UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended SEPTEMBER 30, 1997
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ________________ to ________________
Commission File Number 0 - 23136
COUNTRY STAR RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1536550
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4929 WILSHIRE BLVD., SUITE 428, LOS ANGELES, CA 90010
(Address of Principal Executive Offices) (Zip Code)
(213) 634-5588
(Registrant's telephone number, including area code)
________________________________________________________________________________
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 |_|
The number of shares of common stock outstanding as of November 10, 1997:
67,895,291
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
Index
Page
------
PART I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at
September 30, 1997 (unaudited)...................... 3
Condensed Consolidated Statements of Operations
for the Quarter Ended September 30, 1997
and September 30, 1996 (unaudited)................. 5
Condensed Consolidated Statements of Operations
for the Nine Months Ended September 30, 1997
and September 30, 1996 (unaudited)................. 6
Condensed Consolidated Statements of Cash Flows
for the Quarter Ended September 30, 1997
and September 30, 1996 (unaudited)................. 7
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1997
and September 30, 1996 (unaudited)................. 8
Notes to Condensed Consolidated Financial Statements
(unaudited)......................................... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 12
PART II - Other Information
Item 1. Legal Proceedings........................................ 16
Item 2. Changes in securities.................................... 16
Item 6. Exhibits and Reports on Form 8-K......................... 17
SIGNATURES ......................................................... 18
2
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
Condensed Consolidated Balance Sheet
(Unaudited)
September 30,
1997
------------
ASSETS
CURRENT ASSETS
Cash $ 137,760
Inventories 266,980
Prepaid rent 140,175
Debt issue costs, current 110,833
Other current assets 157,967
------------
Total current assets 813,715
------------
PROPERTY AND EQUIPMENT AT COST, net of
Accumulated depreciation of $1,048,628
Leasehold improvements 13,870,952
Furniture and equipment 1,841,084
Memorabilia 476,989
Capital lease 806,150
------------
Total property and equipment 16,995,175
------------
OTHER ASSETS 219,706
------------
Total assets $ 18,028,596
============
3
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
Condensed Consolidated Balance Sheet (continued)
(Unaudited)
September 30,
1997
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,012,016
Accrued expenses 296,697
------------
Total current liabilities 1,308,713
DEFERRED RENTALS 583,159
CONVERTIBLE DEBT 5,588,000
------------
Total liabilities 7,479,872
------------
MINORITY INTERESTS 1,017,520
------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value,
2,000,000 shares Authorized --
6% Cumulative Convertible Series A -
0 shares issued and outstanding --
Common stock, $0.001 par value,
250,000,000 shares Authorized,
38,887,165 shares issued
and outstanding 38,887
Additional paid-in-capital 40,649,812
Unamortized stock option cost (100,276)
Accumulated deficit (31,057,219)
------------
Total stockholders' equity 9,531,204
------------
Total liabilities and stockholders' equity $18,028,596
============
See accompanying notes to financial statements
4
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
For the Quarter Ended
September 30,
-----------------------------
1997 1996
------------ ------------
Revenues $ 1,293,026 $ 2,841,922
------------ ------------
Costs and expenses
Cost of revenues 475,337 1,100,714
Operating 1,625,017 2,956,876
General and administrative 755,938 800,849
Depreciation and amortization 309,935 804,191
------------ ------------
3,166,227 5,662,630
------------ ------------
Loss from operations (1,873,201) (2,820,708)
Interest (expense) income 145,853 49,609
Minority interests 371,596 764,765
------------ ------------
Loss before extraordinary item (1,355,752) (2,006,334)
------------ ------------
Extraordinary gain - settlement
of accounts payable, net of
income tax of $0 301,161 --
------------ ------------
Net Loss $ (1,054,591) $ (2,006,334)
============ ============
LOSS PER SHARE
Before extraordinary gain (0.04) (0.16)
Extraordinary gain 0.01 --
------------ ------------
