U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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 NUMBER 0-24388
MANHATTAN BAGEL COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 22-2981539
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
246 INDUSTRIAL WAY WEST, EATONTOWN, NEW JERSEY 07724
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(732) 544-0155
(REGISTRANT'S TELEPHONE NUMBER)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the last
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___
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES ___ NO___
NUMBER OF SHARES OF COMMON STOCK, NO PAR VALUE, OUTSTANDING AT MAY 14, 1998:
7,535,572.
<PAGE>
MANHATTAN BAGEL COMPANY, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
Special Note Regarding Forward-Looking Statements -2-
Part I Financial information
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1997
and March 31, 1998 -3-
Consolidated Statements of Operations -
Three months ended March 31, 1997 and 1998 -4-
Consolidated Statements of Cash Flows-Three months
ended March 31, 1997 and 1998 -5-
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
Part II Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K -12-
Signatures -13-
1
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q, particularly
under Items 1-3, constitute "forward-looking statements" within the meaning of
Section 21 of the Securities Exchange Act of 1934. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of Manhattan
Bagel Company, Inc. ("the Company") to be materially different from any future
results, performance or achievements, expressed or implied by such
forward-looking statements.
The Company, filed for protection under Chapter 11 of the Federal
Bankruptcy Code in November 1997 and is operating as a debtor-in-possession. The
Company's success is highly dependent on its ability to structure and implement
a plan of reorganization and to emerge from the Chapter 11 proceedings.
The Company is dependent upon the success of existing and newly franchised
and Company-owned stores, and alternative distribution outlets; the success of
the Company, its master franchisees and area developers in getting new stores or
other retail locations opened; the ability of the Company and its master
franchisees to attract new qualified franchisees; and such other factors as
competition, commodity pricing and economic conditions.
The opening and success of Manhattan Bagel Company stores will depend on
various factors, including the availability of suitable store sites and the
negotiation of acceptable lease terms for new locations, the ability of the
Company or its franchisees to obtain construction and other necessary permits in
a timely manner, the ability to meet construction schedules, the financial and
other capabilities of the Company's franchisees and master franchisees, and
general economic and business conditions.
The Company's success is partially dependent on its ability to attract,
retain and contract with suitable franchisees and the ability of these
franchisees to open and operate their stores successfully.
The Company's business may also be subject to changes in consumer taste,
national, regional and local economic conditions, demographic trends and the
type, number and location of competing businesses. Competition in the bagel
industry is increasing significantly with an increasing number of national,
regional and local stores competing for franchisees and store locations as well
as customers.
The Company's future results may also be negatively impacted by future
pricing of the key ingredients for its frozen bagel dough.
The success of Manhattan Bagel Company units in alternative distribution
locations, including convenience stores, supermarkets, military bases and other
non-traditional locations, will depend, in addition to the factors affecting
traditional franchisee and Company-owned stores, on the success of the locations
in which they are located.
The openings and remodelings of Manhattan Bagel stores, as well as
openings of units within alternative locations, may be subject to potential
delays caused by, among other things, permitting, weather, the delivery of
equipment and materials, and the availability of labor.
2
<PAGE>
MANHATTAN BAGEL COMPANY, INC.
