FORM 10-K/A
Amendment No. 1
(Contains Part III of Registrant's Annual Report on Form 10-K)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _______
Commission file number 0-19623
MIAMI SUBS CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 65-0249329
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6300 N.W. 31ST AVENUE, FORT LAUDERDALE, FLORIDA 33309
(Address of principal executive offices)
(Zip Code)
(954) 973-0000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to
this Form 10-K. [ X ]
As of September 25, 1998, 27,119,340 shares of common stock were outstanding.
On such date, the aggregate market value of the common stock held by
non-affiliates of the Registrant was approximately $6,527,000 (amount computed
based on the closing price on September 25, 1998).
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table contains information regarding the current Directors and
Executive Officers of the Company.
<TABLE>
<CAPTION>
Name Position Age
- ----------------- ------------------------------------------------- ---
<S> <C> <C>
Gus Boulis Chairman of the Board, Director, and Chief 49
Executive Officer
Donald L. Perlyn Director, President, and Chief Operating Officer 55
Bruce R. Galloway Director 40
Greg Karan Director 41
Peter Nasca Director 50
Joseph Zappala Director 64
Gus Bartsocas Senior Vice President of International and Non- 46
Traditional Development
Jerry W. Woda Senior Vice President of Finance, Chief Financial 48
Officer, and Treasurer
=================================================
</TABLE>
The size of the Board is currently set at seven directors, and there currently
is one vacancy on the Board. Directors of the Company are elected annually.
The current Board is expected to serve until the next annual meeting.
Directors who are employees of the Company receive no additional compensation
for their service as directors. Directors who are not employees of the
Company ("non-employee Directors") are paid a fee of $4,000 per year, together
with reimbursement of expenses of attending meetings. In addition, under the
Company's 1990 Executive Option Plan, each Director of the Company who is not
an employee of the Company receives an option to purchase 30,000 shares of
common stock when he or she is first elected a Director, and an option to
purchase 2,000 shares of common stock as of the date of each Meeting of
Shareholders at which the Director is reelected. These options are
immediately exercisable at a price equal to the fair market value per share of
Common Stock on the date of grant, are non-qualified stock options, and have a
ten-year term.
Mr. Boulis, the founder of the Miami Subs concept, has been Chairman of the
Board and Chief Executive Officer of the Company since March 1997, and a
director of the Company since 1990. Mr. Boulis was Chairman of the Board from
September 1990 to January 1994, and served as President and Chief Executive
Officer from July 1992 to January 1994 Mr. Boulis is a private businessman
and investor.
Mr. Perlyn has been a member of the Company's Board of Directors since March
1997. In July 1998, Mr. Perlyn was appointed President and Chief Operating
Officer of the Company. Prior thereto, Mr. Perlyn had been the Company's
Executive Vice President of Franchise Development since March 1992. From
September 1990 to February 1992, Mr. Perlyn served as the Company's Senior
Vice President of Franchising and Development. Between August 1990 and
December 1991, he was Senior Vice President of Franchising and Development for
QSR, Inc., one of the Company's predecessors and an affiliate. Mr. Perlyn is
also an officer, director and a principal of DEMAC Restaurant Corp., a former
franchisee of the Company.
Mr. Galloway has been a member of the Company's Board of Directors since March
1997. He has been Chairman of the Board of Arthur Treacher's, Inc. since June
1996, and a managing director at Burnham Securities, Inc. since 1993. From
1991 to 1993 Mr. Galloway was Senior Vice President at Oppenheimer & Co.
Mr. Karan has been a member of the Company's Board of Directors since June,
1996. Since January 1995, Mr. Karan has been Vice President of Operations for
SunCruz Casino Cruises, a private company owned by Mr. Boulis. He was a
General Manager of a Miami Subs Grill restaurant owned by Kavala, Inc. (a
private company owned by Mr. Boulis) from August 1993 through 1994. Prior
thereto, he was Project Manager from 1987 to March, 1993 for 710288 Ontario,
Ltd., a holding and development company owned by Mr. Boulis in Brampton,
Ontario, Canada.
