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 thirteen weeks ended September 26, 1999 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 November 1, 1999, 3,420,782 shares of common stock par value, $.01 per
share were outstanding.
1
<PAGE>
RED HOT CONCEPTS, INC. AND SUBSIDIARY
FORM 10-QSB
QUARTERLY REPORT
For the Period Ended September 26, 1999
INDEX
<TABLE>
<CAPTION>
Part I: FINANCIAL INFORMATION
Item 1: Financial Statements
<S> <C>
Condensed Consolidated Balance Sheet as of September 26, 1999 [Unaudited] and December 27, 1998 3-4
Condensed Consolidated Statements of Operation for the thirteen week period
June 28, 1999 to September 26, 1999 and the thirty-nine week period December
30, 1998 to September 26, 1999 [Unaudited]
5
Condensed Consolidated Statement of Stockholders' Equity for the thirty-nine week period
December 30, 1998 to September 26, 1999 6
Condensed Consolidated Statements of Cash Flows for the thirty-nine week
period December 30, 1998 to September 26, 1999 [Unaudited]
7
Notes to Condensed Consolidated Financial Statements 8-10
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
11-12
Part II: OTHER INFORMATION 13
SIGNATURES 14
</TABLE>
2
<PAGE>
RED HOT CONCEPTS, INC. AND SUBSIDIARIES (RHC)
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 26, 1999
[UNAUDITED]
<TABLE>
<CAPTION>
September 26, 1999 December 27, 1998
[Audited]
<S> <C> <C>
Assets:
Cash and Cash Equivalents $ 2,536 $ 12,293
Restricted Cash 30,000 30,000
Due From Celebrated Group 26,400 26,400
Prepaid Expenses -- --
Accrued Interest Receivable -- --
------------------------------
Total Current Assets 58,936 68,693
==============================
Furniture and Equipment - Net 3,554 4,697
==============================
Other Assets:
Officer Loan Receivable 31,149 31,149
Investment in Celebrated Group 825,548 3,257,096
------------------------------
Total Other Assets 856,697 3,288,245
==============================
Total Assets $ 919,187 $3,361,635
==============================
</TABLE>
3
<PAGE>
RED HOT CONCEPTS, INC. AND SUBSIDIARIES (RHC)
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 26, 1999
[UNAUDITED]
<TABLE>
<CAPTION>
<S> <C> <C>
September 26, December 27,
1999 1998
[Audited]
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable and Accrued Expenses $ 198,629 $ 215,066
Accrued Interest Payable - Related Party 2,769 0
------------ ------------
Total Current Liabilities 201,398 215,066
Long Term Liabilities:
Due to Related Party 250,277 55,500
------------ ------------
Total Liabilities 451,675 270,566
Commitments and Contingencies -- --
Stockholders' Equity:
Series A Convertible 8% Preferred Stock, $1.00 Par Value
100,000 Shares Authorized, Issued and Outstanding 1,500,000 1,500,000
Series B Preferred Stock, $2.00 Par Value,
725,000 Shares Authorized,
725,000 Shares Issued and Outstanding 1,450,000 1,450,000
Common Stock, $.01 Par Value,
20,000,000 Shares Authorized,
3,420,782 Shares Issued and Outstanding 34,207 34,207
Additional Paid-in Capital 8,443,416 8,443,416
Accumulated Deficit (10,836,916) (8,213,359)
Cumulative Foreign Currency Translation Adjustment (123,195) (123,195)
------------ ------------
Total Stockholders' Equity
467,572 3,091,069
============ ============
Total Liabilities and Stockholders' Equity $ 919,187 $ 3,361,635
============ ============
</TABLE>
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
4
<PAGE>
RED HOT CONCEPTS, INC. AND SUBSIDIARIES (RHC)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS [UNAUDITED]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Thirteen Weeks For the Thirty-Nine Weeks
June 28, 1999 June 29, 1998 December 30, December 29,
to September to September 1998 to 1997 to
26, 1999 27, 1998 September 26, September 27,
1999 1998
Revenues $-0- $-0- $-0- $-0-
Cost of Revenues:
Cost of Revenues -- -- -- --
Restaurant Expense -- -- -- --
================================================================
Total Cost of Revenues -- -- -- --
================================================================
Gross Profit
-- -- -- --
General and Administrative Expenses 53,274 81,739 189,262 323,697
Equity Portion of Celebrated Group Loss 1,500,000 232,560 2,431,548 674,480
----------------------------------------------------------------
Operating Income (Loss) (1,553,274) 314,299 (2,620,810) 998,177
Other Income (Expense):
Interest Income 1 48 22 48
