FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: February 28, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission file number: 0-27068
BAB Holdings, Inc.
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(Name of small business issuer in its charter)
Illinois 36-3857339
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 8,521,706 shares of Common
Stock, as of April 9, 1999.
TABLE OF CONTENTS
PART I
Item 1. Financial Statements ...................................
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation ..................
PART II
Item 1. Legal Proceedings.......................................
Item 2. Changes in Securities...................................
Item 3. Defaults Upon Senior Securities.........................
Item 4. Submission of Matters to a Vote of Security Holders.....
Item 5. Other Information.......................................
Item 6. Exhibits and Reports on Form 8-K........................
SIGNATURE ........................................................
PART I
ITEM 1. FINANCIAL STATEMENTS
BAB Holdings, Inc.
Condensed Consolidated Balance Sheet
February 28, 1999
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents, including
restricted cash of $134,102 $ 303,500
Other current assets 3,230,759
------------
Total current assets 3,534,259
Property and equipment, net of
accumulated depreciation of $1,963,063 4,527,419
Notes receivable 1,075,473
Goodwill, net of accumulated amortization of $182,033 3,794,288
Franchise contract rights, net of accumulated
amortization of $189,959 1,894,006
Other assets and intangible assets, net of
accumulated amortization of $356,356 839,233
------------
$ 15,664,678
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,056,818
Deferred franchise fee revenue 260,000
Current portion of long-term debt 1,893,961
Other current liabilities 499,836
------------
Total current liabilities 4,710,615
Noncurrent liabilities:
Long-term debt, net of portion included
in current liabilities 987,332
Other noncurrent liabilities 472,185
-----------
Total noncurrent liabilities 1,459,517
-----------
Stockholders' equity:
Common stock 11,570,452
Additional paid-in capital 1,452,402
Preferred stock 1,594,430
Treasury stock (36,067)
Accumulated deficit (5,086,671)
------------
Total stockholders' equity 9,494,546
------------
$ 15,664,678
============
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
BAB Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED
FEBRUARY 28,
1999 1998
--------------------------
REVENUES
Net sales by Company-owned stores $ 2,086,087 $ 2,427,150
Royalty fees from franchised stores 815,080 787,527
Licensing fees and other income 237,273 303,163
Franchise and area development fees 130,500 212,000
-------------------------
3,268,940 3,729,840
OPERATING COSTS AND EXPENSES
Food, beverage, and paper costs 704,807 820,614
Store payroll and other operating expenses 1,196,353 1,513,552
Selling, general, and administrative expenses 1,433,263 1,501,148
--------------------------
3,334,423 3,835,314
--------------------------
Loss before interest ( 65,483) (105,474)
Interest expense ( 39,022) ( 46,581)
Interest income 31,099 19,096
--------------------------
Net loss (73,406) (132,959)
Preferred stock divideds accumulated (45,699) ( 50,696)
--------------------------
Net loss attributable to
common shareholders $ (119,105) $ (183,655)
==========================
Basic and diluted loss
per common share $ (0.01) $ (0.02)
==========================
Average number of shares outstanding-
basic and diluted 8,365,262 7,723,610
==========================
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
BAB Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
THREE MONTHS ENDED
FEBRUARY 28,
1999 1998
-----------------------
OPERATING ACTIVITIES
Net cash used for operating activities $ (248,293) $ (369,970)
INVESTING ACTIVITIES
Purchases of property and equipment (184,745) (36,438)
Note repayments 4,647 122,727
Other 34,901 4,171
-----------------------
Net cash (used for) provided by
investing activities (145,197) 90,460
FINANCING ACTIVITIES
Borrowings 257,000 337,500
Repayment of long-term debt (260,172) (9,598)
------------------------
Net cash (used for) provided by
financing activities (3,172) 327,902
------------------------
Net (decrease)increase in
cash and cash equivalents (396,662) 48,392
Cash and cash equivalents at beginning of period 700,162 389,896
----------------------
Cash and cash equivalents at end of period $ 303,500 $ 438,288
======================
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
BAB Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
represent the financial activity of BAB Holdings, Inc. (the "Company" or
"Holdings"), an Illinois corporation incorporated on November 25, 1992, and
its four wholly-owned subsidiaries, BAB Operations, Inc. ("Operations"), BAB
Systems, Inc. ("Systems"), Brewster's Franchise Corporation ("BFC") and My
Favorite Muffin Too, Inc. ("MFM"). Systems was incorporated on December 2,
1992, and was primarily established to franchise "Big Apple Bagels" specialty
bagel retail stores. Operations was formed on August 30, 1995, primarily to
operate Company-owned stores, including one which currently serves as the
franchise training facility. BFC was established on February 15, 1996, to
franchise "Brewster's Coffee" concept retail coffee stores. MFM was acquired
on May 13, 1997. MFM franchises and operates "My Favorite Muffin" specialty
muffin retail stores.
