<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10Q
Quarterly Report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
[x] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended March 31, 1997.
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 0-19522
N.U. PIZZA HOLDING CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 95-3656327
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16800 Devonshire Street, Suite 305 Granada Hills, California 91344
-------------------------------------------------------------------------
(Address of principal executive offices)
(818) 368-2616
----------------------------------------------------
(Registrant's telephone number, including area code)
15414 Cabrito Avenue, Suite A, Van Nuys, California 91406-1419
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Former address, if changed since last report
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 and Exchange Act
of 1934 during the preceding 12 months (or 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.
[x] Yes [ ] No
As of March 31, 1997 there were 31,139,008 shares of Common Stock outstanding.
Par value is $.001.
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PART I - FINANCIAL STATEMENTS
N.U. Pizza Holding Corporation and Subsidiaries
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
Unaudited Audited
----------- ----------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 77,600 $ 255,100
Restricted Cash 13,400 44,900
Franchisee Advertising Receivable 59,200 70,600
Receivables, net of allowance for doubtful
accounts of $48,000 177,200 80,200
Current Portion of Notes Receivable, net
of allowance for possible future losses
of $547,300 258,400 254,800
Inventories 25,500 16,800
Prepaid Expenses 67,100 74,800
---------- ----------
Total Current Assets 678,400 797,200
---------- ----------
Other Assets:
Notes Receivable, net of
current portion 498,300 329,400
Intangibles, net of accumulated amortization
of $230,200 and $180,000, respectively 269,800 120,000
Deposits and Other Assets 39,400 21,800
---------- ----------
807,500 471,200
---------- ----------
Leasehold Improvements, Property and
Equipment and Construction in Progress, net of
accumulated depreciation and amortization of
$340,200 and $254,000, respectively 1,301,200 1,611,900
---------- ----------
$2,787,100 $2,880,300
========== ==========
</TABLE>
See accompanying notes to financial statements and management's discussion
and analysis of financial condition and results of operations.
2
<PAGE> 3
N.U. Pizza Holding Corporation and Subsidiaries
Consolidated Balance Sheets
LIABILITIES AND
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
Unaudited Audited
----------- ----------
<S> <C> <C>
Current Liabilities:
Current Portion of Long-Term Debt $ 428,400 $ 631,100
Accounts Payable and Accrued Expenses 503,900 576,400
Accrued Franchise Advertising 72,600 115,500
Current Portion-Accrued Litigation
Settlement 50,000 50,000
Loans Payable to Officer 50,600 3,300
------------ -----------
Total Current Liabilities 1,105,500 1,376,300
Long-Term Debt, net of current
portion 199,100 338,000
Accrued Litigation Settlement, net of
current portion 336,000 445,800
Deferred Franchise Fee Income 99,400 164,900
------------ -----------
1,740,000 2,325,000
------------ -----------
Stockholders' Equity:
Preferred Stock, Series B, $.10 par value per share,
authorized 10,000,000 shares, 80,000 shares issued
and outstanding(aggregate liquidation preference
$400,000) 8,000 8,000
Preferred Stock, Series C, $.10 par value per
share, authorized 44,000 shares, 44,000
shares issued and outstanding (aggregate
liquidation preference $220,000) 4,400 4,400
Common Stock $.001 par value per
share, authorized 50,000,000 shares,
issued, subscribed and outstanding
31,139,008 and 24,039,008 shares, respectively 31,100 24,000
Additional Paid-in Capital 5,989,000 5,429,200
Notes Receivable Arising from Stock
Purchase Agreements (487,000) (350,000)
Accumulated Deficit (4,498,400) (4,560,300)
----------- -----------
1,047,100 555,300
----------- -----------
$ 2,787,100 $ 2,880,300
=========== ===========
</TABLE>
See accompanying notes to financial statements and management's discussion
and analysis of financial condition and results of operations.
