-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QxjQyD0ghMqCivxHOHUAdvRRPvotm683IpfYaIc756gbzMtScIcsw6J7y5iN6QmT tmUm0JUIfn7/Whfj3WSOgw== 0000891554-98-000640.txt : 19980519 0000891554-98-000640.hdr.sgml : 19980519 ACCESSION NUMBER: 0000891554-98-000640 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980329 FILED AS OF DATE: 19980518 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAM RESTAURANTS INC CENTRAL INDEX KEY: 0001048796 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 133905598 STATE OF INCORPORATION: DE FISCAL YEAR END: 0929 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-13811 FILM NUMBER: 98627450 BUSINESS ADDRESS: STREET 1: 1163 FORREST AVE. CITY: STATEN ISLAND STATE: NY ZIP: 10310 BUSINESS PHONE: 7187205959 MAIL ADDRESS: STREET 1: 1163 FORREST AVENUE CITY: STATEN ISLAND STATE: NY ZIP: 10310 10QSB 1 QUARTERLY REPORT U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) _X_ Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended MARCH 29, 1998. ___ Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________. Commission file number 0-23757 TAM RESTAURANTS, INC. (Exact Name of Small Business Issuer as Specified in its Charter) Delaware 13-3905598 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1163 FOREST AVENUE, STATEN ISLAND, NY 10310 (Address of Principal Executive Offices) (718) 720-5959 (Issuer's Telephone Number including area code) (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ As of May 15, 1998, there were 3,500,000 shares of the issuer's Common Stock outstanding Transitional Small Business Disclosure Format (check one): Yes ___ No _X_ TAM RESTAURANTS, INC. AND SUBSIDIARIES QUARTER ENDED MARCH 29, 1998 FORM 10-QSB INDEX Part I. FINANCIAL INFORMATION Page(s) Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 29, 1998 (Unaudited)........................................................1 Condensed Consolidated Statements of Operations For the Thirteen and Twenty-Six weeks ended March 29, 1998 and March 30, 1997 (Unaudited).....................................2 Condensed Consolidated Statements of Cash Flows For the Twenty-Six weeks ended March 29, 1998 and March 30, 1997 (Unaudited).....................................3 Notes to unaudited Condensed Consolidated Financial Statements .......4 Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations .........................................7 Part II.OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds............................11 Item 6. Exhibits and Reports on Form 8-K.....................................11 -ii- TAM RESTAURANTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) ASSETS March 29, 1998 -------------- Current Assets Cash $ 1,065,163 Accounts receivable 275,799 Inventory 190,478 Prepaid and other expenses 404,126 Loan receivable-officer 59,475 ----------- Total current assets 1,995,041 ----------- Property and equipment-net 5,309,726 Due from affiliates 494,173 Other assets 346,821 ----------- TOTAL ASSETS $ 8,145,761 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt $ 416,620 Current portion of capitalized lease obligations 82,375 Loans payable - related parties 56,860 Accounts payable 662,043 Contract deposits payable 568,618 Accrued expenses 1,661,816 ----------- Total current liabilities 3,448,332 Long-term liabilities Deferred rent expense 258,132 Loans payable-related parties 924,050 Long-term debt-net of current portion 803,719 Capitalized lease obligations-net of current portion 101,499 ----------- Total long-term liabilities 2,087,400 ----------- TOTAL LIABILITIES 5,535,732 ----------- Commitments and contingencies Stockholders' equity Preferred stock; $.0001 par value; 1,000,000 shares authorized, 0 shares issued and outstanding $ -- Common stock; $.0001 par value; 19,000,000 shares authorized; 3,500,000 shares issued and outstanding: 350 Additional paid-in capital 7,234,283 Accumulated deficit (4,624,604) ----------- TOTAL STOCKHOLDERS' EQUITY 2,610,029 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,145,761 =========== The accompanying notes are an integral part of these condensed consolidated financial statements. -1- TAM RESTAURANTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended -------------------------- -------------------------- March 30, March 29, March 30, March 29, 1997 1998 1997 1998 ----------- ----------- ----------- ----------- Sales $ 1,736,828 $ 1,512,613 $ 3,995,920 $ 3,891,440 Cost of Sales 1,315,241 1,432,002 2,841,638 2,957,998 ----------- ----------- ----------- ----------- Gross Profit 421,587 80,611 1,154,282 933,442 Operating and Administrative Expenses 827,554 1,290,066 1,973,094 2,360,535 ----------- ----------- ----------- ----------- Loss from Operations (405,967) (1,209,455) (818,812) (1,427,093) ----------- ----------- ----------- ----------- Other Expense Interest Expense 104,655 109,213 