-----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, Sdh5N4WHOPCQQMJ8RLv5y6tgCnNd45REPRnxmuMQHLIEj6TyOwsGV/1d2QiXZ1na Gzw6+RFr71jw/IvbKyZenw== 0000008734-00-000012.txt : 20000427 0000008734-00-000012.hdr.sgml : 20000427 ACCESSION NUMBER: 0000008734-00-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990603 FILED AS OF DATE: 20000426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMBASSADOR FOOD SERVICES CORP CENTRAL INDEX KEY: 0000008734 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 440656199 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-01744 FILM NUMBER: 608820 BUSINESS ADDRESS: STREET 1: 3269 ROANOKE ROAD CITY: KANSAS CITY STATE: MO ZIP: 64111 BUSINESS PHONE: 8165616474 MAIL ADDRESS: STREET 1: 3269 ROANOKE ROAD CITY: KANSAS CITY STATE: MO ZIP: 64111 FORMER COMPANY: FORMER CONFORMED NAME: AUTOMATIQUE INC DATE OF NAME CHANGE: 19890810 10-K 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-KSB [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended June 3, 1999 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to Commission file number 0-1744 Ambassador Food Services Corporation (Name of small business issuer in its charter) Delaware 44-0656199 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 3269 Roanoke Road, Kansas City, Missouri 64111 (Address of principal executive offices) (Zip Code) Issuer's telephone number: 816 561-6474 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock (Par Value $1) (Title of Class) Check whether the Issuer (1) filed all reports required to be filed by Section 13or 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_____ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] Issuer's revenues for its most recent fiscal year are $ 18,026,417. At February 18, 2000, there were 735,556 shares of the Registrant's common stock outstanding. Based on the average of the highest bid and lowest asked prices reported on the national over-the-counter market (NASDAQ Symbol AMBF), the aggregate market value of the shares held by non-affiliates of the Registrant was $838,534. Exhibit Index is on page 34. Transitional Small Business Disclosure Format: YES NO X PART I Item 1. Description of Business (a) Business Development The Registrant (hereinafter "Company" or "Ambassador") is a Delaware corporation incorporated in 1963. It is engaged, through divisions and a subsidiary, in the food service and janitorial industries in Iowa, Kansas, New York, Texas, New Jersey, Missouri, and Oklahoma. The principal business activity of the Company is the servicing of its customer accounts, primarily factories, offices, hospitals, schools, and social service agencies, through the use of vending machines, cafeterias, and prepared meals delivered from Company commissaries. On August 1, 1989, the name of the Company was changed from Automatique, Incorporated to Ambassador Food Services Corporation. (b) Business of Issuer (1) Description of Business Done by the Registrant in its Food Segment (i and ii) The vending and cafeteria segment of the Company's business consists of contracting to distribute beverages and food products to customer locations consisting of factories, offices, hospitals, and schools. The Company conducts surveys of potential customer locations, determines profitability of the location, and submits a proposal offering to provide the vending and/or cafeteria service for the customer location. Business with local government social service agencies and not-for-profit agencies is obtained through competitive bidding and is serviced by producing meals in a central commissary and delivering them to various designated points for consumption. (iii) No new products have been developed by this segment. The Company, in general, markets products developed by its suppliers. (iv) The vending food service business, made up of a few large companies and many small independently owned local and regional enterprises, is highly competitive. The practice in the industry is to operate under written agreements with the locations served. In the market areas where the Company is located, it has national, regional, and local competition, some of which have substantially greater total sales and assets. Competition for locations in the food service industry normally comes in the form of pricing and in quality of service and product. (v) Raw materials, consisting of packaged products and commodities, are purchased from manufacturers and purveyors and are warehoused or processed by the Company in the local market. There is an adequate supply of raw materials from normal sources; these include Ancona Midwest Food Services, Inc., Pepsi-Cola General Bottlers, and Loeb and Mayer. (vi) During the year ended June 3, 1999, this segment had no single customer whose sales were equal to 10 percent or more of the Company's consolidated revenues. Because the Company's customers are primarily the employees and students of the various schools, colleges, factories, offices, and hospitals at which it has its vending and cafeteria services, the Company normally experiences a seasonal decline in sales during the summer months and around holidays, during which times many of these customers vacation and many locations close completely. (vii) The distinctive logo associated with the Company has been registered under the laws of the United States relating to trade names and trademarks. The Company regards such logo as valuable and will maintain the registration in effect for continuing use in connection with the Company's business. In addition, the segment is a party to the following labor agreements: Bargaining Unit Market Expiration Date Teamsters Local #838 Kansas City 12/31/02 Teamsters Local #90 Des Moines 04/30/02 United Service Employees Union #377 New York 12/31/99
