UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended March 31, 1996 Commission File Number 33-39759
CRESCENT CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3645694
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6701 Democracy Boulevard
Suite 300
Bethesda, Maryland 20817
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (301) 897-4870
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities and Exchange Act of 1934
during the preceding 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 ____
As of May 10, 1996 2,545,200 shares of common stock par value, $0.001 per share
were outstanding.
<PAGE>
CRESCENT CAPITAL, INC.
FORM 10-QSB
QUARTERLY REPORT
For the Three Months Ended March 31, 1996
INDEX
Part I: FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1996
[Unaudited] 1 - 2
Condensed Consolidated Statements of Operations for the
three month periods ended March 31, 1996 and March 31, 1995
[Unaudited] 3
Condensed Consolidated Statement of Stockholders' Equity for
the three month period ended March 31, 1996 [Unaudited] 4
Condensed Consolidated Statements of Cash Flows for the
three month periods ended March 31, 1996 and March 31, 1995
[Unaudited] 5
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
Part II: OTHER INFORMATION 9
SIGNATURES 10
o o o o o o o o o o
<PAGE>
CRESCENT CAPITAL, INC.
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
1996
[Unaudited]
<S> <C>
ASSETS:
Current Assets:
Cash $ 342,959
Trade Accounts Receivable - Net 1,988,007
Franchisee Loans 696,917
Other Receivables 328,112
Inventories 535,253
Prepaid Expenses and Accrued Income 684,343
Officer Loan Receivable 72,836
Deferred Offering Costs 100,000
Due from Related Parties 1,452,528
Deposits 445,187
-----------
Total Current Assets 6,646,142
-----------
Property and Equipment - Net 3,176,935
-----------
Other Assets:
Master Franchise Agreement - Net 918,000
Rights to Store Leases - Net 93,312
Goodwill - Net 11,085
Consulting Agreements - Net 776,145
Store Franchise Agreement - Net 72,084
Store Development Costs - Net 100,884
Start-Up Costs - Net 128,214
-----------
Total Other Assets 2,099,724
-----------
Total Assets $11,922,801
-----------
</TABLE>
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
1
<PAGE>
CRESCENT CAPITAL, INC.
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 1996
[Unaudited]
<S> <C>
Liabilities and Stockholders' Equity:
Current Liability:
Trade Accounts Payable $ 2,940,398
Accrued Expenses 739,374
Other Payables and Accrued Interest 129,723
Obligations Under Capital Leases 190,031
Income Taxes Payable 380,343
Due to Related Parties --
Notes Payable - Short-Term 265,134
------------
Total Current Liabilities 4,645,003
------------
Notes Payable - Long-Term 621,659
------------
Commitments and Contingencies --
------------
Minority Interest 1,907,526
------------
Stockholders' Equity:
$.01 Par Value, Preferred Stock, 1,000,000 Shares Authorized,
No Shares Issued and Outstanding --
$.001 Par Value, Class A Common Stock - 5,000,000 Shares
Authorized and 545,200 Shares Issued and Outstanding 545
$.001 Par Value, Convertible Class B Common Stock -
2,000,000 Shares Authorized, Issued and Outstanding 2,000
Additional Paid-in-Capital 6,209,214
Retained Earnings 60,863
Cumulative Foreign Currency Translation Adjustment (24,009)
Note Receivable for Stock (1,500,000)
------------
Total Stockholders' Equity 4,748,613
------------
Total Liabilities and Stockholders' Equity $ 11,922,801
------------
</TABLE>
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
2
<PAGE>
CRESCENT CAPITAL, INC
- --------------------------------------------------------------------------------
CONDENSED STATEMENTS OF OPERATIONS.
