10QSB 1 0001.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER PERIOD ENDED APRIL 30, 2000 Commission File No. 0-25109 Integrated Food Resources, Inc. ------------------------------- (Name of Small Business Issuer in Its Charter) State of Nevada 93-1255001 --------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6700 S.W. Sandburg Street, Tigard, Oregon 97223 ----------------------------------------------- (Address of Principal Executive Offices) 503-598-4375 ------------ (Issuer's Telephone No.) Issuer has (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (of 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. As of April 30, 2000, there were 16,198,966 shares of Class A Common Stock issued and outstanding. PART I FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET UNAUDITED AS OF APRIL 30, 2000 Assets Current Assets Cash $ 42,492 Accounts Receivable 39,607 Intercompany Receivable 0 Inventory 0 Prepaid Expenses 15,000 Prepaid Interest 0 ------------ Total Current Assets $ 97,099 Fixed Assets Office and Factory Equip $ 13,663 Tuna Packing Plant 0 Less Accumulated Depreciation (9,035) Land Held for Development 74,498,400 Valuation Adj-Foreign Land Grant (74,498,400) Other Assets 5,100 ------------ Total Fixed Assets $ 9,728 Intangible Assets Goodwill $ - Less: Amortization 0 ------------ Total Intangible Assets $ - Total Assets $ 106,828 ============ Liabilities Current Liabilities Accounts Payable $ 138,231 Due from IFR 0 Notes Payable (Stockholder) 437,425 Short Term Notes Payable $ 125,000 ------------ Total Current Liabilities $ 700,656 Long Term Liabilities Longterm Capital Lease $ - Long Term Note Payable - Stockholder 0 Long Term Note Payable - Third Party 0 ------------ Total Long Term Liabilities $ - Total Liabilities $ 700,656 Equities Preferred Stock, $.001 par value 10,000,000 shares authorized, 4,067,087 issued and outstanding $ 4,067 Additional Paid-in-capital(Preferred) 8,062,222 Class A Common Stock, $.001 par value, 50,000,000 shares authorized, 16,198,966 issued and outstanding 16,199 Additional Paid-in-capital(Common) 213,352 Contributed Capital 0 Retained Earnings (8,439,693) Net Income (449,975) ------------ Total Equity Accounts $ (593,828) Total Liablilities & Owners Equity $ 106,828 ============
CONSOLIDATED STATEMENTS OF INCOME UNAUDITED FOR THE PERIOD ENDING APRIL 30 Quarter Ended April 30 Nine Months Ended April 30 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Gross Sales $ - $ 260,478 $ - $ 693,723 Cost of Goods Sold $ - $ 213,699 $ - $ 362,446 Selling, General and Admin Expenses Administrative/Consulting $ 183,039 $ 231,804 $ 370,129 $ 574,586 Other selling and general 0 109,986 0 424,384 Depreciation & Amortization 1,742 119,052 2,613 374,567 Interest Expense 13,299 6,968 19,733 119,041 Bad Debt Expense 57,500 0 57,500 0 ----------- ----------- ----------- ----------- Total Operating Exp. $ 255,580 $ 467,810 $ 449,975 $1,492,578 Total Income $ (255,580) $ (421,031) $ (449,975) $(1,161,301) ----------- ----------- ----------- ----------- Other Income Interest Income $ - $ - $ - $ - Miscellaneous Income 0 0 0 0 ----------- ----------- ----------- ----------- Total Other Income $ - $ - $ - $ - ----------- ----------- ----------- ----------- Net Income $ (255,580) $ (421,031) $ (449,975) $(1,161,301) =========== =========== =========== ============
CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED FOR THE PERIOD ENDING APRIL 30, 2000 Cash Flows Related to Operating Activities Net Loss $ (449,975) Adjustments to Reconcile Net Loss to Cash from Operating Activities Depreciation and Amortization 2,613 Increase/Decrease in: Receivables (5,754) Note Receivable - Inventories - Prepaid Expenses 87,217 Accounts Payable 77,852 Accrued Liabilities - ----------- Net Cash from Operating Activities 161,928 Cash Flows Related to Investing Activites Purchase of Equipment (1,312) Tuna Packing Plant Costs - Other Assets - Goodwill - ----------- Net Cash from Investing Activities (1,312) Cash Flows Related to Financing Activities Proceeds from Short-Term Related-Party Notes Payable 205,325 Proceeds from Third-Party Notes Payable 125,000 Proceeds from Long-Term Capital Lease - Proceeds from Long-Term Third-Party Notes Payable - Proceeds from Long Term Stockholders Notes Payable - Issuance of Preferred Stock - Issuance of Common Stock - Additional Paid-in-Capital-Preferred - ----------- Net Cash from Financing Activities 330,325 ----------- Net Increase (Decrease) in Cash 40,966 Cash, Beginning of Period 1,527 Cash, End of Period $ 42,493 ===========
