FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-12145
AMARILLO MESQUITE GRILL, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0936946
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Suite 200
302 North Rock Road
Wichita, Kansas 67206
(Address of principal executive offices)
(Zip Code)
(316) 685-7286
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No .
As of April 30, 2000, 8,301,137 shares of common stock $.01 par value
were outstanding.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AMARILLO MESQUITE GRILL, INC.
BALANCE SHEETS
(Unaudited)
ASSETS April 30 January 30
2000 2000
Current assets:
Cash $ 427,876 $ 407,710
Accounts receivable 25,396 21,137
Advances to affiliate 45,779 45,655
Inventories 145,610 169,027
Prepaid expenses and other current assets 60,338 125,629
Total current assets 704,999 768,758
Property and equipment:
Buildings 1,108,129 1,108,129
Leasehold improvements 2,877,048 2,868,805
Equipment and fixtures 5,225,192 5,164,940
Leased property under capital lease 1,234,626 1,234,626
10,444,995 10,376,500
Less: accumulated depreciation and amortization 3,226,824 2,998,736
7,218,171 7,377,764
Other assets:
Cost in excess of net tangible assets of purchased
business, net of amortization of $279,209
and $261,004 667,802 686,007
Deposits and other 40,923 40,922
708,725 726,929
$8,631,895 $8,873,451
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable $6,187,493 $ 270,912
Note payable, related party 164,922 224,000
Current portion of long term debt - 36,075
Current portion of obligation under capital lease 45,038 45,038
Accounts payable 802,007 1,029,247
Accrued payroll 226,084 225,674
Other accrued liabilities 691,551 741,154
Total current liabilities 8,117,095 2,572,100
Long-term debt, less current portion - 5,904,586
Obligation under capital lease, less current portion 949,837 961,104
Stockholders' equity (deficit):
Preferred stock, $.01 par value, authorized
10,000,000 shares, none issued - -
Common stock, $.01 par value, authorized 20,000,000
shares,issued 8,301,137 shares at April 30, 2000
and at January 30, 2000 83,011 83,011
Additional paid-in capital 7,557,082 7,532,622
Accumulated deficit (7,805,130) (7,909,972)
Treasury stock, 60,000 shares of common stock
at cost ( 270,000) ( 270,000)
Total stockholders' equity (deficit) ( 435,037) ( 564,339)
$8,631,895 $8,873,451
[FN]
See accompanying notes to financial statements.
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AMARILLO MESQUITE GRILL, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Thirteen Weeks Ended
April 30 May 2
2000 1999
Sales $5,629,353 $4,630,842
Costs and expenses:
Cost of goods sold 1,923,184 1,592,800
Operating expenses 2,856,973 2,201,011
Depreciation and amortization 246,293 220,728
General and administrative 314,095 310,148
5,340,545 4,324,687
Operating income 288,808 306,155
Other income (expense)
Interest expense (159,506) (160,353)
Noncash expense from issuance
of stock options to related
parties pursuant to debt
guarantees ( 24,460) ( 24,460)
(183,966) ( 184,813)
Earnings before income taxes 104,842 121,342
Provision for income taxes - -
Net earnings $ 104,842 $ 121,342
Net earnings per common share-
Basic and diluted $ .01 $ .02
Average shares outstanding-
Basic and diluted 8,241,137 7,783,895
[FN]
See accompanying notes to financial statements.
3
AMARILLO MESQUITE GRILL, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen Weeks Ended
April 30 May 2
2000 1999
Cash flows from operating activities:
Net earnings $ 104,842 $ 121,342
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 246,293 220,728
Noncash expense from issuance of stock
options to related parties pursuant to
debt guarantees 24,460 24,460
Changes in assets and liabilities
(Increase) decrease in accounts receivable ( 4,383) ( 7,803)
(Increase) decrease in inventories 23,417 5,231
(Increase) decrease in prepaid expenses and
other current assets 64,891 70,500
Increase (decrease) in accounts payable ( 227,240) ( 145,940)
Increase (decrease) in accrued expenses ( 49,193) ( 84,372)
Other net ( 1) 500
Cash provided by (used in) operating
activities 183,086 204,646
Cash flows from investing activities:
Purchase of property and equipment ( 68,495) ( 29,890)
Cash used in investing activities ( 68,495) ( 29,890)
Cash flows from financing activities:
Sale of common stock - 24,520
Repayment of notes payable and
Note payable related party ( 83,158) -
Repayment of long-term borrowings
and capital lease obligations ( 11,267) ( 95,080)
Cash provided by financing activities ( 94,425) ( 70,560)
Increase in cash 20,166 104,196
Cash at beginning of period 407,710 214,513
Cash at the end of period $ 427,876 $ 318,709
Supplemental disclosure of cash flow information:
Cash paid for interest $ 159,506 $ 160,353
Cash paid for income taxes $ - $ -
[FN]
See accompanying notes to financial statements.
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AMARILLO MESQUITE GRILL, INC.
Notes to Financial Statements
(Unaudited)
April 30, 2000
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the thirteen week period ended
April 30, 2000 are not necessarily indicative of the results that may
be expected for the year ended January 28, 2001. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's 10-K and Annual Report to
Stockholders as filed on April 23, 2000.
