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 MARCH 29, 1998.
___ 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 of (I.R.S. Employer
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 _X_ No ___
As of May 15, 1998, there were 3,500,000 shares of the issuer's Common Stock
outstanding
Transitional Small Business Disclosure Format (check one):
Yes ___ No _X_
<PAGE>
TAM RESTAURANTS, INC. AND SUBSIDIARIES
QUARTER ENDED MARCH 29, 1998
FORM 10-QSB
INDEX
Part I. FINANCIAL INFORMATION Page(s)
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 29, 1998
(Unaudited)........................................................1
Condensed Consolidated Statements of Operations
For the Thirteen and Twenty-Six weeks ended March 29, 1998
and March 30, 1997 (Unaudited).....................................2
Condensed Consolidated Statements of Cash Flows
For the Twenty-Six weeks ended March 29, 1998
and March 30, 1997 (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 6. Exhibits and Reports on Form 8-K.....................................11
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TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
March 29, 1998
--------------
Current Assets
Cash $ 1,065,163
Accounts receivable 275,799
Inventory 190,478
Prepaid and other expenses 404,126
Loan receivable-officer 59,475
-----------
Total current assets 1,995,041
-----------
Property and equipment-net 5,309,726
Due from affiliates 494,173
Other assets 346,821
-----------
TOTAL ASSETS $ 8,145,761
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 416,620
Current portion of capitalized lease obligations 82,375
Loans payable - related parties 56,860
Accounts payable 662,043
Contract deposits payable 568,618
Accrued expenses 1,661,816
-----------
Total current liabilities 3,448,332
Long-term liabilities
Deferred rent expense 258,132
Loans payable-related parties 924,050
Long-term debt-net of current portion 803,719
Capitalized lease obligations-net of current portion 101,499
-----------
Total long-term liabilities 2,087,400
-----------
TOTAL LIABILITIES 5,535,732
-----------
Commitments and contingencies
Stockholders' equity
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;
3,500,000 shares issued and outstanding: 350
Additional paid-in capital 7,234,283
Accumulated deficit (4,624,604)
-----------
TOTAL STOCKHOLDERS' EQUITY 2,610,029
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,145,761
===========
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)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------------- --------------------------
March 30, March 29, March 30, March 29,
1997 1998 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 1,736,828 $ 1,512,613 $ 3,995,920 $ 3,891,440
Cost of Sales 1,315,241 1,432,002 2,841,638 2,957,998
----------- ----------- ----------- -----------
Gross Profit 421,587 80,611 1,154,282 933,442
Operating and Administrative Expenses 827,554 1,290,066 1,973,094 2,360,535
----------- ----------- ----------- -----------
Loss from Operations (405,967) (1,209,455) (818,812) (1,427,093)
----------- ----------- ----------- -----------
Other Expense
Interest Expense 104,655 109,213 187,560 216,529
Barter Expense 51,149 97,366 51,149 198,840
----------- ----------- ----------- -----------
Total Other Expense 155,804 206,579 238,709 415,369
----------- ----------- ----------- -----------
Loss Before Income Tax Benefit (561,771) (1,416,034) (1,057,521) (1,842,462)
Income Taxes -- -- -- --
----------- ----------- ----------- -----------
Net Loss $ (561,771) $(1,416,034) $(1,057,521) $(1,842,462)
=========== =========== =========== ===========
Net loss per share:
Basic and Diluted $ (.23) $ (.47) $ (.43) $ (.67)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding basic and diluted 2,472,859 2,994,505 2,459,159 2,747,252
=========== =========== =========== ===========
</TABLE>
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)
Twenty-Six Weeks Ended
March 30, March 29,
1997 1998
----------- -----------
Cash Flows from Operating Activities
Net (loss) $(1,057,521) $(1,842,462)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization expense 166,160 188,586
Deferred rent expense 38,226 33,596
Deferred income 43,000 297,490
(Increase) decrease in:
Accounts receivable (121,020) 11,569
Inventory 6,781 14,228
Prepaid and other expenses (7,093) (38,060)
Other assets (74,743) (227,602)
Increase (decrease) in:
Accounts payable (280,980) 139,219
Accrued expenses
and other liabilities 497,935 (714,389)
----------- -----------
Net Cash provided by Operating Activities (789,255) (2,137,825)
----------- -----------
Cash Flows from Investing Activities