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY UNAUDITED FOR THE PERIOD ENDING APRIL 30, 2000 Common Stock Preferred Stock Total -------------------- ----------------- Additional Accumulated Stockholders' Shares Amount Shares Amount Paid-in-Capital Deficit Equity ---------- -------- --------- ------ --------------- ------------ ----------- Balance July 31, 1999 16,198,966 $ 16,199 4,067,087 $4,067 $ 8,275,574 $(8,439,693) $ (143,853) Contributed Capital - - Net Loss (449,975) (449,975) ---------- -------- --------- ------ ----------- ------------ ----------- Balance April 30, 2000 16,198,966 $ 16,199 4,067,087 $4,067 $ 8,275,574 $(8,889,668) $ (593,828) ========== ======== ========= ====== =========== ============ ===========
Item 2 - Management's Discussion and Analysis of Financial Conditions and Results of Operations Review of Operating Results Seabourne Ventures, Inc. (Seabourne) As previously disclosed in Form 10-QSB for the 2nd quarter of Fiscal Year 1999, all tuna packing operations have been suspended while Company management identifies and establishes the necessary means to take full control of the sourcing operation for raw material. The key to asserting this control remains the Company's acquisition and deployment of its own fleet of state-of-the-art fishing and factory processing vessels. Discussions with shipyards and naval architects/engineers continues. Integrated Food Finance Corp. (IFFC) IFFC, the Company's wholly owned subsidiary, was formed to secure debt financing for the Company's subsidiaries and projects. IFFC signed a Senior Note and Note Purchase Agreement within favor of CDC Financial Products, Inc. (CDC) for $201,816,000. CDC and IFFC executed an Escrow agreement with Citibank, N.A. for closing to take place in escrow, and CDC deposited the funds for closing within a 10 day period. Simultaneously, IFFC had entered into a contractual agreement with Mid-State Land Developers, Inc. (MSLD) for the issuance of a standby letter of credit in favor of CDC as an instrument designed to enhance the credit risk of IFFC's Note. After funds were deposited in escrow and IFFC paid all escrow closing fees, the credit enhancement group failed to meet its obligations within the required time frame. As a result, this transaction did not close as anticipated. The opportunity exists to reopen the negotiations with CDC at a later time, however IFFC has now turned its attention to identifying other sources of long-term debt and equity financing. The company is close to completing negotiations with third party investors, and appropriate announcements will be made in due course The failure to close as anticipated has resulted in a net loss to the company of approximately $500,000 including interest, legal fees, escrow fees and miscellaneous expenses. The Company is evaluating the possibility of legal action against MSLD for the recovery of its expenses. A decision has not been made yet. In Form 10-QSB for the second quarter of fiscal year 2000, the Company reported it had reached a $27,500 out-of-court settlement in its previously disclosed lawsuit against Kennedy Funding Inc. (KFI). During the period covered by this report, the Company has taken a one-time bad debt expense totalling $57,500 to account for the loss of the unrecovered portion of the funds paid to KFI. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this disclosure regarding IFR's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. These potential risks and uncertainties could cause actual results to differ from those contained in the forward-looking statements and include, without limitation, IFR's ability to prove its business model and gain operating efficiencies, its ability to enter different and diverse vertical markets, the effects of government regulation, its dependence on a limited number of enterprise customers and our limited relationships with buyers and sellers. These and other risk factors are described in detail the company's filings with the Securities and Exchange Commission. Capital Needs and Future Requirements Seabourne The Company's vision for Seabourne includes the construction of six combination fishing/factory ships at an approximate cost of $180 million. The design of