-----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, Qtw32akiYmtTItKSV9u0MBcWFbWX6KAJ8+Kwcoslq3k0ge8nq6b/3uvRBoCcyhUc RsmjPdMvpFsOP5NhBkJZzg== 0000927016-96-001537.txt : 19961108 0000927016-96-001537.hdr.sgml : 19961108 ACCESSION NUMBER: 0000927016-96-001537 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961107 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTA FOOD INGREDIENTS INC /DE CENTRAL INDEX KEY: 0000883326 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 043117634 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19811 FILM NUMBER: 96655719 BUSINESS ADDRESS: STREET 1: 25 WIGGINS AVE CITY: BEDFORD STATE: MA ZIP: 01730 BUSINESS PHONE: 6172765100 MAIL ADDRESS: STREET 1: 25 WIGGINS AVENUE CITY: BEDFORD STATE: MA ZIP: 01730 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1996 COMMISSION FILE NO. 0-19811 OPTA FOOD INGREDIENTS, INC. (Exact Name of Registrant as Specified in its Charter) DELAWARE 04-3117634 (State of Incorporation) (I.R.S. Employer Identification No.) 25 WIGGINS AVENUE, BEDFORD, MA 01730 (Address of Principal Executive Offices) (Zip Code) (617) 276-5100 (Registrant's Telephone No., 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. YES X NO -- -- Number of shares outstanding of each of the issuer's classes of common stock as of October 31, 1996: COMMON STOCK, PAR VALUE $.01 10,960,488 SHARES OUTSTANDING OPTA FOOD INGREDIENTS, INC. FORM 10-Q - -------------------------------------------------------------------------------- Quarter Ended September 30, 1996 Table of Contents
Page Number ------ Part I - Financial Information - ------------------------------ Item 1 - Financial Statements Condensed Balance Sheet (Unaudited) September 30, 1996 and December 31, 1995......................... 3 Condensed Statement of Operations (Unaudited) for the Three and Nine Months Ended September 30, 1996 and 1995.. 4 Condensed Statement of Cash Flows (Unaudited) for the Nine Months Ended September 30, 1996 and 1995............ 5 Notes to Condensed Unaudited Financial Statements.................. 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 7 Part II - Other Information - --------------------------- Item 1 through Item 6............................................ 11 Signatures....................................................... 12
2 OPTA FOOD INGREDIENTS, INC. CONDENSED BALANCE SHEET (in thousands) - -------------------------------------------------------------------------------- (Unaudited)
SEPTEMBER 30, DECEMBER 31, 1996 1995 -------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 34,408 $ 40,174 Short term investments 4,938 4,993 Accounts receivable, net 1,371 1,133 Inventories, net 3,465 2,234 Other assets 202 314 -------------- ----------- Total current assets 44,384 48,848 Fixed assets, net 12,056 11,137 Intangibles, net 907 905 Other assets 288 379 -------------- ----------- $ 57,635 $ 61,269 ============== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long term debt $ 1,490 $ 1,507 Accounts payable 563 763 Accrued expenses 1,154 882 -------------- ----------- Total current liabilities 3,207 3,152 Long term debt 4,493 5,498 Deferred revenue 439 471 Other liabilities 170 156 -------------- ----------- Total liabilities 8,309 9,277 Stockholders' equity: Common stock 110 107 Additional paid-in capital 78,999 78,088 Accumulated deficit (29,783) (26,203) -------------- ----------- Total stockholders' equity 49,326 51,992 -------------- ----------- $ 57,635 $ 61,269 ============== ===========
3 OPTA FOOD INGREDIENTS, INC. CONDENSED STATEMENT OF OPERATIONS (in thousands, except per share data) - -------------------------------------------------------------------------------- (Unaudited)
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ---------------------- -------------------- 1996 1995 1996 1995 --------- ---------- --------- --------- Revenue: Product sales $ 2,202 $ 1,954 $ 7,128 $ 4,563 Contract revenue - 67 63 201 ---------- ---------- -------- ---------- 2,202 2,021 7,191 4,764 ---------- ---------- -------- ---------- Cost and expenses: Cost of revenue 1,785 1,839 5,921 4,215 Selling, general and administrative 936 782 2,849 2,046 Research and development 1,081 746 3,149 2,274 ---------- ---------- -------- ---------- 3,802 3,367 11,919 8,535 ---------- ---------- -------- ---------- Loss from operations (1,600) (1,346) (4,728) (3,771) ---------- ---------- -------- ---------- Other income (expense): Interest income 498 373 1,606 680 Interest expense (137) (107) (440) (289) Other income (expense) (8) 5 (18) (22) ---------- ---------- -------- ---------- 353 271 1,148 369 ---------- ---------- -------- ---------- Net loss $(1,247) $(1,075) $(3,580) $ (3,402) ========== ========== ======== ========== Net loss per share $(0.11) $(0.12) $(0.33) $(0.42) ========== ========== ======== ========== Weighted average shares outstanding 10,933 9,125 10,848 8,035 ========== ========== ======== ==========
