UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended March 31, 1996 Commission File Number 33-86166
RED HOT CONCEPTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1887105
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6701 Democracy Boulevard
Suite 300
Bethesda, Maryland 20817
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (301) 493-4553
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities and Exchange Act of 1934
during the preceding 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 ____
As of May 10, 1996, 4,762,347 shares of common stock par value, $.01 per share
were outstanding.
<PAGE>
RED HOT CONCEPTS, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTERLY REPORT
For the Period January 1, 1996 to March 31, 1996
INDEX
Part I: FINANCIAL INFORMATION
Item 1 : Financial Statements
Condensed Consolidated Balance Sheet at March 31,
1996 [Unaudited] 1
Condensed Consolidated Statements of Operations for
the period January 1, 1996 to March 31, 1996 and for
the period January 2, 1995 to April 2, 1995[Unaudited] 2
Condensed Consolidated Statement of Stockholders'
Equity for the period January 1, 1996 to March 31,
1996 [Unaudited] 3
Condensed Consolidated Statements of Cash Flows for
the period January 1, 1996 to March 31, 1996 and for
the period January 2, 1995 to April 2, 1995 [Unaudited] 4
Notes to Condensed Consolidated Financial Statements 5
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 7
Part II: OTHER INFORMATION 8
SIGNATURES 9
o o o o o o o o o o
<PAGE>
RED HOT CONCEPTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996. [UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 418,667
Accounts Receivable 25,602
Other Receivables 427,967
Inventories 217,024
Prepaid Expenses and Accrued Income 124,392
-----------
Total Current Assets 1,213,652
===========
Furniture and Equipment - Net 3,414,012
===========
Other Assets:
Development and License Agreement - Net 514,662
Restaurant Development and Start-Up Costs - Net 1,522,744
Advance to Officer 66,000
-----------
Total Other Assets 2,103,406
===========
Total Assets $ 6,731,070
===========
Liabilities and Stockholders' Equity:
Current Liabilities:
Trade and Accrued Payables 2,406,361
Obligations under Capital Leases 15,740
Advances from Related Parties $ 1,099,607
Long Term Debt - Current portion 100,000
-----------
Total Current Liabilities 3,621,708
Long Term Liabilities:
Long Term Debt 100,000
Obligations under Capital Leases 44,737
-----------
Total Long Term Liabilities 144,737
===========
Commitments and Contingencies --
Shareholders Equity
Common Stock, $.01 Par Value,
20,000,000 Shares Authorized, $ 47,623
4,762,347 Shares Issued and Outstanding
Additional Paid-in Capital 4,749,702
Accumulated Deficit (1,801,291)
Cumulative Foreign Currency Translation Adjustment (31,409)
-----------
Total Stockholders' Equity 2,964,625
===========
Total Liabilities and Stockholders' Equity $ 6,731,070
===========
</TABLE>
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
1
<PAGE>
RED HOT CONCEPTS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS.
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three For the Three
Month Period Month Period
January 1, January 2,
1996 to 1995 to
March 31, April 2,
1996 1995
<S> <C> <C>
Revenues $ 1,546,297 $ --
Cost of Revenues 1,275,599 --
----------- -----------
Gross Profit 270,698 --
Expenses:
Distribution and Administrative Expenses 678,180 114,213
----------- -----------
Operating Loss (407,482) (114,213)
Other Income -- --
Interest Income 4,517 69
----------- -----------
Net Loss $ (402,965) $ (114,144)
=========== ===========
Net Loss Per Share $ (0.08) $ (0.03)
=========== ===========
Weighted Average Number of Shares Outstanding 4,762,347 4,700,000
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
2
<PAGE>
RED HOT CONCEPTS INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Common Stock Foreign
Number Additional Accumulated Currency Note Total
of Paid-in Deficit Translation Receivable Shareholders'
Shares Amount Capital Adjustments for Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of
December 31, 1995 4,762,347 47,623 4,749,702 (1,398,326) (14,416) -- 3,384,583
Net Loss for the period
Janauary 1, 1996 to
March 31, 1996 -- -- -- (402,965) -- -- (402,965)
Foreign Currency
Translation Adjustment -- -- -- -- (16,993) -- (16,993)
--------- ------- ---------- ----------- -------- -------- ----------
Balance - March 31, 1996 4,762,347 $47,623 $4,749,702 $(1,801,291) $(31,409) -- $2,964,625
========= ======= ========== =========== ======== ======== ==========
</TABLE>
Foreign Currency Translation
The functional currency for the Company's United Kingdom and Australian
operations is the British pound sterling and Australian dollar, respectively.
