<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER
NEW WORLD COFFEE, INC.
----------------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3690261
- ----------------------------------- -----------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
379 WEST BROADWAY, 4TH FLOOR
NEW YORK, NY 10012
--------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(212) 343-0552
--------------
(ISSUER'S TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE EXCHANGE ACT: NONE
CHECK WHETHER THE REGISTRANT (1) FILED ALL REPORTS REQUIRED TO BE FILED
BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 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
----- -----
AS OF NOVEMBER 8, 1996, 5,043,336 SHARES OF COMMON STOCK OF THE ISSUER WERE
OUTSTANDING.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE);
YES NO X
----- -----
<PAGE>
NEW WORLD COFFEE, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES
SEPTEMBER 29, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
- ------
<S> <C> <C>
1. FINANCIAL STATEMENTS
Condensed Balance Sheet as of September 29, 1996 3
Condensed Statements of Operations for the three and nine months ended
September 29, 1996 and October 1, 1995 4
Condensed Statements of Cash Flows for the nine months ended
September 29, 1996 and October 1, 1995 5
Notes to Financial Statements 6
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 8
CONDITION AND RESULTS OF OPERATIONS FOR THE THREE
MONTHS AND YEAR TO DATE PERIOD ENDED SEPTEMBER 29, 1996
Other Information 12
Signatures 12
</TABLE>
2
<PAGE>
NEW WORLD COFFEE, INC.
----------------------
BALANCE SHEET
-------------
<TABLE>
<CAPTION>
September 29, December 31,
ASSETS 1996 1995
------------ ------------- ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 4,643,949 $ 951,355
Receivables 432,085 66,570
Inventories 318,402 217,439
Prepaid expenses 145,473 70,000
------------ -----------
Total current assets 5,539,909 1,305,364
PROPERTY AND EQUIPMENT, net 7,252,636 7,076,083
DEBT ISSUANCE COST - 753,627
GOODWILL 604,060 -
DEFERRED OFFERING COSTS - 608,000
DEPOSITS AND OTHER ASSETS, net 837,144 523,802
------------ -----------
Total assets $ 14,233,749 $10,266,876
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 527,746 $ 1,158,835
Accrued expenses 590,378 612,348
Accrued compensation 126,403 299,287
Current portion of obligations under 224,567 57,924
capital leases
Current portion of Notes Payable 280,000 -
------------ -----------
Total current liabilities 1,749,094 2,128,394
DEFERRED RENT 691,823 507,432
NOTES PAYABLE 665,000 3,500,000
OBLIGATIONS UNDER CAPITAL LEASES 547,790 111,939
BRIDGE FINANCING - 755,000
CONVERTIBLE REDEEMABLE PREFERRED STOCK - 6,230,051
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible Preferred stock, Series A
, $.001 par value, 2,000,000 shares
authorized, 375 and 0 issued and
outstanding at September 29, 1996 and
December 31, 1995, respectively - -
Common stock, $.001 par value;
20,000,000 shares authorized;
5,043,336 and 1,213,725 shares issued
and outstanding at September 29, 1996
and December 31, 1995, respectively 5,043 1,214
Additional paid-in capital 20,631,064 1,889,744
Accumulated deficit (10,056,065) (4,856,898)
------------ -----------
Total stockholders' equity (deficit) 10,580,042 (2,965,940)
------------ -----------
Total liabilities and stockholders'
equity $ 14,233,749 $10,266,876
------------ -----------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NEW WORLD COFFEE, INC.
