SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 10 or 15(d) of the
Securities Exchange Act of 1934
JULY 31, 2000
------------------------------------------------
Date of Report (date of earliest event reported)
HOST AMERICA CORPORATION
-----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
COLORADO 0-16196 06-1168423
---------------------------- ------------ ----------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation File Number) Identification Number)
TWO BROADWAY
HAMDEN, CONNECTICUT 06518
---------------------------------------
(Address of Principal Executive Offices
Including Zip Code)
(203) 248-4100
-------------------------------
(Registrant's telephone number,
including area code)
NOT APPLICABLE
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of Lindley Food Services Corporation.
LINDLEY FOOD SERVICE
CORPORATION
FINANCIAL STATEMENTS
AS OF MARCH 31, 2000 AND 1999
TOGETHER WITH
INDEPENDENT AUDITORS' REPORT
-2-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
TABLE OF CONTENTS
Page
----
INDEPENDENT AUDITORS' REPORT 4
FINANCIAL STATEMENTS
Balance Sheets 5
Statements of Income 6
Statements of Changes in Stockholders' Equity 7
Statements of Cash Flows 8
Notes to Financial Statements 9
-3-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Lindley Food Service Corporation
We have audited the accompanying balance sheets of Lindley Food Service
Corporation (the Company) as of March 31, 2000 and 1999, and the related
statements of income, changes in stockholders' equity, 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 Lindley Food Service
Corporation as of March 31, 2000 and 1999, 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
August 18, 2000
-4-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
BALANCE SHEETS
MARCH 31, 2000 AND 1999
ASSETS
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 341,653 $ 597,534
Accounts receivable, net of allowance for
doubtful accounts of $13,000 and $14,000
at March 31, 2000 and 1999, respectively 1,307,707 1,387,030
Inventory 190,958 160,459
Due from officers/directors 13,317 -
Prepaid expenses and other 27,706 27,313
----------- -----------
Total current assets 1,881,341 2,172,336
PROPERTY AND EQUIPMENT, net 333,396 300,828
OTHER ASSETS 11,126 62,341
----------- -----------
$ 2,225,863 $ 2,535,505
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Demand note payable $ 175,000 $ -
Current portion of long-term debt 38,993 36,420
Obligations under capital lease 6,881 6,850
Accounts payable 547,781 873,139
Accrued expenses and other 231,468 226,116
Due to officers/directors - 154,020
----------- -----------
Total current liabilities 1,000,123 1,296,545
OTHER LIABILITIES
Long-term debt, less current portion
included above 385,630 423,684
Obligations under capital lease, less current
portion included above 573 -
Deferred income taxes 22,000 15,000
----------- -----------
Total other liabilities 408,203 438,684
STOCKHOLDERS' EQUITY
Preferred stock, 12% non-cumulative,
$1,000 par value; 10,000 shares authorized 300,000 300,000
Common stock, no par value; 1,000 shares
authorized 1,000 1,000
Retained earnings 516,537 499,276
----------- -----------
Total stockholders' equity 817,537 800,276
----------- -----------
$ 2,225,863 $ 2,535,505
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-5-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
NET REVENUES $ 8,415,753 $ 7,518,625
COST OF GOODS SOLD 4,252,574 3,785,416
----------- -----------
Gross profit 4,163,179 3,733,209
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,990,135 3,434,036
----------- -----------
Income from operations 173,044 299,173
OTHER INCOME (EXPENSE)
Other, net 6,934 9,810
Interest expense (66,717) (70,112)
----------- -----------
(59,783) (60,302)
----------- -----------
Income before provision for income taxes 113,261 238,871
PROVISION FOR INCOME TAXES 45,000 105,000
----------- -----------
Net income $ 68,261 $ 133,871
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-6-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------- --------------------- Total
Shares Shares Retained Stockholders'
Outstanding Amount Outstanding Amount Earnings Equity
----------- -------- ------------ -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1998 300 $ 300,000 300 $ 1,000 $ 401,405 $ 702,405
Dividends - - - - (36,000) (36,000)
Net income - - - - 133,871 133,871
------- --------- ------ ------- --------- ---------
Balance, March 31, 1999 300 300,000 300 1,000 499,276 800,276
Dividends - - - - (51,000) (51,000)
Net income - - - - 68,261 68,261
------- --------- ------ ------- --------- ---------
Balance, March 31, 2000 300 $ 300,000 300 $ 1,000 $ 516,537 $ 817,537
======= ========= ====== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-7-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 68,261 $ 133,871
