-----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, C844U1oRilKvhq1ldHe/YxdN14VNIVdJLMBR6tUdwly5UlkQ1yPy55D9oZewokXl 5fRYw93cRGzamvIv/9js6g== 0000950148-96-002004.txt : 19960913 0000950148-96-002004.hdr.sgml : 19960913 ACCESSION NUMBER: 0000950148-96-002004 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960912 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JERRYS FAMOUS DELI INC CENTRAL INDEX KEY: 0000948308 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 953302338 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-26956 FILM NUMBER: 96629367 BUSINESS ADDRESS: STREET 1: 12711 VENTURA BLVD STREET 2: STE 400 CITY: STUDIO CITY STATE: CA ZIP: 91604 BUSINESS PHONE: 8187668311 MAIL ADDRESS: STREET 1: 12711 VENTURA BLVD STREET 2: STE 400 CITY: STUDIO CITY STATE: CA ZIP: 91604 8-K/A 1 AMENDED CURRENT REPORT DATED 6/30/96 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 --------------------- AMENDED FORM 8-K CURRENT REPORT CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) June 30, 1996 JERRY'S FAMOUS DELI, INC. (Exact name of registrant as specified in its charter)
California 0-26956 95-3302338 - ------------------------------- ------------------------ ---------------- (State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Incorporation or Organization) Identification No.)
12711 Ventura Boulevard, Suite 400, Studio City, California 91604 ----------------------------------------------------------------- (Address of Principal Executive Offices) (818) 766-8311 ---------------------------------------- (Registrant's Telephone Number, Including Area Code) 2 This Form 8-K amends Form 8-K filed on July 15, 1996 by the registrant, Jerry's Famous Deli, Inc. The purpose of this Form 8-K is to provide the financial statements and the pro forma financial information for the acquired business, Solley's, Inc., required under Item 7. 1 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired Pursuant to Regulation S-X 210.3-05 audited financial statements for the year ended December 31, 1995 and unaudited financial statements for the six-month periods ended June 30, 1996 and 1995 are provided. Jerry's Famous Deli, Inc. effectively acquired substantially all of the assets and operations of Solley's, Inc. on July 1, 1996. 2 4 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholder Solley's, Inc. We have audited the accompanying balance sheet of Solley's, Inc. as of December 31, 1995, and the related statements of operations, changes in shareholder's deficit, and cash flows for the year ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Solley's, Inc. as of December 31, 1995, and the results of its operations and its cash flows for the year ended December 31, 1995, in conformity with generally accepted accounting principles. COOPERS & LYBRAND, L.L.P. Los Angeles, California May 17, 1996, except as to the information presented in Note 7, for which the date is June 30, 1996. 3 5 SOLLEY'S, INC. BALANCE SHEETS
DECEMBER 31, JUNE 30, 1995 1996 ---- ---- (UNAUDITED) ASSETS Current assets Cash and cash equivalents $ 239,636 $ 163,168 Accounts receivable 11,706 9,328 Due from employee 7,339 5,839 Inventories 87,385 78,657 Prepaid expenses 38,869 469 ----------- ----------- Total current assets 384,935 257,461 Property and equipment, net 691,510 604,754 Deposits 75,000 75,000 ----------- ----------- Total assets $ 1,151,445 $ 937,215 =========== =========== LIABILITIES AND SHAREHOLDER'S DEFICIT Current liabilities Accounts payable $ 146,840 $ 144,123 Accrued expenses 254,394 299,051 Sales tax payable 53,105 40,845 Due to officer -- 1,017,000 Current portion of long-term debt 64,756 90,673 ----------- ----------- Total current liabilities 519,095 1,591,692 Due to officer 1,017,000 -- Long-term debt 67,971 -- ----------- ----------- Total liabilities 1,604,066 1,591,692 Commitments (Note 4) Shareholder's deficit Common stock, no par value, 100,000 shares authorized, 10,000 shares issued and outstanding 11,389 11,389 Accumulated deficit (464,010) (665,866) ----------- ----------- Total shareholder's deficit (452,621) (654,477) Total liabilities and shareholder's deficit $ 1,151,445 $ 937,215 =========== ===========
