<PAGE>
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 March 31, 2000.
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
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(State or other jurisdiction of incorporation or organization)
95-3656327
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(I.R.S. Employer Identification No.)
3550 Wilshire Blvd., Suite 1725 Los Angeles, CA 90010
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(213) 252-9991
-----------------------------
(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 March 31, 2000, there were 49,164,008 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>
March 31, June 30,
2000 1999
ASSETS (Unaudited) (Audited)
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,200 $ 60,600
Restricted cash 11,100 16,800
Franchisee advertising receivable 27,000 35,600
Receivables, net of allowance for
doubtful accounts of $21,100 113,900 54,000
Advances to affiliated corporations 57,600 42,400
Current portion of related party
notes receivable, net of allowances
of $150,300 96,700 96,700
Current portion of notes receivable -
franchisees, net of allowances of $295,700 115,500 130,500
Prepaid expenses 15,300 15,700
------------ ------------
Total current assets 451,300 452,300
------------ ------------
Other assets:
Notes receivable - franchisees, net
of allowances of $118,600 535,600 423,100
Intangible assets, net of accumulated
amortization of $3,600 8,300 8,300
Deposits 35,100 22,900
------------ ------------
579,000 454,300
------------ ------------
1,030,300 $ 906,600
============ ============
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
2
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N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------ ------------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses 416,300 350,500
Accrued franchise advertising 38,100 52,400
Current portion of long-term debt $ 126,300 $ 167,700
Current portion - litigation settlements 110,000 164,800
Loans payable to related parties 617,300 486,400
------------ ------------
Total current liabilities 1,308,000 1,221,800
------------ ------------
Long-term debt, net of current portion 152,700 161,300
Litigation settlements, net of
current portion 117,000 76,500
Deferred franchise fee income - 22,900
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 100,000,000 and
50,000,000 shares, 49,164,008 and
48,164,008 shares issued, subscribed
and outstanding, respectively 49,200 48,400
Additional paid-in capital 6,211,100 6,182,100
Accumulated deficit (6,820,100) (6,818,800)
------------ ------------
(570,400) (575,900)
------------ ------------
$ 1,030,300 $ 906,600
============ ============
3
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
<PAGE>
N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2000 AND 1999
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
FRANCHISE OPERATIONS:
REVENUES:
Initial franchise fees $ 14,800 $ 9,800 $ 34,300 $ 39,300
Royalties 139,400 97,200 315,600 295,700
Rental income - 6,100 - 15,700
Interest income 10,200 11,400 28,500 33,200
Rebate income 22,800 30,800 90,800 98,800
Other income - 14,400 140,100 50,900
Gain on sale of restaurant
and equipment - 2,700 - 18,500
Forgiveness of debt - - 5,600 -
---------- ---------- ---------- ----------
187,200 172,400 614,900 552,100
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Rent - 9,000 - 17,500
General and administrative 161,000 122,600 596,400 453,200
Interest expense 7,100 5,000 22,400 19,400
---------- ---------- ---------- ----------
168,100 136,600 618,800 490,100
---------- ---------- ---------- ----------
Franchise operating income 19,100 35,800 (3,900) 62,000
---------- ---------- ---------- ----------
</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 OPERATIONS AND ACCUMULATED DEFICIT (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
----------- ----------- ------------ ------------
COMPANY-OWNED RESTAURANT (Unaudited) (Unaudited)
OPERATIONS:
<S> <C> <C> <C> <C>
Sales $ - $ 20,700 $ - $ 160,700
----------- ----------- ------------ ------------
COSTS AND EXPENSES:
Cost of sales - 4,900 - 50,400
Operating - 12,500 17,500 82,000
General and administrative - 4,600 - 44,400
----------- ----------- ------------ ------------
- 22,000 17,500 176,800
----------- ----------- ------------ ------------
Company-owned restaurant loss - (1,300) (17,500) (16,100)
----------- ----------- ------------ ------------
Income (loss) before
income tax provision - 34,500 (23,600) 45,900
Income tax provision - - 800 1,700
----------- ----------- ------------ ------------
Net income (loss) $ - $ 34,500 (24,400) 44,200
============ ============
Accumulated deficit,
beginning of period (6,818,800) (4,825,700)
------------ ------------
Accumulated deficit,
end of period $ (6,820,100) $ (4,781,500)
============ ============
Net income (loss)
per share - basic $ 0.00 $ 0.00 $ 0.00 $ 0.00
=========== =========== ============ ============
Weighted average number of
shares outstanding - basic 49,164,008 48,164,008 49,164,008 41,438,182
=========== =========== ============ ============
Net income (loss)
per share - diluted $ 0.00 $ 0.00 $ 0.00 $ 0.00
=========== =========== ============ ============
Weighted average number
of shares outstanding -
diluted 49,164,008 48,164,008 49,164,008 41,438,182
=========== =========== ============ ============
</TABLE>
See accompanying notes to financial stements 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
