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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from
to
Commission File Number 1-10576
GB FOODS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 33-0403086
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
<TABLE>
<S> <C>
1200 N. HARBOR BLVD. 92803
ANAHEIM, CALIFORNIA (Zip Code)
(Address of Principal Executive Office)
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REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 491-6400
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED:
------------------- ---------------------
<S> <C>
Common Stock -- $.08 Par Value Boston Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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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 ___
Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained in this form, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of the common stock held by non-affiliates of
the registrant on February 19, 1998 was approximately $41,936,000 based upon the
closing price of the common stock, as reported on the NASDAQ Small Cap Market.
The number of shares of the common stock of the registrant outstanding on
February 19, 1998 was 6,571,485.
<PAGE> 2
PART I
All statements, other than statements of historical fact, included in this
Form 10-K, including without limitation the statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," are, or may be deemed to be, "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"). Such forward-looking statements involve assumptions, known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of GB Foods Corporation (the "Company") to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements contained in this Form
10-K. Such potential risks and uncertainties include, without limitation,
competitive pricing and other pressures from other restaurant operators,
economic conditions generally and in the Company's primary markets, consumer
spending patterns, perceived quality and value of the Company's products,
availability of capital, cost of labor, food costs, occupancy costs and other
risk factors detailed herein and in other of the Company's filings with the
Securities and Exchange Commission. The forward-looking statements are made as
of the date of this Form 10-K and the Company assumes no obligation to update
the forward-looking statements or to update the reasons actual results could
differ from those projected in such forward-looking statements. Therefore,
readers are cautioned not to place undue reliance on these forward-looking
statements.
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
The Company is engaged in the business of operating Mexican quick-service
restaurants under the trade name "The Green Burrito" at leased facilities in
Southern California and the sale and supervision of Green Burrito franchises.
The Company's strategic plan is to maintain a base of Company-owned and operated
restaurants ("Company Stores") in Southern California sufficient for training,
product development and testing, while developing additional Green Burrito
franchise restaurants through expansion of the Green Burrito free-standing and
dual-concept franchise businesses. As of December 31, 1997, there were 181 Green
Burrito stores, including seven Company Stores and 174 stores owned by
franchisees or third parties ("Franchise Stores"), 134 of which were Green
Burrito dual-concept stores.
On July 22, 1997, Fidelity National Financial, Inc. ("Fidelity") purchased
1,000,000 shares of Common Stock of GB Foods Corporation (the "Company") from
the former Chief Executive Officer and principal stockholder ("Controlling
Shareholder"), for a purchase price of $5,000,000 cash. Fidelity also purchased
Common Stock Purchase Warrants ("Warrants") from the Company's Controlling
Shareholder pursuant to which Fidelity has the right to acquire 2,500,000 shares
of the Company's Common Stock, of which 1,500,000 are immediately exercisable at
$5.00 per share (the "$5.00 Warrants") and 1,000,000 are immediately exercisable
at $7.00 per share (the "$7.00 Warrants"). The $5.00 Warrants were purchased for
$600,000 cash and expire November 23, 2002; the $7.00 Warrants were purchased
for $100,000 cash and expire May 1, 2005. Simultaneously with the closing of the
transaction, Fidelity transferred 30,000 $5.00 Warrants to its investment
advisor.
In a separate transaction, Fidelity also acquired 1,000,000 Warrants
exercisable at $7.50 per share (the "$7.50 Warrants") from a law firm which has
provided services to the Company. The purchase price of the $7.50 Warrants was
$100,000 cash. The $7.50 Warrants expire May 1, 2005.
As a result of the purchase of the Shares and the Warrants, Fidelity
beneficially owns 42.1% of the Company, based on 6,571,485 shares outstanding at
December 31, 1997 and including the Warrants pursuant to which Fidelity has the
right to acquire an additional 3,470,000 shares. In conjunction with the
Fidelity purchases, three of the Company's Directors have resigned which
included both the Chief Executive Officer and Chief Financial Officer of the
Company. Key officers of Fidelity have filled the Director and Officer
vacancies. Several of the Directors and Officers are also Directors and/or
Officers of CKE with whom the Company has entered into a recent acquisition
agreement and with whom the Company has dual-concept franchise agreements.
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On December 12, 1997, the Company announced the execution of a letter of
intent to acquire all the outstanding capital stock of Timber Lodge Steakhouse,
Inc. ("TBRL"). TBRL is a public company traded on Nasdaq under the symbol TBRL
and is the operator of the Timber Lodge Steakhouse family-style restaurants. As
of December 31, 1997, TBRL was operating a total of 16 restaurants which were
located in the states of Minnesota, Wisconsin, Illinois, Western New York and
South Dakota. TBRL's revenues and net income for the fiscal year ended January
1, 1997 were $20,637,000 and $983,000 respectively.
On January 16, 1998, the Company executed a definitive Agreement and Plan
of Merger ("Merger Agreement") with TBRL, pursuant to which the Company will
acquire one hundred percent of the outstanding capital stock of TBRL. The
parties expect to close the transaction in April 1998. Under the terms of the
agreement, each share of TBRL common stock will be converted into the right to
receive .80 of a share of the Company's common stock together with cash in lieu
of any fractional shares (the "Exchange Ratio"). In addition, the agreement has
established a collar for the Exchange Ratio of $14.00 on the high end and $7.50
on the low end. If the Company's average closing common stock price during the
ten day trading period ending on the second business day prior to the closing,
("Average Closing Stock Price"), exceeds the limits of the collar then the
Exchange Ratio will be adjusted. If the Average Closing Stock Price is more than
$14.00, the Exchange Ratio shall be reduced to a number (rounded to the nearest
1/10000) equal to the product of the Exchange Ratio multiplied by a fraction,
the numerator of which is $14.00 and the denominator of which is the Average
Closing Stock Price. If the Average Closing Stock Price is less than $7.50, the
Company may elect to increase the Exchange Ratio to the number (rounded to the
nearest 1/10000) determined by dividing $7.61 by the Average Closing Stock
Price.
The Merger is subject to certain customary conditions, including (i)
Fairness Opinions; (ii) approvals from the shareholders of the Company and TBRL;
and (iii) the parties obtaining all regulatory approvals, including the
Securities and Exchange Commission declaring effective a Registration Statement
covering the shares of the Company's common stock to be issued in the Merger.
The Merger is also subject to the purchase by TBRL from CKE Restaurants, Inc.
("CKE") (NYSE:CKR) or its affiliate of between twelve (12) and (20) JB's
Restaurants for conversion to Timber Lodge Steakhouse restaurants. In this
regard, CKE has agreed under the Merger Agreement to negotiate in good faith
with TBRL to consummate such purchase and sale. In addition, Fidelity National
Financial, Inc. (NYSE:FNF) has agreed under the Merger Agreement that, subject
to the approval of the Merger by TBRL's shareholders, it will exercise currently
outstanding warrants to purchase shares of the Company's common stock for a cash
purchase price aggregating not less than $5,000,000. The Company plans to
utilize such proceeds, in part, for the conversion of the JB's Restaurants
acquired by TBRL into Timber Lodge Steakhouse restaurants.
On February 19, 1998, the Company entered into an Agreement and Plan of
Reorganization (the "Agreement"), pursuant to which the Company shall acquire
one hundred percent (100%) of the issued and outstanding capital stock of JB's
Restaurants, Inc. (JB's), a wholly owned subsidiary of CKE. Under the Agreement,
GBFC shall acquire JB's for one million (1,000,000) shares of GBFC Common Stock.
GBFC and CKE anticipate that the acquisition will Close on or before March 1,
1998. At the Closing, the business of JB's shall be comprised of forty-eight
(48) JB's company-owned restaurants, twenty (20) JB's franchise restaurants, and
four (4) Galaxy diner restaurants. The acquisition is subject to certain
conditions, including the satisfactory completion of due diligence, delivery by
CKE and the approval by GBFC of certain disclosure schedules, the issuance of
Fairness Opinions, approvals from the respective Boards of Directors of GBFC and
CKE, regulatory approvals, the closing of the previously announced acquisition
of twelve (12) JB's restaurants by Star Buffet, Inc., the upstream transfer by
way of dividend of sixteen (16) JB's restaurants and certain other assets to
CKE. It is the intent of the parties that the transaction qualify as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company is engaged in one industry segment. Financial information
concerning the Company's business is included and incorporated by reference in
Part II and Part IV of this Form 10-K.
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(c) NARRATIVE DESCRIPTION OF BUSINESS
GREEN BURRITO CONCEPT. The Green Burrito stores feature a menu of
traditional Mexican food items including burritos, tostadas, enchiladas, tacos,
gorditas, chili rellenos, appetizers, soft drinks and non-alcoholic Mexican
drinks. A variety of condiments, such as jalapeno peppers, hot sauce, and mild
and hot salsa, are available at self-serve salsa bars enabling customers to
spice and garnish their food according to individual tastes. In addition, the
Company has a Mexican breakfast menu, including huevos rancheros, breakfast
burritos, chorizo and egg burritos, tostadas rancheros and orange juice.
Although Green Burrito stores offer traditional Mexican food, the Company's
recipes are specially formulated to produce milder flavors than the flavors
typically associated with Mexican food. Emphasis is on serving substantial
portions of high-quality food using only top grade ingredients, including USDA
loin steak, USDA ground beef, USDA pork, grade "A" chicken meat, real cheddar
and Monterey Jack cheese, #1-long grain rice and triple-cleaned beans. The
Company believes the prices for its menu items give customers good value; entree
selections at Company Stores currently range in price from $.99 for a "super
value menu" item to $3.99 for a combination plate including two steak tacos,
salad, rice and beans. The most popular menu items include the "Big Ed" burrito,
a burrito weighing over two pounds consisting of steak, carnitas, refried beans,
rice, lettuce, tomato, guacamole, cheese and double tortillas at a price of
$4.69, and "wet burritos," consisting of refried beans, rice, cheese, and a
choice of steak, chicken, beef or pork covered with either green chili sauce or
enchilada sauce, and cheese, served with tortilla chips at a price of $3.99. The
menu also features special family prices which discount some of the menu items
for large quantity orders.
The Company has established certain criteria which, if met, allow the sale
of alcoholic beverages for consumption on store premises with prior approval
from the Company. Several Franchise Stores serve alcoholic beverages; however,
the Company may rescind the right to serve alcoholic beverages on 30 days'
written notice if the criteria are not being met.
COMPANY STORES. As of December 31, 1997, the Company operates seven Company
Stores, six of which are wholly-owned and one of which is owned by a limited
partnership of which the Company is the general partner. See "Properties" below.
The wholly-owned Company Stores in Anaheim Hills, Corona, Glendale, La Crescenta
and Long Beach were purchased from franchisees in October 1990, December 1991,
April 1994, November 1994 and December 1994, respectively.
The Company, as general partner of a store (Glendora) owned by a limited
partnership, receives 76.1% of the profits, subject to a non-cumulative
preference on cash distributions to the limited partner of $8,280 per annum
against the limited partner's 23.9% interest in the profits.
FRANCHISE PROGRAM. As of December 31, 1997, the Company had 174 operating
franchises, 134 of which were Green Burrito dual-concept restaurants. See "Green
Burrito Dual-Concept Stores" below. Since the inception of the franchise program
47 franchise restaurants have been closed and the Company has reacquired seven
franchises, five of which are currently operated as Company Stores.
When the Company commenced its franchise expansion, the initial franchise
fee was $10,000. Under the current standard Franchise Agreement for a
free-standing franchise (the "Franchise Agreement"), franchisees pay an initial
fee of $25,000 for each site at the time the Franchise Agreement is signed. The
Company treats the initial franchise fee as fully earned for financial statement
purposes upon the opening of the Franchise store. Franchisees also pay a weekly
franchise royalty equal to the greater of 5% of gross Franchise Store revenues
or $300 per week for each Franchise Store. An advertising fund contribution
equal to the greater of 1.5% of gross Franchise Store revenues or $450 is due
monthly for each Franchise Store. The Company has developed a separate Franchise
Agreement for dual-concept franchise stores. Dual-concept franchisees pay
similar fees related to the sale of Green Burrito proprietary products and
related items. The Company may from time to time change the amount of the
franchise fee, the franchise royalty and the advertising fund contribution to be
charged to franchisees.
The Franchise Agreement for free-standing stores grants the franchisee the
right to operate a Green Burrito store at specified locations and obligates the
Company to perform training and certain other assistance in consideration of the
franchisee's payment of the franchise fees, the franchise royalty and the
advertising fund contribution. The term of the Franchise Agreement is 10 years,
subject to renewal by the franchisee for
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two additional five-year periods, provided that, among other things, the
franchisee has fulfilled all the terms and conditions of the Franchise
Agreement, enters into the then current Franchise Agreement with the Company and
pays a renewal fee in accordance with their initial franchise agreement. The
Franchise Agreement requires franchisees to purchase most equipment, food,
supplies and products from sources approved by the Company in order to maintain
consistency and quality from store to store.