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Revenue:
Sales by Company Owned Stores $ 1,036,214 $ 596,273
Commissary Sales 2,581,566 2,227,989
Franchise Fees 42,848 47,901
Rental Income 328,119 275,975
Royalty Sales 635,186 514,926
Other Operating Income 166,528 110,720
----------- -----------
Total Revenue 4,817,461 3,773,784
----------- -----------
Cost of Sales
Company Owned Stores 762,853 447,541
Food and Packaging 1,893,426 1,651,237
Other Operating Expenses 624,271 391,766
----------- -----------
Total Cost of Sales 3,280,550 2,490,544
----------- -----------
Gross Margin 1,536,911 1,283,240
----------- -----------
Distribution and Administrative Expenses 1,664,974 1,192,327
Operating and Closing Costs of Pizzazz Restaurant 400,986 --
----------- -----------
Operating (Loss) Income (529,049) 90,913
Interest Income 20,370 29,946
Interest Expense (25,696) (9,204)
Minority Interest in Net Income of Subsidiary 149,651 --
----------- -----------
(Loss) Income Before Income Taxes (384,605) 112,522
Income Taxes -- --
----------- -----------
Net (Loss) Income $ (384,605) $ 112,522
----------- -----------
(Loss) Income Earnings Per Share $ (0.15) $ 0.05
----------- -----------
Weighted Average Number of Shares Outstanding
2,545,200 2,420,000
----------- -----------
</TABLE>
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
3
<PAGE>
CRESCENT CAPITAL, INC.
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Foreign
Common Stock Additional Currency Note Total
Number of Paid-in Retained Translation Receivable Stockholders'
Shares Amount Capital Earnings Adjustments For Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 2,545,200 2,545 6,230,593 445,468 31,622 (1,500,000) 5,210,228
Addition Costs from Issuance of Stock
of Subsidiary (21,379) (21,379)
Foreign Currency Translation Adjustment -- -- -- -- (55,631) -- (55,631)
Net Income for the three months ended
March 31, 1996 -- -- -- (384,605) -- -- (384,605)
--------- -------- ----------- --------- --------- ----------- -----------
Balance - March 31, 1996 2,545,200 $ 2,545 $ 6,209,214 $ 60,863 ($ 24,009) $(1,500,000) $ 4,748,613
========= ======== =========== ========= ========= =========== ===========
</TABLE>
Foreign Currency Translation
The functional currency for the Company's foreign operations is the British
pound sterling. The translation from the British pound sterling into U.S.
dollars is performed for balance sheet accounts using the current exchange rate
in effect at the balance sheet date and for revenue and expense accounts using a
weighted average exchange rate during the period. The gains or losses resulting
from such translations are included in stockholders' equity. Equity transactions
are denominated in British Pound sterling have been translated into U.S. dollars
using the effective rate of exchange at date of issuance.
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
4
<PAGE>
CRESCENT CAPITAL, INC.
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Net Cash - Operating Activities ($ 346,527) $(1,269,413)
----------- -----------
Investing Activities:
Purchase of Property, Equipment and Capitalized Costs (511,610) (378,221)
Proceeds on Disposal of Property and Equipment 259,386 4,950
Repayment of Loan to Officer (7,310)
Loan to Related Party (306,000)
----------- -----------
Net Cash - Investing Activities (252,224) (686,581)
----------- -----------
Financing Activities:
Payment of Debt (71,097) (1,339,449)
Proceeds from Sale of Common Stock 253,360
Capital Repayments Made (52,742)
----------- -----------
Net Cash - Financing Activities (123,839) (1,086,089)
----------- -----------
Effect of Exchange Rate Changes on Cash (6,814) 13,270
Net [Decrease] in Cash and Cash Equivalents (729,404) (3,028,813)
Cash and Cash Equivalents - Beginning of Periods 1,072,363 4,814,473
----------- -----------
Cash and Cash Equivalents - End of Periods $ 342,959 $ 1,785,660
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest Paid $ 46,862 $ 98,804
Taxes Paid $ -- $ --
Supplemental Disclosures of Non-Cash Financing and
Investing Activities:
$ --
Fixed Assets acquired under Capital leases $ 248,620 $ --
</TABLE>
The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.
5
<PAGE>
CRESCENT CAPITAL, INC.
- --------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
- --------------------------------------------------------------------------------
[A] Significant Accounting Policies
Significant accounting policies of Crescent Capital, Inc. [the "Company"]
are set forth in the Company's Form 10-KSB for the year ended December 31,
1995, as filed with the Securities and Exchange Commission.
