10-Q 1 q101st02.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended April 29, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-12145 AMARILLO MESQUITE GRILL, INC. Exact name of registrant as specified in its charter) Kansas 48-0936946 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) Suite 200 302 North Rock Road Wichita, Kansas 67206 (Address of principal executive offices) (Zip Code) (316) 685-7286 (Registrant's telephone number, including area code) 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 . As of April 29, 2001, 8,301,137 shares of common stock $.01 par value were outstanding. PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements AMARILLO MESQUITE GRILL, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)

[FN] See accompanying notes to consolidated financial statements. 2 AMARILLO MESQUITE GRILL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

[FN] See accompanying notes to consolidated financial statements. 3 AMARILLO MESQUITE GRILL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

[FN] See accompanying notes to consolidated financial statements. 4 AMARILLO MESQUITE GRILL, INC. Notes to Consolidated Financial Statements (Unaudited) April 29, 2001 (1) Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the thirteen week period ended April 29, 2001 are not necessarily indicative of the results that may be expected for the year ended January 27, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's 10-K and Annual Report to Stockholders as filed on April 27, 2001. (2) Net Earnings Per Share The Company, as required under FASB Statement No. 128, Earnings Per Share, calculates and presents both a basic and diluted earnings per share in the financial statements. Earnings per common share is computed on the basis of the weighted-average number of common shares outstanding during each period presented. The Company has granted options to employees to purchase 1,324,175 shares of common stock at a weighted average exercise price of $1.93 per share. These options were not included in the computation of diluted earnings per share because the exercise price of those options exceeded the average market price of the common shares during the quarter and because The Company had a net loss available to common stockholders and the inclusion of such options would be antidilutive. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation. Results of Operations Thirteen weeks Ended April 29, 2001 Compared to thirteen weeks Ended April 30, 2000. For the thirteen weeks ended April 29, 2001, sales decreased 10.7% to $5,025,645 as compared to $5,629,353 for the first quarter of the prior year. The sales decrease for the quarter ended April 29, 2001 was a result of not running the heavy amounts of promotions that were ran a year ago resulting in less sales compared to the same quarter last year. As of April 29, 2001, the Company operated fourteen Amarillo Mesquite Grills. Cost of sales, as a percentage of total sales, was 35.5% for the quarter ended April 29, 2001 as compared to 34.2% for the first quarter of the prior year. The cost of sales as a percentage of total sales were up due to not being able to take advantage of the buying discounts that were available during this period a year ago, along with the higher cost of meat for the quarter ended April 29, 2001 as compared to the quarter ended April 30, 2000. Operating expenses, as a percentage of total sales, were 52.1% and 50.8% for the 2001 and 2000 periods respectively. The increase in operating expense is a direct result of lower sales for the quarter ended April 29, 2001 as compared to the quarter ended April 30, 2000. The dollars spent should remain stable or lower. General and administrative expenses, as a percentage of sales, was 5.3% for the quarter ended April 29, 2001, as compared to 5.6% for the first quarter of the prior year. The decrease in general and administrative expense, as a percentage of sales, is the result of management being more efficient. Depreciation and amortization is directly related to the acquisition and disposition of fixed assets. The investment in fixed assets increased approximately $55,000 from the end of the first quarter last year to the end of the first quarter of the current year. Depreciation and amortization decreased due to items becoming fully depreciated. Interest expense was $153,673 for the quarter ended April 29, 2001 as compared to $159,506 for the same period a year ago. Interest expense is a function of the interest rate and the amount of debt. The interest rate has decreased over the past few months, as well as the amount of short and long- term debt has decreased. Consequently interest expense is lower this quarter as compared to the same quarter last year. The Company incurred noncash expenses of $24,460 for the 2001 and 2000 periods respectively, relating to the issuance of stock options pursuant to debt guarantees. Liquidity and Capital Resources The Company's primary sources of funding to finance its business have been its cash flow from operations, and proceeds from bank debt. On April 29, 2001 and January 28, 2001, the Company had an excess of current liabilities over current assets of $7,402,984 and $1,675,794, respectively. However included as a current liability as of April 20, 2001 is a bank note payable in the amount of $5,904,586 which is due April 15, 2002. Cash flow from operations was $27,362 and $183,086 for 2001 and 2000 respectively. Management anticipates higher cash flow from operations in fiscal 2002 and that such higher operating cash flow will enable the Company to meet its financial obligations in fiscal 2002 as they come due. 6 Substantially, all of the Company's revenues are derived from cash sales. The Company does not maintain significant receivables and inventories; therefore, working capital requirements for operations are not significant. The Company plans to continue expansion of the Amarillo Mesquite Grill concept in fiscal 2002. The Company intends to lease existing restaurant properties which are suitable for conversion to the Amarillo Mesquite Grill concept. It is expected that each conversion will require approximately $300,000 to $500,000 for equipment and remodel costs. A ground-up proto-type restaurant will cost approximately $1.3 million for the land, building and equipment. The Company has no commitments for financing at this time. In order for the Company to meet its expansion goals for fiscal 2002, it will need to raise additional funds through debt or equity instruments, the availability and terms of which will depend upon market and other conditions. There can be no assurance that such additional financing will be available on terms acceptable to the Company. The Company has restructured its long-term bank debt to provide for interest only payments through April 15, 2002. The purpose of the restructuring is to use cash flow to open additional restaurants that would otherwise be used to retire long term debt. Management views this as a way to continue our growth, that should result in increased future earnings and cash flow, but do so without increasing bank debt. This report contains certain forward-looking statements, including those relating to the opening of additional restaurants and planned capital expenditures. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, actual results could differ materially from such forward-looking statement. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company that objectives and plans of the Company will be achieved. 7 PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable. Item 2. Changes in Securities. Not applicable. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. Item 5. Other Information. Not applicable. Item 6. Exhibits and Reports on Form 8-K Not applicable. 8 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. AMARILLO MESQUITE GRILL INC. (Registrant) Date May 31, 2001 /s/CHRIS F. HOTZE Chris F. Hotze - President

AMARILLO MESQUITE GRILL INC 10-Q