U.S.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
DC
20549
FORM
10-Q
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/X/
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QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31,
2008
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Commission
file number:
001-32134
Z TRIM HOLDINGS, INC.
(Exact
Name of Small Business Issuer as Specified in Its Charter)
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ILLINOIS
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36-4197173
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(State
or Other Jurisdiction of
Incorporation
or Organization)
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(I.R.S. Employer
Identification
No.)
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1011 CAMPUS DRIVE,
MUNDELEIN, ILLINOIS 60060
(Address
of Principal Executive Offices)
(847)
549-6002
(Issuer's
Telephone Number, Including Area Code)
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 / /
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes / / No /X/
The
registrant has a single class of common stock, par value $.00005 per share, of
which there were 75,056,375 shares issued and outstanding as of May 10,
2008.
Transitional
Small Business Disclosure Format (Alternative 2): Yes / / No /X/
PART I –
FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
See
Consolidated Financial Statements beginning on page F-1.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The
following discussion is intended to assist in understanding the financial
condition and results of operations of Z Trim Holdings, Inc. You should read the
following discussion along with our financial statements and related notes
included in this Form 10-Q. The following discussion contains forward-looking
statements that are subject to risks, uncertainties and assumptions. Our actual
results, performance and achievements in 2008 and beyond may differ materially
from those expressed in, or implied by, these forward looking
statements.
Overview.
Z Trim
Holdings, Inc. is an emerging growth company focused on the production,
marketing and distribution of functional food ingredients and formulated foods
for both domestic and international markets. The Company’s core product, Z
Trim®, is a USDA-developed, all-natural, zero calorie functional food ingredient
made from healthy dietary fiber. The Company has an extensive intellectual
property portfolio, highlighted by an exclusive license from the USDA to make,
use and sell Z Trim both domestically and internationally. Currently,
corn and oats are used to make Z Trim, but it can be produced from virtually any
other agricultural product. Current Z Trim products include gel and
powder used to replace portions of fat, gums, starches and carbohydrates in
foods. The Company’s core product portfolio of wellness foods and
dietary fiber food ingredients includes corn Z Trim, non-GMO oat Z Trim, and
functional emulsions and gels. The Company recently introduced
finished products to its sales line, including salad dressings and
mayonnaise. Z Trim is now being used by manufacturers, restaurants,
schools, and consumers on six continents to replace as much as 80% of the fat
and calories in foods without changing taste, texture, appearance or digestive
properties in baked goods, dairy products, snacks, deserts, sauces, dressings,
processed meats and many other foods.
After
years of development, Z Trim is now commercialized. The Company currently
manufactures and markets Z Trim products as competitive ingredients that improve
the food industry's ability to deliver on its promises of healthier foods. The
Company's primary goal is establishing Z Trim as an important ingredient in
revolutionizing the food industry. The Company is developing its
market through (i) direct sales to major food manufacturers, as well as small
and mid size companies, (ii) direct sales to the consumer, and (iii) direct
sales to large food institutions such as those that supply to restaurants,
hospitals, schools and cafeterias. We have an aggressive plan to educate both
the food industry and consumers about the uses and benefits of Z Trim products,
and our research and development team, including strategic industry partners,
continues to develop additional products.
Z Trim
Holdings, Inc. was incorporated in the State of Illinois on May 5, 1994 under
the original name Circle Group Entertainment Ltd.
Z Trim’s
core products compete against fats, fat replacers, modified starches, gums, and
similar ingredients. None of these other products functions
identically to our products. Our business is part of the global
$25-30 billion per year (2006) business of food additives. The global
hydrocolloid business is a comparably minor $3.80 billion per
year. Specifically, the U.S. fat replacer and bulk dietary fiber
(supplement) markets are estimated to be $ 500 million each. The
global business of hydrocolloids at large is intensely oligopolistic with few
major players and the food sector market, although growing at 6.5%, is very
competitive.
The
Company protects an array of intangible assets that includes patents pending and
issued, as well as a wide array of trade secrets and know-how, trademarks and
copyrights. Central to this portfolio is an exclusive license to US Patent
No. 5,766,662, including all related international patents, issued to Dr. George
Inglett of the USDA. This license expires upon the expiration of the
underlying patent in late 2015. Through the process of development and
commercialization of the technology, the Company has identified and sought
patent protection for improvements to the manufacturing process, product
applications and is currently developing several commercially promising spin-off
technologies. The Company also maintains a stable of trademarks that has
continued to gain value through usage and increased brand
recognition.
Presently,
the Company employs 26 full-time employees and no part-time
employees.
RECENT
MATERIAL DEVELOPMENTS
One of
the most exciting and significant recent events is our development of a new line
of food ingredient products that provide additional functionality and
value-added propositions to the food industry. Under the direction of
renowned food scientist Dr. Triveni Shukla, our R & D team has developed a
new product stream similar in function to certain gum
products. Remarkably, this derives from an improvement to the Z Trim
manufacturing process and is therefore a cost effective means of producing
incremental revenue from the same incoming raw materials. In fact,
this innovation will enable our plant to nearly triple production capacity of
saleable products while driving down the unit cost of goods sold.
We
continue to explore additional capabilities and markets for these products, both
individually and in combination with Z Trim in the form of customized blends and
emulsions. We have already had sales of this new product, and it will
be used as an ingredient in finished goods.
In August
of 2007 we revitalized our marketing strategy and began cultivating
relationships with innovative people who are well-positioned within the industry
to exert influence over the purchasing decisions of major food
companies. For example, we strengthened our relationship with Chef
Eric Carre of Amazing Food Creations, who is a founding member of the Research
Chefs’ Association and an industry leader in the development of innovative
foods. Eric has become a champion of Z Trim, using our ingredients in
many of the finished goods he prepares for major food
manufacturers.
We also
began executing a strategy of presenting finished food solutions to large food
manufacturing companies. Instead of merely boasting about how well
our products work, we are showing them tangible examples. Our
creative R & D team has been developing our own finished formulations to
demonstrate Z Trim’s amazing array of functional attributes, as well as how
great the final products taste. Building on that strategy, we have
brought some finished goods directly to the marketplace and we continue to tout
the benefits of our products to the food service sector, particularly the
schools. A limited release of our salad dressings and mayonnaise has
been tremendously well-received, and more importantly, has helped us attract the
attention of the major food companies that dominate the retail and food service
spaces.
On
February 26, 2008, the Company received a letter from Amex in which Amex stated
that the Company has resolved the continued listing deficiencies referenced in
the Amex letter dated August 17, 2007. As is the case for all listed
issuers, Z Trim Holdings' continued listing eligibility will be assessed on an
ongoing basis. However, the threat of de-listing resulting from the notification
of non-compliance on August 17, 2007 no longer exists.
SUMMARY
OF FINANCIAL RESULTS
RESULTS
OF OPERATIONS
THREE
MONTHS ENDING MARCH 31, 2008 COMPARED TO THE THREE MONTHS ENDING MARCH 31,
2007
Revenues
Revenues,
excluding those from the discontinued on-line bedding segment, decreased 221%
for the three months ended March 31, 2008 from $213,223 for the three months
ended March 31, 2007 to $66,444, as a result of a decrease in product
revenues. The decrease in product revenue was primarily due to the
decrease in Z Trim products sales via the internet. The following
table provides a breakdown of the revenues for the periods
indicated:
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Quarter ended March
31,
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2008
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2007
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Products
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$
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66,444
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$
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213,076
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Services
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147
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Total
Revenues
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$
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66,444
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$
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213,223
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Operating
expenses
Operating
expenses consist of payroll and related costs, stock option expense,
insurance, occupancy expenses, professional fees, and general
operating
expenses. Total
operating expenses decreased by $2,161,202 or 61.0% to $1,383,531 for the first
quarter that ended March 31, 2008 from $3,544,733 for the first quarter that
ended March 31, 2007. The de
crease in operating expenses was due in
large part to
a decrease in investor relations expense of
$2,256,342.
The stock
based compensation expense for the first quarter ended March 31, 2008 is
$237,419. The stock based compensation expense for the first quarter
ended March 31, 2007 was $306,955.
Other
income (expense)
Total
other expense for the first quarter ending on March 31, 2008 was $122,362
compared to other income of $10,366 for the first quarter ending on March 31,
2007. The decrease from other income to other expense was due to a
settlement loss of $147,026 resulting from a lawsuit described in Note
11.
