SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) is July 21, 2000
MAIN STREET & MAIN INCORPORATED
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-18668 11-2948370
------------------------------- ----------- -------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or jurisdiction) File Number) Identification Number)
5050 N. 40TH STREET, STE. 200, PHOENIX, AZ 85018
------------------------------------------ ----------
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (602) 852-9000
<PAGE>
MAIN STREET & MAIN INCORPORATED
FORM 8-K
CURRENT REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
ACQUISITION OF FWC, INC. AND CHAPTER TWO, INC.
On July 21, 2000, Main Street and Main Incorporated ("Main Street")
purchased the businesses and substantially all of the assets of FWC, Inc.
("FWC") and Chapter Two, Inc. ("Ch. II"), both Arizona corporations owned by a
sole shareholder. Under the purchase agreement, Main Street acquired the right,
title, and interest under, in, and to the "Bamboo Club" name and restaurant
concept. FWC and Ch. II are engaged in the business of operating Bamboo Club
restaurants that are located in Phoenix and Scottsdale, Arizona. The restaurants
offer specialty Pacific Rim cuisine in an upscale atmosphere. Main Street
intends to continue to operate the business of FWC and Ch. II. The cash purchase
price of $12,000,000 paid by Main Street consisted of $3,273,000 for the assets
of FWC and Ch. II and $8,727,000 for the rights and title to the "Bamboo Club"
and restaurant concept. The acquisition will be accounted for under the purchase
method of accounting.
Main Street financed the acquisition with approximately $7.0 million from
available cash resources and $5.0 million of short-term debt from one of its
lenders. The short-term debt matures on December 31, 2000, but if Main Street
completes a rights offering prior to that date it must use the first $5.0
million of proceeds from the offering to repay the debt. John F. Antioco, Main
Street's Chairman of the Board, and Bart A. Brown, Jr., Main Street's President
and Chief Executive Officer, each have personally guaranteed the $5.0 million of
short-term debt.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Report of Independent Public Accountants
Combined Balance Sheets as of December 31, 1999 and March 31, 2000
(unaudited)
Combined Statements of Operations for the period from April 1, 1999 to
December 31, 1999, the three months ended March 31, 1999 (unaudited),
and the three months ended March 31, 2000 (unaudited)
Combined Statements of changes in Stockholder's Equity for the period
from April 1, 1999 to December 31, 1999 and the three months ended
March 31, 2000 (unaudited)
Combined Statements of Cash Flows for the period from April 1, 1999 to
December 31, 1999 and the three months ended March 31, 2000 (unaudited)
Notes to Combined Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
Introduction
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
March 27, 2000
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
twelve months ended December 27, 1999
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
three months ended March 27, 2000
2
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Main Street and Main Incorporated:
We have audited the accompanying combined balance sheet of FWC, INC. and CHAPTER
TWO, INC. (the Company) as of December 31, 1999, and the related combined
statements of operations, changes in stockholder's deficit and cash flows for
the nine-month period ended December 31, 1999. 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 audit.
We conducted our audit 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 combined financial position of FWC, Inc. and Chapter
Two, Inc. as of December 31, 1999, and the results of their operations and their
cash flows for the nine-month period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ Arthur Andersen LLP
Phoenix, Arizona
July 10, 2000
3
<PAGE>
FWC, INC. AND CHAPTER TWO, INC.
COMBINED BALANCE SHEETS
December 31, March 31,
1999 2000
----------- -----------
(unaudited)
ASSETS
Current Assets:
Cash $ 88,801 $ 119,951
Accounts receivable 63,228 57,000
Inventory 41,141 41,141
----------- -----------
Total current assets 193,170 218,092
Property and equipment, net 461,053 442,751
----------- -----------
Total assets $ 654,223 $ 660,843
=========== ===========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Accounts payable $ 220,180 $ 273,189
Accrued liabilities 653,166 558,850
Income tax liability 191,389 191,389
----------- -----------
Total current liabilities 1,064,735 1,023,428
----------- -----------
Commitments and Contingencies
Stockholder's Equity:
Common stock, no par value; 1,000,000 shares
authorized; 15,000 issued and outstanding at
March 31, 1999 and December 31, 1999 -- --
Additional paid-in capital 15,000 15,000
Retained earnings (deficit) (425,512) (377,585)
----------- -----------
Total stockholder's deficit (410,512) (362,585)
----------- -----------
Total liabilities and stockholder's
deficit $ 654,223 $ 660,843
=========== ===========
The accompanying notes are an integral part of these combined balance sheets.
