U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
Commission File Number: 0-24058
ATOMIC BURRITO, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Oklahoma 84-1131343
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1601 NW Expressway, Suite 1910
Oklahoma City, Oklahoma 73118
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 848-0996
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 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 at least the
past 90 days. Yes [X] No [ ]
Shares of Common Stock, $.001 par value,
outstanding as of November 10, 2000 4,757,121
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
ATOMIC BURRITO, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Condensed Balance Sheets - September 30, 2000 and
December 31, 1999
Consolidated Condensed Statements of Income - For the Three Months
and Nine Months Ended September 30, 2000 and 1999
Consolidated Condensed Statements of Stockholders' Equity - For the
Nine Months Ended September 30, 2000 and 1999
Consolidated Condensed Statements of Cash Flows - For the Nine
Months Ended September 30, 2000 and 1999
Notes to Consolidated Condensed Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Exhibits and Reports on Form 8-K
<PAGE>
ATOMIC BURRITO, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
ASSETS
Current assets:
<S> <C> <C>
Cash $ 22,100 $ 172,622
Accounts receivable 43,498 78,354
Notes and loans receivable 41,954 28,642
Notes receivable from related parties 580,000 319,441
Inventories 77,207 95,648
Prepaid expenses 32,141 38,019
------------ -----------
Total Current Assets 796,900 732,726
------------ -----------
PROPERTY AND EQUIPMENT, at cost:
Land and improvements 77,011 77,011
Leasehold improvements 2,108,373 2,365,157
Equipment 1,138,576 1,057,426
Furniture and fixtures 420,595 543,979
------------ -----------
3,744,555 4,043,573
Less accumulated depreciation (1,820,903) (1,452,412)
------------ -----------
Net Property and Equipment 1,923,652 2,591,161
------------ -----------
OTHER ASSETS:
Deferred income taxes 100,000 100,000
Notes receivable, net of current portion
shown above 356,688 -
Notes from affiliates, net of current portion
shown above 50,000 460,000
Goodwill, net of amortization 85,219 38,374
Covenant not to compete, net of amortization 51,667 -
Investments available for sale 525,000 -
Other investments 57,400 57,400
Deposits and other 66,210 139,003
------------ -----------
Total other assets 1,342,184 794,777
------------ -----------
Total Assets $ 4,012,736 $ 4,118,664
============ ===========
</TABLE>
See accompanying notes.
<PAGE>
ATOMIC BURRITO, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
Accounts payable $ 660,552 $ 624,442
Accrued expenses 340,759 318,557
Dividends payable 15,500 -
Notes payable - related parties 20,000 45,082
Notes and capital leases payable 1,059,720 414,304
----------- ----------
Total Current Liabilities 2,096,531 1,402,385
----------- ----------
Long-term debt 251,138 657,047
----------- ----------
Minority Interests 96,567 327,272
----------- ----------
Stockholders' Equity:
10% convertible preferred stock - Series A 400,000 400,000
10% convertible preferred stock - Series B 600,000 -
10% convertible preferred stock - Series C 60,000 -
Common Stock, $.01 par value; 4,666 4,236
Additional paid in capital 5,056,845 4,754,851
Retained (deficit) (4,503,011) (3,427,127)
Accumulated other comprehensive loss (50,000) -
----------- ----------
Total Stockholders' Equity 1,568,500 1,731,960
----------- ----------
Total Liabilities and
Stockholders' Equity $ 4,012,736 $ 4,118,664
=========== ==========
</TABLE>
See accompanying notes.
