SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM
COMMISSION FILE NUMBER 0-23026
RAPTOR INVESTMENTS, INC.
-----------------------------------------------------------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
FLORIDA 22-3261564
--------------------------------- -------------------------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION
OF INCORPORATION OR ORGANIZATION) NO.)
105 N.W. 13 AVENUE, POMPANO BEACH, FLORIDA 33069
------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
954-346-5799
-----------------------------------------------
(ISSUER'S TELEPHONE NUMBER INCLUDING AREA-CODE)
(FORMER NAME, FORMER ADDRESS AND
FORMER FISCAL YEAR, 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 CORPORATE ISSUERS
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON
STOCK AS OF THE LATEST PRACTICABLE DATE:
COMMON STOCK, $.01 PAR VALUE - 48,887,681 SHARES AS OF MARCH 31, 2004.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES X NO
--- ---
RAPTOR INVESTMENTS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
RAPTOR INVESTMENTS, INC.
AND SUBSIDIARIES
CONTENTS
PAGE 1 CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2004
(UNAUDITED)
PAGE 2 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
PAGE 3 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) FOR THE THREE MONTHS ENDED
MARCH 31, 2004 AND 2003
PAGE 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
PAGES 5 - 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2004
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash $ 92,780
Investments, net 12,695
Accounts receivable, net 1,161,434
Inventories 247,923
Due from stockholder 16,470
Other current assets 2,775
-----------
Total Current Assets 1,534,077
-----------
PROPERTY AND EQUIPMENT - NET 1,995,380
-----------
OTHER ASSETS
Deposits 6,000
Goodwill 1,111,077
-----------
Total Other Assets 1,117,077
-----------
TOTAL ASSETS $ 4,646,534
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Cash overdraft $ 94,530
Accounts payable and accrued expenses 747,508
Due to factor 842,203
Line of credit 250,000
Loans payable - related parties 80,000
Capital lease - current 122,279
-----------
Total Current Liabilities 2,136,520
-----------
LONG-TERM LIABILITIES
Capital lease - non-current 515,823
Line of credit 2,364,228
Note payable 800,000
-----------
Total Long-Term Liabilities 3,680,051
-----------
TOTAL LIABILITIES 5,816,571
-----------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.01 par value,
5,000,000 shares authorized,
Class A, $.01 par value,
15 shares issued and outstanding 1
Common stock, $.01 par value,
100,000,000 shares authorized,
48,887,681 shares issued and outstanding 488,878
Additional paid-in capital 9,652,520
Note receivable - stockholder (1,580,404)
Treasury stock (49,107)
Other comprehensive loss (13,785)
Accumulated deficit (9,489,440)
Stock subscription receivable (178,700)
-----------
Total Stockholders' Deficiency (1,170,037)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 4,646,534
===========
See accompanying notes to condensed consolidated financial statements.
1
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three For the Three
Months Ended Months Ended
March March
31, 2004 31, 2003
------------ ------------
REVENUE $ 2,608,066 $ 2,664,208
COST OF GOODS SOLD 2,018,823 1,989,868
------------ ------------
GROSS PROFIT 589,243 674,340
------------ ------------
OPERATING EXPENSES
Selling expenses 131,232 188,230
Settlement of vendor payables -- (292,919)
Other general and administrative 811,105 567,542
------------ ------------
Total Operating Expenses 942,337 462,853
------------ ------------
INCOME (LOSS) FROM OPERATIONS (353,094) 211,487
------------ ------------
OTHER INCOME (EXPENSE)
Interest income -- 95
Factor fee expense (39,409) --
Interest expense (97,501) (138,821)
------------ ------------
Total Other Income (Expense) (136,910) (138,726)
------------ ------------
NET INCOME (LOSS) BEFORE INCOME TAXES (490,004) 72,761
------------ ------------
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET INCOME (LOSS) $ (490,004) $ 72,761
============ ============
NET INCOME (LOSS) PER SHARE
Net income (loss) $ (490,004) $ 72,761
Preferred stock dividends (22,500) (45,000)
------------ ------------
NET INCOME (LOSS) AVAILABLE TO
COMMON SHAREHOLDERS $ (512,504) $ 27,761
============ ============
Net income (loss) per common share -
basic and diluted $ (0.01) $ --
============ ============
Weighted average number of
common shares outstanding -
basic and diluted 48,887,681 48,887,681
============ ============
See accompanying notes to condensed consolidated financial statements.