Interest Expense - Related Party 0 23,925 (2,769) 63,722
================================================================
Net Loss (1,553,273) 338,176 (2,623,557) (1,061,851)
================================================================
Net Income (Loss) Per Share [Note E] $ (.45) $ (.10) $ (.76) $ (0.31)
----------------------------------------------------------------
Weighted Average Number of Shares Outstanding [Note E] 3,420,782 3,420,782 3,420,782 3,420,782
================================================================
================================================================
</TABLE>
5
<PAGE>
Cumulative
RED HOT CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Series B
Non-Convertible
Common Stock [11E] Additional Preferred Stock
Number of Paid-in Number of
Shares Amount Capital Shares Amount
------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Balance - December 29, 1996 3,087,449 30,874 8,945,789 -- --
Issuances of Common Stock [9C] 333,333 3,333 (3,333) -- --
Convertible Debt to Preferred Stock [9D] -- -- -- 725,000 1,450,000
Adjustment for Unamortized Value of
Warrants Cancelled [7] -- -- (499,040) -- --
Comprehensive Income;
Net Income for the fifty-two week
period ended December 28, 1997 -- -- -- -- --
Other Comprehensive Income;
Foreign Currency Translation
Adjustment -- -- -- -- --
Comprehensive Income -- -- -- -- --
--------- ------- ---------- ------- ----------
Balance - December 28, 1997 3,420,782 $34,207 $8,443,416 725,000 $1,450,000
Notes Payable Converted to Convertible -- -- -- -- --
Preferred Stock [9D]
Comprehensive income;
Net [Loss] for the fifty-two week
period ended December 27, 1998 -- -- -- -- --
--------- ------- ---------- ------- ----------
Balance - December 27, 1998 3,420,782 $34,207 $8,443,416 725,000 $1,450,000
Comprehensive Income -- -- -- -- --
For the thirty-nine weeks ended
September 26, 1999 -- -- -- -- --
--------- ------- ---------- ------- ----------
Balance - September 26, 1999 3,420,782 $34,207 $8,443,416 725,000 $1,450,000
========= ======= ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Series A
Convertible Accumulated
Preferred Stock Compre- Other Total
Number of hensive Accumulated Comprehensive Stockholders'
Shares Amount Income [Deficit] Income Equity
------ ------ ------ --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 29, 1996 -- -- -- (7,693,155) (57,170) 1,226,338
Issuances of Common Stock [9C] -- -- -- -- -- --
Convertible Debt to Preferred Stock [9D] -- -- -- -- -- 1,450,000
Adjustment for Unamortized Value of
Warrants Cancelled [7] -- -- -- -- -- (499,040)
Comprehensive Income;
Net Income for the fifty-two week
period ended December 28, 1997 -- -- -- 2,121,893 -- 2,121,893
Other Comprehensive Income;
Foreign Currency Translation
Adjustment -- -- -- -- (66,025) (66,025)
Comprehensive Income -- -- 2,055,868 -- -- --
------- ---------- ---------- ------------ --------- ----------
Balance - December 28, 1997 -- -- $(5,571,262) $(123,195) $4,233,166
Notes Payable Converted to Convertible 100,000 1,500,000 -- -- -- 1,500,000
Preferred Stock [9D]
Comprehensive income;
Net [Loss] for the fifty-two week
period ended December 27, 1998 -- -- (2,642,097) (2,642,097) -- (2,642,097)
------- ---------- ---------- ------------ --------- ----------
Balance - December 27, 1998 100,000 $1,500,000 -- $(8,213,359) $(123,195) $3,091,069
Comprehensive Income -- -- -- -- -- --
For the thirty-nine weeks ended
September 26, 1999 -- -- (2,623,557) (2,623,557) -- (2,623,557)
------- ---------- ---------- ------------ --------- ----------
Balance - September 26, 1999 100,000 $1,500,000 -- $(10,836,916) $(123,195) $467,512
======= ========== ========== ============ ========= ========
</TABLE>
Foreign Currency Translation:
Prior to December 28, 1997, the functional currency for the Company's United
Kingdom subsidiary and Australian subsidiary was the British pound sterling and
Australian dollar, respectively. The translation from British pound sterling and
Australian dollars into U.S. dollars was 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. For the period December 27, 1998 the translation from
British pound sterling into U.S. dollars for the investment in the Celebrated
group was done using current exchange rates in effect at year end.
The Accompanying Notes are an Integral Part of these Consolidated Financial
Statements.
