<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 December 31, 1995
-----------------------------------
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
-----------------
Jillian's Entertainment Corporation
-------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2334472
- ----------------------- ------------------------
(State or other Jurisdic- (I.R.S. Employer Identif-
tion of Incorporation) ication Number)
727 Atlantic Avenue, Suite 600 Boston, MA 02111
----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(617) 350-3111
----------------------------------------------------
(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
------- -------
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 February 13,
1996 Total number of pages contained in this document: 12
------
<PAGE> 2
<TABLE>
JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Index
<CAPTION>
Part I. Financial Information Page No.
- --------------------------------------- --------
<S> <C> <C>
Item 1. Consolidated Condensed Balance Sheets as of
December 31, 1995 and March 31, 1995 3
Consolidated Condensed Statements of Operations
for the Three Month Periods and Nine Month Periods
ended December 31, 1995 and 1994 4
Consolidated Condensed Statements of Cash Flows
for the Nine Month Periods ended December 31,
1995 and 1994 5
Notes to Consolidated Condensed Financial Statements
for the Nine Month Period ended December 31, 1995 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Part II. Other Information
- -----------------------------------
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
-2-
<PAGE> 3
<TABLE>
JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<CAPTION>
December 31, March 31,
1995 1995
------------ ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 589,949 $ 564,120
Restricted cash -- 690,000
Inventory 202,462 155,567
Accounts receivable 72,241 33,688
Other current assets 277,937 263,910
---------- ----------
Total current assets 1,142,589 1,707,285
Investments, net 39,725 39,725
Property and equipment, net 7,342,028 4,988,624
Goodwill, net 818,697 858,636
Other assets 216,749 253,202
---------- ----------
Total assets $9,559,788 $7,847,472
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,254,911 $ 683,028
Current portion of notes and equipment
leases payable 523,030 484,158
Accrued expenses and other liabilities 355,148 301,030
---------- ----------
Total current liabilities 2,133,089 1,468,216
Deferred rent 1,204,262 263,554
Notes and equipment leases payable 2,194,547 1,568,171
---------- ----------
Total liabilities 5,531,898 3,299,941
---------- ----------
Minority interest 1,397,166 1,435,785
---------- ----------
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
December 31, 1995 and March 31, 1995 9,138 9,138
Paid-in capital 9,513,277 9,513,277
Accumulated deficit (6,891,691) (6,307,256)
---------- ----------
Total 2,630,724 3,215,159
Notes receivable from stockholders -- (103,413)
---------- ----------
Total stockholders' equity 2,630,724 3,111,746
---------- ----------
Total liabilities and stockholders'
equity $9,559,788 $7,847,472
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements
-3-
<PAGE> 4
<TABLE>
JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Month Period Nine Month Period
Ended December 31, Ended December 31,
1995 1994 1995 1994
------- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues from clubs $2,967,995 $2,318,597 $8,105,868 $5,500,912
---------- ---------- ---------- ----------
Cost and expenses:
Cost of club operations:
Cost of goods sold 722,221 503,419 1,943,988 1,207,251
Wages 702,471 527,427 1,944,404 1,323,558
Rent 406,129 321,159 1,215,532 892,661
Direct operating expenses 570,366 420,118 1,710,598 1,103,109
Start-up costs related to
development stage clubs 20,216 146,333 82,575 440,295
General and administrative expenses 531,368 209,747 1,211,652 567,249
Depreciation and amortization 154,226 142,485 449,826 382,301
Minority interest 72,466 38,066 87,864 38,218
---------- ---------- ---------- ----------
Total cost and expenses 3,179,463 2,308,754 8,646,439 5,954,642
---------- ---------- ---------- ----------
Other income/(expenses):
Gain on sale of investment -- -- -- 4,785
Other income, primarily interest 44,629 15,885 89,461 38,364
Interest expense (58,220) (26,209) (133,325) (61,536)
---------- ---------- ---------- ----------
Total other income/(expenses) (13,591) (10,324) (43,864) (18,387)
---------- ---------- ---------- ----------
Net loss $ (225,059) $ (481) $ (584,435)$ (472,117)
========== ========== ========== ==========
