<PAGE>
U. S. 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 PERIOD ENDED MARCH 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM _____________________ TO ______________________
Commission file number 0-25366
-------
AUSTINS STEAKS & SALOON, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 86-0723400
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
6940 "O" Street, Suite 334
Lincoln, Nebraska 68510
(Address of principal executive offices)
(402) 466-2333
(Issuer's telephone number)
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
--- ---
As of April 30, 1996, there were 1,910,000 shares of the issuer's common stock
outstanding.
<PAGE>
Part I: Financial Statements
Item 1 - FINANCIAL STATEMENTS
AUSTINS STEAKS & SALOON, INC.
Consolidated Balance Sheets
as of March 31, 1996 and December 31, 1995
<TABLE>
<CAPTION>
March 31,
1996 December 31,
(unaudited) 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ -- $ --
Inventories 161,899 111,913
Prepaid expenses & other current assets 278,843 310,938
Preopening costs -- 255,512
---------- ----------
Total current assets 440,742 678,363
---------- ----------
Equipment 1,947,254 1,761,768
Leasehold improvements 3,017,206 2,852,730
---------- ----------
4,964,460 4,614,498
Accumulated depreciation & amortization (879,592) (763,093)
---------- ----------
Equipment & leasehold improvements, net 4,084,868 3,851,405
---------- ----------
Intangibles, net 694,436 701,797
Note receivable from officer -- 50,000
Other assets 1,028,495 1,092,058
---------- ----------
$6,248,541 $6,373,623
---------- ----------
---------- ----------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 67,947 $ 305,850
Accounts payable 709,388 419,180
Interest payable 60,931 --
Unredeemed gift certificates 39,982 125,777
Other notes payable-shareholders 200,000 --
Notes payable to bank 1,155,914 550,000
Real estate mortgage note payable 400,049 400,049
Reserve for loss on abandonment 250,000 --
---------- ----------
Total current liabilities 2,884,211 1,800,856
---------- ----------
STOCKHOLDERS' EQUITY
Common stock ($0.01 par value; 7,500,000 and 20,000,000
shares authorized; 1,910,000 shares issued and outstanding) 19,100 19,100
Additional paid-in capital 4,991,722 4,991,722
Accumulated deficit (1,646,492) (438,055)
---------- ----------
Total stockholders' equity 3,364,330 4,572,767
---------- ----------
$6,248,541 $6,373,623
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
AUSTINS STEAKS & SALOON, INC.
Consolidated Statements of Operations
for the three months ended March 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net Sales $ 2,792,906 $ 2,527,859
Costs and expenses:
Cost of sales 2,003,183 1,680,921
Restaurant operating expenses 827,885 572,055
Amortization of preopening costs -- 49,855
----------- -----------
Restaurant costs and expenses 2,831,068 2,302,831
----------- -----------
Restaurant operating income (loss) (38,162) 225,028
General and administrative 617,421 250,493
Provision for loss on restaurant closing 250,000 --
----------- -----------
Loss from operations (905,583) (25,465)
Other expenses (income):
Interest (income) expense, net 47,342 (16,308)
----------- -----------
Loss before income taxes and cumulative
effect on change in accounting principle (952,925) (9,157)
Income tax benefit -- 3,000
----------- -----------
Loss before cumulative
effect on change in accounting principle (952,925) (6,157)
Cumulative effect on prior years
of change in accounting principle (see Note 1b) (255,512) --
----------- -----------
Net loss $(1,208,437) $(6,157)
----------- -----------
----------- -----------
Net loss per share $(0.63) $(0.00)
----------- -----------
----------- -----------
Weighted average number of common shares outstanding 1,910,000 1,677,778
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
AUSTINS STEAKS & SALOON, INC.
Consolidated Statement Of Changes In Stockholders' Equity
for the three months ended March 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
---------------------- Paid-In (Accumulated
Shares Dollars Capital Deficit) Total
------- ------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1995 1,910,000 $19,100 $4,991,722 $ (438,055) $ 4,572,767
Net loss -- -- -- $ (1,208,437) $(1,208,437)
--------- ------- ---------- ------------- ------------
Balances, March 31, 1996 1,910,000 $19,100 $4,991,722 $ (1,646,492) $ 3,364,330
--------- ------- ---------- ------------- ------------
--------- ------- ---------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
AUSTINS STEAKS & SALOON, INC.
