<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 JUNE 30, 1997
[ ] 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 July 31, 1997, there were 2,331,052 shares of the issuer's common stock
outstanding.
<PAGE>
Part I: Financial Information
Item 1 - FINANCIAL STATEMENTS
AUSTINS STEAKS & SALOON, INC.
Consolidated Balance Sheets
as of June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
June 30,
1997 December 31,
(unaudited) 1996
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Inventories $ 132,182 $ 127,885
Prepaid expenses & other current assets 225,488 272,297
------------ ----------
Total current assets 357,670 400,182
------------ ----------
Equipment 1,807,395 1,790,354
Leasehold improvements 2,992,132 2,960,973
------------ ----------
4,799,527 4,751,327
Accumulated depreciation & amortization (1,392,014) (1,150,501)
------------ ----------
Equipment & leasehold improvements, net 3,407,513 3,600,826
------------ ----------
Intangibles, net 630,658 654,229
Other assets 804,188 825,552
------------ ----------
$ 5,200,029 $5,480,789
------------ ----------
------------ ----------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 98,203 $ 48,071
Accounts payable 787,449 566,635
Interest payable 5,412 10,236
Unredeemed gift certificates 32,920 89,135
Current portion of long-term debt 126,754 224,478
Notes payable to bank -- 155,914
Real estate mortgage note payable 194,141 394,141
------------ ----------
Total current liabilities 1,244,879 1,488,610
------------ ----------
Long-term debt, net of current portion 515,021 262,205
Note payable to shareholder 219,928 207,270
------------ ----------
734,949 469,475
------------ ----------
STOCKHOLDERS' EQUITY
Common stock ($0.01 par value; 7,500,000 shares
authorized; 2,331,052 shares issued and outstanding) 23,311 23,311
Additional paid-in capital 5,487,511 5,487,511
Accumulated deficit (2,290,621) (1,988,118)
------------ ----------
Total stockholders' equity 3,220,201 3,522,704
------------ ----------
$ 5,200,029 $5,480,789
------------ ----------
------------ ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
AUSTINS STEAKS & SALOON, INC.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30 ended June 30
1997 1996 1997 1996
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $2,453,438 $2,658,244 $4,890,856 $5,451,150
Costs and expenses:
Cost of sales 1,737,404 1,845,120 3,422,979 3,848,303
Restaurant operating expenses 697,446 688,724 1,418,644 1,516,609
---------- ---------- ---------- -----------
Restaurant costs and expenses 2,434,850 2,533,844 4,841,623 5,364,912
---------- ---------- ---------- -----------
Restaurant operating income 18,588 124,400 49,233 86,238
General and administrative 159,935 178,317 289,872 795,738
Provision for loss on restaurant closing - - - 250,000
---------- ---------- ---------- -----------
Loss from operations (141,347) (53,917) (240,639) (959,500)
Other expense:
Interest expense 30,212 38,281 61,864 85,623
---------- ---------- ---------- -----------
Loss before cumulative
effect of change in accounting principle (171,559) (92,198) (302,503) (1,045,123)
Cumulative effect on prior years
of change in accounting principle (see Note 1b) - - - (255,512)
---------- ---------- ---------- -----------
Net loss $(171,559) $(92,198) $(302,503) $(1,300,635)
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Net loss per share $(0.07) $(0.05) $(0.13) $(0.67)
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Weighted average number of common
shares outstanding 2,331,052 1,974,031 2,331,052 1,937,016
---------- ---------- ---------- -----------
</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 six months ended June 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In (Accumulated
Shares Dollars Capital Deficit) Total
--------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1996 2,311,052 $23,311 $5,487,511 $(1,988,118) $3,522,704
Net loss - - - $ (302,503) $ (302,503)
--------- -------- ---------- ------------- ----------
Balances, June 30, 1997 2,331,052 $23,311 $5,487,511 $(2,290,621) $3,220,201
--------- -------- ---------- ------------- ----------
--------- -------- ---------- ------------- ----------
</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 six months ended June 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (302,503) $(1,300,635)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Cumulative effect of change in accounting principle - 255,512
Depreciation and amortization 267,742 255,816
Loss on sale of equipment and assets held for sale 8,457 7,199
Reserve for loss on restaurant closing - 250,000
Write-off of note receivable from officer - 50,000
Write-off of other assets - 169,914