6
<PAGE>
RED HOT CONCEPTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
<TABLE>
<CAPTION>
<S> <C> <C>
For the Thirty-Nine For the Thirty-Nine
Week Period Week Period December
December 27, 1998 29, 1997 to
to September 26, September 27,
1999 1998
Operating Activities:
Net Cash - Operating Activities $ (204,534) $(547,544)
--------------------- ----------------------
Investing Activities:
Purchase of Furniture, Fixtures and Leasehold Improvements -- --
Store Development and Unit Preopening Costs -- --
Development and License Agreement -- --
Loan to Officer - Net -- --
--------------------- ----------------------
Net Cash - Investing Activities -- --
--------------------- ----------------------
Financing Activities:
Preferred Shares -- 444,872
Proceeds from Loan from Related Party 194,777 --
Repayment of Debt -- --
Proceeds from Sale of Common Stock -- --
Deferred Opening Costs -- --
--------------------- ----------------------
Net Cash - Financing Activities 194,777 444,872
--------------------- ----------------------
Effect of Exchange Rate Changes on Cash -- -
--------------------- ----------------------
Net [Decrease]/Increase in Cash and Cash Equivalents (9,757) (102,672)
Cash and Cash Equivalents - Beginning of Periods 12,293 109,255
--------------------- ----------------------
Cash and Cash Equivalents - End of Periods $ 2,536 $ 6,583
--------------------- ----------------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest Paid -- --
Taxes Paid -- --
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest Paid -- --
Taxes Paid -- --
</TABLE>
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
7
<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
subsidiary (the "Company") are set forth in the Company's Form 10-KSB
for the year ended December 27, 1998, as filed with the Securities and
Exchange Commission.
[B] Basis of Reporting
The balance sheet as of September 26, 1999, the statements of
operations for the period December 28, 1998 to September 26, 1999, and
for the period December 29, 1997 to September 27, 1998, the statement
of stockholders' equity for the period December 31, 1996 to September
26, 1999, and the statements of cash flows for the period December 28,
1998 to September 26, 1999 and for the period December 30, 1997 to
September 27, 1998 have been prepared by the Company without audit. The
accompanying interim condensed unaudited financial have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions of Form 10-QSB and
Regulation SB. 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 September 26,
1999, and the results of its operations and cash flows for the
thirty-nine weeks 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 27, 1998.
Certain reclassifications may have been made to the 1997 financial
statements to conform to classification.
[C] Due To Related Parties
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 27, 1998,
there is no balance due to Woodland. 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
obligation was originally due in May 1998 and was extended by Woodland
to January 1999. This loan was exchanged for convertible preferred
stock discussed below on December 27, 1998.
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 note due until June 1998 and, the Company issued a common stock
purchase warrant entitling Woodland to purchase an additional 166,667
shares of the Company's 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. The warrants
were cancelled upon 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 shares of $1.00 par value
Series A convertible preferred shares. On September 25, 1997, Woodland
agreed to exchange its $1.00 par value Series A 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. 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 27, 1998, no additional
amortization was charged to operations, as the warrants were cancelled
upon conversion to preferred shares.
On December 27, 1998 Woodland agreed to convert $1,500,000 of loans and
accrued interest into 100,000 shares of Series A Convertible 8%
Preferred Stock. The Company's Board of Directors approved this
agreement.
8
<PAGE>
At December 27, 1998 dividends in arrears on the Series B
non-convertible preferred stock amounted to $174,000 or $.24 per share.
At December 27, 1998, Woodland owns approximately 36% of the Company's
outstanding common stock. Woodland also owns 100 % of the Class A
Convertible Preferred Stock, as well as, 100% of Class B
Non-Convertible Preferred Stock. Upon amendment and restatement of the
Series A Convertible Preferred Stock and exchange of the Class B
Preferred Stock into Class A Preferred Stock Woodland would own
1,475,000 shares of Series A Convertible Preferred Stock. Upon
Conversion of the Series A Convertible Preferred Shares Woodland would
own approximately 57% of the Company's outstanding common stock.
Mr. Halpern also is the Chairman of the Board of International
Franchise Systems, Inc. ["IFS"]. IFS charged a management fee to the
Company for administration services of $45,000 for the year end of
December 28, 1997. There were no amounts charged for services in the
year end of December 27, 1998. IFS and one of its wholly-owned
subsidiaries subleased a facility to the Company in the United Kingdom.
For the year ended December 28, 1997, the Company paid $133,449 for
this facility. No amounts were charged to the company for the year
ended December 27, 1998.
The Company has advanced funds to and paid various expenses on behalf
of Mr. Halpern. At December 27, 1998 and December 28, 1997 the total
amount due to the Company is $31,149.
