<PAGE> 1
FORM 1O-QSB
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 1O-QSB
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995
---------------------
OR
/ / TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ------------------
Commission File Number 01-14221
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 51-0339167
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3650 Silverside Road, Suite 1037, Wilmington, Delaware 19810
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (302) - 479 - 7733
-----------------------------
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Exchange Act
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
--- ---
<TABLE>
<CAPTION>
Class Outstanding at June 30, 1995
-------------------------- ----------------------------
<S> <C>
Common stock - Class A -
$.025 par value 2,081,190 shares
Common stock - Class B -
$.025 par value 731,790 shares
</TABLE>
<PAGE> 2
FORM 1O-QSB
PAGE 2.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Facing Sheet 1
Index 2
PART I. Financial Information:
Unaudited Condensed Consolidated
Balance Sheet June 30, 1995 3, 4
Unaudited Condensed Consolidated
Statements of Income for the Six
Months Ended June 30, 1995 and
1994 5
Unaudited Condensed Consolidated
Statements of Income for the Three
Months Ended June 30, 1995 and
1994 6
Unaudited Condensed Consolidated
Statements of Cash Flows for the
Six Months ended June 30, 1995
and 1994 7, 8
Unaudited Condensed Consolidated
Statements of Cash Flows for the
Three Months ended June 30, 1995
and 1994 9, 10
Notes to Unaudited Condensed
Consolidated Financial Statements 11 - 15
Management's Discussion and
Analysis of Financial Condition
and Results of Operations 16 - 19
PART II. Item 6 Exhibits and Reports on
Form 8-K 20
Signatures 21
</TABLE>
<PAGE> 3
FORM 10-QSB
PAGE 3
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<S> <C>
Current Assets
Cash $ 874,870
U. S. Treasury Securities 1,454,772
Marketable securities, at cost,
which approximates market value 1,672
Inventory 5,224
Prepaid income taxes 13,137
Prepaid expenses 38,165
Other receivables 51,649
----------
Total Current Assets 2,439,489
----------
Property and Equipment
Restaurant improvements and equipment 157,707
Land 135,310
Other 66,295
----------
359,312
Less: Accumulated depreciation and
amortization 94,543
----------
Total Property and Equipment 264,769
----------
Other Assets
Certificates of deposit 656,475
Franchise rights, net of amortization 304,114
Asset acquisition costs, net of amortization 16,104
Restaurant and vehicular equipment held for
resale 48,600
Security deposits 25,930
----------
Total Other Assets 1,051,223
----------
Total Assets $3,755,481
==========
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE> 4
FORM 10-QSB
PAGE 4
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT
June 30, 1995
(UNAUDITED)
<TABLE>
<S> <C>
Current Liabilities
Current portion of long-term debt $ 19,352
Accounts payable 86,448
Income taxes payable 32,105
Deferred income 35,000
----------
Total Current Liabilities 172,905
Long-term debt, less current portion above 51,634
----------
Total Liabilities 224,539
----------
Commitments and Contingencies
Stockholders' Equity
Preferred stock, par value $.10
per share - authorized 100
shares - no shares issued and
outstanding -
Common stock, Class A par value,
$.025 per share - authorized
5,000,000 shares - 2,081,190
shares issued and outstanding 52,030
Common stock, Class B, par value,
$.025 per share - authorized
2,000,000 shares - 731,790
shares issued and outstanding 18,294
Additional paid in capital 3,356,135
Retained earnings 104,483
----------
Total Stockholders' Equity 3,530,942
----------
Total Liabilities and
Stockholders' Equity $3,755,481
==========
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE> 5
FORM 10-QSB
PAGE 5
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Operating Revenues (excluding discontinued operations)
