<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1999
Commission File No. 0-10061
AMERICAN VANTAGE COMPANIES
(Exact name of small business issuer as specified in its charter)
Nevada 04-2709807
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6787 W. Tropicana, Ste 200, Las Vegas, Nevada 89103
(Address of Principal Executive Offices) (Zip Code)
(702) 227-9800
(Registrant's Telephone Number, including Area Code)
N/A
(Former Name, Former Address & Former Fiscal Year, if changed since last report)
Check 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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common Stock, $.01 Par Value,
4,887,000 shares at December 10, 1999.
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE> 2
PART 1
FINANCIAL INFORMATION
AMERICAN VANTAGE COMPANIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1999 AND JULY 31, 1999
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
1999 1999
----------- -----------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $11,730,000 $12,626,000
ACCOUNTS RECEIVABLE 35,000 191,000
MORTGAGE NOTE RECEIVABLE AND ACCRUED INTEREST 1,821,000 1,500,000
REFUNDABLE INCOME TAXES 463,000 219,000
DEFERRED TAX ASSET 193,000 135,000
INVENTORIES 205,000 153,000
PREPAID EXPENSES 294,000 376,000
----------- -----------
TOTAL CURRENT ASSETS 14,741,000 15,200,000
----------- -----------
PROPERTY AND EQUIPMENT, NET 1,972,000 2,029,000
LAND HELD FOR INVESTMENT OR DEVELOPMENT 5,105,000 5,105,000
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY 491,000 592,000
DEFERRED TAX ASSET 164,000 191,000
OTHER ASSETS - DEPOSITS AND OTHER 86,000 89,000
----------- -----------
$22,559,000 $23,206,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 322,000 $ 558,000
ACCRUED EXPENSES 292,000 166,000
----------- -----------
TOTAL CURRENT LIABILITIES 614,000 724,000
----------- -----------
COMMITMENTS AND CONTINGENCY -- --
STOCKHOLDERS' EQUITY:
COMMON STOCK, $.01 PAR; 30,000,000 SHARES AUTHORIZED;
4,887,000 AND 5,028,821 SHARES ISSUED AND OUTSTANDING 49,000 49,000
PREFERRED STOCK, $.01 PAR; 10,000,000 SHARES AUTHORIZED;
SHARES ISSUED AND OUTSTANDING - NONE -- --
CAPITAL IN EXCESS OF PAR 2,974,000 2,974,000
RETAINED EARNINGS 18,922,000 19,459,000
----------- -----------
21,945,000 22,482,000
----------- -----------
$22,559,000 $23,206,000
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
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AMERICAN VANTAGE COMPANIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED OCTOBER 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
REVENUES:
CASINO CONSULTING FEES $ -- $ 2,130,000
RESTAURANT SALES 1,091,000 --
----------- -----------
1,091,000 2,130,000
----------- -----------
COSTS AND EXPENSES:
CASINO CONSULTING 124,000 452,000
RESTAURANT OPERATIONS 1,370,000 --
DEATH CARE OPERATIONS 58,000 31,000
GENERAL AND ADMINISTRATIVE 424,000 388,000
AMORTIZATION AND DEPRECIATION 68,000 8,000
LOSS OF UNCONSOLIDATED SUBSIDIARY 101,000 --
----------- -----------
2,145,000 879,000
----------- -----------
INCOME (LOSS) FROM OPERATIONS (1,054,000) 1,251,000
----------- -----------
OTHER INCOME (EXPENSE):
INTEREST INCOME 242,000 226,000
----------- -----------
242,000 226,000
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (812,000) 1,477,000
----------- -----------
INCOME TAX BENEFIT (EXPENSE):
CURRENT:
STATE -- (96,000)
FEDERAL 244,000 (506,000)
DEFERRED:
STATE -- --
FEDERAL 31,000 --
----------- -----------
275,000 (602,000)
----------- -----------
NET INCOME (LOSS) $ (537,000) $ 875,000
=========== ===========
EARNINGS (LOSS) PER COMMON SHARE:
BASIC $ (0.11) $ 0.17
=========== ===========
DILUTED $ (0.11) $ 0.16
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON SHARE EQUIVALENTS:
BASIC 4,887,000 5,031,667
STOCK OPTIONS AND WARRANTS 57,086 301,000
----------- -----------
DILUTED 4,944,086 5,332,667
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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AMERICAN VANTAGE COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED OCTOBER 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (537,000) $ 875,000
------------ ------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED (USED) BY
OPERATING ACTIVITIES:
