UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from_________to______________
Commission file number 02-27569
HEALTH EXPRESS USA, INC.
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(Exact name of small business issuer)
Florida 65-0847995
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(State or other jurisdiction IRS Employer
of incorporation or organization Identification Number
275 Commercial Blvd., Suite 260 Fort Lauderdale, Florida 33308
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(Address of principal executive offices)
(954) 776-5401
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Registrant's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as to the latest practicable date.
Class Outstanding shares at October 10, 2000
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Common Stock 6,438,722
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Health Express USA, Inc.
We have reviewed the accompanying consolidated balance sheet of Health Express
USA, Inc. (the "Company") as of September 30, 2000, and the related consolidated
statements of operations and cash flows for the nine month period then ended.
These financial statements are the responsibility of the management of the
Company.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying September 30, 2000 financial statements for them to
be in conformity with generally accepted accounting principles.
/s/ Ahearn Jasco + Company, P.A.
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AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
November 6, 2000
2
<PAGE>
PART 1: FINANCIAL INFORMATION
Item 1: Financial Statements
HEALTH EXPRESS USA, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2000 (unaudited) and December 31, 1999
ASSETS
------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 71,941 $ 70,553
Inventory 19,946 --
Prepaid expenses 1,597 7,950
----------- -----------
TOTAL CURRENT ASSETS 93,484 78,503
PROPERTY AND EQUIPMENT, net 327,652 256,243
DEPOSITS 5,156 4,350
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TOTAL $ 426,292 $ 339,096
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 22,162 $ 47,161
Current portion of capital lease obligation 3,884 3,884
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TOTAL CURRENT LIABILITIES 26,046 51,045
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LONG TERM PORTION - Capital lease obligation 13,703 15,174
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STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value;10,000,000 shares authorized
zero shares issued and outstanding -- --
Common stock, $0.001 par value; 50,000,000 shares authorized
6,438,722 and 5,640,627 issued and outstanding at September 30, 2000
and December 31, 1999 respectively 6,439 5,640
Additional paid-in capital 5,656,324 4,955,484
Accumulated Deficit (5,276,220) (4,688,247)
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TOTAL STOCKHOLDERS' EQUITY 386,543 272,877
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TOTAL $ 426,292 $ 339,096
=========== ===========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
HEALTH EXPRESS USA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
FOR THE PERIOD ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
Ended Ended Ended Ended
Sept. 30,2000 Sept. 30,2000 Sept. 30,1999 Sept. 30,1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES, net $ 200,256 $ 105,491 $ -- $ --
COST OF SALES 103,555 51,491 -- --
----------- ----------- ----------- -----------
GROSS PROFIT 96,701 54,000 -- --
----------- ----------- ----------- -----------
CONTROLLABLE EXPENSES
Labor 131,507 68,102 -- --
Occupancy 24,202 9,411 -- --
Marketing 25,786 13,846 -- --
Repairs 8,911 2,296 -- --
Other direct costs 43,034 17,311 -- --
----------- ----------- ----------- -----------
233,440 110,966 -- --
----------- ----------- ----------- -----------
OTHER EXPENSES
Compensation 180,769 11,371 13,200 --
Compensatory stock options 24,000 14,250 4,040,000 --
Depreciation 40,228 22,130 -- --
General and Administrative 206,237 49,096 219,279 77,241
----------- ----------- ----------- -----------
451,234 96,847 4,272,479
TOTAL EXPENSES 684,674 207,813 4,272,479 77,241
----------- ----------- ----------- -----------
LOSS BEFORE PROVISION
FOR INCOME TAXES (587,973) (153,813) (4,272,479) (77,241)
PROVISION FOR INCOME TAXES -- -- -- --
----------- ----------- ----------- -----------
NET LOSS $ (587,973) $ (153,813) $(4,272,479) $ (77,241)
=========== =========== =========== ===========
LOSS PER COMMON SHARE:
Basic and diluted $ (0.10) $ (0.02) $ (0.91) $ (0.01)
=========== =========== =========== ===========
Weighted average common shares outstanding 6,125,463 6,437,710 4,709,030 5,278,381
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
HEALTH EXPRESS USA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE PERIOD ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
Nine months Nine months
Ended ended
Sept. 30, 2000 Sept. 30, 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (587,973) $(4,272,479)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation 40,228 --
Common stock issued for services and prizes 75,275 13,200
Issuance of stock options 24,000 4,040,000
Changes in certain assets and liabilities
Inventory, prepaid expenses and other (14,399) (9,655)
Accounts payable (24,999) 10,706
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NET CASH USED IN OPERATING ACTIVITIES (487,868) (218,228)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (107,273) (77,828)
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NET CASH USED IN INVESTING ACTIVITIES (107,273) (77,828)
