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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 MARCH 29, 1998
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
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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 May 11, 1998, there were outstanding
2,175,000 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
PART I - FINANCIAL INFORMATION
Page
------
Item 1. Financial Statements
Consolidated Balance Sheet as of March 29, 1998 (unaudited)........... 3
Consolidated Statements of Operations for the Three Months
Ended March 29, 1998 and March 31, 1997 (unaudited)................... 4
Consolidated Statements of Cash Flows for
the Three Months ended March 29, 1998 and March 31, 1997 (unaudited).. 5
Notes to Consolidated Financial Statements (unaudited)................ 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 8-9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 10
Signatures............................................................ 11
2
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THRIFT MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 29, 1998
--------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $2,265,178
Merchandise inventories 334,720
Prepaid expenses 270,277
Advances to stockholder 63,156
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TOTAL CURRENT ASSETS 2,933,331
EQUIPMENT, FIXTURES AND IMPROVEMENTS, net 505,227
ADVANCES TO STOCKHOLDER 47,367
PREPAID CONSULTING SERVICES 18,750
COVENANTS NOT TO COMPETE, net 30,118
OTHER ASSETS 90,464
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TOTAL ASSETS $3,625,257
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of note payable $ 4,665
Accounts payable 249,529
Accrued expenses 223,357
Accrued income taxes 31,600
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TOTAL CURRENT LIABILITIES 509,151
NOTE PAYABLE, less current portion 3,831
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TOTAL LIABILITIES 512,982
COMMITMENTS AND CONTINGENCIES
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 3,052,266
Retained earnings 36,059
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TOTAL STOCKHOLDERS' EQUITY 3,112,275
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,625,257
==========
See accompanying notes to consolidated financial statements.
3
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THRIFT MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ending
--------------------------------------------
March 29, 1998 March 31, 1997
--------------------- ---------------------
<S> <C> <C>
Net sales $ 2,250,473 $ 1,820,550
Cost of goods sold 1,240,550 848,376
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GROSS PROFIT 1,009,923 972,174
Selling, general and administrative
expenses 876,832 830,991
Officer's bonus incentive 22,501 18,206
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TOTAL OPERATING EXPENSES 899,333 849,197
----------- -----------
INCOME FROM OPERATIONS 110,590 122,977
Interest expense 236 354
Interest income (31,233) (16,378)
----------- -----------
INCOME BEFORE INCOME
TAX EXPENSE 141,587 139,001
Income tax expense 53,584 71,000
----------- -----------
NET INCOME $ 88,003 $ 68,001
=========== ===========
Earnings per share:
Basic:
Net income $ 0.04 $ 0.03
=========== ===========
Diluted:
Net income $ 0.04 $ 0.03
=========== ===========
Weighted average number of shares
Basic 2,145,000 2,115,000
=========== ===========
Diluted 2,193,000 2,115,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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THRIFT MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ending
------------------------------
March 29, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 88,003 $ 68,001
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 24,298 23,012
Loss (Gain) on sale of equipment 3,505 (1,684)
Deferred income tax expense -- 16,500
(Increase) in merchandise inventories (6,287) (37,763)
(Increase) in prepaid expenses (128,090) (45,836)
Increase in accounts payable 107,638 (65,001)
Increase in accrued expenses 15,766 89,731
Increase in accrued income taxes 3,584 --
----------- -----------
Total adjustments 20,414 (20,250)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 108,417 47,751
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (60,347) (124,543)
Proceeds from disposal of property and equipment -- 38,038
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (60,347) (86,505)
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Cash flows from financing activities:
Advances to stockholder, net 15,789 (192,751)
Principal payments on notes payable (1,221) (34,101)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 14,568 (226,852)
----------- -----------
NET INCREASE (DECREASE) IN CASH 62,638 (265,606)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 2,202,540 2,570,188
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 2,265,178 $ 2,304,582
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 236 $ 354
=========== ===========
Income taxes $ 50,000 $ --
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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THRIFT MANAGEMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited 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 29, 1998 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, 1997 of Thrift Management, Inc. (the "Company").
