<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 September 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.)
705 Severn Road, Suite 1037, Wilmington, Delaware 19803
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (302) - 479 - 7733
-----------------------
3650 Silverside Road, Suite 1037, Wilmington, Delaware 19810
- --------------------------------------------------------------------------
(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 September 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> <C>
Facing Sheet 1
Index 2
PART I. Financial Information:
Unaudited Condensed Consolidated
Balance Sheet September 30, 1995 3, 4
Unaudited Condensed Consolidated
Statements of Income for the Nine
Months Ended September 30, 1995
and 1994 5
Unaudited Condensed Consolidated
Statements of Income for the Three
Months Ended September 30, 1995
and 1994 6
Unaudited Condensed Consolidated
Statements of Cash Flows for the
Nine Months ended September 30,
1995 and 1994 7, 8
Unaudited Condensed Consolidated
Statements of Cash Flows for the
Three Months ended September 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
SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<S> <C>
Current Assets
Cash $ 1,066,713
U. S. Treasury Securities 976,104
Marketable securities, at cost,
which approximates market value 1,672
Inventory 8,230
Prepaid income taxes 12,924
Prepaid expenses 42,621
Other receivables 50,083
-----------
Total Current Assets 2,158,347
-----------
Property and Equipment
Restaurant improvements and equipment 157,707
Land 135,310
Other 68,793
-----------
361,810
Less: Accumulated depreciation and
amortization 100,630
-----------
Total Property and Equipment 261,180
-----------
Other Assets
Certificates of deposit 656,475
Franchise rights, net of amortization 298,189
Asset acquisition costs, net of amortization 14,683
Restaurant and vehicular equipment held for
resale 48,600
Security deposits 21,690
-----------
Total Other Assets 1,039,637
-----------
Total Assets $ 3,459,164
============
</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
SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<S> <C>
Current Liabilities
Current portion of long-term debt $ 19,742
Accounts payable 103,317
Income taxes payable 32,430
Deferred income 36,000
-----------
Total Current Liabilities 191,489
Long-term debt, less current portion above 46,549
-----------
Total Liabilities 238,038
-----------
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 (deficit) ( 205,333)
------------
Total Stockholders' Equity 3,221,126
-----------
Total Liabilities and
Stockholders' Equity $ 3,459,164
===========
</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 Nine Months Ended
September 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Operating Revenues (excluding discontinued operations)
Restaurant sales $ 273,504 $ 602,368
Franchise fees 43,672 45,830
Consulting fees - franchisees 24,412 16,646
Consulting fees - affiliated company - 34,702
Other 424 769
----------- ----------
342,012 700,315
----------- ----------
Expenses (excluding discontinued operations)
General and administrative expense 785,706 706,597
Restaurant cost of sales 321,828 840,717
Depreciation and amortization -
restaurant improvements and
equipment 13,194 68,267
Amortization - franchise rights 17,775 17,775
Depreciation and amortization -
other 9,330 8,022
Provision for loss on store closings 5,626 374,677
----------- ----------
1,153,459 2,016,055
----------- ----------
Operating profit (loss) ( 811,447) ( 1,315,740)
---------- -----------
Other Income (Expense)
Interest income 134,686 161,554
Interest expense ( 4,442) ( 33,949)
Charges on redemption of certificates of deposit ( 42,890) -
Equity in earnings (loss) of Gourmet Carts, Inc.,
an affiliated company - ( 102,000)
----------- -----------
87,354 25,605
----------- ----------
Loss before income and franchise taxes (excluding dis-
continued operations) ( 724,093) ( 1,290,135)
Provision for income and franchise taxes 4,038 3,540
----------- ----------
(Loss) from continuing operations ( 728,131) ( 1,293,675)
Income (loss) from discontinued operations, net
of income tax provisions of -0- ( 241,499) 25,376
---------- ----------
Net income (loss) ($ 969,630) ($1,268,299)
========== ==========
Per share of Common Stock
Income (loss) from continuing operations ($ 0.26) ($ 0.46)
========== ============
Income (loss) from discontinued operations ($ 0.08) $ 0.01
========== ==========
Net income (loss) ($ 0.34) ($ 0.45)
========== ==========
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
September 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Operating Revenues (excluding discontinued operations)
Restaurant sales $ 87,918 $ 110,771
Franchise fees 11,341 ( 193)
Consulting fees - franchisees 3,957 -
Consulting fees - affiliated company - 25,702
Other 72 257
----------- ------------
103,288 136,537
----------- ------------
Expenses (excluding discontinued operations)
General and administrative expense 326,642 232,410
Restaurant cost of sales 113,194 154,495
Depreciation and amortization -
restaurant improvements and
