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 JUNE 30, 1999.
-------------
Transition report under 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 Identification No.)
Incorporation or Organization)
1163 FOREST AVENUE, STATEN ISLAND, NY 10310
-------------------------------------------
(Address of Principal Executive Offices)
(718) 720-5959
--------------------------
(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:
3,503,000 SHARES OF COMMON STOCK AS OF AUGUST 13, 1999.
-------------------------------------------------------
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
TAM RESTAURANTS, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 30, 1999
FORM 10-QSB
INDEX
PART I. FINANCIAL STATEMENTS PAGE(S)
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of
June 30, 1999 (unaudited). 1
Condensed Consolidated Statements of Operations
For the Thirteen weeks and Thirty-Nine weeks
ended June 30, 1999 and June 28, 1998 (unaudited). 2
Condensed Consolidated Statements of Cash Flows
For the Thirteen weeks and Thirty-Nine weeks
ended June 30, 1999 and June 28, 1998 (unaudited). 3
Notes to unaudited Condensed Consolidated
Financial Statements 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 6
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURE PAGE 12
(i)
<PAGE>
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
JUNE 30, 1999
-------------
Current Assets
<S> <C>
Cash $ 108,068
Accounts receivable (net of allowance for
doubtful accounts of $15,000) 714,661
Inventory 472,645
Prepaid and other expenses 448,866
-----------
Total Current Assets 1,744,240
Property and Equipment-Net 6,071,678
Due from Affiliates 221,360
Other Assets 346,715
Loan Receivable - Officer 35,772
-----------
TOTAL ASSETS $ 8,419,765
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 1,074,759
Current portion of loans payable, related parties 2,043
Current portion of capitalized lease obligations 106,052
Accounts payable 1,165,968
Contract deposits payable 508,490
Accrued expenses and other 2,101,869
-----------
Total Current Liabilities 4,959,181
-----------
Long-term Liabilities
Deferred rent expense 275,531
Long-term debt - net of current portion 41,028
Loans payable-related parties -
net of current portion 289,839
Capitalized lease obligations-
net of current portion 134,907
Barter advances - net of current portion 439,705
-----------
Total Long-term Liabilities 1,181,010
-----------
TOTAL LIABILITIES 6,140,191
-----------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Stockholders' Equity
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;
3,503,000 shares issued and outstanding 350
Additional paid-in capital 7,977,623
Accumulated deficit (5,698,413)
-----------
TOTAL STOCKHOLDERS' EQUITY 2,279,574
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,419,765
===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
(1)
<PAGE>
TAM RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
June 28, June 30, June 28, June 30,
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 5,319,176 $ 6,687,053 $ 9,210,616 $ 12,787,211
Cost of Sales 3,485,164 3,810,784 6,443,162 7,666,154
------------ ------------ ------------ ------------
Gross Profit 1,834,012 2,876,269 2,767,454 5,121,057
Operating and Administrative Expenses 2,093,900 2,309,135 4,454,435 4,921,080
------------ ------------ ------------ ------------
Income (Loss) from Operations (259,888) 567,134 (1,686,981) 199,977
------------ ------------ ------------ ------------
Other Expense
Interest expense 137,419 198,454 353,948 501,726
Barter Expense 206,577 162,845 405,417 315,320
------------ ------------ ------------ ------------
Total Other Expense 343,996 361,299 759,365 817,046
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (603,884) $ 205,835 $ (2,446,346) $ (617,069)
============ ============ ============ ============
Net income (loss) per share:
Basic and Diluted $ (.17) $ .06 $ (.82) $ (.18)
============ ============ ============ ============
Weighted average number of common
shares outstanding - Basic 3,500,000 3,503,000 2,998,168 3,503,000
============ ============ ============ ============
Weighted average number of common
shares outstanding - Diluted 3,500,000 3,647,081 2,998,168 3,503,000
============ ============ ============ ============
</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 28, 1998 June 30, 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(2,446,346) $ (617,069)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Depreciation and amortization expense 346,830 806,524
Deferred rent expense 60,000 3,362
Amortization of warrants issued on debt conversion -- 30,257
Amortization of original issue discount 58,032 231,255
Deferred income 302,251 (6,000)
(Increase) decrease in:
Accounts receivable (579,692) (54,139)
Inventory (175,291) (90,887)
Prepaid and other expenses 75,865 (99,441)
Other assets (537,979) (41,469)
Increase (decrease) in:
Accounts payable 1,264,664 203,265
Accrued expenses (791,610) (79,023)
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (2,575,006) 286,635
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (1,659,716) (570,562)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of officer's loans 1,462 3,357
Proceeds from long-term debt 1,000,000 --
Proceeds from barter advances -- 650,000
Principal payments on long-term debt
and capitalized lease obligations (477,842) (478,236)
Net repayments (advances) of affiliates and others (266,763) (4,610)
Deferred stock offering costs 128,322 --
Proceeds from initial public offering 3,644,587 --
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,029,766 170,511
----------- -----------
Net decrease in cash (204,956) (113,416)
Cash, Beginning of year 281,625 221,484
----------- -----------
Cash, End of period $ 76,669 $ 108,068
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements
(3)
<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 Form 10- KSB for the fiscal year ended September 27, 1998.
