INFORMATION
STATEMENT
Relating
to Annual Meeting of Bagger Dave’s Burger Tavern, Inc.
BAGGER
DAVE’S BURGER TAVERN, INC.
Dear
Bagger Dave’s Burger Tavern, Inc. Shareholders:
NOTICE
IS HEREBY GIVEN that we have received written consents in lieu of a meeting from stockholders representing a majority of our outstanding
shares of voting stock, approving the following actions:
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1.)
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Approval
of a Reverse /Forward Split and Plan of Recapitalization.
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2.)
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Approval
of the election of Directors.
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3.)
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Approval
of the ratification of BDO USA, LLP, as our outside auditors.
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As
of the close of business on October 14, 2017, the record date for shares entitled to notice of and to sign written consents in
connection with the annual meeting, there were 27,297,727 shares of our common stock and no shares of our preferred stock outstanding.
Prior to the mailing of this Information Statement, certain shareholders who represent a majority of our outstanding voting shares,
signed written consents approving each of the actions listed above on the terms described herein (the “Actions”).
As a result, the Actions have been approved and neither a meeting of our stockholders nor additional written consents are necessary.
We are not asking you for a Proxy and you are requested not to send us a Proxy
. The Actions will be effective 20 days from
the mailing of this Information Statement, which is expected to take place on November 18, 2017, and such Actions will result
in the following:
1.)
Each four hundred (400) shares of our common stock outstanding will be converted into one share of common stock of the Company,
and immediately following that all shareholders with at least one whole share, will receive a forward split of 400 shares of common
stock for each one share held.
The
Plan of Recapitalization provides for the mandatory exchange of shares from the current common stock to new common stock representing
one-four hundredth (1/400
th
) of the previous number of shares held and then a multiple of 400 for each share or portion
thereof held. We urge you to follow the instructions set forth in the attached Information Statement under “Exchange of
Stock”.
2.)
The following persons were elected to the board of directors to serve until the next annual meeting or until their replacement
is elected:
T.
Michael Ansley
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Director
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David
G. Burke
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Director
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Phyllis
Knight
David
Fisher
Shawn
Lilley
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Director
Director
Director
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3.)
BDO USA, LLP was approved to act as our outside auditor for our fiscal year ending December 31, 2017, to the extent such audit
is required in the discretion of the Board.
The
Company will pay all costs associated with the distribution of the Information Statement, including the cost of printing and mailing.
The Company will reimburse brokerage and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending the Information Statement to the beneficial owners of the Company’s common stock.
THIS
IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS: NO STOCKHOLDERS MEETING WILL BE HELD TO CONSIDER ANY MATTER DESCRIBED HEREIN, AND
NO PROXY OR VOTE IS SOLICITED BY THIS NOTICE. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
THE ACTIONS, DESCRIBED MORE SPECIFICALLY BELOW, HAVE ALREADY BEEN APPROVED BY WRITTEN CONSENT OF HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY. A VOTE OF THE REMAINING SHAREHOLDERS IS NOT NECESSARY.
By
Order of the Board of Directors,
/s/
T. Michael Ansley
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T.
Michael Ansley, President
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PROPOSAL
TO APPROVE A PLAN OF RECAPITALIZATION AND TO AMEND THE
COMPANY’S
ARTICLES OF INCORPORATION TO PROVIDE
FOR
A REVERSE/FORWARD STOCK SPLIT
SUMMARY
TERM SHEET
We
are providing this summary term sheet for your convenience. It highlights material information in this document, but you should
realize that it does not describe all of the details of the proposed Reverse/Forward Split to the same extent that they are described
in the body of this document. We urge you to read the entire document and the related letter of transmittal carefully, because
they contain the full details of the Reverse/Forward Split. This summary term sheet is qualified in its entirety by reference
to the more detailed information appearing elsewhere in, or accompanying, this Information Statement.
Q:
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What
if the Reverse/Forward Split?
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A:
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The
Company’s Board of Directors (the Board) and the holders of a majority of the Company’s Common Stock have approved
amendments to the Company’s Certificate of Incorporation to effect a reverse stock split of the Company’s Common
Stock, at an exchange ratio of 1-for-400 shares of outstanding Common Stock (the Reverse Split), immediately followed by a
forward stock split of the Company’s outstanding Common Stock, at an exchange ratio of 400-for-1 shares of outstanding
Common Stock (the Forward Split and together with the Reverse Split, the “Reverse/Forward Split”). Such amendments
will not change the par value per share or the number of authorized shares of Common Stock. Holders of record of less than
one share as a result of the reverse stock split will be cashed out at the rate of $0.31 per pre-split share. Holders of record
of at least one share as a result of the Reverse Split will not be entitled to receive any cash payment. The Plan of Recapitalization
effecting the reverse stock split and the forward stock split is attached as an Exhibit to this Information Statement. The
Reverse/Forward Split will become effective upon the filing of the proposed Certificates of Amendment with the Office of the
Secretary of State of the State of Nevada twenty (20) calendar days following the date this Information Statement is first
furnished to our stockholders.
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Q:
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What
is the purpose of the Reverse/Forward Split?
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A:
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The
Reverse/Forward Split is part of the Company’s plan to terminate the registration of its Common Stock and suspend its
reporting requirements under the Exchange Act. The Reverse/Forward Split is considered a “going private” transaction
as defined in Rule 13e-3, which was promulgated under the Exchange Act, because certain stockholders will be cashed out as
a result of the Reverse Split, which will cause our Exchange Act reporting obligations to become eligible for suspension under
Rule12h-3 or Section 15(d) of the Exchange Act and cause our Common Stock to become eligible for termination of registration
under Rule 12g-4 and Section 12(g) of the Exchange Act. Accordingly, the Company will file a Rule 13e-3 Transaction Statement
on Schedule 13E-3 with the SEC. The Schedule 13E-3 will be available on the SEC’s website at http://www.sec.gov or from
the Company (including the Investor Relations page on the Company’s website at http://www.baggerdave.com. Upon deregistration
of its Common Stock under the Exchange Act and provided the Common Stock following the Reverse/Forward Split is held of record
by less than 300 persons, the Company expects that the deregistration will eliminate the significant expense that had been
required of the Company to comply with its Exchange Act reporting obligations and the SEC’s proxy rules. The Company
estimates the annual savings to be approximately $300,000 in tangible expenses, in addition to the saving of considerable
senior management time and effort spent on compliance and disclosure matters attributable to the Company’s Exchange
Act filings. These activities leave less time for a management to manage and grow our business.
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Q:
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Is
any action required on my part, such as to vote?
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A:
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No
action is required on your part. Your approval is not required and is not being sought. The holders of a majority of the Company’s
Common Stock have already approved the Reverse/Forward Split.
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Q:
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Am
I entitled to any appraisal or dissenters’ rights?
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A:
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Stockholders
will not be entitled to appraisal or dissenters’ rights as a result of the Reverse/Forward Split under Nevada law or
our governance documents.
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Q:
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Will
the business plan or operations of the Company change as a result of the Reverse/Forward Split?
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A:
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The
Reverse/Forward Split is not expected to affect in and of itself our current business plan or operations, except for the
anticipated cost and management time savings associated with deregistration of the Company’s Common Stock.
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Q:
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Will
Bagger Dave’s Burger Tavern, Inc. remain a public company after the completion of the Reverse/Forward Split?
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A:
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If
we reduce the number of our stockholders of record below 300, we will remain a public company and our Common Stock will continue
to be traded on the Pink Sheets under the symbol BAGR. However, we plan to terminate the registration of our Common Stock
under the Exchange Act, suspend our reporting requirements under the Exchange Act, and become a “non-reporting entity.”
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Q:
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What
does the Board of Directors of the Company think of the Reverse/Forward Split?
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A:
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The
Company’s entire Board of Directors (the “Board”) and a majority of the stockholders of the Company voted
in favor of and authorized the Reverse/Forward Split. The Board believes that the Reverse/Forward split is fair to and in
the best interest of all of our stockholders, including the stockholders who will be cashed out and those who will retain
an equity interest in the Company subsequent to the consummation of the Reverse/Forward Split. The Board specifically has
determined that the reverse/forward split is fair to unaffiliated shareholders. The Board established the cash consideration
to be paid to redeem shares of holders of record of less than one share as a result of the Reverse Split in a good faith determination
based upon fairness and other factors the Board deemed relevant, as described in more detail herein.
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Q:
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What
are some of the advantages of the Reverse/Forward Split?
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A:
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The
Board believes that the Reverse/Forward Split will have, among others, the following advantages:
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The
Company will be able to terminate the registration of the Company’s Common Stock under the Exchange Act, which will
eliminate the significant tangible and intangible costs of the Company being a public company, with tangible estimated cost
savings of $300,000 annually.
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The
Company will be able to achieve the overhead reduction associated with the Reverse/Forward Split without negatively affecting
our business operations.
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Q:
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What
are some of the disadvantages of the Reverse/Forward Split?
