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 June 3, 1999
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 (IRS 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 13or 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 $ 18,026,417.
At February 18, 2000, there were 735,556 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 $838,534.
Exhibit Index is on page 34.
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 products 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; these include Ancona Midwest Food Services, Inc.,
Pepsi-Cola General Bottlers, and Loeb and Mayer.
(vi) During the year ended June 3, 1999, 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 12/31/02
Teamsters Local #90 Des Moines 04/30/02
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 1999, 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 resulting from 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)(1 and 2)
(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 June 3, 1999, the Company and its subsidiary employed
approximately 220 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 1999, 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 $300,000 at June 3, 1999.
Annual rentals were approximately $257,544 less $25,800 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 ofProperty (Sq. Ft.) Date
3269 Roanoke Rd.
Kansas City, MO Office/Whse 13,600 Owned
208 E. Aurora
Des Moines, IA Office/Whse 9,200 Mo/Mo
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 Sante Fe Dr.
Overland Park, KS Restaurant- 1,800 2/04
Discontinued
162 Closter Dock Rd.
Closter, NJ Office/Whse 1,200 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 the Company. In several instances, cafeteria and
vending equipment are owned by the account to which food services
are rendered by the Company. The Company operates
approximately 75 vehicles in the conduct of its business,
approximately 10% of which are leased and the balance owned.
The annual rentals on all such leased real estate
properties, equipment, and vehicles approximate $600,000.
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 quotations for the Company's common stock for each quarter
during fiscal years ended June 3, 1999 and May 28, 1998 are shown below:
<TABLE>
<S> <C> <C>
1999 1998
Bid Quotation Bid Quotation
High Low High Low
First Quarter $1.25 $.625 $1.375 $1.00
Second Quarter $1.03125 $.875 $1.0625 $1.0625
Third Quarter $1.125 $.875 $1.1875 $1.125
Fourth Quarter $1.15625 $.875 $1.1875 $1.125
</TABLE>
The quotations above reflect interdealer prices without retail mark-up,
markdown, or commission and may not represent actual transactions.
(b) Number of Equity Security Holders
As of February 18, 2000, there were 550 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
1999 Results
Sales for fiscal 1999 were $1,178,661 or 6.1% less than year ended
May 28, 1998. The decline was due primarily to the loss of vending and
cafeteria contracts to competitors in Kansas City. Fiscal 1998 included
sales of $285,000 for an operation in Tyler, Texas; which was
closed. Gross margins deteriorated over 2.0% in fiscal 1999 compared
to fiscal 1998. Intense competition and sales product mix adversely
affected gross margins. The decline in gross margins was the primary
reason for the substantial loss incurred in fiscal 1999.
Management continues to pursue increased pricing and lower cost
of product.
Operating costs for fiscal 1999 were basically the same as fiscal 1998 in
dollars spent but were 2.8% higher as a percent of sales because of
the sales decline. Administrative costs increased due primarily to the
write-off of non-trade receivables in excess of $100,000. A sales tax
and a union pension liability from prior years of $130,000 was recorded
in fiscal 1999.
Management has taken steps to reduce operating and administrative costs
through staff reductions and control of expenditures in all areas.
The carrying value of intangible assets is periodically reviewed by the
Company based on the estimated future operating income of each acquired
entity on an undiscounted cash flow basis. Based upon its most
recent analysis, the Company believes that no material impairment of
intangible assets exists at June 3, 1999.
1998 Results
Sales declined from fiscal 1997 levels by $3,565,468 to $19,205,078 in the
year ended May 28, 1998. This decline reflected the impact of the
sale of the Company's St. Louis operations in April 1997, which resulted
in a decline of $2,968,360. Additional declines in revenues resulted
from the closing of the Company's operations in Tyler, Texas and
from the loss of vending and cafeteria contracts to competitors in
Kansas City. Despite these lower sales, Ambassador reduced its loss
from operations from $1,164,217 to $75,800. This improvement partially
resulted from the elimination of losses experienced during fiscal 1997
in the Company's St. Louis operations.
The Company improved its gross margins in fiscal 1998 through
improved purchasing and through the addition of sales in its New York
operation in the form of short-term contracts, which carried strong
pricing relative to food cost. Management continues to pursue increased
pricing and to lower the cost of its products; however, the end of
the short-term agreements in New York during late 1998 and early 1999
makes it unlikely the Company's gross margins will improve further in
1999.
