<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1996
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or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
-------------------- ----------------------------
Commission File Number: 0-20143
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Watermarc Food Management Co.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Texas 74-2605598
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
</TABLE>
10777 Westheimer, Suite 1030 Houston, Texas 77042
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(Address of principal executive offices) (Zip Code)
(713) 783-0500
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(Registrant's telephone number)
N/A (Former name, former address and former fiscal year, 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 Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
As of March 31, 1996, the registrant had 13,228,296 shares of its common stock
and 329,540 shares of its preferred stock outstanding, respectively.
<PAGE> 2
WATERMARC FOOD MANAGEMENT CO.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets - 2
March 31, 1996 and July 2, 1995
Statements of Operations - 3
Thirteen Weeks Ended
March 31, 1996 and April 2, 1995
Statements of Operations - 4
Thirty-Nine Weeks Ended
March 31, 1996 and April 2, 1995
Statements of Cash Flows - 5
Thirty-Nine Weeks Ended
March 31, 1996 and April 2, 1995
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 9
</TABLE>
PART II. OTHER INFORMATION
NONE
1
<PAGE> 3
WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1996 JULY 2, 1995
-------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $136,684 $2,101,729
Accounts receivable, trade 265,592 106,385
Accounts receivable from affiliates 638,787 289,982
Inventories 604,172 435,866
Note receivable 73,500 80,000
Prepaid expenses and other current assets 576,896 302,953
-------------- ------------
Total current assets 2,295,631 3,316,915
Property and equipment, net 9,201,131 6,394,512
Notes and accounts receivable from affiliates 2,217,784 2,217,784
Intangible assets, net 11,965,819 4,878,624
Other assets 351,130 864,409
-------------- ------------
$26,031,495 $17,672,244
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $3,057,872 $2,655,001
Accrued liabilities 3,193,746 2,999,133
Current portion of long-term debt and
capital lease obligations 4,026,296 4,880,015
-------------- ------------
Total current liabilities 10,277,914 10,534,149
Long-term debt, less current portion 7,305,790 1,708,654
Capital lease obligations, less current portion 37,185 42,245
Subordinated debentures 217,000 217,000
Deferred rent 291,416 291,416
Commitments and contingencies
Stockholders' equity:
Preferred stock 329,540 329,540
Common stock 661,415 555,601
Additional paid-in capital 26,282,316 23,442,645
Accumulated deficit (19,371,081) (19,449,006)
-------------- ------------
Total stockholders' equity 7,902,190 4,878,780
-------------- ------------
$26,031,495 $17,672,244
============== ============
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
2
<PAGE> 4
WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS ENDED
MARCH 31, 1996 APRIL 2, 1995
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<S> <C> <C>
Revenues $10,118,214 $8,948,210
-------------- --------------
Costs and expenses:
Cost of revenues 3,121,995 2,857,152
Other restaurant operations 5,710,491 5,118,652
Selling, marketing and distribution 208,970 186,006
General and administrative 518,662 461,633
Depreciation and amortization 636,044 549,331
-------------- --------------
Total costs and expenses 10,196,162 9,172,774
-------------- --------------
Income (loss) from operations (77,948) (224,564)
Non-operating income (expense):
Interest income 30,760 23,640
Interest expense (258,665) (186,974)
Other, net 208,963 42,083
-------------- --------------
Total non-operating income (expense) (18,942) (121,251)
-------------- --------------
Income (loss) before income taxes and extraordinary item (96,890) (345,815)
Income taxes -- --
-------------- --------------
Net income (loss) ($96,890) ($345,815)
Preferred stock dividends 74,732 74,732
-------------- --------------
Net income (loss) less preferred stock dividends ($171,622) ($420,547)
============== ==============
Net earnings (loss) per common share ($0.01) ($0.05)
============== ==============
Weighted average common and common equivalent
shares outstanding 12,662,160 9,289,545
