SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Security
- --- Exchange Act of 1934 For the Quarterly period ended September 30,
1996.
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934 For the Transition Period from______ to ______.
Commission file number: 0-25334
THE GREAT AMERICAN BACKRUB STORE, INC.
(Exact name of Small Business Issuer as specified in the charter)
New York 13-3729043
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
425 Madison Avenue, Suite 605, New York, NY 10017
-------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 750-7046
Check whether the issuer: (1) filed all reports required by Section 13
or 15 (d) of the Securities Exchange Act during the past 12 months ( or for such
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
---------- ----------
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at October 29, 1996
----- -------------------------------
Common Stock, $.001 par value 2,236,454
Transitional Small Business Disclosure Format(check one):
Yes No X
---------- ----------
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
PART 1
FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Condensed Balance Sheet 3
Condensed Statements of Operations 4
Statements of Cash Flows 5
Notes to unaudited Financial Statements 6
Signature Page 9
Exhibit 11: Statement re: Computation of per share earnings 10
Exhibit 27: Financial Data Schedule 11
Page 2
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEET
(UNAUDITED)
As of September 30, 1996
Part 1: Financial Information
Item 1: Financial Statements
ASSETS
Current assets:
Cash and cash equivalents $ 1,239,465
Prepaid expenses 293,462
Inventory 293,478
-----------
Total current assets 1,826,405
Property and equipment:
Furniture and fixtures 356,258
Leasehold improvements 677,001
Purchased lease 120,000
Computer equipment 33,318
-----------
1,186,577
Less, Accumulated depreciation (122,896)
-----------
1,063,681
-----------
Other assets:
Deferred offering costs 37,500
Lease and equipment deposits 209,336
-----------
Total other assets 246,836
-----------
Total assets $ 3,136,922
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 120,305
Accrued expenses 279,324
Deferred revenue 49,445
-----------
Total current liabilities 449,074
-----------
Deferred rent 185,108
-----------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.001 per share,
10,000,000 shares authorized, 2,226,342
shares issued and outstanding 2,226
Additional paid in capital 8,223,342
Deficit accumulated during the development stage (5,722,828)
-----------
2,502,740
-----------
Total liabilities and stockholders' equity $ 3,136,922
===========
See accompanying notes to financial statements.
Page 3
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30, December 18, 1992
------------- ------------- (Inception) to
1996 1995 1996 1995 September 30, 1996
---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Services $ 597,793 $ 247,760 $ 1,527,390 $ 535,977 $ 2,993,245
Products 174,827 46,577 442,114 99,694 945,011
Royalties, franchise fees and other -- -- -- 2,035 46,558
----------- ----------- ----------- ----------- -----------
Total 772,620 294,337 1,969,504 637,706 3,984,814
----------- ----------- ----------- ----------- -----------
Operating expenses:
Salaries and wages 358,606 269,799 991,435 713,770 2,859,272
Cost of products sold,buying and occupancy 122,407 24,094 300,252 50,495 718,446
Rental expense 178,581 79,862 463,798 199,420 1,135,589
Advertising and promotion 36,383 26,441 73,862 75,937 376,034
Non-cash financial advisory fees 131,250 -- 350,000 -- 350,000
General and administrative 490,938 383,523 1,356,342 868,473 3,577,615
Depreciation 20,900 3,000 61,700 14,362 151,288
Waived salaries -- -- -- 30,000 350,000
----------- ----------- ----------- ----------- -----------
Total 1,339,065 786,719 3,597,389 1,952,457 9,518,244
----------- ----------- ----------- ----------- -----------
Net loss from operations (566,445) (492,382) (1,627,885) (1,314,751) (5,533,430)
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest Income 66,578 30,687 82,607 129,757 232,298
Interest expense -- -- -- (313,696) (421,696)
----------- ----------- ----------- ----------- -----------
Total 66,578 30,687 82,607 (183,939) (189,398)
----------- ----------- ----------- ----------- -----------
Net loss ($ 499,867) ($ 461,695) ($1,545,278) ($1,498,690) ($5,722,828)
