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 April 20, 1997
---------------
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
-----------------------------
(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:
2,366,030 shares as of June 2, 1997
<PAGE>
CLUCKCORP INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
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ITEM 1. FINANCIAL STATEMENTS
Balance Sheets - 3
April 20, 1997 and December 29, 1996
Statements of Operations - 4
16 Weeks Ended
April 20, 1997 and April 21, 1996
Statements of Cash Flows - 5
16 Weeks Ended
April 20, 1997 and April 21, 1996
Notes to Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION 11
NONE
SIGNATURES 11
2
<PAGE>
<TABLE>
<CAPTION>
CLUCKCORP INTERNATIONAL, INC.
Balance Sheets
April 20, December 29,
1997 1996
----------- ------------
(unaudited)
ASSETS
Current Assets
<S> <C> <C>
Cash $ 517,186 $ 1,271,443
Cash, restricted 200,000 220,000
Inventories 23,783 8,658
Other current assets 39,646 10,590
----------- -----------
Total current assets 780,615 1,510,691
Property and Equipment, net 1,732,381 1,156,362
Other Assets
Intangible property rights, net
of amortization of $152,117 in
1997 and $139,825 in 1996 247,383 259,675
Deposits 230,279 83,257
Other assets 188,886 127,727
----------- -----------
666,548 470,659
----------- -----------
$ 3,179,544 $ 3,137,712
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 337,627 $ 134,204
Accrued liabilities 226,634 220,406
Note payable to bank, current 211,004 200,000
----------- -----------
Total Current Liabilities 775,265 554,610
Note payable to bank, less current
portion 49,860 --
Commitments and contingencies
Stockholders' Equity
Preferred stock -- --
Common stock - $.01 par value,
authorized 10,000,000, issued
2,366,030 in 1997 and 2,112,750 1996 23,660 21,128
Additional paid-in capital 6,705,113 6,138,770
Accumulated deficit (4,374,354) (3,576,796)
----------- -----------
Total Stockholders' Equity 2,354,419 2,583,102
----------- -----------
$ 3,179,544 $ 3,137,712
=========== ===========
See notes to financial statements (unaudited).
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLUCKCORP INTERNATIONAL, INC.
Statements of Operations (Unaudited)
16 Weeks Ended
-----------------------------------
April 20, April 21,
1997 1996
---------- -----------
Revenues
<S> <C> <C>
Restaurants $ 446,994 $ 63,138
Costs and Expenses
Cost of food and paper 230,248 23,734
Restaurant salaries and benefits 234,685 23,854
Occupancy and related expenses 65,012 16,747
Operating expenses 140,219 20,242
Preopening expenses 86,314 9,493
General and administrative expenses 436,505 169,945
Depreciation and amortization 60,635 30,824
----------- -----------
Total costs and expenses 1,253,618 294,839
----------- -----------
Loss from operations (806,624) (231,701)
Other income (expense)
Interest income 16,882 --
Interest and debt discount expense (7,816) (177,319)
----------- -----------
9,066 (177,319)
----------- -----------
Net loss $ (797,558) $ (409,020)
=========== ===========
Net loss per common share $ (.34) $ (.32)
=========== ===========
Weighted average number of common
and common equivalent shares
outstanding 2,316,279 1,285,699
=========== ===========
</TABLE>
See notes to financial statements (unaudited).
4
<PAGE>
<TABLE>
<CAPTION>
CLUCKCORP INTERNATIONAL, INC.
Statements of Cash Flows (Unaudited)
16 Weeks Ended
-----------------------------
April 20, April 21,
1997 1996
------------ -----------
Operating Activities:
<S> <C> <C>
Net loss for the year $ (797,558) $ (409,020)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 60,635 30,824
Amortization of bridge note discount -- 136,855
Changes in operating assets and
liabilities:
Cash, restricted 20,000 --
Inventories (15,125) (1,875)
Deferred financing costs -- (10,701)
Other current assets (29,056) 10,000
Accounts payable and accrued
expenses 209,651 81,060
----------- -----------
Net cash (used) in operating activities (551,453) (162,857)
Investing Activities:
Purchases of property and equipment (555,021) (73,255)
Increase in deposits and other assets (212,522) (81,927)
----------- -----------
Net cash (used) in investing activities (767,543) (155,182)
Financing Activities:
Net proceeds from sale of common
stock and warrants 568,875 --
Net proceeds from sale of common
stock subject to rescission -- 209,884
Proceeds from issuance of bridge notes
payable -- 376,370
Repayments of bank borrowings (4,136) --
----------- -----------
Net cash provided by
financing activities 564,739 586,254
----------- -----------
Net increase (decrease) in cash (754,257) 268,215
Cash at beginning of period 1,271,443 126,447
----------- ------------
Cash at end of period $ 517,186 $ 394,662
=========== ===========
See notes to financial statements (unaudited).
