SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
COMMISSION FILE NUMBER 0-23251
------------------------
SFORZA ENTERPRISES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
FLORIDA 65-0705377
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
490 EAST PALMETTO PARK ROAD SUITE 110 33432
BOCA RATON, FLORIDA (Zip Code)
(Address of principal executive
offices)
</TABLE>
Registrant's telephone number, including area code: (561) 392-0611
------------------------
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 _____
As of March 31, 1998, 1,710,000 shares of the registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
SFORZA ENTERPRISES, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements (Unaudited):
<S> <C>
Consolidated Balance Sheets--March 31, 1998 ............................................................... 1
Consolidated Statements of Operations--Thirteen weeks thirteen weeks ended March 31, 1998 .................. 2
Consolidated Statements of Cash Flows--Thirteen weeks ended March 31, 1998 ................................. 3
Notes to Consolidated Financial Statements--March 31, 1998 ................................................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............ 5 - 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................................................... 10
Item 6. 8 - K Filings ....................... ................................................................ 10
Signatures.................................................................................................... 11
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, 1998
ASSETS
Current assets:
<S> <C>
Cash and cash equivalents $ 573,701
Inventories 60,550
Other current assets 127,611
----------
Total current assets 761,862
Investments in unconsolidated affiliates 3,020,956
Property and equipment, net 1,000,091
Other assets, net 33,289
----------
Total assets $4,816,198
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 69,967
Accrued expenses 210,982
Current portion of long-term debt 19,822
Current portion of obligations under capital
leases 21,638
----------
Total current liabilities 322,409
Long-term debt, net 1,866
Obligations under capital leases, net 37,580
----------
Total liabilities 361,855
----------
Shareholders' equity:
Common stock, $.01 par value; 20,000,000 shares
authorized; 1,710,000 shares issued and
outstanding 17,100
Additional paid-in capital 5,097,064
Retained deficit (659,821)
----------
Total shareholders' equity 4,454,343
----------
Total liabilities and shareholders' equity $4,816,198
==========
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended March 31, 1998 and 1997
1998 1997
----------- ------------
<S> <C> <C>
Net sales $1,132,844 $1,394,298
---------- ----------
Cost and expenses:
Cost of sales 541,330 766,949
Operating expenses 555,496 623,601
Interest expense, net - 4,248
---------- ----------
Total cost and expenses 1,096,826 1,394,798
---------- ----------
Operating income (loss) 36,018 (500)
---------- ----------
Other income:
Other income 6,823 -
Equity in earnings of unconsolidated
affiliates 17,470 -
---------- ----------
Total other income 24,293 -
---------- ----------
Income (loss) before provision for
income taxes 60,311 (500)
Income tax expense - -
---------- ----------
Net income (loss) $ 60,311 $ (500)
========== ==========
Basic net income (loss) per common
share $ .03 $ -
========== ==========
Weighted average common shares
outstanding 1,710,000 997,084
========== ==========
</TABLE>
See notes to interim consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended March 31, 1998 and 1997
1998 1997
--------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 60,311 $ (500)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Equity in earnings of unconsolidated
affiliates (17,470) -
Depreciation and amortization 36,300 30,666
Increase in accounts receivable - (3,115)
(Increase) decrease in inventories 9,612 (50,750)
(Increase) decrease in other current
assets 35,236 (68,484)
Increase (decrease) in accounts
payable (124,901) 185,678
Increase in accrued expenses 38,022 17,910
