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 September 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 001-13559
Restaurant Teams International, Inc.
------------------------------------
(Name of small business issuer in its charter)
Texas 75-2337102
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
911 N.W. Loop 281, Suite 111, Longview, Texas 75604
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (903) 295-6800
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[ ]
Number of shares outstanding of each of the issuer's classes of common stock, as
of November 1, 1999: 10,301,118 shares of common stock, par value $.01.
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RESTAURANT TEAMS INTERNATIONAL, INC.
Page No.
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PART I FINANCIAL INFORMATION................................................... 2
Item 1. Financial Statements.................................................... 2
--------------------
Condensed Balance Sheet for the Nine Month Period
Ended September 30, 1999................................................ 2
Condensed Income Statement For Three Month and
Nine Month Periods Ended September 30, 1998 and September 30, 1999...... 4
Condensed Statement of Cash Flows for the Nine Month
Periods Ended September 30, 1998 and September 30, 1999................. 5
Notes to Interim Condensed Financial Statements (Unaudited)............. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................... 7
---------------------------------------------
PART II OTHER INFORMATION....................................................... 9
Item 2. Changes in Securities................................................... 9
---------------------
Item 4. Submission of Matters to a Vote of Security Holders..................... 9
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Item 6. Exhibits and Reports on Form 8-K........................................ 9
--------------------------------
Signatures ........................................................................ 10
Exhibit Index ........................................................................ 11
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1
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PART 1 - FINANCIAL STATEMENTS
Item 1: FINANCIAL STATEMENTS
Restaurant Teams International, Inc.
Condensed Balance Sheet
For The Nine Month Period Ended
September 30, 1999
September 30, 1999 December 31, 1998
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash .................................... $ 91,280 $ 1,606,245
Prepaid Expenses ........................ 0 7,415
Inventory ............................... 17,533 43,035
Federal Income Tax Receivable ........... 0 38,030
----------- -----------
Total Current Assets ........... 108,813 1,694,725
PROPERTY AND EQUIPMENT
Buildings ............................... 4,211,224 4,094,554
Land .................................... 135,000 135,000
Leasehold Improvements .................. 30,113 30,113
Vehicles and Equipment .................. 1,022,443 938,636
----------- -----------
Total Property and Equipment ... 5,398,780 5,198,303
Accumulated Depreciation ................ (458,505) (350,505)
----------- -----------
Property and Equipment - Net ... 4,940,275 4,847,798
OTHER ASSETS
Other Assets ............................ 87,183 50,526
Assets Held for Sale, Net of Depreciation 1,373,240 1,073,240
Fatburger Acquisition (Pending) ......... 2,130,862 0
Debenture Costs ......................... 194,798 194,798
Notes Receivable - Related Parties ...... 260,243 1,087,243
Deferred Income Tax ..................... 223,155 223,155
----------- -----------
Total Other Assets ............. 4,269,481 2,628,962
TOTAL ASSETS ................... 9,318,569 9,171,485
2
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Restaurant Teams International, Inc.
Condensed Balance Sheet
For The Nine Month Period Ended
September 30, 1999
September 30, 1999 December 31, 1998
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDER EQUITY
CURRENT LIABILITIES
Accrued Expenses .................................... $ 251,987 $ 317,021
Accounts Payable .................................... 51,211 89,835
Income Tax Payable .................................. 0 10,000
Deferred Liabilities ................................ 0 63,141
Deferred Gain on Sale of Assets ..................... 0 193,502
Current Portion of Notes Payable - L/T .............. 147,903 121,862
----------- -----------
Total Current Liabilities .................. 451,101 795,361
OTHER LIABILITIES
Notes Payable - Long Term, Net of Current ........... 1,635,779 2,043,961
Deferred Income Tax Liability ....................... 0 269,945
Convertible Debentures .............................. 2,102,698 2,102,698
----------- -----------
Total Other Liabilities .................... 3,738,477 4,416,604
SHAREHOLDERS EQUITY
Common Stock, $.01 Par Value, 50,000,000 Shares
Authorized, 6,833,443 Issued and Outstanding 12/31/98
9,996,852 Issued and Outstanding 9/15/99 ............ 103,011 68,334
Additional Paid In Capital .......................... 6,698,464 5,718,252
Retained Earnings ................................... (911,334) (1,065,916)
Less Treasury Stock, at Cost ........................ (761,150) (761,150)
----------- -----------
Total Shareholders Equity ...................... 5,128,991 3,959,520
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY ............................ 9,318,569 9,171,485
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3
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Restaurant Teams International, Inc.
