UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
Commission File Number: 000-18668
MAIN STREET AND MAIN INCORPORATED 401(K) PROFIT SHARING PLAN
(Full title of the Plan)
MAIN STREET AND MAIN INCORPORATED
5050 N. 40TH STREET, SUITE 200
PHOENIX, ARIZONA 85018
(Name of issuer of the securities held pursuant to the plan and the address
of its principal executive offices)
TABLE OF CONTENTS
PAGE
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Independent Auditors' Report 1-2
Financial Statements:
Statements of Net Assets Available for Benefits as of
December 31, 2001 and 2000 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2001 4
Notes to Financial Statements 5-8
SUPPLEMENTAL SCHEDULE
Schedule H, line 4i - Schedule of Assets (Held at End of Year) 9
INDEPENDENT AUDITORS' REPORT
The Trustees
Main Street and Main Incorporated
401(k) Profit Sharing Plan:
We have audited the accompanying statement of net assets available for benefits
of Main Street and Main Incorporated 401(k) Profit Sharing Plan (the Plan) as of
December 31, 2001, and the related statement of changes in net assets available
for benefits for the year then ended. These financial statements and the
supplemental schedule referred to below are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audit. The accompanying financial
statements of the Plan as of December 31, 2000 were audited by other auditors
whose report thereon dated June 11, 2001, expressed an unqualified opinion on
those statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2001, and the changes in its net assets available for benefits for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The Schedule H, line 4i - Schedule of Assets (Held
At End of Year) is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ KPMG LLP
Phoenix, Arizona
June 21, 2002
1
This report is a copy of the report previously issued by Arthur Andersen, LLP
and has not been reissued.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustee of the
Main Street and Main Incorporated
401(k) Profit Sharing Plan:
We have audited the accompanying statements of net assets available for benefits
of Main Street and Main Incorporated 401(k) Profit Sharing Plan as of December
31, 2000 and 1999, and the related statement of changes in net assets available
for benefits for the year ended December 31, 2000. These financial statements
and the schedule referred to below are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and 1999, and the changes in its net assets available for
benefits for the year ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule of assets (held at end of
year) is presented for purposes of additional analysis and is not a required
part of the basic financial statements but is supplementary information required
by the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. The supplemental
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
Phoenix, Arizona
June 11, 2001
2
MAIN STREET AND MAIN INCORPORATED
401(K) PROFIT SHARING PLAN
Statements of Net Assets Available for Benefits
December 31, 2001 and 2000
2001 2000
---------- ----------
Investments:
Cash and money market funds $ 797,681 423,816
Investment in Plan Sponsor stock 1,084 61,201
Investments in mutual funds 4,189,533 4,295,094
Loans to participants 224,134 221,913
---------- ----------
5,212,432 5,002,024
---------- ----------
Receivables:
Employer contributions 7,541 13,912
Participant contributions 27,706 60,311
---------- ----------
Total receivables 35,247 74,223
---------- ----------
Net assets available for benefits $5,247,679 5,076,247
========== ==========
See accompanying notes to financial statements
3
MAIN STREET AND MAIN INCORPORATED
401(K) PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2001
Additions:
Additions to net assets attributed to -
Interest and dividends $ 71,127
-----------
Contributions:
Participant 915,279
Employer 236,992
Rollover 6,544
-----------
Total contributions 1,158,815
Transfer of assets to plan 4,227
-----------
Total additions 1,234,169
-----------
Deductions:
Deductions from net assets attributed to:
Net depreciation in fair value of investments (647,464)
Benefits paid to participants (382,424)
Administrative costs (32,849)
-----------
Total deductions (1,062,737)
-----------
Net increase in assets 171,432
Net assets available for benefits, beginning of year 5,076,247
-----------
Net assets available for benefits, end of year $ 5,247,679
===========
See accompanying notes to financial statements
4
MAIN STREET AND MAIN INCORPORATED
401(K) PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(1) DESCRIPTION OF THE PLAN
The following description of the Main Street and Main Incorporated 401(k)
Profit Sharing Plan (the Plan) provides only general information.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
(a) GENERAL
The Plan, which was established effective January 1, 1991, is a
defined contribution plan. The Plan Sponsor is Main Street and Main
Incorporated (Company or Plan Sponsor). Employees become eligible to
participate in the Plan on January 1, April 1, July 1, and October 1,
which coincides or next follows their attainment of age 21 and
completion of six months of eligible service. The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
(b) CONTRIBUTIONS
Participants may elect to defer a percentage of compensation not to
exceed the dollar amount set by law. The annual deferral limit was
$10,500 for 2001 and 2000. Each year, the Company contributes to the
Plan a 50% matching contribution equal to the participant's salary
deferral not to exceed 4% of the participant's compensation.