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CASH FLOWS FROM FINANCING ACTIVITIES
Payment on capital lease obligation (1,471) --
Net proceeds from issuance of common stock 598,000 442,680
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NET CASH PROVIDED BY FINANCING ACTIVITIES 596,529 442,680
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NET INCREASE IN CASH 1,388 146,624
CASH AND CASH EQUIVALENTS, Beginning of thBeginning of the period 70,553 78,495
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CASH AND CASH EQUIVALENTS, End of the yearEnd of the period $ 71,941 $ 225,119
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 2,688 $ --
=========== ===========
Cash paid during the period for income taxes $ -- $ --
=========== ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
During the period September 30, 2000 the Company acquired $
4,363 of property and equipment in exchange for 1,745 shares
of common stock, valued at $
2.5atp$r2.50rperwshare,nwhichorepresents the fair vaue of the
equipment
See notes to consolidated financial statements
5
<PAGE>
HEALTH EXPRESS USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(unaudited)
Basis of Presentation
The accompanying consolidated condensed unaudited financial statements of Health
Express USA, Inc., and its wholly-owned subsidiary, Healthy Bites Grill, Inc.,
(the"Company"), have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Item 310(b) of Regulation S-B. The disclosures in the notes to
the financial statements have been prepared in accordance with the instructions
set forth under Item 310(b), Interim Financial Statements, of Regulation S-B.
The requirements set forth under Item 310(b) require that footnotes and other
disclosures should be provided as needed for the fair presentation of the
financial statements and to ensure that the financial statements are not
misleading. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The requirements of Item 310(b) also require disclosure of
material subsequent events and material contingencies notwithstanding disclosure
in the annual financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included and
there are no material subsequent events or material contingencies that require
disclosure. The financial statements as of and for the periods ended September
30, 2000 and 1999 are unaudited. The financial statements for the period ended
September 30, 2000 have been reviewed by an independent public accountant
pursuant to Item 310(b) of Regulation S-B and following applicable standards for
conducting such reviews, and report of the accountant is included as part of
this filing.
The results of operations for the interim periods presented are not necessarily
indicative of the results of operations to be expected for the fiscal year.
Certain information for 1999 has been reclassified to conform to the 2000
presentation. The accompanying consolidated financial statements should be read
in conjunction with the financial statements and footnotes included in the
Company's Form 10-KSB filed for the year ended December 31, 1999.
The Company was previously a development stage company. Effective April 10,
2000, when the Company began generating revenues from restaurant operations, the
Company was no longer considered to be in a development stage.
6
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations.
Introduction - Forward Looking Statements
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995(the "Reform Act"), Health Express USA, Inc.
("Health Express" or the "Company") is hereby providing cautionary statements
identifying important factors that could cause the Company's actual results to
differ materially from those projected in forward-looking statements made
herein. Any statements that express, or involve discussions as to, expectations,
beliefs, plans, objectives, assumptions of future events or performance are not
statements of historical facts and may be forward-looking. These forward-looking
statements are based largely on the Company's expectations and are subject to a
number of risks and uncertainties, including but not limited to, economic,
competitive, regulatory, growth strategies, available financing and other
factors discussed elsewhere in this report and in documents filed by the Company
with the Securities and Exchange Commission ("SEC"). Many of these factors are
beyond the Company's control. Actual results could differ materially from the
forward-looking statements made. In light of these risks and uncertainties,
there can be no assurance that the results anticipated in the forward-looking
information contained in this report will, in fact, occur.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
Plan of Operations
Health Express USA, Inc. (the "Company") was incorporated in Florida on
July 2, 1998 to develop, construct and operate healthy gourmet fast food
restaurants. The Company's first phase of its plans of operation is to complete
construction of the initial flagship restaurant in Fort Lauderdale, Florida.
Upon operating profitably its first restaurant, the Company plans to expand
conservatively through franchising efforts as well as other Company owned
restaurants.
The flagship restaurant began operations on April 10, 2000 and the revenues
reported from the opening date to September 30, 2000 are revenues from
restaurant operations. The consolidated loss from operations during this period
of approximately $ 588,000 includes a loss incurred by the parent company,
Health Express USA, Inc., of approximately $ 451,000 and a loss incurred by the
subsidiary which operates the restaurant, Healthy Bites Grill, Inc., of
approximately $ 137,000.
Operations - Health Express USA, Inc.
