FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1999 Commission File Number 33-11170-B
HOST AMERICA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1168423
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2 Broadway Hamden, Connecticut 06518-2697
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (203) 248-4100
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(Former name, former address and former fiscal year, if changed since last
report.)
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Indicate by check whether the registrant
(1) has filed all reports required to be
files 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 Yes: X
required to file such report(s), and (2) -----
has been subject to such filing No:
requirements for the past 90 days. -----
Indicate the number of shares outstanding
of each of the issuer's classes of common
stock, as of the close of the period
covered by this report.
Number of shares outstanding at
Class September 30, 1999
Common Stock, $.001 par value 1,130,000 shares
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HOST AMERICA CORPORATION
SEPTEMBER 30, 1999 FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets - September 30, 1999 (Unaudited) and
June 25, 1999 (Audited) 3
Condensed Statements of Operations -three months
ended September 30, 1999 (Unaudited) and
September 27, 1998 (Unaudited) 4
Condensed Statements of Cash Flows - three months
ended September 30, 1999 (Unaudited) and
September 27, 1998 (Unaudited) 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
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HOST AMERICA CORPORATION
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, 1999 June 25, 1999
(Unaudited) (Audited)
------------------ -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,471,710 $ 2,590,515
Accounts receivable, net of allowance for doubtful
accounts of $21,000 as of September 30, 1999
and June 25, 1999, respectively 442,669 447,191
Inventory 242,744 221,704
Prepaid expenses and other 154,321 137,787
------------ ------------
Total current assets 3,311,444 3,397,197
PROPERTY AND EQUIPMENT, net 609,498 516,363
------------ ------------
$ 3,920,942 $ 3,913,560
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 184,922 $ 126,601
Accounts payable 500,847 362,527
Accrued expenses 126,144 116,450
------------ ------------
Total current liabilities 811,913 605,578
LONG-TERM DEBT, less current portion included above 219,075 219,075
COMMITMENTS - -
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 20,000,000 shares
authorized, 700,000 shares issued and outstanding 700 700
Common stock, $.001 par value, 80,000,000 shares
authorized, 1,130,000 shares issued
and outstanding as of September 30, 1999 and
September 27, 1998, respectively 1,130 1,130
Additional paid-in capital 7,526,175 7,526,175
Deficit (4,638,051) (4,439,098)
------------ ------------
Total stockholders' equity 2,889,954 3,088,907
------------ ------------
$ 3,920,942 $ 3,913,560
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
FINANCIAL STATEMENTS.
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<PAGE>
HOST AMERICA CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months ended
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September 30, 1999 September 27, 1998
(Unaudited) (Unaudited)
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<S> <C> <C>
NET REVENUES $ 2,653,255 $ 1,957,540
COST OF GOODS SOLD 2,390,347 1,653,520
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Gross profit 262,908 304,020
GENERAL AND ADMINISTRATIVE EXPENSES 489,942 319,400
------------ ------------
Loss from operations (227,034) (15,380)
OTHER INCOME 28,081 21,440
------------ ------------
Net (loss) income $ (198,953) $ 6,060
============ ============
NET (LOSS) INCOME PER COMMON SHARE $ (0.18) $ 0.01
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
FINANCIAL STATEMENTS.
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<PAGE>
HOST AMERICA CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months ended
---------------------------------------
September 30, 1999 September 27, 1998
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (198,953) $ 6,060
Adjustments to reconcile net (loss) income to net
cash used in operating activities 51,333 25,908
Changes in operating assets and liabilities 114,962 (952,197)
------------ ------------
Net cash used in operating activities (32,658) (920,229)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (144,468) (52,942)
------------ ------------
Net cash used in investing activities (144,468) (52,942)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from demand note payable and long
term debt 89,971 -
Proceeds from issuance of common stock and
warrants, net - 3,759,433
Decrease in deferred offering costs - 486,029
Decrease in due to officer/director - (17,041)
Principal payments on long-term debt (31,650) (115,968)
------------ ------------
Net cash provided by financing activities 58,321 4,112,453
------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (118,805) 3,139,282
CASH AND CASH EQUIVALENTS, beginning of period 2,590,515 49,529
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 2,471,710 $ 3,188,811
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
FINANCIAL STATEMENTS.
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<PAGE>
HOST AMERICA CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - RECENTLY ISSUED ACCOUNTING STANDARDS
EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share". The objective of
SFAS No. 128 is to simplify the standards for computing earnings
per share (EPS) and replaces the presentation of primary and
fully-diluted EPS with a presentation of basic and diluted EPS.
Implementation of SFAS No. 128 did not have any impact on the
Company's calculation of EPS.
Net income per common share was computed based upon 1,130,000 and
877,253 weighted average shares outstanding during the three
months ended September 30, 1999 and September 27, 1998,
respectively. Dilutive earnings per share was not presented as
the potentially dilutive warrants, convertible preferred stock
and stock purchase options are anti-dilutive.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which establishes a fair value based method of
accounting for an employee stock option or similar equity
instrument. SFAS No. 123 gives entities a choice of recognizing
related compensation expense by adopting the new fair value
method or to continue to measure compensation using the intrinsic
value approach under Accounting Principles Board (APB) Opinion
No. 25, the former standard. If the former standard for
measurement is elected, SFAS No. 123 requires supplemental
disclosure to present the effects of using the new measurement
criteria. The Company intends to continue using the measurement
prescribed by APB Opinion No. 25, and accordingly, this
pronouncement will not affect the Company's financial position or
results of operations.
