<PAGE>
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A - 2
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): February 17, 1997
Terrace Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-27132 65-0594270
- ------------------------------ ----------- ------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2699 Stirling Road, Suite C-405, Fort Lauderdale, FL 33312
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(Address of principal executive offices)
Registrant's telephone number, including area code: 305-894-6000
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(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements
TERRACE HOLDINGS, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
[UNAUDITED]
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The following pro forma condensed combined balance sheet as of December 31,
1996, and the condensed combined statements of operations for the year then
ended, give effect to the following:
On February 17, 1997, Terrace Holdings, Inc. [the "Company"] acquired all of the
assets and related liabilities of Downeast Frozen Desserts, LLC ["Downeast"].
Downeast, with principal offices and plant located in Portland, Maine,
manufactures and markets frozen desserts under the name Deering Ice Cream
["Deering"]. Under the Agreements signed originally on December 9, 1996, and as
substantially amended on February 7, 1997, the Company acquired such assets and
related liabilities to continue the business of manufacturing and marketing
frozen desserts through Deering.
Such assets include all accounts receivable of the business, inventories, and
certain furniture and equipment. The stated liabilities assumed were
principally trade payables to suppliers of the business and certain long-term
debt.
In consideration for the acquisition, the Company issued to Downeast: (1)
918,900 shares of its common stock; and (2) warrants to purchase 250,000
additional shares of its common stock at an exercise price of $1.1875 per share,
exercisable commencing February 17, 1997, through August 31, 2000. The Company
also paid Downeast approximately $114,000 in cash.
The acquisition will be accounted for as a purchase, effective January 1, 1997
for accounting purposes. The operations of Deering will be included in the
Company's results of operations from that date.
In connection with the business acquisition, the Company entered into an
employment agreement with an executive who became the President and CEO of
Terrace Holdings, Inc. The three year renewable employment agreement provides
for an annual base salary of $175,000 and certain other benefits including
severance pay.
In connection with the acquisition, the Company issued to each Samuel H. Lasko
and Jonathan D. Lasko [collectively the "Laskos"] warrants to purchase 375,000
shares of the Company's common stock at $1.1875 per share. The Laskos
surrendered their respective performance options to purchase up to 750,000
shares of the Company's common stock, contained in their respective employment
agreements. In addition, the Laskos entered an option agreement to purchase the
businesses, assets or capital stock of three of the Registrant's wholly-owned
subsidiaries, The Lasko Family Kosher Tours, Inc., The Lasko Companies, Inc. and
A&E Management, Inc. at the fair market value thereof, to be independently
determined. The option is exercisable for three years commencing April 1, 1998
until February 17, 2001, or earlier under certain circumstances, and will be
presented to the Company's shareholders for approval at the 1997 annual
shareholders meeting.
The pro forma information is based on the historical financial statements of the
Company and Downeast giving effect to the purchase and the assumptions and
adjustments in the accompanying notes to the pro forma combined financial
statements.
The pro forma combined balance sheet assumes the combination was consummated on
December 31, 1996. The pro forma combined statements of operations give effect
to this transaction as if it had occurred at the beginning of the earliest
period presented. The pro forma combined financial statements are based on the
historical financial statements of the Company and Downeast. These pro forma
combined financial statements may not be indicative of the results that actually
would have occurred if the acquisition had taken place on the dates indicated.
<PAGE>
TERRACE HOLDINGS, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
[UNAUDITED]
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Balance Sheet Adjustments:
The following pro forma adjustments reflect Terrace Holdings, Inc.'s purchase of
Downeast Frozen Desserts, LLC and is allocated as follows:
<TABLE>
<CAPTION>
<S> <C>
Net Equity Deficiency Acquired $(123,872)
Property and Equipment 874,207
Goodwill 13,665
---------
Total Purchase Cost $ 764,000
------------------- =========
</TABLE>
[1] To reflect purchase and issuance of 918,900 shares of the Company's common
stock.
Of the 918,900 shares to be issued, of which 318,900 shares shall be issued
to holders of document promissory notes in the aggregate of $441,764
including interest which has been converted from debt to equity.
<TABLE>
<S> <C> <C>
[2] To reflect payment of notes payable to Downeast shareholders $114,000
========
Income Statement Adjustments: Annual
--------
[3] To reflect settlement agreement with Barclay Partners LLC. $ 75,000
To reflect investment banking, finders fee. 89,000
--------
$164,000
========
[4] To record additional depreciation and amortization expense for
property and equipment and goodwill. $ 63,000
========
The property and equipment is to be depreciated over 7 years under
the straight-line method and the goodwill is to be amortized over
20 years under the straight-line method.
[5] To reflect reduction of interest expense related to paydown
of debt. $ 9,000
========
</TABLE>
<PAGE>
TERRACE HOLDINGS, INC.
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PRO FORMA CONDENSED COMBINED BALANCE SHEETS AS OF DECEMBER 31, 1996.
