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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
October 5, 2000
(Date of earliest event reported)
_______________
EASYRIDERS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 001-14509 33-0811505
--------- --------- ----------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
28210 Dorothy Drive
Agoura Hills, California 91301
(818) 889-8740
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
J. Robert Fabregas, Chief Executive Officer and Chief Financial Officer
Easyriders, Inc.
28210 Dorothy Drive
Agoura Hills, California 91301
(818) 889-8740, ext. 548
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Item 2. Acquisition of Disposition of Assets.
------------------------------------
Sale Transaction and Consideration
As of October 5, 2000 Easyriders, Inc. ("Easyriders" or "Company"), sold
its interests in all of the El Paso Bar-B-Que restaurant operations to El Paso
Bar-B-Que Company, Inc. ("New El Paso"), a wholly-owned subsidiary of Culinary
Holdings, Inc. ("Culinary"). The transaction was effected through a Stock and
Interest Purchase Agreement (the ("El Paso Sale Agreement") by and between
Easyriders, its wholly-owned subsidiary, Newriders, Inc. ("Newriders"), M&B
Restaurants, L.C. a wholly-owned subsidiary of Newriders ("M&B"), MBPCR, Inc., a
wholly-owned subsidiary of Easyriders ("MBPCR"), and Culinary. The El Paso Sale
Agreement provides for the sale to New El Paso of (1) all of Newriders'
membership interests in M&B, a Texas limited liability company, and (2) of all
of the Company's capital stock in MBPCR, a service company through which M&B
conducts restaurant operations in Tulsa, Oklahoma (the "Sale Transaction").
Pursuant to the El Paso Sale Agreement, the Sale Transaction closed on October
5, 2000 (the "Closing").
As consideration for the Sale Transaction, Easyriders and Newriders
received cash in the amount of $4,000,000 and all liabilities of M&B were
assumed by New El Paso. In addition, New El Paso assumed all of the Company's
obligations under that certain 8% Convertible Debenture dated June 10, 1998 in
favor of Wayne L. Knyal in the original principal sum of $1,000,000, originally
due June 30, 2000, and extended to March 31, 2001 (the "Knyal Debenture"). Mr.
Knyal, a director of the Company, also executed a release discharging the
Company from all liability under the Knyal Debenture. As of the Closing, the
balance due under the Knyal Debenture was $1,000,000 of principal and $27,452.46
of accrued interest through the end of business on October 5, 2000.
As of the Closing, the liabilities of M&B were $6,684,863, comprised of
$717,078 in vendor accounts payable, $477,479 of accrued obligations, and
$5,490,306 of long-term obligations. These liabilities will be eliminated from
the consolidated balance sheet of Easyriders by reason of the Sale Transaction.
Relationship of Parties
Culinary is a Delaware corporation of which John Martin, the Company's
Chairman of the Board, is a controlling shareholder. In addition, Mr. Martin
serves as Chairman of Culinary. Culinary owns and operates 5 restaurants in
Orange County, California, operating under the trade names Chimayo Grill,
Chimayo at the Beach, French 75, Sorrento Grille, and Savannah Chophouse.
Pursuant to the Sale Transaction and as of the Closing, William Prather resigned
as the Chief Executive Officer of Easyriders, in order to devote his full-time
efforts to the continued management of the restaurant operations of M&B and the
other restaurant operations of Culinary. He remains a director of Easyriders.
This change of management was agreed to as part of a Settlement Agreement
and Mutual General Release by and between Mr. Prather and the Company as of
October 5, 2000 (the "Settlement Agreement"). Pursuant to the Settlement
Agreement (1) Mr. Prather's employment agreement with the Company was
terminated, (2) no severance compensation was paid, and (3) Mr. Prather received
from Joseph Teresi, a director, shareholder and CEO of the Company's subsidiary,
Paisano Publications, Inc., an option to acquire 500,000 of the Company's common
stock held by Mr. Teresi. Mr. Prather is expected to become an officer and
director of Culinary, and to receive an ownership position in Culinary and/or
New El Paso as part of his compensation arrangement with Culinary. To the
Company's knowledge, these arrangements have not yet been finalized.