Net loss per share of common and
common equivalents $ (0.02) $ -- $ (0.06)$ (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
-4-
<PAGE> 5
<TABLE>
JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Month Period
Ended December 31,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (584,435) $ (472,117)
---------- ----------
Adjustments to reconcile loss to net
cash used by continuing operations:
Depreciation and amortization 449,826 382,301
Gain on sale of investment -- (4,785)
Increase in accounts receivable (38,553) (35,260)
Increase in inventory (46,895) (32,920)
Increase in other assets (367) (188,835)
Increase in accounts payable 324,883 87,035
Increase in other liabilities 106,826 191,686
Increase in minority interest 87,864 38,218
---------- ----------
Total adjustments 883,584 437,440
---------- ----------
Cash provided by\(used by) operating
activities 299,149 (34,677)
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (1,137,932) (1,359,631)
Collections of notes receivable 103,413 6,667
Proceeds from sale of stock -- 9,470
---------- ----------
Cash used in investing activities (1,034,519) (1,343,494)
---------- ----------
Cash flows from financing activities:
Repayment of notes and leases payable (432,571) (220,671)
Issuance of notes payable 630,253 969,320
Proceeds from sale of partnership interest -- 258,084
Distributions to minority interest shareholders (126,483) (70,424)
---------- ----------
Cash provided by financing activities 71,199 936,309
---------- ----------
Net decrease in cash (664,171) (441,862)
Cash and cash equivalents at beginning of year 1,254,120 1,129,561
---------- ----------
Cash and cash equivalents at end of period $ 589,949 $ 687,699
========== ==========
</TABLE>
Supplemental cash flow disclosure:
During 1995, the Company acquired equipment by entering into capital leases in
the amount of $467,566.
During 1995, the Company acquired leasehold improvements of $888,000 through
landlord contributions.
See accompanying notes to consolidated condensed financial statements
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<PAGE> 6
JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
December 31, 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 nine months ended December
31, 1995 are not necessarily indicative of the results which may be expected for
the entire fiscal year.
Certain amounts in the accompanying consolidated condensed financial
statements as of March 31, 1995 and for the three and nine months ended December
31, 1994 have been reclassified to conform to the presentation as of and for the
nine months ended December 31, 1995.
Note B - Tacoma Club
- --------------------
On December 8, 1995, the Registrant, through a wholly owned Delaware
corporation, opened a new Jillian's billiard club in Tacoma, Washington. The
property is located near the University of Puget Sound. The club occupies
approximately 25,000 square feet of space on two floors and contains 25
Brunswick billiard tables, along with other table-top games, dart boards and a
high-tech electronic game room. The cost of building out and equipping the club
was approximately $2,100,000. The Tacoma club is being financed primarily by a
$638,000 landlord contribution, $300,000 in equipment financing, $245,000 in
vendor financing, $300,000 in bank financing, $280,000 in bridge financing and
cash generated from the Registrant's clubs operations. The Registrant is
pursuing an additional $300,000 in bank or bridge financing to complete the
financing of the club.
-6-
<PAGE> 7
JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
December 31, 1995
-----------------
Note C - Contingencies
- ----------------------
On October 13, 1995, an action foreclosing a mechanics lien was filed
against the Registrant in a California Superior Court for Los Angeles county for
approximately $123,000, plus interest. The Registrant has filed an answer and
cross complaint on January 3, 1996. While the Registrant is vigorously
defending the action and believes that it has meritorious defenses, no
assurance can be given of a favorable outcome. An unfavorable outcome could
have a material adverse effect on the Company's financial condition, results of
operation or liquidity.
The Registrant continues to generate losses from its operations and
currently is experiencing a cash shortage. The Registrant is considering
various alternatives, including issuing additional equity or debt securities
and other financing arrangements, to raise funds to meet its working capital
needs and to finance the costs incurred in the build-out of the Tacoma club.
