-----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, D9ogtAnviaZzdM5ohdWwBASX/Kz6SF/Zxg6dOBOEMVz7scTStE6+PuyLf7+ALi9c +bBRmjOvNCjKSzQ7irz/ow== 0000950116-96-000875.txt : 19960928 0000950116-96-000875.hdr.sgml : 19960928 ACCESSION NUMBER: 0000950116-96-000875 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960820 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRANTOR CORP CENTRAL INDEX KEY: 0000870228 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & GENERAL LINE [5141] IRS NUMBER: 222993066 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-19409 FILM NUMBER: 96618278 BUSINESS ADDRESS: STREET 1: 120 E INDUSTRY CT CITY: DEER PARK STATE: NY ZIP: 11729-4706 BUSINESS PHONE: 5169357007 MAIL ADDRESS: STREET 1: 120 E INDUSTRY DR CITY: DEER PARK STATE: NY ZIP: 11729 FORMER COMPANY: FORMER CONFORMED NAME: DELTA VENTURES INC DATE OF NAME CHANGE: 19600201 10QSB 1 FORM 10-QSB FORM 10-Q. QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the period ended June 30, 1996 ------------- Commission File Number: 0-19409 KRANTOR CORPORATION (Exact name of registrant as it appears in its charter) Delaware 22-2993066 - ------------------------- ------------------- (State of incorporation) (I.R.S. Employer identification no.) 120 East Industry Ct. Deer Park, N.Y. 11729 ---------------------------------------- --------- (Address of principal executive offices) (zip code) 516-586-7500 (Registrant's telephone number, including area code) 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 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. [x] YES [ ] NO APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. On August 13, 1996 there were 7,397,365, shares outstanding of the registrant's common stock. KRANTOR CORPORATION FORM 10-Q JUNE 30, 1996 TABLE OF CONTENTS PART I: FINANCIAL INFORMATION Page Balance sheets as of June 30, 1996 (Unaudited) and December 31, 1995 2 - 3 Statements of Operations for the six months ended June 30, 1996 (Unaudited) 4 Statements of Operations for the three months ended June 30, 1996 (Unaudited) 5 Statements of Cash Flows for the six month period ended June 30, 1996 (Unaudited) 6 - 7 Notes to Financial Statements 8 - 9 Management's Discussion and Analysis of Financial Condition and Results of Operation 10 - 12 Forward Looking Information and Cautionary Statements 13 - 14 PART II: OTHER INFORMATION Item VI: Exhibits and Reports on Form 8-K 15 KRANTOR CORPORATION CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1996 AND DECEMBER 31, 1996 June 30, December 31, 1996 1995 ------------- ------------ (Unaudited) ASSETS Current Assets: Cash $ 2,139 370,000 Marketable Securities 2,871 13,871 Accounts Receivable - Net of allowance for doubtful accounts of $137,000 and $ 313,000, respectively 4,822,614 9,465,511 Inventory 2,086,023 6,432,981 Due From officers, employees & shareholders 33,593 111,305 Other Current Assets 1,499,502 552,816 ------------- ------------ Total Current Assets 8,446,742 16,946,484 ------------- ------------ Property and Equipment - Net 902,724 834,118 ------------- ------------ Advances to related parties - 228,718 Deferred Taxes 1,401,780 166,103 Deferred Costs 62,479 Other Assets 54,900 143,051 ------------- ------------ Total Other Assets 1,519,159 537,872 ------------- ------------ Total Assets $ 10,868,625 $ 18,318,474 ============= ============ See Accompanying Notes to Consolidated Financial Statements 2 KRANTOR CORPORATION CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
June 30, December 31, 1996 1995 ------------- ------------ (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes Payable (Note 4) $ 3,926,101 $ 4,621,248 Accounts Payable & Accrued Expenses 2,033,582 6,390,375 Income taxes payable 307,854 ------------- ------------- Total Current Liabilities 5,959,683 11,319,477 Notes Payable after one year 50,000 50,000 Commitments and Contingencies Stockholders' Equity (Note 5) - - Class A $2.20 Cumulative Preferred stock - $.001 par value; 100,000 shares authorized, Issued and Outstanding (Note 3) 100 100 Common stock - $.001 par value; 14,900,000 Shares authorized 5,374 4,950 Additional Paid-in Capital 9,555,00 8,591,758 Accumulated Deficit (4,534,039) (1,480,311) ------------- ------------- 5,026,442 7,116,497 Less treasury stock at cost, 35,000 share ( 167,500) (167,500) ------------- ------------- Total stockholders' equity 4,858,942 6,948,997 Total Liabilities & Shareholder's Equity $ 10,868,625 $ 18,318,474 ============ =============