4
<PAGE>
FWC, INC. AND CHAPTER TWO, INC.
COMBINED STATEMENTS OF OPERATIONS
Nine Months Three Months Three Months
Ended Ended Ended
December 31, March 31, March 31,
1999 1999 2000
---------- ---------- ----------
(unaudited) (unaudited)
Revenue:
Food $3,033,606 $1,153,661 $1,210,429
Bar and beverage 1,222,440 449,903 500,553
Other 39,327 8,009 5,524
---------- ---------- ----------
Total revenue 4,295,373 1,611,573 1,716,506
Cost of Sales 1,202,664 389,194 406,581
---------- ---------- ----------
Gross Margin 3,092,709 1,222,379 1,309,925
Operating Expenses:
Payroll and benefits 1,837,373 589,179 692,586
Depreciation 55,155 18,283 18,302
Other operating expenses 855,566 250,870 247,406
---------- ---------- ----------
Total operating expenses 2,748,094 858,332 958,294
Income from operations 344,615 364,047 351,631
---------- ---------- ----------
Net income $ 344,615 $ 364,047 $ 351,631
========== ========== ==========
The accompanying notes are an integral part of these combined financial
statements.
5
<PAGE>
FWC, INC. AND CHAPTER TWO, INC.
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S DEFICIT
<TABLE>
<CAPTION>
Common Additional
Stock Paid-in Retained
Shares Capital Deficit Total
------ ------- --------- ---------
<S> <C> <C> <C> <C>
Balance, March 31, 1999 (unaudited) 15,000 $15,000 $(247,248) $(232,248)
Distributions -- -- (522,879) (522,879)
Net income -- -- 344,615 344,615
------ ------- --------- ---------
Balance, December 31, 1999 15,000 15,000 (425,512) (410,512)
Distributions -- -- (303,704) (303,704)
Net income -- -- 351,631 351,631
------ ------- --------- ---------
Balance, March 31, 2000 (unaudited) 15,000 $15,000 $(377,585) $(362,585)
====== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
6
<PAGE>
FWC, INC. AND CHAPTER TWO, INC.
COMBINED STATEMENTS OF CASH FLOWS
Nine Months Three Months
Ended Ended
December 31, March 31,
1999 2000
--------- ---------
(unaudited)
Cash Flows from Operating Activities:
Net income $ 344,615 $ 351,631
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation 55,155 18,302
Changes in assets and liabilities:
Accounts receivable (13,430) 6,228
Inventory (1,141) --
Other assets, net 5,205 --
Accounts payable (22,499) 53,009
Accrued liabilities 107,034 (94,316)
Income tax liability (4,911) --
--------- ---------
Net cash provided by operating activities 470,028 334,854
Cash Flows from Investing Activities:
Additions to property and equipment (7,207) --
--------- ---------
Net cash used in investing activities (7,207) --
Cash Flows from Financing Activities:
Distributions (522,879) (303,704)
--------- ---------
Net cash used in financing activities (522,879) (303,704)
Net Increase (Decrease) in Cash (60,058) 31,150
Cash, beginning of period 148,859 88,801
--------- ---------
Cash, end of period $ 88,801 $ 119,951
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $ 9,270 $ --
========= =========
The accompanying notes are an integral part of these combined financial
statements.
7
<PAGE>
FWC, INC. AND CHAPTER TWO, INC.
Notes to Combined Financial Statements
As of December 31, 1999
1. ORGANIZATION AND BASIS OF PRESENTATION
a. Nature of Business
FWC, Inc. (FWC) and Chapter Two, Inc. (Ch. II) (collectively referred to as
the Company) are Arizona corporations. FWC has been engaged in the business
of operating one Bamboo Club restaurant located in Phoenix, Arizona since
May 6, 1994 and Ch. II has been engaged in the business of operating one
Bamboo Club restaurant located in Scottsdale, Arizona since May 28, 1997.
The Bamboo Clubs are specialty restaurants that focus on Pacific Rim
cuisine.
b. Principles of Combination
The accompanying combined financial statements include the accounts of FWC
and Ch. II, which are under common ownership. Intercompany balances and
transactions, including intercompany profits and losses, are eliminated in
combination. The accompanying combined financial statements are prepared
using uniform accounting policies for like transactions and other events in
similar circumstances.
