U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB/A
[As last amended in Release No. 34-38850, July 18, 1997,
effective September 2, 1997, 62 F.R. 39755]
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________ to _________
0-23545
-------
Commission File Number
Jreck Subs Group, Inc.
----------------------
(Exact name of small business issuer as specified in its charter)
Colorado 84-1317674
-------- ----------
(state or other jurisdiction of (IRS Employer Identification Number)
incorporation of organization)
2101 West State Road 434, Suite 100, Longwood, Florida, 32779
-------------------------------------------------------------
(Address of principal executive offices)
(407) 682-6363
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the post 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the most recent practicable date: March 31, 2000 -
31,562,182 Shares
Transitional Small Business Disclosure Format: Yes [ ] No [X]
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
Certified Public Accountants' Review Report
Board of Directors and Stockholders
JRECK Subs Group, Inc. and Subsidiaries
Longwood, Florida
We have reviewed the accompanying consolidated balance sheet of JRECK Subs
Group, Inc. and Subsidiaries as of March 31, 2000 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
three and six months then ended. All information in these financial statements
is the representation of the management of JRECK Subs Group, Inc. and
Subsidiaries.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
statements consists principally of applying analytical procedures to financial
data and making inquiries of personnel responsible for financial and accounting
matter. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards the objective of which is the
expression of an opinion regarding the consolidated financial statements taken
as a whole. Accordingly, we do not express such am opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles.
Certified Public Accountants
Tampa, Florida
May 3, 2000
2
JRECK Subs Group, Inc. and Subsidiaries
Consolidated Balance Sheets
as of March 31, 2000 (Unaudited) and September 30, 1999
March 31, September 30,
2000 1999
- ---------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents, including restricted cash of $35,601
and $35,086, respectively $ 335,446 $ 121,292
Accounts receivable - trade, net of allowance for doubtful accounts
312,623 365,618
Prepaid expenses 649,453 456,883
Notes receivable 80,000 80,000
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 1,377,522 1,023,793
- ---------------------------------------------------------------------------------------------------------------------
Property and equipment, net 671,161 726,667
- ---------------------------------------------------------------------------------------------------------------------
Other assets:
Goodwill, net of accumulated amortization of $1,232,692 and
$984,817, respectively 8,329,344 8,987,076
Covenants not to compete, net of accumulated amortization of
$472,128 and $388,458, respectively 29,872 113,542
Deferred loan costs, net 343,673 376,403
Other 102,683 106,750
- ---------------------------------------------------------------------------------------------------------------------
Total assets $ 10,854,255 $ 11,334,231
=====================================================================================================================
The interim financial statements include all adjustments which, in the opinion of
management are necessary in order to make the financial statements not misleading. 2
3
JRECK Subs Group, Inc. and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2000 (Unaudited) and September 30, 1999, Continued
March 31, September 30,
2000 1999
- ---------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 1,304,754 $ 1,606,041
Accounts payable 538,079 496,553
Accrued liabilities 781,735 552,881
Deposit for sale of assets 475,000 -
Accrued preferred stock dividends 249,016 247,764
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,348,584 2,903,239
Long-term debt, less current portion 735,656 763,505
Note payable to related party - 245,939
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 4,084,240 3,912,683
- ---------------------------------------------------------------------------------------------------------------------
Redeemable common stock 293,000 293,000
- ---------------------------------------------------------------------------------------------------------------------
Redeemable Series F Preferred Stock, no par value, 250 shares
authorized, 197.5 shares issued and outstanding 2,468,750 2,468,750
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Series C Convertible Preferred Stock, no par value, 120 shares
authorized, issued and outstanding 120,000 120,000
Common stock, no par value, 50,000,000 shares authorized,
31,562,182 and 28,403,440 shares issued and outstanding,
respectively 29,343,113 28,394,179