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (5,600) $ 44,200
Adjustments to reconcile net
income (loss) to net cash (used)
provided by operating activities:
Depreciation and amortization 29,900 29,900
Forgiveness of debt (5,600)
Gain on sale of restaurants and equipment - (18,500)
Realization of deferred income (9,800) (29,300)
Changes in assets and liabilities:
Receivables, net (8,800) (56,400)
Inventories - 100
Prepaid expenses - (500)
Accounts payable and accrued expenses (18,900) (84,200)
Accrued royalties due to related party 4,900 26,900
Deposits - (5,300)
---------- ----------
Net cash (used) provided by
operating activities (13,900) (93,100)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on notes receivable 35,500 125,500
Advances to affiliated corporations (57,600) (20,800)
---------- ----------
Net cash provided by investing activities (22,100) 103,600
---------- ----------
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
6
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N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in amounts due to related parties $ 170,600 $ -
Increase in notes payable - 116,800
Principal payments on long-term debt (155,500) (131,400)
---------- ----------
Net cash provided (used)
by financing activities 45,100 (14,600)
---------- ----------
Net (decrease) increase
in cash and cash equivalents (44,100) (4,100)
Cash and cash equivalents,
beginning of period 58,300 54,800
---------- ----------
Cash and cash equivalents, end of period $ 14,200 $ 50,700
========== ==========
Supplemental information:
Cash paid for interest $ 46,100 $ 17,100
Cash paid for income taxes $ 800 $ 1,700
</TABLE>
See accompanying notes to financial statements and management's discussion and
analysis of financial condition and results of operations.
7
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N. U. PIZZA HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
In the opinion of management of N. U. Pizza Holding Corporation and Subsidiaries
(the "Company"), the accompanying unaudited consolidated 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, 2000 and
the results of its operations and changes in its cash flows for the three and
nine month periods presented.
The consolidated financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in the annual
consolidated financial statements and notes.
These unaudited consolidated financial statements should be read in conjunction
with the Company's annual report on Form 10-K for the year ended June 30, 1999.
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. Common Stock
In August 1999, the Company's Board of Directors approved an increase from
50,000,000 to 100,000,000 authorized shares of common stock.
On July 23, 1999, the Company entered into agreements with two consultants. The
agreements are for a fourteen month period and are scheduled to expire on
September 30, 2000. The consultants are to assist the Company with the expansion
of its operations by identifying, evaluating and structuring acquisitions of
other companies. The consultants will also provide ongoing consulting services
in the areas of management, strategic planning, corporate financing and
marketing in connection with the Company's line of business.
In consideration for their efforts, the Company granted each consultant an
option to purchase 1,000,000 shares of the Company's common stock at an
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exercise price of $.03 per share. On September 22, 1999, one of the consultants
exercised his option by paying the Company $30,000 in exchange for 1,000,000
shares of the Company's common stock. On February 28, 2000, the second
consultant exercised his option by paying the Company $60,000 in exchange for
2,000,000 shares of the Company's common stock.
Note 3. 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 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 outstanding utility bills.
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.
9
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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 Pizzeria 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 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
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 March 31, 1999, 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 his 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 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
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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 March 31, 1999
approximately $700 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 with the plaintiff paying 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 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
11
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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 nine months ended March 31, 1999.
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 4. Income Taxes
The Company's federal income tax provisions for the three and nine 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.
Note 5. Resignation of Officer and Directors
On January 1, 1999, the Company's founder and president, Ronald J. Gelet,
resigned his directorship and officerships in the Company so that he would have
more time to deal with some serious family matters and to pursue other
interests, both of a personal and professional nature. In conjunction with Mr.