(c) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution, the employer's matching contribution and Plan earnings.
Allocations of participant contributions are based on participant
earnings or account balances, as defined in the Plan. The benefit to
which a participant is entitled is the benefit that can be provided
from the participants' vested account balance.
(d) VESTING
Participants are immediately vested in their elective salary deferrals
and rollover accounts and earnings thereon. The remainder of the
participant's account is vested on years of service. A participant's
vesting percentage is shown in the following schedule opposite the
number of whole years of their vesting percentage:
VESTING SERVICE VESTING
(WHOLE YEARS) PERCENTAGE
--------------- ----------
1 20
2 40
3 60
4 80
5 100
5
(e) PAYMENT OF BENEFITS
On termination of service, a participant may elect to receive either a
lump sum payment or rollover to an Individual Retirement Account (IRA)
or other qualified employer plan upon one of the following events:
* Normal retirement at age 65 or older
* Early retirement
* Participant's death (payment to designated beneficiary)
* Termination of employment
* Demonstrated financial hardship
(f) ADMINISTRATIVE EXPENSES
Administrative expenses of the Plan are paid by the Plan. The annual
audit fee is paid by the Plan Sponsor. Loan processing fees are paid
by the participant requesting the loan.
(g) INVESTMENT OPTIONS
Participants' account balances under the Plan are invested in shares
of selected mutual funds, all of which are advised by Merrill Lynch,
as selected by the participant. During 2001, the election to invest in
the Plan Sponsor's common stock was terminated.
(h) FORFEITURES
At December 31, 2001, forfeited nonvested accounts totaled $56,226.
The 2001 forfeitures of $15,293 will be allocated to active
participant accounts in 2002.
(i) LOANS TO PARTICIPANTS
Loans are limited to the lesser of (i) $50,000, reduced by other
outstanding loan balances from the Plan to the participant, or (ii)
one-half of the present value of the non-forfeitable accrued benefit
of the participant. The participant must repay the loan within five
years unless the proceeds are used to purchase a principal residence.
The loans are secured by the balance in the participant's account and
bear interest at a rate equal to the prime lending interest rate
(rates range from 6.5% to 10.5% at December 31, 2001) on the date the
loan is processed plus 1%. Principal and interest is paid ratably
through payroll deductions.
(j) PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and
to terminate the Plan subject to the provisions of ERISA. In the event
of Plan termination, participants will become 100% vested in their
accounts.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The financial statements of the Plan have been prepared on the accrual
basis of accounting and present the net assets available for benefits
and changes in those net assets.
(b) USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the Plan Sponsor and Plan Administrator to make estimates and
6
assumptions that affect the reported amount of net assets available
for benefits and changes therein and the disclosure of contingent
assets and liabilities. Actual results could differ from those
estimates.
(c) INVESTMENT VALUATION AND INCOME RECOGNITION
Investments in mutual funds are stated at fair market value, which is
determined by quoted market prices. The resulting increase or decrease
in market value is recorded in the statement of changes in net assets
available for benefits.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
(d) BENEFIT PAYMENTS
Benefits are recorded when paid.
(e) CONCENTRATION OF CREDIT RISK
The Plan provides for various investment fund options which in turn
invest in any combination of stocks, bonds and other investment
securities. Investment securities are exposed to various risks, such
as interest rate, market and credit risk. Due to the level of risk
associated with certain investment securities, it is at least
reasonably possible that changes in risks in the near term would
materially affect participants' account balances and the amounts
reported in the statements of net assets available for benefits and
the statement of changes in net assets available for benefits.
