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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
JOINT CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JANUARY 31, 1997
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<C> <C>
BROOKE GROUP LTD. BGLS INC.
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
1-5759 33-93576
(Commission File Number) (Commission File Number)
51-0255124 13-3593483
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
DELAWARE DELAWARE
(State or other jurisdiction of incorporation (State or other jurisdiction of incorporation
or organization) or organization)
100 S.E. SECOND STREET 100 S.E. SECOND STREET
MIAMI, FLORIDA 33131 MIAMI, FLORIDA 33131
(Address of principal executive offices including Zip Code) (Address of principal executive offices including Zip Code)
305/579-8000 305/579-8000
(Registrant's telephone number, including area code) (Registrant's telephone number, including area code)
(NOT APPLICABLE) (NOT APPLICABLE)
(Former name or former address, (Former name or former address,
if changed since last report) if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 31, 1997, Brooke (Overseas) Ltd. ("BOL"), a wholly-owned
subsidiary of BGLS Inc. ("BGLS"), which is wholly-owned by Brooke Group Ltd.
("Brooke"), entered into a stock purchase agreement (the "Purchase Agreement")
with New Valley Corporation (the "Purchaser"), pursuant to which BOL sold
10,483 shares of the common stock of BrookeMil Ltd. ("BML") to the Purchaser,
comprising 99.1% of the outstanding shares of BML (the "Shares").
The Purchaser paid to BOL for the Shares a purchase price of $55 million,
consisting of $21.5 million in cash and a $33.5 million 9% promissory note of
the Purchaser (the "Note"). The Note is secured by the Shares and is payable
$21.5 million on June 30, 1997 and $12 million on December 31, 1997. The
transaction was approved by the independent members of the Board of Directors
of Brooke. Brooke retained independent legal counsel in connection with the
evaluation and negotiation of the transaction.
Brooke indirectly controls the Purchaser through its indirect ownership of
an approximate 42% voting interest therein. Bennett S. LeBow, Chairman of the
Board, President and Chief Executive Officer of Brooke and BGLS and the
controlling stockholder of Brooke, serves as Chairman of the Board and Chief
Executive Officer of the Purchaser. Howard M. Lorber, a consultant to Brooke
and BGLS and a stockholder of Brooke, serves as President and Chief Operating
Officer and is a director of the Purchaser. Richard J. Lampen, Executive Vice
President of Brooke and BGLS, serves as Executive Vice President and is a
director of the Purchaser. Richard S. Ressler, a greater than 5% stockholder
of Brooke and a former consultant to Brooke and its subsidiaries, serves as a
director of the purchaser.
The foregoing summary of the acquisition is qualified in its entirety by
reference to the text of the Purchase Agreement, which is incorporated by
reference as Exhibit 2.1 to this report and is incorporated herein by reference,
and Brooke's Press Release dated January 31, 1997, which is attached hereto as
Exhibit 99.1, and is incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Pro Forma Financial Information.
In January 1997, Brooke Group Ltd. ("BGL") and BGLS Inc. ("BGLS")
consummated the sale of certain of their real estate assets constituting their
indirect subsidiary, BrookeMil Ltd. ("BrookeMil") in Russia. The Unaudited Pro
Forma Consolidated Statements of Operations for the year ended December 31,
1995 and for the nine months ended September 30, 1996 present the results of
operations of BGL assuming the sale of BrookeMil had been consummated as of the
beginning of the periods presented. Results of operations of BGLS do not
differ materially from those results presented.
The Unaudited Pro Forma Consolidated Balance Sheet as of September 30,
1996 reflects the assets, liabilities and capitalization of BGL after giving
effect to the elimination of the disposed assets and liabilities of BrookeMil,
the receipt of the sale proceeds and the cancellation of intercompany debt. A
portion of the gain on sale has been deferred to the extent of the retained
interest in the property sold through ownership interest in the Purchaser and
the Purchaser's put right on a portion of the property. The Balance Sheet for
BGLS does not differ materially from the balance sheet presented.
The pro forma information does not purport to be indicative of the
results of operations or the financial position which would have actually been
obtained if the disposition transactions had been consummated as of the
beginning of the periods presented or at September 30, 1996. In addition, the
pro forma financial information does not purport to be indicative of results of
operations or financial position which may be obtained in the future.
The pro forma financial information should be read in conjunction with
BGL's and BGLS' historical Consolidated Financial Statements and Notes thereto
contained in the 1995 Annual Report on Form 10-K and the Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September
30, 1996.