Adjustments to reconcile net income to net cash
(used in) provided by operating activities
Depreciation and amortization 44,976 45,120
Deferred income taxes 7,000 4,000
Loss on abandonment of assets - 1,103
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 79,323 (223,929)
Decrease (increase) in other assets 51,215 (2,581)
(Increase) decrease in prepaid expenses and
other (393) 6,824
(Decrease) increase in accrued expenses and
other (9,648) 117,729
Increase in inventory (30,499) (58,282)
(Decrease) increase in accounts payable (325,358) 563,197
----------- -----------
Net cash (used in) provided by
operating activities (115,123) 587,052
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (63,782) (63,681)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from demand note payable 175,000 -
Repayments of obligations under capital lease (13,158) (12,721)
Principal payments on long-term debt (35,481) (82,263)
Payment of dividends (36,000) (36,000)
(Decrease) increase in due to/from
officers/directors (167,337) 137,520
----------- -----------
Net cash (used in) provided by
financing activities (76,976) 6,536
----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (255,881) 529,907
CASH AND CASH EQUIVALENTS, beginning of year 597,534 67,627
----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 341,653 $ 597,534
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 66,717 $ 70,112
Income taxes 53,640 106,496
Non cash investing and financing activities
Property and equipment acquired through assumption
of obligations under capital lease 12,179 -
Dividends declared 15,000 -
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-8-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Lindley Food Service Corporation (the Company) is engaged in
manufacturing meals under various governmental programs which are
sold to customers generally in the Southern New England region.
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
and disclosures in the financial statements. 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 cash
equivalents totaling $338,378 and $195,783 at March 31, 2000 and
1999, respectively, that consisted of an overnight investment account.
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 and amortization are computed by applying the
straight-line method over the estimated useful lives of the
related assets, which range from three to ten years.
Maintenance, repairs and minor renewals are charged to operations
as incurred. Expenditures which substantially increase the
useful lives of the related assets are capitalized.
REVENUE RECOGNITION
The Company's revenue is recognized upon delivery of meals to
customers.
-9-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 statement 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 cash
equivalents and accounts receivable.
* Cash and cash equivalents - 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. The Company had cash balances
on deposit with banks at March 31, 2000 and 1999 that
exceeded federal depository insurance limits by $262,648 and
$120,576, respectively.
* Accounts receivable - The Company grants credit to its
customers, substantially all of whom are provided full
service meal programs. Five major customers comprised 55%
and 57% of accounts receivable as of March 31, 2000 and
1999, respectively. Net revenues from individual customers
which exceeded ten percent of total net revenues during the
years ended March 31, 2000 and 1999 aggregated 43% (3
customers) and 44% (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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
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.
-10-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
MARCH 31, 2000 AND 1999
NOTE 2 - FINANCIAL INSTRUMENTS (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The carrying amount of the Company's financial instruments
approximates their fair value as outlined below:
* Cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses - The carrying amounts
approximate their fair value because of the short maturity
of those instruments.
* Demand note payable, long-term debt and obligations under
capital lease - The carrying amount approximates fair value
as the interest rates on the various notes approximate the
Company's 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:
2000 1999
------ ------
Equipment and fixtures $576,955 $503,046
Vehicles 104,522 104,522
Leasehold improvements 225,652 225,652
-------- --------
907,129 833,220
Less: accumulated depreciation and
amortization 573,733 532,392
-------- --------
$333,396 $300,828
======== ========
Depreciation and amortization expense for the years ended March 31,
2000 and March 31, 1999 totaled $44,976 and $45,120, respectively.
