<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2000
-----------------------------------------------
Commission File No. 0-10061
AMERICAN VANTAGE COMPANIES
--------------------------
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
Nevada 04-2709807
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(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
6787 W. Tropicana, Ste 200, Las Vegas, Nevada 89103
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(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(702) 227-9800
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(Registrant's Telephone Number, including Area Code)
N/A
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(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
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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,
4,865,856 shares at December 12, 2000.
Transitional Small Business Disclosure Format Yes No X
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<PAGE> 2
AMERICAN VANTAGE COMPANIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 2000 AND JULY 31, 2000
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
2000 2000
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 6,692,000 $ 7,307,000
ACCOUNTS RECEIVABLE -- 1,000
MORTGAGE NOTES RECEIVABLE AND ACCRUED INTEREST 1,585,000 1,489,000
REFUNDABLE INCOME TAXES 1,872,000 1,708,000
DEFERRED INCOME TAX ASSET 809,000 641,000
PREPAID EXPENSES 70,000 60,000
----------- -----------
TOTAL CURRENT ASSETS 11,028,000 11,206,000
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PROPERTY AND EQUIPMENT, NET 142,000 148,000
LAND HELD FOR SALE 4,894,000 4,894,000
INVESTMENT IN UNCONSOLIDATED RESTAURANT SUBSIDIARY 2,017,000 2,038,000
DEFERRED INCOME TAX ASSET 97,000 92,000
GOODWILL, NET -- 250,000
NET ASSETS OF DISCONTINUED OPERATION - RESTAURANT 136,000 232,000
NET ASSETS OF DISCONTINUED OPERATION - RECRUITMENT 295,000 387,000
OTHER ASSETS - PRINCIPALLY RESTRICTED CASH 541,000 538,000
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$19,150,000 $19,785,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 301,000 $ 460,000
ACCRUED EXPENSES 528,000 330,000
CURRENT PORTION OF CAPITALIZED LEASE OBLIGATIONS 14,000 20,000
----------- -----------
TOTAL CURRENT LIABILITIES 843,000 810,000
----------- -----------
LONG-TERM LIABILITIES:
CAPITALIZED LEASE OBLIGATIONS, LESS CURRENT PORTION 10,000 12,000
----------- -----------
MINORITY INTEREST IN CONSOLIDATED RECRUITMENT SUBSIDIARY -- 88,000
----------- -----------
COMMITMENTS AND CONTINGENCY -- --
STOCKHOLDERS' EQUITY:
COMMON STOCK, $.01 PAR; 30,000,000 SHARES AUTHORIZED;
SHARES ISSUED AND OUTSTANDING - 4,865,856 AND 4,858,256 49,000 49,000
PREFERRED STOCK, $.01 PAR; 10,000,000 SHARES AUTHORIZED;
SHARES ISSUED AND OUTSTANDING - NONE -- --
CAPITAL IN EXCESS OF PAR 2,940,000 2,941,000
CAPITAL IN EXCESS OF PAR - STOCK OPTIONS 278,000 278,000
RETAINED EARNINGS 15,030,000 15,607,000
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18,297,000 18,875,000
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$19,150,000 $19,785,000
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE> 3
AMERICAN VANTAGE COMPANIES
CONSOLIDATED STATEMENTS OF LOSS
THREE MONTHS ENDED OCTOBER 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
REVENUES $ - $ -
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COSTS AND EXPENSES:
CASINO CONSULTING 32,000 124,000
DEATH CARE OPERATIONS -- 58,000
GENERAL AND ADMINISTRATIVE 441,000 424,000
AMORTIZATION AND DEPRECIATION 7,000 8,000
(INCOME) LOSS OF UNCONSOLIDATED RESTAURANT SUBSIDIARY (179,000) 101,000
----------- -----------
301,000 715,000
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LOSS FROM CONTINUING OPERATIONS (301,000) (715,000)
----------- -----------
OTHER INCOME:
INTEREST INCOME 189,000 240,000
MISCELLANEOUS 1,000 --
----------- -----------
190,000 240,000
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LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (111,000) (475,000)
----------- -----------
INCOME TAX BENEFIT (EXPENSE):
CURRENT:
STATE -- --
FEDERAL 96,000 129,000
DEFERRED:
STATE -- --
FEDERAL (61,000) 31,000
----------- -----------
35,000 160,000
----------- -----------
LOSS FROM CONTINUING OPERATIONS (76,000) (315,000)
DISCONTINUED OPERATIONS:
LOSS FROM OPERATIONS OF DISCONTINUED RECRUITMENT OPERATION, NET OF MINORITY
INTEREST ($36,000) AND INCOME TAX BENEFIT OF $ 61,000 (81,000) --
LOSS FROM OPERATIONS OF DISCONTINUED RESTAURANT OPERATION, NET OF INCOME TAX
