U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 2002
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[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to _________
Commission file number 000-31148
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PENNEXX FOODS, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Pennsylvania 23-3008972
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5501 Tabor Avenue, Philadelphia, PA 19120
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(Address of Principal Executive Offices)
215-743-4331
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(Issuer's Telephone Number, Including Area Code)
980 Glasgow Street, Pottstown, PA 19464
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
----- ------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 25,324,822
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Transitional Small Business Disclosure Format (check one):
Yes No X
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INDEX
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements................................................3
Item 2. Management's Discussion and Analysis or Plan of Operation...........8
PART II
OTHER INFORMATION
Item 1. Legal Proceedings..................................................12
Item 5. Other Information..................................................14
Item 6. Exhibits and Reports on Form 8-K...................................14
2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
PENNEXX FOODS, INC.
Balance Sheets
ASSETS
June 30, 2002 December 31, 2001
(Unaudited)
------------ ------------
Current Assets:
Cash $ 1,169,288 $ 2,415,785
Trade Receivables, net of allowance for doubtful
accounts (2002, $177,736; 2001, $25,595) 3,595,835 2,595,495
Inventory 1,938,790 1,142,223
Prepaid Expenses 188,332 201,843
------------ ------------
Total Current Assets 6,892,245 6,355,346
Fixed Assets:
Land, Property and Equipment 11,748,063 4,186,944
Less Accumulated Depreciation 1,302,912 947,232
------------ ------------
Total Fixed Assets 10,445,151 3,239,712
Other Assets 37,245 61,772
------------ ------------
Total Assets $ 17,374,641 $ 9,656,830
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current Installments on Capital Lease Obligations $ 248,207 $ 233,000
Accounts Payable, Operating 5,694,445 2,100,254
Accrued Expenses 347,646 266,784
------------ ------------
Total Current Liabilities 6,290,298 2,600,038
Long Term Liabilities:
Capital Lease Obligations less Current Installments 554,920 677,790
Accounts Payable, Construction 1,784,467
Notes Payable 7,000,000 2,500,000
------------ ------------
Total Long Term Liabilities 9,339,387 3,177,790
------------ ------------
Shareholders' Equity:
Common Stock 264,249 264,249
Additional Paid-in Capital 12,097,881 12,097,881
Deficit (10,355,517) (8,169,140)
Deferred Compensation (261,657) (313,988)
------------ ------------
Total Shareholders' Equity 1,744,956 3,879,002
------------ ------------
Total Liabilities and Shareholders' Equity $ 17,374,641 $ 9,656,830
============ ============
See notes to condensed financial statements.
3
PENNEXX FOODS, INC.
Statements of Operations
(Unaudited)
For the Three Month For the Six Month
Period Ended June 30, Period Ended June 30,
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2002 2001 2002 2001
---- ---- ---- ----
Sales $ 13,600,172 $ 10,950,870 $ 24,525,143 $ 18,968,494
Cost of Goods Sold
Meat 9,839,926 8,068,446 16,871,017 13,261,489
Labor 1,829,765 1,854,553 3,030,572 3,383,431
Supplies 2,064,681 1,226,794 3,282,880 2,012,919
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Total Cost of Goods Sold 13,734,372 11,149,793 23,184,469 18,657,839
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(134,200) (198,923) 1,340,674 310,655
Gross Profit (Loss)
Operating Expenses 2,016,244 744,241 3,433,415 1,590,420
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(2,150,444) (943,164) (2,092,741) (1,279,765)
Loss from Operations
Interest (Net of Interest Income) 43,383 48,907 93,636 117,056
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Net Loss $ (2,193,827) $ (992,071) $ (2,186,377) $ (1,396,821)
=================================================================================
Loss Per Share
Basic $ (0.08) $ (0.07) $ (0.08) $ (0.11)
Weighted Average Shares Outstanding
Basic 26,424,822 13,575,076 26,424,822 12,676,285
See notes to condensed financial statements.
4
PENNEXX FOODS, INC.
