-----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, T80VPQBD7LkWNC7tMc3igcHrh1dyJvw89cJgF1ATycUywYHdya/SbFJP/i2TdsDd HS+WxD6irh58SmenhXQpRQ== 0000950168-97-001427.txt : 19970529 0000950168-97-001427.hdr.sgml : 19970529 ACCESSION NUMBER: 0000950168-97-001427 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970413 FILED AS OF DATE: 19970528 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIDDIE ACADEMY INTERNATIONAL INC CENTRAL INDEX KEY: 0001001320 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CHILD DAY CARE SERVICES [8351] IRS NUMBER: 521938283 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14052 FILM NUMBER: 97615420 BUSINESS ADDRESS: STREET 1: KIDDIE ACADEMY CORPORATE CENTER STREET 2: 108 WHEEL RD CITY: BEL AIR STATE: MD ZIP: 21015 BUSINESS PHONE: 4105150788 MAIL ADDRESS: STREET 1: KIDDIE ACADEMY CORPORATE CENTER STREET 2: 108 WHEEL RD CITY: BEL AIR STATE: MD ZIP: 21015 10-Q 1 KIDDIE ACADEMY INCORPORATED U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 13, 1997 Commission file number 1-14052 Kiddie Academy International, Inc. (Exact name of small business issuer as specified in its charter) DELAWARE 52-1938283 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 108 Wheel Road, Bel Air, Maryland 21015 (Address of principal executive offices) (410) 515-0788 (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 past 90 days. Yes X No The number of shares outstanding of common stock, as of April 13, 1997: 2,025,000 shares of common stock . - -------------------------------------------- Transitional Small Business Disclosure Format (check one): Yes ; No X Part II, Item 2 and Part II, Item 3 of this Report are omitted and will be filed by amendment pursuant to Rule 12b-25. KIDDIE ACADEMY INTERNATIONAL, INC. Index Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets for April 13, 1997 (Unaudited) and September 29, 1996 1 Unaudited Consolidated Statements of Operations 2 Unaudited Consolidated Statements of Cash Flows 3 Notes to Unaudited Consolidated Financial Statements 4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings 6 Item 2. Changes in Securities 6 Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters 6 Item 5. Other Information 7 Item 6. Exhibits and Reports on Form 8-K 8 Exhibit 27 Financial Data Schedule Signature 9 Part 1. FINANCIAL INFORMATION Item 1. Financial Statements KIDDIE ACADEMY INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS
ASSETS April 13, September 29, 1997 (UNAUDITED) 1996 ----------------- ----------------- Current assets: Cash and cash equivalents $141,070 $1,232,098 Restricted cash 255,000 -- Accounts receivable 133,405 127,972 Prepaid expenses 217,491 60,024 Inventories 101,740 90,347 Notes receivable, current 39,880 15,361 Franchise development costs 773,675 699,527 ----------------- ------------------ Total current assets 1,662,261 2,225,329 ----------------- ------------------ Property and equipment 1,099,088 1,057,066 Accumulated depreciation (378,298) (300,086) ----------------- ------------------ Net property and equipment 720,790 756,980 ----------------- ------------------ Notes receivable, long-term 136,344 136,635 Goodwill 144,815 116,910 Deposits 104,150 105,437 ----------------- ------------------ Total assets $2,768,360 $3,341,291 ================= ================== LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Notes payable $255,000 -- Accounts payable and accrued expenses 844,565 $787,654 Deferred franchise license fees 1,088,001 1,125,002 Current portion of long-term debt 59,413 111,114 Current portion of deferred rent credits 93,992 93,992 ----------------- ------------------ Total current liabilities 2,340,971 2,117,762 ----------------- ------------------ Long-term debt 118,424 190,312 Deferred rent payments 275,846 159,005 Deferred rent credits 231,365 281,976 ----------------- ------------------ Total liabilities 2,966,606 2,749,055 ----------------- ------------------ Stockholders' equity Preferred stock, par value $0.01 per share: authorized 1,000,000 shares; no shares issued and --- --- outstanding Common stock, par value $0.01 per share: authorized 10,000,000 shares; issued and 20,250 20,250 outstanding 2,025,000 Additional paid-in capital 4,294,891 4,260,280 Accumulated deficit (4,513,387) (3,688,294) ----------------- ------------------ Total stockholders' (deficit) equity (198,246) 592,236 ----------------- ------------------ Total liabilities and stockholders' (deficit) equity $2,768,360 $3,341,291 ================= ==================
See notes to consolidated financial statements (unaudited). 1 KIDDIE ACADEMY INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