2
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
For the Three For the Three
Months Ended Months Ended
March March
31, 2004 31, 2003
--------- ---------
Net income (loss) $(490,004) $ 72,761
Unrealized gain (loss) on
available-for-sale securities (890) --
--------- ---------
Comprehensive income (loss) $(490,894) $ 72,761
========= =========
See accompanying notes to condensed consolidated financial statements.
3
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three For the Three
Months Months
Ended Ended
March March
31, 2004 31, 2003
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(490,004) $ 72,761
Adjustments to reconcile net loss to
net cash used in operating activities:
Stock issued for services -- 167,150
Depreciation 26,250 22,958
Non-cash gain on settlement of vendor payables -- (292,919)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 161,447 23,939
Inventories (82,903) (94,854)
Other current assets -- 3,900
Deposits -- (8,525)
Increase (decrease) in:
Cash overdraft 94,530 56,659
Accounts payable 126,667 (26,767)
--------- ---------
Net Cash Used In Operating Activities (164,013) (75,698)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (9,200) --
Purchases of property and equipment -- (2,814)
Restricted cash -- 92,911
--------- ---------
Net Cash Provided By (Used In)
Investing Activities (9,200) 90,097
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to factor 34,413 --
Payments on loan payable - related party -- (48,683)
Payments on capital lease (31,134) (32,998)
Proceeds from notes payable -- 400,000
Dividend payment on preferred stock (22,500) --
--------- ---------
Net Cash Provided By (Used In)
Financing Activities (19,221) 318,319
--------- ---------
NET INCREASE (DECREASE) IN CASH (192,434) 332,718
CASH - BEGINNING OF PERIOD 285,214 9,377
--------- ---------
CASH - END OF PERIOD $ 92,780 $ 342,095
========= =========
SUPPLEMENTAL DISCLOSURE
OF-CASH FLOW INFORMATION:
Cash paid for interest expense $ 97,501 $ 138,821
========= =========
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
The Company acquired $217,770 of property and equipment under capital leases
during the period ended March 31, 2003.
The Company exercised its option to acquire a cold storage facility and
reclassified its option price of $500,000 to property and equipment as of March
31, 2003.
See accompanying notes to condensed consolidated financial statements.
4
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally
accepted in The United States of America and the rules and regulations of
the Securities and Exchange Commission for interim financial information.
Accordingly, they do not include all the information necessary for a
comprehensive presentation of financial position and results of
operations.
It is management's opinion, however that all material adjustments
(consisting of normal recurring adjustments) have been made which are
necessary for a fair financial statements presentation. The results for
the interim period are not necessarily indicative of the results to be
expected for the year.
For further information, refer to the financial statements and footnotes
for the year ended December 31, 2003 included in the Company's Form
10-KSB.
(B) USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
(C) PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of
Raptor Investments, Inc. and its wholly owned subsidiaries LBI
Properties, Inc., LBI Eweb Communities, Inc., 105 NW 13 Avenue Holding
Corporation and J&B Wholesale Produce, Inc., (collectively, the
"Company"). All intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 2 FACTORING AGREEMENT
During 2003, the Company entered into a factoring agreement to sell
certain trade receivables, primarily without recourse. Under the
agreement, the factor will advance 90% of the face value of the
receivable to the Company. The Company will pay a percentage fee of 1.5%
and the remaining 8.5% will be applied against the outstanding line of
credit balance upon collection. The Company's accounts receivable are
pledged as collateral under the agreement. As of March 31, 2004, the
Company has received factor advances of $842,203 on approximately
$1,100,000 of factored accounts receivable and paid factor fees of
$39,409.
5
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
(UNAUDITED)
NOTE 3 INVENTORIES
Inventories consist of purchased produce, fruit and vegetables and is
valued at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method.
NOTE 4 INVESTMENTS
The Company's marketable securities are comprised of equity securities,
all classified as available-for-sale, which are carried at their fair
value based upon quoted market pries of those investments as of March 31,
2004. Accordingly, unrealized gains and losses are included in
stockholders' equity.