NOTE 4 - DEMAND NOTE PAYABLE
The Company has a line of credit with a bank which provides for
maximum borrowings of $400,000. Interest is payable monthly on
amounts outstanding at the bank's prime rate plus 1% (10% at
March 31, 2000). Borrowings outstanding at March 31, 2000 and
1999 totaled $175,000 and $0, respectively.
The demand note and the term note payable (SEE NOTE 5) are
collateralized by substantially all assets of the Company and
personally guaranteed by the officers.
-11-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
MARCH 31, 2000 AND 1999
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following as of March 31, 2000 and
1999:
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Term note payable to bank at 9.34% interest,
payable in monthly installments of principal
and interest totaling $6,462, final payment due
December, 2007. The loan is guaranteed by the
U.S. Small Business Administration (SBA). $424,623 $460,104
Less: current portion 38,993 36,420
-------- --------
$385,630 $423,684
======== ========
</TABLE>
Maturities of long-term debt for each of the fiscal years
succeeding March 31, 2000 are as follows:
Year ending March 31,
2001 $ 38,993
2002 42,848
2003 47,088
2004 51,746
2005 56,864
2006 and thereafter 187,084
--------
$424,623
========
NOTE 6 - LEASE COMMITMENTS
CAPITAL LEASES
The following is an analysis of leased property under capital
leases by major class. Such property is included in property and
equipment in the accompanying balance sheets.
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Class of Property
-------------------
Equipment and fixtures $12,179 $ -
Vehicles 31,195 31,195
------- -------
43,374 31,195
Less: accumulated amortization 26,675 22,211
------- -------
$16,699 $ 8,984
======= =======
</TABLE>
Amortization of leased property under capital leases is included
in the depreciation and amortization expense disclosed in Note 3.
-12-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
MARCH 31, 2000 AND 1999
NOTE 6 - LEASE COMMITMENTS (Continued)
CAPITAL LEASES (Continued)
Future minimum lease payments under capital leases for each of
the fiscal years succeeding March 31, 2000 and the net present
value of future minimum lease payments as of March 31, 2000 are
as follows:
2001 $7,498
2002 578
------
Total future minimum lease payments 8,076
Amount representing interest 622
------
$7,454
======
OPERATING LEASES
The Company has several noncancelable operating leases, for
office, production and warehouse facilities, and transportation
equipment, which expire over the next five years. Future minimum
lease payments under all operating leases with an initial or
remaining term greater than one year are as follows:
Year ending March 31:
2001 $105,487
2002 73,589
2003 50,821
2004 43,200
2005 43,200
--------
$316,297
========
Rent expense for all operating leases totaled $262,435 and
$177,385 for the years ended March 31, 2000 and 1999, respectively.
NOTE 7 - RELATED PARTY TRANSACTIONS
On March 1, 1999, the Company entered into a lease for certain
land and real property from a partnership owned by the Company's
stockholders. On July 1, 2000, the lease was amended to change
the term from a two-year commitment to a term that ends on March 31,
2005. Rent expense totaled $36,000 and $30,000 for the years
ended March 31, 2000 and 1999, respectively.
Amounts due (to)/from officers/directors represents note
obligations and other transactions between the Company and its
President and Secretary and their spouses. The notes carry
interest at 12.5%. Total amounts due (to)/from
officers/directors totaled $13,317 and ($154,020) as of March 31,
2000 and 1999, respectively.
-13-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
MARCH 31, 2000 AND 1999
NOTE 8 - INCOME TAXES
The provision for income taxes consists of the following for the
years ending March 31, 2000 and 1999:
2000 1999
------ ------
Current
Federal $ 31,000 $ 78,000
State 7,000 23,000
Deferred 7,000 4,000
-------- --------
$ 45,000 $105,000
======== ========
The significant components of the deferred tax provision are as follows:
2000 1999
------ ------
Property and equipment, net $ 7,000 $ 4,000
======== ========
The components of the net deferred tax accounts as of March 31, 2000
and 1999 are as follows:
2000 1999
------ ------
Deferred tax liability:
Property and equipment, net $ 22,000 $ 15,000
======== ========
NOTE 9 - EMPLOYEE RETIREMENT PLAN
The Company maintains a profit sharing plan covering
substantially all of its employees. Employees are eligible to
participate following completion of one year of service and
attainment of age twenty-one. Contributions are discretionary
each year and for the years ended March 31, 2000 and 1999 totaled
$143,975 and $120,000, respectively.
