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 JUNE 28, 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 August 12, 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 JUNE 28, 1998
FORM 10-QSB
INDEX
Part I. FINANCIAL INFORMATION Page(s)
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 28, 1998
(Unaudited)......................................................1
Condensed Consolidated Statements of Operations
For the Thirteen and Thirty-Nine weeks ended June 28, 1998
and June 29, 1997 (Unaudited).......................................2
Condensed Consolidated Statements of Cash Flows
For the Thirty-Nine weeks ended June 28, 1998
and June 29, 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
-ii-
<PAGE>
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
June 28, 1998
------------
Current Assets
Cash $ 76,669
Accounts receivable 867,060
Inventory 379,997
Prepaid and other expenses 938,998
Loan receivable-officer 44,997
-----------
Total current assets 2,307,721
Property and equipment-net 5,858,159
Due from affiliates 482,047
Other assets 160,131
-----------
TOTAL ASSETS $ 8,808,058
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 1,000,672
Current portion of capitalized lease obligations 96,185
Loans payable - related parties 56,860
Accounts payable 1,787,488
Contract deposits payable 573,379
Accrued expenses 1,584,595
-----------
Total current liabilities 5,099,179
-----------
Long-term liabilities
Deferred rent expense 284,536
Loans payable-related parties 924,050
Long-term debt-net of current portion 205,592
Capitalized lease obligations-net of current portion 288,556
-----------
Total long-term liabilities 1,702,734
-----------
TOTAL LIABILITIES 6,801,913
-----------
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 (5,228,488)
-----------
TOTAL STOCKHOLDERS' EQUITY 2,006,145
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,808,058
===========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE>
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------------- ------------------------------
June 29, 1997 June 28, 1998 June 29, 1997 June 28, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 4,708,823 $ 5,319,176 $ 8,704,743 $ 9,210,616
Cost of Sales 2,355,393 3,485,164 5,197,031 6,443,162
----------- ----------- ----------- -----------
Gross Profit 2,353,430 1,834,012 3,507,712 2,767,454
Operating and Administrative Expenses 1,516,712 2,093,900 3,489,806 4,454,435
----------- ----------- ----------- -----------
Income (Loss) from Operations 836,718 (259,888) (17,906) (1,686,981)
----------- ----------- ----------- -----------
Other Expense
Interest Expense 90,277 137,419 277,837 353,948
Barter Expense 153,628 206,577 204,777 405,417
----------- ----------- ----------- -----------
Total Other Expense 243,905 343,996 482,614 759,365
----------- ----------- ----------- -----------
Income (Loss) Before Income Tax
Benefit 592,813 (603,884) (464,708) (2,446,346)
Income Taxes -- -- -- --
----------- ----------- ----------- -----------
Net Income (Loss) $ 592,813 $ (603,884) $ (464,708) $(2,446,346)
=========== =========== =========== ===========
Net Income (Loss) Per Share:
Basic and Diluted $ .23 $ (.17) $ (.19) $ (.82)
=========== =========== =========== ===========
Weighted Average Number of Common
Shares Outstanding Basic and Diluted 2,526,957 3,500,000 2,478,713 2,998,168
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-2-
<PAGE>
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
----------------------------
June 29, 1997 June 28, 1998
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities
Net (loss) $ (464,708) $(2,446,346)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization expense 249,241 346,830
Deferred rent expense 57,341 60,000
Deferred income 247,663 302,251
Original issue discount - promissory note 58,032
(Increase) decrease in:
Accounts receivable (694,973) (579,692)
Inventory (20,841) (175,291)
Prepaid and other expenses (138,108) (75,865)
Other assets (121,776) (537,979)
Increase (decrease) in:
Accounts payable (250,301) 1,264,664
Accrued expenses
and other liabilities 1,268,418 (791,610)
----------- -----------
Net Cash provided by (used in) Operating Activities 131,956 (2,575,006)
----------- -----------
Cash Flows from Investing Activities
Acquisition of property and equipment (753,482) (1,659,716)
----------- -----------
Net Cash used in Investing Activities (753,482) (1,659,716)
----------- -----------
Cash Flows from Financing Activities
Officer's Loans (8,843) 1,462
Proceeds from long-term debt and warrants 713,000 1,000,000
Principal payments on long-term debt
and capitalized lease obligations (255,383) (477,842)
Advances to/from affiliates and others 42,339 (266,763)
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 691,113 4,029,766
----------- -----------
Net Increase (Decrease) in Cash 69,587 (204,956)
Cash, Beginning of period 66,616 281,625
----------- -----------
Cash, End of period $ 136,203 $ 76,669
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements
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<PAGE>
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 thirty-nine week periods ended June 28, 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 have
given rise to an original issue discount which has been valued at $482,000,
based on the Black-Scholes option pricing model, and is being amortized
beginning on the date the warrants became exercisable and ending on the due
date of the loans. Total amortization for the periods presented is $58,032
and is included in interest expense.
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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<PAGE>
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.
All the issued and outstanding warrants and options are anti-dilutive for
all periods presented, and these have not been included in the earnings
(loss) per share calculations.
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.
6. Stock Option Plan
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. As of June 28, 1998 the total number of options granted under the
plan was 293,250.
