<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 JUNE 29, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27148
NEW WORLD COFFEE, INC.
(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, INCLUDING ZIP CODE)
(212) 343-0552
(Issuer's telephone number)
Check whether the registrant (1) has 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
----- -----
Transitional small business disclosure format (check one): Yes No X
--- ---
Number of shares of common stock, $.001 par value per share, outstanding:
As of June 29, 1997: 8,921,304.
<PAGE>
NEW WORLD COFFEE, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES
JUNE 29, 1997
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Condensed Consolidated Balance Sheets as of June 29, 1997 and
December 29, 1996................................................... -3-
Condensed Consolidated Statements of Operations for the three months
and year to date period ended June 29, 1997 and June 30, 1996....... -4-
Condensed Consolidated Statements of Cash Flows for the six months
ended June 29, 1997 and June 30, 1996............................... -5-
Notes to Consolidated Financial Statements............................. -6-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 29,
1997................................................................. -9-
ITEM 3. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE YEAR TO DATE PERIOD ENDED JUNE 29,
1997................................................................. -10-
PART II: OTHER INFORMATION................................................... -12-
SIGNATURES.......................................................... -13-
</TABLE>
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NEW WORLD COFFEE, INC.
----------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
June 29, December 29,
1997 1996
--------------- --------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash................................... $ 1,678,018 $ 1,419,786
Receivables............................ 327,177 288,329
Inventories............................ 669,865 450,722
Prepaid expenses....................... 363,411 116,533
------------ ------------
Total current assets........... 3,038,471 2,275,370
Property and Equipment, net............. 10,570,312 10,208,339
Goodwill, net of accumulated
amortization........................... 3,775,394 3,567,721
Deposits and Other Assets, net.......... 1,021,563 904,757
------------ ------------
Total assets................... $ 18,405,740 $ 16,956,187
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------
Current Liabilities:
Accounts payable....................... $ 568,227 $ 866,098
Accrued expenses....................... 747,142 1,100,942
Accrued compensation................... 71,558 318,487
Current portion of notes payable....... 1,480,000 846,645
Current portion of obligations under
capital leases........................ 230,022 230,022
------------ ------------
Total current liabilities...... 3,096,949 3,362,194
------------ ------------
Deferred Rent........................... 758,886 614,285
Notes Payable........................... 1,548,750 2,200,269
Obligations Under Capital Leases........ 589,474 496,961
Stockholders' Equity:
Preferred stock, $.001 par value;
2,000,000 shares authorized............ - -
Series A Convertible Preferred Stock,
$.001 par value;
400 shares authorized, 375 shares
issued, 115 and
320 shares outstanding.................. - -
Series B Convertible Preferred Stock,
$.001 par value;
225 shares authorized, 137.5 shares
issued, 137.5
and 0 shares outstanding................ - -
Common stock, $.001 par value;
20,000,000 shares
authorized; 8,921,304 and 5,034,812
shares issued and outstanding......... 8,921 5,035
Additional paid-in capital............. 24,767,033 20,805,479
Accumulated deficit.................... (12,364,273) (10,528,036)
------------ ------------
Total stockholders' equity........... 12,411,681 10,282,478
------------ ------------
Total liabilities and stockholders'
equity.............................. $ 18,405,740 $ 16,956,187
============ ============
</TABLE>
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NEW WORLD COFFEE, INC.
----------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE FISCAL QUARTER ENDED JUNE 29, 1997 AND JUNE 30, 1996
------------------------------------------------------------
AND YEAR TO DATE PERIOD ENDED JUNE 29, 1997 AND JUNE 30, 1996
-------------------------------------------------------------
UNAUDITED
---------
<TABLE>
<CAPTION>
Fiscal Quarter Ended Year to Date Period Ended
--------------------------- ----------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues $4,019,243 $ 2,628,577 $ 7,686,798 $ 4,907,158
Cost of sales and related occupancy
costs 2,146,058 1,560,216 4,232,954 3,009,429
Store operating expenses 1,338,907 855,739 2,512,795 1,582,072
---------- ----------- ----------- -----------
STORE OPERATING INCOME 534,278 212,622 941,049 315,657
Depreciation and amortization 550,070 282,636 1,070,482 547,310
General and administrative expenses 739,182 758,298 1,515,258 1,279,267
Provision for store closings and
reorganization costs - 1,800,000 - 1,800,000
---------- ----------- ----------- -----------
OPERATING LOSS (754,974) (2,628,312) (1,644,691) (3,310,920)
Interest income (expense), net (95,523) 31,028 (191,546) 19,517
Write-off of debt issuance cost - - - (1,050,000)
---------- ----------- ----------- -----------
NET LOSS $ (850,497) $(2,597,284) $(1,836,237) $(4,341,403)
========== =========== =========== ===========
NET LOSS PER COMMON SHARE $(.12) $(.57) $(.30) (1.06)
========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,856,074 4,522,716 6,185,609 4,086,523
========== =========== =========== ===========
</TABLE>
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NEW WORLD COFFEE, INC.