The composition of marketable equity securities as of March 31, 2004 is
as follows:
Unrealized
Gain or Fair
Basis (Loss) Value
-------- --------- --------
Available-for-sale securities
Common stock $ 26,480 $(13,785) $ 12,695
======== ======== ========
NOTE 5 LINE OF CREDIT
The Company entered into an agreement and signed a promissory note for a
line of credit in the amount of $2,825,000, which shall cap at $2,000,000
when the principal balance is reduced to that amount. The note is due and
payable on March 3, 2008. The note bears interest at the rate of LIBOR
(1.1% at March 31, 2004) plus 10% per annum payable monthly. The note is
secured by the assets of J&B Produce and a personal guarantee of the
President.
During July 2003, the Company entered into a loan extension agreement
with its lender. The extension waived minimum repayment requirement of
$250,000 under the original loan agreement until July 2, 2004. The note
balance at March 31, 2004 is $2,614,228.
NOTE 6 STOCKHOLDERS' EQUITY
During August 2003, the Company and the Preferred Class A stockholder
agreed to amend the terms and conditions of the payment of dividends and
conversion of the Class A Preferred Stock. The Preferred Stockholder
agreed to exchange the original 15 shares of Class A Preferred Stock and
all accrued dividends for 15 shares of Class A Preferred Stock with the
following attributes: annual dividends of $6,000 payable monthly and
increasing to $7,992 annually following the first month the Company
reaches sales over $15 million per annum and increasing to $9,984
6
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
(UNAUDITED)
annually for sales of $16 million and increasing to $11,976 per annum for
all sales over $17 million. In addition, each share of Class A Preferred
Stock is convertible into (0.75%) of the total issued and outstanding
common shares up to a maximum conversion of 562,500 common shares. During
the three months ended March 31, 2004, he Company paid preferred
dividends of $22,500.
NOTE 7 SEGMENT INFORMATION
The Company operates in two business segments, Produce and Other. The
Company operates the Produce segment through its wholly owned
subsidiaries J&B Wholesale Produce, Inc. and 105 NW 13 Avenue Holdings
Corporation ("J&B"). J&B receives its revenues from selling produce
wholesale to restaurants and stores. Raptor Investments, Inc., LBI
Properties, Inc. and LBI Eweb Communities, Inc. do not meet the
quantitative thresholds for a reportable segment and are therefore
included in the Other segment. The accounting policies of the segments
are the same as described in the summary of significant accounting
policies. The Company evaluates segment performance based on income from
operations. All intercompany transactions between segments have been
eliminated. As a result, the components of operating loss for one segment
may not be comparable to another segment. The following is a summary of
the Company's segment information for the period ended March 31:
2004 Produce Other Total
----------- ----------- -----------
Revenues $ 2,608,066 $ -- $ 2,608,066
Segment profit (loss) (444,429) (45,575) (490,004)
Total assets 4,590,578 55,956 4,646,534
Additions to long-lived assets -- -- --
Depreciation and amortization 25,714 536 26,250
2003
Revenues $ 2,664,208 $ -- $ 2,664,208
Segment profit (loss) (5,948) 78,709 72,761
Total assets 3,845,051 675,694 4,520,745
Additions to long-lived assets 2,814 -- 2,814
Depreciation and amortization 22,958 -- 22,958
7
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
(UNAUDITED)
NOTE 8 GOING CONCERN
As shown in the accompanying condensed consolidated financial statements,
the Company incurred a negative cash flow from operations of $164,013,
has an accumulated deficit of $9,489,440 and a stockholders' deficiency
of $1,170,037. These factors raise substantial doubt about the Company's
ability to continue as a going concern.
Management's plan for the Company in regard to these matters is to
continue to grow the produce operations of the business through its J&B
Produce subsidiary, which management believes will provide the necessary
revenue and earnings to enhance shareholder value. Management intends to
focus the business on profitable core customers and reduce marginal costs
by expanding its product line and implementing stricter controls. The
Company is also actively seeking to refinance its long-term debt on terms
more favorable to the Company. Management believes that the actions
presently taken to reduce operating costs, increase revenue and obtain
refinancing provide for the Company to operate as a going concern.