(2) ORGANIZATION
The consolidated financial statements at March 29, 1998 and March 31, 1997
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"), Thrift Shops of North Lauderdale, Inc. ("TSNL")
and Retail Thrift, Inc. ("RTI");(HTMI, TSSB, TSWD, HTI, NBCI, TSNL and RTI
are collectively referred to herein as the "Subsidiaries"). All entities,
except TSNL and RTI (which were incorporated in March 1997 and January 1998
respectively), 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 March 29, 1998 and March 31, 1997 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 ("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
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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.
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 $33,500.
(4) CHANGE IN ACCOUNTING PERIODS
The Company adopted a 52/53 week retail reporting calendar, whereby all
accounting periods end on a Sunday.
(5) CASH AND CASH EQUIVALENTS
At March 29, 1998, the Company had an investment in Federal Home Loan Bank
notes, with a maturity date of May 4, 1998 and a value of $1,474,391, an
investment in Dreyfus Treasury Prime Cash Management with a value of
$453,912, and investments in various bank money market accounts with an
aggregate value of $212,726.
(6) COMMITMENTS
In April 1998, the Company entered into a five-year lease for a new store
location in Pompano Beach in Broward County, Florida. The lease provides
for minimum monthly rental payments of approximately $4,000 and contains
two renewal options for five years under substantially the same terms and
conditions.
As part of the program of operating manned donation trailers as a new
source of donated merchandise, the Company has entered into monthly rental
agreements to rent space in parking lots of shopping centers. In the first
quarter of 1998, the Company entered into six monthly rental agreements
with monthly rental payments totaling approximately $1,200.
The Company's Board of Directors approved the prepayment of up to $130,000
of the 1998 salary and bonus of the Company's President, subject to the
agreement of the President to pay interest on the amount prepaid at the
annual rate of 8.5%. Prepaid expenses as of March 29, 1998 include
$76,634 in prepaid salary and bonus payments to the Company's President.
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
merchandise and the continued availability of suitable merchandise; 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 the Company's gross sales;
and (ii) various independent contract collectors from whom the Company purchases
merchandise in bulk.
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 and is scheduled to open its sixth store in the fourth
quarter of 1998. 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.
In January, 1998 the Company adopted a 52/53 week retail reporting calendar,
whereby all accounting periods end on a Sunday.
8
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RESULTS OF OPERATIONS -- FOR THE THREE MONTHS ENDED MARCH 29, 1998 AND
MARCH 31, 1997.
Revenues for the first quarter ended March 29, 1998 and March 31, 1997 totaled
$2,250,473 and $1,820,550, respectively. Sales increased $429,923 or 23.6% for
the 1998 quarter as compared to the 1997 quarter. The sales increase resulted
primarily from the opening of the Company's fifth store in Lauderdale Lakes,
Florida on July 19, 1997. The same-store sales for the first quarter increased
by 6.0%. In addition, the Company's adoption of a 52/53 week reporting calendar
resulted in the first quarter of 1998 having two days less than the first
quarter of 1997. If the sales for those two days were added to the first quarter
of 1998, the total sales would have increased 25.6%, and the same-store sales
would have increased 7.8%.
In addition, the weaker economic conditions in those overseas markets that
purchase rags resulted in the Company selling rags for approximately $0.16 per
pound in the first quarter of 1998 as compared to approximately $0.20 per pound
in the first quarter of 1997. This unfavorable change in the market price for
rags represented a 2.5% unfavorable variance in total sales compared to the
first quarter of the prior year.
The Company's gross profit for the first quarter of 1998 increased $37,749 or
3.9% to $1,009,923, from $972,174 for the first quarter of 1997. This increase
is attributable to the increased sales volume, which was mostly offset by an
increase in the cost of sales.
