U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
_X_ Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the quarterly period ended DECEMBER 28, 1997 .
___ 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 0-23757
TAM RESTAURANTS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 13-3905598
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1163 FOREST AVENUE, STATEN ISLAND, NY 10310
(Address of Principal Executive Offices)
(718) 720-5959
(Issuer's Telephone Number including area code)
- - --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
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 ___ No _X_
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Approximately 3,500,000 shares of
common stock as of March 26, 1998.
Transitional Small Business Disclosure Format (check one):
Yes ___ No _X_
TAM RESTAURANTS, INC. AND SUBSIDIARIES
QUARTER ENDED DECEMBER 28, 1997
FORM 10-QSB
INDEX
Page(s)
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of December 28, 1997, and
proforma as of December 28,1997 (unaudited). .................. 1
Condensed Consolidated Statements
of Operations For the Thirteen
weeks ended December 28, 1997 and
December 29, 1996 (unaudited). ................................ 2
Condensed Consolidated Statements of Cash Flows
For the Thirteen weeks ended December 28, 1997 and
December 29, 1996 (unaudited). ................................ 3
Notes to unaudited Condensed Consolidated
Financial Statements .......................................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition And Results Of Operations ........................... 7
Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds ..................... 11
Item 4. Submission of Matters to a Vote of Security Holders ........... 12
Item 6. Exhibits and Reports on Form 8-K .............................. 12
ii
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
Actual Proforma
December 28, 1997 December 28, 1997
----------------- -----------------
Current Assets
Cash $ 162,167 $ 4,356,963
Accounts receivable 296,084 296,084
Inventory 206,740 206,740
Prepaid and other expenses 383,889 383,889
Loan receivable-officer 36,301 36,301
------------ ------------
Total Current Assets 1,085,181 5,279,977
Property and Equipment-Net 4,926,925 4,926,925
Due from Affiliates 324,123 324,123
Deferred Stock Offering Costs 334,796 --
Other Assets 115,799 115,799
------------ ------------
TOTAL ASSETS $ 6,786,824 $ 10,646,824
============ ============
LIABILITIES
Current Liabilities
Current portion of long-term debt $ 211,849 $ 211,849
Current portion of capitalized lease obligations 82,561 82,561
Loans payable - related parties 56,680 56,680
Accounts payable 1,680,799 1,680,799
Contract deposits payable 266,457 266,457
Accrued expenses 1,742,771 1,742,771
------------ ------------
Total Current Liabilities 4,041,117 4,041,117
------------ ------------
Long-term Liabilities
Deferred rent expense 237,376 237,376
Loans payable-related parties 924,231 924,231
Long-term debt-net of current portion 1,570,804 1,088,804
Capitalized lease obligations-net of current portion 113,820 113,820
------------ ------------
Total Long-term Liabilities 2,846,231 2,364,231
------------ ------------
TOTAL LIABILITIES 6,887,348 6,405,348
------------ ------------
Commitments and Contingencies
STOCKHOLDERS' EQUITY (DEFICIT)
Stockholders' Equity (Deficit)
Preferred stock; $.0001 par value; 1,000,000
shares authorized, 0 shares issued and
outstanding
Common stock; $.0001 par value;
19,000,000 shares authorized;
2,500,000 shares issued and outstanding; 3,500,000 shares proforma 250 350
Additional paid-in capital 3,107,796 7,449,696
Accumulated deficit (3,208,570) (3,208,570)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (100,524) 4,241,476
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 6,786,824 $ 10,646,824
============ ============
The accompanying notes are an integral part of
these condensed consolidated financial statements.
1
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Thirteen Weeks Ended
December 29, December 28,
1996 1997
------------ ------------
Sales $ 2,259,092 $ 2,378,827
Cost of Sales 1,526,397 1,525,996
----------- -----------
Gross Profit 732,695 852,831
Operating and Administrative Expenses 1,145,540 1.070,469
----------- -----------
Loss from Operations (412,845) (217,638)
----------- -----------
Other Expense
Interest expense 82,905 107,316
Barter expense -- 101,474
----------- -----------
Total Other Expense 82,905 208,790
----------- -----------
Loss Before Income Tax Benefit (495,750) (426,428)
Income Taxes -- --
----------- -----------
.
