In the Merger Agreement, the Company granted to Purchaser an irrevocable option (the “Top-Up Option”) to purchase at the Offer Price a number of authorized but unissued shares of Company Common Stock that would constitute at least one share more than 90% of the shares of Company Common Stock then outstanding (the “Top Up Shares”). In no event will the Top-Up Option be exercisable for a
number of shares in excess of the number of authorized but unissued shares of Company Common Stock as of immediately prior to the issuance of the Top-Up Shares. The Top-Up Option will terminate upon the earlier of: (x) the fifth business day after the later of (1) the expiration date of the Offer and (2) the expiration of any “subsequent offering period”; and (y) the termination of the Merger Agreement in accordance with its terms.
Upon successful completion of the Offer, and subject to the terms and conditions of the Merger Agreement, Purchaser will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Pulmuone (the “Merger”). At the effective time of the Merger, each issued and outstanding share of Company Common Stock, other than shares held in the treasury of the Company or owned
by Pulmuone, Purchaser or any of their subsidiaries, and shares of Company Common Stock held by stockholders who properly demand appraisal rights, will be converted into the right to receive the Offer Price.
The Merger Agreement contains representations, warranties and covenants customary for a transaction of this nature.
The Merger Agreement permits the Company to solicit alternative acquisition proposals from third parties until November 7, 2009 (the “Go-Shop Period Termination Date”). In addition, the Company may at any time respond to unsolicited proposals. There can be no assurance that this process will result in an alternative transaction. The Company does not intend to disclose developments with respect to
the solicitation process unless and until the Board has made a decision to accept an alternative acquisition proposal, if any, it has received.
The Merger Agreement also includes customary termination provisions for the Company and Pulmuone and provides that, in connection with the termination of the Merger Agreement under specified circumstances, the Company will be required to pay Pulmuone a termination fee of $2.17 million (inclusive of expenses incurred by Pulmuone and Purchaser), except that the termination fee will be $1.28 million (inclusive of
expenses incurred by Parent and Purchaser) in the event the Merger Agreement is terminated by the Company in order to except a superior proposal from a party with whom the Company has had ongoing discussions or negotiations prior to the Go-Shop Period Termination Date and has been identified in writing to Pulmuone.
On October 8, 2009, pursuant to Section 2.5 of the Merger Agreement, the Board approved and adopted an amendment (the “ESPP Amendment”) to the Monterey Gourmet Foods, Inc. 1995 Employee Stock Purchase Plan (the “ESPP”). Pursuant to the ESPP Amendment, no new offering periods under the ESPP will commence following October 8, 2009.
On October 8, 2009, prior to the execution of the Merger Agreement, the Board approved a First Amendment to the Shareholder Protection Rights Agreement (the “Rights Agreement Amendment”). The Rights Agreement Amendment, among other things, renders the Rights Agreement inapplicable to the Merger Agreement and the transactions contemplated thereby (including without limitation the Offer and the
Merger). The Rights Agreement Amendment also provides that the Rights Agreement will terminate at the effective time of the Merger.
The foregoing descriptions of the Merger Agreement, the ESPP Amendment, and the Rights Agreement Amendment are qualified in their entirety by reference to the Company’s Report on Form 8-K filed with the SEC on October 9, 2009, by the full texts of those documents attached as exhibits thereto, and by information in confidential disclosure schedules provided by the Company to Pulmuone and Purchaser in
connection with the signing of the Merger Agreement. These disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement.
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
General
The following discussion should be read in conjunction with the financial statements and related notes and other information included in this report. The financial results reported herein do not indicate the financial results that may be achieved by us in any future period.
Other than the historical facts contained herein, this Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, particularly statements relating to our expectations relating to, among other things, our results of operations, future plans and growth strategies. Our actual results regarding such matters may vary materially as a result of
certain risks and uncertainties. For a discussion of such risks and uncertainties, please see our Annual Report on Form 10-K for the year ended December 31, 2008.
13
Background
We were incorporated in June 1989 as a producer and wholesaler of refrigerated gourmet pasta and sauces to restaurants and grocery stores in the Monterey, California area. We have since expanded our operations to provide a variety of gourmet refrigerated food products to grocery and club stores throughout the United States, selected regions in Canada, the Caribbean, Latin America and Asia Pacific. Our overall
strategic plan is to enhance the value of our brands by distributing our gourmet products through multiple channels of distribution.
Our product distribution to grocery and club stores increased from approximately 25 stores as of December 1989, to over 11,000 stores by September 30, 2009. During recent years we added retail and club distribution through internal growth and through Isabella’s Kitchen, Emerald Valley Kitchen, CIBO Naturals, and Sonoma Cheese acquisitions. In 2004, our stockholders approved the change of the name of the
Company to Monterey Gourmet Foods, Inc. The name change was made to more accurately define our strategic direction. The name change also announces to the investor community, our customers and consumers, our strategic direction to become a complete supplier of gourmet refrigerated foods.
Since 2004, we have launched many new product lines outside its core pasta/sauce business, including gourmet refrigerated entrees, fresh tamales, dips, spreads, and frozen One-Step meal entrees. We have also been able to increase distribution by introducing whole wheat, organic, and made with organic pastas which are higher in dietary fiber, have a favorable glycemic index, and are made with whole grains and
organic items.
In January 2004, we acquired CIBO Naturals, a maker of sauces, dips and spreads. In January 2005 we acquired Casual Gourmet Foods, Inc. and we recently announced that we have shuttered this operation due to lack of sales and lack of profits. Sonoma Foods, Inc. acquired in April 2005, markets a line of refrigerated specialty cheese products that features its flagship line of traditional and flavored Sonoma Jack
cheeses which have earned numerous awards over the years. We believe that the convenient gourmet food segment is growing rapidly as time-starved consumers seek high quality quick-meal solutions and that we, with our staff of culinary personnel, our food consultants, and our flexible manufacturing facilities, are well positioned to bring new products to these consumers.