-----------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEAR TO DATE PERIOD ENDED JUNE 29, 1997 AND JUNE 30, 1996
-----------------------------------------------------------------
UNAUDITED
---------
<TABLE>
<CAPTION>
June 29, June 30,
1997 1996
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................................. $(1,836,237) $(4,341,403)
Adjustments to reconcile net loss to net cash used in operating activities-
Depreciation and amortization.................................................... 1,070,482 547,310
Write-off of debt issuance costs................................................. - 1,000,000
Provision for store closings and reorganization costs............................ - 1,800,000
Increase (decrease) in cash resulting from changes in operating assets and
liabilities-
Receivables.................................................................. (38,848) (56,339)
Inventories.................................................................. (219,143) (107,189)
Prepaid expenses............................................................. (246,878) (208,926)
Deposits and other assets.................................................... (116,806) (194,021)
Accounts payable............................................................. (297,871) (624,827)
Accrued expenses............................................................. (353,800) (282,100)
Accrued compensation......................................................... (246,929) (239,661)
Deferred rent................................................................ 144,601 122,403
----------- -----------
Net cash used in operating activities.................................... (2,141,429) (2,584,753)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................................. (1,432,455) (432,123)
Capitalized Leases................................................................... 92,513 -
Goodwill............................................................................. (207,673) -
Cash paid in connection with the Coopers acquisition, including acquisition costs...... - (442,500)
----------- -----------
Net cash used in investing activities.................................... (1,547,615) (874,623)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, net of issuance costs...................................... 3,500,711 11,552,782
Additional paid in capital in connection with the issuance of Series A Preferred
Stock.............................................................................. - 3,325,000
Redemption of Series C Redeemable Preferred Stock................................... - (1,999,997)
Repayment of bridge financing loan................................................... - (755,000)
Repayments of capital leases......................................................... 464,729 (59,343)
Repayment of notes payable........................................................... (18,164) (3,500,000)
----------- -----------
Net cash provided by financing activities................................ 3,947,276 8,563,442
----------- -----------
Net increase (decrease) in cash.......................................... 258,232 5,104,066
CASH, beginning of period.............................................................. 1,419,786 951,355
----------- -----------
CASH, end of period.................................................................... $ 1,678,018 $ 6,055,421
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest......................................................................... 70,822 45,452
Non-cash investing and financing activities:
Equipment purchased under capital leases......................................... 374,664 475,061
Notes issued in connection with the Coopers acquisition.......................... - 770,000
Debt issuance costs incurred in connection with bridge financing................. - 236,884
</TABLE>
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NEW WORLD COFFEE, INC.
NOTED TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The June 29, 1997 consolidated balance sheet presented herein was derived
from the audited December 29, 1996 consolidated financial statements of the
Company.
2. These consolidated 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 consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
of the Company for the year ended December 29, 1996 for a description of the
significant accounting policies, which have continued without change, and other
note information.
3. The consolidated financial statements included herein contain the accounts
of the Company and its wholly-owned subsidiary, Willoughby's, as of the date of
acquisition, October 25, 1996. All material intercompany balances and
transactions have been eliminated for periods subsequent to that date.
4. 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.
5. The Company completed its initial public offering ("IPO") on February 1,
1996 of 2,500,000 shares of Common Stock, par value $.001 at a purchase price
of $5.50 per share, for aggregate net proceeds of approximately $11.1 million.
A portion of the proceeds was used to repay the outstanding balance under the
Company's then existing line of credit agreement ($3,500,000), the bridge
financing ($1,000,000) and the redeemable Series C Preferred Stock ($1,999,997).
In connection with the IPO, the Convertible Redeemable Preferred Stock Series A,
B, and C was converted into common stock of the Company.
6. In December 1995 and January 1996, the Company received $1,000,000 in
bridge financing from a group of lenders, which included $200,000 from certain
related parties. This borrowing bore interest at 10% and was repaid from the
proceeds of the IPO. In connection with this bridge financing, the Company
issued warrants to purchase 181,818 shares of Common Stock at an exercise price
of $.01 per share. During the first quarter of 1996, the Company repaid the
outstanding balance under the loan with proceeds from the IPO and recorded a
write-off of debt issuance costs of $1,050,000 which has been reflected in the
consolidated statement of operations for the first quarter ended March 31, 1996.
