10QSB/A 1 pfi9-01sba2.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB/A (Amendment No. 2) (Mark One) [X] Quarterly report under Section 13 or 15(d) of he Securities Exchange Act of 1934 For the quarterly period ended September 30, 2001 ------------------ [ ] Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from ___________ to _________ Commission file number 000-31148 ----------------------------- PINNACLE FOODS, INC. -------------------------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in Its Charter) Pennsylvania 23-3008972 -------------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 980 Glasgow Street, Pottstown, PA 19464 -------------------------------------------------------------------------------- (Address of Principal Executive Offices) 610-705-3620 -------------------------------------------------------------------------------- (Issuer's Telephone Number, Including Area Code) -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal ear, if Changed Since Last Report) 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 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 26,006,988 ------------------------ Transitional Small Business Disclosure Format (check one): Yes No ----- ------ INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements.............................................3 Item 2 Management's Discussion and Analysis or Plan of Operation.......10 PART II OTHER INFORMATION Item 1. Legal Proceedings...............................................12 Item 6. Exhibits and Reports on Form 8-K................................12 PART I FINANCIAL INFORMATION Item 1. Financial Statements PINNACLE FOODS, INC. Balance Sheet September 30, 2001 (Unaudited)
ASSETS Current Assets: Cash $ 1,969,968 Trade Receivables, less Allowance of $25,595 3,728,273 Inventory 926,325 Prepaid Expenses 131,115 ------------ Total Current Assets 6,755,681 ------------ Fixed Assets: Property and Equipment 4,080,680 Less Accumulated Depreciation (810,761) ------------ Total Fixed Assets 3,269,919 ------------ Other Assets: 33,494 ------------ Total Assets: $ 10,059,094 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current Installments on Capital Lease Obligations $ 264,903 Accounts Payable 2,297,613 Accrued Expenses 414,118 ------------ Total Current Liabilities 2,976,634 ------------ Long Term Liabilities Capital Lease Obligations Less Current Installments 731,814 Notes Payable 2,500,000 ------------ Total Long Term Liabilities 3,231,814 ------------ Stockholders' Equity: Common Stock 264,249 Additional Paid-In Capital 12,106,681 Deficit (8,180,131) Deferred Compensation (340,153) ------------ Total Stockholders Equity 3,850,646 ------------ Total Liabilities and Stockholders' Equity $ 10,059,094 ============ See notes to condensed financial statements.
PINNACLE FOODS, INC. Statements of Operations (Unaudited)
For the Three Month Period Ended For the Nine Month Period Ended September 30 September 30 ----------------------------------- ----------------------------------- 2001 2000 2001 2000 ---------------- --------------- ---------------- --------------- Sales $ 11,919,282 $ 3,833,319 $ 30,887,775 $ 5,949,686 Cost of Goods Sold 11,914,058 4,165,099 30,571,897 6,443,518 ---------------- --------------- ---------------- --------------- Gross Profit 5,224 (331,780) 315,878 (493,832) Operating Expenses 1,286,692 672,320 2,877,113 1,521,318 ---------------- --------------- ---------------- --------------- Loss from Operations (1,281,468) (1,004,100) (2,561,235) (2,015,150) Other Expenses 158,985 135,880 201,050 Interest (Net) 18,826 ---------------- --------------- ---------------- --------------- Net Loss $ (1,300,294) $ (1,163,085) $ (2,697,115) $ (2,216,200) ================ =============== ================ =============== Loss Per Share Basic $ (0.05) $ (0.12) $ (0.16) $ (0.25) Diluted $ (0.05) $ (0.12) $ (0.16) $ (0.25) Weighted Average Shares Outstanding Basic Diluted 26,006,988 9,323,380 17,217,513 8,753,300 26,006,988 9,323,380 17,217,513 8,753,300
See notes to condensed financial statements. PINNACLE FOODS, INC. Statements of Cash Flows (Unaudited)
For the Nine Month Periods Ended September 30 --------------------------------------------------------- 2001 2000 --------------------------- -------------------------- Cash Flows Used for Operating Activities Net Loss $ (2,697,115) $ (2,216,200) Adjustments Provision for Doubtful Accounts - 25,595 Depreciation and Amortization 449,466 226,495 Deferred Compensation 78,497 - Common Stock Issued for: Interest 31,318 166,000 Consulting 128,000 213,600 Compensation - 125,600 Changes in Assets and Liabilities Trade Receivables (2,438,079) (1,015,250) Other Receivables 95,410 (95,410) Inventory (448,560) (543,261) Prepaid Expenses (81,281) (14,242) Accounts Payable (590,262) 2,056,091 Accrued Expenses 137,813 395,349 --------------------------- -------------------------- Net Cash Used for Operating Activities (5,334,793) (675,633) --------------------------- -------------------------- Cash Flows Used for Investing Activities Purchase of Property and Equipment (868,331) (784,714) Other Assets (3,347) (26,865) --------------------------- -------------------------- Net Cash Used for Investing Activities (871,678) (811,579) --------------------------- -------------------------- Cash Flows From Financing Activities Proceeds from Issuance of Common Stock, Net 5,909,567 944,000 Proceeds from Issuance of Convertible Debt - 1,095,240 Proceeds from Issuance of Debt 2,500,000 320,000 Repayments on Debt - (382,454) Repayments on Capital Lease Obligations (233,128) (227,140) --------------------------- -------------------------- Net Cash Provided by Financing Activities 8,179,439 1,749,646 --------------------------- -------------------------- Net Increase in Cash 1,969,968 262,434 Cash, Beginning of Year - 92,271 --------------------------- -------------------------- Cash, End of Period $ 1,969,968 $ 354,705 =========================== ==========================
PINNACLE FOODS, INC. Statements of Cash Flows (Unaudited) (Continued)
Supplemental Disclosures of Cash Flow Information Interest Paid during the Period $ 116,512 $ 58,638 Non-cash Items Purchase of Equipment under Capital Lease Agreements $ 181,775 $ 819,438 Debt Converted into Common Stock 400,000 - Forgiveness of Debt from Shareholder - 270,000 Common Stock issued for Equipment - 311,325
See notes to condensed financial statements.