The Registrant also is seeking to raise funds to finance the development of
additional Jillian's clubs. If the Registrant is unable to obtain such
financing, the Registrant's operations and its plans for future growth will be
materially and adversely affected.
-7-
<PAGE> 8
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
December 31, 1995
-----------------
Results of Operations
- ---------------------
The Registrant had net losses of $225,059 and $584,435, respectively,
for the three and nine month periods ended December 31, 1995 as compared to net
losses of $481 and $472,117, respectively, during the three and nine month
periods ended December 31, 1994. The increase in net losses for the three month
period ended December 31, 1995 as compared to the same period ended December 31,
1994 was primarily due to increased general and administrative expenses of
$321,621, offset in part by a reduction in start-up costs related to development
stage clubs of $126,117. The increase in net losses for the nine month period
ended December 31, 1995 as compared to the same period ended December 31, 1994
was primarily due to increased general and administrative expenses of $644,403,
depreciation and amortization of $67,525 and interest expense of $71,789, offset
in part by higher net club operating income of $317,013 and a reduction in
start-up costs related to development stage clubs of $357,720.
The Registrant had revenues from the clubs of $2,967,995 and $8,105,868,
respectively, for the three and nine month periods ended December 31, 1995 as
compared to $2,318,597 and $5,500,912, respectively, for the three and nine
month periods ended December 31, 1994. The increase of $649,398 for the three
month period ended December 31, 1995, as compared to the same period ended
December 31, 1994 was due to increases in comparable sales of $118,158 and
increased revenues of $531,240 from the Annapolis, Long Beach and Tacoma clubs,
which opened in October 1994, May 1995 and December 1995, respectively. The
increase of $2,604,956 for the nine month period ended December 31, 1995 as
compared to the same period ended December 31, 1994 was due to increases in
comparable club sales of $313,530 and increased revenues of $2,291,426 from the
Champaign, Annapolis, Long Beach and Tacoma clubs, which opened in August 1994,
October 1994, May 1995 and December 1995, respectively.
Total costs and expenses increased $870,709 and $2,691,797,
respectively, for the three and nine month periods ended December 31, 1995 as
compared to the same periods ended December 31, 1994. The increase in total
expenses was due primarily to increased cost of club operations of $629,064 and
$2,287,943, respectively, for the three and nine month periods ended December
31, 1995 as compared to the same periods ended December 31, 1994, of which
$592,117 and $2,172,123, respectively, were increased costs associated with the
Champaign, Annapolis, Long Beach and Tacoma clubs, and increased general and
administrative expenses of $321,621 and $644,403, respectively, for the three
and nine month periods ended December 31, 1995 as compared to the same periods
ended December 31, 1994. The increase in general and administrative expenses
for the nine months was primarily due to increased wages, professional services
and travel of approximately $307,000, $205,000 and $100,000, 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, Vice
President of Operations and
-8-
<PAGE> 9
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
December 31, 1995, Continued
----------------------------
Development and support personnel. The increase in professional fees was
primarily due to consulting and legal fees associated with the preparation and
filing with the Securities and Exchange Commission of a preliminary proxy
statement relating to a proposed transaction that, if approved by the
shareholders, could result in the de-registration of the Registrant's common
stock.
Interest expense was $58,220 and $133,325, respectively, for the three
and nine month periods ended December 31, 1995 as compared to $26,209 and
$61,536, respectively, during the three and nine month periods ended December
31, 1994. The increase was primarily due to additional debt associated with the
opening of the Champaign, Annapolis and Long Beach clubs.
