<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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OR
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ________________
Commission file number: 0-13740
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Jillian's Entertainment Corporation
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(Exact name of registrant as specified in its charter)
Florida 59-2334472
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(State or other Jurisdic- (I.R.S. Employer Identif-
tion of Incorporation) ication Number)
727 Atlantic Avenue, Suite 600 Boston, MA 02111
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(Address of Principal Executive Offices) (Zip Code)
(617) 350-3111
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO _______
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
9,137,798 shares of common stock, $.001 par value as of November 14,
1995. Total number of pages contained in this document: 12
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JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
- - --------------------------------- --------
<S> <C> <C>
Item 1. Consolidated Condensed Balance Sheets as of
September 30, 1995 and March 31, 1995 3
Consolidated Condensed Statements of Operations
for the Three Month Periods and Six Month Periods
ended September 30, 1995 and 1994 4
Consolidated Condensed Statements of Cash Flows
for the Six Month Periods ended September 30,
1995 and 1994 5
Notes to Consolidated Condensed Financial Statements
for the Six Month Period ended September 30, 1995 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
</TABLE>
<TABLE>
<CAPTION>
Part II Other Information
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<S> <C> <C>
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
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JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, March 31,
1995 1995
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ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 340,810 $ 564,120
Restricted cash - 690,000
Inventory 179,094 155,567
Accounts receivable 5,688 33,688
Other current assets 264,081 263,910
--------- ----------
Total current assets 789,673 1,707,285
Investments, net 39,725 39,725
Property and equipment, net 5,555,133 4,988,624
Goodwill, net 832,010 858,636
Other assets 219,973 253,202
--------- ----------
Total assets $7,436,514 $ 7,847,472
========= ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 692,513 $ 683,028
Current portion of notes and equipment
leases payable 472,211 484,158
Accrued expenses and other liabilities 308,519 301,030
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Total current liabilities 1,473,243 1,468,216
Deferred rent 306,572 263,554
Notes and equipment leases payable 1,422,144 1,568,171
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Total liabilities 3,201,959 3,299,941
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Minority interest 1,378,772 1,435,785
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Stockholders' equity:
Cumulative preferred stock, $.001 par
value, 1,000,000 shares authorized, none
issued or outstanding - -
Common stock, $.001 par value,
25,000,000 shares authorized, 9,137,798
shares issued and outstanding on
September 30, 1995 and March 31, 1995 9,138 9,138
Paid-in capital 9,513,277 9,513,277
Accumulated deficit (6,666,632) (6,307,256)
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Total 2,855,783 3,215,159
Notes receivable from stockholders - (103,413)
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Total stockholders' equity 2,855,783 3,111,746
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Total liabilities and stockholders'
equity $ 7,436,514 $ 7,847,472
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements
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JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Six Month Period
Ended September 30, Ended September 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues from clubs $2,676,211 $1,584,234 $5,137,873 $3,182,315
--------- --------- --------- ---------
Cost and expenses:
Cost of club operations:
Cost of goods sold 622,024 347,539 1,221,767 703,832
Wages 664,203 410,603 1,241,933 796,131
Rent 421,863 289,504 809,403 571,502
Direct operating expenses 600,814 339,988 1,140,232 682,991
Start-up costs related to
development stage clubs 4,383 167,007 62,359 293,962
General and administrative expenses 385,314 195,813 680,284 357,502
Depreciation and amortization 152,052 126,174 295,600 239,816
Minority interest (3,986) (28,388) 15,398 152
--------- --------- --------- ---------
Total cost and expenses 2,846,667 1,848,240 5,466,976 3,645,888
--------- --------- --------- ---------
Other income/(expenses):
Gain on sale of investment - - - 4,785
Other income, primarily interest 32,131 10,419 44,832 22,479
Interest expense (29,887) (20,207) (75,105) (35,327)