7. The Company completed the sale of 375 shares of Series A Convertible
Preferred Stock, par value $.001 on June 28, 1996 realizing approximately
$3,320,000 in net proceeds after commissions and costs. During the third
quarter of 1996, 55 shares of Series A Convertible Preferred Stock were
converted into 221,022 shares of Common Stock. During the first quarter ended
March 30, 1997, 175 shares of Series A Convertible Preferred Stock
-6-
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were exchanged for 137.5 shares of Series B Convertible Preferred Stock, par
value $.001 and 194,440 shares of Common Stock. During the second quarter of
1997 30 shares of Series A Convertible Preferred Stock were exchanged for
150,000 shares of Common Stock.
8. On February 27, 1997, the Company completed a private placement of
1,000,000 shares of Common Stock and realized net proceeds of approximately
$1,345,000.
9. In April 1997, the Company filed its Uniform Franchise Offering Circular
("UFOC") with the Federal Trade Commission and the Office of the Attorney
General of the State of New York. On May 6, 1997, the UFOC was approved by the
State of New York.
10. On May 23, 1997, the Company filed a registration statement with the
Securities and Exchange Commission on Form SB-2 relating to the sale on a
minimum basis of such number of shares of Common Stock resulting in gross
proceeds of $250,000 and on a maximum basis of such number of shares of Common
Stock resulting in gross proceeds of $2,500,000. The Company realized
approximately $1,875,000 in gross proceeds from the offering of approximately
1,500,000 shares of Common Stock. In connection with such offering, finders fees
totaling approximately $127,500 were paid to certain finders. In addition, the
Company satisfied obligations totaling approximately $480,000 through the
issuance of approximately 385,000 shares of Common Stock to among others,
certain vendors.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS FORM 10-QSB 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 1996 WITH RESPECT TO THE FINANCIAL CONDITION AND BUSINESS OF THE
COMPANY. THE WORDS "ESTIMATE", "PLAN", "INTEND", "BELIEVES", "EXPECT", AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE AND ARE SUBJECT TO KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES, AND OTHER FACTORS WHICH COULD CAUSE THE ACTUAL RESULTS,
PERFORMANCE, AND ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY
FUTURE RESULTS, PERFORMANCE (FINANCIAL OR OPERATING), OR ACHIEVEMENTS EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG
OTHERS, THE FOLLOWING: COMPETITION; SUCCESS OF OPERATING AND FRANCHISING
INITIATIVES; DEVELOPMENT SCHEDULES; ADVERTISING AND PROMOTIONAL EFFORTS; ADVERSE
PUBLICITY; ACCEPTANCE OF NEW PRODUCT OFFERINGS; AVAILABILITY OF NEW 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-QSB OR IN THE COMPANY'S FORM SB2
DATED MAY 23, 1997.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
New World Coffee, Inc., is the only integrated coffee and bagel retailer in the
United States. The Company owns, operates and franchises 39 stores, consisting
of 27 in New York, seven in Connecticut, three in Pennsylvania and two in New
Jersey. In May 1997 the Company announced its franchising program. To date the
Company has signed franchises for additional stores in New York, New Jersey,
Maryland and Germany.
The Company differentiates itself from other coffee or bagel retailers by
offering an integrated concept based on gourmet coffee and fresh baked bagels
and bagel sandwiches, allowing the stores to capture all three day parts, i.e.
breakfast, lunch and afternoon/evening neighborhood gathering place. The
Company's coffee operations are vertically integrated, with the Company
purchasing beans from around the world which are roasted in its Connecticut
plant.
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 JUNE 29, 1997 COMPARED TO FISCAL QUARTER ENDED JUNE 30,
1996
Revenues. Revenues increased 52.9% to $4,019,243 for the fiscal quarter ended
June 29, 1997 from $2,628,579 for the comparable 1996 period. Comparable store
sales for the 21 stores open for both periods increased 2.3%. Comparable sales
for the Company's converted coffee and bagel store increased 27.8% in the
quarter.
Costs and Expenses. Cost of sales and related occupancy costs as a percentage
of revenues for the fiscal quarter ended June 29, 1997 decreased to 53.4% from
59.4% for the comparable 1996 period. The primary components were a decrease of
3.3% in cost of goods due to better control of store purchasing and waste,
improved coffee costs due to vertical integration and improved vendor pricing
due to greater economies of scale; and a 2.7% decrease in occupancy costs due to
lower rental expense associated with stores located outside of New York City.