Consolidated Statements Of Cash Flows
for the three months ended March 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,208,437) $ (6,157)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Cumulative effect of change in accounting principle 255,512 --
Depreciation and amortization 123,860 62,057
Deferred income taxes -- (3,000)
Reserve for loss on restaurant closing 250,000 --
Write-off of note receivable from officer 50,000 --
Write-off of other assets 169,914 --
Changes in assets and liabilities:
Inventories (49,986) 6,786
Prepaid expenses and other current assets 32,095 (127)
Preopening costs -- (57,093)
Accounts payable 290,208 277,341
Interest payable 60,931 --
Unredeemed gift certificates (85,795) (73,951)
Due to stockholder and related parties -- (4,783)
----------- -----------
Net cash provided by (used in) operating activities (111,698) 201,073
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the maturity of certificates of deposit -- 290,000
Purchase of equipment and leasehold improvements (349,962) (566,718)
Increase in other assets (106,351) (44,466)
----------- -----------
Net cash used in investing activities (456,313) (321,184)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash overdraft (237,903) --
Payments on debt -- (990,000)
Proceeds from debt 805,914 85,925
Proceeds from the issuance of common stock -- 3,380,000
----------- -----------
Net cash provided by financing activities 568,011 2,475,925
----------- -----------
Net increase in cash and cash equivalents -- 2,355,814
Cash and cash equivalents, beginning of period -- 117,912
----------- ----------
Cash and cash equivalents, end of period $ -- $ 2,473,726
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
AUSTINS STEAKS & SALOON, INC.
Notes To Consolidated Financial Statements
(unaudited)
1. Summary of Significant Accounting Policies
a) Basis Of Presentation
In the opinion of management, the accompanying unaudited financial
statements contain all normal recurring adjustments necessary for a
fair presentation of financial position and results of operations and
cash flows for the periods presented.
A summary of the significant accounting policies followed by Austins
Steaks & Saloon, Inc. ("Austins" or the "Company") are set forth in
the Notes To Financial Statements in the company's 1995 Annual Report
on Form 10-KSB filed with the Securities and Exchange Commission.
These financial statements should be read in conjunction with the
financial statements included in the 1995 Annual Report on Form
10-KSB.
b) Change in Method of Accounting
As of January 1, 1996, the Company changed the method of accounting
for pre-opening costs. Labor costs and certain other costs relating
to opening of new restaurants will be expensed as incurred.
Previously, such costs were capitalized and amortized over a 12 month
period on a straight-line basis. Although some retailers capitalize
pre-opening costs, the Company believes expensing such costs as
incurred is preferable and results in a more meaningful presentation
of the Company's working capital. The cumulative effect of the change
of $255,412 represents the reversal of the capitalized pre-opening
costs as of December 31, 1995. The effect of this change for the
quarter ended March 31, 1996, was to decrease the loss before
cumulative effect of the change in accounting principle by $30,761
($0.02 per average common share). On a pro forma basis, had this
change occurred in the quarter ending March 31, 1995, net loss would
increase by $7,235 with a negligible effect on loss per average common
share.
2. Loss on Closing of Restaurant
On March 21, 1996 the Company closed its Columbia, Missouri restaurant. This
restaurant was closed due to its operating performance not meeting the Company's
expectations. The estimated closing costs of $250,000 consist of the non-
realizable value of the equipment and leasehold improvements, expected loss on
lease, and the related costs to dispose of the unit.