Operating costs declined compared to 1997 levels as a percentage
of sales because of unusually high cost in this area associated with the
closing of the Company's St. Louis operations during fiscal 1997.
The Company also lowered its operating expenses by reducing operating
payrolls, vehicle costs, and the cost of supplies in its food service
operations. Management has further reduced payrolls and anticipates even
lower operating costs in fiscal 1999.
Administrative, depreciation, and interest costs were all lower
in 1998 because of strict control of capital expenditures and
reductions in all administrative cost areas. Management anticipates
further improvements in these cost areas during fiscal 1999 through
further staff reduction and continued controls on capital expenditures.
Year 2000
The company did not experience any system problems as a result
of Year 2000.
Liquidity and Capital Resources
The Company's working capital deficit declined by $281,316 from
a deficit of $1,837,837 at May 28, 1998 to a deficit of $1,556,521
at June 3, 1999. Long-term liabilities increased $410,351 during
fiscal 1999. Management was able to strengthen the working capital
position of the Company by refinancing certain of the current obligations
on a long-term basis subsequent to June 3, 1999; and cash flow from
operations will, in the opinion of management, be more than sufficient
to meet the Company's cash requirements. Idle equipment continues to be
available to provide for growth in the Company's vending operations, and
financing is in place for any capital expenditure needs during fiscal
2000.
Item 7. Consolidated Financial Statements
Index to Consolidated Financial Statements
Page
Report of Independent Certified Public Accountants 12
Consolidated Balance Sheets as of
June 3, 1999 and May 28, 1998 13-14
Consolidated Statements of Operations for the Years
Ended June 3, 1999 and May 28, 1998 15
Consolidated Statement of Changes in Stockholders'
Equity (Deficit) for the Years Ended
June 3, 1999 and May 28, 1998 16
Consolidated Statements of Cash Flows for the Years
Ended June 3, 1999 and May 28, 1998 17-18
Notes to Consolidated Financial Statements 19-32
CONSOLIDATED
FINANCIAL STATEMENTS
AND
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
AMBASSADOR FOOD SERVICES CORPORATION
AND SUBSIDIARY
June 3, 1999 and May 28, 1998
C O N T E N T S
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 12
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 13-14
CONSOLIDATED STATEMENTS OF OPERATIONS 15
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT) 16
CONSOLIDATED STATEMENTS OF CASH FLOWS 17-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19-32
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 June 3, 1999 and May 28, 1998
and the related consolidated statements of operations, changes in
stockholders' equity (deficit), 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 Ambassador Food
Services Corporation and Subsidiary as of June 3, 1999 and May 28, 1998
and the consolidated results of their operations and their cash flows for
the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net loss of $807,682 during the year ended
June 3, 1999, and, as of that date, the Company's current liabilities
exceeded its current assets by $1,556,521 and its total liabilities exceeded its
total assets by $402,944. These factors, among others, as discussed in Note B
to the financial statements, raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note B. The financial statements
do not include any adjustments that might result from the outcome of
this uncertainty.
