SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO .
Commission File Number: 0-21932
CALIFORNIA CULINARY ACADEMY, INC.
(Exact name of small business issuer in its charter)
California 94-3042862
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
625 Polk Street
San Francisco, CA 94102
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (415) 771-3536
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
--- ---
The number of shares outstanding of the registrant's Common Stock as of
May 1, 1996 was 3,113,600.
ITEM 1. Financial Statements
CALIFORNIA CULINARY ACADEMY, INC.
BALANCE SHEET
(Unaudited)
March 31,
1996
------------
ASSETS
Current Assets:
Cash and cash equivalents, including restricted cash equivalents of $355,000 $1,674,000
Accounts receivable, net of allowance of $225,000 2,638,000
Inventories 190,000
Prepaid expenses and other assets 324,000
Deferred tax asset 254,000
------------
Total Current Assets 5,080,000
------------
Property and equipment, net of depreciation and amortization 4,243,000
Intangible assets, net of amortization 577,000
Other assets 489,000
------------
TOTAL ASSETS $10,389,000
------------
------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of note payable to bank $250,000
Current portion of capital lease obligations 84,000
Accounts payable 510,000
Accrued liabilities 334,000
Student prepayments 270,000
Deferred revenues 3,607,000
------------
Total Current Liabilities 5,055,000
------------
Long-Term Liabilities:
Note payable to bank 104,000
Capital lease obligations 230,000
Other non-current liabilities 72,000
------------
Total Long Term Liabilties 406,000
------------
Total Liabilities 5,461,000
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, no par value, 3,100 shares authorized,
no shares issued or outstanding -
Common stock, no par value, 20,000,000 shares authorized,
3,113,600 issued and outstanding 8,377,000
Retained deficit (3,449,000)
-----------
Total Shareholders' Equity 4,928,000
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,389,000
-----------
-----------
See the accompanying condensed notes to financial statements.
CALIFORNIA CULINARY ACADEMY, INC.
STATEMENTS OF OPERATIONS
(Unaudited) (Unaudited)
Three Months Ended Nine Months
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Revenues:
Culinary arts education $3,186,000 $3,171,000 $8,756,000 $9,041,000
Restaurants, retail, media and other 812,000 787,000 2,435,000 2,324,000
---------- ---------- ---------- ----------
Total revenues 3,998,000 3,958,000 11,191,000 11,365,000
Costs and expenses:
Operating expenses 2,263,000 2,376,000 6,954,000 6,736,000
Food costs 447,000 408,000 1,290,000 1,195,000
Selling, general and administrative 1,184,000 1,007,000 3,449,000 2,942,000
Interest, net 4,000 2,000 18,000 15,000
---------- ---------- ---------- ----------
Total costs and expenses 3,898,000 3,793,000 11,711,000 10,888,000
Income (loss) before income tax provision 100,000 165,000 (520,000) 477,000
Income tax provision (benefit) 42,000 62,000 (158,000) 205,000
---------- ---------- ---------- ----------
Net income (loss) $58,000 $103,000 ($362,000) $272,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) per share $0.02 $0.03 ($0.11) $0.08
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common shares and equivalents 3,318,958 3,356,156 3,294,630 3,284,515
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
See the accompanying condensed notes to financial statements.
CALIFORNIA CULINARY ACADEMY, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
March 31, March 31,
1996 1995
----------- ----------
Cash Flows From Operating Activities:
Net income (loss) ($362,000) $272,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 784,000 638,000
Provision for losses on accounts receivable (48,000) 131,000
Deferred tax assets (158,000) 205,000
Stock issued for services 13,000 -
Changes in assets and liabilities:
Accounts receivable 726,000 1,233,000
Inventories 68,000 (99,000)
Prepaid expenses and other assets (50,000) 199,000
Other assets (204,000) (153,000)
Accounts payable (291,000) (605,000)
Accrued liabilities (115,000) (374,000)
Student prepayments 39,000 (111,000)
Deferred revenues (752,000) (1,018,000)
Other non-current liabilities (15,000) (9,000)
Restructuring reserve - (144,000)
------------ ------------
Net Cash Provided By (Used In) Operating Activities (365,000) 165,000
------------ ------------
Cash Flows From Investing Activities:
Acquisition of property and equipment (158,000) (562,000)
------------ ------------
Net Cash Used In Investing Activities (158,000) (562,000)
------------ ------------
Cash Flows From Financing Activities:
Net borrowings under equipment term loan agreement - 750,000
Principal payments on term loan agreement (188,000) (182,000)
Principal payments on capital lease obligations (57,000) -
Proceeds from exercise of stock options 83,000 189,000
------------ ------------
Net Cash Provided By (Used In) Financing Activities (162,000) 757,000
------------ ------------
Net Increase (Decrease) In Cash and Cash Equivalents (685,000) 360,000
Cash and cash equivalents, beginning of period 2,359,000 2,101,000
------------ ------------
Cash and cash equivalents, end of period $1,674,000 $2,461,000
------------ ------------
------------ ------------
See the accompanying condensed notes to financial statements.