----------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE THREE MONTHS AND YEAR TO DATE ENDED SEPTEMBER 29, 1996 AND OCTOBER 1, 1995
----------------------------------------------------------------------------------
(UNAUDITED)
-----------
Three Months Ended Year to Date Ended
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Revenues $2,851,041 $2,555,670 $ 7,758,199 $ 7,024,701
Cost of sales and related occupancy 1,672,315 1,587,386 4,681,744 4,430,332
costs
Store operating expenses 885,350 818,998 2,467,422 2,548,481
---------- ---------- ----------- -----------
STORE OPERATING INCOME 293,376 149,286 609,033 45,888
Depreciation and amortization 335,799 286,761 883,109 728,088
General and administrative expenses 787,685 316,658 2,066,952 1,196,512
Provision for store closings and
reorganization costs - - 1,800,000 -
---------- ---------- ----------- -----------
OPERATING LOSS (830,108) (454,133) (4,141,028) (1,878,712)
Interest income (expense), net (26,656) (98,215) (7,139) (190,492)
Write-off of debt issuance cost - - (1,050,000) -
---------- ---------- ----------- -----------
NET LOSS $ (856,764) $ (552,348) $(5,198,167) $(2,069,204)
========== ========== =========== ===========
NET LOSS PER COMMON SHARE $(.19) $(.38) $(1.21) (1.42)
========== ========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,784,564 1,460,642 4,353,009 1,460,642
========== ========== =========== ===========
</TABLE>
4
<PAGE>
NEW WORLD COFFEE, INC.
----------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEAR TO DATE ENDED SEPTEMBER 29, 1996 AND OCTOBER 1, 1995
-----------------------------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
For The Nine Months Ended
September 29 October 1
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,199,167) $(2,069,204)
Adjustments to reconcile net loss to
net cash used in operating activities-
Depreciation and amortization 883,109 696,639
Write-off of debt issuance costs 1,000,050 -
Provision for store closings and
reorganization costs 1,800,000
Increase (decrease) in cash resulting
from changes in operating assets and
liabilities-
Receivables (365,335) 10,748
Inventories (100,963) (91,534)
Prepaid expenses (75,473) (2,941)
Deposits and other assets (313,342) (314,076)
Accounts payable (631,089) 585,071
Accrued expenses (21,970) 325,536
Accrued compensation (172,884) 28,979
Deferred rent 184,391 206,920
----------- -----------
Net cash used in operating activities (3,012,673) (623,862)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,070,059) (3,417,491)
Cash paid in connection with
acquisitions, including acquisition
costs (692,500) -
----------- -----------
Net cash used in investing activities (1,762,559) (3,417,491)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, net of
issuance costs of approximately
$2,200,000 11,552,782 -
Issuance of Series A Convertible
Preferred Stock 3,320,189 -
Issuance of Series C Convertible
Preferred Stock - 2,744,529
Payments of Series C Redeemable
Preferred Stock (1,999,997) -
Repayment of bridge financing loan (755,000) -
Payments on capital leases (150,148) -
Repayment of notes payable (3,500,000) (500,000)
Issuance of notes payable - 2,250,000
----------- -----------
Net cash provided by financing
activities 8,467,826 4,494,529
----------- -----------
Net increase in cash 3,692,594 453,176
CASH, beginning of period 951,355 200,801
----------- -----------
CASH, end of period $ 4,643,949 $ 653,977
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 86,623 $ 271,928
----------- -----------
Non-cash investing and financing
activities:
Equipment purchased under capital
leases $ 150,148 $ 37,505
----------- -----------
Notes issued in connection with
acquisitions $ 920,000 $ -
----------- -----------
Debt issuance costs incurred in
connection with bridge financing $ 236,884 $ -
=========== ===========
</TABLE>
5
<PAGE>
NEW WORLD COFFEE, INC.
NOTED TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The September 29, 1996 balance sheet presented herein was derived from the
audited December 31, 1995 financial statements of the Company.
2. These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
the instructions to Form 10-QSB. The financial statements should be read
in conjunction with the audited financial statements of the Company for the
year ended December 31, 1995 for a description of the significant
accounting policies, which have continued without change, and other
footnote information.
3. All adjustments (recurring in nature) which are, in the opinion of
management, necessary for a fair presentation of the results of the interim
periods have been included. The results of the interim periods are not
necessarily indicative of the results for the full year.
4. The Company completed its initial public offering on February 1, 1996 of
2,500,000 shares realizing approximately $11,500,000 in net proceeds.
