SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File No. 0-23226
GRILL CONCEPTS, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 13-3319172
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11661 San Vicente Blvd., Suite 404, Los Angeles, California 90049
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(Address of principal executive offices)
(310) 820-5559
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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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As of May 2, 1997, 14,605,876 shares of Common Stock of the issuer were
outstanding.
<PAGE>
GRILL CONCEPTS, INC.
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - March 30, 1997
and December 29, 1996............................................ 1
Consolidated Condensed Statements of Operations - For the
three months ended March 30, 1997 and March 31, 1996............. 3
Consolidated Condensed Statements of Cash Flows - For the
three months ended March 30, 1997 and March 31, 1996............. 4
Notes to Consolidated Condensed Financial Statements............ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 6
PART II - OTHER INFORMATION................................................ 7
SIGNATURES................ ................................................ 7
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
March 30, December 29,
1997 1996
----------- -----------
Current assets:
Cash and cash equivalents $ 114,174 $ 372,317
Inventory 283,039 239,237
Prepaid expenses 844,870 1,038,036
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Total current assets 1,242,083 1,649,590
----------- -----------
Property and equipment, at cost 9,609,889 8,589,597
Less: accumulated depreciation (3,564,168) (3,364,486)
----------- -----------
Property and equipment, net 6,045,721 5,225,111
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Other assets:
Goodwill 243,781 245,829
Other 1,008,498 961,484
----------- -----------
Total other assets 1,252,279 1,207,313
----------- -----------
Total assets $ 8,540,083 $ 8,082,014
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 30, December 29,
1997 1996
----------- ------------
Current liabilities:
Bank line of credit $ 645,000 ------
Accounts payable 1,187,654 $1,143,484
Accrued expenses 1,063,399 1,283,805
Current portion of long term debt 420,000 421,317
----------- ----------
Total current liabilities 3,316,053 2,848,606
Long-term debt, net of current 946,936 1,030,927
----------- ----------
Total liabilities 4,262,989 3,879,533
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Stockholders' equity:
Series A, Preferred Stock, $.001
par value, authorized 1,000,000 1 1
shares; Shares issued and
outstanding 610 in 1997, 700
in 1996
Series B, Preferred Stock, $.001
par value, authorized 1,000,000 1 1
shares; 65 shares issued and
outstanding.
Common stock, $.00001 par value:
20,000,000 shares authorized, 144 138
shares issued and outstanding:
14,390,218 in 1997 and 13,799,230
in 1996
Additional paid-in capital 9,552,452 9,552,458
Accumulated deficit (5,275,504) (5,350,117)
----------- ----------
Stockholders' equity 4,277,094 4,202,481
----------- ----------
Total liabilities and stockholders'
equity $ 8,540,083 $8,082,014
=========== ==========
The accompanying notes are an integral part of these consolidated financial
statements
2
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended
---------------------------------
March 30, March 31,
1997 1996
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Sales $ 7,140,720 $ 5,245,779
Cost of sales 1,956,217 1,346,127
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Gross profit 5,184,503 3,899,652
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Costs and expenses:
Restaurant operating expenses 4,340,867 3,182,552
General and administative 523,484 470,934
Depreciation and amortization 199,678 195,684
Amortization of preopening expenses 50,300 --
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Total operating expenses 5,114,329 3,849,170
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Income from operations 70,174 50,482
Non-recurring credit 49,286 --
Interest expense - net (44,047) (37,897)
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Income before provision for income taxes 75,413 12,585
Provision for income taxts (800) (800)
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Net income $ 74,613 $ 11,785
=========== ===========
Net income per share $ 0.01 $0.00
=========== ===========
Weighted average shares outstanding 14,328,736 12,999,230
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Three Months ended
---------------------------------
March 30, March 31,
1997 1996
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Cash flows from operating activities:
Net income $ 74,613 $ 11,785
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 249,978 191,435
Changes in operating assets and
liabilities
Inventories (43,802) (6,834)
Prepaid expenses 193,166 (26,829)
Other assets (97,314) 21,236
Accounts payable 44,170 (223,597)
Accrued liabilities (219,806) (142,020)
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Net cash provided by (used in)
operating activities 201,005 (174,824)
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Cash flows from investing activities:
Additions to furniture, equipment
and improvements (1,020,292) (37,660)
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Net cash used in investing activities (1,020,292) (37,660)
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Cash flows from financing activities:
Proceeds from line of credit 645,000 ---------
Payments on long-term debt (83,856) (83,922)
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Net cash provided by used in
financial activities 561,144 (83,922)
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Net decrease in cash and
cash equivalents (258,143) (296,406)
Cash and cash equivalents, beginning
of period 372,317 631,116
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Cash and cash equivalents, end of period $ 114,174 $ 334,710
========== ==========
Supplemental cash flow information: Cash
paid during the period for:
Interest $ 39,614 $ 40,862
Income taxes $ 421 $ 13,300
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
GRILL CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL PRESENTATION
The interim consolidated financial statements are prepared pursuant to the
requirements for reporting on Form 10-QSB. The December 29, 1996 balance sheet
data was derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The interim
financial statements and notes thereto should be read in conjuntion with the
financial statements and notes included in the Company's Form 10-KSB dated
December 29, 1996. The interim financial statements have not been audited by
independent accountants. However, in the opinion of management, these interim
financial statements reflect all adjustments of a normal recurring nature
necessary for a fair statement of the results for the interim periods presented.
