SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K/A-1
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 31, 1999
.............ELMER'S RESTAURANTS, INC...........
(Exact name of registrant as specified in its charter)
........Oregon...................0-14837............93-0836824...
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
.......11802 SE Stark, Portland, Oregon................97216....
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code..
(503) 252-1485.....
...........................Not Applicable....................
(Former name or former address, if changed since last report.)
<PAGE> Page 1 of __
This Form 8-K/A amends and restates in its entirety the
Registrant's Current Report on Form 8-K dated March 31, 1999 and
filed April 15, 1999.
Item 1. Changes in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
Effective March 31, 1999, Elmer's Restaurants, Inc. (the
"Company"), executed a stock exchange agreement with Grass Valley
Ltd., Inc. ("GVL"), a closely held Oregon corporation, in a
transaction in which the Company acquired 100% of the outstanding
stock of GVL in consideration for the payment by the Company of
the sum of $110,000 in cash and the issuance of 209,620
restricted shares of the Company's common stock to the GVL
shareholders. GVL is now a wholly owned subsidiary of the
Company.
GVL is the owner and operator of four restaurants in Hillsboro,
Aloha, and Tigard, Oregon operating under the moniker of
Richard's Deli and Pub. The first Richard's Deli and Pub was
opened in August 1994 and all the restaurants are located in
leased retail space. The Company plans to continue operations at
all four locations in a substantially similar manner. The
Company's Management believes that it can leverage the
significant synergy that exists between the Richard's Deli and
Pubs and Ashley's Deli operations while accruing potentially
significant savings arising from the consolidation of back office
functions. As previously reported in the Company's report on Form
8-K dated March 4, 1999 as amended, under the terms of the merger
of the Company with its then majority shareholder, CBW, Inc. (the
"CBW Merger"), the Company acquired an option ("CBW Option") to
purchase the four Richards' Deli and Pubs. As part of the CBW
Merger, a special committee of the Company's Board of Directors
reviewed a fairness opinion prepared by Veber Partners, a private
investment bank based in Portland, Oregon. Within the context of
its review of the CBW Merger, Veber Partners valued GVL using
comparable public companies, relevant financial and operating
data, and discounted cash flow analyses and concluded that the
consideration paid by the Company in the CBW Merger (which
included an assessment of the fairness and valuation of the CBW
Option) was fair from a financial point of view to the Company's
shareholders.
Each GVL shareholder, listed in Table 1 hereunder, received
1048.1 restricted shares of the Company's common stock in
exchange for each GVL share owned. The Company's primary source
of financing for the cash portion of the acquisition was from
working capital.
<PAGE> Page 2 of __
<TABLE>
<CAPTION>
Table 1
<S> <C> <C>
Name of Shareholder No. of GVL No. of shares issued in
shares held exchange (and current
ownership percentage)
Richard Buckley 100 104,810 (6.6%)
Gary Weeks 100 104,810 (6.6%)
</TABLE>
The purpose of this Form 8-K/A is to file audited financial
statements of Grass Valley Ltd., Inc. and pro forma combined
financial statements of the Registrant and Grass Valley Ltd.,
Inc. with respect to the transaction.
Item 3. Bankruptcy or Receivership
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not applicable.
Item 5. Other Events.
Not applicable
Item 6. Resignations of Registrant's Directors.
Not applicable.
Item 7. Financial Statements and Exhibits Filed.
This Item 7 amends and restates in its entirety the Item 7 in the
Registrant's Current Report on Form 8-K dated March 31, 1999.
(a) FINANCIAL STATEMENTS OF GVL:
Financial Statements of GVL and Report of Independent
Accountants thereon:
Balance Sheets, March 31, 1998 and 1999.
Statement of Operations for the years ended March 31,
1998 and 1999.
Statement of Changes in Shareholders Equity (Deficit)
for the years ended March 31, 1998 and 1999.
Statement of Cash Flows for the years ended March 31,
1998 and 1999.
Notes to Financial Statements
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION:
Unaudited Pro Forma Combined Financial Statements for
Elmer's Restaurants, Inc. and GVL.
<PAGE> Page 4 of __
Unaudited Pro Forma Combined Balance Sheet as of
December 31, 1998.
Notes to Unaudited Pro Forma Combined Balance Sheet.
Unaudited Pro Forma Combined Statement of Operations
for the nine months Ended December 31, 1998.
Notes to Unaudited Pro Forma Combined Statement of
Operations for the nine months ended December 31,
1998.
Unaudited Pro Forma Combined Statement of Operations
for the year ended March 31, 1998.
Notes to Unaudited Pro Forma Combined Statement of
Operations (year ended March 31, 1998).
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit Sequential
No. Description Page No.
</TABLE>
<PAGE> Page 3 of __
2 (i) * Stock Exchange Agreement, dated March 24, 1999, between
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.+
3 (i) * Restated Articles of Incorporation of the Company
(Incorporated herein by reference from Exhibit No. 3.1 to the
Company's Annual Report on Form 10-K for the year ended March 31,
1988.)
3 (ii) * By-Laws of the Company, as amended. (Incorporated
herein by reference from Exhibit 3.2 of the Company's Annual
Report on Form 10-K for the year ended March 31, 1990.)
99 (ii) * Elmer's Restaurants, Inc. Report on Form 8-K dated
March 4, 1999 (incorporated herein by reference).
