U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] for the fiscal years ended:
June 30, 1996 and June 29, 1997
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[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period
from ___________ to __________
COMMISSION FILE NUMBER: 0 -16196
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UNIVERSITY DINING SERVICES, INC.
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(Name of small business issuer in its charter)
Delaware 06-1168423
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Broadway
Hamden, Connecticut 06518
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (203) 248-4100
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Securities registered under Section 12(b) of the Act: None
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Securities registered under Section 12(g) of the Act:
Common Stock, $.001 par value
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 at least the past 90 days. Yes No X
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Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained herein, and will not be contained, to the best
of 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 its most recent fiscal year: $5,971,926
As of June 29, 1997, the aggregate market value of voting stock held by
non-affiliates was $0 due to the fact the Registrant's Common Stock is not
currently trading.
As of June 29, 1997, the number of Shares of the Registrant's Common Stock,
$.001 par value, outstanding was 13,000,000.
Documents incorporated by reference: None
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HOST AMERICA
FORM 10-KSB
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS FORM 10-KSB UNDER "ITEM 1. DESCRIPTION OF
BUSINESS," "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," AND ELSEWHERE IN THIS FORM 10-KSB
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES,
AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE, OR
ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE
RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE
FOLLOWING: COMPETITION; SUCCESS OF OPERATING INITIATIVES; DEVELOPMENT AND
OPERATING COSTS; ADVERTISING AND PROMOTIONAL EFFORTS; BRAND AWARENESS;
ADVERSE PUBLICITY; ACCEPTANCE OF NEW PRODUCT OFFERINGS; EXPANSION OF THE
HOME MEAL REPLACEMENT BUSINESS; CHANGES IN BUSINESS STRATEGY OR DEVELOPMENT
PLANS; AVAILABILITY AND TERMS OF CAPITAL; FOOD, LABOR, AND EMPLOYEE BENEFIT
COSTS; CHANGES IN GOVERNMENT REGULATIONS; REGIONAL WEATHER CONDITIONS; AND
OTHER FACTORS REFERENCED IN THIS FORM 10-KSB.
ITEM 1. DESCRIPTION OF BUSINESS.
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GENERAL DEVELOPMENT OF BUSINESS.
University Dining Services, Inc., currently doing business as Host
America, (the "Company" or "Host America") was incorporated on February 6,
1986 in the State of Delaware. Since its formation in 1986, and after
conducting a small public offering in 1988, the Company has grown to a
business of approximately $6.0 million in revenues for its fiscal year
ended June 29, 1997. The Company continues to improve its overall
performance through, what it believes to be, superior management
techniques, the aggressive addition of new facilities under its food
management programs and the development of unique marketing concepts such
as the HOMEfood Market described elsewhere in this Report.
During the last fiscal year ended June 29, 1997, the Company added
four (4) new locations and added personnel. One significant customer has
been expanding into several new geographical locations and has utilized the
Company's expertise in establishing its in-house food service for its
employees.
Also during the year ended, the Company successfully negotiated and
secured a multi-year contract to provide special event and catering
services to a country club located in Hamden, Connecticut. As a source of
additional revenues, the Company anticipates that it will continue to
pursue opportunities in "special event" catering services.
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The Company's corporate offices are located at Two Broadway, Hamden,
Connecticut 06518 and its telephone number is (203) 248-4100.
NARRATIVE DESCRIPTION OF BUSINESS.
General
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Host America is a regional contract food service management company
specializing in providing full restaurant and employee dining, special
event catering, vending and office coffee service, home food replacement
and management of sundry, gift and video convenience shops, corporate
dining rooms and cafeterias, office complexes and manufacturing plants.
This diversity of its services allows the Company's clients to offer their
employees full breakfast and lunch availability, multi-level catering and
a variety of complimentary food service options. The Company currently has
operations in Connecticut, New York and New Jersey and, in the near future,
the Company intends to expand to Illinois and Florida.
Currently, the Company's revenues are derived 90% from sales related
to the management of corporate restaurants, convenience shops and catering
in single tenant and multi-tenant office buildings. The balance of
annualized revenues are derived from the maintenance of vending machines
and coffee service at select facilities. The Company concentrates on
small- to medium-size clients generating from $500,000 to $1-2 million per
location in annual food sales. Management believes that these middle
market facilities generally provide greater profit margins and need a
variety of food related services. The Company endeavors to be the
exclusive food provider at the facilities served thereby being able to
control the quality of service and product at each location.
The Company has implemented various marketing and operating
strategies, including providing an umbrella of services at each location
ranging from its basic corporate dining services to special events catering
and home meal replacement programs. The Company believes these strategies
have been important to the Company's growth and in attracting new clients
with multiple needs. The Company endeavors through its on-site employees
and account managers to provide high quality food and client satisfaction
while controlling its labor costs and overhead.
The Company will attempt to increase its revenues through acquisition
of other small- to medium-sized food service providers currently operating
in different geographical locations and dining markets not currently being
served by the Company. The Company believes the increase in revenues will
be coupled with an increase in food costs and general and administrative
expenses. The Company has not, as of the date of this Report, entered into
any agreements in this regard and no assurance can be given that the Company
will be successful in seeking suitable acquisitions.
Industry Overview
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The Company estimates that the United States food service industry had
annual revenues in excess of approximately $100 billion in 1997 and $40
million in corporate services and educational markets in which it competes.
The balance of annualized revenues are concentrated
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in the areas of hospital/health care, correctional facilities, military
facilities and transportation facilities. Additionally, the home-meal
replacement industry is a rapidly growing industry with annual sales
estimated to range from $80 billion to $150 billion. The four largest
national providers known as "Tier I Providers," added 1,500 accounts in
1997, and providers at all levels continued to introduce new operational,
merchandizing and food strategies in this highly-competitive market.
The United States food service market is characterized by large
concentrated businesses and industry populations in a multitude of
strategic locations. The Company's primary geographical area of operations
is located in the Southern New England and New York marketplace. This area
is the largest financial segment of the industry, with its high population
density, numerous corporate office parks, industrial facilities and
concentration of mid-size and large corporations.
