SEC Info  
  Home     Search     My Interests     Help     Sign In     Please Sign In  

Red Hot Concepts Inc ˇ 10KSB40 ˇ For 12/29/96

Filed On 4/15/97   ˇ   SEC File 0-26838   ˇ   Accession Number 950159-97-106

  in   Show  and 
  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 4/15/97  Red Hot Concepts Inc              10KSB40    12/29/96    2:49                                     950159

Annual Report -- Small Business -- [X] Reg. S-B Item 405   ˇ   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB40     Annual Report -- Small Business -- [X] Reg. S-B       48    263K 
                          Item 405                                               
 2: EX-27       Financial Data Schedule                                1      6K 


10KSB40   ˇ   Annual Report -- Small Business -- [X] Reg. S-B Item 405
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page
4Item 1. Business
8Chili's
10Trademarks
11Item 2. Properties
12Item 3. Legal Proceedings
"Item 4. Submissions of Matters to a Vote of Security Officers
"Item 4a. Executive Officers of the Registrant
14Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
15Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations
20Item 7. Financial Statements
21Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
"Item 10. Executive Compensation
"Item 11. Security Ownership of Certain Beneficial Owners and Management
"Item 12. Certain Relationships and Related Transactions
"Item 13. Exhibits and Reports on Form 8-K
23Signatures
25Independent Auditor's Report
26Consolidated Balance Sheet as of December 29, 1996
10KSB401st Page of 48TOCTopPreviousNextBottomJust 1st
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB / X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 29, 1996 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 0-26838 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 identification incorporation or organization) No.) 6701 Democracy Boulevard Suite 300 Bethesda, MD 20817 (Address of principal executive offices) (Zip Code) (301) 493-4553 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value
10KSB402nd Page of 48TOC1stPreviousNextBottomJust 2nd
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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [X] No [ ] As of March 17, 1997, the aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant was $8,954,477. As of March 17, 1997, there were 10,262,347 shares outstanding of the Registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE The information required by Part III will be incorporated by reference to certain portions of a definitive proxy statement which is expected to be filed by the Registrant within 120 days after the close of its fiscal year.
10KSB403rd Page of 48TOC1stPreviousNextBottomJust 3rd
TABLE OF CONTENTS ITEM PAGE PART I 1. Business........................................................ 4 2. Properties...................................................... 11 3. Legal Proceedings............................................... 12 4. Submission of Matters to a Vote of Security Holders................................................ 12 4A. Executive Officers of the Registrant............................ 12 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters......................................................... 14 6. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... 15 7. Financial Statements............................................ 19 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................................... 19 PART III 9. Directors and Executive Officers of the Registrant............................................... 20 10. Executive Compensation.......................................... 20 11. Security Ownership of Certain Beneficial Owners and Management........................................... 20 12. Certain Relationships and Related Transactions.................................................... 20 13. Exhibits and Reports on Form 8-K................................ 20 Signatures...................................................... 20
10KSB404th Page of 48TOC1stPreviousNextBottomJust 4th
PART I Item 1. Business General Red Hot Concepts was incorporated in the state of Delaware on June 14, 1994 and formed to develop the Chili's Restaurant Concept created by Brinker International, Inc. ("Brinker"). Red Hot Concepts and its wholly-owned subsidiaries (collectively, the "Company") have the exclusive development rights for Chili's Restaurants in the United Kingdom ("U.K.") which expire November 1, 2006 and the exclusive rights for Chili's Restaurants in Australia/New Zealand which expire November 8, 2005. The exclusive rights to these territories are renewable subsequent to the initial term for 10 years. The Company is owned 34% by Woodland Limited Partnership and 66% by the public. The Company had five Chili's restaurants open as of December 29, 1996; three in Australia and two in the U.K. During the second quarter of 1997, construction is scheduled to start for three Chili's Restaurants in Australia and the Company expects to have a total of six to eight restaurants operating in Australia by the end of 1997. The Company does not expect to construct any restaurants in the U.K. in 1997. The Company opened its first U.K. Chili's Restaurant in London in October 1995, and opened two additional restaurants in March and May 1996. In December 1996, the Company elected to close one restaurant. In November 1995, the Company purchased a wholly-owned Australian subsidiary of Brinker that had the operating rights to two Chili's Restaurants in Australia. The first restaurant was opened in August 1994 and the second in February 1995. Both restaurants are located in communities surrounding Sydney. In September 1996, the Company opened its third restaurant in a suburb of Melbourne. Before November 2005, as part of its development agreement, the Company is also required to establish and operate a Chili's Restaurant in Auckland, New Zealand. Company's Mission The Company's vision is to be the customer's first choice in casual dining. To accomplish this vision, the Company intends to build a superior management team; demand knowledgeable outgoing employees with a genuine interest in their guests; create and maintain a culture within the Company that is built on integrity, communication, fun and pride; provide an appealing and casual restaurant environment; appreciate and be sensitive to the different cultures where the Company conducts business; enhance profitability to promote company and shareholder growth; and to be a premier Brinker partner. The Company believes that it will be successful in meeting its objectives based on its management's business experience, the recognition and the reputation of Chili's Restaurants in the United States and the foreign countries in which they operate and the support, supervision and assistance that has been and is continuing to be made available to the Company by Brinker. The Chili's Concept and Industry Overview As of December 31, 1996, there were 519 Chili's restaurants system-wide, comprised of 383 owned by Brinker and 136 franchised restaurants located in 46 states and in 12 foreign countries and territories. Chili's Restaurants are full-service southwestern theme restaurants which cater to the casual diner. Casual dining generally refers to a type of restaurant that falls in between family style dining and fine dining establishments and typically features a full range of moderately priced foods and full waiter and bar service. 4
10KSB405th Page of 48TOC1stPreviousNextBottomJust 5th
