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 13, 1997
BAB Holdings, Inc.
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(Name of small business issuer in its charter)
Illinois 0-27068 36-3857339
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
8501 West Higgins Road, Suite 320, Chicago, Illinois 60631
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (773) 380-6100
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(Former name, former address and former fiscal year,
if changed since last report.)
TABLE OF CONTENTS
Page
----
Item 1. Changes in Control of Registrant
Item 2. Acquisition or Disposition of Assets
Item 3. Bankruptcy or Receivership
Item 4. Changes in Registrant's Certifying Accountant
Item 5. Other Events
Item 6. Resignation of Registrant's Directors
Item 7. Financial Statements and Exhibits
Item 8. Change in Fiscal Year
SIGNATURE
INDEX TO EXHIBITS
Item 1. Changes in Control of Registrant
Not applicable.
Item 2. Acquisition or Disposition of Assets
On May 13, 1997 BAB Holdings, Inc. (the "Company") completed the
acquisition by merger of My Favorite Muffin Too, Inc. ("MFM"), a New
Jersey corporation. MFM franchises and operates muffin and bagel
specialty retail stores concentrated primarily in the Eastern United
States and Florida. At May 13, 1997, MFM had 60 franchise and 5
company-operated units in operation. MFM was merged into BAB
Acquisition Corporation, a wholly-owned subsidiary of the Company,
with MFM being the surviving entity.
The Company acquired substantially all the assets of MFM
including all of MFM's right, title and interest in all leased real
property, trademarks, recipes, equipment, machinery, furniture and
fixtures, leasehold improvements, franchise and other operating
contracts, current assets and other assets of the MFM. Additionally,
the Company has assumed liabilities of MFM including accounts
payable, accrued liabilities, lease obligations and obligations under
franchise and operating contracts. The Company intends to continue
using the assets of MFM in the franchising and operation of muffin
and bagel specialty retail stores.
The acquisition through merger was completed by exchanging 150
shares of MFM stock held equally by Owen Stern, Ruth Stern and Illona
Stern (the "Sellers"), for 432,608 shares of the Company's common
stock, restricted as to transfer until January 1, 1999, and $260,000
in cash to the Sellers. In addition to the other liabilities
assumed, the Company has additionally assumed approximately $350,000
of existing bank debt. Additionally, the Company has retained the
Sellers as employees of the Company pursuant to employment contracts,
through May 8, 2001 for Owen Stern, and through May 8, 2000 for Ruth Stern
and Illona Stern.
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
BAB HOLDINGS, INC.
PRO FORMA STATEMENT OF OPERATIONS
Year ended November 30, 1996
(Unaudited)
The following unaudited pro forma statement of operations reflects
the acquisition by the Company of Bagels Unlimited, Inc. ("BUI"), Strathmore
Bagels Franchise Corporation ("Strathmore") and MFM as if they had occurred
on December 1, 1995. Such pro forma information is based upon the historical
results of operations of the Company for the year ended November 30, 1996,
the historical results of operations of BUI for the five months ended April
30, 1996, the historical results of operations of Strathmore for the six
months ended May 21, 1996 and the historical results of operations of MFM
for the year ended December 31, 1996 giving effect to the acquisitions and
the pro forma adjustments set forth in the accompanying notes to pro forma
financial statements. Unaudited pro forma adjustments are based upon
historical information, estimates and certain assumptions that the Company
deems appropriate. The unaudited pro forma financial statements are not
necessarily indicative of either future results of operations or results that
might have been obtained if the foregoing transactions had been consummated
as of the indicated date. This pro forma statement of operations should be
read in conjunction with the historical financial statements and notes
thereto of the Company, BUI, Strathmore and MFM.