<PAGE>
ATOMIC BURRITO, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---------- ---------- ----------- ----------
REVENUES:
<S> <C> <C> <C> <C>
Beverage and food sales $ 744,057 $ 882,045 $ 2,561,016 $2,645,305
Admission fees 169,626 366,404 685,915 1,129,416
Other revenues 169,783 67,717 351,160 231,777
Sale of fixed assets (Note 3) - - - 100,000
--------- --------- ---------- ---------
Total Revenues 1,083,466 1,316,166 3,598,091 4,106,498
--------- --------- ---------- ---------
COSTS AND EXPENSES:
Cost of products and services 936,498 941,867 3,077,791 3,158,155
Depreciation and amortization 98,702 73,848 237,136 215,010
Interest 26,515 23,926 91,238 44,621
General and administrative
expenses 175,679 332,877 485,908 600,394
--------- --------- ---------- ---------
Total Costs and Expenses 1,237,394 1,372,518 3,892,073 4,018,180
--------- --------- ---------- ---------
INCOME (LOSS) BEFORE TAXES
AND MINORITY INTERESTS (153,928) (56,352) (293,982) 88,318
PROVISION (BENEFIT) FOR
INCOME TAXES (56,953) (20,850) (108,773) 32,678
CHANGE IN VALUATION
ALLOWANCE 56,953 20,850 108,773 (32,678)
--------- --------- ---------- ---------
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS (153,928) (56,352) (293,982) 88,318
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, net of income taxes (514,872) 11,137 (766,402) 277
--------- --------- ---------- ---------
NET INCOME (LOSS) BEFORE
DIVIDEND (668,800) (45,215) (1,060,384) 88,595
PREFERRED STOCK DIVIDEND (15,500) (10,001) (15,500) (13,205)
--------- --------- ---------- ---------
NET INCOME (LOSS) (684,300) (55,216) (1,075,884) 75,390
OTHER COMPRENHENSIVE LOSS:
Unrealized losses on
securities (50,000) - (50,000) -
--------- --------- ---------- ---------
COMPREHENSIVE INCOME (LOSS) $ (734,300) $ (55,216) $(1,125,884) $ 75,390
========= ========= ========== =========
EARNINGS (LOSS) PER SHARE $ (0.15) $ (.01) $ (0.24) $ .02
========= ========= ========== =========
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,482,003 3,805,917 4,425,987 3,758,897
========= ========= ========== =========
EARNINGS (LOSS) PER SHARE
ASSUMING DILUTION $ N/A $ N/A $ N/A $ .020
======== ========= ========== =========
WEIGHTED AVERAGE SHARES
OUTSTANDING - ASSUMING
DILUTION N/A N/A N/A 4,235,325
========= ========= ========== =========
</TABLE>
See accompanying notes.
<PAGE>
ATOMIC BURRITO, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Series A Series B Series C
10% 10% 10%
Convertible Convertible Convertible Common
Preferred Preferred Preferred Stock
Stock Stock Stock Accumulated
---------------------------------------------------------- Other
Value Value Value $0.001 Additional Comprehen- Total
of of of par Paid-In Accumulated sive Stockholders'
Shares Shares Shares Value (1) Capital (1) Deficit Loss Equity
------------------------------------------------------------------------------------------------------------
Balance,
December 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $400,000 $ 145,000 $ - $ 3,735 $ 4,397,351 $(2,927,870) $ - $ 2,018,216
Redemption of
preferred stock - (145,000) - - - - - (145,000)
0
Cash dividends:
Preferred -
$1 per share - - - - - - - -
$1.20 per share - - - - - (3,204) - (3,204)
Issuance of common
stock for
payment of debt - - - 500 34,500 - - 35,000
Net income for the
nine months ended
September 30,
1999 - - - - - 88,595 - 88,595
-------------------------------------------------------------------------------------------------------------
Balance,
September 30,
1999 $400,000 $ - $ - $ 3,735 $ 4,431,851 $ (2,842,479) $ - $ 1,993,607
=============================================================================================================
Balance,
December 31,
1999 $400,000 $ - $ - $ 4,236 $ 4,754,851 $ (3,427,127) $ - $ 1,731,960
Exercise of
stock options - - - 170 127,254 - - 127,424
Preferred Stock issued - 600,000 60,000 - - - - 660,000
Common stock issued
to purchase interest
in Boots, Inc. - - - 200 149,800 - - 150,000
Common stock issued
for cash - - - 60 24,940 - - 25,000
Cash dividends:
Preferred -
$1 per share - - - - - - - -
Net loss for the
nine months ended
September 30, 2000 - - - - - (1,075,884) - (1,075,884)
Net unrealized loss
on marketable
securities - - - - - - (50,000) (50,000)
----------------------------------------------------------------------------------------------------
Balance,
September 30, 2000 $400,000 $ 600,000 $ 60,000 $ 4,666 $ 5,056,845$ (4,503,011) $ (50,000)$ $ 1,568,500
====================================================================================================
</TABLE>
(1) The common stock and additional paid-in capital have been adjusted
retroactively to reflect the change in par value from $0.1 to $.001 which
occurred on September 3, 1999.
