<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-13818
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THE RATTLESNAKE HOLDING COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Delaware 06-1369616
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3 Stamford Landing, Suite 130, Stamford, CT 06902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 975-9455
--------------------------
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Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities 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
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2,643,734 Common Shares, par value $.001 per share were outstanding as of
September 29, 1996.
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FORM 10-QSB
THE RATTLESNAKE HOLDING COMPANY, INC.
SEPTEMBER 29, 1996
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information
Consolidated Balance Sheet 3
September 29, 1996 (unaudited) and
June 30, 1996
Consolidated Statements of Operations 4
for the quarter ended September 29,
1996 and September 30, 1995 (unaudited)
Consolidated Statements of Cash Flows for the 5
quarter ended September 29, 1996
and 1995 (Unaudited)
Notes to Consolidated Financial Statements 6
(Unaudited)
Safe Harbor Statement 9
Management's Discussion and Analysis 10
Liquidity 13
Part II-Other Information
Exhibits and Reports on Forms 8-K 16
Signatures 17
</TABLE>
2
<PAGE> 3
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(unaudited)
September 29, June 30,
ASSETS 1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 826,570 $ 684,414
Cash in escrow 0 1,237,625
Accounts receivable, net 40,880 63,659
Inventory 126,720 111,312
Deferred financing costs 15,000 0
Pre-opening costs 67,853 107,289
Prepaid expenses and other current assets 144,092 140,490
------------ ------------
Total current assets 1,221,115 2,344,789
Property and equipment, net 2,916,452 2,374,848
Intangible assets, net 1,680,809 1,534,227
Other assets, net 469,267 246,288
------------ ------------
$ 6,287,643 $ 6,500,152
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of notes payable $ 795,190 $ 576,852
Accounts payable 540,939 574,889
Accrued expenses 375,572 488,204
Other current liabilities 750,148 283,234
------------ ------------
Total current liabilities 2,461,849 1,923,179
Notes payable, net of current maturities 1,243,194 1,255,723
------------ ------------
Stockholders' equity
Preferred stock, $.10 par value, 5,000,000 shares
authorized, 56,500 and 54,500 issued and outstanding at 5,650 5,450
September 29, 1996 and June 30, 1996, respectivly
Common Stock, $.001 par value - 20,000,000 shares authorized,
2,643,734 issued and outstanding, at
September 29, 1996 and June 30, 1996, respectively 2,644 2,644
Additional paid-in capital 10,754,114 10,704,315
Accumulated deficit (8,179,808) (7,391,159)
------------ ------------
2,582,600 3,321,250
$ 6,287,643 $ 6,500,152
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
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THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(unaudited)
Quarter Year Ended
--------------------------------
September 29, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Restaurant sales $ 2,679,539 $ 1,879,905
Promos 111,010 104,516
----------- -----------
Net Sales 2,568,529 1,775,389
Costs and expenses:
Cost of food and beverage sales 825,601 571,524
Restaurant salaries and benefits 949,439 701,387
Occupancy and other 622,861 554,423
Depreciation and amortization expense 204,472 123,207
----------- -----------
Total restaurant costs and operating expenses 2,602,373 1,950,541
General and administration 723,604 656,060
Interest expense, net 26,536 32,367
Miscellaneous expenses 4,665 3,961
----------- -----------
Net loss before extraordinary item (788,649) (867,540)
Extraordinary item:
Gain on early extinguishment of debt -- 89,710
----------- -----------
Net loss $ (788,649) $ (777,830)
=========== ===========
Per share:
Loss before extraordinary item $ (0.30) $ (0.34)
Extraordinary item 0.00 0.04
----------- -----------
Net loss $ (0.30) $ (0.30)
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 2,643,734 2,558,563
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
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THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(unaudited)
Quarter ended
September 29, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (788,649) $ (777,830)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 221,343 131,122
Gain on early extinguishment of debt 0 (89,710)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 22,779 (15,408)
(Increase) in inventory (15,408) (1,854)
(Increase) in prepaids and other assets (96,559) (61,778)
(Increase) in pre-opening costs 0 (17,117)
(Decrease) increase in accounts payable and accrued expenses (146,582) 107,426
Increase (decrease) in other current liabilities 336,892 (52,745)
----------- -----------
Net cash used in operating activities (466,184) (777,894)
----------- -----------
Cash flows from investing activities:
Capital expenditures (240,689) (924,635)
Payments for acquisitions of leaseholds (204,403) (15,000)
----------- -----------
Net cash used in investing activities (445,092) (939,635)
----------- -----------
Cash flows from financing activities:
Net proceeds from private placement of preferred stock 1,237,625 0
Proceeds from issuance of preferred stock 50,000 0
Deferred financing costs (15,000) 0
Proceeds from IPO 0 7,260,800
IPO costs 0 (721,020)
Principal repayment of borrowings (219,193) (954,190)
----------- -----------
Net cash provided by financing activities 1,053,432 5,585,590
----------- -----------
Net increase in cash and cash equivalents 142,156 3,868,061
Cash and cash equivalents, beginning of period 684,414 28,316
Cash and cash equivalent , end of period $ 826,570 $ 3,896,377
=========== ===========
Cash paid during the period for:
Interest $ 62,424 $ 58,882
=========== ===========
Income taxes $ 4,665 $ 3,961
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
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THE RATTLESNAKE HOLDING COMPANY, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 29, 1996
(Unaudited)
1. Principles of consolidation
The consolidated financial statements include the accounts of The
Rattlesnake Holding Company, Inc. and subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
2. Consolidated financial statements
The accompanying unaudited consolidated financial statements as shown
in the index were prepared in accordance with the generally accepted accounting
principles and include all adjustments which, in the opinion of management, are
necessary to present fairly the consolidated financial position of the Company
as of September 29, 1996 and June 30, 1996, and the results of operations and
cash flows for the quarter ended September 29, 1996 and September 30, 1995. In
the opinion of management, all necessary adjustments that were made are of a
normal recurring nature.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed, reclassified or omitted. It is suggested that
these consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for fiscal year end June 30, 1996. The results of
operations for the period ended September 29, 1996 are not necessarily
indicative of the operating results which may be achieved for the full year.
3. Basis of presentation
The accompanying consolidated financial statements have been prepared
on a going concern basis which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business.
However, due to the matters discussed below, its continuation as a going
concern cannot be reasonably assured.
The Company has incurred aggregate losses since inception of
$8,179,808, inclusive of a net loss for the quarter ended September 29 1996 of
$788,649. Based upon interim financial information prepared by management, the
Company has continued to incur losses in fiscal 1997. Additionally, $525,000
of Series A Subordinated notes payable matured on August 1996 (note 9) and a
$425,000 short-term note payable associated with the acquisition of restaurant
matures in fiscal 1997.
Management of the Company is implementing a cost reduction plan to
address these issues. Such plan will include the closing of unprofitable
sites, a reduction in the Company's workforce and other cost containment
measures designed to reduce operating expenses and improve restaurant operating
performance.
Management believes that the implementation of its modified strategic
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expansion and cost reduction plan will, with the consummation of the financing
described in footnote 4, return the Company to profitable operations and
restore liquidity. However, no assurance can be made regarding the achievement
of the goals outlined in the strategic plan or consummation of the
aforementioned financing, or if such plans and financing are achieved, that the
Company's operations will be profitable.
4. Financing arrangements
On June 29, 1995, the Company completed an initial public offering
("IPO") of 1,300,000 shares of common stock and 195,000 additional shares
pursuant to the exercise of the over-allotment option by the underwriter at
$5.50 per share. The net proceeds of the offering after deducting
underwriter's commissions and fees of $986,700 and offering costs of $700,705
were $6,535,095 and were received on July 7, 1995. The proceeds from this
offering were used for working capital, marketing and advertising, the
implementation of the Company's expansion strategy and to repay subordinated
debt as described below.
In July 1995, the Company renegotiated the terms of the $1,800,000 of
9% subordinated notes payable (the "Notes"), and redeemed $225,000 of the
Notes. The remaining principal amount outstanding of $1,575,000 was
restructured as follows:
Each $25,000 principal amount of Notes was exchanged for: (i) $8,334
paid in August and September 1995 (the "First Payment"); and (ii) a 9%
$8,333 Series A Note (the "Series a Notes") due August 6, 1996, and a
9% $8,333 Series B Note (the "Series B Notes") due July 6, 2000. Each
Series B Note is convertible into common stock 13 months after
issuance at a conversion price equal to 70% of the Initial Public
Offering price of the common stock sold, with piggy-back registration
rights for the shares underlying each Series B Note. Each Series B
Note is redeemable with 30 days prior written notice at any time after
the closing bid price of the common stock is 150% of the conversion
price for the 10 consecutive trading days ending within 15 days of the
date of notice of redemption.
