<PAGE> 1
FORM 10-QSB
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 March 31, 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) (Zip Code)
Issuer's telephone number, including area code: 954-985-8100
--------------
Indicate by check mark whether the Issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months 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 May 14, 1997, there were
outstanding 2,115,000 shares of Common Stock, $.01 par value.
Transitional Small Business Disclosure Format: YES / NO X
---- ----
1
<PAGE> 2
THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
INDEX TO FORM 10-QSB
PART I--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of March 31, 1997 (Unaudited).... 3
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 1997 and 1996 (Unaudited)............................. 4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 (Unaudited)............................. 5
Notes to the 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 5. Other Information ............................................... 11
Item 6. Exhibits and Reports on Form 8-K ................................ 11
Signatures .............................................................. 12
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1.
THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 895,697
Short term investments 1,408,885
Merchandise inventories 152,735
Prepaid expenses 139,928
Advances to stockholder - current 63,156
Deferred tax assets 49,500
Other 12,303
----------------
TOTAL CURRENT ASSETS 2,722,204
EQUIPMENT, FIXTURES AND IMPROVEMENTS, net 267,454
ADVANCES TO STOCKHOLDER - NON CURRENT 110,528
PREPAID EXPENSES - NON CURRENT 43,750
COVENANTS NOT TO COMPETE, net 54,213
OTHER ASSETS 72,134
----------------
TOTAL ASSETS $ 3,270,283
================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 239,000
Accrued expenses 223,248
Current portion of notes payable 4,665
----------------
TOTAL CURRENT LIABILITIES 466,913
NOTES PAYABLE, less current portion 8,535
----------------
TOTAL LIABILITIES 475,448
----------------
COMMITMENTS
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 2,115,000 shares 21,150
Additional paid-in capital 3,019,066
Accumulated deficit (247,881)
---------------
TOTAL STOCKHOLDERS' EQUITY 2,794,835
---------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,270,283
===============
</TABLE>
3
<PAGE> 4
THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
1997 1996
------------------- -------------------
<S> <C> <C>
Net sales $ 1,820,550 $ 1,526,933
Cost of goods sold 848,376 666,917
------------------- -------------------
GROSS PROFIT 972,174 860,016
------------------- -------------------
Selling, general and administrative expenses 830,991 602,202
Officer's bonus incentive 18,206 88,018
------------------- -------------------
TOTAL EXPENSES 849,197 690,220
------------------- -------------------
INCOME BEFORE INTEREST
EXPENSE (INCOME) AND
INCOME TAXES 122,977 169,796
Interest expense 354 2,486
Interest income (16,378) (2,901)
------------------- -------------------
INCOME BEFORE INCOME
TAXES 139,001 170,211
INCOME TAX EXPENSE 71,000 NIL
------------------- -------------------
NET INCOME $ 68,001 $ 170,211
=================== ===================
Earnings per common equivalent share
Primary:
Net income before income tax expense $ 0.06 $ 0.13
=================== ===================
Income tax expense $ (0.03) NIL
=================== ===================
Net income $ 0.03 $ 0.13
=================== ===================
Weighted average number of common shares
outstanding 2,115,000 1,303,333
=================== ===================
Pro forma data:
Income before pro forma income tax provision $ 170,211
Pro forma income tax provision 23,500
-------------------
Pro forma net income $ 146,711
===================
Pro forma earnings per common equivalent share:
Net income before pro forma income tax provision $ 0.13
===================
Pro forma income tax provision $ 0.02
===================
Pro forma net income $ 0.11
===================
</TABLE>
4
<PAGE> 5
THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
1997 1996
------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 68,001 $ 170,211
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 23,012 18,990
Loss on sale of fixed assets (1,684) -
Deferred income taxes, net 16,500 -
Changes in assets and liabilities:
Merchandise inventories (37,763) 52,148
Prepaid expenses (45,836) (14,416)
Accounts payable (65,001) (90,452)
Other 791 (57,774)
Accrued expenses 89,731 20,125
------------------- -------------------
Total adjustments (20,250) (71,379)
------------------- -------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 47,751 98,832
------------------- -------------------
Cash flows from investing activities:
Increase in short term investments (1,408,885) -
Purchase of property and equipment (124,543) -
Disposal of property and equipment 38,038 -
------------------- -------------------