In 1999, FWC and Ch. II changed their fiscal year ends from March 31 and
May 31, respectively, to a calendar year end of December 31. The combined
financial statements for December 31, 1999, include the FWC and Ch. II
balance sheets as of December 31, 1999, and the statements of operations
for the nine months then ended.
c. 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 reported amounts of assets
and liabilities, disclosure of contingencies at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The combined financial statements reflect the application of the following
accounting policies:
a. Revenue Recognition
Revenue from restaurant sales is recognized when food and beverage items
are sold.
b. Inventories
Inventories are estimated at period end and consist primarily of food,
beverage and supplies and are stated at the lower of cost (first-in,
first-out) or net realizable value.
8
<PAGE>
c. Fair Market Value of Financial Instruments
The carrying value of accounts receivable, accounts payable, and accrued
liabilities, and approximate fair value due to the short-term nature of
these instruments.
d. Property and Equipment
Property and equipment are stated at cost, depreciated on a straight-line
basis over the estimated useful lives, and consist of the following:
December 31,
Useful Lives 1999
------------ ----------
Restaurant equipment 7 $ 287,938
Building improvements 15 429,008
Furniture and fixtures 7 23,798
---------
740,744
Accumulated depreciation (279,691)
---------
Total $ 461,053
=========
Depreciation expense for the nine months ended December 31, 1999 was
$55,155.
e. Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If
the fair value is less than the carrying amount of the asset, a loss is
recognized for the difference.
f. Income Taxes
Effective April 1, 1999, and June 1, 1999, FWC and Ch. II, respectively,
elected to be treated as Subchapter S corporations. As Subchapter S
corporations, FWC and Ch. II are not subject to taxes imposed at the
corporate level. Instead, the sole shareholder will be taxed directly.
During the first 10 years in which the Subchapter S Election is effective,
any capital gains accumulated prior to the April 1, 1999, and June 1, 1999,
election dates will be subject to taxes. As discussed on Note 6, on July
10, 2000, a Purchase Agreement was entered into and the consummation of
this transaction would result in a capital gains tax liability to the
shareholder of FWC and Ch. II.
Prior to the election dates, FWC and Ch. II were treated as tax
corporations for federal and Arizona income tax purposes. FWC and Ch. II
followed the liability method of accounting for income taxes. Under the
liability method, deferred taxes are recognized for the future tax
consequences of the differences between the financial statement and tax
bases of assets and liabilities using enacted tax rates. Deferred income
tax expense is based on the changes in the net assets or liabilities from
period to period.
g. Recently Adopted Accounting Pronouncements
In 1999, FWC and Ch. II adopted Statement of Position (SOP) 98-5, REPORTING
ON THE COSTS OF START-UP ACTIVITIES. This SOP provides guidance on the
financial reporting of start-up costs and organization costs. The SOP
requires costs of start-up activities and organization costs to be expensed
as incurred. SOP 98-5 is effective for fiscal years beginning after
December 31, 1998. Application of SOP 98-5 did not have a material impact
on the combined financial condition or results of operations.
9
<PAGE>
3. INCOME TAXES
As discussed in Note 1(f), effective April 1, 1999 and June 1, 1999, FWC and Ch.
II, respectively, are not subject to taxes imposed at the corporate level. There
was no net deferred tax asset/liability balance at December 31, 1999.
Income taxes payable was approximately $191,000 at December 31, 1999. This
liability pertains to taxes incurred prior to the S Corporation tax election.
4. STOCKHOLDER'S EQUITY
The combined Company is authorized to issue 1,000,000 shares of common stock
(500,000 for FWC and 500,000 for Ch. II). At inception FWC and Ch. II issued
5,000 and 10,000 shares of common stock with no par value, respectively, to the
sole shareholder.
5. COMMITMENTS AND CONTINGENCIES
The restaurant facilities are leased under operating leases having terms
expiring in February 2004 and November 2007. The restaurant leases have
provisions for contingent rentals based upon percentage of gross sales as
defined. The minimum future lease payments as of December 31, 1999 were, as
follows:
2000 $ 241,486
2001 247,366
2002 253,477
2003 259,862
2004 187,748
Thereafter 541,717
-----------
Total $ 1,731,656
===========
Base rental expense during the nine-month period ended December 31, 1999, was
approximately $184,039. Contingent rental expense incurred based on a percentage
of gross sales during the nine month period ended December 31, 1999 was
$179,881.
6. SUBSEQUENT EVENTS
On July 10, 2000, the Company entered into a Purchase Agreement (the Agreement)
with Main Street and Main Incorporated, an operator of 59 T.G.I. Friday's and
six Redfish restaurants. The Agreement provides for the purchase of
substantially all the assets of the Company and rights, title, and interest
under, in, and to the "Bamboo Club" name and restaurant concept for
approximately $12,000,000 in cash as of the closing date of the transaction.
