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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the three month period ended March 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-10576
GB FOODS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 33-0403086
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1100 NEWPORT CENTER DRIVE
NEWPORT BEACH, CALIFORNIA 92660
(Address of Principal Executive Office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 640-6004
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed 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 required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
As of March 31, 1996, the registrant had 6,297,684 shares outstanding of
its Common Stock, $.08 par value.
1
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GB FOODS CORPORATION
Index
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
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<CAPTION>
Page
<S> <C>
Consolidated Balance Sheets (unaudited) at March 31, 1996 and December 31, 1995...............3
Consolidated Statements of Operations (unaudited) for the three months ended
March 31, 1996 and 1995.......................................................................4
Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended
March 31, 1996 and 1995.......................................................................5
Notes to Consolidated Financial Statements (unaudited)........................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.........................................................................7
Part II. OTHER INFORMATION...................................................................9
</TABLE>
2
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GB FOODS CORPORATION
Consolidated Balance Sheets
(unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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<S> <C> <C>
Current assets
Cash and cash equivalents $ 203,131 $ 216,728
Short-term investments 694,289 763,830
Accounts and notes receivable 245,897 268,277
Other assets 65,216 125,841
------------ ------------
Total current assets 1,208,533 1,374,676
Equipment and improvements 1,093,900 1,268,290
Notes receivable 505,120 519,690
Other assets 108,856 114,061
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$ 2,916,409 $ 3,276,717
============ ============
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities
<S> <C> <C>
Current installments of long-term debt $ 9,875 $ 10,203
Accounts payable and accrued expenses 426,084 562,409
Accrued salaries, wages and employee benefits 78,904 109,199
Deferred franchise fees 75,000 80,000
------------ ------------
Total current liabilities 589,863 761,811
Long-term debt, less current installments 22,826 25,372
Minority interest in consolidated partnership 62,993 60,720
Shareholders' equity
Common stock, $.08 par value, authorized 50,000,000
shares; 6,297,684 and 6,284,684 shares issued and
outstanding at March 31, 1996 and December 31, 1995,
respectively 503,814 502,774
Additional paid-in capital 15,321,674 15,268,714
Accumulated deficit (13,584,761) (13,342,674)
Total shareholders' equity 2,240,727 2,428,814
------------ ------------
$ 2,916,409 $ 3,276,717
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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GB FOODS CORPORATION
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
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<S> <C> <C>
Revenues:
Restaurant operations $ 760,326 $ 1,264,523
Royalties 225,393 173,141
Franchise fees 78,422 -
Interest 28,159 23,857
Other 64,872 64,859
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1,157,172 1,526,380
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Restaurant operating costs:
Food and packaging 287,103 458,244
Payroll and other employee benefits 229,467 405,557
Occupancy and other operating costs 209,314 352,680
General and administrative 666,523 703,551
Litigation settlement and related costs - 716,393
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1,392,407 2,636,425
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Loss before minority interest in consolidated
partnership (235,235) (1,110,045)
Minority interest in consolidated
partnership 6,852 7,932
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Net loss $ (242,087) $(1,117,977)
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Net loss per share $ (.04) $ (.20)
=========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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GB FOODS CORPORATION
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
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<S> <C> <C>
Net cash used in operating activities $(204,556) $(294,988)
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Cash flow from investing activities
Proceeds from short-term investments 749,499 823,978
Expenditures for short-term investments (679,958) (354,119)
Proceeds from notes receivable 10,259 -
Proceeds from sale of equipment and improvements 76,350 -
Expenditures for equipment and improvements (9,793) (53,728)
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Net cash from investing activities 146,357 416,131
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Cash flow from financing activities
Repayments of long-term debt (2,546) (2,030)
Proceeds from issuance of stock 54,000 -
Distribution to minority partner (6,852) (5,500)
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Net cash from financing activities 44,602 (7,530)
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Net increase (decrease) in cash and cash equivalents (13,597) 113,613
Cash and cash equivalents at beginning of period 216,728 414,570
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Cash and cash equivalents at end of period $ 203,131 $ 528,183
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
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GB FOODS CORPORATION
Notes to Consolidated Financial Statements
(unaudited)
1. Summary of Certain Accounting Policies
- - -----------------------------------------
The accompanying unaudited consolidated financial statements of GB Foods
Corporation (the "Company") have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results for the year ending December 31, 1996.
These statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Form 10-K for the year
ended December 31, 1995.
2. Net Loss Per Share
- - ---------------------
Net loss per share is based on 6,293,851 and 5,675,469 weighted average shares
outstanding during the three months ended March 31, 1996 and 1995,
respectively. Outstanding stock options and warrants are considered common
stock equivalents. The assumed exercise of common stock equivalents would
have an anti-dilutive effect in 1996 and 1995 and therefore have not been
included in the number of weighted average shares outstanding for the net loss
per share calculation.
3. Stock Issuance
- - -----------------
On March 31, 1995, the Company agreed to issue 108,000 shares of Company
Common Stock to certain franchisees in exchange for a release of potential
claims against the Company and, in certain instances, to obtain a reduction in
the mile radius clause of the related franchise agreement. Accordingly, the
Company recorded a charge of approximately $648,000 in March 1995.
6
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
The Company's revenues are primarily derived from restaurant operations at
Company-owned stores and franchise royalties and fees received from franchise
stores. Total revenues for the first quarter of 1996 decreased $369,208 (24%)
to $1,157,172 compared to revenues of $1,526,380 for the first quarter of 1995.