LOSS OF UNCONSOLIDATED SUBSIDIARY 101,000 --
AMORTIZATION AND DEPRECIATION 68,000 8,000
DEFERRED INCOME TAX BENEFIT (31,000) --
CHANGES IN OTHER ASSETS AND LIABILITIES, NET (488,000) 285,000
------------ ------------
(350,000) 293,000
------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (887,000) 1,168,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
NOTE RECEIVABLE FROM TABLE MOUNTAIN TRIBE -- (329,000)
PURCHASE OF PROPERTY AND EQUIPMENT, NET (9,000) (5,000)
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (9,000) (334,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM LONG-TERM DEBT -- 329,000
PROCEEDS FROM ISSUANCE OF COMMON STOCK -- 6,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- 335,000
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (896,000) 1,169,000
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 12,626,000 15,371,000
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 11,730,000 $ 16,540,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR STATE AND FEDERAL INCOME TAXES $ -- $ 150,000
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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AMERICAN VANTAGE COMPANIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED JULY 31, 1999 AND THREE MONTHS
ENDED OCTOBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL
----------------------------- IN EXCESS RETAINED
SHARES DOLLARS OF PAR EARNINGS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, JULY 31, 1998 5,029,350 $ 51,000 $ 3,424,000 $ 17,433,000
ISSUANCE OF SHARES 10,833 -- 20,000 --
SHARES REPURCHASED AND RETIRED (153,183) (2,000) (470,000) --
NET INCOME FOR THE YEAR -- -- -- 2,026,000
------------ ------------ ------------ ------------
BALANCE, JULY 31, 1999 4,887,000 49,000 2,974,000 19,459,000
NET LOSS FOR THE PERIOD -- -- -- (537,000)
------------ ------------ ------------ ------------
BALANCE, OCTOBER 31, 1999 4,887,000 $ 49,000 $ 2,974,000 $ 18,922,000
============ ============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
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AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
As permitted by the Securities and Exchange Commission (SEC) under Rule 10-01 of
Regulation S-X, the accompanying consolidated financial statements and notes
have been condensed and, therefore, do not contain all disclosures required by
generally accepted accounting principles. The consolidated financial statements
include the accounts of American Vantage Companies and its majority owned
subsidiaries ("the Company"). A 49% owned subsidiary is reported in the
consolidated balance sheet at the Company's equity in net assets of the
subsidiary. The Company has reported all of the loss of the unconsolidated
subsidiary in the accompanying consolidated statement of income for the three
months ended October 31, 1999. For additional disclosures, refer to the Annual
Report on Form 10-KSB of the Company for the year ended July 31, 1999.
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods.
Certain amounts in the interim period financial statements for Fiscal 1999 have
been reclassified for comparability with the current period presentation.
The computations of basic earnings per common share are based on the weighted
average number of common shares outstanding. The computations of diluted
earnings per share are based on the weighted average number of common shares and
common share equivalents outstanding. Stock purchase warrants and options
outstanding and exercisable at or below the market price are considered common
share equivalents.
Results of the interim periods are not necessarily indicative of those to be
expected for the full year.
NOTE 2 - INDIAN GAMING OPERATIONS
TABLE MOUNTAIN CASINO & BINGO
In March 1993, the Company signed a consulting agreement with the Table Mountain
Rancheria Band of Indians (the "Table Mountain Tribe") for the Table Mountain
Casino & Bingo (the "Table Mountain Casino") in Friant, California. Effective
February 1, 1996, the Company and the Table Mountain Tribe signed a termination
agreement of the March 1993 agreement under which a monthly payment of $350,000
was to be paid to the Company through January 2000, subject to meeting certain
thresholds.