Statements of Cash Flows
(Unaudited)
Six Month Period Ended June 30,
----------------------------------
2002 2001
----------- -----------
Cash flows from operating activities:
Net Loss $(2,186,377) $(1,396,821)
Adjustments:
Depreciation and Amortization 355,680 293,024
Deferred Compensation 52,331 52,332
Provisions for Doubtful Accounts 154,141
Common Stock issued for:
Interest 23,818
Consulting 128,000
Changes in assets and liabilities
Trade Receivables (1,154,481) (1,403,522)
Other Receivables 95,410
Inventory (796,567) (384,916)
Prepaid Expenses 13,511 10,290
Accounts Payable 3,594,191 1,438,335
Accrued Expenses 30,310 2,963
----------- -----------
Net cash provided by (used for) operating activities 62,739 (1,141,087)
Cash flows from investing activities:
Purchase of land, property and equipment (5,726,100) (343,561)
Other Assets 24,527 5,204
----------- -----------
Net cash used for investing activities (5,701,573) (338,357)
Cash flows from financing activities:
Proceeds from issuance of stock, net 5,923,418
Proceeds from issuance of debt 4,500,000
Repayments on capital lease obligations (107,663) (140,200)
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Net cash provided by financing activities 4,392,337 5,783,218
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Net increase (decrease) in cash (1,246,497) 4,303,774
Cash, beginning of year 2,415,785
----------- -----------
Cash, end of period $ 1,169,288 $ 4,303,774
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid during the period $ 25,902 $ 51,096
Non-cash items:
Purchase of equipment under capital lease agreements $ 181,775
Debt converted into common stock $ 100,000
Increase in land, property and equipment and accounts
payable, construction $ 1,784,467
Interest expense capitalized $ 50,552
See notes to condensed financial statements.
5
Pennexx Foods, Inc.
Statement of Shareholders' Equity
Six Month Period ended June 30, 2002
(Unaudited)
Common Stock
$.01 par value
50,000,000 shares authorized
Shares issued Additional Deferred
or issuable Amount paid-in capital Deficit Compensation Total
------------------------------------------------------------------------------------------
Balance, January 1, 2002 26,424,822 $264,249 $12,097,881 $(8,169,140) $(313,988) $3,879,002
Net loss (2,186,377) ($2,186,377)
Amortization of Compensatory Options 52,331 52,331
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Balance, June 30, 2002 26,424,822 $264,249 $12,097,881 $(10,355,517) $(261,657) $1,744,956
==========================================================================================
See notes to condensed financial statements.
6
Pennexx Foods, Inc.
Notes to Condensed Financial Statements
June 30, 2002
1. Basis of presentation.
The unaudited condensed financial statements have been prepared by
Pennexx Foods, Inc. (the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
rules and regulations; nevertheless, the Company believes that the disclosures
are adequate to make the information presented not misleading. These financial
statements and the notes hereto should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB. In the opinion of the Company, all adjustments, including normal
recurring adjustments necessary to present fairly the financial position of the
Company as of June 30, 2002 and the results of its operations and cash flows for
the three and six months then ended, have been included. The results of
operations of the interim period are not necessarily indicative of the results
for the full year.
2. Accounting policies.
There have been no changes in accounting policies used by the Company
during the period ended June 30, 2002.
3. Summary of business.
The Company, incorporated on July 20, 1999 in the Commonwealth of
Pennsylvania, prepares case-ready meat for distribution to food retailers in the
Northeastern United States. It grants credit to its customers without requiring
collateral.
4. Inventory.
The Company's inventories are valued at the lower of first-in,
first-out cost or market. Inventories consist of the following:
June 30, 2002 December 31, 2001
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Unfinished beef, pork, veal, lamb $ 642,000 $ 682,000
Packaging supplies 797,000 344,000
Finished Goods 499,790 116,000
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$1,938,790 $1,142,000
========== ==========
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5. Notes payable.
