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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Red Hot Concepts
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
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<PAGE>
RED HOT CONCEPTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, SEPTEMBER 24, 1998
The Annual Meeting of Shareholders of Red Hot Concepts, Inc. will be
held at the offices of Reed Smith Shaw & McClay at 1301 K Street, N.W., Suite
1100 - East Tower, Washington, DC on September 24, 1998 at 10:00 a.m. for the
following purposes:
1. To elect three Directors for the following year; and
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on August 7, 1998 as the
record date for the meeting. Only shareholders of record at that time are
entitled to notice of and to vote at the meeting and any adjournment thereof. If
you are present at the meeting, you may vote in person even though you have
previously delivered your proxy.
The enclosed proxy is being solicited on behalf of the Company.
By order of the Board of Directors
/s/ H. Michael Bush
--------------------
H. Michael Bush,
Secretary
SHAREHOLDERS ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AMD RETURN
IT PROMPTLY IN THE BUSINESS REPLY ENVELOPE PROVIDED. SHAREHOLDERS WHO ARE
PRESENT AT THE MEETING MAY WITHDRAW THEIR PROXY AND VOTE IN PERSON.
<PAGE>
RED HOT CONCEPTS, INC.
PROXY STATEMENT FOR ANNUAL MEETING
To Be Held on September 24, 1998
This Proxy Statement is furnished in connection with the solicitation
of proxies by the directors of Red Hot Concepts, Inc. (the "Company") for use at
the Annual Meeting of Shareholders to be held at the offices of Reed Smith Shaw
& McClay at 1301 K Street, NW, Suite 1100 - East Tower, Washington, DC at 10:00
a.m. on Thursday, September 24, 1998 (the "Annual Meeting"). The proxy may be
revoked at any time prior to voting thereof by notifying the persons named in
the proxy of the intention to revoke, by execution and delivery of a later dated
proxy or by appearing at the Annual Meeting and voting in person the shares of
common stock ("Shares") to which the proxy relates. Shares will be voted in
accordance with the instruction indicated in a properly executed proxy. If no
instructions are indicated, Shares will be voted as recommended by the
directors.
This Proxy Statement and the enclosed proxy were mailed on or about
August 31, 1998 to shareholders of record at the close of business on August 7,
1998 (the "Record Date"). The Company has mailed each Shareholder of record as
of the Record Date an Annual Report that includes audited financial statements
for the year ended December 28, 1997.
The holders of a majority of the Shares entitled to vote present at the
Annual Meeting in person or represented by proxies will constitute a quorum for
the transaction of business. At the close of business on the Record Date, the
Company had 3,420,782 Shares outstanding and entitled to vote. Each Share has
one vote on all matters including those to be acted upon at the Annual Meeting.
In the election of directors, the three nominees receiving a plurality
of the votes cast at the meeting shall be elected. Approval of all other matters
to be submitted to the shareholders requires the affirmative vote of a majority
of the votes cast at the Annual Meeting. For purposes of determining the number
of votes cast with respect to any voting matter, only those cast "FOR" or
"AGAINST" are included. Abstentions and broker non-votes are counted only for
purposes of determining whether a quorum is present at the Annual Meeting.
The mailing address of the Company is 6701 Democracy Boulevard, Suite
300, Bethesda, Maryland 20817. Notices of revocation of proxies should be mailed
to that address.
2
<PAGE>
OWNERSHIP OF EQUITY SECURITIES
The table below sets forth certain information as of August 7, 1998, the record
date, regarding the beneficial ownership, as defined in regulations of the
Securities and Exchange Commission, of Common Stock and Preferred Stock of (i)
each person who is known to the Company to be the beneficial owner of more than
5% of the outstanding shares of the Company's Common Stock and Preferred Stock,
(ii) each director of the Company, and (iii) all directors and executive
officers as a group. On August 7, 1998, there were 3,420,782 shares of the
Company's Common Stock outstanding. Unless otherwise specified, the named
beneficial owner has sole voting and investment power. The information in the
table below was furnished by the persons listed. "Beneficial Ownership" as used
herein has been determined in accordance with the rules and regulations of the
Securities and Exchange Commission and is not to be construed as a
representation that any of such shares are in fact beneficially owned by any
person.
