<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------
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: 0-20718
-------
FOODQUEST, Inc.
--------------
(Exact name of registrant as specified in its charter)
Florida 65-0343280
------- ----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
899 West Cypress Creek Road, Suite 500, Fort Lauderdale, FL 33309
-----------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(954) 772-5615
(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(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. [X] Yes [_] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
3,218,271 shares of Common Stock as of August 14, 1993.
- ---------
<PAGE>
PAGE>
Part I Financial Information
Item 1. Financial Statements
FOODQUEST, INC.
CONSOLIDATED BALANCE SHEET
June 30, 1996 and March 31, 1996
<TABLE>
<CAPTION>
June 30, 1996 March 31, 1996
------------- --------------
ASSETS
------
<S> <C> <C>
Current assets
Cash and cash equivalents $10,895 $673,994
Receivables and refundable deposits, net of 78,445 88,376
allowance for doubtful accounts of $18,346
and $5,945, respectively
Inventory 41,459 40,774
Prepaid Expenses 81,449 69,817
-------- ---------
Total current assets 212,248 872,961
Property & equipment, net of accumulated depreciation 3,301,513 3,320,174
of $550,099 and $1,049,114, respectively
Intangibles, net of accumulated amortization of $5,690 275,789 275,789
$5,690, respectively
Other assets 772,959 795,459
------- ---------
Total assets $4,562,509 $5,264,383
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable $457,217 $886,204
Accrued liabilities 559,648 694,197
Other current liabilities 247,558 269,558
Due to affiliate 673,601 630,703
Capital leases 131,509 60,347
Notes payable 1,675,948 1,067,326
--------- ---------
Total current liabilities 3,745,481 3,608,335
Deferred rent 2,415 3,218
Notes payable 993,168 1,628,514
Capital leases 186,403 264,128
------- -------
Total liabilities $4,927,467 $5,504,195
Shareholders' equity:
Preferred stock, $.01 par value, authorized
5,000,000 shares, none outstanding 0 0
Common stock, $.01 par value, authorized
20,000,000 shares, 3,218,271 shares
issued and outstanding 32,183 32,183
Additional paid-in capital 12,065,258 12,065,258
Accumulated deficit (12,462,399) (12,337,253)
----------- ------------
Total shareholders' equity (364,958) (239,812)
-------- --------
Total liabilities and shareholders' equity $4,562,509 $5,264,383
========== ==========
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
2
<PAGE>
<TABLE>
FOODQUEST, INC.
CONSOLIDATED INCOME STATEMENT
for the periods ended June 30, 1996 and June 26, 1995
<CAPTION>
June 30, 1996 June 26, 1995
------------- -------------
<S> <C> <C>
Restaurant sales $ 140,012 $ 1,911,117
Franchise fee income - 56,161
Royalty income 956 -
Management fee income - 18,219
---------------- ---------------
Total revenues 140,968 1,985,497
Cost of goods sold 53,104 736,376
Operating labor 52,477 638,030
Other direct restaurant operating expenses 38,958 338,585
Occupancy and related expenses 29,854 205,911
General and administrative expenses 124,507 218,616
Other income (71,104) -
Depreciation and amortization 18,661 144,966
---------------- ---------------
Total operating expenses 246,457 2,282,484
---------------- ---------------
Operating loss (105,489) (296,987)
Interest income 20,228 2,873
Interest expense 17,384 53,730
Equity in investment in joint venture (22,500) (27,602)
---------------- ---------------
Net loss $ (125,145) (375,446)
================ ===============
Earnings per share $ (0.04) $ (0.12)
================= ===============
Weighted average outstanding common shares 3,218,271 3,104,503
================= ===============
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
3
<PAGE>
FOODQUEST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the periods ended June 30, 1996 and June 26, 1995
<TABLE>
<CAPTION>
June 30, 1996 June 26, 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(125,145) $(375,446)
Adjustments to reconcile net income to net
cash provided/(used) by operating activities:
Depreciation and amortization 18,661 144,966
Provision for bad debts 18,346 -
Gain on settlement of trade payables (89,450) -
Loss from equity investment in joint venture 22,500 27,602
Changes in operating assets/liabilities (501,448) 433,970
---------- ---------
Net cash provided/(used) by operating activities (656,536) 231,092
---------- ---------
Cash flows from investing activities:
Purchase of property and equipment - (165,386)
Cash paid for acquisition of restaurant, net
of cash acquired - (366,776)