In 2006, we focused on expanding distribution of our current products, consolidating production facilities in Salinas, improving the quality of our current products, hiring experts in product development and creativity to better utilize our production equipment, improving the synergies between our different brands, and reorganizing our brands into one operating unit. Also in September 2006, the Board of the
Company appointed Eric Eddings as President and Chief Executive Officer of the Company.
In 2007, we focused on strategic growth, improving the synergies that are possible with one sales force for all brands, one marketing department, one finance department, one information systems department, one manager in charge of all our production facilities, and one unified goal to improve our profitability. We focused on brand building with an emphasis on natural and/or organic products by expanding our
product offerings of organic or made with organic ingredients as these products are being well received in the market place.
In 2008, we addressed the capacity and efficiency constraints of our fragmented former Seattle, Washington facility by securing a ten year lease on a new facility in Kent, Washington, approximately 20 miles from the former location. We spent approximately $4.5 million preparing this new facility and moving equipment into it before occupying it in December 2008. The improvements added capacity to our sauce
production and made other important changes in our production processes. In addition, we saw increases in the prices of many of our raw ingredients such as cheese, eggs, corn, flour, oil, pine nuts, and dairy products, and in our transportation costs, but we were not able to increase our prices sufficiently to offset these increased costs during the year.
Also during 2008, we launched new items across all product lines, with the main focus on organic and made with organic products. Our goal is to gain incremental distribution points as soon as possible using promotional and sampling programs as vehicles. We also focused on Sonoma Foods and Casual Gourmet Foods because these two brands have become significantly less profitable during the last two years. In March
2008, we reviewed the low margins and decreasing revenues being generated from the Sonoma Cheese products and determined, among other things, to buy out the minority interest and the employment contracts of the minority stockholders.
In 2009, we finished shuttering the Further Processed Protein Segment as it had declining sales and has not been able to generate a profit for several years. For the nine months ended September 30, 2009, we recorded an income before tax loss of $42,000 to dispose of the remaining inventory and other expenses attributed to its closure. During 2009, we have focused on cost reduction initiatives including
reducing employee counts, reducing costs, and discontinuing unprofitable products. We have also reacted to the current economic downturn by freezing salaries and wages, eliminating our 401k matching contribution and taking other cost cutting initiatives.
14
Also during 2009, we have focused on selling products under other labels besides the brands that we currently own. For example, during the third quarter of 2009, we began selling to Sam’s Club two pasta items which are being sold under the Sam’s Club Members Mark label. In addition, we began selling pasta products to Target Supercenters for the first time in the Company’s history.
The success of our efforts to increase revenue will depend on several key factors: (1) whether grocery and club store chains will continue to increase the number of their stores offering our products, (2) whether we can continue to increase the number of grocery and club store chains offering our products, (3) whether we can continue to introduce new products that meet consumer acceptance, (4) whether we, by
diversifying into other complementary businesses through new product offerings or acquisitions can leverage our strengths and continue to grow revenues at levels attractive to our investors, (5) whether our acquisitions perform as we planned, (6) whether we can maintain and increase the number of items we are selling to our two largest customers, and (7) whether we can successfully deter new competitors from entering the U.S. retail market from international sources. Grocery and club
store chains continually re-evaluate the products carried in their stores, and no assurances can be given that the chains currently offering our product will continue to do so in the future.
We believe that access to capital resources and increasing sales to offset higher fixed overhead, coupled with continued reduction of our administrative and production costs as a percent of sales revenue, will be key requirements in our efforts to enhance our competitive position and increase our market share. In order to support our expansion program, we continue to develop new products for consumers and
revise advertising and promotional activities for our retail grocery and club store accounts. There can be no assurance that we will be able to increase our net revenues from grocery and club stores. Because we will continue to make expenditures associated with the expansion of our business, our results of operations may be affected.
Our overall objective is to be the nationally recognized leader in distinctively-flavored, premium-quality gourmet foods. The key elements of our strategy include the following targeted goals:
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|
|
|
|
|
·
|
Expand market share through same-store revenue growth, addition of new grocery and club stores, geographic diversification, and product line expansion, including creation of additional meal solutions using Monterey Gourmet Foods products.
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|
|
|
|
|
|
·
|
Introduce new products on a timely basis to maintain customer interest and to respond to changing consumer tastes. In order to maximize our margins, we will design new products that can be manufactured and distributed out of our Salinas, California or Kent, Washington facilities or through co-packer arrangement where we can introduce new products quickly to meet customer requests.
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|
|
|
|
|
·
|
Ensure that we have the proper and sufficient staff to accomplish our goals in a timely manner including enhancing our marketing department.
|
|
|
|
|
|
|
·
|
Reduce operating costs as a percentage of sales through continual evaluation of administrative and production staffing and procedures and consolidation of back office functions. We will consider additional capital improvements in order to increase production efficiencies and capacities, and to reduce our cost of goods on a per unit basis.
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|
|
|
|
|
|
·
|
Except for the Sonoma Cheese Products, operate as one reporting unit with a centralized sales force, marketing department, finance department and operational management.
|
|
|
|
|
|
|
·
|
Create brand awareness by communicating to the consumer that we provide flavorful and nutritious lines of products, and promote repeat business by reinforcing positive experiences.
|
|
|
|
|
|
|
·
|
Utilize the existing distribution, customer service and selling capabilities we have for the products of new acquisitions in order to grow sales and maximize the results of all brands.
|
We will continue to direct our advertising and promotional activities to specific programs customized to suit our retail grocery and club store accounts as well as to reach target consumers. These will include in-store demonstrations, coupon programs, temporary price reduction promotions, and other related activities. There can be no assurance that we will be able to increase our net revenues from grocery and
club stores.
15
Results of Operations
Net revenues from operations were as follows (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
September 30, 2008
|
|
September 30, 2009
|
|
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues
|
|
$
|
20,399
|
|
$
|
21,678
|
|
$
|
60,654
|
|
$
|
67,277
|
|
|
Percent Change in Net Revenues from prior period
|
|
|
-6
|
%
|
|
-5
|
%
|
|
-10
|
%
|
|
-3
|
%
|
These results and comparisons are for continuing operations only. The quarterly decrease in third quarter 2009 revenues compared with third quarter 2008 revenues is due to a 72% decline in tamale revenues as a result of additional competition, together with a 9% decline in sales to our largest customer, and a 19% reduction in our revenues to our retail customers. These reductions in revenues are offset by a
32% increase from our co-branded and private label brands and a 30% increase in revenues to our second largest customer. We are also experiencing increases in our foodservice revenues.
