UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly Period Ended June 26, 2000
Commission File Number: 000-18668
MAIN STREET AND MAIN INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 11-294-8370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5050 N. 40TH STREET, SUITE 200, PHOENIX, ARIZONA 85018
(Address of principal executive offices)
(602) 852-9000
(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 [ ]
Number of shares of common stock, $.001 par value, of registrant outstanding at
August 7, 2000: 10,029,351
<PAGE>
MAIN STREET AND MAIN INCORPORATED
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements - Main Street and Main Incorporated
Consolidated Balance Sheets - June 26, 2000 and
December 27, 1999 3
Consolidated Statements of Operations - Three Month and
Six months Ended June 26, 2000 and June 28, 1999 4
Consolidated Statements of Cash Flows - Six Months
Ended June 26, 2000 and June 28, 1999 5
Notes to Consolidated Financial Statements - June 26, 2000 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure about Market Risk 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
<PAGE>
MAIN STREET AND MAIN INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In Thousands)
JUNE 26, 2000 DECEMBER 27, 1999
------------- -----------------
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,019 $ 3,055
Accounts receivable, net 4,018 3,434
Inventories 1,575 1,453
Prepaid expenses 857 621
-------- --------
Total current assets 7,469 8,563
Property and equipment, net 68,062 58,006
Other assets, net 1,950 2,072
Franchise costs, net 17,812 17,884
-------- --------
$ 95,293 $ 86,525
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,830 $ 1,830
Accounts payable 7,261 14,033
Other accrued liabilities 13,458 9,352
-------- --------
Total current liabilities 22,549 25,215
-------- --------
Long-term debt, net of current portion 41,341 31,513
-------- --------
Other liabilities and deferred credits 2,523 2,414
-------- --------
Commitments and contingencies
Stockholders' Equity:
Common stock, $.001 par value, 25,000,000 shares
authorized; 10,029,351 and 10,025,776 shares
issued and outstanding in 2000 and 1999,
respectively 10 10
Additional paid-in capital 44,200 44,190
Accumulated deficit (15,330) (16,817)
-------- --------
28,880 27,383
-------- --------
$ 95,293 $ 86,525
======== ========
The accompanying notes are an integral part of these
consolidated balance sheets.
3
<PAGE>
MAIN STREET AND MAIN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
JUNE 26, 2000 JUNE 28, 1999 JUNE 26, 2000 JUNE 28, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 47,297 $ 35,615 $ 91,636 $ 67,080
RESTAURANT OPERATING EXPENSES:
Cost of sales 13,697 10,080 26,970 19,044
Payroll and Benefits 14,086 10,514 27,731 19,903
Depreciation and amortization 1,727 1,070 3,350 2,111
Other operating expenses 13,036 9,920 24,895 18,417
-------- -------- -------- --------
Total restaurant operating expenses 42,546 31,584 82,946 59,475
-------- -------- -------- --------
Income from restaurant operations 4,751 4,031 8,690 7,605
OTHER OPERATING (INCOME) EXPENSES:
Amortization of intangible assets 268 254 502 512
General and administrative expenses 1,839 1,449 3,498 2,730
Preopening expenses 277 403 803 1,042
New manager training expenses 493 347 934 674
Management fee income (143) (253) (281) (486)
-------- -------- -------- --------
Operating income 2,017 1,831 3,234 3,133
Non operating gain (11) -- (11) --
Interest expense, net 925 683 1,824 1,254
-------- -------- -------- --------
Net income before taxes 1,103 1,148 1,421 1,879
Income tax (benefit) expense 20 -- (66) --
-------- -------- -------- --------
Net income before cumulative effect of
change in accounting principle 1,083 1,148 1,487 1,879
Cumulative effect of change in accounting
principle -- -- -- 168
-------- -------- -------- --------
Net income $ 1,083 $ 1,148 $ 1,487 $ 1,711
======== ======== ======== ========
BASIC EARNINGS PER SHARE:
Net income before cumulative effect of
change in accounting $ 0.11 $ 0.11 $ 0.15 $ 0.19
Cumulative effect of change in accounting -- -- (0.02)
-------- -------- -------- --------
Net income $ 0.11 $ 0.11 $ 0.15 $ 0.17
======== ======== ======== ========
DILUTED EARNINGS PER SHARE:
Net income before cumulative effect of