The extraordinary gain, $89,710 net of the write-off of the remaining
debt issuance cost of $72,114, has been recorded in the accompanying
consolidated statement of operations for the three month period ended September
30, 1995 relating to the early extinguishment of debt associated with the above
mentioned restructuring.
In fiscal 1997, the Company offered an extension agreement to the
Series A note holders, providing for a one year extension of the maturity date,
in exchange for an increase in the interest rate from 9% to 15% and one warrant
for every dollar of indebtedness. The warrants provide for exercise prices
ranging between $2.50-$3.00 and expire on August 6, 2001. Note holders
aggregating $303,749 accepted the terms of the extension and the remaining
$221,243 of $524,992 were paid in cash.
On October 10, 1996, the Company executed a letter of intent with an
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<PAGE> 8
investment banking firm to raise additional capital through a private placement
to be sold on a "best efforts" basis. The terms of the placement were
subsequently restructured to offer accredited investors up to $4,000,000 of
3-year convertible notes ("Notes"). The Notes earn interest at an annual rate
of 9% and are convertible at a price equal to 70% of the average closing bid
price for the ten consecutive trading days immediately preceding the first
closing. The first closing will take place upon the placement agent's receipt
of subscriptions for $1,500,000 in Notes.
5. Accounting for the impairment of long-lived assets and long-lived
assets to be disposed of
The Company is required to adopt in fiscal 1997 Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121
requires, among other things, that long-lived assets held and used by an entity
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company's
management has assessed the impact of the implementation of SFAS No. 121 and has
determined that it has no material impact on the Company's financial statements.
6. Accounting for stock-based compensation
In October 1996, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation," which must be
adopted by the Company in fiscal year 1997. The Company has chosen not to
implement the fair value accounting method for employee stock options, but has
elected to disclose, commencing with the fiscal 1997 Annual Report, the pro
forma net income and earnings per share as if such method had been used to
account for stock- based compensation costs as described in Statement No. 123.
7. Acquisition of assets
On September 5, 1996, the Company acquired a restaurant location on
86th Street in New York City. Of the $388,000 purchase price, $308,000 was
paid in cash for the acquisition of the lease certain furniture, fixtures and
equipment. The remaining purchase price represents the assumption of food
credits.
8
<PAGE> 9
SAFE HARBOR STATEMENT
Certain statements in this Form 10-QSB, including information set
forth under this Item 2 "Management's Discussion and Analysis" constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Act"). The Company desires to avail
itself of certain "safe harbor" provisions of the Act and is therefore
including this special note to enable the Company to do so. Forward-looking
statements included in this Form 10-QSB or hereafter included in other publicly
available documents filed with the Securities and Exchange Commission, reports
to the Company's stockholders and other publicly available statements issued or
released by the Company involve known and unknown risks, uncertainties, and
other factors which could cause the Company's actual results, performance
(financial or operating) or achievements to differ from the future results,
performance (financial or operating) achievements expressed or implied by such
forward looking statement. Such future results are based upon management's
best estimates based upon current conditions and the most recent results of
operations. These risks include, but are not limited to, risks associated with
potential acquisitions, successful implementation of the Company's cost
containment plan and new operating strategy, immediate need for additional
capital, competition, and other risks detailed in the Company's Securities and
Exchange Commission filings, including its Annual Report on Form 10-KSB for the
fiscal year 1996, each of which could adversely affect the Company's business
and the accuracy of the forward looking statements contained herein.
9
<PAGE> 10
MANAGEMENT DISCUSSION & ANALYSIS
The following discussion of the results of operations and financial
condition should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto.