GREEN BURRITO DUAL-CONCEPT STORES. Since 1992, the Company has pursued the
franchising of Green Burrito products alongside an existing quick-service
restaurant line thereby enabling one restaurant facility to offer two restaurant
concepts (the "dual concept"). Dual concept stores are not owned by the Company,
they are all owned and operated by third parties who pay an initial franchise
fee to sell the Green Burrito products in their operations and pay continuing
royalties and advertising fees based on a percentage of the gross sales of Green
Burrito products. The Company has entered into the following dual-concept
arrangements since 1992:
Arby's/Green Burrito. During August 1992, the Company issued a franchise to
an Arby's, Inc. ("Arby's") franchisee for a restaurant located in Long Beach,
California. The Arby's franchisee remodeled an existing Arby's unit to include
the Green Burrito dual-concept in the same facility. A second Arby's/Green
Burrito store, located in Santa Maria, California, opened in January 1994.
Carl's Jr./Green Burrito. During May 1995, the Company reached an agreement
with Carl Karcher Enterprises, Inc., the operator and franchisor of Carl's Jr.
restaurants, and CKE Restaurants, Inc., its parent company (hereinafter jointly
referred to as "CKE"), pursuant to which CKE agreed to convert a minimum of 40
CKE-owned Carl's Jr. restaurants per year into Carl's Jr./Green Burrito
dual-concept stores over a five-year period commencing July 15, 1995. In
February 1997, the Company and CKE modified the agreement to provide for the
conversion of a minimum of 60 Carl's Jr. restaurants per year to Carl's
Jr./Green Burrito dual-concept stores. CKE also agreed to allow its franchisees
to convert their restaurants into Carl's Jr./Green Burrito dual-concept stores.
The initial term of the franchise agreements for CKE-owned locations is 15 years
with a 10-year renewal period. The franchise agreements also allow for an early
termination on a per-store basis if royalties payable to the Company for such
location are less than an average of $250 per month for any calendar year. As of
December 31, 1997, all Carl's Jr./Green Burrito stores were in compliance with
this requirement. As of December 31, 1997, there were 115 Carl's Jr./Green
Burrito restaurants in operation in California and Arizona.
Rally's/Green Burrito. The Company executed a development agreement in June
1995 with Rally's Hamburger's Inc. ("Rally's") for the development of
Rally's/Green Burrito dual-concept restaurants to be located primarily in the
Midwest. The Company also granted Rally's a conditional 10-year warrant to
purchase 1,000,000 shares of the Company's common stock at an exercise price of
$7.50 per share. In April 1996, the Company and Rally's executed an agreement
providing for the termination of the development agreement and the cancellation
of the outstanding warrant. As of December 31, 1996, all 14 of the Rally's
dual-concept stores had been closed.
WSMP/Green Burrito. During July 1995, the Company entered into a test-store
agreement with WSMP, Inc. ("WSMP"), a North Carolina-based food manufacturing
and restaurant company. WSMP restaurant operations include company-owned and
franchise units, primarily in the Southeast. The majority of these restaurants
are Western Steer units, including their traditional Western Steer Family
Restaurant and newer remodels known as Western Steer Steak, Buffet and Bakery
Restaurants. Prime Sirloin and Bennett's are the other two main segments of the
WSMP restaurant division. Pursuant to the test-store agreement, six store
locations were mutually selected for the test, one of which is still currently
operating. The test, as provided in the test-store agreement, concluded on
December 26, 1995. As of December 31, 1997, the parties had evaluated the
results of the test and determined not to progress to a formal franchise
relationship.
Hardee's/Green Burrito. During November 1995, the Company entered into a
test-store agreement with Hardee's Food System, Inc. ("Hardee's"). Pursuant to
the test-store agreement, 20 Hardee's store locations (14 in Tulsa, Oklahoma
area and six in Nebraska and/or Southeastern states) will be converted to
Hardee's/ Green Burrito restaurants. As of December 31, 1996, fifteen Hardee's
dual-concept stores were in operation. The duration of the test, as provided in
the test-store agreement, will continue until July 1, 1997. However, the test
period has been informally extended as a result of the recent acquisition of
Hardee's by CKE. The
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continued conversion of additional Hardee's stores will be contingent upon the
success and consumer acceptance of the converted stores.
Long John Silvers/Green Burrito. During July 1997, the company executed a
dual-concept franchise agreement with American Seafoods Partners ("ASP"), which
is a wholly owned subsidiary of Restaurant Management Company ("RMC") a
Franchisee operator of 120 Pizza Hut stores and 30 Long John Silver stores. One
store was converted in LasVegas New Mexico and opened in September 1997. The
continued conversion of additional Long John Silver dual-concept stores will be
contingent upon the success and consumer acceptance of the converted store.
Texaco/CKE/Green Burrito. During October 1997, the Company executed a
dual-concept franchise agreement with CKE and Texaco Refining and Marketing
("Texaco") where by they will co-develop 50 Carl's Jr./Texaco dual-brand
locations including 15 branded with Green Burrito. The new locations will be
developed in the Western United States over the next three years.
FRANCHISE PROMOTION. The Company is discussing arrangements for
dual-concept store franchises with other quick-service franchisors and intends
to pursue the sale of franchises to operators of free-standing restaurants as
well as operators of other franchises for dual-concept purposes.
COMPETITION. The quick-service restaurant industry is intensely competitive
in the attraction of consumers and franchisees and in obtaining suitable sites
for new stores. Some of the key competitive factors in the restaurant industry
are the quality and value of the food products offered, quality of service,
cleanliness, name identification, restaurant location, price and attractiveness
of facilities. The Company and its franchisees compete with restaurants of all
types in the local market areas surrounding individual stores and particularly
with quick-service restaurants and Mexican restaurants for a share of the
consumers' restaurant food dollars.
The Company believes its primary competition in the quick-service segment
of the restaurant industry is from established national quick-service restaurant
chains offering Mexican food, hamburgers, pizza, and chicken such as Taco Bell,
El Pollo Loco, Del Taco, Burger King, McDonalds, Wendy's, Pizza Hut and KFC.
These restaurants offer strong competition and have national name recognition
and greater advertising, financial, and other resources than the Company. These
competitors also have a far greater density of store sites and substantially
larger facilities. The Company also competes with local quick-service restaurant
chains and both quick-service and full-service "mom-and-pop" restaurants in
specific local markets.
The Company believes that its product is distinguishable from its
competitors because (i) the Green Burrito menu is different than menus of most
Mexican quick-service restaurants; (ii) Green Burrito food is prepared with
high-quality, natural ingredients resulting in food quality comparable to a
full-service restaurant; and (iii) the Company generally has larger portioning
standards giving the customer a good value overall for the price.
FRANCHISE AND OTHER GOVERNMENTAL REGULATION. The restaurant industry is
subject to extensive federal, state, and local regulation governing, among other
things, health and sanitation standards, equal opportunity employment, minimum
wage and licensing for the sale of food. In addition, the Company is subject to
extensive federal and state regulations governing franchise operations and sales
which impose registration and disclosure requirements on franchisors in the
offer and sale of franchises and, in certain cases, dictating substantive
standards that govern the relationship between franchisor and franchisees.
Various federal and state labor laws govern relationships with employees,
including such matters as minimum wage requirements, overtime, and other working
conditions.
MATERIALS. The Company's ability to maintain consistent quality throughout
its restaurants depends in part upon the ability to acquire food products and
related items from reliable vendors in accordance with Company specifications.
The Company has no long-term contracts for any food items used in its
restaurants and the Company is not dependent upon any single source for
ingredients. All essential ingredients for the Company's specially-formulated
recipes, beverage products, and other supplies are available, or upon short
notice could be made available, from alternative qualified suppliers.
EMPLOYEES. On December 31, 1997, the Company had 78 employees, of whom 12
were employed in the corporate office and 66 were employed in the seven Company
Stores. Of the total employees in the Company Stores, 9 were employed as
salaried managers and 57 were employed as hourly food handlers. The Company
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has never experienced a work stoppage and believes its employee relations to be
good. No employee of the Company is represented by a union.
ITEM 2. PROPERTIES
The Company leases retail locations for its restaurant operations as
described below:
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MONTHLY APPROXIMATE LEASE OPTIONAL RENEWAL
LOCATION RENTAL SQUARE FOOTAGE EXPIRATION DATE PERIOD (YEARS)
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<S> <C> <C> <C> <C>
Anaheim Hills.............................. $ 3,465 2,100 January 2000 10
Corona..................................... 4,153 2,500 March 2001 10
Downey..................................... 3,475 1,000 January 1998 0
Glendale................................... 2,773 1,470 March 1999 0
Glendora................................... 2,214 1,000 April 1998 5
La Crescenta............................... 3,505 1,400 January 1999 0
Long Beach................................. 3,168 1,200 May 1998 5
-------
Total............................ $22,753
=======
</TABLE>
The leases for the retail locations generally contain rent escalation
provisions, most of which are tied to increases in the consumer price index.
Some of the leases also provide for payment of additional rent based on a
percentage of sales. No additional rents have been required pursuant to these
provisions.
All of the Franchise Stores are located in leased premises not owned by the
Company. Franchise Store leases typically run for five to 10 years with one or
two five-year renewal options. As a condition of the Franchise Agreement, each
lease for a Franchise Store must contain language granting an option to the
Company to assume the lease if the Agreement is terminated for any reason or if
the franchisee is in default under the lease.
The Company's principal executive office is located in Anaheim, California
in a 650 square foot facility which is leased through October 1998, at the rate
of approximately $2,500 per month from CKE.
The Company is also the primary lessee of four facilities, formerly
occupied by the Company, which have been subleased to unrelated third parties. A
2,800 square foot facility in Newport Beach, California is leased through June
1998 with payments of approximately $5,200 per month and is subleased by the
Company through the lease term for approximately $4,800 per month. An 8,800
square foot facility also in Newport Beach, California is leased through
September 2000 for payments of approximately $16,000 per month and is subleased
by the Company through the lease term for approximately $16,000 per month. A
20,000 square foot building in Anaheim, California is leased through May 1998
for payments of approximately $9,200 per month, substantially all of which is
subleased by the Company through the lease term for approximately $8,700 per
month. The Company continues to utilize approximately 500 square feet of the
Anaheim facility. A 5,300 square foot facility which is leased through July 1998
at the rate of $9,300 per month and is subleased by the Company through the
lease terms for an amount in excess of the Company's obligation
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock trades on the Nasdaq Small Cap Market tier of
the Nasdaq Stock Market, under the symbol "GBFC." The Company's common stock is
also listed on the Boston Stock Exchange under the symbol "GBF." The following
table sets forth, for the calendar periods indicated, the high and low sales
price for the Company's common stock as reported on the Nasdaq Small Cap Market.
The
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prices represent quotations between dealers, without adjustment for retail mark
up, mark down or commission, and do not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
SALES PRICE
------------
HIGH LOW
---- ----
<S> <C> <C>
1996
First Quarter.................................. 10 5/8 6 7/8
Second Quarter................................. 10 3/8 6
Third Quarter.................................. 8 1/2 5 3/4
Fourth Quarter................................. 7 3/8 5 1/2
1997
First Quarter.................................. 8 1/8 6 3/8
Second Quarter................................. 6 1/4 4 3/4
Third Quarter.................................. 14 3/8 4 7/8
Fourth Quarter................................. 14 1/4 9 1/2
</TABLE>
The Company has not paid dividends on its common stock since its
incorporation and anticipates that, for the foreseeable future, earnings, if
any, will continue to be retained for use in its business. On December 31, 1997,
the approximate number of record holders of the Company's common stock was 209;
however, the Company believes that the number of beneficial owners exceeds 1,000
persons.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the five years ended December 31,
1997 is derived from the Consolidated Financial Statements of the Company. The
following information should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained elsewhere in this report. The data has been adjusted to take into
account the discontinuance of the Commissary operations in the fourth quarter of
1992.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues............................. $ 5,380 $ 4,994 $ 6,599 $ 6,612 $ 5,469
Total expenses excluding litigation
settlement and related costs....... (4,526) (5,042) (7,716) (8,287) (6,351)
Litigation settlements and related
costs.............................. -- -- (805) (2,869) (4,195)
Income (loss) from continuing
operations......................... 854 (48) (1,922) (4,544) (5,077)
Income on disposal of commissary
operations......................... -- -- -- -- 87
Net income (loss).................... 854 (48) (1,922) (4,544) (4,990)
Basic net income (loss) per share
from continuing operations......... 0.14 (0.01) (0.32) (0.90) (1.05)
Diluted net income (loss) per share
from continuing operations......... 0.11 (0.01) (0.32) (0.90) (1.05)
Basic net income (loss) per share.... 0.14 (0.01) (0.32) (0.90) (1.05)
Diluted net income (loss) per
share.............................. 0.11 (0.01) (0.32) (0.90) (1.05)
Basic weighted average shares
outstanding........................ 6,292,691 6,177,716 5,982,673 5,029,437 4,762,574
Diluted weighted average shares
outstanding........................ 7,751,921 6,177,716 5,982,673 5,029,437 4,762,574
Total assets......................... 4,802 3,462 3,277 4,267 5,007
Long-term debt....................... -- 15 25 8 11
</TABLE>
No dividends were paid or declared during the five years ended December 31,
1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
This discussion and analysis contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, which are subject to the "safe harbor" created by those sections. The
Company's actual future results could differ materially from those projected in
the forward-looking statements. The Company assumes no obligation to update the
forward-looking statements or such factors.