AND SUBSIDIARIES
DEBTOR-IN-POSSESSION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
--- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,802,396 $ 3,112,025
Accounts receivable, net of allowance for doubtful accounts
of $2,359,454 1,602,346 1,444,919
Construction costs receivable, net of allowance for doubtful accounts
of $1,859,961 -- --
Franchise fee receivable area developers, net of allowance of $755,180 129,555 124,555
Inventories 995,007 1,118,159
Current maturities of notes receivable, net of reserve of $241,736 642,941 644,926
Current maturities of notes receivable - affiliates 1,275,000 0
Income taxes receivable 151,357 25,560
Prepaid expenses and other current assets 286,306 59,894
------------ ------------
Total current assets 7,884,908 6,530,038
------------ ------------
Property and equipment, net of accumulated depreciation of $3,772,464
and $3,991,425, respectively 12,892,070 12,584,119
------------ ------------
Other assets:
Accounts receivable, long term 470,374 470,374
Franchise fee receivable area developers, long term, net of allowance
of $633,019 200,000 200,000
Notes receivable, net of current maturities and a reserve of $4,538,465 6,129,878 6,083,433
Security deposits 911,134 977,624
Investment in stores, net of reserve of $5,826,923 1,193,142 1,193,142
Other assets 409,082 409,082
------------ ------------
Total assets $30,090,588 $28,447,812
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities not subject to settlement:
Current liabilities:
Current maturities of capital lease obligations $ 14,618 $ 14,618
Accounts payable and accrued expenses 5,476,961 5,779,961
Unearned franchise fee income 57,500 61,167
Franchise deposits 122,576 122,576
------------ ------------
Total current liabilities 5,671,655 5,978,322
------------ ------------
Other liabilities:
Capital lease obligations, net of current maturities 19,180 19,180
Security deposits 490,853 490,853
Other liabilities 79,636 79,636
------------ ------------
Total other liabilities 589,669 589,669
------------ ------------
Commitments and contingencies
Liabilities subject to settlement:
Long-term debt 6,753,218 5,183,017
Capital lease obligations 408,884 362,505
Accounts payable 6,375,724 6,441,197
------------ ------------
Total liabilities subject to settlement 13,537,826 11,986,719
------------ ------------
Stockholders' equity:
Preferred stock, 2,000,000 shares authorized,
no shares issued or outstanding -- --
Common stock, no par value, 25,000,000 shares
authorized, 7,535,572 shares issued and outstanding 41,104,828 41,104,828
Accumulated deficit (30,813,390) (31,211,726)
------------ ------------
Total stockholders' equity 10,291,438 9,893,102
------------ ------------
Total liabilities and stockholders' equity $30,090,588 $28,447,812
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
-3-
<PAGE>
MANHATTAN BAGEL COMPANY, INC.
AND SUBSIDIARIES
Debtor-in-Possession
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
---------
1997 1998
---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues
Product sales $ 7,638,616 $ 6,986,541
Franchise & license related revenue 2,213,464 699,153
----------- -----------
Total revenue 9,852,080 7,685,694
----------- -----------
Expenses
Cost of goods sold 5,210,909 5,478,592
Selling, general & administrative expenses 4,824,977 2,109,478
Other income (123,867) (134,132)
Interest income (298,925) (106,391)
Interest expense 177,174 127,578
----------- -----------
Total expenses 9,790,268 7,475,125
----------- -----------
Income before reorganization expenses
and Income taxes 61,812 210,569
Reorganization expenses
Administrative expense 0 116,325
Professional fees 0 492,581
----------- -----------
Total reorganization expense 0 608,906
Income (loss) before income taxes 61,812 (398,337)
Income taxes 0 0
----------- -----------
Net income (loss) $61,812 ($398,337)
=========== ===========
Basic net income (loss) per share $0.01 ($0.05)
=========== ===========
Diluted net income (loss) per share $0.01 ($0.05)
=========== ===========
Weighted average common shares
outstanding - basis 7,492,740 7,535,572
=========== ===========
Weighted average common shares
outstanding - diluted 7,520,458 7,535,572
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
-4-
<PAGE>
MANHATTAN BAGEL COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1997 1998
------ ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash (used in) provided by operating activities ($1,014,801) $ 717,930
----------- -----------
Cash flows from investing activities:
Payments for the purchase of property and equipment (2,239,303) (111,181)
(Purchase) / sale of marketable securities, net 1,358,733 0
Decrease in notes receivable-related parties 0 1,275,000
Other net cash provided by / (used in) investing activities (855,801) 44,460
----------- -----------
Net cash (used in) provided by investing activities (1,736,371) 1,208,279
----------- -----------
Cash flows from financing activities:
Proceeds from debt issuance 2,920,000 0
Principal payments on long term debt and capital leases 0 (1,616,580)
Proceeds from the exercise of stock options 60,000 0
Other net cash provided by / (used in) financing activities (441,761) 0
----------- -----------
Net cash provided by (used in) financing activities 2,538,239 (1,616,580)
----------- -----------
Net (decrease) increase in cash and cash equivalents (212,933) 309,629
Cash and cash equivalents-beginning of period 1,619,494 2,802,396
----------- -----------
Cash and cash equivalents-end of period $ 1,406,561 $ 3,112,025
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
-5-
<PAGE>
MANHATTAN BAGEL COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
---------------------
The financial information in this report should be read in conjunction
with the financial statements included in the Company's Annual Report on Form
10-K, for the year ended December 31, 1997.
