UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter ended October 1, 1997
Commission File No. 0-14311
FAMILY STEAK HOUSES OF
FLORIDA, INC.
Incorporated under the laws of IRS Employer Identification
Florida No. 59-2597349
2113 FLORIDA BOULEVARD
NEPTUNE BEACH, FLORIDA 32266
Registrant's Telephone No. (904) 249-4197
Indicate by check mark whether the registrant 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_____
Title of each class Number of shares outstanding
Common Stock 11,081,000
$.01 par value As of November 7, 1997
FAMILY STEAK HOUSES OF FLORIDA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 1, 1997
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to
Form 10-Q, and do not include all 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 of the results for the interim periods have been
included. Operating results for the thirteen and thirty-nine week
periods ended October 1, 1997 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31,
1997. For further information, refer to the financial statements and
footnotes included in the Company's Annual Report on Form 10-K for
the fiscal year ended January 1, 1997.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany profits, transactions and balances have been
eliminated.
Note 2. Earnings Per Share
Earnings per share for the thirteen and thirty-nine weeks ended
October 1, 1997 and October 2, 1996 were computed based on the
weighted average number of common and common equivalent shares
outstanding. Common equivalent shares are represented by shares
under option and stock warrants.
SFAS No. 128 Required Disclosure
In 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128. "Earnings per
Share" which will require the Company to disclose Basic and Diluted
earnings per share on the face of the income statement. Basic
earnings per share excludes dilution, and is computed by dividing
income available to common stockholders by the weighted-average
number of common shares outstanding for the period. The Company will
adopt SFAS 128 for the fiscal year ended December 31, 1997.
Application of this statement in the third quarter of 1997 would
have no material effect on earnings per share as reported in the
financial statements.
Note 3. Legal Proceedings
On May 13, 1997, the Company received notice from Aetna Life
Insurance Company, the mortgage holder of the property at which the
Company's Clearwater, Florida restaurant is located, that Aetna
intended to foreclose on the property and terminate the Company's
lease due to a default by the landlord on the mortgage. In September
1997, Aetna was granted a Motion for Summary Judgment of Foreclosure
by the Circuit Court of the Sixth Judicial Court in Pinellas County.
This could allow Aetna to evict the Company from the Clearwater
location, which would result in a loss of approximately $360,000 on
the write-off of leasehold improvements. The Company intends to
vigorously defend its interest in the foreclosure action. However,
there can be no assurance that the Company will be successful in
this defense.
On September 8, 1997, the Company filed suit against Bisco
Industries, Inc. and certain of its affiliates. See discussion below
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Recent Developments".
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Quarter Ended October 1, 1997 versus October 2, 1996
The Company experienced a decrease in sales during the third
thirteen weeks of 1997 as compared to the same period in 1996. Same-
store sales (average unit sales in restaurants that have been open
for at least 18 months and operating during comparable weeks during
the current and prior year) in the third quarter of 1997 decreased
9.3% from the same period in 1996, compared to a decrease of 7.5%
from 1996 as compared to 1995.
Management believes that the decrease in same-store sales is
primarily due to the effects of increasing competition, including
several new or remodeled restaurants opened by competitors in areas
close to Company restaurants. Management is seeking to improve sales
trends by focusing on improved restaurant operations, increasing
marketing expenditures, and devising competitive strategies to
offset the effects of new competition. In addition, management is
considering selling restaurants where sales volume has dropped
significantly due to new competition.
Historically, the third and fourth quarters of each fiscal year
are less profitable for the Company than the first and second
quarters. If year-to-date sales trends continue, the Company will
continue to incur losses in the fourth quarter.
The costs and expenses of the Company's restaurants include
food and beverage, payroll and benefits, depreciation and
amortization, repairs, maintenance, utilities, supplies,
advertising, insurance, property taxes and rents. The Company's
food, beverage, payroll and benefit costs are believed to be higher
than the industry average as a percentage of sales as a result of
the Company's philosophy of providing customers with high value of
food and service for every dollar a customer spends. In total, food
and beverage, payroll and benefits, depreciation and amortization
and other operating expenses as a percentage of sales increased to
91.9% in the third quarter of 1997, from 89.3% in the same quarter
of 1996.