5. The Company completed the sale of 375 shares of Series A Convertible
Preferred Stock on June 28, 1996 realizing approximately $3,320,000 in net
proceeds after commissions and costs of $425,000. These shares will
convert to common stock within three years at not more than $3.975 per
share and have an 8% coupon.
6. The Company took a charge in the second quarter of $1,500,000 to provide
for the closing of five unprofitable stores. This represents a provision
for writedowns of property and equipment of $1,350,000 and provides for an
additional accrual of $150,000 for other closure costs. In addition, the
Company provided for a reorganization charge of $300,000 which primarily
consisted of severance and related benefits.
7. On June 13, 1996, the Company purchased three Coopers Coffee Bar
("Coopers") locations for $242,500 cash and a $770,000 note payable over 4
years which bears interest at 6%. The purchase price has been allocated to
the assets acquired based on their fair value at the date of acquisition
and the difference between the cost of acquiring the locations and the
current estimated fair value of the net assets acquired will be treated as
goodwill for accounting purposes, which is being amortized over 10 years.
The Company is currently in the process of completing a final purchase
price allocation for this acquisition and such allocation will be completed
by year end. The consolidated statements of operations of the Company
include the results of Coopers since the date of acquisition.
8. On September 30, 1996, the Company purchased five Willoughby's locations
(plus one under construction) and its roasting facility for total
consideration of $3,800,000 consisting of $1,300,000 cash paid at the
closing with an additional $600,000 due on July 1, 1997, $200,000 worth of
restricted common shares, and a $1,700,000 promissory note with $600,000
due on 1/5/98 and $1,100,000 payable 1/5/99 bearing interest at 6%. The
purchase price will be allocated to the assets acquired based on their fair
market value at the date of acquisition and the difference between the cost
of acquiring the assets and the purchase price will be treated as goodwill
for accounting purposes, which will be amortized over 20 years. The Company
is currently in the process of completing a final purchase price allocation
for this acquisition and such allocation will be completed by year end.
6
<PAGE>
Following is the pro-forma presentation as if the three Coopers locations,
the five Willoughby's stores, the Willoughby's plant and the closing of 5
unprofitable stores had occurred on January 1, 1995 (amounts in 000's):
<TABLE>
<CAPTION>
Year to Date Ended
--------------------------------------------
September 29, 1996 October 1, 1995
------------------- -----------------
<S> <C> <C>
Revenue $ 9,518.2 $ 9,060.0
Store operating income 1,505.9 1,043.6
Operation loss (1,513.0) (1,097.1)
Net loss (2,977.3) (1,394.7)
Net loss per share $ (.70) $ (.95)
</TABLE>
The pro forma information presented above does not purport to be indicative of
the results that actually would have been obtained if the combined operations
had been conducted during the periods presented or of future operations of the
combined operations. Pro forma net loss per share for the year to date period
ended September 29, 1996 includes $75,000 for preferred stock dividends accrued
in the third quarter.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS FORM 10-Q UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE, OR ACHIEVEMENTS OF NEW WORLD COFFEE TO BE MATERIALLY DIFFERENT FROM
ANY FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING:
COMPETITION; SUCCESS OF OPERATING INITIATIVES; DEVELOPMENT SCHEDULES;
ADVERTISING AND PROMOTIONAL EFFORTS; ADVERSE PUBLICITY; ACCEPTANCE OF NEW
PRODUCT OFFERINGS; AVAILABILITY, LOCATIONS, AND TERMS OF SITES FOR STORE
DEVELOPMENT; CHANGES IN BUSINESS STRATEGY OR DEVELOPMENT PLANS; AVAILABILITY AND
TERMS OF CAPITAL; FOOD, LABOR, AND EMPLOYEE BENEFIT COSTS; CHANGES IN GOVERNMENT
REGULATIONS; REGIONAL WEATHER CONDITIONS; AND OTHER FACTORS REFERENCED IN THIS
FORM 10-Q OR IN THE COMPANY'S FORM 10-K FOR ITS 1995 FISCAL YEAR.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company opened its first espresso bar in February 1993 in New York and has
grown to 36 espresso bars in New York, New Jersey, Connecticut and Pennsylvania
since that date.
