SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): March 13, 1998
ON STAGE ENTERTAINMENT, INC.
-----------------------------------------------
(Exact Name of Registrant Specified in Charter)
Nevada 0-92402 88-0214292
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
- - ----------------------------- -------------------------- --------------------
4625 W. Nevso Drive #2
Las Vegas, Nevada 89103
- - ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (702) 253-1333
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
This second amendment to the Registrant's Form 8-K filed with the Securities and
Exchange Commission (the "Commission") on March 30, 1998 (the "Form 8-K"),
amends and modifies Item 7 of the Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Audited Financial Statements of business acquired.
(b) Pro Forma Financial Information (Unaudited).
(1) Unaudited Pro Forma Balance Sheet as of December 31, 1997
(2) Unaudited Pro Forma Statement of Operation for year ended
December 31, 1997
(3) Notes to Pro Forma Consolidated Financial Statements
<PAGE>
Item 7a
Audited Financial Statements of Business Acquired
<PAGE>
Independent Auditor's Report
To the Board of Directors
Gedco USA, Inc.:
We have audited the accompanying combined balance sheets of The Gedco Entities
(which is comprised of certain entities described in Note 1) as of December 31,
1997 and 1996 and the related combined statements of operations, partners'
capital and cash flows for the years then ended. These combined financial
statements are the responsibility of The Gedco Entities (the "Entities")
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of The Gedco Entities
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the periods then ended in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick, LLP
February 26, 1998
<PAGE>
THE GEDCO ENTITIES
Combined Balance Sheets
December 31, 1997 and 1996
1997 1996
---------------------------
ASSETS
Cash $ 2,728,508 $ 3,203,590
Accounts receivable (Note 3) 704,769 543,010
Inventory 145,592 113,688
Prepaid expenses 135,938 112,881
---------------------------
Total current assets 3,714,807 3,973,169
Due from related party 468,035 301,193
Property and equipment, at cost, net of
depreciation and amortization (Note 4) 8,316,439 8,601,162
Other assets 138,582 165,736
---------------------------
Total assets $12,637,863 $13,041,260
===========================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 308,471 $ 464,536
Customer deposits 527,130 535,890
Due to related party 1,056,251 673,715
---------------------------
Total liabilities 1,891,852 1,674,141
Partners' capital 10,746,011 11,367,119
Commitments (Note 5)
---------------------------
Total liabilities and partners'
capital $12,637,863 $13,041,260
===========================
See accompanying notes to combined financial statements.
<PAGE>
THE GEDCO ENTITIES
Combined Statements of Operations
For the Years Ended December 31, 1997 and 1996
1997 1996
--------------------------
Revenues $13,875,572 $15,689,226
Cost of sales 6,910,555 7,929,821
--------------------------
Gross profit 6,965,017 7,759,405
Operating expenses, excluding depreciation
and amortization 4,241,211 4,927,518
--------------------------
Operating income, excluding
depreciation and amortization 2,723,806 2,831,887
Depreciation and amortization (315,845) (304,433)
Interest income, net 146,923 37,416
Gain on sale of equipment 5,778 - -
Other income 8,730 29,671
--------------------------
Net income $ 2,569,392 $ 2,594,541
==========================
See accompanying notes to combined financial statements.
<PAGE>
THE GEDCO ENTITIES
Combined Statements of Partners' Capital
For the Years Ended December 31, 1997 and 1996
Balance at December 31, 1995 $ 8,989,006
Distributions to partners (217,428)
Net income 2,595,541
-----------
Balance at December 31, 1996 11,367,119
Distributions to partners (3,190,500)
Net income 2,569,392
-----------
Balance at December 31, 1997 $10,746,001
===========
See accompanying notes to combined financial statements.
<PAGE>
THE GEDCO ENTITIES
Combined Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996
1997 1998
------------------------
Cash Flows From Operating Activities:
Net income $2,569,392 $2,595,541
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 315,845 304,433
Gain on sale of equipment (5,778) - -
Cash provided by (used for) changes in:
Accounts receivable (161,759) 24,316
Inventory (31,904) 38,203
Prepaid expenses (23,057) 123,667
Due from related party (166,842) (193,712)
Other assets 27,154 5,964
Accounts payable and accrued expenses (157,065) (417,451)
Customer deposits (8,760) (19,250)
Due to related party 382,536 234,742
------------------------
Net cash provided by operating activities 2,740,762 2,696,453
-------------------------
Cash Flows From Investing Activities:
Purchases of property and equipment (31,122) (57,232)
Proceeds from sale of equipment 5,778 - -
------------------------
Net cash flows used in investing
activities (25,344) (57,232)
------------------------
Cash Flows From Financing Activities:
(Payment) of principal on note payable - - (1,062,581)
(Distributions to) partners (3,190,500) (217,428)
------------------------
Net cash flows used in financing
activities (3,190,500) (1,280,009)
------------------------
Net (decrease) increase in cash (475,082) 1,359,212
Cash at beginning of year 3,203,590 1,844,378
------------------------
Cash at end of year $2,728,508 $3,203,590
========================
Supplemental disclosure of cash flow information:
Cash paid during the period of interest $ - - $ 113,827
========================
See accompanying notes to combined financial statements.
