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 24, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27148
New World Coffee - Manhattan Bagel, 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.)
246 Industrial Way West
Eatontown, NJ 07724
(Address of principal executive offices, including zip code)
(732) 544-0155
(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
November 3, 2000: 16,765,219
<PAGE>
NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES
SEPTEMBER 24, 2000
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets as of September 24, 2000 and
December 26, 1999....................................................................... -3-
Consolidated Income Statements for the third quarter and
year to date period ended September 24, 2000 and September 26, 1999..................... -4-
Consolidated Statements of Cash Flows for the year to date period
ended September 24, 2000 and September 26, 1999......................................... -5-
Notes to Consolidated Financial Statements.................................................. -6-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the Third Quarter Ended
September 24, 2000.................................................................. -7-
Item 3. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the Year to Date Period Ended
September 24, 2000.................................................................. -8-
PART II: OTHER INFORMATION...................................................................... -12-
SIGNATURES....................................................................................... -13-
</TABLE>
<PAGE>
NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 24, December 26,
2000 1999
------------- ------------
ASSETS (Unaudited)
------
Current assets:
<S> <C> <C>
Cash and cash equivalents................................... $4,199,409 $2,880,342
Franchise and other receivables, net........................ 4,126,131 2,011,398
Current maturities of notes receivables..................... 709,454 1,959,454
Inventories................................................. 1,687,604 1,845,354
Prepaid expenses and other current assets................... 682,559 275,694
Deferred income taxes - current portion..................... 500,000 500,000
Marketable Securities....................................... 17,411,688 -
Assets held for resale...................................... 5,184,408 1,595,036
--------- ---------
Total current assets..................................... 34,501,253 11,067,278
Property, plant and equipment, net.............................. 6,382,431 7,017,513
Notes and other receivables, net................................ 1,205,478 1,143,073
Trademarks, net................................................. 15,874,458 15,988,993
Goodwill, net................................................... 2,231,619 2,312,645
Deferred income taxes........................................... 7,966,178 6,000,000
Deposits and other assets....................................... 1,350,439 495,296
--------- -------
Total assets $69,511,856 $44,024,798
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ 5,406,858 $2,014,703
Accrued expenses............................................ 1,754,386 4,554,880
Current portion of long-term debt.......................... 2,840,505 2,840,492
Current portion of obligations under capital lease.......... 222,335 163,359
Other current liabilities................................... 11,044 49,642
------ ------
Total current liabilities................................ 10,235,128 9,623,076
Long-term debt.................................................. 16,916,984 15,557,416
Obligations under capital leases................................ 186,539 230,692
Deferred rent................................................... 212,307 227,065
Other liabilities............................................... 5,818,005 6,014,784
Commitments and Contingencies
Series D redeemable preferred stock, $.001 par
value; 25,000 shares authorized; 16,216 and 0
shares issued and outstanding............................... 11,776,764 -
Stockholders' equity:
Series C convertible preferred stock, $.001 par
value; 500,000 shares authorized; 444,190 and 0
shares issued and outstanding............................. 444 -
Common stock, $.001 par value; 50,000,000 shares
authorized; 13,617,259 and 11,313,508 shares
issued and outstanding.................................... 13,617 11,314
Additional paid-in capital.................................. 43,857,066 34,706,849
Accumulated deficit......................................... (19,504,998) (22,346,398)
------------ ------------
Total stockholders' equity............................... 24,366,129 12,371,765
---------- ----------
Total liabilities and stockholders' equity............... $69,511,856 $44,024,798
=========== ===========
<FN>
The accompany notes are an integral part of these consolidated balance sheets.
