SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K A
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: October 16, 1997
(Date of earliest event reported)
THE GREAT AMERICAN BACKRUB STORE, INC.
(Exact name of registrant as specified in its charter)
New York 0-25334 13-3729043
State of other jurisdiction Commission file No. I.R.S. Employer
incorporation or organization ID No.
4500 14Oth Avenue No., Suite 221 Clearwater., Florida 33762
(Address of principal executive offices)
Registrant's telephone number, including area code: (813) 532-4818
53 West 36th Street, Room 1202, New York, New York 10018
(Former name or former address if changed since last report)
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The financial information and pro forma information described below which
is required by Item 7 of Form 8-K is filed herein.
(a) Financial Statements
Independent Auditors' Report
Consolidated Balance Sheet as of December 31, 1996
Consolidated Statements of Operations for the years ended December 31,
1996 and 1995
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1996 and 1995
Consolidated Statements of Cash Flows for years ended December 31, 1996 and
1995
Notes to Consolidated Financial Statements as of December 31, 1996
(b) Pro Forma Financial Information
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1997
Pro Forma Condensed Consolidated Statement of Operations for the Nine
Months Ended September 30, 1997 (Unaudited)
Pro Forma Condensed Consolidated Statement Operations for the Year Ended
December 31, 1996 (Unaudited)
Note to Pro Forma Financial Statements
<PAGE>
[LETTERHEAD OF WEINBERG & COMPANY, P.A.]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Caribsun Corp.
We have audited the accompanying consolidated balance sheet of Caribsun Corp.
and its Subsidiary as of December 31, 1996 and the related statements of
operations, cash flows and changes in stockholders' equity for each of the two
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
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 balance sheet is 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 Caribsun Corp. and its
Subsidiary as of December 31, 1996 and the results of their operations, cash
flows and changes in stockholders' equity for each of the two years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Weinberg & Company, P.A.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
December 23, 1997
Town Executive Center o 6100 Glades Road o Suite 314 o Boca Raton, Florida 33434
Telephone (561) 487-5765 o Telefax (561) 487-5766 o INTERNET: [email protected]
Members: American Institute of CPA's/Division of Firms o
Florida Institute of CPA's
<PAGE>
CARIBSUN CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
ASSETS
Real property $ 5,075,829
Note receivable and accrued interest 104,000
-----------
TOTAL ASSETS $ 5,179,829
===========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
LIABILITIES
Notes payable and accrued interest $ 5,469,315
Management fee payable 204,000
-----------
TOTAL LIABILITIES 5,673,315
-----------
STOCKHOLDER'S DEFICIENCY
Common stock, $.0l par value;
1,500 shares authorized; 100
shares issued and outstanding 1
Capital in excess of par 6,513
Deficit (500,000)
-----------
TOTAL STOCKHOLDER'S DEFICIENCY (493,486)
-----------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY $ 5,179,829
===========
See accompanying notes to consolidated financial statements
2
<PAGE>
CARIBSUN CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31,
1996 1995
--------- ---------
Revenues
Interest income $ 4,000 $ --
--------- ---------
Operating Expenses
Management fees 336,000 168,000
========= =========
NET LOSS $(332,000) $(168,000)
========= =========
NET LOSS PER COMMON SHARE $ (3,320) $ (1,680)
========= =========
See accompanying notes to consolidated financial statements
3
<PAGE>
CARIBSUN CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
COMMON STOCK
--------------------
NUMBER PAR VALUE CAPITAL
OF $.01 IN EXCESS
SHARES AMOUNT OF PAR (DEFICIT)
------ ------ ------ ---------
May 10, 1995 Issuance
of Shares 100 $ 1 $ 6,513 $ --
Net Loss for the Year
Ended 1995 -- -- -- (168,000)
--- --- ------- ----------
Balance --
December 31, 1995 100 1 6,513 (168,000)
Net Loss for the Year
Ended 1996 -- -- -- (332,000)
--- --- ------- ----------
Balance --
December 31, 1996 100 $ 1 $ 6,513 $ (500,000)
=== === ======= ==========
See accompanying notes to consolidated financial statements
4
<PAGE>
CARIBSUN CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------
1996 1995
--------- ---------
Cash Flows From Operating Activities:
Net loss from operations $(332,000) $(168,000)
--------- ---------
Adjustments to reconcile net loss
from operations to cash used for
operating activities:
Increase in accrued interest receivable (4,000) --
Increase in management fees payable 336,000 168,000
--------- ---------
Total Adjustments 332,000 168,000
--------- ---------
Net cash used for operating activities -- --
--------- ---------
Cash and cash equivalents -- beginning of
year -- --
--------- ---------
Cash and cash equivalents -- end of year $ -- $ --
========= =========
Supplemental Information -- Non-cash transactions:
In 1996 the Company sold an investment in real property for $400,000, which
was equal: to its carrying value. The Company received a note receivable of
$100,000 and cash amounting to $300,000 which was immediately advanced to
parent company in exchange for another note receivable. Subsequent thereto
the note receivable from the parent company was used to partially offset
the debt owed to the parent for management fees.