=========== =========== =========== =========== ===========
Weighted average number of
shares outstanding during the period 1,997,411 1,750,000 1,859,506 1,507,500
=========== =========== =========== ===========
Net loss per common share and equivalents $ (0.25) $ (0.26) $ (0.83) $ (0.99)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 4
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended Nine months ended December 18, 1992
September 30, September 30, (Inception) to
1996 1995 September 30, 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($1,545,278) ($1,468,690) ($5,722,828)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 61,700 14,362 137,751
Salaries waived by officers -- 30,000 350,000
Warrant financing costs -- 306,500 412,500
Options granted as compensation 525,000 -- 631,830
Common stock issued to former franchisee and
consultant -- -- 66,915
(Increase) decrease in:
Accounts receivable 9,054 9,641 --
Prepaid expenses (183,774) (181,130) (293,462)
Inventory (75,769) (136,438) (293,478)
Other assets (82,023) 146,873 (246,836)
Increase (decrease) in:
Accounts payable and accrued expenses (238,771) 135,701 399,629
Deferred revenues and rent (41,368) (4,134) 234,553
Accrued officer expenses -- (67,040) --
----------- ----------- -----------
Total adjustments (25,951) 254,335 1,399,402
----------- ----------- -----------
Net cash used in operating activities (1,571,229) (1,214,355) (4,323,426)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of certificate of deposit -- -- (1,000,000)
Maturity of certificate of deposit 1,000,000 -- 1,000,000
Purchased lease -- -- (120,000)
Purchase of property and equipment (259,490) (446,188) (1,066,577)
----------- ----------- -----------
Net cash used in investing activities 740,510 (446,188) (1,186,577)
----------- ----------- -----------
Cash flows from financing activities:
Net proceeds from the issuance of common stock 848,447 5,127,732 6,749,468
Proceeds from issuance of bridge notes and short-term debt -- -- 605,000
Payment of bridge notes and short-term debt -- (605,000) (605,000)
Payment of officer loan payable -- (15,000) --
----------- ----------- -----------
Net cash provided by financing activities 848,447 4,507,732 6,749,468
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 17,728 2,847,189 1,239,465
Cash and cash equivalents, beginning of period 1,221,737 81,044 --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 1,239,465 $ 2,928,233 $ 1,239,465
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $- $ 13,696 $ 20,892
=========== =========== ===========
Income taxes $ 1,500 $ 1,375 $ 12,686
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 5
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Description of Business
The Great American Backrub Store, Inc. (the "Company"), formerly American
Pleasure, Inc., is an owner/operator of retail stores which provide seated,
fully clothed back rubs and sell back related products. The Company,
incorporated on December 28, 1992, began operations in August, 1993 and opened
its first store for business in October, 1993. As of September 30, 1996, the
Company has ten locations, nine in New York City and one in White Plains, NY at
the "Westchester" mall.
Management believes that the Company's planned principal operations, the
establishment of Company-owned stores and franchised stores throughout the
country, have not yet commenced. The initial nine stores have been used to
continue to develop and modify the Company's retail concept. Accordingly, the
accompanying financial statements have been presented as a development stage
company, in accordance with Statement of Financial Accounting Standards (SFAS)
No. 7.
Note 1 - Initial Public Offering
In an initial public offering completed on March 7, 1995, the Company sold
1,250,000 shares of common stock for approximately $6,250,000 which, after
commissions and fees, provided the Company with net proceeds of approximately
$5,127,732.
Note 2 - Condensed Financial Statements
The condensed balance sheet as of September 30, 1996 and the condensed
statements of operations and cash flows for the nine month periods ended
September 30, 1996 and 1995, and the period December 18, 1992 (inception) to
September 30, 1996 have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, and changes in cash flows at September 30, 1996 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto of the
Company as of December 31, 1995.
