1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark
One)
/X/ Annual Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
for the fiscal year ended July 2, 2000
/ / Transition report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required) for
the transition period from ____________ to ___________
Commission file number 0-12701
CUCOS INC.
(Exact name of Small Business Issuer in its charter)
Louisiana 72-0915435
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Veterans Blvd., Suite 222, Metairie, Louisiana 70005
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (504) 835-0306
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Check whether the Issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act
during the past 12 months (or for such shorter period that the
Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form,
and no disclosure will be contained, to the best of issuer's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. /X/
Issuer's revenues for its most recent fiscal year:
$16,082,399.
Aggregate market value (based on the average bid and asked
prices in the over the-counter market) of the voting stock held
by non-affiliates of the Issuer as of September 25, 2000:
approximately 2,663,605.
Number of shares outstanding of each of the Issuer's Classes
of common stock as of September 1, 2000: 2,663,605 shares of
Common Stock, no par value.
Documents Incorporated By Reference.
Portions of the definitive Proxy Statement for the 2000
Annual Meeting of Shareholders (the "2000 Proxy Statement") are
incorporated by reference into Part III of this Form 10-KSB.
INTRODUCTORY
Definitions. Except where the context indicates otherwise,
the following terms have the following respective meanings when
used in this Annual Report: the "Annual Report" means this report
on Form 10-KSB, "Common Stock" means the common stock, no par
value per share, of Cucos Inc., the "Company" or "Cucos" means
Cucos Inc. and the "fiscal 2000" means the 53 weeks ended July 2,
2000, which is the year for which this Annual Report is filed.
Presentation and Dates of Information. The Item numbers
appearing in this Annual Report correspond with those used in
Securities and Exchange Commission (the "Commission") Form 10-KSB
(and, to the extent that it is incorporated into Form 10-KSB, the
letters used in the Commission's Regulation S-B) as effective on
the date hereof, which specifies the information required to be
included in Annual Reports to the Commission. The information
contained in this Annual Report is, unless indicated to be given
as of a specified date or for a specified period, given as of
September 1, 2000. In computing the aggregate market value of
the Company's voting stock held by non-affiliates disclosed on
the cover page to this Annual Report, the following stockholders
were treated as affiliates: all executive officers and directors
of the Company; any person owning more than 10% of the Company's
Common Stock.
PART I
Item 1. Business
The Company is a Louisiana corporation organized in
1981. In November 1999, the shareholders of the Company acted by
written consent to remove and replace six members of the board of
directors. In August 2000, Jacksonville Restaurant Acquisition
Corp. ("JRAC") acquired 1.2 million shares of Common Stock and
became the majority shareholder of the Company. In connection
with acquiring control of the Company, JRAC made a preliminary
review of various potential business strategies. These
strategies include acquiring other private companies in the
casual dining segment and then considering strategic
alternatives. The strategy also includes refurbishing existing
Cucos restaurants and pursing the expansion of both company and
franchised Cucos restaurants.
JRAC borrowed approximately $1.2 million from St. James
Asset Investment, Inc. ("St. James") to purchase the 1.2 million
shares of Common Stock of the Company. JRAC borrowed these funds
from St. James under a $40 million line of credit between JRAC
and St. James. Future advances under this line of credit must be
approved by St. James and are subject to the ability of St. James
to fund such advances.
On September 29, 2000, the Company entered into a ten
year Line of Credit Agreement (the "Credit Agreement") with JRAC,
the Company's majority shareholder. Under the terms of the
Credit Agreement, JRAC may lend the Company up to $5 million for
working capital, payment of outstanding indebtedness,
refurbishing units, establishing new units, and future
acquisitions. The loan is secured by substantially all of the
assets of the Company. Advances will accrue interest at an
annual rate equal to three percentage points above the prime
lending rate of Wells Fargo Bank. JRAC will receive an
origination fee of two percent of the amount of each cash
advance. Beginning January 1, 2001, the outstanding loans (which
include $120,000 advanced from August 14, 2000 to August 28,
2000) will be repayable in monthly installments of principal and
interest. The Company has the right to prepay in whole or part
at any time any indebtedness outstanding under the Credit
Agreement. Future advances under this line of credit are subject
to the ability of JRAC to fund such advances.
JRAC has the option under the Credit Agreement to
require payment (including mandatory prepayment) in common stock
of the Company in lieu of payment in cash at any time when voting
common stock of the Company held by JRAC, plus any voting common
stock previously disposed of by JRAC, represents less than 52% of
the outstanding voting common stock of the Company. For these
purposes, until December 31, 2001, the common stock of Company
shall be treated as having a value of $1 per share. Beginning
January 1, 2002, the stock be valued for these purposes at the
average daily closing price for the 90 days prior to the
applicable payment.
The Credit Agreement was unanimously authorized by a
Special Committee composed of Lee W. Randall and Thomas L.
McCormick, who are both independent directors who have no direct
or indirect interest in this transaction.
The Company operates and franchises full-service
restaurants serving moderately priced Sonoran and Tex-Mex Mexican
appetizers and entrees and complementing alcoholic and non-
alcoholic beverages.
At the end of the fiscal 2000, 17 restaurants were
operating under the Cucos name, 12 of which were owned by the
Company and 5 by franchisees. There were eighteen restaurants in
operation at the end of fiscal year 1999. During the fiscal year
2000, one franchised restaurant was closed and two Company-owned
restaurants became franchised restaurants when the Company sold
the restaurants, one in Birmingham and one in Montgomery,
Alabama, to former employees.
COMPANY-OWNED RESTAURANTS
General. Cucos Mexican Restaurants are full service
restaurants emphasizing fresh ingredients and its own proprietary
recipes.
Cucos serves a variety of traditional Mexican dishes
and appetizers such as sizzling steak, chicken, or shrimp
Fajitas, Burritos, Enchiladas, Tamales, and Chimichangas. Cucos
also serves several large combination dinners. The restaurants
serve vegetarian items as well as burgers. Cucos' margarita was
voted Best Margarita in New Orleans for the eighth year in a row
by New Orleans Magazine. Cucos was also voted Best Mexican
Restaurant in New Orleans by the readers of New Orleans Magazine
for the seventh year and by Gambit this year.
The restaurants are decorated with Mexican antiques and
furniture, terra-cotta tile and large, hand-painted colorful
murals which are unique to each Cucos restaurant. Mexican
pottery, southwestern plants, colorful hand-made Mexican flowers
and festive lighting add more Mexican touches to the casual
restaurants.
Food sales accounted for approximately 79% of revenues
at the Company-owned restaurants operated in fiscal 2000, with
alcoholic and other beverages representing approximately 19% of
revenues. Special luncheon items range in price from $4.95 to
$7.45. The prices of the specialty and combination dinner items
range from $5.95 to $12.95. The per person average check,
including beverage, for fiscal 2000 was $11.31 and the average
dining time per table was approximately 45 minutes.
Restaurant Management and Supervision. Each Company-
owned restaurant operates under uniform standards set by
management relating to the preparation and service of food and
drink, appearance and conduct of employees, and cleanliness of
facilities. Food and beverage products are periodically tested
for quality and uniformity of portions. In accordance with the
Company's standards, each restaurant is run by a general
manager, assisted by two managers, a kitchen supervisor, a
service supervisor and a bar supervisor. At least one manager is
on duty during all serving periods. Each of the Company-owned
restaurants' general managers and managers receives, in addition
to a salary, incentive compensation calculated as a percentage of
sales and profits in excess of a predetermined base level.
The Company requires candidates for general manager to
undergo a thorough training program designed to familiarize them
with all aspects of the Company's operations. A candidate
serves as a manager before becoming a general manager. Persons
selected for training as general managers normally have several
years of food service experience.
Expansion Program. During fiscal year 2001, the
Company will consider acquisition of sites as they come
available. Management intends that the primary growth in sales
for fiscal year 2001 be accomplished by increasing comparable
sales per restaurant through a continuation of existing
advertising, programs to enhance customer satisfaction, and
refurbishing of the restaurants.
The Company is planning for expansion of the Cucos
system over the long-term. In this connection, the Company is
currently studying the population densities, traffic patterns,
income levels, competition and comparative cost structures for
other suitable sites.
The ability of the Company to open a new restaurant
will depend on locating satisfactory sites, the availability of
bank and lease financing at acceptable terms, having sufficient
working capital, obtaining adequate property, casualty and liquor
liability insurance coverages at a reasonable cost, securing
appropriate local government permits, licenses and approvals, and
on the capacity of the Company to supervise construction and to
recruit and train management personnel. Such factors may cause a
delay in the Company's planned development schedule.
The Company believes that its development plan of
controlled growth will occur in the Southeastern United States.
The Company expects in most cases to locate Company-owned and
franchised restaurants in high traffic, high growth areas of
commercial or residential concentration, at or near shopping
centers. Company-owned and franchised restaurant sites will be
judged by the Company's executive management against certain
criteria as to population density, income levels, amount of
competition, ingress/egress and traffic patterns.
The Company believes that there are a number of
existing restaurant facilities which have either closed or are
currently operating at a loss or at marginal levels of
profitability. The Company believes that a number of these units
may be suitable for conversion to a Cucos restaurant and can be
leased or purchased at attractive prices. The Company's strategy
for expansion (with respect to both Company-owned and franchised
restaurants), therefore, is primarily to locate units of this
type rather than to follow the strategy of most specialty
restaurant chains, which has been to construct new restaurant
facilities on land owned or leased by the chain or to enter build-
to-suit arrangements under which new facilities are built to the
specifications of the chain. In addition to the economic
benefits of the Company's strategy, such strategy may
substantially reduce the delay between the site selection and the
opening of a new restaurant and may allow the Company to gain
entry into densely-populated suburban and urban markets in which
land is either not available for the construction of new
restaurants or, if available, is prohibitively expensive. The
Company's expansion strategy may, however, subject it to the same
adverse factors that caused the existing facility to operate
marginally or unprofitably prior to being converted to a Cucos
restaurant. The Company intends to combat these adverse factors
by providing food and service, in renovated facilities, that will
appeal to the available customer base.
