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 SEPTEMBER 30, 2003 .
[ ] 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)
954-695-0195
-----------------------------------------------
(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 SEPTEMBER 30, 2003.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES X NO
--- ---
RAPTOR INVESTMENTS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
RAPTOR INVESTMENTS, INC.
AND SUBSIDIARIES
CONTENTS
PAGE 1 CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30,
2003 (UNAUDITED)
PAGE 2 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
PAGE 3 - 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (UNAUDITED)
PAGES 5 - 9 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2003
(UNAUDITED)
ASSETS
Current assets
Cash $ 60,681
Investments, net 10,200
Accounts receivable, net 1,085,841
Inventories 242,017
Due from stockholder 16,470
Other current assets 2,600
-----------
Total Current Assets 1,417,809
-----------
PROPERTY AND EQUIPMENT - NET 2,135,875
-----------
OTHER assets
Other receivables 65,091
Deposits 8,525
Goodwill 1,111,077
-----------
Total Other Assets 1,184,693
-----------
TOTAL ASSETS $ 4,738,377
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Cash overdraft $ 192,124
Accounts payable and accrued expenses 935,407
Line of credit 250,000
Loans payable - related parties 100,000
Capital lease - current 119,326
-----------
Total Current Liabilities 1,596,857
-----------
LONG-TERM LIABILITIES
Capital lease - non-current 552,558
Line of credit 2,548,000
Note payable 800,000
-----------
Total Long-Term Liabilities 3,900,558
-----------
TOTAL LIABILITIES 5,497,415
-----------
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 9,690,020
Note receivable - stockholder (1,580,404)
Treasury stock (49,107)
Other comprehensive loss (11,585)
Accumulated deficit (9,118,141)
Stock subscription receivable (178,700)
-----------
Total Stockholders' Deficiency (759,038)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 4,738,377
===========
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 For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------
REVENUE $ 2,859,264 $ 2,559,998 $ 8,431,224 $ 2,589,998
COST OF GOODS SOLD 2,258,166 1,985,599 6,523,657 1,985,599
------------ ------------ ------------ ------------
GROSS PROFIT 601,098 574,399 1,907,567 604,399
------------ ------------ ------------ ------------
OPERATING EXPENSES
Stock compensation -- -- 167,150 290,000
Selling expenses 239,073 154,360 629,676 154,360
Settlement of vendor payables -- -- (622,918) --
Other general and administrative 559,123 384,780 1,587,504 763,109
------------ ------------ ------------ ------------
Total Operating Expenses 798,196 539,140 1,761,412 1,207,469
------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS (197,098) 35,259 146,155 (603,070)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income 188 50,312 576 151,347
Interest expense (109,900) (60,944) (301,800) (69,344)
------------ ------------ ------------ ------------
Total Other Income (Expense) (109,712) (10,632) (301,224) 82,003
------------ ------------ ------------
NET INCOME (LOSS) BEFORE INCOME TAXES (306,810) 24,627 (155,069) (521,067)
------------ ------------ ------------ ------------
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (306,810) $ 24,627 $ (155,069) $ (521,067)
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE
Net income (loss) $ (306,810) $ 24,627 $ (155,069) $ (521,067)
Preferred stock dividends (30,000) -- (120,000) (45,000)
------------ ------------ ------------ ------------
NET INCOME (LOSS) AVAILABLE
TO COMMON SHAREHOLDERS $ (336,810) $ 24,627 $ (275,069) $ (566,067)
============ ============ ============ ============
Net income (loss) per common
share - basic and diluted $ (0.01) $ -- $ (0.01) $ (0.01)
============ ============ ============ ============
Weighted average number of
common shares outstanding
- basic and diluted 48,887,681 48,887,681 48,887,681 46,803,432
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
2
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the For the
Nine Months Nine Months
Ended Ended
September 30, September 30,
2003 2002
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (155,069) $ (521,067)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Allowance for doubtful accounts 45,145 --
Stock issued for services 167,150 290,000
Depreciation 105,931 12,229
Non-cash gain on settlement of vendor payables (622,918) --
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (179,860) (716,044)
Inventories (103,428) (203,976)
Royalty receivable -- 8,356
Accrued interest receivable -- (108,066)
Stock subscription receivable
Other assets (53,715) 3,870
Deposits (6,000) (18,995)
Increase (decrease) in:
Cash overdraft 164,796 --
Accounts payable 161,533 283,999
----------- -----------
Net Cash Used In Operating Activities (476,435) (969,694)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (13,900) --
Proceeds from contract receivable -- 121,609
Proceeds from note receivable - stockholder -- 14,500
Payments on loan receivable -- (7,700)
Proceeds on due from shareholder -- 17,870
Purchases of property and equipment (398,269) (388,765)
Restricted cash 355,635 --
Building purchase option -- (500,000)
Goodwill -- (1,195,044)
----------- -----------
Net Cash Used In Investing Activities (56,534) (1,937,530)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised -- 150,000
(Payments) proceeds on line of credit (27,000) 2,825,000
Proceeds from loan payable - related party -- (9,400)
Payments on loan payable - related party (50,125) --
Proceeds from note receivable - stockholder -- --
Payments on capital lease (118,602) (150,136)
Proceeds from notes payable 800,000 90,000
Dividend payment on preferred stock (20,000) --
Proceeds from subscription receivable -- 6,500
----------- -----------
Net Cash Provided By Financing Activities 584,273 2,911,964
----------- -----------
NET INCREASE IN CASH 51,304 4,740
Cash - beginning of PERIOD 9,377 105.135
----------- -----------
Cash - end of PERIOD $ 60,681 $ 109,875
=========== ===========
SUPPLEMENTAL DISCLOSURE OF-CASH FLOW INFORMATION:
Cash paid for interest expense $ 301,800 $ 109,900
=========== ===========
See accompanying notes to condensed consolidated financial statements.