Net Loss $ (495,750) $ (426,428)
=========== ===========
Net loss per share:
Basic and Diluted $ (.20) $ (.17)
=========== ===========
Weighted average number of
common shares outstanding basic and diluted 2,444,859 2,500,000
=========== ===========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
2
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen weeks Ended
December 29, 1996 December 28, 1997
----------------- -----------------
Cash Flows from Operating Activities
Net (loss) $ (495,750) $ (426,428)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization expense 83,080 90,086
Deferred rent expense 19,113 12,840
Deferred income (7,819)
(Increase) decrease in:
Accounts receivable (30,317) (8,716)
Inventory 63,075 (2,034)
Prepaid and other expenses (113,852) (17,823)
Other assets 3,420
Increase (decrease) in:
Accounts payable 289,746 1,157,975
Accrued expenses
and contract deposits/payables 195,458 (630,286)
----------- -----------
Net Cash provided by Operating Activities 10,553 171,215
----------- -----------
Cash Flows from Investing Activities
Acquisition of property and equipment (266,566) (726,033)
----------- -----------
Net Cash used in Investing Activities (266,566) (726,033)
----------- -----------
Cash Flows from Financing Activities
Net repayments of officer's loans 10,158
Loans receivable 5,988 1,997
Proceeds from long-term debt 288,000 1,000,000
Principal payments on long-term
and capitalized lease obligations (47,329) (257,166)
Advances to/from affiliates and others (113,155)
Deferred stock offering costs (206,474)
----------- -----------
Net Cash provided by Financing Activities 246,659 435,360
----------- -----------
Net Decrease in Cash (9,354) (119,458)
Cash, Beginning of period 66,616 281,625
----------- -----------
Cash, Beginning of period $ 57,262 $ 162,167
=========== ===========
The accompanying notes are an integral part of
these condensed consolidated financial statements
3
TAM RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB
and Item 310(b) of Regulation S-B. 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 only normal recurring accruals) considered
necessary for a fair presentation have been included. It is suggested that
the financial statements be read in conjunction with the Company's
consolidated audited financial statements and footnotes thereto contained
in the Company's Registration Statement on Form SB-2. The proforma balance
sheet as of December 28, 1997 has been presented to give effect to the sale
of 1,000,000 shares of common stock offered in the Company's initial public
offering ("the Offering") which was consummated in February 1998, and the
application of the net proceeds of approximately $3,860,000 therefrom,
including the write-off of $334,796 of deferred stock offering costs
related to the offering. Operating results for the thirteen week period
ended December 28, 1997 are not necessarily indicative of the results that
may be expected for the full fiscal year ending September 27, 1998.
2. Long-Term Debt
In October 1997 the Company obtained $1,000,000 in a secured loan from two
entities. The loan bears interest at 10% per annum, payable quarterly and
matures ninteen months after the funding date (May 31, 1999). The loan is
guaranteed by a principal stockholder of the Company and the guarantee is
secured by a pledge of 200,000 shares of common stock held by such
stockholder.
Additionally, as partial consideration for the loan, the Company granted to
the entities warrants to purchase 200,000 shares of common stock at an
exercise price of $5.00 per share expiring in October 2002. The warrants
are exercisable commencing May 11, 1998. The issuance of these warrants
will give rise to an original issue discount which has been valued at
$482,000, based on the Black-Scholes option pricing model, and will be
amortized beginning on the date the warrants are exercisable and ending on
the due date of the loan.
During 1995 and 1996, the Company borrowed an aggregate of $840,000 from
Fleet Bank. Such loans were collateralized by the Company's principal
executive offices, which are owned by Frank Cretella, the President and
Chief Executive Officer of the Company, the warehouse leased by the Company
and owned by Leisure Time Services, Inc. ("Leisure Time"), a company owned
by Jeanne Cretella, Vice President, Director and a principal stockholder of
the Company, and Mr. and Mrs. Cretella's personal residence, and guaranteed
by Mr. and Mrs. Cretella and Leisure Time. In June 1997, Mr. Cretella
agreed to settle the amounts owed to Fleet Bank of $720,405 for $640,000
plus accrued interest through the date of payment. In August 1997, Mr.