Kansas City, Missouri
October 22, 1999, (except for Note N, as to which
the date is December 29, 1999)
CONSOLIDATED FINANCIAL STATEMENTS
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED BALANCE SHEETS
June 3, 1999 and May 28,1998
<TABLE>
<S> <C> <C>
1999 1998
ASSETS
CURRENT ASSETS
Cash (including change funds
of $186,405 in 1999
and $195,412 in 1998)
(note10) $ 238,410 $ 271,709
Trade accounts receivable,
net of allowance for
doubtful accounts of
$16,483 in 1999 and
$87,820 in 1998
(notes A11 and D) 937,533 1,193,619
Income Taxes receivable - 3,277
Inventories (note A4) 538,978 483,999
Prepaid Expenses 90,288 134,961
Current portion of notes
receivable (note L) 21,016 295,570
___________ __________
Total current assets 1,826,225 2,383,135
PROPERTY AND EQUIPMENT (notes A5 and E)
Vending Equipment 4,876,153 4,682,523
Cafeteria and Commissary
Equipment 1,063,661 1,144,887
Building and leasehold
improvements 736,537 634,457
Other 909,569 971,883
___________ __________
7,585,920 7,433,750
Less accumulated depreciation
and amortization 5,761,792 5,622,766
Total property and equipment 1,824,128 1,810,984
OTHER ASSETS
Location contracts,
net of accumulated
amortization of $152,001
in 1999 and $141,138 in 1998 242,482 253,345
(notes A6 and E)
Notes receivable,
less current portion (note L) 291,812 909,100
Unrecognized prior service costs
(notes A& and H) 108,394 146,266
Excess of purchase price
over net assets acquired,
net of accumulated amortization
of $22,704 in 1999 and $21,645
in 1998 (note A6) 20,976 22,035
Deferred expenses 48,616 49,956
Miscellaneous 79,900 111,288
Total other assets 792,180 1,491,990
_________ _________
$ 4,442,533 $ 5,686,109
1999 1998
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
CURRENT LIABILITIES
Checks outstanding in excess
of bank balances $ 364,786 224,290
Trade accounts payable 1,454,568 1,731,606
Accrued expenses (note C) 665,348 678,243
Current maturities of
long-term debt (note E) 480,554 864,904
Line-of-credit (note D) 417,490 721,929
Total current liabilities 3,382,746 4,220,972
LONG-TERM LIABILITIES
Projected benefit obligation
(note H) 292,069 318,545
Other long-term liabilities - 16,366
Subordinated note payable
to stockholder (note F) 168,558 250,000
Long-term debt, less current
maturities (note E) 946,240 396,803
Accrued costs of discontinued
restaurant operations
(note J) 55,864 70,666
Total long-term liabilities 1,462,731 1,052,380
COMMITMENTS AND CONTINGENCIES
(notes F, G, H, J, and M)
STOCKHOLDERS' EQUITY (DEFICIT) (note F)
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
Accumulated deficit (1,801,010) (993,328)
___________ ___________
(73,489) 734,193
Less treasury stock - 274,174
shares in 1999 and 267,074
shares in 1998 329,455 321,436
Total stockholders' equity
(deficit) (402,944) 412,757
___________ __________
$ 4,442,533 $ 5,686,109
___________ __________
___________ __________
</TABLE>
The accompanying notes are an integral part of these statements
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 3, 1999 and May 28, 1998
<TABLE>
<S> <C> <C>
1999 1998
Net Sales
Food $16,326,818 $ 17,511,476
Janitorial 1,699,599 1,693,602
___________ _____________
18,026,417 19,205,078
Cost and expenses (note A8)
Cost of food products sold 7,828,748 7,924,592
Operating (note K) 7,563,302 7,523,717
Selling and administrative 2,597,004 2,852,652
Depreciation and amortization 530,553 602,166
Interest 314,492 377,751
___________ ____________
Total cost and expenses 18,834,099 19,280,878
___________ ____________
NET LOSS $ (807,682) $ (75,800)
___________ ____________
___________ ____________
Loss per common share:
Net loss per common share $ (1.10) $ (0.10)
___________ _____________
___________ _____________
Weighted average of common shares
Outstanding (note A9) $ 737,496 $ 742,156
___________ _____________
___________ _____________
The accompanying notes are an integral part of these statements.
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Years ended June 3, 1999 and May 28, 1998
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Total
Additional Stockholders'
Paid-in Accumulated equity
Common Stock capital deficit (deficit)
Issued Treasury
Shares Amount Shares Amount
Balance
at May
30,1997
1,009,230 $1,009,230 251,774 $(298,561)$718,291 $(917,528) $511,432
Net Loss
- - - - - (75,800) (75,800)
Purchase
of
treasury stock
- - 15,300 (22,875) - - (22,875)
________ ________ _______ ________ ________ _________ _________
Balance
at May
28, 1998
1,009,230 $1,009,230 267,074 (321,436) 718,291 (993,328) 412,757
Net Loss
- - - - - (807,682) (807,682)
Purchase
of
Treasury stock
- - 7,100 (8,019) - - (8,019)
________ _______ ________ _________ ________ ________ _________
Balance
at
June
3, 1999
1,009,230 $1,009,230 274,174 $ (329,455) $ 718,291 $(1,801,010) $(402,944)
</TABLE>
The accompanying notes are an integral part of these statements
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 3, 1999 and May 28, 1998
<TABLE>
<S> <C> <C>
1999 1998
Cash Flows From Operating Activities
Net loss $ (807,682) $ (75,800)
Adjustments to reconcile
net loss to net cash provided
by (used in) operating activities
Depreciation and amortization 530,553 602,166
(Gain) loss on sale of
property and equipment 1,230 (10,596)
Provision for bad debt (71,337) (30,414)
Discount of note receivable 28,070 -
Changes in operating assets
and liabilities:
Trade accounts receivable 327,423 534,568
Income taxes receivable 3,277 5,604
Other assets 1,773 45,149
Inventories (54,979) 64,478
Prepaid expenses 44,673 51,856
Trade accounts payable and
accrued expenses (331,211) (404,556)
Net cash provided by (used in)
operating activities (328,210) 782,455
</TABLE>
The accompanying notes are an integral part of these statements.