Notes payable consist of the following at June 30, 2002 and December
31, 2001:
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June 30, 2002 December 31, 2001
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Revolving loan $2,500,000 $2,500,000
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Tabor Ave. Facility 4,500,000 0
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$7,000,000 $2,500,000
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The Company has established a $30 million Credit Agreement, as amended,
with its 50% shareholder, Smithfield Foods, Inc. ("Smithfield"). The Company's
outstanding balance under the line of credit bears interest at 1% above prime
and is secured by all of the Company's assets. The loan will mature in 2006. At
June 30, 2002, the Company's outstanding principal balance under the line of
credit, for the revolver, was $2.5 million and accrued interest was $35,839.
Smithfield has agreed to allow the Company to use up to $18.3 million
of the $30 million credit line to allow the Company to purchase, renovate and
equip the Tabor Avenue Facility. If the actual costs exceed this amount, the
Company will have to get incremental funding approval from Smithfield, use
internally generated funds, or secure additional commercial financing. As of
June 30, 2002 the Company had been advanced $4.5 million for the plant
renovations and new processing machinery. The outstanding balance bears interest
at 1% above prime. It is anticipated that advances for the new plant will be
repaid from the combined proceeds of industrial revenue bonds and other economic
development loans. The industrial revenue bonds, if purchased, would bear
interest rates appropriate for tax-exempt financings. Accrued and unpaid
interest at June 30, 2002 was $50,552 all of which was capitalized.
6. Net loss per share.
Basic earnings per share ("EPS") is computed using the weighted average
number of common shares outstanding during the period. Diluted EPS is computed
using the weighted average number of common and dilutive common equivalent
shares outstanding during the period. Dilutive common equivalent shares consist
of common stock issuable upon exercise of stock options. For all periods
presented there were no dilutive potential common shares because the assumed
exercise of the options would be anti-dilutive.
Item 2. Management's Discussion and Analysis or Plan of Operation
Certain information contained in this Quarterly Report on Form 10-QSB
represents "forward-looking" statements (as defined in Section 27A of the
Securities Act of 1933, as amended) that involve risks and uncertainties which
may cause actual results to differ materially from those predicted in the
forward-looking statements. If any of the Company's assumptions on which such
statements are based prove incorrect, or should unanticipated circumstances
arise, the Company's actual results could materially differ from those
anticipated by such forward-looking statements. The differences could be caused
by a number of factors or combination of factors, including, but not limited to,
those listed under Item 6, "Note Regarding Forward-Looking Statements" filed
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with the Securities and Exchange Commission on Form 10-KSB for the year ended
December 31, 2001.
Results of Operations
Three Months Ended June 30, 2002 compared to Three Months Ended June 30, 2001
-----------------------------------------------------------------------------
Sales for the three-month period ended June 30, 2002 were $13.6
million, representing an increase of approximately $2.7 million or 25% over
sales of $10.9 million from the corresponding period of 2001. This increase was
primarily the result of the increase in the volume of products handled (due in
part to increasing sales to existing customers as well as sales to new
customers) but was also partially due to a change in the mix of products sold in
favor of higher priced items. As the diversity of services that the Company
offers continues to grow, customers are increasing both the range of products as
well as the quantity ordered.
Cost of goods sold for the three-month period ended June 30, 2002 was
$13.7 million which resulted in a gross loss of approximately $0.1 million. By
comparison, cost of goods sold for the three-month period ended June 30, 2001
was $11.1 million, which resulted in a gross loss of $0.2 million. The Company's
cost of goods sold is comprised of three main components: meat, direct payroll,
and supplies. These items accounted for approximately 72%, 14% and 15% of sales,
respectively, in the three months ended June 30, 2002 as compared to 74%, 17%
and 11% of sales for the corresponding period of the prior year. Although meat
cost declined slightly as a percentage of sales in the current year as compared
to the prior year, meat cost increased substantially as a percentage of sales in
the most recent quarter as compared to the first quarter of 2002. This increase
was due to in large part to the substantial increase in the amount of whole
muscle beef processed by the Company, for which it was less able to obtain
satisfactory yields than has historically been true of its prior mix of meats.
Direct payroll declined as a percentage of sales in 2002 compared to 2001 due to
increasing labor efficiencies. Supplies increased as a percentage of sales in
2002 as compared to 2001 due to increased freight costs and materials pricing.