(2) Net Earnings Per Share
The Company, as required under FASB Statement No. 128, Earnings Per
Share, calculates and presents both a basic and diluted earnings per
share in the financial statements. Earnings per common share is computed
on the basis of the weighted-average number of common shares outstanding
during each period presented. The Company has granted options to
employees to purchase 1,247,525 shares of common stock at a weighted
average exercise price of $2.01 per share. These options were not
included in the computation of diluted earrings per share because the
exercise price of those options exceeded the average market price of the
common shares during the quarter.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Results of Operations
Three Months Ended April 30, 2000 Compared to Three Months Ended May 2, 1999.
For the three months ended April 30, 2000, sales increased 21.6% to
$5,629,353 as compared to $4,630,842 for the first quarter of the prior year.
As of April 30, 2000, the Company operated fourteen Amarillo Mesquite Grills
as compared to twelve Amarillo Mesquite Grills as of May 2, 1999.
Cost of sales, as a percentage of total sales, was 34.2% for the quarter
ended April 30, 2000 as compared to 34.4% for the first quarter of the prior
year.
Operating expenses, as a percentage of total sales, were 50.8% and 47.5%
for the 2000 and 1999 periods respectively. The increase in operating expense
is due to an increase in promotional costs related to various programs designed
to increase customer counts and same store sales. These programs were
successful in reaching both objectives.
General and administrative expenses, as a percentage of sales, was 5.6%
for the quarter ended April 30, 2000, as compared to 6.7% for the first
quarter of the prior year. The decrease in general and administrative expense,
as a percentage of sales, is the result of increasing sales while maintaining
the dollar amount of expense at a fairly constant level for both periods.
Depreciation and amortization is directly related to the acquisition and
disposition of fixed assets. The investment in fixed assets increased
approximately $775,000 from the end of the first quarter last year to the end
of the first quarter of the current year. Consequently, depreciation and
amortization increased.
Interest expense was $159,506 for the quarter ended April 30, 2000 as
compared to $160,353 for the same period a year ago. Interest expense is a
function of the interest rate and the amount of debt. While the interest rate
has increased over the past few months, the amount of short and long-term debt
has decreased. Consequently interest expense has remained relatively constant.
The Company incurred noncash expenses of $24,460 for the 2000 and 1999
periods respectively, relating to the issuance of stock options pursuant to
debt guarantees.
Liquidity and Capital Resources
The Company's primary sources of funding to finance its business have been
its cash flow from operations, and proceeds from bank debt. On April 30, 2000
and January 30, 2000, the Company had an excess of current liabilities over
current assets of $7,412,096 and $1,803,342, respectively. However included
as a current liability as of April 30, 2000 is a bank note payable in the
amount of $5,904,586 which is due April 15, 2001. Management expects to renew
the note on April 15, 2001 and commence making monthly principal payments based
on a 60 month amortization period. Cash flow form operations was $183,086 and
$204,646 for 2000 and 1999 respectively. Management anticipates higher cash
flow from operations in fiscal 2001 and that such higher operating cash flow
will enable the Company to meet its financial obligations in fiscal 2001 as
they come due.
On May 12, 1998, the President of the Company loaned the Company $250,000
to fund construction cost overages. The note was an unsecured 10% demand note
due January 1, 1999. As of April 30, 2000, the note had a balance of $164,922
and has been renewed with a due date of January 3, 2001. Although the
Company's President has made loans to the Company in the past, there is no
assurance that he will make additional loans in the future.
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Substantially, all of the Company's revenues are derived from cash
sales. The Company does not maintain significant receivables and inventories;
therefore, working capital requirements for operations are not significant.
The Company plans to continue expansion of the Amarillo Mesquite Grill
concept in fiscal 2001. The Company intends to lease existing restaurant
properties which are suitable for conversion to the Amarillo Mesquite Grill
concept. It is expected that each conversion will require approximately
$300,000 to $500,000 for equipment and remodel costs. A ground-up proto-type
restaurant will cost approximately $1.3 million for the land, building and
equipment. The Company has no commitments for financing at this time. In order
for the Company to meet its expansion goals for fiscal 2001, it will need to
raise additional funds through debt or equity instruments, the availability and
terms of which will depend upon market and other conditions. There can be no
assurance that such additional financing will be available on terms acceptable
to the Company.
The Company has restructured its long-term bank debt to provide for
interest only payments through April 15, 2001. The purpose of the
restructuring is to use cash flow to open additional restaurants that would
otherwise be used to retire long term debt. Management views this as a way
to continue our growth, that should result in increased future earnings and
cash flow, but do so without increasing bank debt.
This report contains certain forward-looking statements, including those
relating to the opening of additional restaurants and planned capital
expenditures. Although the Company believes that the assumptions underlying
the forward-looking statements contained herein are reasonable, actual results
could differ materially from such forward-looking statement. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company that objectives and plans of the Company will be
achieved.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities.
Not Applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Not Applicable.
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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 thereunto duly authorized.
AMARILLO MESQUITE GRILL INC.
(Registrant)
Date May 31, 2000 /s/LINN F. HOHL
Linn F. Hohl - Vice President
of Finance,
Secretary and
Treasurer
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