-----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, BgtIde79XOXpibsk6Smz/jMA92u04zogtyhHSAHIcG2arVV2ejSa4dI/rnbO2TGK 8la1Bh7kVGSotwoyBqZbSQ== 0000802686-97-000025.txt : 19971125 0000802686-97-000025.hdr.sgml : 19971125 ACCESSION NUMBER: 0000802686-97-000025 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971124 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORIGINAL ITALIAN PASTA PRODUCTS CO INC CENTRAL INDEX KEY: 0000802686 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 042877789 STATE OF INCORPORATION: MA FISCAL YEAR END: 0625 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-16161 FILM NUMBER: 97726841 BUSINESS ADDRESS: STREET 1: 32 AUBURN ST CITY: CHELSEA STATE: MA ZIP: 02150 BUSINESS PHONE: 6178845211 MAIL ADDRESS: STREET 1: 36 AUBURN STREET CITY: CHELSEA STATE: MA ZIP: 02150 10QSB 1 SEPTEMBER 30, 1997 U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended Commission File No. September 30, 1997 0-16161 ORIGINAL ITALIAN PASTA PRODUCTS CO. INC. 32 AUBURN STREET CHELSEA, MA 02150 TELEPHONE (617) 884-5211 State of Incorporation I.R.S. Employer Identification No. Massachusetts 04-2877789 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 twelve months (or 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 [ ] As of November 14, 1997 the number of shares of Common Stock, $.02 par value, outstanding were 1,899,885. Original Italian Pasta Products Co. Inc. INDEX PAGE NO. PART I. FINANCIAL INFORMATION Item 1. Financial Statements: (Current years results are unaudited) Balance Sheets - As at September 30,1997 and June 30, 1997 3 Statement of Operations: Three months ended September 30, 1997 and September 30, 1996 4 Statement of Cash Flows: Nine months ended March 31, 1997 and March 31, 1996 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 6-8 Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings 8-9 SIGNATURES 9 Computation of Earnings Per Share 10 Original Italian Pasta Products Co. Inc. Balance Sheet (Unaudited) Assets September 30, June 30, 1997 1997 Current Assets: Cash and Cash Equivalents $ 92,000 $ 70,000 Accounts Receivable, net 398,000 483,000 Inventories (Note 3) 523,000 603,000 Prepaid expenses and other 16,000 33,000 --------- --------- Total current assets 1,029,000 1,189,000 Property and equipment, net 1,109,000 1,254,000 Other assets, net 47,000 47,000 ---------- --------- Total Assets $ 2,185,000 $ 2,490,000 ========== ========== Liabilities and Shareholders Equity Current Liabilities: Current maturities of long- term debt and capital lease $ 669,000 $ 599,000 Accounts Payable 1,522,000 1,296,000 Accrued Expenses 919,000 871,000 --------- --------- Total current liabilities 3,110,000 2,766,000 Long-term debt and capital lease 30,000 36,000 Shareholders' Deficit Preferred stock - $.01 par value. Authorized - 1,000,000 shares. Issued and outstanding - None. -- -- Common Stock - $.02 par value Authorized - 6,000,000 shares. Issued and outstanding - 1,899,885 shares. 38,000 38,000 Additional paid-in capital 3,912,000 3,912,000 Accumulated deficit (4,905,000) (4,262,000) ----------- ----------- Total Shareholder's Equity $ (955,000) $ (312,000) ----------- ----------- Total Liabilities and Equity $ 2,185,000 $ 2,490,000 ========== ========== See accompanying notes ORIGINAL ITALIAN PASTA PRODUCTS CO. INC. Statement of operations (Unaudited) Three months ended September 30, September 30, 1997 1996 Net sales $ 1,979,000 $ 2,779,000 Cost of goods sold 1,755,000 1,925,000 Gross profit 224,000 854,000 Selling, general and administrative expenses 850,000 1,062,000 Gain/(Loss) from operations operations (626,000) (208,000) Other Expense/Income: Interest income -- 1,000 Interest expense (16,000) (9,000) Other income/(loss) (1,000) 14,000 --------- ------- Income/(Loss) before taxes (643,000) 202,000 Provision for taxes -- -- Net Income/(Loss) after taxes $ (643,000) $ (202,000) ========= ========== Net income/(loss) per share (Note 2), primary $ (0.34) $ (0.11) Net income/(loss) per share (Note 2), fully diluted $ (0.34) $ (0.11) Weighted average shares outstanding, primary 1,900,000 1,900,000 Weighted average shares outstanding, fully diluted 1,900,000 1,900,000 See accompanying notes Original Italian Pasta Products Co. Inc. Statement of cash flows (Unaudited) Three months ended Cash flows from operating September 30, September 30, activities: 1997 1996 Net Income $ (643,000) $ 202,000 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and Amortization 145,000 149,000 (Increase) Decrease in accounts receivable 85,000 106,000 (Increase) Decrease in inventories 80,000 (23,000) (Increase) Decrease in prepaid expenses and other 17,000 50,000 (Decrease) Increase in accounts payable 226,000 137,000 Increase (Decrease) in accrued expenses 48,000 (15,000) Increase (Decrease) in tax provision -- -- (Increase) Decrease in other assets -- 77,000 -------- -------- Net cash provided by operating activities (42,000) 279,000 Cash flows from investing activities: Purchase of property and equipment (42,000) (156,000) -------- --------- Net cash used by investing activities (42,000) (156,000) Cash flows from financing activities: Proceeds from debt 