<PAGE> 1
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________________ to ________________________
Commission File No. 333-5190-A
THRIFT MANAGEMENT, INC.
-----------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 65-0309540
- ------- ----------
State or Other Jurisdiction of I.R.S. Employer I.D. No.
Incorporation or Organization
3141 W. Hallandale Beach Boulevard
Hallandale, Florida 33009
- ---------------------------------------------
(Address of Principal Executive Offices)
Issuer's telephone number, including area code: 954-985-8430
------------
Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
YES X / NO
----- -----
State the number of shares outstanding of each of the Issuer's classes of common
equity as of the latest practical date: At November 13, 1997, there were
outstanding 2,145,000 shares of Common Stock, $.01 par value.
Transitional Small Business Disclosure Format: YES / NO X
----- -----
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THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PART I - FINANCIAL
INFORMATION Page
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<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of September 30, 1997 (Unaudited) 3
Condensed Consolidated Statements of Operations for the Three Months and
the Nine Months Ended September 30, 1997 and 1996 (unaudited) ........... 4
Condensed Consolidated Statements of Cash Flows for
the Nine Months ended September 30, 1997 and 1996 (unaudited) .......... 5
Notes to Condensed Consolidated Financial Statements (unaudited) ........ 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................... 8-10
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds ..................... 11
Item 5. Other Information .............................................. 11
Item 6. Exhibits and Reports on Form 8-K ............................... 12
Signatures .............................................................. 12
</TABLE>
2
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THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
CASH $ 791,002
SHORT TERM INVESTMENTS 1,445,139
RECEIVABLES - SHORT TERM 26,337
MERCHANDISE INVENTORIES 232,904
PREPAID EXPENSES 111,678
ADVANCES TO STOCKHOLDER - CURRENT 63,156
DEFERRED TAX ASSETS 16,500
OTHER 5,752
-----------
TOTAL CURRENT ASSETS 2,692,468
EQUIPMENT, FIXTURES AND IMPROVEMENTS - NET 401,541
RECEIVABLES - LONG TERM 34,479
ADVANCES TO STOCKHOLDER - NON CURRENT 78,950
PREPAID EXPENSES - NON CURRENT 31,250
COVENANTS NOT TO COMPETE - NET 43,008
OTHER ASSETS 82,458
-----------
TOTAL ASSETS $ 3,364,154
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 45,805
ACCRUED EXPENSES 329,355
ACCRUED INCOME TAXES 45,727
CUSTOMER DEPOSITS 10,668
-----------
CURRENT PORTION OF NOTES PAYABLE 4,665
TOTAL CURRENT LIABILITIES 436,220
NOTES PAYABLE, LESS CURRENT PORTION 6,242
-----------
TOTAL LIABILITIES 442,462
STOCKHOLDERS' EQUITY:
PREFERRED STOCK: $.01 PAR VALUE, AUTHORIZED
1,500,000 SHARES, ISSUED AND OUTSTANDING
250,000 SHARES 2,500
COMMON STOCK: $.01 PAR VALUE, AUTHORIZED
15,000,000 SHARES, ISSUED AND OUTSTANDING
2,145,000 SHARES 21,450
ADDITIONAL PAID-IN CAPITAL 3,071,266
ACCUMULATED DEFICIT (173,524)
-----------
TOTAL STOCKHOLDERS' EQUITY 2,921,692
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,364,154
===========
</TABLE>
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THRIFT MANAGEMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
3 MONTH 9 MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
----------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 1,954,591 $ 1,465,111 $ 5,615,439 $ 4,425,128
COST OF GOODS SOLD 954,006 689,891 2,701,855 2,021,898
----------- ----------- ----------- -----------
GROSS PROFIT 1,000,585 775,220 2,913,584 2,403,230
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 919,185 767,432 2,630,310 2,123,943
OFFICER'S BONUS INCENTIVE 19,673 0 56,282 0
----------- ----------- ----------- -----------
TOTAL EXPENSES 938,858 767,432 2,686,592 2,123,943
----------- ----------- ----------- -----------
