<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, 1998
[ ] 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, 1998, there were 2,556,052 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, 1998 and December 31, 1997
<TABLE>
<CAPTION>
June 30,
1998 December 31,
(unaudited) 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Inventories $ 114,953 $ 119,068
Prepaid expenses & other current assets 233,318 168,397
----------- -----------
Total current assets 348,271 287,465
----------- -----------
Equipment 1,666,968 1,479,162
Leasehold improvements 2,578,086 2,308,802
----------- -----------
4,245,054 3,787,964
Accumulated depreciation & amortization (1,593,707) (1,388,183)
----------- -----------
Equipment & leasehold improvements, net 2,651,347 2,399,781
----------- -----------
Intangibles, net 582,041 605,612
Other assets 788,334 786,599
----------- -----------
$ 4,369,993 $4,079,457
----------- -----------
----------- -----------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 95,611 $ 53,224
Accounts payable 840,111 817,157
Interest payable 2,274 8,858
Unredeemed gift certificates 48,485 85,070
Current portion of long-term debt 776,646 119,330
----------- -----------
Total current liabilities 1,763,127 1,083,639
----------- -----------
Long-term debt, net of current portion 331,784 699,361
Note payable to shareholder 269,928 269,928
----------- -----------
601,712 969,289
----------- -----------
STOCKHOLDERS' EQUITY
Common stock ($0.01 par value; 7,500,000 shares authorized;
2,556,052 and 2,331,052 shares issued and outstanding) 25,561 23,311
Additional paid-in capital 5,654,011 5,487,511
Accumulated deficit (3,674,418) (3,484,293)
----------- -----------
Total stockholders' equity 2,005,154 2,026,529
----------- -----------
$ 4,369,993 $ 4,079,457
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
2
<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
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 2,238,459 $ 2,453,438 $ 4,645,856 $ 4,890,856
Costs and expenses:
Cost of sales 1,530,809 1,737,404 3,177,996 3,422,979
Restaurant operating expenses 621,019 697,446 1,279,944 1,418,644
----------- ----------- ----------- -----------
Restaurant costs and expenses 2,151,828 2,434,850 4,457,940 4,841,623
----------- ----------- ----------- -----------
Restaurant operating income 86,631 18,588 187,916 49,233
General and administrative 182,173 159,935 291,941 289,872
Loss on sale of restaurant - - 35,000 -
----------- ----------- ----------- -----------
Loss from operations (95,542) (141,347) (139,025) (240,639)
Other expense:
Interest expense 30,054 30,212 51,100 61,864
----------- ----------- ----------- -----------
Net loss $ (125,596) $ (171,559) $ (190,125) $ (302,503)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic and diluted net loss per share $ (0.05) $ (0.07) $ (0.08) $ (0.13)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding 2,378,030 2,331,052 2,354,671 2,331,052
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
AUSTINS STEAKS & SALOON, INC.
Consolidated Statement Of Changes In Stockholders' Equity
for the six months ended June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid-In (Accumulated
Shares Dollars Capital Deficit) Total
--------- ------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1997 2,331,052 $23,311 $5,487,511 $(3,484,293) $2,026,529
Issuance of shares 225,000 2,250 166,500 - 168,750
Net loss - - - (190,125) (190,125)
--------- ------- ----------- ------------ ----------
Balances, June 30, 1998 2,556,052 $25,561 $5,654,011 $(3,674,418) $2,005,154
--------- ------- ----------- ------------ ----------
--------- ------- ----------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
AUSTINS STEAKS & SALOON, INC.
Consolidated Statements Of Cash Flows
for the six months ended June 30, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(190,125) $(302,503)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization 232,788 267,742
Loss on sale of equipment 167 8,457
Loss on sale of restaurant 35,000 -
Changes in assets and liabilities:
Inventories 4,115 (4,297)
Prepaid expenses and other current assets (64,921) (78,439)
Accounts payable 22,954 220,814
Interest payable (6,584) (4,824)
Unredeemed gift certificates (36,585) (56,215)
------------- -------------
Net cash provided by (used in) operating activities (3,191) 50,735
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment and restaurant 5,305 120,033
Purchase of equipment and leasehold improvements (59,084) (54,100)
Change in other assets (1,735) 21,364
------------- -------------
Net cash provided by (used in) investing activities (55,514) 87,297
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in cash overdraft 42,387 50,132
Payments on debt (127,182) (480,821)
Proceeds from debt 143,500 292,657
------------- -------------
Net cash provided by (used in) financing activities 58,705 (138,032)
------------- -------------
Net increase in cash and cash equivalents - -
Cash and cash equivalents, beginning of period - -
------------- -------------
Cash and cash equivalents, end of period $ - $ -
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment and leasehold improvements acquired
through assumption of debt and issuance of stock $ 442,171 $ -
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<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 1997 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 1997 Annual Report on Form 10-KSB.