Chili's restaurants feature efficient and friendly table service designed to minimize customer waiting time and facilitate table turnover. Emphasis is placed on serving substantial portions of freshly prepared quality food at modest prices and providing excellent service. Chili's Restaurants are generally open between 12 and 14 hours a day, seven days a week, for lunch, dinner and late-night meals. Chili's personnel are dressed casually in jeans or slacks, knit shirts and aprons to reinforce the casual, informal environment. The decor of a Chili's restaurant consists of booth seating, tile-top tables, hanging plants and wood and brick walls covered with interesting memorabilia. Chili's Restaurants are designed to appeal primarily to the age group from 18 to 49 years. In the UK casual dining market, Chili's restaurants compete against multi-unit restaurant operators of American theme restaurants and national and regional chains. The latest statistics reported by the Mintel International Group Ltd.'s ("Mintel") show that the restaurant eating market in the UK is approximately (pound)9.14 billion ($14.6 billion). This market combines the food sales of restaurants, pubs, hotels and catering, but excludes fast foods and take away quick service establishments. The growth rate exhibited in the UK for this segment in the last year was 7%. In Australia and New Zealand, multi-unit restaurants in the casual dining market are a new development. The major competitors in the casual dining market are suburban Chinese restaurants, Sizzler Steakhouse, and The Keg. Relationship with Brinker Chili's Restaurant Development and Licensing Agreements: The Company's relationship with Brinker is governed principally by two Chili's Development and Licensing Agreements, one for the territory of the United Kingdom (the "UK Development Agreement") and one for the territories of Australia and New Zealand (the "Pacific Development Agreement"), collectively (the "Development Agreements"). Pursuant to the agreements, the Company is granted the exclusive right during a ten year period (the "Initial Term") to develop and operate Chili's Restaurants within these defined territories. Major provisions of the Development Agreements are detailed in the following paragraphs. Development Schedules: During the Initial Term of the Development Agreements, the Company is required to open and operate at least 32 Chili's Restaurants under the UK Development Agreement, and 40 in the combined countries of Australia and New Zealand. The development schedule for the United Kingdom over the remaining term of the agreement is scheduled below: By October 31 of Each Cumulative Total Number of of the Following Restaurants Which the Years Company shall have Open 1996 3 1997 2(1) 1998(2) 4 1999 7 2000 11 2001 16 2002 20 2003 23 2004 26 2005 29 2006 32 -------- 1 Shaftesbury location closed during this period. 2 As of December 31, 1998. 5
10KSB406th Page of 48TOC1stPreviousNextBottomJust 6th
Pursuant to the Pacific Development Agreement, the Company will be required to open an additional 37 Chili's Restaurants by November 8, 2005 in accordance with the following schedule: By November 8 of Each Cumulative Total Number of of the Following Restaurants Which the Years Company shall have Open 1996 2 1997 4 1998 7 1999 10 2000 13 2001 17 2002 22 2003 28 2004 34 2005 40 Default Provision: If the Company falls behind the Development Schedule by one restaurant in a given year under either agreement, it will not be in default of its development obligations. However, if the Company falls behind the development schedule for either territory by more than one restaurant, the Company will be in default of that respective territorial development obligation. If such default occurs, the Company's exclusive rights to establish Chili's Restaurants in that territory will terminate and the Company will have to cease developing Chili's Restaurants. However, under the Licensing Agreement, the Company would continue to operate the Chili's Restaurants that had been established and operating and the Company has the option to renew the license for another 20 years. Any development fee obligations that are due under a development agreement but unpaid at the time it is terminated would be owed to Brinker. Renewal Provisions: If the Company is in compliance with the UK Development Agreement at the expiration of its Initial Term and is operating at least 42 Chili's Restaurants, the Company may renew the UK Development Agreement for an additional 10-year period. The number of Chili's Restaurants to be opened during the renewal term will be subject to mutual agreement by the Company and Brinker; however, both parties have agreed that in no event will the number of Chili's Restaurants to be opened during the renewal term be less than four per year. If the Company is in compliance with the Pacific Development Agreement at the expiration of its Initial Term and is operating at least 40 Chili's Restaurants, the Company may renew the Pacific Development Agreement for an additional 10-year period. The number of Chili's Restaurants to be opened during the renewal term will be subject to mutual agreement by the Company and Brinker; however, both parties have agreed that in no event will the number of Chili's Restaurants to be opened during the renewal term be less than two per year. If the Company and Brinker are unable to reach an agreement with respect to determining an annual number of Chili's Restaurants to be opened under either development agreement, the Chili's Development Agreement will not be renewed. If after expiration of the Initial Term (or any renewal term), the Company's exclusive development rights are not renewed, then the Company would continue to have the right to operate its then-existing Chili's Restaurants in accordance with the License Agreement for each such restaurant. In such event, the Company would no longer have the exclusive right to own and operate Chili's Restaurants under the development agreement depending upon the territory (UK or Pacific) and Brinker would have 6
10KSB407th Page of 48TOC1stPreviousNextBottomJust 7th
the right to proceed (or the right to grant a third party the right to proceed) with further development of Chili's Restaurants in these territories, subject to territorial rights granted under then existing License Agreements. The territory agreements are independent and the Company's decision to renew or not renew one agreement does not affect the other agreement. Development Fees: As consideration for the grant of the exclusive development rights for the United Kingdom, the Company agreed to pay Brinker a total of $320,000. Upon execution of the Chili's Development Agreement, the Company paid $100,000 to Brinker. The Company is obligated to pay the additional $225,000 to Brinker in April 1998. The Company paid a development fee of approximately $348,000 for the Australian and New Zealand territories which was included in the acquisition price. Licensing Agreement: The Development Agreements require the Company to enter into license agreement with Brinker for each restaurant it opens ("License Agreement"). The term of each License Agreement is 20 years and it is renewable for another 20 years subject to certain conditions. Prior to beginning construction of a restaurant, the Company must notify Brinker of its intention to establish a restaurant by sending Brinker a license application. A License Agreement for a restaurant is formed upon the earlier of Brinker signing the license application or 30 days after Brinker receives the license application. Licensing Fees: The Company is required to pay Brinker a one-time opening fee of $20,000 for each restaurant opened in the United Kingdom, Australia or New Zealand. In addition, the Company must pay to