Net loss $ (0.03) $ (0.16)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 30,414,124 12,473,469
============ ============
See accompanying notes to financial statements
5
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
For the Nine Months Ended
September 30,
-------------------------------
1997 1996
------------ ------------
Revenues $ 5,288,899 $ 4,928,342
------------ ------------
Costs and expenses
Cost of revenues 1,979,532 1,722,655
Operating 5,364,736 4,730,015
General and administrative 2,999,826 2,605,941
Depreciation and amortization 1,081,466 1,147,300
------------ ------------
11,425,560 10,205,911
------------ ------------
Loss from operations (6,136,661) (5,277,569)
Interest (expense) income (48,520) 182,125
Minority interests 1,106,926 764,765
------------ ------------
Loss before extraordinary item (5,078,255) (4,330,679)
------------ ------------
Extraordinary gain -
settlement of accounts
payable, net of 1,654,639 --
Income tax of $0
------------ ------------
Net Loss $ (3,423,616) $ (4,330,679)
============ ============
LOSS PER SHARE
Before extraordinary gain (0.24) (0.44)
Extraordinary gain 0.08 --
------------ ------------
Net loss $ (0.16) $ (0.44)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 20,835,245 9,811,992
============ ============
See accompanying notes to financial statements
6
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Quarter Ended
September 30,
---------------------------
1997 1996
----------- -----------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES $(1,058,581) $ 92,623
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment -- (6,804,361)
----------- -----------
Net cash used by investing activities -- (6,804,361)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common
and preferred stock 934,642 2,857,500
Proceeds from issuance of convertible debt 95,000 --
Capital lease payments -- 145,701
----------- -----------
Net cash provided by financing activities 1,029,642 3,003,201
----------- -----------
NET DECREASE IN CASH (28,939) (3,708,537)
Cash, beginning of period 166,699 6,048,587
----------- -----------
Cash, end of period $ 137,760 $ 2,340,050
=========== ===========
Supplemental schedule of non-cash
financing activity:
Purchase of equipment through issuance of
200,000 shares of common stock $ 50,000 --
Settlement with vendors through issuance
of 188,500 shares of common stock $ 76,578 --
Rental discount through issuance of
1,383,529 shares of common stock $ 490,000 --
=========== ===========
See accompanying notes to financial statements
7
<PAGE>
COUNTRY STAR RESTAURANTS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
----------------------------
1997 1996
----------- ------------
NET CASH USED IN OPERATING ACTIVITIES $(3,782,261) $ (1,976,856)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (10,445) (11,434,939)
----------- ------------
Net cash used by investing activities (10,445) (11,434,939)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common
and preferred stock 2,926,498 5,886,257
Proceeds from issuance of convertible debt 595,000 --
Capital lease payments (540,237) 104,913
----------- ------------
Net cash provided by financing activities 2,981,261 5,991,170
----------- ------------
NET DECREASE IN CASH (811,445) (7,420,625)
Cash, beginning of period 949,205 9,760,675
----------- ------------
Cash, end of period $ 137,760 $ 2,340,050
=========== ============
Supplemental schedule of non-cash
financing activity:
Purchase of leased equipment through
issuance of 600,000 shares of common stock $ 447,462 --
Purchase of equipment through issuance of
200,000 shares of common stock $ 50,000 --
Settlement with vendors through issuance
of 188,500 shares of common stock $ 76,578 --
Rental discount through issuance of
1,383,529 shares of common stock $ 490,000 --
=========== ============
See accompanying notes to financial statements
8
<PAGE>
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Country Star Restaurants, Inc. have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission.
The information furnished herein reflects all adjustments, consisting
of only 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. The notes to the
condensed consolidated financial statements should be read in
conjunction with the notes to the consolidated financial statements
contained in the Company's Form 10-KSB for the year ended December 31,
1996. Company management believes that the disclosures are sufficient
for interim financial reporting purposes.