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BROOKE GROUP LTD. AND SUBSIDIARY
PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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As of September 30, 1996
-------------------------------------
Pro Forma
Historical Adjustments Pro Forma
-------------------------------------
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ASSETS:
Current assets:
Cash and cash equivalents................................................ $ 2,103 $ 21,500 (A) $ 23,591
(12)(C)
Accounts receivable - trade.............................................. 18,526 18,526
Other receivables........................................................ 1,788 1,788
Receivables from affiliates.............................................. 22 33,500 (B) 33,522
Inventories.............................................................. 54,370 54,370
Other current assets..................................................... 4,624 (125)(C) 4,499
--------- --------- ---------
Total current assets.................................................. 81,433 54,863 136,296
Property, plant and equipment, net.......................................... 68,269 (40,140)(C) 28,129
Intangible assets, net...................................................... 4,181 4,181
Investment in affiliate..................................................... 0 0
Other assets................................................................ 9,779 (3,178)(C) 6,601
--------- --------- ---------
Total assets.......................................................... $ 163,662 $ 11,545 $ 175,207
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities:
Notes payable and current portion of long-term debt........................ $ 52,373 $(12,360)(C) $ 40,013
Accounts payable........................................................... 27,969 (1,651)(C) 26,318
Accrued promotional expenses............................................... 28,684 28,684
Accrued taxes payable...................................................... 19,900 870 20,770
Accrued interest........................................................... 10,101 10,101
Other accrued liabilities.................................................. 27,196 (4,276)(C) 22,920
--------- --------- ---------
Total current liabilities................................................. 166,223 (17,417) 148,806
Notes payable, long-term debt and other obligations, less current portion... 387,880 (10,349)(C) 377,531
Noncurrent employee benefits................................................ 30,283 30,283
Other liabilities........................................................... 13,367 (3,300)(C) 32,398
22,331 (D)
Commitments and contingencies...............................................
Stockholders' equity (deficit):
Common stock, par value $0.10 per share, authorized 40,000,000
shares, issued 24,998,043 shares, outstanding 18,497,096 shares........... 1,850 1,850
Additional paid-in capital................................................. 90,806 90,806
Deficit..................................................................... (470,359) 20,280 (E) (450,079)
Other...................................................................... (24,049) (24,049)
Less: 6,500,947 shares of common stock in treasury, at cost............... (32,339) (32,339)
--------- --------- ---------
Total stockholders' equity (deficit)..................................... (434,091) 20,280 (413,811)
--------- --------- ---------
Total liabilities and stockholders' equity (deficit)..................... $ 163,662 $ 11,545 $ 175,207
========= ========= =========
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(A) To record cash received at sale of BrookeMil
(B) To record promissory note received
(C) To record sale of BML
(D) To record deferred gain on sale
(E) Represents gain realized on the sale of BrookeMil, net of tax effect
<PAGE> 5
BROOKE GROUP LTD. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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<CAPTION>
Nine Months Ended September 30, 1996
----------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------------------------------------
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Revenues.................................................. $ 330,364 $ (2,006)(A) $ 328,358
Cost of goods sold........................................ 168,931 168,931
----------- -------- -----------
Gross profit.......................................... 161,433 (2,006) 159,427
Operating, selling, general and administrative expenses... 158,482 (1,527)(A) 156,955
----------- -------- -----------
Operating income...................................... 2,951 (479) 2,472
Other income (expenses):
Interest income.......................................... 203 203
Interest expense......................................... (45,488) (634)(A) (46,122)
Equity in (loss) of affiliate............................ (7,152) (7,152)
Sale of assets........................................... 6,745 6,745
Other, net............................................... 1,846 1,846
----------- -------- -----------
(Loss) from continuing operations......................... (40,895) (1,113) (42,008)
Provision for income taxes................................ 1,291 1,291
----------- -------- -----------
(Loss) from continuing operations......................... (42,186) (1,113) (43,299)
----------- -------- -----------
Proportionate share of New Valley capital transactions.... 1,782 1,782
----------- -------- -----------
Net (loss) income applicable to common shares.......... $ (40,404) $ (1,113) $ 41,517
=========== ======== ===========
Per common share(B): $ (2.18) $ (0.06) $ (2.24)
=========== ======== ===========
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(A) To eliminate the operations of BrookeMil
(B) Weighted average number of shares used in computing loss per
common share was 18,497,096.
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BROOKE GROUP LTD. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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<CAPTION>
Year Ended December 31, 1995
-----------------------------------
Pro Forma
Historical Adjustments Pro Forma
----------------------------------
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Revenues.................................................. $ 461,459 $ 461,459
Cost of goods sold........................................ 216,187 216,187
--------- ------- ---------
Gross profit.......................................... 245,272 245,272
Operating, selling, administrative and general expenses... 237,212 (4,139)(A) 233,073
--------- ------- ---------
Operating income (loss)............................... 8,060 4,139 12,199
Other income (expenses):
Interest income.......................................... 989 989
Interest expense......................................... (57,505) (57,505)
Equity in earnings of affiliate.......................... 678 678
Other, net............................................... 2,776 (2,675)(A) 101
--------- ------- ---------
(Loss) gain from continuing operations.................... (45,002) 1,464 (43,538)
Provision (benefit) for income taxes...................... 342 342
--------- ------- ---------
(Loss) gain from continuing operations.................... (45,344) 1,464 (43,880)
--------- ------- ---------
Proportionate share of New Valley capital transaction..... 16,802 16,802
--------- ------- ---------
Net (loss) income applicable to common shares......... $ (28,542) 1,464 (27,078)
========= ======= =========
Per common share(B): $ (1.56) $ 0.08 $ (1.48)
========= ======= =========
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(A) To eliminate operations of BrookeMil
(B) Weighted average number of shares used in computing loss per
common share was 18,301,186.