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
<TABLE>
<S> <C> <C>
1999 1998
Cash Flows From Investing Activities
Purchase of property and equipment (466,478) (195,028)
Proceeds from sale of property
and equipment 2,300 68,610
Collections of notes receivable 863,772 394,729
Net cash provided by investing activities 399,594 268,311
Cash Flows From Financing Activities
Proceeds from issuance of long-term debt 601,660 309,091
Principal payments on long-term debt (518,015) (551,864)
Purchase of treasury stock (8,019) (22,875)
Net increase (decrease) in checks
outstanding in excess of bank balances 140,496 (437,796)
Other financing activities (16,366) (25,669)
Net payments under line-of-credit (304,439) (420,284)
Net cash used in financing activities (104,683) (1,149,397)
Net Decrease in Cash (33,299) (98,631)
Cash, Beginning of Year 271,709 370,340
Cash, End of Year $238,410 $271,709
Supplementary Schedule of Cash Flow Information:
Cash paid during year for:
Income taxes $ - $ 1,300
Interest 314,492 368,282
</TABLE>
The accompanying notes are an integral part of these statements.
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended June 3, 1999 and May 28, 1998
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies
consistently applied in the preparation of the
accompanying consolidated financial 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 located principally 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 1999 and 1998 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 a
straight-line basis. The estimated lives used in
determining depreciation are as follows:
Vending equipment 4-8 years
Cafeteria and
commissary equipment 3-10 years
Building and leasehold
improvements 3-22 years
Other 3-10 years
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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.
These relationships were generally cancelable by either party with
limited notice. Such amounts are amortized on a straight-line basis
over 5 to 40 years.
The carrying value of intangible assets is periodically reviewed by the
Company based on the estimated future operating income of each
acquired entity on an undiscounted cash flow basis. Based upon
its most recent analysis, the Company believes that no material
impairment of intangible assets exists at June 3, 1999.
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. Loss Per Common Share
Loss per share has been computed using the
weighted average of common shares outstanding
during the period. Certain convertible debt was
outstanding during the reporting periods, but was
not considered in the net loss per share
calculation as the 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.
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
11. Concentration of Credit Risk
Of the Company's accounts receivable,
approximately $890,000 in 1999 and $930,000 in
1998 are with customers located in the
northeastern United States. The Company grants
credit to customers, which include businesses,
schools, and governmental agencies. Collateral
is 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
Short-Term Financial Instruments - The fair value
of short-term financial instruments, including
cash and cash equivalents, trade accounts
receivable and payable and certain accrued
liabilities, approximates their carrying amounts
in the financial statements due to the short
maturity of such instruments.
Notes Payable and Long-Term Debt - The fair value
of the line of credit approximates its carrying
amount since the currently effective rates
reflect market rates. The fair value of fixed
rate notes payable approximates its carrying
amount based on the Company's estimated current
incremental borrowing rate for similar
obligations with similar terms.
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 continue to
meet its financing requirements, obtain additional
financing, and to succeed in its future operations.
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
B. REALIZATION OF ASSETS - Continued
These consolidated 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 its
existence.
Management has taken the following steps to revise its operating
and financial requirements, which it believes are sufficient to
provide the Company with the ability to continue in existence:
Several administrative and regional positions have been eliminated.
Steps to improve margins and reduce costs have been taken.
Increasing the growth and profit of current operations through
internal sales efforts has become the Company's focus.
