<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 27, 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 0-12145
AMARILLO MESQUITE GRILL, INC.
(formerly Maverick Restaurant Corporation)
Exact name of registrant as specified in its charter)
Kansas 48-0936946
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Suite 200
302 North Rock Road
Wichita, Kansas 67206
(Address of principal executive offices)
(Zip Code)
(316) 685-7286
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
----- -----
As of July 27, 1997, 7,112,155 shares of common stock $.01 par value were
outstanding.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AMARILLO MESQUITE GRILL, INC.
BALANCE SHEETS
(Unaudited)
ASSETS July 27, January 26,
------- ----------
1997 1997
------- ----------
Current assets:
Cash and cash equivalents $ 457,193 $ 328,285
Accounts receivable - trade 40,341 22,058
Inventories 165,600 219,315
Prepaid expenses 228,790 130,902
---------- ----------
Total current assets 891,924 700,560
---------- ----------
Property and equipment:
Buildings 865,032 224,178
Leasehold improvements 1,616,370 1,433,338
Equipment and fixtures 3,547,929 3,901,586
Leased property under capital lease 1,234,626 1,903,191
---------- ----------
7,263,957 7,462,293
Less: accumulated depreciation and amortization 1,409,982 2,860,486
---------- ----------
5,853,975 4,601,807
---------- ----------
Other assets:
Cost in excess of net tangible assets of purchased
business, net of amortization of $78,900
and $436,309 868,111 1,012,496
License fees, net of amortization of $9,165
and $52,361 51,835 63,327
Deposits 82,659 79,504
----------- ----------
1,002,605 1,155,327
----------- ----------
$7,748,504 $6,457,694
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $3,294,483 $1,014,778
Current portion of obligation under capital lease 32,649 95,947
Accounts payable 1,156,933 1,039,399
Accrued payroll 182,385 205,373
Other accrued liabilities 494,031 575,514
----------- ----------
Total current liabilities 5,160,481 2,931,011
----------- ----------
Long-term debt, less current portion 1,438,104 1,506,421
Obligation under capital lease, less current portion 1,066,537 1,500,618
Deferred credits - 6,789
Stockholders' equity:
Preferred stock, $.01 par value, authorized 10,000,000
shares, none issued - -
Common stock, $.01 par value, authorized
20,000,000 shares, issued 7,172,155,
outstanding 7,112,155 71,722 71,414
Additional paid-in capital 6,584,667 6,491,984
Accumulated deficit (6,303,007) (5,780,543)
Treasury stock, 60,000 shares of common stock ( 270,000) ( 270,000)
----------- ----------
Total stockholders' equity 83,382 512,855
----------- ----------
$7,748,504 $6,457,694
----------- ----------
----------- ----------
See notes to financial statements
2
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<TABLE>
<CAPTION>
AMARILLO MESQUITE GRILL, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
July 27 July 28 July 27, July 28,
---------- ---------- ----------- ----------
1997 1996 1997 1996
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $3,549,776 $3,314,884 $7,452,424 $6,077,200
Costs and expenses:
Cost of goods sold 1,321,827 1,094,818 2,747,331 1,973,187
Operating expenses (Note 2) 1,822,785 1,921,660 4,018,867 3,590,861
Depreciation and amortization 137,667 145,198 285,224 279,266
General and administrative (Note 2) 465,596 233,334 919,009 358,602
---------- ---------- ---------- ----------
3,747,875 3,395,010 7,970,431 6,201,916
---------- ---------- ---------- ----------
Operating income (loss) (198,099) (80,126) (518,007) (124,716)
---------- ---------- ---------- ----------
Other income (expense)
Interest expense (115,507) (68,862) (209,865) (130,005)
Noncash expense from issuance
of stock options pursuant to
debt guarantees (24,460) - ( 48,920) -
Gain (loss) on sale of assets - (52,268) 254,328 (52,268)
Provision for restaurant closings
and dispositions - (595,598) - (595,598)
---------- ---------- ---------- ----------
(139,967) (716,728) (4,457) (777,871)
---------- ---------- ---------- ----------
Earnings (loss) before income taxes (338,066) (796,854) (522,464) (902,587)
Provision for income taxes - - - -
---------- ---------- ---------- ----------
Net earnings (loss) $ (338,066) $ (796,854) $(522,464) $ (902,587)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings (loss) per common share $ (.05) $ (.12) $ (.09) $ (.14)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average shares outstanding 7,112,155 6,542,966 7,112,155 6,312,227
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements.
