SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) : June 11, 2001
Spectrum Organic Products, Inc.
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(Exact name of registrant as specified in its charter)
California 333-22997 94-3076294
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No)
incorporation)
133 Copeland Street
Petaluma, CA 94952
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(Address of Principal Executive Offices)
(707) 778-8900
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(Registrant's telephone number)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 11, 2001, Spectrum Organic Products, Inc. (the "Company") entered into
an Asset Purchase Agreement (the "Agreement") with Acirca, Inc. ("Acirca")
pursuant to which the Company sold certain assets to Acirca related to the
Company's tomato-based product lines (the "Disposition"). Acirca has been, and
may continue to be, a customer of the Company, purchasing organic ingredients
from the Company. The total consideration paid to the Company in connection with
the Disposition was $3,046,015 in cash, which included $696,015 paid in
consideration for saleable inventory sold to Acirca, subject to post-closing
adjustments. The aggregate amount of consideration was determined following
negotiations between the Company and Acirca and is set forth in the Agreement.
Included in the total amount of consideration paid to the Company was $350,000
which was deposited in an escrow account to be applied towards indemnity claims
of Acirca and, to the extent not utilized for any indemnity claims of Acirca,
released to the Company in two equal installments at the six month and one year
anniversaries of the Agreement.
ITEM 5. OTHER EVENTS
On June 12, 2001, Acirca and the Company issued a joint press release reporting
the implementation of the Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
On June 11, 2001, the Company sold its tomato-based product lines to
Acirca, Inc., an unrelated third party, in a transaction approved by
unanimous vote of the Company's Board of Directors. The assets disposed of
included inventories, trademarks and goodwill associated with the Millina's
Finest, Garden Valley Natural, Parrot and Frutti di Bosco brands of pasta
sauces and salsas, as well as children's meals sold under the Grandma
Millina's Kitchen Kids' Meals brand and certain private label pasta sauce
and salsa products.
Pro forma financial information is presented below which discloses the
changes necessary to the balance sheet at March 31, 2001 as if the
transaction was consummated on that date, and to the statements of
operations for the three-month and twelve-month periods ended March 31,
2001 and December 31, 2000, respectively, as if the transaction had
occurred at the beginning of each period presented. The pro forma results
for the statements of operations for both periods presented exclude
material non-recurring charges directly attributable to the transaction
(see Note 11).
2
SPECTRUM ORGANIC PRODUCTS, INC.
BALANCE SHEET
March 31, 2001
ASSETS
(Unaudited)
(Unaudited) Disposition of (Unaudited)
As Product Lines Pro Forma
Reported Inc/(Dec) Results
------------ ------------ ------------
Current Assets:
Cash $ 1,000 $ -- $ 1,000
Accounts receivable, net 3,719,200 -- 3,719,200
Inventories, net (Note 2) 7,694,800 (696,000) 6,998,800
Other current assets (Note 5) 101,500 350,000 451,500
------------ ------------ ------------
Total Current Assets 11,516,500 (346,000) 11,170,500
Property and Equipment, net (Note 2) 3,175,700 (10,500) 3,165,200
Other Assets:
Goodwill, net (Note 3) 9,495,600 (6,776,400) 2,719,200
Other assets, net 139,700 -- 139,700
------------ ------------ ------------
Total Assets $ 24,327,500 $ (7,132,900) $ 17,194,600
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank overdraft $ 856,600 -- $ 856,600
Line of credit (Note 5) 6,312,800 (2,696,000) 3,616,800
Accounts payable, trade (Note 4) 6,442,300 125,000 6,567,300
Accrued expenses 833,300 -- 833,300
Current maturities of notes payable, former
stockholder 375,000 -- 375,000
Current maturities of notes payable and capitalized
lease obligations 967,700 -- 967,700
Current maturities of notes payable, stockholders 140,000 -- 140,000
------------ ------------ ------------
Total Current Liabilities 15,927,700 (2,571,000) 13,356,700
Notes payable, former stockholder, less current
maturities 874,300 -- 874,300
Notes payable, stockholders, less current maturities 286,400 -- 286,400
Notes payable and capitalized lease obligations, less
current maturities 387,000 -- 387,000
------------ ------------ ------------
Total Liabilities 17,475,400 (2,571,000) 14,904,400
------------ ------------ ------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, 5,000,000 shares authorized, no
shares issued or outstanding -- --
Common stock, no par value, 60,000,000 shares
authorized, 45,140,354 issued and outstanding 8,745,200 -- 8,745,200
Additional paid-in capital 345,100 -- 345,100
Accumulated deficit (2,238,200) (4,561,900) (6,800,100)
------------ ------------ ------------
Total Stockholders' Equity 6,852,100 (4,561,900) 2,290,200
------------ ------------ ------------
Total Liabilities and Stockholders' Equity $ 24,327,500 $ (7,132,900) $ 17,194,600
============ ============ ============
The accompanying notes are an integral part
of the financial statements.