change in accounting $ 0.11 $ 0.11 $ 0.15 $ 0.18
Cumulative effect of change in accounting -- -- -- (0.02)
-------- -------- -------- --------
Net income $ 0.11 $ 0.11 $ 0.15 $ 0.16
======== ======== ======== ========
Weighted average shares outstanding-basic 10,029 10,011 10,029 10,011
Weighted average shares outstanding-diluted 10,208 10,400 10,233 10,400
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
MAIN STREET AND MAIN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------
JUNE 26, 2000 JUNE 28, 1999
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 1,487 $ 1,711
Adjustments to reconcile net income to net
cash flows operating activities:
Depreciation and amortization 3,852 2,623
Non-cash compensation expense for issuance
of common stock to certain employees 10 0
Changes in assets and liabilities:
Accounts receivable, net (584) (575)
Inventories (122) (239)
Prepaid expenses (236) (184)
Other assets, net 26 225
Accounts payable (6,772) (374)
Other accrued liabilities and deferred credits 4,217 496
-------- -------
Net Cash Flows - Operating Activities 1,878 3,683
-------- -------
Cash Flows From Investing Activities:
Purchases of property and equipment (14,978) (9,768)
Cash received from sale-leaseback transactions, net 1,572 1,678
Cash paid to acquire franchise rights (334) (22)
Cash paid to acquire additional interest in subsidiary -- (500)
-------- -------
Net Cash Flows - Investing Activities (13,740) (8,612)
-------- -------
Cash Flows From Financing Activities:
Long-term debt borrowings 10,825 3,700
Principal payments on long-term debt (999) (736)
-------- -------
Net Cash Flows - Financing Activities 9,826 (2,964)
-------- -------
Net change in cash and cash equivalents (2,036) (1,965)
Cash and cash equivalents, beginning 3,055 7,294
-------- -------
Cash and cash equivalents, end $ 1,019 $ 5,329
======== =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 1,636 $ 1,435
======== =======
Cash paid during the period for income taxes $ -- $ --
======== =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
MAIN STREET AND MAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 26, 2000
(Unaudited)
1. INTERIM FINANCIAL REPORTING
The accompanying financial statements have been prepared by us without audit
pursuant to the rules and regulations of the Securities and Exchange Commission.
The information furnished herein reflects all adjustments (consisting of normal
recurring accruals and adjustments) which are, in the opinion of management,
necessary to fairly state the operating results for the respective periods.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations, although
our management believes that the disclosures are adequate to make the
information presented not misleading. For a complete description of the
accounting policies, see our Form 10-K Annual Report for the year ended December
27, 1999.
We operate on fiscal quarters of 13 weeks.
The results of operations for the three and six months ended June 26, 2000 are
not necessarily indicative of the results to be expected for a full year.
Certain amounts in 1999 have been reclassified to conform with the 2000
presentation.
2. STARTUP COSTS
On the first day of its 1999 fiscal year, December 29, 1998, we adopted
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up
Activities". Pursuant to this accounting requirement, the costs of start-up
activities are expensed as incurred. The adoption of SOP 98-5 resulted in
deferred preopening costs on our consolidated balance sheet at December 28, 1998
of $168,000, or $0.02 per share, being charged to operations as the cumulative
effect of a change in accounting principle during the quarter ended March 29,
1999. Additionally, pursuant to SOP 98-5, preopening costs of $277,000 and
$803,000, or $0.03 and $0.08 per share, were charged to operations during the
three and six months ended June 26, 2000.
3. LEGAL AND CONDEMNATION COSTS
During the six months ended June 26, 2000, we charged approximately $936,000 in
legal and condemnation costs against the reserve for projected losses,
principally as the result of the settlement of a lawsuit in February 2000 as
noted in our Form 10-K for the year ended December 27, 1999. The reserve balance
in other accrued liabilities at June 26, 2000, was approximately $217,000 for
legal and condemnation costs.
