UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 01-15109
Cala Corporation
--------------------------------------------------------------
(Exact name of registrant as specified in its amended charter)
Oklahoma 73-1251800
-------- ----------
(State of other jurisdiction of (I.R.S. Employer )
incorporation or organization) Identification No)
100 N. Broadway, Suite 1890, Oklahoma City, OK 73102
---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 235-4960
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock $.005 par value
----------------------------
Title of Class
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 file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Disclosure of delinquent filers in response to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-KSB or any amendment to
this form 10-KSB.(X)
Issuer's revenues for the year ended December 31,1999 were $978,322.
The aggregate market value of voting common stock held by non-affiliates
was $7,740,489 on December 31, 1999 based on the average bid and asked price of
such stock as reported on the "pink sheets" of the National Daily Quotation
Service. (APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of shares outstanding of issuer's common stock, par value
$.005,as of December 31, 1999 was 24,662,156.
Transitional Small Business Disclosure Format(check one) Yes No X
<PAGE>
PART I
Item 1. Business:
- ------------------
On October 6, 1999, Joseph Cala, an international developer and operator of
hospitality businesses, secured the rights to purchase 90 % of the common stock
of 10 of the largest shareholders of Creative Restaurant Concepts, Inc. by
agreeing to pay 50 % of their notes payable from Creative Restaurant Concepts,
Inc. J. Cala signed a six-month note with these stockholders which called for
the assignment of 100 % of each shareholders CRC notes plus the right to
purchase 90 % of their stock.
In November, 1999 Creative Restaurant Concepts, Inc. changed its name to
Cala Corporation (the Company) and acquired a new trading symbol (CCAA) and new
CUSIP No. 12804A 10 0. Cala Corporation will concentrate its resources in the
hospitality industry. Cala Corporation's business strategy includes the
development of the worlds first Undersea Hotel/Casino, the development of
Extended Care Facilities in conjunction with golf courses, plus the development
of a chain of Italian style restaurant/coffee shops called Caffe L' Italiano.
Cala Corporation will also actively seek hospitality related businesses for
acquisitions.
As of January 1, 1999, the Company owned and operated three Ground Floor
Cafes located in Oklahoma City, Oklahoma and two Crocketts Smokehouse BBQ
restaurants also located in Oklahoma City. In February, 1999, the Company closed
one Ground Floor Cafe and in September, 1999 the Company sold its two Crocketts
Smokehouse BBQ restaurants.
In November, 1999 Cala Corporation acquired the rights to the Cascina
Italian Restaurant from Joseph Cala and Gary Modafferi, which is under
construction in the Radisson Hotel on Beach Street at Fisherman's Wharf in San
Francisco, California.
On December 31, 1999, Cala Corporation operated two Ground Floor Cafe
Restaurants in Oklahoma City and had one Cascina Italian Restaurant under
construction in San Francisco.
Operations:
- -----------
Cala Corporation provides its hospitality businesses with standard
operating specifications for the preparation and service of food and beverages
plus specifications for the maintenance of the premises and proper employee
conduct.
Cala Corporation is not dependent on particular suppliers for its food,
beverages or other products and believes there are numerous suppliers from which
it can obtain similar products at comparable costs. Cala expects to be able to
offset cost increases in its ingredients by increasing the retail prices of its
products or services. Food, beverage and paper goods inventory in Cala
Corporation hospitality businesses usually will not exceed the value of one
week's sales.
2
<PAGE>
Marketing:
- ----------
Marketing activities for Cala Corporation hospitality businesses is handled
on a local basis. The company does not now, nor does it plan to manage to
conduct a nationwide marketing or advertising program.
Employees:
- ----------
As of December 31, 1999 the Company had 11 full-time and 6 part-time
employees.
Competition:
- ------------
Cala Corporation and its predecessor companies have competed with numerous
companies engaged in the business of operating casual dining restaurants, coffee
shops and hotels. Many food-service facilities compete for customers which
existing and previous Cala Corporation Restaurants were designed to attract.
Additionally, any Cala Corporation's hospitality businesses will be subject to
regular changes in eating preferences of the public as well as the effects of
local and national economic conditions that influence consumer spending habits.
Many of Cala Corporation's hospitality industry competitors are better
known, better capitalized and have greater financial resources, more experienced
organizations with a greater number of employees than Cala Corporation does.
Cala Corporation believes, however, that the quality of its products in its
existing and former restaurants, the physical attractiveness of its facilities,
its restaurant business's modest prices and the extensive prior hospitality
industry experience of its senior management, will enable Cala Corporation to
continue to compete in the future in the market.