See accompanying notes to consolidated financial statements
5
<PAGE>
CARIBSUN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
NOTE 1 -- ACCOUNTING POLICIES
A. Business Organization
Caribsun Corp. ( the Company) was formed on May 10, 1995 in the State of
Delaware. On June 8, 1995, as part of a simultaneous stock purchase and
reorganization agreement, Caribsun Corp. acquired 100% of Canzone Del Mare
Limited ("CDM") (See Note 2) and Le Bistro Limited ("LBL") (See NOTE 2) in
exchange for four notes payable to the former stockholders of CDM and LBL.
The contract valued the 2 entities at $10,000,000, and notes were issued in
that amount. However, the contract stated that upon the issuance of stock
to the note holders in an acceptable corporation, the note indebtedness
would be reduced to $5,000,000, The notes bore interest at 6% (See Note 5).
Concurrent with its acquisition of the aforementioned subsidiaries, the
Company was acquired by TAC Technology, Inc. ("TAC"), a New York
Corporation, in exchange for 6,514,339 shares of .001 par value TAC common
stock valued at $6,514. Immediately following the acquisition of the
Company by TAC, the 6,514,339 shares that the Company had received were
transferred to the note holders in complete satisfaction of two of the four
notes referred to above relating to that portion of the debt arising from
the acquisition of the subsidiaries, leaving a balance due of $5,000,000 on
the Notes (see Note 5).
On July 15, 1996, TAC merged with Ascot International Corp. ("AIC"), a
Delaware Corporation, and under the terms of the merger agreement AIC
became the surviving corporation. Additionally, under the terms of the
merger agreement, all the existing shareholders of TAC, without any action
on their part, automatically became shareholders of AIC through the
conversion of common stock at the rate of one share of the surviving
corporation (AIC) for each one share of common stock of TAC.
On October 2, 1996, CDM, the wholly-owned subsidiary of the Company changed
its corporate name to Coconut Hall Resort, Ltd.
6
<PAGE>
CARIBSUN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
NOTE 1 -- ACCOUNTING POLICIES CONTINUED
B. Principles Of Consolidation
The accompanying consolidated financial statements includes the accounts of
the Company and its wholly-owned subsidiary, Coconut Hall. Resort, Ltd.
C. Use Of Estimates In Preparation Of Financial Statements
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 statement during the reporting period. Actual results could
differ from those estimates.
NOTE 2 -- REAL PROPERTY
Real property consists of the 85.91 acres of land located in the Parish of
Saint Peter, Antigua titled in the name of CDM, and is being carried at
cost. On October 1, 1997, the property was appraised by HVS International,
an independent appraiser and their report dated October 14, 1997 opines
that the fair market value of the 85.91 acres of land is $10,000,000.