None of the Company's liabilities that arose prior to the closing date of the
transaction will be assumed by the Buyer. As provided in the Agreement, the
Company's sole shareholder will transfer to the Buyer, free and clear of all
encumbrances, all rights, title, and interest under, in, and to the "Bamboo
Club" name and restaurant concept.
10
<PAGE>
MAIN STREET AND MAIN, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
INTRODUCTION
On July 21, 2000, Main Street and Main Incorporated (Main Street) consummated a
transaction to acquire substantially all of the assets of FWC, Inc. (FWC) and
Chapter Two, Inc. (Ch. II) from the sole shareholder of FWC and Ch. II. Main
Street also purchased and acquired from the sole shareholder, free and clear of
all encumbrances, all the shareholder's rights, title, and interest under, in,
and to the "Bamboo Club" name and restaurant concept. The following unaudited
pro forma condensed consolidated financial statements of Main Street for the
fiscal year ended December 27, 1999, and the three-month period ended March 27,
2000, gives effect to the acquisition of FWC and Ch. II. Main Street paid a
purchase price of approximately $12,000,000, in the form of $7,000,000 of cash
from available cash resources and $5,000,000 from the proceeds of a short-term
financing. Main Street anticipates that it will repay the short-term debt with
proceeds from a rights offering. The acquisition, related financing, and
anticipated rights offering are herein referred to as the transactions.
The unaudited pro forma condensed consolidated balance sheet as of March 27,
2000, gives effect to the transactions as if they had occurred on March 27,
2000. The unaudited pro forma condensed consolidated statement of operations for
the fiscal year ended December 27, 1999, and the three-month period ended March
27, 2000, assumes that the acquisition was completed on December 29, 1998. The
unaudited pro forma financial information presented herein does not purport to
represent what Main Street's actual results of operations would have been had
the transactions occurred on those dates or to project Main Street's results of
operations for any future period.
The unaudited pro forma condensed consolidated balance sheet of Main Street as
of March 27, 2000, has been derived from unaudited historical financial
statements of Main Street as of March 27, 2000, and of FWC and Ch. II as of
March 31, 2000. The unaudited condensed consolidated pro forma statement of
operations for the three months ended March 27, 2000, has been derived from the
unaudited historical financial statements of Main Street as of March 27, 2000,
and of FWC and Ch. II for the three months ended March 31, 2000.
The unaudited pro forma condensed consolidated statement of operations for the
fiscal year ended December 27, 1999 has been derived from (a) the audited
financial statements of Main Street from December 29, 1998, to December 27,
1999, (b) the FWC and Ch. II audited historical financial statements for the
period from April 1, 1999, to December 31, 1999; and (c) the FWC and Ch. II
unaudited historical financial statements for the period from January 1, 1999 to
March 31, 1999.
The unaudited pro forma condensed consolidated financial statements contain
certain adjustments that are directly attributable to the transactions. The
unaudited pro forma condensed consolidated statements of operations above do not
include any adjustments related to potential selling, general and administrative
expense synergies as a result of the acquisitions of FWC and Ch. II.
11
<PAGE>
MAIN STREET AND MAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 27, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
Main Street
and Main Acquired
Incorporated Entities
March 27, March 31, Total Pro Forma Pro Forma
2000 2000 (1) Combined Adjustments Combined
------------ -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,332 $ 120 $ 4,452 $ (120)(2) $ 4,332
Accounts receivable, net 2,955 57 3,012 (57)(2) 2,955
Inventories 1,636 41 1,677 (41)(2) 1,636
Prepaid expenses 563 -- 563 -- 563
-------- -------- -------- --------- ---------
Total current assets 9,486 218 9,704 (218) 9,486
Property and equipment, net 65,154 443 65,597 (14)(2)(3) 65,583
Other assets, net 2,007 -- 2,007 -- 2,007
Franchise costs, net 17,993 -- 17,993 -- 17,993
Goodwill -- -- -- 11,571(3) 11,571
-------- -------- -------- --------- ---------
$ 94,640 $ 661 $ 95,301 $ 11,339 $ 106,640
======== ======== ======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-tem debt $ 1,830 $ -- $ 1,830 $ -- $ 1,830
Accounts payable 8,271 274 8,545 (274)(2) 8,271
Accrued liabilities 12,374 750 13,124 (750)(2) 12,374
Short-term debt -- -- -- 5,000(4)(5) 5,000
Notes payable -- -- -- 7,000(4) 7,000
-------- -------- -------- --------- ---------
Total current liabilities 22,475 1,024 23,499 10,976 34,475
Long-Term Debt, net of current portion 41,861 -- 41,861 -- 41,861
Other liabilities and deferred credits 2,507 -- 2,507 -- 2,507
Commitments and Contingencies
Stockholders' Equity:
Stockholder's equity (acquired entities) -- (363) (363) 363(2) --
Preferred stock -- -- -- -- --
Common stock 10 -- 10 -- 10
Additional paid-in capital 44,200 -- 44,200 -- 44,200
Accumulated deficit (16,413) -- (16,413) -- (16,413)
-------- -------- -------- --------- ---------
Total stockholders' equity 27,797 (363) 27,434 363 27,797
-------- -------- -------- --------- ---------
Total liabilities and
stockholders' equity $ 94,640 $ 661 $ 95,301 $ 11,339 $ 106,640
======== ======== ======== ========= =========
</TABLE>
----------
(1) Reflects the historical combined balance sheet of FWC and Ch. II as of
March 31, 2000.
