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 March 31, 2000
--------------
[ ] 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
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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 May 15, 2000: 10,661,066 shares of common stock, par value $.01.
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RESTAURANT TEAMS INTERNATIONAL, INC.
Page No.
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<S> <C> <C>
PART I FINANCIAL INFORMATION.......................................................... 2
Item 1. Financial Statements........................................................... 2
--------------------
Condensed Balance Sheets for the Periods
Ended March 31, 2000 and December 31, 1999..................................... 2
Condensed Statements of Operations For the Three Month Periods
Ended March 31, 2000 and March 31, ............................................ 4
Condensed Statements of Cash Flows for the Three Month
Periods Ended and March 31, 2000 March 31, 1999 ............................... 5
Notes to Interim Condensed Financial Statements .................... .......... 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
---------------------
Item 4. Submission of Matters to a Vote of Security Holders............................ 10
---------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K............................................... 10
--------------------------------
Signatures ............................................................................... 11
Exhibit Index ............................................................................... 12
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1
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PART 1 - FINANCIAL STATEMENTS
Item 1: FINANCIAL STATEMENTS
Restaurant Teams International, Inc.
Condensed Balance Sheets
Dec. 31, 1999 March 31, 2000
(Audited) (Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,521 $ 96,564
Trade accounts receivable -- 498,070
Inventories 13,690 124,294
Prepaid Expenses 18,657 18,657
Federal Income Tax Receivable 38,030 38,030
----------- -----------
Total Current Assets 72,898 775,615
PROPERTY AND EQUIPMENT, net 3,608,114 4,156,272
NOTE RECEIVABLE -- 37,444
GOODWILL, net -- 2,931,560
OTHER ASSETS
Assets Held for Sale, net 1,844,586 1,844,586
Acquisition costs of
Fatburger (pending) 3,861,632 3,906,632
Debenture issuance costs, net 62,150 51,800
TOTAL ASSETS $ 9,449,380 $13,703,909
=========== ===========
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See accompanying notes to these condensed financial statements.
2
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<CAPTION>
Restaurant Teams International, Inc.
Condensed Balance Sheets
Dec. 31, 1999 March 31, 2000
(Audited) (Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 76,324 207,512
Accrued expenses and other liabilities 430,997 765,422
Income taxes payable 10,000 10,000
Notes payable -- 350,000
Current portion of long-term debt 719,380 708,286
------------ ------------
Total current liabilities 1,236,701 2,041,226
LONG-TERM DEBT, net of current portion 1,328,276 1,315,106
DEFERRED LIABILITIES 24,819 24,819
CONVERTIBLE DEBENTURES, less discount 2,227,846 2,244,036
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, no shares issued -- --
Preferred stock - Series A, $.01 par value,
no shares issued -- --
Common stock, $.10 Par Value,
14,661,066 outstanding 12/31/99
15,661,066 outstanding 3/31/00 149,416 159,415
Additional paid-in capital 8,921,335 11,861,335
Treasury stock, 280,440shares, at cost (761,150) (761,150)
Accumulated deficit (3,311,120) (2,814,129)
Notes receivable - related parties (366,743) (366,743)
------------ ------------
Total Stockholders' equity 4,631,738 8,078,728
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 9,449,380 $ 13,703,909
============ ============
</TABLE>
See accompanying notes to these condensed financial statements.
3
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Restaurant Teams International, Inc.
Condensed Statements of Operations
Three Months Ended
March 31
(Unaudited)
2000 1999
---- ----
<S> <C> <C>
REVENUES
Restaurant sales $ 1,434,598 $ 1,264,726
Regulatory services 629,246 --
Rental income 78,662 --
------------ ------------
Total revenues 2,142,506 1,264,726
OPERATING COSTS AND EXPENSES
Cost of sales 431,660 334,565
Labor and benefits 581,370 449,990
Other operating expenses 231,680 158,759
General and administrative expenses 150,101 75,744
Depreciation expense 98,535 66,000
Amortization expenses 18,444 --
------------ ------------
Total operating costs and expenses 1,511,786 1,085,058
Operating income 630,720 179,668
NON - OPERATING INCOME (EXPENSE)
Interest expense (161,869) (160,481)
Gain on sales of assets 28,140 --
Acquisition costs -- (188,288)
------------ ------------
Total non-operating income (expense) (133,729) (348,769)
NET INCOME (LOSS) $ 496,991 $ (169,101)
============ ============
NET INCOME (LOSS) PER COMMON SHARE - basic $ 0.05 $ (0.02)
============ ============
NET INCOME (LOSS)LOSS PER COMMON SHARE - diluted $ 0.04 $ (0.02)
============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - basic 10,145,000 7,036,000
============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - diluted 13,885,000 7,036,000
============ ============
</TABLE>
See accompanying notes to these condensed financial statements.
4
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Restaurant Teams International, Inc.
