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):
JUNE 12, 1997
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AMERICAN CINEMASTORES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-23138 95-4374952
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2300 S. EASTERN AVENUE, CITY OF COMMERCE, CALIFORNIA 90040
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(Address of principal executive offices)
Registrant's telephone number, including area code (213) 725-4955.
AMERICAN CINEMASTORES, INC.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
On June 12, 1997, American CinemaStores, Inc. (The "Company") acquired 100%
of the common stock of Susan Burrowes, Ltd., a California Corporation, ("SBL").
(b) AUDITED FINANCIAL INFORMATION.
Audited for the 12 month period ending February 28, 1997, for Susan
Burrowes Ltd. are being provided.
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 thereunto duly authorized.
AMERICAN CINEMASTORES, INC.
By: /s/ Christopher J. Ebert
---------------------------------------------
Christopher J. Ebert, Chief Financial Officer
Date: July 14, 1997
AMERICAN CINEMASTORES, INC.
ITEM 2. ACQUISITION OF ASSETS.
The control of the assets of SBL represented by the acquisition of one
hundred percent (100%) of the common stock of SBL was acquired by the Company
on June 12, 1997, pursuant to the Stock Purchase Agreement. SBL is engaged
in the design, manufacture, and distribution of moderately priced women's
apparel items. SBL was incorporated in California in 1978. The mailing
address of SBL's executive offices is 2300 S. Eastern Avenue, City of
Commerce, California 90040; the telephone number is (213) 725-4955.
Currently, SBL's major business activities are focused in the design and
merchandizing of wholesale women's apparel in the areas of career dressing for
sizes ranging from petite, missy and women's, incorporating several trademarks
and brand names for distribution of sales to major retail chains both nationally
and internationally. The company also intends to pursue long-term, growth
oriented strategies to enhance its business activities.
(a) EXHIBITS.
Stock Purchase Agreement by and among American CinemaStores, Inc., and
Susan Burrowes, Ltd.
[Letterhead]
SUSAN BURROWES, LTD.
FINANCIAL STATEMENTS
FEBRUARY 28, 1997
CONTENTS
PAGE
Independent accountants' report 1
Balance sheet 2
Statement of loss and retained earnings 3
Statement of cash flows 4
Notes to financial statements 5-8
Independent accountants' report on supplemental information 9
Supplemental information 10-12
[LETTERHEAD]
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Susan Burrowes, Ltd.
We have audited the accompanying balance sheet of Susan Burrowes, Ltd. as of
February 28, 1997, and the related statements of loss and retained earnings and
cash flows for the year then ended. These financial statements are the
responsibility of the management of Susan Burrowes, Ltd. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. 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 Susan Burrowes, Ltd. as of
February 28, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
The report is intended solely for the information and use of the Board of
Directors and Management of American Cinemastores, Inc. and should not be used
for any other purpose.
/s/Cohn Handler & Co
COHN HANDLER & CO
An Accountancy Corporation
May 22, 1997
(June 12, 1997 as to Note 14)
1
[Letterhead] SUSAN BURROWES, LTD.
BALANCE SHEET - FEBRUARY 28, 1997
ASSETS
Current assets:
Cash $ 1,000
Trade accounts receivable 65,000
Inventory 2,216,000
Loan receivable, officer 75,000
Income tax refund receivable 97,000
Prepaid expenses 67,000
-----------
Total current assets $ 2,521,000
Property and equipment, net 290,000
Deposits 29,000
-----------
$ 2,840,000
-----------
-----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Due to factor $ 955,000
Accounts payable 1,373,000
Note payable, bank 18,000
Accrued expenses 379,000
---------
Total current liabilities $ 2,725,000
Stockholder's equity:
Common stock, no par value; 100,000 shares
authorized, 25,000 shares issued 25,000
Retained earnings 90,000
----------
Total stockholder's equity 115,000
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$ 2,840,000
----------
----------
See independent accountants' report and notes to financial statements.
2
[Letterhead] SUSAN BURROWES, LTD.
STATEMENT OF LOSS AND RETAINED EARNINGS
YEAR ENDED FEBRUARY 28, 1997
Amount Percent
----------- ----------
Net sales $15,320,000 100.0%
Cost of sales 10,958,000 71.5
---------- ------
Gross profit 4,362,000 28.5
Operating expenses 4,721,000 30.8
---------- ------
Loss from operations (359,000) (2.3)
---------- ------
Other expenses:
Interest expense 388,000 2.5
Other expense 44,000 0.3
---------- ------
432,000 2.8
---------- ------
Loss before state income taxes (791,000) (5.1)
State income taxes 1,000 -0-
---------- ------
Net loss (792,000) (5.1)%
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------
Retained earnings, beginning 882,000
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Retained earnings, ending $ 90,000
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See independent accountants' report and notes to financial statements.
