ITEM 1. BUSINESS
General
Food Concepts, Inc., the Company, formerly known as Granite, Ltd. and then Savon Coffee, Inc. was incorporated under the law of the State of Nevada on June 16, 1982.
The Company was founded to provide gourmet and specialty coffees to consumers. Food Concepts is a roaster, packer and seller of roasted coffees and produces over 70 flavored coffees. It distributes it's products through sales representatives advertising specialty companies and the United States Army. In addition, the Company sells orders obtained directly from customers such as restaurants, coffee houses and retailers.
The Company has approximately 700 accounts and a market that is very diversified.
The Company purchases its coffee beans through coffee importers and agents. The principal sources for such raw materials are South America, Central America and Africa as well as any other areas where coffee beans are grown and exported. It is the Company's opinion that sources of raw materials while their prices do fluctuate are plentiful on the world market.
Food Concepts owns the registered intellectual property right charters listed as follows:
"Coffee Lovers Six Pack" (registered mark number 151,553,926, said mark having been registered with United States Patent Office and the mark was issued on August 29, 1989 and is valid for 20 years).
"Coffee Lovers Coffee" (registered mark number 1,673566 registered in the United States Patent Office and issued on January 28, 1992 and valid for 10 years).
The above marks have been registered in applicable states where necessary.
ITEM 2.
ITEM 2. PROPERTIES
The Company presently leases 6800 square feet of warehouse and office space at 6601 Lyons Road, Suite C-12, Coconut Creek, Florida 33073. The term of said lease is for five years and two months commencing the 12th day of February, 1996. The rent for the first 26 months is fixed and the remaining 36 months is subject to a formula which is provided in the lease.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Coffee House Holding Company has filed a law suit against Savon Coffee in the amount of $7,524 plus a percentage of gross profit for not fulfilling an agreement to purchase coffee exclusively from Coffee House Holding. The Company expects to be successful in this matter.
The Company has commenced an action in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida bearing docket number 96-09431-11 entitled Food Concepts, Inc. vs. Lasorda's Dug Out, Inc., a Florida corporation, et al. The Company is seeking damages in the amount of $200,000. The Company expects to be successful in this matter.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
On October 25, 1995 Granite, Ltd. the predecessor of Food Concepts, Inc. acquired all of the outstanding stock of Savon Coffee, Inc. for 20,000,000 shares of Granite common stock $.0001 par value which was subsequently reverse split one for ten leaving 2,000,000 shares $.001 par value which then constituted approximately 85.6 percent of the corporation Granite reserved or issued outstanding securities in consideration for the conveyance of all shares of Savon stock which then constituted 100 percent of Savon's authorized issued and outstanding securities. In conjunction therewith the Certificate of Incorporation of Granite was amended affecting a one for ten reverse split of the corporations common stock $.0001 par value (converting the 50,000,000 shares then authorized into 5,000,000 shares, $.001 par value, and the 3,327,300 then outstanding into 332,700 shares, $.0001 par value, followed by an increase in the resulting authorized capitalization of Granite from 5,000,000 shares, $.0001 par value to 20,000,000, $0001 par value. Subsequent thereto the name of the Company was changed from Granite, Ltd. to Savon Coffee, Inc. a Nevada corporation and said Savon subsequently had its name changed to Food Concepts, Inc. a Nevada corporation on March 26, 1996. The common stock and warrants are traded in the over the counter market on a National Association of Security Dealers Automatic Quotation System (NASDAQ). There is no other
established market for the Company's securities. The following table sets forth the range of high and low bid prices for the Company's common stock as quoted by NASDAQ. These quotations set forth below represent prices between dealers in securities and do not reflect retail markups, markdowns, or commissions and do not necessarily represent actual transactions.
As of June 30, 1996 there were in excess of 350 shareholders (based on the number of shareholders of record and an approximation of the number of beneficial owners of common stock). Holders of common stock are entitled to dividends when, as, and if declared by the Board of Directors out of funds legally available therefore. The Company has not paid any cash dividends on its common stock and, for the immediate future, intends to retain earnings, if any, to finance development and expansion of its business. Future dividends policy is subject to the discretion of the Board of Directors.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7. MANAGEMENTS DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AS A RESULT OF OPERATIONS.