In the opinion of management, the accompanying financial statements
include all adjustments necessary for a fair presentation. All such adjustments
are of a normal recurring nature. The results of operations for the three months
ended March 31, 1998 are not necessarily indicative of the results to be
expected for the full year.
The accompanying condensed consolidated financial statements have been
prepared on a going concern basis which contemplates the realization of assets
and satisfaction of liabilities and commitments in the normal course of business
despite the filing by the Company for reorganization under Chapter 11 of the
Federal Bankruptcy Act.
Certain March 31, 1997 balances have been reclassified to conform with the
March 31, 1998 presentation.
NOTE 2 - INVENTORIES
-----------
December 31, 1997 March 31, 1998
----------------- --------------
Raw materials $ 389,207 $ 672,755
Finished Goods 605,800 445,404
---------- ----------
$ 995,007 $1,118,159
========== ==========
NOTE 3 - NET INCOME (LOSS) PER COMMON SHARE
----------------------------------
During the fourth quarter of 1997, the Company adopted Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128), which
specifies the method of computation, presentation and disclosure for earnings
per share ("EPS"). SFAS 128 requires the presentation of two EPS amounts, basic
and diluted. Basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. Basic net income
loss per share is based upon the weighted average Common Stock outstanding
during each year.
NOTE 4 - CONTINGENCIES
-------------
The Company is involved in various pending legal proceedings. The adverse
outcome of any of these legal proceedings is not expected to have a material
adverse effect on the financial condition of the company. It is the company's
expectation that each of these claims will be disposed of as part of the plan of
reorganization to be filed in the Company's Chapter 11 Case.
6
<PAGE>
The franchisee financing facilities that the Company had in place with
Atlantic Financial Services, Sun Trust Credit Corp. and Global Alliance Finance
Company, LLC have all been terminated. The Company's contingent liability at
March 31, 1998 amounted to $2,129,914 and $1,580,008 under the terms of the
Atlantic Financial Services and Sun Trust Credit Corp. agreements, respectively.
The ultimate amount of such liability, if any, and settlement thereof is subject
to adjustment based on the finalization of a Plan of Reorganization under the
Chapter 11 proceedings.
Under the Chapter 11 proceeding, actions to enforce certain claims against
the Company are stayed if the claims arose, or are based on, events that
occurred on or before the petition date. The ultimate terms of settlement of
these claims will be determined in accordance with a plan of reorganization
which requires the approval of the impaired prepetition creditors and
shareholders and confirmation by the Bankruptcy Court. Other liabilities may
arise or be subject to compromise, as a result of rejection of executory
contracts and unexpired leases, or the Bankruptcy court's resolution of claims
for contingencies and other disputed amounts. The ultimate resolution of such
liabilities, all of which are subject to compromise, will be part of a plan of
reorganization.