(3) INVESTMENTS
Investments that represent 5% or more of net assets available for benefits
are as follows:
2001 2000
---------- ----------
Merrill Lynch Retirement Reserves
Money Market Fund $ 747,402 398,027
Managers International Equity Fund 328,657 399,788
Merrill Lynch Fundamental Growth Fund 1,812,161 2,002,896
Merrill Lynch S & P 500 Index Fund 1,168,193 1,237,945
---------- ----------
$4,056,413 4,038,656
========== ==========
During the year ended December 31, 2001, the Plan's investments (including
gains and losses on investments bought and sold, as well as held during the
year) depreciated in value by $647,464 as follows:
Mutual Funds $ (703,642)
Plan Sponsor Common Stock 56,178
----------
$ (647,464)
==========
(4) PARTY-IN-INTEREST
Certain Plan Investments are shares of mutual funds managed by Merrill
Lynch. Merrill Lynch is the investment manager as defined by the Plan and,
therefore, these transactions qualify as party-in-interest. Fees paid by
the Plan for administrative recordkeeping and investment management
services provided by Merrill Lynch amounted to $32,849 for the year ended
December 31, 2001. Additionally, the plan held an investment in the Plan
Sponsor's common stock, therefore, the Plan Sponsor is also a
party-in-interest.
7
(5) TAX STATUS
The Internal Revenue Service has determined and informed the Company by
letter dated September 10, 1992 that the Plan and its related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (IRC) and, therefore, is exempt from federal income taxes. The Plan
has been amended since receiving the determination letter, however,
management believes that the Plan is designed and currently being operated
in compliance with the applicable requirements of the IRC.
8
MAIN STREET AND MAIN INCORPORATED
401(k) PROFIT SHARING PLAN
EIN # 11-2948370 Plan #001
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
Column A Column B Column C Column D Column E
-------- ------------------- ------------------------------------ -------- -------------
Description of investment, including
Identity of issuer, maturity date, number of shares or
borrower, lessor or units, rate of interest, collateral,
similar party and par or maturity value Cost Current Value
------------------- ------------------------------------ ---- -------------
Cash Cash ** $ 5,165
* Merrill Lynch Ready Assets Trust Money Market ** 45,114
* Merrill Lynch Retirement Reserves Money Market ** 747,402
* Main Street and Main, Incorporated Common Stock, 219 shares at $4.94 ** 1,084
* Managers International Equity Fund, 8,739 shares at $37.61 ** 328,657
* Managers International GM Equity Fund, 845 shares at $37.61 ** 31,764
* Merrill Lynch Fundamental Growth Growth Fund, 100,064 shares at $18.11 ** 1,812,161
* Merrill Lynch S&P 500 Index Index Fund, 82,968 shares at $14.08 ** 1,168,193
* Merrill Lynch Small Cap Index Small Cap Value Fund, 5,084 shares at $10.53 ** 53,534
* Merrill Lynch PIMCO Small Cap Index Small Cap Value Fund, 2,305 shares at $19.41 ** 76,863
* Lord Abbett Development Growth Growth Fund, 15,153 shares at $15.11 ** 228,968
* AIM Asian Growth Fund International Fund, 37 shares at $9.63 ** 359
* Merrill Lynch Global Technology Fund International Fund, 6,249 shares at $8.78 ** 54,868
* Mercury Pan Europe Grade Fund International Fund, 68 shares at $8.34 ** 570
* Merrill Lynch Equity Income Fund Equity Fund, 18,572 shares at $11.58 ** 215,060
* Merrill Lynch Corporate Bond Bond Fund, 19,357 shares at $11.29 ** 218,536
* Various Participants Participant loans (85) - interest rates ranging
from 6.5% to 10.5% with maturities through 2006 $0 224,134
----------
Total assets held for investment purposes at end of year $5,212,432
==========
* Denotes a party in interest.
** Participant-directed investment, cost information is omitted.
See accompanying independent auditors' report.
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
MAIN STREET AND MAIN INCORPORATED 401(K)
PROFIT SHARING PLAN
By: /s/ Bart A. Brown, Jr.
------------------------------------
Bart A. Brown, Jr.,
Chief Executive Officer and Director
Date: June 27, 2002
10
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
1 Consent of KPMG LLP
2 Reference to Consent of Arthur Andersen LLP