U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended May 29, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 0-1744
Ambassador Food Services Corporation
(Name of small business issuer in its charter)
Delaware 44-0656199
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3269 Roanoke Road, Kansas City, Missouri 64111
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 816 561-6474
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (Par Value $1)
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act 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 X NO
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year are $22,770,546.
At April 1, 1998 there were 745,456 shares of the Registrant's common stock
outstanding. Based on the average of the highest bid and lowest asked prices
reported on the national over-the-counter market (NASDAQ Symbol AMBF), the
aggregate market value of the shares held by non-affiliates of the Registrant
was $1,001,893.
Exhibit Index is on page 37.
Transitional Small Business Disclosure Format: YES NO X
PART I
Item 1. Description of Business
(a) Business Development
The Registrant (hereinafter "Company" or "Ambassador") is a Delaware
corporation incorporated in 1963. It is engaged, through divisions and a
subsidiary, in the food service and janitorial industries in Iowa, Kansas,
New York, Texas, New Jersey, Missouri, and Oklahoma.
The principal business activity of the Company is the servicing of its
customer accounts, primarily factories, offices, hospitals, schools, and social
service agencies, through the use of vending machines, cafeterias, and
prepared meals delivered from Company commissaries.
On August 1, 1989, the name of the Company was changed from Automatique,
Incorporated to Ambassador Food Services Corporation.
(b) Business of Issuer
(1) Description of Business Done by the Registrant in its Food Segment
(i and ii)The vending and cafeteria segment of the Company's business
consists of contracting to distribute beverages and food products
to customer locations consisting of factories, offices,
hospitals, and schools. The Company conducts surveys of
potential customer locations, determines profitability of the
location, and submits a proposal offering to provide the vending
and/or cafeteria service for the customer location. Business
with local government social service agencies and not-for-profit
agencies is obtained through competitive bidding and is
serviced by producing meals in a central commissary and
delivering them to various designated points for consumption.
(iii) No new products have been developed by this segment. The
Company, in general, markets the product developed by its
suppliers.
(iv) The vending food service business, made up of a few large
companies and many small independently owned local and
regional enterprises, is highly competitive. The practice in the
industry is to operate under written agreements with the
locations served. In the market areas where the Company is
located, it has national, regional, and local competition, some of
which have substantially greater total sales and assets.
Competition for locations in the food service industry
normally comes in the form of pricing and in quality of
service and product.
(v) Raw materials, consisting of packaged products and commodities, are
purchased from manufacturers and purveyors and are warehoused
or processed by the Company in the local market. There is an
adequate supply of raw materials from normal sources; which
include Midwest Food Distributors, Inc., Pepsi Cola General
Bottlers and Loeb and Mayer.
(vi) During the year ended May 29, 1997, this segment had no single
customer whose sales were equal to 10 percent or more of the
Company's consolidated revenues.
Because the Company's customers are primarily the employees and
students of the various schools, colleges, factories, offices, and
hospitals at which it has its vending and cafeteria services, the
Company normally experiences a seasonal decline in sales during the
summer months and around holidays, during which times many of these
customers vacation and many locations close completely.
(vii) The distinctive logo associated with the Company has been
registered under the laws of the United States relating to
trade names and trademarks. The Company regards such logo as
valuable and will maintain the registration in effect for
continuing use in connection with the Company's business. In
addition, the segment is a party to the following labor
agreements:
<TABLE>
<S> <C> <C>
Bargaining Unit Market Expiration Date
Teamsters Local #838 Kansas City 1/1/00
Teamsters Local #90 Des Moines 4/30/98
United Service Employees
Union #377 New York 12/31/99
</TABLE>
(viii) The Company does not have a material portion of its business
subject to renegotiation or termination at the election of
the Government.
(ix) The Company does not believe that existing or probable government
regulations have a material effect on its operation.
(b) (2) Description of Business Done by the Registrant in its
Janitorial Segment
(i and ii) The janitorial and maintenance service division of the
Company's business consists primarily of contracting
various types of routine cleaning services for
customers on a weekly, monthly, or as-needed basis.
Customers currently include grocery stores and public
housing complexes in New York and New Jersey.
(iii) No new products have been introduced by this segment.
(iv) The janitorial segment is limited to the New Jersey and New York
metropolitan areas. Competition for janitorial contracts comes in
the form of pricing and quality of service. Competition in
general is from regional and local companies.
(v) The sources and availability of raw materials for this segment are
adequate. Sources of raw materials include Graco Manufacturing
and Malone Chemical.
(vi) During fiscal 1997, this segment had no single customer whose
sales were equal to 10 percent or more of the Company's
consolidated revenues.
This segment is not subject to material fluctuations in sales volume
due to seasonality.
Sales in this segment are on open accounts receivable. Inventory
levels are not significant.
(vii) This segment is operating without registered trademarks or
patents. The segment is a party to a labor agreement with
the United Service Employees Union #377 in New York that expires
December 31, 1999.
(viii) The Company does not have a material portion of its business
subject to renegotiation or termination at the election of the
Government.
(ix) The Company does not believe that existing or probable government
regulations have a material effect on its operations.
(b) (x) Through (xii) with Respect to the Registrant's Business in
General
(x) The Company has not incurred any expense for research and
development activities during any of its last two (2)
fiscal years.
(xi) Compliance with federal, state, and local laws and
regulations involving the protection of the environment
will not have a material effect.
(xii) As of May 29, 1997, the Company and its subsidiary employed
approximately 300 persons.
Item 2. Description of Properties
The Company leased all real estate for office, warehouse, garage, repair
shops, and commissaries in each of its market areas throughout fiscal 1997,
except for the property located at 3269 Roanoke Road, which was
purchased in July 1990. The property was encumbered by a mortgage in the
amount of $277,552 at May 29, 1997. Annual rentals were approximately
$358,652 less $20,400 of sublease income. The suitability of the leased
properties is adequate; such properties are described below:
<TABLE>
<S> <C> <C> <C>
Size Expiration
Location Type of Property (Sq. Ft.) Date
3269 Roanoke Rd., Kansas City, MO Office/Whse 13,600 Owned
208 E. Aurora, Des Moines, IA Office/Whse 9,200 5/98
10745 Midwest Indust Dr., St.Louis, MO Office/Whse 15,800 9/98
5-30 54th Ave., Long Island City, NY Office/Whse 8,000 Mo/Mo
41-43 24th St., Long Island City, NY Office/Whse 2,500 3/01
9100 Santa Fe Dr., Overland Park, KS Restaurant-
Discontinued 1,800 2/04
162 Closter Dock Rd., Closter, NJ Office/Whse 1,200 Mo/Mo
900 West 8th St., Kansas City, MO Warehouse 300 Mo/Mo
36 Clark St., Des Moines, IA Office/Whse 10,600 3/01
</TABLE>
The major portion of the physical properties used by the Company is made up
of automatic vending equipment and food service and production equipment.