Condensed Statements of Cash Flows
March 31,2000 March 31, 1999
(Unaudited) (Unaudited)
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 496,991 (169,101)
Adjustments to reconcile net income (loss) to
net cash provided by
(used in) operating activities:
Depreciation and amortization 116,975 66,000
Amortization of discount and issuance
costs of the convertible debenture 26,540 64,450
Gain on sale of assets (28,140) --
Net change in operating assets and liabilities:
Increase in accounts receivable (498,070) --
Increase in inventories (30,604) (8,083)
Increase in prepaid expenses -- (67,500)
Increase (decrease) accounts payable 131,188 (25,411)
Increase (decrease) accrued expenses
and other liabilities 113,543 (41,134)
----------- -----------
Net cash provided by (used in) operating activities 328,423 (180,779)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (180,116) (108,337)
Proceeds from sale of property and equipment 70,000
Payments in connection with acquisition of Fatburger (pending) (45,000) (1,125,000)
Payments in connection with current acquisitions (350,000) --
Decrease in notes receivable from related parties, net -- 162,000
Cash acquired in current acquisitions 20,000 --
----------- -----------
Net cash used in investing activities (485,116) (1,071,337)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (24,264) (3,182)
Proceeds from issuance of note payable 275,000 --
Net cash provided (used in) financing activities 250,736 (3,182)
NET INCREASE (DECREASE) IN CASH 94,043 (1,255,298)
CASH AT BEGINNING OF PERIOD 2,521 1,606,245
----------- -----------
CASH AT END OF PERIOD $ 96,564 $ 350,947
=========== ===========
</TABLE>
See accompanying notes to these condensed financial statements.
5
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<CAPTION>
Restaurant Teams International, Inc.
Condensed Statements of Cash Flows
March 31, 2000 March 31, 1999
(Unaudited) (Unaudited)
<S> <C> <C>
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Common stock and note payable issued in connection
with the acquisition of Regulatory Solutions Inc. $ 3,025,000 $ -
Note payable issued and accrued liability incurred in
connection with the acquisition of Tanner's assets 220,882 -
Note receivable accepted in connection with the sale
of property and equipment 37,444 -
Property and equipment acquired in connection with the
default of a related party note receivable - 306,498
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6
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Restaurant Teams International, Inc.
Notes To Interim Condensed Financial Statements
For the Three Month Period Ended
March 31, 2000
(Unaudited)
Note 1. Basis of Presentation
The balance ofRestaurant Teams International, Inc. (the "Company")
sheet as of March 31, 2000 and the statements of operations for the
three month period s ended March 31, 2000 and March 31, 1999 were
taken from the Company's books and records without audit. However, in
the opinion of management, such information includes all adjustments
(consisting only of normal recurring accruals) which are necessary to
properly reflect the financial postion of the Company as of March 31,
2000 and the results of operations for the three month periods ended
March 31, 2000 and March 31, 1999.
The condensed financial statements refered to above, 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, Tenner's Corner Grill
Restaurant and owns four other facilities which it leases to other
operators.
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 14, 2000. Company management believes that the disclosures
are sufficient for interim financial reporting purposes.
Note 2. 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 $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 one hundred thousand dollars
($100,000) cash , one million shares of the Company's common stock at
closing, and one million dollars ($1,000,000) worth of the Company's
common stock on the first and second anniversary of the acquisition.
7
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These acquititions were accounted for under the purchase method of
accounting and, accordingly, their results of operations are included
in the financial statements as of the acquitition dates: The Company
has allocated the excess purchase price over the fair value of net
tangible assets acquired, totaling $2,950,000, to goodwill and in
amortizing this amount on a stright-line basis over twenty years.
The following pro forma information has been prepared as if the
acquisitions of Tanner's and RSI had occurred at the beginning of the
respective periods. Such information is not necessarily reflective of
the actual results that would have occurred had the acquisitions
occurred on those dates:
Three Months Ended
March 31
(Unaudited)
2000 1999
---- ----
Revenues $3,126,036 $3,512,906
Net incoome (loss) $ 720,181 $(596,298)
Net income (loss) per share $.07 $(.09)
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 and for the three month period
ended March 31, 2000 is as follows:
March 31, 2000
Assets
Restaurant Division $ 1,626,351
Regulatory Services 3,538,978
Real Estate 4,478,935
Corporate 4,059,645
------------
Total Assets 13,703,909
Sales
Restaurant Division 1,434,598
Regulatory Division 629,246
Real Estate 78,662
Corporate 0
------------
Total Sales 2,142,506
Operating Income (Loss)
Restaurant Division 323,111
Regulatory Division 407,634
Real Estate 78,662
Corporate (178,687)
------------
Total operating income (loss) 630,720
Information for the three month period ended March 31, 1999 has not been
provided since the Company principally operated in a single reportable segment
during that period.
8.
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Note 4. Earnings (Loss) per share
Basic earnings (loss) per share (EPS) is calculated by dividing the
net income or loss by the weighted average number of common shares
outstanding during the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. Potential
dilution is not assumed to occur when the effect would be
anti-dilutive (e.g., reduced loss per share).
Included in the diluted weighted average shares calculation are
3,740,000 shares represented by the convertible A and B debentures.
