FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1999 Commission File Number 33-11170-B
HOST AMERICA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1168423
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2 Broadway Hamden, Connecticut 06518-2697
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (203) 248-4100
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(Former name, former address and former fiscal year, if changed since last
report.)
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Indicate by check whether the registrant
(1) has filed all reports required to be
files 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 Yes: X
required to file such report(s), and (2) -----
has been subject to such filing No:
requirements for the past 90 days. -----
Indicate the number of shares outstanding
of each of the issuer's classes of common
stock, as of the close of the period
covered by this report.
Number of shares outstanding at
Class December 31, 1999
Common Stock, $.001 par value 1,138,444 shares
HOST AMERICA CORPORATION
DECEMBER 31, 1999 FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheets - December 31, 1999 (Unaudited) and
June 25, 1999 (Audited) 3
Condensed Statements of Operations -three months ended
December 31, 1999 (Unaudited) and December 25, 1998
(Unaudited) 4
Condensed Statements of Operations -six months ended
December 31, 1999 (Unaudited) and December 25, 1998
(Unaudited) 5
Condensed Statements of Cash Flows - six months ended
December 31, 1999 (Unaudited) and December 25, 1998
(Unaudited) 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
HOST AMERICA CORPORATION
BALANCE SHEETS
ASSETS
December 31, 1999 June 25, 1999
(Unaudited) (Audited)
----------------- ---------------
CURRENT ASSETS
Cash and cash equivalents $ 1,955,076 $ 2,590,515
Accounts receivable, net of allowance for
doubtful accounts of $21,000 as of December
31, 1999 and June 25, 1999 724,084 447,191
Inventory 272,084 221,704
Prepaid expenses and other 146,408 137,787
------------ ------------
Total current assets 3,097,652 3,397,197
PROPERTY AND EQUIPMENT, net 699,384 516,363
------------ ------------
$ 3,797,036 $ 3,913,560
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 157,017 $ 126,601
Accounts payable 500,591 362,527
Accrued expenses 126,780 116,450
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Total current liabilities 784,388 605,578
LONG-TERM DEBT, less current portion included
above 225,826 219,075
COMMITMENTS - -
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 20,000,000
shares authorized, 700,000 shares issued and
outstanding 700 700
Common stock, $.001 par value, 80,000,000
shares authorized, 1,138,444 and 130,000
shares issued and outstanding as of
December 31, 1999 and June 25, 1999,
respectively 1,138 1,130
Additional paid-in capital 7,548,441 7,526,175
Deficit (4,763,457) (4,439,098)
------------ ------------
Total stockholders' equity 2,786,822 3,088,907
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$ 3,797,036 $ 3,913,560
============ ============
The accompanying notes are an integral part of these condensed
financial statements.
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HOST AMERICA CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
For the three months ended
-----------------------------------
December 31, 1999 December 25, 1998
(Unaudited) (Unaudited)
----------------- -----------------
NET REVENUES $ 3,104,582 $ 2,027,690
COST OF GOODS SOLD 2,786,184 1,886,363
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Gross profit 318,398 141,327
GENERAL AND ADMINISTRATIVE EXPENSES 487,419 481,566
------------ ------------
Loss from operations (169,021) (340,239)
OTHER INCOME 43,615 44,789
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Net loss $ (125,406) $ (295,450)
============ ============
LOSS PER COMMON SHARE $ (0.11) $ (0.26)
============ ============
The accompanying notes are an integral part of these condensed
financial statements.
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HOST AMERICA CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
For the six months ended
-----------------------------------
December 31, 1999 December 25, 1998
(Unaudited) (Unaudited)
----------------- -----------------
NET REVENUES $ 5,757,837 $ 3,985,230
COST OF GOODS SOLD 5,176,531 3,539,883
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Gross profit 581,306 445,347
GENERAL AND ADMINISTRATIVE EXPENSES 977,361 800,966
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Loss from operations $ (396,055) $ (355,619)
OTHER INCOME 71,696 66,229
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Net loss $ (324,359) $ (289,390)
============ ============
LOSS PER COMMON SHARE $ (0.29) $ (0.26)
============ ============
The accompanying notes are an integral part of these condensed
financial statements.