3
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N.U. Pizza Holding Corporation and Subsidiaries
Consolidated Statements of Operations and Accumulated Deficit
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------------------------------------------
Unaudited Unaudited
1997 1996 1997 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
FRANCHISE OPERATIONS:
REVENUES:
Initial Franchise Fees 38,500 $ 13,500 $ 90,500 $ 45,500
Royalties 144,600 151,400 402,500 526,400
Rental Income 42,000 27,800 140,200 122,800
Interest Income 9,100 9,800 30,300 28,000
Rebate Income 36,800 36,300 130,300 108,900
Gain (Loss) on Sales of Rest.and Equip. 70,200 (3,900) 70,200 (148,900)
Forgiveness of Debt Income 0 29,500 0 171,200
Other Income 29,200 6,800 48,800 12,900
----------- ----------- ---------- ----------
370,400 271,200 912,800 866,800
----------- ----------- ---------- ----------
COSTS AND EXPENSES:
Rent 198,500 37,900 313,800 210,500
General and Administrative 178,200 195,700 559,700 688,400
Interest Expense 9,000 14,200 27,100 39,100
----------- ----------- ---------- ----------
385,700 247,800 900,600 938,000
----------- ----------- ---------- ----------
Franchise Operating Income (Loss) (15,300) 23,400 12,200 (71,200)
----------- ----------- ---------- ----------
COMPANY-OWNED RESTAURANT
OPERATIONS:
Sales 473,200 0 1,227,000 254,800
----------- ----------- ---------- ----------
COSTS AND EXPENSES:
Cost of Sales 146,800 0 366,000 84,000
Operating 211,900 0 656,400 178,700
General and Administrative 68,200 0 152,500 87,800
----------- ----------- ---------- ----------
426,900 0 1,174,900 350,500
----------- ----------- ---------- ----------
Company-Owned Restaurant Income(Loss) 46,300 0 52,100 (95,700)
----------- ----------- ---------- ----------
Income(Loss) Before Income Tax
Provision 31,000 23,400 64,300 (166,900)
Income Tax Provision 0 0 2,400 2,400
----------- ----------- ---------- ----------
Net Income (loss) $ 31,000 $ 23,400 61,900 (169,300)
=========== ===========
Accumulated Deficit, Beginning of Period (4,560,300) (3,286,500)
----------- -----------
Accumulated Deficit, End of Period ($4,498,400) ($3,455,800)
=========== ===========
Net Income (loss) per Share $0.00 $0.00 $0.00 ($0.01)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 30,846,617 15,237,946 29,486,834 15,200,868
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements and management's discussion
and analysis of financial condition and results of operations.
4
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N.U. Pizza Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31, March 31,
1997 1996
------------- ----------
Unaudited Unaudited
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 61,900 ($169,300)
--------- ----------
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Non-cash items included in net income (loss):
Depreciation and amortization 222,900 109,000
(Gain) Loss on sale of restaurants and equipment (70,200) 148,900
Realization of deferred license fee (65,500) (30,500)
Forgiveness of debt 0 (171,200)
Changes in assets and liabilities:
Receivables, net (165,900) (63,900)
Inventories (8,700) 3,100
Prepaid expenses and other current assets 22,700 25,000
Accounts payable and accrued expenses (49,500) 9,900
Deposits (17,600) 28,700
Income taxes payable 0 (3,200)
--------- ----------
Total adjustments (131,800) 55,800
--------- ----------
Net cash used by operating
activities (69,900) (113,500)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections received on notes receivable 83,400 228,400
Acquisition of DAS Group, Inc. assets (200,000) 0
Capital expenditures (1,800) (7,500)
--------- ----------
Net cash (used) provided by investing
activities (118,400) 220,900
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in loans payable to
officer 47,300 (120,000)
Issuance of common stock 515,000 798,600
Principal payments on long-term liabilities (551,500) (316,000)
--------- ----------
Net cash provided by financing
activities 10,800 362,600
--------- ----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (177,500) 470,000
CASH AND CASH EQUIVALENTS, beginning of period 255,100 15,100
--------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 77,600 $ 485,100
========= ==========
</TABLE>
See accompanying notes to financial statements and management's discussion
and analysis of financial condition and results of operations
5
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N.U. Pizza Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31, March 31,
1997 1996
------------- ----------
Unaudited Unaudited
<S> <C> <C>
Cash paid for interest $ 17,000 $ 39,200
Cash paid for taxes $ 800 $ 3,200
NON-CASH TRANSACTIONS:
Notes receivable issued in exchange for accounts
receivable. $ 45,900 $ 0
Notes payable forgiven in exchange for
fixed assets. $ 0 $ 31,900
Forgiveness of notes receivable in exchange
for payables reduction $ 23,000 $ 11,800
Notes receivable issued in exchange for fixed
assets. $ 210,000 $ 284,500
Note receivable issued for stock $ 402,000 $ 535,000
Conversion of debt to equity $ 0 $ 151,800
Issuance of stock for future services $ 15,000 $ 23,200
Conversion of inventory to accounts
receivable $ 0 $ 25,700
</TABLE>
See accompanying notes to financial statements and management's discussion
and analysis of financial condition and results of operations
6
<PAGE> 7
N.U. Pizza Holding Corporation and Subsidiaries
Notes to Financial Statements
Nine Months Ended March 31, 1997 and 1996
(Unaudited)
In the opinion of the management of N.U. Pizza Holding Corporation and
Subsidiaries (the "Company"), the accompanying unaudited financial statements
reflect all adjustments (consisting only of normal recurring accruals) necessary
to present fairly the financial position of the Company as of March 31, 1997 and
the results of its operations and changes in its cash flows for the three and
nine month periods presented.