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A:
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The
Board believes that the Reverse/Forward Split will have, among others, the following disadvantages:
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Stockholders
of record owning fewer than 400 shares of the Company’s Common Stock will not have an opportunity to liquidate their
shares at a time and for a price of their choosing; instead, they will be cashed out, will no longer be stockholders of the
Company and will not have the opportunity to participate in or benefit from any future potential appreciation in our value.
Stockholders of record who want to continue to be stockholders in the Company can attempt to purchase shares after the Reverse
Split but prior to us filing to become a non-reporting entity. After the Company becomes a non-reporting entity, it is anticipated
that the Company’s Common Stock will remain on the Pink Sheets. However, there may be limited liquidity for the Common
Stock and you may not be able to purchase or sell the Common Stock at all or at prices you desire.
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Stockholders
holding the Company’s Common Stock following the Reverse/Forward Split and subsequent filing to become a non-reporting
entity may no longer have the information that is currently provided in our filings with the SEC pursuant to the Exchange
Act regarding such matters as our business operations and developments, legal proceedings involving the Company, our financial
results, the compensation of our directors and named executive officers, and Company securities held by our directors, officers
and major stockholders. In addition, it is likely that there will be limited liquidity for the Common Stock and that trading
of shares may only continue in privately negotiated sales. As a result, you may not be able to purchase or sell the Common
Stock at all or at prices you desire.
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Our
stockholders will no longer have the protections provided by the liability provisions of the Exchange Act and the Sarbanes-Oxley
Act of 2002 applicable to the Company and our directors, officers and major stockholders, including the short-swing profit
provisions of Section 16, the proxy solicitation rules under Section 14, the stock ownership reporting rules under Section
13, provisions relating to personal attestation by officers about accounting controls and procedures, potential criminal liability
regarding the disclosure by the Company and provisions relating to restrictions on lending.
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There
is the potential for renewed applicability of public reporting requirements if continuing stockholders transfer shares of
Common Stock in a manner that results in the Company having more than 500 record holders who are not accredited investors
or 2,000 record holders (in either case, provided the Company has total assets exceeding $10 million).
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Q:
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What
is the total cost of the Reverse/Forward Split to the Company?
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A:
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We
estimate that we will pay up to approximately $7,750 to cash out holders of record of less than one share as a result of the
Reverse Split. In addition, we anticipate incurring approximately $30,000 in advisory, legal, financial, accounting and other
fees and costs in connection with the Reverse/Forward Split. We currently have the financial resources to complete the Reverse/Forward
Split.
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Q:
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Will
my shares be cashed out in the Reverse/Forward Split and, if so, what will I receive for my shares?
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A:
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Stockholders
of record who own less than 400 pre-split shares of Common Stock on the Effective Date will be cashed out at a price of $0.31
per pre-split share.
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Stockholders
of record who hold at least 400 pre-split shares of Common Stock on the Effective Date will not receive any cash payments.
Rather, their shares will be split on a 1-for-400 basis and then immediately split on a 400-for-1 basis, will leave them with
the same number of shares after the forward/reverse split as they had prior to that.
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Q:
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If
I own less than 400 pre-split shares of Common Stock on the Effective Date, how and when will I be paid?
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A:
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As
soon as practicable after the Effective Date, we will send you a letter of transmittal to be used to transmit your Common
Stock certificates to Island Transfer (the “Exchange Agent”). You will receive a cash payment in the amount
of $0.31 for each pre-split share owned by you. Upon proper completion and execution of the letter of transmittal, and
the return of the letter of transmittal and accompanying stock certificate(s) to the Exchange Agent, you will receive
a check for this amount.
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In
the event we are unable to locate certain stockholders or if a stockholder fails to properly complete, execute and return
the letter of transmittal and accompanying stock certificate to the Exchange Agent, any funds payable to such stockholders
pursuant to the Reverse/Forward Split will be held in escrow until a proper claim is made, subject to applicable abandoned
property laws. Stockholders who hold shares in a book-entry account are not required to take any action to receive a cash
payment. The Exchange Agent will furnish stockholders with the necessary instructions for surrendering their pre-split stock
certificates.
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Q:
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What
do I have to do if I have lost my stock certificates, or if they have been mutilated, destroyed or stolen?
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A:
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Call
our Exchange Agent, Island Stock Transfer, at (727) 239-0010.
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Q:
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What
are the United States federal tax consequences?
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A:
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We
believe that the Reverse/Forward Split will be treated as a tax-free “recapitalization” for federal income tax
purposes. We will not apply for any ruling from the Internal Revenue Service, nor will we receive an opinion of counsel with
respect to the tax consequences of the Reverse Split.
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We
believe that any stockholders who continue to hold Common Stock immediately after the Reverse/Forward Split, and who receive
no cash as a result of the Reverse Split, should not recognize any gain or loss or dividend income as a result of the Reverse/Forward
Split and will have the same adjusted tax basis and holding period in their Common Stock as they had in such stock immediately
prior to the Reverse/Forward Split.
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We
believe that a stockholder who receives cash in the Reverse/Forward Split (i.e., a stockholder of record who holds less than
one share as a result of the Reverse Split) will be treated as having such shares redeemed in a taxable transaction governed
by Section 302 of the Code.
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See
the information set forth below under the caption “Federal Income Tax Consequences of the Reverse/Forward Split.”
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Q:
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What
if I hold shares of Common Stock in “street name”?
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A:
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If
a person or entity holds shares of Common Stock in “street name,” then its broker, bank or other nominee (the
“Record Owner”) is considered the owner of record with respect to those shares of Common Stock and not such person
or entity. If the Record Owner holds less than one share as a result of the Reverse Split, it will be cashed out at the rate
of $0.31 per pre-split share. Record Owners of at least one share as a result of the Reverse Split will not be entitled to
receive any cash payment, even if a Record Owner hold shares of Common Stock in “street name” for any individual
beneficial owners that held beneficial ownership in less than 400 pre-split shares of Common Stock.
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Special
Factors
Fairness
of the Transaction
The
Board of Directors unanimously approved the Transaction, including the price to be paid for fractional Common Shares following
the Reverse Stock Split, and recommended that our shareholders approve the Transaction. Our Board of Directors determined that
the Transaction and the price to be paid for the fractional shares resulting from the Reverse Stock Split are substantively and
procedurally fair to and in the best interest of the Company and our unaffiliated shareholders (including both Continuing Shareholders
and Cashed Out Shareholders).
The
Board of Directors considered various factors regarding the fairness of the Actions to us and our unaffiliated Continuing Shareholders
and unaffiliated Cashed Out Shareholders, including the following in relative order of their weight in the determination:
(1)
the direct and indirect cost savings to be realized from the elimination of expenses related to our disclosure and reporting requirements
under the Exchange Act;
(2)
the ability of shareholders with less than 400 shares to exchange their shares for cash at premium to market prices prevailing
at the time of the approval of the Transaction and without incurring brokerage commissions or, alternatively, to purchase additional
shares if they desire to remain a shareholder;
(3)
the fact that the Reverse Stock Split will apply to all shareholders;
(4)
the reduction in publicly available information about us that will result from the Transaction;
(5)
the inability of Cashed Out Shareholders to participate in any future increases in the value of our stock.
(6)
the likely reduction in liquidity for our Common Shares following the termination of our Exchange Act registration, OTCQB listing
and periodic reporting;
(7)
the possible decrease in the trading price of the Common Shares;
(8)
the fact that there are no unusual conditions to the consummation of the Transaction;
(9)
The Board determined that it was capable of evaluating the fairness of the proposed transaction and that it was not necessary
to obtain a fairness opinion or appraisal, and that it was not necessary to form a special committee to make this determination.
The entire Board considered the issue and made the determination, which they were comfortable with considering the fact that the
$.31 per share they are paying to certain shareholders is double the trading price at the time the decision was made, and now
is ten times the trading price of $.03 per share.
Detailed
Discussion and Reasons for the Reverse/Forward Split
The
primary purpose of the Reverse/Forward Split is to ensure that the number of record holders of our Common Stock will be below
300 so that we can terminate the registration of our Common Stock under Section 12(g) of the Exchange Act. The Reverse/Forward
Split is expected to result in the elimination of the expenses related to our disclosure and reporting requirements under the
Exchange Act. For some time, the management of the Company has been concerned about the expense of continuing to comply with the
periodic reporting requirements of the Exchange Act, given the earnings and overhead of the Company and the extremely low trading
volume of our shares. Significantly, the Company had an annual operating loss during the year ended December 25, 2016 of $11,420,515,
and during the quarter ended September 24, 2017, the Company had an operating loss of $5,339,224. For these reasons, among others
the Board decided to consider whether it should remain a reporting company. The Board believes that any material benefit derived
from continued registration under the Exchange Act is outweighed by the cost, including the cost and tangible and intangible burdens
associated with compliance with the Sarbanes-Oxley Act of 2002.
The
Board believes that the significant costs are not justified, because we have not been able to realize many of the benefits that
publicly traded companies sometimes realize. The Board does not believe that we are in a position to use our status as a public
company to raise capital through sales of securities in a public offering, or otherwise to access the public markets to raise
equity capital. In addition, our Common Stock’s extremely limited trading volume, stock price and public float have all
but eliminated our ability to use our Common Stock as acquisition currency or to attract and retain employees.