Brinker a monthly royalty fee equal to 2% of each restaurant's gross receipts determined in local currency (exclusive of value added or other taxes payable by the Company). This royalty fee is payable to Brinker irrespective of the profitability of the Company or the restaurant. The Company's payments to Brinker are to be made in US dollars at the telegraphic transfer exchange rate applicable on the date the payment is made. Licenser's Obligations: Under the terms of a License Agreement, the Company is entitled to receive from Brinker, on an ongoing basis, all information and materials necessary to make the Company knowledgeable of the Chili's restaurant system and the methods used to operate and manage those restaurants, including without limitation, access to Brinker's "Chili's Concept Team", and other Brinker employees that Brinker considers appropriate to provide assistance in the following aspects of the Chili's system: design, purchasing, food and beverage specifications, marketing, real estate site criteria, training, financial analysis and computer information systems. Assignment Provision: The Development Agreements are not assignable by the Company without Brinker's consent, which consent may be withheld in Brinker's reasonable discretion or given conditionally. In addition, during the Initial Term of the Development Agreements, unless terminated sooner, and for two years thereafter, the Company may not have an interest in any casual dining restaurant in the United Kingdom, Australia or New Zealand that has an image identical or deceptively similar to a Chili's Restaurant. Right of Refusal: In addition to its rights to develop Chili's Restaurants in the United Kingdom, Australia and New Zealand, the Company has been granted rights of refusal with respect to developing and operating other Brinker full service restaurant concepts such as Romano's Macaroni Grill, On the Border, Cozymel's, and Maggiano's in these territories. Under the terms of the Development Agreements, if at any time Brinker intends to license or develop itself any of its own full service restaurant concepts in these territories, Brinker must first notify the Company and at the Company's request, Brinker would be obligated to negotiate in good faith with the Company the terms of the license agreement for the other concept. After 60 days in the UK and 90 days in Australia and New Zealand, if the Company and Brinker were unable to reach mutual agreement as to the terms of the development agreement, Brinker would be free to negotiate with third parties or develop themselves the other concept. 7
10KSB408th Page of 48TOC1stPreviousNextBottomJust 8th
Termination: Under certain circumstances of default by the Company, Brinker has the right to terminate the Development Agreements. Upon termination of the UK or Pacific Development Agreement, the Company must pay all amounts due, but unpaid, to Brinker under the agreement and stop the development of Chili's Restaurants. The Company would, however, be able to continue operating any Chili's Restaurants under License Agreements then in effect. Proposed Restaurant Development The Company, pursuant to its current plan of operation in Australia, will seek to open three to five Chili's Restaurants in 1997 and five to seven restaurants in 1998. The Company intends to open three Chili's restaurant in the UK in 1998. As of December 29, 1996, the Company has opened three Chili's Restaurants in the Australia and had opened three Chili's Restaurants in the U.K. (and subsequently closed one). The Company intends to concentrate its efforts in the United Kingdom on the development of Chili's Restaurants in regional economic areas such as Bristol, Leeds, Birmingham and Newcastle. In Australia, the Company has reviewed sites for Chili's Restaurants around the Sydney and Melbourne metropolitan areas and has selected and is negotiating contracts for two sites. Site Selection: The Company is responsible for the selection of sites for its restaurants and must give Brinker the opportunity to comment on the suitability of each site. Brinker will provide the Company with site selection guidelines and criteria for proposed locations (based on those used in the United States for free standing units) and prototype specifications and plans for construction and fit-out of Chili's Restaurants. The Company intends to lease the majority of its restaurant sites. The Company believes that the restaurant site selection process is critical to its success and intends to devote a significant effort to the investigation of locations. The site selection process involves an evaluation of a variety of factors, including demographics (such as population density and household income levels); specific site characteristics (such as visibility, accessibility and traffic volume); proximity to activity centers (such as office or retail shopping districts and apartment, hotel and office complexes); competition in the area; construction or renovation costs, and lease terms and conditions. All sites must generally be approved by the local planning board, which approval generally takes approximately three to six months. Brinker is working with the Company to ensure that the plans submitted are consistent with the Chili's image. The Company believes it will be successful in obtaining municipal approval for the other UK sites it selects. In Australia, Chili's Restaurants are "build to suit" sites where the property landlord assumes building construction responsibilities. The Company works with the property landlord to obtain local planning approval. Brinker works with the Company to ensure the construction plans are consistent with the Chili's image. Restaurant Design Chili's: Chili's Restaurants in the United States are traditionally free-standing units averaging approximately 5,800-7,000 square feet in size, with a seating capacity of approximately 210-250 people. The bar area consists of 8-12 tables with a seating capacity of approximately 50-60 people. The decor of a Chili's restaurant consists of booth seating, tile-top tables, hanging plants and wood and brick walls covered with interesting memorabilia. The Company intends to modify the traditional design to accommodate the needs of its market. These modifications may include a larger bar area and more table seating (and less booth seating) so that the restaurant can accommodate larger parties. The Company currently estimates that once a site has been made available, approximately four months is required to open a Chili's Restaurant. The Company currently estimates the cost of opening a Chili's Restaurant in the United Kingdom to be approximately (pound)750,000 ($1,160,000) including leasehold 8
10KSB409th Page of 48TOC1stPreviousNextBottomJust 9th
