-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TMsZbZ5Z1XCRq33FS7/DcCjfubdCW5TbdGsSQZ3gE3X82LjtkDQGNcsCBWVlY2la koJaF5BH0RLEvZwKAvAbGg== 0000912057-96-018284.txt : 19960820 0000912057-96-018284.hdr.sgml : 19960820 ACCESSION NUMBER: 0000912057-96-018284 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960819 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREAMS INC CENTRAL INDEX KEY: 0000810829 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 870368170 STATE OF INCORPORATION: UT FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-15399 FILM NUMBER: 96617674 BUSINESS ADDRESS: STREET 1: 42-620 CAROLINE COURT STREET 2: GARDEN STE CITY: PALM DESERT STATE: CA ZIP: 92211 BUSINESS PHONE: 6197761010 MAIL ADDRESS: STREET 2: 1776 NORTH STATE STREET SUITE 130 CITY: OREM STATE: UT ZIP: 84057 FORMER COMPANY: FORMER CONFORMED NAME: STRATAMERICA CORP DATE OF NAME CHANGE: 19920703 10QSB 1 FORM 10-QSB FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1996 --------------------------------------------------------------- Commission file number 0-15399 --------------------------------------------------------- Dreams, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Utah 87-0368170 - ------------------------------------- ------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 42-620 Caroline Court, Palm Desert, California 92211 - --------------------------------------------------- --------- (Address of principal executive offices) (Zip Code) (619) 776-1010 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, including area code) StratAmerica Corporation - -------------------------------------------------------------------------------- Former Address from Previous Form 10-Q 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 --- --- 24,000,000 Common Shares, $0.05 par value, were issued and outstanding as of August 15, 1996. Transitional Small Business Disclosure Format. Yes No X --- --- ITEM 1 - FINANCIAL STATEMENTS DREAMS, INC. CONSOLIDATED BALANCE SHEET (Dollars in Thousands) (unaudited) June 30, March 31, 1996 1996 -------- -------- ASSETS Current assets: Cash $ 28 $ 367 Restricted cash - 30 Trade accounts receivable 35 45 Current portion of notes receivable 13 13 Inventories 90 109 Prepaid expenses 111 85 -------- --------- Total current assets 277 649 Notes receivable 165 166 Property and equipment, net 78 86 Other assets 10 11 -------- --------- $ 530 $ 912 -------- --------- -------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 433 $ 449 Accrued liabilities 1,825 1,954 Current portion of long-term debt and capital lease obligations 200 211 Notes payable 656 697 Payable to restricted cash 168 75 Deferred franchise fees - 25 -------- -------- Total current liabilities 3,282 3,411 Long-term debt and capital lease obliga- tions, less current portion 209 294 Accumulated losses in excess of investment in unconsolidated subsidiary 121 121 Deferred revenue 378 378 Minority interest in consolidated subsidiary 357 357 -------- --------- 4,347 4,561 -------- --------- Shareholders' equity: Common stock, $.05 par value - authorized 50,000,000 shares; 24,000,000 shares issued and outstanding 1,200 1,200 Capital in excess of par value 11,707 11,667 Deferred compensation (535) (550) Accumulated deficit (16,189) (15,966) -------- --------- (3,817) (3,649) -------- --------- $ 530 $ 912 -------- --------- -------- --------- See notes to consolidated financial statements. -2- DREAMS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Dollars in Thousands, except per share amounts) (unaudited) Three Months Ended -------------------- June 30, -------------------- 1996 1995 -------- --------- Revenues: Restaurant $ 249 $ 2,804 Retail 68 101 Franchise fees and royalties 114 112 Other 4 1 Interest 1 24 -------- --------- 436 3,042 -------- --------- Expenses: Restaurant cost of sales, excluding depreciation 163 1,929 Restaurant rent 33 324 Other restaurant occupancy and operating expense 45 539 Retail cost of sales 48 78 Retail operating expense 86 74 General and administrative expense 248 332 Depreciation and amortization 8 144 Interest 28 121 -------- --------- 659 3,541 -------- --------- Net loss $ (223) $ (499) -------- --------- -------- --------- Net loss per share $ (0.01) $ (0.05) -------- --------- -------- --------- See notes to consolidated financial statements. -3- DREAMS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands) (unaudited) Three Months Ended -------------------- June 30, -------------------- 1996 1995 --------- -------- Cash flows from operating activities: Cash received from customers $ 538 $ 2,959 Cash paid to suppliers and employees (786) (2,892) Interest received 1 1 Interest paid (26) (382) -------- --------- Net cash used in operating activities (273) (314) -------- --------- Cash flows from investing activities: Purchase of property and equipment - (5) Other 1 (3) -------- --------- Net cash (used in) provided by investing activities 1 (8) -------- --------- Cash flows from financing activities: Principal payments on notes payable, long- term debt and capital lease obligation (97) (80) Proceeds from borrowings - 136 -------- --------- Net cash (used in) provided by financing activities (97) 56 -------- --------- Net increase (decrease) in cash (369) (266) Cash and restricted cash at the beginning of period 397 272 -------- --------- Cash and restricted cash at end of period $ 28 $ 6 -------- --------- -------- --------- (continued) See notes to consolidated financial statements. -4- DREAMS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands) (unaudited) (continued) Three Months Ended --------------------- June 