1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1997
--------------------
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 0-12226
CALIFORNIA BEACH RESTAURANTS, INC.
-------------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-2693503
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
17383 Sunset Boulevard, Suite 140, Pacific Palisades, CA 90272
---------------------------------------------------------------
(Address and zip code of Principal executive offices)
(310) 459-9676
------------------------------------------------------
(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 the filing
requirements for at least the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
Number of Shares Outstanding
Class at December 1, 1997
----- ----------------------------
Common Stock, $.01 par value 3,400,975
- ---------------------------- -------------------
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
OCTOBER 31, 1997
INDEX
Part I - FINANCIAL INFORMATION Page Number
-----------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at October 31, 1997
and April 30, 1997............................................3
Consolidated Statements of Operations for the
Three Months Ended and Six Months Ended
October 31, 1997 and 1996.....................................5
Consolidated Statements of Cash Flows for the
Six Months Ended October 31, 1997 and 1996....................6
Notes to Consolidated Financial Statements....................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................9
Item 3. Quantitative and Qualitative Disclosures about Market Risk...13
Part II - OTHER INFORMATION
Item 1. Legal Proceedings............................................13
Item 2. Changes in Securities .......................................13
Item 3. Defaults Upon Senior Securities..............................13
Item 4. Submission of Matters to a Vote of Security Holders..........13
Item 5. Other Information............................................13
Item 6. Exhibits and Reports on Form 8-K.............................13
Signature Page........................................................14
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
October 31, 1997 April 30, 1997
---------------- --------------
(Unaudited) (1)
Current Assets:
Cash $ 393,000 $ 626,000
Restricted cash - 475,000
Trade and other receivables 48,000 51,000
Inventories 288,000 286,000
Prepaid expenses 216,000 234,000
---------- ----------
Total current assets 945,000 1,672,000
Fixed Assets (at cost) - net of accumulated
depreciation and amortization (Note C) 1,040,000 1,075,000
Other Assets:
Goodwill, net of accumulated amortization
of $4,913,000 at October 31, 1997 and
$4,584,000 at April 30, 1997 1,812,000 2,141,000
Other 187,000 190,000
---------- ----------
$3,984,000 $5,078,000
========== ==========
The accompanying notes to consolidated financial statements are an integral part
of this statement.
(1) The April 30, 1997 amounts have been extracted from the Company's Annual
Report on Form 10-K for the year ended April 30, 1997.
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
October 31, 1997 April 30, 1997
---------------- --------------
(Unaudited) (1)
Current Liabilities:
Accounts payable $ 777,000 $ 673,000
Accrued liabilities 818,000 713,000
Current portion of long-term debt (Note D) - 1,488,000
------------ ------------
Total current liabilities 1,595,000 2,874,000
Other liabilities (Note E) 273,000 -
Stockholders' Equity:
Common stock, $.01 par value, authorized
25,000,000 shares, issued and outstanding,
3,401,000 shares at October 31, 1997 and
at April 30, 1997 34,000 34,000
Additional paid-in capital 13,175,000 13,175,000
Deficit in retained earnings (11,093,000) (11,005,000)
------------ ------------
Total stockholders' equity
2,116,000 2,204,000
------------ ------------
$ 3,984,000 $ 5,078,000
============ ============
The accompanying notes to consolidated financial statements are an integral part
of this statement.
(1) The April 30, 1997 amounts have been extracted from the Company's Annual
Report on Form 10-K for the year ended April 30, 1997.