(viii) The Company does not have a material portion of its business subject to renegotiation or termination at the election of the Government. (ix) The Company does not believe that existing or probable government regulations have a material effect on its operation. (b)(2) Description of Business Done by the Registrant in its Janitorial Segment (i and ii) The janitorial and maintenance service division of the Company's business consists primarily of contracting various types of routine cleaning services for customers on a weekly, monthly, or as-needed basis. Customers currently include grocery stores and public housing complexes in New York and New Jersey. (iii) No new products have been introduced by this segment. (iv) The janitorial segment is limited to the New Jersey and New York metropolitan areas. Competition for janitorial contracts comes in the form of pricing and quality of service. Competition in general is from regional and local companies. (v) The sources and availability of raw materials for this segment are adequate. Sources of raw materials include Graco Manufacturing and Malone Chemical. (vi) During fiscal 1999, this segment had no single customer whose sales were equal to 10 percent or more of the Company's consolidated revenues. This segment is not subject to material fluctuations in sales volume resulting from seasonality. Sales in this segment are on open accounts receivable. Inventory levels are not significant. (vii) This segment is operating without registered trademarks or patents. The segment is a party to a labor agreement with the United Service Employees Union #377 in New York that expires December 31, 1999. (viii) The Company does not have a material portion of its business subject to renegotiation or termination at the election of the Government. (ix) The Company does not believe that existing or probable government regulations have a material effect on its operations. (b)(1 and 2) (x) Through (xii) with Respect to the Registrant's Business in General (x) The Company has not incurred any expense for research and development activities during any of its last two- (2) fiscal years. (xi) Compliance with federal, state, and local laws and regulations involving the protection of the environment will not have a material effect. (xii) As of June 3, 1999, the Company and its subsidiary employed approximately 220 persons. Item 2. Description of Properties The Company leased all real estate for office, warehouse, garage, repair shops, and commissaries in each of its market areas throughout fiscal 1999, except for the property located at 3269 Roanoke Road, which was purchased in July 1990. The property was encumbered by a mortgage in the amount of $300,000 at June 3, 1999. Annual rentals were approximately $257,544 less $25,800 of sublease income. The suitability of the leased properties is adequate; such properties are described below: Size Expiration Location Type ofProperty (Sq. Ft.) Date 3269 Roanoke Rd. Kansas City, MO Office/Whse 13,600 Owned 208 E. Aurora Des Moines, IA Office/Whse 9,200 Mo/Mo 5-30 54th Ave. Long Island City, NY Office/Whse 8,000 Mo/Mo 41-43 24th St. Long Island City, NY Office/Whse 2,500 3/01 9100 Sante Fe Dr. Overland Park, KS Restaurant- 1,800 2/04 Discontinued 162 Closter Dock Rd. Closter, NJ Office/Whse 1,200 Mo/Mo 36 Clark St. Des Moines, IA Office/Whse 10,600 3/01
The major portion of the physical properties used by the Company is made up of automatic vending equipment and food service and production equipment. Most of the equipment used is owned by the Company. In several instances, cafeteria and vending equipment are owned by the account to which food services are rendered by the Company. The Company operates approximately 75 vehicles in the conduct of its business, approximately 10% of which are leased and the balance owned. The annual rentals on all such leased real estate properties, equipment, and vehicles approximate $600,000. Item 3. Legal Proceedings None. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year of the Company. PART II Item 5. Market for Common Equity and Related Stockholder Matters (a) Price Range of Common Stock The principal market in which the common stock of the Company is traded is the national over-the-counter market (NASDAQ symbol AMBF). The bid quotations for the Company's common stock for each quarter during fiscal years ended June 3, 1999 and May 28, 1998 are shown below: 1999 1998 Bid Quotation Bid Quotation High Low High Low First Quarter $1.25 $.625 $1.375 $1.00 Second Quarter $1.03125 $.875 $1.0625 $1.0625 Third Quarter $1.125 $.875 $1.1875 $1.125 Fourth Quarter $1.15625 $.875 $1.1875 $1.125
The quotations above reflect interdealer prices without retail mark-up, markdown, or commission and may not represent actual transactions. (b) Number of Equity Security Holders As of February 18, 2000, there were 550 record holders of the Company's common stock. (c) Dividends The Company has never paid cash dividends on its common stock. Payment of dividends will be within the discretion of the Company's Board of Directors and will depend, among other factors, on earnings, debt agreements, capital requirements, and the operating and financial condition of the Company. Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Continuing Operations 1999 Results Sales for fiscal 1999 were $1,178,661 or 6.1% less than year ended May 28, 1998. The decline was due primarily to the loss of vending and cafeteria contracts to competitors in Kansas City. Fiscal 1998 included sales of $285,000 for an operation in Tyler, Texas; which was closed. Gross margins deteriorated over 2.0% in fiscal 1999 compared to fiscal 1998. Intense competition and sales product mix adversely affected gross margins. The decline in gross margins was the primary reason for the substantial loss incurred in fiscal 1999. Management continues to pursue increased pricing and lower cost of product. Operating costs for fiscal 1999 were basically the same as fiscal 1998 in dollars spent but were 2.8% higher as a percent of sales because of the sales decline. Administrative costs increased due primarily to the write-off of non-trade receivables in excess of $100,000. A sales tax and a union pension liability from prior years of $130,000 was recorded in fiscal 1999. Management has taken steps to reduce operating and administrative costs through staff reductions and control of expenditures in all areas. The carrying value of intangible assets is periodically reviewed by the Company based on the estimated future operating income of each acquired entity on an undiscounted cash flow basis. Based upon its most recent analysis, the Company believes that no material impairment of intangible assets exists at June 3, 1999. 