8
PART I ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
FORWARD LOOKING STATEMENTS
--------------------------
When used in this Quarterly Report, the words or phrases "will likely result",
"are expected to", "will continue", "is anticipated", "estimate", "projected",
"intends to" or similar expressions are intended to identify "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The Company's forward-looking statements reflect the company's best
judgment based on current information and are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
expressed in, or implied by, these statements. Readers are cautioned that they
should not place undue reliance on any forward-looking statements because such
statements speak only as of the date they are made.
This quarterly report should be read in light of the following factors which can
be ascertained from our financial disclosure for the quarter ended March 31,
2004:
1. LIQUIDITY. Our financial situation deteriorated during the quarter and our
resources are limited, and we must take, and have taken, affirmative steps to
increase sales, improve our profit margins for the foodstuffs we sell, and
reduce costs.
2. CAPITAL RESOURCES. Our company is highly leveraged and the lack of capital
could foreseeable limit our ability to expand. To that end, we have been in
discussion with our lenders concerning our cash needs, and have kept our lenders
abreast of our situation on a daily basis. We have firm commitments from our
lenders to support us, our management and Board, and to continue to support our
efforts in the future.
3. LOAN OBLIGATIONS. We are not in default on any of our obligations to pay our
lenders, or on our obligation to pay a fixed dividend on our preferred stock. We
will meet our obligation contained within the loan agreement with our lenders to
reduce our debt (principal) by $250,000 on or before July 2, 2004.
4. MARKET CONDITIONS. The economy and the markets for our products are changing
daily. While fuel costs have stabilized, and in some cases abated, we are still
paying more than 100% more for truck fuel than we paid for the similar period
one year ago. We are paying approximately 400% of our year-ago costs for freight
charges to bring bulk vegetables to our loading docks. We are trying to buy
vegetables which require as short a distance for freight as possible.
MATERIAL CHANGES IN FINANCIAL CONDITION FROM MARCH 31, 2003 TO MARCH 31, 2004:
Revenues for the three month period ended March 31, 2004 were essentially static
compared to the same time period for 2003. The cost of goods sold was also
essentially the same, however dramatic increases in our operating expenses from
$462,853 in 2003 to $942,337 in 2004 resulted in a deterioration in our results
from a $211,487 net income from operations in 2003 to a net loss from operations
of $353,094 in the like period for 2004. Net loss for the period was $490,004
compared with net income for the like period in 2003 of $72,761. Management
considers this unacceptable and is taking the steps necessary to reverse this
trend.
DESCRIPTION OF CAUSES FOR DECLINE IN BUSINESS:
---------------------------------------------
The decline in our results of operations from the period March 31, 2003 are
attributable to the following:
1. Increases in fuel costs.
2. Increases in freight costs.
3. Loss of customers.
4. Lengthened time periods for customer payments.
5. Price pressures from larger, better capitalized competitors.
6. Salary and office expense increases.
PLAN OF OPERATION
The Company's primary operations are centered in the J&B Wholesale Produce, Inc.
wholly-owned subsidiary. J&B is a regional provider of produce to restaurants in
Miami-Dade, Broward, Palm Beach, Martin and Monroe counties in southeast
Florida. Management expects 2004 gross sales in the J&B unit of $14 million.
Management feels that liquidity, cash available for operations, and business
conditions generally are favorable to the continued operations, and expansion,
of the Company's J&B Wholesale Produce Operations. The material positive changes
in the financial condition of the Company, from fiscal 2002,
are attributable to the acquisition of and operations of J&B Wholesale Produce.
The management of J&B continues to pursue more higher yielding produce
customers, which should improve long-term liquidity. In addition, management has
set minimum daily order amounts, and sought to limit the number of smaller,
unprofitable or less profitable accounts which it services, to further expand
the business and maximize profit while limiting the cost per delivery of the
Company. Management continues to streamline the day-to-day operations of J&B,
and has upgraded the computers of the Company.
9
Management has taken steps to streamline the customer order process, to reduce
errors and to prevent theft and employee pilfering. Substantial improvements to
the product delivery line have greatly increased efficiency, reduced errors and
missed deliveries, and reduced product spoilage.