See accompanying notes.
<PAGE>
ATOMIC BURRITO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Page 1 of 2
<TABLE>
<CAPTION>
2000 1999
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $(1,075,884) $ 88,595
Adjustments to reconcile net loss
to net cash provided by operating
activities -
Depreciation and amortization 374,934 243,917
Impairment write down 208,329 -
Gain on sale of assets - (100,000)
Minority interests in earnings of
subsidiaries - 9,515
Changes in assets (increase) decrease -
Accounts receivable 66,664 24,660
Due from related parties 117,683 -
Inventories 18,441 (53,855)
Prepaid expenses 5,878 56,343
Deposits and other assets 119,293 (208,359)
Changes in liabilities increase
(decrease) -
Accounts payable 36,111 87,177
Accrued expenses 22,201 14,005
Dividends payable 15,500 -
---------- ---------
Net cash provided by (used in)
operating activities (90,850) 161,998
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayments of notes receivable - 105,596
Sale of investments 25,000 -
Capital advance for formation of
unconsolidated investee - (174,003)
Acquisition of property and equipment (431,827) (792,738)
---------- ---------
Net cash provided by (used in)
investing activities (406,827) (861,145)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Partnership distributions to minority
interests - (8,750)
Minority interest investments in LLC's (79,694) 150,000
Sale of common stock 152,424 22,500
Sale of preferred stock 60,000 -
Retirement of preferred stock - (145,000)
Payments of dividends - (13,205)
Borrowings under notes payable
and capital leases 260,396 850,000
Repayments of notes payable (45,971) (245,145)
---------- ---------
Net cash provided by (used in)
financing activities 347,155 610,400
---------- ---------
NET INCREASE (DECREASE) IN CASH (150,522) (88,747)
CASH, BEGINNING OF PERIOD 172,622 205,411
---------- ---------
CASH, END OF PERIOD $ 22,100 $ 116,664
========== =========
</TABLE>
See accompanying notes.
<PAGE>
ATOMIC BURRITO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Page 2 of 2
<TABLE>
<CAPTION>
2000 1999
----------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<S> <C> <C>
Cash paid for interest $ 91,238 $ 44,737
========== ==========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
During March 1999, the Company sold its rights to a note receivable,
previously written off, for a $100,000 note receivable due from the
affiliate.
During June 2000, the Company issued 60,000 shares of 10% convertible
Preferred Stock in exchange for 120,000 shares of The National Capital
Companies, Inc. common stock. This transaction was valued at $600,000 for
financial reporting purposes
During June 2000, the Company issued 200,000 shares of its common stock in
exchange for the 20% interest in Boots, Inc. not owned by the Company.
This transaction was valued at $150,000 for financial reporting purposes
and resulted in recording goodwill of $89,704.
During September 2000, the Company sold the assets and operations of its
Atomic Burrito restaurant in Norman, Oklahoma in exchange for a note
receivable of $370,000.
See accompanying notes.
<PAGE>
ATOMIC BURRITO, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - GENERAL
In the opinion of Atomic Burrito, Inc. (the "Company"), the
accompanying unaudited consolidated condensed financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position as of September 30, 2000 and the
results of operations and cash flow for the three months and nine months ended
September 30, 2000 and 1999. These statements are condensed and, therefore, do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The statements should
be read in conjunction with the consolidated financial statements and footnotes
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999. The results of operations for the nine months ended September
30, 2000 and 1999 are not necessarily indicative of the results to be expected
for the full year.
ACCOUNT RECLASSIFICATIONS
Operating results were reclassified for 1999 and 2000 to segregate the
discontinued operations of the Atomic Burrito Restaurants from continuing
operations.
Note 2 - CHANGES IN CAPITAL STOCK
During February 1999, $145,000 of Series B preferred stock was redeemed
at face value. The Company issued 50,000 shares of common stock in payment for
$35,000 of professional fees effective June 30, 1999. In July 1999, stock
options for 30,000 shares of common stock were exercised at a price of $ .75 per
share.
During June 2000, the Company issued 60,000 shares of 10% convertible -
Series B preferred stock in exchange for 120,000 shares of stock in a publicly
traded company. This transaction was valued at $600,000 for financial reporting
purposes. The 10% convertible preferred stock has a $10 par value with 100,000
shares authorized and 60,000 shares issued and outstanding at September 30,
2000.