Food and beverage costs as a percentage of sales increased to
40.9% in the third quarter of 1997 from 40.4% in the same period of
1996, primarily due to higher beef prices compared to the same
period in 1996, and management's efforts to increase sales volumes
by upgrading buffet menus and offering low-priced lunch specials.
Payroll and benefits as a percentage of sales increased to
28.5% in the third quarter of 1997 from 27.7% in the same quarter of
1996, primarily due to the decline in same-store sales and increases
in the total number of restaurant managers, designed to provide the
Company's managers with a five-day work week and a higher quality of
life, and therefore improve management retention and customer
service.
Other operating expenses as a percentage of sales increased to
17.5% in the third quarter of 1997 from 16.8% in 1996, primarily due
to higher utilities costs and the decline in same-store sales.
Depreciation and amortization increased as a percentage of sales in
the third quarter of 1997 compared to 1996, as a result of additions
to property and equipment over the last 12 months.
General and administrative expenses as a percentage of sales
were 8.2% in the third quarter of 1997, compared to 5.9% in the same
quarter of 1996, primarily due to costs associated with the Bisco
takeover attempt, an accrual of costs for potential sales tax due
under an ongoing Florida sales tax audit, and the decline in same-
store sales. Interest expense increased from $376,800 during the
third quarter of 1996 to $401,100 in 1997. The increase was due
primarily to interest costs associated with a new restaurant opened
in January 1997.
The effective income tax benefit rates for the quarters ended
October 1, 1997 and October 2, 1996 were 21.1% and 25.2%,
respectively.
Net loss for the third quarter of 1997 was $471,600, compared
to $87,400 in 1996. Loss per share was $.04 for 1997, compared to
$.01 in 1996.
Nine Months Ended October 1, 1997 versus October 2, 1996
For the nine months ended October 1, 1997, total sales
decreased 2.0% compared to the same period of 1996. Same-store sales
decreased 7.7% for the nine months ended October 1, 1997, due
primarily to increased competition.
Food and beverage costs, as a percentage of sales, for the nine
month period ended October 1, 1997 was 39.6%, compared to 39.8% for
the same period in 1996. Payroll and benefits increased from 27.4%
in 1996 to 28.3% in 1997. The increase was primarily due to the
decrease in same-store sales, which resulted in decreased
efficiencies in labor scheduling, and to the increased number of
total restaurant managers employed.
For the nine months ended October 1, 1997, other operating
expenses, as a percentage of sales, increased to 15.8% from 15.5% in
1996, primarily due to the decline in same store sales. Depreciation
and amortization increased as a percentage of sales for the nine
month period ended October 1, 1997, compared to the same period of
1996, due to additions to property, plant and equipment over the
last 12 months.
For the nine months ended October 1, 1997, general and
administrative expenses, as a percentage of sales, increased to 7.1%
of sales from 5.8% for the same period in 1996, primarily due to
costs associated with the Bisco takeover attempt. Interest expense
increased for the first nine months of 1997 to $1,190,000 from
$1,152,300 for the same period in 1996.
The effective income tax rates for the nine-month periods ended
October 1, 1997 and October 2, 1995 were (21.4%) and 13.6%
respectively.
Net loss for the nine months ended October 1, 1997 was $372,900
or $.03 per share, compared to net earnings of $366,000 or $.03 per
share for the same period in 1996.
The Company's operations are subject to some seasonal
fluctuations. Revenues per restaurant generally increase from
January through April and decline from September through December.
Operating results for the quarter ended October 1, 1997 are not
necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1997.
Recent Developments
On March 6, 1997, Bisco Industries, Inc. ("Bisco"), a
shareholder of the Company, launched an unsolicited tender offer for
the purchase of approximately 24% of the Company's common stock. The
tender offer, if successful, would have resulted in ownership by
Bisco and its affiliates of approximately 34% of the Company's
outstanding common stock.