Condensed Income Statement
For The Three and Nine Month Periods Ended
September 30, 1998 and September 30, 1999
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
(Unaudited) (Unaudited)
----------------------- --------------------------
<S> <C> <C> <C> <C>
SALES........................................................ $238,230 1,076,110 $ 2,176,684 $ 2,816,946
EXPENSES
Food and Beverage Costs ..................................... 51,781 303,374 557,990 776,985
Salaries and Contract Labor ................................. 69,429 306,993 634,031 743,872
Payroll and other Taxes ..................................... 7,036 50,822 104,510 125,093
Professional Fees ........................................... 157,969 12,590 214,800 40,105
Advertising and Promotional ................................. 5,546 37,166 15,358 79,606
Rent ........................................................ 19,878 65,623 172,012 174,186
Insurance ................................................... 21,222 21,691 68,280 56,400
Telephone ................................................... 27,311 13,932 38,814 25,224
Travel ...................................................... 5,173 2,165 13,189 9,053
Utilities ................................................... 8,055 27,437 34,336 74,386
Depreciation ................................................ 36,000 38,800 108,000 109,568
Amortization ................................................ 0 18,000 0 49,417
Interest .................................................... 37,211 55,877 135,216 133,611
Linen and Laundry ........................................... 0 12,008 4,209 35,625
Repairs and Maintenance ..................................... 619 10,924 18,005 46,578
Supplies .................................................... 8,690 7,823 21,521 28,665
Miscellaneous ............................................... 318 806 318 6,886
----------------------- --------------------------
Total Expenses ......................................... 456,238 986,031 2,140,589 2,515,260
OPERATING INCOME ....................................... (218,008) 90,079 36,095 301,686
OTHER INCOME/(EXPENSE)
Profit / (Loss) on Sale of Assets ........................... 0 1,763 193,502 263,330
Acquisition Cost - Old San Francisco Steak .................. 0 10,758 (188,288) 38,844
Rental Income ............................................... 45,798 0 113,274 0
Income Tax (Expense)/Benefit:
Current ................................................ 0 0 0 0
Deferred ............................................... 0 0 0 0
NET INCOME ............................................. (172,210) 102,600 154,583 603,860
Earnings Per Share .......................................... ($.02) $.02 $.02 $.09
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4
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Restaurant Teams International, Inc.
Condensed Statements of Cash Flows
For The Nine Month Period Ended
September 30, 1998 and September 30, 1999
September 30, 1999 September 30, 1998
(Unaudited) (Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income / (Loss)........................................ $ (172,210) $ 603,861
ADJUSTMENT TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Depreciation .............................................. 108,000 109,568
Amortization .............................................. 0 49,417
NET CHANGE IN ASSETS AND LIABILITIES:
Decrease / (Increase) in Inventory ........................ 25,502 (34,030)
(Decrease) / Increase in Accounts Payable ................. (38,624) 4,027
(Decrease) / Increase in Accrued Expenses ................. (65,034) (295,399)
----------- -----------
TOTAL ADJUSTMENTS .................................................. (78,156) (166,417)
Net cash provided by operating activities .......................... (142,366) 437,444
Cash Flows from Investing Activities:
Capital Expenditures ...................................... (537,134) (3,623,312)
Fatburger Acquisition (Pending) ........................... (2,130,862) 0
(Increase) / Decrease in Notes Receivable ................. 827,000 89,543
Net Proceeds from Sale of Assets .......................... 0 605,673
----------- -----------
Net Cash Used in Investing Activities .............................. (1,840,996) (2,928,096)
Cash Flows from Financing Activities:
Repurchase of Common Stock ............................. 0 (562,692)
Sale of Common Stock / Debentures ......................... 1,014,889 2,967,555
Borrowing on Notes Payable ................................ 500,000 1,433,026
Principal Payments on Notes Payable ....................... (1,046,492) (580,000)
----------- -----------
Net Cash Provided by Financing Activities .......................... 468,397 3,257,889
NET INCREASE / (DECREASE) IN CASH .................................. (1,514,965) 767,237
CASH AT BEGINNING OF YEAR .......................................... 1,606,245 20,373
CASH AT END OF PERIOD .............................................. 91,280 787,610
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5
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Restaurant Teams International, Inc.