5
</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 three restaurants in
operation in San Antonio, Texas and one restaurant in Corpus Christi,
Texas. The restaurants provide high quality, quick service food featuring
marinated oak-roasted rotisserie chicken, oak-roasted turkey breast, roast
ham, meatloaf, an assortment of sandwiches and other fresh homestyle food
items.
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 16 weeks ended April 20, 1997 may not be indicative of
the results for the full fiscal year.
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.
NOTE C - IMPACT OF NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, effective for fiscal years ending after
December 15, 1997. Implementation of this Statement is not expected to have
a significant impact on the earnings per share calculation of the Company.
NOTE D - SUBSEQUENT EVENT
In May 1997, the Company filed an amended registration statement for the
sale of two types of securities (i) 500,000 shares of Redeemable
Convertible Preferred Stock at an offering price of $10.00 per share and
(ii) 1,500,000 Redeemable Preferred Stock Purchase Warrants at an offering
6
<PAGE>
price of $.10 per warrant. The Preferred Stock is convertible into common
stock at a to be determined conversion price. There is no assurance that
the registration statement will be declared effective by the Securities and
Exchange Commission, or that the Company will be successful in selling the
Preferred Stock.
The Company intends to utilize a substantial portion of the proceeds from
the proposed offering for the purchase of up to 12 existing restaurant
properties which will be converted to Harvest Rotisserie restaurants and
resold to area developers for operation as franchised units.
7
<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 various reports filed 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.
General
The Company was organized in June 1993 and opened its San Antonio Cluckers
restaurant in January 1994. During the fourth quarter of 1994, the Company
established its corporate offices and began the initial development of its
franchising program. During the third quarter of 1995, the Company began
refinements to its Cluckers restaurant which evolved into the Harvest Rotisserie
restaurant. In February 1996 the Company elected to limit its activities to the
development of Harvest Rotisserie restaurants and opened its first Harvest
Rotisserie restaurant in November 1996. In January and February 1997 the Company
opened two additional Harvest Rotisserie restaurants, and in January 1997, the
Company converted its San Antonio Cluckers restaurant to a Harvest Rotisserie
restaurant, at a cost of $25,000. To date, the Company has four restaurants in
operation but has not sold any franchises nor does it have any area development
agreements in effect.
Results of Operations - For the sixteen weeks ended April 20, 1997 and April 21,
1996.
Revenues. Restaurant revenues for the sixteen weeks ended April 20, 1997
were $446,994, an increase of $383,856 as compared to the same period in 1996.
The increase in revenue was due to the opening of three additional restaurants
from November 1996 to February 1997. On a comparative basis, same store revenues
decreased $29,743 or 47.1% between the two periods. The decrease in same store
revenues was due in part to a reduction in the restaurant operating hours for
the Company's only restaurant in operation during the first quarter of 1996.
This restaurant is currently open five days each week from 11 a.m. to 2 p.m. and
is being used as a training facility. Initial sales volumes from the three newly
opened stores have met management expectations. Typically revenues from new
stores are not as high in the first several periods following openings as in
later periods. Management anticipates that sales volumes for its existing
restaurants will improve in future periods as a result of marketing efforts and
enhanced name recognition as the Company opens additional restaurants in the San
Antonio area, although there can be no such assurance.
8
<PAGE>
Costs and Expenses. Cost of food and paper were 51.5% of restaurant
revenues for the sixteen weeks ended April 20, 1997, as compared to 37.6% for
the same period in 1996. The increase in food and paper costs was due to the
opening of new restaurants during the period. Costs of sales is generally higher
as a percentage of revenue for newly opened restaurants than for mature
restaurants due to increased food usage for opening promotions and
inefficiencies caused by less experienced employees.
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
$439,916 or 98.4% of restaurant revenues for the sixteen weeks ended April 20,
1997 as compared to $60,843 or 96.4% for the same period in 1996. A substantial
portion of these costs are fixed or indirectly variable. For the sixteen week
period ended April 20, 1997 these costs were disproportionate to revenues due to
the opening of new restaurants, which have higher expenses during the initial
periods after opening.
General and administrative expenses increased $266,560 or 157% for the
sixteen weeks ended April 20, 1997 as compared to the same period in 1996. The
increase resulted from the initial development of a corporate infrastructure
needed to support the planned expansion of company-owned and franchised stores,
and continued expenses associated with the Company's expansion efforts.
Preopening expenses were $86,314 and $9,493 for the sixteen weeks ended
April 20, 1997 and April 21, 1996 respectively. Substantially all of the
increase in 1997 relates to the two additional restaurants opened during the
period and expenses associated with obtaining new sites for future restaurant
development.
