U.S. 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 DECEMBER 27, 2000
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Transition report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
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For the transition period from to
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Commission file number 0-23757
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TAM RESTAURANTS, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 13-3905598
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1163 FOREST AVENUE, STATEN ISLAND, NY 10310
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(Address of Principal Executive Offices)
(718) 720-5959
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(Issuer's Telephone Number)
(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
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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: 4,535,500 shares of common stock as
of March 19, 2001.
Transitional Small Business Disclosure Format (check one):
Yes No X
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TAM RESTAURANTS, INC. AND SUBSIDIARIES
QUARTER ENDED DECEMBER 27, 2000
FORM 10-QSB
INDEX
PART I. FINANCIAL STATEMENTS PAGE(S)
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of
December 27, 2000 (unaudited). 1
Condensed Consolidated Statements of Operations
For the Thirteen weeks ended December 27, 2000 and
December 29, 1999 (unaudited). 2
Condensed Consolidated Statements of Cash flow
For the Thirteen weeks ended December 27, 2000 and
December 29, 1999 (unaudited). 3
Notes to unaudited Condensed Consolidated
Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition And Results of Operation 6
Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 10
Item 6. Exhibits and reports on Form 8-K 10
Signature Page 11
i
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
DECEMBER 27, 2000
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Current Assets
Cash $ 110,669
Restricted cash 200,000
Accounts receivable (net of allowance for
doubtful accounts of $0) 172,040
Inventory 138,289
Prepaid and other expenses 89,931
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Total Current Assets 710,929
Property and Equipment-Net 6,795,761
Due from stockholder 180,128
Restricted cash 1,024,546
Other Assets 562,096
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TOTAL ASSETS $ 9,273,460
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Current portion of long-term debt $ 100,800
Cash overdraft 463,195
Note payable bank 183,357
Current portion of loans payable, related parties 675,600
Current portion of capitalized lease obligations 112,634
Accounts payable 1,640,952
Due to officer / Shareholder 393,715
Withholding taxes payable 941,439
Contract deposits payable 115,058
Barter advances 349,422
Accrued expenses and other 1,719,908
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Total Current Liabilities 6,696,080
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Long-term Liabilities
Deferred rent expense 786,123
10% Convertible bonds 500,000
Loans payable-related parties - net of current portion 2,053,868
Capitalized lease obligations-net of current portion 183,772
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Total Long-term Liabilities 3,523,763
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TOTAL LIABILITIES 10,219,843
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Commitments and Contingencies
STOCKHOLDERS' DEFICIT
Stockholders' Deficit
Preferred stock; $.0001 par value;
1,000,000 shares authorized,
144,081 shares issued and outstanding 14
Common stock; $.0001 par value,
19,000,000 shares authorized;
4,535,500 shares issued and outstanding 454
Additional paid-in capital 9,977,520
Accumulated deficit (10,924,371)
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TOTAL STOCKHOLDERS' (DEFICIT) (946,383)
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TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 9,273,460
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The accompanying notes are an integral part of these
condensed consolidated financial statements.
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TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Thirteen Weeks Ended
December 29, December 27,
1999 2000
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Sales $ 4,646,150 $ 2,529,553
Cost of Sales 2,739,746 1,667,635
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Gross Profit 1,906,404 861,918
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OPERATING EXPENSES:
General and Administrative Expenses 1,517,347 928,041
Preopening expenses -- 231,804
Depreciation and amortization 207,035 119,984
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Total operating expenses 1,724,382 1,279,829
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Income (Loss) from Operations 182,022 (417,911)
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Other Expense
Interest expense 57,917 50,900
Barter expense 103,253 99,860
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Total Other Expense 161,170 150,760
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NET INCOME (LOSS) $ 20,852 $ (568,671)
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Net income (loss) per share:
Basic $ 0.0 $ (0.13)
Diluted $ 0.0 $ (0.13)
Weighted average number of
common shares outstanding - Basic 3,503,000 4,535,500
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Weighted average number of
common shares outstanding -diluted 3,647,081 4,535,500
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The accompanying notes are an integral part of these
condensed consolidated financial statements.
