SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-QSB
QUARTERLY REPORT
UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
COMMISSION FILE NUMBER 0-23251
- --------------------------------------------------------------------------------
SFORZA ENTERPRISES INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0705377
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
222 CLEMATIS STREET, SUITE 202 33401
WEST PALM BEACH, FLORIDA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (561) 366-0027
- --------------------------------------------------------------------------------
Indicate by a 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 June 30, 1999, 1,710,000 shares of the issuer's Common Stock, $.01
par value, were outstanding.
<PAGE>
SFORZA ENTERPRISES INC.
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheet--June 30, 1999 1
Consolidated Statements of Operations for the six months and
three months ended June 30, 1999 and 1998 2
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 1998 3
Notes to Interim Consolidated Financial Statements 4 - 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation 7 - 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 1999
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 878,857
Inventories 60,001
Other current assets 70,522
-----------
Total current assets 1,009,380
Investments in unconsolidated affiliates 1,933,968
Property and equipment, net 868,940
Other assets, net 64,495
-----------
Total assets $ 3,876,783
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 93,636
Accrued expenses 170,826
Installment note payable 626
Current portion of obligations under capital leases 18,634
-----------
Total current liabilities 283,722
Obligations under capital leases - net 10,675
-----------
Total liabilities 294,397
-----------
Shareholders' equity:
Common stock, $.01 par value 17,100
Additional paid in capital 5,097,064
Retained earnings (deficit) (1,531,778)
-----------
Total shareholders' equity 3,582,386
-----------
Total liabilities and shareholders' equity $ 3,876,783
===========
</TABLE>
See notes to interim consolidated financial statements.
1
<PAGE>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Six Months and Three Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Six Months Three Months Six Months Three Months
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net sales $ 2,241,521 $ 982,749 $ 2,139,609 $ 1,006,765
----------- ----------- ----------- -----------
Cost and expenses:
Cost of sales 1,102,070 480,234 1,040,667 499,337
Operating expenses 1,242,890 659,924 1,159,136 603,640
Interest expense 3,294 1,524 2,156 2,156
----------- ----------- ----------- -----------
Total cost and
expenses 2,348,254 1,141,682 2,201,959 1,105,133
----------- ----------- ----------- -----------
Operating loss (106,733) (158,933) (62,350) (98,368)
Other income:
Other income 25,601 22,114 13,826 7,003
Equity in earnings
(loss) of
unconsolidated
affiliates 7,097 (20,866) 14,870 (2,600)
----------- ----------- ----------- -----------
Loss before provision
for income taxes (74,035) (157,685) (33,654) (93,965)
Income tax expense
(benefit) -- -- (13,125) (13,125)
----------- ----------- ----------- -----------
Net loss $ (74,035) $ (157,685) $ (20,529) $ (80,840)
=========== =========== =========== ===========
Basic net loss per
common share $ (.04) $ (.09) $ (.01) $ (.05)
=========== =========== =========== ===========
Weighted average common
shares outstanding 1,710,000 1,710,000 1,710,000 1,710,000
=========== =========== =========== ===========
</TABLE>
See notes to interim consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
1999 1998
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (74,035) $ (20,529)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in earnings of unconsolidated affiliates (7,097) (14,870)
Depreciation and amortization 90,196 72,825
Decrease in inventories 9,145 5,762
(Increase) decrease in other current assets 62,876 (68,703)
Decrease in accounts payable (189,686) (73,795)
Increase in accrued expenses 10,762 67,030
--------- ---------
Net cash used in operating activities (97,839) (32,280)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (34,006) (17,183)
Increase in other assets (37,412) (18,000)
Return of investment in limited partnership 622,714 --
Investments in unconsolidated affiliates -- (127,600)
--------- ---------
Net cash provided by (used in) investing activities 551,296 (162,783)
--------- ---------
Cash flows from financing activities:
Principal payments on installment note payable (1,816) (12,412)
Principal payments on obligations under
capital leases (12,260) (19,805)
--------- ---------
Net cash used in financing activities (14,076) (32,217)
--------- ---------
Net increase (decrease) in cash and cash equivalents 439,381 (227,280)
Cash and cash equivalents, beginning of period 439,476 591,269
--------- ---------
Cash and cash equivalents, end of period $ 878,857 $ 363,989
========= =========
</TABLE>
See notes to interim consolidated financial statements.
3
<PAGE>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
The consolidated statements of Sforza Enterprises Inc. and subsidiaries (the
Company) as of June 30, 1999 and for the six months and three months ended June
30, 1999 and 1998 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 periods ended June 30, 1999 are
not necessarily indicative of the results to be obtained for the full fiscal
year ending December 31, 1999.