Most of the equipment used is owned by Company. In several instances, the
cafeteria and vending equipment is owned by the account to which food
services are rendered by the Company. The Company operates
approximately 100 vehicles in the conduct of its business, approximately
25% of which are leased and the balance owned. The annual rentals on
all such leased real estate properties, equipment, and vehicles are
approximately $750,000.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year of the Company.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Price Range of Common Stock
The principal market in which the common stock of the Company is traded is
the national over-the-counter market (NASDAQ symbol AMBF).
The bid quotation for the Company's common stock for each quarter during
fiscal years ended May 29, 1997 and May 30, 1996 are shown below:
<TABLE>
1996 1995
Bid Quotation Bid Quotation
<S> <C> <C> <C> <C>
High Low High Low
First Quarter 1 1/16 1 1/16 3/4 3/4
Second Quarter 1 1/8 1 1/16 3/4 3/4
Third Quarter 1 1/2 1 1/16 1 3/4
Fourth Quarter 1 7/16 1 3/8 1 3/8 15/16
</TABLE>
The quotations above reflect inter-dealer prices without retail mark-up,
mark-down, or commission and may not represent actual transactions.
(b) Number of Equity Security Holders
As of May 29, 1997, there were 601 record holders of the Company's common
stock.
(c) Dividends
The Company has never paid cash dividends on its common stock. Payment of
dividends will be within the discretion of the Company's Board of
Directors and will depend, among other factors, on earnings, debt
agreements, capital requirements, and the operating and financial
condition of the Company.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Continuing Operations
1997 Results
Despite growth in sales of more than $ 2,000,000 from fiscal 1996 levels,
Ambassador experienced a before tqax loss from continuing operations of
$1,164,217 compared to a before tax profit of $ 50,244 in 1996. Growth in
sales waas provided through the acquisition of a competitor in the Des
Moines, Iowa market during the latter part of fiscal 1996 and the opening
of a new operation in Tyler, Texas during the second quarter of 1997.
The loss reflects poor results in the Company's Midwest operations and the
costs associated with the sales of Ambassador's ooperations in St. Louis.
During 1997, operating losses of $432,000 were recorded in the St. Louis
operation with an additional loss of $199,000 recorded on the sales of the
operation. The new operation in Tyler, Texas failed to meet sales
objectives and produced a loss of $31,000 during the year. The operation
in Tyler has been closed during fiscal 1998.
Cost of food products sold continue to increase as a percentage of sales.
This problem impacted all markets as cost of products rose dramatically
during the year and price increases implemented were not adequate to offset
the effect of these rising costs. Management continues to persue pricing
as well as purchasing opportunities to improve gross margins.
Operating costs increased dramatically due to the cost associated with the
closing of the St. Louis operation as well as high operating lease costs
that relate to the acquisition in Iowa. Administrative cost increased as a
percentage of sales due to higher payroll costs. Additionally, the Company
experienced unusually high costs relating to placement fees within the
Company's corporate accounting office and late payment fees for various
obligations. Management has taken steps to reduce operating and
administrative cost through staff reductions and stringent controls on
expenditures in all areas.
1996 Results
Income from continuing operations declined from the 1995 level despite
increased sales of $836,773 during the year ended May 30, 1996. These
earnings were $50,224 in fiscal 1996, down from $180,052 in 1995. A
change in the reserve relating to the Company's discontinued restaurant
operations brought the net result to a loss of $42,076.
This disappointing result reflects continued deterioration in margins in
the Company's vending and cafeteria operations. While management
implemented price increases throughout the year, food costs continued to
rise at a substantial rate resulting in a decline in margins during the
year. Price increases and improved controls and purchasing are being
implemented to address this problem. It is imperative that margins
improve for the Company to return to profitability.
All other cost areas combined remained near 1995 levels in relation to
sales. Operating costs were lower as a percentage of sales due to lower
operating payroll; however, increased administrative payroll and
interest costs offset these decreases.
Year 2000
Management has reviewed its systems relative to the Year 2000 issue and has
determined that no material expenditures will be required for modifications
or replacement of software due to this problem. Management does anticipate
replacing its primary financial reporting and control systems as part of
its short-term business plan and will ensure that all new systems are Year
2000 compliant.
Liquidity and Capital Resources
Working Capital at the close of fiscal 1997 was a deficit of almost
$2,000,000. This reflects the impact of the loss incurred during fiscal
1997 coupled with the $1,000,000 deficit at the end of fiscal 1996. The
Company has implemented stringent controls on capital expenditures and has
idle equipment in its vending operations to support substantial growth in
sales,if needed.
Management has been successful in attaining financing during fiscal 1998
necessary to meet its current obligations. Additionally, payments being
received on the sale of its St. Louis operations continue to provide
capital. While financing continues to be available for the Company's
capital equipment needs, Ambassador's ability to maintain its lending
relationships are dependent upon a return to profitability.