4 OPTA FOOD INGREDIENTS, INC. CONDENSED STATEMENT OF CASH FLOWS (in thousands) - -------------------------------------------------------------------------------- (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 -------------- ----------- Cash flows from operating activities: Net loss $ (3,580) $ (3,402) -------------- ----------- Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 913 579 Forgiveness of notes receivable 20 68 Change in assets and liabilities: Increase in accounts receivable, net (238) (581) Increase in inventories, net (1,231) (1,240) (Increase) decrease in other assets 112 (74) Increase (decrease) in accounts payable (200) 318 Increase in accrued expenses 272 221 Decrease in deferred revenue (32) (163) Increase in other liabilities 14 12 -------------- ----------- Total adjustments (370) (860) -------------- ----------- Net cash used in operating activities (3,950) (4,262) -------------- ----------- Cash flows from investing activities: Purchase of short term investments (4,938) (5,792) Sale of short term investments 4,993 2,302 Purchase of fixed assets (1,673) (1,669) Increase in intangible assets (161) (150) Decrease in other assets 71 4 -------------- ----------- Net cash used in investing activities (1,708) (5,305) -------------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock, net 914 37,152 Proceeds from long term debt 151 786 Payments on long term debt (1,173) (247) -------------- ----------- Net cash (used in) provided by financing activities (108) 37,691 -------------- ----------- Net increase (decrease) in cash and cash equivalents (5,766) 28,124 Cash and cash equivalents, beginning of period 40,174 11,665 -------------- ----------- Cash and cash equivalents, end of period $ 34,408 $ 39,789 ============== ===========
5 OPTA FOOD INGREDIENTS, INC. NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION The condensed unaudited financial statements of Opta Food Ingredients, Inc. (the "Company" or "Opta") include, in the opinion of management, all adjustments (consisting of normal and recurring adjustments) necessary for a fair statement of the Company's financial position at September 30, 1996 and December 31, 1995 and the results of operations for the three and nine months ended September 30, 1996 and 1995. The results of operations are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the Securities and Exchange Commission pursuant to Section 15(d) of the Securities Exchange Act of 1934. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission rules and regulations. 2. INVENTORIES, NET (Unaudited) Inventories consist of the following (in thousands):
SEPTEMBER 30, DECEMBER 31, 1996 1995 --------------- -------------- Raw materials $ 376 $ 314 Finished goods 3,089 1,920 --------------- -------------- $3,465 $2,234 =============== ==============
Inventories are stated at the lower of cost or market, cost being determined using the first-in, first-out method. 6 PART I ITEM 2 OPTA FOOD INGREDIENTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- INTRODUCTION: Opta Food Ingredients, Inc. is a fully integrated developer, manufacturer and marketer of proprietary food ingredients used by consumer food companies to improve the nutritional content, healthfulness and taste of a wide variety of foods. The Company modifies inexpensive raw materials and produces natural food ingredients that can be considered GRAS under current FDA regulations. The Company began shipping its first product, EverFresh/R/, in November 1991, acquired an oat fiber business in June 1992, launched Opta/R/ Oat Fibers in September 1992, began shipping OptaGrade/R/ in the fourth quarter of 1993 and commercialized CrystaLean/R/ and OptaFil/R/ in fourth quarter of 1994 and OptaMist/TM/, Optex /R/ and OptaGlaze/R/ in June 1996. The Company currently derives substantially all of its revenue from its Opta Oat Fibers and OptaGrade products. The Company has not been profitable since inception and expects to incur additional losses. This discussion should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and the accompanying unaudited condensed financial statements and notes thereto. This Management's Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements based on the Company's current expectations. Factors which could cause actual results to differ from these expectations include the size and timing of significant orders, as well as deferral of orders, over which the Company has no control; the extended product testing cycles of the Company's potential customers; the variation in the Company's sales cycles from customer to customer; increased competition posed by food ingredient manufacturers; changes in pricing policies by the Company and its competitors; the need to secure or build additional manufacturing capacity in order to meet future demand for the Company's products; the Company's success in expanding its sales and marketing programs and its ability to gain increased market acceptance for its existing product lines; the Company's ability to timely develop and introduce new products in its pipeline at acceptable costs; the ability to scale up and successfully produce its products; the potential for significant quarterly variations in the mix of sales among the Company's products; the gain or loss of significant customers; shortages in the availability of raw materials from the Company's suppliers; the impact of new government regulations on food products; and general economic conditions. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995: Revenue. Revenue for the three months ended September 30, 1996 was $2.2 million, an increase of $181,000 or 9% over 1995. The increase in revenue from 1995 to 1996 primarily reflects the increased product sales of OptaGrade and Opta Oat Fibers to new and existing customers. Opta anticipates increased product revenue as 7 OPTA FOOD INGREDIENTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- both OptaGrade and Opta Oat Fibers as well as new product introductions gain acceptance in the marketplace, although the amount and timing of customer orders will continue to be unpredictable. Cost of revenue. Cost of revenue for the three months ended September 30, 1996 was $1.8 million, a decrease of $54,000 or 3% over 1995. Cost of revenue as a percentage of revenue decreased to 81% in 1996 from 91% in 1995. This decrease reflects certain improvements in OptaGrade and Opta Oat Fibers margins resulting from operating efficiencies related to increased production volumes. Opta believes that its cost of revenue as a percentage of revenue will be further reduced due to operating efficiencies gained from increased manufacturing volume. Selling, general and administrative. Selling, general and administrative ("SG&A") expenses for the three months ended September 30, 1996 were $936,000, an increase of $154,000 or 20% over 1995. SG&A expenses as a percentage of revenue increased to 43% in 1996 from 39% in 1995. The increase in SG&A is due to the hiring of additional sales and marketing staff and related expenses, as well as, increased consulting expenses. Opta anticipates that SG&A expenses will continue to increase as it seeks to market its products to consumer food companies. Research and development. Research and development ("R&D") expenses for the three months ended September 30, 1996 were $1.1 million, an increase of $335,000 or 45% over 1995. R&D expenses as a percentage of revenue increased to 49% in 1996 from 37% in 1995. The increase in R&D expenses is the result of pilot plant trials related to new product development, initial operating costs of the new Galesburg facility and increases in salaries and related expenses. Opta expects that R&D expenses will continue to increase as the Company provides intensive technical support for existing products while pursuing research and development opportunities for future products. Other income. Other income for the three months ended September 30, 1996 was $353,000, an increase of $82,000 or 30% over 1995. The increase reflects the interest earned on increased cash and cash equivalents resulting from proceeds of the Company's public offering of common stock in the third quarter of 1995 and the exercise of warrants to purchase common stock associated with the Company's 1994 private placement. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995: Revenue. Revenue for the nine months ended September 30, 1996 was $7.2 million, an increase of $2.4 million or 51% over 1995. The increase in revenue from 1995 to 1996 primarily reflects continued increases in product sales of OptaGrade and Opta Oat Fibers in additional applications with new and existing customers. Opta anticipates increased product revenue as both OptaGrade and Opta Oat Fibers as well as new product introductions gain acceptance in the marketplace, although the amount and timing of customer orders will continue to be unpredictable. 8 OPTA FOOD INGREDIENTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - -------------------------------------------------------------------------------- Cost of revenue. Cost of revenue for the nine months ended September 30, 1996 was $5.9 million, an increase of $1.7 million or 40% over 1995. Cost of revenue as a percentage of revenue decreased to 82% in 1996 from 88% in 1995. The percentage decrease reflects the improvements in OptaGrade and Opta Oat Fibers margins resulting from operating efficiencies related to increased production volumes. Opta believes that its cost of revenue as a percentage of revenue will be further reduced due to operating efficiencies gained from increased manufacturing volume. Selling, general and administrative. SG&A expenses for the nine months ended September 30, 1996 were $2.8 million, an increase of $803,000 or 39% over 1995. SG&A expenses as a percentage of revenue decreased to 40% in 1996 from 43% in 1995. The increase in SG&A is due to the hiring of additional sales and marketing staff and related expenses, as well as, increased advertising and consulting expenses. Opta anticipates that SG&A expenses will continue to increase as it seeks to market its products to consumer food companies. Research and development. R&D expenses for the nine months ended September 30, 1996 were $3.1 million, an increase of $875,000 or 38% over 1995. R&D expenses as a percentage of revenue decreased to 44% in 1996 from 48% in 1995. The increase in R&D expenses are the result of pilot plant trials related to new product development, initial operating costs of the new Galesburg facility and increases in salaries and related expenses. Opta expects that R&D expenses will continue to increase as the Company provides intensive technical support for existing products while pursuing research