SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 30, 1998
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FAST FOOD OPERATORS, INC.
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(Exact Name of Registrant as Specified in Charter)
0-10213
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(Commission File Number)
New York 13-2974867
--------------------------- ---------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification Number)
42-40 Bell Boulevard
Bayside, New York 11361
---------------------- --------------
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code:(718) 229-1113
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- -------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. Acquisition or Disposition of Assets
On November 30, 1998, the Company completed the sale of four
restaurants to Popyork, LLC for $900,000 plus net closing
adjustments of $33,752, all of which was paid in cash. Such sale
was approved by the Company's shareholders on October 26, 1998.
The Company realized a pre-tax gain on the sale of $546,000 after
legal fees of $10,000. Such gain was approximately $93,000 less
than previously anticipated due to significant repairs and
improvements required by the franchisor to be made to certain of
the restaurants as a condition of the sale. Approximately
$67,500 of such repairs and improvements were made subsequent to
September 27, 1998.
On October 29, 1998, the Company had sold the managed Empire
Boulevard, Brooklyn restaurant to that restaurant's manager. As
a result, the sale of the four restaurants on November 30, 1998
left the Company with no restaurants and no operations.
As indicated in the Company's Proxy Statement, the liquidation
and dissolution of the Company is expected to result in return of
capital distributions to the shareholders of amounts at least
equal to $.11 per share. Operating cash flow for the third
quarter ended September 27, 1998 and the subsequent priod through
November 30, 1998 is expected to offset the reduction in net sale
proceeds described in the first paragraph above. (See the pro-
forma financial statements).
ITEM 7. Financial Statements, Pro-Forma Financial Information
and Exhibits
(b) Pro-forma financial information
Pro-forma balance sheet as of September 27, 1998
Pro-forma statements of operations for the year ended
December 28, 1997 and the nine months ended September 27, 1998
Notes to pro-forma financial statements
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 hereunto duly authorized.
Fast Food Operators, Inc.
-------------------------
(Registrant)
December 15, 1998 By: /S/ Lewis E. Topper
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Name: Lewis E. Topper
Title: President
PRO-FORMA CONSOLIDATED FINANCIAL INFORMATION
The following pro-forma consolidated financial information
of the Company is based on and should be read in conjunction with
the Company's consolidated interim and annual financial
statements reported in the Company's Forms 10-QSB and 10-KSB for
the nine month and annual periods ended September 27, 1998 and
December 28, 1997, respectively. The pro-forma balance sheet as
of September 27, 1998 gives effect to (i) the sale of the Empire
Boulevard, Brooklyn Restaurant, which sale closed on October 29,
1998 and (ii) both of the transactions contemplated by the
Company's Proxy Statement, specifically: (a) the sale of the
remaining four restaurants to Popyork, LLC for $900,000 in cash
plus closing adjustments which sale closed on November 30, 1998
and (b) the liquidation of the Company including liquidating
distributions to shareholders of at least $.11 per share or
$980,573 in the aggregate, which liquidition has not yet
occurred. The pro-forma consolidated statements of operations
for the year ended December 28, 1997 and the nine months ended
September 27, 1998 give effect to the (i) sale of the Empire
Boulevard Restaurant and (ii) the sale of the other four
restaurants as if they both had occurred on the first day of the
respective period.
The pro-forma adjustments are based upon available
information and certain assumptions that management believes are
reasonable in the circumstances. Costs and expenses during the
liquidation period have been estimated. The aggregate amount
estimated to be available as liquidating distributions to
shareholders may be slightly greater than the $980,573 ($.11 per
share) reflected on the accompanying pro-forma balance sheet, but
is not expected to be less than such amount.
The pro-forma financial statements of the Company should be
read in conjunction with the notes thereto. The pro-forma
statements of operations do not purport to be indicative of the
results of operations which may be expected to occur in the
future.