Accumulated deficit (21,267,348) (19,666,881)
Less: Stock subscriptions receivable (4,187,500) (4,187,500)
- ---------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 4,008,265 4,659,798
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 10,854,255 $ 11,334,231
=====================================================================================================================
The interim financial statements include all adjustments which, in the opinion of
management are necessary in order to make the financial statements not misleading. 3
4
JRECK Subs Group, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Six and Three Months Ended March 31, 2000 and 1999 (Unaudited)
Six Months Ended Six Months Ended Three Months Ended Three Months Ended
March 31, March 31, March 31, March 31,
2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Revenues:
Continuing royalty revenues $ 1,248,551 $ 1,281,996 $ 605,865 $ 632,508
Initial royalty revenues 50,000 51,125 5,000 17,459
Retail sales - company-owned stores - 110,878 - -
Retail sales - bakery and other products 376,003 323,103 181,144 160,079
Other revenues 569,136 324,309 318,129 140,781
- -----------------------------------------------------------------------------------------------------------------------------------
Operating costs and expenses:
Franchise servicing costs 744,668 901,524 357,007 496,682
Cost of retail sales and operating costs - stores - 117,561 - -
Cost of retail sales and operating costs - bakery 380,025 331,409 192,409 162,409
General and administrative 910,105 677,835 448,153 357,960
Consulting and investor relations 614,818 238,589 380,672 185,738
Bad debt expense 25,442 125,417 25,442 -
Long-lived asset writedown - 1,902,290 - -
Amortization and depreciation 396,276 507,474 213,862 213,235
- -----------------------------------------------------------------------------------------------------------------------------------
3,071,334 4,802,099 1,617,545 1,416,024
- -----------------------------------------------------------------------------------------------------------------------------------
Loss from operations (827,644) (2,710,688) (507,407) (465,197)
Other income (expense):
Interest, net (193,165) (322,701) (114,546) (135,947)
Loss on disposal of assets - (504,638) - (39,606)
Loss on impairment of intangible asset (409,856) - (409,856) -
Other, net (62,000) - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss (1,492,665) (3,538,027) (1,031,809) (640,750)
Preferred stock dividends (107,802) (96,540) (57,801) (43,640)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss applicable to common stock $(1,600,467) $(3,634,567) $(1,089,610) $ (684,390)
===================================================================================================================================
Weighted average of common shares outstanding 29,046,200 19,336,079 29,391,187 20,375,969
===================================================================================================================================
Net loss per common share - basic and diluted $ (.06) $ (.19) $ (.04) $ (.03)
===================================================================================================================================
The interim financial statements include all adjustments which, in the opinion of
management are necessary in order to make the financial statements not misleading. 4
5
JRECK Subs Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six and Three Months Ended March 31, 2000 and 1999 (Unaudited)
Six Months Ended Six Months Ended Three Months Ended Three Months Ended
March 31, March 31, March 31, March 31,
2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Operating activities:
Net loss $(1,492,665) $(3,538,027) $(1,031,809) $(640,750)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization and depreciation 396,276 507,474 213,862 213,235
Write down of long-lived assets 409,856 1,902,290 409,856 -
Bad debts 25,442 125,417 25,442 -
Loss on disposal of assets - 504,638 - 39,606
Stock and stock options issued for services 131,468 51,526 105,000 -
Prepaid interest and loan fees amortized to
interest expense 44,731 121,272 22,366 88,174
Prepaid consulting fees amortized to consulting
and investor relations expense 385,703 257,577 207,299 135,738
Other 45,876 (112,076) 45,876 -
(Increase) decrease in:
Accounts receivable 27,553 (44,458) 3,750 21,145
Prepaid expenses 22,607 (179,637) (968) (62,042)
Increase (decrease) in:
Accounts payable 41,526 449,480 (51,508) 175,245
Accrued liabilities 102,148 (83,313) 111,281 (274,506)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 140,521 (37,837) 60,447 (304,155)
- ------------------------------------------------------------------------------------------------------------------------------------
Investing activities:
Collection on notes receivable - 55,265 - 55,265
Purchase of property and equipment (5,158) - (2,902) -
Deposit received for sale of assets 475,000 - 475,000 -
