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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
_X_ Quarterly report under Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the quarterly period ended October 1, 1996.
___ Transition report under Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the transition period from ____ to_____.
COMMISSION FILE NUMBER 333-5488-D
STOICO RESTAURANT GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 48-1177558
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3151 North Rock Road, Wichita, Kansas 67226
(Address of principal executive office) (Zip code)
(316) 636-5776
(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 past 90 days. Yes __ No _X_.
At October 1, 1996, 4,307,027 shares of common stock, $0.01 per share par
value were outstanding.
Transitional Small Business Disclosure Format (check one): Yes __ No _X_:
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STOICO RESTAURANT GROUP, INC.
INDEX TO 10-QSB FOR THE QUARTERLY
PERIOD ENDED OCTOBER 1, 1996
PAGE
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Stoico Restaurant Group, Inc. and Subsidiaries
Consolidated Balance Sheet - October 1, 1996
and December 26, 1995 3
Stoico Restaurant Group, Inc. and
Subsidiaries Consolidated Statement of
Operations - Twelve Week Period and Forty Week
Period ended October 1, 1996 and October 3, 1995,
respectively. 4
Stoico Restaurant Group, Inc. and Subsidiaries
Consolidated Statement of Cash Flows - Forty Week
Period ended October 1, 1996 and October 3, 1995,
respectively. 5
Notes to Consolidated Financial Statements -
October 1, 1996 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION 7
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS 15
ITEM 2: CHANGES IN SECURITIES 15
ITEM 3: DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF
SECURITY-HOLDERS 15
ITEM 5: OTHER INFORMATION 15
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 17
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Stoico Restaurant Group, Inc. and Subsidiaries
Consolidated Balance Sheet
October 1, 1996 and December 26, 1995
(Unaudited)
October 1, December 26,
ASSETS 1996 1995
------ --------- ------------
Current assets:
Cash and cash equivalents $221,413 $ 784,171
Receivables 62,943 56,482
Inventories 115,961 108,880
Prepaid expenses and other
current assets 152,503 42,012
------- --------
Total current assets 552,820 991,545
Property and equipment 1,725,486 1,693,354
Goodwill, net of amortization of
$60,551 and $10,165, respectively 1,005,518 1,055,903
Notes receivable:
Officer 225,000 -
Other, net of related deferred
income of $228,615 at October 1, 1996 17,385
Deferred offering costs 281,621 -
Other assets 49,570 14,572
--------- ----------
Total assets $3,857,400 $ 3,755,374
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Current liabilities:
Accounts payable $ 777,084 $ 698,766
Accrued expenses 458,314 28,190
Current portion of long-term debt 1,896,695 357,139
Deferred revenue 115,000 36,917
--------- ---------
Total current liabilities 3,247,093 1,380,012
Long-term debt, less current portion 3,757,822 4,661,415
Long-term lease obligation on
closed store 123,333 -
Deferred revenue 140,000 -
--------- ---------
Total liabilities 7,268,248 6,041,427
Redeemable equity-common stock
subject to rescission; 0 shares at
October 1, 1996 and 684,915 shares at
December 26, 1995 - 1,250,526
Stockholders' equity (deficit):
Preferred stock, $.01 par value,
5,000,000 shares authorized at October
1, 1996 and December 26, 1995,
0 shares issued and outstanding
Common stock, $.01 par value,
20,000,000 shares authorized,
4,307,027 and 3,046,604 issued at
October 1, 1996 and December 26,
1995 43,070 30,466
Additional paid-in capital 4,482,362 2,810,596
Accumulated deficit (7,936,280) (6,377,641)
----------- -----------
Total stockholders'
equity (deficit) (3,410,848) (2,286,053)
Commitments - -
----------- -----------
Total liabilities and stockholders'
equity (deficit) $3,857,400 $3,755,374
========== ==========
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Stoico Restaurant Group, Inc. and Subsidiaries
Consolidated Statement of Operations
(Unaudited)
Twelve Week Forty Week
Period Ended Period Ended
--------------------- --------------------
October 1, October 3, October 1, October 3,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Revenues:
Sales $1,579,906 $1,506,270 $5,228,920 $4,564,382
Royalty income 30,673 42,890 104,248 112,258
Franchise fees - - 34,000 -
---------- ---------- ---------- ----------
Total revenues 1,610,579 1,549,160 5,367,168 4,676,640
---------- ---------- ---------- ----------
Cost of sales:
Food and paper: 500,396 468,587 1,651,954 1,489,018
Wages and benefits 522,902 475,287 1,676,633 1,596,835
---------- ---------- ---------- ---------
Total cost of sales 1,023,298 943,874 3,328,587 3,085,853
---------- ---------- ---------- ---------
Gross profit 587,281 605,286 2,038,581 1,590,787
Restaurant operating expenses 453,096 408,811 1,547,667 1,153,020
Pre-opening expenses 97,389 - 133,973 -
Administrative expenses 474,405 368,139 1,329,031 1,027,344
Noncash compensation expense - - 13,749 -
--------- ---------- --------- ---------
Operating loss (437,609) (171,664) (985,839) (589,577)
Other income (expense):
Miscellaneous other income 5,621 24,877 31,695 58,377
Provision for lease obligation
on closed store - - (175,855) -
Interest income 17,056 28,319 42,824 40,596
Interest expense (161,859) (143,675) (471,464) (295,922)
Equity in income of joint
ventures - 7,986 - 16,812
Minority interests in
loss of entities - (5,410) - 35,266
not wholly-owned
--------- ----------- --------- --------
Loss before income taxes (576,791) (259,567) (1,558,639) (734,448)
Income taxes - - - -
--------- ----------- --------- --------
Net loss $(576,791) $(259,567) $(1,558,639)$(734,448)
========== =========== ========== ==========
Loss per common share $ (0.13) $ (0.06) $ (0.36) $ (0.18)
========== =========== ========== ==========
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Stoico Restaurant Group, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
Forty Week
Period Ended
------------------------------------------
October 1, October 3,
1996 1995
--------------------- -------------------
Cash from operating activities:
Net loss $(1,558,639) $(734,448)
Adjustments to reconcile net
loss to net cash used in
operating activities, net of
amounts acquired in purchase
of joint ventures:
Depreciation and amortization 321,256 173,101
Loss (gain) on disposal
of equipment 3,302 -
(Increase) decrease in receivables (6,461) (56,928)
Increase in inventories (7,081) (2,611)
Increase in notes receivable (242,385) -
Decrease (increase) in prepaid
expenses other current assets (110,491) 24,039
(Decrease) increase in accounts
payable 78,318 (70,250)
(Decrease) increase in accrued
expenses 171,124 (63,564)
Increase in long-term lease
obligation on closed store 123,333 -
(Decrease) increase in deferred
revenues 218,083 (20,000)
Loss attributable to minority
interests - (35,266)
Income attributable to investment
in joint ventures - (16,812)
Decrease (increase) in other assets (34,998) 16,154
-------- --------
Net cash used in operating
activities (1,044,639) (786,585)
----------- ---------
Cash flows from investing activities:
Purchase of property, plant and
equipment (606,949) (477,269)
Purchase of remaining interest
in limited partnerships and
joint ventures, net of cash
acquired - (586,272)
Proceeds from sale of restaurant 251,300 -
---------- ---------
Net cash used in investing
activities (355,649) (1,063,541)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of
long-term debt 1,000,000 3,020,000
Principal payments on
long-term debt (195,944) (93,460)
Proceeds from issuance of common
stock 315,095 152,200
Deferred offering costs (281,621) -
Distributions to minority interests - (45,159)
---------- ----------
Net cash provided by financing
activities 837,530 3,033,581
---------- ----------
Net increase (decrease) in
cash and cash equivalents (562,758) 1,183,455
Cash and cash equivalents at
beginning of period 784,171 31,317
---------- ---------
Cash and cash equivalents at
end of period $ 221,413 $1,214,772
========== ==========
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STOICO RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. The information furnished, in the opinion of
management, reflects all adjustments, which consist of normal recurring
adjustments, necessary to present fairly the results of operations of Stoico
Restaurant Group, Inc. and subsidiaries (the "Company") for the forty week
periods ended October 1, 1996 and October 3, 1995. The consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and
analysis of financial condition and results of operations, contained in the
Company's Prospectus dated October 22, 1996.
(2) INCOME (LOSS) PER SHARE
Loss per share is determined based on the weighted average number of
common and common equivalent shares outstanding during each period. The
weighted average number of common and common equivalent shares outstanding for
the forty weeks ended October 1, 1996 and October 3, 1995 were 4,307,252 and
4,116,785, respectively and for the twelve weeks ending October 1, 1996 and
October 3, 1995 were 4,315,861 and 4,167,131, respectively.
Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common stock issued or common stock options granted during
the twelve-month period prior to the filing of a registration statement
applicable to the contemplated initial public offering (see Management's
Discussion and Analysis of Financial Condition and Results of Operation -
Liquidity and Capital Resources), with issue or exercise prices below the
assumed initial public offering price, have been included in the calculation
of common share equivalents, using the treasury stock method, as if such
common stock were outstanding for all periods presented.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
COMPANY-OWNED RESTAURANTS OPENED AT END OF PERIOD
Forty Weeks Ended
-------------------------------
October 1, October 3,
1996 1995
-------------- --------------
Spaghetti Jack's 4 4
Sub & Stuff 16 14
RESULTS OF OPERATIONS
The following table sets forth information derived from the Company's
statement of operations expressed as a percentage of revenues:
Forty Weeks Ended
----------------------------------
October 1, October 3,
1996 1995
--------------- ----------------
Revenues 100.0% 100.0%
Cost of sales 62.0 66.0
Restaurant operating expenses 28.8 24.7
Pre-opening expenses 2.5 -
Administrative expenses 24.8 22.0
Noncash compensation expense 0.3 -
Other income (expense) (10.7) (3.1)
Income taxes - -
Net loss 29.0 15.7
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FORTY WEEK PERIODS ENDED OCTOBER 1, 1996 AND OCTOBER 3, 1995
REVENUES
Revenues in 1996 increased 14.8% over the same period for 1995, primarily
for the reasons discussed below. Spaghetti Jack's restaurant sales decreased
10.1% in 1996. The decrease in sales is the result of increased couponing as
a marketing tool, the lack of advertising via broadcast media and increased
competition. Comparable restaurant sales (defined as sales from restaurants
open during both fiscal periods for the entire period) for Spaghetti Jack's
decreased 13.1% in the aggregate. Sub & Stuff restaurant sales increased
27.1% in 1996, primarily as a result of two new restaurants being opened in
1996 and from the acquisition in August and September 1995 of the remaining
interest in three joint ventures (which each owned one restaurant). These
acquisitions resulted in the operations of the restaurants being included in
the financial statements on a consolidated basis for the full forty weeks in
1996 versus the equity method for the majority of the forty weeks in 1995.
Comparable restaurants sales for Sub & Stuff decreased 10.5% in the aggregate.
This decrease is due to the increased couponing as a marketing tool, the lack
of broadcast media advertising and increased competition. Spaghetti Jack's
royalty income decreased 9.1% in 1996 over 1995. Sub & Stuff royalty income
increased 19.2% in 1996 over 1995. Spaghetti Jack's franchise fees in 1996
were $25,000, which is the result of the addition of one franchise restaurant
in 1996. One Sub & Stuff franchise has opened in 1996, resulting in $9,000 in
franchise fees.
COST OF SALES
Cost of sales increased 7.9%, primarily as a result of the acquisition of
the remaining interests in the Sub & Stuff joint ventures mentioned above.
Spaghetti Jack's food and paper cost decreased by 11.0% in the forty week
period ended October 1, 1996 compared to the forty week period ended October
3, 1995. This decrease is attributed to the decrease in sales and to the sale
of a Company-owned restaurant. As a percentage of Spaghetti Jack's restaurant
sales, the cost of food and paper decreased to 29.7% in 1996 from 29.8% in
1995, due to increased operational efficiencies. Sub & Stuff food and paper
cost increased by 21.1%. This increase is attributed to the same factors
which caused the above described increase in sales, offset by substantial
gains in operational efficiencies. As a percentage of Sub & Stuff restaurant
sales, the cost of food and paper decreased to 32.4% in 1996 from 34.0% in
1995, as a result of operational efficiencies. Spaghetti Jack's costs of
wages and benefits decreased by 25.5% in 1996 compared to 1995. This decrease
is attributed to the introduction of an aggressive labor management system and
productivity expectations. As a percentage of Spaghetti Jack's restaurant
sales, the cost of wages and benefits decreased to 28.7% in 1996 from 33.7% in
1995, as the result of the labor management system mentioned above. Sub &
Stuff wages and benefits increased by 19.1% in 1996 compared to 1995. This
increase is attributed to the same factors which caused the above described
increase in sales. As a percentage of Sub & Stuff restaurant sales, the cost
of wages and benefits decreased to 33.3% in 1996 from 35.5% in 1995, as the
result of the introduction of an aggressive labor management system and
productivity expectations into the restaurants.