NOTE 10 - SUBSEQUENT EVENT - PURCHASE
On July 31, 2000, all of the issued and outstanding shares of the
Company were purchased by Host America Corporation (Host) of
Hamden, Connecticut for $3,7000,000 in cash, 198,122 shares of
Host common stock valued at $1,000,000 and the assumption of
certain debt of the Company. Host America Corporation
specializes in providing full service restaurant and employee
dining, special event catering, vending and office coffee service
to business and industry accounts located in the Northeast.
-14-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
UNAUDITED CONDENSED BALANCE SHEETS
JUNE 30, 2000 AND 1999
ASSETS
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 111,068 $ 368,034
Accounts receivable, net of allowance for
doubtful accounts of $13,000 and $14,000
at June 30, 2000 and 1999, respectively 1,516,784 1,161,690
Inventory 250,008 203,882
Prepaid expenses and other 172,781 311,887
----------- -----------
Total current assets 2,050,641 2,045,493
PROPERTY AND EQUIPMENT, net 323,619 329,807
OTHER ASSETS 11,126 62,341
----------- -----------
$ 2,385,386 $ 2,437,641
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Demand note payable $ 175,000 $ 200,000
Current portion of long-term debt 30,157 27,315
Obligations under capital lease 4,590 10,925
Accounts payable 471,118 452,335
Accrued expenses and other 417,977 474,836
Dividends payable - 9,000
----------- -----------
Total current liabilities 1,098,842 1,174,411
OTHER LIABILITIES
Long-term debt, less current portion included
above 385,630 430,639
Obligations under capital lease, less current
portion included above 573 -
Deferred income taxes 22,000 15,000
----------- -----------
Total other liabilities 408,203 445,639
STOCKHOLDERS' EQUITY
Preferred stock, 12% non-cumulative,
$1,000 par value; 10,000 shares authorized 300,000 300,000
Common stock, no par value; 1,000 shares authorized 1,000 1,000
Retained earnings 577,341 516,591
----------- -----------
Total stockholders' equity 878,341 817,591
----------- -----------
$ 2,385,386 $ 2,437,641
=========== ===========
</TABLE>
NOTE: The above unaudited condensed balance sheets as of June 30, 2000 and
1999 reflect all adjustments which are, in the opinion of management,
necessary to present a fair statement of the financial position as of the
dates presented.
-15-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
UNAUDITED CONDENSED STATEMENTS OF INCOME
AND CHANGES IN RETAINED EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
NET REVENUES $ 2,013,733 $ 1,991,008
COST OF GOODS SOLD 1,015,928 1,003,484
----------- -----------
Gross profit 997,805 987,524
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 889,340 960,976
----------- -----------
Income from operations 108,465 26,548
OTHER INCOME (EXPENSE) (6,661) 1,767
----------- -----------
Income before provision for income taxes 101,804 28,315
PROVISION FOR INCOME TAXES 41,000 11,000
----------- -----------
Net income 60,804 17,315
RETAINED EARNINGS, beginning of period 516,537 499,276
----------- -----------
RETAINED EARNINGS, end of period $ 577,341 $ 516,591
=========== ===========
</TABLE>
NOTE: The above unaudited condensed statements of income and changes in
retained earnings for the three months ended June 30, 2000 and 1999 reflect
all adjustments which are, in the opinion of management, necessary to
present a fair statement of the results of operations for the interim
periods presented.