The Company estimates that the initial investment that
will be required in leasing an existing restaurant facility and
converting it for operation as a Company-owned restaurant will be
between $550,000 and $800,000. A new (rather than existing)
leased facility could involve substantially higher costs for
leasehold improvements.
When a new Company-owned restaurant is opened, the
Company temporarily transfers experienced personnel from one or
more of its existing restaurants to the new restaurant. Prior to
opening, personnel at the new location undergo intensive
training, which includes several pre-opening events at which test
meals are served.
The success of the Company's expansion program will
depend on, among other factors, capital availability, whether the
Company is able to attract and retain sufficient qualified,
experienced management, and whether management will be able to
ensure that Company-owned and franchise restaurants operate in
accordance with the Company's standards.
The Company will also consider the acquisition of other
casual dining concepts that fit with its growth strategy,
depending on acceptable terms and available financing.
Purchasing. Management believes that centralized
purchasing is advantageous to the Company in that it has allowed
it to take advantage of certain volume discounts. Fresh produce,
beverages and certain other items are purchased by each Company-
owned restaurant from local wholesalers. The Company believes
that satisfactory local sources of supply are generally available
for all of the other items it regularly uses in its restaurants.
Insurance. Insurance costs have risen considerably in
the restaurant business. The Company carries fire and casualty
insurance on its Company-owned restaurants and liability
insurance in amounts which management feels is adequate for its
operations.
Marketing. The Company advertises primarily by print
and radio advertising. Its advertising promotes the name "Cucos"
and emphasizes quality dining serving tasty food in a festive
atmosphere at moderate prices.
FRANCHISED RESTAURANTS
The Company, during fiscal year 2001, plans to re-
activate the franchising program, seeking new franchisees to help
grow the system. No assurances can be given as to the number of
franchise development areas that will be sold during the fiscal
year 2001 or the impact of development fee revenues upon the
Company's profitability and cash position during fiscal year
2001.
The development agreements generally obligate the
developer to construct a specified number of Cucos restaurants
within the licensed territory. The restaurants may be either new
restaurants or conversions of existing restaurants, although the
Company encourages franchisees to convert existing restaurants
whenever possible (see "Expansion Program"). A developer must
open new Cucos restaurants within the development territory in
accordance with the schedule set forth in the development
agreement. If a developer fails to open restaurants in
accordance with the schedule, generally the Company may notify
the developer that it is in default under the development
agreement and may terminate the agreement 30 days thereafter if
the default has not been cured.
Generally, a development agreement expires three years
after the latest date set forth in the development schedule.
During the first year after completion of the schedule, the
Company is prohibited from either opening a Cucos restaurant or
granting a franchise to someone other than the developer to
establish a Cucos restaurant within the licensed territory. If
during the second and third year after the completion of the
schedule, the Company desires to establish additional restaurants
within the licensed territory, the developer for that area has a
right of first refusal to enter into additional development
agreements with respect to such additional restaurants so long as
the developer is in compliance with the then existing development
agreement. If the developer exercises its right of first
refusal, the developer is required to pay the fees for each
restaurant then being charged to new developers. Upon expiration
of the development agreement, the Company may open Company-owned
restaurants in the previously licensed territory or grant
franchises to other persons to open additional franchised
restaurants in the previously licensed territory.
Development agreements provide for the payment of an
initial nonrefundable development fee by the developer upon
execution of the agreement. The development fee with respect to
development agreements is generally $15,000 per restaurant up to
five restaurants and $10,000 per restaurant thereafter. The
Company anticipates that the amount of the development fee with
respect to future development agreements will be based upon the
size and nature of the area covered by the development agreement.
Prior to the acquisition of a site for a restaurant in
the licensed territory, the developer must submit to the Company
certain information concerning the site and certain market
information. Upon the Company's approval of the site, the
developer is required to enter into a license agreement with the
Company with respect to the restaurant to be developed under the
development agreement.
The license agreements generally have terms of 20 years
from the date of their execution. However, if the license
agreement pertains to a franchised restaurant that is leased, the
license agreement terminates upon the earlier of 20 years from
the commencement date of the lease or upon the termination or
expiration of the primary term of the lease, plus any options to
renew the lease.
Generally franchisees are required to pay to the
Company under the license agreement a continuing royalty fee
equal to 4% of gross revenues at the restaurant. In addition,
franchisees are required to pay a continuing monthly contribution
to an advertising materials fund equal to .5% of gross revenues
at the restaurant and if a national advertising fund or a
regional advertising fund applicable to the franchisee's region
is established by the Company (the Company has not done so to
date), the franchisees must also pay to the Company continuing
monthly contributions, for use by such funds, equal to amounts
not to exceed 1% and 2% of gross revenues of the restaurant,
respectively, for the national media fund or the regional
advertising fund in the franchisee's region. The Company has not
established a national or regional advertising fund and
accordingly has not required contributions for such funds.
The license agreement provides that the franchisees
will comply strictly with the Company's standards,
specifications, processes, procedures, requirements and
instructions regarding the operation of the franchisee's
restaurant. The Company is obligated to provide initial training
programs for franchisees and to provide personnel for on-site
assistance in opening each franchised restaurant. The Company
has the right to approve the person designated by the franchisee
to have overall supervisory authority over franchised restaurant
operations or, if no such overall operations manager is designed,
to approve each restaurant general manager.
Franchisees purchase food products and restaurant
supplies conforming to the Company's specifications from
independent suppliers. Alternate sources of these items are
generally readily available. The Company may sell equipment,
food or supplies to franchisees upon request, but otherwise does
not intend to do so. The Company continues to sell a small
amount of proprietary advertising materials. The Company
provides confidential recipe spice packs to franchisees through a
third party. The Company anticipates continuing these sales.
EMPLOYEES
At the end of fiscal 2000, the Company-owned
restaurants employed 536 persons, consisting of 384 part-time and
152 full-time persons, which included 41 full-time general
managers and managers. In addition, 12 persons were employed at
the Company's executive office. The Company endeavors to
control its employee turnover rate by offering to all full-time
restaurant employees certain paid benefits, including life
insurance, health insurance and vacation. None of the Company's
employees are represented by a labor union. The Company has
experienced no work stoppages attributable to labor disputes and
considers its employee relations to be satisfactory.
COMPETITION
The restaurant business is highly competitive and is
often affected by changes in taste and eating habits, by local
and national economic conditions affecting spending habits, and
by population and traffic patterns. The Company believes that
the quality and price of food products are the principal means of
competition in the restaurant industry. Also of importance are
site locations, quality and speed of service, cleanliness,
advertising and attractiveness of facilities.
The Company competes with several national chains
including El Chico, Rio Bravo, Don Pablo's, El Patio, Chili's,
Applebees, Olive Garden, LaFiesta, and Chevy's, as well as many
local dining concepts. Several of the national chains have had
significant funding available provided by public stock offerings,
which has enabled them to expand significantly in the Company's
smaller markets. These expansions have adversely impacted the
Company's guest counts in the smaller markets. These national
chains, as well as some regional chains, operate more restaurants
and have greater financial resources and greater name recognition
than the Company. In addition, gaming operations in the
Company's Louisiana and Mississippi markets often offer food at
discounted or below cost prices which provide an additional level
of indirect competition in those markets.
GOVERNMENT REGULATION
The Company's franchise operations are subject to a
variety of laws regulating the marketing of franchises. Federal
Trade Commission regulations impose certain disclosure
requirements on persons engaged in the business of offering
franchises. States in which the Company offers franchises also
may have franchising laws that require registration prior to the
offering of franchises for sale in those states or that afford
franchisees substantive rights, including limiting the
circumstances under which franchises may be terminated.
The Company is also subject to the Fair Labor Standards
Act, which governs such matters as minimum wages, overtime, and
other working conditions. Many of the Company's food service
personnel are paid at rates related to the minimum wage and,
accordingly, increases in the minimum wage increase the Company's
labor costs.
Each of the Company's restaurants is subject to
licensing and regulation by state liquor control boards and the
state police in Louisiana (with respect to video poker), and by
municipal health, sanitation, safety and fire department
agencies. The Company expects that liquor sales and video poker
revenues will account for a significant portion of the Company's
revenues. During fiscal 2000, liquor sales and video poker
revenues accounted for approximately 19.4% and 1.4%,
respectively, of food and beverage revenues. The loss of an
existing liquor license or video poker license would adversely
affect the Company's operations at that restaurant.
The Company is also subject to the provisions of the
Americans with Disabilities Act. The Company has remodeled its
restaurants to meet these requirements where necessary.
MISCELLANEOUS
Customers. No material part of the Company's business
is dependent upon a single customer, or a very few customers, the
loss of any one of which would have a material adverse effect on
the Company. No single customer accounts for as much as 10% of
the Company's total revenues.
Seasonality. The Company's results are impacted by
seasonality. Usually the highest sales periods occur in late
spring and summer, with sales declining in the fall and winter.
This is especially true for the Gulf Coast restaurants where
sales are more dependent on tourism.
Service Marks, Trademarks and Copyrights. The Company
is the owner of United States Service Mark Registration Nos.