Proceeds from sale of assets - 518,226 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 469,842 573,491 472,098 55,265
- ------------------------------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from preferred stock - 200,000 - 200,000
Payments on redeemable common stock - (243,750) - -
Payments on long-term debt (289,659) (487,254) (242,447) (13,154)
Payment of preferred stock dividends (106,550) (9,300) (57,175) -
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (396,209) (540,304) (299,622) 186,846
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 214,154 (4,650) 232,923 (62,044)
Cash and cash equivalents, beginning of period 121,292 253,184 102,523 310,578
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 335,446 $ 248,534 $ 335,446 $ 248,534
====================================================================================================================================
The interim financial statements include all adjustments which, in the opinion of
management are necessary in order to make the financial statements not misleading. 5
6
JRECK Subs Group, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Six Months Ended March 31, 2000 (Unaudited) and the Nine Months Ended September 30, 1999
Common Preferred Series C Preferred Series D Accumulated Subscription Total
Shares Amount Shares Amount Shares Amount Deficit Notes Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December
31, 1998 19,503,596 $26,225,338 120 $120,000 2,350 $3,918,271 $(17,751,842) $(4,187,500) $8,324,267
Conversion of
debt to equity 692,308 159,400 - - - - - - 159,400
Stock issued
for current and
prepaid services 1,291,667 340,000 - - - - - - 340,000
Exercise of options
for common stock 37,500 - - - - - - - -
Stock issued for
marketable security 769,230 174,563 - - - - - - 174,563
Conversion of preferred
Series D to
common stock 4,250,499 791,983 - - (475) (791,983) - - -
Conversion of
preferred Series D
stock dividend 397,966 44,399 - - - - (44,399) - -
Acquisition and
retirement of
common stock (776,779) (1,111,031) - - - - - - (1,111,031)
Other stock sales 500,000 150,000 - - - - - - 150,000
Stock issued for
price adjustments 850,000 197,695 - - - - - - 197,695
Stock issued on
acquisition
restructuring 887,453 664,294 - - - - - - 664,294
Conversion of
preferred Series
D to Series F
redeemable preferred
stock - 757,538 - - (1,875) (3,126,288) - - (2,368,750)
Preferred dividends - - - - - - (102,541) - (102,541)
Net loss - - - - - - (1,768,099) - (1,768,099)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, September
30, 1999 28,403,440 28,394,179 120 120,000 - - (19,666,881) (4,187,500) 4,659,798
Stock issued for
current and prepaid
services 1,415,000 340,299 - - - - - - 340,299
Options issued for
current and prepaid
services - 172,699 - - - - - - 172,699
Conversion of debt
to equity 1,743,742 435,936 - - - - - - 435,936
Preferred dividends - - - - - - (107,802) - (107,802)
Net loss - - - - - - (1,492,665) - (1,492,665)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
March 31, 2000 31,562,182 $29,343,113 120 $120,000 - $ - $(21,267,348) $(4,187,500) $4,008,265
===================================================================================================================================
The interim financial statements include all adjustments which, in the opinion of
management are necessary in order to make the financial statements not misleading. 6
7
Jreck Subs Group, Inc.
Notes to Interim Financial Statements
Form 10-QSB/A
March 31, 2000
Note 1. The unaudited financial statements and notes are presented as permitted
by Form 10-QSB. Accordingly, certain information and note disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted. The accompanying financial statements
and notes should be read in conjunction with the audited financial statements
and notes of the Company for the fiscal year ended September 30, 1999. The
results of operations for the six and three months ended March 31, 2000 are not
necessarily indicative of those to be expected for the entire year.
Note 2. Effective April 28, 2000, the Company completed its sale of the Mountain
Mike's Pizza franchising assets to Concept Acquisitions, LLC ("COAC") for
$3,668,829. COAC is a company controlled by Bradley L. Gordon, who concurrent
with this transaction resigned as Chief Operating Officer and as a Director of
the Company. Mr. Gordon is President and Chief Executive Officer of COAC. The
consideration consisted of $3,000,000 cash (of which $530,000 was immediately
used to retire debt), a $200,000 note and COAC units with an $468,829 value
representing an 18% participation in the Mountain Mike's Pizza franchising
division. For the six and three months ended March 31, 2000, the Company
recorded as loss of $409,856 relating to the sale of the Mountain Mike's Pizza
franchising assets. As stated in the accompanying March 31, 2000 financial
statements, the Company had received a deposit for sale of assets of $475,000
from COAC.