Investments in Unconsolidated Affiliates
On December 30, 1997, the Company acquired 51% limited partnership interests in
each of four limited partnerships for an aggregate of $3,000,000, pursuant to a
partnership interest subscription agreement. Each of the limited partnerships
operates or planned to operate a Max's Grille Restaurant at a separate location
in South Florida. The business of the limited partnerships is governed by
identical limited partnership agreements which vest overall management and
control of the limited partnerships to Unique Restaurant Concepts, Inc. (URCI)
through management agreements with URCI executed by each of the limited
partnerships. Three of the restaurants were developed and operating as of
December 31, 1998. The Company accounted for the investments in the limited
partnerships using the equity method through June 30, 1999.
During June 1999, the Company elected to forego the development of the fourth
restaurant and the related limited partnership was liquidated. The Company
received approximately $620,000 in cash representing a return of its investment
upon the liquidation of the limited partnership.
Summarized statement of operations information for the three limited
partnerships for the six months and three months ended June 30, 1999 follows:
<TABLE>
<CAPTION>
Three
Six Months Months
---------- ------
<S> <C> <C>
Sales, net $4,752,117 $2,174,473
---------- ----------
Cost and expenses:
Cost of sales 2,393,108 1,114,253
Operating expenses 2,307,351 1,076,942
Interest expense 16,270 7,965
---------- ----------
Total cost and expenses 4,716,729 2,199,160
---------- ----------
Operating income (loss) 35,388 (24,687)
Other income 5,076 (2,953)
---------- ----------
Net income (loss) $ 40,464 $ (27,640)
========== ==========
</TABLE>
4
<PAGE>
During August 1999, the Company purchased from an affiliate of URCI the
remaining 49% interests in each of the three remaining limited partnerships for
an aggregate purchase price of $160,000. In addition, the affiliate was granted
options to purchase up to 20,000 shares of the Company's common stock at $2.50
per share. The agreement also terminates the management agreements with URCI and
requires the limited partnerships to pay license fees to URCI ranging from .75%
to 1.75% of the three Max's Grille Restaurants' revenue during the twelve month
period following the acquisition. The licensing arrangement generally may be
terminated after twelve months.
The Company will consolidate the three remaining limited partnerships in its
financial statements for periods subsequent to the acquisition date. The excess
of the Company's aggregate investment in the three limited partnerships plus the
incremental purchase price for the 49% interests over the book value of the net
assets acquired will be recorded as goodwill and amortized over approximately
eight years.
Income Taxes
As of June 30, 1999, the Company has loss carryforwards approximating $965,000,
which expire through 2013. No income tax benefit is recognized for the six
months and three months ended June 30, 1999 for the loss carryforwards due to
the Company's limited operating history. Management intends to recognize the
loss carryforwards when they are realized or it determines that it is more
likely than not that such loss carryforwards will be realized.
Stock Options Granted
During February 1999, the Company granted options to certain employees to
purchase 12,000 shares at $1.00 per share which become exercisable on December
31, 1999 pursuant to the equity incentive plan (the Plan). During February 1999,
the Company also granted options to certain employees to purchase 40,000 shares
under the Plan at $4.44 per share; 20,000 of which become exercisable in October
1999 and 20,000 of which become exercisable in October 2000. In addition, during
February 1999, the Company granted non qualified, non-plan options to certain
employees to purchase 30,000 shares at $2.50 per share, of which 15,000 become
exercisable in October 1999 and 15,000 become exercisable in October 2000. No
compensation expense was recorded in connection with the granting of these
options.
Earnings (Net Loss) per Common Share
Earnings (net loss) per common share is computed in accordance with Financial
Accounting Standards Board Statement 128 (FAS 128). Basic earnings per common
share excludes dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period.
5
<PAGE>
Diluted earnings per share reflects, where appropriate, the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the Company's earnings. The Company utilizes the
treasury stock method for computing diluted earnings per share. The effects of
this calculation are anti-dilutive for the six months and three months ended
June 30, 1999 and 1998, since the exercise prices exceed the average market
price. Therefore, diluted earnings per share for the six months ended and three
months June 30, 1999 and 1998 is not presented. Securities that could
potentially dilute basic earnings per share in future periods include
outstanding options to purchase 75,000 shares at $5.00 per share, options to
purchase 65,000 shares at $11.63 per share, options to purchase 12,000 shares at
$1.00 per share, options to purchase 40,000 shares at $4.44 per share, options
to purchase 30,000 shares at $2.50 per share and warrants to purchase 650,000
shares at $9.50 per share.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-QSB under Item 2, "Management's Discussion
and Analysis of Financial Condition and Results of Operation", 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; and technological
difficulties associated with the Company's management information systems; and
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; and other
factors referenced in this Form 10-QSB and the Company's Form 10-KSB for the
fiscal year ended December 31, 1998.
