EXHIBIT 99
ADDITIONAL INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
The Company's Quarterly Report on Form 10-QSB for the 13 and 27 week
periods ended July 3, 1999 (the "Quarterly Report") contains various
forward-looking statements which reflect the Company's current views with
respect to future events and financial results. Forward-looking statements
usually include the verbs "anticipates," "believes," "estimates," "expects,"
"intends," "plans," "projects," "understands" and other verbs suggesting
uncertainty. The Company reminds shareholders that forward-looking statements
are merely predictions which are inherently subject to uncertainties and other
factors which could cause the actual results to differ materially from the
forward-looking statement. Some of these uncertainties and other factors are
discussed in the Quarterly Report. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." In this Exhibit 99, the Company
has attempted to identify additional uncertainties and other factors which may
affect its forward-looking statements.
Shareholders should understand that the uncertainties and other factors
identified in the Quarterly Report and this Exhibit 99 do not constitute a
comprehensive list of all the uncertainties and other factors which may affect
forward-looking statements. The Company has merely attempted to identify those
uncertainties and other factors which, in its view at the present time, have the
highest likelihood of significantly affecting its forward-looking statements. In
addition, the Company does not undertake any obligation to update or revise any
forward-looking statements or the list of uncertainties and other factors which
could affect such statements.
* * *
Dependence on Independent Distributors. Historically, we have been
dependent on maintaining satisfactory relationships with our various health food
distributors, Mattus Ice Cream Company, our frozen dessert distributor in the
New York Metropolitan area ("Mattus"), and the other independent distributors
that have acted as our distributors. Our health food distributors accounted for
47% of our sales. While we believe that our relationships with our distributors
have been satisfactory and have been instrumental in the Company's growth, we
have at times experienced difficulty in maintaining such relationships to our
satisfaction. Since available distribution alternatives are limited, there can
be no assurance that difficulties in maintaining satisfactory relationships with
our distributors will not have a material adverse effect on our business in the
future.
Recent Growth in Sales and Earnings. In the first six months of 1999, our
net sales increased 49% to $6,074,000 from $4,075,000 in the comparable 1998
period. The successful introduction of innovative products on a periodic basis
has become increasingly important to our sales growth. Accordingly, the future
degree of market acceptance of any of our new products, which may be accompanied
by significant promotional expenditures, is likely to have an important impact
on our future financial results.
Competitive Environment. The frozen dessert and health food markets are
highly competitive. The ability to successfully introduce innovative products on
a periodic basis that are accepted by the marketplace is a significant
competitive factor. In addition, many of our principal competitors are large,
diversified companies with resources significantly greater than ours. We expect
strong competition to continue, including competition for adequate distribution
and competition for the limited shelf space for the frozen dessert category in
supermarkets and other retail food outlets.
Our Operating Results Vary Quarterly And Seasonally. We have often
recognized a substantial portion of our revenues in the second and third quarter
of the year and in the last month, or even weeks, of a quarter. Our expense
levels are substantially based on our expectations for future revenues and are
therefore relatively fixed in the short-term. If revenue levels fall below
expectations, our quarterly results are likely to be disproportionately
adversely affected because a proportionately smaller amount of our expenses
varies with its revenues. Our operating results reflect seasonal trends and we
expect to continue to be affected by such trends in the future. We expect to
continue to experience relatively higher sales in the second and third quarters,
and relatively lower sales in the fourth and first quarters, as a result of
reduced sales of frozen non-dairy desserts. Due to the foregoing factors, in
some future quarter our operating results may be below the expectations of
public market analysts and investors. In such event, it is likely that the price
of our common stock would be materially adversely affected.
Reliance on a Limited Number of Key Personnel. Our success is significantly
dependent on the services of David Mintz, Chief Executive Officer, Mr. Steven
Kass, Chief Financial Officer, and Reuben Rapoport, Director of Product
Development. The loss of the services of any of these persons could have a
material adverse effect on our business.