Item 7. Consolidated Financial Statements
Index to Consolidated Financial Statements
Page
Report of Independent Certified Public Accountants 10
Consolidated Balance Sheets as of May 29, 1997 and May 30, 1996 11-12
Consolidated Statements of Operations for the Years Ended
May 29, 1997 and May 30, 1996 13
Consolidated Statement of Changes in Stockholders' Equity for the
Years Ended May 29, 1997 and May 30, 1996 14
Consolidated Statements of Cash Flows for the Years Ended May 29, 1997
and May 30, 1996 15-16
Notes to Consolidated Financial Statements 17
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Ambassador Food Services Corporation and Subsidiary
We have audited the accompanying consolidated balance sheets of Ambassador Food
Services Corporation and Subsidiary as of May 29, 1997 and May 30, 1996 and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ambassador Food
Services Corporation and Subsidiary as of May 29, 1997 and May 30, 1996 and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
Kansas City, Missouri
November 24, 1997
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED BALANCE SHEETS
May 29, 1997 and May 30, 1996
<TABLE>
<S> <C> <C>
ASSETS 1997 1996
CURRENT ASSETS
Cash (including change funds of $241,719 in 1997
and $291,505 in 1996) (note A10) $ 370,340 $ 402,768
Trade accounts receivable, net of allowance for
doubtful accounts of $118,234 in 1997 and
$22,174 in 1996 (notes A11 and D) 1,697,773 1,768,211
Income taxes receivable 8,881 17,042
Inventories (note A4) 548,477 593,820
Prepaid expenses 186,817 248,916
Current portion of note receivable (notes N,O and P) 372,351 114,182
Deferred income taxes (note J) - 30,033
Total current assets 3,184,639 3,174,972
PROPERTY AND EQUIPMENT - at cost (notes A5 and E)
Vending equipment 4,804,840 5,044,062
Cafeteria, commissary, and restaurant equipment 1,205,077 1,171,549
Building and leasehold improvements 641,814 649,877
Other 991,570 1,056,859
7,643,301 7,922,347
Less accumulated depreciation and amortization 5,445,471 5,792,683
Total property and equipment 2,197,830 2,129,664
OTHER ASSETS
Location contracts (note A6) 267,530 1,242,656
Note receivable, less current portion (notes N,O and P)1,227,048 481,961
Unrecognized prior service costs (notes A7 and H) 183,009 222,932
Excess of purchase price over net assets acquired,net of
accumulated amortization of $20,375 in 1997 and
$19,355 in 1996 (note A6) 23,054 93,771
Deferred expenses 52,432 58,012
Miscellaneous 180,320 273,398
Total other assets 2,372,730 1,616,174
The accompanying notes are an integral part of these statements.
</TABLE>
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED BALANCE SHEETS - CONTINUED
May 29, 1997 and May 30, 1996
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
CURRENT LIABILITIES
Checks outstanding in excess of bank balances $ 662,086 $ 567,769
Trade accounts payable 1,532,775 1,564,088
Accrued expenses (note C) 1,249,170 679,549
Current maturities of long-term debt (note E) 582,863 485,261
Line of credit (note D) 1,142,213 949,352
Total current liabilities 3,413,343 3,254,400
LONG-TERM LIABILITIES
Deferred income taxes (note J) - 297,102
Projected benefit obligation (note H) 337,468 337,342
Other long-term liabilities 42,035 68,522
Subordinated note payable to stockholder
(note F) 250,000 250,000
Long-term debt, less current maturities
(note E) 921,617 910,939
Accrued costs of discontinued restaurant
operations (note K) 84,203 97,612
Accrued litigation and sales tax costs
(note L) - 46,594
Total long-term liabilities 1,635,323 2,008,111
COMMITMENTS AND CONTINGENCIES
(notes G, I, K, L, and N) - -
STOCKHOLDERS' EQUITY (notes F and I)
Common stock, par value $1.00 per share;
authorized, 2,000,000 shares; issued,
1,009,230 shares 1,009,230 1,009,230
Additional paid-in capital 718,291 718,291
Retained earnings (accumulated deficit) (917,528) (20,380)
809,993 1,707,141
Less treasury stock - 251,774 shares in 1997
and 241,274 shares in 1996 (298,561) (283,905)
Total stockholders' equity 511,432 1,423,236
The accompanying note are an integgral part of these statements.
</TABLE>
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended May 29, 1997 and May 30, 1996
<TABLE>
<S> <C> <C>
1997 1996
Net sales
Food $20,839,872 $18,807,080
Janitorial 1,930,674 1,655,385
22,770,546 20,462,465
Cost and expenses
Cost of food products sold 9,497,576 8,300,394
Operating (note M) 9,818,547 8,265,161
Selling and administrative 3,521,127 2,930,109
Depreciation and amortization 684,352 671,911
Interest 413,161 244,666
Total cost and expenses 23,934,763 20,412,241
Earnings (loss) from continuing operations
before income taxes (1,164,217) 50,224
Income tax benefit (note J) 267,069 -
Net earnings from continuing
operations (897,148) 50,224
Discontinued operations
Change in estimate of loss on
disposal of restaurants (note K) - (92,300)
Net Loss $ (897,148) $ (42,076)
Earnings (loss) per common share:
Earnings from continuing
operations $ (1.18) $ .07
Loss on disposal of restaurants - (.13)
Net loss per
common share $ (1.18) $ (.06)
Weighted average common shares
outstanding (note A9) 760,906 719,207
</TABLE>
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS' EQUITY
Years ended May 29, 1997 and May 30, 1996
<TABLE>
Retained
Additional Earnings Total
Paid-In (Accumulated Stockholders'
Common Stock Capital Deficit) Equity
Issued Treasury Stock
Shares Amount Shares Cost
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
June 1,
1995 1,009,230 $1,009,230 305,873 $348,504 $718,291 $ 21,696 $1,400,713
Net
earnings - - - - - (42,076) (42,076)
Sale of
treasury
stock - - (77,267) (77,267) - - 77,267
Purchase of
treasury
stock - - 12,668 12,668 - - (12,668)
Balance at
May 30,
1996 1,009,230 1,009,230 241,274 283,905 718,291 (20,380) 1,423,236
Net loss - - - - - (897,148) (897,148)
Purchase of
treasury
stock - - 10,500 14,656 - - (14,656)
Balance at
May 29,
19976 1,009,230 $1,009,230 251,774 $298,561 $718,291 $(917,528) $ 511,432
</TABLE>
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended May 29, 1997 and May 30, 1996
<TABLE>
<S> <C> <C>
1997 1996
Cash Flows From Operating Activities
Net earnings (loss) $(897,148) $(42,076)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operations
Depreciation and amortization 684,352 671,911
Gain on sale of property and equipment 198,898 (1,342)
Provision for bad debts 96,060 9,589
Deferred income taxes (267,069) -
Changes in operating assets and
liabilities:
Trade accounts receivable (25,622) (74,648)
Income taxes receivable 8,161 4,520
Miscellaneous - other assets 39,264 (180,374)
Inventories 45,343 (110,537)
Prepaid expenses 62,099 (148,320)
Trade accounts payable and
accrued expenses 416,432 311,005
Net cash provided by
(used in) operating
activities 360,770 438,728
5
Cash Flows From Investing Activities
Purchase of property and equipment (844,257) (638,663)
Proceeds from sale of property and
equipment - 12,174
Issuance of note receivable - (600,000) 3,857 -
Collections on notes receivable 96,744 3,857
Net cash used in investing
activities (747,513) (1,222,632)
Cash Flows From Financing Activities
Proceeds from issuance of long-term debt 524,046 1,179,648
Principal payments on long-term obligations (415,766) (606,068)
Purchase of treasury stock (14,656) (12,668)
Sale of treasury stock - 77,267
Net increase in checks outstanding in excess
of bank balances 94,317 58,927
Other financing activities (26,485) 41,675
Net borrowings under line of credit 192,861 125,420
Net cash provided by financing
activities 354,315 864,201
Net Increase (Decrease) in Cash (32,428) 81,297
Cash, Beginning of Year 402,768 321,471
Cash, End of Year $ 470,340 $ 402,768
Supplementary Schedule of Cash Flow Information:
Cash paid during year for:
Income taxes $ - $ 6,553
Interest $ 422,629 $ 250,436
Noncash investing and financing activities:
Purchase of Bassman Vending, Inc.
