U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended January 26, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from October 28 to January 26, 1997.
Commission File Number
0-18369
BOSTON RESTAURANT ASSOCIATES, INC.
(Name of Small Business Issuer as Specified in its Charter)
Delaware 61-1162263
(State or Other (I.R.S. Employer
Jurisdiction of Identification
Incorporation or No.).
Organization)
999 Broadway
Saugus, Massachusetts 01906
(Address of Principal
Executive Offices)
617-231-7575
(Issuer's Telephone Number
including area code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X No
As of March 7, 1997, 5,015,293 shares of the issuer's Common Stock, par value
$.01 per share, were outstanding.
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
January 26, 1997..................................... 3
Condensed Consolidated Statements of Operations
for the thirteen weeks and thirty-nine weeks
ended January 26, 1997 and January 28, 1996.......... 4
Condensed Consolidated Statements of Cash Flow
for the thirteen weeks and thirty-nine weeks
ended January 26, 1997 and January 28, 1996.......... 5
Notes to condensed Consolidated Financial
Statements........................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 8
PART II-OTHER INFORMATION.............................................. 18
SIGNATURES............................................................. 20
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
January 26 April 28
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents $444,350 $159,564
Accounts receivable $50,944 $65,079
Inventories $242,711 $232,427
Prepaid expenses and other $80,055 $66,609
---------- ----------
Total current assets $818,060 $523,679
Net property and equipment $3,083,416 $2,739,681
Other assets $734,425 $752,624
---------- ----------
Total assets $4,635,901 $4,015,984
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $490,527 $885,791
Accrued liabilities $853,372 $1,021,641
Current maturities:
Notes payable-stockholder $4,225 $4,038
Long-term debt $229,721 $144,836
Subordinated debentures $0 $84,000
---------- ----------
Total current liabilities $1,577,845 $2,140,306
Long-term obligations:
Notes payable-stockholders, less current maturities $126,877 $130,072
Long-term debt, less current maturities $818,926 $474,414
Convertible subordinated debentures $700,000 $0
Deferred rent $59,071 $60,871
---------- ----------
Total liabilities $3,282,719 $2,805,663
Stockholders' equity
Common stock, $.01 par value, 25,000,000
shares authorized, 5,015,293 shares issued $50,150 $50,150
Additional paid in capital $8,953,788 $8,953,788
Accumulated deficit ($7,650,756) ($7,793,617)
---------- ----------
Total stockholders' equity $1,353,182 $1,210,321
Total liabilities and stockholders' equity $4,635,901 $4,015,984
========== ==========
</TABLE>
See accompanying notes.
3
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BOSTON RESTAURANTS ASSOCIATES,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
January 26 January 28 January 26 January 28
1997 1996 1997 1996
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $2,856,969 $2,325,664 $8,669,099 $8,407,824
Cost of food and beverage $613,350 $557,635 $1,964,328 $2,019,968
Payroll $857,037 $856,854 $2,644,613 $2,919,929
Other operating expenses $1,030,553 $958,601 $2,940,801 $2,932,171
General and administrative $300,609 $531,349 $888,645 $1,371,415
Loss from store closure $0 $821,598 $0 $821,598
---------- ----------- ---------- ----------
Income/(Loss) from operations $55,420 ($1,400,373) $230,712 ($1,657,257)
Other(income) ($1,190) ($3,355) ($3,494) ($53,698)
Interest(income) ($1,136) ($2,144) ($1,136) ($5,305)
Interest expense $37,689 $6,864 $92,487 $17,098
---------- -------- ---------- ----------
Net Income/(Loss) $20,057 ($1,401,738) $142,855 ($1,615,352)
========== ======== ========== ==========
Income/(Loss) per share $0.004 ($0.28) $0.03 ($0.32)
========== ======== ========== ==========
Weighted average number of
common shares outstanding 5,015,293 5,015,293 5,015,293 5,015,293
========== ======== ========== ==========
</TABLE>
See accompanying notes.