<PAGE> 7
(c) Exhibits.
The following Exhibits are provided in accordance with the
provisions of Item 601 of Regulation S-K and are filed herewith unless
otherwise noted.
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EXHIBIT INDEX
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2.1 Stock Purchase Agreement dated as of January 31, 1997 among BrookeMil
Ltd. ("BML"), Brooke (Overseas) Ltd. ("BOL"), BGLS Inc. and New Valley
Corporation ("New Valley") (incorporated by reference to Exhibit 2.1 in
New Valley's Current Report on Form 8-K dated January 31, 1997 (the "New
Valley Form 8-K")).
10.1 Promissory Note of New Valley dated January 31, 1997 in favor of BOL
(incorporated by reference to Exhibit 10.1 in the New Valley Form 8-K).
10.2 Pledge Agreement dated as of January 31, 1997 entered into by and between
BOL and New Valley (incorporated by reference to Exhibit 10.2 in the New
Valley Form 8-K).
10.3 Use Agreement dated as of January 31, 1997, entered into by and between
BML and Liggett-Ducat Joint Stock Company (incorporated by reference to
Exhibit 10.3 in the New Valley Form 8-K).
99.1 Press Release of Brooke Group Ltd. dated January 31, 1997.
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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.
BROOKE GROUP LTD.
By: /s/ Joselynn D. Van Siclen
------------------------------
Joselynn D. Van Siclen
Vice President and Chief
Financial Officer
Date: January 31, 1997
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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.
BGLS INC.
By: /s/ Joselynn D. Van Siclen
-------------------------------
Joselynn D. Van Siclen
Vice President and Chief
Financial Officer
Date: January 31, 1997
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INDEX TO EXHIBITS
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Exhibit No. Exhibit
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2.1 Stock Purchase Agreement dated as of January 31, 1997
among BrookeMil Ltd. ("BML"), Brooke (Overseas)
Ltd. ("BOL"), BGLS Inc. and New Valley Corporation
("New Valley") (incorporated by reference to Exhibit 2.1
in New Valley's Current Report on Form 8-K dated
January 31, 1997 (the "New Valley Form 8-K")).
10.1 Promissory Note of New Valley dated January 31, 1997
in favor of BOL (incorporated by reference to Exhibit 10.1
in the New Valley Form 8-K).
10.2 Pledge Agreement dated as of January 31, 1997 entered into
by and between BOL and New Valley (incorporated by reference
to Exhibit 10.2 in the New Valley Form 8-K).
10.3 Use Agreement dated as of January 31, 1997, entered into
by and between BML and Liggett-Ducat Joint Stock Company
(incorporated by reference to Exhibit 10.3 in the New Valley Form
8-K).
99.1 Press Release of Brooke Group Ltd. dated January 31, 1997.
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EXHIBIT 99.1
FOR INCLUSION IN BROOKE GROUP LTD.'S AND
BGLS INC.'S JOINT CURRENT REPORT ON FORM 8-K
DATED JANUARY 31, 1997
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CONTACT: GEORGE SARD/ANNA CORDASCO/PAUL CAMINITI
SARD VERBINNEN & CO.
212/687-8080
BROOKE GROUP DIVESTS RUSSIAN REAL ESTATE COMPANY TO FOCUS ON TOBACCO
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MIAMI, FL, JANUARY 31, 1997 -- Brooke Group Ltd. (NYSE: BGL) today
announced it has sold its Russian real estate development business, BrookeMil
Ltd., to New Valley Corporation (OTC: NVYL) for $55 million, enabling Brooke to
focus on its tobacco operations.
Brooke Group received $21.5 million in cash and $33.5 million in a 9%
promissory note for BrookeMil, due within one year. The transaction was
approved by the independent members of the Board of Directors of Brooke Group.
"The sale of Brooke's Russian real estate will allow us to devote full
attention to revitalizing our tobacco business," said Bennett S. LeBow,
Chairman, President and CEO of Brooke Group. "Ron Fulford is making good
progress restructuring Liggett, our U.S. tobacco company, and we are working to
expand our Russian tobacco business through Liggett-Ducat. Brooke shareholders
will continue to share in the success of the Russian real estate development
projects through their 42% ownership of New Valley, which also has other real
estate in its portfolio."
BrookeMil is developing a three-phase complex on 2.2 acres of land in
downtown Moscow, for which it has a 98-year lease. In 1993, the first phase of
the project, Ducat Place I, a 46,500 sq. ft. Class-A office building, was
successfully built and leased. Tenants include Citicorp, the G-7 Group of
Nations and the European Bank for Reconstruction and Development. In 1995,
BrookeMil began construction of Ducat Place II, a premier 150,000 sq. ft.
office building. Ducat Place II has already been pre-leased to a number of
leading international companies including Motorola, Lukoil-Arco and Morgan
Stanley. The third phase, Ducat Place III, is planned as a 400,000 sq. ft.
mixed-use complex, with construction set to begin in 1998.
Brooke Group is a holding company which owns Liggett Group Inc. and
controlling interests in Liggett-Ducat and New Valley Corporation.
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