--------- --------- --------- ---------
Total other income/(expenses) 2,244 (9,788) (30,273) (8,063)
--------- --------- --------- ---------
Net loss $ (168,212) $ (273,794) $ (359,376)$ (471,636)
========= ========= ========= =========
Net loss per share of common and
commmon equivalents $ (0.02) $ (0.03) $ (0.04)$ (0.06)
========= ========= ========= =========
Weighted average common and common
equivalent shares outstanding 9,137,798 8,032,798 9,137,798 8,032,798
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements
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<PAGE> 5
JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Month Period
Ended September 30,
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (359,376) $ (471,636)
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Adjustments to reconcile loss to net
cash used by continuing operations:
Depreciation and amortization 295,600 239,816
Gain on sale of investment - (4,785)
Decrease/(increase) in accounts receivable 28,000 (3,221)
Increase in inventory (23,527) (9,557)
Decrease/(increase) in other assets 17,358 (128,947)
Increase in accounts payable 9,485 68,513
Increase in other liabilities 50,507 106,005
Decrease in minority interest 15,398 152
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Total adjustments 392,821 267,976
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Cash used by operating activities 33,445 (203,660)
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Cash flows from investing activities:
Purchases of property and equipment (652,217) (976,208)
Collections of notes receivable 103,413 6,667
Proceeds from sale of stock - 9,470
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Cash used in investing activities (548,804) (960,071)
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Cash flows from financing activities:
Repayment of notes and leases payable (375,540) (148,825)
Issuance of note payable 50,000 650,000
Proceeds from sale of partnership interest - 258,084
Distributions to minority interest shareholders (72,411) (44,566)
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Cash (used by)/provided by financing activities (397,951) 714,693
---------- ----------
Net decrease in cash (913,310) (449,038)
Cash and cash equivalents at beginning of year 1,254,120 1,129,561
---------- ----------
Cash and cash equivalents at end of period $ 340,810 $ 680,523
========== ==========
</TABLE>
Supplemental cash flow disclosure:
During 1995, the Company acquired equipment by entering into capital leases in
the amount of $167,566.
See accompanying notes to consolidated condensed financial statements
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JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
September 30, 1995
----------------------
Note A - General
- - ------------------
The unaudited consolidated financial statements include the accounts of
Jillian's Entertainment Corporation (the "Registrant"), Jillian's, Inc. and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
Net loss per share amounts are computed based upon the average number of
common and common equivalent shares outstanding, assuming proceeds from the
assumed exercise of options and warrants were used to purchase common shares
outstanding at the average fair market value during each period, unless such
exercise is anti-dilutive.
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions for Form 10-QSB and therefore
do not include all information and footnotes necessary for a fair presentation
of financial position, results of operations and changes in cash flow in
conformity with generally accepted accounting principles. The unaudited
consolidated condensed financial statements should be read in conjunction with
the financial statements and related notes included in the Registrant's Annual
Report on Form 10-KSB for the year ended March 31, 1995. In the opinion of
management, the unaudited consolidated condensed financial statements contain
all adjustments necessary for a fair presentation of the results of operations
for the interim periods presented and all such adjustments are of a normal and
recurring nature. The results of operations for the six months ended September
30, 1995 are not necessarily indicative of the results which may be expected
for the entire fiscal year.
Certain amounts in the accompanying condensed consolidated financial
statements as of March 31, 1995 and for the three and six months ended
September 30, 1994 have been reclassified to conform to the presentation as of
and for the six months ended September 30, 1995.
Note B - Development Stage Club
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On December 21, 1994, the Registrant, through a wholly owned Delaware
corporation, entered into a lease to operate a Jillian's billiard club in
Tacoma, Washington. The property is located near the University of Puget
Sound. The Registrant anticipates that this club will open in December 1995.