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED BALANCE SHEET
September
27, 1998
September Sale of Pro-Forma
27, 1998 Empire (Pre-Sale
Historical Restaurant Transaction)
---------- ---------- -----------
Assets
Current assets:
$ 80,233 (1)
Cash $ 414,749 ( 5,000)(2) $ 466,526
( 23,456)(3)
Inventory 23,870 ( 4,596)(1) 19,274
Other current assets 26,597 ( 11,637)(1) 14,960
----------- ----------- -----------
Total current assets 465,216 35,544 500,760
Property and equipment,
net 337,372 ( 60,902)(4) 276,470
Other assets 8,500 - 8,500
----------- ----------- -----------
Total assets $ 811,088 $( 25,358) $ 785,730
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and
other $ 278,823 $( 23,456)(3) $ 255,367
Due to Integrated Food
Systems, Inc. 16,882 - 16,882
----------- ----------- -----------
Total current
liabilities: 295,705 ( 23,456) 272,249
Security deposits
payable 6,000 ( 6,000)(1) -
---------- ----------- -----------
Total liabilities: 301,705 ( 29,456) 272,249
----------- ----------- -----------
Shareholders' equity:
Common stock/paid-in
capital 2,232,005 - 2,232,005
Retained earnings
(deficit) (1,722,622) 4,098 (5) (1,718,524)
----------- ----------- -----------
Total shareholders'
equity 509,383 4,098 513,481
----------- ----------- -----------
Total liabilities
and equity $ 811,088 $ ( 25,358) $ 785,730
=========== =========== ===========
(Continued on following page)
See accompanying notes to pro-forma consolidated financial statements.
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED BALANCE SHEET
(Continued from previous page)
September September
27, 1998 Pro-Forma 27, 1998
Pro-Forma Adjustments Pro-Forma
(Pre-Sale Re: Sale (Before
Transaction) Transaction Liquidation)
----------- ----------- -----------
Assets
Current assets:
$ 933,752 (6)
Cash $ 466,526 ( 102,530)(7) $ 1,072,748
( 225,000)(8)
Inventory 19,274 ( 19,274)(6) -
Other current assets 14,960 ( 5,978)(6) 8,982
----------- ----------- -----------
Total current assets 500,760 580,970 1,081,730
Property and equipment,
net 276,470 ( 276,470)(9) -
Other assets 8,500 ( 8,500)(6) -
----------- ----------- -----------
Total assets $ 785,730 $ 296,000 $ 1,081,730
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and
other $ 255,367 $( 225,000)(8) $ 30,367
Due to Integrated
Food Systems, Inc. 16,882 - 16,882
----------- ----------- -----------
Total current
liabilities: 272,249 ( 225,000) 47,249
Security deposits
payable - - -
----------- ----------- -----------
Total liabilities: 272,249 ( 225,000) 47,249
----------- ----------- -----------
Shareholders' equity:
Common stock/
paid-in capital 2,232,005 - 2,232,005
Retained earnings
(deficit) (1,718,524) 521,000 (10) (1,197,524)
----------- ----------- -----------
Total shareholders'
equity 513,481 521,000 1,034,481
----------- ----------- -----------
Total liabilities
and equity $ 785,730 $ 296,000 $ 1,081,730
=========== =========== ===========
(Continued on following page)
See accompanying notes to pro-forma consolidated financial statements.
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED BALANCE SHEET
(Continued from previous page)
September September
27, 1998 Pro-Forma 27, 1998
Pro-Forma Adjustments Pro-Forma
(Before to Reflect (After
Liquidation) Liquidation Liquidation)
----------- ----------- -----------
Assets
Current assets:
$( 47,249)(11)
Cash $ 1,072,748 ( 980,573)(12) $ -
Inventory - ( 44,926)(13) -
Other current assets 8,982 ( 8,982)(14) -
----------- ----------- ----------
Total current assets 1,081,730 (1,081,730) -
Property and equipment, net - - -
Other assets - - -
----------- ----------- ----------
Total assets $ 1,081,730 $(1,081,730) $ -
=========== =========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and
other $ 30,367 $( 30,367)(11) $ -
Due to Integrated Food
Systems, Inc. 16,882 ( 16,882)(11) -
----------- ----------- ----------
Total current liabilities: 47,249 ( 47,249)(11) -
Security deposits payable - - -
----------- ----------- ----------
Total liabilities: 47,249 ( 47,249) -
----------- ----------- ----------
Shareholders' equity:
Common stock/
paid-in capital 2,232,005 ( 980,573)(12) 1,251,432
Retained earnings
(deficit) (1,197,524) ( 53,908)(15) (1,251,432)
----------- ----------- ----------
Total shareholders'
equity 1,034,481 (1,034,481) -
----------- ----------- ----------
Total liabilities and
equity $ 1,081,730 $(1,081,730) $ -
=========== =========== ==========
See accompanying notes to pro-forma consolidated financial statements.