Write off of equipment - 23,529
Changes in assets and liabilities:
Inventories (4,297) (38,587)
Prepaid expenses and other current assets (78,439) 107,638
Accounts payable 220,814 344,696
Interest payable (4,824) 13,124
Unredeemed gift certificates (56,215) (85,457)
Reserve for loss on abandonment - (47,216)
------------- -----------
Net cash provided by operating activities 50,735 5,533
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment and assets held
for sale 120,033 9,500
Purchase of equipment and leasehold improvements (54,100) (529,051)
Change in other assets 21,364 (105,726)
------------- -----------
Net cash provided by (used in) investing
activities 87,297 (625,277)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in cash overdraft 50,132 (208,296)
Payments on debt (480,821) (2,874)
Proceeds from debt 292,657 830,914
------------- -----------
Net cash provided by (used in) financing
activities (138,032) 619,744
------------- -----------
Net increase in cash and cash equivalents - -
Cash and cash equivalents, beginning of period - -
------------- -----------
Cash and cash equivalents, end of period $ - $ -
------------ -----------
------------ -----------
</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 1996 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 1996 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 the opening of new restaurants are 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 $255,512 represents the reversal of the capitalized pre-opening
costs as of December 31, 1995.
c) New Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" (SFAS No. 128). SFAS No. 128 specifies the computation,
presentation, and disclosure requirements for earnings per share.
SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997. The Company does not expect a
material impact as a result of the adoption of SFAS No. 128.
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>
June 30,
1997 December 31,
(unaudited) 1996
----------- ------------
<C> <C> <C>
Land held for sale $ 535,039 $ 535,039
Liquor licenses 193,183 193,183
Deposits 45,615 59,894
Organization costs, net 30,351 37,436
----------- ------------
$804,188 $ 825,552
----------- -----------
----------- -----------
4. Notes Payable and Long-Term Debt
Notes payable and long-term debt consisted of the following:
June 30,
1997 December 31,
(unaudited) 1996
----------- ------------
Notes Payable:
Note payable to bank, principal and interest at 2% above the
WALL STREET JOURNAL prime rate due January 24, 1997,
collateralized by a liquor license. $ - $ 85,139
Note payable to bank, principal and interest at 2% above the
WALL STREET JOURNAL prime rate due March 10, 1997,
collateralized by a liquor license. - 70,775
----------- -----------
$ - $ 155,914
----------- -----------
----------- -----------
Real estate mortgage note payable, due in quarterly installments
of $100,000 beginning February 1, 1997, plus interest at 11% per
annum, with the unpaid principal balance due on October 31, 1997,
collateralized by real estate. $ 194,141 $ 394,141
----------- -----------
----------- -----------
Long-term Debt:
Note payable to corporation, due November 1, 2001, payable in
monthly installments of $856, including interest at 2% above the
NY Composite Prime Lending Rate. $ - $ 31,958
Note payable to bank, due in weekly installments of $5,000,
including interest at the bank's prime rate with the unpaid
principal balance due on January 16, 1998, collateralized by
substantially all assets. 293,984 454,725
Note payable to shareholder, due on December 31, 1998, interest
rate equal to the rate presently being charged by First National
Bank of Omaha. 219,928 207,270
Notes payable to bank, due March 17, 2000, payable in monthly
installments of $945, including interest at a fixed rate of 8.25%. 27,761 -
Notes payable to bank, principal and interest at the
WALL STREET JOURNAL prime rate due January 27, 1998,
guaranteed by a shareholder and collateralized by
real estate. 250,000 -
<PAGE>
Notes payable to bank, due March 25, 2000, payable in
monthly installments of $1,000, including interest at
2% above the WALL STREET JOURNAL prime rate, due March
25, 2000, collateralized by a liquor license. 70,030 -
----------- ------------
861,703 693,953
Less current portion (126,754) (224,478)
----------- ------------
Total long-term debt $ 734,949 $ 469,475
----------- ------------
----------- ------------
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 was opened 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
Statements of Operations.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100% 100% 100% 100%
Costs and expenses:
Cost of sales 70.8 69.4 70.0 70.6
