SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
(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, 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) 758-2811
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 August 15, 2000 17,356,638 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
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Condensed Balance Sheets as of December 31, 1999 and
June 30, 2000 (Unaudited)............................... 2
Condensed Income Statements For Three Month and
Six Month Periods Ended June 30, 1999 and
June 30, 2000 (Unaudited)............................... 4
Condensed Statements of Cash Flows for the Six Month
Periods Ended June 30, 1999 and
June 30, 2000 (Unaudited)............................... 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
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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
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Signatures ........................................................ 10
Exhibit Index ........................................................ 11
1
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PART 1 - FINANCIAL STATEMENTS
Item 1: FINANCIAL STATEMENTS
Restaurant Teams International, Inc.
Condensed Balance Sheets
As of December 31, 1999 and
June 30, 2000
December 31,1999 June 30, 2000
(Audited) (Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 2,521 $ 88,439
Prepaid Expenses 18,657 --
Marketable securities -- 33,659
Inventory 13,690 48,746
Federal Income Tax Receivable 38,030 38,030
----------- -----------
Total Current Assets 72,898 208,874
PROPERTY AND EQUIPMENT, net 3,608,114 4,394,016
GOODWILL, net -- 409,928
OTHER ASSETS
Assets Held for Sale, Net 1,844,586 1,844,586
Fatburger Acquisition (Pending) 3,861,632 4,156,632
Debenture issuance costs 62,150 34,050
----------- -----------
TOTAL ASSETS $ 9,449,380 $11,048,086
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2
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<TABLE>
<CAPTION>
Restaurant Teams International, Inc.
Condensed Balance Sheet
As of December 31, 1999 and
June 30, 2000
December 31, 1999 June 30, 2000
(Audited) (Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 76,324 $ 440,348
Accrued expenses and other liabilities 430,997 902,395
Income tax payable 10,000 --
Current portion of long term debt 719,380 2,600,092
------------ ------------
Total Current Liabilities 1,236,701 3,942,835
LONG TERM DEBT, net of current portion 1,328,276 1,266,638
DEFERRED LIABILITIES 24,819 24,819
CONVERTIBLE DEBENTURE, 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 149,416 176,411
Additional paid in capital 8,921,335 11,153,551
Treasury stock (761,150) (761,150)
Dividend distribution -- (966,341)
Accumulated deficit (3,311,120) (4,478,677)
Notes receivable - related parties (366,743) --
------------ ------------
Total Shareholders' Equity 4,631,738 5,123,794
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 9,449,380 $ 11,048,086
============ ============
</TABLE>
3
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<TABLE>
<CAPTION>
Restaurant Teams International, Inc.
Condensed Income Statements
For The Three and Six Month Periods Ended
June 30, 1999 and June 30, 2000
Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
(Unaudited) (Unaudited)
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Revenues
Restaurant sales $ 1,510,381 $ 673,728 $ 2,944,979 $ 1,938,454
Regulatory services -- -- 629,246 --
Rental income 78,662 67,476 157,324 67,476
------------ ------------ ------------ ------------
Total revenues 1,589,043 741,204 3,731,549 2,005,930
OPERATING COSTS AND EXPENSES
Cost of sales 499,109 171,644 930,768 506,209
Labor and benefits 535,780 212,096 1,117,149 662,077
Other operating expenses 329,901 93,024 561,581 269,711
General and administrative expenses 66,317 18,534 216,419 76,350
Bad debt expense 498,070 -- 498,070 --
Depreciation expense 98,535 79,000 197,070 145,000
Amortization expense 36,872 -- 55,312 --
Inventory write-down - RSI 80,000 -- 80,000 --
Goodwill impairment - RSI 484,760 -- 484,760 --
Write-off cash advanced - RSI 169,043 -- 169,043 --
------------ ------------ ------------ ------------
Total operating costs and expenses 2,798,387 574,298 4,310,172 1,659,347
NON - OPERATING INCOME (EXPENSE)
Interest expense (450,750) (392,065) (612,619) (552,555)
Gain on sales of assets -- -- 28,139 --
Other income (4,454) -- (4,454) --
Acquisition costs -- -- -- (188,288)
------------ ------------ ------------ ------------
Total non-operating income (expense) (455,204) (392,065) (588,934) (740,843)
------------ ------------ ------------ ------------
NET LOSS $ (1,664,548) $ (225,159) $ (1,167,557) $ (394,260)
============ ============ ============ ============
NET LOSS PER COMMON
SHARE - basic and diluted $ (.16) $ (.03) $ (.11) $ (.05)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 10,735,596 7,399,288 10,440,089 7,215,755
</TABLE>
4
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<TABLE>
<CAPTION>
Restaurant Teams International, Inc.
Condensed Statements of Cash Flows
Six Months Ended
----------------
June 30, 2000 June 30, 1999
(Unaudited) (Unaudited)
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,167,557) $ (394,260)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 252,382 145,000
Amortization of discount and issuance
costs of convertible debentures 251,823 384,800
Write downs and impairment of RSI assets 733,803 --
Loss (gain) on sale of assets (28,139) 193,502
Net change in operating assets and liabilities:
Increase in inventories (35,056) (28,791)
Increase in other current assets (15,002) --
Increase (decrease) in accounts payable
and other liabilities 825,422 (112,065)
Other 81,214 --
----------- -----------
Net cash provided by operating activities 898,890 188,186
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (982,972) (493,134)
Payments in connection with acquisition of Fatburger (pending) (295,000) (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 (1,502,972) (1,796,996)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt -- (449,077)
Proceeds from issuance of note payable and debentures 690,000 500,000
----------- -----------
Net cash provided by (used in) financing activities 690,000 50,923
NET INCREASE (DECREASE) IN CASH 85,918 (1,557,887)
CASH AT BEGINNING OF PERIOD 2,521 1,606,245
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CASH AT END OF PERIOD $ 88,439 $ 43,858
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</TABLE>
See accompanying notes to these condensed financial statements.
