 55,167 ------------ ------------ 8,123,047 2,616,477 ------------ ------------ Total Liabilities and Shareholders' Equity $ 11,898,038 $ 8,951,085 ============ ============ The Accompanying Notes are an Integral Part of the Financial Statements
ORGANIC FOOD PRODUCTS, INC. STATEMENTS OF OPERATIONS Nine Months Ended Three Months Ended --------------------------------- -------------------------------- March 31, March 31, March 31, March 31, 1998 1997 1998 1997 ----------- ----------- ----------- ---------- (Unaudited) (Unaudited) Revenues $ 8,207,704 $ 9,067,049 $ 2,568,043 $ 2,589,422 Cost of Goods Sold 6,054,441 6,085,139 1,972,338 1,602,822 ----------- ----------- ----------- ----------- Gross Profit 2,153,263 2,981,910 595,705 986,600 ----------- ----------- ----------- ----------- Sales and Marketing Expense 2,232,404 1,497,059 656,839 543,402 General and Administrative Expenses 771,956 896,711 311,047 442,003 ----------- ----------- ----------- ----------- 3,004,360 2,393,770 967,886 985,405 ----------- ----------- ----------- ----------- Income (Loss) from Operations (851,097) 588,140 (372,181) 1,195 Interest Income (Expense), Net (56,902) (151,338) (19,881) (60,853) Other Income (Expense), Net (55,805) 13,712 (24,839) 551 ----------- ----------- ----------- ----------- Income (Loss) before Provision for Income Taxes (963,804) 450,514 (416,901) (59,107) ----------- ----------- ----------- ----------- Provision for Income Tax Benefit (Expense): (Note 1) - current -- (125,092) -- (9,992) - deferred 240,948 18,000 104,222 31,000 ----------- ----------- ----------- ----------- 240,948 (107,092) 104,222 21,008 ----------- ----------- ----------- ----------- Net Income (Loss) $ (722,856) $ 343,422 $ (312,679) $ (38,099) =========== =========== =========== =========== Per share data: Basic earnings (loss) $ (.12) $ .06 $ (.05) $ (.01) per share (Note 3) ========== ========== ========== ========== Basic weighted average common stock shares outstanding (Note 3) 6,196,064 5,297,913 6,692,913 5,297,913 =========== =========== =========== =========== Earnings (loss) per common share assuming dilution $ .06 (Note 3) ========== Weighted average common stock outstanding, 5,692,830 assuming dilution (Note 3) =========== The Accompanying Notes are an Integral Part of the Financial Statements
ORGANIC FOOD PRODUCTS, INC. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) Accumulated Total Common Stock Additional Deficit Retained Shareholders' ------------------------- Paid-in Form S Earnings Equity Shares Amount Capital Corporation (Deficit) (Deficit) ------ ------ ------- ----------- --------- --------- Balance at June 30, 1996 4,500,000 $ 2,317,400 $ -- $ (1,410,410) $ -- $ 906,990 Proceeds from private offering, net of costs of $340,462 823,500 1,718,288 -- -- -- 1,718,288 Purchase and retirement of treasury stock (31,250) (78,125) -- -- -- (78,125) Stock issued for director expenses 5,663 14,157 -- -- -- 14,157 Net income for the year ended June 30, 1997 -- -- -- -- 55,167 55,167 ----------- ------------ -------- ------------ ------------ ------------ Balance at June 30,1997 5,297,913 3,971,720 -- (1,410,410) 55,167 2,616,477 Proceeds from initial public offering, net of costs of $1,084,975 1,495,000 4,495,025 -- -- -- 4,495,025 Stock issued for director expenses 17,200 34,401 -- -- -- 34,401 Stock issued for acquisition of Sunny Farms, Inc. 425,000 1,700,000 -- -- -- 1,700,000 Net loss for the nine month period ended March 31, 1998 (unaudited) -- -- -- -- (722,856) (722,856) ----------- ------------ -------- ------------ ------------ ------------ Balance at March 31 1998 7,235,113 $ 10,201,146 $ -- $ (1,410,410) $ (667,689) $ 8,123,047 =========== ============ ======== ============ ============ ============ The Accompanying Notes are an Integral Part of the Financial Statements
