<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, 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
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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, 1998, 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 March 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(unaudited) 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,305 $ -
Inventories 103,323 119,068
Prepaid expenses & other current assets 208,583 168,397
----------- -----------
Total current assets 314,211 287,465
----------- -----------
Equipment 1,444,041 1,479,162
Leasehold improvements 2,311,526 2,308,802
----------- -----------
3,755,567 3,787,964
Accumulated depreciation & amortization (1,489,286) (1,388,183)
----------- -----------
Equipment & leasehold improvements, net 2,266,281 2,399,781
----------- -----------
Intangibles, net 593,827 605,612
Other assets 784,080 786,599
----------- -----------
$ 3,958,399 $ 4,079,457
----------- -----------
----------- -----------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ - $ 53,224
Accounts payable 862,069 817,157
Interest payable 2,350 8,858
Unredeemed gift certificates 54,270 85,070
Current portion of long-term debt 738,318 119,330
----------- -----------
Total current liabilities 1,657,007 1,083,639
----------- -----------
Long-term debt, net of current portion 69,464 699,361
Note payable to shareholder 269,928 269,928
----------- -----------
339,392 969,289
----------- -----------
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 (3,548,822) (3,484,293)
----------- -----------
Total stockholders' equity 1,962,000 2,026,529
----------- -----------
$ 3,958,399 $ 4,079,457
----------- -----------
----------- -----------
</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, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Net sales $2,407,397 $2,437,418
Costs and expenses:
Cost of sales 1,647,187 1,685,575
Restaurant operating expenses 658,925 721,198
---------- ----------
Restaurant costs and expenses 2,306,112 2,406,773
---------- ----------
Restaurant operating income 101,285 30,645
General and administrative 109,768 129,937
Loss on sale of restaurant 35,000 -
---------- ----------
Loss from operations (43,483) (99,292)
Other expenses:
Interest expense 21,046 31,652
---------- ----------
Net loss $ (64,529) $ (130,944)
---------- ----------
---------- ----------
Basic and diluted net loss per share $ (0.03) $ (0.06)
---------- ----------
---------- ----------
Weighted average number of common shares
outstanding 2,331,052 2,331,052
---------- ----------
---------- ----------
</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, 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
Net loss - - - (64,529) (64,529)
--------- ------- ---------- ----------- ----------
Balances, March 31, 1998 2,331,052 $23,311 $5,487,511 $(3,548,822) $1,962,000
--------- ------- ---------- ----------- ----------
--------- ------- ---------- ----------- ----------
</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, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (64,529) $(130,944)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 116,581 134,470
Loss on sale of equipment 167 3,209
Loss on sale of restaurant 35,000 -
Changes in assets and liabilities:
Inventories 15,745 (14,418)
Prepaid expenses and other current assets (40,186) (47,539)
Accounts payable 44,912 156,671
Interest payable (6,508) (2,431)
Unredeemed gift certificates (30,800) (44,470)
--------- ----------
Net cash by provided by operating
activities 70,382 54,548
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment and restaurant 5,305 33
Purchase of equipment and leasehold improvements (11,768) (27,772)
Decrease in other assets 2,519 3,460
--------- ----------
Net cash used in investing activities (3,944) (24,279)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in cash overdraft (53,224) 13,752
Payments on debt (106,409) (206,679)
Proceeds from debt 95,500 162,658
--------- ----------
Net cash used in financing activities (64,133) (30,269)
--------- ----------
Net increase in cash and cash equivalents 2,305 -
Cash and cash equivalents, beginning of period - -
--------- ----------
Cash and cash equivalents, end of period $ 2,305 $ -
--------- ----------
--------- ----------
</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 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>
March 31,
1998 December 31,
(unaudited) 1997
----------- ------------
<S> <C> <C>
Land held for sale $535,039 $535,039
Liquor licenses 193,183 193,183
Deposits 36,140 36,115
Organization costs, net 19,718 22,262
-------- --------
$784,080 $786,599
-------- --------
-------- --------
</TABLE>
<PAGE>
3. Long-Term Debt and Note Payable to Shareholder:
Long-term debt and note payable to shareholder consisted of the following:
<TABLE>
<CAPTION>
March 31,
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 and guaranteed by a shareholder. $ 181,006 $ 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. 150,500 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. 20,804 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 a balance of principal due
upon maturity, collateralized by a liquor license. 60,472 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
--------- ---------
807,782 818,691
Less current portion (738,318) (119,330)
--------- ---------
Total long-term debt $ 69,464 $ 699,361
--------- ---------
Note payable to shareholder, principal and simple interest
at 10.25% due on December 31, 1999. $ 269,928 $ 269,928
--------- ---------
</TABLE>
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.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company currently operates seven steakhouse restaurants: Four 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, and January 1996; 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
Statement of Operations.
