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, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
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Commission file number 001-13559
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Restaurant Teams International, Inc.
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(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 [ ] No[X]
Number of shares outstanding of each of the issuer's classes of common stock, as
of October 20, 2000: 19,899,011 shares of common stock, par value $.01.
<PAGE>
RESTAURANT TEAMS INTERNATIONAL, INC.
Page No.
PART I FINANCIAL INFORMATION..........................................2
Item 1. Financial Statements...........................................2
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Condensed Balance Sheets as of
September 30, 2000 and December 31, 1999.......................2
Condensed Statements of Operations For the Three and Nine Month
Periods Ended September 30, 1999 and September 30, 2000
(Unaudited)....................................................4
Condensed Statements of Cash Flows for the Nine Month
Periods Ended September 30, 1999 and September 30, 2000
(Unaudited)....................................................5
Notes to Interim Condensed Financial Statements (Unaudited)....7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................8
---------------------------------------------
PART II OTHER INFORMATION.............................................10
Item 2. Changes in Securities.........................................10
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Item 4. Submission of Matters to a Vote of Security Holders...........10
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Item 6. Exhibits and Reports on Form 8-K..............................10
--------------------------------
Signatures ..............................................................11
Exhibit Index ..............................................................12
<PAGE>
PART 1 - FINANCIAL STATEMENTS
Item 1: FINANCIAL STATEMENTS
Restaurant Teams International, Inc.
Condensed Balance Sheets
Dec. 31, 1999 September 30, 2000
(Audited) (Unaudited)
---------- ----------
ASSETS
CURRENT ASSETS
Cash $ 2,521 $ 726
Accounts receivable -- 9,091
Inventories 13,690 38,425
Prepaid Expenses 18,657 --
Marketable securities -- 33,659
Federal Income Tax Receivable 38,030 38,030
---------- ----------
Total Current Assets 72,898 119,931
PROPERTY AND EQUIPMENT, net 3,608,114 4,088,481
GOODWILL, net -- 145,617
OTHER ASSETS
Assets Held for Sale, net 1,844,586 1,844,586
Acquisition costs of
Fatburger (pending) 3,861,632 --
Debenture issuance costs, net 62,150 24,970
---------- ----------
TOTAL ASSETS $9,449,380 $6,223,585
========== ==========
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<TABLE>
<CAPTION>
Restaurant Teams International, Inc.
Condensed Balance Sheets
Dec. 31, 1999 September 30, 2000
(Audited) (Unaudited)
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 76,324 297,562
Accrued expenses and other liabilities 430,997 926,530
Income taxes payable 10,000 --
Current portion of long-term debt 719,380 2,389,169
------------ ------------
Total current liabilities 1,236,701 3,613,261
LONG-TERM DEBT, net of current portion 1,328,276 1,266,638
DEFERRED LIABILITIES 24,819 24,819
CONVERTIBLE DEBENTURES, less discount 2,227,846 690,000
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value -- --
Preferred stock - Series A, $.10 par value, -- --
Common stock, $.01 Par Value, 149,416 201,834
Additional paid-in capital 8,921,335 11,353,128
Treasury stock (761,150) (761,150)
Dividend distribution -- (966,341)
Accumulated deficit (3,311,120) (9,198,604)
Notes receivable - related parties (366,743) --
------------ ------------
Total Stockholders' equity 4,631,738 628,867
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 9,449,380 $ 6,223,585
============ ============
</TABLE>
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<TABLE>
<CAPTION>
Restaurant Teams International, Inc.
Condensed Statements of Operations
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
(Unaudited) (Unaudited)
----------------------------- ----------------------------
<S> <C> <C> <C> <C>
REVENUES
Restaurant sales 1,065,053 $ 238,230 $ 4,010,032 $ 2,176,684
Regulatory services -- -- 629,246 --
Rental income 78,778 45,798 236,102 113,274
------------ ------------ ------------ ------------
Total revenues 1,143,831 284,028 4,875,380 2,289,958
OPERATING COSTS AND EXPENSES
Cost of sales 401,852 51,781 1,332,620 557,990
Labor and benefits 594,284 97,687 1,711,434 738,541
Other operating expenses 165,084 43,106 726,665 334,039
General and administrative expenses 23,554 270,453 239,972 346,803
Bad debt expense -- -- 498,070 --
Depreciation expense 98,535 79,000 295,605 224,000
Amortization expense 5,815 -- 61,127 --
Acquisition costs 4,156,632 -- 4,156,632 188,288
Inventory write-down - RSI -- -- 80,000 --
Goodwill impairment - RSI 258,496 -- 743,256 --
Write-off cash advanced - RSI 29,349 -- 198,392 --
------------ ------------ ------------ ------------
Total operating costs and expenses 5,733,601 542,027 10,043,773 2,389,661
Operating loss (4,589,770) (257,999) (5,168,393) (99,703)
NON-OPERATING EXPENSE
Interest expense (90,909) (136,536) (635,776) (689,091)
Loss on sale of assets (107,000) -- (78,861) --
Other (91) -- (4,454) --
------------ ------------ ------------ ------------
Total non-operating expense (197,818) (136,536) (719,091) (689,091)
NET LOSS $ (4,787,588) $ (394,535) $ (5,887,484) $ (788,795)
============ ============ ============ ============
NET LOSS PER COMMON SHARE -
basic and diluted $ (.37) $ (.05) $ (.52) $ (.11)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 12,771,155 8,610,500 11,394,316 7,729,150
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Restaurant Teams International, Inc.
