<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: August 31, 1998
| | TRANSITION REPORT PURSUANT TO SECTION 13(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to________
COMMISSION FILE NUMBER: 0-29346
FRM NEXUS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 13-3754422
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
271 NORTH AVENUE, NEW ROCHELLE, NY 10801
(Address of principal executive offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 636-3432
N/A
(Former name, former address and former fiscal year,
if changed since last report)
--------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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( )
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by checkmark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes ( ) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, at October 13, 1998: 1,817,453.
<PAGE> 2
FRM Nexus, Inc. and Subsidiaries
Index to Consolidated Financial Statements
PART I
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -- August 31, 1998 and February 28, 1998...........2
Consolidated Statements of Operations -- Six months and three months ended
August 31, 1998 and 1997.......................................................4
Consolidated Statements of Stockholders' Equity --
Six months ended August 31, 1998 ...........................................5
Consolidated Statements of Cash Flows --
Six months ended August 31, 1998 and 1997...................................6
Notes to Consolidated Financial Statements.....................................7
-1-
<PAGE> 3
FRM NEXUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1998 1998
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 1,112,855 $ 1,434,893
Mortgage and notes receivable 23,251 22,232
Finance receivables, net 1,929,488 1,782,687
Vendor rebate receivable -- 244,477
Inventories 100,902 96,922
Other current assets 170,399 250,663
----------- -----------
Total current assets 3,336,895 3,831,874
----------- -----------
Property and equipment:
Property and equipment, at cost 6,215,295 5,850,404
Less accumulated depreciation and amortization 2,513,260 2,310,626
----------- -----------
3,702,035 3,539,778
----------- -----------
Other assets:
Real estate held for development and sale 1,474,389 1,375,445
Mortgage and notes receivable 3,191,712 3,203,598
Finance receivables, net 20,000 --
Loans receivable 79,944 88,995
Leasehold costs, net of accumulated amortization
of $357,593 at August 31, 1998 and $333,143
at February 28, 1998 516,004 507,145
Technical assistance fees, net of accumulated
amortization of $158,382 at August 31, 1998 and
$147,672 at February 28, 1998 216,618 227,238
Other 264,859 240,007
----------- -----------
Total other assets 5,763,526 5,642,428
----------- -----------
Total assets $12,802,456 $13,014,080
=========== ===========
</TABLE>
See notes to interim consolidated financial statements.
-2-
<PAGE> 4
FRM NEXUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1998 1998
----------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,089,174 $ 960,172
Current portion of notes payable 233,455 228,578
Due to finance customers 919,896 975,545
Income taxes payable 8,616 64,202
Other current liabilities 14,546 19,489
----------- ------------
Total current liabilities 2,265,687 2,247,986
----------- ------------
Other liabilities:
Notes payable 2,306,072 2,391,867
Deferred income taxes 20,545 20,729
Deferred Income 2,760,624 2,760,624
----------- ------------
Total other liabilities 5,087,241 5,173,220
----------- ------------
Commitments and contingencies
Stockholders' equity:
Common stock - $.10 par value;
Authorized - 2,000,000 shares;
Issued and outstanding - 1,817,453 shares 181,745 181,745
Capital in excess of par value 5,827,125 5,827,125
Unrealized loss on mortgage and notes receivable (162,202) (162,202)
Retained earnings (accumulated deficit) (397,140) (253,794)
----------- ------------
Total stockholders' equity 5,449,528 5,592,874
----------- ------------
Total liabilities and stockholders' equity $ 12,802,456 $ 13,014,080
============ ============
</TABLE>
See notes to interim consolidated financial statements.
-3-
<PAGE> 5
FRM NEXUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Restaurant food sales $ 4,475,868 $ 4,670,196 $ 8,416,786 $ 8,939,131
Sale of real estate -- -- 40,678 --
Rental income 34,419 -- 58,330 --
Interest from mortgages 59,039 36,432 118,190 75,074
Income from the purchase of medical receivables 240,699 154,045 527,670 315,583
----------- ----------- ----------- -----------
Total income 4,810,025 4,860,673 9,161,654 9,329,788
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Restaurants 4,182,993 4,309,631 7,990,484 8,292,396
Real estate 77,336 77,268 202,403 224,043
Medical receivables 255,842 173,179 507,404 345,152
Corporate expenses 127,270 52,247 242,884 107,766
Depreciation and amortization 119,359 125,670 238,518 250,663
----------- ----------- ----------- -----------
Total costs and expenses 4,762,800 4,737,995 9,181,693 9,220,020
----------- ----------- ----------- -----------
Income (loss) from operations 47,225 122,678 (20,039) 109,768
----------- ----------- ----------- -----------
Other income (expense):
Interest income 9,659 18,205 21,291 33,728
Interest expense (57,108) (118,875) (119,503) (238,168)
----------- ----------- ----------- -----------
(47,449) (100,670) (98,212) (204,440)
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes (224) 22,008 (118,251) (94,672)
Provision for income taxes 17,677 20,683 24,780 21,113
----------- ----------- ----------- -----------
Net income (loss) $ (17,901) $ 1,325 $ (143,031) $ (115,785)
=========== =========== =========== ===========
Basic and diluted earnings (loss) per common share $ (0.01) $ 0.00 $ (0.08) $ (0.06)
=========== =========== =========== ===========
Number of shares used in computation of basic and
diluted earnings per share 1,817,453 1,817,453 1,817,453 1,817,453
=========== =========== =========== ===========
</TABLE>
See notes to interim consolidated financial statements.