General Comments
Sforza Enterprises Inc. and subsidiaries (the Company) operate Sforza
Ristorante, a full-service northern Italian restaurant, which opened in February
1996, and My Martini Grille, a full-service up-scale grill which opened in
February 1997. Both restaurants are located in downtown West Palm Beach,
Florida.
On December 30, 1997, the Company acquired 51% limited partnership interests in
each of four limited partnerships which operate or planned to operate Max's
Grille Restaurants in separate South Florida locations for $3,000,000. The first
Max's Grille Restaurant began operations in May 1997, the second opened in June
1998 and the third in October 1998. The business of the limited partnerships is
governed by identical limited partnership agreements which vest overall
management and control of the limited partnerships to Unique Restaurant
Concepts, Inc. (URCI) through management agreements with URCI executed by each
of the limited partnerships. The Company accounted for the investments in the
limited partnerships using the equity method through June 30, 1999. During June
1999, the Company elected to forego the development of the fourth restaurant and
the related limited partnership was liquidated. The Company received
approximately $620,000 in cash representing a return of its investment upon the
liquidation of the limited partnership.
7
<PAGE>
During August 1999, the Company purchased from an affiliate of URCI the
remaining 49% interests in each of the three remaining limited partnerships for
an aggregate purchase price of $160,000. In addition, the affiliate was granted
options to purchase up to 20,000 shares of the Company's common stock at $2.50
per share. The agreement also terminates the management agreements and requires
the limited partnerships to pay license fees to URCI ranging from .75% to 1.75%
of the three Max's Grille Restaurants' revenue during the twelve month period
following the acquisition. The licensing agreement generally may be terminated
after twelve months.
The Company will consolidate the three remaining limited partnerships in its
financial statements for periods subsequent to the acquisition date. The excess
of the Company's aggregate investment in the three limited partnerships plus the
incremental purchase price for the 49% interests over the book value of the net
assets acquired will be recorded as goodwill and amortized over approximately
eight years.
This management's discussion and analysis of financial condition and results of
operation should be read in conjunction with the Company's unaudited interim
consolidated financial statements and notes thereto presented elsewhere herein.
Equity Method of Accounting
The Company has 51% limited partnership interests in each of three limited
partnerships which operate Max's Grille Restaurants at separate locations.
Because the Company did not exercise control over the limited partnerships, the
Company's investments are accounted for using the equity method of accounting
through June 30, 1999. As a result, the revenue and expenses of these
restaurants are not incorporated into the consolidated revenue and expenses for
Sforza Enterprises Inc. Instead, 51% of the profit or losses from the limited
partnerships is recognized in results of operations as "equity in earnings of
unconsolidated affiliates".
The Company purchased the remaining 49% interests in the limited partnerships
during August 1999 and will consolidate the three limited partnerships in its
financial statements in periods subsequent to the acquisition date (see "General
Comments").
Results of Operations
The following table presents, for the periods indicated, the consolidated
statements of operations of the Company expressed as percentages of net sales.
The results of operations for the six months and three months ended June 30,
1999 are not necessarily indicative of the results to be expected for the full
fiscal year ending December 31, 1999.
8
<PAGE>
Comparative Operational Percentages
Stated as a Percentage of Net Sales
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1999 1998 1999 1998
------------------ ------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
--------- --------- -------- --------
Cost and expenses:
Cost of sales 48.8 49.6 49.2 48.6
Operating expenses 67.1 59.9 55.4 54.2
Interest expense .2 .2 .1 .1
--------- --------- -------- --------
Total cost and
expenses 116.1 109.7 104.7 102.9
--------- --------- -------- --------
Operating loss (16.1) (9.7) (4.7) (2.9)
Other income, net .3 .7 1.1 .6
Equity in earnings
(losses) of unconsoli-
dated affiliates (.2) (.3) .3 .7
--------- --------- -------- --------
Loss before income
taxes (16.0) (9.3) (3.3) (1.6)
Income tax expense
(benefit) - (1.3) - (.6)
--------- --------- -------- --------
Net loss (16.0)% (8.0)% (3.3)% (1.0)%
========= ========= ========= ========
</TABLE>
Net Sales
The Company's net sales consist of the food and beverage sales realized by the
restaurants it operates. The first restaurant, Sforza Ristorante, opened in
February 1996 and the second restaurant, My Martini Grille, opened in February
1997. The restaurants are in adjacent locations in downtown West Palm Beach,
Florida. Net sales increased from $2,139,609 for the six months ended June 30,
1998 to $2,241,521 for the six months ended June 30, 1999, representing an
increase of 4.8%. The increase in net sales from 1998 to 1999 was principally
due to the increased customer counts at My Martini Grille for the six months
ended June 30, 1999. Sforza Ristorante's net sales were $1,041,783 for the six
months ended June 30, 1999 and $1,061,440 for the six months ended June 30,
1998, while My Martini Grille's net sales were $1,199,738 for the six months
ended June 30, 1999 and $1,078,169 for the six months ended June 30, 1998. The
increase in My Martini's net sales was 11.3% from 1998 to 1999, while Sforza
Ristorante's net sales decreased by 1.9% for the same period.