The decrease in the nine months of 2009 revenues compared with the nine months of 2008 revenues is due to a 49% decline in tamale revenues as a result of additional competition, together with a 15% decline in sales to our second largest customer.
Gross profit and gross margin percent were as follows (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
September 30, 2008
|
|
September 30, 2009
|
|
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
5,161
|
|
$
|
5,506
|
|
$
|
16,050
|
|
$
|
17,356
|
|
|
Gross margin percent
|
|
|
25.3
|
%
|
|
25.4
|
%
|
|
26.5
|
%
|
|
25.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin percent for the year ended December 31, 2008 was 24.9%. The gross margin percent for the third quarter of 2009 decreased compared to the third quarter of 2008 due to a 6% reduction in net revenues and $228,000 of expenses associated with the closure of the Eugene, Oregon facility which is captured in our cost of goods sold and impacts our gross margin percent. Other costs associated with the
Eugene, Oregon facility are captured elsewhere in the Statement of Operations. The costs were incurred mostly in September 2009 and we have had insufficient time to recover these costs through production in our Kent, Washington facility. Adding back these costs, our gross margin percent for the third quarter 2009 would have been 26.4%.
The gross margin percent for the nine months of 2009 increased compared to the nine months of 2008.This increase in gross margin percent is due to lower raw material costs and the cost reduction initiatives we have taken. The reduced costs are partially offset by lower revenues which reduced the facility overhead absorption rate.
Selling, general and administrative expenses, or SG&A, were as follows (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
September 30, 2008
|
|
September 30, 2009
|
|
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A Expense
|
|
$
|
5,077
|
|
$
|
5,852
|
|
$
|
14,999
|
|
$
|
17,859
|
|
|
SG&A Expense as a percent of net revenues
|
|
|
24.9
|
%
|
|
27.0
|
%
|
|
24.7
|
%
|
|
26.5
|
%
|
For the calendar year ended December 31, 2008, SG&A expenses were 27.6% of net revenues. SG&A as a percent of net revenues for the three months ended September 30, 2009 was 24.9% which is down from 27.0% for the three months ended September 30, 2008. The decrease compared to the third quarter of 2008 is related to decreased costs from our initiatives to reduce costs and lower freight costs. SG&A
expense in dollars was reduced by 13% or $775,000. The main components of the SG&A decrease are reductions in costs of freight ($260,000) and salaries and benefits ($272,000). We also spent $149,000 researching, developing, printing and introducing new presentation labels for our retail product line. During the three months ended September 30, 2009, we incurred $499,000 in legal fees, mostly associated with the merger transaction described in Footnote 11. SG&A as a percent of
net revenues, excluding the legal fees, would have been 22.4% for the three months ended September 30, 2009.
16
SG&A as a percent of net revenues for the nine months ended September 30, 2009 was 24.7%. The decrease compared to the first nine months of 2008 is related to decreased costs from our initiatives to reduce costs and lower freight costs. SG&A expense in dollars was reduced by 16% or $2.9 million. The main components of the SG&A decrease are reductions in costs of freight ($1,224,000); salaries and
benefits ($1,561,000); and travel costs ($135,000). During the nine months ended September 30, 2009, we incurred $787,000 in legal and related costs, mostly associated with the merger transaction described in Footnote 11, which increased our SG&A costs.
Freight to customers is included in SG&A costs. Our freight costs for the three months and nine months ended September 30, 2009 were $907,000 and $2,492,000, respectively. Our freight costs for the three months and nine months ended September 30, 2008 were $1,167,000 and $3,716,000, respectively.
Depreciation and amortization expense, included in cost of sales and SG&A, was $2,334,000, or 3.8% of net revenues for the nine months ended September 30, 2009, compared to $2,245,000, or 3.3% of net revenues for the nine months ended September 30, 2008. The increase in depreciation expense in 2009 is associated with additional equipment and leasehold improvements associated with the new production
facility in Kent, Washington and other capital expenditures during 2009.
Gain or loss on disposition of fixed assets represents the write-off of $118,000 of leasehold improvements associated with the closure of the Eugene, Oregon facility offset by the cash sale of other fixed assets. The net of the two transactions equates to a net loss of the disposition of assets of $97,000.
Net interest income was $1,000 for the third quarter ended September 30, 2009, compared to net interest income of $15,000 for the same quarter in 2008. For the nine months ended September 30, 2009, net interest income was $3,000 compared to net interest income of $63,000 for the same period in 2008. The reduced income is a result of the lower interest rate being paid on the Company’s excess
cash.
Income taxes for the third quarter of 2009 reflect a tax expense of $0, which reflects a 0% tax rate compared with income tax expense of $0 or approximately 0% of pretax income for the same period in 2008. Income taxes for the first nine months of 2009 reflect an income tax expense of $41,000, which reflects a 4% tax rate compared with an income tax expense of $3,000 for the same period in 2008. We determine
our quarterly tax provision based on the expected annual effective tax rate by tax filing entities and jurisdictions. Overall we are projecting a profit for 2009, and because we have an NOL carryover, we will only pay Alternative Minimum Taxes for federal tax purposes and certain state taxes
We continue to have a valuation allowance of 100% of our deferred tax assets at September 30, 2009. The full valuation allowance was established during the fourth quarter of 2008 as a result of the reassessment of the realizability of deferred tax assets.
Segment Results:
We operate in two segments: Gourmet Foods Products and Sonoma Cheese Products.