Revenues from restaurant operations for the first quarter of 1996 decreased
$504,197 (40%) to $760,326 from $1,264,523 for the corresponding period in 1995.
This decrease in revenue was primarily attributable to the sale of five Company-
owned stores to a franchisee in October of 1995, and the closure of one Company-
owned store at the end of February 1996. In addition, same store sales
decreased $25,711 (3%) in the first quarter of 1996 as compared to the first
quarter of 1995. As of March 31, 1996 and 1995, the Company had seven and
thirteen Company-owned stores, respectively.
Franchise royalties for the first quarter of 1996 increased $52,252 (30%)
to $225,393 from $173,141 earned during the first quarter of 1995, primarily due
to an increase in the number of dual-concept franchise stores in operation. The
total number of free-standing franchise stores was comparable at 45, for both
the first quarter of 1996 and 1995. The following is a summary of the dual-
concept franchise store activity during the first quarter of 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Dual-concept stores at beginning of quarter 41 5
Dual-concept stores opened during quarter 26 1
---- ----
Dual-concept stores at end of quarter 67 6
==== ====
</TABLE>
Franchise fee income for the first quarter of 1996 was $78,422 compared to
zero earned in the first quarter of 1995 because of the twenty-six dual-concept
franchise store openings discussed above. The one dual-concept franchise store
opening in the first quarter of 1995 was a test-store and therefore was not
required to pay a franchise fee. Fourteen of the dual-concept franchise stores
will be closing prior to April 1998.
Cost of sales for restaurant operations (food, packaging, payroll and other
employee benefits) expressed as a percentage of sales ranged from 65% to 75% and
62% to 79% for the quarters ended March 31, 1996 and 1995, respectively.
Occupancy and other operating costs for restaurant operations expressed as a
percentage of sales ranged from 21% to 43% and 19% to 40% for the quarters ended
March 31, 1996 and 1995, respectively. On an aggregate basis, cost of sales and
occupancy and other operating costs expressed as a percentage of sales for the
Company restaurants have remained consistent in the first quarter of 1996 as
compared to 1995.
General and administrative expenses for the quarter ended March 31, 1996
decreased to $666,523 compared to $703,551 in the first quarter of 1995
primarily because of decreased legal fees.
Included in litigation settlement and related costs in the first quarter of
1995 is a charge of $648,000 resulting from an agreement entered into by the
Company to issue Company Common Stock to certain franchisees in exchange for a
release of potential claims against the Company and, in certain instances, as
(continued)
7
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recognition for a reduction in the mile radius protection clause of the related
franchise agreements.
Impact of Company Expansion Plans on Operations. The management of the
Company anticipates that continued expansion of the dual-concept restaurant
business will improve the Company's liquidity and profitability by generating
additional franchise fees and royalties. The Company anticipates that its
existing management will be able to supervise the additional franchise sales and
existing franchise stores, as well as manage the Company-owned stores without
the addition of significant personnel in the next 12 months.
Effect of Inflation. Food and labor costs are significant inflationary
factors in the Company's operations. Many of the Company's employees are paid
hourly rates related to the statutory minimum wage, therefore, increases in the
minimum wage increase the Company's costs. In 1990, the federal statutory
minimum wage was increased to $4.25 per hour. This increase in the statutory
minimum wage has not had a material impact on the Company's current operations
as the Company's hourly employees have been paid the statutory minimum wage
since 1989. At March 31, 1996, approximately 15 the Company's 68 hourly
employees are paid the statutory minimum wage. In addition, most of the
Company's leases require it to pay base rents with escalation provisions based
on the consumer price index, in addition to percentage rentals based on
revenues, and to pay taxes, maintenance, insurance, repairs, and utility costs,
all of which are expenses subject to inflation. The Company has been able to
offset the effects of inflation to date through small price increases and
economies resulting from the purchase of food products in increased numbers due
to the increased number of Green Burrito stores.
Liquidity and Capital Resources
The Company had working capital of $618,670 at March 31, 1996 compared to
$612,865 at December 31, 1995 including cash and cash equivalents of $203,161 at
March 31, 1996 and $216,728 at December 31, 1995. Management believes the
Company's cash, cash equivalents and short-term investments will be sufficient
to finance current and forecasted operations and obligations.
8
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27
The information set forth herein reflects all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
interim period.
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 thereunto duly authorized.
GB FOODS CORPORATION
Date: May 10, 1996 By: William M. Theisen
--------------------------------------
William M. Theisen
Chief Executive Officer, President and
Chairman of the Board
Date: May 10, 1996 By: Madeleine E. Clyde
--------------------------------------
Madeleine E. Clyde
Chief Financial Officer
(Principal Accounting Officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GB FOODS
CORPORATION FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 203,131
<SECURITIES> 694,289
<RECEIVABLES> 431,943
<ALLOWANCES> 186,046
<INVENTORY> 0
<CURRENT-ASSETS> 1,208,533
<PP&E> 2,189,511
<DEPRECIATION> 1,095,611
<TOTAL-ASSETS> 2,916,409
<CURRENT-LIABILITIES> 589,863
<BONDS> 22,826
0
0
<COMMON> 503,814
<OTHER-SE> 1,736,913
<TOTAL-LIABILITY-AND-EQUITY> 2,916,409
<SALES> 1,064,141
<TOTAL-REVENUES> 1,157,172
<CGS> 516,570
<TOTAL-COSTS> 725,884
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (242,087)
<INCOME-TAX> 0
<INCOME-CONTINUING> (242,087)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (242,087)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
