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| FRHV.OB > SEC Filings for FRHV.OB > Form 10QSB on 16-Jun-2008 | All Recent SEC Filings |
16-Jun-2008
Quarterly Report
This section of the Report includes a number of forward-looking statements that
reflect our current views with respect to future events and financial
performance. Forward-looking statements are often identified by words like:
believe, expect, estimate, anticipate, intend, project and similar expressions,
or words which, by their nature, refer to future events. You should not place
undue certainty on these forward-looking statements, which apply only as of the
date of this Report. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or our predictions.
Overview
We are an early stage company and have generated only nominal revenues from our organic food business operations since inception on November 26, 2003 through April 30, 2008 ($587,896). We only began having revenues from operations during the quarter ending July 31, 2006. Our net loss from inception until April 30, 2008 is $3,019,573 and to date, we have been dependent upon equity and debt financing. Since our inception through April 30, 2008, we have been funded through capital contributions of $68,803 from Michael Jordan Friedman, our President and Chief Executive Officer, from the sale of common stock between November 2005 through April 30, 2008 for gross proceeds of $123,969 to 11 investors, from convertible loans totaling $388,000 from 15 individuals, and one private loan of $7,500. $95,000 of those convertible loans was issued during the quarter ended April 30, 2007. In addition, Arthur Friedman, the father of the Company's President and CEO, has made advances to Fresh Harvest and after conversion of a portion of his debt to equity, through the period ending April 20, 2008 his advances are $525,211. Illuminate, Inc., a principal shareholder, has made advances of $13,000 to Fresh Harvest. Such advances do not have written terms and are not convertible nor is the previously mentioned $7,500 private loan. In the quarter ending April 30, 2008, $432,000 due to Illuminati, Inc. per the Merger Agreement was converted in equity of the Company. Arthur Friedman converted $250,000 of his debt into equity of the Company and three convertible Note Holders converted debt to equity, thus decreasing the Company's debt by $318,925. Thus, for the quarter ending April 30, 2008 the Company decreased its total debt to Noteholders by $750,925.
We were formed in New Jersey as a blank check company on April 21, 2005, under the name Serino 1, Corp. with no operations, assets or purpose other than the purpose of seeking a privately held operating company as an acquisition or merger candidate. On December 16, 2005, we acquired Fresh Harvest Products, Inc., a New York corporation, a development stage company in the organic food business, and absorbed its operations into our business. As a result of the acquisition, we are no longer a blank check company, and the controlling shareholders of the acquired company became the controlling shareholders of our company. The acquisition was considered a reverse acquisition for accounting and financial reporting purposes. The unaudited consolidated financial statements that are a part of this quarterly report include the accounts of our company since the acquisition (December 16, 2005) and the historical accounts of Fresh Harvest Products, Inc. the New York corporation since the date of its inception, November 26, 2003. All significant intercompany balances and transfers have been eliminated in consolidation.
After the acquisition, our business plan has been to market and distribute (both domestic and imported) a line of organic food products. We intend our focus to be on the finding quality organic and artisan food products throughout the world. We plan that our Fresh Harvest branded organic food products will be produced by artisan farms, co-ops and families who have historically grown organic products. We initially plan to offer products that include: olive oils from Italy and Spain; coffee from South America, USA and Africa and Fresh Harvest Health Bars that have no sugar added, are cholesterol free, trans fat free, low in sodium and gluten free. Our goal is to bring healthy, great tasting organic food products at affordable prices to the mass markets. All packaging has been previously designed and approved. We also plan to market and distribute a line of Fresh Harvest Health Bars once that product can be produced. We are now selling the product line to select supermarkets chains in the eastern part of the United States. We have one trade name (Wings of Nature™).
Our unaudited financial statements contained in this quarterly report have been prepared on a going concern basis, which assumes that we will be able to realize our assets and discharge our obligations in the normal course of business. Our financial statements indicate that we incurred net losses for the period from inception of November 26, 2003 to April 30, 2008 of $3,019,574.
