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 MARCH 28, 2001.
[ ] Transition report under Section 13 or 15 (d) of the Securities Exchange
- ----- Act of 1934
For the transition period from to .
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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 of (I.R.S. Employer
Incorporation or Organization) Identification No.)
114 MCCLEAN AVENUE, STATEN ISLAND, NY 10305
(Address of Principal Executive Offices)
(718) 273-2532
(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 X No
-------------- ------------
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: 4,553,500 shares of
common stock as of March 28, 2001.
Transitional Small Business Disclosure Format (check one):
Yes No X
--
TAM RESTAURANTS, INC. AND SUBSIDIARIES
QUARTER ENDED MARCH 28, 2001
FORM 10-QSB
INDEX
Part I. FINANCIAL STATEMENTS Page(s)
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of March 28, 2001
(unaudited). 3
Condensed Consolidated Statements of Operations
For the Thirteen weeks and Twenty-Six weeks
ended March 28, 2001 and March 29, 2000 (unaudited). 4
Condensed Consolidated Statements of Cash flow
For Twenty-Six weeks ended March 28, 2001 and
March 29, 2000 (unaudited). 5
Notes to unaudited Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition And Results of Operation 8
Part II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature Page 13
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
MARCH 28, 2001
--------------
Current Assets
Cash $ 55,228
Restricted Cash 200,000
Accounts receivable (net of allowance
for doubtful accounts of $0) 151,542
Inventory 118,839
Prepaid and other expenses 72,771
------------
Total Current Assets 598,380
Property and Equipment-Net 7,533,698
Due from stockholder 212,118
Restricted Cash 200,299
Other Assets 625,944
------------
TOTAL ASSETS $ 9,170,439
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Note payable bank $ 1,208,349
Current portion of long-term debt 183,273
Cash overdraft 260,945
Current portion of loans payable, related parties 825,500
Current portion of capitalized lease obligations 123,886
Withholding taxes payable 915,949
Accounts payable 1,982,361
Due to officer 88,870
Contract deposits payable 204,022
Barter advances 550,782
Accrued expenses and other 1,382,147
------------
Total Current Liabilities 7,726,084
------------
Long-term Liabilities
Deferred rent expense 858,154
Long-term debt - net of current portion 0
10% Convertible bonds 500,000
Loans payable-related parties - net of current portion 2,053,334
Capitalized lease obligations-net of current portion 147,657
Barter advances - net of current portion 0
------------
Total Long-term Liabilities 3,559,145
------------
TOTAL LIABILITIES 11,285,229
------------
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 453
Additional paid-in capital 9,977,520
Accumulated deficit (12,092,777)
------------
TOTAL STOCKHOLDERS' DEFICIT (2,114,790)
------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 9,170,439
============
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 Twenty-six Weeks Ended
March 29, March 28, March 29, March 28,
2000 2001 2000 2001
---- ---- ---- ----
Sales $ 2,341,944 $ 1,437,131 $ 6,988,094 $ 3,966,684
Cost of Sales 2,210,585 1,250,322 4,950,331 2,917,957
----------- ----------- ----------- -----------
Gross Profit 131,359 186,809 2,037,763 1,048,727
Operating expenses
General and administrative expenses 1,538,674 883,037 3,066,011 1,811,078
Preopening expenses -- 231,450 -- 463,254
Depreciation and amortization 238,141 120,022 435,156 240,006
----------- ----------- ----------- -----------
Total operating expenses 1,776,815 1,234,509 3,501,197 2,514,338
----------- ----------- ----------- -----------
Loss from Operations (1,645,456) (1,047,700) (1,463,434) (1,465,611)
----------- ----------- ----------- -----------
Other Expense
Interest expense 109,810 52,806 167,727 103,706
Barter Expense 110,515 49,890 213,768 149,750
----------- ----------- ----------- -----------
Total Other Expense 220,325 102,696 381,495 253,456
----------- ----------- ----------- -----------
NET LOSS $(1,865,781) $(1,150,396) $(1,844,929) $(1,719,067)
=========== =========== =========== ===========
Net loss per share:
Basic and Diluted $ (.46) $ (.26) $ (.50) $ (.39)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding - basic and diluted 4,073,000 4,535,500 3,791,000 4,535,500
=========== =========== =========== ===========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
-4-
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Twenty-Six weeks Ended
MARCH 29, 2000 MARCH 28, 2001
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,844,929) $(1,719,067)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization expense 435,156 240,006
Deferred rent expense 27,000 64,436
Provision for bad debts -- (15,000)
Decrease (increase) in:
Accounts receivable 1,090 123,281
Inventory 138 33,251
Prepaid and other expenses (194,201) 75,576
Other assets 192,409 (77,127)
Increase (decrease) in:
Accounts payable (755,409) 131,394
Bank overdraft -- (246,424)
Contract deposits payable 70,959 76,433
Withholding tax payable -- (53,283)