The current period results of operations are not necessarily indicative of
results which ultimately will be reported for the full year ending December 28,
1997.
2. BUSINESS AND ORGANIZATION
In April of 1996, the Company acquired 100% of the common stock of EMNDEE, Inc.
("EMNDEE") and The Grill on the Alley, Inc. ("Grill, Inc."). EMNDEE and Grill,
Inc. own, collectively, 100% of The Grill Limited Partnership, a California
limited partnership which owns and operates The Grill on the Alley (the
"Grill"), an upscale Beverly Hills restaurant which opened in 1984 and served as
the model for the Company's Daily Grill restaurants. The acquisition has been
accounted for under the purchase method. As a result of the foregoing, these
interim statements include the accounts of the Grill during 1997. As acquisition
of the Grill occured after March 31,1996, the accounts of the Grill are not
reflected in the financial statements as of and for the quarter ended March 31,
1996.
The unaudited proforma financial information set forth below is presented
as if the aquisition of the Grill had been consumated as of December 31,
1995. The proforma financial information is not necessarily indicative of
what actual results of operations of the Company would have been if the
acquisitions were consummated as of December 31, 1995, nor does it purport
to represent the results of operations for future periods.
1997 1996
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Sales $7,140,720 $6,101,074
Net income (loss) $ 74,613 $ 84,195
3. SHAREHOLDER'S EQUITY
During the quarter ended March 30, 1997, 90 shares of Series A Convertible
Preferred Stock were converted resulting in the issuance of an aggregate of
84,024 shares of common stock at an average price of $1.07 per share.
4. SUBSEQUENT EVENTS
Subsequent to March 30,1997, 180 shares of Series A Convertible Preferred
Stock were converted resulting in the issuance of an aggregate of 214,445
shares of common stock at an average price of $0.84 per share.
Additionally, 5 shares of Series B Convertible Preferred Stock were
converted resulting in the issuance of an aggregate of 62,539 shares of
common stock at an average price of $0.80 per share.
5. BANK LINE OF CREDIT
During the quarter, the Company borrowed $645,000 of the available
$1,000,000 line.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Material Changes in Results of Operations for the Three Months Ended March 30,
1997 as Compared to the Three Months Ended March 31, 1996.
Due to the acquisition of The Grill in April, 1996 as explained in the Notes to
Consolidated Condensed Financial Statements, the results of operations for the
13 week period ended March 30, 1997 include the operations of seven Daily Grill
Restaurant for the full quarter plus the Washington D.C. Daily Grill for three
weeks; three Pizzeria Uno units and The Grill restaurant. The first quarter of
1996 includes six Daily Grill restaurants and the three Pizzeria Uno stores.
The Company's revenues for the three month period increased 36.1% to $7,141,000
from $5,246,000 for the same period in 1996. The increase of $1.9 million is
primarily a result of added sales by the inclusion of The Grill restaurant this
year, the addition of the Irvine, California, Daily Grill and three weeks of
sales from the Washington D.C. Daily Grill. Additionally, same stores increased
3.6%.
