SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K\A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 31, 1996
Efficiency Lodge, Inc.
-----------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
Georgia 0-2290 58-0898219
- --------------------------------------------------------------
(State or other Jurisdiction of (Commission (IRS Employer
Incorporation or Organization) File Number) Identification No.)
Efficiency Lodge, Inc.
928 Bankhead Highway
Mableton, Georgia 30059
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 948-2447
Southern Acceptance Corporation
277 Pat Mell Road, Suite A
Marietta, Georgia 30060
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
All references herein to the "Proxy Statement" refer to the
Proxy Statement dated October 8, 1996 of Southern Acceptance
Corporation, a Georgia corporation, ("SAC"), as filed with the
Commission on October 8, 1996, and incorporated herein by
reference to Exhibit 99. With respect to each document referred
to herein and filed with the Securities and Exchange Commission
as an exhibit to this report, reference is made to the exhibit
for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such
reference.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION.
(a) Financial Statements of the Business Acquired
Financial statements of Efficiency Lodge, Inc., including
the balance sheet as of December 31, 1995, and the
statement of earnings, stockholders' deficit and cash flows
for the years ended December 31, 1994 and 1995, including
the report of independent auditors.
Unaudited financial statements of Efficiency Lodge, Inc.,
including the balance sheet as of September 30, 1996, and the
statement of earnings, stockholders' deficit and cash flows
for the nine months ended September 30, 1995 and 1996
(b) Pro Forma Financial Information
Unaudited pro forma condensed combined balance sheet as of
September 30, 1996 and unaudited pro forma condensed combined
statement of operations for the year ended December 31, 1995 and
the nine months ended September 30, 1996 and the notes related
thereto.
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Efficiency Lodge, Inc.
We have audited the accompanying balance sheet of Efficiency Lodge,
Inc. (a Georgia S Corporation) as of December 31, 1995, and the related
statements of earnings, stockholders' deficit and cash flows for the year
then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Efficiency
Lodge, Inc. as of December 31, 1995, and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Grant Thornton LLP
Grant Thornton LLP
Atlanta, Georgia
February 9, 1996<PAGE>
MOORE & CUBBEDGE, LLP
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of
Efficiency Lodge, Inc.
Mableton, Georgia
We have audited the accompanying statements of earnings,
stockholders' deficit and cash flows of Efficiency Lodge, Inc. (an S
Corporation) for the year ended December 31, 1994. 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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. These standards require that we plan and perform the
audit to obtain reasonable assurance about whether the statements of
earnings, stockholders' deficit and cash flows are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements of earnings,
stockholders' deficit and cash flows. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the
statements of earnings, stockholders' deficit and cash flows. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the statements of earnings, stockholders' deficit
and cash flows present fairly, in all material respects, the results of
operations, changes in stockholders' deficit and cash flows of Efficiency
Lodge, Inc. for the year ended December 31, 1994, in conformity with
generally accepted accounting principles.
Moore & Cubbedge, LLP
August 29, 1995
Marietta, Georgia
<PAGE>
Efficiency Lodge, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31, September 30,
1995 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Property and equipment - net (Note B) $ 9,058,165 $ 8,802,548
Cash 84,064 279,546
Inventory 23,611 28,663
Due from stockholder (Note F) 129,714 220,395
Note receivable - stockholder (Note C) 470,000 470,000
Interest receivable - stockholder (Note C) 58,639 83,314
Loan fees, net of accumulated amortization (Note D) 248,053 235,663
Due from affiliates - 239,982
Other assets 82,949 101,724
---------- ----------
$ 10,155,195 $ 10,461,835
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Mortgage notes payable (Note E) $10,342,399 $ 10,087,317
Accounts payable and accrued expenses 26,329 266,933
Customer deposits 10,462 17,620
Due to stockholder (Note F) 130,010 100,010
---------- ----------
Total liabilities 10,509,200 10,471,880
STOCKHOLDERS' DEFICIT
Common stock - $1 par value, 100,000
shares authorized; 900 shares issued
and outstanding 900 900
Accumulated deficit (354,905) (10,945)
---------- ----------
(354,005) (10,045)
---------- ----------
$ 10,155,195 $ 10,461,835
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Efficiency Lodge, Inc.
