-----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, E/HassIBO+9NlaxIwV9g/kWq3B+HNDkVezYwqo49mIxSwBKNyJCUQA4ssfL+2UgP NjcLQuOP6QJVlvel7wr3Dg== 0001047469-99-006224.txt : 19990217 0001047469-99-006224.hdr.sgml : 19990217 ACCESSION NUMBER: 0001047469-99-006224 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA CULINARY ACADEMY INC CENTRAL INDEX KEY: 0000858915 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 943042862 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-21932 FILM NUMBER: 99542623 BUSINESS ADDRESS: STREET 1: 625 POLK ST CITY: SAN FRANCISCO STATE: CA ZIP: 94102 BUSINESS PHONE: 4157713536 MAIL ADDRESS: STREET 1: 625 POLK ST CITY: SAN FRANCISCO STATE: CA ZIP: 94102 10QSB 1 10QSB - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-QSB (MARK ONE) /X/ QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998. / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND 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 Identification incorporation or organization) Number) 625 POLK STREET SAN FRANCISCO, CA 94102 (Address of principal executive (Zip Code) offices)
Issuer's Telephone Number: (415) 771-3536 ------------------------ Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 December 31, 1998, was 3,815,431. Transitional Small Business Disclosure Format. Yes / / No /X/. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CALIFORNIA CULINARY ACADEMY, INC. CONDENSED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31 JUNE 30, DECEMBER 31, 1998 1998 1997 ------------ --------- ------------ (UNAUDITED) (NOTE 1) (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents............................................... $ 770 $ 2,533 $ 1,293 Accounts receivable, net of allowance................................... 4,437 3,660 3,397 Inventories............................................................. 249 227 291 Prepaid expenses and other assets....................................... 514 379 581 ------------ --------- ------------ Total Current Assets.................................................. 5,970 6,799 5,562 ------------ --------- ------------ Property and equipment, net............................................... 7,938 4,830 7,000 Other assets.............................................................. 667 647 646 ------------ --------- ------------ TOTAL ASSETS.......................................................... $ 14,575 $ 12,276 $ 13,208 ------------ --------- ------------ ------------ --------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities................................ $ 923 $ 1,383 $ 1,056 Deferred revenue........................................................ 4,344 4,737 4,011 Current portion of long term debt....................................... 166 75 89 Other current liabilities............................................... 475 401 ------------ --------- ------------ Total Current Liabilities............................................. 5,908 6,195 5,557 ------------ --------- ------------ Long Term Debt............................................................ 2,244 97 1,324 ------------ --------- ------------ TOTAL LIABILITIES..................................................... 8,152 6,292 6,881 ------------ --------- ------------ Convertible preferred stock, no par value, 5,000,000 shares authorized, 1998: 0 and 1997: 254,500 issued and outstanding........................ 91 Common stock, no par value, 20,000,000 authorized, 1998: 3,814,431 and 3,795,350; 1997: 3,568,500 issued and outstanding....................... 11,355 11,351 11,165 Note receivable from 1998: shareholder, 1997: shareholders................ (511) (489) (530) Deficit................................................................... (4,421) (4,878) (4,399) ------------ --------- ------------ Total Shareholders' Equity............................................ 6,423 5,984 6,327 ------------ --------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................ $ 14,575 $ 12,276 $ 13,208 ------------ --------- ------------ ------------ --------- ------------
See notes to consolidated financial statements 2 CALIFORNIA CULINARY ACADEMY, INC. CONDENSED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31 ---------------------- 1998 1997 ---------- ---------- Revenues: Culinary arts education............................................................... $ 7,704 $ 6,514 Restaurants & catering and other...................................................... 1,501 1,603 ---------- ---------- Total revenues...................................................................... 9,205 8,117 Cost of sales Food & beverage....................................................................... 1,108 886 Other cost of sales................................................................... 755 802 ---------- ---------- 1,863 1,688 ---------- ---------- Gross Margin............................................................................ 7,342 6,429 Operating expenses Occupancy............................................................................. 1,155 958 Depreciation & amortization........................................................... 550 551 Compensation & benefits............................................................... 3,602 3,305 Outside services...................................................................... 237 385 Advertising & promotion............................................................... 273 394 Legal & other......................................................................... 1,008 1,204 ---------- ---------- 6,825 6,797 Interest income......................................................................... 82 5 ---------- ---------- Income (loss) before provision for income taxes......................................... 599 (363) Income tax provision (benefit).......................................................... 60 (70) ---------- ---------- Net income (loss)....................................................................... $ 539 $ (293) ---------- ---------- ---------- ---------- Earnings (loss) per share: Basic................................................................................. $ 0.14 $ (0.09) ---------- ---------- ---------- ---------- Diluted............................................................................... $ 0.12 $ (0.09) ---------- ---------- ---------- ---------- Weighted average shares outstanding: Basic................................................................................. 3,815,431 3,580,716 Diluted............................................................................... 4,417,551 3,580,716