assets with long-term debt $ - $ 251,000
Sale of St. Louis location financed
with note receivable $ 1,200,000 $ -
</TABLE>
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended May 29, 1997 and May 30, 1996
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying consolidated fanancial statements
follows.
1. Principles of Consolidation
The consolidated financial statements include the accounts of Ambassador Food
Services Corporation and its wholly-owned subsidiary, Ambassador Fast
Services,Inc. All material intercompany balances and transactions have been
eliminated.
2. Nature of Business
The Company and its subsidiary are engaged in two segments: food service
(vending, cafeteria and catering) and janitorial service. The Company's
customers are principally located in the Midwest and Northeast United States.
3. Reporting Periods
The Company has a fiscal year (52 or 53 weeks) ending on the Thursday nearest
May 31. Both fiscal years 1997 and 1996 contained 52 weeks.
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
5. Property and Equipment
Property and equipment are stated at cost. Depreciation is
provided in amounts sufficient to relate the cost of depreciable assets to
operations over their estimated useful lives on the straight-line method.
The estimated lives used in determining depreciation are:
Vending equipment 8 years
Cafeteria and commissary equipment 3-10 years
Building and leasehold improvements 3-22 years
Other 2-4 years
6. Location Contracts and Excess of Purchase Price Over Net Assets
Acquired
Location contracts and excess of purchase price over net assets acquired arise
from the purchase of various companies and are carried at cost. Location
contracts represent the amount paid for customer vending relationships in
existence at the time of acquisition which were generally cancelable by either
party with limited notice. Amounts resulting from acquisitions prior to
November 1, 1970 ($1,064,787) were not amortized and relate mainly to St.
Louis operations. During 1997, these costs for St. Louis were disposed of in
conjunction with the sales of the operation (see Note O). Acquisitions of
$568,173 expended subsequent to November 1, 1970 are being amortized on a
straight-line basis over 5 to 40 years.
The Company's management continually evaluates the carrying value of
their intangible assets based upon local market and economic conditions, and, in
their opinion, there has been no diminution in the value of these assets.
7. Unrecognized Prior Service Costs
Unrecognized prior service costs, related to the defined benefit pension plan
discussed in Note H, are being amortized straight-line over the average
remaining service period of the participants included in the plan.
8. Costs and Expenses
Preopening costs associated with new vending and cafeteria accounts are expensed
as incurred.
9. Earnings (Loss) Per Common Share
Loss per share has been computed using the weighted average common
shares outstanding during the period. In addition to these shares, certain
stock options and convertible debt exist that were outstanding during the
reporting periods. These common stock equivalents were not considered in the
net loss per share calculation for fiscal year 1997 and 1996 as their effect
is antidilutive.
10. Statements of Cash Flows
For purposes of reporting cash flows, cash includes cash on hand, in banks, and
in change funds.
11. Concentration of Credit Risk
Approximately $1,300,000 in 1997 and $1,500,000 of the Company's accounts
receivable, are with customers located in the Northeast
United States. The Company grants credit to customers; which includes
businesses, schools, and governmental agencies. Collateral is generally not
required.
12. Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
13. Financial Instruments
The carrying value of the Company's financial instruments, including cash,
accounts and notes receivable, accounts payable, line of credit, and
long-term debt, approximate fair value.
14. Reclassifications
Certain items in the 1996 consolidated financial statements have been
reclassified to conform to the 1997 presentation.
B. REALIZATION OF ASSETS
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern.
Recoverability of the recorded asset amounts shown in the accompanying
consolidated balance sheets is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet
its financing requirements on a continuing basis and to succeed in its
future operations. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded
asset amounts or amounts and classification of liabilities that might be
necessary should the Company be unable to continue in existence.
Management has taken the following steps to revise its operating and
financial reqquirements, which it believes are sufficient to provide the
Company with the ability to continue in existence:
Certain unprofitable operations have been closed
Several administrative and regional positions have been eliminated
Steps to improve margins and reduce costs have been taken.
Making current operations profitable and growing through intenal
sales efforts have become the Company's focus.
The existing lender refinanced the equipment loan and the Company
obtained a short-term loan to provide additional liquidity.
Total debt has been reduced and debt service requirements
sucstantially decrease in June 1998.
C. CURRENT LIABILITIES
Accrued expenses include the following:
<TABLE>
<S> <C> <C>
1997 1996
Legal fees $122,095 $ 108,874
Vacation pay 69,546 97,376
Commissions 61,543 61,674
Taxes 332,476 47,622
Salaries 217,132 245,070
Current portion of projected benefit
obligation (Note H) 18,900 60,638
Accrued costs of discontinued restaurant
operations (Note K) 13,562 16,388
Accrued litigation and sales tax costs
(Note L) 123,416 29,000
Deferred revenue 98,405 -
Medical Insurance 54,589 -
Lease Termination 62,000 -
Other 75,506 12,907
$1,249,170 $679,549
</TABLE>
D. LINE OF CREDIT AGREEMENT
The Company has a line of credit agreement with a financing company that
that carries interest at the publicly announced prime rate (8.5% at May 29
1997) plus 3.5%. The amount drawn cannot exceed 80% of eligible accounts
receivable and is collateralized by the Company's accounts receivable.