The financial statements and notes are presented as permitted by Form 10-Q and
do not contain certain information included in the annual financial statements
and notes.
These unaudited financial statements should be read in conjunction with the
Company's annual report on Form 10-K for the year ended June 30, 1996.
Note 1 - A summary of significant accounting policies is currently
on file with the Securities and Exchange Commission on
Form 10-K.
The accompanying consolidated financial statements include the accounts of N.U.
Pizza Holding Corporation and its wholly-owned subsidiaries, Numero Uno
Franchise Corporation, Numero Uno, Inc., Westwood Pizzerias and Formaggi Inc.
("the Company") (Note 5). Intercompany transactions and balances have been
eliminated in consolidation.
Note 2 - Stockholders' Equity:
During the nine months ended March 31, 1997, the Company
raised $515,000 in capital via Regulation S and S-8 offerings;
1,000,000 shares of common stock were issued at $.07 per
share, 1,800,000 shares of common stock were issued at $.10
per share, 150,000 shares of common stock were issued at $.10
per share in exchange for $15,000 of future consulting
services, 650,000 shares of common stock were issued at $.08
per share in exchange for a subscription note receivable of
$52,000 and 3,500,000 shares of common stock were issued at
$.10 per share in exchange for a subscription note receivable
of $350,000. The Company collected $265,000 on this $350,000
receivable and $85,000 remained uncollected at March 31, 1997.
Additionally, a $350,000 subscription note receivable
outstanding at June 30, 1996 remained uncollected for a total
of $487,000 of outstanding subscription notes receivable at
March 31, 1997.
7
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Note 3 - Litigation
Pending
An action was filed in October 1994 against the Company for
breach of a settlement agreement. This matter arose out of the
settlement of a previous lawsuit filed by the plaintiff
against the Company in 1987. As part of that settlement, the
Company entered into a written agreement with the plaintiff
for the purchase of and payment for merchandise. The plaintiff
alleges that the Company breached that agreement by failing to
purchase all the required items and also failed to pay for
some items which were delivered under the settlement
agreement. The Company contends that the plaintiff breached
the settlement agreement. After a settlement conference was
held, the Company agreed to pay the plaintiff an irrevocable
consulting fee of $500,000, payable in monthly installments of
$4,167 for a period of ten years commencing in June 1996 and
to use the plaintiff as exclusive supplier of various paper
products used by the Company and its franchisees in Numero Uno
restaurants for a period of five years. Subsequently, the
Company filed a Demand for Arbitration before JAMS/Endispute,
Inc. alleging that the plaintiff violated terms of the
settlement agreement. The Company intends to vigorously
prosecute the matter in arbitration and expects to obtain a
favorable ruling. The Company is currently paying the
plaintiff $1,750 per month until the matter is resolved.
A complaint was filed by the Company in January 1996 for
damages and injunctive relief for service mark infringement,
unfair competition and breach of contract. One of the
defendants, a former franchisee of the Company, sold his
restaurant to the remaining defendants. Specifically excluded
from the assets sold to the defendants was the right to use
the name Numero Uno. The defendants continued to use the name
and other trademarks. The Court held the defendants in
contempt, issued a bench warrant and ordered the defendants to
appear again in April 1996. The defendants have yet to appear
before the Court and the Company intends to file a Request for
Default Judgment in the near future.
An action was filed in September 1995 against the Company
for breach of contract for the failure of Numero Uno
Takeout and Delivery, Inc. to make payments on a
8
<PAGE> 9
promissory note. The plaintiffs sought $12,604. The Company
subsequently made a settlement offer to the plaintiffs but the
plaintiffs' counsel has not pursued settlement. Currently, the
case is dormant. The Company believes the matter will
eventually be settled for no more than the balance due on the
original promissory note.