1,509,612, dated October 18, 1988, for the mark CUCOS & DESIGN;
and 1,941,214, dated December 12, 1995, for the mark CUCOS
MEXICAN CAFE & DESIGN. The Company is also the owner of United
States Trademark Registration Nos. 1,405,169, dated August 12,
1986, for the mark FRESH-ITAS (Cucos' version of fajitas) and
1,465,729, dated November 17, 1987, for the mark FRESH-ITA NACHOS
(Cucos' version of fajita nachos). The Company is also the owner
of United States Service Mark Registration No. 1,996,748, dated
August 27, 1996, for the mark THE TASTE TO MAKE YOU SAY OLE` and
United States Service Mark Registration No. 2,019,308, issued
November 27, 1996, for the mark IT TASTES BETTER OUR WAY. Those
registrations, unless sooner terminated by law, issued prior to
November 16, 1989 have an effective term of 20 years and those
issued on or after November 16, 1989 have an effective term of 10
years, unless sooner terminated by law, and all may be renewed
for successive terms so long as the marks continue to be used by
Company in interstate commerce for the specified services or
goods. The Company also owns a service mark registration as
issued by the State of Louisiana, dated July 14, 1987; a
Tennessee State Registration, issued July 2, 1987; a Florida
State Registration No. 707,637, dated July 17, 1987; an Alabama
State Registration No. 103,383, issued July 14, 1987; a
Mississippi State Registration No. 1,509,612, issued on July 27,
1987; and an Arkansas State Registration No. 181-87, issued on
July 8, 1987, all for the service mark CU-CO's. These
registrations are effective for a term of 10 years and may be
renewed for successive terms. All of these registrations are
valid and subsisting. In addition, the Company is the owner of
Copyright Registration No. TXU 357-784 for the Cucos Power Manual
and Copyright Registration No. PAU 1,195,506 for the Video, both
dated November 4, 1988.
Item 2. Properties.
All of the Company-owned restaurants are located in
facilities that are leased from third parties. The following
table summarizes certain information concerning Company-operated
restaurants located in facilities that are leased from others as
of August 10, 2000.
Lease
Size Dining Lease Option(s)
Location Opened/Acquired (Sq.Ft.) Capacity Expires Through
New Orleans -
Metairie, LA June 1981 5,138 136 2007 2027
Biloxi, MS April 1982 5,600 159 2002 2032
New Orleans -
Westbank, LA September 1983 4,800 147 2001 2010
Monroe, LA June 1984 4,476 146 2004 2019
Slidell, LA November 1984 5,300 139 2008 2018
Alexandria, LA March 1985 5,125 143 2001 2005
New Orleans -
Uptown, LA November 1985 4,152 120 2005 2015
Pascagoula, MS December 1989 5,160 130 2006 2016
Hammond, LA July 1990 6,062 130 2001 None
Birmingham, AL March 1992 4,560 150 2006 2012
Houma, LA September 1992 6,000 148 2007 2017
Ruston, LA February 1996 5,476 162 2003 2026
The New Orleans-Westbank and Slidell locations are in
strip shopping centers. The Hammond, Birmingham, and Houma
locations are in shopping malls. Seven leased locations are free-
standing buildings. The restaurant leases require the Company to
pay real estate taxes, insurance and utilities, and to bear
repair, maintenance and other expenses normally borne by the
lessee under a triple net lease. In the opinion of the
management of Company, the leased properties are adequately
covered by insurance.
In addition to the leases above, the Company has leases
on three restaurant properties that are no longer used in its
operations. The properties have been subleased to other
companies. The following table provides certain information
about these properties:
Location Lease Expires Sublease Expires
Montgomery, AL 2002 2002
Columbus, GA 2004 2004
Macon, GA 2011 2011
Item 3. Legal Proceedings.
On April 11, 1990, a franchisee filed a complaint in
the 24th District Court, State of Louisiana, Parish of Jefferson,
Case No. 397856-5, against the Company and certain of its
officers alleging breach of contract and misrepresentation and
seeks damages in excess of $1.6 million. There has been no
activity in this litigation for more than ten years except for a
discovery request filed in January 1996, which avoided a
dismissal of the litigation for non-prosecution. The Company
believes the claims are without merit and the likelihood of a
loss is remote.
Ronnie Natal Contractors, Inc. versus Cucos, Inc.,
Civil Action No. 95-17928, Section "L", Civil District Court for
the Parish of Orleans, State of Louisiana. In this action, Ronnie
Natal Contractors, Inc. ("Natal") and Current Electric, Inc. seek
to recover on what is allegedly due and owing in connection with
the build out of a Cucos Restaurant in New Orleans, Louisiana.
Natal alleges it is owed $64,935.00; Current Electric claims to
be owed $3,408.00. Cucos, Inc. does not deny that Natal and
Current provided some service in connection with the restaurant
build out, although Cucos does have questions with the accuracy
of the amount claimed. Rather, the principal issue in this
litigation is whether any amount is owed by Cucos, Inc. The
restaurant at issue was not owned by Cucos, Inc. but rather was a
franchise restaurant owned by LBG, Inc. a closely held
corporation controlled by former members of management of Cucos.
Significantly, the amount claimed by Natal and Current
Electric does not represent all amounts billed by them in
connection with the restaurant build out. In fact, tenant build
out funds were advanced by the lessor, and these funds were used
in part to satisfy Current Electric and Natal's claims. However,
as LBG defaulted on its lease, the lessor refused to advance
further tenant build out leaving the balance that is allegedly
due. Natal and Current claim that they were under the
misapprehension that the work they were providing was for Cucos,
Inc. as opposed to LBG citing the fact that persons at Cucos
involved with franchisee relations had direct dealings with both
Natal and Current.
Cucos has filed a third party demand against LBG. LBG
has failed to answer timely, and Cucos is in the process of
securing a default. A non jury trial of this matter is scheduled
for January 9, 2001.
Discovery is not complete in this matter and it is not
possible at this time to estimate the company's ultimate
liability, if any. Counsel has been instructed to defend this
matter vigorously, and counsel has not been provided with
settlement authority.
Item 4. Submission of Matters to a Vote of Security
Holders.
There were no matters submitted to a vote of
stockholders during the period covered by this Annual Report.
However, effective on Friday, November 5, 1999, the holders of a
majority of the Company's outstanding Common Stock, acting by
written consent, removed six members of the board of directors
and elected a new group of directors. Subsequent to that
election, two directors, including the Chairman, resigned, and,
on August 24, 2000, the remaining members of the board elected
two new directors to fill the vacancies and named a new Chairman.
The current board members are James W. Osborn (Chairman), Elias
Daher, Lee W. Randall, Thomas L. McCormick, Calvin O. Cox, Dennis
A. Grinn and William F. Saculla.
PART II
Item 5. Market for the Company's Common Stock and Related
Shareholder Matters.
Cucos Inc. - Stock Data
The Company's Common Stock which was formerly traded on The
NASDAQ Small-Cap Market under the symbol CUCO was delisted on
February 2, 1999. The Company's Common Stock is currently
listed on the OTC Bulletin Board. The following table sets forth
the range of the high and low bid and ask prices for each of the
quarters indicated for fiscal 2000 and fiscal 1999 as indicated
by Yahoo Finance website.
Fiscal 1999 High Ask Low Bid
1st Quarter ended 10/18/98 $1.1875 $0.7500
2nd Quarter ended 1/10/99 0.0875 0.3125
3rd Quarter ended 4/4/99 1.0625 0.3750
4th Quarter ended 6/27/99 0.4375 0.2500
Fiscal 2000 High Ask Low Bid
1st Quarter ended 10/17/99 $0.8750 $0.1250
2nd Quarter ended 1/9/00 2.2650 0.6520
3rd Quarter ended 4/2/00 1.6875 1.0000
4th Quarter ended 7/2/00 1.3750 0.6250
On September 14, 2000, the closing bid and ask prices for
the Company's Common Stock were $1.50 bid and $1.50 ask.
The foregoing quotations reflect inter-dealer prices,
without retail markup, mark-down or commission and may not
necessarily represent actual transactions.
Since becoming a public company, the Company has paid no
cash dividends and has no present intention of paying dividends,
but rather expects to retain its earnings to provide funds for
expansion of its business and other corporate purposes.
Approximate number of shareholders (including beneficial
shareholders through nominee registration) as of September 20,
2000: 725.
On January 26, 2000, the Company sold 300,000 shares of its
Series A Preferred Stock, no par value per share (the Preferred
Stock), to JRAC for $300,000. On February 1, 2000, the Company
sold 100,000 shares of Preferred Stock to JRAC for $100,000.
Each share of Preferred Stock is convertible at JRAC's option
into one share of the Company's Common Stock. These shares were
issued in transactions exempt from registration under Section
4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), in a private offering to a single investor.
On February 21, 2000, Mr. Daniel Earles, former Executive
Vice President of Operations of the Company, exercised his
options to purchase 11,875 shares of Common Stock at a price of
$1.00 per share. These shares were issued in a transaction
exempt from registration pursuant to Section 4(2) of the
Securities Act.
On January 20, 2000 and on May 16, 2000, the Company granted
options to purchase an aggregate of 135,000 shares of Common
Stock to some of its officers and directors. These options were
issued in transactions exempt from registration pursuant to
Section 4(2) of the Securities Act.
Item 6. Management's Discussion and Analysis.
Overview
The Company operates and franchises full-service restaurants
serving moderately priced Sonoran and Tex-Mex Mexican appetizers
and entrees and complementing alcoholic and non-alcoholic
beverages. At the end of fiscal 2000, 17 restaurants were
operating under the Cucos name, 12 of which were owned by the
Company and 5 by franchisees. There were eighteen restaurants in
operation at the end of fiscal 1999. During fiscal 2000, one
franchised restaurant was closed and two Company-owned
restaurants became franchised restaurants when the Company sold
the restaurants, one in Birmingham and one in Montgomery,
Alabama, to former employees.
Fiscal 2000 Compared to Fiscal 1999
Sales of Food and Beverages declined $4,037,700 (20.1%) to
$16,082,399 from $20,120,099. This decrease in sales was
primarily the result of three fewer restaurants in fiscal 2000.
Two Company-owned restaurants in Birmingham and Montgomery,
Alabama, were closed and sold to franchisees during the first
quarter of fiscal 2000, and the Meridian, Mississippi, restaurant
closed at the end of the third quarter of 1999 fiscal year. The
closings accounted for $2,214,946 of the decline in Sales of Food
and Beverages. Sales of Food and Beverages at restaurants open
throughout the 2000 and 1999 fiscal years (the "Comparable
Restaurants") decreased $1,427,076. In addition, the ban on
video poker devices in five Louisiana parishes became effective
June 30, 1999, resulting in a decline in revenues of $395,678.