[UNAUDITED]
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<TABLE>
<CAPTION>
Historicals
-------------------------------
Terrace Downeast
------- --------
Holdings, Inc. Frozen Desserts Pro Forma
-------------- --------------- ---------
December 31, October 26, Pro Forma Combined
------------ ----------- --------- --------
1996 1996 Adjustments Amounts
---- ---- ----------- -------
<S> <C> <C> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $1,570,907 $ 4,289 $(114,000)[2] $1,461,196
Accounts Receivable 123,243 935,032 -- 1,058,275
Inventory 27,239 957,846 -- 985,085
Other Current Assets 70,779 62,465 -- 133,244
---------- ---------- --------- ----------
Total Current Assets 1,792,168 1,959,632 (114,000) 3,637,800
Property and Equipment - Net 392,741 825,693 874,207[1] 2,092,641
Goodwill -- -- 13,665[1] 13,665
Intangible Assets 415,125 -- -- 415,125
Security Deposits and Other Assets 190,432 66,968 -- 257,400
---------- ---------- --------- ----------
Total Assets $2,790,466 $2,852,293 $ 773,872 $6,416,631
========== ========== ========= ==========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
<PAGE>
TERRACE HOLDINGS, INC.
- --------------------------------------------------------------------------------
PRO FORMA CONDENSED COMBINED BALANCE SHEETS AS OF DECEMBER 31, 1996.
[UNAUDITED]
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<TABLE>
<CAPTION>
Historicals
-------------------------------
Terrace Downeast
------- --------
Holdings, Inc. Frozen Desserts Pro Forma
-------------- --------------- ---------
December 31, October 26, Pro Forma Combined
------------ ----------- ---------- --------
1996 1996 Adjustment Amounts
---- ---- ---------- -------
<S> <C> <C> <C> <C>
Liabilities and Stockholders' Equity [Deficit]:
Current Liabilities:
Accounts Payable and Accrued Expenses $ 196,188 $1,589,169 $ -- $1,785,357
Deferred Revenue 186,412 -- -- 186,412
Due to Related Parties -- -- -- --
Other Current Liabilities -- -- -- --
Current Portion of Long-Term Debt -- -- -- --
Note Payable -- 810,000 -- 810,000
----------- ---------- ----------- ----------
Total Current Liabilities 382,600 2,399,169 -- 2,781,769
----------- ---------- ----------- ----------
Long-Term Debt -- 576,996 (114,000)[2] 462,996
----------- ---------- ----------- ----------
Stockholders' Equity [Deficit]:
919 [1]
Common Stock 3,313 225,000 (225,000)[1] 4,232
763,081 [1]
Additional Paid-in Capital 3,945,948 448,000 (448,000)[1] 4,709,029
Retained Earnings [Deficit] (1,541,395) (796,872) 796,872 [1] (1,541,395)
----------- ---------- ----------- ----------
Total Stockholders' Equity [Deficit] 2,407,866 (123,872) 887,872 3,171,866
----------- ---------- ----------- ----------
Total Liabilities and Stockholders'
Equity [Deficit] $ 2,790,466 $2,852,293 $ 773,872 $6,416,631
=========== ========== =========== ==========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
<PAGE>
TERRACE HOLDINGS, INC.
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PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER
31, 1996.
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historicals
-----------------------------------
Terrace Downeast
------- --------
Holdings, Inc. Frozen Desserts
-------------- ---------------
Year ended Nine months ended Pro Forma
---------- ----------------- ---------
December 31, October 26, Pro Forma Combined
------------ ----------- --------- --------
1 9 9 6 1 9 9 6 Adjustments Amounts
------- ------- ----------- -------
<S> <C> <C> <C> <C>
Revenue $ 5,497,130 $5,008,049 $ -- $10,505,179
Cost of Sales 3,965,512 4,576,228 -- 8,541,740
----------- ---------- --------- -----------
Gross Profit 1,531,618 431,821 -- 1,963,439
----------- ---------- --------- -----------
Operating Expenses:
Selling, General and 63,000 [4]
Administrative Expenses 1,612,792 770,176 164,000 [3] 2,609,968
Payroll and Related Expense 1,041,285 356,465 -- 1,397,750
Loss on Disposal 129,826 -- 129,826
----------- ---------- --------- -----------
Total Operating Expense 2,783,903 1,126,641 227,000 4,137,544
----------- ---------- --------- -----------
[Loss] from Operations (1,252,285) (694,820) (227,000) (2,174,105)
----------- ---------- --------- -----------
Other Income [Expense]:
Interest Expense (7,667) (103,370) 9,000 [5] (102,037)
Interest Income 103,925 1,318 -- 105,243
----------- ---------- --------- -----------
Total Other [Expense] 96,258 (102,052) 9,000 3,206
----------- ---------- --------- -----------
Net [Loss] $(1,156,027) $ (796,872) $(218,000) $(2,170,899)
=========== ========== ========= ===========
[Loss] Per Share $ (.35) $ -- $ -- $ (.66)
=========== ========== ========= ===========
Weighted Average Number
of Shares Outstanding 3,312,500 -- -- 3,312,500
=========== ========== ========= ===========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
<PAGE>
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.
TERRACE HOLDINGS, INC.
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(Registrant)
Date: May 15, 1997
By: /s/ Samuel H. Lasko
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Samuel H. Lasko
President