</FN>
</TABLE>
<PAGE>
NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
CONSOLIDATED INCOME STATEMENTS
FOR THE THIRD QUARTER ENDED SEPTEMBER 24, 2000 AND SEPTEMBER 26, 1999
AND YEAR TO DATE PERIODS ENDED SEPTEMBER 24, 2000 AND SEPTEMBER 26, 1999
UNAUDITED
<TABLE>
<CAPTION>
Third Quarter Ended Year To Date Ended
------------------- -------------------- ------------------- -------------------
September 24, September 26, September 24, 2000 September 26, 1999
2000 1999
------------------- -------------------- ------------------- -------------------
Revenues:
<S> <C> <C> <C> <C>
Manufacturing revenues.......................... $7,030,233 $6,241,681 $19,705,393 $18,438,142
Retail sales.................................... 4,433,486 2,119,763 7,595,237 6,849,190
Franchise related revenues...................... 2,098,435 1,841,205 5,575,365 4,283,294
--------- --------- --------- ---------
Total Revenues...................................... 13,562,154 10,202,649 32,875,995 29,570,626
Cost of sales................................... 9,590,584 7,001,447 22,210,072 20,800,635
General and administrative expenses............. 1,681,238 1,589,771 4,855,910 4,577,389
Depreciation and amortization................... 678,726 565,905 1,838,061 1,640,573
------- ------- --------- ---------
Operating Income.................................... 1,611,606 1,045,526 3,971,952 2,552,029
Interest expense, net........................... 448,408 431,212 1,387,397 1,044,978
------- ------- --------- ---------
Income before Income Tax Benefit and
Extraordinary Item.............................. 1,163,198 614,314 2,584,555 1,507,051
Income Tax Benefit 1,966,178 - 1,966,178 -
--------- ------- --------- ---------
Income before Extraordinary Item 3,129,376 614,314 4,550,733 1,507,051
Extraordinary Item:
Net Gain from Early Extinguishment
Of Debt...................................... - 240,023 - 240,023
--------- ------- --------- ---------
Net Income.......................................... 3,129,376 854,337 4,550,733 1,747,074
Dividend issued to redeemable
preferred stockholders representing
the beneficial conversion of warrants
issued......................................... (1,709,333) - (1,709,333) -
----------- -------- ----------- ----------
Net Income available to Common
Stockholders................................... $1,420,043 $854,337 $2,841,400 $1,747,074
========== ======== ========== ==========
Net income Per Common Share - Basic
Income before extraordinary item............... $.12 $.06 $.24 $.15
==== ==== ==== ====
Extraordinary item............................. - .02 - .02
= === = ===
Net income..................................... $.12 $.08 $.24 $.17
==== ==== ==== ====
Net income per share - Diluted
Income before extraordinary item............... $.09 $.06 $.21 $.15
==== ==== ==== ====
Extraordinary item............................. - .02 - .02
= === = ===
Net income..................................... $.09 $.08 $.21 $.17
==== ==== ==== ====
Weighted average number of common
shares oustanding:
Basic............................................... 12,120,104 10,367,680 11,751,153 10,075,071
========== ========== ========== ==========
Diluted............................................. 15,845,625 10,607,680 13,380,807 10,295,071
========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
</TABLE>
<PAGE>
NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR TO DATE PERIODS ENDED SEPTEMBER 24, 2000 AND SEPTEMBER 26, 1999
UNAUDITED
<TABLE>
<CAPTION>
September 24, September 26,
2000 1999
-------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income...................................................................... $4,550,733 $1,747,074
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization............................................... 1,838,061 1,640,573
Gain on sale of fixed assets................................................ 119,344 (299,726)
Extraordinary gain for early extinguishment of debt......................... - (240,023)
Increase/(decrease) in cash as a result of changes in operating
assets and liabilities:
Receivables................................................................. (2,114,731) (1,260,857)
Inventories................................................................. 157,751 (482,342)
Prepaid expenses and other current assets................................... (23,071) (18,275)
Receipts on notes receivable................................................ 256,758 497,866
Advances under notes receivable............................................. (119,163) (470,250)
Deposits and other assets................................................... (273,560) (101,629)
Deferred tax asset.......................................................... (1,966,178) -
Accounts payable............................................................ 3,392,156 334,367
Accrued expenses............................................................ (1,211,388) (995,977)
Deferred rent............................................................... (14,758) 22,542
Other liabilities........................................................... (220,524) (259,362)
--------- ---------
Net cash provided by/(used in) operating activities.................. 4,371,430 113,981
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................ (282,294) (692,919)