Note 3. On March 31, 2000, the Company issued 894,911 shares of its common stock
to retire indebtedness of $223,728 due to a company controlled by the Company's
president.
Note 4. On March 31, 2000, the Company issued 848,831 shares of its common stock
for satisfaction of a note with accrued interest totaling $212,208.
Note 5. Included in accrued liabilities of $781,735 at March 31, 2000 is
$219,350 relating to the value of 965,000 shares of the Company's common stock
to be issued in connection with consulting services.
8
Item 2. Management's Discussion and Analysis.
Forward Looking Statements
The following discussion contains certain forward-looking statements
subject to the safe harbor created by the "Private Securities Litigation Reform
Act of 1995". These statements use such words as "may," "will," "expect,"
"believe," "plan," "anticipate" and other similar terminology. These statements
reflect management's current expectations and involve a number of risks and
uncertainties. Actual results could differ materially due to changes in global
and local business and economic conditions; the potential effect on business
from year 2000 issues; legislation and government regulation; competition;
success of operating, initiatives including advertising and promotional efforts;
changes in food, labor and other operating costs; availability and cost of land
and construction; adoption of new or changes in accounting policies and
practices; changes in consumer preferences, spending patterns and demographic
trends and changes in the political or economic climate.
Overview
The Company derives its revenue from several sources: royalties,
franchise fees and other franchise related activities as well as a bakery
acquired to supply sandwich rolls to certain franchisees. All company owned
restaurants were disposed by the end of 1998 by selling or transferring them to
new or existing franchisees. The Company has approximately 210 franchised units
at March 31, 2000.
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999.
Results of Operations
The Company had a net loss before preferred dividends of ($1,031,809)
for the three months ended March 31, 2000 compared to a net loss of ($640,750)
for the same period in 1999. The loss per share was $0.04 for the three months
ended March 31, 2000 compared to a loss per share of $0.03 for the same period
in 1999. The increase in net loss was primarily attributable to the loss of
$409,856 relating to the sale of the Mountain Mike's Pizza franchising assets.
Total revenues increased $159,311 or 16.8% to $1,110,138 for the three
months ended March 31, 2000 compared to $950,827 for the same period in 1999.
Revenues from bakery sales were $181,144 for the three months ended March 31,
2000 compared to $160,079 for the same period in 1999, an increase of $21,065.
Royalties decreased $26,643 or 4.2% to $605,865 for the three months ended March
31, 2000 compared to $632,508 for the same period in 1999. The decrease is
primarily from the sale of the Company's Little King's and Georgio's submarine
sandwich chains which were sold prior to the end of the Company's fiscal year of
September 30, 1999.
Total expenses increased $201,521 or 14.2.1% to $1,617,545 for the
three months ended March 31, 2000 compared to $1,416,024 for the same period in
1999. The increase is primarily due to an increase in consulting and investor
relations expense which increased $194,934 to $380,672 for the three months
ended March 31, 2000 compared to $185,738 for the same period in 1999. The
increase in consulting and investor relations expense is consistent with the
Company's effort to seek potential acquisition candidates. General and
administrative expenses increased $90,193 or 25.2% to $448,153 for the three
months ended March 31, 2000 compared to $357,960 for the same period in 1999 due
to an increase in corporate staff and professional expenses. Franchise servicing
costs decreased $139,675 or 28.1% to $357,007 for the three months ended March
31, 2000 compared to $496,682 for the same period in 1999 as two of the
Company's submarine sandwich chains of Little King and Georgio's were sold prior
to the end of the Company's fiscal year of September 30, 1999.
9
Liquidity and Capital Resources
Net cash provided by operating activities was $60,447 for the three
months ended March 31, 2000 compared to net cash used in operating activities of
$(304,155) for the comparable period in 1999. The increase in cash provided by
operating activities is primarily attributable to a net increase in accounts
receivable, prepaid expenses, accounts payable and accrued expenses of $62,555
for the three months ended March 31, 2000 compared to a net decrease of
$(140,158) for the same period in 1999.
