U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1995
--------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-12706
Tubby's, Inc.
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(Exact name of small business issuer as specified in its charter)
New Jersey 22-2166602
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
6029 East Fourteen Mile Road, Sterling Heights, Michigan 48312
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(Address of principal executive officers)
810/978-8829
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(Issuer's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to filed such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No _____
As of October 10, 1995, there were 25,381,131 shares of common stock
outstanding.
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INDEX
Page No.
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PART I -Financial Information
Item 1. Financial Statements (Unaudited)........................................... 3
Consolidated Balance Sheets, August 31, 1995 and November 30, 1994......... 3
Consolidated Statements of Operations, Three and Nine Months Ended
August 31, 1995 and 1994................................................... 5
Consolidated Statements of Cash Flows, Nine Months Ended August 31,
1995 and 1994.............................................................. 6
Notes to Consolidated Financial Statements................................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................... 9
PART II - Other Information
Item 2. Legal Proceedings......................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders....................... 15
Item 6. Exhibits and Reports on Form 8-K.......................................... 15
Signatures........................................................................ 15
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Tubby's Inc. - Form 10Q/SB - 2 - August 31, 1995
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PART I - Financial Information ITEM 1 - Financial Statements
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TUBBY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 31, November 30,
1995 1994
ASSETS (Unaudited) (Note)
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Current Assets:
Cash & Cash Equivalents $ 986,784 $ 347,706
Accounts & Notes Receivable, Less Allowance for Doubtful
Accounts of $84,630 ($84,630 in 1994) 461,858 300,998
Inventories 33,467 48,377
Prepaid Expenses and Other 89,827 28,380
Construction in Progress 27,944 --
---------- ----------
Total Current Assets 1,599,880 725,461
Property & Equipment:
Land 253,623 253,623
Building and Improvements 434,172 441,870
Furniture & Fixtures 120,371 121,561
Equipment 338,730 332,695
Vehicles 15,009 15,009
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1,161,905 1,164,758
Less Accumulated Depreciation 509,573 507,163
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Net Property and Equipment 652,332 657,595
Net Assets Held for Disposal 159,471 304,000
Other Assets:
Intangibles, Less Amortization of $51,674 ($46,442 in 1994) 349,523 343,692
Notes Receivable, Less Allowance for Doubtful
Accounts of $181,091 ($181,091 in 1994) 470,091 553,830
Related Party Receivables 13,413 77,316
Other Assets 22,435 21,416
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Total Other Assets 855,462 996,254
TOTAL ASSETS $3,267,145 $2,683,310
========== ==========
<FN>
Note: The balance sheet at November 30, 1994 has been derived from the
audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated
Financial Statements
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Tubby's Inc. - Form 10Q/SB - 3 - August 31, 1995
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TUBBY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 31, November 30,
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) (Note)
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Current Liabilities:
Accounts Payable $ 147,100 $ 161,553
Accrued Liabilities:
Compensation 26,809 31,688
Other 29,418 36,042
Joint Venture 10,000 10,000
Deferred Revenue 70,964 140,875
Long-Term Debt & Capital Lease Due
Within One Year 270,300 281,525
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Total Current Liabilities 554,591 661,683
Deferred Revenue 134,625 61,000
Long-Term Debt & Capital Leases 263,565 330,038
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Total Liabilities 952,781 1,052,721
Shareholders' Equity:
Common Stock, $.001 Par Value, 30,000,000
Shares Authorized 25,381,131 Issued and
Outstanding (19,613,131 Shares in 1994) 25,382 19,632
Additional Paid-In Capital 3,430,044 2,975,794
Retained Earnings (Deficit) (1,141,062) (1,364,837)
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Total Shareholders' Equity 2,314,364 1,630,589
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 3,267,145 $ 2,683,310
=========== ===========
<FN>
Note: The balance sheet at November 30, 1994 has been derived from the
audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated
Financial Statements
</TABLE>
Tubby's Inc. - Form 10Q/SB - 4 - August 31, 1995
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TUBBY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
1995 1994 1995 1994
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Revenues:
Food Sales $ 319,093 $ 431,980 $ 1,023,200 $ 1,235,638
Franchise Fees:
Monthly 179,770 158,457 507,825 472,989
Initial 8,000 15,000 95,750 36,250
Equipment & Restaurant Sales 122,715 39,860 430,164 560,274
Advertising Fees 158,012 138,742 427,738 390,049
Commissions & Other Fees 75,026 58,511 306,432 225,354
------------ ------------ ------------ ------------
Total Revenues 862,616 842,550 2,791,109 2,920,554
Costs & Expenses:
Operating Expenses 484,640 846,286 1,541,985 2,128,776
Cost Of Food Sales 238,330 343,203 759,791 1,006,864
Cost of Equipment & Restaurant Sales 98,364 38,405 381,168 551,131
Provision for Doubtful Accounts -- 300,130 -- 371,358
------------ ------------ ------------ ------------
Total Costs & Expenses 821,334 1,528,024 2,682,944 4,058,129
------------ ------------ ------------ ------------
Operating Income (Loss) 41,282 (685,474) 108,165 (1,137,575)
------------ ------------ ------------ ------------
Other Income (Expense):
Provision For Estimated Loss
On Disposal (39,000) -- (89,000) --
Interest Expense (8,934) (15,880) (30,495) (59,621)
Gain On Sale of Fixed Assets -- 4,184 109,178 19,672
Interest Income 22,462 16,314 63,864 48,391
Minority Interest 1,483 77,913 51,483 168,964
Miscellaneous 954 -- 10,908 --
------------ ------------ ------------ ------------
Total Other (Expense) (23,035) 82,531 115,938 177,406
Income (Loss) Before Income Taxes 18,247 (602,943) 224,103 (960,169)
Provision for Income Taxes 329 -- 329 --
------------ ------------ ------------ ------------
Net Income (Loss) $ 17,918 $ (602,943) $ 223,774 $ (960,169)
============ ============ ============ ============
Net Income (Loss) Per Share $ 0.0007 $ (0.0307) $ 0.0091 $ (0.0492)
============ ============ ============ ============
Weighted Average Number of
Shares Outstanding 25,381,131 19,631,131 24,701,801 19,530,827
============ ============ ============ ============
</TABLE>
Tubby's Inc. - Form 10Q/SB - 5 - August 31, 1995
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TUBBY'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended August 31,
1995 1994
(Unaudited) (Unaudited)
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Cash Flows From Operating Activities:
Net Income (Loss) $ 223,774 $(960,169)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities:
Depreciation and Amortization 80,323 294,702
Provision For Estimated Loss On Disposal Of Restaurant 89,000 --
Minority Interest in Net Loss (51,483) (168,964)
Provision for Losses on Accounts & Notes Receivable -- 371,362
Gain on Sale of Fixed Assets (109,178) (19,672)
Increase (Decrease) in Cash Due to Changes In:
Accounts & Notes Receivable (160,860) 174,748
Inventories 14,910 51,034
Prepaid Expenses & Other (61,447) 145,611
Construction In Progress (27,944) --
Accounts Payable (14,453) (177,783)
Accrued Liabilities (11,503) 112,216
Deferred Revenues 3,714 73,000
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Net Cash Provided (Used) by Operating Activities (25,147) (103,915)
Cash Flows from Investing Activities:
Purchase of Property & Equipment (64,590) (131,381)
Net Proceeds from Sale of Property & Equipment 213,800 50,000
Related Parties Receivables 63,903 19,977
Intangibles (13,910) --
Other Assets (1,019) --
Notes Receivable Paid 83,739 27,202
--------- ---------
Net Cash Provided By Investing Activities 281,923 (34,202)
Cash Flows from Financing Activities:
Payments on Long-Term Debt (77,698) (67,363)
Proceeds from Issuance of Capital Stock 460,000 186,500
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Net Cash Provided by Financing Activities 382,302 119,137
Increase (Decrease) in Cash 639,078 (18,980)
Cash at Beginning of Period 347,706 200,966
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Cash at End of Period $ 986,784 $ 181,986
========= =========
<FN>
See Accompanying Notes to Consolidated
Financial Statements
</TABLE>
Tubby's Inc. - Form 10Q/SB - 6 - August 31, 1995
<PAGE>
TUBBY'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - Consolidated Financial Statements
The accompanying financial statements do not include all of the
information and footnotes necessary for the annual presentation of
financial position, results of operation and cash flows in conforming
with generally accepted accounting principles. In the opinion of The
Company, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and changes in cash flow at August 31, 1995 and
August 31, 1994 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These
consolidated financial statements should be read in conjunction with
the financial statements and notes thereto as of November 30, 1994 and
the Form 10-KSB as of November 30, 1994.
