SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 6, 1996
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or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 33-95796
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CLUCKCORP INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 76-0406417
------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1250 N.E. Loop 410, Suite 335 San Antonio, Texas 78209
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(210) 824-2496
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(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
2,108,750 shares as of November 11, 1996
<PAGE>
CLUCKCORP INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets - 3
October 6, 1996 and December 31, 1995
Statements of Operations - 4
12 Weeks Ended
October 6, 1996 and October 8, 1995
Statements of Operations - 5
40 Weeks Ended
October 6, 1996 and October 8, 1995
Statements of Cash Flows - 6
40 Weeks Ended
October 6, 1996 and October 8, 1995
Notes to Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 9
PART II. OTHER INFORMATION 12
NONE
SIGNATURES 12
2
<PAGE>
CLUCKCORP INTERNATIONAL, INC.
Balance Sheets (Unaudited)
October 6, December 31,
1996 1995
---------- -----------
ASSETS
Current Assets
Cash and cash equivalents $2,773,717 $ 126,447
Inventories 3,654 5,044
Prepaid expenses 400 119,364
Deferred loan costs - 24,710
Note receivable from stockholder 30,000 40,000
----------- ----------
Total Current Assets 2,807,771 315,565
Property and Equipment 544,293 193,980
Less accumulated depreciation ( 77,702) ( 43,112)
----------- -----------
466,591 150,868
Other Assets
Intangible property rights, net
of amortization of $148,554 in
1996 and $99,875 in 1995 268,126 299,625
Deposits 21,766 25,007
Other assets 55,158 34,780
----------- ----------
345,050 359,412
----------- ----------
$3,619,412 $ 825,845
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bridge notes payable, net of
unamortized discount of $-0- in
1996 and $133,523 in 1995 $ - $ 940,977
Accounts payable, trade 167,142 161,642
Accrued liabilities 48,644 89,043
Note payable to bank 200,000 -
---------- ----------
Total Current Liabilities 415,786 1,191,662
Common stock subject to rescission,
118,750 shares in 1996 and 57,750
shares in 1995 405,702 195,818
Stockholders' Equity (Deficit)
Preferred stock - $1.00 par value,
authorized 5,000,000, none issued - -
Common stock - $.01 par value,
authorized 10,000,000, issued
1,990,000 in 1996 and 990,000 1995 19,900 9,900
Additional paid-in capital 5,724,297 994,007
Accumulated deficit (2,946,273) (1,565,542)
----------- -----------
Total Stockholders' Equity (Deficit) 2,797,924 ( 561,635)
----------- -----------
$3,619,412 $ 825,845
=========== ==========
See notes to financial statements (unaudited).
3
<PAGE>
CLUCKCORP INTERNATIONAL, INC.
Statements of Operations (Unaudited)
12 Weeks Ended
-----------------------------
October 6, October 8,
1996 1995
----------- -----------
Revenues
Restaurants $ 47,430 $ 42,914
Costs and Expenses
Cost of food and paper 21,105 15,505
Restaurant salaries and benefits 25,879 27,095
Occupancy and related expenses 16,070 15,615
Operating expenses 18,500 13,036
General and administrative expenses 216,296 134,910
Preopening expenses 28,288 18,000
Depreciation and amortization 21,366 15,007
----------- ----------
Total costs and expenses 347,504 239,168
----------- ----------
Loss from operations ( 300,074) ( 196,254)
Other income (expense)
Interest income 21,681 -
Interest and debt discount expense ( 3,799) ( 29,057)
----------- -----------
17,882 ( 29,057)
----------- -----------
Net loss $( 282,192) $( 225,311)
=========== ===========
Net loss per common share $( .13) $( .18)
=========== ===========
Weighted average number of common
and common equivalent shares
outstanding 2,108,750 1,223,958
=========== ==========
See notes to financial statements (unaudited).
4
<PAGE>
CLUCKCORP INTERNATIONAL, INC.
