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EX-10.3 - ARC Group, Inc. | v168120_ex10-3.htm |
EX-23.1 - ARC Group, Inc. | v168120_ex23-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 2
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
American Restaurant
Concepts, Inc.
(Name of
small business issuer in our charter)
Florida
|
7221
|
59-3649554
|
||
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard
Industrial
Classification
Code
Number)
|
IRS
I.D.
|
14476
Duval Place West, Suite 103
Jacksonville,
FL
|
32218
|
Registrant’s
telephone number: 904 741-5500
Debra
Hill
Hill
& Chevalier
8834
Goodbys Executive Drive
Jacksonville,
FL 32217
904.346.0140
(Name,
address and telephone number of agent for service)
Approximate
date of commencement of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.
Large accelerated filer
¨
|
Accelerated Filer ¨
|
Non-accelerated filer
¨
|
Smaller
reporting company x
|
CALCULATION
OF REGISTRATION FEE
Title of each class of
securities to be registered
|
Amount to be
registered
|
Proposed
maximum
offering
price per
unit
|
Proposed
maximum
aggregate
offering price
|
Amount of
registration
fee [1] [2]
|
||||||||||||
Common
Stock offered by the Selling Stockholders [3]
|
955,667 | $ | .25 | $ | 238,916.75 | $ | 13.34 |
(1) Estimated
in accordance with Rule 457(c) of the Securities Act of 1933 solely for the
purpose of computing the amount of the registration fee based on recent prices
of private transactions.
(2) Calculated
under Section 6(b) of the Securities Act of 1933 as .00005580 of the aggregate
offering price.
(3) Represents
shares of the registrant’s common stock being registered for resale that have
been issued or will be issued to the selling shareholders named in this
registration statement.
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay our effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a) may
determine.
PROSPECTUS
AMERICAN
RESTAURANT CONCEPTS, INC.
955,667
Shares of Common Stock
Selling
shareholders are offering up to 955,667 shares of common stock. The
selling shareholders will offer their shares at $.25 per share until our shares
are quoted on the OTC Bulletin Board and, assuming we secure this qualification,
thereafter at prevailing market prices or privately negotiated
prices. We will not receive proceeds from the sale of
shares from the selling shareholders.
There are
no underwriting commissions involved in this offering. We have agreed
to pay all the costs of this offering. Selling shareholders will pay no offering
expenses.
Prior to
this offering, there has been no market for our securities. Our common stock is
not now listed on any national securities exchange, the NASDAQ stock market, or
the OTC Bulletin Board. There is no guarantee that our securities
will ever trade on the OTC Bulletin Board or other exchange.
This
offering is highly speculative and these securities involve a high degree of
risk and should be considered only by persons who can afford the loss of their
entire investment. See “Risk Factors” beginning on page
8.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is _________________ , 2009.
2
TABLE OF
CONTENTS
SUMMARY
INFORMATION AND RISK FACTORS
|
4 | |||
USE
OF PROCEEDS
|
20 | |||
DETERMINATION
OF OFFERING PRICE
|
20 | |||
DILUTION
|
20 | |||
SELLING
SHAREHOLDERS
|
20 | |||
PLAN
OF DISTRIBUTION
|
23 | |||
LEGAL
PROCEEDINGS
|
25 | |||
EXPERTS
|
25 | |||
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
LIABILITIES
|
25 | |||
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
|
26 | |||
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
27 | |||
DESCRIPTION
OF SECURITIES
|
28 | |||
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
LIABILITIES
|
29 | |||
DESCRIPTION
OF BUSINESS
|
29 | |||
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
39 | |||
DESCRIPTION
OF PROPERTY
|
42 | |||
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
44 | |||
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
43 | |||
EXECUTIVE
COMPENSATION
|
45 | |||
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
48 | |||
FINANCIAL
STATEMENTS
|
F-1 |
3
SUMMARY
INFORMATION AND RISK FACTORS
You
should carefully read all information in the prospectus, including the financial
statements and their explanatory notes, under the Financial Statements prior to
making an investment decision.
Organization
American
Restaurant Concepts, Inc., a Florida corporation, was incorporated in April
2000.
Our
executive office address is:
14476
Duval Place West, Suite 103
Jacksonville,
FL 32218
Our
telephone number is 904 741-5500
Our web
site is located at www.dickswingsandgrill.com. Information contained
on our website is not part of this Prospectus.
Business
American
Restaurant Concepts currently franchises Dick’s Wings restaurants, using the
Dick’s Wings product line. Dick’s Wings Express is a limited service restaurant,
concentrating on take out orders. Dick’s Wings & Grill is a full
service restaurant.
We offer
two types of franchise opportunities:
|
·
|
Area
Development Agreements, also called Master License Agreements, which grant
the right to open a specified number of Dick’s Wings restaurants (either
Dick’s Wings & Grille, Dick’s Wings Express or both) within an
exclusive development area in accordance with a specified development
schedule.
|
|
·
|
The
Dick’s Wings Franchise offers qualified purchasers the right to establish
and operate, from a single location within a specified territory, a racing
theme restaurant under the Dick’s Wings marks and
system.
|
We
currently have one Area Development Agreements for the following
territories: Exclusive in Florida and non-Exclusive in the rest of
the U.S. We granted Master Licensee the to license
Franchisees within a defined area, referred to as “Master License Area” defined
as:
|
·
|
A
non-exclusive right to solicit and service franchisees on behalf of us in
all of the United States
|
|
·
|
So
long as Master Licensee is in good standings under the Agreement, Master
Licensee have the exclusive right to solicit and service franchisees on
behalf of us in the state of
Florida
|
Master
Licensee paid a master license fee in the sum of $400,000, which is payable upon
signing of the Agreement. The term of the Agreement is ten
years. The agreement has a required development schedule during the term
requiring a minimum of 3 store openings in 2009 and 5 store openings in all
years thereafter.
4
We
received an initial license fee and will receive on-going royalty
fees. The Agreement provides for non-competition while the Agreement
is in effect and in the event of a termination of the Agreement, for a period of
five years after termination. The Agreement requires that the Master
Licensee and its franchisees comply with operating procedures specified by
us. The percentage of revenues recognized by us from this agreement is set
forth in the table below.
We
currently have 19 Franchises located in Florida and 3 Franchisees located in
Georgia.
Dick’s
Wings is the fictitious name used by American Restaurants Concepts,
Inc. Moose River Management, Inc., owned by Michael Rosenberger, our
President, was incorporated in January 2007 and is the owner of the US
registered trademarks “Dick’s Wings,” “Dick’s Wings & Grille and
design” and “Dick’s Wings Express and design” and the state trademark “Dick’s
Wings and Design.” The use of these marks was licensed to us in
perpetuity by Moose River Management, Inc. in 2007, as amended and restated in
2009.
5
For
fiscal year ended December 31, 2008 and for the first nine months of fiscal year
2009, we generated the following percentages of revenues from each of these
categories:
First nine months of fiscal year 2009
(unaudited)
|
Fiscal year 2008
|
|||||||||||||||
Revenues
|
Percentage of
Total Revenues
|
Revenues
|
Percentage of
Total Revenues
|
|||||||||||||
Master
License Agreement
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$ | 13,794 | 3.2 | % | - | - | ||||||||||
Franchise
Agreements
|
$ | 37,787 | 8.9 | % | $ | 103,740 | 14.6 | % | ||||||||
Fees
related to franchisee operations
|
$ | 374,813 | 87.9 | % | $ | 608,721 | 85.4 | % | ||||||||
TOTAL
|
$ | 426,394 | 100 | % | $ | 712,461 | 100 | % |
Dick’s
Wings is the fictitious name used by American Restaurant Concepts. Moose River
Management, Inc., and affiliate of American Restaurant Concepts owned by Michael
Rosenberger, our president, was incorporated in January 2007 and is the owner of
the trademarks “Dick’s Wings,” “Dick’s Wings & Grille” and
“Dick’s Wings Express.” Moose River Management licenses the
following to us:
|
·
|
Non-exclusive
license to reproduce the Trademark on or in association with the Licensed
Products, for the use of franchising, as well as on packaging, promotional
and advertising material associated
herewith.
|
|
·
|
The
right to sublicense the Trademarks to any franchisee for use in the
franchised locations.
|
|
·
|
Although
our right is non-exclusive so long as the agreement is in effect, Moose
River agrees not to grant any other party a license to use the
Trademarks.
|
|
·
|
The
agreement includes any trademarks that Moose River Management, Inc.
applies for and registers during the duration of this
Agreement.
|
The
agreements is for a term of fifty years commencing June 2007. We have the right
to renew the Agreement for a one additional fifty year term. As
consideration for the Agreement, we paid Moose River $100. Moose
River Management engages in no business other than the license to
us. Mr. Rosenberger, as sole officer and owner of Moose River
Management, does not devote any time to the business of Moose River Management
as none of his time is required due to the limited nature of the business of
Moose River Management.
Dick’s Wings
Concept
The
Dick’s Wings concept features made to order menu items, including buffalo style
chicken wings covered in one of our fourteen signature sauces. In addition to
fresh chicken wings, the Dick’s Wings menu features specialty hamburgers and
sandwiches, buffalito soft tacos, finger foods and salads. The fourteen Dick’s
Wings sauces from the mildest, teriyaki to the hottest blazing, are designed to
compliment many of the Dick’s Wings menu items, allowing guests to customize
their meal by adding a signature sauce. Our Dick’s Wings Restaurants feature a
full bar, including approximately twenty domestic and imported beers on tap, a
broad selection of bottled beer, wine and liquor. We also provide an array of
value added entertainment with trivia games, 35-40 televisions, 7-10 big screen
projection televisions, video games and a family friendly dining area. Our
Dick’s Wings Restaurants feature a flexible service model that allows entering
guests to order at the counter for dine in or take out service or order at the
table from our servers.
6
The
Offering
As of the
date of this prospectus, we had 34,885,668 shares of common stock
outstanding.
Selling
shareholders are offering up to 955,667 shares of common stock shares of common
stock. The selling shareholders will offer their shares at $.25 per share until our
shares are quoted on the OTC Bulletin Board and thereafter at prevailing market
prices or privately negotiated prices. We will pay all expenses of
registering the securities, estimated at approximately $100,000. We will not
receive any proceeds of the sale of these securities.
To be
quoted on the OTC Bulletin Board, a market maker must file an application on our
behalf in order to make a market for our common stock. The current
absence of a public market for our common stock may make it more difficult for
you to sell shares of our common stock that you own.
Financial
Summary
Because
this is only a financial summary, it does not contain all the financial
information that may be important to you. Therefore, you should carefully read
all the information in this prospectus, including the financial statements and
their explanatory notes before making an investment decision.
7
Statements
of Operations Data
|
||||||||||||||||
AMERICAN
RESTAURANT CONCEPTS, INC.
|
||||||||||||||||
Nine
Months Ended
|
Years
ended
|
|||||||||||||||
September
27,
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September
28,
|
December
29,
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December
30,
|
|||||||||||||
2009
|
2008
|
2008
|
2007
|
|||||||||||||
(Unaudited)
|
||||||||||||||||
Revenue
|
$ | 426,394 | $ | 570,496 | $ | 712,461 | $ | 613,004 | ||||||||
Net
Income (loss)
|
$ | (261,243 | ) | $ | 305,511 | $ | 279,156 | $ | 234,499 | |||||||
Net
Income (loss) per share
|
$ | (0.01 | ) | $ | 0.01 | $ | 0.01 | $ | 0.01 | |||||||
Weighted
average number of common shares outstanding - basic and fully
diluted
|
34,000,000 | 34,000,000 | 34,000,000 | 34,000,000 | ||||||||||||
Balance
Sheet Data
|
||||||||||||||||
September
27,
|
December
29,
|
|||||||||||||||
2009
|
2008
|
|||||||||||||||
(Unaudited)
|
||||||||||||||||
Cash
|
$ | 163,119 | $ | 90,372 | ||||||||||||
Working
capital (deficit)
|
$ | (33,197 | ) | $ | 90,591 | |||||||||||
Total
assets
|
$ | 244,237 | $ | 272,380 | ||||||||||||
Total
current liabilities
|
$ | 244,353 | $ | 43,056 | ||||||||||||
Accumulated
deficit
|
$ | (518,621 | ) | $ | (163,069 | ) | ||||||||||
Total
Stockholders' equity
|
$ | (351,837 | ) | $ | (149,985 | ) |
8
Risk
Factors
In
addition to the other information provided in this prospectus, you should
carefully consider the following risk factors in evaluating our business before
purchasing any of our common stock. All material risks are discussed
in this section.
Because our business model
is franchisor based and our future revenues depend in part upon our continued
sale of franchises, any decrease in the sale of franchises could decrease our
ability to implement our business plan and our future
revenues.
Our
business model is franchisor based and our future revenues depend in part upon
our continued sale of franchises. As a franchisor, we are be subject to risks
incident to the a business plan based upon sale of franchises, including:
changes in general economic or local conditions, such as a decrease in demand
for the purchase of our franchises due to a decrease in employment or or
continued adverse downturns in the general economy; changes to preferences that
reduce the attractiveness of our franchises to end users; cost and availability
of financing; changes in supply or demand of competing franchise opportunities
in an area; and changes in governmental regulations that may render the sale of
franchises difficult or unattractive. Our ability to sell franchises
could also be reduced due to operating problems experienced by our current or
future franchisees as further described in “Risk
Factors Related to Our Franchisees’ Restaurants” set forth
below. And decrease in the sale of franchises could decrease our
ability to implement our business plan and our future revenues.
Increasing regulatory
complexity surrounding our operations will continue to affect our operations and
results of operations in material ways including reducing our
revenues.
We are
also subject to a Federal Trade Commission rule and to various state and foreign
laws that govern the offer and sale of franchises. These laws regulate various
aspects of the franchise relationship, including terminations and the refusal to
renew franchises. The failure to comply with these laws and regulations in any
jurisdiction or to obtain required government approvals could result in a ban or
temporary suspension on future franchise sales, fines, other penalties or
require us to make offers of rescission or restitution, any of which could
adversely affect our business and operating results. We could also face lawsuits
by our franchisees based upon alleged violations of these
laws.
If we
fail to comply with existing or future laws and regulations, we may be subject
to governmental or judicial fines or sanctions. In addition, our and our
franchisees’ capital expenditures could increase due to remediation measures
that may be required if we are found to be noncompliant with any of these laws
or regulations.
Our business may be affected
by changes in consumer discretionary spending during this time of economic
difficulties in the U.S. economy which could reduce our revenues or impair our
financial condition.
We
receive revenues in the form of royalties and fees from our franchisees. As a
result, our operating results substantially depend upon our franchisees’ sales
volumes, restaurant profitability, and financial viability. However, our
franchisees are independent operators. Our and our franchisees’
success depends to a significant extent on discretionary consumer spending,
which is influenced by general economic conditions, consumer confidence and the
availability of discretionary income. Changes in economic conditions affecting
our guests such as those occurring in the U.S. currently could reduce traffic in
some or all of our franchisees’ restaurants or limit their ability to raise
prices, either of which could have a material adverse effect on their and our
financial condition and results of operations. As a result, our per
share revenues have declined an average of 5% since the economic difficulties
commenced in September 2008.
9
Accordingly,
we may experience a decline in sales of franchises and our franchises may
experience declines in sales during economic downturns, periods of prolonged
elevated energy prices or due to severe weather conditions, health epidemics or
pandemics, terrorist attacks or the prospect of such events (such as the
potential spread of avian flu). Any material decline in the amount of
discretionary spending could reduce our revenues or impair our financial
condition.
Our ability to raise capital
in the future may be limited, which could adversely impact our business and
reduce our revenues.
Changes
in our operating plans, acceleration of our expansion plans, lower than
anticipated sales, increased expenses or other events, including those described
in this section, may cause us to seek additional debt or equity financing. We
have decided to forego our original strategy of building corporate owned stores
to maintain a 70/30 split in franchised stores vs. corporate owned
stores. Over a five year span, we estimate that we would have needed
to raise around $14,000,000 to reach this goal. The current strategy is to grow
through franchise stores only, having only one corporate store each of “Dick’s
Wings and Grill” and “Dick’s Wing’s Express”. For the next 12, we now
anticipate that we will need to raise up to $1,500,000 to be used for additional
staff needed to implement our new strategy including additional staffing and
marketing expenses and to maintain public status. Management believes
that no additional capital will be required after the this twelve month period .
However, if our revenues were to be reduced due to any of the Risk Factors
described in this section, we could need additional financing. Such
financing may not be available on acceptable terms, or at all, and our failure
to raise capital when needed could negatively impact our growth and other plans
as well as our financial condition and results of operations. Additional equity
financing, if available may be dilutive to the holders of our common stock and
may involve significant cash payment obligations and covenants and/or financial
ratios that restrict our ability to operate and expand.
Insurance may not provide
adequate levels of coverage against claims which could indirectly impact our
revenues.
We
currently maintain no insurance; however our Franchisees are required to carry
insurance as specified in the Franchise Agreements and list us as an additional
insured. Under the Franchise Agreement, we may purchase insurance on
their behalf if they fail to do so. However, there are types of
losses they may incur that cannot be insured against or that are not
economically reasonable to insure against, such as losses due to natural
disasters or terrorism. Such damages from loses may cause direct economic impact
to us and our franchisees’ restaurants and thus indirectly impact our
revenues.
10
We and
our franchisees may be unable to compete effectively in the restaurant industry
which could reduce our revenues.
The
restaurant industry is intensely competitive. We believe we compete primarily
with franchisors of regional and local sports bars, casual dining and quick
casual establishments, and quick service wing-based take-out concepts. We
believe our franchisees compete primarily with franchisees of regional and local
sports bars, casual dining and quick casual establishments, and quick service
wing-based take-out concepts. Many of our direct and indirect competitors are
well-established national, regional or local chains with a greater market
presence than us. Further, some competitors have substantially greater
financial, marketing and other resources than us. In addition, independent
owners of local or regional establishments may enter the wing-based restaurant
business without significant barriers to entry and such establishments may
provide price competition for our franchisees’ restaurants. Competition in the
casual dining, quick casual and quick service segments of the restaurant
industry is expected to remain intense with respect to price, service, location,
concept and the type and quality of food. Our franchisees also face intense
competition for real estate sites, qualified management personnel and hourly
restaurant staff.
We may not be able to
protect our trademarks, service marks or trade secrets and if we do not, our
revenues could be reduced.
We place
considerable value on our trademarks, service marks and trade secrets. We intend
to actively enforce and defend our marks and if violations are identified, to
take appropriate action to preserve and protect our goodwill in our marks. We
attempt to protect our sauce recipes as trade secrets by, among other things,
requiring confidentiality agreements with our sauce suppliers and executive
officers. However, we cannot be sure that our franchisees will be able to
successfully enforce our rights under our marks or prevent competitors from
misappropriating our sauce recipes. We can also not be sure that:
|
·
|
our
marks are valuable,
|
|
·
|
using
our marks does not, or will not, violate others'
marks,
|
|
·
|
the
registrations of our marks would be upheld if challenged, or our
franchisees
|
|
·
|
would
not be prevented from using our marks in areas of the country where others
might have already established rights to
them.
|
Any of
these uncertainties could have an adverse effect on us and our expansion
strategy.
