<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 12, 1999
OR
[ ] TRANSITION RPEORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER 0-24788
MACHEEZMOO MOUSE RESTAURANTS, INC.
(Exact name of small business issuer as specified in its charter)
OREGON 93-0929139
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1020 SW TAYLOR STREET, SUITE 685
PORTLAND, OREGON 97205
(Address of principal executive offices)
503-274-0001
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities 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
--- ---
Number of shares of Common Stock outstanding at January 12, 1999: 3,985,630
Transitional Small Business Disclosure Format: Yes No X
--- ---
<PAGE>
MACHEEZMO MOUSE RESTAURANTS, INC
FORM 10-QSB
INDEX
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets - January 12, 1999 and June 30, 1998 2
Statements of Operations - Twelve Weeks and Twenty-Eight Weeks
Ended January 12, 1999 and January 13, 1998. 3
Statements of Cash Flows - Twenty-Eight Weeks Ended January 12, 1998
and January 13, 1998 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 5
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8 - K
</TABLE>
<PAGE>
MACHEEZMO MOUSE RESTAURANTS, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 12, JUNE 30,
1999 1998
(UNAUDITED) (AUDITED)
------------- -----------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 37 $ 341
Short-term investments in marketable securities 411 511
Inventories of food and paper 178 109
Non-trade receivables 4 -
Trade receivables 60
Other current assets 16 67
------------- -----------
Total current assets 706 1,027
Property and equipment 1,472 1,447
Accumalated depreciation (853) (767)
Other assets 20 21
------------- -----------
$ 1,345 $ 1,729
------------- -----------
------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 171 $ 235
Accrued payroll and payroll related expenses 75 130
Accrued expenses and other current liabilities 19 24
------------- -----------
Total current liabilities 265 389
Other deferred liabilities
Deferred rent expense 72 80
Other liabilities 45 45
------------- -----------
Total liabilities 382 514
Shareholders' equity
Preferred stock, undesignated, 5000 shares
authorized, none issued -
Common stock, 10,000 shares
authorized, 3,986 shares issued and outstanding 10,178 10,178
Accumulated deficit (9,215) (8,963)
------------- -----------
Total shareholders' equity 963 1,215
------------- -----------
$ 1,345 $ 1,729
------------- -----------
------------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
MACHEEZMO MOUSE RESTAURANTS, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED TWENTY-EIGHT WEEKS ENDED
------------------------------ -----------------------------
JANUARY 12, JANUARY 13, JANUARY 12, JANUARY 13,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues
Restaurant operations $ 1,124 $ 1,324 $ 2,795 $ 3,237
Retail operations 47 - 244 -
--------------- --------------- --------------- ---------------
1,171 1,321 3,039 3,237
--------------- --------------- --------------- ---------------
RESTAURANT OPERATING COSTS:
Food, beverage and packaging costs 315 442 803 1,121
Restaurant labor 419 489 1,012 1,172
Other restaurant operating, expenses 276 313 680 734
--------------- --------------- --------------- ---------------
1,010 1,244 2,495 3,027
--------------- --------------- --------------- ---------------
RETAIL OPERATING COSTS:
Food, beverage and packaging costs 44 - 133 -
Other operating, expenses 35 - 41 -
--------------- --------------- --------------- ---------------
79 - 174 -
--------------- --------------- --------------- ---------------
DEPRECIATION AND AMORTIZATION 39 46 86 108
RETAIL DIVISION EXPENSES - 25 - 25
GENERAL AND ADMINISTRATIVE EXPENSES 220 264 541 686
--------------- --------------- --------------- ---------------
259 1,579 627 3,846
--------------- --------------- --------------- ---------------
OPERATING LOSS $ (177) $ (255) $ (257) $ (609)
--------------- --------------- --------------- ---------------
OTHER INCOME (EXPENSE)
Interest income 3 12 5 37
Interest expense - - - -
Other - - - -
--------------- --------------- --------------- ---------------
NET LOSS $ (174) $ (243) $ (252) $ (572)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.04) $ (0.06) $ (0.06) $ (0.14)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING 3,986 3,986 3,986 3,986
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
MACHEEZMO MOUSE RESTAURANTS, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-EIGHT WEEKS ENDED
-----------------------------------------
JANUARY 12, JANUARY 13,
1999 1998
(UNAUDITED) (UNAUDITED)
------------------ ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (252) $ (572)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 86 108
Discount amortization on investments - -
Loss on disposal of equipment - -
Net changes in operating assets and liabilities:
Inventories (69) 7
Non-trade receivables (4) 87
Trade receivables (60)
Other current assets 51 (45)
Accounts payable, accrued payroll and expenses,
deferred rent and other liabilities (125) (202)
Accrued restructuring expense (137)
------------------ ----------------
Net cash used in operating activities (373) (754)
------------------ ----------------
Cash flows from investing activities:
Acquisition of property and equipment (25) (40)
Purchase of marketable securities (403) (501)
Proceeds from maturity of marketable securities 498 498
Increase (decrease) in other assets (1) 4
------------------ ----------------
Net cash (used in) provided by investing activities 69 (39)
------------------ ----------------
Cash flows from financing activities:
Proceeds from exercise of stock options -
------------------ ----------------
Net cash provided by financing activities - -
------------------ ----------------
Net decrease in cash and cash equivalents (304) (793)
Cash and cash equivalents at beginning of period 341 1,306
------------------ ----------------
Cash and cash equivalents at end of period $ 37 513
------------------ ----------------
------------------ ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
MACHEEZMO MOUSE RESTAURANTS, INC
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements as of and for the twelve and
twenty-eight week periods ended January 12, 1999 and January 13, 1998 have
been prepared in conformity with generally accepted accounting principles.
