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. Two customers account for more than 10 percent of the Company's present revenues. They are Christmas Tree Shop and Anron Coffee and Tea, Inc.
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. The Company faces a great deal of competition within this area especially over the last three years due to the immense growth of the coffee market of wholesale and retail.
The Company however has been able to compete successfully by offering very competitive prices and service to its customers.
The Company presently employs seven individuals, two in management, one clerical and four warehouse personnel. The Company considers their labor relations to be excellent and none of the persons presently employed are represented by organized labor.
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 year s).
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. Included within the warehouse facilities are coffee roasters and packaging equipment to prepackage and customize the packaging seventy flavored coffees.
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. This action was instituted against Savon Coffee, Inc. on March 16, 1994 in the Supreme Court of the State of New York, County of Kings, for not fulfilling an agreement to purchase coffee exclusively from Coffee Holding Company. The Company expects to be successful in this matter.
On July 3, 1996, the Company 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 resulting from the non payment of outstanding loans and other payments assigned to the Company under the rights of an oral contract. 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.
SHARES OVER THE COUNTER
BID OFFER
Quarter Ending High .968 cent .9375 cent June 30, 1996 Low .85 cent .83 cent
Quarter Ending High 6 cent 6 cent October 31, 1996 Low 4 cent 4 cent
Quarter Ending High 7 cents 7 cents February 28, 1997 Low 4 cents 4 cents
Quarter Ending High 6 cents 6 cents June 30, 1997 Low 4 cents 4 cents
Number of Shareholders - 396 Dividends - None
As of June 30, 1997 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
Operating Income $(47,065.00) Income from Continuing Operations $(47,065.00) Total Income $(47,065.00) Loss per Share $(.003) Total Assets $312,842.00 Current Liabilities $100,416.00 Long Term Obligations $-0- Dividends $-0-
ITEM 7.
ITEM 7. MANAGEMENTS DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AS A RESULT OF OPERATIONS.
Liquidity and capital resources
OPERATIONS. The operating entities of the company, Savon Coffee, Inc. and Palm Beach Coffee, Inc., represents 100 percent of the total revenue of the Company with Savon contributing 80 percent and Palm Beach 20 percent. The cost of operating both companies is similar and neither one results in any disparate expense to the Company. 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 publically 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. The Company is presently indebted to the First Union Bank in the approximate amount of $ 7,000. Said note is secured by the inventory and equipment of the Company. The Company does not now have any specific need to arrange for additional credit lines.
Due to the nature of the Company's business, a large amount of inventory is necessary. The Company presently roasts and ships approximately 70 different types of flavored coffees. This in and of itself necessitates a large inventory. In addition, substantial inventory is also necessary as the Company is dependent upon foreign growers for coffee beans. Management sees no detriment to the maintaining of a large inventory as it pertains to their cash flow and working capital.
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.
On October 21, 1997 the Company intends to acquire Tri-Star Medical Group, Inc. The transaction will be executed through a reverse acquisition.
Tri-Star Medical Group, Inc. is a holding company that acquires and manages businesses in the medical service industry.
ITEM 8.
ITEM 8. SELECTED FINANCIAL DATA
See Item 14 herein.
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:
NAME TITLE
Herbert Glaubman Director since October 1995 Director, President and CEO
Francis Glaubman Director since October 1995 Director and Secretary
Harold Strulowitz Director since March 1996 Director
The following information is provided with respect to the directors.
HERBERT GLAUBMAN Age 67 Founder of the Company
FRANCIS GLAUBMAN Age 53 Co-founder of the Company
HAROLD STRULOWITZ Age 54 Certified public account and president of Palm Beach Gourmet
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.
Name of Individual Capacities in Cash or Group which served Compensation
Herbert Glaubman President and CEO $-0-
Francis Glaubman Vice President and Secretary $55,000.00
All executive officers as a group including individuals named above (2 persons) $55,000.00
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.
Name Percentage Owned Number of Shares Owned
Herbert and Francis Glaubman 22.657% 4,500,000
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 Vice President President
Dated: October 29, 1997 Dated: October 29, 1997
FOOD CONCEPTS, INC. AND SUBSIDIARIES
AUDITED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
FOOD CONCEPTS, INC. AND SUBSIDIARIES
PAGE
Report of Certified Public Accountants on the Financial Statements 1
Financial Statements
Consolidated Balance Sheet 2 Consolidated Statement of Operations 3 Consolidated Statement of Shareholders' Equity (Deficiency) 4 Consolidated Statement of Cash Flows 5 Notes to Consolidated Financial Statements 6-10
Joel S. Baum and Company, P.A. University Avenue Coral Springs, Florida
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, 1997 and the related consolidated statements of operations, stockholders' equity (deficiency) and cash flows for the years ended June 30, 1997 and 1996. 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 audits 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, 1997 and the results of its operations and cash flows for the years ended June 30, 1997 and 1996 in conformity with generally accepted accounting principles.