2. Other Assets
Other assets consisted of the following:
<TABLE>
<CAPTION>
June 30,
1998 December 31,
(unaudited) 1997
----------- ------------
<S> <C> <C>
Land held for sale $535,039 $535,039
Liquor licenses 193,183 193,183
Deposits 42,940 36,115
Organization costs, net 17,172 22,262
-------- --------
$788,334 $786,599
-------- --------
-------- --------
</TABLE>
6
<PAGE>
3. Long-Term Debt and Note Payable to Shareholder:
Long-term debt and note payable to shareholder consisted of the following:
<TABLE>
<CAPTION>
June 30,
1998 December 31,
(unaudited) 1997
----------- ------------
<S> <C> <C>
Note payable to bank, due in monthly installments
of $5,000, including interest at 1% above the bank's
prime rate, with the unpaid principal balance due on
January 31, 1999, collateralized by substantially all
assets of the Company, except for the assets of the
Maple Street location in Omaha, Nebraska, and
guaranteed by a shareholder. $ 166,006 $ 236,006
Note payable to bank, due January 27, 1999, interest
only payable monthly at the bank's prime rate, with principal
due upon maturity, collateralized by real estate and
guaranteed by a shareholder. 395,000 395,000
Bank line of credit in the amount of $210,000, due January 3,
1999, interest only payable monthly at the bank's prime rate,
with principal due upon maturity and guaranteed by a shareholder. 198,500 55,000
Note payable to bank, due March 17, 2000, payable in monthly
installments of $945, including interest at 8.25% per annum,
with balance of principal due upon maturity. 18,392 23,177
Note 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, with balance of principal due
upon maturity, collateralized by a liquor license. 59,850 65,367
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
January 31, 1998, collateralized by real estate. - 44,141
Note payable to bank, due October 2, 2003, payable in monthly
installments of $1,976.89, including interest at 9.75% per annum,
with balance of principal due upon maturity, collateralized by
substantially all assets of the Maple Street restaurant, in
Omaha, Nebraska. 97,123 -
Note payable, due August 15, 2001, payable in monthly
installments of $1,620.12, including interest at 9% per annum,
with the unpaid principal balance due upon maturity and
guaranteed by a shareholder. 173,559 -
--------- ---------
1,108,430 818,691
Less current portion (776,646) (119,330)
--------- ---------
Total long-term debt $ 331,784 $ 699,361
--------- ---------
--------- ---------
Note payable to shareholder, principal and simple interest
at 10.25% due on December 31, 1999. $ 269,928 $ 269,928
--------- ---------
--------- ---------
</TABLE>
7
<PAGE>
4. Sale of Restaurant
On March 13, 1998, the Company finalized an agreement which resulted in
assignment of the lease on the Lincoln store and transfer of certain
personal property to a family-run restaurant business ("buyer") at a sales
price of $40,000. The conditions of assignment included a guarantee to the
lessor by the Company of performance of the lease for the duration of the
lease term, which runs through February 2014. Additionally, the lessor has
secured a personal guarantee by a majority shareholder of the Company in
the amount of $40,000. The Lincoln store operations ceased on March 17,
1998.