Cretella paid to Fleet Bank $140,000 as part of the settlement, and the
balance was paid in October 1997. As consideration for entering into the
settlement, the Company has issued to Mr. Cretella a promissory note in the
principal amount of $720,405, which bears interest at a rate of 10% per
annum. Interest is payable in monthly installments of $6,003, with the
outstanding principal balance payable in November 2002 upon maturity of the
note. The condensed consolidated financial statements reflect the effects
of this refinancing.
4
TAM RESTAURANTS, INC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Capital Stock
In connection with, and prior to the Offering, the Company effected a
1-for-1.8135268 reverse stock split. All shares and per share data in the
condensed consolidated financial statements have been adjusted to give
retroactive effect to the reverse stock split.
4. Loss Per Share
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128") "Earnings Per
Share". SFAS No. 128 replaced the previously reported primary and fully
diluted earnings per share with basic and diluted earnings per share and
was effective for all financial statements after December 15, 1997. Unlike
primary earnings per share, basic earnings per share is arrived at by
dividing net income (loss) by the weighted-average number of common shares
outstanding for the period while diluted earnings per share includes the
potential dilution that could occur if options and warrants outstanding
were included in the weighted-average number of common shares outstanding
for the period. Earnings per share amounts for all periods presented have
been restated to conform to SFAS No. 128 requirements.
5. Subsequent Events
In February 1998, the Company completed an initial public offering of
1,000,000 shares of common stock and 500,000 redeemable warrants. The
offering resulted in net proceeds to the Company of approximately
$3,860,000.
In addition, in February 1998, the Company entered into three-year
employment agreements with the Chief Executive Officer and a Vice
President, which are automatically renewable and provide for an annual base
compensation of $175,000 and $75,000, respectively, and such bonuses as the
Board of Directors may from time to time determine.
The Company has adopted a stock option plan (the "Option Plan") pursuant to
which 525,000 shares of common stock have been reserved for issuance upon
the exercise of options designated as either (i) options intended to
constitute incentive stock options ("ISOs") under the Internal Revenue Code
of 1986, as amended or (ii) non-qualified options. ISOs may be granted
under the Option Plan to officers and employees of the Company.
Non-qualified options may be granted under the Option Plan to consultants,
directors (whether or not they are employees), employees or officers of the
Company.
On March 25, 1998 the Company announced that on April 1, 1998 it expects to
open its third New York restaurant, American Park at the Battery in Battery
Park.
5
TAM RESTAURANTS, INC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. New Accounting Standards Not Yet Adopted
In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. Results of operations and financial position will be
unaffected by implementation of these new standards.
Statement of Financial Accounting Standards No. 130, ("SFAS No. 130")
"Reporting Comprehensive Income", established standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components
of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS No.
131, (SFAS No. 131") "Disclosures about Segments of an Enterprise and
Related Information", which supercedes SFAS No. 14, "Financial Reporting
for Segments of a Business Enterprise", establishes standards for the way
that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information
about operating segments in interm financial statements issued to the
public. It also establishes standards for disclosures regarding products
and services, geographic areas and major customers. SFAS No. 131 defines
operating segments as components of an enterprise about which separate
financial information is available that is evaluated regularly by
Management in deciding how to allocate resources and in assesing
performance.
Both of these new standards are effective for financial statements for
fiscal years beginning after December 15, 1997 and require comparative
information for earlier years to be restated. The adoption of these
statements is not expected to have a material effect on the Company's
consolidated financial statements.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: Certain statements contained in this Item 2 and elsewhere in the Form
10-QSB Constitute "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward looking statements
involve a number of know and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward looking statements. Such factors include,
but are not limited to, the Company's recent operating losses, increased
operating expenses and the Company's need to generate additional revenues which
is dependent upon its ability to open additional restaurants and maintain market
acceptance, the Company's significant capital requirements and need for
additional financing, the Company's limited restaurant base and geographic
concentration, risks relating to its proposed expansion plans and the opening of
new restaurants, including the high failure rate that typically characterizes
the opening of new restaurants, seasonality, risks relating to licensing
requirements, outstanding indebtedness, competition, litigation, potential
liability relating to the sale of alcoholic beverages, government regulation and
other risks detailed in the Company's Registration Statement on Form SB-2 as
filed with the Securities and Exchange Commission. The words "believe",
"expect", "anticipate", "intend" and "plan" and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date the statement
was made.