Restaurant operating expenses 28.5 25.9 29.0 27.8
---- ---- ---- ----
Restaurant costs and expenses 99.3 95.3 99.0 98.4
---- ---- ---- ----
Restaurant operating income .7 4.7 1.0 1.6
---- ---- ---- ----
General and administrative 6.5 6.7 5.9 14.6
Provision for loss on restaurant closing - - - 4.6
---- ---- ---- ----
Loss from operations (5.8) (2.0) (4.9) (17.6)
Other expense:
Interest expense 1.2 1.5 1.3 1.6
Loss before cumulative effect
of change in accounting principle (7.0) (3.5) (6.2) (19.2)
Cumulative effect on prior years of change in
accounting principle - - - (4.7)
---- ---- ---- ----
Net loss (7.0)% (3.5)% (6.2)% (23.9)%
---- ---- ----- ----
---- ---- ----- ----
Store data:
Number of restaurants open, beginning of period 8 8 8 8
Number of restaurants open, end of period 8 8 8 8
</TABLE>
<PAGE>
QUARTER AND YEAR-TO-DATE ENDED JUNE 30, 1997 COMPARED TO QUARTER
ENDED JUNE 30, 1996
Net sales for the quarter ended June 30, 1997 were $2.5 million, a 7.7% decrease
from the second quarter 1996 revenues of $2.7 million. For the six months ended
June 30, 1997, net sales decreased 10.3% to $4.9 million from net sales of $5.5
million in the comparable 1996 period. For the quarters ended June 30, 1997 and
June 30, 1996, net sales include the operations of eight restaurants for the
entire period. For the year-to-date ended June 30, 1997, net sales include the
operations of eight restaurants for the entire period. For the six months ended
June 30, 1996, net sales include the operations of seven restaurants for the
entire period, an eighth restaurant (Columbia) for approximately three months
and a ninth restaurant (Old Market) for five months. During the first six
months of 1997, same store sales for restaurants open for more than one year
decreased by 8.4% primarily because of decreased revenues from the Company's
three mature Omaha stores. Increased competition, traffic pattern changes due
to road construction and the negative effect that the addition of casino
gambling has had on retail spending can be attributed to the decrease in same
store sales in the Omaha market. Excluding the three mature Omaha units, same
store sales decreased 1.9% during the first six months of 1997 compared to the
prior year. The Company has increased food promotions to help enhance same store
sales.
Cost of sales (consisting primarily of food, beverage, and restaurant labor
costs) decreased 5.8% to $1.74 million (or 70.8% of net sales) during the
second quarter of 1997, compared to $1.85 million (or 69.4% of net sales) in
the 1996 second quarter. For the six month period ended June 30, 1997, cost
of sales were $3.4 million (or 70.0% of net sales), a 11.1% decrease from
$3.8 million (or 70.6% of net sales) in the comparable 1996 period. The
increase in the cost of sales as a percentage of net sales is primarily due
the dramatic increase in meat prices while menu prices have stayed consistent
and the increase in in-store food promotions during the second quarter of
1997. The decrease in the cost of sales percentage for the six month period
of 1997 compared to the prior year is attributed to improved food and
beverage margins as a result of improved controls to reduce waste and
spoilage.
Restaurant operating expenses were $697,446 (or 28.5% of net sales) during the
second quarter of 1997, compared to $688,724 (or 25.9% of net sales) in the
comparable 1996 period. During the first six months of 1997, the costs
decreased 6.5% to $1.4 million (or 29.0% of net sales) from $1.5 million (or
27.8% of net sales) in the first six months of 1996. Restaurant operating
expenses represent primarily the costs of occupancy (including rent,
depreciation, maintenance, and utilities), and various related costs. The
increase, as a percentage of net sales, during the quarter and for the first six
months of 1997 is due primarily to the relatively fixed nature of occupancy and
advertising costs and lower same store sales volumes, as noted above.
General and administrative costs decreased 10.3% during the second quarter of
1997 to $160,000 (or 6.5% of net sales) from $178,000 (or 6.7% of net sales) in
the comparable 1996 period. For the six months ended June 30, 1997, these costs
decreased 64% to 290,000 (or 5.9% of net sales) from $796,000 (or 14.6% of net
sales) in the comparable 1996 period. The first six month period decrease is
primarily due to the write-off of various abandoned assets during the first
quarter of 1996 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 noncollectible. The decrease in the
<PAGE>
second quarter general and administrative costs from 1997 to 1996 was due to
the decrease in salaried corporate management personnel and controlling other
overhead costs.