/s/ Joel S. Baum
Coral Springs, Florida October 14, 1997
FOOD CONCEPTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET JUNE 30, 1997
ASSETS
Current Assets Cash overdraft $ (269) Accounts Receivable (Note 3) 110,654 Inventory (Note 1) 152,776 Loans Receivable 750 Total Current Assets 263,911
Property, Plant & Equipment (Note 2) (Net of Accumulated Depreciation of $38,385) 29,930
Other Assets Refundable Deposits 19,001
Total Assets $ 312,842
LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities Accounts Payable $ 88,316 Accrued Expenses 4,855 Notes Payable - Short-Term (Note 3) 7,245 Total Current Liabilities 100,416 Total Liabilities 100,416
Shareholders' Equity Common Stock - $.001 par value; authorized 20,000,000; issued and outstanding - 19,861,744 shares at June 30, 1997 19,862 Additional Paid-In-Capital 1,004,253
Accumulated Deficit (811,689) Total Shareholders' Equity (Deficiency) 212,426
Total Liabilities & Shareholders' Equity (Deficiency) $ 312,842
See Accompanying Notes to Consolidated Financial Statements.
FOOD CONCEPTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED JUNE 30,
1997 1996
Sales $ 903,316 $ 745,671 Cost of Sales 371,367 363,061 Gross Profit 531,949 382,610
Operating Expenses:
Selling, General and Administrative 567,394 457,506
Income (Loss) Before Interest Expense (35,445) (74,896)
Interest Expense 11,620 20,586 Income (Loss) Before Income Taxes (47,065) (95,482) Provision for Income Taxes (Note 1) - 0 - - 0 - Net Income (Loss) $ (47,065) $ (95,482)
Income (Loss) Per Common Share (Note 1) (.003) (.041) Weighted Average Common Shares Outstanding (Note 1) 13,750,911 2,308,900, respectively
See Accompanying Notes to Consolidated Financial Statements.
FOOD CONCEPTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY) FOR THE YEARS ENDED JUNE 30, 1996 AND JUNE 30, 1997
ADDITIONAL COMMON PAID-IN ACCUMULATED STOCK CAPITAL DEFICIT
Balance June 30, 1995 $ 333 $ 455,810 $ (620,464) Additional Stock Issued For Acquisition of Subsidiary October 27, 1995 1,900 - 0 - - 0 -
Additional Stock Issued for Acquisition of Subsidiary January 1, 1996 50 - 0 - (48,677)
Additional Stock Issued for S-8 Offering 1,500 - 0 - - 0 - Additional Stock Issued For Shareholders' Contribution 112 439,409 - 0 -
Net Loss June 30, 1996 - 0 - - 0 - (95,482)
Balance June 30, 1996 3,895 895,219 (764,623)
Additional Stock Issued For S-8 Offering 15,967 109,034 (47,066)
New Loss June 30, 1997 - 0 - - 0 - - 0 -
Balance June 30, 1997 $ 19,862 $1,004,253 $(811,689)
See Accompanying Notes to Consolidated Financial Statements.
FOOD CONCEPTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JUNE 30,
1997 1996
Cash Flows From Operations: Net Loss $ (47,065) $ (95,482) Adjustments to Reconcile Net Income To Net Cash Used for Operating Activities:
Depreciation 11,801 9,876 Excess Liabilities over Assets of Acquired Subsidiary - 0 - (48,584)
Changes in Assets and Liabilities:
(Increase) Decrease in Prepaid Expenses 375 - 0 - (Increase) Decrease in Accounts Receivable 16,733 (44,305) (Increase) Decrease in Inventory 28,170 (112,959) (Increase) Decrease in Loans Receivable (750) - 0 - (Increase) Decrease in Other Assets (12,341) (525) Increase (Decrease) in Accounts Payable (46,672) 82,115 Increase (Decrease) in Accrued Expenses (6,888) (33,675) Increase (Decrease) in Notes Payable (52,366) (59,947) Net Cash Used in Operations (109,003) (303,486)
Cash Flows From Investing Activities:
Purchase of Property, Plant & Equipment (5,066) (21,565) Issuance of Common Stock 15,967 3,562 Additional Paid-In Capital generated as a result of issuance of Common Stock 109,034 439,409
Net Cash Provided By Investing Activities 119,935 421,406
Cash Flows from Financing Activities: Increase (Decrease) in Loan Payable Affiliated Company - 0 - (79,774) Increase (Decrease) in Officer Loans Payable - 0 - (39,600)
Net Cash Used in Financing Activities - 0 - (119,374)
Net Increase (Decrease) in Cash 10,932 (1,454)
Cash Overdraft - Beginning of Period (11,201) (9,747)
Cash Overdraft - End of Period $ (269) $ (11,201)
See Accompanying Notes to Consolidated Financial Statements.