PINNACLE FOODS, INC. Statement of Stockholders' Equity Nine Month Period Ended September 30, 2001 (Unaudited) Common stock $.01 par value 50,000,000 shares authorized --------------------------------- Shares Additional issued or paid-in Deferred issuable Amount capital Deficit Compensation Total ------------------------------------------------------------------------------------------ Balance, January 1, 2001 13,367,298 $ 133,673 $ 5,768,372 $ (5,483,016) $ (418,650) $ 379 Net Loss (2,697,115) (2,697,115) Grant of Compensatory Options 78,497 78,497 Common Stock Issued or Issuable For: Cash, Net 12,510,161 125,102 5,784,465 5,909,567 Consulting 160,000 1,600 126,400 128,000 Interest 20,696 207 31,111 31,318 Convertible Debt 366,667 3,667 396,333 400,000 ------------------------------------------------------------------------------------------ Balance, September 30, 2001 26,424,822 $ 264,249 $ 12,106,681 $ (8,180,131) $ (340,153) $ 3,850,646 ==========================================================================================
See notes to condensed financial statements. PINNACLE FOODS, INC. Notes to Condensed Financial Statements September 30, 2001 1. Basis of Presentation. --------------------- The unaudited condensed financial statements have been produced by Pinnacle Foods, Inc. (the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such SEC rules and regulations; nevertheless, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements and the notes hereto should be read in conjunction with the financial statements and notes thereto included in the Company's Registration Statement on From 10-SB, as amended. In the opinion of the Company, all adjustments, including normal recurring adjustments, necessary to present fairly the financial position of the Company as of September 30, 2001 and the results of its operations and cash flows for the three and nine month periods ended September 30, 2001 have been included. The results of operations for the interim period are not necessarily indicative of the results for the year. 2. Accounting Policies. ------------------- There have been no changes in accounting policies used by the Company during the quarter ended September 30, 2001. 3. Summary of Business. ------------------- The Company, incorporated on July 20, 1999 in the Commonwealth of Pennsylvania, prepares case-ready meats for distribution to retailers in the Northeastern United States. It grants credit to its customers without requiring collateral. 4. Inventory. --------- The Company's inventories are valued at the lower of first-in, first-out or market. Inventories at September 30, 2001 consist of the following: Beef, pork, veal, lamb $ 265,476 Packaging supplies 463,364 Finished goods 197,485 ------------ $ 926,325 ============ 5. Notes Payable. ------------- During 2001, the Company repaid $400,000 of convertible bonds with its common stock. The conversion ratio for these borrowings ranged between $1.00 and $1.50 per share. 6. Stock Options. ------------- During 2001, the Company granted 375,000 stock options. The exercise price of these stock options range between $1.00 to $1.25 per share. In addition, options to purchase 25,000 shares were forfeited. 7. Stockholders' Equity. -------------------- In June of 2001, the Company entered into an agreement with Smithfield Foods, Inc. ("Smithfield") in which Smithfield purchased shares of the Company which resulted in Smithfield's owning 50% of the issued and outstanding shares upon completion of the transaction for $6,000,000. In addition, Smithfield provided the Company with a $30,000,000 revolving line of credit. Moneys dues under the line of credit bear interest at 1% above prime and are secured by all of the Company's assets. The loan will mature in five years. 8. Net Income (Loss) Per Share. --------------------------- Basic loss per share (LPS) is computed using the weighted average number of common shares outstanding during the period. Diluted LPS is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares consist of common stock issuable upon exercise of stock options. No adjustments to earnings were made for purposes of per share calculations. There were no dilutive potential common shares in 2000 or 2001 because the assumed exercise of the options would be anti-dilutive. Item 2. Management's Discussion and Analysis or Plan of Operation Sales for the nine-month period ended September 30, 2001 were $30.9 million, representing an increase of approximately $25.0 million over sales of $5.9 million from the corresponding period of 2000. This increase was primarily the result of the increase in the volume of products handled (due in part to increasing sales to existing customers as well as sales to new customers) but was also partially due to a change in the mix of products sold in favor of higher priced items. As the diversity of services that the Company offers continues to grow, customers are increasing both the range of products as well as the quantity ordered. Cost of goods sold for the nine-month period ended September 30, 2001 was $30.6 million which resulted in a gross profit of approximately $0.3 million. By comparison, cost of goods sold for the nine-month period ended September 30, 2000 was $6.4 million, which resulted in a gross loss of approximately $0.5 million. Operating expenses for the nine-month period ended September 30, 2001 were $2.9 million as compared to $1.5 for the comparable period of the prior