these fishing vessels has been completed. It is anticipated that the first vessels will be operational by the fourth quarter of fiscal year 2001. IFFC IFFC continues to pursue and investigate global funding opportunities in order to support the development and implementation of the Company's various projects. While prospects remain optimistic, no funding arrangements have yet been finalized. Without a fresh injection of equity, the Company does not have sufficient liquidity to continue operation past the end of its fiscal year end. Management's entire time is now focussed on the negotiation of fresh equity and/or credit-enhanced debt. Capital-Intensive Projects Project Harvest(R) continues to advance through the development and planning process. Project Harvest(R) is the Company's business-to-business, e-commerce platform. It will link global buyers and sellers of food products with each other, and enable them to conduct secure internet transactions. Buyers will be empowered to identify specific suppliers who meet their customized requirements for hazard control, food safety, process control, hygiene, manufacturing practices, financial stability and product quality. The Project Harvest(R) technology will enable suppliers to create a global customer base by broadening the reach of their marketing programs. Project Harvest(R) will create the first global rating standards for production facilities and product quality. The Company's expected funding requirements to finish the software development, hire the management team and complete the business plan remains as previously disclosed at approximately $10 million. These funds will be provided from the proceeds of the long-term financing currently being pursued by IFFC. PART II - OTHER INFORMATION Item 1 - Legal Proceedings During the covered period, no legal proceedings were initiated by the Company, nor were there any such proceedings brought against the Company. Item 2 - Changes in Securities and Use of Proceeds During the covered period, there were no changes in the number of issued and outstanding shares in any class of the Company's securities. The total of Class A Common Stock issued and outstanding as of the end of the Company's third fiscal quarter is 16,198,966 shares. Item 3 - Defaults on Senior Securities During the covered period, there were no defaults on any senior securities. Item 4 - Submission of Matters to a Vote of Security Holders During the covered period, no matters were submitted to a vote of the shareholders. Item 5 - Other Information The following additional matters of interest occurred during the covered period. In anticipation of the transaction with MSLD, the Board of IFFC on February 22, 2000 appointed Kenneth Don Henry as a director of IFFC to represent the credit enhancement group on the Board of Directors. Due to MSLD's failure to perform, Mr. Henry was asked to resign his position as a director and officer of IFFC, and on April 4, 2000, the Board of IFFC accepted his resignation. On March 2, 2000, the Company's Board of Directors approved a stock option program. The salient points of this program are: - covered directors of the Company: Alain de la Motte, Alan Resnik, Jim McKenzie - covered directors of IFFC: Bob West, Dave Ramer - covered director of Seabourne: Harald Kvalo - covered individuals to be issued options for 100,000 shares with vesting to occur over 2 years at the rate of 50,000 per year; Bob West to be issued options for 150,000 shares with vesting to occur over 2 years at the rate of 75,000 per year - 650,000 shares of the Company's common stock allocated for the program - options set to expire on March 15, 2005 - exercise price of the options set at $1.00 (the trading price at the time of the Board's decision) - option plan subject to review by corporate legal counsel Item 6 - Exhibits On March 28, 2000 Form 8-K Current Report was filed regarding the Execution of Note Agreement, Note and Escrow Agreement between IFFC and CDC. All relevant and previously disclosed exhibits incorporated by reference. INDEX TO EXHIBITS No. Exhibit Description Filed Here 27 Financial Data Schedule Yes SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Integrated Food Resources, Inc. ---------------------------------- (Registrant) June 19, 2000 /s/Alain L. de la Motte ------------- ---------------------------------- Alain L. de la Motte Chief Executive Officer