---------- ---------
Net cash used by investing activities - (532,162)
---------- ---------
Cash flows from financing activities:
Proceeds from capital leases - 363,598
Repayment of notes payable - (7,091)
Repayment of capital leases (6,563) (17,954)
---------- ---------
Net cash provided/(used) by financing activities (6,563) 338,553
---------- ---------
Net increase in cash and cash equivalents (663,099) 37,483
Cash and cash equivalents at beginning of year 673,994 851,836
---------- ---------
Cash and cash equivalents at end of three months $10,895 $889,319
========== =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $16,259 $24,179
========== =========
The accompanying notes are an integral part of these financial statements
</TABLE>
4
<PAGE>
FOODQUEST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
for the periods ended June 30, 1996 and June 26, 1995
Supplemental Schedule of Noncash Investing and Financing Activities
- -------------------------------------------------------------------
Net assets of restaurant acquired:
June 26, 1995
-------------
Prepaid expenses $ 3,002
Inventory 4,995
Property, plant and equipment 543,983
--------
Total assets 551,480
Accrued liabilities 5,582
--------
Total liabilities assumed 5,582
--------
Net assets acquired 545,898
--------
Purchase price:
Cash 366,776
Notes payable 466,277
--------
833,053
--------
Excess of purchase price over net assets acquired $287,155
========
The accompanying notes are an integral part of these financial statements
5
<PAGE>
FOODQUEST, Inc. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for Form 10-QSB and Regulation
S-B related to interim period financial statements and, therefore, do not
include all information and footnotes required by generally accepted
accounting principles. However, in the opinion of management, all adjustments
considered necessary for a fair presentation of the consolidated financial
position of the Company and its subsidiaries at June 30, 1996 and its
consolidated results of operations for the three months then ended have been
included. The results of the interim period are not necessarily indicative of
the results that may be expected for the entire year. Reference should be
made to the annual financial statements, including footnotes thereto,
included in the Company's Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission.
2. Effective March 29, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109"), SFAS 109 requires recognition of deferred tax liabilities and assets
for the expected future consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to
reverse.
At June 30, 1996, the Company had a net deferred tax asset of approximately
$4,766,000 comprised of the tax effects of certain temporary differences and
a net operating loss carry-forward. The temporary differences relate mainly
to pre-opening costs, depreciation and deferred franchise fee income. A
valuation allowance of approximately $4,766,000 has been applied against the
net deferred tax asset, therefore, there was no cumulative effect reflected
in the consolidated statement of operations for the quarter ended June 30,
1996. At June 30, 1996, the Company has available for federal income tax
purposes a net operating loss carry-forward of approximately $10,756,000 for
federal and state tax purposes available to offset future taxable income
expiring, if not used, periodically through the year 2010. A portion of the
net operating loss carryforwards are subject to an annual limitation of
approximately $1,225,000, because of the change in control which occurred in
November 1994.
3. Effective April 1, 1996 the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation". SFAS No. 123 establishes optional alternative
accounting methods for stock-based compensation as well as new required
disclosures. The Company will adopt SFAS No. 123 for fiscal year 1997 for
disclosure purposes only and it will not impact the Company's financial
position, annual operating results or cash flows.
4. On March 31,1996, the Company entered into a contract to sell its four Kenny
Rogers Roasters concept restaurants in Dade County, Florida (collectively,
the "Dade Restaurants"), to Roasters Corp. for an aggregate purchase price of
$3,393,918 and in connection, borrowed $500,000 from Roasters. The purchase
price includes (a) the cancellation of $1,653,657 in debt owed by the Company
to Roasters, (b) the assumption by Roasters of $843,127 of other obligations
owed by the Company to Roasters and its affiliates and (c) the assumption by
Roasters of $843,460 in debt and equipment lease obligations of the Company.