BENEFIT OF $ 34,000 IN 2000 AND $ 115,000 IN 1999 (68,000) (222,000)
ESTIMATED LOSS ON DISPOSAL OF DISCONTINUED RECRUITMENT OPERATION, INCLUDING
PROVISION OF $184,000 FOR OPERATING LOSSES DURING PHASE-OUT PERIOD AND
WRITE OFF OF GOODWILL ($250,000), NET OF MINORITY INTEREST ($51,000) AND
APPLICABLE INCOME TAX BENEFIT OF $207,000 (352,000) --
----------- -----------
NET LOSS $ (577,000) $ (537,000)
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LOSS PER COMMON SHARE - BASIC:
LOSS FROM CONTINUING OPERATIONS $ (0.02) $ (0.06)
DISCONTINUED OPERATIONS (0.10) (0.05)
----------- -----------
NET LOSS $ (0.12) $ (0.11)
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LOSS PER COMMON SHARE - DILUTED:
LOSS FROM CONTINUING OPERATIONS $ (0.02) $ (0.06)
DISCONTINUED OPERATIONS $ (0.10) $ (0.05)
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NET LOSS $ (0.12) $ (0.11)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON SHARE EQUIVALENTS:
BASIC 4,866,000 4,887,000
STOCK OPTIONS AND WARRANTS -- --
----------- -----------
DILUTED 4,866,000 4,887,000
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
AMERICAN VANTAGE COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED OCTOBER 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $ (577,000) $ (537,000)
------------ ------------
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
ESTIMATED LOSS ON DISPOSAL OF NON-CURRENT ASSETS OF DISCONTINUED
RECRUITMENT OPERATION 73,000 --
MINORITY INTEREST IN CONSOLIDATED RECRUITMENT SUBSIDIARY (88,000) --
(INCOME) LOSS OF UNCONSOLIDATED RESTAURANT SUBSIDIARY (179,000) 101,000
AMORTIZATION AND DEPRECIATION 7,000 8,000
WRITE OFF OF GOODWILL RELATED TO DISCONTINUED RECRUITMENT OPERATION 250,000 --
DEFERRED INCOME TAX BENEFIT (173,000) (31,000)
CHANGES IN OTHER ASSETS AND LIABILITIES, NET (234,000) (593,000)
CHANGES IN NET ASSETS OF DISCONTINUED OPERATIONS 115,000 165,000
------------ ------------
(229,000) (350,000)
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NET CASH USED BY OPERATING ACTIVITIES (806,000) (887,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
CASH DISTRIBUTION FROM UNCONSOLIDATED RESTAURANT SUBSIDIARY 200,000 --
PURCHASE OF PROPERTY AND EQUIPMENT, NET -- (9,000)
------------ ------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 200,000 (9,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS ON CAPITALIZED LEASES (8,000) --
REPURCHASE OF COMMON STOCK (26,000) --
PROCEEDS FROM ISSUANCE OF COMMON STOCK 25,000 --
------------ ------------
NET CASH USED BY FINANCING ACTIVITIES (9,000) --
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (615,000) (896,000)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 7,307,000 12,626,000
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 6,692,000 $ 11,730,000
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
AMERICAN VANTAGE COMPANIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED JULY 31, 2000 AND THREE MONTHS
ENDED OCTOBER 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL
IN EXCESS
COMMON STOCK CAPITAL OF PAR -
IN EXCESS STOCK RETAINED
SHARES DOLLARS OF PAR OPTIONS EARNINGS
<S> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1999 4,887,000 $ 49,000 $ 2,974,000 -- $19,459,000
ISSUANCE OF COMMON STOCK OPTIONS FOR SERVICES -- -- -- 179,000 --
ISSUANCE OF COMMON STOCK OPTIONS IN ACQUISITION OF
PLACEMENT 2000.COM, INC -- -- -- 99,000 --
SHARES REPURCHASED AND RETIRED (28,744) -- (33,000) -- --
NET LOSS FOR THE YEAR -- -- -- -- (3,852,000)
--------- -------- ------------ --------- -----------
BALANCE, JULY 31, 2000 4,858,256 49,000 2,941,000 278,000 15,607,000
SHARES ISSUED 22,333 -- 25,000 -- --
SHARES REPURCHASED AND RETIRED (14,733) -- (26,000) -- --
NET LOSS FOR THE PERIOD (577,000)
--------- -------- ------------ --------- -----------
BALANCE, OCTOBER 31, 2000 4,865,856 $ 49,000 $ 2,940,000 $278,000 $15,030,000
========= ======== ============ ========= ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE> 6
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
As permitted by the Securities and Exchange Commission 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 restaurant subsidiary is reported in
the consolidated balance sheet at the Company's equity in net assets of the
subsidiary. The Company has reported all (100%) of the income and loss of the
unconsolidated subsidiary in the accompanying consolidated statements of loss
for the three month periods ended October 31, 2000 and 1999. For additional
disclosures, refer to the Annual Report on Form 10-KSB of the Company for the
year ended July 31, 2000 ("Fiscal 2000").
