<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission File Number: 33-39231
Soulfood Concepts, Inc.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 13-3585743
(State of Incorporation) (IRS Employer Identification No.)
630 Ninth Avenue, New York, New York 10036
(Address if Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (212) 262-8333
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the past 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 No X
---- ---
The number of shares outstanding of the issuer's only class of common stock, par
value $.003 per share, as of March 31, 1997 was 3,139,816 shares.
<PAGE>
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 81,872 $ 80,751
Accounts Receivable 70,200 45,293
Inventory 41,031 30,489
Prepaid Expenses 31,966 22,422
Escrow Advance -- 33,500
Loans & Exchange 8,056 15,968
---------- ----------
Total Current Assets 233,125 228,423
Property and Equipment, Net of Accumulated
Depreciation of $263,238 and $215,037,
respectively 721,576 262,032
Intangible Assets, Net of Accumulated
Amortization of $395,185 and $387,405,
respectively 212,585 36,735
Security Deposits 52,407 49,357
Deferred Taxes -- --
---------- ----------
TOTAL ASSETS $1,219,693 $ 576,547
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
- 1 -
<PAGE>
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - LIABILITIES AND
STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash Overdraft $ -- $ 3,851
Current Portion of Long-Term Debt 10,956 10,956
Accounts Payable & Accrued Expenses 328,122 257,709
Obligation Under Capital Lease 47,406 5,533
---------- ----------
Total Current Liabilities 386,484 278,049
Long-Term Debt (Notes 7 & 8) 688,462 171,199
---------- ----------
TOTAL LIABILITIES 1,074,946 449,248
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock, par value $.003; Authorized
500,000 shares; issued and outstanding
125,000 shares 375 375
Common Stock, par value $.003; Authorized
14,500,000 shares; issued and outstanding
3,139,816 shares 9,420 9,420
Additional Paid-in Capital 765,649 765,649
Partners'Capital 6,520 ( 18,356)
Accumulated Deficit ( 637,217) ( 629,789)
---------- ----------
Total Stockholders' Equity 144,747 127,299
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,219,693 $ 576,547
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
- 2 -
<PAGE>
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
SALES $ 1,008,432 $ 812,285
COST OF SALES 265,510 223,651
----------- -----------
GROSS PROFIT 742,922 588,634
----------- -----------
Operating Expenses 640,370 567,156
Interest Expense 14,995 3,376
----------- -----------
655,365 570,532
----------- -----------
Income Before Depreciation, Amortization,
Other Income (Expenses) and Provision for Income Taxes 87,557 18,102
Depreciation & Amortization ( 35,692) ( 19,729)
Interest Income 188 --
Pre-Opening Expenses ( 33,985) --
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 18,068 ( 1,627)
PROVISION FOR INCOME TAXES 620 --
----------- -----------
NET INCOME (LOSS) $ 17,448 $( 1,627)
=========== ===========
EARNINGS (LOSS) PER SHARE:
Primary $ .01 $( .00)
=========== ===========
Fully Diluted $ .01 $( .00)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
- 3 -
<PAGE>
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in
Shares Amount Shares Amount Capital
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1994 -- $ -- 5,468,753 $ 5,469 $ 14,837
Distributions -- -- -- -- --
Net Income (Loss) -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance - December 31, 1995 -- -- 5,468,753 5,469 14,837
Issuance of Common Stock in
Conversion of Stockholder Loan -- -- 2,750,690 2,751 547,387
Reverse 1 for 3 Stock Split -- -- (5,479,627) -- --
Issuance of Common Stock in
Conversion of Stockholder Loan -- -- 400,000 1,200 78,800
Issuance of Preferred Stock in
Conversion of Stockholder Loan 125,000 375 -- -- 124,625
Distributions -- -- -- -- --
Net Income -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance - December 31, 1996 125,000 375 3,139,816 9,420 765,649
Net Income (Loss) -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance - March 31, 1997 125,000 $ 375 3,139,816 $ 9,420 $ 765,649
=========== =========== =========== =========== ===========
<CAPTION>