Restaurant sales $ 185,586 $ 491,597
Franchise fees 32,331 46,023
Consulting fees - franchisees 20,455 26,158
Other 352 -
----------- -----------
238,724 563,778
----------- -----------
Expenses (excluding discontinued operations)
General and administrative expense 459,064 474,187
Restaurant cost of sales 208,634 686,222
Depreciation and amortization -
restaurant improvements and
equipment 8,796 54,055
Amortization - franchise rights 11,850 11,850
Depreciation and amortization -
other 6,220 5,864
Provision for loss on store closings 5,626 -
----------- -----------
700,190 1,232,178
----------- -----------
Operating profit (loss) ( 461,466) ( 668,400)
----------- -----------
Other Income (Expense)
Interest income 91,844 105,658
Interest expense ( 3,053) ( 31,998)
Loss on redemption of certificates of deposit ( 42,890) -
Equity in earnings (loss) of Gourmet Carts, Inc.,
an affiliated company - ( 47,000)
----------- -----------
45,901 26,660
----------- -----------
Loss before income and franchise taxes (excluding dis-
continued operations) ( 415,565) ( 641,740)
Provision for income and franchise taxes 2,750 2,300
----------- -----------
(Loss) from continuing operations ( 418,315) ( 644,040)
Income (loss) from discontinued operations, net
of income tax provisions of -0- ( 241,499) 16,916
----------- -----------
Net income (loss) ($ 659,814) ($ 627,124)
=========== ===========
Per share of Common Stock
Income (loss) from continuing operations ($ 0.15) ($ 0.23)
======= =======
Income (loss) from discontinued operations ($ 0.08) $ 0.01
======= =======
Net income (loss) ($ 0.23) ($ 0.22)
======= =======
Average Common Shares Outstanding 2,812,980 2,812,980
=========== ===========
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE> 6
FORM 10-QSB
PAGE 6
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Operating Revenues (excluding discontinued operations)
Restaurant sales $ 94,081 $ 229,834
Franchise fees 11,865 24,150
Consulting fees - franchisees - 25,988
Other 293 -
----------- -----------
106,239 279,972
----------- -----------
Expenses (excluding discontinued operations)
General and administrative expense 194,143 235,216
Restaurant cost of sales 101,530 329,859
Depreciation and amortization -
restaurant improvements and
equipment 4,398 27,027
Amortization - franchise rights 5,925 5,925
Depreciation and amortization -
other 3,110 2,932
----------- -----------
309,106 600,959
----------- -----------
Operating profit (loss) ( 202,867) ( 320,987)
----------- -----------
Other Income (Expense)
Interest income 45,170 48,910
Interest expense ( 1,481) ( 30,080)
Equity in earnings (loss) of Gourmet Carts, Inc.,
an affiliated company - ( 47,000)
----------- -----------
43,689 ( 28,170)
----------- -----------
Loss before income and franchise taxes (excluding dis-
continued operations) ( 159,178) ( 349,157)
Provision for income and franchise taxes 1,466 1,150
----------- -----------
Loss from continuing operations ( 160,644) ( 350,307)
Income (loss) from discontinued operations, net
of income tax provisions of -0- ( 164,262) 8,466
----------- -----------
Net income (loss) ($ 324,906) ($ 341,841)
=========== ===========
Per share of Common Stock
Income (loss) from continuing operations ($ 0.06) ($ 0.12)
======= =======
Income (loss) from discontinued operations ($ 0.06) $ 0.00
======= =======
Net income (loss) ($ 0.12) ($ 0.12)
======= =======
Average Common Shares Outstanding 2,812,980 2,812,980
=========== ===========
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE> 7
FORM 10-QSB
PAGE 7
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 659,814) ($ 627,124)
Adjustments to reconcile
net income to net cash (used in) provided
by Operating Activities
Depreciation and amortization 38,555 89,445
Loss on abandonment of leasehold 155,244 -
Amortization of discount on U.S.
