-----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, HuXtKoygVbtyxBlDhsd/YqFAe+4whtwdIgCvvjY6YyK2r6S9YGBb6PmmtQo/ifru Vdugn1xwX6Y1a0FC45ouhQ== 0000881590-00-000009.txt : 20000516 0000881590-00-000009.hdr.sgml : 20000516 ACCESSION NUMBER: 0000881590-00-000009 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SARATOGA BRANDS INC CENTRAL INDEX KEY: 0000868075 STANDARD INDUSTRIAL CLASSIFICATION: DAIRY PRODUCTS [2020] IRS NUMBER: 133413467 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-19721 FILM NUMBER: 631005 BUSINESS ADDRESS: STREET 1: 1835 SWARTHMORE AVENUE CITY: LAKEWOOD STATE: NJ ZIP: 08701 BUSINESS PHONE: 3103154979 MAIL ADDRESS: STREET 1: 1835 SWARTHMORE AVE CITY: LAKEWOOD STATE: NJ ZIP: 08701 FORMER COMPANY: FORMER CONFORMED NAME: EMPIRE SPECIALTY FOODS INC /NY/ DATE OF NAME CHANGE: 19600201 10QSB 1 FORM 10QSB FOR 03/31/00 U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB (Mark One) [x]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934 Commission file number 0-19721 THE CLASSICA GROUP, INC. (Formerly Saratoga Brands Inc.) (Exact name of small business issuer as specified in its charter) New York 13-3413467 (State or other jurisdiction of (IRS Employer identification no.) incorporation or organization) 1835 Swarthmore Avenue, Lakewood, New Jersey 08701 (Address of principal executive offices) (732) 363-3800 (Issuer's telephone number) --------------------------------- Check whether the issuer (1) 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 PROCEEDINGS DURING THE PRECEDING FIVE YEARS 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 confirmed by a court. Yes .......No ....... APPLICABLE ONLY TO CORPORATE ISSUERS Number of shares outstanding of each of the issuer's classes of common equity as of May 9, 2000 Title of Each Class Number of Shares Outstanding Common Stock, $.001 par value per share 1,267,833 PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements THE CLASSICA GROUP, INC. AND SUBSIDIARIES (FORMERLY SARATOGA BRANDS INC. AND SUBSIDIARIES) Consolidated Balance Sheet (Unaudited) March 31, 2000 ASSETS Current Assets: Cash and cash equivalents $255,074 Accounts receivable-net of allowance for doubtful accounts of $63,140 697,494 Inventories 538,273 Prepaid expenses and other current assets 173,117 ----------- Total current assets 1,663,958 Fixed Assets - net 2,667,425 Other assets 544,150 Intangible assets - net 1,034,288 ----------- TOTAL ASSETS $5,909,821 =========== See notes to the consolidated financial statements (Unaudited). 2 THE CLASSICA GROUP, INC. AND SUBSIDIARIES (FORMERLY SARATOGA BRANDS INC. AND SUBSIDIARIES) Consolidated Balance Sheet (Unaudited) (continued) March 31, 2000 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Current Liabilities: Accounts payable and accrued expenses $1,962,690 Current portion of long-term debt 125,342 Current portion of capital lease obligations 76,470 ------------ Total current liabilities 2,164,502 Long-term debt 729,687 Capital lease obligations 236,614 ------------ Total liabilities 3,130,803 ------------ STOCKHOLDERS' EQUITY Preferred stock 397,898 Class A participating convertible preferred shares, $1 par value, stated at liquidation value, authorized 200 shares of which 16.5 shares are issued and outstanding. Common stock 1,232 Par value $.001 - 25,000,000 shares authorized, 1,231,833 shares issued and outstanding Additional paid-in-capital 853,017 Retained Earnings 1,526,871 ----------- Total Stockholders' Equity 2,779,018 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,909,821 =========== See notes to the consolidated financial statements (Unaudited). 3 THE CLASSICA GROUP, INC. AND SUBSIDIARIES (FORMERLY SARATOGA BRANDS INC. AND SUBSIDIARIES) Consolidated Statements of Operations (Unaudited) For the Three Months Ended March 31, 2000 and 1999 March 31, 2000 1999 ------------------------------ Net sales $ 2,622,062 $ 2,762,182 Cost of sales 2,031,100 1,940,595 ------------------------------ Gross profit 590,962 821,587 Selling, general and administrative expenses 670,158 618,478 Loss on abandoned operation - 52,866 ------------------------------ (Loss) income from operations (79,196) 150,243 Interest expense - net 69,255 63,145 ------------------------------ (Loss) income before taxes (148,451) 87,098 Income tax provision 4,400 8,500 ------------------------------ Net (loss) income ($152,851) $ 78,598 ============================== EARNINGS PER COMMON SHARE BASIC & DILUTED Net (loss) income ($0.13) $0.08 ============================== Basic weighted average shares used in computation 1,155,295 1,009,333 Diluted weighted average shares used in computation 1,155,295 1,009,333 See notes to the consolidated financial statements (Unaudited). 