During the first nine months of 2000, stock options for 169,900 shares
of common stock were issued for $127,424 in cash.
During June 2000, the Company acquired the remaining 20% interests in
the Wichita Night Club for 200,000 shares of common stock. This transaction,
which was treated as a purchase for financial reporting purposes, was valued at
$150,000, and resulted in the recording of $89,704 in goodwill.
During August 2000, the Company issued 6,000 share of Series C 10%
preferred stock in exchange for $60,000 in cash.
Note 3 - SALE OF ASSETS
During March 1999, the Company sold two notes receivable totaling
$155,000 plus accrued interest thereon, (previously reserved 100%), for a
$100,000 note receivable due March 25, 2001, bearing interest at 6% per annum.
This transaction resulted in a gain of $100,000.
<PAGE>
During September 2000, the Company sold its interest in the furniture,
fixtures, equipment and inventory located at its Atomic Burrito restaurant in
Norman, Oklahoma for a $370,000 note receivable. This note is to be repaid in
monthly payments of $3,536 with the remaining unpaid balance due on September
15, 2007. This note bears interest at 8% per annum and is collateralized by
furniture, fixtures, and equipment. The Company recognized a $715 loss on this
sale. The purchaser is assuming the liability on the Norman building lease,
however, the Company has not been released from liability on this lease.
Note 4 - RESTAURANT CLOSING
On August 30, 2000, the Company announced its intentions to
discontinue its Atomic Burrito Restaurant operations. In connection with these
intentions, the following actions were taken:
During September 2000, the Company closed its Atomic Burrito
restaurant in Oklahoma City, Oklahoma. Management is currently
attempting to dispose of it investment in equipment and leasehold
improvements at this location. The Company recognized a $100,000 loss
impairment on these assets at September 30, 2000.
During August 2000, the Company closed the Atomic Burrito
restaurant in Houston, Texas in which it owned a 50% interest. The
leasehold improvements at this location were forfeited to the landlord.
Management is currently attempting to sell the equipment used at this
restaurant. The Company reconized a $108,373 loss impairment on these
assets at September 30, 2000.
The Company is currently attempting to sell its remaining two
Atomic Burrito restaurants located in Tulsa, Oklahoma (in which it owns
a 57% interest) and Wichita, Kansas (in which it owns a 50% interest).
During September 2000, the Company sold its interest in the
furniture, fixtures, equipment and inventory located at its Norman Atomic
Burrito for a $370,000 note receivable. This note is to be repaid in monthly
payments of $3,536 with the remaining unpaid balance due on September 15, 2007.
This note bears interest at 8% per annum and is collateralized by furniture,
fixtures, and equipment. The Company recognized a $715 loss on this sale. The
purchaser is assuming the liability on the Norman building lease, however, the
landlord has not release the Company from liability on this lease.
Note 5 - INVESTMENT IN MARKETABLE SECURITIES
As of September 30, 2000, the Company held 115,000 shares of The
National Capital Companies, Inc. which it intends to hold for an indefinite
period of time and thus this investment has been classified as available for
sale. In accordance with Statement of Financial Accounting Standards No.
115, investments available for sale are reflected on the Company's balance sheet
at their current market value with any unrealized gains and losses reflected as
adjustments to shareholders' equity.
As of September 30, 2000 the Company had reduced stockholders' equity by $50,000
reflecting the difference between the current market value of the investment
available for sale and the Company's original cost basis in this investment.
<PAGE>
PART 1 - ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART 1
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10- QSB under "Item 1. Description of
Business", "Item 3. Legal Proceedings", "Item 6. Management's Discussion and
Analysis" and elsewhere constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other facts which may cause the actual results, performance or
achievements of Atomic Burrito Inc. (the "Company") and its subsidiaries and
affiliated partnerships to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions; competition; success of operating initiatives;
development and operating costs; advertising and promotional efforts; adverse
publicity; customer appeal and loyalty; advisability, locations and terms of
sites for nightclub development; the development of the "Atomic Burrito"
concept; changes in business strategy or development plans; quality of
management; availability, terms and development of capital; business abilities
and judgment of personnel; availability of qualified personnel; food, labor and
employee benefit costs; changes in, or the failure to comply with government
regulations; regional weather conditions; construction schedules; and other
factors referred in the Form 10QSB. The use in this Form 10 QSB of such words as
"believes", "anticipates", "Expects", "intends", and similar expressions are
intended to identify forward-looking statements, but are not the exclusive means
of identifying such statements. The success of the Company is dependent on the
efforts of the Company and its management and personnel and the manner in which
they operate and develop stores.