Condensed Statements of Cash Flows
Sept. 30, 2000 Sept. 30 , 1999
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,887,484) (788,795)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization 326,732 196,000
Amortization of discount and issuance
costs of convertible debenture 279,800 553,875
Stock compensation -- 80,000
Write down and impairment of RSI assets 823,256 --
Write off of Fatburger acquisition 4,156,632 --
Loss on sale of assets 78,861 --
Net change in operating assets and liabilities:
Increase in accounts receivable (9,091) --
Increase in inventories (24,735) 25,502
Increase in other current assets (15,002) --
Increase (decrease) accounts payable
and other liabilities 706,771 (103,658)
Other (19,743) 105,290
----------- -----------
Net cash provided by (used in) operating activities 415,997 (142,366)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (982,972) (537,134)
Proceeds from sale of property and equipment 100,000 --
Payments in connection with acquisition of Fatburger -- (2,130,862)
Payments in connection with current acquisitions (225,000) --
Decrease in notes receivable from related parties, net -- 827,000
----------- -----------
Net cash used in investing activities (1,107,792) (1,840,996)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock / debenture -- 1,014,889
Principal payments of long-term debt -- (1,046,492)
Proceeds from issuance of note payable 690,000 500,000
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Net cash provided (used in) financing activities 690,000 468,397
NET INCREASE (DECREASE) IN CASH (1,795) (1,514,965)
CASH AT BEGINNING OF PERIOD 2,521 1,606,245
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CASH AT END OF PERIOD $ 726 $ 91,280
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</TABLE>
<PAGE>
Restaurant Teams International, Inc.
Notes To Interim Condensed Financial Statements
For the Nine Month Period Ended
September 30, 2000
(Unaudited)
Note 1. Basis of Presentation
The condensed financial statements of Restaurant Teams International,
Inc. (the "Company") as of September 30, 1999 and September 30, 2000
have been prepared by the Company, pursuant to the rules and
regulations of the Securities and Exchange Commission. 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,
2000. Company management believes that the disclosures are sufficient
for interim financial reporting purposes.
Note 2. Pro-Forma disclosure regarding acquisitions
In February and March of 2000 the Company made two acquisitions. The
first acquisition was an asset purchase of substantially all of the
assets of the bankrupt subsidiaries of Hartan, Inc. dba Tanner's
Restaurants whereby the Company paid $325,000 in cash and incurred
$220,882 in acquisitions cost. The second acquisition was a stock
purchase whereby the Company obtained 100% of the stock of Regulatory
Solutions, Inc. ("RSI") in exchange for $100,000 cash , one million
shares of the Company's common stock at closing, and $1,000,000 worth
of the Company's common stock on each of the first and second
anniversary of the acquisition.
During the second quarter of fiscal year 2000, the former owners of
RSI filed a motion with the court to rescind the acquisition. The
motion was denied, however, the Company does not currently have
operational control of RSI. Therefore, the Company has written off
the RSI assets and impaired the goodwill to the value of the stock
that would be returned if the transaction were rescinded. The total
charges to operations for these items are $287,845 and $1,519,718 for
the three and nine months ended September 30, 2000.
The following pro forma information has been prepared as if the
acquisition of Tanner's had occurred at the beginning of 1999. Such
information is not necessarily reflective of the actual results that
would have occurred had the acquisitions occurred on that date:
Restaurant Teams International, Inc.
Pro-forma Financial Statements
Nine Months Ended
September 30, 1999
(Unaudited)
Revenues $ 9,409,000
Net loss $ (2,086,000)
Net loss per share $ (.27)
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<TABLE>
<CAPTION>
Note 3. Segment Information
The Company applies Statement of Financial Accounting Standards No.
131, "Disclosures about Segments on an Enterprise and Related
Information", which establishes standards for reporting information
about operating segments in financial statements. The Company's
business segments for the periods covered are comprised of a
Restaurant Division, Regulatory Division, Real Estate Division, and
Corporate Division.
Summarized segment information as of September 30, 2000 and for the
three and nine month periods ended September 30, 2000 is as follows:
September 30, 2000
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Assets
Restaurant Division $ 656,370
Regulatory Services 145,617
Real Estate 4,492,323
Corporate 929,275
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Total Assets 6,223,585
Sales Nine Months Ended Three Months Ended
September 30, 2000 September 30, 2000
------------------ ------------------
<S> <C> <C>
Restaurant Division $ 4,010,032 $ 1,065,053
Regulatory Division 629,246 --
Real Estate 236,102 78,778
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Total Sales 4,875,380 1,143,831
Operating Income (Loss)
Restaurant Division 416,837 (71,206)
Regulatory Division (1,512,226) (287,845)
Real Estate 78,947 26,393
Corporate (4,151,951) (4,257,112)
------------ -----------
Total operating income (loss) (5,168,393) (4,589,770)
</TABLE>
Information for the nine month period ended September 30, 1999 has
not been provided since the Company principally operated in a single
reportable segment during that period.