Regulation
- ----------
Cala Corporation's hospitality businesses are subject to licensing and
regulation by the departments of alcohol licensing, health sanitation, fire,
building, planning, traffic and revenue of the states and municipalities in
which these businesses operate. Delays in obtaining, or denials of, necessary
licenses or approvals of future hospitality businesses, could have a material
adverse impact on Cala Corporation's growth. Furthermore, any expansion of
certain of Cala Corporation hospitality businesses through the sale of licenses
or franchises is subject to federal, state and local franchiser disclosure laws.
3
<PAGE>
Item 2. Properties:
- -------------------
Cala Corporation's main corporate office is located in Bank One Tower,
Oklahoma City, Oklahoma at the following address where it has a three year lease
on 1,100 square feet of commercial office space.
100 N. Broadway, Suite 1890
Oklahoma City, Oklahoma 73102
Cala Corporation also has office affiliations in the following locations:
Beverly Hills, California
Milano, Italy
San Jose, California
Honolulu, Hawaii
Cala Corporation restaurant Locations at December 31, 1999 are:
1. Nichols Hills
6430 Avondale Drive
Oklahoma City, OK 73116
(3,650 sq. ft. - 3 year lease)
2. Leadership Square
211 N. Robinson
Oklahoma City, OK 73102
(975 sq. ft. - 3 year lease)
3. Cascina (under construction) Restaurant
(in the
Radisson Hotel at
Fisherman's Wharf)
250 Beach St.
San Francisco, CA
(5,800 sq. ft.-10 year lease)
Item 3. Legal Proceedings:
- ------- ------------------
o Country Club Associates, an Oklahoma General Partnership vs. Magnolia
Foods, Inc. re: lawsuit on amount due under lease guaranty for Gators
Restaurant closed in 1995. The amount contested is approximately
$13,000.
o Bowne and Co., Dallas, Texas vs. Magnolia Foods, Inc. - Lawsuit on an
amount of printing costs for work performed in 1997. The amount
contested is $6,500.
o Oklahoma Tax Commission vs. Gators/Magnolia Foods, Inc. re: sales tax
amounts for Gators Restaurant in 1994-95. An agreement was reached and
a payment plan was executed.
4
<PAGE>
Item 4. Submission of Matters to a vote of Secuity Holders:
- ------- ---------------------------------------------------
On October 19, 1999 Creative Restaurant Concepts, Inc.'s name was changed
to Cala Corporation upon approval of a majority of the security holders.
PART II
Item 5. Market for registrants Common Stock and Related Stockholder Matters:
- -----------------------------------------------------------------------------
Common Stock
Bid
High Low
---- ---
1998
First Quarter .1250 .0325
Second Quarter .2500 .1250
Third Quarter .0375 .1250
Fourth Quarter .2500 .1250
1999
First Quarter .0500 .0500
Second Quarter .0600 .0600
Third Quarter .0700 .0700
Fourth Quarter .3500 .3500
As of December 31, 1999, the Company's issued and outstanding common stock
was held by 455 holders of record.
Cala Corporation, or any of its predecessor companies has never declared a
cash dividend on its common stock. It is the present policy of Cala Corporation
not to pay cash dividends on its common stock. Any payment of cash dividends in
the future will be dependent upon the prior payment of dividends on its
outstanding Preferred Stock, the amount of funds legally available thereof, Cala
Corporation's earnings, financial condition, capital requirements and other
factors, which the Cala Corporation's Board of Directors deem relevant.
5
<PAGE>
Item 6. Management's Discussion and analysis of Plan of Operation:
- -------------------------------------------------------------------
Results of Operations: During 1999, the Company owned and operated the
following restaurants for the times indicated.
o Ground Floor Cafes
------------------
o Mathis Brothers Location 01/01/99 - 02/28/99
o Leadership Square Location 01/01/99 - 12/31/99
o Nichols Hills Location 01/01/99 - 12/31/99
o Crocketts Smokehouse BBQ Restaurants
------------------------------------
o South May Ave Location 01/01/99 - 08/30/99
o Reno and Meridian Location 01/01/99 - 09/30/99
Sales during 1999 were $978,322 verses $1,226,852 in 1998. The Company operated
three Ground Floor Cafes in 1998 plus the City Bites Sandwich Shop in Wichita,
Kansas, which was sold 12/31/98. The difference in sales from 1998 to 1999 was
due to closing one Ground Floor Cafe in February, 1999 and the sale of the City
Bites of Wichita in 12/31/98.