Mr. Nasca has been a member of the Company's Board of Directors since March
1997. Since 1984, Mr. Nasca has been President of Peter Nasca Associates,
Inc., a corporate communications firm, and a principal and director of
Paradigm Marketing, a private marketing company.
Mr. Zappala has been a member of the Company's Board of Directors since July,
1994. From 1989 until 1992, Mr. Zappala served as U.S. Ambassador to Spain.
Since 1992, Mr. Zappala has been a private businessman and investor.
Mr. Bartsocas has been principally responsible for franchise operations since
December 1996, and Senior Vice President of International and Non-Traditional
Development since March 1995. From December 1996 until January 1998 Mr.
Bartsocas was also responsible for Company restaurant operations. From April
1994 to March 1995, Mr. Bartsocas served as Senior Vice President of Franchise
Operations and Procurement of the Company. From August 1992 to April 1994,
Mr. Bartsocas served as Vice President of Restaurant Development and
Procurement of the Company. Mr. Bartsocas is also a Vice President and
director of Subies Enterprises, Inc., a franchisee of the Company (see section
below entitled "Certain Relationships and Related Transactions"), and
president and sole shareholder of Gustos, Inc., a casual restaurant operation.
Mr. Woda has been Senior Vice President of Finance, Chief Financial Officer,
and Treasurer of the Company since September, 1992, having acted as a
consultant to the Company since March, 1992. From 1989 until joining the
Company, Mr. Woda was the Chief Financial Officer of Kavala, Inc., a private
company owned by Mr. Boulis.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10 percent of
the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock. In addition, these individuals are also required
by SEC regulations to furnish the Company with copies of all Section 16(a)
forms they file. To the Company's knowledge, based solely on a review of
copies of such reports furnished to the Company, during the fiscal year ended
May 31, 1998, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than ten percent beneficial owners
were complied with.
ITEM 11. Executive Compensation
The following table sets forth the compensation paid during the past three
fiscal years to the Company's Chief Executive Officer and each of the
Company's other executive officers whose total annual salary and bonus for
fiscal year 1998 was $100,000 or more (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Long Term
Annual Annual Annual Compensation Compensation
Compensation Compensation Compensation Awards Awards
-------------- -------------- --------------- ------------- --------------
Other Annual Securities All Other
Name and Fiscal Compensation(a) Underlying Compensation
Principal Position Year Salary ($) Bonus ($) ($) Options (#) ($)
- ------------------------------- ------ -------------- -------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Gus Boulis 1998 - - - - -
Chairman of the Board and 1997 - - - - $ 3,000
Chief Executive Officer (b) 1996 - - - - $ 4,000
Donald L. Perlyn, 1998 $ 149,520 $ 7,500 - 650,000(d) -
President and Chief Operating 1997 $ 142,400 - - - -
Officer (c) 1996 $ 142,400 - - 50,000 -
Gus Bartsocas, Senior Vice 1998 $ 126,000 $ 7,500 - 560,000(e) -
President of International and 1997 $ 123,577 - - - -
Non-Traditional Development 1996 $ 100,000 - - 200,000 -
Jerry W. Woda, Senior Vice 1998 $ 96,000 $ 7,500 - 325,000(f) -
President and Chief Financial 1997 $ 96,000 - - - -
Officer 1996 $ 96,000 - - 100,000 -
=============================== ====== ============== ============== =============== ============= ==============
</TABLE>
(a) Does not include the value of personal benefits since the aggregate
value of such benefits for each of these officers in the periods for which
amounts are not shown was less than 10% of such officer's salary and bonus.
(b) Gus Boulis became Chairman of the Board and Chief Executive Officer in
March 1997. Mr. Boulis was paid standard director fees in fiscal year 1997
and 1996 during periods that he was not an officer of the Company, of $3,000
and $4,000, respectively, which amounts are included in "All Other
Compensation."
(c) Donald L. Perlyn was appointed President and Chief Operating Officer
in July 1998. During fiscal year 1996, 1997, and 1998, Mr. Perlyn served as
Executive Vice President of Franchise Development.
