<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO Section 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--- ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
-------- --------
COMMISSION FILE NO. 0-23936 (CA)
JAVA CENTRALE, INC.
-------------------------------------------------------------
(Exact name of registrant as specified in its c-harter)
CALIFORNIA 68-0268780
- --------------------------------------- ----------------------------
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1610 ARDEN WAY, SUITE 145
SACRAMENTO, CALIFORNIA 95815
- --------------------------------------- ----------------------------
(Address of principal executive office) (Zip Code)
ISSUER'S TELEPHONE NUMBER: (916) 568-2310
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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. .
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. AS OF FEBRUARY 7, 1997,
13,458,881 SHARES OF COMMON STOCK (NO PAR VALUE) WERE OUTSTANDING.
<PAGE>
JAVA CENTRALE, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, March 31,
1996 1996
(UNAUDITED)
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $731,337 $1,182,078
Notes receivable - current 730,638 485,751
Accounts receivable, net 563,522 405,574
Inventories 349,131 417,780
Notes receivable - officer 227,293 235,201
Prepaid expenses and other 421,699 595,285
----------- -----------
Total current assets 3,023,620 3,321,669
NOTES RECEIVABLE 1,974,877 1,298,574
PROPERTY AND EQUIPMENT, NET 3,394,558 5,737,980
INTANGIBLE ASSETS 4,252,122 5,526,203
DEFERRED CHARGES AND OTHER 611,277 670,658
OTHER INVESTMENTS 876,982 176,983
----------- -----------
$14,133,436 $16,732,067
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,053,819 $1,807,136
Current maturities of long-term debt 818,174 711,745
Short term debt 11,253 35,040
Current capital lease obligations 67,715 96,267
Accrued liabilities 896,386 726,244
Due to related parties 116,253 22,637
----------- -----------
Total current liabilities 2,963,600 3,399,069
DEFERRED REVENUES 893,500 1,003,500
LONG-TERM DEBT 628,413 1,171,161
CONVERTIBLE DEBT 1,599,546 3,500,000
CAPITAL LEASES 97,940 129,054
OTHER LIABILITIES 106,810 148,376
STOCKHOLDERS' EQUITY
Series B Redeemable Preferred Stock, $.01 Per share
per annum cumulative, convertible, no par
25,000,000 shares authorized - none outstanding - -
Common Stock, no par, 25,000,000 shares authorized,
issued and outstanding shares; 13,262,482 at
December 31,1996, and 8,533,587 at March 31, 1996 18,124,270 15,493,137
Accumulative deficit (10,280,643) (8,112,230)
----------- -----------
7,843,627 7,380,907
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$14,133,436 $16,732,067
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----------- -----------
The accompanying notes are an integral part of these statements.
2
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JAVA CENTRALE, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Company cafe sales $3,151,579 $1,354,591 $10,708,076 $3,553,683
Franchise operations 20,000 169,500 223,000 254,500
Royalties 357,690 102,052 971,666 232,271
Sales of equipment and supplies 9,266 502,207 117,107 633,180
---------- ---------- ---------- ----------
Total revenue 3,538,535 2,128,350 12,019,849 4,673,634
---------- ---------- ---------- ----------
Cost of company sales:
Food and beverage 1,074,882 466,645 3,727,114 1,179,625
Labor 1,117,474 510,795 3,862,070 1,278,712
Direct and occupancy 666,447 321,167 2,230,734 823,645
Cost of equipment and supplies 5,771 502,990 108,020 607,370
Depreciation 112,004 34,531 432,929 70,369
Other 5,350 68,331 95,585 120,824
---------- ---------- ---------- ----------
Total cost of company sales 2,981,928 1,904,459 10,456,452 4,080,545
---------- ---------- ---------- ----------
General and administrative expenses 1,015,190 887,595 3,127,550 3,071,237
Depreciation and amortization 88,959 91,965 407,889 231,395
Loss associated with cafe closures 118,515 83,495 247,095 179,993
---------- ---------- ---------- ----------
Operating loss (666,057) (839,164) (2,219,137) (2,889,536)
---------- ---------- ---------- ----------
Other income (expense):
Interest expense and financing fees (217,222) (22,814) (395,424) (52,563)
Interest income 48,201 - 95,755 60,876
Gain on sale of assets 167,175 - 203,159 -
Other income 19,866 26,602 156,359 50,257
---------- ---------- ---------- ----------
Net loss ($648,037) ($835,376) ($2,159,288) ($2,830,966)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net loss per weighted average equivalent
common share outstanding ($0.05) ($0.12) ($0.20) ($0.47)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Equivalent common shares outstanding 12,836,365 6,872,912 10,920,142 5,984,102
</TABLE>
The accompanying notes are an integral part of these statements.
3
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JAVA CENTRALE, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months ended
December 31,
1996 1995
---------- ----------
Increase (decrease) in cash
Net cash flows from operating activities: $(2,763,940) $(1,424,168)
----------- ----------
Cash flows from investing activities:
Purchase of furniture and equipment (240,120) (739,700)
Proceeds from the sale of assets 1,556,000 -
Acquisition of Paradise Bakery, Inc. - (5,375,000)
Acquisition of cafes - (45,000)
Increase (decrease) in other 20,997 (658,000)
---------- ----------
Net cash used in investing activities 1,336,877 (6,817,700)
---------- ----------
Cash flows from financing activities:
Proceeds from the issuance of common stock 962,500 3,561,837
Proceeds from convertible note issued - 2,000,000
Proceeds from notes payable and
capital lease obligations 843,455 -
Proceeds from short term borrowing 750,000 -
Payments of notes payable and capital leases (1,579,633) (9,628)
---------- ----------
Net cash provided by financing activities 976,322 5,552,209
---------- ----------
Net increase (decrease) in cash (450,741) (2,689,659)
Cash and cash equivalents, beginning of period 1,182,078 3,764,278
---------- ----------
Cash and cash equivalents, end of period $731,337 $1,074,619
---------- ----------
---------- ----------
Cash paid for:
Income tax $ 800 $ -
Interest and financing fees $ 380,091 $ 30,519
The accompanying notes are an integral part of these statements.
4
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JAVA CENTRALE, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
NON-CASH TRANSACTIONS:
During the nine months ended December 31, 1996, the Company signed
franchise agreements which included notes receivable in the amount of
$80,000 and canceled notes receivable in the amount of $150,000 which
resulted in a decrease in deferred revenues of $70,000. During the nine
months ended December 31, 1995, the Company signed franchise agreements
which included notes receivable in the amount of $300,000 and canceled one
note receivable for $225,000 resulting in an increase of $75,000.
During the nine months ended December 31, 1996, the Company terminated 14
franchise agreements and refunded $156,625 in cash and canceled $105,000 in
notes associated with the franchise fees.
During the nine months ended December 31, 1996, holders of the convertible
debt converted $1,900,454 of the notes into 2,940,433 shares of common
stock pursuant to the terms of their notes.
During the nine months ended December 31, 1996 and December 31, 1995 the
Company expensed $840,818 and $301,764 respectively for deprecation and
amortization.
During the nine months ended December 31, 1995 the Company completed the
initial phase of a joint venture for the development of the Florida market
and issued 89,428 shares of common stock in exchange for 18.3% of the joint
venture's outstanding shares.
During the nine months ended December 31, 1995 the Company issued 203,000
common shares valued at $452,944 pursuant to a consulting agreement to
develop strategic acquisitions, identify Java Centrale franchise
development opportunities and consult regarding investor relations matters
for the Company. The Company recognized a one-time non recurring expense
of $452,944 as a result of issuance of these shares.
During the nine months ended December 31, 1995 the Company acquired four
Java franchise cafes. In connection with these purchases, the Company
issued 239,567 shares of restricted common stock valued at $436,169,
assumed $133,968 in long term debt and canceled franchisee receivables of
$106,303.
On December 31, 1995 the Company acquired 100% of the outstanding shares of
Paradise Bakery, Inc. In connection with the acquisition, the Company
issued a Note Payable to the seller in the amount of $1,350,000.
The accompanying notes are an integral part of these statements.
5
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JAVA CENTRALE, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Sale of certain assets of Java Centrale, Inc., and Subsidiary for the nine
months ended December 31, 1996.
Cash received $1,556,000
Note receivable received 1,350,884
Preferred stock received 700,000
Liabilities assumed 128,394
Net book value of assets sold (3,532,119)
-----------
Gain (Loss) on sale of assets $203,159
-----------
-----------
The accompanying notes are an integral part of these statements.
6
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JAVA CENTRALE, INC., AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared without audit and do not
include certain notes and certain financial presentations normally required
under generally accepted accounting principles and, therefore, should be
read in conjunction with the Company's financial statements included with
the Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended March 31, 1996. It should be
understood that accounting measurements at interim dates inherently involve
greater reliance on estimates than at year end. The results of operations
for the three months and nine months ended December 31, 1996 are not
necessarily indicative of results that can be expected for the full year.
The December 31, 1996 financial statements included herein are unaudited.
They contain, however, all adjustments which, in the opinion of management
are necessary to present fairly the financial position of the Company at
December 31, 1996 and December 31, 1995, and March 31, 1996; and the
results of its operations for the three months and nine months ended
December 31, 1996 and 1995, and its cash flows for the nine months ended
December 31, 1996 and 1995, respectively.
Certain reclassifications have been made to the 1995 financial statements
to conform to the 1996 presentation.
NOTE 2 - STOCKHOLDERS' EQUITY
a. JOINT VENTURE FORMATION AGREEMENT
During the nine months ended December 31, 1995 the Company completed the
initial phase of the joint venture agreement for the development of the
Florida market and issued 89,428 shares of common stock in exchange for
18.3% of the joint venture's outstanding shares. In February, 1997 the
Company expects to complete the termination of this agreement and these
shares will be canceled.
b. ISSUANCE OF ADDITIONAL COMMON SHARES
During the nine months ended December 31, 1995 the Company completed
certain private placements of restricted common shares resulting in the
issuance 876,000 common shares for net proceeds of $3,561,837.