Gelet's decision, his wife, Gloria Gelet, also resigned her directorship in the
Company as of January 1, 1999.
Dan Rouse, vice president and a director of the Company for the past five years,
with the approval of the Company's board of directors, has succeeded Mr. Gelet
as president of the Company.
Jane Yennie, controller of the Company resigned her officership as Treasurer on
February 15, 2000. On April 15, 2000, Jane Yennie was relived of her
responsibility of Corporate Controller and was let go.
Note 6. Subsequent Event
On February 4, 2000, the Company filed chapter 11.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 2000:
LIQUIDITY AND CAPITAL RESOURCES.
After filing of chapter 11 the Company staff and attorneys have worked with
franchisees on their past due royalty and note payments due to the company.
Plans have been worked out with franchisees to pay arrears on short term notes
to go into effect April 2000. Cash and cash equivalents at March 31, 2000 were
$14,200.
OPERATING ACTIVITIES.
Accounts receivable remain unchanged $113,900 at March 31, 2000.
Prepaid expenses remain unchanged $15,300 at March 31, 2000.
Intangible assets remain unchanged $8,800 at March 31, 2000.
Accounts payable and accrued expenses decreased $18,900 to $416,300 at March 31,
2000, primarily due to the increased payment of outstanding trade payables.
Related party loans payable decreased $18,200 to $617,300 at March 31, 2000.
INVESTING ACTIVITIES:
Notes receivable - franchisees and related party notes receivable increased
$37,000 to $651,100 at March 31, 2000 due to the rearrangements of past due
payments.
RESULTS OF OPERATIONS.
NINE MONTHS ENDED MARCH 31, 2000
AS COMPARED TO NINE MONTHS ENDED MARCH 31, 1999
FRANCHISE OPERATIONS.
For the nine months ended March 31, 2000, the Company recognized initial
franchise fees of $29,300 from one international license contract and $5,000
one-time transfer fee from franchisee, a 12.7% decrease in fees from the same
period in 1999.
The Company recognized $315,600 of royalty income during the nine months ended
March 31, 2000, a $19,900 (6.7%) increase from royalty income of $295,700
recognized for the comparable period in 1999.
No rental income was recognized during the nine months ended March 31, 2000 as
compared to $15,700 of rental income recognized during the same period in 1999.
This decrease is due to the franchisees paying their rent directly to the
landlord instead of rents being passed through the Company as in prior years.
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Interest income decreased $4,700 (14.2%) to $28,500 for the nine months ended
March 31, 2000 as compared to $33,200 for the nine months ended March 31, 1999.
This decrease is due to an decrease in interest bearing notes receivable
outstanding during nine months ended March 31, 2000.
Rebate income decreased $8,000 (8.1%) to $90,800 during the nine months ended
March 31, 2000 as compared to the nine months ended March 31, 1999, due to an
overall decline in system-wide sales.
Other income increased $89,200 (75.3%) to $140,100 for the nine months ended
March 31, 2000 due primarily to a one-time receipt during the nine months ended
March 31, 1998 from a promotion Company to be used exclusively.
The Company recognized $5,600 of forgiveness of debt income for the nine months
ended March 31, 2000 due to the writeoff of previously accrued accounts payable.
There were no such writeoffs during the nine months ended March 31, 1999.
General and administrative expenses increased $143,200 (31.6%) to $596,400
during the nine months ended March 31, 2000 as compared to the nine months ended
March 31, 1999 due primarily to franchisee who vacated their stores leaving
corporate debt.
Interest expense increased $3,000 (15.5%) to $22,400 for the nine months ended
March 31, 2000 as compared to the nine months ended March 31, 1999 due to a
change in interest payments on the Company's long-term debt.
COMPANY-OWNED RESTAURANT OPERATIONS.
There were no Company-owned restaurant operations during the nine months ended
March 31, 2000. For the nine months ended March 31, 1999, Company-owned
restaurant revenues totaled $160,700 and Company-owned restaurant costs and
expenses totaled $176,800, resulting in a Company-owned restaurant loss of
$16,100.
THREE MONTHS ENDED MARCH 31, 2000
AS COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
FRANCHISE OPERATIONS.