NET CASH (USED IN) INVESTING
ACTIVITIES (1,495,390) -
------------------- -------------------
Cash flows from financing activities:
Advances to stockholder, net (192,751) (222,900)
Principal payments on loans payable (34,101) (11,819)
Dividends paid - (162,997)
Costs of initial public offering and private placement - 40,000
Sale of stock - 250,000
------------------- -------------------
NET CASH (USED IN) FINANCING
ACTIVITIES (226,852) (107,716)
------------------- -------------------
NET (DECREASE) IN CASH (1,674,491) (8,884)
CASH - BEGINNING OF PERIOD 2,570,188 15,704
------------------- -------------------
CASH - END OF PERIOD $ 895,697 $ 6,820
=================== ===================
</TABLE>
5
<PAGE> 6
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 three months ended March 31, 1997 are
not necessarily indicative of the results to be expected for the full
year.
These statements should be read in conjunction with the 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 March 31, 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 as of March 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 March 31, 1997 and 1996, and for the periods then ended, the Company
has presented 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 15th 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.
6
<PAGE> 7
(3) STOCKHOLDERS' EQUITY--Continued
The Company filed a post-effective amendment to its Registration Statement
on Form SB-2, on behalf of certain of its security holders, with respect to
165,000 shares of common stock, 600,000 warrants to purchase shares of
common stock and 600,000 shares of common stock underlying the
aforementioned warrants. The post-effective amendment was declared
effective by the Securities and Exchange Commission on April 21, 1997. None
of the proceeds from the sale of these securities will be received by the
Company. The Company will bear all expenses in connection with the
registration of these securities.
(4) SHORT TERM INVESTMENTS
At March 31, 1997, the Company has investments in two United States
Treasury Bills with maturity values amounting to $708,000 and $717,000 and
related maturity dates of May 8, 1997 and August 7, 1997, respectively.
(5) COMMITMENT
In March 1997, the Company entered into a five year lease for a new store
location in Broward County, 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.
7
<PAGE> 8
Item 2.
THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
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 to the extent that such analysis contains
statements that are not of a historical nature, such statements are forward
looking statements, which involve risks and uncertainties. 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 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 two to three percent (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 four 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 March 31, 1997 and
March 31, 1996
- -----------------------------------------------------------------------
Revenues for the first quarter ended March 31, 1997 and 1996, totaled
$1,820,550 and $1,526,933, respectively. Revenues increased $293,617 or 19.2%
for 1997 as compared to 1996. The sales increase resulted from increased market
penetration at each of the Company's locations. The Company expects to continue
to achieve increased same-store sales revenues due to further increases in
market share in each of the Company's markets. The Company's gross profit for
the first quarter of 1997 increased $112,158 to $972,174 from $860,016 for the
first quarter ended March 31, 1996. This increase is attributable principally
to increased sales volumes partially offset by increases in cost of sales.
8
<PAGE> 9
RESULTS OF OPERATIONS -- For the Three Months Ended March 31, 1997 and
March 31, 1996 -- Continued
Costs of goods sold, as a percentage of sales, increased 3% comparing the
first quarter of 1997 against the first quarter of 1996. The Company is
attempting to diversify its sources of supply and is also accumulating
additional merchandise with which to supply its new store which is expected to
become operational during the second quarter of 1997 in Lauderdale Lakes,
Florida. Some of the merchandise being acquired is being purchased from sources
outside the state requiring additional freight costs. The Company 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 for the Company to support the additional sales, the
Company has been relying to a greater degree on purchased merchandise as
compared to merchandise acquired through direct donation. The additional costs
resulting from the Company's greater reliance on purchased goods offset the cost
reduction achieved by the Company when it renegotiated its purchase contracts
with the charitable organizations to reduce the fees paid to them by the Company
effective January 1, 1996. Management is currently reviewing ways to improve
donation levels at the charities with which it currently has agreements.