The financial information as of June 30. 1998 is derived from the Macheezmo
Mouse Restaurants, Inc. (the "Company") financial statements included in the
Company's Annual Report on Form 10-KSB for the year ended June 30, 1998
(fiscal 1998). Certain information or footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, pursuant to the rules
and regulations of the Securities and Exchange Commission. In the opinion of
management, the accompanying unaudtied financial statements include all
adjustments necessary (which are of a normal and recurring nature) for the
fair presentations of the results of the interim period presented. The
accompanying unaudited financial statements should be read in conjunction
with the Company's audited financial statements for fiscal 1998, as included
in the Company's Annual Report on Form 10-KSB for the year then ended.
Operating results for the twelve and twenty-eight week periods ended January
12, 1999 and January 13, 1998 are not necessarily indicative of the results
that may be expected for the entire fiscal year ending June 30, 1999 (fiscal
1999), or any portion thereof.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
INTRODUCTION
The Company commenced operations in 1981 with the opening of the first
restaurant in Portland, Oregon. As of January 12, 1999 the Company owned
and operated 13 restaurants. Four restaurants were closed in Fiscal 1997 and
one restaurant was closed in the first quarter of fiscal 1998. In February
1998 the Company closed one additional restaurant in Portland, Oregon. The
closing of restaurants affects the comparability of results of operations
from period to period.
The company prepares statements of operations for 13 periods each year. The
first fiscal quarter, generally consisting of the months of July through
mid-October, includes four periods (sixteen weeks) and each of the following
three-quarters includes three such periods (twelve or thirteen weeks).
Because of the longer first fiscal quarter and the seasonality of its
business, the Company's sales and operating income are typically highest in
the first fiscal quarter. The Company's fiscal year ends on the Tuesday
closet to June 30; June 29, 1999 for fiscal 1999. Fiscal 1998 was a 52-week
period and fiscal 1999 will also be a 52- week period.
QUARTERLY VARIABILITY
The Company's restaurants have historically experienced higher average weekly
sales in the first and fourth fiscal quarters. Accordingly, operating income
margins and net income margins have been and are expected to continue to be
higher in each of those quarters than in second and third fiscal quarters. In
addition, the first quarter includes 16 weeks of operations, compared with 12
or 13 weeks for each of the remaining three-quarters. Consequently,
consecutive quarter-to-quarter comparisons of the company's results of
operations may not be meaningful and results of any quarter are not
necessarily indicative of the actual results for a full fiscal year.
5
<PAGE>
FORWARD - LOOKING INFORMATION.
The statements concerning expected future financing requirements, cost
reduction and retail activities and the Year 2000 issue constitutes forward
- -looking statements that are subject to risks and uncertainties. Factors that
could materially affect future financing in the event of lower than expected
retail and restaurant sales, increased competitive factors ( including
increased competition, new product offerings by competitors and price
pressures), in sales volume, changes in menu offerings, a longer than
expected period to achieve market acceptance of any new menu or retail
offerings, a longer than expected period to achieve market acceptance of any
new menu or retail offerings and difficulties implementing new menu and
retail offerings, as well as unfavorable business conditions and disruptions
in the restaurant industry and general economy. Factors that could adversely
affect cost reduction and retail activities include, but are not limited to,
the industry factors and general business conditions noted above. Factors
that could materially impact the Year 2000 issue include, but are not limited
to, unanticipated cost associated with any required modification to the
Company's computer systems and associated software.