Proceeds from the sale of fixed assets ......................................... - 696,195
Net cash paid for acquisition.................................................. (1,770,788) (2,311,453)
Additions to assets held for resale............................................ (1,812,355) (64,085)
Net cash paid for investments................................................... (17,411,688) -
------------ -----------
Net cash provided by/(used in) investing activities.................. (21,277,125) (2,372,262)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net of issuance costs................................. 2,425,868 679,564
Issuance of preferred stock, net of issuance costs.............................. 16,794,527 -
Payment of liabilities in connection with acquired assets....................... (1,989,104) (2,828,037)
Repayments of capital leases.................................................... (366,110) (502,622)
Proceeds from long-term borrowings.............................................. 1,500,000 14,837,998
Early retirement of debt........................................................ - (4,650,000)
Repayment of notes payable...................................................... (140,419) (7,350,475)
--------- -----------
Net cash provided by/(used in) financing activities.................. 18,224,762 186,428
---------- -----------
Net increase(decrease) in cash....................................... 1,319,067 (2,071,853)
CASH, Beginning of Period........................................................... 2,880,342 5,269,627
--------- ---------
CASH, End of Period................................................................. $4,199,409 $3,197,774
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest..................................................................... 1,524,413 1,035,352
Non-cash investing and financing activities:
Equipment purchased under capital leases..................................... 388,691 747,724
DETAILS OF ACQUISITION
Assets acquired................................................................. 3,020,788 6,311,453
Note Receivable extinguished.................................................... (1,250,000) -
Notes issued.................................................................... - (1,500,000)
Estimated accruals at time of acquisition....................................... - (2,500,000)
--------- -----------
Cash paid for acquisition.................................................. 1,770,788 2,311,453
========= =========
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
</TABLE>
<PAGE>
NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. The September 24, 2000 consolidated balance sheet presented herein was
derived from the audited December 26, 1999 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 26, 1999 for a description of the significant accounting policies,
which have continued without change, and other note 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. Certain
reclassifications have been made to the prior interim financial statements
to conform to the current interim presentation.
4. On May 5, 2000, the Company acquired certain lien rights on substantially
all the assets of New York Bagel Enterprises (NYBE) and its wholly owned
subsidiary Lots `A Bagels, Inc. (LAB) from a bank. Both NYBE and LAB were
operating as Debtors in Possession under Chapter 11 of the bankruptcy code.
On May 13, 2000, the Company acquired the leases and other assets of 17
NYBE stores through NYBE's bankruptcy proceeding. In addition, the Company
acquired all trademarks and franchise rights for 12 stores operating under
the New York Bagel & Deli trade name. The store assets acquired are
included as Assets held for resale in the accompanying balance sheet, as
the Company intends to sell the stores to franchisees. On July 12, 2000, in
LAB's bankruptcy proceeding, the Company acquired the leases and other
assets of an additional 6 LAB stores.
5. On June 26, 2000, the Company acquired the operating assets of 13 Manhattan
Bagel stores in Western New York from a franchisee that was operating in
Bankruptcy. The store assets were acquired for cash and settlement of a
note receivable held by the Company.
6. On June 7, 2000, the Company issued 1,219,471 Shares of Common Stock and
392,190 shares of Series C Convertible Preferred Stock as a part of a
private placement. The proceeds from this offering, net of related expenses
were $3,628,905. On June 27, 2000 the Company issued 140,920 Shares of
Common Stock and 52,000 shares of Series C Convertible Preferred Stock
concluding the private placement. The proceeds from this offering, net of
related expenses were $494,000. Each share of the Series C Convertible
Preferred Stock is convertible into 3 shares of Common Stock. Conversion to
Common Stock is mandatory upon the registration of the underlying common
stock. The Series C Convertible Preferred Stock provides for a cumulative
dividend equal to 10% per annum, based upon a deemed value of $ 7.00 per
share. As of the date of this filing, all Series C preferred shares have
been converted to common stock.
7. On August 11, 2000, the Company, Brookwood New World Investors, LLC
("Brookwood") and BET Associates, L.P.("BET") entered into a Series D
Preferred Stock and Warrant Purchase Agreement (the "Purchase Agreement").