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 and year end financial statements for
Fiscal 2000 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 options outstanding and
exercisable at or below the market price are considered common share
equivalents. Common share equivalents are not included in the computation of
loss per share in the interim periods for the year ending July 31, 2001 ("Fiscal
2001") and the year ended July 31, 2000 (`Fiscal 2000") because the effect would
be antidilutive.
Results of the interim periods are not necessarily indicative of those to be
expected for the full year.
NOTE 2 - RESTAURANT OPERATIONS
DISCONTINUED OPERATION - WCW NITRO GRILL
The Company owns an 88% interest in a consolidated subsidiary, which operated
the WCW Nitro Grill restaurant in the Excalibur Hotel and Casino on the Las
Vegas Strip in Las Vegas, Nevada.
On September 30, 2000, the Company closed the restaurant. At October 31, 2000,
additional estimated losses of $68,000 (net of an income tax benefit of $34,000)
were recorded to provide for the final resolution of the restaurant's
operations, which is anticipated to occur in the second quarter of Fiscal 2001.
The costs of the closure and its operating losses for the three months ended
October 31, 2000 are reported as loss from operations of discontinued restaurant
operation in the accompanying consolidated statements of loss. The financial
statements for the three months ended October 31, 1999 have been restated to
report the operations of the subsidiary as a discontinued operation. The
discontinued operation had revenues of $453,000 and $1,091,000 for the three
month periods ended October 31, 2000 and 1999, respectively.
6
<PAGE> 7
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The net assets of the discontinued operation have been recorded at their
estimated net realizable value under the caption "Net assets of discontinued
operation - restaurant " in the accompanying balance sheets.
INVESTMENT IN UNCONSOLIDATED RESTAURANT 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
invested $2,750,000 in BGLV.
All (100%) of the income/loss from the operations for the restaurant is reported
as income/loss of unconsolidated subsidiary in the consolidated statements of
loss for the three month periods ended October 31, 2000 and 1999. In the future,
if the restaurant continues to have 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 3 - PLACEMENT 2000.COM, INC.
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
plus up to an additional $2 million in cash, contingent on future events and
earnings, to be used for Placement 2000's general corporate purposes. The
Company granted options to Placement 2000's former principal, who has remained
with Placement 2000, to purchase up to 333,334 shares of the Company's common
stock. A portion of the options (66,667) is exercisable as of the acquisition
date, and the remainder (266,667) is exercisable when certain profitability
goals are met.
The $1,099,000 purchase price recorded at December 1, 1999 was comprised of
$1,000,000 in cash and the value of stock options, which were exercisable as of
the acquisition date. Additionally, $500,000 of the contingent purchase price
was placed into an escrow account and will be paid to Placement 2000 if future
events occur. The acquisition was accounted for as a purchase. The excess of the
total acquisition price over the fair value of the net assets acquired
("goodwill") totaled $276,000 and is being amortized on a straight line basis
over seven (7) years. Operations of Placement 2000 after December 1, 1999 are
included in the Company's consolidated financial statements.
