SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 1, 1998
MERITAGE HOSPITALITY GROUP INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
MICHIGAN
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(State or Other Jurisdiction
of Incorporation)
0-17442 38-2730460
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Commission File Number) (IRS Employer
Identification Number)
40 PEARL STREET, N.W., SUITE 900
GRAND RAPIDS, MICHIGAN 49503
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (616) 776-2600
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 1, 1998, the Company's wholly-owned subsidiary, Thomas Edison Inn,
Incorporated, sold real and personal property including (i) the hotel and
restaurant facility (known as the Thomas Edison Inn) located at 500 Thomas
Edison Parkway, Port Huron, Michigan (the "Hotel"), (ii) the fixtures,
furniture, furnishings, equipment and supplies used in the operation of the
Hotel, and (iii) certain other real and personal property owned by the
subsidiary and located adjacent to the Hotel (collectively, the "Assets"). The
Assets were sold to Innkeeper's Management, LLC and its affiliate,
Reynolds/Ehinger Enterprises, LLC, both of whom have no relation to the Company.
The Assets were sold for $12,200,000 pursuant to the terms of an agreement dated
April 16, 1998 and amended on September 1, 1998. The purchase price was
comprised of $10,200,000 in cash and a $2,000,000 one-year secured note bearing
interest at 8.0% over the prime lending rate. The Company reduced its long-term
indebtedness by approximately $9,600,000 as a result of the sale.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information:
(1) Pro Forma financial statements of Meritage Hospitality Group Inc.
and Subsidiaries. See "Index to Unaudited Pro Forma Consolidated
Financial Statements" on page F-1.
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 hereto duly authorized.
MERITAGE HOSPITALITY GROUP INC.
Dated: November 12, 1998 By: /s/ Robert E. Schermer, Jr.
---------------------------------
Robert E. Schermer, Jr.
President and
Chief Executive Officer
- 2 -
<PAGE>
MERITAGE HOSPITALITY GROUP INC. & SUBSIDIARIES
INDEX TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS PAGE NUMBER
- -------------------- -----------
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
- AS OF AUGUST 31, 1998 F-2
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS - FOR THE YEAR ENDED NOVEMBER 30, 1997 F-3
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS - FOR THE NINE MONTHS ENDED AUGUST 31, 1998 F-4
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS F-5
F-1
<PAGE>
Meritage Hospitality Group Inc. & Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
As of August 31, 1998
Meritage
Hospitality Pro
Group Inc. & Pro Forma Forma Consolidated
Subsidiaries Adjustments Ref. Pro Forma
------------ ----------- ----- ------------
ASSETS
Current Assets
Cash and cash equivalents $1,436,651 $ 305,004 (1) $1,741,655
Receivables 80,039 80,039
Inventories 152,425 152,425
Prepaid expenses and
other current assets 70,085 250,000 (1) 320,085
Net assets of discontinued
operations 179,181 2,000,000 (1) 2,762,214
231,666 (1)
(185,000) (1)
536,367 (2)
----------------------------------------------
Total Current Assets 1,918,381 3,138,037 5,056,418
Property, Plant and
Equipment, net 8,615,276 8,615,276
Other Assets 856,606 856,606
Goodwill, net 5,140,050 5,140,050
-----------------------------------------------
Total Assets $16,530,313 $3,138,037 $19,668,350
===============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of
long-term debt $ 474,744 $ 474,744
Current portion of
obligations under
capital leases 284,716 284,716
Trade accounts payable 873,103 873,103
Accrued expenses 1,176,475 1,176,475
-----------------------------------------------
Total Current Liabilities 2,809,038 2,809,038
Long-Term Debt 7,185,957 7,185,957
Obligations Under Capital Leases 1,473,709 1,473,709
Deferred Income Taxes 190,000 190,000
Deferred Revenue 2,047,141 2,047,141
-----------------------------------------------
Total Liabilities 13,705,845 13,705,845
-----------------------------------------------
Stockholders' Equity
Preferred stock 1,323 1,323
Common stock 52,599 52,599
Additional paid in capital 13,500,840 13,500,840
Note receivable from sale
of shares, net (1,660,961) (1,660,961)
Accumulated deficit (9,069,333) 2,601,670 (1) (5,931,296)
536,367 (2)
-----------------------------------------------
Total Stockholders' Equity 2,824,468 3,138,037 5,962,505
-----------------------------------------------
Total Liabilities and
Stockholders' Equity $16,530,313 $3,138,037 $19,668,350
===============================================
See notes to unaudited pro forma consolidated financial statements.
F-2
<PAGE>
Meritage Hospitality Group Inc. & Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
for the Year Ended November 30, 1997
Meritage
Hospitality Pro
Group Inc. & Pro Forma Forma Consolidated
Subsidiaries Adjustments Ref. Pro Forma
------------ ----------- ----- ------------
(Restated)
Food and Beverage Revenue $26,860,546 $26,860,546
Costs and Expenses
Cost of food and beverages 7,672,613 7,672,613
Operating expenses 15,993,942 15,993,942
General and administrative
expenses 2,797,477 2,797,477
Depreciation and amortization 1,150,863 1,150,863
---------------------------------------------
Total costs and expenses 27,614,895 27,614,895
---------------------------------------------
Operating Loss (754,349) (754,349)
Other Income (Expense)
Interest expense (1,440,192) (1,440,192)
Interest income 592,850 592,850
Loss on sale of assets (218,602) (218,602)
Minority Interest (195,639) (195,639)
---------------------------------------------
(1,261,583) (1,261,583)
---------------------------------------------
Loss from continuing
operations $(2,015,932) $(2,015,932)
=============================================
Basic and diluted loss from
continuing operations per
common share $ (.66) $ (.66)
=============================================
Weighted average shares
outstanding - basic and
diluted 3,214,836 3,214,836
=============================================
Note: The unaudited pro forma consolidated statement of operations for the
year ended November 30, 1997 has been restated to reflect the lodging
business segment as a discontinued operation. There are no pro forma
adjustments to the statement of operations as the disposition
transaction does not effect results from continuing operations.