Total
Partners' Accumulated Stockholders'
Capital Deficit Equity (Deficit)
----------- ----------- -----------
<S> <C> <C> <C>
Balance - December 31, 1994 $( 69,273) $( 363,087) $( 412,054)
Distributions ( 812) -- ( 812)
Net Income (Loss) 17,615 ( 279,678) ( 262,126)
----------- ----------- -----------
Balance - December 31, 1995 ( 52,470) ( 642,765) ( 674,992)
Issuance of Common Stock in
Conversion of Stockholder Loan -- -- 550,138
Reverse 1 for 3 Stock Split -- -- --
Issuance of Common Stock in
Conversion of Stockholder Loan -- -- 80,000
Issuance of Preferred Stock in
Conversion of Stockholder Loan -- -- 125,000
Distributions ( 16,880) -- ( 16,880)
Net Income 50,994 12,976 63,970
----------- ----------- -----------
Balance - December 31, 1996 ( 18,356) ( 629,789) 127,299
Net Income (Loss) 24,876 ( 7,428) 17,448
----------- ----------- -----------
Balance - March 31, 1997 $ 6,520 $( 637,217) $ 144,747
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
- 4 -
<PAGE>
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 17,448 $( 1,627)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 35,692 19,729
(Increase) Decrease In:
Accounts Receivable ( 24,907) 1,307
Prepaid Expenses ( 9,544) ( 22,755)
Inventory ( 10,542) 2,501
Escrow Advance 33,500 --
Loans and Exchange 7,912 ( 1,500)
Security Deposits ( 3,050) 800
Other Assets ( 183,630) --
(Decrease) Increase In:
Accounts Payable & Accrued Expenses 70,413 ( 40,669)
Leases Payable 41,873 --
--------- ---------
NET CASH (USED IN) OPERATING ACTIVITIES ( 24,835) ( 42,214)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment ( 507,745) ( 2,670)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Debt 542,430 48,139
Repayment of Debt ( 4,880) ( 5,613)
Partner Distributions -- ( 813)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 537,550 41,713
--------- ---------
Net Increase (Decrease) in Cash During the Period 4,970 ( 3,171)
Cash - January 1, 76,902 9,351
--------- ---------
Cash - March 31, $ 81,872 $ 6,180
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Period:
Interest $ 2,614 $ 2,894
========= =========
Taxes $ 4,595 $ 1,408
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
- 5 -
<PAGE>
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
a. Basis of Presentation
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-QSB and Regulation S-B. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair
presentation have been included.
For further information refer to the financial statements and
footnotes included in the Registrant's Prospectus on Form 10-KSB
for the year ended December 31, 1996.
The results of Operations for any interim period are not
necessarily indicative of the results to be expected for the
year ended December 31, 1997.
The accompanying consolidated financial statements include the
accounts of Soulfood Concepts, Inc. ("The Company"), a holding
company organized under the laws of the state of Delaware during
October, 1984 and its subsidiaries:
1) Shark Restuarant Corp., ("SRC") incorporated under the laws
of the State of New York on June 7, 1990 (owned 100% by the
Company);
2) Shark Catering Corp., ("SCC"), incorporated under the laws of
the State of New York on May 14, 1992 (owned 100% by the
Company); currently inactive.
3) 7 West Corp. ("7 West"), incorporated under the laws of the
State of New York on February 1, 1994 (owned 100% by the
Company);
4) Avenue A Restuarnat Associates, L.P. ("Avenue A"), organized
as a limited partnership pursuant to a limited partnership
agreement dated September 1994 (owned 62% by 7 West);
5) Affair Restaurant, Inc. ("Shark Bar Chicago"), purchased on
January 10, 1997 from Affair, L.P. (See Note 5), (owned
100% by the Company); and
6) TWS Restaurant, Corp. ("TWS"), incorporated under the laws of
the State of New York on May 1, 1995 (owned 100% by the
Company); currently inactive.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
- 6 -
<PAGE>
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (cont'd)
b. Earnings Per Share
The computation of primary earnings per share is based on the
weighted average number of outstanding common shares during the
period. Fully diluted earnings per share additionally assumes
the conversion of outstanding Preferred Stock.