Statements of Operations (Unaudited)
40 Weeks Ended
------------------------------
October 6, October 8,
1996 1995
----------- ----------
Revenues
Restaurants $ 157,827 $ 184,997
Area development fee, stockholder - 50,000
---------- ----------
157,827 234,997
Costs and Expenses
Cost of food and paper 68,624 67,068
Restaurant salaries and benefits 87,846 94,336
Occupancy and related expenses 46,426 44,899
Operating expenses 51,595 61,349
General and administrative expenses 718,754 362,974
Preopening expenses 63,044 31,862
Depreciation and amortization 73,165 44,812
----------- ----------
Total costs and expenses 1,109,454 707,300
----------- ----------
Loss from operations ( 951,627) ( 472,303)
Other income (expense)
Interest income 22,392 -
Interest and debt discount expense ( 451,496) ( 44,806)
----------- ----------
( 429,104) ( 44,806)
Net loss $(1,380,731) $(517,109)
============ ==========
Net loss per common share $( 1.00) $( .43)
============ ==========
Weighted average number of common
and common equivalent shares
outstanding 1,386,661 1,216,287
============ ==========
See notes to financial statements (unaudited)
5
<PAGE>
<TABLE>
<CAPTION>
CLUCKCORP INTERNATIONAL, INC.
Statements of Cash Flows (Unaudited)
40 Weeks Ended
----------------------------------
October 6, October 8,
1996 1995
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<S> <C> <C>
Operating Activities:
Net loss for the period $(1,380,731) $( 517,109)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 73,165 44,812
Amortization of bridge note discount 367,153 14,362
Changes in operating assets and
liabilities:
Inventories 1,390 ( 3,175)
Prepaid expenses 118,964 ( 116,553)
Deferred loan costs 24,710 ( 15,465)
Other current assets 10,000 ( 40,000)
Accounts payable and accrued
liabilities ( 34,899) 90,140
----------- -----------
Net cash (used) in
operating activities ( 820,248) ( 542,988)
Investing Activities:
Purchase of property and equipment ( 350,313) ( 1,627)
Additions to deposits and other assets ( 24,213) ( 57,442)
----------- ------------
Net cash (used) in
investing activities ( 374,526) ( 59,069)
Financing Activities:
Net proceeds from sale of
common stock and warrants 4,740,290 _
Net proceeds from issuance of
common stock subject to rescission 209,884 76 865
Proceeds from issuance of bridge notes
payable, net of discount 376,370 546,825
Proceeds from bank borrowing 200,000 -
Repayments of bridge notes payable (1,684,500) -
Repayments of stockholder advances - ( 16,889)
----------- ------------
Net cash provided by
financing activities 3,842,044 606,801
----------- -----------
Net increase in cash 2,647,270 4,744
Cash at beginning of period 126,447 42,711
----------- -----------
Cash at end of period $2,773,717 $ 47,455
=========== ===========
Supplemental disclosure of
cash flow information:
Interest paid $ 130,243 $ -
=========== ===========
Federal income taxes paid $ - $ -
=========== ===========
See notes to financial statements (unaudited).
6
</TABLE>
<PAGE>
CLUCKCORP INTERNATIONAL, INC.
Notes to Financial Statements (Unaudited)
NOTE A - ORGANIZATION AND BASIS OF PRESENTATION
Organization - CluckCorp International, Inc. (the "Company") intends to own,
operate and franchise quick service restaurants under the name "Harvest
Rotisserie". To date the Company has one restaurant in operation in San
Antonio, Texas under the name "Cluckers" which it utilizes as a both a
training facility and a public restaurant which it intends to convert to a
Harvest Rotisserie restaurant.
Basis of Presentation - The accompanying unaudited financial statements have
been prepared by the Company, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The information furnished herein
reflects all adjustments (consisting of normal recurring accruals and
adjustments) which are, in the opinion of management, necessary to fairly
state the operating results for the respective periods. The results of
operations for the 40 weeks ended October 6, 1996 may not be indicative of
the results for the full fiscal year.
The report of the Company's independent accountants related to the fiscal
year ended December 31, 1995 financial statements contains an explanatory
paragraph referring to an uncertainty concerning the Company's ability to
continue as a going concern. The December 31, 1995 financial statements have
been prepared assuming the Company will be able to continue as a going
concern. The Company incurred net losses of $924,483 during the year ended
December 31, 1995 and $1,380,731 during the 40 weeks ended October 6, 1996.
The Company's continuation as a going concern is dependent upon its ability
to successfully expand its base of operations and generate sufficient cash
flow to meet its obligations on a timely basis.
The Company consummated an initial public offering of its common stock
on July 15, 1996. See Note C.
NOTE B - FISCAL YEAR
In 1996, the Company adopted a 52/53-week fiscal year ending on the last
Sunday in December. The fiscal year is divided into thirteen four-week
periods. The first quarter consists of four periods and each of the
remaining three quarters consists of three periods, with the first, second
and third quarters ending 16 weeks, 28 weeks and 40 weeks respectively, into
the fiscal year.