INCOME BEFORE INTEREST EXPENSE (INCOME)
AND INCOME TAXES 61,727 7,788 226,992 279,287
INTEREST EXPENSE (297) (748) (1,098) (4,622)
INTEREST INCOME 22,169 0 63,690 0.00
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 83,599 7,040 289,584 274,665
INCOME TAX EXPENSE 42,527 2,700 147,227 2,700
----------- ----------- ----------- -----------
NET INCOME $ 41,072 4,340 $ 142,357 $ 271,965
=========== =========== =========== ===========
Earnings per common equivalent share Primary:
Net income before income tax expense $ 0.04 $ 0.00 $ 0.14 $ 0.15
=========== =========== =========== ===========
Income tax expense $ 0.02 $ 0.00 $ 0.07 $ 0.00
=========== =========== =========== ===========
Net income $ 0.02 $ 0.00 $ 0.07 $ 0.15
=========== =========== =========== ===========
Weighted average number of common shares
outstanding 2,125,000 1,800,000 2,125,000 1,800,000
=========== =========== =========== ===========
Pro forma data:
Income before pro forma income tax provision $ 7,040 $ 274,665
Pro forma income tax provision $ 2,700 $ 104,000
----------- -----------
Pro forma net income $ 4,340 $ 170,665
=========== ===========
Pro forma earnings per common equivalent share:
Net income before pro forma income tax expense $ 0.00 $ 0.15
=========== ===========
Pro forma income tax provision $ 0.00 $ 0.06
=========== ===========
Pro forma net income $ 0.00 $ 0.09
=========== ===========
</TABLE>
4
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THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
9 MONTHS ENDED SEPTEMBER 30
-----------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 142,357 $ 271,965
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 64,317 43,327
LOSS ON SALE OF FIXED ASSETS (1,708) 0
PAYMENT OF CONSULTING EXPENSES WITH COMPANY STOCK 52,500 0
DEFERRED INCOME TAXES, NET 49,500 0
CHANGES IN ASSETS AND LIABILITIES:
RECEIVABLES (60,816) 0
MERCHANDISE INVENTORIES (117,932) (4,866)
PREPAID EXPENSES (17,586) (30,897)
ACCOUNTS PAYABLE (258,199) (124,361)
OTHER 9,523 0
ACCRUED EXPENSES 195,838 44,624
ACCRUED INCOME TAXES 45,727 2,700
CUSTOMER DEPOSITS 10,668 0
----------- ---------
TOTAL ADJUSTMENTS (28,168) (69,473)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 114,189 202,492
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
INCREASE IN SHORT TERM INVESTMENTS (1,445,139) (5,191)
PURCHASE OF PROPERTY AND EQUIPMENT (288,705) (31,456)
DISPOSAL OF PROPERTY AND EQUIPMENT 38,038 0
----------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (1,695,806) (36,647)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
ADVANCES TO STOCKHOLDER, NET (161,175) (29,926)
PRINCIPAL PAYMENTS ON NOTES PAYABLE (36,394) (92,338)
DEFERRED OFFERING COSTS INCURRED 0 (92,964)
DIVIDENDS PAID 0 (260,920)
PRINCIPAL RE-PAYMENTS ON STOCKHOLDER LOANS 0 (198,085)
SALE OF STOCK 0 682,500
----------- ---------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES (197,569) 8,267
----------- ---------
NET (DECREASE) INCREASE IN CASH (1,779,186) 174,112
CASH - BEGINNING OF PERIOD 2,570,188 15,704
----------- ---------
CASH - END OF PERIOD $ 791,002 $ 189,816
=========== =========
</TABLE>
5
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THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-QSB
and do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. However, such information reflects all adjustments
(consisting solely of normal recurring adjustments), which are, in the
opinion of Management, necessary for a fair statement of results for
the interim periods.
The results of operations for the nine months ended September 30, 1997
are not necessarily indicative of the results to be expected for the
full year.
These statements should be read in conjunction with the consolidated
financial statements and notes thereto, included in the Form 10-KSB for
the year ended December 31, 1996 of Thrift Management, Inc. (the
"Company").
(2) ORGANIZATION
The consolidated financial statements at September 30, 1997 and 1996
include the accounts of the Company, Hallandale Thrift Management, Inc.