Settled
An action was filed for breach of contract in October 1993
against the Company and its president. The matter arose out of
a promissory note executed by the Company in 1991, in the
original principal amount of $130,000 which was secured by a
security agreement. The plaintiff alleged that the Company
breached the security agreement and therefore the entire
amount outstanding on the promissory note was accelerated and
due in full. At an arbitration hearing in December 1995, the
matter was resolved in favor of the Company. The Company was
held not to be liable for any portion of the note.
A complaint was filed against the Company in July 1995 for
$50,943 due on a promissory note and guarantees. The Company
guaranteed a franchisee's note payments. The franchisee
defaulted on payments under the promissory note due to the
plaintiff beginning in April 1995 and continuing thereafter.
The parties settled the matter. The Company agreed to pay the
plaintiff the sum of $56,723 in monthly installments until
paid in full.
An action for breach of lease was filed against the Company in
June 1995 by the landlord of premises leased by Numero Uno
Takeout and Delivery, Inc. In March 1995, Numero Uno Takeout
and Delivery, Inc. vacated the premises. The plaintiffs sought
rent in the sum of $20,512 and other amounts for damages
according to proof. Numero Uno Takeout and Delivery, Inc. is a
defunct entity. There was no contractual liability on behalf
of the Company. The Company answered the complaint in August
1995 and an arbitration hearing was held in June 1996.
Thereafter, the arbitrator awarded plaintiffs the sum of
$31,781. The Company did not agree with the award and
requested a trial. The action was settled on March 12, 1997.
The Company has agreed to pay the plaintiff $16,500 in monthly
installments of $1,250.
9
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An action was filed against the Company in August 1995
alleging breach of contract arising out of a lease agreement
entered into in June 1990. The plaintiffs sued for back rent
and other damages. The parties agreed to settle the matter by
the Company paying the plaintiffs $12,913. The settlement was
paid in full in March 1996.
A suit was filed by a former franchisee against the Company in
November 1994 alleging breach of contract and various other
causes of action. The Company filed a cross-complaint for
amounts owing on a note by the plaintiff under the franchise
agreement. The case was mediated on February 13, 1997 and was
settled in March 1997 in favor of the Company. The plaintiff
has agreed to pay the Company $30,000, in two installments of
$15,000, beginning in April 1997.
An action for breach of contract and foreclosure of mechanics
lien was filed in September 1995 against the Company. The
dispute centers around a parcel of real property for which the
Company contracted with the plaintiff to perform improvements.
The plaintiff sought $15,764, the outstanding balance owed on
the contract. The matter was settled with the Company agreeing
to pay the plaintiff $15,129 in monthly installments of $500
until paid in full.
In July 1995, an action was filed against the Company for
outstanding amounts due on a promissory note. The Company
settled the matter in April 1996 and paid the plaintiffs
$96,000.
An action was filed in November 1995 against the Company for
unlawful detainer for one of the Numero Uno restaurant
locations. The landlord (plaintiff) sought approximately
$58,000 in past due rent. The matter was settled with the
Company agreeing to pay $30,000 in monthly installments for
prior rent arrearages. The Company also entered into a new
lease agreement for the premises. Upon payment in full, the
plaintiff agreed to dismiss the action.
An action was filed in September 1995 against the Company for
breach of a promissory note and security agreement. The
plaintiffs allege that the Company defaulted on amounts owing
them in the sum of $77,917. The Company settled the matter and
agreed to pay the sum requested by the plaintiffs. The Company
paid $14,000 initially and will make monthly payments of
$2,500 until the entire balance is paid in full.
10
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Note 4 - Reclassification of Prior Year's Amounts
Certain reclassifications have been made in the March 31, 1996
financial statements to conform to the classifications used in
the March 31, 1997 presentation.
Note 5 - Acquisition of Assets
On January 7, 1997, N.U. Pizza Holding Corporation finalized
an Asset Purchase Agreement whereby it acquired certain
assets from the DAS Group, Inc., the owner of an Oregon
restaurant chain known as Oregon's Original Sandwich Express
and Bakery ("Sandwich Express") for consideration of
$200,000 in cash. Upon the closing of the Agreement, N.U.
Pizza Holding Corporation contributed the $200,000 of assets
purchased from the DAS Group, Inc. to its wholly-owned
subsidiary, Formaggi Inc., a recently organized corporation,
in exchange for 2,000,000 shares of Formaggi Inc.'s common
stock.
