<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-1
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------- ----------------
Commission file number 001-13559
FRESH'N LITE, INC.
(Name of small business issuer in its charter)
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<S> <C>
TEXAS 75-2337102
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
1705 E. WHALEY, LONGVIEW, TEXAS 75605
(Address of principal executive offices) (Zip Code)
</TABLE>
Issuer's telephone number (903) 758-2811
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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[ ]
Number of shares outstanding of each of the issuer's classes of common stock,
as of May 18, 1998: 6,356,852 shares of common stock, par value $.01.
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FRESH'N LITE, INC.
<TABLE>
<CAPTION>
PAGE NO.
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PART I FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Condensed Balance Sheet for the Three Month Period
Ended March 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Condensed Income Statement For the Three Month Periods
Ended March 31, 1997 and March 31, 1998 . . . . . . . . . . . . . . . . . 4
Condensed Statement of Cash Flows for the Three Month
Periods Ended March 31, 1997 and March 31, 1998 . . . . . . . . . . . . . 5
Notes to Interim Condensed Financial Statements (Unaudited) . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . 7
PART II OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
FRESH'N LITE, INC.
CONDENSED BALANCE SHEET
FOR THE THREE MONTH PERIOD ENDING
MARCH 31, 1998
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
----------- -----------
(Restated (Unaudited)
Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash ........................................................................ $ 20,373 $ 201,163
Inventory ................................................................... 26,571 26,468
----------- -----------
Total Current Assets ............................................... 46,944 227,631
----------- -----------
PROPERTY AND EQUIPMENT (Pledged)
Buildings ................................................................... 3,774,141 4,545,522
Land ........................................................................ 135,000 135,000
Leasehold Improvements ...................................................... 30,113 30,113
Vehicles and Equipment ...................................................... 1,250,302 1,398,060
----------- -----------
Total Property and Equipment ....................................... 5,189,556 6,108,695
Accumulated Depreciation .................................................... (430,325) (466,475)
----------- -----------
Property and Equipment - Net ....................................... 4,759,231 5,642,220
----------- -----------
OTHER ASSETS
Assets Held for Sale, Net of Accumulated Depreciation ....................... 909,835 441,373
Corporate Organizational Costs and Other Assets,
Net of Accumulated Amortization ........................................... 32,651 30,683
Note Receivable - Related Parties ........................................... 164,543 146,005
----------- -----------
TOTAL OTHER ASSETS................................................. 1,107,029 618,061
----------- -----------
TOTAL ASSETS ....................................................... 5,913,204 6,487,912
=========== ===========
</TABLE>
See accompanying notes.
2
<PAGE> 4
FRESH'N LITE, INC.
CONDENSED BALANCE SHEET
FOR THE THREE MONTH PERIOD ENDING
MARCH 31, 1998
(Continued)
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
----------- ------------
(Restated (Unaudited)
Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Accrued Expenses .......................................................... $ 340,635 $ 314,665
Accounts Payable .......................................................... 52,864 62,357
Bank Overdraft ............................................................ 48,104 --
Note Payable - Short Term ................................................. 10,249 3,389
Income Taxes Payable ...................................................... 8,800 8,800
Current Portion of Capital Lease Obligations .............................. 6,175 6,175
Current Portion of Notes Payable - Long Term .............................. 465,015 215,020
----------- -----------
Total Current Liabilities ........................................ 931,842 610,406
OTHER LIABILITIES
Capital Lease Obligations, Net of Current Portion ......................... 165,504 165,504
Notes Payable - Long Term, Net of Current Portion ......................... 1,101,437 1,484,590
Deferred Income Tax Liability ............................................. 121,200 121,200
----------- -----------
Total Liabilities ................................................ 2,319,983 2,381,700
----------- -----------
SHAREHOLDERS EQUITY
Common Stock, $.01 Par Value; 50,000,000 Shares Authorized;
6,356,852 Shares Issued and Outstanding ................................. 61,585 63,568
Additional Paid In Capital ................................................ 3,278,499 3,574,071
Retained Earnings - Prior ................................................. 135,001 254,387
Retained Earnings - Current ............................................... 119,386 215,436
Less Treasury Stock, at Cost, 1,250 shares ................................ (1,250) (1,250)
----------- -----------
Total Shareholders Equity ........................................ 3,593,221 4,106,212
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY ........................ 5,913,204 6,487,912
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 5
FRESH'N LITE, INC.
