We got a quick response from the company....
I'm going to try to format this..
Tuesday January 12, 11:23 am Eastern Time
Company Press Release
SOURCE: Restaurant Teams International, Inc.
Restaurant Teams International, Inc. Answers Litigation Charges
LONGVIEW, Texas, Jan. 12 /PRNewswire/ -- Restaurant Teams International, Inc. (OTC Bulletin Board: RTIN - news) today responded to charges made in a press release and in litigation pleadings filed by the Canadian investor group, Dominion Capital Fund, Ltd., Sovereign Partners, L.P. and Canadian Advantage, L.P. (the ''Investors''). RTI filed suit against the Investors on December 15, 1998, alleging fraud, misrepresentation and violations of federal and state securities laws by the Investors in their stated intentions and activity in the Company's common stock before and after their investment in convertible debentures issued by the Company.
The Company's suit was filed, on the advice of counsel, to initiate recision of the debenture in response to the subsequent damages to Restaurant Teams International, Inc. common stock. In filing the lawsuit, Curtis Swanson, Chief Financial Officer of Restaurant Teams International stated, ''We are taking this action because we feel the time has come for companies like ours to stand up to 'naked' short sellers who have driven the value of many companies like ours to unwarranted values. Clearly, these market manipulators are only successful when left unencumbered to operate in an atmosphere of fear and concealment.''
The defendants press release and litigation pleadings allege that RTI's financial statements were fraudulent and misleading.
In answering these charges, Mr. Swanson further stated, ''The Investors' counterclaims and allegations against RTI are spurious and will be proved to be without merit. The Canadians point to minor accounting changes made by the Company in response to SEC comments on the Company's financial statements that the SEC made after the Company filed a registration statement. Trying to inflate these changes into some kind of fraudulent conduct demonstrates the lengths the Investors have gone to concoct an answer to our suit.''
The facts are these:
1. RTI included a line item subtotal called "gross profit," which was
merely sales less cost of goods sold. At the SEC's suggestion, the
line item subtotal was removed. The net change from the restatement
was as follows:
Income Statement
Restated
Expenses Audit 1997 Expenses Audit 1997
Sales $3,106,144 Sales $3,106,144
Cost of Sales 890,944
Gross Profit 2,215,200
Expenses 2,048,338 Expenses 2,926,758
Net Income 110,862 Net Income 119,386
The elimination of a gross profit subtotal had no effect on the Company's results of operations.
In fact, there was actually an increase in net income, due to the balance sheet change described below.
2. RTI, on advice of its auditors, included certain restaurant leases as
capital leases, creating a balance sheet asset and a corresponding
liability. The SEC suggested that the leases were instead operating
leases for which only rent is paid and should be included as an
expense. The change created no balance sheet asset or liability. The
resulting difference was as follows:
Balance Sheet
Restated
Audit 1997 Audit
Assets $8,145,537 Assets $5,913,204
Liabilities 4,513,616 Liabilities 2,319,983
Equity 3,631,921 Equity 3,593,221
The difference, while resulting in a reduction of balance sheet assets and liabilities, was in fact only a 1% change in total shareholder's equity, hardly the, ''material representation'' claimed by the defendants.
Stanley L. Swanson, Chief Executive Officer stated, ''We are continuing to pursue every means available to us to ensure continued shareholders value.''
This press release contains forward-looking statements, which are generally preceded by words such as ''believes'', ''expects'', ''anticipates'', or ''intends''. Such statements are subject to risks and uncertainties, including but not limited to competitive conditions, real estate zoning and permitting complications, government regulations, and general conditions in the restaurant market.
SOURCE: Restaurant Teams International, Inc. |