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TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Thirteen weeks Ended
DECEMBER 29,1999 DECEMBER 27, 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ 20,852 $(568,671)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization expense 207,035 119,984
Deferred rent expense 11,856 (7,595)
Provision for bad debts 0 (15,000)
(Increase) decrease in:
Accounts receivable (131,352) 102,784
Inventory (132,183) 13,801
Prepaid and other expenses (6,025) 58,416
Other assets (30,884) (10,887)
Increase (decrease) in:
Accounts payable (294,905) (210,015)
Bank Overdraft -- (44,174)
Withholding Tax Payable -- (27,793)
Contract deposits payable (187,687) (12,531)
Accrued expenses (16,396) (252,113)
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NET CASH USED IN OPERATING ACTIVITIES (559,689) (853,794)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (64,653) (855,768)
Restricted Cash -- 830,087
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NET CASH USED IN INVESTING ACTIVITIES (64,653) (25,681)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (18,010) (18,010)
Net repayments (advances) of officer's loans 93,081 43,715
Net proceeds (repayments) from bank line of credit -- (15,790)
Proceeds from issuance of convertible bonds -- 500,000
Proceeds from barter advances -- 98,701
Proceeds from capitalized lease 102,869 --
Principal payments on long-term
and capitalized lease obligations (37,300) (46,252)
Net (repayments) advances to stockholders/affiliates 448,124 349,251
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NET CASH PROVIDED BY FINANCING ACTIVITIES 588,764 911,615
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Net increase (decrease) in cash (35,578) 32,140
Cash, Beginning of Year 82,814 78,529
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Cash, End of period $ 47,236 $ 110,669
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The accompanying notes are an integral part of these
condensed consolidated financial statements
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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 accounting principles generally accepted
in the United States of America 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 Form
10-KSB for the fiscal year ended September 27, 2000. Operating results for
the thirteen week period ended December 27, 2000 are not necessarily
indicative of the results that may be expected for the full fiscal year
ended September 26, 2001.
2. ACCOUNTING PERIOD
The Company reports on a 52/53 year.
3. INVENTORY
Inventory consists of:
DECEMBER 27, 2000
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Food and beverage $ 23,274
Liquor 97,491
Paper 3,736
Retail Merchandise 13,788
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Total Inventory $138,289
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4. LONG-TERM DEBT
In February 2000, the Company received $2,500,000 in financing from a loan
syndicate headed by Kayne-Anderson to construct a LUNDY BROS. RESTAURANT in
New York's Times Square. The proceeds are maintained in a separate account
and can only be used to construct and open the Times Square Restaurant.
Repayment of the principal will be paid out of the free cash flow of TIMES
SQUARE LUNDY'S in accordance with the terms of the loan agreement. The loan
bears interest at prime plus 1%.
In October 2000, the Company sold $500,000 principal amount of 10% three
year Convertible Debentures to Peter Salvatore, a director and major
stockholder of the Company. The debenture is convertible into shares of
common stock at a price $0.15 per share at any time up to maturity.
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5. INCOME (LOSS) PER SHARE
For the calculation of the income (loss) per share for the three months
ended December 27, 2000 and December 29, 1999, all of the Company options
and warrants are excluded for basic and diluted loss per share as they are
anti-dilutive. For the 1999 period net income has been adjusted for the
preferred stock dividend of $18,010 and the diluted shares include 144,081
of convertible preferred shares outstanding. For the 2000 period the net
loss has been adjusted for the preferred stock dividend of $18,010.