Net
loss
The
Company incurred a net loss of $1,886,308 for the first quarter ending on March
31, 2008 or $(.03) per share, from the net loss of $3,906,811 for the first
quarter ending March 31, 2007 or $(.06) per share. The reduction in net loss is
due in large part the result of the decrease in investor relation expense of
$2,256,342.
LIQUIDITY
AND CAPITAL RESOURCES
FIRST
QUARTER ENDING MARCH 31, 2008 COMPARED TO THE FIRST QUARTER ENDING MARCH 31,
2007
At March
31, 2008, we had cash and cash equivalents, of $996,426, compared to $4,026,889
at March 31, 2007. The Company raised approximately $9,010,000 in
additional equity capital through equity transactions during the year ended
December 31, 2007.
Net cash
used by operating activities decreased by 9.95% to $1,373,714 for the quarter
ended March 31, 2008 as compared to $1,525,407 for the quarter ended March 31,
2007. Cash provided by discontinued operations was $485 for the
quarter ended March 31, 2008 and $14,820 for the quarter ended March 31,
2007.
Net cash
used by investing activities was $20,080 for the quarter ended March 31, 2008,
as compared to $131,029 for the quarter ending March 31, 2007. The change was
due to additions of property and equipment for our manufacturing plant in the
current year.
Net cash
provided by financing activities was $24,066 for the quarter ended March 31,
2008, as compared to $5,023,102 for the quarter ended March 31,
2007. Net cash provided by financing activities for the quarter ended
March 31, 2007 was primarily from the proceeds received from the sale of stock,
options and warrants exercised.
As of
March 31, 2008, our cash balance was approximately $996,426. To
successfully grow our business, we must improve our cash position through
greater and sustainable sales of our product lines, increase the productivity of
the production process, as well as raise additional capital through a
combination of public or private equity offerings, strategic alliances or debt
financing to allow us to make necessary changes to our plant and to provide
working capital until we achieve profitability. The Company estimates
that it will take from 18 to 30 months to achieve
profitability. Given this estimate, the Company will likely need to
find sources of funding for both the short and long terms. The
Company does not expect or anticipate that its concerns over its ability to
continue as a going concern will have any impact on its ability to raise capital
from internal and external sources.
OFF-BALANCE
SHEET ARRANGEMENTS
We have
no off-balance sheet arrangements.
CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
Certain
information set forth in this report contains "forward-looking statements"
within the meaning of federal securities laws. Forward looking statements
include statements concerning our plans, objectives, goals, strategies, future
events, future revenues or performance, capital expenditures, and financing
needs and other information that is not historical information. When used in
this report, the words "estimates," "expects," "anticipates," "forecasts,"
"plans," "intends," "believes" and variations of such words or similar
expressions are intended to identify forward-looking statements. Additional
forward-looking statements may be made by us from time to time. All such
subsequent forward-looking statements, whether written or oral and whether made
by us or on our behalf, are also expressly qualified by these cautionary
statements.
Our
forward-looking statements are based upon our current expectations and various
assumptions. Our expectations, beliefs and projections are expressed in good
faith and are believed by us to have a reasonable basis, including without
limitation, our examination of historical operating trends, data contained in
our records and other data available from third parties, but there can be no
assurance that our expectations, beliefs and projections will result or be
achieved or accomplished. Our forward-looking statements apply only as of the
date made. We undertake no obligation to publicly update or revise
forward-looking statements which may be made to reflect events or circumstances
after the date made or to reflect the occurrence of unanticipated
events.
There are
a number of risks and uncertainties that could cause actual results to differ
materially from those set forth in, contemplated by or underlying the
forward-looking statements contained in this report. Those risks and
uncertainties include, but are not limited to, our history of operating losses,
lack thus far of significant market acceptance of our products, the fact that we
may dilute existing shareholders through additional stock issuances, our
reliance on our intellectual property, and the potential negative effects of
manipulation in the trading of our common stock. Those risks and certain
other uncertainties are discussed in more detail in our 2007 Annual Report on
Form 10-KSB and our subsequent filings with the SEC. There may also be other
factors, including those discussed elsewhere in this report that may cause our
actual results to differ from the forward-looking statements. Any
forward-looking statements made by us or on our behalf should be considered in
light of these factors.
ITEM 3. QUANTITATIVE AND QUALITATIVE ANALYSIS OF
MARKET RISKS
There are
no material changes in the market risks faced by us from those reported in
our Annual Report on Form 10-K for the year ended December 31,
2007.
ITEM
4. CONTROLS AND PROCEDURES
As
required by Rule 13a-15(b) under the Exchange Act, we conducted an evaluation,
under the supervision and with the participation of our management, including
our chief executive officer and our chief financial officer, of the
effectiveness and the design and operation of our disclosure controls and
procedures as of March 31, 2008, the end of the period covered by this
report. Based upon that evaluation, our chief executive officer and
our chief financial officer concluded that our disclosure controls and
procedures are effective to ensure that information required to be disclosed in
the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms and includes controls and
procedures designed to ensure that information required to be disclosed in these
reports is accumulated and communicated to our management, including our chief
executive officer and our chief financial officer, as appropriate to allow
timely decisions regarding the required disclosure.
The
Company’s Chief Executive Officer and Chief Financial Officer conclude that, as
of March 31, 2008, internal control over financial reporting was
effective.
Changes in Internal Control Over
Financial Reporting
. During the first quarter of 2008,
there were no changes in internal controls over financial
reporting.
PART II –
OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
As the
Company previously reported, on November 29, 2007 the settlement agreement
concerning the Company's litigation with Farhad Zaghi and related parties
(collectively, "Zaghi") was deemed null and void by Zaghi.
The
parties have since attended a court-ordered settlement conference, and all
parties other than Greg Halpern (the Company's former CEO) have reached a new
settlement agreement. Whereas the old agreement had two components: (1) the
Company would have an open-ended obligation to issue common stock to Zaghi until
he realized proceeds of approximately $1.7 million from the sale of stock before
the litigation would be dismissed, and (2) the issuance of approximately 2.26
million warrants, the new agreement requires only that a fixed number of shares
and warrants be issued to Zaghi. Specifically, under the new settlement
agreement, the Company has agreed to issue to a Zaghi affiliate and register for
resale 3 million shares of the Company's common stock and a warrant to purchase
an additional 2.5 million shares of the Company's common stock. See
also Note 11 for disclosure of the 2007 loss recognized. The warrant
is immediately exercisable, with a three-year term and a variable exercise price
equal to the lowest twelve-trading-day average closing price of the Company's
common stock during the period between the date of issuance of the warrant and
the date of notice of exercise. Under the new settlement agreement, the parties
to the agreement have agreed to dismiss their cases without prejudice, and have
exchanged covenants not to sue. The Company's registration obligation with
respect to the settlement shares and the shares underlying the warrants is on a
best-efforts basis, but because the registration was not effective by March 17,
2008, Zaghi has the right to terminate the agreement. The Company has
already listed the shares with Amex, and filed a registration statement with the
S.E.C. As soon as the S.E.C. approves the registration statement, the
shares will become free-trading, and the parties will be obligated to dismiss
the case.
On July
7, 2007, the Company was served with a complaint by Joseph Sanfilippo and James
Cluck for violation of the Consumer Fraud Act, purportedly due to the Company’s
refusal to allow for the exercise of 300,000 stock
options. Management believes that the allegations are frivolous and
wholly without merit and will vigorously defend the claim.
On March
20, 2007, the Company filed a patent infringement suit in the United States
District Court for the Western District of Wisconsin seeking unspecified damages
and equitable relief against a manufacturer of a competing
product. On January 28, 2008, the Court granted summary judgment in
favor of the Defendant, finding non-infringement. The Company has
since filed an appeal.
On
January 18, 2007, the Company was served with a complaint by Daniel Caravette
for breach of contract and violation of the Illinois Wage Payment and Collection
Act, seeking damages in excess of $1,000,000. The Company settled
this case as set forth above in Note 11.
On
November 23, 2005, the Company entered into a Letter of Agreement ("LOA") with
George Foreman Enterprises, Inc. ("GFME") pursuant to which both parties would
form a new limited liability company for the purpose of promoting the Company's
zero calorie fat replacement food ingredient, Z Trim®. The parties
did not reach any definitive Agreement as is required by the LOA. On
May 9, 2006, the Company filed a lawsuit alleging breach of the Parties'
nondisclosure agreement and trade secret misappropriation in the Circuit Court
of the 19th Judicial District, Lake County, Illinois seeking damages and
injunctive relief against GFME. On August 3, 2006 the court, based
upon a finding that the Company has demonstrated a likelihood of success on the
merits of the case, issued an order granting the Company a preliminary
injunction enforcing the non-disclosure agreement between the
parties. GFME subsequently appealed the preliminary
injunction. The Appellate Court denied GFME’s appeal, and the
injunctive order remains in place.