Cost of goods sold for 1999 was $365,103 or 37.3 % versus $480,026 or 39.1 % in
1998. The decrease in cost of goods sold from 1999 as compared to 1998 is the
result of stricter operating controls in the reduced number of restaurants.
General and Administrative expenses for the 12 months ending 12/31/99 were
$565,545 versus $1,341,543 for the same period in 1998. These costs were reduced
due to improved operating efficiencies at the companies Ground Floor Cafe
Restaurants plus fewer incentive shares were issued in 1999 and 1998 and capital
was infused into the Company in the 4th quarter.
Importantly, a significant component of the General and Administrative expense
is the cost of shares of restricted common stock issued to Cala Corporation's
note holders as incentive for them to renew their notes and for restricted
common stock shares issued in lieu of the payment of interest on the note
payables.
The Company's business development plans have changed since Joseph Cala became
Chairman, President and Chief Executive Officer on October 6, 1999. Cala
Corporation will concentrate its resources in the hospitality industry. Cala
Corporation plans to develop the world's first undersea hotel casino plus expand
a chain of licensed/franchised Italian style restaurant/coffee shops.
Liquidity and Financial Resources:
- ----------------------------------
Working capital at 12/31/99 was ($1,131,742) versus ($1,546,245) at 12/31/98.
The decrease in deficit was due to the capital infused in the 4th quarter.
The company plans to pursue opportunities to acquire existing operating
businesses such as the Twin Hills Golf and Country Club in Oklahoma City, on
which an offer was made in early 2000.
6
<PAGE>
Item 7. Financial Statements:
- -----------------------------
The financial statements and schedules are included herewith.
Item 8. Change in, Disagreements with Accountants on Accounting and Financial
Disclosure:
- --------------------------------------------------------------------------------
None
PART III
Item 9. Directors and Executive Officers of the Registrant:
- ------------------------------------------------------------
The directors and officers of Cala Corporation as of 12/31/99 are
identified below. No family relationships exist between or among any directors
or officers of Cala Corporation.
Director
Position Continuous
Name Age with the Company Since
---- --- ---------------- -----
Giuseppe Cala 39 Chairman, President, October, 1999
Director
Joseph J. Johnston 56 Vice-President, June, 1985
Secretary, Director
Stephen Ko 48 Interim Chief Financial November, 1999
Officer, Director
J. Joseph Cala, age 39, is Chairman of the Board and Chief Executive
Officer of the Cala Corporation. Mr. Cala has been a successful international
business owner most of his professional life. He began his career in the late
sixties in the hospitality industry, rising to top management in the most
prestigious resorts and hotels around the world. Also, Mr. Cala was President
and Chairman of Cala Group doing business as: Fila Sportwear, USA; Mondi
Fashion, USA, L'Italiano Restaurants, Cala Hotels, Inc., L'Italiano Weddings in
Hawaii and Japan, Cala Investment, Inc., Hydrogen Future Inc; Undersea Resorts
for over two decades; Cala Institute (a non-profit organization) established to
assist disadvantaged youth.
7
<PAGE>
Joseph J. Johnston, Jr., age 56, formerly served as President and Chairman
of the Board and a director of the Company from 1985 until October, 1999. Mr.
Johnston remains as a director and corporate secretary.
Previously, Mr. Johnston worked in restaurant management and operations
capacities with Kentucky Fried Chicken Corp., Chi-Chi's Mexican Restaurants
(franchisee) Kelly - Johnston Enterprises from 1970-1985.
Stephen Ko, age 48, formerly served as Associate Managing Director with
Private Capital Corporation responsible for providing investment banking and
financial consulting services to private clients. Prior to that, Steven served
as Executive Vice President, Bank of America, FSB in Honolulu, Hawaii. At that
capacity he was responsible for all corporate compliance and internal audit
activities with specific responsibility for corporate development programs. As
Chief Planning Officer, Steven was responsible for strategic planning, capital
market activities, managing investment portfolios, secondary loan marketing and
loan servicing activities of the bank.
Prior to joining Bank of America, Steven, who is a Certified Public
Accountant, worked as senior supervising auditor and computer audit specialist
for KPMG Peat Marwick, Honolulu, Hawaii and as staff auditor for Coopers and
Lybrand in Seattle, Washington.
Item 10. Executive Compensation
- --------------------------------
Giuseppe Cala, Cala Corporation, Chairman and CEO is paid an annual salary
of $150,000. Part of that compensation is paid in cash with the balance being
paid in restricted common stock on a monthly basis.
Joseph J. Johnston, prior to the acquisition of the controlling interest in
Creative Restaurant Concepts, Inc. by Giuseppe Cala, in October, 1999 was paid
$35,700 out of which $18,950 direct CRC operating expenses were paid.