In June 1997, the consulting agreement was amended, and in November 1997, a
second amendment to the consulting agreement was signed. The consulting fee
schedule was adjusted, effective February 1, 1998, to provide for a base fee of
$50,000 and additional fees of $45,000 to $60,000 for increments of $250,000 to
$500,000 or portion thereof, of monthly casino net income in excess of $1.5
million of net income from casino operations. The term of the agreement was
extended to June 30, 2000.
The Company was to receive a monthly payment of $350,000 in accordance
with terms of the termination agreement signed in February 1996. These payments
will continue through January 2000,
6
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AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
subject to meeting certain thresholds.
Pursuant to the consulting agreement, the Company was obligated, under certain
circumstances, to loan the Table Mountain Tribe up to $4,000,000.
The tribe prematurely terminated the contracts in May 1999. See Note 4 -
Litigation with the Table Mountain Tribe.
TRIBAL-STATE COMPACT
In September 1999, approximately 59 Native American tribes in California signed
a compact with the Governor of the State of California to permit certain
specified types of gaming in casinos on Indian owned land. Among other things,
the compacts will permit each tribe to have house banked black jack games and
operate up to 2,000 video gaming machines. The compacts can not be legally
recognized until an amendment is made to the California State constitution. The
amendment will require its approval by a majority of the voters in a statewide
election, which will be held in March 2000.
NOTE 3 - RESTAURANT OPERATIONS
WCW NITRO GRILL
The Company owns an 88% interest in a consolidated subsidiary, which operates
the WCW Nitro Grill restaurant in the Excalibur Hotel and Casino on the Las
Vegas Strip in Las Vegas, Nevada. The restaurant began operations on May 17,
1999. Startup costs associated with the restaurant were expensed in the fourth
quarter of Fiscal 1999.
The Company has a non-exclusive worldwide licensing agreement with World
Championship Wrestling ("WCW"), a Time Warner Company, to develop wrestling
themed restaurants. Among other provisions of the licensing agreement, the
Company must designate the site for its second restaurant by June 2000 and open
the restaurant by December 2000. The licensing agreement is renewable annually
and provides for annual minimum non-refundable licensing payments of $250,000
plus percentage royalties on food, beverage and retail merchandise sold in the
restaurant. Percentage royalties are payable when on an annual basis they exceed
the non-refundable licensing fee.
The Company also has an agreement with another company requiring payment of 2%
of gross sales of the restaurant as consideration for finders' fees and
consulting services. The term of the restaurant lease is for 10 years beginning
in May 1999. The lease provides for minimum annual lease payments of $175,000
with percentage rents based on gross sales of the restaurant when they exceed
minimum monthly rental payments. The lease also requires an annual payment of
$65,000 for utilities.
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
The Company owns a 49% interest in Border Grill Las Vegas, LLC ("BGLV"), which
owns the Border Grill restaurant. The restaurant is located in the Mandalay Bay
Resort & Casino on the Las Vegas Strip in Las Vegas, Nevada. The Company is
committed to invest up to $2,750,000 in BGLV and loan up to $175,000 to BGLV for
construction of and initial working capital for the restaurant. As of October
31, 1999, the
7
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AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Company had expended $1,200,000 of its commitment.
All (100%) of the loss from the operations for the restaurant is reported as
loss of unconsolidated subsidiary in the consolidated statement of income for
the three months ended October 31, 1999. Startup costs were expensed in the
fourth quarter of Fiscal 1999. In the future, if the restaurant has net income,
the Company will recognize all such income until prior losses have been offset
and thereafter net income will be split proportionate to ownership interests.
BGLV has an operating agreement with an entity owned by the majority owners
requiring payments equal to 5% of the gross sales of the restaurant.