Borrowings are limited to a maximum of $1,500,000 plus the outstanding
principal related to a portion of the line of credit due August 1997
($213,878 at May 29, 1997). Interest is payable monthly and amounts
outstanding are due upon demand. At May 29,1997 and May 30,1996,amounts
outstanding were $1,142,213 and $949,352,respectively.
E. LONG-TERM DEBT
<TABLE>
<S> <C> <C>
1996 1995
Note payable - bank, payable in monthly installments
of $2,848, including interest at prime rate
(8.5% at May 29, 1997) plus 2.0%, due July 1998,
collateralized by building $277,552 $282,937
Notes payable - equipment, payable in monthly
installments of $57,449, including interest at
rates ranging from 9% to 19.25%, due through
July 2002, collateralized by equipment 1,014,837 817,467
Note payable to Bassman Vending, Inc. payable in
monthly installments of $5,150, including interest
at 8.5%, due through March 2001, collateralized by
certain location contracts and equipment
(See Note N). 201,430 244,232
Note payable - other 10,661 51,564
1,504,480 1,396,200
Less current maturities 582,863 485,261
$ 921,617 $ 910,939
</TABLE>
Aggregate annual principal payments applicable to long-term debt due
subsequent to May 29, 1997 are as follows:
<TABLE>
<S> <C>
Fiscal Year
Ending Amount
1998 $ 582,863
1999 542,938
2000 202,453
2001 138,924
2002 37,302
$1,504,480
</TABLE>
F. SUBORDINATED NOTE PAYABLE TO STOCKHOLDER
During fiscal year 1996, the Company borrowed $250,000 from a stockholder and
officer. The note calls for interest at 10%, payable quarterly with quarterly
principal payments of $12,500 beginning June 30, 2001, with a final payment
June 30, 2006.
The note is subordinate to all other indebtedness of the Company.
From April 30, 1998 to May 1, 2006, the note is convertible to shares of the
Company's stock at a price of $1.25 per share. In the event any payments
are made on the note, the Company will issue warrants to the stockholder
which will entitle the stockholder to purchase an equivalent number of shares
during the same period. The conversion terms may be adjusted upon certain
events to prevent dilution of the stockholder conversion rights.
G. LEASES
Future minimum lease payments under all noncancellable operating leases as
of May 29, 1997 are as follows
<TABLE>
<S> <C> <C> <C>
Fiscal year
ending Real estate Equipment Total
1998 $ 209,392 $ 436,352 $ 645,744
1999 195,921 370,494 566,415
2000 156,606 314,231 470,837
2001 135,580 39,678 175,258
$ 697,499 $1,160,755 $1,858,254
</TABLE>
Rental expense charged to operations was as follows:
<TABLE>
<S> <C> <C>
1997 1996
Minimum rentals $845,198 $499,703
Less sublease rentals - ( 6,630)
$845,198 $493,073
</TABLE>
H. EMPLOYEE BENEFIT PLANS
The Company has a nonqualified defined benefit pension plan covering two key
employees and three former officers of the Company. Under the terms of the
plan, each individual will receive a fixed monthly payment for ten years
after retirement. The benefit does not vest until the employee reaches age
65. If the individual dies, either during employment or after retirement, the
beneficiary is entitled to receive benefits as specified in the agreement.
The plan is unfunded.
The following table sets forth the status and amounts recognized in the
Company's consolidated financial statements for 1997 and 1996:
<TABLE>
<S> <C> <C>
1997 1996
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $248,080 in 1997 and
$302,806 in 1996 $ 356,368 $ 397,980
Projected benefit obligation for service
rendered to date $ 356,368 $ 397,980
Plan assets at fair value - -
Projected benefit obligation in excess of
plan assets 356,368 397,980
Additional minimum liability recorded 183,009 183,009
Prior service cost not yet recognized in net
periodic pension cost (183,009) (222,932)
Net accrued pension cost $ 356,368 $ 397,980
Net accrued pension cost is included in the accompanying consolidated financial
statements as follows:
1996 1995
Current portion included in accrued
expenses $ 18,900 $ 60,638
Long-term portion of obligation 337,468 337,342
$ 356,368 $ 397,980
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 8.0% in 1997 and 1996.
Net pension cost for 1997 and 1996 includes the following components:
<TABLE>
<S> <C> <C>
1997 1996
Service cost - benefits earned
during the period $ 5,491 $ 5,085
Interest cost on projected benefit
obligation 31,571 35,363
Amortization of prior service cost 37,746 37,745
Net periodic pension cost $74,808 $78,193
The Company contributed approximately $74,000 and $83,000 in fiscal years
1997 and 1996, respectively, to several multi-employer pension plans for
employees covered by collective bargaining agreements. These plans are not
administered by the Company, and contributions are determined in accordance
with provisions of negotiated labor contracts.
The Multiemployer Pension Plan Amendments Act of 1980(the Act)
significantly increased the pension responsibilities of participating employers.
Under the provisions of the Act, if the plans terminate or the Company
withdraws, the Company could be subject to a substantial "withdrawl liability."
Management has no intention of undertaking any action which would subject the
Company to this obligation.
The Company has a defined contribution plan that covers all permanent
nonunion employees. Under the terms of the plan, employees can contribute
up to a maximum of 15% of their gross annual salary. Company contributions
to the Plan are at the discretion of the Board of Directors. The Company made
no contributions to this plan during fiscal year 1997 or 1996.
I. STOCK OPTIONS
In fiscal year 1993, the Board of Directors granted nonstatutory options for
40,000 shares to an officer and certain key employees. These options expired of
unexercised subsequent to May 29, 1997.
In fiscal year 1996, the Board of Directors approved the granting of
nonstatutory options for 65,000 shares to certain key employees. The
exercise price of the options was $1 per share, which approximated the fair
market value of the shares on the date of grant of the option. The options were
exercised during fiscal year 1996.