The first closing, under the Purchase Agreement, pursuant to which BET
purchased its Series D Preferred Stock and its Warrant (as defined below),
occurred on August 11, 2000. The second closing under the Purchase
Agreement, pursuant to which Brookwood purchased its Series D Preferred
Stock and Warrant (as defined below), occurred on August 18, 2000. Under
the terms of the Purchase Agreement, Brookwood and BET each purchased (i)
8,108.108 shares of New World's Series D Preferred Stock (the "Series D
Preferred Stock") and (ii) a warrant to purchase up to 1,196,910 shares of
the Common Stock of New World, which represents the right to purchase in
the aggregate approximately 12.9% of the Common Stock (each, a "Warrant").
The shares of Common Stock issuable upon exercise of a Warrant are entitled
to registration rights under the terms of a Registration Rights Agreement
among New World, the Brookwood and BET. Under the terms of the Purchase
Agreement, if New World fails to take actions to redeem the Series D
Preferred Stock within one year of the closing, New World will be required
to issue to each of Brookwood and BET, each quarter for the next four
quarters, additional warrants representing the right to purchase in the
aggregate an additional 2.68% of New World's Common Stock, subject to
reduction for any redemption(s) of Preferred Stock that occur prior to any
such quarter. Further, under the terms of the Purchase Agreement, if New
World fails to take actions to redeem the Series D Preferred Stock within
two years of the closing, New World will be required to issue to each of
Brookwood and BET, each quarter for the next four quarters, additional
warrants representing in the aggregate an additional 4.03% of New World's
Common stock, subject to reduction for any redemption(s) that occur prior
to any such quarter. As of September 24, 2000 there were 25,000 shares of
Series D Preferred Stock authorized and 16,216.216 shares issued and
outstanding.
8. FAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities," requires that all applicable investments be classified as
trading securities, available-for-sale securities or held-to-maturity
securities. The Company's Marketable Securities consist of $28,666,000
(face value) of Einstein Noah Bagel Corporation ("ENBC") 7.25% subordinated
debentures due June 1, 2004 which have been classified as
available-for-sale securities. ENBC is currently in default on these
debentures and is operating under Chapter 11 of the Bankruptcy Code. Based
upon ENBC's current court proceedings, the Company expects to fully realize
this investment based upon the Company's cost of $17,411,688 which
approximates its fair value as of September 24, 2000.
9. During the quarter ended September 24, 2000 the deferred tax asset
valuation allowance decreased by $3,000,000 resulting in the recognition of
an income tax benefit, net of current provision for income taxes of
$1,966,178 in the accompanying Income Statement. The decrease is primarily
the result of the Company's analysis of the likelihood of realizing the
future tax benefit of tax loss carryforwards and additional temporary
differences associated with New World Coffee. The Company had previously
adjusted the valuation allowance for recognition of tax loss carryforwards
related to its Manhattan Bagel Company, Inc. subsidiary. Realization of the
net deferred tax asset (net of recorded valuation allowance) is dependent
upon profitable operations and future reversals of existing taxable
temporary differences. Although realization is not assured, the Company
believes it is more likely than not that the net recorded benefits will be
realized through the reduction of future taxable income. The amount of the
net deferred tax assets considered realizable, however, could be reduced in
the near term if actual future taxable income is lower than estimated, or
if there are differences in the timing or amount of future reversals of
existing taxable temporary differences.
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; the ability to integrate acquisitions successfully;
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 , in the Company's Form 10-KSB for its
1999 fiscal year, and in the Company's most recent S-3 filing which are
incorporated by reference herein.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THIRD QUARTER ENDED SEPTEMBER 24, 2000 AND SEPTEMBER 26,
1999
General
New World Coffee - Manhattan Bagel, Inc. is the largest franchisor of bagel
bakeries and coffee bars in the United States. It operates and franchises bagel
bakeries and coffee bars in 27 states throughout the United States and the
District of Columbia. The first Company-owned New World Coffee store opened in
1993 and the first franchised New World Coffee store opened in 1997. On November
24, 1998, the Company acquired the stock of Manhattan Bagel, Company, Inc. On
August 31, 1999, the Company acquired the assets of Chesapeake Bagel Bakery. At
September 24, 2000 the Company's retail system consisted of approximately 374
stores, including 48 Company-owned and 326 franchised and licensed stores.
The Company is vertically integrated with bagel dough manufacturing plants
in Eatontown, NJ and Los Angeles, CA, and a coffee roasting plant in Branford,
CT. The Company's products are sold to franchised, licensed and Company-owned
stores as well as to wholesale, supermarket and non-traditional outlets.