The translation from British pound sterling and Australian dollars into U.S.
dollars is performed for balance sheet accounts using current exchange rates in
effect at the balance sheet date and for revenue and expense accounts using a
weighted average exchange rate during the period. The gains or losses resulting
from such translation are included in stockholders' equity. Equity transactions
denominated in British pound sterling and Australian dollars have been
translated into U.S. dollars using the effective rate of exchange at date of
issuance.
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
3
<PAGE>
RED HOT CONCEPTS INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Month For the Three
Period January 1, Month Period
1996 to March 31, January 2, 1995 to
1996 April 2, 1995
<S> <C> <C>
Operating Activities:
Net Cash - Operating Activities 862,377 181,306
------------ ------------
Investing Activities:
Purchase of Office Furniture and Fixtures (1,427,046) (827)
Store Development and Unit Preopening Costs (785,431) (202,510)
------------ ------------
Net Cash - Investing Activities (2,212,477) (203,337)
============ ============
Financing Activities:
Increase in Cash Overdrafts -- 3,059
------------ ------------
Net Cash - Financing Activities -- 3,059
============ ============
Effect of Exchange Rate Changes on Cash 3,798 13,256
============ ============
Net (Decrease) in Cash and Cash Equivalents (1,346,302) (5,716)
Cash and Cash Equivalents - Beginning of Periods 1,764,969 5,716
------------ ------------
Cash and Cash Equivalents - End of Periods $ 418,667 $ --
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest Paid -- --
Taxes Paid -- --
</TABLE>
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
4
<PAGE>
RED HOT CONCEPTS INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
- --------------------------------------------------------------------------------
[A] Significant Accounting Policies
Significant accounting policies of Red Hot Concepts, Inc. and Subsidiaries
[the "Company"] are set forth in the Company's Form 10-KSB for the year
ended December 31, 1995, as filed with the Securities and Exchange
Commission.
[B] Basis of Reporting
The condensed consolidated balance sheet as of March 31, 1996, the
condensed consolidated statements of operations for the period January 1,
1996 to March 31, 1996 and for the period January 2, 1995 to April 2, 1995
and the condensed consolidated statement of stockholders' equity for the
period January 1, 1996 to March 31, 1996 and for the period January 2, 1995
to April 2, 1995 and the condensed consolidated statements of cash flows
for the period January 1, 1996 to March 31, 1996 and for the period January
2, 1995 to April 2, 1995 have been prepared by the Company without audit.
The accompanying interim condensed consolidated unaudited financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
requirements of Regulation SB and Form 10-QSB for condensed financial
statements. 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 the management of the Company, such
statements include all adjustments [consisting only of normal recurring
items] which are considered necessary for a fair presentation of the
financial position of the Company at March 31, 1996, and the results of its
operations and cash flows for the periods then ended. It is suggested that
these unaudited financial statements be read in conjunction with the
financial statements and notes contained in the Company's Form 10-KSB for
the year ended December 31, 1995.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The Company was organized on June 14, 1994 and has a limited operating history.
The Company was in the development stage until October 1995 when operations
commenced. The Company has spent significant time focusing its efforts on
various activites including selecting sites, hiring and traning management
personnel, establishing adminstrative and financial policies and procedures and
undertaking other activities necessary to operate new restaurants in United
Kingdom and Australia. To date, the Company has five restaurants operating.
The Company was formed to develop Chili's Bar & Grill Restaurants ["Chili's
Restaurants"], a full service restaurant concept created by Brinker
International, Inc. ["Brinker"]. The Company has exclusive right to own and
operate Chili's Bar & Grill Restaurants in the United Kingdom, Australia and New
Zealand pursuant to development and license agreements [the "Chili's Development
Agreements"] with Brinker. The Chili's Development Agreement for the United
Kingdom requires the Company to open three Chili's Restaurants by November 1,
1996. The Company has the option to terminate the Chili's Development Agreement,
without further obligation to Brinker, at any time between June 20, 1996 and
November 1, 1996 [the "Test Completion Date"].