Freight costs increased in 2002, in part, due to the necessity for temporary
off-site storage of goods resulting from the Company's having outgrown its
Pottstown plant.
Operating expenses for the three months ended June 30, 2002 were $2.0
million (15% of sales) as compared to $.7 million (7% of sales) for the
corresponding period of 2001. This increase of $1.3 million resulted from
increased non-productive payroll expenses, increased depreciation expenses,
increased maintenance expenses, increased insurance expenses, and increased
commissions expenses due to sales volume and continued growth.
Interest expense (net of interest income) for the three-month period
ended June 30, 2002 was approximately $.04 million compared to approximately
$.05 million for the comparable period of 2001. This decrease in interest
expense (net of interest income) is principally due to the increase in interest
earned on investments as well as aging leases on equipment. The net loss for the
three-month period of 2002 was approximately $2.2 million as compared to a net
loss of $1.0 million for the second quarter of 2001.
9
Six Months Ended June 30, 2002 compared to Six Months Ended June 30, 2001
-------------------------------------------------------------------------
Sales for the six-month period ended June 30, 2002 were $24.5 million,
representing an increase of approximately $5.5 million or 29% over sales of
$19.0 million from the corresponding period of 2001. This increase was primarily
the result of the increase in the volume of products handled (due in part to
increasing sales to existing customers as well as sales to new customers) but
was also partially due to a change in the mix of products sold in favor of
higher priced items.
Cost of goods sold for the six-month period ended June 30, 2002 was
$23.2 million which resulted in a gross profit of approximately $1.3 million or
6% of sales. By comparison, cost of goods sold for the six-month period ended
June 30, 2001 was $18.7 million, which resulted in a gross profit of $.3 million
or 2% of sales. The Company's cost of goods sold is comprised of three main
components: meat, direct payroll, and supplies. These items accounted for
approximately 69%, 12% and 13% of sales, respectively, in the six months ended
June 30, 2002 as compared to 70%, 18% and 11% of sales for the corresponding
period of the prior year. Direct payroll declined as a percentage of sales in
2002 as compared to 2001 due to increasing labor efficiencies. Supplies
increased as a percentage of sales in 2002 as compared to 2001 due to increased
material costs as well as increased freight charges.
Operating expenses for the six months ended June 30, 2002 were $3.4
million (14% of sales) as compared to $1.6 million (9% of sales) for the
corresponding period of 2001. This increase of $1.8 million resulted from
increased non-productive payroll expenses, increased depreciation expenses,
increased maintenance expenses, increased insurance expenses, and increased
commissions expenses due to sales volume and continued growth.
Interest expense (net of interest income) for the six-month period
ended June 30, 2002 was approximately $.1 million compared to approximately $.1
million for the comparable period of 2001. The net loss for the six-month period
of 2002 was approximately $2.2 million as compared to a net loss of $1.4 million
for the second quarter of 2001.
Tabor Avenue Facility
On April 2, 2002 the Company purchased a 145,000 square foot facility
on ten acres of land located at 5501 Tabor Avenue in Philadelphia, Pennsylvania
(the "Tabor Avenue Facility") from QF Acquisition Corp., the equitable owner,
and PIDC Financing Corp., the legal owner. The purchase price of the Tabor
Avenue Facility was $2 million which was negotiated at arms length by the
parties.
The Company is consolidating all operations in the new plant at the
same time it is renovating and equipping the plant. The Company's current
estimate to renovate and equip the Tabor Avenue Facility is as follows:
10
Renovation Costs $3.1 million
Equipment Costs $12.9 million
Other Costs $0.5 million
------------------
Total $16.5 million
==================
In addition to these expenses, the Company will incur moving expenses
and other costs associated with the move to the new plant. Although employment
has been offered to the existing work force and the Company is running vans from
the former facility to the new plant, the Company believes that it will have to
replace at least a portion of the work force which chooses not to relocate from
Pottstown. As a result, the Company will probably experience, at least
temporarily, certain lost efficiencies among workers, and will incur additional
costs to train new employees.