6
<PAGE>
RESULTS OF OPERATIONS
The following is a discussion of the results of operations for the 12 and 28
week periods ended January 12, 1999 and January 13, 1998. The Statement of
Operations table sets forth the percentage relationship to net sales, unless
otherwise indicated, of certain statement of operations data. The Restaurant
Operating Data table sets forth certain restaurant data for the periods
indicated.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED TWENTY-EIGHT WEEKS ENDED
------------------------------- --------------------------------
JANUARY 12, JANUARY 13, JANUARY 12, JANUARY 13,
1999 1998 1999 1998
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES
Restaurant operations 96.0% 100.0% 92.0% 100.0%
Retail operations 4.0 - 8.0 -
----------- ----------- ----------- -----------
100.0 100.0 100.0 100.0
----------- ----------- ----------- -----------
RESTAURANT OPERATING COSTS:
Food, beverage and packaging costs 26.9 33.4 26.4 34.6
Restaurant labor 35.8 36.9 33.3 36.2
Other restaurant operating, expenses 23.6 23.6 22.4 22.7
----------- ----------- ----------- -----------
86.3 93.9 82.1 93.5
----------- ----------- ----------- -----------
RETAIL OPERATING COSTS:
Food, beverage and packaging costs 3.7 - 4.4 -
Other operating, expenses 3.0 - 1.3 -
----------- ----------- ----------- -----------
6.7 - 5.7 -
----------- ----------- ----------- -----------
DEPRECIATION AND AMORTIZATION 3.3 3.5 2.8 3.3
RETAIL DIVISION EXPENSES - 1.9 - 0.8
GENERAL AND ADMINISTRATIVE EXPENSES 18.8 20.0 17.8 21.2
----------- ----------- ----------- -----------
22.1 25.4 20.6 25.3
----------- ----------- ----------- -----------
OPERATING LOSS (15.1) (19.3) (8.4) (18.8)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 0.3 0.9 0.1 1.1
Interest expense - - - -
Other - - - -
----------- ----------- ----------- -----------
NET LOSS (14.8) (18.4) (8.3) (17.7)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
RESTAURANT OPERATING DATA
<TABLE>
<CAPTION>
TWENTY-EIGHT WEEKS ENDED
----------------------------------
JANUARY 12, JANUARY 13,
1999 1998
------------ -----------
<S> <C> <C>
Number of restaurants:
Open at the beginning of the period 13 15
Opened during the period - -
Closed during the period - (1)
------------ -----------
Open at the end of period 13 14
------------ -----------
------------ -----------
</TABLE>
7
<PAGE>
TWELVE WEEKS (SECOND QUARTER) AND TWENTY-EIGHT WEEKS (FIRST HALF) ENDED
JANUARY 12, 1999 COMPARED TO TWELVE WEEKS (SECOND QUARTER) AND TWENTY-EIGHT
WEEKS (FIRST HALF) ENDED JANUARY 13, 1998
SALES, RESTAURANTS. Restaurant sales decreased in the second quarter of
fiscal 1999 by 15.1% in comparison to second quarter of fiscal 1998, and
decreased in the first half of fiscal 1999 by 13.7% in comparison to first
half of fiscal 1998. There were 13 restaurants operating at the end of the
second quarter of 1999 compared to 14 restaurants operating in the same
fiscal period of 1998. Same store restaurant sales decreased in second
quarter of fiscal 1999 in comparison to second quarter of fiscal 1998.
SALES, RETAIL. The retail division was newly formed in the 3rd quarter of
fiscal 1998 and therefore no comparable sales are available.
RESTAURANTS OPERATING COSTS
Food, beverage and packaging costs decreased as a percentage of sales by 6.5%
in the second quarter of fiscal 1999 compared to same quarter in fiscal 1998,
and decreased as a percentage of sales by 8.2% in the first half of fiscal
1999 compared to the first half of fiscal 1998. The Company is aggressively
managing its cost of sales and the purchasing relationships with our vendors.
This aggressive management has resulted in greatly improved COS numbers.
Restaurant labor expenses consists primarily of restaurant management and
hourly employee wages, payroll taxes, worker's compensation and group
insurance. Labor expenses decreased as a percentage of sales by 1.1% in the
second quarter of fiscal 1999 in comparison to same quarter ending in fiscal
1998, and decreased as a percentage of sales by 2.9% in first half of fiscal
1999 compared to first half of 1998. The decreases were due to efficiencies
in operations and salary and hourly management. As reflected in the
management of COS, the Company is aggressively managing store level labor
costs while at the same time improve the level of customer service for our
patrons. The Company's current stores are located in the Portland, Oregon
metropolitan area where unemployment is low, which has the effect of
increasing wage levels required to attract and retain qualified employees.
Other restaurant operating expenses consist primarily of rent, utilities and
miscellaneous supplies and services. Other restaurant operating expenses have
remained the same in the second quarter of fiscal 1999 compared to second
quarter of fiscal 1998, and decreased as a percentage of sales by 0.3% in the
first half of fiscal 1999 compared to first half of fiscal 1998. The decrease
is primarily due to efficiencies in operating systems and management.
RETAIL OPERATING COSTS
Food, beverage and packaging. . The retail division was newly formed in the
3rd quarter of fiscal 1998 and therefore no comparable costs are available.