30, -------------------- 1996 1995 -------- --------- Net loss $ (223) $ (499) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 8 144 Change in assets and liabilities: Increase (decrease) in receivables 10 (25) Increase in other receivables - (23) Increase (decrease) in inventories 19 (4) Increase in prepaid expenses (26) (77) Increase (decrease) in accounts payable and accrued liabilities (145) 195 Change in deferred revenue, deposits and other 84 (25) -------- --------- Net cash used in operating activities $ (273) $ (314) -------- --------- -------- --------- SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: None. See notes to consolidated financial statements. -5- DREAMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 - UNAUDITED FINANCIAL STATEMENTS: Information as of June 30, 1996 and for the three months ended June 30, 1996 and 1995 is unaudited. The information in the unaudited financial statements reflects all adjustments which are, in the opinion of management, necessary to a fair presentation of the financial statements so as not to be misleading. These adjustments are of a normal recurring nature. These financial statements are prepared in accordance with the requirements of Form 10-Q and consequently may not include all the disclosures normally required by generally accepted accounting principles or those normally made in the annual Form 10-K filing. Any required information omitted is either insignificant or is not applicable. NOTE 2 - LOSS PER SHARE: Loss per share amounts are based on the weighted average shares outstanding of 24,000,000 for the three months ended June 30, 1996 and 10,000,000 for the three months ended June 30, 1995. NOTE 3 - INVENTORY: Inventory consists primarily of food and beverage inventories sold through its restaurant and sports memorabilia sold through its wholly owned subsidiary Dreams Franchise Corporation. NOTE 4 - COMMITMENTS AND CONTINGENCIES: The Company has guaranteed five store lease obligations of third party and former employee franchisees of Dreams Franchise Corporation, which are in default at June 30, 1996 because the Company has not obtained written landlord approval for these subleases. -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS During the three months ended June 30, 1996, total revenue decreased $2,606,000, when compared to the three months ended June 30, 1995, due primarily to the decrease in restaurant revenue of $2,555,000. Restaurant revenue decreased during the three months ended June 30, 1996 when compared to the three month period ended June 30, 1995 due to the sale or closure of all the Company's restaurants during February and March 1996, except the single Heidi's restaurant located in San Mateo, California. Total expenses for the three months ended June 30, 1996 decreased $2,882,000 when compared to the three months ended June 30, 1995 due primarily to the sale or closure of all but one restaurant location. Restaurant cost of sales as a percentage of restaurant revenue decreased by 4 percent during the three months ended June 30, 1996 when compared to the same three month period in 1995, due to the fact that unprofitable restaurants were sold or closed during February and March 1996. Retail cost of sales as a percentage of retail revenue decreased by 6 percent for the three months ended June 30, 1996 when compared to the three months ended June 30, 1995 due to improved profitability on products sold. Retail operating expenses have increased by $12,000 during 1996 when compared to 1995 due to increased franchise advertising and promotion. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, the Company has a working capital deficit of $3,005,000 compared to a working capital deficit at March 31, 1996 of $2,775,000. The increase in the working capital deficit was due primarily to the loss for the three month period ended June 30, 1996. However, during the three month period ended June 30, 1996, the Company managed to decrease the loss from operations by $276,000 when compared to the three months ended June 30, 1995, due primarily to the sale or closure of restaurant locations as discussed above and the reduction of interest and overhead. Management is hopeful that the Company can continue to reduce costs and that the Company will be successful in furthering the business growth of Dreams Franchise Corporation (DFC). During the three month period ended June 30, 1996, several new franchisees made initial franchise payments to DFC. These franchises are expected to open store locations during the next 4 to 6 months. Despite the improvement in DFC franchise sales, the Company will still require significant capital resources during the remainder of fiscal year 1997. Management is unable to predict what additional financing will be available, either from related or other parties, in the future. The failure of the Company to meet any of these objectives could have a significant negative impact on the liquidity and capital resources of the Company. Management does not believe that the effects of inflation and changing prices will have a significant effect on the Company. -7- 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. None. Item 5. OTHER INFORMATION. None. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. None. -8- 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. SIGNATURES: Dreams, Inc. - ---------------------------- ----------------------------------- Date President Sam D. Battistone - ---------------------------- ----------------------------------- Date Principal Financial Officer Dale E. Larsson -----END PRIVACY-ENHANCED MESSAGE-----