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 27, 1998 was $32,000. At December 27,
1998 there was a $94,500 balance due and owing by the Company to this
firm.
The Chief Financial Officer of the Company is also the Chief Financial
Officer of IFS. On February 11, 1998 the Chief Financial Officer of the
company became the Chief Financial Officer and Chief Executive Officer
of the Celebrated Group, Plc. No amount was allocated to IFS or
Celebrated of his salary of $37,333 for 1998.
[D] Divestitures
On December 19, 1997, the Company sold its rights to Chili's
Restaurants in Australia and New Zealand to Brinker International, Inc.
("Brinker"). The $2.68 million purchase price was before the payment of
liabilities of the Australian operation which are estimated to be
approximately $700,000. The Company agreed to use the remaining
proceeds to repay the Brinker short term loan.
On December 16, 1997, the Company merged its UK subsidiary, Restaurant
House Ltd. with the Celebrated Group Plc.
On August 27, 1999, Celebrated obtained an Administration Order to
effect a financial restructuring and/or a disposal of its various
businesses. The sole asset of Red Hot Concepts is its ownership of
approximately 45.6 % of Celebrated stock.
Ernest & Young has been appointed as the Administrator of Celebrated
and its subsidiaries and will review and implement any appropriate
alternative regarding Celebrated which may include a sale of all its
assets to a third party.
As of November 10, 1999, Celebrated has closed four of the Starvin
Marvin restaurants, contracted for sale to a third party one
restaurant, and is operating one Starvin Marvin restaurant. The four
Chili's restaurants are still operating.
Red Hot Concepts has taken a charge to operations of $1,500,000 in the
third quarter of 1999 to reduce the carrying value of its investment in
Celebrated to its approximate estimated net realizable value.
[E] Stock Transactions
On January 23, 1997, the Company issued 1,000,000 shares of the 1.6
million unissued shares of stock sold under a Reg S share offering. As
of March 28, 1999, the Company had not issued the remaining 600,000
shares of stock. The Company is in dispute with the stock subscriber
regarding the price to be paid. For financial reporting purposes, the
Company has calculated the earnings per share with the assumption that
the shares had been issued.
In March 1997, the Company agreed with Woodland Limited Partnership to
convert $750,000 of long-term debt to 100,000 shares of $1.00 par value
Series A convertible preferred shares. On September 25, 1997, Woodland
agreed to exchange its $1.00 par value 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. Warrants issued in connection with notes payable were
valued at $145,522
9
<PAGE>
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. For the year ended December 27, 1998, no amounts have been
amortized, as the warrants were canceled after conversion to preferred
stock.
On December 27, 1998 Woodland agreed to convert $1,500,000 of loans and
accrued interest into 100,000 shares of Series A Convertible 8%
Preferred Stock. The Company's Board of Directors approved this
agreement.
The company intends to amend and restate the Series A Preferred Stock
terms. The company will authorize an additional 1,900,000 shares. The
then total of 2,000,000 shares will be changed to $2.00 par value. The
agreed dividend will be 8% and will be cumulative. The shares will have
a liquidation preference of $2.00 plus an amount equal to an imputed
dividend of 8% per annum. In addition, the shares will be convertible
into 1.1 common shares for each preferred share.
After amendment of the Series A Preferred Stocks, Woodland has agreed
to exchange its 725,000 shares of Series B Non-Convertible Preferred
Stocks for 725,000 shares of Series A Preferred Stocks. In addition,
100,000 shares of Series A Convertible Preferred Stocks will be amended
to 750,000 shares of $2.00 par value Series A Preferred Stocks.
At December 27, 1998 dividends in arrears on the Series B
non-convertible preferred stock amounted to $174,000 or $.24 per share.
Stock Transactions of Subsidiary
In September 1996, Red Hot Pacific issued 53 shares of common stock to
Brinker in connection with a guaranty agreement valued at $1.00.
The above issuance reduced Red Hot ownership of Red Hot Pacific from
100% to 95%. As a result of this stock transaction and related
liability for the guaranty agreement Red Hot reduced its additional
paid-in-capital by $2,497 in consolidation.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Result
of Operations
Overview -
Red Hot Concepts was incorporated in the state of Delaware on June 14, 1994. Red
Hot Concepts and its wholly owned subsidiaries (collectively, the "Company") are
owned 36% by Woodland Partnership Ltd. and the remaining shares are publicly
held. The Company was formed to establish and develop the Chili's Grill & Bar
restaurant concept franchised by Brinker International Inc. ("Brinker") outside
the United States.