On July
17, 2006, George Forman Enterprises, Inc. filed a complaint against Z Trim
Holdings, Inc. in the U.S. District Court seeking damages in excess of
$70,000,000 for specific performance, breach of contract, promissory estoppel
and unjust enrichment. The basis for all such claims is the
underlying LOA, set forth above. The Company received summary
judgment in its favor as to the count seeking promissory
estoppel. Further, on September 18, 2007, the Court issued a number
of orders limiting the evidence that GFME may bring in support of its claims.
Management believes that GFME’s allegations are frivolous and wholly without
merit and will vigorously defend the claim. The trial date of
February 2008 has been stricken, and reset for September 2008.
During
November 2007, the Company determined, through the course of its
investigation of all prior equity transactions, that 1,040,000 options that were
issued in 2002 and 2003 to a former officer were both issued without proper
authorization and non-qualified stock options, as opposed to
qualified. The Company had previously treated these options as if
properly issued and as qualified “incentive stock options.” The
former officer exercised these options in 2004 and 2005, resulting in the
issuance of 1,040,000 shares of common stock. The Company shall seek
to rescind these transactions and thus recover the shares. In order
to do so, the Company would have to reimburse the former officer the amount paid
to exercise the options (listed at $132,000). If the Company is
unsuccessful in recovering the shares, it could potentially be responsible for
unpaid FICA and Medicare taxes resulting from the re-classification of the
options from qualified to non-qualified. This potential liability
would be for approximately $166,000, half of which would be the responsibility
of the Company, and half of which would the responsibility of the former
officer.
ITEM
1A. RISK FACTORS
There have been no material changes to
the risk factors disclosed in Item 1A Risk Factors in our Annual Report for the
year ended December 31, 2007.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
NONE
ITEM
3. DEFAULS UPON SENIOR SECURITIES
NONE
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM
5. OTHER INFORMATION
NONE
ITEM
6. EXHIBITS
A list of
the exhibits required to be filed as part of this report are presented in the
Exhibit Index.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized as of May 14, 2008.
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Z
TRIM HOLDINGS, INC.
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By:
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/s/ Steven
J. Cohen
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Steven
J. Cohen
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Director,
and Chief Executive Officer
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In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities as of May
15, 2008.
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/s/
Steven J. Cohen
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Steven
J. Cohen
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Director
and Chief Executive Officer
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(principal
executive officer)
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/s/
Brian Chaiken
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Brian
Chaiken
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Chief
Financial Officer
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(principal
financial or accounting officer)
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INDEX OF
EXHIBITS
EXHIBIT
NO. DESCRIPTION
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3(i)
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Articles
of Incorporation of Z Trim Holdings, Inc. (filed as Exhibit 2.1 to the
Company's Form 10-SB filed on August 21, 2000, and as Exhibit 3.3 to the
Company's Form 10-QSB filed on August 16, 2004, and incorporated herein by
reference).
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3(ii)
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Bylaws
of Z Trim Holdings, Inc., as amended (filed as Exhibit 2.2 to the
Company’s Registration Statement on Form 10-SB, Exhibit 3(ii) to the
Company’s Form 8-K filed on November 2, 2007, and as Exhibit 3(ii) to the
Company’s Form 8-K filed on November 16, 2007, and incorporated herein by
reference).
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4.1
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Specimen
Certificate for common stock (filed as Exhibit 3.1 to the Company's Form
10-SB filed on August 21, 2000, and incorporated herein by
reference).
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4.2
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Form
of Subscription Agreement (filed as Exhibit 4.1 to the Company's Form 8-K
filed on March 30, 2006 and incorporated herein by
reference).
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4.3
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Form
of Warrant to Purchase Common Stock (filed as Exhibit 4.2 to the Company's
Form 8-K filed on March 30, 2006 and incorporated herein by
reference).
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4.4
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Form
of Registration Rights Agreement (filed as Exhibit 4.3 to the Company's
Form 8-K filed on March 30, 2006 and incorporated herein by
reference).
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4.5
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Form
of Subscription Agreement (filed as Exhibit 4.5 to the Company’s Form
10-KSB filed on April 2, 2007 and incorporated herein by
reference).
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4.6
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Form
of Warrant to Purchase Common Stock (filed as Exhibit 4.6 to the Company’s
Form 10-KSB filed on April 2, 2007 and incorporated herein by
reference).
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4.7
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Form
of Registration Rights Agreement (filed as Exhibit 4.7 to the Company’s
Form 10-KSB filed on April 2, 2007 and incorporated herein by
reference).
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10.1
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Steve
Cohen Employment Agreement (filed as Exhibit 10.12 to the Company’s Form
10-QSB for the quarter ending June 20, 2006 and incorporated herein by
reference).
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10.2
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Brian
Chaiken Employment Agreement, dated October 17, 2007 (filed as Exhibit
10.2 to the Company’s Form 10-KSB filed on April 15, 2008 and incorporated
herein by reference).
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10.3
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Michael
J. Theriault Employment Agreement (filed as Exhibit 10.2 to the Company’s
Form 10-KSB filed on April 2, 2007 and incorporated herein by
reference).
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10.4
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Z
Trim Holdings, Inc. 2004 Equity Incentive Plan (filed as Appendix C to the
Z Trim's Proxy Statement for its Annual Meeting conducted on June 16, 2004
and approved by its Shareholders on that date and incorporated herein by
reference).
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10.5
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Industrial
Lease Agreement between CLO Enterprises and Z Trim Holdings, Inc. dated
May 20, 1999 (filed as Exhibit 6.7 the Company’s Registration Statement on
Form 10-SB and incorporated herein by
reference).
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10.6
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Industrial
Lease Agreement between CLO Enterprises and Z Trim Holdings, Inc. dated
June 18, 1999 (filed as Exhibit 6.8 to Z Trim's Registration Statement on
Form 10-SB and incorporated herein by
reference).
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10.7
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Assignment
of License Agreement between UTEK Corporation, Z Trim Holdings, Inc. and
Brookhaven Science Associates dated March 26 2003 (filed as Exhibit 10.14
to Z Trim's Form 10-QSB for the quarter ending September 30, 2003 and
incorporated herein by reference).
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10.8
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Assignment
of License Agreement between UTEK Corporation, Z Trim Holdings, Inc. and
University of Illinois dated July 9, 2003 (filed as Exhibit 10.15 to Z
Trim's Form 10-QSB for the quarter ending September 30, 2003
and incorporated herein by
reference).
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10.9
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Assignment
of License Agreement between Z Trim Holdings, Inc. and Brookhaven Science
Associates dated July 22, 2003 (filed as Exhibit 10.16 to Z Trim's Form
10-QSB for the quarter ending September 30, 2003 and incorporated herein
by reference).
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31.1*
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Statement
Under Oath of Principal Executive Officer of the Company pursuant to
Section 302 of Sarbanes-Oxley Act of
2002.
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31.2*
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Statement
Under Oath of Principal Financial Officer of the Company pursuant to
Section 302 of Sarbanes-Oxley Act of
2002.
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32.1*
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Statement
Under Oath of Principal Executive Officer of the Company pursuant to
Section 906 of Sarbanes-Oxley Act of
2002.
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32.2*
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Statement
Under Oath of Principal Financial Officer of the Company pursuant to
Section 906 of Sarbanes-Oxley Act of
2002.