The Company obtained additional borrowings to retire the
line-of-credit, for which payment had been demanded. In addition a
new revolving credit line agreement was entered into in December
1999. (See Note N)
C. CURRENT LIABILITIES
Accrued expenses include the following:
<TABLE>
<S> <C> <C>
1999 1998
Legal fees $ 32,302 $ 42,183
Vacation pay 64,628 65,952
Commissions 47,311 19,756
Taxes 57,814 281,205
Salaries 73,027 187,382
Current portion of
projected benefit
obligation (note H) 26,822 18,900
Accrued costs of
discontinued
restaurant operations
(note J) 13,813 13,562
Accrued sales tax costs 204,296 19,674
Medical insurance
(Note M) 59,656 23,318
Additional multiemployer
pension liability 81,816 -
Other 3,863 6,311
$ 665,348 $ 678,243
</TABLE>
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
D. LINE-OF-CREDIT AGREEMENT
The Company has a line-of-credit agreement with a
financing company, which is due on demand. The
financing company has demanded payment on or before
November 22, 1999. The agreement carries interest
at the publicly announced prime rate (8% at June 3,
1999) plus 3.5%. The amount drawn cannot exceed 80%
of eligible accounts receivable ($707,550 at June 3,
1999). Borrowings are limited to a maximum of
$750,000. The amount is collateralized by the
Company's accounts receivable. At June 3, 1999 and
May 28, 1998, amounts outstanding were $417,490 and
$721,929, respectively. See Note N.
E. LONG-TERM DEBT
Long-term debt includes the following:
<TABLE>
<S> <C> <C>
1999 1998
Note payable - bank, payable in monthly
installments of $3,081, including interest
at 11%, due January 1999 $ - $ 275,476
Notes payable - equipment, payable in
monthly installments of approximately $25,500,
including interest at rates ranging from 9% to
19.3%, due through October 2002, colllateralized
by equipment 422,216 631,126
Note payable to Bassman Vending, Inc. (BVI)
payable in monthly installments of $5,150,
including interest at 8.5%, due through March 2001,
collateralized by certain location contracts and
equipment 104,578 155,105
Note payable to officer, payable in
quarterly interest installments of $7,875,
including interest at 10.5%, due February 2002,
collateralized by building, subordinate to the
revolving credit line agreement entered into on
December 29, 1999 (Note N) 300,000 -
</TABLE>
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
E. LONG-TERM DEBT - Continued
<TABLE>
<S> <C> <C>
1999 1998
Note payable to individual at 11%, payable
in monthly installments of interest only
through January 2000, at which time
payments are $50,000 through April 2000,
at which time payments are $25,000 plus
interest through October 2001,
collateralized by subordinated interests
in accounts receivable and a building.
The note includes warrants to purchase
25,000 shares of the Company's common stocks
at $1.25 during the term of the agreement.
Additionally, 25,000 warrants for the $1.25
will be issued if the agreement is extended
15 months, refinanced on November 1, 1999
(note N) 600,000 200,000
1,426,794 1,261,707
Less current maturities 480,554 864,904
$ 946,240 $ 396,803
</TABLE>
Aggregate annual principal payments applicable to long-term debt due
subsequent to June 3, 1999 are as follows:
<TABLE>
<S> <C> <C>
Fiscal Year
Ended Amount
2000 $ 480,554
2001 487,267
2002 458,973
$1,426,794
</TABLE>
F. SUBORDINATED NOTE PAYABLE AND CONSULTING
AGREEMENT
The Company borrowed $250,000 from a stockholder. The note calls
for interest at 10%, payable quarterly with quarterly principal
payments of $12,500 beginning June 30, 2001, with afinal payment
June 30, 2006. The note is subordinate to all other indebtedness
of the Company.
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
F. SUBORDINATED NOTE PAYABLE TO STOCKHOLDER - Continued
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 entitling the stockholder to purchase
equivalent numbers of shares during the same period.
During fiscal year 1999, the Company entered into a
consulting agreement with the stockholder. The
agreement calls for weekly payments totaling
$100,482 per year beginning in May 1999 through May
2009.
Subsequent to June 3, 1999, the stockholder agreed
to defer payments on the consulting agreement for
one year if equivalent payments were made on the
note payable. At June 3, 1999 and May 28, 1998,
amounts outstanding on the note were $168,558 and
$250,000, respectively. Warrants for the purchase
of 66,752 shares have been issued in accordance with
the terms of the note and are outstanding as of June
3, 1999. 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
noncancelable operating leases as of June 3, 1999
are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Fiscal Year Real
Ending estate Equipment Total
2000 $164,883 $351,064 $515,947
2001 139,029 278,234 417,263
2002 - 7,542 7,542
2003 - 7,542 7,542
2004 - 2,232 2,232
</TABLE>
Rental expense charged to operations was $634,735 in 1999 and
$708,962 in 1998.