General
The Company operates two country-western nightclubs, one located in St. Louis,
Missouri and one located in Wichita, Kansas. In 1999 the Company commenced
operating Atomic Burrito restaurants which feature a "Fresh-Mex" concept. The
Company opened a total of five Atomic Burrito restaurants, one each in Tulsa,
Oklahoma, Wichita, Kansas, Oklahoma City, Oklahoma, Norman, Oklahoma, and
Houston, Texas. Due to substantial operating losses generated by the Atomic
Burrito restaurants, in August of 2000, management decided to dispose of the
this section of its business. In connection with this decision, the operations
and certain assets of the Norman location were sold and the Oklahoma City and
Houston locations were closed. Management is currently attempting to dispose of
the remaining assets from these locations. As of September 30, 2000 the Company
recognized loss impairments in the Houston and Oklahoma City restaurants of
$208,329 and $100,000, respectively. The Company also recognized a $149,491 loss
incurred in connection with the departure of the Company's former president.
As of September 30, 2000 the Company continued to operate the Tulsa and Wichita
locations while it seeks a buyer to acquire these operations.
<PAGE>
Comparison of three months ended September 30, 2000 with three months ended
September 30, 1999
Revenues - Revenues decreased by 18% from $1,316,166 in 1999 to $1,083,466 in
2000. This decrease was due in part to a 16% decrease in beverage and food sales
from $882,045 in 1999 to $744,057 in 2000. Also contributing to this decrease is
a 54% decrease in admissions fees from $366,404 in 1999 to $169,626 due
primarily to a change in operations whereby the night clubs ceased hiring live
entertainment directly and allowed the live entertainment to share in admission
fees.
Cost of Goods and Services - The cost of goods and services decreased by 1% from
$941,687 in 1999 to $936,498 in 2000. This decrease is due in part to an 16%
decrease in beverage and food sales combined with a decrease in fees paid to
live entertainment offset in part by higher food and beverage costs.
General and Administrative Expense - General and administrative expenses
decreased by 47% from $332,877 in 1999 to $175,679 in 2000. This decrease is due
primarily to managements efforts to reduce administrative expenses.
Depreciation and Amortization - Depreciation and amortization increased by 33%
from $73,848 in 1999 to $98,702 in 2000. This increase was due primarily to
amortization of goodwill associated with the acquisition of the remaining 20%
interest in the Wichita club.
Interest Expense - Interest expense increased by 11% from $23,926 in 1999 to
$26,515 for the same period in 2000. This increase in interest expense is due to
the increased debt load assumed by the Company in connection with acquiring and
opening its five Atomic Burrito restaurants.
Loss from Discontinued Operations - During the three months ended September 30,
1999 the Atomic Burrito restaurants made a profit of $11,137. During the third
quarter of 2000, the Company decided to dispose of its Atomic Burrito restaurant
operations. In connection with this decision, the Oklahoma City and Houston
locations were closed and the Norman location was sold. In connection with the
closing of the Oklahoma City and Houston locations, the Company recognized
impairment losses totalling $208,329. Furthermore, the Company charged $149,491
to the loss on discontinued operations related to the departure of the Company's
former president. For the quarter ended September 30, 2000, the Company
recognized a loss of $(514,872) associated with its Atomic Burrito restaurant
operations. The Company continued to operate its Tulsa and Wichita locations
while it attempts to sell these operations.
Comparison of nine months ended September 30, 2000 with nine months ended
September 30, 1999
Revenues - Revenues decreased by 12% from $4,106,498 in 1999 to $3,598,091 in
2000. This decrease was due in part to a 3% decrease in beverage and food sales
from $2,645,305 in 1999 to $2,561,016 in 2000. Also contributing to this
decrease is a 39% decrease in admissions fees from $1,129,416 in 1999 to
$685,915 due primarily to a change in operations whereby the night clubs ceased
hiring live entertainment directly and allowed the live entertainment to share
in admission fees.