NOTE 4 - LITIGATION WITH THE TABLE MOUNTAIN TRIBE
In June 1999, the Company filed a lawsuit in the United States District Court,
Eastern District of California against the Table Mountain Tribe. The Company has
two contracts to provide gaming consulting services to the Table Mountain
Casino. In May 1999, the Table Mountain Tribe voted to terminate both contracts
with the Company. The first contract, entered into in February 1996, was a
buyout of an earlier contract and requires payments of $350,000 per month for 48
months through January 2000. The second contract, also entered into in February
1996 and subsequently amended, is a consulting contract, which is to expire in
June 2000. Since May 1999, the Table Mountain Tribe has not honored the
consulting and termination agreements the Company has with the Table Mountain
Tribe.
The lawsuit seeks to recover payments totaling $3,150,000 due under the first
contract and under the consulting contract, the Company seeks an award of
$790,000, which represents only the base fees due under the consulting contract.
The Company also seeks interest, court costs and additional unspecified and "to
be determined" consulting fees that would have been due during the remainder of
the consulting term.
The Table Mountain Tribe has filed a countersuit against the Company claiming
the consulting contracts are invalid, for several reasons, and requesting
restitution for all consulting fees paid to the Company during the period of the
contracts. Management strongly believes the contracts are valid, enforceable and
comply with all aspects of the Indian Gaming Regulatory Act and intends to
vigorously seek to enforce their provisions. A trial date has been set for
September 2000.
The loss of casino consulting fees will have a material adverse effect on the
operations of the Company. Although the WCW Nitro Grill opened in May 1999, its
contribution to income from operations cannot be expected to reach the level
generated by the Table Mountain Casino contract. Company management is
continuing its diversification efforts and is seeking other business
opportunities to replace the consulting revenue received from the Table Mountain
Casino (see Note 5 - Subsequent Events). Until such time as, and if, these
efforts are successful, the Company will utilize accumulated cash reserves to
provide working capital for corporate operating expenses.
8
<PAGE> 9
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 SUBSEQUENT EVENTS
REVERSE STOCK SPLIT
Effective December 1, 1999, the Company's Board of Directors authorized a one
for three reverse split of the Company's issued and outstanding common stock. No
fractional shares will be issued in connection with the reverse split.
Stockholders will receive one additional share for any fractional shares.
The accompanying consolidated financial statements for Fiscal 1999 have been
restated to adjust for the reverse split as though it occurred at the beginning
of Fiscal 1999.
ACQUISITION OF PLACEMENT 2000
The Company completed the acquisition, effective December 1, 1999, of an 80%
interest in Placement 2000.Com, Inc. (Placement 2000) for $1 million in cash and
up to an additional $2 million in cash, based on future events and earnings, to
be used for Placement 2000's general corporate purposes. Placement 2000 is a
privately held Internet concern specializing in online services for information
technology (IT) professionals, companies, and recruiters. AVCS granted options
to Placement 2000's former principal, who is remaining with the company, to
purchase up to 333,334 shares of AVCS common stock.
Based in New York, Placement 2000 maintains three distinct web-based properties
that offer fully integrated online recruiting solutions for information
technology candidates, corporate hiring managers, and third party recruiters.
The flagship site is intended to be a resume and job-posting database with
advanced search capabilities containing many value-added features which
Placement 2000 believes are not already present in any of the existing career
sites on the Internet today. The site also is intended to provide dynamic
content, helpful links to other prominent career web-based resources, and
strategic distribution partnerships with several other well-known job sites. The
two other sites are a resume forwarding service and a site for facilitating
relationships and sharing of positions and candidates in the third party
recruiting "split" market. Placement 2000's three web-properties additionally
intend to generate a significant value stream for its traditional recruiting
operations. The resume and job-posting database site and the "split" market site
are intended to be fully operational within 90 days of the acquisition date.