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
December 28,
Year Ended 1997
December 28, Pro-Forma Adjustments(1) Pro-Forma
1997 --------------------------- (Pre-Sale
Historical Hillside Empire Transaction)
------------ ----------- ----------- -----------
Sales $ 5,247,779 $( 170,061) $( 629,974) $4,447,744
Cost of sales 1,697,245 ( 55,836) ( 238,334) 1,403,075
------------ ----------- ----------- ----------
Gross profit 3,550,534 ( 114,225) ( 391,640) 3,044,669
------------ ----------- ----------- ----------
Selling, general
and admin-
istrative
expenses 3,380,944 ( 116,936) ( 441,717) 2,822,291
Interest expense 8,100 - - 8,100
Rental income ( 10,800) - 10,800(2) -
Gain on sale of
restaurant ( 13,908) 13,908 (a) - (b) - (c)
Income and expense
reimbursement
arising from
management
sub-contract ( 6,484) - 6,484(3) -
Loss on asset
impairment 159,772 - ( 159,772)(4) -
------------ ----------- ----------- ----------
3,517,624 ( 103,028) ( 584,205) 2,830,391
------------ ----------- ----------- ----------
Net income $ 32,910 $( 11,197)(a) $ 192,565(b) $ 214,278(c)
============ =========== =========== ==========
Weighted average
number of shares
outstanding 8,914,300 8,914,300
============ ==========
Net income
per share $ - $ .02
============ ==========
(Continued on following page)
(a) Excludes gain of $13,908 on the sale of the Hillside
Restaurant, sold April 15, 1997.
(b) Excludes gain of $4,098 on the sale of the Empire
Restaurant.
(c) Excludes aggregate gain of $18,006 on the sale of the
Hillside and Empire Restaurants.
See accompanying notes to pro-forma consolidated financial statements.
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued from previous page)
Year Ended
December 28, Year Ended
1997 Pro-Forma December 28,
Pro-Forma Adjustments 1997
(Pre-Sale Re: Sale (After Sale
Transaction) Transaction Transaction)
------------ ------------ --------------
Sales $ 4,447,744 $(4,447,744) $ -
Cost of Sales 1,403,075 (1,403,075) -
------------ ----------- ------------
Gross profit 3,044,669 (3,044,669) -
------------ ----------- ------------
Selling, general and
administrative
expenses 2,822,291 (2,822,291) -
Interest expense 8,100 ( 8,100)(5) -
Rental income - - -
Gain on sale of
restaurant - (c) - (d) - (e)
Income and expense
reimbursement
arising from
management
sub-contract - - -
Loss on asset
impairment - - -
------------ ----------- -----------
2,830,391 (2,830,391) -
------------ ----------- ------------
Net income $ 214,278(c) $ ( 214,278)(d)(f) $ - (e)(f)
============ =========== ============
Weighted average
number of shares
outstanding 8,914,300 8,914,300
============ ============
Net income
per share $ .02 $ -
============ ============
(c) Excludes aggregate gain of $18,006 on the sale of the Hillside and
Empire Restaurants.
(d) Excludes gain of $521,000, attributable to the Sale Transaction, net
of estimated income taxes thereon of $25,000.
(e) Excludes aggregate net gain of $539,006 on the sale of all six
restaurants.
(f) Also excludes estimated liquidation period loss of $53,908. See Note
15 to the pro-forma consolidated balance sheet.
See accompanying notes to pro-forma consolidated financial statements.