As part of the original acquisition as outlined in Note 1, the Company also
acquired property located in Antigua titled in the name of LBL, consisting
of 1.8 acres of land, 3 houses thereon, a restaurant and bar operating
thereon, and the related fixtures, equipment and operating licenses. This
investment was subsequently sold on March 13, 1996 (See Note 3).
NOTE 3 -- DISPOSITION
On March 13, 1996, the Company sold its 100% interest in LBL for the sum of
$400,000. In connection with this sales agreement, the purchasers paid the
Company $300,000 in cash and issued a 5% note in the principal amount of
$100,000. The $300,000 received in cash for the sale was advanced to the
Company's parent, TAC, in exchange for a
7
<PAGE>
CARIBSUN CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
NOTE 3 -- DISPOSITION (CONTINUED)
note. The $300,000 note was subsequently used by the Company to partially
satisfy a debt owed to TAC for management fees. (See Note 4, Related Party
Transactions).
NOTE 4 -- RELATED PARTY TRANSACTIONS
Under the terms of a management agreement that commenced on July 1, 1995,
the Company has been charged management fees in the amount of $336,000 and
$168,000 for the years ended December 31, 1996 and 1995, respectively, by
its parent company for managerial and administrative services, Of this
amount, $300,000 has been paid and the balance of $204,000 is shown in the
accompanying balance sheet as management fees payable. This agreement was
subsequently terminated on September 23, 1997.
NOTE 5 -- SUBSEQUENT EVENTS
Preferred stock was issued on October 6, 1997 to satisfy the debt
obligation and accrued interest thereon incurred by the Company in the
acquisition of the real property discussed in Notes 1 and 2. At the time of
issuance of the preferred stock, the debt obligations and accrued interest
aggregated $5,698,615.
The preferred stock is non voting, non convertible and is cumulative as to
dividends at the rate of 7% per annum. The Company had the right to redeem
the preferred stock at any time for $5,698,615 plus the accumulated unpaid
dividends.
On October 16, 1997, Ascot International Corp. ("Ascot") (parent of the
Company) sold 100% of the issued and outstanding common stock of the
Company to Great American Backrub Store; Inc. ("Great American") in
exchange for 80% of the outstanding shares of common stock of Great
American. As a result of this Securities Exchange Agreement, ASCOT obtained
majority voting interest in Great American and therefore will be treated as
the acquirer for accounting purposes. Consequently, this transaction will
be accounted for as a reverse acquisition for financial reporting purposes.
8
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC. AND CARIBSUN, CORP.
PRO-FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
THE GREAT
AMERICAN PRO-FORMA
BACKRUB CARIBSUN ADJUSTMENTS
STORE, INC. CORP. NOTE (A) PRO-FORMA
----------- ----- -------- ---------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 12,404 $ -- $ -- $ 12,404
Receivables -- other 129,722 -- -- 129,722
Prepaid expenses 10,527 -- -- 10,527
Inventory 207,235 -- -- 207,235
---------- ---------- ---------- ----------
Total current assets 359,888 -- -- 359,888
---------- ---------- ---------- ----------
Property and equipment:
Furniture and fixtures 463,560 -- -- 463,560
Leasehold improvements 930,946 -- -- 930,946
Purchased lease 120,000 -- -- 120,000
Computer equipment 45,107 -- -- 45,107
---------- ---------- ---------- ----------
1,559,613 -- -- 1,559,613
Less, accumulated depreciation
Property and equipment, net (419,637) -- -- (419,637)
---------- ---------- ---------- ----------
1,139,976 -- -- 1,139,976
---------- ---------- ---------- ----------
Other assets:
Investment in real property -- 5,305,129 -- 5,305,129
Notes receivable 50,938 108,000 -- 158,938
Lease and equipment deposits 197,109 -- -- 197,109
Goodwill -- -- 1,024.307 1,024,307
---------- ---------- ---------- ----------
Total other assets 248,047 5,413,129 1,024.307 6,685,483
---------- ---------- ---------- ----------
TOTAL ASSETS $1,747,911 $5,413,129 $1,024.307 $8,185,347
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 620,678 $ -- $ -- $ 620,678
Accrued expenses 202,977 450,000 -- 652,977
Accrued payroll and related 41,012 -- -- 41,012
Bridges notes 239,796 -- -- 239,796
Deferred revenue 30,343 -- -- 30,343
---------- ---------- ---------- ----------
Total current liabilities 1,134,806 450,000 -- 1,584,806
---------- ---------- ---------- ----------
Deferred rent 371,412 -- -- 371,412
---------- ---------- ---------- ----------
Stockholders' equity 241,693 4,963,129 1,024,307 6,229,129
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,747,911 $5,413,129 $1,024,307 $8,185,347
========== ========== ========== ==========
</TABLE>
See accompanying notes to pro-forma financial statements.