See notes to consolidated financial statements 3 CALIFORNIA CULINARY ACADEMY, INC. CONDENSED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS, UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, -------------------- 1998 1997 --------- --------- Cash flows from operating activities: Net income (loss).......................................................................... $ 539 $ (293) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization............................................................ 550 551 Tax provision (benefit).................................................................. 60 (70) Provision for losses on accounts receivable.............................................. 58 54 Deferred rent............................................................................ 73 (82) Stock issued for services................................................................ 31 Changes in assets and liabilities: Accounts receivable...................................................................... (818) (604) Inventories.............................................................................. (23) 50 Prepaid expenses and other assets........................................................ (143) 27 Notes receivable......................................................................... (22) Accounts payable and accrued and other liabilities....................................... (484) (86) Deferred revenue......................................................................... 284 799 --------- --------- Net cash provided by (used in) operating activities.................................... 74 377 --------- --------- Cash flows from investing activities: Capital expenditures....................................................................... (4,114) (2,523) --------- --------- Net cash used in investing activities.................................................. (4,114) (2,523) --------- --------- Cash flows from financing activities: Borrowings under long term debt agreements................................................. 2,325 1,230 Principal payments on long term debt....................................................... (81) Principal payments on capital lease obligations............................................ (48) Proceeds from exercise of stock options and warrants....................................... 61 Payment of preferred stock dividends....................................................... (76) Cost of offering--preferred stock.......................................................... (3) --------- --------- Net cash provided by (used in) financing activities.................................... 2,277 1,131 --------- --------- Net decrease in cash and cash equivalents.................................................... (1,763) (1,015) Cash and cash equivalents, beginning of period............................................... 2,533 2,308 --------- --------- Cash and cash equivalents, end of period..................................................... $ 770 $ 1,293 --------- --------- --------- ---------
See notes to consolidated financial statements 4 CALIFORNIA CULINARY ACADEMY, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS NOTE 1 BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared from the records of the California Culinary Academy, Inc. (the "Academy") without audit and, in the opinion of management, include all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position at December 31, 1998, and the interim results of operations and cash flows for the six months ended December 31, 1998 and December 31, 1997. The balance sheet at June 30, 1998, presented herein, has been derived from the audited financial statements of the Academy for the fiscal year then ended. Accounting policies followed by the Academy are described in Note 1 to the audited financial statements for the fiscal year ended June 30, 1998. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted for the purposes of the interim condensed financial statements. The interim condensed financial statements should be read in conjunction with the audited financial statements including notes thereto, for the year ended June 30, 1998. The results of operations for the six months presented herein are not necessarily indicative of the results to be expected for the full year. Certain prior year amounts have been reclassified to conform to current year presentation. NOTE 2 LEASE AGREEMENTS In May 1997, The Academy renegotiated its lease for its core campus in San Francisco. The new lease runs through March 2013 and provides for three five-year extensions. Under the lease agreement, the Academy has a right of first refusal on an additional approximately 12,000 square feet of space when it becomes available. The Academy currently occupies approximately 65,000 square feet (75% of the building). The monthly rental obligation is approximately $95,000 and the Academy is responsible for its pro-rata share of insurance, real estate taxes and common area maintenance which is approximately $13,000 monthly. In August 1997, the Academy entered into a master lease of a 68-room hotel in San Francisco, approximately one block from the main campus, to provide student housing. The monthly rental