NOTE 2 - INVENTORY
Inventory consisted of the following at:
March 31, December 31,
1997 1996
------- -------
Food $10,503 $ 6,459
Beverage 30,371 23,611
------- -------
40,874 30,070
Other Merchandise 157 419
------- -------
$41,031 $30,489
======= =======
NOTE 3 - PROPERTY AND EQUIPMENT
Property and Equipment consisted of the following:
Accumulated Net Book
Cost Depreciation Value
-------- -------- --------
March 31, 1997
Furniture, Fixtures &
Equipment $622,253 $210,805 $411,448
Leasehold Improvement 362,561 52,433 310,128
-------- -------- --------
$984,814 $263,238 $721,576
======== ======== ========
December 31, 1996
Furniture, Fixtures &
Equipment $370,100 $170,293 $199,807
Leasehold Improvement 106,969 44,744 62,225
-------- -------- --------
$477,069 $215,037 $262,032
======== ======== ========
Depreciation and amortization expense of property and equipment
for the three months ended March 31, 1997 was $27,912.
- 7 -
<PAGE>
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INTANGIBLE ASSETS
Itangible Assets consisted of the following:
<TABLE>
<CAPTION>
Accumulated Net Book
Cost Amortization Value
---------- -------------- ----------
<S> <C> <C> <C>
March 31, 1997
--------------
Organization Cost $ 54,890 $ 24,598 $ 30,292
Cost of Leasehold 410,000 350,587 59,413
Restrictive Covenant 10,000 10,000 -
Goodwill 10,000 10,000 -
Prepaid Opening Costs 122,880 - 122,880
---------- ----------- ----------
$ 607,770 $ 395,185 $ 212,585
========== ========== ==========
December 31, 1996
-----------------
Organization Cost $ 24,140 $ 23,120 $ 1,020
Cost of Leasehold 380,000 344,285 35,715
Restrictive Covenant 10,000 10,000 -
Goodwill 10,000 10,000 -
---------- ---------- ----------
$ 424,140 $ 387,405 $ 36,735
========== ========== ==========
</TABLE>
NOTE 5 - ACQUISITIONS
On January 10, 1997, the Company completed the purchase of the
"Affair Restaurant, Inc." in Chicago, Ill. from Affair, L.P. for
$335,000. To finance this acquisition, the President of the
Company has loaned $305,000 at 10% interest to the Company which
will be convertible into capital stock. The purchase was for
the lease, restaurant assets and licenses of Affair Restaurant,
Inc. The Affair, L.P. partners will have no connection to the
new restaurant. The Shark bar restaurant opened to the public
on March 22, 1997.
- 8 -
<PAGE>
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ----------
<S> <C> <C>
Working capital loan from Citibank, bearing
interest at 11.5% per annum on the
outstanding balance, payable in monthly
installments of $913 principal only with
interest accrued, maturing in January, 1999. $ 19,957 $ 22,826
Advances from officer of the Company. It is
intended that these advances will be
exchanged for preferred stock. Interest has
been accrued on these advances. 372,345 73,169
Partner loans to Avenue A Restaurant
Associates, L.P. being repaid on a quarterly
basis. Interest is also being paid on a
quarterly basis at 10% per annum to the
limited partners and any unpaid amounts have
been accrued. 86,160 86,160
The Company received a loan from an outside
investor of $220,000 in February 1997. 220,000 --
---------- ----------
Total 698,462 182,155
Less: Current Portion 10,956 10,956
---------- ----------
Long-Term Debt $ 688,462 $ 171,199
========== ==========
</TABLE>
- 9 -
<PAGE>
SOULFOOD CONCEPTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES
The provision for income taxes is summarized as follows:
March 31, March 31,
1996 1996
------- ----------
Federal Income Tax $ -- $ --
State and Local 620 --
------- ----------
620 --
Tax Benefit of Net Operating Loss
Carryfowards -- --
------- ----------
Provision for Income Taxes $ 620 $ --
======= ==========
The Company has net carryforward losses substantially in excess
of their profits. Because of the uncertainty of future profits,
a valuation allowance has been established equal to the tax
benefit of the loss carryforwards.