<PAGE>
THE GEDCO ENTITIES
Notes to Combined Financial Statements
December 31, 1997 and 1996
(1) Organization and Basis of Presentation
The combined financial statements presented as of and for the years ended
December 31, 1997 and 1996, include the financial position and operations of the
operating units named below and have been referred to as The Gedco Entities (the
"Entities"). All significant intercompany balances and transactions have been
eliminated in combination.
Gedco USA, Inc. ("Gedco") was incorporated in 1995, for the purpose of forming
and investing in four limited partnerships: King Henry's USA LTD, Fort Liberty,
LTD and Blazing Pianos, LTD. and Fun'N Wheels, LTD. (the "Partnerships"). Gedco
is the general partner for each partnership. In addition, the owner of Gedco is
also the 100% owner of Wild Bill's Management, Inc., a subchapter S corporation
which holds the liquor license for Wild Bill's in California.
Pursuant to the Asset Purchase Agreement dated June 30, 1995 and effective July
25, 1995, Gedco, on behalf of the Partnerships, purchased the following
operating units:
Location Operation
-------------------------------------------------------
King Henry's Feast Orlando, Florida Dinner Theater
Fort Liberty Kissimmee, Florida Dinner Theater
Blazing Pianos Orlando Florida Piano Bar
Wild Bill's Los Angeles, California Dinner Theater
The Asset Purchase Agreement also included the purchase of Gedco of certain
vacant land and buildings located in Anaheim, California and land adjoining Fort
Liberty in Kissimmee, Florida.
The purchase price amounted to $8,800,000 plus or minus working capital assets
and liabilities. The purchase price was allocated to the noncurrent assets of
the properties based on their estimated market value, as provided in the Asset
Purchase Agreement.
(2) Summary of Significant Accounting Policies
(a) Revenue recognition
Revenue is recognized as food service and entertainment are
presented.
(b) Inventories
Inventories are primarily comprised of food and beverage and gift
shop merchandise and are stated at the lower of cost or market. Cost
is determined utilizing the first-in, first-out method (FIFO).
(c) Depreciation and Amortization
Depreciation is recorded on a straight-line basis over the estimated
useful lives of the assets as follows:
Buildings 20 years
Equipment and automobiles 3 years
Leasehold improvements are amortized over the lesser of the lease
term or estimated useful life of the assets.
(d) Advertising
The costs of advertising are charged to operations in the year
incurred. Advertising expense was $659,855 and $1,006,204 for the
years ended December 31, 1997 and 1996, respectively.
(e) Income taxes
Under the provisions of the Internal Revenue code and applicable
state laws, the partnerships that form the Gedco Group are not
directly subject to income taxes; the results of its operations are
includable in the tax returns of its partners. Therefore, no
provision for income taxes has been included in the accompanying
combined financial statements.
<PAGE>
(f) 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.
(g) Corporate Overhead
Corporate expenses included in the accompanying combined statements
of operations reflect those corporate expenses allocated to the
Entities. Corporate expenses incurred by GEDCO, who also manages
other commonly owned entities, have been allocated based upon the
relationship of revenue of the Entities to total revenues of the
businesses included in the GEDCO Group.
(h) Accounting Pronouncements
On March 31, 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". This Statement establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles,
and goodwill related to those assets to be held and used for
long-lived assets and certain identifiable intangibles to be disposed
of. It requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. It also
prescribes the value of these assets to be disposed be reported at
the lower of carrying amount of fair value less cost to sell.
The Entities adopted Statement 121 effective January 1, 1997, and
there is no significant impact on the combined financial statements.
(3) Accounts Receivable
Accounts receivable are summarized as follows as of December 31:
1997 1996
-----------------------
Trade accounts receivable $544,167 $468,026
Tenant receivables 48,164 62,699
Other 112,438 12,285
-----------------------
Total $704,769 $543,010
=======================
(4) Property and Equipment
Property and equipment is comprised of the following as of December 31:
1997 1996
-------------------------
Land $6,900,000 $6,900,000
Buildings 814,735 814,735
Equipment 773,753 741,359
Leasehold improvements 513,029 509,474
Automobiles 26,575 27,575
Accumulated depreciation and amortization (711,653) (391,981)
-------------------------
$8,316,439 $8,601,162
=========================
<PAGE>
(5) Lease Obligations
At December 31, 1997, the Entities were obligated on various noncancellable
operating leases with rental commitments as follows:
Fiscal Year Scheduled Payments
- - -------------- ----------------
1998 $ 629,070
1999 629,803
2000 577,876
2001 420,602
2002 412,292
Thereafter 2,999,970
----------
Total $5,669,613
==========
Rent expense for the years ended December 31, 1997 and 1996 amounted to $775,014
and $782,340, respectively.