Sale Criteria and Methodology
The Company has previously announced the establishment of an independent
committee of the Board of Directors, comprised of directors Wayne Knyal, John
Corrigan, Stewart Gordon and Dan Gallery (the
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"Committee"), to manage the process of selling the company's interest in M&B
and/or the assets of M&B. In furtherance of this objective, the Committee
directed Company's management to compile and circulate among qualified buyers a
confidential memorandum describing the restaurant operations of M&B. This
process produced interest on the part of Culinary and two other parties. After
negotiations were pursued with all parties, Culinary emerged as the party
offering the highest price and best terms for the proposed transaction. On
August 14, 2000 the Company entered into a Letter of Intent with Culinary, which
contemplated a sale of all of M&B's assets for $4,000,000 in cash, and the
assumption of liabilities not to exceed $6,400,000.
Thereafter, the Company engaged Imperial Capital, LLC of Beverly Hills,
California ("Imperial Capital"), to render a formal opinion as to the fairness,
from a financial point of view, of this transaction. Subsequently, the structure
of the transaction was changed to a stock and interest purchase, rather than the
purchase of assets and assumption of liabilities. As of September 6, 2000,
Imperial Capital issued a written opinion stating that the consideration to be
received by the Company - i.e. cash in the amount of $4 million, a release from
the Knyal Debenture in the principal amount of $1 million, and the elimination
of not less than $6.4 million of debt from the consolidated balance sheet of the
Company - was fair from a financial point of view.
Item 5. Other Events
------------
As noted above, as of the Closing of the Sale Transaction, William Prather
resigned as the Chief Executive Officer of Easyriders, and from all officer and
director positions of all affiliated companies. He remains a director of the
Company. J. Robert Fabregas, the Company's Chief Financial Officer, was
appointed by the Board of Directors to serve as the Interim Chief Executive
Officer.
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Not applicable
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated financial statements and
notes thereto are attached hereto at pages PF-1 through PF-7:
(i) Pro forma consolidated statements of operations for the year ended
December 31, 1999.
(ii) Notes to pro forma consolidated statements of operations for the
year ended December 31, 1999.
(iii) Pro forma consolidated statements of operations for the six months
ended June 30, 2000.
(iv) Notes to the consolidated statements of operations for the six
months ended June 30, 2000.
(v) Pro forma consolidated balance sheet as of June 30, 2000.
(vi) Notes to pro forma consolidated balance sheet as of June 30, 2000.
(c) Exhibits
Exhibit 1.1 Stock and Interests Purchase Agreement dated as of October 5,
2000, by and among Easyriders, Newriders, M&B, MBPCR, New El Paso and Culinary.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 8-K to be signed on its behalf by
the undersigned, hereunto duly authorized.
EASYRIDERS, INC.
By: /s/ J. Robert Fabregas
_________________________________________
Name: J. Robert Fabregas
Title: Chief Executive Officer and Chief Financial
Officer
October 20, 2000
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UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION OF EASYRIDERS, INC.
AND ITS CONSOLIDATED SUBSIDIARIES
The following unaudited pro forma consolidated statements of operations and
unaudited consolidated balance sheet give effect to the Sale Transaction by the
Company of its interests in all of the El Paso Bar-B-Que restaurant operations
("ELP") to El Paso Bar-B-Que Company, Inc. ("New El Paso"), a wholly-owned
subsidiary of Culinary Holdings, Inc., as discussed in Item 2, and the use of
the proceeds from the Sale Transaction to repay portions of the outstanding
accrued interest, long-term debt and other payables. Prior to the completion of
the Sale Transaction, ELP was wholly-owned by the Company.
The pro forma consolidated statements of operations for the year ended
December 31, 1999 and the six months ended June 30, 2000 assume that the Sale
Transaction and the use of the net proceeds to repay accrued liabilities and
payables occurred on December 31, 1998.
The pro forma consolidated statements of operations for the year ended
December 31, 1999 and the six months ended June 30, 2000 reflect the
deconsolidation of ELP and the non-recurring loss on the Sale Transaction.
