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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities 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 September 30, 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 0-19522
N. U. PIZZA HOLDING CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada
--------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
95-3656327
------------------------------------
(I.R.S. Employer Identification No.)
16800 Devonshire St., Suite 305 Granada Hills, CA 91344
-------------------------------------------------------
(Address of principal executive offices)
(818) 368-2616
----------------------------------------------------
(Registrant's telephone number, including area code)
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 September 30, 1998 there were 32,139,008 shares of common stock
outstanding. Par value is $.001.
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Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 48,300 $ 54,800
Restricted cash 31,900 13,000
Franchisee advertising receivable 6,000 16,600
Receivables, net of allowance for
doubtful accounts of $21,100 50,800 47,000
Current portion of related party
note receivable 25,800 25,700
Current portion of notes
receivable - franchisees, net
of allowances of $20,700 107,400 104,300
Inventories 3,700 3,600
Prepaid expenses 15,600 23,100
------------- -------------
Total current assets 289,500 288,100
------------- -------------
Other assets:
Related party note receivable,
net of allowances of $110,300 126,100 129,100
Notes receivable - franchisees,
net of allowances of $236,000 787,700 814,500
Intangible assets, net of
accumulated amortization of
$334,700 and $331,200, respectively 165,300 168,800
Investments in affiliated corporations 262,200 262,200
Deposits and other assets 37,900 34,000
------------- -------------
1,379,200 1,408,600
------------- -------------
Leasehold improvements and property
and equipment, net of accumulated
depreciation and amortization of
$300,600 and $288,800, respectively 202,600 214,400
------------- -------------
$ 1,871,300 $ 1,911,100
============= =============
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
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N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 160,100 $ 175,300
Accounts payable and accrued expenses 441,100 461,600
Accrued franchise advertising 37,900 29,600
Current portion - litigation settlements 31,900 35,300
Loans payable to related parties 171,000 163,500
Income taxes payable 1,700 --
------------- -------------
Total current liabilities 843,700 865,300
------------- -------------
Long-term debt, net of current portion 82,500 91,500
Litigation settlements, net of current
portion 29,400 32,500
Deferred franchise fee income 57,100 66,900
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,
32,139,008 shares issued, subscribed
and outstanding 32,100 32,100
Additional paid-in capital 6,038,100 6,038,100
Notes receivable arising from stock
purchase agreements (402,000) (402,000)
Accumulated deficit (4,822,000) (4,825,700)
------------- -------------
858,600 854,900
------------- -------------
$ 1,871,300 $ 1,911,100
============= =============
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
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N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
FRANCHISE OPERATIONS:
REVENUES:
Initial franchise fees $ 14,800 $ 9,800
Royalties 99,300 138,800
Rental income 4,600 30,000
Interest income 10,600 6,200
Rebate income 31,400 34,700
Other income 20,400 87,100
------------- -------------
181,100 306,600
------------- -------------
COSTS AND EXPENSES:
Rent -- 40,600
General and administrative 165,900 165,100
Interest expense 2,300 800
------------- -------------
168,200 206,500
------------- -------------
Franchise operating income 12,900 100,100
------------- -------------
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
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N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND
ACCUMULATED DEFICIT (CONTINUED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
COMPANY-OWNED RESTAURANT OPERATIONS:
Sales $ 106,800 $ 458,000
------------- -------------
COSTS AND EXPENSES:
Cost of sales 34,000 154,400
Operating 52,000 211,800
General and administrative 28,300 186,200
------------- -------------
114,300 552,400
------------- -------------
Company-owned restaurant loss (7,500) (94,400)
------------- -------------
Income before income tax provision 5,400 5,700
Income tax provision 1,700 1,600
------------- -------------
Net income 3,700 4,100
Accumulated deficit,
beginning of period (4,825,700) (4,477,400)
------------- -------------
Accumulated deficit, end of period $ (4,822,000) $ (4,473,300)
============= =============
Net income per share - basic $ -- $ --
============= =============
Weighted average number of
shares outstanding - basic 32,139,008 31,139,008
============= =============
Net income per share - diluted $ -- $ --
============= =============
Weighted average number of
shares outstanding - diluted 32,139,008 31,139,008
============= =============
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
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N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,700 $ 4,100
Adjustments to reconcile net
income to net cash (used)
provided by operating activities:
Depreciation and amortization 15,300 79,500
Realization of deferred income (9,800) (9,800)
Changes in assets and liabilities:
Receivables, net (3,800) (17,600)
Inventories (100) 200
Prepaid expenses and other
current assets 3,600 34,400
Accounts payable and accrued
expenses (20,500) (50,700)
Accrued royalties due to officer 7,500 7,500
Income taxes payable 1,700 1,600
------------- -------------
Net cash (used) provided by
operating activities (2,400) 49,200
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on notes receivable 26,600 25,400
------------- -------------
Net cash provided by investing
activities 26,600 25,400
------------- -------------
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
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N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable
to related parties $ -- $ 5,000
Principal payments on long-term debt (30,700) (75,500)
------------- -------------
Net cash used by financing activities (30,700) (70,500)
------------- -------------
Net (decrease) increase in
cash and cash equivalents (6,500) 4,100
Cash and cash equivalents,
beginning of period 54,800 --
------------- -------------
Cash and cash equivalents,
end of period $ 48,300 $ 4,100
============= =============
Supplemental information:
Cash paid for interest $ 2,300 $ 800
Cash paid for income taxes -- --
Noncash transactions:
Notes receivable issued
in exchange for accounts
receivable $ -- $ 12,200
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
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N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
In the opinion of 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 September 30, 1998 and the
results of its operations and changes in its cash flows for the three 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, 1998.