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HOST AMERICA CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
For the six months ended
-----------------------------------
December 31, 1999 December 25, 1998
(Unaudited) (Unaudited)
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (324,359) $ (289,390)
Adjustments to reconcile net loss to net
cash used in operating activities 101,921 52,893
Changes in operating assets and liabilities (187,500) (877,693)
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Net cash used in operating activities (409,938) (1,114,190)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (266,118) (103,609)
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Net cash used in investing activities (266,118) (103,609)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock and
warrants, net 3,450 3,759,433
Decrease in deferred offering costs - 486,029
Decrease in due to officer/director - (17,041)
Proceeds (payment) from demand note payable and
long term debt 37,167 (130,092)
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Net cash provided by financing activities 40,617 4,098,329
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (635,439) 2,880,530
CASH AND CASH EQUIVALENTS, beginning of period 2,590,515 49,529
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CASH AND CASH EQUIVALENTS, end of period $ 1,955,076 $ 2,930,059
============ ============
The accompanying notes are an integral part of these condensed
financial statements.
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HOST AMERICA CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - RECENTLY ISSUED ACCOUNTING STANDARDS
EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share". The objective of
SFAS No. 128 is to simplify the standards for computing earnings
per share (EPS) and replaces the presentation of primary and
fully-diluted EPS with a presentation of basic and diluted EPS.
Implementation of SFAS No. 128 did not have any impact on the
Company's calculation of EPS.
Net income per common share was computed based upon 1,134,079 and
1,130,000 weighted average shares outstanding during the three
months ended December 31, 1999 and December 25, 1998,
respectively. Dilutive earnings per share was not presented as
the potentially dilutive warrants, convertible preferred stock
and stock purchase options are anti-dilutive.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which establishes a fair value based method of
accounting for an employee stock option or similar equity
instrument. SFAS No. 123 gives entities a choice of recognizing
related compensation expense by adopting the new fair value
method or to continue to measure compensation using the intrinsic
value approach under Accounting Principles Board (APB) Opinion
No. 25, the former standard. If the former standard for
measurement is elected, SFAS No. 123 requires supplemental
disclosure to present the effects of using the new measurement
criteria. The Company intends to continue using the measurement
prescribed by APB Opinion No. 25, and accordingly, this
pronouncement will not affect the Company's financial position or
results of operations.
SEGMENT INFORMATION
Statement of Financial Accounting Standards (SFAS) No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, was issued effective for fiscal years ending after
December 15, 1998. The Company's primary operating segments are
the management of corporate restaurants and catering and vending
operations. The vending operations do not meet the quantitative
thresholds of SFAS No. 131 and therefore, the Company has not
adopted the reporting requirements of this Statement.
NOTE B - STOCK ISSUANCE
On July 28, 1999, the Board of Directors authorized the issue of
2,476 shares of the Company's common stock to an employee for
payment of goals achieved and to an attorney for services
performed. On November 1, 1999, the Board of Directors
authorized the issue of 5,968 shares of the Company's common
stock to three employees as compensation for goals achieved.
Total compensation expense recognized in connection with the
issuance of these shares totaled $18,824.
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HOST AMERICA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company opened eight new accounts during the quarter ending December
31, 1999. It is anticipated that these accounts will generate
approximately $3.1 million in annual sales. However, the Company did incur
opening expenses for these accounts for training, inventory and smallware
investments.
On October 4, 1999, the Company opened the following three accounts:
Corporate Campus I, Bayer Pharmaceuticals and Merritt Corporate Woods all
located in Milford, Connecticut. The Company is responsible for providing
corporate dining, catering, office coffee and vending services to these clients.
On October 4, 1999, the Company opened Stolt-Nielson Transportation Group
located in Greenwich, Connecticut. The Company is responsible for
providing corporate dining, catering and office coffee services for this client.
On October 11, 1999, the Company opened two accounts for Oxford Health
Plans located in Nashua and Hookset, New Hampshire. The Company is
responsible for providing corporate dining, catering and office coffee
services for this client.