<TABLE>
<CAPTION>
Names and Address of Amount and Nature of Percentage of
Beneficial Owner Beneficial Ownership Class
- - ---------------- -------------------- -------------
<S> <C> <C>
Woodland Limited Partnership (1) 1,245,833 (3) 36%
1301 K Street, N.W.
Washington, DC 20005
Colin Halpern 8,333 (2) *
H. Michael Bush 20,000 (2) *
Robert P. Flack 11,666 (2) *
Aaron L. Lebedow -0- *
All directors and officers 39,999 (2) *
As a group (3 persons)
</TABLE>
- - ----------------------
* Less than 1%
(1) Woodland Limited Partnership, a limited partnership of which Woodland
Group is the General Partner, owns approximately 36% of Red Hot
Concepts issued and outstanding shares of Common Stock. Woodland Group
is owned one-third by Mr. Jay Halpern, one-third by Ms. Nancy Gillon
and one-third by Mrs. Gail Halpern. Gail Halpern is the wife of Colin
Halpern. Jay Halpern and Nancy Gillon are the children of Gail and
Colin Halpern. By reason of their indirect ownership of 100% of
Woodland Limited Partnership, Mr. Halpern, Ms. Gillon and Mrs. Halpern
may be deemed to have a beneficial interest in the shares owned by
Woodland Limited Partnership. Messrs. Halpern, Ms. Gillon and Mrs.
Halpern disclaim beneficial ownership of such securities.
(2) Represents options to purchase shares of Common Stock exercisable
within 60 days of August 7, 1998.
(3) Including preferred shares.
3
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting, three Directors are to be elected, each to hold office
until the next annual meeting of Shareholders and until his or her successor is
duly elected and qualified, except in the event of death, resignation or
removal. Unless otherwise specified, proxies solicited hereby will be voted
"FOR" the election of the nominees listed below, except that in the event any of
those named should not continue to be available for election, discretionary
authority may be exercised to vote for a substitute. No circumstances are
presently known that would render any nominee named herein unavailable.
The nominees, their ages, the year of election of each of the nominees for the
Board of Directors, their principal occupations during the past five years or
more, and directorships of each in public companies in addition to the Company,
are as follows:
Colin Halpern, age 61, has served as Chairman of the Board of the
Company since June 1994 and served as President of the Company from June 1994 to
August 1996, and again, since May 1997. He also currently serves as President
and Director of Crescent Capital, Inc., Chairman of the Board of International
Franchise Systems, Inc., President, Chief Executive Officer and Chairman of the
Board of Directors of NPS Technologies Group, Inc. ("NPS"), all of which are
public companies. He has held these positions since July 1994, December 1993,
and August 1983, respectively. Mr. Halpern also served as Executive Vice
President of Lafayette Industries, Inc. from January 1992 through December 1996.
Colin Halpern also served as President of International Franchise Systems, Inc.
from December 1993 through May 1996. From 1985 to the present, Mr. Halpern has
served as the Chairman of Universal Service Corp. Mr. Halpern was formerly the
Chairman and Chief Executive Officer of DRC Industries, Inc., a company that,
from November 1975 through October 1985, had a Budget Rent-A-Car master license
agreement for the New York metropolitan area, including LaGuardia and John F.
Kennedy Airports.
In June 1991, the SEC sought and received, and NPS consented to the
entering of, an order against NPS and its officers and employees that required
NPS to file certain periodic reports with the SEC that had not been timely filed
and permanently restrained and enjoined NPS and such officers and employees from
failing to file in proper form with the SEC accurate and complete reports
required to be filed by NPS pursuant to the rules and regulations of the SEC.
Mr. Colin Halpern is the President and Director of NPS, which is currently
inactive. Since June 1991, certain of NPS' reports have not been timely filed by
NPS and other reports have not been filed in proper form. The SEC has taken no
further action against NPS or any of its officers and employees.