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 and Formaggi Inc.
(the "Company"). Intercompany transactions and balances have
been eliminated in consolidation.
Certain prior period balances have been reclassified in the consolidated
financial statements to conform to the current period's presentation.
Note 2. Litigation
Pending
In June 1993, a dispute arose between a franchisee and the Company relating to
the termination of the franchisee's delivery rights and the exclusivity of the
franchisee's original geographic territory. The plaintiff franchisee sought
compensatory and punitive damages of approximately $130,000, alleging that its
geographic territory was exclusive and its delivery rights nonterminable by the
Company. The Company strongly disagreed and contended that the geographic
territory assigned to the franchisee was nonexclusive and terminable by the
Company and that a replacement delivery area was agreed to by the
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franchisee. In September 1994, the parties settled the matter. The settlement
agreement grants the franchisee an abatement of the payment of royalties to the
Company for a five year period and a one-time waiver of the transfer fee should
the franchisee decide to sell its franchise. The parties established the
boundaries of the franchisee's geographic territory and delivery rights.
As part of the settlement agreement, one of the plaintiffs entered into a new
franchise agreement with the Company in October, 1995. Subsequently, the
plaintiff breached his obligations under the franchise agreement by failing to
pay required fees and his franchise was terminated by the Company. The plaintiff
refused to vacate the restaurant he was subleasing from the Company, continued
to use Company trademarks and breached his building lease with the landlord by
failing to pay rent which was due. The Company was forced to pay back rent to
the landlord and utilities.
The plaintiff and the Company agreed to arbitrate their claims. The plaintiff
filed a claim against the Company and its president for fraud, intentional
infliction of emotional distress and breach of fiduciary duty in the amount of
$418,000. The Company filed a cross claim against the plaintiff for breach of
contract and trademark infringement for $100,000. The Company is also seeking
indemnification for rents and utilities paid on behalf of the plaintiff and
damages for trademark infringement and unfair competition claims in the amount
of $7,000.
Management believes that the Company will prevail in arbitration, because the
plaintiff's claims are without merit, and at best the plaintiff can only seek
damages for breach of his franchise agreement since the September, 1994
settlement agreement was reached between the parties. Management also believes
that the outcome will not have a material adverse effect on the Company's
financial position.
In September 1995, an action was filed against the Company for breach of
contract for failure to make payments on a Promissory Note totaling
approximately $12,800. The Company filed an answer on December 6, 1995 and made
a settlement offer to the plaintiffs but the plaintiffs' counsel has not pursued
settlement. Currently, the case is dormant and the Company believes that the
matter will eventually be settled for no more that the current balance due on
the original promissory note of approximately $12,800, which has been classified
as a current liability.
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Settled
In 1987, as part of a settlement of a previously filed complaint, the Company
agreed to make certain purchases and pay certain amounts to a plaintiff
supplier. In October 1994, the plaintiff alleged that the Company breached that
agreement by failing to purchase all the required items and also by failing to
pay for some items which were delivered under the settlement agreement. The
Company contended that the plaintiff breached the settlement agreement. The
Company answered the complaint and the Superior Court referred the matter to the
Joint Association Settlement Program. After a settlement conference was held,
the parties settled the matter.