On April 30, 1997, Bisco filed a Consent Solicitation Statement
requesting that the Company's shareholders approve several
amendments to the Company's bylaws designed to allow Bisco to
complete its tender offer. Bisco failed to obtain consents from
shareholders owning a majority of the Company's outstanding stock,
as required by Florida Law, and the solicitation deadline expired on
June 30, 1997.
The Company's Board of Directors opposed the Bisco tender offer
and consent solicitation, and has implemented several measures
designed to protect the Company's shareholders against the potential
adverse effects of an unsolicited takeover, including a Shareholder
Rights Agreement.
On July 24, 1997, Bisco notified the Company that it was
demanding that a special meeting of shareholders be called for the
purpose of voting on Bisco - sponsored resolutions to: (i) amend the
Company's bylaws to require that the Board of Directors redeem the
Company's Shareholder Rights Plan and prohibit the adoption of
similar plans in the future without shareholder approval, (ii) amend
the Company's bylaws to opt out of the Florida Control Share Act,
and (iii) remove the three outside directors currently serving on
the Board and replace them with Bisco nominees. The Company does not
consider Bisco's demand for a special meeting of shareholders to be
lawful. If the Bisco proposals are adopted by the Company's
shareholders, Bisco would effectively obtain control of the Company.
On September 8, 1997, the Company filed a complaint in the
United States District Court for the Middle District of Florida
against Bisco and its affiliates alleging, among other things, that
Bisco violated numerous federal securities laws in its hostile
takeover bid. The suit requested that the court enjoin Bisco from
proceeding with its tender offer and certain other actions and
declare, among other things, that Bisco, its affiliates, and certain
other shareholders had acted in concert with respect to the
takeover, and therefore triggered certain provisions of the
Company's Shareholder Rights Agreement. On September 28, 1997, Bisco
withdrew its tender offer. Bisco subsequently filed a Motion to
Dismiss the Company's lawsuit, which is currently pending before the
District Court.
Possible Delisting of Securities from The Nasdaq Stock Market.
The Company's common stock is currently listed on the Nasdaq
National Market. On August 22, 1997, the Securities and Exchange
Commission approved changes to the listing and maintenance
requirements of the National Market. The Company's qualification for
continued listing on this market would require that (i) the Company
maintain at least $4.0 million in net tangible assets, (ii) the
minimum bid price of the Common Stock be $1.00 or more per share,
(iii) there be at least 750,000 shares in the public float, valued
at a minimum of $5.0 million or more, (iv) the Common Stock have at
least two active market makers and (v) the Common Stock be held by
at least 400 holders.
If the Company is unable to satisfy the Nasdaq National
Market's maintenance requirements, the Company's securities may be
delisted from the Nasdaq National Market. In such event, trading, if
any, in the Common Stock would thereafter be conducted in the over-
the-counter markets in the so-called "pink sheets" or the National
Association of Securities Dealers, Inc.'s "Electronic Bulletin
Board", or, possibly in the Nasdaq SmallCap Market. Consequently,
the liquidity of the Company's securities could be impaired, not
only in the number of shares that could be bought and sold, but also
as a result of delays in the timing of the transactions, a reduction
in the number and quality of security analysts' and the news media's
coverage of the Company, lower prices for the Company's securities
than might otherwise be attained and a larger spread between the bid
and asked prices for the Company's securities.
In addition, if the Company's securities were to be delisted
from the Nasdaq National Market, the Company's securities could
become subject to Rule 15g-9 under the Exchange Act relating to
penny stocks, which imposes additional sales practice requirements
on broker-dealers which sell such securities to persons other than
established customers and "accredited investors" (generally,
individuals with net worth in excess of $1,000,000 or annual incomes
exceeding $200,000, or $300,000 together with their spouses).
Commission regulations define a "penny stock" to be any equity
security that is not listed on The Nasdaq Stock Market or a national
securities exchange and that has a market price (as therein defined)
of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions. If the Company's
securities were subject to the rules on penny stocks, the market
liquidity for the Company's securities could be adversely affected.
As of November 3, 1997, the Company met all of the new Nasdaq
National Market listing requirements, except for the $1.00 minimum
bid price requirement. The Company's stock has consistently had a
bid price of less than $1.00 in recent years. On November 3, 1997,
the Company's stock closed at $.72. Management plans to seek
shareholder approval for a reverse stock split to increase the
trading price to an amount above $1.00.