Cost of goods sold, as a percentage of sales, increased 8.5% points for the
first quarter of 1998 as compared to the first quarter of 1997. 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 23.6% increase in
store sales, the Company increased its purchases of merchandise from private
sources. The Company's purchases from private sources for the first quarter of
1998 increased 39.6% 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 in the primary factor resulting in a higher cost of
goods sold. In May 1998, the Company retained Ray Bryce as its Senior Vice
President-Vendor Relations. Mr. Bryce has more than 14 years experience in the
thrift industry. He was most recently the Director of Vendor Relations for Value
Village Stores, Inc. where he was responsible for obtaining merchandise for
their 66 Canadian thrift stores. Management is currently implementing a program
to establish manned donation trailers and drop boxes at multiple locations in
South Florida as an additional source of merchandise. As of May 11, 1998, the
Company has eight donation trailers on locations in Broward and Dade County,
Florida and has approval for the placement of an additional four trailers.
Management believes this will help to reduce merchandise collection costs and
will provide additional sources of merchandise for the Company's stores.
Operating expenses for the first quarter of 1998 increased $50,136 or 5.9% to
$899,333,
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from $849,197 for the first quarter of 1997. This increase is due to the $76,857
in operating expenses related to the Company's fifth store in Lauderdale Lakes,
Florida, which opened in July 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 29, 1998, the Company had working capital of $2,424,180, as compared to
working capital of $2,255,291 at March 31, 1997. The net increase in working
capital is attributable primarily to merchandise inventory increasing by
$181,985, as a result of the new Lauderdale Lakes store plus higher merchandise
inventory in the four other stores. Cash and cash equivalents at March 29, 1998
totaled $2,265,178, a decrease of $39,404, as compared with $2,304,582 at March
29, 1997. Net cash provided by operating activities totaled $108,417 for the
three months ended March 29, 1998, as compared to $47,751 for the three months
ending March 31, 1997. 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.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Number Description
10.1 Executive Employment Agreement between the Company and Ray
Bryce dated May 1, 1998
10.2 Promissory Note dated May 8, 1998 from Marc Douglas, as
maker, to the Company
11.1 Statement re: computation of per share earnings
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
NONE
10
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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)
By: /s/ Stephen L. Wiley
-------------------------------------------
Stephen L. Wiley, Chief Financial
Officer (Principal Financial Officer)
Date: May 13, 1998
11
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EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of this 1st day of May, 1998, between THRIFT MANAGEMENT, INC., a
Florida corporation (the "Company"), and Ray Bryce (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 Senior Vice President of the Company and/or a wholly
owned subsidiary 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 Senior Vice President of the Company and/or
a wholly owned subsidiary of the Company, with such duties, responsibilities and
authority 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 from the date of this Agreement through April 30, 2002. 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.
2. COMPENSATION AND BENEFITS. The Company shall pay to the Executive
the annual compensation and other amounts set forth below:
<PAGE> 2
(a) BASE SALARY. The Company shall pay the Executive an
initial annual base salary of US$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 be entitled to such
further annual increases in base salary as may be determined by the Board of
Directors from time to time during the Employment Term, provided that such
increases shall not be less than 5% annually.
(b) CASH BONUS. The Executive shall receive an annual bonus in
an amount to be determined by the Board of Directors, which annual bonus shall
be not less than US$10,000.
(c) AUTOMOBILE. The Company shall provide the Executive with a
leased vehicle for his use in Florida and will reimburse the Executive for
insurance, gasoline and repairs in connection therewith. To the extent that the
Executive's personal vehicle is used by him for Company business outside of
Florida, the Executive shall be reimbursed at a rate of US$.27 per mile.