The accompanying condensed consolidated financial statements are unaudited.
These financial statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statement prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. In the opinion of the
Company's management, the condensed consolidated financial statements for the
unaudited interim periods presented include all adjustments necessary to
fairly present the results of such interim periods and the financial position
as of the end of said period. These adjustments were of a normal recurring
nature and did not have a material impact on the financial statements
presented.
2. Stores Open
Stores which have been opened at February 28, 1999 are as follows:
Stores opened:
Company-owned 27
Franchisee-owned 193
Licensed 73
---
Total 293
===
3. Acquisitions and Dipositions
In January 1998, the Company sold one store located in Lincoln, Nebraska to a
franchisee in exchange for $30,000 and a $177,000 note receivable which bears
interest at a rate of 8.5% per annum. Principal and interest payments are
payable monthly until March 1, 2003 when the remaining unpaid principal
balance is due in full.
On February 1, 1999 the Company acquired certain assets of a group of related
entities doing business as Jacobs Bros. Bagels (Jacobs Bros.) which include
eight retail bagel stores and a central commissary facility in exchange for
$950,000 in cash and warrants for the purchase of an aggregate of 500,000
shares of common stock at an exercise price of $1.25 per share as to 275,000
shares and $1.50 per share as to 225,000 shares. These warrants are first
exercisable on February 1, 2000 and expire on January 31, 2006. On February
26, 1999 the Company issued a total of 160,000 shares of common stock to the
investment bankers who provided services in connection with this acquisition.
Further, the Company entered into noncompetition agreements with two former
principals of Jacobs Bros. totaling $210,000 to be paid over varying periods.
As the cash portion of the purchase price was financed pursuant to a loan
commitment, this has been presented as a non-cash transaction. See Note 6.
4. Preferred Stock - Series A Convertible Preferred Stock
In April 1997, the Company completed the sale of 87,710 shares of $25.00
Series A Convertible Preferred Stock (the "Preferred Stock") in a private
placement to institutional investors. The Preferred Stock carries an 8% annual
dividend payable in cash or, at the option of the Company, in shares of common
stock. However, during a Conversion Suspension Period (defined below),
dividends accrue at a rate of 15% per annum. Dividends are payable only when
shares are converted to shares of common stock. The holders have no voting
rights and have a liquidation preference of $25.00, plus accrued dividends,
out of assets of the Company available for distribution to shareholders.
Commencing August 1, 1997 through July 31, 1999, which date shall be extended
by the number of days in all Conversion Suspension Periods, the shareholders
may elect to convert each share of Preferred Stock into that number of shares
of common stock determined by dividing the $25 purchase price by the lesser of
$5.64 or 85% of the average closing bid price of the common stock for the 30
trading days immediately preceding the conversion date. In addition, if the
Company engages in an underwritten public offering, for any holder who has
given notice of participation in such offering, the conversion rate shall be
85% of the public offering price, if less than the amount calculated in the
immediately preceding sentence.