Decrease in unearned revenue - (32,185)
Decrease in income taxes payable - (15,387)
--------- ---------
Net cash provided by operating activities 37,110 63,833
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (39,890) (422,491)
Decrease in other assets 257 90,939
Investments in unconsolidated
affiliates (3,486) -
--------- ---------
Net cash used in investing activities (43,119) (331,552)
--------- ---------
Cash flows from financing activities:
Repayment of notes payable, shareholders - (21,930)
Proceeds from issuance of long-term debt - 258,250
Principal payments on long-term debt (6,130) (6,026)
Principal payments on obligations
under capital leases (5,429) (1,783)
Proceeds from issuance of common stock - 31,250
--------- ---------
Net cash provided by financing activities (11,559) 261,861
--------- ---------
Net decrease in cash and cash equivalents (17,568) (7,858)
Cash and cash equivalents, beginning of
period 591,269 202,639
--------- ---------
Cash and cash equivalents, end of period $ 573,701 $ 194,781
========= =========
Total interest paid during the period $ 3,406 $ 4,248
========= =========
Total income taxes paid during the period $ - $ 15,387
========= =========
</TABLE>
3
<PAGE>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
The consolidated statements as of March 31, 1998 and for the three months ended
March 31, 1998 and 1997 are unaudited; however, in the opinion of management,
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the consolidated financial statements for these interim
periods have been included. The results of the interim period ended March 31,
1998 are not necessarily indicative of the results to be obtained for the full
fiscal year ending December 31, 1998.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS FORM 10-Q UNDER ITEM 2, "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS", WHICH ARE NOT
HISTORICAL FACTS CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND ARE INTENDED TO BE
COVERED BY THE SAFE HARBORS CREATED THEREBY. FORWARD-LOOKING STATEMENTS INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE
ACTUAL RESULTS, PERFORMANCE, OR ACHIEVEMENTS OF SFORZA ENTERPRISES, INC. AND ITS
SUBSIDIARIES TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH
RISKS, UNCERTAINTIES, AND OTHER FACTORS INCLUDE, BUT ARE NOT NECESSARILY LIMITED
TO, THE FOLLOWING: CHANGES IN GENERAL ECONOMIC CONDITIONS WHICH AFFECT CONSUMER
SPENDING PATTERNS FOR RESTAURANT DINING OCCASIONS; INCREASING COMPETITION IN THE
UPSCALE CASUAL DINING SEGMENT OF THE RESTAURANT INDUSTRY; ADVERSE WEATHER
CONDITIONS WHICH CAUSE THE TEMPORARY UNDERUTILIZATION OF OUTDOOR PATIO SEATING
AVAILABLE AT SEVERAL OF THE COMPANY'S RESTAURANTS; EVENTS WHICH INCREASE THE
COST TO DEVELOP AND/OR DELAY THE DEVELOPMENT AND OPENING OF NEW RESTAURANTS;
CHANGES IN THE AVAILABILITY AND/OR COST OF RAW MATERIALS, LABOR, AND OTHER
RESOURCES NECESSARY TO OPERATE THE COMPANY'S RESTAURANTS; THE SUCCESS OF
OPERATING INITIATIVES; DEPTH OF MANAGEMENT; ADVERSE PUBLICITY; TECHNOLOGICAL
DIFFICULTIES ASSOCIATED WITH THE COMPANIES MANAGEMENT INFORMATION SYSTEMS
INITIATIVES; THE RATE OF GROWTH OF GENERAL AND ADMINISTRATIVE EXPENSES
ASSOCIATED WITH BUILDING A STRENGTHENED CORPORATE INFRASTRUCTURE TO SUPPORT THE
COMPANY'S EXPANDED RESTAURANT OPERATIONS; THE AVAILABILITY, AMOUNT, TYPE, AND
COST OF CAPITAL FOR THE COMPANY AND THE DEPLOYMENT OF SUCH CAPITAL; CHANGES IN,
OR ANY FAILURE TO COMPLY WITH, GOVERNMENTAL REGULATIONS; THE REVALUATION OF ANY
OF THE COMPANY'S ASSETS; THE AMOUNT OF, AND ANY CHANGES TO, TAX RATES; ADVERSE
RULINGS, JUDGMENTS OR SETTLEMENTS INVOLVING LITIGATION OR OTHER LEGAL MATTERS;
AND OTHER FACTORS REFERENCED IN THIS FORM 10-Q AND THE COMPANY'S FORM 10-K FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1997.
GENERAL COMMENTS
As of March 31, 1998, the company owns and operates two restaurants which are
owned 100% and four additional restaurants which are 51% owned. Of the four
restaurants that are 51% owned one is open and three are in development. The
three restaurants in development are all scheduled to open in the current year.
