-----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, KFe5hrFTt6Ta4F5+FWnsnvfBY5DJJNa7xg7UBqxsXIv5Gx6yYs3EMAsaImsjmfzC URoQZRq4fCzahwLh1D2/7w== 0000095302-97-000004.txt : 19970618 0000095302-97-000004.hdr.sgml : 19970618 ACCESSION NUMBER: 0000095302-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970503 FILED AS OF DATE: 19970617 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUN CITY INDUSTRIES INC CENTRAL INDEX KEY: 0000095302 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 590950777 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06914 FILM NUMBER: 97625474 BUSINESS ADDRESS: STREET 1: 5545 NW 35TH AVE STREET 2: DRAWER OFFICE BOX 8848 CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 BUSINESS PHONE: 9547303333 MAIL ADDRESS: STREET 1: P O BOX 8848 CITY: FT LAUDERDALE STATE: FL ZIP: 33310-8848 FORMER COMPANY: FORMER CONFORMED NAME: SUN CITY DAIRY PRODUCTS INC DATE OF NAME CHANGE: 19690727 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended May 3, 1997 Commission File No. 1-6914 SUN CITY INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware 59-0950777 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5545 N.W. 35 Ave. Fort Lauderdale, FL 33309 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (954) 730-3333 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_____ FINANCIAL INFORMATION The consolidated financial statements included herein have been prepared by the Company, without audit, according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The financial statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to represent fairly the financial position and results of operations as of and for the periods indicated. The statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended February 1, 1997. The results of operations for the three-month period ended May 3, 1997, are not necessarily indicative of results to be expected for the entire year ending January 31, 1998. SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS May 3, February 1, ASSETS 1997 1997 CURRENT ASSETS: Accounts and trade notes receivable, less allowance for doubtful accounts of approximately $526,000 and $460,000 in 1997 and 1996, respectively $5,508,379 $5,521,144 Inventories 2,248,623 2,334,987 Notes receivable - current portion 16,573 18,927 Prepaid expenses 237,053 218,838 TOTAL CURRENT ASSETS 8,010,628 8,093,896 PROPERTY, PLANT AND EQUIPMENT: Land and improvements 108,133 108,133 Buildings and improvements 507,316 499,917 Machinery and equipment 2,303,103 2,243,175 2,918,552 2,851,225 Less accumulated depreciation (1,422,777) (1,319,437) 1,495,775 1,531,788 Properties held for sale 515,704 504,849 Long-term notes receivable 86,230 88,308 Excess of purchase price over fair value of net assets acquired 1,758,711 1,780,836 OTHER ASSETS 455,271 447,340 TOTAL $12,322,319 $12,447,017 May 3, February 1, LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1997 CURRENT LIABILITIES: Cash Overdraft $ 427,482 $ 214,744 Accounts payable 4,976,137 5,003,332 Accrued expenses 784,843 734,354 Current portion of long-term debt 1,713,875 1,720,129 TOTAL CURRENT LIABILITIES 7,902,337 7,672,559 DEFERRED COMPENSATION PAYABLE 128,618 123,106 LONG-TERM DEBT 5,106,201 5,409,828 STOCKHOLDERS' EQUITY: Common stock, $.10 par value 3,000,000 shares authorized; 2,276,116 shared issued in 1997 and 1996 227,612 227,612 Capital in excess of par value 1,041,721 1,041,721 Retained earnings 781,390 837,751 2,050,723 2,107,084 Less: Treasury stock at cost, 828,214 shares in 1997 and 1996, respectively (2,653,560) (2,653,560) Less: Receivable for common stock sold to ESOP (212,000) (212,000) TOTAL STOCKHOLDERS' EQUITY (814,837) (758,476) TOTAL $12,322,319 $12,447,017 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended May 3, May 4, 1997 1996 Sales $19,320,269 $19,301,698 Costs and Expenses Cost of goods sold 16,642,874 16,411,838 Operating expenses 1,350,712 1,377,138 Selling, general and administrative expenses 1,143,313 1,186,051 Interest expense 238,437 216,257 Other expense (income), net 1,294 (6,130) Total Cost and Expenses 19,376,630 19,185,154 (Loss) Earnings From Operations Before Income Taxes (56,361) 116,544 Provision For Income Taxes -0- -0- Net (Loss) Earnings (56,361) 116,544 Net (Loss) Earnings Per Common Share $ (.04) $ .08 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended May 3, May 4, CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 Net earnings $ (56,361) $ 116,544 Adjustments To Reconcile Net (Loss) Earnings To Net Cash Provided By or (Used In) Operating Activities: Depreciation 103,339 93,611 Amortization of excess of purchase price over fair market value of net assets acquired 22,125 17,627 Provision for losses on accounts receivable 67,229 69,098 Change in assets and liabilities: (Increase) decrease in accounts and trade notes receivable (54,464) 1,049,756 Decrease (increase) in inventories 86,364 (503,966) (Increase) in prepaid expenses (18,215) (150,069) (Increase) decrease in other assets (7,931) (6,513) (Decrease) increase in accounts payable(27,195) (244,500) Increase (decrease) in accrued expenses 50,489 76,326 Increase in deferred compensation payable 5,512 6,370 Total Adjustments 227,253 407,740 Net Cash Provided By Or (Used In) Operating Activities $ 170,892 $ 524,284 Cash Flows From Investing Activities: Capital expenditures (78,181) (2,399) Cash (Used In) Or Provided By Investing Activities (78,181) (2,399) Cash Flows From Financing Activities: Repayments on notes receivable 4,432 3,566 Principal payments on notes payable (309,881) (827,553) Proceeds from exercise of options -0- 75 Net Cash (Used In) Or Provided By Financing Activities (305,449) (823,912) Net (Decrease) Increase In Cash and Equivalents (212,738) (302,027) Cash and Equivalents, Beginning of Year (214,744) 760,885 Cash and Equivalents, End of Year $(427,482) $ 458,858 Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion provides information which management believes is relevant to an assessment and understanding of the Company's operations and financial condition. This discussion should be read in conjunction with the financial statements. COMPANY PROFILE: Sun City Industries, Inc. (the "Company"), which began in 1949 as an egg processing and marketing company, has now moved its focus to the foodservice marketing and distribution business throughout parts of the eastern seaboard of the United States with a heavy concentration in the state of Florida. In 1990, the Company began its expansion as a foodservice distributor that now includes five centers in Florida covering the West Coast of Florida, Central Florida and Southeast Florida. In addition, the Company has operations that distribute to markets in Atlanta, Georgia, Baltimore, Maryland, Philadelphia, Pennsylvania and throughout New Jersey. The Company's clientele includes hotels, restaurants, airline caterers, country clubs and cruiseship lines. The Company's current goal is to finalize its pending merger to take full advantage of the broad based business that currently exists throughout the heavily populated eastern seaboard of the United States. RESULTS OF OPERATIONS: FOR THE THREE MONTHS ENDED MAY 3, 1997 AND MAY 4, 1996 SALES: During the three months, consolidated sales remained static compared to a year ago. Three Total Foodservice% of Egg % of Months Sales Division Total Division Total 1997 $19,320,269 $17,762,546 91.9% $1,557,723 8.1% 1996 19,301,698 17,610,037 91.2 1,691,661 8.8 Net change $18,571 $152,509 $(133,938) Explanation: Foodservice: Increased sales at the Produce and Sheppard were $152,509 greater than sales decreases in the other foodservice divisions. Eggs: The decrease in sales of $133,938 results primarily from lower selling prices on 2 million dozens sold. COST OF GOODS SOLD: Cost of goods sold include product cost and freight in costs. During the three months, cost of goods sold increased $231,036. This increase was generally in line with changes in the Company's business and the extremely negative impact on costs at the Gulf Coast division. The rate of change is influenced by the Company's overall customer and product mix, as well as the changes in market prices which fluctuate from year to year. OPERATING EXPENSES: Operating expenses include warehousing and distribution costs. During the three months operating expenses decreased $26,426 reflecting minor changes in the Company's business as compared to the same period of the prior year. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: During the three months, selling, general and administrative expenses were down $42,738. The change reflects minor changes in all divisions. INTEREST EXPENSE: Interest expense increased by $22,180 during the first three months. This increase reflects a 2% greater cost for borrowing, offset by reduced borrowing levels of approximately $900,000, incurred with the Company's primary lender. INCOME TAXES: The Company accounts for income taxes in accordance with SFAS 109, under which deferred tax liabilities are recognized for future taxable amounts and deferred tax assets are recognized for future deductions and operating loss carryforwards. A valuation allowance is recognized to reduce net deferred tax assets to the amounts that are more likely than not to be realized. The Company estimates that, after filing its fiscal 1997 tax return, it will have tax loss carryforwards of approximately $5,500,000 expiring in the years 2009 through 2012. NET (LOSS) EARNINGS: For the three months the net loss amounted to $56,361 as compared to net earnings of $116,544 for the same three months a year ago. The loss per share is $.04 versus a profit of $.08 per share reported for the same period a year ago. Comparisons To The Prior Year: Explanations Foodservice $(141,000) The impact of a 23% decline in first quarter sales at Gulf Coast resulted in a loss of $43,000 compared to a profit of $60,000 for the same