Accrued expenses 125,843 (589,874)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,941,944) (1,956,398)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (90,414) (1,711,335)
Restricted cash -- 1,654,334
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (90,414) (57,001)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid (36,024) (36,020)
Net proceeds from bank line of credit 700,000 1,009,202
Proceeds from long-term debt 2,500,000 --
Proceeds from issuance of convertible bonds -- 500,000
Sale of common stock 2,000,000 --
Repayment of related party loan (1,000,000) --
Proceeds from barter advances 139,290 300,061
Principal payments on long-term
and capitalized lease obligations (74,381) (64,819)
Net (repayments) advances from
Officers, stockholders and affiliates 544,417 205,497
Proceeds from equipment refinancing loans 271,320 --
Repayment of long-term debt (22,087) 76,177
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,022,535 1,990,098
----------- -----------
Net increase (decrease) in cash 2,990,177 (23,301)
Cash, Beginning of year 82,814 78,529
----------- -----------
Cash, End of period $ 3,072,991 $ 55,228
=========== ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements
-5-
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 Form
10-KSB for the fiscal year ended September 27, 2000. Operating results for
the thirteen and twenty-six week periods ended March 28, 2001 are not
necessarily indicative of the results that may be expected for the full
fiscal year ended September 28, 2001.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company had a working
capital deficit as of September 27, 2000, and had incurred a significant
loss from operations for the year ended September 27, 2000 that raised
substantial doubt about its ability to carryout its business and continue
as a going concern without continued trade vendor support, additional
financing or equity or its ability to reach or comply with agreements with
Federal and State taxing authorities.
Management is aggressively seeking new business with the construction of
the Lundy's Times Square restaurant and additional financing which it
believes will return the Company to profitability. There can be no
assurances that the Company will be successful in these efforts. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Certain amounts from the prior year have been reclassified to conform to
the current year presentation.
2. ACCOUNTING PERIOD
The Company reports on a 52/53 year.
3. INVENTORY
Inventory consists of:
March 28, 2001
Food and beverage $ 34,619
Liquor 80,484
Paper 3,736
---------
Total Inventory $118,839
=========
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.
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
securitized by collateral provided by Peter Salvatore a director and major
stockholder of the Company.
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5. LOSS PER SHARE
For the calculation of the loss per share for the thirteen and twenty six
weeks ended March 28, 2001 and March 29, 2000, all of the Company options
and warrants are excluded for basic and diluted loss per share as they are
anti-dilutive. For the 2001 and 2000 thirteen-week period net loss 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 twenty-six week period the net loss has been adjusted for the
preferred stock dividend of $36,020.
6. SUBSEQUENT EVENTS
On March 30, 2001 the Company, in a private placement, sold 5,700,000
shares of common stock at $0.10 per share for net proceeds of $570,000.
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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 Financial Condition and Results of
Operations 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 May 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 twenty-six weeks ended March 28, 2001 were $3,966,684, a
decrease of $3,021,410 or 43.2% as compared to $6,988,094 for the twenty-six
weeks ended March 29, 2000. The Company's sales for the thirteen weeks ended
March 28, 2001 were $1,437,131, a decrease of $904,813 or 38.6%, as compared to
$2,341,944 for the thirteen weeks ended March 29, 2000. The decrease in sales
for the thirteen week and twenty-six week periods was due primarily to the loss
of the THE BOATHOUSE operation in Central Park and the closure of LUNDY'S AT
SEA. For the twenty-six weeks ended March 29, 2000 THE BOATHOUSE and LUNDY'S AT
SEA generated revenues of approximately $2,607,991. The additional decrease of
approximately $414,014 can be attributed to the severe weather conditions
experienced in the northeast during the thirteen weeks ended March 28, 2001 and
the resulting impact on a la carte sales at both LUNDY'S and AMERICAN PARK.
Cost of sales for the twenty-six weeks ended March 28, 2001 were $2,917,957
or 73.6% of sales as compared to $4,950,331 or 70.8% of sales for the twenty-six
weeks ended March 29, 2000. Cost of sales for the thirteen weeks ended March 28,
2001 were $1,250,322 or 87.0% of sales as compared to $2,210,585 or 94.4% of
sales for the thirteen weeks ended March 29, 2000. When cost of sales numbers
for the twenty-six weeks ended March 29, 2000 are adjusted to remove the costs
associated the now suspended BOATHOUSE and LUNDY'S AT SEA operations, the cost
of sales was $3,190,645 or 72.8%.
