-----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, CyuIC4XuhSIZV0QFIP+2HytJBaSoLit2Xr3U/Um/6s/PkRpMqa5VwCQQhuU9Xeuj WtghuH32UBFlKBYqXMIBVw== 0001005477-97-002627.txt : 19971126 0001005477-97-002627.hdr.sgml : 19971126 ACCESSION NUMBER: 0001005477-97-002627 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19971125 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLIMPIE INTERNATIONAL INC CENTRAL INDEX KEY: 0000895477 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 132908793 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-21036 FILM NUMBER: 97728375 BUSINESS ADDRESS: STREET 1: 1775 THE EXCHANGE STREET 2: SUITE 600 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7709842707 MAIL ADDRESS: STREET 1: 1775 THE EXCHANGE STREET 2: SUITE 600 CITY: ATLANTA STATE: GA ZIP: 30339 10-K/A 1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A Amendment No. 1 to Annual Report on Form 10-K for the fiscal year ended June 30, 1997 (the "Report") to correct typographical and EDGAR conversion errors appearing in the Report at Item 6, Selected Financial Data, and in Notes 2, 3, 15 and 17 of registrant's audited financial statements appearing in the Report at Item 8, Financial Statements. BLIMPIE INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Commission File No. 0-21036 New Jersey 13-2908793 (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 740 Broadway, New York, NY 10003 (Address and Zip Code of Principal Executive Offices) Registrant's Telephone Number: (212) 673-5900 Signature In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. BLIMPIE INTERNATIONAL, INC. Dated: November 25, 1997 By: /s/ Joanne Guarnieri ------------------------------------------------- Joanne Guarnieri, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 1 Item 6. SELECTED FINANCIAL DATA Fiscal Years Ended June 30, ------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (Dollars in 000's, Except Per Share and Outlets Open Data) Revenues $38,127 $34,991 $26,374 $16,090 $11,800 Continuing Fees 15,391 12,465 8,734 6,017 4,310 Net Income 3,278 4,040 2,340 1,383 1,049 Primary Earnings Per Share $ 0.34 $ 0.43 $ 0.27 $ 0.16 $ 0.14* Fully Diluted Earnings Per $ 0.34 $ 0.41 $ 0.27 $ 0.16 $ 0.14* Share Total Assets $27,704 $21,823 $15,252 $11,170 $ 7,876 Long Term Debt -0- 5 13 19 24 Long Term Trademark 3,509 -0- -0- -0- -0- Obligations Total Shareholders' Equity 18,865 15,675 7,308 5,311 3,376 Cash Dividends Declared Per $ 0.07 $ 0.06 $ 0.05 $ 0.02* $ 0.017* Common Share Outlets Open 1,684 1,407 986 674 499 - ---------- * Adjusted to account for three for two stock split implemented in March 1994. Item 8. FINANCIAL STATEMENTS Note 2: Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 2 Revenue Recognition Fees relating to subfranchisor and master licensor sales are recognized when all material services or conditions relating to the sale are substantially performed or satisfied by the Company. If fees are collectible over an extended period and no reasonable basis exists for estimating collectibility, those fees are recognized as they are collected or when the uncertainty regarding collectibility of fees is resolved. Initial fees from the awarding of individual franchises are deferred and recorded as revenue when the franchisee's restaurant is opened. Expenses associated with site selection, real estate, training, commissions and design are deferred and charged to expense when the initial fees are recognized. Continuing fees from franchised restaurants are recorded as revenue when earned. Revenue from equipment sales is recognized when the equipment is shipped. Cash and Cash Equivalents For the purpose of the statement of cash flows, the company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. The Company has cash deposits with financial institutions which fluctuate in excess of federally insured limits. If these financial institutions were not to honor their contractual liability, the Company could incur losses. Management is of the opinion that there is no significant risk of loss because of the financial strength of the financial institutions. Investments Investment securities with maturities of three months or less at the time of acquisition are considered cash equivalents. Pursuant to Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," debt securities included in the company's investment portfolio for which there is a positive intent and ability to hold to maturity are carried at amortized cost. Debt securities that may be sold prior to maturity and all marketable equity securities are classified as available-for-sale and carried at fair value. Fair value is estimated based on quoted market prices for those or similar investments. Net unrealized gains and losses, determined on the specific identification method, on securities classified as available-for-sale are carried as a separate component of Stockholders' Equity. Fair Market Value Disclosure Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments" (SFAS 107), requires disclosure of the fair value of certain items, including receivables, payables, debt and investments. The Company believes that the amounts disclosed within the consolidated balance sheet do not differ significantly from fair value as defined in SFAS 107. The carrying value of cash and