The club will contain approximately 25,000 square feet of space on two floors
and approximately 20 Brunswick billiard tables, along with other table-top
games, dart boards and a game room. The estimated cost of building out and
equipping the club is approximately $2,100,000. Approximately $1,600,000 of
the $2,100,000 currently believed by management to be necessary for the
development and opening of the Tacoma club was or will be derived from a
landlord contribution, equipment financing, cash generated
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<PAGE> 7
JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements, Continued
September 30, 1995
----------------------
Note B - Development Stage Club, Continued
- - ------------------------------------------
from the Registrant's operations and bridge financing. Unless approximately
$500,000 is obtained by approximately December 1, 1995, it will be necessary to
cease development activities for the club. The Registrant originally believed
that the total cost of the Tacoma club would be between $1,000,000 and
$1,600,000, but the Registrant's decision to install an upgraded equipment and
fixtures package and a comprehensive game room increased the projected
cost of the club to the estimated $2,100,000. The approximately $500,000
necessary to complete the game room will most likely come from financing
arrangements with the vendors and will not affect the opening. In order to
raise the additional capital, the Board of Directors, at its meeting on October
2, 1995, approved an effort to obtain bridge financing from a limited number of
friends and relatives of certain officers or directors of the Registrant at the
rate of approximately 25 percent per annum.
Note C - Subsequent Events
On October 2, 1995, the Board of Directors voted to approve a new
Director, Adviser and Key Employee Non-qualified Stock Option Plan (the
"Plan"). In conjunction with the approval of the Plan, the Board reserved
1,650,000 shares for issuance under the Plan, and granted 1,650,000
non-qualified options to certain key executives at an exercise price of $.40
per share. The options vest at a rate of 25% per annum beginning in January
1996.
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Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
September 30, 1995
---------------------------------
Results of Operations
- - ---------------------
The Registrant had net losses of $168,212 and $359,376, respectively,
for the three and six month periods ended September 30, 1995 as compared to net
losses of $273,794 and $471,636, respectively, during the three and six month
periods ended September 30, 1994. The decrease in net losses for the three
month period ended September 30, 1995 as compared to the same period ended
September 30, 1994 was primarily due to higher net club operating income of
$170,707 and a reduction in start-up costs related to development stage clubs
of $162,624, offset in part by increased general and administrative expenses of
$189,501 and depreciation and amortization of $25,878. The decrease in net
losses for the six month period ended September 30, 1995 as compared to the
same period ended September 30, 1994 was primarily due to higher net club
operating income of $296,679 and a reduction in start-up costs related to
development stage clubs of $231,603, offset in part by increased general and
administrative expenses of $322,782, depreciation and amortization of $55,784
and interest expense of $39,778.
The Registrant had revenues from the clubs of $2,676,211 and $5,137,873,
respectively, for the three and six month periods ended September 30, 1995 as
compared to $1,584,234 and $3,182,315, respectively, for the three and six
month periods ended September 30, 1994. The increase of $1,955,558 for the six
month period ended September 30, 1995 as compared to the same period ended
September 30, 1994 was due to increases in comparable club sales of $236,663
and increased revenues of $1,718,895 from the Champaign, Annapolis and Long
Beach clubs, which opened in August 1994, October 1994 and May 1995,
respectively.
Total costs and expenses increased $998,427 and $1,821,088, respectively,
for the three and six month periods ended September 30, 1995 as compared to the
same periods ended September 30, 1994. The increase in total expenses was due
primarily to increased cost of club operations of $921,270 and $1,658,879,
respectively, for the three and six month periods ended September 30, 1995 as
compared to the same periods ended September 30, 1994, of which $823,415 and
$1,580,006, respectively, were increased costs associated with the Champaign,
Annapolis and Long Beach clubs, and increased general and administrative
expenses of $189,501 and $322,782, respectively, for the three and six month
periods ended September 30, 1995 as compared to the same periods ended
September 30, 1994. The increase in general and administrative expenses for
the six months was primarily due to increased wages, professional services and
travel of approximately $142,000, $96,000 and $64,000, respectively. The
increase in wages and travel from 1994 to 1995 was primarily attributed to the
hiring of a new President and Chief Operating Officer, Controller and
additional personnel. The increase in professional fees was primarily due to
various consulting and legal fees.