<PAGE>
Item 7b (1)
Unaudited Pro Forma Balance Sheet as of December 31, 1997
<TABLE>
ASSETS Pro-forma Pro-forma
On Stage Gedco Adjustments Consolidated
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $ 2,323,559 $2,728,508 $(2,649,775) (1)(2) $ 2,402,292
Accounts receivable 455,340 704,769 (704,769) (1) 455,340
Inventory 118,700 145,592 - - 264,292
Deposits & Prepaid Expenses 749,628 135,938 - - 885,566
Direct acquisition costs 258,133 -- (258,133) (2) - -
Due from related party - - 468,035 (468,035) (1) - -
Property and equipment
(net of depreciation) 2,455,488 8,316,439 6,358,561 (2) 17,130,488
Intangibles and other assets 55,805 138,582 611,418 (1)(2) 805,805
-------------------------------------------------------------
TOTAL ASSETS $ 6,416,653 $12,637,863 $ 2,889,267 $21,943,783
=============================================================
LIABILITIES
Accounts payable/accrued expenses $ 880,288 $ 308,471 $ (308,471) $ 880,288
Customer Deposits - - 527,130 - - 527,130
Due to related party - - 1,056,251 (1,056,251) (1) - -
Other accrued liabilities 698,499 - - - - 698,499
Short-term debt 271,918 - - - - 271,918
Long-term debt 550,332 - - 12,500,000 (2) 13,050,332
-------------------------------------------------------------
TOTAL LIABILITIES 2,401,037 1,891,852 11,135,278 15,428,167
EQUITY
Common stock and APIC 7,345,356 - - 2,500,000 (2) 9,845,356
Accumulated deficit (3,329,740) - - - - (3,329,740)
Equity in net assets acquired - - 10,746,011 (10,746,011)(2) - -
------------------------------------------------------------
TOTAL EQUITY 4,015,616 10,746,011 (8,246,011) 6,515,616
TOTAL LIABILITIES
AND EQUITY $ 6,416,653 $12,637,863 $ 2,889,267 $21,943,783
=============================================================
</TABLE>
<PAGE>
Item 7b (2)
Unaudited Pro Forma Statement of Operation for year ended December 31, 1997
<TABLE>
Historical
------------ Pro Forma Pro Forma
On Stage Gedco Adjustments Consolidated
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 15,726,074 $ 13,875,572 $ -- $ 29,601,646
Cost of Revenues 11,413,524 6,910,555 -- 18,324,079
---------------------------------------------------------------------------
Gross Profit 4,312,550 6,965,017 -- 11,277,567
Operating Expenses 5,928,315 4,241,211 464,708 (4) 10,634,306
Loss on discontinued location 489,285 -- -- 489,285
---------------------------------------------------------------------------
Operating Income (Loss) (2,105,050) 2,723,806 (464,780) 153,976
Depreciation & Amortization -- 315,845 (315,845)(4) - -
Interest Income (Expense), Net (834,333) 146,923 (1,396,923)(3) (2,084,333)
Other income -- 14,508 -- 14,508
Income Tax Expense 6,673 -- -- 6,673
---------------------------------------------------------------------------
Net (Loss) Income $(2,946,056) $ 2,569,392 $(1,545,858) $(1,922,522)
===========================================================================
Basic income (loss) per share (0.51) (0.30)
=========== ===========
Diluted income (loss) per share (0.51) (0.30)
============ ============
Basic average number of common
shares outstanding 5,800,841 595,238 6,396,079
============ ==================================
Diluted average number of common
shares outstanding 5,800,841 6,396,079
============ ============
</TABLE>
<PAGE>
Item 7b (3)
Notes to Pro Forma Consolidated Financial Statements
On March 13, 1998, On Stage Entertainment, Inc. (the "Company")
consummated the acquisition of certain assets (primarily relating to property,
equipment and leasehold improvements) from Gedco USA, Inc. and its affiliates
relating to three (3) dinner theaters and one piano bar (the "Acquired Dinner
Theaters") for a purchase price of $ 14 million, consisting of $11.5 million
cash and $2.5 million in common stock of the Company (par value $ .01 per
share), plus fees and expenses of approximately $1.6 million. A substantial
portion of the cash payment to sellers was obtained from a $12.5 million
mortgage loan on the properties acquired, with the balance provided for by the
Company's working capital. In connection with the acquisition, the Company
entered into an employment agreement with a shareholder of the Sellers which
included the grant of warrants for purchase of the Company's common stock and
non-competition restrictions.