4
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BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
January 26 January 28
1997 1996
---------- --------
<S> <C> <C>
Cash flows used for operating activities ($113,706) ($762,602)
---------- --------
Cash flows from investing activities:
Proceeds from sale of property $0 $260,000
Additions to property and equipment ($610,935) ($460,422)
Additions to other assets ($32,966) ($5,224)
---------- --------
Cash flows used for investing activities ($643,901) ($205,646)
---------- --------
Cash flows from financing activities:
Repayments of long-term debt ($142,548) $0
Repayments of stockholders loans ($3,004) ($2,846)
Repayment of convertible subordinated debentures ($84,000) (100,000)
Proceeds from convertible subordinated debentures $700,000 $0
Proceeds from long-term debt $571,945 $412,062
---------- --------
Cash flows provided by financing activities $1,042,393 $309,216
---------- --------
Increase (decrease) in cash and cash equivalents $284,786 ($659,032)
Cash and cash equivalents at beginning of period $159,564 $688,978
---------- --------
Cash and cash equivalents at end of period $444,350 $29,946
========== ========
</TABLE>
See accompanying notes.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
JANUARY 26, 1997
(Unaudited)
NATURE OF BUSINESS AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the thirteen week period and thirty-nine week periods
ended January 26, 1997 are not necessarily indicative of the results that may be
expected for the year ending April 27, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on form 10-KSB, for the year ended April 28, 1996. The
balance sheet at April 28, 1996 has been derived from the audited financial
statements at that date.
The accompanying statements of operations and cash flows for the 39
week, Fiscal 1997 period reflect the consolidated operations and cash flow of
two casual dining Italian restaurants and nine Pizzeria Regina restaurants. The
accompanying statements of operations and cash flows for the 39 week, Fiscal
1996 period, reflect the consolidated operations and cash flows of two casual
dining Italian restaurants for the entire period, two casual dining Italian
restaurants for a portion of the period, and seven Pizzeria Regina Restaurants.
At the October 18, 1996 annual stockholders meeting, the stockholders
approved an amendment to the Company's 1994 Non- Employee Director Stock Option
Plan (the "Director's Plan), pursuant to which each eligible director will
receive 10,000 options to purchase 10,000 shares of Common Stock, on March 15
and September 15 of each year commencing on March 15, 1996. In addition, each
eligible director will receive an option to purchase 10,000 shares of Common
Stock when such person has served a term of five consecutive years on the
Company's Board of Directors. Under the Director's Plan, as amended, each of Mr.
Smith, Mr. Reeves, and Mr. Caruso received options to purchase 10,000 shares of
Common Stock on March 15, 1996 and September 15,
6
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1996. Mr. Smith also received an additional option to purchase
10,000 shares of Common Stock on March 15, 1996 in recognition of
his having served as a director for five consecutive years.
The shareholders also approved an increase in the number of shares
reserved for issuance under the Company's 1994 Combination Stock Option Plan
(the "Combination Plan"). Subsequent to that meeting, options to purchase an
aggregate of 83,000 shares of Common Stock were granted under the Combination
Plan.
On December 31, 1996 the Company completed the sale, in a transaction
exempt from registration under Section 42 of the Securities Act of 1933, as
amended (the "Securities Act"), to a limited number Accredited Investors of a
series of 15-Year Variable Rate Convertible Subordinated Debentures (the
"Debentures"), in the aggregate principal amount of $700,000.
The Debentures presently bear interest at a rate of 8% per annum. The
Debentures are convertible into shares of the Company's Common Stock, at a
conversion price of $1.25 per share, subject to other terms and conditions
specified in the Debentures.
In connection with the sale of Debentures, the Company used the
services of a placement agent (the "Placement Agent"). As compensation for
services rendered as a Placement Agent the Company issued a Stock Purchase
Warrant entitling the Placement Agent the right to purchase up 350,000 shares of
Company's Common Stock (the "Warrant"), at an initial exercise price of $3.00
per share, subject to other terms and conditions specified in the Warrant. The
purchase rights of the Warrant are exercisable in whole or in part until
December 31, 2006.