A Conversion Suspension Period takes effect if the closing bid price of the
common stock is less than $2.325 for 30 consecutive trading days. The
Conversion Suspension Period continues until the first trading day thereafter
that the closing bid price for the common stock has exceeded $2.325 for 30
consecutive trading days; provided, however, that a Conversion Suspension
Period shall not continue for more than sixty (60) days in any period of 365
days. The Company is not required to recognize or accept any conversion of
Preferred Stock during a Conversion Suspension Period. During any Conversion
Suspension Period, the Company, at its option, may redeem any or all of the
Preferred Stock by payment to the holders of $28.75 per share, plus all
accrued and unpaid dividends. The Company entered into a Conversion
Suspension Period during January 1999. Preferred dividends accumulated
during the three months ended February 28, 1999 and 1998 were $45,699 and
$50,696, respectively.
During fiscal 1998, holders elected to convert 18,710 shares of Preferred
Stock plus dividends accrued thereon into 673,376 shares of common stock. No
shares of Preferred Stock were converted during the three months ended
February 28, 1999 and 60,000 share of the Preferred Stock remain issued and
outstanding.
5. Line of Credit Agreement
In December 1998, the Company repaid $127,465 on a line of credit facility
which expired on December 31, 1998 and replaced it with a $1.75 million line-
of-credit facility which expires December 31, 1999 (the Line). Maximum
borrowing under the Line is limited to 75% of accounts receivable under 90
days and 40% of the original cost of equipment, furniture and fixtures.
Interest is payable monthly at prime plus 1% (8.75% as of February 28, 1999),
with principal due upon maturity on December 31, 1999. The Line is secured by
substantially all of the assets of the Company and requires, among other
things, that the Company maintain minimum net worth of $8 million and a
compensating cash balance of $250,000. At February 28, 1999, the Company had
borrowed $1,750,000 on the Line, all of which is classified as a current
liability. The Company is currently in the process of replacing the Line with
a long-term credit facility.
6. Notes Payable
In January 1999, the Company received a commitment from a finance
company for secured loans totaling $1,350,000 to be used to acquire the Jacobs
Bros. assets and refurbish and convert the units acquired to Big Apple
Bagels concept stores. In February 1999, the Company borrowed $1,100,000
pursuant to this commitment. Principal and interest are payable
monthly over a period of seven years and are secured by the assets acquired
and all improvements made thereon. The loans bear interest at an annual
percentage rate of 11.3 percent.
7. Loss per Share
The following tables sets forth the computation of basic and diluted loss per
share:
THREE MONTHS ENDED
FEBRUARY 28,
1999 1998
---------- --------
Numerator:
Net loss $ (73,406) $(132,952)
Preferred stock dividend accumulated (45,699) (50,696)
---------- ----------
Numerator for basic and diluted loss
per share- loss attributable to common
shareholders $ (119,105) $(183,655)
========== ==========
Denominator:
Denominator for basic and diluted
loss per share--weighted
average shares 8,365,262 7,723,610
========== ==========
Basic and diluted loss per share $ (0.01) $ (0.02)
========== ==========
Options to purchase 435,240 shares of common stock at varying prices are
outstanding at February 28, 1999 under the Company's 1995 Long-Term Incentive
and Stock Option Plan (the Incentive Plan) and the 1995 Outside Directors
Stock Option Plan (the Directors' Plan). Also outstanding during the period
ended February 28, 1999 was a warrant sold in connection with the Company's
initial public offering to the underwriter to purchase 255,000 shares of
common stock at $3.20 per share. Additionally, in connection with various
acquisitions, the Company issued options to purchase 1,054,500 shares of
common stock issuable at varying exercise prices ranging from $1.25 per share
to $6.17 per share. Further, warrants issued to each holder of Preferred
Stock and the placement agent of the Preferred Stock were outstanding to
purchase 175,320 and 13,315 shares of common stock at $2.35 and $3.29 per
share, respectively. Finally, shares of common stock are issuable pursuant
to the terms of the Company's convertible Preferred Stock (see Note 4).