Expenses required to operate
as a public company will reduce funds available to develop our business and
could negatively affect our stock price and adversely affect our results of
operations, cash flow and financial condition.
Operating
as a public company is more expensive than operating as a private
company. For example, as a public company, we are and may be required
to obtain outside assistance from legal, accounting, investor relations, or
other professionals that could be more costly than planned. We may also be
required to hire additional staff to comply with additional SEC reporting
requirements and compliance under the Sarbanes-Oxley Act of 2002. Our failure to
comply with reporting requirements and other provisions of securities laws could
negatively affect our stock price and adversely affect our results of
operations, cash flow and financial condition.
Because
our business plan is based upon the concept of franchising restaurants, our
success depends in significant part upon the success of our franchised
restaurants, difficulties experienced in opening or operating existing or new
restaurants could hinder our ability to implement our business plan and thus
reduce our revenues.
Our
ability to successfully implement our business plan depends upon the success of
our franchised restaurants. Difficulties experienced in opening or
operating existing or new restaurants could hinder our ability to implement our
business plan. We have described these risks under “Risk Factors
Related to Our Franchisees’ Restaurants,” below.
11
Risk Factors Related to Our
Franchisees’ Restaurants
Because
our business plan is based upon the concept of franchising restaurants, our
success depends in significant part upon the success of our franchised
restaurants. Difficulties experienced in our franchisees opening or
operating existing or new restaurants could hinder our ability to implement our
business plan and reduce our revenues. We have described each
specific of these risks below.
We must identify and obtain
a sufficient number of suitable new restaurant sites for us to sustain our
revenue growth rate.
We
require that all proposed restaurant sites meet our site-selection criteria.
There may be errors made in selecting these criteria or applying these criteria
to a particular site, or there may be an insignificant number of new restaurant
sites meeting these criteria that would enable us to achieve our planned
expansion in future periods. Our franchisees face significant competition from
other restaurant companies and retailers for sites that meet our criteria and
the supply of sites may be limited in some markets. Further, our franchisees may
be precluded from acquiring an otherwise suitable site due to an exclusivity
restriction held by another tenant. As a result of these factors, costs to
obtain and lease sites may increase, or our franchisees may not be able to
obtain certain sites due to unacceptable costs. Inability to obtain suitable
restaurant sites at reasonable costs may reduce our growth rate.
Our franchising and our
franchisees’ restaurants may not achieve market acceptance in the new geographic
regions we enter which could reduce revenues we receive from
franchisees.
Our
expansion plans depend franchising and our franchisees’ opening restaurants in
new markets where we or our franchisees have little or no operating experience.
Our franchisees may not be successful in operating their restaurants in new
markets on a profitable basis. The success of these new restaurants will be
affected by the different competitive conditions, consumer tastes and
discretionary spending patterns of the new markets as well as the ability to
generate market awareness of the Dick’s Wings brand. Sales at restaurants
opening in new markets may take longer to reach average annual restaurant sales,
if at all, thereby affecting their and our profitability.
New restaurants added to our
existing markets may take sales from existing restaurants which could reduce
revenues we receive from franchisees.
Our
franchisees intend to open new restaurants in our existing markets, which may
reduce sales performance and guest visits for existing restaurants in those
markets. In addition, new restaurants added in existing markets may not achieve
sales and operating performance at the same level as established restaurants in
the market.
Implementing our expansion
strategy may strain our resources which could reduce our
revenues.
Our
expansion strategy may strain our management, financial and other resources. Our
franchisees must attract and retain talented operating personnel to maintain the
quality and service levels at our existing and future restaurants. Our
franchisees must also continue to enhance our operational, financial and
management systems. Our franchisees may not be able to effectively manage these
or other aspects of our expansion. If our franchisees fail to do so, our
business, financial condition, operating results and cash flows could
suffer.
12
Restaurant quarterly
operating results may fluctuate due to the timing of special events and other
factors, including the recognition of impairment losses.
Our
franchisee restaurants’ quarterly operating results depend, in part, on special
events, such as the Super Bowl(R) and other popular sporting events, and thus
are subject to fluctuations based on the dates for such events. Historically,
sales in most of our franchisees’ restaurants have been higher during fall and
winter months based on the relative popularity of national, regional and local
sporting and other events. Further, our quarterly operating results may
fluctuate significantly because of other factors, including:
o
|
Increases
or decreases in same-store sales;
|
o
|
Fluctuations
in food costs, particularly fresh chicken
wings;
|
o
|
The
timing of new restaurant openings, which may impact margins due to the
related preopening costs and initially higher restaurant level operating
expense ratios;
|
o
|
Labor
availability and costs for hourly and management
personnel;
|
o
|
Changes
in competitive factors;
|
o
|
Disruption
in supplies;
|
o
|
General
economic conditions and consumer
confidence;
|
o
|
Claims
experience for self-insurance
programs;
|
o
|
Increases
or decreases in labor or other variable
expenses;
|
o
|
The
impact from natural disasters;
|
o
|
Fluctuations
in interest rates; and
|
o
|
The
timing and amount of asset impairment loss and restaurant closing
charges.
|
As a
result of the factors discussed above, our quarterly and annual operating
results dependant upon franchisee revenues may fluctuate significantly.
Accordingly, results for any one quarter are not necessarily indicative of
results to be expected for any other quarter or for any year. These fluctuations
may cause future operating results to fall below the expectations of securities
analysts and investors. In that event, the price of our common stock would
likely decrease.
Our franchisees are
susceptible to adverse trends and economic conditions in Florida and Georgia
which could
reduce revenues we receive from franchisees.
As of
June 30, 2009, all of our franchised restaurants are located in Florida and
Georgia. As a result, our franchisees are susceptible to adverse trends and
economic conditions in those states. In addition, given our
geographic concentration in the Southeast, negative publicity regarding any of
restaurants could have a material effect on our business and operations
throughout the region, as could other regional occurrences such as local
strikes, new or revised laws or regulations, or disruptions in the supply of
food products.
13
Changes in consumer
preferences or discretionary consumer spending could harm our franchisees’
restaurants performance which could reduce revenues we receive from
franchisees.
Our
franchisees’ success depends, in part, upon the continued popularity of chicken
wings, our other menu items, sports bars and casual dining restaurant styles.
Our franchisees also depend on trends toward consumers eating away from home
more often. Shifts in these consumer preferences could negatively affect our
future profitability. Such shifts could be based on health concerns related to
the cholesterol, carbohydrate or fat content of certain food items, including
items featured on our menu. Negative publicity over the health aspects of such
food items may adversely affect consumer demand for our menu items and could
result in a decrease in guest traffic to our franchisees’ restaurants, which
could materially harm our business. Smoking bans imposed by state or local laws
could also adversely impact our franchisees’ restaurants' performance. In
addition, our success depends to a significant extent on numerous factors
affecting discretionary consumer spending, including economic conditions,
disposable consumer income and consumer confidence. A decline in consumer
spending or in economic conditions could reduce guest traffic or impose
practical limits on pricing, either of which could harm our business, financial
condition, operating results or cash flow.
Changes in public health
concerns may impact our franchisees’ restaurants performance which could reduce
revenues we receive from franchisees.
Changes
in public health concerns may affect consumer preferences for our products. For
example, if incidents of the avian flu occur in the United States, consumer
preferences for poultry products may be negatively impacted, resulting in a
decline in demand for our products. Similarly, public health concerns over
smoking have seen a rise in smoking bans. Such smoking bans may adversely affect
our operations to the extent that such bans are imposed in specific locations,
rather than state-wide, or that exceptions to the ban are given to bars or other
establishments, giving patrons the ability to choose nearby locations that have
no such ban. Further, growing movements to lower legal blood alcohol levels may
result in a decline in alcohol consumption at our stores or increase the number
of dram shop claims made against us, either of which may negatively impact
operations. Under dram shop liability laws, a party injured by an
intoxicated person can sue establishments contributing to that person’s
intoxication, such as our franchisees.
A decline in visitors to any
of the business districts near the locations of our franchisees’ restaurants
could negatively affect our franchisees’ restaurant sales which could reduce
revenues we receive from franchisees.
Some of
our franchisees’ restaurants are located near high activity areas such as retail
centers, big box shopping centers and entertainment centers. Our franchisees
depend on high visitor rates at these businesses to attract guests to their
restaurants. If visitors to these centers decline due to economic conditions,
road construction, changes in consumer preferences or shopping patterns, changes
in discretionary consumer spending or otherwise, our restaurant sales could
decline significantly and adversely affect our results of
operations.
14
Complaints or litigation may
hurt our franchisees’ restaurants which could reduce revenues we receive from
franchisees.
Occasionally,
guests file complaints or lawsuits against our franchisees’ restaurants alleging
that our franchisees are responsible for an illness or injury they suffered at
or after a visit to our franchisees’ restaurants. Our franchisees are also
subject to a variety of other claims arising in the ordinary course of business,
including personal injury claims, contract claims, employment-related claims,
claims by franchisees, and claims arising from an incident at a franchised
restaurant. The restaurant industry has also been subject to a growing number of
claims that the menus and actions of restaurant chains have led to the obesity
of certain of their guests. In addition, our franchisees are subject to "dram
shop" statutes. These statutes generally allow a person injured by an
intoxicated person to recover damages from an establishment that wrongfully
served alcoholic beverages to the intoxicated person. Recent litigation against
restaurant chains has resulted in significant judgments and settlements under
dram shop statutes. Regardless of whether any claims against us are valid or
whether our franchisees are liable, claims may be expensive to defend and may
divert time and money away from our operations and hurt our performance. A
judgment significantly in excess of our insurance coverage or for which our
franchisees do not have insurance coverage could materially affect our financial
condition or results of operations. Further, adverse publicity resulting from
these allegations may adversely affect us and our franchisees’
restaurants.
Natural disasters and other
events could harm our franchisees’ restaurants’ performance which could reduce
revenues we receive from franchisees.
A natural
disaster, such as a hurricane, a serious and widespread disease, such as an
avian flu pandemic, or other events, such as a serious terrorist attack, could
have a material adverse effect on our franchisees’ restaurants’
performance.
Government regulations
concerning restaurant operations may harm our franchisees’ restaurants’
operations which could reduce revenues we receive from
franchisees.
The
restaurant industry is subject to numerous federal, state and local governmental
regulations, including those relating to the preparation and sale of food and
alcoholic beverages, sanitation, public health, fire codes, zoning and building
requirements. Termination of the liquor license for any restaurant would
adversely affect the revenues of that restaurant and inability to obtain such
licenses could adversely affect our expansion plans. Our franchisees’
restaurants are also subject to laws governing our relationships with employees,
including benefit, wage and hour laws, and laws and regulations relating to
workers' compensation insurance rates, unemployment and other taxes, working and
safety conditions and citizenship or immigration status. In certain states our
franchisees’ restaurants may be subject to "dram-shop" statutes, which generally
provide that a person injured by an intoxicated person has the right to recover
damages from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. A judgment against them under a dram shop statute
in excess of our insurance coverage, or any inability to continue to obtain
insurance coverage at reasonable costs, could have a material adverse effect on
them. Failure to comply with any of these regulations or increases in the
minimum wage rate, employee benefit costs or other costs associated with
employees, could adversely their operations.
An increase in the cost of
food products could adversely affect our franchisees’ operating results which
could reduce revenues we receive from franchisees.
If the
cost of chicken wings or beef increases, cost of sales will increase and
operating income could be reduced. Our restaurants’ primary food products are
fresh chicken wings, chicken breast tenders and ground beef. Any material
increase in the cost of fresh chicken wings or ground beef could adversely
affect operating results. Cost of sales could be significantly affected by
increases in the cost of fresh chicken wings and ground beef, which can result
from a number of factors, including seasonality, increases in the cost of grain,
disease and other factors that affect availability, and greater international
demand for domestic chicken and beef products.
15
Risks Related to the Market
for our Stock
Certain
of our stockholders hold a significant percentage of our outstanding voting
securities which could reduce the ability of minority shareholders to effect
certain corporate actions.
Our
officers, directors and 5% or more shareholders and their affiliates are the
beneficial owners of approximately 98.2% of our outstanding voting
securities. As a result, they possess significant influence and can
elect a majority of our board of directors and authorize or prevent proposed
significant corporate transactions. Their ownership and control may also have
the effect of delaying or preventing a future change in control, impeding a
merger, consolidation, takeover or other business combination or discourage a
potential acquirer from making a tender offer.
If our common stock is
quoted on the OTC Bulletin Board which may have an unfavorable impact on our
stock price and liquidity.
We
anticipate that our common stock will be quoted on the OTC Bulletin Board. The
OTC Bulletin Board is a significantly more limited market than the New York
Stock Exchange or NASDAQ system. The quotation of our shares on the OTC Bulletin
Board may result in a less liquid market available for existing and potential
stockholders to trade shares of our common stock, could depress the trading
price of our common stock and could have a long-term adverse impact on our
ability to raise capital in the future.
We will be subject to penny
stock regulations and restrictions and you may have difficulty selling shares of
our common stock.
The SEC
has adopted regulations which generally define so-called “penny stocks” to be an
equity security that has a market price less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exemptions. If our common
stock becomes a “penny stock”, we may become subject to Rule 15g-9 under the
Exchange Act, or the “Penny Stock Rule”. This rule imposes additional sales
practice requirements on broker-dealers that sell such securities to persons
other than established customers. For transactions covered by Rule 15g-9, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser’s written consent to the transaction prior to
sale. As a result, this rule may affect the ability of broker-dealers to sell
our securities and may affect the ability of purchasers to sell any of our
securities in the secondary market.
For any
transaction involving a penny stock, unless exempt, the rules require delivery,
prior to any transaction in a penny stock, of a disclosure schedule prepared by
the SEC relating to the penny stock market. Disclosure is also required to be
made about sales commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stock.
Our
common stock will not initially qualify for exemption from the Penny Stock Rule.
In any event, even if our common stock were exempt from the Penny Stock Rule, we
would remain subject to Section 15(b)(6) of the Exchange Act, which gives the
SEC the authority to restrict any person from participating in a distribution of
penny stock, if the SEC finds that such a restriction would be in the public
interest.
16
Sales of our common stock
under Rule 144 could reduce the price of our stock.
There are
885,668 shares of our common stock held by non-affiliates and 34,000,000 shares
held by affiliates Rule 144 of the Securities Act of 1933 defines as restricted
securities.
795,667
of our shares held by non-affiliates and 160,000 shares held by affiliates are
being registered in this offering. All shares being registered
hereunder are available for resale as of the date of effectiveness of this
registration statement. Of the shares not being registered hereunder,
all the restricted securities held by affiliates, subject to the limitations on
amounts and manner of sale in Rule 144, could be available for sale in a public
market, if developed, beginning 90 days after the date of this prospectus. The
availability for sale of substantial amounts of common stock under Rule 144
could reduce prevailing market prices for our securities.
If our stock trades below
$5.00 per share, and is quoted on the OTC Bulletin Board, our stock will be
considered a "penny stock" which can reduce its liquidity.
If the
trading price of our common stock is less than $5.00 per share, our common stock
will be considered a "penny stock," and trading in our common stock will be
subject to the requirements of Rule 15g-9 under the Securities Exchange Act of
1934. Under this rule, broker/dealers who recommend low-priced securities to
persons other than established customers must satisfy special sales practice
requirements. The broker/dealer must make an individualized written suitability
determination for the purchaser and receive the purchaser's written consent
prior to the transaction.
SEC
regulations also require additional disclosure in connection with any trades
involving a "penny stock," including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and its
associated risks. These requirements severely limit the liquidity of securities
in the secondary market because few broker or dealers are likely to undertake
these compliance activities. In addition to the applicability of the penny stock
rules, other risks associated with trading in penny stocks could also be price
fluctuations and the lack of a liquid market.
This prospectus permits
selling security holders to resell their shares. If they do so, the market price
for our shares may fall and purchasers of our shares may be unable to resell
them.
This
prospectus includes 955,667 shares being offered by existing stockholders. To
the extent that these shares are sold into the market for our shares, if
developed, there may be an oversupply of shares and an undersupply of
purchasers. If this occurs the market price for our shares may decline
significantly and investors may be unable to sell their shares at a profit, or
at all.
Investors may have
difficulty in reselling their shares due to the lack of market or state Blue Sky
laws.
Our
common stock is currently not quoted on any market. No market may ever develop
for our common stock, or if developed, may not be sustained in the
future.
17
The
holders of our shares of common stock and persons who desire to purchase them in
any trading market that might develop in the future should be aware that there
may be significant state law restrictions upon the ability of investors to
resell our shares. Accordingly, even if we are successful in having the Shares
available for trading on the OTCBB, investors should consider any secondary
market for the Company's securities to be a limited one. We intend to seek
coverage and publication of information regarding the company in an accepted
publication which permits a "manual exemption." This manual exemption permits a
security to be distributed in a particular state without being registered if the
company issuing the security has a listing for that security in a securities
manual recognized by the state. However, it is not enough for the security to be
listed in a recognized manual. The listing entry must contain (1) the names of
issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a
profit and loss statement for either the fiscal year preceding the balance sheet
or for the most recent fiscal year of operations. We may not be able
to secure a listing containing all of this information. Furthermore,
the manual exemption is a non issuer exemption restricted to secondary trading
transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and Poor's, Moody's
Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and
many states expressly recognize these manuals. A smaller number of states
declare that they “recognize securities manuals” but do not specify the
recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual exemption: Alabama, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and
Wisconsin.
Accordingly,
our shares should be considered totally illiquid, which inhibits investors’
ability to resell their shares.
Although we will be a
mandatory reporting company under Section 15(d) of the Securites Act of 1933
until and through fiscal year end December 31, 2009, if we do not file a
Registration Statement on Form 8-A to become a mandatory reporting company under
Section 12(g) of the Securities Exchange Act of 1934, we will continue as a
voluntary reporting company and will not be subject to the proxy statement or
other information requirements of the 1934 Act, our securities can no longer be
quoted on the OTC Bulletin Board, and our officers, directors and 10%
stockholders will not be required to submit reports to the SEC on their stock
ownership and stock trading activity, all of which could reduce the value of
your investment and the amount of publicly available information about
us.
As a
result of this offering as required under Section 15(d) of the Securities
Exchange Act of 1934, we will file periodic reports with the Securities and
Exchange Commission through December 31, 2009, including a Form 10-K for the
year ended December 31, 2009, assuming this registration statement is declared
effective before that date. At or prior to December 31, 2009, we
intend voluntarily to file a registration statement on Form 8-A which will
subject us to all of the reporting requirements of the 1934 Act. This will
require us to file quarterly and annual reports with the SEC and will also
subject us to the proxy rules of the SEC. In addition, our officers, directors
and 10% stockholders will be required to submit reports to the SEC on their
stock ownership and stock trading activity. We are not required under
Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have
more than 500 shareholders and total assets of more than $10 million on December
31, 2009. If we do not file a registration statement on Form 8-A at
or prior to December 31, 2009, we will continue as a voluntary reporting company
and will not be subject to the proxy statement or other information requirements
of the 1934 Act, our securities can no longer be quoted on the OTC Bulletin
Board, and our officers, directors and 10% stockholders will not be required to
submit reports to the SEC on their stock ownership and stock trading
activity.