On September 20, 1996 the Company completed certain private placements of
restricted common shares resulting in the issuance 1,538,462 common shares
for net proceeds of $900,000.
7
<PAGE>
NOTE 2 - STOCKHOLDERS' EQUITY - CONTINUED
c. CONSULTING AND DEVELOPMENT AGREEMENT
During the nine months ended December 31, 1995 the Company issued 203,000
common shares valued at $452,944 or ($.08) per share pursuant to a
consulting agreement to develop strategic acquisitions, identify Java
Centrale franchise opportunities and consult regarding investor relation
matters for the Company.
d. ACQUISITIONS OF JAVA CENTRALE FRANCHISES
During the nine ended December 31, 1995 the Company completed the
acquisition of four Java Centrale franchised cafes. The Company acquired
all of the operating assets (excluding cash) held at the various locations.
In connection with these purchases, the company issued 239,567 shares of
restricted common stock valued at $436,169, assumed $133,968 in long term
debt and canceled franchisee receivables of $106,303. The tangible assets
acquired consist of tenant improvements, equipment and loans payable.
e. CONVERSION OF NOTES PAYABLE
On September 28, 1995 the Company exercised its right to convert a note
payable of $932,342, related to the acquisition of substantially all the
assets of Oh La La, Inc., into common shares at a price of $4.00 per share.
f. WARRANTS EXERCISED
On September 9, 1996 warrants were exercised for 250,000 shares of common
stock for proceeds of $62,500. The warrants were initially granted to
Growth Science Ventures.
g. CONVERSION OF CONVERTIBLE DEBT
During the nine months ended December 31, 1996, holders of the convertible
debt converted $1,900,454 of the notes into 2,940,433 common shares
pursuant to the terms of the notes.
NOTE 3 - SALE OF OH LA LA! DIVISION
In November, 1996, the Company sold all operating locations of its Oh La
La! Division pursuant to the terms of an asset purchase agreement dated
November 22, 1996 between the Company, and Good Food Fast Companies
Inc. ("GFF"). The assets sold consisted of 10 Oh La La! cafes and carts
located in San Francisco, Ca., the leases with respect to each location,
related equipment and improvements for each location, inventory, accounts
receivable and deposits associated with these locations. The consideration
paid for the purchase of its Oh La La! Division consisted of 233,333 (or
$750,000) preferred shares of GFF, $1,250,000 in cash, $750,000 in a
convertible note receivable and the assumption of $48,341 in liabilities.
The preferred shares of GFF were issued with certain conversion rights
into common shares of GFF, covenants, an 8%
8
<PAGE>
NOTE 3 - SALE OF OH LA LA - CONTINUED
cumulative dividend and other restrictions. The convertible note bears
interest at 9% interest per year payable monthly with the principal due
in three years and certain conversion rights into common shares of GFF.
The following unaudited proforma information discloses the effect on
earnings of the sale of its Oh La La! Division. This information
is presented as if the sale had occurred at the beginning of the period
presented.
Unaudited for the
Nine Months Ended December 31,
---------------------------------
1996 1995
----------------- --------------
Revenues $9,394,000 $2,011,000
Net Loss $(2,151,000) $(2,934,000)
Loss per share $(.20) $(.49)
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company began operations on March 5, 1992, and operated as a
development stage enterprise through the end of its fiscal year ended March 31,
1993. As a development stage enterprise, the Company focused its efforts on
financial planning, raising capital, research and development, establishing
sources of supply, developing markets, organizing the corporation, acquiring
assets, and developing its business plan. During this time, the Company
completed the filing of its Uniform Franchise Offering Circulars. The Company
also completed its training facility in Folsom, California, which is now being
used to provide training to franchisees and their key employees in the
operations of franchisee-owned Java Centrale cafes.
As of December 31, 1996, the Company had operating 16 Company-owned and
operated locations, three Company-owned locations under management agreements,
61 franchisee-owned cafes and eight franchised carts, as compared to 22
Company-owned locations and 23 franchisee-owned locations as of December 31,
1995.
The Company entered into agreements with franchisees to open seven cafes
during the quarter ended December 31, 1996, as compared to entering into
agreements with franchisees to open 13 cafes during the quarter ended December
31, 1995. The Company entered into agreements with franchisees to open 15 cafes
during the nine months ended December 31, 1996, as compared to entering into
agreements with franchisees to open 24 cafes during the nine months ended
December 31, 1995. The Company canceled agreements for two locations during the
quarter ended December 31, 1996 as a result of the Company and the franchisees
inability to select an acceptable location, as compared to one cancellation
during the quarter ended December 31, 1995. For the nine months ended
December 31, 1996 the Company canceled agreements for 10 locations as a
result of the Company and the franchisees inability to select an acceptable
location as compared to six cancellations during the nine months ended
December 31, 1995.
The Company opened two franchisee-owned cafes and no company-owned cafes or
carts during the quarter ended December 31, 1996, as compared to opening seven
franchisee-owned cafe and one Company-owned cafe and one Company-owned cart
during the quarter ended December 31, 1995. During the quarter ended December
31, 1996 the Company sold its Oh La La! Division consisting of 10 Company-owned
Oh La La! locations. During the quarter ended December 31, 1995, no
Company-owned cafes were sold. The Company closed one Company-owned cart and
three franchisee-owned cafes during the quarter ended December 31, 1996 as
compared to closing three Company-owned carts and closing no franchisee-owned
cafes or carts during the quarter ended December 31, 1995.
The Company opened one Company-owned cart and opened five franchisee-owned
cafes for the nine months ended December 31, 1996 as compared to opening two
Company-owned cafes and opening eight franchisee-owned cafes during the nine
months ended December 31, 1995. The Company acquired no franchisee-owned cafes
and entered into management agreements with three franchisees to operate
Company-owned cafes during the nine months ended December 31, 1996, as compared
to acquiring four franchisee-owned cafes and entering no management agreements
during the nine months ended December 31, 1995. The Company closed two
Company-owned cafes and one Company-owned cart, sold its Oh La La! Division,
sold three cart locations to a licensee, sold five Company-owned cafes to
franchisees and closed four franchisee-owned cafes during the nine months ended
December 31, 1996, as compared to closing three Company-owned carts, selling no
Company-owned cafes or carts, and closing no franchisee-owned cafe during the
nine months ended December 31, 1995.
10
<PAGE>
On November 14, 1994 the Company entered into a Joint Venture Formation
Agreement with Banyan Capital, Limited Partnership for the development of 50
cafes in the State of Florida over a five-year period, and for rights to other
markets on the Eastern Seaboard. The Joint Venture Formation Agreement and
related transactions was completed in July, 1995 and as of December 31, 1996,
there were three cafes operating under this agreement. In February, 1997 the
Company and its Joint Venture partners informally agreed to terminated the Joint
Venture, as a result of the Company and the Joint Venture's inability to meet
the projected performance standards. Then the formal termination agreement
is entered into it is anticipated that both the Company and Banyan Capital will
exchange ownership and cancel all obligations required under the agreements.
All cash paid will be retained by the Company. The Company will retain a note
receivable of $200,000 from Java Southeast, the Joint Venture entity. The
Company plans to initiate franchising in Florida upon the termination of the
Joint Venture's formal agreement, this is expected to take place on or before
fiscal year end, March 31, 1997.
On March 30, 1995, with bankruptcy court approval, the Company acquired
substantially all the operating assets of Oh-La-La!, Inc. held at the locations
being purchased and certain other operating assets. The tangible assets and
liabilities acquired consist mainly of tenant improvements, equipment, and loans
payable. The purchased locations represented a significant portion of the
Company's revenues and operations during the quarter ended December 31, 1995.
In December 1996, the Company sold all operating locations of their Oh La La
Division pursuant to the terms of an asset purchase agreement dated November 22,
1996 between the Company, and GFF. The assets sold consisted of 10 Oh La La
cafes and carts located in San Francisco, Ca. and certain liabilities assumed by
the buyer.
On December 31, 1995, the Company acquired 100% of the outstanding stock of
Paradise Bakery, Inc. At the time of the acquisition, Paradise Bakery had seven
Company-owned and 44 franchisee-owned bakery/cafes operating in nine states. On
January 1, 1996, the Company acquired through a merger with Founders Venture,
Inc., seven franchisee-owned bakery/cafes operating in Texas. On January 1,
1996, the Company acquired through an asset purchase agreement three
franchisee-owned bakery/cafes operating in Northern California. Immediately
following these three acquisitions, the Company was operating 17 Company-owned
and 34 franchisee-owned bakery/cafes. The Company opened one Company-owned
bakery/cafe in the year ended March 31, 1996. These acquisitions of Paradise
bakery/cafe locations represent a significant portion of the Company's revenues
and operations.
RESULTS OF OPERATIONS
The Company's revenues are currently derived primarily from Company-owned
locations, initial franchise fees, resulting from cafe openings, franchise
royalties, equipment sales, and product overrides on sales to its franchisees.
Franchise fees range from $15,000 to $35,000 per cafe. The Company is entitled
to 4%-6% of the gross receipts from each franchised cafe, and 2%-10% of the
gross receipts from each franchised cart. Product overrides range from 3% to
10% of the total purchase of coffee from the Company's contract roaster.
QUARTER 1996 AS COMPARED TO QUARTER 1995
Total Company revenues for the quarter ended December 31, 1996 totaled
$3,539,000, as compared to $2,129,000 for the quarter ended December 31, 1995,
an increase of $1,410,000, or 66%. This increase resulted from both the
increase in revenues amounting to $2,700,000 from the acquisition of the
Paradise Bakery operations as of December 31, 1995 and the decrease in revenues
amounting to $1,286,000 from the sale of the Oh La La division, on November 22,
1996, discontinued the sale and closure of Company-cafes and the discontinuing
of the equipment sales.
The Company's revenues from Company-owned retail operations increased by
$1,797,000, to
11
<PAGE>
$3,152,000 for the quarter ended December 31, 1996, from $1,355,000 for the
quarter ended December 31, 1995. This increase resulted from a increase of
$2,478,000 in revenues recognized from the acquired operations of the Paradise
Bakery Company-owned locations along with a decrease in revenues totaling
$681,000 from the sell of the Oh La La division and the sale and closure of
Company-cafes.