7
<PAGE>
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Results of Operations:
Overview:
In the thirteen weeks ended January 26, 1997, the Company reported a
net income of $20,057 compared to a net loss of $1,401,738 for the quarter ended
January 28, 1996. The Company attributes this turn-around to the substantial
completion of the restructuring of its Capucino's(R) and Bel Canto(R) restaurant
operations during which the Company closed its Cambridge Capucino's restaurant
(May 1995), converted its Saugus Capucino's restaurant location into a Polcari's
North End(TM) restaurant (completed March 1995), closed its Framingham
Capucino's restaurant location (June 1995), sold its Wellesley Bel Canto
restaurant location (October 1995), and converted its Brookline Capucino's
location into a Pizzeria Regina(R) restaurant (completed February 1996). The
Company is also currently negotiating the sale of its Framingham location and in
Fiscal 1996, reduced the carrying value of the assets related to that location
to reflect its estimated realizable value in connection with such sale. The
Company will continue to operate its Lexington Bel Canto's through the
termination of the lease at this location (November, 1998). The Company's net
income in the current Fiscal quarter is substantially attributable to the income
generated by the Company's Pizzeria Regina restaurant business, which has
remained profitable throughout the Company's restructuring.
Thirteen Weeks Ended January 26, 1997, as Compared to Thirteen
Weeks Ended January 28, 1996:
Revenues:
Net sales in the current period were $2,857,000 compared to net sales
in the prior year's period of $2,326,000. Net sales in the current period
increased at the Company's Pizzeria Regina restaurants, due primarily to the
opening of the two new Pizzeria Regina food court restaurants (one of which
replaced an in-line restaurant at the same location) and at the Polcari's North
End restaurant as compared to the prior year's period. These increases were
partially offset by the reduction in revenue resulting from the closure or
conversion of three of the Company's full-service Capucino's and the sale of the
Wellesley Bel Canto restaurant.
Net sales at the Company's Pizzeria Regina restaurants increased to
$2,037,000 in the current period from $1,555,000 in
8
<PAGE>
the prior year's period. This increase was primarily attributable to the
addition of sales from the Company's converted Brookline Pizzeria Regina
restaurant, the opening of two new Pizzeria Regina food court restaurants (one
of which replaced an in-line restaurant at the same location).
Net sales at the Company's full service casual dining restaurants
increased to $810,000 in the current period from $767,000 in the prior year's
period. This increase was primarily attributable to the addition of sales from
the Company's Polcari's North End restaurant, partially offset by a decrease in
sales from the Company's Bel Canto's restaurants. Sales at the Polcari's North
End restaurant in the current period increased by over $126,000 from the sales
in the prior year's period. Net sales at the Company's Bel Canto's restaurants
were $191,000 in the current Fiscal 1997 period compared to $241,000 for the
same period in Fiscal 1996. The decrease in sales was primarily due to the sale
of the Wellesley Bel Canto in November 1995 and reduced sales at the remaining
Lexington Bel Canto's.
9
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Costs and Expenses:
Cost of Food and Beverages:
Cost of food and beverages as a percentage of net sales was 21% in the
third quarter of Fiscal 1997 compared to 24% in the third quarter of Fiscal
1996. This decrease was primarily due to a greater portion of the Company's net
sales being derived from the higher margin Pizzeria Regina locations.
The cost of food and beverages as a percentage of net sales at the
Pizzeria Regina restaurants was 18% and 20% in the Fiscal 1997 and 1996 periods,
respectively. The cost of food and beverages as a percentage of net sales
decreased at the Pizzeria Regina restaurants principally due to lower food costs
and an increase in selling prices.
The cost of food and beverages as a percentage of net sales at the
Company's full service casual dining restaurants was 31% and 32% in the Fiscal
1997 and 1996 periods, respectively. This decrease was primarily due to the
Company's Bel Canto's and Polcari's restaurants where the cost of food and
beverages as a percentage of net sales decreased due to the introduction of a
new menu, resulting in a favorable menu mix.
Payroll Expenses:
Payroll expenses were $857,000 (30% of net sales) in the current period
compared to payroll expenses in the prior year's period of $857,000 (37% of net
sales). The decrease in payroll expenses as a percentage of sales was primarily
attributable to the addition of two Pizzeria Regina food courts, which have a
more favorable payroll and the closure or conversion of three and the sale of
one of the Company's full-service casual dining restaurants during Fiscal 1996,
which have higher payroll costs than the Pizzeria Regina's restaurants.