The Company's experience has been that espresso bars in residential and
shopping areas generally offer more attractive economics than central business
district sites as they typically are open up to 14 hours a day, seven days a
week and attract customers throughout the day, resulting in more cost-effective
staffing and operations. Based on this experience, the Company's site selection
strategy has shifted to opening more espresso bars in residential and shopping
areas.
The Company has incurred losses in each fiscal year from inception primarily
due to the cost of retail store expansion and developing an infrastructure to
support future growth. The Company's fiscal year ends on the Sunday closest to
December 31. Prior to fiscal 1995 the Company was on a calendar year basis.
Fiscal Quarter Ended September 29, 1996 Compared to Fiscal Quarter Ended October
1, 1995
Revenues. Revenues increased 11.6% to $2,851,038 for the fiscal quarter ended
September 29, 1996 from $2,555,669 for the comparable 1995 period. Comparable
store sales for the 24 stores open for both periods decreased 6.5%. Management
attributes this decrease to its cannibalization of certain existing stores to
solidify the Company's presence in Manhattan and the capacity constraints
experienced in certain of the Company's primarily residential stores which
average approximately 615 square feet in size and are achieving approximately
$900 in sales per square foot. The Company has, in response, expanded both its
geographic focus (to four states: New York, New Jersey, Connecticut, and
Pennsylvania) and its average store size (to 1,500 to 2,000 square feet) and
believes that its comparable store sales should improve as its newer format
stores enter the comparable base. See "Special Note Regarding Forward-looking
Statements".
Costs and Expenses. Cost of sales and related occupancy costs as a percentage
of revenues for the fiscal quarter ended September 29, 1996 decreased to 58.7%
from 62.1% for the comparable 1995 period. The primary components were a
decrease of 4.3% in cost of goods due to the Company's implementation of its
new personal computer based point of sale system as well as improved vendor
pricing. Occupancy expense as a percentage of revenues increased 0.9% .
Store operating expenses as a percentage of revenues for the fiscal quarter
ended September 29, 1996 decreased to 31.1% from 32.0% for the comparable 1995
period. The primary component was a 0.9% decrease in miscellaneous store
expenses due to increased cash controls and reduced supply costs.
Depreciation and amortization expenses as a percentage of revenues for the
fiscal quarter ended September 29, 1996 increased to 11.8% from 11.2% for the
comparable 1995 period primarily due to costs associated with the implementation
of the Company's new personal computer based point of sale system.
General and administrative expenses increased to $787,686 or 27.6% of
revenues, for the fiscal quarter ended September 29, 1996 compared to $316,658
or 12.4% of revenues, for the comparable 1995 period. Corporate payroll and
recruiting expense increased by $179,926 due to the addition of a Chief
Operating Officer, a Vice President of Real Estate and Development, and
Directors of Construction, Human Resources, and Training as the Company
continues to add to its infrastructure to support its planned expansion.
General and administrative expenses also include $58,129 or 2.0% of revenues
relating to a corporate marketing program begun in the second quarter.
Interest expense, net for the fiscal quarter ended September 29, 1996
decreased to $26,656 or 1.0% of revenues, from $98,215 or 3.8% for the
comparable 1995 period. This decrease resulted from interest earned on cash and
cash equivalents resulting from the Company's initial public offering and
private placement.
8
<PAGE>
Net Loss. Net loss for the fiscal quarter ended September 29, 1996 increased
to $856,764 from $552,348 for the comparable 1995 period. Operating margins
decreased to a loss of 29.1% from a loss of 17.7% in the comparable 1995 period.
Store operating income increased by 4.5% as a percentage of revenues but this
was offset by an increase in general and administrative expenses of 15.2% as a
percentage of revenues.
Year to Date Ended September 29, 1996 Compared to the Year to Date Ended October
1, 1995
Revenues. Revenues increased 10.4% to $7,758,199 for the year to date ended
September 29, 1996 from $7,024,701 for the comparable 1995 period. Comparable
store sales for the nineteen stores opened for both periods decreased 9.4%.