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----------------------
*Filed
herewith
INDEX TO
FINANCIAL STATEMENTS
|
|
PAGE
|
|
|
|
|
Consolidated
Balance Sheet at March 31, 2008 (unaudited) and
December
31, 2007
|
F-1
|
|
|
|
|
Consolidated
Statements of Operations as of March 31, 2008 and 2007 (unaudited)..
|
F-3
|
|
|
|
|
Consolidated
Statements of Cash Flows as of March 31, 2008 and 2007
(unaudited)
|
F-4
|
|
|
|
|
Notes
to Consolidated Financial Statements as of March 31, 2008 and
2007
(unaudited)
|
F-5
|
Z TRIM HOLDINGS INC AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
Current
Assets
|
|
3/31/2008
|
|
|
12/31/2007
|
|
|
Cash
and cash equivalents
|
|
$
|
996,426
|
|
|
$
|
2,436,581
|
|
|
Accounts
receivable (net of allowance of $1,005 in 2008
|
|
|
and $1,005
in 2007)
|
|
|
18,080
|
|
|
|
7,522
|
|
|
Inventory
|
|
|
672,740
|
|
|
|
592,666
|
|
|
Prepaid
expenses and other assets
|
|
|
106,807
|
|
|
|
152,597
|
|
|
Net
assets of discontinued operations
|
|
|
-
|
|
|
|
485
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
1,794,053
|
|
|
|
3,189,851
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
6,072,324
|
|
|
|
6,221,653
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
|
|
|
|
|
Intangible
assets, net
|
|
|
-
|
|
|
|
140,001
|
|
|
Deposits
|
|
|
14,453
|
|
|
|
14,453
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other assets
|
|
|
14,453
|
|
|
|
154,454
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
7,880,830
|
|
|
$
|
9,565,958
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
Z TRIM HOLDINGS INC AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
Current
Liabilities
|
|
3/31/2008
|
|
|
12/31/2007
|
|
|
Accounts
payable
|
|
$
|
893,148
|
|
|
$
|
709,027
|
|
|
Accrued
expenses and other
|
|
|
1,017,562
|
|
|
|
2,189,308
|
|
|
Total
current liabilities
|
|
|
1,910,710
|
|
|
|
2,898,335
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.00005 par value; authorized 200,000,000
|
|
|
|
|
|
|
shares;
issued and outstanding 75,056,375 and
|
|
|
|
|
|
|
|
|
|
72,056,375
shares, respectively
|
|
|
3,753
|
|
|
|
3,600
|
|
|
Additional
paid-in capital
|
|
|
71,962,294
|
|
|
|
70,773,639
|
|
|
Accumulated
deficit
|
|
|
(65,995,927
|
)
|
|
|
(64,109,616
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
5,970,120
|
|
|
|
6,667,623
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
7,880,830
|
|
|
$
|
9,565,958
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
Z TRIM HOLDINGS INC AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
THE THREE MONTHS ENDED MARCH 31
|
|
2008
|
|
|
2007
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
Products
|
|
$
|
66,444
|
|
|
$
|
213,076
|
|
|
Services
|
|
|
-
|
|
|
|
147
|
|
|
Total
revenues
|
|
|
66,444
|
|
|
|
213,223
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUES:
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
493,705
|
|
|
|
600,687
|
|
|
Total
cost of revenues
|
|
|
493,705
|
|
|
|
600,687
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
MARGIN
|
|
|
(427,261
|
)
|
|
|
(387,464
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
1,081,111
|
|
|
|
3,234,445
|
|
|
Stock
based compensation expense
|
|
|
237,419
|
|
|
|
306,955
|
|
|
Impairment
of intangible assets
|
|
|
136,668
|
|
|
|
-
|
|
|
Amortization
of intangible assets
|
|
|
3,333
|
|
|
|
3,333
|
|
|
Loss
on asset disposals, net
|
|
|
(75,000
|
)
|
|
|
-
|
|
|
Total
operating expenses
|
|
|
1,383,531
|
|
|
|
3,544,733
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(1,810,792
|
)
|
|
|
(3,932,197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES):
|
|
|
|
|
|
|
|
|
|
Rental
and other income
|
|
|
10,863
|
|
|
|
10,500
|
|
|
Interest
income
|
|
|
13,836
|
|
|
|
1,242
|
|
|
Interest
expense
|
|
|
(35
|
)
|
|
|
(1,376
|
)
|
|
Settlement
(loss) gain
|
|
|
(100,180
|
)
|
|
|
-
|
|
|
Total
other income (expenses)
|
|
|
(75,516
|
)
|
|
|
10,366
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS
|
|
$
|
(1,886,308
|
)
|
|
$
|
(3,921,831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
DISCONTINUED
OPERATIONS
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations
|
|
|
|
|
|
|
|
|
|
(net
of applicable tax of $0 in 2008 and 2007)
|
|
$
|
-
|
|
|
$
|
15,020
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(1,886,308
|
)
|
|
$
|
(3,906,811
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss per Share from continuing operations
|
|
|
|
|
|
|
|
|
|
-
Basic and Diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.06
|
)
|
|
Net
Loss per Share - Basic and Diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Shares Basic and Diluted
|
|
|
75,056,375
|
|
|
|
65,678,053
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
Z TRIM HOLDINGS INC AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
FOR
THE THREE MONTHS ENDED MARCH 31
|
|
2008
|
|
|
2007
|
|
|
Cash
Flows From Operating Activities From Continuing
Operations:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,886,308
|
)
|
|
$
|
(3,906,811
|
)
|
|
Less:
Income from discontinued operations, net of tax
|
|
|
-
|
|
|
|
15,020
|
|
|
Adjustments
to reconcile loss from continuing operations to
|
|
|
|
|
|
|
|
|
|
net
cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
172,742
|
|
|
|
162,071
|
|
|
Issuance
of common stock and warrants for services
|
|
|
-
|
|
|
|
2,188,940
|
|
|
Amortization
of noncash expenses associated with stock and
|
|
|
|
|
|
|
|
|
|
warrants
issued for services
|
|
|
-
|
|
|
|
113,339
|
|
|
Stock
based compensation expense
|
|
|
237,419
|
|
|
|
306,955
|
|
|
Impairment
of intangible assets
|
|
|
136,668
|
|
|
|
-
|
|
|
Stock
and warrant settlement
|
|
|
97,026
|
|
|
|
-
|
|
|
(Increase)
in:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(10,558
|
)
|
|
|
(40,800
|
)
|
|
Inventory
|
|
|
(80,074
|
)
|
|
|
(136,563
|
)
|
|
Prepaid
expenses and other assets
|
|
|
45,790
|
|
|
|
(127,946
|
)
|
|
Increase
in:
|
|
|
-
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
(86,418
|
)
|
|
|
(69,571
|
)
|
|
Cash
flows used in operating activities from continuing
operations
|
|
|
(1,373,714
|
)
|
|
|
(1,525,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Investing Activities From Continuing
Operations:
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(20,080
|
)
|
|
|
(131,029
|
)
|
|
Cash
flows used in investing activities from continuing
operations
|
|
|
(20,080
|
)
|
|
|
(131,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Financing Activities From Continuing
Operations:
|
|
|
|
|
|
|
|
|
|
Net
proceeds from sales of stock
|
|
|
-
|
|
|
|
3,559,025
|
|
|
Exercise
of options and warrants
|
|
|
-
|
|
|
|
1,469,906
|
|
|
Payments
on capital lease obligations
|
|
|
-
|
|
|
|
(5,829
|
)
|
|
Cash
flows provided by financing activities from continuing
operations
|
|
|
0
|
|
|
|
5,023,102
|
|
|
Net
cash and cash equivalents used in (provided by) continuing
operations
|
|
|
(1,393,794
|
)
|
|
|
3,366,666
|
|
|
Net
cash and cash equivalents provided (used) by discontinued
operations
|
|
|
485
|
|
|
|
(14,820
|
)
|
|
Net
(decrease)increase in cash and cash equivalents
|
|
|
(1,393,309
|
)
|
|
|
3,351,846
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, at beginning of period
|
|
|
2,436,580
|
|
|
|
675,043
|
|
|
Cash
and cash equivalents, at end of period
|
|
$
|
1,043,272
|
|
|
$
|
4,026,889
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
35
|
|
|
$
|
1,376
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Schedule of Noncash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock and warrants for services
|
|
$
|
-
|
|
|
$
|
6,765
|
|
|
Issuance
of common stock in settlement of accrual
|
|
$
|
840,000
|
|
|
|
|
|
|
Stock
subscriptions receivable incurred for issuance of stock
|
|
$
|
-
|
|
|
$
|
3,398,976
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
NOTE 1 – NATURE OF BUSINESS
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of
Business
Z Trim
Holdings, Inc. (the “Company”) manufactures a line of functional food
ingredients that can be used to replace fats and deliver fiber to a wide variety
of foods. The Company’s products can be used by food manufacturers
and processors, restaurants, schools, and the general public worldwide. The
company continues to explore all available options for its other Z Trim
technologies and related assets.
The
Company has participated in several public and private offerings and has
expanded its business. In 2002, the Company acquired FiberGel
Technologies, Inc. (“FiberGel”), which owns an exclusive license to Z Trim, an
all-natural, agriculture-based fat replacement.