Stock option transactions for the two years are summarized below:
</TABLE>
<TABLE>
<S> <C> <C>
Option Shares
1997 1995
Outstanding, beginning of year 40,000 40,000
Granted - 65,000
Exercised - (65,000)
Outstanding, end of year 40,000 40,000
</TABLE>
J. INCOME TAXES
The net deferred tax liability in the accompanying consolidated balance sheets
includes the following amounts of deferred tax assets and liabilities:
<TABLE>
<S> <C> <C>
1997 1996
Deferred tax liability $ 232,883 $ 528,337
Deferred tax asset (721,444) (693,295)
Less: Valuation allowance 488,561 432,027
Net deferred tax liability $ - $ 267,069
</TABLE>
The net deferred tax liability is included in the accompanying consolidated
financial statements as follows:
<TABLE>
<S> <C> <C>
1997 1996
Deferred income taxes - noncurrent
liability $ - $ 297,102
Deferred income taxes - short-term
asset - (30,033)
- $ 267,069
</TABLE>
The approximate tax effect of each temporary difference giving rise to the
deferred tax liability and asset was as follows at May 29, 1997 and May 30,
1996:
<TABLE>
<S> <C> <C>
1997 1996
Amortization of location contracts $ 1,201 $ 297,069
Accelerated depreciation 231,682 231,268
$ 232,883 $ 528,337
Accrued costs $ (62,308) $ (60,681)
Amortization of pension costs (66,758) (69,118)
Vacation accrual (27,123) (37,977)
Allowance for bad debts (46,111) (8,648)
Other (7,689) -
Net operating loss carryforward (244,847) (243,834)
AMT credit carryforward (106,504) (108,716)
Investment tax credit carryforward (160,104) (164,321)
$ (721,444) $ (693,295)
</TABLE>
The valuation allowance was established to reduce the deferred tax asset to the
amount that will more likely than not be realized. The reduction is necessary
due to prior operating losses and uncertainty as to the Company's ability to
utilize tax credit and net operating loss carryforwards before they expire.
The valuation allowance was increased $56,534 and $10,759 in
fiscal years 1997 and 1996, respectively.
The income tax benefit reflected in the consolidated statements of operations
differs from the amounts computed at federal statutory income tax rates. The
principal differences are as follows:
<TABLE>
<S> <C> <C>
1996 1995
Federal income tax benefit
computed at statutory rate $ (396,000) $ (14,000)
State income tax benefit (58,000) (2,000)
Tax effect of nondeductible expenses 14,000 12,000
Increase in valuation allowance 57,000 11,000
Underaccrual of prior deferred tax liability 120,000 -
Other, net (4,000) (7,000)
$ (267,000) $ -
</TABLE>
The Company had available for income tax purposes the following investment
credit carryforwards at May 29, 1997:
<TABLE>
<S> <C>
Year of Expiration Amount
1998 59,630
1999 25,168
2000 49,551
2001 25,755
$160,104
</TABLE>
In addition, the Company had the following net operating loss carryforwards
available at May 29, 1997:
<TABLE>
<S> <C>
Year of Expiration Amount
2008 $252,779
2009 138,822
2010 63,240
2011 156,463
2012 16,508
$627,812
</TABLE>
K. ACCRUED COSTS OF DISCONTINUED RESTAURANT OPERATIONS
During fiscal year 1988, management ceased restaurant operations.
The estimated obligation under the property lease, netof anticipated sublease
rentals, is accrued.
The accrual is included in the accompanying consolidated financial
statements as follows:
<TABLE>
<S> <C> <C>
1997 1996
Current portion included in accrued
expenses $ 13,562 $ 16,388
Accrual included in long-term
liabilities 84,203 97,612
$ 97,765 $114,000
</TABLE>
L. ACCRUED LITIGATION AND SALES TAX COSTS
During fiscal year 1994, the Company established an accrual relating to
a lawsuit filed by the federal government on behalf of the United States
Department of Agriculture. To avoid further litigation expenses, an agreement
for settlement was reached. Terms of the agreement included payment by the
Company to the government of $164,000, the last installment of which was paid
in 1996.
At May 30, 1996, the Company had an accrual of $75,594 relating to
a New York state sales tax audit performed in 1988. The amount is a total of
the sales tax assessed plus interest and penalties, less total payments. During
the year the Company received a letter granting amnesty for the tax year
liability for 1988 and before.
During fiscal year 1997, the Company was assessed $133,233 in taxes
and penalties by the Missouri Department of Revenue for delinquent sales taxes
for the period from September 1996 through February 1997. The Company entered
into an agreement to pay this amount plus interest at 12% in monthly
installments of $11,150 through April 1998.
The accrual is in the accompanying consolidated financial statements
as follows:
<TABLE>
<S> <C> <C>
1997 1996
Current portion included in accrued expenses $ 123,416 $ 29,000
Reserve included in long-term liabilities - 46,594
$ 123,416 $ 75,594
</TABLE>
The New York State Department of Taxation and Finance is conducting a
sales and use tax examination for the period from June 1993 through November
1995. The examination is not completed, and no adjustments have been proposed.
The ultimate outcome of this examination cannot presently be
determineed. Therefore, no provision for any liability that may result has been
made in the accompanying consolidated financial statements.
M. OPERATING EXPENSES
Operating expenses in the accompanying consolidated statements of operations are
composed of the following:
<TABLE>
<S> <C> <C>
1996 1995
Payroll and related costs $6,676,089 $6,162,640
Equipment rental costs 535,893 255,431
Other 2,606,565 1,847,090
$9,818,547 $8,265,161
</TABLE>
N. ACQUISITION
During fiscal year 1996, the Company acquired certain location contracts, parts
inventory and equipment from Bassman Vending, Inc. (BVI) for $251,000 allocated
as follows:
<TABLE>
<S> <C>
Location contracts (in and around Des Moines, Iowa) $161,000
Parts inventory 30,000
Equipment 60,000
$251,000
</TABLE>
The purchase price was financed with a $251,000 note payable to BVI, which is
described in Note E.
In addition, the Company has entered into noncancellable operating leases with
BVI whereby the Company will lease certain equipment and real estate for $6,000
and $24,500 per month, respectively, from March 1996 through March 2001.
Additionally, the Company lent BVI $600,000 (See Note P).