("HTMI"), Thrift Shops of South Broward, Inc. ("TSSB"), Thrift Shops of
West Dade, Inc. ("TSWD"), Hallandale Thrift, Inc. ("HTI"), North
Broward Consignment, Inc. ("NBCI") and Thrift Shops of North
Lauderdale, Inc. ("TSNL"); (HTMI, TSSB, TSWD, HTI, NBCI and TSNL are
collectively referred to herein as the "Subsidiaries"). All entities,
except TSNL which was incorporated in March 1997, were wholly-owned by
a common stockholder until May 31, 1996. As of May 31, 1996, HTMI,
TSSB, TSWD, HTI, and NBCI became wholly-owned subsidiaries of the
Company pursuant to a reorganization plan. Accordingly, as of September
30, 1997 and 1996, and for the periods then ended, the Company has
presented condensed consolidated financial statements. All significant
intercompany accounts and transactions have been eliminated for
financial statement presentation purposes.
(3) STOCKHOLDERS' EQUITY
In December 1996, the Company consummated its initial public offering
in which it sold 615,000 units at a price of $5.75 per unit. Each unit
consisted of one share of common stock and one warrant to purchase one
share of common stock for $5.00 per share. The warrants are exercisable
for a period of five years commencing December 11, 1996 and may be
redeemed by the Company on 30 days' notice at any time during such
period at a price of $.10 per warrant if the closing bid price of the
common stock for 20 consecutive trading days ending on the fifteenth
day prior to the date that notice of redemption was given by the
Company has been at least 150% of the exercise price then in effect.
The Company realized approximately $2,596,950 in proceeds from the
offering, net of underwriting discounts and expenses and other offering
expenses. Simultaneously with the offering, the Company charged all
offering costs incurred to additional paid-in capital, which costs
totaled $653,050.
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(4) SHORT TERM INVESTMENTS
At September 30, 1997, the Company had an investment in a United States
Treasury Bill with a value at maturity of $1,453,000 and a maturity
date of November 6, 1997.
(5) COMMITMENT
In March 1997, the Company entered into a five year lease for a new
store location in Lauderdale Lakes, Florida. The lease agreement
provides for minimum monthly rental payments amounting to approximately
$9,600 and contains two renewal options for five year periods under
substantially the same terms and conditions. This store opened on July
19, 1997.
(6) STOCK OPTION PLAN
On May 19, 1997, the Company granted a total of 178,000 stock options
to its employees under the Company's 1996 Stock Option Plan at an
exercise price equal to the fair market value of the Common Stock at
the date of grant. These options vest over the next two years and all
options expire on May 19, 2007.
In the third quarter the Company finalized a grant of 25,000 stock
options to an employee under the Company's 1996 Stock Option Plan at an
exercise price equal to the fair market value of the Common Stock at
the date of grant. The options vest over the next two years and all
options expire 10 years from the date of grant unless employment
terminates.
(7) CAPITAL STOCK
On June 17, 1997, the Company issued 30,000 shares of its restricted
Common Stock to a business consultant in payment for service rendered
to the Company. Such restricted Common Stock was valued at $52,500.
7
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THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is an analysis of the results of operations of Thrift Management,
Inc. and Subsidiaries (collectively, the "Company") and its liquidity and
capital resources. The Company cautions readers that certain important factors
may affect the Company's actual results and could cause such results to differ
materially from any forward-looking statements that may be deemed to have been
made in this Report or that are otherwise made by or on behalf of the Company.
For this purpose, any statements contained in this Report that are not
statements of historical fact may be deemed to be forward-looking statements
which involve risks and uncertainties. Without limiting the generality of the
foregoing, words such as "may," "expect," "believe," "anticipate," "intend,"
"could," "estimate," or "continue" or the negative or other variations thereof
or comparable terminology are intended to identify forward-looking statements.
These risks include: risks of increases in the costs of the Company's products;
the Company's relationship with its suppliers, licensors and contributors;
changes in preferences of customers; competitive and general economic factors in
the markets where the Company sells and collects goods; the impact of and
changes in government regulations such as restrictions or prohibitions relating
to the contribution of charitable goods; and other factors discussed herein or
from time to time in the Company's filings with the Securities and Exchange
Commission.