CALIFORNIA CULINARY ACADEMY, INC.
STATEMENTS OF CASH FLOWS
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Academy paid approximately $64,000 and $50,000 in interest for the nine
months ended March 31, 1996 and 1995, respectively.
The Academy paid approximately $9,000 and $7,000 in income taxes for the
nine months ended March 31, 1996 and 1995, respectively.
The Academy entered into capital lease obligations for approximately
$190,000 and $130,000 for the nine months ended March 31, 1996 and 1995,
respectively.
CALIFORNIA CULINARY ACADEMY, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed financial statements and related footnotes have been
prepared in accordance with generally accepted accounting principles. The
balance sheet as of March 31, 1996, the related statements of operations for the
three and nine months ended March 31, 1996 and 1995 and cash flows for the nine
months ended March 31, 1996 and 1995 are unaudited but have been prepared on
substantially the same basis as the annual audited financial statements. In the
opinion of management, the unaudited financial statements reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position, operating results and cash flows
for those periods presented. The unaudited results for the three and nine
months ended March 31, 1996 are not necessarily indicative of results to be
expected for the entire year.
The accompanying financial statements should be read in conjunction with the
Academy's annual report on form 10-KSB for the year ended June 30, 1995.
Certain reclassifications have been made to the financial statements in the
prior period to conform to classifications used in the current period.
NOTE 2 - INCOME TAXES
Deferred taxes are recorded based upon differences between financial statement
and tax basis of assets and liabilities and available tax carryforwards. The
principal temporary differences that result in deferred tax assets and
liabilities are certain expenses and losses accrued for financial reporting
purposes not deductible for tax purposes until paid, depreciation for income tax
purposes in excess of depreciation for financial reporting purposes and unused
net operating losses.
As of March 31, 1996, for tax reporting purposes, the Academy has federal and
California net operating loss carryforwards of approximately $1,683,000 and
$724,000 respectively, which are available to offset future taxable income.
NOTE 3 - NET INCOME (LOSS) PER SHARE
Net income (loss) per share is based on the weighted average number of shares
outstanding during each of the respective periods, including the dilutive
effects of stock options and warrants using the treasury stock method. The
treasury stock method assumes that all dilutive options and warrants are
exercised, the proceeds of which are assumed to be used to repurchase shares of
stock on the open market at the average price of the stock during the period.
The treasury stock method increases outstanding shares by the difference between
the number of shares assumed exercised and the number of shares assumed
repurchased.
CALIFORNIA CULINARY ACADEMY, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
NOTE 4 - BANK DEBT
As of March 31, 1996, the Academy had available a revolving line of credit and
term loan with a bank. The line of credit provides for borrowings up to
$500,000 with interest at the prime rate of the bank. Any outstanding principal
balance shall be due and payable on February 1, 1997. As of March 31, 1996, the
Academy had no borrowings under the line of credit. The term loan provides for
borrowings up to $750,000 with interest at 1% above the prime rate of the bank,
the proceeds of which financed the purchase of new equipment in July 1994. The
outstanding principal balance of the term loan is to be repaid in 36 monthly
installments of approximately $21,000, which repayment began September 1, 1994.
The revolving line of credit and term loan are collateralized by all of the
Academy's equipment and a certificate of deposit for $355,000.