Gourmet Foods Products Results:
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|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
September 30, 2008
|
|
September 30, 2009
|
|
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gourmet Foods Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues
|
|
$
|
18,861
|
|
$
|
20,095
|
|
$
|
56,262
|
|
$
|
62,690
|
|
|
Gross Profit
|
|
$
|
4,804
|
|
$
|
5,337
|
|
$
|
15,030
|
|
$
|
17,354
|
|
|
Operating Profit
|
|
$
|
(81
|
)
|
$
|
(115
|
)
|
$
|
755
|
|
$
|
795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit percentage
|
|
|
25.5
|
%
|
|
26.6
|
%
|
|
26.7
|
%
|
|
27.7
|
%
|
|
SGA percentage
|
|
|
25.9
|
%
|
|
27.1
|
%
|
|
25.4
|
%
|
|
26.4
|
%
|
17
Highlights for the three months ended September 30, 2009:
|
|
|
|
|
|
·
|
Our tamale sales declined 72% or $802,000 less than the revenues for the same quarter last year. This is due to increased competition for our sales of this item to Costco Wholesale.
|
|
|
·
|
Our pasta sales declined 4%, due in part to slower sales to our largest customer.
|
|
|
·
|
Our second largest customer switched from a branded product to a private labeled product. Even though this switch occurred during the third quarter of 2009, revenues to this customer were up 30% compared to the same quarter of 2008.
|
|
|
·
|
The gross margin percent of 25.5% for the three months ended September 30, 2009 decreased compared to 26.6% for the three months ended September 30, 2008 due mainly to lower production volume through our facilities, especially our facility where our refrigerated pasta and our tamales are produced and to the costs of $228,000 associated with closing the Eugene, Oregon facility.
|
|
|
·
|
SG&A as a percent of net revenues for the three months ended September 30, 2009 was 25.9% compared to 27.1% for the three months ended September 30, 2008. The decrease in SG&A as a percent of net revenues for 2009 compared to 2008 is due to lower salaries and operating costs associated with our cost reduction initiatives, offset by legal fees associated with the merger transaction described in Footnote 11.We also spent $149,000 researching,
developing, printing and introducing new presentation labels for our retail product line.
|
|
|
|
|
|
Highlights for the nine months ended September 30, 2009:
|
|
|
|
|
|
|
·
|
Our tamale sales declined 49% or $1,735,000 less than revenues reported for the same nine months of 2008. This is due to increased competition for our sales of this item to Costco
|
|
|
·
|
Our pasta sales declined 11% partially due to our second largest customer switching from a branded product to a private labeled product. Our sales are down as this customer transitions its product line up.
|
|
|
·
|
The gross margin percent of 26.7% for the nine months ended September 30, 2009 decreased compared to 27.7% for the same nine months of 2008 due mainly to lower net revenues and its impact on our overhead absorption.
|
|
|
·
|
SG&A as a percent of net revenues for the nine months ended September 30, 2009 was 25.4% compared to 26.4% for the nine months ended September 30, 2008. The decrease in SG&A as a percent of net revenues for 2009 compared to 2008 is due to lower salaries and operating costs associated with our cost reduction initiatives offset by a decline in net revenues.
|
Sonoma Cheese Products results:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
September 30, 2008
|
|
September 30, 2009
|
|
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sonoma Cheese Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
1,538
|
|
$
|
1,583
|
|
$
|
4,392
|
|
$
|
4,587
|
|
|
Gross profit
|
|
$
|
357
|
|
$
|
169
|
|
$
|
1,020
|
|
$
|
2
|
|
|
Impairment
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(1,606
|
)
|
|
Operating profit (loss)
|
|
$
|
58
|
|
$
|
(231
|
)
|
$
|
199
|
|
$
|
(2,912
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit percentage
|
|
|
23.2
|
%
|
|
10.7
|
%
|
|
23.2
|
%
|
|
0.1
|
%
|
|
SGA percentage
|
|
|
19.4
|
%
|
|
25.2
|
%
|
|
18.7
|
%
|
|
28.5
|
%
|
Highlights for the three months ended September 30, 2009:
|
|
|
|
|
|
·
|
Packaged cheese products revenues declined $45,000 when comparing the three months ended September 30, 2009 with the three months ended September 30, 2008. This is the first quarter for this year in which revenues are similar to those for the prior year. We have increased our distribution and our promotions are improving our sales.
|
|
|
·
|
The gross margin percent increased to 23.2% for the quarter ended September 30, 2009, as compared to 10.7% for the three months ended September 30, 2008, which reflects lower cheese and milk prices.
|
|
|
·
|
SG&A as a percent of net revenues for the quarter ended September 30, 2009 was 19.4% compared to 25.2% for the same period ended September 30, 2008. The decrease in SG&A for 2009 compared to 2008 reflects the absence of any unusual charges during the quarter.
|
18
|
|
|
|
|
Highlights for the nine months ended September 30, 2009:
|
|
|
|
|
|
|
·
|
Packaged cheese products revenues declined 4% when comparing the nine months ended September 30, 2009 with the nine months ended September 30, 2008. The decline is attributable to consumers purchasing lower priced items as opposed to specialty cheeses in the first part of the year.
|
|
|
·
|
The gross margin percent of 23.2% for the nine months ended September 30, 2009 increased significantly compared to 0.1% for the nine months ended September 30, 2008, and reflects lower cheese and milk prices. In addition, in March 2008, we set up inventory reserves for items from processed cheeses and lower margin items which we discontinued.
|
|
|
·
|
SG&A as a percent of net revenues for the nine months ended September 30, 2009 was 18.7% compared to 28.5% for the same period ended September 30, 2008. The decrease in SG&A for 2009 compared to 2008 is due to the fact that in 2008 we experienced higher selling expenses, higher freight costs, higher legal fees, and an accrual for severance payments.
|
Also, in the first quarter of 2008, we saw a significant reduction in sales in the Sonoma Cheese Products Segment. Due to the reduced sales in March 2008 and the accelerating losses from this segment, we determined that a triggering event under SFAS 142 occurred and therefore tested for the impairment of goodwill and other intangible assets during the first quarter of 2008. As a result of the impairment test,
we recorded a pre-tax, non-cash charge of $1.1 million in the first quarter of 2008 related to the impairment of intangible assets associated with the Sonoma Foods, Inc. acquisition on April 7, 2005.