Control of the Company. Our Chairman of the Board and Chief Executive
Officer, David Mintz, holds shares representing approximately 49% of the
outstanding common stock, permitting him as a practical matter to elect all
members of the Board of Directors and thereby effectively control the business,
policies and management of our company.
We May Be Affected By Year 2000 Issues. We are in the process of addressing
the Year 2000 problem. Although we believe that we have identified and upgraded
or replaced all of the computers, software applications and related equipment
used in connection with our internal operations that must be modified, upgraded,
or replaced to minimize the possibility of a material disruption to our business
because of the Year 2000 problem, we cannot provide any assurance to this
effect. We believe the Year 2000 problem does not pose a significant operational
or financial risk. We have a broad base of customers with no customer
responsible more than 10% of net sales. We also have a broad base of suppliers
with multiple sourcing possibilities for many of our purchases.
Our assessment of the Year 2000 problem is based upon certain assumptions
that may later prove to be inaccurate. We believe that the greatest potential
risks relate to those situations beyond
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our control, particularly the inability of suppliers and customers to be Year
2000 compliant, causing disruptions in the manufacturing and distribution
network. Additionally, customer's inability to pay in a timely manner and the
disruption of electronic invoicing and payment systems could cause financial
risk and losses to our company.
We Are Subject To Risks Associated With International Operations. In 1998
approximately 12% of our revenues were from international sales. Although we
continue to expand our international operations, we cannot be certain that we
will be able to maintain or increase international market demand for our
products. To the extent that we cannot do so in a timely manner, our business,
operating results and financial condition will be adversely affected.
International operations are subject to inherent risks, including the
following:
o the impact of possible recessionary environments in multiple foreign
markets;
o longer receivables collection periods and greater difficulty in
accounts receivable collection;
o unexpected changes in regulatory requirements;
o potentially adverse tax consequences; and
o political and economic instability.
We may be adversely affected by fluctuations in currency exchange rates. We
do not currently engage in any currency hedging transactions intended to reduce
the effect of fluctuations in foreign currency exchange rates on our results of
operations. Although exposure to currency fluctuations to date has not had a
material adverse effect on our business, there can be no assurance such
fluctuations in the future will not have a material adverse effect on revenues
from international sales and, consequently our business, operating results and
financial condition.
We May Require Additional Capital In The Future. Our working capital
requirements and the cash flow provided by our operating activities are likely
to vary greatly from quarter to quarter, depending on the timing of orders and
deliveries, the build-up of inventories, and the payment terms offered to
customers. We anticipate that our existing capital resources, will be adequate
to satisfy our working capital and capital expenditure requirements for at least
12 months. No assurance can be given that we will not consume an unexpected and
significant amount of our available resources. Our future capital requirements
will depend on many factors, including continued progress in our expansion plans
and the success of new product introductions. To the extent that the funds
generated from our operations are insufficient to fund our operating and
financial requirements, we may be required to raise additional funds through
public or private financings or other sources. Any equity or debt financings, if
available at all, may cause dilution to our then-existing shareholders. If
additional funds are raised through the issuance of equity securities, the net
tangible book value per
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share of our common shares may decrease and the percentage ownership of then
current shareholders may be diluted. We do not have any committed sources of
additional financing, and there can be no assurance that additional financing,
if necessary, will be available on commercially reasonable terms, if at all. If
adequate funds are not available, our business, financial condition and results
of operations would be materially and adversely affected.
Our Stock Price Is Subject To Volatility. The market price of our common
stock may be subject to wide fluctuations in response to announcements
concerning us or our competitors, quarterly variations in operating results, the
introduction of new products or changes in product pricing policies by us or our
competitors, general market conditions in the industry, developments in the
financial markets and other factors.
We Do Not Intend To Pay Cash Dividends. Our policy is to retain earnings,
if any, for use in our business and, for this reason, we do not intend to pay
cash dividends on the common shares in the foreseeable future.
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