Business Strategy
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In addition to the acquisition strategy described below, the Company
will actively seek to expand by implementing innovative marketing and
management programs in the areas of home meal replacement and the expansion
into geographical regions where existing clients have operating facilities.
It is anticipated the first move in this area will be to open in buildings
in Chicago and Orlando, where Oxford Health Plans, Inc., a major customer
of the Company, is expanding their corporate offices.
The Company has also instituted a comprehensive plan of evaluating
existing food operations, studying such elements of food service as traffic
flows, waiting times, food presentation, menu variety, nutritional
assessment, work preparation and labor qualifications. In addition, the
Company maintains strict cost containment policies, nutritional programs
for better health, custom designed menus to meet regional and ethnic tastes
and facilities enhancement with state-of-the-art equipment.
The Company continues to offer quality service to existing and new
clients by improving its existing operational procedures and developing new
menu ideas and product presentation. The Company also attempts to maintain
a high degree of employee satisfaction in the form of training, wages,
benefits and stable working conditions. The Company believes by providing
better working conditions for its employees, they will, in turn, give the
clients better and more consistent service.
Marketing
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The Company selectively bids for both privately owned facility
contracts and contracts awarded by governmental and quasi-governmental
agencies. The privately-negotiated transactions are usually competitive in
nature, with a privately-owned facility owner or operator soliciting
proposals from the Company and several of its competitors. These bids
often require the Company to formulate a rapid response and make a proposal
encompassing, among other things, a capital investment and other financial
terms. In certain cases, a private-facility owner may choose to negotiate
with the Company exclusively for a period of time. Governmental contracts
are usually awarded pursuant to a request-for-proposal process. Bidding in
publicly
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controlled venues often requires more than a year of effort by a Company
team, focusing on building meaningful relationships in the local community
in which the venue is located and raising the profile of the Company name
with the decision makers within that community. During this bidding
period, the Company expends substantial time, effort and funds preparing a
contract proposal and negotiating the contract. All accounts are visited
weekly by an account representative to ensure a response time to problems
is minimized. Account representatives are constantly trying to upgrade the
quality and service of the product to ensure satisfied accounts.
Potential food service contracts come to the Company's attention
through direct contact with a customer by mail and telephone, from
conversations with suppliers, such as purveyors and vending machine
suppliers, and state listings. Generally, the Company will meet with the
customer to discuss the specifics of service, which can include the
following: establishing a corporate profile, evaluating contractual
options, touring the facility and answering questions before presenting the
potential customer with a formal proposal. After such discussions, a
competitive bid or proposal is submitted covering the following areas:
finances, menus, innovative service items, employees and the facilities
nutritional goals and/or objectives. The Company has observed that price
alone is not always the reason for a customer's selection of a food service
company; rather well prepared and nutritious food, as well as service and
a congenial atmosphere, are also important conditions.
The Company markets its contract food services in three specific
areas: business dining, manufacturing facilities and home meal replacement.
Business dining encompasses corporate dining rooms, manufacturing plant
cafeterias for employees working day shifts, and on-site vending machines
for second and third shifts of those plants.
The Company feels that food service contracting in both the business
and educational segments is far from saturated and the Company believes
that it can compete with even the largest of its competitors because it has
the ability to provide direct personal contact with its clients two or
three times a week, offer flexible menus to meet customer's desires, and
better train its unit managers.
HOMEfood Markets
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In February 1996, the Company developed the HOMEfood Market program as
its version of home meal replacement for employees and building tenants.
Home meal replacement is broadly defined as retail food service that is a
replacement for home-style meals, made from scratch and with the
convenience of fast food, ranging from parts of meals, like salads, to
complete meals. Home-style meals also require some sort of further
processing, such as reheating or finishing, at home.
The Company's program provides a convenient way to assemble fresh,
convenient meals at home which are fully prepared and ready to heat. The
Company believes its program to be unique in that it offers a number of
branded items made offsite, like DeLuca Italian entrees, which are placed
in microwavable containers that can be heated and served quickly. The
Company's opens its "markets" in its customer buildings or with its
corporate client customers between the hours of 4:30 P.M. and 5:30 P.M.
with one attendant operating two carts positioned
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at or near the main lobby of the facility. The menu offers a variety of
branded Italian entrees, whole rotisserie chickens, chicken dinners,
sandwich roll-ups, sandwiches and salad entrees.
The Company's home meal replacement program currently being offered is
in its developmental stage with its primary facility being located at its
largest account, Oxford Health Plans, Inc., in Trumbull, Connecticut. The
Company believes that variety is the primary factor influencing customer
satisfaction and frequency of visits. Accordingly, the Company continually
evaluates the HOMEfood Market menu, including price in an attempt to
maximize the success of the program. The Company will continue to test
market this concept as it believes it meets changing national trends in
food shopping and cooking with the emphasis being on maximum convenience,
cost effectiveness, superior product safety and ease of preparation.
Major Contracts
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The Company maintains a number of large, multi-year contracts among
its' twenty-two separate operations. Some of the larger contracts include
Pitney Bowes Corp., of Stamford, CT (currently 3 locations with over 3,000
employees), Oxford Health Plans, Inc., of White Plains, NY (currently 5
locations with over 4,000 employees), and Ft. James Paper Co., of Norwalk,
CT (with over 1,000 employees).
Near future expansion plans for Oxford Health Plans, Inc., the
Company's largest customer, includes the opening of new facilities in
Tampa, FL (approximately 1,000 employees), Chicago, IL (approximately 800
employees), both within the next ninety to one-hundred twenty days and
Edison, NJ (approximately 900 employees) within the next 30 - 60 days.