Comparison of the Year Ended December 31, 1997 to the Year Ended December
31, 1996. Total revenues from operations for the year ended December 31, 1997
were $5,380,000, an increase of 8% from $4,994,000 earned in the comparable
period in 1996. Revenues for the years ended December 31, 1997 and 1996,
respectively, included $3,019,000 and $2,988,000 from restaurant operations,
$1,229,000 and $1,069,000 from royalties, $409,000 and $390,000 from franchise
fees, $495,000 and $349,000 from other sources, $143,000 and $105,000 from
interest income, and $85,000 and $93,000 from frozen food operations.
Revenues from restaurant operations for 1997 increased 1% to $3,019,000
compared to $2,988,000 earned in 1996, as the result of an increase in same
store sales. Store-operating months decreased to 84 in 1997 from 86 in 1996. The
Company anticipates revenues from restaurant operations in 1998 to remain
consistent with revenues from 1997. At December 31, 1997 and 1996, respectively,
seven Company Stores were open (including the one consolidated partnership-owned
store in both years).
9
<PAGE> 10
Revenues from franchise royalties increased 15% to $1,229,000 for the year
ended December 31, 1997 from $1,069,000 earned in the comparable period in 1996.
Royalties from dual-concept Franchise Stores range from 3% to 4% of Green
Burrito sales while royalties from free-standing Franchise Stores are typically
5% of sales. The following table is a summary of Franchise Store activity during
1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---- --------
<S> <C> <C>
DUAL-CONCEPT FRANCHISE STORES
Stores at beginning of year.............................. 84 41
Stores opened during year................................ 53 59
Stores closed during the year............................ (3) (16)
-------- --------
Stores at end of year.................................... 134 84
======== ========
Number of dual-concept
Franchise Store operating months....................... 1,291 833
======== ========
Royalty income........................................... $579,000 $387,000
======== ========
FREE-STANDING FRANCHISE STORES
Stores at beginning of year.............................. 43 47
Stores closed during the year............................ (3) (4)
-------- --------
Stores at end of year.................................... 40 43
======== ========
Number of free-standing
Franchise Store operating months....................... 503 532
======== ========
Royalty income........................................... $650,000 $682,000
======== ========
</TABLE>
Royalty income from dual-concept Franchise Stores for the year ended
December 31, 1997 increased $192,000, to $579,000 in 1997 from $387,000 earned
in 1996, as the result of the increase in store operating months to 1,291 in
1997 compared with 833 in 1996. The increase in store operating months is the
result of a net increase of 50 dual-concept franchise stores during 1997. The
net increase of 50 dual-concepts stores in 1997 is the result of 52 CKE openings
plus 1 Long John Silver opening, less 3 WSMP closings. Royalty income from
free-standing Franchise Stores for the year ended December 31, 1997 decreased
$32,000 from the amount earned in 1996 as a result of the reduction in
store-operating months. The store operating months decreased as a result of the
closure of 3 stores. The Company anticipates royalties earned from dual-concept
Franchise Stores to grow in 1998 while royalties earned in 1998 from
free-standing Franchise Stores are anticipated to remain comparable to 1997
royalties.
Revenues from franchise fees increased 5% to $409,000 for the year ended
December 31, 1997 from $390,000 earned in the comparable period in 1996,
primarily due to the opening of 53 dual-concept stores during 1997 as compared
to a net 44 openings in 1996. Although there were 59 openings in 1996, the 15
Hardee's store openings were considered "test stores" and did not pay any
franchise fees. Franchise fees from dual-concept stores range from $5,000 to
$7,500 per store. At a minimum, the Company expects to earn franchise fees in
the year ended December 31, 1998 at a level comparable to 1997.
Revenues from other sources increased $145,000 to $494,000 for the year
ended December 31, 1997 from $349,000 earned in the comparable period in 1996.
Included in other revenue are volume incentives received from various vendors.
Volume incentives which cannot be directly related to company owned and operated
stores are recorded as other income. Volume incentives which are directly
related to the company owned stores are recorded as reductions to either food
costs or paper costs depending on the source of the respective volume incentive.
Revenues from frozen food operations decreased 9% to $85,000 for the year
ended December 31, 1997 from $93,000 earned in the comparable period in 1996.
Late in the second quarter of 1995, the Company made a strategic decision to
discontinue its retail frozen burrito business for the time being while the
Company focuses on other growth plans. The Company is continuing to sell a small
quantity of frozen burritos through various channels, but is not actively
pursuing the development of this business.
On an aggregate basis, cost of sales from restaurant operations (food,
packaging, payroll and other employee benefits), expressed as a percentage of
sales, averaged 65% for December 31, 1997 and 67% for
10
<PAGE> 11
1996. Cost of sales for the years ended December 31, 1997 and 1996,
respectively, included $1,077,000 and $1,132,000 from food and packaging and
$871,000 and $880,000 from payroll and other employee benefits. The favorable
decrease in cost of sales was the direct result of lower food and packaging
costs negotiated with vendors in 1997.
On an aggregate basis, occupancy and other operating costs (including
utilities, housekeeping, liability insurance, repairs and maintenance, and other
miscellaneous items), expressed as a percentage of sales, averaged approximately
27% for both the years ended December 31, 1997 and 1996. Occupancy and other
operating costs for the years ended December 31, 1997 and 1996 totaled $821,000
and $810,000, respectively.
The frozen foods division incurred operating costs of $76,000 and $81,000
resulting in income of $9,000 and $12,000 for the years ended December 31, 1997
and 1996 respectively.
General and administrative expense for the years ended December 31, 1997
and 1996 was $1,667,000 and $2,123,000, respectively, representing 31% and 43%
of total revenue for each respective year. The decrease in general and
administrative expenses is primarily the result of decreased corporate expenses
relating to the change of control and relocation and downsizing of the corporate
office and staff.
Comparison of the Year Ended December 31, 1996 to the Year Ended December
31, 1995. Total revenues from operations for the year ended December 31, 1996
were $4,994,000, a decrease of 24% from $6,599,000 earned in the comparable
period in 1995. Revenues for the years ended December 31, 1996 and 1995,
respectively, included $2,988,000 and $4,818,000 from restaurant operations,
$1,069,000 and $845,000 from royalties, $390,000 and $322,000 from franchise
fees, $349,000 and $305,000 from other sources, $105,000 and $89,000 from
interest income, and $93,000 and $220,000 from frozen food operations.
Revenues from restaurant operations for 1996 decreased 38% to $2,988,000
compared to $4,818,000 earned in 1995, as a result of a decrease in
store-operating months to 86 in 1996 from 144 in 1995. This decrease in
store-operating months is due to the sale of five Company stores in late 1995
and the closure of one Company store in February 1996. In addition, same-store
sales decreased 4%. Management believes same-store sales decreased primarily
because of increased competition from new fast-food restaurant openings in close
proximity to the Company Stores. At December 31, 1996 and 1995, respectively,
seven and eight Company Stores were open (including the one consolidated
partnership-owned store in both years).
Revenues from franchise royalties increased 27% to $1,069,000 for the year
ended December 31, 1996 from $845,000 earned in the comparable period in 1995.
Royalties from dual-concept Franchise Stores range from 3% to 4% of Green
Burrito sales while royalties from free-standing Franchise Stores are typically
5% of sales. The following table is a summary of Franchise Store activity during
1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
DUAL-CONCEPT FRANCHISE STORES
Stores at beginning of year............................ 41 5
Stores opened during year.............................. 59 37
Stores closed during the year.......................... (16) (1)
-------- --------
Stores at end of year.................................. 84 41
======== ========
Number of Dual-concept
Franchise Store operating months..................... 833 220
======== ========
Royalty income......................................... $387,000 $ 78,000
======== ========
Free-standing Franchise Stores
Stores at beginning of year............................ 47 45
Stores closed during year.............................. (4) (3)
Stores purchased from Company by franchisee............ -- 5
-------- --------
Stores at end of year.................................. 43 47
======== ========
Number of Free-standing
Franchise Store operating months..................... 532 540
======== ========
Royalty income......................................... $682,000 $767,000
======== ========
</TABLE>
11
<PAGE> 12
Royalty income from dual-concept Franchise Stores for the year ended
December 31, 1996 increased $309,000, to $387,000 in 1996 from $78,000 earned in
1995, as the result of the increase in store operating months to 833 in 1996
compared with 220 in 1995. The increase in store operating months is the result
of a net increase of 43 dual-concept franchise stores during 1996. The net
increase of 43 dual-concepts stores in 1996 is the result of 43 CKE openings
plus 15 Hardee's store openings and one WSMP opening, less 14 Rally's closings
and two WSMP closings. However, the 15 Hardee's store openings are considered
"test-stores" and do not earn royalties. Royalty income from free-standing
Franchise Stores for the year ended December 31, 1996 decreased $85,000 over the
amount earned in 1995 as a result of the reduction in store-operating months.
The store operating months decreased as a result of the closure of four stores.
Revenues from franchise fees increased 21% to $390,000 for the year ended
December 31, 1996 from $322,000 earned in the comparable period in 1995,
primarily due to the opening of 59 dual-concept stores during 1996. Of the 59
dual-concept stores opened in 1996, 15 were considered test-stores and were not
required to pay a franchise fee and the balance paid franchise fees ranging from
$5,000 to $7,500 per store.
Revenues from other sources increased $44,000 to $349,000 for the year
ended December 31, 1996 from $305,000 earned in the comparable period in 1995.
Included in other revenue are volume incentives received from various vendors.
Also included in other revenue in 1995 is a non-recurring workers compensation
refund totaling $115,000.
Revenues from frozen food operations decreased 58% to $93,000 for the year
ended December 31, 1996 from $220,000 earned in the comparable period in 1995.
Late in the second quarter of 1995, the Company made a strategic decision to
discontinue its retail frozen burrito business for the time being while the
Company focuses on other growth plans. The Company is continuing to sell a small
quantity of frozen burritos through various channels, but is not actively
pursuing the development of this business.
On an aggregate basis, cost of sales from restaurant operations (food,
packaging, payroll and other employee benefits), expressed as a percentage of
sales, averaged 67% for both the years ended December 31, 1996 and 1995. Cost of
sales for the years ended December 31, 1996 and 1995, respectively, included
$1,132,000 and $1,795,000 from food and packaging and $880,000 and $1,443,000
from payroll and other employee benefits.
On an aggregate basis, occupancy and other operating costs (including
utilities, housekeeping, liability insurance, repairs and maintenance, and other
miscellaneous items), expressed as a percentage of sales, averaged approximately
28% for both the years ended December 31, 1996 and 1995. Occupancy and other
operating costs for the years ended December 31, 1996 and 1995 totaled $810,000
and $1,363,000 respectively.
The frozen foods division incurred operating costs of $81,000 and $228,000
resulting in income of $12,000 and a loss of $8,000 for the years ended December
31, 1996 and 1995 respectively.
General and administrative expense for the years ended December 31, 1996
and 1995 was $2,123,000 and $2,872,000, respectively, representing 43% and 44%
of total revenue for each respective year. The decrease in general and
administrative expenses is primarily the result of decreased legal and
accounting fees. During 1995, a large amount of legal and accounting fees were
incurred related to litigation settlements.
There were no litigation settlements for the year ended December 31, 1996,
compared with $805,000 for comparable period in 1995. In 1995, the Company
incurred expenses of approximately $648,000 related to certain settlements with
non-litigating franchisees and incurred other legal settlement costs totaling
$157,000.
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 Stores without the
addition of significant personnel in the next 12 months.
Utilization of Net Operating Loss Carryforwards. At December 31, 1997 and
1996, the Company had net operating loss carryforwards for federal tax purposes
of approximately $11,906,000 and $12,846,000 respectively, which if unused to
offset future taxable income, will expire between 2008 and 2012. At December 31,
1997 and 1996, the Company had state net operating loss carryforwards of
approximately
12
<PAGE> 13
$5,694,000 and $6,656,000 respectively, which if unused will expire between 1999
and 2002. Utilization of the carryforwards can be limited to specific amounts
each year. These net operating loss carryforwards resulted in a potential
deferred tax asset of approximately $4.4 million as of December 31, 1997.
However, SFAS No. 109 requires that a valuation allowance be recorded against
tax assets which are not likely to be realized. Due to the uncertain nature of
the ultimate realization of the deferred tax asset, based upon the Company's
past operating performance and expiration dates of the loss carryforwards, the
Company established a full valuation allowance, for both December 31, 1997 and
1996, against these carryforward benefits and is recognizing the benefits only
as reassessment demonstrates they are realizable. Realization is entirely
dependent upon future earnings in specific tax jurisdictions. While the need for
this valuation allowance is subject to period review, if the allowance is
reduced, the tax benefits of the carryforwards will be recorded in future
operations as a reduction of the Company's income tax expense.
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. On October 1, 1996, the federal
statutory minimum wage was increased to $4.75 per hour. This increase in the
statutory minimum wage has not had a material impact on the Company's current
operations as the majority of the Company's hourly employees have been paid in
excess of the statutory minimum wage. On March 1, 1997 the California statutory
minimum wage was increased to $5.00 per hour and again increased on September 1,
1997 to $5.15 per hour. At September 1, 1997, approximately 20 of the 57 hourly
employees are paid the California 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 quantities
due to the increased number of Green Burrito stores.
Liquidity and Capital Resources. The Company's cash and short-term
investments increased $1,678,000 to $3,453,000 at December 31, 1997 compared to
$1,775,000 at December 31, 1996, due to increases in cash flow from operations
and issuances of common stock. Net cash provided by operating activities was
$1,142,000 in 1997 as compared to $265,000 in 1996. The increase was attributed
to improved operating results and collections of notes receivable.