Treasury securities ( 36,489) -
Equity in (earnings) loss of Gourmet
Carts, Inc., an affiliated company - 47,000
Changes in certain current
assets and liabilities
Current assets 11,911 ( 45,031)
Current liabilities ( 70,933) ( 63,294)
----------- -----------
Net Cash Provided (Used) by
Operating Activities ( 561,526) ( 599,004)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of long-term certificates
of deposit - ( 966,118)
Purchase of U.S. Treasury securities ( 1,911,075) -
Maturity of U.S. Treasury securities 492,795 -
Redemption of certificates of deposit 2,095,726 -
Purchase of property, equipment
and construction in progress ( 20,121) ( 150,433)
Sale of restaurant equipment 19,400 -
Decrease (increase) in security deposits 3,020 ( 1,110)
Increase in tenant security deposits payable - 409
Investment in Gourmet Carts, Inc., an affil-
iated company - ( 200,000)
----------- -----------
Net Cash Provided (Used) by Investing
Activities 679,745 ( 1,317,252)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt ( 9,110) ( 8,414)
----------- -----------
Net Cash Provided (Used) by Financing
Activities ( 9,110) ( 8,414)
----------- -----------
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE> 8
FORM 10-QSB
PAGE 8
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Net Increase (Decrease) in Cash
and Certificates of Deposit $109,109 ($1,924,670)
Cash and Certificates of Deposit
at beginning of period 765,761 3,018,010
-------- ----------
Cash and Certificates of Deposit
at end of period $874,870 $1,093,340
======== ==========
Supplemental Cash Flow Information
Interest paid $ 3,053 $ 31,998
Income taxes paid $ - $ 31,571
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE> 9
FORM 10-QSB
PAGE 9
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
1995 1994
----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 324,906) ($ 341,841)
Adjustments to reconcile
net income to net cash (used in) provided
by Operating Activities
Depreciation and amortization 18,153 44,722
Loss on abandonment of leasehold 155,244 -
Amortization of discount on U.S.
Treasury securities ( 21,227) -
Equity in (earnings) loss of Gourmet
Carts, Inc., an affiliated company - 47,000
Changes in certain current
assets and liabilities
Current assets ( 29,632) ( 35,300)
Current liabilities ( 41,252) ( 57,338)
----------- -----------
Net Cash Provided (Used) by
Operating Activities ( 243,620) ( 342,757)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of long-term certificates
of deposit - ( 693,000)
Maturity of U.S. Treasury securities 492,795 -
Redemption of certificates of deposit 95,000 -
Purchase of property, equipment
and construction in progress ( 18,828) ( 8,293)
Sale of restaurant equipment 19,400 -
Decrease (increase) in security deposits 2,250 -
Increase in tenant security deposits payable - 409
Investment in Gourmet Carts, Inc., an affil-
iated company - ( 200,000)
----------- -----------
Net Cash Provided (Used) by Investing
Activities 590,617 ( 900,884)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt ( 4,601) ( 4,250)
Loan payable-officer - ( 143,751)
----------- -----------
Net Cash Provided (Used) by Financing
Activities ( 4,601) ( 148,001)
----------- -----------
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE> 10
FORM 10-QSB
PAGE 10
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Net Increase (Decrease) in Cash
and Certificates of Deposit $ 342,396 ( 1,391,642)
Cash and Certificates of Deposit
at beginning of period 532,474 2,484,982
----------- -----------
Cash and Certificates of Deposit
at end of period $ 874,870 $ 1,093,340
=========== ===========
Supplemental Cash Flow Information
Interest paid $ 1,481 $ 30,080
Income taxes paid $ - $ 31,571
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE> 11
FORM lO-QSB
PAGE 11
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 AND 1994
1. The financial information included herein is unaudited; however, in the
opinion of the Company, such information reflects all adjustments
(consisting solely of normal recurring accruals) necessary to present
fairly results for the interim periods.
2. The results of operations for the six-month and three-month periods
ended June 30, 1995 and 1994 are not necessarily indicative of the
results to be expected for the full year. Certain items in the 1994
financial statements have been reclassified to conform with the 1995
presentation.
3. As a result of the surrender of the New York premises to the landlord,
and the release of the Company of the obligation under the lease (see
Note 4 below), the Company discontinued its premises and equipment
leasing business segment at its New York facility in May, 1995. These
operations have been presented, net of tax effect, as discontinued
operations in the financial statements.
The Company's discontinued school operations had received the majority
of its funds under various governmental programs which provided for
some form of tuition assistance for students. The various governmental
authorities have the right to audit the Company for compliance with
their specific regulations. The Company believes it was in compliance
with all such regulations, and no provision has been made in the
financial statements for any possible penalties for non-compliance.