SEGMENT INFORMATION
Statement of Financial Accounting Standards (SFAS) No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, was issued effective for fiscal years ending after
December 15, 1998. The Company's primary operating segments are
the management of corporate restaurants and catering and vending
operations. The vending operations do not meet the quantitative
thresholds of SFAS No. 131 and therefore, the Company has not
adopted the reporting requirements of this Statement.
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<PAGE>
HOST AMERICA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company opened three new accounts in September, 1999, for Stanley
Products. It is anticipated that these accounts will generate
approximately $850,000 in annual sales. One account is located in East
Greenwich, Rhode Island and the other two accounts are in New Britain,
Connecticut. In addition to providing corporate dining, catering and
coffee snack cart services, the Company is responsible for Stanley's office
coffee and vending services.
In August, 1999, the Company determined it would be best to terminate the
contracts at the Twin Rinks and Cummings Center. The Company spent
considerable time and resources attempting to restructure these accounts,
however it was determined that it would be more advantageous to focus the
Company's energy on the core business.
The Company has incurred significant marketing expenses to showcase the
Company in proposals to Fortune 500 Companies. The material is also being
used for its merger and acquisition program.
The Company is in the process of finalizing a contract with the New York
City Housing Authority. An early December, 1999, opening date is
anticipated. Proposed annual revenues are estimated at $1.8 million.
RESULTS OF OPERATIONS
Net revenues for the three months ended September 30, 1999 were $2,653,255
as compared to $1,957,540 for the three months ended September 27, 1998.
Accordingly, revenues increased $695,715 or approximately 36%. The increase
is primarily due to the aggressive program of adding new facilities and
maximizing revenue from existing facilities.
Cost of goods sold increased $736,827 for the three months ended September
30, 1999 when compared to the three months ended September 27, 1998. This
increase can be attributed to the developmental costs involved in opening
the Company's new accounts including marketing, inventory, and other start-up
expenses. The Company also absorbed significant one-time charges to the
first quarter in relation to the termination of the contracts for the Twin
Rinks and the Cummings Center.
The Company incurred a net loss of $198,953 for the three months ended
September 30, 1999 as compared to net income of $6,060 for the three months
ended September 27, 1998. The losses in 1999 are due primarily to the
expenses incurred in the opening of the Company's new accounts. The
expenses related to the new accounts included hiring and training expenses
for new full-time employees, and transportation, overnight expenses, rental
expenses, and smallware costs.
LIQUIDITY AND CAPITAL RESOURCES
The company's liquidity as evidenced by its current ratio has declined.
The current ratio at September 30, 1999 and June 25, 1999 was 4.08:1 and
5.61:1, respectively. This decline is due mainly to the use of cash and an
increase in financing to support the Company's rapid expansion.
-7-
<PAGE>
HOST AMERICA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Net cash flows for the three month period in 1999 resulted in a decrease in
cash and cash equivalents of $118,805. Operating activities resulted in a
cash outflow during the period of $32,658 primarily due to the net loss for
the period. Purchases of equipment to support the rapid expansion of
facilities under management amounted to $144,468 and the Company's
financing activities resulted in a cash inflow of $58,321 due primarily to
proceeds from financing sources.
Net cash flows for the three months ended September 27, 1998 resulted in an
increase in cash and cash equivalents for the quarter of $3,139,282.
Operating activities resulted in a cash outflow during the period of
$920,229 primarily relating to the payment of liabilities upon receiving
the proceeds of the public offering. Purchases of property and equipment
to support the rapid expansion of facilities under management amounted to
$52,942 and the Company's financing activities resulted in cash inflow of
$4,112,453 due primarily to the receipt of proceeds from the public offering.
-8-
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings NONE
Item 2 - Change in Securities NONE
Item 3 - Defaults Upon Senior Securities NONE
Item 4 - Submission of Matters to a Vote of Security Holders
NONE
Item 5 - Other Information NONE
Item 6 - Exhibits and Reports on Form 8-K NONE
-9-
<PAGE>
SIGNATURES
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Pursuant to the requirements of The Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
HOST AMERICA CORPORATION
Date: November 11, 1999 By:/s/ GEOFFREY W. RAMSEY
- ----------------------- -------------------------------------
Geoffrey W. Ramsey, President
and Chief Financial Officer
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 2,472
<SECURITIES> 0
<RECEIVABLES> 464
<ALLOWANCES> 21
<INVENTORY> 243
<CURRENT-ASSETS> 3,311
<PP&E> 1,140
<DEPRECIATION> 531
<TOTAL-ASSETS> 3,921
<CURRENT-LIABILITIES> 812
<BONDS> 0
0
1
<COMMON> 1
<OTHER-SE> 2,888
<TOTAL-LIABILITY-AND-EQUITY> 3,921
<SALES> 2,653
<TOTAL-REVENUES> 2,653
<CGS> 2,390
<TOTAL-COSTS> 2,390
<OTHER-EXPENSES> 490
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> (199)
<INCOME-TAX> 0
<INCOME-CONTINUING> (199)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (199)
<EPS-BASIC> (.18)
<EPS-DILUTED> 0
</TABLE>