The Company initially intends to concentrate the opening of restaurants in the
United Kingdom in central London and the south of England, where the
demographics, site characteristics and proximity to retail/office complexes will
generate high volumes. In Australia, the Company intends to concentrate
restaurants in the large metropolitan areas of Melbourne and Sydney. In general,
a Chili's Restaurant will average approximately 5,800 to 7,000 square feet in
size with seating capacity of 210-250 people. The decor of a Chili's restaurant
consists of booth seating, tile-top tables, hanging plants, and wood and brick
walls covered with interesting memorabilia. The Company intends to lease all the
restaurant sites. The Company expects the total cost per restaurant in the
United Kingdom to be approximately $1.2 million (including design, leasehold
improvements. purchase of equipment and fixtures and start-up costs) excluding
leasing costs and license fees. In Australia, the Company expects the cost per
restaurant to be approximately $815,000
The Company opened its first Chili's Restaurants at Canary Wharf, London on
October 9, 1995 and opened additional restaurants on March 20,1996 and May 1,
1996 in Cambridge and central London respectively. The Company purchased two
restaurants in Australia in November, 1995. The Company intends to open 2 more
in Australia before the end of the year.
Results of Operations
The Company did not recognize revenue in the first quarter 1995. In the first
quarter 1996, the revenues of $1,546,297 (U.S. dollars) consisted mainly of the
Canary Wharf restaurant and the two restaurants in Australia. The Canary Wharf
restaurant averaged $24,700 (U.S. dollars) per week in revenues for the first
quarter. This average was lower than the previous quarter because of the post
holiday slowdown and a terrorist bombing at a nearby Canary Wharf Complex. Food
and labor costs as a percentage of sales came down in the first quarter and are
closer to the Company's objectives of total food and labor costs of 60% or
below. The two restaurants in Australia averaged $42,300 (U.S. dollars) per week
in the first quarter. The same store sales are higher by 8% versus last year
when the restaurants were under different ownership. The food and labor costs as
a percentage of sales are in line with the Company's objectives. The general and
administrative costs are primarily in connection with salaries and office costs,
travel and professional fees and fixed costs directly attributable to the
restaurants. The Company believes that general and administrative costs are high
as a percentage of revenue and will come into line when the additional
restaurants open.
Liquidity and Capital Resources
The Company's cash and cash equivalents decreased by $1,346,302 in the quarter
as the Company purchased furniture and fittings and made leasehold improvements
to newly opened restaurants. The Company financed the fixed assets primarily
with the remaining proceeds from the initial public offering and a loan from
Woodland Limited Partnership ($945,000). In February 1996, the Company obtained
a commitment for a $1 million (approximately) fixed rate seven year term loan
with National Westminster Bank in the United Kingdom. The Company has received a
preliminary commitment from the National Australia Bank for an asset lease
arrangement. Under the proposed terms, the bank will purchase the
furniture/fittings/equipment for the restaurants and lease them to the Company
under a five year term. The Company will have the rights to acquire the assets
at the end of the term at a fixed price.
The Company believes that the anticipated future cash flow generated from
operations, an additional loan from Woodland and the bank financing that has
been secured will be sufficient to construct and commence operations at two to
three restaurants over the next 12 months. If the Company's plans change or
assumptions or estimates prove to be inaccurate, the Company may require
additional funds to open additional restaurants or, if such funds are
unavailable, the Company will have to reduce operations or not open additional
stores to a level consistent with its available funding.
Impact of Inflation
Inflation is not expected to have a material impact on the Company's operations.
6
<PAGE>
Part II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any litigation or governmental
proceedings that management believes would result in judgments or
fines that would have a material adverse effect on the Company.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holder
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits
(a) Exhibits
Commercial Fixed Rate Loan Agreement - NatWest.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by
this report.
7
<PAGE>
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RED HOT CONCEPTS, INC.
Date: May 15, 1996 By: /s/ Colin Halpern
Colin Halpern, President
Corporate Banking Services
Milton Keynes
Corporate Business Centre
Central Business Exchange
Exchange House
478 Midsummer Boulevard
Central Milton Keynes MK9 2EA
Telephone: 01908 666373
Facsimile: 01908 605190
Your ref:
Our ref: CO3/SMR/147
[GRAPHIC OMITTED - LOGO]
Private & Confidential NatWest
C Halpern Esq.
Restaurant House Limited
Unit 6
Maryland Road
Tongwell
Milton Keynes MK15 8HF
16 February 1996
Dear Colin,
COMMERCIAL FIXED RATE LOAN AGREEMENT
We NATIONAL WESTMINSTER BANK PLC and any person to whom we transfer our rights
or duties under this agreement agree to offer you a loan under the terms and
conditions set out below and on the attached appendix. The first part of the
appendix explains some of the words and phrases used in this agreement.
1) Date Of Offer 16 February 1996
2) Your name: Restaurant House Limited, Unit 6,
("you" is the Borrower) Maryland Road, Tongwell, Milton Keynes,
MK15 8HF.