Note 6 - Income Taxes
The Company's income tax provisions for the three month
periods ended March 31, 1997 and 1996 and the nine month
period ended March 31, 1997 have been eliminated or reduced by
the utilization of net operating loss carryforwards. The
Company would have been required to pay additional income
taxes in these periods had it not been able to utilize these
carryforwards.
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended March 31, 1997:
Liquidity and Capital Resources.
For the nine months ended March 31, 1997, $69,900 of cash was used by operating
activities; however, the Company has attained satisfactory cash flows for the
nine months ended March 31, 1997 by raising $250,000 via Regulation S offerings
and collecting $265,000 of subscriptions receivable generated primarily from S-8
offerings. Cash and cash equivalents at March 31, 1997 were $77,600.
11
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Operating Activities.
Accounts receivable increased $97,000 to $177,200 at March 31, 1997 primarily
because franchisees have had continued difficulty making royalty payments in a
timely manner. Past due royalties of $45,900 were converted to notes receivable
and $23,000 of notes receivable from franchisees were offset against accounts
payable to franchisees during the nine months ended March 31, 1997.
Inventories increased $8,700 to $25,500 at March 31, 1997 due to the completion
and opening of a restaurant location that was under construction at June 30,
1996 and the purchase of inventory at the Sandwich Express bakery.
Prepaid expenses decreased $7,700 to $67,100 at March 31, 1997. This decrease is
primarily due to the expiration of $21,400 in prepaid legal fees at June 30,
1996 and an offsetting increase of $15,000 of prepaid consulting fees in
exchange for 150,000 shares of common stock at $.10 per share.
Deposits increased $17,600 to $39,400 at March 31, 1997 due primarily to the
payment of a rent deposit on one of the restaurants purchased in June 1996.
Accounts payable and accrued expenses decreased $72,500 to $503,900 at March 31,
1997 due to the increased payment of outstanding trade payables.
Deferred license fees of $65,500 were recognized as income during the nine
months ended March 31, 1997.
Accrued franchise advertising payable decreased $42,900 to $72,600 at March 31,
1997. Correspondingly, restricted cash and franchise advertising receivable have
also decreased $42,900 to $13,400 and $59,200, respectively at March 31, 1997.
Investing Activities.
Notes receivable increased $172,500 to $756,700 at March 31, 1997. The Company
exchanged $210,000 of notes receivable for fixed assets, received $83,400 of
principal payments on outstanding amounts due and converted $45,900 of royalties
receivable to notes receivable.
In January 1997, the Company paid $200,000 to acquire certain assets of the DAS
Group, Inc.
Net leasehold improvements, property and equipment and construction in progress
decreased $310,700 to $1,301,200 at March 31, 1997.
12
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The decrease is due primarily to depreciation and amortization of $172,700 and
an offsetting increase attributed to equipment purchases of $1,800. The Company
also issued $210,000 of notes receivable in exchange for the sale of restaurant
equipment and leasehold improvements with a net book value of $139,800 resulting
in a gain on the sale of $70,200.
Financing Activities.
Long-term debt decreased $341,600 to $627,500 and accrued litigation settlement
decreased $109,800 to $386,000 at March 31, 1997. The Company made principal
payments on outstanding debt of $551,500 which were offset by an increase of
$47,300 in loans payable to an officer.
Common stock and additional paid-in capital increased $7,100 and $559,800,
respectively, to $31,100 and $5,989,000, respectively, at March 31, 1997 due to
the issuance of common stock via Regulation S and S-8 offerings and collections
on subscriptions receivable that were outstanding at June 30, 1996.
Results of Operations.
Nine Months Ended March 31, 1997 as Compared to Nine Months Ended March 31,
1996.
Franchise Operations.
The Company recognized $90,500 of licensing fees from international license
contracts during the nine months ended March 31, 1997. This is a $45,000 (98.9%)
increase from license fees recognized during the nine months ended March 31,
1996. This increase is due primarily to the opening of the first franchised
restaurant in Indonesia in December 1996.
For the nine months ended March 31, 1997, the Company earned royalty income of
$402,500, a $123,900 (23.5%) decrease from royalty income earned of $526,400 for
the nine months ended March 31, 1996. The decrease was due to a continued
decline in system-wide sales and the conversion of three franchises into
Company-owned restaurants in June 1996 from which the Company no longer
receives royalties.