4 THE CLASSICA GROUP, INC. AND SUBSIDIARIES (FORMERLY SARATOGA BRANDS INC. AND SUBSIDIARIES) Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2000 and 1999 March 31, 2000 1999 ---------------------------- Cash Flows from operating activities: Net (loss) income $ (152,851) $ 78,598 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 130,541 117,908 Provision for losses on accounts receivable 17,008 9,000 Decrease (increase)in accounts receivable 111,684 (45,035) Decrease in inventories 119,143 492 Decrease (increase) in prepaid expenses and other assets 78,766 (98,874) Decrease in accounts payable and accrued expenses (246,299) (35,279) ---------------------------- Net cash provided by operating activities 57,992 26,810 ---------------------------- Cash flows from investing activities: Purchase of fixed assets (65,321) (54,353) Increase in intangible assets (1,150) 0 ---------------------------- Net cash provided by (used in) investing activities (66,471) (54,353) ---------------------------- Cash flows from financing activities: Proceeds of long-term debt 0 200,000 Repayment of long-term debt (73,055) (243,356) Issuance of capital stock-private placement 300,000 0 Issuance of capital stock-exercise of options 28,126 0 Proceeds of capital leases 0 200,000 Repayment of capital leases (18,068) (14,151) ---------------------------- Net cash provided by financing activities 237,003 142,493 ---------------------------- Net increase in cash and cash equivalents 228,524 114,950 Cash and cash equivalents at beginning of period 26,550 108,357 ---------------------------- Cash and cash equivalents at end of period $ 255,074 $ 223,307 ============================ Supplemental disclosure of cash flow information: Interest paid $ 70,627 $ 59,753 ============================ See notes to the consolidated financial statements (Unaudited). 5 THE CLASSICA GROUP, INC. AND SUBSIDIARIES (FORMERLY SARATOGA BRANDS INC. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE 1 --ORGANIZATION AND BASIS OF PRESENTATION The Classica Group, Inc. (formerly Saratoga Brands, Inc.) (The "Company") through its subsidiaries is a national distributor of specialty cheeses and operates a food processor, distributor and mobile catering business servicing Rhode Island, eastern Connecticut and southeastern Massachusetts. In the first quarter of 2000, the Company formed Classica Microwave Technologies, Inc. ("CMT") which will provide an innovative microwave based food-processing system to improve the bacterial integrity of food products as well as extend the shelf life of food products. The unaudited consolidated financial statements included herein have been prepared by the Company in accordance with the same accounting principles followed in the presentation of the Company's annual financial statements for the year ended December 31, 1999, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments that are of a normal and recurring nature and are necessary to fairly present the results of operations, the financial position and cash flows of the Company have been made on a consistent basis. This report should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-KSB Annual Report for the year ended December 31, 1999. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances are eliminated. Income taxes for the interim period are based on the estimated effective tax rate expected to be applicable for the full fiscal year. The Company has recorded a full valuation allowance related to the deferred tax asset at March 31, 2000. NOTE 2 --PER SHARE DATA The per share data has been calculated using the weighted average number of Common Shares outstanding during each period presented on both a basic and diluted basis in accordance with SFAS 128. 675,149 outstanding options and warrants have been excluded from the computation due to their antidilutive effect. The financial statements reflect share amounts after having given effect to a reverse stock split of 1:5, which became effective October 6, 1999. 6 NOTE 3 --FIXED ASSETS Fixed assets consists of the following at March 31, 2000: Useful Life ------------- Land $611,007 Buildings 894,402 38.5 years Furniture & equipment 1,214,270 5 - 10 years Vehicles 544,503 5 - 7 years Leasehold improvements 46,667 5 years Equipment held for sale 10,000 Capital Leases 460,732 ----------- Total Cost 3,781,581 Less accumulated depreciation and amortization (1,114,156) ----------- Fixed assets - net $2,667,425 =========== NOTE 4 -- LONG-TERM DEBT Long-term debt consists of the following at March 31, 2000: Term Loan - payable in installments through 2000. Interest at prime plus 1%. Secured by accounts receivable, inventories and fixed assets $ 17,700 Term loan - payable $37,500 annually through 2002, With a balloon payment in 2003. Interest at 8%. Secured by building. 693,750 Note payable - payable in monthly installments of $4,837. Interest at 9.865%. Secured by certain vehicles 120,579 Note payable, unsecured - payable in monthly installments of $9,375. Interest at prime plus 1%. 18,750 Other 4,250 ---------- Subtotal 855,029 Less current maturities 125,342 ---------- Long -term debt $729,687 ========== 7 Maturities of Long Term Debt are as follows: 2000 $ 104,612 2001 89,509 2002 70,283 2003 590,625 ---------- $ 855,029 ========== Note 5 -- SEGMENT REPORTING Industry segment information at March 31, 2000 is summarized as follows: Total Operating Revenues Profit(Loss) ------------- -------------- CCI $ 1,851,062 $ 214,846 Deli 698,877 (230,528) CMT - (12,500) ------------- -------------- Total Segment 2,549,939 (28,182) Eliminations and other corporate income(expenses) 72,123 (51,014) ------------- -------------- Consolidated $ 2,622,062 (79,196) ============= Interest expense 69,255 -------------- Loss before income taxes $ (148,451) ============== Depreciation Capital and Amortization Identifiable Expenditures