187,560 216,529 Barter Expense 51,149 97,366 51,149 198,840 ----------- ----------- ----------- ----------- Total Other Expense 155,804 206,579 238,709 415,369 ----------- ----------- ----------- ----------- Loss Before Income Tax Benefit (561,771) (1,416,034) (1,057,521) (1,842,462) Income Taxes -- -- -- -- ----------- ----------- ----------- ----------- Net Loss $ (561,771) $(1,416,034) $(1,057,521) $(1,842,462) =========== =========== =========== =========== Net loss per share: Basic and Diluted $ (.23) $ (.47) $ (.43) $ (.67) =========== =========== =========== =========== Weighted average number of common shares outstanding basic and diluted 2,472,859 2,994,505 2,459,159 2,747,252 =========== =========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. -2- TAM RESTAURANTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Twenty-Six Weeks Ended March 30, March 29, 1997 1998 ----------- ----------- Cash Flows from Operating Activities Net (loss) $(1,057,521) $(1,842,462) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization expense 166,160 188,586 Deferred rent expense 38,226 33,596 Deferred income 43,000 297,490 (Increase) decrease in: Accounts receivable (121,020) 11,569 Inventory 6,781 14,228 Prepaid and other expenses (7,093) (38,060) Other assets (74,743) (227,602) Increase (decrease) in: Accounts payable (280,980) 139,219 Accrued expenses and other liabilities 497,935 (714,389) ----------- ----------- Net Cash provided by Operating Activities (789,255) (2,137,825) ----------- ----------- Cash Flows from Investing Activities Acquisition of property and equipment (343,527) (1,207,334) ----------- ----------- Net Cash used in Investing Activities (343,527) (1,207,334) ----------- ----------- Cash Flows from Financing Activities Net repayments of officer's loans 11,745 Loans receivable 12,515 (24,761) Proceeds from long-term debt and warrants 713,000 1,000,000 Principal payments on long-term and capitalized lease obligations (55,850) (352,307) Advances to/from affiliates and others 243,815 (278,889) Deferred stock offering costs 128,322 Proceeds from capital stock issuance 200,000 Proceeds from initial public offering 3,644,587 ----------- ----------- Net Cash provided by Financing Activities 1,113,480 4,128,697 ----------- ----------- Net Increase (Decrease) in Cash (19,302) 783,538 Cash, Beginning of period 66,616 281,625 ----------- ----------- Cash, End of period $ 47,314 $ 1,065,163 =========== =========== The accompanying notes are an integral part of these condensed consolidated financial statements -3- TAM RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. 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 management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. It is suggested that the financial statements be read in conjunction with the Company's consolidated audited financial statements and footnotes thereto contained in the Company's Registration Statement on Form SB-2. Operating results for the thirteen and twenty-six week periods ended March 29, 1998 are not necessarily indicative of the results that may be expected for the full fiscal year ending September 27, 1998. 2. Long-Term Debt In October 1997, the Company obtained $1,000,000 in secured loans from two entities. The loans bear interest at 10% per annum, payable quarterly and matures nineteen months after the funding date (May 31, 1999). The loans are guaranteed by a principal stockholder of the Company and the guarantee is secured by a pledge of 200,000 shares of common stock held by such stockholder. Additionally, as partial consideration for the loans, the Company granted to the entities warrants to purchase 200,000 shares of common stock at an exercise price of $5.00 per share expiring in October 2002. The warrants became exercisable on May 11, 1998. The issuance of these warrants will give rise to an original issue discount which has been valued at $482,000, based on the Black-Scholes option pricing model, and will be amortized beginning on the date the warrants are exercisable and ending on the due date of the loans. During 1995 and 1996, the Company borrowed an aggregate of $840,000 from Fleet Bank. Such loans were collateralized by the Company's principal executive offices, which are owned by Frank Cretella, the President and Chief Executive Officer of the Company, the warehouse leased by the Company and owned by Leisure Time Services, Inc. ("Leisure Time"), a company owned by Jeanne Cretella, Vice President, Director and a principal stockholder of the Company, and Mr. and Mrs. Cretella's personal residence, and guaranteed by Mr. and Mrs. Cretella and Leisure Time. In June 1997, Mr. Cretella agreed to settle the amounts owed to Fleet Bank of $720,405 for $640,000 plus accrued interest through the date of payment. In August 1997, Mr. Cretella paid to Fleet Bank $140,000 as