Based on recent trading prices of the Company's stock,
acquisition by Bisco or any other shareholder of more than 10% of
the Company's stock would likely result in failure to meet the $5.0
million public float requirement. This would result in the de-
listing of the Company's stock from the Nasdaq National Market.
Management has informed Bisco of this possible consequence if Bisco
attempts to acquire additional shares, but Bisco has continued to
make public its intentions to acquire a significant amount of
additional shares.
Liquidity and Capital Resources
Substantially all of the Company's revenues are derived from
cash sales. Inventories are purchased on credit and are converted
rapidly to cash. Therefore, the Company does not carry significant
receivables or inventories. As a result, working capital
requirements for continuing operations are not significant.
At October 1, 1997, the Company had a working capital deficit
of $392,800, compared to a working capital deficit of $616,800 at
January 3, 1996.
Cash provided by operating activities decreased to $984,800 in
the first nine months of 1997 from $1,754,100 in the same period of
1996. This decrease is primarily due to lower net earnings in 1997.
The Company spent approximately $2,126,900 in the first nine
months of 1997 for restaurant renovation and equipment. Capital
expenditures for 1997 and 1998, based on present costs and plans for
expansion, are estimated to be $3,000,000 (not including the sales-
leaseback financing for the new restaurant as discussed above) and
$1,500,000 respectively. The Company projects that cash generated
from operations will be sufficient to fund these expenditures, plus
funding available under its financing agreement with Franchise
Finance Corporation of America ("FFCA").
In December 1996, the Company entered into a $15.36 million
Loan Agreement with FFCA Mortgage Corporation ("FFCA"). The Loan
Agreement governs eighteen Promissory Notes payable to FFCA. Each
Note is secured by a mortgage on a Company restaurant property. The
Promissory Notes provide for a term of twenty years and an interest
rate equal to the thirty-day LIBOR rate plus 3.75%, adjusted
monthly. The Loan Agreement provides for various covenants,
including the maintenance of prescribed debt service coverages. As
of October 1, 1997, the outstanding balance due under the loan was
$15,167,000.
The Company used the proceeds of the FFCA loan to retire its
Notes with Cerberus Partners, L.P. ("Cerberus") and its loans with
the Daiwa Bank Limited and SouthTrust Bank of Alabama, N.A. The
Company realized a discount on the retirement of the Cerberus Notes,
which was partially offset by unamortized debt issuance costs. The
resulting gain of $348,500, net of income taxes, has been accounted
for as an extraordinary item 1n 1996. In addition, the Company
retired Warrants for 1,050,000 shares of the Company's common stock
previously held by Cerberus. Cerberus continues to hold Warrants to
purchase 700,000 shares of the Company's common stock at an exercise
price of $.40 per share.
Also in December 1996, the Company entered into a separate loan
agreement with FFCA under which it may borrow up to an additional
$4,640,000 in 1997. This additional financing would be evidenced by
four additional Promissory Notes secured by mortgages on four
Company restaurant properties. The terms and conditions of this loan
agreement are substantially identical to those of the loan agreement
described above. In July 1997, the Company entered into a letter
agreement with FFCA extending the expiration date of funding under
the loan agreement through June 1998.
Impact of Inflation
Costs of food, beverage, and labor are the expenses most
affected by inflation in the Company's business. Although inflation
has not had a significant impact on the Company in the past, there
can be no assurance that it will not in the future. A significant
portion of the Company's employees are paid at the federally
established statutory minimum wage. In August 1996, President
Clinton signed into law a bill which raised the federally mandated
minimum wage by $.50 per hour on October 1, 1996, and by an
additional $.40 per hour on September 1, 1997.
The Company raised sales prices approximately 1% in 1997 and 3%
in 1996 in order to offset the effect of higher payroll and benefit
costs.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See discussions under "Legal Developments " and "Recent
Developments".
ITEM 2. CHANGES IN SECURITIES
None
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) The following exhibits are filed as part of this
report on Form 10-Q, and this list comprises the Exhibit
Index.