Net Royalty and Franchise Revenues decreased $3,836 (3%) to
$125,311 from $129,147. Royalty Revenue decreased $22,222
primarily due to the closing of the franchised restaurants in Des
Moines, Iowa, and Boynton Beach, Florida. Although two
franchised restaurants in Birmingham and Montgomery, Alabama
opened, the royalties from these restaurants were considerably
less than the restaurant that closed during fiscal 2000. The
decrease in Royalty Revenue was partially offset by the
Development Fee forfeited by the Des Moines franchisee when the
restaurant was closed.
Commissary and Other Income declined $104,991 (85.8%) to
$17,318 from $122,309. During the second quarter of fiscal 2000,
the Company's contract to manage a franchised restaurant was
cancelled. The reduction in management fee income was $46,001,
and the Company's share of profits for this restaurant declined
an additional $16,968 versus the 1999 fiscal year. During the
same quarter, the Company closed its commissary operation and
contracted with a vendor to supply these services, resulting in a
revenue decline of $25,420.
Restaurant Cost of Sales decreased $1,205,073 (21.6%) to
$4,363,359 from $5,568,432. The reduction attributed to the
three closed restaurants was $641,549, and Comparable Restaurants
Cost of Sales declined $563,524. Cost of Sales as a percentage
of Food and Beverage Sales decreased 1.01% for Comparable
Restaurants.
Restaurant Labor and Benefits decreased $1,171,534 (16.3%)
to $5,996,316 from $7,167,850. Closed restaurants accounted for
$953,898 of the reduction, while Comparable Restaurants Labor and
Benefits costs declined $217,636. Comparable Restaurant Labor and
Benefits increased 1.88% as a percentage of sales.
Other Operating Expenses decreased $1,322,604 (35.2%) to
$2,431,628 from $3,754,232. Comparable Restaurants Other
Operating Costs declined $774,261, and closed restaurants
accounted for $548,343. Comparable Restaurants costs declined
3.3% as a percentage of sales.
Occupancy Costs decreased $526,143 (23.4%) to $1,719,188
from $2,245,331. The reduction attributed to the three closed
restaurants was $418,311, while Comparable Restaurants decreased
$107,832. As a percentage of sales, Comparable Restaurants
Occupancy Costs were virtually unchanged.
Preopening Expenses decreased $54,525. Amortization of
costs for the Meridian, Mississippi, restaurant (opened in fiscal
year 1998) was completed in fiscal year 1999. No new Company-
owned restaurants opened during the fiscal year 2000.
Operations Supervision Expenses declined $242,977 (30.2%) to
$561,077 from $804,054. The decline in expenses is primarily the
result of a decrease in the costs associated with management
training and supervision (labor and benefits), and decreased bad
debt provision.
Corporate Expenses decreased $491,095 (29.2%) to $1,193,506
from $1,684,601. The decline is attributable to reductions of
personnel in the marketing, construction, accounting, finance,
and legal departments, and the downsize of the corporate offices.
The Company, working with a consultant, negotiated reductions of
various vendor payables. In addition, during fiscal year 1999,
the Company incurred charges of $250,000 for legal fees,
abandoned sites, and costs associated with television commercial
production.
During fiscal 2000, the Company recorded a charge of
$364,251 in connection with the settlement with the former
Chairman and CEO. The expense primarily includes amounts
attributable to the transfer of the Company's interest in a
franchise restaurant to the former Chairman and CEO and the
forgiveness of a receivable from a company of which the former
Chairman and CEO is an affiliate.
During fiscal 1999, the Company adjusted the value of
impaired property located in Meridian, Birmingham, Cutler Ridge
and Macon, resulting in impairment charges of $1,926,557. During
fiscal 2000, management's efforts to dispose of these assets and
settle related lease liabilities resulted in a net benefit of
$117,304.
Interest expense increased $279,011 (57%) to $766,798 from
$487,787. This increase is due to additional interest associated
with the Company's credit facility, which is discussed in detail
in the Notes to Financial Statements.
Liquidity and Capital Resources
In fiscal 2000, the Company's operating activities used
$407,298. In fiscal 1999, the Company's operating activities
provided cash flow of $425,853. The change in net cash provided
by (used in) operating activities from fiscal 1999 to fiscal 2000
resulted primarily because the Company significantly reduced its
trade accounts payable in fiscal 2000, compared to fiscal 1999
when the Company had extended its trade payable terms with
vendors.
During fiscal 2000 the Company's working capital needs were
financed primarily by the sale of $400,000 of convertible
preferred stock to JRAC. In fiscal 1999, working capital needs
were financed from operations and short-term borrowings.
Presently, the Company has no commitments from third parties to
provide short-term borrowings.
Net cash used by investing activities was $86,120 in fiscal
2000 compared to $188,143 in 1999. In fiscal 2000, the Company
received $78,600 from the sale of assets for a closed unit.
Net cash provided by financing activities was $245,920 in
fiscal 2000, and included $400,000 of proceeds from the sale of
convertible preferred stock and $166,155 of principal payments on
long-term debt. Net cash used in financing activities was
$347,953 in 1999 and included repayment of the Company's line of
credit and principal payments on long-term debt. Proceeds from
long-term borrowings in 1999 were from notes payable
collateralized by life insurance policies.
The Company considers earnings before interest, taxes,
depreciation and amortization (EBITDA) to be a relevant indicator
of liquidity. EBITDA is not a measure defined by accounting
principles generally accepted in the United States, however. The
amounts presented below may not be comparable to similarly titled
measures reported by other companies. EBITDA increased to
$503,347 for fiscal year ended July 2, 2000 compared to a deficit
of $43,213 for fiscal year ended June 27, 1999.
[CAPTION]
<TABLE>
EBITDA
Fiscal Year Ended
July 2, 2000 June 27, 1999
<S> <C> <C>
Net Loss $(1,053,791) $(3,321,814)
Add:
Depreciation and amortization of property
and equipment 543,393 809,732
Preopening amortization - 54,525
Interest 766,798 487,787
Charges related to closed units and asset impairment, net (117,304) 1,926,557
Charges related to settlement with former management 364,251 -
EBITDA $ 503,374 $ (43,213)
</TABLE>
Management attributes the total financial improvement to
improved operational controls and administrative and operational
personnel reductions.
In May 1999, the Company and its commercial lender entered
into a forbearance agreement whereby the commercial lender agreed
to defer the Company's requirement to make required principal and
interest payments for May, June and July 1999 until April 2001,
and to defer required principal payments for August, September
and October 1999 until April 2001. The Company did not make its
required interest payment on October 1, 1999, nor did it make its
required principal and interest payment on November 1, 1999 and
December 1, 1999, and was therefore in default on its credit
facility. The Company received notice from its commercial lender
that under the terms of the credit facility, the entire amount
outstanding, $3,105,031 at October 17, 1999 was immediately due,
and the lender could take possession of the assets pledged as
collateral. Until September 1, 2000, the commercial lender agreed,
pursuant a forbearance agreement, to not exercise its rights to
the collateral. The Company is attempting to obtain financing
through JRAC to repay the debt in default, negotiate a waiver
of the credit facility default, or obtain additional payment
deferrals in fiscal year 2001. There can be no assurances that
the Company will be successful in these efforts.
On September 29, 2000, the Company entered into a ten
year Line of Credit Agreement (the "Credit Agreement") with JRAC,
the Company's majority shareholder. Under the terms of the
Credit Agreement, JRAC may lend the Company up to $5 million for
working capital, payment of outstanding indebtedness,
refurbishing units, establishing new units, and future
acquisitions. The loan is secured by substantially all of the
assets of the Company. Advances will accrue interest at an
annual rate equal to three percentage points above the prime
lending rate of Wells Fargo Bank. JRAC will receive an
origination fee of two percent of the amount of each cash
advance. Beginning January 1, 2001, the outstanding loans (which
include $120,000 advanced from August 14, 2000 to August 28,
2000) will be repayable in monthly installments of principal and
interest. The Company has the right to prepay in whole or part
at any time any indebtedness outstanding under the Credit
Agreement. Future advances under this line of credit are subject
to the ability of JRAC to fund such advances.
Because of the Company's recurring net losses, the debt in
default, its net capital deficiency, and the lack of firm
commitments from third parties to provide short-term or long-term
financial resources, there can be no assurance that the Company
will be able to meet its obligations as they come due in 2001.
Impact of Inflation and Changing Prices
Inflation in food, labor, construction costs and interest
rates can affect the Company's operations. Many of the Company's
employees are paid hourly rates related to the minimum wage,
which is subject to fluctuation.
Management reviews its pricing regularly to ensure that its
Company's product(s) are priced competitively, that it offers
outstanding value to its customers, and that margins are
maintained. Inflation can also affect rent, taxes, maintenance,
and insurance costs.
Seasonality
The Company's results are affected by seasonality. Usually
the highest sales periods occur in late spring and summer, with
sales declining in the fall and winter. This is especially true
for the Gulf Coast restaurants where sales are more dependent on
tourism.
Forward-Looking Statements
Forward-looking statements regarding management's present
plans or expectations for new unit openings, remodels, other
capital expenditures, the financing thereof, and disposition of
impaired units, involve risks and uncertainties relative to
return expectations and related allocation of resources, and
changing economic or competitive conditions, as well as the
negotiation of agreements with third parties, which could cause
actual results to differ from present plans or expectations, and
such differences could be material. Similarly, forward-looking
statements regarding management's present expectations for
operating results involve risk and uncertainties relative to
these and other factors, such as advertising effectiveness and
the ability to achieve cost reductions, which also would cause
actual results to differ from present plans. Such differences
could be material. Management does not expect to update such
forward-looking statements continually as conditions change, and
readers should consider that such statements speak only as to the
date hereof.
Item 7. Financial Statements.
Cucos Inc.