(d) On June 25, 1997, (i) 100,00 options were granted to Mr. Perlyn under
the Company's 1990 Executive Option Plan (the "Plan") and (ii) 550,000 options
previously issued to Mr. Perlyn under the Plan were amended to change the
exercise prices and other terms thereof.
(e) On June 25, 1997, (i) 100,000 options were granted to Mr. Bartsocas
under the Company's 1990 Executive Option Plan (the "Plan") and (ii) 460,000
options previously issued to Mr. Bartsocas under the Plan were amended to
change the exercise prices and other terms thereof.
(f) On June 25, 1997, (i) 100,000 options were granted to Mr. Woda under
the Company's 1990 Executive Option Plan (the "Plan") and (ii) 225,000 options
previously issued to Mr. Woda under the Plan were amended to change the
exercise prices and other terms thereof.
COMPENSATION PURSUANT TO CONTRACTS
The Company entered into Change of Control Agreements with each of Donald
Perlyn, Gus Bartsocas and Jerry Woda (the "Agreements"). The Agreements
became effective on February 13, 1996 and expire on January 20, 2000.
A "Change of Control" is a defined term in the Agreements but, generally, is
deemed to have taken place if (i) any person other than Mr. Boulis is or
becomes the beneficial owner of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding
securities, (ii) Mr. Boulis or any of his affiliates or associates is or
becomes the beneficial owner of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding
securities, (iii) the shareholders of the Company shall have approved (A) a
reorganization, merger or consolidation where the shareholders of the Company
immediately prior to such transaction, did not, immediately thereafter, own
more than 50% of the reorganized, merger or consolidated companies then
outstanding voting securities, (B) a liquidation or dissolution of the
Company, or (C) a sale of substantially all of the assets of the Company, or
(iv) as a result of a tender offer, exchange offer, merger, consolidation,
sale of assets or contested election or any combination of the foregoing, the
persons who are directors of the Company immediately before shall cease to
constitute a majority of the Board of Directors immediately after such
transaction occurs.
The Agreements provide that in the event that (i) within six months after a
Change of Control the officer dies, becomes disabled or terminates his
employment with the Company for "Good Reason" (as defined in the Change of
Control Agreements and includes such events as diminution of position,
reduction of compensation and benefits, relocation or material impairment of
the assets of the Company), (ii) within 12 months after a Change of Control
the officer's employment with the Company is terminated by the Company for any
reason other than "Cause" (as defined in the Change of Control Agreements), or
(iii) within the period beginning on the sixth month anniversary of a Change
of Control of the Company and ending on the twelfth month anniversary thereof,
the officer terminates his employment for any reason, then in such event the
officer shall be entitled to receive lump sum compensation in an amount equal
to two times (a) his highest annual base salary during the term of the
Agreement, plus (b) bonuses paid, if any, for the two most recently ended
fiscal years prior to the Change of Control. In addition, all options shall
vest, and the officer shall receive at least the equivalent of the same
benefits he received immediately before the Change of Control for two years
after such termination. Any payments shall be grossed up unless such gross-up
would cause such payments to be subject to (i) the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended ("Code"), in
which case the gross-up would be reduced so as not to trigger imposition of
the excise tax, or (ii) Section 162(m) of the Code, which imposes a $1,000,000
annual limit on deductions to the Company from compensation paid to certain
employees, if applicable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Although the Company has established a Compensation Committee comprised of
non-employee directors, the Compensation Committee did not meet or take action
during fiscal year 1998. The functions of the Compensation Committee were
performed by the entire Board of Directors. Gus Boulis and Donald L. Perlyn,
each of whom are officers of the Company, participated in deliberations of the
Company's Board of Directors concerning executive officer compensation.
During fiscal year 1998, no executive officer of the Company (i) served on the
compensation committee (or other Board committee performing equivalent
functions) of another entity one of whose executive officers served on the
Board of Directors of the Company, or (ii) served as a director of another
entity one of whose executive officers served on the Board of Directors of the
Company.
Option Grants
The following table provides information on stock options granted during
fiscal year 1998 under the Company's 1990 Stock Option Plan to each of the
executive officers named in the "Summary Compensation Table."