NOTE B - CAPITAL TRANSACTIONS AND CHANGE IN MANAGEMENT
On February 12, 1997, the Company entered into a secured loan
agreement with Dan Rubin ("Rubin") and Cameron Capital Ltd., an
institutional investor ("Cameron").
The secured loan agreement provided that Cameron had the fully
assignable right to name three (3) members of the Board of Directors
of the Company and that the Board of Directors shall not consist of
more than five (5) members. Cameron assigned this right to Rubin as
its agent. Immediately after the closing of the secured financing,
Rubin's nominees, Darren Rice, William Wei and Robert Nardone were
elected to the Board of Directors of the Company. The Board then
elected Rubin to fill the last seat on the Board of Directors.
The Board then elected Dan Rubin as Chief Executive Officer and
President, and Robert L. Davidson as Secretary of the Company. Mr.
Rubin assumed control of day-to-day operations of the Company. Mr.
Rubin is being compensated at the rate of $20,000 per month, payable
in cash or common stock of the Company, valued at market value at the
time of issuance. Mr. Rubin's employment is terminable at will.
Under the secured financing agreement, Rubin has made a $3,500,000
line of credit loan available to the Company, of which an initial
advance of $500,000 was committed at closing. Rubin, in his sole
discretion, may make additional advances to the Company under this
line of credit, but is not required to make any such additional
advances. The outstanding amount advanced under the line of credit was
$595,000 as of September 30, 1997. All advances under the line of
credit loan bear interest at the rate of prime plus four percent (4%),
semi-annually commencing December 31, 1997. The principal balances of
all line of credit advances are due and payable on October 9, 1999.
Any portion or all of the amount outstanding under the line of credit
may be converted into Common Stock of the Company. Upon conversation,
the Company shall issue that number of shares of its Common Stock
obtained by dividing the principal amount of the line of credit
converted by 80% of the average closing bid price of the Common Stock
for the five (5) consecutive trading days preceding the date of
conversion.
(continued)
9
<PAGE>
NOTE B - CAPITAL TRANSACTIONS AND CHANGE IN MANAGEMENT (continued)
In consideration for the initial line of credit advance of $500,000,
the Company issued a warrant to acquire 166,667 shares of its common
stock at an exercise price of $.625 per share, which was the market
value of the Company's common stock on February 12, 1997.
All additional line of credit advances shall have the same terms and
conditions as the initial line of credit advance. For each such
additional advance, Rubin shall receive one (1) common stock purchase
warrant for every $3 advanced. The exercise price for these warrants
shall be $.625 per share. All of the warrants issued or to be issued
to Rubin shall be subject to adjustment in the event of stock splits,
stock dividends, mergers, consolidations, or similar corporate events.
Cameron exchanged its 4,000 shares of Series B Convertible Preferred
Stock of the Company, with an aggregate liquidation preference of
$4,000,000, for a convertible term note in the principal amount of
$4,000,000. The convertible term note bears interest at the rate of
seven percent (7%) per annum, payable semi-annually commencing
December 31, 1997, which was waived when the shares were registered.
The principal balance is due and payable on October 9, 1999. Any
portion or all of the principal amount of the note outstanding may be
converted into common stock of the Company commencing ninety (90) days
after the date of closing of the financing. Upon conversion, the
Company shall issue that number of shares of its common stock obtained
by dividing the principal amount of the loan converted by the lesser
of (i) $1.33, or (ii) 80% of the average closing bid price of the
common stock for the five (5) consecutive trading days preceding the
date of conversion. Originally, the maximum number of shares into
which the convertible note may be converted shall not exceed
3,000,000. This has been subsequently amended to a maximum of
8,000,000 shares. The conversion formula is subject to adjustment in
the event of stock splits, stock dividends, mergers, consolidations,
or similar transactions. As of September 30, 1997, Cameron had
converted $100,000 principal amount of the Note into 317,420 shares of
Common Stock. As of November 10, 1997, Cameron had converted $578,370
principal amount into 5,750,000 shares.