18
Our management decisions are
made by Michael
Rosenberger, President and James R. Shaw, Vice President, if we lose their services,
our revenues may be reduced.
The
success of our business is dependent upon the expertise of Michael Rosenberger,
President and James R. Shaw, Vice President. Because Michael Rosenberger,
President and James R. Shaw, Vice President are essential to our operations, you
must rely on their management decisions. Michael Rosenberger, President and
James R. Shaw, Vice President will continue to control our business affairs
after this filing. We have not obtained any key man life insurance relating to
Michael Rosenberger, President and James R. Shaw, Vice President. If we lose
their services, we may not be able to hire and retain other management with
comparable experience. We have no employment agreements with Michael
Rosenberger, President and James R. Shaw, Vice President. As a
result, the loss of the services of Michael Rosenberger, President and James R.
Shaw, Vice President could reduce our revenues.
Our management has limited
experience in managing the day to day operations of a public company and, as a
result, we may incur additional expenses associated with the management of our
business.
The
management team, including Michael Rosenberger, President and James R. Shaw,
Vice President is responsible for our operations and reporting. Although Mr.
Shaw had some experience managing a public company in the 1990’s, the
requirements of operating as a small public company in today’s regulatory
environment are new to the management team and the employees as a whole. This
may require us to obtain outside assistance from legal, accounting, investor
relations, or other professionals that could be more costly than planned. We may
also be required to hire additional staff to comply with additional SEC
reporting requirements and compliance under the Sarbanes-Oxley Act of 2002. Our
failure to comply with reporting requirements and other provisions of securities
laws could negatively affect our stock price and adversely affect our results of
operations, cash flow and financial condition.
We are exposed to increased
expenses from recent legislation requiring companies to evaluate internal
control over financial reporting which could reduce our
revenues.
Assuming
current legislation introduced in Congress does not pass and we are subject to
Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"), Section
404 requires our management to report on the operating effectiveness
of our Internal Controls over financial reporting for the year ended December 31
in the fiscal year after the fiscal year in which this registration statement is
declared effective. W.T. Uniack & Co., CPAs P.C. is our independent
registered public accounting firm, will be required to attest to the
effectiveness of our internal control over financial reporting beginning for our
fiscal year ended December 31, 2011. We must establish an ongoing program to
perform the system and process evaluation and testing necessary to comply with
these requirements. We expect that the cost of this program will require us to
incur expenses and to devote resources to Section 404 compliance on an ongoing
basis which will reduce our revenues. We anticipate that we will have effective
internal controls that meet the requirements of Section 404 if and when
applicable to us.
19
Because we do not have an
audit or compensation committee, shareholders will have to rely on the entire
board of directors, no members of which are independent, to perform these
functions.
We do not
have an audit or compensation committee comprised of independent directors.
Indeed, we do not have any audit or compensation committee. These functions are
performed by the board of directors as a whole. None of the members of the board
of directors are independent directors under the definition set forth in the
listing standards of the NASDAQ Stock Market, Inc. Thus, there is a potential
conflict in that board members who are management will participate in
discussions concerning management compensation and audit issues that may affect
management decisions.
Special
Information Regarding Forward Looking Statements
Some of
the statements in this prospectus are “forward-looking
statements.” These forward-looking statements involve certain known
and unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by these
forward-looking statements. These factors include, among others, the
factors set forth above under “Risk Factors.” The words “believe,”
“expect,” “anticipate,” “intend,” “plan,” and similar expressions identify
forward-looking statements. We caution you not to place undue
reliance on these forward-looking statements. We undertake no
obligation to update and revise any forward-looking statements or to publicly
announce the result of any revisions to any of the forward-looking statements in
this document to reflect any future or developments. However, the
Private Securities Litigation Reform Act of 1995 is not available to us as a
non-reporting issuer. Further, Section 27A(b)(2)(D) of the Securities
Act and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that
the safe harbor for forward looking statements does not apply to statements made
in connection with an initial public offering.
USE
OF PROCEEDS
Not
applicable. We will not receive any proceeds from the sale of shares
offered by the selling shareholders.
DETERMINATION
OF OFFERING PRICE
The
offering price has been arbitrarily determined and does not bear any
relationship to our assets, results of operations, or book value, or to any
other generally accepted criteria of valuation. Prior to this offering, there
has been no market for our securities. In order to assure that
selling shareholders will offer their shares at $.25 per share until our shares
are quoted on the OTC Bulletin Board, we will notified our shareholders and our
Transfer Agent that no sales will be allowed prior to the date our shares are
quoted on the OTC Bulletin Board without proof of the selling
price.
20
DILUTION
Not
applicable. We are not offering any shares in this registration statement. All
shares are being registered on behalf of our selling shareholders.
SELLING
SHAREHOLDERS
The
selling shareholders named below are selling the securities. The
table assumes that all of the securities will be sold in this offering. However,
any or all of the securities listed below may be retained by any of the selling
shareholders, and therefore, no accurate forecast can be made as to the number
of securities that will be held by the selling shareholders upon termination of
this offering. These selling shareholders acquired their shares by
purchase exempt from registration under section 4(2) of the Securities Act of
1933 under the Securities Act of 1933, specifically:
During
the period January 12, 2009 to May 27, 2009, the Company raised $153,700 from
seventeen investors. It is planned that the amount raised will result
in 608,667 shares issued. 578,000 of the shares were sold at $0.25
per share and 30,667 of the shares were sold at $0.30 per share. The
securities were offered pursuant to SEC Regulation D and have been issued to
only accredited or sophisticated investors. In addition, during the
period January 15, 2009 to June 14, 2009, the Company issued 377,000 shares for
paralegal, business plan development, office support/secretarial/business
development and branding, securities legal and operational support to thirteen
individuals. The Company valued theses shares at $103,750 based on
the value of services rendered. Mr. Shaw acquired his shares directly
from Mr. Rosenberger on January 4, 2009 for his agreement to become an officer
and director of the Company.
We
believe that the selling shareholders listed in the table have sole voting and
investment powers with respect to the securities indicated. We will
not receive any proceeds from the sale of the securities by the selling
shareholders. No selling shareholders are broker-dealers or
affiliates of broker-dealers.
21
Selling Shareholder
|
Shares to be
offered by the
Selling
Stockholders
|
Percentage
owned
before
Offering
|
Amount
owned after
the offering,
assuming all
shares sold
|
Percentage
owned after
the offering,
assuming
all shares
sold
|
Material
Transactions with
Selling Shareholder
in past 3 years [2]
|
||||||||||||
Bartlet,
Duane
|
8,000 | * | 0 | 0 | |||||||||||||
Champagne,
Raymond
|
10,000 | * | 0 | 0 | |||||||||||||
Crowe,
Chuck
|
5,000 | * | 0 | 0 | |||||||||||||
Emrick,
Bill
|
24,000 | * | 0 | 0 | |||||||||||||
Ferstl,
Tom
|
56,000 | * | 0 | 0 | |||||||||||||
Freed,
Corey
|
80,000 | * | 0 | 0 | |||||||||||||
Gulie,
Barbara
|
80,000 | * | 0 | 0 | |||||||||||||
Gulie,
Beverly
|
80,000 | * | 0 | 0 | |||||||||||||
Gulie,
Susan
|
80,000 | * | 0 | 0 | |||||||||||||
Hilt,
Robert
|
12,000 | * | 0 | 0 | |||||||||||||
Murk,
Kay
|
16,667 | * | 0 | 0 | |||||||||||||
Naso,
Dominic J
|
55,000 | * | 0 | 0 | |||||||||||||
Paul,
Jerry
|
40,000 | * | 0 | 0 | |||||||||||||
Wagner
Living Trust
|
8,000 | * | 0 | 0 | |||||||||||||
Williams,
Gary
|
40,000 | * | 0 | 0 | |||||||||||||
Franklin
L. Silber
|
4,000 | * | 0 | 0 | |||||||||||||
Shiela
Wood
|
10,000 | * | 0 | 0 |
Business
Plan Development 11/3/08-4/14/09 [2]
|
||||||||||||
Denise
Annunciata
|
4,000 | * | 0 | 0 |
Paralegal
11/15/08- 6/9/09 [2]
|
||||||||||||
Joanne
Wolforth
|
4,000 | * | 0 | 0 |
Paralegal
11/15/08- 6/9/09 [2]
|
||||||||||||
Kathy
Rasler
|
4,000 | * | 0 | 0 |
Paralegal
11/15/08- 6/9/09 [2]
|
||||||||||||
Benjamin
Silber
|
20,000 | * | 0 | 0 |
Business
Plan Development 11/3/08-4/14/09 [2]
|
||||||||||||
Herb
Senft
|
10,000 | * | 0 | 0 |
Business
Plan Development 10/13/08-11/18/08 [2]
|
||||||||||||
Susan
Lister
|
24,000 | * | 0 | 0 |
Secretarial
10/13/08 – 8/1/09 [2]
|
||||||||||||
Gerald
Smith
|
12,000 | * | 0 | 0 |
Internet
and web support 10/13/08 – 6/24/09 [2]
|
||||||||||||
James
Smith
|
24,000 | * | 0 | 0 |
Business
Consulting 10/15/08 – 8/20/09 [2]
|
||||||||||||
Michael
Williams
|
50,000 | * | 90,000 | * |
Attorney: on-going
[2]
|
||||||||||||
Brandon
Williams
|
17,500 | * | 0 | 0 |
Affiliate
of Attorney [2]
|
||||||||||||
Maggie
Ensley
|
17,500 | * | 0 | 0 |
Affiliate
of Attorney [2]
|
||||||||||||
James
Shaw
|
80,000 | * | 13,520,000 | 38.7 |
Officer/Director: on-going
[2]
|
||||||||||||
Michael
Rosenberger [1]
|
80,000 | * | 18,820,000 | 53.9 |
Officer/Director: on-going
[2]
|
||||||||||||
Total
|
955,667 | 32,430,000 |
* Less
than 1%
[1] Excludes
1,500,000 shares held by Shawn Particia McCarthy, his wife.
22
[2] The
agreement with these service providers was that if they rendered the required
services as described in this column, they would receive these
shares. All service providers did render the required
services.
Blue Sky
The
holders of our shares of common stock and persons who desire to purchase them in
any trading market that might develop in the future should be aware that there
may be significant state law restrictions upon the ability of investors to
resell our shares. Accordingly, even if we are successful in having the Shares
available for trading on the OTCBB, investors should consider any secondary
market for the Company's securities to be a limited one. We intend to seek
coverage and publication of information regarding the company in an accepted
publication which permits a "manual exemption." This manual exemption permits a
security to be distributed in a particular state without being registered if the
company issuing the security has a listing for that security in a securities
manual recognized by the state. However, it is not enough for the security to be
listed in a recognized manual. The listing entry must contain (1) the names of
issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a
profit and loss statement for either the fiscal year preceding the balance sheet
or for the most recent fiscal year of operations. We may not be able
to secure a listing containing all of this information. Furthermore,
the manual exemption is a non issuer exemption restricted to secondary trading
transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and Poor's, Moody's
Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and
many states expressly recognize these manuals. A smaller number of states
declare that they “recognize securities manuals” but do not specify the
recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual exemption: Alabama, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and
Wisconsin.
PLAN
OF DISTRIBUTION
Our
common stock is currently not quoted on any market. No market may
ever develop for our common stock, or if developed, may not be sustained in the
future. Accordingly, our shares should be considered totally
illiquid, which inhibits investors’ ability to resell their shares.
Selling
shareholders are offering up to 955,667 shares of common stock. The
selling shareholders will offer their shares at $.25 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We will not receive any proceeds of
the sale of these securities. We will pay all expenses of registering
the securities.
The
securities offered by this prospectus will be sold by the selling shareholders
without underwriters and without commissions. The distribution of the
securities by the selling shareholders may be effected in one or more
transactions that may take place in the over-the-counter market or privately
negotiated transactions.
The
selling shareholders may pledge all or a portion of the securities owned as
collateral for margin accounts or in loan transactions, and the securities may
be resold pursuant to the terms of such pledges, margin accounts or loan
transactions. Upon default by such selling shareholders, the pledge in such loan
transaction would have the same rights of sale as the selling shareholders under
this prospectus. The selling shareholders may also enter into exchange traded
listed option transactions, which require the delivery of the securities listed
under this prospectus. After our securities are qualified for quotation on the
OTC Bulletin Board, the selling shareholders may also transfer securities owned
in other ways not involving market makers or established trading markets,
including directly by gift, distribution, or other transfer without
consideration, and upon any such transfer the transferee would have the same
rights of sale as such selling shareholders under this prospectus.
23
In
addition to the above, each of the selling shareholders will be affected by the
applicable provisions of the Securities Exchange Act of 1934, including, without
limitation, Regulation M, which may limit the timing of purchases and sales of
any of the securities by the selling shareholders or any such other
person. We have instructed our selling shareholders that they many
not purchase any of our securities while they are selling shares under this
registration statement. We have advised them that we will monitor our
stock transfer records on a regular basis and will void any transaction they
undertake in violation of this restriction.
Upon this
registration statement being declared effective, the selling shareholders may
offer and sell their shares from time to time until all of the shares registered
are sold; however, this offering may not extend beyond two years from the
initial effective date of this registration statement.
There can
be no assurances that the selling shareholders will sell any or all of the
securities. In various states, the securities may not be sold unless
these securities have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied
with.
All of
the foregoing may affect the marketability of our securities. Pursuant to oral
promises we made to the selling shareholders, we will pay all the fees and
expenses incident to the registration of the securities.
Should
any substantial change occur regarding the status or other matters concerning
the selling shareholders or us, we will file a post-effective amendment
disclosing such matters.
OTC Bulletin Board
Considerations
We
anticipate that our stock will not be listed on a securities exchange but will
only be qualified for quotation on the OTC Bulletin Board. To be
quoted on the OTC Bulletin Board, a market maker must file an application on our
behalf in order to make a market for our common stock. We have
engaged in preliminary discussions with a FINRA Market Maker to file our
application on Form 211 with FINRA, but as of the date of this prospectus, no
filing has been made. Based upon our counsel’s prior experience, we
anticipate that after this registration statement is declared effective, it will
take approximately 2 – 8 weeks for FINRA to issue a trading symbol.
The OTC
Bulletin Board is separate and distinct from the NASDAQ stock
market. NASDAQ has no business relationship with issuers of
securities quoted on the OTC Bulletin Board. The SEC’s order handling
rules, which apply to NASDAQ-listed securities, do not apply to securities
quoted on the OTC Bulletin Board.
Although
the NASDAQ stock market has rigorous listing standards to ensure the high
quality of its issuers, and can delist issuers for not meeting those standards,
the OTC Bulletin Board has no listing standards. Rather, it is the
market maker who chooses to quote a security on the system, files the
application, and is obligated to comply with keeping information about the
issuer in their files. FINRA cannot deny an application by a market
maker to quote the stock of a company. The only requirement for
inclusion in the bulletin board is that the issuer be current in our reporting
requirements with the SEC.
24
Although
we anticipate qualifying our securities for quotation on the OTC Bulletin board
will increase liquidity for our stock, investors may have greater difficulty in
getting orders filled because it is anticipated that if our stock trades on a
public market, it initially will trade on the OTC Bulletin Board rather than on
NASDAQ. Investors’ orders may be filled at a price much different
than expected when an order is placed. Trading activity in general is
not conducted as efficiently and effectively as with NASDAQ-listed
securities.
Investors
must contact a broker-dealer to trade OTC Bulletin Board
securities. Investors do not have direct access to the bulletin board
service. For bulletin board securities, there only has to be one
market maker.
Bulletin
board transactions are conducted almost entirely manually. Because
there are no automated systems for negotiating trades on the bulletin board,
they are conducted via telephone. In times of heavy market volume,
the limitations of this process may result in a significant increase in the time
it takes to execute investor orders. Therefore, when investors place
market orders - an order to buy or sell a specific number of shares at the
current market price - it is possible for the price of a stock to go up or down
significantly during the lapse of time between placing a market order and
getting execution.
Because
bulletin board stocks are usually not followed by analysts, there may be lower
trading volume than for NASDAQ-listed securities.
LEGAL
PROCEEDINGS
There are
no pending or threatened lawsuits against us.
EXPERTS
The
balance sheet as of December 29, 2008, and the related statements of operations,
changes in stockholders’ deficit and cash flows for the periods ended December
29, 2008 and December 30, 2007 included in this Prospectus have been audited by
W.T. Uniack & Co., CPAs P.C.an independent registered public accounting
firm, to the extent set forth in its report and are incorporated herein in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
The
legality of the shares offered under this registration statement is being passed
upon by Williams Law Group, P.A., Tampa, Florida. Michael T. Williams,
principal of Williams Law Group, P.A., and two affiliates of the firm own
175,000 shares of our common stock, of which 85,000 are being registered in this
offering.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
LIABILITIES
Our
Bylaws, subject to the provisions of Florida Law, contain provisions which allow
the corporation to indemnify any person against liabilities and other expenses
incurred as the result of defending or administering any pending or anticipated
legal issue in connection with service to us if it is determined that person
acted in good faith and in a manner which he reasonably believed was in the best
interest of the corporation. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
directors, officers and controlling persons, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
25
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The Board
of Directors elects our executive officers annually. A majority vote
of the directors who are in office is required to fill
vacancies. Each director shall be elected for the term of one year
and until his successor is elected and qualified or until his earlier
resignation or removal. Our directors and executive officers are as
follows:
Name
|
Age
|
Position
|
|||
Michael
Rosenberger
|
57
|
President
and Director
|
|||
James
R. Shaw
|
56
|
Vice
President and Director
|
Michael
Rosenberger has been President and Director since our formation in April
2000. He has been President of Moose River Management, Inc., our
licensor, since its formation in January 2007. From 1997
to date, Mr. Rosenberger has been President and Director of Hot Wings Concepts,
Inc., a franchisee of 3 Dick’s Wings restaurants located in Jacksonville FL.
From January 2002 until January 2007, he was president of Dick’s Wings
USA, Inc., now inactive, which previously owned the rights licensed to us but
transferred them to Moose River Management, Inc. upon its
formation.
James
R. Shaw has been Vice President and Director since he joined us in October
2008. From June 2005 to August 2006, he was President of In Touch
Parents, Inc, a child protection company. From August 2004 to date,
he has been President of Crescent Hill Capital Corp., a business advisory
company. From June 2004 to August 2006, he was President of In Touch
Parents, Inc, a child protection company. In July 2007, he started an
e-commerce web site called E-World Mall Inc. which is currently
inactive. In February 2004, he consented to the entry of an Order of
Prohibition from the State of Wisconsin providing that he and his affiliates
would not make offers or sales of securities in Wisconsin unless the securities
were covered or registered securities under Wisconsin law.
He
received a BA from Carson-Newman College in 1979.