Payroll expenses at the Pizzeria Regina restaurants increased to
$555,000 (27% of net sales) in the current period from $489,000 (31% of net
sales) in the prior year's period. The increase in payroll expenses at the
Pizzeria Regina restaurants was primarily attributable to the conversion of the
Company's Brookline Capucino's restaurant into a full service Pizzeria Regina
and the opening of two new Pizzeria Regina Food Court restaurants (one of which
replaced an in-line restaurant at the same location).
Payroll expenses at the Company's full service casual dining
restaurants decreased to $274,000 (34% of net sales) in the current period from
$342,000 (45% of net sales) in the prior year's period, reflecting the closure
or conversion of three, and the sale of one of the Company's restaurants in
Fiscal 1996.
10
<PAGE>
Payroll expenses at the Company's commissary increased to $28,000 for Fiscal
1997 compared to $26,000 in Fiscal 1996.
Other Operating Expenses:
Other operating expenses from the Pizzeria Regina restaurants increased
to $678,000 (33% of net sales) in the current period from $532,000 (34% of net
sales) in the prior year's period. This increase is primarily attributable to
the conversion of the Brookline Capucino's restaurant into a Pizzeria Regina
restaurant and the opening of the two new Pizzeria Regina food court restaurants
(one of which replaced an in-line restaurant at the same location).
Other operating expenses at the Company's full service casual dining
restaurants decreased to $331,000 (41% of net sales) in the current period from
$407,000 (53% of net sales) in the prior year's period. This decrease was
primarily attributable to the closures of the Cambridge Capucino's restaurant,
the Framingham Capucino's restaurant, and the sale of the Wellesley Bel Canto
restaurant during Fiscal 1996, which was partially offset by increased costs
associated with the Polcari's North End restaurant. Other operating expenses
also include commissary expenses of $22,000 in both Fiscal 1997 and Fiscal 1996
periods.
General and Administrative Expenses:
General and administrative expenses were $301,000 (11% of net sales) in
the current period, as compared to $531,000 (23% of net sales) in the prior
year's period. The decrease in general and administrative expenses was
principally due to a reduction in administrative personnel, office rent (due to
the relocation of the corporate office to Saugus, MA) and a decrease in
depreciation and amortization (attributable to the sale of equipment previously
used in full service restaurants), and legal expenses.
11
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Interest Expense:
Interest expense increased to $38,000 in the current period as compared
to interest expense in the prior year's period of $7,000. This increase is
primarily attributable to the Company's use of the long term credit facility
with Haymarket Co-operative Bank, the equipment lease contracts with HCB
Corporation and the interest expense associated with the convertible
subordinated debentures issued on December 31, 1996.
Thirty-Nine Weeks Ended January 26, 1997 as Compared to Thirty-
Nine Weeks Ended January 28, 1996.
Revenues:
Net sales in the first three quarters of Fiscal 1997 period were
$8,669,000, compared to net sales in the first three quarters of Fiscal 1996
period of $8,408,000. Net sales in the 1997 period increased primarily due to
the opening of two new Pizzeria Regina food court restaurants (one of which
replaced an in-line restaurant at the same location) and increased sales at the
Polcari's North End restaurant. These increases were partially offset by the
conversion of the Company's full service Capucino's and the sale of the
Wellesley Bel Canto restaurant.
Net sales at the company's Pizzeria Regina restaurants increased to
$6,002,000 in the Fiscal 1997 period from $4,938,000 in the Fiscal 1996 period
primarily due to the opening of two new Pizzeria Regina food court restaurants
(one of which replaced an in-line restaurant at the same location) and the
addition of sales from the Company's converted Brookline Pizzeria Regina
restaurant.
Net sales at the Company's full service casual dining restaurants
decreased to $2,636,000 in the Fiscal 1997 period from $3,445,000 in the Fiscal
1996 period. While sales at the Polcari's North End restaurant in the Fiscal
1997 period increased by over $310,000, this increase was offset by the closure
or conversion of three and the sale of one of the Company's full service casual
dining restaurants during Fiscal 1996.