Notes To Interim Condensed Financial Statements
For the Nine Month Period Ended
September 30, 1999
(Unaudited)
Note 1. Basis of Presentation
The condensed financial statements of Restaurant Teams International,
Inc. (the "Company") as of September 30, 1998 and September 30, 1999
have been prepared by the Company, pursuant to the rules and
regulations of the Securities and Exchange Commission. The Company
operates one restaurant under the name Street Talk Cafe and owns
three other facilities which it leases to other operators.
The information furnished herein reflects all adjustments (consisting
of normal recurring accruals and adjustments) which are, in the
opinion of management, necessary to fairly state the operating
results for the respective periods. However, these operating results
are not necessarily indicative of the results expected for the full
fiscal year. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with
generally accepted accounting principals have been omitted pursuant
to such rules and regulations. The notes to the condensed financial
statements should be read in conjunction with the notes to the
financial statements contained in the Form 10-KSB filed on April 15,
1999. Company management believes that the disclosures are sufficient
for interim financial reporting purposes.
6
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Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-QSB includes "forward-looking"
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), and Section 21E of the Securities Exchange Act of
1934, as amended (the Exchange Act), which can be identified by the use of
forward-looking terminology such as, "may", "believe", "expect", "intend",
"anticipate", "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. All statements other than
statements of historical fact included in this Form 10-QSB, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors with
respect to any such forward-looking statements, including certain risks and
uncertainties that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") are disclosed in this Form
10-QSB, including, without limitation, in conjunction with the forward-looking
statements included in this Form 10-QSB, and in the Company's Annual Report on
Form 10-KSB/A-1 for the year ended December 31, 1998. Important factors that
could cause actual results to differ materially from those in the
forward-looking statements herein include, but are not limited to, the newness
of the Company, the need for additional capital and additional financing, the
Company's limited restaurant base, lack of geographic diversification, the risks
associated with expansion, a lack of marketing experience and activities, risks
of franchising, seasonability, the choice of site locations, development and
construction delays, need for additional personnel, increases in operating and
food costs and availability of supplies, significant industry competition,
government regulation, insurance claims and the ability of the Company to meet
its stated business goals. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements.
The following discussion of the results of operations and financial
condition should be read in conjunction with the Financial Statements and
related Notes thereto included herein.
Overview
The Company was organized in June of 1990 as Bosko's, Inc. under the
laws of the State of Delaware. In November of 1992 the Company changed its name
to Fresh'n Lite, Inc., and in November of 1995 the Company merged into a Texas
corporation also bearing the name Fresh'n Lite, Inc. The Company currently owns
and operates 1 Street Talk Cafe restaurant in the Colony, Texas, and owns 3
other facilities which it leases to other operators. In September of 1998 the
Company changed its name to Restaurant Teams International, Inc. in order to
more accurately reflect management's desire to position the Company as a
franchise holding company.
Results of Operations
Comparison of Three Months Ended September 30, 1998 and 1999
Revenues. For the three months ended September 30, 1999, the Company
has generated revenues of $284,028 compared to revenues in the same period of
1998 of $1,076,110, a 74% decrease. The decrease in revenue is due solely to
management's decision to close stores and lease them to other operators in an
effort to prepare for the pending acquisition of Fatburger Corporation.
7
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Costs and Expenses. Costs and expenses for the three month period ended
September 30, 1999 decreased by $529,793 or 47% to $456,238 as compared to
$986,031 for the corresponding period of 1998. This decrease was also due to the
closing of stores to prepare for the pending Fatburger Corporation acquisition.
The reason that costs did not decrease proportionately with the decrease in
revenue was due to the increased legal and accounting fees incurred by the
company associated with it's current legal battle with the debenture holders,
the legal work on the Fatburger acquisition, and the accounting fees associated
with a change to a national auditing firm.