Net cash provided by investing activities was $472,098 for the three
months ended March 31, 2000 compared to net cash provided by investing
activities of $55,265 for the comparable period in 1999 as the Company received
a deposit of $475,000 in connection with the sale of its Mountain Mike's Pizza
franchise division which was completed on April 28, 2000.
Net cash of $(299,622) was used by financing activities for the three
months ended March 31, 2000 as payments on long-term debt and preferred stock
dividends compared to net cash provided of $186,846 for the comparable period in
1999. The 1999 amount reflects the proceeds from the sale of preferred stock of
$200,000.
Working capital deficit at March 31, 2000 was $1,971,062 compared with
a deficit of $1,949,831 at December 31, 1999, an increase in deficit of $21,231.
The Company believes that cash flow from operations and from the sale
of the Mountain Mike's Pizza franchising assets in April 2000 will continue to
fund its operations as well as generate a portion of the capital necessary to
meet the Company's obligations on its long-term debt. The Company intends to
seek other sources of financing, restructure and/or pay off some of its
long-term debt. There is no assurance that additional funding will be available,
or that if available, it can be obtained on terms favorable to the Company.
Failure to obtain such funding could adversely affect the Company's financial
condition.
Six Months Ended March 31, 2000 Compared to Six Months Ended March 31, 1999.
Results of Operations
The results of operations for the six months ended March 31, 2000
reflect no retail sales as all company owned restaurants were disposed by
December 31, 1998.
The Company had a net loss before preferred dividends of ($1,492,665)
for the six months ended
March 31, 2000 compared to a net loss of ($3,538,027) for the same period in
1999. The decrease in the net loss is primarily from the result of a one time
charge of $1,902,290 incurred during the six months ended March 31, 1999 due to
a goodwill adjustment from the write-down of long-lived assets and a loss of
$504,638 from the disposition of the Company's corporately owned restaurants and
other assets. These items were reflected in a loss per share of $0.06 for the
six months ended March 31, 2000 compared to a loss per share of $0.19 for the
same period in 1999.
10
Total revenues increased $152,279 or 7.3% to $2,243,690 for the six
months ended March 31, 2000 compared to $2,091,411 for the same period in 1999.
This increase was offset by a decrease of $110,878 resulting from the sale of
all corporately owned restaurants by the end of 1998. Revenues from bakery sales
were $376,003 for the six months ended March 31, 2000 compared to $323,103 for
the same period in 1999, an increase of $52,900. Royalties decreased $33,445 or
2.6% to $1,248,551 for the six months ended March 31, 2000 compared to
$1,281,996 for the same period in 1999. The decrease is primarily from the sale
of the Company's Little King's and Georgio's submarine sandwich chains which
were sold prior to the end of the Company's fiscal year of September 30, 1999.
Total expenses decreased $1,730,765 or 36.0% to $3,071,334 for the six
months ended March 31, 2000 compared to $4,802,099 for the same period in 1999.
The decrease is primarily due to the result of a one time charge of $1,902,290
incurred during the six months ended March 31, 1999 due to a goodwill adjustment
from the write-down of long-lived assets. General and administrative expenses
increased $232,270 or 34.3% to $910,105 for the six months ended March 31, 2000
compared to $677,835 for the same period in 1999 due to an increase in corporate
staff and professional expenses from the Company changing its fiscal year. Cost
of retail sales for the Company's corporately owned restaurants were $117,561
for the six months ended March 31, 1999 compared to $0 for the same period in
2000 as the Company disposed of all of its corporately owned restaurants prior
to the end of 1998. Franchise servicing costs decreased $156,856 or 17.4% to
$744,668 for the six months ended March 31, 2000 compared to $901,524 for the
same period in 1999 as two of the Company's submarine sandwich chains of Little
King and Georgio's were sold prior to the end of the Company's fiscal year of
September 30, 1999.