part of the settlement, and the balance was paid in October 1997. As consideration for entering into the settlement, the Company has issued to Mr. Cretella a promissory note in the principal amount of $720,405, which bears interest at a rate of 10% per annum. Interest is payable in monthly installments of $6,003, with the outstanding principal balance payable in November 2002 upon maturity of the note. The condensed consolidated financial statements reflect the effects of this refinancing. -4- TAM RESTAURANTS, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. Capital Stock In January 1998, the Company effected a 1-for-1.8135268 reverse stock split. All shares and per share data in the condensed consolidated financial statements have been adjusted to give retroactive effect to the reverse stock split. 4. Loss Per Share In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 ("SFAS No. 128") "Earnings Per Share." SFAS No. 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share and was effective for all financial statements after December 15, 1997. Unlike primary earnings per share, basic earnings per share is arrived at by dividing net income (loss) by the weighted-average number of common shares outstanding for the period while diluted earnings per share includes the potential dilution that could occur if options and warrants outstanding were included in the weighted-average number of common shares outstanding for the period. Earnings per share amounts for all periods presented have been restated to conform to SFAS No. 128 requirements. 5. Initial Public Offering In February 1998, the Company completed an initial public offering of 1,000,000 shares of common stock and 500,000 redeemable warrants. The offering resulted in net proceeds to the Company of $3,644,587. In addition, in February 1998, the Company entered into three-year employment agreements with the Chief Executive Officer and a Vice President, which are automatically renewable and provide for an annual base compensation of $175,000 and $75,000, respectively, and such bonuses as the Board of Directors may from time to time determine. The Company has adopted a stock option plan (the "Option Plan") pursuant to which 525,000 shares of common stock have been reserved for issuance upon the exercise of options designated as either (i) options intended to constitute incentive stock options ("ISOs") under the Internal Revenue Code of 1986, as amended or (ii) non-qualified options. ISOs may be granted under the Option Plan to officers and employees of the Company. Non-qualified options may be granted under the Option Plan to consultants, directors (whether or not they are employees), employees or officers of the Company. 6. Subsequent Events. The Company opened its third New York restaurant, American Park at the Battery in Battery Park, in April 1998. -5- TAM RESTAURANTS, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. New Accounting Standards Not Yet Adopted In June 1997, the Financial Accounting Standards Board issued two new disclosure standards. Results of operations and financial position will be unaffected by implementation of these new standards. Statement of Financial Accounting Standards No. 130, ("SFAS No. 130") "Reporting Comprehensive Income", established standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, SFAS No. 130 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", which supercedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise", establishes standards for the way that public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS No. 131 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by Management in deciding how to allocate resources and in assessing performance. Both of these new standards are effective for financial statements for fiscal years beginning after December 15, 1997 and require comparative information for earlier years to be restated. The adoption of these statements will not have a material effect on the Company's consolidated financial statements. -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Certain statements contained in this Item 2 and elsewhere in the Form 10-QSB constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, but are not limited to, the Company's recent operating losses, increased operating expenses and the Company's need to generate additional revenues which is dependent upon its ability to open additional restaurants and maintain market acceptance, the Company's significant capital requirements and need for additional financing, the Company's limited restaurant base and geographic concentration, risks relating to its proposed expansion plans and the opening of new restaurants, including the high failure rate that typically characterizes the opening of new restaurants, seasonality, risks relating to licensing requirements, outstanding