1998 Results Sales declined from fiscal 1997 levels by $3,565,468 to $19,205,078 in the year ended May 28, 1998. This decline reflected the impact of the sale of the Company's St. Louis operations in April 1997, which resulted in a decline of $2,968,360. Additional declines in revenues resulted from the closing of the Company's operations in Tyler, Texas and from the loss of vending and cafeteria contracts to competitors in Kansas City. Despite these lower sales, Ambassador reduced its loss from operations from $1,164,217 to $75,800. This improvement partially resulted from the elimination of losses experienced during fiscal 1997 in the Company's St. Louis operations. The Company improved its gross margins in fiscal 1998 through improved purchasing and through the addition of sales in its New York operation in the form of short-term contracts, which carried strong pricing relative to food cost. Management continues to pursue increased pricing and to lower the cost of its products; however, the end of the short-term agreements in New York during late 1998 and early 1999 makes it unlikely the Company's gross margins will improve further in 1999. Operating costs declined compared to 1997 levels as a percentage of sales because of unusually high cost in this area associated with the closing of the Company's St. Louis operations during fiscal 1997. The Company also lowered its operating expenses by reducing operating payrolls, vehicle costs, and the cost of supplies in its food service operations. Management has further reduced payrolls and anticipates even lower operating costs in fiscal 1999. Administrative, depreciation, and interest costs were all lower in 1998 because of strict control of capital expenditures and reductions in all administrative cost areas. Management anticipates further improvements in these cost areas during fiscal 1999 through further staff reduction and continued controls on capital expenditures. Year 2000 The company did not experience any system problems as a result of Year 2000. Liquidity and Capital Resources The Company's working capital deficit declined by $281,316 from a deficit of $1,837,837 at May 28, 1998 to a deficit of $1,556,521 at June 3, 1999. Long-term liabilities increased $410,351 during fiscal 1999. Management was able to strengthen the working capital position of the Company by refinancing certain of the current obligations on a long-term basis subsequent to June 3, 1999; and cash flow from operations will, in the opinion of management, be more than sufficient to meet the Company's cash requirements. Idle equipment continues to be available to provide for growth in the Company's vending operations, and financing is in place for any capital expenditure needs during fiscal 2000. Item 7. Consolidated Financial Statements Index to Consolidated Financial Statements Page Report of Independent Certified Public Accountants 12 Consolidated Balance Sheets as of June 3, 1999 and May 28, 1998 13-14 Consolidated Statements of Operations for the Years Ended June 3, 1999 and May 28, 1998 15 Consolidated Statement of Changes in Stockholders' Equity (Deficit) for the Years Ended June 3, 1999 and May 28, 1998 16 Consolidated Statements of Cash Flows for the Years Ended June 3, 1999 and May 28, 1998 17-18 Notes to Consolidated Financial Statements 19-32 CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AMBASSADOR FOOD SERVICES CORPORATION AND SUBSIDIARY June 3, 1999 and May 28, 1998 C O N T E N T S Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 12 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS 13-14 CONSOLIDATED STATEMENTS OF OPERATIONS 15 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) 16 CONSOLIDATED STATEMENTS OF CASH FLOWS 17-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19-32 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Ambassador Food Services Corporation and Subsidiary We have audited the accompanying consolidated balance sheets of Ambassador Food Services Corporation and Subsidiary as of June 3, 1999 and May 28, 1998 and the related consolidated statements of operations, changes in stockholders' equity (deficit), and cash flows for the years then ended. 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 audits. We conducted our audits 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ambassador Food Services Corporation and Subsidiary as of June 3, 1999 and May 28, 1998 and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company incurred a net loss of $807,682 during the year ended June 3, 1999, and, as of that date, the Company's current liabilities exceeded its current assets by $1,556,521 and its total liabilities exceeded its total assets by $402,944. These factors, among others, as discussed in Note B to the financial statements, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Kansas City, Missouri October 22, 1999, (except for Note N, as to which the date is December 29, 1999) CONSOLIDATED FINANCIAL STATEMENTS Ambassador Food Services Corporation and Subsidiary CONSOLIDATED BALANCE SHEETS June 3, 1999 and May 28,1998 1999 1998 ASSETS CURRENT ASSETS Cash (including change funds of $186,405 in 1999 and $195,412 in 1998) (note10) $ 238,410 $ 271,709 Trade accounts receivable, net of allowance for doubtful accounts of $16,483 in 1999 and $87,820 in 1998 (notes A11 and D) 937,533 1,193,619 Income Taxes receivable - 3,277 Inventories (note A4) 538,978 483,999 Prepaid Expenses 90,288 134,961 Current portion of notes receivable (note L) 21,016 295,570 ___________ __________ Total current assets 1,826,225 2,383,135 PROPERTY AND EQUIPMENT (notes A5 and E) Vending Equipment 4,876,153 4,682,523 Cafeteria and Commissary Equipment 1,063,661 1,144,887 Building and leasehold improvements 736,537 634,457 Other 909,569 971,883 ___________ __________ 7,585,920 7,433,750 Less accumulated depreciation and amortization 5,761,792 5,622,766 Total property and equipment 1,824,128 1,810,984 OTHER ASSETS Location contracts, net of accumulated amortization of $152,001 in 1999 and $141,138 in 1998 242,482 253,345 (notes A6 and E) Notes receivable, less current portion (note L) 291,812 909,100 Unrecognized prior service costs (notes A& and H) 108,394 146,266 Excess of purchase price over net assets acquired, net of accumulated amortization of $22,704 in 1999 and $21,645 in 1998 (note A6) 20,976 22,035 Deferred expenses 48,616 49,956 Miscellaneous 79,900 111,288 Total other assets 792,180 1,491,990 _________ _________ $ 4,442,533 $ 5,686,109 1999 1998 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Checks outstanding in excess of bank balances $ 364,786 224,290 Trade accounts payable 1,454,568 1,731,606 Accrued expenses (note C) 665,348 678,243 Current maturities of long-term debt (note E) 480,554 864,904 Line-of-credit (note D) 417,490 721,929 Total current liabilities 3,382,746 4,220,972 LONG-TERM LIABILITIES Projected benefit obligation (note H) 292,069 318,545 Other long-term liabilities - 16,366 Subordinated note payable to stockholder (note F) 168,558 250,000 Long-term debt, less current maturities (note E) 946,240 396,803 Accrued costs of discontinued restaurant operations (note J) 55,864 70,666 Total long-term liabilities 1,462,731 1,052,380 COMMITMENTS AND CONTINGENCIES (notes F, G, H, J, and M) STOCKHOLDERS' EQUITY (DEFICIT) (note F) Common stock, par value $1.00 per share; authorized, 2,000,000 shares; issued, 1,009,230 shares 1,009,230 1,009,230 Additional paid-in capital 718,291 718,291 Accumulated deficit (1,801,010) (993,328) ___________ ___________ (73,489) 734,193 Less treasury stock - 274,174 shares in 1999 and 267,074 shares in 1998 329,455 321,436 Total stockholders' equity (deficit) (402,944) 412,757 ___________ __________ $ 4,442,533 $ 5,686,109 ___________ __________ ___________ __________