12 weeks 13 weeks 28 weeks 26 weeks ended April 13, ended March 31, ended April 13, ended March 31, 1997 1996 1997 1996 ------------------ ------------------- ----------------- ---------------------- REVENUES: Company-owned mature centers $494,148 $419,713 $1,036,943 $786,901 Company-owned new centers 1,017,693 267,301 2,037,979 398,447 Franchise license fees 105,000 84,047 230,000 218,410 Franchise royalties 270,401 178,019 594,268 332,000 Product sales 103,259 67,117 338,654 112,848 Administrative fees 21,029 18,876 47,133 37,376 ------------------ ------------------- ----------------- ---------------------- Total revenue 2,011,530 1,035,073 4,284,977 1,885,982 OPERATING EXPENSES: Company-owned mature centers 432,334 367,817 909,993 736,472 Company-owned new centers 1,284,986 537,975 2,756,497 793,869 Cost of product sales 82,820 52,682 253,857 80,253 General and administrative 683,014 545,658 1,348,737 999,119 ------------------ ------------------- ----------------- ---------------------- Total operating expenses 2,483,154 1,504,132 5,269,084 2,609,713 ------------------ ------------------- ----------------- ---------------------- Loss from operations (471,624) (469,059) (984,107) (723,731) INTEREST INCOME (EXPENSE) 270 33,153 8,302 (2,093) OTHER INCOME, net 8,783 57,391 150,712 59,186 ------------------ ------------------- ----------------- ---------------------- NET LOSS ($462,571) ($378,515) ($825,093) ($666,638) ================== =================== ================= ====================== NET LOSS PER COMMON SHARE ($0.23) ($0.18) ($0.41) ($0.42) ================== =================== ================= ====================== WEIGHTED AVERAGE SHARES OUTSTANDING 2,025,000 2,051,909 2,025,000 1,593,576 ================== =================== ================= ======================
See notes to consolidated financial statements (unaudited). 2 KIDDIE ACADEMY INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
28 weeks ended 26 weeks ended April 13, 1997 March 31, 1996 ------------------- -------------------- Cash flows from operating activities Net loss ($825,093) ($666,638) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 78,212 21,822 Gain on disposal of asset (77,388) (56,598) Gain on extinguishment of debt (66,092) -- Amortization of debt issuance costs -- 26,667 Changes in assets and liabilities: Restricted Cash (255,000) -- Accounts receivable (5,433) (63,703) Inventory (11,393) (20,831) Notes receivable (9,060) (51,824) Franchise development costs (74,148) (69,092) Other assets (26,508) (136,869) Accounts payable and accrued expenses 56,911 (12,477) Deferred franchise license fees (37,001) (8,950) ------------------- -------------------- Net cash used in operating activities (1,251,993) (1,038,493) ------------------- -------------------- Cash flows from investing activities: Disposal (acquisition) of property and equipment 5,780 (467,507) Proceeds from disposal of property and equipment -- 40,000 Net cash (used) provided in investing activities 5,780 (427,507) ------------------- -------------------- Cash flows from financing activities: Borrowings/(payments) on notes payable 255,000 (149,861) Payments to shareholders -- (87,722) Proceeds from IPO -- 3,998,613 Borrowings/(payments) of long-term debt (99,815) 50,000 ------------------- -------------------- Net cash provided in financing activities 155,185 3,811,030 ------------------- -------------------- Net (decrease) increase in cash (1,091,028) 2,345,030 Cash, beginning of period 1,232,098 51,527 ------------------- -------------------- Cash, end of period $141,070 $2,396,557 =================== ==================== Non-cash investing and financing activities: Write-off of deferred compensation -- $110,000 Early retirement of long-term debt $62,738 -- Notes received in connection with sale of center 98,815 -- Notes payable in connection with purchase of center 51,435 -- Notes receivable retired in connection with purchase of center 68,657 -- ------------------- ------------------- Total non-cash activities $281,645 $110,000 =================== ====================