In connection with the commitment to make the line of credit loan,
Rubin and other investors in the Company have agreed to settle certain
claims against the Company for the amount of $1,950,000, plus $50,000
in fees and expenses. The Company has issued its convertible term
notes in the aggregate amount of $1,950,000 and agreed to pay $50,000
to Rubin and these investors, in settlement of their claims. These
convertible term notes contain the same terms and conditions as the
convertible term note issued to Cameron, except that the holders of
these convertible term notes may exercise their conversion feature at
any time following the closing. As of September 30, 1997, Rubin and
the other investors have converted $857,000 principal amount of their
Convertible Notes into 9,300,000 shares of Common Stock; as of
November 10, 1997, Rubin and the others had converted $1,950,000
principal amount into 21,170,000 shares.
The February 12, 1997 agreements described above relating to the
exchange of Convertible Preferred Stock and the issuance of
convertible term notes have been accounted for effective December 31,
1996 because substantially all of the conditions precedent to the
occurrence of these transactions had taken place as of that date.
(continued)
10
<PAGE>
NOTE B - CAPITAL TRANSACTIONS AND CHANGE IN MANAGEMENT (continued)
The line of credit advances by Rubin, Cameron's convertible term note
and the convertible term notes issued in settlement of claims are all
secured by a lien on substantially all of the tangible and intangible
assets of the Company. In the event of default, the secured parties
shall participate in the proceeds of the collateral in proportion to
their outstanding debt.
In connection with the secured financing transaction, Robert Schuster
Chairman of the Board and Chief Executive Officer of the Company,
resigned as Chief Executive Officer and agreed to release the Company
from all obligations under his Employment Agreement, including
severance obligations. Schuster continued to serve as a Director until
February 13, 1997.
In connection with the secured financing transaction, Mr. Peter
Feinstein resigned as Director, President and Chief Financial Officer
of the Company and released the Company from all obligations under his
Employment Agreement, including severance obligations.
NOTE C - EXTRAORDINARY ITEM
During the three months ended September 30, 1997, the Company
continued the process of settling with its creditors that began in
March of 1997. The Company has settled with over 375 creditors as of
September 30,1997 resulting in a gain of $301,161 and $1,654,639 for
the three and nine months ended September 30, 1997, respectively.
11
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended Sept. 30, 1997 compared to three months ended Sept. 30, 1996
Revenues:
Total revenues decreased to $1.293 million for the three months ended September
30, 1997, compared with $2.842 million for the three months ended September 30,
1996, a decrease of $1.549 million or 55%, primarily due to slow sales at
Country Star Las Vegas. Hollywood store revenues dropped 30%, and Country Star
Atlanta was closed during the three months ended September 30, 1997 except for
private parties.
Costs and expenses:
Cost of revenues decreased from $1.101 million for the three months ended
September 30, 1996 to $475 thousand for the three months ended September 30,
1997. Cost of revenues as a percentage of revenues decreased from 39% to 37%
primarily due to the cost control procedures adopted. Country Star Atlanta was
closed on February 22, 1997.
Operating expenses decreased from $2.957 million for the three months ended
September 30, 1996 to $1.625 million for the three months ended September 30,
1997, reflecting the cost control procedures adopted. As a percentage of
revenues, operating expenses were 104% and 126% for the three months ended
September 30, 1996 and 1997 respectively.
General and administrative expenses decreased from $801 thousand for the three
months ended September 30, 1996 to $756 thousand for the three months ended
September 30,1997. As a percentage of revenues, general and administrative
expenses increased from 28% of revenues to 58% of revenues respectively.
Depreciation and amortization decreased from $804 thousand for the three months
ended September 30, 1996 to $310 thousand for the three months ended September
30, 1997, reflecting the effects of adjustments made on December 31, 1996 to
eliminate cost over-runs. As a percentage of total revenues, depreciation and
amortization decreased from 28% to 24%.