Since the October acquisition of Creative Restaurant Concepts, Inc., Mr.
Johnston has been paid an average of $2,500 per month as expenses.
Stephen Ko, Interim Chief Financial Officer has been paid 12,000 shares of
restricted common stock for his services.
Compensation Pursuant to Plans
------------------------------
Under Creative Restaurant Concepts, Inc.'s 1996 Stock Option Plan, designed
to serve as an incentive for retaining qualified, competent key employees,
consultants, officers and directors, and partially in lieu of salary payments
when funds were not available, shares were issued as shown below. While some
options granted under the Plan are intended to qualify as "incentive stock
options" under Section 4224 of the Internal Revenue Code, other options may be
granted that do not qualify.
8
<PAGE>
The Board of Directors has administered the Plan. The Board is authorized
to grant options to such key employees, consultants, officers and directors as
it determined. Options may be granted on such terms, conditions and at such
prices as determined by the Board of Directors; provided however, that the
exercise price may not be less than the appraised fair market value on the date
of grant. Each option shall be immediately exercisable as specified in the
individual option agreements, but no incentive stock option shall be exercisable
for more than ten years from the date of the grant.
The following shares of Creative Restaurant Concepts, Inc. common stock
were issued as partial or full payment of salaries in lieu of cash compensation
during 1999 for work performed in 1999 by Linda A. Matlock, 150,000 shares;
Frank Ward 150,000 shares; Sed Kennedy 62,500 shares; and Joseph J. Johnston
125,000 shares.
IItem 11. Security Ownership of Certain Beneficial Owners and Management:
- --------------------------------------------------------------------------
A. Security Ownership of Certain Beneficial Owners
--------------------------------------------------
Beneficial Ownership of over 5 % of common stock.
Name Shares Percentage
---- ------ ----------
Dulaney's, Inc. 5,375,000 21.8 %
PO Box 54714
Oklahoma City, OK
Teddy Mitchell 1,502,017 6.1 %
3137 Elmwood Ave.
Oklahoma City, OK
Gary Modafferi 2,800,000 11.4 %
3003 Balboa St.
San Francisco, California
Don Zachritz 1,228,078 5.0 %
PO Box 54714
Oklahoma City, OK
9
<PAGE>
B. Security Ownership of Management
-----------------------------------
Number of Shares
Name of Beneficially Owned Per
Title of Class Beneficial Owner as of 12/31/99 Class-2
-------------- ---------------- -------------- -------
Cala Corporation Giuseppe Cala 2,546,474 10.3 %
Common Stock
Joseph J. Johnston 342,500 1.4 %
Par Value $.005
Stephen Ko 12,000 0
(1) Except as otherwise described herein, each beneficial owner has sole
voting and investment power with respect to the shares listed.
(2) Percent of call is based upon shares of Cala Corporation Common Shares
outstanding as reflected on the Company's books as of 12/31/99 and is
calculated without regard to the Cala Corporation common shares
issuable upon exercise of outstanding warrants or any stock options,
if any or upon conversion of the company's convertible securities
except that any shares a person is deemed to own by having the right
to acquire by exercise of a warrant or option or the conversion of a
convertible security are considered to be outstanding solely for
purposes of calculating such person's percentage ownership.
(3) Mr. Cala beneficially owns 2,366,474 shares of Cala Corporation common
stock. Such amount excludes (a) 60,000 shares held by Sandra Olga
Acevedo (b) 60,000 shares held by Alexis Cala Trust for which Sandra
Acevedo is Trustee (c) 60,000 shares held by Filippo Cala Trust for
which Sandra Acevedo is Trustee.
(4) Mr. Cala owns warrants to purchase up to 150,000 shares of Cala
Corporation common stock at $.05 per share. Mr. Cala also owns 225
shares of Series AA Convertible Preferred Stock which is convertible
into 45,000 shares of common stock of Cala Corporation.
(5) Mr. Johnston beneficially owns 332,250 shares of Cala Corporation
common stock. Such amount excludes (a) 3,750 shares held by the Linda
B. Johnston Trust for the benefit of Linda Johnston, for which she
also serves as the controlling co-Trustee. (b) 1,250 shares held by
Michael T. Johnston Trust for the benefit of Michael T. Johnston, son
of Mr. And Mrs. Johnston, for which Mrs. Johnston serves as Trustee;
and (c) 1,250 shares held by the Jennifer A. Johnston Trust for the
benefit of Jennifer A. Swales, daughter of Mr. And Mrs. Johnston, for
which Mrs. Johnston serves as Trustee.