3
<PAGE>
AMARILLO MESQUITE GRILL, INC.
STATEMENTS OF CASH FLOW
(Unaudited)
Twenty-Six Weeks Ended
July 27 July 28
----------- ----------
1997 1996
----------- ----------
Operating Activities
Net loss $ (522,464) (902,587)
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 285,224 279,266
Changes in assets and liabilities
(Increase) decrease in accounts receivable (18,283) (27,820)
(Increase) decrease in inventories (12,460) (46,982)
(Increase) decrease in prepaid expenses (92,403) (257,067)
Increase (decrease) in accounts payable 117,534 222,785
Increase (decrease) in accrued expenses (104,471) 132,660
(Gain) loss on sale of assets (254,328) 52,268
Noncash expense from issuance of stock
options pursuant to debt guarantees 48,920 -
Provision for restaurant closings
and dispositions - 595,598
Other net ( 9,591) (1,367)
----------- ----------
Net cash provided (used) by operating activities (562,322) 46,754
----------- ----------
Investing activities
Purchase of property and equipment (1,975,860) (911,865)
Purchase of other assets - (618,786)
Proceeds from sale of assets 435,000 235,747
----------- ----------
Net cash provided (used) by investing activities (1,540,860) (1,294,904)
----------- ----------
Financing activities
Sale of common stock 44,071 -
Long-term borrowings 2,350,000 1,775,000
Repayment of long-term borrowings
and capital lease obligations (161,981) (370,238)
----------- ----------
Net cash provided (used) by financing activities 2,232,090 1,404,762
----------- ----------
Net increase (decrease) in cash and cash equivalents 128,908 156,612
Cash and cash equivalents at beginning of period 328,285 195,365
----------- ----------
Cash and cash equivalents at the end of period $ 457,193 $ 351,977
----------- ----------
----------- ----------
See notes to financial statements.
4
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AMARILLO MESQUITE GRILL, INC.
Notes to Financial Statements
(Unaudited)
July 27, 1997
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three month period ended July 27, 1997 are not necessarily indicative of
the results that may be expected for the year ended January 25, 1998. For
further information, refer to the financial statements and footnotes
thereto included in the Company's 10-K and Annual Report to Stockholders as
filed on April 24, 1997.
(2) RECLASSIFICATION
For the prior year periods ending July 28, 1996, recruiting and training
expenses in the amount of $51,224 has been reclassified from operating
expense to general and administrative expense. All recruiting and training
costs for the current year are also included with general and
administrative expense.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
GENERAL
Over the past year the Company has taken major steps toward reorganizing
and changing the direction of the Company in terms of moving away from low
volume fast food restaurants and towards high volume full service restaurants.
Due to differences in volume and the nature of the business, the operating
results, expressed as percentage of sales, can be substantially different for
fast food as compared to a full service restaurant.
In addition, over the past eighteen months the number of restaurants
operated by the Company has changed substantially as follows:
Cotton Amarillo
Grandy's Patch Cafe Grill
-------- ---------- --------
January 28, 1996 8 7 -
Opened 1
Purchased 4
Converted (1) 1
Closed (2)
-------- ---------- --------
January 26, 1997 8 5 5
Opened 2
Converted (1) 1
Sold (8)
Closed (1)
-------- ---------- --------
July 27, 1997 - 3 8
-------- ---------- --------
-------- ---------- --------
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 27, 1997 COMPARED TO THREE MONTHS ENDED JULY 28, 1996.
For the three months ended July 27, 1997, sales increased 7.1% to $3,549,776
as compared to sales of $3,314,884 for the second quarter of the prior year. As
of July 27, 1997, the Company operated eight Amarillo Mesquite Grills and three
Cotton Patch Cafes as compared to four Amarillo Mesquite Grills, eight Grandy's
restaurants and seven Cotton Patch Cafes as of April 28, 1996.