Store operating expenses as a percentage of revenues for the fiscal quarter
ended June 29, 1997 increased to 33.3% from 32.6% for the comparable 1996
period. Store payroll as a percentage of revenues increased by 0.3% as the
benefits of improved staffing efficiencies were partly offset by higher payroll
costs for stores opened in the latter part of 1996 which experienced higher
payroll costs during their ramp-up period. Miscellaneous store expenses
increased 0.4% as a percent of revenues reflecting higher utility and other
expenses during the ramp up period of stores opened late in 1996.
Depreciation and amortization expenses as a percentage of revenues for the
fiscal quarter ended June 29, 1997 increased to 13.7% from 10.8% for the
comparable 1996 period primarily due to an increase in the number of new stores
opened during the latter part of 1996 which carry
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higher depreciation expense as a percentage of revenues during their ramp-up
period as well as amortization related to the acquisitions made during the
latter half of 1996.
General and administrative expenses for the current quarter decreased as a
percentage of revenues to 18.4% from 28.9% for the fiscal quarter ended June 30,
1996. General and administrative expenses include $50,000 in non-recurring
severance charges associated with corporate overhead reduction in the second
quarter of 1997. The Company expects this improvement to continue as its
investment in building a senior management team is substantially complete and
further growth will enable it to leverage these costs.
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. There were no such charges for the comparable 1997 period.
Interest expense, net for the fiscal quarter ended June 29, 1997 increased to
$95,523, or 2.4% of revenues, from an interest income of $31,199, or 1.2% for
the comparable 1996 period. The 1997 expense reflects interest on the notes
issued during 1996 in connection with the various acquisitions and interest on
capital leases entered into subsequent to the first quarter of 1996.
Net Loss. Net loss for the fiscal quarter ended June 29, 1997 decreased to
$850,497 from $2,597,295 for the comparable 1996 period. Operating margins
improved to a loss of 21.2% from a loss of 98.8% in the comparable 1996 period,
primarily due to increased store operating income of 5.2% as a percentage of
revenues, a decrease in general and administrative expenses of 10.4% as a
percentage of revenues, the 1996 provision for store closings of 57.1% as a
percentage of revenues and 1996 restructuring charges of 11.4% as a percentage
of revenues.
YEAR TO DATE PERIOD ENDED JUNE 29, 1997 COMPARED TO THE YEAR TO DATE PERIOD
ENDED JUNE 30, 1996
Revenues. Revenues increased 56.6% to $7,686,798 for the year to date period
ended June 29, 1997 from $4,907,158 for the comparable 1996 period. Comparable
store sales for the 21 stores open for both periods increased 2.1%. Comparable
sales for the Company's converted coffee and bagel store increased 14.4% for
the six months ended June 29, 1997.
Costs and Expenses. Cost of sales and related occupancy costs as a percentage
of revenues for the year to date period ended June 29, 1997 decreased to 55.0%
from 61.4% for the comparable 1996 period. The primary components were a
decrease of 3.6% in cost of goods due to better control of store purchasing and
waste, improved coffee costs due to vertical integration and improved vendor
pricing due to greater economies of scale; and a 2.8% decrease in occupancy
costs due to lower rental expense associated with stores located outside of New
York City.
Store operating expenses as a percentage of revenues for the year to date
period ended June 29, 1997 increased to 32.7% from 32.2% for the comparable 1996
period. Miscellaneous store
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expenses increased 0.5% as a percentage of revenues reflecting higher utility
and other expenses during the ramp up period of stores opened late in 1996.
Depreciation and amortization expenses as a percentage of revenues for the year
to date period ended period June 29, 1997 increased to 13.9% from 11.2% for the
comparable 1996 period primarily due to an increase in the number of new stores
opened during the latter part of 1996 which carry higher depreciation expense as
a percentage of revenues during their ramp-up period as well as amortization
related to the acquisitions made during the latter half of 1996.
General and administrative expenses decreased as a percentage of revenues to
19.7% for the year to date period ended June 29, 1997 from 26.1% of revenues for
the comparable 1996 period. General and administrative expenses include $50,000
in non-recurring severance charges associated with corporate overhead reduction
in the second quarter of 1997. The Company expects general and administrative
expenses as a percentage of revenue to continue to decrease as its investment in
building a senior management team is substantially complete and further growth
will enable it to leverage these costs.
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. There were no such charges for the comparable 1997 period.