NOTE 6 - YEAR 2000 COMPLIANCE
The year 2000 presents a potential problem for businesses utilizing computers in
their operations since many computer programs are date sensitive and will only
recognize the last two digits of the year, thereby recognizing the year 2000 as
the year 1900 or not at all (the "Year 2000 Issue"). The Company has evaluated
its internal operating system and worked with companies with which it transacts
business to assess their efforts to comply with the Year 2000 Issue and the
Company's resulting exposure. Maintenance or modification costs of computer
programs associated with the Year 2000 Issue are expensed as incurred, while the
costs of any new software are capitalized and amortized over the software's
useful life. At this time, it appears the aggregate cost to the Company relating
to the Year 2000 Issue will not be material. The Company believes that its
software programs are Year 2000 compliant, however, there can be no assurances
that the Year 2000 Issue will not adversely affect the Company.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere in this
Report.
STATEMENT ON FORWARD-LOOKING STATEMENTS
Included in this Item 2, and in the Notes to the Consolidated Financial
Statements are certain forward-looking statements reflecting the Company's
current expectations. Although the Company believes that its expectations are
based on reasonable assumptions, there can be no assurance that the Company's
financial goals or expectations will be realized. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance, or achievements of the Company, or
industry results, to be materially different from future results, performance,
or achievements expressed or implied by such forward-looking statements.
Numerous factors may affect the Company's actual results and may cause results
to differ materially from those expressed in forward-looking statements made by
or on behalf of the Company. These risks and uncertainties include, but are not
limited to, those relating to construction activities, dependence on existing
management, gaming regulation of casinos on Indian land by Federal, State and
Tribal governments, issues related to the Year 2000, domestic and global
economic conditions and changes in Federal and State tax laws or the
administration of such laws. The Company assumes no obligation to update or
revise any such forward-looking statements or the factors listed below to
reflect events or circumstances that may arise after this report is filed, and
that may have an effect on the Company's overall performance.
OVERVIEW - FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company until May 1999 derived nearly all of its revenues from providing
consulting services to the Table Mountain Casino. In May 1999, the Table
Mountain Tribe voted to terminate the contracts it has with the Company and
since May 1999 has not honored the consulting and termination agreements. As a
result, the Company's primary source of revenue for Fiscal 2000 has been
eliminated and it will have a significant negative impact on the Company's
source of funds. If, and until, the restaurant operations begin to provide cash
flows, the Company will use existing working capital for operating purposes.
The year 2000 presents a potential problem for businesses utilizing computers in
their operations since many computer programs are date sensitive and will only
recognize the last two digits of the year, thereby recognizing the year 2000 as
the year 1900 or not at all (the "Year 2000 Issue"). The Company has evaluated
its internal operating system and worked with companies with which it transacts
business to assess their efforts to comply with the Year 2000 Issue and the
Company's resulting exposure. Maintenance or modification costs of computer
programs associated with the Year 2000 Issue are expensed as incurred, while the
costs of any new software are capitalized and amortized over the software's
useful life. At this time, it appears the aggregate cost to the Company relating
to the Year 2000 Issue will not be material. The Company believes that its
software programs are year 2000 compliant, however, there can be no assurances
that the Year 2000 Issue will not adversely affect the Company.
10
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RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1999 COMPARED WITH THE THREE MONTHS ENDED OCTOBER
31, 1998
REVENUES
Casino consulting fees for the three months ended October 31, 1999 ("Fiscal
2000") decreased as a result of the premature termination of the consulting and
termination agreements between the Company and the Table Mountain Tribe as
described below.
In June 1997, the consulting agreement was amended, and in November 1997, a
second amendment to the consulting agreement was signed. The consulting fee
schedule was adjusted, effective February 1, 1998, to provide for a base fee of
$50,000 and additional fees of $45,000 to $60,000 for increments of $250,000 to
$500,000 or portion thereof, of monthly casino net income in excess of $1.5
million of net income from casino operations. The term of the agreement was
extended to June 30, 2000.
Additionally, effective February 1, 1996, the Company and the Table Mountain
Tribe signed a termination agreement of a March 1993 consulting agreement under
which a monthly payment of $350,000 will be paid to the Company through January
2000, subject to meeting certain thresholds.