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RESTAURANT OPERATING EXPENSES
Overall restaurant and operating expenses increased 34.2%, primarily as a
result of increased advertising expenses and the inclusion of all operating
expenses related to the Sub & Stuff restaurants previously operated through
joint ventures. Spaghetti Jack's restaurant operating expenses decreased by
4.4% compared to 1995. As a percentage of Spaghetti Jack's restaurant sales,
operating expenses increased to 34.2% in 1996, from 32.2% in 1995. Sub &
Stuff restaurant operating expenses increased by 57.6% in 1996 compared to
1995. The acquisition of the joint ventures and opening of two restaurants
mentioned above contributed to the increase in operating expenses. The
remaining increase is primarily attributed to same restaurant increases in
advertising expenses, additional maintenance expense and depreciation and
amortization. As a percentage of Sub & Stuff restaurant sales, operating
expenses increased to 27.9% in 1996 from 22.5% in 1995 as a result of the
factors noted above.
PRE-OPENING EXPENSES
Pre-opening expenses are those costs associated with the opening of a
Company restaurant. The expenses consist principally of non-recurring costs
such as employee recruiting and training, supplies and miscellaneous
expenditures. Such costs are expensed as incurred. During the forty week
period ended October 1, 1996 expenses totaled $133,973 as compared to none in
the comparable period of 1995. Two Sub & Stuff restaurants have opened and
one Sub & Stuff was relocated during 1996, no stores were opened in the
comparable period of 1995. Subsequent to the period ended October 1, 1996,
the Company opened two Spaghetti Jack's and two Sub & Stuff restaurants and
relocated one Sub & Stuff restaurant to a new site which also offers Spaghetti
Jack's menu items. Although expenses were incurred during the period ended
October 1, 1996, some stores associated with these costs did not open until
after period end.
ADMINISTRATIVE EXPENSES
Administrative expenses increased by 29.4% for the forty week period
ended October 1, 1996, compared to the forty week period ended October 3,
1995. This increase is attributed to increased number of staff positions that
include a Director of Franchise Development and a Vice President of Operations
for Spaghetti Jack's. The increase is also due to increased fixed occupancy
costs including higher depreciation and amortization associated with the
relocation of the corporate office facility.
OTHER INCOME AND EXPENSE
During 1996, the Company recorded a provision of $175,855 for a lease
obligation on a closed Company-owned restaurant based on management's
assessment of the loss exposure to this lease. Changes in interest income
between the periods are primarily due to changes in the level of cash
available for investment. Interest expense increased by $175,542 to $471,464
for the forty week period ended October 1, 1996, compared to $295,922 for the
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forty week period ended October 3, 1995. This increase in interest expense is
the result of increased borrowing during the period ended October 1, 1996.
Equity in income of joint ventures and the minority interest in loss of
entities not wholly-owned decreased in 1996 compared to 1995 as a result of
the acquisition, by the Company, of such interests during 1995.
INCOME TAXES
The Company continues to operate unprofitably and to accumulate net
operating loss carryforwards and, as a result, does not have taxable income.
TWELVE WEEK PERIODS ENDED OCTOBER 1, 1996 AND OCTOBER 3, 1995
REVENUES
Revenues decreased 4.0%, primarily as a result of increased couponing as
a marketing tool, the lack of advertising via broadcast media and increased
competition. Spaghetti Jack's restaurant sales for the twelve week period
ended October 1, 1996 decreased 27.1% from the comparable period ended October
3, 1995. The decrease in sales is for the same reasons that overall sales
declined mentioned above. Comparable restaurant sales (defined as sales from
restaurants open during both fiscal periods for the entire period) for
Spaghetti Jack's decreased 23.4% in the aggregate. Sub & Stuff restaurant
sales increased 21.2% for the twelve week period in 1996 over the comparable
twelve week period in 1995. The increase in sales resulted from the
acquisition in August and September 1995 of the remaining interest in three
joint ventures (which each owned one restaurant). These acquisitions resulted
in the operations of the restaurants being included in the financial
statements on a consolidated basis for the full twelve weeks in 1996 versus
only a portion of the twelve weeks in 1995. Comparable restaurants sales for
Sub & Stuff decreased 18.6% in the aggregate. Spaghetti Jack's royalty income
decreased to $26,941 in 1996 from $41,315 in 1995. Sub & Stuff royalty income
for the twelve week period was $3,732 in 1996 compared to $1,575 in 1995.