10
<PAGE>
(6) Mr. Johnston's reported holdings also exclude (a) 2,000 shares held by
Michael T. Johnston, son of Mr. And Mrs. Joseph Johnston and (b) 2,000
shares held by Jennifer A. Swales, daughter of Mr. And Mrs. Joseph J.
Johnston.
(7) Mr. Ko beneficially owns 12,000 shares.
The following table sets forth the Cala Corporation common stock
ownership of all the directors and officers as a group as of December
31, 1999:
Number of Shares Percent
Name Beneficially Owned (1) of Class
---- ---------------------- --------
Giuseppe Cala (2) 2,546,474 10.3 %
Joseph J. Johnston (3) 342,500 1.4 %
Stephen Ko (4) 12,000 0 %
(1) - (4) for footnotes 1,2, 3 and 4 see Footnotes 1,2,3,4,5 and 6 of the
immediately preceding table.
Item 12. Certain Relationships and Related Transactions:
- ---------------------------------------------------------
(A) On October 12, 1999, Mr. Giuseppe Cala acquired the right to be issued
2,500,000 shares of restricted Cala Corporation Common stock in
consideration for $25,000 in cash paid into the company as capital,
services provided and for the issuance of notes to stockholders in the
amount of $426,797. However, Mr. Cala's shares were not issued until
after December 31, 1999.
(B) On November 11, 1999, Cala Corporation acquired a lease agreement from
Giuseppe Cala and Gary Modafferi to construct and open a Cacina
Italian Restaurant in the Radisson Hotel on Beach Street near
Fisherman's Wharf in San Francisco. Consideration for the transaction
was 5.6 million shares of restricted Cala Corporation common stock,
split 50-50 between Messrs. Cala and Modafferi.
11
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
- ------------------------------------------
The following documents are filed as a part of this report:
Exhibit:
11. Statement re: Computation of Earnings per Share
27. Financial Data Schedule.
(b) The Company filed a Form 8-K report with the Securities and
Exchange Commission on October 12, 1999.
Signatures
Pursuant to requirements of Section 13 or 15 (d) 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.
Cala Corporation
By: /s/ Joseph J. Johnston
----------------------
Joseph J. Johnston, Vice President and Chief Operating Officer
Dated March 31, 2000
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 31st day of March, 2000.
By: /s/ Joseph J. Johnston
----------------------
Joseph J. Johnston, Director
By: /s/ Joseph Cala
----------------------
Joseph Cala, Director
By: /s/ Stephen, Ko
----------------------
Stephen Ko, Director
12
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independant Auditor's Report....................................... F-1
Balance Sheet...................................................... F-2
Statement of Income................................................ F-3
Statement of Cash Flow............................................. F-4
Statement of Stockholders Equity................................... F-5
Notes to Financial Statements...................................... F-6-12
<PAGE>
Cala Corporation formerly Creative Restaurant Concepts, Inc
FINANCIAL STATEMENTS AND
AUDITOR'S REPORT THEREON
As of and for the year
Ending December 31, 1999
<PAGE>
Hunter, Atkins & Russell, PLC
5805 North Grand Suite D
Oklahoma City, OK 73118
(405) 843-3964
To the Board of Directors
Cala Corporation
Oklahoma City, Oklahoma
Independent Auditor's Report
We have audited the accompanying balance sheets of Cala Corporation as of
December 31, 1999 and the related statements of income, cash flows and
stockholder's equity for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is the express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cala Corporation as of December
31, 1999 and the results of its operation and it cash flows for the year then
ended in conformity with generally accepted accounting principles.
Hunter, Atkins & Russell, PLC
March 30, 2000
F-1
<PAGE>
Cala Corporation
Balance Sheet
December 31,1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 96,699
Inventory 16,069
-----------
Total Current Assets 112,768
PROPERTY AND EQUIPMENT, net 65,795
OTHER ASSETS
Organizational costs, net 4,000
Deposits 6,622
Lease Assignment, net 972,330
Other investments 16,800
-----------
Total other assets 999,752
-----------
Total Assets $ 1,178,315
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 82,233
Accrued expenses 268,642
Notes payable and current portion of long-term debt 893,635
-----------
Total current liabilities 1,244,510
LONG-TERM DEBT, less current of $47,197 86,528
STOCKHOLDERS' EQUITY
Series A 10 % cumulative preferred stock,
Par value $.01, 250,000 shares authorized,
Issued and outstanding 2,500
Series AA 6 % cumulative convertible preferred
Stock, par value $0.0, 10,000 shares authorized,
1,485 shares issued and outstanding 149
Common Stock - par value $.005, 50,000,000 shares
authorized, 24,662,156 shares issued and outstanding 123,311
Additional paid-in capital 7,446,903
Retained Earnings (deficit) (7,724,384)
Less: Treasury stock - 4,530 shares at cost (1,202)
-----------
Total Stockholders' Equity $ 1,178,315
===========
See accountants' report and notes to financial statements.