The overall decrease in royalty income was offset in part by the acquisition of
Sandwich Express in January 1997. Royalties earned from new franchisees totaled
$23,524 during the quarter ended March 31, 1997.
Rental income for the nine months ended March 31, 1997 increased $17,400 (14.2%)
to $140,200 compared to $122,800 for the nine months ended March 31, 1996. This
increase is due to increased rental receipts from franchisees who pay their rent
to the Company who, in turn, pays rent directly to the landlord.
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Interest income increased during the nine months ended March 31, 1997 to
$30,300, a $2,300 (8.2%) increase compared to $28,000 earned during the nine
months ended March 31, 1996. This increase is due to the successful collection
of notes receivable as it is the Company's policy to not accrue interest income
on notes receivable that are six months or more past due.
Rebate income earned from suppliers for the nine months ended March 31, 1997 was
$130,300, a $21,400 (19.7%) increase from rebate income earned of $108,900 for
the nine months ended March 31, 1996.
This increase is due to the Company's negotiation with one its major paper goods
suppliers to receive a rebate on all pizza boxes purchased on a system-wide
basis.
Other income increased $35,900 (278.3%) to $48,800 during the nine months ended
March 31, 1997 compared to $12,900 during the nine months ended March 31, 1996.
This increase is due in part to a franchisee who sold his restaurant and paid
the Company past due charges which totaled $13,500. In addition, the Company had
pizza sauce sales revenue and vending game income of approximately $22,400 for
the nine months ended March 31, 1997.
Rent expense increased $103,300 (49.1%) to $313,800 during the nine months ended
March 31, 1997 compared to $210,500 for the nine months ended March 31, 1996.
This increase is due to increased rental receipts from franchisees who pay their
rent to the Company who, in turn, pays rent directly to the landlord.
During the nine months ended March 31, 1996, the Company's rent expense was
substantially reduced as a result of a lawsuit settlement. The Company was not
required to make rental payments for a period of time. During the nine months
ended March 31, 1997, the Company resumed its rental payments and opened four
restaurant locations which increased its rent expense.
General and administrative expenses for the nine months ended March 31, 1997
decreased $128,700 (18.7%) to $559,700 compared to $688,400 during the nine
months ended March 31, 1996. This decrease is due primarily to an overall
reduction in administrative and management staff.
Interest expense for the nine months ended March 31, 1997 decreased $12,000
(30.7%) compared to $39,100 for the nine months ended March 31, 1996. This
decrease is primarily due to the continued reduction in notes payable.
Company-owned Restaurant Operations.
Company-owned restaurant revenues increased $972,200 (381.6%) to $1,227,000
during the nine months ended March 31, 1997 compared to $254,800 during the nine
months ended March 31, 1996.
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Overall company-owned restaurant expenses increased $824,400 (235.2%) to
$1,174,900 during the nine months ended March 31, 1997 compared to $350,500
during the nine months ended March 31, 1996.
These increases are due to the acquisition of Sandwich Express in January 1997
and purchase of three existing franchises and the opening of one constructed
restaurant which were acquired at the end of the 1996 fiscal year.
During the nine months ended March 31, 1997, the Company had net income of
$61,900 compared to a net loss of $169,300 for the nine months ended March 31,
1996.
Three Months Ended March 31, 1997 as Compared to Three Months Ended March 31,
1996.
Franchise Operations.
The Company recognized $38,500 of the licensing fees from international license
contracts during the three months ended March 31, 1997. This is a $25,000
(185.2%) increase from license fees of $13,500 recognized during the three
months ended March 31, 1996. This increase is due to the opening of the first
franchised restaurant in Indonesia in December 1996.
For the three months ended March 31, 1997, the Company earned royalty income of
$144,600, a $6,800 (4.5%) decrease from royalty income earned of $151,400 for
the three months ended March 31, 1996. The decrease was due to a continued
decline in system-wide sales and the conversion of three franchises into
Company-owned restaurants at the end of the 1996 fiscal year from which the
Company no longer receives royalties.
The overall decrease in royalty income was offset in part by the acquisition of
Sandwich Express in January 1997. Royalties earned from new franchisees totaled
$23,524 during the quarter ended March 31, 1997.