============== ==============
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
3
<PAGE> 5
WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
39 WEEKS ENDED
MARCH 31, 1996 APRIL 2, 1995
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<S> <C> <C>
Revenues $28,003,586 $27,988,290
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Costs and expenses:
Cost of revenues 8,695,945 8,780,368
Other restaurant operations 14,868,223 15,781,255
Selling, marketing and distribution 1,057,191 812,373
General and administrative 1,786,013 2,202,427
Depreciation and amortization 1,554,489 1,452,120
-------------- -------------
Total costs and expenses 27,961,861 29,028,543
-------------- -------------
Income (loss) from operations 41,725 (1,040,253)
Non-operating income (expense):
Interest income 126,724 93,975
Interest expense (578,039) (557,136)
Other, net 487,515 156,322
-------------- -------------
Total non-operating income (expense) 36,200 (306,839)
-------------- -------------
Income (loss) before income taxes and extraordinary item 77,925 (1,347,092)
Income taxes -- --
-------------- -------------
Income (loss) before extraordinary item 77,925 (1,347,092)
Extraordinary item - gain on extinguishment of debt -- 455,579
-------------- -------------
Net income (loss) 77,925 (891,513)
Preferred stock dividends 223,030 222,980
-------------- -------------
Net income (loss) less preferred stock dividends ($145,105) ($1,044,501)
============== =============
Earnings (loss) per common share before
extraordinary item ($0.01) ($0.17)
Extraordinary item per common share -- $0.05
-------------- -------------
Net earnings (loss) per common share ($0.01) ($0.12)
============== =============
Weighted average common and common equivalent
shares outstanding 11,650,166 9,027,859
============== =============
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
4
<PAGE> 6
WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
39 WEEKS ENDED
MARCH 31, 1996 APRIL 2, 1995
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<S> <C> <C>
Operating activities:
Net income (loss) for the period $77,925 ($891,513)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 1,420,792 1,386,449
Amortization of debt issue costs 133,697 65,671
Changes in assets and liabilities:
Accounts receivable, trade (259,206) 260,008
Accounts receivable from affiliates (348,805) (88,104)
Inventories (81,080) 104,529
Prepaid expenses and other current assets (236,927) (391,678)
Accounts payable and accrued liabilities (448,243) (2,933,161)
Accounts payable to affiliates -- (195,000)
Other assets 623,903 (36,023)
-------------- -------------
Net cash used in operating activities 882,056 (2,718,822)
-------------- -------------
Investing activities:
Purchase of property and equipment (1,654,003) (723,661)
Repayment of notes receivable 6,500 817,050
Repayment of receivable from affiliate -- 20,817
Cost of acquisitions, net of cash acquired (8,883,437) --
-------------- -------------
Net cash provided by (used in) investing activities (10,530,940) 114,206
-------------- -------------
Financing activities:
Net proceeds from borrowings 6,537,073 3,252,697
Net proceeds from issuance of common stock 2,945,482 1,667,476
Payments on notes payable to affiliates (665,000) --
Payments on other borrowings (1,128,656) (2,744,333)
Payments on capital lease obligations (5,060) (44,972)
-------------- -------------
Net cash provided by (used in) financing activities 7,683,839 2,130,868
-------------- -------------
Net (decrease) increase in cash and cash equivalents (1,965,045) (473,748)
Cash and cash equivalents, beginning of period 2,101,729 531,710
-------------- -------------
Cash and cash equivalents, end of period $136,684 $57,962
============== =============
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
5
<PAGE> 7
WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION:
ORGANIZATION
Watermarc Food Management Co. (The "Company"), formerly Billy Blues Food
Corporation, owns and operates restaurants under the names "Billy Blues";
"Marco's Mexican Restaurants"; "Longhorn Cafe"; "Pete's Barbecue";
"Hotspurs"; and "The Original Pasta Co". All but the Billy Blues
restaurant are operated by wholly-owned subsidiaries of the Company. The
Company also produces and markets two brands of barbecue sauce, "Billy
Blues Barbecue Sauce" and "Chris' & Pitt's Bar-B-Que Sauce". Both are
marketed to supermarkets, other retail stores and food service outlets.