In the audited financial statements contained in our Annual Report on Form 10KSB for the year ended October 31, 2007, our auditors had provided an explanatory note that indicated that we are an early stage company and our ability to continue as a going concern is dependent on raising additional capital to fund future operations and ultimately to attain profitable operations. We believe that nothing has happened in our business operation since then that would change our auditor's opinion about this.
During the next 12 months, we have no material commitments for capital including but not limited to the purchase or sale of a plant or significant equipment. In addition, we do not expect to incur research and development costs within the next 12 months or have any significant changes in the number of our employees.
Plan of Operation for the Next Twelve Months
Our plan of operation for the twelve months following the date of this quarterly report is to continue to develop and expand our business operations to have sustainable cash flow. This plan has remained virtually the same since April 30, 2007 because to date we have not had sufficient capital to implement it. We will continue to be delayed in initiating our business plan if and until we have at least an additional approximate $1,000,000 of capital. If we are not successful in raising this capital, we will have to reassess our plan or our chances of being profitable. The plan of operation over the next 12 months may include, but not exclusively, activities such as:
·
Capitalization, including obtaining financing through equity and/or debt financing. Currently, we do not have sufficient financial resources to implement or complete our business plan. We anticipate that we will need a minimum of an additional approximate $1,000,000 to satisfy our cash requirements over the next 12 months. We cannot be assured that revenue from operations, if any, will be sufficient to fund our activities during the next 12 months. Accordingly, we will have to seek alternates sources of capital-including private placements, a future public offering, and/or loans from officers and/or third party lenders. We are not experienced in selling equity. We can offer no assurance that we will be able to raise additional funds if needed, on acceptable terms to us or otherwise. If we are unsuccessful in our attempts to raise sufficient capital, we may have to cease operations or postpone our plans to initiate or complete our business plan. In that case, you may lose your entire investment in our company.
·
Establishing and/or solidifying relationships with manufacturers, packagers and suppliers, including growers of organic foods such as artisan farms, co-ops and farming families in America and throughout the world. Estimated cost: $255,000 (which includes the production of sample products).
·
Establishing a distribution network for our products including supermarkets,
independent grocers, food brokers and snack distributors. Estimated cost:
$95,000.
·
Conducting a search for new manufacturers and packaging companies.
Commence and establish marketing, advertising and promotion programs to increase brand equity and awareness. Estimated cost: $400,000.
·
Salaries, including for present employees and possible new hiring of additional
management personnel and appropriate operating and sales staff. Estimated cost:
$250,000.
These are only estimates and no assurance can be given regarding either statement as to timing or actual eventuality. If we can raise more than the minimum amounts indicated above, we anticipate spending increased amounts on establishing and expanding our distribution network, marketing, advertising and promotions.
We commenced operations and first had revenues from operations during our third quarter ended July 31, 2006. It is our plan that our business operations will generate sufficient revenues to sustain our operations and cash flow by July 1, 2009. We have been purchasing a minimum number of products (coffee, health and coffee and salsa), and anticipates sales that will provide revenues for operations. The revenue generated from these sales will be used to make additional product purchases and minimally fund our operations.
We estimate that our cash and other current assets as of April 30, 2008, of approximately $189,518 will only be sufficient to meet our short term needs for approximately four months. If we are unable to raise the required financing, we will be delayed in commencing our business plan. Currently, because we are considered a new business with limited credit history with vendors, suppliers, manufacturers, packagers and food producers, we must pay for our purchases "up front" and are not granted credit terms. This will continue until we have established a satisfactory credit history. We cannot estimate, with any certainty, how long this may take, or if it will occur at all. Our inability to obtain credit from such providers has a significant impact upon our liquidity and our ability to utilize funds for other purposes. Similarly, if and when we hire salesmen and /or additional personnel, including management and sales personnel, the cost related to such hirings will have a significant impact on our liquidity and deployment of funds.
Results of Operations for Three Months Ending April 30, 2008 and April 30, 2007.
Financial Information from Comparative Quarters
We first began to have revenues during the quarter ending July 31, 2006. Prior to that we did not have revenues and only had losses. We are presently in the early stages of our business. In that regard, we can provide no assurance that we will ever be profitable in our operations.