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
H. EMPLOYEE BENEFIT PLANS
The Company has a nonqualified defined-benefit
pension plan covering two key employees and two
former officers of the Company. Under the terms of
the plan, each individual will receive, for ten
years after retirement, a fixed monthly payment that
was set at the inception of the plan. 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 change in benefit
obligation in the Company's consolidated financial
statements for 1999 and 1998:
<TABLE>
<S> <C> <C>
1999 1998
Projected benefit obligation,
beginning of year $ 337,445 $ 356,368
Service cost 6,682 5,931
Interest cost 29,810 29,630
Benefits paid (55,046) (54,484)
Projected benefit obligation,
end of year $ 318,891 $ 337,445
</TABLE>
Net accrued pension cost is included in the accompanying consolidated
financial statements as follows:
<TABLE>
<S> <C> <C>
1999 1998
Current portion included
in accrued expenses $ 26,822 $ 18,900
Long-term portion of obligation 292,069 318,545
$ 318,891 $ 337,445
</TABLE>
The weighted-average discount rate used was 8.0% in determining the
actuarial present value of the projected benefit obligation in 1999 and 1998.
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
H. EMPLOYEE BENEFIT PLANS - Continued
Net pension cost for 1999 and 1998 includes the
following components:
<TABLE>
<S> <C> <C>
1999 1998
Service cost - benefits earned
during the period $ 6,682 $ 5,931
Interest cost on projected benefit
obligation 29,810 29,630
Amortization of prior service cost 37,872 37,745
Net periodic pension cost $ 74,364 $ 73,306
</TABLE>
The Company contributed approximately $40,000 and
$54,000 in fiscal years 1999 and 1998, respectively,
to several multiemployer pension plans for employees
covered by collective bargaining agreements. The
Company does not administer these plans, 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 "withdrawal liability." Management
has no intention of undertaking any action that
could subject the Company to this obligation.
The Company had a defined-contribution plan that
covers all permanent nonunion employees. Under the
terms of the plan, employees could contribute up to
a maximum of 15% of their gross annual salary. The
Company made no contributions to this plan during
fiscal year 1999 or 1998. The Plan was terminated
as of September 30, 1998.
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
I. INCOME TAXES
Deferred income taxes includes the following amounts
of deferred tax assets and liabilities:
<TABLE>
<S> <C> <C>
1999 1998
Deferred tax liability $ 239,360 256,890
Deferred tax asset (959,037) (746,111)
Less: valuation allowance 719,677 489,221
Net deferred tax $ - $ -
</TABLE>
The approximate tax effect of each temporary difference giving rise to the
deferred tax liability and asset was as follows at June 3, 1999 and May 28,
1998:
<TABLE>
<S> <C> <C>
1999 1998
Amortization of location contracts $ 5,360 $ 2,305
Accelerated depreciation 234,000 254,585
Net deferred tax $ 239,360 $ 256,890
Accrued costs $ (27,870) $ (33,691)
Amortization of pension costs (84,200) (76,002)
Vacation accrual (25,851) (26,381)
Allowance for bad debts (6,593) (35,128)
Other (16,424) (18,803)
Net operating loss carryforward (591,121) (289,498)
ATM credit carryforward (106,504) (106,504)
Investment tax credit carryforward (100,474) (160,104)
$(959,037) $(746,111)
</TABLE>
The valuation allowance was established to reduce the deferred tax
asset to zero. The reduction is necessary because of prior operating
losses and uncertainty about the Company's ability to utilize tax
credit and net operating loss carryforwards before they expire. The
valuation allowance was increased $230,456 and $660 in fiscal years 1999
and 1998, respectively.