obligation is approximately $29,000. The Academy is also responsible for payment of its pro rata share of insurance and real property taxes, which were approximately $1,500 per month during fiscal year 1998. The lease term extends until August 31, 2012, with three five-year renewal options thereafter. In October 1997, the Academy purchased for approximately $1,900,000 an 80-room hotel in San Francisco, across the street from its main campus, which it intends to use for student housing. In June 1998, the Academy sold the hotel for $2,220,000 and entered into a lease for the property. Under the terms of the lease, the Landlord will renovate and deliver at least sixty rooms to the Academy over an eighteen-month period, which began September 1, 1998. The base monthly rent under the lease is $435 per room delivered to the Academy. In addition, the Academy is responsible for payment of its pro rata share of insurance, real property taxes and maintenance which is estimated to be $2,000 per month. In July 1998, the Academy entered into a lease for a 5,000 square foot building in La Mesa, California. The monthly rental obligation is approximately $4,000. The Academy is also responsible for payment of its pro rata share of insurance, real property taxes and common area maintenance. The Academy estimates such payments will be approximately $1,000 per month. The lease term extends until June 30, 2003 and the 5 CALIFORNIA CULINARY ACADEMY, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 LEASE AGREEMENTS (CONTINUED) lease provides for three extension options of five years each. The Academy developed the building into a College of Food campus which was opened in December of 1998 In January 1999, the Academy entered into a lease for a 5050 square foot space in a building complex in Garden Grove, California. The Academy plans to develop the space into a College of Food campus expected to be opened in June 1999. The monthly rent obligation is approximately $5,050. The Academy is also responsible for payment of its pro-rata share of insurance, real property taxes and common area maintenance which the Academy estimates to be approximately $1,000 per month. The lease term extends until May of 2010 and the lease provides for two extension options of five years each. In December 1998, the Academy purchased a six building, 153,000 square foot building complex in New Orleans, Louisiana. Over the next two years the Academy plans to develop the buildings into a core campus similar in size and scope to its San Francisco campus. The Academy plans to open the first phase of the campus with a capacity of approximately 400 students in the Fall of 1999. To provide funding for a portion of the approximately $18 million development budget for the campus, the Academy plans to sell the land and buildings and lease them back under a long term lease agreement. Management projects that the annual lease payments for the New Orleans campus will be approximately $1,350,000. The Academy management estimates that the capacity of the existing core campus in San Francisco and the planned campus in New Orleans is approximately 1,200 students. The capacity of the two existing and one planned College of Food campuses are 150 students. Once full enrollment is achieved in the existing and planned new campuses, the Academy believes that additional facilities can be opened. NOTE 3 RELATED PARTY TRANSACTIONS In December 1997, the Chairman of the Board of Directors exercised stock options under the Company's 1992 stock option plan. In exchange, he delivered a promissory note for the value of the stock options of $465,000 bearing an interest rate of 9.5% and a due date no later than December 31, 1998. Accrued interest on this note was $46,000 as of December 31, 1998. Payment on this promissory note is currently delinquent. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion should be read in conjunction with the financial statements and notes thereto. The Academy's revenues are derived primarily from culinary arts education as well as restaurant, retail and media operations. Culinary arts education primarily consists of the AOS Program, the B&P Certificate program, the College of Food Basic Professional Culinary Skills Program, and weekend professional skills program offerings. The AOS Program enrolls students on a two-week cycle. The program can accommodate up to 25 students per class, with 581 students enrolled as of December 31, 1998. The 30-week B&P Program enrolls classes on a five week cycle typically ranging in size from 15 to 20 students with 75 students enrolled as of December 31, 1998. The College of Food programs commenced October 14, 1996 at the Academy's prototype facility in Salinas, California and the Academy opened its second College of Food facility on the campus of San Diego State University in February 1998. In December 1998, The San Diego State Campus was closed and a larger campus was opened in La Mesa, California approximately 5 miles from the previous facility. The College of Food programs enroll students every three to four weeks. As of December 31, 1998, approximately 70 and 109 students were enrolled in the Basic Professional Culinary Skills program in Salinas and San Diego, respectively. Weekend professional programs are currently offered every eight or fourteen weeks. As of December 31, 1998, the Academy had 78 students enrolled in various weekend professional programs. Consumer education consists of programs oriented to a part-time audience. The course length and content address the interests of food industry professionals, home cooks and career changers. These courses include single topic classes and various three or four class series covering current topics and basic skills. Restaurant and retail operations include two restaurants and a private dining room which is generally open to the public seven days per week, banquet services generally offered seven days per week and a small on-site retail