The accompanying notes are an integral part of these statements Ambassador Food Services Corporation and Subsidiary CONSOLIDATED STATEMENTS OF OPERATIONS Years ended June 3, 1999 and May 28, 1998 1999 1998 Net Sales Food $16,326,818 $ 17,511,476 Janitorial 1,699,599 1,693,602 ___________ _____________ 18,026,417 19,205,078 Cost and expenses (note A8) Cost of food products sold 7,828,748 7,924,592 Operating (note K) 7,563,302 7,523,717 Selling and administrative 2,597,004 2,852,652 Depreciation and amortization 530,553 602,166 Interest 314,492 377,751 ___________ ____________ Total cost and expenses 18,834,099 19,280,878 ___________ ____________ NET LOSS $ (807,682) $ (75,800) ___________ ____________ ___________ ____________ Loss per common share: Net loss per common share $ (1.10) $ (0.10) ___________ _____________ ___________ _____________ Weighted average of common shares Outstanding (note A9) $ 737,496 $ 742,156 ___________ _____________ ___________ _____________ The accompanying notes are an integral part of these statements. Ambassador Food Services Corporation and Subsidiary CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) Years ended June 3, 1999 and May 28, 1998
Total Additional Stockholders' Paid-in Accumulated equity Common Stock capital deficit (deficit) Issued Treasury Shares Amount Shares Amount Balance at May 30,1997 1,009,230 $1,009,230 251,774 $(298,561)$718,291 $(917,528) $511,432 Net Loss - - - - - (75,800) (75,800) Purchase of treasury stock - - 15,300 (22,875) - - (22,875) ________ ________ _______ ________ ________ _________ _________ Balance at May 28, 1998 1,009,230 $1,009,230 267,074 (321,436) 718,291 (993,328) 412,757 Net Loss - - - - - (807,682) (807,682) Purchase of Treasury stock - - 7,100 (8,019) - - (8,019) ________ _______ ________ _________ ________ ________ _________ Balance at June 3, 1999 1,009,230 $1,009,230 274,174 $ (329,455) $ 718,291 $(1,801,010) $(402,944)
The accompanying notes are an integral part of these statements Ambassador Food Services Corporation and Subsidiary CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended June 3, 1999 and May 28, 1998 1999 1998 Cash Flows From Operating Activities Net loss $ (807,682) $ (75,800) Adjustments to reconcile net loss to net cash provided by (used in) operating activities Depreciation and amortization 530,553 602,166 (Gain) loss on sale of property and equipment 1,230 (10,596) Provision for bad debt (71,337) (30,414) Discount of note receivable 28,070 - Changes in operating assets and liabilities: Trade accounts receivable 327,423 534,568 Income taxes receivable 3,277 5,604 Other assets 1,773 45,149 Inventories (54,979) 64,478 Prepaid expenses 44,673 51,856 Trade accounts payable and accrued expenses (331,211) (404,556) Net cash provided by (used in) operating activities (328,210) 782,455
The accompanying notes are an integral part of these statements. Ambassador Food Services Corporation and Subsidiary CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED Years ended June 3, 1999 and May 28, 1998 1999 1998 Cash Flows From Investing Activities Purchase of property and equipment (466,478) (195,028) Proceeds from sale of property and equipment 2,300 68,610 Collections of notes receivable 863,772 394,729 Net cash provided by investing activities 399,594 268,311 Cash Flows From Financing Activities Proceeds from issuance of long-term debt 601,660 309,091 Principal payments on long-term debt (518,015) (551,864) Purchase of treasury stock (8,019) (22,875) Net increase (decrease) in checks outstanding in excess of bank balances 140,496 (437,796) Other financing activities (16,366) (25,669) Net payments under line-of-credit (304,439) (420,284) Net cash used in financing activities (104,683) (1,149,397) Net Decrease in Cash (33,299) (98,631) Cash, Beginning of Year 271,709 370,340 Cash, End of Year $238,410 $271,709 Supplementary Schedule of Cash Flow Information: Cash paid during year for: Income taxes $ - $ 1,300 Interest 314,492 368,282
The accompanying notes are an integral part of these statements. Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended June 3, 1999 and May 28, 1998 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows. 1. Principles of Consolidation The consolidated financial statements include the accounts of Ambassador Food Services Corporation and its wholly owned subsidiary, Ambassador Fast Services, Inc. All material intercompany balances and transactions have been eliminated. 2. Nature of Business The Company and its subsidiary are engaged in two segments: food service (vending, cafeteria and catering) and janitorial service. The Company's customers are located principally in the Midwest and Northeast United States. 3. Reporting Periods The Company has a fiscal year (52 or 53 weeks) ending on the Thursday nearest May 31. Both fiscal years 1999 and 1998 contained 52 weeks. 4. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market. 5. Property and Equipment Property and equipment are stated at cost. Depreciation is provided in amounts sufficient to relate the cost of depreciable assets to operations over their estimated useful lives on a straight-line basis. The estimated lives used in determining depreciation are as follows: Vending equipment 4-8 years Cafeteria and commissary equipment 3-10 years Building and leasehold improvements 3-22 years Other 3-10 years Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued 6. Location Contracts and Excess of Purchase Price Over Net Assets Acquired Location contracts and excess of purchase price over net assets acquired arise from the purchase of various companies and are carried at cost. Location contracts represent the amount paid for customer vending relationships in existence at the time of acquisition. These relationships were generally cancelable by either party with limited notice. Such amounts are amortized on a straight-line basis over 5 to 40 years. The carrying value of intangible assets is periodically reviewed by the Company based on the estimated future operating income of each acquired entity on an undiscounted cash flow basis. Based upon its most recent analysis, the Company believes that no material impairment of intangible assets exists at June 3, 1999. 