Interest and debt discount expense. Interest and debt discount expense
decreased by $169,503 for sixteen weeks ended April 20, 1997 as compared to the
same period in 1996, primarily as a result of the repayment of all outstanding
bridge notes in July 1996.
Net Loss. The Company incurred net losses of $797,558 for the sixteen weeks
ended April 20, 1997 as compared to $409,020 for the same period in 1996. The
increase in net loss was primarily the result of significantly higher general
and administrative expenses, preopening costs and initial operating losses for
newly opened restaurants. The Company expects to incur losses in future periods
until it generates sufficient revenues from expanded restaurant operations or
from franchising activities to offset ongoing operating, financing and expansion
costs.
Liquidity and Capital Resources
The Company has incurred losses from operations since inception, and as of
April 20, 1997 has an accumulated deficit of $4,374,354 and working capital of
$5,350. The Company is not currently generating sufficient revenues from
9
<PAGE>
operations to meet its cash requirements and requires additional financing from
debt or equity placements to continue operations. Management anticipates that
the Company must increase revenues from existing Restaurants, open at lease four
additional Restaurants and realize revenues from its franchise program to
generate a positive cash flow from operations, although there can be no such
assurance. The Company estimates it will require up to six months to realize
such increases in revenues from operations. The ability of the Company to fund
costs associated with its operations and expansion plans is dependent upon the
successful development of its Restaurants, its franchising activities and its
ability to obtain additional capital through future debt or equity placements.
The Company requires capital principally for the expansion of its
restaurant operations, to fund costs associated with the promotion of its
franchise program, and for the continual development of a corporate
infrastructure to support the planned expansion in operations. During 1996 and
for the first sixteen weeks of 1997, the Company invested $1,614,675 in property
and equipment, of which approximately $1,451,703 was for the development of
three restaurants including the purchase of land and building for a restaurant
at a cost of $400,000. These restaurants opened in November 1996, January 1997,
and February 1997. To date, the Company funded its operations and capital needs
with funds provided from the sale of its securities, including its IPO, which
raised net proceeds of approximately $4,700,000. The Company does not have a
working capital line of credit with any financial institution. Future sources of
liquidity will be limited to the Company's ability to obtain additional debt or
equity financing, which will be difficult to obtain until and unless the Company
begins to generate earnings. Management's plan is to move the Company toward
profitable operations in fiscal 1997 and to seek additional capital to fund
further expansion of its operations. There can be no assurance that the Company
will be successful in either regard.
Between December 1994 and March 1996, the Company issued a total of
$1,684,500 of 10% unsecured Bridge Notes. Proceeds from the Bridge Notes were
used for working capital purposes, development of the Company's initial
franchising program and to pay certain costs associated with the Company's IPO.
The bridge notes were repaid on July 15, 1996 using a portion of the proceeds
from the IPO.
In May 1997, the Company filed an amended registration with the Securities
and Exchange Commission for the sale of 500,000 shares of preferred stock at
$10.00 per share and 1,500,000 preferred stock purchase warrants at $.10 per
warrant. The Company intends to use a significant portion of the proceeds from
its proposed Offering to acquire restaurant properties which will be converted
to Harvest Rotisserie restaurants and resold to area developers for operation as
franchised units. The Company also intends to utilize a portion of the proceeds
of the Offering to open three additional Company-owned restaurants and for
working capital purposes.
Internal sources of capital are limited to the Company achieving profitable
operations in future periods or raising additional capital from investors. The
Company anticipates that its existing capital resources together with the
proceeds of the proposed preferred stock Offering and projected cash flows from
10
<PAGE>
planned operations will be sufficient to maintain its operations through 1997;
however, implementation of the Company's plans to develop additional restaurants
is dependent upon the completion of the Offering. If it does not complete the
Offering and is unable to obtain alternative financing, then the Company's
operations will be significantly curtailed.
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: June 2, 1997 By: s/ William J.Gallagher
----------------- ------------------------------
William J. Gallagher,
Chairman of the Board
(Duly Authorized Signatory)
Date: June 2, 1997 By: s/ Joseph Fazzone
----------------- -------------------------------
Joseph Fazzone,
Chief Financial Officer
(Duly Authorized Signatory)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> APR-20-1997
<CASH> 717,186
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 23,783
<CURRENT-ASSETS> 780,615
<PP&E> 1,873,656
<DEPRECIATION> 141,275
<TOTAL-ASSETS> 3,179,544
<CURRENT-LIABILITIES> 775,265
<BONDS> 0
0
0
<COMMON> 23,660
<OTHER-SE> 2,330,759
<TOTAL-LIABILITY-AND-EQUITY> 3,179,544
<SALES> 446,994
<TOTAL-REVENUES> 446,994
<CGS> 230,248
<TOTAL-COSTS> 464,933
<OTHER-EXPENSES> 205,231
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,816
<INCOME-PRETAX> (797,558)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (797,558)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