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
October 31, October 31,
--------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Sales $ 3,798,000 $ 3,748,000 $ 7,798,000 $ 7,832,000
Costs and expenses:
Cost of goods sold 3,010,000 2,947,000 6,192,000 6,189,000
Selling, general and administrative 658,000 259,000 872,000 475,000
Legal and litigation settlement 276,000 26,000 361,000 50,000
Depreciation 69,000 109,000 138,000 217,000
----------- ----------- ----------- -----------
(215,000) 407,000 235,000 901,000
Other income (expenses):
Interest expense - - (1,000) (1,000)
Amortization of intangible assets (166,000) (166,000) (332,000) (331,000)
Other, net 9,000 7,000 17,000 15,000
----------- ----------- ----------- -----------
Income (loss) before income taxes (372,000) 248,000 (81,000) 584,000
Provision for income taxes - 4,000 7,000 12,000
----------- ----------- ----------- -----------
Net income (loss) $ (372,000) $ 244,000 $ (88,000) $ 572,000
=========== =========== =========== ===========
Net income (loss) per
common share: $ (.11) $ .07 $ (.03) $ .17
=========== =========== =========== ===========
Weighted average number of
common shares outstanding: 3,401,000 3,401,000 3,401,000 3,401,000
=========== =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part
of this statement.
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED OCTOBER 31,
(UNAUDITED)
1997 1996
----------- -----------
Cash flows from operating activities:
Net income (loss) $ (88,000) $ 572,000
Adjustments to reconcile net income (loss)
to cash provided by operations:
Depreciation and amortization 470,000 548,000
Changes in operating assets and liabilities:
Restricted cash 475,000 -
Trade and other receivables 3,000 (24,000)
Inventories (2,000) (17,000)
Prepaid expenses 18,000 (98,000)
Accounts payable 104,000 92,000
Accrued liabilities 105,000 (232,000)
----------- -----------
Cash provided by operations 1,085,000 841,000
----------- -----------
Cash flows used in investing activities:
Additions to fixed assets (103,000) (85,000)
Increase in other assets - (12,000)
----------- -----------
Net cash used in investing activities (103,000) (97,000)
----------- -----------
Cash flows from financing activities:
Increase in other liabilities 273,000 -
Principal payments on borrowings (1,488,000) (720,000)
----------- -----------
Net cash used in financing activities (1,215,000) (720,000)
----------- -----------
Net increase (decrease) in cash (233,000) 24,000
Cash at beginning of period 626,000 624,000
----------- -----------
Cash at end of period $ 393,000 $ 648,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,000 $ 1,000
Income taxes $ 12,000 $ 12,000
=========== ===========
The accompanying notes to consolidated financial statements are an integral part
of this statement
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The unaudited consolidated financial statements presented herein include the
accounts of California Beach Restaurants, Inc., and its wholly-owned
subsidiaries (the "Company"). All significant intercompany accounts and
transactions have been eliminated.
The unaudited consolidated financial statements presented herein have been
prepared in accordance with generally accepted accounting principles and the
instructions to Form 10-Q and article 10 of Regulation S-X and do not include
all of the information and footnote disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying financial statements include all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
the Company's financial position and results of operations. The results of
operations for the six month period ended October 31, 1997 may not be indicative
of the results that may be expected for the year ending April 30, 1998. These
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K for the year-ended April 30, 1997.
NOTE B - ACCOUNTING PERIODS
The Company's restaurant operations are conducted through its wholly-owned
subsidiary, Sea View Restaurants, Inc. ("Sea View"). The Company's consolidated
financial statements for the three months and six months ended October 31, 1997
and 1996 include Sea View's operations for the twelve weeks and twenty-four
weeks ended October 16, 1997 and October 17, 1996, respectively.
NOTE C - FIXED ASSETS
October 31, 1997 April 30, 1997
---------------- --------------
Leasehold improvements $ 2,779,000 $ 2,754,000
Furniture and equipment 1,003,000 925,000
----------- -----------
3,782,000 3,679,000
Less accumulated depreciation and amortization (2,742,000) (2,604,000)
----------- -----------
$ 1,040,000 $ 1,075,000
=========== ===========
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
NOTE D - LONG-TERM DEBT
On December 22, 1994 Sea View completed a restructuring of its bank debt and
entered into an Amended and Restated Loan Agreement ("Amended Loan"). The
Amended Loan included a senior secured note in the principal amount of
$3,000,000, bearing interest at 12% per annum, and payable at varying monthly
amounts through October 31, 1997, and a junior secured note in the amount of
$400,000 accruing interest at 12% per annum with both interest and principal
payable in a single lump sum on October 31, 1997. Interest to maturity on the
senior secured and junior secured notes was included in the carrying value of
such notes, in accordance with Financial Accounting Standards Board Statement
No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructuring,"
and was not recognized as interest expense during the term of the loans. At
October 31, 1997 both the senior secured note and the junior secured note were
paid in full.