Operating results for the thirteen and thirty-nine week periods ended June
30, 1999 are not necessarily indicative of the results that may be expected
for the full fiscal year ending September 29, 1999.
2. ACCOUNTING PERIOD
-----------------
The Company reports on a 52/53 year. For fiscal 1999 the Company changed
its period end day from Sunday to Wednesday in order to facilitate better
cost controls and streamline its reporting systems. As a result, the first
thirty- nine weeks of fiscal 1999 include three additional days of revenues
and expenses when compared to fiscal 1998. The net effect of which had no
material effect on the revenues and expenses reported in the period ended
June 30, 1999.
3. LONG-TERM DEBT
--------------
In October 1997, the Company obtained $1,000,000 in a secured loan from two
entities. The loan bears interest at 10% per annum, payable quarterly and
matures September 30, 1999. The loan is guaranteed by a principal
stockholder of the Company and the guarantee is secured by a pledge of
200,000 shares of common stock held by such stockholder.
Additionally, as partial consideration for the loan, the Company granted to
the entities warrants to purchase 200,000 shares of common stock at an
exercise price of $5.00 per share expiring in October 2002. The issuance of
these warrants gave rise to an original issue discount which has been
valued at $482,000. As of June 30, 1999 $77,085 of original issue discount
expense remains to be amortized.
In October 1997, the Company issued to Mr. Cretella a promissory note in
the original principal amount of $720,405 which bears interest at the 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. On December 30, 1998, Mr. Cretella converted the
$720,405 of indebtedness owed to him by the Company into 144,081 shares of
Series A Preferred Stock. As further inducement to Mr. Cretella to convert
the debt to equity the Company also issued to Mr. Cretella 72,040 warrants
to
(4)
<PAGE>
purchase the Company's Common Stock at $6.00 per share. The Company
incurred a, one time, non-cash interest charge of $30,257 representing the
original issue discount relating to the warrants issued to Mr. Cretella.
The Company received a fairness opinion with respect to this transaction.
4. NET INCOME (LOSS) PER SHARE
---------------------------
For the calculation of the net income (loss) per share for the thirteen and
thirty-nine weeks ended fiscal 1999 and 1998, all of the Company options
and warrants are excluded for basic and diluted net income (loss) per share
as they are anti-dilutive; however, 144,081 shares of Series A Preferred
Stock were included in the diluted net income per share calculation for the
thirteen weeks ended June 30, 1999.
5. PREFERRED STOCK
---------------
The Company's Board of Directors authorized the designation of 150,000
shares of preferred stock, of the 1,000,000 previously authorized and
unallocated, to be 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.
(5)
<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: 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, THE BOATHOUSE
IN CENTRAL PARK ("THE BOATHOUSE"), a multi-use facility featuring an upscale
restaurant and catering pavilion, located on the lake in New York City's Central
Park, 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.
RESULTS OF OPERATIONS
Sales for the thirty-nine weeks ended June 30, 1999 were $12,787,211, an
increase of $3,576,595 or 38.8%, as compared to $9,210,616 for the thirty-nine
weeks ended June 28, 1998. The Company's sales for the thirteen weeks ended June
30, 1999 were $6,687,053, an increase of $1,367,877 or 25.7%, as compared to
$5,319,176 for the thirteen weeks ended June 28, 1998. The increase in sales for
both the thirteen week period and thirty-nine week period was primarily due to
the addition of AMERICAN PARK , which opened in the middle of the third quarter
of fiscal 1998, and increased sales at THE BOATHOUSE. AMERICAN PARK'S sales
during the thirteen and thirty-nine weeks ended June 30, 1999 were $1,418,257
and $2,761,890 respectively. Beginning in fiscal 1999, the Company changed its
period end from Sunday to Wednesday the result of which added three additional
days of sales into the thirty-nine weeks ended June 30, 1999 when compared to
the thirty-nine weeks ended June 28, 1998. A total of $214,773 in sales were
generated by the additional three days included in the thirty-nine weeks ended
June 30,1999.