Overview
The Company operates Lundy's, a high-volume, casual, upscale seafood
restaurant located in Brooklyn, New York, and the Boathouse a multi-use facility
featuring an upscale restaurant and catering pavilion, located on the lake in
New York City's Central Park. Lundy's and The Boathouse are high-profile
locations which host many special events and receive extensive press coverage.
The Company is also constructing American Park, which has been designed as a
high volume premium-quality restaurant to be located at the water's edge in
Battery Park, a New York City landmark visited by approximately 4 million
visitors during 1996. The Company expects American Park to open for business on
or about April 1, 1998.
Results of Operations
Sales for the thirteen weeks ended December 28, 1997 ("1997") were
$2,378,827, an increase of $119,735 or 5.3%, as compared to $2,259,092 for the
thirteen weeks ended December 29, 1996 ("1996"). Sales for Lundy's and The
Boathouse for 1997 were $1,298,670 and $1,080,157 respectively, compared to
$1,254,416 and $1,002,231, respectively, during 1996. The increase in sales for
Lundy's and The Boathouse were primarily due to an increase in catering
revenues. The Company's food, liquor and other sales accounted for 85.7%, 9.0%
and 5.3% of sales, respectively, for 1996, and 75.7%, 18.3% and 6.0% of sales,
respectively, for 1997.
7
Cost of sales for 1997 were $1,525,996 approximately the same as the cost
of sales of $1,526,397 for 1996. The decrease in cost of sales in 1997 was
attributable to an increase in catering revenues over the prior year, which
carries an overall lower product cost and thereby reduces the Company's overall
cost of sales.
Gross profit for 1997 was $852,831, or 35.9%, of sales as compared to
$732,695, or 32.4%, of sales for 1996. The increase in gross profit as a
percentage of sales was primarily attributable to the increase in catering
revenues as described above.
Operating and Administrative expenses for 1997 were $1,070,469 a decrease
of $75,071, or 6.5%, as compared to $1,145,540 for 1996. Operating and
Administrative expenses for 1997 were lower than 1996 due principally to price
reductions received from certain significant vendors.
Other expenses for 1997 were $208,790 an increase of $125,885, or 151.8%,
as compared to other expenses of $82,905 for 1996. A total of $101,474 of the
increase was due to barter expense. This expense is a result of bartering
agreements entered into with member dining clubs whereby member dining clubs
advance cash to the Company in exchange for food and beverage credits which are
passed along at a discount to members of the dining clubs. Upon entering into
the agreement, the Company records its obligation to provide food and beverages
at the amount of the advance it receives. When a member of a dining club
purchases food or beverages, the Company records revenue for the amount of food
and beverage purchased by the guest, and the barter discount as a barter
expense. The balance of the increase in other expenses is due to an increase in
interest expense to $107,316 in 1997 as compared to $82,905 in 1996 as a result
of an increase in the Company's note payables.
The net loss amounted to $426,428 or $.17 per share for 1997 as compared to
a net loss of $495,750 or $.20 per share in 1996.
Liquidity and Capital Resources
At December 28,1997 the Company had a working capital deficiency of
$2,955,936 due to, among other things, costs associated with development,
opening and start-up costs of the Lundy's and American Park restaurants and
building a corporate infrastructure sufficient to support the Company's proposed
expanded operations. As a result, the Company has been substantially dependent
upon sales of its equity securities, loans from financial institutions and the
Company's officer, directors and stockholders and bartering transactions with
member dining clubs to finance a portion of its working capital requirements.
During 1997, net cash decreased by $119,458. Net cash provided by operating
activities was $171,215, net cash used in investing activities was $726,033 ,
relating to the acquisition of property and equipment primarily for American
Park, and net cash provided from financing activities was $435,360, consisting
primarily of long-term borrowing of $1,000,000, offset by repayments of
indebtedness to others of $370,321 and stock offering costs of $206,474.
8
During 1996, net cash decreased by $9,354. Net cash provided by operating
activities was $10,553, net cash used in investing activities was $266,566,
consisting primarily of costs associated with the preliminary development of
American Park. Net cash provided by financing activities was $246,659, primarily
a result of additional borrowings.