3) Lending Branch: Milton Keynes Corporate Business Centre,
Central Business Exchange, Exchange
House, 478 Midsummer Boulevard, Milton
Keynes, MK9 2EA.
4) Amount (pound)650,000
5) Purpose of the Loan: This facility is to be made available to
assist the company in the building of
the "Chili's" restaurants in Cambridge
and Shaftesbury Avenue, London.
6) Period of the Loan: Seven Years
Continued........../
<PAGE>
-2-
7) Interest Rate: A fixed rate of interest for the whole period of the Loan
(Please see
a. paragraph 4 of the appendix for how we work out the interest
b. paragraph 5 of the appendix for how we fix the rate of interest.)
8) Fee: (pound)8,500 due on the date on which you accept our offer as set out
in paragraph 20 of the appendix.
9) Drawing the loan: You must draw the loan in full in one amount.
10) Repayment: You must have repaid the loan in full on the last day of the
period shown in term 6 of this agreement.
Subject always to our rights under paragraph 13 of the appendix, you will
repay the Loan by 84 equal instalments of principal payable every month
starting one month after the date on which you draw the Loan.
From time to time we will tell you the instalments you must pay.
11) Security:
Legal Mortgage Over the leasehold premises at Cabot
Place, Canary Wharf, London.
Legal Mortgage Over the leasehold premises at 24
Cambridge Circus and 84/86 Charing Cross
Road, London.
Legal Mortgage Over the leasehold premises at Abbeygate
House, 164/167 East Road, Cambridge.
Mortgage Debenture Over the fixed and floating assets of
Restaurant House Limited.
12) Value of security: The security shown in term 11 of this agreement must be
worth at least 100% of the amount which you owe at any time on the loan.
Paragraph 6 of the appendix explains how we work out the value of the
security.
Continued........../
<PAGE>
- 3 -
13) Financial agreements: You agree to the following:
Please see paragraph 2 of the appendix for an explanation of the words and
phrases used below.
a) You will not allow Total Borrowing to be more than 100% of Tangible
Net Worth
b) You must not allow Adjusted Operating Profit to be less than 300% of
Total Borrowing Costs.
c) You will not allow net cash generated from operating activities to be
less than 125% of the Commercial fixed Rate Loan capital repayments.
d) You must not without our prior written consent either create, extend
or increase any security interest on the whole or any part of your
undertaking, property or assets (including uncalled capital) whether
present or future. Security interest includes (without limitation)
liens, pledges, charges, mortgages or other encumbrances.
e) You will provide us with such financial and other information relating
to you or to the Group as we may reasonably require including (without
limitation) copies of the consolidated audited accounts of the Group
not later than six months after the end of the accounting period to
which they relate.
In order to verify whether you are complying with these covenants, we will
refer to your annual audited accounts.
14) Environmental liabilities:
Paragraph 17 of the appendix and (e) and (f) of paragraph 3 of the appendix
will not apply.
15) Overdue payments:
If you do not make any payment under this agreement on the date it is due,
then, without prejudice to our other rights, we will charge interest on the
overdue amount from the date it was due to the date upon which we receive
payment (as well after as before judgement). This will be calculated (and
compounded in accordance with our normal practice) on the basis of a year
of 365 days and the actual number of days elapsed.
You will pay interest to us at a rate which is equal to the sum of :
5% per year, and
our base rate from time to time
Any late payments may be debited to a separate account.
Continued........./
<PAGE>
- 4 -
16) Early repayment
Paragraph 8 of the appendix gives details of how you may ask to repay the
loan before the specified repayment dates. In connection with paragraph 8
of the appendix, the prepayment fee is 0.5% of the amount which you prepay.
<PAGE>
Commercial Fixed Rate Loan
Appendix
1 Agreement
This appendix forms part of the agreement between us.
If we refer to a paragraph, this will mean a paragraph of this appendix. If
we refer to a term this will mean a term of the agreement.
2 Meanings of words and phrases used in the agreement
the 'Agreement Date' means the date on which our offer is accepted in the
way set out in paragraph 20 of the appendix.
'Business Day' shall mean a day on which banks in general are open in the
City of London for the transaction of business of the nature set out in
this agreement.
'Event of Default' shall mean any event specified in paragraph 13 of the
appendix.
'the Group' means you and your subsidiary undertakings (as defined by
Section 258 of the Companies Act 1985) taken as a whole (and, save where
the context does not admit, any of them individually); if there are no
subsidiary undertakings for the time being, references to the Group shall
be taken to be references to you and the word "consolidated" in relation to
any accounts or other financial matters shall be ignored.
the 'Loan' means the loan facility which we have agreed to provide under
the terms and subject to the conditions of this agreement and, where
necessary, it will mean all amounts owed under this agreement.