7. Unrecognized Prior Service Costs Unrecognized prior service costs, related to the defined benefit pension plan discussed in Note H, are being amortized straight-line over the average remaining service period of the participants included in the plan. 8. Costs and Expenses Preopening costs associated with new vending and cafeteria accounts are expensed as incurred. 9. Loss Per Common Share Loss per share has been computed using the weighted average of common shares outstanding during the period. Certain convertible debt was outstanding during the reporting periods, but was not considered in the net loss per share calculation as the effect is antidilutive. 10. Statements of Cash Flows For purposes of reporting cash flows, cash includes cash on hand, in banks, and in change funds. Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued 11. Concentration of Credit Risk Of the Company's accounts receivable, approximately $890,000 in 1999 and $930,000 in 1998 are with customers located in the northeastern United States. The Company grants credit to customers, which include businesses, schools, and governmental agencies. Collateral is not required. 12. Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. 13. Financial Instruments Short-Term Financial Instruments - The fair value of short-term financial instruments, including cash and cash equivalents, trade accounts receivable and payable and certain accrued liabilities, approximates their carrying amounts in the financial statements due to the short maturity of such instruments. Notes Payable and Long-Term Debt - The fair value of the line of credit approximates its carrying amount since the currently effective rates reflect market rates. The fair value of fixed rate notes payable approximates its carrying amount based on the Company's estimated current incremental borrowing rate for similar obligations with similar terms. B. REALIZATION OF ASSETS The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. Recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to continue to meet its financing requirements, obtain additional financing, and to succeed in its future operations. Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 B. REALIZATION OF ASSETS - Continued These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue its existence. Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue in existence: Several administrative and regional positions have been eliminated. Steps to improve margins and reduce costs have been taken. Increasing the growth and profit of current operations through internal sales efforts has become the Company's focus. The Company obtained additional borrowings to retire the line-of-credit, for which payment had been demanded. In addition a new revolving credit line agreement was entered into in December 1999. (See Note N) C. CURRENT LIABILITIES Accrued expenses include the following: 1999 1998 Legal fees $ 32,302 $ 42,183 Vacation pay 64,628 65,952 Commissions 47,311 19,756 Taxes 57,814 281,205 Salaries 73,027 187,382 Current portion of projected benefit obligation (note H) 26,822 18,900 Accrued costs of discontinued restaurant operations (note J) 13,813 13,562 Accrued sales tax costs 204,296 19,674 Medical insurance (Note M) 59,656 23,318 Additional multiemployer pension liability 81,816 - Other 3,863 6,311 $ 665,348 $ 678,243
Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 D. LINE-OF-CREDIT AGREEMENT The Company has a line-of-credit agreement with a financing company, which is due on demand. The financing company has demanded payment on or before November 22, 1999. The agreement carries interest at the publicly announced prime rate (8% at June 3, 1999) plus 3.5%. The amount drawn cannot exceed 80% of eligible accounts receivable ($707,550 at June 3, 1999). Borrowings are limited to a maximum of $750,000. The amount is collateralized by the Company's accounts receivable. At June 3, 1999 and May 28, 1998, amounts outstanding were $417,490 and $721,929, respectively. See Note N. E. LONG-TERM DEBT Long-term debt includes the following: 1999 1998 Note payable - bank, payable in monthly installments of $3,081, including interest at 11%, due January 1999 $ - $ 275,476 Notes payable - equipment, payable in monthly installments of approximately $25,500, including interest at rates ranging from 9% to 19.3%, due through October 2002, colllateralized by equipment 422,216 631,126 Note payable to Bassman Vending, Inc. (BVI) payable in monthly installments of $5,150, including interest at 8.5%, due through March 2001, collateralized by certain location contracts and equipment 104,578 155,105 Note payable to officer, payable in quarterly interest installments of $7,875, including interest at 10.5%, due February 2002, collateralized by building, subordinate to the revolving credit line agreement entered into on December 29, 1999 (Note N) 300,000 -
Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 E. LONG-TERM DEBT - Continued 1999 1998 Note payable to individual at 11%, payable in monthly installments of interest only through January 2000, at which time payments are $50,000 through April 2000, at which time payments are $25,000 plus interest through October 2001, collateralized by subordinated interests in accounts receivable and a building. The note includes warrants to purchase 25,000 shares of the Company's common stocks at $1.25 during the term of the agreement. Additionally, 25,000 warrants for the $1.25 will be issued if the agreement is extended 15 months, refinanced on November 1, 1999 (note N) 600,000 200,000 1,426,794 1,261,707 Less current maturities 480,554 864,904 $ 946,240 $ 396,803
Aggregate annual principal payments applicable to long-term debt due subsequent to June 3, 1999 are as follows: Fiscal Year Ended Amount 2000 $ 480,554 2001 487,267 2002 458,973 $1,426,794