COST OF SALES
Cost of sales increased 8.4%, primarily as a result of the acquisition
of the remaining interests in the joint ventures mentioned above. Spaghetti
Jack's food and paper cost decreased by 23.6% in the twelve week period ended
October 1, 1996 compared to the comparable period ended October 3, 1995. This
decrease is attributed to the decrease in sales discussed above and the sale
of a Company-owned restaurant. As a percentage of Spaghetti Jack's restaurant
sales, the cost of food and paper increased to 29.6% in 1996 from 28.3% in
1995. Sub & Stuff food and paper cost increased by 21.4% in 1996 compared to
1995. This increase is attributed to the same factors which caused the above
described increase in sales. As a percentage of Sub & Stuff restaurant sales,
the cost of food and paper remained constant at 32.3% in both 1996 and 1995.
Spaghetti Jack's costs of wages and benefits decreased by 23.5% in 1996
compared to 1995. This decrease is attributed to the decrease in sales as
described above. As a percentage of Spaghetti Jack's restaurant sales, the
cost of wages and benefits increased to 30.0% in 1996 from 28.6% in 1995.
This increase is a result of increasing headcount levels in current
restaurants, to have trained personnel to transfer to new restaurants. Sub &
Stuff wages and benefits increased by in 26.1% in 1996 compared to 1995. This
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increase is attributed to the same factors which caused the above described
increase in sales. As a percentage of Sub & Stuff restaurant sales, the cost
of wages and benefits increased to 34.1% in 1996 from 32.8% in 1995. This
increase is a result of increasing headcount levels in current restaurants, to
have trained personnel to transfer to new restaurants.
RESTAURANT OPERATING EXPENSES
Overall restaurant and operating expenses increased 10.8% during the
twelve week period ended October 1, 1996, over the comparable period for 1995,
primarily as a result of increased advertising expenses and the inclusion of
all operating expenses related to the Sub & Stuff restaurants previously
operated through joint ventures. Spaghetti Jack's restaurant operating
expense decreased by 39.7% in 1996 compared to 1995. This decrease is
attributed to a decrease in sales. As a percentage of Spaghetti Jack's
restaurant sales, operating expense decreased to 31.4% in 1996, from 37.9% in
1995, as a result of decreases in variable costs. Sub & Stuff restaurant
operating expenses increased by 41.2% in 1996 compared to 1995. The
acquisition of the joint ventures and opening of two restaurants mentioned
above contributed to the increase in operating expenses. The remaining
increase is primarily attributed to same restaurant increases in advertising
expenses, maintenance expense and depreciation and amortization. As a
percentage of Sub & Stuff restaurant sales, operating expenses increased to
27.8% in 1996 from 23.9% in 1995 as a result of the decrease in comparable
store sales without related reductions in expenses as well as the factors
noted above.
PRE-OPENING EXPENSES
Pre-opening expenses are those costs associated with the opening of a
Company restaurant. The expenses consist principally of non-recurring costs
such as employee recruiting and training, supplies and miscellaneous
expenditures. During the twelve week period ended October 1, 1996 expenses
totaled $97,389 as compared to none in the comparable period of 1995. No
restaurants were opened in the period ended October 1, 1996, however,
subsequent to the period, the Company opened two Spaghetti Jack's and two Sub
& Stuff restaurants and relocated one Sub & Stuff restaurant to a new site
which also offers Spaghetti Jack's menu items.
ADMINISTRATIVE EXPENSES
Administrative expenses increased by for 28.9% for the twelve week period
ended October 1, 1996 compared to the twelve week period ended October 3,
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1995. This increase is attributed to increased number of staff positions that
include a Director of Franchise Development and a Vice President of Operations
for Spaghetti Jack's. The increase is also due to increased fixed occupancy
costs including higher depreciation and amortization associated with the
relocation of the corporate office facility.
OTHER INCOME AND EXPENSE
Changes in interest income between the periods are primarily due to
changes in the level of cash available for investment. Interest expense
increased by $18,184 to $161,859 for the twelve week period ended October 1,
1996, compared to $143,675 for the twelve week period ended October 3, 1995.