A summary
of significant accounting policies follows.
Presentation of Interim
Information
The
financial information at March 31, 2008 is unaudited, but includes all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation of the financial information set
forth herein, in accordance with accounting principles generally accepted in the
United States (“U.S. GAAP”) for interim financial information, and with the
instructions to Form 10-Q. Accordingly, such information does not include
all of the information and footnotes required by U.S. GAAP for annual financial
statements. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company’s annual Report on
Form 10-KSB for the year ended December 31, 2007.
The
results for the three months ended March 31, 2008 may not be indicative of
results for the year ending December 31, 2008 or any future
periods.
Principle of Consolidation
and Presentation
The
accompanying consolidated financial statements include the accounts of Z Trim
Holdings, Inc. and its subsidiaries after elimination of significantly all
intercompany accounts and transactions.
On
September 17, 2007, the Company resolved to discontinue all subsidiaries, other
than FiberGel. Accordingly, the accompanying consolidated financial
statements for the three months ended March 31, 2007 have been restated to
present the results of two out of three segments as discontinued
operations.
Use of
Estimates
The
preparation of the accompanying consolidated financial statements in conformity
with accounting principles generally accepted in the United States (U.S. GAAP)
requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Revenue
Recognition
The
Company generally recognizes product revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collectability is probable. In instances where the final acceptance of the
product is specified by the customer, revenue is deferred until all acceptance
criteria have been met. No provisions were established for estimated product
returns and allowances based on the Company’s historical
experience.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
NOTE 1 – NATURE OF BUSINESS
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Doubtful
Accounts
Management
of the Company makes judgments as to its ability to collect outstanding
receivables and provide allowances for the portion of receivables when
collection becomes doubtful. Provisions are made based upon a specific review of
all significant outstanding invoices. For those invoices not specifically
reviewed, provisions are provided at differing rates, based upon the age of the
receivable. In determining these percentages, management analyzes its historical
collection experience and current economic trends. If the historical data the
Company uses to calculate the allowance for doubtful accounts does not reflect
the future ability to collect outstanding receivables, additional provisions for
doubtful accounts may be needed and the future results of operations could be
materially affected. As of March 31, 2008, the allowance for doubtful
accounts was $1,005. As of March 31, 2007 the allowance for doubtful
accounts is $0.
Cash and cash
equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid
investments with a maturity of three months or less to be cash
equivalents.
Fair value of financial
instruments
All
financial instruments are carried at amounts that approximate estimated fair
value.
Concentrations
Cash and
cash equivalents are maintained with several financial institutions. Deposits
held with banks may exceed the amount of insurance provided on such deposits.
Generally, these deposits may be redeemed upon demand and therefore bear minimal
risk.
Inventory
Inventory
is stated at the lower of cost or market, using the first-in, first-out
method.
Property and
Equipment
Property
and equipment are stated at cost. Maintenance and repair costs are
expensed as incurred. Depreciation is calculated on the accelerated
and straight-line methods over the estimated useful lives of the assets.
Estimated useful lives of five to ten years are used for machinery and
equipment, office equipment and furniture, and automobile. Estimated useful
lives of up to five years are used for computer equipment and related software.
Depreciation and amortization of leasehold improvements are computed using the
term of the lease.
Intangible
Assets
Intangible
assets are carried at the purchased cost less accumulated amortization.
Amortization is computed over the estimated useful lives of the respective
assets, generally from fifteen to twenty years.
Impairment of Long-Lived
Assets
Long-lived
assets and certain identifiable intangible assets to be held and used are
reviewed for impairment whenever events or changes in circumstance indicate that
the carrying amount of such assets may not be recoverable. Determination of
recoverability is based on an estimate of undiscounted future cash flows
resulting from the use of the asset and its eventual disposition. Measurement of
an impairment loss for long-lived assets and certain identifiable intangible
assets that management expects to hold and use is based on the fair value of the
asset. Long-lived assets and certain identifiable intangible assets to be
disposed of are reported at the lower of carrying amount or fair value less
costs to sell.
NOTE 1 – NATURE OF BUSINESS
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income
Taxes
The
Company and its subsidiaries are included in the consolidated federal income tax
return filed by the Parent. The amount of current and deferred taxes
payable or refundable is recognized as of the date of the financial statements,
utilizing currently enacted tax laws and rates. Deferred tax expenses
or benefits are recognized in the financial statements for the changes in
deferred tax liabilities or assets between years.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
Advertising
Costs
The
Company expenses all advertising costs as incurred. The amount for
March 31, 2008 was $29,586. The amount for March 31, 2007 was
$120,768.
Income (Loss) Per Common
Share
Basic net
income (loss) per share includes no dilution and is computed by dividing net
income (loss) available to common stockholders by the weighted average number of
common stock outstanding for the period. Diluted earnings per share is computed
by dividing net income by the weighted average number of shares outstanding and,
when diluted, potential shares from options and warrants to purchase common
stock using the treasury stock method. Diluted net loss per common share does
not differ from basic net loss per common share since potential shares of common
stock are anti-dilutive for all periods presented.
Cashless Exercise of
Warrants
The
Company has issued warrants to purchase common stock where the holder is
entitled to exercise the warrant via a cashless exercise, when the exercise
price is less than the fair value of the common stock. The Company accounts
for
the
issuance of common stock on the cashless exercise of warrants on a net
basis.
Stock Based
Compensation
Effective
January 1, 2006, the Company adopted the fair value recognition provisions of
FASB Statement No. 123(R), “Share-Based Payment” (SFAS 123R), using the
modified-prospective-transition method. Under that transition method,
compensation cost recognized in 2006 includes: (a) compensation cost for all
share-based payments granted prior to, but not yet vested as of January 1, 2006
based on the grant date fair value calculated in accordance with the original
provisions of SFAS 123, and (b) compensation cost for all share-based payments
granted subsequent to December 31, 2005, based on the grant-date fair value
estimated in accordance with the provisions of SFAS 123(R).
As a
result of adopting SFAS 123(R) on January 1, 2006, the Company recognized
pre-tax compensation expense related to stock options of $237,419 and $306,955
for quarters ended March 31, 2008 and 2007, respectively. The March
31, 2007 stock option expense includes an additional charge of $12,607 from the
modification of 45,000 out-of-money options. These options were
granted a two year extension.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
NOTE 1 –NATURE OF BUSINESS
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting
Pronouncements
In May
2007, the FASB issued FASB Staff Position No. FIN 48-1 (“FSP 48-1”),
Definition of Settlement in FASB
Interpretation No. 48
. FSP 48-1 amended FIN 48 to provide
guidance on how an enterprise should determine whether a tax position is
effectively settled for the purpose of recognizing previously unrecognized tax
benefits. FSP 48-1 required application upon the initial adoption of
FIN 48. The adoption of FSP 48-1 did not affect the Company’s
consolidated financial statements.
In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Financial Accounting Standards (“FAS”) No. 159,
The Fair Value Option for Financial
Assets and
Financial
Liabilities - Including an amendment of FASB Statement No. 115
, which
permits entities to choose to measure many financial instruments and certain
other items at fair value at specified election dates. A business entity is
required to report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent reporting date. This
statement is expected to expand the use of fair value measurement. FAS No.159 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Company
believes this has no impact on its current financial reporting.
In
September 2006, the FASB issued FAS No. 157,
Fair Value Measurements
. FAS
No. 157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. This statement addresses how to calculate fair value
measurements required or permitted under other accounting pronouncements.
Accordingly, this statement does not require any new fair value measurements.
However, for some entities, the application of the statement will change current
practice. FAS No. 157 is effective for the Company beginning January 1, 2008.
The adoption of FAS No. 157 did not affect the Company’s consolidated financial
statements.
In
December 2007, the FASB issued SFAS No. 141 (R),
Business Combinations
, and
SFAS No. 160,
Noncontrolling
Interests in Consolidated Financial Statements
. SFAS N. 141
(R) requires an acquirer to measure the identifiable assets acquired, the
liabilities assumed and any noncontrolling interest in the acquiree at their
fair values on the acquisition date, with goodwill being the excess value over
the net identifiable assets acquired. SFAS No. 160 clarifies that a
noncontrolling interest in a subsidiary should be reported as equity in the
consolidated financial statements. The calculation of earnings per
share will continue to be based on income amounts attributable to the
parent. SFAS No. 141 (R) and SFAS No. 160 are effective for financial
statements issued for fiscal years beginning after December 15,
2008. Early adoption is prohibited. We have not yet
determined the effect on our consolidated financial statements, if any, upon
adoption of SFAS No. 141 (R) or SFAS No. 160.
