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| FRHV.OB > SEC Filings for FRHV.OB > Form 10-Q on 21-Sep-2009 | All Recent SEC Filings |
21-Sep-2009
Quarterly Report
Overview
We are a development stage company and have generated only nominal revenues from our organic food business operations since inception on November 26, 2003 through July 31, 2009 $768,974, and accumulated net losses of ($4,265,245) since inception. For the quarter ending July 31, 2009, we had net losses of $126,523. We only began having revenues from operations during the quarter ending July 31, 2006. To date, we have been dependent upon equity and debt financing. Since our inception through July 31, 2009, 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 July 31, 2009 for gross proceeds of $123,969 to 11 investors; from convertible loans totaling $356,210 from 15 individuals; and one private loan of $7,500. In addition, since inception, Arthur Friedman, the father of the Company's President and CEO, has made advances to Fresh Harvest totaling $859,598, a portion of which ($250,000) was converted into 5,000,000 shares of common stock in February 14, 2008. Illuminate, Inc., a principal shareholder, has made advances of $13,000 to Fresh Harvest. In the quarter which ended April 30, 2008, $432,000 due to Illuminati, Inc., pursuant to a 2005 merger agreement, was converted into 13,060,190 common shares of the Company's common stock. During the quarter ending April 30, 2008, three convertible Note Holders converted debt into 903,697 shares of common stock.
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 were 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 focus on finding
quality organic and natural food and beverage products throughout the world.
Our products include: coffee from South America, USA and Africa and Fresh
Harvest Health Bars that have no refined sugar added, are cholesterol free,
trans fat free, low in sodium and gluten free. Our goal is to bring healthy,
great tasting organic food and beverage products at affordable prices to the
mass markets. We market and distribute a line of Fresh Harvest Health Bars and
are now selling the product lines to select retailers and markets in the United
States.
To date, our primary efforts have been devoted to developing, marketing, and selling our line of organic food products and raising capital. Accordingly, we have limited capital resources and have experienced net losses and negative cash flows from operations since inception and expect these conditions to continue for the foreseeable future. As of July 31, 2009, the Company had current assets of $122,479 that includes cash $41, net accounts receivable of $5,069 and inventory of $117,369. Management believes that the liquid cash and other liquid assets on hand as of July 31, 2009 are not sufficient to fund operations for the next 12 months. Accordingly, we will be required to raise additional funds to meet our short and long-term planned goals. There can be no assurance that such funds, if available at all, can be obtained on terms reasonable to us. In this regard, we have obtained and will continue to attempt to obtain (short and long term) loans for inventory purchases, new product development, expansion, advertising and marketing as well as seeking to enter into factoring arrangements using our receivables to finance our operations. In addition, we will attempt to raise funds through the sale of equity. We cannot assure you that we will be successful in obtaining the aforementioned financings (either debt or equity) on terms acceptable to us, or otherwise.
In the audited financial statements contained in our Annual Report on Form 10KSB for the year ended October 31, 2008, our auditors had included in their report 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.
Recent Events in the Third Quarter
On June 18, 2009 we entered an asset purchase agreement ("Purchase Agreement") with and purchased the assets of Organic Chef, LLC of Brooklyn, NY ("Organic Chef"). In connection with this acquisition, on the same date, the Company entered into: (1) a Brokerage Agreement and (2) a Consulting Agreement. with an entity (Haichel Esther) controlled by the principal of Organic Chef (Barry Moskowitz); Organic Chef was a distributor of organic food and beverages including its own line of TeAloe™ organic beverages as well as some of the Company's own Wings of Nature™ Esther is a company located in Brooklyn, NY in the food and beverage business.
Our consideration for the acquisition and the brokerage and consulting agreements was our common stock only. The consultant can also earn sales commissions and, if a minimum capital infusion is received, a weekly consulting fee.
See our Current Report on Form 8-K filed on June 24, 2009.
Plan of Operation for the Next Twelve Months
Since we have been unable to raise sufficient capital over the past three years, 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 remains virtually the same since July 31, 2009 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 $500,000 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 $500,000 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 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.