improvements, furniture, fixtures, equipment, opening inventories and hiring and training staff, but excluding lease payments and the license fee. Such estimates vary depending on the size of the proposed restaurant and the extent of required leasehold improvements. In Australia, the Company currently estimates that once a site has been made available, approximately four months is required to open a Chili's Restaurant. The Company currently estimates the cost of opening a Chili's Restaurant in Australia to be approximately A$1,800,000 ($1,386,000) including leasehold improvements, furniture, fixtures, equipment, opening inventories and hiring and training staff, but excluding lease payments and the license fee. In Australia, restaurants are constructed as "build to suit" by the property owner and the owner pays the costs for site preparation and construction. The Company's costs are the interior decor, furniture, fixtures and equipment. Menu Chili's restaurants feature a casual atmosphere and a limited menu of broadly appealing food items, including a variety of hamburgers, fajitas, chicken, imported beef and seafood entrees, sandwiches, barbecued ribs, salads, appetizers and desserts, all of which are prepared fresh daily according to recipes specified by Brinker. Emphasis is placed on serving substantial portions of quality food at modest prices. In the UK, entree selections generally range in price from (pound)4.75 to (pound)10.95 ($7.50 - $22.25) British Pounds. The average per person check, before tip, but including alcoholic beverages and taxes, is approximately (pound)10.95 ($17.50). In Australia, entree selections generally range in price from 4.75 to 15.95 Australian Dollars ($3.75 - $12.50). The average per person check, before tip, but including alcoholic beverages and taxes, is approximately A$15.00 ($11.75). Brinker updates its menus twice a year, at which time new items are introduced and items which no longer sell well are removed. Brinker also continually test markets new menu additions prior to their introduction. The Company offers the standard Chili's menu items in each of its restaurants. The Company may deviate, however, from the standard menu items in the event that the supply of a particular item is unavailable in the United Kingdom or Pacific or if the Company believes that a particular item is particularly appropriate or inappropriate based on customer preferences in the United Kingdom, Australia or New Zealand. In the event the Company determines to remove an item from the menu or change a menu item, the Company must first obtain the approval of Brinker. Restaurant Operations Restaurant Personnel: In the restaurants in the UK and Australia, the Company employs one general manager, three restaurant managers, and approximately 60 to 80 hourly employees, most of whom work part-time. The general manager is responsible for the day-to-day operation of the restaurant and for the maintenance of operating standards. The Company seeks to hire experienced restaurant managers and staff and motivate and retain them by providing opportunities for advancement and performance-based financial incentives. Training: The Company requires all of the general managers and restaurant managers for its restaurants to participate in a system-wide comprehensive 12 to 16-week training program for the restaurant concept by which they are employed. The program teaches management trainees detailed food preparation standards and procedures. In addition, each employee will be required to be trained in the operation of that restaurant's system. The Company has established its own training program both in the U.K. and Australia to reduce the costs of United States based Brinker training teams. The Company also participates in regional and national training and development programs sponsored by Brinker. Hours of Operation: The Company keeps its restaurants open between 12 and 14 hours a day, seven days a week, for lunch, dinner, late-night meals, and [in some areas breakfast], depending on local approval and regulations. 9
10KSB4010th Page of 48TOC1stPreviousNextBottomJust 10th
Purchasing; Food Distribution Operations Brinker and the Company set quality standards for all products used in the Company's restaurants. Brinker provides the Company with an operations manual which includes full ingredient specifications for each menu item, including photographs of each item. The Company has developed local sources of supply in order to minimize the importation of food supply from the United States. In the Pacific and the U.K. the Company will negotiate purchase contracts for virtually all of the ingredients and supplies used in a Chili's Restaurant and the individual restaurants will order directly from approved suppliers. Advertising and Promotion The License Agreement which the Company must execute for each restaurant requires the Company to spend in the UK and the Pacific a minimum of one-half of one percent of the average of its gross receipts (exclusive of taxes) for the previous twelve consecutive months on advertising and promotion. The Company is responsible for using this money for advertising and promotional plans, materials and activities under the UK and Pacific Development Agreement. All advertising, promotional plans, materials and activities must be consistent with the Chili's image. The Company has engaged a public relations firm in the UK to help publicize the activities of the Company and its restaurants and has consulted with an advertising agency to help develop the Company's printed promotional material. The Company's principal method of promotion has been printed advertising in newspapers, magazines, leaflets, local radio and limited television in Australia. The Company believes that as the number of restaurants in the United Kingdom and Australia increases, the Company will be able to begin using more radio advertising in the UK and use radio and television more extensively in Australia. The Company also offers an extensive number of promotional items, such as hats, t-shirts, sweat clothing, overnight bags, pens and pencils at its Chili's Restaurant locations. Trademarks The Company is authorized to use the names Chili's Texas Grill & Bar in the United Kingdom and Chili's Texas Grill in Australia and such other trademarks specified by Brinker from time to time (collectively, the "Trademarks"). Brinker has represented to the Company that it owns the Trademarks in the United Kingdom, Australia and New Zealand. Foreign Currency and Exchange Revenues from operations in the United Kingdom and Australia are maintained in local currency-denominated accounts, although they may be freely converted into foreign currencies, at then-current official exchange rates, for purposes of paying for foreign goods and for repatriation of profits. The Company anticipates that it will leave a substantial portion of the profits of its operations, if any, in the United Kingdom and Australia for use in the Company's business in such markets. There are presently no limitations on the Company's ability to repatriate profits. The exact amount of profits, if any, that the Company repatriates at a given time depends on, among other factors, the Company's financial condition, results of operations and capital requirements. The Company will be subject to risks from exchange rate fluctuations. The Company seeks to limit its exposure to the risk of currency fluctuations by engaging in hedging or other transactions, if necessary. United States Income Taxes Pursuant to United States tax laws, if the Company's subsidiaries organized under the laws of the United Kingdom and Australia are not engaged in business in the United States, such subsidiaries will not be subject to United States taxation. Any earnings of the United Kingdom and Australia subsidiaries, when 10
10KSB4011th Page of 48TOC1stPreviousNextBottomJust 11th