The restaurants currently open are:
- ------------------------ ------------------------- -----------------
Restaurant Location Date Opened
- ------------------------ ------------------------- -----------------
Sforza's Ristorante West Palm Beach, FL February, 1996
My Martini West Palm Beach, FL February, 1997
Max's Beach Place Fort Lauderdale, FL April 29, 1997
- ------------------------ ------------------------- -----------------
The restaurants currently in development are:
<TABLE>
<S> <C> <C>
- ----------------- ---------------------------------------------------------- -----------------------
Restaurant Location Scheduled Opening
- ----------------- ---------------------------------------------------------- -----------------------
Max's Grille Las Olas Riverfront Development, Fort Lauderdale, FL June 12, 1998
Max's Grille Weston , FL October 1, 1998
TBA Boca Raton, FL September 1, 1998
- ----------------- ---------------------------------------------------------- -----------------------
</TABLE>
Each restaurant is an upscale, high volume, casual dining operation.
5
The Company's revenues consist primarily of sales from its restaurant
operations. The Company's costs and expenses relate to restaurant sales (cost of
food, beverages and supplies) and the management to run the operations or
overhead. (operating expenses including labor and occupancy, general and
administrative expenses, depreciation and amortization expenses, and preopening
amortization expense).
Equity method of Accounting
As Sforza Enterprises, Inc. owns 51% of Max's Beach Place and the three
restaurants in development, these restaurants are accounted for via the equity
method of accounting. As a result, the revenues and expenses of these
restaurants are not incorporated into the consolidated revenues and expenses for
Sforza Enterprises, Inc. Instead, 51% of the profit of these restaurants is
recognized on the income statement as "Equity in earnings of unconsolidated
affiliates".
The Company has recently entered into a letter of intent to purchase the
remaining 49% of the four restuarants which it currently does not own in
consideration of 700,000 shares. If consummated, the operating results of the
four restaurants will be included in the Company's financials on a consolidated
basis as of the closing date. There are no assurances that the acquisition will
be consummated.
Results of Operations
The following table presents, for the periods indicated the Consolidated
Statements of Operations of the Company expressed as percentages of total
revenues. The results of operations for the thirteen weeks ended March 31, 1998
are not necessarily indicative of the results to be expected for the full fiscal
year.
<TABLE>
<CAPTION>
Sforza Enterprises, Inc.
Comparative Operational Percentages
Stated as a Percentage of Total Revenue
Three Months Ended Three Months Ended % Point
March 31, 1998 March 31, 1997 Change
------------------------ ------------------------- ------------
<S> <C> <C> <C>
Food Revenue 48.79% 52.00% -3.21%
Beverage / Other Revenue 51.21% 48.00% 3.21%
------------------------ ------------------------- ------------
Total Revenues 100.00% 100.00%
======================== =========================
Food Cost 63.36% 69.21% -5.85%
Liquor Cost 32.94% 39.62% -6.68%
------------------------ ------------------------- ------------
Cost of Goods Sold 47.79% 55.01% -7.22%
Gross Profit 52.21% 44.99% 7.22%
------------------------ ------------------------- ------------
Operating Expenses 38.89% 31.27% 7.62%
Operating profit 13.32% 13.72% -0.40%
------------------------ ------------------------- ------------
Overhead / G&A 10.13% 13.45% -3.32%
Interest Expense 0.00% 0.30% -0.30%
Equity in Earnings of Affiliate -1.54% 0.00% -1.54%
Other Income -0.60% 0.00% -0.60%
------------------------ ------------------------- ------------
Total Other (Income)/Expense 7.99% 13.75% -5.76%
Income Before Tax 5.32% -0.04% 5.36%
======================== ========================= ============
</TABLE>
6
<PAGE>
Revenues
For the thirteen weeks ended March 31, 1998, the Company's total revenues
decreased 18.75% to $1,132 thousand. The sales decrease is the result of
increased competition in the West Palm Beach area resulting from the continued
development of the Clematis Street area. Max's Beach Place, which opened in
April, 1997, is not considered when calculating revenues due to the less than
controlling interest of Max's Beach Place owned by Sforza Enterprises, Inc.