O. SALE OF ST. LOUIS OPERATIONS
During fiscal year 1997, the Company entered into an agreement to lease and sale
equipment and location contracts for its St. Louis operations. The agreement
called for rental payments to be paid in monthly installments equal to 10% of
the gross revenues from all sales during the lease to customers identified in
the agreement. Equipment located at customers no longer receiving service from
the purchaser will be returned to the Company. All returned equipment will
result in a credit to the purchase price of 50% of the yearly revenue of the
customer as set forth in the agreement.
At the end of the lease, the remaining equipment will be purchased for a sales
price of $1,200,000,net of the credits above(See Note P).
As a result of this sale, the Company recognized a loss of $198,898 during
fiscal year 1997.
P. NOTES RECEIVABLE
Notes receivable include the following:
<TABLE>
<S> <C> <C>
1997 1996
Note receivable from BVI, payable in
monthly installments of $12,300, including
interest at 8.5% through April 2001,
collateralized by the equipment and real
estate being leased by the Company as
discussed in Note N $ 493,247 $ 596,143
Note receivable from sales of St. Louis
operations, with $120,000 payment due in
January 1998, with 60 monthly installments
commencing February 1998, plus interest
at 10%, collateralized by the equipment
sold as discussed in Note O 1,106,152 -
1,599,399 596,143
Less current portion 372,351 114,182
$1,227,048 $ 481,961
</TABLE>
Q. YEAR-END ADJUSTMENTS
The following adjustments were made in the fourth quarter of fiscal year 1997:
<TABLE>
<S> <C>
(Income)
expense
Correct accounts payable $ 154,000
Increase in allowance for and write-off
of questionable trade and miscellaneous
receivables. 273,000
Correct Iowa sales tax payable 69,000
Record loss on sales of St.Louis operations 199,000
Reduce deferred tax liability (267,000)
Amnesty on New York sales tax obligation (76,000)
$ 352,000
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no disagreements of the type described in paragraph (a) or any
reportable event as described in paragraph (b) of Item 304 of Regulation SB
during the two most recent fiscal years.
Part III
Item 9. Directors and Executive Officers of the Registrant; Compliance with
16 (a) of the Exchange Act.
(a), (b) The Executive Officers and Directors of the Company are:
</TABLE>
<TABLE>
<S> <C> <C> <C>
Name Age Principal Occupation Director
Since
Arthur D. Stevens (1) 73 Chairman of the Board of Directors,
Executive Officer, and Treasurer of
Ambassador (2) 1963
George T. Terris(1) 75 Investor (3) 1966
Robert A. Laudicina(1) 57 Executive Vice-President and
General Manager of Ambassador's
New York Operations (4) 1986
Richard A. Mitchell 32 Assistant Secretary, Vice President
ofOperations (5) N/A
Ann W. Stevens 55 1996
Douglas M. Schosser,CPA 27 Director,Key Asset Management Co. 1997
</TABLE>
(1) Member of Executive Committee of Board of Directors
(2) Mr. Stevens has been Chairman of the Board of Directors of
Ambassador since February 15, 1963, Chief Executive Officer
since April 11, 1963, and Treasurer since January 26, 1972. He was
also the first President and Treasurer of Ambassador beginning
on April 19, 1963, relinquishing those positions in April 1978
and October 1969, respectively. He again assumed the position of
President on January 1, 1987 upon the retirement of Mr. George
Terris from that position.
(3) Mr. Terris, until his retirement January 1, 1987, was President and
Chief Operations Officer of Ambassador.
(4) Mr. Laudicina was elected Executive Vice President February 22,
1989. He served as Vice President prior to that time, beginning
in January 1982. He was New York Sales and Marketing Director
from December 1977 to January 1979 and has been divisional
President of Ambassador's New York operations since January 1979.
(5) Mr. Mitchell served as Manager of Operating Systems from August
1991 through November 1994 and has served as Assistant Secretary
since November 1991. In November 1994, he was appointed to the
position of Vice President of Operations.
(c) Arthur D. Stevens,CEO and Chairman, and Ann W. Stevens,Director,are
husband and wife. No other family relationship exists between
any of the executive officers and directors listed above.
Each Officer holds his office at the pleasure of the Board of Directors
until the next annual meeting of the Directors and until his successor
is duly elected and qualified.
(d) The Executive Officers and Directors listed above were not involved
or a part of any legal proceedings as described in Item 401(d).
Item 10. Executive Compensation
(a), (b) The following table sets forth information as to the remuneration
accrued by Ambassador Food Services Corporation and its
subsidiary during the fiscal year ended May 29, 1997, for each
Director and Officer whose aggregate remuneration for the year
exceeded $100,000.
<TABLE>
<S> <C> <C>
Names of Individuals,
Number of Persons in Group Fiscal Base
and Capacities in which Served Year Salary
Arthur D. Stevens, 1997 $144,144
Chairman of the Board, President, Chief Executive 1996 188,428
Officer and Treasurer of Ambassador and Officer 1995 161,100
and Director of its Subsidiary
Robert A. Laudicina, 1997 $157,000
Executive Vice President and 1996 169,597
General Manager of New York Operations 1995 140,446
</TABLE>
Executive Retirement Program
An executive retirement program was adopted during the 1990 fiscal year to
provide a target annual retirement benefit at age 65 or upon retirement, if
later, in an amount equal to approximately 40-45% of annual salary, payable
for 10 years, for certain salaried employees, including the following officer:
Robert A. Laudicina. This target retirement benefit will be provided through
the combination of (1) discretionary annual cash retirement bonus payments in
the amount of $2,000, which must be invested in an individual retirement
account or a universal life insurance policy, and (2) a nonqualified (for tax
purposes) supplemental retirement agreement from the Company. The nonqualified
retirement agreements will pay the estimated portion of the target retirement
benefit which cannot be funded by the executive through the annual cash
retirement bonus payments. The nonqualified retirement arrangements will
also provide a pre-retirement death benefit in the event of the executive's
death prior to age 65.
These annual retirement benefits of the above named Officer, are estimated
to be as follows:
<TABLE>
<S> <C> <C> <C> <C>
Name of Executive Age Estimated Benefit Supplemental Target
From Cash Retirement Retirement
Retirement Benefit Benefit
Robert A. Laudicina 57 $9,123 $46,227 $55,350
</TABLE>
*based upon contributions of $2,000 per year until age 65 and interest at
8% annum.