Sales and Distribution through our customer base will consist principally of Natural Food Distributors, Mass-Market Retailers, and Supermarkets. Our products are sold through a Specialty Food Distributor
·
Commence and establish marketing, advertising and promotion programs to increase
brand equity and awareness through the targeting of specific consumer groups
through targeted retail outlets utilizing specialty food distributors.
Estimated cost: $150,000.
·
Salaries, including for present employees and possible new hiring of additional
management personnel and appropriate operating and sales staff. Estimated cost:
$100,000.
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 October 31, 2010. 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 July 31, 2009, of approximately $122,479 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 July 31, 2009 and July 31, 2008.
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 can provide no assurance that we will ever be profitable in our operations.
For the three months ended July 31, 2009, we recorded revenues of $19,108 versus revenues of $57,363 in the same period of 2008. The decrease in revenues is attributed to the Company decreasing its direct store delivery sales and a decrease in orders from its distributors, which we believe is due to economic factors.
Gross profit, defined as revenues less cost of goods sold, was $5,554 for the three months ended July 31, 2009, compared to $24,122 for the three months ended July 31, 2008. This decrease in gross profits is attributed to the fact that there was a decrease in revenue.
Cost of goods sold was $13,555 for the three months ended July 31, 2009 compared to $33,241 for the three months ended July 31, 2008. The difference can be attributed to the decrease in products sold.
We incurred operating expenses in the amount of $129,224 for the three months ended July 31, 2009, and $429,436 for the three months ended July 31, 2008. The decrease in operating expenses is a direct result of decreasing operating and selling costs.
Our net loss decreased from $408,184 for three months ended July 31, 2008 to $126,523 for the three months ended July 31, 2009. The decrease was primarily a result of a decrease in operating expenses.
Since inception, we have not been able to finance our business from cash flows from operations and have been reliant upon loans and proceeds from the sale of equity which may not be available to us in the future, or if available, on reasonable terms. Accordingly, if we are unable to obtain funding from loans and the sale of our equity, it is unlikely that we will be able to continue as a going concern.
At July 31, 2009, we had current assets of $122,479 including cash in the amount of $41, inventory of $117,369 and accounts receivable of $5,069. We had net fixed assets of $38,464.
Results of Operations for Nine Months Ending July 31, 2009 and July 31, 2008.
Financial Information from Comparative Quarters
For the Nine months ended July 31, 2009, we recorded revenues of $67,267 versus revenues of $193,191 in the same period of 2008. The decrease in revenues is attributed to the Company decreasing its direct store delivery sales, a decrease in orders from its distributors, and which we believe is due to economic factors.
Gross profit, defined as revenues less cost of goods sold, was $18,419for the nine months ended July 31, 2009, compared to $45,900 for the six months ended July 31, 2008. This decrease in gross profits is attributed to the fact that there was a decrease in revenues.
Cost of goods sold was $48,848 for the nine months ended July 31, 2009 compared to $147,291 for the three months ended July 31, 2008. The difference can be attributed to the decrease in products sold.
We incurred operating expenses in the amount of $582,013 for the nine months
ended July 31, 2009, and $1,135,367 for the nine months ended July 31, 2008.
The decrease in operating expenses is a result of decreases in operating costs
and selling expenses.
Our net loss decreased from $1,098,077 for nine months ended July 31, 2008 to $571,636 for the nine months ended July 31, 2009. The decrease was primarily a result of a decrease in expenses.
Financial Condition and Liquidity
Since inception, we have not been able to finance our business from cash flows from operations and have been reliant upon loans and proceeds from the sale of equity which may not be available to us in the future, or if available, on reasonable terms. Accordingly, if we are unable to obtain funding from loans and the sale of our equity, it is unlikely that we will be able to continue as a going concern.
At July 31, 2009, we had current assets of $122,479 including cash in the amount of $41, inventory of $117,369 and accounts receivable of $5,069. We had net fixed assets of $38,464.
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
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 operating costs. The impact on sales volume and operating results due to the timing and extent of these factors can significantly impact our business. For these reasons, you should not rely on our quarterly operating results as indications of future performance.
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, 2008. 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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