Expense Assets ---------------------------------------------------- CCI $ 11,515 $ 57,041 $1,799,411 Deli 29,829 66,000 3,164,260 CMT 23,977 - 23,977 Corporate - 7,500 922,173 ==================================================== Consolidated $ 65,321 $ 130,541 $5,909,821 ==================================================== 8 Note 6 - RECENT SALE OF UNREGISTERED SECURITIES On February 1, 2000, the Company sold 200,000 unregistered shares of the Company's common stock. The shares were sold to several accredited investors at $1.50 per share. Total net proceeds were $300,000 for which no commission or broker fee was paid. The Company intended that the shares be exempt from registration under the Securities Act by virtue of Section 4(2) and/or Section 4(6) of the Securities Act and the provisions of Regulation D promulgated thereunder. Under the terms of the subscription agreement the Company is required to file a registration statement with the Securities and Exchange Commission to register for resale under the Securities Act the shares of Common Stock within 120 days of the closing. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis contains forward-looking statements, which involve risk and uncertainties. When used herein, the words "anticipated," "believe," "estimate," and "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements which the meaning of the Private Securities Litigation Reform Act of 1995. The Company's actual results, performance or achievements could differ materially from the results expressed or implied by these forward-looking statements. Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Unaudited Financial Statements and related notes, which are contained herein. Results of Operations for the Three Months Ended March 31, 2000 and 1999 Net sales for the three months ended March 31, 2000 were $2,622,062 compared with $2,762,182 in 1999, a decrease of $140,120 or 5.1%. This decrease is the result of a reduction in sales of $77,844 or 10.0% at the Company's Deli King subsidiary, and $111,388 or 5.7% at CCI. The reduction in net sales at the Deli King subsidiary resulted from the loss of a significant number of independent caterers who left to move to a commissary with a location closer to the area serviced by their routes. In the first quarter of 2000, Deli King has taken steps to move its operation. The move is on schedule to be completed by the end of the second quarter. Management believes that this move will improve the profitability of the mobile catering business by substantially increasing its revenues resulting from sales to additional caterers at a more favorable location. The decrease in revenues at CCI was primarily the result of a delay in the sale of imported cheese products due to the timing of the Easter and Passover holidays in 2000. The shortfall should be made up in the second quarter. The Company generated gross profit of $590,962 or 22.5% of net sales in 2000, vs. $821,587 or 29.7% of net sales in 1999. The decrease in gross profit margin was the result of a reduction in gross profit of $117,464 or 69.9% at the Deli King subsidiary. Deli King's gross margin decreased because a substantial portion of their cost of sales are fixed costs. CCI's gross profit decreased to $468,252 or 25.3% of net sales in 2000 compared to $630,522 or 32.1% of net sales in 1999, a decrease of $162,270. CCI's gross profit in the quarter decreased primarily as the result of the lower import sales in the period causing the product mix to skew toward the lower margin domestic products. Selling, general and administrative expenses were $670,158 and $618,478 in 2000 and 1999, respectively. This represents an increase of $27,516 or 1.1% of net sales. This increase is the result of increased costs at the Deli King subsidiary resulting from an attempt to increase wholesale business as a result of the loss of caterers due to our undesirable location, and costs related to our new CMT division. 10 The Company generated a net loss of $152,851 for the three months ended March 31, 2000 versus income of $78,598 for the same period in 1999. This represents a reduction of $231,449. Deli King's results from operations for 2000 were a loss of $(247,271) compared to a loss of $(137,250) in 1999. CCI's results from operations for 2000 were $157,934 compared to $309,233 in 1999. Interest expense was $69,225 and $63,145 for the three-months ended March 31, 2000 and 1999, respectively. The increase is the result of capital leases, which were entered into after the first quarter of 1999. The Company reported no provision for Federal income taxes for the three month periods ended March 31, 2000 and 1999, as the Company had a net loss for 2000 and taxable operating earnings were offset by net operating loss carry forwards in 1999. The Company reported a provision for state income taxes of $4,400 and $8,500 for the three-month periods ended March 31, 2000 and 1999, respectively. Liquidity and Capital Resources The Company's sources of capital include, but are not limited to, the issuance of public or private debt, bank borrowings and the issuance of equity securities. At March 31, 2000, the Company had a net worth of $2,779,018 compared with $3,806,065 at March 31, 1999. The Company has limited requirements for capital expenditures