-4-
<PAGE> 6
FRM Nexus, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
February 28, 1998 through August 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL UNREALIZED EARNINGS TOTAL
COMMON PAID-IN GAINS (ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL (LOSSES) DEFICIT) EQUITY
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, February 28, 1998 $181,745 $ 5,827,125 $ (162,202) $ (253,794) $ 5,592,874
Payment of fractional shares - - - (315) (315)
Net loss - - - (143,031) (143,031)
-------------------------------------------------------------------------------------------
Balance, August 31, 1998 $181,745 $ 5,827,125 $ (162,202) $ (397,140) $ 5,449,528
===========================================================================================
</TABLE>
See notes to interim consolidated financial statements.
-5-
<PAGE> 7
FRM NEXUS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED AUGUST 31,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (143,031) $ (115,785)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 238,518 250,663
Deferred interest expense -- 33,855
Deferred income tax expense(benefit) (184) (6,192)
Changes in operating assets and liabilities:
Vendor rebate receivable 244,477 --
Inventories (3,980) (10,342)
Additions to real estate held for
development and sale (98,944) (2,093)
Prepaid expenses, miscellaneous receivables
and other assets 25,364 (17,972)
Accounts payable, accrued expenses and taxes 73,416 (33,576)
Other current liabilities (4,943) (37,878)
----------- -----------
Net cash provided by operating activities 330,693 60,680
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures & intangible assets (368,966) (269,906)
Repayment of loans receivable 9,051 --
Increase in finance receivables (166,801) (820,340)
Due to finance customers (55,649) 501,449
Principal payments on notes receivable 10,867 156,202
----------- -----------
Net cash used in investing activities (571,498) (432,595)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of notes payable 250,000 --
Principal payments on notes payable (330,918) (175,791)
Proceeds of finance obligation -- 104,500
Payment of fractional shares (315) --
----------- -----------
Net cash used in financing activities (81,233) (71,291)
----------- -----------
Net decrease in cash and cash equivalents (322,038) (443,206)
Cash and cash equivalents, beginning of period 1,434,893 1,861,219
----------- -----------
Cash and cash equivalents, end of period $ 1,112,855 $ 1,418,013
=========== ===========
ADDITIONAL CASH FLOW INFORMATION
Interest paid $ 117,772 $ 204,313
=========== ===========
Income taxes paid $ 39,074 $ 33,227
=========== ===========
</TABLE>
See notes to interim consolidated financial statements.
-6-
<PAGE> 8
FRM NEXUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information in response to the requirements of Article 10 of
Regulation S-X. Accordingly they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting only of
normal recurring items) necessary to present fairly the financial position as of
August 31, 1998; results of operations for the six months and three months ended
August 31, 1998 and 1997; cash flows for the six months ended August 31, 1998
and 1997; and changes in stockholders' equity for the six months ended August
31, 1998. For further information, refer to the Company's financial statements
and notes thereto included in the Company's Form 10-K for the year ended
February 28, 1998. The consolidated balance sheet at February 28, 1998 was
derived from the audited financial statements as of that date. Results of
operations for interim periods are not necessarily indicative of annual results
of operations.
Certain prior year amounts were reclassified to conform with the current year
presentation.