Acquisition Strategy
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The Company believes there are significant opportunities to expand its
business through the acquisition of companies in the contract food service
industry, particularly in the education and corporate dining markets. The
Company's Officers and Directors will be responsible for identifying,
pursuing and negotiating potential acquisition candidates and integrating
acquired operations. The Company believes it can integrate such companies
into the Company's management structure and diversified operations
successfully without a significant increase in general and administrative
expenses. In addition, future acquisitions are expected to enable the
Company to lower overhead costs through centralized geographical office
operations and to grow to a size so that it qualifies for bids on larger
volume quality accounts that require asset or purchase programs to meet the
higher standard. There can be no assurance, however, that the Company's
acquisition strategy will be successful.
Competition
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The Company encounters significant competition in each area of the
contract food service market in which it operates. Food service companies
compete for clients on the basis of quality and service standards, local
economic conditions, innovative approaches to food service facilities
design and maximization of sales and price (including the making of loans,
advances and investments in client facilities and equipment). Competition
may result in price reductions, decreased gross margins and loss of market
share. Certain of the Company's competitors
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compete with the Comany on both a national and international basis and have
greater financial and other resources than the Company. In addition,
existing or potential clients may elect to "self operate" their food
service, eliminating the opportunity for the Company to compete for the
account. There can be no assurance that the Company will be able to
compete successfully in the future or that competition will not have a
material adverse effect on the Company's business, financial condition or
results of operations.
Government Regulation
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The Company's business is subject to various governmental regulations
including environmental employment and safety regulations. In addition,
the Company is subject to state health department regulations with yearly
inspections. Food service operations at the various locations are subject
to various sanitation and safety standards and state and local licensing of
the sale of food products. Compliance with these various regulations are
not material; however, there can be no assurance that additional federal
and state legislation or changes in regulatory implementation will not
limit the activities of the Company in the future or increase the cost of
regulatory compliance.
Employees
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As of June 29, 1997, the Company had 140 full time employees including
Geoffrey Ramsey, David Murphy and Anne Ramsey, Officers and Directors of
the Company and 25 part time employees employed for special occasions and
seasonal busy times.
ITEM 2. PROPERTIES.
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The Company leases its office facility under the terms of a month to
month lease agreement with a monthly payment of $1,575. The Company
believes that its existing facilities are adequate to meet its current
needs.
ITEM 3. LEGAL PROCEEDINGS.
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The Company is not a party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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During the fourth quarter of the most recently completed fiscal year,
the Company did not submit any matter to a vote of its shareholders. It is
anticipated that the Company will hold its Annual Meeting of Shareholders
in the Winter of 1997 to elect a new slate of Directors, effectuate a
reverse stock split and amend its Certificate of Incorporation to change
the Company's name to Host America Corp.
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PART II
ITEM 5. MARKET PRICE OF THE COMPANY'S COMMON STOCK AND RELATED SECURITY
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HOLDER MATTERS.
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(a) MARKET INFORMATION.
The Company's shares are not currently trading in any public market
nor has any trading activity occurred during the past five (5) years.
(b) HOLDERS.
The number of record holders of the Company's Common Stock on June 29,
1997 was approximately 109.
(c) DIVIDENDS.
The Company has never paid dividends with respect to its Common Stock
and currently does not have any plans to pay cash dividends in the future
as it intends to retain future earnings to finance the growth of the
business. There are no contractual restrictions on the Company's present or
future ability to pay dividends. Future dividend policy is subject to the
discretion of the Board of Directors and is dependent upon a number of
factors, including future earnings, capital requirements and the financial
condition of the Company.
ITEM 6. MANAGEMENT'S DISCUSSION OF AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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The following discussion of the financial condition and results of
operations for the Company should be read in conjunction with the Company's
financial statements and notes hereto attached hereto.
FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE
When used in this Form 10-KSB, the words "anticipate," "estimate,"
"expect," "project," and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks,
uncertainties and assumptions including the Company failing to generate
projected revenues. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those anticipated, estimated or projected.
GENERAL
Host America is a regional contract food service management company
specializing in providing full restaurant and employee dining, special
event catering, vending and office coffee service, home food replacement
and management of sundry, gift and video convenience shops, corporate
dining rooms and cafeterias, office complexes and manufacturing plants.
This diversity of its services allows the Company's clients to offer their
employees full breakfast and
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lunch availability, multi-level catering and a variety of complimentary
food service options. The Company currently has operations in Connecticut,
New York and New Jersey and, in the near future, the Company intends to
expand to Illinois and Florida.
RESULTS OF OPERATIONS
THE COMPANY - FOR THE YEAR ENDED JUNE 29, 1997 COMPARED TO THE YEAR ENDED
JUNE 30, 1996
Net revenues aggregated $5,971,926 for the year ended June 29, 1997
representing an increase of $1,032,498 or 20.9% over the year ended June
30, 1996. Further, when the net revenues for the year ended June 29, 1997
are compared with the amount of net revenues two years ago of $3,388,677
for fiscal 1995, the increase is $2,583,249 or 76.2%.
The Company has continued an aggressive program of adding new
facilities under its food management programs as well as enhanced revenues
at existing facilities. The Company added four new locations during fiscal
1997 which accounted for approximately $853,000 of the overall increase.
A significant portion of this increase is due to increased penetration with
one customer, Oxford Health ("Oxford"). Oxford has been expanding into
several new geographic locations and has sought the Company's assistance in
establishing its in-house food service for its employees in certain of
those locations. The Company has developed a methodology to implement a
full service food and canteen operation in a timely and responsive manner
to support the expanding needs of this important customer. The remaining
increase of approximately $179,000 results from expansion of food and
canteen items offered for sale as well as continued refining of the mix of
products sold to maximize sales per location.
Cost of sales increased $858,026 for the year ended June 29, 1997 when
compared to the year ended June 30, 1996, representing an increase of
19.2%. Although the increase was trending similar to net revenues, the
increase in cost of sales was less as a percentage than the increase in net
revenues reflecting the favorable impact on margins that the change in
product mix is having on operations.
General and administrative expenses increased $111,818 or 25.3% in
fiscal 1997 when compared to fiscal 1996 primarily related to additional
salaries and related costs incurred to support the additional facilities
taken on during the year.