NOTE E - OTHER LIABILITIES
As a result of the satisfactory completion of certain performance criteria
during the quarter ended October 31, 1997, the Company is obligated under a
long-term incentive bonus arrangement with two of its senior executives. The
payment of this obligation is subject to the determination by the Board of
Directors that adequate cash resources are available. It is currently
anticipated that the timing of such payment will occur over a two year period.
The present value of the Company's obligation under the bonus arrangement is
$339,000, of which $108,000 has been recorded as a non-current liability due to
the expectation that such payment will not be made in the next twelve months.
Pursuant to the terms of a litigation settlement agreement, the Company is
obligated to make certain future annual payments from October 1999 through
October 2001. The Company has recorded $107,000 as a non-current liability
representing the present value of such payment obligation.
The present values of the obligations described above were calculated based on
the Company's incremental borrowing rate of 12%.
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
RESTAURANT REVENUES
Restaurant operations include the results of Gladstone's 4 Fish ("Gladstone's")
in Pacific Palisades, California and RJ's - Beverly Hills in Beverly Hills,
California.
Total sales for the three months ended October 31, 1997 were $3,798,000 compared
with $3,748,000 for the same period last year, an increase of $50,000 or 1.3%.
For the six months ended October 31, 1997, total sales were $7,798,000 compared
with $7,832,000 for the same period last year, a decrease of $34,000 or .4%.
Gladstone's is located on the beach in Pacific Palisades, California and is
dependent, to a certain extent, on favorable weather and tourism. Gladstone's
has a large outside deck overlooking the Pacific ocean which is a very popular
destination but is only open as weather permits. For both the three months and
six months ended October 31, 1997, Gladstone's benefitted from slightly better
weather than the comparable periods a year ago. The improved weather was offset
by weaker tourism in the Los Angeles area during the same periods.
Weather experts are currently predicting that major storms caused by the "El
Nino" weather pattern will impact southern California this winter. If the local
area receives above average rainfall, or if severe storms cause flood or other
physical damage or restrict access along the coast near Gladstone's, sales and
operating profit at Gladstone's will likely be adversely impacted.
As a result of typically more favorable weather and higher tourism during the
summer months from May through September the Registrant's sales and operating
profits have historically been higher in the first and second quarters of its
fiscal year.
GLADSTONE'S CONCESSION AGREEMENT
Sea View has operated Gladstone's pursuant to a concession agreement with the
County of Los Angeles ("County") which expired October 31, 1997. The County's
standard operating procedure for contracts in excess of certain minimum length
or dollar value is to distribute a Request for Proposal seeking bids prior to
entering into new agreements. In March 1997, the County completed the bid
process and announced their intention to enter into formal negotiations with
Gladstone's for a twenty year concession agreement, subject to approval by the
County Board of Supervisors. On April 15, 1997 the Board of Supervisors
unanimously approved the recommendation to enter into formal negotiations with
Gladstone's.