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
I. INCOME TAXES - Continued
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>
1999 1998
Federal income tax benefit
computed at statutory rate $ (274,600) $ (26,000)
State income tax benefit (48,000) (4,000)
Tax effect of nondeductible
expenses 20,000 10,000
Increase in valuation allowance 230,456 660
Expiration of investment tax credit
carryforward 59,630 -
Other, net 12,514 19,340
$____-_____ $_____-____
</TABLE>
The Company had available for income tax purposes
the following investment credit carryforwards at
June 3, 1999:
<TABLE>
<S> <C> <C>
Year of Expiration Amount
2000 $ 25,168
2001 49,551
2002 25,755
$ 100,474
</TABLE>
In addition, the Company had the following net operating loss
carryforwards available at June 3, 1999:
<TABLE>
<S> <C> <C>
Year of Expiration Amount
2008 $ 252,779
2009 138,822
2010 63,240
2011 156,463
2012 16,508
2013 107,773
2019 1,003,006
$ 1,738,591
</TABLE>
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
J. ACCRUED COSTS OF DISCONTINUED RESTAURANT
OPERATIONS
In fiscal year 1988, management ceased restaurant
operations. The estimated obligation under the
property lease, net of anticipated sublease rentals,
is accrued.
The accrual is included in the accompanying
consolidated financial statements as follows:
<TABLE>
<S> <C> <C>
1999 1998
Current portion included in
accrued expenses $ 13,813 $ 13,562
Accrual included in long-term
liabilities 55,864 70,666
$ 69,677 $ 84,228
</TABLE>
K. OPERATING EXPENSES
Operating expenses in the accompanying consolidated
statements of operations are composed of the
following:
<TABLE>
<S> <C> <C>
1999 1998
Payroll and related costs $ 5,590,281 $ 5,725,843
Equipment rental costs 370,736 476,677
Other 1,602,285 1,321,197
$ 7,563,302 $ 7,523,717
</TABLE>
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
L. NOTES RECEIVABLE
Notes receivable include the following:
<TABLE>
<S> <C> <C>
1999 1998
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 $ 312,828 $ 382,072
Note receivable from sale 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. Note was discounted by
$28,070 in December 1998 in
consideration for repayment of
the remaining balance ____-____ 822,598
312,828 1,204,670
Less current portion 21,016 295,570
$_291,812 $ 909,100
</TABLE>
M. SELF-INSURANCE LIABILITIES
The Company is partially self-insured for health
claims for its employees and their eligible
dependents. The Company is liable for claims up to
$25,000 per participant, per plan year.
Accordingly, the Company has accrued estimated
claims of $59,656 and $23,318 as of June 3, 1999 and
May 28, 1998, respectively.
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years ended June 3, 1999 and May 28, 1998
N. SUBSEQUENT EVENTS
On October 27, 1999, the Company borrowed $500,000
at 14.5% from an individual, collateralized by
certain vending, cafeteria, and commissary
equipment. Monthly payments of interest only are due through
November 2000, at which time payments are $50,000
plus interest through September 2001.
On November 1, 1999, the Company borrowed $1,100,000
at 12.5% from an individual, collateralized by a
building and certain vending equipment. The debt is
subordinate to the revolving credit line entered
into on December 29, 1999 as described below. The
note proceeds paid in full the $500,000 borrowed on
October 27, 1999, and the $600,000 note payable
outstanding at June 3, 1999.
Monthly payments of interest only are due through
November 2000, at which time payments are $65,000
plus interest through April 2002. The note includes
warrants to purchase 25,000 shares of the Company's
common stock at $1.25 during the term of the
agreement. Additionally, 25,000 warrants for $1.25
will be issued if the agreement is extended 15
months.
On December 29, 1999, the Company entered into a
revolving credit line agreement that provides for
borrowing up to $1,000,000 and is due December 2001.
Borrowings are limited to 80% of eligible accounts
receivable. The agreement carries interest at the
publicly announced prime rate plus 4.0%. The amount
is collateralized by the Company's accounts
receivable, inventories and equipment. The
agreement, among other things, requires a minimum
tangible net worth, as defined.
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 as follows:
<TABLE>
<S> <C> <C> <C>
Director
Name Age Principal Occupation Since
Robert A. Laudicina (1) 59 President, Treasurer (2) 1986
Arthur D. Stevens (1) 75 Chairman of the Board (3) 1963
George T. Terris 76 Investor (4) 1966
Ann W. Stevens 58 Real Estate Broker 1996
Douglas M. Schosser, CPA 29 Director, Key Asset Mgmt 1997
</TABLE>
(1) Member of Executive Committee of Board of Directors
(2) Mr. Laudicina was elected President in March 1998
and Treasurer in May 1998. He served as Executive Vice
President beginning in February 1989 and Vice President
prior to that time beginning in January 1982.
