<PAGE> 1
FORM 10-QSB
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM lO-QSB
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For Quarter Ended March 31, 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 March 31, 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 10-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 March 31, 1995 3, 4
Unaudited Condensed Consolidated
Statements of Income for the Three
Months Ended March 31, 1995 and
1994 5
Unaudited Condensed Consolidated
Statements of Cash Flows for the
Three Months ended March 31, 1995
and 1994 6
Notes to Unaudited Condensed
Consolidated Financial Statements 7 - 11
Management's Discussion and
Analysis of Financial Condition
and Results of Operations 12 - 14
PART II. Item 5 Other Information 15
Item 6 Exhibits and Reports on
Form 8-K 15 - 16
Signatures 17
</TABLE>
<PAGE> 3
PAGE 3
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<S> <C>
Current Assets
Cash $ 532,474
U. S. Treasury Securities 1,926,337
Marketable securities, at cost,
which approximates market value 1,672
Inventory 6,288
Prepaid income taxes 13,350
Prepaid expenses 9,767
Other receivables 49,138
-----------
Total Current Assets 2,539,026
-----------
Property and Equipment
New York leasehold improvements and
equipment 814,277
Restaurant improvements and equipment 157,707
Land 135,310
Other 65,467
-----------
1,172,761
Less: Accumulated depreciation and
amortization 742,769
-----------
Total Property and Equipment 429,992
-----------
Other Assets
Certificates of deposit 751,475
Franchise rights, net of amortization 310,039
Asset acquisition costs, net of amortization 17,525
Restaurant equipment held for resale 50,000
Security deposits 28,180
-----------
Total Other Assets 1,157,219
-----------
Total Assets $ 4,126,237
===========
</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
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<S> <C>
Current Liabilities
Current portion of long-term debt $ 18,970
Accounts payable 138,025
Income taxes payable 31,780
Deferred income 25,000
----------
Total Current Liabilities 213,775
Long-term debt, less current portion above 56,617
----------
Total Liabilities 270,392
----------
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 429,386
----------
Total Stockholders' Equity 3,855,845
----------
Total Liabilities and
Stockholders' Equity $4,126,237
==========
</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 Three Months Ended
March 31,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Operating Revenues
Premises sublease and equipment
rental income $ - $ 88,130
Restaurant sales 91,505 261,763
Franchise fees 20,466 21,873
Consulting fees - franchisees 20,455 -
Other 59 170
---------- ----------
132,485 371,936
---------- ----------
Expenses
General and administrative expense 264,921 238,971
Restaurant cost of sales 107,104 356,363
Rental expense - sublease 70,268 72,556
Depreciation and amortization -
sublease property 6,969 7,124
Depreciation and amortization -
restaurant improvements and
equipment 4,398 27,028
Amortization - franchise rights 5,925 5,925
Depreciation and amortization -
other 3,110 2,932
Provision for loss on store closings 5,626 -
---------- ----------
468,321 710,899
---------- ----------
Operating profit (loss) ( 335,836) ( 338,963)
---------- ----------
Other Income (Expense)
Interest income 46,674 56,748
Interest expense ( 1,572) ( 1,918)
Loss on redemption of certificates of deposit (42,890) -
---------- ----------
2,212 54,830
---------- ----------
Loss before income and franchise taxes ( 333,624) ( 284,133)
Provision for income and
franchise taxes 1,284 1,150
---------- ----------
Net Income (loss) ( 334,908) ($ 285,283)
========== ==========
Per Share of Common Stock
Net Income (loss) ($ 0.12) ($ 0.10)
========== ==========
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 CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) ($ 334,908) ($ 285,283)
Adjustments to reconcile
net income to net cash provided
by Operating Activities
Depreciation and
amortization 20,402 44,723
Changes in certain current
assets and liabilities
Current assets 41,543 ( 9,731)
Current liabilities ( 29,681) ( 5,956)
----------- -----------
Net Cash Provided (Used) by
Operating Activities ( 302,644) ( 256,247)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of long-term certificates
of deposit - ( 273,118)
Purchase of U.S. Treasury securities ( 1,926,337) -
Redemption of certificates of deposit 2,000,726 -
Purchase of property, equipment
and construction in progress ( 1,293) ( 142,140)
Decrease (increase) in security
deposits 770 ( 1,110)
----------- -----------
Net Cash Provided (Used) by Investing
Activities 73,866 ( 416,368)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt ( 4,509) ( 4,164)
Loan payable-officer - 143,751
----------- -----------
Net Cash Provided (Used) by Financing
Activities ( 4,509) 139,587
----------- -----------
Net Increase (Decrease) in Cash
and Certificates of Deposit ( 233,287) ( 533,028)
Cash and Certificates of Deposit
at beginning of period 765,761 3,018,010
----------- -----------
Cash and Certificates of Deposit
at end of period $ 532,474 $ 2,484,982
=========== ===========
Supplemental Cash Flow Information
Interest paid $ 1,572 $ 1,918
Income taxes paid $ - $ -
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
<PAGE> 7
FORM 10-QSB
PAGE 7.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 three-month period ended March 31,
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. 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. CPU
(NY) will remain liable to its landlord through its lease term ending
March 31, 1999, for the annual rentals stipulated in the Company's
lease with respect to such approximately 22,500 square feet of space.