The accompanying notes are an integral part of these financial statements 4 6 SOLLEY'S, INC. STATEMENTS OF OPERATIONS
YEAR SIX MONTHS SIX MONTHS ENDED ENDED ENDED DECEMBER 31, 1995 JUNE 30, 1996 JUNE 30, 1995 ----------------- -------------- ------------- (UNAUDITED) (UNAUDITED) Sales $ 7,459,530 $ 3,537,215 $ 3,775,854 Cost of sales 2,522,518 1,219,419 1,257,171 ----------- ----------- ----------- Gross profit 4,937,012 2,317,796 2,518,683 Labor 2,905,115 1,469,669 1,446,458 Occupancy and other 1,289,482 645,347 626,718 General and administrative expenses 527,202 278,738 323,952 Depreciation expense 175,422 86,757 84,752 ----------- ----------- ----------- Income (loss) from operations 39,791 (162,715) 36,803 Interest income 3,202 2,016 1,137 Interest expense (91,747) (40,786) (47,548) Other income, net 21,314 429 20,616 ----------- ----------- ----------- Income (loss) before income taxes (27,440) (201,056) 11,008 Income tax provision (800) (800) (800) ----------- ----------- ----------- Net income (loss) $ (28,240) $ (201,856) $ 10,208 =========== =========== ===========
The accompanying notes are an integral part of these financial statements 5 7 SOLLEY'S, INC. STATEMENTS OF CHANGES IN SHAREHOLDER'S DEFICIT FOR THE YEAR ENDED DECEMBER 31, 1995
Common Stock ---------------------------------------------- Shares Shares Issued Accumulated Authorized and Outstanding Amount Deficit Total ---------- --------------- -------- ----------- ---------- Balance, December 31, 1994 100,000 10,000 $ 11,389 $ (435,770) $ (424,381) Net loss (28,240) (28,240) ------- ------ ------- --------- --------- Balance, December 31, 1995 100,000 10,000 11,389 (464,010) (452,621) ------- ------ -------- --------- --------- Net loss (unaudited) (201,856) (201,856) ------- ------ -------- --------- --------- Balance, June 30, 1996 (unaudited) 100,000 10,000 $ 11,389 $ (665,866) $(654,477) ======= ====== ======== ============ ==========
The accompanying notes are an integral part of these financial statements 6 8 SOLLEY'S, INC. STATEMENTS OF CASH FLOWS
YEAR SIX MONTHS SIX MONTHS ENDED ENDED ENDED DECEMBER 31, 1995 JUNE 30, 1996 JUNE 30, 1995 ----------------- -------------- ------------- (UNAUDITED) (UNAUDITED) Cash flows from operating activities: Net income (loss) $ (28,240) $(201,856) $ 10,208 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 175,422 86,756 84,752 Changes in assets and liabilities Accounts receivable 16,866 2,378 17,616 Due from employee 3,202 1,500 1,450 Inventories (11,790) 8,728 (4,510) Prepaid expenses 2,703 38,400 26,871 Accounts payable 330 (2,717) 16,983 Accrued expenses and sales tax payable 35,619 32,397 (62,442) --------- --------- --------- Net cash provided by (used in) operating activities 194,112 (34,414) 90,928 --------- --------- --------- Cash flows from investing activities: Purchases of equipment (49,922) -- (21,124) --------- --------- --------- Net cash used in investing activities (49,922) -- (21,124) --------- --------- --------- Cash flows from financing activities: Payments on long-term debt (74,203) (42,054) (34,628) --------- --------- --------- Net cash used in financing activities (74,203) (42,054) (34,628) --------- --------- --------- Net increase (decrease) in cash and cash equivalents 69,987 (76,468) 35,176 Cash and cash equivalents, beginning of year 169,649 239,636 169,649 --------- --------- --------- Cash and cash equivalents, end of year $ 239,636 $ 163,168 $ 204,825 ========= ========= ========= Supplemental cash flow disclosures : Interest paid $ 60,728 $ 5,851 $ 45,867 ========= ========= ========= Income taxes paid $ 1,658 $ -- $ -- ========= ========= =========