(2) Reflects the reversal of assets, liabilities, and equity not purchased or
assumed.
(3) Reflects the preliminary allocation of the purchase price to the net assets
of the business acquired.
(4) Reflects payment of consideration for the FWC and Ch. II acquisition,
including a $5 million short-term loan and $7 million from available cash
at July 21, 2000, which is reflected as a note payable at March 27, 2000.
(5) The short-term debt bears interest at the lender's prime rate plus 0.25%
and matures on December 31, 2000. Main Street anticipates that it will
repay the short-term debt with proceeds from a rights offering.
12
<PAGE>
MAIN STREET AND MAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Main Street
and Main Acquired
Incorporated Entities
December 27, December 31, Total Pro Forma Pro Forma
1999 1999(1) Combined Adjustments Combined
------------ ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenue $ 140,294 $5,907 $ 146,201 $ -- $ 146,201
Restaurant operating expenses 125,952 5,198 131,150 -- 131,150
--------- ------ --------- ------- ---------
Income from restaurant operations 14,342 709 15,051 -- 15,051
Other operating expenses 10,550 -- 10,550 771(2) 11,321
--------- ------ --------- ------- ---------
Operating income 3,792 709 4,501 (771) 3,730
Interest expense and other, net 2,604 -- 2,604 487(3) 3,091
--------- ------ --------- ------- ---------
Income before income taxes,
cumulative effect of change in
accounting principle, and
extraordinary item 1,188 709 1,897 (1,258) 639
Provision (benefit) for income taxes 50 -- 50 -- (4) 50
--------- ------ --------- ------- ---------
Net income before cumulative
effect of change in accounting
principle and extraordinary
item 1,138 709 1,847 (1,258) 589
Cumulative effect of change in
accounting principle (168) -- (168) -- (168)
--------- ------ --------- ------- ---------
Net income (loss) $ 970 $ 709 $ 1,679 $(1,258) $ 421
========= ====== ========= ======= =========
Basic earnings per share
Net income before cumulative
effect of change in accounting
principle and extraordinary
item $ 0.11 $ 0.06
Cumulative effect of change in
accounting principle (0.02) (0.02)
--------- ---------
Net income $ 0.09 $ 0.04
========= =========
</TABLE>
13
<PAGE>
MAIN STREET AND MAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1999 (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Main Street
and Main Acquired
Incorporated Entities
December 27, December 31, Total Pro Forma Pro Forma
1999 1999(1) Combined Adjustments Combined
------------- ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Diluted earnings per share
Net income before cumulative
effect of change in accounting
principle and extraordinary
item $ 0.11 $ 0.06
Cumulative effect of change in
accounting principle (0.02) (0.02)
-------- --------
Net income $ 0.09 $ 0.04
======== ========
Weighted average shares
outstanding - basic 10,008 10,008
======== ========
Weighted average shares
outstanding - diluted 10,407 10,407
======== ========
Supplemental Pro Forma Presentation(5)
Combined net income $ 421
--------
Pro forma adjustment to compensation
expense:
Reduction to be made in sole
shareholder salary 840
Related income taxes -- (4)
--------
Pro forma net income after reduction
reduction to be made in sole
shareholder salary 1,261
--------
Earnings per share - basic $ .09 $ 0.13
======== ========
Earnings per share - diluted $ .09 $ 0.12
======== ========
</TABLE>
----------
(1) Reflects the combined historical statement of operations for the twelve
months ended December 31, 1999 of FWC and Ch. II.