For the three months ended March 31, 2000 and 1999, the Company recognized
initial franchise fees of $14,800 from one international license contract and
$5,000 one-time transfer fee from franchisee, a 51.0% increase in fees from the
same period in 1999.
The Company recognized $139,400 of royalty income during the three months ended
March 31, 1999, a $42,200 (43.4%) increase from royalty income of $97,200
recognized for the comparable period in 1999. The increase was due primarily to
collecting back royalties from franchisees.
No rental income was recognized during the three months ended March 31, 2000 as
compared to $6,100 of rental income recognized during the same period in 1999.
This decrease is due to the franchisees paying their rent directly to
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the landlord instead of rents being passed through the Company as in prior
years.
Interest income decreased $1,200 (10.5%) to $10,200 for the three months ended
March 31, 2000 as compared to $11,400 for the three months ended March 31, 1999.
This decrease is due to a decrease in collections on notes receivable during the
current quarter.
Rebate income decreased $8,000 (26.0%) to $22,800 during the three months ended
March 31, 2000 as compared to the three months ended March 31, 1999, due to an
overall decline in system-wide sales.
General and administrative expenses increased $38,400 (31.3%) to $161,000 during
the three months ended March 31, 2000 as compared to the three months ended
March 31, 1999 due primarily to franchisee who vacated their stores leaving
corporate debt.
Interest expense increased $2,100 (42.0%) to $7,100 for the three months ended
March 31, 2000 as compared to the three months ended March 31, 1999 due to a
change in interest payments on the Company's long-term debt.
COMPANY-OWNED RESTAURANT OPERATIONS.
There were no Company-owned restaurant operations during the three months ended
March 31, 2000. For the three months ended March 31, 1999, Company-owned
restaurant revenues totaled $20,700 and Company-owned restaurant costs and
expenses totaled $22,000, resulting in a Company-owned restaurant loss of
$1,300.
PRESIDENT'S COMMENTS:
After filing of chapter 11 the company has shown positive cash flow, while
maintaining current obligations. We have taken steps to reduce overhead and
staff. Also the company has hired a new accounting firm to help through chapter
11 and to do year end audit as well as the required filings for Securities and
Exchange Commission in order to maintain the public status.
Three new stores have been opened. Two of the stores being dual concept stores
featuring Numero Uno and Salsa Fresh Grill menu items; one store is Numero Uno
take-out and delivery store. This is a very positive move for the corporation.
Some of these stores have assumed lease obligations that the company was paying
before.
The company has also gone on the Internet throughout the chain for customers to
order online. Long term we feel that this will increase sales. Numero Uno
started a very aggressive marketing campaign using cable TV to build awareness
and sales.
The Company has also started to lay the groundwork to expand outside the state
of California using the trade name NU Magic Pizza.
We feel very confident that the Company will come out of chapter 11 stronger and
more focused.
15
<PAGE>
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
During the current fiscal year, the Company began the process of identifying,
evaluating and implementing changes to computer programs necessary to address
the year 2000 issue. This issue affects computer systems that have
time-sensitive programs that may not properly recognize the year 2000. This
could result in major system failures or miscalculations. The Company is
currently addressing its internal year 2000 issue with modifications to existing
programs and conversions to new programs. The Company is also communicating with
franchisees, vendors and others with which it conducts business to help them
identify and resolve the 2000 issue.
The total cost associated with the required modifications and conversions is not
expected to be material to the Company's consolidated results of operations and
financial position and is being expensed as incurred.
If necessary modifications and conversions by the Company and those with which
it conducts business are completed in a timely manner, the year 2000 issue is
not expected by management of the Company to have a material adverse effect on
the Company's consolidated results of operations and financial position.
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 Form 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.
16
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - None
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - 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>
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 Los
Angeles, State of California on May 22, 2000.
N. U. PIZZA HOLDING CORPORATION
By: /S/ Dan Rouse
--------------------------------------
Dan Rouse
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/ Dan Rouse Dated: 5/22/00
- ------------------------------- ------------------
Dan Rouse
Director, President and Treasurer
/s/ Deborah Murphy Dated: 5/22/00
- ------------------------------- ------------------
Deborah Murphy
Director, Vice President and
Secretary
/s/ Michael L. Lorella Dated: 5/22/00
- ------------------------------- ------------------
Michael L. Lorella
Director
18
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<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
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0
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<COMMON> 49,200
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