F-2
<PAGE>
Cala Corporation
Statement of Operations
For the Year Ended December 31, 1999
REVENUES $ 978,322
COST OF SALES 365,103
-----------
GROSS PROFIT 613,219
OPERATING COSTS AND EXPENSES
General, selling, and administrative 474,544
Maintenance & Operations 580,058
Depreciation 63,331
Amortization 27,670
-----------
Total Expenses 1,145,603
-----------
Net Loss $ (532,384)
===========
Loss per share $ (0.04)
===========
Fully Diluted Loss Per Share $ (0.04)
===========
See accountants' report and notes to financial statements.
F-3
<PAGE>
Cala Corporation
Statement of Cash Flows
For the Year Ended December 31, 1999
Cash flows from operating activities $ (532,384)
Net loss
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 91,001
Changes in assets and liabilities
(Increase) decrease in:
Inventory (2,503)
Deposits and Organizational Costs 22,830
Increase (decrease) in
Accounts Payable (99,102)
Accrued expenses 128,053
-----------
140,279
Net cash used by operating activities $ (392,105)
-----------
Cash flows from investing activities
Purchase of property and equipment $ (95,134)
Disposal of property and equipment 174,029
Acquisition of long term lease (1,000,000)
-----------
Net cash used by investing activities (921,105)
-----------
Cash flows from financing activities
Principal payments on long term debt $ (80,203)
Issuance of stock 1,494,637
Error Correction (900)
Net cash provided by financing activities 1,413,534
-----------
Net increase in cash and cash equivalents $ 100,324
Cash and cash equivalents at beginning of period (3,625)
-----------
Cash and cash equivalents at end of period $ 96,699
===========
Supplemental cash flow information:
Cash paid during the year for interest $ 0
===========
Cash paid during the year for income taxes $ 0
===========
See accountants' report and notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Cala Corporation
Statement of Stockholders' Equity
For the Year Ended December 31, 1999
Series A Series AA Common Stock Retained
Preferred Preferred ------------------------ Paid-in Earnings Treasury
Stock Stock Shares Amount Capital (Deficit) Stock
----- ----- ------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance, 1/01/99 $ 2,500 $ 149,500 9,694,056 $ 45,970 $ 5,881,256 $ (7,192,900) $ (1,202)
Common stock issued for
Payment of expense debt
And debt financing 14,968,100 75,529 1,419,108
Prior Period Adjustment (148,351) 1,812 146,539 900
Net Loss (532,384)
------------ ------------ ------------ ------------ ------------ ------------ ----------
Ending Balance, 12/31/99 $ 2,500 $ 149 24,662,156 $ 123,311 $ 7,446,903 ($ 7,724,384) ($ 1,202)
============ ============ ============ ============ ============ ============ =========
See accountants' report and notes to financial statements.
F-5
</TABLE>
<PAGE>
CALA CORPORATION
OKLAHOMA CITY, OKLAHOMA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
ORGANIZATION
Magnolia Foods, Inc. (the Company) was incorporated on June 13, 1985 under the
laws of the State of Oklahoma. The Company's sole industry segment has been the
business of owning, operating, licensing and joint venturing restaurants.
On August 21, 1997 the Company changed its name to Creative Restaurant Concepts,
Inc. On November 21, 1999, the Company changed its name to Cala Corporation.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company and
all partnership and corporate subsidiaries in which the Company holds a majority
voting and controlling interest. Investments in affiliates for which the Company
does not exercise significant influence over operating and financial policies
are accounted for on the equity method. Significant intercompany accounts and
transactions are eliminated in consolidation.
Inventories
- -----------
Inventories of food and beverages are stated at the lower of cost (determined by
the first-in, first-out method) or market.
When a restaurant is opened, the initial purchase of china, glass, and
silverware (smallwares) is recorded as inventory as is not amortized. All
replacements are expensed.
F-6
<PAGE>
Property and Equipment
- ----------------------
Property and equipment are recorded at cost. Expenditures which increase values,
change capacities, or extend useful lives are capitalized. Routine maintenance,
repairs and renewals are charged to operations.
Leasehold improvements are amortized by the straight-line method over the lesser
of the life of the lease including renewal options or the estimated useful lives
of the assets.