cash equivalents and accounts receivable approximates fair value because of the short maturity of those instruments. The carrying value of notes receivable was deemed appropriate since recognition was deferred until such time as collection can be assured. The carrying value of amounts due from related parties was deemed to approximate fair value based on current market conditions as well as the relationship of the parties. Accounts and Notes Receivable The Company provides an allowance for doubtful receivables equal to the estimated collection losses that will be incurred in the collection of all receivables. The estimated losses are based on historical collection experience coupled with a review of all existing receivables. Property and equipment are carried at cost. Depreciation is computed over the estimated useful lives of the assets using both accelerated and straight-line methods. Significant expenditures for additions and improvements are capitalized and expenditures for routine repairs and maintenance are charged to operations as incurred. The costs of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal. Gains or losses 3 resulting from disposals are included in operations. Trademarks Trademarks are carried at cost less accumulated amortization which is calculated on a straight-line basis over the estimated useful lives of 15-40 years. Amortization expense was $135,004 in 1997 and $19,132 in 1996. Advertising The Company follows the policy of charging the costs of advertising to expense as incurred. Advertising expense was $477,026 in 1997, $427,256 in 1996 and $192,494 in 1995. Income Taxes The Company and its wholly-owned subsidiaries file a consolidated Federal income tax return. The provision for income taxes and corresponding balance sheet accounts are determined in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Under SFAS 109, the deferred tax liabilities and assets are determined based on temporary differences between the basis of certain assets and liabilities for income tax and financial reporting purposes. These differences are primarily attributable to differences in the recognition of depreciation and amortization of property and revenues. Earnings per Share and Per Share Amounts Primary and fully diluted earnings per share amounts are computed on the weighted average number of shares outstanding, 9,517,462 in 1997, 9,372,447 in 1996 and 8,573,797 in 1995, adjusted for the assumed conversion of dilutive common stock equivalents, principally stock options. Common Stock On January 10, 1995, the shareholders approved an increase in the authorized common stock from 10,000,000 shares to 20,000,000. On August 11, 1995, the Company issued 862,500 additional shares of common stock (see Note 16). Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Accordingly, actual results could differ from those estimates. Accounting Pronouncements In February, 1997 the FASB issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128), which the Company is required to adopt effective for fiscal year ended June 30, 1998. SFAS 128 establishes standards for computing and presenting earnings per share (EPS). SFAS 128 simplifies the standards for computing earnings per share and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS and requires dual presentation of basic and diluted EPS on the face of the income statement. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common share outstanding for the period. The Company does not believe the adoption will have a material effect on the financial statements. In June, 1997 the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131), which the Company is required to adopt effective for fiscal year ended June 30, 1998. SFAS 131 requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Management is currently reviewing the provisions of SFAS 4 131 and does not believe that the Company's financial statements will be significantly impacted by the adoption. Reclassifications Certain amounts have been reclassified to conform with current year presentation. Note 3: Investments The following is a summary of available-for-sale securities included in investments as of June 30: 1997 Unrealized Fair Cost Gain (Losses) Value ---- ------------- ----- Available-for-Sale Securities: Current Common stock $ 60,969 $ 19,508 $ 80,477 Preferred stock 178,765 4,968 183,733 Mutual funds 124,986 (1,401) 123,585 U. S. Government securities 4,071,628 3,952 4,075,580 ------------ ------------ ----------- $ 4,436,348 $ 27,027 $ 4,463,375 ============ ------------ =========== Long-Term U.S. Government securities 3,877,827 (1,122) 3,876,705 ------------ ------------ ----------- $ 8,314,175 $ 25,905 $ 8,340,080 ============ ============ =========== 1997 Unrealized Fair Cost Gain (Losses) Value ---- ------------- ----- Available-for-Sale Securities: Current Common stock $ 86,362 $ (1,230) $ 85,132 Preferred stock 255,896 (2,818) 253,078 Mutual funds 86,829 458 87,287 ------------ ------------ ----------- $ 429,087 $ (3,590) $ 425,497 ============ ============ =========== Held-to-Maturity Securities: Current U.S. Government securities $ 5,005,453 $ (18,340) $ 4,987,113 Long-Term U.S. Government securities 6,016,014 (7,114) 6,008,900 ------------ ------------ ----------- $ 11,021,467 $ (25,454) $10,996,013 ============ ============ =========== The contractual maturities of long-term debt securities at June 30, 1997 are as follows: $3,527,402 in 1999 and $350,425 in 2000. On February 19, 1997, the Company sold held-to-maturity securities with an aggregate cost of $2,646,039 and realized a gain of $27,766. The proceeds from the sale were $2,673,805. At June 30, 1997, United States Treasury notes previously categorized as being held-to-maturity were recategorized as available-for-sale. Accordingly, this group of securities has been marked to market with the resulting adjustment reported in shareholders' equity. Note 15: Subfranchisor Fees and Franchise Revenue Franchise Fees and Costs The initial non-refundable fee for franchisees that have never owned a Blimpie restaurant is $18,000, which is payable in cash at the time of execution of the franchise agreement. Additional franchises are awarded at lesser amounts based upon the number of units awarded. The initial non-refundable fee 5 for new concept franchisees, such as convenience stores, institutional food service entities, colleges, schools, mass feeders, hospitals and others range from $1.00 to $18,000 (dependent upon the number of new concept transactions executed, the location of the new concept franchisee, the marketing area and other subjective concerns). The Company reserves the right to issue franchises to its subfranchisors or their designees for $1.00 to $5,000 each in order to accelerate the development of the area of subfranchisor. The Company defers recognition of the revenues and costs related to these transactions until the restaurant is opened. The number of franchised restaurants open as of June 30, 1997, 1996 and 1995 were 1,684 (1,667 United States, 17 International), 1,407 (1,402 United States, 5 International) and 986, respectively. The following is a summary of the deferred franchise revenues and costs. No. of Revenue Costs Units ------- ----- ----- Balance June 30, 1994 $ 2,506,880 $ 1,728,311 368 Franchises awarded 4,775,377 3,679,125 792 Revenue recognized (3,276,524) (2,425,533) (451) ----------- ----------- ---- Balance June 30, 1995 4,005,733 2,981,903 709 Franchises awarded 3,881,419 3,019,592 774 Revenue recognized (3,991,459) (3,091,749) (605) ----------- ----------- ---- Balance June 30, 1996 3,895,693 2,909,746 878 Franchises awarded 3,356,041 2,612,079 632 Revenue recognized (3,710,820) (2,833,585) (737) ----------- ----------- ---- Balance June 30, 1997 $ 3,540,914 $ 2,688,240 773 =========== =========== ==== Subfranchisor and Master Licensor Fees The subfranchisor and master licensor fee ranges from $10,000 to $575,000. These fees are established by calculating the population of the area of the subfranchisor or master licensor and multiplying the population by $0.10 for the United States and $0.01 for International. Subfranchisors and master licensors in operation as of June 30, 1997, 1996 and 1995 were, 121 (105 United States, 16 International), 117 (109 United States, 8 International) and 107, respectively. During the year ended June 30, 1995, the Company implemented new subfranchisor agreements which provide for annual renewals. In addition, the Company amended certain of the existing subfranchisor agreements to an annual renewable basis. The aggregate revenue recognized in the year ended June 30, 1995 related to these replacement agreements was approximately $75,000. Pursuant to the new form of agreement, the Company sells a territory to a subfranchisor or master licensor for a one year period, followed by four to six renewal terms, all but the last of which are annual in duration. If the subfranchisor or master licensor has met all terms and conditions of the subfranchise or master license agreement during the initial one year term and each of the one year renewal terms, a 50 to 60 year right is granted during the final renewal term upon payment of the fee set forth in the agreement. The following is a summary of the remaining deferred subfranchisor fees. Revenue ------- Balance June 30, 1994 $ 2,627,772 Subfranchisor fees 1,322,238 Revenue recognized (1,722,662) Contracts amended (613,159) ----------- Balance June 30, 1995 1,614,189 Revenue recognized (921,218) ----------- Balance June 30, 1996 692,971 Revenue recognized (220,499) ----------- Balance June 30, 1997 $ 472,472 =========== 6 Note 17: Quarterly Information (Unaudited) The following table sets forth a summary of the unaudited quarterly results of operations for the twelve month periods ended June 30, 1997 and June 30, 1996.
1997 First Second Third Fourth Total Total Revenues $10,017,062 $9,186,739 $8,928,875 $9,994,323 $38,126,999 Gross Profit 3,923,459 3,553,852 3,453,292 4,394,573 15,325,176 Net Income 940,723 850,714 755,748 730,809 3,277,994 Primary Earnings Per Share 0.10 0.08 0.08 0.08 0.34 Fully Diluted Earnings Per Share $ 0.10 $ 0.08 $ 0.08 $ 0.08 $ 0.34 1996 First Second Third Fourth Total Total Revenues $7,767,427 $8,578,196 $8,929,892 $9,715,867 $34,991,382 Gross Profit 3,059,062 3,667,177 3,937,010 4,063,098 14,726,347 Net Income 784,463 1,015,846 1,247,379 992,587 4,040,275 Primary Earnings Per Share 0.09 0.11 0.13 0.10 0.43 Fully Diluted Earnings Per Share $ 0.09 $ 0.11 $ 0.13 $ 0.08 $ 0.41
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