Robert Pace Flack, age 60, has served as a director of the Company
since December 1995. Mr. Flack is currently serving as a Managing Director of
Business Development Services, a private company. From December 1995 to May
1997, he served as Chief Executive Officer, President and Director of Kona
Restaurant Group, Inc. From June 1989 to December 1994, Mr. Flack held several
positions and most recently served as the President and Chief Executive Officer
of Sonic Industries, a Nasdaq listed, fast food service, drive-in restaurant
chain with over 1,300 outlets, 90% of which were franchised. He has served in
senior management positions with several restaurant companies including El Chico
Corporation (Nasdaq), Pizza Inn, Inc. (AMEX) and Village Kitchen Foods, Inc. Mr.
Flack is a member of the National Restaurant Association and the International
Franchise Association. Mr. Flack is also a director of Lincoln National Bank,
Oklahoma.
4
<PAGE>
Aaron L. Lebedow, age 63, has served as a director of the Company since
December 1997. Mr. Lebedow is currently serving as President of Global
MarkeTactics, a market planning consulting firm he founded in 1994. From 1966 to
1993, Mr. Lebedow was Chairman of Technomic Consultants International, a
strategic marketing consulting firm serving Fortune 500 and equivalent
multinational firms. Mr. Lebedow is also a director of the Council of Jewish
Elderly, a position he has held since 1987.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES SET FORTH ABOVE.
5
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the aggregate cash compensation paid by
the Company for the fifty-two weeks ended December 28, 1997 to those executive
officers whose salary and bonus exceeded $100,000 and the Chief Executive
Officer.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
------------------- ----------------------
Other Restricted Securities
Name and Salary Annual Stock Underlying All Other
Principal Compensation Bonus Compensation Award(s) Options Compensation
Position Year ($) ($)(1) ($)(2) ($) (#) ($)
- - -------- ---- ------------ ------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Colin Halpern 1997 72,000 0 27,238 0 3,332 0
President(3) 1996 72,000 0 15,840 0 1,666 0
1995 72,000 0 60,156 0 0 0
</TABLE>
(1) Represents amounts paid under the Company bonus plan.
(2) For 1997, Colin Halpern's compensation includes $18,322 car allowance and
$8,916 for insurance and for 1996 includes $15,840 car allowance and $7,443
for insurance and for 1995 includes $15,840 car allowance, $7,443 for
insurance, and $32,760 for housing allowance. Where no amount is given, the
dollar value of perquisites paid to the named executive officer does not
exceed the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for the named executive officer.
(3) Colin Halpern has served as President since May 1997.
6
<PAGE>
Stock Option Grants
The following tables set forth, as to the executive officers, certain
information relating to options for the purchase of Common Stock granted and
exercised during fiscal year 1997 and held at the end of fiscal year 1997.
Option Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
% of Total Options
Options Granted Granted to Employees Exercise or
Name Year (#)(1) in Fiscal Year Base Price(1) Expiration Date
- - ---- ---- --------------- -------------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Colin Halpern 1997 1,666(2) 31% $8.25 01/01/07
1996 1,666(2) 1% $3.9375 04/01/07
</TABLE>
(1) Reflects one-for-three reverse split, which occurred on November 28, 1997.
(2) Represents options granted under the Company's 1996 Non-Employee Director
Plan. Mr. Colin Halpern was not an executive officer of the Company at the
time of grant. Such options are exercisable after the first anniversary of
the grant until ten years from the date of grant.
Aggregated Option Exercises in Last
Fiscal Year and FY-End Option Values
<TABLE>
<CAPTION>
# of Securities # of Securities Value of Value of
Underlying Underlying Unexercised unexercised
Shares Unexercised Unexercised in-the-money in-the-money
acquired on Value Options at Options at option at option at
exercise Realized FY-End FY-End FY-End FY-End(1)
Name (#) ($) Exercisable Unexercisable Exercisable(1) Unexercisable
---- ----------- -------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Colin Helpen 0 0 1,666 3,332 $ -- $ --
H. Michael Bush 0 0 9,999 20,000 $ -- $ --
</TABLE>
(1) Represents the difference between the option exercise price and the closing
market price for the Company's Common Stock on December 31, 1997 ($1.50).