Reserves for projected losses and contingencies were reduced significantly due
to the settlement and payment of a pending lawsuit in February 2000. Management
feels current reserves, as per note 5 above, are adequate to cover all known
losses and contingencies.
4. SEGMENT REPORTING
Effective December 30, 1997, we adopted SFAS No. 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION", which established revised
standards for the reporting of financial and descriptive information about
operating segments in financial statements. We have determined that we have one
reportable operating segment. Accordingly, we have not presented separate
financial information any of our operating segments as our consolidated
financial statements present our one reportable segment.
6
<PAGE>
5. ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards 133 - Accounting for Derivative Instruments
and Hedging Activities ("SFAS 133"). This statement establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. In June 1999, the FASB
issued Statement of Financial Accounting Standards 137 - Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133. This statement deferred the effective date of SFAS
No. 133 to our fiscal year beginning January 1, 2001. Although we have not used
derivative instruments and hedging activities in the past, are currently
evaluating the impact of SFAS No. 133 on its future results of operations and
financial position.
6. EARNINGS PER SHARE
The following table sets forth basic and diluted earnings per share computations
for the three and six months ended June 26, 2000 and June 28, 1999 (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 26, 2000 JUNE 28, 1999
--------------------------- --------------------------
NET PER SHARE NET PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $1,083 10,029 $0.11 $1,148 10,011 $0.11
Effect of stock options
and warrants -- 179 -- -- 389 --
------ ------ ----- ------ ------ -----
Diluted EPS $1,083 10,208 $0.11 $1,148 10,400 $0.11
====== ====== ===== ====== ====== =====
SIX MONTHS ENDED
JUNE 26, 2000 JUNE 28, 1999
--------------------------- --------------------------
NET PER SHARE NET PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------ ------ ------ ------ ------ ------
Basic EPS $1,487 10,029 $0.15 $1,711 10,011 $0.17
Effect of stock options
and warrants -- 204 -- -- 389 --
------ ------ ----- ------ ------ -----
Diluted EPS $1,487 10,233 $0.15 $1,711 10,400 $0.16
====== ====== ===== ====== ====== =====
</TABLE>
7. SUBSEQUENT EVENTS
On July 21, 2000, the Company acquired two Bamboo Club restaurants and the
right, title and interest under, in, and to the "Bamboo Club" name and
restaurant concept. The two Bamboo Club restaurants are located in Phoenix and
Scottsdale, Arizona and offer specialty Pacific Rim cuisine in an upscale
atmosphere. The Company paid a cash purchase price of approximately $12,000,000,
which consisted of approximately $3,273,000 for the operating assets and
$8,727,000 for the rights and title to the "Bamboo Club" name and restaurant
concept.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentages that
certain items of income and expense bear to total revenue:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- -----------------------------
JUNE 26, 2000 JUNE 28, 1999 JUNE 26, 2000 JUNE 28, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue 100% 100% 100% 100%
RESTAURANT OPERATING EXPENSES:
Cost of sales 28.9 28.3 29.4 28.4
Payroll and Benefits 29.8 29.5 30.2 29.7
Depreciation and amortization 3.7 3.0 3.7 3.1
Other operating expenses 27.5 27.9 27.2 27.5
----- ----- ----- -----
Total restaurant operating expenses 89.9 88.7 90.5 88.7
----- ----- ----- -----
Income from restaurant operations 10.1 11.3 9.5 11.3
OTHER OPERATING (INCOME) EXPENSES:
Amortization of intangible assets 0.6 0.7 0.5 0.7
General and administrative expenses 3.9 4.1 3.8 4.0
Preopening expenses 0.6 1.1 0.9 1.6
New manager training expenses 1.0 1.0 1.0 1.0
Management fee income (0.3) (0.7) (0.3) (0.7)
----- ----- ----- -----
Operating income 4.3 5.1 3.6 4.7
Interest expense, net 2.0 1.9 2.0 1.9
----- ----- ----- -----
Net income before taxes 2.3% 3.2% 1.6% 2.8%
===== ===== ===== =====
</TABLE>
8
<PAGE>
THREE AND SIX MONTHS ENDED JUNE 26, 2000 COMPARED WITH COMPARABLE PERIODS IN
1999
Revenue for the three months ended June 26, 2000, increased by 33% to
$47,297,000 compared with $35,615,000 for the comparable period in 1999. On a
year-to-date basis for the six months ended June 26, 2000, versus the same
period in 1999, revenue increased 37% to $91,636,000 from $67,080,000 from last
year. The significant increase is attributed to the opening of 13 new
restaurants in 1999, five new restaurants in the first half of 2000 combined
with a same-store sales increase of 4.8% for the quarter as compared with a 6.1%
increase for the same period in 1999. Through six months ended June 26, 2000,
same-store sales were up 6.1% as compared to a same-store increase of 6.4% in
the first six months of 1999. In addition, the sales performance of the majority
of our new units continue to exceed our expectations.