As part of the second settlement agreement, the Company agreed to pay the
plaintiff an irrevocable consulting fee of $500,000, payable in monthly
installments of $4,200 for a period of ten years commencing on June 15, 1996 and
to use the plaintiff as exclusive supplier of various paper products used by the
Company 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 the terms of the second settlement agreement. In November
1996, the parties entered into a new third settlement agreement which superseded
both previous agreements referenced above. This final settlement agreement
required the Company to pay the plaintiff a total of $238,000 consisting of an
immediate cash payment of $101,000, subsequent installment payments totaling
$37,000 plus interest at 8% per annum due on or before November 1, 1998 and
$100,000 (reduced to $75,000 during the year ended June 30, 1998) payable in
sixty monthly installments of $1,250.
At September 30, 1998, the Company classified the remaining amount due under the
terms of the final settlement agreement as a litigation settlement on its
balance sheet.
In January 1982, the Company subleased a restaurant location to a franchisee. In
March 1992, the franchisee assigned their right, title and interest to the
sublease. The sublease specifically stated that it shall not release the
originally named sublessee from liability for the continued performance on the
terms and provisions of the sublease. In January 1994, the assignees failed to
pay rent to the lessor or to the Company.
As a result of the failure to pay rent, the landlord brought an action against
the Company to recover damages for breach of the lease. In August 1994, the
Company stipulated with the landlord to a payment of $43,600 and a judgment may
be entered against the Company if it fails to meet the obligation. The Company
has performed all of the conditions and obligations to be performed under the
original sublease and believes that it is entitled to indemnification from the
sublessee in the same amount as the
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stipulated agreement with the landlord. The Company entered into a stipulated
agreement with the sublessee who agreed to pay the Company $31,000 in monthly
installments of $750 which began on October 15, 1994. During the year ended June
30, 1997, with $10,000 remaining due on the installment agreement, the sublessee
agreed to pay the Company $6,000 and the remaining $4,000 was forgiven by the
Company.
In May 1987, the Company guaranteed the payments on a note payable to a former
franchisee by the party to whom the franchise was sold. In April 1995, the
outside party defaulted on the note payable and the plaintiff noteholder filed a
complaint for approximately $50,900, the balance remaining on the note. The
parties settled the matter; the Company agreed to pay the plaintiff $56,700 in
monthly installments of $2,500 until paid in full. At September 30, 1998,
approximately $9,900 remained unpaid and was accrued as a current liability in
connection with this case.
In June 1995, the landlord of premises leased by Numero Uno Takeout and Delivery
Corporation filed a complaint against the Company and other defendants for
breach of a lease agreement in the amount of approximately $20,500. The
plaintiffs contended that the premises were vacated in March 1995 and that the
Company and other defendants were responsible for the unpaid rent. The Company
contended that Numero Uno Takeout and Delivery Corporation was a defunct entity
and that there was no contractual liability on behalf of the Company and the
other named defendants. After the discovery stage, the Court assigned the case
to nonbinding arbitration which was held on June 20, 1996. Thereafter, the
arbitrator awarded the plaintiffs the sum of $31,800. The Company did not agree
with the award of the arbitrator and filed a Request For Trial De Novo with the
Court. Subsequently, the Court set a trial date for March 31, 1997. Prior to
trial, the parties entered into a settlement agreement which provides for a
stipulation for judgment should the Company fail to pay installments pursuant to
the terms of the settlement. The Company agreed to pay $16,500 plus interest in
monthly installments which was paid in full during the year ended June 30, 1998.
In November 1994, a franchisee filed an action against the Company alleging
breach of contract and various other causes of action. Prior to trial, the
parties settled the matter and the plaintiff paid the Company $30,000 during the
year ended June 30, 1997.
In September 1995, a complaint was filed against the Company for breach of
contract and foreclosure of mechanics liens. The dispute centered around a piece
of real property for which the Company contracted with the plaintiff to perform
investment services. The plaintiff sought the sum of $15,800 as the
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outstanding balance owed on the contract. The Company responded to the complaint
on October 31, 1995. After some discovery, the matter was settled. The Company
agreed to pay the plaintiff the sum of $15,200 at the rate of $500 per month
which was paid in full during the year ended June 30, 1997.
In November 1995, an action was filed against the Company for unlawful detainer
at one of its restaurant locations. The landlord was seeking approximately
$58,000 in past due rent. The matter was settled out of court and the Company
paid the landlord $30,000 during the year ended June 30, 1997 and entered into a
new lease for the premises. The action has been dismissed by the landlord.