99 (ii) * Elmer's Restaurants, Inc. Report on Form 8-K/A dated
June 14, 1999 (incorporated herein by reference).
+ Previously filed as exhibits to the Registrant's Current Report
on Form 8-K dated March 31, 1999.
GRASS VALLEY LTD., INC.
FINANCIAL STATEMENTS
as of March 31, 1998 and 1999
and for the years ended March 31, 1998 and 1999
<PAGE> Page __ of __
Report of Independent Accountants
To the Board of Directors and Shareholders
Grass Valley Ltd., Inc.
In our opinion, the accompanying balance sheets and the related
statements of operations, changes in shareholders' equity
(deficit) and of cash flows present fairly, in all material
respects, the financial position of Grass Valley Ltd., Inc. (the
"Company") at March 31, 1998 and 1999, and the results of its
operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted
auditing standards that 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, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Portland, Oregon
June 7, 1999
<PAGE> Page __ of __
Grass Valley Ltd., Inc.
Balance Sheets
March 31, 1998 and 1999
<TABLE>
March 31,
ASSETS 1998 1999
<S> <C> <C>
Current assets:
Cash and cash equivalents $106,592 $80,403
Accounts receivable 6,544 32,601
Inventories 40,606 109,929
Prepaid expenses 9,318 15,980
-------- -------
Total current assets 163,060 238,913
Property and equipment, net 40,293 28,028
Other assets 11,797 15,283
-------- -------
Total assets $215,150 $282,224
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $156,554 $150,983
Accrued payroll and related taxes 30,707 30,178
due to affiliate - 58,671
-------- --------
Total current liabilities 187,261 239,832
-------- --------
Commitments and contingencies
Shareholders' equity:
Common stock, no par value; 500 shares
authorized; 200 shares outstanding in
1998 and 1999 125,437 125,437
Accumulated deficit (97,548) (83,045)
--------- ---------
Total shareholders' equity 27,889 42,392
-------- --------
Total liabilities and shareholders' equity $215,150 $282,224
======== ========
</TABLE>
The accompanying notes are an integral part of the financial
statements.
<PAGE> Page __ of __
Grass Valley Ltd., Inc.
Statements of Operations
for the years ended March 31, 1998 and 1999
<TABLE>
March 31,
---------
ASSETS 1998 1999
---------- ----------
<S> <C> <C>
Revenues $1,575,549 $2,217,549
---------- ----------
Costs and expenses:
Food, beverage and supplies 508,923 898,629
Labor and related 399,690 640,569
Occupancy costs 88,026 93,467
Depreciation and amortization 27,175 28,329
General and administrative expenses 398,618 347,052
---------- ----------
1,422,432 2,008,046
---------- ----------
Net income $ 153,117 $ 209,503
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> Page __ of __
Grass Valley Ltd., Inc.
Statements of Changes in Shareholders' Equity (Deficit)
for the years ended March 31, 1998 and 1999
<TABLE>
Common Stock Accumulated
------------
Shares Amount Deficit
------ ------ -----------
<S> <C> <C> <C>
Balance, March 31, 1997 200 $101,306 $ (63,665)
Capital contributions - 24,131 -
Distributions to shareholders - - (187,000)
Net income 153,117
----- -------- ----------
Balance, March 31, 1998 200 125,437 (97,548)
Distributions to shareholders - - (195,000)
Net income - - 209,503
----- -------- ----------
Balance, March 31, 1999 200 $125,437 $ (83,045)
===== ======== ===========
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE> Page __ of __
Grass Valley Ltd., Inc.
Statements of Cash Flows
for the years ended March 31, 1998 and 1999
<TABLE>
March 31,
---------
1998 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $153,117 $209,503
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 27,175 28,329
Changes in assets and liabilities:
Receivables (5,153) (26,057)
Inventories (25,191) (69,323)
Prepaid expenses (1,006) (6,662)
Other assets 2,405 (3,486)
Accounts payable and accrued expenses 45,915 (6,100)
Due to affiliate - 58,671
-------- --------
Net cash provided by operating activities 197,262 184,875
-------- --------
Cash flows from investing activities:
Additions to property and equipment (23,047) (16,064)
--------- ---------
Cash flows from financing activities:
Capital contributions 24,131 -
Distributions to shareholders (187,000) (195,000)
--------- ---------
Net cash used in financing activities (162,869) (195,000)
--------- ---------
Net increase (decrease) in cash and
cash equivalents 11,346 (26,189)
Cash and cash equivalents, beginning of year 95,246 106,592
-------- --------
Cash and cash equivalents, end of year $106,592 $ 80,403
======== ========
</TABLE>
The accompanying notes are an integral part of the financial
statements.
<PAGE> Page __ of __
Grass Valley Ltd., Inc.
Notes to Financial Statements
1. The Company and Summary of Significant Accounting Policies:
Effective March 31, 1999, 100% of the outstanding stock of
the Company was acquired by Elmer's Restaurants, Inc. (Elmer's)
in consideration for the payment by Elmer's of $110,000 in cash
and the issuance of 209,620 restricted shares of Elmer's common
stock to the Company's shareholders. The Company is now a wholly-
owned subsidiary of Elmer's.