(d) OTHER BENEFITS. In addition to the foregoing, the
Executive shall receive:
(i) US$200.00 per month for the purpose of
reimbursement of the health insurance needs for
himself and his dependents, which payments shall
continue until the Company implements a health
insurance plan;
(ii) three weeks' paid vacation annually, provided
that during the first year of the Employment Term,
the Executive shall be entitled to two weeks' paid
vacation after the first six months of the Employment
Term;
(iii) a laptop computer for his use, with docking for
monitor and keyboard, together with Microsoft Office
software and Internet access;
(iv) a printer, facsimile machine and photocopier for
home use;
(v) a digital cellular telephone;
(vi) a Company credit card and reimbursement of
Company-related travel expenses;
(vii) if the Executive relocates at the Company's
request, reimbursement of reasonable moving expenses;
(viii) all such other benefits, including
participation in all retirement and other benefit
plans (which may include, in the Board's sole
discretion, ESOP, 401(k) and life and disability
insurance plans) and paid holidays consistent with
the Company's practices (which currently provides for
six
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paid holidays), as may be available from time to time
to officers and employees of the Company generally.
The Company agrees that the Executive shall be
immediately eligible for all such benefits and plans,
as permitted by applicable law.
(e) OPTIONS.
(i) Upon signing this Agreement, the Executive shall
be granted options (the "Options") to acquire an
aggregate of 25,000 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"),
under the Company's 1996 Stock Option Plan, as
amended (the "Plan"). The exercise price shall be
US$_______ per share of Common Stock. The Options
shall vest as follows: (i) with respect to 25% of the
Options, at any time on or after one year from the
date hereof; (ii) with respect to an additional 25%
of the Options, at any time on or after two years
from the date hereof; (iii) with respect to an
additional 25% of the Options, at any time on or
after three years from the date hereof; and (iv) with
respect to the remaining 25% of the Options, at any
time on or after four years from the date hereof.
(ii) In addition to the foregoing, the Executive
shall be granted a minimum of 5,000 additional
Options per year, at exercise prices based on the
then-current market value, subject to increase in the
Board's discretion if the Executive has achieved
certain agreed-upon performance objectives.
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 material failure of
the Executive to fulfill the Executive's Duties, after notice to the Executive
describing such material failure and the steps required to fulfill the
Executive's Duties, and the Executive's subsequent failure to complete such
steps; (ii) 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; (iii) 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 (iv) any material breach of this Agreement by the
Executive.
(b) The Executive's employment hereunder shall terminate upon
his death.
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(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 60 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. The
Company agrees that, if the Executive subsequently becomes able to return to his
employment on a full-time basis after receipt of a Notice of Termination from
the Company, the Company will consider the Executive for possible re-employment
with the Company if, in the Company's sole discretion, an appropriate position
is available.
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 60 days' prior written notice of any
termination of this Agreement by him.
5. PAYMENTS UPON TERMINATION.
(a) Upon termination of this Agreement pursuant to Sections
3(a), 3(b) or 3(c) 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 pursuant to Sections 3(a), 3(b) or 3(c) 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 one year's
total compensation (which shall include payment of the Executive's base salary,
annual bonus, unused vacation, health insurance reimbursement and any other
benefits or payments that would be due to the Executive pursuant to the
Company's then-current plans and policies).
(c) In the event of a termination of this Agreement, any
Options granted pursuant to Section 2(e)(i) hereof that have not vested as of
the date of termination shall be cancelled. Any vested Options as of the date of
termination shall remain exercisable in accordance with their terms.
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<PAGE> 5
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. COVENANT NOT TO COMPETE. The Executive agrees that during the term
of this Agreement and for a period of one year from the date of termination of
this Agreement, he will not, directly or indirectly, engage in the business of
operating a "thrift" store, or solicit any potential suppliers or charities for
such business within the State of Florida; provided, however, that the Executive
shall not be limited by the foregoing provision if the Executive's employment is
terminated by the Company without Cause.
8. 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:
If to the Executive: Ray Bryce
1508 Chalice Crescent
Mississanga, Ontario
CAN L5C153
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.
9. 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.
-5-
<PAGE> 6
10. 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.
11. GOVERNING LAW. The validity, interpretation, and performance of
this Agreement shall be governed by the laws of the State of Florida.
12. 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.