Liquidity and capital resources
OPERATIONS. The Company, Food Concepts, Inc., which evolved from Savon Coffee, Inc. was originally founded by its now president and vice president Herbert Glaubman and Francis Resnick respectively in August of 1986. The Company was originally located at 5197 Northwest 15th Street, Margate, Florida. The Company has maintained various locations from August 1986 through 1993 during which time the Company was a development stage enterprise funded primarily by the founders. On October 27, 1995 the Company by virtue of a reorganization agreement wherein Granite, Ltd., a publicly traded Nevada corporation, acquired Savon Coffee, Inc. which subsequently changed its name to Food Concepts, Inc. became a public company trading its stock on the OTC bulletin board.
The Company does not presently have any specific plan or arrangement for alternate financing and there is no assurance that any will be available to the Company.
ACQUISITIONS
On October 27, 1995, the Company acquired all of the issued and outstanding common stock of Savon Coffee, Inc. whose principal business consists of manufacture and direct sales distributing of Gourmet Coffee, for 20,000,000 shares (pre-split) of common stock.
On January 1, 1996, the Company acquired all of the issued and outstanding common stock of Palm Beach Gourmet Coffee, Inc., whose principal business is direct sales of Gourmet Coffee, in exchange for 50,000 shares of common stock of the Company.
ITEM 8.
ITEM 8. FINANCIAL DATA
FOOD CONCEPTS, INC. AND SUBSIDIARIES
AUDITED FINANCIAL STATEMENTS JUNE 30, 1996
FOOD CONCEPTS, INC. AND SUBSIDIARIES
Report of Certified Public Accountants on the Financial Statements 6
Financial Statements
Consolidated Balance Sheet 8 Consolidated Statement of Operations 9 Consolidated Statement of Shareholders, Equity 10 Consolidated Statement of Cash Flows 11 Notes to Consolidated Financial Statements 12 - 15
JOEL S. BAUM P.A.
CERTIFIED PUBLIC ACCOUNTANT MEMBER AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AICPA SEC. & PRIVATE COMPANIES DIVISION
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Food Concepts, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Food Concepts, Inc and Subsidiaries as of June 30, 1996 and the related consolidated statement of operations, stockholders, equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects the financial position of Food Concepts, Inc. and Subsidiaries as of June 30, 1996 and the results of its operations for the year then ended in conformity with generally accepted accounting principles.
/S/ JOEL BAUM JOEL BAUM P.A.
Coral Springs, Florida September 1, 1996 1515 University Drive, Coral Springs, Florida 33071 N. Broward (305) 752-1712, S. Broward (305) 344-6994
FOOD CONCEPTS, INC., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET JUNE 30, 1996
FOOD CONCEPTS, INC. CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 1996
See Accompanying Notes to Consolidated Financial Statements.
FOOD CONCEPTS, INC. AND SUBSIDIARIES CONSOLIDATE STATEMENT OF SHAREHOLDERS' EQUITY JUNE 30, 1996
See Accompanying Notes to Consolidated Financial Statements-
FOOD CONCEPTS, INC. AND SUBSIDIARIES CONSOLIDATE STATEMENT OF CASE FLOWS JUNE 30, 1996
See Accompanying Notes to Consolidated Financial Statements.
FOOD CONCEPTS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization and Business Food Concepts, Inc. was organized under the laws of the State of Nevada on June 16, 1982. On October 27, 1995 the Company reorganized and acquired Savon Coffee, Inc. as a wholly owned subsidiary. On January 1, 1996, the Company acquired Palm Reach Gourmet Coffee, Inc. as a wholly owned subsidiary. The principal business of the Company is direct sales distributing of Gourmet Coffee, offering more than seventy coffee blends as well as gift coffee packages, private label coffee and special coffee roasting services.
B. Significant Accounting Policies
Basis of Accounting: The Company policy is to prepare its financial statements using the accrual basis of accounting in accordance with generally accepted accounting principles.
Inventory: Inventory is valued at the lower of cost or market determined by the weighted average method.
Property, Equipment and Depreciation: Property and equipment are recorded at cost. The company charges expenditures for additions or major replacements to the asset accounts. The Company provides for depreciation using the straight-line method over the estimated useful lives of the assets (5-10 years).
Income Taxes In February 1992, the Financial Accounting Standards Board issued Statement on Financial Accounting Standards 109 of "Accounting for Income Taxes." Under Statement 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Net Loss Per Common Share: Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. For the year then ended June 30, 1996, the Company's common shares outstanding were 2,308,900.
