UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 1, 1996
BAB Holdings, Inc.
(Name of small business issuer in its charter)
Illinois 0-27068 36-3857339
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
8501 West Higgins Road, Suite 320, Chicago, Illinois 60631
(Address of principal executive offices) Zip Code)
Issuer's telephone number (312) 380-6100
(Former name, former address and former fiscal year,
if changed since last report.)
TABLE OF CONTENTS
Page
Item 1. Changes in Control of Registrant.........................1
Item 2. Acquisition or Disposition of Assets.....................1
Item 3. Bankruptcy or Receivership...............................1
Item 4. Changes in Registrant's Certifying Accountant............1
Item 5. Other Events.............................................2
Item 6. Resignation of Registrant's Directors....................2
Item 7. Financial Statements and Exhibits....................... 2
Item 8. Change in Fiscal Year................................... 2
SIGNATURE ......................................................... 2
INDEX TO EXHIBITS...................................................3
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 1, 1996, BAB Systems, Inc. (Systems), a wholly owned subsidiary
of BAB Holdings, Inc. (Holdings or the Company), exercised its option to
purchase substantially all of the assets of Bagels Unlimited, Inc. (BUI), a
Wisconsin corporation. This option was acquired in January 1996 in connection
with a revolving line of credit extended to BUI by Systems. BUI, a franchisee of
Systems, was engaged in the business of owning and operating five Big Apple
Bagels stores and had the development rights for one additional store in the
Milwaukee, Wisconsin area.
The assets acquired by Systems included all inventory, furniture,
equipment, signage and improvements of the five Big Apple Bagels stores in
operation. Additionally, Systems acquired all franchise and area development
rights and other contractual rights owned by BUI, including BUI's interest in
the leases for the five existing stores and the lease for the sixth store which
is currently under construction.
The purchase of assets was completed in exchange for the following
consideration: (a) $772,000, reduced by the outstanding principal and interest
owed on the January 31, 1996 revolving line of credit issued by Systems to BUI
(excluding monies borrowed in connection with the development of the fifth Big
Apple Bagels store which opened in April 1996), and increased by BUI's inventory
on hand at cost, (b) 50,000 shares of Holdings' common stock, no par value, and
(c) an option to purchase 100,000 shares of Holdings' common stock exerciseable
for 5 years commencing on May 1, 1996 at a $4.00 per share price. The total
purchase price has been preliminarily allocated to assets acquired based on the
estimated fair value as of the date of acquisition. The allocation was based on
preliminary estimates which may be revised at a later date. The excess of
consideration paid over the estimated fair value of net assets acquired in the
amount of $727,332 has been recorded as goodwill and is being amortized on a
straight-line basis over 40 years.
Additionally, Holdings entered into a non-competition agreement with
the two principals of BUI in exchange for total consideration of $100,000 for a
period of 6 years from the closing of this transaction. The Company financed
this transaction using a portion of the net proceeds from its November 27, 1995
initial public offering of securities.
Systems will be assigning its rights in the existing five Big Apple
Bagels stores and the sixth store which is in development to BAB Operations,
Inc., a wholly owned subsidiary of Holdings, which owns and operates
Company-owned stores. The acquired stores and related assets will continue to be
operated as Big Apple Bagels stores, but will be Company-owned rather than
franchised stores.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
None.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following unaudited pro forma condensed financial information
reflects the acquisition of BUI by Holdings as if it had occurred on December 1,
1994. The fiscal year pro forma information is based on the historical audited
consolidated statement of operations of Holdings for the fiscal year ended
November 30, 1995, and the statement of operations of BUI for its fiscal year
ended February 29, 1996. The unaudited quarterly pro forma condensed financial
information is based on the consolidated statement of operations of Holdings for
the fiscal quarter ended February 29, 1996, and the statement of operations of
BUI for the fiscal quarter ended February 29, 1996. This unaudited condensed pro
forma financial information should be read in conjunction with the historical
financial statements and footnotes thereto of Holdings which have been filed as
part of Form 10-KSB for the fiscal year ended November 30, 1995, and Form 10-QSB
for the fiscal quarter ended February 29, 1996, and in conjunction with the
financial statements and footnotes of BUI for the fiscal year ended February 29,
1996 as filed in exhibit 10.27 below.
This unaudited pro forma condensed financial information is not
necessarily indicative of what the actual consolidated results of operations
would have been if the acquisition of assets had been completed as set forth
above, nor does it purport to represent the consolidated results of operations
of Holdings for future periods.
Historical Historical Pro Forma
---------- ---------- ---------
Holdings BUI
-------- ---
Year Ended Year Ended
November 30, February 29,
1995 1996 Adjustments Consolidated
--------------- -------------- ------------ ------------
Revenues................................... $ 2,033,003 $ 2,746,415 $ (136,000)(1) $ 4,643,418
Operating costs and expenses............... 2,453,581 2,855,792 18,183 (2) 5,201,369
(136,000)(1)
(6,854)(3)
16,667 (4)
--------------- -------------- ------------ ------------
Loss from operations....................... (420,578) (109,377) (27,996) (557,951)
Other expenses, net........................ 15,182 46,014 -- 61,196
----------- ------------- ------------ -------------
Net loss................................... (435,760) (155,391) (27,996) (619,147)
Preferred stock dividend accumulated....... 4,000 -- -- 4,000
----------- ------------- ------------ -------------
Net loss attributable to
common shareholders................... $ (439,760) $ (155,391) $ (27,996) $ (623,147)
=========== ============= =========== =============
Net loss attributable to common share:
Primary............................... $ (0.13) $ (0.18)
=========== =============
Fully diluted......................... $ (0.12) $ (0.17)
=========== =============
Average number of shares used:
Primary............................... 3,382,917(5) 50,000(6) 3,432,917
=========== ============ =============
Fully diluted......................... 3,560,256(5) 50,000(6) 3,610,256
=========== ============ =============
See accompanying notes to pro forma condensed consolidated financial
information.