Revenues from the Company's franchising operations decreased to $20,000 for
the quarter ended December 31, 1996, from $169,500 for the quarter ended
December 31, 1995. This decrease resulted from recognizing a franchise fee of
$15,000 associated with the opening of one franchisee-owned Paradise Bakery and
the recognition of $5,000 in fees associated with the transfer of ownership of
one Java Centrale franchisee-owned cafe as compared to $169,500 associated with
the opening of seven Java Centrale franchisee-owned during the quarter ended
December 31, 1995.
Revenues from the Company's royalties increased $256,000, or 251%, to
$358,000 for the quarter ended December 31, 1996, from $102,000 for the quarter
ended December 31, 1995. This increase resulted primarily from the royalties
associated with the acquisition of the Paradise Bakery franchise operations
amounting to $244,000 and the additional franchisee-owned operating locations
during the 1997 fiscal year as compared to 1996.
Revenues from the Company's equipment and supplies sales decreased
$492,700, or 98%, to $9,300 for the quarter ended December 31, 1996 from
$502,000 for the quarter ended December 31, 1995. This decrease resulted from
discontinuing the sale of equipment directly to the franchisees in May of 1996.
Total expenses for the quarter ended December 31, 1996 were $4,205,000, an
increase of $1,237,000, or 42%, over expenses of $2,968,000 for the quarter
ended December 31, 1995. The principal components of the increase in expenses
resulted from $2,336,000 in expenses associated with operating the acquired
Paradise Bakery locations. Additionally, there was an increase in depreciation
and amortization expenses, other operating costs from the acquisition the
Paradise Bakery operations, and a decrease of $1,258,000 resulting from the
sale of Company-owned locations during the 1997 fiscal year and an overall
decrease in general and administrative, expenses totaling $123,000.
The cost of food and beverage, labor, and operating costs for the Company's
retail operations increased $1,560,000, for the quarter ended December 31, 1996,
to $2,859,000 as compared to $1,299,000 for the quarter ended December 31, 1995.
The increase resulted from $2,205,000 in operating costs associated with the
acquisition of the Paradise Bakery locations and a decrease in operating costs
associated with the sale of three Company-owned Java Centrale cafes and the sell
of the Oh La La locations totaling $645,000.
The Company's cost of equipment decreased by $497,200 in the quarter ended
December 31, 1996, to $5,800, as compared to $503,000 for the quarter ended
December 31, 1995. This decrease results from discontinuing the sale of
equipment directly to the franchisees in May of 1996.
Selling, general, and administrative expenses increased $127,000, or 14%,
during the quarter ended December 31, 1996, to $1,015,000 from $888,000 during
the quarter ended December 31, 1995. This increase results primarily from an
increase in general and administrative expenses associated with the operation
of the Paradise Bakery totaling $251,000. Additionally there was a decrease in
marketing expenses, investor relations expenses, merger expenses, and personnel
costs associated with the Company's administration, in addition to an increase
in legal and accounting expenses resulting in an overall decrease of $124,000.
For the quarter ended December 31, 1996, the Company had an operating loss
of $666,000, a net loss of $648,000, and a loss per share of $0.05, as compared
to an operating loss of $839,000, a net loss of $835,000, and a loss per share
of $0.12 for the quarter ended December 31, 1995. An improved operating loss
is primarily due to a decrease in accounts receivable write-offs, general and
administrative costs and marketing expenses, the elimination of losses from
certain Company-owned locations and the additional income associated with the
Paradise Bakery operations. The improved net loss is a result of a decrease
in the operating loss, an increase in interest expenses, the interest of
income from the gain on sale of assets and those revenues and expenses
described above.
12
<PAGE>
NINE MONTHS ENDED 1996 AS COMPARED TO NINE MONTHS ENDED 1995
Total Company revenues for the nine months ended December 31, 1996 totaled
$12,020,000, as compared to $4,674,000 for the nine months ended December 31,
1995, an increase of $7,346,000 or 157%. The principal component was a result
of both an increased revenues amounting to $8,031,000 from the acquisition of
Paradise Bakery operations as of December 31, 1995 and the termination of
selling equipment to franchisees in May, 1996 totaling $546,000. Additionally
revenues decreased from the sell of the Oh La La division, on November 22, 1996,
and the sale and closure of Company-owned cafes during the nine months ended
December 31, 1996.
The Company's revenues from Company-owned retail operations increased by
$7,154,000, to $10,708,000 for the nine months ended December 31, 1996, from
$3,554,000 for the nine months ended December 31, 1995. This increase resulted
primarily from $7,316,000 in revenues recognized from the operations of the
Paradise Bakery Company-owned locations and a decrease of $162,000 from the sale
of the Oh La La division and the sale and closure of Company-cafes.
Revenues from the Company's royalties increased $740,000, or 319%, to
$972,000 for the nine months ended December 31, 1996, from $232,000 for the nine
months ended December 31, 1995. This increase resulted primarily from the
royalties associated with the acquisition of the Paradise Bakery franchise
operations amounting to $644,000 and $96,000 resulting from the opening of 10
franchisee-owned locations during the 1997 fiscal year as compared to 1996
fiscal year.
Revenues from the Company's franchising operations decreased $32,000 to
$223,000 for the nine months ended December 31, 1996, as compared to $255,000
for the nine months ended December 31, 1995, this decrease results from
franchise fees of $40,000 recognized from the sale of two Company-owned Paradise
Bakeries to a franchisee and $30,000 in recognized fees associated with the
opening two new Paradise Bakery franchisee-owned cafes, $40,000 in franchise
fees associated with the sale of three Company-owned Java Centrale cafes to
franchisees and $43,000 fees associated with the opening of three new Java
Centrale franchisee-owned cafes and forfeited franchise fees of $70,000 as
compared to recognizing franchise fees from the opening of eight
franchisee-owned cafes of $200,000 and forfeited franchise fees amounting to
$54,500 during the nine months ended December 31, 1995.
Revenues from the Company's equipment and supplies sales decreased by
$516,000 or 82%, to $117,000 for the nine months ended December 31, 1996 as
compared to $633,000 for the nine months ended December 31, 1995. This decrease
resulted primarily from the Company discontinuing the sale of equipment to
franchisees in May of 1996.
Total expenses for the nine months ended December 31, 1996 were
$14,239,000, an increase of $6,676,000, or 88%, over expenses of $7,563,000 for
the nine months ended December 31, 1995. The principal component of the
increase in expenses resulted from $6,936,000 in expenses associated with
operating the acquired Paradise Bakery locations. Additionally, there was an
increase in depreciation and amortization and other operating costs from the
addition of Paradise Bakery. There was a decrease in the operations related to
both the sale of the Oh La La division and the sale and closure of Company-cafes
totaling $556,000 and a decrease in general and administrative expenses totaling
$776,000.
The cost of food and beverage, labor, and operating costs for the Company's
retail operations
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increased $6,538,000, for the nine months ended December 31, 1996, to $9,820,000
as compared to $3,282,000 for the nine months ended December 31, 1995. The
increase resulted primarily from $6,528,000 in operating costs associated with
the acquisition of the Paradise Bakery locations.
The Company's cost of equipment decreased by $499,000 in the nine months
ended December 31, 1996, to $108,000, as compared to $607,000 for the nine
months ended December 31, 1995. This decrease resulted primarily from
discontinuing the sale of equipment directly to the franchisees in May of 1996.
Selling, general, and administrative expenses increased $56,000, or 2%,
during the nine months ended December 31, 1996, to $3,127,000 from $3,071,000
during the nine months ended December 31, 1995. This increase primarily
results from an increased general and administrative expenses associated with
the acquisition of Paradise Bakery operations of $832,000. Additionally there
was a decrease in marketing expenses, investor relations expenses, merger
expenses, consulting fees and other costs associated with the Java Centrale
operations, along with an increase in legal and accounting expenses resulting
an overall total decrease of $776,000.
For the nine months ended December 31, 1996, the Company had an operating
loss of $2,219,000, a net loss of $2,159,000, and a loss per share of $0.20, as
compared to an operating loss of $2,890,000, a net loss of $2,831,000, and a
loss per share of $0.47 for the nine months ended December 31, 1995. An
improved operating loss is primarily due to lower accounts receivable
write-offs, general and administrative expenses, lower consulting fees and
marketing expenses, elimination of losses from certain Company-owned
locations, higher legal and accounting expenses and the income associated
with the Paradise Bakery operations. The improved net loss is a result of a
decrease in the operating loss, an increase in interest expenses, an increase
of income from the gain on sale of assets and those revenues and expenses
described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's initial capitalization was obtained through the issuance of
2,500,000 shares of no par common stock for $10,000 on March 5, 1992. In
addition, the Company issued 2,950,000 shares of Series A cumulative preferred
stock, in exchange for 2,950,000 shares of no par cumulative preferred stock,
which were subscribed for on March 5, 1992 for proceeds of $590,000, on
March 12, 1993. On March 30, 1993, the Company sold 5,000,000 shares of no par
value redeemable Series B cumulative preferred stock for $1,000,000. The
proceeds from the issuance of all such stock were used for capital acquisitions
and operating costs of the Company during its development stage. On
May 19, 1994, the Company raised $7,288,000 in net proceeds from an initial
public offering of 1,500,000 shares of common stock. Of the 4,291,820 shares
outstanding after the offering, 855,300 were placed in escrow and are subject to
an Escrow Agreement which provides for the release of such shares on or before
March 31, 1999, with earlier release based upon the financial performance of the
Company.
The Company used a portion of the proceeds from the initial public offering
to repay long term debt, purchase equipment and furniture, support the operating
losses in developing the Company's operating system, and pay $500,000 as part of
the purchase price to acquire the operating assets of Oh-La-La!, Inc.
On July 15, 1994, the Company issued a 25% stock split on its Common Stock
to shareholders of record on June 30, 1994. Prior to the issuance of the
dividend, employees and officers of the Company holding securities, including
warrants and options, waived their rights to receive the stock dividend and also
waived the impact such stock dividend would have on any options or warrants held
by the security holders, including, but not limited to, any anti-dilution
provisions relating to such options and warrants.