The Company maintains insurance policies on the lives of the executives in
amounts estimated to be sufficient to reimburse it for most of the supplemental
retirement and/or death benefit payments.
(d) Stock Options
There were no stock options held by any Officer or Director whose
remunerations exceeded $100,000 as of May 29, 1997.
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth, as of May 29, 1997, the information with
respect to common stock ownership of each person known by the Company to own
beneficially more than 5% of the shares of the Company's common stock, and of
all Officers and Directors as a group.
<TABLE>
<S> <C> <C>
Amount Percent of
Beneficially Outstanding
Name and Address of Beneficial Owner(s) Owned Shares
Arthur D. Stevens
1901 W. 69th Street
Mission Hills, KS 66205 181,444 (1) 23.9%
Thomas G. Berlin
800 Superior Avenue, Suite 2100
Cleveland, Ohio 44114 124,218 (3) 16.4%
George T. Terris
936 West Shaker Circle
Nequon, WI 53092 50,000 (2) 6.6%
George F. Crawford
10110 Fontana Lane
Overland Park, KS 66207 52,597 6.9%
</TABLE>
(1) Does not include 60,000 shares beneficially owned by Mr. Stevens'
adult children, in which shares he disclaims any beneficial
interest. Additionally, does not include 200,000 shares which may
be issued in the event of conversion of certain debt under its
conversion provisions which are effective from April 30, 1998 to
May 1, 2006.
(2) Does not include 4,000 shares owned by Mr. Terris' immediate
family, in which shares he disclaims any beneficial interest.
(3) Includes 12,800 shares owned by Mr. Berlin's wife.
(b) Security Ownership of Management
<TABLE>
<S> <C> <C>
Shares of Stock
Beneficially Owned
May 29, 1997
Name Number Percent
of Shares of Stock
Arthur D. Stevens
1901 W. 69th Street
Mission Hills, KS 66205 181,444 (1) 23.9%
George T. Terris
936 West Shaker Circle
Nequon, WI 53092 50,000 (2) 6.6%
Robert A. Laudicina
303 Cedar Court
Norwood, NJ 07648 26,500 3.5%
Ann W. Stevens
1901 W. 69th Street
Mission Hills, KS 66205 1,000 0.1%
Douglas M. Schosser
1050 Allston Road
Cleveland Heights, OH 44121 2,000 0.3%
All Directors and Officers
as a Group (6 persons) 264,144 34.9%
</TABLE>
(1) Does not include 60,000 shares beneficially owned by Mr. Stevens'
adult children, in which shares he disclaims any beneficial
interest. Additionally, does not include 200,000 shares which may
be issued in the event of conversion of certain debt under its
conversion provisions which are effective from April 30, 1998
to May 1, 2006.
(2) Does not include 4,000 shares owned by Mr. Terris' immediate
family, in which shares he disclaims any beneficial interest.
(c) Changes in Control
The Company knows of no contractual arrangements which may, at a subsequent
date, result in a change in control of the Company.
Item 12. Certain Relationships and Related Transactions
(a) Certain Business Relationships
There were no transactions with any member of management during
fiscal 1997 which exceeded $60,000.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibit No.:
3A Articles of Incorporation of the Registrant (1)
3B By-Laws of the Registrant (1)
6 1984 Incentive Stock Option Plan Dated January 31, 1984(2)
10 Material Contracts Agreement with Paul F. Leathers (1)
22 Subsidiary of the Registrant (3)
(1) This exhibit was filed with the Ambassador's 10-K for the fiscal
year ended May 28, 1981. A copy of the Certificate of Amendment
of Certificate of Incorporation changing the Company's name was
filed as a supplement to said exhibit for the fiscal year ended
June 1, 1989.
(2) This exhibit was filed with the Company's 10-K for the fiscal year
ended May 31, 1984.
(3) Exhibit attached as part of filing.
Exhibit No. 22
Subsidiary of the Registrant
Ambassador Food Services Corporation (a Delaware Corporation), the parent
Company, has the following subsidiary, which is included in the consolidated
financial statements.
Name of Subsidiary State of Incorporation % of Voting
Securities Owned
Ambassador Fast
Services, Inc.
d/b/a Squire Maintenance
Services New York 100%
Note: The Company will provide, on the written request of any stockholder, a
copy of any exhibit to this Form 10-KSB at a rate of $.15 per page.
The minimum fee is $5.00. Requests should be directed to Arthur
D. Stevens, President, Ambassador Food Services Corporation, P.O. Box
419586, Kansas City, Missouri 64141-6586.
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.
AMBASSADOR FOOD SERVICES CORPORATION
(Registrant)
/s/ Robert A. Laudicina Date April 20, 1998
Robert A. Laudicina
Interim President
/s/ Richard Mitchell Date April 20, 1998
Richard Mitchell
Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Arthur D. Stevens Chairman of the Board April 20, 1998
Arthur D. Stevens Title Date
/s/ Robert A. Laudicina Interim President/Director April 20, 1998
Robert A. Laudicina Title Date
/s/ Ann W. Stevens Director April 20, 1998
Ann W. Stevens Title Date
/s/ George T. Terris Director April 20, 1998
George T. Terris Title Date
/s/Douglas M. Schosser Director April 20, 1998
Douglas M. Schosser Title Date
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-29-1997
<PERIOD-END> MAY-29-1997
<CASH> 370,340
<SECURITIES> 0
<RECEIVABLES> 1,697,773
<ALLOWANCES> 118,234
<INVENTORY> 548,477
<CURRENT-ASSETS> 3,184,639
<PP&E> 7,643,301
<DEPRECIATION> 5,445,471
<TOTAL-ASSETS> 7,315,862
<CURRENT-LIABILITIES> 5,169,107
<BONDS> 0
<COMMON> 1,009,230
0
0
<OTHER-SE> (199,237)
<TOTAL-LIABILITY-AND-EQUITY> 7,315,862
<SALES> 22,770,546
<TOTAL-REVENUES> 22,770,546
<CGS> 19,316,123
<TOTAL-COSTS> 4,205,479
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 413,161
<INCOME-PRETAX> (1,164,217)
<INCOME-TAX> (267,069)
<INCOME-CONTINUING> (897,148)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (897,148)
<EPS-PRIMARY> (1.18)
<EPS-DILUTED> (1.18)
</TABLE>