122,000 -- Principal payments on deb (58,000) (107,000) -------- --------- Net cash used by financing activities 64,000 (107,000) -------- --------- Net increase (decrease) in cash and cash equivalents 22,000 15,000 Cash - beginning of period 70,000 195,000 ------- -------- Cash - end of period $ 92,000 $ 210,000 ======= ======== See accompanying notes Original Italian Pasta Products Co. Inc. Notes to financial statements (Unaudited) NOTE 1: BASIS OF PRESENTATION: The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) considered necessary for a fair presentation have been included. Results from operations for the three month period ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending June 30, 1998. For further information, refer to the financial statements and the footnotes included in the Company's annual report on Form 10-KSB for the year ended June 30, 1997. NOTE 2: NET INCOME (LOSS) PER COMMON SHARE: Net loss per common share is computed by dividing the net income by the weighted average number of shares of common stock . Common stock equivalents have not been included due to their antidilutive effect. NOTE 3: INVENTORIES: Inventories, stated at the lower of cost or market, on a first-in, first-out basis, are comprised of the following: September 30, June 30, 1997 1997 Raw Materials $ 114,000 $ 101,000 Packaging Materials 116,000 218,000 Finished Goods 293,000 284,000 -------- -------- Total $ 523,000 $ 603,000 ======== ======== Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition and operating results during the periods included in the accompanying financial statements. RESULTS OF OPERATIONS: For the quarter ended September 30,1997 compared to the quarter ended September 30, 1996. Net sales for the quarter ended September 30, 1997 were $1,979,000 versus $2,779,000 for the same period last year. This decrease of 29% is mainly attributable to decreased sales to warehouse club customers. Gross profit for the quarter ended September 30,1997 came in at 11% of net sales or $224,000. Last years gross profit was at 31% of net sales or $854,000. Gross profit is down as the result of lower sales volume. Selling, General and Administrative expenses decreased to $850,000 or 43% of net sales from $1,062,000 or 38% for the quarter ended September 30, 1996. This decrease is due to lower promotional expenses as well as fixed sales and administrative costs. Loss from operations for the quarter ended September 30, 1997 was $643,000 or 32% of net sales as compared to a loss from operations of $208,000 or 7% of net sales for the same quarter ended last year. Interest expense was $16,000 or 1% of net sales for the quarter ended September 30, 1997 versus $9,000 or 0% for the same period last year. Net loss per common share, primary was $0.34 for the three months ended September 30, 1997 compared to a net loss per common share of $0.11, primary for the same period last year. Liquidity and Capital Resources: On October 31, 1997 Danvers Savings Bank agreed to loan the Company an additional $150,000. This loan bears an interest rate of 2.5% over prime and must be repaid in total by January 29, 1998. The loan is secured by an interest in substantially all the Company's assets. As described above, although the Company has violated certain requirements of its debt agreements primarily due to not making timely payments. Its lenders have not declared the Company in default and have allowed the Company to remain in violation of these agreements. The Company has engaged an investment banker and is considering various alternatives, including the sale of the Company, the sale of certain assets or the sale of common shares. The Company continues to work toward reducing discretionary operating expenses, such as expenses relating to advertising, product demonstrations and promotions. The current operating plans indicate that the Company will experience increased losses. The sum of cumulative net losses are impairing the Company's ability to continue its operation because those losses were funded, in part, by debt which must be repaid out of current cash flows. The Company will attempt to provide working capital through operations and other alternatives noted above. The Company can provide no assurances that these efforts will be successful in raising the capital necessary to continue to meet its working capital requirements. Intense competition and the resulting loss of certain customers have affected the Company's profit and loss as well as cash flow. The Company is finding it difficult to generate sufficient working capital to continue operations. At September 30, 1997, the Company's liabilities exceed current assets by $2,081,000. The Company has a line of credit available from its primary bank lenders (the "Bank"). As of March 31, 1997, the Company had drawn down the remaining $125,000 available at June 30, 1996. In addition, the Bank has agreed to loan the Company an additional $75,000. Of this amount, the Company has drawn down $50,000. This loan will be for a period of twenty four months with a monthly principal payment of $3,125. Payments commenced in February 1997. The Company must repay the $250,000 currently drawn on the line of credit by making principal payments of $7,083 per month with all such principal to be repaid on or before December of 1999. The Company is in technical default on this loan. In April 1997, the Company entered into an agreement with MBDC, a Massachusetts development agency, to provide up to $400,000 to the Company for the purchase of equipment and machinery, leasehold improvements, trade payables and working capital. The Company has expended $377,133 as of September 30, 1997. This loan is payable in equal monthly installments of principal. Interest is payable at prime plus 2 3/4% adjusted monthly. Due to cross-default provisions in the loan agreement, the Company is in technical default on this loan. PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS: The Company publishes this Section for the purpose of fulfilling its legal duty to notify Shareholders and the Securities and Exchange Commission ("SEC") of legal proceedings in which it currently is involved. I. The Trio's 1991 lawsuit Against the Company Anthony Trio and Genevieve Trio, d/b/a Trio's v. Original Italian Pasta Products Co., Inc. and Paul K. Stevens. Suffolk Superior Court (Boston, Massachusetts), C.A. No. 91-2680-A. On June 6, 1997, the Massachusetts Appeals Court issued a decision affirming the trial court's judgment rejecting the Trio's claim that they could terminate the License Agreement dated July 12, 1985, finding that the Trios were not entitled to terminate the Agreement or revoke licenses soley on account of the Company's failure to pay all royalties owed that the Company was entitled to deduct promotional expenses and freight before computing "Net Sales" for purposes of computing the royalty, and that the Company hadthe right to distribute at private label derivative products that were not flour-based and found that all products presently sold by the Company fell into one of the two categories. The Trios petitioned the Supreme Judicial Court for further appellate review of only that part of the Appeals Court's decision that held that the Trios could not terminate the License Agreement and revoke the licenses. The Trio's petition was denied on July 31, 1997, formally ending the case. II. Trios file Libel Lawsuit Against the Company in 1994 Genevieve Trio and Anthony Trio v. Original Italian Pasta Products Co., Inc. and Paul K. Stevens. Middlesex Superior Court (Cambridge, Massachusetts), C.A. No. 94-6910 On December 5, 1994, the Trios filed their third lawsuit against the Company and Paul K. Stevens. The complaint alleges that the Company and Mr. Stevens libeled the Trios by sending shareholders a document, typed on official stationary, which states that the Trios sought to extort money from the Comapny. The Trios claim that the documents acuse them of having committed a crime and constitute lebel per se. The Trios seek an as yet unspecified amount of monetary damages, as well as interest, costs and reasonable attorney fees for slander, libel, injuriuos falsehoods, malicious interference with a contractual right and fraud. The primary allegations is the language which appears in the "Legal Proceedings" section of the Forms 10-KSB attached to the Company's 1992 and 1994 Annual Reports constitutes libel. Each of those Forms describes the allegations in, and the status at year's end of, the Trios' 1991 lawsuit against the Company. The Form 10-KSB language which the Trios allege is defamatory, is found in a paragraph describing the Company's countercliams in the 1991 lawsuit. The contested language is taken directly from statements contained in the legal pleadings which the Company filed with the Court in the 1991 lawsuit. The Company has asserted, among other defenses, that the statement aat issue was one of opinion and not a statement that the Trios had committed a criminal act, was made in an official document issued in compliance with the law (the SEC requires the Company to report and describe the previous litigation in its Form 10-KSB) and was privileged because it related to and was contained within legal pleadings with the Court. On September 27, 1996, after the Company moved for summary judgment, the Court entered judgment in the Company's favor, dismissing all counts of the Trios' complaint. That ruling is presently on appeal by the Trios. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant had duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. ORIGINAL ITALIAN PASTA PRODUCTS CO. INC. Registrant November 21,1997 Date /s/ Paul K. Stevens President Chief Executive Officer Original Italian Pasta Products Co., Inc. Calculation of earnings per share Three months ended September 30, 1997 PRIMARY FULLY DILUTED Net Income $ (643,000) $(643,000) Interest reduction (assumed) -- -- Adjusted net income (643,000) (643,000) ========== ========= Common shares outstanding 1,900,000 1,900,000 Earnings per share $(.034) $(0.34) ======= ======= EX-27 2
5 1,000 3-MOS JUN-30-1998 SEP-30-1997 70 22 565 167 523 1029 4981 3872 2185 3110 0 0 0 38 (993) 2185 1979 1979 1755 850 (1) 0 16 (643) 0 (643) 0 0 0 (643) (0.34) (0.34)
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