For the three months ended April 30, 2008, we recorded revenues of $67,638 versus revenues of $63,946 in the same period of 2007. The increase in revenues is attributed to the increase in distribution through our distributors and an increase in our marketing expenses.
Gross profit, defined as revenues less cost of goods sold, was $12,949 for the three months ended April 30, 2008, compared to $16,364 for the three months ended April 30, 2007. The difference is attributed to the fact there we increased our advertising, marketing and promotion programs.
Cost of goods sold was $54,689 for the three months ended April 30, 2008 compared to $47,582 for the three months ended April 30, 2007. The difference can be attributed to the increase in products sold and a cost increase in one of our products and thus an increase in the cost of goods sold.
We incurred operating expenses in the amount of $223,325 for the three months ended April 30, 2008, and $158,843 for the three months ended April 30, 2007.
Our net loss increased from $142,479 for three months ended April 30, 2007 to $223,325 for the three months ended April 30, 2008. The increase was primarily a result of an increase in marketing, sales and salary expenses.
Financial Information from Comparative Six Month Periods
For the six months ended April 30, 2008, we recorded revenues of $135,828 versus revenues of $88,948 in the same period of 2007. The increase in revenues is attributed to the increase in distribution.
Gross profit, defined as revenues less cost of goods sold, was $21,778 for the six months ended April 30, 2008, compared to $7,014 for the six months ended April 30, 2007. The difference is attributed to the fact that there we increased our advertising, marketing and promotion programs.
Cost of goods sold was $114,050 for the six months ended April 30, 2008 compared to $81,934 for the six months ended April 30, 2007. The increase is attributed to an increase in products sold and a cost increase in one of our products and thus an increase in the cost of goods sold.
We incurred operating expenses in the amount of $711,671 for the six months ended April 30, 2008, and $367,616 for the six months ended April 30, 2007.
Our net loss increased from $689,983 for six months ended April 30, 2008 to $360,682 for the six months ended April 30, 2007. The increase was primarily a result of an increase in marketing, sales and salary expenses.
Financial Condition and Liquidity
At April 30, 2008, we had current assets of $189,518 including cash in the amount of $4,349, inventory of $142,607 and accounts receivable of $42,562. We had net fixed assets of $42,105.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.
Critical Accounting Policies
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The accounting principles we use require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and amounts of income and expenses during the reporting periods presented. We believe in the quality and reasonableness of our critical accounting policies; however, it is likely that materially different amounts would be reported under different conditions or using assumptions different from those that we have consistently applied. The accounting policies that have been identified as critical to our business operations and understanding the results of our operations pertain to revenue recognition and sales incentives, valuation of accounts and chargebacks receivable, inventories and plant and equipment.
Seasonality
While our snack food product lines are stronger in the warmer months, our coffee product line primarily markets hot coffee products and, as a result, its quarterly results of operations reflect seasonal trends resulting from increased demand for its hot coffee products in the cooler months of the year. In years where there are warm winter seasons, our sales of cooler weather products, which typically increase in our second and third fiscal quarters, may be negatively impacted.
Quarterly fluctuations in our sales volume and operating results are due to a number of factors relating to our business, including the timing of trade promotions, advertising and consumer promotions and other factors, such as seasonality, inclement weather and unanticipated increases in labor, commodity, energy, insurance or other
Inflation
We do not believe that inflation had a significant impact on our results of operations for the periods presented.
Note Regarding Forward Looking Information
Certain statements contained in this Quarterly Report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1934 and Sections 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the Company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following: general economic and business conditions; our ability to implement our business and acquisition strategy; the ability to effectively integrate our acquisitions; competition; availability of key personnel; changes in, or the failure to comply with government regulations; and other risks detailed from time-to-time in the Company's reports filed with the Securities and Exchange Commission, including the report on Form 10-K, and any amendments thereto, for the fiscal year ended October 31, 2007. As a result of the foregoing and other factors, no assurance can be given as to future results, levels of activity and achievements and neither the Company nor any person assumes responsibility for the accuracy and completeness of these statements.
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