Management believes the Company's cash, cash equivalents and short-term
investments will be sufficient to finance current and forecasted operations and
obligations. It is anticipated that long-term cash requirements will be funded
by the implementation of the Company's current expansion plans, which primarily
involve the expansion of the number of Green Burrito dual-concept stores through
franchising. These expansion plans are not anticipated to require significant
increases in personnel prior to achieving positive cash flow from such
dual-concept franchising efforts. It is anticipated that these expansion plans
will significantly improve the Company's cash flow from operations once they are
fully achieved. If the Company's expansion plans are neither completed nor
successful, the Company will rely on cash, cash equivalents and short-term
investments and will pursue other financing alternatives to fund operations
until such time as alternative expansion plans can be formulated and achieved.
13
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements and Schedule:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Certified Public Accountants......... 15
Consolidated Balance Sheets as of December 31, 1997 and
1996...................................................... 17
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995.......................... 18
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1997, 1996 and 1995.............. 19
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................... 20
Notes to Consolidated Financial Statements.................. 21
Schedule II -- Valuation and Qualifying Accounts............ 35
</TABLE>
Schedules not included above have been omitted because of the absence of
the conditions under which they are required or because the information called
for is shown in the consolidated financial statements or in the notes thereto.
14
<PAGE> 15
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of
GB Foods Corporation
We have audited the accompanying consolidated balance sheets of GB Foods
Corporation as of December 31, 1997 and 1996 and the related consolidated
statements of operations, 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 audit 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 consolidated financial position of GB Foods
Corporation as of December 31, 1997 and 1996, and the consolidated results of
its operations and its consolidated cash flows for the years then ended in
conformity with generally accepted accounting principles.
We have also audited Schedule II of GB Foods Corporation for the years
ended December 31, 1997 and 1996. In our opinion, this schedule presents fairly,
in all material respects, the information required to be included therein.
/s/ GRANT THORNTON LLP
--------------------------------------
Grant Thornton LLP
Irvine, California
January 30, 1998, except for Note 16 as to
which the date is February 19, 1998
15
<PAGE> 16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of
GB Foods Corporation
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of GB Foods Corporation and its subsidiary
(the "Company") for the year ended December 31, 1995. In connection with our
audit of the consolidated financial statements, we also have audited the
consolidated financial statement schedule for the year ended December 31, 1995.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of the Company's operations
and their cash flows for the year ended December 31, 1995, in conformity with
generally accepted accounting principles. Also in our opinion, the related
consolidated financial statement schedule taken as a whole, presents fairly, in
all material respects, the information set forth therein.
/s/ CACCIAMATTA ACCOUNTANCY CORPORATION
- ----------------------------------------------
CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California
February 23, 1996
16
<PAGE> 17
GB FOODS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $ 1,129,536 $ 753,601
Short-term investments.................................... 2,323,181 1,020,893
Accounts receivable, net of allowance for doubtful
accounts of $81,613 in 1997 and $75,613 in 1996........ 198,076 185,465
Current portion of notes receivable....................... 78,703 179,583
Other assets.............................................. 218,849 81,003
------------ ------------
Total current assets.............................. 3,948,345 2,220,545
Equipment and improvements, net............................. 449,144 739,005
Notes receivable, net....................................... 338,763 399,098
Other assets................................................ 65,379 103,448
------------ ------------
$ 4,801,631 $ 3,462,096
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long-term debt.................... $ -- $ 10,538
Accounts payable and accrued expenses..................... 283,668 359,329
Accrued salaries, wages and employee benefits............. 114,347 109,649
Deferred franchise fees................................... 25,000 12,500
------------ ------------
Total current liabilities......................... 423,015 492,016
Long-term debt, less current installments................... -- 14,835
Minority interest in consolidated partnership............... 60,687 60,149
Commitments and contingencies
Stockholders' equity
Common stock, $.08 par value, authorized 50,000,000
shares;
6,571,485 and 6,440,414 shares issued and outstanding
in
1997 and 1996, respectively............................ 525,719 515,232
Additional paid-in capital................................ 16,329,617 15,770,983
Accumulated deficit....................................... (12,537,407) (13,391,119)
------------ ------------
Total shareholders' equity........................ 4,317,929 2,895,096
------------ ------------
$ 4,801,631 $ 3,462,096
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17
<PAGE> 18
GB FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Revenues:
Restaurant operations............................... $3,018,949 $2,987,609 $ 4,818,483
Franchise royalties................................. 1,229,498 1,069,190 845,059
Franchise fees...................................... 409,253 389,392 322,165
Frozen food operations.............................. 85,142 93,250 220,116
Interest............................................ 143,097 105,299 88,795
Other............................................... 494,365 348,939 304,354
---------- ---------- -----------
5,380,304 4,993,679 6,598,972
---------- ---------- -----------
Restaurant operating costs:
Food and packaging.................................. 1,077,433 1,132,226 1,794,864
Payroll and other employee benefits................. 870,533 879,830 1,442,601
Occupancy and other operating costs................. 820,704 810,437 1,363,245
Frozen food operating costs:
Food and packaging.................................. 74,228 78,787 218,375
Other operating costs............................... 1,280 2,524 9,299
General and administrative............................ 1,667,063 2,123,068 2,871,507
Litigation settlements and related costs.............. -- -- 804,753
---------- ---------- -----------
4,511,241 5,026,872 8,504,644
---------- ---------- -----------
Income (loss) before minority interest in consolidated
partnership......................................... 869,063 (33,193) (1,905,672)
Minority interest in consolidated partnership......... (15,351) (15,252) (16,774)
---------- ---------- -----------
Net income (loss)..................................... $ 853,712 $ (48,445) $(1,922,446)
========== ========== ===========
Basic net income (loss) per share..................... $ .14 $ (.01) $ (.32)
========== ========== ===========
Diluted net income (loss) per share................... $ .11 $ (.01) $ (.32)
========== ========== ===========
Basic weighted average shares......................... 6,292,691 6,177,716 5,982,673
========== ========== ===========
Diluted weighted average shares....................... 7,751,921 6,177,716 5,982,673
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE> 19
GB FOODS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- ADDITIONAL TOTAL
NUMBER LITIGATION DEFERRED PAID-IN ACCUMULATED SHAREHOLDERS'
OF SHARES AMOUNT SETTLEMENTS COMPENSATION CAPITAL DEFICIT EQUITY
--------- -------- ----------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994... 5,671,556 $453,724 $ 2,523,000 $(52,175) $11,780,200 $(11,420,228) $ 3,284,521
Settlement of litigation... -- -- 648,000 -- -- -- 648,000
Issuance of common stock... 108,000 8,640 (648,000) -- 639,360 -- --
Issuance of common stock... 400,000 32,000 (2,523,000) -- 2,491,000 -- --
Issuance of common stock
under stock option
plans.................... 105,128 8,410 -- -- 358,154 -- 366,564
Amortization of stock
awards................... -- -- -- 52,175 -- -- 52,175
Net loss................... -- -- -- -- -- (1,922,446) (1,922,446)
--------- -------- ----------- -------- ----------- ------------ -----------
Balance, December 31, 1995... 6,284,684 502,774 -- -- 15,268,714 (13,342,674) 2,428,814
Issuance of common stock
under stock option
plans.................... 155,730 12,458 -- -- 502,269 -- 514,727
Net loss................... -- -- -- -- -- (48,445) (48,445)
--------- -------- ----------- -------- ----------- ------------ -----------
Balance, December 31, 1996... 6,440,414 515,232 -- -- 15,770,983 (13,391,119) 2,895,096
Issuance of common stock
under stock option
plans.................... 131,071 10,487 -- -- 558,634 -- 569,121
Net income................. -- -- -- -- -- 853,712 853,712
--------- -------- ----------- -------- ----------- ------------ -----------
Balance, December 31, 1997... 6,571,485 $525,719 $ -- $ -- $16,329,617 $(12,537,407) $ 4,317,929
========= ======== =========== ======== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
19
<PAGE> 20
GB FOODS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ 853,712 $ (48,445) $(1,922,446)
Adjustments to reconcile net income (loss) to net
cash flows provided by (used in) operating
activities:
Litigation settlements....................... -- -- 648,000
Stock issued in exchange for services........ -- -- 39,130
Amortization of stock awards................. -- -- 52,175
Provision for doubtful accounts.............. 790 87,663 84,051
Depreciation and amortization................ 296,857 344,573 438,453
Minority interest in consolidated
partnership............................... 14,210 15,252 16,774
Loss on disposal of equipment and
improvements.............................. -- 154,123 65,072
Changes in operating assets and liabilities:
Accounts and current notes receivable........ 67,680 (100,209) (171,421)
Other current assets......................... (150,926) 44,838 25,831
Non-current notes receivable................. 80,135 40,867 10,608
Other non-current assets..................... 38,069 (3,330) 9,079
Accounts payable and accrued expenses........ (75,661) (203,080) (52,891)
Salaries, wages and employee benefits........ 4,698 450 (5,103)
Deferred franchise fees...................... 12,500 (67,500) (95,000)
----------- ----------- -----------
Net cash provided by (used in) operating
activities.............................. 1,142,064 265,202 (857,688)
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from short-term investments.............. 5,175,131 2,082,108 1,921,481
Purchases of short-term investments............... (6,477,419) (2,339,171) (1,304,313)
Proceeds from equipment and improvements.......... 69,209 76,351 207,727
Expenditures for equipment and improvements....... (63,126) (36,319) (494,241)
----------- ----------- -----------
Net cash provided by (used in) investing
activities.............................. (1,296,205) (217,031) 330,654
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt...................... -- -- 31,098
Repayments of revolving line of credit and
long-term debt................................. (25,373) (10,202) (11,645)
Proceeds from issuance of common stock primarily
under stock option plans....................... 569,121 514,727 327,434
Distributions to minority partner................. (13,672) (15,823) (17,695)
----------- ----------- -----------
Net cash provided by financing
activities.............................. 530,076 488,702 329,192
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents....................................... 375,935 536,873 (197,842)
Cash and cash equivalents at beginning of year...... 753,601 216,728 414,570
----------- ----------- -----------
Cash and cash equivalents at end of year............ $ 1,129,536 $ 753,601 $ 216,728
=========== =========== ===========
Supplemental Information:
Cash paid during the year for:
Interest.......................................... $ 1,266 $ 2,719 $ 2,234
Income taxes...................................... $ 1,600 $ 1,600 $ 1,600
Non-cash investing and financing activities:
Assets sold for notes receivable.................. $ -- $ -- $ 465,056
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE> 21
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business activities
GB Foods Corporation and its wholly-owned subsidiary GB Franchise
Corporation (the "Company") sell and supervise Mexican quick-service franchise
restaurants, primarily in Southern California, under the trade name "The Green
Burrito." The Company is currently expanding its franchise business in certain
regional markets throughout the country. The Company also owns and operates a
small number of Green Burrito restaurants in Southern California.
Principles of consolidation
The consolidated financial statements include the accounts of GB Foods
Corporation, GB Franchise Corporation and an investment in a partnership-owned
restaurant in which the Company has a majority interest. All significant
intercompany balances and transactions have been eliminated.
Cash, cash equivalents and short-term investments
All highly liquid investments with an original maturity of three months or
less at the date of purchase are considered cash equivalents. Investments with
original maturities between three and 12 months are considered short-term
investments. Short-term investments, consisting of U.S. government and agency
securities, are classified as held to maturity and are carried at cost which
approximates market.
The Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts. The Company believes it is not exposed to any significant
credit risk on cash and cash equivalents.
Long-lived assets
Equipment and improvements are recorded at cost and depreciated over their
estimated useful lives, ranging from two to seven years, using the straight-line
method. Leasehold improvements are amortized over the lesser of the estimated
useful life of the related asset or the respective lease term.
All of the Company's long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate the carrying amount may not be
recovered. If the sum of the expected future cash flows is less than the
carrying amount of the asset, a loss is recognized.
Advertising costs
Advertising costs are charged to operations when incurred. Advertising
expense for the years ended December 31, 1997, 1996 and 1995 was $55,347,
$56,913, and $86,873, respectively.
Income taxes
The Company recognizes income taxes using the liability method, under which
deferred tax assets and liabilities are determined based on the net tax effects
of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Deferred tax assets are reduced by a valuation allowance when it is more likely
than not that they will not be realized.
Basic and diluted net income (loss) per share
Net income (loss) per share is calculated in accordance with Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"), which
superseded APB Opinion No. 15. Net income
21
<PAGE> 22
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(loss) per share for all periods presented has been restated to reflect the
adoption of SFAS 128. Basic net income (loss) per share is based upon the
weighted average number of common shares outstanding. Diluted net income (loss)
per share is based on the assumption that all dilutive convertible shares and
stock options were converted or exercised. Dilution is computed by applying the
treasury stock method. Under this method, options and warrants are assumed to be
exercised at the beginning of the period (or at the time of issuance, if later),
and as if funds obtained thereby were used to purchase common stock at the
average market price during the period.
Restaurant Operations
At December 31, 1997, the Company currently owns and operates seven Company
owned stores, which includes one consolidated partnership owned 52.2% by the
Company. Revenues and operating costs from such operations are depicted as
"Restaurant Operations" and "Restaurant Operating Costs," respectively in the
accompanying financial statements.