6. SUBSEQUENT EVENTS
In January 2001, the Company obtained a $1,000,000 loan, payable interest
only, at prime, with the principal due in January 2002. The loan was
secured by Peter Salvatore a director and major stockholder of the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: The statements which are not historical facts contained in the
Management's Discussion and Analysis of Plan of Operation and elsewhere in this
report on Form 10-QSB are forward-looking statements that involve a number of
known 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 risks related to the opening of new restaurants, including
capital requirements, continued popularity of existing and new restaurants,
seasonality and other risks detailed in the Company's filings 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 BROS. RESTAURANT ("LUNDY'S"), a high-volume,
casual, upscale seafood restaurant located in Brooklyn, New York, and AMERICAN
PARK AT THE BATTERY ("AMERICAN PARK"), a multi-use facility featuring an upscale
restaurant, catering floor, two outside patios and a fast food kiosk, located at
the water's edge in Battery Park, a New York City landmark. The Company is also
completing construction on a new LUNDY BROS. RESTAURANT in New York City's Times
Square. The new restaurant in scheduled to open in late April 2001. The Company
has a lease with the City of Hoboken to build a restaurant in Hoboken, New
Jersey. There are no specific deadlines in place as to completion.
RESULTS OF OPERATIONS
Sales for the thirteen weeks ended December 27, 2000 were $2,529,553, a
decrease of $2,116,597 or 45.6%, as compared to $4,646,150, for the thirteen
weeks ended December 29, 1999. The decrease in sales for the thirteen week
period was due primarily to the loss of the THE BOATHOUSE operation in Central
Park and the closure of LUNDY'S AT SEA. For the thirteen weeks ended December
29, 1999 THE BOATHOUSE and LUNDY'S AT SEA generated revenues of approximately
$2,092,310.
Cost of sales for the thirteen weeks ended December 27, 2000 were
$1,667,635 or 65.9% of sales as compared to $2,739,746 or 59.0% of sales for the
thirteen weeks ended December 29, 1999. When cost of sales numbers for the
thirteen weeks ended December 29, 1999 are adjusted to remove the costs
associated the now suspended BOATHOUSE AND LUNDY'S AT SEA Cost of sales was
$1,679,193 or 65.8%.
As a result of the foregoing, gross profit for the thirteen weeks ended
December 27, 2000 was $861,918, a decrease of $1,044,486 or 54.8%, as compared
to $1,906,404 for the thirteen weeks ended December 29, 1999. When adjusted to
remove the revenues and costs associated with the now suspended BOATHOUSE and
LUNDY'S AT SEA operations the gross profit for the thirteen weeks ended December
29, 1999 was $874,647.
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Operating expenses for the thirteen weeks ended December 27, 2000 were
$1,279,829 or 50.6% of sales consisting of $928,041 in general and
administrative expenses, $231,804 in pre-opening expenses and $119,984 in
depreciation and amortization. As compared to $1,724,382 or 37.1% of sales, for
the thirteen weeks ended December 39, 1999 consisting of $1,517,347 in general
and administrative expenses and $207,035 in depreciation and amortization. When
adjusted to remove the expenses associated with the now suspended BOATHOUSE and
LUNDY'S AT SEA operations, operating and administrative expenses for the
thirteen weeks ended December 29, 1999 were $1,002,308.
Other expenses for the thirteen weeks ended December 27, 2000 were $150,760
a decrease of $10,410 or 6.5% as compared to $161,170 for the thirteen weeks
ended December 29, 1999. Other expenses for the thirteen weeks ended December
27, 2000 consisted of $99,860 of barter expense and $50,900 of interest expense
as compared to $103,253 and $57,917, respectively, during the same period in
fiscal 2000.
As a result of the foregoing, the net loss amounted to $568,671 or $.13 per
share for the thirteen weeks ended December 27, 2000 as compared to a net profit
of $20,852 or $0.0 per share for the thirteen weeks ended December 29, 1999.