Balance Sheet
July 2, 2000
Assets
Current assets:
Cash $ 268,712
Receivables less allowance for doubtful accounts of $66,716 99,015
Inventories 150,958
Prepaid expenses 154,792
Other current assets 3,968
TOTAL CURRENT ASSETS 677,445
Property and equipment:
Equipment 2,085,926
Leasehold improvements 3,009,947
5,095,873
Less accumulated depreciation and amortization and
impairment reserves 3,009,359
2,086,514
Deferred costs, less accumulated amortization of $96,760 225,414
Other assets 253,898
TOTAL ASSETS $ 3,243,271
Liabilities and Net Capital Deficiency
Current liabilities:
Trade accounts payable $ 1,346,626
Accrued interest 321,253
Accrued expenses 522,021
Current portion of long-term debt 190,767
Debt in default 3,105,031
TOTAL CURRENT LIABILITIES 5,485,698
Long-term debt, less current portion 177,971
Deferred revenue 270,954
Net Capital Deficiency:
Convertible preferred stock, no par value-1,000,000
shares authorized: 400,000 issued and outstanding,
stated at liquidation preference value of $1 per share 400,000
Common stock, no par value - 20,000,000 shares:
authorized, 2,663,605 shares issued and outstanding 5,264,649
Additional paid-in capital 110,788
Retained earnings deficit (8,466,789)
NET CAPITAL DEFICIENCY (2,691,352)
TOTAL LIABILITIES AND NET CAPITAL DEFICIENCY $ 3,243,271
See accompanying notes.
[CAPTION]
<TABLE>
Cucos Inc.
Statements of Operations
Fiscal Year Ended
July 2, 2000 June 27, 1999
<S> <C> <C>
Restaurant operations:
Sales of food and beverages $16,082,399 $20,120,099
Restaurant expenses:
Cost of sales 4,363,359 5,568,432
Restaurant labor and benefits 5,996,316 7,167,850
Other operating expenses 2,431,628 3,754,232
Occupancy expenses 1,719,188 2,245,331
Preopening expenses - 54,525
Total restaurant expenses 14,510,491 18,790,370
Income from restaurant operations 1,571,908 1,329,729
Royalties and franchise revenues, net of expenses of $2,093 and 125,311 129,147
$2,979, respectively
Commissary and other income 17,318 122,309
1,714,537 1,581,185
Operations supervision expenses 561,077 804,054
Corporate expenses 1,193,506 1,684,601
Charges related to settlement with former management 364,251 -
Charges related to closed units and asset impairment (117,304) 1,926,557
Operating loss (286,993) (2,834,027)
Interest expense 766,798 487,787
Loss before income taxes (1,053,791) (3,321,814)
Income taxes - -
Net loss $(1,053,791) $(3,321,814)
Net loss per share - basic and diluted $(0.40) $(1.25)
Weighted average number of common shares and common share
equivalents outstanding - basic and diluted 2,642,272 2,651,730
</TABLE>
See accompanying notes.
[CAPTION]
<TABLE>
Cucos Inc.
Statements of Cash Flows
Fiscal Year Ended
July 2, 2000 June 27, 1999
<S> <C> <C>
Operating activities
Net loss $ (1,053,791) $(3,321,814)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Payments related to closed units and asset impairment - 1,926,557
Costs paid related to closed units (42,961) -
Depreciation and amortization of property and equipment 543,393 809,732
Amortization of deferred costs 30,283 157,522
Change in deferred revenue 187,212 (7,578)
Gain on sale of assets and other (76,156) (3,571)
Charges related to settlement with former management 364,251 -
Changes in operating assets and liabilities:
Receivables 80,728 199,339
Inventories 48,348 33,573
Prepaid expenses and other current assets 183,300 4,145
Trade accounts payable (815,452) 715,650
Accrued expenses 143,547 (87,702)
Net cash provided by (used in) operating activities (407,298) 425,853
Investing activities
Purchases of property and equipment (164,720) (188,143)
Proceeds from sale of assets 78,600 -
Net cash used in investing activities (86,120) (188,143)
Financing activities
Changes in short-term debt payable to banks - (100,000)
Proceeds from borrowings - 74,364
Principal payments on borrowings (166,155) (322,317)
Proceeds from sale of convertible preferred stock 400,000 -
Proceeds from sale of common stock 11,875 -
Net cash provided by (used in) financing activities 245,720 (347,953)
Change in cash (247,698) (110,243)
Cash at beginning of year 516,410 626,653
Cash at end of year $268,712 $516,410
Supplemental cash flow information:
Non-cash financing and investing activities:
Equipment and leasehold improvements financed by capital leases $48,349 $ -
Interest paid $543,094 $424,734
See accompanying notes.
</TABLE>
[CAPTION]
<TABLE>
Cucos Inc.
Statements of Shareholders' Equity
Additional Retained
Preferred Common Preferred Common Paid-In Earnings
Shares Shares Stock Stock Capital (Deficit) Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of June 28, 1998 - 2,651,730 - $ 5,252,774 $110,788 $(4,091,184) $ 1,272,378
Net loss - - - - - (3,321,814) (3,321,814)
Balance as of June 27, 1999 - 2,651,730 - $ 5,252,774 $110,788 $(7,412,998) $ (2,049,436)
Net loss - - - - - (1,053,791) (1,053,791)
Sale of common stock - 11,875 - 11,875 - - 11,875
Sale of preferred stock 400,000 - $ 400,000 - - - 400,000
Balance as of July 2, 2000 400,000 2,663,605 $ 400,000 $ 5.264.649 $110,788 $(8,466,789) $ (2,691,352)
</TABLE>
See accompanying notes.
Cucos Inc.
July 2, 2000
Notes to Financial Statements
1. Basis of Presentation and Significant Accounting Policies
Basis of Presentation: Cucos Inc. (the "Company") incurred a net
loss of $1,053,791 in the fiscal year 2000 and $3,321,814 in the
fiscal year 1999. In addition, at July 2, 2000, the Company had
a net capital deficiency of $2,691,352 and was in default on debt
totaling $3,105,031. See note 3. These conditions raise
substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any
adjustments to reflect the uncertainties related to the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the inability
of the Company to continue as a going concern.
The Company has developed plans to refocus its operations,
reverse sales declines, increase restaurant profitability and
reduce other operating and corporate expenses. The Company is
also attempting to obtain alternate financing to repay the debt
in default, or negotiate with its commercial lender to
restructure the terms of the debt in default. The Company
believes that it can continue to meet its obligations through the
end of fiscal year 2001 if it can extend its existing forbearance
agreement with its commercial lender, or restructure the terms of
the debt in default, or obtain alternate financing to repay the
debt, on terms acceptable to the Company. However, considering,
among other things, the Company's history of net losses and the
debt in default, there can be no assurance that these plans will
have the expected effect on the Company's results of operations
and its cash flows in fiscal 2001.
Fiscal Year: The Company uses a 52/53-week year for financial
reporting purposes with its fiscal year ending on the Sunday
closest to June 30. Fiscal year 2000 was a 53-week year, and
fiscal year 1999 was a 52-week year.
Use of Estimates: The preparation of the financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
Inventories: Inventories, consisting primarily of food and
beverages, are stated at the lower of cost (first-in, first-out
method) or market.
Property and Equipment: Property and equipment is stated at cost.
Depreciation and amortization are computed by the straight-line
method over the assets' useful lives or their lease terms,
whichever is shorter. Amortization of assets recorded under
capital leases is included in depreciation expense. The useful
lives of equipment range from 3-10 years, and the useful lives of
leasehold improvements are generally 15 years.
Deferred Costs: Deferred costs represent debt issuance and other
costs, which are primarily trademarks. Deferred debt issuance
costs are amortized over the life of the related debt. Deferred
site costs incurred in the selection of sites for new Company-
owned restaurants are capitalized and amortized on a straight-
line basis over a 10-year period; costs incurred in the selection
of sites for franchised restaurants are accumulated and expensed
when the related franchise revenue is recognized. If a potential
site is abandoned, the deferred costs related to that site are
charged to current operations. Other deferred costs, primarily
trademarks, are amortized on a straight-line basis over 20 years.
Advertising Costs: Advertising costs are expensed as incurred.
Advertising expense was $222,000 in fiscal 2000 and $794,000 in
fiscal 1999.
Franchise Fees and Royalties: The Company sells exclusive rights
to develop Cucos restaurants in designated territories (Area
Development Agreements), as well as individual franchises for
each restaurant. The Area Development Agreements call for a
nonrefundable fee paid to the Company in exchange for territorial
exclusivity. Franchise development fee revenue from these
agreements is deferred and recognized as income on a pro rata
basis as restaurants are developed in the designated territory or
when the developer forfeits the development rights under the
agreement. Franchise fee revenue related to the individual
restaurants is recognized as income when all obligations of the
Company are substantially fulfilled, which occurs when the
franchise restaurant begins operations. Royalty income is based
upon a percentage of franchise sales and is recognized as income
when earned. Royalties and other receivables are often
collateralized by personal guarantees and sometimes by equipment
owned by the franchisee.
Income Taxes: The Company accounts for income taxes using the
liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities, and are
measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
Impairment of Long-Lived Assets: The Company reviews long-lived
assets to be held and used in the business for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset or a group of assets may not be
recoverable. Assets are evaluated for impairment at the operating
unit level. The Company considers a history of operating losses
to be its primary indicator of potential impairment. An asset is
deemed to be impaired if a forecast of undiscounted future
operating cash flows directly related to the asset, including
disposal value if any, is less than its carrying amount. If an
asset is determined to be impaired, the loss is measured as the
amount by which the carrying amount of the asset exceeds its fair
value. The Company generally estimates fair value by discounting
estimated future cash flows. Considerable judgment is necessary
to estimate cash flows. Accordingly, it is reasonably possible
that actual results could vary significantly from such estimates.
Stock-Based Compensation: The Company accounts for its stock
compensation arrangements under the provision of Accounting
Principles Board No. 25, Accounting for Stock Issued to
Employees.
Reclassifications: Certain balances in the prior fiscal year have
been reclassified to conform with the presentation in the current
fiscal year.