In May 1999, the Table Mountain Tribe voted to terminate both contracts with the
Company and since May 1999, the Tribe has not honored the consulting and
termination agreements the Company has with the Tribe. As a result of this
action, consulting fees for Fiscal 2000 have declined from those reported in
Fiscal 1999. See Notes to Consolidated Financial Statements - Note 4 -
Litigation With the Table Mountain Tribe.
Restaurant revenues were derived from the Company's new WCW Nitro Grill
restaurant, which began operations in May 1999.
COSTS AND EXPENSES
Casino consulting expenses in Fiscal 2000 decreased to $124,000, down 72.6%,
from $452,000 in Fiscal 1999. Expenses in Fiscal 2000 are comprised principally
of consulting expenses and legal expenses incurred in litigation with the Table
Mountain Tribe.
Restaurant operations expenses of $1,370,00 were associated with the Company's
new WCW Nitro Grill, which began operations in May 1999. Significant expense
items were comprised of cost of sales ($414,000), labor ($647,000) and rent and
royalties ($144,000).
The Company incurred $58,000 in death care operating expenses in Fiscal 2000 as
compared to expenses of $31,000 in Fiscal 1999. Expenses in Fiscal 2000 were
comprised mainly of developmental costs. Expenses in Fiscal 1999 consisted
principally of payroll costs.
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<PAGE> 12
General and administrative expenses in Fiscal 2000 increased by $36,000 or 9.28%
from Fiscal 1999. The increase resulted from an increase in payroll costs, which
previously were allocated to casino consulting operations and now are charged to
general and administrative. The increase in payroll was offset by decreases in
political contributions and general corporate legal costs.
Amortization and depreciation was $68,000 and $8,000 in Fiscal 2000 and 1999,
respectively. The increase in Fiscal 2000 is attributed to depreciation of
restaurant equipment and leasehold improvements and amortization of restaurant
organization costs, which are being amortized over a five-year period. In Fiscal
1999, the expense was comprised of the depreciation of office equipment and
leasehold improvements.
The loss of unconsolidated subsidiary in Fiscal 2000 represents 100% of the loss
from operations of the 49% owned restaurant investment. The restaurant began
operations in June 1999. In the future, if the restaurant has net income, the
Company will recognize all such income until prior losses have been offset and
thereafter net income will be split proportionate to ownership interests.
OTHER ITEMS
Interest income from time deposits with financial institutions totaled $242,000
and $226,000 in Fiscal 2000 and 1999, respectively.
The Company recorded a refundable income tax benefit of $244,000 and deferred
Federal income tax benefits of $31,000 in the three months ended October 31,
1999. The Company recorded provisions of $96,000 and $506,000 for Federal and
State of California income taxes currently payable for the three months ended
October 31, 1998.
Net loss was $537,000 ($0.11 basic and diluted loss per share) and net income
was $875,000 ($0.17 basic earnings per share and $0.16 diluted earnings per
share) for the three months ended October 31, 1999 and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1999, the Company had consolidated working capital of
$14,127,000, as compared with working capital of $14,476,000 at July 31, 1999.
INVESTING ACTIVITIES:
During the three months ended October 31, 1999, investing activities used $9,000
as compared to $334,000 used by investing activities in the same period in
Fiscal 1999. Funds were used in Fiscal 2000 to acquire furniture and equipment.
FINANCING ACTIVITIES:
No funds were used in the three months ended October 31, 1999 for financing
activities. In the three months ended October 31, 1998, $329,000 was loaned to
the Table Mountain Tribe. The loan was repaid in the fourth quarter of Fiscal
1999.
The Company owns approximately 40 acres of land in North Las Vegas, Nevada on
which it plans to develop a funeral home and cemetery. The estimated cost to
build the project has not been determined. Funds required to construct and
develop the project will be provided from cash on hand, operations, and
financing arrangements or a combination of all three sources. The Company's
working capital or short term financing arrangements initially will provide
funds required for the property's operations, after completion of construction.