The Company has received notification from the Securities and Exchange
Commission that the SEC Staff is considering recommending that the SEC institute
a civil enforcement action against the Company (but not including any present
officer or director of the Company) relating to the filing by the Company of
what the Staff believes are inaccurate financial statements for certain prior
periods. The Staff and the Company have had discussions regarding the Company's
differing views on these matters. No action has been commenced by the SEC and
the Company is unable to predict if or when such an action might be commenced.
NOTE (5)--IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
----------------------------------------------
On January 1, 1998 the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS No. 130) "Reporting Comprehensive Income". SFAS No. 130
establishes standards for the reporting and display of comprehensive income and
its components and is applied to all enterprises. The adoption of SFAS No. 130
had no impact on the Company's consolidated results of operations, financial
position or cash flows.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
----------------------------------------------------------------------
FINANCIAL CONDITION.
--------------------
On November 19, 1997, Manhattan Bagel Company, Inc. and on December 31,
1997, I & J Bagel, Inc. filed voluntary petitions in the United States
Bankruptcy Court for the district of New Jersey (the "Bankruptcy Court") seeking
to reorganize under Chapter 11 of the U.S. Bankruptcy Code. Under Chapter 11,
certain claims against the Company in existence prior to the filing of the
petition for relief under federal bankruptcy law are stayed while the Company
continues business operations as debtor-in-possession. These claims are
reflected in the accompanying consolidated balance sheet as "liabilities subject
to settlement." In addition, the filing of a voluntary petition under Chapter 11
was an event of default under certain of the Company's loan agreements.
The accompanying Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles applicable to a company
on a "going concern" basis, which, except as otherwise noted, contemplates the
realization of assets and the liquidation of liabilities in the ordinary course
of business; however, as a result of the Chapter 11 proceedings, and
circumstances relating to this event, including the Company's debt structure,
its operating losses, and current economic conditions, such realization of
assets and liquidation of liabilities are subject to significant uncertainties.
The Company experienced a substantial net loss in 1997. During the Chapter 11
proceedings, the Company has incurred and will continue to incur substantial
reorganization costs. The Company's ability to continue as a going concern is
dependent upon the confirmation of a plan of reorganization by the Bankruptcy
Court, the ability to secure adequate exit financing, combined with the
achievement of profitable operations. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. See the
qualification regarding the Company's ability to continue as a going concern in
the Independent Auditors report included in the 1997 Form 10-K Report.
A plan of reorganization, as finally approved by the Bankruptcy Court,
could materially change the currently recorded amounts of assets and
liabilities. These financial statements do not reflect further adjustments to
the carrying value of assets and the amounts and classifications of liabilities
or shareholders' equity that might be necessary as a consequence of the
bankruptcy proceedings.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
In the first quarter of 1998 the Company generated net income before
reorganization expenses of $210,569 as compared to net income of $61,812 in the
same period of the prior year. The net loss for the period was $398,337 as
compared to net income of $61,812 in the same period of the prior year. The loss
in 1998 was attributable to reorganization expenses and other factors which the
Company believes impacts the comparability of results. These items are discussed
below.
REVENUES. Total revenues of the Company for the three months ended March
31, 1998 were $7,685,694 as compared to total revenues of $9,852,080 for the
three months ended March 31, 1997, a $2,166,386 or 22.0% decrease over the three
months of the prior year. Product sales decreased $652,075 resulting from the
decrease in the number of Company stores. The decrease in franchise and license
related revenues
8
<PAGE>
is primarily attributable to the decreases in area developer fees of $1,000,000
and franchise fees of $290,546. In addition ongoing royalties decreased
$223,765. The Company's revenues are primarily derived from (i) the sale of
frozen raw bagel dough and cheese spreads to franchisees and licensees, (ii)
retail and wholesale sale of products by the Company-owned stores, and (iii)
royalties, franchise and license fees, including master franchise fees, and area
development fees. The percentage of revenues derived from product sales to total
sales for the three months ended March 31, 1998 was 90.9% as compared to 77.5%
for the comparable 1997 period.