The pro forma consolidated balance sheet as of June 30, 2000 assumes that
the Sale Transaction occurred on June 30, 2000. The pro forma consolidated
statements of operations and balance sheet do not purport to represent the
results of operations or financial position of the Company had the transaction
assumed therein occurred on the date specified, nor are they necessarily
indicative of the results of operations that may be achieved in the future.
The pro forma consolidated financial information is based on assumptions
and adjustments described in the notes to the pro forma financial statements.
The pro forma financial information should be read in conjunction with the
Company's historical financial statements, including notes thereto, which are
incorporated herein by reference.
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Easyriders, Inc.
Pro Forma Consolidated Statements of Operations (Unaudited)
For the year ended December 31, 1999
<TABLE>
<CAPTION>
As previously Pro Forma
reported Adjustments Pro Forma
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<S> <C> <C> <C>
Continuing Operations:
Sales $ 44,496,402 $ (11,294,859) (a) $ 33,201,543
Cost of Sales 37,012,329 (7,150,980) (a) 29,861,349
-----------------------------------------------------------------
Gross Margin 7,484,073 (4,143,879) 3,340,194
Expenses:
Selling, general and administrative 14,125,966 (3,215,512) (a) 10,910,454
Depreciation and amortization 3,215,780 (838,865) (a) 2,376,915
Stock issuance expense 739,379 739,379
-----------------------------------------------------------------
Total expenses 18,081,125 (4,054,377) 14,026,748
-----------------------------------------------------------------
Loss from Operations (10,597,052) (89,502) (10,686,554)
Other Income 287,181 287,181
Interest Expense (3,782,187) 227,066 (a) (3,555,121)
-----------------------------------------------------------------
Loss before Provision for Income Taxes (14,092,058) 137,564 (13,954,494)
Provision for Income Taxes 11,500 11,500
-----------------------------------------------------------------
Net Loss from Continuing Operations $ (14,103,558) $ 137,564 $ (13,965,994)
Loss on Discontinued Operations (888,084) (b) (888,084)
-----------------------------------------------------------------
Net Loss $ (14,103,558) $ (750,520) $ (14,854,078)
=================================================================
Net Loss per Share - Basic and Diluted
Continuing Operations $ (0.65) $ (0.65)
Discontinued Operations - (0.04)
-------------------- -------------------
Net Loss $ (0.65) $ (0.69)
==================== ===================
Weighted Average Number of Shares
Outstanding - Basic and Diluted 21,617,543 21,617,543
==================== ===================
</TABLE>
See accompanying notes to Pro Forma Consolidated Statements of Operations for
the Year Ended December 31, 1999.
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Easyriders, Inc.
Notes to Pro Forma Consolidated Statements of Operations (Unaudited)
For the year ended December 31, 1999
(a) To deconsolidate El Paso Bar-B-Que Company from the Company's
consolidated results.
(b) To record estimated loss on sale of discontinued operations.
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Easyriders, Inc.
Pro Forma Consolidated Statements of Operations (Unaudited)
For the six months ended June 30, 2000
<TABLE>
<CAPTION>
As previously Pro Forma
reported Adjustments Pro Forma
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<S> <C> <C> <C>
Continuing Operations:
Sales $ 15,684,591 $ - $ 15,684,591
Cost of Sales 12,823,698 - 12,823,698
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Gross Margin 2,860,893 - 2,860,893
Expenses:
Selling, general and administrative 3,068,734 - 3,068,734
Depreciation and amortization 2,032,590 2,032,590
Stock issuance expense 195,584 195,584
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Total expenses 5,296,908 - 5,296,908
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Loss from Operations (2,436,015) - (2,436,015)
Other Income (350,730) (350,730)
Interest Expense (2,089,419) (2,089,419)
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Loss before Provision for Income Taxes (4,876,164) - (4,876,164)
Provision for Income Taxes 9,852 9,852
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Net Loss from Continuing Operations (4,886,016) - (4,886,016)
Discontinued Operations:
Income from Operations 121,066 (121,066) (a) -
Loss on Disposal (2,100,000) 1,211,916 (b) (888,084)
-------------------------------------------------------------
Net Loss $ (6,864,950) $ 1,090,850 $ (5,774,100)
=============================================================
Net Loss per Share - Basic and Diluted
Continuing Operations $ (0.19) $ (0.19)
Discontinued Operations (0.08) (0.04)
----------------- ----------------
Net Loss $ (0.27) $ (0.23)
================= ================
Weighted Average Number of Shares
Outstanding - Basic and Diluted 25,594,509 25,594,509
================= ================
</TABLE>
See accompanying notes to Pro Forma Consolidated Statements of Operations for
the Six Months Ended June 30, 2000.