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1998 1997
---- ----
<S> <C> <C>
Net sales 100% 100%
Costs and expenses:
Cost of sales 68.4 69.2
Restaurant operating expenses 27.4 29.6
---- ----
Restaurant costs and expenses 95.8 98.8
---- ----
Restaurant operating income 4.2 1.2
General and administrative 4.6 5.3
Loss on sale of restaurant 1.4 -
---- ----
Loss from operations (1.8) (4.1)
Other expenses:
Interest expense 0.9 1.3
Net loss (2.7)% (5.4)%
---- ----
Store data:
Number of restaurants open,
beginning of period 8 8
Number of restaurants open,
end of period 7 8
</TABLE>
<PAGE>
QUARTER ENDED MARCH 31, 1998 COMPARED TO QUARTER ENDED MARCH 31, 1997
Net sales for the quarter ended March 31, 1998 were $2,407,000, a 1.2%
decrease from the comparable 1997 period net sales of $2,437,000. Net sales
for the quarter ended March 31, 1997 include the operations of eight
restaurants for the entire period. For the quarter ended March 31, 1998, net
sales include the operation of seven restaurants for the entire period and an
eighth restaurant (Lincoln) for two and a half months. The decrease in net
sales is due to a blizzard in Nebraska which closed five of the eight
restaurants for one weekend day in March. This snow storm accounted for
approximately a $50,000 loss in sales. The decrease in net sales is also
attributed to the Company selling the Lincoln store midway through March.
Due to poor performance, the Lincoln store was sold on March 13, 1998. Same
store sales for restaurants open more than one year (excluding the Lincoln
store) increased by 0.4%. The increase in same store sales can be attributed
to the Company's new branding campaign, "Eat Steak. Sleep Steak, Think
Steak." in the Omaha market.
Cost of sales (consisting primarily of food, beverage, and restaurant labor
costs) decreased 2.3% to $1,647,000 (or 68.4% of net sales) for the quarter
ended March 31, 1998, from $1,686,000 (or 69.2% of net sales) during the
quarter ended March 31, 1997. The decrease in cost of sales and the
percentage of net sales is attributed to improved food, beverage, and labor
margins as a result of better pricing, improved controls to reduce waste and
spoilage, a reduction in overall labor hours, and manager and employee
retention levels.
Restaurant operating expenses were $659,000 (or 27.4% of net sales) for the
quarter ended March 31, 1998, compared to $721,000 (or 29.6% of net sales) in
the comparable 1997 period. 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 decreased 15.5% during the quarter ended
March 31, 1998 to $110,000 (or 4.6% of net sales) from $130,000 (or 5.3% of
net sales) in the comparable 1997 period. The decrease in general and
administrative costs is attributable to management controlling overhead costs
and reducing corporate management personnel.
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.
Interest expense for the quarter ended March 31, 1998 was $21,000 compared to
$32,000 for the comparable 1997 period. The decrease in interest expense is
due to the consistent effort of the Company paying down its debt and more
favorable interest rates.
The Company incurred a net loss during the first quarter of 1998 of $64,529.
This compares to a net loss of $130,944 in the first quarter of 1997. The
decrease in net loss is primarily due to the
<PAGE>
decrease in overall expenses as discussed above. Expenses related to the
operating results and loss on the sale of the Lincoln store totaled $65,000.
Therefore, the 1998 first quarter results excluding the Lincoln store would
have shown a profit for the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has $181,006 borrowed under an agreement with First
National Bank of Omaha, at a variable interest rate which was 10.50% at March
31, 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 January 1997,
in the amount of $395,000 at a variable interest rate which was 8.50% at
March 31, 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 an initial interest rate of
8.50%. As of March 31, 1998, there was $150,500 outstanding under this
agreement. This line of credit is also guaranteed by a shareholder and
matures on January 3, 1999, at which time it is expected that the agreement
will be renewed, or a new agreement will be negotiated.
The Company's capital requirements relate principally to the daily operation
of existing restaurants. Capital expenditures during the first three months
of 1998 were $11,768 compared to $27,772 for the comparable period in 1997.
Currently, the Company has a signed purchase agreement for the Rio Rancho
real estate which was purchased in anticipation of opening a new store. This
sale will increase working capital, support the renovation needed for the
mature Omaha stores and repay the related $395,000 debt collateralized by
this asset in addition to other various debt listed on the balance sheet.
The Company is negotiating the sale of the liquor license in New Mexico. The
proceeds will also be used to repay debt. 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.
<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 first quarter of 1998.
<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: May 11, 1998 By: /s/ Trisha N. Gade-Jones
----------------------- -------------------------------
Trisha N. Gade-Jones
Its: Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT 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> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,305
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 103,323
<CURRENT-ASSETS> 314,211
<PP&E> 3,755,567
<DEPRECIATION> 1,489,286
<TOTAL-ASSETS> 3,958,399
<CURRENT-LIABILITIES> 1,657,007
<BONDS> 0
0
0
<COMMON> 23,311
<OTHER-SE> 1,938,689
<TOTAL-LIABILITY-AND-EQUITY> 3,958,399
<SALES> 2,407,397
<TOTAL-REVENUES> 2,407,397
<CGS> 2,306,112
<TOTAL-COSTS> 2,306,112
<OTHER-EXPENSES> 144,768
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,046
<INCOME-PRETAX> (64,529)
<INCOME-TAX> 0
<INCOME-CONTINUING> (64,529)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (64,529)
<EPS-PRIMARY> (0.03)<F1>
<EPS-DILUTED> (0.03)<F1>
<FN>
<F1> The Company did not restate the Financial Data Schedule since the
new calculation did not change values for the EPS-Primary
and the EPS-Diluted tags.
</FN>
</TABLE>