NOTE 2 - Accounting for Income Taxes
The Company has acquired net operating loss carry forwards relating to
the SYF merger of approximately $1,250,000 which are available to
offset future taxable income. However, to the extent such loss carry
forwards are utilized to reduce future operating income, the related
tax benefit will first be credited to goodwill until fully eliminated
and then to income. Utilization of these losses is limited based on
the taxable income generated by the activity that generated these
loses and expire beginning in 1999.
The Company also has net operating loss carry forwards for tax
purposes of approximately $938,000 relating to losses incurred
subsequent to the SYF acquisition which expires beginning in 2006.
NOTE 3 - Shareholders Equity
On January 17, 1995, the Board of Directors of Tubby's, Inc.
authorized the sale of 5,000,000 shares of restricted common stock
through private placements at $0.08 per share and, on February 28,
1995, amended the authorization to increase the number of shares to
5,750,000. During the quarter ended February 28, 1995, the company
issued 5,750,000 at a price of $0.08 per share. Proceeds from these
sales, net of fees to NASDAQ, amounted to $372,500 and included a
Tubby's Sub Shop valued at $80,000, (see Note #4, Related Party
Transactions).
NOTE 4 - Related Party Transactions
Certain individuals who are officers and directors of Tubby's, Inc.
purchased 3,000,000 shares of restricted common stock at $0.08 per
share, (see Note #3, Shareholders Equity). The net proceeds of these
sales amounted to $240,000 and included a Tubby's Sub Shop valued at
$80,000. Historical valuation methods as used with outside franchisees
were utilized to determine the value of this Tubby's Sub Shop.
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In addition to the above, in February, 1995, The Company sold one of
its Company stores for $135,000, to a relation of a Board member. The
purchase price was determined based upon historical valuation methods
as used with outside franchisees. The Company received net proceeds of
$140,000. The distribution is as follows:
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Amount Received For Purchase of Store $ 135,000.00
Initial Franchise Fee 15,000.00
Store Remodeling Costs (10,000.00)
--------------
Net Cash Received By The Company $ 140,000.00
==============
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NOTE 5 - Assets Held For Disposal
During the quarter ended August 31, 1994, The Company contemplated the
sale of two of its Tubby's Express restaurants. At that time
management provided $137,000 for the expected losses from operations
and on disposal of these locations. In December, 1994, Management
decided to close these restaurants and did so on January 31, 1995.
Additionally, Management decided to sell the four remaining Tubby's
Express restaurants. Additional reserves of $180,514, $50,000, and
$39,000 have been recorded for the estimated loss on disposal of these
locations at November 30, 1994, May 31, 1995, and August 31, 1995,
respectively.
The net assets held for disposal of $159,471 and $304,000 respectively
have been separately disclosed in the accompanying balance sheet for
August 31, 1995, and November 30, 1994. The assets consist primarily
of building improvements and equipment, net of accumulated
depreciation, totaling $240,767, less $81,296 reserve for estimated
losses on disposal and $622,000, less $353,000 reserve for estimated
losses on disposal respectively. The reserve for estimated losses was
increased by $89,000 as a result of increased losses associated with
the disposal of these locations. Revenues from the Tubby's Express
restaurants totaled $537,837 and $620,040 respectively for the nine
months ended August 31, 1995 and August 31, 1994.
NOTE 6 - Litigation
On August 17, 1995, a civil action was commenced in the United States
District Court for the Eastern District of Michigan, captioned Patrick
J. McCourt, Individually, the Patrick J. McCourt Trust, and McCourt
Corporation, a Michigan corporation v Tubby's, Inc., a New Jersey
Corporation, the McTub Company, a Michigan partnership, Robert M.