Ultimately, management anticipates that the property will generate sufficient
cash flow to maintain its operations independently. The development of this
property has been delayed
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while the Clark County, Nevada government finalizes its plan for construction of
a flood control project for the area. In the event the flood control project is
built as intended, the Company would not have to build major water control
culverts on the cemetery project. The Company is awaiting additional progress on
the construction of the flood control project before it begins development of
the property; however, it may seek a waiver of the requirement to build the
major water control culverts.
The Company completed the acquisition, effective December 1, 1999, of an 80%
interest in Placement 2000.Com, Inc. (Placement 2000) for $1 million in cash and
up to an additional $2 million in cash, based on future events and earnings, to
be used for Placement 2000's general corporate purposes. Placement 2000 is a
privately held Internet concern specializing in online services for information
technology (IT) professionals, companies, and recruiters. AVCS granted options
to Placement 2000's former principal, who is remaining with the company, to
purchase up to 333,334 shares of AVCS common stock. The funds for the
acquisition came from the Company's working capital. Additional payments, if
they are required, will also come from working capital.
Historically, the Company has provided funds for its operations from operating
activities, financing from financial institutions and stockholders, and issuance
of common stock, and it will likely continue to use these sources of liquidity
in the future. The Table Mountain Tribe's failure to honor the Company's
consulting and termination agreements will have a significant negative impact on
the Company's source of funds. If, and until, the restaurant operations begin to
provide cash flows, the Company will use existing working capital for operating
purposes. The Company has always sought and will continue to seek other suitable
consulting contracts and/or ownership of casinos and other gaming opportunities
on and off Indian land, as well as recreational, leisure time and entertainment
ventures. The Company, as part of its diversification strategy, will seek to
acquire and develop companies which can become market leaders on the Internet
and enable the Company to realize a significant influence over the management
and policies of the companies and to realize a significant return to compensate
for its investment of management time and effort, as well as capital. The
Company intends to allocate capital to the acquisition of Internet companies
that meet its investment criteria should the proper opportunities arise.
Additionally, the Company will continue to pursue any business venture,
including those not previously described, which management believes afford an
opportunity to increase stockholder value. In the event any of these
opportunities come to fruition, management will consider satisfying financing
requirements from working capital, through borrowing or capital infusion through
the public or private placement of common stock of the Company or its
subsidiaries.
At October 31, 1999, the Company had a $1,000,000 revolving line of credit with
a bank. The line of credit is unsecured, expires in March 2000 and bears
interest at 1% above an indexed prime. At October 31, 1999, no funds were
outstanding on the line of credit.
13
<PAGE> 14
PART II
OTHER INFORMATION
Item 1. See Part I, Note 4 of Notes to Consolidated Financial Statements.
Item 2. See Part 1, Note 5 of Notes to Consolidated Financial Statements
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule
14
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AMERICAN VANTAGE COMPANIES
Dated: December 14, 1999 By: /s/ Ronald J. Tassinari
Las Vegas, Nevada ---------------------------
Ronald J. Tassinari
President
(Principal Executive Officer)
By: /s/ Roy K. Keefer
---------------------------
Roy K. Keefer
(Chief Financial Officer and
Accounting Officer)
15
<PAGE> 16
EXHIBIT INDEX
Exhibit No. Description
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-31-1999
<EXCHANGE-RATE> 1
<CASH> 11,730,000
<SECURITIES> 0
<RECEIVABLES> 1,856,000
<ALLOWANCES> 0
<INVENTORY> 205,000
<CURRENT-ASSETS> 14,741,000
<PP&E> 1,972,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,559,000
<CURRENT-LIABILITIES> 614,000
<BONDS> 0
0
0
<COMMON> 49,000
<OTHER-SE> 21,896,000
<TOTAL-LIABILITY-AND-EQUITY> 22,559,000
<SALES> 1,091,000
<TOTAL-REVENUES> 1,091,000
<CGS> 0
<TOTAL-COSTS> 2,145,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (812,000)
<INCOME-TAX> (275,000)
<INCOME-CONTINUING> (537,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (0.11)
<EPS-DILUTED> (0.15)
</TABLE>