shop offering student-prepared foods, beverages, cookbooks, video tapes, kitchen wares and selected clothing. Media operations primarily consist of the marketing of the "COOKING AT THE ACADEMY" television series and cookbook royalties. Certain expenses such as food costs and costs of goods sold are related to both educational services and retail restaurant operations. Additionally, the Academy has a multi-year agreement with Simon & Schuster to author and publish four cookbooks. Revenues from the Academy's AOS Program and the B&P Program rely exclusively on enrollments in those programs. Tuition is initially recorded as deferred revenue at the commencement of each enrollment period and recognized over the length of a program as students complete course work required for graduation. The Academy has available housing for students enrolled in the AOS and B&P programs. In July 1997, the Academy entered into a master lease of a 68-room hotel in San Francisco, approximately one block from the main campus, to provide student housing. In October 1997, the Academy purchased for approximately $1,900,000 an 80-room hotel in San Francisco, across the street from its main campus, to use for student housing. In June 1998, the Academy sold the hotel for $2,220,000 and entered into a lease for the property. Under the terms of the lease, the landlord will renovate and deliver at least sixty rooms to the Academy over an eighteen-month period, which began September 1, 1998. Management believes available student housing will continue to have a favorable impact on new student enrollments and student retention rates. 7 The Academy believes that manageable growth is achievable through the addition of extension campuses offering selected courses from the AOS Program at training facilities such as its Colleges of Food at Salinas and San Diego, California and by the addition of contract training programs offered to the food industry. While management believes that this strategy will enable it to increase revenues by providing additional educational and training resources to the food industry, there can be no assurance that management will be able to successfully implement such a strategy. 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 based upon current expectations, and actual results may differ materially. Forward-looking statements contained in this report involve numerous risks and uncertainties, including those discussed in this report and the Academy's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998, 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. The primary risks and uncertainties that could affect future results include, without limitation: (i) the inability to sustain the Company's recent profitable operations in future periods; (ii) the inability of management to successfully implement and manage the Academy's new growth strategy of adding more remote training facilities and new programs to be offered to the foodservice industry; (iii) uncertainties associated with overhauling the structure of the A.O.S. degree program enrollment process and the inability of the Academy to make appropriate adjustments in a timely manner; (iv) the increased competition from both for-profit and non-profit culinary arts education institutions; (v) the continued dependence on financial aid programs to fund a majority of Academy students' education, together with the uncertainty that budgetary constraints or other factors in the future could impact the availability and amount of both public and private sources of financial aid; (vi) that the percentage of Academy students who have defaulted on repayment of government student loans will increase to 25%, which could in the future impair or limit the Academy's participation in government financial aid programs; and (vii) the possibility that federal and state regulatory agencies could revise regulations in such a way that the Academy would not be able to comply with new regulations in a timely manner. Investors are cautioned not to place undue reliance on forward-looking statements contained in this report, which reflect management's analysis only as of the date hereof. The Academy undertakes no obligation to publicly announce any revision to these forward-looking statements as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. RESULTS OF OPERATIONS REVENUES Culinary arts education revenue increased 10.5% to $3,577,000 for the quarter ended December 31, 1998 from $3,237,000 in the same period last year. The increase in culinary arts education revenue is due primarily to increases in student enrollment and tuition in all education programs. Restaurant & catering and other revenue increased 2.4% to $975,000 for the quarter ended December 31, 1998 from $951,000 in the same period last year. The increase for the quarter is primarily due to revenues generated by the Academy's student housing division. 8 COST OF SALES Food and beverage cost increased 56.9% to $722,000 for the quarter ended December 31, 1998 from $460,000 reported in the same period last year. The increase in food and beverage cost results from inadvertent underreporting of inventory usage during the six months ended December 31, 1998. Other costs of sales decreased 7.6% to $604,000 for the quarter ended December 31, 1998 from $389,000 reported in the same period last year. The decrease for the quarter ended December 31, 1998 is attributed primarily to lower cost of merchandise associated with student supply packages. OPERATING EXPENSES Occupancy cost increased 17.5% to $604,000 for the quarter ended December 31, 1998 from $514,000 from the same period last year. The increase is due primarily to the lease of the second residential hotel in San Francisco in September 1998 and the rent at the new La Mesa College of Food Campus in San Diego. Depreciation and amortization for the quarter ended December 31, 1998 was $281,000 compared to $282,000 for the same period of the prior