Paganes, P. Terrance Paganes, J. Thomas Paganes, Vincent J. Tatone,
Docket No. 95-CV-73339-DT. Patrick J. McCourt, as trustee of the
Patrick J. McCourt Trust and as President of McCourt Corporation,
purchased restricted shares of Tubby's common stock pursuant to
private placements in June, July and November of 1993, and formed the
McTub Company, a general partnership with Tubby's, in August of 1993
for the purpose of owning and operating certain quick service
restaurants. Plaintiffs' Complaint seeks recision of those
transactions and, in connection therewith, alleges violation of
federal securities regulations, fraudulent misrepresentation,
violation of the racketeer influenced and corrupt organizations act,
dissolution of partnership and accounting, violation of Michigan's
security act and Michigan's franchise investment law. The Company
filed an answer in which it denied liability to Plaintiffs. In
addition, the Company filed a cross-claim against the McTub Company
seeking a declaratory judgment that The Company is entitled to a
distribution in the amount of $105,000.00 prior to any other
distributions that may be made by that company, and filed third-party
complaints against
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Alexander P. Bardy, the Company's former President and Chief Executive
Officer, and Kevin J. Sullivan, the Company's former Chief Financial
Officer. In the third-party complaints, the Company denies any
liability to Plaintiffs but asserts, alternatively, in the event that
it is determined to be liable to Plaintiffs for any amount of money
damages, third party defendants would be liable to the Company for all
such damages, plus any additional damages sustained by the Company in
connection with the Complaint. The Company intends to zealously defend
against the claims asserted in the Complaint and to zealously
prosecute its cross-claim and third-party complaints.
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<PAGE>
PART I - Financial Information ITEM 2 - Management's Discussion
and Analysis of Financial Condition
and Results of Operation.
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The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto and with the
Company's Form 10-KSB and audited financial statements and notes thereto for
the fiscal year-ended November 30, 1994.
Financial Condition
Cash increased by $639,078 for the nine months ended August 31,1995 as
compared with a decrease of $18,980 for the nine months ended August
31, 1994. The Company's cash position has continued to improve as a
result of its ongoing "back-to basics" operations approach, the sale
of a Company-owned store, the private placement of restricted stock
and the strong cost cutting measures initiated in the previous fiscal
year. Additionally, the implementation of new procedures have
accelerated the collection of accounts and notes receivable. The
improvement in cash position is particularly noteworthy in light of
The Company's timely status relative to it's vendors and general
creditors.
The Company closed two unprofitable Tubby's Express restaurants on
January 31, 1995, sold two unprofitable Tubby's Express restaurants on
June 1, 1995, and September 1, 1995, and anticipates the sale of the
two remaining Tubby's Express restaurants during 1995, (see Note #5,
Assets Held for Disposal). Though the closing and sale of these four
restaurants has reduced food sales, The Company anticipates that it
will not experience additional operating losses as had been previously
associated with the Tubby's Express concept. Rather, The company will
experience increased monthly franchise and advertising income
resulting from the continued operation of the two Tubby's Express
restaurants that were sold to a franchisee.
The sale of a Tubby's Express restaurant and a company owned store as
well as the opening of seven new franchised restaurants resulted in
the recognition of initial franchise fees of $95,750, equipment sales
of $430,164, and continuing monthly franchise and advertising fees.
The anticipated opening of three additional franchised locations
and the sale of a Tubby's Express restaurant will occur by the
end of the fiscal year at November 30, 1995 and will similarly
result in additional equipment sales, the recognition of initial
franchise fees, and continuing monthly franchise and advertising fees.
The three new franchised locations consist of two Tubby's Sub Shops
and one Stuff-Yer-Face restaurant. The Company believes that with
profitable first, second and third quarters and the anticipated
openings of at least three additional franchised restaurants in the
fourth quarter, it will obtain its goal of achieving a profitable 1995
fiscal year.