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
----------------------- -----------------
1994 1995 1995 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Revenue $ 2,641,091 $3,292,952 $2,268,433 $3,082,297
Operating expenses 1,554,811 2,058,869 1,330,102 1,761,794
--------- --------- --------- ---------
Operating profit 1,086,280 1,234,083 938,331 1,320,503
Other expense (income)
Interest income (Note B) (465) (627) (743) (534)
Interest income from stockholder (25,450) (32,681) (24,675) (24,675)
Interest expense 781,351 1,039,805 769,021 818,058
Other income (1,474) (9,473) (4,550) (26,306)
--------- --------- --------- ---------
753,962 997,024 739,053 766,543
--------- --------- --------- ---------
Net earnings $ 332,318 $ 237,059 $ 199,278 $ 553,960
========== ========= ========= =========
Net earnings per share $ 369.24 $ 263.40 $ 221.42 $ 615.51
========== ========= ========= =========
Weighted average shares outstanding 900 900 900 900
========== ========= ========= =========
Historical net earnings $ 332,318 $ 237,059 $ 199,278 $ 553,960
Pro forma income tax expense 128,000 87,000 73,000 211,000
--------- --------- --------- ---------
Pro forma net earnings $ 204,318 $ 150,059 $ 126,278 $ 342,960
========== ========= ========= =========
Pro forma net earnings per share $ 227.02 $ 166.73 $ 140.31 $ 381.07
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Efficiency Lodge, Inc.
STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common Accumulated
stock deficit Total
------ ----------- --------
<S> <C> <C> <C>
Balance at January 1, 1994 $ 900 $ (714,282) $ (713,382)
Net earnings for the year - 332,318 332,318
Distributions to shareholders - (200,000) (200,000)
------ --------- ---------
Balance at December 31, 1994 900 (581,964) (581,064)
Net earnings for the year - 237,059 237,059
Distributions to stockholders - (10,000) (10,000)
----- -------- ---------
Balance at December 31, 1995 900 (354,905) (354,005)
Net earnings for the nine months (unaudited) - 553,960 553,960
Distributions to stockholders (unaudited) - (210,000) (210,000)
----- -------- --------
Balance at September 30, 1996 (unaudited) $ 900 $ (10,945) $ (10,045)
===== ========== ========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Efficiency Lodge, Inc.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
----------------------- -----------------
1994 1995 1995 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Increase (Decrease) in Cash
Cash flows from operating activities
Net earnings $ 332,318 $ 237,059 $ 199,278 $ 553,960
Adjustments to reconcile net earnings
to net cash provided by operating
activities
Depreciation and amortization 288,868 354,707 227,555 284,540
Change in assets and liabilities
Increase in interest receivable (25,450) (13,839) (11,550) (24,675)
(Increase) decrease in inventories 3,306 (18,917) (10,543) (5,052)
(Increase)decrease in other assets (19,539) (40,542) 30,717 (25,257)
Increase (decrease) in accounts
payable and accrued expenses 36,449 (11,012) 214,423 240,605
Increase (decrease) in customer
deposits - (937) (937) 7,158
------------ ----------- ----------- ------------
Net cash provided by
operating activities 615,952 506,519 648,943 1,031,279
Cash flows from investing activities
Purchases of property and equipment (2,375) (2,406,550) (2,404,539) (16,534)
Increase in due from stockholder (55,935) (73,779) (50,813) (90,681)
Increase in due from affiliates - - (6,482) (233,500)
------------ ----------- ----------- ------------
Net cash used by investing
activities (58,310) (2,480,329) (2,461,834) (340,715)
Cash flows from financing activities
Proceeds from notes payable - 2,382,903 2,382,903 -
Payments made on notes payable (377,857) (321,962) (204,010) (255,082)
Decrease in due to stockholder - - - (30,000)
Distributions made to shareholders (200,000) (10,000) - (210,000)
Payments made on due to former
stockholder (21,000) - - -
------------ ----------- ----------- ------------
Net cash provided (used) by
financing activities (598,857) 2,050,941 2,178,893 (495,082)
------------ ----------- ----------- ------------
</TABLE>
<PAGE>
Efficiency Lodge, Inc.
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
---------------------- -------------------
1994 1995 1995 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Net increase (decrease) in cash (41,215) 77,131 366,002 195,482
Cash at beginning of period 48,148 6,933 6,933 84,064
---------- ------- -------- --------
Cash at end of period $ 6,933 $ 84,064 $ 372,935 $ 279,546
========== ======= ======== ========
Cash paid during the period for
interest $ 78,351 $1,039,805 $ 688,134 $ 732,116
========== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Efficiency Lodge, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of the accounting policies consistently applied in the
accompanying financial statements follows.
1. Nature of Operations
--------------------
The Company owns and operates lodging facilities in Georgia which offer
both temporary (minimum seven days) and long-term accommodations which
include fully-equipped cooking facilities and on-premises laundry
facilities. Customers include people on short-term work or training
assignments, recreational travelers, and people in the midst of
relocation.