Net interest income (expense) increased from $50 thousand to $146 thousand, for
the three months ended September 30, 1996 and 1997, respectively, reflecting the
waiver of interest on convertible debt financing arrangements entered into on
February 12, 1997.
(continued)
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Minority interest for the three months ended September 30, 1997 reflects the
Company's controlling interest of over 50% in Country Star Las Vegas LLC
triggered by the opening of the Las Vegas facility in July, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in (provided by) operating activities for the three months ended
September 30, 1996 and September 30, 1997 increased from $93 thousand provided,
to $1.059 million used, due primarily to the decrease in Accounts Payable in
1997. The company has settled with over 75 creditors during the three months
ended September 30, 1997.
Net cash used in investing activities in the three months ended September 30,
1996 was $6.804 million reflecting the Company's development of the Atlanta
facility in 1996.
Net cash provided by financing activities for the three months ended September
30, 1996 and September 30, 1997 was $3.003 million and $1.030 million,
respectively, due primarily to the net proceeds from the issuance of common
stock in 1996 and 1997, and convertible debt in 1997.
RESULTS OF OPERATIONS
Nine months ended Sept. 30, 1997 compared to nine months ended Sept. 30, 1996
Revenues:
Total revenues increased to $5.289 million for the nine months ended September
30, 1997, compared with $4.928 million for the nine months ended September 30,
1996, an increase of $361 thousand or 7%, primarily due to the opening of
Country Star Las Vegas in July 1996 and Country Star Atlanta in October 1996.
Same store revenues (Hollywood) dropped 14%.
Costs and expenses:
Cost of revenues increased from $1.723 million for the nine months ended
September 30, 1996 to $1.980 million for the nine months ended September 30,
1997. Cost of revenues as a percentage of revenues increased from 35% to 37%
primarily due to the negative impact of the Atlanta facility during the first
quarter of 1997. Country Star Atlanta was closed on February 22, 1997.
(continued)
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Operating expenses increased from $4.730 million for the nine months ended
September 30, 1996 to $5.365 million for the nine months ended September 30,
1997, reflecting the increase in the number of operating restaurants from one to
two. As a percentage of revenues, operating expenses increased from 96% to 101%
for the nine months ended September 30, 1996 and 1997 respectively due primarily
to operating problems with Atlanta during the first quarter of 1997.
General and administrative expenses increased from $2.606 million for the nine
months ended September 30, 1996 to $3 million for the nine months ended
September 30, 1997. As a percentage of revenues, general and administrative
expenses increased from 53% of revenues to 57% of revenues.
Depreciation and amortization decreased from $1.147 million for the nine months
ended September 30, 1996 to $1.081 million for the nine months ended September
30, 1997, reflecting the adjustments made on December 31, 1996 to eliminate cost
over-runs offsetting the increase in the number of restaurants from one to
three. As a percentage of total revenues, depreciation and amortization
decreased from 23% to 20%.
Interest expense decreased from $93 thousand to $54 thousand, for the nine
months ended September 30, 1996 and 1997, respectively reflecting the waiver of
interest on convertible debt financing arrangements entered into on February 12,
1997.
Minority interest for the nine months ended September 30, 1997 reflects the
Company's controlling interest of over 50% in Country Star Las Vegas LLC
triggered by the opening of the Las Vegas facility in July, 1996. Previously,
the Company's investment in Las Vegas was accounted for under the cost method.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the nine months ended September 30,
1996 and September 30, 1997 increased from $1.977 million to $3.782 million due
primarily to the payments and settlements of Accounts Payable in 1997. The
Company has settled with over 375 creditors during the nine months ended
September 30, 1997.
Net cash used in investing activities in the nine months ended September 30,
1996 and 1997 was $11.435 million and $10 thousand, respectively, reflecting the
Company's completion of the Las Vegas and Atlanta facilities in 1996.