The exercise of outstanding options and warrants and the conversion of
convertible securities outstanding during the three months ended February 28,
1999 and 1998 is not assumed as the result is antidilutive to the reported
loss per share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations, including statements regarding
the development of the Company's business, the markets for the Company's
products, anticipated capital expenditures, and the effects of completed and
proposed acquisitions, and other statements contained herein regarding matters
that are not historical facts, are forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995). Because such
statements include risks and uncertainties, actual results may differ
materially from those expressed or implied by such forward-looking statements.
Certain risks and uncertainties are outside the control of the Company and its
management including its ability to attract new franchisees; the continued
success of current franchisees; the effects of competition on franchisee and
Company-owned store results; consumer acceptance of the Company's products in
new and existing markets; fluctuation in development and operating costs;
brand awareness; availability and terms of capital; adverse publicity;
acceptance of new product offerings; availability of locations and terms of
sites for store development; food, labor and employee benefit costs; changes
in government regulation (including increases in the minimum wage law);
regional economic and weather conditions; the hiring, training, and retention
of skilled corporate and restaurant management; and the integration and
assimilation of acquired concepts. Some of these risks and uncertainties are
wholly outside of the control of the Company. Accordingly, readers are
cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date hereof. The Company
undertakes no obligation to publicly release the results of any revision to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
General:
From its inception in November of 1992, the Company has grown to 27 Company-
owned stores and 266 franchised and licensed units as of February 28, 1999.
Systemwide revenues for the three months ended February 28, 1999 were $19.9
million, a $291,000 increase from the year-ago period.
The Company continues to derive a substantial portion of its revenue from
sales generated at its Company-owned stores - Company-owned store sales
accounted for 64% of total revenues during the current year quarter. The
eight units acquired in February 1999 which were formerly owned by
Jacobs Bros. are anticipated to contribute approximately $3.3 million in
additional revenues in fiscal 1999. Ongoing royalty revenues and franchise
fees recognized upon the opening of a franchised unit also represent a
significant source of revenue to the Company, totaling 29% of total revenues
in the current year quarter. Management anticipates that the current
infrastructure is adequate to support the growth in the number of franchised
units which are anticipated to open during fiscal 1999. Further, additional
revenues generated from the sale of international master franchise agreements
are anticipated in fiscal 1999. In the first quarter of 1999, four
franchised units opened in Lima, Peru and are now contributing to ongoing
franchise fees as a result of an international master franchise agreement
sold in the prior fiscal year. Finally, licensing fees continue to be a
source of increasing revenues to the Company as it continually seeks to
develop additional methods of distribution for its brands. Management
anticipates that the commissary which was recently acquired in the Jacobs
Bros. acquisition will provide opportunities for increased profitability on
product sold via non-traditional sources of distribution.
Product sales are also generated through the Company's Web site. Web site
customers can order My Favorite Muffin gift baskets; select offerings of
Brewster's Coffee and branded merchandise; access investor, franchise and
financial information; search for store locations and send comments directly
to the corporate offices.
During the first quarter of 1999 the Company began test marketing a new line
of artisan breads and a complete line of sandwiches, soups and salads. This
test is now being expanded from 3 locations to additional company-owned units
and franchise units. If successful, this program will be rolled out in mid to
late 1999.
During the fourth quarter of fiscal 1997, management identified certain under-
performing stores which were operating at a loss and which, based on the
estimated future cash flows, were considered to be impaired. Four of the
seven stores which were considered to be impaired were located in the Southern
California market. In accordance with the Financial Accounting Standards
Board Standard No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of" and the Emerging Issues Task
Force Issue No. 94-3, "Liability Recognition of Costs to Exit an Activity",
management recorded in November 1997 a provision for impairment of assets and
store closures which totaled approximately $1,837,000. One store was closed
during fiscal 1997 and the remaining units were closed during the first
quarter of 1998. The six stores incurred operating losses of approximately
$90,000 during the three months ended February 28, 1998. As of February 1999
management has terminated its obligations under all the non-cancelable lease
obligations and paid all lease obligations in full.
Results of Operations
Three Months Ended February 28, 1999 versus Three Months Ended February 28,
1998.