NOTE 5 - SALE OF SECURITIES
In January 1996, the Board of Directors authorized management to issue up to
$10,000,000 in Convertible Subordinated Promissory Notes ("Notes") which will
convert into (I) Common Stock, at the option of the note holder, or (II)
Preferred Stock, automatically, on the date the Academy becomes legally
authorized to issue a new series of Preferred Stock. The Notes provide for
interest of 7.5%. The Preferred Stock carries a cumulative dividend of 7.5%,
payable quarterly, when and as declared by the Board of Directors. Although the
Preferred Stock is nonvoting, in the event the Academy fails to pay a quarterly
dividend, the holders of the Preferred Stock will be entitled to elect one-third
of the Academy's Board of Directors at the next meeting held for the election of
directors. After six months from the final closing of the offering, the
Preferred Stock will convert automatically to Common Stock at $5.50 per share if
the closing price of the Common Stock equals or exceeds $8.00 for 20 consecutive
trading days. In the event the average closing bid price of the Academy's
common stock for any 30 consecutive trading day period subsequent to the earlier
of I) the public announcement of quarterly or annual financial results, or II)
the date upon which the respective Quarterly Report on Form 10-Q or Form 10-QSB
is less than 80% of the initial conversion price of $5.50 per share, then the
conversion price for such Preferred Stock shall be reduced to a new conversion
price equal to such average closing sale price. In no event, however, shall the
conversion price be less than $3.50 per share. The Preferred Stock also carries
certain registration rights.
On May 10, 1996, the Academy had its first closing of the sale of notes and
received gross proceeds in the amount of $1,400,000. Although additional
closings are anticipated, there is no assurance that additional notes will be
sold.
CALIFORNIA CULINARY ACADEMY, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
NOTE 6 - REGULATORY COMPLIANCE
The Academy participates in various federal and state financial aid programs.
In order to offer such programs to students to assist them in financing their
education, the Academy must maintain certain financial ratios. For fiscal years
ending after July 1, 1995, the Department of Education requires participating
schools to achieve an acid test ratio of 1 to 1. The Academy believes that as
of June 30, 1996, the date in which compliance is first required, it will meet
or exceed this new financial covenant as well as continuing to adhere to other
standards which remain unchanged. The Department of Education's current
requirement is for a current ratio of 1 to 1, with which the Academy is in
compliance as of March 31, 1996.
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
The Academy's revenues are derived from culinary arts education and restaurant,
retail and media operations. Culinary arts education primarily consists of the
16-Month A.O.S. Degree Program, the 30-week Baking and Pastry Arts Certificate
Program, and consumer education classes. Consumer education consists of
professional and avocational weekend and evening programs. Restaurant and
retail operations include two restaurants and two private dining rooms open to
the public five days per week, banquet services generally offered seven days per
week and a small on-site retail shop offering student-prepared foods, beverages,
cookbooks and video tapes, kitchen wares and a line of clothing. Media
operations consists of royalties received from the sale of cookbooks,
principally from the sale of the companion cookbook, "Festive Favorites,
Entertaining with the California Culinary Academy" from the newly created
26-part television series "Cooking at the Academy" with the KQED television
station. Certain expenses such as food costs and costs of sales relate to both
culinary education and restaurant operations.
In response to market demands, the Academy has expanded its educational
offerings by adding a professional weekend Baking & Pastry program. The weekend
program, first offered in February 1996, consists of 8 courses of 14 weeks each
ranging from simple breads to the most advanced candies and show work. Students
in the weekend Baking & Pastry courses can articulate into the full time Baking
& Pastry Certificate Program.
In July 1995, the Academy executed a non-binding letter of intent to purchase
all of the outstanding stock of the New York Restaurant School, Inc. ("NYRS"),
which letter of intent expired March 15, 1996. The Academy is in the process of
arranging satisfactory financing necessary to consummate the acquisition. The
letter of intent provided for the Academy and NYRS to execute a definitive Stock
Acquisition Agreement. Although the letter of intent has expired and no
definitive agreement has been executed, the Academy is continuing to pursue
financing, and both the Academy and NYRS continue to negotiate in good faith.
If the transaction is consummated, the Academy is expected to account for the
acquisition using the purchase method of accounting. As of March 31, 1996, the
Academy has capitalized approximately $90,000 which, if the transaction is not
consummated, will be expensed.
In January 1996, the Academy entered into an agreement with a company to serve
as the selling agent for a placement of up to $10,000,000 in Convertible
Subordinated Promissory Notes ("Notes") (see Note 5). The Chairman and
President of the selling agent company serves on the Academy's Board of
Directors. The selling agent company will be entitled to receive a commission
equal to 7% of the gross proceeds sold, a nonaccountable expense allowance of 3%
and warrants to purchase 10% of the number of shares sold in the offering.