Three additional refrigerated trucks have been leased and added to the
Company's fleet in order to service new customers.
The Company has released all under-performing salespersons and is constantly
seeking and hiring new sales professionals, particularly in the fast-growing
northern and western suburbs of the service area. All employees have been placed
on a time clock and salaried employees have been changed over to hourly. The
Company no longer pays any employees in cash.
The Company is subject to market conditions in the fresh produce industry taken
as a whole. Fresh produce is subject to tremendous variations in quality and
consistency, as well as availability, and is the most highly perishable
agricultural commodity. On a daily basis, company employees have to visually
inspect hundreds of different products for size, shape, consistency, and visual
defects. The public is increasingly concerned with the use of pesticides,
herbicides, and genetically engineered foodstuffs. While cosmetically imperfect
produce is acceptable to enter the processed foods stream, it is not acceptable
to the fresh produce stream, and especially to the restaurants served by the
company. The Company's buyers have to make daily decisions on where to source
each item based on quality, availability, price and location. These factors can
change daily for each type of produce. Weather conditions or other factors can
effect the price of a major volume product, such as lettuce, potatoes, onions,
or tomatoes and have a significant impact on the company for the period. The
successful acquisition of produce at a competitive price and of the highest
quality will insure the continued success, and growth, of the company.
The Company operates primarily in Miami-Dade, Broward and Palm Beach counties in
southeast Florida. Many of the restaurants and other foodservice establishments
which the company serves are seasonal in nature. While few of these
establishments actually close during the summer months, many have a reduced
order volume in the range of up to 40%. The company is attempting to limit the
impact of the seasonal nature of the vacation industry in the region by
concentrating on restaurants in areas where year-round residents live,
particularly in the western suburbs of Miami, Fort Lauderdale and West Palm
Beach. Seasonal volume changes are much less pronounced in these "bedroom
communities". The entire tourism industry in Southeast Florida is dependant upon
favorable travel conditions for continued success. Terrorism, or a decline in
economic conditions, have a negative impact on tourism and could lead to reduced
sales both for the company and the restaurants it serves.
The Company has entered into a factoring arrangement with it's lender, American
Millennium Investment Corporation. Commencing on October 6, 2003, the company
has received a line of credit against pledged receivables in the total amount of
$1,100,000. As of March 31, 2004 the company had drawn down $ 905,000. under
the factoring agreement. Gelpid Associates LLC, the company's principal lender,
agreed to subordinate it's first perfected lien position on the company's
receivables in order to make the factoring arrangement possible. Gelpid
Associates LLC and American Millennium Investment Corporation are related
entities.
10
Management believes that the factoring arrangement will allow the Company to
expand at a faster rate, and more broadly, than would have been possible without
factoring. The factoring arrangement has allowed the company to compete for
larger, national chain restaurant accounts which frequently require terms as
long as sixty days for payment. Also, the company can pursue large accounts such
as cruise lines and tourist facilities which would otherwise be out of the reach
of the company.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2004, the Company had a stockholder's deficiency of $1,170,037.
As of March 31, 2004 the Company incurred a loss of $512,504. Almost all of the
company's revenues for the quarter ended March 31, 2004 is attributable to the
continued operations of the wholesale produce segment, specifically the result
of operations of the J&B Wholesale Produce, Inc. subsidiary. The Company plans
to generate revenue in the future by retaining business consulting clients in
the private and public sector for its Business consulting segment. In addition,
the Company plans to seek the acquisition of additional income producing assets
such as J&B Wholesale Produce, Inc. and to continue to grow that subsidiary
company.
Management feels that liquidity, cash available for operations, and business
conditions generally are favorable to the continued operations, and expansion,
of the company's J&B Wholesale Produce Operations. The material positive changes
in the financial condition of the company, from the like period in fiscal 2003,
and from the fourth fiscal quarter of 2003 to the first fiscal quarter of 2004,
are attributable to the acquisition of and operations of J&B Wholesale Produce.