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Individual Individual Individual Potential Realizable
Grants Grants Grants Grants Value at Assumed
------------------- ----------------- ------------- -----------
Annual Rates of Stock
Price Appreciation for
Option Term(2)
------------------------
Number of Percent of Total
Securities Options Granted Exercise or
Underlying Options to Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh)(1) Date 5%($)
- ---------------- ------------------- ----------------- ------------- ----------- ------------------------
<S> <C> <C> <C> <C> <C>
Donald L. Perlyn 650,000(3) 33.3% $ .75 (3) $ 157,340
- ---------------- ------------------- ----------------- ------------- ----------- ------------------------
Gus Bartsocas 560,000(4) 28.7% $ .75 (4) $ 155,825
- ---------------- ------------------- ----------------- ------------- ----------- ------------------------
Jerry W. Woda 325,000(5) 16.7% $ .75 (5) $ 118,075
- ---------------- ------------------- ----------------- ------------- ----------- ------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term(2)
------------------------
Name 10%($)
- ---------------- ------------------------
<S> <C>
Donald L. Perlyn $ 375,572
- ---------------- ------------------------
Gus Bartsocas $ 379,940
- ---------------- ------------------------
Jerry W. Woda $ 282,825
- ---------------- ------------------------
</TABLE>
(1) All options were granted at market value (closing price for the
Company's common stock) at the date of grant.
(2) The dollar amounts in these columns are the result of calculations at
the five percent and ten percent rates required by the regulations of the
Securities and Exchange Commission and are not intended to forecast future
appreciation of the Company's stock price.
(3) On June 25, 1997, (i) 100,00 options were granted to Mr. Perlyn under
the Company's 1990 Executive Option Plan (the "Plan") and (ii) 550,000 options
previously issued to Mr. Perlyn under the Plan were amended to change the
exercise prices and other terms thereof. All options granted are currently
exercisable, and expire on various dates through 2007.
(4) On June 25, 1997, (i) 100,00 options were granted to Mr. Bartsocas
under the Company's 1990 Executive Option Plan (the "Plan") and (ii) 460,000
options previously issued to Mr. Bartsocas under the Plan were amended to
change the exercise prices and other terms thereof. All options granted are
currently exercisable and expire on various dates through 2007.
(5) On June 25, 1997, (i) 100,00 options were granted to Mr. Woda under
the Company's 1990 Executive Option Plan (the "Plan") and (ii) 225,000 options
previously issued to Mr. Woda under the Plan were amended to change the
exercise prices and other terms thereof. All options granted are currently
exercisable and expire on various dates through 2007.
Option Exercises and Year End Option Values
The following table sets forth certain information regarding unexercised stock
options to purchase Common Stock granted under the Company's 1990 Executive
Option Plan to each of the executive officers named in the "Summary
Compensation Table." None of the individuals named in the Summary
Compensation Table exercised any options to purchase Common Stock during the
fiscal year ended May 31, 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
NUMBER OF SECURITIES NUMBER OF SECURITIES VALUE OF UNEXERCISED VALUE OF UNEXERCISED
UNDERLYING UNDERLYING IN-THE-MONEY IN-THE-MONEY
UNEXERCISED OPTIONS UNEXERCISED OPTIONS OPTIONS AT MAY 31, OPTIONS AT MAY 31,
AT MAY 31, 1998 (#) AT MAY 31, 1998 (#) 1998 ($)(1) 1998 ($)(1)
--------------------- --------------------- --------------------- ---------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Donald L. Perlyn 650,000 0 0 0
Gus Bartsocas 560,000 0 0 0
Jerry W. Woda 325,000 0 0 0
================ ===================== ===================== ===================== =====================
</TABLE>
______________________
(1) None of the options listed in this table were "in-the-money" as of May
31, 1998 because the exercise prices of all of the options listed in this
table were the same as the closing price of the Company's Common Stock on May
31, 1998 as reported by NASDAQ.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of
Common Stock as of September 25, 1998 by persons known by the Company to own
of record or beneficially more than five percent of its outstanding Common
Stock, each director of the Company, each of the Company's Named Executive
Officers and by all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner(1) Beneficial Ownership(2) Percent of Class(3)
- ------------------------------------------------ ----------------------- -------------------
<S> <C> <C>
Gus Boulis 8,121,000 29.9%
Donald L. Perlyn 650,000(4) 2.3%
Bruce R. Galloway 50,000(4) *
Greg Karan 100,000(4) *
Peter Nasca 50,000(4) *
Joseph Zappala 160,000(5) *
Gus Bartsocas 560,000(4) 2.0%
Jerry W. Woda 325,000(4) 1.2%
All current directors and executive officers of
the Company, including those named above, as
a group (8 persons) 10,016,000(6) 34.5%
================================================ ======================= ===================
</TABLE>
___________________________
* Represents less than one percent of shares outstanding.