Family Relationships
There are
no family relationships among our officers or directors.
Legal
Proceedings
Except as
set forth above, no officer, director, or persons nominated for such positions,
promoter, or significant employee has been involved in the last five years in
any of the following:
|
·
|
Any
bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer, either at the time of the
bankruptcy or within two years prior to that
time;
|
|
·
|
Any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor
offenses);
|
|
·
|
Being
subject to any order, judgment, or decree, not subsequently reversed,
suspended, or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending, or otherwise limiting his
involvement in any type of business, securities, or banking activities;
and
|
26
|
·
|
Being
found, by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission, to have violated a
federal or state securities or commodities law, and the judgment has not
been reversed, suspended, or
vacated.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following tables set forth the ownership, as of the date of this prospectus, of
our Common Stock by each person known by us to be the beneficial owner of more
than 5% of our outstanding Common Stock, our directors, and our executive
officers, and our executive officers and directors as a group. To the
best of our knowledge, the persons named have sole voting and investment power
with respect to such shares, except as otherwise noted. There are not
any pending or anticipated arrangements that may cause a change in
control.
The
information presented below, regarding beneficial ownership of our voting
securities, has been presented in accordance with the rules of the Securities
and Exchange Commission and is not necessarily indicative of ownership for any
other purpose. Under these rules, a person is deemed to be a
"beneficial owner" of a security if that person has, or shares, the power to
vote or direct the voting of the security or the power to dispose or direct the
disposition of the security. A person is deemed to own beneficially
any security as to which such person has the right to acquire sole or shared
voting or investment power within 60 days through the conversion or exercise of
any convertible security, warrant, option, or other right. More than
one person may be deemed to be a beneficial owner of the same
securities.
The
percentage of beneficial ownership by any person, as of a particular date, is
calculated by dividing the number of shares beneficially owned by such person,
which includes the number of shares as to which such person has the right to
acquire voting or investment power within 60 days, by the sum of the number of
shares outstanding as of such date plus the number of shares as to which such
person has the right to acquire voting or investment power within 60
days. Consequently, the denominator used for calculating such
percentage may be different for each beneficial owner. Except as otherwise
indicated below and under applicable community property laws, we believe that
the beneficial owners of our Common stock listed below have sole voting and
investment power with respect to the shares shown. The business
address for all persons is East 14476 Duval Place West, Suite 103, Jacksonville,
FL 32218.
27
Shareholders
|
# of Shares
|
Percentage
|
||||||
Michael
Rosenberger [1]
|
20,400,000 | 58.3 | % | |||||
Shawn
Particia McCarthy [1]
|
20,400,000 | 58.3 | % | |||||
James
R. Shaw
|
13,600,000 | 38.9 | % | |||||
All
officers and directors as group [2 persons]
|
34,000,000 | 97.2 | % |
[1] Owned
18,900,000 by Mr. Rosenberger and 1,500,000 by Ms. McCarthy, his
wife.
This
table is based upon information derived from our stock
records. Unless otherwise indicated in the footnotes to this table
and subject to community property laws where applicable, each of the
shareholders named in this table has sole or shared voting and investment power
with respect to the shares indicated as beneficially
owned. Applicable percentages are based upon 34,885,668 shares of
Common Stock outstanding as of September 1, 2009.
DESCRIPTION
OF SECURITIES
The
following description is a summary of the material terms of the provisions of
our Articles of Incorporation and Bylaws as they relate to our capital
structure. The Articles of Incorporation and Bylaws are available for
inspection upon request.
Common
Stock
We have
100,000,000 authorized shares of Common Stock with a $.01 par
value. All shares are equal to each other with respect to liquidation
and dividend rights. Holders of voting shares are entitled to one
vote for each share they own at any shareholders' meeting. Holders of
our shares of Common Stock do not have cumulative voting rights.
Each
share of Common Stock entitles the holder to one vote, either in person or by
proxy, at meetings of shareholders. The holders are not permitted to
vote their shares cumulatively. Accordingly, the shareholders of our
Common Stock who hold, in the aggregate, more than fifty percent of the total
voting rights can elect all of our directors and, in such event, the holders of
the remaining minority shares will not be able to elect any of the such
directors. The vote of the holders of a majority of the issued and
outstanding shares of Common Stock entitled to vote thereon is sufficient to
authorize, affirm, ratify, or consent to such act or action, except as otherwise
provided by law.
Holders
of Common Stock are entitled to receive ratably such dividends, if any, as may
be declared by the Board of Directors out of funds legally
available. Although we made distributions to owners when we were an S
Corporation in 2008 and 2009, since our conversion to a C Corporation in January
2009, we have not paid any, and we presently anticipate that all earnings, if
any, will be retained for development of our business. Any future
disposition of dividends will be at the discretion of our Board of Directors and
will depend upon, among other things, our future earnings, operating and
financial condition, capital requirements, and other factors.
28
Holders
of our Common Stock have no preemptive rights or other subscription rights,
conversion rights, redemption, or sinking fund provisions. Upon our
liquidation, dissolution, or winding up, the holders of our Common Stock will be
entitled to share ratably in the net assets legally available for distribution
to shareholders after the payment of all of our debts and other
liabilities. There are not any provisions in our Articles of
Incorporation or our Bylaws that would prevent or delay change in our
control. There is no conversion, preemptive or other subscription
rights or privileges with respect to any shares.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
LIABILITIES
Our
Articles and Bylaws, subject to the provisions of Florida law, contain
provisions which allow the corporation to indemnify any person against
liabilities and other expenses incurred as the result of defending or
administering any pending or anticipated legal issue in connection with service
to us if it is determined that person acted in good faith and in a manner which
he/she reasonably believed was in the best interest of the
corporation. Insofar, indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to our directors, officers, and
controlling persons. We have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
DESCRIPTION
OF BUSINESS
Organization
American
Restaurant Concepts, Inc., a Florida corporation, was incorporated in April
2000.
Business
American
Restaurant Concepts currently franchises Dick’s Wings restaurants, using the
Dick’s Wings product line. Dick’s Wings Express is a limited service restaurant,
concentrating on take out orders. Dick’s Wings & Grill is a full
service restaurant.
We offer
two types of franchise opportunities:
|
·
|
Area
Development Agreements, also called Master License Agreements, which grant
the right to open a specified number of Dick’s Wings restaurants (either
Dick’s Wings & Grille, Dick’s Wings Express or both) within an
exclusive development area in accordance with a specified development
schedule.
|
|
·
|
The
Dick’s Wings Franchise offers qualified purchasers the right to establish
and operate, from a single location within a specified territory, a racing
theme restaurant under the Dick’s Wings marks and
system.
|
We
currently have one Area Development Agreements for the following
territories: Exclusive in Florida and non-Exclusive in the rest of
the U.S.
We
currently have 19 Franchises located in Florida and 3 Franchisees located in
Georgia.
29
Dick’s
Wings is the fictitious name used by American Restaurants Concepts,
Inc. Moose River Management, Inc., an affiliate of American
Restaurant Concepts, Inc. owned by Michael Rosenberger, our President, was
incorporated in January 2007 and is the owner of the US registered
trademarks “Dick’s Wings,” “Dick’s Wings & Grille and design” and
“Dick’s Wings Express and design” and the state trademark “Dick’s Wings and
Design.” The use of these marks was licensed to us in perpetuity by
Moose River Management, Inc. in 2007, as amended and restated in
2009.
For
fiscal year ended December 31, 2008 and for the first nine months of fiscal year
2009, we generated the following percentages of revenues from each of these
categories:
First nine months of fiscal year 2009
(unaudited)
|
Fiscal year 2008
|
|||||||||||||||
Revenues
|
Percentage of
Total Revenues
|
Revenues
|
Percentage of
Total Revenues
|
|||||||||||||
Master
License Agreement
|
$ | 13,794 | 3.2 | % | - | - | ||||||||||
Franchise
Agreements
|
$ | 37,787 | 8.9 | % | $ | 103,740 | 14.6 | % | ||||||||
Fees
related to franchisee operations
|
$ | 374,813 | 87.9 | % | $ | 608,721 | 85.4 | % | ||||||||
TOTAL
|
$ | 426,394 | 100 | % | $ | 712,461 | 100 | % |
Dick’s
Wings is the fictitious name used by American Restaurant Concepts. Moose River
Management, Inc., and affiliate of American Restaurant Concepts owned by Michael
Rosenberger, our president, was incorporated in January 2007 and is the owner of
the trademarks “Dick’s Wings,” “Dick’s Wings & Grille” and
“Dick’s Wings Express.” Moose River Management licenses the
following to us:
|
·
|
Non-exclusive
license to reproduce the Trademark on or in association with the Licensed
Products, for the use of franchising, as well as on packaging, promotional
and advertising material associated
herewith.
|
|
·
|
The
right to sublicense the Trademarks to any franchisee for use in the
franchised locations.
|
30
|
·
|
Although
our right is non-exclusive so long as the agreement is in effect, Moose
River agrees not to grant any other party a license to use the
Trademarks.
|
|
·
|
The
agreement includes any trademarks that Moose River Management, Inc.
applies for and registers during the duration of this
Agreement.
|
The
agreements is for a term of fifty years commencing June 2007. We have the right
to renew the Agreement for a one additional fifty year term. As
consideration for the Agreement, we paid Moose River $100.
Dick’s Wings
Concept
The
Dick’s Wings concept features made to order menu items, including buffalo style
chicken wings covered in one of our fourteen signature sauces. In addition to
fresh chicken wings, the Dick’s Wings menu features specialty hamburgers and
sandwiches, buffalito soft tacos, finger foods and salads. The fourteen Dick’s
Wings sauces from the mildest, teriyaki to the hottest blazing, are designed to
compliment many of the Dick’s Wings menu items, allowing guests to customize
their meal by adding a signature sauce. Our Dick’s Wings Restaurants feature a
full bar, including approximately twenty domestic and imported beers on tap, a
broad selection of bottled beer, wine and liquor. We also provide an array of
value added entertainment with trivia games, 35-40 televisions, 7-10 big screen
projection televisions, video games and a family friendly dining area. Our
Dick’s Wings Restaurants feature a flexible service model that allows entering
guests to order at the counter for dine in or take out service or order at the
table from our servers.
Master License
Agreement
On June
28, 2008, we entered into a Master License Agreement with DWG Partners as Master
Licensee. The material terms of the Agreement are as
follows:
We
granted Master Licensee the to license Franchisees within a defined
area, referred to as “Master License Area” defined as:
|
·
|
A
non-exclusive right to solicit and service franchisees on behalf of us in
all of the United States
|
|
·
|
So
long as Master Licensee is in good standings under the Agreement, Master
Licensee have the exclusive right to solicit and service franchisees on
behalf of us in the state of
Florida
|
Master
Licensee paid a master license fee in the sum of $400,000.
The term
of the Agreement is ten years. We and Master Licensee shall negotiate a
new development schedule in good faith during the last three months of the
term. The maximum term under any renewal Development Schedule shall be a
ten year period.
The
Development Schedule as set forth below for the exclusive territory of Florida
is as follows:
31
Year
|
Minimum Store Openings in
Florida
Required By Year End
|
Minimum Cumulative Stores in
Florida Open At Year End
|
||||||
2009
|
3 | 3 | ||||||
2010
|
5 | 8 | ||||||
2011
|
5 | 13 | ||||||
2012
|
5 | 18 | ||||||
2013
|
5 | 23 | ||||||
2014
|
5 | 28 | ||||||
2015
|
5 | 33 | ||||||
2016
|
5 | 38 | ||||||
2017
|
5 | 43 | ||||||
2018
|
5 | 48 | ||||||
2019
|
5 | 53 | ||||||
2020
|
5 | 58 |
Master
Licensee is entitled to compensation as follows.
|
·
|
Initial
Franchise Fee: Master Licensee is entitled to hundred (100%) percent of
the Initial Franchise Fee for each sale made by Master Licensee in the
Master License Area. Master Licensee shall not be entitled to any Initial
Franchise Fee for a sale outside the Master License Area or any sale not
made by Master Licensee. Franchisee
shall pay Us the Initial Franchise Fee and we shall pay Master Licensee
within 30 days of its receipt.
|
|
·
|
Royalty: So
long as Master Licensee provides the service obligations pursuant to the
franchise agreement on behalf of us, Master Licensee shall be entitled to
receive a percentage of the Royalties paid by the franchisee to whom
Master Licensee provide the support. Master Licensee shall
receive the Royalty payments so long as Master Licensee remains in good
standing under the Agreement or until the assumption of the service
obligations by us or upon Master Licenseer breachs of the
Agreement. Master Licensee will not receive a royalty on any of
our restaurants, including our Affiliates, or any franchisees in which
Master Licensee does not provide
support.
|
The
royalty split shall be:
1.
|
Existing
Restaurants as of the date of the
Agreement:
|
Master
Franchisee: Sixty (60%) percent
Us: Forty
(40%) percent
2.
|
Subsequent
Restaurant opened after the date of the
Agreement:
|
Master
Franchisee: Eighty (80%) percent
Us;
Twenty (20%) percent.
The
Agreement provides for termination in the event of breach of the Agreement or
other specified reasons. The Agreement may not be assigned, transferred or
sold by Master Licensee without first having received our written
consent.
The
Agreement provides for non-competition while the Agreement is in effect and in
the event of a termination of the Agreement, for a period of five years after
termination does not allow Master Licensee to engage in, a business which is the
same or substantially similar to a Dick’s Wings & Grill Restaurant,
including without limitation, any restaurant selling chicken wing products or
other proprietary products similar to those sold in a Dick’s Wings & Grill
restaurant, and which is operating or soliciting others to operate anywhere
within the Master License Area or within 5 miles of any Dick’s Wings & Grill
Restaurant, unless such right is granted pursuant to a separate agreement with
us.
32
The
Agreement requires that the Master Licensee and its franchisees comply with
operating procedures specified by us.
Current Restaurant
Locations
As of
June 30, 2009, we franchised 19 Dick’s Wings restaurants in the following cities
in Florida:
Jacksonville,
FL (11)
|
Callahan,
FL
|
GCS,
FL
|
Atlantic
Beach, FL
|
Middleburg,
FL
|
St.
Augustine, FL
|
Stark,
FL
|
Orange
Park, FL
|
Fernandina
Bch, FL
|
We also
franchised 3 Dick’s Wings restaurants in the following cities in
Georgia:
Folkston,
GA
|
St.
Mary's, GA
|
Waycross,
GA
|
Restaurants
range in size from 4,000 to 7,600 square feet, with an average of approximately
5,600 square feet for restaurants that have opened in the last three years. We
anticipate that future restaurants will range in size from 4,500 square feet to
6,400 square feet with an average cash investment per restaurant of
approximately $1.2 million, excluding preopening expenses of approximately
$180,000. From time to time, we expect that restaurants may be smaller or larger
or cost more or less than our targeted range, depending on the particular
circumstances of the selected site or market.
Restaurants
are typically open on a daily basis from 11 a.m. to 2 a.m. Closing times vary
depending on the day of the week and city and state regulations governing the
sale of alcoholic beverages. Our franchise agreements require franchisees to
operate their restaurants for a minimum of 12 hours a day.
Kitchen
Operations
An
important aspect of our concept is the efficient design, layout and execution of
our kitchen operations. Due to the relatively simple preparation of our menu
items, the kitchen consists of fryers, grill and food prep stations that are
arranged assembly-line style for maximum productivity. Given our menu and
kitchen design, we are able to staff our kitchen with hourly employees who
require only basic training before reaching full productivity. Additionally, we
do not require the added expense of an on-site chef. The ease and simplicity of
our kitchen operations allows us to achieve our goal of preparing casual dining
quality food with minimal wait times. We also believe the ease of our kitchen
operations is a significant factor in attracting franchisees.
33
Food
Preparation, Quality Control and Purchasing
We strive
to maintain high quality standards. Our systems are designed to protect our food
supply throughout the preparation process. We provide detailed specifications to
suppliers for our food ingredients, products and supplies. Our restaurant
managers are certified in a comprehensive food safety and sanitation course,
ServSafe, developed by the National Restaurant Association Educational
Foundation.
We
negotiate directly with independent suppliers for our supply of food and paper
products. We use members of UniPro Food Services, Inc., a national cooperative
of independent food distributors, to distribute these products from the
suppliers to our restaurants. To maximize our purchasing efficiencies and obtain
the lowest possible prices for our ingredients, products and supplies, our
purchasing team negotiates prices based on system-wide usage for franchised
restaurants. We believe that competitively priced, high quality alternative
manufacturers, suppliers, growers and distributors are available should the need
arise.
We
utilize T. Marzetti company for the production of our signature sauces. They
maintain sufficient inventory levels to ensure consistent supply to our
restaurants. We have a confidentiality agreement with Marzetti which prevents
our sauces from being supplied to, or manufactured for, anyone
else.
Fresh
chicken wings are an important component of our cost of sales. Prices are
generally based on the underlying commodity price of chicken wings plus
additional costs for handling and distribution. Fresh chicken wings accounted
for approximately 24%, 27%, and 34% of our cost of sales in 2006, 2005, and
2004, respectively. We ensure consistent supply of high quality chicken wings by
utilizing four to six suppliers, with Peco Foods, Inc. currently accounting for
approximately 33% of the total system-wide supply. Given our multiple suppliers
and the commodity nature of fresh chicken wings, we believe we have sufficient
supplier flexibility to maintain a consistent chicken wing supply. We regularly
review our buying procedures to ensure quality and cost
optimization.
Site Selection and
Development
Our
site selection process is integral to the successful execution of our growth
strategy. We have processes for identifying, analyzing and approving new
markets, as defined by the A.C. Nielson designated market areas in the United
States. In selecting designated market areas, we collect and review restaurant
industry data relating to restaurant sales, spending on food away from home and
expected restaurant growth in the market, as well as market demographics,
population data and relative media costs for radio and television advertising.
Once a market is identified, we use a trade area and site selection evaluation
system, which has been customized for the requirements of the Dick’s Wings
system, to assist in identifying suitable trade areas within that market and
suitable sites within identified trade areas. Criteria examined to determine
appropriate trade areas include the presence of a casual dining corridor,
projected growth within the trade area, the locations of key big box retailers
and multi-screen movie theaters in the neighborhood, key demographics and
population density, drive time and trade area analysis and other quantitative
and qualitative measures. Once a suitable trade area is identified, we examine
site-specific details including visibility, signage, access and
parking.
Marketing and
Advertising
We
have created a unique marketing program designed to communicate a distinctive
and consistent brand that differentiates Dick’s Wings from our competitors and
that showcases our food in a fun and energetic atmosphere. These efforts include
marketing campaigns and advertising to support our franchised restaurants. The
primary goal of these efforts is to build brand awareness throughout the United
States. In addition, advertising campaigns are also designed
to:
34
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drive
positive same-store sales through additional visits by our existing guests
and visits by new guests,
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increase
margins,
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increase
average order size, and
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support
strong restaurant openings.
