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

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

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

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 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

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 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.           

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 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

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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.               

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   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.                                                      

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     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                                                 

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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.   

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     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     

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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.             

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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   

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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                                                                  

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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

----------                                                                      
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 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.           

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 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.                                           

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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.                                        

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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.      

                                                        · 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)

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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.               

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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.                                      

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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.                                                     

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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.                                                                 

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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.       

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(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.          

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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                                                          

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RED HOT CONCEPTS, INC. AND SUBSIDIARIES                                         
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INDEX TO FINANCIAL STATEMENTS                                                   
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                                                                            Page

Independent Auditor