13. NO ASSIGNMENT. This Agreement may not be assigned by any party
without the prior written consent of the other party; notwithstanding the
foregoing, the Company may, at any time in its sole discretion, assign its
rights and obligations under this Agreement to a wholly owned subsidiary.
14. 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.
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:
/s/ Diane Richards By: /s/ Marc Douglas
- ----------------------------- -----------------------------
Marc Douglas, President and
Chief Executive Officer
EXECUTIVE:
Attest:
/s/ Nancy Bryce /s/ Ray Bryce
- ----------------------------- -----------------------------
Ray Bryce
-6-
<PAGE> 1
EXHIBIT 10.2
PROMISSORY NOTE
$130,000.00 Effective January 4, 1998
For value received, the undersigned, Marc Douglas, ("Borrower"),
promises to pay to the order of Thrift Management, Inc. ("Lender"), the
principal sum of One Hundred, Thirty Thousand and 00/100 Dollars ($130,000.00)
in lawful money of the United States of America, together with interest accruing
thereon from the date hereof at the rate hereinafter provided, calculated on the
daily outstanding principal balances from time to time based on a 360-day year.
The outstanding principal balance of this Note represents a prepayment
of a portion of Borrower's 1998 salary and bonus. This Note shall bear interest
at a rate of 8.5% per annum. Payments of accrued interest on the principal
balance outstanding from time to time on this Note (which shall be reduced as
such prepaid salary and bonus is earned by Borrower) shall commence on the 4th
day of June, 1998, and on the same day of each month thereafter. The outstanding
principal balance of this Note, and all accrued but unpaid interest thereon,
shall be payable on or before December 31, 1998. Borrower hereby agrees that if
not paid as provided herein, the principal balance and any accrued but unpaid
interest thereon may be offset against and deducted from any amounts due to
Borrower from Lender.
So long as no default exists under this Note, Borrower shall have the
right to prepay the unpaid principal evidenced by this Note in whole or in part
without premium or penalty but with accrued interest to the date of such
prepayment on any amount prepaid.
All payments received hereunder shall be applied first to the payment
of any expenses or charges payable hereunder, then to interest due and payable,
with the balance applied to principal, or in such other order as Lender shall
determine at its option.
Notwithstanding any provision of this Note to the contrary, the parties
intend that no provision of this Note be interpreted, construed, applied or
enforced so as to permit or require the payment or collection of interest in
excess of the highest rate of interest permitted to be paid or collected by the
laws of the State of Florida (or federal law, in the event federal law preempts
Florida law or is otherwise applicable), with respect to this transaction
("Maximum Permitted Rate"). If the rate of interest charged by Lender under the
provisions of this Note exceeds the Maximum Permitted Rate, then Lender and any
holders of this Note, and Borrower and any endorsers and guarantors, do hereby
agree that the provisions of this Note automatically shall be deemed reformed
NUNC PRO TUNC so as to require payment only of interest at the Maximum Permitted
Rate; and if interest payments in excess of such Maximum Permitted Rate have
been received, the amount of such excess shall be deemed credited NUNC PRO TUNC
in reduction of the then-outstanding principal amount of this obligation,
together with interest at such Maximum Permitted Rate. In connection with all
calculations to determine the Maximum Permitted Rate, the parties intend: first,
that all charges be excluded to the extent they are properly excludable under
the usury laws of the State of Florida, as they from time to time are determined
to apply to this obligation; and, second, that all charges that may be "spread"
in the manner provided by Section 687.03(3), Florida Statutes, or any similar
successor law.
<PAGE> 2
Any payment not made when due shall constitute a default. If default be
made in the payment of any installment under this Note, the entire principal sum
and accrued interest shall become due and payable without notice at the option
of the Lender. Failure to exercise this option shall not constitute a waiver of
the right to exercise the same at any other time. Upon such default, the unpaid
principal balance of this Note, and accrued and unpaid interest, if any, shall
bear interest at 18% from the date of default until the default is corrected.