THE COMPANY - FOR THE YEAR ENDED JUNE 30, 1996 COMPARED TO THE YEAR ENDED
JUNE 30, 1995.
Net revenues increased $1,550,751 or 45.7% for the year ended June 30,
1996 in comparison to the year ended June 30, 1995. The increase resulted
from the net addition of three (3) new locations during the year in which
the Company was successful in winning contracts to manage food service and
canteen primarily in commercial facilities. The Company has been seeking
new venues in food service for expanding its market base of operations. In
keeping with its operational objectives, the Company successfully
negotiated and secured a multi-year contract to provide "up-scale" special
event and catering services to the "Laurel View Country Club," located in
Hamden, Connecticut. This account has had a very positive impact on both
the public and corporate image of the Company.
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Cost of goods sold increased $1,454,477 in the year ended June 30,
1996 in comparison to the same period in 1995. This increase represented
a 48.4% increase which was greater than the percentage increase in sales.
Food and supply purchases were higher than normal due to initiating
contracts with several new vendors and not having the opportunity to
arrange longer-term supply agreements. Further, overhead expenses reflect
higher levels than expected due to the volume on new locations and the
extra start-up expenses associated with some of those locations.
General and administrative expenses increased $45,837 or only 11.6%
when compared to expenses of the same period in the prior fiscal year
reflecting a stable cost environment for these expenses in a period of
rapid expansion. This period of stable general and administrative expenses
resulted from rigid cost controls implemented by management to partially
offset the severe pressure on overhead expenses due to expansion of
facilities under management.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity as evidenced by its current ratio has
continued to improve. The current ratio at June 29, 1997, June 30, 1996
and 1995 was .929:1, .808:1 and .680:1, respectively. This improving
condition is to a great extend due to increasing profitability, however,
management of other balance sheet items has also contributed to the
improvement.
Cash flows from operating activities in fiscal 1997 amounted to
$184,610. The positive cash flow was primarily due to net income ($86,543)
and non-cash expenditures such as depreciation and amortization of
($82,299). The remainder, $15,768 resulted from management of other
current asset and liability items during the period. Cash flows from
investing activities for the year ended June 29, 1997 reflected an outflow
of $68,543 reflecting a net investment in new equipment to support the
expansion to new facilities.
Cash flows from financing activities also resulted in a net outflow of
cash of $48,692 representing a net repayment of debt when considering the
additional financing and repayment of existing notes.
The net effect of all these events resulted in increasing cash by
$67,375 for the year and achieving an ending cash balance of $140,121 at
June 29, 1997.
Net cash flows for the year ending June 30, 1996 resulted in a
negative change in cash for the year of $37,917. Although operating
activities contributed $34,139 due principally to net earnings for the
year, purchases of equipment to support the rapid expansion of facilities
under management amounted to $110,259 and exceeded the net financing
activities of the Company for the same period of $38,203.
SEASONABILITY
The Company's business is, in part, seasonal in nature. Many of the
Company's corporate customers are slower in the summer months due to
vacation schedules of their employees and shift reductions. Special events
catering tend to peak at various times of the year depending on corporate
meetings, holiday parties and the frequency of weddings and special
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events. Among other things, the Company adjusts its labor staffing and
inventories during these periods.
COMMITMENTS
The Company leases its office facility under the terms of a month to
month lease agreement with a monthly payment of $1,575.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
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The Company's audited financial statements are included and follow at
Item 13 of this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
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FINANCIAL DISCLOSURES.
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Not Applicable.
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
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(a)(b) IDENTIFICATION OF DIRECTORS, EXECUTIVE OFFICERS AND
SIGNIFICANT EMPLOYEES.
The following sets forth certain information with respect to the
officers and directors of the Company.
Tenure as
Name Age Position Officer or Director
- ---- --- -------- -------------------
Geoffrey W. Ramsey 47 President, Treasurer March, 1986 to present
and a Director
David J. Murphy 40 Vice President and March, 1986 to present
a Director
Anne D. Ramsey 50 Secretary and March, 1986 to present
a Director
Thomas P. Eagan, Jr. 54 Director November, 1988 to present
_____________________
All Directors hold office until the next annual meeting of
shareholders or until their successors have been duly elected and
qualified. Executive officers of the Company are appointed by and serve at
the discretion of the Board of Directors. The Board of Directors has
appointed a compensation committee and an audit committee for the upcoming
fiscal year.
GEOFFREY W. RAMSEY has been the President, Treasurer and a Director of
the Company since March, 1986. Mr. Ramsey is the Company's co-founder and
current President and has more than 25 years experience in the food service
industry. Currently, he is responsible for the day-to-day management of
all marketing and sales activities for the Company. Since its inception,
he has successfully negotiated and opened more than eighteen self-sustaining
and profitable business accounts. He has secured major business
and industrial accounts from national competitors like Marriott, ARA,
Canteen, Service America and other competitors throughout Connecticut and
New York. He has developed a comprehensive sales program for manual dining
operations, vending and other ancillary services. Prior to 1986, Mr.
Ramsey operated a number of diverse food service operations. These
included the University of New Haven, Southern Connecticut State
University, Choate School and others. Mr. Ramsey was Personnel and
Training Specialist for ARA Services and has a B.S. degree from the
University of New Haven and a AAS degree from the Culinary Institute of
America.
DAVID J. MURPHY has been Vice President and a Director of the Company
since March, 1986. Mr. Murphy is the Company's co-founder, Chief Financial
Officer and Executive Vice President and has more than 20 years experience
in the industry. Since its inception, he has successfully hired employees,
opened and operated more than 18 business dining cafeterias and
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vending services. In addition, he has successfully implemented a
computerized purchasing and inventory tracing system for the main warehouse
and satellite units. Further, he established vending, office coffee and
water service for 35 site locations. Prior to 1986, Mr. Murphy served as
the Food Service Director of Greater Hartford Community College, Hartford,
Connecticut. From 1984 to 1986 he was the Operations Manager for Campus
Dining at the University of New Haven and served as Adjunct Professor in
the Hotel, Restaurant and Tourism School. From 1983 to 1984 he was
involved in operations at Hamilton College, Clinton, New York and Fairleigh
Dickinson University, Madison, New Jersey. Mr. Murphy received his B.S.
degree in International Business from Quinnipiac College, Hamden,
Connecticut, and a certificate in Exporting Marketing from the same
college. He has also completed post graduate courses in business and is a
member of the National Restaurant Association and the National Association
of College and University Food Services and is listed in 1986-1987 Director
of Hospitality Educators.