(1) Unless otherwise indicated, the address of each person in this table
is 6300 N.W. 31st Avenue, Fort Lauderdale, Florida 33309.
(2) Unless otherwise indicated, each person has sole voting and investment
power with respect to such shares.
(3) As of September 25, 1998, 27,119,340 shares of Common Stock were
outstanding.
(4) Consists of options deemed outstanding, representing presently
exercisable options under the Company's 1990 Executive Option Plan.
(5) Includes options for 150,000 shares deemed outstanding, representing
presently exercisable options under the Company's 1990 Executive Option Plan.
(6) Includes options for 1,885,000 shares deemed outstanding, representing
presently exercisable options under the Company's 1990 Executive Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At May 31, 1998, the Company leased six restaurant properties from Kavala,
Inc., a private company owned by the Company's chairman of the board and chief
executive officer, Gus Boulis. Rent expense for all leases between the
Company and Kavala was $424,000 in 1998. The Company leases a formerly
vacant, non-Miami Subs property to a company owned by Boulis for $66,000 per
year through December 1998, and increasing to $72,000 per year thereafter
through December 2003. The Company believes that rents charged under these
leases are not materially different from the rents that would have been
incurred or obtained from leasing arrangements with unaffiliated parties.
In February 1998, the Company entered into a management agreement with Mr.
Boulis providing for the Company to manage an existing Miami Subs Grill
restaurant owned by Mr. Boulis for a fee of 5.0% of the restaurant's gross
restaurant sales. The agreement was terminated in June 1998 upon the sale of
the restaurant to a third party franchisee.
Mr. Bartsocas, an officer of the Company, is also an officer and director of
Subies Enterprises, Inc. ("Subies"), a franchisee of the Company. Under an
agreement which was entered into in 1991 between the Company and Subies,
Subies paid a franchise fee of $5,000 for each of five restaurants developed
by Subies, and Subies was exempt from paying royalty fees on the restaurants
as long as the restaurants were owned by Subies. Three of the restaurants
have been subsequently sold to independent franchisees.
Mr. Donald L. Perlyn, who has been an officer of the Company since 1990 and a
director since 1997, was appointed president and chief operating officer of
the Company in July 1998. Mr. Perlyn is also an officer and principal of
DEMAC Restaurant Corp. which owned and operated a Miami Subs Grill restaurant
in Florida. In connection with his appointment in July, Mr. Perlyn agreed to
sell to the Company the Miami Subs restaurant owned by DEMAC for approximately
$260,000. Mr. Perlyn is also indebted to the Company in the amount of
$85,000. The loan accrues interest at a rate of prime plus 1.5%, and the
principal and all accrued interest thereunder is due in full in June 1999.
Two existing Miami Subs Grill restaurants owned by the Company are co-branded
with Arthur Treacher's, Inc. ("Treacher's"). Treacher's is operating and
managing the restaurants, the Company and Treacher's share in the operating
profits of the restaurants, and Treacher's has an option to acquire each of
the restaurants from the Company. Mr. Bruce Galloway, a member of the board
of directors of the Company, is the Chairman of the Board of Treacher's.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
MIAMI SUBS CORPORATION
(Registrant)
Date: September 25, 1998 By: /s/ Jerry W. Woda
JERRY W. WODA
Senior Vice President, Chief Financial
Officer, And Principal Accounting and
Financial Officer