2. Inventory
---------
Inventory consists of personal care items and snack foods for resale
and is stated at the lower of cost or market using the first-in, first-
out method.
3. Property and Equipment
----------------------
Property and equipment are recorded at cost including capitalized
interest cost incurred during the period of construction. Depreciation
is provided for in amounts sufficient to relate the cost of depreciable
assets to operations over their estimated service lives using the
straight-line method for buildings and accelerated methods for
furniture and equipment.
4. Loan Fees
---------
Loan fees and other associated closing costs are recorded at cost.
Amortization is calculated using the straight-line method over the term
of the related loan.
5. Income Taxes
------------
The Company has elected to be taxed under the provisions of Subchapter
S of the Internal Revenue code. Under those provisions, the Company
does not pay federal and state income taxes. Instead, the stockholders
are taxed on their proportionate share of the Company's taxable income.
Therefore, no provision or liability for federal and state taxes has
been included in these financial statements. The net income tax basis
of the Company's assets and liabilities is approximately $425,000 less
than the amounts reported in the Company's financial statements. If
the Company were to convert to a Subchapter C corporation, in which
income taxes are payable by the Company rather than it's stockholders,
the Company would record a deferred tax liability for the income tax
effect of the $425,000 difference noted above.
<PAGE>
Efficiency Lodge, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
6. Use of Estimates
----------------
In preparing the Company's financial statements, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the 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.
7. Recently Issued Accounting Standard
-----------------------------------
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be
Disposed Of, was issued in March 1995. This standard was adopted
as of January 1, 1996 and did not have a material impact on
financial position or results of operations.
8. Interim Financial Statements
----------------------------
The unaudited interim financial statements reflected herein, include
all adjustments which, in the opinion of management are necessary in
order to make the interim financial statements not misleading.
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31,
1995:
<TABLE>
<CAPTION>
Depreciable
lives
-----------
<S> <C> <C>
Buildings 31-39 years $ 8,680,967
Furniture and equipment 5-7 years 1,138,259
---------
9,819,226
Less accumulated depreciation 2,078,010
---------
7,741,216
Land 1,316,949
---------
$ 9,058,165
=========
</TABLE>
<PAGE>
Efficiency Lodge, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C - NOTE RECEIVABLE - STOCKHOLDER
The $470,000 note receivable from stockholder bears interest at 7%,
matures on February 14, 1998 and is uncollateralized. Accrued interest
on this note totalled $58,639 as of December 31, 1995. Interest income
on this note totalled $25,450 and $32,681, for the years ended December
31, 1994 and 1995, respectively.
NOTE D - LOAN FEES
Loan fees were as follows as of December 31, 1995:
Loan fees $ 405,522
Less: accumulated amortization 157,469
----------
Net loan fees $ 248,053
==========
NOTE E - MORTGAGE NOTES PAYABLE
Mortgage notes payable consists of the following notes payable
collateralized by all of the Company's real property as of December 31,
1995.
Variable rate notes - 10.5% to 11% and payments of
principal and interest totalling $104,000 per month
at December 31, 1995, maturing on various dates
through 2019 $ 9,245,630
Fixed rate notes - 10%, payments of principal and interest
totalling $11,000 per month, maturing on various dates
through 2025 1,096,769
----------
$ 10,342,399
==========
<PAGE>
Efficiency Lodge, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E - MORTGAGE NOTES PAYABLE - Continued
Future maturities of long-term debt as of December 31, 1995 are as follows:
1996 $ 604,138
1997 1,676,337
1998 300,568
1999 327,835
2000 357,552
Thereafter 7,075,969
----------
$ 10,342,399
==========
NOTE F - RELATED PARTY TRANSACTIONS
Management fees of $71,582 and $117,500 were paid in 1994 and 1995,
respectively, to a stockholder who owns fifty percent of the
outstanding stock of the Company.
As of December 31, 1995, $130,010 was due to a stockholder who owns
fifty percent of the outstanding stock of the Company. This payable is
non-interest bearing and has no specified repayment terms.
As of December 31, 1995, $129,714 was due from a stockholder who owns
fifty percent of the outstanding stock of the Company. This unsecured
receivable is non-interest bearing and has no specified repayment
terms.
During 1994 and 1995, the Company purchased maintenance supplies
totalling $62,900 and $89,400, respectively, from a stockholder who
owns fifty percent of the outstanding stock of the Company.