Franchise revenues
Franchise arrangements, with franchises who operate in various states
generally provide for initial fees and continuing royalty payments to the
Company based upon a percent of sales. Franchise royalties are recognized as
earned on a monthly basis. For the majority of the Franchise Stores currently in
operation, they are required to pay a weekly franchise royalty equal to the
greater of 5% of gross Franchise Store revenues or a minimum per week as
specified in each franchise agreement. The Company has developed a separate
Franchise Agreement for dual-concept franchise stores. Dual-concept franchisees
pay similar fees related to the sale of Green Burrito proprietary products and
related items. The Company may from time to time change the amount of the
franchise royalty fee charged to the franchisees.
The Company generally charges an initial franchise fee for each new
franchised restaurant that is added. The Company recognizes initial franchise
fees when substantially all services required by the Company are complete and
when the related franchise store commences operations. Initial franchise fees
currently range from $5,000 to $25,000 for each franchise restaurant pursuant to
the respective franchise agreement.
The Franchise Agreement for free-standing stores grants the franchisee the
right to operate a Green Burrito store at specified locations and obligates the
Company to perform training and certain other assistance in consideration of the
franchise's payment of the franchise fees, the franchise royalty and the
advertising fund contribution. The term of the Franchise Agreement is 10 years,
subject to renewal by the franchisee for two additional five-year periods,
provided that, among other things, the franchisee has fulfilled all the terms
and conditions of the Franchise Agreement, enters into the then current
Franchise Agreement with the Company and pays a renewal fee in accordance with
their initial franchise agreement. The Franchise Agreement requires franchisees
to purchase most equipment, food, supplies and products from sources approved by
the Company in order to maintain consistency and quality from store to store.
Following is a summary of franchise store activity:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Franchise stores at beginning of year................... 127 88 50
Franchise stores opened during year..................... 53 59 37
Franchise stores closed during year..................... (6) (20) (4)
Company stores sold to franchisee....................... -- -- 5
--- --- --
Franchise stores at end of year......................... 174 127 88
=== === ==
</TABLE>
22
<PAGE> 23
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
As of December 31, 1997, CKE Restaurants, Inc. (CKE) owned and operated 115
dual-concept franchise stores. Franchise revenues generated from the CKE
dual-concept franchise stores were approximately $942,000 for the year ended
December 31, 1997, which represented approximately 18% of total revenues.
Stock-based compensation
Statement of Financial Accounting Standard (SFAS) No. 123 "Accounting for
Stock-Based Compensation" was issued by the Financial Accounting Standards Board
(FASB) in October 1995, and is effective for transactions entered into after
December 15, 1995. SFAS No. 123 provides for companies to recognize compensation
expense associated with stock-based compensation plans over the anticipated
service period based on the fair value of the award at the date of grant.
However, SFAS No. 123 allows for companies to continue to measure compensation
costs as prescribed by APB Opinion (APB) No. 25, "Accounting for Stock Issued to
Employees." The Company has elected to continue its current policy, which is to
account for stock-based compensation plans under APB No. 25.
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
2. NOTES RECEIVABLE
Notes receivable consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Notes receivable...................................... $499,835 $ 666,260
Less allowance for doubtful notes..................... (82,369) (87,579)
-------- ---------
417,466 578,681
Less current portion of notes receivable.............. (78,703) (179,583)
-------- ---------
$338,763 $ 399,098
======== =========
</TABLE>
Included in notes receivable at December 31, 1997 and 1996, is an
installment note receivable totaling $384,197 and $454,829, respectively, from a
franchisee and current shareholder who purchased the assets of and franchise
rights to five Company-owned restaurants from the Company in October 1995. The
note bears interest at 8% per annum and requires principal and interest payments
of $8,009 until the note is paid in full in October 2002. The note is
collateralized by the assets of the related restaurants and a pledge of company
common stock.
Also included in notes receivable at December 31, 1997 and 1996, is an
installment note totaling $91,424 and $98,787, respectively. The note arose when
the Company sold the assets of its restaurant located in Paramount, California
and entered into a franchise agreement with the purchaser of the assets for a
franchise fee of $10,000. The note bears interest at 8% per annum and is payable
in monthly principal and interest installments of $1,250 until paid in full in
May 2006. The note is substantially reserved as of December 31, 1997 and 1996.
23
<PAGE> 24
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. EQUIPMENT AND IMPROVEMENTS
Equipment and improvements, at cost, are as follows at December 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Vehicles.......................................... $ 53,460 $ 124,644
Equipment, furniture and fixtures................. 1,174,602 1,200,109
Leasehold improvements............................ 735,063 884,884
----------- -----------
1,963,125 2,209,637
Less accumulated depreciation and amortization.... (1,513,981) (1,470,632)
----------- -----------
Net equipment and improvements.................... $ 449,144 $ 739,005
=========== ===========
</TABLE>
In October 1996, the Company signed a lease for a new Corporate office with
a commencement date of January 15, 1997. Consequently, the Company has written
off the leasehold improvements and built-in furniture at the old Corporate
office that had a net book value of $128,278 as of December 31, 1996.
In October 1995, the Company sold the assets of five Company-owned
restaurants and the franchise rights to operate the restaurants for $52,262 in
cash and an installment note of $500,000. Included in the installment note
balance is an aggregate franchise fee of $50,000 for the five stores related to
the sales of the franchise rights by the Company to the purchaser of the assets.
The Company recorded a loss on the sales of the assets of $31,414.
4. LONG-TERM DEBT
Long-term debt at December 31, 1996 was comprised of notes payable to banks
at interest rates ranging from 7% to 9%, which were collateralized by
automobiles. All the notes were paid off during 1997.
5. MINORITY INTEREST
Green Burrito-Glendora #21, a California limited partnership
("GB-Glendora") comprised of the Company and one other limited partner, owns and
operates a Green Burrito store located in Glendora, California. The Company has
controlling interest in GB-Glendora and accordingly, the related assets,
liabilities and results of operations are consolidated. The limited partner's
ownership interest in the store is recorded as minority interest. The limited
partner has a non-cumulative preference on cash distributions of $8,280 per year
against the limited partner's 23.9% interest in the profits of the store.
GB-Glendora had net income of $48,910, $53,064 and $59,403 in 1997, 1996 and
1995, respectively.
6. INCOME TAXES
A reconciliation between the actual income tax provision (benefit) and the
federal statutory rate follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- --------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
--------- --- -------- --- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Computed income tax provision
(benefit) at statutory rate....... $ 290,000 34% $(16,000) (34)% $(654,000) (34)%
Operating loss (with) without
current tax benefit............... (290,000) (34)% 16,000 34% 654,000 34%
--------- --- -------- --- --------- ---
Income tax benefit.................. $ -- -- $ -- -- $ -- --
========= === ======== === ========= ===
</TABLE>
At December 31, 1997 and 1996, the Company had net operating loss
carryforwards for federal tax purposes of approximately $11,906,000 and
$12,846,000 respectively, which if unused to offset future taxable income, will
expire between 2008 and 2012. At December 31, 1997 and 1996, the Company had
state net operating loss carryforwards of approximately $5,694,000 and
$6,656,000 respectively, which if unused will
24
<PAGE> 25
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONT.)
expire between 1999 and 2002. Utilization of the carryforwards can be limited to
specific amounts each year. These net operating loss carryforwards resulted in a
potential deferred tax asset of approximately $4.4 million as of December 31,
1997. However, SFAS No. 109 requires that a valuation allowance be recorded
against tax assets which are not likely to be realized. Due to the uncertain
nature of the ultimate realization of the deferred tax asset, based upon the
Company's past operating performance and expiration dates of the loss
carryforwards, the Company established a full valuation allowance, for both
December 31, 1997 and 1996, against these carryforward benefits and is
recognizing the benefits only as reassessment demonstrates they are realizable.
Realization is entirely dependent upon future earnings in specific tax
jurisdictions. While the need for this valuation allowance is subject to
periodic review, if the allowance is reduced, the tax benefits of the
carryforwards will be recorded in future operations as a reduction of the
Company's income tax expense.
Significant components of the Company's deferred tax assets as of December
31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net operating loss carryforwards.................. $ 4,381,000 $ 4,756,000
Receivables and other reserves.................... 65,000 65,000
Other............................................. 53,000 67,000
----------- -----------
Current deferred tax assets....................... 4,499,000 4,888,000
Depreciation...................................... 236,000 325,000
----------- -----------
4,735,000 5,213,000
Valuation allowance............................... (4,735,000) (5,213,000)
----------- -----------
Total deferred tax assets......................... $ -- $ --
=========== ===========
</TABLE>
7. LITIGATION SETTLEMENTS
In 1995, the Company issued 108,000 shares of Company common stock to
certain Green Burrito franchisees in exchange for a release of potential claims
against the Company, and, in certain instances, as recognition for a reduction
in the radius protection clause of the related franchise agreements.
Accordingly, the Company recorded a charge of $648,000 in the year ended
December 31, 1995.
Also in 1995, the Company concluded an agreement with certain Green Burrito
franchisees and former franchisees to settle all outstanding claims against the
Company and certain former officers and directors of the Company. During 1995,
the Company issued 400,000 shares of Company common stock to the franchisees in
full satisfaction of the settlement agreement. The Company recorded a charge of
$2,523,000 in the year ended December 31, 1994 relating to this settlement
agreement. The recorded charge represented the fair value of the stock agreed to
be issued at the settlement date. Shares were ultimately issued in 1995.
8. STOCKHOLDER RIGHTS AGREEMENT
On July 9, 1996 the Company adopted a Stockholder Rights Agreement designed
to protect stockholders from abusive takeover tactics and to preserve for
stockholders the long-term value of the Company. The Rights Agreement was not
adopted in response to any effort to acquire control of the Company, and the
Board of Directors is not aware of any such effort.
Under the Stockholder Rights Agreement, the Company's stockholders (with
the exception of the Company's former Chief Executive Officer and Chairman, his
related interests, and current holders of warrants to purchase 1,000,000 or more
shares of the Company's common stock) received one right for each outstanding
share of the Company's common stock. Each right entitles its holder to buy one
share of the Company's common stock at an exercise price of $29. The Company can
redeem the rights at $.001 each at
25
<PAGE> 26
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCKHOLDER RIGHTS AGREEMENT (CONT.)
any time before a non-exempt person acquires 15% of the Company's common stock.
The rights will trade with, and are not detachable from, the Company's common
stock until the rights become exercisable.
The rights also become exercisable if a person or group (other than certain
exempt persons) acquires 15% or more of the Company's common stock or announces
a tender offer for 15% or more of the Company's common stock. If such a person
acquires 15% or more of the Company's common stock, each right would then enable
a Company stockholder to acquire such number of shares of the Company's common
stock having a market value of twice the right's exercise price, or in effect,
at a 50% discount to the market price. If the Company were acquired by a merger
or similar transaction after such an event, each right would then enable a
Company stockholder to buy such number of shares of the acquiring company having
a market value of twice the right's exercise price, or in effect, at a 50%
discount to the market price.
The rights dividend distribution was made on August 1, 1996 payable to
eligible stockholders of record on August 1, 1996. The rights expire on July 9,
2006.
On July 22, 1997, the Company exercised its right to redeem all the rights
under the July 9, 1996 Stockholders Rights Agreement for an exercise price of
$.001 per right or total consideration of $6,494.
9. ISSUANCE OF COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS
In May 1995, the Company authorized the issuance of three common stock
purchase warrants to acquire a total of 3,000,000 shares of Company common
stock. These three warrants were granted at an exercise price that exceeded the
closing market price of the Company's common stock on the grant date. Each of
these common stock purchase warrants is further discussed below.
In May 1995, as partial consideration for legal services rendered in
connection with the negotiation of the settlement and development agreement with
Carl Karcher Enterprises, Inc. ("CKE"), the Company agreed to issue a common
stock purchase warrant to the law firm representing the Company. The warrant had
a purchase price of $100 and provides for the purchase of 1,000,000 shares of
Company common stock at an exercise price of $7.50 per share, exercisable after
May 1, 1996 and expiring on April 30, 2005.
In May 1995, the Company authorized a common stock purchase warrant
agreement with Rally's Restaurants, Inc. ("Rally's") as part of the
consideration for entering into a development agreement with the Company. The
conditional warrant had a purchase price of $100 and provides for the purchase
of 1,000,000 shares of Company common stock at an exercise price of $7.50 per
share expiring June 7, 2005. Exercisability was contingent upon Rally's
compliance with the development agreement. In April 1996, the Company and
Rally's executed an agreement providing for the termination of the development
agreement. Consequently, the 1,000,000 common stock purchase warrants that were
granted to Rally's were canceled.
In May 1995, in recognition of extraordinary personal efforts in connection
with the negotiations of the settlement and development agreement with CKE, and
the development agreement with Rally's, and in accordance with the incentive
component of the Company's compensation philosophy for its former President and
Chief Executive Officer, the Company issued a common stock purchase warrant to
its then President and Chief Executive Officer. The warrant had a purchase price
of $100 and provides for the purchase of 1,000,000 shares of Company common
stock at an exercise price of $7.00 per share expiring May 1, 2005.