The following discussion and analysis should be read in conjunction with the
condensed consolidated financial statements and the related notes thereto of the
Company included elsewhere herein.
GENERAL
The Company was organized in July, 1991 for the purpose of managing the
operation of retail thrift stores that offer new and used articles of clothing,
furniture, miscellaneous household items and antiques. HTMI is registered with
the State of Florida as a professional solicitor. The Company obtains its
merchandise primarily from two sources: (i) purchase contracts with charitable
organizations in return for an average of 2% - 3% of its gross sales; and (ii)
contracts with drop box collectors who maintain drop boxes throughout designated
areas from whom the Company purchases merchandise in bulk at a flat rate per
pound.
Items from the stores that remain unsold are sold in bulk to exporters, which
ship the items to countries throughout the Caribbean, Central and South America,
and Eastern Europe. Through its subsidiaries, the Company currently operates
five retail stores. HTMI is responsible for the solicitation of donations on
behalf of the charities through direct mailings, newspaper advertising and
telemarketing. HTMI is, in addition, responsible for the pickup of the donated
merchandise throughout the communities surrounding the Company's stores.
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND
SEPTEMBER 30, 1996
Revenues for the third quarter ended September 30, 1997 and 1996, totaled
$1,954,591 and $1,465,111 respectively. Revenues increased $489,480 or 33.4% for
the 1997 quarter as compared to the 1996 quarter. The sales increase resulted
from increased market penetration at each of the Company's locations plus the
opening of the Company's fifth store in Lauderdale Lakes, Florida on July 19,
1997. The same-store sales for the third quarter were up 18.8%, and the Company
currently expects to continue to achieve increased
8
<PAGE> 9
same-store sales revenues as it attempts to increase its market share in each of
the Company's markets. The Company's gross profit for the third quarter of 1997
increased $225,365 or 29.1% to $1,000,585 from $775,220 for the third quarter of
1996. This increase is attributable principally to increased sales volumes,
which was partially offset by an increase in the cost of sales.
Cost of goods sold, as a percentage of sales, increased 1.7% points for the
third quarter of 1997 as compared to the third quarter of 1996. The Company
currently has two sources for merchandise: direct donated goods through the
charities with which it has entered into purchase contracts, and fresh donated
goods purchased from private sources. In order to support the 33.4% increase in
store sales, the Company increased its purchases of merchandise from private
sources. The Company's purchases from private sources for the third quarter of
1997 increased 28.2% versus the prior year. Some of the merchandise being
acquired is being purchased from sources in other states, requiring additional
freight costs. The additional costs resulting from the Company's greater
reliance on purchased goods is the primary factor resulting in a higher cost of
goods sold. Management is currently implementing a program to establish manned
donation trailers and drop boxes at multiple locations in South Florida.
Management believes this will help to reduce merchandise collection costs and
will provide additional sources of merchandise for the Company's stores.
General and administrative expenses for the third quarter of 1997 increased
$171,426 to $938,858 from $767,432 for the third quarter of 1996. This increase
is principally due to the increase of $116,589 of selling, general and
administrative expenses related to the Company's fifth store in Lauderdale
Lakes, Florida; a $21,850 increase in outside legal, accounting and consulting
fees; plus higher other corporate overhead expenses related to the Company's
expansion.
RESULTS OF OPERATIONS - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
SEPTEMBER 30, 1996
Revenues for the nine months ended September 30, 1997 and 1996 totaled
$5,615,439 and $4,425,128, respectively. Revenues increased $1,190,311 or 26.9%
for the 1997 period as compared to the 1996 period. The sales increase resulted
from increased market penetration at each of the Company's locations plus the
opening of the Company's fifth store in Lauderdale Lakes, Florida on July 19,
1997. The same-store sales for the nine months were up 22.1%, and the Company
currently expects to continue to achieve increased same-store sales revenues as
it attempts to increase its market share in each of the Company's markets. The
Company's gross profit for the nine months ended September 30, 1997 increased
$510,354 or 21.2% to $2,913,584 from $2,403,230 for the nine months ended
September 30, 1996. This increase is attributable principally to increased sales
volumes, which was partially offset by an increase in the cost of sales.