CONDENSED INCOME STATEMENT
FOR THE THREE MONTH PERIODS ENDING
MARCH 31, 1997 AND MARCH 31, 1998
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1998
-------------- --------------
(Restated (Unaudited)
Unaudited)
<S> <C> <C>
SALES ................................................... $ 712,352 $798,219
EXPENSES
Cost of Sales ........................................... 204,967 205,156
Salaries and Contract Labor ............................. 208,836 228,022
Payroll and other Taxes ................................. 32,024 39,882
Professional Fees ....................................... 53,892 8,428
Advertising and Promotional ............................. 18,568 15,285
Rent .................................................... 35,644 50,579
Insurance ............................................... 13,804 17,121
Telephone ............................................... 7,858 5,309
Travel .................................................. 3,750 3,231
Utilities ............................................... 25,045 23,592
Depreciation ............................................ 38,464 36,150
Amortization ............................................ 192,294 14,850
Interest ................................................ 19,744 33,846
Linen and Laundry ....................................... 5,284 11,575
Repairs and Maintenance ................................. 17,718 20,129
Supplies ................................................ 6,518 9,307
Miscellaneous ........................................... 2,500 0
--------- --------
Total Expenses ................................. 886,910 722,462
--------- --------
OPERATING INCOME (LOSS) ........................ (174,558) 75,757
OTHER INCOME/(EXPENSE)
Profit/(Loss) on Sale of Assets ......................... -- 111,593
Rental Income ........................................... -- 28,086
Income Tax (Expense) Benefit:
Current ........................................ -- --
Deferred ....................................... -- --
--------- --------
NET INCOME ..................................... (174,558) 215,436
Basic Earnings Per Share ................................ $ (.03) $ .034
Diluted Earnings Per Share .............................. $ (.03) $ .034
</TABLE>
See accompanying notes.
4
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FRESH'N LITE, INC.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDING
MARCH 31, 1997 AND MARCH 31, 1998
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<CAPTION>
March 31, 1997 March 31, 1998
-------------- --------------
(Restated (Unaudited)
Unaudited)
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Cash Flows from Operating Activities:
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . $ (174,558) $ 215,436
------------ ------------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . 38,464 36,150
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 192,294 14,850
Net Change in Assets and Liabilities:
Decrease / (Increase) in Inventory . . . . . . . . . . . (27,768) 103
(Decrease) / Increase in Accounts Payable . . . . . . . (18,070) (51,471)
(Decrease) / Increase in Accrued Expenses . . . . . . . (40,018) (25,970)
------------ ------------
Total Adjustments . . . . . . . . . . . . . . . . . . . . . . . 144,902 (26,338)
------------ ------------
Net Cash Provided by Operating Activities . . . . . . . (29,656) 189,098
------------ ------------
Cash Flows from Investing Activities:
Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . (239,804) (919,139)
Expenditures for Preopening/Remodel Costs
and other Assets . . . . . . . . . . . . . . . . . . . . . . . (24,020) 0
(Increase) / Decrease in Notes Receivable . . . . . . . . . . . (19,221) 18,538
Increase in Deferred Franchise System Costs . . . . . . . . . . (39,969) 0
Net Proceeds from Sale of Assets . . . . . . . . . . . . . . . . 0 461,580
------------ ------------
Net Cash Used in Investing Activities . . . . . . . . . (323,014) (439,021)
------------ ------------
Cash Flows from Financing Activities:
Sale of Common Stock . . . . . . . . . . . . . . . . . . . . . . 698,000 297,555
Borrowing on Notes Payable . . . . . . . . . . . . . . . . . . . 385,000 633,158
Principal Payments on Notes Payable . . . . . . . . . . . . . . (556,727) (500,000)
------------ ------------
Net Cash Provided by Financing Activities . . . . . . . 526,273 430,713
------------ ------------
NET INCREASE / (DECREASE) IN CASH . . . . . . . . . . . . . . . 173,603 180,790
CASH AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . 19,640 20,373
------------ ------------
CASH AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . 193,243 201,163
============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 7
FRESH'N LITE, INC.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDING
MARCH 31, 1998
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The condensed financial statements of Fresh'n Lite, Inc. (the
"Company") as of March 31, 1997 and March 31, 1998 have been
prepared by the Company, pursuant to the rules and regulations of
the Securities and Exchange Commission. The Company owns and
operates four restaurants under the names of "Fresh'n Lite Cafe &
Grill" and "Street Talk Cafe."
The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments) which are,
in the opinion of management, necessary to fairly state the
operating results for the respective periods. However, these
operating results are not necessarily indicative of the results
expected for the full fiscal year. Certain information and footnote
disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principals
have been omitted pursuant to such rules and regulations. The notes
to the condensed financial statements should be read in conjunction
with the notes to the financial statements contained in the Annual
Report filed on May 1, 1997 on Form 10-KSB and the notes to the
financial statements contained in the Form 10-KSB/A-1 filed on
August 14, 1998. Company management believes that the disclosures
are sufficient for interim financial reporting purposes.