In January, 1988, the Office of the State Comptroller ("OSC") issued a
preliminary report of its findings based on an audit of the Tuition
Assistance Program ("TAP") certification for the academic years
1983-1984 through 1986-1987. The audit covered 6,084 awards totaling
$4,672,370 for these academic years. The preliminary findings recommend
that the Higher Education Services Corporation seek recovery of
$316,105 from the Company arising out of the alleged incorrect
certification of 465 awards. The Company submitted a response to such
findings and, upon advice of its special counsel, has not taken any
other action with regard thereto. According to management of the
Company, the Company received no further communications with regard to
such findings up to the date of filing of this report.
4. On May 24, 1990, the Company's subsidiary, CPU (NY), received from the
landlord of its New York premises consent to sublease approximately
22,500 square feet of the premises to an unrelated party for a term to
run substantially until the expiration date of the main lease. CPU
(NY) also leased to the subtenant most of the Company's school
equipment which had been used in connection with the premises. On May
26, 1995, CPU surrendered the premises to the landlord and was released
from all obligations related to the lease. As a result of such
surrender, improvements and equipment having a net book value of
$155,244 were written off.
<PAGE> 12
FORM lO-QSB
PAGE 12.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 AND 1994
(Con't...)
On January 27, 1995, the Sublessee filed a Chapter 11 petition and
moved to reject the aforementioned Sublease and equipment rental
contract. On March 2, 1995, the Court issued an order rejecting the
Sublease and equipment rental contract. At December 31, 1994, after
having applied the security deposit of $56,000, there remained $60,856
of the premises and equipment rental due. This amount had been fully
reserved in the 1994 financial statements and the applicable reserve
and receivable have been written off in January, 1995.
5. In August, 1992, a purported stockholder of the Company filed in the
United States District Court for the Southern District of New York a
stockholder's derivative action on behalf of the Company, naming two of
the Company's directors as defendants and the Company as nominal
defendant. Such action alleged (i) alleged insider trading in
Company's stock, (ii) alleged breach of fiduciary duty in approving and
accepting compensation alleged to be excessive, and (iii) allegedly
operating an unregistered investment company. In addition to seeking
unspecified monetary damages on behalf of the Company, Plaintiff sought
the appointment of a trustee or receiver to dispose of the assets of
the Company. On April 30, 1993, the Plaintiff filed a motion to
dismiss the action without prejudice and is waiting court determination
as to whether individual stockholder notification is required.
6. On April 30, 1993, a wholly-owned subsidiary that was created for the
Company's food service business, S.P. Unlimited, Inc., (SPU) acquired
substantially all the assets of Premier Franchise Corporation ("PFC")
(formerly called the Salad Bar Corporation) and SPFC, Inc. consisting
principally of franchise rights, restaurant improvements and equipment
for an aggregate consideration of $498,000 (including $351,000 of cash
and $147,000 of notes).
In addition, upon acquisition of the PFC assets, SPU assumed the
existing lease on the restaurant located in Miami Lakes, Florida. Such
lease, expiring December 31, 1998, provides for minimum annual rentals
of $39,615 and a share of the real estate taxes. The lease is
guaranteed by the Company.
Since acquisition, SPU has entered into leases for two additional
restaurants in Margate and Oakland Park, Florida which provide for
monthly rentals aggregating $5,000 plus all expenses of operating the
properties. The two leases, which commenced late in 1993, have five
year terms with renewal options. In July, 1994, SPU closed the two
aforementioned restaurants. In June, 1995, SPU was released from its
obligations with respect to the Margate lease. SPU is attempting to
sublet the remaining premises in Oakland Park.
<PAGE> 13
FORM lO-QSB
PAGE 13.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 AND 1994
(Con't...)
In connection with the acquisition, SPU also entered into an Employment
Agreement with Donald J. Ryan, pursuant to which Mr. Ryan was to act
as President, Chief Operating Officer and a Director of SPU, and a
Director of the Company, for a compensation package which included a
salary of $100,000 and an incentive bonus of $50,000 for any year in
which pre-tax earnings of the Company exceeded $1,500,000. Mr. Ryan's
agreement was scheduled to expire on April 30, 2000, unless earlier
terminated for cause, as specified in such agreement (which, among
other things, included cessation of the business of SPU). In the event
that SPU was sold and the sale did not provide for continued employment
of Mr. Ryan on terms at least as favorable as those provided in such
agreement, Mr. Ryan would be entitled to full compensation for the
balance of the term, including the average of his past bonus amounts.