The
affiliates of the Company will not become the direct beneficiary of the cost savings associated with the Company’s withdrawal
from the 34 Act reporting requirement. The reduced compliance costs will benefit all shareholders equally.
Our
Common Stock’s limited trading volume and public float have also hindered our stockholders’ ability to sell their
shares, which has prevented them from realizing the full benefits of holding publicly traded stock. Our low market capitalization
has resulted in limited interest from market makers or financial analysts who might report on our activity to the investment community.
Because the Common Stock has been thinly traded, any attempt to trade a large block of shares in the public markets, to the extent
possible, would risk a significant impact on the market price of our Common Stock. The Board believes that it is unlikely that
our market capitalization and trading liquidity will increase significantly in the foreseeable future.
The
overall executive time expended on the preparation and review of our public filings is likely to continue to increase rather than
decrease. Since we have relatively few executive personnel, these indirect costs can be significant relative to our overall expenses
and, although there will be no direct monetary savings with respect to these indirect costs when the Reverse/Forward Split is
effected and the Affiliates of the Company will not become the direct beneficiary of the cost savings associated with the Company’s
withdrawal from the 34 Act reporting requirement. The reduced compliance costs will benefit all shareholders equally. We cease
filing periodic reports with the SEC, the time currently devoted by management to our public company reporting obligations could
be devoted to other purposes, such as operational concerns to further our business objectives and the interests of our stockholders.
The Board believes that it is in our best interests and the best interests of our stockholders to eliminate the administrative,
financial and additional accounting burdens associated with periodic reporting to the SEC by consummating the Reverse/Forward
Split at this time rather than continue to subject the Company to these burdens.
There
is no constituency that is expected to become the beneficiary at the Company’s net operating loss carryover, and it is not
anticipated that the Company will be in a position to benefit from the net operating loss carryover.
Strategic
Alternatives Considered
While
considering the merits of the Reverse/Forward Split, the Board evaluated a number of strategic alternatives. In evaluating the
risks and benefits of each strategic alternative, the Board determined that the Reverse/Forward Split would be the simplest and
most cost-effective approach to achieve the purposes described above. The Board considered the following alternatives:
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Self-tender
offer
. The Board considered a self-tender offer considerably more costly than the Reverse/Forward Split, and as a result,
rejected this alternative.
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Purchase
of shares in the open market
. The Board considered a stock repurchase program, but believes that it is unlikely that open
market purchases will achieve the intended result of the Reverse/Forward Split, which is to ensure that the number of our
record stockholders will be below 300. Due to the expense and logistical problems associated with the open market purchases
the Board determined this option was not viable.
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Maintaining
the status quo
. The Board also considered taking no action to reduce the number of our stockholders of record. However,
due to the significant and increasing costs of being an SEC registered public company, not being able to realize many of the
benefits that publicly traded companies sometimes realize and other factors enumerated elsewhere in this Information Statement,
such as the operating losses of the Company, the Board believed that maintaining the status quo would be detrimental to all
stockholders. We would continue to incur the expenses of being a public company without realizing the benefits of public company
status.
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Fairness
of the Reverse/Forward Split to Stockholders
The
Company is required, under Item 1014(a) of Regulation M-A (17 C.F.R. §229.1014), to determine whether it reasonably believes
that a going private transaction, such as the Reverse/Forward Split, is fair or unfair to its unaffiliated stockholders. The Board,
on behalf of the Company, has itself made that determination and, for the reasons set forth below, has reached a decision that
the Reverse/Forward Split is fair to the unaffiliated stockholders.
The
Board did not obtain a report, opinion, or appraisal from an appraiser or financial advisor with respect to the consideration
to be paid to holders of record of less than one share as a result of the Reverse Split. In addition, no representative or advisor
was retained on behalf of the unaffiliated stockholders to review or negotiate the transactions. Further, the result of the Reverse/Forward
Split is anticipated to affect less than 25,000 shares, or less than 1%, of the Common Stock of the Company for a total cost to
the Company of approximately $7,750, which will be paid out of the Company’s available cash reserves.
No
director who is not an employee of the Company has retained an unaffiliated representative to act solely on behalf of unaffiliated
security holders for purposes of negotiating the terms of the Reverse/Forward Split and/or preparing a report concerning the fairness
of the transaction.
Each
Director on the Board approved the Reverse/Forward Split. The Board, which has unanimously approved the Reverse/Forward Split,
concluded that the expense of these procedures was not reasonable in relation to the size of the transaction contemplated and
concluded that the Board could adequately establish the fairness of the Reverse/Forward Split without such outside persons.
The
Board did not create a Special Committee of the Board to approve the Reverse/Forward Split. Creating a Special Committee by hiring
new directors and retaining independent counsel for such a committee would significantly increase the cost of the Reverse/Forward
Split.
The
Board determined that the Reverse/Forward Split, including the proposed cash payment of $0.31 per pre-split share, which represents
a 100% premium to the 30-day average closing price prior to the Record Date to stockholders whose shares will be cashed out, is
substantively and procedurally fair, in form and from a financial point of view, to all of our unaffiliated stockholders, including
those whose shares will be cashed out and those who continue to be stockholders of the Company.
The
Board determined that certain additional factors supported the fairness of the Reverse/Forward Split to those unaffiliated stockholders
whose shares will be cashed out, including the fact that they will not pay the brokerage commissions they would have paid if they
attempted to sell their shares in the open market.
Furthermore,
the Board considered that, with extremely limited liquidity in the public market for our Common Stock, only a small portion of
our stockholders would have been able to attain the historical closing prices before the stock price decreased measurably. The
proposed transaction price of $0.31 per pre-split share does not include any discount for the lack of liquidity of our Common
Stock or for the minority status of the shares of our Common Stock owned by unaffiliated stockholders.
For
the thirty trading days prior to the Record Date, the average daily trading volume has been 14,742, shares, with an average closing
price of $0.155. The cash payment of $0.31 per pre-split share to stockholders whose shares will be cashed out represents a premium
of 100% over the average closing price from September 1, 2017 through October 13, 2017, inclusive.
With
respect to the fairness of the Reverse/Forward Split to the stockholders whose stock would not be cashed out in the Reverse/Forward
Split, the Board also relied on the fact that the amount being paid to stockholders whose stock would be cashed out was fair.
In addition, the Board noted that voting control of approximately 11,723,650 of the shares held by stockholders who would remain
stockholders after the Reverse/Forward Split was held by members of the Board so that the interests of such stockholders would
remain aligned with the interests of the Board.
The
Board determined that current and historical market prices of its Common Stock were the best measures of the fairness of the cash
out price for holders of record of less than one share as a result of the Reverse Split to unaffiliated stockholders, because
recent and historical prices provide valuable insight into how the market has historically valued our Common Stock. The Board
also reviewed stockholders’ equity, which at September 24, 2017 was $10,010,967 million under generally accepted accounting
principles (“GAAP”), and net book value, which as of September 24, 2017 was $562,604, under GAAP, as alternative measures
of the cash out price per pre-split share for holders of record of less than one share as a result of the Reverse Split. The cash
payment of $0.31 per pre-split share to stockholders whose shares will be cashed out represents a premium of 15.5 times net book
value as of September 24, 2017. It also discussed liquidation value as another measure by comparing stockholders’ equity
of approximately $10,000,000 at September 24, 2017. However, the Board did not ultimately explicitly establish or consider liquidation
value as a factor in determining the fairness of the transaction since the Company has no present intent to liquidate and only
a small fraction of existing stockholders will be eliminated as equity holders as a result of the Reverse/Forward Split. Accordingly,
the Board did not consider or establish, explicitly or otherwise, the going concern value of the Company in connection with determining
the fairness of the Reverse/Forward Split, because only a small number of stockholders will be cashed out in the Reverse/Forward
Split. The Company has not engaged in any stock repurchases.
The
Board analyzed historical market prices, more recent market prices and other similar factors, and they considered all available
information, including the financial trends in the business and the disclosures of the Company’s net losses. Based on that
information, the Board believes the most recent trading price available was the most relevant with respect to the value of common
stock for the reverse split transaction, and that is why they chose the 30 days prior to making the offer as the best and most
fair basis of valuation. In addition, the Board reviewed other similar filings which use this method. Finally, we note that the
stock price has continued to trend downward and the current price of the shares is $.04, which further supports the valuation
decision made by the Board.
The
Reverse/Forward Split is not expected to affect in and of itself our current business plan or operations, except for the anticipated
cost and management time savings associated with termination of our obligations to file periodic reports under the Exchange Act
with the SEC. Once we deregister our Common Stock under the Exchange Act, we will not be required to provide our stockholders
with periodic, annual, quarterly or other reports regarding the Company, although we intend to provide certain information to
our stockholders on an annual basis. However, we do not intend to make available to stockholders any financial or other information
about us that is not required by law. We do not intend, but may in our discretion elect, to distribute press releases for material
and other events. We will continue to hold meetings as required under Nevada law, including annual meetings, or to take actions
by written consent of stockholders in lieu of meetings.