<PAGE>
3. Other Assets
Other assets consisted of the following:
<TABLE>
<CAPTION>
March 31,
1996 December 31,
(unaudited) 1995
----------- -----------
<S> <C> <C>
Investment - land $ 533,183 $ 533,183
Liquor licenses 448,988 342,637
Deposits -- 92,466
Organization costs, net 46,324 55,172
Other -- 68,600
----------- -----------
$ 1,028,495 $ 1,092,058
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
4. Notes Payable
Notes payable consisted of the following:
March 31,
1996 December 31,
(unaudited) 1995
----------- ---------
<S> <C> <C>
Note payable - shareholder (Roger Sack, due on demand, interest
rate of 1% in excess of Norwest Bank Nebraska "Base Rate") $ 200,000 $ --
----------- --------
----------- --------
Notes payable to bank:
First National Bank of Omaha (due June 1, 1996, interest rate
at bank's prime rate) 700,000 500,000
Norwest Bank Nebraska (due May 31, 1996, interest at
National Money Market rate) 300,000 100,000
First State Bank Santa Fe (due January 24, 1997, interest at
Wall Street Journal prime rate plus 2.0%, collateralized by
New Mexico liquor license #2668) 85,139 --
First State Bank Santa Fe (due October 22, 1996, interest at
Wall Street Journal prime rate plus 2.0%, collateralized by
New Mexico liquor license #2532) 70,775 --
----------- --------
$1,115,914 $550,000
----------- --------
----------- --------
Real estate mortgage note payable (Amrep Southwest, Inc.,
due October 31, 1996, interest at 11% per annum, collateralized
by Real Estate) $ 400,049 $400,049
----------- --------
----------- --------
</TABLE>
<PAGE>
5. Authorized Shares
Pursuant to stockholder approval at the Company's 1995 annual meeting, the
number of shares of common stock authorized was reduced from 20,000,000 to
7,500,000 shares. This change was filed in the office of the Secretary of State
of Delaware on January 24, 1996, and became effective on that date.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
The Company currently operates eight steakhouse restaurants: Four are located in
Omaha, Nebraska; and one each is located in Lincoln, Nebraska; Scottsdale,
Arizona; Santa Fe, New Mexico; and Albuquerque, New Mexico. The Omaha
restaurants were opened in September 1989, January 1992, December 1992, and
January 1996; the Santa Fe restaurant was opened in April 1994; the Lincoln
restaurant in December 1994; the Albuquerque restaurant was opened in February
1995; and the Scottsdale restaurant was opened in December 1995. On March 21,
1996 the company closed its Columbia, Missouri restaurant which opened in
November 1993.
RESULTS OF OPERATIONS
The following table sets forth for the periods presented the percentage
relationship to net sales of certain items included in the Consolidated
Statement of Operations.
Three Months Ended
March 31
-----------------
1996 1995
------ ------
Net sales 100% 100%
Costs and expenses:
Cost of sales 71.7 66.5
Restaurant operating expenses 29.7 22.6
Amortization of pre-opening costs -- 2.0
----- ------
Restaurant costs and expenses 101.4 91.1
----- -----
Restaurant operating income (loss) (1.4) 8.9
General and administrative 22.1 9.9
Provision for loss on restaurant closing 8.9 ( -- )
----- -----
Loss from operations (32.4) (1.0)
Other expenses (income):
Interest (income) expense, net 1.7 0.7
(Loss) before income taxes and cumulative effect
on change of accounting principle (34.1) (0.3)
Income tax (benefit) -- (0.1)
----- -----
Loss before cumulative effect
on change of accounting principle (34.1) (0.2)
Cumulative effect on prior years change in
accounting principle (9.1) --
----- -----
Net loss (43.2)% (0.2)%
------- -------
------- -------
Store data:
Number of restaurants open, beginning of period 8 6
Number of restaurants open, end of period 8 7
<PAGE>
QUARTER ENDED MARCH 31, 1996 COMPARED TO QUARTER ENDED MARCH 31, 1995
Net sales for the quarter ended March 31, 1996 were $2.8 million, an 12%
increase from the comparable 1995 period net sales of $2.5 million. Net sales
for the quarter ended March 31, 1996 include the operations of eight restaurants
for the entire period and a ninth restaurant (Omaha-Old Market) for two months.
For the quarter ended March 31, 1995 net sales include the operations of six
restaurants for the entire period, and a seventh restaurant (Albuquerque) for
approximately one month. The increase in net sales is due to the additional
restaurants in operation during 1996. Same store sales for restaurants open
more than one year decreased by 21.4%. The same store sales declines can be
partially attributed to increased competition in the Company's more mature
markets, and, to a lesser extent, traffic pattern changes due to road
construction. The Company's net sales have also been adversely impacted by the
negative effect that the addition of casino gambling has had on retail spending
in its Omaha market.