The Company is the owner and operator of four restaurants in
Hillsboro, Aloha and Tigard, Oregon operating under the name of
Richard's Deli and Pub. The first Richard's Deli and Pub was
opened in August 1994. All the restaurants are located in leased
retail space. The Company plans to continue operations at all
four locations in a substantially similar manner.
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.
Disclosure of Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash
and cash equivalents and accounts receivable approximated fair
value as of March 31, 1998 and 1999 because of the relatively
short maturity of these instruments.
Cash and Cash Equivalents
The Company considers all short-term, highly-liquid
investments with a maturity of three months or less when
purchased to be cash equivalents.
Inventories
Inventories of food, beverages and supplies are stated at
the lower of first-in, first-out cost or market.
<PAGE> Page __ of __
Grass Valley Ltd., Inc.
Notes to Financial Statements, Continued
1. The Company and Summary of Significant Accounting Policies,
Continued:
Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization are computed using accelerated and straight-line
methods over the estimated useful lives of the related assets.
Lives used for calculating depreciation and amortization rates
for the principal asset classifications are as follows:
furniture, fixtures and equipment - 5 to 7 years; leasehold
improvements - life of lease or applicable shorter period;
intangible assets - 5 to 15 years. Maintenance and repairs are
expensed as incurred; renewals and improvements are capitalized.
Upon disposal of assets subject to depreciation, the related
costs and accumulated depreciation are removed and resulting
gains and losses are reflected in the consolidated statements of
income.
Income Taxes
The Company has been treated for federal income tax purposes as
an S corporation under Subchapter S of the Internal Revenue Code
of 1986, as amended, since its inception, August 16, 1994 and has
been treated as a S corporation for state income tax purposes
under comparable state tax laws. As a result, the Company's
earnings through March 31, 1999 have been taxed directly to the
Company's shareholders, at their individual federal and state
income tax rates, rather than to the Company.
2. Property and Equipment:
<TABLE>
March 31,
1998 1999
<S> <C> <C>
Furniture, fixtures and equipment $ 43,019 $ 48,778
Leasehold improvements 34,470 42,433
-------- --------
77,489 91,211
Less accumulated depreciation and amortization 37,196 63,183
-------- --------
40,293 28,028
======== ========
</TABLE>
<PAGE> Page __ of __
Grass Valley Ltd., Inc.
Notes to Financial Statements, Continued
3. Leases:
Minimum fiscal year rental commitments for the years ending
March 31 under operating leases for retail space with
noncancelable terms of more than one year are as follows:
<TABLE>
<S> <C>
2000 $ 72,774
2001 74,135
2002 58,883
2003 28,770
--------
$234,562
========
</TABLE>
The leases generally require the Company to pay certain
other costs of the properties. Rental expense on operating
leases amounted to $88,026 and $93,467 for the years ended
March 31, 1998 and 1999, respectively.
<PAGE> Page __ of __
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Pro Forma Combined Financial Statements (Unaudited)
December 31, 1998 and for the nine months ended December 31, 1998
and for the year ended March 31, 1998
<PAGE>
Pro Forma Combined Financial Statements
Elmer's Restaurants, Inc.
Elmer's Restaurants, Inc. merger with Grass Valley Ltd., Inc.
- --------------------------------------------------------------
Effective March 31, 1999, Elmer's Restaurants, Inc. (the
"Company") executed a stock exchange agreement with Grass Valley
Ltd., Inc. ("GVL"), a closely held Oregon corporation, in a
transaction in which the Company acquired 100% of the outstanding
stock of GVL in consideration for the payment by the Company of
$110,000 in cash and the issuance of 209,620 restricted shares of
the Company's common stock to the GVL shareholders. GVL is now a
wholly owned subsidiary of the Company.
GVL is the owner and operator of four restaurants in Hillsboro,
Aloha and Tigard, Oregon operating under the name of Richard's
Deli and Pub. The first Richard's Deli and Pub was opened in
August 1994 and all the restaurants are located in leased retail
space. The Company plans to continue operations at all four
locations in a substantially similar manner.
Presented on the following pages ___ through ___ are the
unaudited pro forma balance sheet as of December 31, 1998 as if
the GVL merger transaction occurred at that date and the
unaudited pro forma statements of operations for the year ended
March 31, 1998 and the nine months ended December 31, 1998 as if
the merger transaction occurred at the beginning of the
respective periods.
Elmer's Restaurants, Inc. merger with CBW, Inc. (As reported on
- ----------------------------------------------------------------
a separate Form 8-K/A dated June 14, 1999).
- -------------------------------------------
Effective February 18, 1999, CBW, Inc. ("CBW") merged with
Elmer's Restaurants, Inc. ("Elmer's") in a transaction in which
Elmer's was the surviving corporation. CBW had previously
acquired 53.8% of the outstanding stock of Elmer's on August 25,
1998 for approximately $4,500,000, in a transaction accounted for
as a purchase of Elmer's by CBW and a new basis of accounting was
thus established for the assets and liabilities of Elmer's to the
extent of the change in ownership at that date. Inasmuch as CBW
owned a controlling interest before and after the merger, the
merger is also accounted for as a purchase transaction as if CBW
acquired the assets and assumed the liabilities of Elmer's for an
amount equal to the fair market value of the 46.2% separate
public ownership of Elmer's.
The merger was consummated by Elmer's issuance of 770,500
restricted shares of Elmer's common stock to CBW shareholders.