F. SUBORDINATED NOTE PAYABLE AND CONSULTING AGREEMENT The Company borrowed $250,000 from a stockholder. The note calls for interest at 10%, payable quarterly with quarterly principal payments of $12,500 beginning June 30, 2001, with afinal payment June 30, 2006. The note is subordinate to all other indebtedness of the Company. Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 F. SUBORDINATED NOTE PAYABLE TO STOCKHOLDER - Continued From April 30, 1998 to May 1, 2006, the note is convertible to shares of the Company's stock at a price of $1.25 per share. In the event any payments are made on the note, the Company will issue warrants entitling the stockholder to purchase equivalent numbers of shares during the same period. During fiscal year 1999, the Company entered into a consulting agreement with the stockholder. The agreement calls for weekly payments totaling $100,482 per year beginning in May 1999 through May 2009. Subsequent to June 3, 1999, the stockholder agreed to defer payments on the consulting agreement for one year if equivalent payments were made on the note payable. At June 3, 1999 and May 28, 1998, amounts outstanding on the note were $168,558 and $250,000, respectively. Warrants for the purchase of 66,752 shares have been issued in accordance with the terms of the note and are outstanding as of June 3, 1999. The conversion terms may be adjusted upon certain events to prevent dilution of the stockholder conversion rights. G. LEASES Future minimum lease payments under all noncancelable operating leases as of June 3, 1999 are as follows: Fiscal Year Real Ending estate Equipment Total 2000 $164,883 $351,064 $515,947 2001 139,029 278,234 417,263 2002 - 7,542 7,542 2003 - 7,542 7,542 2004 - 2,232 2,232
Rental expense charged to operations was $634,735 in 1999 and $708,962 in 1998. Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 H. EMPLOYEE BENEFIT PLANS The Company has a nonqualified defined-benefit pension plan covering two key employees and two former officers of the Company. Under the terms of the plan, each individual will receive, for ten years after retirement, a fixed monthly payment that was set at the inception of the plan. The benefit does not vest until the employee reaches age 65. If the individual dies, either during employment or after retirement, the beneficiary is entitled to receive benefits as specified in the agreement. The plan is unfunded. The following table sets forth the change in benefit obligation in the Company's consolidated financial statements for 1999 and 1998: 1999 1998 Projected benefit obligation, beginning of year $ 337,445 $ 356,368 Service cost 6,682 5,931 Interest cost 29,810 29,630 Benefits paid (55,046) (54,484) Projected benefit obligation, end of year $ 318,891 $ 337,445
Net accrued pension cost is included in the accompanying consolidated financial statements as follows: 1999 1998 Current portion included in accrued expenses $ 26,822 $ 18,900 Long-term portion of obligation 292,069 318,545 $ 318,891 $ 337,445
The weighted-average discount rate used was 8.0% in determining the actuarial present value of the projected benefit obligation in 1999 and 1998. Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 H. EMPLOYEE BENEFIT PLANS - Continued Net pension cost for 1999 and 1998 includes the following components: 1999 1998 Service cost - benefits earned during the period $ 6,682 $ 5,931 Interest cost on projected benefit obligation 29,810 29,630 Amortization of prior service cost 37,872 37,745 Net periodic pension cost $ 74,364 $ 73,306
The Company contributed approximately $40,000 and $54,000 in fiscal years 1999 and 1998, respectively, to several multiemployer pension plans for employees covered by collective bargaining agreements. The Company does not administer these plans, and contributions are determined in accordance with provisions of negotiated labor contracts. The Multiemployer Pension Plan Amendments Act of 1980 (the Act) significantly increased the pension responsibilities of participating employers. Under the provisions of the Act, if the plans terminate or the Company withdraws, the Company could be subject to a substantial "withdrawal liability." Management has no intention of undertaking any action that could subject the Company to this obligation. The Company had a defined-contribution plan that covers all permanent nonunion employees. Under the terms of the plan, employees could contribute up to a maximum of 15% of their gross annual salary. The Company made no contributions to this plan during fiscal year 1999 or 1998. The Plan was terminated as of September 30, 1998. Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 I. INCOME TAXES Deferred income taxes includes the following amounts of deferred tax assets and liabilities: 1999 1998 Deferred tax liability $ 239,360 256,890 Deferred tax asset (959,037) (746,111) Less: valuation allowance 719,677 489,221 Net deferred tax $ - $ -
The approximate tax effect of each temporary difference giving rise to the deferred tax liability and asset was as follows at June 3, 1999 and May 28, 1998: 1999 1998 Amortization of location contracts $ 5,360 $ 2,305 Accelerated depreciation 234,000 254,585 Net deferred tax $ 239,360 $ 256,890 Accrued costs $ (27,870) $ (33,691) Amortization of pension costs (84,200) (76,002) Vacation accrual (25,851) (26,381) Allowance for bad debts (6,593) (35,128) Other (16,424) (18,803) Net operating loss carryforward (591,121) (289,498) ATM credit carryforward (106,504) (106,504) Investment tax credit carryforward (100,474) (160,104) $(959,037) $(746,111)
The valuation allowance was established to reduce the deferred tax asset to zero. The reduction is necessary because of prior operating losses and uncertainty about the Company's ability to utilize tax credit and net operating loss carryforwards before they expire. The valuation allowance was increased $230,456 and $660 in fiscal years 1999 and 1998, respectively. Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 I. INCOME TAXES - Continued The income tax benefit reflected in the consolidated statements of operations differs from the amounts computed at federal statutory income tax rates. The principal differences are as follows: 1999 1998 Federal income tax benefit computed at statutory rate $ (274,600) $ (26,000) State income tax benefit (48,000) (4,000) Tax effect of nondeductible expenses 20,000 10,000 Increase in valuation allowance 230,456 660 Expiration of investment tax credit carryforward 59,630 - Other, net 12,514 19,340 $____-_____ $_____-____
The Company had available for income tax purposes the following investment credit carryforwards at June 3, 1999: Year of Expiration Amount 2000 $ 25,168 2001 49,551 2002 25,755 $ 100,474
In addition, the Company had the following net operating loss carryforwards available at June 3, 1999: Year of Expiration Amount 2008 $ 252,779 2009 138,822 2010 63,240 2011 156,463 2012 16,508 2013 107,773 2019 1,003,006 $ 1,738,591
Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 J. ACCRUED COSTS OF DISCONTINUED RESTAURANT OPERATIONS In fiscal year 1988, management ceased restaurant operations. The estimated obligation under the property lease, net of anticipated sublease rentals, is accrued. The accrual is included in the accompanying consolidated financial statements as follows: 1999 1998 Current portion included in accrued expenses $ 13,813 $ 13,562 Accrual included in long-term liabilities 55,864 70,666 $ 69,677 $ 84,228
K. OPERATING EXPENSES Operating expenses in the accompanying consolidated statements of operations are composed of the following: 1999 1998 Payroll and related costs $ 5,590,281 $ 5,725,843 Equipment rental costs 370,736 476,677 Other 1,602,285 1,321,197 $ 7,563,302 $ 7,523,717
Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 L. NOTES RECEIVABLE Notes receivable include the following: 1999 1998 Note receivable from BVI, payable in monthly installments of $12,300, including interest at 8.5% through April 2001, collateralized by the equipment and real estate being leased by the Company $ 312,828 $ 382,072 Note receivable from sale of St. Louis operations, with $120,000 payment due in January 1998, with 60 monthly installments commencing February 1998, plus interest at 10%, collateralized by the equipment sold. Note was discounted by $28,070 in December 1998 in consideration for repayment of the remaining balance ____-____ 822,598 312,828 1,204,670 Less current portion 21,016 295,570 $_291,812 $ 909,100
M. SELF-INSURANCE LIABILITIES The Company is partially self-insured for health claims for its employees and their eligible dependents. The Company is liable for claims up to $25,000 per participant, per plan year. Accordingly, the Company has accrued estimated claims of $59,656 and $23,318 as of June 3, 1999 and May 28, 1998, respectively. Ambassador Food Services Corporation and Subsidiary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Years ended June 3, 1999 and May 28, 1998 N. SUBSEQUENT EVENTS On October 27, 1999, the Company borrowed $500,000 at 14.5% from an individual, collateralized by certain vending, cafeteria, and commissary equipment. Monthly payments of interest only are due through November 2000, at which time payments are $50,000 plus interest through September 2001. On November 1, 1999, the Company borrowed $1,100,000 at 12.5% from an individual, collateralized by a building and certain vending equipment. The debt is subordinate to the revolving credit line entered into on December 29, 1999 as described below. The note proceeds paid in full the $500,000 borrowed on October 27, 1999, and the $600,000 note payable outstanding at June 3, 1999. Monthly payments of interest only are due through November 2000, at which time payments are $65,000 plus interest through April 2002. The note includes warrants to purchase 25,000 shares of the Company's common stock at $1.25 during the term of the agreement. Additionally, 25,000 warrants for $1.25 will be issued if the agreement is extended 15 months. On December 29, 1999, the Company entered into a revolving credit line agreement that provides for borrowing up to $1,000,000 and is due December 2001. Borrowings are limited to 80% of eligible accounts receivable. The agreement carries interest at the publicly announced prime rate plus 4.0%. The amount is collateralized by the Company's accounts receivable, inventories and equipment. The agreement, among other things, requires a minimum tangible net worth, as defined. Part III Item 9. Directors and Executive Officers of the Registrant; Compliance with 16 (a) of the Exchange Act. (a), (b) The Executive Officers and Directors of the Company are as follows: Director Name Age Principal Occupation Since Robert A. Laudicina (1) 59 President, Treasurer (2) 1986 Arthur D. Stevens (1) 75 Chairman of the Board (3) 1963 George T. Terris 76 Investor (4) 1966 Ann W. Stevens 58 Real Estate Broker 1996 Douglas M. Schosser, CPA 29 Director, Key Asset Mgmt 1997
(1) Member of Executive Committee of Board of Directors (2) Mr. Laudicina was elected President in March 1998 and Treasurer in May 1998. He served as Executive Vice President beginning in February 1989 and Vice President prior to that time beginning in January 1982. (3) Mr. Stevens has been Chairman of the Board of Directors of Ambassador since February 15, 1963. He was also the first President and Treasurer of Ambassador beginning on April 19, 1963, relinquishing those positions in April 1978 and October 1969, respectively. He again assumed the position of President on January 1, 1987, upon the retirement of Mr. George Terris from that position, serving in that capacity through March 1998. He was Chief Executive Officer from April 11, 1963 through May 1998 and Treasurer from January 26, 1972 through May 1998. (4) Mr. Terris, until his retirement January 1, 1987, was President and Chief Operations Officer of Ambassador. (a) Arthur D. Stevens, Chairman, and Ann W. Stevens, Director, are husband and wife. No other family relationship exists between any of the executive officers and directors listed above. Each Officer holds his office at the pleasure of the Board of Directors until the next annual meeting of the Directors and until his successor is duly elected and qualified. (a) The Executive Officers and Directors listed above were not involved in or part of any legal proceedings, as is described in Item 401(d). Item 10. Executive Compensation (a), (b) The following table sets forth information as to the remuneration accrued by Ambassador Food Services Corporation and its subsidiary during the fiscal year ended June 3, 1999, for each Director and Officer whose aggregate remuneration for the year exceeded $100,000. Names of Individuals, Fiscal Base Number of Persons in Group Year Salary and Capacities in which Served Arthur D. Stevens, Chairman of the Board, President, 1999 $ 51,868 Chief Executive Officer and 1998 147,877 Treasurer of Ambassador and 1997 144,144 Officer and Director of its subsidiary Robert A. Laudicina, 1999 $ 166,905 President, Executive Vice President and 1998 $ 165,095 General Manager of New York Operations 1997 $ 157,000
