FORM 10-QSB
SECURITY AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________________ to _____________________.
Commission file number: 0-24681
UNISERVICE CORPORATION AND SUBSIDIARY
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0816177
- --------------------------------------------------------------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1900 Glades Road, Suite 351, Boca Raton, Florida 33431
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 763-1200
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 report(s), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS
As of March 31, 2000, there were 1,430,000 shares of Class A Common Stock, par
value $.0001 per share, and 1,400,000 shares of Class B Common stock, par value
$.0001 per share, outstanding.
<PAGE>
UNISERVICE CORPORATION
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED) AND
DECEMBER 31, 1999
2
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
<TABLE>
<CAPTION>
INDEX
PAGE
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information
</TABLE>
3
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
A S S E T S March 31, 2000 December 31, 1999
-------------- -----------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 487,711 $ 522,497
Accounts receivable, net 330,308 235,259
Due from related parties 419,225 416,436
Other receivables 258,219 553,464
Inventory 581,911 581,935
Income taxes receivable 129,960 124,006
Other current assets 193,971 146,928
------------ ------------
Total Current Assets 2,401,305 2,580,525
Property and Equipment, net 9,674,069 9,098,890
Intangibles 218,672 264,193
Long-term receivable - deferred revenue 199,507 332,000
Long-term prepaid contract 256,658 265,409
Deposits 444,240 411,452
------------ ------------
$ 13,194,451 $ 12,952,469
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,542,076 $ 1,545,223
Lines-of-credit 671,757 730,837
Current maturities of long-term debt 131,437 131,437
Current portion of capital lease obligations 190,421 148,601
Current portion of deferred revenue 195,144 195,144
------------ ------------
Total Current Liabilities 2,730,835 2,751,242
------------ ------------
Long-Term Liabilities:
Long-term debt 509,829 503,691
Capital lease obligations, excluding current portion 578,679 490,309
Deferred revenue, excluding current portion 1,192,912 1,170,865
------------ ------------
2,281,420 2,164,865
------------ ------------
Stockholders' Equity:
Class A common stock 143 143
Class B common stock 140 140
Preferred stock - -
Additional paid-in capital 8,707,157 8,707,157
Retained earnings 1,368,450 1,371,750
Cumulative translation adjustment (1,893,694) (2,042,828)
------------ ------------
Total Stockholders' Equity 8,182,196 8,036,362
------------ ------------
$ 13,194,451 $ 12,952,469
============ ============
</TABLE>
4
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------
March 31,
2000 1999
----------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 2,935,849 $ 3,200,148
Cost of Operations 1,088,342 1,253,930
-------------- --------------
Gross Profit 1,847,507 1,946,218
-------------- --------------
Selling and Administrative Expenses:
Payroll and employee benefits 753,337 747,362
Occupancy 475,495 542,337
Other selling and administrative 680,383 704,501
-------------- --------------
1,909,215 1,994,200
-------------- --------------
Loss from Operations (61,708) (47,982)
-------------- --------------
Other Income (Expenses):
Other, net 101,933 110,762
Interest expense (43,525) (20,924)
-------------- --------------
58,408 89,838
-------------- --------------
Net (Loss) Income $ (3,300) $ 41,856
============== ==============
Net (Loss) Income Per Common Share $ (0.001) $ 0.02
============== ==============
Weighted Average Common Shares
Outstanding 2,830,000 2,363,333
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Class A Class B Additional Cumulative Total
Common Common Paid-in Retained Translation Stockholders'
Stock Stock Capital Earnings Adjustment Equity
----- ----- ------- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 143 $ 140 $ 8,707,157 $ 1,371,750 $(2,042,828) $ 8,036,362
Net loss (Unaudited) -- -- -- (3,300) -- (3,300)
Translation adjustment (Unaudited) -- -- -- -- 149,134 149,134
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2000 (Unaudited) $ 143 $ 140 $ 8,707,157 $ 1,368,450 $(1,893,694) $ 8,182,196
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
March 31,
----------------------------------------------------
2000 1999
----------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income $ (3,300) $ 41,856