ANNE RAMSEY has been the Secretary and a Director of the Company since
March, 1986. Along with her duties as Corporate Secretary, Ms. Ramsey
serves as a District Supervisor and is responsible for seven Host America
facilities in Connecticut. Ms. Ramsey developed and implemented many of
the Company's operational control systems and successfully computerized the
sales system. Prior to 1986, she was Vice President of Operations for
Comstock Leasing, Inc. in San Mateio, California from 1984 to 1985. From
1980 to 1984, she was Operations Manager for Comstock Leasing.
THOMAS P. EAGAN, JR. has been a Director of the Company since
November, 1988. He has been employed as a sales representative with
Eastern Bag & Paper Co., Inc., Bridgeport, Connecticut since May, 1979.
From February, 1972 to May 1979, Mr. Eagan owned and operated Purifier
Systems, Inc., Hamden, Connecticut, a wholesale paper distributor. From
January 1972 to February, 1973, Mr. Eagan was Regional Manager for Piedmont
Capital Corp., a mutual fund life insurance underwriter located in
Woodbridge, Connecticut. In this capacity, Mr. Eagan supervised Piedmont's
Financial Planners and District Managers in southern Connecticut. From
November, 1969 to January, 1972, Mr. Eagan was the New England Regional
Manager for Cornerstone Financial Services, a nationwide sales organization
specializing in financial planning located in Woodbridge, Connecticut. Mr.
Eagan supervised Cornerstone's offices throughout the New England Region
and was responsible for the recruitment of Cornerstone's District Managers.
Mr. Eagan was Division Manager for Fairfield County, Connecticut for
Founders Mutual Depositor Corp. from September, 1967 to October, 1969.
From September, 1966 to September, 1967, Mr. Eagan was sales representative
for Waddell & Reed, Hamden, Connecticut, a life insurance mutual fund
underwriter. Mr. Eagan studied Business Administration at Quinnipiac
College, Hamden, Connecticut.
LIMITED LIABILITY AND INDEMNIFICATION OF DIRECTORS
In accordance with the Delaware General Corporation Law, the Company
has included a provision in its Articles of Incorporation to limit the
personal liability of its directors for violations of their fiduciary duty.
The provision eliminates directors liability to the Company or its
stockholders for monetary damages, except (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for unlawful payment of
-13-
<PAGE>
dividends or unlawful stock purchases or redemptions, or (iv) for any
transaction from which a director derived an improper personal benefit.
Additionally, in accordance with the Delaware General Corporation Law,
the Company's Articles of Incorporation and Bylaws indemnify its directors
against liability which they may incur in their capacity as a director
against judgments, penalties, fines, settlements and reasonable expenses
incurred in connection with threatened, pending or completed civil,
criminal, administrative, or investigative proceedings by reason of the
fact that he is or was a director, officer, employee, fiduciary or agent of
the Company if such director acted in good faith and in a manner reasonably
believed to be in the best interests of the Company.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
(c) FAMILY RELATIONSHIPS.
There are no family relationships among any of the Company's officers
and directors except Mr. Geoffrey Ramsey and Anne Ramsey are brother and
sister.
(d) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
No officer, director, significant employee, promoter or control person
of the Company has been involved in any event of the type described in Item
401(d) of Regulation S-B during the past five years.
(e) COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on the Company's review of the
copies of such forms received by it during the fiscal years ended June 30,
1996 and June 29, 1997, and written representations that no other reports
were required, the Company believes that except as described below each
person who, at any time during such fiscal year, was a director, officer or
beneficial owner of more than 10% of the Company's Common Stock complied
with all Section 16(a) filing requirements during such fiscal year or prior
fiscal years.
-14-
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------
(a)(b) SUMMARY COMPENSATION TABLE.
The following table sets forth all compensation paid or accrued by the
Company for services of Geoffrey W. Ramsey, the Company's President,
Treasurer and Chief Executive Officer, for the fiscal years ended June 30,
1995, 1996 and June 29, 1997. No Officer other than Mr. Ramsey received
cash compensation from the Company in excess of $100,000 during such fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
-----------------------------------------------------------------------------------------
Other All
Name Annual Restricted LTIP Other
and Compen- Stock Options/ Pay- Compen-
Principal Salary Bonus sation Award(s) SARs outs sation
Position Year (1) ($) ($) ($) ($) (#) ($) ($)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Geoffrey W. Ramsey 1997 $ 65,000 $ 0 $ 0 N/A -0- N/A $ 0
President and Chief 1996 $ 56,000 $ 0 $ 0 -- -0- -- $ 0
Executive Officer 1995 $ 48,000 $ 0 $ 0 -- -0- -- $ 0
</TABLE>
- -----------------------------------
(1) Periods presented are for the years ended June 29, 1997 and June 30,
1996 and 1995.
COMPENSATION OF DIRECTORS
The non-employee directors of the Company will receive $250 for each
meeting they attend plus expenses. Directors may also receive options as
designated by the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee for the fiscal year ended June
29, 1997 consisted of Geoffrey W. Ramsey and Thomas P. Eagan. During the
fiscal year ended June 29, 1997, Messrs. Ramsey and Eagan were Directors of
the Company.
(c) OPTION/SAR GRANTS TABLE.
OPTIONS GRANTED
The following table sets forth the options that have been granted to
Geoffrey W. Ramsey, the Company's President, Treasurer and Chief Executive
Officer, listed in the Executive Compensation Table.