Furniture and equipment are depreciated by the straight-line method over the
estimated useful lives of the assets, generally seven years.
Earnings (Loss) per Share
- -------------------------
Net income (loss) per share is based upon the weighted average number of shares
outstanding during the period.
Cash Equivalents
- ----------------
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
NOTE 2 - GOING CONCERN CONSIDERATIONS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company has sustained substantial
operating losses in recent years. In addition, the Company has used substantial
amounts of working capital in its operations. Further, at December 31, 1999
current liabilities exceed current assets by $1,131,742.
F-7
<PAGE>
In view of these matters, payment of existing liabilities in the accompanying
balance sheet is dependent upon the success of the Company's future operations
and its ability to raise capital. The Company's management believes that all
obligations can and will be paid with future operations. Management further
believes that the Company is a going concern due to the current operations that
are not reflected as of the date of these financial statements.
NOTE 3 - BUSINESS COMBINATION
During the year ending December 31, 1999 the Company acquired 100% of the
outstanding stock of Ground Floor Cafe an Oklahoma restaurant company. The
Company gave 750,000 shares of the Company's common stock for 100% of the stock
for Ground Floor Cafe, making Ground Floor Cafe a wholly owned subsidiary of
Cala Corporation. Ground Floor Cafe is consolidated with Cala Corporation with
Cala Corporation the surviving entity.
NOTE 4 - PROPERTY AND EQUIPMENT
As of December 31, 1999 property and equipment consisted of office furniture and
restaurant equipment. Depreciation is calculated using the straight-line method
over the estimated useful life of the asset.
NOTE 5 - OTHER INVESTMENTS
In October, 1998, the Company entered into negotiations which led to the January
1, 1999 acquisition of 66 2/3 of the outstanding shares of Crockett's Smokehouse
of Choctaw, Inc., 80% of the outstanding shares of Crockett's Smokehouse of
South May, Inc., 90% of the outstanding shares of Pizza Planet of Reno and
Meridian, Inc. and the assets of McAllister and Reed Inc. from Paul McNutt. At
the same time 33 1/3 of the outstanding shares of Crockett's Smokehouse of
Choctaw, Inc. were acquired from Ali Khalili; 20% of the outstanding shares of
Crockett's Smokehouse of South May, Inc. were acquired from Mark McAllister and
10% of Pizza Planet of Reno and Meridian, Inc. was acquired from Steve Haben. In
January 1999, the assets of Crockett's Smokehouse of Choctaw, Inc. were sold to
Ali Khalili. In August, 1999, the assets of Crockett's Smokehouse of South May,
Inc. were sold to CWT, Inc. In September, 1999, the assets of Pizza Planet of
Reno and Meridian Inc. were sold to Restaurant Acquisition Corporation.
F-8
<PAGE>
NOTE 6 - NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consist of the following:
Payable to various individuals, 12% interest,
Unsecured, due various maturity dates $ 846,438
===========
Long-term debt consists of the following:
Installment loan with local commercial bank,
9.5% interestrate, maturing October 2002,
collateralized by equipment and fixtures $ 8,631
Installment loan with local commercial bank,
9.5% interest rate, maturing October 2002,
collateralized by equipment and fixtures 125,094
-----------
133,725
Less: current portion 47,197
-----------
$ 180,922
===========
The following is a summary of maturities of principal under long-term debt for
the years ending December 31:
2000 $ 47,197
2001 47,197
2002 39,331
--------
$133,725
========
NOTE 7 - CAPITAL STOCK TRANSACTIONS
The Company issued 7,196,756 common shares in 1998 and 14,968,100 common shares
in 1999.
During 1997, 450,000 shares were issued under common stock options granted in
1994 at an exercise price of $.18 per share. A total of 2,000,000 options with
an expiration date of December 31, 2000 were issued during 1997. Such options
were exercised in 1999. An additional 400,000 options were issued in 1999 and
remain unexercised as follows:
F-9
<PAGE>
Number of Option Exercise Price Expiration Date
---------------- -------------- ---------------
150,000 $.05 May 1, 2000
100,000 $.01 November 2, 2001
150,000 $.25 June 5, 2000
NOTE 8 - INCOME TAXES
Income taxes are provided for the tax effect of transactions reported in the
financial statements in a period different from which they are reported for
income tax purposes, The items creating such a timing difference are the
accelerated depreciation of property and equipment for tax purposes as compared
to the straight-line method for financial reporting purposes, and the
amortization of leasehold improvements over a prescribed thirty-nine year period
for tax purposes as compared to the lease terms for financial reporting
purposes.