indebtedness, competition, litigation, potential liability relating to the sale of alcoholic beverages, government regulation and other risks detailed in the Company's Registration Statement on Form SB-2 as filed with the Securities and Exchange Commission. The words "believe", "expect", "anticipate", "intend" and "plan" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. Overview The Company operates Lundy Bros. Restaurant ("Lundy's"), a high-volume, casual, upscale seafood restaurant located in Brooklyn, New York, and The Boathouse in Central Park ("The Boathouse") multi-use facility featuring an upscale restaurant and catering pavilion, located on the lake in New York City's Central Park. Lundy's and The Boathouse are high-profile locations which host many special events and receive extensive press coverage. Subsequent to the end of the reporting quarter, in April 1998, the Company has also opened American Park at the Battery, in Battery Park ("American Park"), which has been designed as a high volume premium-quality restaurant to be located at the water's edge in Battery Park, a New York City landmark visited by approximately 4 million visitors during 1996. Results of Operations Sales for the twenty-six weeks ended March 29, 1998 were $3,891,440 as compared with $3,995,920 for the twenty-six weeks ended March 30, 1997, a decrease of $104,480 or 2.6%. The Company's sales for the thirteen weeks ended March 29, 1998 were $1,512,613 as compared with $1,736,828 for the thirteen weeks ended March 30, 1997, a decrease of $224,215 or 12.9%. The decrease in sales for the thirteen week period was due primarily to a reduction in off premise catering of $208,850 related to Lundy's operations. -7- Cost of sales for the twenty-six weeks ended March 29, 1998 were $2,957,998 as compared to $2,841,638 for the twenty-six weeks ended March 30, 1997, an increase of $116,360 or 4.1%. Cost of sales for the thirteen weeks ended March 29, 1998 amounted to $1,432,002 as compared to $1,315,241 for the thirteen weeks ended March 30, 1997, an increase of $116,761 or 8.9%. This increase was due principally to an increase in restaurant payroll costs which is attributable to the lack of management focus on operations while it was in the registration process related to the Company's initial public offering which was consummated in February 1998. Gross profit for the twenty-six weeks ended March 29, 1998 was $933,442 or 24% of sales, as compared to $1,154,282 or 28.9% of sales for the twenty-six weeks ended March 30, 1997, a decrease of $220,840 or 19.1%. The gross profit for the thirteen weeks ended March 29, 1998 was $80,611 or 5.3% of sales, as compared to $421,587 or 24.3% of sales for the thirteen weeks ended March 30, 1997. Operating and administrative expenses for the twenty-six weeks ended March 29, 1998 were $2,360,535 as compared to $1,973,094 for the twenty-six weeks ended March 30, 1997, an increase of $387,441. Operating and administrative expenses for the thirteen weeks ended March 29, 1998 were $1,290,066, compared with $827,554 for the thirteen weeks ended March 30, 1997, an increase of $462,512. These increases were due principally to an increase in management payroll related to the Company's expansion of its corporate infrastructure, significantly higher marketing costs related to its operations during this period and an increase in occupancy costs and other unit level expenses. Other expenses for the twenty-six weeks ended March 29, 1998 were $415,369 as compared to $238,709 for the twenty-six weeks ended March 30, 1997, an increase of $176,660. Other expenses for the thirteen weeks ended March 29, 1998 amounted to $206,579 as compared to $155,804, an increase of $50,775. The increase is attributable to a slight increase in interest expense as well as an increase in barter expense of $147,691 for the twenty-six week period and $46,217 for the thirteen week period. This increased expense is the result of bartering agreements entered into with member dining clubs whereby member dining clubs advance cash to the Company in exchange for food and beverage credits which are passed along as a discount to members of the dining clubs. Upon entering into the agreement, the Company records its obligation to provide food and beverages at the amount of the advance it receives. When a member of a dining club purchases food or beverages, the Company records revenue for the amount of food and beverage purchased by the guest, and the barter discount as a barter expense. The net loss for the twenty-six weeks ended March 29, 1998 was $1,842,462 or $.67 per share as compared to $1,057,521 or $.43 per share or an increase of $784,941. The net loss for the thirteen weeks ended March 29, 1998 was $1,416,034 or $.47 per share or an increase of $854,262 as compared to $561,771 or $.23 per share for the thirteen weeks