[B] Basis of Reporting
The balance sheet as of March 31, 1996, the statements of operations for
the period January 1, 1996 to March 31, 1996, and for the period January 1,
1995 to March 31, 1995 the statement of stockholders' equity for the period
January 1, 1996 to March 31, 1996 and the statements of cash flows for the
period January 1, 1996 to March 31, 1996 and for the period January 1, 1995
to March 31, 1995 have been prepared by the Company without audit. The
accompanying interim condensed unaudited financial have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions of Form 10-QSB and
Regulation SB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the management of the Company, such
statements include all adjustments [consisting only of normal recurring
items] which are considered necessary for a fair presentation of the
financial position of the Company at March 31, 1996, and the results of its
operations and cash flows for the three months then ended. It is suggested
that these unaudited financial statements be read in conjunction with the
financial statements and notes contained in the Company's Form 10-KSB for
the year ended December 31, 1995.
[C] Subsequent Event
In May, the Company decided to suspend Pizzazz Restaurant operations and
the development of the Pizzazz concept. The Company feels, at this time,
that management attention and resources must be focused on the core
business of delivery stores. In the Condensed Consolidated Statement of
Operations, the "Operating and Closing Costs of Pizzazz Restaurant"
consists of the following items:
Revenues $ 48,997
Cost of Sales (97,899)
Operating Expenses (199,054)
Estimated Closing Costs (153,030)
--------
Total ($400,986)
o o o o o o o o o o
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Result of Operations
Overview
Income for the quarter was lower than the same quarter of the previous year
despite the increase in per store sales of 11%. At the end of the quarter,
management believes it experienced a significant boost in sales as a result of
the scare regarding English beef. The Company promotes their use of only Danish
beef and the "healthy" aspects of pizza as part of their advertising and
marketing strategies.
The Company's core business of franchise fees, commissary sales and the Company
owned stores lost approximately $10,000 for the quarter versus an income of
$112,522 in the same quarter of the previous year. The deterioration of income
was the result of lower margins on products sold from the commissary, higher
company overhead costs, and higher costs on the Company owned delivery stores.
The Company opened one new franchise store in the quarter.
The Company's Haagen Dazs stores lost approximately $88,000 for the quarter.
This business is seasonal and management believes that cold weather had a
significant adverse impact on the unit's activities.
The Company opened a sit down casual dining pizza restaurant ("Pizzazz") in late
December to compliment the delivery stores and further establish brand
recognition for Domino's pizza. Although the "Pizzazz" concept was developed by
Domino's in the United States, the Company did not receive assistance from
Domino's in the start up of this concept in the United Kingdom. During the
quarter ended March 31, 1996, the Company recorded losses of approximately
$248,000 and established a reserve for closing costs of approximately $153,000
related to the Pizzazz concept.
The Company has taken corrective actions where possible to return the Company to
a level of profitability.
Results of Operations
Comparison of the three month period January 1, to March 31, 1996 and January 1
to March 31, 1995
Total revenue for the period was $4,817,461, an increase of $1,043,677 (28%)
against the same period of 1995. The main constituents of this increase arose
from sales at Company owned stores which increased by $466,941, royalty income
which increased by $120,260 and commissary sales which increased by $353,577.
Increases were also evident in rental and other income streams of $107,952.
The increase in sales at Company owned stores resulted primarily from the
increased number of stores in operation during this period against 1995 (10
versus 9) and the addition of three Haagen Dazs stores which contributed
$269,899. The increase in royalty income and commissary sales resulted almost
entirely from the increase in system wide sales.
The Company also experienced an increase in cost of sales in excess of the
increase in sales. Cost of sales increase of $887,905 (36%). This is the result
of lower commissary margins, the inclusion of Haagen Dazs cost of sales and an
increase in the royalty percentage payable to Domino's.
An operating loss of ($529,049) was incurred in the period against operating
income of $91,938 in the comparable period in 1995. This decrease in
profitability resulted from higher gross margins offset by higher administrative
and corporate store costs ($131,883), the operating losses and closing costs of
the Pizzazz restaurant ($400,986), and operating loss offset by gross margins of
the Haagen Dazs stores ($88,118).