'The Offer Date' is the date shown in term 1 of the agreement. This is the
date on which we make the written offer of the Loan.
'Option' means either of the interest rate options shown in term 7 of the
agreement.
'Quotation' means a statement from us in response to a request under
paragraph 5 of the appendix giving details of a period and an interest rate
and any other terms under which we are willing to provide the Loan.
'The Quotation Date' is the date on which we make a Quotation.
'Security' means the security shown in term 11 of the agreement and any
other security which you provide under paragraph 6 of the appendix.
The following definitions apply to the financial agreements in term 13
of the agreement.
'Adjusted Operating Profit' in respect of any financial period, means
the Profit (we set out the meaning of this below) for such period adjusted
by us (in manner and on bases reasonably satisfactory to us) as follows:
(i) There shall be added back depreciation on fixed assets charged for such
period;
(ii) There shall be deducted or added back any excess over book value or
shortfall below book value, as the case may be, (after deducting selling
costs) of the disposal proceeds of any of the Group's fixed assets disposed
of during such period;
(iii) There shall be deducted any taxation paid or payable by the Group
during such period;
(iv) There shall be taken into account the cash effect of any changes in
the consolidated net working capital (being Current Assets less Current
Liabilities) of the Group during such period; and
(v) There shall be deducted the aggregate amount of dividends paid by the
Group during such period.
'Borrowing Costs' means, in respect of any financial period. all
continuing, regular or periodic costs, charges and expenses (including but
not limited to, interest) incurred by the Group in effecting, servicing or
maintaining Total Borrowing.
'Capital Expenditure' means, in respect of any financial period. the
aggregate expenditure of the Group on the purchase of fixed assets (as
determined in accordance with generally accepted United Kingdom accounting
principles (consistently applied))
<PAGE>
Commercial Fixed Rate Loan
'Current Assets' means all assets of the Group which would be
classified, in accordance with generally accepted United Kingdom accounting
principles (consistently applied) as current assets.
'Current Liabilities' means all liabilities of the Group which would
be classified, in accordance with generally accepted United Kingdom
accounting principles (consistently applied) as current liabilities.
'Profit' means, in respect of any financial period, the amount of
profit of the Group before taxation, interest payable, and any unusual,
extraordinary or exceptional items.
'Tangible Net Worth' means the amount for the time being paid up or
credited as paid up on your issued share capital plus all reserves of the
Group which would, in accordance with generally accepted United Kingdom
accounting principles consistently applied be classified as shareholders
capital plus retained earnings of the Group but deducting assets of the
Group which would, in accordance with such principles, be classified as
intangible assets.
'Total Borrowing' means the total outstanding principal amount of all
borrowings or monies otherwise raised by the Group from all sources
whatever, whether by way of debenture, mortgage, unsecured loan, overdraft
or in any other manner (including redeemable preference shares) plus the
aggregate face amount of all discounted acceptance credits.
3. Availability of Loan
From the Offer Date shown in term 1 of the agreement you will have 30 days
in which you can draw the Loan. However, you can only accept this offer and
draw the Loan if we have received the following items from you and are
satisfied with them:
a) A copy of this agreement with the acceptance form signed on your
behalf.
b) If you are a company we will need a certified copy of a resolution of
the board of directors showing that it
o accepts the terms and conditions of the Loan;
o agrees to give the security set out in term 11 of the agreement; and
o authorises a person or persons to take such other action on your
behalf as may be necessary for the purpose of the agreement.
c) If you are a company we will need a copy of your Memorandum and
Articles of Association certified by your secretary or a director as
being up to date (including copies of all amending resolutions).
d) The security set out in term 11 of the agreement.
e) An environmental audit prepared by environmental consultants (at your
expense) approved by us. The audit must confirm that neither your
assets nor the use of those assets has broken or is likely to break
any Environmental Law (please see paragraph 17 of the appendix for an
explanation of the meaning of Environmental Law).
f) A certified copy of the relevant Environmental Licence (please see
paragraph 17 of the appendix for an explanation of the meaning of
Environmental Licence).
You must give us three days' notice of your intention to draw the
Loan. These days must be Business Days. We will credit your current
account with the amount of the Loan on the day on which you accept the
Quotation.
You may not draw the Loan until we are satisfied that you have
accepted a Quotation.