Total revenues decreased 12% to $3,269,000 in the first quarter 1999 from
$3,730,000 in the prior year quarter. This decrease is substantially
explained by the difference in the number of Company stores in operation in
each of the periods. In the three months ended February 28, 1998 there were
27 stores in operation for the full three months and six additional stores
open for varying portions of the three month period. For the three months
ended February 28, 1999 there were 18 stores owned and operated for 2 months
and 27 stores owned and operated for one month. In addition, severe weather
in the Midwest during the month of January 1999 greatly decreased sales in
both Company owned and franchise stores, which resulted in both lower
company store revenue which resulted in a lower royalties than would
otherwise have been earned.
There was a 4% increase in royalty revenues, which were $28,000 greater than
that generated in the year-ago quarter. This increase is attributed to the
overall increase in the number of franchised units open during the current
year period. Licensing fees and other income in total decreased $66,000 to
$237,000 from the year-ago period. Approximately $20,000 of the decrease can
be attributed to the sale of a Company-owned store that occurred in the three
months ended February 28, 1998 with no similar transaction in the current year
period. An additional $38,000 of the decrease was due to the sale of
promotional material which was produced in-house and shipped during the first
quarter of 1998 with no similar transaction in the current period. Finally,
franchise and area development fee revenue decreased 39% to $130,500 from the
year-ago period.
Costs associated with Company-owned store operations as a percentage of sales
decreased 5% in the first quarter 1999 versus 1998. This improvement resulted
in Company-owned store operations contributing an additional $92,000 to
profitability in the 1999 quarter despite the 14% decrease in associated
revenues. Management attributes the improved profitability to the 1998
closure of under-performing units and improvements in training and management
techniques to improve store-related costs by over 5%.
Selling, general and administrative expenses remained relatively flat-
$1,149,000 compared to $1,185,000 in the year ago quarter. Management
anticipates that the current infrastructure will continue to be able to
support increased growth in franchised and licensed operations with moderate
additions in field personnel and other support services.
Loss from operations was $65,000 in the first quarter of fiscal 1999 versus
a loss of $105,000 generated in the prior year period. Interest expense
decreased slightly to $39,000 in the three months ended February 28, 1999.
This was due to a combination of a lower outstanding balance during the 1999
period and also lower interest rates during the 1999 quarter. Interest income
increased 63% to $31,000 from $19,000 in the 1998 quarter.
Net loss was $73,000 in the quarter ended February 28, 1999 versus a loss of
$133,000 in the year-ago quarter. Dividends on the Preferred Stock of $46,000
were accumulated during the current year period versus $51,000 in the prior
year period.
Net loss per share for the quarter ended February 28, 1999 was $0.01 versus a
net loss per share for the year-ago quarter of $0.02 on both a basic and
diluted basis. Average shares outstanding increased due to the conversion
of 17,710 shares of Preferred Stock to 640,704 shares of Common Stock since
February 28, 1998.
Liquidity and Capital Resources
The net cash used by operating activities totaled $248,000 during the first
quarter of fiscal 1999. Cash used represents the net loss, adjusted for
depreciation and amortization of $292,000, and is offset principally by an
increase in accounts receivable of $207,000, an increase in prepaid and other
current assets of $135,000 and a decrease in deferred franchise fee revenue
of $101,000. The net cash used in operating activities in the year-ago
quarter totaled $370,000.
Investing activities used $145,000 during the three months ended February
28, 1999, and consisted primarily of the purchase of property and equipment
used to refurbish and convert units acquired from Jacobs Bros.
Cash used in financing activities totaled $3,000 during the three months
ended February 28, 1999 and was provided by borrowings under the line of
credit offset by the repayment of long-term debt. For the three months ended
February 28, 1998 cash provided by financing activities was $328,000. This
consisted primarily of borrowings on the Company's line of credit which
expired December 31, 1998.
In January 1999, the Company obtained loan commitments totaling $1,350,000
from a finance company whereby the Company could borrow $950,000 to purchase
certain assets of Jacobs Bros. and up to $400,000 to purchase equipment and
fund remodeling required for the units acquired in the purchase. In February
1999, the Company borrowed $1,100,000 pursuant to these commitments.