Cost of sales as a percentage of revenue for the three months ended June 26,
2000, increased to 28.9% as compared with 28.3% in the same period in 1999. For
the six months ended June 26, 2000, cost of sales was 29.4%, up from 28.4% for
the same period in 1999. Cost of sales increased as a result of higher food
costs incurred as we sought alternative food supply distributors because our
major food supplier, Ameriserve discontinued its business. An expanded
discussion on Ameriserve is included later in this report.
Payroll and benefit costs as a percentage of revenue were 29.8% for the three
months ended June 26, 2000 as compared with 29.5% for the same period in 1999.
For the six months ended June 26, 2000, payroll and benefit costs were 30.2% of
revenue as compared to 29.7% for the same period in 1999. While this expense
category is significantly improved over the first quarter of 2000 (at 30.8%),
the increase is primarily due to the resulting inefficiencies created in our
restaurants as management had to expend additional efforts to acquire necessary
inventory and supplies.
Depreciation and amortization expense has increased to 3.7% for each of the
three and six months ended June 26, 2000, as compared with 3.0% and 3.1% for the
same periods in 1999. The increase was due to additional restaurants that we
opened in 1999 and the first six months of 2000.
Other operating expenses decreased as a percentage of revenue to 27.5% in the
three months ended June 26, 2000 from 27.9% in the comparable period in 1999.
For the six months ended June 26, 2000, other operating expenses decreased to
27.2% compared to 27.5% for the same period in 1999. The decrease of these
costs, as a percentage of revenue, are due primarily to the effect of leveraging
our fixed costs over substantially increased same-store sales, despite the
pressure of increased costs created in the new restaurants.
Amortization of intangible assets declined as a percentage of revenue to 0.6%
for the three months ended June 26, 2000 as compared with 0.7% for the same
period in 1999. For the six months ended June 26, 2000, amortization of
intangible assets decreased to 0.5% compared to 0.7% for the same period in
1999. This is primarily the result of the fixed nature of intangibles spread
over a much larger revenue base.
9
<PAGE>
General and administrative expenses decreased as a percentage of revenue to 3.9%
for the three months ended June 26, 2000 as compared with 4.1% for the same
period in 1999. For the six months ended June 26, 2000, general and
administrative costs decreased to 3.8% of revenue as compared with 4.0% for the
same period in 1999. This decrease is a continuation of the trend caused by the
beneficial effect of spreading the fixed costs over a larger sales base. Our
efforts to ensure that administrative costs do not grow in excess of sales
growth have been effective.
During the first quarter of 1999, we adopted Statement of Position 98-5
("SOP-98-5"), as promulgated by the American Institute of Certified Public
Accountants, which requires us to expense preopening expenses as they are
incurred. Prior to 1999, such expenses were capitalized and amortized over a
period of one year. Pursuant to SOP-98-5, preopening expenses of $277,000, or
0.6% of revenue, were charged to operations during the quarter ended June 26,
2000, as compared with $403,000, or 1.1% of revenue, for the same period in
1999. On a year-to-date basis, preopening costs were $803,000, or 0.9% of
revenue, as compared to $1,042,000, or 1.6% of revenue, for the same period in
1999. We opened five new restaurants in the first half of both 2000 and 1999.
Our continued efforts to control preopening costs are reflected in the
significant decline of the expense as a percentage to sales and in the 20%
decline in the preopening cost per new restaurant.