Interest expense, net for the year to date period ended June 29, 1997 decreased
to $191,546 or 2.5% as a percentage of revenues, from $1,029,402 or 21.0% for
the comparable 1996 period. This decrease resulted from a charge taken in the
first fiscal quarter of 1996 of $1,050,000 for issuance costs relating to the
Company's bridge financing prior to its initial public offering.
Net Loss. Net loss for the year to date period ended June 29, 1997 decreased to
$1,836,237 from $4,341,420 for the comparable 1996 period. Operating margins
decreased to a loss of 23.9% from a loss of 88.5% for the comparable 1996
period, primarily due to increased store operating income of 5.8% as a
percentage of revenues, a decrease in general and administrative expenses of
6.4% as a percentage of revenues, the 1996 provision for store closings of 30.6%
as a percentage of revenues, 1996 restructuring charges of 6.1% and 1996 debt
issuance costs of 21.4% as a percentage of revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirement is to support its franchising
efforts. The Company currently estimates that capital expenditures through
fiscal 1997 will be approximately $500,000. The Company expects to meet its
funding requirements with cash on hand and internally generated funds, as well
as prospective cash flow from franchising.
At June 29, 1997 the Company had a working capital deficit of $58,478 compared
to a working capital deficit of $1,086,824 at December 29, 1996. The primary
reason for this reduction is the completion of the secondary public offering.
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The Company had net cash used in operating activities of $2,141,429 for the
first six months of 1997 compared with net cash used in operating activities of
$2,584,753 for the comparable 1996 period.
The Company had net cash used for investing activities of $1,547,615 for the
first six months of 1997 compared with net cash used for investing activities of
$874,623 for the comparable 1996 period. 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 $3,500,711 for the
first six months of 1997. These funds were primarily the result of additional
stock offerings. The Company had net cash provided by financing activities of
$8,563,442 for the comparable 1996 period as a result of its initial public
offering which raised approximately $11.1 million in net proceeds.
On May 23, 1997, the Company filed a registration statement with the Securities
and Exchange Commission on Form SB-2 relating to the sale on a minimum basis of
such number of shares of Common Stock resulting in gross proceeds of $250,000
and on a maximum basis of such number of shares of Common Stock resulting in
gross proceeds of $2,500,000. The Company realized approximately $1,875,000 in
gross proceeds from the offering of approximately 1,500,000 shares of Common
Stock. In connection with such offering, finders fees totaling approximately
$127,500 were paid to certain finders. In addition, the Company satisfied
obligations totaling approximately $480,000 through the issuance of
approximately 385,000 shares of Common Stock to among others, certain vendors.
The Company has re-negotiated the principal payment schedule of the
Willoughby's acquisition to $200,000 on July 1, 1997, $1,000,000 on April 1,
1998 and $1,100,000 on January 5, 1999.
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.
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PART II - OTHER INFORMATION
NEW WORLD COFFEE, INC.
JUNE 29, 1997
Item 1. Legal Proceedings
A holder of Series A Preferred Stock alleged in a lawsuit filed against
the Company on May 6, 1997 in the Delaware Court of Chancery in New Castle
County, Delaware that the Company breached its obligations to such holder
pursuant to the Company's Certificate of Incorporation because it failed to
notify such holder of the Company's attempt to create Series B Preferred Stock
and failed to obtain the necessary consents of the holders of Series A Preferred
Stock prior to the issuance of Series B Preferred Stock. Such holder requested
that the court cancel the Series B Preferred Stock and enjoin the Company from
creating any new series of stock on parity with the Series A Preferred Stock
without complying with the Company's Certificate of Incorporation. On July 11,
1997, the Company entered into a settlement agreement with such holder providing
for the dismissal of this action.
Item 2. Changes in Securities
On May 23, 1997, the Company filed a registration statement with the
Securities and Exchange Commission on Form SB-2 relating to the sale on a
minimum basis of such number of shares of Common Stock resulting in gross
proceeds of $250,000 and on a maximum basis of such number of shares of Common
Stock resulting in gross proceeds of $2,500,000. The Company realized
approximately $1,875,000 in gross proceeds from the offering of approximately
1,500,000 shares of Common Stock. In connection with such offering, finders fees
totaling approximately $127,500 were paid to certain finders. In addition, the
Company satisfied obligations totaling approximately $480,000 through the
issuance of approximately 385,000 shares of Common Stock to among others,
certain vendors.
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
Not applicable
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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
President and Chief Executive Officer
Date: By: _______________________________________
Jerold E. Novack
Vice President-Finance
-13-
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