At February 28, 1999, the Company had borrowed $1,750,000 on its new credit
facility which is due on December 31, 1999. This outstanding balance is
classified as a current liability. Management is currently in the process of
seeking long-term financing to replace this credit facility.
YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs written to
identify the applicable year with two digits rather than four. As
written, these programs may identify the year "00" as 1900 rather than
2000, which could result in system miscalculations or systems failure
leading to potentially substantial business disruptions.
The Year 2000 problem could affect computers, software and other
equipment used, operated or maintained by the Company. Accordingly, the
Company has adopted a Year 2000 plan which consists of identifying all
of its internal computer programs, systems and hardware and contacting
its vendors to obtain assurance that each product is Year 2000-
compliant. During this process, one exception was identified in the
Company's point of sale hardware and software for certain restaurant
units. The Company expects to incur capital costs totaling
approximately $10,000 to purchase Year 2000-compliant hardware and
software for those units. The Company presently believes that all of
its information technology systems will be Year 2000 compliant in a
timely manner. Costs related to the Year 2000, other than the cost
related to the point of sale system, are not expected to be material.
In addition, the Company is currently in the process of identifying all
significant third party vendors, including the Company's landlords,
equipment vendors, service providers, banks and utility companies and
assessing the impact on the Company if those vendors are not Year 2000-
compliant. To date, the Company is not aware of any third party vendors
whose malfunctions would materially disrupt the Company's business.
However, third party compliance efforts are outside the Company's
control. To the extent that the Company determines that a significant
vendor is not likely to be Year 2000 compliant, the Company intends to
develop contingency plans which include obtaining alternative sources
for any product or service material to the business. There can be no
assurance that all of the Company's material third party vendors will be
Year 2000 compliant or that the Company will successfully develop and
implement satisfactory contingency plans on a timely basis. The
occurrence of any such event could materially impact the financial
condition or results of operations of the Company.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On February 1, 1999 the Company issued warrants for purchase of an
aggregate of 500,000 shares of the Company's Common Stock in connection
with the acquisition of certain assets of Jacobs Bros. These warrants
are exercisable at an exercise price of $1.25 per share as to 275,000
shares and $1.50 per share as to 225,000 shares commencing February 1,
2000 and ending on January 31, 2006. The warrants were offered and sold
without registration under the Act in reliance upon Section 4(2) of the
Act.
On February 26, 1999 the Company issued a total of 160,000 shares of
Common Stock in connection with services rendered in the Jacobs Bros.
acquisition, including 65,000 shares which may be deemed to be
beneficially owned by David Epstein, a member of the Board of Directors
of the Company. Such securities were offered and sold without
registration under the Act in reliance upon Section 4(2) of the Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the first quarter of the fiscal year ending November 30, 1999, no
matter was submitted to a vote of security holders.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
EXHIBITS
The following exhibits are filed herewith.
Exhibit No. Description of Exhibit
- ----------- -------------------------------------------------------------
[i] 2.1 Asset Purchase Agreement dated February 2, 1996
between the Company, Brewster's Coffee Company, Inc.
and Peter D. Grumhaus
[ii] 2.2a Asset Purchase Agreement by and among BAB Systems,
Inc., Bagels Unlimited, Inc.("BUI"), and Donald Nelson
and Mary Ann Varichak dated May 1, 1996
[ii] 2.2b Non-Competition Agreement by and among the Company and
Donald Nelson and Mary Ann Varichak dated May 1, 1996
[ii] 2.2c Stock Option Agreement between the Company and BUI
dated May 1, 1996
[ii] 2.2d Registration Rights Agreement between the Company
and BUI dated May 1, 1996
[iii] 2.3a Asset Purchase Agreement by and between the Company
and Strathmore Bagels Franchise
Corp. ("Strathmore") dated May 21, 1996
[iii] 2.3b Stock Option Agreement dated May 21, 1996 between
the Company and Strathmore
[iii] 2.3c Registration Rights Agreement dated May 21, 1996
between the Company and Strathmore
[iii] 2.3d Non-Competition Agreement dated May 21, 1996 among
the Company, Strathmore, Jack Freedman and Glen Steuerman
[iii] 2.3e Memorandum of Understanding Regarding Form of
License Agreement effective November 30, 1995,
between Strathmore and Host International, Inc.