5. Acquisition of Restaurant
On June 12, 1998, the Company purchased the equipment and leasehold
improvements of another restaurant in Omaha, Nebraska. The assets acquired
were recorded on the Company's balance sheet at fair market value. As
consideration for the purchase, the Company issued 225,000 shares of its
own common stock to the restaurant corporation. The shares issued were
valued at the closing market price on June 12, 1998. In addition, the
Company assumed two additional notes payable totaling $273,421. The Company
opened the new location on June 20, 1998.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company currently operates eight steakhouse restaurants: Five are located
in Omaha, Nebraska; and one each is located in Scottsdale, Arizona; Santa Fe,
New Mexico; and Albuquerque, New Mexico. The Omaha restaurants were opened in
September 1989, January 1992, December 1992, January 1996 and June 1998; the
Santa Fe restaurant was opened in April 1994; the Albuquerque restaurant was
opened in February 1995; and the Scottsdale restaurant was opened in December
1995. The Lincoln restaurant was sold in March 1998.
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
--------------------- -------------------
1998 1997 1998 1997
------ ------ ------ -----
<S> <C> <C> <C> <C>
Net sales 100% 100% 100% 100%
Costs and expenses:
Cost of sales 68.4 70.8 68.4 70.0
Restaurant operating expenses 27.7 28.5 27.6 29.0
----- ----- ----- -----
Restaurant costs and expenses 96.1 99.3 96.0 99.0
----- ----- ----- -----
Restaurant operating income 3.9 .7 4.0 1.0
----- ----- ----- -----
General and administrative 8.2 6.5 6.3 5.9
Loss on sale of restaurant - - .7 -
----- ----- ----- -----
Loss from operations (4.3) (5.8) (3.0) (4.9)
Other expense:
Interest expense 1.3 1.2 1.1 1.3
Net loss (5.6)% (7.0)% (4.1)% (6.2)%
===== ===== ===== =====
Store data:
Number of restaurants open, beginning of period 7 8 8 8
Number of restaurants open, end of period 8 8 8 8
</TABLE>
9
<PAGE>
QUARTER AND YEAR-TO-DATE ENDED JUNE 30, 1998 COMPARED TO QUARTER
ENDED JUNE 30, 1997
Net sales for the quarter ended June 30, 1998 were $2.2 million, a 8.8%
decrease from the second quarter 1997 revenues of $2.5 million. For the six
months ended June 30, 1998, net sales decreased 5.0% to $4.6 million from net
sales of $4.9 million in the comparable 1997 period. For the quarter ended
June 30, 1998, net sales include the operations of seven restaurants for the
entire period and an eighth restaurant (Maple Street restaurant in Omaha) for
eleven days. For the year-to-date ended June 30, 1998, net sales include the
operations of seven restaurants for the entire period, an eighth restaurant
(Lincoln) for two and a half months and a ninth restaurant (Maple Street) for
eleven days. For the quarter and year-to-date ended June 30, 1997, net sales
include the operations of eight restaurants for the entire period. The
decrease in net sales is due to one less restaurant three months out of the
six month period in 1998. During the first six months of 1998, same store
sales for restaurants open for more than one year decreased by 0.1% primarily
because of a blizzard in Nebraska which closed five of the eight restaurants
for one weekend day in March.
Cost of sales (consisting primarily of food, beverage, and restaurant labor
costs) decreased 11.9% to $1.53 million (or 68.4% of net sales) during the
second quarter of 1998, compared to $1.74 million (or 70.8% of net sales) in
the 1997 second quarter. For the six month period ended June 30, 1998, cost
of sales were $3.2 million (or 68.4% of net sales), a 7.2% decrease from $3.4
million (or 70.0% of net sales) in the comparable 1997 period. The decrease
in the cost of sales and the percentage of net sales is attributed to one less
restaurant three months out of the six month period, as discussed above, in
addition to, a decrease in in-store food promotions.
Restaurant operating expenses were $621,000 (or 27.7% of net sales) during
the second quarter of 1998, compared to $697,000 (or 28.5% of net sales) in
the comparable 1997 period. During the first six months of 1998, the costs
decreased 9.8% to $1.3 million (or 27.6% of net sales) from $1.4 million (or
29.0% of net sales) in the first six months of 1997. Restaurant operating
expenses represent primarily the costs of occupancy (including rent,
depreciation, maintenance, and utilities), and various related costs. The
decrease, as a percentage of net sales, is due to the conscious effort of
restaurant management in controlling variable expenses such as operating
supplies and equipment maintenance.