-15-
<PAGE>
OPTION/SAR GRANTS
-----------------
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------
% of Total
Options/ Options/SARs Exercise
SARs Granted to or Base
Granted Employees Price Expiration
Name (#) in Fiscal Year ($/Share) Date
- ----------- -------- -------------- --------- ----------
Geoffrey W. Ramsey (1) 0 N/A N/A N/A
President and Chief
Executive Officer
- -----------------------
(1) Mr. Ramsey was granted 500,000 options to purchase 500,000 shares of
Common Stock in August 1997. The options are for a ten year period
and are exercisable at $4.00 per share.
(d) AGGREGATED OPTION/SAR EXERCISE AND FISCAL YEAR-END OPTION/SAR
VALUE TABLE.
Not applicable.
(e) TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE.
Not applicable.
(f) COMPENSATION OF DIRECTORS.
In August 1997, the Board of Directors granted 500,000 options to
Geoffrey W. Ramsey and David J. Murphy and 100,000 options to Anne D.
Ramsey and Thomas P. Eagan, Jr. The options are exercisable for a ten (10)
year term at any time for $4.00 per option. The holders of the options
have the right to request the options be registered for sale after two
years from the date of their initial grant.
(g) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS.
It is anticipated that the Board of Directors will authorize
employment agreements that will be put in place with Messrs. Ramsey and
Murphy, founders and Officers of the Company, on terms to be negotiated.
The Board believes the full time and continuing employment of these key
individuals are essential to the continued growth of the Company.
(h) REPORTING ON REPRICING OF OPTIONS/SARS.
Not Applicable.
-16-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------
(a)(b) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth, as of June 29, 1997 the ownership of
the Company's Common Stock by (i) each Director of the Company, (ii) all
Executive Officers and Directors of the Company as a group, and (iii) all
persons known by the Company to own more than 5% of the Company's Common
Stock.
Beneficial Ownership (1)
-------------------
Name and Address Shares Percent
- ---------------- ------ -------
Geoffrey W. Ramsey 2,250,000 (2) 17.3%
2 Broadway
Hamden, CT 06518-2697
David J. Murphy 1,870,000 (2) 14.3%
2 Broadway
Hamden, CT 06518-2697
Anne Ramsey 40,000 *%
2 Broadway
Hamden, CT 06518-2697
Thomas P. and Irene 1,100,000 (3) 8.4%
Eagan
11 Woodhouse Avenue
Northford, CT 06472
Debra D. Ramsey 2,250,000 (4) 17.3%
2 Broadway
Hamden, CT 06518-2697
All Executive Officers and
Directors as a group (5 persons) 5,260,000 40.3%
- ---------------------------------
* Less than 1%
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934. Unless otherwise stated below, each such person has sole voting
and investment power with respect to all such shares. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage
owned by such person, but are not deemed outstanding for the purpose
of calculating the number and percentage owned by each other person
listed.
(2) Has sole voting and investment power with respect to the shares shown.
(3) Held in joint tenancy.
(4) Mrs. Ramsey may be deemed to be the beneficial owner of the 2,250,000
shares held in the name of her husband, Geoffrey W. Ramsey.
-17-
<PAGE>
(c) CHANGES IN CONTROL.
There is no arrangement or understanding known to the Company,
including any pledge by any person of securities of the Company, the
operation of which may at a subsequent date result in a change in control
of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
(a)(b) TRANSACTIONS WITH MANAGEMENT AND OTHERS.
Not applicable.
(c) TRANSACTIONS WITH PROMOTERS.
See (a) (b) above.
-18-
<PAGE>
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- ------------------------------------------------------------------------
(a) The following documents are filed as a part of this Form 10-KSB:
1. Financial Statements of University Dining Services, Inc.
Independent Auditor's Report
Balance Sheets - June 29, 1997 and June 30, 1996
Statements of Income and Deficit - Year ended June 29, 1997
and year ended June 30, 1996
Statements of Cash Flows - Year ended June 29, 1997 and year
ended June 30, 1996
Notes to Financial Statements
4. Exhibits required to be filed are listed below and, except where
incorporated by reference, immediately follow the Financial Statements.
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) During the last quarter of the period covered by this report the
Company did not file any current Reports on Form 8-K.
(c) Required exhibits are attached hereto and are listed in Item
13(a)(3) of this Report.
(d) Required financial statement schedules are listed and included in
Item 13(a)(2) of this Report.
-19-
<PAGE>
UNIVERSITY DINING SERVICES,
INC.
FINANCIAL STATEMENTS
AS OF JUNE 29, 1997 AND JUNE 30, 1996
TOGETHER WITH
INDEPENDENT AUDITORS' REPORT
<PAGE>
UNIVERSITY DINING SERVICES, INC.
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Income and Deficit 3
Statements of Cash Flows 4
Notes to Financial Statements 5
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
University Dining Services, Inc.
We have audited the accompanying balance sheets of University Dining
Services, Inc. (the Company) as of June 29, 1997 and June 30, 1996, and the
related statements of income and deficit, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits
provide 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 University Dining
Services, Inc. as of June 29, 1997 and June 30, 1996, and the results of
its operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles
/s/ DISANTO BERTOLINE & COMPANY, P.C.
Glastonbury, Connecticut
November 11, 1997
-1-
<PAGE>
UNIVERSITY DINING SERVICES, INC.
BALANCE SHEETS
JUNE 29, 1997 AND JUNE 30, 1996
ASSETS
1997 1996
---------- ----------
CURRENT ASSETS
Cash $ 140,121 $ 72,746
Accounts receivable, net of allowance
for doubtful accounts of $10,000
and $2,800 at June 29, 1997 and
June 30, 1996, respectively 331,263 232,369
Inventory 173,759 165,377
Prepaid expenses 73,082 52,499
---------- ----------
Total current assets 718,225 522,991
PROPERTY AND EQUIPMENT, net 234,133 248,200
OTHER ASSETS 30,000 43,832
---------- ----------
$ 982,358 $ 815,023
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 85,643 $ 87,954
Accounts payable 580,190 436,892
Accrued expenses 96,393 110,207
Note payable to officer/director 10,641 12,100
---------- ----------
Total current liabilities 772,867 647,153
LONG-TERM DEBT, less current portion
included above 80,770 125,692
COMMITMENTS - -
STOCKHOLDERS' EQUITY
Common stock, $.001 par value,
100,000,000 shares authorized,
13,000,000 shares issued and outstanding 13,000 13,000
Additional paid-in capital 232,088 232,088
Deficit (116,367) (202,910)
---------- ----------
Total stockholders' equity 128,721 42,178
---------- ----------
$ 982,358 $ 815,023
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-2-
<PAGE>
UNIVERSITY DINING SERVICES, INC.