Pursuant to the formal negotiations, Sea View and the County have executed an
agreement for a new twenty year concession agreement commencing on November 1,
1997. The new agreement includes minimum annual rent payments of $1,750,000, an
increase of approximately $600,000 over rents paid in fiscal 1997. Percentage
rents based on 10% of food sales and 12% of the sales of alcoholic beverages,
merchandise and parking lot revenue will be payable to the extent that
percentage rents exceed the minimum annual rent. The agreement further requires
the expenditure of at least $2,700,000 for renovations to the restaurant
facility by January 1999. Pursuant to Sea View's bid, minimum annual rent will
be reduced by $218,750 per year, for the first two years of the agreement. The
new agreement also requires Sea View to post a $2,000,000 letter of credit in
favor of the County, as a security deposit. The County may draw upon the letter
of credit if Gladstone's fails to pay rent as it comes due. The letter of credit
obligation will be reduced to an amount equal to three months minimum rent on
November 1, 2000, if Sea View has completed its required capital improvements
and meets a minimum net worth level
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
GLADSTONE'S CONCESSION AGREEMENT (CONT.)
for the prior twelve months. The new agreement also provides, in certain
circumstances, for payments to be made by Sea View to the County in the event of
a Change of Ownership or Financing Event, as defined in such agreement.
COST OF GOODS SOLD
Cost of goods sold includes all food, beverages, liquor, direct labor and other
operating expenses, including rent, of the Registrant's restaurant operations.
Cost of goods sold for the three months ended October 31, 1997 was $3,010,000,
or, as a percentage of sales, 79.3% compared with $2,947,000, or, as a
percentage of sales, 78.6% during the same period last year. Cost of goods sold
for the six months ended October 31, 1997 was $6,192,000, or, as a percentage of
sales, 79.4% compared with $6,189,000, or, as a percentage of sales, 79.0%
during the same period last year.
The Registrant has been impacted by the implementation of a higher minimum wage.
For the four months ended August 31, 1997 the minimum wage increased $.75 per
hour, or 17.6% over the minimum wage which was in effect for the same period
last year. The minimum wage in the state of California increased an additional
$.15 per hour on September 1, 1997 and will further increase $.60 per hour on
March 1, 1998. This will result in a state of California minimum wage of $5.75,
which will be $.60 per hour above the new federal standard. At present, the
state of California, unlike most states, does not allow any adjustment of
minimum wage for employees that receive tips. These wage increases, unless
offset by an adjustment for tipped employees, have and will continue to have an
adverse impact on the Registrant's labor costs. Increases in the Registrant's
labor costs for the six months ended October 31, 1997 have been partially offset
by lower food costs. This decrease is a result of more normalized pricing on key
dairy products, compared with significantly higher prices paid during the same
period last year.
The Registrant also expects that its cost of goods sold will increase
significantly based on the terms of Gladstone's new concession agreement. Annual
minimum rent will increase to $1,750,000, which is approximately $600,000 higher
than total rent expense in fiscal 1997. Additionally, Gladstone's will assume
certain maintenance obligations which were previously the responsibility of the
County as landlord.
Cost of goods sold will typically be slightly lower during the first and second
quarters due to additional economies of scale that can be achieved with labor
and certain other costs when sales levels are higher. For the fiscal year ended
April 30, 1997, cost of goods sold, as a percentage of sales, was 82.0%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the three months ended October 31, 1997, selling, general and administrative
expenses were $658,000 compared with $259,000 for the same period last year, an
increase of $399,000. As previously reported in the Registrant's Form 10-K for
the year ended April 30, 1997, the board of directors had approved an incentive
bonus arrangement for two senior executives. The bonus was contingent upon (i)
the execution of a new concession agreement for Gladstone's for a minimum of ten
years, on terms acceptable to the board of directors and (ii) the repayment in
full of Sea View's debt obligations to Bank of America. The Registrant had not
previously recorded any expense related to these bonuses due to the contingent
nature of such obligation. As of October 31, 1997, the two contingencies were
satisfied and the bonuses were earned. The timing of the payment of this
obligation is subject to the determination by the board of directors that
adequate cash resources are available. It is currently anticipated that the
obligation will be paid over a two year period. Accordingly, the Registrant has
recorded a bonus expense of $339,000, representing the present value of the
payments. The Registrant is also obligated to three consultants for services
rendered in assisting Sea View's efforts to secure a new twenty year
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (CONT.)
concession agreement for Gladstone's. These fees were contingent upon the
execution of a new concession agreement. The payment of these obligations will
occur over five years and the Registrant has recorded a $79,000 expense
representing the present value of such obligation. The expenses pursuant to the
bonus arrangement and the consultant services account for the increase in
selling, general and administrative expenses.