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
<PAGE> 8
FORM 10-QSB
PAGE 8.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
(Con't...)
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. If CPU (NY) does
not relet the premises to another tenant in 1995, improvements and
equipment having a net book value of approximately $175,000 will be
written off.
CPU (NY) has failed to pay the rent due to its landlord since December,
1994. The landlord has drawn on the letter of credit which it held as
security deposit for the lease and, in March, 1995, the $72,000
certificate of deposit held as collateral for such letter of credit was
redeemed. CPU (NY) continues to remain liable to its landlord for
performance of that portion of the lease of the New York premises which
is presently subleased, until the expiration date of the lease in 1999.
On July 2, 1992, CPU (NY) entered into an agreement with the landlord
of its New York City premises, pursuant to which, effective as of that
date, CPU (NY) delivered possession to such landlord of 40% of its New
York premises (the entire third floor thereof), and, among other
things, the landlord eliminated such third floor from CPU (NY)'s lease
and released CPU (NY) from rent and additional rent obligations
relating to such third floor, resulting in a pro rata reduction in CPU
(NY)'s overall payment obligations under its lease for the entire
premises. Such agreement resulted from the landlord having entered
into a lease with the Association in Manhattan for Autistic Children,
Inc. ("AMAC"), for a term ending on or after March 31, 1999 (which is
the end of CPU (NY)'s lease term), for such third floor. However, if
such AMAC lease, along with the leases between AMAC and the landlord
for two other floors in such building, are terminated for non-payment
of rent or additional rent, the landlord has the right to re-deliver
possession of the third floor to CPU (NY), whereupon all of CPU (NY)'s
payment and other obligations will recommence as if the aforesaid
agreements had not been entered into.
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.
<PAGE> 9
FORM 10-QSB
PAGE 9.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
(Con't...)
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 (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 connection with the acquisition, SPU entered into an Employment
Agreement with Donald J. Ryan, pursuant to which Mr. Ryan is to act as
President, Chief Operating Officer and a Director of SPU, and a
Director of the Company, for a compensation package which includes a
salary of $100,000 and an incentive bonus of $50,000 for any year in
which pre-tax earnings of the Company exceed $1,500,000. Mr. Ryan's
agreement expires on April 30, 2000, unless earlier terminated for
cause, as specified in such agreement (which, among other things,
includes cessation of the business of SPU). In the event that SPU is
sold and the sale does 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 has
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.
The Company and SPU have requested a declaratory judgment that the
arbitration proceeding should be stayed and enjoined and the issues
should proceed directly to Court. Although the Company and SPU have
filed a motion for a preliminary injunction seeking to restrain the
prosecution of the American Arbitration Association proceeding, such
motion has been denied.
In addition, upon acquisition of the 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 and is attempting to sublet the premises.
<PAGE> 10
FORM 10-QSB
PAGE 10.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
(Con't...)
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
subsidiaries 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 cumulative 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.
<PAGE> 11
FORM 10-QSB
PAGE 11.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
(Con't...)
8. In April, 1994 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 March 31, 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, and other matters pertaining to the oven, the Company
in 1994 has written 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 the Company, CPU of Florida, Inc. does not
believe that the collateral will yield any more than the cost of
litigation and the cost of performance under certain guarantees which
the Company has made.
On January 4, 1995, the Company filed suit against Gourmet Carts, Inc.
claiming that Gourmet Carts defaulted under a note and security
agreement with the Company. Although the Company sought to recover
possession of collateral, which consists of several pizza ovens, such
motion has 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 three months ended March
31, 1995 and 1994. All calculations of primary and fully diluted
earnings per share were anti-dilutive.
<PAGE> 12
FORM 10-QSB
PAGE 12.
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.
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO MARCH 31, 1994
The Company sustained a gross profit (loss) from its one remaining
restaurant of ($15,599) for the three months ended March 31, 1995. This
compares to a gross profit (loss) from the operations of three restaurants of
($94,600) in the comparable quarter of 1994. Two of the restaurants were
closed in July, 1994. Other income from franchise fees and royalties
aggregated $20,466 for the three months ended March 31, 1995 as compared to
$21,873 in the comparable 1994 period. Consulting fees received from
franchisees aggregated $20,455 for the three months ended March 31, 1995.