The Company had guaranteed SPU's obligations to Mr. Ryan.
On January 6, 1995, Mr. Ryan was terminated from his employment at SP
Unlimited. Shortly thereafter, Mr. Ryan commenced an arbitration
proceeding against the Company and S.P. Unlimited, Inc. before the
American Arbitration Association, claiming that his employment
agreement was breached by virtue of such termination and seeking
damages as a result. The Company asserts that Ryan's employment was
terminated for cause and intends to vigorously defend the proceeding.
7. On April 30, 1993, in connection with the PFC acquisition, the Company
entered into a Stock Option Agreement with Donald Ryan, pursuant to
which the Company granted Mr. Ryan options, at a price of $.875 per
share, to purchase an aggregate of 250,000 shares of Class A Common
Stock, exercisable on a cumulative basis with regard to 50,000 shares
each at the end of each year for five years. Such options expire on
April 30, 2003. Mr. Ryan's employment was terminated in January, 1995.
Whether or not such options are currently effective depends on the
outcome of the arbitration described earlier.
On October 12, 1993, the Company entered into a Stock Option Agreement
with Mohamad Al-Omari, pursuant to which the Company granted Mr.
Al-Omari options, at a price of $.875 per share, to purchase an
aggregate of 100,000 shares of Class A Common Stock, exercisable on a
cumulative basis with regard to 20,000 shares each at the end of each
year for five years. Such options expire on October 12, 2003.
On May 14, 1993, the Board of Directors of the Company adopted the
Commercial Programming Unlimited, Inc. Incentive Stock Option Plan (the
"Plan"), effective June 1, 1993. The Plan was approved by the
stockholders at the Company's annual meeting. The Plan provides for
the grant to officers and key employees of the Company and its sub-
<PAGE> 14
FORM lO-QSB
PAGE 14.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(Con't...)
sidiaries of incentive stock options and non-qualified stock options
for the purchase of Class A Common Stock. Two hundred thousand shares
of Class A Common Stock are reserved for issuance upon exercise of
options granted under the Plan. If an option terminates for any reason
without being exercised, then the shares represented by such option
will be available for the further grant of options. Generally, all
options are exercisable, commencing one year after the respective dates
of grant, to the extent of a cululative 25% of the shares subject to a
particular option during each of the next four years, provided that no
option may be exercised prior to six months from the date of grant
thereof. The option price for each option granted under the Plan may
not be less than 100% of the fair market value of the stock when the
option is granted. For purposes of the Plan, the fair market value of
the shares of Class A Common Stock on any date is generally the mean
between the closing bid and asked prices of the shares as quoted on
NASDAQ on such date (or the average, on such date, of the high and low
sales prices of such shares in the principal market in which such
shares are traded, if they are not then quoted on NASDAQ). No options
have been granted under the Plan.
No options have been exercised.
8. In April, 1994, a wholly owned subsidiary of the Company, CPU of
Florida, Inc., entered into an agreement with the inventors of a
portable pizza oven to form a corporation, Gourmet Carts, Inc., to
produce and market the ovens and related carts. CPU of Florida, Inc.
acquired a 50% interest in Gourmet Carts, Inc. for $200,000, and has
made loans and advances to such Corporation of an additional $252,658
through June 30, 1995. The inventors, who also acquired a 50% interest
in Gourmet Carts, Inc., contributed a prototype oven. A patent has
since been applied for. The investment in this development stage
company is accounted for under the equity method.
Gourmet Carts, Inc. sustained an operating loss of $361,000 from
inception in April to December 31, 1994. As a result of the losses,
the litigation discussed below, and other matters pertaining to the
oven, the Company in 1994 wrote off its total investment in and loans
and advances to this affiliate. Although the loans to Gourmet Carts,
Inc. are secured by all the assets of that company, CPU of Florida,
Inc. does not believe that the collateral will yield any significant
amount.