In September 1995, an action was filed against the Company for breach of
contract for failure to make payments under the terms of a promissory note and
Security Agreement. The plaintiffs alleged that the Company defaulted on amounts
due them totaling approximately $77,900. A tentative settlement was reached with
the plaintiff's attorney but the plaintiffs did not agree to the terms. A
Settlement Conference was held on June 29, 1996. The parties were unable to
settle the matter at the Conference and the Court scheduled a trial date for
October 16, 1996. However, prior to the trial date, the parties settled the
matter with the Company agreeing to pay the sum of approximately $54,500 plus
interest at 10% per annum in monthly installments which was paid in full during
the three months ended September 30, 1998.
In October 1996, an action was filed against the Company for sexual battery,
intentional infliction of emotional distress and other allegations concerning
sexual discrimination. The matter arose out of an alleged incident between an
employee of the Company and the plaintiff. The Company investigated the matter
and believed it was without merit. A status conference was held on June 2, 1997
and the Court set the matter for trial on October 20, 1997. Prior to the trial
date, the Company resolved the matter by paying the plaintiff a settlement of
$5,000.
Note 3. Income Taxes
The Company's federal income tax provisions for the three month periods
presented have been eliminated by the utilization of net operating loss
carryforwards. The Company would have been required to pay additional federal
income taxes in these periods had it not been able to utilize these
carryforwards. A provision for minimum state income taxes has been provided in
the consolidated financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended September 30, 1998:
Liquidity and Capital Resources.
For the three months ended September 30, 1998, the Company had an overall
negative cash flow of $6,500. Collection of principal amounts due on notes
receivable were offset by the Company's continued payments on outstanding trade
and notes payable. Cash and cash equivalents at September 30, 1998 were $48,300.
Operating Activities.
Accounts receivable increased $3,800 to $50,800 at September 30, 1998 primarily
due to franchisees not paying their royalties on a timely basis.
Prepaid expenses decreased $7,500 to $15,600 at September 30, 1998. The decrease
is due primarily to the expiration of prepaid advertising, insurance and rent
recorded at June 30, 1998.
Inventories increased $100 to $3,700 at September 30, 1998 and deposits
increased $3,900 to $37,900 at September 30, 1998 due to normal business
fluctuations.
Intangible assets decreased $3,500 to $165,300 during the three months ended
September 30, 1998 due to normal monthly amortization.
Accounts payable and accrued expenses decreased $20,500 to $441,100 at September
30, 1998, primarily due to the increased payment of outstanding trade payables.
Accrued franchise advertising payable increased $8,300 during the three months
ended September 30, 1998. This increase is offset by an increase to advertising
cash of $18,900 and a decrease in advertising receivables of $10,600.
Deferred license fees of $9,800 were recognized as income during the three
months ended September 30, 1998.
Income taxes payable increased $1,700 at September 30, 1998 due to the accrual
of required minimum state tax liabilities for the current fiscal year.
Related party loans payable increased $7,500 to $171,000 at September 30, 1998
due to the accrual of additional dough royalties due to the president of the
Company.
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Investing Activities:
Notes receivable and related party receivables decreased $26,600 to $895,100 and
$151,900, respectively at September 30, 1998 due the continued collection of
outstanding amounts due to the Company.
Net leasehold improvements and property and equipment decreased $11,800 to
$202,600 at September 30, 1998 due to normal monthly depreciation and
amortization.
Financing Activities.
Long-term debt and litigation settlements decreased $24,200 and $6,500,
respectively, to $242,600 and $61,300, respectively, at September 30, 1998 due
to payments on outstanding obligations.
Results of Operations.
Three Months Ended September 30, 1998
As Compared to Three Months Ended September 30, 1997
Franchise Operations.
For the three months ended September 30, 1998, the Company recognized initial
franchise fees of $9,800 from one international license contract and $5,000 from
a one-time transfer fee from a franchisee, a 51% increase in fees from the same
period in 1997.
The Company recognized $99,300 of royalty income during the three months ended
September 30, 1998, a $39,500 (28.5%) decrease from royalty income of $138,800
recognized for the comparable period in 1997. The decrease was due primarily to
a reduction in the total number of operating franchised restaurants during the
three months ended September 30, 1998 as compared to the same period in 1997.
Rental income decreased $25,400 (84.7%) during the three months ended September
30, 1998 as compared to the three months ended September 30, 1997, due to the
elimination of rental receipts from franchisees who pay their rent directly to
the landlord instead of to the Company as a pass through to the landlord.
Historically, the Company's only source of rental income was from franchisees
who purchased restaurants that were previously owned by the Company. The
Company, who remained obligated on the lease, would collect rent from the
franchisees (subleases) and pay it directly to the landlord.