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization 122,716 56,567
Translation adjustment 149,134 (544,719)
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net (95,049) 12,828
Other receivables 260,241 15,656
Inventory 24 (28,278)
Income taxes receivable (5,954) (46,630)
Other current assets 12,039 132,766
Deferred revenue receivable 132,493 --
Long-term prepaid contract 8,751 (276,249)
Intangibles 45,521 (8,845)
Deposits (32,789) 8,295
Increase (decrease) in:
Accounts payable and accrued expenses (3,147) 422,467
Deferred revenue 22,047 (34,577)
--------- ---------
Net Cash Provided by (Used in) Operating Activities 612,727 (248,863)
--------- ---------
Cash Flows from Investing Activities:
Acquisition of property and equipment (721,972) (290,199)
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
March 31,
----------------------------------------------------
2000 1999
----------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Financing Activities:
Net (repayment) proceeds of lines-of-credit $ (59,080) $ 91,894
Net advances to related parties (2,789) 46,322
Proceeds (payments) on capital lease obligations 130,190 (187,147)
Proceeds from long-term debt 6,138 --
----------- -----------
Net Cash Provided by (Used in) Financing Activities 74,459 (48,931)
----------- -----------
Decrease in Cash and Cash Equivalents (34,786) (587,993)
Cash and Cash Equivalents - Beginning of Period 522,497 1,618,179
----------- -----------
Cash and Cash Equivalents - End of Period $ 487,711 $ 1,030,186
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 43,525 $ 20,924
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
8
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited) With Respect to March 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Uniservice Corporation, (the "Company"), is a
Florida corporation incorporated in November 1997 as a holding
company to acquire Inversiones e Inmobiliaria Kyoto, S.A.'s
("Kyoto") 99.97% interest in Kentucky Foods Chile, S.A. ("KyF
Chile") (collectively, the "Company"). KyF Chile is in the fast
food service business and presently operates 36 restaurants of
which the majority are in the Santiago, Chile area pursuant to its
international franchise agreement with Tricon Global Restaurants,
Inc. ("Tricon").
Basis of Presentation - In August 1998, the Company acquired 99.7%
of Kyoto's interest in KyF Chile in exchange for 1,399,900 shares
of Class B common stock which occurred simultaneously with the
closing of the initial public offering of the Company's stock. In
order to comply with Chilean law and the requirements of the
Central Bank of Chile for foreign investments, two stock purchase
agreements were effectuated at the time of the closing of the
initial public offering of the Company's stock whereby (i) Kyoto
purchased 1,399,900 shares of Class B common stock for $2.2
million, and (ii) the Company purchased Kyoto's 99.97% interest in
Kentucky Foods Chile, S.A. for $2.2 million and KyF Chile became a
majority owned (99.97%) subsidiary of the Company. The substance
of this transaction is an exchange of shares between the Company
and Kyoto which was accounted for by the pooling of interests.
During 1999, the Company increased its estimate of the useful
lives of certain restaurant equipment and leasehold improvements
to better reflect the remaining estimated useful lives of these
assets. This change has the effect of increasing income from
operations for 1999 by approximately $396,000 ($0.14 per share).
Functional Currency - The financial statements have been
translated in accordance with the provisions set forth in
Statement of Financial Accounting Standards No. 52, from Chilean
pesos (the functional currency) into US dollars (the reporting
currency).
Earnings Per Common Share - Earnings per common share are based on
the weighted average number of shares outstanding of 2,830,000 for
the periods ended March 31, 2000 and 1999, respectively. All
warrants issued have exercise prices greater than the existing
market value of the company stock and therefore are deemed
anti-dilutive and are not components of earnings per share.
9
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company generates operating revenues in two ways: sales of products from
restaurant locations (approximately 93% of total revenues) and sales of coupon
books (approximately 7% of total revenues). Typically, business entities will
receive coupon books from the Company and give them to employees as incentives.
The coupon holders present the coupons to the individual restaurants which will
subsequently bill the employer for the food purchased by the coupon holders.