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Marketing
Campaigns
Our
primary marketing campaigns focus on a particular menu item, day or daypart in
an attempt to drive traffic and build brand awareness. For example, ***. Our
secondary marketing campaigns focus on reaching beyond the core Dick’s Wings
guest. Given our strategy to be a neighborhood destination, community marketing
is also a key to developing brand awareness in each market. Restaurants actively
sponsor local sporting teams and sporting events to drive guest traffic
associated with those activities.
Advertising
Our media
advertising focuses on positioning the Dick’s Wings brand as an inviting
neighborhood dining location. Our commercials, print advertisements and radio
spots are irreverent by design and have been recognized in the restaurant and
advertising industries for their creativity.
Franchise
Involvement
System-wide
campaigns and promotions are developed and implemented with input from the
Dick’s Wings National Advertising Advisory Board. This volunteer franchisee
board is elected by franchisees annually and meets regularly to review marketing
strategies, provide input on advertising messages and vendor co-op programs, and
discuss marketing objectives.
Restaurant Franchise
Operations
Our
concept continues to attract a strong group of franchisees, many of whom have
substantial prior restaurant operations experience. Our franchisees execute a
separate franchise agreement for each restaurant opened, typically providing for
a 15 to 20-year initial term, with an opportunity to enter into a renewal
franchise agreement subject to certain conditions. Our agreement currently
requires franchisees to pay an initial franchise fee of $42,500 for the first
restaurant opened and $32,500 for each additional restaurant they open. The
$32,500 fee is reduced to $12,500 if the additional restaurant is in the
designated area of the franchisee's existing restaurant. If a franchisee has
entered into an area development agreement with us, the initial franchise fee is
$42,500 for the first restaurant, $32,500 for the second restaurant and $27,500
for each subsequent restaurant. These amounts are reduced to $32,500 for the
first restaurant and $12,500 for each subsequent restaurant if the franchisee is
an existing area developer signing an additional area development agreement. If
the franchisee is an existing franchisee that subsequently signs an area
development agreement, the franchise fee is $32,500 for the first restaurant and
$22,500 for each subsequent restaurant.
35
Franchisees
also pay us a royalty fee of 5.0% of their restaurant sales. Franchise
agreements typically allow us to assess franchisees an advertising fee in the
amount of 3.5% of their restaurant sales, of which 3.0% was contributed to our
Advertising Fund in 2006 and the remaining 0.5% was spent directly by the
franchisee in the applicable local market. Our current form of franchise
agreement permits us to increase the required contribution to the Advertising
Fund by 0.5% once every three years.
All of
our franchise agreements require that each franchised restaurant be operated in
accordance with our defined operating procedures, adhere to the menu established
by us, meet applicable quality, service, health and cleanliness standards and
comply with all applicable laws. We ensure these high standards are being
followed through a variety of means including mystery shoppers and announced and
unannounced quality assurance inspections. We also employ franchise consultants
to assist our franchisees in developing profitable operations and maintaining
our operating standards. We may terminate the franchise rights of any franchisee
who does not comply with our standards and requirements. We believe that
maintaining superior food quality, an inviting and energetic atmosphere and
excellent guest service are critical to the reputation and success of our
concept; therefore, we aggressively enforce the contractual requirements of our
franchise agreements.
Franchisees
are required to report sales on a daily basis through an on-line reporting
network and submit their restaurant-level financial statements on a quarterly or
annual basis.
The area
development agreement establishes the number of restaurants that must be
developed in a defined geographic area and the deadlines by which these
restaurants must open. For area development agreements covering three to seven
restaurants, restaurants are usually required to open in 12-month intervals. For
larger development agreements, the interval is typically shorter. The area
development agreement can be terminated by us if, among other reasons, the area
developer fails to open restaurants on schedule.
Competition
The
restaurant industry is intensely competitive. We compete on the basis of the
taste, quality and price of food offered, guest service, ambience, location, and
overall dining experience. We believe that our attractive price-value
relationship, the atmosphere of our restaurant, our flexible service model and
the quality and distinctive flavor of our food enable us to differentiate
ourselves from our competitors. We believe we compete primarily with local and
regional sports bars and casual dining and quick casual establishments, as well
as with quick service restaurants such as wing-based take-out concepts. Many of
our direct and indirect competitors are well-established national, regional or
local chains and some have substantially greater financial and marketing
resources than we do. We also compete with many restaurant and retail
establishments for site locations and restaurant employees.
Proprietary
Rights
We
license the rights to the "Dick’s Wings(R)" service mark and to certain other
service marks and trademarks used in our system from Moose River Management,
Inc., an affiliate owned by our president. The license is
exclusive. This mark is federally registered along with Dick’s Wings
& Grill but is not owned by us. The term of the Agreement is for
50 years, with a right to renew for an additional 50 years. In
consideration for the right to use the Trademarks and Licensed Products, we
promised to use, promote, and advertise the Moose River’s products and to use
the Trademarks for franchising Dick’s Wings and Dick’s Wings Express
locations.
36
We
attempt to protect our sauce recipes as trade secrets by, among other things,
requiring a confidentiality agreement with our sauce supplier and executive
officers. It is possible that competitors could develop recipes and procedures
that duplicate or closely resemble our recipes and procedures. We believe that
our trademarks, service marks and other proprietary rights have significant
value and are important to our brand-building efforts and the marketing of our
restaurant concept. We vigorously protect our proprietary rights. We cannot
predict, however, whether steps taken by us to protect our proprietary rights
will be adequate to prevent misappropriation of these rights or the use by
others of restaurant features based upon, or otherwise similar to, our concept.
It may be difficult for us to prevent others from copying elements of our
concept and any litigation to enforce our rights will likely be costly and may
not be successful. Although we believe that we have sufficient rights to all of
our trademarks and service marks, we may face claims of infringement that could
interfere with our ability to market restaurants and promote our brand. Any such
litigation may be costly and divert resources from our business. Moreover, if we
are unable to successfully defend against such claims, we may be prevented from
using our trademarks or service marks in the future and may be liable for
damages.
Government
Regulation
The
restaurant industry is subject to numerous federal, state and local governmental
regulations, including those relating to the preparation and sale of food and
alcoholic beverages, sanitation, public health, fire codes, zoning and building
requirements. Each restaurant requires appropriate licenses from regulatory
authorities allowing it to sell liquor, beer and wine, and each restaurant
requires food service licenses from local health authorities. Our licenses to
sell alcoholic beverages must be renewed annually and may be suspended or
revoked at any time for cause, including violation by us or our employees of any
law or regulation pertaining to alcoholic beverage control, such as those
regulating the minimum age of employees or patrons who may serve or be served
alcoholic beverages, the serving of alcoholic beverages to visibly intoxicated
patrons, advertising, wholesale purchasing and inventory control. The failure of
a restaurant to retain liquor or food service licenses could have a material
adverse effect on operations.
Our
franchisees are also subject to laws governing our relationships with employees,
including laws and regulations relating to benefits, wages, hours, workers'
compensation insurance rates, unemployment and other taxes, working and safety
conditions and citizenship or immigration status. They may also be subject in
certain states to "dram-shop" statutes, which generally allow a person injured
by an intoxicated person to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated person.
In
addition, we are subject to various state and federal laws relating to the offer
and sale of franchises and the franchisor-franchisee relationship. In general,
these laws and regulations impose specific disclosure and registration
requirements prior to the sale and marketing of franchises and regulate certain
aspects of the relationship between franchisor and franchisee.
We are
not registered in Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New
York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and
Wisconsin.
Federal
Franchise Requirements. Federal franchise regulations have been put
in place by the Federal Trade Commission (FTC) to ensure full disclosure of
information relating to a franchise company prior to the purchase of a
franchise. The basic disclosure rule requires a franchisor to provide potential
franchisees with a disclosure document (Franchise Disclosure Document or
“FDD”). The FTC rule requires disclosure only and does not require
registration, filing, review, or approval of any disclosures, advertising, or
agreements by the FTC. Civil litigants do not have a private right of action
under the FTC regulations.
37
State Requirements: Florida
regulations requires that franchise companies selling in the state of Florida or
selling to Florida residents follow the FTC requirements by giving franchise
purchasers a private right of action for violations of the FTC regulation.
Florida also prohibits certain misrepresentations in connection with the selling
or establishing a franchise under the Florida Franchise Misrepresentation Act.
Florida requires disclosure only and does not require registration,
filing, review or approval of any disclosures, advertising or agreements.
Franchise companies are exempt from Florida’s business opportunities
regulations if they comply with the FTC regulations and file an annual exemption
form. Georgia law does not have regulations which provide franchisees with a
private right of action for violations of FTC requirements. Georgia provides
protection to franchise purchasers under Georgia’s Business Opportunity
statutes; however, the license of a federally registered trademark or service
mark to a franchise purchaser is exempt from Georgia’s business opportunity
statutes. Georgia does not requirement registration, filing, review or
approval of any disclosures, advertising or agreements.
Research and
Development
We did
not incur any research and development expenses in our last two fiscal
years.
Employees
We have
the following full-time employees:
Clerical
–
Operations
– 2
Administrative
– 1
Management
– 2
38
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Disclosure
Regarding Forward Looking Statements
This
registration statement contains forward-looking statements. In some cases,
you can identify these statements by forward-looking words such as “may,”
“might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “intends,” “potential” and similar expressions.
All of the forward-looking statements contained in this registration statement
are based on estimates and assumptions made by our management. These estimates
and assumptions reflect our best judgment based on currently known market and
other factors. Although we believe such estimates and assumptions are
reasonable, they are inherently uncertain and involve risks and uncertainties.
In addition, management’s assumptions about future events may prove to be
inaccurate. We caution you that the forward-looking statements contained in this
registration statement are not guarantees of future performance and we cannot
assure you that such statements will be realized. In all likelihood, actual
results will differ from those contemplated by such forward-looking statements
as a result of a variety of factors, including those factors discussed in “Risk
Factors”. We will update these forward-looking statements only as required by
law. However, we do not undertake any other responsibility to update any
forward-looking statements.
Overview
American
Restaurant Concepts currently franchises Dick’s Wings restaurants, using the
Dick’s Wings product line. Dick’s Wings Express is a limited service restaurant,
concentrating on take out orders. Dick’s Wings & Grill is a full
service restaurant.
We offer
two types of franchise opportunities:
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Area
Development Agreements, also called Master License Agreements, which grant
the right to open a specified number of Dick’s Wings restaurants (either
Dick’s Wings & Grille, Dick’s Wings Express or both) within an
exclusive development area in accordance with a specified development
schedule.
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The
Dick’s Wings Franchise offers qualified purchasers the right to establish
and operate, from a single location within a specified territory, a racing
theme restaurant under the Dick’s Wings marks and
system.
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We
currently have one Area Development Agreements for the following
territories: Exclusive in Florida and non-Exclusive in the rest of
the U.S.
We
currently have 19 Franchises located in Florida and 3 Franchisees located in
Georgia.
Dick’s
Wings is the fictitious name used by American Restaurants Concepts,
Inc. Moose River Management, Inc., an affiliate of American
Restaurant Concepts, Inc. owned by Michael Rosenberger, our President, was
incorporated in January 2007 and is the owner of the US registered
trademarks “Dick’s Wings,” “Dick’s Wings & Grille and design” and
“Dick’s Wings Express and design” and the state trademark “Dick’s Wings and
Design.” The use of these marks was licensed to us in perpetuity by
Moose River Management, Inc.
Results
of Operations
Fiscal
years ended December 28, 2008 and December 30, 2007
39
Our
revenue increased $99,457 or 16.2% from $613,004 in fiscal year 2007 to $712,461
in fiscal year 2008. The increase was primarily due to increased
franchise fees resulting from the opening of two new franchised restaurants and
increased royalty income.
Our
expenses increased $13,053 or 3.3% from $401,342 in fiscal year 2007 to $414,395
in fiscal year 2008. The increase was primarily due to commissions
related to franchise sales offset by lower general and administrative
expenses.
Income
from operations increased $86,404 or 40.8% from $211,662 in fiscal year 2007 to
$298,066 in fiscal 2008. This increase is primarily due to the
opening of two new franchised restaurants and increased royalty
income. The franchise agreements and establishment of the operations
of these two locations occurred prior the most severe level of the economic
downturn. In addition, royalty income increased as a result of
new franchise locations opened in the second half of fiscal
2007. Further, restaurant sales continued to grow due to the opening
of new locations and growth from our existing locations. Our general
and administrative expenses were lower due to expense controls established by
the Company given the difficult economic conditions in fiscal 2008.
Interest
expenses decreased from $33,923 in fiscal year 2007 to $18,910 in fiscal 2008
due to a decrease in outstanding debt.
Net
income increased $44,657 or 19.0% from $234,499 in fiscal year 2007 to $279,156
in fiscal year 2008.
Nine
Months ended September 27, 2009 and September 28, 2008
Our
revenue decreased $144,102 or 25.3% from $570,496 during the nine months ended
September 28, 2008 to $426,394 during the nine months ended September 27,
2009. The decrease was primarily due to a decrease in royalty income
resulting from a restaurant closing.
Our
expenses increased $441,562 from $246,075 during the nine months ended September
28, 2008 to $687,637 during the nine months ended September 27,
2009. This increase is due to franchise sales and the expansion
efforts undertaken by us during the first nine months of 2009. The
increase was primarily due to commissions of $73,330 related to franchise sales,
professional fees of $187,369 related to expansion and registration related
costs, an increase in salaries of $77,393 and stock in lieu of cash compensation
of $103,750.
We
incurred a loss from operations of ($261,243) during the nine months ended
September 27, 2009 as compared to income from operations of $324,421 during the
nine months ended September 28, 2008. This change is primarily due to
increased expenses resulting from franchise sales and the expansion efforts
undertaken by us during the first nine months of 2009.
Interest
expenses decreased from $18,910 during the nine months ended September 28, 2008
to zero during the nine months ended September 27, 2009 due to a decrease in
outstanding debt.
We
incurred a net loss of ($261,243) during the nine months ended September 27,
2009 as compared to net income of $305,511 during the nine months ended
September 28, 2008. This change is primarily due to increased
expenses.
Liquidity
and Sources of Capital
Our
balance sheet as of September 27, 2009 reflects cash and current assets of
$211,156, current liabilities of $244,353, and a working capital deficit of
($33,197). However, most of our current liabilities consist of
deferred revenue of $340,000. Deferred revenue is amortized as
franchises are sold under the Area Development Agreement.
40
During
the nine months ended September 27, 2009, net cash used in operating activities
was ($92,296). Net cash used in operating activities consisted
primarily of net loss of ($261,243) offset by payables and accrued liabilities
of $187,503.
During
fiscal years 2008 and 2007, net cash provided by operating activities was
$400,050 and $227,465, respectively. Net cash provided by operating
activities in 2008 consisted primarily of net income of $279,156 and deferred
revenue of $400,000 offset by payables and accrued liabilities of
$261,205. Net cash provided by operating activities in 2007 consisted
primarily of net income of $234,499 less gain on sale of assets of $56,760
offset by changes in operating assets and liabilities.
During
the fiscal year 2007, net cash provided by investing activities was $104,213
resulting from the sale of fixed assets.
During
the nine months ended September 27, 2009, net cash provided by financing
activities was $165,043. Net cash provided by financing activities
consisted primarily of proceeds from stock subscribed of $153,700 and repayments
of related party receivables of $105,652 offset by dividend distributions of
($94,309).
During
fiscal years 2008 and 2007, net cash used in financing activities was ($385,239)
and ($294,010), respectively. Net cash used in financing activities
consisted primarily of dividend distributions in 2008 and repayments of notes
payable and dividend distributions in 2007.
Based on
our analysis and operating budget for the next twelve months, we believe that
cash flows generated from franchise fees and royalties will be sufficient to
fund our planned expenses for the next twelve months. These expenses
include marketing, advertising, commissions and administrative
expenses. Administrative expenses are expected to increase due to
legal and accounting fees associated with being a reporting
company.
In
order to implement our business plan, we believe we need approximately $1.5
million over the next five years. Such financing may not be available on
acceptable terms, or at all, and our failure to raise capital when needed could
negatively impact our growth and other plans as well as our financial condition
and results of operations. Additional equity financing, if available may be
dilutive to the holders of our common stock and may involve significant cash
payment obligations and covenants and/or financial ratios that restrict our
ability to operate and expand.
41
DESCRIPTION
OF PROPERTY
We rent
the following property:
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Address:
14436 Duval Pl. #103, Jacksonville FL
32228
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Number
of Square Feet: 1800
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Name
of Landlord: Bradford
Management
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Term
of Lease: 3 years, commencing April
2008
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Monthly
Rental: $1,300
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Adequate
for current needs: Yes
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We do not
intend to renovate, improve, or develop properties. We are not subject to
competitive conditions for property and currently have no property to insure. We
have no policy with respect to investments in real estate or interests in real
estate and no policy with respect to investments in real estate mortgages.
Further, we have no policy with respect to investments in securities of or
interests in persons primarily engaged in real estate activities
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Dick’s
Wings is the fictitious name used by American Restaurant Concepts. Moose River
Management, Inc., owned by Michael Rosenberger, our president, was incorporated
in January 2002 and is the owner of the trademarks “Dick’s Wings,” “Dick’s Wings
& Grille” and “Dick’s Wings Express.” Moose River
Management licenses the following to us:
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Non-exclusive
license to reproduce the Trademark on or in association with the Licensed
Products, for the use of franchising, as well as on packaging, promotional
and advertising material associated
herewith.
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The
right to sublicense the Trademarks to any franchisee for use in the
franchised locations.
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Although
our right is non-exclusive so long as the agreement is in effect, Moose
River agrees not to grant any other party a license to use the
Trademarks.
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The
agreement includes any trademarks that Moose River Management, Inc.
applies for and registers during the duration of this
Agreement.
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The
agreements is for a term of fifty years commencing June 2007. We have the right
to renew the Agreement for a one additional fifty year term. As
consideration for the Agreement, we paid Moose River $100.
In
2008, $328,392 of indebtedness was transferred to Michael Rosenberger, our
president, in consideration of repayment of certain advances made to Michael
Rosenberger. The value of the debt assumed equaled the net
asset value of the assets relieved. Mr. Rosenberger was directly
liable for the indebtedness as a condition of the original funding. Therefore,
the Company was never liable and has no remaining liability for the transferred
indebtedness. Mr. Rosenberger’s debt remains outstanding and there
are no provisions for discounts upon repayment.
We issued
one share of stock to Crescent Hill Capital Corp., a corporation partially owned
by Mr. Shaw, in January 2009 for the purpose of terminating our status as an S
Corporation. We received no cash consideration in connection with
this transaction.
42
From 1997
to date, Mr. Rosenberger has been President and Director of Hot Wings Concepts,
Inc., a franchisee of 3 Dick’s Wings restaurants located in Jacksonville
FL. The restaurants are franchised upon the same terms as all
non-affiliated Dick’s Wings franchisees and Mr. Rosenberger receives no economic
incentive or benefit not received by non-affiliated
franchisees.
Except as
set forth above, we have not entered into any material transactions with any
director, executive officer, promoter, beneficial owner of five percent or more
of our shares, or family members of such persons since our
inception.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
There is
no established public trading market for our securities and a regular trading
market may not develop, or if developed, may not be sustained. A
shareholder in all likelihood, therefore, will not be able to resell his or her
securities should he or she desire to do so when eligible for public resales.