3
[LETTERHEAD] SUSAN BURROWES, LTD.
STATEMENTS OF CASH FLOWS
YEAR ENDED FEBRUARY 28, 1997
Cash flows from operating activities:
Net loss $(792,000)
Adjustments to reconcile net loss to net cash
flows provided by operating activities:
Depreciation $ 66,000
Loss from disposal of assets 53,000
(Increase) decrease in assets:
Trade accounts receivable 21,000
Inventory 637,000
Deferred income taxes 44,000
Loan receivable, officer 27,000
Income tax refund receivable 10,000
Prepaid expenses 10,000
Deposits 11,000
Increase (decrease) in liabilities:
Due to factor 356,000
Accounts payable ( 159,000)
Accrued expenses ( 203,000)
----------
873,000
--------
Net cash flows provided by operating
activities 81,000
Net cash flows applied to investing activities:
Purchase of property and equipment (58,000)
Net cash flows applied to financing activities:
Repayment of note payable, bank (23,000)
--------
Net change in cash -0-
Cash, beginning 1,000
--------
Cash, ending $ 1,000
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--------
SCHEDULE OF NONCASH ACTIVITIES:
1. Write-off of property and equipment and accumulated
depreciation of fully depreciated assets. $ 30,000
--------
--------
2. Write-off of property and equipment and accumulated
depreciation from disposal of property and equipment. $ 53,000
--------
--------
See independent accountants' report and notes to financial statements.
4
[LETTERHEAD] SUSAN BURROWES, LTD.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997
1. Principle industry:
The Company is exclusively engaged in the wholesale apparel industry.
2. Summary of significant accounting policies:
Inventory valuation: Inventory is valued at the lower of cost (first-in,
first-out) or market.
Property and equipment: Property and equipment are stated at cost.
Depreciation is provided for by both the straight - line and accelerated
methods over the estimated useful lives of the related assets.
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
3. Major customer:
The Company has three major customers which account for approximately 50
percent of the Company's receivables. At the balance sheet date, the
receivables from these customers were deemed collectible.
4. Trade accounts receivable:
Accounts receivable are principally from trade customers. The factor, to
the extent of any financing provided, holds a security interest in all
receivables of the Company. No allowance for doubtful account, is provided
for or required against these receivables.
5. Inventory:
Piece goods $ 917,000
Work-in-process 493,000
Finished goods 806,000
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$ 2,216,000
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See independent accountants' report.
5
[LETTERHEAD] SUSAN BURROWES, LTD.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FEBRUARY 28, 1997
6. Property and equipment, net:
Machinery and equipment $ 261,000
Furniture and fixtures 72,000
Leasehold improvements 15,000
Auto 11,000
Computer 152,000
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Total, at cost 511,000
Less accumulated depreciation 221,000
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$ 290,000
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----------
Machinery and equipment costing approximately $70,000 is collateral for the
note payable, bank.
7. Due to factor:
The Company sells substantially all of its accounts receivable to a factor
under a continuing contract cancellable upon written notice. In cases where
the factor approves the credit, the account is sold without recourse; i.e.,
the factor takes the credit risk. In those cases where the factor does not
approve the credit, the Company bears the credit risk. At the balance
sheet date, the receivables which were at the Company's risk were
negligible. The factor, to the extent of any financing provided, holds a
security interest in all accounts receivable of the Company. The
stockholder of the Company has also pledged real property to the factor as
collateral.
8. Note payable, bank:
Note payable, bank, is due in monthly installments of approximately $2,000
plus interest at prime plus 3 percent per annum through December 1997.
Machinery and equipment costing approximately $70,000 is collateral for the
note payable, bank.
See independent accountants' report.
6
SUSAN BURROWES, LTD.
[LETTERHEAD]
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FEBRUARY 28, 1997
9. Accrued expenses:
Contract labor $ 138,000
Freight-out 10,000
Payroll and payroll taxes 55,000
Other 176,000
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$ 379,000
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----------
10.
Lease commitments:
The Company leases its operating facilities under a lease expiring
November 30, 1998. The Company is required to pay all utilities,
repairs and maintenance, insurance and any increases in real property
taxes. Each year rent shall be increased due to cost of living
increases based on the Consumer Price Index, not to exceed 5 percent
per year.
The Company also leases its New York showroom under a lease expiring
April 30, 1998. The Company, as lessee, is required to pay all
insurance, repairs and maintenance, and any increases in real property
taxes over the lease period.
Rent expense for the year ended February 28, 1997 amounted to
$321,000.