NOTE G - FINANCIAL INSTRUMENTS
The table below includes estimated fair value information as of
December 31, 1995 for the Company's financial instruments. Such
information, which pertains to the Company's financial instruments,
does not purport to represent the aggregate net fair value of the
Company. The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which it is
practicable to estimate that value:
CASH: The carrying amount represents fair value because these amounts
are on deposit at local banks and are available upon demand.
<PAGE>
Efficiency Lodge, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE G - FINANCIAL INSTRUMENTS - Continued
NOTES RECEIVABLE AND DUE FROM RELATED PARTIES: The interest rates that
would currently be offered by the Company for similar instruments are
used to value these receivables.
LONG-TERM DEBT: The current rates offered to the Company for debt of
the same remaining maturities are used to estimated the fair value of
the Company's long-term debt.
The carrying values and estimated fair values of the Company's
financial instruments as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
-------- ----------
<S> <C> <C>
Cash $ 84,064 $ 84,064
Due from related parties $ 129,714 $ 118,000
Note receivable - stockholder $ 470,000 $ 455,000
Long-term debt $ (10,342,399) $(10,342,399)
</TABLE>
NOTE H - BARTOW LODGE ACQUISITION
On June 16, 1995, the Company acquired a lodge facility located in
Bartow County, Georgia for $2,382,903. The purchase was accomplished
by the assumption of loans totalling $1,382,903 and the issuance of a
$1,000,000 note payable. The acquisition has been accounted for as a
purchase and there was no goodwill associated with the transaction.
Results of operations of the facility have been included in the
statement of earnings from the date of acquisition. Unaudited pro
forma financial information as if the acquisition had occurred at the
beginning of fiscal year 1995 is as follows:
Revenue $3,523,214
Net earnings $ 115,949
Earnings per share $ 128.83
These pro forma amounts are not necessarily indicative of what the
actual results of operations might have been if the acquisition had
occurred at the beginning of fiscal year 1995.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 1996
<TABLE>
<CAPTION>
ASSETS
Southern Pro
Acceptance Efficiency Pro Forma Forma
Corporation Lodge Adjustments Combined
----------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Property and equipment, net $ 38,267 $ 8,802,548 $ 100,000 (1) $ 8,940,815
Cash 163,424 279,546 (14,768)(1) 428,202
Other assets 479 1,379,741 1,380,220
----------- ------------ -------- ----------
Total assets $ 202,170 $ 10,461,835 $ 85,232 $10,749,237
=========== ============ ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Mortgage notes payable $ 39,877 $ 10,087,317 $ - $ 10,127,194
Other liabilities 6,945 384,563 200,000 (1,2) 591,508
----------- ------------ -------- ----------
Total liabilities 46,822 10,471,880 200,000 10,718,702
Stockholders' deficit
Common stock 521,347 900 (419,559)(1) 102,688
Additional paid-in capital 2,615,506 - (2,615,506)(1,2) -
Accumulated deficit (2,981,505) (10,945) 2,920,297 (1,2) (72,153)
----------- ------------ -------- ----------
Total stockholders' deficit 155,348 (10,045) (114,768) 30,535
----------- ------------ -------- ----------
Total liabilities and
stockholders' deficit $ 202,170 $ 10,461,835 $ 85,232 $ 10,749,237
============ ============ ======== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 1995
<TABLE>
<CAPTION>
Southern
Acceptance Efficiency Pro Forma Pro Forma
Corporation Lodge Bartow Adjustments Combined
----------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ - $ 3,292,952 $ 230,262 $ - $ 3,523,214
Operating expenses - 2,058,869 184,922 42,450 (3) 2,286,241
----------- ---------- --------- ------- ----------
Operating income - 1,234,083 45,340 (42,450) 1,236,973
Other (income) expense, net 156,302 997,024 66,786 57,214 (4) 1,277,326
----------- ---------- --------- ------- ----------
Earnings (loss) before
income taxes (156,302) 237,059 (21,446) (99,664) (40,353)
Provision for income taxes - - - - -
---------- ---------- --------- -------- ----------
Net earnings (loss) $ (156,302) $ 237,059 $ (21,446) $ (99,664) $ (40,353)
========== ========== ========= ======= ==========
Net loss per common
share $ (0.04)
==========
Weighted average number of
common shares outstanding 1,026,880
==========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Nine months ended September 30, 1996
<TABLE>
<CAPTION>
Southern
Acceptance Efficiency Pro Forma Pro Forma
Corporation Lodge Adjustments Combined
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ - $ 3,082,297 $ - $3,082,297
Operating expenses - 1,761,794 1,761,794
--------- ---------- ---------- ---------
Operating income - 1,320,503 - 1,320,503
Other (income) expense, net 89,188 766,543 - 855,731
--------- ---------- ---------- ---------
Earnings (loss) before
income taxes (89,188) 553,960 - 464,772
Provision for income taxes - - 153,000 (5) 153,000
--------- ---------- ---------- ---------
Net earnings (loss) $ (89,188) $ 553,960 $ (153,000) $ 311,772
========= ========== ========= =========
Net income per
common share $ 0.30
=========
Weighted average number of
common shares outstanding 1,026,880
=========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. Assumptions
-----------
On December 31, 1996, Efficiency Lodge, Inc. ( ELI ) merged with and into
Southern Acceptance Corporation (the Company ), which is the Surviving
Corporation. For accounting purposes, the transaction has been treated
as a recapitalization of ELI with ELI as the acquirer (reverse
acquisition).