NOTE 2. SALE OF RESTAURANT FACILITY
On March 17, 1998, the Company sold its facility in Nacogdoches,
Texas. The Company realized a gain of $111,593 on the sale of this
facility which was previously classified as "assets held for sale."
NOTE 3. SUBSEQUENT EVENTS
On April 3, 1998, the Board of Directors approved a plan to
repurchase up to 100,000 shares of the Company's common stock.
Repurchases will be made from time to time in open market
transactions. All repurchases will be made in accordance with
applicable securities regulations, and the timing of the repurchases
will be dependent upon market conditions, share price, and other
factors. The repurchased common stock may be used by the Company to
meet the needs of its various stock option plans, or for other
corporate purposes.
On April 8, 1998, the Board of Directors approved an increase in the
previously approved stock repurchase plan from 100,000 to 150,000
shares.
6
<PAGE> 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB/A-1 includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), which can be identified by the use of
forward-looking terminology such as, "may," "believe," "expect," "intend,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. All statements other than
statements of historical fact included in this Form 10- QSB/A-1, are
forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Important factors with respect to any such forward-looking statements,
including certain risks and uncertainties that could cause actual results to
differ materially from the Company's expectations ("Cautionary Statements") are
disclosed in this Form 10-QSB/A-1, including, without limitation, in
conjunction with the forward- looking statements included in this Form
10-QSB/A-1, and in the Company's Annual Report on Form 10-KSB/A-1 for the year
ended December 31, 1997. Important factors that could cause actual results to
differ materially from those in the forward-looking statements herein include,
but are not limited to, the newness of the Company, the need for additional
capital and additional financing, the Company's limited restaurant base, lack
of geographic diversification, the risks associated with expansion, a lack of
marketing experience and activities, risks of franchising, seasonability, the
choice of site locations, development and construction delays, need for
additional personnel, increases in operating and food costs and availability of
supplies, significant industry competition, government regulation, insurance
claims and the ability of the Company to meet its stated business goals. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
The following discussion of the results of operations and financial
condition should be read in conjunction with the Financial Statements and
related Notes thereto included herein.
OVERVIEW
The Company was organized in June of 1990 as Bosko's, Inc. under the
laws of the State of Delaware. In November of 1992 the Company changed it's
name to Fresh'n Lite, Inc., and in November of 1995 the Company merged into a
Texas corporation also bearing the name Fresh'n Lite, Inc. The Company
currently owns and operates three Fresh'n Lite Cafe & Grill restaurants, in
Dallas, Irving (Valley Ranch), and The Colony, Texas. The Company's prototype
Street Talk Cafe restaurant opened May 7, 1998 in Richardson, Texas. The
Company plans to expand by opening additional Street Talk Cafe restaurants on a
Company owned basis in the Dallas/Ft. Worth demographic market area.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1997 and 1998.
Revenues. For the three months ended March 31, 1998, the Company has
generated revenues of $798,219 compared to revenues in the same period of 1997
of $712,352, a 12.1% gain, a profit of $215,435 compared to a net operating loss
of $174,558 in the first quarter of 1997. The difference in profitability from
1997 to 1998 is attributed to the following factors; (1) in the first quarter of
1997 the Company accelerated the amortization of costs in the amount of $169,075
associated with the closing of the Nacogdoches and Texarkana, Texas facilities;
(2) in the first quarter of 1997 the Company had a one time charge of $50,000
for professional fees associated with the Company's filing to trade on the
NASDAQ Over the Counter Bulletin Board; (3) in the first quarter of 1998 the
Company realized a one time gain of $111,593 on the sale of the Nacogdoches,
Texas facility; and (4) in the first quarter of 1998 the Company realized rental
income of $28,086 on a temporary lease of the Texarkana facility.
7
<PAGE> 9
The increase in revenues was due to the fact that the Valley Ranch
location only operated for 1 1/2 months of the same period in 1997 and The
Colony facility was not operating during the same period of 1997.
The closing of the East Texas facilities, which generated
significantly lower volumes than the Valley Ranch and Colony facilities had very
little impact on revenues.
The Company only had one store, being the Fresh'n Lite location at
Preston and Frankford that has been open long enough to generate same store
sales figures. This unit generated $195,619 in revenue for the three month
period ending March 31, 1998 a 2% decrease from $199,610 in the same period of
1997. The Company attributes the decrease to more competition in the immediate
vicinity of this location.
Costs and Expenses. Costs and expenses for the three month period
ended March 31, 1998 increased by $164,448, or 22.8% to $886,910 as compared to
$722,462 for the corresponding period of 1997 due to the opening of additional
higher-volume restaurants in the Dallas market.