2. FINANCE RECEIVABLES, NET
Net finance receivables consist of the following:
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1998 1998
------------------------------------
<S> <C> <C>
Gross finance receivables $2,264,383 $2,083,043
Allowance for credit losses (72,866) (72,866)
Deferred finance income (242,029) (227,490)
------------------------------------
1,949,488 1,782,687
Less long-term portion 20,000 -
------------------------------------
Finance receivables, net - current $1,929,488 $1,782,687
====================================
</TABLE>
-7-
<PAGE> 9
FRM Nexus, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. CONTINGENCIES
LITIGATION
On August 26, 1998 the litigation as discussed in Note 8 of the February 28,
1998 financial statements involving the Yolo Capital subsidiary ("Yolo") was
settled. All counterclaims against Yolo were dismissed. The property at Hunter
is no longer under lien.
PSI LITIGATION
In 1993, shareholders of Programming and Systems, Inc. ("PSI") brought a class
action against PSI and certain of its officers in the United States District
Court for the Southern District of New York, which was settled by a Stipulation
of Settlement dated as of November 15, 1993 (the "Stipulation"), pursuant to
which PSI Settlement Corp. ("Nexus") was formed. On January 21, 1994, Judge
Robert Sweet signed the Order confirming the Stipulation. Pursuant to that
Stipulation (i) the eligible shareholders of PSI received a pro-rata
distribution of $1,400,000, after deduction of the fees and expenses of the
class action, which amounted to $.50 per share, and (ii) all the shares of Nexus
were delivered to Escrow Agents to hold for the benefit of all shareholders of
PSI. Pursuant to the Orders of Judge Sweet, PSI transferred certain assets to
Nexus as specified in the Stipulation and the Court's Orders. These payments,
including the shares of Nexus, fully settled all of the claims by PSI
shareholders that could have been asserted against PSI and the other defendants
in the class action.
On June 12, 1995, Judge Sweet signed an Order approving an amendment of the
Stipulation which permitted Nexus to operate as an ongoing entity rather than
liquidating its assets, provided the escrowed shares of Nexus were delivered out
to PSI shareholders by June 12, 1997 (such shares were delivered on August 12,
1996) and listed for trading on NASDAQ.
In addition to settling the class action and making payment to shareholders, PSI
has now settled the action by the Securities and Exchange Commission against it
and resolved the material claims and lawsuits which arose out of its
discontinued vocational school operations.
-8-
<PAGE> 10
FRM Nexus, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. CONTINGENCIES (CONTINUED)
At the present time, PSI is indebted to (i) the United States Department of
Education for $1,000,000 by reason of the fraudulent conduct of a former chief
executive officer, (ii) to the Internal Revenue Service for $416,000
representing excess refunds of income taxes made by IRS to PSI plus interest
thereon and (iii) to a former landlord of a PSI school for $98,621. As a result
of the Stipulation described above, the Company believes it is not responsible
for the obligations of PSI.
4. INCOME TAXES
The provision (benefit) for income taxes consist of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31,
1998 1997 1998 1997
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Current:
Federal $ - $ - $ - $ -
State 17,770 23,792 24,964 27,305
---------------------------------------------------------------
Total current 17,770 23,792 24,964 27,305
---------------------------------------------------------------
Deferred:
Federal - - - -
State (93) (3,109) (184) (6,192)
---------------------------------------------------------------
Total deferred (93) (3,109) (184) (6,192)
---------------------------------------------------------------
Total $ 17,677 $ 20,683 $ 24,780 $ 21,113
===============================================================
</TABLE>
Nexus filed consolidated federal tax returns with PSI through August 12, 1996,
which has no federal tax liability due to current and prior year net operating
losses. After August 12, 1996, Nexus and its subsidiaries are not filing
consolidated tax returns with PSI. Nexus and its subsidiaries are filing
individual federal tax returns for the period beginning August 13, 1996 and
ending February 28, 1997. Subsequent to February 28, 1997, Nexus and its
subsidiaries are filing consolidated federal tax returns.
5.STOCK SPLIT
On May 14, 1998, the Company declared a common stock dividend of one common
share for every two common shares owned of record on June 14, 1998. The
accompanying financial statements give retroactive effect to this stock
dividend.
-9-
<PAGE> 11
FRM Nexus, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. NOTES PAYABLE
In September 1998 the food service division entered into a term loan agreement
with a bank which was used to finance the opening of the seventeenth restaurant.
The loan is for $600,000 and bears interest at the rate of 8.75%. The first four
payments are for interest only, followed by 56 monthly payments of principal and
interest in the amount of $5,998. On June 22, 2003 a balloon payment will be due
in the amount of $498,319. The loan is secured by a first deed of trust on the
leasehold estate and a first lien security position in all equipment and
furnishings of the restaurant. As additional collateral for the loan, a second
deed of trust was pledged on a restaurant in another location.