The accompanying notes are an integral part of these financial statements. 7 9 SOLLEY'S, INC. NOTES TO FINANCIAL STATEMENTS 1. Summary Of Significant Accounting Policies: Organization and Basis Of Presentation Solley's, Inc. ("Solley's" or the "Company") was established in 1977 as a C corporation. Solley's owns and operates two deli-style restaurants located in Woodland Hills and Sherman Oaks, California. The Sherman Oaks location also operates a bakery, supplying its restaurants with bagels and other baked goods. Cash and Cash Equivalents Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased, and are carried at cost, which approximates fair value. The Company currently maintains substantially all of its operating cash balances with a single financial institution. At times, these cash balances may be in excess of Federal Deposit Insurance Corporation insurance limits. Inventories Inventories consist primarily of food products and are stated at the lower of cost (first-in, first-out) or market. Property and Equipment Property and equipment are recorded at cost. Improvements are capitalized while repair and maintenance costs are expensed as incurred. When an item is sold or retired, the accounts are relieved of both the cost and the related accumulated depreciation and the resulting gain or loss, if any, is included in earnings. Depreciation is provided using the straight-line method over the estimated useful lives of the assets or the primary terms of the respective leases. Depreciation periods are as follows:
Fixtures and equipment 5 years Transportation equipment 5 years Leasehold improvements Primary term of lease
Income Taxes Income taxes are recorded in accordance with Statement of Accounting Standards ("SFAS") No. 109, which requires recognition of deferred tax assets and liabilities for temporary differences and net operating losses ("NOL") and tax credit carryforwards. Under SFAS No. 109, deferred income taxes are established based on enacted tax rates expected to be in effect when temporary differences are scheduled to reverse and NOL and tax credit carryforwards are expected to be utilized. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions for the reporting period and as of the financial statement date. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates. 8 10 SOLLEY'S, INC. NOTES TO FINANCIAL STATEMENTS Unaudited Interim Financial Information The unaudited balance sheet as of June 30, 1996 and the unaudited statements of operations and cash flows for the six-month periods ended June 30, 1996 and 1995 and the unaudited statement of changes in shareholders' deficit for the six months ended June 30, 1996 (collectively, "interim financial information"), have been prepared on the same basis as the audited financial statements included herein. In the opinion of the Company's management, the interim financial information includes all adjustments, consisting of only normal recurring adjustments necessary for a fair statement of the results of the interim periods. The results of operations for the six months ended June 30, 1996, may not be indicative of the operating results to be achieved for the full year or any other interim period. 2. Property and Equipment: Property and equipment consist of the following as of:
December 31, 1995 June 30, 1996 ----------------- ------------- (Unaudited) Fixtures and equipment $ 1,007,882 $ 1,007,882 Transportation equipment 157,692 157,692 Leasehold improvements 689,793 689,793 ----------- ------------ 1,855,367 1,855,367 Less: Accumulated depreciation (1,163,857) (1,250,613) $ 691,510 $ 604,754 =========== ============
3. Long-Term Debt: Long-term debt consists of the following as of:
December 31, 1995 June 30, 1996 ----------------- ------------- (Unaudited) Note payable to a bank; interest is payable monthly at the bank's reference rate (8.25% at December 31, 1995 and June 30, 1996) plus 2.25%; due December 1, 1997. $95, 834 $70,883 Note payable to a bank; interest is payable monthly at the bank's reference rate (8.25% at December 31, 1995) plus 3.25%; paid off June 1, 1996. 11,795 - Note payable to a bank; collateralized by transportation equipment; interest rate at 9.5%; due December 15, 1997. 15,979 12,518
9 11 SOLLEY'S, INC. NOTES TO FINANCIAL STATEMENT 3. Long-Term Debt (continued):
December 31, 1995 June 30, 1996 ----------------- ------------- (Unaudited) Note payable to a bank; collateralized by transportation equipment; interest rate at 9.25%; due December 1, 1997. 9,119 7,272 ---------- ----------- 132,727 90,673 Less: Current maturities 64,756 90,673 ---------- ---------- Total long-term debt $ 67,971 $ - =========== =========== The following are future maturities of long-term debt for each of the remaining two years ending December 31: 1996 $ 64,756 $ 22,702 1997 67,971 67,971 ---------- ---------- Total $ 132,727 $ 90,673 ========== ==========