4
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company acquired $217,770 of property and equipment under capital leases
during the period ended September 30, 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
September 30, 2003.
5
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
(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, 2002 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., (from July 2, 2002, date of
acquisition) (collectively, the "Company"). All intercompany accounts and
transactions have been eliminated in consolidation.
NOTE 2 FACTORING AGREEMENT
On September 30, 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 September 30, 2003, the
Company has not factored any accounts receivable.
6
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
(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 September
30, 2003. Accordingly, unrealized gains and losses are included in
stockholders' equity.
The composition of marketable equity securities as of September 30, 2003
is as follows:
Basis Unrealized Fair Value
Gain or (Loss)
---------- -------------- -------------
Available-for-sale
securities
Common stock $ 21,785 $ (11,585) $ 10,200
========== ============== =============
NOTE 5 LINE OF CREDIT
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. As of
September 30, 2003, the company has not made any of the required minimum
payments and has recorded $250,000 as the current liability under the
loan extension agreement.
NOTE 6 NOTE PAYABLE
During 2003, the Company issued a 10% note payable of $800,000 due March
8, 2008 with interest only payments due monthly. The note is secured by
the assets of J&B Produce and 105 NW 13 Avenue Holding Corporation as of
September 30, 2003, the outstanding note payable balance is $800,000.
7
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
(UNAUDITED)
NOTE 7 STOCK ISSUANCES
(A) Common Stock Warrants
During 2003, the Company issued 1,500,000 common stock warrants at an
exercise price of $.05 to consultants for services. Using the
Black-Scholes model, the warrants were valued at $167,150 using the
following assumptions: no annual dividend, volatility of 315%, risk-free
interest rate of return of 3.0% and a term of one year.
(B) Preferred Stock and Preferred Stock Dividends
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
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.
NOTE 8 COMMITMENTS AND CONTINGENCIES
(A) Lawsuits
As of September 30, 2003, the Company and its insurance company have come
to an agreement to settle all unresolved legal fees related to the prior
operations and management of the Company. During 2003, management
recorded a gain on the settlement of vendor payables and accrued legal
fees of $622,918.
(B) Stock Repurchase
The Company entered into an agreement to repurchase certain outstanding
shares of common stock from two former officers and directors at a tender
price of $0.20 per share. The tender price offer is guaranteed by the
Company's President and Chief Financial Officer. The total shares owned
by the former officers and directors is approximately 1,691,000. As of
the date of this report, the Company is in default of the agreement. The
former officers and directors have withheld insurance proceeds of $66,533
until the Company and the former officers and directors can reach an
agreement.
NOTE 9 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 September 30:
8
RAPTOR INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
(UNAUDITED)
2003 Produce Other Total
------------- ----------- ------------
Revenues $ 8,431,224 $ - $ 8,431,224
Segment profit (loss) (394,782) 239,713 (155,069)
Total assets 4,569,745 168,632 4,738,377
Additions to long-lived assets 383,269 15,000 398,269
Depreciation and amortization 103,791 2,140 105,931
2002
Revenues $ 2,539,998 $ 50,000 $ 2,589,998
Segment loss (139,971) (381,096) (521,067)
Total assets 2,416,560 2,882,745 5,299,305
Additions to long-lived assets 388,765 - 388,765
Depreciation and amortization 10,789 1,440 12,229
NOTE 10 GOING CONCERN
As shown in the accompanying condensed consolidated financial statements,
the Company incurred a negative cash flow from operations of $ (476,435),
has an accumulated deficit of $ (9,118,141) and a stockholders'
deficiency of $ (759,038). These factors raise substantial doubt about
the Company's ability to continue as a going concern.