Acquisition of property and equipment (343,527) (1,207,334)
----------- -----------
Net Cash used in Investing Activities (343,527) (1,207,334)
----------- -----------
Cash Flows from Financing Activities
Net repayments of
officer's loans 11,745
Loans receivable 12,515 (24,761)
Proceeds from long-term debt and warrants 713,000 1,000,000
Principal payments on long-term
and capitalized lease obligations (55,850) (352,307)
Advances to/from affiliates and others 243,815 (278,889)
Deferred stock offering costs 128,322
Proceeds from capital stock issuance 200,000
Proceeds from initial public offering 3,644,587
----------- -----------
Net Cash provided by Financing Activities 1,113,480 4,128,697
----------- -----------
Net Increase (Decrease) in Cash (19,302) 783,538
Cash, Beginning of period 66,616 281,625
----------- -----------
Cash, End of period $ 47,314 $ 1,065,163
=========== ===========
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 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. Operating results for the thirteen and twenty-six week
periods ended March 29, 1998 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 secured loans from
two entities. The loans bear interest at 10% per annum, payable quarterly
and matures nineteen months after the funding date (May 31, 1999). The
loans are 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 loans, 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
became exercisable on 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 loans.
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.
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TAM RESTAURANTS, INC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Capital Stock
In January 1998, 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. Initial Public Offering
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 $3,644,587.
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.
6. Subsequent Events.
The Company opened its third New York restaurant, American Park at the
Battery in Battery Park, in April 1998.
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TAM RESTAURANTS, INC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. 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, "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 interim 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
assessing 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 will not have a material effect on the Company's consolidated
financial statements.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 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 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 Bros. Restaurant ("Lundy's"), a high-volume,
casual, upscale seafood restaurant located in Brooklyn, New York, and The
Boathouse in Central Park ("The Boathouse") 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. Subsequent to the end
of the reporting quarter, in April 1998, the Company has also opened American
Park at the Battery, in Battery Park ("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.
Results of Operations
Sales for the twenty-six weeks ended March 29, 1998 were $3,891,440 as
compared with $3,995,920 for the twenty-six weeks ended March 30, 1997, a
decrease of $104,480 or 2.6%. The Company's sales for the thirteen weeks ended
March 29, 1998 were $1,512,613 as compared with $1,736,828 for the thirteen
weeks ended March 30, 1997, a decrease of $224,215 or 12.9%. The decrease in
sales for the thirteen week period was due primarily to a reduction in off
premise catering of $208,850 related to Lundy's operations.
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Cost of sales for the twenty-six weeks ended March 29, 1998 were $2,957,998
as compared to $2,841,638 for the twenty-six weeks ended March 30, 1997, an
increase of $116,360 or 4.1%. Cost of sales for the thirteen weeks ended March
29, 1998 amounted to $1,432,002 as compared to $1,315,241 for the thirteen weeks
ended March 30, 1997, an increase of $116,761 or 8.9%. This increase was due
principally to an increase in restaurant payroll costs which is attributable to
the lack of management focus on operations while it was in the registration
process related to the Company's initial public offering which was consummated
in February 1998.
Gross profit for the twenty-six weeks ended March 29, 1998 was $933,442 or
24% of sales, as compared to $1,154,282 or 28.9% of sales for the twenty-six
weeks ended March 30, 1997, a decrease of $220,840 or 19.1%. The gross profit
for the thirteen weeks ended March 29, 1998 was $80,611 or 5.3% of sales, as
compared to $421,587 or 24.3% of sales for the thirteen weeks ended March 30,
1997.
