-----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, GwXM6S0A9pDMzNFbN/Yn0SfK1ReDWuDKkW4kqoXSNoHl3LysrocnZH8e8Ww0Tsz4 NIf83d0VgnguZv7pBhEbjg== 0001050502-98-000015.txt : 19980224 0001050502-98-000015.hdr.sgml : 19980224 ACCESSION NUMBER: 0001050502-98-000015 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980223 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: 943076294 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-22231 FILM NUMBER: 98547406 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 DECEMBER 31, 1997 [ ] 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, 6,810,113 shares as of September 30, 1997. Transitional Small Business Disclosure Format: Yes [ ] No [ X ] ORGANIC FOOD PRODUCTS, INC. BALANCE SHEETS ASSETS December 31, June 30, 1997 1997 ----------- ----------- (Unaudited) Current Assets: Cash $ -- $ 62,925 Accounts receivable, net 1,402,461 1,343,891 Inventory 3,359,653 3,451,698 Prepaid expenses 74,864 35,447 Advances to shareholder 126,000 84,000 Income tax refund receivable 167,694 167,694 Deferred tax asset 86,000 86,000 ----------- ----------- Total Current Assets 5,216,672 5,231,655 ----------- ----------- Property and Equipment: Computer software 99,377 71,008 Leasehold improvements 154,443 151,668 Machinery and equipment 1,180,848 884,240 Office equipment 65,678 61,256 Printing plates 12,997 12,997 Vehicles 19,542 13,314 ----------- ----------- 1,532,885 1,194,483 Less: accumulated depreciation (275,892) (182,057) ----------- ----------- 1,256,993 1,012,426 ----------- ----------- Other Assets: Deposits and other 53,938 8,378 Deferred offering costs -- 421,338 Goodwill, net 2,229,845 2,277,288 ----------- ----------- 2,283,783 2,707,004 ----------- ----------- Total Assets $ 8,757,448 $ 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 December 31, June 30, 1997 1997 ----------- ----------- (Unaudited) Current Liabilities: Notes payable - current portion $ -- $ 1,824,938 Notes payable - related parties - current portion 483,538 1,749,323 Capital lease obligations - current portion 4,296 6,033 Accounts payable 1,173,373 2,074,506 Accrued wages and taxes 43,398 22,867 Accrued commissions 32,256 40,610 ----------- ----------- Total Current Liabilities 1,736,861 5,718,277 ----------- ----------- Long-Term Liabilities: Notes payable - related parties - long-term portion 269,322 497,237 Capital lease obligations - long-term portion 15,539 17,094 Deferred income taxes payable -- 102,000 ----------- ----------- 284,861 616,331 ----------- ----------- Shareholders' Equity: (Note 2) Common stock 8,501,146 3,971,720 Accumulated deficit from S Corporation (1,410,410) (1,410,410) Retained earnings (355,010) 55,167 ----------- ----------- 6,735,726 2,616,477 ----------- ----------- Total Liabilities and Shareholders' Equity $ 8,757,448 $ 8,951,085 =========== =========== The Accompanying Notes are an Integral Part of the Financial Statements
ORGANIC FOOD PRODUCTS, INC. STATEMENTS OF OPERATIONS Six Months Ended Three Months Ended December 31, December 31, December 31, December 31, 1997 1996 1997 1996 ---- ---- ---- ---- (Unaudited) (Unaudited) Revenues $ 5,639,661 $ 6,477,627 $ 2,805,777 $ 2,874,082 Cost of Goods Sold 4,082,103 4,482,317 2,212,411 1,726,719 ----------- ----------- ----------- ----------- Gross Profit 1,557,558 1,995,310 593,366 1,147,363 ----------- ----------- ----------- ----------- Sales and Marketing Expense 1,575,565 953,657 870,114 567,961 General and Administrative Expenses 460,909 454,708 283,188 190,562 ----------- ----------- ----------- ----------- 2,036,474 1,408,365 1,153,302 758,523 ----------- ----------- ----------- ----------- Income (Loss) from Operations (478,916) 586,945 (559,936) 388,840 Interest Income (Expense), Net (37,021) (90,485) (10,756) (47,771) Other Income (Expense), Net (30,966) 13,161 (41,241) 10,276 ----------- ----------- ----------- ----------- Income (Loss) before Provision for Income Taxes (546,903) 509,621 (611,933) 351,345 ----------- ----------- ----------- ----------- Provision for Income Tax Benefit (Expense): (Note 1) - current -- (115,100) -- -- - deferred 136,726 (13,000) 136,726 (72,703) ----------- ----------- ----------- ----------- 136,726 (128,100) 136,726 (72,703) ----------- ----------- ----------- ----------- Net Income (Loss) $ (410,177) $ 381,521 $ (475,207) $ 278,642 =========== =========== =========== =========== Per share data: Basic earnings (loss) $ (.06) $ .07 $ (.07) $ .05 per share (Note 3) ========== ========== ========== ========== Basic weighted average common stock shares outstanding (Note 3) 6,525,173 5,297,913 6,525,173 5,297,913 =========== =========== =========== =========== Earnings (loss) per common share assuming dilution $ (.06) $ .07 $ (.07) $ .05 (Note 3) =========== ========== =========== ========== Weighted average common stock outstanding, 6,525,173 5,360,035 6,525,173 5,360,035 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 Additional Deficit Retained Shareholders' Common Stock Paid-in From 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 Net loss for the six month period ended December 31, 1997 (unaudited) -- -- -- -- (410,177) (410,177) ----------- ----------- ------ ----------- ----------- ----------- Balance at December 31, 1997 (unaudited) 6,810,113 $ 8,501,146 $ -- $(1,410,410) $ (355,010) $ 6,735,726 =========== =========== ====== =========== =========== =========== The Accompanying Notes are an Integral Part of the Financial Statements
ORGANIC FOOD PRODUCTS, INC. STATEMENTS OF CASH FLOWS Six Months Ended Three Months Ended ---------------- ------------------ December 31, December 31, December 31, December 31, 1997 1996 1997 1996 ---- ---- ---- ---- (Unaudited) (Unaudited) Increase (Decrease) in Cash: Net cash provided (used) by operating activities $(1,391,500) $(1,365,080) $ (37,195) $ (488,773) ----------- ----------- ----------- ----------- Cash flows from investing activities: Sale of fixed assets 27,819 5,004 -- 5,004 Purchase of fixed assets (280,388) (165,427) (127,903) (35,514) Advances to shareholders (42,000) -- (21,000) -- ----------- ----------- ----------- ----------- Net cash used by investing activities (294,569) (160,423) (148,903) (30,510) ----------- ----------- ----------- ----------- Cash flows from financing activities: Repayment of capital lease (3,609) (2,757) (1,488) (2,757) Repayment of notes payable (1,824,938) (40,695) -- 175,075 Repayment of notes payable - related parties (1,506,586) (292,630) (146,376) 323,175 Proceeds from issuance of stock 4,958,277 1,754,311 -- 99,990 Purchase of treasury stock -- (78,125) -- (78,125) Deferred offering costs -- -- -- (71,225) ----------- ----------- ----------- ----------- Net cash provided (used) by financing activities 1,623,144 1,340,104 (147,864) 446,133 ----------- ----------- ----------- ----------- Net increase (decrease) in cash (62,925) (185,399) (333,962) (73,150) Cash at beginning of period 62,925 191,073 333,962 78,824 ----------- ----------- ----------- ----------- Cash at end of period $ -- $ 5,674 $ -- $ 5,674 =========== =========== =========== =========== 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 six month period ended December 31, 1997, 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 December 31, 1997 and December 31, 1996, and the effect on income and the weighted average number of shares of dilutive potential of common stock. Subsequent to December 31, 1997 the Company issued 425,000 shares of common stock in relation to the acquisition of a fruit juice manufacturer. If this transaction had taken place during the period ended December 31, 1997, it would have changed the number of shares used in the computations of earnings per share.