For the six months ended October 31, 1997, selling, general and administrative
expenses were $872,000 compared with $475,000 for the same period last year, an
increase of $397,000. This increase is also due to the matters described above.
LEGAL AND LITIGATION SETTLEMENT
For the three months and six months ended October 31, 1997, legal and litigation
settlement expenses were $276,000 and $361,000, respectively, compared with
$26,000 and $50,000, respectively, for the same periods last year.
The respective increases are primarily due to legal expenses and settlement
costs involving an employment related litigation matter (See Part II - Item I -
Legal Proceedings). In addition, the Registrant also incurred legal expenses
associated with the negotiation of a new twenty year concession agreement for
Gladstone's. All costs related to the negotiation of a new concession agreement
have been expensed as incurred. Both the litigation and the concession agreement
were finalized as of October 31, 1997 and the Registrant expects that its legal
expenses will be significantly lower for the balance of fiscal 1998.
DEPRECIATION/AMORTIZATION OF INTANGIBLE ASSETS
For the three months and six months ended October 31, 1997,depreciation expense
was $69,000 and $138,000, respectively, compared with $109,000 and $217,000,
respectively, for the same periods last year. During the six months ended
October 31, 1997, certain restaurant assets became fully depreciated resulting
in the decrease in depreciation expense for both the three months and six months
ended October 31, 1997.
Amortization expense relates completely to the Registrant's Goodwill and other
intangible assets and will approximate $717,000 per year.
LIQUIDITY AND CAPITAL RESOURCES
Sea View and the County have executed a new twenty year concession agreement for
Gladstone's. Based on Gladstone's bid, the terms of the new concession
agreement, which commenced on November 1, 1997, require Sea View to post a
$2,000,000 letter of credit as a security deposit for rental payments due to the
County. In the event that rents are not paid when due, the County may draw upon
the letter of credit. The letter of credit will be reduced after three years if
Sea View completes certain capital improvement obligations and meets a minimum
net worth test for the prior twelve months. The agreement also requires that Sea
View complete at least $2,700,000 in renovations to the restaurant facility by
January 1999.
The Registrant posted the letter of credit by utilizing cash collateral provided
by Overhead Partners, L.P. ("Overhead"), an entity affiliated with one of the
Registrant's principal shareholders and with a member of its board of directors.
The letter of credit expires on July 31, 1998, unless extended prior to
expiration. In consideration of providing the cash collateral, the Registrant
will compensate Overhead as follows: for the period November 1, 1997 through
January 31, 1998 a fee of $20,000; for the period February 1, 1998 through April
30, 1998 a fee of $60,000; and for the period May 1, 1998 through July 31, 1998
a fee of $100,000. If the Registrant is able to provide the letter of credit
without the need for cash collateral, from outside sources, at any time after
February 1, 1998 any fees which are due will be prorated over the actual period
that the
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES (CONT.)
collateral is in place. In the event that any amounts are drawn down on the
letter of credit, such amounts will automatically convert into a debt obligation
of the Registrant, payable with interest ninety days (or earlier under certain
circumstances) from the date of such conversion.
On November 24, 1997, Sea View entered into a one year, $1,000,000 unsecured
line of credit agreement with Outside LLC, an entity affiliated with Overhead,
with one of the Registrant's principal shareholders and with a member of its
board of directors . This agreement provides for interest of 10% on all amounts
borrowed, requires a commitment fee of 1.25% of the total line and is guaranteed
by the Registrant. The line will be used by Sea View for seasonal working
capital needs as well as for certain renovations to Gladstone's.