ORGANIC FOOD PRODUCTS, INC. STATEMENTS OF CASH FLOWS Nine Months Ended Three Months Ended ------------------ ------------------ March 31, March 31, March 31, March 31, 1998 1997 1998 1997 ----------- ----------- ----------- ---------- (Unaudited) (Unaudited) Increase (Decrease) in Cash: Net cash provided (used) by operating activities $(2,260,753) $(1,352,085) $ (856,415) $ 12,995 ----------- ----------- ----------- ----------- Cash flows from investing activities: Purchase of fixed assets (421,322) (294,457) (168,753) (134,034) Advances to shareholders (63,000) (64,914) (21,000) (64,914) ----------- ----------- ----------- ----------- Net cash used by investing activities (484,322) (359,371) (189,753) (198,948) ----------- ----------- ----------- ----------- Cash flows from financing activities: Repayment of capital lease (4,330) (3,986) (672) (1,229) Repayment of notes payable (2,094,193) (2,290) (269,255) 38,405 Repayment of notes payable - related parties (1,555,966) (321,832) (62,267) (29,202) Proceeds from notes payable 1,378,563 419,583 1,378,563 419,583 Proceeds from issuance of stock 4,958,277 1,718,288 -- (36,023) Purchase of treasury stock -- (78,125) -- -- Deferred offering costs -- (211,055) -- (211,055) ----------- ----------- ----------- ----------- Net cash provided (used) by financing activities 2,682,351 1,520,583 1,046,369 180,479 ----------- ----------- ----------- ----------- Net increase (decrease) in cash (62,724) (190,873) 201 (5,474) Cash at beginning of period 62,925 191,073 -- 5,674 ----------- ----------- ----------- ----------- Cash at end of period $ 201 $ 200 $ 201 $ 200 =========== =========== =========== =========== The Accompanying Notes are an Integral Part of the Financial Statements
ORGANIC FOOD PRODUCTS, INC. NOTES TO FINANCIAL STATEMENTS 1. Interim Financial Statements: The unaudited interim financial statements include all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are necessary in order to make the financial statements not misleading. Operating results for the nine month period ended March 31, 1998, are not necessarily indicative of the results that may be expected for the entire year ending June 30, 1998. These financial statements have been prepared in accordance with the instructions to Form 10-QSB and do not contain certain information required by generally accepted accounting principles. These statements should be read in conjunction with financial statements and notes thereto included in the Company's Form 10-KSB for the year ended June 30, 1997. 2. Initial Public Offering: The Company completed its initial public offering of 1,495,000 shares of its no par value common stock at a price of $4.00 per share sold under its Registration Statement and Prospectus dated August 8, 1997. Gross proceeds of approximately $6,000,000 were received by the Company. The Company issued 130,000 warrants to an underwriter in connection with its initial public offering. The warrants are exercisable at a price of $4.80 per share, and expire in approximately two and one-half (2.5) years from the date of the offering. 3. Basic earnings per share are based upon the weighted average number of shares outstanding for each of the respective periods. The following data reflects the amount used in computing earnings per share for the periods ended March 31, 1998 and March 31, 1997, and the effect on income and the weighted average number of shares of dilutive potential of common stock.