The Company purchased The Original Pasta Co. restaurants effective January
26, 1996. (See Notes 4 and 5).
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to such
rules and regulations. The information furnished herein reflects all the
adjustments (consisting of normal recurring accruals and adjustments) which
are, in the opinion of management, necessary to fairly state the operating
results for the respective periods.
The financial statements have been prepared assuming the Company will be
able to continue as a going concern. The Company incurred losses of
approximately $8.4 million for the fiscal year ended July 3, 1994 and $7.0
million for the fiscal year ended July 2, 1995. The report of the
Company's Independent Certified Public Accountants accompanying the
financial statements for the fiscal year ended July 2, 1995 contains an
explanatory paragraph describing the uncertainty as to the ability of the
Company to continue as a going concern. The financial statements do not
reflect any adjustments that might result from the outcome of this
uncertainty. The Company's continuation as a going concern is dependent
upon its ability to generate sufficient cash flow to meet its obligations
on a timely basis, to obtain additional financing or capital, to refinance
its debt and to continue to maintain profitability. The results of
operations for the 39 weeks ended March 31, 1996 may not be indicative of
the results for the full fiscal year.
Management's plans include the following:
o Eliminating unprofitable restaurants, which was achieved in late
fiscal 1995.
o Increasing revenues in existing restaurants by remodeling certain
Marco's Mexican Restaurants and by improving marketing programs and
customer service.
o Increasing revenues from the sale of food products by reinforcing
existing markets, expanding distribution to new market areas,
introducing more aggressive marketing programs, adding methods of
distribution and developing new products.
o Opening new restaurants.
o Acquiring profitable restaurants.
o Reducing operating expenses through improved cost controls.
o Continuing to reduce general and administrative expenses.
o Obtaining additional financing.
o Refinancing existing debt.
6
<PAGE> 8
2. CONTINGENCIES:
Effective in 1992, the Company voluntarily discontinued its workers'
compensation coverage in the state of Texas. The Company anticipates that
the ultimate expense of representing itself and settling claims will be
less than the cost of insurance. The Company intends to vigorously defend
and pursue all unreasonable claims. Management does not believe that any
existing claims will have a material adverse impact on the financial
position, results of operations, or cash flows of the Company.
The Company is currently involved in a lawsuit related to alleged wrongful
termination and the plaintiff is suing for $500,000 in actual damages and
$1,000,000 in punitive damages. The Company is also involved in various
other lawsuits arising in the ordinary course of its business. Management
believes that the resolution of these matters will not have a material
adverse impact on the financial position, results of operations or cash
flows of the Company.
3. RECENT ACCOUNTING STANDARDS:
On July 3, 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a
Loan," and SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets To Be Disposed Of." The adoption of these
accounting standards did not materially impact the Company's financial
statements. The Company has not as yet made an election as to which
alternative to adopt under SFAS No. 123 "Accounting For Stock-Based
Compensation" nor has management determined the impact of each alternative
on the Company's financial statements. SFAS No. 123 will be effective for
the Company beginning with its fiscal year ending June 29, 1997.
4. RELATED PARTY TRANSACTIONS:
In September of 1995, the Company's Board of Directors approved the
acquisition of all the issued and outstanding shares of The Original Pasta
Co., a Texas corporation which owned and operated a chain of ten Italian
restaurants in Houston, Texas ("Pasta Co."), from Ghulam M. Bombaywala, the
sole stockholder of Pasta Co. (The "Stockholder"). Mr. Bombaywala is also
a director, the Chief Executive Officer and principal shareholder of the
Company. The Company, the Stockholder and Pasta Co. then entered into an
Agreement and plan of Merger which provided for the merger of Pasta Co.
with and into the Company (the "Merger").