Other operating expenses. . The retail division was newly formed in the 3rd
quarter of fiscal 1998 and therefore no comparable costs are available.
The Company incurred expenses of approximately $25,000 in the second quarter
of fiscal 1998 related to the start-up of retail operations (Macheezmo
Foods), which primarily consisted of recipe development, packaging
development, and sales related activities. The Company, as originally
planned, launched its first retail contract in third quarter of fiscal 1998
by selling fresh deli burrito's through local Costco's. In addition to
Costco, the Company expanded its' retail operations in fourth quarter of
fiscal 1998 by entering into contracts with Albertson's Groceries with frozen
burritos and Alaska Airlines with and bulk breakfast and lunch burritos.
8
<PAGE>
OTHER COSTS
Depreciation and amortization expenses decreased 0.2% in the second quarter
of fiscal 1999 compared to second quarter of fiscal 1998, and decreased 0.5%
In the first half of fiscal 1999 compared to first half of fiscal 1998. In
the fourth quarter of both fiscal 1997 and 1996 the company wrote down closed
and existing restaurant assets to their estimated fair market values in
accordance with the adoption of Statement of Financial Accounting Standards
No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED
OF" (SFAS No. 121), thereby decreasing the amount of related depreciation
expenses.
General and administrative expenses decreased as a percentage of sales by
1.2% in the second quarter of fiscal 1999 compared to second quarter of
fiscal 1998, and decreased as a percentage of sales by 3.4% in the first half
of fiscal 1999 compared to first half of fiscal 1998. The decreases were
primarily attributable to the reduction in the number of general and
administrative employees, reduction in corporate spending and increased
corporate operating efficiencies.
INCOME TAXES
The Company is in a net deferred tax position and has generated 100% net
operating losses in the current period. Accordingly, no provision for
benefit from income taxes has been recorded in the accompanying statements of
operations. The Company will continue to provide a valuation allowance for
it's deferred tax assets until it becomes more likely than not, in
management's assessment, that the Company's deferred tax assets will be
realized.
NASDAQ MATTERS
Since October 1, 1997 trading in the Company's Common Stock has been
conducted in the over the counter market on an electronic bulletin board
established for securities that do not meet Nasdaq requirements, or in what
are commonly referred to as "Pink Sheets". As a result, an investor may
likely find it more difficult to dispose of or to obtain accurate quotations
as to the price of the Company's Common Stock than was the case when the
Company's Common Stock was listed on the Nasdaq NMS. In addition, after
October 1, 1997, the Company's Common Stock is subject to "Penny Stock" rules
that impose additional sales practice requirements on broker-dealers who sell
such securities. The delisting of the Company's Common Stock from Nasdaq NMS
could adversely affect the ability or willingness of broker-dealers to sell
the Company's Common Stock and the ability of purchasers of the Company's
Common Stock to sell their securities in the secondary market.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On November 6, 1997 at the Company's annual meeting, the holders of the
Company's outstanding common stock took the action described below. At the
Company's annual meeting, 3,985,630 shares of common stock were eligible to
vote.
1. The shareholders elected each of William S. Warren, Jack B. Schwartz and
Dara Dejbakhsh to Company's board of directors, by the votes indicated
below, to serve for ensuing year. There were no abstentions or broker
non-votes.
<TABLE>
<S> <C> <C>
VOTES FOR VOTES WITHHELD
William S. Warren 3,508,091 77,575
Jack B. Schwartz 3,512,052 73,614
Dara Dejbakhsh 3,512,641 73,025
</TABLE>
9
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibit filed as part of this report is listed below:
EXHIBIT NO.
27 Financial Date Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the twelve weeks ended January 12,
1999.
10
<PAGE>
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.
Dated: February 28th, 1999
MACHEEZMO MOUSE RESTAURANTS, INC
By: WILLIAM S. WARREN
President
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE UNAUDITED
FINANCIAL STATEMENTS FOUND IN THE COMPANY'S 10QSB FOR THE TWENTY EIGHT WEEKS
ENDED JAN 12, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-29-1999
<PERIOD-START> JUN-30-1998
<PERIOD-END> JAN-12-1999
<CASH> 37
<SECURITIES> 411
<RECEIVABLES> 64
<ALLOWANCES> 0
<INVENTORY> 178
<CURRENT-ASSETS> 706
<PP&E> 1,472
<DEPRECIATION> (853)
<TOTAL-ASSETS> 1,345
<CURRENT-LIABILITIES> 265
<BONDS> 0
0
0
<COMMON> 10,178
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,345
<SALES> 3,039
<TOTAL-REVENUES> 3,039
<CGS> 936
<TOTAL-COSTS> 2,360
<OTHER-EXPENSES> 5
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (252)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (252)
<EPS-PRIMARY> (0.6)
<EPS-DILUTED> (0.6)
</TABLE>