12
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Costs, Expenses and Other Income:
Cost of Food and Beverages:
Cost of food and beverages as a percentage of net sales was 23% in the
Fiscal 1997 period as compared to 24% in the Fiscal 1996 period. This was
primarily due to the opening of two new Pizzeria Reginas' (one of which replaced
an in-line restaurant at the same location). Pizzeria Regina enjoys a lower
percentage cost than the Company's full service Italian restaurant.
The cost of food and beverages as a percentage of net sales at the
Pizzeria Regina restaurants was 19% in both the Fiscal 1997 and Fiscal 1996
periods.
The cost of food and beverages as a percentage of net sales at the
Company's full service casual dining restaurants was 31% in both the Fiscal 1997
and 1996 periods.
Payroll Expenses:
Payroll expenses were $2,645,000 (31% of net sales) in the Fiscal 1997
period, compared to payroll expenses in the Fiscal 1996 period of $2,920,000
(35% of net sales). The decrease in payroll expenses was primarily attributable
to the closure or conversion of three and the sale of one of the Company's full
service casual dining restaurants during Fiscal 1996 which was partially offset
by the opening of two new Pizzeria Reginas' (one of which replaced an in-line
restaurant at the same location).
Payroll expenses at the Pizzeria Regina restaurants increased to
$1,687,000 (28% of net sales) in the Fiscal 1997 period from $1,425,000 (29% of
net sales) in the Fiscal 1996 period. The increase in payroll expenses at the
Pizzeria Regina restaurants was primarily attributable to the conversion of the
Brookline Capucino's restaurant into a full service Pizzeria Regina and the
opening of two new Pizzeria Regina food court restaurants (one of which replaced
an in-line restaurant at the same location).
Payroll expenses at the Company's full service casual dining
restaurants decreased to $869,000 (33% of net sales) in the Fiscal 1997 period
from $1,411,000 (41% of net sales) in the Fiscal 1996 period. The decrease in
payroll expenses was primarily attributable to the closure or conversion of
three and the sale of one of the Company's full service restaurants in Fiscal
1996. Payroll expenses at the Company's commissary increased to $89,000 in
Fiscal 1997 period compared to $84,000 in the Fiscal 1996 period.
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Other Operating Expenses:
Other operating expenses in the Fiscal 1997 period were $2,941,000 (34%
of net sales), compared to $2,932,000 (35% of net sales) in the Fiscal 1996
period. The increase in other operating expenses in the Fiscal 1997 period was
primarily attributable to the conversion of the Brookline Capucino's restaurant
to a Pizzeria Regina restaurant and the opening of two new Pizzeria Regina food
court restaurants (one of which replaced an in-line restaurant at the same
location). The increase in operating expenses was partially offset by the
closure of the Braintree Pizzeria Regina restaurant and to the Company's full
service restaurant closures and sale.
Other operating expenses from the Pizzeria Regina restaurants increased
to $1,955,000 (33% of net sales in the Fiscal 1997 period from $1,567,000 ( 32%
of net sales) in the Fiscal 1996 period. This increase was primarily
attributable to the conversion of the Brookline Capucino's restaurant to a
Pizzeria Regina restaurant and the opening of two new Pizzeria Regina food court
restaurants (one of which replaced an in-line restaurant at the same location).
Other operating expenses at the Company's full service casual dining
restaurants decreased to $923,000 (35% of net sales)in the Fiscal 1997 period
from $1,304,000 (38% of net sales) in the Fiscal 1996 period. This decrease was
primarily attributable to the closure of the Framingham and Cambridge Capucino's
restaurants, the sale of the Wellesley Bel Canto restaurant, and the conversion
of Brookline Capucino's into a Pizzeria Regina restaurant during Fiscal 1996.
This decrease was partially offset by increased variable costs associated with
increased sales at the Polcari's North End restaurant. Other operating expenses
also include commissary expenses of $63,000 in the Fiscal 1997 period compared
to $62,000 in the Fiscal 1996 period.