and development opportunities for future products. Other income. Other income for the nine months ended September 30, 1996 was $1.1 million, an increase of $779,000 over 1995. The increase reflects the interest earned on increased cash and cash equivalents resulting from proceeds of the Company's public offering of common stock in the third quarter of 1995 and the exercise of warrants to purchase common stock associated with the Company's 1994 private placement. LIQUIDITY AND CAPITAL RESOURCES: At September 30, 1996, the Company had $39.3 million in cash and cash equivalents and short term investments and $41.2 million of working capital. The Company used approximately $4.0 million of cash in operations during the nine months ended September 30, 1996, compared with approximately $4.3 million used in the same period in 1995. In 1995, the Company expended significant efforts to build up inventory balances in anticipation of the Opta Oat Fibers plant expansion, which began in the second quarter of 1995. Inventory levels have continued to increase in 1996, which the Company believes is appropriate given the current demand for Opta's products. The Company expects to incur significant operating losses as it continues to increase its investment in the development, production and marketing of its new and existing products. The Company intends to fund its operating losses principally through product sales, existing cash and cash equivalents, short term investments, and long and short term debt. 9 OPTA FOOD INGREDIENTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) - ------------------------------------------------------------------------------- The Company has an available line of credit of $1.2 million; there were no borrowings under this facility at September 30, 1996. The line of credit expired subsequent to September 30, 1996 and the Company is in the process of negotiating a replacement facility. The Company's various debt agreements contain covenants regarding maintenance of minimum cash and tangible net worth of $4.0 million and $13.5 million, respectively, a 2.5 to 1 quick asset ratio and a 1 to 1 debt to tangible net worth ratio, among others. The Company was in compliance or had obtained a waiver with respect to all covenants and restrictions in its loan agreements at September 30, 1996. The Company believes that continued expenditure of funds will be necessary to support its current operations and future growth. The Company believes that its existing cash and cash equivalents, short term investments, long and short term debt and product sales will be adequate to fund its planned operations, capital requirements and expansion needs through at least 1997. However, the Company may require additional capital in the longer term, which it may seek through equity or debt financing, collaborative arrangements with corporate partners, equipment lease financing or funds from other sources. No assurance can be given that these funds will be available to the Company on acceptable terms, if at all. In addition, because of the Company's need for funds to support future operations, it may seek to obtain funds when conditions are favorable, even if it does not have an immediate need for additional capital at such time. 10 OPTA FOOD INGREDIENTS, INC. PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- Items 1, 2, 3, 4, 5 and 6(b) - Not Applicable. ITEM 6 (A) EXHIBITS (11) Net Loss Per Share Computation (in thousands, except per share data):
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------------- ------------------------ 1996 1995 1996 1995 ------------- ---------- ----------- ------------ Net loss $(1,247) $(1,075) $(3,580) $(3,402) ========== ========= ========= ========= Weighted average shares 10,933 9,125 10,848 8,035 outstanding ========== ========= ========= ========= Net loss per share $ (0.11) $ (0.12) $ (0.33) $ (0.42) ========== ========= ========= ==========
Fully diluted loss per share would be identical to primary loss per share as presented above and therefore is not presented. 11 OPTA FOOD INGREDIENTS, INC. SIGNATURES - -------------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Opta Food Ingredients, Inc. --------------------------- (Registrant) DATE: November 6, 1996 BY: /s/ Lewis C. Paine, III -------------------------------- Lewis C. Paine, III Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer) DATE: November 6, 1996 BY: /s/ Scott A. Kumf -------------------------------- Scott A. Kumf Chief Financial Officer Vice President Administration (Principal Financial and Accounting Officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTER END 9/30/96 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS 9-MOS DEC-31-1996 DEC-31-1996 JUL-01-1996 JAN-01-1996 SEP-30-1996 SEP-30-1996 0 34,408,000 0 4,938,000 0 1,371,000 0 0 0 3,465,000 0 44,384,000 0 14,541,000 0 2,485,000 0 57,635,000 0 3,207,000 0 0 0 0 0 0 0 110,000 0 49,216,000 0 57,635,000 2,202,000 7,128,000 2,202,000 7,191,000 1,785,000 5,858,000 1,785,000 5,921,000 2,017,000 5,998,000 0 0 137,000 440,000 (1,247,000) (3,580,000) 0 0 (1,247,000) (3,580,000) 0 0 0 0 0 0 (1,247,000) (3,580,000) $(0.11) $(0.33) 0 0
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