equipment 4,398 14,212
Amortization - franchise rights 5,925 5,925
Depreciation and amortization -
other 3,110 2,158
Provision for loss on store closings - 374,677
----------- -----------
453,269 783,877
----------- -----------
Operating profit (loss) ( 349,981) ( 647,340)
---------- -----------
Other Income (Expense)
Interest income 42,842 55,896
Interest expense ( 1,389) ( 1,951)
Equity in earnings (loss) of Gourmet Carts, Inc.,
an affiliated company - ( 55,000)
----------- -----------
41,453 ( 1,055)
----------- -----------
Loss before income and franchise taxes (excluding dis-
continued operations) ( 308,528) ( 648,395)
Provision for income and franchise taxes 1,288 1,240
----------- -----------
Loss from continuing operations ( 309,816) ( 649,635)
Income (loss) from discontinued operations, net
of income tax provisions of -0- - 8,460
----------- -----------
Net income (loss) ($ 309,816) ($ 641,175)
============ ============
Per share of Common Stock
Income (loss) from continuing operations ($ 0.11) ($ 0.23)
========== ============
Income (loss) from discontinued operations $ - $ 0.00
========== ============
Net income (loss) ($ 0.11) ($ 0.23)
========== ============
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 Nine Months Ended
September 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 969,630) ($1,268,299)
Adjustments to reconcile
net income to net cash (used in) provided
by Operating Activities
Depreciation and amortization 51,988 120,577
Loss on abandonment of leasehold 155,244 -
Loss (Gain) on disposal of property
and equipment - 290,048
Amortization of discount on U.S.
Treasury securities ( 42,681) -
Equity in (earnings) loss of Gourmet
Carts, Inc., an affiliated company - 102,000
Changes in certain current
assets and liabilities
Current assets 6,228 21,089
Current liabilities ( 52,739) 9,384
---------- ----------
Net Cash Provided (Used) by
Operating Activities ( 851,590) ( 725,201)
---------- ----------
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 sercurities 977,655 -
Redemption of certificates of deposit 2,095,726 -
Purchase of property, equipment
and construction in progress ( 22,619) ( 156,628)
Sale of restaurant equipment 19,400 -
Decrease (increase) in security deposits 7,260 ( 510)
Increase in tenant security deposits payable - 526
Investment in Gourmet Carts, Inc., an affil-
iated company - ( 320,773)
----------- ----------
Net Cash Provided (Used) by Investing
Activities 1,166,347 ( 1,443,503)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt ( 13,805) ( 12,749)
------------ ----------
Net Cash Provided (Used) by Financing
Activities ( 13,805) ( 12,749)
---------- ----------
</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 Nine Months Ended
September 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Net Increase (Decrease) in Cash
and Certificates of Deposit $ 300,952 ($2,181,453)
Cash and Certificates of Deposit
at beginning of period 765,761 3,018,010
----------- -----------
Cash and Certificates of Deposit
at end of period $ 1,066,713 $ 836,557
=========== ==========
Supplemental Cash Flow Information
- ----------------------------------
Interest paid $ 4,442 $ 33,949
Income taxes paid (refunded) $ - ($ 2,120)
</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
September 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 309,816) ($ 641,175)
Adjustments to reconcile
net income to net cash (used in) provided
by Operating Activities
Depreciation and amortization 13,433 31,132
Loss (Gain) on disposal of property
and equipment - 290,048
Amortization of discount on U.S.
Treasury securities ( 6,192) -
Equity in (earnings) loss of Gourmet
Carts, Inc., an affiliated company - 55,000
Changes in certain current
assets and liabilities
Current assets ( 5,683) 66,120
Current liabilities 18,194 72,678
---------- ----------
Net Cash Provided (Used) by
Operating Activities ( 290,064) ( 126,197)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of U.S. Treasury securities 484,860 -
Purchase of property and equipment ( 2,498) ( 6,195)
Decrease in security deposits 4,240 600
Increase in tenant security deposits payable - 117
Investment in Gourmet Carts, Inc., an affil-
iated company - ( 120,773)
--------- ----------
Net Cash Provided (Used) by Investing
Activities 486,602 ( 126,251)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of long-term debt ( 4,695) ( 4,335)
--------- ----------
Net Cash Provided (Used) by Financing
Activities ( 4,695) ( 4,335)
-------- ----------
</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
September 30,
1995 1994
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Net Increase (Decrease) in Cash
and Certificates of Deposit $ 191,843 ($ 256,783)
Cash and Certificates of Deposit
at beginning of period 874,870 1,093,340
----------- ----------
Cash and Certificates of Deposit
at end of period $ 1,066,713 $ 836,557
=========== ==========
Supplemental Cash Flow Information
----------------------------------
Interest paid $ 1,389 $ 1,951
Income taxes paid (refunded) $ - ( 33,691)
</TABLE>
See accompanying notes to the unaudited condensed consolidated
financial statements.