Although not required by law, the Board of Directors of the Company elected
to submit the Merger to its independent shareholders for approval at its
Annual Meeting of Shareholders held on January 9, 1996. Mr. Bombaywala,
who owned 4,620,000 shares of the Company's common stock, or 41.6%, agreed
not to vote on the Merger at the Annual Meeting. At such meeting, the
independent shareholders voted in favor of the Merger and the Merger became
effective on January 26, 1996 (the "Effective Date"). In consideration for
his shares, the Stockholder received 1,666,667 shares of common stock of
the Company and two promissory notes in the aggregate principal amount of
$3,750,000. As a part of the merger agreement, the Company was granted the
right to manage Pasta Co. and received a management fee of three percent
of the gross revenues of Pasta Co. from September 1995 through the
Effective Date.
Until April 1, 1996, the Company was obligated under a long-term lease
commitment associated with a closed Billy Blues restaurant located in
Denver, Colorado. At such time, as incentive for being relieved of such
obligation, the Company transferred the fixed assets of the restaurant to a
limited partnership of which the general partner is an unaffiliated third
party. As additional incentive to such general partner, Ghulam M.
Bombaywala, Director, Chief Executive Officer and principal shareholder of
the Company and Angelo Pitillo, Director, President and Chief Operating
Officer of the Company, invested in the partnership as limited partners.
The limited partnership will operate the restaurant under another name and
not as a Billy Blues restaurant.
7
<PAGE> 9
5. BUSINESS COMBINATIONS:
Effective January 26, 1996, the Company acquired all of the outstanding
common stock of The Original Pasta Co. (Pasta Co.). The purchase price was
$6,666,667, consisting of $3,750,000 of notes and the issuance of 1,666,667
shares of the Company's common stock valued at $2,916,667. The acquisition
has been accounted for as a purchase and, accordingly, the assets and
liabilities of Pasta Co. have been recorded at their fair value at the date
of acquisition. The excess of the purchase price over the fair values of
the net assets acquired is reported as goodwill and is being amortized over
15 years.
The statement of operations includes the results of Pasta Co. from the date
of acquisition. The following table summarizes the unaudited pro forma
results of operations of the Company as if the acquisition had occurred at
the beginning of each period presented:
<TABLE>
<CAPTION>
39 WEEKS ENDED
----------------------------------------
MARCH 31, 1996 APRIL 2, 1995
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<S> <C> <C>
Revenues $33,751,493 $ 32,385,267
Net loss $ (899,069) $ (1,480,996)
Net loss per common share $ (.07) $ (.14)
</TABLE>
6. ISSUANCE OF COMMON STOCK:
In December of 1995, the Company issued 225,000 shares of common stock in
settlement of a lawsuit which alleged breach of contract in relation to a
lease.
In January of 1996, the Company issued 112,603 shares of common stock as
payment of a dividend to Preferred Stockholders.
Also in January of 1996, the Company issued 1,666,667 shares of common
stock in connection with the acquisition of The Original Pasta Co. (See
Note 4).
In February 1996, the Company issued 112,000 shares of common stock valued
at approximately $168,000 in settlement of accounts payable.
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
INTRODUCTION
The Company utilizes a 52 - 53 week fiscal year which ends on the Sunday
closest to June 30. References to the third quarter of fiscal years 1996
and 1995 are to the thirteen week periods ended March 31, 1996 and April 2,
1995 respectively. References to the first three quarters of fiscal years
1996 and 1995 are to the thirty-nine week periods ending on those same
dates.
Effective January 26, 1996, the Company acquired The Original Pasta Co.
which operated a chain of ten restaurants (the "Pasta Co. Restaurants").
The acquisition was accounted for as a purchase, and no revenues or
expenses are reported for past periods. Cost percentages for the acquired
restaurants are similar to those of the Company's existing restaurant
operations.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED APRIL 2, 1995 COMPARED TO THE
THIRTEEN WEEKS ENDED MARCH 31, 1996.