Management is also considering entering into purchase contracts with additional
charitable organizations in order to reduce costs and obtain additional sources
for the Company's merchandise, although there can be no assurance that it will
be able to do so.
General and administrative expenses for the first quarter of 1997 increased
$228,789 to $830,991 from $602,202 for the first quarter of 1996. This increase
is principally due to certain legal and accounting costs estimated at $60,000
associated with the Company's initial public offering ("IPO"), which was
completed in 1996, and additional costs of opening up the Company's fifth store
in Lauderdale Lakes, Florida estimated at $30,000. These costs are one time
costs and are not expected to recur in future periods. Additionally, management
has hired more store and administrative personnel in anticipation of the new
store commencing operations in the second quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had working capital of $2,255,291 as
compared to a working capital deficiency of $574,924 at March 31, 1996. The net
increase in working capital is attributable primarily to cash increasing by
$2,297,762, principally as a result of consummation of the IPO in December 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 March 31, 1997 is $895,697 as compared with $6,820 at March 31,
1996. Net cash provided by operating activities was $47,751 for the three
months ended March 31, 1997 as compared to $98,832 for the three months ending
March 31, 1996. From December 31, 1996 through March 31, 1997, the net decrease
in cash of $1,674,491 resulted primarily from the purchase of additional
property and equipment to be utilized for the new store in Lauderdale Lakes,
Florida, the purchase of certain short term investments and the reduction in
the amount due to stockholder of $192,751.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES--Continued
The increase in cash from March 31, 1996 to March 31, 1997 is the net
result of three items: receipt of net proceeds of $2,596,950 from the IPO,
receipt of net proceeds of $680,000 from two private offerings, liquidation of
the Company's liability to the Miami Jewish Home, dividends and loans paid to
the sole stockholder and the purchase of Common Stock and Warrants for
$500,000.
The Company believes that its current capital resources, together with
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.
10
<PAGE> 11
PART II - OTHER INFORMATION
Item 5. OTHER INFORMATION
During the first quarter of 1997, TMI assigned all of its right, title
and interest under the agreement to solicit salvageable property with the
Missing Children Awareness Foundation, Inc. to HTMI. There were no other
changes to agreements with charities.
The Company expects that its fifth store will commence operations in
Lauderdale Lakes, Florida prior to the end of the second quarter and the
Company is seeking a new Chief Financial Officer to assist in Company growth
and operations.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K dated May 1,
1997, reporting under Item 4 of Form 8-K the change in the
Registrant's certifying accountants.
11
<PAGE> 12
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 and principal financial and
accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THRIFT MANAGEMENT, INC. FOR THE THREE MONTHS ENDED MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 895,697
<SECURITIES> 1,408,885
<RECEIVABLES> 264,887
<ALLOWANCES> 0
<INVENTORY> 152,735
<CURRENT-ASSETS> 2,722,204
<PP&E> 392,628
<DEPRECIATION> 125,174
<TOTAL-ASSETS> 3,270,283
<CURRENT-LIABILITIES> 466,913
<BONDS> 8,535
0
2,500
<COMMON> 21,150
<OTHER-SE> 2,771,185
<TOTAL-LIABILITY-AND-EQUITY> 3,270,283
<SALES> 1,820,550
<TOTAL-REVENUES> 1,820,550
<CGS> 848,376
<TOTAL-COSTS> 848,376
<OTHER-EXPENSES> 849,197
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 354
<INCOME-PRETAX> 139,001
<INCOME-TAX> 71,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,001
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
