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 March 31, 2000 Commission File Number 33-11170-B
HOST AMERICA CORPORATION
(Exact name of registrant as specified in its charter)
COLORADO 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 March 31, 2000
Common Stock, $.001 par value 1,138,444 shares
<PAGE>
HOST AMERICA CORPORATION
MARCH 31, 2000 FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Balance Sheets - March 31, 2000 (Unaudited) and
June 25, 1999 (Audited) 3
Condensed Statements of Operations -three months ended
March 31, 2000 (Unaudited) and March 26, 1999 (Unaudited) 4
Condensed Statements of Operations -nine months ended
March 31, 2000 (Unaudited) and March 26, 1999 (Unaudited) 5
Condensed Statements of Cash Flows - nine months ended
March 31, 2000 (Unaudited) and March 26, 1999 (Unaudited) 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
HOST AMERICA CORPORATION
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, 2000 June 25, 1999
(Unaudited) (Audited)
---------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,777,991 $ 2,590,515
Accounts receivable, net of allowance for
doubtful accounts of $21,000 as of March
31, 2000 and June 25, 1999 848,616 447,191
Inventory 308,912 221,704
Prepaid expenses and other 105,866 137,787
------------ ------------
Total current assets 3,041,385 3,397,197
PROPERTY AND EQUIPMENT, net 722,847 516,363
------------ ------------
$ 3,764,232 $ 3,913,560
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 39,175 $ 126,601
Accounts payable 614,628 362,527
Accrued expenses 138,063 116,450
------------ ------------
Total current liabilities 791,866 605,578
LONG-TERM DEBT, less current portion included above 309,329 219,075
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, 1,138,444 and 1,130,000 shares issued
and outstanding as of March 31, 2000 and
June 25, 1999, respectively 1,138 1,130
Additional paid-in capital 7,548,441 7,526,175
Deficit (4,887,242) (4,439,098)
------------ ------------
Total stockholders' equity 2,663,037 3,088,907
------------ ------------
$ 3,764,232 $ 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
---------------------------------
March 31, 2000 March 26, 1999
(Unaudited) (Unaudited)
--------------------------------
<S> <C> <C>
NET REVENUES $ 3,428,032 $ 2,134,212
COST OF GOODS SOLD 3,209,030 1,863,809
------------ ------------
Gross profit 219,002 270,403
GENERAL AND ADMINISTRATIVE EXPENSES 365,130 505,590
------------ ------------
Loss from operations (146,128) (235,187)
OTHER INCOME (EXPENSE) 22,340 34,409
------------ ------------
Net loss $ (123,788) $ (200,778)
============ ============
NET LOSS PER COMMON SHARE $ (0.11) $ (0.18)
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
FINANCIAL STATEMENTS.
-4-
<PAGE>
HOST AMERICA CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the nine months ended
---------------------------------
March 31, 2000 March 26, 1999
(Unaudited) (Unaudited)
--------------------------------
<S> <C> <C>
NET REVENUES $ 9,185,869 $ 6,119,445
COST OF GOODS SOLD 8,385,561 5,403,691
------------ ------------
Gross profit 800,308 715,754
GENERAL AND ADMINISTRATIVE EXPENSES 1,342,491 1,306,741
------------ ------------
Loss from operations (542,183) (590,987)
OTHER INCOME 94,036 100,633
------------ ------------
Net loss $ (448,147) $ (490,354)
============ ============
NET LOSS PER COMMON SHARE $ (0.39) $ (0.45)
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
FINANCIAL STATEMENTS.
-5-
<PAGE>
HOST AMERICA CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine months ended
--------------------------------
March 31, 2000 March 26, 1999
(Unaudited) (Unaudited)
--------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (448,147) $ (490,354)
Adjustments to reconcile net loss to net
cash used in operating activities 163,714 88,475
Changes in operating assets and liabilities (160,721) (918,837)
------------ ------------
Net cash used in operating activities (445,154) (1,320,716)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (370,198) (273,731)
------------ ------------
Net cash used in investing activities (370,198) (273,731)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from assumption of long-term debt 280,203 -
Proceeds from issuance of common stock and
warrants, net - 3,759,433
Deferred offering costs - 486,029
(Repayment of) due to officer/director - (17,041)
(Repayment of) demand note payable and
long-term debt (277,375) (113,434)
------------ ------------
Net cash provided by financing activities 2,828 4,114,987
------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (812,524) 2,520,540
CASH AND CASH EQUIVALENTS, beginning of period 2,590,515 49,529
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 1,777,991 $ 2,570,069
============ ============
</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 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The interim financial statements for the three and nine months
ended March 31, 2000 and March 26, 1999 have been prepared by
Host America Corporation (the "Company") pursuant to the rules
and regulations of the Securities and Exchange Commission (the
"SEC") for interim financial reporting. These financial
statements are unaudited and, in the opinion of management,
include all adjustments (consisting only of normal recurring
accruals) and disclosures necessary to present fairly the balance
sheets, statements of operations and statements of cash flows for
the periods presented in accordance with generally accepted
accounting principles. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been omitted in accordance with the rules and regulations of the
SEC. These financial statements should be read in conjunction
with the audited financial statements, and accompanying notes,
included in the Company's Annual Report on Form 10-KSB for the
year ended June 25, 1999.
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.
EARNINGS PER SHARE
Net loss per common share was computed based upon 1,138,444 and
1,130,000 weighted average shares outstanding during the three
months ended March 31, 2000 and March 26, 1999, respectively and
1,135,336 and 1,078,276 for the nine months ended March 31, 2000
and March 26, 1999, respectively. Dilutive earnings per share
was not presented as the potentially dilutive warrants,
convertible preferred stock and stock purchase options are anti-
dilutive.