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months
Ended
Nine Months Sept 27, 1998
Ended Sale of Pro-Forma
Sept 27, 1998 Empire (Pre-Sale
Historical Restaurant Transaction)
------------- ------------ --------------
Sales $ 4,036,875 $( 510,702) $ 3,526,173
Cost of sales 1,240,650 ( 200,640) 1,040,010
------------ ----------- ------------
Gross profit 2,796,225 ( 310,062) 2,486,163
------------ ----------- ------------
Selling, general and
administrative
expenses 2,601,282 ( 335,571) 2,265,711
Interest expense 211 - 211
Rental income ( 8,100) 8,100(2) -
Income and expense
reimbursement arising
from management
sub-contract ( 15,021) 15,021(3) -
------------ ----------- ------------
2,578,372 ( 312,450) 2,265,922
------------ ----------- ------------
Pre-tax income 217,853 2,388 220,241
Provision for income
taxes 8,000 - 8,000
------------ ----------- ------------
Net income $ 209,853 $ 2,388(a) $ 212,241(a)
============ =========== ============
Weighted average
number of shares
outstanding 8,914,300 8,914,300
============ ============
Net income per share $ .02 $ .02
============ ============
(Continued on following page)
(a) Excludes gain of $4,098 on the sale of the Empire Boulevard
Restaurant.
See accompanying notes to pro-forma consolidated financial statements.
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued from previous page)
Nine Months Nine Months
Ended Ended
Sept 27, 1998 Pro-Forma Sept 27, 1998
Pro-Forma Adjustments Pro-Forma
(Pre-Sale Re: Sale (After Sale
Transaction) Transaction Transaction)
-------------- ------------ -------------
Sales $ 3,526,173 $(3,526,173) $ -
Cost of sales 1,040,010 (1,040,010) -
------------ ----------- ------------
Gross profit 2,486,163 (2,486,163) -
------------ ----------- ------------
Selling, general and
administrative
expenses 2,265,711 (2,265,711) -
Interest expense 211 ( 211)(5) -
Rental income - - -
Income and expense
reimbursement arising
from management
sub-contract - - -
------------ ----------- ------------
2,265,922 (2,265,922) -
------------- ----------- ------------
Pre-tax income 220,241 ( 220,241) -
Provision for income
taxes 8,000 ( 8,000) -
------------ ----------- ------------
Net income $ 212,241(a) $( 212,241)(b) $ -(a)(b)
============ =========== ============
Weighted average number
of shares outstanding 8,914,300 8,914,300
============ ============
Net income per share $ .02 $ -
============ ============
(a) Excludes gain of $4,098 on the sale of the Empire Boulevard
Restaurant.
(b) Excludes net gain of $521,000 attributable to the Sale Transaction.
Also excludes estimated liquidation period loss of $53,908. See Note
15 to the pro-forma consolidated balance sheet.
See accompanying notes to pro-forma consolidated financial statements.
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
NOTES TO PRO-FORMA FINANCIAL STATEMENTS
NOTES TO PRO-FORMA CONSOLIDATED BALANCE SHEET
1. Represents the receipt of the all-cash consideration for the
sale of the Empire Boulevard, Brooklyn Restaurant. The sale
closed on October 29, 1998. The proceeds consisted of the
following:
Purchase Price $ 70,000
Closing adjustments:
Inventory 4,596
Other current assets 11,637
Security deposits ( 6,000)
--------
Total proceeds of sale $ 80,233
========
2. Represents estimated closing costs for legal fees in
connection with the sale of the Empire Restaurant.
3. Represents the payment of trade and other liabilities
directly attributable to the Empire Restaurant paid from the
sale proceeds thereof.
4. Represents the net book value of the property and equipment
of the Empire Restaurant.
5. Represents the gain on the sale of the Empire Restaurant
measured by the sales price of $70,000 (excluding dollar for
dollar closing adjustments) less closing costs for legal
fees of $5,000 over the $60,902 carrying value of the
restaurant assets sold. Due to available net operating tax
loss carryforwards, income taxes on such gain are expected
to be immaterial and have been ignored.