The results of operations for the nine month periods ending September 30, 1996
and 1995 are not necessarily indicative of the operating results for the full
year.
Cash and Cash Equivalents
Cash and cash equivalents represent all amounts held in banks and money market
accounts and short term investments such as United States Treasury Bills with
original maturities of three months or less.
Page 6
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 3 - Earnings per Share
Net loss per common share for the nine month period ended September 30, 1996 is
computed by dividing net loss by the weighted average common shares outstanding
during the period. The assumed exercise of common share equivalents was not
utilized since the effect was anti-dilutive.
Net loss per common share for the nine month period ended September 30, 1995 is
computed by dividing net loss by the weighted average number of common shares
and common share equivalents outstanding, adjusted for the effects of applying
Securities and Exchange Commission Staff Accounting Bulletin No. 83, using the
treasury stock method.
Note 4 - Stock Options
At the Company's 1994 annual meeting of shareholders held on July 18, 1994, the
Company's shareholders approved the Employee Plan. The purpose of the Employee
Plan is to promote the success of the Company by providing a method whereby
eligible employees of the Company and its subsidiaries, as defined therein, may
be awarded additional remuneration for services rendered, thereby increasing
their personal interest in the Company. The Employee Plan is also intended to
aid in attracting persons of suitable ability to become employees of the Company
and its subsidiaries. The plan covers an aggregate of 75,000 shares of the
Company's Common Stock. As of September 30, 1996, options to purchase 8,500
shares of Common Stock were outstanding under the plan.
In December 1994, the Company granted ten-year options to purchase 120,000
shares of Common Stock to each of Messrs. Zanker, Murray, and Steven Thompson,
then the Company's Chief Financial Officer. Such options are exercisable at a
price of $3.75 per share. One-third of such options became exercisable in March,
1995, one-third became exercisable in December 1995 and one-third become
exercisable in December 1996. In July 1995, the Company granted five-year
options to purchase 100,000 shares of Common Stock to each of Messrs. Zanker and
Murray, each exercisable at a price of $1.875 per share. All such options have
been exercised. In July 1995, the Company granted options to purchase 10,000
shares of Common Stock to Mr. Dee. Such options are exercisable at a price of
$2.5625 per share. Options to purchase 5,000 shares vest and become exercisable
in July 1996 and options to purchase an additional 5,000 shares vest and become
exercisable in July 1997. All such options expire on the day before the 5-year
anniversary of vesting. In March 1995, the Company granted ten-year options to
purchase 100,000 shares of Common Stock to a consultant to the Company. Such
options are exercisable at a price of $5.00 per share. All such options are
currently exercisable. In July 1995, the Company granted five-year options to
purchase 65,000 shares of Common Stock to consultants to the Company. Such
options are exercisable at a price of $4.00 per share. All such options are
currently exercisable. In August 1995, the Company granted three-year options to
purchase 100,000 shares of Common Stock to a consultant to the Company, of which
options to purchase 76,500 shares have been exercised to date. Such options are
exercisable at a price of $2.375 per share. All such options are currently
exercisable. In February, 1996, the Company granted warrants to purchase 300,000
shares of Common Stock to a financial advisor and consultant to the Company,
100,000 of which are exercisable at a price of $1.00 per share, all of which
have been exercised, and 200,000 of which are exercisable at a price of $2.50
per share, of which 100,000 have been exercised.
Page 7
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 5 - Leases
The Company leases retail stores and office equipment. All of the retail stores
are leased under noncancelable agreements which expire at various dates through
the year 2005. The agreements, which have been classified as operating leases,
require the Company to pay insurance, taxes and other maintenance costs.
Rent expense amounted to $463,798 and $199,420 for the nine month periods ended
September 30, 1996 and 1995, respectively. Rent expense from December 18,
1992(inception) to September 30, 1996 was $1,135,589.