The closing of the sale is contingent upon approval of the transaction by
shareholders other than Roasters, and landlords and lenders consents. There
is no assurance that the sale of the restaurant will be completed. Until the
sale is consummated, Roasters will manage the Dade Restaurants pursuant to a
Management Agreement dated March 31, 1996 which entitles Roasters to receive
all revenues from the operation of the Dade Restaurants after payment of all
operating expenses including rent, payment of insurance premiums, equipment
lease payments, payment of interest and principal on all loans collateralized
by the Dade Restaurants and similar such payments.
6
<PAGE>
FOODQUEST, Inc. and Subsidiaries
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is an analysis of the Company's results of operations, liquidity
and capital resources. To the extent that such analysis contains statements that
are not of a historical nature, such statements are forward-looking statements,
which involve risks and uncertainties. These risks and uncertainties include the
Company's ability to continue as a going concern, to consummate a merger or
acquisition and to obtain additional capital; changes in the competitive
environment for the Company's products; general economic factors in markets
where the Company's products are sold; and other factors discussed in the
Company's filings with the Securities and Exchange Commission.
Comparison of fiscal quarters ended June 30, 1996 and June 26, 1995
- -------------------------------------------------------------------
Results of Operations
- ---------------------
Revenues
- --------
The Company's restaurant sales were $140,012 for the three months ended June 30,
1996 compared with $1,911,117 for the same period in the prior year, a decrease
of $1,771,105 or 92.7%. The decrease is primarily due to the following three
factors: decreases in (1) sales from four of the Company's Roasters concept
restaurants being managed by Roasters Corp., pending their proposed sale, of
approximately $974,023, (2) sales from two Roasters concept restaurants sold to
a joint venture of approximately $409,237, and (3) sales from three closed
Clucker's concept restaurants of $376,498. The Company does not anticipate a
significant increase in restaurant level revenues to occur in the next quarter.
The Company's management continues to seek acquisition or merger candidates
which would allow the Company the prospect of continued viability.
Franchise and royalty revenues were $0 and $956 for the three months ended June
30, 1996 compared with $56,161 and $0 for the same period in the prior year. The
royalty revenue recognized in fiscal 1997 is related to an agreement with the
Company's licensee in Texas. The Company expects the current royalty stream to
continue and does not consider the fee a significant source of future income.
The Company curtailed its franchise activities as a result of its strategy of
becoming predominantly an operator of restaurants.
Management fee income was $0 for the three months ended June 30, 1996 compared
with $18,219 for the same period in the prior fiscal year. The decrease is
directly attributable to the termination of the Company's agreement to manage
two joint venture restaurants in which the Company formerly owned a 50%
interest. The Company does not expect to earn any management fee income in the
near term.
Cost of Sales
- -------------
Cost of sales consisting of food and paper products, were $53,104 or 37.9% of
restaurant sales for the three months ended June 30, 1996 compared with $736,376
or $38.5% of restaurant sales in the same period in the prior year. The decrease
is attributable to the streamlining of the Company's product line. The reduced
product line eliminated several higher cost main courses which had negatively
impacted the Company's total cost of sales.
Restaurant Operating Expenses
- -----------------------------
Restaurant operating expenses consisting of labor, occupancy and other direct
restaurant expenses were $121,289 compared with $1,182,526 or 86.6% and 61.9% of
restaurant sales in fiscal 1997 and 1996 respectively. The decreased dollar
expenditures are a result of the operation of only one restaurant in fiscal
1997. The increase in restaurant operating expenses as a percentage of sales is
attributable to two factors, first the Company is operating only one restaurant.
That restaurant operates at relatively lower operating margins because of its
lower sales volumes, and second the Company had expenses which were incurred
subsequent to its fiscal year-end caused by the timing differences inherent in
various restaurant level fixed costs. The Company anticipates lowering its
restaurant operating expenses to levels closer to those experienced prior to the
proposed sale of its restaurants.