3
SPECTRUM ORGANIC PRODUCTS, INC.
STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2001
(Unaudited) (Unaudited)
Consolidated Disposed (Unaudited)
Results Product Pro Forma
As Reported Lines Results
------------ ------------ ------------
Gross Sales (Note 6) $ 11,002,600 $ 1,306,500 $ 9,696,100
Discounts and Allowances (Note 6) 790,600 119,000 671,600
------------ ------------ ------------
Net Sales 10,212,000 1,187,500 9,024,500
Cost of Goods Sold (Note 6) 7,463,700 875,000 6,588,700
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Gross Profit 2,748,300 312,500 2,435,800
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Operating Expenses:
Sales and Marketing (Note 7) 1,584,100 98,000 1,486,100
General and Administrative (Note 8) 843,700 4,000 839,700
Amortization of Goodwill (Note 9) 225,400 163,300 62,100
------------ ------------ ------------
Total Operating Expenses 2,653,200 265,300 2,387,900
------------ ------------ ------------
Income from Operations 95,100 47,200 47,900
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Other Income (Expense):
Other Income 20,800 0 20,800
Gains/(Losses) on Sale of Assets (2,500) 0 (2,500)
Interest Expense (Note 10) (281,200) (19,100) (262,100)
------------ ------------ ------------
Total Other Expenses, Net (262,900) (19,100) (243,800)
------------ ------------ ------------
Income/(Loss) Before Income Taxes (167,800) 28,100 (195,900)
Provision for Income Tax Expense -- -- --
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Net Income/(Loss) $ (167,800) $ 28,100 $ (195,900)
============ ============ ============
Basic and Fully Diluted Loss Per Share $ 0.00 $ 0.00
============ ============
Weighted Average Shares Outstanding 44,785,702 44,785,702
============ ============
The accompanying notes are an integral part
of the financial statements.
4
SPECTRUM ORGANIC PRODUCTS, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2000
(Unaudited)
Consolidated Disposed (Unaudited)
Results Product Pro Forma
As Reported Lines Results
------------ ------------ ------------
Gross Sales (Note 6) $ 45,582,400 $ 4,644,500 $ 40,937,900
Discounts and Allowances (Note 6) 2,490,800 366,200 2,124,600
------------ ------------ ------------
Net Sales 43,091,600 4,278,300 38,813,300
Cost of Goods Sold (Note 6) 31,819,400 3,284,000 28,535,400
------------ ------------ ------------
Gross Profit 11,272,200 994,300 10,277,900
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Operating Expenses:
Sales and Marketing (Note 7) 6,455,900 372,600 6,083,300
General and Administrative (Note 8) 4,157,900 20,600 4,137,300
Loss on Disposition of Property and
Equipment 436,500 -- 436,500
Amortization of Goodwill (Note 9) 909,600 658,900 250,700
------------ ------------ ------------
Total Operating Expenses 11,959,900 1,052,100 10,907,800
------------ ------------ ------------
Loss from Operations (687,700) (57,800) (629,900)
------------ ------------ ------------
Other Income (Expense):
Interest Expense (Note 10) (1,381,500) (79,000) (1,302,500)
Gain on Disposal of Trademarks and Labels 50,000 -- 50,000
Other Income 20,800 -- 20,800
------------ ------------ ------------
Total Other Expenses, Net (1,310,700) (79,000) (1,231,700)
------------ ------------ ------------
Loss Before Taxes (1,998,400) (136,800) (1,861,600)
Provision for Income Tax Expense (3,900) -- (3,900)
------------ ------------ ------------
Net Loss $ (2,002,300) $ (136,800) $ (1,865,500)
============ ============ ============
Basic and Fully Diluted Loss Per Share $ (0.05) $ (0.04)
============ ============
Weighted Average Shares Outstanding 44,234,378 44,234,378
============ ============
The accompanying notes are an integral part
of the financial statements.
5
SPECTRUM ORGANIC PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
These are unaudited pro forma financial statements and include all
adjustments which, in the opinion of Management, are necessary in order to
make the pro forma financial statements not misleading. The Company does
not presently manage its operations by business segment, and does not
prepare internal financial statements by business segment for use by
Management. Accordingly, sales and marketing expenses, general and
administrative expenses and certain unassigned cost of sales items have
been allocated to the disposed product lines based on specific assumptions
disclosed in the Notes to Financial Statements. Pro forma results for the
three-month period ended March 31, 2001 are not necessarily indicative of
the results that may be expected for the entire year ending December 31,
2001. These financial statements have been prepared in accordance with the
instructions to Form 8-K and do not include certain disclosures required by
generally accepted accounting principles.