Management's plan for the Company in regards to these matters is to
continue to grow the produce operations of the business through the 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 costs using
inventory controls. The Company is also actively seeking to refinance its
long-term line of credit on terms more favorable to the Company.
Management believes that the actions presently taken to reduce operating
costs and obtain refinancing provide for the Company to operate as a
going concern.
9
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.
PLAN OF OPERATION
-----------------
The Company closed on the Acquisition of J&B Wholesale Produce, Inc. on July 2,
2002 and the Acquisition was reported on Form 8-K, which form is incorporated
herein and made a part hereof by reference.
The Company completed the acquisition of LBI E Web Communities, Inc. LBI E Web
is an Internet related holding company that currently owns the following five
domain names: FinanceItOnTheWeb.com (a financial services directory site),
Brassbulls.com (a public relations and financial information site),
MyEnumber.com (an online address book and one stop Rolodex), Homewaiter.com (a
food delivery and information site), and Mimesaro.com (a Spanish food delivery
and information site). The Brassbulls.com website was completed in April 2002
and is fully operational. LBI E Web plans to create a network of self-developed
websites covering a diverse universe of subjects.
The Company continues to pursue business consulting contracts from publicly
traded and privately held companies. The Company plans to provide consultation
in various areas including: mergers and acquisitions; venture capital; public
relations; restructuring and financing. The Company plans to market its services
to publicly traded and privately held companies through referrals and
advertising in various business publications.
10
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2003, the Company had a stockholder's deficiency of
$759,038. As of September 30, 2003 the Company incurred gross profit of
$1,907,567. Almost all of the company's revenues and all of its gross profit for
the quarter ended September 30, 2003 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.
During the three and six months ended September 30, 2003, net sales totaled
$2,859,264 and $8,431,224 respectively. Gross profit margin for the three and
six month periods ended September 30, 2003 were 22.6% and 21.01%,
respectively. Selling expense for the three and six month periods ended
September 30, 2003 were $239,073 and $629,676, respectively. Management
feels that comparisons to previous years figures are irrelevant because the
Company had significantly different business activities following the
acquisition of the wholesale produce segment of the 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 2002,
and from the second fiscal quarter of 2003 to the third fiscal quarter of 2003,
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.
Management has taken steps to streamline the customer order process, to reduce
errors and to prevent theft and employee pilfering. The company can now identify
the employees who are responsible for, and had access to, each shipment.
Substantial improvements to the product delivery line, combined with new
computers and automated systems, have greatly increased efficiency, reduced
errors and missed deliveries, and reduced product loss.
Particularly, the company has entered into a contract to replace all of the
computers and software which controls inventory, ordering, distribution,
invoicing, accounts receivable, and accounts payable. The new systems will be
installed and tested and will be fully operational by the close of the fiscal
year on December 31, 2003. Three additional refrigerated trucks have been leased
and added to the company's fleet in order to service new customers and
streamline routing.
11
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
$1,000,000. As of October 8, 2003 the company had drawn down $800,000. 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.
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.
12
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, 2002. 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.
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.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
Not Applicable
ITEM 5. OTHER INFORMATION
The Company completed the acquisition of J&B Wholesale Produce, Inc. ("J&B") on
July 1, 2002. J&B is engaged in the wholesale produce business in Florida.
In order to effectuate the purchase, Raptor and J & B borrowed $2,825,000. from
Gelpid Associates LLC ("Gelpid") a Florida Limited Liability Company. A
promissory note ("Note") in the amount of $2,825,000. was executed. The Note has
a term of three years, and bears interest at the rate of LIBOR plus ten percent,
adjusted monthly. The minimum monthly payment due under the Note is accrued
interest only. There is no prepayment penalty under the Note.
The Note is secured by the machinery, equipment, furniture, fixtures, inventory,
accounts receivable, work in progress, , motor vehicles, computer hardware and
computer software of J & B. UCC-1 Financing Statements have been filed by Gelpid
and Gelpid has taken possession of the titles to all of the motor vehicles owned
by J&B as per the Terms of the Loan Agreement between Raptor and Gelpid.
Contemporaneously with the execution of the Note, Raptor and J & B entered into
a loan agreement with Gelpid which permits Gelpid to either appoint one member
to the Board of Directors of Raptor and J & B, or at the election of Gelpid to
appoint an observer to be present at the meetings of the Board of Directors of
Raptor and J & B. Upon the request of Gelpid, Mr. Don A. Paradiso of Pompano
Beach, Florida was appointed to the Board.
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.
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: October 31, 2003
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)
14