Nine Months Ended Three Months Ended ------------------ ------------------ March 31, March 31, March 31, March 31, 1998 1997 1998 1997 ----------- ------------ ----------- ----------- Net income available to common stockholders used in basic EPS $ (722,856) $ 343,663 $ (312,679) $ (38,099) Basic earnings (loss) per share: Weighted average common shares 6,196,064 5,297,913 6,692,913 5,297,913 outstanding ----------- ----------- ----------- ---------- $ (.12) $ .06 $ (.05) (.01) Basic earnings (loss) per share =========== =========== =========== ========== Earnings per Share Assuming Dilution: Common stock equivalents Options and warrants granted 975,666 and unexercised Assumed buyback of options (580,750) ----------- 394,917 Weighted average of common shares outstanding 5,297,913 ----------- Weighted average common shares outstanding assuming dilution 5,692,830 =========== Earnings (loss) per share assuming dilution $ .06 ===========
Options and warrants on 975,666 shares of common stock were not included in computing diluted EPS for the nine month and three month periods ended March 31, 1998 and the three month period ended March 31, 1997 respectively, because their effects were antidilutive. 4. On February 10, 1998 the Company purchased certain assets of Sunny Farms Corporation, a producer of bottled water and natural juice products in Richmond, California. The Company purchased Sunny Farms' Napa Valley Springs bottled water product line, the Pacific Rim fruit flavored drinks product line, the Sunny Farms packaged fruit juice product line, related inventory, trademarks, recipes, customer lists, supplier information, goodwill and certain juice processing equipment. The base purchase price for the intangible assets was $1,700,000 plus $737,367 for the inventory and $120,000 for the juice processing equipment. The Company issued 425,000 shares of its common stock as payment for the intangible assets and paid cash in the amount of $120,000 for the juice processing equipment. Regarding the payment of inventory, (a) the Company assumed Sunny Farms' debt obligations owing to Wells Fargo Bank in the amount of $698,765.71, and (b) agreed to pay any remaining amounts owing for the inventory from the proceeds received from sales of the inventory by the Company after the Company has received proceeds equal to the amount of the assumed debt. 5. New Accounting Pronouncements: Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128)issued by the Financial Accounting Standards board is effective for fiscal years and interim periods ending after December 15, 1997. This pronouncement provides a different method of calculating earnings per share than is currently used in accordance with APB 15, "Earnings per Share." SFAS 128 provides for the calculation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, similar to fully diluted earnings per share. The Company has adopted this accounting standard for its earnings per share computations. 6. Inventory - Other: Due to a manufacturing problem (see details under Other Matters), the Company was forced to withdraw certain products from its distribution channels during the third quarter. A claim was filed with the Company's insurance carrier seeking reimbursement for the economic loss. The insurance carrier has cooperated with the Company, and the Company expects that a high percentage of the total claim could be recovered; however, the Company cannot say with certainty what the final settlement will be. The Company has separated the inventory to be sold to the insurance carrier on the balance sheet and listed it as "Inventory - Other". The cost of the product is listed at $508,031. Revenue will be recorded on the sale of this inventory as the insurance claim is paid by the insurance carrier. 7. Change in Estimate: During the three month period ending March 31, 1998 the Company elected to raise the allowance for manufacturers charge-backs to an amount equal to 100% of the accounts receivable subject to the charge-backs. In prior periods, the allowance was approximately 60%. Item 2: Management's Discussion and Analysis - -------------------------------------------- Results of Operations for the Nine and Three Months Ended March 31, 1998 and Nine and Three Months Ended March 31, 1997 - ------------------------------------------------------------------------ Organic Food Products, Inc. (OFPI or the "Company") reported a net loss for the nine and three months ended March 31, 1998 of $722,856 and $312,679 respectively, compared to a net income of $343,422 and a net loss of $38,099 for the same periods from the prior year. The losses can be attributed to lower than estimated sales volumes, increased manufacturing costs, the write-down of discontinued inventory items and increases in reserves due to a change in estimates for uncollectible receivables related to manufacturers charge-backs. Revenues -------- Revenues decreased $859,000 or 9.5% for the nine months but only $21,000 or .8%for the three months ended March 31, 1998 compared to the same periods from the prior fiscal year. Year-to-date revenues were down as a result of the phase out of industrial sales of organic raw material ingredients. Revenue for the quarter reflected the additional sales of Sunny Farms products. These products represented net revenues of $490,000 for the current quarter. However, sales for the quarter