COSTS OF GOODS SOLD. Cost of goods sold for the three months ended March
31, 1998 increased 5.1% to $5,478,592 as compared to $5,210,909 for the three
months ended March 31, 1997. This increase is attributable to increases in raw
material and factory overhead costs related to factory sales offset in part by
decreases in material due to a decrease in Company store sales. The decrease in
Company store retail revenue also negatively impacted cost of goods sold as a
percentage of sales which increased to 78.4% of sales for the three months ended
March 31, 1998 compared to 68.2% of sales for the three months ended March 31,
1997. Increased costs were incurred in 1998 in the distribution of the Company's
products due to the geographic expansion of the territory that the Company is
servicing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative as a percentage of total revenues, was 27.4% for the three months
ended March 31, 1998 as compared to 49.0% for the three months ended March 31,
1997. Total expenses decreased 56.3% to $2,109,478 for the three months ended
March 31, 1998, compared with $4,824,977 for the three months ended March 31,
1997. The decrease in percent and absolute dollars is a result of the closing of
Company-owned stores, the cost reduction steps taken by the Company in the
fourth quarter of 1997 and the decrease in legal expenses as a result of the
stay of legal proceedings against the Company under the Chapter 11 filing.
OTHER INCOME. Other income for the three months ended March 31, 1998 was
$134,132 compared to $123,867 for the three months ended March 31, 1997, an
increase of $10,265.
INTEREST INCOME. Interest income for the three months ended March 31, 1998
was $106,391 compared to $298,925 for the three months ended March 31, 1997. The
decrease of $192,534 was primarily due to the sale of the Company's marketable
securities.
INTEREST EXPENSE. Interest expense decreased from $177,174 for the three
months ended March 31, 1997 to $127,578 for the three months ended March 31,
1998. The $49,596 decrease was primarily due to a decrease in debt.
INCOME BEFORE REORGANIZATION EXPENSES AND INCOME TAXES. Income before
reorganization expenses and provision for income taxes for the three months
ended March 31, 1998 was $210,569, compared with $61,812 for the three months
ended March 31, 1997. This increase is attributable to the factors discussed
above.
REORGANIZATION EXPENSES. Reorganization expenses for the three months
ended March 31, 1998 are expenses incurred a as result of the Company filing a
voluntary petition for reorganization under Chapter 11 of the Federal Bankruptcy
Act. Such expenses include fees for the attorneys and accountants for both the
Company and the creditors.
9
<PAGE>
INCOME TAX. There is no benefit for income taxes for the three months
ended March 31, 1998 and 1997. A benefit for income taxes has not been recorded
for the either quarter because a valuation allowance has been recorded against
the Company's operating losses.
NET INCOME LOSS. The Company generated a net loss of $398,337 ($.05 per
share) for the three months ended March 31, 1998, as compared to a net income of
$61,812 ($.01 per share) for the three months ended March 31, 1997 as a result
of the factors discussed above.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 (SFAS No. 131), "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131 is
effective for financial statements for fiscal years beginnings after December
15, 1997. The Company will adopt the new requirements in conjunction with its
1998 Form 10-K. The adoption of SFAS No. 131 will have no significant impact on
the Company's financial reporting.
LIQUIDITY AND CAPITAL RESOURCES
The Company has no liquidity and capital resources except for the cash
collateral being provided by its primary lender which has a security interest in
all assets of the Company. The Company is using cash collateral in accordance
with a budget approved by the primary lender and the Bankruptcy Court. The
Company has no liquidity through any other source and no other debtor in
possession financing.
The franchisee financing facilities that the Company had in place with
Atlantic Financial Services, Sun Trust Credit Corp. and Global Alliance Finance
Company, LLC have all been terminated. The Company's contingent liability at
March 31, 1998 amounted to $2,129,914 and $1,580,008 under the terms of the
Atlantic Financial Services and Sun Trust Credit Corp. agreements, respectively.