The Company has a consolidated net operating loss carryforward of approximately
$5,000,000, which will expire between the years 2001 and 2006. Because of the
uncertainty of the Company's future operations, and because possible
restrictions on the application of the net operating losses against future
profits are being researched due to ownership changes reflected in various stock
issuance, no tax benefits are recorded in these financial statements.
NOTE 9 - LEASE COMMITMENTS
The Company leases office space for $938 per month under a lease expiring
December, 2002. Future minimum lease payments as of December 31, 1999 were
$32,830.
The Company leases restaurant space for $3,750 per month under a lease expiring
April, 2002. Future minimum lease payments as of December 31, 1999 were
$105,000.
The Company leases restaurant space for $1,400 per month under a lease expiring
August, 2002. Future minimum lease payments as of December 31, 1999 were
$44,800.
The Company acquired assignment of a ten year lease on a restaurant location in
San Francisco, California from Cala Hotels, Inc., a related party. Such
assignment was valued at $1,000,000, substantially less than the market value of
5,600,000 shares of the Company's stock exchanged for the assignment. The
assignment is being amortized over its ten year life.
F-10
<PAGE>
NOTE 10 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
As supplemental information to the statement of cash flows, cash paid for
interest during the year was none. No income taxes were due during the reporting
years. Nor was any interest paid in cash for the year ending December 31, 1999.
NOTE 11 - CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED
STOCK SERIES A
The Company has outstanding 250,000 shares of series A 10% cumulative
convertible redeemable preferred stock, par value $.01, 250,000 shares
authorized. Each share of Series A preferred stock converts to one share of
common stock at 125% of the registration price. Total dilutive value of 250,000
shares.
NOTE 12 - CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED
STOCK SERIES AA
The Company has outstanding 1485 shares of Series AA 6% cumulative convertible
redeemable preferred stock, par value $.01, 10,000 shares authorized. Each share
of Series AA preferred stock converts to 200 shares of common stock. Total
dilutive value of 2,000,000 shares.
NOTE 13 - CONTINGENCIES
Litigation
The Company has no material litigation as of December 31, 1999.
NOTE 14 - SUBSEQUENT EVENTS
In the first quarter of 2000, $739,088 of notes payable by Cala Corporation were
retired.
On March 22, 2000 the Company entered into an agreement with Guido Perla and
Associates, Inc., naval architects, mechanical and electrical engineers for
phase I of the comprehensive design of the prototype Under Sea Hotel. The amount
of the contract $570,000.
F-11
<PAGE>
In January, 2000, Cala Corporation entered into an agreement with the
architectural firm of Wemberly, Allison, Tong and Goo to provide consultant
services as well as interior design plans for the Under Sea Hotel. The amount of
the contract is $200,000.
On March 22, 2000, the Company entered into an agreement with Economic Research
Association (ERA), a research organization specializing in travel and leisure
activities, to provide world wide feasibility studies for the Under Sea Hotel.
The amount of the contract is $75,000.
On January 1, 2000, Cala Corporation sold one of its two remaining Ground Floor
Cafes located in downtown Oklahoma City, to Restaurant Acquisition Corp. for
$100,000.
F-12
Exhibit 11
<TABLE>
<CAPTION>
Exhibit 11
Statement Re: Computation of Earnings Per Share
December 31 December 31
1999 1998
---- ----
<S> <C> <C>
Primary Earnings Per Share
Net Income (Loss) $ (532,384) $ (648,343)
Weighted average shares outstanding 15,648,467 7,214,807
Primary Income (Loss) Per Shares (.03) $ (0.09)
Fully Diluted Earnings Per Share
Net Income (Loss) $ (532,384) $ (648,343)
Weighted average shares outstanding 15,648,467 7,214,807
Addition from assumed exercise of 400,000 253,750
Common stock purchase warrants
And options
Addition from assumed conversion of 299,500 225,000
Preferred Stock
Weighted average number of Common Share 16,347,967 7,693,557
Outstanding on a fully diluted basis
Fully Diluted (Loss) Per Share $ (0.03) $ (0.08)
</TABLE>
(a) This calculation is submitted in accordance with regulation S-K Item 601
(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 96,699
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 16,069
<CURRENT-ASSETS> 112,768
<PP&E> 65,795
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,178,315
<CURRENT-LIABILITIES> 1,244,510
<BONDS> 0
0
2,649
<COMMON> 123,311
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,178,315
<SALES> 978,322
<TOTAL-REVENUES> 978,322
<CGS> 365,103
<TOTAL-COSTS> 365,103
<OTHER-EXPENSES> 1,145,603
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (532,384)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