The Acquired Dinner Theaters were purchased from a selling group
unaffiliated with the Company comprised of Gedco USA, Inc., a Florida
corporation, Wild Bill's Management, Inc., a Florida corporation and Florida
limited partnerships of King Henry's Feast USA Ltd, Fort Liberty Ltd. and
Blazing Pianos Ltd (collectively, the "Sellers"). The Company will account for
the acquisition using the purchase method of accounting with the assets acquired
and liabilities assumed recorded at fair value, and the results of the Acquired
Dinner Theaters included in the Company's consolidated financial statements from
the date of acquisition. Pursuant to the terms of the definitive purchase
agreement, dated December 29, 1997 (as amended), the purchase price is subject
to adjustment to the extent that EBITDA and working capital of the Acquired
Dinner Theaters vary from established threshold levels on the Closing Date.
The accompanying unaudited pro forma condensed consolidated financial
statements illustrate the effects of the acquisition on the Company's financial
position and results of operations. The pro forma condensed consolidated balance
sheet as of December 31, 1997 is based on the historical balance sheets of the
Company and the Sellers as of that date and assumes the acquisition took place
on that date. The pro forma condensed consolidated statements of operations for
the year ended December 31, 1997 are based on the historical statements of
operations of the Company and the Acquired Dinner Theaters for that period. The
pro forma condensed consolidated statements of operations assume the acquisition
took place on January 1, 1996.
The pro forma condensed consolidated financial statements may not be indicative
of the actual results of the acquisition. In particular, the pro forma condensed
consolidated financial statements are based on management's current estimate of
the allocation of the purchase price, the actual allocation of which may differ.
The accompanying condensed consolidated pro forma financial statements
should be read in connection with the historical financial statements of the
Company and the Acquired Dinner Theaters.
<PAGE>
NOTE A - The pro forma adjustments to the condensed consolidated balance sheet
are as follows:
(1) To eliminate assets not acquired and liabilities not assumed in connection
with the Gedco Acquisition as follows:
Cash $2,307,908
Accounts receivable 704,769
Due from related party 468,035
Other assets 138,582
Accounts payable/accrued expenses (308,471)
Due to related party (1,056,251)
Equity in net assets acquired (2,254,572)
----------
$ - -
==========
(2) To record the acquisition of the Gedco and the allocation of the purchase
price on the basis of the fair value of the assets acquired and liabilities
assumed. New borrowings of $12,500,000 (collateralized by the property
being acquired) were used to fund the cash payment to Sellers, while
$1,000,000 of acquisition costs were funded from new borrowings and the
balance from existing working capital. The components of the purchase price
and its allocation to the assets and liabilities are as follows:
Components of purchase price:
Cash payment to Sellers $11,500,000
Acquisition costs 1,600,000
-----------
Cash portion 13,100,000
Shares of common stock 2,500,000
-----------
Total purchase price $15,600,000
-----------
Allocation purchase price:
Equity of net assets acquired $ 8,491,439
Increase in property and equipment 6,358,561
Increase in debt issue costs 750,000
-----------
Total allocation of purchase price $15,600,000
-----------
Cash was adjusted to record the net cash required to pay the remaining
acquisition costs not funded by the new borrowings as follows:
Total acquisition costs $1,600,000
Less amount funded by new borrowings (1,000,000)
----------
600,000
Amounts previously paid and capitalized
through December 31, 1997 (258,133)
----------
$ 341,867
==========
Property and equipment was adjusted to record these assets at their fair values
as follows:
Fair value of property and equipment $14,675,000
Less recorded value (8,316,439)
-----------
$ 6,358,561
===========
Equity in net assets acquired was eliminated to record the allocation of the
purchase price as follows:
Total purchase price $15,600,000
Less increase in property and equipment (6,358,561)
Less debt issue costs incurred (750,000)
-----------
$ 8,491,439
===========
<PAGE>
NOTE B - The pro forma adjustments to the condensed consolidated statements of
operations are as follows:
(3) To record adjustments to interest expense resulting from the use of new
mortgage financing to fund a portion of the purchase consideration (using
an assumed interest rate of 10.0%), net of the elimination of Gedco
historical interest income.
(4) To record adjustments to depreciation expense based on the revised values
of the depreciable assets and to amortization expense relating to debt
issue costs based on the term of the mortgage loan and to reclassify all
depreciation and amortization to operating expenses.
<PAGE>
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.
ON STAGE ENTERTAINMENT, INC.
(Registrant)
By \s\ Kiranjit S. Sidhu
-------------------------------------
Kiranjit S. Sidhu
Chief Financial Officer and Treasurer
Dated: November 12, 1998
<PAGE>