The management of J&B continues to pursue more higher yielding produce
customers, which should improve long-term liquidity. In addition, management has
set minimum daily order amounts, and sought to limit the number of smaller,
unprofitable or less profitable accounts which it services, to further expand
the business and maximize profit while limiting the cost per delivery of the
company. Management continues to streamline the day-to-day operations of J&B,
has moved most back-office activities away from the produce warehouse facility,
and has upgraded the computers of the company.
The company is subject to market conditions in the fresh produce industry taken
as a whole. Fresh produce is subject to tremendous variations in quality and
consistency, as well as availability, and is the most highly perishable
agricultural commodity. On a daily basis, company employees have to visually
inspect hundreds of different products for size, shape, consistency, and visual
defects. The public is increasingly concerned with the use of pesticides,
herbicides, and genetically engineered foodstuffs. While cosmetically imperfect
produce is acceptable to enter the processed foods stream, it is not acceptable
to the fresh produce stream, and especially to the restaurants served by the
11
company. The company's buyers have to make daily decisions on where to source
each item based on quality, availability, price and location. These factors can
change daily for each type of produce. Weather conditions or other factors can
effect the price of a major volume product, such as lettuce, potatoes, onions,
or tomatoes and have a significant impact on the company for the period. The
successful acquisition of produce at a competitive price and of the highest
quality will insure the continued success, and growth, of the company.
The company operates primarily in Miami-Dade, Broward and Palm Beach counties in
southeast Florida. Many of the restaurants and other foodservice establishments
which the company serves are seasonal in nature. While few of these
establishments actually close during the summer months, many have a reduced
order volume in the range of up to 40%. The company is attempting to limit the
impact of the seasonal nature of the vacation industry in the region by
concentrating on restaurants in areas where year-round residents live,
particularly in the western suburbs of Miami, Fort Lauderdale and West Palm
Beach. Seasonal volume changes are much less pronounced in these "bedroom
communities". The entire tourism industry in Southeast Florida is dependant upon
favorable travel conditions for continued success. Terrorism, or a decline in
economic conditions, have a negative impact on tourism and could lead to reduced
sales both for the company and the restaurants it serves.
The company has entered into a factoring arrangement with it's lender, American
Millennium Investment Corporation. Commencing on October 6, 2003, the company
has received a line of credit against pledged receivables in the total amount of
$1,100,000. As of March 31, 2004 the company had drawn down $ 905,000. Under the
factoring agreement. Gelpid Associates LLC, the company's principal lender,
agreed to subordinate it's first perfected lien position on the company's
receivables in order to make the factoring arrangement possible. Gelpid
Associates LLC and American Millennium Investment Corporation are related
entities.
Management believes that the factoring arrangement will allow the company to
expand at a faster rate, and more broadly, than would have been possible without
factoring. The factoring arrangement has allowed the company to compete for
larger, national chain restaurant accounts which frequently require terms as
long as sixty days for payment. Also, the company can pursue large accounts such
as cruise lines and tourist facilities which would otherwise be out of the reach
of the company.
FINANCIAL DISCLOSURE AND CONTROLS
Management feels that the company has adequate disclosure controls and
procedures in place to insure the accurate and timely reporting of the financial
condition of the company to it's auditors, and to the public. Specifically,
regular, routine meetings are held between and among management, it's attorney,
and it's accountants to resolve financial issues and insure the timely, accurate
reporting of the financial condition of the company.
Paul F. Lovito, Jr., our Chief Executive Officer, and Matthew Lovito, our Chief
Financial Officer, performed an evaluation of the Company's disclosure controls
12
and procedures as of March 31, 2004. Based on their evaluation, they
concluded that the controls and procedures in place are sufficient to assure
that material information concerning the Company which could affect the
disclosures in the Company's quarterly and annual reports is made known to them
by the other officers and employees of the Company, and that communications
occur with promptness sufficient to assure the inclusion of the information in
the then-current report.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect those controls subsequent to the
date on which Mr. Paul Lovito and Mr. Matthew Lovito made their evaluation.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
The company included a full report of all litigation pending in it's annual
report for the period ending December 31, 2003. That report is incorporated
herein and made a part hereof by reference. Everything contained within this
quarterly report is subject to the information contained within that annual
report. In the opinion of management there are no outstanding litigation issues
which threaten the viability of the company as an ongoing concern. There is no
litigation against the company or any of it's subsidiaries which management
considers of a material nature to the company.