The unaudited pro forma condensed balance sheet as of September 30, 1996
gives effect to the Merger as if the Merger had occurred on September 30,
1996. The unaudited pro forma condensed statements of operations for the
year ended December 31, 1995 and for the nine months ended September 30,
1996 give effect to the merger as if the merger had been consummated as
of January 1, 1995. The unaudited pro forma condensed statement of
operations for the year ended December 31, 1995 also includes the results
of operations for Bartow Lodge for the period January 1, 1995 through
June 15, 1995 (the date of acquisition by ELI).
Unaudited pro forma balance sheets and statements of operations are
presented for informational purposes only and do not purport to be
indicative of the financial condition that actually would have resulted
if the merger had been consummated at September 30, 1996 or the results
of operations that actually would have resulted if the merger had been
consummated on January 1, 1995 nor which may result from future
operations.
2. Stockholders' Equity
--------------------
The pro forma adjustments to common stock and additional paid-in-capital
as of September 30, 1996, reflect the one hundred for one conversion of
the Company's outstanding stock, redemption of fractional shares for
$14,768 and the issuance of 975,536 shares of common stock for all of the
outstanding common stock of ELI.
3. Reclassifications
-----------------
Certain reclassifications have been made to historical amounts of the
Company to conform the financial presentation of the three companies.
4. Weighted Average Shares Outstanding
-----------------------------------
The weighted average number of outstanding shares of common stock on a
pro forma basis gives effect to the merger transactions described in Note
2.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS - CONTINUED
5. Pro Forma Adjustments
---------------------
The following adjustments have been made to the historical financial statements.
September 30,
1996
-------------
(1) Elimination of Southern Acceptance's
equity as a result of the merger
Common stock $ (521,347)
Additional paid-in capital (2,615,506)
Accumulated deficit 2,981,505
Elimination of ELI common stock
Common stock (900)
Issuance of 1,026,880 shares in
surviving corporation and redemption
of fractional shares
Cash (14,768)
Common stock 102,688
Additional paid-in capital 38,792
Because the acquisition is accounted for as a
reverse acquisition, the purchase price is deemed
to be the fair value of the net tangible assets of the
Company. This is approximately $217,500 and was
allocated to the net assets as follows:
Property and equipment, $138,267; cash, $163,424;
other assets, $479; mortgage notes payable, $39,877,
other liabilities, $44,945
Fair value of net Company assets and liabilities over
historical basis and deferred tax effect
Property and equipment 100,000
Other liabilities (deferred income taxes) 38,000
Additional paid-in capital 62,000
Summary of above adjustments
Cash (14,768)
Property and equipment 100,000
Other liabilities 38,000
Common stock (419,559)
Additional paid-in capital (2,514,714)
Accumulated deficit 2,981,505
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS - CONTINUED
5. Pro Forma Adjustments - Continued
---------------------------------
<TABLE>
<CAPTION>
Nine months
Year ended ended
December 31, September 30,
1995 1996
------------ -------------
<S> <C> <C>
(2) Change in ELI's tax status from a non-taxable
to a taxable entity
Deferred tax liability $ 162,000
Additional paid-in capital (100,792)
Accumulated deficit (61,208)
(3) Additional depreciation expense for
Bartow Lodge based on ELI's cost
Operating expenses $ 42,450
(4) Additional interest expense for Bartow
Lodge based on ELI's financing cost
Other expenses 57,214
(5) Income tax expense based on the combined
entity being a taxable entity
Income tax expense 153,000
/TABLE
<PAGE>
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.
EFFICIENCY LODGE, INC.
By: /s/ W. Ray Barnes
W. Ray Barnes
President Secretary-Treasurer
February 14, 1997
Date