We
estimate that we will pay approximately $7,750 to cash out holders of record of less than one share as a result of the Reverse
Split. In addition, we anticipate incurring approximately $30,000 in advisory, legal, financial, accounting and other fees and
costs in connection with the Reverse/Forward Split. The Company has sufficient cash on hand to cover the cost of cashing out holders
of record of less than one share as a result of the Reverse Split and the related fees and costs of implementing the Reverse/Forward
Split and this Information Statement. The Company will not be using borrowed funds to finance the cost of the Reverse/Forward
Split, there are no conditions relating to the use of the cash to cover the cost of the Reverse/Forward Split, and there are no
alternative financing arrangements or alternative financing plans in place to cover the ultimate cost of the Reverse/Forward Split.
The estimated costs consist of the following, although actual costs may vary.
Department
|
|
Cost
|
|
Legal
|
|
$
|
15,000
|
|
Accounting
|
|
|
5,000
|
|
Printing
|
|
|
1,000
|
|
Distribution
|
|
|
4,000
|
|
Administrative
|
|
|
5,000
|
|
Total
|
|
$
|
30,000
|
|
On
October 13, 2017, at the close of the trading day, which was prior to the Record Date, our Common Stock’s closing price
per share was $0.15 on trading volume of 2,462 shares. Previous to this date, our average closing price for the 30 trading days
prior to October 13, 2017 was approximately $.15 per share on an unweighted basis.
Procedural
Fairness of the Reverse/Forward Split
As
stated above, the Company is required, under Item 1014(a) of Regulation M-A (17 C.F.R.§229.1014), to determine whether it
reasonably believes that a going private transaction, such as the Reverse/Forward Split, is fair or unfair to its unaffiliated
stockholders. The Board, on behalf of the Company, has itself made that determination and, for the reasons set forth below, has
reached a decision that the Reverse/Forward Split is also procedurally fair to all unaffiliated stockholders, including both stockholders
who will receive cash payments in connection with the Reverse/Forward Split and will not be continuing stockholders of the Company
and stockholders who will retain an equity interest in the Company. In reaching this conclusion, the Board noted that the potential
ability of unaffiliated stockholders of record to decide whether or not to remain stockholders following the Reverse/Forward Split
by attempting to buy or sell shares of Common Stock in the open market, if permissible at prices acceptable to such stockholders,
afforded protection to those stockholders who would not be continuing stockholders of the Company. Specifically, the Board noted
that current holders of record of fewer than 400 shares may be able to remain stockholders of the Company by acquiring additional
shares, if available at prices they are willing to pay, so that they own at least 400 shares immediately before the Reverse/Forward
Split. Conversely, stockholders of record that own 400 or more shares and desire to liquidate their shares in connection with
the Reverse/Forward Split may be able to sell or otherwise reduce their holdings to less than 400 shares prior to the Reverse/Forward
Split. It should be noted that, because there has historically been very limited trading in the Company’s Common Stock,
stockholders seeking to either increase or decrease their holdings prior to the Reverse/Forward Split may not be able to do so
at all or at a price they are willing to pay or accept.
The
Company has not received any offers from any unaffiliated person during the past two years for:
|
(a)
|
the
merger of the Company with another company;
|
|
(b)
|
the
sale or other transfer of all or any substantial part of the assets of the Company; and
|
|
(c)
|
a
purchase of the Company’s securities that would enable the holder to exercise control of the Company.
|
In
addition, the Board noted that voting control of approximately 99% of the shares will be held by stockholders who will remain
stockholders after the Reverse/Forward Split. Therefore, there would be no change in control as a result of the reverse/forward
split, and the interests of remaining stockholders would not be substantially diminished. Further, the result of the Reverse/Forward
Split is anticipated to affect less than 25,000 shares, or less than 1%, of the Common Stock of the Company.
In
light of the Board’s determination that the interests of unaffiliated stockholders were protected by (i) the representation
of stockholders who will remain stockholders after the Reverse/Forward Split on the Board, and (ii) the ability of unaffiliated
stockholders to decide whether or not to remain stockholders following the Reverse/Forward Split by buying or selling shares of
Common Stock in the open market, the Board did not create a Special Committee or retain independent counsel.
The
Board determined not to condition the approval of the Reverse/Forward Split on approval by a majority of unaffiliated stockholders
for several reasons. First, the Board believes that any such vote would not provide additional protection to those unaffiliated
stockholders who will be cashed out because the majority of the shares held by unaffiliated stockholders are held by stockholders
who would not be cashed out and who may therefore have different interests from the unaffiliated stockholders who would be cashed
out in the Reverse/Forward Split. The Reverse/Forward Split is also a matter that could not be voted on by brokers without instruction
from the beneficial owners of the shares so even shares beneficially owned by holders of small numbers of shares held in brokerage
accounts might be unlikely to be voted.
The
Board did not retain an unaffiliated representative to act solely on behalf of the unaffiliated stockholders due to the fact that
it would not affect the outcome of the Actions, because a majority vote of the unaffiliated stockholders is not required under
Nevada law.
The
Board did not grant unaffiliated stockholders access to our corporate files, except as provided under Nevada law. The Board determined
that this Information Statement, together with our other filings with the SEC, provides adequate information for unaffiliated
stockholders.
The
Board determined that the process leading up to the approval of the Reverse/Forward Split was procedurally fair to the stockholders,
because of the structural fairness of the Reverse/Forward Split and the procedural protections available to stockholders.
Effects
of the Reverse Stock Split
As
a result of the Reverse Stock Split:
|
●
|
The
number of record holders of our Common Shares will be reduced below 300, which will allow us to terminate the registration
of our Common Shares under the Exchange Act. Accordingly, we will no longer be subject to any reporting requirements under
the Exchange Act or the rules of the SEC applicable to public companies. We will, therefore, cease to file annual, quarterly,
current, and other reports and documents with the SEC, and shareholders will cease to receive annual reports and proxy statements.
Persons that remain our shareholders after the Transaction and subsequent deregistration are completed will, therefore, have
access to much less information about us and our business, operations and financial performance. We will also no longer be
subject to the provisions of the Sarbanes-Oxley Act of 2002 and the liability provisions of the Exchange Act, including the
requirement that our officers certify the accuracy of our financial statements. Our officers, directors and 10% shareholders
will no longer be subject to the reporting requirements of Section 16 of the Exchange Act or be subject to the prohibitions
against retaining short-swing profits in our Common Shares.
|
|
●
|
Shareholders
who have fewer than 400 shares of our Common Shares before the Reverse Stock Split will receive cash in exchange for their
shares of our Common Shares, and will no longer be shareholders or have any ownership interest in the Company and shall cease
to participate in any of our future earnings and growth. The cash payment will be equal to $0.31 per share held prior to the
effectiveness of the Reverse Stock Split.
|
|
|
|
|
●
|
Shareholders
who have more than 400 shares of our Common Shares before the Transaction will not receive any payment for their shares and
shall continue to hold the same number of shares that they held before the Transaction.
|
|
|
|
|
●
|
Our
Common Shares will no longer be traded on the OTCQB Market. Any trading in our Common Shares will occur in the “pink
sheets” or in privately negotiated transactions. Shareholders should note that market makers (not the Company) quote
Common Shares in the “pink sheets.” Therefore, we cannot guarantee that our Common Shares will be available for
trading in the “pink sheets.” The limited trading market for our Common Shares after the Transaction may cause
a decrease in the market price of our Common Shares.
|
|
|
|
|
●
|
After
we de-register it will be more difficult for us to access the public equity and public debt markets, and it will be more expensive
to access the private debt markets.
|
Effects
of the Forward Stock Split
As
a result of the Forward Stock Split:
|
●
|
Shareholders
who have fewer than 400 shares of our Common Shares before the Reverse Stock Split will receive cash in exchange for their
shares of our Common Shares and will not be affected by the Forward Stock Split;
|
|
|
|
|
●
|
Shareholders
who have more than 400 shares of our Common Shares before the Transaction will, as a result of the Forward Stock Split, continue
to hold the same number of shares as before the Transaction, without having to tender their shares to the Company’s
stock transfer agent;
|
|
|
|
|
●
|
Options
and warrants evidencing rights to purchase Common Shares would be unaffected by the Transaction, because the options will,
after the Transaction, be exercisable into the same number of Common Shares as before the Transaction.
|
RECOMMENDATION
OF THE BOARD OF DIRECTORS
For
the above reasons, the reverse/forward stock split and the deregistration of our common stock under the 34 Act was approved by
the unanimous vote of our Board of Directors, including a majority of Directors who are not employees of the Company, all of whom
believe that the transaction is in the Company’s best interest and in the best interests of our shareholders. There can
be no guarantee, however, that the market price of our common stock after the reverse/forward stock split will be equal to the
market price before the reverse stock, or that the market price following the reverse/forward stock split will either exceed or
remain in excess of the current market price.