See Accompanying Notes to Consolidated Financial Statements. 3 KRANTOR CORPORATION CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1996 1995 -------------- ------------ Sales (Note 7) $ 5,836,991 $ 21,024,043 Cost of Sales 5,356,548 18,473,199 -------------- ------------ Gross Profit 480,443 2,550,844 Selling General and Administrative Expenses 220,728 1,460,190 Depreciation and Amortization 222,330 69,486 -------------- ------------ Operating Income 37,385 1,021,168 -------------- ------------ Other Income (Expense): Miscellaneous Income (Expense) ( 10,848) 89,108 Interest Expense (197,177) (159,297) Financing Costs - (47,523) -------------- ------------ Total Other Expense (208,025) (117,712) ============== ============ Income (Loss) From Continuing Operations Before Income Taxes ( 170,640) 903,456 Income Taxes (Benefit) ( 56,000) 297,000 -------------- ------------ Income (Loss) from Continuing Operation $ ( 114,640) $ 606,456 ============== ============ Discontinued Operations (Note 7) Loss From Discontinued Operation (less applicable income taxes of $ (1,448,000)) (2,939,088) - -------------- ------------ Net Income (Loss) (3,053,728) 606,456 ============== ============ Income (Loss) Applicable to Common Stock $ (3,163,728) $ 601,456 ============== ============ Earnings (Loss) Per Common Share From Continuing Operations $ (.04) $ .13 Loss Per Common Share From Discontinued Operations (.59) - -------------- ------------ Earnings (Loss) Per Common Share $ (.63) $ .13 ============== ============ Weighted Average Number of Shares Outstanding 5,059,228 4,752,982
Unaudited - See Notes To Consolidated Financial Statements 4 KRANTOR CORPORATION CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
1996 1995 -------------- ------------ Sales (Note 7) $ 1,057,319 $ 10,793,691 Cost of Sales 952,932 9,394,546 -------------- ------------- Gross Profit 104,387 1,399,145 Selling General and Administrative Expenses 38,671 789,435 Depreciation and Amortization 73,915 34,614 -------------- ------------- Operating Income (Loss) ( 8,199) 575,096 -------------- ------------- Other Income (Expense): Miscellaneous Income (Expense) ( 9,839) 39,024 Interest Expense ( 94,142) (85,032) Financing Costs - (23,760) -------------- ------------- Total Other Expense ( 103,981) ( 69,768) ============== ============= Income (Loss) From Continuing Operations Before Income Taxes ( 112,180) 505,328 Income Taxes (benefit) ( 37,000) 167,000 -------------- ------------- Income (Loss) From Continuing Operation $ ( 75,180) $ 338,328 ============== ============= Discontinued Operations (Note 7) Loss from Discontinued Operations (Less Applicable Income Taxes of $ (1,367,945)) (2,768,448) - -------------- ------------- Net Income (Loss) (2,843,628) 338,328 ============== ============= Income (Loss) Applicable to Common Stock $ (2,898,628) $ 338,328 ============== ============= Earnings (Loss) Per Common Share From Continuing Operations $ (.02) $ .07 Earnings (Loss) Per Common Share From Discontinued Operations (.54) - -------------- ------------- Earnings (Loss) Per Common Share $ (.56) $ .07 ============== ============= Weighted Average Number of Shares Outstanding 5,136,015 4,779,257
Unaudited - See Notes To Consolidated Financial Statements 5 KRANTOR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
1996 1995 -------------- ------------- Cash Flows From Operating Activities: Income (Loss) From Continuing Operations $( 114,640) $ 606,456 Income (Loss) From Discontinued Operations ( 2,939,088) - Adjustments to Reconcile Net Income (Loss) From Continuing Operations to Net Cash Flows From Continuing Operating Activities: Depreciation and Amortization 110,976 69,486 Amortization of Financing Costs - 46,805 Non-Cash Expenses - 34,773 Provision for Bad Debts ( 176,000) - Changes in Operating Assets and Liabilities: Purchase of Marketable Securities - ( 463,318) Sales of Marketable Securities 11,000 302,331 Accounts Receivable 4,818,897 (2,383,174) Inventory 4,346,958 (1,544,605) Prepaid Expenses - ( 17,341) Deferred Taxes ( 1,235,677) 232,887 Other Current Assets ( 946,686) - Other Assets 88,151 84,099 Accounts Payable ( 4,356,793) 1,505,404 Accrued Expenses - ( 23,427) Income Taxes Payable ( 307,854) 49,741 -------------- ------------- Net Cash Flows (Used) Operating Activities ( 700,756) ( 1,499,883) Cash Flows From Investing Activities: Purchase of Furniture and Equipment ( 179,582) ( 19,150) Advances To Related Parties 228,718 ( 85,208) Due From Officers and Shareholders 77,712 ( 35, 521) Deferred Costs - ( 22,941) -------------- ------------- Net Cash Flows (Used) Investing Activities 126,848 ( 162,820) Cash Flows From Financing Activities: Net Borrowing (Payments) on Notes Payable ( 695,147) 1,518,020 Proceeds from Insurance of Common Stock 1,073,673 - Cash Dividends on Preferred Stock ( 110,000) ( 5,000) Deferred Costs ( 62,479) - Expenses Related to Sale of Stock - ( 80,244) -------------- ------------- Net Cash Flows Provided by Financing Activities 206,047 1,432,776 -------------- ------------- Net Increase ( Decrease) in Cash ( 367,861) ( 229,927) Cash - Beginning of Period 370,000 502,797 -------------- ------------- Cash - End of Period $ 2,139 $ 272,870 ============== =============