Liquidity and Capital Resources
Net cash provided by operating activities was $140,521 for the six
months ended March 31, 2000 compared to net cash used in operating activities of
$(37,837) for the comparable period in 1999. The increase in cash provided by
operating activities is primarily attributable to a net increase in accounts
receivable, prepaid expenses, accounts payable and accrued expenses of $193,834
for the six months ended March 31, 2000 compared to $142,072 for the same period
in 1999.
Net cash provided by investing activities was $469,842 for the six
months ended March 31, 2000 as the Company received a deposit of $475,000 in
connection with the sale of its Mountain Mike's Pizza franchise division which
was completed on April 28, 2000 compared to net cash provided by investing
activities of $518,226 for the comparable period in 1999 as the Company sold all
of its corporately owned restaurants.
Net cash of $396,209 was used by financing activities for the six
months ended March 31, 2000 as payments on long-term debt and preferred stock
dividends compared to net cash used of $540,304 for the comparable period in
1999. The 1999 amount reflects the redemption of $243,750 in redeemable common
stock, the proceeds of $200,000 from the issuance of preferred stock and
payments on long-term debt of $487,254.
11
Working capital deficit at March 31, 2000 was $1,971,062 compared with
a deficit of $1,879,446 at September 30, 1999, an increase in deficit of
$91,616.
The Company believes that cash flow from operations and from the sale
of the Mountain Mike's Pizza franchising assets in April 2000 will continue to
fund its operations as well as generate a portion of the capital necessary to
meet the Company's obligations on its long-term debt. The Company intends to
seek other sources of financing, restructure and/or pay off some of its
long-term debt. There is no assurance that additional funding will be available,
or that if available, it can be obtained on terms favorable to the Company.
Failure to obtain such funding could adversely affect the Company's financial
condition.
12
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
On August 2, 1999, shareholders of Li'l Dino Management Corporation
filed a complaint against the Company and some of its officers in Civil Action
Number 1:99-CV631 in the United States District Court for the Middle District of
North Carolina, Greensboro Division. The Company was served with this complaint
on August 5, 1999. This complaint alleges damages of $4.5 million for securities
fraud, misappropriation of corporate opportunities and negligent
misrepresentation, and seeks treble damages, interest and attorney's fees. The
allegations in the complaint relate to the Company's acquisition of
substantially all of the assets of Li'l Dino Management.
The Company believes that the claims made in the complaint are without
merit. The Company intends to defend itself vigorously in this matter.
Item 2. Changes in Securities and Use of Proceeds.
The following table sets forth information with respect to the sale or
issuance of unregistered securities by the Company between January 1, 2000 to
March 31, 2000:
Exempt From
1933 Act
Shares Type of Value of Business Registration In
Issued Security Consideration To Whom Issued Purpose Reliance of:
- ------ -------- ------------- -------------- ------------- ------------
235,000 Common $54,050 Compass Point Consulting Section 4(2)
Group Services
500,000 Common $110,000 Stockbroker Consulting Section 4(2)
Relations Services
150,000 Common $52,500 James Skalko Consulting Section 4(2)
Services
150,000 Common $52,500 Roger Tichenor Consulting Section 4(2)
Services
894,911 Common $223,728 Tri-Emp Settlement Section 4(2)
Enterprises of Debt
848,831 Common $212,208 Monterrey Settlement Section 4(2)
Corporation of Debt
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
Effective April 28, 2000, Bradley L. Gordon, Chief Operating Officer and
a Director of the Company, terminated his employment and board of directors'
seat with the Company.
Item 6. Exhibits and Reports on Form 8-K.
Waiver and Consent to Actions in Lieu of Special Meeting of Directors.
Resignation Letter from Bradley L. Gordon previously filed on May 11, 2000
13
SIGNATURES
In accordance with all the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Jreck Subs Group, Inc.
- -------------------------
(Registrant)
President & Duly
09/18/00 Christopher M. Swartz Authorized Officer /s/ Christopher M. Swartz
- -------- --------------------- ------------------ -------------------------
Date Print Name Title Signature
Chief Financial
Officer & Principal
09/18/00 Michael E. Cronin Accounting Officer /s/ Michael E. Cronin
- -------- --------------------- ------------------- -------------------------
Date Print Name Title Signature
14