2. Tender Offer
In August 2000, pursuant to a tender offer to the Company's
shareholders, the Jacksonville Restaurant Acquisition Corp.
(JRAC) purchased 1.2 million shares of the Company's Common Stock
for $1,200,000 in cash. During fiscal 2000, JRAC purchased
400,000 shares of convertible Preferred Stock at $1 per share.
3. Debt
Capital lease obligations, fixed interest rates
of 12.09% to 14.2% with monthly payments of $10,100 $ 330,805
Other 37,933
368,738
Less current portion 190,767
$ 177,971
Debt in default $3,105,031
Debt in default represents a note payable to a commercial lender.
This note is part of a pool of loans financed by the commercial
lender at a stated interest rate of 11.6%. However, the loan
agreement requires the Company to pay additional interest each
month if certain loan pool conditions are not met. These monthly
payments, if required, would increase interest incurred by a
maximum of $400,000 over the life of the loan. During fiscal
2000, the Company incurred additional interest of $52,000 as a
result of these requirements. The loan agreement also contains a
provision that requires the Company to pay prepayment premiums in
the event the loan is paid prior to its maturity. At July 2,
2000, this premium was approximately $660,000.
In May 1999, the Company and its commercial lender entered into a
forbearance agreement whereby the commercial lender agreed to
defer the Company's requirement to make required principal and
interest payments for May, June and July 1999 until April 2001,
and to defer required principal payments for August, September
and October 1999 until April 2001. The Company did not make its
required interest payment on October 1, 1999, nor did it make its
required principal and interest payment on November 1, 1999 and
December 1, 1999, and was therefore in default on its credit
facility. The Company received notice from its commercial lender
that under the terms of the credit facility, the entire amount
outstanding, $3,105,031 at October 17, 1999 was immediately due,
and the lender could take possession of the assets pledged as
collateral. Until September 1, 2000, the commercial lender agreed,
pursuant a forbearance agreement, to not exercise its rights
to the collateral. The Company is attempting to obtain financing
through JRAC to repay the debt in default, negotiate a waiver of
the credit facility default, or obtain additional payment
deferrals in fiscal year 2001. There can be no assurances that
the Company will be successful in these efforts.
On September 29, 2000, the Company entered into a ten
year Line of Credit Agreement (the "Credit Agreement") with JRAC,
the Company's majority shareholder. Under the terms of the
Credit Agreement, JRAC may lend the Company up to $5 million for
working capital, payment of outstanding indebtedness,
refurbishing units, establishing new units, and future
acquisitions. The loan is secured by substantially all of the
assets of the Company. Advances will accrue interest at an
annual rate equal to three percentage points above the prime
lending rate of Wells Fargo Bank. JRAC will receive an
origination fee of two percent of the amount of each cash
advance. Beginning January 1, 2001, the outstanding loans (which
include $120,000 advanced from August 14, 2000 to August 28,
2000) will be repayable in monthly installments of principal and
interest. The Company has the right to prepay in whole or part
at any time any indebtedness outstanding under the Credit
Agreement. Future advances under this line of credit are subject
to the ability of JRAC to fund such advances.
This debt is collateralized by substantially all of the Company's
restaurant equipment and leasehold improvements and other assets.
Maturities of long-term debt, including capital leases, not in
default for each of the next five fiscal years are $190,767 in
fiscal year 2001, $103,404 in fiscal year 2002, $63,268 in fiscal
year 2003, $9,575 in fiscal year 2004, and $1,724 in fiscal year
2005.
The carrying amounts reported in the balance sheet for debt not
in default approximate fair value, as estimated using discounted
cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing instruments. The
Company is not able to calculate the fair value of debt in
default.
4. Charges Related to Closed Units and Asset Impairment
In fiscal year 1999, the Company recorded impairment charges of
$1,926,557, primarily related to equipment, leasehold
improvements, reacquired franchise rights and certain subleased
properties. These charges were determined based upon the
Company's accounting policy for impairment of long-lived assets,
as described in Note 1. During fiscal 2000, management's efforts
to dispose of these assets and settle related lease liabilities
resulted in a net benefit of $117,304.
5. Income Taxes
Significant components of the Company's deferred tax assets and
liabilities are as follows:
Deferred tax assets:
Net operating loss carryforwards 2,543,000
Tax credit carryforwards 642,000
Property and equipment 283,000
Other - net 85,000
Total deferred tax assets 3,553,000
Valuation allowance for deferred tax assets (3,488,000)
65,000
Deferred tax liabilities:
Prepaid expenses and deferred costs 65,000
Net deferred tax assets $ -
The following is a reconciliation of income taxes at the federal
statutory rate of 34% to income taxes reported in the statements
of operations based on the loss before income taxes:
[CAPTION]
<TABLE>
July 2, 2000 June 27, 1999
<S> <C> <C>
Income tax benefit at the federal statuary rate $ (318,000) $ (1,129,000)
State taxes, net of federal deductions (37,000) (121,000)
Change in valuation allowance 355,000 1,250,000
Income taxes $ - $ -
</TABLE>
At year end, the Company had net operating loss carryforwards of
approximately $6,692,900 and investment and jobs tax credits
carryforwards of approximately $642,000. These carryforwards
expire beginning in 2001. The acquisition of 45% of the
Company's stock by JRAC in August 2000 constituted a change in
control. Internal Revenue Code provisions limit the amount of
net operating loss carryforwards which can be utilized each year
to approximately $200,000.
The Company has provided a valuation allowance for deferred tax
assets, which may not be realized through future taxable income
and the reversals of taxable temporary differences.
6. Leases
The Company leases 12 restaurant facilities and its corporate
headquarters under noncancelable operating lease agreements with
initial lease terms expiring in fiscal 2001 and through fiscal
2008. The restaurant leases have remaining renewal options and
provide for contingent rentals based on sales performance in
excess of specified minimums. Contingent rentals were not
material in any year. Some of the leases also have varying
escalation clauses based either on fixed dollar increases, a
percentage of the previous minimum annual rental, or the consumer
price index.
The Company subleases three restaurant facilities under
noncancelable sublease agreements with lease terms expiring in
fiscal year 2002 through fiscal year 2011. The Company
anticipates that income from these sublease agreements will be
sufficient to cover the Company's remaining minimum lease
payments.
Future minimum lease and sublease payments under the non-
cancelable leases were as follows at year end:
Operating Leases Capital
Lease Sublease Net Lease
2001 $923,000 $66,000 $857,000 $217,000
2002 839,000 66,000 773,000 121,000
2003 723,000 66,000 657,000 68,000
2004 620,000 65,000 555,000 11,000
2005 523,000 35,000 488,000 2,000
Thereafter 834,000 48,000 786,000 -
419,000
Less unamortized discount (12.09% - 14.2%) 88,000
$331,000
Rent expense on all the Company's operating leases was $1,029,000
in fiscal 2000 and $1,419,000 in fiscal 1999.
7. Related Party Transactions
The Company recorded a charge of $364,251 in the second quarter
of the fiscal year 2000 in connection with the settlement with
its former Chairman and CEO. The charge includes amounts
attributable to the transfer of the Company's interest in a
franchisee, LaMexiCo, L.LC., to the former Chairman and CEO and
the forgiveness of debts owed to the Company by affiliated
entities. The Company believes that the settlement was in the
best interests of the Company and its shareholders.
During the third quarter of fiscal 2000, the Company negotiated a
settlement with a former board member and franchisee.
Receivables of $55,000 were settled for a cash payment of $15,000
and forfeiture of $17,000 in development fees.
In addition, during the fourth quarter of fiscal 2000, the
Company agreed to forgive $20,000 of debts owed by its former
President. In return, the development fee of $500 for the Baton
Rouge area was forfeited.
Also, in connection with the settlement with the former Chairman
and CEO, the Company terminated agreements with Brothers Video,
Inc., formerly an affiliated company, to supply video poker
machines in nine Cucos restaurants located in Louisiana.
On January 26, 2000, the Company sold 300,000 shares of its
Series A Preferred Stock, no par value per share (the Preferred
Stock), to JRAC for $300,000. On February 1, 2000, the Company
sold 100,000 shares of Preferred Stock to JRAC for $100,000.
Each share of Preferred Stock is convertible at JRAC's option
into one share of the Company's Common Stock. These shares were
issued in a transactions exempt from registration under Section
4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), in a private offering to a single investor.
8. Capital Stock
Convertible Preferred Stock: Each share of convertible preferred
stock is convertible, at the option of the holder, into one share
of common stock at any time.
Stock Option: The Company's 1993 Incentive Stock Option Plan
(Option Plan) authorizes the grant of options to directors and
management personnel for up to 509,000 shares of the Company's
Common Stock. The option price of each incentive stock option
granted may not be less than the fair market value of the Common
Stock at date of grant. Additionally, the Company may award
nonqualified stock options under the Option Plan at an exercise
price of not less than the fair market value of the Common Stock
at the date of grant. All options granted have 10-year terms and
vest and become exercisable in four equal annual installments
beginning one year after the grant date.
The following table summarizes options outstanding for fiscal
2000 and fiscal 1999.
[CAPTION]
<TABLE>
2000 1999
Weighted Weighted
Shares Average Shares Average
Exercise Exercise
Price Price
<S> <C> <C> <C> <C>
Outstanding at beginning of year 402,700 $1.26 444,200 $1.33
Granted 162,000 $1.02 43,500 $0.67
Forfeited (189,625) $1.25 (85,000) $1.34
Exercised (11,875) $1.00 0 -
Outstanding at end of year 363,200 $1.17 402,700 $1.26
Exercisable at end of year 187,950 311,800
Exercise price $0.41- $1.94 $0.72 - $1.94
</TABLE>
The weighted average remaining contractual life of the options
outstanding at July 2, 2000 is 6.8 years. The weighted average
fair value of options granted during fiscal 2000 and fiscal 1999
were $1.08 and $0.59 per share, respectively.