The Registrant is currently evaluating available options to raise the necessary
funds or receive appropriate commitments to meet the letter of credit
requirement after July 31, 1998 as well as to complete the required renovations
to Gladstone's. Funding for the renovations to Gladstone's needs to be secured
prior to October 1998 when the major construction work is anticipated to begin.
There can be no assurance that the Registrant will be successful in completing
the required equity or debt financing. The failure to extend the letter of
credit beyond July 31, 1998 or the failure to substantially commence
construction, as defined in the concession agreement, are events of default
under such agreement.
On September 8, 1997, Sea View repaid all remaining debt obligations under its
loan agreement with Bank of America. (See Note D to the Consolidated Financial
Statements for further information). The Registrant believes that the line of
credit along with cash on hand and cash flow from operations will allow it to
meet its normal operating expenses over the next year.
The Registrant is also exploring various opportunities to expand its operations.
The Registrant's ability to expand is subject to the availability of debt or
equity financing on terms that are acceptable to the Registrant. There can be no
assurance that such financing will be available.
Capital expenditures for the six months ended October 31, 1997 totaled
approximately $103,000. The Registrant estimates that renovation costs for
Gladstone's will approximate $2,700,000. The timing of such renovations is
subject to the receipt of all necessary permits. The Registrant anticipates that
a portion of the renovation costs will be incurred in fiscal 1998 with the
majority of the costs incurred in fiscal 1999.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, certain statements in
this Form 10-Q, including statements in this item, are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievement of the Registrant, or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward looking statements. Such factors include, among others,
the following: the Registrant's ability to secure adequate debt or equity
financing in order to comply with the terms of the new concession agreement with
the County of Los Angeles for the operations of Gladstone's, including the
maintenance of a $2,000,000 letter of credit, payment of significantly higher
rents and completion of required renovations; the Registrant's ability to
generate an operating profit based on the terms of the new concession agreement;
that its principal source of cash are funds generated from operations; that
restaurants historically have represented a high risk investment in a very
competitive industry; general and local economic conditions, which can, among
other things, impact tourism, consumer spending and restaurant revenues; quality
of management; changes in, or the failure to comply with, governmental
regulations; unexpected increases in the cost of key food products, labor and
other operating expenses in connection with the Registrant's business; and other
factors referenced in this Form 10-Q and in the Registrant's Annual Report on
Form 10-K for the year ended April 30, 1997.
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to the lawsuit described in the Registrant's annual
report on Form 10-K for the year ended April 30, 1997 and quarterly
report on Form 10-Q for the three months ended July 31, 1997. In
October 1997 the Registrant reached a settlement agreement with the
plaintiff whereby the Registrant paid $100,000 and agreed to make
certain payments over a four year period which have a present value of
approximately $107,000.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
None
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.
Exhibits
10.57 - Concession Agreement dated as of November 1, 1997 by and
between County of Los Angeles and Sea View Restaurants, Inc.
10.58 - Non Disturbance and Attornment Agreement dated September 26,
1997 by and between the State of California Department of Parks
and Recreation and Sea View Restaurants, Inc.
10.59 - Letter of Credit Agreement dated as of November 1, 1997 by
and between California Beach Restaurants, Inc., Sea View
Restaurants, Inc. and Overhead Partners, L.P., a California
Limited Partnership.
10.60 - Line of Credit Agreement dated as of November 24, 1997 by and
between Outside LLC, a California Limited Liability Company and
Sea View Restaurants, Inc. with guaranty by California Beach
Restaurants, Inc.
27 - Financial data schedule
Reports on Form 8-K
None
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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
Signature(s)
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
California Beach Restaurants, Inc. (Registrant)
Dated: December 11, 1997 By: Alan Redhead
------------------------------------
Alan Redhead
Chief Executive Officer
(Duly Authorized Officer)
By Mark E. Segal
------------------------------------
Mark E. Segal
Vice President - Finance
and Chief Financial Officer
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