Pro Pro
Forma Forma
Strath- Adjust- as
Company BUI more MFM ments Adjusted
---------- --------- --------- ---------- --------- --------
REVENUES:
Net sales
by Company-
owned stores $3,484,319 $1,152,522 $1,310,663 $5,947,504
Royalty fees
from
franchised
stores 1,402,839 896,002 $(59,524)(1) 2,239,317
Franchise
and area
development
fees 1,023,331 235,250 1,258,581
Licensing
fees and
other
revenues 413,109 $278,268 269,450 960,827
---------- ---------- ---------- ---------- -------- ---------
Total
revenues 6,323,598 1,152,522 278,268 2,711,365 (59,524) 10,406,229
OPERATING
COSTS AND
EXPENSES:
Food,
beverage
and paper
costs 1,221,826 417,213 426,333 2,065,372
Store payroll
and other
operating
expenses 1,753,397 608,981 823,301 3,185,679
Costs of
uncompleted
business
acquisition 650,922 650,922
Depreciation
and
amortization 379,266 28,920 16,835 84,600 151,266(2) 660,887
Selling,
general and
adminis-
trative
expenses 2,938,806 198,060 319,209 1,269,420 (59,524)(1)4,665,971
---------- --------- --------- ---------- --------- ---------
Total
operating
costs and
expenses 6,944,217 1,253,174 336,044 2,603,654 91,742 11,228,831
---------- --------- --------- ---------- --------- ----------
Income (loss)
from
operations (620,619) (100,652) (57,776) 107,711 (151,266) (822,602)
Interest and
other income
(expense), net 299,775 (20,318) (25,927) 253,530
---------- --------- --------- ----------- -------- ----------
Income(loss)
before taxes (320,844) (120,970) (57,776) 81,784 (151,266) (569,072)
Provision for
income taxes -- -- 12,462 47,993 -- 60,455
---------- --------- --------- ----------- -------- ----------
Net income
(loss)
attributable
to common
shareholders $(320,844) $(120,970) $ (70,238) $ 33,791 $(151,266) $(629,527)
========== ========== ========== ========== ========= ==========
Net income
(loss)
attributable
to common
share, fully
diluted $(0.04) $(0.08)
========== =========
Average number
of shares
used fully
diluted(3) 7,420,538 7,873,979
========== =========
(1) Elimination of franchise royalty revenue of the Company
and related expense recognized by BUI.
(2) Amortization of BUI goodwill over 40 years ($7,576),
amortization of BUI non-competition agreement over six
years ($6,945), amortization of Strathmore goodwill over
40 years ($27,616), Strathmore contract rights over
102 months ($28,818) and amortization of MFM franchise
contract rights over 20 years ($83,167), reduced by
elimination of BUI initial franchise fee amortization ($2,856).
(3) Adjusted for 432,608 shares of common stock issued in
MFM transaction.
BAB HOLDINGS, INC.
PRO FORMA STATEMENT OF OPERATIONS
Six months ended May 31, 1997
(Unaudited)
The following unaudited pro forma statement
of operations reflects the acquisition by the Company
of MFM as if it had occurred on December 1, 1996. Such
pro forma information is based upon the historical results
of operations of the Company for the six months ended
May 31, 1997 and the historical results of operations of
MFM for the period from December 1, 1996 through May 13,
1997 (date of MFM acquisition) giving effect to the
acquisition and the pro forma adjustments set forth in the
accompanying notes to pro forma financial statements.
Unaudited pro forma adjustments are based upon historical
information, estimates and certain assumptions that the
Company deems appropriate. The unaudited pro forma financial
statements are not necessarily indicative of either future
results of operations or results that might have been
obtained if the foregoing transaction had been consummated
as of the indicated date. This pro forma statement of
operations should be read in conjunction with the historical
financial statements and notes thereto of the Company and
MFM.