Note 5. Prior Period Adjustments and Restatements
Certain errors, resulting in both the understatement and
overstatement of previously reported assets, liabilities, income and
expenses as of, and for the three month period ended, March 31, 1999
resulted in the following changes to total assets, total liabilities,
beginning accumulated deficit and net income:
Total Total Accumulated Net
Assets Liabilities Deficit Income
(Loss)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
As previously reported $8,997,705 $4,884,459 $ 912,190 $ 153,726
Incorrect recognition of
a gain on the sale of assets 306,498 1,93,502 193,502 (193,502)
Understatement of
amortization in
connection with debenture
issuance costs and discounts (33,163) 31,287 64,450 (64,450)
Understatement
of accrued interest expense - 34,875 34,875 (34,875)
Understatement of
depreciation expense (30,000) - 30,000 (30,000)
----------- ----------- ----------- -----------
As restated $8,934,542 $5,144,123 $1,235,017 $(169,101)
=========== =========== =========== ===========
</TABLE>
Earnings per share results previously reported for the three month period ended
March 31, 1999 have been restated as a result of the items identified above as
follows:
Three Month
Period Ended
March 31, 1999
--------------
Net income per share as previously reported $ 0.02
Effect of corrections of errors (0.04)
-----------
Net loss per share as restated $ (0.02)
===========
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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 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 seven Tanner's Corner Grills in Atlanta, GA, one Street Talk Cafe
restaurants in The Colony, Texas, and Regulatory Solutions, Inc. of Richardson,
Texas.
10
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Results of Operations
Comparison of three month period ended March 31, 1999 and March 31, 2000.
Revenues. Operating revenues for the three month period ended March 31,
1999 were $1,264,726, with an operating income of $179,668.
Operating revenues for the three month period ended March 31, 2000 were
$2,142,506, a 69% increase from 1999, with an operating profit of $630,720. The
69% increase in revenues over 1999 is attributed to the acquisition of the
Tanner's restaurants in Atlanta, GA and Regulatory Solutions of Richardson,
Texas.
Costs and Expenses. Costs and expenses for the three month period ended
March 31, 2000 increased by $426,728 or 39.3% to $1,511,786 as compared to
$1,085,058 for the corresponding period ended March 31, 1999. This was primarily
due to the operating expenses associated with the acquisitions. General and
Administrative Costs for the three month period of 2000 increased by 90% to
$150,101 as compared to $75,744 in 1999. This increase was primarily due to the
development of infrastructure in anticipation of the future growth and
acquisitions. Additionally the Company realized increased professional fees
associated with the proposed acquisition of the Fatburger and the completed
acquisitions of the Tanner's chain and Regulatory Solutions.
Net Income. The Company had a net income for the three month period
ended March 31, 2000 of $496,991 compared to net loss of $169,101 for the same
period in 1999, representing $.05 and <$.02> per share, respectively
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.
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.
11
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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 International, Inc. is the following
exhibit:
No. Description of Exhibit
--- ----------------------
27 Financial Data Schedule
(b) Current Reports on Form 8-K:
The Company filed the following 8-K reports which are incorporated
herein by reference.
January 6, 2000 Announcement of lawsuit initiated by the Compan
against FB Holding Corp.
January 6, 2000 Announcement by the Company of the retention of
Hein and Associates to serve as the Company's
independent auditors.
March 7, 2000 Announcement by the Company of the Tanner's and
Regulatory Solutions acquisitions.
March 14, 2000 Announcement by the Company of a law suit filed
against it by Oxford Holdings, Inc.
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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: May 22, 2000 By: /s/ Stanley L. Swanson
----------------------
Stanley L. Swanson, Chief Executive Officer
(Duly Authorized Signatory)
Date: May 22, 2000 By: /s/ Curtis A. Swanson
---------------------
Curtis A. Swanson, Chief Financial Officer
and Executive Vice President
(Duly Authorized Signatory)
12
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EXHIBIT INDEX
No. Description of Exhibit
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000921066
<NAME> RESTAURANT TEAMS INTERNATIONAL, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 96,564
<SECURITIES> 0
<RECEIVABLES> 56,687
<ALLOWANCES> 0
<INVENTORY> 124,294
<CURRENT-ASSETS> 775,615
<PP&E> 4,254,807
<DEPRECIATION> 98,535
<TOTAL-ASSETS> 13,703,909
<CURRENT-LIABILITIES> 2,041,220
<BONDS> 3,583,961
0
0
<COMMON> 159,415
<OTHER-SE> 7,919,313
<TOTAL-LIABILITY-AND-EQUITY> 13,703,909
<SALES> 2,142,506
<TOTAL-REVENUES> 2,170,646
<CGS> (431,660)
<TOTAL-COSTS> (1,080,126)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (161,869)
<INCOME-PRETAX> 496,991
<INCOME-TAX> 0
<INCOME-CONTINUING> 496,991
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 496,991
<EPS-BASIC> .05
<EPS-DILUTED> .04
</TABLE>