Furthermore, it is unlikely that a lending institution will accept our
securities as pledged collateral for loans unless a regular trading market
develops.
Penny Stock
Considerations
Our
shares will be "penny stocks", as that term is generally defined in the
Securities Exchange Act of 1934 to mean equity securities with a price of less
than $5.00. Thus, our shares will be subject to rules that impose
sales practice and disclosure requirements on broker-dealers who engage in
certain transactions involving a penny stock.
Under the
penny stock regulations, a broker-dealer selling a penny stock to anyone other
than an established customer must make a special suitability determination
regarding the purchaser and must receive the purchaser's written consent to the
transaction prior to the sale, unless the broker-dealer is otherwise
exempt.
In
addition, under the penny stock regulations, the broker-dealer is required
to:
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Deliver,
prior to any transaction involving a penny stock, a disclosure schedule
prepared by the Securities and Exchange Commission relating to the penny
stock market, unless the broker-dealer or the transaction is otherwise
exempt;
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Disclose
commissions payable to the broker-dealer and our registered
representatives and current bid and offer quotations for the
securities;
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Send
monthly statements disclosing recent price information pertaining to the
penny stock held in a customer's account, the account's value, and
information regarding the limited market in penny stocks;
and
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Make
a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement
to the transaction, prior to conducting any penny stock transaction in the
customer's account.
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Because
of these regulations, broker-dealers may encounter difficulties in their attempt
to sell shares of our Common Stock, which may affect the ability of selling
shareholders or other holders to sell their shares in the secondary market, and
have the effect of reducing the level of trading activity in the secondary
market. These additional sales practice and disclosure requirements
could impede the sale of our securities, if our securities become publicly
traded. In addition, the liquidity for our securities may be
decreased, with a corresponding decrease in the price of our
securities. Our shares in all probability will be subject to such
penny stock rules and our shareholders will, in all likelihood, find it
difficult to sell their securities.
43
OTC Bulletin Board
Qualification for Quotation
To have
our shares of Common Stock on the OTC Bulletin Board, a market maker must file
an application on our behalf in order to make a market for our Common
Stock. We have engaged in preliminary discussions with a FINRA Market
Maker to file our application on Form 211 with FINRA, but as of the date of this
Prospectus, no filing has been made. Based upon our counsel's prior
experience, we anticipate that after this registration statement is declared
effective, it will take approximately 2 - 8 weeks for FINRA to issue a trading
symbol and allow sales of our Common Stock under Rule 144.
Sales of our Common Stock
under Rule 144
There are
895,667 shares of our common stock held by non-affiliates and 34,090,000 shares
held by affiliates Rule 144 of the Securities Act of 1933 defines as restricted
securities.
All
895,667 of our shares held by non-affiliates and 100,000 shares held by
affiliates are being registered in this offering. All shares being
registered hereunder are available for resale as of the date of effectiveness of
this registration statement Of the shares not being registered
hereunder, all the restricted securities held by affiliates, subject to the
limitations on amounts and manner of sale in Rule 144, could be available for
sale in a public market, if developed, beginning 90 days after the date of this
prospectus. The availability for sale of substantial amounts of common stock
under Rule 144 could reduce prevailing market prices for our
securities.
Holders
As of the
date of this registration statement, we had 32 shareholders of record of our
Common Stock.
Dividends
Although
we made distributions to owners when we were an S Corporation in 2008 and 2009,
since our conversion to a C Corporation in January 2009, we have not paid any,
and we presently anticipate that all earnings, if any, will be retained for
development of our business. Any decisions as to future
payments of dividends will depend on our earnings and financial position and
such other facts, as the Board of Directors deems relevant.
Reports to
Shareholders
As a
result of this offering as required under Section 15(d) of the Securities
Exchange Act of 1934, we will file periodic reports with the Securities and
Exchange Commission through December 31, 2009, including a Form 10-K for the
year ended December 31, 2009, assuming this registration statement is declared
effective before that date. At or prior to December 31, 2009, we
intend voluntarily to file a registration statement on Form 8-A which will
subject us to all of the reporting requirements of the 1934 Act. This will
require us to file quarterly and annual reports with the SEC and will also
subject us to the proxy rules of the SEC. In addition, our officers, directors
and 10% stockholders will be required to submit reports to the SEC on their
stock ownership and stock trading activity. We are not required under
Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have
more than 500 shareholders and total assets of more than $10 million on December
31, 2009. If we do not file a registration statement on Form 8-A at
or prior to December 31, 2009, we will continue as a voluntary reporting company
and will not be subject to the proxy statement or other information requirements
of the 1934 Act, our securities can no longer be quoted on the OTC Bulletin
Board, and our officers, directors and 10% stockholders will not be required to
submit reports to the SEC on their stock ownership and stock trading
activity.
44
Where You Can Find
Additional Information
We have
filed with the Securities and Exchange Commission a registration statement on
Form S-1. For further information about us and the shares of common
stock to be sold in the offering, please refer to the registration statement and
the exhibits and schedules thereto. The registration statement and exhibits may
be inspected, without charge, and copies may be obtained at prescribed rates, at
the SEC's Public Reference Room at 100 F St., N.E., Washington, D.C.
20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The
registration statement and other information filed with the SEC are also
available at the web site maintained by the SEC at
http://www.sec.gov.
EXECUTIVE
COMPENSATION
Summary Compensation
Table
The table
below summarizes all compensation awarded to, earned by, or paid to our
Principal Executive Officer, our most highly compensated executive officers
other than our CEO who occupied such position at the end of our latest fiscal
year, by us, or by any third party where the purpose of a transaction was to
furnish compensation, for all services rendered in all capacities to us for the
latest fiscal years ended December 31, 2008 and 2007.
Name
|
Title
|
Year
|
Salary
|
Bonus
|
Stock
awards
|
Option
awards
|
Non
equity
Incen-
tive
plan
com-
pen-
sation
|
Non
qualified
deferred
compensa-
tion
|
All other
Compensation
|
Total
|
||||||||||||||||||||||||||
Michael
Rosenberger
|
President
|
2008
|
$ | 43,691 | 0 | 0 | 0 | 0 | 0 | $ | 472,264 | $ | 515,955 | |||||||||||||||||||||||
2007
|
$ | 47,300 | 0 | 0 | 0 | 0 | 0 | $ | 180,451 | $ | 227,751 | |||||||||||||||||||||||||
James
R. Shaw
|
Vice
President
|
2008
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
[1] Includes
Distributions of $390,239 and other compensation
of $82,025 (Personal AMEX bills paid by the
company. The Company has adopted a written policy to no longer
reimburse personal AMEX bills.)
[2]
Distributions
45
Summary Equity Awards
Table
The
following table sets forth certain information for our executive officers
concerning unexercised options, stock that has not vested, and equity incentive
plan awards as of December 31, 2008.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
||||||||||||||||||||||||||||||||||||
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number
Of
Unearned
Shares,
Units
or
Other
Rights
That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
|||||||||||||||||||||||||||
Michael
Rosenberger
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
James
R. Shaw
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Narrative disclosure to
summary compensation and option tables
We
have an employment agreement with Mr. Rosenberger as President effective January
1, 2010. The principal provisions of the agreement are as
follows:
|
·
|
Term: Two
years, subject to prior termination as provided in the
Agreement
|
|
·
|
Compensation: $100,000
per year.
|
|
·
|
The
Agreement has Non-Competition, Non-Interference and Non-Disclosure
provisions.
|
|
·
|
The
Agreement may be terminated prior to term for cause as specified in the
Agreement.
|
Prior
to January 1, 2009, we were a Subchapter S corporation. As such, Mr.
Rosenberger received profit distributions during fiscal years 2007 and
2008. During the period of fiscal years 2007 and 2008, there was no
written policy regarding compensation, expense reimbursements and profit
distributions. Beginning with the effective date of the change in
corporate status, we ceased to issue payments to Mr. Rosenberger in the form of
profit distributions and expenses. It is our policy to compensate Mr.
Rosenberger as an employee.
At no
time during the last fiscal year with respect to any person listed in the Table
above was there:
46
|
·
|
any
outstanding option or other equity-based award repriced or otherwise
materially modified (such as by extension of exercise periods, the change
of vesting or forfeiture conditions, the change or elimination of
applicable performance criteria, or the change of the bases upon which
returns are determined;
|
|
·
|
any
waiver or modification of any specified performance target, goal or
condition to payout with respect to any amount included in non-stock
incentive plan compensation or
payouts;
|
|
·
|
any
option or equity grant;
|
|
·
|
any
non-equity incentive plan award made to a named executive
officer;
|
|
·
|
any
nonqualified deferred compensation plans including nonqualified defined
contribution plans; or
|
|
·
|
any
payment for any item to be included under All Other Compensation (column
(i)) in the Summary Compensation
Table.
|
Board of
Directors
Director
Compensation
Name
|
Fees
earned or
paid in
cash
($)
|
Stock
awards
($)
|
Option
awards
($)
|
Non-equity
incentive plan
compensation
($)
|
Nonqualified
deferred
compensation
earnings
($)
|
All other
compensation
($)
|
Total
($)
|
|||||||||||||||||||||
Michael Rosenberger
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
James
R1. Shaw
|
Narrative
to Director Compensation Table
We have
no compensation arrangements (such as fees for retainer, committee service,
service as chairman of the board or a committee, and meeting attendance) with
directors.
No
director has a different compensation arrangement.
47
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
48
FINANCIAL
STATEMENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of American Restaurant Concepts,
Inc.
Jacksonville,
Florida
We
have audited the accompanying balance sheet of American Restaurant Concepts,
Inc. (the “Company”) as of December 28, 2008 and December 30, 2007 and the
related statements of operations, cash flows, and stockholders’
equity for each of the two years in the period ended December 28, 2008. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 28, 2008
and December 30, 2007, and the results of its operations and its cash flows for
each of the years in the period ended December 28, 2008, in conformity with
accounting principles generally accepted in the United States of
America.
/s/
W. T. Uniack & Co., CPAs, P.C.
|
Alpharetta,
Georgia
|
August
31, 2009
|
F-1
AMERICAN
RESTAURANT CONCEPTS, INC.
STATEMENTS
OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 29, 2008 AND DECEMBER 30, 2007
2008
|
2007
|
|||||||
Revenue
|
$ | 712,461 | $ | 613,004 | ||||
Expenses
|
||||||||
Professional
fees
|
$ | 28,252 | $ | 43,106 | ||||
Salaries
and wages
|
134,657 | 115,071 | ||||||
Commissions
|
90,433 | - | ||||||
Advertising
|
45,726 | 40,267 | ||||||
Depreciation
and amortization
|
- | 5,900 | ||||||
General
and administrative
|
115,327 | 196,998 | ||||||
414,395 | 401,342 | |||||||
Income
from operations
|
298,066 | 211,662 | ||||||
Interest
expense
|
(18,910 | ) | (33,923 | ) | ||||
Gain
on sale of fixed assets
|
- | 56,760 | ||||||
Net
income
|
$ | 279,156 | $ | 234,499 | ||||
Net
income per common share - basic and fully diluted
|
$ | 0.01 | $ | 0.01 | ||||
Weighted
average number of common shares outstanding - basic and fully
diluted
|
34,000,000 | 34,000,000 | ||||||
Proforma
tax and earnings per share (Note 6)
|
||||||||
Pre-tax
income
|
279,156 | 234,499 | ||||||
Proforma
income tax expense
|
106,358 | 89,344 | ||||||
Proforma
net income
|
$ | 172,798 | $ | 145,155 | ||||
Proforma
net income per common share - basic and fully diluted
|
$ | 0.01 | $ | - | ||||
Weighted
average number of common shares outstanding - basic and fully
diluted
|
34,000,000 | 34,000,000 |
F-2
AMERICAN
RESTAURANT CONCEPTS, INC.
BALANCE
SHEETS
DECEMBER
28, 2008 AND DECEMBER 30, 2007
2008
|
2007
|
|||||||
ASSETS
|
||||||||
Cash
|
$ | 90,372 | $ | 75,561 | ||||
Accounts
receivable, net
|
43,275 | 25,374 | ||||||
Advances
- Related parties, net
|
- | 56,760 | ||||||
Total
current assets
|
$ | 133,647 | $ | 157,695 | ||||
Property
and equipment, net of accumulated depreciation of $4,674
|
- | - | ||||||
Other
assets - Related parties (Note 5)
|
138,733 | 138,733 | ||||||
Total
Assets
|
$ | 272,380 | $ | 296,428 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Accounts
payable and accrued expenses
|
12,500 | 6,938 | ||||||
Due
to related parties, net
|
4,865 | - | ||||||
Deferred
revenue (Note 8)
|
20,691 | - | ||||||
Note
payable (Note 7)
|
5,000 | - | ||||||
Bank
note payable (Note 7)
|
- | 88,782 | ||||||
Total
current liabilities
|
43,056 | 95,720 | ||||||
Deferred
revenue (Note 8)
|
379,309 | - | ||||||
Notes
payable - long-term
|
- | 239,610 | ||||||
Total
liabilities
|
422,365 | 335,330 | ||||||
Commitments
and contingencies (Note 2)
|
||||||||
STOCKHOLDERS'
DEFICIT
|
||||||||
Common
stock, Par value $0.01, 100,000,000 shares authorized, 34,000,000 shares
issued and outstanding
|
1 | 1 | ||||||
Additional
paid in capital
|
13,083 | 13,083 | ||||||
Accumulated
deficit
|
(163,069 | ) | (51,986 | ) | ||||
Total
stockholders' deficit
|
(149,985 | ) | (38,902 | ) | ||||
Total
liabilities and stockholders' deficit
|
$ | 272,380 | $ | 296,428 |
F-3
AMERICAN
RESTAURANT CONCEPTS, INC.
STATEMENT
OF STOCKHOLDERS' DEFICIT
FOR
THE YEARS ENDED DECEMBER 28, 2008 AND DECEMBER 30, 2007
ADDITIONAL
|
||||||||||||||||||||
COMMON
STOCK
|
PAID
IN
|
ACCUMULATED
|
||||||||||||||||||
SHARES
|
AMOUNT
|
CAPITAL
|
DEFICIT
|
TOTAL
|
||||||||||||||||
Balance
as of January 1, 2007
|
34,000,000 | $ | 1 | $ | 13,083 | $ | (106,034 | ) | $ | (92,950 | ) | |||||||||
Distributions
to Stockholder
|
(180,451 | ) | (180,451 | ) | ||||||||||||||||
Net
income
|
234,499 | 234,499 | ||||||||||||||||||
Balance
as of December 30, 2007
|
34,000,000 | 1 | 13,083 | (51,986 | ) | (38,902 | ) | |||||||||||||
Distributions
to Stockholder
|
(390,239 | ) | (390,239 | ) | ||||||||||||||||
Net
income
|
279,156 | 279,156 | ||||||||||||||||||
Balance
as of December 28, 2008
|
34,000,000 | $ | 1 | $ | 13,083 | $ | (163,069 | ) | $ | (149,985 | ) |
F-4
AMERICAN
RESTAURANT CONCEPTS, INC.
STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 28, 2008 AND DECEMBER 30, 2007
2008
|
2007
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
income
|
$ | 279,156 | $ | 234,499 | ||||
Less
gain on sale of fixed assets
|
$ | (56,760 | ) | |||||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
- | 5,900 | ||||||
Increase
(decrease) in operating assets and liabilites:
|
||||||||
Deferred
revenue
|
400,000 | - | ||||||
Accounts
receivable
|
(17,901 | ) | 68,709 | |||||
Accounts
payable and accrued liabilities
|
(261,205 | ) | (24,883 | ) | ||||
Net
cash provided by operating activities
|
400,050 | 227,465 | ||||||
Cash
flows from investing activities
|
||||||||
Sale
of fixed assets, net
|
- | 104,213 | ||||||
Net
cash provided by investing activities
|
- | 104,213 | ||||||
Cash
flows from financing activities
|
||||||||
Repayments
of notes payable
|
- | (113,559 | ) | |||||
Proceeds
from note payable
|
5,000 | - | ||||||
Dividend
distributions
|
(390,239 | ) | (180,451 | ) | ||||
Net
cash used in financing activities
|
(385,239 | ) | (294,010 | ) | ||||
Net
increase in cash
|
14,811 | 37,668 | ||||||
Cash
- beginning of year
|
75,561 | 37,893 | ||||||
Cash
- end of year
|
$ | 90,372 | $ | 75,561 |
F-5
AMERICAN
RESTAURANT CONCEPTS, INC.
NOTES
TO FINANCIAL STATEMENTS
FISCAL
YEARS ENDED DECEMBER 29, 2008 AND DECEMBER 30, 2007
NOTE
1 - Nature of Business and Summary of Significant Accounting
Policies
(a)
Nature of Business
The
Company was organized for the purpose of operating Dick’s Wings and Grill
restaurants, as well as selling Dick’s Wings and Grill restaurant
franchises. In exchange for the initial and continuing franchise fees
received, the Company gives franchisees the right to use the name Dick’s Wings
and Grill.
At
December 29, 2008, and December 30, 2007, the Company had 21 and 20 franchised
restaurants, respectively.
(b)
Fiscal Year
We
operate on a 52 or 53-week fiscal year ending on the last Sunday in December.
The fiscal year will allow direct year to year comparisons of the future
financial statements.
(c)
Restaurant Sales Concentration
As of
December 29, 2008, the Company had 18 franchised restaurants in the state of
Florida and 3 in the state of Georgia. The restaurants in Florida
aggregated 90% and 84% of the Company’s total franchise network sales
in fiscal 2008, and 2007. The Company is subject to adverse trends and economic
conditions in the state of Florida.
(d)
Cash and Cash Equivalents
Cash and
cash equivalents include highly liquid investments with original maturities of
three months or less.
(e)
Accounts Receivable
Accounts
receivable – consists primarily of royalty receivables from the Company’s
franchisees. In addition, accounts receivable may include
contractually-determined receivables for leasehold improvements, credit cards,
vendor rebates, and purchased interest on investments.
(f)
Property and Equipment
Property
and equipment are recorded at cost. Leasehold improvements include the cost of
improvements funded by landlord incentives or allowances and during the
build-out period leasehold improvements are amortized using the straight-line
method over the lesser of the term of the lease, without consideration of
renewal options, or the estimated useful lives of the assets, which typically
range from five to ten years. Furniture and equipment are depreciated using the
straight-line method over the estimated useful lives of the assets, which range
from two to eight years. Maintenance and repairs are expensed as incurred. Upon
retirement or disposal of assets, the cost and accumulated depreciation are
eliminated from the respective accounts and the related gains or losses are
credited or charged to earnings.
F-6
(h)
Revenue Recognition
Franchise
agreements have terms ranging from ten to twenty years. These agreements also
convey multiple extension terms of five or ten years, depending on contract
terms and if certain conditions are met. The Company provides the use of the
Dick’s Wings and Grill trademarks, system, training, pre-opening assistance, and
restaurant operating assistance in exchange for area development fees, franchise
fees, and royalties of 5% of a restaurant’s sales.