Since Sforza Enterprises own only 51% of Max's Beach Place, the equity method of
accounting was used in the consolidation process. Had Max's Beach Place been
reported on a consolidated basis, revenues would have increased 17.1% as
compared to quarter ended March 31, 1997. The following is a presentation of
what total revenues would have been if the operating results of Max's Beach
Place had been presented on the consolidated method.
<TABLE>
<CAPTION>
Total
Revenues
13 Weeks Ending Ownership % Revenues per
3/31/98 Consolidated
Method
----------------------------------------------------------
<S> <C> <C> <C>
Sforza Enterprises, Inc. 1,132,844 100% 1,132,844
Max's Beach Place 980,971 51% 500,295
-----------------
Total Consolidated Revenues 1,633,139
=================
Total Revenues - 13 Weeks Ending 3/31/97 1,394,298
=================
Increase - $ 238,841
Increase - % 17.1%
</TABLE>
Cost of Food, Beverages and Supplies
During the thirteen weeks ended March 13, 1998, cost of food, beverages and
supplies for the restaurants was $541.3 thousand versus $766.9 thousand for the
comparable period last year. The related decrease of $225.6 thousand is
primarily attributable to menu redesign and management control. The decrease in
revenues also attributed to the decline in food cost. Of the $225.6 decrease in
food cost, $124.7 thousand is attributable to the revenue decrease and $100.9
thousand is attributable to the improvement in the cost of goods sold percent.
As a percentage of restaurant sales, these costs decreased to 47.79% versus
55.01% for the same period of the prior year. The menu at the Company's
restaurants is a diverse menu and is not overly dependent on a single commodity.
The Company's food production principles dictates that all items are prepared
from the highest quality, fresh food. As a result, the Company is more dependent
upon spot market prices as opposed to longer term commodity pricing.
With respect to newly opened restaurants, these costs will typically be higher
than normal during the first 90-120 days of operations until the restaurant
staffs become more accustomed to optimally managing and servicing the high sales
volumes typically experienced by the Company's restaurants.
Operating Expenses - Labor
Labor expenses, which includes restaurant-level labor (including associated
fringe benefits), were $330.9 thousand for the thirteen weeks ended March 31,
1998 versus $431.2 thousand for the same period of the prior year. This decrease
was principally due to the decline in revenues and greater focus on labor
efficiencies by management. As a percentage of total revenues, labor expenses
were 29.2% versus 31..0% for the comparable period last year.
7
<PAGE>
Occupancy and Other Expenses
Occupancy and other expenses increased to $440.7 thousand for the thirteen weeks
ended March 31, 1998 versus $436.1 thousand for the same period of the prior
year. As a percentage of total revenues, occupancy and other expenses increased
to 38.9% for the thirteen weeks ended March 31, 1998 versus 31.3% for the same
period of fiscal 1996. The percentage increase is the result of incurring
approximately the same dollar expenses on a smaller revenue base.
A detailed analysis of these expenditures follows:
Sforza Enterprises, Inc.