5
<PAGE>
Restaurant Teams International, Inc.
Notes To Interim Condensed Financial Statements
For the Six Month Period Ended
June 30, 2000
(Unaudited)
Note 1. Basis of Presentation
The condensed financial statements of Restaurant Teams International,
Inc. (the "Company") as of June 30, 1999 and June 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 notes and
incurrred $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 $1,231,873 for the three
months ended June 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 acquisition occurred on that date:
Restaurant Teams International, Inc.
Pro-forma Financial Statements
Six Months Ended
June 30, 1999
(Unaudited)
Revenues $ 7,098,000
Net loss $ (1,419,000)
Net loss per share $ (.20)
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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 June 30, 2000 and for the three
and six month period ended June 30, 2000 is as follows:
June 30, 2000
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Assets
Restaurant Division $ 728,219
Regulatory Services 409,928
Real Estate 4,492,323
Corporate 5,417,616
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Total Assets $ 11,048,086
Sales Six Months Ended Three Months Ended
June 30, 2000 June 30, 2000
---------------- ------------------
Restaurant Division $ 2,944,979 $ 1,510,381
Regulatory Division 629,246 -
Real Estate 157,324 78,662
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Total Sales 3,731,549 1,589,043
Operating Income (Loss)
Restaurant Division 488,043 164,932
Regulatory Division (861,110) (1,268,744)
Real Estate 52,554 26,662
Corporate (258,110) (132,193)
------------ ------------
Total operating loss (578,623) (1,209,343)
Information for the six-month period ended September 30, 1999 has not
been provided since the Company principally operated in a single
reportable segment during that period.
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<TABLE>
<CAPTION>
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 June 30, 1999, and for the six month period ended,
June 30, 1999 resulted in the following changes to total assets,
total liabilities, accumulated deficit and net income:
Net
Total Total Accumulated Income
Assets Liabilities Deficit (Loss)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
As previously reported $ 9,264,358 $ 4,929,061 $ 739,124 $ 326,792
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 (66,326) 62,574 128,900 (128,900)
Understatement of accrued
interest expense -- 69,750 69,750 (69,750)
Beneficial conversion
feature to loans -- -- 255,900 (255,900)
Understatement of
depreciation expense (73,000) -- 73,000 (73,000)
----------- ----------- ----------- -----------
As restated $ 9,125,032 $ 5,254,887 $ 1,460,176 $ (394,260)
=========== =========== =========== ===========
</TABLE>
Earnings per share results previously reported for the six-month period ended
June 30, 1999 have been restated as a result of the items identified above as
follows:
Six Month
Period Ended
June 30, 1999
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Net income per share as previously reported $ .03
Effect of corrections of errors (.08)
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Net loss per share as restated $ (.05)
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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 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, Tanner's
Rotisserie Grills in Atlanta, GA. and Regulatory Solutions, Inc. of Dallas,
Texas. 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 June 30, 1999 and 2000
Revenues. For the three months ended June 30, 2000, the Company has
generated revenues of $1,589,043 compared to revenues in the same period of 1999
of $741,204, a 114% increase. The increase in revenue is due solely to the
acquisitions of Tanner's.
9
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Costs and Expenses. Costs and expenses for the three month period ended
June 30, 2000 increased by $2,224,538, or 387% to $2,798,836 as compared to
$574,298 for the corresponding period of 1999. This increase was due to the
costs associated with the increase revenues from Tanner's and Regulatory
Solutions, Inc. ("RSI").
Net Loss. The Company had a net loss for the three months ended June
30, 2000 of $1,664,548 compared to net loss of $225,159 for the corresponding
three months of 1999, representing $(.15) and $(.03) per share, respectively.
The increase in net loss is due primarily to the write off and impairment of
RSI's assets of approximately $1,231,000 as described in Note 2 to the financial
statments.
Comparison of Six Months Ended June 30, 1999 and 2000
Revenues. For the six months ended June 30, 2000, the Company has
generated revenues of $3,731,549 compared to revenues in the same period 1999 of
$2,005,930, an 86% gain.
Costs and Expenses. Costs and expenses for the six month period ended
June 30, 2000 increased by $2,650,825, or 160% to $4,310,172 as compared to
$1,659,347 for the corresponding period of 1999. The increase in costs and
expenses are primarily due to the same factors cited for the three months ended
June 30, 2000 above.
Net Loss. The Company had a net loss for the six months ended June 30,
2000 of $1,167,557 compared to a net loss of $394,260 for the corresponding six
months of 1999, representing $(.12) and $(.05) per share, respectively. The
increase in net loss is due primarily to the write off and impairment of RSI's
assets of approximately $1,231,000.
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.
The Company has negative working capital of $3,733,961 at June 30,
2000, the majority of which represents the remaining balance of the 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.
10
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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 Interanational, 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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