In connection with the merger, Elmer's assumed approximately $4
million in debt owed by CBW arising from CBW's acquisition of the
controlling block of Elmer's stock on August 25, 1998, whereby
CBW acquired all the stock and assets of Elmer's. Elmer's
entered into a new financing agreement whereby it borrowed funds
to refinance its existing debt and debt of CBW totaling
approximately $1,750,000. Elmer's also applied approximately
$1,000,000 in cash to reduce existing debt.
Each CBW shareholder received 144.4507 restricted shares of
Elmer's common stock for every CBW share owned. The shares of
Elmer's common stock previously acquired by CBW, a total of
705,000 restricted shares, were concurrently transferred to
Elmer's and were canceled upon receipt thereof.
Summary
- -------
In the opinion of management, all adjustments necessary to
present fairly such pro forma financial statements have been made
based on the terms and structure of the transactions. The
Company anticipates, however, that changes in the composition of
the assets to be acquired and liabilities to be assumed will
occur due to changes in the ordinary course of business. The
Company believes any related change in adjustments will not be
material to the pro forma financial statements.
These unaudited pro forma financial statements are not
necessarily indicative of what actual results would have been had
the transactions occurred at the beginning of the respective
periods nor do they purport to indicate the results of future
operations of the Company.
These unaudited pro forma financial statements should be read in
conjunction with the notes and the historical financial
statements and notes thereto of Elmer's, CBW and GVL.
<PAGE> Page __ of __
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Pro Forma Combined Balance Sheet (Unaudited) (a)
December 31, 1998
<TABLE>
<CAPTION>
Elmer's Restaurants, Inc.
----------------------------------------
- -----------------
Pro Forma
ASSETS Historical (e) Adjustments Pro Forma
---------- ----------- ---------
(Unaudited)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $1,619,406 $(1,000,000) (f)
$ 619,406
Accounts and notes receivables 323,235
- - 323,235
Inventories 313,130 -
313,130
Prepaid expenses and other 198,256 -
198,256
---------- ----------- -----
- -----
Total current assets 2,454,027 (1,000,000)
1,454,027
Property, buildings and equipment,
net 6,050,251 890,876 (h)
6,941,127
Intangible assets, net 2,726,263 468,473 (h)
3,194,736
Other assets 96,783 -
96,783
---------- ----------- -----
- -----
$11,327,324 $ 359,349
$11,686,673
=========== ===========
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable, current portion $ 218,625 $ -
$ 218,625
Accounts payable 751,014 -
751,014
Accrued payroll and related taxes 180,842 -
180,842
Accrued expenses 143,205 50,000 (g)
193,205
Income taxes payable 55,955 -
55,955
----------- ---------- -----
- ------
Total current liabilities 1,349,641 50,000
1,399,641
Notes payable, net of
current portion 6,913,375 (1,000,000) (f)
5,913,375
Deferred income tax 460,000 350,000 (g)
810,000
----------- ---------- -----
- ------
8,723,016 (600,000)
8,123,016
----------- ----------- -----
- ------
Minority interest 1,843,651 (1,843,651)
- -
----------- ----------- -----
- ------
Shareholders' equity:
Preferred stock, pro forma -
no par value, 500,000 shares
authorized, no shares issued
and outstanding
Common stock, historical -
10,000 shares authorized,
5,334 shares issued and
and outstanding; pro forma -
10,000,000 shares authorized,
1,586,229 shares issued and
outstanding 895,020 2,803,000 (g)
3,698,020
Retained earnings (accumulated
deficit) (134,363) -
(134,363)
------------ ---------- -----
- -------
760,657 2,803,000
3,653,657
------------ ---------- -----
- ------
$11,327,324 $ 359,349
$11,686,673
=========== ==========
===========
continued on next page
The accompanying notes are an integral part of the pro forma
combined financial statements.
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Pro Forma Combined Balance Sheet (Unaudited) (a) (Continued)
December 31, 1998
Grass Valley
Ltd. Pro Forma
Historical Adjustments Pro
Forma
---------- ----------- -----
- ----
(Unaudited)
Current Assets:
Cash and cash equivalents $ 48,816 $ (110,000) (c)
$ 558,222
Accounts and notes receivables 9,466 -
332,701
Inventories 98,059 -
411,189
Prepaid expenses and other 10,243 -
208,499
----------- ----------- -----
- ------
Total current assets 166,584 (110,000)
1,510,611
Property, buildings and equipment,
net 26,265 -
6,967,392
Intangible assets, net 15,283 1,109,063 (d)
4,319,082
Other assets - -
96,783
----------- ---------- -----
- ------
$ 208,132 $ 999,063
$12,893,868
========== ==========
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable, current portion $ - $ -
$ 218,625
Accounts payable 95,861 -
846,875
Accrued payroll and related taxes - -
180,842
Accrued expenses 27,834 35,000 (c)
256,039
Income taxes payable - -
55,955
---------- ---------- -----
- ------
Total current liabilities 123,695 35,000
1,558,336
Notes payable, net of
current portion - -
5,913,375
Deferred income tax - -
810,000
---------- ---------- -----
- ------
123,695 35,000
8,281,711
---------- ---------- -----
- ------
Minority interest - -
- -
---------- ---------- -----
- ------
Shareholders' equity:
Preferred stock, pro forma -
no par value, 500,000 shares
authorized, no shares issued
and outstanding
Common stock, historical -
10,000 shares authorized,
5,334 shares issued and
and outstanding; pro forma -
10,000,000 shares authorized,
1,586,229 shares issued and
outstanding 125,437 923,063 (b)(c)
4,746,520
Retained earnings (accumulated
deficit) (41,000) 41,000 (b)
(134,363)
----------- ---------- -----
- -------
84,437 964,063
4,612,157
---------- ---------- -----
- -------
$ 208,132 $ 999,063
$12,893,868
========== ==========
===========
</TABLE>
The accompanying notes are an integral part of the pro forma
combined financial statements.