7
<PAGE>
FOODQUEST, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
General and Administrative Expenses
- -----------------------------------
General and administrative expenses were $124,507 for the quarter ended June 30,
1996, compared with $218,616 in the same period in the prior year, a decrease of
$94,109 or 43.0%. The decrease is attributable to the elimination of virtually
all of the Company's administrative, managerial and support staff, and the
elimination of the majority of all other ancillary corporate expenses. Included
in fiscal 1997's expenses were approximately $16,000 of non-recurring penalties
paid to satisfy amounts related to payroll taxes from calendar 1993. The Company
anticipates further reducing its expenses from the move of its administrative
offices at the end of July 1996 into space provided by Roasters Corp.
Other Income
- ------------
Other income was $(71,104) and $0 for fiscal 1997 and 1996 respectively. Other
income was comprised of a reduction in the trade payables of approximately
$89,450. These reductions were negotiated by the Company. The Company was able
to obtain these vendor concessions due to its current liquidity problems. The
Company anticipates attempting to negotiate similar concessions from its
remaining trade payables if it is able to improve its cash position. Other
income was offset by an allowance for bad debt with regard to moneys owed the
Company by Atlanta FOODQUEST, LLC. The Company owns a 49.9% interest in the
joint venture, and holds a note receivable for $1,011,423. The Company currently
does not envision receiving any interest payments from the joint venture in the
near term.
Interest Income
- ---------------
Interest income was $20,228 and $2,873 for the first three months of fiscal 1997
and 1996 respectively. Interest income for fiscal 1997 is attributable to a note
receivable relating to the Company's sale of its Atlanta Roasters concept
restaurants to a joint venture. The Company has booked an offsetting allowance
relating to this receivable reflecting the uncertainty of collecting this
amount. The Company will continue to record interest income on the note and will
record a corresponding allowance until the likelihood of collection on the note
is deemed more likely.
Interest Expense
- ----------------
Interest expense was $53,730 and $17,384 for the first three months of fiscal
1997 and 1996 respectively. The decrease in expense can be attributed to the
secured long-term obligations which will either be assumed or satisfied in the
sale of restaurants to Roasters, and the lease obligations which were sold as
part of the sale of the Atlanta market for which the Company was not responsible
for in the first quarter of fiscal 1997.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1996, the Company has $10,895 in cash and cash equivalents, which
includes highly liquid investments, compared with a balance of $673,994 at March
31, 1996. The decrease of $663,099 is primarily due to amounts paid to satisfy
the Company's trade payables and accrued liabilities.
Working capital at June 30, 1996 was a deficit of $3,533,233 compared with a
deficit of $2,735,374 at March 31,1996, a decrease of $797,859. The decrease is
attributable to increases in the current portion of notes payable of $608,622,
the current portion of capital lease obligations of $71,162, and amounts due to
affiliates of $42,898.
Cash used by operations was $656,536 for the three months ended June 30, 1996
compared with cash provided of $231,092 for the same period in the prior year.
The use of cash in fiscal 1997 is comprised primarily of the payment of
outstanding trade payables and accrued liabilities and the net loss from
operations partially offset by non-cash expenses of approximately $59,500.
Cash used for investing activities was $0 for the three months ended June 30,
1996 compared with $532,162 used in the same period in the prior year. The
decrease in cash used is directly related to the Company's sale of the majority
of its operations. The Company currently has only one operating restaurant and
does not anticipate any substantial uses of cash for investing activities.
8
<PAGE>
FOODQUEST, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Cash used by financing activities was $6,563 for the three months ended June 30,
1996 compared with $338,553 provided by financing activities in the prior year,
a decrease of $345,116 in cash from financing activities. The decrease can be
attributed to the Company completing no debt or equity financing transactions
during the first three months of fiscal 1997. The lack of financing is a direct
result of the Company's inability to enter into a merger or acquisition
transaction. The Company believes that a financing transaction would have to
accompany any merger or acquisition that would occur.
The Company has experienced losses of $4,084,665 and $4,914,715 during its two
most recent fiscal years. Such losses have resulted in a deterioration of the
Company's working capital position and relate to the operations of several
poorly performing restaurants and the Company's inability to raise capital for
expansion at terms favorable to the Company. The Company's current strategy for
improving its financial condition involve reducing its operations to a minimum,
satisfying its liabilities to the extent possible, minimizing any contingent
liabilities that may exist and identifying, negotiating and closing a potential
merger or acquisition. There is no assurance that the Company can successfully
implement all of the components of this strategy.