Costs of goods sold, as a percentage of sales, increased 2.4% points for the
1997 period as compared to the 1996 period. The Company currently has two
sources for merchandise: direct donated goods through the charities with which
it has entered into purchase contracts, and fresh donated goods purchased from
private sources. In order to support the 26.9% increase in store sales and to
accumulate merchandise for its new Lauderdale Lakes store (which opened July 19,
1997), the Company significantly increased its purchases of merchandise from
private sources. The Company's purchases from private sources during the nine
months ended September 30, 1997 increased 58.2% versus the prior year. Some of
the merchandise being acquired is being purchased from sources in other states,
requiring additional freight costs. The additional costs resulting from the
Company's greater reliance on purchased goods is the primary factor resulting in
a higher cost of goods sold as a percentage of sales. Management is implementing
a program to establish manned donation trailers and drop boxes at multiple
locations in South Florida. Management believes this will help to reduce
merchandise collection costs and will provide additional sources of merchandise
for the Company's stores. With the same-store sales increases and the planned
new stores, the Company expects that goods purchased from private sources may
increase and will continue to be a significant source of the total merchandise
acquired by the Company for sale to its customers.
9
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General and administrative expenses for the nine months ended September 30, 1997
increased $562,649 to $2,686,592 from $2,123,943 for the nine months of 1996.
This increase is principally due to the one-time pre-opening cost of $108,978
and the increase of selling, general and administrative expenses of $116,589
related to the Company's fifth store in Lauderdale Lakes, Florida which opened
on July 19, 1997; the $178,802 increase in outside legal, accounting, and
consulting expenses associated with being a public company and the planned
growth of the Company; the balance is related to other increases in corporate
and the other four stores' selling, general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had working capital of $2,256,248 as compared
to a working capital deficit of $($43,275) at September 30, 1996. The net
increase in working capital is attributable primarily to cash and short term
investments increasing by $2,046,325, principally as a result of consummation of
the Company's initial public offering in December 1996 and the receipt of net
proceeds therefrom, and the liquidation of a $250,000 promissory note receivable
that represents consideration received by the Company for the sale of its
securities in a private offering in February, 1996.
Cash at September 30, 1997 totaled $791,002, as compared with $189,816 at
September 30, 1996. Net cash provided by operating activities totaled $114,189
for the nine months ended September 30, 1997 as compared to $202,492 for the
nine months ending September 30, 1996. From December 31, 1996 through September
30, 1997, the net decrease in cash of $1,779,186 resulted primarily from the
purchase of additional property and equipment to be utilized for the new store
in Lauderdale Lakes, Florida plus other locations ($288,705), the purchase of
certain short-term investments ($1,445,139 ) and the reduction in amount due to
stockholder ($161,175).
The increase in cash and short-term investments from September 30, 1996 to
September 30, 1997 is the net result of the following items: receipt of net
proceeds of $2,596,950 from the initial public offering, receipt of net proceeds
of $680,000 from two private offerings, settlement of certain litigation
involving the Miami Jewish Home, dividends and loans paid to the sole
stockholder, and the repurchase of Common Stock and warrants for $500,000.
The Company believes that its current capital resources, together with the
expected cash flow from its operations, will be sufficient to meet its
anticipated working capital requirements through at least 1998. There can be no
assurances, however, that such will be the case.
INFLATION AND SEASONALITY
Although the Company cannot accurately determine precisely the effects of
inflation, management does not believe that inflation currently has a material
effect on the Company's sales or results of operations.
The Company's operations are located in South Florida, which has numerous
part-time residents during the winter. The Company's results of operations
reflect the seasonable nature of this market, with donations and sales of
merchandise being higher in the winter months.
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PART II - OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
On December 5, 1996, the U.S. Securities and Exchange Commission declared
effective the Company's Registration Statement on Form SB-2 (SEC File Number
333-5190-A). The offering (the "Offering") of the securities registered pursuant
to the Registration Statement commenced on December 5, 1996. The Offering
terminated after the sale of 615,000 units (the "Units") for $5.75 per Unit.