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 Company had estimated closing costs of $250,000 consisting of
the non-realizable value of the equipment and leasehold improvements, expected
loss on the lease, and the related costs to dispose of the unit.
Interest expense approximated $30,000 during the second quarter of 1997 compared
to $38,000 in the comparable 1996 period. Year-to-date 1997 interest expense was
$62,000 compared to $86,000 in the same six month period of 1996. The decrease
in interest expense is due to the lower average borrowings for the period.
In 1996, the Company changed its method of accounting for pre-opening costs.
Labor costs and other costs relating to the opening of new restaurants are being
expensed as incurred.
As a result of the factors described above, the Company had a net loss during
the 1997 second quarter of $172,000, and a net loss for the first six months of
1997 of $303,000. This compares to net loss of $92,000 in the second quarter of
1996, and $1.3 million for the first six month period of 1996. The increase in
net loss for the second quarter is primarily due to the decrease in restaurant
operating income resulting from decreased same-store sales, and the increase in
cost of sales and restaurant operating expenses. The decrease in net loss for
the six month period is due to lower general and administrative costs, interest
expense, restaurant closing costs, and the cumulative effect of the change in
accounting principle.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has $293,984 borrowed under an agreement with First
National Bank of Omaha, at a variable interest rate which was 10.50% at June 30,
1997. The Company began paying down the principal $5,000 a week starting August
1, 1996. This bank agreement expires on January 16, 1998 at which time it is
expected that the agreement will be renewed, or a new agreement will be
negotiated.
The Company obtained a line of credit from First Bank, N.A. in January 1997, in
the amount of $395,000 at an initial interest rate of 8.25%. The line of credit
is quaranteed by a stockholder and is collaterized by the Rio Rancho land held
for sale. The Company currently has $250,000 borrowed against the line to pay
off existing debt.
The Company currently has borrowed $220,000 from The Schorr Family Company, Inc.
due December 31, 1998 with an interest rate equal to the First National Bank of
Omaha "Base Rate".
The Company's capital requirements relate principally to the operation of
existing restaurants. Capital expenditures for the first six months of 1997 were
$54,000 compared to $529,000 for the comparable period in 1996.
<PAGE>
During the second quarter of 1997, the Company sold one its liquor licenses for
$120,000, and paid off the $71,000 debt related to the asset. The Company
realized a $5,248 loss in connection with the sale of this asset.
Currently, the Company is in the process of selling a liquor license in New
Mexico and real estate in Rio Rancho which were purchased in anticipation of
opening new stores. These sales will increase working capital, support the
renovation need for the mature Omaha stores and repay the related debt
collateralized by these two assets and other various debt listed on the
balance sheet. Management believes the Company has the financial resources
in light of projected cash flow to maintain its current level of operations
throughout 1997. There can be no assurance that the Company will be
successful in its attempt to sell the assets offered for sale at a profit and
maintain profitable operations to the extent necessary to meet existing debt
service requirements.
<PAGE>
Part II: Other Information
Item 3. - EXHIBITS
a) Exhibit 27 - Financial Data Schedule
<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: 8-11-97 By: /s/ Tish Gade-Jones
--------------------------------- --------------------------------
Tish Gade-Jones
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CNOTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-K FOR THE YEAR-TO-DATE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 132,182
<CURRENT-ASSETS> 357,670
<PP&E> 4,799,527
<DEPRECIATION> 1,392,014
<TOTAL-ASSETS> 5,200,029
<CURRENT-LIABILITIES> 1,244,879
<BONDS> 0
0
0
<COMMON> 23,311
<OTHER-SE> 3,196,890
<TOTAL-LIABILITY-AND-EQUITY> 5,200,029
<SALES> 4,890,856
<TOTAL-REVENUES> 4,890,856
<CGS> 4,841,623
<TOTAL-COSTS> 4,841,623
<OTHER-EXPENSES> 289,872
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,864
<INCOME-PRETAX> (302,503)
<INCOME-TAX> 0
<INCOME-CONTINUING> (302,503)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (302,503)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> 0
</TABLE>