Cost of Goods and Services - The cost of goods and services decreased by 3% from
$3,158,155 in 1999 to $3,077,791 in 2000. This decreased is due in part to a 3%
decrease in beverage and food sales combined with a decrease in fees paid to
live entertainment offset in part by higher food and beverage costs.
General and Administrative Expense - General and administrative expenses
decreased by 19% from $600,394 in 1999 to $485,908 in 2000. This decrease is due
primarily to managements efforts to reduce administrative expenses.
Depreciation and Amortization - Depreciation and amortization increased by 9%
from $215,010 in 1999 to $237,136 in 2000. This increase was due primarily to
amortization of goodwill associated with the acquisition of the remaining
20% interest in the Wichita club.
Interest Expense - Interest expense increased by 104% from $44,621 in 1999 to
$91,238 for the same period in 2000. This increase in interest expense is due to
the increased debt load assumed by the Company in connection with acquiring and
opening its five Atomic Burrito restaurants.
Loss from Discontinued Operations - During the nine months ended September 30,
1999 the Atomic Burrito restaurants made a profit of $277. During the third
quarter of 2000, the Company decided to dispose of its Atomic Burrito restaurant
operations. In connection with this decision, the Oklahoma City and Houston
locations were closed and the Norman location was sold. In connection with the
closing of the Oklahoma City and Houston locations, the Company recognized
impairment losses totalling $208,329. Furthermore, the Company charged $149,491
to the loss on discontinued operations related to the departure of the
Company's former president. For the nine months ended September 30, 2000, the
Company recognized a loss of $(766,402) associated with its Atomic Burrito
restaurant operations. The Company continued to operate its Tulsa and Wichita
locations while it attempts to sell these operations.
Liquidity and Capital Resources
As of September 30, 2000 the Company had cash of $22,100 and a working capital
deficit of $1,299,631. During the nine months ended September 30, 2000, the
Company had a cash flow deficit from operations of $(90,850). This cash flow
deficit was a result of operating losses at the Atomic Burrito restaurants and
the Wichita night club.
During the nine months ended September 30, 2000 the Company was able to raise
$962,424 in additional capital, $600,000 of which was for the contribution of
120,000 shares of publicly traded stock, $150,000 was for the acquistion of the
20% minority interest in the Wichita night club, and the remaining $212,424 was
for cash.
The future viability of the Company is dependent upon its ability to sell or
otherwise dispose of its Atomic Burrito operations, improve its working capital
position and obtain a profitable level of operations.
Management is currently taking the following actions:
* The Company is looking for a buyer to acquire the Tulsa and Wichita
Atomic Burrito operations. The Company is continuing to operate these
locations while it seeks a buyer.
* The Company is looking for a buyer to take over the lease, leasehold
improvements, and furniture and equipment from its Oklahoma City
Atomic Burrito location. Operations at this facility were terminated
in September of 2000.
* The Company is attempting to lease or sell the equipment and furniture
used in its Houston Atomic Burrito location.
* Management has significantly reduced its corporate overhead by a
reduction in personnel and other cost saving measures
* Management is seeking other night club operations for possible merger
with the Company.
* Management is also seeking investors who might be willing to make
capital injections into the Company.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Special Note: Certain statements set forth below under this caption constitute
forward-looking statements within the meaning of the Reform Act. See "Special
Note Regarding Forward Looking Statements" for additional factors relating to
such statements.
The Company is involved in various legal actions associated with the normal
conduct of its business operations. No such actions involve known material gain
or loss contingencies not reflected in the consolidated financial statements of
the Company.
Item 4 - Submission of Matters to a Vote of Security Holders
During the third quarter of 2000, the Company did not submit any matters to a
vote of its shareholders.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
11. Statement Re: Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
On March 30, 2000 the Company filed a form 8-K to announce an
agreement in principal to acquire Unhatched.com, Inc.
On August 30, 2000 the Company filed a form 8K to announce the
appointment of Don W. Grimmit as its president replacing James E.
Blacketer and to announce the Companies intention to sell its
Atomic Burrito restaurant division and re-focus on its nightclub
operations.
On September 1, 2000 the Company filed a form 8K to announce a
change in the Company's outside auditors from Gray & Northcutt,
Inc. to Hogan & Slovacek.
<PAGE>
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
November 20, 2000 Atomic Burrito, Inc.
By/s/Joe R. Love
---------------------------------
Joe R. Love
Chairman of the Board