STATEMENTS OF INCOME AND DEFICIT
FOR THE YEARS ENDED JUNE 29, 1997 AND JUNE 30, 1996
1997 1996
---------- ----------
NET REVENUES $5,971,926 $ 4,939,428
COST OF GOODS SOLD 5,320,361 4,462,335
---------- ----------
Gross profit 651,565 477,093
GENERAL AND ADMINISTRATIVE EXPENSES 553,367 441,549
---------- ----------
Income from operations 98,198 35,544
OTHER INCOME (EXPENSE)
Miscellaneous income 18,924 30,580
Interest expense (18,079) (23,000)
---------- ----------
845 7,580
---------- ----------
Income before provision for income
taxes 99,043 43,124
PROVISION FOR INCOME TAXES 12,500 11,000
---------- ----------
Net income 86,543 32,124
DEFICIT, beginning of year (202,910) (235,034)
---------- ----------
DEFICIT, end of year $ (116,367) $ (202,910)
========== ==========
NET INCOME PER SHARE NIL NIL
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 13,000,000 13,000,000
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-3-
<PAGE>
UNIVERSITY DINING SERVICES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 29, 1997 AND JUNE 30, 1996
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 86,543 $ 32,124
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization 82,299 75,643
Gain on sale of property and
equipment 311 -
Changes in operating assets and
liabilities:
Increase in accounts payable 143,298 107,690
Decrease (increase) in other
assets 13,832 (309)
Increase in inventory (8,382) (43,432)
(Decrease) increase in accrued
expenses (13,814) 26,798
Increase in prepaid expenses (20,583) (31,506)
Increase in accounts receivable (98,894) (132,869)
---------- ----------
Net cash provided by operating
activities 184,610 34,139
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment 4,088 -
Purchases of property and equipment (72,631) (110,259)
---------- ----------
Net cash used in investing
activities (68,543) (110,259)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 43,041 97,000
Principal payments on note payable
to officer/director (1,459) (3,900)
Principal payments on long-term debt (90,274) 8,914
---------- ----------
Net cash (used in) provided by
financing activities (48,692) 102,014
---------- ----------
NET INCREASE (DECREASE) IN CASH 67,375 25,894
CASH, beginning of year 72,746 110,663
---------- ----------
CASH, end of year $ 140,121 $ 136,557
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 18,079 $ 23,000
Income taxes 4,200 10,887
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
-4-
<PAGE>
UNIVERSITY DINING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 29, 1997 AND JUNE 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
University Dining Services, Inc. (the Company) was incorporated
as a Delaware corporation on February 6, 1986. The Company is a
contract food management organization which specializes in
providing full service restaurant and employee dining, special
event catering, vending and office coffee service, home food
replacement, and management of sundry, gift and video shops to
business and industry accounts primarily located in Connecticut.
Approximately 90% of sales are directly related to the management
of corporate restaurants and catering, with the remaining 10% of
sales attributable to vending operations.
FISCAL YEAR
The Company's fiscal year ends on the last Sunday in June.
Fiscal years in the two-year period ended June 29, 1997, each
contain fifty-two weeks.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets
and liabilities as of the date of the financial statements, and
the revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CASH EQUIVALENTS
For the purpose of the statement of cash flows the Company
defines cash equivalents as highly liquid instruments with an
original maturity of three months or less. The Company had no
cash equivalents at June 29, 1997 and June 30, 1996.
INVENTORY
Inventory consists primarily of food supplies and is stated at
the lower of cost or market, with cost determined on a first-in,
first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Upon retirement or
disposition of depreciable properties, the cost and related
accumulated depreciation are removed from the accounts and any
resulting gain or loss is reflected in the results of operations.
Depreciation is computed by applying the straight-line method
over the estimated useful lives of the related assets, which
range from three to ten years.
-5-
<PAGE>
UNIVERSITY DINING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 29, 1997 AND JUNE 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT (CONTINUED)
Maintenance, repairs and minor renewals are charged to operations
as incurred. Expenditures which substantially increase the
useful lives of the related assets are capitalized.
INCOME TAXES
The Company recognizes deferred tax liabilities and assets for
the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred tax
liabilities and assets are determined based on the differences
between the financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
NOTE 2 - FINANCIAL INSTRUMENTS
CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and
accounts receivable.
* Cash - The Company places its cash and temporary cash
investments with high credit quality institutions. At times
such investments may be in excess of the FDIC insurance
limit.
* Accounts receivable - The Company grants credit to its
customers, substantially all of whom provide full service
restaurant and employee dining services. Three major
customers comprise 78% of accounts receivable as of June 29,
1997 and two major customers comprise 66% of accounts
receivable at June 30, 1996. Net revenues from individual
customers which exceeded ten percent of total net revenues
during the years ended June 29, 1997 and June 30, 1996
aggregated 49% ( 2 customers) and 67% (3 customers),
respectively. The Company reviews a customer's credit
history before extending credit and establishes an allowance
for doubtful accounts based upon factors surrounding the
credit risk of specific customers, historical trends, and
other information. Such losses have been within
management's expectations.
-6-
<PAGE>
UNIVERSITY DINING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 29, 1997 AND JUNE 30, 1996
NOTE 2 - FINANCIAL INSTRUMENTS (CONTINUED)
Statement of Financial Accounting Standards (SFAS) No. 107, FAIR
VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of the fair
value of financial instruments for which the determination of
fair value is practicable. SFAS No. 107 defines the fair value
of a financial instrument as the amount at which the instrument
could be exchanged in a current transaction between willing
parties.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments
approximates their fair value as outlined below:
* Cash, accounts receivable, accounts payable and accrued
expenses - The carrying amounts approximate their fair value
because of the short maturity of those instruments.