The Company has taken the following actions to improve Company profitability:
Commissary In late February, the Company implemented a 5% price increase to
the franchisees which will cover most of the rising costs of the raw
materials of topping/cheese etc. The Company has also initiated an internal
study to ensure that fresh dough provided to the franchisees is priced to
cover the increased production costs and earn a fair profit.
Delivery Stores The Company has hired a person dedicated to new franchisee
development. This person has industry experience and is using his industry
contacts to develop new franchisee interests. In addition, the Company has
participated in two trade shows and is scheduled to participate in two more
later in the year. The Company has also successfully concluded their test
period arrangement with Total Oil Great Britain and have finalized an
agreement to open Domino's franchises in gas stations. This should result
in the rapid development of non-traditional stores in addition to the
traditional stores. The
7
<PAGE>
Company has also entered into another arrangement with Alldays, a British
convenience store company to install "cash and carry" Domino's stores on
the premises. The Company anticipates that a minimum of twelve new
non-traditional stores will open before the end of the year.
Company Owned Stores The Company has installed computer systems in company
owned stores which will allow daily monitoring and control of food and
labor costs by headquarters personnel. It is anticipated that this new
system will allow the Company to control the costs and achieve better
profitability.
Haagen Dazs The Company continues to have discussions with the Master
Franchisor in the United Kingdom to discuss menu items and other ways to
reduce the seasonal impact of Haagen Dazs stores. The Company expects the
units to perform profitably for the next two quarters.
Pizzazz The Company believes these losses resulted from the lack of
Domino's support, the timing of the restaurant opening, product pricing,
menu items and promotion. The Company believes the concept is viable and
the knowledge gained over the last quarter is valuable. However, the
Company feels, at this time, management attention and resources must be
focused on the "core" business of delivery stores. Consequently, in May
1996, the Company decided to suspend operations and the development of the
Pizzazz restaurant concept.
Liquidity and Capital Resources
At March 31, 1996 the Company's working capital of $2,001,139 has been reduced
by $1,020,127 from the end of the Company's last fiscal year. The Company used a
portion of the net proceeds from the initial public offering of a subsidiary to
purchase fixed assets and repay the outstanding short-term notes payable.
Additionally, the Company sold a non-performing company owned store to finance a
new company owned store opened in April 1996. The company believes that its
working capital will be sufficient to satisfy its obligations over the next
twelve months.
Exchange Rates
The weighted exchange rate for the three months ended March 31, 1996 ($1.526 per
British pound sterling) was approximately 4% lower than the exchange rate during
the comparable period in 1995 ($1.597 per British pound sterling). This
difference has the effect of reducing the Company's results by approximately 4%
when expressed in U.S. dollars.
Inflation
To date, inflation has not had a material effect on the Company's operations.
8
<PAGE>
Part II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any litigation or governmental
proceedings that management believes would result in judgements or
fines that would have a material adverse effect on the Company.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Other Information
Not Applicable.
Item 5. Exhibits
(a) Exhibits
None.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by this
report.
9
<PAGE>
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRESCENT CAPITAL, INC.
Date: May 15, 1996 By: /s/ Colin Halpern
Colin Halpern, President
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000874017
<NAME> CRESCENT CAPITAL INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 342,959
<SECURITIES> 0
<RECEIVABLES> 1,988,007
<ALLOWANCES> 0
<INVENTORY> 535,253
<CURRENT-ASSETS> 6,646,142
<PP&E> 3,176,935
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,922,801
<CURRENT-LIABILITIES> 4,645,003
<BONDS> 0
0
0
<COMMON> 2000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,922,801
<SALES> 4,817,461
<TOTAL-REVENUES> 4,817,461
<CGS> 3,280,550
<TOTAL-COSTS> 3,280,550
<OTHER-EXPENSES> 2,065,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,696
<INCOME-PRETAX> (529,049)
<INCOME-TAX> 0
<INCOME-CONTINUING> (529,049)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 149,651
<NET-INCOME> (384,605)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