On July 22, 1997, Fidelity National Financial, Inc. ("Fidelity") purchased
1,000,000 shares of Common Stock of GB Foods Corporation (the "Company") from
the former Chief Executive Officer and principal stockholder ("Controlling
Shareholder"), for a purchase price of $5,000,000 cash. Fidelity also purchased
Common Stock Purchase Warrants ("Warrants") from the Company's Controlling
Shareholder pursuant to which Fidelity has the right to acquire 2,500,000 shares
of the Company's Common Stock, of which 1,500,000 are immediately exercisable at
$5.00 per share (the "$5.00 Warrants") and 1,000,000 are immediately
26
<PAGE> 27
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. ISSUANCE OF COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS (CONT.)
exercisable at $7.00 per share (the "$7.00 Warrants"). The $5.00 Warrants were
purchased for $600,000 cash and expire November 23, 2002; the $7.00 Warrants
were purchased for $100,000 cash and expire May 1, 2005. Simultaneously with the
closing of the transaction Fidelity transferred 30,000 Warrants with an exercise
price of $5.00 to its investment advisor.
In a separate transaction, Fidelity also acquired 1,000,000 Warrants
exercisable at $7.50 per share (the "$7.50 Warrants") from the aforementioned
law firm which had provided services to the Company. The purchase price of the
$7.50 Warrants was $100,000 cash. The $7.50 Warrants expire May 1, 2005.
As a result of the purchase of the Shares and the Warrants, Fidelity
beneficially owns 42.1% of the Company, based on 6,571,485 shares outstanding at
December 31, 1997 and including the Warrants pursuant to which Fidelity has the
right to acquire an additional 3,470,000 shares. In conjunction with the
Fidelity purchases, three of the Company's Directors have resigned which
included both the Chief Executive Officer and Chief Financial Officer of the
Company. Key officers of Fidelity have filled the Director and Officer
vacancies. Several of the Directors and Officers are also Directors and or
Officers of CKE with whom the Company has entered into a recent acquisition
agreement and with whom the Company has dual-concept franchise agreements.
In conjunction with its 1990 initial public offering, the Company entered
into an escrow agreement with three former executives pursuant to which the
former executives deposited certain shares of the Company's common stock,
originally acquired by them in 1988, into an escrow account to be released upon
the achievement of certain income levels by the Company. These shares were owned
by certain executives and shareholders prior to the initial public offering and
the underwriters requested that these shares be placed into escrow until certain
earning goals were achieved. The respective shareholders have retained full
voting rights and full dividend rights to the shares. These restricted shares
continue to be included in shares outstanding but have been excluded when
calculating basic earnings per share. As of December 31, 1997 and 1996, 178,571
shares were in the escrow account to be returned to the Company for cancellation
if the Company has not reported earnings of $1,500,000 for any twelve-month
period concluding with the twelve-month period ending June 30, 1997. On May 5,
1997, the Board of Directors extended the terms of the escrow through June 30,
1998. The Company is currently evaluating the continued extension of the escrow
terms and conditions.
Warrant transactions for 1997, 1996 and 1995 described above are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- ----------------------------- ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ---------------- ---------- ---------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Warrants outstanding
January 1,......... 4,000,000 $6.12 5,000,000 $6.40 2,000,000 $5.00
Granted.............. -- -- -- -- 3,000,000 7.33
Canceled............. -- -- (1,000,000) 7.50 -- --
--------- ---------- ---------
Warrants outstanding
December 31,....... 4,000,000 $6.12 4,000,000 $6.12 5,000,000 $6.40
========= ========== =========
</TABLE>
10. STOCK-BASED COMPENSATION PLANS
The Company has two stock option plans and from time-to-time grants other
nonstatutory options. Options are granted to eligible employees and directors,
officers and consultants who are actively involved in the development of the
business of the Company. Generally, the exercise price of options granted
27
<PAGE> 28
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK-BASED COMPENSATION PLANS (CONTINUED)
approximates the fair market value of the Company's common stock on the date of
grant. Currently outstanding options become exercisable either immediately or
over a period of up to three years and expire five-to-ten years after the grant
date. The following provides additional information on these plans and other
options:
Incentive stock option plan
In 1989, the Board of Directors of the Company adopted an Incentive Stock
Option Plan ("ISOP"). Under the ISOP, all key employees, including officers and
directors (who are also employees) of the Company are eligible to receive
options to purchase up to an aggregate of 125,000 shares for any one person. To
be eligible to receive options under the ISOP, an employee must have been a
full-time employee in good standing with the Company for one year. The total
number of options authorized under the plan is 312,500. During 1995, the Company
granted options for the purchase of 44,000 shares of the Company's common stock
to employees. The exercise price of the options were $5.75. As of December 31,
1997, the Company has 77,555 options available for future grant under the plan.
Non -- qualified stock option plan
In October 1989, the Company adopted a non-qualified stock option plan (the
"NQSOP") for directors who are not full-time employees of the Company and
individuals who act as consultants to the Company or who are actively involved
in the development of the business of the Company. The plan provides for the
issuance of a maximum of 125,000 shares of Company common stock at the market
price thereof on the date of grant. Each option lapses, if not previously
exercised or extended, on the tenth anniversary of the date of grant or 90 days
after the optionee has terminated continuous activity with the Company. As of
December 31, 1997, there are no remaining options available for grant under this
plan.
Other options issued
On December 23, 1997, the Company granted an option for the purchase of
50,000 shares of the Company's common stock at its market price of $10.38 per
share to an officer of the Company. The shares vest one year from the date of
grant.
On August 26, 1997, the Company granted options for the purchase of 445,000
shares of the Company's common stock at its market price of $8.63 per share to
officers and directors of the Company. The shares vest one year from the date of
grant.
In October 1996, the Company granted options for the purchase of 100,000
shares of Company common stock at $6.50 per share to an officer and director of
the Company, with 50,000 shares vesting immediately, and 50,000 shares vesting
one year from the date of grant. The officer resigned in July 1997 and the
unvested shares were immediately vested. No options have been exercised.
During 1995, the Company also granted options for the purchase of 260,000
shares of Company common stock to other directors, officers and consultants that
immediately vested. The exercise price of the options ranged from $5.75 to
$7.00.
28
<PAGE> 29
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK-BASED COMPENSATION PLANS (CONTINUED)
Combined plan transactions for 1997, 1996 and 1995 for the ISOP's, NQSOP's,
and other options described above are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- ---------------------------- ---------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
-------- ----------------- -------- ----------------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
January 1,......... 634,083 $5.66 705,167 $5.00 426,224 $3.63
Granted............ 495,000 8.80 100,000 6.50 304,000 6.78
Canceled............. -- -- (1,667) 5.75 (2,000) 5.75
Exercised............ (131,071) 4.34 (169,417) 3.45 (23,057) 2.95
-------- -------- -------
Options outstanding
December 31,....... 998,012 $7.39 634,083 $5.66 705,167 $5.00
======== ======== =======
</TABLE>
The following information applies to options outstanding at December 31,
1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------------------------------
WEIGHTED AVERAGE OPTIONS EXERCISABLE
REMAINING --------------------------------
NUMBER CONTRACTUAL LIFE WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
OUTSTANDING (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
----------- ----------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Range of exercise
prices
$1.80 - $ 2.70....... 48,388 2 $ 1.80 48,388 $1.80
$2.71 - $ 4.05....... 42,000 4 3.46 42,000 3.46
$4.06 - $ 6.08....... 30,000 4 5.75 30,000 5.75
$6.09 - $ 7.00....... 382,624 7 6.82 382,624 6.82
$7.01 - $ 8.63....... 445,000 10 8.63 -- --
$8.64 - $10.38....... 50,000 10 $10.38 -- --
------- -------
998,012 503,012 $5.99
======= =======
</TABLE>
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of grant over
the amount an employee must pay to acquire the stock.
29
<PAGE> 30
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK-BASED COMPENSATION PLANS (CONTINUED)
Had compensation cost for the plan been determined based on the fair value
of options and warrants at the grant dates consistent with the method of SFAS
No. 123, the Company's net earnings and earnings per share would have been:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- -----------
<S> <C> <C> <C>
Net income (loss) As reported........... $853,712 $ (48,445) $(1,922,446)
Pro forma............................... $216,867 $(154,989) $(8,861,577)
Basic earnings per share As reported.... .13 (.01) (.31)
Pro forma............................... .03 (.02) (1.44)
Diluted earnings per share
As reported............................. .11 (.01) (.31)
Pro forma............................... .03 (.02) (1.44)
</TABLE>
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related to
grants made before 1995. The fair value of these options was estimated at the
date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1997, 1996, and 1995:
<TABLE>
<S> <C>
Expected life (years)............................ 3 - 10
Risk-free interest rate.......................... 5.5%
Volatility....................................... 30% - 70%
</TABLE>
The weighted fair value of options granted during the years ended December
31, 1997, 1996, and 1995 for which the exercise price approximated the market
price on the grant date was $3.22, $1.86, and $5.37 respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
Management also believes that if the model took into consideration other
important factors, such as the block size of an option granted to an individual,
transferability restrictions on the sale of stock by CEO's or directors, or
other relevant factors, the fair value measurement of these options would be
substantially less.
30
<PAGE> 31
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
The following table illustrates the required disclosure of the
reconciliation of the numerators and denominators of the basic and diluted
earnings per share computations.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Basic Earnings per share:
Numerator
Net income (loss)................................... $ 853,712 $ (48,445) $(1,922,446)
========== ========== ===========
Denominator
Basic weighted average number of common shares
outstanding during the period.................... 6,471,262 6,356,287 6,161,244
Escrowed restricted shares issued and outstanding
excluded from basic earnings per share.............. (178,571) (178,571) (178,571)
---------- ---------- -----------
6,292,691 6,177,716 5,982,673
========== ========== ===========
Basic net income (loss) per share..................... $ .14 $ (.01) $ (.32)
========== ========== ===========
Diluted Earnings per share:
Numerator
Net income (loss)................................... $ 853,712 $ (48,445) $(1,922,446)
========== ========== ===========
Denominator
Basic weighted average number of common shares
outstanding during the period.................... 6,292,691 6,177,716 5,982,673
Incremental common shares attributable to exercise of:
escrowed restricted shares(a).................. 178,571 -- --
outstanding options............................ 140,225 -- --
outstanding warrants........................... 1,140,434 -- --
---------- ---------- -----------
1,280,659 -- --
---------- ---------- -----------
Diluted weighted average shares....................... 7,751,921 6,177,716 5,982,673
========== ========== ===========
Diluted net income (loss) per share................... $ .11 $ (.01) $ (.32)
========== ========== ===========
</TABLE>
- ---------------
(a) Escrowed restricted shares have not been included in loss years because the
effect would be antidilutive.
12. OTHER RELATED PARTY TRANSACTIONS
During 1994, an officer and director (who resigned his positions with the
Company in June 1994), purchased three existing Franchise Stores paying the
Company a $2,500 transfer fee for two of the stores and paying no transfer fee
for the third. The Company's standard transfer fee is $5,000. Further, the
royalty fee for one of these stores was waived by the Company from September 1,
1994 through February 28, 1995, while the royalty fee for another was waived
from September 1, 1994 through August 31, 1995. The third store pays the
standard 5% royalty fee. A director of the Company provided legal services to
the Company valued at $55,261, $48,467 and $95,055 during 1997, 1996 and 1995,
respectively.
13. COMMITMENTS AND CONTINGENCIES
The Company's executive offices and all properties used for restaurant
operations are leased under operating leases expiring on various dates through
2001. Certain leases require payment of contingent rentals based upon a
percentage of restaurant sales. No contingent rentals were required in 1997,
1996, or 1995.
31
<PAGE> 32
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES (CONT.)
In October 1997, the Company relocated the Corporate office and signed a
new one year lease. The old office has been subleased for an amount greater than
the Company's current obligation.
As of December 31, 1997, future minimum rental payments and sublease income
under all non-cancelable operating leases for years ending December 31 are as
follows:
<TABLE>
<CAPTION>
RENTAL SUBLEASE
PAYMENTS INCOME
---------- --------
<S> <C> <C>
1998................................. $ 599,417 $383,494
1999................................. 358,793 234,569
2000................................. 222,484 150,921
2001................................. 14,015 --
2002................................. -- --
---------- --------
$1,194,709 $768,984
========== ========
</TABLE>
Rental expense under all agreements for the years ended December 31, 1997,
1996, and 1995 was $383,674, $489,046, and $624,787, respectively. Sublease
rental income for the years ended December 31, 1997, 1996 and 1995 was $383,405,
$167,556 and $115,163 respectively.
The Company sold five operating restaurants in 1995 and one in 1993 and
assigned the related leases to the respective purchasers. The Company remains
liable pursuant to the original lease agreements under the respective leases in
the event of a default by the purchasers. Following is a summary of the
Company's commitment pursuant to these leases.
<TABLE>
<CAPTION>
RENTAL
PAYMENTS
--------
<S> <C>
1998............................................ $210,028
1999............................................ 197,400
2000............................................ 152,900
2001............................................ 20,000
2002............................................ 13,600
Thereafter...................................... --
--------
$593,928
========
</TABLE>
The Company has not incurred expenses in any of the years presented related
to these assigned leases.
The Company is involved in legal proceedings, claims and litigation arising
in the ordinary course of business. Management believes that any resulting
liability should not materially affect the Company's financial position or
results of operations.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments approximates
their estimated fair value at December 31, 1997 and 1996. The fair value of cash
and cash equivalents was based on the carrying value of such assets. The
estimated fair value of short-term investments were based on quoted market
prices. The fair value of notes receivable and long-term debt, were estimated
based on discounted cash flows using market rates at the balance sheet date. The
use of discounted cash flows can be significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. The
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument.