OVERVIEW (CONTINUED)
On May 10, 1996, the Academy had its first closing of the sale of notes and
received gross proceeds in the amount of $1,400,000. Although additional
closings are anticipated, there is no assurance that additional notes will be
sold.
Except for historical information contained herein, this report contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. The forward-looking statements contained herein are subject to certain
risks and uncertainties, including those discussed below and in the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1995, that
could cause actual results to differ materially from those projected.
Investors are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof.
The Academy undertakes no obligation to publicly release the results of any
revision to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Total revenues for the quarter ("Q3-96") and nine months ended March 31, 1996
were $3,998,000 and $11,191,000, respectively, a 1% increase and a 2% decrease
over total revenues of $3,958,000 and $11,365,000 for the quarter ("Q3-95") and
nine months ended March 31, 1995, respectively. Total revenues have remained
relatively constant for the quarter ended March 31, 1996 compared to the quarter
ended March 31, 1995. For the nine months ended March 31, 1996 and 1995,
there has been a decrease in culinary arts education revenues which was
partially offset by an increase in restaurants, retail, media and other
revenues.
Culinary arts education revenues increased $15,000 or less than 1% from
$3,171,000 for Q3-95 to $3,186,000 for Q3-96. Culinary arts education revenues
decreased $285,000 or 3% from $9,041,000 for the nine months ended March 31,
1995 to $8,756,000 for the nine months ended March 31, 1996. This decrease
reflects a decrease in enrollment and total student population in the A.O.S.
Degree Program during Q3-96 as compared to student enrollment and total student
population during Q3-95. The decrease was partially offset by tuition increases
in the A.O.S Degree Program and the 30-week Baking and Pastry Arts Certificate
Program. For the A.O.S. Program, the average time period from initial contact
with prospective students to enrollment is approximately six months with the
strongest enrollment periods during late summer and the fall.
The total student population as of March 31, 1996 was 659 students compared to
694 students as of March 31, 1995. The Academy previously anticipated
enrollments for the April 1996 class at 83 students. Actual enrollment for the
April 1996 class was approximately 60 students. The effect of this lower
enrollment is estimated to decrease anticipated revenues for Q4-96 and for the
year ending June 30, 1997 by approximately $70,000 and $432,000, respectively.
Beginning with the June 1996 class, the Academy will enroll students every two
weeks instead of its current two month enrollment cycle. This shorter
enrollment will allow for guaranteed class sizing with the Academy's option to
delay or accelerate enrollments depending on the number of students entering.
Additionally, this new enrollment method will allow the Academy to change the
order in which students take classes, to ensure better competency testing and
advancement through the entire program. If the Academy should decide to
postpone an enrollment of students for two weeks, idle kitchens will be used to
offer other programs such as contract training with large employers,
teambuilding classes for avocational students, and part-time offerings. While
other programs are being planned, there is no assurance that the Academy will be
successful in marketing or selling these new programs.
CALIFORNIA CULINARY ACADEMY, INC.
RESULTS OF OPERATIONS (CONTINUED)
The Academy estimates that because of the shift to the new two-week enrollment
method, revenues for fiscal 1997 could be approximately $200,000 less than under
the current two-month enrollment method. This is a temporary revenue delay to
be incurred until the current students enrolled under the two-month method have
graduated from the program. In light of this anticipated decrease in revenues,
the Academy is reducing certain operating costs and expenses, which reductions
will be completed during Q4-96.
Additionally, management has examined what it believes to be the causes of
decreased enrollments and student attrition and is implementing a series of
recruiting and retention strategies. While the Academy is optimistic about the
potential success of those strategies, there is no assurance, however, that
these strategies will be successful or that enrollments or student retention
will increase in the future.
Revenues from restaurant, retail, media and other operations increased 3% or
$25,000, from $787,000 for Q3-95 to $812,000 for Q3-96. For the nine months
ended March 31, 1996, revenues increased 5% or $111,000 compared to the nine
months ended March 31, 1995. The increases in revenues were primarily
attributable to an increase in banquet sales. For the quarter and nine months
ended March 31, 1996, the Academy implemented an aggressive marketing and
promotional strategy for restaurant banquet sales. For the nine months ended
March 31, 1996, these increases were offset by a decrease in cookbook revenue.
In June, 1994, the Academy entered into an agreement with the KQED television
station to produce 26 new episodes of "Cooking at the Academy" and develop a
companion cookbook. For the nine months ended March 31, 1995, the Academy
recognized approximately $115,000 for fees related to the production of the
series and cookbook, and fees related to the solicitation and maintenance of
underwriting accounts.