The Company incurs costs primarily for raw food and paper supplies, which
represent approximately 37% of total revenues, as well as payroll and rent which
represent 26% and 13% of total revenues, respectively, as of March 31, 2000.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Results of Operations
Gross revenues decreased from $3,200,148 for the three months ended March 31,
1999 to $2,935,849 for the three months ended March 31, 2000, a decrease of
$264,299 or approximately 8%. A decline in sales for the three months ended
March 31, 2000 in U.S. dollars was prompted by the increased competition in the
fast-food market as well as the devaluation of the Chilean peso against the
dollar which was $483.83 Chilean Pesos (the functional currency) to U.S. $1.00
at March 31, 1999 and $501.41 pesos to U.S. $1.00 at March 31, 2000.
Cost of operations for the three months ended March 31, 2000 decreased $165,588
from $1,253,930 for the three months ended March 31, 1999 to $1,088,342, a
decrease of approximately 13%. The decline in cost of operations is principally
attributable to the devaluation of the Chilean peso against the dollar and the
decrease in sales.
Gross profit percentages increased by 2% for the three months ended March 31,
2000 when compared to the three months ended March 31, 1999. This increase from
61% to 63% was attributable to the Company's negotiations with vendors to reduce
costs.
Payroll and employee benefits increased to $753,337 for the three months ended
March 31, 2000 from $747,362 for the three months ended March 31, 2000, an
increase of $5,975 or 1%.
Occupancy expense decreased from $542,337 for the three months ended March 31,
1999 to $475,495 for the three months ended March 31, 2000, a decrease of
$66,842 or 12%, due to the Company renegotiating some of the stores' leases
subject to a percentage of sales by obtaining more favorable leasing terms.
10
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Results of Operations (Continued)
- ---------------------------------
Selling and administrative expenses for the three months ended March 31, 2000
were $680,383 compared to $704,501, for the three months ended March 31, 1999, a
decrease of $24,118 or approximately 3%. This decrease is attributable to the
Company's efforts to reduce costs.
Other income (expenses) consisted of two major categories: other revenues and
interest expense and their composition is as follows:
Other income includes advertising credits and refunds from vendors and suppliers
and amortization of deferred revenue arising from the ECUSA (Pepsico franchise
and bottling company in Chile) exclusivity agreement. The decrease in this
category was from $110,762 for the three months ended March 31, 1999 to $101,933
for the three months ended March 31, 2000, a change of $8,829 or 8%. The
decrease was primarily due to a decline in the incentive fees paid to the
Company by vendors. For the three months ended March 31, 2000, approximately
$50,000 relates to the amortization of deferred revenue and $52,000 relates to
refunds and credits from vendors.
The second category relates to interest expense paid to banks and leasing
companies which increased by $22,601 to $43,525 in March 31, 2000 from $20,924
in March 31, 1999 or 108%. The increase is due primarily to the average
outstanding balance of debt during the related periods.
For the three months ended March 31, 2000, the Company had a net loss of $3,300
compared to net income of $41,856 for the three months ended March 31, 1999. The
reasons for this decrease was the increasing competition in the fast-food market
in Chile.
During the first quarter, interest rates have increased from 9 - 11% at December
31, 1999 to 11 - 12% at March 31, 2000, resulting in the stabilization of the
peso. Management anticipates that the stabilization of the Chilean peso should
have a positive effect on consumer spending and that gross revenues and net
profits should increase.
At March 31, 2000, accounts receivable increased by $95,049 to $330,308 from
$235,259 at December 31, 1999, due to an increase in sales of coupon books to
employees.
Other receivables decreased to $258,219 at March 31, 2000 from $553,464 at
December 31, 1999, a decrease of $295,245, due to the collection of its second
installment due as the result of the Company's exclusivity agreement with ECUSA
(the Chilean bottling company representing Pepsico).
11
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Results of Operations (Continued)
- ---------------------------------
Other current assets increased to $193,971 at March 31, 2000 from $146,928 at
December 31, 1999, an increase of $47,043, due to an increase in sales taxes
receivable and other prepaid expenses.
The Company did not incur Chilean income taxes in 2000 or 1999, as a result of
various Chilean government incentives designed to promote expansion and
continued development of business in the country. Tax credits for building
acquisitions, rapid acceleration of depreciation, and employee education have
resulted in the elimination of any current tax liability for the Company.