<PAGE> Page __ of __
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Notes to Pro Forma Combined Balance Sheet (Unaudited)
December 31, 1998
(a) See the introductory paragraphs under "Pro Forma Combined
Financial Statements."
Pro Forma Adjustments - Grass Valley Ltd., Inc.
- -----------------------------------------------
(b) Eliminate historical equity of Grass Valley Ltd., Inc.
(c) The total estimated purchase cost of the merger transaction
is comprised of the following:
<TABLE>
<S> <C>
Cash $ 110,000
Estimated value of 209,620 shares of common
stock of Elmer's issued in connection
with merger transaction 1,048,500
Assumed liabilities 123,695
Accrued expenses related to the transaction 35,000
----------
$1,317,195
==========
</TABLE>
(d) The excess of the estimated fair value of the assets
acquired ($1,317,195) over the historical cost ($208,132) has
been allocated to goodwill ($1,109,063), as the historical costs
of all tangible assets are assumed to be equal to their fair
value.
Pro Forma Adjustments - Elmer's Restaurants, Inc. (As reported on
- -----------------------------------------------------------------
a separate Form 8-K/A dated June 14, 1999)
- ------------------------------------------
(e) The historical consolidated balance sheet of CBW, Inc. as of
December 31, 1998 includes the accounts of Elmer's at that date
and reflects the purchase accounting adjustments related to the
acquisition of 53.8% of the outstanding common stock of Elmer's
by CBW.
(f) To reflect use of cash to reduce existing debt arising from
the acquisition of 53.8% of the outstanding common stock of
Elmer's by CBW:
$(1,000,000)
==========
(g) The total estimated fair value of assets acquired in the
merger transaction is comprised of the following:
<TABLE>
<S> <C>
Estimated value of 606,109 shares of outstanding
common stock of Elmer's (other than CBW ownership)
at the date of the merger $2,803,000
Assumed liabilities 1,880,153
Accrued expenses related to the transaction 50,000
Deferred income taxes 350,000
----------
Estimated fair value of assets acquired $5,803,153
==========
</TABLE>
<PAGE> Page __ of __
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Notes to Pro Forma Combined Balance Sheet (Unaudited) (Continued)
December 31, 1998
(h) The estimated purchase price has been allocated to the
assets to be acquired and obligations to be assumed, based on the
estimate of the 46.2% proportionate fair values of the assets and
liabilities, as follows:
<TABLE>
<S> <C> <C> <C>
Historical Estimate
of
Cost Basis the Fair
of Assets to Value of
Assets be Acquired Adjustments to be
Acquired
------------- ----------
- -- ---------------
Cash $ 735,676 $
- - $ 735,676
Receivables 142,042
- - 142,042
Inventories 103,998
- - 103,998
Other 81,205
- - 81,205
----------- ----------
- - -----------
Total current assets 1,062,921
- - 1,062,921
Property, buildings and equipment 2,196,292
890,876 3,087,168
Intangible assets (primarily
trademarks and goodwill) 426,708
468,473 895,181
Other assets 37,883
- - 37,883
----------- ----------
- - -----------
Total assets $ 3,723,804 $
1,359,349 $ 5,083,153
===========
=========== ===========
</TABLE>
<PAGE> Page __ of __
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Pro Forma Combined Statement of Operations (Unaudited) (a)
for the nine months ended December 31, 1998
<TABLE>
<S> <C> <C> <C>
Elmer's Restaurants, Inc.
----------------------------------------
- ----------
Historical
(Unaudited)
----------------------------------------
- ----------
Elmer's
September 1
to
Elmer's Rest- December
31
CBW, Inc. aurants, Inc. 1998
(g)
--------- ------------- ----------
- --
Revenue $ 7,265,695 $12,765,833
$(5,704,513)
----------- ----------- ----------
- -
Costs and expenses:
Food, beverage and supplies 2,110,452
3,236,108 (1,425,973)
Labor and related 2,251,048 4,204,747
(1,900,939)
Occupancy costs 460,426 771,050
(353,846)
Depreciation and amortization 241,601
528,149 (230,813)
General and administrative expenses 1,531,340
3,206,218 (1,376,021)
----------- ----------- ----------
- -
6,594,867 11,946,272
(5,287,592)
Income from operations 670,828 819,561
(416,921)
Nonoperating income (expense):
Interest income 14,338 44,597
(13,011)
Interest expense (259,570) (206,635)
79,843
Gain on disposition of assets 9,977
35,732 (9,977)
----------- ----------- ----------
- -
Income before provision for
income taxes 435,573 693,255
(360,066)
Provision for income taxes (144,735)(h) (235,750)
121,735
Minority interest in earnings of
consolidated subsidiary (109,824) -
109,824
----------- ----------- ----------
- -
Net income (loss) $ 181,014 $ 457,505 $
(128,507)
=========== ===========
===========
Pro forma net income per share
Weighted-average shares outstanding 4,626
===========
The accompanying notes are an integral part of the pro forma
combined financial statements.