General and Administrative Expenses:
General and administrative expenses were $889,000 (10% of net sales) in
the Fiscal 1997 period, as compared to $1,371,000 (16% of net sales) in the
Fiscal 1996 period. The decrease in general and administrative expenses in the
Fiscal 1997 period as compared to the Fiscal 1996 period was primarily due to
the reduction in administrative personnel, office rent and a decrease in
depreciation and amortization (attributable to the sale of equipment previously
used in full service restaurants)and legal expenses.
Other Income:
Other income in the Fiscal 1997 period decreased to $3,000
14
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when compared to $54,000 in Fiscal 1996 which was as a result of the gain
realized on the sale of the Company's Wellesley Bel Canto restaurant which
occurred in Fiscal 1996.
15
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Interest Expense:
Interest expense increased to $92,000 in the Fiscal 1997 period as
compared to interest expense in the Fiscal 1996 period of $17,000. This increase
reflects the Company's use of the long-term credit facility with Haymarket
Co-operative Bank, the equipment lease contracts with HCB Corporation, and the
interest expense associated with the convertible subordinated debentures issued
on December 31, 1996.
Liquidity and Capital Resources:
At January 26, 1997, the Company had a negative net working capital of
approximately $760,000 and cash and cash equivalents of approximately $444,000
compared to a negative net working capital of approximately $1,617,000 and cash
and cash equivalents of approximately $160,000 at April 28, 1996 (Fiscal 1996
Year End).
During the thirty-nine weeks ended January 26, 1997, the Company had a
net increase in cash and cash equivalent of $285,000 reflecting net cash used
for operating activities of $114,000, net cash used for investing activities of
$644,000, and net cash provided by financing activities of $1,042,000. Net cash
used for operating activities included the reduction of $168,000 of accrued
expenses, $395,000 in accounts payable, and the reduction in accounts receivable
of $14,000. Changes in operating activities also included $318,000 in
depreciation and amortization, and a change in inventory of $10,000, prepaid
expenses of $13,000, and net income of $143,000 for the period included in
operating activities. Net cash used in investing activities primarily reflects
costs associated with the construction of the new Braintree, Massachusetts
Pizzeria Regina food court and the new Marlboro, Massachusetts Pizzeria Regina
food court. Net cash provided by financing activities are funds provided by
Haymarket Co-operative Bank, HCB Leasing Corporation, and from convertible
subordinated debentures, less principal repayments of debt.
At January 26, 1997, the Company had current liabilities of $1,578,000,
including $491,000 of accounts payable, $853,000 of accrued liabilities and
current maturities of long-term debt in the amount of $234,000. At January 26,
1997, the Company had long-term obligations, less current maturities, in the
amount of $1,705,000, including $819,000 under its credit facility with
Haymarket Co-operative Bank, $127,000 of loans payable to stockholders,
convertible subordinated debentures of $700,000, and $59,000 of deferred rent.
The President and the Treasurer of the Company and each of the Company's
subsidiaries have guaranteed the Company's obligations to the bank. As of
January 26, 1997, the Company had borrowed the full amount available under this
credit facility.
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On December 31, 1996, the Company completed the sale, in a transaction
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), to a limited number Accredited Investors of a series of
15-Year Variable Rate Convertible Subordinated Debentures (the "Debentures"), in
the aggregate principal amount of $700,000.
The Debentures presently bear interest at a rate of 8% per annum. The
Debentures are convertible into shares of the Company's common stock, $.01 par
value per share (the Common Stock"), at a conversion price of $1.25 per share,
subject to other terms and conditions specified in the Debentures.
The Company believes that its existing resources, cash flow from
operations, and borrowings under its credit facility will be sufficient to allow
it to meet its obligations over the next twelve months. The Company intends to
fund its current obligations and operating expenses through cash generated from
operations and amounts, if any, to be received upon the proposed sale of its
Framingham location. In addition, upon the sale of the Framingham location, the
Company will benefit from the elimination of ongoing expenses associated with
the location. During Fiscal 1996, the Company incurred rent and utility expenses
at the Framingham location of $283,000. The Company is also seeking additional
financing in order to fund its expansion plans and other cash flow requirements.