Through the quarter ending September 29, 1996, the Company has
modified its strategy of expansion to focus on existing profitable restaurants,
implement cost cutting measures and continue the development of new
restaurants. Through fiscal year 1996 and the first quarter of fiscal year
1997, the Company's expansion plans have resulted in an increase in net
restaurant sales of 44.7% to $2,568,529 for the quarter year ended September
29, 1996 from $1,775,389 for the same period ended September 30, 1995. The
increase in net restaurant sales resulted from the increase in the number of
restaurants operating during the period. For quarter year ended September 29,
1996, the Company decreased its losses as a percentage of sales to 30.7% from
43.8% for the quarter year ended September 30, 1995. As described below, the
Company's variable costs have remained relatively constant as a percentage of
net sales. General and administrative costs have decreased as a percentage of
net sales from 37.0% from the quarter ended September 30, 1995 to 28.2% for the
quarter ended September 29, 1996 but increased slightly to $723,604 for the
quarter ended September 29, 1996 from $656,060 for the same period ended
September 30, 1995. Management believes that the implementation of its
modified strategic expansion and cost reduction plan will, with the
consummation of the current $4,000,000 debt offering, return the Company to
profitable operations and restore liquidity. However, no assurance can be made
regarding the achievement of goals outlined in the strategic plan or
consummation of the aforementioned financing. The Company continues to support
the investment in its infrastructure necessary to further the Company's
expansion. See further explanation below.
OPERATING RESULTS FOR THE QUARTER ENDED SEPTEMBER 29, 1996 AS COMPARED WITH THE
QUARTER ENDED SEPTEMBER 30, 1995
Gross restaurant sales increased 42.5% to $2,679,539 for the quarter
ended September 29, 1996 from $1,879,905 for the quarter ended September 30,
1995. Likewise, net restaurant sales increased 44.7% to $2,568,529 in 1996
from $1,775,389 in 1995. The increase in restaurant sales resulted from an
increase in the number of restaurants operating during the period and declining
promotional sales as a percentage of gross sales. Seven restaurants were
operating during the quarter ended September 29, 1996 as compared to five
during the quarter ended September 30, 1995. For the four restaurants
operating for both periods, same store sales declined 14.8%. Over 50% of this
decline is directly related to the opening of a new unit in June 1995. New
units typically generate higher
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sales volumes during the first few months of operation. As new units attain
maturity and existing mature units generate steady sales volumes, the effect of
new unit openings will have less of an impact on the Company's same store sales
as a whole. Management believes that same store sales across the industry
continues to decline as documented in industry trade journals.
Promotional sales declined as a percentage of gross sales from 5.6%
for the quarter ended September 30, 1995 to 4.1% for the quarter ended
September 29, 1996. This decline is attributed to the unusually high
promotional costs in the quarter ended September 30, 1995 resulting from the
opening of the Danbury location in August 1996. No new units were opened
during the first quarter ended September 29, 1996. Also contributing to this
decline is a concentrated focus to cut unnecessary manager and bar comps at the
units.
For the quarter year ended September 29, 1996, the Company's cost of
food and beverage sales remained relatively constant as a percentage of sales.
As a percentage of net sales for the quarter ended September 29, 1996 cost of
sales were 32.1% as compared to 32.2% for the quarter ended September 30, 1995.
The cost of food and beverage sales increased from $571,524 for the quarter
ended September 30, 1995 to $825,601 for the quarter ended September 29, 1996.
The Company has maintained this cost of sales rate despite higher food costs
for items such as beef, poultry and fish. The Company has attempted to diminish
the effect of these increased prices through changes to the Company's menu,
centralized purchasing and low food cost specials.
Restaurant salaries and fringe benefits, which consist of direct
salaries of restaurant managers, hourly employee wages and related fringe
benefits, increased to $949,439 for the quarter ended September 29, 1996 as
compared to $701,387 for the quarter ended September 30, 1995. As a percentage
of restaurant sales, these costs decreased to 37.0% in 1996 as compared to
39.5% in 1995. This decrease is attributed to the slightly higher costs
reflected in 1995 as a result of the opening of Danbury in August 1995.
Management also attributes this decrease to a reduction in restaurant managers
and more formalized training programs.
Occupancy and other related expenses, which include linen, repairs,
maintenance, utilities, rent, insurance and other occupancy related expenses,
increased to $622,681 for the quarter year ended September 29, 1996 from
$554,423 for the quarter ended September 30, 1995. As a percentage of net
restaurant sales, these costs decreased to 24.2% in the quarter ended September
29, 1996 from 31.2% in the quarter ended September 30, 1995. Rent expense
recorded in the quarter ended September 30, 1995 was high due to rent which was
paid in July and August, prior to the August 30, 1995 opening of the new unit.
Other expenses such as supplies and utilities caused the occupancy and other
related expenses to be
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higher in the quarter ended September 30, 1995. These costs moderated in the
quarter ended September 29, 1996 as a result of no new restaurants opening
during this period.