At December 31, 1997, the Company no longer had the exclusive rights to operate
Chili's restaurants in the United Kingdom or Australia. From November 1995 until
December 18, 1997, the Company owned the Chili's concept development rights for
Australia and New Zealand. During 1997, the Company operated three Chili's
restaurants in Australia (two in suburban Sydney and one in suburban Melbourne).
However, on December 18, 1997, the Company sold its Australian and New Zealand
operations back to Chili's franchisor, Brinker International, for $2.68 million.
From July 1994 until December 15, 1997, the Company owned the UK rights to the
Chili's concept. During 1997, the Company operated two Chili's restaurants in
the UK (one in Canary Wharf and one in Cambridge). On December 15, 1997, the
Company merged its UK operations into the Celebrated Group Plc ("Celebrated").
The Company's exclusive development rights for Chili's restaurants in the UK
transferred to Celebrated in the merger.
Celebrated is publicly traded on the Alternative Index Market (AIM) of the
London Stock Exchange. As part of the merger, Red Hot Concepts acquired 46% of
Celebrated's outstanding stock and an option to acquire a 50% ownership
interest. In early 1998, a principal officer and a director of the Company
assumed comparable roles at Celebrated, in addition to retaining their positions
with the Company.
On August 27, 1999, Celebrated obtained an Administration Order to effect a
financial restructuring and/or a disposal of its various businesses. The sole
asset of Red Hot Concepts is its ownership of approximately 45.6 % of Celebrated
stock.
Ernest & Young has been appointed as the Administrator of Celebrated and its
subsidiaries and will review and implement any appropriate alternative regarding
Celebrated which may include a sale of all its assets to a third party.
As of November 10, 1999, Celebrated has closed four of the Starvin Marvin
restaurants, contracted for sale to a third party one restaurant, and is
operating one Starvin Marvin restaurant. The four Chili's restaurants are still
operating.
Red Hot Concepts has taken a charge to operations of $1,500,000 in the third
quarter of 1999 to reduce the carrying value of its investment in Celebrated to
its approximate estimated net realizable value.
Results of Operations -
The Company realized a net loss of $2,623,557 for the thirty-nine weeks ending
September 26, 1999 which compares to a net loss of $1,061,851 for the same
period in 1998. The net loss from 1998 to 1999 increased significantly due to
the Company's write down of its investment in Celebrated Group discussed above.
The Company included the net loss and write down of its investment of the
Celebrated Group totaling $2,431,548 in the results of operations for the
thirty-nine weeks ended September 26, 1999.
Liquidity and Capital Resources
The Company's negative working capital as of September 26, 1999 was $142,462 as
compared to a negative working capital of $146,373 as of December 27, 1998.
Total current assets were at $58,936 as of September 26, 1999. Current
liabilities were reduced by $13,688 from December 27, 1998.
11
<PAGE>
The following chart represents the net funds raised and/or used in operating,
financing and investment activities for both periods.
<TABLE>
<CAPTION>
December 27, December 29,
1998 1997
To To
September 26, 1999 September 27, 1998
------------------ ----------------------
In Thousands In Thousands
<S> <C> <C>
Net cash (used) in operating activities $(205) $(548)
Cash (used) in investing -- --
Cash provided by financing 195 445
</TABLE>
During the thirteen week period ended September 26, 1999, the Company used
$49,629 for operating activities. The Company had a net loss of $1,553,273. The
Company's accounts payable was increased by approximately $3,283.
Cash generated by financing activities for the thirty-nine weeks ended September
26, 1999 was $194,777, which include the proceeds from a loan from related
parties of $194,777.
The Company has improved short term liquidity through a number of different
steps including the reduction of administrative expenses and headcount and the
rescheduling of payment terms on the advances from Woodland Limited Partnership.
The Company believes that additional capital or borrowing will be necessary to
finance working capital in the short-term. The Company does not anticipate that
Celebrated will pay dividends in 1999. The Company does not currently have any
commitments to secure financing and there is no assurance that the Company will
be able to secure financing in the future and that even if the Company is able
to obtain financing, such financing will be available on terms acceptable to the
Company. If the Company's plans change, or if the assumptions or estimates prove
to be inaccurate, of if the Company is unable to raise more funds, the Company
will reduce its holdings in Celebrated.
Impact of Inflation
Inflation is not expected to have a material effect on the company's operations.
12
<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 judgements 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. Other Information
Not Applicable.
Item 5. Exhibits
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
13
<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: November 15, 1999 By: /s/ Colin Halpern
Colin Halpern, President
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000932623
<NAME> RED HOT CONCEPTS, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-26-1999
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0
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