The Company's current cash flows from operations are insufficient to provide for
its day-to-day needs and its debt obligations. Accordingly, Roasters Corp. has
been funding the Company's operating and administrative payroll since
approximately July 15, 1996. If such support does not continue the Company may
not be able to continue as a going concern, and may have to consider protection
in the form of bankruptcy. Roasters has provided no guarantees that such support
will continue and has indicated that such support may cease subsequent to the
Company's scheduled meeting of shareholders in September 1996.
The Company's primary capital requirements are for daily operations. The Company
currently cannot fund such operations and will continue to seek assistance from
Roasters Corp. The Company will continue to streamline its operations and seek
ways to minimize its liabilities in the interest of finding a suitable merger or
acquisition. The Company's capital requirements in the immediate future will
continue to be funded through the operation of its one restaurant and Roasters.
In the event an acquisition or merger candidate is found the Company does not
believe it will provide any capital to such a transaction. The Company believes
that such a transaction would allow the Company to fund the capital needs of
such a venture through either debt or equity financing. There is no assurance
that such a transaction will be identified, or that if available it can be
negotiated successfully. Absent such a transaction there is no assurance that
additional funding will be available to the Company, or that if available it can
be obtained on terms favorable to the Company. Failure to obtain such funds
would adversely affect the Company's ability to remain in operation.
Nico B.M. Letschert, an outside director, is currently the only director of the
Company. He has remained a director in order to oversee, for the benefit of the
Company' shareholders, the Company's efforts to achieve its primary business
objectives, the accomplishment of which there is no assurance. At his request,
Ronald T. Linares, who is currently the only officer of the Company, has agreed
to remain as the Company's Vice President and Chief Financial Officer at least
through the Company's 1996 Annual Meeting of Shareholders to provide necessary
operational management for the Company during that time.
9
<PAGE>
FOODQUEST, Inc. and Subsidiaries
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In October, 1993, the Company instituted a lawsuit in the United States
District Court for the Southern District of Florida against Jack Pesso
d/b/a J.P. Enterprises, et al. The Company is primarily alleging
trademark infringement subsequent to defendants' breach of the
franchise agreement by payment and non-monetary defaults. The Company
is seeking a permanent injunction barring defendants from using the
name "Clucker's" in order to conform to the non-competition covenants
of the franchise agreement and an undetermined amount of damages. The
defendants have asserted counterclaims citing a breach of the franchise
agreement based on the Company's failure to provide assistance and
misstatement of the Company's history, and are seeking compensatory
damages of at least $24 million. The parties have entered into
settlement negotiations, although a settlement of the action cannot be
assured.
On December 15, 1994, Robert B. Pine, the Company's area developer for
the northeastern part of New Jersey, instituted a lawsuit against the
Company, its franchising subsidiary, Roasters Corp. and David L.
Scharps in the United States District Court for the Southern District
of Florida. The plaintiff had entered into a franchise agreement with
the Company in July 1993, opened one restaurant and then closed it in
October 1994. In the lawsuit, the plaintiff alleges claims against the
Company for breach of contract; breach of fiduciary duty and implied
duty of good faith and fair dealing; fraud, misrepresentation and
negligence; violations of Florida and New Jersey law pertaining to
franchises; rescission; promissory and equitable estoppel; and, along
with Roasters, violations of the federal antitrust laws. The plaintiff
seeks to recover from the Company in excess of $3 million in actual and
compensatory damages, including, but not limited to, out-of-pocket
expenses; lost profits; loss of future profits; loss of goodwill;
damages for pain, suffering and emotional distress; reasonable
attorneys' fees; costs; and interest; punitive damages in excess of $10
million; and with respect to the antitrust claims, treble damages in
excess of $9 million and invalidation of the Stock Purchase Agreement
dated August 16, 1994, among the Company, Roasters Corp. and Mr.