Depreciation and amortization expenses, including the amortization of
pre-opening store expenses, increased to $204,472 or 8.0% of net restaurant
sales for the quarter year ended September 29, 1996 from $123,207 or 6.9% for
the quarter year ended September 30, 1995. This increase is attributed to the
higher amortization expense recognized during the quarter ended September 30,
1995 on preopening costs resulting from the timing of restaurant openings.
General and administrative expenses decreased as a percentage of sales
from 37.0% in the quarter year ended September 30, 1995 to 28.2% for the
quarter year ended September 29, 1996. This decrease is the result of
additional operating units and related increased sales. As additional units
are opened, the corporate overhead costs are more fully absorbed into the
operations of the units. General and administrative expenses increased from
$656,060 for the quarter ended September 30, 1995 to $723,604 for the quarter
ended September 29, 1996. The increase is primarily attributed to additions to
corporate level management put in place to facilitate the Company's expansion
plan. Additionally, increased costs of other general and administrative
expenses relating to the growth of the Company contributed to the overall
increase in general and administrative expenses. General and administrative
expenses on the restaurant level have decreased from 7.7% of net restaurant
sales for the quarter ended September 30, 1995 to 6.1% for the same quarter
ended September 29, 1996. This decrease in restaurant general and
administrative expenses is attributed to management's focus on reducing
controllable costs at the units. The Company has implemented cost reduction
measures which are anticipated to further reduce general and administrative
costs at both the corporate and unit levels.
Interest expense decreased to $26,536 for the quarter ended September
29, 1996 from $32,367 for the quarter ended September 30, 1995. This decrease
in interest expense is attributed to reduced debt outstanding, as a result of
the Company's repayment of such debt.
The net loss as a percentage of net sales decreased from 43.8% for the
quarter year ended September 30, 1995 to 30.7% for the quarter year ended
September 29, 1996. This improvement in net income is primarily due to
increased sales as a result of the increase in operating units while
maintaining general and administrative costs at a constant level. Management
believes that the Company's overall profitability will continue to improve as
the Company continues its expansion plans.
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LIQUIDITY
The Company's cash position increased by $142,156 during the quarter
ended September 29, 1996, principally as a result of the net proceeds received
from the June 1996 private placement of preferred stock, which were recorded as
cash in escrow at June 30, 1996, offset by capital expenditures associated with
the development of new restaurant locations, repayment of borrowings and
financing of the Company's operations.
Net cash used in operating activities was $466,184, principally
relating to the Company's net loss, increase in prepaid and other assets and
decrease in accounts payable and accrued expenses, offset by depreciation and
amortization expenses and increases in other current liabilities. The Company
utilized $445,092 in investing activities for capital expenditures and lease
acquisition costs. The Company generated $1,053,432 from financing activities,
principally relating to the receipt of proceeds from the private placement of
preferred stock, offset by reductions of outstanding indebtedness.
In July 1995, the Company redeemed $225,000 of the notes and restructured
the remaining principal amount outstanding of $1,575,000. This redemption was
partially funded by a $50,000 note payable issued in June 1995 by the Company,
with interest at 9%, and repaid in July 1995, together with 10,000 shares of
common stock. Each $25,000 principal amount of Notes was exchanged as follows:
(i) $8,334 paid in August and September 1995 (the "First Payment"); and (ii) a
9% $8,333 Series A Note (the Series A Notes) due 13 months after the first
payment, and a 9% $8,333 Series B Note (the Series B Notes) due five years
after the first payments were issued to each Note holder with the First
Payment. Each Series B Note is convertible into common stock thirteen months
after issuance at a conversion price equal to $3.85 per share, with piggy-back
registration rights for the shares underlying the Series B Notes. Each Series
B Note is redeemable with 30 days prior written notice at any time after the
closing bid price of the common stock is 150% of the conversion price for the
ten consecutive trading days ending within 15 days of the date of notice of
redemption.
In August and September, the due dates of $312,000 Series A Notes were
extended to August 6, 1997 in consideration of an increase in the interest rate
to 15% and warrants to purchase 312,000 shares of the Company's common stock.
Accrued interest was paid on the extended notes to August 6, 1996. The
remaining $213,000 Series A Notes were paid with accrued interest in August,
September and October 1996.