Management attributes this decrease to record snowfalls in the Northeast in the
first quarter and to the Company's cannibalization of certain existing stores
to solidify its presence in Manhattan and the capacity constraints experienced
in certain of the Company's primarily residential existing stores which average
approximately 615 square feet in size and are achieving approximately $900 in
sales per square foot. The Company has, in response, expanded both its
geographic focus to four states: New York, New Jersey, Connecticut, and
Pennsylvania and its average store size (to 1,500 to 2,000 square feet) and
believes that its comparable store sales should improve as its newer format
stores enter the comparable base. See "Special Note Regarding Forward-looking
Statements".
Costs and Expenses. Cost of sales and related occupancy costs as a percentage
of revenues for the year to date ended September 29, 1996 decreased to 60.3%
from 63.1% for the comparable 1995 period. The primary components were a
decrease of 3.9% in cost of goods due to the Company's ability to negotiate
improved vendor pricing as a result of increased purchasing power and reduced
shrinkage due to the implementation of the Company's personal computer based
point of sale system. This was partially offset by an increase in occupancy
costs of 1.2% primarily due to higher occupancy expense as a percentage of
revenues on certain commercial store locations.
Store operating expenses as a percentage of revenues for the year to date
ended September 29, 1996 decreased to 31.8% from 36.3% for the comparable 1995
period. The primary component was a 3.9% decrease in personnel costs primarily
due to more efficient staffing currently and an overstaffing of store level
personnel that occurred during the first quarter of 1995 period due to a delay
in the closing of the Company's Series C Preferred Stock Offering.
Miscellaneous store expenses decreased 0.6% due to improved cost controls.
Depreciation and amortization expenses as a percentage of revenues for the
year to date ended September 29, 1996 increased to 11.4% from 10.4% for the
comparable 1995 period primarily due to lower than anticipated revenues on
certain commercial locations.
General and administrative expenses increased to $2,066,952 or 26.6% of
revenues, for the year to date ended September 29, 1996 compared to $1,196,512
or 17.0% of revenues, for the comparable 1995 period. Corporate payroll expense
increased by $397,096 to $821,947 or 10.6% as a percentage of revenues due to
the additions of the Company's Chief Operating Officer, Vice President of Real
Estate and Development, Directors of Construction, Human Resources and Training
as the Company continues to add to its infrastructure to support its planned
expansion.
The Company recorded a provision for store closings and reorganization costs
in the fiscal quarter ended June 30, 1996 of $1,800,000. This charge was taken
to provide for the closing of five unprofitable stores, four of which are not in
residential areas, in accordance with the Company's strategy of concentrating
its business in primarily residential areas, and the reorganization of senior
management.
Interest expense, net for the year to date ended September 29, 1996 increased
to $1,057,139 or 13.6% as a percentage of revenues, from $190,492 or 2.7% for
the comparable 1995 period. This increase resulted from a charge taken in the
first fiscal quarter of $1,050,000 for issuance costs relating to the Company's
bridge financing prior to its initial public offering.
9
<PAGE>
Net Loss. Net loss for the year to date ended September 29, 1996 increased to
$5,198,167 from $2,069,204 for the comparable 1995 period. Operating margins
decreased to a loss of 53.3% from a loss of 26.8% in the comparable 1995 period,
primarily due to increased store operating income of 7.3% as a percentage of
revenues, and an increase in general and administrative expenses of 9.6% as a
percentage of revenues and the provision for store closings of 19.3% as a
percentage of revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company successfully completed its initial public offering on February 1,
1996. The Company realized approximately $11,500,000 in net proceeds. The
Company repaid its bank line of $3,500,000 and repurchased from an existing
shareholder approximately $2,000,000 of the Company's Series C Convertible
Preferred Stock. On June 28th, 1996 the Company completed the sale of Series A
Convertible Preferred Stock realizing approximately $3,320,000 in net proceeds.
The Company's capital requirement is primarily for expansion of its retail
operations. Currently, all of the Company's stores are in leased facilities.