The ultimate amount of such liability, if any, and settlement thereof is subject
to adjustment based on the finalization of a Plan of Reorganization under the
Chapter 11 proceedings.
Under the Chapter 11 proceeding, actions to enforce certain claims against
the Company are stayed if the claims arose, or are based on, events that
occurred on or before the petition date. The ultimate terms of settlement of
these claims will be determined in accordance with a plan of reorganization
which requires the approval of the impaired prepetition creditors and
shareholders and confirmation by the Bankruptcy Court. Other liabilities may
arise or be subject to compromise, as a result of rejection of executory
contracts and unexpired leases, or the Bankruptcy Court's resolution of claims
for contingencies and other disputed amounts. The ultimate resolution of such
liabilities, all of which are subject to compromise, will be part of a plan of
reorganization.
Inherent in a successful plan of reorganization is a capital structure
which permits the Company to generate sufficient cash flow after reorganization
to meet its restructured obligations and fund the current obligations of the
reorganized Company. Under the Bankruptcy Code, the rights of and ultimate
payment to prepetition creditors may be substantially altered and, as to some
classes, eliminated. At this time, the Company cannot predict the outcome of the
Chapter 11 filing, in general, or its affect on the future business of the
Company or on the ultimate interests of creditors or shareholders.
The Company's net increase in cash and cash equivalents for the three
months ended March 31, 1998 amounted to $309,629.
10
<PAGE>
Net cash provided by operating activities amounted to $717,930. It is
primarily composed of the net loss for the period $(398,337) offset by non-cash
charges for depreciation and amortization $419,132, the provision for
reorganization expenses in excess of payments $395,327, and the net change in
other operating assets and liabilities $301,808.
Net cash provided by investing activities amounted to $1,208,279 and
consisted primarily of repayment of a note receivable from a related party.
Net cash used in financing activities amounted to $1,616,580 and consisted
primarily of repayments under the Company's various loan agreements and the
repayment of obligations incurred under capital leases.
Until a plan of reorganization is confirmed by the Bankruptcy Court, only
such payments on prepetition obligations that are approved or required by the
Bankruptcy Court will be made. Except for payments for certain property and
equipment under lease, principal and interest payments on prepetition debt have
not been made since the filing date and will not be made without the Bankruptcy
Court's approval or until a plan of reorganization, defining the repayment
terms, has been confirmed by the Bankruptcy Court. There is no assurance at this
time that a plan of reorganization will be proposed by the Company or approved
and confirmed by the Bankruptcy Court.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 5- OTHER INFORMATION.
------------------
ITEM 6- EXHIBITS & REPORTS ON FORM 8-K.
-------------------------------
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MANHATTAN BAGEL COMPANY, INC.
Dated: May 20, 1998 By:
-----------------------
Jack Grumet,
Chairman of the Board and
Chief Executive Officer
Dated: May 20, 1998 By:
-----------------------
James J. O'Connor
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> $3,112,025
<SECURITIES> 0
<RECEIVABLES> 7,458,142
<ALLOWANCES> (5,243,742)
<INVENTORY> 1,118,159
<CURRENT-ASSETS> 6,530,038
<PP&E> 16,575,544
<DEPRECIATION> (3,991,425)
<TOTAL-ASSETS> 28,447,812
<CURRENT-LIABILITIES> 5,978,322
<BONDS> 0
0
0
<COMMON> 41,104,828
<OTHER-SE> (31,211,726)
<TOTAL-LIABILITY-AND-EQUITY> 28,447,812
<SALES> 6,986,541
<TOTAL-REVENUES> 7,685,694
<CGS> 5,478,592
<TOTAL-COSTS> 2,109,478
<OTHER-EXPENSES> (134,132)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,187
<INCOME-PRETAX> 210,569
<INCOME-TAX> 0
<INCOME-CONTINUING> (398,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (398,337)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
