<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 [FEE REQUIRED]
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER
NEW WORLD COFFEE, INC.
----------------------
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN IT'S 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 ISSUER (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 MAY 8, 1996, 4,501,979 SHARES OF COMMON STOCK OF THE ISSUER WERE
OUTSTANDING.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT;
YES NO X
------- --------
<PAGE>
NEW WORLD COFFEE, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES
MARCH 31, 1996
PAGE
1. FINANCIAL STATEMENTS
Condensed Balance Sheet as of March 31, 1996 1
Condensed Statements of Operations for
the first quarter ended April 2, 1995
and March 31, 1996 2
Condensed Statements of Cash Flows for the
first quarter ended April 2, 1995
and March 31, 1996 3
Notes to Financial Statements 4
2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND 5 -6
RESULTS OF OPERATIONS FOR THE FIRST QUARTER ENDED MARCH 31, 1996
OTHER INFORMATION 7
<PAGE>
NEW WORLD COFFEE, INC.
----------------------
BALANCE SHEET-UNAUDITED
-----------------------
<TABLE>
<CAPTION>
ASSETS March 31, 1996 December 31, 1995
CURRENT ASSETS:
<S> <C> <C>
Cash $ 4,655,094 $ 951,355
Receivables 103,834 66,570
Inventories 214,439 217,439
Prepaid expenses 305,078 70,000
----------- -----------
Total current assets 5,278,445 1,305,364
PROPERTY AND EQUIPMENT, net 7,073,990 7,076,083
DEBT ISSUANCE COST - 753,627
DEFERRED OFFERING COSTS - 608,000
DEPOSITS AND OTHER ASSETS, net 631,849 523,802
----------- -----------
Total assets $12,984,284 $10,266,876
=========== ===========
LIABILITIES AND STOCKHOLDERS'
DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 587,505 $ 1,158,835
Accrued expenses 670,869 612,348
Accrued compensation 247,931 299,287
Current portion of obligations under 64,446 57,924
capital leases ----------- -----------
Total current liabilities 1,570,751 2,128,394
DEFERRED RENT 570,263 507,432
NOTES PAYABLE - 3,500,000
OBLIGATIONS UNDER CAPITAL LEASES 180,281 111,939
BRIDGE FINANCING - 755,000
CONVERTIBLE REDEEMABLE PREFERRED STOCK - 4,230,054
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value;
10,000,000 shares authorized; 4,502 1,214
4,501,979 shares issued and
outstanding
Additional paid-in capital 17,259,502 1,889,744
Accumulated deficit (6,601,015) (4,856,898)
----------- -----------
Total stockholders' equity 10,662,989 (2,965,940)
----------- -----------
Total liabilities and $12,984,284 $10,266,876
stockholders' equity =========== ===========
</TABLE>
<PAGE>
NEW WORLD COFFEE, INC.
----------------------
STATEMENTS OF OPERATIONS - UNAUDITED
------------------------------------
FOR THE FIRST QUARTER ENDED MARCH 31, 1996 AND APRIL 2, 1995
------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
REVENUES $ 2,278,581 $ 2,051,649
COST OF SALES AND RELATED OCCUPANCY 1,449,213 1,311,951
COSTS
STORE OPERATING EXPENSES 726,333 984,441
----------- -----------
Store operating income 103,035 (244,743)
DEPRECIATION AND AMORTIZATION 264,674 196,502
GENERAL AND ADMINISTRATIVE EXPENSES 520,969 581,985
----------- -----------
Operating loss (682,608) (1,023,230)
INTEREST EXPENSE FOR 1996, Net of 1996 (11,511) (35,288)
Interest Income of approximately 30,000
WRITE-OFF OF DEBT ISSUANCE COST (1,050,000) -
----------- -----------
Net loss $(1,744,119) $(1,058,518)
=========== ===========
NET LOSS PER COMMON SHARE (.48) (.72)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON 3,650,331 1,460,642
SHARES OUTSTANDING =========== ===========
</TABLE>
<PAGE>
NEW WORLD COFFEE, INC.
-----------------------
STATEMENTS OF CASH FLOWS-UNAUDITED
----------------------------------
FOR THE FIRST QUARTER ENDED MARCH 31, 1996 AND APRIL 2, 1995
------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,744,119) $(1,058,518)
Adjustments to reconcile net loss to
net cash used in operating activities-
Depreciation and amortization 264,674 196,502
Write-off of debt issuance costs 1,000,000 -
Increase (decrease) in cash
resulting from changes in
operating assets and liabilities-
Receivables (37,264) 30,582
Inventories 3,000 (132,911)
Prepaid expenses (235,078) 95,537
Deposits and other assets (135,669) (54,270)
Accounts payable (571,330) 259,967
Accrued expenses 58,520 595,426
Accrued compensation (51,356) 147,823
Deferred rent 62,831 71,121
----------- -----------
Net cash used in operating (1,385,791) 151,259
activities ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (234,955) (1,700,807)
----------- -----------
Net cash used in investing (234,955) (1,700,807)
activities ----------- -----------
- ----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, net of 11,512,734 -
issuance costs of approximately
$2,350,000
Additional paid in capital in 236,884 -
connection with bridge financing
Issuance of Series C Convertible - 2,555,817
Preferred Stock
Payments of Series C Redeemable (1,999,997) -
Preferred Stock
Repayment of bridge financing loan (1,000,000) -
Issuance (net) of capital leases 74,864 -
Repayment of notes payable (3,500,000) (500,000)
----------- -----------
Net cash provided by 5,324,485 2,055,817
financing activities ----------- -----------
Net increase in cash 3,703,739 506,269
CASH, beginning of period 951,355 200,801
----------- -----------
CASH, end of period $ 4,655,094 $ 707,070
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest 35,701 35,288
----------- -----------
Non-cash investing and financing
activities:
Equipment purchased under capital 48,251 -
leases -----------
Debt Issuance Costs Incurred in 236,884 -
Connection with Bridge Financing ===========
</TABLE>
<PAGE>
NEW WORLD COFFEE, INC.