NOTE B - STOCK ISSUANCE
On July 28, 1999, the Board of Directors granted 2,476 shares of
the Company's common stock to an employee for payment of goals
achieved and to an attorney for services performed. On November 1,
1999, the Board of Directors granted 5,968 shares of the
Company's common stock to three employees as compensation for
goals achieved. Total compensation expense recognized in
connection with the issuance of these shares totaled $18,824.
-7-
<PAGE>
HOST AMERICA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company opened three new corporate dining facilities during the quarter
ending March 31, 2000. It is anticipated that these corporate dining
facilities will generate approximately $915,000 in annual sales.
On January 6, 2000 the Company opened a corporate dining facility for the
New York City Housing Authority located at 90 Church Street in Manhattan.
The Company is responsible for providing corporate dining and catering
services for this client.
On February 21, 2000 the company opened a corporate dining facility for
Trumpf, Inc. located in Farmington, Connecticut. The Company is
responsible for providing corporate dining and catering services for this
client. In early June, 2000, the Company will be opening another corporate
dining services facility for Trumpf, Inc. also in Farmington, Connecticut.
On February 28, 2000, the Company opened a corporate dining facility for
Konover & Associates in Farmington, Connecticut. The Company is
responsible for providing corporate dining, catering and office coffee
service for this client.
The Company was featured in several articles during the quarter ended March 31,
2000. The February 28, 2000 issue of NATION'S RESTAURANT NEWS included
an article - "dot.com dining" which details the Company's corporate dining
facility services and HOMEfood MARKET program. The March, 2000 issue of
TOTAL FOOD SERVICE announced the opening of the corporate dining facility
at Konover & Associates in Farmington, Connecticut. On March 15, 2000, the
FOOD SERVICE DIRECTOR listed the Company in it's 1999 results of "How
Contract Firms are Performing". The Company had the highest growth rate of
the firms listed at 62%. On April 5, 2000, the NEW HAVEN REGISTER featured
the Company in an article in the business section of the newspaper as "a
Hamden firm in national spotlight."
-8-
<PAGE>
HOST AMERICA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
Net revenues for the three months ended March 31, 2000 were $3,428,032 as
compared to $2,134,212 for the three months ended March 26, 1999.
Accordingly, revenues increased $1,293,820 or approximately 61%. Net
revenues for the nine months ended March 31, 2000 increased $3,066,424, or
50%, when compared to the nine months ended March 26, 1999. The increases
are primarily due to the aggressive program of adding new facilities and
maximizing revenue from existing facilities.
Cost of goods sold increased $1,345,221 and $2,981,870 for the three and
nine months ended March 31, 2000, respectively, when compared to the three
and nine months ended March 26, 1999. This increase reflects not only the
costs of increased sales volume but also the significant start-up expenses
associated with the new customer account openings.
The Company incurred a net loss of $123,788 and $448,147 for the three and
nine months ended March 31, 2000, respectively, as compared to net loss of
$200,778 and $490,354 for the three and nine months ended March 26, 1999,
respectively. The losses are due primarily to the start-up expenses
incurred in the opening of the Company's new customer accounts. The
expenses related to the new accounts included hiring and training expenses
for new full-time employees, temporary travel and living expenses, rental
expenses, and smallware costs.
Although the Company expects its growth rate to continue, the impact of the
start-up costs on losses from operations will diminish as the customer base
grows. Further, profitability of existing units is expected to increase as
operating costs stabilize, and as management continues to move sales and
product mix to achieve optimum market penetration.
LIQUIDITY AND CAPITAL RESOURCES
The company's liquidity as evidenced by its current ratio has declined.
The current ratio at March 31, 2000 and June 25, 1999 was 3.84:1 and
5.61:1, respectively. This decline is due mainly to the use of working
capital to support the Company's rapid expansion.
Net cash flows for the nine month period in 2000 resulted in a decrease in
cash and cash equivalents of $812,524. Operating activities resulted in a
cash outflow during the period of $445,154 primarily due to the net loss
for the period. Purchases of equipment to support the rapid expansion of
facilities under management amounted to $370,198 and the Company's
financing activities resulted in a cash inflow of $2,828 due primarily to
proceeds from financing sources, net of repayments of long-term debt.
Net cash flows for the nine months ended March 26, 1999 resulted in an
increase in cash and cash equivalents for the quarter of $2,520,540.
Operating activities resulted in a cash outflow during the period of
$1,320,716 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
$273,731 and the Company's financing activities resulted in cash inflow of
$4,114,987 due primarily to the receipt of proceeds from the public offering.
-9-
<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
-10-
<PAGE>
SIGNATURES
----------
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: May 12, 2000 By:/s/ GEOFFREY W. RAMSEY
----------------------------
Geoffrey W. Ramsey, President
and Chief Executive Officer
-11-
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-25-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,778
<SECURITIES> 0
<RECEIVABLES> 849
<ALLOWANCES> 21
<INVENTORY> 309
<CURRENT-ASSETS> 3,041
<PP&E> 723
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,764
<CURRENT-LIABILITIES> 792
<BONDS> 0
0
1
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<OTHER-SE> 2,661
<TOTAL-LIABILITY-AND-EQUITY> 3,764
<SALES> 3,428
<TOTAL-REVENUES> 3,428
<CGS> 3,209
<TOTAL-COSTS> 365
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<CHANGES> 0
<NET-INCOME> (124)
<EPS-BASIC> (.11)
<EPS-DILUTED> (.11)
</TABLE>