No. Exhibit
27.01 Financial Data Schedule.
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.
FAMILY STEAK HOUSES OF FLORIDA, INC.
(Registrant)
/s/ Lewis E. Christman
Date: November 11, 1997 Lewis E. Christman, Jr.
President and CEO
/s/ Edward B. Alexander
Date: November 11, 1997 Edward B. Alexander
Vice President of Finance
(Principal Financial and Accounting
Officer)
/s/ Michael J. Walters
Date: November 11, 1997 Michael J. Walters
Controller
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.
FAMILY STEAK HOUSES OF FLORIDA, INC.
(Registrant)
____________________________________
Date: November 11, 1997 Lewis E. Christman, Jr.
President and CEO
____________________________________
Date: November 11, 1997 Edward B. Alexander
Vice President of Finance
(Principal Financial and Accounting
Officer)
____________________________________
Date: November 11, 1997 Michael J. Walters
Controller
Family Steak Houses of Florida, Inc.
Consolidated Results of Operations
(Unaudited)
For The Quarters Ended
--------------------------
October 1, October 2,
1997 1996
---------------------------
Sales $8,660,100 $9,084,600
Cost and expenses:
Food and beverage 3,544,000 3,665,800
Payroll and benefits 2,466,600 2,514,800
Depreciation and amortization 430,100 412,200
Other operating expenses 1,518,100 1,523,600
General and administrative expenses 710,500 533,800
Franchise fees 259,500 272,400
Loss from disposition of equipment 33,700 18,400
---------------------------
8,962,500 8,941,000
(Loss) earnings from operations (302,400) 143,600
Interest and other income 105,600 116,400
Interest expense (401,100) (376,800)
---------------------------
(Loss) before income taxes (597,900) (116,800)
(Benefit) for income taxes (126,300) (29,400)
---------------------------
Net (loss) ($471,600) ($87,400)
============= ============
Net (loss) per common and equivalent
share ($0.04) ($0.01)
============= ============
Weighted average common shares and equivalents 11,401,000 11,728,000
============= ============
See accompanying notes to consolidated financial statements.
Family Steak Houses of Florida, Inc.
Consolidated Results of Operations
(Unaudited)
For The Nine Months Ended
---------------------------
October 1, October 2,
1997 1996
---------------------------
Sales $28,666,400 $29,259,400
Cost and expenses:
Food and beverage 11,360,900 11,640,800
Payroll and benefits 8,112,000 8,010,400
Depreciation and amortization 1,275,300 1,250,700
Other operating expenses 4,532,800 4,525,000
General and administrative expenses 2,042,500 1,696,000
Franchise fees 859,300 877,200
Loss from disposition of equipment 112,000 38,700
---------------------------
28,294,800 28,038,800
(Loss) earnings from operations 371,600 1,220,600
Interest and other income 344,000 355,300
Interest expense (1,190,000) (1,152,300)
---------------------------
(Loss) earnings before income taxes (474,400) 423,600
(Benefit) provision for income taxes (101,500) 57,600
---------------------------
Net (loss)earnings ($372,900) $366,000
============= ============
Net (loss) earnings per common and equivalent
share ($0.03) $0.03
============= ============
Weighted average common shares and equivalents 11,584,000 11,989,000
============= ============
See accompanying notes to consolidated financial statements.
Family Steak Houses of Florida, Inc.
Consolidated Balance Sheet
(Unaudited) October 1,
1997
------------
ASSETS
Current assets:
Cash and cash equivalents $1,193,900
Investments 1,546,300
Receivables 58,600
Current portion of mortgages receivable 447,600
Income taxes receivable 198,900
Inventories 259,000
Prepaid and other current assets 370,200
------------
Total current assets 4,074,500
Property and equipment:
Land 9,095,800
Buildings and improvements 20,185,100
Equipment 12,998,100
------------
42,279,000
Accumulated depreciation (15,545,600)
------------
Net property and equipment 26,733,400
Property held for resale 552,800
Other assets, principally deferred charges,
net of accumulated amortization 786,300
------------
$32,147,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,517,100
Accrued liabilities 2,668,700
Current portion of long-term debt 279,000
Current portion of obligation under capital lease 2,500
------------
Total current liabilities 4,467,300
Long-term debt 14,888,500
Obligation under capital lease 1,056,600
Deferred revenue 44,200
------------
Total liabilities 20,456,600
Shareholders' equity:
Preferred stock of $.01 par; authorized
10,000,000 shares; none issued --
Common stock of $.01 par;
authorized 20,000,000 shares;
outstanding 11,081,000 110,800
Additional paid-in capital 8,162,400
Retained earnings 3,417,200
------------
Total shareholders' equity 11,690,400
------------
$32,147,000
============
See accompanying notes to consolidated financial statements.