NOTED TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The March 31, 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 and Rule 10-01 of Regulation S-X. 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.
<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 27 espresso bars in New York, New Jersey 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 March 31, 1996 Compared to Fiscal Quarter Ended April 2,
1995
Revenues. Revenues increased 11.1% to $2,278,581 for the fiscal quarter ended
March 31, 1996 from $2,051,649 for the comparable 1995 period. Comparable store
sales for the nineteen stores opened for both periods decreased 12.8%.
Management attributes this decrease to its cannibalization of certain existing
stores to solidify the Company's presence in certain trade areas as well record
snowfalls in the Northeast. Sales for the 23 stores which were open during the
first quarter of 1995 contributed to a 4.8 % decrease in revenues. Sales for
the 4 stores opened since April 2, 1995 contributed 15.9% of the percentage
increase in revenues..
Costs and Expenses. Cost of sales and related occupancy costs as a percentage
of revenues for the fiscal quarter ended March 31, 1996 decreased to 63.6% from
63.9% for the comparable 1995 period. The primary components were a decrease of
3.7% 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 initial point of sale system. This was
partiality offset by an increase in occupancy costs of 3.4% 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 fiscal quarter
ended March 31, 1996 decreased to 31.9% from 48.0% for the comparable 1995
period. The primary components were 14.7% decreases in personnel costs
primarily due to more efficient staffing currently and an overstaffing of store
level personnel that occurred during the comparable 1995 period due to a delay
in the closing of the Company's Series C Preferred Stock Offering.
Miscellaneous store expenses decreased 1.7% due to improved cost controls.
Depreciation and amortization expenses as a percentage of revenues for the
fiscal quarter ended March 31, 1996 increased to 11.6% from 9.5% for the
comparable 1995 period primarily due to lower than anticipated revenues on the
commercial locations opened during the fourth quarter of 1994.
General and administrative expenses decreased to $520,969 or 22.9% of
revenues, for the fiscal quarter ended March 31, 1996 compared to $581,985 or
28.4% of revenues, for the comparable 1995 period. General and administrative
expenses for the comparable 1995 period included a non-recurring charge of
$101,000 taken as a reserve for non-operating leases as well as $80,000 of costs
related to special marketing projects (which represent expenditures in
connection with certain specific promotions, which were not continued) incurred
in the first quarter of 1995, without which general and administrative expenses
as a percentage of revenues for the comparable 1995 period would have been
approximately at 19.8% of revenues.
Interest expense, net for the fiscal ended March 31, 1996 increased to
$1,061,511 or 46.6% of revenues, from $35,288 or 1.7% for the comparable 1995
period. This increase resulted from a charge of $1,050,000 for issuance costs
relating to the Company's bridge financing prior to its initial public offering.
<PAGE>
Net Loss. Net loss for the fiscal March 31, 1996 increased to $1,744,119 from
$1,058,518 for the comparable 1995 period. Operating margins improved to a loss
of 30.0% from a loss of 50.1% in the comparable 1995 period, primarily due to
increased store operating income of 16.4% as a percentage of revenues, and a
decrease in general and administrative expenses of 5.7% 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 $11,400,000 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 Common Stock. The
Company's primary capital requirement is for expansion of its retail operations.
Currently, all of the Company's stores are in leased facilities. per store.
The Company currently estimates that capital expenditures through fiscal 1996
will be approximately $10,000,000.
At March 31, 1996 the Company had working capital of $3,707,694 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.
The Company had net cash provided by operating activities of $151,259 for the
first quarter of 1995 and net cash used in operating activities of $1,385,791
for the first quarter of 1996.
The Company had net cash used for investing activities of $1,700,807 for the
first quarter of 1995, and $234,955 for the first quarter of 1996. 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 $2,055,817 for
the first quarter of 1995, and $5,324,485 for the first quarter of 1996. The
Company funded its growth through it's initial public offering raising
approximately $11.4 Million in net proceeds.
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.
The Company is negotiating a commitment letter from its lender to extend its
line of credit of $2,500,000 for an additional one year period.
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.
<PAGE>
PART II - OTHER INFORMATION
NEW WORLD COFFEE, INC.
MARCH 31, 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.
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
(b) Reports on Form 8-k
No reports on Form 8-K were filed during the quarter
ended March 31, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on it's behalf by the
undersigned thereunto duly authorized.
NEW WORLD COFFEE, INC.
Date: By: _______________________________________
R. Ramin Kamfar - Co-President & Co-CEO
Date: By: _______________________________________
Jerold E. Novack - Vice President-Finance
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,655
<SECURITIES> 0
<RECEIVABLES> 104
<ALLOWANCES> 0
<INVENTORY> 214
<CURRENT-ASSETS> 5,278
<PP&E> 8,377
<DEPRECIATION> 1,303
<TOTAL-ASSETS> 12,984
<CURRENT-LIABILITIES> 1,572
<BONDS> 0
0
0
<COMMON> 17,264
<OTHER-SE> (6,601)
<TOTAL-LIABILITY-AND-EQUITY> 12,984
<SALES> 2,279
<TOTAL-REVENUES> 2,279
<CGS> 1,449
<TOTAL-COSTS> 2,175
<OTHER-EXPENSES> 786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,062
<INCOME-PRETAX> (1,744)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,744)
<EPS-PRIMARY> (.48)
<EPS-DILUTED> 0
</TABLE>