The Company expects to amortize the acquisition, renovation and related
construction interest and transaction costs of the Tabor Avenue Facility over 39
years. The costs of moving and installing equipment in the new plant will be
capitalized and depreciated over three years.
In the third quarter, the Company will write off all remaining
unamortized leasehold improvements located at the Pottstown plant in the amount
of $162,000. As described below, the Company is in litigation with the landlord
of the Pottstown plant.
The new facility is intended to address space and automation issues.
Management believes that the new facility will allow the Company to accommodate
a substantial increase in production orders and, after accounting for the
increased costs associated with the move (such as higher debt service expense),
management expects that such increased volume, if achieved, will lead to higher
gross profits. In addition, the new plant offers the physical layout to improve
the Company's automation which, after accounting for the costs of equipment
acquisition, installation, and training, should also increase gross profits.
These projected increases in gross profit, in turn, are expected to help cover
Company overheads.
Liquidity and Capital Resources
At June 30, 2002, the Company had $1.2 million of cash (and cash
equivalents), slightly less than half of the amount it had at December 31, 2001.
The Company's ratio of current assets to current liabilities at June 30, 2002
was 1.1, down from 2.44 at December 31, 2001. Both decreases are primarily the
result of the Company's net loss in the six months ended June 30, 2002.
Generally, the Company maintains an unfinished inventory of meat
supplies equal to approximately 60-75% of estimated weekly sales volume.
Purchases are made using the trade credit programs of suppliers, which allow the
Company to purchase meat supplies with payment due within seven days. Inventory
is purchased generally on a daily basis and in advance (i.e., in anticipation)
of customer orders.
The Company's working capital decreased from $3.8 million at December
31, 2001 to $0.6 million at June 30, 2002, principally as a result of the net
11
loss in the six months ended June 30, 2002 and also partially as a result of the
purchase of property and equipment. Management believes that, due to the move
from the Pottstown plant to the Tabor Avenue plant in July, 2002, the Company
experienced an additional loss in that month. If the Company's losses continue,
it will shortly deplete its remaining cash resources. Accounts payable,
operating increased from $2.1 million at December 31, 2001 to $5.7 million at
June 30, 2002 as a result of the Company's increasing the amount of time taken
to pay some outstanding invoices. The Company estimates that as a result of this
increase in time of payment, approximately 50%-60% of accounts payable at June
30, 2002 were within suppliers' terms. Finally, accrued expenses were unusually
high at June 30, 2002 as a result of the timing of payroll dates in relation to
the quarter ending June 30, 2002.
Smithfield has agreed to allow the Company to use up to $18.3 million
of the $30 million credit line (see note 5 to financial statements) to allow the
Company to purchase, renovate and equip the Tabor Avenue Facility. If the actual
costs exceed this amount, the Company will have to get incremental funding
approval from Smithfield, use internally generated funds, or secure additional
commercial financing. The amount outstanding on the Smithfield line of credit
was as follows on the dates indicated:
Description June 30, 2002 December 31, 2001
Principal Advances $7,000,000 $2,500,000
Accrued Interest 86,391 58,000
---------------- -----------------
Total $ 7,086,391 $2,558,000
---------------- -----------------
The Company has also applied for certain economic development related
financing for the new facility in an aggregate amount of $16 million. To the
extent received, these amounts would be used to repay advances made by
Smithfield on the line of credit. The economic development loans, if obtained,
would bear below market interest rates.
For a discussion of the potential financial effect on the Company's
liquidity of an adverse ruling in litigation to which the Company is a party,
see, Part II. Other Information, Item 1. Legal Proceedings.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is the defendant in a lawsuit brought by its former
landlord at the Pottstown plant. Proceedings began almost two years ago in the
Montgomery County Court of Common Pleas. Since the commencement of the
litigation, the landlord filed a voluntary petition for protection from its
creditors under Chapter 11 of the Bankruptcy Code, and the case has been moved
to the Bankruptcy Court for the Eastern District of Pennsylvania. In the
lawsuit, the landlord has alleged that the Company failed to make timely rental
payments and is seeking damages. In addition, the landlord claims that it is
entitled to retain certain equipment purchased and installed by the Company as
trade fixtures at the plant, or alternatively, to be paid the value of such
equipment if removed. The Company's defense to the claim is that the unpaid rent
12
has been withheld because of the landlord's failure to honor its obligations to
make certain improvements at the property.