Federal
Income Tax Consequences of the Reverse/Forward Split
We
have summarized below what we believe to be certain federal income tax consequences to the Company and its stockholders resulting
from the Reverse/Forward Split. This summary is based on United States federal income tax law, existing as of the date of this
Information Statement. Such tax laws may change, even retroactively. This summary does not discuss all aspects of federal income
taxation that may be important to you in light of your individual circumstances. In addition, this summary does not discuss any
state, local, foreign, or other tax considerations. This summary assumes that you are a United States citizen and have held, and
will hold, your shares as capital assets under the Internal Revenue Code (the “Code”). You should consult your tax
advisor as to the particular federal, state, local, foreign, and other tax consequences, in light of your specific circumstances.
We
believe that the Reverse/Forward Split will be treated as a tax-free “recapitalization” for federal income tax purposes.
We will not apply for any ruling from the Internal Revenue Service, nor will we receive an opinion of counsel with respect to
the tax consequences of the Reverse Split.
We
believe that any stockholders who continue to hold Common Stock immediately after the Reverse/Forward Split, and who receive no
cash as a result of the Reverse Split, should not recognize any gain or loss or dividend income as a result of the Reverse/Forward
Split and will have the same adjusted tax basis and holding period in their Common Stock as they had in such stock immediately
prior to the Reverse/Forward Split.
We
believe that a stockholder who receives cash in the Reverse/Forward Split (i.e., a stockholder of record who holds less than one
share as a result of the Reverse Split) will be treated as having such shares redeemed in a taxable transaction governed by Section
302 of the Code and, depending on a stockholder’s situation, the transaction will be taxed as either: (a) a sale or exchange
of the redeemed shares, in which case the stockholder will recognize gain or loss equal to the difference between the cash payment
and the stockholder’s tax basis for the redeemed shares; or (b) a cash distribution which is treated: (i) first, as a taxable
dividend to the extent of allocable earnings and profits, if any; (ii) second, as a tax-free return of capital to the extent of
the stockholder’s tax basis in the redeemed shares; and (iii) finally, as gain from the sale or exchange of the redeemed
shares. Amounts treated as gain or loss from the sale or exchange of redeemed shares will be capital gain or loss. Amounts treated
as a taxable dividend are ordinary income to the recipient; however, a corporate taxpayer (other than an S corporation) may be
allowed a dividend received deduction subject to applicable limitations and other special rules.
The
foregoing discussion summarizing certain federal income tax consequences does not refer to the particular facts and circumstances
of any specific stockholder. Stockholders are urged to consult their own tax advisors for more specific and definitive advice
as to the federal income tax consequences to them of the Reverse/Forward Split, as well as advice as to the application and effect
of state, local and foreign income and other tax laws.
Termination
of Exchange Act Registration
Our
Common Stock is currently registered under the Exchange Act and bought and sold on the OTCQB Market. We are permitted to terminate
such registration if there are fewer than 300 record holders of outstanding shares of our Common Stock. As of October 1, 2017,
we had approximately 400 record holders of our Common Stock. Upon the effectiveness of the Reverse/Forward Split, we expect to
have approximately 230 record holders of our Common Stock. We intend to terminate the registration of our Common Stock under the
Exchange Act promptly after the Effective Date.
Termination
of registration under the Exchange Act will substantially reduce the information which we will be required to furnish to our stockholders
under the Exchange Act. After deregistration of our shares, our stockholders will have access to our corporate books and records
to the extent provided by the Nevada General Corporation Law, and to any additional disclosures required by our directors’
and officers’ fiduciary duties to the Company and our stockholders.
We
estimate that termination of registration of our Common Stock under the Exchange Act will save us an estimated $300,000 per year
in legal, accounting, auditing, printing and other expenses, and will also enable our management to devote more time to our operations.
By reducing the Company’s number of stockholders of record to less than 300 and deregistering our Common Stock under the
Exchange Act as intended, based on historical expenses, the Company expects to save (i) approximately $200,000 per year in professional
fees and expenses for the preparation and filing of reports required by the Exchange Act and (ii) approximately $100,000 per year
in other costs related to being a public reporting entity, such as Edgarization and XBRL costs, printing and mailing costs, expenses
for compliance with the internal control and procedure requirements associated with Sarbanes-Oxley, the Dodd-Frank Act and regulatory
compliance issues applicable to public entities, other than internal personnel expenses. The termination of the Company’s
public reporting obligations will also alleviate a significant amount of time and effort previously required of the Company’s
employees in preparing and reviewing the periodic reports and filings required of public entities under the Exchange Act and the
pressure and expense of hiring staff to satisfy the regulatory and accounting reporting requirements of the Exchange Act. The
Company will also have no further requirement to engage an independent auditor to complete quarterly revenue or an annual audit.
DESCRIPTION
OF PLAN
The
Board of Directors of the Company has unanimously approved a proposal to amend the Company’s Articles of Incorporation to
effect a plan of recapitalization that provides for a four hundred for one (400 for 1) reverse stock split followed by a one for
four hundred (1 for 400) forward stock split of our common stock, subject to the approval of such action by the shareholders.
Pursuant to written resolutions, a majority of the shareholders of the Company voted to approve the proposal to authorize the
reverse/forward stock split. We are now notifying you and the other shareholders that did not participate in the action of the
majority of the shareholders. The reverse/forward stock split will take effect, when we file a Certificate of Amendment to the
Articles of Incorporation with the Secretary of State of Nevada.
We
expect that the Certificate of Amendment will be filed promptly after your receipt of this Information Statement. However, our
board of directors may elect not to file, or to delay the filing of, the Certificate of Amendment if they determine that filing
the Certificate of Amendment would not be in the best interest of our shareholders.
Under
the plan of recapitalization and reverse/forward stock split, each four hundred (400) shares of the Company’s outstanding
common stock on the effective date (the “Old Common Stock”) of the reverse stock split (the “Effective Date”)
will be automatically changed into and will become one share of the Company’s New Common Stock (the “New Common Stock”).
No fractional shares will be issued. Shareholders who own fewer than 400 common shares immediately prior to the reverse split
will have their shares cancelled and converted into a right to receive payment per share on a pre-reverse split basis. The cash
payment will be based on the average closing price of the stock over a thirty-day period prior to the Record Date, which will
be increased by a premium of 100%. Any shareholder that owns in excess of one (1) share immediately following the reverse split
will receive a forward stock split of 400 shares for each share and fraction thereof he holds. The practical effect of this transaction
is that all shareholders who own 400 or more shares prior to the Actions will own the same number of shares after the Actions.
All shareholders who own less than 400 shares before the Actions will be paid the value of those shares in cash. The reverse/forward
stock split will not change the current per share par value of the Company’s common stock nor change the current number
of authorized shares of common stock. The effective date of the reverse/forward stock split will be the date the articles of amendment
are accepted for filing by the Nevada Secretary of State.
If
a person or entity holds shares of Common Stock in “street name,” then its broker, bank or other nominee (the “Record
Owner”) is considered the owner of record with respect to those shares of Common Stock and not such person or entity. If
the Record Owner holds less than one share as a result of the Reverse Split, it will be cashed out at the rate of $0.31 per pre-split
share. Record Owners of at least one share as a result of the Reverse Split will not be entitled to receive any cash payment,
even if a Record Owner holds shares of Common Stock in “street name” for any individual beneficial owners that beneficially
own less than 400 pre-split shares of Common Stock.
The
Reverse/Forward Split can be illustrated with the following example:
|
a.
|
a.
Stockholder A holds of record 390 shares of pre-split Common Stock. After the Effective Date, he will receive $120.90 in cash
and will surrender his shares.
|
|
|
|
|
b.
|
b.
Stockholder B holds of record 410 shares of pre-split Common Stock. After the Effective Date, he will hold 410 shares of Common
Stock and will receive no cash or other compensation for his shares.
|
As
soon as practicable after the Effective Date, we will send all stockholders of record with less than one share as a result of
the Reverse Split a letter containing a cash payment of $.031 for each pre-split share owned. In the event we are unable to locate
certain stockholders, any funds payable to such stockholders pursuant to the Reverse/Forward Split will be held in escrow until
a proper claim is made, subject to applicable abandoned property laws. Stockholders who hold shares in book-entry form are not
required to take any action to receive a cash payment. The Exchange Agent will furnish stockholders with the necessary instructions
for surrendering their pre-split shares for payment.
Stockholders
who hold shares that are not cashed out as a result of the Reverse/Forward Split will not be required to exchange their certificates
representing pre-split shares for new certificates. The Reverse/Forward Split will take place on the Effective Date without any
action on the part of the holders of the Common Stock and without regard to current certificates representing shares of Common
Stock being physically surrendered for certificates representing the number of shares of Common Stock that each stockholder is
entitled to have access to receive as a result of the Reverse/Forward Split.
Although
the Reverse/Forward Split has been approved by the holders of the requisite majority of the shares of Common Stock of the Company,
the Board reserves the right, in its discretion, to abandon the Reverse/Forward Split prior to the proposed Effective Date if
it determines that abandonment is in the best interests of the Company or the stockholders. Factors that may lead the Board to
abandon the Reverse/Forward Split may include, among other things, increased transaction costs to consummate the transaction,
changes in the current economic environment, and an adverse response from the markets in which the Company operates or adverse
responses from our stockholders. If such a determination to abandon the Reverse/Forward Split is made by the Board, our stockholders
would be notified through the filing of a Current Report with the SEC on Form 8-K.