year. This increase of $1.4 million resulted from the increase in freight and commission expenses. The Company leased three trucks in 2001 as compared to the prior year in which it leased two trucks. The move of the majority of operations to the Pottstown facility in the first quarter and subsequently, the move of all operations to Pottstown in the second quarter was initiated to control costs more effectively. The Philadelphia facility is currently being used as a storage facility. Interest expense (net) for the nine-month period ended September 30, 2001 was approximately $0.1 million compared to approximately $0.2 million for the comparable period of 2000. This decrease in interest expense is due to the repayment of loans in late 2000 as well as an increase in interest earned on investments. The net loss for the nine-month period of 2001 was approximately $2.7 million as compared to $2.2 million for 2000. The Company has lost money continually since inception; however, the loss in September, 2001 was significantly lower than the losses in both July and August of 2001. The principal reason for the magnitude of the loss in July and August is the Company's agreement to adopt a branded program for one of its major customers that resulted in significant operational changes and processes which have now been overcome. Liquidity and Capital Resources Until the closing of the Smithfield transactions in June 2001, the Company had been chronically undercapitalized. Although the Company had a line of credit with a small bank for a short time period, the line was supported by personal guarantees of shareholders or officers. The Company's minimal equity position of $379 at December 31, 2000 resulted from start-up expenses that were funded through operations and private offerings of capital stock or convertible debt. The Company currently has no convertible debt outstanding. On May 17, 2001, Smithfield loaned the Company $2.0 million, which the Company repaid on the closing date of the Smithfield transactions, June 27, 2001. Although the Company's liquidity problem prior to the closing of the Smithfield transactions had not prevented the Company from filling orders (i.e. by preventing the Company from purchasing necessary raw materials or paying its workforce), it had caused the Company to seek capital infusions repeatedly since commencement of business and has required the indulgence periodically of Company vendors. Generally, the Company maintains an inventory of meat supplies using the trade credit programs of its suppliers, which allow the Company to purchase meat supplies with payment due within seven days. The Company's liquidity difficulty prior to the closing of the Smithfield transactions was exacerbated by the requirement that it pay for meat supplies sooner than it was able to get paid by its customers, and because, in the case of the Company's largest customer, its meat supplier was also the paying agent for the customer. This paying agent deducted current meat purchases from prior amounts owed to the Company by the customer before remitting payment to the Company. By completing the Smithfield transactions, the Company addressed its liquidity problem in two ways. First, the Company's immediate need for capital was addressed by the $6 million purchase price paid by Smithfield for its equity stake in the Company. Second, the Company received a $30 million line of credit through Smithfield on terms that the Company had not been able to obtain before establishing the relationship with Smithfield. The Smithfield transactions should allow the Company to meet its capital needs for sufficient capital in the immediate future. Management is cautiously optimistic that operations will improve in the future; however, if they do not, there is no assurance that the Smithfield transactions will provide sufficient capital for the Company to operate successfully on a long-term basis. Because of the liquidity provided by the purchase of the shares sold to Smithfield, as well as the working capital available under the Smithfield line of credit, the Company has terminated the prior arrangement by which it dealt with a meat supplier that was also acting as paying agent for a large Company customer. The combination of cash availability under the Smithfield line and the change referred to in the preceding sentence has increased Company liquidity significantly. Nonetheless, the Company continues to consume significant amounts of cash to fund ongoing operating losses and increases in accounts receivable in excess of the sum of the increase in accounts payable plus the amounts available under the Smithfield line. At September 30, 2001, the Company had $2.0 million of cash (and cash equivalents). The Company's current ratio at September 30, 2001 was 2.27. If the Company continues to consume cash at the rate which prevailed during the first nine months of 2001, the Company will deplete its cash resources by the spring or early summer of 2002. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K The Company filed no Current Reports on Form 8-K during the three month period ended September 30, 2001. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PENNEXX FOODS, INC. f/k/a PINNACLE FOODS, INC. Date: April 8, 2002 By: /s/ Michael D. Queen ------------------------------------ Michael D. Queen, President By: /s/ Thomas K. McGreal ------------------------------------ Thomas K. McGreal, Principal Financial Officer