Each Unit consisted of one share of the Company's common stock, $.01 par value
per share (the "Common Stock") and one warrant (the "Warrant"), which entitles
the holder to purchase one share of Common Stock for $5.00. The underwriter for
the public offering of the Company's securities was First Hanover Securities,
Inc.
In connection with the Offering, the Company incurred expenses of approximately
$653,050. These expenses were in the form of direct or indirect payments to
others and not direct or indirect payments to directors or officers of the
Company or to persons owning more than 10% of any class of securities of the
Company. From the net proceeds of approximately $2,596,950, the Company has used
approximately $288,705 for the purchase of fixed assets used at the new North
Lauderdale store opened in July 1997 and the other existing store locations,
$160,950 for working capital purposes, $150,000 for the payment of tax
reimbursement, $25,000 for corporate tax estimated payments, $35,000 for payment
of additional initial public offering expenses, and has invested $1,937,295 in
treasury bills and money market funds. None of the payments from the use of
proceeds were made to officers, directors or persons owning more than 10% of any
class of securities of the Company except for the payment of tax reimbursement
noted above.
ITEM 5 - OTHER INFORMATION
1. The Company plans to retain the services of Mr. Jay M. Haft as a
strategic and business consultant and as a Director of the Company. He
is a Managing General Partner of Venture Capital Associates, Ltd. and
of Gen Am "1" Venture Fund, a domestic and an international venture
capital fund, respectively. Mr. Haft is also a Director of numerous
public and private corporations, including Robotic Vision Systems, Inc.
(OTC), Noise Cancellation Technologies, Inc. (OTC), Extech, Inc. (OTC),
Encore Medical Corporation (OTC), Viragen, Inc. (OTC), PC Service
Source, Inc. (OTC), DUSA Pharmaceuticals, Inc. (OTC), Oryx Technology
Corp. (OTC) and Conserver Corporation of America (OTC). He is a
graduate of Yale College and Yale Law School.
2. On October 20, 1997, Bush J. Davis joined the Company as its Director
of Donation Locations for the Company's new program of operating manned
donation trailers and drop boxes. Prior to joining the Company, Mr.
Davis spent several years with the Dade County (FL) Goodwill
organization as one of its senior managers in their Division which
operates 31 manned donation trailers.
3. The Company is in the final stages of negotiations for a sublease for a
9,300 square foot retail store in North Miami, Florida. This will be
the Company's sixth store, and the Company is planning to open this new
store in the fourth quarter of 1997 or the first quarter of 1998.
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Number Description
-------------- -----------
10.1 Executive Employment Agreement between the
Company and Stephen L. Wiley dated June
19, 1997.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
NONE
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THRIFT MANAGEMENT, INC.
By: /s/ Marc Douglas
----------------------------------------
Marc Douglas, President and Chief Executive
Officer (Principal Executive Officer)
Date: November 13, 1997
/s/ Stephen L. Wiley
--------------------------------------------
Stephen L. Wiley, Chief Financial
Officer (Principal Financial Officer)
12
<PAGE> 1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is effective as
of this 19th day of June, 1997, between THRIFT MANAGEMENT, INC., a Florida
corporation (the "Company"), and STEPHEN L. WILEY (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of the Directors of the Company desires to employ
the Executive to serve as the Chief Financial Officer of the Company;
WHEREAS, the Board desires to provide for the employment of the
Executive and establish the terms of Executive's compensation, including
appropriate incentive compensation based on the Company's performance during the
term of the Executive's employment with the Company; and
WHEREAS, in order to effect the foregoing, the Company and the
Executive wish to enter into an employment agreement on the terms and conditions
set forth below;
NOW, THEREFORE, in consideration of the promises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to serve, as Chief Financial Officer of the Company,
with such duties, responsibilities and authority as are set forth in Exhibit A
hereto, and as may, from time to time, be assigned to the Executive by the Board
of Directors or Chief Executive Officer of the Company (the "Executive's
Duties"). The Executive shall devote all of his working time and efforts to the
business and affairs of the Company. The term of this Agreement (the "Employment
Term") shall be for the period from the date of this Agreement through June 30,
1999. The Executive's employment with the Company shall continue until the end
of the Employment Term, unless either the Company or the Executive shall have
previously provided to the other party written notice of such party's intention
not to continue such employment in accordance with Section 4 hereof. This
Agreement may be renewed or extended by the Board of Directors, in its sole
discretion, upon such terms as may be agreed upon by the Chief Executive Officer
and the Executive.