9
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC. AND CARIBSUN, CORP.
PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THE GREAT PRO-FORMA
AMERICAN CARIBSUN ADJUSTMENTS
BACKRUB STORE, INC. CORP. NOTE (B) PRO-FORMA
------------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Services $ 2,324,092 $ 4,000 $ -- $ 2,328,092
Products 501,390 -- -- 501,390
Royalties, franchise fees and other 20,474 -- -- 20,474
------------ ------------ ------------ ------------
Total revenues 2,845,956 4,000 -- 2,849,956
------------ ------------ ------------ ------------
Operating expenses:
Salaries and wages 1,413,777 -- -- 1,413,777
Cost of products sold, buying and occupancy 406,576 -- -- 406,576
Rental expense 825,742 -- -- 825,742
Advertising and promotion 58,437 -- -- 58,437
Options granted as financial advisory fees 43,750 -- -- 43,750
General and administrative 1,355,547 246,000 -- 1,601,547
Amortization of goodwill -- -- 153,648 153,648
Depreciation 139,748 -- -- 139,748
------------ ------------ ------------ ------------
Total operating expenses 4,243,577 246,000 153,648 4,643,225
------------ ------------ ------------ ------------
Net loss from operations (1,397,621) (242,000) (153,648) (1,793,269)
Interest expense, net 222,927 -- -- 222,927
------------ ------------ ------------ ------------
Net loss $ (1,620,548) $ (242,000) $ (153,648) $ (2,016,196)
============ ============ ============ ============
Loss per share: $ (0.67) $ (0.10)
============ ============
Weighted average number of common
shares outstanding 2,402,743 20,402,743
============ ============
</TABLE>
See accompanying notes to pro-forma financial statements.
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC. AND CARIBSUN, CORP.
PRO-FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR YEAR THE ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THE GREAT PRO-FORMA
AMERICAN CARIBSUN ADJUSTMENTS
BACKRUB STORE, INC. CORP. NOTE (B) PRO-FORMA
------------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Services $ 2,140,340 $ 4,000 $ -- $ 2,144,304
Products 868,214 -- -- 868,214
Royalties, franchise fees and other 37,419 -- -- 37,419
------------ ------------ ------------ ------------
Total revenues 3,045,937 4,000 -- 3,049,937
------------ ------------ ------------ ------------
Operating expenses:
Salaries and wages 1,495,274 -- -- 1,495,274
Cost of products sold, buying and occupancy 611,919 -- -- 611,919
Rental expense 734,588 -- -- 734,588
Advertising and promotion 210,754 -- -- 210,754
Options granted as financial advisory fees 481,250 -- -- 481,250
General and administrative 2,294,907 336,000 -- 2,630,907
Amortization of goodwill -- -- 204,864 204,864
Depreciation 128,876 -- -- 128,876
------------ ------------ ------------ ------------
Total operating expenses 5,957,568 336,000 204,864 6,498,432
------------ ------------ ------------ ------------
Net loss from operations (2,911,631) (332,000) (204,864) (3,448,495)
Interest expense, net 86,319 -- -- 86,319
------------ ------------ ------------ ------------
Net loss $ (2,825,312) $ (332,000) $ (204,864) $ (3,362,176)
============ ============ ============ ============
Loss per share: $ (1.41) $ (0.17)
============ ============
Weighted average number of common
shares outstanding 2,005,573 20,005,573
============ ============
</TABLE>
See accompanying notes to pro-forma financial statements.