Franchise
fee revenue from individual franchise sales is recognized upon signing of the
franchise agreement prior to performance of all material obligations and initial
services by the Company which support opening of new franchised locations. Area
development fees are dependent based on the number of restaurants in the
territory, as are the Company’s obligations under the area development
agreement. Consequently, as obligations are met, area development fees are
recognized proportionally with expenses incurred with the opening of each new
restaurant and any royalty-free periods. Royalties are accrued as earned and are
calculated each period based on restaurant sales.
All sales
taxes are presented on a net basis and are excluded from revenue.
(i)
Franchise Operations
The
Company enters into franchise agreements with unrelated third parties to build
and operate restaurants using the Dick’s Wings and Grill brand within a defined
geographical area. The Company believes that franchising is an effective and
efficient means to expand the Dick’s Wings and Grill brand. The franchisee is
required to operate their restaurants in compliance with their franchise
agreement that includes adherence to operating and quality control procedures
established by the Company. The Company does not provide loans, leases, or
guarantees to the franchisee or the franchisee’s employees and vendors. If a
franchisee becomes financially distressed, the Company does not provide any
financial assistance. If financial distress leads to a franchisee’s
noncompliance with the franchise agreement and the Company elects to terminate
the franchise agreement, the Company has the right but not the obligation to
acquire the assets of the franchisee at fair value as determined by an
independent appraiser. The Company receives a 5% royalty of gross sales as
defined in the franchise agreement and in most cases, allowances directly from
the franchisees’ vendors that generally are less than 0.5% of the franchisees’
gross sales. The Company has financial exposure for the collection of the
royalty payments. Franchisees generally remit franchise payments weekly for the
prior week’s sales, which substantially minimizes the Company’s financial
exposure. Historically, the Company has experienced insignificant write-offs of
franchisee royalties. Franchise and area development fees are paid upon the
signing of the related agreements.
F-7
(j)
Preopening Costs
Costs
associated with the opening of any new Company-owned restaurants were amortized
over a five year period—see note 6.
(k)
Payments Received from Vendors
Vendor
allowances include allowances and other funds received from vendors. Certain of
these funds are determined based on various quantitative contract terms. The
Company also receives vendor allowances from certain manufacturers and
distributors calculated based upon purchases made by franchisees. Franchisee
purchase allowances are recorded as Other Income. Amounts that
represent a reimbursement of costs incurred, such as advertising, are recorded
as a reduction of the related expense. Amounts that represent a reduction of
inventory purchase costs are recorded as a reduction of inventoriable
costs.
(l)
National Advertising Fund
The
Company has a system-wide marketing and advertising fund. Company-owned and
franchised restaurants are required to remit a designated portion of sales, to a
separate advertising fund that is used for marketing and advertising efforts
throughout the system. In 2007, that amount was 1%. Certain payments received
from various vendors are deposited into the National Advertising Fund. These
funds are used for development and implementation of system-wide initiatives and
programs.
(m)
Earnings Per Common Share
Basic
earnings per common share is computed by dividing the net earnings available to
common stockholders by the weighted average number of common shares outstanding
during the period.
(n)
Significant Recent Accounting Pronouncements:
Business
Combinations
In
December 2007, the FASB issued FASB Statement No. 141(R), “Business
Combinations,” which amends SFAS No. 141, and provides revised guidance for
recognizing and measuring identifiable assets and goodwill acquired, liabilities
assumed, and any noncontrolling interest in the acquiree. It also provides
disclosure requirements to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS
No. 141(R) is effective for the Company’s fiscal year beginning
January 1, 2009 and is to be applied prospectively. The Company has
evaluated the potential impact of adopting this statement on the Company’s
financial position, results of operations and cash flows and believes that no
application is necessary.
F-8
Accounting for Convertible Debt
Instruments
In
September 2007, the FASB published Proposed FSP No. APB 14-a, “Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion.”
The proposed FSP applies to convertible debt instruments that, by their stated
terms, may be settled in cash (or other assets) upon conversion, including
partial cash settlement, unless the embedded conversion option is required to be
separately accounted for as a derivative under SFAS 133. Convertible debt
instruments within the scope of the proposed FSP are not addressed by the
existing APB 14. The proposed FSP would require that the liability and equity
components of convertible debt instruments within the scope of the proposed FSP
shall be separately accounted for in a manner that reflects the entity’s
nonconvertible debt borrowing rate. This will require an allocation of the
convertible debt proceeds between the liability component and the embedded
conversion option (i.e., the equity component). The difference between the
principal amount of the debt and the amount of the proceeds allocated to the
liability component would be reported as a debt discount and subsequently
amortized to earnings over the instrument’s expected life using the effective
interest method. The Company has evaluated the potential impact of adopting this
statement on the Company’s financial position, results of operations and cash
flows and believes that no application is necessary.
Accounting
for Income Tax Benefits of Dividends on Share-Based Payment Awards
In June
2007, the EITF reached consensus on Issue No. 06-11, “Accounting for Income
Tax Benefits of Dividends on Share-Based Payment Awards.” EITF Issue
No. 06-11 requires that the tax benefit related to dividend and dividend
equivalents paid on equity-classifed nonvested shares and nonvested share units,
which are expected to vest, be recorded as an increase to additional paid-in
capital. EITF Issue No. 06-11 is to be applied prospectively for tax
benefits on dividends declared in the Company’s fiscal year beginning
January 1, 2008. The Company has evaluated the potential impact of adopting
this statement on the Company’s financial position, results of operations and
cash flows and believes that no application is necessary.
Fair
Value Accounting
In
February 2007, the FASB issued FASB Statement No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities” (“FAS 159”). FAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value, with the objective of improving financial reporting
by mitigating volatility in reported earnings caused by measuring related assets
and liabilities differently without having to apply complex hedge accounting
provisions. The provisions of FAS 159 are effective for the Company’s fiscal
year beginning January 1, 2008. The Company does not expect the adoption of
FAS 159 to have a material impact on the Company’s financial
results.
In
September 2006, the FASB issued FASB Statement No. 157, “Fair Value
Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. The provisions of FAS 157 are
effective for the Company’s fiscal year beginning January 1, 2008. The
Company does not expect the adoption of FAS 157 to have a material impact on the
Company’s financial results.
F-9
NOTE
2 - Commitments & Contingencies
The
Company leases its corporate offices under an operating lease. The
lease is effective through March 31, 2011. The future lease
obligations for the corporate office are as follows:
2009
|
$1,324
per month
|
$15,888
per year
|
|
2010
|
$1,364
per month
|
$16,368
per year
|
|
2011
|
$1,404
per month
|
$16,848
per
year
|
During
the fourth quarter of 2008, the Company entered into a Master License Agreement
with a company, the Master Licensee, that gives the Master Licensee the
exclusive licensing rights for the state of Florida. The term of the
Agreement is for ten years and includes a non-refundable fee of
$400,000. For each franchise sold by the master licensee, the
franchise fee of $35,000 will be allocated as a reduction of the aforementioned
amount until it is paid in full. For all existing store franchisees,
the Master Licensee and the company will split all royalty fees on a 60 to 40 %
basis. For all new locations sold by the Master Licensee, there will
be an 80 to 20% split for royalty fees due.
NOTE
3 - Stockholders’ Equity
The
Company currently has one class of Common Stock authorized, issued and
outstanding—Class A. Common Stock. Par value is $.01/share. The
Company does not currently have any outstanding stock options, restricted stock,
warrants, or employee stock purchase plans.
NOTE
4 - Related Party Transactions
The
intellectual property, trademarks, services marks, registered logos, etc.,
including “Dick’s Wings”, “Dick’s Wings & Grill”, and “Dick’s Wings
Express”, are held by an affiliated company, Moose River Management, Inc., which
is wholly owned by the CEO of American Restaurant Concepts, Inc.
The
Company issued one share of its common stock to Crescent Hill Capital
Corporation, a corporation partially owned by an officer of the Company, in
January 2009 for the purpose of terminating our status as an S
Corporation. The Company received no cash consideration in connection
with this transaction.
NOTE
5 – Disposition of Waycross-company owned store
In 2007
the company sold to a related party all the net assets of its store located in
Waycross, Georgia for $75,000. The Company recognized a gain on sale
of fixed assets of $56,760.
F-10
NOTE 6 – Income
taxes
American
Restaurant Concepts Inc. is organized as a Subchapter S corporation within the
state of Florida. As such, there is normally no entity level tax for
federal income purposes with any income and or loss flowing to each shareholder
based upon the shareholder’s percentage of stock ownership.
In
January, 2009, we converted from a Subchapter S corporation to a C
corporation.
The
proforma effective tax rate varies from the maximum federal statutory rate as a
result of the following items for the years ended December 29, 2008 and December
30, 2007:
December
29,
2009
|
December
30,
2008
|
|||||||
Tax
computed at the maximum federal statutory rate
|
34.0 | % | 34.0 | % | ||||
State
tax rate, net of federal tax benefit
|
4.1 | 4.1 | ||||||
Increase
in valuation allowance
|
- | - | ||||||
Effective
income tax rate
|
38.1 | % | 38.1 | % |
NOTE
7 - Notes Payable
In 2008,
$328,392 of indebtedness was transferred to our majority stockholder
inconsideration of repayment of certain advances made to the majority
stockholder. The value of the debt assumed equaled the net
asset value of the assets relieved.
During
the fourth quarter the Company raised $5,000 and issued a promissory demand note
at an interest rate of 7.5%. The proceeds are to be used by the
Company to defray costs associated for a planned direct public
offering.
NOTE
8 - Master Franchise Agreement
During
the fourth quarter 2008, the Company entered into a master franchise agreement
covering the state of Florida. The agreement provided for an up front
payment of $400,000 at signing. The Company recorded the receipt of
cash as deferred revenue. Revenue will be recognized as franchises
are sold in the Florida.
F-11
NOTE 9 - Subsequent
Events (Unaudited)
During
the period January 12, 2009 to May 27, 2009, the Company raised $153,700 from
seventeen investors. It is planned that the amount raised will result
in 608,667 shares issued. 578,000 of the shares were sold at $0.25
per share and 30,667 of the shares were sold at $0.30 per share. The
securities were offered pursuant to SEC Regulation D and have been issued to
only accredited or sophisticated investors. In addition, during the
period January 15, 2009 to June 14, 2009, the Company issued 377,000 shares for
paralegal, business plan development, office support/secretarial/business
development and branding, securities legal and operational support to thirteen
individuals. The Company valued theses shares at $103,750 based on
the value of services rendered.
Subsequent
to the end of the year the Company terminated its S-corporation
status. Therefore the Company has C corporate status for federal
income tax reporting beginning on January 1, 2009.
On July
7, 2009, the Company effected a forward split of its common stock of 340,000
shares for one share.
F-12
AMERICAN
RESTAURANT CONCEPTS, INC.
STATEMENTS
OF OPERATIONS
FOR
THE NINE MONTHS ENDED SEPTEMBER 27, 2009 AND SEPTEMBER 28, 2008
2009
|
2008
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Revenue
|
$ | 426,394 | $ | 570,496 | ||||
Expenses
|
||||||||
Professional
fees
|
$ | 210,421 | $ | 23,052 | ||||
Salaries
and wages
|
192,378 | 114,985 | ||||||
Stock-based
compensation
|
103,750 | - | ||||||
Commissions
|
73,330 | - | ||||||
Advertising
|
48,251 | 32,520 | ||||||
General
and administrative
|
59,507 | 75,518 | ||||||
687,637 | 246,075 | |||||||
Income
(loss) from operations
|
(261,243 | ) | 324,421 | |||||
Interest
expense
|
- | (18,910 | ) | |||||
Net
Income (loss)
|
$ | (261,243 | ) | $ | 305,511 | |||
Net
income (loss) per common share - basic and fully
diluted
|
$ | (0.01 | ) | $ | 0.01 | |||
Weighted
average number of common shares outstanding - basic and fully
diluted
|
34,000,000 | 34,000,000 |
F-13
AMERICAN
RESTAURANT CONCEPTS, INC.
BALANCE
SHEETS
SEPTEMBER
27, 2009 AND DECEMBER 28, 2008
September
27,
|
December
28,
|
|||||||
2009
|
2008
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Cash
|
$ | 163,119 | $ | 90,372 | ||||
Accounts
receivable, net
|
48,037 | 43,275 | ||||||
Total
current assets
|
$ | 211,156 | $ | 133,647 | ||||
Property
and equipment, net of accumulated depreciation of
$4,674
|
- | - | ||||||
Other
assets - Related parties (Note 5)
|
33,081 | 138,733 | ||||||
Total
Assets
|
$ | 244,237 | $ | 272,380 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Accounts
payable and accrued expenses
|
204,868 | 12,500 | ||||||
Due
to related parties, net
|
- | 4,865 | ||||||
Deferred
revenue (Note 8)
|
34,485 | 20,691 | ||||||
Note
payable (Note 7)
|
5,000 | 5,000 | ||||||
Total
current liabilities
|
244,353 | 43,056 | ||||||
Deferred
revenue (Note 8)
|
351,721 | 379,309 | ||||||
Total
liabilities
|
596,074 | 422,365 | ||||||
Commitments
and contingencies (Note 2)
|
||||||||
STOCKHOLDERS'
DEFICIT
|
||||||||
Common
stock, Par value $0.01, 100,000,000 shares authorized, 34,000,000 shares
issued and outstanding
|
1 | 1 | ||||||
Common
stock to be issued
|
153,700 | - | ||||||
Additional
paid in capital
|
13,083 | 13,083 | ||||||
Accumulated
deficit
|
(518,621 | ) | (163,069 | ) | ||||
Total
stockholders' deficit
|
(351,837 | ) | (149,985 | ) | ||||
Total
liabilities and stockholders' deficit
|
$ | 244,237 | $ | 272,380 |
F-14
AMERICAN
RESTAURANT CONCEPTS, INC.
STATEMENT
OF STOCKHOLDERS' DEFICIT
FOR
THE NINE MONTHS ENDED SEPTEMBER 27, 2009
(UNAUDITED)
COMMON
|
ADDITIONAL
|
|||||||||||||||||||||||
COMMON STOCK
|
STOCK
|
PAID IN
|
ACCUMULATED
|
|||||||||||||||||||||
SHARES
|
AMOUNT
|
TO BE ISSUED
|
CAPITAL
|
DEFICIT
|
TOTAL
|
|||||||||||||||||||
Balance
as of January 1, 2009
|
34,000,000 | $ | 1 | $ | - | $ | 13,083 | $ | (163,069 | ) | $ | (149,985 | ) | |||||||||||
Proceeds
from offering
|
153,700 | 153,700 | ||||||||||||||||||||||
Distributions
to Stockholder
|
(94,309 | ) | (94,309 | ) | ||||||||||||||||||||
Net
loss
|
(261,243 | ) | (261,243 | ) | ||||||||||||||||||||
Balance
as of September 27, 2009
|
34,000,000 | 1 | $ | 153,700 | 13,083 | (518,621 | ) | (351,837 | ) |
F-15
AMERICAN
RESTAURANT CONCEPTS, INC.
STATEMENTS
OF CASH FLOWS
FOR
THE NINE MONTHS ENDED SEPTEMBER 27, 2009 AND SEPTEMBER 28, 2008
2009
|
2008
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
(loss) income
|
$ | (261,243 | ) | $ | 305,511 | |||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Increase
(decrease) in operating assets and liabilites:
|
||||||||
Deferred
revenue
|
(13,794 | ) | - | |||||
Accounts
receivable
|
(4,762 | ) | (21,515 | ) | ||||
Current
liabilities
|
187,503 | (286,580 | ) | |||||
Net
cash (used in) provided by operating activities
|
(92,296 | ) | (2,584 | ) | ||||
Cash
flows from financing activities
|
||||||||
Proceeds
from stock subscriptions
|
153,700 | - | ||||||
Repayments
of related party receivables
|
105,652 | |||||||
Dividend
distributions
|
(94,309 | ) | (64,950 | ) | ||||
Net
cash provided by financing activities
|
165,043 | (64,950 | ) | |||||
Net
increase in cash
|
72,747 | (67,534 | ) | |||||
Cash
- beginning of year
|
90,372 | 75,561 | ||||||
Cash
- end of year
|
$ | 163,119 | $ | 8,027 |
F-16
Statements of Operations Data
|
||||||||||||||||
AMERICAN RESTAURANT CONCEPTS, INC.
|
||||||||||||||||
Nine Months Ended
|
Years ended
|
|||||||||||||||
September 27,
|
September 28,
|
December 29,
|
December 30,
|
|||||||||||||
2009
|
2008
|
2008
|
2007
|
|||||||||||||
(Unaudited)
|
||||||||||||||||
Revenue
|
$ | 426,394 | $ | 570,496 | $ | 712,461 | $ | 613,004 | ||||||||
Net
Income (loss)
|
$ | (261,243 | ) | $ | 305,511 | $ | 279,156 | $ | 234,499 | |||||||
Net
Income (loss) per share
|
$ | (0.01 | ) | $ | 0.01 | $ | 0.01 | $ | 0.01 | |||||||
Weighted
average number of common shares outstanding - basic and fully
diluted
|
34,000,000 | 34,000,000 | 34,000,000 | 34,000,000 |
Balance Sheet Data
|
||||||||
September 27,
|
December 29,
|
|||||||
2009
|
2008
|
|||||||
(Unaudited)
|
||||||||
Cash
|
$ | 163,119 | $ | 90,372 | ||||
Working
capital (deficit)
|
$ | (33,197 | ) | $ | 90,591 | |||
Total
assets
|
$ | 244,237 | $ | 272,380 | ||||
Total
current liabilities
|
$ | 244,353 | $ | 43,056 | ||||
Accumulated
deficit
|
$ | (518,621 | ) | $ | (163,069 | ) | ||
Total
Stockholders' equity
|
$ | (351,837 | ) | $ | (149,985 | ) |
F-17
AMERICAN
RESTAURANT CONCEPTS, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 27, 2009 AND
SEPTEMBER
28, 2008
(UNAUDITED)
NOTE
1 - Nature of Business and Summary of Significant Accounting
Policies
(a)
Nature of Business
The
Company was organized for the purpose of operating Dick’s Wings and Grill
restaurants, as well as selling Dick’s Wings and Grill restaurant
franchises. In exchange for the initial and continuing franchise fees
received, the Company gives franchisees the right to use the name Dick’s Wings
and Grill.
At
September 27, 2009, the Company had 21 and 20 franchised restaurants,
respectively.
(b)
Fiscal Year
We
operate on a 52 or 53-week fiscal year ending on the last Sunday in December.
The fiscal year will allow direct year to year comparisons of the future
financial statements.
(c)
Restaurant Sales Concentration
As of
September 27, 2009, the Company had 18 franchised restaurants in the state of
Florida and 3 in the state of Georgia. The restaurants in Florida
aggregated 90% and 84% of the Company’s total franchise network sales
in fiscal 2008, and 2007. The Company is subject to adverse trends and economic
conditions in the state of Florida.
(d)
Cash and Cash Equivalents
Cash
and cash equivalents include highly liquid investments with original maturities
of three months or less.