-8-
As a result of the foregoing, gross profit for the twenty-six weeks ended
March 28, 2001 was $1,048,727 or 26.4% of sales as compared to $2,037,763 or
29.2% of sales for the twenty-six weeks ended March 29, 2000, a decrease of
$989,036 or 48.5%. Gross profit for the thirteen weeks ended March 28, 2001 was
$186,809 or 13.0% of sales as compared to $131,359 or 5.6% of sales for the
thirteen weeks ended March 29, 2000.
Operating expenses for the twenty-six weeks ended March 28, 2001 were
$2,514,338 or 63.4% of sales consisting of $1,811,078 in general and
administrative expenses, $463,254 in preopening expenses and $240,006 in
depreciation and amortization. As compared to $3,501,197 or 50.1% of sales for
the twenty-six weeks ended March 29, 2000, consisting of $2,926,041 in general
and administrative expenses, a sales tax charge of $140,000, and $435,156 in
depreciation and amortization. Operating expenses for the thirteen weeks ended
March 28, 2001 were $1,234,509 or 85.9% of sales consisting of $883,037 in
general and administrative expenses, $231,450 in preopening expenses and
$120,022 in depreciation and amortization. As compared with $1,776,815 or 75.9%
of sales for the thirteen weeks ended March 29, 2000, consisting of $1,389,674
in general and administrative expenses, a sales tax charge of $140,000 and
$238,141 in depreciation and amortization. When adjusted to remove the expenses
associated with the now suspended BOATHOUSE and LUNDY'S AT SEA operations,
general and administrative expenses for the thirteen and twenty-six weeks ended
March 28, 2000 were $1,124,768 and $2,190,930 respectively, including a sales
tax charge of $140,000.
Other expenses for the twenty-six weeks ended March 28, 2001 were
$253,456, a decrease of $128,039 or 33%, as compared to $381,495 for the
twenty-six weeks ended March 29, 2000. Other expenses for the thirteen weeks
ended March 28, 2001 were $102,696, a decrease of $117,629 or 53.4%, as compared
to $220,325 for the thirteen weeks ended March 29, 2000. Other expenses for the
twenty-six weeks ended March 28, 2001 consisted of $149,750 of barter expense
and $103,706 of interest expense. As compared to $213,768 in barter expenses,
and $167,727 in interest expenses.
As a result of the foregoing, net loss amounted to $1,719,067 or $.39 per
share for the twenty-six weeks ended March 28, 2001, as compared to a net loss
of $1,844,929 or $.50 per share for the twenty-six weeks ended March 29, 2000.
For the thirteen weeks ended March 28, 2001, net loss amounted to $1,150,396 or
$.26 per share, as compared to a net loss of $1,865,781 or $.46 per share for
the thirteen weeks ended March 29, 2000.
-9-
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 March 28, 2001, the Company had a working capital deficit of
$7,127,704), due to, among other things, costs associated with the development,
pre-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.
As a result of the above, the Company's ability to carryout its
business and continue as a going concern is contingent upon trade vendor
support, additional financing or equity. The Company's independent certified
public accountants have issued a going concern opinion in regard to the fiscal
2000 financial statements. Management is aggressively seeking to locate and
secure the required financing to shore up the Company's working capital.
During the twenty-six weeks ended March 28, 2001, net cash decreased by
$23,301. Net cash used in operating activities was $1,956,398. Net cash used in
investing activities was $57,001, relating primarily to pre-opening and start-up
costs associated with LUNDY BROS. RESTAURANT in Times Square. The net increase
in cash from financing activities was $1,990,098 which relates primarily to the
sale of $500,000 in convertible debentures, the securitization of a bank loan
by Peter Salvatore, a Director and principal shareholder of the Company in the
amount of $1,000,000, and $300,000 in barter card advances.
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.
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.
-10-
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(1) On February 7, 2000, and February 9, 2000, the Registrant issued and sold
an aggregate of 1,000,000 shares of its Common Stock to three accredited
investors for a total purchase price of $2,000,000 under a Common Stock
Purchase Agreement dated as of February 1, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(3) Exhibits.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during the
period covered by this Report.
-11-
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, thereunto duly
authorized.
TAM RESTAURANTS, INC.
---------------------
(Registrant)
Dated: May 25, 2001 /S/ ANTHONY B. GOLIO
--------------------
Anthony B. Golio
President and Chief Financial
and Operating Officer
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