On January 4, 1995, CPU of Florida, Inc. filed suit against Gourmet
Carts, Inc. claiming that Gourmet Carts defaulted under a note and
security agreement. Although the Company sought to recover possession
of collateral, which consists of several pizza ovens, such motion has
<PAGE> 15
FORM lO-QSB
PAGE 15.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(Con't...)
been denied. In addition, on March 10, 1995, the Company, SPU and CPU
of Florida, Inc. commenced an action against Gourmet Carts, Inc.,
Donald Ryan and the inventors of the oven for damages and declaratory
and injunctive relief claiming breach of fiduciary duty, conversion,
breach of contract and tortious interference with contract.
On January 13, 1995, Gourmet Carts, Inc. and the inventors filed suit
against the Company, CPU of Florida, Inc., SPU and Walter Small seeking
declaratory relief regarding the parties' rights and obligations under
the Gourmet Carts, Inc. stockholders agreement and under the security
agreement with respect to which the Company alleges Gourmet Carts, Inc.
is in default. Gourmet Carts alleges that the Company failed to
cooperate in carrying out the intentions of the stockholders agreement,
raises issues concerning the Company's right to appoint a substitute
designee director, and also alleges that the Company unlawfully took
possession of two of Gourmet Carts, Inc.'s ovens. The Company disputes
all of the material allegations made by the plaintiffs.
9. Earnings per common share are calculated based on the weighted average
number of common shares outstanding during each period. No common
stock equivalents were outstanding for purposes of calculating primary
and fully diluted earnings per share for the six months and three
months ended June 30, 1995 and 1994. All calculations of primary and
fully diluted earnings per share were anti-dilutive.
<PAGE> 16
FORM 10-QSB
PAGE 16.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed consolidated
financial statements.
SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO JUNE 30, 1994
As a result of the surrender of the New York premises to the landlord,
and the release of the Company of the obligation under the lease, the Company
discontinued its premises and equipment leasing business segment at its New
York facility in May, 1995. These operations have been presented, net of tax
effect, as discontinued operations in the financial statements.
The following discussion relates to the Company's continuing operations:
The Company sustained a gross profit (loss) from its one remaining
restaurant of ($23,048) for the six months ended June 30, 1995. This compares
to a gross profit (loss) from the operations of three restaurants of ($194,625)
in the comparable period of 1994. Two of the restaurants were closed in July,
1994. Other income from franchise fees and royalties aggregated $32,331 for
the six months ended June 30, 1995 as compared to $46,023 in the comparable
1994 period. Consulting fees received from franchisees aggregated $20,455 for
the six months ended June 30, 1995 compared to $26,158 in the comparable 1994
period.
General and administrative expense decreased by 3.2% to $459,064 for
the six months ended June 30, 1995, as compared to the corresponding 1994
period. This decrease is primarily the result of the decrease in general
operating expenses due to the downsizing of the operations, which was largely
offset by the increase over the 1994 period in legal fees incurred in
connection with various litigation involving Donald Ryan, SP Unlimited, Inc.
and Gourmet Carts, Inc.
Depreciation and amortization decreased from 1994 due to the closing of
two restaurants in July, 1994.
Interest income for the six months ended June 30, 1995 decreased 13.1%
to $91,844, as compared to the corresponding 1994 period, primarily due to a
decrease in available liquid resources offset by an increase in short and
intermediate-term interest rates.
Interest expense for the six months ended June 30, 1995 decreased by
$28,945 compared to the corresponding 1994 period, since the prior period was
burdened by interest incurred in connection with a settlement of prior tax
liabilities.
<PAGE> 17
FORM lO-QSB
PAGE 17.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Con't...)
SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO JUNE 30, 1994 (Cont'd.)
The Company's share of losses from its investment in Gourmet Carts,
Inc. aggregated $47,000 for the six months ended June 30, 1994. The investment
in and advances to this affiliated development stage company were written off
at December 31, 1994.
A majority of the long-term certificates of deposit were redeemed
during the six months ended June 30, 1995. A loss of $42,890 was incurred
during the period as a result of such early redemptions.
The tax provisions for 1995 and 1994 reflect State and local taxes for
the current periods.
As a result of the foregoing, operating losses decreased $206,934; loss
before income and franchise taxes (excluding discontinued operations) decreased
$226,175; and net loss from continuing operations decreased $225,725 in the six
month period ending June 30, 1995 as compared to the same period in 1994.