Additionally, The Company, during the nine months ending August 31,
1995, sold two Area Development Agreements (ADA). The Company
anticipates that the ADA's will eventually result in ten new
franchised restaurants; one of which has already opened in August,
1995. The Company received $72,000 cash and a $8,000 note that matures
February 7, 1996, in payment for the two ADA's. As each restaurant of
an ADA opens, the initial franchise fee of $8,000 will be recognized
as income to The Company.
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The Company in an effort to accelerate its growth in future periods
has initiated the search process for finding and hiring an individual
experienced in real estate activities. This individual will be
responsible for the site selection process for future Tubby's Sub
Shops as well as for lease negotiation with prospective landlords on
behalf of The Company and/or its franchisees.
Results of operations for the three months ended August 31, 1995 as compared
with the three months ended August 31, 1994.
Revenues for the three months ended August 31, 1995, rose 2.4% to
$862,616 as compared to the same period of 1994. Cost and Expenses for
the three months ended August 31, 1995, decreased by 46.2% to $821,334
as compared to same period of 1994.
Of the overall revenue increase, Food Sales declined $112,887 or
26.1%. The decline in Food Sales is largely attributable to the
closing of the two unprofitable company-owned Tubby's Express
restaurants and the sale of a company-owned Tubby's Express and
Tubby's Sub Shop restaurant to franchisees. Monthly Franchise and
Advertising fees increased approximately $40,583 or 13.7% reflecting
the opening of seven new franchised Tubby's Sub Shops and the sale
of two company-owned restaurants to franchisees in the current
fiscal year as well as the improved sales of existing restaurants.
Initial Franchise Fees decreased by $7,000 or 46.7% reflecting the
opening of one Tubby's Sub Shop restaurant at the reduced ADA fee of
$8,000 in the three months ended August 31, 1995, as opposed to the
normal $15,000 fee. Equipment and Restaurant Sales increased by
$82,855 or 207.9% reflecting the sale of one "turnkey" Tubby's Sub
Shop as well miscellaneous sales of equipment to existing franchisees.
Commissions and Other increased by $16,515 or 28.2% reflecting
increased efforts to collect vendor commissions.
Of the overall decline in Costs & Expenses, Operating Expenses
declined $361,646 or 42.7% reflecting the closing and sale of the
company owned stores mentioned above as well as the ongoing cost
cutting measures initiated in the previous fiscal year. Likewise, Cost
of Food Sales declined $104,873 or 30.6%, also reflecting the sale of
the company-owned stores mentioned above. Cost of Equipment &
Restaurant Sales increased by $59,959 or 156.1% reflecting the cost
associated with the sale of one "turnkey" Restaurant and other
miscellaneous equipment. Overall Operating Income derived from
Equipment & Restaurant Sales increased from 3.7% of sales in 1994 to
19.8% of sales in 1995 or a increase of $22,896 between the two years.
There is no addition required for the Provision for Doubtful Accounts
in 1995 reflecting the disposition in 1994 of accounts believed to be
uncollectible and the aggressive collection efforts initiated in 1995.
The Company provided an additional $39,000 to the provision for the
estimated loss on disposal of its Tubby's Express Restaurants. The
effect of this current period expense was partially negated by the
increased Minority Interest of $1,483. Interest Expense decreased by
$6,946 or 43.7% reflecting the continuing reduction of debt and the
fiscal restraint exercised by management with its "back to basics"
approach. Interest Income increased by $6,148 or 37.7% reflecting the
investment of excess company funds.
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The Company's subsidiary that provides advertising and promotional
services for the benefit of The Company and its franchisees incurred
an Operating Loss of $26,887 for the three months ending August 31,
1995, effectively decreasing consolidated operating and net income by
a similar amount. Though the Company believes that the increased
advertising and promotional effort was warranted by market conditions
at the time, it is the intention of The Company in the future to
expend funds only to the extent that advertising revenue is obtained
from its franchisees and company owned stores. The effect of this
operating loss by The Company's advertising subsidiary was a reduction
of Operating Income of $68,169 to $41,282 and Net Income of $44,805 to
$17,918 for the three months ending August 31, 1995.
The Company incurred Operating Income of $41,282 and Net Income of
$17,918 for the three months ending August 31, 1995. For the three
months ended August 31, 1994, The Company incurred an Operating Loss
of $685,474 and a Net Loss of $602,943. The Company believes that this
profitable quarter is a direct result of its ongoing aggressive cost
cutting measures and "back to basics" approach.