The Company currently estimates that capital expenditures and acquisitions
through fiscal 1996 will be approximately $6,000,000 which includes the
Willoughby's acquisition.
At September 29, 1996 the Company had working capital of $3,790,815 compared
to a working capital deficit of $823,030 at December 31, 1995. This change in
working capital is primarily due to the Company's completion of its initial
public offering on February 1, 1996 and the sale of Series A Convertible
Preferred Stock on June 28, 1996.
The Company is pursuing various alternative financing methods to continue to
fund its additional expansion.
The Company had net cash used in operating activities of $3,012,673 for the
first three fiscal quarters of 1996 and net cash used in operating activities of
$623,862 for the first three fiscal quarters of 1995.
The Company had net cash used for investing activities of $1,762,559 for the
first three fiscal quarters of 1996, and $3,417,491 for the first three fiscal
quarters of 1995. The primary use of cash for investing activities was for
capital expenditures related to the Company's retail store expansion.
The Company had net cash provided by financing activities of $8,467,826 for
the first three fiscal quarters of 1996, and $4,494,529 for the first three
fiscal quarters of 1995. The Company funded its growth through it's initial
public offering and the sale Series A Convertible Preferred Stock raising
approximately $11.5 million and $3.320 million in net proceeds respectively.
In December 1995 and January 1996, the Company obtained a bridge loan totaling
$1,000,000 from certain individuals and financial institutions. The loan
carried an interest rate of 10% and was repaid within ten days after the closing
of the public offering. In connection with the loan, the Company issued to the
lenders warrants to purchase 181,818 shares of its Common Stock at a price of
$0.01 per share. The warrants are exercisable immediately, but the shares
issued pursuant to the warrants are subject to a six month lock-up agreement.
SEASONALITY AND GENERAL ECONOMIC TRENDS
The Company anticipates that its business will be affected by general economic
trends that affect retailers in general. While the Company has not operated
during a period of high inflation, it believes based on industry experience that
it would generally be able to pass on increased costs resulting from inflation
to its customers. The Company's business may be affected by other factors,
including increases in the commodity prices of green coffee, acquisitions by the
Company of existing espresso bars, existing and additional competition,
marketing programs, weather, special or unusual events, and variations in the
number of store openings. The Company has few, if any, employees at the minimum
wage level and therefore believes that an increase in the minimum wage would
have minimal impact on its operations and financial condition.
10
<PAGE>
PART II - OTHER INFORMATION
NEW WORLD COFFEE, INC.
SEPTEMBER 29, 1996
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
On February 1, 1996 the Company completed its initial public
offering selling 2,500,000 shares of Common Stock at $5.50 per
share.
On June 28th, 1996 the Company completed the sale of Series A
Convertible Preferred Stock selling 375 shares at $10,000 per
share. These shares are convertible at not more than $3.975
per share.
Item 3 . Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None
---------
(b) Reports on Form 8-k
Current Reports on Form 8-K (Date of Event June 28, 1996) was
filed with the SEC on July 12, 1996. Report was filed for item
2 relating to the sale of convertible preferred securities.
SIGNATURES
In accordance with 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.
NEW WORLD COFFEE, INC.
Date: By: _______________________________________
R. Ramin Kamfar -President & CEO
Date: By: _______________________________________
Jerold E. Novack - Vice President-Finance
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> SEP-29-1996
<CASH> 4,644
<SECURITIES> 0
<RECEIVABLES> 578
<ALLOWANCES> 0
<INVENTORY> 318
<CURRENT-ASSETS> 5,540
<PP&E> 9,030
<DEPRECIATION> 1,777
<TOTAL-ASSETS> 14,234
<CURRENT-LIABILITIES> 1,749
<BONDS> 1,212
3,320
0
<COMMON> 5
<OTHER-SE> 7,255
<TOTAL-LIABILITY-AND-EQUITY> 14,234
<SALES> 7,758
<TOTAL-REVENUES> 7,758
<CGS> 3,009
<TOTAL-COSTS> 4,682
<OTHER-EXPENSES> 7,224
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,050
<INCOME-PRETAX> (5,198)
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