See notes to consolidated financial statements (unaudited). 3 KIDDIE ACADEMY INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) APRIL 13, 1997 AND MARCH 31, 1996 1. Summary of Significant Accounting Policies (a) Principles of Consolidation The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission") and include all adjustments which are, in the opinion of management, necessary for a fair presentation. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures are adequate to make the information presented not misleading; however, it is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's annual Form 10-KSB. (b) Net Loss Per Common Share Net loss per common share is determined by dividing the net loss by the weighted average number of common and common share equivalents outstanding. Weighted average shares used in computing net loss per common share for the period ended April 13, 1997 consist solely of 2,025,000 shares of common stock issued, as the effect of the warrants would be antidilutive. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, stock options and warrants granted during the 12-month period prior to the expected date of the initial filing of the Registration Statement, with exercise prices below the initial public offering price, have been included in the calculation of the period ended March 31, 1996 common share equivalents, using the treasury stock method, for the period. Weighted average shares used in computing net loss per common share for the period ended March 31, 1996 consist of 2,051,909 weighted average shares of common stock outstanding and common stock equivalents. (c) Fiscal Year-end During fiscal year 1996, the Company changed its fiscal year to a 52 or 53 week period which ends the Sunday nearest to September 30. As a result, the first quarter of fiscal year 1997 ended on January 19, 1997, the second quarter ended April 13, 1997, and the third quarter will end on July 6, 1997. 2. Restricted Cash The Company has borrowed $255,000 on its $500,000 Certificate of Deposit (CD) Line of Credit as of April 13, 1997. This amount is reflected in current liabilities as a note payable 4 and the applicable portion of the CD is reflected as restricted cash. The CD earned 4.95% interest and borrowings against the CD incur interest expense of 6.95%. 3. Commitments and Contingencies In October 1996, the Company entered into a three-year employment agreement with Angelo D. Bizzarro, the Company's new Chief Executive Officer. The agreement calls for a minimum salary level, a bonus based on a percentage of pre-tax profits and various stock options, including a) 75,000 non-qualified stock options (at an exercise price of $3.64 per share); b) 25,000 incentive stock options (at an exercise price of $2.56 per share); and c) 100,000 incentive stock options (at an exercise price of $2.13 per share). Also in October 1996, the employment agreements with George Miller and Michael Miller were each extended to expire on February 19, 2000. In many instances, the Company has guaranteed some or all of a franchisee's obligations under the lease for the franchisee's child care center. The Company is subject to complaints and claims arising in the ordinary course of business, including its business as a franchisor. Except as noted in Part II, Item 1 the Company believes that none of the current claims or complaints are material to the Company's consolidated financial position. 4. Earnings Per Share In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (EPS) which simplifies the standards for computing EPS previously found in APB Opinion No. 15 and makes them comparable to international EPS standards. The Statement is effective for financial statements issued for periods ending after December 15, 1997. Had the following statement been effective for the quarters and the six months ended April 13, 1997 and March 31, 1996, earnings per share would have been presented as follows:
12 weeks 13 weeks 28 weeks 26 weeks ended ended ended ended April 13, March 31, April 13, March 31, 1996 1997 1996 1997 ---------- ---------- ----------- ----------- 1. Earnings per common share ($.23) ($0.18) ($.41) ($0.42) 2. Earning per common share- assuming dilution ($.23) ($0.18) ($.41) ($0.42)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This Item is omitted and will be filed by amendment pursuant to Rule 12b-25. 5 PART II - OTHER INFORMATION Item 1. Legal Proceedings. The Company is a party to the following litigation: Two Metroplex LLC, v. Bankers Unicorp, Incorporated, Charles Brown and Kiddie Academy Child Care Learning Centers, Inc., Marion Superior Court, Indiana, Cause No. 49D04-9610-CP-1414. This matter was instituted in October 1996 by Two Metroplex LLC (the "Landlord"), the owner of certain premises leased to the Company's franchisee, Bankers Unicorp, Incorporated (the "Tenant), and arises out of the Tenant's default under its lease. The Tenant's obligations under the Lease were guaranteed by Charles Brown, the Tenant's sole stockholder, and Kiddie Academy Child Care Learning Centers, Inc. In the suit, the Landlord is seeking from the Company $184,199.36, plus interest, attorneys' fees and court costs. The $184,199.36 includes unpaid basic rent of $22,676, delinquency service charges of $20,252.71, plus $141,270.65 in tenant improvement costs. The Company is defending the action on the basis that its Guaranty of Lease was not intended to cover the amount of any tenant improvement expenses, that these expenses were not known by or authorized by the Company, and that these amounts greatly exceed the reasonable cost of the build-out approved by the Company. Merrill Corporation v. Kiddie Academy International, Inc., Circuit Court for Harford County, Maryland, Case No. 26591/59/681. This matter was instituted on September 23, 1996 by Merrill Corporation in connection with financial printing services rendered to the Company in connection with the Company's initial public offering. Merrill asserts a claim in the amount of $129,710.36. The Company has filed a defense and counter-claim to this action which is primarily based upon the fact that Merrill has billed the Company for an amount which greatly exceeds its estimate of $60,000, and that the additional charges were due to "rush work" and additional services not authorized by the Company, and mistakes made by Merrill. Merrill's motion for summary judgment was denied on February 11, 1997, and the matter has been set for trial for June 30, 1997. The Company is involved in additional litigation from time to time. In management's opinion, any litigation in which the Company is currently involved, except as noted above, will not result in liabilities that will have a material adverse effect on its financial condition or results of operations. Item 2. Changes in Securities. Not applicable. Item 3. Defaults Upon Senior Securities. This Item is omitted and will be filed by amendment pursuant to Rule 12b-25. Item 4. Submission of Matters to a Vote of Security Holders. The Company's Annual Meeting of Shareholders was held on March 11, 1997. Each of the Company's then current directors was elected to serve for an additional one-year term of office. 6 These directors are as follows: Angelo D. Bizzarro, Carl J. Meil, Jr., George Miller, Michael J. Miller, James A. Mitarotonda and Julian R. Siegel. The additional matters voted upon at the meeting consisted of a) a proposal to increase the number of shares available to be issued under the Company's 1995 Incentive Compensation Plan (the "Plan") from 100,000 to 300,000, and to establish 250,000 as the maximum number of shares or options to issue shares that may be issued in any one calendar year to any individual under the Plan; and b) the ratification of the selection of Deloitte and Touche, LLP as the Company's independent accountants for the current year. The following is a tabulation of all matters voted upon at the March 11, 1997 Annual Meeting: 1. Election of directors: For Withheld A. Bizzarro 1,999,505 13,100 C. Meil, Jr. 1,999,505 13,100 G. Miller 1,999,505 13,100 M. Miller 1,999,505 13,100 J. Mitarotonda 1,999,505 13,100 R. Siegel 1,999,505 13,100 2. Amendments to 1995 Incentive Compensation Plan. For Against Abstain Not Voted 1,167,637 62,550 18,500 763,918 3. Appointment of Deloitte & Touche LLP. For Against Abstain 2,003,605 9,000 -0- Item 5. Other Information. None. 7 Item 6. Exhibits and Reports on Form 8-K. a. Exhibits required by Item 601 Regulation S-K: Exhibit 27 - Financial Data Summary b. Reports on Form 8-K - NASDAQ Delisting - March 28, 1997 - Boston Stock Exchange Delisting and Liquidity Issue - May 23, 1997 8 SIGNATURE In accordance with the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Kiddie Academy International, Inc. BY: ----------------------- May 28, 1997 Angelo D. Bizzarro - ----------------- Chief Executive Officer Date BY: ---------------------- May 28, 1997 Guy A. Matta - ---------------- Chief Financial Officer Date 9 SIGNATURE In accordance with the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Kiddie Academy International, Inc. May 28, 1997 BY: /s/ Angelo D. Bizzarro - --------------------- ---------------------------------- Date Angelo D. Bizzarro Chief Executive Officer May 28, 1997 BY: /s/ Guy A. Matta - --------------------- ---------------------------------- Date Guy A. Matta Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 This schedule contains summary financial information derived from Kiddie Academy International, Inc.'s unaudited financial statements for the twenty-eight weeks ended April 13, 1997, and is qualified in its entirety by reference to such financial statements and the notes thereto. 7-MOS SEP-28-1997 APR-13-1997 396 0 133 0 102 1,662 1,099 378 2,768 2,341 0 0 0 0 [COMMON] 20 (198) 2,768 4,285 4,285 5,269 5,269 [OTHER-INCOME] 151 0 [INTEREST-INCOME] 8 (825) 0 (825) 0 0 0 (825) (0.41) (0.41)
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