32
<PAGE> 33
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes
standards for the reporting and display of comprehensive income and its
components (revenue, expenses, gains and losses) in a full set of general-
purpose financial statements. SFAS 130 requires all items that are required to
be recognized under accounting standards as components of comprehensive income
to be reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS 130 does not require a specific
format for that financial statement, but requires that an enterprise display an
amount representing total comprehensive income for the period covered by that
financial statement. SFAS 130 requires an enterprise to (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. SFAS 130 is effective for fiscal years
beginning after December 15, 1997. Management has determined that the adoption
of SFAS 130 will not have a material impact on the Company's financial position
or results of operations.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information'
("SFAS 131"). SFAS 131 establishes standards for public business enterprises to
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This statement supersedes FASB Statement
No. 14, "Financial Reporting for Segments of a Business Enterprise, but retains
the requirement to report information about major customers. It amends FASB
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries," to remove
the special disclosure requirements for previously unconsolidated subsidiaries.
SFAS 131 requires, among other items, that a public business enterprise report a
measure of segment profit or loss, certain specific revenue and expense items,
segment assets, information about the revenues derived from the enterprise's
products or services and major customers. SFAS 131 also requires that the
enterprise report descriptive information about the way that the operating
segments were determined and the products and services provided by the operating
segments. SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997. In the initial year of application, comparative
information for earlier years to be restated. SFAS 131 need not be applied to
interim financial statements in the initial year of application, but comparative
information for interim periods in the initial year of application is to be
reported in financial statements for interim periods in the second year of
application. Management has determined that the adoption of SFAS 131 will not
have a material impact on the Company's financial reporting.
16. SUBSEQUENT EVENTS
On December 12, 1997, the Company announced the execution of a letter of
intent to acquire all the outstanding capital stock of Timber Lodge Steakhouse,
Inc. ("TBRL"). TBRL is a public company traded on Nasdaq under the symbol TBRL
and is the operator of the Timber Lodge Steakhouse family-style restaurants. As
of December 31, 1997, TBRL was operating a total of 16 restaurants which were
located in the states of Minnesota, Wisconsin, Illinois, Western New York and
South Dakota. TBRL's revenues and net income for the fiscal year ended January
1, 1997 were $20,637,000 and $983,000 respectively.
On January 16, 1998, the Company executed a definitive Agreement and Plan
of Merger ("Merger Agreement") with TBRL, pursuant to which the Company will
acquire one hundred percent of the outstanding capital stock of TBRL. The
parties expect to close the transaction in April 1998. Under the terns of the
agreement, each share of TBRL common stock will be converted into the right to
receive .80 of a share of the Company's common stock together with cash in lieu
of any fractional shares (the "Exchange Ratio"). In addition, the agreement has
established a collar for the Exchange Ratio of $14.00 on the high end and $7.50
33
<PAGE> 34
GB FOODS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS (CONT.)
on the low end. If the Company's average closing common stock price during the
ten day trading period ending on the second business day prior to the closing,
("Average Closing Stock Price"), exceeds the limits of the collar then the
Exchange Ratio will be adjusted. If the Average Closing Stock Price is more than
$14.00, the Exchange Ratio shall be reduced to a number (rounded to the nearest
1/10000) equal to the product of the Exchange Ratio multiplied by a fraction,
the numerator of which is $14.00 and the denominator of which is the Average
Closing Stock Price. If the Average Closing Stock Price is less than $7.50, the
Company may elect to increase the Exchange Ratio to the number (rounded to the
nearest 1/10000) determined by dividing $7.61 by the Average Closing Stock
Price.
The Merger is subject to certain customary conditions, including (i)
Fairness Opinions; (ii) approvals from the shareholders of the Company and TBRL;
and (iii) the parties obtaining all regulatory approvals, including the
Securities and Exchange Commission declaring effective a Registration Statement
covering the shares of the Company's common stock to be issued in the Merger.
The Merger is also subject to the purchase by TBRL from CKE Restaurants, Inc.
("CKE") (NYSE:CKR) or its affiliate of between twelve (12) and (20) JB's
Restaurants for conversion to Timber Lodge Steakhouse restaurants. In this
regard, CKE has agreed under the Merger Agreement to negotiate in good faith
with TBRL to consummate such purchase and sale. In addition, Fidelity National
Financial, Inc. (NYSE:FNF) has agreed under the Merger Agreement that, subject
to the approval of the Merger by TBRL's shareholders, it will exercise currently
outstanding warrants to purchase shares of the Company's common stock for a cash
purchase price aggregating not less than $5,000,000. The Company plans to
utilize such proceeds, in part, for the conversion of the JB's Restaurants
acquired by TBRL into Timber Lodge Steakhouse restaurants. The Chairman and
Chief Executive Officer of Fidelity is also the Chairman and Chief Executive
Officer of CKE.
On February 19, 1998, the Company entered into an Agreement and Plan of
Reorganization (the "Agreement"), pursuant to which the Company shall acquire
one hundred percent (100%) of the issued and outstanding capital stock of JB's
Restaurants, Inc. ("JB's"), a wholly owned subsidiary of CKE. Under the
Agreement, GBFC shall acquire JB's for one million (1,000,000) shares of GBFC
Common Stock. GBFC and CKE anticipate that the acquisition will Close on or
before March 1, 1998. At the Closing, the business of JB's shall be comprised of
forty-eight (48) JB's company-owned restaurants, twenty (20) JB's franchise
restaurants, and four (4) Galaxy diner restaurants. The acquisition is subject
to certain conditions, including the satisfactory completion of due diligence,
delivery by CKE and the approval by GBFC of certain disclosure schedules, the
issuance of Fairness Opinions, approvals from the respective Boards of Directors
of GBFC and CKE, regulatory approvals, the closing of the previously announced
acquisition of twelve (12) JB's restaurants by Star Buffet, Inc., the upstream
transfer by way of dividend of sixteen (16) JB's restaurants and certain other
assets to CKE. It is the intent of the parties that the transaction qualify as a
tax-free reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended.
34
<PAGE> 35
GB FOODS CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AMOUNTS AT END
DESCRIPTION OF PERIOD EXPENSES WRITTEN-OFF OTHER OF PERIOD
----------- ---------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts
and notes....................... $ 163,192 $ 790 $ -- $ -- $ 163,982
========== ========= ========= ======== ==========
Allowance for deferred tax
assets.......................... $5,213,000 $(478,000) $ -- $ -- $4,735,000
========== ========= ========= ======== ==========
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts
and notes....................... $ 196,918 $ 87,663 $ (88,457) $(32,932) $ 163,192
========== ========= ========= ======== ==========
Allowance for deferred tax
assets.......................... $5,178,000 $ 35,000 $ -- $ -- $5,213,000
========== ========= ========= ======== ==========
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts
and notes....................... $ 242,455 $ 84,051 $(129,588) $ -- $ 196,918
========== ========= ========= ======== ==========
Allowance for deferred tax
assets.......................... $4,476,000 $ 702,000 $ -- $ -- $5,178,000
========== ========= ========= ======== ==========
</TABLE>
35
<PAGE> 36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On October 28, 1996, the Company filed a Special Report on Form 8-K
reporting the change of its principal accountants from Cacciamatta Accountancy
Corporation (formerly known as SaddingtonoCacciamatta), to Grant Thornton LLP.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
The following sets forth certain information for each director of the
Company as of December 31, 1997.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE SINCE POSITION WITH THE COMPANY
--------------- --- -------- -------------------------
<S> <C> <C> <C>
William P. Foley, II 53 1997 Chairman and Director
Andrew F. Puzder 47 1997 Chief Executive Officer and Director
Frank P. Willey 44 1997 Director
Bruce H. Haglund 46 1989 Director
T.Anthony Gregory 59 1989 Director
</TABLE>
William P. Foley, II became Chairman of the Board and a Director of the
Company in July 1997. Mr. Foley is also Chairman of the Board and Chief
Executive Officer of Fidelity, a company engaged in title insurance and related
services. Mr. Foley is also the Chairman of the Board and Chief Executive
Officer of CKE, a company engaged in the fast food business. He is also a member
of the Boards of Directors of Rally's, Checkers, Data Works Corporation and
Micro General Corporation.
Andrew F. Puzder became a Director of the Company in July 1997 and
appointed Chief Executive Officer in August 1997. Mr. Puzder also serves as an
Executive Vice President and General Counsel for CKE. Mr. Puzder is also an
Executive Vice President for Fidelity. Mr. Puzder has been with Fidelity since
January 1995. From March 1994 to December 1994, he was a partner with the law
firm of Stradling, Yocca, Carlson & Rauth. Prior to that, he was a partner with
the law firm of Lewis, D'Amato, Brisbois & Bisgard, from September 1991 through
March 1994, and he was a partner of the Stolar Partnership from February 1984
through September 1991. Mr. Puzder is also a Director for Javelin Systems, Inc.
and Rally's Hamburgers, Inc.
Frank P. Willey became a Director in July 1997. He is also the President of
Fidelity National Financial, Inc. and has been a director since February 1984.
He was the General Counsel of Fidelity National Financial, Inc. from 1984 to
January 1995. Mr. Willey also serves on the Boards of Directors of CKE, Southern
Pacific funding Corporation, and Ugly Duckling Holdings, Inc.
Bruce H. Haglund has served as a Director of the Company since 1989. Mr.
Haglund is an attorney in private practice in Orange County, California and has
been a principal in the law firm of Gibson, Haglund & Johnson since April 1994.
He was a principal in the law firm of Phillips, Haglund, Haddan & Jeffers from
February 1991 to April 1994. From 1984 to February 1991, he was a partner in the
law firm of Gibson & Haglund, and from 1980 to 1984 was an associate with the
firm. He is also a director of Aviation Distributors, Inc.
T. Anthony Gregory has served as a Director of the Company since 1989.
Since 1962, Mr. Gregory has owned and operated U.S. Customs Air Bonded
Warehouse. In June 1989, Mr. Gregory opened U.S. Customs Bonded Container and
Freight Station, and in August 1989 opened Custom Air Trucking Company. Mr.
Gregory was Vice President and Secretary of Equitable Saving & Loan Association,
a holding company for several savings and loan companies from 1963 to 1965.
Executive Officers
Andrew F. Puzder, see "Directors" above.
Nicholas J. Caddeo, 51 has been an Executive Vice President and Chief
Operating Officer of the Company since August 1992. Prior to joining the
Company, he was employed for more than 20 years by
36
<PAGE> 37
Foodmaker, Inc., the corporate operator of Jack-in-the-Box restaurants, serving
as a Regional Manager for the Los Angeles area from January 1985 to July 1992.
Gary R. Nelson, 50 was appointed Executive Vice President, Chief Financial
Officer in August 1997. Mr. Nelson also serves as the Senior Vice President of
Mergers and Acquisitions for Fidelity National Title Insurance Company since
1992. Mr. Nelson previously served as the Senior Vice President, Chief Financial
Officer and Treasurer of Fidelity National Financial, Inc. from 1988 to 1991.
Mr. Nelson is a Certified Public Accountant.
M'Liss Jones Kane, 45 was appointed Vice President-Secretary in August
1997. Mrs. Kane also serves as the Senior Vice President Corporate Counsel and
Corporate Secretary for Fidelity National Financial, Inc. since 1995. Mrs. Kane
also serves as Corporate Counsel and Assistant Secretary of CKE. Mrs. Kane
previously served as Vice President, General Counsel and Secretary of ICN
Biomedicals, Inc. and subsequently in addition became Vice President, general
Counsel of SPI Pharmaceuticals, Inc.
Carl A. Strunk, 59 was appointed Executive Vice President, Finance in
December 1997. Mr. Strunk also serves as Executive Vice President , Chief
Financial Officer for CKE. He also serves as the Executive Vice President,
Finance for Fidelity National Financial, Inc. and has been with Fidelity since
1992. Mr. Strunk previously served as President of Land Resources Corporation
from 1986 to 1991. Mr. Strunk is a Certified Public Accountant and is also a
member of the Board of Directors of Micro General Corporation.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation of William P. Foley, II, the Company's Chairman of the Board and
Director, Andrew F. Puzder, the Company's Chief Executive Officer and Director,
Nicholas J. Caddeo, the Company's Chief Operating Officer, and Gary R. Nelson,
the Company's Chief Financial Officer, for each of the three years in the period
ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- ------------------
NAME AND PRINCIPAL POSITION YEAR SALARY OTHER(1) STOCK OPTIONS
--------------------------- ---- ------- -------- ----- -------
<S> <C> <C> <C> <C> <C>
William P. Foley, II(2)................ 1997 $ 0 0 0 0
Chairman of the Board and 1996 $ 0 0 0 0
Director 1995 $ 0 0 0 0
Andrew F. Puzder(3).................... 1997 $ 0 0 0 0
Chief Executive Officer 1996 $ 0 0 0 0
1995 $ 0 0 0 0
Nicholas J. Caddeo..................... 1997 $92,900 $ 9,600 0 0
Chief Operating Officer 1996 $82,800 $11,800 0 0
and Executive Vice President 1995 $92,600 $11,205 0 0
Gary R. Nelson(4)...................... 1997 $10,000 0 0 0
Chief Financial Officer and 1996 $ -- 0 0 0
Executive Vice President 1995 $ -- 0 0 0
</TABLE>
- ---------------
(1) The remuneration described in the table does not include the cost to the
Company of benefit furnished to the named executive officer, including
premiums for health insurance and other personal benefits provided to such
individual that are extended to employees of the Company in connection with
their employment. The value of such benefits cannot be precisely determined;
however, the executive officer named above did not receive other
compensation in excess of the lesser of $25,000 or 10% of such cash
compensation.