ended March 30, 1997. Liquidity and Capital Resources At March 29, 1998, Company had a working capital deficit of $1,453,291. The Company's financing requirements have historically exceeded cash flows from operations primarily due to, among other things, costs associated with development, opening and start-up costs of the Lundy's and American Park restaurants and building a corporate infrastructure sufficient -8- to support the Company's proposed expanded operations. As a result, the Company has been substantially dependent upon sales of its equity securities, loans from financial institutions and the Company's officers, directors and stockholders and bartering transactions with member dining clubs to finance a portion of its working capital requirements. During the twenty-six weeks ended March 29, 1998, net cash increased by $783,538. Net cash used in operating activities was $2,137,825, net cash used in investing activities was $1,207,334, relating primarily to the acquisition of property and equipment for American Park, and net cash provided from financing activities was $4,128,697, consisting of long-term borrowing of $1,000,000, offset by repayments of indebtedness to others of $779,212 and stock offering net cash proceeds of $3,772,909 (before deduction of expenses of $128,322 paid prior to September 28, 1997). During the twenty-six weeks ended March 30, 1997, net cash decreased by $19,302. Net cash used by operating activities was $789,255, net cash used in investing activities was $343,527, consisting primarily of costs associated with the preliminary development of American Park. Net cash provided by financing activities was $1,113,480, primarily a result of additional borrowings. During 1995 and 1996, the Company borrowed an aggregate of $840,000 from Fleet Bank, N.A. Such loans were collateralized by the Company's principal executive offices, which are owned by Frank Cretella, President and Chief Executive Officer of the Company, the warehouse leased by the Company and owned by Leisure Time Services, Inc. ("Leisure Time"), a company owned by Jeanne Cretella, and Mr. and Ms. Cretella's personal residence, and guaranteed by Mr. and Mrs. Cretella and Leisure Time. In June 1997, Mr. Cretella agreed to pay to Fleet $640,000 as payment for the amount owed by the Company (approximately $720,000 as of October 15, 1997). In August 1997, Mr. Cretella paid to Fleet $140,000 as part of the settlement. Mr. Cretella paid the balance of the principal owed to Fleet and the Company paid the accrued interest of approximately $39,000 owed to Fleet in October 1997. As consideration for repaying the loan, the Company issued to Mr. Cretella a promissory note in the principal amount of $720,405 which bears interest at the rate of 10% per annum. Interest is payable in monthly installment of $6,003 with the outstanding principal balance payable in November 2002 upon maturity of the note. In October 1997, Kayne Anderson Non-Traditional Investments, L. P. and ARBCO Associates, L.P. affiliates of Kayne Anderson Investment Management, Inc. (collectively, "Kayne Anderson"), loaned the Company an aggregate of $1,000,000. The loans bear interest at the rate of 10% per annum, payable quarterly commencing December 31,1997, and are due May 31, 1999. The loans are guaranteed by Frank Cretella, President, Chief Executive Officer, a director and principal stockholder of the Company, and the guarantee is secured by a pledge of 200,000 shares of Common Stock owned by Frank Cretella and Jeanne Cretella, Vice President, a director and principal stockholder of the Company. As partial consideration for the loans, the Company issued to Kayne Anderson warrants (the "KA Warrants") to purchase 200,000 shares of Common Stock. The KA Warrants are exercisable at a price of $5.00 per share (subject to adjustment under certain circumstances) at any time from May 11, 1998 until October 31, 2002. The Company will incur a non-cash interest charge of $482,000 representing the original -9- issue discount relating to the promissory notes issued to Kayne Anderson over the life of the promissory notes. In February 1998, the Company completed its initial public offering (the "Offering") of common stock and redeemable warrants resulting in the Company's receipt of net proceeds of $3,644,587. The Company anticipates that the net proceeds from the Offering, together with anticipated cash flow from operations and equipment, vendor and landlord financing, will be sufficient to satisfy its contemplated cash requirements until at least April 1999. However, in the event that the Company's plans change or its assumptions prove to be inaccurate (due to unanticipated expenses, construction delays or other difficulties) or the proceeds of the Offering otherwise prove to be insufficient to fund operations and implement the Company's proposed