Cost of sales (consisting primarily of food, beverage, and restaurant labor
costs) increased 18% to $2.0 million (or 71.7% of net sales) for the quarter
ended March 31, 1996 from $1.7 million (or 66.5% of net sales) during the
quarter ended March 31, 1995. The increase in cost of sales is primarily due to
the additional restaurants in operation during 1996, as discussed above. The
increase as a percentage of net sales is attributed mainly to the effect that
lower same store volumes have on the fixed component of labor. The Company
expects cost of sales to approximate their current levels in future periods,
when expressed as a percentage of net sales.
Restaurant operating expenses were $827,885 (or 29.7% of net sales) for the
quarter ended March 1996, compared to $572,055 (or 22.6% of net sales) in the
comparable 1995 period. Restaurant operating expenses represent primarily the
costs of occupancy (including rent, depreciation, maintenance, and utilities),
and various related costs. The increase, as percentage of net sales, is due
primarily to the relatively fixed nature of occupancy and advertising costs of
the Company's newer restaurant locations, and lower same store sales volumes, as
described above. Initially, the Company's newer locations generally experience
lower revenue levels than the more mature locations. As a larger customer base
is developed in the newer locations, these costs should be comparable to the
Company's more mature locations, when expressed as a percentage of net sales.
There can be no assurance that the Company's newer locations will develop
significant customer bases.
Amortization of pre-opening costs was $49,855 or 2% of net sales for the quarter
ended March 31, 1995. The decrease in dollars is due to the $255,512 cumulative
effect of change in accounting principle. There were $63,348 of additional pre-
opening costs in the first quarter of 1996 related to the Company's Omaha-Old
Market restaurant. This amount has been included in restaurant operating
expenses as of March 31, 1996.
<PAGE>
General and administrative costs increased 146.5% during the first quarter ended
March 31, 1996 to $617,421 (or 22.1% of net sales) from $250,493 (or 9.9% of net
sales) in the comparable 1995 period. The increase in general and
administrative costs was primarily due to the write-off of various abandoned
assets including restaurant architectural prototype costs, computer equipment,
development costs incurred for sites not to be developed, and receivables from
the Company's former President and Chief Executive Officer which have been
determined to be uncollectible, including the $50,000 note receivable from
officer. Also included in general and administrative costs during the first
quarter ended March 31, 1996 was approximately $73,000 in marketing development
costs associated with the introduction of the Sadie Austins identity.
Interest expense for the quarter ended March 31, 1996, was $47,342 compared to
interest income of $16,308 for the comparable 1995 period. The interest expense
was due to the Company's borrowings compared to 1995 when the Company was
recognizing interest income from investments.
On March 21, 1996, the Company closed its Columbia, Missouri restaurant. This
restaurant was closed due to its operating performance not meeting the Company's
expectations. The estimated closing costs of $250,000 consist of the non-
realizable value of the equipment and leasehold improvements, expected loss on
lease, and the related costs to dispose of the unit.
The Company incurred a net loss during the first quarter of 1996 of $1,208,437.
This compares to a net loss of $6,157 in the first quarter of 1995. The
increase in net loss is primarily due to the decrease in restaurant operating
income resulting from decreased same-store sales, the increase in general and
administrative costs, interest expense, restaurant closing costs, and the
cumulative effect of the change in accounting that were discussed above.
Liquidity and Capital Resources
The Company currently has $700,000 of borrowing available to it under an
agreement with First National Bank of Omaha, at a variable interest rate which
was 9.25% at March 31, 1996. As of March 31, 1996 there was $700,000
outstanding under this agreement. Of this amount, $275,000 was used to purchase
the leasehold and other improvements from the former tenant of the real property
on which the Company's Scottsdale, Arizona restaurant is located, and a
favorable sublease of the property. The total purchase price was $325,000. The
Company continues to negotiate with prospective third parties to purchase these
rights from the Company, and ultimately become the Company's landlord for this
property. This bank agreement expires on May 31, 1996 at which time it is
expected that the agreement will be renewed, or a new agreement will be
negotiated. The Company also has $300,000 of borrowing available to it under a
note payable to Norwest Bank Nebraska, N. A., which was entered into in January
1996. Currently, the Company has $300,000 outstanding under this note at an
interest rate equal to the Norwest National Money Market Rate which was 9.25% at
March 31, 1996. The Schorr Family Company, Inc. has guaranteed the Company's
obligation under this note. This note expires on May 31, 1996 at which time it
is expected that the note will be renewed. On March 18, 1996 the Company
borrowed $200,000 from Roger D. Sack, a director of the Company, under a demand
note with an interest rate equal to the Norwest Bank Nebraska "Base Rate" plus
1%.