Lender's failure to exercise this right with respect to any default shall not
constitute a waiver of this right as to any subsequent default. All parties
liable for the payment of this Note agree to pay the Lender hereof reasonable
attorneys' fees for the services and expenses of counsel employed after default
to collect this Note (including any appeals relating to such enforcement
proceedings), whether or not suit be brought.
The remedies of Lender as provided herein shall be cumulative and
concurrent, and may be pursued singly, successively or together, at the sole
discretion of Lender, and may be exercised as often as occasion therefor shall
arise. No act of omission or commission of Lender, including specifically any
failure to exercise any right, remedy or recourse, shall be effective as a
waiver thereof unless it is set forth in a written document executed by Lender
and then only to the extent specifically recited therein. A waiver or release
with reference to one event shall not be construed as continuing, as a bar to,
or as a waiver or release of, any subsequent right, remedy or recourse as to any
subsequent event.
Borrower and all sureties, endorsers and guarantors of this Note
hereby: (a) waive demand, presentment for payment, notice of nonpayment,
protest, notice of protest and all other notice, filing of suit and diligence in
collecting this Note, in enforcing any of its rights; (b) agree to any addition
or release of any party or person primarily or secondarily liable hereon; (c)
agree that Lender shall not be required first to institute any suit, or to
exhaust his, their or its remedies against Borrower or any other person or party
to become liable hereunder in order to enforce payment of this Note; (d) consent
to any extension, rearrangement, renewal or postponement of time of payment of
this Note and to any other indulgence with respect hereto without notice,
consent or consideration to any of the foregoing; (e) agree to the right to set
off against any deposits, funds or monies owing; and (f) agree that,
notwithstanding the occurrence of any of the foregoing (except the express
written release of Lender of any such person), they shall be and remain jointly
and severally, directly and primarily, liable for all sums due under this Note.
BORROWER KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVES ANY RIGHT
BORROWER HAS TO A TRIAL BY JURY IN CONNECTION WITH ANY MATTER DIRECTLY OR
INDIRECTLY RELATING TO THIS NOTE. BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR
ANY PERSON ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
As used herein, the words "Borrower" and "Lender" shall be deemed to
include Borrower and Lender as defined herein and their respective heirs,
personal representatives, successors and assigns.
/s/ Marc Douglas
----------------------------
Marc Douglas
2
<PAGE> 1
EXHIBIT 11.1--STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
The following table presents the computation of basic and diluted earnings
per share:
Three Months Ended
--------------------------
March 29, March 31,
1998 1997
----------- -----------
Numerator:
Net income $ 88,003 $ 68,001
----------- -----------
Denominator:
Denominator for basic earnings per
share--weighted-average shares 2,145,000 2,115,000
Effect of dilutive securities:
Employee stock options 48,000
----------- -----------
Denominator for diluted earnings per share 2,193,000 2,115,000
=========== ===========
Earnings per share:
Basic $ 0.04 $ 0.03
=========== ===========
Diluted $ 0.04 $ 0.03
=========== ===========
<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
29, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-29-1998
<CASH> 124,149
<SECURITIES> 2,141,029
<RECEIVABLES> 333,433
<ALLOWANCES> 0
<INVENTORY> 334,720
<CURRENT-ASSETS> 2,933,331
<PP&E> 996,794
<DEPRECIATION> (304,868)
<TOTAL-ASSETS> 3,625,257
<CURRENT-LIABILITIES> 509,151
<BONDS> 3,831
0
2,500
<COMMON> 21,450
<OTHER-SE> 3,088,325
<TOTAL-LIABILITY-AND-EQUITY> 3,625,257
<SALES> 2,250,473
<TOTAL-REVENUES> 2,250,473
<CGS> 1,240,550
<TOTAL-COSTS> 1,240,550
<OTHER-EXPENSES> 899,333
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 236
<INCOME-PRETAX> 141,587
<INCOME-TAX> 53,584
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,003
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