period a year ago. The remainder of $38,000 results from a small net decline in all other foodservice operations. Egg Marketing (15,000) The small decrease of $15,000 results from a decline of 65,000 units sold and reduced levels of consulting income. Interest Expense (22,000) Interest expense increased due to higher rates in the first quarter compared to a year ago. All Other 5,000 Net Difference $(173,000) (LOSS) EARNINGS PER COMMON SHARE: May 3, May 4, Three Months Ended 1997 1996 (Loss) earnings per common share $(.04) $ .08 Average shares used in the computation: 1,447,902 1,531,092 LIQUIDITY AND CAPITAL RESOURCES: The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, during the years ended February 1, 1997 and February 3, 1996, the Company incurred net losses of $1,167,087 and $2,761,305, respectively, and as of February 1, 1997 the Company had a stockholders' deficit of $758,476. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. As described in Note F of Form 10K for fiscal 1997, the Company is not in compliance with several provisions of its line of credit agreement and the lender has placed significant operating and financing restrictions on the Company pursuant to a forbearance agreement. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to comply with the terms and covenants of its financing agreements, to obtain additional financing or refinancing as may be required, and ultimately to attain successful operations. Management is continuing its efforts to obtain additional funds from investors so that the Company can meet its obligations and sustain operations. There can be no assurance, however, that management's efforts will ultimately be successful. During fiscal 1997, The Company: Was placed in default by its major lender as a result of over- advances the lender made to the Company which were not secured by assets of the Company. As a result of the default, the Company's stated interest rate on this debt increased from 2.25% over the prime rate in fiscal 1996 to 4.25% over the prime rate in fiscal 1997. On December 16, 1996, signed a Forbearance Agreement which extends the existing line of credit until March 30, 1998, agrees to a repayment schedule that permits the Company to operate and fund its business under certain limitations and conditions and provides the lender additional collateral in the form of its North Carolina and Virginia real estate. Failed to make its regular semi-annual interest payments on the Senior Subordinated Convertible Debentures. Although the Company is in monetary default, its Bondholders have not indicated they will place the Company in default. On the contrary, the Bondholders are cooperating with the Company in the Company's attempt to raise additional capital through a direct investment or through a qualified merger partner. Did not fully satisfy the American Stock Exchange's guidelines for continued listing. Accordingly, there can be no assurance that the listing will be continued. On May 20, 1997, mortgaged the Hawthorne, Florida property for $251,500 and signed an option agreement to sell its New Jersey operations if certain conditions were not met. On May 29, 1997, the Company announced that it had entered into preliminary merger discussions with a privately owned Miami based specialty seafood producer and distributor SeaSpecialties Inc. If the merger were to be consummated, the combination would create a food processing and distribution entity with sales in excess of $100 million per year. Although a definitive merger agreement has yet to be signed, both SeaSpecialties Inc., and Sun City have indicated that discussions are progressing. If the merger should be consummated, Mr. Oxenberg, Chairman and C.E.O. of SeaSpecialties, in a stock for stock transaction, will own a majority of the stock and SeaSpecialties Inc. will assume control of the combined company. If a definitive merger agreement is signed within the next few weeks the merger will be subject to approval of the shareholders of both Companies and holders of the Sun City's convertible bonds. It is anticipated that if consummated the transaction will close during late summer this year. COMMITMENTS: As of February 1, 1997, the Company had no commitments for capital expenditures. 8-K FILING: On August 7, 1996, From 8-K was filed with the Securities and Exchange Commission and the American Stock Exchange. SALES OF UNREGISTERED SECURITIES (DEBT OR EQUITY): None 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. SUN CITY INDUSTRIES, INC. REGISTRANT DATE: June 17, 1997 Malvin Avchen Malvin Avchen, C.E.O. DATE: June 17, 1997 Syed Jafri Syed Jafri, Treasurer The financial statements for the three months ended May 3, 1997 and May 4, 1996, respectively, are unaudited but are prepared in conformity with accounting principles used at our last fiscal year end and include all adjustments which the Company considers necessary for a fair presentation. -----END PRIVACY-ENHANCED MESSAGE-----