In the 1996 fiscal year the Company issued 1,604,692 common shares for
$3,540,722 in net proceeds in a series of private placements. The Company also
issued convertible debt in three separate private transactions totaling
$3,500,000. As of December 31, 1996, $1,750,454 of the convertible debt has
been
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converted into 2,580,194 shares of the Company's common stock. The Company
during the nine months ended December 31, 1996 issued 1,538,462 common shares
for $900,000 in net proceeds in a private placement and issued 250,000 common
shares for proceeds of $62,500 as a result of certain warrants being exercised.
The Company used $5,375,000 of the cash raised through the private
transactions to acquire 100% of the common stock in Paradise Bakery, Inc., on
December 31, 1995. Additionally, as part of the acquisition of Paradise Bakery,
Inc., the Company issued notes to the seller in the amount of $1,350,000. The
Company also issued notes in the amount of $46,071 to the sellers and assumed
$97,950 in debt obligation associated with the asset purchase of the three
Paradise Bakery locations. The Company assumed bank debt in the amount of
$1,085,000 and $24,535 in lease obligations associated with the merger of
Founders Venture, Inc., into Paradise Bakery, Inc.
As part of the purchase price for the assets of Oh La La! acquired by the
Company on March 31, 1995, the Company issued to Oh La La!, Inc. a note payable
of $745,874, and assumed liabilities for tenant improvement loans related to the
properties acquired of $113,306. In January of 1996, the Company converted a
note payable of $745,874 into 234,000 shares of common stock pursuant to the
terms of the note associated with the acquisition of Oh La La!.
In November, 1996, the Company sold all operating locations of its Oh La
La! Division pursuant to the terms of an asset purchase agreement dated
November 22, 1996 between the Company, and Good Food Fast Companies Inc.
("GFF"). The assets sold consisted of 10 Oh La La! cafes and carts located in
San Francisco, Ca., the leases with respect to each location, related equipment
and improvements for each location, inventory, accounts receivable and deposits
associated with these locations. The consideration paid for the purchase of
its Oh La La! Division consisted of 233,333 (or $750,000) preferred shares of
GFF, $1,250,000 in cash, $750,000 in a convertible note receivable and the
assumption of $48,341 in liabilities. The preferred shares of GFF were issued
with certain conversion rights into common shares of GFF, covenants, an 8%
cumulative dividend and other restrictions. The convertible note bears interest
at 9% interest per year payable monthly with the principal due in three years
and certain conversion rights into common shares of GFF.
Additionally during the nine months ended December 31, 1996, the Company
sold 10 operating locations for proceeds of $356,000 in cash, $601,000 in notes
receivables and liabilities of $77,000 assumed by buyer.
The Company incurred a net loss of $2,044,974 and used net cash of
$2,759,000 in operating activities for the nine months ended December 31, 1996.
The Company has developed a specific operating and financing plan to meet
the ongoing liquidity needs of the Company's operations both for the year ended
March 31, 1997 and thereafter. During the nine months ended December 31,
1996, the Company reduced had administrative salaries, certain employee
benefit costs and marketing expenses. The Company has sold 20 Company-owned
cafes and carts for proceeds of $1,556,000 in cash and is actively pursuing
the sale of additional assets. The Company intends to operate Company-owned
locations. Additionally, the Company had completed the sale of common stock
for proceeds of $900,000 and is actively pursuing the placement of additional
equity and/or debt financing. In July, 1996, the Company had obtained three
separate lines of credit amounting to $925,000, of which senior management
has committed to $175,000. As of December 31, 1996, the Company had
$575,000 in credit available under two separate lines of credit and no
balance outstanding. During the nine months ended December 31, 1996 the
Company borrowed $750,000 in short term debt and received $779,000 in long
term debt and paid the short term notes of $350,000 and $330,000 in notes
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payable due under the terms of the merger with Founder Venture, Inc. The
Company was also required to retire $400,000 of short term debt from the
proceeds of the sale of its Oh La La! Division.
In January, 1997 the Company re-negotiated the terms of a line of credit
and borrowed the available amount of $300,000 under a short term note due in
May, 1997. The stock of the subsidiary Paradise Bakery is pledged as the
collateral for this note. The Company as of February 1, 1997 had available a
line of credit from the senior management in the amount of $175,000. This line
secure all the Company's assets. In addition to the operating plan, the Company
will benefit from 12 months of Paradise Bakery operating income during the year
ended March 31, 1997, as compared to three months in the year ended March 31,
1996.
Management believes that this plan, which is currently being implemented,
is sufficient to meet the Company's liquidity needs for the year ended March 31,
1997 and thereafter.
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PART II
ITEM 1. LEGAL PROCEEDINGS
On December 11, 1995, Coffee Centrale, Inc., a franchisee of the Company in
Dallas, Texas, and its owners Diana and Iosif Etinger (together, the
"plaintiffs") sued the Company in the 44th Judicial District Court of Dallas
County, Texas. The Plaintiffs allege that the Company committed fraud and
violated the Texas Business Opportunity Act by knowingly misrepresenting
material facts concerning the Plaintiff's franchisee and committing other
misleading or deceptive acts, breached its fiduciary duty in connection with the
Plaintiffs' entry into a lease agreement for the premises committed
discriminatory pricing by paying a lower price and/or receiving rebates for
brand name products not available to the Plaintiffs, causing the Plaintiffs to
receive a different price than similarly situated Company franchisees for a like
kind or quality of goods. Relief sought in this suit includes unspecified
actual damages and punitive damages in excess of $2,000,000. The Company, which
has denied the allegations, has filed a related action against Coffee Centrale,
Inc. in the Federal District Court in Sacramento, California, alleging breach of
the franchise agreement. Although the proceedings are still at an early stage
and no depositions have yet been taken in the Texas case and therefore no
prediction may be made about the potential outcome of this litigation, the
Company believes that the Plaintiff's claims are without substantial merit and
it intends to vigorously defend itself against this lawsuit.
ITEM 2. CHANGES IN SECURITIES
NONE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's October 17, 1996, annual shareholders meeting, three
directors were reelected and one new director was elected, a proposal to
amend the Company's Articles of Incorporation failed and Grant Thornton,
L.L.P. was ratified as the Company's independent accountants. The vote was
as follows:
Issue For Against Abstain
----- --- ------- -------
1. Election of Directors
a. Richard D. Shannon 8,998,392 - 86,670
b. Gary C. Nelson 8,997,392 - 86,670
c. Kevin Baker 8,997,392 - 86,670
d. Lyle Edwards 8,997,392 - 87,770
2. Amendment to the Company's
Articles of Incorporation - Failed 4,787,757 301,893 20,000
3. Accountant Ratification - Passed 8,981,392 61,295 13,025
ITEM 5. OTHER INFORMATION
NONE.
ITEM 6. EXHIBITS; REPORTS ON FORM 8-K
(a) EXHIBITS
The Company is filing herewith the Exhibits listed on Schedule I attached
hereto.
(b) REPORTS ON FORM 8-K
During the quarter ended December 31, 1996 the Company filed a Form 8-K in
regards to the sale of the Company's Oh La La! Division to Good Food Fast
Companies, Inc.
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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.
JAVA CENTRALE, INC.
(Registrant)
Date: February 13, 1997
By: /s/
------------------------------------------
Gary C. Nelson
President and Chief Executive Officer
By: /s/
------------------------------------------
Steven J. Orlando
Vice President and Chief Financial Officer
(Principal Financial and
Accounting Officer)
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INDEX TO EXHIBITS
Exhibits marked with an asterisk (*) represent management contracts or
compensatory plans or arrangements.
EXHIBIT
NUMBER DESCRIPTION
-------- ------------
2.3 Purchase Agreement dated November 22, 1996, between
Java Centrale, Inc. and Good Food Fast Companies, Inc.
(filed as Exhibit 2.3 to the Registrant's Registration
Statement of Form 8-K dated December 16, 1996.
10.23 Finance Agreement effective December 1, 1996 between
the Company and Vision Capital Corporation.
10.24 Loan Agreement effective dated January 31, 1997 between
the Company and Alta Petroleum.
11 Statement re: Computation of Per Share Earnings (Loss)
27 Financial Data Schedule
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Exhibit 10.23
VISION CAPITAL CORPORATION
MASTER EQUIPMENT FINANCE AGREEMENT # 430022
MASTER EQUIPMENT FINANCE AGREEMENT dated DECEMBER 1, 1996, by and between
VISION CAPITAL CORPORATION ("Secured Party"), having its principal office and
place of business at 16935 West Bernardo Drive, Suite 231, San Diego, CA 92127,
and PARADISE BAKERY, INC. ("Debtor"), having its principal office and place of
business at 151 Kalmus Dr., Suite E-200, Costa Mesa CA, 92626.
IN CONSIDERATION of the mutual agreement set forth hereinafter and the payment
of installment debt as provided for herein, the parties hereby agree as follows:
1. AGREEMENT; EQUIPMENT; SECURITY INTEREST: This contract constitutes a Master
Equipment Finance Agreement ("Agreement") to include one or more separate
Schedules, and each such Schedule shall incorporate by reference any and all
conditions and provisions as set forth herein. In the event that any terms
and/or conditions of a Schedule conflict with the Agreement, the terms and/or
conditions of such Schedule shall then prevail relative to such Schedule. Each
Schedule shall be substantially in the same form as Exhibit "A" annexed hereto
and made a part hereof, and shall contain additional terms and conditions as
Secured Party and Debtor shall mutually agree upon therein. Each Schedule shall
be enforceable according to the terms and conditions of this Agreement as
amended therein. The terms and conditions of this Agreement cover each item of
machinery, equipment and other personal property (herein the "Equipment")
described in each Schedule now or hereafter executed between Secured Party and
Debtor. Debtor hereby grants Secured Party a security interest in and to all
Debtor's right, title and interest in and to the Equipment under the Uniform
Commercial Code as of Debtor's execution of this Agreement, or, if Debtor has no
interest in the Equipment at that time, as of such subsequent time as Debtor
acquires an interest in the Equipment. Such security interest is granted by
Debtor to secure performance by Debtor of Debtor's obligations to Secured Party
hereunder. Debtor will ensure that such security interest will be and remain a
sole and valid first lien security interest subject only to the lien of current
taxes and assessments not in default but only if such taxes are entitled to
priority as a matter of law.