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Easyriders, Inc.
Notes to Pro Forma Consolidated Statements of Operations (Unaudited)
For the six months ended June 30, 2000
(a) To deconsolidate El Paso Bar-B-Que Company from the Company's
consolidated results.
(b) To adjust estimated loss from discontinued operations.
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Easyriders, Inc.
Pro Forma Consolidated Balance Sheet (Unaudited)
As of June 30, 2000
<TABLE>
<CAPTION>
As previously Pro Forma
reported Adjustments Pro Forma
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<S> <C> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents $ 253,704 $ 4,000,000 (c) $ 253,704
(4,000,000) (d)
Accounts receivable, net 3,505,316 3,505,316
Inventories 2,251,001 2,251,001
Prepaid publication costs 669,410 669,410
Prepaid expenses and other 748,798 748,798
Receivable from shareholder 392,995 392,995
Net assets of El Paso Bar-B-Que 6,862,998 (6,862,998) (a) -
-----------------------------------------------------
Total current assets 14,684,222 (6,862,998) 7,821,224
Property and equipment, net 962,177 962,177
Goodwill, net 52,177,809 52,177,809
Other assets 222,734 222,734
-----------------------------------------------------
$ 68,046,942 $ (6,862,998) $ 61,183,944
=====================================================
</TABLE>
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<TABLE>
<CAPTION>
As previously Pro Forma
reported Adjustments Pro Forma
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<S> <C> <C> <C>
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 6,451,564 $(2,506,495) (d) $ 3,945,069
Accrued payroll and payroll related expenses 889,084 889,084
Accrued interest payable 1,292,632 (1,302,205) (d) (9,573)
Other current liabilities 763,258 (69,300) (d) 693,958
Income taxes payable 12,000 12,000
Reserve for disposal of El Paso Bar-B-Que Company 2,100,000 (2,100,000) (b) -
Current portion of deferred subscription
and advertising income 3,974,286 3,974,286
Current portion of long-term debt 954,364 954,364
-------------------------------------------------------------
Total current liabilities 16,437,188 (5,978,000) 10,459,188
-------------------------------------------------------------
Convertible debentures, related party 1,000,000 (1,000,000) (c) -
Note payable to stockholder 8,000,000 8,000,000
Long-term debt, net of current portion 21,646,429 (122,000) (d) 21,524,429
Other long-term liabilities 3,156,950 3,156,950
Stockholders' equity:
Common Stock 28,343 28,343
Additional paid-in capital 64,027,445 64,027,445
Receivable from the sale of stock (7,300,000) (7,300,000)
Accumulated deficit (38,949,413) (6,862,998) (a) (38,712,411)
2,100,000 (b)
5,000,000 (c)
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Total stockholders' equity 17,806,375 237,002 18,043,377
-------------------------------------------------------------
$ 68,046,942 $(6,862,998) $ 61,183,944
=============================================================
</TABLE>
See accompanying notes to Pro Forma Consolidated Balance Sheet at
June 30, 2000.
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Easyriders, Inc.
Notes to Pro Forma Consolidated Balance Sheet (Unaudited )
June 30, 2000
(a) To deconsolidate El Paso Bar-B-Que Company from the Company's
consolidated results.
(b) To remove estimated loss on the disposition of discontinued operations
accrued prior to June 30, 2000.
(c) To record the cash proceeds from the sale and the forgiveness of debt.
(d) To reflect use of proceeds from the Sale Transaction.
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
1.1 Stock and Interests Purchase
Agreement dated as of October 5,
2000, by and among Easyriders,
Newriders, M&B, MBPCR, New
El Pas and Culinary
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