Pro Pro
Forma Forma
Adjust- as
Company MFM ments Adjusted
---------- ---------- --------- --------
REVENUES:
Net sales
by Company-
owned stores $4,087,363 $ 658,683 $4,746,046
Royalty fees
from
franchised
stores 958,744 408,441 1,367,185
Franchise
and area
development
fees 647,900 56,250 704,150
Licensing
fees and
other
revenues 570,827 130,957 701,784
---------- ---------- -------- ---------
Total
revenues 6,264,834 1,254,331 7,519,165
OPERATING
COSTS AND
EXPENSES:
Food,
beverage
and paper
costs 1,350,415 276,455 1,626,870
Store payroll
and other
operating
expenses 2,262,798 359,769 2,622,567
Depreciation
and
amortization 562,946 50,356 37,335(1) 650,637
Selling,
general and
adminis-
trative
expenses 1,949,368 599,522 2,548,890
---------- ---------- --------- ---------
Total
operating
costs and
expenses 6,125,527 1,286,102 37,335 7,448,964
---------- ---------- --------- ---------
Income (loss)
from
operations 139,307 (31,771) (37,335) 70,201
Interest and
other income
(expense), net 34,678 (22,839) 11,839
---------- ---------- ---------- ---------
Net Income
(loss) 173,985 (54,610) (37,335) 82,040
Preferred stock
dividend
accumulated (222,715) -- -- (222,715)
---------- ----------- --------- --------
Net income
(loss)
attributable
to common
shareholders $ (48,730) $ (54,610) $(37,335) $(140,675)
========== ========= ========== =========
Net income
(loss)
attributable
to common
share, fully
diluted $(0.01) $(0.02)
========== ==========
Average number
of shares
used fully
diluted(2) 7,194,725 7,389,398
========= =========
(1) Amortization of MFM franchise contract rights over 20 years.
(2) Adjusted for 432,608 shares of common stock issued in
MFM transaction.
Exhibits
The following exhibits are filed herewith.
Exhibit
No. Description of Exhibit
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2.5* Acquisition Agreement dated May 1, 1997 by and among
BAB Holdings, Inc., BAB Acquisition Corp., My Favorite
Muffin Too, Inc., Muffin Holdings of Pennsylvania,
a limited partnership, Ruth Stern, Owen Stern and Illona
Stern (without schedules)
4.6* Registration Rights Agreement dated as of May 1, 1997,
between BAB Holdings, Inc. and Owen Stern, Ruth Stern,
Illona Stern and Pierce W. Hance
99.1 Report of BDO Seidman, L.L.P., independent auditors, on
the Combined Financial Statements of My Favorite Muffin
Too, Inc. and My Favorite Muffin, Inc., as of December 31,
1996 and for the year then ended
99.2 Historical Combined Financial Statements of My Favorite
Muffin Too, Inc., and My Favorite Muffin, Inc., for the
year ended December 31, 1996
99.3 Historical Combined Condensed Financial Statements of My
Favorite Muffin Too, Inc. and My Favorite Muffin, Inc.,
for the interim period January 1, 1997 through
May 13, 1997 (unaudited)
* Incorporated by reference to exhibits bearing same exhibit
numbers filed as part of report on Form 8-K concerning this
transaction on May 28, 1997.
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 23, 1997 By:/s/ THEODORE P. NONCEK
--------------------------
Theodore P. Noncek, Chief Financial
Officer,Secretary and Treasurer
(Principal accounting and financial officer)
Index
Number Description Page #
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2.5* Acquisition Agreement dated May 1, 1997 by and
among BAB Holdings, Inc., BAB Acquisition Corp.,
My Favorite Muffin Too, Inc., Muffin Holdings of
Pennsylvania, a limited partnership, Ruth Stern,
Owen Stern and Illona Stern (without schedules)
4.6* Registration Rights Agreement dated as of May 1,
1997, between BAB Holdings, Inc. and Owen Stern,
Ruth Stern, Illona Stern and Pierce W. Hance
99.1 Report of BDO Seidman, L.L.P., independent
auditors, on the Combined Financial Statements of
My Favorite Muffin Too, Inc. and My Favorite
Muffin, Inc., as of December 31, 1996 and for the
year then ended
99.2 Historical Combined Financial Statements of My
Favorite Muffin Too, Inc., and My Favorite Muffin,
Inc., for the year ended December 31, 1996
99.3 Historical Combined Condensed Financial Statements of
My Favorite Muffin Too, Inc. and My Favorite Muffin,
Inc., for the interim period January 1, 1997 through
May 13, 1997 (unaudited)
* Incorporated by reference to exhibits bearing same exhibit
numbers filed as part of report on Form 8-K concerning this
transaction on May 28, 1997.