2. DEBTOR'S OBLIGATIONS. The obligations of Debtor under this Agreement
respecting the Equipment, except the obligation to pay installment payments with
respect thereto which will commence as set forth in paragraph 3 below, shall
commence upon the grant to Secured Party of a security interest in the
Equipment. Debtor's obligations hereunder with respect to the Equipment and
Secured Party's security interest therein will continue until payment of all
amounts due and performance of all terms and conditions required hereunder with
respect thereto; provided, however, that if this Agreement is then in default,
said obligations and security interest will continue during the continuance of
said default. Upon termination of Secured Party's security interest in the
Equipment, Secured Party will execute such release of interest with respect
thereto as Debtor reasonably requests.
3. INSTALLMENT PAYMENTS AND OTHER PAYMENTS. Debtor will repay advances Secured
Party makes on account of the Equipment in installment payments in the amounts
and at the times set forth in the Schedules, whether or not Secured Party has
rendered an invoice therefor, at the office of Secured Party set forth herein,
or to such person and/or at such other place as Secured Party may from time to
time designate with notice to Debtor. Any other amounts required to be paid
Secured Party by Debtor hereunder are due upon Debtor's receipt of Secured
Party's invoice therefor and will be payable as directed in the invoice.
Payments under this Agreement may be applied to Debtor's then accrued
obligations to Secured Party in such order as Secured Party may choose.
4. NET AGREEMENT; NO OFFSET; SURVIVAL. This Agreement is a net agreement, and
Debtor will not be entitled to any abatement of installment payments or other
payments due hereunder or any reduction thereof under any circumstances or for
any reason whatsoever. Debtor hereby waives any and all existing and future
claims, as offsets, against any installment payments or other payments due
hereunder and agrees to pay the installment payments and other amounts due
hereunder as and when due regardless of any offset or claim which may be
asserted by Debtor or on its behalf. The obligations and liabilities of Debtor
hereunder will survive the termination of this Agreement.
5. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
DEBTOR ACKNOWLEDGES THAT THE EQUIPMENT HAS BEEN OR WILL BE SELECTED AND ACQUIRED
SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED PARTY IS NOT AND WILL NOT
BE THE VENDOR OF ANY EQUIPMENT AND THAT SECURED PARTY HAS NOT MADE AND WILL NOT
MAKE ANY AGREEMENT, REPRESENTATION OR WARRANTY WITH RESPECT TO THE
MERCHANTABILITY, CONDITION, QUALIFICATION OR FITNESS FOR A PARTICULAR PURPOSE OR
VALUE OF THE EQUIPMENT OR ANY OTHER MATTER WITH RESPECT THERETO IN ANY RESPECT
WHATSOEVER.
6. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURER OR OTHER
SUPPLIER OF THE EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY IN CONNECTION WITH
THIS AGREEMENT AND ANY SCHEDULE HERETO IS AN AGENT OF SECURED PARTY, AND SECURED
PARTY SHALL NOT BE BOUND BY ANY REPRESENTATION OF ANY SUCH PARTY.
7. ACCEPTANCE. Execution by Debtor and Secured Party of a Schedule covering
the Equipment will conclusively establish that such Equipment has been included
under and will be subject to all the terms and conditions of this Agreement. If
Debtor has not furnished Secured Party with an executed Schedule by the earlier
of fourteen (14) days after receipt of such Schedule from Secured Party or by
the expiration of a commitment period as set forth in any applicable Equipment
Finance Commitment letter issued to Debtor by Secured Party relative to such
Schedule, Secured Party may then terminate its obligation to advance funds as to
the applicable Equipment.
8. LOCATION; INSPECTION; USE. Debtor will keep, or in the case of motor
vehicles, permanently garage and not remove from the United States, as
appropriate, the Equipment in Debtor's possession and control at the Equipment
Location designated in the applicable Schedule, or at such other location to
which such Equipment may have been moved with the prior written consent of
Secured Party. Whenever requested by Secured Party, Debtor will advise Secured
Party as to the exact location of the Equipment. Secured Party will have the
right to inspect the Equipment and observe its use during normal business hours
and to enter into and upon the premises where the Equipment may be located for
such purpose. The Equipment will at all times be used solely for commercial or
business purposes and operated in a careful and proper manner and in compliance
with all applicable laws, ordinances, rules and regulations, all conditions and
requirements of the policy or policies of insurance required to be carried by
Debtor under the terms of this Agreement and all manufacturer's instructions and
warranty requirements. Any modifications or additions to the Equipment required
by any such governmental edict or insurance policy will be promptly made by
Debtor.
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9. ALTERATIONS; SECURITY INTEREST COVERAGE. Without the prior written consent
of Secured Party, Debtor will not make any alterations, additions or
improvements to the Equipment which detract from its economic value or
functional utility, except as may be required pursuant to paragraph 8 above.
Secured Party's security interest in the Equipment will include all
modifications and additions thereto and replacements and substitutions therefor,
in whole or in part. Such reference to replacements and substitutions will not
grant Debtor greater rights to replace or substitute than are provided in
paragraph 11 below or as may be allowed upon the prior written consent of
Secured Party.
10. MAINTENANCE. Debtor will maintain the Equipment in good repair, condition
and working order. Debtor will also cause the Equipment for which a service
contract is generally available to be covered by such a contract which provides
coverages typical as to property of the type involved and is issued by a
competent servicing entity.
11. LOSS AND DAMAGE; CASUALTY VALUE. In the event of the loss of, theft of,
requisition of, damage to or destruction of the Equipment ("Casualty
Occurrence"), Debtor will give Secured Party prompt notice thereof and will
thereafter place such Equipment in good repair, condition and working order;
provided, however, that if such Equipment is determined by Secured Party to be
lost, stolen, destroyed or damaged beyond repair, is requisitioned or suffers a
constructive total loss as defined in any applicable insurance policy carried by
Debtor in accordance with paragraph 14 below, Debtor, at Secured Party's option,
will (a) replace such Equipment with like equipment in good repair, condition
and working order whereupon such replacement equipment will be deemed the
Equipment for all purposes hereof or, (b) pay Secured Party the "Casualty Value"
of such Equipment which value will equal the total of (i) all installment
payments and other amounts due from Debtor to Secured Party at the time of such
payment and (ii) each future installment payment due with respect to such
Equipment, with each such payment discounted to its present value at six percent
(6.0%) per annum simple interest from the date due to the date of such payment.
The discounting contemplated in this paragraph will be in accordance with the
FINANCIAL COMPOUND INTEREST AND ANNUITY TABLES, SIXTH EDITION, published by the
Financial Publishing Company. Upon such replacement or payment, as appropriate,
this Agreement and Secured Party's security interest will terminate with, and
only with, respect to the Equipment so replaced or as to which such payment is
made in accordance with paragraph 2 above.
12. TITLING; REGISTRATION. Any Equipment subject to title registration laws
will at all times be titled and/or registered by Debtor as Secured Party's agent
and attorney-in-fact with full power and authority to register (but without
power to affect title to) such Equipment in such manner and in such jurisdiction
or jurisdictions as Secured Party directs. Debtor will promptly notify Secured
Party of any necessary or advisable retitling and/or re-registration of such
Equipment in a jurisdiction other than one in which such Equipment is then
titled and/or registered. Any and all documents of title will be furnished or
caused to be furnished to Secured Party by Debtor within sixty (60) days of the
date any titling or registering or retitling or re-registering, as appropriate,
as directed by Secured Party.
13. TAXES. Debtor will make all filings as to and pay when due all personal
property and other ad valorem taxes and all other taxes, fees, charges and
assessments based on the ownership or use of the Equipment and will pay as
directed by Secured Party or reimburse Secured Party for all other taxes,
including, but not limited to, gross receipts taxes (exclusive of federal and
state taxes based on Secured Party's net income, unless such net income taxes
are in substitution for or relieve Debtor from any taxes which Debtor would
otherwise be obligated to pay under the terms of this paragraph 13), fees,
charges and assessments whatsoever, however designated, whether based on the
installment payments or other amounts due hereunder, levied, assessed or imposed
upon the Equipment or otherwise related hereto or to the Equipment; now or
hereafter levied, assessed or imposed under the authority of a federal, state or
local taxing jurisdiction, regardless of when and by whom payable. Filings with
respect to such other amounts will, at Secured Party's option, be made by
Secured Party or by Debtor as directed by Secured Party.
14. INSURANCE. Debtor will procure and continuously maintain all risk
insurance against loss of or damage to the Equipment from any cause whatsoever
for not less than the full replacement value thereof naming Secured Party and/or
its assigns as Loss Payee. Such insurance must be in a form and with companies
approved by Secured Party, must provide at least thirty (30) days advance
written notice to Secured Party of cancellation, change or modification in any
term, condition or amount of protection provided therein, must provide full
breach of warranty protection and must provide that the coverage is "primary
coverage" (does not require contribution from any other applicable coverage).
Debtor will provide Secured Party with an original policy or certificate
evidencing such insurance. In the event of an assignment of this agreement of
which Debtor has notice, Debtor will cause such insurance to provide the same
protection to the assignee as its interests may appear. The proceeds of such
insurance, at the option of Secured Party or such assignee, as appropriate, will
be applied toward (a) repair or replacement of the appropriate Equipment, (b)
payment of the Casualty Value thereof or (c) payment of, or as provision for,
satisfaction of any other accrued obligations of Debtor hereunder. Debtor
hereby appoints Secured Party as Debtor's attorney-in fact with full power and
authority to do all things, including, but not limited to, making claims,
receiving payments and endorsing documents, checks or drafts, necessary to
secure payments due under any policy contemplated hereby on account of a
Casualty Occurrence. Debtor and Secured Party contemplate that the
jurisdictions where the Equipment will be located will not impose any liability
upon Secured Party for personal injury and/or property damage resulting out of
the possession, use, operation or condition of the Equipment. Debtor agrees
that if Debtor fails to procure, maintain and pay for such insurance, Secured
Party shall have the right, but not the obligation, to obtain such insurance on
behalf of and at the expense of Debtor. In the event Secured Party does obtain
such insurance, Debtor agrees to pay all costs thereof immediately upon demand.