New manager training expenses are those costs incurred in training newly hired
or promoted managers, as well as those costs incurred to relocate those managers
to permanent management positions. Due to our aggressive growth, these expenses
increased to $493,000, or 1.0% of revenue, for the three months ended June 26,
2000, as compared with $347,000, or 1.0% of revenue, for the same period in
1999. Year-to-date new manager training cost of $934,000 and $674,000 for 2000
and 1999 were also 1.0% of revenue in each period.
Management fee income declined significantly to 0.3% for the three and six
months ended June 26, 2000 as compared with 0.7% in the same periods in 1999.
Three Louisiana T.G.I. Friday's that we operated under a management contract
were sold by their owner in January 2000. This sale terminated our contract to
operate the three stores caused the decrease in management fee income.
Interest expense was $925,000 for the quarter and $1,824,000 year-to-date, both
of which represented 2.0% of revenue for the period ended June 26, 2000, as
compared with $683,000 and $1,254,000, or 1.9% of revenue, for the same periods
of 1999. The increase is the result of debt incurred in the development of new
restaurants in 1999 and 2000 along with an increase in the cost of our variable
debt (see Item 3).
We recognized a tax expense of $20,000 during the quarter ended June 26, 2000,
which leaves us on a year-to-date basis with a $66,000 net tax benefit related
to the utilization of available tax credits anticipated for the year ending
December 25, 2000.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Our current liabilities exceed our current assets due in part to cash expended
on our development requirements and because the restaurant business receives
substantially immediate payment for sales, while payables related to inventories
and other current liabilities normally carry longer payment terms, usually 15 to
30 days. At June 26, 2000, we had a cash balance of $1,019,000 and monthly cash
receipts have been sufficient to pay all obligations as they became due.
At June 26, 2000, we had long-term debt of $41,341,000 and a current portion of
long-term debt of $1,830,000. There were no new long-term debt borrowings added
this quarter.
We opened two new restaurants in the second quarter of 2000, which bring us to
five new restaurants year-to-date. We currently have four additional restaurants
under construction.
At June 26, 2000, we had outstanding debt and sale/leaseback financing
commitments totaling $25,600,000, which will be utilized to help fund
development activity over the next year.
We lease our restaurants with terms ranging from 10 to 25 years. Minimum
payments on our existing lease obligations are approximately $8,000,000 per year
through 2003.
We believe that our current cash resources, our lines of credit, sale/leaseback
financing commitments, the anticipated proceeds from the rights offering, and
expected cash flows from operations will be sufficient to fund our capital needs
during the next 12 months, at our current level of operations, and our
anticipated development activities. We may be required to obtain additional
capital to fund our planned growth during the next 12 to 18 months and beyond.
Potential sources of any such capital may include bank financing,
sale/lease-back financing, strategic alliances, and additional offerings of our
equity or debt securities. We cannot provide assurance that such capital will be
available from these or other potential sources, and the lack of capital could
have a material adverse effect on the growth of our business.
AMERISERVE
The following information supplements the information with respect to the
Ameriserve situation set forth on Page 11 of our Form 10-Q for the quarterly
period ended March 27, 2000.
During the second quarter of fiscal 2000, we completed the transition to our
current food distributors, U.S. Foods in California, Arizona, and Nevada, and
Performance Food Group in Missouri, Kansas, Texas and New Mexico, following the
Chapter 11 bankruptcy filing of our previous distributor, Ameriserve. Although
we anticipated continuing disruptions to our business and incurred costs during
the second quarter as a result of this transition, the actual financial impact
was significantly lower than in the previous two quarters and in particular, the
first quarter of 2000.