From time to time, the Company is involved as plaintiff or defendant in various
legal proceedings arising in the normal course of its business. While the
ultimate outcome of these various legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these legal
actions should not have a material effect on the Company's financial position,
results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-------------------------------------------------
On June 27, 2002 the Company issued fifteen (15) shares of Preferred Stock,
Class A, to Mr. Christian T. Chiari in exchange for certain financial consulting
services provided to the Company by Mr. Chiari, including the acquisition by Mr.
Chiari of funding from Gelpid Associates, LLC in order that the Company could
close on it's acquisition of J&B Wholesale Produce, Inc. The acquisition of J&B
Wholesale Produce, Inc., and a description of the transaction between the
Company and Gelpid Associates LLC is contained within the 8-K filing of the
Company which is incorporated herein and made a part hereof by reference.
The Preferred Stock, Class A, had an annual dividend of $12,000 per share,
payable in equal quarterly installments beginning with the date of issue. The
Preferred Stock, Class A was convertible, in whole, but not in part, into so
many shares of the Common Stock of the Company as equals one half of one percent
(0.5%) of the total number of shares of issued and outstanding Common Stock of
the Company on the date of conversion. However, no shares of Preferred Stock,
Class A, were convertible into more than 375,000 Common shares.
13
On August 1, 2003, the company, in agreement with the holder thereof, altered
the terms of payment on the Class A Preferred Stock. Each share of Class A
Preferred Stock, par value $0.01 features an annual dividend of $6000.00 per
share, payable in equal monthly installments beginning August 1, 2003; said
dividend ($7500.00 per month in total) to increase by a total of $2500.00 per
month beginning in the first full calendar month after the company reaches $15
million per annum in gross revenues, and thereafter by a total of $2500.00 per
month for each $1 million in additional gross revenues, up to a maximum of $17
million in gross revenues, and each share of the Class A Preferred stock is
convertible into shares of the Common Capital stock of the Corporation using the
following ratio:
Each Class A Preferred share shall be convertible, in whole, but not in part, to
so many shares of the common capital stock of the Corporation as equals three
quarters of one percent (0.75%) of the total number of issued and outstanding
common capital shares of the company as exist on the date of conversion.
Provided, however, that no Class A Preferred shares is convertible into more
than 562,500 common capital shares. Upon conversion, the common capital stock
issued for the conversion shall enjoy all of the rights, including voting
rights, and dividends, as all of the common capital stock of the Corporation.
On July 15, 2003 the company entered into a loan extension agreement with it's
lender, Gelpid Associates LLC. Under the express terms of the 2002 loan to the
company in the amount of $2,825,000, the company was obligated to make a minimum
payment to reduce the principal balance of the loan of $250,000 by July 1, 2003.
Under the express terms of the loan extension agreement, the lender waived the
requirement of payment of the unpaid sums due for principal reduction under the
2002 loan until July 2, 2004.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
Not Applicable
ITEM 5. OTHER INFORMATION
Paul Lovito, our Chief Executive Officer, and Matthew Lovito, our Chief
Financial Officer, performed an evaluation of the Company's disclosure controls
and procedures within 90 days prior to the filing date of this report based on
their evaluation, they concluded that the controls and procedures in place are
sufficient to assure that material information concerning the Company which
could affect the disclosures in the Company's quarterly and annual reports is
made known to them by the other officers and employees of the Company, and that
the communications occur with promptness sufficient to assure the inclusion of
the information in the then current report.
14
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect those controls subsequent to the
date on which they performed their evaluation.
ITEM 6. EXHIBITS
--------------------------
(a) EXHIBITS.
The following exhibits are filed herewith.
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
(a) Financial Data Schedule
--------------------
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
RAPTOR INVESTMENTS, INC.
DATED: June 4, 2004
BY: /S/ PAUL LOVITO
------------------
PAUL LOVITO,
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
BY: /S/ MATTEW LOVITO
-------------------
MATTHEW LOVITO,
TREASURER AND CHIEF FINANCIAL OFFICER
(PRINCIPAL ACCOUNTING OFFICER)
15