Rental income for the three months ended March 31, 1997 increased $14,200
(51.1%) to $42,000 compared to $27,800 for the three months ended March 31,
1996. Rental expense for the three months ended March 31, 1997 increased
$160,600 (423.8%) to $198,500 compared to $37,900 during the three months ended
March 31, 1996. The rental income increase is due to increased rental receipts
from franchisees who pay their rent to the Company who, in turn, pays rent
directly to the landlord.
During the three months ended March 31, 1996, the Company's rent expense was
substantially reduced as a result of a lawsuit settlement. The Company was not
required to make rental payments for a period of time.
15
<PAGE> 16
During the three months ended March 31, 1997, the Company resumed its rental
payments and had opened four restaurant locations which increased its rent
expense.
Interest income decreased during the three months ended March 31, 1997 to
$9,100, a $700 (7.1%) decrease compared to $9,800 earned during the three months
ended March 31, 1996. This decrease is due to reduced note receivable
collections during the current quarter and the Company's policy to not accrue
interest income on notes receivable that are six months or more past due.
Rebate income from suppliers for the three months ended March 31, 1997 was
$36,800, a $500 (1.4%) increase from rebate income of $36,300 earned for the
three months ended March 31, 1996.
This increase is due to the Company's negotiation with one of its major paper
goods suppliers to receive a rebate on all pizza boxes purchased on a
system-wide basis.
Other income increased $22,400 (329.4%) to $29,200 during the three months ended
March 31, 1997 compared to $6,800 during the three months ended March 31, 1996.
This increase is due to pizza sauce sales revenue and vending game income earned
of $22,400 during the quarter ended March 31, 1997.
General and administrative expenses for the three months ended March 31, 1997
decreased $17,500 (8.1%) to $178,200 compared to $195,700 during the three
months ended March 31, 1996. This decrease is due primarily to an overall
reduction in administrative and management staff.
Interest expense for the three months ended March 31, 1997 decreased $5,200
(36.6%) compared to $14,200 for the three months ended March 31, 1996. This
decrease is primarily due to the continued reduction in notes payable.
Company-owned Restaurant Operations.
Company-owned restaurant revenues were $473,200 and overall Company-owned
restaurant expenses were $426,900 for the three months ended March 31, 1997.
There were no Company-owned restaurants during the three months ended March 31,
1996. These increases are due to the acquisition of Sandwich Express in January
1997 and the purchase of three existing franchises and the opening of one
constructed restaurant which were acquired at the end of the 1996 fiscal year.
During the three months ended March 31, 1997, the Company had net income of
$31,000 compared to net income of $23,400 for the three menths ended March 31,
1996.
16
<PAGE> 17
Management Discussion.
During the nine months ended March 31, 1997, the Company had continued success
with its short-term strategic plans implemented during the year ended June 30,
1996.
Those plans included reducing negative cash flow, disposing of unprofitable and
under-performing Company-owned restaurants and strengthening the financial
position of the Company through the payment of most long-term debt obligations
or converting such long-term debt to equity.
The Company is now concentrating it efforts to develop the Numero Uno concept of
the future and to achieve rapid growth through enhanced revenues and
profitability.
In order to accomplish these goals, the Company purchased and remodeled three
existing Numero Uno franchised restaurants at the end of the 1996 fiscal year
and constructed a fourth restaurant. These restaurants are generating profits
and are meeting the Company's sales projections.
On January 7, 1997, the N.U. Pizza Holding Corporation purchased certain assets
from the DAS Group, Inc., the owner of an Oregon restaurant chain known as
Oregon's Original Sandwich Express and Bakery ("Sandwich Express") for
consideration of $200,000 in cash. N.U. Pizza Holding Corporation transferred
these assets to its recently organized subsidiary, Formaggi Inc., for 2,000,000
shares of Formaggi Inc.'s common stock.
Formaggi Inc. owned and managed the operations of the Sandwich Express during
the quarter ended March 31, 1997. During that period, Sandwich Express generated
revenues of approximately $50,400 and showed a small operating loss of
approximately $2,300. The operating loss resulted from high operating expenses
that were incurred during the quarter due to the change in ownership of the
Sandwich Express.
Formaggi Inc. is in the process of retrofiting the Sandwich Express chain into a
new dual concept. The concept will be a limited service, waiter assisted,
sit-down restaurant featuring Numero Uno's award winning thick and thin crust
pizza, pastas and salads, as well as specialty sandwiches and bread products.