The Company sublet a portion of its New York premises, and leased
equipment previously used in its New York school operations. The revenue
derived therefrom, reflected as premises sublease and equipment rental income,
was -0- for the three months ended March 31, 1995, compared to $88,130 for the
comparable 1994 period. The subtenant filed for bankruptcy protection in
January, 1995 and vacated the premises at that time.
General and administrative expense increased by 10.9% to $264,921 for
the three months ended March 31, 1995, as compared to the corresponding 1994
quarter. This increase is primarily the result of the increase from the 1994
quarter in legal fees incurred in connection with various litigation involving
SP Unlimited, Inc. and Gourmet Carts, Inc. offset by a decrease in general
operating expenses.
Rental expense - sublease remained constant for the three months ended
March 31, 1995 compared to the corresponding 1994 quarter.
Depreciation and amortization, with the exception of the depreciation
and amortization of the assets held for resale since two restaurants were
closed in July, 1994, remained constant for the three months ended March 31,
1995 and 1994.
Interest income for the three months ended March 31, 1995 decreased
17.8% to $46,674, 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.
A majority of the long-term certificates of deposit were redeemed
during the three months ended March 31, 1995. A loss of $42,890 was incurred
during the quarter as a result of such redemptions.
<PAGE> 13
FORM 10-QSB
PAGE 13.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Con't...)
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO MARCH 31, 1994 (Cont'd.)
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 $3,127; loss
before income and franchise taxes increased $49,491; and net loss increased
$49,625 in the three month period ending March 31, 1995 as compared to the same
period in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased during the first three months of 1995 by $233,287 to
$532,474. The net reduction in cash is principally attributable to cash used by
operating activities ($302,644).
Despite the continuing losses, the Company still retains significant
liquid resources. Current assets at March 31, 1995 were $2,539,026 while
current liabilities were only $213,775. Cash, investments in U.S. Treasury
Securities, marketable securities, and long-term certificates of deposit
totalled $3,211,958 at March 31, 1995.
The 1994 losses were principally attributable to the failure of the
Company's efforts to develop Company-owned stores, and problems related to the
acquisition through investment and loans of a 50% ownership in Gourmet Carts,
Inc. These resulted in huge losses for the year and, ultimately, in the
replacement of senior management personnel for the food service and franchising
division of the Company. The Company has now redirected its efforts and
resources into the primary goal of increasing and improving its store
franchises.
The Company, through it subsidiaries, intends to aggressively develop
franchised stores under the names of Sir Pizza and Sir Subs and Pizza
throughout Florida, the United States and overseas.
In January, 1995, the Company's franchisee, The Exhibition, opened its
first franchise in Bahrain. The newly opened unit is an approximately 6,000
sq. ft. restaurant selling chicken and hamburgers as well as traditional subs
and pizza. Sales have been very satisfactory and the franchisee is now
discussing an accelerated schedule of expansion in the Middle East and is
currently negotiating a Master Franchise for Saudi Arabia.
<PAGE> 14
FORM 10-QSB
PAGE 14.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Con't...)
The franchisee located on Margarita Island in Venezuela has almost
completed its new franchise store and arrangements are being made for final
training of the franchisee's employees.
Three franchised stores in El Salvador are now open; two are doing
well, while the third store appears to be only marginal. Visits to the units
are scheduled for early summer to identify and correct the problems.
It is anticipated that the Hialeah, Florida, franchisee will open its
first store in June, 1995. The company is currently working with the Master
Franchisee on plans to open additional units in Dade County in 1995.
In December, 1994, SPU opened a prototype take out and delivery
franchise in a Shell gasoline station in North Bay Village (Miami). Initial
problems relating to quality control and signage have been cured. While growth
has been slower than anticipated, a change in philosophy to heavier dependence
on the sale of subs has created renewed optimism that the concept of a
convenience store outlet can be a profitable market for the Company.
In February, 1995, SPU began working with a new Master Franchisee for
Southern Illinois. The first unit is scheduled to open in Mt. Carmel,
Illinois, in the late spring, 1995.
SPU has exhibited its concepts at the International Franchise Expo in
Washington, DC on April 21-23, 1995. With over 22,000 attendees, including
almost 4,000 from foreign operations, this has provided an opportunity to open
a significant number of contacts for expanding its franchise operations.
SPU is aggressively seeking to reduce or eliminate its exposures on its
lease commitments in Margate and Oakland Park, and negotiations with potential
tenants are currently underway. The land in Lake Worth is under discussions to
rent as an interim step to ultimate disposal.