4. Interest
We will work out interest on the balance of the Loan outstanding from day
to day on the basis of the actual days elapsed and a 365 day year.
You must pay interest to us on our usual charging days in March, June,
September and December or by combined interest and principal instalments
(where specified under term 10) on such dates as are specified under term
10 of the agreement.
If you have chosen Option 1 you will pay a fixed rate of interest for the
entire period of the Loan as specified in your Quotation. This rate of
interest will be the rate shown in the Quotation.
<PAGE>
Commercial Fixed Rate Loan
If you have chosen Option 2, you will pay:
o a fixed rate of interest for the Initial Fixed Rate Period shown in
your Quotation and at the rate shown in your Quotation; and thereafter
o interest at the rate shown in term 7 of the Agreement for the Floating
Rate Period.
We may charge interest to your current account or to your loan account.
If you do not make any payments on the due date under this agreement, then
the rate of interest specified in term 15 shall apply to any overdue
amounts.
5 Fixed Rate of Interest
You must give us three days notice in writing of the date on which you want
to draw the Loan. All these days must be Business Days
If we have received the items listed in paragraph 3 of this appendix
(within the time period set out there), you may ask for a Quotation at any
time up to 4 p.m. on the required day for the Loan (which must be a
Business Day). You must also tell us the interest rate option you want.
You must accept or reject our Quotation immediately. If you do not accept
the Quotation immediately you shall be deemed to have rejected it.
Once you have accepted the Quotation we will normally send to you written
details of the terms of the Quotation. These details will include the
repayment dates and repayment instalment amounts but if you do not receive
these written details it will not affect your obligations in respect of the
Quotation which you have accepted.
Accepting the Quotation in any way (whether by telephone telex or in any
other way) shall be binding on you and will mean that you will have to
borrow the full amount of the Loan as set out in this agreement and the
Quotation on the Quotation Date
If we do not receive instructions from you in relation to the Quotation
which you have accepted we shall be entitled to credit the amount thereof
to a current account in your name at the lending branch shown in term 3 of
the agreement and you shall thereby be deemed to have drawn the Loan.
6 Security
You must give us the security shown in term 11 of the agreement and this
will be a continuing security for the discharge on demand of all your
indebtedness and your other liabilities to us from time to time.
You undertake to provide any extra security which we need to maintain the
value of the Security at the level specified in term 12 of the agreement
within such period as we may require. The open market value of the Security
shall be determined at our option from time to time by an independent
professional valuation. You will have to pay for this valuation.
7 Fees and Costs
We have the right to debit your current account with the fees set out in
term 8 and 16 of the agreement.
8 Early Repayment
We may (but are not obliged to) agree to let you repay the Loan early if
you ask us in writing. You must give us five days notice in writing to do
this. This notice shall be irrevocable and these days must be Business
Days. If we allow you to repay the Loan early, the prepayment will be on
such terms as we may require including (without limitation) you
indemnifying us against any funding or other costs, losses, expenses or
liabilities (including loss of profit) sustained or incurred by us as a
result of such prepayment.
If we allow you to repay the Loan early you will have to pay us the
prepayment fee set out in term 16 of the agreement.
You cannot reborrow any amount you have prepaid.
<PAGE>
Commercial Fixed Rate Loan
9 Liability
If you are more than one person then the expression "you" shall mean all of
such persons and (save where the context does not so admit) any of them and
the obligation of those persons shall be joint and several.
Each such person irrevocably appoints each other person as his agent for
the service of any demand or notice under this agreement.
10 Current Accounts
You agree to maintain a current account with us throughout the period of
the Loan.
11 Payments
We may transfer amounts from your current account to meet the repayments
set out in term 10 of the agreement.
We may use any repayment instalment (including instalments of principal and
interest) or any part of any repayment instalment to:
o reduce the amount of principal outstanding on the Loan.
o pay interest accrued on the Loan.
o discharge any other payment due under this agreement.
You must make all payments under this agreement in full in pounds sterling
without any deduction or withholding (whether in respect of set-off,
counterclaim, duties, taxes, charges or otherwise howsoever).
12 Set-off
We shall be entitled to set-off against any of your liabilities to us
hereunder (whether present, future, actual or contingent) any of your
credit balances on any of your accounts with us or in your name. We do not
have to give you any prior notice to do this.
13 Default
If any of the following events occur, we may, by giving you written notice,
cancel our outstanding commitments to you (including the availability of
the Loan if you have not drawn it) and demand immediate repayment of your
indebtedness to us and exercise our rights under any Security
(a) If you breach any term or condition (including any covenant) of this
agreement.