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The loss for the period ending September 30, 2000 of approximately $
451,000 includes compensation paid to officers and directors of $ 84,000 in cash
and $ 82,750 in stock and options (non-cash). Excluding depreciation expense of
$ 40,228 and non-cash compensation of $ 15,000 for outside services, Health
Express USA, Inc., incurred cash outlays for general, administrative,
professional and advertising expenses of approximately $ 229,000. For the nine
months ended September 30, 2000 an additional amount of $ 112,000 was expended
toward the construction of the restaurant. These capital expenditures were
incurred primarily during the first quarter of the current year and the
restaurant began operations on April 10, 2000. Management does not expect
additional material restaurant capital expenditures.
7
<PAGE>
General and administrative expenses for the nine months ended September 30,
2000 of approximately $ 229,000 is comparable to the same period of the prior
year. However, for the third quarter, Health Express USA, Inc. is maintaining a
lower level of general and administrative expenses compared to the first quarter
of this year. This lower level of expenses was previously indicated in the
Company's June 30, 2000 report.
Operations - Healthy Bites Grill, Inc.
-------------------------------------
Restaurant operations have incurred a total loss of approximately $ 137,000
for the period of April 10, 2000, date of the opening, to September 30, 2000.
The loss for the third quarter of approximately $ 57,000 represents an
improvement to the second quarter loss of approximately $ 80,000. Management has
began, toward the end of third quarter, to implement new restaurant operating
procedures, in the areas of purchasing and labor, in order to bring profit
margins in line with industry standard. Management believes that it has
identified the problem areas that caused restaurant losses higher than
anticipated.
As a result of an intensive review of restaurant operations, Management has
identified that the causes of higher than anticipated food and labor costs are
menu driven. As a result, the menu has been streamlined and food preparation has
been substantially reduced. These new procedures have been implemented without
affecting the quality of food. Combined with an expected increase in sales, as a
result of the start of the busy tourist season in South Florida, the Management
expects that the fourth quarter results will show a substantial improvement in
the bottom line of restaurant operations.
Management is well cognizant that an efficient operation is a pre-requisite
for franchise operations. The initial period of restaurant operations has given
Management an understanding on how to operate the restaurant within the
requirements and objectives set forth in its mission statement of providing
healthy fast food. While the menu has undergone various changes, with related
changes in purchasing and labor requirements, in the areas of preparation and
service, the quality of the food has remained high.
Customer satisfaction also remains high and average ticket price is above
other fast food restaurants, supporting Management's initial belief that health
conscious consumer is willing to pay a higher price for quality healthy food. As
we enter the traditionally busy tourist season in South Florida, Management
expects the results of the new restaurant operating procedures combined with an
increased sales volume to be reflected in the Company's statement of operations
for the fourth quarter.
Liquidity and Capital Resources
The Company has cash available to satisfy short-term working capital
requirements. The Company currently has no debt outside of normal and recurring
accounts payable resulting from restaurant operations and an obligation for a
capital lease of a Point of Sale register system.
While Management projects that cash flow from restaurant operations will be
sufficient to meet the Company's working capital requirements, additional funds
may be necessary to finance the development of franchise operations in South
Florida. To raise additional funds the Company may seek additional financing
through the sale of its securities. The Company's directors also may provide
additional funds by exercising their options. The Company may also seek
alternative sources of financing, including more conventional sources such as
bank loans and credit lines or loans from the Company's officers. However, no
assurances can be given that the Company will be able to meet its needs through
the sale of securities or otherwise.
8
<PAGE>
From time to time the Company may evaluate potential acquisitions involving
complementary businesses, content, products or technologies. The Company has no
present agreements or understanding with respect to such acquisition. The
Company's future capital requirements will depend on many factors, including
growth of the Company's restaurant business, the success of its franchising
operations, economic conditions and other factors including results of future
operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following exhibit is included herein:
Exhibit 10 - Material Contracts. Health Express USA, Inc. entered into an
employment agreement with its financial officer, Bruno Sartori.
A copy of the contract is included herein.
Exhibit 27 - Financial Data Schedule Article 5 included for Electronic Data
Gathering Analysis, and Retrieval (EDGAR) purposes only. This
Schedule contains summary financial information extracted from
the consolidated balance sheets and consolidated statements of
operations of the Company as of and for the nine months ended
September 30, 2000 and is qualified in its entirety by reference
to such financial statements.
9
<PAGE>
Signatures:
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HEALTH EXPRESS USA, INC.
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(Registrant)
11/14/2000
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Date Douglas Baker, President
11/14/2000 /S/ Bruno Sartori
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Date Bruno Sartori, Chief Financial Officer