Pro forma information regarding net income and earnings per share
is required by FASB Statement 123, Accounting for Stock Based
Compensation, which also requires that the information be
determined as if the Company has accounted for its employee stock
options under the fair value method. The fair value of these
options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average
assumptions for fiscal 2000 and the fiscal year 1999,
respectively: weighted average risk-free interest rates of 6.34%
and 6.06%; no dividends; volatility factors of the expected
market price of the Company's common stock of .74 and .60; and a
weighted-average expected life of the options of 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting
period. The Company's pro forma information follows (in
thousands except for earnings per share information).
2000 1999
Pro forma net loss $(1,099,000) $(3,397,000)
Pro forma loss per share - basic and diluted $ (.42) $ (1.28)
9. Per Share Amounts
Basic loss per share amounts are based on the weighted average
number of shares of common stock outstanding. Diluted per share
amounts give effect to securities (stock options) outstanding, if
any. Stock options were anti-dilutive in fiscal 2000 and fiscal
1999.
10. Franchise Operations
In addition to its company-owned restaurants, the Company had
five franchised restaurants in operation at the end of fiscal
2000. During fiscal 2000 two franchised restaurants opened and
one franchised restaurant closed. During fiscal 1999 no
franchised restaurant opened and one closed.
11. Defined Contribution Plan
The Company sponsors a defined contribution savings plan which is
available to substantially all employees. Eligible employees may
contribute up to 20% of their compensation. The Company
contributes an additional amount to the plan equal to 15% of
employee contributions up to 5% of compensation. Company
contributions were $13,086 and $13,465 in fiscal year 2000 and
fiscal year 1999, respectively.
12. Contingencies
On April 11, 1990, a franchisee filed a complaint in 24th
District Court, State of Louisiana, Parish of Jefferson, Case No.
397856-5 against the Company and certain of its officers alleging
breach of contract and misrepresentation and seeks damages in
excess of $1.6 million. There has been no activity in this
litigation for more than ten years except for a discovery request
filed in January 1996, which avoided a dismissal of the
litigation for non-prosecution. The Company believes the claims
are without merit and the likelihood of a loss is remote.
Ronnie Natal Contractors, Inc. versus Cucos, Inc., Civil Action
No. 95-17928, Section "L", Civil District Court for the Parish
of Orleans, State of Louisiana. In this action, Ronnie Natal
Contractors, Inc. ("Natal") and Current Electric, Inc. seek to
recover on what is allegedly due and owing in connection with the
build out of a Cucos Restaurant in New Orleans, Louisiana. Natal
alleges it is owed $64,935.00; Current Electric claims to be owed
$3,408.00. Cucos, Inc. does not deny that Natal and Current
provided some service in connection with the restaurant build
out, although Cucos does have questions with the accuracy of the
amount claimed. Rather, the principal issue in this litigation
is whether any amount is owed by Cucos, Inc. The restaurant at
issue was not owned by Cucos, Inc. but rather was a franchise
restaurant owned by LBG, Inc. a closely held corporation
controlled by former members of management of Cucos.
Significantly, the amount claimed by Natal and Current Electric
does not represent all amounts billed by them in connection with
the restaurant build out. In fact, tenant build out funds were
advanced by the lessor, and these funds were used in part to
satisfy Current Electric and Natal's claims. However, as LBG
defaulted on its lease, the lessor refused to advance further
tenant build out leaving the balance that is allegedly due.
Natal and Current claim that they were under the misapprehension
that the work they were providing was for Cucos, Inc. as opposed
to LBG citing the fact that persons at Cucos involved with
franchisee relations had direct dealings with both Natal and
Current.
Cucos has filed a third party demand against LBG. LBG has failed
to answer timely, and Cucos is in the process of securing a
default. A non jury trial of this matter is scheduled for
January 9, 2001.
Discovery is not complete in this matter and it is not possible
at this time to estimate the company's ultimate liability, if
any. Counsel has been instructed to defend this matter
vigorously, and counsel has not been provided with settlement
authority.
The Company has various other lawsuits arising from its normal
operations for which the Company carries appropriate levels of
insurance. It is the opinion of management that the outcome of
these matters will not have a material adverse effect on the
Company's financial position or results of operations.
Report of Independent Auditors
The Board of Directors and Shareholders
Cucos Inc.
We have audited the accompanying balance sheet of Cucos Inc. as
of July 2, 2000, and the related statements of operations,
shareholders' equity, and cash flows for each of the two years in
the period ended July 2, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Cucos Inc. at July 2, 2000, and the results of its operations
and its cash flows for each of the two years in the period ended
July 2, 2000, in conformity with accounting principles generally
accepted in the United States.
As discussed in Note 1 to the financial statements, the Company
is in default on debt totaling $3,105,000. This default,
combined with the Company's recurring losses from operations and
net capital deficiency raise substantial doubt about its ability
to continue as a going concern. Management's plans as to these
matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome
of these uncertainties.
Ernst & Young LLP
New Orleans, Louisiana
September 6, 2000, except
for the third paragraph of
Note 3, as to which the
date is September 29, 2000.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act of the Company.
Reference is made to the information concerning the
directors of the Company and the nominees for re-election as
directors appearing under the caption "Election of Directors" in
the 2000 Proxy Statement. Such information is incorporated
herein by reference to the Company's 2000 Proxy Statement to be
filed with the Securities and Exchange Commission in October,
2000.
Reference is made to the information concerning the
executive officers of the Company who are not directors appearing
under the caption "Executive Officers of the Company" in the 2000
Proxy Statement. Such information is incorporated herein by
reference to the Company's 2000 Proxy Statement to be filed with
the Securities and Exchange Commission in October, 2000.
Reference is made to the information concerning
compliance with Section 16(a) of the Exchange Act appearing under
the caption "Section 16(a), Beneficial Ownership Reporting
Compliance" in the 2000 Proxy Statement. Such information is
incorporated herein by reference to the Company's 2000 Proxy
Statement to be filed with the Securities and Exchange Commission
in October, 2000.
Item 10. Executive Compensation.
Reference is made to the information concerning
remuneration of directors and executive officers of the Company
appearing under the captions "Additional Information-Executive
Compensation," "Additional Information-Stock Option Grants During
Fiscal 2000," "Additional Information-Aggregated Stock Option
Exercises and Fiscal Year-Ended Option Values," and "Additional
Information-Compensation of Directors," in the 2000 Proxy
Statement. Such information is incorporated herein by reference
to the Company's 2000 Proxy Statement to be filed with the
Securities and Exchange Commission in October, 2000.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
Reference is made to the information concerning
beneficial ownership of the Company's Common Stock, which is the
only class of the Company's voting securities, appearing under
the captions "Beneficial Ownership" and "Election of Directors"
in the 2000 Proxy Statement. Such information is incorporated
herein by reference to the Company's 2000 Proxy Statement to be
filed with the Securities and Exchange Commission in October,
2000.
Item 12. Certain Relationships and Related Transactions.
Reference is made to the information regarding certain
relationships and transactions between the Company and its
directors, nominees for re-election as directors of the Company,
its executive officers, beneficial owners of 5% or more of its
Common Stock and any member of the immediate family of any of the
foregoing persons, appearing under the caption "Additional
Information-Certain Relationships and Related Transactions" in
the 2000 Proxy Statement. Such information is incorporated
herein by reference to the Company's 2000 Proxy Statement to be
filed with the Securities and Exchange Commission in October,
2000.
Item 13. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed with this Annual
Report or are incorporated herein by reference:
Exhibit Title
Number
1 2 - Joint Agreement of Merger, dated February 23,
1983, of Cu-Co's of Biloxi, Inc.
1 3-A - Copy of Articles of Incorporation of the Company.
1 3-A-1 - Copy of Amendment to Articles of Incorporation of
the Company.
1 3-A-2 - Copy of Amendment to Articles of Incorporation of
the Company.
1 3-A-3 - Copy of Amendment to Articles of Incorporation of
the Company.
1 3-B - Copy of By-Laws of the Company.
2 3-B-1 - Copy of Amendment to By-Laws of Company.
9 3-B-2 - Amended and Restated By-Laws of the Company.
3 4-A - Rights Agreement, dated as of February 5, 1990,
between the Company and Commercial National Bank
in Shreveport.
3 4-B - Letter, dated February 26, 1991, from Whitney
National Bank to the Company confirming the
change of Rights Agent from Commercial National
Bank in Shreveport to Whitney National Bank.
3 4-C - Assignment of Rights Agreement, dated August 30,
1993, among Whitney National Bank, Boatmen's
National Bank and the Company with respect to the
change of Rights Agent from Whitney National Bank
to Boatmen's National Bank.
11 4-D - Copy of Mortgage and Security Agreement dated
April 25, 1994, with First National Bank of
Commerce for $450,000.
11 4-E - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for
$200,000.
11 4-F - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for
$250,000.
11 4-G - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for
$500,000.
10 4-H - Note Purchase Agreement dated July 28, 1995 (with
Exhibits).
10 4-I - Amendment No. 1 to Rights Agreement dated March
12, 1991.
12 4-J - Assignment of Rights Agreement dated June 2,
1997, among Boatman's National Bank, ChaseMellon
Shareholder Services, L.L.C. and the Company with
respect to the change of Rights Agent to
ChaseMellon Shareholder Services, L.L.C.
13 4-K - Assignment of Rights Agreement dated September
21, 1998, among ChaseMellon shareholder Services,
L.L.C., Registrar and Transfer Company and the
Company with respect to the change of Rights
Agent to Registrar and Transfer Company.
1 10-A - Copy of Company's 1983 Stock Option Plan.
1 10-B - Copy of letter agreement between the Company and
certain stockholders of the Company relating to
piggyback registration rights.
4 10-C - Amendment No. 1 to 1983 Stock Option Plan of
Cucos Inc.
5 10-D - Amendment No. 2 to 1983 Stock Option Plan of
Cucos Inc.
5 10-E - Amendment No. 3 to 1983 Stock Option Plan of
Cucos Inc.
6 10-F - Amendment No. 4 to 1983 Stock Option Plan of
Cucos Inc.