The Company is a Delaware corporation and was organized in November 1992.
Results of Operations
Quarter Ended September 24, 2000 Compared to Quarter Ended September 26, 1999
Revenues. Total revenues increased 32.9% to $13,562,154 for the quarter
ended September 24, 2000 from $10,202,649 for the comparable 1999 period.
Manufacturing revenues increased 12.6% to $7,030,233 or 51.8% of total revenues
for the quarter ended September 24, 2000 from $6,241,681 or 61.2% of total
revenues for the comparable 1999 period. Retail sales increased 109.2% to
$4,433,486 or 32.7% of total revenues for the quarter ended September 24, 2000
from $2,119,763 or 20.8% of total revenues for the comparable 1999 period
primarily due to the addition of Company owned stores through acquisitions.
Franchise related revenues increased 14.0% to $2,098,435 or 15.5% of total
revenues for the quarter ended September 24, 2000 from $1,841,205 or 18.0% of
total revenues for the comparable 1999 period, primarily as a result of the
acquisition of Chesapeake Bagel Bakery in August of 1999.
Costs and Expenses. Cost of sales as a percentage of manufacturing revenues
and retail sales remained constant at 83.7% for the quarter ended September 24,
2000 as compared to the comparable 1999 period.
General and administrative expenses increased to $ 1,681,238 or 12.4% of
total revenues for the quarter ended September 24, 2000 from $ 1,589,771 or
15.6% of total revenues for the comparable 1999 period. The increase in expenses
is primarily attributable to additional administrative costs associated with
recently acquired Company owned stores. General and administrative expenses
expressed as a percentage of total revenues decreased to 12.4% for the quarter
ended September 24, 2000 from 15.6% for the comparable 1999 period. The decrease
is the result of the higher revenue base for the quarter ended September 24,
2000 primarily from revenues associated with newly acquired Company owned
stores.
Depreciation and amortization expense increased to $678,726 or 5.0% of
total revenues for the quarter ended September 24, 2000 from $565,905 or 5.5% of
total revenues for the comparable 1999 period. The increase is primarily
attributable to depreciation on recently acquired Company owned stores and
infrastructure improvements which were made in the fourth quarter of 1999.
Interest expense increased to $448,408 or 3.3% of total revenues, for the
quarter ended September 24, 2000 from $431,212, or 4.2% of revenues for the
comparable 1999 period. This increase is primarily due to interest costs
relating to the acquisition of the Chesapeake Bagel Bakery as well as interest
incurred on borrowings for infrastructure improvements.
Gain from the Early Extinguishment of Debt, net, decreased to $0 as no such
gain occurred during the quarter ended September 24, 2000. The gain, realized in
the comparable 1999 period, represents an $850,000 discount earned for the
prepayment of the Manhattan Bagel Unsecured Creditors' Trust Note which was
partially offset by the costs associated with obtaining such discount.
Net Income. Net income increased to $3,129,376 or 23.1% of total revenues
for the quarter ended September 24, 2000 from $854,337 or 8.4% of total revenues
for the comparable 1999 period. This increase is primarily a result of increased
manufacturing and retail gross profit of $513,138, increased franchise related
revenues of $257,230 and the income tax benefit of $1,966,178 which were
partially offset by increases in general and administrative expenses of $91,467,
interest expense of $17,196, depreciation and amortization expense of $112,821
and a reduction in gain from the early extinguishment of debt of $240,023.
ITEM 3. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE YEAR TO DATE PERIOD ENDED SEPTEMBER 24, 2000 AND SEPTEMBER
26, 1999
Results of Operations
Year To Date Period Ended September 24, 2000 Compared to Year To Date Period
Ended September 26, 1999
Revenues. Total revenues increased 11.2% to $32,875,995 for the year to
date period ended September 24, 2000 from $29,570,626 for the comparable 1999
period. Manufacturing revenues increased 6.8% to $19,705,393 or 59.9% of total
revenues for the year to date period ended September 24, 2000 from $18,438,142
or 62.3% of total revenues for the comparable 1999 period. Retail sales
increased 10.9% to $7,595,237 or 23.1% of total revenues for the year to date
period ended September 24, 2000 from $6,849,190 or 23.2% of total revenues for
the comparable 1999 period primarily due to the acquisition of additional
Company owned stores. Franchise related revenues increased 30.2% to $5,575,365
or 17.0% of total revenues for the year to date period ended September 24, 2000
from $4,283,294 or 14.5% of total revenues for the comparable 1999 period,
primarily as a result of the acquisition of Chesapeake Bagel Bakery.