7
<PAGE> 8
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following summarizes the acquisition of Placement 2000:
<TABLE>
<S> <C>
Fair value of assets acquired,
including cash $1,138,000
Liabilities assumed (109,000)
Goodwill 276,000
Minority interest (206,000)
Stock options issued (99,000)
----------
Cash paid $1,000,000
----------
</TABLE>
Placement 2000 specializes in online services for information technology (IT)
professionals, companies, and recruiters. Based in New York, Placement 2000 is
developing three distinct web-based properties that will offer fully integrated
online recruiting solutions for IT 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 certain
value-added features. 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. Placement
2000 has experienced a shortage of working capital and in November and December
2000 the Company advanced $70,000 to Placement 2000 to assist with this
shortfall.
See Note 5 - Subsequent Event - Discontinued Operation.
NOTE 4 - LITIGATION WITH THE TABLE MOUNTAIN TRIBE
Until May 1999, the Company had two contracts to provide gaming consulting
services to the Table Mountain Casino. In May 1999, the Table Mountain Tribe
voted to prematurely terminate both contracts with the Company. The first
contract, entered into in February 1996, was a buyout of an earlier contract and
required payments of $350,000 per month for 48 months through January 2000. The
second contract, a consulting contract, also entered into in February 1996 and
subsequently amended, was to expire in June 2000. Since May 1999, the Table
Mountain Tribe has not honored the consulting and termination contracts with the
Company.
In June 1999, the Company filed a lawsuit in the United States District Court,
Eastern District of California ("District Court") against the Table Mountain
Tribe. The lawsuit sought to recover payments totaling $3,150,000 due under the
first (buyout) contract. And under the consulting contract, the Company sought
an award of $790,000, which represents only the base fees provided by the
contract. The Company also sought 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 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.
8
<PAGE> 9
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In September 2000, an Order ("Order") was filed with the District Court by Judge
Anthony W. Ishii dismissing, with prejudice, the Company's claims against the
Table Mountain Tribe due to the District Court's lack of subject matter
jurisdiction. The Order also dismissed the Table Mountain Tribe's counterclaim
against the Company. The Company or the Tribe, however, had the right to file a
motion to amend their pleading to remain in District Court or, in the
alternative, pursue the matter in state court. On December 8, 2000 the Company
filed a suit against the Table Mountain Tribe in the Superior Court of the State
of California. The Company intends to vigorously pursue its litigation against
the Table Mountain Tribe.
The loss of casino consulting fees has had and will continue to have a material
adverse effect on the operations of the Company. The Company has begun a
corporate restructuring to divest itself of its non-core assets. Although the
restructuring has not been finalized, it will involve the sale of the land held
for sale and the disposition of other existing operations/investments and may
include the acquisition of new subsidiaries or a merger transaction. 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.
NOTE 5 - SUBSEQUENT EVENT - DISCONTINUED OPERATION
In December 2000, the Board of Directors authorized management to begin
divesture plans for the Company's investment in Placement 2000. Although the
divestiture plans are not final, the Company may sell the company or it may
cease to fund the operation and initiate procedures to close the business. The
Company anticipates that the divestiture will be finalized by January 31, 2001.
In connection with the discontinuance of this business, the Company recorded
operating losses of $81,000 (net of minority interest ($36,000) and a tax
benefit of $61,000) for the three month period ended October 31, 2000.
At October 31, 2000, the Company recorded a provision of $176,000 to provide for
losses, which the Company may incur in disposing of Placement 2000's furniture
and equipment. In connection with the discontinuance of this operation, the
Company recorded operating losses of $184,000 projected for Placement 2000 for
the period from November 1, 2000 through January 31, 2001. Additionally,
unamortized goodwill associated with the acquisition of Placement 2000
($250,000) was expensed in the three month period ended October 31, 2000. These
expenses are reported net of minority interest ($51,000) and a tax benefit of
$207,000.
The discontinued recruitment operation had revenues of $374,000 for the three
month period ended October 31, 2000.
The net assets of the discontinued operation have been recorded at their
estimated net realizable value under the caption "Net assets of discontinued
operation - recruitment" in the accompanying consolidated balance sheets.
9
<PAGE> 10
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 dependence on existing management, Federal and
state regulation of the restaurant industry, 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
Until May 1999, the Company derived all of its revenues from providing
consulting services to the Table Mountain Casino. In May 1999, the Table
Mountain Tribe voted to prematurely terminate the contracts it had with the
Company and since May 1999 has not honored the consulting and termination
contracts. As a result, the Company's primary source of revenue for Fiscal 2000
was eliminated and it had a significant negative impact on the operations of the
Company and its source of funds. The Company has begun a corporate restructuring
to divest itself of its non-core assets. Although the restructuring has not been
finalized, it will involve the sale of the land held for sale and the
disposition of other existing operations/investments and may include the
acquisition of new subsidiaries or a merger transaction. 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. The
discontinuance of the WCW Nitro Grill and the planned divestiture of the
Placement 2000.Com, Inc. ("Placement 2000") operation will eliminate the
negative cash flows these operations have experienced.