The
Reverse/Forward Split will not materially change the rights, preferences or limitations of those stockholders who will retain
an interest in the Company subsequent to the consummation of the Reverse/Forward Split.
The
Reverse/Forward Split is not expected to affect in and of itself our current business plan or operations, except for the anticipated
cost and management time savings associated with termination of our obligations to file periodic reports under the Exchange Act
with the SEC. Nevertheless, if operating losses continue at the Company following the Reverse/Forward Split and any other cost
saving measures instituted by the Company and the Company is unable to improve its revenues or profitability, the Company may
need to explore other revenue improvement and cost reduction strategies. Once we deregister our Common Stock under the Exchange
Act, we will not be required to provide our stockholders with periodic, annual, quarterly or other reports regarding the Company,
although we intend to provide certain information to our stockholders on an annual basis. However, we do not intend to make available
to stockholders any financial or other information about us that is not required by law. We do not intend, but may in our discretion
elect, to distribute press releases for material and other events. We will continue to hold meetings as required under Nevada
law, including annual meetings, or to take actions by written consent of stockholders in lieu of meetings.
The
bullet points below provide information regarding the essential features and significance of the proposed transaction. A more
detailed discussion of these matters may be found under the heading “Detailed Discussion and Reasons for Reverse/Forward
Split.”
EFFECT
OF THE REVERSE/FORWARD SPLIT
ON THE NUMBER OF AUTHORIZED AND ISSUED SHARES
As
of September 24, 2017, the Company had a total of 27,297,727 of its 100,000,000 authorized shares of Common Stock issued and outstanding.
The total number of authorized shares of Common Stock will not change as a result of the Reverse/Forward Split. The table below
illustrates the estimated effect on the number of authorized shares available for issuance as a result of the Reverse/Forward
Split. Significantly, the result of the Reverse/Forward Split is anticipated to affect approximately 25,000 shares, or less than
1%, of the Common Stock of the Company.
|
|
Shares
Authorized
|
|
|
Shares
Issued
and Outstanding
|
|
|
Authorized
Shares
Available for Issuance
|
|
Before
Reverse/Forward Split
|
|
|
100,000,000
|
|
|
|
27,297,727
|
|
|
|
72,702,273
|
|
After
Reverse/Forward Split
|
|
|
100,000,000
|
|
|
|
27,272,727
|
|
|
|
72,727,273
|
|
The
shares acquired in the Reverse/Forward Split will be retired and returned to the status of authorized but unissued shares of Company
Common Stock.
CERTAIN
INFORMATION CONCERNING THE COMPANY
Bagger
Dave’s Burger Tavern’s administrative and executive offices are located at 807 W. Front Street, Suite B, Traverse
City, Michigan 49684, and its telephone number is (231) 486-0527.
As
of September 24, 2017 the Company had 27,297,727 shares of its $.0001 par value common stock issued and outstanding.
TRADING
MARKET AND PRICE
Our
Common Stock is currently bought and sold on the OTCQB Market. The following is a schedule of the reported high and low closing
prices per share for our Common Stock during the period from March 26, 2017 through September 24, 2017 (the past two quarters),
all of which quotations represent prices between dealers, do not include retail mark-up, mark-down or commission and may not necessarily
represent actual transactions:
Quarter
Ending
|
|
High
|
|
|
Low
|
|
June
24, 2017
|
|
$
|
0.75
|
|
|
$
|
0.08
|
|
September
24, 2017
|
|
$
|
0.37
|
|
|
$
|
0.12
|
|
December
25, 2017
|
|
$
|
0.17
|
|
|
$
|
0.03
|
|
DIVIDENDS
PAID BY THE COMPANY
The
Company has not paid cash dividends on its common stock, and due to operating losses, does not expect to pay a cash dividend in
the future.
STOCK
PURCHASES BY THE COMPANY
The
Company has not purchased shares of its Common Stock on the open market.
AMENDMENT
TO THE ARTICLES OF INCORPORATION
The
Reverse/Forward Stock Split Amendment will amend the Company’s Articles of Incorporation to add two new paragraphs. At the
effective date, without further action on the part of the Company or the holders, each share of the common stock will be converted
into one four-hundredth (1/400
th
) of a share of common stock and then the forward stock split will be implemented and
that will give all the shareholders holding one whole share or more, 400 shares of Common Stock for a every whole share or fraction
thereof. The Reverse/Forward Split Amendment will be filed with the Secretary of State of Nevada and will become effective on
the date of filing.
NO
DISSENTER’S RIGHTS
Under
Nevada law, you are not entitled to dissenter’s rights or rights of appraisal with respect to the amendment of the articles
of incorporation or the reverse/forward stock split.
POTENTIAL
REINSTATEMENT OF REPORTING OBLIGATIONS
The
intended effect of the Reverse/Forward Split is to reduce the number of record holders of our Common Stock to fewer than 300.
This will make us eligible to terminate the registration of our Common Stock under Rule 12g-4 and Section 12(g) of the Exchange
Act. We expect to reduce the number of our record holders to approximately 230 as a result of the Reverse/Forward Split. However,
if the Reverse/Forward Split does not have the intended effect, or if the number of record holders of our Common Stock rises to
either 500 or more persons who are not accredited investors or 2,000 persons after the consummation of the Reverse/Forward Split
for any reason (in each case, provided the Company has total assets exceeding $10 million), we may once again be subject to the
periodic reporting obligations under the Exchange Act and the SEC’s proxy rules, which would negate much, if not all, of
the savings intended to be accomplished through the Reverse/Forward Split.
FINANCIAL
INFORMATION
The
following documents that we filed with the SEC, are incorporated by reference in this Information Statement: (i) the Annual Report
on Form 10-K for the fiscal year ended December 25, 2016, (ii) the Quarterly Report on Form 10-Q for the fiscal quarter ended
March 25, 2017, (iii) the Quarterly Report on Form 10-Q for the fiscal quarter ended June 24, 2017, and (iv) the Quarterly Report
on Form 10-Q for the fiscal quarter ended September 24, 2017; Schedule 13E-3 will be amended to reflect information incorporated
by reference from periodic reports filed after the information statement is distributed.
The
Reverse/Forward split is not anticipated to have a material effect on (1) the Company’s balance sheet as of September 24,
2017; (2) the Company’s statement of income, earnings per share, and ratio of earnings to fixed charges for the fiscal year
ended December 25, 2016 and the quarterly period ended September 24, 2017; and (3) the Company’s book value per common share
as of September 25, 2017.
Any
statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Information Statement to the extent that a statement contained herein (or in any other subsequently
filed documents which also is deemed to be incorporated by reference herein) modifies or supersedes the statement. Any statement
so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Statement.
|
|
Three
Months Ended
September 24, (unaudited)
|
|
|
Nine
Months Ended
September 30, (unaudited)
|
|
|
Year
Ended
December 31, (unaudited)
|
|
|
|
Sept.
24, 2017
|
|
|
Sept.
25, 2016
|
|
|
Sept.
24, 2017
|
|
|
Sept.
25, 2016
|
|
|
Dec.
25, 2016
|
|
|
Dec.
27, 2015
|
|
Revenue
from operating activities
|
|
|
$
3,897, 256
|
|
|
$
|
5,063,316
|
|
|
$
|
13,685,893
|
|
|
$
|
15,772,728
|
|
|
$
|
20,741,427
|
|
|
$
|
27,685,331
|
|
Other
income
|
|
|
3,788
|
|
|
|
1,019
|
|
|
|
56,530
|
|
|
|
9,905
|
|
|
|
11,066
|
|
|
|
39,644
|
|
Total
income
|
|
|
3,901,044
|
|
|
|
5,064,336
|
|
|
|
13,742,423
|
|
|
|
15,782,633
|
|
|
|
20,752,493
|
|
|
|
27,724,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant
operating costs
|
|
|
1,645,296
|
|
|
|
1,742,499
|
|
|
|
5,293,791
|
|
|
|
5,520,214
|
|
|
|
7,235,319
|
|
|
|
7,668,173
|
|
General
and administrative costs
|
|
|
500,738
|
|
|
|
1,149,648
|
|
|
|
1,494,671
|
|
|
|
2,817,159
|
|
|
|
4,063,920
|
|
|
|
5,168,753
|
|
Impairment
and (gain) loss on disposal of property and equipment
|
|
|
1,425,203
|
|
|
|
77,863
|
|
|
|
2,568,190
|
|
|
|
(649,911
|
)
|
|
|
2,946,387
|
|
|
|
13,275,670
|
|
Total
expenses
|
|
|
6,514,932
|
|
|
|
7,135,157
|
|
|
|
19,205,018
|
|
|
|
21,280,222
|
|
|
|
32,161,942
|
|
|
|
54,281,812
|
|
Net
income (- loss) before tax
|
|
|
(2,613,888
|
)
|
|
|
(2,070,822
|
)
|
|
|
(5,462,595
|
)
|
|
|
(5,497,589
|
)
|
|
|
(11,409,449
|
)
|
|
|
(26,556,837
|
)
|
Provision
for Income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
75,585
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net
income after taxes
|
|
|
(2,613,887.7
|
)
|
|
|
(2,070,821.6
|
)
|
|
|
(5,538,180.0
|
)
|
|
|
(5,497,589.0
|
)
|
|
|
(11,409,449
|
)
|
|
|
(26,556,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income from continuing operations
|
|
$
|
(0.10
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(1.01
|
)
|
Net
income from common share
|
|
$
|
(0.10
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(1.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of earnings to fixed charges
|
|
|
n/a
|
(1)
|
|
|
n/a
|
(1)
|
|
|
n/a
|
(1)
|
|
|
n/a
|
(1)
|
|
|
n/a
|
(1)
|
|
|
n/a
|
(1)
|
(1)
Bagger Dave’s did not have any fixed charges for any of the periods disclosed above.