15. SECURED PARTY'S PAYMENT. If Debtor fails to pay any amounts due hereunder
or to perform any of its other obligations under this Agreement, Secured Party
may, at its option, but without any obligation to do so, pay such amounts or
perform such obligations, and Debtor will reimburse Secured Party the amount of
such payment or cost of such performance immediately upon demand.
16. INDEMNITY. Debtor does hereby assume liability for and does agree to
indemnify, defend, protect, save and keep harmless Secured Party from and
against any and all liabilities, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including court costs and legal
expenses, of whatever kind and nature, imposed on, incurred by or asserted
against Secured Party (whether or not also indemnified against by any other
person) in any way relating to or arising out of this Agreement or the
manufacture, financing, ownership, delivery, possession, use, operation,
condition or disposition of the Equipment by Secured Party or Debtor, including,
without limitation, any claim alleging latent and other defects, whether or not
discoverable by Secured Party or Debtor, and any other claim arising out of
strict liability in tort, whether or not in either instance relating to an event
occurring while Debtor remains obligated under this Agreement, and any claim for
patent, trademark or copyright infringement. Debtor agrees to give Secured
Party and Secured Party agrees to give Debtor notice of any claim or liability
hereby indemnified against promptly following learning thereof.
17. DEFAULT. Any of the following will constitute an event of default
hereunder: (a) Debtor's failure to pay when due any installment payment or
other amount due hereunder, which failure continues for ten (10) days after the
due date thereof; (b) Debtor's default in performing any other obligation, term
or condition of this Agreement or default under any further agreement providing
security for the performance by Debtor of its obligations hereunder, provided
such default has continued for more than twenty (20) days, except as provided in
(c) and (d) hereinbelow, or, without limiting the generality of subparagraph (1)
hereinbelow, default under any lease or any mortgage or other instrument
contemplating the provision of financial accommodation applicable to the real
estate where any Equipment is located; (c) any writ or order of attachment or
execution or other legal process being levied on or charged against any
Equipment and not being released or satisfied within ten (10) days; (d) Debtor's
failure to comply with its obligations under paragraph 14 above or any transfer
by Debtor in violation of paragraph 21 below; (e) a non-appealable judgment for
the payment of money in excess of $100,000 being rendered by a court of record
against Debtor which Debtor does not discharge or make provision for discharge
in accordance with the terms thereof within ninety (90) days from the date of
entry thereof; (f) death or judicial declaration of incompetency of Debtor, if
an individual; (g) the filing by Debtor of a petition under the Bankruptcy Act
or any amendment thereto or under any other insolvency law or law providing for
the relief of debtors, including, without limitation, a petition for
reorganization, arrangement or extension, or the commission by Debtor of an act
of bankruptcy; (h) the filing against Debtor of any such petition not dismissed
or permanently stayed within thirty (30) days of the filing thereof; (i) the
voluntary or involuntary making of an assignment of substantial portion of its
assets by Debtor for the benefit of creditors, appointment of a receiver or
trustee for Debtor or for any of Debtor's assets, institution by or against
Debtor or any other type of insolvency proceeding (under the Bankruptcy Act or
otherwise) or of any formal or informal proceeding for dissolution, liquidation,
settlement of claims
2
<PAGE>
against or winding up of the affairs of Debtor, Debtor's cessation of business
activities or the making by Debtor of a transfer of all or a material portion of
Debtor's assets or inventory not in the ordinary course of business; (j) the
occurrence of any event described in parts (e), (f), (g), (h) or (i) hereinabove
with respect to any guarantor or other party liable for payment or performance
of this Agreement; (k) any certificate, statement, representation, warranty or
audit heretofore or hereafter furnished with respect hereto by or on behalf of
Debtor or any guarantor or other party liable for payment or performance of this
Agreement proving to have been false in any material respect at the time as of
which the facts therein set forth were stated or certified or having omitted any
substantial contingent or unliquidated liability or claim against Debtor or any
such guarantor or other party; (l) breach by Debtor of any lease or other
agreement providing financial accommodation under which Debtor or its property
is bound or (m) a transfer of effective control of Debtor, if an organization.
18. REMEDIES. Upon the occurrence of an event of default, Secured Party will
have the rights, options, duties and remedies of a secured party, and Debtor
will have the rights and duties of a debtor, under the Uniform Commercial Code
(regardless of whether such Code or a law similar thereto has been enacted in a
jurisdiction wherein the rights or remedies are asserted) and, without limiting
the foregoing, Secured Party may exercise any one or more of the following
remedies; (a) declare the Casualty Value or such lesser amount as may be set by
law immediately due and payable with respect to the Equipment without notice or
demand to Debtor; (b) sue from time to time for and recover all installment
payments and other payments then accrued and which accrue during the pendency of
such action with respect to any or all of the Equipment; (c) take possession of
and, if deemed appropriate, render unusable any or all of the Equipment, without
demand or notice, wherever same may be located, without any court order or other
process of law and without liability for any damages occasioned by such taking
of possession and remove, keep and store the same or use and operate or lease
the same until sold; (d) require Debtor to assemble the Equipment at the
Equipment Location therefor, such location to which such Equipment may have been
moved with the written consent of Secured Party or such other location in
reasonable proximity to either of the foregoing as Secured Party designates; (e)
upon ten days notice to Debtor or such other notice as may be required by law,
sell or otherwise dispose of any of the Equipment, whether or not in Secured
Party's possession, in a commercially reasonable manner at public or private
sale at any place deemed appropriate and apply the net proceeds of such sale,
after deducting all costs of such sale, including, but not limited to, costs of
transportation, repossession, storage, refurbishing, advertising and broker's
fees, to the obligations of Debtor to Secured Party hereunder or otherwise, with
Debtor remaining liable for any deficiency and with any excess being returned to
Debtor; (f) upon thirty (30) days notice to Debtor, retain any repossessed or
assembled Equipment as Secured Party's own property in full satisfaction of
Debtor's liability for the installment payments due hereunder with respect
thereto, provided that Debtor will have the right to redeem such Equipment by
payment in full of its obligations to Secured Party hereunder or otherwise or to
require Secured Party to sell or otherwise dispose of such Equipment in the
manner set forth in subparagraph (e) hereinabove upon notice to Secured Party
within such thirty (30) day period or (g) utilize any other remedy available to
Secured Party under the Uniform Commercial Code or similar provision of law or
otherwise at law or in equity. No right or remedy conferred herein is exclusive
of any other right or remedy conferred herein or by law; but all such remedies
are cumulative of every other right or remedy conferred hereunder or at law or
in equity, by statute or otherwise, and may be exercised concurrently or
separately from time to time. Any sale contemplated by subparagraph (e) of this
paragraph 18 may be adjourned from time to time by announcement at the time and
place appointed for such sale, or for any such adjourned sale, without further
published notice, and Secured Party may bid and become the purchaser at any such
sale. Any sale of the Equipment, whether under said subparagraph or by virtue
of judicial proceedings, will operate to divest all right, title, interest,
claim and demand whatsoever, either at law or in equity, of Debtor in and to
such Equipment and will be a perpetual bar to any claim against such Equipment,
both at law and in equity, against Debtor and all persons claiming by, through
or under Debtor.
19. DISCONTINUANCE OF REMEDIES. If Secured Party proceeds to enforce any right
under this Agreement and such proceedings are discontinued or abandoned for any
reason or are determined adversely, then and in every such case Debtor and
Secured Party will be restored to their former positions and rights hereunder.
20. SECURED PARTY'S EXPENSES. Debtor will pay Secured Party all costs and
expenses, including reasonable attorneys' fees and court costs and sales costs
not offset against sales proceeds under paragraph 18 above, incurred by Secured
Party in exercising any of its rights or remedies hereunder or enforcing any of
the terms, conditions or provisions hereof. This obligation includes the
payment or reimbursement of all such amounts whether an action is ultimately
filed and whether an action filed is ultimately dismissed.
21. ASSIGNMENT. Without the prior written consent of Secured Party, Debtor
will not sell, lease, pledge or hypothecate, except as provided in this
Agreement, any Equipment or any interest therein or assign, transfer, pledge or
hypothecate this Agreement or any interest in this Agreement or permit the
Equipment to be subject to any lien, charge or encumbrance of any nature except
the security interest of Secured Party contemplated hereby. Debtor's interest
herein is not assignable and will not be assigned or transferred by operation of
law. Consent to any of the foregoing prohibited acts applies only in the given
instance and is not a consent to any subsequent like act by Debtor or any other
person. All rights of Secured Party hereunder may be assigned, pledged,
mortgaged, transferred or otherwise disposed of, either in whole or in part,
without notice to Debtor but always, however, subject to the rights of Debtor
under this Agreement. If Debtor is given notice of any such assignment, Debtor
will acknowledge receipt thereof in writing. In the event Secured Party assigns
this Agreement or the installment payments due or to become due hereunder or any
other interest herein, whether as security for any of its indebtedness or
otherwise, no breach or default by Secured Party hereunder or pursuant to any
other agreement between Secured Party and Debtor, should there be one, will
excuse performance by Debtor of any provision hereof, it being understood that
in the event of such default or breach by Secured Party that Debtor will pursue
any rights on account thereof solely against Secured Party. No such assignee,
unless such assignee agrees in writing, will be obligated to perform any duty,
covenant or condition required to be performed by Secured Party in connection
with this Agreement. Subject always to the foregoing, this Agreement inures to
the benefit of, and is binding upon, the heirs, legatees, personal
representatives, successors and assigns of the parties hereto.