Family Steak Houses of Florida, Inc.
Consolidated Balance Sheet
(Unaudited) January 1,
1997
------------
ASSETS
Current assets:
Cash and cash equivalents $1,750,800
Investments 1,093,100
Receivables 566,100
Current portion of mortgages receivable 120,600
Inventories 202,300
Prepaid and other current assets 247,200
------------
Total current assets 3,980,100
Mortgages receivable 1,089,100
Property and equipment:
Land 9,089,200
Buildings and improvements 19,676,500
Equipment 12,240,400
------------
41,006,100
Accumulated depreciation (14,656,200)
------------
Net property and equipment 26,349,900
Property held for resale 552,800
Other assets, principally deferred charges,
net of accumulated amortization 831,600
------------
$32,803,500
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,183,000
Accounts payable - construction $411,800
Accrued liabilities 2,582,100
Income taxes payable 84,800
Current portion of long-term debt 332,700
Current portion of obligation under capital lease 2,500
------------
Total current liabilities 4,596,900
Long-term debt 15,107,200
Obligation under capital lease 1,058,600
Deferred revenue 43,100
------------
Total liabilities 20,805,800
Shareholders' equity:
Preferred stock of $.01 par;authorized
10,000,000 shares; none issued --
Common stock of $.01 par;
authorized 20,000,000 shares;
outstanding 10,893,200 109,200
Additional paid-in capital 8,098,400
Retained earnings 3,790,100
------------
Total shareholders' equity 11,997,700
------------
$32,803,500
============
See accompanying notes to consolidated financial statements.
Family Steak Houses of Florida, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended
(Unaudited)
October 1, October 2,
1997 1996
----------- ------------
Operating activities:
Net earnings ($372,900) $366,000
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 1,275,300 1,250,700
Directors' fees in the form of stock options 15,000 15,000
Amortization of loan discount -- 41,700
Amortization of loan fees 16,500 67,400
Loss on disposition of equipment 112,000 38,700
Decrease (increase) in:
Receivables 31,400 2,700
Income taxes receivable (198,900) --
Inventories (56,700) 21,400
Prepaids and other current assets (123,000) (188,400)
Other assets (50,900) (9,100)
Increase (decrease) in:
Accounts payable 334,100 46,000
Accrued liabilities 86,600 (5,400)
Income taxes payable (84,800) 109,900
Deferred revenue 1,100 (2,500)
----------- ------------
Net cash provided by operating activities 984,800 1,754,100
----------- ------------
Investing activities:
Capital expenditures (2,126,900) (566,800)
Principal receipt on notes receivable 762,100 180,100
Purchase of investments (453,200) (554,000)
Proceeds from sale of property and equipment -- 555,300
----------- ------------
Net cash used by investing activities (1,818,000) (385,400)
----------- ------------
Financing activities:
Payments on long-term debt (272,400) (1,184,900)
Construction draw on capital lease 500,100 --
Payments on capital lease (2,000) --
Proceeds from the issuance of common stock 50,600 8,200
----------- ------------
Net cash provided (used) by financing activities 276,300 (1,176,700)
----------- ------------
Net (decrease) increase in cash and cash equivalents (556,900) 192,000
Cash and cash equivalents - beginning of period 1,750,800 711,400
----------- ------------
Cash and cash equivalents - end of period $1,193,900 $903,400
=========== ============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $1,173,500 $1,045,200
=========== ============
Cash paid during the period for income taxes $181,000 $38,000
=========== ============
See accompanying notes to consolidated financial statements.