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 July 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 July 29, 2001, 8,241,137 shares of common stock $.01 par value were
outstanding.
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
AMARILLO MESQUITE GRILL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS July 29 January 28
2001 2001
Current assets:
Cash $ 316,033 $ 348,182
Accounts receivable 7,702 17,248
Advances to affiliate 55,700 35,868
Inventories 171,690 168,953
Prepaid expenses and other current assets 294,810 130,421
Total current assets 845,935 700,672
Property and equipment:
Buildings 1,114,105 1,122,019
Leasehold improvements 2,689,259 2,758,064
Equipment and fixtures 5,677,779 5,365,362
Leased property under capital lease 1,234,626 1,234,626
10,715,769 10,480,071
Less: accumulated depreciation and
amortization 4,160,325 3,733,643
6,555,444 6,746,428
Other assets:
Cost in excess of net tangible assets of
purchased business, net of amortization
of $370,234 and $333,824 576,777 613,187
Deposits and other 38,613 38,613
615,390 651,800
$8,016,769 $8,098,900
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable $6,098,183 $ 220,284
Note payable, other 170,498 -
Current portion of obligation under
capital lease 50,231 50,231
Accounts payable 1,399,793 1,059,669
Accrued payroll 208,692 213,338
Other accrued liabilities 667,086 797,094
Accrual for restaurant closings 15,120 35,850
Total current liabilities 8,609,603 2,376,466
Long-term debt, less current portion - 5,904,586
Obligation under capital lease, less
current portion 888,339 910,873
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 July 29, 2001 and at
January 28, 2001 83,011 83,011
Additional paid-in capital 7,692,382 7,643,462
Accumulated deficit (8,986,566) (8,549,498)
Treasury stock, 60,000 shares of common
stock at cost ( 270,000) ( 270,000)
Total stockholders' equity (deficit) (1,481,173) (1,093,025)
$8,016,769 $8,098,900
<FN>
See accompanying notes to consolidated financial statements.
2
AMARILLO MESQUITE GRILL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Thirteen Weeks Ended Twenty-Six
Weeks Ended
July 29 July 30 July 29
July 30
2001 2000 2001
2000
Net sales $4,653,177 $5,127,450 $9,678,822
$10,756,803
Costs and expenses:
Cost of goods sold 1,763,362 1,751,628 3,546,576
3,674,812
Operating expenses 2,540,970 2,728,159 5,161,648
5,585,132
Depreciation and amortization 238,857 246,294 475,400
492,587
General and administrative 284,197 292,139 549,322
606,234
Provision for restaurant closings 47,770 - 47,770
- -
4,875,156 5,018,220 9,780,716
10,358,765
Operating income ( 221,979) 109,230 ( 101,894)
398,038
Other income (expense)
Interest expense ( 132,581) ( 166,604) ( 286,254) (
326,110)
Noncash expense from issuance
of stock options to related
parties pursuant to debt
guarantees ( 24,460) ( 24,460) ( 48,920) (
48,920)
( 157,041) ( 191,064) ( 335,174) (
375,030)
Earnings (loss) before income taxes ( 379,020) ( 81,834) ( 437,068)
23,008
Provision for income taxes - - -
- -
Net Earnings (loss) $( 379,020) $( 81,834) $( 437,068) $
23,008
Net earnings (loss) per common share-
Basic and diluted $ (.05) $ (.01) $ (.05) $
- -
Average shares outstanding-
Basic and diluted 8,241,137 8,241,137 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)
Twenty Six Weeks Ended
July 29 July 30
2001 2000
Cash flows from operating activities:
Net earnings $( 437,068) $ 23,008
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 475,400 492,587
Noncash expense from issuance of stock
options pursuant to debt guarantees 48,920 48,920
Changes in assets and liabilities
(Increase) decrease in accounts receivable 9,546 2,360
(Increase) decrease in inventories ( 2,737) 7,352
(Increase) decrease in prepaid expenses and
other current assets ( 164,389) ( 139,505)
(Increase) decrease in advances to
affiliate ( 19,832) -
Increase (decrease) in accounts payable 340,124 147,687
Increase (decrease) in accrued expenses ( 155,384) ( 44,788)
Other net - ( 2,380)
Cash provided by (used in) operating
activities 94,580 535,241
Cash flows from investing activities:
Purchase of property and equipment ( 248,006) ( 355,251)
Cash used in investing activities ( 248,006) ( 355,251)
Cash flows from financing activities:
Proceeds from long-term debt 187,165 -
Repayment of notes payable and
Note payable other ( 43,354) ( 167,957)
Repayment of long-term borrowings
and capital lease obligations ( 22,534) ( 22,534)
Cash provided by financing activities 121,277 ( 190,491)
Increase (decrease) in cash ( 32,149) ( 10,501)
Cash at beginning of period 348,182 407,710
Cash at the end of period $ 316,033 $ 397,209
Supplemental disclosure of cash flow information:
Cash paid for interest $ 286,254 $ 326,110
Cash paid for income taxes $ - -
<FN>
See accompanying notes to consolidated financial statements.