NOTE 2 – GOING
CONCERN
The
Company's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. In
the near term, the Company expects operating costs to continue to exceed funds
generated from operations. As a result, the Company expects to
continue to incur operating losses and may not have enough capital to grow its
business in the future. The Company can give no assurance that it
will achieve profitability or be capable of sustaining profitable
operations. As a result, operations in the near future are expected
to continue to use working capital.
To
successfully grow the business, the Company must decrease its cash outflows,
improve its cash position and its revenue base, and succeed in its ability to
raise additional capital through a combination of primarily public or private
equity offerings or strategic alliances.
The
Company is currently in the process of obtaining additional financing for its
current operations.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
NOTE 3 –
INVENTORY
At March
31, 2008 and December 31, 2007, inventory consists of the
following:
|
|
|
3/31/2008
|
|
|
12/31/2007
|
|
|
Raw
materials
|
|
$
|
36,195
|
|
|
$
|
30,402
|
|
|
Work-in-process
|
|
|
-
|
|
|
|
4,850
|
|
|
Packaging
|
|
|
61,558
|
|
|
|
67,421
|
|
|
Finished
goods
|
|
|
574,987
|
|
|
|
489,993
|
|
|
Other
|
|
|
|
|
|
|
-
|
|
|
Total
inventory
|
|
$
|
672,740
|
|
|
$
|
592,666
|
|
NOTE 4 – PROPERTY AND
EQUIPMENT, NET
At March
31, 2008 and December 31, 2007, property and equipment, net consists of the
following:
|
|
|
3/31/2008
|
|
|
12/31/2007
|
|
|
Production,
engineering and other equipment
|
|
$
|
5,230,198
|
|
|
$
|
5,213,084
|
|
|
Leasehold
improvements
|
|
|
2,801,053
|
|
|
$
|
2,798,971
|
|
|
Office
equipment and furniture
|
|
|
591,853
|
|
|
$
|
591,384
|
|
|
Computer
equipment and related software
|
|
|
188,179
|
|
|
$
|
185,603
|
|
|
Construction
in process - equipment
|
|
|
62,700
|
|
|
$
|
64,860
|
|
|
|
|
|
8,873,982
|
|
|
|
8,853,903
|
|
|
Accumulated
depreciation
|
|
|
(2,801,659
|
)
|
|
|
(2,632,250
|
)
|
|
Property
and equipment, net
|
|
$
|
6,072,324
|
|
|
$
|
6,221,653
|
|
Depreciation expense was
$169,409 and $158,374 for the quarters ended March 31, 2008 and December 31,
2007, respectively.
NOTE 5 – INTANGIBLE
ASSETS
As of
April 16, 2008, management determined that it did not want to continue paying
the costs associated with the License Rights to our Nutritional Analysis Tools
System (“NATS”) website, and therefore the Company terminated the license
agreement and wrote off the asset as impaired. At March 31, 2008, the
carrying cost of $136,668 was expensed.
Amortization
of intangibles was $3,333 and $3,337 for the quarters ended March 31, 2008 and
2007, respectively.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
NOTE 6 – ACCRUED EXPENSES
AND OTHER
At March
31, 2008 and December 31, 2007 accrued expenses consist of the
following:
|
|
|
3/31/2008
|
|
|
12/31/2007
|
|
|
Accrued
legal
|
|
$
|
205,632
|
|
|
$
|
457,747
|
|
|
Accrued
payroll and taxes
|
|
|
34,793
|
|
|
|
65,510
|
|
|
Accrued
settlements
|
|
|
500,729
|
|
|
|
1,328,273
|
|
|
Accrued
expenses and other
|
|
|
276,408
|
|
|
|
337,778
|
|
|
Total
accrued expenses and other
|
|
$
|
1,017,562
|
|
|
$
|
2,189,308
|
|
NOTE 7 – CAPITAL LEASE
OBLIGATION
In August
2002, the Company sold certain property and equipment to an unrelated party for
$121,500 and leased the equipment back from the party under three lease
agreements that were classified as capital leases in accordance with SFAS 13,
“Accounting for Leases.” These assets are being depreciated over their estimated
useful economic lives and are included in the depreciation expense for the
quarters ended March 31, 2008 and 2007.
NOTE 8 – STOCKHOLDERS'
EQUITY/ SUBSEQUENT EVENT
Private Placement
Offerings
On
February 2, 2007, the Company entered into an agreement with J.P. Turner &
Company, L.L.C. to sell shares of the Company’s common stock, par value $0.00005
per share (“Common Stock”), and warrants exercisable for Common Stock (the
“Warrants”). The purchase price was $1.00 per share, which was
greater than 70% of the volume weighted average price of the Company’s common
stock for the 90 days from the day prior to the closing date, which was March
29, 2007. The investors also received a 25% stock warrant at an
exercise price equal to 120% of the purchase price. The Warrants have
a term of 5 years.
The
offering closed on March 29, 2007. In the aggregate the Company sold
8,000,000 shares of its common stock and 2,000,000 warrants. J.P.
Turner & Company, L.L.C received a placement fee of 10% of the gross
proceeds and 15% warrant coverage with an exercise price equal to the purchase
price. The Company received $6,958,000 in proceeds, which is net of
offering costs and commissions of $1,042,000.
The
Company filed a Registration Statement covering the resale of the Common Stock
underlying the units and Warrants with the SEC. The Company has
responded to all SEC comments and is waiting for the registration approval from
the SEC.
Exercising of Stock Warrants
and Options
During
the first three months of 2008 no stock warrants and options were
exercised. The Company received total proceeds of $1,469,000 by
virtue of 1,569,551 options and warrant exercised, and an additional 11,578
non-cash warrants exercised, in the first quarter of 2007.
On August
20, 2007, the Board cancelled all outstanding options held by the former CEO
Gregory J. Halpern and his family. This resulted in the cancellation
of 3,462,682 options.
Common Stock Issued on the
Cashless Exercise of Warrants
No shares
of common stock were issued on the cashless exercise of warrants during the
first three months of 2008. During the first three months of 2007,
the Company issued 11,578 shares of common stock on the cashless exercise of
warrants.
Director’s Grant of
Equity
On
January 3, 2008, the Board of Directors approved a compensation plan that
includes a grant of 200,000 shares of common stock to each of the five external
directors. A tax gross up of up to 35% will be
included. These shares were not issued in the first three months of
2008. The Board also created a pool of an additional 500,000 shares
of common stock that will be awarded based on the amount of time spent per
director on Company affairs outside of monthly board meetings.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
NOTE 9 – NET LOSS PER
SHARE
The
computation of basic and diluted net loss per share is as follows:
|
|
|
Three
Months Ended
|
|
|
|
|
March
31
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net
loss from continuing operations
|
|
$
|
(1,886,308
|
)
|
|
$
|
(3,921,831
|
)
|
|
Income
from discontinued operations
|
|
$
|
-
|
|
|
$
|
15,020
|
|
|
Net
loss
|
|
$
|
(1,886,308
|
)
|
|
$
|
(3,906,811
|
)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
75,056,375
|
|
|
|
65,678,053
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share from continuing operations- basic and
diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.06
|
)
|
|
Income
per share from discontinued operations - basic and diluted
|
|
$
|
-
|
|
|
$
|
0.00
|
|
|
Net
loss per share-basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.06
|
)
|
As the
Company incurred net losses for the three months ended March 31, 2008 and 2007,
the effect of dilutive securities totaling 2,206,128 and 3,906,811 equivalent
shares, respectively, has been excluded from the calculation of diluted loss per
share because the effect was anti-dilutive.