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
certificates of deposit and other interest bearing instruments, changes in
interest rates will have a significant impact on such interest income.
<PAGE> 15
FORM 10-QSB
PAGE 15.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 5. Other Information.
A. On April 26, 1995, Ronald S. Berkley, then Vice President, Secretary
and Director of Registrant, and an officer and director of certain of its
subsidiaries, resigned as an officer and Director of Registrant and all of its
affiliates and subsidiaries. On May 8, 1995, Registrant's Board of Directors
elected Mohamad Al-Omari, Vice President-Operations of Registrant's wholly-owned
subsidiary, S.P. Unlimited, Inc. ("SPU"), as (i) a director to fill the vacancy
on the Board caused by the resignation of Mr. Berkley, and (ii) President of
Registrant, replacing Walter Small, who will remain a Director, Chairman of the
Board, Treasurer and Chief Executive Officer. At the same time, Eleanor Wright
was elected as Secretary of Registrant to fill the vacancy caused by the
resignation of Mr. Berkley from such position.
B. On April 19, 1995, Registrant's motion in the Circuit Court for the
Fifteenth Judicial Circuit, in and for Palm Beach County, Florida for a Writ of
Replevin, to recover against Gourmet Carts, Inc. possession of the assets of
Gourmet Carts, which are subject to Registrant's security interest, was denied.
C. On May 2, 1995, Registrant's attorneys received an Order from the
Circuit Court for the Fifteenth Judicial Circuit in and for Palm Beach County,
Florida staying Registrant's legal actions against Donald J. Ryan, formerly
President of SPU and Vice President of Registrant, pending the outcome of the
arbitration initiated by Mr. Ryan against Registrant and SPU with regard to
termination of Mr. Ryan's Employment Agreement.
D. Walter Small has voluntarily reduced his salary to $100,000 for the
current year, as of May 1, 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 11 (a). Computation of Net Income Per Share.
(b) Reports on Form 8-K. The following reports on Form 8-K, were filed
during the quarter for which this Report is being filed:
(1) Report dated January 16, 1995, for an event of December 16,
1994, reporting the following: (i) election of Allan Wachtel as a Director of
Registrant; (ii) the abandonment by SCS Business & Technical Institute, Inc. of
its sublease of premises located at 25 West 17th Street, New York, New York,
from Registrant's wholly-owned subsidiary, Commercial Programming Unlimited,
Inc., a New York corporation; (iii) termination of Donald Ryan's employment as
President of SPU; and (iv) SPU's opening of a new "Sir Pizza" franchise in a gas
station in Miami, Florida.
<PAGE> 16
FORM 10-QSB
PAGE 16.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
PART II OTHER INFORMATION
CONTINUED
(2) Report dated February 6, 1995, for an event of January 30,
1995, reporting the following: (i) commencement of an arbitration proceeding
against Registrant by Donald Ryan; (ii) certain actions in connection with
litigation between Registrant against Gourmet Carts; and (iii) SPU's opening of
a "Sir Pizza and Sir Subs" franchise in Bahrain.
(3) Report dated March 20, 1995 for an event of March 10, 1995,
reporting delisting of Registrant's Class A Common Stock from the NASDAQ
SmallCap Market.
<PAGE> 17
FORM 10-QSB
PAGE 17.
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
Treasurer
(Principal financial and duly
authorized officer)
Date: May 11, 1995
<PAGE> 18
EXHIBIT INDEX
-------------
Exhibit
No. Description
- ------- -----------
11(a) Computation of Net Income Per Share.
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 three months ended
March 31,
-----------------------------
1995 1994
---- ----
<S> <C> <C>
PRIMARY
Net income (loss) ($ 334,908) ($ 285,283)
Weighted average number of
common shares outstanding
during the period 2,812,980 2,812,980
=========== ===========
Primary income (loss) per
common share ($ 0.12) ($ 0.10)
=========== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 532,474
<SECURITIES> 1,928,009
<RECEIVABLES> 49,138
<ALLOWANCES> 0
<INVENTORY> 6,288
<CURRENT-ASSETS> 2,539,026
<PP&E> 1,172,761
<DEPRECIATION> 742,769
<TOTAL-ASSETS> 4,126,237
<CURRENT-LIABILITIES> 213,775
<BONDS> 0
<COMMON> 70,324
0
0
<OTHER-SE> 3,356,135
<TOTAL-LIABILITY-AND-EQUITY> 4,126,237
<SALES> 91,505
<TOTAL-REVENUES> 179,159
<CGS> 107,104
<TOTAL-COSTS> 468,321
<OTHER-EXPENSES> 42,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,572
<INCOME-PRETAX> (333,624)
<INCOME-TAX> 1,284
<INCOME-CONTINUING> (334,908)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (334,908)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