Continued on next page
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Pro Forma Combined Statement of Operations (Unaudited) (a),
for the nine months ended December 31, 1998 (Continued)
Elmer's Restaurants, Inc.
---------------------------------
Pro Forma
Adjustments Pro Forma
----------- -----------
Revenue $ - $14,327,015
Costs and expenses:
Food, beverage and supplies - 3,920,587
Labor and related - 4,554,856
Occupancy costs - 877,630
Depreciation and amortization (84,000)(i)(j)
454,937
General and administrative expenses -
3,361,537
----------- -----------
(84,000) 13,169,547
Income from operations 84,000 1,157,468
Nonoperating income (expense):
Interest income (30,000)(k) 15,924
Interest expense (46,000)(l) (432,362)
Gain on disposition of assets -
35,732
----------- -----------
Income before provision for
income taxes 8,000 776,762
Provision for income taxes (3,000)(m) (261,750)
Minority interest in earnings of
consolidated subsidiary - -
----------- -----------
Net income (loss) $ 5,000 $ 515,012
=========== ===========
Pro forma net income per share $ .37
=========== ===========
Weighted-average shares outstanding 1,371,983(n)
1,376,609
The accompanying notes are an integral part of the pro forma
combined financial statements.
Continued on next page
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc. Pro Forma
Combined Statement of Operations (Unaudited) (a),
for the nine months ended December 31, 1998 (Continued)
Grass Valley Ltd., Inc.
----------------------------------------
- ----------
Historical
----------------------------------------
- ----------
Less Three Nine
Months Months
Year Ended Ended Ended
March 31 March 31, December 31
1999 1999 1998
(Unaudited)
(Unaudited)
----------- ----------- ----------
- -
Revenue $ 2,217,549 $ 621,821 $
1,595,728
----------- ----------- ----------
- -
Costs and expenses:
Food, beverage and supplies 898,629
286,067 612,562
Labor and related 640,569 144,123
496,446
Occupancy costs 93,467 21,078
72,389
Depreciation and amortization 28,329
10,135 18,194
General and administrative expenses 347,052
101,680 245,372
----------- ----------- ----------
- -
2,008,046 563,083
1,444,963
Income from operations 209,503 58,738
150,765
Nonoperating income (expense):
Interest income - -
- -
Interest expense - -
- -
Gain on disposition of assets -
- - -
----------- ----------- ----------
- -
Income before provision for
income taxes 209,503 58,738
150,765
Provision for income taxes - -
- -
Minority interest in earnings of
consolidated subsidiary - -
- -
----------- ----------- ----------
- -
Net income (loss) $ 209,503 $ 58,738 $
150,765
=========== ===========
===========
Pro forma net income per share
Weighted-average shares outstanding
The accompanying notes are an integral part of the pro forma
combined financial statements.
Continued on next page
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Pro Forma Combined Statement of Operations (Unaudited) (a),
for the nine months ended December 31, 1998 (Continued)
Grass Valley Ltd., Inc.
--------------------------------
Pro Forma
Adjustments Pro Forma
----------- ----------
Revenue $ - $15,922,743
Costs and expenses:
Food, beverage and supplies - 4,533,149
Labor and related - 5,051,302
Occupancy costs - 950,019
Depreciation and amortization 18,000(b)(c)
491,131
General and administrative expenses -
3,606,909
----------- -----------
18,000 14,632,510
----------- -----------
Income from operations (18,000) 1,290,233
Nonoperating income (expense):
Interest income - 15,924
Interest expense - (432,362)
Gain on disposition of assets -
35,732
----------- -----------
Income before provision for
income taxes (18,000) 909,527
Provision for income taxes (45,000)(d)(e) (306,750)
Minority interest in earnings of
consolidated subsidiary - -
----------- -----------
Net income (loss) $ (63,000) $ 602,777
=========== ===========
Pro forma net income per share $ .38
===========
Weighted-average shares outstanding 209,620(f)
1,586,229
</TABLE>
The accompanying notes are an integral part of the pro forma
combined financial statements.
<PAGE> Page __ of __
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Notes to Pro Forma Combined Statement of Operations (Unaudited)
for the nine months ended December 31, 1998
(a) See the introductory paragraphs under "Pro Forma Combined
Financial Statements."
Pro Forma Adjustments - Grass Valley Ltd., Inc.
- -----------------------------------------------
(b) Adjustment to reflect amortization of $1,110,000 of excess
of costs over fair value of net tangible assets acquired
(goodwill) over 30 years.
$ 28,000
========
(c) Adjustment to reflect reduction in depreciation expense
related to Grass Valley Ltd., Inc. assets acquired.
$(10,000)
========
(d) Adjustment to reflect the income tax effect of the pro forma
adjustments in (b) and (c).
$ (6,000)
========
(e) Adjustment to reflect income tax provision on earnings of
Grass Valley Ltd., Inc. as if it were a taxable corporation.