Operating and administrative expenses for the twenty-six weeks ended March
29, 1998 were $2,360,535 as compared to $1,973,094 for the twenty-six weeks
ended March 30, 1997, an increase of $387,441. Operating and administrative
expenses for the thirteen weeks ended March 29, 1998 were $1,290,066, compared
with $827,554 for the thirteen weeks ended March 30, 1997, an increase of
$462,512. These increases were due principally to an increase in management
payroll related to the Company's expansion of its corporate infrastructure,
significantly higher marketing costs related to its operations during this
period and an increase in occupancy costs and other unit level expenses.
Other expenses for the twenty-six weeks ended March 29, 1998 were $415,369
as compared to $238,709 for the twenty-six weeks ended March 30, 1997, an
increase of $176,660. Other expenses for the thirteen weeks ended March 29, 1998
amounted to $206,579 as compared to $155,804, an increase of $50,775. The
increase is attributable to a slight increase in interest expense as well as an
increase in barter expense of $147,691 for the twenty-six week period and
$46,217 for the thirteen week period. This increased expense is the 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 as 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 net loss for the twenty-six weeks ended March 29, 1998 was $1,842,462
or $.67 per share as compared to $1,057,521 or $.43 per share or an increase of
$784,941. The net loss for the thirteen weeks ended March 29, 1998 was
$1,416,034 or $.47 per share or an increase of $854,262 as compared to $561,771
or $.23 per share for the thirteen weeks ended March 30, 1997.
Liquidity and Capital Resources
At March 29, 1998, Company had a working capital deficit of $1,453,291. The
Company's financing requirements have historically exceeded cash flows from
operations primarily 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
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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 officers, directors and stockholders
and bartering transactions with member dining clubs to finance a portion of its
working capital requirements.
During the twenty-six weeks ended March 29, 1998, net cash increased by
$783,538. Net cash used in operating activities was $2,137,825, net cash used in
investing activities was $1,207,334, relating primarily to the acquisition of
property and equipment for American Park, and net cash provided from financing
activities was $4,128,697, consisting of long-term borrowing of $1,000,000,
offset by repayments of indebtedness to others of $779,212 and stock offering
net cash proceeds of $3,772,909 (before deduction of expenses of $128,322 paid
prior to September 28, 1997).
During the twenty-six weeks ended March 30, 1997, net cash decreased by
$19,302. Net cash used by operating activities was $789,255, net cash used in
investing activities was $343,527, consisting primarily of costs associated with
the preliminary development of American Park. Net cash provided by financing
activities was $1,113,480, 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) 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
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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 (the
"Offering") of common stock and redeemable warrants resulting in the Company's
receipt of net proceeds of $3,644,587. The Company anticipates that the net
proceeds from the 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 April 1999. However, in the event
that the Company's plans change or its assumptions prove to be inaccurate (due
to unanticipated expenses, construction delays or other difficulties) or the
proceeds of the 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 have historically been 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 was
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 anticipates that the opening of American Park and the
winterizing of the Boathouse (which will provide indoor seating) will reduce the
seasonal fluctuations in its operating results.
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 any of
the periods being reported on.
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PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(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 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 net proceeds of the Offering was approximately $3,644,587. As of
March 29, 1998, the Company used approximately $2,560,000 of such
proceeds for payment of accrued expenses and liabilities (approximately
$1,000,000), construction and pre-opening costs of American Park
(approximately $1,322,000) and working capital and general corporate
purposes (approximately $238,000).
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 March 29, 1998.
-11-
<PAGE>
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 18th day of May 1998.
TAM RESTAURANTS, INC.
(Registrant)
/s/ Frank Cretella
----------------------------------------
Frank Cretella
President and Chief Executive Officer
-12-
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