(2) Became Chairman of the Board and a Director in July 1997.
(3) Became a Director in July 1997 and Chief Executive Officer in August 1997.
(4) Became Chief Financial Officer in August 1997.
37
<PAGE> 38
OPTIONS GRANTED IN FISCAL YEAR 1997
During the fiscal year ended December 31, 1997, non-qualified stock options
were granted to William P. Foley, II, Andrew F. Puzder, Nicholas J. Caddeo and
Gary R. Nelson at an exercise price of $8.63 per share, 150,000, 100,000, 25,000
and 50,000 shares respectively. The options vest at the end of one year from
issuance.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1997 AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth the number of options, both exercisable and
unexercisable, held by each of the executive officers of the Company as of
December 31, 1997 and the value of any in-the-money options, assuming that the
value of the shares was $10.88, the fair market value of the Company's common
stock on December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William P. Foley, II....... 0 0 0 150,000 0 $337,500
Andrew F. Puzder........... 0 0 0 100,000 0 $225,000
Nicholas J. Caddeo......... 0 0 7,500 25,000 $ 81,563 $ 56,250
Gary R. Nelson............. 0 0 0 50,000 0 $112,500
</TABLE>
COMPENSATION OF THE BOARD OF DIRECTORS
The members of the Board of Directors who are not employees receive $1,000
for their attendance in person at Board meetings and $500 if they are present at
a Board meeting telephonically. Members of the Board of Directors have also
received nonstatutory stock options in the past in recognition of their service
as members of the Board of Directors. Effective August 1997, Members of the
Board of Directors were granted an annual grant of 20,000 options per year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 31, 1997,
relating to the beneficial ownership of the Company's common stock by (i) all
persons known by the Company to beneficially own more than 5% of the outstanding
shares of the Company's common stock, (ii) each director, director nominee and
officer of the Company and, (iii) all officers and directors of the Company as a
group. Unless otherwise
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<PAGE> 39
noted, each of the shareholders listed owns less than 1% of the outstanding
common stock of the Company. The Company had 6,571,485 shares outstanding as of
December 31, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIAL OWNER(1)(2)(3) BENEFICIALLY OWNED(1) OUTSTANDING(4)
------------------------- --------------------- --------------------
<S> <C> <C>
Fidelity National Financial, Inc.(5)...... 4,509,500 42.1%
17911 Von Karman Ave
Irvine, CA 92614
William M. Theisen(6)..................... 769,826 7.2%
c/o Business Ventures
210 Regency Parkway, Suite 12
Omaha, NE 68114
T. Anthony Gregory(7)..................... 127,661 1.2%
25651 Paseo de la Paz
San Juan Capistrano, CA 92675
Bruce H. Haglund (8)...................... 115,794 1.1%
2010 Main St., Suite 400
Irvine, CA 92614
Nicholas J. Caddeo(9)..................... 28,200 0.3%
William P. Foley, II(10).................. 0 0.0%
All officers and directors as a group (4
persons)(11)............................ 4,781,155 44.6%
</TABLE>
- ---------------
(1) Unless otherwise noted, the Company believes that all shares are
beneficially owned and that all persons named in the table have sole voting
and investment power with respect to all shares of Company common stock
owned by them.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from December 31, 1997 upon the
exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from December 31, 1997 have been exercised.
(3) Unless otherwise indicated, the address of each stockholder listed is 1200
North Harbor Blvd., Anaheim, California 92803.
(4) Assumes 10,712,373 shares outstanding, including 6,571,485 shares currently
outstanding and 4,140,888 issuable upon exercise of presently exercisable
stock options and warrants held by the above-listed shareholders.
(5) Includes 3,470,000 shares issuable upon the exercise of presently
exercisable warrants on the basis of 10,712,373 shares outstanding as set
forth in footnote 4 above.
(6) Includes 500,000 shares issuable upon the exercise of presently exercisable
warrants. Also includes 107,286 shares held by Gemini Aviation and Marine
Services, Inc. which is a corporation wholly owned by Mr. Theisen.
(7) Includes 74,194 shares issuable upon the exercise presently exercisable
nonstatutory stock options.
(8) Includes 89,194 shares issuable upon the exercise of presently exercisable
nonstatutory stock options.
(9) Includes 7,500 shares issuable upon the exercise of presently exercisable
incentive stock options.
(10) Excludes the 4,509,500 beneficial shares held by Fidelity, of which William
P. Foley, II. is the Chairman of the Board and Chief Executive Officer.
(11) Includes an aggregate of 170,888 shares issuable upon the exercise of
presently exercisable stock options and all beneficial shares held by
Fidelity, of which William P. Foley, II. is the Chairman of the Board and
Chief Executive Officer.
39
<PAGE> 40
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
The Company believes that the transactions hereunder were the result of
arm's-length negotiations, and the terms of each such transaction was no less
favorable to the Company as would have been available from an unaffiliated third
party. The transactions discussed below were negotiated either (i) before the
parties became affiliates; (ii) after the parties ceased to be affiliates; or
(iii) with a majority of a disinterested members of the Company's Board of
Directors. Furthermore, it is the policy of the Company that a majority of the
disinterested members of the Company's Board of Directors must approve
related-party transactions.
During May 1995, the Company reached an agreement with Carl Karcher
Enterprises, Inc., the operator and franchisor of Carl's Jr. restaurants, and
CKE Restaurants, Inc., its parent company (hereinafter jointly referred to as
"CKE"), pursuant to which CKE agreed to convert a minimum of 40 CKE-owned Carl's
Jr. restaurants per year into Carl's Jr./Green Burrito dual-concept stores over
a five-year period commencing July 15, 1995. In February 1997, the Company and
CKE modified the agreement to provide for the conversion of a minimum of 60
Carl's Jr. restaurants per year to Carl's Jr./Green Burrito dual-concept stores.
CKE also agreed to allow its franchisees to convert their restaurants into
Carl's Jr./Green Burrito dual-concept stores. The initial term of the franchise
agreements for CKE-owned locations is 15 years with a 10-year renewal period.
The franchise agreements also allow for an early termination on a per-store
basis if royalties payable to the Company for such location are less than an
average of $250 per month for any calendar year. As of December 31, 1997, all
Carl's Jr./Green Burrito stores were in compliance with this requirement. As of
December 31, 1997, there were 115 Carl's Jr./Green Burrito restaurants in
operation in California and Arizona.
Payments to Director for Professional Services
The law firm of Gibson, Haglund & Johnson, of which Mr. Haglund, the
Company's Secretary and a Director, is a principal, received compensation in the
form of legal fees for services rendered to the Company in 1997 of $33,886.
Carl's Jr/Green Burrito Settlement and Development Agreement
CKE Restaurants, Inc. and GB Foods Corporation are parties to a Settlement
and Development Agreement dated May 30, 1995 as amended by letter dated February
20, 1997, whereby CKE is to develop and operate Carl's Jr./Green Burrito dual
concept restaurants and pay GB Foods a $7,500 franchise fee per restaurant and a
4% royalty on Green Burrito sales in such restaurants. As of June 1, 1998, there
were 139 Carl's Jr./Green Burrito dual concept restaurants.
40
<PAGE> 41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report on Form 10-K:
1. Consolidated Financial Statements
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public
Accountants....................................... 15
Balance Sheets.................................... 17
Statements of Operations.......................... 18
Statements of Stockholders' Equity................ 19
Statements of Cash Flows.......................... 20
Notes to Financial Statements..................... 21
2. Schedule to Consolidated Financial Statements
Schedule II -- Valuation and Qualifying
Accounts.......................................... 35
3. Index to Exhibits
</TABLE>
(b) Reports on Form 8-K
On July 22, 1997, the Company filed a Special Report on Form 8-K regarding
a change of control which occurred on July 22, 1997 when Fidelity National
Financial Inc. purchased 1,000,000 shares of the Company's common stock and
3,500,000 common stock purchase warrants.
On December 12, 1997, the Company filed a Special Report on Form 8-K
announcing the execution of a Letter of Intent whereby the Company will acquire
all the outstanding capital stock of Timber Lodge Steakhouses, Inc. a public
company trading under the symbol TBRL on the Nasdaq Exchange.
SUPPLEMENTAL INFORMATION
An annual report and an information statement shall be furnished to the
security holders of the Company subsequent to the filing of this Form 10-K. The
Company shall furnish copies of the annual report to security holders and the
proxy statement to the Securities and Exchange Commission when it is sent to the
security holders.
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<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ ANDREW F. PUZDER
------------------------------------
Andrew F. Puzder
Chief Executive Officer
Date: July 10, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
Chairman of the Board,
- --------------------------------------------------- Director
William P. Foley, II
/s/ ANDREW F. PUZDER Chief Executive Officer, Director July 10, 1998
- --------------------------------------------------- (Principal Executive Officer)
Andrew F. Puzder
/s/ THEODORE ABAJIAN Chief Financial Officer, July 10, 1998
- --------------------------------------------------- (Principal Financial and Accounting
Theodore Abajian Officer)
/s/ FRANK P. WILLEY Director July 10, 1998
- ---------------------------------------------------
Frank P. Willey
/s/ BRUCE H. HAGLUND Director July 10, 1998
- ---------------------------------------------------
Bruce H. Haglund
/s/ T. ANTHONY GREGORY Director July 10, 1998
- ---------------------------------------------------
T. Anthony Gregory
</TABLE>
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<PAGE> 43
GB FOODS CORPORATION
INDEX TO EXHIBITS
The following exhibits are being filed with this Annual Report on Form 10-K
and/or incorporated by reference therein in accordance with the designated
footnote references.
<TABLE>
<C> <S>
3.1 Restated Certificate of Incorporation (3)
3.2 Bylaws of the Company, as amended (1)
4.1 Rights Agreement dated as of July 9, 1996 between GB Foods
Corporation and American Securities Transfer Incorporated.
All rights were redeemed on July 22, 1997 (6)
10.1 Incentive Stock Option Plan and form of Non-qualified Stock
Option Agreement (1)
10.2 Non-qualified Stock Option Plan and form of Non-qualified
Stock Option Agreement (1)
10.3 Form of Franchise Agreement (7)
10.4 Form of Dual-concept Franchise Agreement (7)
10.5 Green Burrito-Glendora #21 Limited Partnership Agreement (1)
10.6 Operations Support Agreement between GB Foods, Inc. and GB
Franchise Corporation dated April 1, 1989 (1)
10.7 Office Lease between the Company and The Irvine Company
dated July 1, 1994 (7)
10.8 Stock Purchase Agreement between William M. Theisen and the
Company dated October 29, 1992, including Amendment to Stock
Purchase Agreement dated November 4, 1992 and Second
Amendment to Stock Purchase Agreement dated November 23,
1992 (4)
10.9 Amended Warrant Agreement and Form of Warrant Certificate
between the Company and William M. Theisen dated November
23, 1992 (7)
10.10 Form of Irrevocable Proxy Agreement between Ruben M.
Rodriguez, Gary A. McArthur, and Robert V. Gibson, as
"Stockholders," and William M. Theisen (4)
10.11 Sub-Lease dated March 29, 1993 between the Company and T&J
Sausage Kitchen, Inc. (5)
10.12 Warrant agreement dated May 1, 1995 between the Company and
McGrath, North, Mullin & Kratz, P.C. The Warrant was
purchased by Fidelity on July 22, 1997 (7)(9)
10.13 Stock Option Agreement between the Company and George J.
Kubat dated October 3, 1996 (8)
10.14 Fidelity Stock and Warrant Purchase Agreements dated July
22, 1997 (9)
10.15 Letter of Intent to acquire stock of Timber Lodge Steakhouse
dated December 12, 1997 (10)
11 Computation of earnings per share (11)
17 Board of Directors Letters of Resignation dated July 22,
1997 for William M. Theisen, George L. Kubat, and Michael J.
Scherr (9)
21 List of Subsidiaries of the Registrant (2)
27 Financial Data Schedule (11)
</TABLE>
- ---------------
(1) Filed with the Company's Registration Statement on Form S-18, dated August
21, 1990, and incorporated by reference.
(2) Filed with the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated by reference.
(3) Filed with the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, and incorporated by reference.
(4) Filed with the Company's Report on Form 8-K dated November 23, 1992, and
incorporated by reference.
(5) Filed with the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, and incorporated by reference.
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<PAGE> 44
(6) Filed with the Company's Report on Form 8-K for July 9, 1995 and
incorporated by reference.
(7) Filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated by reference.
(8) Filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, and incorporated by reference.
(9) Filed with the Company's Report on Form 8-K dated July 22, 1997, and
incorporated by reference.
(10) Filed with the Company's Report on Form 8-K dated December 12, 1997, and
incorporated by reference.
(11) Filed with the Company's original Report on Form 10-K for the year ended
December 31, 1997, and incorporated by reference.
44