6. Represents the receipt of the all-cash consideration for the
four restaurants comprising the Sale Transaction as follows:
Purchase price $900,000
Closing adjustments
Inventory 19,274
Prepayments and other 5,978
Security deposits, net 8,500
--------
Total proceeds of sale $933,752
========
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
NOTES TO PRO-FORMA FINANCIAL STATEMENTS
NOTES TO PRO-FORMA CONSOLIDATED BALANCE SHEET
7. Represents closing costs for legal fees in connection with
the Sale Transaction and estimated income taxes attributable
to the gain on the sale (after the benefits of net operating
tax loss carryforwards) as well as additional costs required
to be incurred to close the sale as follows:
Legal fees $ 10,000
--------
New York State income taxes 14,000
Federal income taxes 11,000
--------
Total income taxes 25,000
--------
Repairs and improvement costs
required by the franchisor
to be made to certain
restaurants as a condition
of the sale 67,530
--------
Total closing costs, income
taxes and additional
required costs $102,530
========
8. Represents the payment of trade and other liabilities
directly attributable to the four restaurants comprising the
Sale Transaction paid from the sale proceeds thereof.
9. Represents the net book value of the property and equipment
of the four restaurants comprising the Sale Transaction as
of September 27, 1998.
10. Represents the gain on the Sale Transaction measured by the
sales price of $900,000 (excluding dollar for dollar closing
adjustments) over the adjusted carrying value of $344,000
($276,470 plus $67,530) of the restaurant assets sold,
closing costs for legal fees of $10,000 and estimated income
taxes of $25,000 (net of tax loss carryforward benefits)
directly attributable to the gain.
11. Represents payment of the remaining $47,249 of liabilities
of the Company, consisting of $16,882 owed to Integrated
Food Systems and $30,367 of trade payables and other
liabilities.
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
NOTES TO PRO-FORMA FINANCIAL STATEMENTS
NOTES TO PRO-FORMA CONSOLIDATED BALANCE SHEET
12. Represents the payment of two liquidating distributions to
shareholders in the aggregate amount of $.11 per share. The
first of such dividends, in the amount of $.10 per share
(increased from the previously anticipated amount of $.09
per share) was declared on November 30, 1998 and is payable
on December 18, 1998 to shareholders of record as of
December 10, 1998. The Company expects that a second
distribution of not less than $.01 per share, will be made
sometime in 1999 after all liabilities of the Company have
been liquidated. Depending on the amount of operating cash
flow earned in the final two months of operation and the
actual expenses incurred in the liquidation period, the
final distribution may be fractionally greater than $.01 per
share.
13. Represents estimated costs and expenses during the
liquidation period.
14. Represents estimated losses of $8,982 on the non-realization
of certain prepayments.
15. Represents the estimated net loss during the liquidation
period as follows:
Estimated liquidation costs
and expenses $44,926
Estimated loss on realization
of certain assets 8,982
-------
Estimated net loss during
the liquidation period $53,908
=======
FAST FOOD OPERATORS, INC. AND SUBSIDIARIES
NOTES TO PRO-FORMA FINANCIAL STATEMENTS
NOTES TO PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
1. The pro-forma adjustments applicable to the sale of the
Hillside and Empire Restaurants and the four restaurants
comprising the Sale Transaction, other than where indicated
by a specific footnote, generally consist of subtracting the
restaurant sales, cost of sales and direct operating
expenses attributable thereto for each period presented.
Certain items are specifically footnoted below. (See Notes
2 thru 5). In accordance with the requirements for the
presentation of pro-forma financial information, the pro-
forma statements of operations exclude the gain from the
sales of the various restaurants.
2. Rental income was earned exclusively from a sub-lease of a
portion of the Empire Boulevard premises. The sub-lease was
sold together with the restaurant.
3. The income and expense reimbursement relates to the
management sub-contract for the Empire Boulevard restaurant.
4. The loss on asset impairment in 1997 was incurred on the
property and equipment of the Empire Boulevard Restaurant.
For pro-forma presentation purposes, such loss is
eliminated. Absent such elimination, the effect of the
impairment write-down would have been recognized in the loss
on sale, which would then be eliminated as a non-recurring
loss related to such sale.
5. Interest expense is eliminated since receipt of the proceeds
from the Sale Transaction would have been sufficient to
retire the interest bearing indebtedness at the beginning of
each period.