Approximately $145,000, representing all rents due under the lease from
the commencement of the dispute to May 31, 2002, have been deposited into
escrow. However, the landlord contends that the Company owes rent at a rate
higher than the contract rent set forth in the lease from November 2000 to the
present. The contract rent is approximately $96,000 per year. The landlord has
demanded approximately $750,000 in rent in excess of the amount in escrow,
approximately $50,000 of interest due on such demanded additional rent, $35,000
on account of property of a company related to the landlord and allegedly taken
and used by the Company, and approximately $125,000 in counsel fees and other
miscellaneous expenses. The Company vigorously disputes all of such claims. As a
result, the Company has not provided any loss contingency on account of the
pending claim because of management's belief that any award to the plaintiff
will not materially exceed the amount in escrow.
In addition to the foregoing items, there is also a dispute in the
pending litigation over the Company's right to remove certain refrigeration
equipment which it installed at the Pottstown plant. The value of such
refrigeration equipment is estimated at $150,000. The landlord contends that
such equipment must be abandoned by the Company at the plant.
On April 25, 2002, the landlord filed a motion for partial summary
judgment to evict, eject and dispossess the Company from the Pottstown plant. On
June 21, 2002, the Bankruptcy Court ruled in favor of the landlord.
Consequently, the Company accelerated its relocation to the Tabor Avenue
Facility. The acceleration of the timing of the move from Pottstown to Tabor
Avenue means that new equipment intended to automate the new plant will have to
be installed around the work schedule of the new plant after such new equipment
arrives. Moreover, the Company will be required to subcontract a portion of its
pork processing work for a time through a transition period until the new plant
is completely configured and the new equipment is completely installed.
These events will have an adverse financial effect on the Company.
Revenues and margins will be reduced until full operations are established at
the Tabor Avenue plant. The Company estimates that this time period will extend
until at least September, 2002 and perhaps until October, 2002. The Company will
be incurring key employees' salaries and fixed operating costs despite the
reduction of revenues and margins during such time period. The Company estimates
that these expenses will approximate $175,000 to $225,000 per month.
The Company's cash and cash equivalents on June 30, 2002 were $1.2
million. The Company's line of credit with Smithfield is based primarily on
inventories and accounts receivable. If inventories and accounts receivable
decline as a result of these events (which is likely), the Company will be
required to begin paying down the balance of the line of credit, which it may
not be able to do.
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Item 5. Other Information
The Company and Smithfield are among the parties to a Standstill
Agreement dated June 27, 2001 (the "Standstill Agreement") which was filed as an
exhibit to the Company's registration statement on Form 10-SB filed July 9,
2001. Under the Standstill Agreement, the parties thereto have agreed, during
the Limitation Period (as defined in the Standstill Agreement), among other
things, (1) not to change the number of directors on the Company's Board of
Directors and (2) to vote their shares in order to ensure that the Company's
Board of Directors will remain composed of five directors: two nominees of
Smithfield, two nominees of Ellis M. Shore, and one nominee of Michael D. Queen.
The Limitation Period ends when any one of four events set forth in the
Standstill Agreement occurs. One such event is the net worth of the Company
first falling below $2 million. The net worth of the Company at June 30, 2002
was approximately $1.7 million, and accordingly the Limitation Period has ended.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certificate Pursuant to 18 U.S.C.ss.1350.
(b) The Company filed a Current Report on Form 8-K dated April 2, 2002
in connection with its purchase of the Tabor Avenue facility.
14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PENNEXX FOODS, INC.
By: /s/ Michael D. Queen
--------------------------------
Michael D. Queen
President
Date: August 19, 2002
15