$ 51,000
========
(f) Adjustments to weighted-average shares outstanding consist
of the following:
To reflect the shares to be issued in connection
with this merger transaction 209,620
=======
Pro Forma Adjustments - Elmer's Restaurants, Inc. (As reported on
- -------------------------------------------------
a separate Form 8-K/A dated June 14, 1999)
(g) To eliminate results of operations for Elmer's for the
period September 1, 1998 through December 31, 1998 as such
results have also been included in the consolidated results of
operations of CBW. (The results of operations of Elmer's from
August 25, 1998 - the date of acquisition of 53.8% of Elmer's
outstanding common stock by CBW - to August 31, 1998 are not
material to the combined results of operations.)
(h) Represents unaudited pro forma income tax provision as if
CBW was a taxable corporation for the nine months ended December
31, 1998.
<PAGE> Page __ of __
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Notes to Pro Forma Combined Statement of Operations (Unaudited)
for the nine months ended December 31, 1998 (Continued)
(i) Adjustments to expenses for the period April 1, 1998 to
August 31, 1998 to reflect the effect of purchase accounting
adjustments relating to the acquisition of 53.8% of the
outstanding common stock of Elmer's by CBW:
<TABLE>
<S> <C>
To reflect amortization of $2,300,000 of trademarks
and excess of costs over fair value of net tangible
assets acquired over 30 years $ 57,000
To record depreciation expense on adjusted buildings
and equipment over their useful lives (equipment -
3 to 7 years, buildings - 35 years, leasehold
improvements - life of lease or applicable shorter
period) 198,000
Less depreciation and amortization expense previously
recorded (282,000)
---------
$(27,000)
=========
</TABLE>
(j) Adjustments to expenses for the nine months ended December
31, 1998 to reflect the merger transaction of Elmer's and CBW.
<TABLE>
<S> <C>
To reflect amortization of $900,000 of trademarks
and excess of costs over fair value of net tangible
assets acquired over 30 years $ 23,000
To record depreciation expense on adjusted buildings
and equipment over their useful lives (equipment -
3 to 7 years, buildings - 35 years, leasehold
improvements - life of lease or applicable shorter
period) 166,000
Less depreciation and amortization expense previously
recorded (246,000)
---------
$(57,000)
=========
</TABLE>
(k) Adjustment to interest income due to the use of
approximately $1,000,000 to reduce debt related to the
acquisition of common stock:
To reflect decrease in interest income $ 30,000
=========
(l) Adjustment to interest expense due to $3,000,000
of CBW debt, which is included in the historical
financial statements from September 1, 1998, consists
of the following:
To reflect increase in interest expense on $1,250,000
at 12% $112,000
To reflect increase in interest expense on $1,750,000
at 7.7% 101,000
Less interest expense previously recorded (167,000)
---------
$ 46,000
=========
(m) Adjustments to provision for income taxes (at
an assumed effective rate of approximately 34%)
consist of the following:
To reflect the income tax effect of the pro forma
adjustments in (g) through (l) $ (3,000)
---------
(n) Adjustments to weighted-average shares
outstanding consist of the following:
To reflect the shares to be outstanding after the
merger transaction 1,371,983
---------
<PAGE> Page __ of __
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Pro Forma Combined Statement of Operations (Unaudited) (a)
for the year ended March 31, 1998
<TABLE>
<S> <C> <C> <C>
Elmer's Restaurants, Inc.
----------------------------------------
- ----------------
Historical
---------------------------------------
Elmer's Pro Forma
CBW, Inc. Restaurants, Inc.
Adjustments
----------- ----------
- ------- -----------
Revenue $ 1,591,293 $ 16,596,397 $ -
----------- ------------ ----------
- -
Costs and expenses:
Food, beverage and supplies 564,115
4,263,703 -
Labor and related 420,427 5,490,690 -
Occupancy and costs 138,058 998,782 -
Depreciation and amortization 56,263 679,455
(86,000) (h)(i)
Selling, general and administrative
expenses 172,312 4,107,003 -
----------- ------------ ----------
- --
1,351,175 15,539,633
(86,000)
----------- ------------ ----------
- --
Income from operations 240,118
1,056,764 86,000
Nonoperating income (expense):
Interest income 48 66,225
(40,000) (j)
Interest expense (34,896) (324,578) (285,000)
(k)
Gain on disposition of assets -
368 -
------------ ------------ ----------
- ---
Income before income taxes 205,270
798,779 (239,000)
Provision for income taxes (72,000)(b)
(269,000) 81,000 (l)
------------ ------------ ----------
- ---
Net income $ 133,270 (b) $
529,779 $ (158,000)
============ ============
=============
Pro forma net income per share
Weighted-average shares outstanding 4,000
1,372,609 (m)
============
=============
</TABLE>
The accompanying notes are in integral part of the pro forma
combined financial statements.
Continued on next page
Elmer's Restaurants, Inc. and CBW, Inc.