22. MARKINGS; PERSONAL PROPERTY. If Secured Party supplies Debtor with labels,
plates, decals or other markings stating that Secured Party has an interest in
the Equipment, Debtor will affix and keep the same prominently displayed on the
Equipment or will otherwise mark the Equipment or its then location or
locations, as appropriate, at Secured Party's request to indicate Secured
Party's security interest in the Equipment. The Equipment is, and at all times
will remain, personal property, notwithstanding that the Equipment may now be,
or hereafter become, in any manner affixed or attached to, or embedded in, or
permanently resting upon real property or any improvement thereof or attached in
any manner to what is permanent as by means of cement, plaster, nails, bolts,
screws or otherwise. If requested by Secured Party, Debtor will obtain and
deliver to Secured Party waivers of interest or liens in recordable form
satisfactory to Secured Party from all persons claiming any interest in the real
property on which any Equipment is or is to be installed or located.
23. LATE CHARGES. If Debtor fails to pay any installment payment or any other
sum to be paid by Debtor to Secured Party within ten (10) days of when due,
Debtor will pay to Secured Party (a) an amount calculated at the rate of five
cents ($.05) per one dollar ($1.00) of each such delayed payment as compensation
for Secured Party's internal operating expenses arising as a result of such
failure, (b) any expenses incurred by Secured Party's relevant to the collection
thereof, and (c) interest on such unpaid installment or other amounts due
Secured Party, including taxes and late charges, at the rate of one and one-half
percent (1.5%) per month, or at such greater or lesser contract rate as may be
fixed by law, computed from the date due to the date paid.
24. NON-WAIVER. No covenant or condition of this Agreement can be waived
except by the written consent of Secured Party. Forbearance or indulgence by
Secured Party in regard to any breach hereunder will not constitute a waiver of
the related covenant or condition to be performed by Debtor.
25. ADDITIONAL DOCUMENTS. In connection with and in order to perfect and
evidence the security interest in the Equipment granted Secured Party hereunder,
Debtor will execute and deliver to Secured Party such financing statements and
similar documents as Secured Party may request from time to time. Debtor
authorizes Secured Party, where permitted by law, to make filings of such
financing statements without Debtor's signature. Debtor further will furnish
Secured Party (a) a fiscal year end financial statement including balance sheet
and profit and loss statement within one hundred twenty (120) days of the close
of each fiscal year, (b) any other information normally provided by Debtor to
the public and (c) such other financial data or information relative to this
Agreement and the Equipment, including, without limitation, copies of vendor
proposals and purchase orders and agreements, listings of serial numbers or
other identification data and confirmations of such information, as Secured
Party may from time to time reasonably request. Debtor will procure and/or
execute, have executed, acknowledge, have acknowledged, deliver to Secured
Party,
3
<PAGE>
record and file such other documents and showings as Secured Party deems
necessary or desirable to protect its interest in and rights under this
Agreement and its interest in the Equipment. Debtor will pay as directed by
Secured Party or reimburse Secured Party for all filing, search, title report,
legal and other fees incurred by Secured Party in connection with any documents
to be provided by Debtor pursuant to this paragraph or paragraph 22 and any
further similar documents Secured Party may procure.
26. DEBTOR'S WARRANTIES. Debtor certifies and warrants that the financial data
and other information which Debtor has submitted or will submit to Secured Party
in connection with this Agreement is, or will be at time of delivery, as
appropriate, a true and complete statement of the matters therein contained.
Debtor further certifies and warrants: (a) this Agreement and the attendant
documents have been duly authorized by Debtor and, when executed and delivered
by the person signing on behalf of Debtor below, will constitute the legal,
valid and binding obligations of Debtor, enforceable against Debtor in
accordance with their respective terms; (b) this Agreement and each and every
showing provided by or on behalf of Debtor in connection herewith may be relied
upon by Secured Party in accordance with the terms thereof, notwithstanding the
failure of Debtor or other applicable party to ensure proper attestation
thereto, whether by absence of a seal or acknowledgment or otherwise; (c) Debtor
has the right, power and authority to grant a security interest in the Equipment
to Secured Party for the uses and purposes herein set forth; (d) there is no
litigation or proceeding pending or threatened against Debtor which may have a
materially adverse effect on Debtor or which would prevent or hinder the
performance by Debtor of its obligations hereunder; (e) no action by or with any
commission ar administrative agency is required in connection herewith; (f)
Debtor has the power to own its assets and to transact business in which it is
engaged; (g) Debtor will give Secured Party prompt notice of any change in its
name, identity or structure; and (h) the Equipment will, at the time such
Equipment becomes subject hereto, be in good repair, condition and working
order.
27. ENTIRE AGREEMENT. This instrument and all Schedules hereto constitutes the
entire Agreement between Secured Party and Debtor and may not be amended,
altered or changed except by a written agreement signed by the parties.
28. NOTICES. Notices under this Agreement must be in writing and must be
mailed by United States certified mail with return receipt requested, duly
addressed with postage prepaid to the party involved at its respective address
set forth herein or at such other address as such party may provide on written
notice to the other from time to time. Notices will be effective when
deposited. Each party will promptly notify the other of any change in the first
party's address.
29. GENDER, NUMBER: JOINT AND SEVERAL LIABILITY. Whenever the context of this
Agreement requires, the neuter gender includes the feminine or masculine and the
singular number includes the plural; and whenever the words "Secured Party" are
used herein, they include all assignees of Secured Party, it being understood
that specific reference to "assignee" in paragraph 14 above is for further
emphasis. If there is more than one Debtor named in this Agreement, the
liability of each will be joint and several.
30. TITLES. The titles to the paragraphs of this Agreement are solely for the
convenience of the parties and are not an aid in the interpretation of the
instrument.
31. GOVERNING LAW; VENUE. This Agreement will be governed by and construed in
accordance with the laws of the State of California. Venue for any action
related to this Agreement will be in an appropriate court in San Diego County,
California, to which Debtor consents, or in another court selected by Secured
Party which has jurisdiction over the parties. In the event any provision
hereof is declared invalid, such provision will be deemed severable from the
remaining provisions of this Agreement which provisions will remain in full
force and effect.
32. TIME. Time is of the essence of this Agreement and each and all of its
provisions.
ACCEPTED BY:
VISION CAPITAL CORPORATION, PARADISE BAKERY, INC., DEBTOR
SECURED PARTY
BY: /s/ BY: /s/
--------------------------- --------------------------------
TITLE: Larry B. Turner, President TITLE: Steven J. Orlando, CFO
4
<PAGE>
Exhibit 10.24
ALTA PETROLEUM, INC.
240 SAINT PAUL ST., SUITE 310
DENVER, COLORADO, 80206-5115
January 29, 1997
PERSONAL AND CONFIDENTIAL
- -------------------------
Java Centrale, Inc.
1610 Arden Way, Suite 145
Sacramento, CA 95815
Attention: Mr. Richard D. Shannon
- ----------
Dear Mr. Shannon:
RE: PROPOSED BRIDGE LOAN
- -------------------------
We confirm our recent discussion relating to the Company's short-term working
capital requirements. We have reviewed all of the documents you have provided
to us and agree that the Company requires additional working capital during the
period of time it arranges term financing and/or sells Paradise Bakery Inc.
Company owned stores. We are prepared to offer a bridge loan facility (the
"Facility") as described in this letter. If accepted, the Facility will replace
the $400,000 Stand-By Line of Credit dated July 10, 1996 which is hereby
terminated. The terms and conditions set out below will become effective upon
execution of this letter.
AMOUNT: THREE HUNDRED THOUSAND ($300,000) DOLLARS U.S.
ADVANCE: One advance of the total amount to be made on January 31,
1997.
TERM: One Hundred Twenty (120) days.
INTEREST RATE: All amounts outstanding shall bear interest at an annual
rate equal to Fourteen (14%) percent per annum, payable
monthly until the Term expires and thereafter at an annual
rate equal to Sixteen (16%) percent per annum, payable
monthly.
REPAYMENT: Principal and accrued interest may be repaid at any time and
shall be repaid in full out of the proceeds of any
refinancing of greater than $1,000,000 or sale of any of the
Paradise Bakery assets, concluded by the Company during the
Term.
NOTES: The Advance will be evidenced by a Promissory Note having a
due date of May 31, 1997.
<PAGE>
January 29, 1997
Page: 2
CONVERSION: The principal outstanding may be converted, in whole or in
part, into common stock of Java at any time during the Term,
upon written notice to the Company, at a price equal to
$1.00 per share (to a maximum of 300,000 shares). Java will
use its best efforts to register the shares for trading
prior to the expiry of the Term.
BONUS: We shall be entitled to a bonus equal to 10% of the
principal balance to be payable upon the earlier of: (a)
repayment of the Facility, or (b) expiry of the Term. If
the Facility is not repaid by the end of the Term the bonus
earned shall increase by Two (2%) percent for each Thirty
(30) days the Facility remains outstanding.
SECURITY: The Company will grant in our favour a pledge of 100% of the
issued and outstanding shares of Paradise Bakery Inc.
LEGAL: All reasonable legal and other agreed third party costs
incurred in securing and operating the Facility shall be for
the account of the Company.
We trust the foregoing is in accord with our discussion and if so your should
sign and return one copy of this letter.
Yours truly,
ALTA PETROLEUM, INC.
Lyle P. Edwards
Vice-President
RDS/pm
encl.
RDS\API006.AGR
ACKNOWLEDGED AND AGREED TO THIS
30TH DAY OF JANUARY, 1997
JAVA CENTRALE, INC.
Per: /s/
-------------------------------
Richard D Shannon
Chairman
<PAGE>
PROMISSORY NOTE
$300,000 January 31, 1997
U.S. Dollars
FOR VALUE RECEIVED the undersigned, JAVA CENTRALE, INC., promises to
pay to or to the order of ALTA PETROLEUM, INC. at DENVER, COLORADO, on or before
the 31st day of May, 1997, the sum of THREE HUNDRED THOUSAND (300,000) DOLLARS,
UNITED STATES FUNDS, together with interest thereon at an annual rate of
FOURTEEN (14%) Percent payable monthly until May 31, 1997 and thereafter at an
annual rate equal to SIXTEEN (16%) Percent, payable monthly.