<PAGE> 11
FORM 1O-QSB
PAGE 11
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 nine-month and
three-month periods ended September 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 operation 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 1O-QSB
PAGE 12.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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; the monthly
rental under such lease is $3,000 plus expenses.
<PAGE> 13
FORM 1O-QSB
PAGE 13.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 claim. Arbitration hearings were held in
September and October before the American
Arbitration Association and a decision of the
arbitrator has not yet been received.
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 1O-QSB
PAGE 14.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 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.
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 September 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 1O-QSB
PAGE 15.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 nine months and three months ended
September 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.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO
SEPTEMBER 30, 1994
As a result of the surrender of the New York
premises to the landlord, and the release of the Company
from its obligations 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 ($48,324) for the nine months
ended September 30, 1995. This compares to a gross
profit (loss) from the operations of three restaurants of
($238,349) in the comparable period of 1994. Two of the
restaurants were closed in July, 1994. Upon the closing
of these two restaurants, the Company made a provision of
$374,677 for estimated remaining occupancy costs and
projected losses on equipment sales and the dimunition in
value of the leasehold improvements. This provision was
increased by $5,626 in the nine months ended September
30, 1995. Other income from franchise fees and royalties
aggregated $43,672 for the nine months ended September
30, 1995 as compared to $45,830 in the comparable 1994
period. Consulting fees received from franchisees
aggregated $24,412 for the nine months ended September
30, 1995 compared to $16,646 in the comparable 1994
period.
In 1994, the Company received consulting fees for
services performed for Gourmet Carts, Inc., an affiliated
development stage company. Such fees aggregated $34,702
from June 30, 1994 to September, 1994. No fees were
received in 1995.
General and administrative expense increased by
11.2% to $785,706 for the nine months ended September 30,
1995, as compared to the corresponding 1994 period. This
increase is primarily the result of 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. offset partially by the
decrease in general operating expenses due to the
downsizing of the operations.
Depreciation and amortization decreased from 1994
due to the closing of two restaurants in July, 1994.
<PAGE> 17
FORM 1O-QSB
PAGE 17.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Con't...)
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO
SEPTEMBER 30, 1994
(Cont'd.)
Interest income for the nine months ended September
30, 1995 decreased 16.6% to $134,686, as compared to the
corresponding 1994 period, primarily due to a decrease
in available liquid resources.
Interest expense for the nine months ended September
30, 1995 decreased by $29,507 compared to the
corresponding 1994 period, 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 $102,000 for the nine
months ended September 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 nine months ended September 30,
1995. Charges of $42,890 were 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 $504,293; loss before income and franchise taxes
(excluding discontinued operations) decreased $566,042;
and net loss from continuing operations decreased
$565,544 in the nine month period ending September 30,
1995 as compared to the same period in 1994.
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO
SEPTEMBER 30, 1994
As a result of the surrender of the New York
premises to the landlord, and the release of the Company
from its obligations 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 ($25,276) for the three
months ended September 30, 1995. This compares to a
gross profit (loss) from the operations of three
restaurants of ($43,724) in the comparable quarter of
1994. Two of the
<PAGE> 18
FORM 1O-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 SEPTEMBER 30, 1995 COMPARED TO
SEPTEMBER 30, 1994
(Cont'd.)
restaurants were closed in July, 1994. Upon the closing
of these two restaurants, the Company made a provision of
$374,677 for estimated remaining occupancy costs and
projected losses on equipment sales and the dimunition in
value of the leasehold improvements. Other income from
franchise fees and royalties aggregated $11,341 for the
three months ended September 30, 1995 as compared to
($193) in the comparable 1994 period. The 1994 period
reflected a $13,500 refund of a franchise fee previously
reported as income in the first quarter of 1994.
In 1994, the Company received consulting fees for
services performed for Gourmet Carts, Inc., an affiliated
development stage company. Such fees aggregated $25,702
for the three months ended September 30, 1994. No fees
were received in 1995.
General and administrative expense increased by 40.6%
to $326,642 for the three months ended September 30, 1995,
as compared to the corresponding 1994 quarter. This
increase is primarily the result of 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. offset partially by the decrease in
general operating expenses due to the downsizing of the
operations.
Depreciation and amortization decreased from 1994
due to the closing of two restaurants in July, 1994.
Interest income for the three months ended September
30, 1995 decreased 23.4% to $42,842 as compared to the
corresponding 1994 period, primarily due to a
decrease in available liquid resources.
The Company's share of losses from its investment in
Gourmet Carts, Inc. aggregated $55,000 for the three
months ended September 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 $297,359; loss before income and franchise
taxes (excluding discontinued operations) decreased
$339,867; and net loss from continuing operations
decreased $339,819 in the three month period ending
September 30, 1995 as compared to the same period in
1994.