During 1995 and 1996, the Company borrowed an aggregate of $840,000 from
Fleet Bank, N.A. Such loans were collateralized by the Company's principal
executive offices, which are owned by Frank Cretella, President and Chief
Executive Officer of the Company, the warehouse leased by the Company and owned
by Leisure Time Services, Inc. ("Leisure Time"), a company owned by Jeanne
Cretella, and Mr. and Ms. Cretella's personal residence, and guaranteed by Mr.
and Mrs. Cretella and Leisure Time. In June 1997, Mr. Cretella agreed to pay to
Fleet $640,000 as payment for the amount owed by the Company (approximately
$720,000 as of October 15, 1997). In August 1997, Mr. Cretella paid to Fleet
$140,000 as part of the settlement. Mr. Cretella paid the balance of the
principal owed to Fleet and the Company paid the accrued interest of
approximately $39,000 owed to Fleet in October 1997. As consideration for
repaying the loan, the Company issued to Mr. Cretella a promissory note in the
principal amount of $720,405 which bears interest at the rate of 10% per annum.
Interest is payable in monthly installment of $6,003 with the outstanding
principal balance payable in November 2002 upon maturity of the note.
In October 1997, Kayne Anderson Non-Traditional Investments, L. P. and
ARBCO Associates, L. P. affiliates of Kayne Anderson Investment Management, Inc.
(collectively, "Kayne Anderson"), loaned the Company an aggregate of $1,000,000.
The loans bear interest at the rate of 10% per annum, payable quarterly
commencing December 31,1997, and are due May 31, 1999. The loans are guaranteed
by Frank Cretella, President, Chief Executive Officer, a director and principal
stockholder of the Company, and the guarantee is secured by a pledge of 200,000
shares of Common Stock owned by Frank Cretella and Jeanne Cretella, Vice
President, a director and principal stockholder of the Company. As partial
consideration for the loans, the Company issued to Kayne Anderson warrants (the
"KA Warrants") to purchase 200,000 shares of Common Stock. The KA Warrants are
exercisable at a price of $5.00 per share (subject to adjustment under certain
circumstances) and are exercisable at any time from May 11, 1998 until October
31, 2002. The Company will incur a non-cash interest charge of $482,000
representing the original issue discount relating to the promissory notes issued
to Kayne Anderson over the life of the promissory notes.
In February 1998, the Company completed its initial public offering of
common stock and redeemable warrants resulting in the Company's receipt of net
proceeds of approximately $3,860,000. A portion of the proceeds of the Offering
together with anticipated cash flow from operations and equipment, vendor and
landlord financing will be used to implement the Company's expansion strategy
(including the opening of American Park and new Lundy's locations and
9
the costs associated therewith). The Company anticipates that the net proceeds
of its Offering, together with anticipated cash flow from operations and
equipment, vendor and landlord financing, will be sufficient to satisfy its
contemplated cash requirements until at least February 1999. However, in the
event that the Company's plans change or its assumptions prove to be inaccurate
(due to unanticipated expenses, construction delays of other difficulties) or
the proceeds of its public offering otherwise prove to be insufficient to fund
operations and implement the Company's proposed expansion strategy, the Company
could be required to seek additional financing sooner than anticipated. Although
the Company believes it has the ability to enter into bartering transactions
with member dining clubs, the Company has no current arrangements with respect
to, or potential sources of, additional financing from such clubs or elsewhere,
and it is not anticipated that any officers, directors or stockholders will
provide any additional loans to the Company. Consequently, there can be no
assurance that any additional financing will be available to the Company when
needed, on commercially reasonable terms, or at all.
Seasonality and Fluctuations in Quarterly Operating Result
The Company's business is seasonal. The restaurant and bicycle and rowboat
rentals at the Boathouse currently are open only March through November, with
Dinner served in the restaurant May 1 through October 1. All of the seating at
the Boathouse and a portion of the seating at Lundy's is outdoors. In addition,
since Lundy's is a waterside location, it attracts more guests during the warmer
weather months. As a result, the Company's restaurant sales generally increase
from May through September, and decrease from November through March.
The Company also expects that future quarterly operating results will
fluctuate as a result of the timing of and expenses related to the openings of
new restaurants (as the Company will incur significant expenses during the
months preceding the opening of a restaurant), as well as due to various
factors, including the seasonal nature of its business, weather conditions in
New York City, the health of New York City's economy in general and its tourism
industry in particular. Accordingly, the Company's sales and earnings may
fluctuate significantly from quarter to quarter and operating results for any
quarter will not necessarily be indicative of the results that may be achieved
for a full year.