7
<PAGE>
NOTE C - INITIAL PUBLIC OFFERING
On July 9, 1996, the Company's Registration Statement on Form SB-2 was
declared effective by the Securities and Exchange Commission. On July 15,
1996, the Company consummated an initial public offering of 1,000,000 shares
of its common stock at $5.50 per share and 2,000,000 redeemable common stock
purchase warrants at $.125 per warrant and received approximately $4.7
million in proceeds from the offering, net of underwriting discount and
other expenses of the offering of approximately $1 million. The Company
applied $1,684,500 of the proceeds along with accrued interest of $130,243
to retire outstanding bridge notes payable to unaffiliated individuals.
On July 26, 1996, the Underwriters exercised an over-allotment option for
300,000 warrants at $.125 per warrant, and the Company received $33,750 in
proceeds, net of underwriting discount.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Forward-looking Statements:
Except for the historical information contained herein, the matters set
forth in this report are forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks are detailed in
the Company's initial registration statement filed in July 1996 with the
Securities and Exchange Commission. These forward-looking statements speak only
as of the date hereof. The Company disclaims any intent or obligation to update
these forward-looking statements.
Results of Operations - For the 12 and 40 week periods ended October 6, 1996
compared to the 12 and 40 week periods ended October 8, 1995.
Revenues. Restaurant revenues for each period were derived entirely from the
Company's one restaurant located in San Antonio, Texas. Restaurant revenues for
the 12 week period ended October 6, 1996 were $47,430, a 10.5% increase as
compared to the same period in 1995. However, year to date revenues for the 40
week period were $157,827, a decrease of 14.7% as compared to the same period in
1995. The year to date decrease in revenues was due in part to a reduction in
the restaurant operating hours which was implemented during the third quarter of
1995. The restaurant is currently open five days each week from 11 a.m. to 7
p.m. and is being used as a training facility. Restaurant revenues during the
first 40 weeks of 1996 were approximately 30% of capacity for the restaurant and
below the restaurant's operating costs. Management attributes the low sales
volumes to the lack of a drive-through window at the restaurant, which is
located in a shopping center. It is the Company's plan that most new Restaurants
will be free-standing with drive-through windows.
In the prior year, during the 40 week period ended October 8, 1995 the
Company sold an area development license for $50,000 to a stockholder of the
Company.
Costs and Expenses. Cost of food and paper were 44.5% and 43.5% of
restaurant revenues for the 12 and 40 week periods ended October 6, 1996, as
compared to 36.1% and 36.3% for the same periods in 1995. The increase in food
and paper costs resulted primarily from food usage for recipe development for
the Company's expanded Harvest Rotisserie menu.
Restaurant salaries, benefits, occupancy and related expenses, and operating
expenses include all other restaurant level operating expenses, the major
components of which are direct and indirect labor, payroll taxes and benefits,
operating supplies, rent, advertising, repairs and maintenance, utilities, and
other occupancy costs. The combined total of these expenses was 127% and 118% of
restaurant revenues for the 12 and 40 week periods ended October 6, 1996, as
compared to 130% and 108% for the same comparable periods in 1995. A substantial
portion of these costs are fixed or indirectly variable and therefore were
disproportionate to revenues for both periods due to low sales volumes.
General and administrative expenses increased 65% and 104% for the 12 and 40
week periods ended October 6, 1996 as compared to the same periods in 1995. The
increase resulted from the establishment of the Company's corporate offices in
1996 and expenses associated with company's financing, franchising, and
expansion activities.
Preopening expenses increased by $10,288 and $31,182 for the 12 and 40 week
periods ended October 6, 1996 as compared to the same periods in 1995. The
increase relates to initial costs associated with the development of a new
Harvest Rotisserie restaurant which is anticipated to open in the fourth quarter
of 1996.
9
<PAGE>
Interest and debt discount expense. Interest and debt discount expense
decreased $25,258 for the 12 weeks ended October 6, 1996 as compared to the same
period in 1995. The decrease was due to the repayment of all outstanding bridge
notes on July 15, 1996. Year to date interest and debt discount expense increase
$406,690 for the 40 weeks ended October 6, 1996 as compared to 1995. The
significant year to date increase relates to the issuance of $1,187,500 face
amount of 10% bridge notes from August 1995 to March 1996. The total amount of
amortized debt issue discount in 1996 was $367,153.
Net Loss. The Company incurred net losses of $282,192 and $1,380,731 for the
12 and 40 week periods ended October 6, 1996 as compared to $225,311 and
$517,109 for the same periods in 1995. The increase in the year to date net loss
for 1996 was primarily the result of significantly higher interest and debt
discount expense and general and administrative expenses. The Company expects to
incur losses in future periods until it generates sufficient revenues from
expanded restaurant operations or its franchising activities to offset ongoing
operating and expansion costs.