paid to the Company (or, in certain cases, deemed paid, even though not distributed, under certain technical provisions of the Internal Revenue Code), would be included by the Company for United States Federal income tax purposes. However, the Company would receive a credit against Federal income tax liability that otherwise would result from any deemed or actual distributions from its United Kingdom and Australia subsidiaries, for any United Kingdom and Australian corporate taxes paid by such subsidiaries on these distributions, as well as for any dividend and royalty withholding taxes imposed directly on the Company. Because the United Kingdom and Australian corporation tax rate is equal to or higher than the United States corporate tax rate, the Company does not anticipate being subject to significant United States Federal income tax on either distributed or undistributed earnings of its United Kingdom and Australian subsidiaries. Government Regulation The Company is subject to various British, Australian, New Zealand and local laws affecting its business. Each of the Company's restaurants will be subject to licensing and regulation by a number of governmental authorities, which include health, safety, sanitation, building and fire agencies in the municipality in which the restaurant is located. Difficulties in obtaining or failure to obtain required licenses or approvals could delay or prevent the opening of a new restaurant in a particular area. The food distribution facility is licensed and subject to regulation by national and local health and fire codes, and the operation of its trucks is subject to certain regulations. The Company is also subject to environmental regulations, but the Company does not believe that these regulations will have a material effect on the Company's operations. The Company's restaurant operations in the United Kingdom will be subject to British, local and European Community laws governing such matters as wages, working conditions, citizenship requirements and overtime. Significant numbers of the Company's hourly personnel will be paid at rates related to the minimum wage and, accordingly, further increases in the minimum wage could increase the Company's labor costs. New European Community regulations could materially increase the Company's cost of operations. Item 2. Properties The Company's principal place of business in the United Kingdom is located at Unit 6, Maryland Road, Tongwell, Milton Keynes. The leased space is approximately 800 square feet and houses the administrative offices. The rent for this facility is (pound)500 ($783) per month. The Company maintains its principal place of business in Australia at Unit 26, 3-9 Terminus Street, Castle VIII-NSW 2154, Western Australia. The leased space houses the company's administrative offices. The rent for this facility is A$20,000 ($15,625). The lease is a 24 month lease and expires on August 31, 1998, but can be renewed at the Company's option for two twelve month periods. Red Hot Concepts maintains space for its U.S. office at corporate headquarters located in Bethesda, Maryland. The lease was for a term of one year and expires on June 30, 1997. The total rent payable during the term of the lease is approximately $19,200. The Company intends to lease the facilities for each of its Chili's Restaurants. The Company has entered into long term leases with respect to its Wentworthville and Ringwood Chili's Restaurants. The Company has entered into a short-term lease with an option to purchase the property for its Cambelltown Chili's Restaurant. The lease also provides the Company with the option to renew the lease for two five-year and one ten-year renewal periods. In September, 1996, the Company entered into an agreement with Brinker pursuant to which Brinker agreed to guaranty, under certain circumstances, a minimum of five and up to twelve leases for properties in Australia developed as Chili's Restaurants (the "Guaranty Agreement"). The Company can request that Brinker guaranty up to five leases at any time through September 30, 2001, subject to the 11
10KSB4012th Page of 48TOC1stPreviousNextBottomJust 12th
limits on Brinker's total liability described below. The Company has used one guaranty for the Ringwood restaurant. The Company can also request up to an additional seven guarantees but only if (I) the demographic profile for the proposed Chili's location is substantially similar to the average demographic profile for a similar Chili's in the United States, (ii) the Company under the lease to be guaranteed is not then in default under another lease, and (iii) the average gross sales of all of the similar Chili's Restaurants in Australia is equal to or greater than 90% of the average gross sales of all similar Chili's in the United States. Brinker's maximum liability under any one lease may not exceed $225,000 and the term of any guaranty shall be the lesser of (I) the first three years o the lease and (ii) the remaining term of the Guaranty Agreement. Brinker's maximum liability under the Guaranty Agreement in any year shall be as follows: Year Maximum Guaranty 1997 $1,200,000 1998 2,250,000 1999 2,100,000 2000 1,200,000 2001 50,000 Brinker was issued fifty-three shares (5%) of stock of the Company's Red Hot Concepts Pacific subsidiary in connection with the Guaranty Agreement. In the event Brinker is obligated to make any payments under any guaranty and the Company does not reimburse Brinker within 20 days of making such payment, the Company is required to issue stock to Brinker in an amount representing 15.1% of the then outstanding shares of the Company's Red Hot Concepts Pacific subsidiary stock. On September 30, 2001 (expiration date of the agreement), the Company is required to repurchase from Brinker the stock the Company issued under the Guaranty Agreement. The shares are to be repurchased at a price determined by a formula based on the Company's operating profit and general and administrative expenses. The purchase price of any 15.1% block of stock issued shall not exceed $1,200,000 not be less than $600,000. The Company may satisfy its obligation to repurchase the stock with cash or a two year promissory note. The Guaranty Agreement imposes certain financial and operating limitations on the Company including limitations on debt, payments to Red Hot Concepts, officers salaries and transfers of assets. Item 3. Legal Proceedings The Company is not a party to any litigation or governmental proceedings that management believes would result in judgments or fines that would have a material adverse effect on the Company. Item 4. Submissions of Matters to a Vote of Security Officers No matters were submitted to a vote of the holders of the Company's Common Stock during the fourth quarter of the Company's fiscal year ended December 31, 1995. Item 4A. Executive Officers of the Registrant Officers are elected on an annual basis. Officers serve at the discretion of the Board of Directors. The executive officers of the Company and their respective positions are as follows: Name Age Position Norman J. Abdallah 34 President, Director H. Michael Bush 42 Chief Financial Officer ---------- 12
10KSB4013th Page of 48TOC1stPreviousNextBottomJust 13th
Norman J. Abdallah joined Red Hot Concepts as President in August 1996. Prior to this position, Mr. Abdallah was employed with Brinker International, the casual dining giant for nine years. Mr. Abdallah served in various management positions at Brinker including Vice President of Franchise Operations and Development from August 1993 to August 1996, Franchise Operations Director from July 1992 to July 1993 and Area Director, Chili's Concept prior to July 1992. H. Michael Bush, has served as Chief Financial Officer of the Company since November 1995. He currently also serves as Acting President, Chief Financial Officer and Secretary of International Franchise Systems, Inc. Mr. Bush has been employed with Red Hot Concepts, Inc. as its Chief Financial Officer since November 1995. Prior to joining Red Hot, Mr. Bush worked at Mobil Oil Corporation. He served at Mobil in various financial capacities from 1980 through November 1995, including Manager of Financial Analysis, Controls and Joint Venture Reporting and Senior Tax Planning Advisor. From 1976 through 1980, Mr. Bush worked at Unisys. Mr. Bush is a certified public accountant. 13
10KSB4014th Page of 48TOC1stPreviousNextBottomJust 14th
PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Market Information The Company's Common Stock is traded as part of a unit (a "Unit") which includes one share of Common Stock, one warrant to purchase one share of stock through December 31, 1997 at $6.00 per share (a "Class A Warrant") and one warrant to purchase one share of stock through November 3, 2000 at $12.00 per share (a "Class B Warrant"). The Company's Units and Common Stock are quoted on the NASDAQ Small-Cap Market System under the symbols RHCSU and RHCS, respectively. The Company's Class A and Class B Warrants currently are not traded. The high and low sale prices of the Units and Common Stock as reported by NASDAQ were as follows: 1996 Units Common High Low High Low First Quarter $4.00 $1.25 $ -- $ -- Second Quarter 2.75 1.625 -- -- Third Quarter 4.00 1.50 3.375 1.875 Fourth Quarter 4.00 2.00 3.875 2.25 1995 Units Common High Low High Low Third Quarter $8.00 $6.00 Common not traded (beginning August 8, 1995) during this period Fourth Quarter 8.00 1.50 Dividends The Company has not paid any cash dividends on its Common Stock and does not intend to pay cash dividends on its Common Stock for the foreseeable future. The Company intends to retain future earnings to finance future developments. Number of Stockholders As of March 25, 1997, there were 76 record holders of the Company's Common Stock, 50 record holders of the Class A Warrants and 49 record holders of the Class B Warrants. The Company believes there are approximately 2800 beneficial owners of the Company's Common Stock. 14
10KSB4015th Page of 48TOC1stPreviousNextBottomJust 15th
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations Introduction The Company was incorporated on June 14, 1994 and was in the development stage until October 1995. The Company was formed to develop the Chili's Concept created by Brinker International and has acquired an exclusive right to develop the Chili's Concept in the United Kingdom, Australia and New Zealand pursuant to development and license agreements with Brinker. As of December 29, 1996, the Company had five operating restaurants. The Company opened its first Chili's Restaurant at Canary Wharf in the United Kingdom on October 9, 1995 and opened additional restaurants on March 20, 1996 and May 1, 1996 in Cambridge and central London, respectively. In November 1995, the Company purchased the Australian subsidiary of Brinker International which had two Chili's Restaurants operating in communities surrounding Sydney. The Company opened its third restaurant in Australia near Melbourne in September 1996. In late December 1996, the Company closed the central London restaurant. The auditors have issued a going concern report to the Company, due to the Company suffering recurring losses from operations, not satisfying certain loan covenants, and having a deficit working capital at December 29, 1996. United Kingdom The Company has taken several significant steps to improve the overall profitability of the United Kingdom subsidiary. In June, the Company began restructuring the headquarters staffing to significantly reduce the headcount from thirteen to two and reduce overhead expenses. For administrative services, the Company relies on a related company in the U.K. The Company changed the name of the restaurants to Chili's "Texas" Grill & Bar from Chili's Grill & Bar. This change was in response to consumer focus groups which found the brand name to imply hot Mexican cuisine rather than American Grill. The Company reinforced the Texas Grill positioning with intensive marketing efforts and a new menu. In August, the Company hired a senior operations director from Brinker to manage the existing restaurants. This resulted in an overall improvement in the execution of service, food preparation, presentation, and the feel of the "Chili's" experience. Sales at the Canary Wharf and Cambridge restaurants improved by approximately 40% from August until the end of the year which the Company believes is attributed to these improvements. In December, the Company decided to close the central London restaurant. The restaurant did not achieve results consistent with management expectations and was unlikely to in the future without a significant investment. The Company has written off the investment of $2.1 million and believes that there are no further obligations under the lease of the property. The Company believes these changes and the continuing improvement in the restaurant operations will significantly improve the operating results for 1997. Australia The Company has spent significant time focusing its efforts on various activities including selecting sites, hiring and training management personnel, establishing administrative and financial policies and procedures, and undertaking other activities necessary to operate new restaurants. The Company implemented a "market partner" program to rapidly expand the brand by giving management an equity position in their restaurants. The Company has also concluded an agreement in principle with a property investment group to finance the construction of Chili's restaurants. 15
10KSB4016th Page of 48TOC1stPreviousNextBottomJust 16th
In September, the Company entered into an agreement with Brinker pursuant to which Brinker agreed to guarantee, under certain circumstances, a minimum of five and up to twelve leases for properties. This enables the Company to unrestrict cash balances that were designated for rent deposits. As consideration under the agreement, Brinker received 5% ownership of Red Hot Concepts Pacific, the parent company to the Australia subsidiary. Corporate Activities In August 1996, Colin Halpern stepped down as President of Red Hot Concepts and Norman Abdallah, the former Vice President of Franchise Operations for Brinker International was hired as President. The Company believes Mr. Abdallah's comprehension of the Chili's concept and his industry contacts have been a tremendous asset to the Company. Mr. Halpern remains as Chairman of the Board to focus on the long term strategic development of the Company. Results of Operations The Company realized a net loss of $6.3 million for the fifty-two week period ended December 29, 1996 partly attributable to the $2.2 million loss associated with the closing of the restaurant in the U.K. This compared with a net loss of $1.3 million for the same period last year. The following table sets forth expenses as a percentage of total revenue for the period ended December 29, 1996 and for the period ended December 31, 1995. ˇ Enlarge/Download Table 1996 1995 Consolidated Consolidated UK Australia Parent Total Total Revenues 100% 100% 100% 100% Costs and Expenses Food & Beverage (35%) (30%) (32%) (37%) Restaurant Labor (27%) (26%) (26%) (33%) Restaurant Expense (20%) (11%) (15%) (12%) Royalties (2%) (2%) (2%) (2%) Fixed Restaurant Expense (35%) (19%) (27%) (18%) ---- ---- ---- ---- ---- Total Costs and Expenses (119%) (88%) (102%) (102%) Gross Margin (Loss) (19%) (12%) (2%) (2%) General & Administrative (27%) (8%) (13%) (29%) (110%) Depreciation/Amortization (16%) (3%) (9%) (11%) Closing Costs of Restaurant (53%) -- -- (23%) -- ---- ---- ---- ---- ---- Operating Loss (115%) 1% (13%) (63%) (123%) Other Income (Expense) (4%) -- (2%) (4%) 3% ---- ---- ---- ---- ---- Net Income/(Loss) (119%) 1% (15%) (67%) (120%) Comparison of the Fifty-Two Week Period Ended December 29, 1996 and December 31, 1995. Australia United Kingdom Total Revenues $5,327,463 $4,111,276 $9,438,739 Operating Income/(Loss) 46,320 (4,740,546) (4,694,226) 16
10KSB4017th Page of 48TOC1stPreviousNextBottomJust 17th