7 10-G - Amendment No. 5 to 1983 Stock Option Plan of
Cucos Inc.
5 10-H - Form of Incentive Stock Option Agreement for 1983
Stock Option Plan.
5 10-I - Form of Non-Qualified (Employee) Stock Option
Agreement for 1983 Stock Option Plan.
5 10-J - Form of Non-Qualified (Director) Stock Option
Agreement for 1983 Stock Option Plan.
8 10-K - Description of Company's Bonus Plan.
9 10-L - Copy of Company's 1993 Stock Option Plan as
amended.
9 10-M Form of Non-Qualified Stock Option Agreement for
1993 Stock Option Plan
9 10-N Form of Incentive Stock Option Agreement for 1993
Stock Option Plan
Line of Credit Agreement between the Company and
14 10 Jacksonville Restaurant Acquisition Corp.
23 - Consent of Independent Auditors
27 - Financial Data Schedule
________________________________
1 Filed as an exhibit to the Company's Registration Statement
on Form S-18 (Commission File No. 2-87372A) and incorporated
herein by reference.
2 Filed as an exhibit to Form 10-K for the fiscal year ended
July 1, 1984 (Commission File No. 0-12701) and incorporated
herein by reference.
3 Filed as an exhibit to Form 8-K dated February 23, 1991
(Commission File No. 0-12701), as amended by Form 8 dated
March 12, 1991, and incorporated herein by reference.
4 Filed as an exhibit to the Company's Registration Statement
on Form S-8 (Commission File No. 33-03953) and incorporated
herein by reference.
5 Filed as an exhibit to the Company's Registration Statement
on Form S-8 (Commission File No. 33-15785) and incorporated
herein by reference.
6 Filed as an exhibit to the Company's Registration Statement
on Form S-8 (Commission File No. 33-26941) and incorporated
herein by reference.
7 Filed as an exhibit to Form 10-K for the fiscal year ended
June 28, 1992 (Commission File No. 0-12701) and incorporated
herein by reference.
8 Filed as an exhibit to Form 10-K for the fiscal year ended
June 28, 1987 (Commission File No. 0-12701) and incorporated
herein by reference.
9 Filed as an exhibit to Form 10-KSB for the fiscal year ended
July 3, 1994 (Commission File No. 0-12701) and incorporated
herein by reference.
10 Filed as an exhibit to Form 8-K filed August 11, 1995
(Commission File No. 0-12701) and incorporated herein by
reference.
11 Filed as an exhibit to Form 10-KSB for the fiscal year ended
July 2, 1995 (Commission File No. 0-12701) and incorporated
herein by reference.
12 Filed as an exhibit to Form 8-A dated September 11, 1998,
and incorporated herein by reference.
13 Filed as an exhibit to Form 10-KSB dated September 29, 1998.
14 Filed as an exhibit to Form 10-KSB dated October 2, 2000.
The Company is a party to various agreements defining
the rights of holders of long-term debt of the Company, but no
single agreement authorizes securities in an amount which exceeds
10% of the total assets of the Company. Accordingly, such
agreements are omitted as exhibits as permitted by Item 601(b)
(4) (ii) of Regulation S-B.
(b) No reports on Form 8-K were filed during the fourth
quarter of fiscal 2000.
QUALIFICATION BY REFERENCE
Information contained in this Annual Report as to the
contents of any contract or other document referred to or
evidencing a transaction referred to is necessarily not complete,
and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to this Annual
Report or incorporated herein by reference, all such information
being qualified in its entirety by such reference.
SIGNATURE
In accordance with Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
CUCOS INC.
Date: October 2, 2000 By: /s/ James W. Osborn
James W. Osborn
Chairman of the Board and
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934,
this report has been signed below by the following persons on
behalf of the Company and in the capacities indicated as of
October 2, 2000.
/s/ Elias Daher /s/ Thomas L. McCormick
Elias Daher, Vice President of Operations Thomas L. McCormick,
and Director Director and Secretary
/s/ Lee W. Randall /s/ Calvin O. Cox
Lee W. Randall, Director Calvin O. Cox, Director
/s/ Dennis A. Grinn /s/ William F. Saculla
Dennis A. Grinn, Director William F. Saculla, Director
/s/ James W. Osborn.
James W. Osborn., President, Chairman
of the Board of Directors and
Chief Executive Officer
EXHIBIT INDEX
Exhibit Title
Number
(1) 2 - Joint Agreement of Merger, dated February 23,
1983, of Cu-Co's of Biloxi, Inc.
(1) 3-A - Copy of Articles of Incorporation of the
Company.
(1) 3-A-1 - Copy of Amendment to Articles of Incorporation
of the Company.
(1) 3-A-2 - Copy of Amendment to Articles of Incorporation
of the Company.
(1) 3-A-3 - Copy of Amendment to Articles of Incorporation
of the Company.
(1) 3-B - Copy of By-Laws of the Company.
(2) 3-B-1 - Copy of Amendment to By-Laws of Company.
(9) 3-B-2 - Amended and Restated By-Laws of the Company.
(3) 4-A - Rights Agreement, dated as of February 5, 1990,
between the Company and Commercial National Bank
in Shreveport.
(3) 4-B - Letter, dated February 26, 1991, from Whitney
National Bank to the Company confirming the
change of Rights Agent from Commercial National
Bank in Shreveport to Whitney National Bank.
(3) 4-C - Assignment of Rights Agreement, dated August 30,
1993, among Whitney National Bank, Boatmen's
National Bank and the Company with respect to
the change of Rights Agent from Whitney National
Bank to Boatmen's National Bank.
(11) 4-D - Copy of Mortgage and Security Agreement dated
April 25, 1994, with First National Bank of
Commerce for $450,000.
(11) 4-E - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for
$200,000.
(11) 4-F - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for
$250,000.
(11) 4-G - Copy of Promissory Note dated October 27, 1994,
with First National Bank of Commerce for
$500,000.
(10) 4-H - Note Purchase Agreement dated July 28, 1995
(with Exhibits).
(10) 4-I - Amendment No. 1 to Rights Agreement dated March
12, 1991.
(12) 4-J - Assignment of Rights Agreement dated June 2,
1998, among Boatman's National Bank, ChaseMellon
Shareholder Services, L.L.C. and the Company
with respect to the change of Rights Agent to
ChaseMellon Shareholders Services, L.L.C.
Assignment of Rights Agreement dated September
(13) 4-K - 21, 1998, among ChaseMellon shareholder
Services, L.L.C., Registrar and Transfer Company
and the Company with respect to the change of
Rights Agent to Registrar and Transfer Company.
(1) 10-A - Copy of Company's 1983 Stock Option Plan.
(1) 10-B - Copy of letter agreement between the Company and
certain stockholders of the Company relating to
piggyback registration rights.
(4) 10-C - Amendment No. 1 to 1983 Stock Option Plan of
Cucos Inc.
(5) 10-D - Amendment No. 2 to 1983 Stock Option Plan of
Cucos Inc.
(5) 10-E - Amendment No. 3 to 1983 Stock Option Plan of
Cucos Inc.
(6) 10-F - Amendment No. 4 to 1983 Stock Option Plan of
Cucos Inc.
(7) 10-G - Amendment No. 5 to 1983 Stock Option Plan of
Cucos Inc.
(5) 10-H - Form of Incentive Stock Option Agreement for
1983 Stock Option Plan.
(5) 10-I - Form of Non-Qualified (Employee) Stock Option
Agreement for 1983 Stock Option Plan.
(5) 10-J - Form of Non-Qualified (Director) Stock Option
Agreement for 1983 Stock Option Plan.
(8) 10-K - Description of Company's Bonus Plan.
(9) 10-L - Copy of Company's 1993 Stock Option Plan as
amended.
(9) 10-M Form of Non-Qualified Stock Option Agreement for
1993 Stock Option Plan
(9) 10-N Form of Incentive Stock Option Agreement for
1993 Stock Option Plan
(14) 10 Line of Credit Agreement between the Company and
Jacksonville Restaurant Acquisition Corp
23 - Consent of Independent Auditors
27 - Financial Data Schedule
________________________________
(1) Filed as an exhibit to the Company's Registration Statement
on Form S-18 (Commission File No. 2-87372A) and incorporated
herein by reference.
(2) Filed as an exhibit to Form 10-K for the fiscal year ended
July 1, 1984 (Commission File No. 0-12701) and incorporated
herein by reference.
(3) Filed as an exhibit to Form 8-K dated February 23, 1990
(Commission File No. 0-12701), as amended by Form 8 dated
March 12, 1991, and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Registration Statement
on Form S-8 (Commission File No. 33-03953) and incorporated
herein by reference.
(5) Filed as an exhibit to the Company's Registration Statement
on Form S-8 (Commission File No. 33-15785) and incorporated
herein by reference.
(6) Filed as an exhibit to the Company's Registration Statement
on Form S-8 (Commission File No. 33-26941) and incorporated
herein by reference.
(7) Filed as an exhibit to Form 10-K for the fiscal year ended
June 28, 1992 (Commission File No. 0-12701) and incorporated
herein by reference.
(8) Filed as an exhibit to Form 10-K for the fiscal year ended
June 28, 1987 (Commission File No. 0-12701) and incorporated
herein by reference.
(9) Filed as an exhibit to Form 10-KSB for the fiscal year ended
July 3, 1994 (Commission File No. 0-12701) and incorporated
herein by reference.
(10) Filed as an exhibit to Form 8-K filed August 11, 1995
(Commission File No. 0-12701) and incorporated herein by
reference.
(11) Filed as an exhibit to Form 10-KSB for the fiscal year ended
July 2, 1995 (Commission File No. 0-12701) and incorporated
herein by reference.
(12) Filed as an exhibit to Form 8-A dated September 11, 1998,
and incorporated herein by reference.
(13) Filed as an Exhibit to Form 10-KSB dated September 29, 1998.
(14) Filed as an exhibit to Form 10-KSB dated October 2, 2000.