For the three months ended August 31, 1995, The Company opened one new
franchised restaurant and sold a Company owned Tubby's Express
restaurant. The Tubby's Express restaurant will continue operations as
a franchised location of The Company. Additionally one new multiple
store ADA was initiated.
Results of Operations for the nine months ended August 31, 1995 as compared
with the nine months ended August 31, 1994.
Revenues for the nine months ended August 31, 1995, decreased 4.4% to
$2,791,109 as compared to the same period of 1994. Cost and Expenses
for the nine months ended August 31, 1995, decreased by 33.9% to
$2,682,944 as compared to the same period of 1994.
Of the overall revenue increase, Food Sales declined $212,438 or
17.2%. The decline in Food Sales is largely attributable to the
closing of the two unprofitable company-owned Tubby's Express
restaurants and the sale of a company-owned Tubby's Express and
Tubby's Sub Shop restaurant to franchisees. Monthly Franchise and
Advertising fees increased approximately $72,525 or 8.4% reflecting
the opening of seven new franchised Tubby's Sub Shops and the sale
of two company-owned restaurants to franchisees in the current
fiscal year as well as the improved sales of existing restaurants.
Initial Franchise Fees increased by $59,500 or 164.1% reflecting the
opening of the seven Tubby's Sub Shops in 1995. Equipment and
Restaurant Sales declined by $130,110 or 23.2% reflecting lower sales.
However, the Operating Income generated by the lower Equipment and
Restaurant sales increased from $9,143 or 1.6% in 1994 to $48,996 or
11.4% in 1995. Commissions and Other increased by $81,078 or 36.0%
reflecting increased system-wide sales and additional efforts to
collect vendor commissions.
Of the overall decline in Costs & Expenses, Operating Expenses
declined $586,791 or 27.6% reflecting the closing and sale of the
company owned stores mentioned above as well as the ongoing cost
cutting measures initiated in the previous fiscal year. Likewise, Cost
of Food Sales declined $247,073 or 24.5% reflecting the sale of the
company-owned stores mentioned above. The Company believes that as of
August 31, 1995, it has an adequate Provision for Doubtful Accounts
and, as a result; has not provided for any additional provision.
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<PAGE>
Other Income decreased $61,468 or 34.6% for the nine months ending
August 31, 1995 as compared to the nine months ending August 31, 1994.
The Company provided an additional $89,000 for the estimated loss on
disposal of its Tubby's Express Restaurants. The effect of this
current period expense was partially negated by the increased Minority
Interest of $51,483. Interest Expense decreased by $29,126 or 48.9%
reflecting reduced debt. Interest Income increased by $15,473 or 32.0%
reflecting earnings generated by the investment of excess funds. The
sale of a company owned store resulted in a gain of $109,178, (see
Note #4 of the Consolidated Financial Statements).
The Company's subsidiary that provides advertising and promotional
services for the benefit of The Company and its franchisees incurred
an Operating Loss of $84,801 for the nine months ending August 31,
1995, effectively decreasing consolidated operating and net income by
a similar amount. Though Company Management believes that the
increased advertising and promotional effort was warranted by market
conditions at the time, it is the intention of The Company in the
future to expend funds only to the extent that advertising revenue is
obtained from its franchisees and company owned stores. The effect of
this Operating Loss by the Company's advertising subsidiary was a
reduction of Operating Income of $192,966 to $108,165 and Net Income
of $308,575 to $223,774 for the nine months ending August 31, 1995.
Operating Income for the nine months ended August 31, 1995, increased
to $108,165 as compared to an Operating Loss of $1,137,575 for the
similar period in 1994. Net Income for the nine months ended August
31, 1995 increased to $223,774 as compared to a Net Loss of $960,169
for the nine months ending August 31, 1994.