United Kingdom Revenues Revenues for the three restaurants as of December 29, 1996 totaled $4.1 million as compared to $0.4 million in 1995. The significant increase in revenue was principally related to three restaurants operating in 1996 versus one restaurant operating in 1995. Restaurant operating weeks in 1995 totaled 12 as compared to 128 weeks in 1996. At the end of the third quarter, the Company implemented a market plan to increase revenues at its restaurants by changing the brand identity to Chili's "Texas" Grill & Bar. The name change, in complement with a new menu rollout, resulted in an increase in average weekly sales for August to December of approximately 40%. Cost and Expenses Restaurant cost of food, labor, variable and fixed expenses totaled $4.9 million for the period ended December 29, 1996. This is an increase of $4.4 million for the year ended December 31, 1995. The increase was principally related to the number of store operating weeks in 1996 versus 1995. Food costs as a percentage of revenue fell from 50% in 1995 to 35% in 1996 as the Company improved purchasing power through economics of scale and sourcing more products locally. Labor costs as a percentage of revenue fell from 45% to 27% in 1995 as the Company reduced restaurant staff after store grand openings, and implemented programs to improve staff training and work productivity. During the last quarter of 1996, food costs and labor costs as a percentage of revenue were 31% and 19% respectively. Restaurant expense and fixed costs as a percentage of revenue increased in 1996 to 55% from 32% in 1995. This increase in the percentage was principally related to high fixed expenses associated with the central London restaurant in comparison to the revenues generated. General and Administrative Expense The total cost of general and administrative expenses for the fifty-two weeks ended December 29, 1996 were $1.1 million or 27% of revenues. General and administrative costs in 1995 were $300,000 or 75% of revenues. The administrative costs to run the three restaurants were reduced significantly in an effort to achieve overall profitability in the United Kingdom. In 1995, significant costs were incurred to develop the brand, hire and train personnel, and build the administrative infrastructure. Closing Costs for Restaurant The Company closed one restaurant in Central London in December. The costs incurred to close the restaurant in addition to the write off of leasehold improvements, inventories, pre-opening costs and equipment total $2,198,451 or 53% of the total U.K. sales revenues. Australia The original owners of the Chili's development agreement opened the first Sydney restaurant in August 1994 and the second restaurant in February 1995. The restaurants and the Development Agreement were sold back to Brinker in July 1995. The Company purchased the development rights and the restaurants from Brinker in November 1995. Revenues Total revenues for the fifty-two weeks ended December 29, 1996 were $5.3 million. Revenues on a pro forma combined basis for the 52 weeks ended October 31, 1995 for the two restaurants were approximately $3.4 million. The increase in revenues was attributed to more restaurant trading weeks (139 in 1996 versus 90 in 1995) and an increase in same store sales of 8% over the previous year. Sales trends improved in 1996 through a combination of new customer trial, repeat business, and effective sales building marketing programs. 17
10KSB4018th Page of 48TOC1stPreviousNextBottomJust 18th
Cost and Expense For the fifty-two weeks ended December 29, 1996, the total cost of food, labor, variable and fixed restaurant expenses were $4.7 million. The cost of food sales as a percentage of revenue was 30% during the year as compared to 33% in 1995 on a pro forma basis. The cost of sales percentage improved during 1996 as the Company moved to more cost effective food sources and improved efficiencies in the restaurants. Labor costs as a percentage of revenue were 26% during 1996. Labor costs as a percentage of revenue were reduced during 1996 as a result of less labor after the store openings, efficiency improvements and the reduction of management in the restaurants. Other restaurant variable and fixed costs were 32% of revenue. Other variable and fixed costs were higher in 1996 as a result of opening a third restaurant which increased the fixed costs. General and Administrative Expenses The total cost of general and administrative expenses for the fifty-two weeks ended December 29, 1996 were approximately $400,000 or 8% of revenue. The administrative costs to run the three restaurants were reduced significantly in an effort to achieve overall profitability in Australia. In 1995, the previous owners incurred significant costs to develop the brand in Australia and integrate the business into the structure of the parent company. Liquidity and Capital Resources The Company The Company's working capital as of December 29, 1996 was approximately $3.1 million as compared to working capital of $300,000 on December 31, 1995. Total current assets were $1.5 million on December 29, 1996 and $2.6 million on December 31, 1995. Current liabilities increased by $2.3 million in 1996 to $4.6 million from $2.3 million in 1995. The primary decrease in current assets was attributed to the use of initial public offering funds to acquire fixed assets. The increase in current liabilities is related to trade payables associated with restaurant operations and interest on related party debt. The following chart represents the net funds raised and/or used in operating, financing and investment activities for both periods. January 1, 1996 January 2, 1995 to to December 29, 1996 December 31, 1995 In Thousands In Thousands Net cash (used) in operating activities $(1,573) $ (618) Cash (used) in investing (4,804) (2,500) Cash provided by financing 5,289 4,733 During the fiscal year ended December 29, 1996, the Company used approximately $1,573,000 for operating activities. The Company had a net loss of approximately $6.3 million which was reduced by non-cash adjustments of $3,140,600. Accounts receivable decreased by approximately $166,000 which was offset by an increase of inventories of $80,000 and an increase of prepaid expenses of $464,000. The accounts payables, accrued liabilities, and other payables increased by approximately $1,960,000. Cash used in investing activities of approximately $4,800,000 is primarily attributed to $4,057,000 spent on leasehold improvements, furniture and fixtures for the new restaurants in the United Kingdom and Australia, and $664,000 spent on pre-opening costs associated with new restaurants. New officer loans totaled $118,000 and loans were repaid of $35,000. 18
10KSB4019th Page of 48TOC1stPreviousNextBottomJust 19th