(continued)
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Net cash provided by financing activities for the nine months ended September
30, 1996 and September 30, 1997 was $5.991 million and $2.981 million
respectively due primarily to the net proceeds from the issuance of common stock
in 1996 and 1997, and convertible debt in 1997.
New management took over the Company on February 12, 1997 and determined that a
major overhaul of corporate strategy was required to deal with the Company's
financial problems. Measures taken by new management include (i) the temporary
closing and planned reopening of Country Star Atlanta, (ii) the expansion of the
"country" theme, (iii) planned expansion through joint ventures and licensing
rather than expensive construction, and (iv) settlement with the trade creditors
at 40% of the amounts owed.
Management has also made operational changes to improve revenues, control
operating costs, and limit corporate overhead. The positive impact of these
measures and changes began to be realized in the second quarter of calendar
1997. The Company will need to continue to raise additional capital before it
can obtain profitability from operations. Management believes it can raise this
capital through private placements of equity and the granting by lenders of
discretionary advances under outstanding lines of credit.
15
<PAGE>
Part II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about April 21, 1997, 3030 Peachtree, LLC, the Landlord of the
Company's Atlanta restaurant, commenced an action in the Magistrate Court of
Fulton County, Georgia, regarding repossession of the Atlanta restaurant.
Additional information concerning this litigation is set forth in the Company's
Report on Form 8-K dated April 21, 1997.
ITEM 2. CHANGES IN SECURITIES
During July/August 1997, the Company issued an aggregate of 1,772,029
shares of its Common Stock to creditors of the Company in full settlement of
their claims against the Company and to vendors in exchange for property and a
rental discount. The issuance of the Common Stock was exempt from registration
pursuant to Section 4 (2) of the Securities Act of 1933, as amended (the "Act").
During July/August 1997, the Company sold in a private offering an
aggregate of 3,578,572 shares of its Common Stock at a price of $.28 per share,
for a total offering price of $1,002,000. Josephthal Lyon & Ross Inc. acted as
placement agent and received commissions of approximately $107,000. The net
proceeds received by the Company were approximately $895,000. The issuance of
the Common Stock was exempt from registration pursuant to Rule 505 of Regulation
D, promulgated under the Act.
During July, August and September 1997 the holders of convertible debt of
the Company in the aggregate principal amount of $957,000 converted their debt
into 9,617,420 shares of Common Stock.
(continued)
16
<PAGE>
OTHER INFORMATION
(continued)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits None
(b) Reports on form 8-K
On October 24, 1997 the Company filed a report on Form 8-K regarding sales
of equity securities pursuant to Regulation S. The Company reported the sale of
an aggregate principal amount of $150,000 of its Convertible Debt and the
issuance of five million shares of Common Stock for a full release by a group of
institutional investors of their alleged claims against the Company.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly authorized and caused the undersigned to sign this Report on
the Registrant's behalf.
COUNTRY STAR RESTAURANTS, INC.
By: /s/ Dan J. Rubin
------------------------------
Dan J. Rubin
Chief Executive Officer
Dated: November 19, 1997
18
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<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 137,760
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 266,980
<CURRENT-ASSETS> 813,715
<PP&E> 18,043,803
<DEPRECIATION> 1,048,628
<TOTAL-ASSETS> 18,028,596
<CURRENT-LIABILITIES> 1,308,713
<BONDS> 0
0
0
<COMMON> 38,887
<OTHER-SE> 9,492,317
<TOTAL-LIABILITY-AND-EQUITY> 18,028,596
<SALES> 1,293,026
<TOTAL-REVENUES> 1,293,026
<CGS> 475,337
<TOTAL-COSTS> 3,166,227
<OTHER-EXPENSES> (371,596)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (145,853)
<INCOME-PRETAX> (1,355,752)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,355,752)
<DISCONTINUED> 0
<EXTRAORDINARY> 301,161
<CHANGES> 0
<NET-INCOME> (1,054,591)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