(b) If you do not make any payment on the date it is due under this
agreement and whether by way of principal, interest or otherwise.
(c) If you do not use the Loan for the purpose set out in term 5 of the
agreement.
(d) If the Security or any part thereof shall cease to be fully
enforceable in accordance with its terms or with effect from the date
on which the determination of the continuing nature of the Security or
any part thereof occurs, such continuing nature is determined whether
such determination be by actual or constructive notice or be deemed to
have occurred or any binding undertaking provided in the Security or
any part thereof shall be breached.
(e) If you sell or dispose of any asset listed in term 11 of the agreement
or it ceases to be in your sole possession.
(f) Your current account becomes overdrawn after the debiting of any
payment due from you under the Loan or it becomes overdrawn in excess
of any limit agreed with us and you do not offer payment in cash to us
when we inform you of this.
(g) If any representation, warranty or statement made to us by you in
connection with the Loan is breached or is false or if you fail to
tell us anything which in our opinion is material to the Loan.
(h) If you make any default in the performance of any other agreement for
borrowed money whether with us or any other lender whereby the due
date of repayment thereunder is rendered capable of acceleration or
any of your indebtedness becomes or is declared by the holder or the
lender thereof to be due and payable prior to its stated maturity or
such indebtedness is not
<PAGE>
Commercial Fixed Rate Loan
repaid in full at its stated maturity or if repayable on demand is not
repaid in full forthwith upon demand being made or if any guarantee or
indemnity given by any giver of security in connection with any of
your liabilities to us or any other lender is not honoured when due
and called upon.
(i) If you are a company and a petition is presented or a resolution
passed for your winding up or a petition is presented for an
administration order to be made in relation to you or your directors
make a proposal for a voluntary arrangement with your creditors or you
are unable to pay your debts within the meaning of Section 123 of the
Insolvency Act 1986 or an encumbrancer takes possession of or a
receiver or an administrative receiver is appointed over any of your
assets.
(j) If you are not a company and a bankruptcy petition is presented
against you or you make a proposal to your creditors for a voluntary
arrangement within the meaning of Section 253 of the Insolvency Act
1986 or you make or seek to make any composition with your creditors
or you appear to be unable to pay a debt within the meaning of Section
268(1) of the Insolvency Act 1986 or appear to have no reasonable
prospect of being able to pay a debt within the meaning of Section
268(2) of the Insolvency Act 1986 or an encumbrancer takes possession
of any of your assets or if you are not more than one person you die
or become mentally incapacitated.
14 Delay in exercising our rights
If we delay in giving any notice or exercising any of our rights under this
agreement this will not be construed as a waiver of any of our rights.
15 Demands and notices
Any demand or notice to you will be made in writing and be signed by one of
our officers and served either by personal delivery on you at any place or
by post addressed to you at your place of business last known to us.
Service by post on you shall be deemed to be effective on the next Business
Day after the date of posting even if it is returned undelivered.
Any notice to us under this agreement must be made in writing and signed by
you or where you are a company, by a duly authorised officer on your
behalf. It must be delivered by hand or by post to the lending branch
specified in term 3 of the agreement.
16 Representations and Warranties
You represent and warrant that you have full power to accept and be bound
by the terms and conditions set out in this agreement and to draw the Loan
and that you have taken all necessary steps and obtained all necessary
consents and authorisations to do so and that accordingly this agreement
constitutes your legal, valid and binding obligations fully enforceable in
accordance with their terms.
You represent and warrant as follows:
(a) (If you are a company) You are duly incorporated and validly existing
under the laws of England.
(b) No Event of Default has occurred or is outstanding and no event has
occurred which with the giving of notice or the lapse of time would
constitute an Event of Default.
(c) All information, exhibits and reports furnished to us in connection
with this agreement were and remain true and accurate in all respects
and do not omit any fans thereby rendering misleading any statement
contained therein.
(d) The representations and warranties set out above shall survive your
acceptance of this agreement and the drawing of the Loan and shall be
deemed to be repeated on each day throughout the period of the Loan
with reference to the facts and circumstances existing at that time.
17 Environmental Matters
(a) We may at any time during the period of the Loan require you to obtain
written confirmation addressed to us which is in a format acceptable to us
from the environmental consultant who undertook the environmental audits
referred to in paragraph 3 of the Appendix that such audit remain valid and
there has been no violation of Environmental Law.
<PAGE>
Commercial Fixed Rate Loan
(b) You must notify us immediately if you receive any claim, notice or other
communication in respect of any alleged breach of Environmental Law.