2. Compensation and Benefits. The Company shall pay to the Executive
the annual compensation and other amounts set forth below:
(a) Base Salary. The Company shall pay the Executive an
initial annual base salary of $100,000, payable in bi-weekly installments
according to the Company's regular payroll practices and subject to such
deductions as may be required by law. The Executive shall
-1-
<PAGE> 2
be entitled to an $137,500 annual salary to begin on January 1, 1998 and
continuing until the end of the Employment Term.
(b) Automobile. An automobile will be leased for the Executive
during the period of the Employment Term at a monthly lease payment not to
exceed $669 per month. In addition, the Company shall reimburse the Executive
for insurance, gasoline and repairs.
(c) Other Benefits. The Executive: (i) shall be paid $400.00
per month for the purpose of reimbursement of the health insurance needs for
himself and his dependents; (ii) shall be entitled to one week of paid vacation
following the first six months of employment with the Company and one week of
paid vacation during the second year of the Employment Term; and (iii) shall be
entitled to all such other benefits, including participation in all retirement
and other benefit plans, as may be available from time to time to officers and
employees of the Company generally.
(d) Options. The Executive shall be granted options (the
"Options") to acquire an aggregate of 25,000 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), under the Company's 1996
Stock Option Plan, as amended (the "Plan"). The exercise price shall be $3.125
per share of Common Stock. The Options shall vest in accordance with the
following: Options to acquire 10,000 shares of Common Stock shall vest on
January 1, 1998; Options to acquire 10,000 shares of Common Stock shall vest on
January 1, 1999; and Options to acquire 5,000 shares of Common Stock shall vest
on June 30, 1999 (each of such dates is referred to herein as a "Vesting Date");
provided, however, that such vesting shall occur on any Vesting Date only if on
or before such Vesting Date the Board of Directors shall have affirmatively
determined that the Executive has fulfilled or made satisfactory progress toward
fulfilling the Executive's Duties; and, provided further, upon any termination
of this Agreement pursuant to Section 3 hereof, any outstanding Options (whether
or not vested) shall be immediately cancelled and shall terminate unexercised as
of the date of such termination.
3. Termination. The Executive's employment hereunder may be terminated
at any time prior to the scheduled expiration of the Employment Term by the
Board of Directors or the Chief Executive Officer of the Company in its or his
sole discretion, as applicable, including as follows:
(a) The Executive's employment may be terminated for "Cause."
For purposes of this Agreement, "Cause" shall mean (i) the Executive's engaging
in misconduct that is materially injurious to the Company, monetarily or
otherwise, or that constitutes personal dishonesty or breach of fiduciary duty;
(ii) any action by the Executive or any failure to act on the part of the
Executive that constitutes fraud, embezzlement or conviction of a felony; or
(iii) any material breach of this Agreement by the Executive.
(b) The Executive's employment hereunder shall terminate upon
his death.
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<PAGE> 3
(c) If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
hereunder on a full-time basis for more than 30 days in any 12-month period (the
"Disability Period") and if within 10 days after a written Notice of Termination
is given, the Executive shall not have returned to the performance of his duties
on a full-time basis, the Company may terminate the Executive's employment by
delivering a Notice of Termination in accordance with Section 4 hereof.
4. Notice of Termination.
(a) Termination by the Company. Any termination of the
Executive's employment by the Company (other than termination by reason of the
Executive's death) shall be communicated by a written Notice of Termination to
the Executive. For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice indicating the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(b) Termination by the Executive. The Executive hereby agrees
to provide the Company with not less than 90 days' written notice of any
termination of this Agreement by him.