This increase in interest expense is the result of increased borrowing during
the period ended October 1, 1996. Equity in income of joint ventures and the
minority interest in loss of entities not wholly-owned decreased in 1996
compared to 1995 as a result of the acquisition, by the Company, of such
interests during 1995.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its need for liquidity and
capital through issuances of common stock and debt. As of October 1, 1996,
the Company had approximately $5.7 million in debt. The Company's restaurant
operations do not have significant receivables or inventory and receive trade
credit based upon negotiated terms in purchasing food and supplies. As of
October 1, 1996, the Company had a working capital deficit of $2,694,273 as
compared to a deficit of $388,467 at October 3, 1995. The increase in working
capital deficit is primarily due to a $1.7 million note payable to a
stockholder being included in current portion of long-term debt.
On October 22, 1996 the Company began an initial public offering
("Offering") of its common stock on a best efforts basis, with a minimum of
1,066,667 shares and a maximum of 1,600,000 shares available for sale.
The Offering period will close on or about December 11, 1996.
During the forty week period ended October 1, 1996 the Company's cash
deficit from operations increased by $258,054 as compared to the cash deficit
during the forty weeks ended October 3, 1995. This increase in cash deficit
is primarily due to the increased net loss.
During the forty week period ended October 1, 1996 the Company had a cash
deficit from investing activities of $355,649 as compared to a deficit of
$1,063,541 for 1995. The reduction of the deficit was primarily due to the
acquisition of the remaining interest in three joint ventures in 1995 but not
in 1996 and proceeds from the sale of a Company owned restaurant in 1996 but
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not in 1995.
Capital expenditures during the forty week period ended October 1, 1996
totaled $606,949 as compared to expenditures of $477,269 for the related
period in 1995. These expenditures are primarily associated with the opening
of new stores. During 1966, two Sub & Stuff restaurants have opened and one
Sub & Stuff was relocated. Subsequent to the period ended October 1, 1996,
the Company opened two Spaghetti Jack's and two Sub & Stuff restaurants and
relocated one Sub & Stuff restaurant to a new site which also offers Spaghetti
Jack's menu items. During the balance of fiscal 1996, the Company anticipates
opening two to three Company-owned Spaghetti Jack's restaurants and three to
four Company-owned Sub & Stuff sandwich shops. The amount of the Company's
cash requirements for capital expenditures depends in part on the number of
new restaurants opened and the development costs associated with such
restaurants.
During the forty week period ended October 1, 1996, the Company had cash
flows from financing activities of $837,530 as compared to cash flows of
$3,033,581 for the same period in 1995. This decrease in cash flows is
primarily due to the Company needing less long term debt during the period.
In August 1996, the Company obtained a stand-by financing commitment from
a private entity controlled by W. Frank Barton to provide a line of credit to
the Company up to $750,000 at a rate of 12% per annum, payable quarterly.
Subsequent to period end, the Company accessed this line of credit
for the full amount. Upon successful completion of the Offering, the Company
anticipates that the stock proceeds will be sufficient to repay the line of
credit and fund its planned expansion and other operating cash requirements
through the end of fiscal year 1997.
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PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
None
ITEM 2: CHANGES IN SECURITIES
None
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
At the Special Meeting of Stockholders of Stoico Restaurant Group,
Inc. held on September 16, 1996, the following numbers of votes were cast for
the matters indicated:
1. Proposal to approve a .407533252 to one reverse stock split.
Broker
For Against Abstain Non-Vote
- --- ------- ------- --------
8,474,607 -0- -0- -0-
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION
S-B
3(a)* Articles of Incorporation
3(b)* Bylaws
4** Specimen of Common Stock Certificate
10(a)(i)* Mid-Central/Sysco Food Services Distribution Agreement
10(a)(ii)* Pre-March, 1996, Spaghetti Jack's form of Area
Development Agreement
10(a)(iii)* Post-March, 1996, Spaghetti Jack's form of Area
Development Agreement
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10(a)(iv)* Pre-March, 1996, Spaghetti Jack's form of Franchise
Agreement
10(a)(v)* Post-March, 1996, Spaghetti Jack's form of Franchise
Agreement
10(a)(vi)* Pre-March, 1996, Sub & Stuff form of Area Development
Agreement
10(a)(vii)* Post-March, 1996, Sub & Stuff form of Area Development
Agreement
10(a)(viii)*Pre-March, 1996, Sub & Stuff form of Franchise Agreement
10(a)(ix)* Post-March, 1996, Sub & Stuff form of Franchise Agreement
10(b)(i)* Employment Agreement with Timothy J. Jeffrey
11 Statement re: computation of per share earnings
27 Financial Data Schedule
_______________________________
* Incorporated by reference to such numbered exhibit filed as part of
Registration Statement No. 333-5488-D filed with the Commission on August 29,
1996.