Net Income. The Company had a net loss for the three months ended
September 30, 1999 of $172,210 compared to net income of $102,557 for the
corresponding three months of 1998, representing $(.02) and $.01 per share,
respectively. Earnings per share figures are based on basic and diluted earnings
per share.
Comparison of Nine Months Ended September 30, 1998 and 1999
Revenues. For the nine months ended September 30, 1999, the Company has
generated revenues of $2,176,684 compared to revenues in the same period 1998 of
$2,816,946, a 23% reduction.
Costs and Expenses. Costs and expenses for the nine month period ended
September 30, 1999 decreased by $374,671, or 15% to $2,140,589 as compared to
$2,515,260 for the corresponding period of 1998.
Net Income. The Company had a net income for the nine months ended
September 30, 1999 of $154,583 compared to a net income of $603,681 for the
corresponding nine months of 1998, representing $.02 and $.09 per share,
respectively. Earnings per share figures are based on basic and diluted earnings
per share.
Liquidity and Capital Resources
Historically, the Company has required capital to fund the operations
and capital expenditure requirements of its Company-owned restaurants.
The Company is currently operating out of cash flow from operations.
The Company did two private placements of the A Debentures and the B Debentures
on May 29, 1998 and June 29, 1998 providing net proceeds to the Company of
$2,670,000.
Plan of Operations
The Company has planned the following operations for the 1999 calendar
year, including:
(i) Management's objectives for 1999 include the acquisition and expansion
of Fatburger Corporation and the implementation of an aggressive
franchising program.
(ii) The Company will continue to aggressively pursue every legal remedy
available to it under the law to restore our shareholders value
through the litigation in New York regarding the debenture holders.
Employees
The Company expects to hire two full time management personnel and
twenty part time hourly personnel with the opening of each new restaurant
operation. The cost of these personnel should be 25% of the annual operating
revenue to be generated by each operation. The initial cost of hiring and
training of all personnel is covered in the store start up costs.
8
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Year 2000 Compliance
The Company uses current versions of widely used, publicly available
software for its accounting, data processing, and point of sale computer
requirements. The providers of the software utilized by the Company have stated
that there will be no failures in the programs used by the Company resulting
from the year 2000. The Company does not utilize any customized software. The
Company has not yet determined the impact, if any, that year 2000 issued may
have on its vendors. However, the Company believes there are adequate
alternative vendors that can supply products and services to the Company if
necessary. Finally, the Company's business is not highly dependent upon
electronic data processing. In conclusion, the Company does not believe it is at
a material risk from year 2000 issues.
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Hereafter set forth as an exhibit to the Form 10-QSB of Restaurant
Teams International, Inc. is the following exhibit:
No. Description of Exhibit
27 Financial Data Schedule
(b) Current Reports on Form 8-K:
None
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Restaurant Teams International,Inc.
(Registrant)
Date: November 30, 1999 By: /s/ Stanley L. Swanson
----------------------
Stanley L. Swanson, Chief Executive Officer
(Duly Authorized Signatory)
Date: November 30, 1999 By: /s/ Curtis A. Swanson
---------------------
Curtis A. Swanson, Chief Financial Officer
and Executive Vice President
(Duly Authorized Signatory)
10
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EXHIBIT INDEX
No. Description of Exhibit
- --- ----------------------
27 Financial Data Schedule
11
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<CIK> 0000921066
<NAME> Restaurant Teams International, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 91,280
<SECURITIES> 0
<RECEIVABLES> 483,398
<ALLOWANCES> 0
<INVENTORY> 17,533
<CURRENT-ASSETS> 592,211
<PP&E> 9,184,863
<DEPRECIATION> (458,505)
<TOTAL-ASSETS> 9,318,569
<CURRENT-LIABILITIES> 451,101
<BONDS> 3,738,477
0
0
<COMMON> 103,011
<OTHER-SE> 5,025,980
<TOTAL-LIABILITY-AND-EQUITY> 9,318,569
<SALES> 238,230
<TOTAL-REVENUES> 284,028
<CGS> 51,781
<TOTAL-COSTS> 209,277
<OTHER-EXPENSES> 157,969
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,211
<INCOME-PRETAX> (172,210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (172,210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (172,210)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
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