The undersigned hereby waives presentment for payment, notice of
protest and notice of non-payment. No time given to or security taken from or
composition or arrangements entered into with any party hereto shall prejudice
the rights of the holder to proceed against any other party.
JAVA CENTRALE, INC.
Per: /s/
----------------------------------
Richard D. Shannon, Chairman
<PAGE>
UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS
OF
JAVA CENTRALE, INC.
The undersigned, constituting the entire Board of Directors ( the "Board")
of JAVA CENTRALE, INC., a California corporation, (the "Corporation"), acting by
unanimous written consent in lieu of a special meeting of the Board pursuant to
Section 307(b) of the California Corporations Code and Article III, Section 13
of the Bylaws of the Corporation, do hereby adopt, approve and authorize the
resolutions set forth below:
APPROVAL OF THE FOLLOWING TRANSACTIONS:
1. Commitment Letter form Alta Petroleum, Inc. dated January 29, 1997 relating
to a $300,000 Loan Facility for the Corporation, a copy of which is
attached hereto as Schedule 1 (the "Alta Credit");
WHEREAS the Board believes it is in the best interest of the Corporation to
accept the Alta Credit in the form attached hereto as Schedule 1 (the
"Commitment Letter"); and
WHEREAS all of the security and other documents contemplated by the
Commitment Letter is herein referred to as (the "Security Documents");
NOW THEREFORE BE IT RESOLVED that this Board of Directors unanimously
believes it is in the best interest of the Corporation and its Shareholders that
the Commitment Letter be and it is hereby accepted;
AND RESOLVED FURTHER that the execution on behalf of the Corporation of the
Commitment Letter and the Security Documents shall be and they are hereby
ratified, confirmed and approved;
AND RESOLVED FURTHER that it is in the best interest of the Corporation and
its Shareholders that the Corporation shall be the borrower under the Commitment
Letter and shall grant the security required thereunder;
AND RESOLVED FURTHER that any and all actions taken and documents executed
relative to the Commitment Letter and the Security Documents by any individual
officer or agent of the Corporation that are within the authority conferred by
these resolutions shall be and they are hereby ratified, confirmed and approved
as the acts and deeds of this Corporation, as fully as though these resolutions
had been adopted prior to the taking of such actions;
<PAGE>
2
AND RESOLVED FURTHER that the officer of this Corporation shall be and they
are hereby authorized and directed to execute the Commitment Letter and the
Security Documents and that the officers of the Corporation shall be and they
are hereby authorized and directed to do all acts and to execute, file and/or
deliver all other documents and agreements that the may deem necessary or
appropriate hereinafter in order to carry out the purposes expressed in these
resolutions.
IN WITNESS WHEREOF this Unanimous Written Consent has been executed by each
of the following, including all of the Directors of the Corporation, to be
effective as of the latest date indicated below.
January 29, 1997 /s/
-------------------------------------
GARY C. NELSON, Director
January 29, 1997 /s/
-------------------------------------
RICHARD D. SHANNON, Director
January 29, 1997 /s/
-------------------------------------
KEVIN R. BAKER, Director
January 29, 1997 /s/
-------------------------------------
LYLE P. EDWARDS, Director
<PAGE>
PLEDGE OF SECURITIES
The undersigned, having lodged and deposited with Alta Petroleums,
Inc. (hereafter called "Alta") One Thousand (1,000) Common Shares of Paradise
Bakery, Inc., being 100 % of the issued and outstanding shares and represented
by Share Certificate No. 2 attached hereto as Schedule "A" (hereinafter called
the "Shares") for valuable consideration, HEREBY COVENANTS AND AGREES with Alta
as follows:
1. The shares are hereby assigned, transferred, pledged and hypothecated
to and in favour of Alta as general and continuing collateral security for the
payment and fulfillment of all debts, liabilities and obligations, present and
future, direct and indirect, matured or not, of the undersigned to Alta of
whatsoever nature and kind and whether arising from any agreement or dealings
with Alta and any third party by which Alta may be or become in any manner
whatsoever a creditor of the undersigned or howsoever otherwise arising and
whether the undersigned be bound alone or with another or others and whether as
principal or surety (hereinafter called the "obligations").
2. If Alta considers it desirable for its protection so to do or the
undersigned fails to fulfill any of the obligations, Alta may from time to time
sell at public or private sale or otherwise realize upon all or any of the
Shares for such price and money or other consideration and upon the best
possible terms then available, upon Sixty (60) days written notice to the
undersigned.
3. All income from the Shares, and the proceeds of any collection or
realization of the Shares, after deduction of the expenses thereof, which with
interest shall be borne by the undersigned, may be held by Alta as security
aforesaid or from time to time applied against any of the obligations as Alta
deems best.
4. Alta need not present, protest, give any notice in connection with,
collect, enforce or realize any of the shares and need not protect or
preserve them from, and hereby
<PAGE>
2
released from any responsibility for, any depreciation in or loss of value which
they may suffer, and Alta shall be bound to exercise in all of its dealings with
the Shares that standard of care required of a senior lending institution.
5. All claims, present or future, of the undersigned against any person
liable upon or for the payment pursuant to any of the Shares are hereby assigned
to Alta. Alta is hereby appointed the irrevocable attorney of the undersigned,
with full powers of substitution, from time to time, to endorse and/or transfer
the Shares and is hereby empowered to exercise all rights and powers to and
perform all acts of ownership in respect of the Shares to the same extent as the
undersigned might do and the undersigned shall forthwith repay all consequent
outlay and expense with interest.
6. This shall be a continuing agreement and shall have effect whenever
and so often as any of the obligations exist.
7. This agreement shall be binding upon the undersigned and the heirs,
executors, administrators, successors and assigns of the undersigned and shall
enure to the benefit of Alta and its successors and assigns.
DATED at Calgary, Alberta, this 31st day of January, 1997.
JAVA CENTRALE, INC.
Per: /s/
--------------------------------------
Richard D. Shannon, Chairman
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Chart House Enterprises, Inc. a Delaware corporation
hereby sells, assigns and transfers unto Java Centrale, Inc., a California
corporation, One Thousand (1,000) shares of the capital stock of Paradise
Bakery, Inc. standing in the name of Chart House Enterprises, Inc. on the books
of Paradise Bakery, Inc. (the "Company") represented by Certificate No. 2
herewith and does hereby irrevocably constitute and appoint ___________________
attorney to transfer the said stock on the books of the Company with full power
of substitution in the matter hereinbefore stated.
Dated: December 29, 1995
-----------------
/s/
----------------------------------------
Richard D. Tipton
Vice President, Chart House Enterprises
In the presence of:
- ---------------------------
<PAGE>
JAVA CENTRALE INC. AND SUBSIDIARY
COMPUTATION OF NET LOSS PER COMMON SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
December 31, December 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 12,836,365 6,872,912 10,920,142 5,984,102
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net Loss ($648,037) ($835,376) ($2,159,288) ($2,830,966)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss per weighted average
equivalent commonshares outstanding ($0.05) ($0.12) ($0.20) ($0.47)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
<CAPTION>
Share Months Outstanding
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Calculation of weighted average
shares outstanding (2)
April 1, 1995 - 5,316,820 shares 15,742,419 47,646,922
June 30, 1995 - 83,594 shares 250,782 501,564
August 28, 1995 - 403,000 shares 1,209,000 1,652,300
August 30, 1995 - 100,000 shares 300,000 403,333
September 2, 1995 - 124,567 shares 373,701 489,964
September 6, 1995 - 250,000 shares 750,000 950,000
September 15, 1995 - 326,000 shares 978,000 1,141,000
September 22, 1995 - 95,000 shares 285,000 342,000
October 19, 1995 - 5,834 shares 14,196 14,196
October 25, 1995 - 20,000 shares 44,667 44,667
November 8, 1995 - 300,000 shares 530,000 530,000
December 17, 1995 - 302,083 shares 140,972 140,972
April 1, 1996 - 8,533,587 shares 25,600,761 76,802,283
April 24, 1996 - 83,723 shares 251,169 694,901
May 20, 1996 - 442,142 shares 1,326,426 3,286,589
May 28, 1996 - 124,378 shares 373,134 891,376
May 31, 1996 - 2,105 shares 6,315 14,875
June 5, 1996 - 271,001 shares 813,003 1,869,907
June 7, 1996 - 68,376 shares 205,128 467,236
June 14, 1996 - 67,919 shares 203,757 448,265
June 18, 1996 - 133,200 shares 399,600 861,360
June 19, 1996 - 132,334 shares 397,002 851,349
June 27, 1996 - 224,215 shares 672,645 1,382,659
August 2, 1996 - 659,335 shares 1,978,005 3,274,697
August 5, 1996 - 213,675 shares 641,025 1,039,885
August 15, 1996 - 157,791 shares 473,373 715,319
September 20, 1996 - 1,538,462
shares 4,615,386 5,128,207
November 15, 1996 - 360,239 shares 552,366 552,366
Options outstanding (1) (1) (1) (1)
Warrants outstanding (1) (1) (1) (1)
------------ ------------ ------------ ------------
Total 38,509,095 20,618,737 98,281,274 53,856,918
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number
of common shares outstanding 12,836,365 6,872,912 10,920,142 5,984,102
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
(1) Not calculated as anti-dilutive
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-01-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 731,337
<SECURITIES> 0
<RECEIVABLES> 3,351,468
<ALLOWANCES> 144,842
<INVENTORY> 349,131
<CURRENT-ASSETS> 3,023,620
<PP&E> 4,261,621
<DEPRECIATION> 867,063
<TOTAL-ASSETS> 14,133,436
<CURRENT-LIABILITIES> 2,963,600
<BONDS> 0
0
0
<COMMON> 19,124,270
<OTHER-SE> (10,280,643)
<TOTAL-LIABILITY-AND-EQUITY> 14,133,436
<SALES> 10,825,183
<TOTAL-REVENUES> 12,019,049
<CGS> 10,456,452
<TOTAL-COSTS> 14,238,986
<OTHER-EXPENSES> (455,273)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 395,424
<INCOME-PRETAX> (2,159,288)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,159,288)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,159,288)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
