UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 1, 1997
THE CASTLE GROUP, INC.
(Exact name of registrant as specified in its charter)
Utah 0-23338 99-037845
(State or other jurisdiction (Commission File (IRS Employer Identification
of incorporation) Number) Number)
745 Fort Street, 10th Floor, Honolulu, Hawaii 96813
(Address of principal executive office)
Registrant's telephone number, including area code 808-524-0900
Not Applicable
(Former name or former address, if changed since last report)
Page 1 of 4 sequentially numbered pages
Item 5. OTHER EVENTS.
On August 1, 1997, the Company issued a press release regarding the
potential acquisition of 51% of the authorized issued and outstanding stock of
P.T. Qualita Indah ("PTQI"). The 51% interest is currently owned by P.T.
Ponderosa Pelangi ("PTPP"). The acquisition has not yet been consummated and
is subject to many conditions, including but not limited to, receiving certain
approvals from the Company's board of directors, the seller, and other third
parties.
Date and Manner of Acquisition
On July 25, 1997, The Company and PTPP executed a letter of intent for the
Company to purchase a 51% interest in PTQI from PTPP. The acquisition is
not consummated and is subject the negotiation and execution of a definitive
agreement within sixty days. The acquisition is also subject to, among other
things, the approval of the board of directors of the Company and the approval
of the acquisition from the master franchisor of PTQI.
Description of Assets
The acquisition, if consummated, shall be for 51% of the authorized issued
and outstanding stock of PTQI from PTPP. PTQI is an Indonesian company that
manages 11 hotels and has contracts to manage another 10 hotels currently under
construction. All of the properties managed by PTQI are located in Indonesia.
PTQI has an exclusive master franchise agreement with Choice Hotels,
International to franchise the Choice Hotels product lines.
Amount of Consideration
The consideration paid by the Company to PTPP, if the transaction is
consummated, would be an initial exchange of 375,000 shares of the Company's
Common Stock for the 51% interest in the stock of PTQI. In addition to the
initial 375,000 shares, additional shares may be issued based upon the net
earnings, if any, of PTQI as of the end of the third fiscal year of the
Company following the acquisition.
Identity of the Seller
The seller is P.T. Ponderosa Pelangi, an Indonesian corporation, which
owns 51% of the authorized issued and outstanding stock of PTQI.
Relationships Between Registrant and Seller
To the best of management's knowledge, there are no direct or indirect
relationships between the Company, its employees, agents, subsidiaries or
directors and the seller.
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Sources of Funds Used for the Acquisition
The acquisition, if consummated as currently proposed, would be paid for
by the Company via its Common Stock and therefore, no cash would be necessary
for the closing of the purchase. Any working capital needed, if any, for the
operations of PTQI would be provided by operating funds of the Company and
through borrowing from financial institutions which as yet are unknown due to
the preliminary status of the acquisition.
Fixed Assets Acquired
The fixed assets acquired include a proportionate share of PTQI's
furniture and equipment used in the management and franchising of the Choice
Hotel name.
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SIGNATURES
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.
THE CASTLE GROUP, INC.
(Registrant)
Date August 15, 1997 Michael S. Nitta
Chief Financial Officer and
Vice President Finance
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