NOTE 10 – STOCK OPTION PLAN
AND WARRANTS
The
Company has a Stock Option Plan (the Plan) effective January 2, 1999 and amended
in 2002 and 2004, which provides for the issuance of qualified options to all
employees and non-qualified options to directors, consultants and other service
providers.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
A summary of the status of stock options as of March 31, 2008 and
2007
|
|
|
3/31/2008
|
|
|
12/31/2007
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Number
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
|
|
|
of
|
|
|
Exercise
|
|
|
of
|
|
|
Exercise
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Outstanding
at beginning of year
|
|
|
16,595,523
|
|
|
$
|
1.04
|
|
|
|
20,285,749
|
|
|
$
|
0.99
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
2,532,000
|
|
|
|
1.19
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
(453,318
|
)
|
|
|
0.77
|
|
|
Expired
and Cancelled
|
|
|
(491,750
|
)
|
|
$
|
1.06
|
|
|
|
(5,768,908
|
)
|
|
|
0.96
|
|
|
Outstanding
at end of period
|
|
|
16,103,773
|
|
|
$
|
1.04
|
|
|
|
16,595,523
|
|
|
$
|
1.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at end of period
|
|
|
16,053,773
|
|
|
$
|
1.04
|
|
|
|
16,270,523
|
|
|
$
|
1.04
|
|
At March
31, 2008 the aggregate intrinsic value of all outstanding options was $0 with a
weighted average remaining contractual term of 1.8 years, of which 16,053,773 of
the outstanding options are currently exercisable with an aggregate intrinsic
value of $0, a weighted average exercise price of $1.04 and a weighted average
remaining contractual term of 1.8 years. The total intrinsic value of
options exercised during the quarter ended March 31, 2008 was $0. The
total fair value of options vested during the first quarter of 2008 was
$237,419.
The fair
value of each stock option granted is estimated on the date of grant using the
Black-Scholes option valuation model. This model uses the assumptions
listed in the table below. Expected volatilities are based on the
historical volatility of the Company’s stock. The risk-free rate for
periods within the expected life of the option is based on the U.S. Treasury
yield curve in effect at the time of grant.
|
|
|
2008
|
|
|
2007
|
|
|
Weighted
average fair value per option granted
|
|
$
|
-
|
|
|
$
|
0.85
|
|
|
Risk-free
interest rate
|
|
|
0.00
|
%
|
|
|
4.54
|
%
|
|
Expected
dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
Expected
lives
|
|
|
-
|
|
|
|
3.00
|
|
|
Expected
volatility
|
|
|
0.00
|
%
|
|
|
112.92
|
%
|
As of
March 31, 2008, the unrecognized compensation cost related to non-vested
share-based compensation arrangements granted under the plan was $16,162, which
had an average expense recognition period of 135 days.
As of
March 31, 2008, the Company had reserved 20.0 million shares for issuance under
the Plan. As of March 31, 2008, the Company had 3.77 million options
available for grant under the Plan.
Stock
options outstanding at March 31, 2008 are as follows:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
|
|
Range
of
|
|
|
|
|
Remaining
|
|
Average
|
|
|
|
|
|
Exercise
|
|
|
Options
|
|
Contractual
|
|
Exercise
|
|
|
Options
|
|
|
Prices
|
|
|
Outstanding
|
|
Life
|
|
Price
|
|
|
Exercisable
|
|
|
$
|
0.01-$1.50
|
|
|
|
15,608,773
|
|
1.8
years
|
|
$
|
1.00
|
|
|
|
15,558,773
|
|
|
$
|
1.51-$3.00
|
|
|
|
495,000
|
|
1.9
years
|
|
$
|
2.35
|
|
|
|
495,000
|
|
|
|
|
|
|
|
16,103,773
|
|
1.8
years
|
|
$
|
1.04
|
|
|
|
16,053,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
As of
March 31, 2008 and 2007, the Company has warrants outstanding to purchase
6,879,234 and 4,347,048 shares of the Company’s common stock, respectively, at
prices ranging from $0.68 to $1.28 per share. These warrants expire
at various dates through May 2012. There were 0 warrants issued
in the first quarters of 2008 and 2007, respectively.
NOTE 11 – SETTLEMENT LOSSES/
SUBSEQUENT EVENT
In April
2008, the Company settled a case with a former employee, Daniel
Caravette. The Company agreed to pay $50,000 cash, and to provide
245,000 shares of unrestricted common stock with a fair value of $63,700 and
200,000 three-year warrants at a strike price of $0.26, with a fair value of
$33,326, in exchange for a release of all claims.
The
Company executed an agreement with Farhad Zaghi on February 8,
2008. Pursuant to the agreement, 3,000,000 shares of the Company’s
common stock were issued at a fair value of $840,000 and 2,500,000 warrants are
to be issued with a fair value of $353,703 as of March 31, 2008.
NOTE 12 – MAJOR CUSTOMERS
AND CREDIT CONCENTRATION
The
Company’s customers are food manufacturers, school districts and the general
public that orders directly over the internet. There were four
significant customers that accounted for greater than 10% (each) for the quarter
ended March 31, 2008. There were no significant customers for the quarter ended
March 31, 2007. There were no outstanding amounts at March 31,
2008.
The
Company maintains cash deposits with major banks, which from time to time may
exceed federally insured limits. At March 31, 2008 and December 31,
2007, $896,426 and $2,337,048 respectively, were in excess of federally insured
limits. The Company periodically assesses the financial condition of
the institutions and believes that the risk of any loss is minimal.
NOTE 13 –
COMMITMENTS
Building
Lease
The
Company leases a combined production and office facility located in Mundelein,
Illinois. The facility is approximately 44,000 square
feet. The Company extended the lease until March 2010 and the
required monthly rental payments increased to $21,000, exclusive of property
taxes. The Company also is responsible for payment of all
property taxes. Insurance and maintenance are billed when
due.
The
Company subleases approximately 9,800 square feet of the facility to two
tenants. Both tenants terminated their respective leases in
2008.
The
Company also leases a 5,000 square foot warehouse in Mundelein,
Illinois. The lease commenced on August 1, 2007 and ends July 31,
2011. The monthly net rent is $2,750.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
The
future minimum annual rental payments and sub-lease income for the years ended
December 31 under the lease terms are as follows:
|
Year Ended
|
|
Rentals
|
|
|
2009
|
|
|
285,000
|
|
|
2010
|
|
|
96,000
|
|
|
2011
|
|
|
19,250
|
|
|
|
|
$
|
400,250
|
|
NOTE 14 – PENDING
LITIGATION/ CONTINGENT LIABILITY/ SUBSEQUENT EVENT
As the
Company previously reported, on November 29, 2007 the settlement agreement
concerning the Company's litigation with Farhad Zaghi and related parties
(collectively, "Zaghi") was deemed null and void by Zaghi.
The
parties have since attended a court-ordered settlement conference, and all
parties other than Greg Halpern (the Company's former CEO) have reached a new
settlement agreement. Whereas the old agreement had two components: (1) the
Company would have an open-ended obligation to issue common stock to Zaghi until
he realized proceeds of approximately $1.7 million from the sale of stock before
the litigation would be dismissed, and (2) the issuance of approximately 2.26
million warrants, the new agreement requires only that a fixed number of shares
and warrants be issued to Zaghi. Specifically, under the new settlement
agreement, the Company has agreed to issue to a Zaghi affiliate and register for
resale 3 million shares of the Company's common stock and a warrant to purchase
an additional 2.5 million shares of the Company's common stock. See
also Note 11 for disclosure of the 2007 loss recognized. The warrant
is immediately exercisable, with a three-year term and a variable exercise price
equal to the lowest twelve-trading-day average closing price of the Company's
common stock during the period between the date of issuance of the warrant and
the date of notice of exercise. Under the new settlement agreement, the parties
to the agreement have agreed to dismiss their cases without prejudice, and have
exchanged covenants not to sue. The Company's registration obligation with
respect to the settlement shares and the shares underlying the warrants is on a
best-efforts basis, but because the registration was not effective by March 17,
2008, Zaghi has the right to terminate the agreement. The Company has
already listed the shares with Amex, and filed a registration statement with the
S.E.C. As soon as the S.E.C. approves the registration statement, the
shares will become free-trading, and the parties will be obligated to dismiss
the case.
On July
7, 2007, the Company was served with a complaint by Joseph Sanfilippo and James
Cluck for violation of the Consumer Fraud Act, purportedly due to the Company’s
refusal to allow for the exercise of 300,000 stock
options. Management believes that the allegations are frivolous and
wholly without merit and will vigorously defend the claim.
On March
20, 2007, the Company filed a patent infringement suit in the United States
District Court for the Western District of Wisconsin seeking unspecified damages
and equitable relief against a manufacturer of a competing
product. On January 28, 2008, the Court granted summary judgment in
favor of the Defendant, finding non-infringement. The Company has
since filed an appeal.
On
January 18, 2007, the Company was served with a complaint by Daniel Caravette
for breach of contract and violation of the Illinois Wage Payment and Collection
Act, seeking damages in excess of $1,000,000. The Company settled
this case as set forth above in Note 11.