(e)
Accounts Receivable
Accounts
receivable – consists primarily of royalty receivables from the Company’s
franchisees. In addition, accounts receivable may include
contractually-determined receivables for leasehold improvements, credit cards,
vendor rebates, and purchased interest on investments.
(f)
Property and Equipment
Property
and equipment are recorded at cost. Leasehold improvements include the cost of
improvements funded by landlord incentives or allowances and during the
build-out period leasehold improvements are amortized using the straight-line
method over the lesser of the term of the lease, without consideration of
renewal options, or the estimated useful lives of the assets, which typically
range from five to ten years. Furniture and equipment are depreciated using the
straight-line method over the estimated useful lives of the assets, which range
from two to eight years. Maintenance and repairs are expensed as incurred. Upon
retirement or disposal of assets, the cost and accumulated depreciation are
eliminated from the respective accounts and the related gains or losses are
credited or charged to earnings.
F-18
(h)
Revenue Recognition
Franchise
agreements have terms ranging from ten to twenty years. These agreements also
convey multiple extension terms of five or ten years, depending on contract
terms and if certain conditions are met. The Company provides the use of the
Dick’s Wings and Grill trademarks, system, training, pre-opening assistance, and
restaurant operating assistance in exchange for area development fees, franchise
fees, and royalties of 5% of a restaurant’s sales.
Franchise
fee revenue from individual franchise sales is recognized upon performance of
all material obligations and initial services by the Company which support
opening of new franchised locations. In accordance with the franchise
agreement, the franchise fee is deemed fully earned and
non-refundable. The Company provides development stage assistance and
operational assistance as long as the Franchisee is in good
standing. This assistance is provided during pre-opening and at the
opening of a restaurant. Therefore, we recognize franchise fee income when the
restaurant opens.
Royalties
are accrued as earned and are calculated each period based on restaurant
sales.
Proceeds
from master license agreements are recorded as deferred
revenue. Revenue is amortized ratably based on the total number of
restaurants in the development schedule of the license agreement. The
amount is derived by dividing the total amount of the license fee by the number
of restaurants in the development schedule. When a restaurant is
opened in a licensee’s area, revenue is recognized.
All
sales taxes are presented on a net basis and are excluded from
revenue.
(i)
Franchise Operations
The
Company enters into franchise agreements with unrelated third parties to build
and operate restaurants using the Dick’s Wings and Grill brand within a defined
geographical area. The Company believes that franchising is an effective and
efficient means to expand the Dick’s Wings and Grill brand. The franchisee is
required to operate their restaurants in compliance with their franchise
agreement that includes adherence to operating and quality control procedures
established by the Company. The Company does not provide loans, leases, or
guarantees to the franchisee or the franchisee’s employees and vendors. If a
franchisee becomes financially distressed, the Company does not provide any
financial assistance. If financial distress leads to a franchisee’s
noncompliance with the franchise agreement and the Company elects to terminate
the franchise agreement, the Company has the right but not the obligation to
acquire the assets of the franchisee at fair value as determined by an
independent appraiser. The Company receives a 5% royalty of gross sales as
defined in the franchise agreement and in most cases, allowances directly from
the franchisees’ vendors that generally are less than 0.5% of the franchisees’
gross sales. The Company has financial exposure for the collection of the
royalty payments. Franchisees generally remit franchise payments weekly for the
prior week’s sales, which substantially minimizes the Company’s financial
exposure. Historically, the Company has experienced insignificant write-offs of
franchisee royalties. Franchise and area development fees are paid upon the
signing of the related agreements.
F-19
(j)
Preopening Costs
Costs
associated with the opening of any new Company-owned restaurants were amortized
over a five year period—see note 6.
(k)
Payments Received from Vendors
Vendor
allowances include allowances and other funds received from vendors. Certain of
these funds are determined based on various quantitative contract terms. The
Company also receives vendor allowances from certain manufacturers and
distributors calculated based upon purchases made by franchisees. Franchisee
purchase allowances are recorded as Other Income. Amounts that
represent a reimbursement of costs incurred, such as advertising, are recorded
as a reduction of the related expense. Amounts that represent a reduction of
inventory purchase costs are recorded as a reduction of inventoriable
costs.
(l)
National Advertising Fund
The
Company has a system-wide marketing and advertising fund. Company-owned and
franchised restaurants are required to remit a designated portion of sales, to a
separate advertising fund that is used for marketing and advertising efforts
throughout the system. In 2007, that amount was 1%. Certain payments received
from various vendors are deposited into the National Advertising Fund. These
funds are used for development and implementation of system-wide initiatives and
programs.
(m)
Earnings Per Common Share
Basic
earnings per common share is computed by dividing the net earnings available to
common stockholders by the weighted average number of common shares outstanding
during the period.
(n)
Significant Recent Accounting Pronouncements:
Business
Combinations
In
December 2007, the FASB issued FASB Statement No. 141(R), “Business
Combinations,” which amends SFAS No. 141, and provides revised guidance for
recognizing and measuring identifiable assets and goodwill acquired, liabilities
assumed, and any noncontrolling interest in the acquiree. It also provides
disclosure requirements to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS
No. 141(R) is effective for the Company’s fiscal year beginning
January 1, 2009 and is to be applied prospectively. The Company has
evaluated the potential impact of adopting this statement on the Company’s
financial position, results of operations and cash flows and believes that no
application is necessary.
F-20
Accounting
for Convertible Debt Instruments
In
September 2007, the FASB published Proposed FSP No. APB 14-a, “Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion.”
The proposed FSP applies to convertible debt instruments that, by their stated
terms, may be settled in cash (or other assets) upon conversion, including
partial cash settlement, unless the embedded conversion option is required to be
separately accounted for as a derivative under SFAS 133. Convertible debt
instruments within the scope of the proposed FSP are not addressed by the
existing APB 14. The proposed FSP would require that the liability and equity
components of convertible debt instruments within the scope of the proposed FSP
shall be separately accounted for in a manner that reflects the entity’s
nonconvertible debt borrowing rate. This will require an allocation of the
convertible debt proceeds between the liability component and the embedded
conversion option (i.e., the equity component). The difference between the
principal amount of the debt and the amount of the proceeds allocated to the
liability component would be reported as a debt discount and subsequently
amortized to earnings over the instrument’s expected life using the effective
interest method. The Company has evaluated the potential impact of adopting this
statement on the Company’s financial position, results of operations and cash
flows and believes that no application is necessary.
Accounting
for Income Tax Benefits of Dividends on Share-Based Payment
Awards
In
June 2007, the EITF reached consensus on Issue No. 06-11, “Accounting for
Income Tax Benefits of Dividends on Share-Based Payment Awards.” EITF Issue
No. 06-11 requires that the tax benefit related to dividend and dividend
equivalents paid on equity-classifed nonvested shares and nonvested share units,
which are expected to vest, be recorded as an increase to additional paid-in
capital. EITF Issue No. 06-11 is to be applied prospectively for tax
benefits on dividends declared in the Company’s fiscal year beginning
January 1, 2008. The Company has evaluated the potential impact of adopting
this statement on the Company’s financial position, results of operations and
cash flows and believes that no application is necessary.
Fair
Value Accounting
In
February 2007, the FASB issued FASB Statement No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities” (“FAS 159”). FAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value, with the objective of improving financial reporting
by mitigating volatility in reported earnings caused by measuring related assets
and liabilities differently without having to apply complex hedge accounting
provisions. The provisions of FAS 159 are effective for the Company’s fiscal
year beginning January 1, 2008. The Company does not expect the adoption of
FAS 159 to have a material impact on the Company’s financial
results.
F-21
In
September 2006, the FASB issued FASB Statement No. 157, “Fair Value
Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. The provisions of FAS 157 are
effective for the Company’s fiscal year beginning January 1, 2008. The
Company does not expect the adoption of FAS 157 to have a material impact on the
Company’s financial results.
NOTE
2 - Commitments & Contingencies
The
Company leases its corporate offices under an operating lease. The
lease is effective through March 31, 2011. The future lease
obligations for the corporate office are as follows:
2009 $1,324
per
month $15,888
per year
2010 $1,364
per
month $16,368
per year
2011 $1,404
per
month $16,848
per year
During
the fourth quarter of 2008, the Company entered into a Master License Agreement
with a company, the Master Licensee, that gives the Master Licensee the
exclusive licensing rights for the state of Florida. The term of the
Agreement is for ten years and includes a non-refundable fee of
$400,000. For each franchise sold by the master licensee, the
franchise fee of $35,000 will be allocated as a reduction of the aforementioned
amount until it is paid in full. For all existing store franchisees,
the Master Licensee and the company will split all royalty fees on a 60 to 40 %
basis. For all new locations sold by the Master Licensee, there will
be an 80 to 20% split for royalty fees due.
NOTE
3 - Stockholders’ Equity
The
Company currently has one class of Common Stock authorized, issued and
outstanding—Class A. Common Stock. Par value is $.01/share. The
Company does not currently have any outstanding stock options, restricted stock,
warrants, or employee stock purchase plans.
During
the period January 12, 2009 to May 27, 2009, the Company raised $153,700 from
seventeen investors. It is planned that the amount raised will result
in 608,667 shares issued. 578,000 of the shares were sold at $0.25
per share and 30,667 of the shares were sold at $0.30 per share. The
securities were offered pursuant to SEC Regulation D and have been issued to
only accredited or sophisticated investors. In addition, during the
period January 15, 2009 to June 14, 2009, the Company issued 377,000 shares for
paralegal, business plan development, office support/secretarial/business
development and branding, securities legal and operational support to thirteen
individuals. The Company valued theses shares at $103,750 based on
the value of services rendered.
F-22
On
July 7, 2009, the Company effected a forward split of its common stock of
340,000 shares for one share.
NOTE
4 - Related Party Transactions
The
intellectual property, trademarks, services marks, registered logos, etc.,
including “Dick’s Wings”, “Dick’s Wings & Grill”, and “Dick’s Wings
Express”, are held by an affiliated company, Moose River Management, Inc., which
is wholly owned by the CEO of American Restaurant Concepts,
Inc.
The
Company issued one share of its common stock to Crescent Hill Capital
Corporation, a corporation partially owned by an officer of the Company, in
January 2009 for the purpose of terminating our status as an S
Corporation. The Company received no cash consideration in connection
with this transaction.
NOTE
5 – Disposition of Waycross-company owned store
In
2007, the Company sold to a related party, Mr. Rosenberger’s mother, the net
assets of its store located in Waycross, Georgia for $75,000. The
sales price was determined based on fair market value of the
assets. The fair market value was ascertained based on an arms length
transaction with a non-related party. The Company recognized a gain
on sale of assets of $56,760.
NOTE 6 – Income
taxes
From
inception to December 31, 2008, American Restaurant Concepts Inc. was organized
as a Subchapter S corporation in the state of Florida. In January,
2009, we converted from a Subchapter S corporation to a C
corporation.
The
effective tax rate varies from the maximum federal statutory rate as a result of
the following items for the nine months ended September 27, 2008 and September
28, 2007:
September
27,
2009
|
September
28,
2008
|
|||||||
Tax
benefit computed at the maximum federal statutory rate
|
(34.0 | )% | (34.0 | )% | ||||
State
tax rate, net of federal tax benefit
|
(4.1 | ) | (4.1 | ) | ||||
Increase
in valuation allowance
|
38.1 | 38.1 | ||||||
Effective
income tax rate
|
0.0 | % | 0.0 | % |
F-23
Deferred
income tax assets and the related valuation allowances result principally from
the potential tax benefits of net operating loss carryforwards.
The
Company has recorded a valuation allowance to reflect the uncertainty of the
ultimate utilization of the deferred tax assets as follows:
September 27,
2008
|
September 28,
2007
|
|||||||
Deferred
tax assets
|
$ | 81,929 | $ | — | ||||
Less
valuation allowance
|
(81,929 | ) | — | |||||
Net
deferred tax assets
|
$ | — | $ | — |
As of
the conversion date and during the period ended September 27, 2009, the Company
had no temporary differences. In addition, at the conversion date and
during the period ended September 27, 2009, the Company had no uncertain tax
positions.
NOTE
7 - Notes Payable
In
2008, $328,392 of indebtedness was transferred to our majority stockholder
inconsideration of repayment of certain advances made to the majority
stockholder. The value of the debt assumed equaled the net
asset value of the assets relieved. Mr. Rosenberger was directly liable for the
indebtedness as a condition of the original funding. Therefore, the Company was
never liable and has no remaining liability for the transferred
indebtedness.
During
the fourth quarter the Company raised $5,000 and issued a promissory demand note
at an interest rate of 7.5%. The proceeds are to be used by the
Company to defray costs associated for a planned direct public
offering.
NOTE
8 - Master Franchise Agreement
During
the fourth quarter 2008, the Company entered into a master franchise agreement
covering the state of Florida. The agreement provided for an up front
payment of $400,000 at signing. The Company recorded the receipt of
cash as deferred revenue. Revenue will be recognized as franchises
are sold in the Florida. During the nine months ended September 27, 2009, two
franchises were sold in the state of Florida. As a result, the
Company recognized $13,794 as franchise revenue.
F-24
PROSPECTUS
AMERICAN
RESTAURANT CONCEPTS, INC.
Dated
_____________, 2009
Selling
shareholders are offering up to 955,667 shares of common
stock. The selling shareholders will offer their shares at $.25 per share until our
shares are quoted on the OTC Bulletin Board or Pick Sheet Exchange and
thereafter at prevailing market prices or privately negotiated
prices.
Our
common stock is not now listed on any national securities exchange, the NASDAQ
stock market or the OTC Bulletin Board.
Dealer Prospectus Delivery
Obligation
Until
_________ (90 days from the date of this prospectus) all dealers that effect
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
49
Part
II-INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION
OF OFFICERS AND DIRECTORS
Pursuant
to Section 607.0850 of the Florida Statutes, the Registrant has the power to
indemnify any person made a party to any lawsuit by reason of being a director
or officer of the Registrant, or serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. Our
By-laws provide that the Registrant shall indemnify its directors and officers
to the fullest extent permitted by Florida law.
With
regard to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person of the Systems Corporation in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by us is against
public policy as expressed in the Securities Act of 1933, as amended, and will
be governed by the final adjudication of such case.
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table is an itemization of all expenses, without consideration to
future contingencies, incurred or expected to be incurred by us in connection
with the issuance and distribution of the securities being offered by this
prospectus. Items marked with an asterisk (*) represent estimated expenses. We
have agreed to pay all the costs and expenses of this offering. Selling security
holders will pay no offering expenses.
ITEM
|
AMOUNT
|
|||
SEC
Registration Fee*
|
$ | 35 | ||
Legal
Fees and Expenses
|
36,000 | |||
Accounting
Fees and Expenses*
|
36,000 | |||
Miscellaneous
|
28,000 | |||
Total*
|
$ | 100,000 |
*
Estimated Figure
50
RECENT SALES OF UNREGISTERED
SECURITIES
We issued
one share of stock to a corporation in January 2009 for the purpose of
terminating our status as an S Corporation.
During
the period January 12, 2009 to May 27, 2009, the Company raised $153,700 from
seventeen investors. It is planned that the amount raised will result
in 608,667 shares issued. 578,000 of the shares were sold at $0.25
per share and 30,667 of the shares were sold at $0.30 per share. The
securities were offered pursuant to SEC Regulation D and have been issued to
only accredited or sophisticated investors. In addition, during the
period January 15, 2009 to June 14, 2009, the Company issued 377,000 shares for
paralegal, business plan development, office support/secretarial/business
development and branding, securities legal and operational support to thirteen
individuals. The Company valued theses shares at $103,750 based on
the value of services rendered.
We relied
upon Section 4(2) of the Securities Act of 1933, as amended for the above
issuances to US citizens or residents.
We
believed that Section 4(2) of the Securities Act of 1933 was available
because:
|
·
|
None
of these issuances involved underwriters, underwriting discounts or
commissions.
|
|
·
|
Restrictive
legends were and will be placed on all certificates issued as described
above.
|
|
·
|
The
distribution did not involve general solicitation or
advertising.
|
|
·
|
The
distributions were made only to investors who were sophisticated enough to
evaluate the risks of the
investment.
|
In
connection with the above transactions, although some of the investors may have
also been accredited, we provided the following to all investors:
|
·
|
Access
to all our books and records.
|
|
·
|
Access
to all material contracts and documents relating to our
operations.
|
|
·
|
The
opportunity to obtain any additional information, to the extent we
possessed such information, necessary to verify the accuracy of the
information to which the investors were given
access.
|
Prospective
investors were invited to review at our offices at any reasonable hour, after
reasonable advance notice, any materials available to us concerning our
business. Prospective Investors were also invited to visit our
offices.
51
EXHIBITS
Item
3
1
|
Articles
of Incorporation of American Restaurant Concepts,
Inc.
|
2
|
Amendment
to Articles of Incorporation
|
3
|
Bylaws
of American Restaurant Concepts,
Inc.
|
Item
4
|
1
|
Form
of common stock Certificate of the American Restaurant Concepts, Inc.(1)
|
Item
5
1
|
Legal
Opinion of Williams Law Group, P.A.
|
Item
10
|
1.
|
Form
of Franchise Agreement
|
|
2.
|
License
from Dick’s Restaurant USA, Inc.
|
|
3.
|
Master
License Agreement with DWG Partners
|
|
4.
|
Rosenberger
Employment Agreement *
|
Item
23
1
|
Consent
of W.T. Uniack & Co., CPAs P.C.
*
|
2
|
Consent
of Williams Law Group, P.A. (included in Exhibit
5.1)
|
*
Filed herewith
All other
Exhibits called for by Rule 601 of Regulation SK are not applicable to this
filing.
(1)
Information pertaining to our common stock is contained in our Articles of
Incorporation and Bylaws.
UNDERTAKINGS
The
undersigned registrant hereby undertakes:
1.
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
i.
|
To
include any prospectus required by section
10(a)(3) of the Securities Act of
1933;
|
ii.
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement.
|
52
iii.
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
|
2.
|
That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
|
3.
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
4.
|
That,
for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such
purchaser:
|
i.
|
Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
|
ii.
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
|
iii.
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
|
iv.
|
Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
|
53
5. That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser: Each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to our directors, officers and controlling persons, we have been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by a director, officer or controlling person of the
corporation in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by us is
against public policy as expressed in the Securities Act of 1933, as amended,
and will be governed by the final adjudication of such case.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Jacksonville, State of
Florida on December 4, 2009.
American
Restaurant Concepts, Inc.
BY:
|
Date
|
Signature
|
Michael
Rosenberger, President
|
December
4, 2009.
|
s/
Michael Rosenberger
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the date
indicated.
SIGNATURE
|
NAME
|
TITLE
|
DATE
|
|||
/s/
Michael Rosenberger
|
Michael
Rosenberger
|
Principal
Executive Officer, Principal Financial Officer, Principal Accounting
Officer, President, Director
|
December
4, 2009.
|
|||
/s/
James R. Shaw
|
James
R. Shaw
|
Vice
President/Director
|
December
4,
2009.
|
54