-10-
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF INTERIM OPERATIONS
AND FINANCIAL CONDITION
All statements contained herein that are not historical facts,
including but not limited to, statements regarding future operations, financial
condition and liquidity, expenditures to develop real estate owned by the
Company, future borrowing, capital requirements and the Company's future
development plans are based on current expectations. These statements are
forward looking in nature and involve a number of risks and uncertainties.
Actual results may differ materially. Among the factors that could cause actual
results to differ materially are the following: changes in the business of the
Company's medical provider clients, changes in the real estate, fast food and
financial markets, and other risk factors described in the Company's reports
filed and to be filed from time to time with the Commission. The discussion and
analysis below is based on the Company's unaudited consolidated financial
statements for the six months and three months ended August 31, 1998 and 1997.
The following should be read in conjunction with the Management's Discussion and
Analysis of results of operations and financial condition included in the 1998
10-K.
OVERVIEW
Nexus generates revenues from three business segments: food services, real
estate and medical financing. Revenues in the real estate division vary
substantially from period to period depending on when a particular transaction
closes and depending on whether the closed transaction is recognized for
accounting purposes as a sale or reflected as a financing or is deferred to a
future period.
RESULTS OF OPERATIONS
1998 PERIODS COMPARED TO THE 1997 PERIODS
The Company's revenues decreased by $51,000, or 1%, for the three
months ended August 31, 1998 to $4,810,000 from $4,861,000 for the three months
ended August 31, 1997. Revenues decreased by $168,000, or 2%, for the six months
ended August 31, 1998 to $9,162,000 from $9,330,000 for the six months ended
August 31, 1997 The reduction was a result of decreased revenues in the food
service division offset by increased revenues in the real estate and medical
financing divisions.
The revenue decrease in the the food service division for the three
months ended August 31, 1998 was $194,000 and $522,000 for the six months ended
August 31, 1998 as compared to the same periods in the prior years. The decrease
was attributable primarily to the higher revenue in the 1997 period resulting
from special national advertising, which was used to implement new menu and
promotional items. In addition, the opening of a competing restaurant at one of
the locations adversely affected revenues. Revenue in the real estate division
increased by $57,000 for the three months ended
-11-
<PAGE> 13
August 31, 1998 as compared to the three months ended August 31, 1997. Revenues
in the real estate division for the six months ended August 31, 1998 increased
by $142,000 as compared to the same period in 1997. The additional revenue in
the real estate division was attributable to the sale of real estate in the 1998
period and increases in interest and rental income. Growth in revenues in the
medical financing division for the three months and six months ended August 31,
1998 was $87,000 and $212,000 as compared to the same periods in 1997. The
increase in revenues was due to the increase in the medical insurance claims
receivables that were purchased in the current period from existing and new
customers.
Costs and expenses increased $25,000, or less than 1%, for the three
months ended August 31, 1998, to $4,763,000 from $4,738,000 for the three months
ended August 31, 1997. Costs and expenses decreased $38,000, or less than 1% for
the six months ended August 31, 1998, to $9,182,000 from $9,220,000 for the six
months ended August 31, 1997. The net increase for the three months ended August
31, 1998 was due to decreases in the food service division of $127,000 and
$7,000 in depreciation and amortization, which were offset by increases of
$83,000 in the medical financing division and $75,000 in corporate expenses. The
net decrease for the six months ended August 31, 1998 was due to decreases in
the food service division of $302,000, $22,000 in the real estate division and
$12,000 in depreciation and amortization, which were offset by increases of
$162,000 in the medical financing division and $135,000 in corporate expenses.
The decrease in the costs and expenses of the food service division is
attributable to the decrease in food costs due to the reduced revenues for both
the six month and three month periods ended August 31, 1998 as compared with the
same periods ended in the prior year. This was offset by higher labor costs,
which are due in part to an increase in the minimum wage and the hiring of
additional managers in restaurants that were previously understaffed during the
prior periods. The decrease in the real estate division is attributable to a
reduction in operating costs. The increase in corporate expenses is primarily
due to the additional costs related to the initial registration of the Company's
common stock pursuant to the Securities and Exchange Act of 1934 in 1998. The
increase of the costs and expenses of the medical financing division was
attributable to additional expenditures on staff and systems as a result of the
increase in volume.