10
<PAGE> 11
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 2000 COMPARED WITH THE THREE MONTHS ENDED OCTOBER
31, 1999
REVENUES
The closure of the WCW Nitro Grill and the planned divestiture of Placement 2000
resulted in the elimination of the Company's sources of revenues. The operating
results of these two companies are reported as discontinued operations.
COSTS AND EXPENSES
Casino consulting expenses in the three month period ended October 31, 2000
("Fiscal 2001") decreased to $32,000, down 74.2%, from $124,000 in the three
month period ended October 31, 1999 ("Fiscal 2000"). Expenses in Fiscal 2001 are
comprised principally of legal expenses incurred in the litigation with the
Table Mountain Tribe.
The Company incurred $58,000 in death care operating expenses in Fiscal 2000.
Expenses in Fiscal 2000 were comprised mainly of developmental costs. In
December 1999, the Board of Directors decided to cancel plans to develop the
cemetery and funeral home project on the 40 acre parcel of land purchased for
this project. Proceeds from the sale of this parcel and another 20 acre parcel
of land owned by the Company will be allocated toward development of the
Company's new corporate growth plans. As a result, capitalized costs related to
the development of the cemetery/funeral home project were written off as death
care operations expense in the second quarter of Fiscal 2000.
General and administrative expenses in Fiscal 2001 increased by $17,000 or 4.0%
from Fiscal 2000. 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. Also, increases were experienced in
accounting/auditing fees and directors fees. The Board of Directors was expanded
from five to seven members.
Amortization and depreciation was $7,000 and $8,000 in Fiscal 2001 and 2000,
respectively.
The income/loss of unconsolidated restaurant subsidiary in Fiscal 2001 and
Fiscal 2000 represent 100% of the income/loss from operations of the 49% owned
restaurant investment. The restaurant began operations in June 1999. In the
future, if the restaurant continues to have 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 $189,000
and $240,000 in Fiscal 2001 and 2000, respectively.
The Company recorded current income tax benefits of $96,000 and $129,000 for
Fiscal 2001 and Fiscal 2000, respectively. Deferred income tax expense totaled
$61,000 in Fiscal 2001 and income tax benefits were $31,000 for Fiscal 2000.
Net loss from continuing operations was $76,000 ($0.02 per basic and diluted
loss per share) and $315,000 ($0.06 per basic and diluted loss per share) for
Fiscal 2001 and Fiscal 2000, respectively.
Net loss was $577,000 ($0.12 basic and diluted loss per share) and $537,000
($0.11 basic and diluted loss per share) for Fiscal 2001 and Fiscal 2000,
respectively.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 2000, the Company had consolidated working capital of
$10,185,000, as compared with working capital of $10,396,000 at July 31, 2000.
INVESTING ACTIVITIES:
The Company received a cash distribution ($200,000) from the unconsolidated
restaurant subsidiary during the three months ended October 31, 2000. Funds were
used in Fiscal 2000 to acquire furniture and equipment.
FINANCING ACTIVITIES:
In the three month period ended October 31, 2000, the Company recorded $25,000
of proceeds from the issuance of its common stock and repurchased and retired
its common stock for $26,000. Principal payments on capitalized leases used
$8,000 of funds. No funds were used in the three month period ended October 31,
1999 for financing activities
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 had a significant negative impact on the
Company's operations and its source of funds.
During Fiscal 2000, the Company began a corporate restructuring to divest itself
of its non-core assets. Although the restructuring has not been finalized, it
will involve the sale of the land held for sale and the disposition of other
existing operations/investments and may include the acquisition of new
subsidiaries or a merger transaction. 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. The discontinuance of the WCW
Nitro Grill and the planned divestiture of the Placement 2000 operation will
eliminate the negative cash flows these operations have experienced. 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.
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.
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PART II
OTHER INFORMATION
Item 2. See Part 1, Note 4 of Notes to Consolidated Financial Statements
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule
13
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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 13, 2000 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)
14
<PAGE> 15
Exhibit Index
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Exhibit
Number Description
27.1 Financial Data Schedule