<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
Cash increased during the first nine months of 1995
by $300,952 to $1,066,713. The net increase in cash is
principally attributable to cash provided by investing
activities ($1,166,347) offset by cash used by operating
activities ($851,590).
Despite the continuing losses, the Company still
retains significant liquid resources. Current assets at
September 30, 1995 were $2,158,347 while current
liabilities were only $191,489. Cash, investments in U.S.
Treasury Securities, marketable securities, and long-term
certificates of deposit totalled $2,700,964 at September
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.
The company, through its subsidiary, Universal
Franchise Operations, Inc., (UFOI) has applied for a
patent of its newly designed food vending cart. The
company intends to exhibit the cart at several trade
shows in 1996 to market its new product.
In July, 1995, the Company signed an agreement with
a franchisee in Lima, Peru. The first unit is scheduled
to open in January 1996.
In October 1995, the Company successfully negotiated
the sale of its vacant land in Lake Worth, Florida at a
selling price of $120,000. A loss of approximately
$16,000 will result from such sale.
Inflation
Inflationary factors in recent years have not had a
significant effect on the Company's operations. As long
as the Company continues to hold treasury securities,
certificates of deposit and other interest bearing
instruments, changes in interest rates will have a
significant impact on such interest income.
<PAGE> 20
FORM 10-QSB
PAGE 20.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 11 (a). Computation of Net Income Per
Share.
Exhibit 11 (b). Computation of Net Income Per
Share.
(b) Reports on Form 8-K. The registrant has not
filed any reports on Form 8-K during the three months
ended September 30, 1995.
<PAGE> 21
FORM 10-QSB
PAGE 21.
PART II OTHER INFORMATION
CONTINUED
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
UNIVERSAL FRANCHISE OPPORTUNITIES CORP.
By: /s/ WALTER SMALL
--------------------------------------
Walter Small
Chairman and Treasurer
(Principal financial and duly
authorized officer)
Date: November 9, 1995
<PAGE> 22
EXHIBIT INDEX
Exhibit 11 (a). Computation of Net Income Per
Share.
Exhibit 11 (b). Computation of Net Income Per
Share.
Exhibit 27. Financial Data Schedule
<PAGE> 1
FORM 10-QSB
UNIVERSAL FRANCHISE OPPORTUNITIES CORP. AND SUBSIDIARIES
EXHIBIT 11(a)
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
For the nine months ended
September 30,
-------------------------------
1995 1994
---- ----
PRIMARY
-------
<S> <C> <C>
Income (loss) from continuing
operations ($ 728,131) ($1,293,675)
Income (loss) from discontinued
operations ($ 241,499) $ 25,376
----------- ----------
Net income (loss) ($ 969,630) ($1,268,299)
=========== ==========
Weighted average number of common
shares outstanding during the
period 2,812,980 2,812,980
=========== ==========
Primary income (loss) per common
share-continuing operations ($ 0.26) ($ 0.46)
Primary income (loss) per common
share-discontinued operations ($ 0.08) $ 0.01
----------- ----------
Primary income (loss) per common
share ($ 0.34) ($ 0.45)
=========== ==========
</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
September 30,
-----------------------------
1995 1994
---- ----
PRIMARY
-------
<S> <C> <C>
Income (loss) from continuing
operations ($ 309,816) ($ 649,635)
Income (loss) from discontinued
operations - $ 8,460
----------- -----------
Net income (loss) ($ 309,816) ($ 641,175)
=========== ===========
Weighted average number of common
shares outstanding during the
period 2,812,980 2,812,980
=========== ===========
Primary income (loss) per common
share-continuing operations ($ 0.11) ($ 0.23)
Primary income (loss) per common
share-discontinued operations $ - $ 0.00
----------- ---------
Primary income (loss) per common
share ($ 0.11) ($ 0.23)
=========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,066,713
<SECURITIES> 977,776
<RECEIVABLES> 50,083
<ALLOWANCES> 0
<INVENTORY> 8,230
<CURRENT-ASSETS> 2,158,347
<PP&E> 361,810
<DEPRECIATION> 100,630
<TOTAL-ASSETS> 3,459,164
<CURRENT-LIABILITIES> 191,489
<BONDS> 0
<COMMON> 70,324
0
0
<OTHER-SE> 3,356,135
<TOTAL-LIABILITY-AND-EQUITY> 3,459,164
<SALES> 273,504
<TOTAL-REVENUES> 342,012
<CGS> 321,828
<TOTAL-COSTS> 1,153,459
<OTHER-EXPENSES> 42,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,442
<INCOME-PRETAX> (724,093)
<INCOME-TAX> 4,038
<INCOME-CONTINUING> (728,131)
<DISCONTINUED> (241,499)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (969,630)
<EPS-PRIMARY> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