REVENUES. Total revenues increased $1,170,004 or 13.1% to $10,118,214 for
the third quarter of fiscal 1996 as compared to $8,948,210 for the third
quarter of fiscal 1995. Revenues attributable to the Pasta Co. Restaurants
were $1,838,906. Remaining revenues decreased by $668,902 due to the
closing or sale of four Billy Blues restaurants and one Longhorn Cafe
restaurant, partially offset by the opening of three new Marco's Mexican
Restaurants.
COSTS AND EXPENSES. Total cost of revenues decreased to 30.9% of revenues
in 1996 as compared to 31.9% of revenues in 1995. The decline is due to
operational efficiencies introduced by management.
Restaurant operations include all other unit-level operating expenses,
comprised principally of labor, supplies, rent, utilities, repairs and
maintenance, and other direct expenses. As a percentage of restaurant
revenues, these costs decreased from 57.2% of revenues in fiscal 1995 to
56.4% of revenues in fiscal 1996 due to disproportionally higher expenses
associated with the Billy Blues restaurants which were sold or closed.
Selling, marketing and distribution expenses increased by $22,964 primarily
due to the acquisition of the Pasta Co. Restaurants.
General and administrative expenses increased by $57,029 primarily due to
the acquisition of the Pasta Co. Restaurants.
Depreciation and amortization increased by $86,713 primarily due to the
acquisition of the Pasta Co. Restaurants.
NON-OPERATING INCOME (EXPENSE). Interest expense increased by $71,691 due
to interest accrued on notes payable associated with the acquisition of the
Pasta Co. Restaurants, partially offset by reductions in other interest
bearing debt.
Other income increased by $166,880 primarily due to a gain of approximately
$150,000 on the sale of a Longhorn Cafe restaurant in February, 1996.
NET INCOME. As a result of the changes in the relationship between revenues
and costs and expenses discussed above, the Company showed a net loss of
$96,890 for the third quarter of fiscal 1996 compared to a net loss of
$345,815 for the third quarter of fiscal 1995.
9
<PAGE> 11
THIRTY-NINE WEEKS ENDED MARCH 31, 1996 COMPARED TO THE
THIRTY-NINE WEEKS ENDED APRIL 2, 1995.
REVENUES. Total revenues increased by $15,296 to $28,003,586 for the first
three quarters of fiscal 1996 from $27,988,290 for the first three quarters
of fiscal 1995. Revenues attributable to the Pasta Co. Restaurants were
$1,838,906. Remaining revenues decreased by $1,823,610 due to the closing
or sale of four Billy Blues restaurants and one Longhorn Cafe restaurant
partially offset by the opening of three new Marco's Mexican Restaurants.
COSTS AND EXPENSES. Total cost of sales decreased slightly as a percentage
of sales from 31.4% in fiscal 1995 to 31.1% in fiscal 1996 due to
operational efficiencies implemented by management.
Restaurant operations include all other unit-level operating expenses,
comprised principally of labor, supplies, rent, utilities, repairs and
maintenance, and other direct expenses. As a percentage of revenues, these
costs decreased to 53.1% in fiscal 1996, as compared to 56.4% in fiscal
1995 due to disproportionally higher expenses associated with the Billy
Blues restaurants which were sold or closed.
Selling, marketing, and distribution expenses increased by $244,818
primarily due to increased promotional activity early in fiscal 1996.
General and administrative expenses decreased by $416,414 due to cost
reductions implemented by management, partially offset by increased
expenses associated with the Pasta Co. Restaurants.
NON-OPERATING INCOME (EXPENSE). Interest expense increased by $20,903 due
to interest accrued on notes associated with the acquisition of the Pasta
Co. Restaurants, partially offset by a reduction in other interest bearing
debt.
Other income increased by $331,193 due to management fees charged to The
Original Pasta Co. prior to the acquisition and a gain of approximately
$150,000 on the sale of a Longhorn Cafe restaurant.