In addition, on April 18, 2008, the Company, Sonoma Foods, Inc., and the stockholders of Sonoma Foods, Inc. entered into an amendment to the Purchase Agreement dated April 7, 2005, pursuant to which we acquired all of the outstanding shares of Sonoma. Pursuant to the amendment, our purchase of the remaining 20% of Sonoma Foods, Inc.’s outstanding shares not already owned by us was accelerated and the
purchase price was set at $50,000, plus a potential earn-out based upon an agreed formula. At the same time, the Company and the stockholders terminated existing employment agreements with the stockholders and entered into severance arrangements which provide for payments and benefits substantially equivalent to those provided by the former employment agreements. From the purchase of minority interest, we recorded a gain of $109,000 in the three months ended September 30, 2008. The gain
was reported in other income in our statement of operations.
Liquidity and Capital Resources
During the nine months ended September 30, 2009, we provided $2,470,000 of cash from operations compared to $3,701,000 in cash provided by operations for the nine months ended September 30, 2008. As illustrated in the following table, adjusting for working capital which was impacted by the timing of cash payments and cash receipts, we provided $3,554,000 cash from operating activities compared to $1,776,000 of
cash for the same nine months in 2008, a 100% increase.
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
September 30, 2008
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
958
|
|
$
|
(2,228
|
)
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,334
|
|
|
2,245
|
|
|
Impairment and restructuring
|
|
|
—
|
|
|
1,606
|
|
|
Stock-based compensation
|
|
|
262
|
|
|
262
|
|
|
Gain on acquisition of minority interest
|
|
|
—
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
Sub-Total
|
|
|
3,554
|
|
|
1,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments related to changes in working capital and other
|
|
|
(1,084
|
)
|
|
1,925
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
2,470
|
|
$
|
3,701
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense accounted for $262,000 of non-cash expense for the nine months ended September 30, 2009 compared to $262,000 for the nine months ended September 30, 2008. Capital expenditures were $859,000 in the nine months ended September 30, 2009. Capital spending in 2009 has been limited to projects deemed necessary to run or improve the business until we can grow our revenue sufficiently
to justify additional spending to support growth.
During the nine months of 2009, we issued 23,611 shares under our Employee Stock Purchase Plan and received cash of $15,000. No other shares were issued during nine months of 2009.
19
During the nine months of 2008, the Company issued 14,366 shares under its Employee Stock Purchase Plan and received cash of $26,000. Additionally, 20,000 shares of common stock were issued during the same period as part of employee stock option exercises with proceeds to the Company of $24,000.
As of September 30, 2009 we had $3.8 million of cash recorded on our balance sheet. Cash is held in our checking account or in short-term money market accounts with no withdrawal restrictions. Cash accounts are FDIC insured up to the FDIC insurance limits. In addition, we had $11.6 million of working capital as of September 30, 2009. We finance our operations and growth primarily with cash flows generated from
operations. We have a $5.0 million working capital line of credit which is currently unused. The working capital line of credit commitment expires June 30, 2010. In addition, we have a letter of credit in the amount of $400,000 which is issued in favor of an insurance company to support the outstanding liabilities of a self-funded worker’s compensation program. The letter of credit expires January 2, 2010.
We believe that our existing credit facilities, existing cash, and cash flow from operations, are sufficient to meet our cash needs for normal operations including all anticipated capital expenditures for the next twelve months.
Contractual Obligations
We have no raw material contracts exceeding one year in duration. We lease production, warehouse and corporate office space as well as certain equipment under both month-to-month and non-cancelable operating lease agreements. All building leases have renewal options and all include cost of living adjustments. The following table summarizes our estimated annual contractual obligations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period
|
|
|
|
|
|
|
|
Contractual obligations
(in thousands)
|
|
Total
|
|
Less than 1
year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than 5
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
$
|
10,450
|
|
$
|
1,718
|
|
$
|
3,465
|
|
$
|
2,544
|
|
$
|
2,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,450
|
|
$
|
1,718
|
|
$
|
3,465
|
|
$
|
2,544
|
|
$
|
2,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have a standby letter of credit in favor of an insurance company for $400,000 for workers’ compensation insurance which expires on January 2, 2010. We also purchase custom made finished products ready for sale from certain suppliers (“co-packers”). From time to time, these co-packers acquire raw materials that are specific to the products being manufactured for us. We have oral agreements
with these co-packers that if we cease selling these products, we will purchase the residual inventory from the co-packers.
Stock Repurchase Program
We commenced a public repurchase program of our common stock in December 2007 and suspended the program on June 26, 2008. For the program to date we have purchased 624,871 shares for $1,789,000 with an average purchase price of $2.86. The program was terminated by the Board on October 8, 2009, in connection with its approval of the merger transaction described in Footnote 11.
Critical Accounting Policies and Management Judgments
Accounts Receivable and Allowances
We provide allowances for estimated credit losses, product returns, spoilage, and adjustments at a level deemed appropriate to adequately provide for known and inherent risks related to such amounts. The allowances are based on reviews of the history of losses, returns, spoilage, and contractual relationships with customers, current economic conditions, and other factors which warrant consideration in
estimating potential losses. While we use the best information available in making our determination, the ultimate recovery of recorded accounts, notes, and other receivables is also dependent on future economic and other conditions that may be beyond our control.
20
Income Taxes
Our accounting for corporate income taxes requires an asset and liability approach. This approach results in the recognition of deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary timing differences between the book carrying amounts and the tax basis of assets and liabilities. Future tax benefits are subject to a valuation allowance to
the extent of the likelihood that the deferred tax assets may not be realized. Our deferred tax assets include significant amounts of net operating losses (“NOLs”). In 2008 we assessed our valuation allowance based on our evaluation of the sources of future taxable income and the likelihood of realization of such deferred tax assets and set up a full valuation allowance for all deferred tax assets.
For business combinations, we must record deferred taxes and liabilities relating to the book versus tax basis differences of acquired assets and liabilities. Generally, such business combinations result in deferred tax liabilities as the book values are reflected at fair value whereas the tax basis is carried over from the acquired company. Such deferred taxes initially are estimated based on
preliminary information and are subject to change as valuations and tax returns are finalized.