|
|
As of
|
|
|
|
September 24, 2017
|
|
|
December 25, 2016
|
|
Total assets
|
|
$
|
12,416,374
|
|
|
$
|
17,583,624
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
1,381,630
|
|
|
|
960,697
|
|
Total liabilities
|
|
|
2,660,892
|
|
|
|
2,348,442
|
|
|
|
|
|
|
|
|
|
|
Net tangible book value per common share
|
|
$
|
0.34
|
|
|
$
|
0.55
|
|
PROPOSAL
TO ELECT DIRECTORS
The
Board currently consists of five members, each of whom serve one-year terms or until their successor is elected. The current board
consists of T. Michael Ansley, David G. Burke, David Fisher, Shawn Lilley and Phyllis Knight. These individuals have been elected
by the vote of the Shareholders to serve as Directors until the Annual Meeting of Shareholders in Fiscal 2018, until their successors
have been duly elected and qualified or until their earlier death, resignation or removal.
The
following table provides information concerning our officers and directors.
Name
and Address
|
|
Age
|
|
Position(s)
|
T.
Michael Ansley
|
|
46
|
|
President,
CEO, CFO, and Director
|
David
G. Burke
|
|
46
|
|
Secretary,
Director
|
David
Fisher
|
|
46
|
|
Director
|
Shawn
Lilley
|
|
56
|
|
Director
|
Phyllis
Knight
|
|
54
|
|
Director
|
The
directors named above serve for one-year terms or until their successors are elected or they are re-elected at the annual stockholders’
meeting. Officers hold their positions at the pleasure of the board of directors, absent any employment agreement. There is no
arrangement or understanding between any of our directors or officers and any other person pursuant to which any director or officer
was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management
shareholders will exercise their voting rights to continue to elect the current directors to the Company’s board.
The
address of each officer and director is c/o Bagger Dave’s Burger Tavern, 807 W. Front Street, Suite B, Traverse City, Michigan
49684, and the telephone number is (231) 486-0527. No officer or director of the Company has been convicted in a criminal, judicial
or administrative proceeding in the last five (5) years.
Executive
Officers
The
following individual serves as Bagger’s executive officer as of October 1, 2017:
Name
|
|
Age
|
|
Position
|
T.
Michael Ansley
|
|
46
|
|
Chairman
of the Board, Chief Executive Officer, President and Chief Financial Officer
|
The
members of our board of directors are subject to change from time to time by the vote of the stockholders at special or annual
meetings to elect directors.
The
foregoing notwithstanding, except as otherwise provided in any resolution or resolutions of the board, directors who are elected
at an annual meeting of stockholders, and directors elected in the interim to fill vacancies and newly created directorships,
will hold office for the term for which elected and until their successors are elected and qualified or until their earlier death,
resignation or removal.
Whenever
the holders of any class or classes of stock or any series thereof are entitled to elect one or more directors pursuant to any
resolution or resolutions of the board, vacancies and newly created directorships of such class or classes or series thereof may
generally be filled by a majority of the directors elected by such class or classes or series then in office, by a sole remaining
director so elected or by the unanimous written consent or the affirmative vote of a majority of the outstanding shares of such
class or classes or series entitled to elect such director or directors. Officers are elected annually by the directors.
We
may employ additional management personnel, as our board of directors deems necessary. Bagger Dave’s has not identified
or reached an agreement or understanding with any other individuals to serve in management positions, but does not anticipate
any problem in employing qualified staff.
The
factual information below for each director and for each executive officer has been provided by that person. The particular experience,
qualifications, attributes or skills that led our Board to conclude that each should serve on our Board, in light of our business
and structure, was determined by our Board or independent members of the Board.
T.
Michael Ansley
has served as our President, Chief Executive Officer, Chief Financial Officer and Chairman since our inception.
Mr. Ansley served as both Executive Chairman and Chief Executive Officer for Diversified Restaurant Holdings, Inc. (“DRH”),
a reporting company pursuant to Section 12 of the Exchange Act. Mr. Ansley held similar positions for DRH’s wholly-owned
subsidiaries AMC Group, Inc., AMC Wings, Inc. and AMC Real Estate, Inc. The Company’s roots can be traced back to 2008 when
Mr. Ansley opened his first Bagger Dave’s restaurant in Berkley, Michigan. Mr. Ansley received a Bachelor of Science degree
in business administration from the University of Dayton and currently serves on the Board of Directors of the Michigan Restaurant
Association.
We
believe Mr. Ansley is qualified to serve as a director of the Company due to his extensive experience in restaurant management,
operations and development as well as his demonstrated business leadership abilities and long history with the Company as its
founder.
David
G. Burke
has been a member of the Board since our inception. Mr. Burke also serves on the Board of Directors of DRH, a position
he has held since 2007. He is currently President and CEO of DRH and was the Company’s CFO from 2010 to 2016. Prior to joining
the Company, Mr. Burke was employed by Federal-Mogul Corporation, a leading global supplier of powertrain and safety technologies
serving the world’s foremost original equipment manufacturers and the worldwide aftermarket, where he held roles of increasing
responsibility in finance, marketing, and corporate development. Mr. Burke earned a Bachelor of Science degree in mechanical engineering
from the University of Dayton and a Master of Business Administration, with a concentration in finance, from the University of
Michigan — Ross School of Business.
We
believe Mr. Burke is qualified to serve as a director due to his strong leadership, business acumen, and analytical skills, including
a unique proficiency with regard to financial modeling and market analysis. Mr. Burke honed his skill set through eight years
of experience with a $7.0 billion global public corporation, while handling special projects for executive management, such as
business development through acquisition, labor cost-reduction initiatives, strategic planning and supply chain management.
David
Fisher
was elected to the Board in 2016. Since 1994 Mr. Fisher has been an owner and president of ThreeWitt Enterprises, Inc.
located in Dayton, Ohio. ThreeWitt Enterprises is the parent company of subsidiaries that own and operate various types of restaurants.
From 1994 to 2011 ThreeWitt owned and operated up to 15 Buffalo Wild Wing restaurants. On December 5, 2001 ThreeWitt sold the
Buffalo Wild Wing Restaurants back to the franchisor, Buffalo Wild Wings International, Inc. Since 2002 ThreeWitt, through its
subsidiary, has owned and operated Milano’s Pizza Subs and Taps. Currently, ThreeWitt owns and operates four Milano’s
restaurants in Metro Dayton, Ohio. From 1989 to 1991 Mr. Fisher attended Wittenberg University, located in Springfield, Ohio.
In 1993 Mr. Fisher received a Bachelor of Arts degree from Ohio State University, located in Columbus, Ohio.
We
believe Mr. Fisher is qualified to serve as a director of the Company due to his extensive experience in restaurant ownership
and operations.
Shawn
Lilley
was elected to the Board in 2016. From 1993 to 2006 Mr. Lilley owned and operated the largest Adecco staffing firm
in the country. In 2006 Mr. Lilley sold the staffing firm back to Adecco, and he was named senior vice president of Adecco. In
that position Mr. Lilley was responsible for Adecco’s mid-America division and for all Adecco acquisitions in North America.
From 2006 to 2016 Mr. Lilley was the owner and managing partner of ADS Partners, headquartered in Troy, Michigan. ADS Partners
provided healthcare services to seniors in nursing homes. ADS Partners operates in 14 states and is the largest provider of healthcare
services to nursing homes in the country. In March 2016 ADS Partners was sold to Citizens Financial Corporation. In 1985, Mr.
Lilley received a bachelor’s degree in accounting from Walsh College, located in Troy, Michigan.
We
believe that Mr. Lilley is qualified to serve as a director due to his extensive business experience at an executive level and
his accounting background.
Phyllis
Knight
brings more than 30 years of finance, accounting and leadership experience to the Company. She is currently the Chief
Financial Officer and Treasurer of Diversified Restaurant Holdings, Inc. and, prior to that, served in several senior executive
positions in manufacturing, home building and the mortgage services industries. Ms. Knight most recently served as EVP and CFO
of Polar Corporation, the largest tank trailer manufacturing, parts, and service organization in North America. Prior to that,
Ms. Knight spent eleven years at Champion Enterprises, Inc. and Champion Enterprises Holdings, LLC, the bulk of which she served
as EVP and CFO. At Champion, she directed all finance functions, including strategic planning, Securities and Exchange Commission
reporting, treasury, capital markets, investor relations, cash management, risk management, mergers and acquisitions, and IT.