[iii] 2.3f Consent to Assignment between Strathmore and Host
International, Inc., dated March 13, 1996,
as amended May 21, 1996
[iv] 2.4a 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 Ilona Stern
[iv] 2.4b Registration Rights Agreement dated as of May 1,
1997 between BAB Holdings, Inc., and
Owen Stern, Ruth Stern, Ilona Stern and Pierce W.
Hance.
[v] 3.1a Amended Articles of Incorporation of the Company
[vii] 3.1b Amended and Restated Statement of Designation,
Number, Voting Powers, Preferences and Rights of
Series A Convertible Preferred Stock as filed with
the Secretary of State of Illinois on March 26, 1997
[v] 3.2 Bylaws of the Company, as amended
[v] 4.1 Form of Stock Certificate evidencing Common Stock,
no par value
[v] 4.2 Subscription Agreement with the Aladdin
International, Inc. dated August 31, 1995
[v] 4.3 Amended Form of Warrant Issued to Aladdin
International, Inc.
[v] 10.1 Form of Franchise Agreement
[v] 10.2 Form of Franchise Agreement-Satellite
[v] 10.3 Form of Franchise Agreement-Wholesale
[v] 10.4 Form of Area Development Agreement
[v] 10.5 Confidentiality and Non-Competition Agreement with
Franchisees
[v] 10.6 Form of Confidentiality Agreement with Employees
[v] 10.7 Licensing Agreement dated November 20, 1992 between
the Company and Big Apple Bagels, Inc.
[v] 10.8 Assignment of Royalty Mark & Trademark to the
Company by Big Apple Bagels, Inc. dated November 20, 1992
[v] 10.9 Agreement dated September 14, 1995 among the
Company, Big Apple Bagels, Inc. and Paul C. Stolzer
[i] 10.10 Consulting agreement dated February 16, 1996 between
Paul C. Stolzer and BAB Holdings, Inc.
[v] 10.11 Leases dated November 2, 1994 and February 14, 1995
for principal executive office
[v] 10.12 1995 Long-Term Incentive and Stock Option Plan
[v] 10.13 1995 Outside Directors Stock Option Plan
[v] 10.14 Settlement Agreement with Timothy Williams d/b/a Big
Apple Deli and Stipulated Dismissal with Prejudice
[i] 10.15 Program Agreement dated February 10, 1997 between
BAB Systems, Inc. a wholly owned subsidiary of
the Company, and Franchise Mortgage Acceptance
Company LLC
[iv] 10.16 Employment agreement between the Company and Owen
Stern dated May 8, 1997
10.17 Loan document-CIB line of credit dated 12/31/98.
10.18 Loan document-CIB line of credit date 02/01/99.
27.1 Financial data schedule
[i] Incorporated by reference to the Company's Report on Form 10-KSB for
the fiscal year ended November 30, 1995
[ii] Incorporated by reference to the Company's Report on Form 8-K dated
May 1, 1996
[iii] Incorporated by reference to the Company's Report on Form 8-K
dated May 21, 1996
[iv] Incorporated by reference to the Company's Report on Form 8-K dated
May 13, 1997
[v] Incorporated by reference to the Company's Registration Statement on
Form SB-2, effective November 27, 1995 (Commission File No. 33-98060C)
[vi] Incorporated by reference to the Company's Report on Form 10-KSB for
the fiscal year ended November 30, 1996
[vii] Incorporated by reference to the Company's Report on Form 10-QSB
for the quarter ended February 28, 1997
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BAB HOLDINGS, INC.
Dated: April 14, 1999 By: /s/ JOSEPH M. MERKIN
--------------------
Joseph M. Merkin
Chief Financial Officer
(Principal financial and
accounting officer)