in the immediate future, except for the costs related to moving the Deli King operation to its new facility, and the start-up of the new CMT division. To that end, on February 1, 2000, the Company issued 200,000 shares of its common stock in a private placement, for which it yielded net proceeds of $300,000. CCI's factoring arrangement with GMAC Commercial Credit, LLC has adequate availability to provide working capital to support sales growth in that division. Deli King owns real estate with a market value of approximately $1,450,000 against which there exists a mortgage in the amount of $693,750 at March 31, 2000. Additionally, Deli King has a loan collateralized by its fleet of trucks in the amount of $120,579 at March 31, 2000. Except for a capital lease on two of its computers all other Deli King assets are owned free and clear, and provide adequate collateral to support borrowing for working capital needs in that subsidiary. The Company utilizes capital leases for the acquisition of operating assets at the subsidiaries when appropriate. At March 31, 2000, the Company has capital leases with an unamortized balance of $313,084. Management believes that the Company has sufficient working capital to meet the needs of its current level of operations. 11 Seasonality The Company's businesses are subject to the effects of seasonality. Consequently, the operating results for the quarter ended March 31, 2000 are not necessarily indicative of results to be expected for the entire year. Anticipated Future Growth New Business - Classica Microware Technologies, Inc. Classica Microwave Technologies, Inc. ("CMT") is currently testing microwave-processing systems for use in food processing. CMT is anticipating the delivery of its first laboratory system in early June of 2000. This system will have the ability to develop and test food products for companies looking to ensure the bacterial integrity of their products. In addition, CMT's engineer has been successful in designing a microwave system capable of drying various food products. CMT anticipates installing a second laboratory system utilizing this drying process. These systems will provide longer refrigerated and non-refrigerated shelf life without dependency on additives or preservatives of any kind. The Company will also have the ability to develop new products for the expansion of the product lines of its other companies. CMT expects to have several revenue sources including; the development of food products having bacterial integrity and extended refrigerated and non-refrigerated shelf life, the sale of systems to food processors concerned about the bacterial integrity of their products, and strategic joint ventures for product development and sales with existing food processors. Management believes that the future growth of the Company will be the result of five efforts; (1) the operations of the Company's new Classica Microwave Technologies, Inc. subsidiary (2) acquisition of other companies in the food and food related industries, (3) increasing sales to existing customers by offering new products and product lines, (4) obtaining new customers in the existing markets and developing new markets via current marketing channels and the internet, and (5) controlling and containing production, operating and administrative costs. 12 PART II - OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds On February 1, 2000, the Company sold 200,000 unregistered shares of the Company's common stock. The shares were sold to several accredited investors at $1.50 per share. Total net proceeds were $300,000 for which no commission or broker fee was paid. The Company intended that the shares be exempt from registration under the Securities Act by virtue of Section 4(2) and/or Section 4(6) of the Securities Act and the provisions of Regulation D promulgated thereunder. Under the terms of the subscription agreement the Company is required to file a registration statement with the Securities and Exchange Commission to register for resale under the Securities Act the shares of Common Stock within 120 days of the closing. Proceeds from the above private placement are being used to relocate the mobile catering business. Item 6. Exhibits and reports on Form 8-K (a) Exhibits None (b) Reports filed on Form 8K None 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf the undersigned thereunto duly authorized THE CLASSICA GROUP, INC. ------------------------ (Registrant) Date: May 12, 2000 By: /s/ Scott G. Halperin --------------------- Scott G. Halperin Chairman Chief Executive Officer Date: May 12, 2000 By: /s/ Bernard F. Lillis, Jr. -------------------------- Bernard F. Lillis, Jr. Chief Financial Officer Principal Accounting Officer Treasurer 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 This shedule contains summary financial information extracted from Consolidated Audited Financial Statements contained in Form 10KSB and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-2000 JAN-1-2000 MAR-31-2000 255,074 0 760,634 (63,140) 538,273 1,663,958 3,781,581 (1,114,156) 5,909,821 2,164,502 0 0 397,898 1,232 2,379,888 5,909,821 2,622,062 2,622,062 2,031,100 670,158 0 17,008 69,255 (148,451) 4,400 (152,851) 0 0 0 (152,851) (0.13) (0.13)
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