2. Tangible Assets Sold
The adjustments entered in the balance sheet column captioned "Disposition
of Product Lines" reflect the sale of tangible assets associated with the
transaction, principally inventories of finished case goods and packaging
materials as well as the unamortized cost of label plates, dies, molds and
artwork. Accounts receivable related to the disposed product lines were not
sold, nor were any liabilities of the Company assumed by the buyer.
3. Intangible Assets Sold
The adjustments entered in the balance sheet column captioned "Disposition
of Product Lines" reflect the sale of intangible assets associated with the
transaction, principally trademarks and goodwill. Since the product lines
disposed of comprise all of the remaining assets of Organic Food Products,
Inc. (the former registrant), the remaining unamortized goodwill associated
with the reverse acquisition of OFPI in October 1999 has been written-off.
4. Transaction Costs
The adjustment entered in the balance sheet column captioned "Disposition
of Product Lines" reflects the estimated transaction costs incurred,
principally investment banking, accounting and legal fees associated with
executing the transaction.
5. Consideration Received
The adjustments entered in the balance sheet column captioned "Disposition
of Product Lines" reflect the net cash proceeds of $2,696,000 which were
applied against the Company's line of credit and the funds deposited into
escrow of $350,000.
6
6. Results of Operations
The adjustments entered in the statement of operations column captioned
"Disposed Product Lines" reflect the elimination of the reported sales,
discounts and allowances and cost of goods sold directly associated with
the disposed product lines for each period presented. Certain unassigned
cost of goods sold items have been allocated to the disposed product lines
based on ratios that are appropriate in the opinion of Management.
7. Sales and Marketing
The adjustment entered in the statement of operations column captioned
"Disposed Product Lines" reflects the elimination of sales and marketing
expenses either directly attributable to the disposed product lines or
appropriately allocated based on the percentage relationship between gross
sales of the disposed product lines to total branded culinary products
gross sales. No employee-related expenses have been allocated since the
Company does not have personnel assigned solely to the disposed product
lines, nor does it anticipate headcount reductions as a result of the
disposition.
8. General and Administrative
The adjustment entered in the statement of operations column captioned
"Disposed Product Lines" reflects the elimination of discounts taken
against accounts receivable, which was allocated based on the percentage
relationship between gross sales of the disposed product lines to total
Company gross sales. No employee-related expenses have been allocated since
the Company does not have personnel assigned solely to the disposed product
lines, nor does it anticipate headcount reductions as a result of the
disposition.
9. Amortization of Goodwill
The adjustment entered in the statement of operations column captioned
"Disposed Product Lines" reflects the elimination of the goodwill
amortization expense associated with the reverse acquisition of OFPI in
October 1999, which resulted in goodwill of $7,866,000 which was being
amortized to expense over a twelve year life.
10. Interest Expense
The adjustment entered in the statement of operations column captioned
"Disposed Product Lines" reflects the elimination of estimated interest
expense associated with the additional borrowing base available under the
Company's revolving line of credit before the sale of inventories and
collection of trade accounts receivable associated with the disposed
product lines.
11. Material Non-recurring Items
The pro forma results on the statements of operations for both periods
presented are intended to present the continuing operations of the Company,
before non-recurring charges directly attributable to the Disposition.
7
Accordingly, the pro forma results exclude material non-recurring charges
which result directly from the transaction and which will be included in
the operating results of the Company for the three and six month periods
ending June 30, 2001. These non-recurring items consist primarily of the
non-cash loss on the sale of the product lines of approximately $4,425,000
and investment banking, accounting and legal fees associated with executing
the transaction of approximately $125,000. These non-recurring items are
reflected in the pro forma balance sheet as of March 31, 2001.
(c) Exhibits
2.03 Asset Purchase Agreement dated June 11, 2001 by and between Spectrum
Organic Products, Inc. and Acirca, Inc.
2.04 Escrow and Security Agreement dated June 11, 2001 by and among
Spectrum Organic Products, Inc., Acirca, Inc. and Webster Trust
Company, NA.
2.05 Transition Services Agreement dated June 11, 2001 by and between
Spectrum Organic Products, Inc. and Acirca, Inc.
2.06 License Agreement dated June 11, 2001 by and between Spectrum Organic
Products, Inc. and Acirca, Inc.
2.07 Noncompetition Agreement dated June 11, 2001 by and among Spectrum
Organic Products, Inc., Acirca, Inc., Jethren Phillips, and John
Battendieri.
2.08 Assignment and Assumption Agreement dated June 11, 2001 by and between
Spectrum Organic Products, Inc. and Acirca, Inc.
99.01 Joint press release of Acirca and the Company dated June 12, 2001,
titled "Acirca Acquires Millina's Finest Sauces".
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 hereunto duly authorized.
Dated: June 25, 2001 Spectrum Organic Products, Inc.
By: /s/ Robert B. Fowles
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Robert B. Fowles
Duly Authorized Officer &
Chief Financial Officer