Cost of sales, as a percentage of total sales, was 37.2% and 33.0% for the
1997 and 1996 periods respectively. The increase in cost of sales, as a
percentage of total sales, is the result of a change in direction by the Company
from fast food restaurants such as our Grandy's which historically have had a
31.0% cost of sales to an upscale, full service restaurant concept, Amarillo
Mesquite Grill, which has a higher cost of sales.
Operating expenses, as a percentage of total sales, was 51.4% and 58.0% for
the 1997 and 1996 periods respectively. The decrease in operating expense, as a
percentage of total sales, is the result of operating more Amarillo Mesquite
Grills which have a higher sales volume and lower operating costs than the
Grandy's restaurants which were sold during the first quarter of the current
year.
General and administrative expenses, as a percentage of total sales, was
13.1% and 7.0% for the 1997 and 1996 periods respectively. The increase in
general and administrative expense, as a percentage of total sales, can be
attributed to recruiting and training expenses relating to expansion of the
Amarillo Mesquite Grill concept. During the quarter the Company incurred
approximately $246,000 in recruiting and training expenses relating to the
development of management personnel for future restaurants.
The increase in the dollar amount of interest expense from 1996 to 1997 is
the result of an increase in bank debt relating to new store development and the
acquisition of four Amarillo Grills.
The Company incurred noncash expenses of $24,460 in the first quarter
related to the issuance of stock options pursuant to debt guarantees.
6
<PAGE>
SIX MONTHS ENDED JULY 27, 1997 COMPARED TO SIX MONTHS JULY 26, 1996.
For the six months ended July 27, 1997, sales increased 22.6% to $7,452,424
as compared to sales of $6,077,200 for the six months ended July 28, 1996. As
of July 27, 1997, the Company operated eight Amarillo Mesquite Grills and three
Cotton Patch Cafes as compared to four Amarillo Grills, eight Grandy's
restaurants and seven Cotton Patch Cafes as of July 28, 1997.
Cost of sales, as a percentage of total sales, was 36.9% and 32.5% for the
1997 and 1996 periods respectively. The higher cost of sales, as a percentage
of total sales, can be attributed to the Amarillo Mesquite Grill restaurants
which operate at a higher cost of sales percentage than do the Grandy's or
Cotton Patch Cafes.
Operating expenses, as a percentage of total sales was 53.9% and 59.1% for
the 1997 and 1996 periods respectively. The decrease in operating expense, as
percentage of total sales, was the result of operating more Amarillo Mesquite
Grills which have a higher sales volume and lower operating costs than the
Grandy's restaurants which were sold during the first quarter of the current
year.
General and administrative expenses, as a percentage of total sales, was
12.3% and 5.9% for the 1997 and 1996 periods respectively. The increase in
general and administrative expenses, as a percentage of total sales, can be
attributed to recruiting and training expenses relating to expansion of the
Amarillo Mesquite Grill concept. During the first six months ending July 27,
1997, the Company incurred approximately $457,000 in recruiting and training
expense relating to the development of management personnel for future
restaurants.
The increase in the dollar amount of interest expense from 1996 to 1997 is
the result of an increase in bank debt relating to new store development and the
acquisition of four Amarillo Mesquite Grills.
The Company incurred noncash expenses of $48,920 in the first quarter
related to the issuance of stock options pursuant to debt guarantees.
The Company has determined that it is in its best interest to focus its
efforts and financial resources on the Amarillo Grill concept. Therefore,
effective March 24, 1997, the Company sold to Red Apple Corporation all of the
assets of the eight Grandy's restaurants owned and operated by the Company. Red
Apple Corporation is owned by five individuals, four of which are officers and
directors of the Company. The consideration received for these assets consisted
of $435,000 in cash. Red Apple Corporation also assumed the lease obligations
associated with these restaurants. The Company recognized a gain of
approximately $254,000 on this disposition. The sales price was computed as
three times last year's store level cash flow before overhead or administrative
expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds to finance its business have been
its cash flow from operations, and proceeds from the sale of the Company's
common stock. At July 27, 1997, the Company had a working capital deficit of
$4,268,557 compared to working capital deficit of $2,230,451 as of January 26,
1997. The Company does have available $500,000 of unused funds from a
$3,500,000 bank line of credit. While the line of credit expires in June 1998,
management anticipates the loan agreement will be renewed at that time under
comparable terms.
