SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
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 No. 33-8964
AM-PAC INTERNATIONAL, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 16-1260971
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
431 East Central Boulevard, Suite 900
Orlando, Florida 32801
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(407) 841-1350
--------------------------
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date:
Class Shares Outstanding Date
----------------------- ------------------ ----------------
Common, $.001 par value 8,315,547 November 1, 1997
<PAGE>
AM-PAC INTERNATIONAL, INC.
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Balance Sheets - September 30, 1997
and December 31, 1996........................................ 3
Consolidated Statements of Operations - For the three
months and nine months ended September 30, 1997 and 1996..... 4
Consolidated Statements of Cash Flows - For the nine months
ended September 30, 1997 and 1996 ........................... 5
Notes to Consolidated Financial Statements................... 6
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 7
PART II - OTHER INFORMATION............................................ 8
SIGNATURES............................................................. 9
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AM-PAC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 3,195 $ 47,651
Inventory 20,568 0
Prepaid expenses 1,179 0
Employee advance 100 0
---------- -----------
Total current assets 25,042 47,651
PROPERTY AND EQUIPMENT
Buildings and improvements 164,917 171,614
Land and improvements 0 204,841
Furniture and equipment 94,971 2,000
Less accumulated depreciation ( 10,711) ( 103,313 )
--------- --------
Net property and equipment 249,177 275,142
OTHER ASSETS
Escrow deposits 16,562 6,228
Loan receivable - stockholder 237,847 238,398
Related party receivable 43,123 0
Organizational costs, net 1,522 1,837
Note receivable - related party 978,830 0
---------- -------------
Total other assets 1,277,884 246,463
--------- --------
Total assets $ 1,552,103 $ 569,256
========= =======
LIABILITY AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 40,745 $ 111,287
Other liabilities 13,103 22,915
Current portion long term debt 0 9,075
------------- ----------
Total current liabilities 53,848 143,277
LONG TERM DEBT
Mortgage payable 0 435,719
Loans payable - related party 230,593 114,459
--------- --------
Total long-term debt 230,593 550,178
--------- --------
Total liabilities 284,441 693,455
STOCKHOLDERS' EQUITY:
Common Stock; $.001 par value; 149,000,000
shares authorized, 8,315,547 and 7,740,547
shares issued and outstanding respectively, 8,316 7,740
Additional paid in capital 1,613,673 973,058
Accumulated deficit ( 354,327) (1,104,997 )
--------- ---------
Total stockholders' equity (deficit) 1,267,662 ( 124,199)
--------- ----------
Total liabilities and stockholder equity $ 1,552,103 $ 569,256
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
AM-PAC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
-------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Sales $ 102,474 $ 0 $ 241,263 $ 720
Franchise fees 14,785 10,204 111,331 43,108
Commissions (50) 0 63 7,333
Rental property income 462 21,450 1,382 64,350
Interest income, net 19,195 0 19,219 288
----------- ------------ --------- ----------
Total revenue 136,866 31,654 373,258 115,799
Costs and expenses:
Cost of sales 23,185 0 70,909 0
Rental property expenses 0 19,198 0 57,594
Operating, general and
administrative expenses 226,956 51,267 682,256 76,195
--------- -------- -------- --------
Total costs and expenses 250,141 70,465 753,165 133,789
-------- -------- -------- --------
Net income (loss) from operations ( 113,275) ( 38,811) (379,907 ) ( 17,990)
Gain on sale of property 0 0 1,130,588 0
-------- --------- --------- ---------
Net income (loss) before taxes ( 113,275 ) ( 38,811) 750,681 ( 17,990)
Provision for income taxes 0 0 0 0
-------- -------- --------- ---------
Net income $ ( 113,275 ) $ ( 38,811) $ 750,681 $(17,990)
========== ======== ======== =======
Net income per share $ ( .01) $ ( .01) $ .09 $ ( .00)
=========== ======== ========= ========
Average weighted number
of shares outstanding 8,265,547 2,580,182 8,081,991 4,629,436
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
AM-PAC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
---------------------------------------
1997 1996
-------------- ----------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 750,681 $ ( 17,990 )
Adjustments to reconcile net
cash provided (used) by
operating activities
Depreciation and amortization 15,346 6,020
(Increase)/decrease in prepaids ( 11,512 ) ( 9,587 )
(Increase)/decrease in inventory ( 20,568 ) ( 0 )
(Increase)/decrease in receivable ( 100 ) 7,175
Increase/(decrease) in accounts
payable 70,649 ( 1,725 )
Increase/(decrease) in other
current liabilities ( 9,811 ) 61
Gain on sale of property (1,130,588 ) 0
Increase in income accrual ( 19,192)
----------
Net cash provided (used) by operating