-8-
<PAGE> 9
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
September 30, 1995, Continued
-----------------------------------
Interest expense was $29,887 and $75,105, respectively, for the three and
six month periods ended September 30, 1995 as compared to $20,207 and $35,327,
respectively, during the three and six month periods ended September 30, 1994.
The increase was primarily due to debt associated with the Champaign, Annapolis
and Long Beach clubs.
Liquidity and Capital Resources
- - -------------------------------
The Registrant's cash and cash equivalents and restricted cash decreased
$913,310 during the six month period ended September 30, 1995. The primary
reason for the decrease was the construction costs related to the Long Beach
club and the repayment of certain indebtedness, of approximately $676,000 and
$376,000, respectively.
The total cost of building out and equipping the Long Beach club was
$1,500,000. The Long Beach club was financed primarily by a $250,000 landlord
contribution, a $450,000 eleven-year loan from the City of Long Beach,
equipment financing and cash generated from the Registrant's club operations.
The Registrant estimates that the total cost of the Tacoma club, which
currently is under development and is expected to open for business in December
1995, will be approximately $2,100,000. Approximately $1,600,000 of the
$2,100,000 currently believed by management to be necessary for the
development and opening of the Tacoma club was or will be derived from a
landlord contribution, equipment financing, cash generated from the
Registrant's operations and bridge financing. Unless approximately $500,000
is obtained by approximately December 1, 1995, it will be necessary to cease
development activities for the club. The Registrant originally believed that
the total cost of the Tacoma club would be between $1,000,000 and $1,600,000,
but the Registrant's decision to install an upgraded equipment and fixtures
package and a comprehensive game room increased the projected cost of the club
to the estimated $2,100,000. The approximately $500,000 necessary to complete
the game room will most likely come from financing arrangements with the
vendors and will not affect the opening. In order to raise the additional
capital, the Board of Directors, at its meeting on October 2, 1995, approved an
effort to obtain bridge financing from a limited number of friends and
relatives of certain officers or directors of the Registrant at the rate of
approximately 25 percent per annum.
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<PAGE> 10
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
September 30, 1995, Continued
-----------------------------------
The Registrant had nine clubs fully operational as of September 30, 1995 as
compared to seven clubs as of September 30, 1994. Net club operating income
was $367,307 and $724,538, respectively, for the three and six month periods
ended September 30, 1995 as compared to $196,600 and $427,859, respectively,
for the three and six month period ended September 30, 1994, respectively.
The Company believes that the available cash on hand as of September
30, 1995 and cash generated from its operations will be sufficient for it to
meet its current obligations. However if the Company is unable to obtain the
bridge financing for the completion of the Tacoma Club, it will have to cease
development at that location which may have a material adverse effect on the
Company's future operations.
The Registrant intends to develop, through wholly owned subsidiaries of
Jillian's, Inc., additional Jillian's clubs. These clubs may be owned by
Jillian's, Inc. subsidiaries directly or indirectly through their participation
in limited partnerships or joint ventures. In the case of clubs owned by
limited partnerships, the Registrant expects that in each case a wholly owned
subsidiary would be the general partner, own a substantial interest in the
limited partnership and receive a management fee. The Registrant currently is
investigating potential sites for clubs in Arizona, Florida, Massachusetts, and
certain other areas in the Midwest and Mid-Atlantic states. There can be no
assurance that the Registrant will be successful in developing additional
billiard clubs.
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<PAGE> 11
Part II
Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
None
(b) Reports on Form 8-K
-------------------
None
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<PAGE> 12
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JILLIAN'S ENTERTAINMENT CORPORATION
(Registrant)
By: /s/ Richard F. Landry
---------------------------------------
Richard F. Landry
Vice President of Finance, Treasurer,
Secretary and Principal Accounting Officer
Dated: November 14, 1995
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