There can be no assurance that cash flows will improve in an amount sufficient
to allow the Company to fund its current obligations and operating expenses, or
that the Company will be able to obtain such additional financing upon favorable
terms, if at all. Failure of the Company to do so could result in the Company's
failure to be able to meet its cash flow requirements.
"Safe Harbor" Statement Under the Private Securities Litigation
Reform Act of 1995:
Forward-looking statements in this report, including, without
limitation, statements relating to the adequacy of the Company's resources, are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that such forward-looking statements
involve risks and uncertainties, including without limitation: potential
quarterly fluctuations in the Company's operating results; seasonality of sales;
competition; risks associated with expansion; the Company's reliance on key
employees; risks generally associated with the restaurant industry; risks
associated with geographic concentration of the Company's restaurants; risks
associated with serving alcoholic beverages; and other risks and uncertainties
indicated from time to time in the Company's filings with the Securities and
Exchange Commission.
17
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PART II
ITEM 1. Legal Proceedings
-----------------
No material litigation.
ITEM 2. Changes in Securities
---------------------
On December 31, 1996 the Company completed the sale, in a transaction
exempt from registration under Sec 42 of the Securities Act of 1933, as amended
(the "Securities Act"), to a limited number Accredited Investors of a series of
15-Year Variable Rate Convertible Subordinated Debentures (the "Debentures"), in
the aggregate principal amount of $700,000.
The Debentures presently bear interest at a rate of 8% per annum. The
Debentures are convertible into shares of the Company's Common Stock, at a
conversion price of $1.25 per share, subject to other terms and conditions
specified in the Debentures.
In connection with the sale of Debentures, the Company used the
services of a placement agent (the "Placement Agent"). As compensation for
services rendered as a Placement Agent the Company issued a Stock Purchase
Warrant entitling the Placement Agent the right to purchase up 350,000 shares of
Company's Common Stock (the "Warrant"), at an initial exercise price of $3.00
per share, subject to other terms and conditions specified in the Warrant. The
purchase rights of the Warrant are exercisable in whole or in part until
December 31, 2006.
ITEM 3. Defaults Upon Senior Securities
-------------------------------
None
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
ITEM 5. Other Information
-----------------
None
ITEM 6. Exhibits And Reports on Form 8-K
--------------------------------
A) Exhibits
Exhibit 27 - Financial Statement
B) Reports on Form 8-K
On 28 January, 1997 the Company filed with the
18
<PAGE>
Security and Exchange Commission a report on Form 8-K in regards to a 15 year
Variable Rate Convertible Subordinate Debenture.
19
<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BOSTON RESTAURANT ASSOCIATES, INC.
/s/George R. Chapdelaine
--------------------------------
Date: By: George R. Chapdelaine
President and Chief
Executive Officer
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS AS OF JANUARY 26, 1997 AND APRIL 28, 1996 (AUDITED)
AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED
JANUARY 26, 1997 AND JANUARY 28, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS".
</LEGEND>
<CIK> 0000926295
<NAME> BOSTON RESTAURANT ASSOCIATES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-28-1996
<PERIOD-START> OCT-28-1996
<PERIOD-END> JAN-26-1997
<EXCHANGE-RATE> 1.00
<CASH> $444,350
<SECURITIES> 0
<RECEIVABLES> $50,944
<ALLOWANCES> 0
<INVENTORY> $242,711
<CURRENT-ASSETS> $818,060
<PP&E> $3,817,841
<DEPRECIATION> 0
<TOTAL-ASSETS> $4,635,901
<CURRENT-LIABILITIES> $1,577,845
<BONDS> 0
0
0
<COMMON> $50,150
<OTHER-SE> $8,953,788
<TOTAL-LIABILITY-AND-EQUITY> $4,635,901
<SALES> $2,856,969
<TOTAL-REVENUES> $2,859,296
<CGS> $613,350
<TOTAL-COSTS> $2,801,549
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $37,689
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $20,057
<EPS-PRIMARY> $0.004
<EPS-DILUTED> $0.004
</TABLE>