Inventory Valuation
Inventories are stated at the lower of cost (using the first-in, first-out method) or market and consist principally of component ingredients to our refrigerated pasta and sauces, finished goods, and packaging materials. Many of the ingredients used in our products have a short shelf life and if not used in a certain amount of time may spoil. We estimate that the raw material will be used in a
timely manner; however, we have established certain reserves for the potential of inventory obsolescence, especially for slow moving inventory. As of September 30, 2009, we reduced the carrying value of our inventory by $382,000. This write-down was made to cover certain refrigerated raw material inventory that is nearing its shelf-life, certain packaging labels for products that may be rotated out of the club stores accounts, products that have already been rotated out of the club
store accounts that may or may not be rotated back into the club store accounts, and products that have been discontinued especially certain items associated with Sonoma Cheese. The allowance is established based on our estimate of alternative usage or salvage value of obsolete inventory. We believe our estimates for spoiled and obsolete inventory is adequate given the current volume of business to our customers.
Revenue Recognition
We recognize revenues through sales of our products primarily to grocery and club store chains. Revenues are recognized once there is evidence of an arrangement (such as a customer purchase order), product has been shipped or delivered to the customer depending on the customer’s sales order and invoice documentation, the price and terms are fixed, and collectability is reasonably assured.
Accordingly, sales are recorded when goods are shipped or delivered, at which time title and risk of loss have passed to the customer, consistent with the freight terms for most customers Potential returns, adjustments and spoilage allowances are recorded as a reduction in revenues and are provided for in accounts receivable allowances and accruals. We also use co-packers to process some of our purchase orders. We record the revenues from these sales on a gross basis as we have
inventory risk and are the primary obligors. We record our shipping cost for products delivered to our customers in selling, general, and administrative expense. Any amounts charged to customers for freight and deliveries are included in revenues. Certain incentives granted to customers such as promotions, trade ads, slotting fees, terms discounts, and coupons are recorded as offsets to revenues.
Workers Compensation Reserve
Our California and former Oregon locations entered into a self-insured worker’s compensation program with a stop loss provision for fiscal year 2003 and continued the program through December 31, 2007. This program was suspended for 2008 and we insured ourselves with a guaranteed fixed cost insurance program. Starting January 1, 2009, we returned to this self-insured worker’s
compensation program. This program features a fixed annual payment, with a deductible on a per occurrence basis with a stop loss provision if a claim exceeds $350,000. The annual expense consists of a base fee paid to an insurance company to administer the program, direct cash expenses to pay for injuries, an estimate for potential injuries that may have occurred but have not been reported, an estimate by the insurance company of costs to close out each injury and an estimate for injury
development. We have been on this self-insured program for just a few years and therefore we have limited history of claim resolution available to support our projected liabilities. Therefore we are using published industry actuarial data from an insurance carrier and reviewing each claim individually to determine the amount of reserves that should be established.
21
Valuation of Goodwill/Indefinite-lived Intangible Assets
Goodwill and intangible assets with indefinite useful lives are to be tested for impairment at least annually and we tested these assets as of December 31, 2008. The primary identifiable intangible assets of each reporting unit with indefinite lives are trademarks, tradenames and goodwill acquired in business acquisitions. As of December 31, 2008, the net book value of tradename and trademarks
and other identifiable indefinite-lived intangible assets was reduced by $501,000 to $1.3 million and such assets are now considered finite-lived assets and will be amortized prospectively over 20 years.
Goodwill is not amortized but is subject to periodic assessments of impairment at least as often as annually and as triggering events occur. Our annual impairment evaluation date is December 31 and the recoverability of goodwill is evaluated using a comparison of the fair value of a reporting unit with its carrying value. The fair value of the reporting unit is calculated based on the Market
Approach and the Income Approach. We review and estimate a number of factors to discount anticipated future cash flows including operating results, business plans and present value techniques. Rates used to discount cash flows are dependent upon projected interest rates and the cost of capital at the relevant point in time. There are inherent uncertainties related to these factors and judgment is used in applying them to the analysis of goodwill impairment. In March 2008 as part of a
triggering event, we impaired $1.0 million of goodwill associated with the acquisition of Sonoma Foods. In December 2008, as a result of our annual impairment test, we impaired an additional $12.2 million of goodwill associated with all of the acquisitions made over the many years. Although all goodwill has been fully impaired, it is possible that assumptions underlying the impairment analysis will change in such a manner that further impairment of our other intangible assets may occur
in the future.
Our impairment evaluations of both goodwill and other intangible assets included reasonable and supportable assumptions and projections and were based on estimates of projected future cash flows, historical performance and our current market capitalization. These estimates of future cash flows are based upon our experience, historical trends, estimates of future profitability and economic
conditions. Future estimates of profitability and economic conditions require estimating such factors as sales growth, employment rates and the overall economics of the retail food industry for five to ten years in the future, and are therefore subject to variability, are difficult to predict and in certain cases, beyond our control. The assumptions utilized by us were consistent with those developed in conjunction with our long-range planning process. If the assumptions and projections
underlying these evaluations prove to be incorrect, the amount of the impairment could be adversely affected.
As of September 30, 2009, we had no goodwill or indefinite lived assets recorded on our books.
Valuation of Plant and Equipment and finite-lived Intangible Assets
We review finite-lived long-lived assets, primarily consisting of plant and equipment and amortized intangible assets such as acquired recipes, customer lists and non-compete agreements, whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Intangible assets with finite useful lives continue to be amortized over their respective
estimated useful lives. The estimated useful life of an identifiable intangible asset is based upon a number of factors, including the effects of demand, competition, and future cash flows. For these assets, if the total expected future undiscounted cash flows from the asset group are less than the carrying amount of the asset group, an impairment loss is recognized for the difference between the fair value and the carrying value of the asset group. The impairment test we performed as
of December 31, 2008 required us to estimate the undiscounted cash flows and fair value of the asset groups. We performed a test on our Sonoma Cheese reporting unit in March 2008 and recorded an impairment of $32,000 for the non-compete agreement. In addition, based on our annual test in December 2008 we impaired an additional $581,000 of finite-lived intangible assets, with an aggregate 2008 impairment charge for such assets of $613,000. As of December 31, 2008, the net book value of
finite-lived intangible assets was $3.3 million.