When adjusted to reflect the loss of THE BOATHOUSE and LUNDY'S AT SEA operations
net loss for the thirteen weeks ended December 27, 1999 would have been
$403,601.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements have been and will continue to be
significant and its cash requirements have been exceeding its cash flow from
operations (at December 27, 2000, the Company had a working capital deficit of
$5,985,151), due to, among other things, costs associated with development,
opening and start-up costs of the new LUNDY BROS. RESTAURANT in Times Square and
the failure of our license to be renewed at THE BOATHOUSE in Central Park. As a
result, the Company has been substantially dependent upon sales of its equity
securities, loans from financial institutions and the Company's officers,
directors and stockholders and bartering transactions with member dining clubs
to finance a portion of its working capital requirements.
During the thirteen weeks ended December 27, 2000, net cash increased by
$32,140. Net cash used in operating activities was $853,794. Net cash used in
investing activities was $25,681. The net increase in cash from financing
activities of $911,615 relates primarily to the sale of $500,000 in convertible
debentures and an advance from Peter Salvatore, a Director and principal
shareholder of the Company in the amount of $350,000.
The Company enters into bartering agreements with member dining clubs
whereby member dining clubs advance cash to the Company in exchange for the
Company's agreement to provide to the clubs' members food and beverages at a
designated Company restaurant. The restaurant must permit the clubs' members to
purchase food and beverages at rates between 160% and 200% of the amount
advanced. Upon entering into the agreement, the Company records its obligation
to provide food and beverages at the amount of the advance it receives. Upon a
guest purchasing 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 Company will need to raise additional capital to implement its
expansion plans. Other than 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, and it is not anticipated
that any officers, directors or stockholders will provide any additional loans
to the Company.
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SEASONALITY AND FLUCTUATIONS IN QUARTERLY OPERATING RESULTS.
The Company's business is seasonal. The two outdoor patios at AMERICAN PARK
and the fast food kiosk are only open March through November and its location in
Battery Park also restricts winter sales potential. The indoor restaurant and
catering level are open year round.
LUNDY'S is a waterside location and attracts more guests during warmer
months. As a result, the Company's average weekly restaurant sales and operating
cash flow generally increases from April through October and decreases 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 during the
last two fiscal years.
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PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) On November 19, 1998 the Company's Board of Directors authorized the
designation of 150,000 shares of a series of preferred stock ("Series A
Preferred Stock") bearing a 10% cumulative dividend payable quarterly
in cash, convertible into Common Stock at anytime after issuance, at
the holder's option, at the rate of one share of Common Stock for each
share of Series A Preferred Stock, subject to adjustment under certain
circumstances. The Series A Preferred Stock is senior in rights and
preferences to any subsequently designated series and/or class of
preferred stock and is entitled to one vote per share of Common Stock
into which the issued and outstanding shares of Series A Preferred
Stock is then convertible, on all matters submitted to a vote of the
Company's stockholders. Outstanding shares of Series A Preferred Stock
are redeemable at any time by the Company, at its option, at the
redemption price of $5.00 per share, upon timely notice of its intent
to redeem.
(b) In December 1998, Frank Cretella converted $720,405 of indebtedness
owed by the Company to him into shares of Series A Preferred Stock at
the ratio of one share of Series A Preferred Stock for each $5.00 of
indebtedness outstanding. As an inducement to Mr. Cretella to convert
the debt to equity, the Company also issued Mr. Cretella 72,040
warrants to purchase the Company's Common Stock at $6.00 per share.
ITEM 6. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) Exhibits.
2.7 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K dated October 21, 2000 disclosing Item 5. Other
Events was filed by the Company during the thirteen weeks ended
December 27, 2000.
A report on Form 8-K dated November 16, 2000 disclosing Item 5. Other
Events was filed by the Company during the thirteen weeks ended
December 27, 2000.
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TAM RESTAURANTS, INC. AND SUBSIDIARIES
Signature Page
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 20th day of March, 2001.
TAM RESTAURANTS, INC.
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(Registrant)
Dated: March 20, 2001 /S/ ANTHONY B. GOLIO
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Anthony B. Golio
President and Chief Financial and
Operating Officer