** Incorporated by reference to such numbered exhibit filed as part of
Registration Statement No. 333-5488-D filed with the Commission on October 28,
1996.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the three months ended
October 1, 1996.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
DATED: December 5, 1996 STOICO RESTAURANT GROUP, INC.
(Registrant)
/s/ Timothy J. Jeffrey
-------------------------------------
Timothy J. Jeffrey
President and Chief Executive Officer
/s/ Cathy K. Martsolf
-------------------------------------
Cathy K. Martsolf
Senior Vice President of Administration
and Principal Accounting Officer
-17-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Description
-------------- -----------
3(a)* Articles of Incorporation
3(b)* Bylaws
4** Specimen of Common Stock Certificate
10(a)(i)* Mid-Central/Sysco Food Services Distribution
Agreement
10(a)(ii)* Pre-March, 1996, Spaghetti Jack's form of Area
Development Agreement
10(a)(iii)* Post-March, 1996, Spaghetti Jack's form of Area
Development Agreement
10(a)(iv)* Pre-March, 1996, Spaghetti Jack's form of
Franchise Agreement
10(a)(v)* Post-March, 1996, Spaghetti Jack's form of
Franchise Agreement
10(a)(vi)* Pre-March, 1996, Sub & Stuff form of Area
Development Agreement
10(a)(vii)* Post-March, 1996, Sub & Stuff form of Area
Development Agreement
10(a)(viii)* Pre-March, 1996, Sub & Stuff form of Franchise
Agreement
10(a)(ix)* Post-March, 1996, Sub & Stuff form of Franchise
Agreement
10(b)(i)* Employment Agreement with Timothy J. Jeffrey
11 Statement re: computation of per share earnings
27 Financial Data Schedule
_____________________________
* Incorporated by reference to such numbered exhibit filed as part of
Registration Statement No. 333-5488-D filed with the Commission on August 29,
1996.
** Incorporated by reference to such numbered exhibit filed as part of
Registration Statement No. 333-5488-D filed with the Commission on October 28,
1996.
-18-
<PAGE>
Exhibit 11
STOICO RESTAURANT GROUP, INC.
COMPUTATION OF EARNINGS PER SHARE
Twelve Weeks Ended Forty Weeks Ended
-------------------------------------------
October 1, October 3, October 1, October 3,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Weighted average common
shares outstanding 4,307,027 3,230,751 4,266,231 3,180,405
Effect of common stock issued
or common stock options
granted during the twelve-month
period prior to the initial
public offering:
Common stock issued - 927,546 32,187 927,546
Common stock options granted 8,834 8,834 8,834 8,834
-------- -------- ------- --------
Total weighted average of
common and common
equivalent shares 4,315,861 4,167,131 4,307,252 4,116,785
--------- --------- --------- ---------
Net loss $(576,791) (259,567) (1,558,639) (734,448)
Loss per share $ (.13) (.06) (.36) (.18)
---------- --------- ----------- ---------
-19-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
STOICO RESTAURANT GROUP, INC.
FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENT OF STOICO RESTAURANT GROUP, INC. AS OF
October 1, 1996, AND FOR THE THREE MONTHS THEN ENDED, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jul-10-1996
<PERIOD-END> Oct-01-1996
<EXCHANGE-RATE> 1
<CASH> 221,413
<SECURITIES> 0
<RECEIVABLES> 62,943
<ALLOWANCES> 0
<INVENTORY> 115,961
<CURRENT-ASSETS> 522,820
<PP&E> 3,542,321
<DEPRECIATION> 1,816,835
<TOTAL-ASSETS> 3,857,400
<CURRENT-LIABILITIES> 3,247,093
<BONDS> 0
0
0
<COMMON> 43,070
<OTHER-SE> 4,482,362
<TOTAL-LIABILITY-AND-EQUITY> 3,857,400
<SALES> 0
<TOTAL-REVENUES> 1,610,579
<CGS> 1,023,298
<TOTAL-COSTS> 1,612,171
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,859
<INCOME-PRETAX> (576,791)
<INCOME-TAX> 0
<INCOME-CONTINUING> (576,791)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (576,791)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