Note 4. Prior Period Adjustments and Restatements
Certain errors, resulting in both the understatement and
overstatement of previously reported assets, liabilities, income and
expenses as of September 30, 1999, and for the nine month period
ended, September 30, 1999 resulted in the following changes to total
assets, total liabilities, beginning accumulated deficit and net
income:
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<TABLE>
<CAPTION>
Net
Total Total Accumulated Income
Assets Liabilities Deficit (Loss)
------ ----------- ------- ------
<S> <C> <C> <C> <C>
As previously reported $ 9,318,569 $ 4,189,578 $ 911,334 $ 154,582
Incorrect recognition of a gain on
the sale of assets - 193,502 193,502 (193,502)
Understatement of
amortization in connection
with debenture issuance
costs and discounts
(99,489) 93,861 193,350 (193,350)
Understatement of accrued
interest expense - 104,625 104,625 (104,625)
Beneficial conversion feature
to loans - - 255,900 (255,900)
Stock compensation - - 80,000 (80,000)
Understatement of
depreciation expense (116,000) 116,000 (116,000)
---------------- ---------------- ---------------- ----------------
As restated $ 9,103,080 $ 4,581,566 $ 1,854,711 $ (788,795)
================ ================ ================= ==================
</TABLE>
Earnings per share results previously reported for the nine month
period ended September, 1999 have been restated as a result of the
items identified above as follows:
Nine Month
Period Ended
September 30, 1999
Net income per share as previously reported $ 0.02
Effect of corrections of errors (0.13)
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Net loss per share as restated $ (0.11)
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<PAGE>
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 for the year ended December 31, 1999. 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 1990 as Bosko's, Inc. under the laws of the
State of Delaware. In November 1992 the Company changed its name to Fresh'n
Lite, Inc., and in November 1995 the Company merged into a Texas corporation
also bearing the name Fresh'n Lite, Inc. On September 15, 1998 the Company
changed its name to Restaurant Teams International, Inc. to more accurately
reflect the direction management is taking with respect to positioning the
Company as a multi-concept holding company. The Company currently owns and
operates theTanner's Corner Grills in Atlanta, GA, one Street Talk Cafe
restaurants in The Colony, Texas, and Regulatory Solutions, Inc. of Richardson,
Texas.
Results of Operations
Comparison of nine month period ended September 30, 1999 and September 30, 2000.
Revenues. Operating revenues for the nine month period ended September
30, 1999 were $2,289,958 with an operating loss of $99,703.
Operating revenues for the nine month period ended September 30, 2000
were $ 4,875,380, a 112% increase from 1999, with an operating loss of
$5,168,393. The 112% increase in revenues over 1999 is attributed to the
acquisition of the Tanner's restaurants in Atlanta, GA.
<PAGE>
Costs and Expenses. Costs and expenses for the nine month period ended
September30, 2000 increased by $7,654,112or 320% to $10,043,773as compared to
$2,389,661 for the corresponding period ended September 30, 1999. This was
primarily due to the expenses associated with the impairments to the Regulatory
Solutions transaction and to the costs of the Fatburger acquisition
($4,156,632), which was abandoned in the third quarter of 1999. General and
Administrative Costs for the same period in 2000 decreased by 31% to $239,972 as
compared to $346,803 in 1999. This decrease was primarily due to a reduction in
professional fees.
Net Loss. The Company had a net loss for the nine month period ended
September 30, 2000 of $5,887,484 compared to net loss of $788,795 for the same
period in 1999, representing ($.52) and ($.11) per share, respectively. The net
loss is attributed almost exclusively to two factors. Number one, the company
has written off all costs, expenses, and deposits, associated with the Fatburger
acquisition in the amount of $4,156,632 and number two, the company recognized
impairments and write downs to the Regulatory Solutions acquisition in the
amount of $1,519,718.
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 completed two private placements of A Debentures and B Debentures on
May 29, 1998 and June 29, 1998, respectively, providing net proceeds to the
Company of $2,670,000. The proceeds were used to fund the Company's expansion
strategy of opening additional Street Talk Cafe restaurants in the Dallas market
area.
At September 30, 2000, the Company has negative working capital of
$3,823,444, the majority of which represents the remaining balance of the
aforementioned debentures, which are due in May and June 2001. The Company will
need to convert these debentures to stock and/or raise additional capital to be
able to realize its assets and satisfy its liabilities in the normal course of
business.
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
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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 20, 2000 By: /s/ Stanley L. Swanson
----------------------
Stanley L. Swanson, Chief Executive Officer
(Duly Authorized Signatory)
Date: November 20, 2000 By: /s/ Curtis A. Swanson
---------------------
Curtis A. Swanson, Chief Financial Officer
and Executive Vice President
(Duly Authorized Signatory)
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EXHIBIT INDEX
No. Description of Exhibit
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27 Financial Data Schedule