-16-
<PAGE>
LINDLEY FOOD SERVICE CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 60,804 $ 17,315
Adjustments to reconcile net income to net cash
used in operating activities 11,795 9,656
Changes in operating assets and liabilities (303,356) (258,941)
----------- -----------
Net cash used in operating activities (230,757) (231,970)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (2,018) (38,635)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in due to/from
officers/directors 13,317 (154,020)
Proceeds from demand note payable - 200,000
Repayments of obligations under capital lease (2,291) (2,725)
Principal payments on long-term debt (8,836) (2,150)
----------- -----------
Net cash provided by financing activities 2,190 41,105
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (230,585) (229,500)
CASH AND CASH EQUIVALENTS, beginning of the period 341,653 597,534
----------- -----------
CASH AND CASH EQUIVALENTS, end of the period $ 111,068 $ 368,034
=========== ===========
</TABLE>
NOTE: The above unaudited condensed statements of cash flows for the three
months ended June 30, 2000 and 1999 reflect all adjustments which are, in
the opinion of management, necessary to present a fair statement of the
cash flows for the interim periods presented.
-17-
<PAGE>
(b) Pro Forma Financial Information.
HOST AMERICA CORPORATION AND SUBSIDIARY
PRO FORMA BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Historical Financial Statements
-------------------------------
Host Lindley Food
America Service
Corporation Corporation Pro Forma
June 30, 2000 March 31, 2000 Adjustments Pro Forma
------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,720,407 $ 341,653 $(2,054,160) $ 7,900
Accounts receivable, net 934,202 1,307,707 - 2,241,909
Inventory 258,977 190,958 - 449,935
Due from officers/directors - 13,317 - 13,317
Prepaid expenses and other 152,588 27,706 - 180,294
----------- ----------- ----------- -----------
Total current assets 3,066,174 1,881,341 (2,054,160) 2,893,355
PROPERTY AND EQUIPMENT, net 670,263 333,396 - 1,003,659
OTHER ASSETS
Goodwill - - 4,693,784 4,693,784
Other - 11,126 25,000 36,126
----------- ----------- ----------- -----------
- 11,126 4,718,784 4,729,910
----------- ----------- ----------- -----------
$ 3,736,437 $ 2,225,863 $ 2,664,624 $ 8,626,924
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - line of credit $ - $ 175,000 $ 287,890 $ 462,890
Current portion of long-term debt 145,035 45,874 (38,993) 151,916
Due to seller - - 118,894 118,894
Accounts payable 690,532 547,781 - 1,238,313
Accrued expenses and other 313,452 231,468 - 544,920
----------- ----------- ----------- -----------
Total current liabilities 1,149,019 1,000,123 367,791 2,516,933
OTHER LIABILITIES
Long-term debt, less current
portion included above 152,162 385,630 2,114,370 2,652,162
Other - 22,573 - 22,573
----------- ----------- ----------- -----------
152,162 408,203 2,114,370 2,674,735
STOCKHOLDERS' EQUITY
Preferred stock 700 300,000 (300,000) 700
Common stock 1,139 1,000 (802) 1,337
Additional paid-in capital 7,546,566 - 999,802 8,546,368
Retained earnings (deficit) (5,113,149) 516,537 (516,537) (5,113,149)
----------- ----------- ----------- -----------
Total stockholders' equity 2,435,256 817,537 182,463 3,435,256
----------- ----------- ----------- -----------
$ 3,736,437 $ 2,225,863 $ 2,664,624 $ 8,626,924
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these pro forma
financial statements.
-18-
<PAGE>
HOST AMERICA CORPORATION AND SUBSIDIARY
PRO FORMA STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Historical Financial Statements
-------------------------------
Host Lindley Food
America Service
Corporation Corporation
for the for the
year ended year ended Pro Forma
June 30, 2000 March 31, 2000 Adjustments Pro Forma
------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES $13,019,800 $ 8,415,753 $ - $21,435,553
COST OF GOODS SOLD 11,652,380 4,252,574 - 15,904,954
----------- ----------- ----------- -----------
Gross profit 1,367,420 4,163,179 - 5,530,599
GENERAL AND ADMINISTRATIVE EXPENSES 2,138,667 3,990,135 (841,653) 5,287,149
----------- ----------- ----------- -----------
Income (loss) from operations (771,247) 173,044 841,653 243,450
OTHER INCOME (EXPENSE) 97,196 (59,783) 62,087 99,500
----------- ----------- ----------- -----------
Income (loss) before provision
for income taxes (674,051) 113,261 903,740 342,950
PROVISION FOR INCOME TAXES - 45,000 1,000 46,000
----------- ----------- ----------- -----------
Net income (loss) $ (674,051) $ 68,261 $ 902,740 $ 296,950
=========== =========== =========== ===========
INCOME (LOSS) PER COMMON SHARE $ (0.59) $ 0.22
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,136,712 1,334,834
=========== ===========
</TABLE>
The accompanying notes are an integral part of these pro forma
financial statements.