THREE MONTHS ENDED JUNE 30, 1995 COMPARED TO JUNE 30, 1994
As a result of the surrender of the New York premises to the landlord,
and the release of the Company of the obligation under the lease, the Company
discontinued its premises and equipment leasing business segment at its New
York facility in May, 1995. These operations have been presented, net of tax
effect, as discontinued operations in the financial statements.
The following discussion relates to the Company's continuing operations:
The Company sustained a gross profit (loss) from its one remaining
restaurant of ($7,449) for the three months ended June 30, 1995. This compares
to a gross profit (loss) from the operations of three restaurants of ($100,025)
in the comparable quarter of 1994. Two of the restaurants were closed in July,
1994. Other income from franchise fees and royalties aggregated $11,865 for
the three months ended June 30, 1995 as compared to $24,150 in the comparable
1994 period. The Company did not earn any consulting fees from franchisees for
the three months ended June 30, 1995, compared to consulting fee income of
$25,988 in 1994.
General and administrative expense decreased by 17.5% to $194,143 for
the three months ended June 30, 1995, as compared to the corresponding 1994
quarter. This decrease is primarily the result of the decrease in general
operating expenses due to the downsizing of the operations which was largely
offset by the increase over the 1994 period in legal fees incurred in
connection with various litigation involving Donald Ryan, SP Unlimited, Inc.
and Gourmet Carts, Inc.
<PAGE> 18
FORM lO-QSB
PAGE 18.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Con't...)
THREE MONTHS ENDED JUNE 30, 1995 COMPARED TO JUNE 30, 1994 (Cont'd.)
Depreciation and amortization decreased from 1994 due to the closing of
two restaurants in July, 1994.
Interest income for the three months ended June 30, 1995 decreased
7.6% to $45,170, as compared to the corresponding 1994 period, primarily due to
a decrease in available liquid resources offset by an increase in short and
intermediate-term interest rates.
Interest expense for the three months ended June 30, 1995 decreased by
$28,599 compared to the corresponding 1994, since the prior period was burdened
by interest incurred in connection with a settlement of prior tax liabilities.
The Company's share of losses from its investment in Gourmet Carts,
Inc. aggregated $47,000 for the three months ended June 30, 1994. The
investment in and advances to this affiliated development stage company were
written off at December 31, 1994.
The tax provisions for 1995 and 1994 reflect State and local taxes for
the current periods.
As a result of the foregoing, operating losses decreased $118,120; loss
before income and franchise taxes (excluding discontinued operations) decreased
$189,979; and net loss from continuing operations decreased $189,663 in the
three month period ending June 30, 1995 as compared to the same period in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased during the first six months of 1995 by $109,109 to
$874,870. The net increase in cash is principally attributable to cash provided
by investing activities ($679,745) offset by cash used by operating activities
($561,526).
Despite the continuing losses, the Company still retains significant
liquid resources. Current assets at June 30, 1995 were $2,439,489 while
current liabilities were only $172,905. Cash, investments in U.S. Treasury
Securities, marketable securities, and long-term certificates of deposit
totalled $2,987,789 at June 30, 1995. Until its operations generate profits,
or the Company finds a business to generate sufficient operating profits, the
Company will be unable to report any material profits in its financial
statements.
<PAGE> 19
FORM 10-QSB
PAGE 19.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Con't...)
LIQUIDITY AND CAPITAL RESOURCES (Cont'd.)
The Company, through its subsidiaries, is continuing the development
plans for franchised stores under the original Sir Pizza concept. In addition,
the Company intends to aggressively develop the food vending and distribution
operations nationally and overseas.
In July, 1995, the first franchise unit in Illinois opened. The newly
opened unit has exceeded sales expectations. This unit's design and menu
reflects the Company's first "return to basics" business approach, focusing on
the franchise service with the Company's franchisees building the traditional
Sir Pizza style restaurants.
In September, 1995, the Company, through its subsidiaries, will begin
the marketing of food vending operations and product distribution facilities.