Liquidity and Capital Resources
- -------------------------------
The Registrant's cash and cash equivalents and restricted cash decreased
$664,171 during the nine month period ended December 31, 1995. The decrease was
primarily due to the construction costs related to the Long Beach and Tacoma
clubs of approximately $1,024,000 and the repayment of certain indebtedness of
approximately $433,000, offset in part, by approximately $299,000 from cash
provided by operating activities and approximately $630,000 in issuance of notes
payable. Property and equipment, net of accumulated depreciation and
amortization was $7,342,028, as of December 31, 1995, increasing $2,353,404 over
March 31, 1995. The new club development of Long Beach and Tacoma accounted for
the majority of the Registrant's capital additions.
As of December 31, 1995, inventory was $202,462 as compared to $155,567
as of March 31, 1995. The increase was primarily due to the Long Beach and
Tacoma clubs, which opened in May 1995 and December 1995, respectively.
As of December 31, 1995, notes and equipment payable were $2,717,577 as
compared to $2,052,329 as of March 31, 1995. The majority of the increase is
attributed to the development of the Long Beach and Tacoma clubs.
As of December 31, 1995, total current liabilities were $2,133,089 as
compared to $1,468,216 as of March 31, 1995. The increase is primarily due to
the increase in current portion of long-term debt, increased accounts payable
and accrued expenses relating to the opening of the Long Beach and Tacoma clubs
and professional services.
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.
-9-
<PAGE> 10
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
December 31, 1995, Continued
----------------------------
On December 8, 1995, the Registrant, through a wholly owned Delaware
corporation, opened a new Jillian's billiard club in Tacoma, Washington. The
property is located near the University of Puget Sound. The club occupies
approximately 25,000 square feet of space on two floors and contains 25
Brunswick billiard tables, along with other table-top games, dart boards and a
high-tech electronic game room. The cost of building out and equipping the club
is approximately $2,100,000. The Tacoma club is being financed primarily by a
$638,000 landlord contribution, $300,000 in equipment financing, $245,000 in
vendor financing, $300,000 in bank financing, $280,000 in bridge financing and
cash generated from the Registrant's clubs operations. The Registrant is
pursuing an additional $300,000 in bank or bridge financing to complete the
financing of the club.
The Registrant had ten clubs fully operational as of December 31, 1995
as compared to eight clubs as of December 31, 1994. Net club operating income
was $566,808 and $1,291,346, respectively, for the three and nine month periods
ended December 31, 1995 as compared to $546,474 and $974,333, respectively, for
the three and nine month period ended December 31, 1994.
The Registrant continues to generate losses from its operations and
currently is experiencing a cash shortage. The Registrant is considering
various alternatives, including issuing additional equity or debt securities
and other financing arrangements, to raise funds to meet its working capital
needs and to finance the costs incurred in the build-out of the Tacoma club.
The Registrant also is seeking to raise funds to finance the development of
additional Jillian's clubs. If the Registrant is unable to obtain such
financing, the Registrant's operations and its plans for future growth will be
materially and adversely affected.
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 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.
-10-
<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
-11-
<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: February 14, 1996
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE JULLIAN'S ENTERTAINMENT CORPORATION FOR THE NINE
MONTHS ENDED DECEMBER 31, 1995, AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000759855
<NAME> JULLIAN'S ENTERTAINMENT CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 589,949
<SECURITIES> 0
<RECEIVABLES> 72,241
<ALLOWANCES> 0
<INVENTORY> 202,462
<CURRENT-ASSETS> 1,142,589
<PP&E> 8,840,080
<DEPRECIATION> (1,498,052)
<TOTAL-ASSETS> 9,559,788
<CURRENT-LIABILITIES> 2,133,089
<BONDS> 2,194,547
<COMMON> 9,138
0
0
<OTHER-SE> 2,621,586
<TOTAL-LIABILITY-AND-EQUITY> 9,559,788
<SALES> 0
<TOTAL-REVENUES> 8,105,868
<CGS> 1,943,988
<TOTAL-COSTS> 8,646,439
<OTHER-EXPENSES> 43,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 133,325
<INCOME-PRETAX> (584,435)
<INCOME-TAX> 0
<INCOME-CONTINUING> (584,435)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (584,435)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