year. Compensation and benefits cost increased 5.3% to $1,773,000 for the quarter ended December 30, 1998 from $1,684,000 for the same period last year. The increase is due primarily to restructuring and the opening of the second College of Food in San Diego in February 1998. As expected, all other operating expenses decreased for the quarter ended December 31, 1998 as compared to the same period last year. INTEREST INCOME Interest income consists primarily of interest earned on cash equivalents and short-term investments. Interest income increased due to higher cash balances during the quarter. INCOME TAX PROVISION The Academy has provided for federal and state income taxes at 28.3% for the quarter ended December 31, 1998. The six-month year to date tax provision totals 10% of net income. The effective tax rate is the result of net operating losses incurred though June 30, 1998 and gives effect to the corporate alternative minimum income tax for the fiscal year ending June 30, 1999. 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 obligations and cash flow provided by operations. At December 31, 1998, the Academy's principal sources of liquidity included cash and cash equivalents of $370,000 and net accounts receivable of $4,437,000. Cash and cash equivalents decreased from $2,533,000 at June 30, 1998 due primarily to the Academy's using cash and cash flow from operations to purchase of the land and buildings and pre-opening expenses for the development of the planned Regional Area Campus in New Orleans, LA and to pay for lease hold improvements and equipment for the College of Food campus facility located in La Mesa, California and to costs associated with the Academy's search for equity financing. Additionally, cash was used to build and increase the number of student classrooms in San Francisco. The Academy expects to increase its cash and cash equivalents by approximately $1.2 million prior to June 30, 1999 when the planned sale and lease back of the New Orleans property is completed. The Academy has long-term obligations of $2,244,000 and working capital of $81,000 at December 31, 1998 compared to $97,000 and $604,000 as of June 30, 1998, respectively. All of the long-term debt at December 31, 1998 resulted from the purchase of the land and buildings in New Orleans. The 9 current portion of long term debt consists of a one year unsecured loan to finance a portion of the purchase of the New Orleans property. Management expects to apply the proceeds of the sale and lease back of the New Orleans property to the repayment of its existing long term debt. As of December 31, 1998, the Academy had no other outstanding bank loans or other material capital commitments other than those related to the purchase of the New Orleans property. PLANNED PRIVATE PLACEMENT The Academy is currently seeking private equity and/or convertible debt financing in a transaction that would be exempt from the registration requirements under the federal securities laws. The proceeds of the proposed financing, if completed, would be used to fund development of a planned Regional Area Campus in New Orleans, Louisiana and new College of Food campuses elsewhere in the United States. The terms of the investment are subject to negotiation with potential investors and will be publicly announced upon execution of a definitive purchase agreement. There can be no assurance that such financing will be available to the Academy on favorable terms or at all. YEAR 2000 CONSIDERATIONS The Academy has a number of computer and software systems that are critical to the efficient and timely processing of information and business transactions. The Academy has determined that most of its computerized systems are year 2000 compliant and that the few systems that are not compliant can be brought into compliance by the year 2000 for a minimal cost. The company believes that its systems that are currently non-compliant would not pose a significant problem for the Academy in terms of cost or disruption of services if they cannot be made compatible. During the first quarter of fiscal 1999, the Academy established a committee to assess its Y2K compliance and the changes necessary to become compliant. That committee has determined that most systems are Y2K compliant. The Academy has engaged a consultant to work with the Company on those few systems that are not Y2K compliant. The Company believes that this compliance work will be completed by the end of fiscal year ending June 30, 1999 for a minimal cost. With the exception of utility companies' who supply electricity, gas, water and telephone service to Academy's facilities, the Academy estimates that the year 2000 compliance issue will have minimal effect on its ability to obtain the products and services required by the Academy. The Academy is unable to assess the year 2000 issue as it relates to its suppliers of utility services. Disruption of utilities of any kind could have a major but undeterminable effect on Academy's business and profits. The Company has not yet developed a contingency plan to address the interruption of utility services. There is no assurance, however, that unforeseen year 2000 problems will not occur that will have a significant negative effect on Academy's revenues and profits. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are various legal claims and lawsuits pending by and against the Academy that, in the opinion of management, after consultation with legal counsel, are not expected to have in any material adverse effect on the results of operations or financial position of the Academy. ITEM 2. CHANGES IN SECURITIES None 10 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 11 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. November 16, 1998 CALIFORNIA CULINARY ACADEMY, INC. By: ----------------------------------------- Charles E. White CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) 12 -----END PRIVACY-ENHANCED MESSAGE-----