A Certified Public Accountant (inactive license), Ms. Knight began her career at KPMG after earning a Bachelor of Arts degree
in Accounting from Michigan State University.
We
believe that Ms. Knight is qualified to serve as a director due to her experience in corporate financial matters and specifically
due to her experience as Chief Financial Officer in various business enterprises.
During
the last five years, none of the above individuals have been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) and they have not been parties to a judicial or administrative proceeding (except for matters that were
dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining them from future violations
of, or prohibiting activities subject to, federal or state securities laws, or finding a violation of any federal or state securities
law. All of the individuals list above are citizens of the United States.
Committees
of the Board
We
do not currently have separate committees of our board of directors for all functions, however, we do have an audit committee.
The
responsibilities of various committees are fulfilled by our board of directors and all of our directors participate in such responsibilities,
two of whom are “independent”, as defined under Rule 4200(a)(15) of the NASDAQ’s listing standards described
below. Our financial position and lean corporate structure has made it extremely difficult to attract and retain qualified independent
board members. Since we do not have some of the subject committees, our entire board of directors participate in the consideration
of our finances, compensation, and nomination deliberations.
Rule
4200(a)(15) of the NASDAQ’s listing standards defines an “independent director” as a person other than an executive
officer or employee of the company or any other individual having a relationship which, in the opinion of the issuer’s board
of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The
following persons shall not be considered independent:
|
●
|
A
director who is, or at any time during the past three years was, employed by the company;
|
|
|
|
|
●
|
A
director who is, or at any time during the past three years was, employed by the former owner of the company, Diversified
Restaurant Holdings, Inc.
|
|
|
|
|
●
|
A
director who accepted or who has a family member who accepted any compensation from the company in excess of $120,000 during
any period of twelve consecutive months within the three years preceding the determination of independence, other than the
following: (i) compensation for board or board committee service; (ii) compensation paid to a family member who is an employee
(other than as an executive officer) of the company; or (iii) benefits under a tax-qualified retirement plan, or non-discretionary
compensation. Provided, however, that in addition to the requirements contained in this paragraph, audit committee members
are also subject to additional, more stringent requirements under NASDAQ Rule 4350(d).
|
|
|
|
|
●
|
A
director who is a family member of an individual who is, or at any time during the past three years was, employed by the company
as an executive officer;
|
|
●
|
A
director who is, or has a family member who is, a partner in, or a controlling stockholder or an executive officer of, any
organization to which the company made, or from which the company received, payments for property or services in the current
or any of the past three fiscal years that exceed five percent of the recipient’s consolidated gross revenues for that
year, or $200,000, whichever is more, other than the following: (i) payments arising solely from investments in the company’s
securities; or (ii) payments under non-discretionary charitable contribution matching programs;
|
|
|
|
|
●
|
A
director of the issuer who is, or has a family member who is, employed as an executive officer of another entity where at
any time during the past three years any of the executive officers of the issuer serve on the compensation committee of such
other entity; or
|
|
|
|
|
●
|
A
director who is, or has a family member who is, a current partner of the company’s outside auditor, or was a partner
or employee of Bagger’s outside auditor who worked on the company’s audit at any time during any of the past three
years.
|
Audit
Committee
Our
audit committee is solely responsible for appointing and reviewing fee arrangements with our independent accountants and approving
any non-audit services by our independent accountants. Our Audit Committee reviews and monitors our internal accounting procedures
and they review the scope and results of the annual audit and other services provided by our independent accountants. The Audit
Committee is also responsible for overseeing our compliance with legal and regulatory requirements, including our disclosure,
controls and procedures. Our Audit Committee currently consists of David Fisher and Phyllis Knight. Our Board has determined that
Mr. Fisher meets the criteria for independence under the standards of the NASDAQ Stock Market.
We
believe that each of the members of the Audit Committee is financially sophisticated and is able to read and understand our consolidated
financial statements. The Audit Committee did not meet in 2016, because it was not formed until 2017. Our Board has determined
that Mr. Fisher is an audit committee financial expert as defined in Item 401 of Regulation S-K.
Nominating
Committee
Our
size and the size of our board, at this time, do not require a separate nominating committee. When evaluating director nominees,
our directors consider the following factors:
|
●
|
The
appropriate size of our board of directors;
|
|
|
|
|
●
|
Our
needs with respect to the particular talents and experience of our directors;
|
|
|
|
|
●
|
The
knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light
of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the board;
|
|
|
|
|
●
|
Experience
in political affairs;
|
|
|
|
|
●
|
Experience
with accounting rules and practices; and
|
|
|
|
|
●
|
The
desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new board members.
|
Our
goal is to assemble a board that brings together a variety of perspectives and skills derived from high quality business and professional
experience. In doing so, the board will also consider candidates with appropriate non-business backgrounds.
Other
than the foregoing, there are no stated minimum criteria for director nominees, although the board may also consider such other
factors as it may deem in our best interests as well as in the best interests of our stockholders. In addition, the board identifies
nominees by first evaluating the current members of the board willing to continue in service. Current members of the board with
skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination.
If any member of the board does not wish to continue in service or if the board decides not to re-nominate a member for re-election,
the board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of
the board are polled for suggestions as to individuals meeting the criteria described above. The board may also engage in research
to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying
potential nominees, although we reserve the right in the future to retain a third-party search firm, if necessary. The board does
not typically consider stockholder nominees because it believes that its current nomination process is sufficient to identify
directors who serve our best interests.
Finance
Committee
Although
we currently do not have a Finance Committee if and when one is established it will consist of a minimum of three members of the
board of directors, the majority of whom shall meet the same independence and experience requirements of the Audit Committee of
the Company and the applicable provisions of federal law and the rules and regulations promulgated thereunder and the rules of
any exchange where the shares of the Company may be listed or quoted for sale. The members of the Finance Committee are to be
recommended by the Nominating and Corporate Governance Committee and are appointed by and serve at the discretion of the board
of directors.
Compensation
Committee
Although
we currently do not have a Compensation Committee, if and when one is established it will assist the board of directors in meeting
its responsibilities with regard to oversight and determination of executive compensation and to review and make recommendations
to the board of directors with respect to major compensation plans, policies and programs of Bagger. The Compensation Committee
shall consist of not fewer than two members of the board of directors, with the exact number being determined by the board. Members
of the Compensation Committee shall be appointed from time to time to serve in such capacity by the Board. Each member shall meet
the independence and outside director requirements of applicable tax and securities laws and regulations and stock market rules.
Code
of Ethics for Senior Executive Officers and Senior Financial Officers
We
have adopted a Code of Ethics for Senior Executive Officers and Senior Financial Officers that applies to our president, and all
financial officers, including the principal accounting officer. The code provides as follows:
|
●
|
Each
officer is responsible for full, fair, accurate, timely and understandable disclosure in all periodic reports and financial
disclosures required to be filed by us with the United States Securities and Exchange Commission or disclosed to our stockholders
and/or the public.
|
|
|
|
|
●
|
Each
officer shall immediately bring to the attention of the audit committee, or disclosure compliance officer, any material information
of which the officer becomes aware that affects the disclosures made by us in our public filings and assist the audit committee
or disclosure compliance officer in fulfilling its responsibilities for full, fair, accurate, timely and understandable disclosure
in all periodic reports required to be filed with the Securities and Exchange Commission.
|
|
●
|
Each
officer shall promptly notify our general counsel, if any, or the president or chief executive officer of any information
he may have concerning any violation of our Code of Business Conduct or our Code of Ethics, including any actual or apparent
conflicts of interest between personal and professional relationships, involving any management or other employees who have
a significant role in our financial reporting, disclosures or internal controls.
|
|
|
|
|
●
|
Each
officer shall immediately bring to the attention of our general counsel, if any, the president or the chief executive officer
and the audit committee any information he may have concerning evidence of a material violation of the securities or other
laws, rules or regulations applicable to us and the operation of our business, by us or any of our agents.
|
|
|
|
|
●
|
Any
waiver of this Code of Ethics for any officer must be approved, if at all, in advance by a majority of the independent directors
serving on our board of directors. Any such waivers granted will be publicly disclosed in accordance with applicable rules,
regulations and listing standards.
|
Board
of Directors Meetings
During
the year ended December 25, 2016, our board of directors held one formal meeting and no meetings were held where board actions
were taken by written consent. All of Bagger’s directors attended 100% of our meetings in 2016.
Communication
with Directors
Stockholders
and other interested parties may contact any of our directors by writing to them at Bagger Dave’s Burger Tavern, Inc., 807
W. Front Street, Suite B, Traverse City, Michigan 49684, telephone (231) 486-0527, or email them at
mansley@baggerdaves.com.
Our
board has approved a process for handling letters received by us and addressed to any of our directors. Under that process, our
president reviews all such correspondence and regularly forwards to the directors a summary of all such correspondence, together
with copies of all such correspondence that, in the opinion of our president, deal with functions of the board or committees thereof
or that he otherwise determines requires their attention.