FOOD CONCEPTS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1996
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
NOTE 3 - NOTES PAYABLE
NOTE 4 - MAJOR CUSTOMERS
Major customers include the Christmas Tree Shop and Anron Coffee & Tea, Inc.
NOTE 5 - LAWSUIT COFFEE HOLDING COMPANY
Coffee Holding Company has filed a lawsuit against Savon/Coffee in the amount of $7,524 plus a percentage of gross profit for not fulfilling an agreement to purchase coffee exclusively from Coffee Holding Company.
NOTE 6 - ACQUISITIONS
A. On October 27, 1995, the Company acquired all of the issued and outstanding common stock of Savon Coffee, Inc. whose principal business consists of manufacture and direct sales distributing of Gourmet coffee, for 20,000,000 shares (pre-split) of common stock. The acquisition was accounted for under the pooling of interest method and the acquired company activity for the full period reported on is included.
B. On January 1, 1996, the Company acquired all of the issued and outstanding common stock of Palm Reach Gourmet Coffee, Inc,, whose principal business is direct sales of Gourmet Coffee, in exchange for 50,000 shares of common stock of the Company. The acquisition was accounted for under the pooling of interests method. Under the pooling method the acquired company activity for the full period reported on is included.
FOOD CONCEPT, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996
NOTE 7 - LEASING ARRANGEMENTS
Operating Lease
The Company conducts it operation from facilities that are leased under a five year lease ending April 30, 2001. The lease calls for monthly rent payments starting in February, 1996 of $2,692.00 per month plus a pro-rata share of real property taxes. The Company also has various leases with various expiration dates,
Future Minimum Lease Payments
Future minimum lease payments for operating leases at June 30, 1996 are:
NOTE 8 - COMMITMENTS AND CONTINGENCIES
A Subsidiary of the Company has incurred approximately $5,210 plus interest and penalties of unpaid payroll tax liabilities to the Internal Revenue Service. A payment plan of $500 per month has been worked out with the government on the satisfaction of this outstanding liability. It is to begin September 15, 1996.
NOTE 9 - DEFERRED
As discussed in Note 1, the Company has applied the provision of Statement 109. The significant components of deferred income tax expense (benefit) for the year ended June 30, 1996:
Current Loss $ 149,162 Valuation Allowance (149,162) $ - 0 -
The valuation allowance has been estimated at 100%.
FOOD CONCEPTS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996
NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION
Year Ended June 30. 1996
Taxes Paid $ 2,239 - Total Interest Paid 20,586 - Total
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors and Executive Officers
Directors of the Company hold office until the next annual meeting of Stockholders (which is expected to be held in July, 1997) and until their successors have been elected and shall qualify or until their death, resignation or removal from office. The officers of the Company are elected by the Board of Directors at the first meeting after each annual meeting of the Company's Stockholders, and hold office until their successors are chosen and qualified, or until their death, resignation or removal from office. The directors and officers of the Company are as follows:
The following information is provided with respect to the directors.
Officer-Directors do not presently receive compensation for serving on the Board. At present, there are no pension, profit sharing or other forms of deferred compensation presently available to any employee of the Company.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid by the Company during the fiscal year ended June 30, 1996 to all executive officers of the Company as a group and to all executive officers of the Company each of whose total cash compensation exceeded $60,000.00 for services in all capacities.
All executive officers are not covered by the Company's major medical insurance and disability plans. The officers of the Company presently have use of an automobile leased by the Company.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage, as of June 30, 1996 of the company's Common Shares owned of record and/or beneficially by each person owning more than 5% of such Common Shares, by each Director who owns any shares of the Company and by all officers and directors as a group.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
I. Financial Statements and Schedules
Report of Independent Certified Public Accountants.
Consolidated Financial Statements:
Balance Sheets Statements of Operations Statements of Changes in Stockholders Equity Statements of Cash Flow Notes to Financial Statements
II. Reports on Form 8-K:
One report on Form 8-K was filed during the second quarter of the fiscal year covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FOOD CONCEPTS, INC. FOOD CONCEPTS, INC.
BY: /S/ FRANCIS GLAUBMAN BY: /S/ HERBERT GLAUBMAN FRANCIS GLAUBMAN HERBERT GLAUBMAN
Dated: November 20, 1996 Dated: November 20, 1996