For the reasons noted above, income from operations decreased $76,000
from a profit of $123,000 for the three months ended August 31, 1997 to a profit
of $47,000 for the three months ended August 31,1998. Income from operations
decreased $130,000 from a profit of $110,000 for the six months ended August 31,
1997 to a loss of $20,000 for the six months ended August 31,1998. Net interest
costs decreased $53,000 and the provision for tax decreased $3,000 producing a
net loss of $18,000 for the three months ended August 31, 1998 as compared to a
profit of $1,000 for the three months ended August 31, 1997. Net interest costs
decreased $106,000 and the provision for tax increased $4,000 producing an
increase in net loss of $27,000, from a loss of $116,000 for the six months
ended August 31, 1997 to a loss of $143,000 for the six months ended August 31,
1998.
-12-
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company's three business activities during the six month period
ended August 31, 1998 resulted in the use of cash in the amount of $322,000. The
Company expects growth of its medical financing division to increase which will
result in the continued use of cash. The funds for those needs are expected to
be provided from financing activities such as asset-based borrowing on the
Company's mortgages and accounts receivable. Cash flow provided from the food
service division decreased by $30,000 to $791,000 for the six months ended
August 31, 1998 as compared with $821,000 for the same period in 1997. The
Company's anticipated reduction in the amount of capital expenditures should
result in cash continuing to be provided from the food service division for the
balance of the current fiscal year. Management believes the effects of
competition at one of its locations will diminish and the addition of new menu
items will have a positive effect on cash flow during fiscal 1999. The real
estate division is not expected to be a significant user of cash flow from
operations by reason of the disposition as of January 1, 1998 of the formerly
vacant space in the Granby, CT property. The Company's real estate assets in
Hunter, NY and Brookfield, CT. are owned free and clear of mortgages. Further
development of those properties, at any significant cost, is expected to be
funded by asset-based financing. The Company believes that its present cash
resources and the cash available from financing activities will be sufficient on
a short-term basis and over the next 12 months to fund continued expansion of
its medical financing business, its company-wide working capital needs and
expected investments in property and equipment. The Company intends to pace its
growth in the medical financing division to its capacity to provide the funds
internally and from its financing activities.
Cash provided by operations during the six months ended August 31, 1998
was $331,000 compared to $61,000 provided during the same period in the prior
year. The increase in 1998 was due to fluctuations in operating assets and
liabilities primarily caused by timing differences in the payment of accounts
payable and the collection of a rebate due from a soft drink vendor in the food
service division. Cash used in investing activities was $572,000 for six months
ended August 31, 1998 as compared with $433,000 used in the prior year. The
increase in the use of cash in 1998 was due to an increase in capital
expenditures related to the opening of the seventeenth Wendy's restaurant, a
lower amount that was due and collected from notes receivable and increases in
payments to finance customers, offset by a decrease in purchased medical claims
receivable. Net cash used by financing activities was $81,000 during the six
months ended August 31, 1998 as compared with $71,000 used in the prior year.
The increase in the use of cash in 1998 was due fluctuations in borrowing and
repayment of debt offset by a decrease in the proceeds from finance obligation.
In September 1998, the food service division closed on a $600,000 loan which was
used to finance the opening of the seventeenth restaurant.
-13-
<PAGE> 15
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997 the FASB issued SFAS No. 131 "Disclosure About Segments of an
Enterprise and Related Information". SFAS No. 131 requires the reporting of
profit and loss, specific revenue and expense items, and assets for reportable
segments. It also requires the reconciliation of total segment revenues, total
segment profit and loss, total segment assets and other amounts disclosed for
segments to the corresponding amounts in the general purpose financial
statements. This statement is effective for financial statements issued for
periods beginning after December 15, 1997. The Company will adopt this statement
in the fiscal year ending February 28, 1999. SFAS No. 131 is not required to be
applied to interim financial statements in the initial year of its application.
-14-
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBITS.
27. Financial Data Schedule
b) REPORTS ON FORM 8K.
None.
.
-15-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FRM NEXUS, INC.
By: /S/ VICTOR BRODSKY
----------------------------------------
Victor Brodsky
Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: October 13, 1998
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 1,112,855
<SECURITIES> 0
<RECEIVABLES> 2,025,605
<ALLOWANCES> 72,866
<INVENTORY> 100,902
<CURRENT-ASSETS> 3,336,895
<PP&E> 6,215,295
<DEPRECIATION> 2,513,260
<TOTAL-ASSETS> 12,802,456
<CURRENT-LIABILITIES> 2,265,687
<BONDS> 2,306,072
0
0
<COMMON> 181,745
<OTHER-SE> 5,267,783
<TOTAL-LIABILITY-AND-EQUITY> 12,802,456
<SALES> 8,416,786
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<OTHER-EXPENSES> 0
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<INCOME-PRETAX> (118,251)
<INCOME-TAX> 24,780
<INCOME-CONTINUING> (143,031)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (143,031)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