<PAGE>
The Company's capital requirements relate principally to the development of new
restaurants and the operation of existing restaurants. Capital expenditures
during the first three months of 1996 were $349,962 compared to $566,718 for the
comparable period in 1995.
Currently, the Company is seeking to extend the maturities of the Company's
existing debt to make the maturity dates more consistent with the cash flows of
the Company. A major shareholder has expressed the ability and intent to fund
working capital and approved capital expenditure requirements through December
31, 1996 to the extent that the Company is not able to fund such requirements
with internal funds, refinancing of existing debt, and additional financing
obtained.
<PAGE>
Part II: Other Information
Item 3. - EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibit 18 - Preferability letter from Coopers & Lybrand L.L.P. regarding
change in accounting method
b) Exhibit 27-Financial Data Schedule
c) Reports on Form 8-K
A report was filed on Form 8-K on April 17, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Austins Steaks & Saloon, Inc.
Date: 6-4-96 By: /s/ Paul C. Schorr, III
--------------------------- ---------------------------------
Paul C. Schorr, III
Its: Chairman of Board of Directors
<PAGE>
[COOPERS
&LYBRAND LETTERHEAD]
May 24, 1996
Austins Steaks & Saloon, Inc.
6940 O Street, Suite 334
Lincoln, Nebraska 68510
We are providing this letter to you for inclusion as an exhibit
to your Form 10-QSB filing pursuant to Item 601 of Regulation
S-K.
We have read management's justification for the change in
accounting from capitalizing preopening costs and amortizing
them over twelve months to the method of expensing such costs as
incurred contained in the Company's Form 10-QSB for the quarter
ended March 31, 1996. Based on our reading of the data and
discussions with Company officials of the business judgment and
business planning factors relating to the change, we believe
management's justification to be reasonable. Accordingly, in
reliance on management's determination as regards elements of
business judgment and business planning, we concur that the
newly adopted accounting principle described above is preferable
in the Company's circumstances to the method previously applied.
We have not audited any financial statements of Austins Steaks &
Saloon, Inc. as of any date or for any period subsequent to
December 31, 1995, nor have we audited the application of the
change in accounting principle disclosed in Form 10-QSB of
Austins Steaks & Saloon, Inc. for the three months ended March
31, 1996; accordingly, our comments are subject to revision on
completion of an audit of the financial statements that include
the accounting change.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 2 AND 3 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE
</LEGEND>
<CIK> 0000930686
<NAME> AUSTINS STEAKS & SALOON INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 161,899
<CURRENT-ASSETS> 278,843
<PP&E> 4,964,460
<DEPRECIATION> 879,592
<TOTAL-ASSETS> 6,248,541
<CURRENT-LIABILITIES> 2,884,211
<BONDS> 0
0
0
<COMMON> 19,100
<OTHER-SE> 3,345,230
<TOTAL-LIABILITY-AND-EQUITY> 6,248,541
<SALES> 2,792,906
<TOTAL-REVENUES> 2,792,906
<CGS> 2,831,068
<TOTAL-COSTS> 2,831,068
<OTHER-EXPENSES> 867,421
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,342
<INCOME-PRETAX> (952,925)
<INCOME-TAX> 0
<INCOME-CONTINUING> (952,925)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (255,512)<F1>
<NET-INCOME> (1,208,437)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> 0
<FN>
<F1>As of January 1, 1996, the Company changed the method of accounting
for pre-opening costs. Labor costs and certain other costs relating to opening
of new restaurants will be expensed as incurred. Previously, such costs were
capitalized and amortized over a 12 month period on a straight-line basis.
</FN>
</TABLE>