Executive Retirement Program An executive retirement program was adopted during the 1990 fiscal year to provide a target annual retirement benefit at age 65 or upon retirement, if later, in an amount equal to approximately 40- 45% of annual salary, payable for 10 years, for certain salaried employees, including the following officer: Robert A. Laudicina. This target retirement benefit will be provided through the combination of (1) discretionary annual cash retirement bonus payments in the amount of $2,000, which must be invested in an individual retirement account or a universal life insurance policy, and (2) a nonqualified (for tax purposes) supplemental retirement agreement from the Company. The nonqualified retirement agreements will pay the estimated portion of the target retirement benefit which cannot be funded by the executive through the annual cash retirement bonus payments. The nonqualified retirement arrangements will also provide a pre-retirement death benefit in the event of the executive's death prior to age 65. These annual retirement benefits of the above- named Officer are estimated to be as follows: Name of Executive Age Estimated Benefit Supplemental Target From Cash Retirement Retirement Retirement Benefit Benefit Bonus Payments* Robert A. Laudicina 59 $9,123 $46,227 $55,350
*based upon contributions of $2,000 per year until age 65 and interest at 8% per annum. d) Stock Options Robert Laudicina, President and Treasurer hold options to purchase 3,125 shares of Ambassador common stock at $1.37 exercisable anytime before June 1, 2003, effective June 1, 1998. g) Consulting Agreement During fiscal year 1999, the Company entered into a consulting agreement with Arthur D. Stevens, Chairman and former President. The agreement calls for weekly payments totaling $100,482 per year beginning in May 1999 through May 2009. Subsequent to June 3, 1999, Mr. Stevens agreed to defer payments on the consulting agreement for one year if equivalent payments were made on a certain note payable to him. At June 3, 1999 and May 28, 1998, amounts outstanding on the note were $168,558 and $250,000, respectively. Warrants for the purchase of 66,752 shares have been issued in accordance with the terms of the note and are outstanding as of June 3, 1999. The conversion terms may be adjusted upon certain events to prevent dilution of the stockholder conversion rights. Item 11. Security Ownership of Certain Beneficial Owners and Management (a) Security Ownership of Certain Beneficial Owners The following table sets forth, as of June 3, 1999, the information with respect to common stock ownership of each person known by the Company to own beneficially more than 5% of the shares of the Company's common stock, and of all Officers and Directors as a group. Amount Percent of Beneficially Outstanding Name and Address of Beneficial Owner(s) Owned Shares Arthur D. Stevens 1901 W. 69th Street Mission Hills, KS 66205 181,444 (1) 24.5% Thomas G. Berlin 800 Superior Avenue, Suite 2100 Cleveland, OH 44114 124,218 (3) 16.8% George T. Terris 104 S. Warbler Sarasota, FL 34236 64,000 (2) 8.7% George F. Crawford 10110 Fontana Lane Overland Park, KS 66207 52,597 7.1%
(1) Does not include 60,000 shares beneficially owned by Mr. Stevens' adult children, in which shares he disclaims any beneficial interest. Additionally, does not include 200,000 shares, which may be issued in the event of conversion of certain debt under its conversion provisions, which are effective from April 30, 1998 to May 1, 2006. (2) Does not include 4,000 shares owned by Mr. Terris' immediate family, in which shares he disclaims any beneficial interest. (3) Includes 12,800 shares owned by Mr. Berlin's wife. (b) Security Ownership of Management Shares of Stock Beneficially Owned June 3, 1999 Number Percent Name of Shares of Stock Arthur D. Stevens 1901 W. 69th Street Mission Hills, KS 66205 181,444 (1) 24.5% George T. Terris 104 S. Warbler Sarasota, FL 34236 64,000 (2) 8.7% Robert A. Laudicina 303 Cedar Court Norwood, NJ 07648 29,390 (3) 4.0% Ann W. Stevens 1901 W. 69th Street Mission Hills, KS 66205 1,000 0.1% Douglas M. Schosser 1050 Allston Road Cleveland Heights, OH 44121 2,000 0.3% All Directors and Officers as a Group (6 persons) 289,989 (4) 38.4%
(1) Does not include 60,000 shares beneficially owned by Mr. Stevens'adult children, in which shares he disclaims any beneficial interest. Additionally, does not include 200,000 shares, which may be issued in the event of conversion of certain debt under its conversion provisions, which are effective from April 30, 1998 to May 1, 2006. (2) Does not include 4,000 shares owned by Mr. Terris' immediate family, in which shares he disclaims any beneficial interest. (3) Includes 3,125 shares, which Mr. Laudicina could purchase for $1.37 per share under a stock option exercisable anytime before June 1, 2003. (4) Includes 6,250 shares, which could be purchased by certain officers and directors under stock options. (c) Changes in Control The Company knows of no contractual arrangements, which may, at a subsequent date, result in a change in control of the Company. Item 12. Certain Relationships and Related Transactions (a) Certain Business Relationships There were no transactions with any member of management during fiscal 1999, which exceeded $60,000. Item 13. Exhibits and Reports on Form 8-K (a) Exhibit No.: 3A Articles of Incorporation of the Registrant (1) 3B By-Laws of the Registrant (1) 6 1984 Incentive Stock Option Plan Dated January 31, 1984 (2) 10 Material Contracts Agreement with Paul F. Leathers (1) 22 Subsidiary of the Registrant (3) (1) This exhibit was filed with Ambassador's 10-K for the fiscal year ended May 28, 1981. A copy of the Certificate of Amendment of Certificate of Incorporation changing the Company's name was filed as a supplement to said exhibit for the fiscal year ended June 1, 1989. (2) This exhibit was filed with the Company's 10-K for the fiscal year ended May 31, 1984. (3) Exhibit attached as part of filing. Exhibit No. 22 Subsidiary of the Registrant Ambassador Food Services Corporation (a Delaware Corporation), the parent Company, has the following subsidiary, which is included in the consolidated financial statements. Name of Subsidiary State of Incorporation % of Voting Securities Owned Ambassador Fast Services, Inc. New York 100% d/b/a Squire Maintenance Services Note: The Company will provide, on the written request of any stockholder, a copy of any exhibit to this Form 10-KSB at a rate of $.15 per page. The minimum fee is $5.00. Requests should be directed to Robert A. Laudicina, President, Ambassador Food Services Corporation, 3269 Roanoke Road, Kansas City, Missouri 64111. Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMBASSADOR FOOD SERVICES CORPORATION (Registrant) By Date Arthur D. Stevens Chairman of the Board By Date Robert Laudicina Acting Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Chairman of the Board Date Arthur D. Stevens Title President and Chief Executive Officer/Director Date Robert A. Laudicina Title Director Date Ann W. Stevens Title Director Date George T. Terris Title Director Date Douglas M. Schosser Title
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