EXTRAORDINARY ITEM. In the second quarter of fiscal 1995, the Company paid
off a note at a discount from face value. The amount of the discount was
recorded as a gain on extinguishment of debt.
NET INCOME (LOSS). As a result of the changes in the relationship between
revenues and costs and expenses discussed above, the Company showed a net
profit of $77,925 for the first three quarters of fiscal 1996 compared to a
net loss of $891,513 for the first three quarters of fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. Since inception, the Company has incurred losses from
operations and, as of March 31, 1996, has an accumulated deficit of
$19,371,081. During the thirty-nine weeks ended March 31, 1996, net cash
flow from operating activities equaled $882,056.
As of March 31, 1996, the Company had negative working capital of
$8,182,285, as compared to negative working capital of $7,217,234 at July 2,
1995.
CAPITAL REQUIREMENTS. The Company has renegotiated the payment terms of its
$3 million 12% Subordinated Notes which were due on March 31, 1996.
Principal is now due on July 1, 1997.
10
<PAGE> 12
The material capital commitments of the Company over the coming year are
related to:
o Expansion of Marco's and Pasta Co. Restaurants.
o Reduction of the Company's working capital deficit, including payments
on notes, accounts payable and accrued liabilities.
The Company completed its acquisition of Pasta Co. on January 26, 1996. The
acquisition was financed by the issuance of stock and notes. For its
investment, the Company received ten operating restaurants with their
associated assets and liabilities. See, "Notes 4 and 5 to Notes to
Condensed Consolidated Financial Statements."
In March, 1996, the Company opened a new Pasta Co. Restaurant. Plans for
the coming year include opening two new Marco's Restaurants and four
additional Pasta Co. Restaurants, two of which are currently under
construction. Both Marco's and Pasta Co. Restaurants require an initial
capital investment of approximately $400,000, or a total investment of
approximately $2.4 million to open six restaurants. The Company intends to
finance these expenditures either through cash flow from operations or from
additional outside financing. There is no assurance that such funds will be
available on a timely basis, especially considering the Company's upcoming
debt service requirements. The actual number of new restaurants opened will
depend upon the availability of capital.
The Company expects to continue to achieve positive cash flow from
operations in fiscal 1996, principally from its Marco's and Pasta Co.
Restaurants. However, cash generated from operations may not be sufficient
to meet all of the commitments set forth above. Without additional debt or
equity financing in the short-term, the Company may not be able to meet its
targeted expansion goals, and reduce its current working capital deficit. If
additional financing is not available, the Company may be forced to curtail
its expansion efforts.
11
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 - Watermarc Food Management Co. and Subsidiaries
Computation of Earnings (Loss) Per Common and
Common Equivalent Shares
27 - Financial Data Schedules
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1996.
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 thereunto duly authorized.
WATERMARC FOOD MANAGEMENT CO.