4
AMARILLO MESQUITE GRILL, INC.
Notes to Consolidated Financial Statements
(Unaudited)
July 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 twenty six week period ended July 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
1,357,975 shares of common stock at a weighted average exercise price of
$1.87 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.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Results of Operations
Thirteen Weeks Ended July 29, 2001 Compared to Thirteen weeks Ended
July 30, 2000.
For the thirteen weeks ended July 29, 2001, sales decreased 9.3% to
$4,653,177 as compared to $5,127,450 for the second quarter of the
prior year. As of July 29, 2001, the Company operated fourteen
Amarillo Mesquite Grills.
Cost of sales, as a percentage of total sales, was 37.9% for the quarter
ended July 29, 2001, as compared to 34.2% for the second quarter of the
prior year. The cost of sales as a percentage of total sales were up due
to the rise in the cost of meat.
Operating expenses, as a percentage of total sales, were 54.6% and 53.2%
for the 2001 and 2000 periods respectively. The increase in operating
expense is directly related to the decrease in sales for the quarter ended
July 29, 2001, as compared to the quarter ended July 30, 2000. The dollars
spent were actually lower this quarter as compared to the same quarter last
year.
General and administrative expenses, as a percentage of sales, was 6.1%
for the quarter ended July 29, 2001, as compared to 5.7% for the second
quarter of the prior year. The increase in general and administrative, as a
percentage of sales, is the result of lower sales as well as higher real
estate and personal property taxes and insurance costs. Depreciation and
amortization is directly related to the acquisition and disposition of
fixed assets.
Interest expense was $132,581 for the quarter ended July 29, 2001 as
compared to $166,604 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 has decreased.
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.
Twenty Six Weeks Ended July 29, 2001 Compared to Twenty Six Weeks Ended
July 30, 2000.
For the twenty six weeks ended July 29, 2001, sales decreased 10.7% to
$9,678,822 as compared to sales of $10,756,803 for the first twenty six weeks
of the prior year. The Company operated fourteen Amarillo Mesquite Grills
as of July 29, 2001.
Cost of sales, as a percentage of total sales, was 36.6% and 34.2% for the
2001 and 2000 periods respectively. The cost of sales as a percentage of total
sales was up for the twenty six weeks ended July 29, 2001 due to the rise in
meat costs and grocery costs as compared to the same twenty six week period
ended July 30, 2000.
Operating expense, as a percentage of total sales, was 53.3% and 51.9% for
the 2001 and 2000 periods respectively. The increase in operating expense as
a percentage of total sales for the twenty six week period ended July 29, 2001,
as compared to the same twenty six week period for the prior year, was due to
the decrease in sales and the increase in real estate and property taxes as
well as insurance costs.
General and administrative expense, as a percentage of total sales was 5.7%
for the twenty six weeks ended July 29, 2001, as compared to 5.6% for the first
twenty six weeks of the prior year. The increase in general and administrative
expense, as a percentage of sales, is the result of lower sales.
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Depreciation and amortization is directly related to the acquisition and
disposition of fixed assets.
Interest expense was $286,254 for the twenty six weeks ended July 29, 2001,
as compared to $326,110 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 $48,920 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 July 29, 2001
and January 28, 2001, the Company had an excess of current liabilities over
current assets of $7,763,668 and $1,675,794, respectively. However included
as a current liability as of July 29, 2001 is a bank note payable in the amount
of $5,904,586 which is due April 15, 2002. Cash flow from operations was
$114,412 and $535,241 for 2001 and 2000 respectively.
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.
During this quarter the Company moved the Wichita West location to a new
location with more visibility and newer facilities. In conjunction with this
move the Company incurred an additional note in the amount of $187,165 for
additional equipment as well as writing off leasehold improvements on the
prior location in the amount of $47,770.
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 statements. 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.
On June 1, 2001, the Company held it's Annual Meeting of stockholders.
The only
matter voted upon at such meeting was the election of directors. The
following
Directors were re-elected to serve on the Board of Directors:
FOR WITHHELD
Chris F. Hotze 6,610,251 2,200
C. Howard Wilkins, Jr. 6,612,451 0
Alan Bundy 6,612,251 200
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 August 29, 2001 /s/Chris F. Hotze
Chris F. Hotze - President
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