Historical Historical Pro Forma
---------- ---------- ---------
Holdings BUI
-------- ---
Quarter Ended Quarter Ended
February 29, February 29,
1996 1996 Adjustments Consolidated
------------- -------------- ------------ -------------
Revenues................................... $ 825,641 $ 634,035 $ (34,000)(1) $ 1,425,676
Operating costs and expenses............... 845,945 713,948 4,546(2) 1,532,892
(34,000)(1)
(1,714)(3)
4,167(4)
------------- -------------- ------------ -------------
Loss from operations....................... (20,304) (79,913) (6,999) (107,216)
Other income (expenses), net............... 99,116 (11,504) -- 87,612
------------- -------------- ------------ -------------
Net income (loss) attributable to
common shareholders................... $ 78,812 $ (91,417) $ (6,999) $ (19,604)
============= ============= =========== =============
Net income attributable to common share:
Primary............................... $ 0.01 $ --
============= =========
Fully diluted......................... $ 0.01 $ --
============= =========
Average number of shares used:
Primary............................... 6,962,199(5) 13,318(6) 6,975,517
============= ============= =============
Fully diluted......................... 6,995,825(5) (16,866)(6) 6,978,959
============= ============= =============
See accompanying notes to pro forma condensed consolidated financial
information.
Notes to pro forma condensed consolidated financial information:
(1) Elimination of franchise royalty fee revenue of Holdings and expense of
BUI.
(2) Amortization of goodwill over a 40-year period associated with the
purchase of BUI by Holdings.
(3) Elimination of franchise fee amortization by BUI associated with initial
franchise fees paid Holdings.
(4) Amortization of non-competition agreement over 6-year period.
(5) Average number of shares reported have been adjusted to retroactively
give effect of 50% stock split effected in the form of a dividend payable
to shareholders of record of Holdings on April 12, 1996.
(6) Reflects the issuance of 50,000 shares of Holdings common stock as
partial consideration for purchase. Quarterly amount further adjusted to
recognize antidilutive impact of common stock equivalents under loss
position in pro forma consoldiated financial information.
EXHIBITS
The following exhibits are filed herewith.
Exhibit
No. Description of Exhibit
10.17* Asset Purchase Agreement by and among BAB Systems, Inc., Bagels
Unlimited, Inc. and Donald Nelson and Mary Ann Varichak dated May 1, 1996
(without schedules)
10.18* Non Competition Agreement by and among BAB Holdings, Inc. and Donald
Nelson and Mary Ann Varichak dated May 1, 1996
10.19* Stock Option Agreement between BAB Holdings, Inc. and Bagels Unlimited,
Inc. dated May 1, 1996
10.20* Registration Rights Agreement between BAB Holdings, Inc. and Bagels
Unlimited, Inc. dated May 1, 1996
10.27 Historical Financial Statements of Bagels Unlimited, Inc. for the periods
ended February 29, 1996 and February 28, 1995, including Statements of
Operations, Retained Earnings/Accumulated Deficit and Cash Flows for the
period August 31, 1993 (inception) through February 28, 1994.
* Incorporated by reference to exhibits bearing same exhibit numbers filed
as part of report on Form 8-K concerning this transaction on May 15,
1996.
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BAB HOLDINGS, INC.
Dated: July 12, 1996 By: /s/ THEODORE P. NONCEK
-------------------------------
Theodore P. Noncek,
Chief Financial Officer
(Principal accounting and
financial officer)
INDEX
NUMBER DESCRIPTION PAGE #
10.17* Asset Purchase Agreement by and among BAB Systems, Inc., Bagels
Unlimited, Inc. and Donald Nelson and Mary Ann Varichak dated
May 1, 1996 (filed without schedules and exhibits)
10.18* Non Competition Agreement by and among BAB Holdings, Inc. and
Donald Nelson and Mary Ann Varichak dated May 1, 1996
10.19* Stock Option Agreement between BAB Holdings, Inc. and Bagels
Unlimited, Inc. dated May 1, 1996
10.20* Registration Rights Agreement between BAB Holdings, Inc. and
Bagels Unlimited, Inc. dated May 1, 1996
10.27 Historical Financial Statements of Bagels Unlimited, Inc. for
the periods ended February 29, 1996 and February 28, 1995,
including Statements of Operations, Retained Earnings/Accumulated
Deficit and Cash Flows for the period August 31, 1993 (inception)
through February 28, 1994.
* Incorporated by reference to exhibits bearing same exhibit numbers filed
as part of report on Form 8-K concerning this transaction on May 15,
1996.