This represents an excellent opportunity to increase sales as 80% of Sandwich
Express's business is derived from lunchtime business and approximately 80% of
Numero Uno's business is derived from evening business. Furthermore, the menus
complement each other as Numero Uno's cuisine appeals to customers during the
spring, fall and winter months and Sandwich Express's fare is popular during the
spring and summer months.
17
<PAGE> 18
The name of the new concept has been registered and the prototype plan
developed. Management believes that the revenues of the acquired Sandwich
Express restaurants will increase dramatically and that the new concept will
generate sales in excess of industry averages. The Company intends to begin
developing Company-owned restaurants and to sell individual and territorial
franchises outside the State of California in 1997.
The international marketplace is growing very rapidly and the Company continues
to have ten franchises open and operating in South Korea, four in Kuwait and one
in China.
A franchise opened in Indonesia in December 1996 and four additional franchises
in South Korea and two in Kuwait are expected to open within the next three
months. In addition, the Company has entered into a licensing agreement for the
Philippines requiring six restaurants to be opened during the next three years.
The new Company-owned restaurants, the acquisition of Sandwich Express and the
rapidly expanding international marketplace leads management to believe that the
Company will continue to have profitable operations during the remainder of the
fiscal year ending June 30, 1997.
Management continues to believe that the Company is in the best position that it
has been in since the late 1980s.
PART II - OTHER INFORMATION
Item 1 - None
Item 2 - None
Item 3 - None
Item 4 - None
Item 5 - None
Item 6 - Exhibits and Reports on Form 8-K
A report on Form 8-K was filed during the quarter ended March 31, 1997. The
report was filed on February 4, 1997. The Form 8-K is being filed as Exhibit I
to this report. There are no other Exhibits that are required to be filed.
18
<PAGE> 19
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, in the City of Granada
Hills, State of California on May 15, 1997.
N.U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
By: /s/
----------------------------------
Ronald J. Gelet, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
/s/ Dated:
- ------------------------------------- -----------------
Ronald J. Gelet
Director, President, Chief Executive
Officer, Chief Financial and
Accounting Officer
/s/ Dated:
- ------------------------------------- -----------------
Gloria Gelet
Director
/s/ Dated:
- ------------------------------------- -----------------
Jane Yennie
Controller
/s/ Dated:
- ------------------------------------- -----------------
Dan Rouse
Director
19
<PAGE> 1
EXHIBIT 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 7, 1997
N.U. PIZZA HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
Nevada 0-19522 95-3656327
---------------- ------------- ------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
of incorporation)
15414 Cabrito Road, Suite A, Van Nuys, California 91406-1419
------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (818) 779-8600.
-------------------------------------------------------------------
<PAGE> 2
ITEM 5. Other Events
On January 7, 1997, the Registrant (Buyer) consummated an Asset
Purchase Agreement whereby, the Registrant agreed to buy certain assets from The
DAS Group, Inc. (Seller).
Pursuant to the executed Agreement, a copy of which is attached hereto
as an exhibit, the Registrant purchased certain assets of The DAS Group, Inc.
for consideration of $200,000 in cash.
The Agreement was approved by the respective Directors of
both N.U. Pizza Holding Corporation and The DAS Group, Inc.
Upon the closing of the Agreement, the Registrant contributed the $200,000 of
assets purchased from the DAS Group, Inc. to its wholly-owned Subsidiary,
Formaggi Inc., a recently organized Nevada corporation, in exchange for
2,000,000 shares of Formaggi Inc.'s common stock.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Asset Purchase Agreement (Without Exhibits)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
N.U. PIZZA HOLDING CORPORATION
By: _____________________________
RONALD J. GELET, PRESIDENT
DATED: JANUARY 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 91,000
<SECURITIES> 0
<RECEIVABLES> 1,090,100
<ALLOWANCES> 595,300
<INVENTORY> 25,500
<CURRENT-ASSETS> 678,400
<PP&E> 1,641,400
<DEPRECIATION> 340,200
<TOTAL-ASSETS> 2,787,100
<CURRENT-LIABILITIES> 1,105,500
<BONDS> 0
0
12,400
<COMMON> 31,100
<OTHER-SE> 1,003,600
<TOTAL-LIABILITY-AND-EQUITY> 2,787,100
<SALES> 1,227,000
<TOTAL-REVENUES> 2,139,800
<CGS> 366,000
<TOTAL-COSTS> 1,682,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,100
<INCOME-PRETAX> 64,300
<INCOME-TAX> 2,400
<INCOME-CONTINUING> 61,900
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