General and administrative costs increased 13.9% during the second quarter of
1998 to $182,000 (or 8.2% of net sales) from $160,000 (or 6.5% of net sales)
in the comparable 1997 period. For the six months ended June 30, 1998, these
costs increased 0.6% to 292,000 (or 6.3% of net sales) from $290,000 (or 5.9%
of net sales) in the comparable 1997 period. The increase in general and
administrative costs during the second quarter is primarily due the
settlement of two lawsuits within the ordinary course of business during the
second quarter of 1998.
On March 13, 1998, the Company finalized an agreement which resulted in an
assignment of the lease on the Lincoln store and transfer of certain personal
property to a family-run restaurant business. The $35,000 relates to real
estate agent fees paid by the Company to sell the Lincoln restaurant. The
Lincoln store operations ceased on March 17, 1998. The non-realizable value
of the equipment and leasehold improvements were considered in management's
estimate of the store's impairment loss taken during the fourth quarter of
1997.
10
<PAGE>
Interest expense approximated $30,054 during the second quarter of 1998
compared to $30,212 in the comparable 1997 period. Year-to-date 1998 interest
expense was $51,100 compared to $61,864 in the same six month period of 1997.
The decrease in interest expense is due to the lower average borrowings for
the six month period.
The Company incurred a net loss during the 1998 second quarter of $126,000,
and a net loss for the first six months of 1998 of $190,000. This compares to
net loss of $172,000 in the second quarter of 1998, and $303,000 for the
first six month period of 1997. The decrease in net loss is primarily due to
the decrease in store expenses as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has $166,006 borrowed under an agreement with First
National Bank of Omaha, at a variable interest rate which was 10.50% at June
30, 1998. The Company is paying $5,000 a month in principal plus interest.
This bank agreement is guaranteed by a shareholder and matures on January 31,
1999, 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 U.S. Bank, N.A., in the amount of
$395,000 at a variable interest rate which was of 8.5% at June 30, 1998. The
line of credit is guaranteed by a stockholder and is collateralized by the
Rio Rancho land held for sale. The Company currently has $395,000 borrowed
against the line to pay off existing debt. This line of credit matures on
January 27, 1999.
The Company currently has borrowed $269,928 from The Schorr Family Company,
Inc. due December 31, 1999 with an interest rate equal to the First National
Bank of Omaha "Base Rate".
On November 3, 1997, the Company entered into another line of credit with
U.S. Bank, N.A. in the amount of $210,000 at a variable interest rate which
was 8.5% at June 30, 1998. Currently, the Company has $198,500 outstanding
under this agreement. This line of credit is also guaranteed by a shareholder
and matures on January 3, 1999, at which time it expected that the agreement
will be renewed, or a new agreement will be negotiated.
On June 12, 1998, the Company purchased the assets and leasehold improvements
of another restaurant in Omaha, Nebraska. As consideration for the purchase,
the Company issued 225,000 shares of its own common stock to the restaurant
corporation. In addition, the Company also assumed two additional notes
payable totaling $270,682 as of June 30, 1998. The Company's Maple location
in Omaha, Nebraska was opened on June 20, 1998.
The Company's capital requirements relate principally to the operation of
existing restaurants. Capital expenditures for the first six months of 1998
were $59,000 compared to $54,000 for the comparable period in 1997.
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.
11
<PAGE>
Management believes the Company has the financial resources in
light of projected cash flow to maintain its current level of operations
throughout 1998. 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.
12
<PAGE>
Part II: Other Information
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K:
No reports on Form 8-K were filed during the second quarter of 1998.
13
<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: August 6, 1998 By: /s/ Tish Gade-Jones
---------------------------- ------------------------
Tish Gade-Jones
Chief Financial Officer
14
<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 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 114,953
<CURRENT-ASSETS> 348,271
<PP&E> 4,245,054
<DEPRECIATION> 1,593,707
<TOTAL-ASSETS> 4,369,993
<CURRENT-LIABILITIES> 1,763,127
<BONDS> 0
0
0
<COMMON> 25,561
<OTHER-SE> 1,979,593
<TOTAL-LIABILITY-AND-EQUITY> 4,369,993
<SALES> 4,645,856
<TOTAL-REVENUES> 4,645,856
<CGS> 4,457,940
<TOTAL-COSTS> 4,457,940
<OTHER-EXPENSES> 326,941
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,100
<INCOME-PRETAX> (190,125)
<INCOME-TAX> 0
<INCOME-CONTINUING> (190,125)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (190,125)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