Date:_____________________ By: ______________________________________
Thomas J. Buckley
Chief Financial Officer
(Duly Authorized Signatory and
Principal Financial & Accounting Officer)
12
<PAGE> 14
INDEX TO EXHIBITS
11.1 - Watermarc Food Management Co. and Subsidiaries
Computation of Earnings (Loss) Per Common and
Common Equivalent Shares
27 - Financial Data Schedules
<PAGE> 1
EXHIBIT 11.1
WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER COMMON AND COMMON EQUIVILENT SHARES
<TABLE>
<CAPTION>
13 WEEKS ENDED
MARCH 31, 1996 APRIL 2, 1995
-------------- -------------
<S> <C> <C>
Computation of primary earnings (loss) per
common and common equivalent shares:
Net income (loss) applicable to common stock ($171,622) ($420,547)
============== =============
Weighted average number of common shares
outstanding 12,662,160 9,289,545
============== =============
Primary earnings (loss) per common share ($0.01) ($0.05)
============== =============
Computation of earnings (loss) per common share
assuming full dilution (A):
Net income (loss) applicable to common stock ($171,622) ($420,547)
Dividends on preferred stock 74,732 74,732
Interest on 9% convertible subordinated debentures 4,882 60,548
-------------- -------------
Net income (loss) assuming full dilution ($92,008) ($285,267)
============== =============
Weighted average number of shares outstanding 12,662,160 9,289,545
Common shares issuable from stock option
plans and from warrants 3,319,070 1,875,320
Less shares assumed repurchased with proceeds (9,855,519) (1,599,604)
Shares assumed issued upon conversion of
preferred stock 411,925 450,414
Shares assumed issued upon conversion of 9%
subordinated debentures 43,400 134,550
-------------- -------------
Common shares outstanding assuming full dilution 6,581,036 10,150,225
============== =============
Earnings (loss) per common and common equivalent
share assuming full dilution ($0.01) ($0.03)
============== =============
</TABLE>
(A) This calculation is submitted in accordance with the Securities and
Exchange Act of 1934, Release No. 9083, although it is contrary to
paragraph 40 of APB Opinion No. 15 because it produced an anti-dilutive
result.
13
<PAGE> 2
EXHIBIT 11.1
WATERMARC FOOD MANAGEMENT CO. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER COMMON AND COMMON EQUIVILENT SHARES
<TABLE>
<CAPTION>
39 WEEKS ENDED
MARCH 31, 1996 APRIL 2, 1995
-------------- -------------
<S> <C> <C>
Computation of primary earnings (loss) per
common and common equivalent shares:
Net income (loss) applicable to common stock ($145,105) ($1,044,501)
============== =============
Weighted average number of common shares
outstanding 11,650,166 9,027,859
============== =============
Primary earnings (loss) per common share ($0.01) ($0.12)
============== =============
Computation of earnings (loss) per common share
assuming full dilution (A):
Net income (loss) applicable to common stock ($145,105) ($1,044,501)
Dividends on preferred stock 223,030 222,980
Interest on 9% convertible subordinated debentures 14,646 120,916
-------------- -------------
Net income (loss) assuming full dilution $92,571 ($700,605)
============== =============
Weighted average number of shares outstanding 11,650,166 9,027,859
Common shares issuable from stock option
plans and from warrants 3,305,737 1,875,320
Less shares assumed repurchased with proceeds (8,647,880) (1,599,604)
Shares assumed issued upon conversion of
preferred stock 411,925 450,414
Shares assumed issued upon conversion of 9%
subordinated debentures 43,400 134,550
-------------- -------------
Common shares outstanding assuming full dilution 6,763,348 9,888,539
============== =============
Earnings (loss) per common and common equivalent
share assuming full dilution $0.01 ($0.07)
============== =============
</TABLE>
(A) This calculation is submitted in accordance with the Securities and
Exchange Act of 1934, Release No. 9083, although it is contrary to
paragraph 40 of APB Opinion No. 15 because it produced an anti-dilutive
result.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 136,684
<SECURITIES> 0
<RECEIVABLES> 265,592
<ALLOWANCES> 0
<INVENTORY> 604,172
<CURRENT-ASSETS> 2,295,631
<PP&E> 17,082,909
<DEPRECIATION> 7,881,778
<TOTAL-ASSETS> 26,031,495
<CURRENT-LIABILITIES> 10,277,914
<BONDS> 0
<COMMON> 661,415
0
329,540
<OTHER-SE> 25,620,901
<TOTAL-LIABILITY-AND-EQUITY> 26,031,495
<SALES> 10,118,214
<TOTAL-REVENUES> 10,118,214
<CGS> 3,121,995
<TOTAL-COSTS> 7,074,167
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 258,665
<INCOME-PRETAX> (96,890)
<INCOME-TAX> 0
<INCOME-CONTINUING> (96,890)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (96,890)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> .01
</TABLE>