On November 15, 1999, the Company opened Priceline.com, the internet
service that lets you "Name Your Own Price", located in Norwalk,
Connecticut. The Company is responsible for providing corporate dining,
catering, office coffee and vending services. At this account in addition
to providing breakfast and lunch, the Company also serves a dinner meal.
Priceline.com stated that one of the major reasons for choosing the Company
was due to "its HMR program" (HOMEfood MARKET). The Company has spent
considerable resources developing this program and feels this is evidence
of its value.
On December 16, 1999, the Company opened 499 Cafe located in Edison, New
Jersey. The Company is responsible for providing a cafeteria service with
catering, office coffee service and vending to the client.
The Company expected to open a new account for the New York City Housing
Authority, but due to construction delays by the client's contractor, the
opening was moved to January, 2000. The customer is reimbursing the
Company for out of pocket expenses incurred by the Company.
In the November, 1999, issue of the Food Management magazine on pages 48
and 49, the Company's HOMEfood MARKET program was prominently featured.
The Company was notified it will be listed in the Food Service Director
magazine's March issue as one of 100 top food service companies. These
articles indicate that the food service industry recognizes the Company's
level of expertise and reputation.
The new account activity is a reflection of the Company's continued
commitment to grow the business. At the present time the Company is
strategically investing its resources in developing new accounts and
exploring acquisition candidates.
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HOST AMERICA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
Net revenues for the three months ended December 31, 1999 were $3,104,582
as compared to $2,027,690 for the three months ended December 25, 1998.
Accordingly, revenues increased $1,076,892 or approximately 53%. Net
revenues for the six months ended December 31, 1999 increased $1,772,607,
or 45%, when compared to the six months ended December 25, 1998. The
increases are primarily due to the aggressive program of adding new
facilities and maximizing revenue from existing facilities.
Cost of goods sold increased $899,821 and $1,636,648 for the three and six
months ended December 31, 1999, respectively, when compared to the three
and six months ended December 25, 1998. This increase reflects not only
the costs of increased sales volume but also the significant start-up
expenses associated with the new account openings.
The Company incurred a net loss of $125,406 and $324,359 for the three and
six months ended December 31, 1999, respectively, as compared to net loss
of $295,450 and $289,390 for the three and six months ended December 25,
1998, respectively. The losses in 1999 are due primarily to the start-up
expenses incurred in the opening of the Company's new accounts. The
expenses related to the new accounts included hiring and training expenses
for new full-time employees, temporary travel and living expenses, rental
expenses, and smallware costs.
LIQUIDITY AND CAPITAL RESOURCES
The company's liquidity as evidenced by its current ratio has declined.
The current ratio at December 31, 1999 and June 25, 1999 was 3.9:1 and
5.61:1, respectively. This decline is due mainly to the use of working
capital to support the Company's rapid expansion.
Net cash flows for the six month period in 1999 resulted in a decrease in
cash and cash equivalents of $635,439. Operating activities resulted in a
cash outflow during the period of $409,938 primarily due to the net loss
for the period. Purchases of equipment to support the rapid expansion of
facilities under management amounted to $266,118 and the Company's
financing activities resulted in a cash inflow of $40,617 due primarily to
proceeds from financing sources.
Net cash flows for the six months ended December 25, 1998 resulted in an
increase in cash and cash equivalents for the quarter of $2,880,530.
Operating activities resulted in a cash outflow during the period of
$1,114,190 primarily relating to the payment of liabilities upon receiving
the proceeds of the public offering. Purchases of property and equipment
to support the rapid expansion of facilities under management amounted to
$103,609 and the Company's financing activities resulted in cash inflow of
$4,098,329 due primarily to the receipt of proceeds from the public offering.
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings NONE
Item 2 - Change 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 NONE
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SIGNATURES
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Pursuant to the requirements of The Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
HOST AMERICA CORPORATION
Date: February 14, 2000 By:/s/ GEOFFREY W. RAMSEY
-------------------------
Geoffrey W. Ramsey, President
and Chief Executive Officer
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