Substantially, all of the Company's revenues are derived from cash sales. The
Company does not maintain significant receivables and inventories; therefore,
working capital requirements for continuing operations are not significant.
Additions to property and equipment represent the single largest use of
funds by the Company. The expenditures are primarily made for the purchase and
development of new restaurants. Capital expenditures were $1,975,860 for six
months ended July 27, 1997, compared to $911,865 for the six months ended
July 28, 1996. These capital expenditures have resulted in an increase in
property and equipment and a decrease in working capital.
7
<PAGE>
The Company plans to continue expansion of the Amarillo Mesquite Grill
concept in fiscal 1998. The Company intends to lease existing restaurant
properties which are suitable for conversion to the Amarillo Mesquite Grill
concept. It is expected that each conversion will require approximately
$300,000 to $500,000 for equipment and remodel costs. A ground-up proto-type
restaurant will cost approximately $1.7 million for the land, building and
equipment. New restaurants will be financed with proceeds received as a result
of bank debt.
The Company does not expect to pay dividends in the foreseeable future, but
rather intends to retain all available funds for the development of the
business.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
On May 23, 1997, the Company held its Annual Meeting of
Stockholders. The matters voted upon and the vote tabulations for each
matter are as follows:
1. ELECTION OF DIRECTORS. The following directors were re-elected
to serve on the Board of Directors:
FOR WITHHELD
Chris F. Hotze 5,968,167 14,990
Linn F. Hohl 5,968,167 14,990
Andres Mouland 5,967,767 15,390
C. Howard Wilkins Jr. 5,967,167 14,990
Alan L. Bundy 5,968,767 15,390
2. AMENDMENT TO ARTICLES OF INCORPORATION. The stockholders of the
Company approved the amendment to Article First of the Company's
Articles of Incorporation to change the corporate name to Amarillo
Mesquite Grill, Inc. The vote was as follows:
FOR AGAINST ABSTAIN
5,979,967 2,340 850
3. ADOPTION OF THE 1997 STOCK OPTION PLAN. The stockholders of the
Company approved adoption of the 1997 Incentive Stock Option Plan.
The vote was as follows:
FOR AGAINST ABSTAIN
5,348,209 93,328 13,780
4. ELECTION OF AUDITORS. The stockholders of the Company elected
KPMG Peat Marwick, LLP, independent certified public accountants, as
auditors for the Company for the fiscal year ending January 25, 1998.
The vote was as follows:
FOR AGAINST ABSTAIN
5,977,817 4,200 1,140
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMARILLO MESQUITE GRILL INC.
(Registrant)
Date September 2, 1997 /s/ LINN F. HOHL
---------------------------------------
Linn F. Hohl - Vice President
of Finance, Secretary and Treasurer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF AMARILLO MESQUITE GRILL, INC. FOR
THE THIRTEEN WEEKS ENDED JULY 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-26-1997
<PERIOD-START> APR-28-1997
<PERIOD-END> JUL-27-1997
<CASH> 457,193
<SECURITIES> 0
<RECEIVABLES> 40,341
<ALLOWANCES> 0
<INVENTORY> 165,600
<CURRENT-ASSETS> 891,924
<PP&E> 7,263,957
<DEPRECIATION> 1,409,982
<TOTAL-ASSETS> 7,748,504
<CURRENT-LIABILITIES> 5,160,481
<BONDS> 0
0
0
<COMMON> 71,722
<OTHER-SE> 6,584,667
<TOTAL-LIABILITY-AND-EQUITY> 7,748,504
<SALES> 3,549,776
<TOTAL-REVENUES> 3,549,776
<CGS> 1,321,827
<TOTAL-COSTS> 3,747,875
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115,507
<INCOME-PRETAX> (338,066)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (338,066)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