activities ( 355,095 ) ( 16,046 )
Cash flows from investing activities
Purchase of equipment and leasehold
improvements ( 257,888 ) 0
Collection on related party receivable 3,476 0
---------- ---------
Net cash provided (used) by investing
activities ( 254,412 ) 0
Cash flows from financing activities
Expenses of asset sale ( 590 ) 0
Loans to related parties ( 46,048 ) ( 6,201 )
Proceeds from related party borrowings 616,134 0
Repayment of debt ( 4,445 ) ( 9,375 )
--------- -------
Net cash provided (used) by financing activities ( 565,051 ) ( 15,576 )
------- ------
Net increase (decrease) in cash ( 44,456 ) ( 31,622 )
Cash at beginning of period 47,651 34,040
------ ------
Cash at end of period $ 3,195 $ 2,418
======== ========
Supplemental disclosure of cash flow
information:
Interest expense $ 31,437 $ 33,025
======= =======
Income taxes $ 0 $ 0
======== =========
Supplemental schedule of noncash investing
and financing activities:
Conversion of accounts payable to common
stock 141,191 $ 0
======= ==========
Conversion of related party debt to common
stock 500,000 $ 0
======= ==========
Receipt of note receivable on sale of
property 959,637 $ 0
======= ==========
Assumption of mortgage on sale of property $ 440,363 $ 0
======= ==========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
AM-PAC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. INTERIM PRESENTATION
The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-QSB. The December 31, 1996 balance sheet data was
derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The
interim financial statements and notes thereto should be read in
conjunction with the financial statements and footnotes thereto included in
the Company's report on Form 10-KSB for the year ended December 31, 1996.
In the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of
the results for the interim periods presented.
2. RELATED PARTY TRANSACTIONS - SALE AND LEASEBACK OF ASSETS
On June 29, 1997, the Company sold the real estate, including all land and
premises, housing the Company's HeadlightZ restaurant to JT Investments
Ltd., an entity controlled by Thomas Tedrow, the President and a
controlling shareholder of the Company, and Jeffrey Martin who may be
deemed a controlling shareholder of the Company. The sale price of the
property was $1.4 million, consisting of assumption of a first mortgage on
the property in the amount of $440,363 and a note payable in the amount of
$959,637 due June 29, 1999 with interest at 8%.
The Company recorded a gain of $1,130,588 on the sale of the property.
Simultaneous with the sale of the property, the Company's subsidiary,
HeadlightZ of Orlando, Inc., and JT Investments entered into a lease
pursuant to which the Company will lease the property through July 1, 2002
for $8,000 per month. The Company is also responsible for all operating
expenses with respect to the property.
3. SHAREHOLDERS' EQUITY
During the nine months ended September 30, 1997, the Company issued 500,000
shares of common stock in satisfaction of notes payable to related parties
totaling $500,000 and issued 75,000 shares of common stock in satisfaction
of accounts payable totaling $141,191.
4. CONTINGENCIES
In connection with the sale of the Company's HeadlightZ property, the
purchaser assumed a first mortgage on such property in the amount of
$440,363. The Company did not obtain a release of liability on the first
mortgage at the time of sale. Accordingly, the Company may be liable for
any deficiency in the event of a default on the mortgage.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-QSB contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward looking statements.
Results of Operations - Nine months ended September 30, 1997 compared to the
nine months ended September 30, 1996.
Revenues. Revenues for the nine months ended September 30, 1997 increased
by $257,459 or 222.3% to $375,258 from $115,799 for the nine months ended
September 30, 1996. This increase resulted from an increase in sales (from $720
in 1996 to $241,263 in 1997) attributable to the Company's acquisition of
HeadlightZ and an increase in franchise fees ($43,108 in 1996 to $111,331 in
1997) attributable to a one-time payment of $75,000 in connection with the
establishment of a Captain Tony's franchise in Utah, which increases were
partially offset by reductions in commissions, rental and interest income. The
decrease in rental income from $64,350 in 1996 to $1,382 in 1997 was
attributable to the termination of a lease agreement pursuant to which the
Company leased the premises housing the Company's HeadlightZ restaurant to the
former operator of such restaurant pending the Company's acquisition of a liquor
license. After obtaining a liquor license, the lease of the premises to the
former operator was terminated and the Company took over operation of the
restaurant.
Cost of Sales.Cost of sales for the nine months ended September 30, 1997
were $70,909. There were no cost of sales for the nine months ended September
30, 1996 because the Company's restaurant was not in operation during this
period in 1996.