5. Payments Upon Termination.
(a) Upon termination of this Agreement by the Company pursuant
to Section 3(a) hereof or by the Executive for any reason, then, except for
salary and other payments provided for herein that are due as of the date of
termination, the Company shall have no obligation whatsoever after the date of
such termination to make any payments to the Executive.
(b) Upon termination of this Agreement by the Company other
than for Cause as defined in Section 3(a) hereof, then, in addition to the
salary and other payments provided for herein that are due as of the date of
termination, the Executive (or his heirs or personal representative, as
applicable) shall be entitled to receive a severance payment equal to three
months' salary at the monthly rate then in effect.
6. Binding Effect. Except as herein otherwise provided, this Agreement
shall inure to the benefit of and shall be binding upon the parties hereto,
their personal representatives, successors, heirs and assigns.
7. Notice. For the purposes of this Agreement, notices, demands and all
other communications provided for in the Agreement shall be in writing and shall
be hand delivered or sent by facsimile transmission or by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
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<PAGE> 4
If to the Executive: Stephen L. Wiley
7030 W. Cypresshead Drive
Parkland, Florida 33067
Facsimile:
---------------
If to the Company: Thrift Management, Inc.
3141 W. Hallandale Beach Boulevard
Hallandale, Florida 33009
Facsimile: 954/964-7920
or to such other address as any party may have furnished to the others in
writing in accordance herewith. Any notice or communication given in conformity
with this Section shall be deemed to be effective when received by the addressee
if delivered by hand, overnight courier or facsimile (with confirmed receipt),
and shall be deemed to be effective three days after mailing, if mailed.
8. Amendment and Waiver. No provisions of this Agreement may be
amended, modified, waived or discharged unless such amendment, waiver,
modification or discharge is agreed to in writing signed by the Executive and on
behalf of the Company by such officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
9. Entire Agreement. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party that are not set forth expressly in this Agreement.
10. Governing Law. The validity, interpretation, and performance of
this Agreement shall be governed by the laws of the State of Florida.
11. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
COMPANY:
THRIFT MANAGEMENT, INC.,
a Florida corporation
Attest:
By: /s/ Marc Douglas
- ---------------------------------- -------------------------
Marc Douglas, President and
Chief Executive Officer
EXECUTIVE:
Attest:
/s/ Stephen L. Wiley
- ---------------------------------- -----------------------------
Stephen L. Wiley
-5-
<PAGE> 6
EXHIBIT A
TO
EXECUTIVE EMPLOYMENT AGREEMENT
Employment Objectives of Executive:
a. Management/information systems objectives:
1. Reorganization of accounting department.
2. Reconfiguration of computer hardware into a network
system communicating directly with the stores.
3. Analysis of existing software programs and
replacement consistent with the Company's objectives.
4. Establishment of management reports on an electronic
rather than manual basis.
5. Integration of information systems to enable more
efficient use of personnel.
b. Growth objectives:
1. Acquisitions.
2. Existing store growth.
3. New store openings.
c. Addition of listing brokerage houses/market makers.
d. Financial reporting responsibilities:
1. Preparation of quarterly reporting to the SEC.
2. Coordination and preparation of filing of the annual
report.
3. Preparation and/or supervision over monthly financial
reporting.
4. Coordination of income tax reporting.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 791,002
<SECURITIES> 1,445,139
<RECEIVABLES> 223,423
<ALLOWANCES> 0
<INVENTORY> 232,904
<CURRENT-ASSETS> 2,692,468
<PP&E> 518,119
<DEPRECIATION> 153,567
<TOTAL-ASSETS> 3,364,154
<CURRENT-LIABILITIES> 436,220
<BONDS> 6,242
0
2,500
<COMMON> 21,450
<OTHER-SE> 2,897,742
<TOTAL-LIABILITY-AND-EQUITY> 3,364,154
<SALES> 5,615,439
<TOTAL-REVENUES> 5,615,439
<CGS> 2,701,855
<TOTAL-COSTS> 2,701,855
<OTHER-EXPENSES> 2,686,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,098
<INCOME-PRETAX> 289,584
<INCOME-TAX> 147,227
<INCOME-CONTINUING> 142,357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142,357
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