Operating Expense Analysis
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, March 31,
1998 1997
-----------------------------------------------------------
$ % of Revenue $ % of Revenue $
Change
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Manager Compensation 76,524 6.8% 102,588 7.4% (26,064)
Other Wages 5,572 0.5% 0 0.0% 5,572
Employee benefits 63,670 5.6% 71,873 5.2% (8,203)
Management Fee 12,703 1.1% 16,569 1.2% (3,866)
Parking Fees 1,371 0.1% 1,803 0.1% (432)
Laundry and Linen 8,065 0.7% 13,721 1.0% (5,656)
Uniforms 1,665 0.1% 1,825 0.1% (160)
Cleaning and Pest Control 9,739 0.9% 5,645 0.4% 4,094
Liquor Tax 0 0.0% 11,155 0.8% (11,155)
Music Service 3,822 0.3% 2,437 0.2% 1,385
Advertising 8,998 0.8% 37,018 2.7% (28,020)
Office Expenses 4,754 0.4% 5,488 0.4% (734)
Utilities 25,819 2.3% 25,153 1.8% 666
Credit Card Fees 19,154 1.7% 19,232 1.4% (78)
Professional Fees 6,399 0.6% 4,811 0.3% 1,588
Repairs & Maintenance 18,619 1.6% 22,347 1.6% (3,728)
Rent 61,772 5.5% 41,823 3.0% 19,949
Insurance 12,589 1.1% 10,014 0.7% 2,575
Pre-opening Amortization 25,470 2.2% 0 0.0% 25,470
Depreciation & Amortization 32,098 2.8% 26,487 1.9% 5,611
Miscellaneous 41,880 3.7% 16,077 1.2% 25,803
-------------------------- -------------------------- --------------
440,683 38.9% 436,066 31.3% 4,617
========================== ========================== ==============
</TABLE>
Other Income and Expense including Overhead / General & Administration
General and administrative expenses consist of restaurant field supervision
expenses, corporate support expenses (salaries and related fringe benefits,
travel, and other administrative expenses), and expenses associated with
non-operational properties such as rent and insurance. General and
administrative expenses decreased to $114.8 thousand for the thirteen weeks
ended March 31, 1998 from $187.5 thousand for the same period of fiscal 1997, a
decrease of $72.7 thousand or 38%. As a percentage of total revenues, general
and administrative expenses decreased to 10.1% for the thirteen weeks ended
March 31, 1998 versus 13.5% for the same period of fiscal 1997. These decreases
were principally attributable to discontinuation of services provided by
officers of the Company in 1998.
8
<PAGE>
The Company plans to continue to strengthen its field supervision and corporate
support infrastructures during the remainder of fiscal 1998 and fiscal 1999 to
support its planned future growth. This strengthening will likely result in a
higher level of general and administrative expenses during those respective
periods. One of the Company's principal objectives for the remainder of fiscal
1998 and fiscal 1999 is to more effectively leverage its operational and
corporate support infrastructure with higher sales volumes through the design
and implementation of turnkey management information systems to be installed at
our operations.
Depreciation and Amortization Expenses
Depreciation and amortization expenses are incorporated into Operating Expenses
for our field operations and into our Overhead / G&A line for depreciation and
amortization expenses for our support areas.
Depreciation and amortization expenses were $36.3 thousand for the thirteen
weeks ended March 31, 1998 versus $30.7 thousand for the thirteen weeks ended
March 31, 1997. As a percentage of total revenues, depreciation and amortization
expenses were 3.2% for the thirteen weeks ended March 31, 1998 versus 2.2% for
the same period of the prior year. The increase of $5.6 thousand for the
thirteen weeks ended March 31, 1998 principally consisted of an increase in
restaurant depreciation expense which was principally attributable to the
recognition of depreciation expense for the full quarter of the My Martini
restaurant in 1998.
Preopening amortization expense was $25.5 thousand for the thirteen weeks ended
March 31, 1998 versus $0.0 thousand for the same period of the prior year. As a
percentage of total revenues, preopening expense amortization was 2.2% versus
0.0% for the thirteen weeks ended March 31, 1997.
As a result of the highly customized and operationally complex nature of the
Company's restaurants, the restaurant preopening process is extensive and costly
relative to that of most chain restaurant operations. Preopening costs, which
often exceed $800 thousand per restaurant, include recruiting, training,
relocation and related costs for developing management and hourly staff for new
restaurants, as well as other costs directly related to the opening of new
restaurants. Preopening costs will vary from location to location depending on a
number of factors including, among others, the proximity of other established
Company restaurants, the size and layout of each location, and the relative
difficulty of the restaurant staffing and training process. As is currently the
practice for of many upscale, highly customized and "theme" restaurant entities,
the Company defers its restaurant preopening costs and then amortizes them over
the 12-month period immediately following the opening of the respective
restaurants. Total restaurant preopening amortization will vary from quarter to
quarter depending on the timing of restaurant openings and the number of newer
restaurants amortizing their preopening costs in a given quarter. Currently, the
Company is evaluating its restaurant preopening process with the objective of
reducing its timeframe, intensiveness, and overall cost. However, there can be
no assurance that preopening costs will be minimized for future restaurants.