Cost of sales for the thirty-nine weeks ended June 30, 1999 were $7,666,154
or 60% of sales as compared to $6,443,162 or 69.9% of sales for the thirty-nine
weeks ended June 28, 1998. Cost of sales for the thirteen weeks ended June 30,
1999 were $3,810,784 or 57% of sales as compared to $3,485,164 or 65.5% of sales
for the thirteen weeks ended June 28, 1998. The decrease in the cost of sales
relative to overall sales can be attributed to the Company's tightening of
purchasing specifications and the implementation of menu changes and labor cost
controls at all of the units, which were initiated in the fourth quarter of
fiscal 1998.
(6)
<PAGE>
As a result of the foregoing, gross profit for the thirty-nine weeks ended
June 30, 1999 was $5,121,057 or 40% of sales as compared to $2,767,454 or 30% of
sales for the thirty-nine weeks ended June 28, 1998, an increase of $2,353,603
or 85%. Gross profit for the thirteen weeks ended June 30, 1999 was $2,876,269
or 43.0% of sales an increase of $1,042,257 or 56.8% as compared to $1,834,012
or 34.5% of sales for the thirteen weeks ended June 28, 1998.
Operating and administrative expenses for the thirty-nine weeks ended June
30, 1999 were $4,921,080 or 38.5% of sales as compared to $4,454,435 or 48.4% of
sales for the thirty-nine weeks ended June 28, 1998. Operating and
administrative expenses for the thirteen weeks ended June 30, 1999 were
$2,309,135 or 34.5% of sales as compared with $2,093,900 or 39.4% of sales for
the thirteen weeks ended June 28, 1998. For the thirteen and thirty-nine weeks
ended June 30,1999 operating and administrative expenses increased by $466,645
and $215,235 respectively, primarily as a result of the operation of AMERICAN
PARK which opened in the middle of the third quarter of fiscal 1998. The
decrease in operating and administrative expenses relative to overall sales
during the thirteen and thirty-nine week periods ended June 30, 1999, can be
attributed to operating efficiencies accomplished through contract negotiations
with significant vendors, reduction in corporate overhead and the overall
increase in revenues generated.
Other expenses for the thirty-nine weeks ended June 30, 1999 were $817,046,
an increase of $57,681 or 7.6%, as compared to $759,365 for the thirty-nine
weeks ended June 28, 1998. Other expenses for the thirteen weeks ended June 30,
1999 were $361,299, an increase of $17,303 or 5%, as compared to $343,996 for
the thirteen weeks ended June 28, 1998. Other expenses for the thirty-nine weeks
ended June 30, 1999 consisted of $315,320 of barter expense as compared to
$405,417 in fiscal 1998. The decrease in barter expense, however, was offset by
an increase in interest expense related to charges of $231,255 for an original
issue discount resulting from the issuance of the Kayne Anderson warrants and
$30,257 for an interest charge resulting from the issuance of the Cretella
warrants.
As a result of the foregoing, net loss amounted to $617,069 or $.18 per
share for the thirty-nine weeks ended June 30, 1999, as compared to a net loss
of $2,446,346 or $.82 per share for the thirty-nine weeks ended June 28, 1998.
For the thirteen weeks ended June 30, 1999, net income amounted to $205,835 or
$.06 per share, as compared to a net loss of $603,884 or $.17 per share for the
thirteen weeks ended June 28, 1998.
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 June 30, 1999, the Company had a working capital deficit of
$3,214,941), due to, among other things, costs associated with development,
opening and start-up costs of AMERICAN PARK and PARK VIEW at THE BOATHOUSE and
building a corporate infrastructure sufficient to support the Company's
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 30, 1999, net cash decreased by
$113,416. Net cash during the thirty-nine weeks ended June 30, 1999 provided by
operating activities was $286,635 and net cash used in investing activities was
$570,562, relating primarily to the additional catering space
(7)
<PAGE>
at LUNDY'S, the renovation of the indoor dining space at THE BOATHOUSE, the
addition of outdoor catering space at AMERICAN PARK, expansion of the Company's
offices, and investment in the Company's management information systems in
connection with Year 2000 requirements. The net increase in cash from financing
activities was $170,511.
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.