Interest income increased $4,400 (71%) to $10,600 for the three months ended
September 30, 1998 as compared to $6,200 for the
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three months ended September 30, 1997. This increase is due to an increase in
collections on notes receivable.
Rebate income decreased $3,300 (9.5%) during the three months ended September
30, 1998 as compared to the three months ended September 30, 1997, due to an
overall decline in system-wide sales.
Other income decreased $66,700 (76.6%) to $20,400 for the three months ended
September 30, 1998 due primarily to the one-time receipt during the three months
ended September 30, 1997 of $83,000 from a vendor when the Company agreed to
change its soft drink supplier.
General and administrative expenses increased by only $800 (.5%) to $165,900
during the three months ended September 30, 1998 as compared to the three months
ended September 30, 1997.
Interest expense minimally increased by $1,500 (187.5%) to $2,300 for the three
months ended September 30, 1998 as compared to the three months ended September
30, 1997.
Company-owned Restaurant Operations.
Company-owned restaurant revenues decreased $351,200 or 76.7% during the three
months ended September 30, 1998 as compared to the same period in 1997. The
Company owned four operating restaurants and the Sandwich Express bakery during
the three months ended September 30, 1997 as compared to only one Company-owned
restaurant during the three months ended September 30, 1998.
Due to the decrease in sales volume, gross profit decreased $230,800 (76%) for
the three months ended September 30, 1998 as compared to the same period in
1997. Gross profit as a percentage of sales, however, increased 1.9% from 66.3%
to 68.2% for the three months ended September 30, 1998. The increase was due to
decreases in food costs.
Company-owned restaurant costs and expenses decreased $317,700 or 79.8% during
the three months ended September 30, 1998 as compared to the same period in 1997
as a result of the sales of three Company-owned restaurants and the closure of
the Sandwich Express bakery during the year ended June 30, 1998.
President's Comments:
The Company reported a small profit of $3,700 for the first quarter of its
fiscal year ending June 30, 1999. More importantly, the Company's cash flow
position has stabilized and the Company has continued to reduce its current
liabilities and long-term debt.
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The Company is still negotiating a sales transaction which was presented,
discussed and approved at the Company's last shareholders' meeting. Management
anticipates that the transaction will improve the Company's overall financial
position by eliminating current and long-term debt and by providing the cash
necessary to give the Company the financial strength to expand its breadth of
operations.
Although negotiations are taking longer than expected, management is hopeful
that they will be completed, a letter of intent will be consummated and the
transaction will be finalized before the end of the third quarter of this fiscal
year.
The Company has also recently entered into negotiations with Salsa Fresh, Inc.,
to develop and promote its concept, Salsa Fresh Grill, throughout Southern
California. This could substantially increase the Company's revenues, as the
Company would be entitled to receive a significant percentage of the franchise
fee of each transaction that it initiates on behalf of Salsa Fresh, Inc.
The entire management team is optimistic about the Company's future and is
confident that future operations will be profitable and shareholders will see
increased value.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this report may be forward-looking in nature, or "forward
looking statements" as defined in the Private Securities Litigation Reform Act
of 1995. Forward-looking statements in this 10-Q relate to the Company's Year
2000 compliance efforts, including expectations about compliance timetables and
costs.
Actual results may differ from those expressed or implied in forward-looking
statements. With respect to any forward-looking statements contained in this
report, the Company believes that its results are subject to a number of risk
factors, including the ability of the Company to identify and address
successfully Year 2000 issues in a timely manner, and at costs that are
reasonably in line with projections, and the ability of the Company's vendors to
identify and address successfully their own Year 2000 issues in a timely manner.
Any forward-looking statements in this report should be evaluated in light of
these important risk factors.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - None
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
17
<PAGE> 18
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 November 13, 1998.
N.U. PIZZA HOLDING CORPORATION
By: /s/
-------------------------------
Ronald J. Gelet
President
Pursuant to 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: 11/13/98
- ------------------------------- -------------------------------
Ronald J. Gelet
Director, President and Chief
Executive Officer
/s/ Dated: 11/13/98
- ------------------------------- -------------------------------
Gloria Gelet
Director
/s/ Dated: 11/13/98
- ------------------------------- -------------------------------
Jane Yennie
Controller
/s/ Dated: 11/13/98
- ------------------------------- -------------------------------
Dan Rouse
Director
18
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
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<INVENTORY> 3,700
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<PP&E> 503,200
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0
12,400
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