See notes to unaudited pro forma consolidated financial statements.
F-3
<PAGE>
Meritage Hospitality Group Inc. & Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
for the Nine Months Ended August 31, 1998
Meritage
Hospitality Pro
Group Inc. & Pro Forma Forma Consolidated
Subsidiaries Adjustments Ref. Pro Forma
------------ ----------- ----- ------------
Food and beverage revenue $20,041,338 $20,041,338
Cost and Expenses
Cost of food and beverages 5,753,689 5,753,689
Operating expenses 11,794,667 11,794,667
General and administrative
expenses 2,166,414 2,166,414
Depreciation and amortization 892,878 892,878
---------------------------------------------
Total costs and expenses 20,607,648 20,607,648
---------------------------------------------
Operating Loss (566,310) (566,310)
Other Income (Expense)
Interest expense (1,096,529) (1,096,529)
Interest income 47,734 47,734
Gain on sale of assets 519,739 519,739
Minority Interest 25,677 25,677
---------------------------------------------
(503,379) (503,379)
---------------------------------------------
Loss from continuing
operations $(1,069,689) $(1,069,689)
=============================================
Basic and diluted loss from
continuing operations
per common share $ (.25) $ (.25)
=============================================
Weighted average shares
outstanding - basic and
diluted 4,687,097 4,687,097
=============================================
Note: The unaudited pro forma consolidated statement of operations for the
nine months ended August 31, 1998 reflects the lodging business segment
as a discontinued operation. There are no pro forma adjustments to the
statement of operations as the disposition transaction does not effect
results from continuing operations.
See notes to unaudited pro forma consolidated financial statements.
F-4
<PAGE>
MERITAGE HOSPITALITY GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On September 1, 1998, the Company's wholly-owned subsidiary, Thomas Edison Inn,
Incorporated, sold real and personal property including (i) the hotel and
restaurant facility (known as the Thomas Edison Inn) located at 500 Thomas
Edison Parkway, Port Huron, Michigan (the "Hotel"), (ii) the fixtures,
furniture, furnishings, equipment and supplies used in the operation of the
Hotel, and (iii) certain other real and personal property owned by the
subsidiary and located adjacent to the Hotel (collectively, the "Assets"). The
Assets were sold to Innkeeper's Management, LLC and its affiliate,
Reynolds/Ehinger Enterprises, LLC, both of whom have no relation to the Company.
The Assets were sold for $12,200,000 pursuant to the terms of an agreement dated
April 16, 1998 and amended on September 1, 1998. The purchase price was
comprised of $10,200,000 in cash and a $2,000,000 one-year secured note bearing
interest at 8.0% over the prime lending rate. The Company reduced its long-term
indebtedness by approximately $9,600,000 as a result of the sale.
The unaudited pro forma consolidated balance sheet as of August 31, 1998
reflects this transaction as if it occurred on that date. The unaudited pro
forma statements of operations for the year ended November 30, 1997 and for the
nine months ended August 31, 1998 reflect this transaction as if it occurred on
December 1, 1996.
In management's opinion, all material adjustments necessary to reflect the
transaction are presented in the pro forma adjustments. The pro forma statements
do not purport to project the Company's financial position or results of
operations at any future date or for any future period, and should be read in
conjunction with the Company's consolidated historical financial statements, and
notes thereto contained in the Company's Form 10-K for the year ended November
30, 1997 and the quarterly report on Form 10-Q for the quarterly period ended
August 31, 1998.
The pro forma adjustments are as follows:
Balance Sheet:
(1) To reflect the sale of the Assets and the debt reduction from the use of
the cash proceeds from the sale of the Assets as of September 1, 1998,
thereby reflecting the consolidated balance sheet as if the sale had been
consummated on August 31, 1998. The pro forma adjustment to "net assets of
discontinued operations" consists of the following:
Current assets $ (188,544)
Property, plant and equipment (8,248,567)
Other assets (942,640)
Current liabilities 219,065
Long-term debt 9,392,352
-------------
Net assets of discontinued operations $ 231,666
=============
F-5
<PAGE>
MERITAGE HOSPITALITY GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(2) To recognize the earnings from operations of the discontinued business
segment from the measurement date (May 31, 1998) through the date of
disposal of the business segment (September 1, 1998) and to recognize the
deferred gain on the disposal of the business segment.
The net assets of discontinued operations after the pro forma adjustments
consist of the following:
Current assets, exclusive of notes receivable $ 371,611
Notes receivable from sale of assets 3,375,000
Other assets 60,890
Current liabilities (1,045,287)
------------
Net assets of discontinued operations $ 2,762,214
============
Statements of Operations:
The unaudited pro forma consolidated statements of operations for the year ended
November 30, 1997 (as restated) and for the nine months ended August 31, 1998
reflect the lodging business segment as a discontinued operation. There are no
pro forma adjustments to the statements of operations as the above described
transaction does not effect results from continuing operations.
F-6