Liquidity and Capital Resources
- -------------------------------
In September 1999, the Company entered into a seven-year agreement with ECUSA (a
supplier) requiring the exclusive use by the Company of Pepsi products for each
of its existing KFC(R) restaurants. Additionally, the agreement provides that
each new KFC(R) restaurant owned by the Company would also be subject to the
same agreement. In exchange for this exclusivity agreement, the Company received
and deferred approximately $1,300,000 net of tax, which is being recognized and
amortized ratably over a seven year period. For the periods ended March 31,
2000, the Company recognized approximately $52,000 of the deferred revenue.
The Company utilizes bank lines-of-credit for periodic operational expenses. At
March 31, 2000, the Company had approximately $672,000 outstanding on its
$800,000 line-of-credit facility.
Seasonality
- -----------
The Company generates the highest amount of sales during July and December. The
slowest month for sales is February, when many Chileans are on summer vacation.
The fourth quarter is normally the most profitable and this is due to the cash
rebates received based on purchases from suppliers. As the Company opens
additional stores, the Company anticipates amounts received in rebates will
increase.
Inflation
- ---------
Over the past five years, Chile has experienced a decrease in inflation. The
Chilean economic system is based on an indexed inflation system and therefore,
no material inflation is anticipated in the immediate future.
12
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OTHER MATTERS
On January 27, 2000, the Company received notice from Tricon Restaurants
International that the opening and operating of restaurants without approval
from Tricon may be a breach and default of the Company's franchise agreement.
The Company has attempted to cure contractual non-compliance, by paying unpaid
initial fees for restaurants and obtaining Tricon's approval for the sale of
certain food products. On May 11, 2000, the Company was notified that, while it
had cured some of the claims that existed on January 27, 2000, contractual
non-compliance defaults remained uncured and new breaches were alleged. These
include the operation of restaurants without the execution of franchise
agreements for each restaurant, unpaid fees and the unauthorized use of
trademarks and other proprietary information in relation to the restaurants
operating without a franchise agreement. Tricon has advised the Company that if
they do not receive properly executed franchise agreements, together with full
payment of all past due royalties (approximately $76,000) by June 1, 2000,
Tricon will deliver a formal notice of default. Failure to remedy these defaults
within the applicable time period would place all of the Company's business and
outlets at risk of termination. Management is working on resolving all issues
with Tricon.
13
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
Part II: Other Information
ITEM 1: Legal Proceedings
None
ITEM 2: Changes in Securities and Use of Proceeds
None
ITEM 3: Defaults upon Senior Securities
None
ITEM 4: Submission of Matters to a vote of Securities Holders
None
ITEM 5: Other Information
14
<PAGE>
SIGNATURE
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 as a duly authorized officer as the chief financial officer of the
Registrant.
UNISERVICE CORPORATION AND SUBSIDIARY
By: /s/ Ricardo Vilensky
--------------------------------------------------
Ricardo Vilensky, President
and Chief Executive Officer
By: /s/ Mauricio Aguirre
---------------------------------------------------
Mauricio Aguirre, Chief Financial Officer
(authorized Officer and Chief Accounting Officer)
DATED: May 15, 2000
15
<PAGE>
UNISERVICE CORPORATION AND SUBSIDIARY
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> Jan-1-1999
<PERIOD-END> Mar-31-2000
<CASH> 487,711
<SECURITIES> 0
<RECEIVABLES> 330,308
<ALLOWANCES> 0
<INVENTORY> 581,911
<CURRENT-ASSETS> 2,401,305
<PP&E> 12,649,339
<DEPRECIATION> 2,975,270
<TOTAL-ASSETS> 13,194,451
<CURRENT-LIABILITIES> 2,730,835
<BONDS> 0
0
0
<COMMON> 283
<OTHER-SE> 8,181,913
<TOTAL-LIABILITY-AND-EQUITY> 13,194,451
<SALES> 2,935,849
<TOTAL-REVENUES> 2,935,849
<CGS> 1,088,342
<TOTAL-COSTS> 1,088,342
<OTHER-EXPENSES> 1,909,215
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,525
<INCOME-PRETAX> (3,300)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,300)
<EPS-BASIC> (.001)
<EPS-DILUTED> (.001)
</TABLE>