Liquidity and Capital Resources
The Company has incurred losses from operations since inception and as of
October 6, 1996 has an accumulated deficit of $2,946,273. The Company is not
presently generating sufficient revenues to meet its operating needs. Management
anticipates that it will need to open five additional restaurants to generate a
positive cash flow and achieve profitability, although there can be no such
assurance.
The Company requires capital principally for the expansion of its restaurant
operations and to fund the costs associated with the promotion of its franchise
program. The Company does not have a working line of credit, but intends to
apply for such a line with a financial institution. On July 9, 1996, the
Company's registration statement on Form SB-2 was declared effective by the
Securities and Exchange Commission. On July 15, 1996, the Company consummated an
initial public offering of 1,000,000 shares of its common stock at $5.50 per
share and 2,000,000 redeemable common stock purchase warrants at $.125 per
warrant. Net proceeds of the offering were approximately $4.7 million after
deducting commissions and other expenses of the offering of approximately $1.0
million.
Between December 1994 and March 1996, the Company issued a total of
$1,684,500 of 10% unsecured promissory notes ("Bridge Notes"). The notes were
issued to individuals in four separate private offerings as follows; (i)
$497,000 completed May 1995, (ii) $225,000 in August 1995, (iii) $352,500 in
November 1995, and (iv) $610,000 in March 1996. Proceeds from the bridge
financing were used for working capital purposes, development of a franchising
program and to pay certain costs associated with the public offering of the
Company's common stock. The bridge notes were repaid on July 15, 1996 using a
portion of the proceeds from the Company's initial public offering.
10
<PAGE>
The Company intents to open up to six Company-owned restaurants and up to
five joint ventured restaurants during the next 12 months. The Company estimates
the total development costs, which includes leasehold improvements, furniture,
fixtures, equipment and preopening costs of opening a typical restaurant in a
leased facility will average approximately $325,000 and that its investment in
joint ventured restaurants will average $150,000 for each restaurant. If the
land and building are purchased, the purchase price and related acquisition
expenses would be significantly higher. In May 1996, the Company began
development of a new Harvest Rotisserie restaurant in San Antonio, Texas, which
is anticipated to open in the fourth quarter of 1996.
The Company anticipates that approximately $100,000 will be required to
promote its franchise program. In March 1995, the Company executed an area
development agreement with an affiliate to develop up to ten restaurants in
Singapore and has executed a nonbinding letter of intent to sell area
development rights to a third party pursuant to which the third party would have
the right but not the obligation to develop at its expense up to 50 Harvest
Rotisserie restaurants in the Baltimore, Maryland area. The Company has not yet
operated any nor opened any Harvest Rotisserie franchised Restaurants.
The Company anticipates that the proceeds from the public offering along
with anticipated cash flows from future restaurant operations will enable it to
complete its initial expansion plans and maintain its current operations for at
least the next 12 months.
11
<PAGE>
PART II - OTHER INFORMATION
NONE
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 thereunto duly authorized.
CLUCKCORP INTERNATIONAL, INC.
Date: November 4, 1996 By: s/ William J.Gallagher
---------------- ----------------------------------------
William J. Gallagher,
Chairman of the Board
(Duly Authorized Signatory)
Date: November 4, 1996 By: s/ D.W. Gibbs
---------------- ----------------------------------------
D.W. Gibbs,
Chief Executive Officer and
President
(Duly Authorized Signatory)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FORM 10-QSB FOR THE QUARTER ENDED OCTOBER 6, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> OCT-06-1996
<CASH> 2,773,717
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3,654
<CURRENT-ASSETS> 2,807,771
<PP&E> 544,293
<DEPRECIATION> (77,702)
<TOTAL-ASSETS> 3,619,412
<CURRENT-LIABILITIES> 415,786
<BONDS> 0
0
0
<COMMON> 19,900
<OTHER-SE> 2,778,024
<TOTAL-LIABILITY-AND-EQUITY> 3,619,412
<SALES> 157,827
<TOTAL-REVENUES> 157,827
<CGS> 68,624
<TOTAL-COSTS> 202,896
<OTHER-EXPENSES> 51,595
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 451,496
<INCOME-PRETAX> (1,380,731)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,380,731)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,380,731)
<EPS-PRIMARY> (1.00)
<EPS-DILUTED> (1.00)
</TABLE>