(3) Mr. Stevens has been Chairman of the Board of
Directors of Ambassador since February 15, 1963. 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, serving in that capacity through March 1998.
He was Chief Executive Officer from April 11, 1963
through May 1998 and Treasurer from January 26, 1972
through May 1998.
(4) Mr. Terris, until his retirement January 1, 1987,
was President and Chief Operations Officer of Ambassador.
(a) Arthur D. Stevens, 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.
(a) The Executive Officers and Directors listed above
were not involved in or part of any legal proceedings, as
is 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 June 3,
1999, for each Director and Officer whose
aggregate remuneration for the year exceeded
$100,000.
<TABLE>
<S> <C> <C>
Names of Individuals, Fiscal Base
Number of Persons in Group Year Salary
and Capacities in which Served
Arthur D. Stevens,
Chairman of the Board, President, 1999 $ 51,868
Chief Executive Officer and 1998 147,877
Treasurer of Ambassador and 1997 144,144
Officer and Director of its subsidiary
Robert A. Laudicina, 1999 $ 166,905
President, Executive Vice President and 1998 $ 165,095
General Manager of New York Operations 1997 $ 157,000
</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
Bonus Payments*
Robert A. Laudicina 59 $9,123 $46,227 $55,350
</TABLE>
*based upon contributions of $2,000 per year until age 65 and interest at
8% per annum.
d) Stock Options
Robert Laudicina, President and Treasurer hold
options to purchase 3,125 shares of Ambassador
common stock at $1.37 exercisable anytime before
June 1, 2003, effective June 1, 1998.
g) Consulting Agreement
During fiscal year 1999, the Company entered into a consulting
agreement with Arthur D. Stevens, Chairman and former President. The
agreement calls for weekly payments totaling $100,482 per year beginning
in May 1999 through May 2009.
Subsequent to June 3, 1999, Mr. Stevens agreed to defer payments on the
consulting agreement for one year if equivalent payments were made on a
certain note payable to him.
At June 3, 1999 and May 28, 1998, amounts outstanding on the note were
$168,558 and $250,000, respectively. Warrants for the purchase of
66,752 shares have been issued in accordance with the terms of the note
and are outstanding as of June 3, 1999. The conversion terms may be
adjusted upon certain events to prevent dilution of the stockholder
conversion rights.
Item 11. Security Ownership of Certain Beneficial
Owners and Management
(a) Security Ownership of Certain Beneficial
Owners
The following table sets forth, as of June 3, 1999,
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) 24.5%
Thomas G. Berlin
800 Superior Avenue, Suite 2100
Cleveland, OH 44114 124,218 (3) 16.8%
George T. Terris
104 S. Warbler
Sarasota, FL 34236 64,000 (2) 8.7%
George F. Crawford
10110 Fontana Lane
Overland Park, KS 66207 52,597 7.1%
</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>
Shares of Stock
Beneficially Owned
June 3, 1999
<C> <C>
Number Percent
Name of Shares of Stock
Arthur D. Stevens
1901 W. 69th Street
Mission Hills, KS 66205 181,444 (1) 24.5%
George T. Terris
104 S. Warbler
Sarasota, FL 34236 64,000 (2) 8.7%
Robert A. Laudicina
303 Cedar Court
Norwood, NJ 07648 29,390 (3) 4.0%
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) 289,989 (4) 38.4%
</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 3,125 shares, which Mr. Laudicina could purchase
for $1.37 per share under a stock option exercisable
anytime before June 1, 2003.
(4) Includes 6,250 shares, which could be purchased by certain
officers and directors under stock options.
(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 1999, 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 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.
<TABLE>
<S> <C> <C>
Name of Subsidiary State of Incorporation % of Voting
Securities Owned
Ambassador Fast Services, Inc. New York 100%
d/b/a Squire Maintenance Services
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 Robert A.
Laudicina, President, Ambassador Food Services
Corporation, 3269 Roanoke Road, Kansas City, Missouri 64111.
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)
By Date
Arthur D. Stevens
Chairman of the Board
By Date
Robert Laudicina
Acting 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.
Chairman of the Board Date
Arthur D. Stevens Title
President and Chief
Executive Officer/Director Date
Robert A. Laudicina Title
Director Date
Ann W. Stevens Title
Director Date
George T. Terris Title
Director Date
Douglas M. Schosser Title
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