* Note payable to officer/director - It is not practicable to
estimate the fair value of this financial instrument because
no formal agreement exists for repayment of the balance.
* Long-term debt - The carrying amount approximates fair value
as the interest rates on the various notes approximate the
Company's estimated incremental borrowing rate.
The Company's financial instruments are held for other than
trading purposes.
NOTE 3 - PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
1997 1996
---------- ----------
Equipment and fixtures $623,906 $560,001
Vehicles 124,263 121,440
Leasehold improvements 7,089 7,089
-------- --------
755,258 688,530
Less: accumulated depreciation
and amortization 521,125 440,330
-------- --------
$234,133 $248,200
======== ========
Depreciation and amortization expense for the years ended June
29, 1997 and June 30, 1996 totaled $82,299 and $75,643,
respectively.
-7-
<PAGE>
UNIVERSITY DINING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 29, 1997 AND JUNE 30, 1996
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following as of June 29, 1997 and
June 30, 1996:
1997 1996
---------- ----------
Various equipment notes
payable at interest rates
ranging from 10% to 10.25%,
maturing through November,
2000. $115,000 $125,614
Various vehicle notes
payable at interest rates
ranging from 8.75% to 10.5%,
maturing through January,
2000. 46,397 63,279
Note payable to vendor at an
interest rate of 18%, payable
in weekly installments of
principal and interest of $500,
final payment due November,
1997. 5,016 24,753
-------- --------
166,413 213,646
Less: current portion 85,643 87,954
-------- --------
$ 80,770 $125,692
======== ========
Maturities of long-term debt for each of the fiscal years
succeeding June 29, 1997 are as follows:
1998 $ 85,643
1999 64,266
2000 16,504
--------
$166,413
========
NOTE 5 - NOTE PAYABLE TO OFFICER/DIRECTOR
The Company has a note payable to an officer/director. Principal
and interest is payable monthly based on a twenty year
amortization schedule. However, the note is due upon demand.
Interest rates range from 1% to 1.5% over the bank's prime
lending rate (9.5% to 10% at June 29, 1997).
-8-
<PAGE>
UNIVERSITY DINING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 29, 1997 AND JUNE 30, 1996
NOTE 6 - INCOME TAXES
The provision for income taxes consists of the following:
1997 1996
---------- ----------
Current
Federal $ - $ 1,200
State 4,200 4,600
Deferred 8,300 5,200
-------- --------
$ 12,500 $ 11,000
======== ========
The provision for income taxes differs from the amount computed
by applying the statutory rate of 34% for the fiscal years ended
June 29, 1997 and June 30, 1996. The principal reasons for this
difference are listed in the following table:
1997 1996
---------- ----------
Net operating loss - federal $ 25,500 $ 12,000
Net operating loss - state 8,400 16,400
Allowance for doubtful
accounts (2,800) -
Valuation allowance (22,800) (23,200)
-------- --------
$ 8,300 $ 5,200
======== ========
The components of the deferred tax asset account as of June 29,
1997 and June 30, 1996 are as follows:
1997 1996
---------- ----------
Deferred tax assets:
Net operating loss -
federal $ 33,000 $ 58,500
Allowance for doubtful
accounts 2,800 -
Net operating loss - state - 8,400
Valuation allowance (5,800) (28,600)
-------- --------
Total deferred tax asset $ 30,000 $ 38,300
======== ========
-9-
<PAGE>
UNIVERSITY DINING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 29, 1997 AND JUNE 30, 1996
NOTE 7 - OPERATING LEASE COMMITMENTS
The Company leases its office facility under the terms of a three
year lease agreement expiring October, 1997 with a monthly
payment of $1,575. Rent expense charged to operations under this
and preceding leases aggregated $18,900 for the years ended June
29, 1997 and June 30, 1996.
The Company is also leasing various equipment under certain other
operating leases which expire within one to two years. In
certain cases, the cost of leasing the equipment is billed to
customers in connection with the Company's cafeteria services.
Rent expense for these operating leases for equipment aggregated
$5,909 and $7,518 for the years ended June 29, 1997 and June 30,
1996, respectively.
Future minimum lease payments on all operating leases for each of
the fiscal years succeeding June 29, 1997 are as follows:
1998 $ 38,585
1999 35,850
2000 24,000
2001 16,000
--------
$114,435
========
NOTE 8 - ADVERTISING
The Company expenses the production costs of advertising the
first time the advertising takes place. Advertising expense was
$17,571 and $18,737 for the years ended June 29, 1997 and June
30, 1996, respectively.
NOTE 9 - SUBSEQUENT EVENT
On August 10, 1997, the Company granted stock purchase options to
certain officers and directors of the Company extending the right
to purchase up to 1,200,000 shares of the Company's common stock
at an exercise price of four dollars per share subject to
provisions as set forth in the agreements. The stock purchase
options expire ten years from the date of the grant.
-10-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: January 13, 1998 UNIVERSITY DINING SERVICES, INC.
By /s/ GEOFFREY W. RAMSEY
--------------------------------
Geoffrey W. Ramsey, President,
Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ GEOFFREY W. RAMSEY President, Treasurer and January 13, 1998
- ---------------------------- Director
Geoffrey W. Ramsey
/s/ DAVID J. MURPHY Vice President and January 13, 1998
- --------------------------- Director
David J. Murphy
/s/ ANNE D. RAMSEY Secretary and Director January 13, 1998
- ---------------------------
Anne D. Ramsey
/s/ THOMAS P. EAGAN, JR. Director January 13, 1998
- ---------------------------
Thomas P. Eagan, Jr.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-29-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-29-1997
<CASH> 140
<SECURITIES> 0
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<PP&E> 234
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0
0
<COMMON> 13
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</TABLE>