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 29, 2001
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 29, 2001, 8,301,137 shares of common stock $.01 par value were
outstanding.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AMARILLO MESQUITE GRILL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS April 29 January 28
2001 2001
Current assets:
Cash $ 336,978 $ 348,182
Accounts receivable 9,240 17,248
Advances to affiliate 31,120 35,868
Inventories 156,378 168,953
Prepaid expenses and other current assets 77,162 130,421
Total current assets 610,878 700,672
Property and equipment:
Buildings 1,114,105 1,122,019
Leasehold improvements 2,759,301 2,758,064
Equipment and fixtures 5,391,851 5,365,363
Leased property under capital lease 1,234,626 1,234,625
10,499,883 10,480,071
Less: accumulated depreciation and
amortization 3,957,501 3,733,643
6,542,382 6,746,428
Other assets:
Cost in excess of net tangible assets of
purchased business, net of amortization
of $352,029 and $333,824 594,982 613,187
Deposits and other 38,613 38,613
633,595 651,800
$7,786,855 $8,098,900
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable $6,111,863 $ 220,284
Current portion of long term debt - -
Current portion of obligation under capital
lease 50,231 50,231
Accounts payable 892,811 1,059,669
Accrued payroll 198,350 213,338
Other accrued liabilities 735,257 797,094
Accrual for restaurant closings 25,350 35,850
Total current liabilities 8,013,862 2,376,466
Long-term debt, less current portion - 5,904,586
Obligation under capital lease, less current
portion 899,606 910,873
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 29, 2001 and at January 28, 2001 83,011 83,011
Additional paid-in capital 7,667,922 7,643,462
Accumulated deficit (8,607,546) (8,549,498)
Treasury stock, 60,000 shares of common stock
at cost ( 270,000) ( 270,000)
Total stockholders' equity (deficit) (1,126,613) (1,093,025)
$7,786,855 $8,098,900
[FN]
See accompanying notes to consolidated financial statements.
2
AMARILLO MESQUITE GRILL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Thirteen Weeks Ended
April 29 April 30
2001 2000
Sales $5,025,645 $5,629,353
Costs and expenses:
Cost of goods sold 1,783,214 1,923,184
Operating expenses 2,620,678 2,856,973
Depreciation and amortization 236,543 246,293
General and administrative 265,125 314,095
4,905,560 5,340,545
Operating income 120,085 288,808
Other income (expense)
Interest expense (153,673) (159,506)
Noncash expense from issuance
of stock options to related
parties pursuant to debt
guarantees ( 24,460) ( 24,460)
(178,133) (183,966)
Earnings before income taxes ( 58,048) 104,842
Provision for income taxes - -
Net earnings $ ( 58,048) $ 104,842
Net earnings per common share-
Basic and diluted $ ( .01) $ .01
Average shares outstanding-
Basic and diluted 8,241,137 8,241,137
[FN]
See accompanying notes to consolidated financial statements.
3
AMARILLO MESQUITE GRILL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen Weeks Ended
April 29 April 30
2001 2000
Cash flows from operating activities:
Net earnings $( 58,048) $ 104,842
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 236,543 246,293
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 12,756 ( 4,383)
(Increase) decrease in inventories 12,575 23,417
(Increase) decrease in prepaid expenses
and other current assets 53,259 64,891
Increase (decrease) in accounts
payable ( 166,858) ( 227,240)
Increase (decrease) in accrued
expenses ( 87,325) ( 49,193)
Other net - ( 1)
Cash provided by (used in)
operating activities 27,362 183,086
Cash flows from investing activities:
Purchase of property and equipment ( 14,292) ( 68,495)
Cash used in investing activities ( 14,292) ( 68,495)
Cash flows from financing activities:
Sale of common stock - -
Repayment of notes payable and
Note payable related party ( 13,007) ( 83,158)
Repayment of long-term borrowings
and capital lease obligations ( 11,267) ( 11,267)
Cash provided by financing activities ( 24,274) ( 94,425)
(Decrease)/Increase in cash ( 11,204) 20,166
Cash at beginning of period 348,182 407,710
Cash at the end of period $ 336,978 $ 427,876
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 153,673 $ 159,506
Cash paid for income taxes $ - $ -
[FN]
See accompanying notes to consolidated financial statements.
4
AMARILLO MESQUITE GRILL, INC.
Notes to Consolidated Financial Statements
(Unaudited)
April 29, 2001
(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 29, 2001 are
not necessarily indicative of the results that may be expected for the
year ended January 27, 2002. 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 27,
2001.
(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 1,324,175 shares of common stock at a weighted
average exercise price of $1.93 per share. These options were not
included in the computation of diluted earnings per share because the
exercise price of those options exceeded the average market price of the
common shares during the quarter and because The Company had a net loss
available to common stockholders and the inclusion of such options would
be antidilutive.
5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Results of Operations
Thirteen weeks Ended April 29, 2001 Compared to thirteen weeks Ended April 30,
2000.
For the thirteen weeks ended April 29, 2001, sales decreased 10.7% to
$5,025,645 as compared to $5,629,353 for the first quarter of the prior year.
The sales decrease for the quarter ended April 29, 2001 was a result of not
running the heavy amounts of promotions that were ran a year ago resulting in
less sales compared to the same quarter last year. As of April 29, 2001, the
Company operated fourteen Amarillo Mesquite Grills.
Cost of sales, as a percentage of total sales, was 35.5% for the quarter
ended April 29, 2001 as compared to 34.2% for the first quarter of the prior
year. The cost of sales as a percentage of total sales were up due to not
being able to take advantage of the buying discounts that were available during
this period a year ago, along with the higher cost of meat for the quarter
ended April 29, 2001 as compared to the quarter ended April 30, 2000.
Operating expenses, as a percentage of total sales, were 52.1% and 50.8%
for the 2001 and 2000 periods respectively. The increase in operating expense
is a direct result of lower sales for the quarter ended April 29, 2001 as
compared to the quarter ended April 30, 2000. The dollars spent should remain
stable or lower.
General and administrative expenses, as a percentage of sales, was 5.3% for
the quarter ended April 29, 2001, as compared to 5.6% for the first quarter of
the prior year. The decrease in general and administrative expense, as a
percentage of sales, is the result of management being more efficient.
Depreciation and amortization is directly related to the acquisition and
disposition of fixed assets. The investment in fixed assets increased
approximately $55,000 from the end of the first quarter last year to the end of
the first quarter of the current year. Depreciation and amortization decreased
due to items becoming fully depreciated.
Interest expense was $153,673 for the quarter ended April 29, 2001 as
compared to $159,506 for the same period a year ago. Interest expense is a
function of the interest rate and the amount of debt. The interest rate has
decreased over the past few months, as well as the amount of short and long-
term debt has decreased. Consequently interest expense is lower this quarter
as compared to the same quarter last year.
The Company incurred noncash expenses of $24,460 for the 2001 and 2000
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 29, 2001
and January 28, 2001, the Company had an excess of current liabilities over
current assets of $7,402,984 and $1,675,794, respectively. However included
as a current liability as of April 20, 2001 is a bank note payable in the
amount of $5,904,586 which is due April 15, 2002. Cash flow from operations
was $27,362 and $183,086 for 2001 and 2000 respectively. Management
anticipates higher cash flow from operations in fiscal 2002 and that such
higher operating cash flow will enable the Company to meet its financial
obligations in fiscal 2002 as they come due.
6
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 2002. 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 2002, 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, 2002. 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.
7
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, 2001 /s/CHRIS F. HOTZE
Chris F. Hotze - President