On June 24, 1996, the Company entered into an agreement to continue
its participation in a discounted meal program in exchange for $230,000 in
temporary financing, of which $115,000 was received
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in June 1996 and the remainder was received in July 1996. On October 3, 1996
the Company received $150,000 from another dining services company in exchange
for meal credits at the Company's units.
In March 1996, the Company entered into an agreement with an
investment banking firm to sell 200,000 shares of Series A preferred stock and
800,000 common stock warrants in a private placement for total consideration of
$5,000,000. The preferred stock was valued at $24.50 per share and each
warrant at $.125 per warrant. On June 30, 1996, the Company closed on the sale
of 54,500 shares of the aforementioned Series A preferred stock and 218,000
common stock purchase warrants. The net proceeds of the offering were
$1,129,082, net of commissions and expenses of $233,418. The dividend rate for
the preferred shares is 7-1/2% per annum payable semi-annually in arrears on
May 15 and November 15 of each year commencing November 15, 1996. The shares
are convertible at any time, one year after issuance into common stock at a
conversion price equal to the lesser of (i) 120% of the average of the last
reported sale price of the common stock for the 10 trading days immediately
preceding the first closing of the offering, or $4.50, whichever is lower; or
(ii) 85% of the average of the last reported sales price of the common stock
for the 10 trading days immediately preceding the first anniversary of the
first closing subject to certain anti-dilution adjustments. The warrants are
exercisable between September 1, 1996 and August 31, 2001 at an exercise price
of $7.00 per share, with piggy-back and demand rights on the common stock
underlying the preferred stock and the warrants.
The Company may consider entering into joint ventures for restaurants,
whereby the Rattlesnake Southwestern Grill concept will be implemented in
locations where the joint venture would provide a portion of the financing for
the new facility.
On March 31, 1996, the Company exercised its option to purchase the
building housing the Fairfield facility for $425,000. This transaction was
closed on August 31, 1996 and was financed by a principal stockholder through a
15% short term note due in January 1997. In addition, the investor received
50,000 warrants at an exercise price equal to the market price at the date of
the grant.
On September 5, 1996, the Company acquired a restaurant location on
86th Street in New York City for a purchase price of $308,000 cash and $80,000
in store food credits. Included in the purchase price was the lease and
certain furniture, fixtures and equipment.
On September 16, 1996, the Company announced a letter of intent had
been signed for the acquisition of Hoot Owl Restaurants, Inc., a Northeastern
U.S. based area franchisee of Hooters
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Restaurant national chain. This letter of intent expired on October 10, 1996,
but the Company is continuing its negotiations.
On October 10, 1996, the Company executed a letter of intent with an
investment banking firm to raise additional capital through a private placement
to be sold on a "best efforts" basis. The terms of the private placement were
restructured to offer accredited investors the opportunity to purchase up to
$4,000,000, of 3-year convertible notes ("Notes"). The Notes earn interest at
an annual rate of 9% and are convertible at a price equal to 70% of the average
closing bid price for the ten consecutive trading days immediately preceding
the first closing. The first closing will take place upon the placement
agent's receipt of subscriptions for $1,500,000 in Notes.
The Company is implementing a cost containment plan which will reduce
overhead and operating expenses. The plan will include a reduction in
corporate staff, a re-alignment of management staff at the restaurant level,
menu redevelopment in response to increases in certain food costs and other
cost containment measures designed to reduce expenses and improve operating
performance.
The Company is currently negotiating with several financing
institutions to obtain equipment leasing for its existing and new facilities.
The Company's management believes that the consummation of the aforementioned
$4,000,000 offering and improved operating results will provide sufficient
liquidity to implement the Company's modified expansion plan, fund current
operations and meet debt service requirements. However, there can be no
assurance such financing will be obtained or, if obtained, will be sufficient
to enable the Company to maintain current levels of operations.
15
<PAGE> 16
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Forms 8-K.
(b) Reports on Form 8-K
During the quarter ended September 29, 1996, the Company filed no reports on
Form 8-K.
16
<PAGE> 17
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.
THE RATTLESNAKE HOLDING COMPANY, INC.
(Registrant)
By: /s/William J. Opper
-----------------------------
William J. Opper
Chairman of the Board
By: /s/David C. Sederholt
-----------------------------
David C. Sederholt
Chief Financial Officer
Date: November 18, 1996
17
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<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-29-1996
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