A new accounting standard is currently under consideration by the American
Institute of Certified Public Accountants which, if adopted, would require a
change in the Company's accounting for preopening costs to an
expense-as-incurred basis. The Company's implementation of a new accounting
principle in this respect would require the recognition of the cumulative effect
of the change in accounting principle as a one-time charge against earnings, net
of any related income tax effect, retroactive to the beginning of the fiscal
year of implementation.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating restuarants are located in West Palm Beach, Florida and
are therefore subject to the seasonality of the tourist industry in South
Florida. Restuarant sales are expected to be brisk in the tourist season which
is generally from mid-fall to mid-spring and slow during the off-season. The
Company expects to use its cash reserves or working capital generated during its
busy season to fund its operations during the off-season.
The Company's principal financing for the construction and opening of its
restuarants through March 31, 1998, was provided by its shareholders.
The Company does not have an existing arrangement for a credit facility with a
financial institution for short term financing. Management believes that cash
flow generated from operations, together with the above financing transactions
and the net proceeds from the initial public offering will be sufficient to meet
the Company's working capital requirements and anticipated capital expenditures
through 1998.
On December 30, 1997, the Company consummated the acquisition of 51% of the
equity interests in each of four limited partnerships for an aggregate payment
of $3,000,000 pursuant to a partnership interest subscription agreement. Each of
the limited partnerships operates or is planned to operate Max's Grill
Restuarants at a separate location in South Florida. The investments in the
limited partnerships are accounted for under the equity method of accounting.
Summarized combined balance sheet information for the limited partnerships as of
March 31, 1998 follows:
Assets:
Current assets $ 761,862
Property and equipment, net 1,000,091
Other assets 33,289
-----------
Total assets $ 4,816,198
===========
Liabilities and equity:
Current liabilities $ 322,409
Long-term debt 37,580
Partners' equity 4,454,343
-----------
Total liabilities and equity $ 4,816,198
===========
The Company has recently entered into a letter of intent to purchase the
remaining 49% of the four restuarants which it currently does not own in
consideration of 700,000 shares. If consummated, the operating results of the
four restuarants will be included in the Company's financials on a consolidated
basis as of the closing date. There are no assurances that the acquisition will
be consummated.
As part of the letter of intent to purchase the remaining 49% of the four
restuarants, the Company has agreed to acquire two additional restuarants and a
restuarant management company. The restuarants known as Max's Grille and The
Coffee Shop are both located in Mizner Park, Boca Raton, FL. The restuarant
management company currently performs management services for Sforza
Enterprises, Inc., as well as 14 other restuarants located in South Florida. In
consideration for this acquisition, 1,400,000 shares of common stock will be
issued. There are no assurances that the acquisition will be consummated.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Currently there are no legal proceedings against the Company that the Company is
aware of or initiated by the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. None.
(b) Reports on Form 8-K. None.
11
<PAGE>
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.
SFORZA ENTERPRISE, INC.
Date: May 13, 1998
By: /s/ DENNIS MAX
----------------------------------------
Dennis Max
PRESIDENT
By: /s/ FREDERICK J. DREIBHOLZ
----------------------------------------
Frederick J. Dreibholz
CHIEF FINANCIAL OFFICER
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 573,701
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 60,550
<CURRENT-ASSETS> 761,862
<PP&E> 1,199,517
<DEPRECIATION> 199,426
<TOTAL-ASSETS> 4,816,918
<CURRENT-LIABILITIES> 322,409
<BONDS> 0
0
0
<COMMON> 17,100
<OTHER-SE> 4,437,243
<TOTAL-LIABILITY-AND-EQUITY> 4,816,198
<SALES> 1,132,844
<TOTAL-REVENUES> 1,132,844
<CGS> 541,330
<TOTAL-COSTS> 1,096,826
<OTHER-EXPENSES> (24,293)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 60,311
<INCOME-TAX> 0
<INCOME-CONTINUING> 60,311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,311
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