-5-
<PAGE>
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 supersedes 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 condensed
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. In April 1998, the
Company opened American Park at the Battery, in Battery Park ("American Park"),
a premium-quality restaurant 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 thirty-nine weeks ended June 28, 1998 were $9,210,616 as
compared with $8,704,743 for the thirty-nine weeks ended June 29, 1997, an
increase of $505,873 or 5.8%. The Company's sales for the thirteen weeks ended
June 28, 1998 were $5,319,176 as compared with $4,708,823 for the thirteen weeks
ended June 28, 1997, an increase of $610,353 or 13%. The increase in sales for
the thirteen and thirty-nine week periods were due primarily to the opening of
American Park which accounted for sales of $654,709 during the nine operating
weeks in which it was open. In addition, sales at The Boathouse increased in
both reporting periods by approximately 8.5%, while revenues at Lundy's
declined, principally in connection with off-premise catering.
-7-
<PAGE>
Cost of sales for the thirty-nine weeks ended June 28, 1998 were $6,443,162
as compared to $5,197,031 for the thirty-nine weeks ended June 29, 1997, an
increase of $1,246,131 or 24%. Cost of sales for the thirteen weeks ended June
28, 1998 amounted to $3,485,164 as compared to $2,355,393 for the thirteen weeks
ended June 29, 1997, an increase of $1,129,771 or 48%. This increase was due
principally to an increase in restaurant payroll and food costs, the opening of
American Park, and unusually high costs associated with the opening of American
Park, and the conversion of The Boathouse restaurant to the new Park View at The
Boathouse. Certain restaurant level management changes have been made in order
to more stringently monitor the Company's operating costs. In addition, the
Company is currently evaluating its cost structure in an effort to reduce its
future cost of sales.
As a result of the foregoing, gross profit for the thirty-nine weeks ended
June 28, 1998 was $2,767,454 or 30% of sales, as compared to $3,507,712 or 40.3%
of sales for the thirty-nine weeks ended June 29, 1997, a decrease of $740,258.
The gross profit for the thirteen weeks ended June 28, 1998 was $1,834,012 or
34.5% of sales, as compared to $2,353,430 or 50% of sales for the thirteen weeks
ended June 29, 1997.
Operating and administrative expenses for the thirty-nine weeks ended June
28, 1998 were $4,454,435 as compared to $3,489,806 for the thirty-nine weeks
ended June 29, 1997, an increase of $964,629. Operating and administrative
expenses for the thirteen weeks ended June 28, 1998 were $2,093,900, compared
with $1,516,712 for the thirteen weeks ended June 29, 1997, an increase of
$577,188. These increases were due principally to the operation of American
Park, which was not open during the comparable prior periods. In addition, these
increases were due to an increase in management payroll related to the Company's
expansion of its corporate infrastructure, significantly higher marketing costs
during this period, and an increase in restaurant level expenses. The Company is
currently evaluating its cost structure in an effort to reduce its future level
of operating and administrative expenses.
Other expenses for the thirty-nine weeks ended June 28, 1998 were $759,365
as compared to $482,614 for the thirty-nine weeks ended June 29, 1997, an
increase of $276,751. Other expenses for the thirteen weeks ended June 28, 1998
amounted to $343,996 as compared to $243,905 for the thirteen weeks ended June
29, 1997, an increase of $100,091. The increase is attributable to a slight
increase in interest expense and the amortization of $58,032 in original issue
discounts relating to issued warrants. In addition, the Company experienced an
increase in barter expense of $200,640 for the thirty-nine week period and
$52,949 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.
As a result of the foregoing, the net loss for the thirty-nine weeks ended
June 28, 1998 was $2,446,346 or $.82 per share as compared to $464,708 or $.19
per share or an increase of $1,981,638. The net loss for the thirteen weeks
ended June 28, 1998 was $603,884 or $.17 per share which represents a decrease
of $1,196,697 as compared to net income of $592,813 or $.23 per share for the
thirteen weeks ended June 29, 1997.
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<PAGE>
Liquidity and Capital Resources
At June 28, 1998, the Company had a working capital deficit of $2,791,458.
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 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 thirty-nine weeks ended June 28, 1998, net cash decreased by
$204,956. Net cash used in operating activities was $2,575,006. Net cash used in
investing activities was $1,659,716, relating primarily to the acquisition of
property and equipment for American Park. Net cash provided from financing
activities was $4,029,766, consisting of stock offering net cash proceeds of
$3,772,909 (before deduction of expenses of $128,322 paid prior to September 28,
1997) and long-term borrowings of $1,000,000, which were partially offset by
payments on long-term debt and capitalized lease obligations and advances to
certain affiliates.
During the thirty-nine weeks ended June 29, 1997, net cash increased by
$69,587. Net cash provided by operating activities was $131,956, net cash used
in investing activities was $753,482, consisting primarily of costs associated
with the development of American Park. Net cash provided by financing activities
was $691,113, 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.
-9-
<PAGE>
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 is incurring a non-cash interest charge of $482,000
representing the original issue discount relating to the promissory notes issued
to Kayne Anderson beginning on the date the warrants became exercisable and
ending on the due date of the loans. Total amortization for the periods
presented is $58,032.
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 is currently evaluating
alternative sources of financing to enable it to satisfy its contemplated cash
requirements until at least June 30, 1999. 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.
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.
-10-
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
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 June
28, 1998, the Company used such proceeds for payment of accrued expenses
and liabilities (approximately $1,000,000), construction and pre-opening
costs of American Park (approximately $1,500,000) and working capital and
general corporate purposes (approximately $1,144,587).
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 June 28, 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 17th day of August 1998.
TAM RESTAURANTS, INC.
(Registrant)
/s/ Frank Cretella
----------------------------------------
Frank Cretella
President and Chief Executive Officer
-12-
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