Cash provided by financing activities for the year was aprroximately $5,289,000 which include the net proceeds from the sale of common shares of approximately $3,397,000 less additional offering costs of $55,000, the proceeds from a loan from Westminster Bank for $1.0 million and advances from a related party of $2,861,000 with repayments of approximately $1,609,000. The repayment terms on the intercompany advances have been extended to June 1998. The Company has a lease for its U.S. corporate office which terminates in June 1997. The United Kingdom headquarters at Milton Keynes, England is subject to a month-to-month lease. The Australian headquarters are in Sydney, Western Australia. The leased property is subject to a two year lease which expires in August 1998. Estimated annual lease payments for each of the next five years are approximately $947,000, $936,000, $924,000 and $924,000 per year, respectively. This cost relates primarily to the restaurant sites. To finance the construction and opening of the second and third restaurants in the U.K., the Company obtained debt financing and financing from a related party. The Company has signed a Fixed Rate Loan Agreement for 650,000 British Pounds (approximately $1 million) with the National Westminster Bank PLC. The terms of the loan are for seven years at an interest rate of the U.K. base rate plus three percent. The Company currently is not in compliance with certain loan covenant provisions. The Company has implemented sales building and cost reduction programs which should enable it to satisfy the operating profitability guidelines. In our discussion with the bank, the bank feels that the loan is fully secured and at this time has not expressed intentions to demand repayment of the loan. The Company secured a short term loan of $1.6 million from Brinker in February 1997. The interest rate is 8% and the monies are to be repaid either in August 1997 or March 1998 depending on certain conditions. These monies will be used for short term working capital purposes. In Australia, the landlord has committed to finance the three restaurants that will start construction in the second quarter. The Company has also agreed on heads of terms with an investment management company to finance land purchases and restaurant construction. This agreement will be used in lieu of landlord financing in each case when possible. The Company is responsible for financing the interior decor, furniture, equipment and pre-opening costs. The Company will use cash flow from local operations and bank financing to pay for its responsibilities. The Company does not have a bank commitment at this time for future equipment leases. The Company used one guaranty provided by Brinker to secure the Ringwood lease. The Company has reached an agreement in principle with Woodland Limited Partnership to convert $750,000 of long term debt to convertible preferred shares. This agreement will be presented to the Company's Board of Directors for approval. The Company has improved short term liquidity through a number of different steps including the reduction of administrative expenses and headcount; sales building in the restaurants; the rescheduling of payment terms on the advances from Woodland Limited Partnership; and securing a working capital loan from Brinker. The Company is also analyzing the cost to construct restaurants and incur pre-opening expenses to identify ways to elimintate cost. The Company believes that anticipated revenues and additional capital or borrowing will be necessary to achieve the Company's development schedule and satisfy future construction obligations and amounts due to Brinker. 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 it the Company is unable to raise more funds, the Company will reduce its operations to a level consistent with its available funding. 19
10KSB4020th Page of 48TOC1stPreviousNextBottomJust 20th
Inflation To date, inflation has not had a material effect on the Company's operations. Item 7. Financial Statements See the Financial Statements data listed in the accompanying Index to Financial Statements on Page F-1 herein. Information required by other schedules called for under Regulation S-X is either not applicable or is included in the financial statements or notes thereto. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures Not Applicable. 20
10KSB4021st Page of 48TOC1stPreviousNextBottomJust 21st
PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act The information relating to the directors will be in the Company's definitive proxy materials to be filed with the Securities and Exchange Commission and is incorporated in this Annual Report on Form 10-KSB by this reference. Item 10. Executive Compensation The information required by this Item 10 will be in the Company's definitive proxy materials to be filed with the Securities and Exchange Commission and is incorporated in this Annual Report on Form 10-KSB by this reference. Item 11. Security Ownership of Certain Beneficial Owners and Management The information required by this Item 10 will be in the Company's definitive proxy materials to be filed with the Securities and Exchange Commission and is incorporated in this Annual Report on Form 10-KSB by this reference. Item 12. Certain Relationships and Related Transactions The information required by this Item 10 will be in the Company's definitive proxy materials to be filed with the Securities and Exchange Commission and is incorporated in this Annual Report on Form 10-KSB by this reference. Item 13. Exhibits and Reports on Form 8-K (a) Exhibits 3(A)(2) Certificate of Incorporation (C)(2) Bylaws of Registrant 4(A)(3) Form of Common Stock Certificate (B)(3) Class A and Class B Common Stock Purchase Warrant Specimens 10(A)(2) Development Agreement dated July 15, 1994 between Brinker International, Inc. and Restaurant House Limited 10(A)(i)(4) License Agreement dated January 27, 1995 between Brinker International, Inc. and Restaurant House Limited 10(A)(ii)(4) Letter Agreement dated January 9, 1995 by Brinker International, Inc. 21
10KSB4022nd Page of 48TOC1stPreviousNextBottomJust 22nd
(E)(4)(**) Form of Incentive Stock Option Plan 21(2) Subsidiaries of the Registrant 10(F)(5) Development Agreement between Brinker International, Inc. and Red Hot Concepts-Pacific, Inc. dated November 8, 1995 10(G)(5) Share Sale Agreement between Red Hot Concepts-Pacific, Inc. and Brinker Australia, Inc. dated November 8, 1995 11(*)(**) 1996 Non-Employee Directors Stock Option Plan --------------------- (*) Filed herewith. (**) Denotes Compensatory Plans 1 Incorporated by reference, filed as an exhibit to Registrant's Post-Effective Amendment No. 1 to SB-2 filed with the Securities and Exchange Commission on November 8, 1994. 2 Incorporated by reference, filed as an exhibit to Registrant's Registration Statement on Form SB-2, filed with the Securities and Exchange Commission on November 8, 1994. 3 Incorporated by reference, filed as an exhibit to Registrant's Pre-Effective Amendment No. 1 to SB-2, filed with the Securities and Exchange Commission on November 8, 1994. 4 Incorporated by reference previously filed as an exhibit to Registrant's Pre-Effective Amendment No. 2 to SB-2 filed with the Securities and Exchange Commission on November 8, 1994. 5 Incorporated by reference filed as Exhibit to Registrant's 8-K, filed with the Securities and Exchange Commission on November 28, 1995. (b) Reports on Form 8-K During the last quarter the following Form 8-K's were filed by the Company: (i) On November 7, 1996, the Company filed a report on Form 8-K reporting events under Item 9. (ii) On December 27, 1996, the Company filed a report on Form 8-K reporting events under Item 9. 22
10KSB4023rd Page of 48TOC1stPreviousNextBottomJust 23rd
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. By:/s/Norman Abdallah Norman Abdallah, President Date: April 2, 1997 In accordance with the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. /s/Norman Abdallah President and Director April 2, 1997 Norman Abdallah (Chief Executive Officer) /s/H. Michael Bush Chief Financial Officer April 2, 1997 H. Michael Bush and Secretary (Principal Financial and Accounting Officer) /s/Colin Halpern Chairman of the Board April 2, 1997 Colin Halpern /s/Melvin F. Lazar Director April 2, 1997 Melvin F. Lazar /s/Robert Pace Flack Director April 2, 1997 Robert Pace Flack /s/Franklen Myles Abelman Director April 2, 1997 Franklen Myles Abelman 23
10KSB4024th Page of 48TOC1stPreviousNextBottomJust 24th
RED HOT CONCEPTS, INC. AND SUBSIDIARIES -------------------------------------------------------------------------------- INDEX TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- Page Independent Auditor