Pro Forma Combined Statement of Operations (Unaudited) (a),
for the year ended March 31, 1998 (Continued)
<TABLE>
<S> <C> <C> <C> <C>
Historical
Grass Valley Pro
Forma
Pro Forma Ltd. Adjustments Pro
Forma
----------- ------------ -------
- ---- -----------
Revenue $18,187,690 $ 1,575,549 $
- - $19,763,239
----------- ----------- -----------
- -----------
Costs and expenses:
Food, beverage and supplies 4,827,818 508,923
- - 5,336,741
Labor and related 5,911,117 399,690
- - 6,310,807
Occupancy and costs 1,136,840 88,026
- - 1,224,866
Depreciation and amortization 649,718 27,175
17,000(c)(d) 693,893
Selling, general and administrative
expenses 4,279,315 398,618
- - 4,677,933
----------- ----------- --------
- --- -----------
16,804,808 1,422,432
17,000 18,244,240
----------- ----------- --------
- --- -----------
Income from operations 1,382,882 153,117
(17,000) 1,518,999
Nonoperating income (expense):
Interest income 26,273 -
- - 26,273
Interest expense (644,474) -
- - (644,474)
Gain on disposition of assets 368 -
- - 368
------------ ----------- --------
- --- ------------
Income before income taxes 765,049 153,117
(17,000) 901,166
Provision for income taxes (260,000)
- - (46,000)(e)(f) (306,000)
------------ ----------- --------
- ---- ------------
Net income $ 505,049 $ 153,117 $
(63,000) $ 595,166
============ ===========
============ ============
Pro forma net income per share $ .37
.38
============
============
Weighted-average shares outstanding $ 1,376,609
209,620 (g) 1,586,229
============
============ ===========-
</TABLE>
The accompanying notes are in integral part of the pro forma
combined financial statements.
<PAGE> Page __ of __
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Notes to Pro Forma Combined Statement of Operations (Unaudited)
for the year ended March 31, 1998
(a) See the introductory paragraphs under "Pro Forma Combined
Financial Statements."
(b) Represents unaudited pro forma income tax provision as if
CBW was a taxable corporation for the year ended March 31, 1998.
Pro Forma Adjustments - Grass Valley Ltd., Inc.
- -----------------------------------------------
(c) Adjustment to reflect the amortization of $1,110,000 excess
of cost over fair value of net tangible assets acquired
(goodwill) over 30 years:
$ 37,000
========
(d) Adjustment to reflect reduction in depreciation expense
related to Grass Valley Ltd., Inc. assets acquired.
$(20,000)
========
(e) Adjustment to reflect the income tax effect of the pro forma
adjustments in (c) and (d).
$ (6,000)
========
(f) Adjustment to reflect income tax provision on earnings of
Grass Valley Ltd., Inc. as if it were a taxable corporation.
$ 52,000
========
(g) Adjustments to weighted-average shares outstanding consist
of the following:
To reflect the shares to be issued in connection
with this merger transaction 209,620
=======
Pro Forma Adjustments - Elmer's Restaurants, Inc. (As reported on
- -------------------------------------------------
a separate Form 8-K/A dated June 14, 1999)
(h) Adjustments to expenses for the year ended March 31, 1998 to
reflect the effect of purchase accounting adjustments relating to
the acquisition of 53.8% of the outstanding common stock of
Elmer's by CBW:
<PAGE> Page __ of __
<TABLE>
<S> <C>
To reflect the amortization of $2,300,000 of
trademarks and excess of costs over fair value
of net tangible assets acquired over 30 years $ 77,000
To record depreciation expense on adjusted
buildings and equipment over their useful lives
(equipment - 3 to 7 years, buildings - 35 years,
leasehold improvements - life of lease or
applicable shorter period) 265,000
Less depreciation and amortization expense
previously recorded (363,000)
---------
$(21,000)
========
</TABLE>
Elmer's Restaurants, Inc. and Grass Valley Ltd., Inc.
Notes to Pro Forma Combined Statement of Operations (Unaudited)
(Continued)
for the year ended March 31, 1998
(i) Adjustment to expenses for the year ended March 31, 1998 to
reflect the merger transaction of CBW and Elmer's:
<TABLE>
<S> <C>
To reflect the amortization of $900,000 of
trademarks and excess of costs over fair value
of net tangible assets acquired over 30 years $ 30,000
To record depreciation expense on adjusted
buildings and equipment over their useful lives
(equipment - 3 to 7 years, buildings - 35 years,
leasehold improvements - life of lease or
applicable shorter period) $ 221,000
Less depreciation and amortization expense
previously recorded (316,000)
---------
$(65,000)
========
</TABLE>
(j) Adjustment to interest income due to the use of
approximately $1,000,000 to reduce debt related to the
acquisition of common stock:
To reflect decrease in interest income $ 40,000
=========
(k) Adjustments to interest expense due to $3,000,000 of CBW
debt consists of the following:
<TABLE>
<C> <C>
To reflect increase in interest expense on
$1,250,000 at 12% $150,000
To reflect increase in interest expense on
$1,750,000 at 7.7% 135,000
--------
$285,000
========
(l) Adjustments to provision for income taxes (at an assumed
effective rate of approximately 34%) consist of the following:
To reflect the income tax effect of the pro forma
adjustments in (h) through (k) above $ 81,000
========
(m) Adjustments to weighted-average shares outstanding consist
of the following:
<PAGE> Page __ of __
To reflect the shares to be outstanding after the
merger transaction 1,372,609
==========
<PAGE> Page __ of __
Item 8. Change in Fiscal Year
Not applicable.
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.
ELMER'S RESTAURANTS, INC.
Date June 14, 1999 ../s/ William Service, C.E.O..............
William W. Service, Chief Executive Officer
<PAGE> Page __ of __
</TABLE>