<PAGE>
The Great American Backrub Store, Inc. And Caribsun, Corp.
Notes to the Proforma Financial Statements
Note A
- ------
The purchase price of The Great American BackRub Store, Inc. and the
related goodwill is estimated as follows:
Common Shares outstanding on
October 16, 1997 at fair value $ 906,000
Acquisition costs (fair value of
common shares issued for acquisition
related services and costs incurred) 360,000
----------
Purchase price 1,066,000
Less: Tangible net worth acquired 241,693
----------
Goodwill $1,024,307
==========
Note B
- ------
The pro-forma adjustments to the unaudited pro-forma condensed consolidated
statements of operations are as follows;
Nine months ended Year ended
September 30, 1997 December 1, 1996
------------------ ----------------
Amortization of goodwill over an
estimated usefull life of 5 years $ 153,648 $ 204,864
================== ================
Note C
On September 30, 1997 the Company entered into a Securities Exchange
Agreement (the "Securities Exchange Agreement"), to acquire (the
"Acquisition") 100% of the issued and outstanding common stock of Caribsun,
Corp. from Ascot International Corp. ("Ascot"). Caribsun, Corp.
("Caribsun") owns approximately 86 acres of land located in the Parish of
Saint Peter, Antigua. On October 16, 1997 the Securities Exchange Agreement
was amended and the Company initially issued 11,000,000 shares of its
Common Stock to Ascot in exchange for all of the outstanding shares of
Caribsun's Common Stock. Under the terms of the Securities Exchange
Agreement, the Company will issue up to a maximum of 17,097,419 shares in
exchange for Caribsun.
The Caribsun Acquisition and the issuance of approximately 80% of the
Company's outstanding common stock to the former Caribsun stockholder
resulted in that stockholder obtaining a majority
page 1 of 2
<PAGE>
The Great American Backrub Store, Inc. And Caribsun, Corp.
Notes to the Proforma Financial Statements
Note C continued
voting interest in the Company. As a consequence, the Caribsun Acquisition
will be accounted for as a reverse acquisition for financial reporting
purposes and Caribsun will be deemed to have acquired the Company, as of
the date of the acquisition. Accordingly, the Company's financial
statements following the acquisition date will be as follows: (1) the
balance sheet will consist of Caribsun's net asset at historical cost and
the Company's net assets at fair value (acquired cost): and (2) the
statement of operations will include Caribsun's operations for the period
presented and the Company's operations from October 16, 1997.
The Purchase price of $ 1,266,000 consists of the approximate fair value of
the Company's outstanding shares of common stock on October 16, 1997
(before the issuance of any of the Company's shares of common stock to
Ascot) and acquisition costs.
The accompany unaudited pro forma condensed consolidated financial
statements illustrate the effect of the acquisition on the Company's
financial position and results of operation. The condensed consolidated
balance sheet as of September 30, 1997 is based on historical balance sheet
of the Company and Caribsun as of September 30, 1997 and assumes the
acquisition took place on that date. The unaudited pro forma condensed
consolidated statements of operations for the year ended December 317 1996
and nine months ended September 30, 1997 assume the acquisition took place
on January 1, 1996.
The unaudited pro forma condensed consolidated financial statements have
been included as required by the rules of the Securities and Exchange
Commission and are provided for comparative purposes only. The pro forma
statements do not purport to be indicative of the results which would have
been obtained if the acquisition had been effected on the date or dates
indicated or which may be obtained in the future. The unaudited pro forma
consolidated financial statements are based on management's current
estimate of allocation of the purchase price, the actual allocation of
which may differ.
The accompanying unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the respective historical
financial of the Company and those of Caribsun which are elsewhere herein.
page 2 of 2