Six Months Ended Three Months Ended ---------------- ------------------ December 31, December 31, December 31, December 31, 1997 1996 1997 1996 ---- ---- ---- ---- Net income available to common stockholders used in basic EPS $ (410,177) $ 381,521 $ (475,207) $ 278,642 Basic earnings (loss) per share: Weighted average common shares 6,525,173 5,297,913 6,525,173 5,297,913 outstanding ----------- ----------- ----------- ----------- $ (.06) $ .07 $ (.07) $ .05 Basic earnings (loss) per share =========== =========== =========== =========== Earnings per Share Assuming Dilution: Common stock equivalents Options and warrants granted and unexercised -- 433,000 -- 433,000 Assumed buyback of options -- 370,878 -- 370,878 ----------- ----------- ----------- ----------- -- 62,122 -- 62,122 Weighted average of common shares outstanding 6,525,173 5,297,913 6,525,173 5,297,913 ----------- ----------- ----------- ----------- Weighted average common shares outstanding assuming dilution 6,525,173 5,360,035 6,525,173 5,360,035 =========== =========== =========== =========== Earnings (loss) per share assuming dilution $ (.06) $ .07 $ (.07) $ .05 =========== =========== =========== ===========
Options and warrants on 542,666 shares and 975,666 shares of common stock were not included in computing diluted EPS for the six month and three month periods ended December 31, 1997 and December 31, 1996 respectively, because their effects were antidilutive. 4. 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. Item 2: Management's Discussion and Analysis - -------------------------------------------- Results of Operations for the Six and Three Months Ended December 31, 1997 and - -------------------------------------------------------------------------------- Six and Three Months Ended December 31, 1996 - -------------------------------------------- Organic Food Products, Inc. (OFPI or the "Company") reported a net loss for the six and three months ended December 31, 1997 of $410,177 and $475,207, respectively, compared to a net income of $381,521 and $278,642 for the same periods from the prior year. The loss was primarily due to a write-down of discontinued inventory items and an increase in reserves for receivables the Company considers to be uncollectible. Revenues - -------- Revenues decreased 12.9% for the six months and 2.4% for the three months ended December 31, 1997 compared to the same periods from the prior fiscal year. The decrease was due to the continuing phase-out of the sales of organic raw material ingredients. Since this business is highly speculative, the sales price can vary greatly from period to period. Since July of 1997, the Company has continued to focus its efforts on developing branded business with an emphasis on its pasta sauce, kids meals and juice line. Since July 1997, the Company has chosen to discontinue certain products that produced top-line revenues but were unprofitable. The Company expects to see significant sales growth in the third quarter of 1998. Cost of Goods Sold - ------------------ The Company's cost of goods sold increased as a percentage of sales for the six and three months ended December 31, 1997 from 72.4% and 78.8%, respectively, compared to 69.2% and 60.1% for the same periods from the prior year. The additional cost was due in part to an inventory write-down of certain discontinued items and the absorption of excess production capacity. Sales and Marketing - ------------------- Sales and marketing expenses increased as a percentage of sales for the six and three months ended December 31, 1997 from 27.9% and 31.0%, respectively, compared to 14.7% and 19.8% 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 required for manufacturer charge-backs. General and Administrative - -------------------------- The Company's general and administrative expenses increased as a percentage of sales for the six and three months ended December 31, 1997 from 8.2% and 10.0%, respectively, compared to 7.0% and 6.6% for the same periods from the prior year. The increase was due to reorganization costs that caused higher than normal payroll and severance 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 through 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 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 - ------------------------------------------------------------------ In connection with the previously announced acquisition of Sunny Farms Corporation and the out-of-pocket expenses related to the production problem (see Other Matters below), the Company could experience certain periods of cash shortages during the third quarter of fiscal year 1998. Adequate cash flows should be available during the fourth quarter. The company currently has a working capital line of credit of $1,200,000 and anticipates increasing it to $1,500,000. Other Matters - ------------- With a new sales force, the Company plans to intensify its marketing efforts in natural food stores. The Company also plans to focus more strongly on expanding sales in major grocery stores and clubs using specialty distributors. Due to excess capacity in its production facility, the Company is aggressively searching for co-packing business that would increase plant throughput and lower the product break-even point. As a result of a production problem, the Company was forced to withdraw certain pasta sauce products subsequent to December 31, 1997 that may cause the Company to incur costs up to $200,000. The Company has various insurance coverages in place which are expected to absorb a large percentage of this outlay. Therefore, no accrual was made at December 31, 1997 to recognize this potential loss. 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 6-MOS JUN-30-1998 DEC-31-1997 0 0 2,412,715 (555,696) 3,359,653 5,216,672 1,532,885 (275,892) 8,757,448 1,736,861 0 0 0 7,090,736 0 8,757,448 5,639,661 5,639,661 4,082,103 2,036,474 0 0 37,021 (546,903) 136,726 (410,177) 0 0 0 (410,177) (.06) (.06)
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