For the nine months ended August 31, 1995, the Company opened seven
new franchised restaurants in addition to the sale of two Company-owned
restaurants. An additional Company-owned Tubby's Express Restaurant
was sold to a franchisee on September 1, 1995. Two new multiple store
ADA's representing ten stores were initiated in the nine months ended
August 31, 1995. The Company closed two unprofitable Tubby's Express
Restaurants, (see Note #5, Assets Held For Disposal). The company as
of August 31, 1995, has sixty-one franchised and five company owned
restaurants.
Liquidity and Capital Resources
On January 17, 1995, the Board of Directors of Tubby's, Inc.
authorized the sale of 5,000,000 shares of restricted common stock
through private placements at $0.08 per share and, on February 28,
1995, amended the authorization to increase the number of shares to
5,750,000. During the quarter ended February 28, 1995, the company
issued 5,750,000 at a price of $0.08 per share. Proceeds from these
sales, net of fees to NASDAQ, amounted to $372,500 which included a
Tubby's Sub Shop valued at $80,000, (see Note #4, Related Party
Transactions). Of the shares authorized, the $80,000 proceeds from the
final sale of 1,000,000 shares were received in March of 1995.
In addition to the eight new franchised restaurants opened and the two
company-owned restaurants sold in the first three quarters of 1995,
two new Tubby's Sub Shops and one Stuff-Yer-Face restaurants are
expected to open by the end of the fiscal year at November 30, 1995.
The sale of one Tubby's Express Restaurant to a franchisee occurred on
September 1, 1995. The sale of the two remaining Tubby's Express
restaurants is anticipated by late 1995.
- 13 -
<PAGE>
The Company is responsible for supervising construction and equipment
installation for its new locations. As part of that process, The
Company will contract for the purchase of equipment and execute
construction contracts. Although The Company is reimbursed entirely
for its costs when the Restaurant is sold, it often must prepay some
costs. As of October 10, 1995, the Company has two new Tubby's Sub
Shop and one Stuff-Yer-Face restaurants scheduled to open by November
30, 1995. The Company is responsible for the construction and
equipment installation at these locations. The Company believes it has
sufficient working capital to internally finance these projects.
- 14 -
<PAGE>
PART II - Other Information
ITEM 1 - Legal Proceedings
- - -----------------------------------------------------------------------------
As of August 31, 1995, the Company was a defendant in a lawsuit
which could constitute a material loss contingency. This lawsuit is
disclosed in Note 6 - Litigation of the preceding Consolidated
Financial Statements.
ITEM 4 - Submission of Matters to a Vote of Security Holders
- - -----------------------------------------------------------------------------
None
ITEM 6 - Exhibits and Reports on Form 8-K
- - -----------------------------------------------------------------------------
(a) There are no exhibits submitted with this report.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed by
the Registrant during the nine months ended August 31, 1995.
SIGNATURE(S)
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TUBBY'S, INC.
By: /s/ Melvyn Erdos
------------------------------------
Melvyn Erdos, C.P.A.
Chief Financial Officer and a duly
authorized officer
Dated: October 10, 1995
By: /s/ Robert M. Paganes
------------------------------------
Robert M. Paganes
President & CEO and a duly
authorized officer
Dated: October 10, 1995
- 15 -
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> AUG-31-1995
<CASH> $ 986,784
<SECURITIES> 0
<RECEIVABLES> 461,658
<ALLOWANCES> 84,630
<INVENTORY> 33,467
<CURRENT-ASSETS> 1,599,880
<PP&E> 1,161,905
<DEPRECIATION> 509,573
<TOTAL-ASSETS> 3,267,145
<CURRENT-LIABILITIES> 554,591
<BONDS> 0
<COMMON> 25,382
0
0
<OTHER-SE> 2,288,982
<TOTAL-LIABILITY-AND-EQUITY> 3,267,145
<SALES> 1,453,364
<TOTAL-REVENUES> 2,791,109
<CGS> 1,140,959
<TOTAL-COSTS> 2,682,944
<OTHER-EXPENSES> 116,267
<LOSS-PROVISION> 89,000
<INTEREST-EXPENSE> 30,495
<INCOME-PRETAX> 224,103
<INCOME-TAX> 329
<INCOME-CONTINUING> 223,774
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 223,774
<NET-INCOME> 223,774
<EPS-PRIMARY> .009
<EPS-DILUTED> .009
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