Inflation
The effect of inflation on the Company has not been significant in either
of the 1996 or 1997 periods.
10
RIDER TO FORM 10-QSB
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(a) In anticipation of the initial public offering of certain securities by the
Company, prior to the Offering the Company effected a 1-for-1.8135268
reverse stock split ("Stock Split") of all the then issued and outstanding
common stock, par value $.0001 per share (the "Common Stock") of the
Company.
(c) In October 1997, the Company issued warrants to an officer and principal
stockholder of the Company to purchase 4,724 shares of Common Stock at an
exercise price of $4.53 per share, as compensation for services rendered to
the Company. These warrants were subsequently converted into Selling
Securityholders' Warrants (as described herein below).
In October 1997, the Company issued 20,000 shares of Common Stock and
Warrants to purchase 5,441 shares of Common stock at an exercise price of
$.01 per share, to an individual as partial consideration for certain
business consulting services provided to the company by the individual.
In October 1997, the Company issued warrants to purchase an aggregate of
200,000 shares of Common Stock to two entities as partial consideration for
a $1,000,000 loan made by such entities to the Company. The warrants are
exercisable commencing May 11, 1998 through October 2002, at an exercise
price of $5.00 per share subject to adjustment under certain circumstances.
The foregoing options and warrants were issued by the Company in private
transactions exempt from registration under Section 4 (2) of the securities
Act of 1933, as amended.
(d) On February 13, 1998 the Company consummated its initial public offering
(the "offering") contemplated by its Registration Statement on Form SB-2
(file no. 333-39937) which was declared effective by the Securities and
Exchange Commission on February 10, 1998. A total of 1,150,000 shares of
Common Stock (including 150,000 shares subject to an over-allotment option
granted to Paragon Capital Corporation, the underwriter of the offering)
were registered for sale by the Company to the public and 1,000,000 shares
were sold to the public for gross proceeds of $5,000,000. In addition,
Redeemable Warrants ("Warrants") to purchase 575,000 shares of Common Stock
(including 75,000 Redeemable Warrants subject to the over-allotment option)
were registered for sale to the public of which 500,000 Warrants were sold
in the Offering for gross proceeds of $50,000. In addition, 575,000 shares
of Common Stock issuable upon exercise of the Warrants were registered. The
warrants are exercisable between March 10, 1999 and February 9, 2003. In
addition, 310,000 warrants were registered and issued to certain selling
stockholders ("Selling Securityholders' Warrants") in
11
exchange for other warrants previously owned by them and converted at the
time of the offering. The underlying shares of Common Stock were also
registered and both the Selling Securityholders' Warrants and underlying
shares are subject to a lock-up that expires in May 1999.
The proceeds of the Company's initial public offering of common stock and
warrants was approximately $3,860,000 which amounts were received
subsequent to the period covered by this report.
Item 4. Submission of Matters to a Vote of Security Holders.
On October 6, 1997, by written consent in lieu of a special meeting
pursuant to Section 228 of the Delaware General Corporation Law ("DGCL") holders
of approximately 67% of the issued and outstanding Common Stock of the Company
consented to the adoption of the Company's 1997 Stock Option Plan and the
reservation of 525,000 shares of Common Stock from the authorized but unissued
shares of the Company for issuance upon the exercise, from the time to time, of
options to be granted under the plan.
On December 17, 1997, by written consent in lieu of a special meeting
pursuant to Section 228 of the DGCL, holders of approximately 67% of the issued
and outstanding Common Stock of the Company consented to the change of the
Company's name to TAM Restaurants, Inc.
In addition, by written consent in lieu of a special meeting pursuant to
Section 228 of the DGCL, holders of approximately 67% of the issued and
outstanding Common Stock of the Company consented to the 1-for 1.8135268 reverse
stock split of the then issued and outstanding Common Stock of the Company.
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 by the Company during the thirteen
week period December 28, 1997.
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TAM RESTAURANTS, INC AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Exchange Act , the Registrant caused
this report to be signed on its behalf by the undersigned, hereunto duly
authorized on the 26th day of March, 1998.
TAM RESTAURANTS, INC.
(Registrant)
/s/ Frank Cretella
-------------------------------------
Frank Cretella
President and Chief Executive officer
13