4. Commitments: The Company leases its restaurant facilities under noncancellable operating leases, with terms ranging from 8 to 13 years plus certain renewal options. These leases generally include land and building, and require contingent rent above the minimum lease payments based on a percentage of sales ranging from 6.5% to 8%. Expenses incidental to the use of the property in excess of specified minimums are also required. The following are the future minimum base rental payments under operating leases for each of the next five years ending December 31 and in total thereafter:
1996 $ 537,120 1997 531,520 1998 528,720 1999 528,720 2000 528,720 Thereafter 3,196,760 ------------ $ 5,851,560 ============
Rent expense for the periods ending are as follows:
December 31, 1995 June 30, 1996 ----------------- ------------- (Unaudited) . Base rent $ 579,807 $ 297,420 Contingent rent 34,511 17,882 Other rental charges 56,034 52,878 ------------- -------------- Total $ 670,352 $ 368,180 ============ ============
10 12 SOLLEY'S, INC. NOTES TO FINANCIAL STATEMENTS 5. Provision for Income Taxes: The major components of the net deferred tax assets and liabilities as of December 31, 1995 are as follows:
Deferred tax assets: Net operating loss carryforward $ 133,518 Interest expense 61,202 FICA tip credit 49,233 Fixed assets and depreciation 42,802 Valuation allowance (276,799) ------------- Total deferred tax assets 9,956 ------------- Deferred tax liabilities: State taxes (9,956) ------------- Total deferred tax liabilities (9,956) ------------- Net deferred tax assets $ - =============
Due to the uncertainty surrounding the realization of net operating loss carryovers and other net deferred tax assets for the year ended December 31, 1995, the Company has provided a full valuation reserve against the net federal deferred tax asset position. The Company has approximately $372,000 in federal net operating losses to be carried forward to future years. There are also approximately $75,000 in California net operating losses to be carried forward to future years. The losses will start to expire in December 2003 and December 1997, respectively. 6. Related-Party Transactions: The Company maintains a note payable to its sole shareholder for $1,017,000 as of December 31, 1995. Interest only is payable monthly at 7% until December 31, 1995, at which time the principal plus 7% interest is due in monthly installments of $7,500 until its maturity on April 1, 2008. Interest paid to related parties for the year ending December 31, 1995 is $41,528 and for the six months ending June 30, 1996 is $176,257 (unaudited). The Company purchased seafood and other related inventory totalling approximately $190,000 and $110,000 (unaudited) for the periods ended December 31, 1995 and June 30, 1996, respectively, from Jenny Ann Foods, an affiliated company. Jenny Ann Foods is 100% owned by the Company's sole shareholder. 11 13 SOLLEY'S, INC. NOTES TO FINANCIAL STATEMENTS 7. Subsequent Event: On June 30, 1996, the Company completed the sale of substantially all of its assets and operations to Jerry's Famous Deli, Inc. for approximately $2,543,000. 12 14 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (b) Pro Forma Financial Statements Pro Forma Condensed Consolidated Statements of Operations and Consolidated Balance Sheet These unaudited Pro Forma Consolidated Statements of Operations and Balance Sheet are presented as if the purchase of assets of Solley's, Inc. ("Solley's") had occurred as of January 1, 1995 and should be read in conjunction with the Consolidated Financial Statements of Jerry's Famous Deli, Inc. ("JFD") and the Notes thereto, included in the Company's Form 10-K for the year ended December 31, 1995. In management's opinion, all adjustments necessary to reflect the purchase of substantially all of the assets of Solley's, Inc. with JFD have been made. The unaudited Pro Forma Consolidated Statements of Operations are not necessarily indicative of what the actual results of operations of Jerry's Famous Deli, Inc. and Solley's, Inc. would have been for the periods ended, nor do they purport to represent the results of operations for future periods.