Net Income. The Company had a net income for the three months ended
March 31, 1998 of $215,436 compared to a net income of $174,558 for the
corresponding three months of 1997, representing $.033 and $(.03) per share,
respectively. Earnings per share figures are based on basic earnings per share
as well as diluted earnings per share.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has required capital to fund the
operations and capital expenditure requirements of its Company-owned
restaurants.
From January 4, 1995 through December 12, 1997, the Company received
gross proceeds from an intra-state offering of $2,219,500. Approximately
$287,600 of the proceeds were used to cover offering related costs, including
underwriting discounts and commissions. The net proceeds were used primarily
for the acquisition of the Company's corporate offices. The remaining proceeds
were used to develop additional restaurants and for general corporate purposes.
The Company met fiscal 1997 capital requirements with cash generated
by operations, the proceeds from the intra-state offering, and borrowing on
notes payable. In fiscal 1997 the Company's operations generated approximately
$644,352 in cash, as compared to $551,804 in fiscal 1996 and $461,811 in fiscal
1995. The Company's restaurant operations are labor intensive and do not have
significant receivables or inventory. The Company receives trade credit based
upon negotiated terms in purchasing food and supplies and ordinarily operates
with a relatively small level of working capital.
The Company's principal capital requirements are the funding of new
restaurant development or acquisitions and remodeling of existing units.
During fiscal 1997, the Company constructed and opened one unit in The Colony,
Texas and began construction of a second unit in Richardson, Texas, and
purchased its corporate offices facility. The total capital outlay for the
year was $2,288,392. Opening additional Company-owned restaurants is a key
component of its expansion strategy.
During the three month period ended March 31, 1998, the Company
operated out of cash flow from operations. During the three month period ended
March 31, 1998, the Company explored the placement of private debt which
included convertible instruments. The Company's ability to expand depends on
the ability of management to secure additional sources of funding.
8
<PAGE> 10
PLAN OF OPERATIONS
The Company has planned the following operations for the 1998
calendar year, including:
(i) Convert the Fresh'n Lite Cafe & Grill located at 6150
Frankford Rd., Dallas, Texas to a Street Talk Cafe.
(ii) Open two additional Street Talk Cafe restaurants at locations
still to be negotiated.
EMPLOYEES
The Company expects to hire three full time management personnel and
thirty part time hourly personnel with the opening of each new restaurant
operation. The cost of these personnel should be 25% of the annual operating
revenue to be generated by each operation. The initial cost of hiring and
training of all personnel is covered in the store start up costs.
YEAR 2000 COMPLIANCE
The Company uses current versions of widely used, publicly available
software for its accounting, data processing, and point of sale computer
requirements. The providers of the software utilized by the Company have
stated that there will be no failures in the programs used by the Company
resulting from the year 2000. The Company does not utilize any customized
software. The Company has not yet determined the impact, if any, that year
2000 issued may have on its vendors. However, the Company believes there are
adequate alternative vendors that can supply products and services to the
Company if necessary. Finally, the Company's business is not highly dependent
upon electronic data processing. In conclusion, the Company does not believe
it is at a material risk from year 2000 issues.
9
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Hereafter set forth in the Form 10-QSB/A-1 of Fresh'n Lite,
Inc. and incorporated by reference herein are the following
exhibits:
No. Description of Exhibit
--- ----------------------
27 Financial Data Schedule
(b) Current Reports on Form 8-K:
None.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
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FRESH'N LITE, INC.
(Registrant)
Date: August 14, 1998 By: /s/ Stanley L. Swanson
--------------------------------------------------
Stanley L. Swanson, Chief Executive Officer
(Duly Authorized Signatory)
Date: August 14, 1998 By: /s/ Curtis A. Swanson
--------------------------------------------------
Curtis A. Swanson, Chief Financial Officer
And Executive Vice President
(Duly Authorized Signatory)
</TABLE>
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EXHIBIT INDEX
No. Description of Exhibit
--- ----------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 201,163
<SECURITIES> 0
<RECEIVABLES> 146,005
<ALLOWANCES> 0
<INVENTORY> 26,468
<CURRENT-ASSETS> 227,631
<PP&E> 6,108,695
<DEPRECIATION> (466,475)
<TOTAL-ASSETS> 6,487,912
<CURRENT-LIABILITIES> 610,406
<BONDS> 1,484,590
0
0
<COMMON> 63,568
<OTHER-SE> 4,106,212
<TOTAL-LIABILITY-AND-EQUITY> 6,487,912
<SALES> 798,219
<TOTAL-REVENUES> 937,898
<CGS> 205,156
<TOTAL-COSTS> 468,610
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,846
<INCOME-PRETAX> 215,436
<INCOME-TAX> 0
<INCOME-CONTINUING> 215,436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,436
<EPS-PRIMARY> .034
<EPS-DILUTED> .034
</TABLE>