Net sales for the three months ended June 30, 1999 of $982,749 decreased by
$24,016, or 2.4%, from the comparable period in 1998. The net sales volume for
both years was lower in the second quarter as compared with the respective first
quarter. The Company expects its second quarter volumes to decline due to the
seasonality of the South Florida restaurant industry.
9
<PAGE>
Cost of Sales
Cost of sales includes the cost of food and beverages sold and the salaries and
wages related to food preparation and service. Cost of sales increased from
$1,040,667 for the six months ended June 30, 1998 to $1,102,070 for the six
months ended June 30, 1999, a 5.5% increase. This is primarily a result of
increased sales at My Martini Grille for the six months ended June 30, 1999.
The cost of sales for Sforza Ristorante as a percentage of net sales was 48.5%
for the six months ended June 30, 1999 and 50.3% for the six months ended June
30, 1998. Cost of sales for My Martini Grille was 49.7% for the six months ended
June 30, 1999 and 47.0% for the six months ended June 30, 1998. Management is
continuing its evaluation of the menu offerings and pricing structure in an
attempt to maximize the sales and profits from its restaurants. Total cost of
sales, expressed as a percentage of net sales, was 49.2% in 1999 and 48.6% in
1998.
Cost of sales for the three months ended June 30, 1999 of $480,234 decreased by
$19,103, or 3.8%, from the comparable period in 1998. The decrease was
principally due to the reduced sales volume.
Operating Expenses
Operating expenses include other salaries and wages, rent and other occupancy
expenses, advertising, repairs and maintenance, general supplies, depreciation
and amortization, management fees and administrative expenses. Operating
expenses increased by $83,754 from $1,159,136 in the six months ended June 30,
1998 to $1,242,890 in the six months ended June 30, 1999, a 7.2% increase. This
increase is primarily due to additional costs incurred as a result of increased
sales and costs incurred to improve the Company's management of the restaurants.
Such expenses totaled 55.4% and 54.2% of net sales in 1999 and 1998,
respectively.
During the six months ended June 30, 1998, the Company incurred management fees
of approximately $21,000, pursuant to arrangements with URCI which terminated on
October 31, 1998. Depreciation and amortization totaled $90,196 for the six
months ended June 30, 1999 and $72,825 for the six months ended June 30, 1998.
Operating expenses increased to $659,924 for the three months ended June 30,
1999 from $603,640 for the comparable period in 1998. The increase was primarily
attributable to additional management personnel retained to evaluate and improve
the profitability of the Company-owned and Max's Grille restaurants.
Equity in Earnings of Unconsolidated Affiliates
On December 30, 1997, the Company acquired 51% equity interests in each of four
limited partnerships which operate or planned to operate Max's Grille
Restaurants. Two of the restaurants were operating as of June 30, 1998 and two
additional restaurants were opened during the remainder of 1998. The Company's
investments are accounted for using the equity method through June 30, 1999 (see
"Equity Method of Accounting" above). See "Liquidity and Capital Resources"
below for combined, summarized financial information for the limited
partnerships.
10
<PAGE>
The Company's share of the combined income of the limited partnerships for the
six months ended June 30, 1999 was $7,097 as compared to $14,870 for the six
months ended June 30, 1998. The Company's share of the combined losses of the
limited partnerships for the three months ended June 30, 1999 was $(20,866)
compared to $(2,600) for the comparable period in the prior year. The decreases
were primarily due to additional costs incurred to improve the profitability of
the restaurants.
Other Income
Other income for the six months and three months ended June 30, 1999 and 1998
principally consists of interest earned.