Year Ended December 31, 1995 Six Months Ended June 30, 1996 ---------------------------- ------------------------------ JFD Solley's Pro Forma JFD Solley's Pro Forma ------- -------- --------- ------- ------- ------------ (Unaudited ) (in thousands except per share data) Revenues $28,030 $7,460 $ 35,490 $15,736 $3,537 $ 19,273 Cost of goods sold 9,168 2,523 11,691 4,883 1,219 6,102 ------- ------ -------- ------- ------ ------------ Gross profit 18,862 4,937 23,799 10,853 2,318 13,171 Operating expenses 13,634 4,195 17,829 7,499 2,115 9,614 General and administrative expenses 2,924 294(a) 3,218 1,853 160(a) 2,013 Depreciation and amortization expenses 977 328(c) 1,305 652 164(c) 816 Restaurant concept discontinuation costs 137 -- 137 -- -- -- ------- ------ -------- ------- ------ ------------ Total expenses 17,672 4,817 22,489 10,004 2,439 12,443 ------- ------ -------- ------- ------ ------------ Income (loss) from operations 1,190 120 1,310 849 (121) 728 Interest income 72 3 75 109 2 111 Interest expense (182) - (b) (182) (156) --(b) (156) Other income, net 69 21 90 14 1 15 ------- ------ -------- ------- ------ ------------ Income (loss) before income provision for taxes and minority interest 1,149 144 1,293 816 (118) 698 Provision for income taxes 187 1 188 274 1 275 Minority interest 180 -- 180 131 -- 131 ------- ------ -------- ------- ------ ------------ Net income (loss) $ 782 $ 143 $ 925 $ 411 $ (119) $ 292 ======= ====== ========== ======= ====== ============ Net income per share $ 0.09 $ 0.03 ========== ============ Weighted average shares outstanding 10,476,241 10,481,244
(a) Total compensation and benefits for the prior owner of Solley's in the amounts of approximately $118,000 and $233,000 for the six and twelve months, respectively, have been eliminated. (b) Since no debt or other liabilities of Solley's were assumed by the Company, interest expense of $41,000 and $91,000 for the six and twelve months, respectively, have been eliminated. (c) Includes amortization of goodwill of $37,000 and $73,000 and of the covenant not to compete of $40,000 and $80,000 for the six and twelve months, respectively. 13 15 Pro Forma Condensed Consolidated Statements of Operations and Consolidated Balance Sheet
June 30, 1996 ------------------------------------ JFD Solley's(1) Pro Forma --- ----------- --------- (in thousands) ASSETS Current assets Cash and cash equivalents $ 1,462 $ -- $ 1,462 Accounts receivable, net 284 -- 284 Inventory 178 25 203 Prepaid expenses 383 -- 383 Other current assets 501 -- 501 ------- ------- ------- Total current assets 2,808 25 2,833 Property and equipment, net 18,007 667 18,674 Acquisition deposit in escrow 2,543 (2,543) -- Organization costs, deferred taxes and other assets 408 110 518 Goodwill -- 1,341 1,341 Covenant not to compete -- 400 400 ------- ------- ------- Total assets $23,766 $ -- $23,766 ======= ======= ======= LIABILITIES AND EQUITY Current liabilities $ 2,943 $ -- $ 2,943 Long-term debt and other liabilities 7,317 -- 7,317 Minority interest 342 -- 342 Equity 13,164 -- 13,164 ------- ------- ------- Total liabilities and equity $23,766 $ -- $23,766 ======= ======= =======
(1) The purchase price of $2,543,000 was allocated to the following: $25,000 to inventory; $667,000 to property and equipment based on the fair value; $400,000 for a covenant not to compete which will be amortized on a straight-line basis over 5 years; $110,000 for deposits to the landlords; and the balance to goodwill which will be amortized on a straight-line basis over 18 years. 14 16 SIGNATURES 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 hereunto duly authorized. JERRY'S FAMOUS DELI, INC. Date: September 11, 1996 By: /s/ Isaac Starkman ------------------------------------ Isaac Starkman Chief Executive Officer and Chairman of the Board of Directors 15 -----END PRIVACY-ENHANCED MESSAGE-----