When analyzing finite, long-lived assets for potential impairment, significant assumptions are used in determining the undiscounted cash flows of the asset group, including the cash flows attributed to the asset group; future cash flows of the asset group, including estimates of future growth rates; and the period of time in which the assets will be held and used. We primarily determine fair
values of the asset group using discounted cash flow models. In addition, to estimate fair value we are required to estimate the discount rate that incorporates the time value of money and risk inherent in future cash flows.
Accounting for Stock-Based Awards
The Company has two stock option incentive plans for employees and non-employee directors. The Company’s policy is to grant options with the exercise price equal to the market price of the common stock on the date of grant. Ordinary options issued to employees vest over three years and expire ten years after the grant date. The fair value of stock-based compensation granted to
non-employee directors is expensed at the time of the grant. We recorded a pre-tax expense of $262,000 for stock-based compensation for the nine months ended September 30, 2009 compared to $262,000 for the nine months ended September 30, 2008.
22
The determination of fair value of share-based payment awards to employees and directors on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected
employee stock option exercise behaviors. We estimated the expected terms using the historical information and we have used historical data to estimate forfeitures. The risk-free rate is based on U.S. Treasury rates in effect during the corresponding period of grant. The expected volatility is based on the historical volatility of our stock price.
Sales and Marketing
Our sales and marketing strategy is twofold and emphasizes sustainable growth in distribution of our products and introduction of innovative new products to keep us positioned as a leader in the marketplace.
Pasta is a staple of the North American diet. It is widely recognized that pasta is a convenient and nutritious food. The USDA places pasta on the foundation level of its pyramid of recommended food groups and pasta supports consumers’ lifestyle demands for convenient at-home meals.
We offer our customers distinctive packaging, which incorporates color graphics and product photography in a contemporary look. The packaging is created to communicate to our consumers (1) higher product quality, (2) ease and swiftness of preparation, and (3) appetite appeal to encourage point of sale purchase and to show a variety in product choice. We continue to improve our products to
enhance the dining experience. Our package is designed to both strengthen our brand recognition and reinforce our positioning as a premium quality product.
We employ full-time chefs and have hired additional outside culinary consultants to develop new products. Recent introductions include a line of whole wheat fresh pastas, sauces, and dips. We were the first to introduce whole wheat pasta and all organic pasta in the refrigerated pasta category.
For the nine months ended September 30, 2009, Costco Wholesale accounted for 52% and Sam’s Club accounted for 15% of our net revenues. For the nine months ended September 30, 2008, Costco Wholesale and Sam’s Club accounted for 54% and 12%, respectively, of our net revenues. No other customer accounted for greater than 10% of net revenues for these periods.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Risk Disclosure
We do not hold market risk-sensitive trading instruments, nor do we use financial instruments for trading purposes. Except as disclosed below in this item, all sales, operating items and balance sheet data are denominated in U.S. dollars; therefore, we have no significant foreign currency exchange rate risk.
In the ordinary course of our business we enter into commitments to purchase raw materials over a period of time, generally nine months to one year, at contracted prices. At September 30, 2009, these future commitments were not at prices in excess of current market, or in quantities in excess of normal requirements. We do not utilize derivative contracts either to hedge existing risks or for
speculative purposes.
Interest Rate Risk
We invest excess cash in money market fund investments consisting of cash equivalents. The magnitude of the interest income generated by these cash equivalents is affected by market interest rates. There are no restrictions as to when we can access the funds from these accounts. We do not use marketable securities or derivative financial instruments in our investment portfolio.
The interest payable on our bank line of credit is based on variable interest rates and therefore affected by changes in market interest rates. As of September 30, 2009, we do not have any loans with variable interest rates.
23
Currency Risk
During the three and nine months periods ended September 30, 2009, we did not sell any products in currency other than U.S. dollars.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (together the “Certifying Officers”), of the effectiveness of the design and operation of our disclosure
controls and procedures as of September 30, 2009, the end of the period covered by this report. Based upon that evaluation, the Certifying Officers concluded that our disclosure controls and procedures were effective as of September 30, 2009 to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is
accumulated and communicated to our management, including our Certifying Officers, as appropriate, to allow for timely decisions regarding required disclosure.
Inherent Limitations on Effectiveness of Controls
We are responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management team and our Board; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition our assets that could have a material effect on the financial statements.
Our management personnel, including the Certifying Officers, recognize that our internal control over financial reporting cannot prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Controls
There has been no change during our quarter ended September 30, 2009 in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 4T. Controls and Procedures
The information required under item 4T is included in item 4 above.
24
PART II. OTHER INFORMATION
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008, which could materially affect our business, financial condition or future results. We not aware of any other material changes to the risks described in our latest
Annual Report on Form 10-K.
Item 6. Exhibits
See Index of Exhibits for all exhibits filed with this report.
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
MONTEREY GOURMET FOODS
|
|
|
|
|
|
Date: November 4, 2009
|
|
|
|
|
|
|
|
|
By:
|
/s/ ERIC C. EDDINGS
|
|
|
|
|
|
|
|
Eric C. Eddings
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
By:
|
/s/ SCOTT S. WHEELER
|
|
|
|
|
|
|
|
Scott S. Wheeler
|
|
|
|
Chief Financial Officer
|
26
|
|
|
|
|
Index to Exhibits
|
|
|
|
|
|
(Unless otherwise indicated, all exhibits incorporated by reference are filed under SEC file number 001-11177.)