appeared flat when compared to the same period from the prior fiscal year because of a product market withdrawal that occurred during the quarter (see details under Other Matters). The Company anticipates a settlement with the Company's insurance carrier that will permit the Company to record product sales in the fourth quarter that would have been recorded in the third quarter if the product had not been returned by customers to the Company. The insurance carrier has cooperated with the Company, but the Company cannot say with certainty what the final settlement will be. Cost of Goods Sold ------------------ The Company's cost of goods sold increased as a percentage of sales for the nine and three months ended March 31, 1998 from 73.8% and 76.8%, respectively, compared to 67.1% and 61.9% for the same periods from the prior year. The year-to-date increase is a function of a cost of goods sold that is equivalent to the prior fiscal period but is higher as a percentage of sales due to a decrease in revenue of $859,000. The quarterly increase is due to increased production costs and higher priced raw food ingredients for Sunny Farms products. Sales and Marketing ------------------- Sales and marketing expenses increased as a percentage of sales for the nine and three months ended March 31, 1998 from 27.2% and 25.6%, respectively, compared to 16.5% and 21.0% for the same periods from the prior year. The increase in sales and marketing expenses between these comparative periods was due primarily to the additional reserves recorded for manufacturer charge- backs due to a change in estimates. General and Administrative -------------------------- The Company's general and administrative expenses decreased as a percentage of sales for the nine and three months ended March 31, 1998 from 9.4% and 12.1%, respectively, compared to 9.9% and 17.1% for the same periods from the prior year. This decrease occurred even though sales revenue was down or flat when compared to previous periods. The decrease represents a stabilization and/or reduction in overall general and administrative expenses. Seasonality ----------- In relation to product purchasing, the Company will seasonally contract for certain product for the entire year at harvest time or at planting time to secure raw materials throughout the year. These purchases take place annually from early spring to mid-summer and are effected to reduce the risk of price swings due to demand fluctuations. These annual purchases can create overages or shortages in inventory. The Company's intention to sell certain bulk raw materials to other manufacturers as necessary may assist in reducing overages and should allow for more effective purchasing of the required raw materials. Liquidity and Capital Resources and Changes in Financial Condition ------------------------------------------------------------------ Due to expenses related to the manufacturing problem (see Other Matters below), the Company has experienced certain periods of cash shortages during the third quarter of fiscal 1998. As reported in the 10-QSB for the period ending December 31, 1997, adequate cash flows should resume in the fourth quarter. The company currently has a working line of credit of $1,500,000 that will decrease to $1,300,000. Other Matters ------------- Due to a manufacturing problem, the Company was forced to withdraw certain products from its distribution channels during the third quarter. After consulting with scientific experts regarding the magnitude of the problem, it was determined that the total economic cost was approximately $600,000. This included product cost, overtime replacement labor and recall freight. A claim was filed with the Company's insurance carrier which totaled approximately $900,000 and included lost profits on the product. Thus far, the Company has received advances on this claim totaling $300,000. The insurance carrier has cooperated with the Company, and the Company expects that a high percentage of the $900,000 could be recovered; however, the Company cannot say with certainty what the final settlement will be. The Company has separated the inventory to be sold to the insurance carrier on the balance sheet and listed it as "Inventory - Other". The cost of the product is listed at $508,031. Revenue will be recorded on the sale of this inventory as the insurance claim is paid by the insurance carrier. Part II - Other Information Item 1. Legal Proceedings - -------------------------- The Company is not party to any litigation other than routine litigation incidental to the business. Item 2. Changes in Securities - ----------------------------- None. Item 3. Defaults Upon Senior Securities - --------------------------------------- None. Item 4. Submission of Matters to a Vote of Security Holders - ----------------------------------------------------------- None. Item 5. Other Information - ------------------------- None. Item 6. Exhibits and Reports on Form 8-K - ---------------------------------------- None. EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS JUN-30-1998 MAR-31-1998 201 0 1,659,861 (262,244) 4,584,880 6,327,229 1,735,047 (333,294) 11,898,038 3,529,921 0 0 0 10,201,146 0 11,898,038 8,207,704 8,207,704 6,054,441 3,004,360 0 0 (56,902) (963,804) 240,948 (722,856) 0 0 0 (722,856) (.12) (.12)
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