7
<PAGE>
DIRECTOR COMPENSATION
Directors who are officers or employees of the Company receive no additional
compensation for service as members of the Board of Directors or committees
thereof. Directors who are not officers or employees of the Company receive such
compensation for their services as the Board of Directors may from time to time
determine. Non-employee directors receive an annual fee of $5,000 and a fee of
$1,000 for each board, committee, and shareholder meeting attended. During
fiscal year 1997, non-employee directors participated in the 1996 Non-Employee
Directors Stock Option Plan (See Note 16A of Notes to Financial Statements),
which plan was adopted by the shareholders at the 1997 annual meeting of
shareholders. During fiscal year 1997, Mr. Melvin Lazar was granted options to
acquire 6,664 shares of common stock (reflecting the November 28, 1997
one-for-three reverse stock split) at an exercise price of $8.25, $3.9375, $1.50
and $4.03 (1,666 shares at each price) under the plan. These options have
expired. In addition, Mr. Franklin Abelman was granted options to acquire 3,332
shares of common stock at an exercise price of $8.25 and $3.9375 (1,666 shares
at each price) under the plan. These options have also expired.
8
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Woodland Limited Partnership ["Woodland"] is a partnership controlled by members
of Mr. Colin Halpern's family. Mr. Halpern is the President and Chairman of the
Board of the Company. As of December 28, 1997, the balance due to Woodland for
funds advanced to the Company was $1,011,317 which includes accrued interest
payable of $230,065. This note has been extended to September 1998. During 1997,
funds were advanced for $265,184 and repayments of $1,506,815 were made to
Woodland.
In June 1996, as partial consideration for the conversion of short-term advances
to a note payable loan, the Company issued a common stock purchase warrant
entitling Woodland to purchase 166,667 shares of the Company's common stock at
$7.50 per share for a period of 24 months commencing on the date of the loan.
The warrants will be redeemable at $.01 per share if the closing bid price of
the Company's common stock exceeds $30 for 10 consecutive trading days ending
within five days of the notice of redemption. In December 1996, Woodland agreed
to extend the term of the note due until June 1998 and the shares of the
Company's common stock at $5.25 per share for a term expiring December 31, 1999.
As of December 29, 1996, the note was recorded net of the fair value of these
stock warrants at $694,556. Interest expense amortized on purchase warrants for
the 52 week period ended December 28, 1997 is $130,000. The warrants were
cancelled with conversion of the notes to equity.
In March 1997, the Company agreed with Woodland Limited Partnership to convert
$750,000 of long-term debt to 100,000 $1.00 par value Series A convertible
preferred shares. On September 25, 1997, Woodland agreed to exchange its $1.00
par value Series A non-convertible preferred shares to 375,000 $2.00 par value
Series B non-convertible preferred shares.
On September 25, 1997, Woodland agreed to convert an additional $700,000 of
notes payable into 350,000 $2.00 par value Series B non-convertible preferred
shares. The agreed dividend is 8% and is cumulative. The preferred shares hold
the same voting rights as the common shares. The warrants issued in connection
with notes payable were valued at $145,522 and was accounted for as a discount
to the notes payable to Woodland. At December 28, 1997, the Company amortized
$116,000 as interest expense.
At December 28, 1997, dividends in arrears on the Series B non-convertible
preferred stock amounted to $58,000, or $0.08 per share.
Mr. Halpern also is the Chairman of the Board of International Franchise
Systems, Inc. ["IFS"]. At December 31, 1995, IFS had advanced funds to the
Company in the amount of $183,635. During 1996, the entire amount was repaid.
IFS charges a management fee to the Company for administration services. For the
years ended December 28, 1997 and December 29,1996, this management fee was
$45,000 and $25,000, respectively, and those amounts were charged to operations.
IFS and one of its wholly owned subsidiaries sublease a facility to the Company
in the United Kingdom. For the 52 week period ended December 28, 1997, the
Company paid $133,449 for this facility. During the fifty-two week period ended
December 31, 1995, IFS transferred motor vehicles under capital lease at the
remaining net lease value to the Company. These motor vehicles were returned to
the leasing company upon cancellation of the lease and the related asset and
liability were written off during 1996.
9
<PAGE>
The Company has advanced funds to and paid various expenses on behalf of Mr.
Halpern. During 1996, the total amount advanced to Mr. Halpern was $15,148 with
repayments of $35,000. At December 28, 1997, the total amount due to the Company
from Mr. Halpern is $31,149. This amount is being offset through reimbursements
due to Mr. Halpern.