|
|
|
|
|
2.1
|
Agreement and Plan of Merger dated October 8, 2009 by and among Pulmuone U.S.A., Inc, Pulmuone Cornerstone Corporation and the Company (incorporated by reference from Exhibit 2.1 filed with the Company’s Current Report on Form 8-K filed October 9, 2009)
|
|
3.1
|
Certificate of Incorporation dated August 1, 1996 (incorporated by reference from Exhibit B to the Company’s Definitive Proxy Statement for its August 1, 1996 Special Meeting of Shareholders filed June 27, 1996)
|
|
3.2
|
Amendments of Articles I and IV of Delaware Certificate of Incorporation (incorporated by reference from Exhibits 3 and 4 to the Company’s Definitive Proxy Statement for its 2004 Annual Meeting of Shareholders filed June 21, 2004)
|
|
3.3
|
Certificate of Designation of Series A Junior Participating Preferred Stock. (incorporated by reference from Exhibit 3.3 filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008)
|
|
3.4
|
Bylaws of the Company, as amended (incorporated by reference from Exhibit 3.3 filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.
|
|
4.1
|
Form of Investor Warrant, issued by Monterey Gourmet Foods, Inc. to the investors in connection with the June 28, 2006 private offering. (incorporated by reference from Exhibit 10.31 filed with the Company’s Current Report on Form 8-K on June 13, 2006)
|
|
4.2
|
Registration Rights Agreement (incorporated by reference from Exhibit 10.29 filed with the Company’s Current Report on Form 8-K on June 13, 2006)
|
|
4.3
|
Shareholder Protection Rights Agreement between the Company and Corporate Stock Transfer dated July 1, 2008, as amended October 8, 2009 (incorporated by reference from Exhibit 10.1 filed with the Company’s Current Report on Form 8-K filed July 2, 2008 and Exhibit 4.1 filed with the Company’s Current Report on Form 8-K filed October 9, 2009)
|
|
10.1*
|
2002 Stock Option Plan, as amended (incorporated by reference from Exhibit 10.1 filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
|
|
10.2*
|
1995 Employee Stock Purchase Plan, as amended (incorporated by reference from Exhibit 10.15 filed with the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1995 (the “1995 Form 10-K”) and Exhibit 10.1 filed with the Company’s Current Report on Form 8-K filed October 9, 2009)
|
|
10.3
|
Monterey County Production Facility Lease of the Company, as amended (incorporated by reference from Exhibit 10.03 to the Company’s Registration Statement on Form SB-2 filed with the Commission on August 29, 1993 (the “SB-2))
|
|
10.4
|
Amendment No. 1 dated February 1, 1995 and Amendment No. 2 dated March 1, 1995 to Monterey County Production Facility Lease of the Company (incorporated by reference from Exhibit 10.6 filed with the 1995 Form 10-K)
|
|
10.5
|
Amendment No. 3 dated September 12, 1997, and Amendment No. 4 dated February 6, 1998 to Monterey County Production Facility Lease of the Company (incorporated by reference from Exhibit 10.5 filed with the Company’s September 27, 1998 Quarterly Report on Form 10-Q (“1998 Q3 10-Q”))
|
|
10.6
|
Lease Extension and Modification Agreement between the Company and Kenneth Slama and Pattie Slama dated August 24, 2005 (incorporated by reference from Exhibit 10.18 filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005)
|
|
10.7
|
Trademark Registration—MONTEREY PASTA COMPANY and Design, under Registration No. 1,953,489, registered on January 30, 1996 with the U.S. Patent and Trademark Office (incorporated by reference from Exhibit 10.27 to the 1995 Form 10-K)
|
|
10.8
|
Commercial lease dated January 1, 2000 between the Company and PTF for Operating Engineers, LLC (incorporated by reference to Exhibit 10.32, in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 25, 2000)
|
|
10.9
|
Third Lease Modification to Commercial lease dated August 8, 2006 between the Company and PTF for Operating Engineers, LLC for storage space in Monterey County, California (incorporated by reference to Exhibit 10.16 filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2006)
|
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10.10
|
Securities Purchase Agreement, dated as of June 12, 2006, (incorporated by reference from Exhibit 10.28 filed with the Company’s Current Report on Form 8-K on June 13, 2006)
|
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10.11*
|
Employment Agreement dated September 15, 2006 with Company Chief Executive officer Eric Eddings (incorporated by reference from Exhibit 10.1 filed with the Company’s Current Report on Form 8-K/A filed September 21, 2006)
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27
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|
|
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10.12
|
Commercial Lease dated November 15, 2007 between the Company and RREEF America REIT II Corp II (incorporated by reference from Exhibit 10.27 filed with the Company’s Current Report on Form 8-K on November 21, 2007)
|
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10.13**
|
Commencement Date Memorandum dated March 25, 2008, to Commercial Lease dated November 15, 2007 between the Company and RREEF America REIT II Corp II
|
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10.14**
|
Loan and Security Agreement between the Company and Comerica Bank dated March 27, 2006
|
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10.15**
|
First Modification dated January 4, 2007, to Loan and Security Agreement between the Company and Comerica Bank dated March 27, 2006
|
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10.16**
|
Second Modification dated May 21, 2007, to Loan and Security Agreement between the Company and Comerica Bank dated March 27, 2006
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10.17**`
|
Third Modification dated June 17, 2008, to Loan and Security Agreement between the Company and Comerica Bank dated March 27, 2006
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10.18**
|
Fourth Modification dated December 26, 2008, to Loan and Security Agreement between the Company and Comerica Bank dated March 27, 2006
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10.19**`
|
Fifth Modification dated February 12, 2009, to Loan and Security Agreement between the Company and Comerica Bank dated March 27, 2006
|
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10.20**
|
Sixth Modification dated July 15, 2009, to Loan and Security Agreement between the Company and Comerica Bank dated March 27, 2006
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10.21*
|
Form of Change in Control Severance Agreement with Executive Officers (incorporated by reference from Exhibit 10.1 filed with the Company’s Current Report on Form 8-K filed May 22, 2008)
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31.1**
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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|
31.2**
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
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32.1**
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
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32.2**
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
* Management contract or compensatory plan or arrangement covering executive officers or directors of the Company and/or its subsidiaries.
** filed herewith
28
Monterey Gourmet Foods (MM) (NASDAQ:PSTA)
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