6 KRANTOR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
1996 1995 -------------- ------------- Supplemental Disclosure of Cash Flow Information: Cash Paid During the Period for: Interest Continuing Operation $ 197,177 $ 159,297 Discontinued Operation 64,951 ============== ============= Income Taxes Continuing Operations $ ( 56,000 $ 297,000 Discontinued Operations ( 1,448,000) ============== ============= Supplemental Disclosure of Non-Cash Operating, Investing and Financing Activities: Expenses paid via the distribution of registered shares of the Company's Common Stock through it's Compensation and Services Plan - 34,773 Prepaid Expenses paid via the distribution of registered shares of the Company's Common Stock through it's Compensation and Services Plan - 50,675 Deferred Costs paid via the distribution of registered shares of the Company's Common Stock through its Compensation and Services Plan - - Changes to additional-paid-in capital related to distribution of registered shares of the Company's Common Stock through its Compensation and Services Plan - - -------------- ------------- Total Non-Cash Operating, Investing and Financing Activities $ 85,448 ============== =============
Unaudited - See Notes to Consolidated Financial Statements 7 KRANTOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1996 Note 1 - Basis of Presentation: The December 31, 1995 balance sheet represents the prior year's audited balance sheet and is presented for comparative purposes. In the opinion of management, all adjustments which include only normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made to the unaudited interim financial statements. The results of operations for interim periods are not necessarily indicative of the operating results for the full year. Footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting practices have been omitted in accordance with the published rules and regulations of the Securities and Exchange Commission. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the most recent year end. Note 2 - Summary of Significant Accounting Policies: Principles of Consolidation - The consolidated financial statements include the accounts of the Company, Island Wholesale Grocers, Inc. (IWG), its wholly owned subsidiary, formed in April, 1994 and Island Frozen & Dairy (IFD) formed in May, 1995 (See Note 7). All significant intercompany accounts and transactions have been eliminated in consolidation. Net Income Per Common Share - Net income per common share is based on the weighted average number of common shares outstanding during the periods. When losses are incurred, warrants and options are not included since the effect would dilute loss per share. When net income is reported, warrants and options are included using the treasury stock method, when exercise prices are less than the average market price. Inventory - Inventory, consisting entirely of finished goods is stated at the lower of cost or market determined by the first in, first-out method. Note 3 - Preferred Dividends: Dividends on the preferred stock in the amount of $55,000 for the three months ending June 30, 1996 were declared and caused to be paid in common stock. Note 4 - Revolving Line of Credit: The Company finances its receivables through a loan and security agreement with a lender. Under the terms of the agreement, the Company receives cash advances of up to eighty percent of its eligible accounts receivable, as defined. The proceeds from collections of the eligible accounts receivable are used to reduce the loan balance. On May 14th the Company amended the loan agreement with the Lender to include financing Island Frozen & Dairy, increased its line to $8,000,000 and extended the maturity to November 14, 1997. Note 5- Shareholders Equity: In the 2nd quarter of 1996, the Company issued 388,821 shares of the Company's common stock pursuant to the terms of the 1994 Services and Consulting Compensation Plan. Note 6 - Related Party Transactions: There were no sales to related parties during the first six months of 1996 and 1995. Purchases from related parties during the first six months of 1996 and 1995 were approximately $307,000 and $ 950,000 respectively. 