While revenues increased by 36.1% in the 1997 three month period when compared
with the similar period in 1996, cost of sales increased 45.3% and increased as
a percentage of sales from 25.7% to 27.4%. This increase in cost of sales as a
percentage of sales during the 1997 period is attributable principally to the
inclusion of The Grill which has historically experienced a 31% cost of sales as
compared to approximately 27% cost of sales for Daily Grill. This higher cost of
sales at The Grill is offset by lower labor costs at The Grill.
As a result, gross profit increased 32.9% from $3,900,000 (74.3% of sales) in
1996 to $5,185,000 (72.6% of sales) in 1997.
Restaurant operating expenses increased to $4,341,000 (60.8% of sales) in 1997
from $3,183,000 (60.7% of sales) in 1996, a minimal increase as a percentage of
sales. The increase in restaurant operating expenses was attributable to the
operation of the three new restaurants during the 1997 period
General and administrative expenses increased only 11.2% to represent 7.3% of
sales in the 1997 first quarter while amounting to 9.0% of sales in the 1996
period. This percentage decrease occurred as a result of the added volume from
two additional Daily Grills and the addition of The Grill with only a $52,000
increase in corporate overhead.
Depreciation and amortization expense increased by $54,294 during 1997 as a
result of the opening of two new restaurants. Included in amortization expense
is $50,300 relating to the amortization of preopening expenses on the two new
Daily Grill restaurants. The Company had no amortization of preopening expenses
during the period in 1996.
The Company also reported a non-recurring credit of $49,286 during 1997 relating
to an overaccrual of non-recurring acquisition costs reported in 1996.
Material Changes in Financial Condition, Liquidity and Capital Resources.
At March 30, 1997 the Company had negative working capital of $2,075,000 and a
cash balance of $114,000 as compared to negative working capital of $1,119,000
and a cash balance of $372,000 at December 29, 1996. The decrease in working
capital and cash was primarily attributable to the funds utilized for building
the new Washington, D.C. Daily Grill.
6
<PAGE>
Historically, the Company has funded its day-to-day operations through its
operating cash flow, while funding growth through a combination of bank
borrowing, loans from stockholders/officers, the sale of Debentures, the sale of
Preferred Stock, the issuance of warrants and loans and tenant allowances from
certain of its landlords. At March 30,1997, GCI had existing bank borrowing of
$1,632,000, an SBA loan of $155,000, loans from stockholders/officers of
$84,000, loans/advances from a landlord of $140,000.
In addition to the Washington, D.C. Daily Grill opened in March, 1997, the
Company presently anticipates opening one additional Daily Grill store in the
greater-Washington, D.C. area and is in negotiations with a potential partner
with respect to opening "The Grill" in San Jose, California. The cost of opening
new Daily Grill restaurants is anticipated to be between $800,000 and $1,400,000
per site depending upon the location and available tenant allowances. Pursuant
to the on going negotiations with a potential partner, the Company expects that
the partner will pay a disproportionate share of the costs associated with
opening "The Grill" should such plans materialize.
Other than the opening of new restaurants, management believes that the Company
has adequate resources on hand and through cash flow to sustain operations for
at least the following 12 months.
PART II - OTHER INFORMATION
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GRILL CONCEPTS,INC.
Dated: May 9, 1997 By: /s/ Robert Spivak
------------------------------------
Robert Spivak, President and C.E.O.
Dated: May 9, 1997 By: /s/ Ben Sumner
------------------------------------
Ben Sumner, Chief Financial Officer
and Accounting Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1996
<CASH> 114,174
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 283,039
<CURRENT-ASSETS> 1,242,083
<PP&E> 9,609,889
<DEPRECIATION> 3,564,168
<TOTAL-ASSETS> 8,540,083
<CURRENT-LIABILITIES> 3,316,053
<BONDS> 946,936
0
2
<COMMON> 144
<OTHER-SE> 4,276,948
<TOTAL-LIABILITY-AND-EQUITY> 8,540,083
<SALES> 7,140,720
<TOTAL-REVENUES> 7,140,720
<CGS> 1,956,217
<TOTAL-COSTS> 1,956,217
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,286
<INCOME-PRETAX> 75,413
<INCOME-TAX> 800
<INCOME-CONTINUING> 74,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,613
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