(c) You undertake to notify us immediately if any Environmental Licence is
withdrawn or is not renewed.
(d) You must give us certified copies of any new Environmental Licence and any
renewal of any Environmental Licences within twenty-eight days of issue and
you must meet all associated costs and expenses.
(e) You represent and warrant to us that you have obtained all requisite
Environmental Licences and you have at all times complied in all material
respects with the terms and conditions of the Environmental Licences
applicable to you and all other applicable Environmental Law and you
confirm that no Hazardous Materials (other than those incidental to your
business and which are stored in full compliance with Environmental
Licence(s)) have been used, disposed of, generated, stored, transported,
deposited, buried or emitted at, on, from or under any premises (whether or
not owned, leased, occupied or controlled by you) in circumstances where
this might result in a liability to you.
(f) You represent that you have not received any notices of withdrawal,
violations and/or advisory action by regulatory agencies regarding
environmental control matters or Environmental Licence compliance.
(g) You will indemnify and hold us and our respective officers, directors,
employees and agents (the 'Indemnified Parties') free and harmless from and
against any and all actions, causes of action, losses, costs, liabilities
and damages of any kind and every kind of character known or unknown fixed
or contingent, out of pocket or consequential and all expenses incurred in
connection therewith including reasonable legal fees and disbursements
(irrespective of whether any such Indemnified Parties are a party to the
action for which indemnification is sought) (the "Indemnified Environmental
Liabilities) incurred by the Indemnified Parties or any of them as a result
of or arising out of or relating to
(i) The imposition or recording of any liens, pledges, charges or
mortgages on or over any of your assets by any government agency or
local governmental agency or authority pursuant to any Environmental
Law or the removal of any such liens, pledges, charges or mortgages
over any of your assets.
(ii) The claims of any private parties or local government or government
agency or authority regarding violations of Environmental Law in
connection-with your operations or the effect of the presence of any
Hazardous Material on the value of the assets belonging to you or in
connection with compliance by you or the Indemnified Parties with any
regulation or order issued pursuant to Environmental Law. Your
obligations to the Indemnified Parties shall continue after you have
repaid the Loan. For the purposes of this agreement:
"Environmental Law" shall mean any law, regulation, code of practice,
circular, guidance notes or the like (whether in the United Kingdom or
elsewhere and whether now existing hereafter enacted or promulgated) or any
judicial or administrative interpretation thereof concerning the protection
of human health or the environment or the conditions of the work place or
the generation, transportation, storage, treatment and disposal of
hazardous materials.
"Hazardous Materials" shall mean any radioactive emissions and any natural
or artificial substance (whether in solid or liquid form or in the form of
a gas or vapour and whether alone or in combination with any other
substance) which are defined, determined identified prohibited, limited or
regulated by Environmental Law or any other chemical, material, substance
or element existing now or in the future and which is capable of causing
harm to man or any other living organism which is capable of damaging the
environment or public health or welfare including any controlled, special,
dangerous, toxic, radioactive or hazardous waste.
"Environmental Licence" shall mean any permit, licence or authorisation,
consent or other approval required by Environmental Law.
18 Costs and Expenses
You will pay all costs, charges and expenses arising in connection with the
Loan including its negotiation and preparation and all costs, charges and
expenses arising in connection with the preservation and/or enforcement of
our rights hereunder or under the Security and will indemnify us for any
and all losses, costs and expenses occasioned by the occurrence of an Event
of Default.
<PAGE>
Commercial Fixed Rate Loan
19 General Points
(a) If at any time any one or more of the provisions in this agreement is
or becomes invalid, illegal or unenforceable in any respect, the
validity, legality or enforceability of the remaining provisions
hereof shall not in any way be affected or impaired thereby.
(b) This agreement is governed by the laws of England.
(c) All expressions in this letter bearing a plural meaning shall (where
the context so admits) also bear the singular thereof and vice versa.
(d) All references in this letter to any statutory provision shall be
deemed to include any statutory modification or re-enactment thereof.
20 Acceptance
Acceptance of the offer contained in this agreement may be effected by
receipt by us at the lending branch (please see term 3 of the agreement)
within fourteen days of the date specified in term 1 of the agreement of
the items specified in paragraph 3 of the appendix.
--------------------------------
For and on behalf of
National Westminster Bank Plc
FORM OF ACCEPTANCE
We accept the Loan on the terms and conditions set out in this letter
By: /s/ Colin Halpern
------------------------
For and on behalf of
--------------------------------- Date
------------------------------
RWB635
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