8 KRANTOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1996 Note 7 -Discontinued Operations On June 30, 1996 the Company discontinued its Kosher Food business operated through IFD. All assets and applicable liabilities have been consolidated into the Company's balance sheet. Applicable financing costs and operating expenses were allocated to the loss from discontinued operations in the consolidated statement of income. The Consolidated Balance Sheet from discontinued operations includes (IFD) $4,362,000 of current assets and 3,115,000 in current liabilities excluding intercompany accounts. The results of discontinued operations are summarized as follows: June 30, 1996 ------------- Net Sales $ 12,826,040 ============ Loss from discontinued operations before income taxes $( 4,387,088) Income taxes (credit) 1,448,000 ------------- Loss from discontinued operations $ (2,939,088) ============ The above results for 1996 are through the end of the second quarter when the decision was made to dispose of IFD. Operating results of discontinued operations include allocations of overhead and interest expense. Overhead expense of $2,148,189 was allocated based upon determination of those costs which were not expected to be incurred by continuing operations after closing. Financing costs of $542,381 were allocated based on debt incurred to finance the discontinued operations since acquisition. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company is a distributor of promotional brand-name grocery, general merchandise, Health and Beauty Aids & Frozen Seafood (IWG). The Company discontinued its Kosher Food business (IFD) on June 30, 1996. (See Note 7 to Consolidated Statements). The Company's current assets consist primarily of accounts receivable, inventory, equipment, prepaid expenses and cash. The Company's liabilities consist of accounts payable and short term debt used to finance accounts receivable. Revenues from continued operations decreased for the six months ended June 30, 1996 to $5,836,991 a (72%) decrease as compared to the prior period. Revenues from discontinued operations (IFD) for the period totaled $12,852,527. Total revenues for the combined business would have been $18,689,518 an 11% decrease from the prior period (See Note 7 to Consolidated Financial Statements). The decrease in revenues is related to discontinuing IFD's business, and the lack of sufficient working capital to maintain continuing operations, due to the financial requirements of IFD. The redirection of capital to continuing operations (IWG) should allow the core grocery and seafood business to expand to Fiscal 1995 levels; although additional capital may be required (See Liquidity and Capital Resources). Cost of sales for continued operations decreased for the quarter ended June 30, 1996 to $ 5,356,548 or (71 %) decrease as compared to the prior year. This decrease was primarily attributable to the decrease in the Company's revenues (See Note 7 to Consolidated Financial Statements). The Company's gross profit from continuing operations decreased from 12% to 8% in the same period. Selling General & Administrative (SG&A) expenses from continuing operations decreased to $220,728 for the period an 85% decrease. This decrease is related to lower revenues from continued operations. SG&A as a percentage of sales for continued operation decreased from 7% to 4% for the same period. Loss from continued operations totaled $114,640 for the period as compared to $606,456 profit for the same period. This decrease is related to a 72% drop in revenues from continuing operations. Loss from discontinued operations totaled $2,939,088. This loss is a one time change to earnings attributable to discontinuing IFD's operations (See Note 7 to Consolidated Financial Statements). 10 Liquidity and Capital Resources As a result of the Company's recent expansion into the wholesale segment of the food distribution industry and the high levels of inventory needed to operate successfully in that segment, the Company has been experiencing cash flow shortages. In particular, the Company has incurred significant costs in connection with discontinuing Island Frozen & Dairy's (IFD) operations. Another reason for the Company's cash flow shortages is the manner in which its inventory was converted into sales. Although most of the Company's customers are required to pay within thirty days of product delivery, IFD, for competitive reasons, made advance purchases of inventory in order to quickly meet retail demand and take advantage of promotional buying opportunities. In addition IFD experienced significant collection problems from its customers and delays in receiving rebates and allowances from its vendors. These factors extend the time between the original purchase of goods from manufacturers and the eventual cash collection from its retail customers to a period which is well beyond acceptable terms. The Company is continuing to collect its outstanding IFD receivables and sell its remaining inventory. The Company believes that within 90 days the assets of IFD should be fully converted (See Note 7 to Consolidated Statements). Working capital decreased by 56% to $2,487,000 while inventory and payables both decreased by 68% for the period. These changes reflect the working capital position of the Company after the one time loss from discontinued operation. The Company