Operating expenses decreased 5% or $113,000, from $2,376,000 for Q3-95 to
$2,263,000 for Q3-96. Operating expenses were $6,954,000 for the nine months
ended March 31, 1996 compared to $6,736,000 for the nine months ended March 31,
1995 representing an increase of $218,000 or 3%. The increase for the nine
months ended March 31, 1996 was attributable to the addition of personnel to
improve the content and quality of the educational programs and additional
staffing to pursue other business opportunities, including new media venues. The
Academy is now on-line through the World Wide Web at HTTP://WWW.BAYCHEF.COM as
an additional tool to recruit students. The Academy's WEB site, On-line SPICE
(Superior Products In Culinary Education) provides information on the Academy's
cooking programs, admissions procedures, profiles chef instructors, offers
articles and practical cooking techniques for culinary enthusiasts and provides
an interactive culinary help line. In addition the increase in operating
expenses for the quarter and nine months ended March 31, 1996 was attributable
to an increase in occupancy costs, including depreciation, which was incurred
primarily due to the continued upgrade of the Academy's computer systems. For
the quarter ended March 31, 1996, these increases were offset by certain
operational cost containment measures including a decrease in facility costs
through renegotiation of certain maintenance contracts and other strategies.
CALIFORNIA CULINARY ACADEMY, INC.
RESULTS OF OPERATIONS (CONTINUED)
Food costs were 14% and 13% of education revenues for Q3-96 and Q3-95,
respectively. For the nine months ended March 31, 1996 and 1995, food costs
were 15% and 13%, respectively, of education revenues. Food costs have remained
relatively constant as a percentage of education revenues.
Selling, general and administrative expenses increased $177,000 or 18%, from
$1,007,000 for Q3-95 to $1,184,000 for Q3-96. Selling, general and
administrative expenses were $3,449,000 for the nine months ended March 31, 1996
compared to $2,942,000 for the nine months ended March 31, 1995 representing an
increase of $507,000 or 17%. During the nine months ended March 31, 1996, the
Academy implemented an aggressive television marketing strategy and incurred
consulting and other professional fees in an effort to increase the awareness of
the Academy and boost enrollments. In addition, the Academy continues to expand
the services available to the student population with the addition of a variety
of alumni programs and benefits and other student services.
In September, 1995, the Academy executed a new non-binding letter of intent to
purchase all of the outstanding stock of NYRS, which letter of intent expired
March 15, 1996. The Academy is currently pursuing financing to acquire NYRS and
has chosen to capitalize certain costs incurred. In January 1996, the Academy
entered into an agreement with a company, of which the Chairman and President is
a member of the Academy's Board of Directors, to serve as the selling agent for
a placement of up to $10,000,000 in Notes (see Note 5) to provide funding for
potential acquisitions, working capital and other corporate purposes. For the
six months ended March 31, 1996, the Academy has elected to capitalize offering
costs related to the sale of the Notes (see Note 5).
On May 10, 1996, The Academy had its first closing of the sale of notes and
received gross proceeds in the amount of $1,400,000. Although additional
closings are anticipated, there is no assurance that additional notes will be
sold.
For the quarter and nine months ended March 31, 1996 and 1995, interest expense,
net of interest income remained relatively constant.
CALIFORNIA CULINARY ACADEMY, INC.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Academy financed its growth from the issuance of equity
securities in private and public transactions, borrowings from related parties,
lease and debt financing and through cash flows provided by operations.
Of the $1,674,000 in cash and cash equivalents at March 31, 1996, a $355,000
certificate of deposit was restricted as collateral for the revolving line of
credit and term loan. The certificate of deposit matured in April 1996 and was
subsequently reinvested and will mature in July 1996.
As of March 31, 1996, the Academy had available a revolving line of credit with
advances up to $500,000, at prime interest rate. As of March 31, 1996, there
have been no borrowings under the revolving line of credit. In July 1994, the
Academy borrowed $750,000 on a term loan to finance equipment used in its
expansion and renovation. The first payment of approximately $21,000 of the 36
month repayment term began September 1994.
