Meritage Hospitality Group Inc – ‘8-K/A’ for 11/12/98

As of:  Thursday, 11/12/98   ·   For:  11/12/98   ·   Accession #:  892251-98-330   ·   File #:  1-12319

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Amendment to Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Amendment No. 1                                        8     31K 

Document Table of Contents

8-K/A
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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
--------------------------------------------------------------------------------
(State or Other Jurisdiction
 of Incorporation)

  0-17442                                                 38-2730460
--------------------------------------------------------------------------------
Commission File Number)                                      (IRS Employer    
                                                          Identification Number)

40 PEARL STREET, N.W., SUITE 900
                         GRAND RAPIDS, MICHIGAN                      49503
--------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)          (Zip Code)

Registrant's telephone number, including area code: (616) 776-2600

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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

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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

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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 

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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 

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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 

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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 

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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 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘8-K/A’ Filing		Date		First		Last			Other Filings
Filed on / For Period End:		11/12/98		2					8-K,  8-K/A
		9/1/98		1		8
		8/31/98		3		8			10-Q
		5/31/98		8					10-Q
		4/16/98		2		7
		11/30/97		3		8			10-K,  8-K,  8-K/A,  DEF 14A
		12/1/96		7
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