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, and
were originally due May 31, 1999. Upon an event of default under the loans, the
interest rate increases to 15% per annum and the Company would be required to
pay to Kayne Anderson 50% of the operating profits from AMERICAN PARK on a
monthly basis until the loan is fully repaid. The loan is guaranteed by Frank
Cretella, President, Chief Executive Officer, a director and a principal
stockholder of the Company, and the guarantee is secured by a pledge of 200,000
shares of Common Stock owned by Frank Cretella and Jeanne Cretella, Vice
President, a director and principal stockholder of the Company. As partial
consideration for the loans, the Company issued to Kayne Anderson warrants (the
"KA Warrants") to purchase 200,000 shares of Common Stock. The KA Warrants are
exercisable at a price of $5.00 per share (subject to adjustment under certain
circumstances) and are exercisable at any time until October 31, 2002. The
Company will incur a non-cash interest charge of $482,000 representing the
original issue discount relating to the KA Warrants issued to Kayne Anderson,
over the life of the promissory notes. In connection with the loan, the Company
agreed to use its best efforts to cause a representative designated by Kayne
Anderson, to be elected to the Company's Board of Directors. Kenneth Harris has
been elected a director as Kayne Anderson's initial designee. In August 1998,
the Company and Kayne Anderson agreed to amend the loan agreement to extend the
maturity date of the loans to September 30, 1999. Under the terms of the
amendment the Company agreed to pay 50% of THE BOATHOUSE operating profits
rather than 50% of AMERICAN PARK operating profits if the Company failed to
repay the loan by September 30, 1999.
In February 1998, the Company consummated an initial public offering ("the
Public Offering") of 1,000,000 shares of Common Stock and 500,000 Warrants for
gross proceeds of $5,050,000. After payment of the underwriters discounts and
commissions and expenses of the Public Offering, net proceeds realized by the
Company were $3,637,249.
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.
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
(8)
<PAGE>
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.
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. The Company incurred a, one time, non-cash interest charge of
$30,257 representing the original issue discount relating to the warrants issued
to Mr. Cretella.
SEASONALITY AND FLUCTUATIONS IN QUARTERLY OPERATING RESULTS.
The Company's business is seasonal. The bicycle, rowboat rentals and
outdoor dining at THE BOATHOUSE are open only March through November. The
catering facilities, indoor section of the PARK VIEW restaurant and the fast
food operation are open year round, but at a substantially reduced sales volume
during the winter due to the BOATHOUSE'S location in the middle of Central Park.
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.
YEAR 2000
The Company has evaluated and is in the process of updating its internal
Management Information Systems to ensure that it will have the capability to
manage and manipulate data in the year 2000 and beyond. As the Company takes
measures to be in compliance, new programs are currently being tested. In
accordance with the Company's Y2K plan, the Company's information technology
("IT") systems were substantially compliant as of June 30th, 1999. The Company
is still reviewing several of the system changes made to ensure the continued
reliability and compliance of
(9)
<PAGE>
its IT systems. Costs incurred by the Company to date to implement its plan have
not been material and are not expected to have a material effect on the
Company's financial condition or results of operations.
The Company has begun to assess the compliance of its non-IT systems. It is
anticipated that these systems will be compliant by December 31, 1999.
The Company has addressed year 2000 compliance with its major customers and
service providers and anticipates that those key vendors and service providers
who are not yet compliant will be prior to calendar year end.
INFLATION
The effect of inflation on the Company has not been significant during the
last two fiscal years.
(10)
<PAGE>
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. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the thirty-nine
weeks ended June 30, 1999.
(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, thereunto duly
authorized.
TAM RESTAURANTS, INC.
---------------------
(Registrant)
Dated: August 16, 1999 /S/ FRANK CRETELLA
------------------
Frank Cretella
President and Chief Executive Officer
Dated: August 16, 1999 /S/ ANTHONY B. GOLIO
--------------------
Anthony B. Golio
Vice President
(12)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 108,068
<SECURITIES> 0
<RECEIVABLES> 714,661
<ALLOWANCES> 15,000
<INVENTORY> 472,645
<CURRENT-ASSETS> 1,744,240
<PP&E> 9,177,073
<DEPRECIATION> 3,105,395
<TOTAL-ASSETS> 8,419,765
<CURRENT-LIABILITIES> 4,959,181
<BONDS> 0
<COMMON> 0
14
350
<OTHER-SE> 2,279,574
<TOTAL-LIABILITY-AND-EQUITY> 8,419,765
<SALES> 12,787,211
<TOTAL-REVENUES> 12,787,211
<CGS> 7,666,154
<TOTAL-COSTS> 7,666,154
<OTHER-EXPENSES> 315,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 501,726
<INCOME-PRETAX> (617,069)
<INCOME-TAX> 0
<INCOME-CONTINUING> (617,069)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (617,069)
<EPS-BASIC> (.18)
<EPS-DILUTED> (.18)
</TABLE>