expansion strategy, the Company could be required to seek additional financing sooner than anticipated. Although the Company believes it has the ability to enter into bartering transactions with member dining clubs, the Company has no current arrangements with respect to, or potential sources of, additional financing from such clubs or elsewhere, and it is not anticipated that any officers, directors or stockholders will provide any additional loans to the Company. Consequently, there can be no assurance that any additional financing will be available to the Company when needed, on commercially reasonable terms, or at all. Seasonality and Fluctuations in Quarterly Operating Result The Company's business is seasonal. The restaurant and bicycle and rowboat rentals at the Boathouse have historically been open only March through November, with dinner served in the restaurant May 1 through October 1. All of the seating at the Boathouse and a portion of the seating at Lundy's was outdoors. In addition, since Lundy's is a waterside location, it attracts more guests during the warmer weather months. As a result, the Company's restaurant sales generally increase from May through September, and decrease from November through March. The Company anticipates that the opening of American Park and the winterizing of the Boathouse (which will provide indoor seating) will reduce the seasonal fluctuations in its operating results. The Company also expects that future quarterly operating results will fluctuate as a result of the timing of and expenses related to the openings of new restaurants (as the Company will incur significant expenses during the months preceding the opening of a restaurant), as well as due to various factors, including the seasonal nature of its business, weather conditions in New York City, the health of New York City's economy in general and its tourism industry in particular. Accordingly, the Company's sales and earnings may fluctuate significantly from quarter to quarter and operating results for any quarter will not necessarily be indicative of the results that may be achieved for a full year. Inflation The effect of inflation on the Company has not been significant in any of the periods being reported on. -10- PART II - OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds. (d) On February 13, 1998 the Company consummated its initial public offering (the "Offering") contemplated by its Registration Statement on Form SB-2 (file no. 333-39937) which was declared effective by the Securities and Exchange Commission on February 10, 1998. A total of 1,150,000 shares of Common Stock (including 150,000 shares subject to an over-allotment option granted to Paragon Capital Corporation, the underwriter of the offering) were registered for sale by the Company to the public and 1,000,000 shares were sold to the public for gross proceeds of $5,000,000. In addition, Redeemable Warrants ("Warrants") to purchase 575,000 shares of Common Stock (including 75,000 Redeemable Warrants subject to the over-allotment option) were registered for sale to the public of which 500,000 Warrants were sold in the Offering for gross proceeds of $50,000. In addition, 575,000 shares of Common Stock issuable upon exercise of the Warrants were registered. The warrants are exercisable between March 10, 1999 and February 9, 2003. In addition, 310,000 warrants were registered and issued to certain selling stockholders ("Selling Securityholders' Warrants") in exchange for other warrants previously owned by them and converted at the time of the offering. The underlying shares of Common Stock were also registered and both the Selling Securityholders' Warrants and underlying shares are subject to a lock-up that expires in May 1999. The net proceeds of the Offering was approximately $3,644,587. As of March 29, 1998, the Company used approximately $2,560,000 of such proceeds for payment of accrued expenses and liabilities (approximately $1,000,000), construction and pre-opening costs of American Park (approximately $1,322,000) and working capital and general corporate purposes (approximately $238,000). Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the thirteen week period March 29, 1998. -11- TAM RESTAURANTS, INC. AND SUBSIDIARIES SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, hereunto duly authorized on the 18th day of May 1998. TAM RESTAURANTS, INC. (Registrant) /s/ Frank Cretella ---------------------------------------- Frank Cretella President and Chief Executive Officer -12- EX-27 2 FDS
5 6-MOS SEP-27-1998 SEP-29-1997 MAR-29-1998 1,065,163 0 275,799 0 190,478 1,995,041 5,309,726 0 8,145,761 3,448,332 0 0 0 350 2,609,679 8,145,761 3,891,440 3,891,440 2,957,998 2,957,998 198,840 0 216,529 (1,842,462) 0 (1,842,462) 0 0 0 (1,842,462) (.67) (.67)
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