The Academy's operating activities consumed cash of $365,000 during the nine
months ended March 31, 1996. The increases to cash were a result of a decrease
in accounts receivable of $726,000, a decrease in inventories of $68,000, and an
increase in student prepayments of $39,000. These increases in cash were offset
by the loss for the nine months of $362,000, an increase in prepaid expenses and
other assets of $50,000, an increase in other assets of $204,000, a decrease in
accounts payable and accrued liabilities of $406,000, a decrease of deferred
revenues of $752,000, and a decrease in non-current liabilities of $15,000.
Cash of $158,000 was used for investing activities primarily to upgrade the
existing computer and fire and security systems and facility improvements.
Cash from financing activities was provided from the exercise of stock options
of $83,000 which was offset by principal payments on the term loan agreement of
$188,000 and principal payments on capital lease obligations of $57,000.
For the nine months ended March 31, 1996, cash decreased by $685,000 as a result
of the activities described above.
The Academy had working capital at March 31, 1996 of $25,000 compared with
working capital of $339,000 at June 30, 1995. Working capital has decreased
primarily due to a decrease in cash and cash equivalents and is in turn due to
lower enrollments and student population thus providing less cash from
operations.
The Academy may, from time to time, enter into additional debt or equity
transactions to finance its growth. There is no assurance, however, that debt
or equity transactions can be entered into or that the amounts obtained from
such financing will be adequate for its needs.
CALIFORNIA CULINARY ACADEMY, INC.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
In January 1996, the Academy entered into an agreement with a company, of which
the Chairman and President is a member of the Academy's Board of Directors, to
serve as the selling agent for a placement of up to $10,000,000 in Notes (see
Note 5) to provide funding for potential acquisitions, working capital and other
corporate purposes.
On May 10, 1996, the Academy had its first closing of the sale of notes and
received gross proceeds in the amount of $1,400,000. Although additional
closings are anticipated, there is no assurance that additional notes will be
sold.
The Academy believes that cash and cash equivalents and cash flows from
operations will be sufficient to satisfy its cash requirements for the next
twelve months. The Academy believes that inflation has not had a material effect
on its operations. Additionally, the Academy believes that as of June 30,
1996, the date on which the Department of Education will require
participating schools to achieve an acid test ratio of 1 to 1, that the
Academy will meet or exceed this new financial covenant as well as continuing
to adhere to other standards which remain unchanged (see Note 6).
CALIFORNIA CULINARY ACADEMY, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None
ITEM 2. CHANGES IN SECURITIES. None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of the shareholders' was held on March 2, 1996. Six
directors were elected. The vote was as follows:
Number of shares
------------------------
Authority
Name For Withheld
---------------------- --------- ---------
Theodore G. Crocker 2,856,112 8,600
Alexander M. Hehmeyer 2,856,112 8,600
William G. DeMar 2,856,112 8,600
Robert J. Marani 2,841,112 23,600
Grover T. Wickersham 2,853,012 11,700
W. Bruce C. Bailey 2,812,612 52,100
All directors were elected for one year terms.
(b) The shareholders also ratified the appointment of Arthur Andersen LLP as
the Academy's independent public accountants. The vote was as follows:
Number of Shares
--------------------------------------------
For Against Abstain
---------- -------- --------
2,852,842 8,500 3,370
(c) The shareholders also ratified the proposal amending the Academy's
Incentive Stock Option Plan to increase by 100,000 shares the number of
shares that may be issued upon exercise of options. The vote was as
follows:
Number of Shares
-------------------------------------------------
For Against Abstain
--------------- --------------- ---------------
2,612,260 223,014 29,438
CALIFORNIA CULINARY ACADEMY, INC.
PART II. OTHER INFORMATION (CONTINUED)
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit No. Description
----------------- --------------------------------
10.1 Amended Financing Agreement with
Wells Fargo Bank dated February 1,
1996
10.2 Agreement with Simon & Schuster,
Inc. dated February 22, 1996
(b) REPORTS ON FORM 8-K None
CALIFORNIA CULINARY ACADEMY, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CALIFORNIA CULINARY ACADEMY, INC.
Dated May 15, 1996 By: /s/ Theodore G. Crocker
---------------------------------
Theodore G. Crocker
Chairman of the Board of Directors and
Chief Executive Officer
Dated May 15, 1996 By: /s/ Keith H. Keogh
---------------------------------
Keith H. Keogh
President and Chief Operating Officer
Dated May 15, 1996 By: /s/ Christine E. Munson
---------------------------------
Christine E. Munson
Vice President of Finance, Chief
Financial Officer and Assistant
Secretary