FOOD CONCEPTS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 AND 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 Beach 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.
Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks, and any highly liquid investments with a maturity of three months or less at the time of purchase.
The Company and its Subsidiaries maintain cash and cash equivalent balances at several financial institutions which are insured by the Federal Deposit Insurance Corporation up to $100,000. At June 30, 1997 and 1996 there is no concentration of credit risk from uninsured bank balances.
Inventory Inventory is valued at the lower of cost or market determined by the weighted average method. At June 30, 1997, the Company's inventory is largely held in various coffee blends, flavorings and supplies, approximately as follows: Raw Materials $117,843 Finished Goods 34,933 $152,776
FOOD CONCEPTS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 AND 1996
NOTE 1 -BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con't)
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 attributable 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 Income (Loss) Per Common Share Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. For the year ended June 30, 1997 and 1996, the Company's weighted average common shares outstanding were 13,750,911 and 2,308,900 respectively.
NOTE 2 -PROPERTY, PLANT AND EQUIPMENT Consists of the Following:
Equipment $ 59,062 Office Furniture and Equipment 1,235 Leasehold Improvements 8,018 Total $ 68,315 Less: Accumulated Depreciation (38,385)
$ 29,930
Depreciation expense for the year ended June 30, 1997 and 1996 amounted to $11,801 and $9,876, respectively.
FOOD CONCEPTS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 AND 1996
NOTE 3 - NOTES PAYABLE Loan factor $ 7,245 Total Notes Payable $ 7,245
NOTE 4 -MAJOR CUSTOMERS
Major customer sales are presented in tabular form as follows:
Period Ended Christmas Tree Shop Anron Coffee & Tea Inc. June 30, 1997 $ 13,103 20% $ - 0 - 0% June 30, 1996 $208,800 28% $ 186,400 25%
NOTE 5 -LEGAL PROCEEDINGS
Coffee Holding Company, Inc. has filed a lawsuit against Savon Coffee, Inc. in the amount of $7,524 plus a percentage of gross profit in the amount of 18% for the period from January 1993 to August, 1993. This action was instituted against Savon Coffee, Inc. on March 16, 1994 in the Supreme Court of the State of New York, County of Kings, for not fulfilling an agreement to purchase coffee exclusively from Coffee Holding Company.
On July 3, 1996 the Company 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 resulting from the non-payment of outstanding loans and other payments assigned to the Company under the rights of an oral contract.
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 (85.6% of the Company's shares). This business combination has been treated as a reverse acquisition that was accounted for as a recapitalization of Savon Coffee, Inc. using purchase method accounting.
B. 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. The acquisition was accounted for under the purchase method of accounting. Under the purchase method of accounting the acquired company's activity is included in the financial statements from the date of acquisition.
FOOD CONCEPTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 AND 1996
NOTE 7 -LEASING ARRANGEMENTS
Operating Lease
The Company conducts its operation from facilities that are leased under a five year lease ending April 3, 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, 1997 are:
Year Ended Operating June 30 Leases 1998 50,391 1999 45,663 2000 41,789 2001 30,758
Total Minimum Payments $168,601
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 INCOME TAXES
As discussed in Note 1, the Company has applied the provision of Statement 109. The significant components of deferred income tax benefit arising from net operating loss curry forwards of approximately $200,000 is as follows at June 30, 1997:
Deferred Tax Benefit $ 18,355 Valuation Allowance (18,355) $ - 0 -
The valuation allowance has been estimated at 100%
FOOD CONCEPTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 AND 1996
NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION
Year Ended Year Ended June 30, 1997 June 30, 1996
Taxes Paid $ - 0 - $ - 0 -
Interest Paid $ 11,620 $ 20,586
NOTE 11 - SUBSEQUENT EVENT
On October 21, 1997 the Company intends to acquire Tri-Star Medical Group, Inc. The transaction will be executed through a reverse acquisition.
Tri-Star Medical Group, Inc. is a holding company that acquires and manages businesses in the medical service industry.