-19-
<PAGE>
HOST AMERICA CORPORATION AND SUBSIDIARY
NOTES TO PRO FORMA FINANCIAL STATEMENTS
On July 31, 2000, the Host America Corporation (Host) purchased all of the
issued and outstanding shares of Lindley Food Service Corporation
(Lindley), plus acquisition costs. The acquisition was partially financed
by a $2,500,000 five-year term loan. The acquisition was accounted for
using the purchase method of accounting.
The Pro Forma Condensed Financial Statements of the consolidated entity
(Company) are unaudited and presented for informational purposes only and
may not reflect the Company's future results of operations and financial
position or what the results of operations and financial position would
have been had such transactions occurred as of the dates indicated. The
unaudited Pro Forma Condensed Financial Statements and Notes should be read
in conjunction with the Company's Financial Statements and Notes and
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" included in Host's Annual Report on Form 10KSB for the
year ended June 30, 2000.
BASIS OF PRESENTATION OF PRO FORMA FINANCIAL STATEMENTS
The pro forma financial statements include a balance sheet and statement of
income as of and for the year ended June 30, 2000 for Host (latest audited
financial statements) and as of and for the year ended March 31, 2000 for
Lindley (latest audited financial statements). Overall, adjustments were
made in the pro forma financial statements to record the acquisition, and
to reflect known changes being made in the operations of the business.
In the pro forma balance sheet, the acquisition entry was presented to
allocate the purchase price to the assets purchased and the liabilities
assumed based upon their fair values at the date of acquisition. In
addition, adjustments have been made to reflect the financing assumed on
the acquisition date and to record the payment of certain bank debt of
Lindley by Host.
In the pro forma statements of income, adjustments were made to reflect
decreased expenses for excessive officers' compensation and benefits which
are now fixed under employment agreements and certain other administrative
expenses to eliminate duplicative expenses. These decreases in expense
have been partially offset to reflect the estimated annual amortization
expense of goodwill over a 15-year life and the first years interest
expense payable to the bank in connection with the financing. These
adjustments have been shown net of an estimated income tax effect. Such
pro forma amounts are not necessarily indicative of what the actual
consolidated results of operations might have been had the acquisitions
been effective at the beginning of Host and Lindleys' fiscal years.
The pro forma statements of income do not consider an "Earnout EBITA"
provision estimated at $365,000 for the first year following the
acquisition since such amount is considered to be nonrecurring. The
"Earnout EBITA" was calculated in accordance with the provisions of the
purchase agreement utilizing the amounts reflected in the pro forma
statements of income.
The weighted average shares outstanding for Host have been adjusted for the
purposes of the pro forma financial statements to reflect the total shares
issued in connection with the acquisition.
-20-
<PAGE>
(c) Exhibits:
10.15 Share Purchase Agreement between Host America
Corporation, Lindley Food Service Corporation,
and Gilbert J. Rossomando and Mark J. Cerreta,
dated July 31, 2000.*
10.16 Non-Competition, Non-Solicitation and Employment
Agreement between Host America Corporation and
Gilbert J. Rossomando, dated August 1, 2000.*
10.17 Non-Competition, Non-Solicitation and Employment
Agreement between Host America Corporation and
Mark J. Cerreta, dated August 1, 2000.*
10.18 Registration Rights Agreement between Host
America Corporation and Gilbert J. Rossomando and
Mark J. Cerreta, dated July 31, 2000.*
_____________________
*previously filed
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
HOST AMERICA CORPORATION
Dated: October 13, 2000 By: /s/ David J. Murphy
--------------------------
David J. Murphy
Chief Financial Officer
-21-