Rental Property Expense. There was no rental property expense for the nine
months ended September 30, 1997 while rental property expense totaled $57,594
for the nine months ended September 30, 1996. This decrease in rental property
expense resulted from the termination of the lease from Company to the former
operator of the restaurant located at the HeadlightZ site, as described above.
General and Administrative Expense. General and administrative expenses for
the nine months ended September 30, 1997 increased by $606,061 or 795.4% to
$682,256 from $76,195 for the nine months ended September 30, 1996. This
increase resulted from the hiring of additional employees, increased
professional fees and pre-opening expenses associated with the renovation and
opening of the Florida restaurant.
Gain on Sale of Assets. During the quarter ended June 30, 1997, the Company
sold the real estate, including all land and premises, housing the Company's
HeadlightZ restaurant to JT Investments Ltd., an entity controlled by Thomas
Tedrow, the President and a controlling shareholder of the Company, and Jeffrey
Martin who may be deemed a controlling shareholder of the Company. The sale
price of the property was $1.4 million, consisting of assumption of a first
mortgage on the property in the amount of $440,363 and a note payable in the
amount of $959,637 due June 29, 1999 with interest at 8%. The Company recorded a
gain of $1,130,588 on the sale of the property.
Simultaneous with the sale of the property, the Company's subsidiary,
HeadlightZ of Orlando, Inc., and JT Investments entered into a lease pursuant to
which the Company will lease the property through July 1, 2002 for $8,000 per
month. The Company is also responsible for all operating expenses with respect
to the property.
Changes in Financial Condition, Liquidity and Capital Resource.
For the past twelve months, the Company has funded its operations and
capital requirements with loans from related parties. As of September 30, 1997,
the Company had cash of $3,195 and a deficiency of working capital of $28,806.
Net cash used in operating activities increased to $355,095 from $16,046
for the nine months ended September 30, 1997 and 1996 respectively. The increase
resulted from the sale of property for a promissory note which more than offset
the reported net income for the period.
7
<PAGE>
Net cash used in investing activities increased to $254,412 from $0 for the
nine months ended September 30, 1997 and 1996, respectively. This increase
resulted from the purchase of equipment and construction of leasehold
improvements at the Company's Florida restaurant.
Net cash provided by financing activities increased to $565,051 from
$(15,576) for the nine months ended September 30, 1997 and 1996, respectively.
This increase in cash provided is entirely attributable to borrowing from
related parties. During the nine months ended September 30, 1997, the Company
converted $500,000 of loans from related parties into 500,000 shares of common
stock and the Company converted $141,191 of legal fees payable into 75,000
shares of common stock.
At September 30, 1997, the Company had long-term debt of $230,593. The
mortgage on the Company's HeadlightZ restaurant property, totaling $440,363, was
assumed by a related party in connection with the sale of the property. The
Company did not obtain a release on such mortgage and remains contingently
liable on said mortgage.
During the quarter ended June 30, 1997, the Company sold the property which
houses the Florida restaurant and leased the facility for 5 years. Under the
terms of the lease, the Company is obligated to make annual payments of $96,000.
The Company has limited financial resources and continues to operate at a
loss. In order to fund continued operations, the Company will require continuing
loans from affiliates or new equity investment or other financing until such
time as the Company can increase its restaurant and franchise revenues to a
level sufficient to support the Company's overhead and other capital needs.
Unless the affiliates are willing to make additional loans or the Company is
able to secure additional financing from other sources, the Company will not
have sufficient capital to carry on its operations for the next twelve months.
Management is presently evaluating various options for financing future
operations but, as of the date of this report, has received no commitments to
provide necessary financing.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AM-PAC INTERNATIONAL, INC.
Date: November 20, 1997 By: /s/ Thomas Tedrow
---------------------------------
Thomas Tedrow
Chief Executive Officer
Date: November 20, 1997 By: /s/ Michael J. Martella
---------------------------------
Michael J. Martella
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,195
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 20,568
<CURRENT-ASSETS> 25,042
<PP&E> 259,888
<DEPRECIATION> 10,711
<TOTAL-ASSETS> 1,552,103
<CURRENT-LIABILITIES> 53,848
<BONDS> 0
0
0
<COMMON> 8,316
<OTHER-SE> 1,259,346
<TOTAL-LIABILITY-AND-EQUITY> 1,552,103
<SALES> 241,263
<TOTAL-REVENUES> 373,258
<CGS> 70,909
<TOTAL-COSTS> 70,909
<OTHER-EXPENSES> 682,256
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 750,681
<INCOME-TAX> 0
<INCOME-CONTINUING> 750,681
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 750,681
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