NOTE 14 – PENDING
LITIGATION/ CONTINGENT LIABILITY/ SUBSEQUENT EVENT
(CONTINUED)
On
November 23, 2005, the Company entered into a Letter of Agreement ("LOA") with
George Foreman Enterprises, Inc. ("GFME") pursuant to which both parties would
form a new limited liability company for the purpose of promoting the Company's
zero calorie fat replacement food ingredient, Z Trim®. The parties
did not reach any definitive Agreement as is required by the LOA. On
May 9, 2006, the Company filed a lawsuit alleging breach of the Parties'
nondisclosure agreement and trade secret misappropriation in the Circuit Court
of the 19th Judicial District, Lake County, Illinois seeking damages and
injunctive relief against GFME. On August 3, 2006 the court, based
upon a finding that the Company has demonstrated a likelihood of success on the
merits of the case, issued an order granting the Company a preliminary
injunction enforcing the non-disclosure agreement between the
parties. GFME subsequently appealed the preliminary
injunction. The Appellate Court denied GFME’s appeal, and the
injunctive order remains in place.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
On July
17, 2006, George Forman Enterprises, Inc. filed a complaint against Z Trim
Holdings, Inc. in the U.S. District Court seeking damages in excess of
$70,000,000 for specific performance, breach of contract, promissory estoppel
and unjust enrichment. The basis for all such claims is the
underlying LOA, set forth above. The Company received summary
judgment in its favor as to the count seeking promissory
estoppel. Further, on September 18, 2007, the Court issued a number
of orders limiting the evidence that GFME may bring in support of its claims.
Management believes that GFME’s allegations are frivolous and wholly without
merit and will vigorously defend the claim. The trial date of
February 2008 has been stricken, and reset for September 2008.
During
November 2007, the Company determined, through the course of its
investigation of all prior equity transactions, that 1,040,000 options that were
issued in 2002 and 2003 to a former officer were both issued without proper
authorization and non-qualified stock options, as opposed to
qualified. The Company had previously treated these options as if
properly issued and as qualified “incentive stock options.” The
former officer exercised these options in 2004 and 2005, resulting in the
issuance of 1,040,000 shares of common stock. The Company shall seek
to rescind these transactions and thus recover the shares. In order
to do so, the Company would have to reimburse the former officer the amount paid
to exercise the options (listed at $132,000). If the Company is
unsuccessful in recovering the shares, it could potentially be responsible for
unpaid FICA and Medicare taxes resulting from the re-classification of the
options from qualified to non-qualified. This potential liability
would be for approximately $166,000, half of which would be the responsibility
of the Company, and half of which would the responsibility of the former
officer.
NOTE 15 – RELATED PARTY
TRANSACTIONS
There
were no related party transactions for the first three months of
2008. There were no related party transactions for the first three
months of 2007.
NOTE 16 –
GUARANTEES
The
Company from time to time enters into certain types of contracts that
contingently require the Company to indemnify parties against third party
claims. These contracts primarily relate to: (i) divestiture agreements, under
which the Company may provide customary indemnifications to purchasers of the
Company’s businesses or assets; (ii) certain real estate leases, under which the
Company may be required to indemnify property owners for environmental and other
liabilities, and other claims arising from the Company’s use of the applicable
premises; and (iii) certain agreements with the Company's officers, directors
and employees, under which the Company may be required to indemnify such persons
for liabilities arising out of their employment relationship. The
terms of such obligations vary. Generally, a maximum obligation is not
explicitly stated. Because the obligated amounts of these types of agreements
often are not explicitly stated, the overall maximum amount of the obligations
cannot be reasonably estimated. Historically, the Company has not been obligated
to make significant payments for these obligations, and no liabilities have been
recorded for these obligations on its consolidated balance sheet as of March 31,
2008.
In
general, the Company offers a one-year warranty for most of the products it
sold. To date, the Company has not incurred any material costs
associated with these warranties.
NOTE 17 – SEGMENT
INFORMATION
The
Company evaluates its reporting segments in accordance with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. The Chief
Executive Officer has been identified as the Chief Operating Decision Maker as
defined by SFAS No. 131. The Chief Executive Officer allocates resources to each
segment based on their business prospects, competitive factors, net sales and
operating results.
The
Company’s structure includes three principal operating segments: (i) Food
Product Development, (ii) Security Training and Products and (iii)
E-tailer. The food product development segment owns the exclusive,
worldwide license to Z Trim(TM). The Security training offers cost
effective self-defense training courses and products with a uniquely targeted
curriculum. The e-tailer segment is a distributor of pillows,
blankets, and other bedding products. In third quarter of 2007, the
Company resolved to discontinue all subsidiaries, other than Fiber-Gel. As a
result, the security training and products segment and e-tailer segment are
reclassified to discontinued operations and the food product development segment
remains as the Company’s reportable segment The Company also has other
subsidiaries that do not meet the quantitative thresholds of a reportable
segment.
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
The
Company reviews the operating segments’ income to evaluate performance and to
allocate resources. Operating companies' income for the reportable segments
excludes income taxes, minority interest and amortization of goodwill. Provision
for income taxes is centrally managed at the corporate level and, accordingly,
such items are not presented by segment. The segments' accounting policies are
the same as those described in the summary of significant accounting
policies.
Intersegment
transactions are recorded at cost.
NOTE 17 – SEGMENT
INFORMATION (CONTINUED)
Summarized
financial information of the Company’s results by operating segment is as
follows:
|
|
|
Three
Months Ended
|
|
|
|
|
March
31
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Net
Revenue:
|
|
|
|
|
|
|
|
Food
Product Development
|
|
$
|
66,444
|
|
|
$
|
213,076
|
|
|
Net
Revenue by Reportable Segment
|
|
$
|
66,444
|
|
|
$
|
213,076
|
|
|
All
Other Operating Revenue
|
|
|
-
|
|
|
|
147
|
|
|
Consolidated
Net Revenue
|
|
$
|
66,444
|
|
|
$
|
213,223
|
|
|
Operating
Income (Loss):
|
|
|
|
|
|
|
|
|
|
Food
Product Development
|
|
$
|
(756,346
|
)
|
|
$
|
(765,909
|
)
|
|
Operating
Loss by Reportable Segment
|
|
$
|
(756,346
|
)
|
|
$
|
(765,909
|
)
|
|
All
Other Operating Loss
|
|
|
(1,054,446
|
)
|
|
|
(3,166,288
|
)
|
|
Consolidated
Operating Loss
|
|
$
|
(1,810,792
|
)
|
|
$
|
(3,932,197
|
)
|
|
Net
Loss:
|
|
|
|
|
|
|
|
|
|
Food
Product Development
|
|
$
|
(756,346
|
)
|
|
$
|
(766,136
|
)
|
|
Net
Loss by Reportable Segment
|
|
$
|
(756,346
|
)
|
|
$
|
(766,136
|
)
|
|
All
Other Net Loss
|
|
|
(1,129,962
|
)
|
|
|
(3,155,695
|
)
|
|
Consolidated
Net Loss from
|
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
|
$
|
(1,886,308
|
)
|
|
$
|
(3,921,831
|
)
|
|
Net (Loss)
Income from Discontinued
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
Personal
Safety Training and Products
|
|
$
|
-
|
|
|
$
|
533
|
|
|
E-tailer
|
|
|
-
|
|
|
|
14,487
|
|
|
Net
(Loss) Income from
|
|
|
|
|
|
|
|
|
|
Discontinued
Operations
|
|
$
|
-
|
|
|
$
|
15,020
|
|
|
Consolidated
Net Loss
|
|
$
|
(1,886,308
|
)
|
|
$
|
(3,906,811
|
)
|
Z
TRIM HOLDING INC
NOTES
TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
|
|
|
March
31
|
|
|
Total
Assets:
|
|
2008
|
|
|
2007
|
|
|
Food
Product Development
|
|
$
|
6,290,528
|
|
|
$
|
6,365,973
|
|
|
All
other segments
|
|
|
1,590,302
|
|
|
|
4,673,488
|
|
|
|
|
|
7,880,830
|
|
|
|
11,039,461
|
|
|
Discontinued
Operations:
|
|
|
|
|
|
|
|
|
|
Personal
Safety Training and Products
|
|
|
-
|
|
|
|
62,036
|
|
|
E-tailer
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
62,036
|
|
|
Consolidated
assets
|
|
$
|
7,880,830
|
|
|
$
|
11,101,497
|
|
F-17
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