Income Tax Expense (Benefit)
The Company reported a net loss for federal income tax purposes for the year
ended December 31, 1998 and, at June 30, 1999, has available net operating loss
carryforwards approximating $965,000 which may be used to reduce future taxable
income. The tax benefit from the operating loss carryforwards was offset by a
valuation allowance at June 30, 1999 and, accordingly, no net deferred tax
assets are recognized in the accompanying consolidated balance sheet. An income
tax benefit of $13,125 was recognized for the six months and three months ended
June 30, 1998.
Interest Expense
Interest incurred principally relates to capital leases for equipment.
Net Loss
As a result of the above, the Company's net loss attributable to common
shareholders was $74,035 and $20,529 for the six months ended June 30, 1999 and
1998, respectively.
Liquidity and Capital Resources
The Company's operating restaurants are located in West Palm Beach, Florida and
are therefore subject to the relative seasonality of the tourist industry in
South Florida. Restaurant sales are expected to be brisk in the tourist season
which is generally from mid-fall to mid-spring and slower during the off-season.
The Company expects to use its cash reserves or any 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 two
company-owned restaurants and the three restaurants operated by the limited
partnerships (see below) was provided by public and private common stock
offerings.
11
<PAGE>
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 net proceeds from its common
stock offerings will be sufficient to meet the Company's working capital
requirements and anticipated capital expenditures through 1999.
As discussed under "General Comments" above, during June 1999, the Company
received approximately $620,000 in cash representing a return of its investment
upon liquidation of a non-operating limited partnership. During August 1999, the
Company executed an agreement to acquire the remaining 49% interests of the
three remaining limited partnerships for an aggregate purchase price of
$160,000.
The investments in the limited partnerships were accounted for under the equity
method of accounting through June 30, 1999. Summarized combined balance sheet
information for the limited partnerships as of June 30, 1999 follows:
<TABLE>
<CAPTION>
<S> <C>
Assets:
Current assets $ 319,038
Property and equipment, net 1,867,111
Other assets 26,981
----------
Total assets $2,213,130
==========
Liabilities and equity:
Current liabilities $ 761,906
Long-term debt 127,428
Partners' equity 1,323,796
----------
Total liabilities and equity $2,213,130
==========
</TABLE>
Summarized combined results of operations for the limited partnerships for the
six months ended June 30, 1999 and 1998 are presented as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net sales $4,752,117 $1,973,566
========== ==========
Net income $ 40,464 $ 29,156
========== ==========
</TABLE>
Impact of Inflation
The Company has not operated in a highly inflationary period and its management
does not believe that inflation has had a material effect on sales or expenses.
As operating expenses increase, the Company expects to recover increased costs
by increasing prices, to the extent permitted by competition. Because the
Company's business is somewhat dependent on tourism in Florida, any significant
decrease in tourism caused by inflation would likely have a material adverse
effect on sales and profitability.
Year 2000 Issue
The Company recognizes the need to ensure its operations will not be adversely
impacted by year 2000 software failures. Management has addressed the issue and
12
<PAGE>
believes its operating systems to be year 2000 compliant. The Company is in the
process of contacting its suppliers to determine whether such vendors are year
2000 compliant and the potential effect, if any, on the Company. The Company has
not yet determined the full extent to which it is vulnerable to the failure by
its key vendors to remediate year 2000 compliance issues. There can be no
assurance that the failure of the Company's vendors to be year 2000 compliant
would not have a material adverse affect on the Company's business, financial
condition, or results of operations.
13
<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. Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. None.
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 ENTERPRISES INC.
Date: August 12, 1999
By:/s/ Jay Visconti
-------------------
Jay Visconti, President
By:/s/ Vincent Holland
----------------------
Vincent Holland, Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited consolidated financial statements for the six months ended
June 30, 1999 and is qualified in its entirety by reference to such financial
statements and related notes.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 878857
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 60001
<CURRENT-ASSETS> 70522
<PP&E> 1296511
<DEPRECIATION> 427571
<TOTAL-ASSETS> 3876783
<CURRENT-LIABILITIES> 283096
<BONDS> 626
0
0
<COMMON> 17100
<OTHER-SE> 3565286
<TOTAL-LIABILITY-AND-EQUITY> 3876783
<SALES> 2241521
<TOTAL-REVENUES> 2241521
<CGS> 1102070
<TOTAL-COSTS> 1102070
<OTHER-EXPENSES> 1242890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3294
<INCOME-PRETAX> (74035)
<INCOME-TAX> 0
<INCOME-CONTINUING> (74035)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74035)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