(2) Reflects the amortization of deductible goodwill over 15 years.
(3) Reflects interest expense on the short-term debt incurred to finance the
acquisition.
(4) Reflects the provision for income taxes based on applying the statutory
income tax rates of each company and Main Street's available net operating
loss carryforwards.
(5) Supplemental Pro Forma Presentation reflects the reduction of salaries and
benefits of the sole shareholder of FWC and Ch. II, who is continuing with
the combined companies in a consulting capacity.
14
<PAGE>
MAIN STREET AND MAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 27, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
Main Street
and Main Acquired
Incorporated Entities
March 27, March 31, Total Pro Forma Pro Forma
2000 2000(1) Combined Adjustments Combined
--------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue $ 44,339 $ 1,717 $ 46,056 $ - $ 46,056
Restaurant operating expenses 40,402 1,365 41,767 - 41,767
--------- -------- --------- --------- ---------
Income from restaurant operations 3,937 352 4,289 - 4,289
Other operating expenses 2,721 - 2,721 193(2) 2,914
--------- -------- --------- --------- ---------
Operating income 1,216 352 1,568 (193)(2) 1,375
Interest expense and other, net 898 - 898 122(3) 1,020
--------- -------- --------- --------- ---------
Income/(loss) before income taxes 318 352 670 (315) 355
Income tax (benefit) provision (86) - (86) -- (4) (86)
--------- -------- --------- --------- ---------
Net income $ 404 $ 352 $ 756 $ (315) $ 441
========= ======== ========= ========= =========
Basic earnings per share $ 0.04 $ 0.04
========= =========
Diluted earnings per share $ 0.04 $ 0.04
========= =========
Weighted average shares
outstanding - basic 10,028 10,028
========= =========
Weighted average shares
outstanding - diluted 10,346 10,346
========= =========
Supplemental Pro Forma Presentation(5)
Combined net income $ 441
---------
Pro forma adjustment to compensation
expense:
Reduction to be made in sole
shareholder salary 262
Related income taxes -- (4)
---------
Pro forma net income after reduction to
be made in sole shareholder salary 703
---------
Basic earnings per share $ .04 $ .07
========= =========
Diluted earnings per share $ .04 $ .07
========= =========
</TABLE>
----------
(1) Reflects the combined historical statement of operations for the three
months ended March 31, 2000 of FWC and Ch. II.
(2) Reflects the amortization of deductible goodwill over 15 years.
(3) Reflects interest expense on the short term debt incurred to finance the
acquisition.
(4) Reflects the provision for income taxes based on applying the statutory
income tax rates of each company and Main Street's available net operating
loss carryforwards.
(5) Supplemental Pro Forma Presentation reflects the reduction of salaries and
benefits of the sole shareholder of FWC and Ch. II, who is continuing with
the combined companies in a consulting capacity.
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(C) EXHIBITS.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
2.1 Asset Purchase Agreement dated July 10, 2000, among Main Street
and Main Incorporated, FWC, Inc., Chapter Two, Inc., and Debbie
Bloy
10.35 Credit Agreement dated April 2, 1999, between Main Street and
Main Incorporated and Imperial Bank
10.35A First Amendment to Credit Agreement dated August 2, 1999 between
Main Street and Main Incorporated and Imperial Bank
10.35B Second Amendment to Credit Agreement dated July 13, 2000, between
Main Street and Main Incorporated and Imperial Bank
10.36 Revolving Promissory Note dated July 13, 2000, in the principal
amount of $5,000,000 from Main Street and Main Incorporated, as
Borrower, to Imperial Bank, as Lender
10.37 Term Promissory Note dated July 13, 2000, in the principal amount
of $5,000,000 from Main Street and Main Incorporated, as
Borrower, to Imperial Bank, as Lender
10.38 Unconditional Guarantee of Payment of Term Promissory Note
executed by John F. Antioco, as Guarantor, in favor of Imperial
Bank, as Lender
10.39 Unconditional Guarantee of Payment of Term Promissory Note
executed by Bart A. Brown, as Guarantor, in favor of Imperial
Bank, as Lender
23.1 Consent of Arthur Andersen LLP, independent public accountants
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SIGNATURE
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.
July 21, 2000
MAIN STREET & MAIN INCORPORATED
By: /s/ Bart A. Brown, Jr.
----------------------------------------
Bart A. Brown, Jr.
President and Chief Executive Officer
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