The loss carryforwards expire as follows:
December 31,
2007 $ 4,419
2008 26,900
2009 218,652
2010 120,030
--------
$370,001
========
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company is obligated under several rental agreements.
1. Shark Bar Restaurant space expires 1999. Annual rent of $82,800
with no scheduled increases.
2. Shark Bar Restaurant extension expires 1999. Annual rent of
$29,800 increasing to $36,200 by expiration.
3. Office space expiring August 1998 with an annual rent of $31,800
increasing to $32,400 by expiration.
4. Mekka Restaurant space expires December, 2002 with an annual
rent of $44,128 increasing to $53,628 by expiration. There is an
option to extend the lease five years for a $20,000 fee. This
agreement includes an additional rental of 1% of sales monthly
to be paid monthly.
5. Shark Bar Chicago space expires July 31, 1999 with an annual
base rent of $48,000. The agreement also calls for an additional
rental of 8% of sales that exceed $50,000 monthly to be paid
monthly with a maximum additional rent of $5,000 per month.
- 10 -
<PAGE>
SOULFOOD CONCEPTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying consolidated financial
statements and information relating to a new restaurant opening on March 22,
1997.
Results of Operations for Three Months Ended March 31, 1997 vs. 1996
Sales for the three months ended March 31, 1997 increased by 19% to $1,008,432
from sales of $812,285 during the three months ended March 31, 1996. The
principal reasons for the increase were higher sales level at two existing
locations from the prior year, as well as, the new location contributing $60,000
to the sales level. Cost of sales decreased to 26.4% during the three months
ended March 31, 1997 from 27.5% during 1996. This improvement resulted from
both the sales mix and from improved controls.
Income before depreciation, amortization, other income (expenses) and provision
for income taxes increased to $87,557 from $18,102 in the previous year. This
increase is due to higher sales and lower operating expenses as a percentage of
sales. Overall expenses increased $84,833 from the previous period mainly due to
the opening of the new location.
Liquidity and Capital Resources at March 31, 1997 and Subsequent Acquisitions
Cash at March 31, 1997 was $81,872 which marginally increased from $80,751 at
December 31, 1996. Assets increased by $643,146 to $1,219,693 mainly due to the
acquisition of a new restaurant location. Total liabilities increased by
$625,698 to $1,074,946 in part due to loans received in connection with the
acquiring of new restaurant.
In furtherance of the Company's nationwide expansion strategy, the Company on
January 10, 1997, completed the purchase of a restaurant location in Chicago,
Illinois. To finance this acquisition the president of the Company contributed
capital of $305,000 which will be converted into capital stock. The Company
also secured a loan from an outside investor for $220,000 which is intended
to be converted to capital stock and Long-Term note. Further, one of the
Company's subsidiary contributed approximately $170,000. On March 22, 1997,
the restaurant opened with resulting sales of $60,000 for the nine business
days ending March 31, 1997.
- 11 -
<PAGE>
PART II. OTHER INFORMATION
NONE
- 12 -
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SOULFOOD CONCEPTS, INC.
Date: May 13, 1997 By: /s/ Brian Hinchcliffe
----------------------- Brian Hinchcliffe,
President
Date: May 13, 1997 By: /s/ Kevin Starkes
----------------------- Kevin Starkes
Vice President and
Treasurer (Principal
Financial Officer)
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 81,872
<SECURITIES> 0
<RECEIVABLES> 70,200
<ALLOWANCES> 0
<INVENTORY> 41,031
<CURRENT-ASSETS> 233,125
<PP&E> 31,966
<DEPRECIATION> 263,238
<TOTAL-ASSETS> 1,219,693
<CURRENT-LIABILITIES> 386,484
<BONDS> 0
0
375
<COMMON> 9,420
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,219,693
<SALES> 1,008,432
<TOTAL-REVENUES> 0
<CGS> 265,510
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 640,370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,995
<INCOME-PRETAX> 18,068
<INCOME-TAX> 620
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,448
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