Mr. Halpern's son is an attorney with a law firm that provides legal services to
the Company. Legal expense incurred with this firm for the fifty-two weeks ended
December 28, 1997 was $20,000. At December 28, 1997 there was a balance of
$115,000 due and owing by the Company to this firm.
The Chief Financial Officer of the Company is also the Chief Financial Officer
of IFS. The charge for his services was $130,000 and is allocated between the
two companies.
10
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company, from its inception, has engaged the firm of Moore Stephens, P.C.
(formerly Mortenson & Associates, P.C.) as its independent public accountants.
A representative of Moore Stephens, P.C. will be present at the Annual Meeting,
and will be given the opportunity to make any statement he desires to make and
will be available to respond to questions.
OTHER MATTERS
Management does not know of other matters that are likely to be brought before
the meeting. However, in the event that any other matters properly come before
the Annual Meeting, the persons named in the enclosed proxy are expected to vote
the Shares represented by such proxy on such matters in accordance with their
best judgement.
The cost of preparing, assembling and mailing this Proxy Statement, the Notice
of Meeting and the enclosed proxy is to be borne by the Company.
In addition to the solicitation of proxies by the use of the mails, the Company
may utilize some of its officers and employees (who will receive no compensation
in addition to their regular salaries) to solicit proxies personally and by
telephone. The Company does not currently intend to retain a solicitation firm
to assist in the distribution of proxy statements and the solicitation of
proxies. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the Proxy Statement to their principals and
to request authority for the execution of proxies, and will reimburse such
persons for their expenses in so doing.
SHAREHOLDERS' PROPOSALS
Any proposal which a Shareholder intends to present at the Company's 1999 Annual
Meeting of Shareholders must be received by the Company no later than December
15, 1998 in order to be included in the Company's Proxy Statement and form of
proxy relating to that meeting.
The Company will provide Shareholders, without charge, a copy of the Company's
Annual Report on Form 10-KSB filed with the Securities and Exchange Commission
for the year ended December 18, 1997, including the financial statements and
schedules attached thereto, upon written request to H. Michael Bush, at Red Hot
Concepts, Inc., 6701 Democracy Boulevard, Suite 300, Bethesda, MD 20817.
By order of the Board of Directors
/s/ H. Michael Bush
-------------------
H. Michael Bush,
Secretary
August 10, 1998
11
<PAGE>
RED HOT CONCEPTS, INC.
Proxy for Annual Meeting of Shareholders September 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Red Hot Concepts, Inc. appoints Colin Halpern,
Robert Flack, and Aaron Lebedow and each of them, with full power of
substitution, as proxy to vote all shares of the undersigned in Red Hot
Concepts, Inc. at the Annual Meeting of Shareholders to be held on Thursday,
September 24, 1998 and at any adjournment thereof, with like effect and as if
the undersigned were personally present and voting, upon the following matters:
1. To elect three Directors
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary (to vote for all nominees listed
below) below)
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line though the nominee's name in the list below)
Colin Halpern Robert P. Flack Aaron L. Lebedow
2. Such other matters as may properly come before the meeting at the
discretion of the proxy holders.
(Continued and to be signed on reverse side)
<PAGE>
(Continued from reverse side)
PROXIES WILL BE VOTED AS DIRECTED OR SPECIFIED. IF NO CHOICE IS SPECIFIED, THIS
PROXY WILL BE VOTED (1) FOR THE NOMINATED DIRECTORS, (2) FOR OR AGAINST ANY
OTHER MATTERS THAT PROPERLY COME BEFORE THE MEETING AT THE DISCRETION OF THE
PROXY HOLDER.
Dated:_______________________, 1998
___________________________________
Signature of Shareholder
___________________________________
Signature of Shareholder
SIGNATURE(S) MUST CORRESPOND EXACTLY
WITH NAME(S) AS IMPRINTED HEREON. When
signing as attorney, executor,
administrator, trustee or guardian,
please give the full title as such, and
if the signer is a corporation, please
sign with the full corporate name by a
duly authorized officer. If stock is
held in the name of more than one
person, all named holders must sign the
proxy.