11
<PAGE>
In a related matter, Ameriserve has asserted claims against our company totaling
$3.7 million for product and supplies. In response, we have advised Ameriserve
that we have claims exceeding $5.0 million against Ameriserve for the additional
costs Ameriserve caused our company to incur and other damages to our business.
Therefore, we claim that any amounts we may owe to Ameriserve are more than
offset by amounts owed by Ameriserve to us. We are endeavoring to resolve this
matter with Ameriserve as soon as possible.
RECENT DEVELOPMENTS
Subsequent to the end of the second quarter, we acquired two Bamboo Club
restaurants and the right, title and interest under, in, and to the "Bamboo
Club" name and restaurant concept. The two Bamboo Club restaurants are located
in Phoenix and Scottsdale, Arizona and offer specialty Pacific Rim cuisine in an
upscale atmosphere. We paid a cash purchase price of approximately $12,000,000,
which consisted of approximately $3,273,000 for the operating assets and
$8,727,000 for the rights and title to the "Bamboo Club" name and restaurant
concept. In connection with the acquisition, we entered into an agreement with
the former owner of the Bamboo Club concept under which the former owner (1)
will provide consulting and advisory services to us for one year, subject to
extension for up to two additional years on mutually agreeable terms, and (2)
agreed that for a period of five years the former owner will not own, manage,
operate, promote, or develop (a) any restaurant in Maricopa County, Arizona, or
(b) any restaurant employing a Pacific Rim concept anywhere within the
continental United States.
We financed the acquisition with approximately $7.0 million from available cash
resources and $5.0 million of short-term debt from one of our lenders. The
short-term debt matures on December 31, 2000, but if we complete the rights
offering described below prior to that date we must use the first $5.0 million
of proceeds from the offering to repay the debt. John F. Antioco, our Chairman
of the Board, and Bart A. Brown, Jr., our President and Chief Executive Officer,
each have personally guaranteed the $5.0 million of short-term debt.
We intend to continue to operate the existing Bamboo Club restaurants, and we
currently are developing plans to expand the Bamboo Club concept by opening
additional restaurants. We currently do not have definitive plans with respect
to the number and timing for any new Bamboo Club restaurants that we may
develop. We also may explore opportunities to franchise the Bamboo Club concept
to third parties in the future.
On August 1, 2000, we commenced a rights offering to our stockholders of record
as of July 31, 2000. We distributed rights to purchase one share of common stock
for every 2.5 shares held as of the record date, for a maximum of 4,011,740
shares offered. The exercised price of the rights is $2.375 per share. Three of
our directors, John F. Antioco, Bart A. Brown, Jr., and William G. Shrader, have
advised us that they intend to exercise rights in an amount that will provide us
with at least $5.75 million of proceeds. We will use the first $5.0 million of
proceeds to repay the short-term debt we incurred in the Bamboo Club
acquisition. We plan to use any excess proceeds to fund our continuing expansion
into new restaurants.
12
<PAGE>
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, including statements regarding
our business strategies, our business, and the industry in which we operate.
These forward-looking statements are based primarily on our expectations and are
subject to a number of risks and uncertainties, some of which are beyond our
control. Actual results could differ materially from the forward-looking
statements as a result of numerous factors, including those set forth in our
Form 10-K for the year ended December 27, 1999, as filed with the Securities and
Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk exposure is limited to interest rate risk associated with our
credit instruments. We incur interest on loans made under revolving lines of
credit at variable interest rates of 1.125% over prime and 2.65% over "30-Day
Dealer Commercial Paper Rates." At June 26, 2000, we had outstanding borrowings
on these lines of credit of approximately $3,200,000.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
27.1 Financial Data Schedule
(b) Reports on Form 8-K - Not applicable
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Main Street and Main Incorporated
Dated: August 8, 2000 /s/ Bart A. Brown Jr.
---------------------------------
Bart A. Brown Jr., President and
Chief Executive Officer
Dated: August 8, 2000 /s/ Duane E. Wilkes
---------------------------------
Duane E Wilkes, Corporate
Controller and Secretary
15