As of June, 1995, S.P. Unlimited, Inc. was released from all
obligations under its Margate lease. The land in Lake Worth has been
temporarily rented as an interim step to being sold. Negotiations are in
progress to procure a release from liability undr the Oakland Park lease.
Inflation
Inflationary factors in recent years have not had a significant effect
on the Company's operations. As long as the Company continues to hold treasury
securities, certificates of deposit and other interest bearing instruments,
changes in interest rates will have a significant impact on such interest
income.
<PAGE> 20
FORM 10-QSB
PAGE 20.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 11 (a). Computation of Net Income Per Share.
Exhitit 11 (b). Computation of Net Income Per Share.
(b) Reports on Form 8-K. The following report on Form 8-K was filed
during the quarter for which this Report is being filed:
Report dated May 26, 1995 reporting that Registrant's
wholly-owned subsidiary, Commercial Programming Unlimited, Inc., a New York
corporation, had entered into a Surrender, Termination of Lease and Release
Agreement, effective as of May 26, 1995, surrendering to its Landlord its leased
premises located at 25 West 17th Street and 18 West 18th Street, New York, New
York, terminating the lease therefore and releasing the parties thereto from all
claims and obligations.
<PAGE> 21
FORM 10-QSB
PAGE 21.
PART II OTHER INFORMATION
CONTINUED
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.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
By: /s/ Walter Small
--------------------------------
Walter Small
Chairman and Treasurer
(Principal financial and duly
authorized officer)
Date: August 16, 1995
<PAGE> 22
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
Exhibit 11 (a) Computation of Net Income Per Share
Exhibit 11 (b) Computation of Net Income Per Share
Exhibit 27 Financial Data Schedule
<PAGE> 1
FORM 10-QSB
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
EXHIBIT 11(a)
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
For the six months ended
June 30,
----------------------------
1995 1994
---- ----
<S> <C> <C>
PRIMARY
Income (loss) from continuing
operations ($ 418,315) ($ 644,040)
Income (loss) from discontinued
operations ($ 241,499) $ 16,916
----------- -----------
Net income (loss) ($ 659,814) ($ 627,124)
=========== ===========
Weighted average number of common
shares outstanding during the
period 2,812,980 2,812,980
=========== ===========
Primary income (loss) per common
share-continuing operations ($ 0.15) ($ 0.23)
Primary income (loss) per common
share-discontinued operations ($ 0.08) $ 0.01
----------- -----------
Primary income (loss) per common
share ($ 0.23) ($ 0.22)
=========== ===========
</TABLE>
<PAGE> 1
FORM 10-QSB
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
EXHIBIT 11(b)
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
For the three months ended
June 30,
--------------------------
1995 1994
---- ----
<S> <C> <C>
PRIMARY
Income (loss) from continuing
operations ($ 160,644) ($ 350,307)
Income (loss) from discontinued
operations ($ 164,262) $ 8,466
----------- -----------
Net income (loss) ($ 324,906) ($ 341,841)
=========== ===========
Weighted average number of common
shares outstanding during the
period 2,812,980 2,812,980
=========== ===========
Primary income (loss) per common
share-continuing operations ($ 0.06) ($ 0.12)
Primary income (loss) per common
share-discontinued operations ($ 0.06) $ 0.00
----------- -----------
Primary income (loss) per common
share ($ 0.12) ($ 0.12)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 874,870
<SECURITIES> 1,456,444
<RECEIVABLES> 51,649
<ALLOWANCES> 0
<INVENTORY> 5,224
<CURRENT-ASSETS> 2,439,489
<PP&E> 359,312
<DEPRECIATION> 94,543
<TOTAL-ASSETS> 3,755,481
<CURRENT-LIABILITIES> 172,905
<BONDS> 0
<COMMON> 70,324
0
0
<OTHER-SE> 3,356,135
<TOTAL-LIABILITY-AND-EQUITY> 3,755,481
<SALES> 185,586
<TOTAL-REVENUES> 238,724
<CGS> 208,634
<TOTAL-COSTS> 700,190
<OTHER-EXPENSES> 42,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,053
<INCOME-PRETAX> (415,565)
<INCOME-TAX> 2,750
<INCOME-CONTINUING> (418,315)
<DISCONTINUED> (241,499)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (659,814)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