believes that it has sufficient working capital to fund its continuing operations but requires additional financing to expand. Continuing operations will be conducted through Island Wholesale Grocers (IWG), the promotional grocery and seafood subsidiary of Krantor. The Company's receivables for the first six months decreased by 49 % to $4,822,614. The reduction in receivables is primarily attributable to a decrease in revenues by Krantor Corporation and Island Wholesale Grocers in order to finance the working capital requirements of Island Frozen & Dairy. Receivables should increase for IWG's business and decrease for IFD as receivables are collected. The Company plans on expanding its core grocery and frozen seafood market through IWG. Krantor believes that by discontinuing IFD's operation it should enable it to support the capital requirements of its continuing operation through IWG. However, the Company believes it will need additional financing in the form of subordinated debt or equity to finance its expansion plans. See "Forward-Looking Information and Cautionary Statements." The Company has consolidated its agreements with two lending institutions through a single agreement with one of those institutions. The current consolidated lending facility provides for a total of $8 million from Fidelity Funding of California, Inc. ("Fidelity"). Under the facility, the Company may borrow up to the lesser of $8 million or 80% of eligible accounts receivables. This line funds sales activities for Krantor Corporation and its wholly owned subsidiaries, IWG and IFD (which has been discontinued on June 30, 1996). As of June 30, 1996, the Company had approximately $4,074,000 available under the facility for additional borrowing subject to the borrowing formula. The facility, which expires in November 1996, was extended on May 11, 1996 through November 14, 1997 by Fidelity. Management is not aware of negative trends in the Company's area of business or other economic factors which may cause a significant change in the Company's viability or financial stability, except as specified herein and in "Forward-Looking Information and Cautionary Statements." Management has no plans to alter the nature of its business, other than by discontinuing its Kosher frozen food business (IFD). 11 Liquidity and Capital Resources (cont'd) Subject to available financing, the Company intends to further expand its continuing business by purchasing and maintaining short-term inventories of well accepted, readily marketable promotional brand-name grocery products and frozen seafood. The Company believes that by warehousing these products it will be able to make larger purchases during manufacturers' promotional periods, gain better access to some product promotions ordinarily reserved for higher volume purchasers, increase sales by having more inventory available for shipment on demand, and thereby expand its customers and supplier base. The Company also plans to significantly expand its seafood business in the third and fourth quarters of 1996. As a result of this contemplated expansion, the Company believes it can obtain better margins on its sale of Frozen Seafood products. However, there can be no assurance that the Company's proposed expansion plan will be successful. The Company needs to enhance its leverage so that it can expand. Additional working capital is required beyond the current available financing in order for the Company to expand from its current levels. Seasonality Seasonality affects the demand for certain products sold by the Company, such as juice drinks in the summer months or hot cereals in fall and winter months. However, all these products are available to the Company throughout the year. Manufacturers also tend to promote more heavily towards the close of the fiscal quarters and during the spring and early summer months. Accordingly, the Company is able to purchase more product and increase sales during these periods and reduce its product cost due to these promotions. The Company generally experiences lower sales volume in the fourth quarter due to the reduced number of selling days resulting from the concentration of holidays in the quarter. Sale of frozen seafood is more significant in the third and fourth quarters due to the seasonal catch which occurs in the second quarter. Inflation The Company believes that inflation, under certain circumstances, could be beneficial to the Company's business. When inflationary pressures drive product costs up, the Company's customers sometimes purchase greater quantities of product to expand their inventories to protect against further pricing increases. This enables the Company to sell greater quantities of products that are sensitive to inflationary pressures. Additionally, inflationary pressures frequently increase interest rates. Since the Company is dependent on financing, any increase in interest rates will increase the Company's credit costs, thereby reducing its profits unless these additional credit costs can be passed on to the Company's customers. 