Note 6 - Financial advisory and consulting agreement
On February 7, 1996, the Company entered into a financial advisory and
consulting agreement with an investment banking firm to, among other things,
advise the Company on the possible sale of additional securities, as well as to
introduce and assist in the evaluation of potential merger and partnering
opportunities.
The agreement is for a period of one year commencing as of February 1, 1996 and
includes (i) a $100,000 retainer paid on the execution of the agreement, (ii)
warrants to purchase 100,000 shares of the Company's common stock at an exercise
price of $1.00 per share excercisable from the date of agreement to and
including January 31, 1997(all of which have been exercised) and (iii)warrants
to purchase 200,000 shares of the Company's common stock at an exercise price of
$2.50 per share exercisable from the date of the agreement to and including
January 31, 1998(100,000 of which have been excercised).
Such warrants have resulted in a non-cash charge of $350,000 for the nine month
period ended September 30, 1996.
Page 8
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE GREAT AMERICAN BACKRUB STORE, INC.
Registrant
Date: January 28, 1997
/s/Keith R. Dee
----------------------------------------
Keith R. Dee, Chief Financial Officer
(duly authorized officer and principal
financial officer and principal accounting
officer) and Secretary
Page 9
<TABLE>
<CAPTION>
Nine months' Three months'
Nine Months Ended Three Months ended weighting factor weighting factor
September 30, September 30, (in months) (in months)
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock, June 1993 375,000 375,000 375,000 375,000 9 6 3 3
Sale of common stock, October 1993 125,000 125,000 125,000 125,000 9 6 3 3
Sale of common stock, March 1995
1,250,000 shares 1,250,000 972,278 1,250,000 1,250,000 9 7 3 3
Shares issued upon exercise of
options and warrants 109,506 -- 247,411 -- see below see below
SAB 83 shares - see below -- 35,222 -- -- 9 2 0 0
--------- --------- --------- ---------
Common stock and equivalents 1,859,506 1,507,500 1,997,411 1,750,000
========= ========= ========= =========
</TABLE>
Computation of weighted average number of shares issued
upon exercise of options and warrants:
Nine months' Three months'
weighting factor weighting factor
Shares (in days) (in days)
Date Issued 1996 1996
- ---- ------ ---- ----
5/1/96 12,500 6,944 12,500
6/1/96 200,000 88,889 200,000
6/3/96 12,500 5,417 12,500
6/7/96 4,000 1,674 4,000
6/18/96 4,000 1,511 4,000
6/18/96 6,000 2,267 6,000
7/8/96 2,500 759 2,278
7/9/96 2,000 600 1,800
8/22/96 7,500 1,444 4,333
9/18/96 200,000 8,889 26,667
------- -------
Total 109,506 247,411
======= =======
SAB 83 Calculation (treasury stock method)
June, 1995
<TABLE>
<CAPTION>
Incremental
Options/Warrants Price/Share Proceeds Shares
<S> <C> <C> <C> <C>
Options issued in December, 1994 360,000 $3.75 1,350,000
---------
IPO price 5.00
Shares assumed repurchased 270,000 90,000
Warrants issued in December, 1994 137,500 $2.50 343,750
IPO price 5.00
Shares assumed repurchased 68,750 68,750
-------
Total SAB 83 shares considered outstanding 158,750
=======
</TABLE>
Page 10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-QSB/A for the three month period ended September 30, 1996 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,239,465
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 293,478
<CURRENT-ASSETS> 1,826,405
<PP&E> 1,186,577
<DEPRECIATION> 122,896
<TOTAL-ASSETS> 3,136,922
<CURRENT-LIABILITIES> 449,074
<BONDS> 0
0
0
<COMMON> 2,219
<OTHER-SE> 8,223,349
<TOTAL-LIABILITY-AND-EQUITY> 3,136,922
<SALES> 772,620
<TOTAL-REVENUES> 772,620
<CGS> 122,407
<TOTAL-COSTS> 1,216,658
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (499,867)
<INCOME-TAX> 0
<INCOME-CONTINUING> (499,867)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (499,867)
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