Scharps. The Company disputes Mr. Pine's allegations and is vigorously
defending this lawsuit. On January 31, 1996, the court granted the
Company's motion to compel arbitration by the American Arbitration
Association, and stay the lawsuit pending the results of the
arbitration. The parties have selected the arbitrators who will hear
the arbitration. The initial hearing in connection with the arbitration
is currently scheduled to occur on September 13, 1996.
On September 11, 1995, Olga Garcia instituted a lawsuit against the
Company, Roasters Corp., Roosters J.V., Roosters Investment
Corporation, Rodberg Construction, and Calusa Partners, in the Circuit
Court of the Eleventh Judicial Circuit in and for Dade County, Florida.
In the lawsuit the plaintiff alleges claims against the Company for
negligence in maintaining and operating the restaurant. The plaintiff
seeks to recover unspecified damages, including, but not limited to
permanent and total disability; permanent injury; medical expense;
aggravation of an existing condition; lost earnings and earnings
capacity; scarring and disfigurement in connection with an accident
occurring at a Company run Kenny Rogers Roasters restaurant. The
Company disputes Ms. Garcia's allegations and is vigorously defending
this lawsuit.
On August 5, 1996, Helen B. Scharps instituted litigation against the
Company in the Circuit Court of the Eleventh Judicial Circuit in and
for Dade County, Florida. The plaintiff alleges that the Company is in
default pursuant to three notes from the Company payable to her in the
respective original principal amounts of $122,327, $200,000, and
$264,000 and that were respectively collateralized by the assets of the
restaurant in connection which the loan was made. The plaintiff alleges
that the three notes are cross-collateralized, which the Company
disputes. In May 1996, The Company paid the $122,327 note in full; that
note had been secured by the assets of one of the Company's four
restaurants located in Dade County, Florida, that the Company proposes
to sell to Roasters Corp. after receipt of shareholder approval and
landlords' and lenders; consents (the "Restaurants Sale"). As of the
date of filing the litigation, there were no payment defaults pursuant
to either of the two outstanding notes. As of that same date, the
outstanding unpaid principal balances of the other two notes was
$119,000 and $171,600, respectively. The plaintiff seeks to recover
compensatory damages in excess of $15,000, attorney's fees and pre-
judgement interest and to obtain injunctive
10
<PAGE>
relief to prevent the consummation of the Restaurants Sale. The Company
disputes Mrs. Scharps' allegations. The Company's answer in the
litigation is due August 26, 1996.
In the normal course of business, various other claims and lawsuits
have been filed or are pending against the Company.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(b) Reports on Form 8-K
During the fiscal quarter ended June 30, 1996, the Company
filed a Form 8-K dated March 31, 1996, disclosing the
formation of the Atlanta joint venture, the sale of its two
restaurants in the Atlanta area to the joint venture and the
contract to sell its four restaurants in Dade County, Florida
to Roasters Corp.
11
<PAGE>
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.
FOODQUEST, INC.
---------------
Registrant
Date: 8/22/96 /s/Ronald T. Linares
------- --------------------
Vice President and
Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITS
CONSOLIDATED BALANCE SHEET DATED JUNE 30, 1996 AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 10,895
<SECURITIES> 0
<RECEIVABLES> 78,445
<ALLOWANCES> 18,346
<INVENTORY> 41,459
<CURRENT-ASSETS> 212,248
<PP&E> 3,301,513
<DEPRECIATION> 550,099
<TOTAL-ASSETS> 4,562,509
<CURRENT-LIABILITIES> 3,745,481
<BONDS> 3,020,315
0
0
<COMMON> 32,183
<OTHER-SE> (397,141)
<TOTAL-LIABILITY-AND-EQUITY> 4,562,509
<SALES> 140,012
<TOTAL-REVENUES> 150,968
<CGS> 53,104
<TOTAL-COSTS> 121,289
<OTHER-EXPENSES> 76,217
<LOSS-PROVISION> 18,347
<INTEREST-EXPENSE> (2,844)
<INCOME-PRETAX> (125,145)
<INCOME-TAX> 0
<INCOME-CONTINUING> (125,145)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (125,145)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