12 Forward Looking Information and Cautionary Statements Other than the factual matters set forth herein, the matters and items set forth in this report are forward- looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following: 1. Cash Flow. The Company has experienced cash shortages which continue to adversely affect its business. See "Liquidity and Capital Resources". 2. Dependence on Public Trends. The Company's business is subject to the effects of changing customer preferences and the economy, both of which are difficult to predict and over which the Company has no control. A change in either consumer preferences or a down-turn in the economy may affect the Company's business prospects. 3. Potential Product Liability. As a participant in the distribution chain between the manufacturer and consumer, the Company would likely be named as a defendant in any products liability action brought by a consumer. To date, no claims have been asserted against the Company for products liability; there can be no assurance, however, that such claims will not arise in the future. Accordingly, the Company maintains a products liability of $10,000,000 per occurrence. In the event that any products liability claim is not fully funded by insurance, and if the Company is unable to recover damages from the manufacturer or supplier of the product that caused such injury, the Company may be required to pay some or all of such claim from its own funds. Any such payment could have a material adverse impact on the Company. 4. Reliance on Common Carriers. The Company does not utilize its own trucks in its business and is dependent, for shipping of product purchases, on common carriers in the trucking industry. Although the Company uses several hundred common carriers, the trucking industry is subject to strikes from time to time, which could have material adverse effect on the Company's operations if alternative modes of shipping are not then available. Additionally the trucking industry is susceptible to various natural disasters which can close transportation lanes in any given region of the country. To the extent common carriers are prevented from or delayed in utilizing local transportation lanes, the Company will likely incur higher freight costs due to the limited availability of trucks during any such period that transportation lanes are restricted. 13 Forward Looking Information and Cautionary Statements 5. Competition. The Company is subject to competition in both its promotional and seafood businesses. While both industries are highly fragmented, with no one distributor dominating the industry, the Company is subject to competitive pressures from other distributors based on price and service. 6. Discontinued Operation. The Company has experienced a significant one time loss in discontinuing its Kosher Food business (IFD). This loss materially reduced the Company's working capital position. (See Liquidity & Capital Resources). The Company needs additional capital to expand its core grocery and frozen seafood business (IWG). Without additional capital the Company would not be able to utilize the maximum availability under its loan agreement to finance its contemplated expansion. 7. Litigation The Company has commenced a business interference lawsuit against a major secured vendor of IFD & Krantor claiming damages that directly relate to the discontinuation of IFD's business. The secured vendor has also commenced an action for trade debt in the amount of $450,000. The company is defending the action. These actions have an effect on the company's borrowing facilities and until they are resolved the company's borrowing availability under its loan agreements may be limited. 14 Part II- Other Information Item 6- Exhibits and Reports on Form 8-K (a) Exhibits None (b) There were no reports filed on Form 8-K for the relevant period 15 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KRANTOR CORPORATION /S/ Mair Faibish Date 8/19/96 ---------------------------- -------------------- By Mair Faibish Chief Financial Officer /S/ Mitchell Gerstein Date 8/19/96 ---------------------------- -------------------- By Mitchell Gerstein Treasurer EX-27 2 FINANCIAL DATA SCHEDULE
5 0000870228 KRANTOR CORP. 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 2,139 2,871 4,822,614 0 2,086,023 8,446,742 902,724 0 10,868,625 5,959,683 0 0 100 5,374 0 10,868,625 5,836,991 5,836,991 (5,356,548) (443,058) (208,025) 0 (197,177) (170,640) (56,000) (114,640) (4,387,088) (1,448,000) (2,939,088) (3,053,728) (.63) (.00)
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