Minimum lease commitments for the fiscal years ending February 28, are
as follows:
1998 $ 235,000
1999 176,000
11. Lease commitment, obligation under non-capitalized leases:
The following is a schedule by fiscal year of future minimum payments
under non-capitalized leases and the present value of future minimum
rentals as of February 28:
1998 $ 7,000
1999 6,000
2000 6,000
2001 2,000
See independent accountants' report.
7
SUSAN BURROWES, LTD.
[LETTERHEAD]
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FEBRUARY 28, 1997
12. Income taxes:
The Company has a federal net operating loss carryforwards of
approximately $806,000 and a state net operating loss carryforwards of
approximately $574,000, available for carryforward through 2011 and 2002,
respectively. As of the balance sheet date, none of the net operating
loss carryforwards have been utilized.
13. Supplemental cash flow disclosures:
Cash paid during the period was as follows:
Interest $ 387,000
---------
---------
Income taxes $ 1,000
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14. Subsequent event:
On June 12, 1997, 100 percent of the Company's outstanding stock was sold
to American Cinemastores, Inc. The investor provided an initial $1,000,000 of
working capital and management for the Company.
See independent accountants' report.
8
[Letterhead]
INDEPENDENT ACCOUNTANTS' REPORT ON
SUPPLEMENTAL INFORMATION
Board of Directors
Susan Burrowes, Ltd.
The independent accountants report on the basic financial statements of Susan
Burrowes, Ltd. as of February 28, 1997 appears on page 1. That audit was made
for the purpose of forming an opinion on the basic financial statements taken as
a whole. The supplemental information on pages 10 through 12 is presented for
purposes of additional analysis and is not part of the basic financial
statements. Such information has not been subjected to the auditing procedures
applied in the audit of the basic financial statements and accordingly, we do
not express an opinion on the supplemental information.
/s/ Cohn Handler & Co
COHN HANDLER & CO
An Accountancy Corporation
May 22, 1997
9
[Letterhead]
SUSAN BURROWES, LTD.
SUPPLEMENTAL INFORMATION
SCHEDULE OF NET SALES AND COST OF SALES
YEAR ENDED FEBRUARY 28, 1997
Net sales:
Sales $16,862,000
Discounts 1,142,000
Returns and allowances 400,000
-----------
$15,320,000
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Cost of sales:
Inventory, beginning $ 2,853,000
Purchases 6,035,000
Trim 702,000
Freight-in 80,000
Contract labor 3,146,000
Cutting salaries and fringe 358,000
-----------
13,174,000
Inventory, ending 2,216,000
-----------
$10,958,000
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See independent accountants' report on supplemental information.
10
SUSAN BURROWES, LTD.
SUPPLEMENTAL INFORMATION
[LOGO]
SCHEDULE OF OPERATING EXPENSES
YEAR ENDED FEBRUARY 28, 1997
Design, sample and production:
Design $ 72,000
Design salaries 225,000
Marking and grading 11,000
Marking and grading salaries 98,000
Model fees 16,000
Patternmakers salaries 304,000
Payroll taxes 72,000
Production 115,000
Production salaries 292,000
Quality control salaries 81,000
Receiving salaries 63,000
Sample costs 11,000
Sample cuts 252,000
Samplemakers salaries 231,000
------------
$1,843,000
Selling:
Advertising 88,000
Payroll taxes 33,000
Sales commissions 9,000
Selling 81,000
Selling salaries 401,000
Showroom 64,000
Showroom rent 93,000
Trade shows 7,000
Travel and entertainment 192,000
------------
968,000
See independent accountants' report on supplemental information.
11
COHN HANDLER & CO
An Accountancy Corporation
SUSAN BURROWES, LTD.
SUPPLEMENTAL INFORMATION
[LOGO]
SCHEDULE OF OPERATING EXPENSES - CONTINUED
YEAR ENDED FEBRUARY 28, 1997
Shipping:
Freight-out 76,000
Payroll taxes 14,000
Shipping supplies 25,000
Shipping salaries 175,000
-----------
290,000
General and administrative:
Auto 39,000
Bank charges 11,000
Computer 54,000
Contributions 2,000
Depreciation 66,000
Dues and subscriptions 18,000
Equipment rental 12,000
Factor commission 147,000
Insurance 181,000
Loss from disposal of assets 5,000
Office expenses 49,000
Office salaries 409,000
Officer salaries 130,000
Payroll service fees 5,000
Payroll taxes 40,000
Postage 3,000
Professional fees 89,000
Rent 228,000
Repairs and maintenance 36,000
Security 5,000
Taxes and licenses 6,000
Telephone 35,000
Utilities 50,000
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1,620,000
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$ 4,721,000
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-----------
See independent accountants' report or supplemental information.
COHN HANDLER & CO
12
An Accountancy Corporation