Costs and Expenses. Cost of sales as a percentage of manufacturing revenues
and retail sales decreased to 81.4% for the year to date period ended September
24, 2000 from 82.3% for the comparable 1999 period. The reduction was primarily
the result of the Company's ability to leverage fixed manufacturing overhead
costs over increased manufacturing revenues.
General and administrative expenses as a percentage of revenues increased
to $4,855,910 or 14.8% of total revenues for the year to date period ended
September 24, 2000 from $4,577,389 or 15.5% for the comparable 1999 period. The
increase is primarily attributable to additional administrative costs associated
with recently acquired Company owned stores. General and administrative expenses
expressed as a percentage of revenues continue to decline as the Company
continues to leverage its existing infrastructure.
Depreciation and amortization expense as a percentage of revenues increased
to $ 1,838,061 or 5.6% of total revenues for the year to date period ended
September 24, 2000 from $1,640,573 or 5.5% of total revenues for the comparable
1999 period. The increase is primarily attributable to depreciation on recently
acquired Company owned stores and infrastructure improvements which were made in
the fourth quarter of 1999.
Interest expense increased to $1,387,397 or 4.2% of revenues, for the year
to date period ended September 24, 2000 from $1,044,978, or 3.5% of revenues for
the comparable 1999 period. This increase is primarily due to interest costs
relating to the acquisition of the Chesapeake Bagel Bakery brand as well as
interest incurred on borrowings for infrastructure improvements.
Gain from the Early Extinguishment of Debt, net, decreased to $0 as no such
gain occurred during the year to date period ended September 24, 2000. The gain,
realized in the comparable 1999 period, represents an $850,000 discount earned
for the prepayment of the Manhattan Bagel Unsecured Creditors' Trust Note which
was partially offset by the costs associated with obtaining such discount.
Net Income. Net income increased to $4,550,733 or 13.8% of total revenues
for the year to date period ended September 24, 2000 from $1,747,074 or 5.9% of
total revenues for the comparable 1999 period. This increase is primarily a
result of increased manufacturing and retail gross profit of $603,861, increased
franchise related revenues of $1,292,071 and the income tax benefit of
$1,966,178 which were partially offset by increases in general and
administrative expenses of $278,521, interest expense of $342,419, depreciation
and amortization expense of $197,488 and a reduction in gain from the early
extinguishment of debt of $240,023.
Liquidity and Capital Resources
The Company plans to satisfy any of its capital requirements for the
remainder of 2000 through cash flow from operations and the sale of
Company-owned stores to franchisees, which should generate additional cash. The
Company continually accesses its ongoing capital needs and may consider the
issuance of additional shares in order to raise capital should business
conditions dictate that such is necessary.
On June 7, 2000, the Company issued 1,219,471 Shares of Common Stock and
392,190 shares of Series C Convertible Preferred Stock as a part of a private
placement. The proceeds, net of related offering expenses, were $3,628,905. On
June 27, 2000 the Company issued 140,920 Shares of Common Stock and 52,000
shares of Series C Convertible Preferred Stock concluding the private placement.
The proceeds, net of related offering expenses, were $494,000.
On August 11 and 18, 2000, the Company issued 8,108.108 and 8,108.108
shares, respectively, of newly authorized Series D Preferred Stock (see note 7).
The proceeds, net of related offering expenses, were $ 14,687,350. The proceeds
from these stock sales were utilized to purchase marketable securities (see note
8).
At September 24, 2000 the Company had a working capital surplus of
$24,266,125 compared to a working capital surplus of $ 1,444,202 at December 26,
1999. The increase in working capital was primarily attributable to proceeds
from the preferred stock offering completed during the year to date period ended
September 24, 2000.
The Company had net cash provided by operating activities of $4,371,430 for
the year to date period ended September 24, 2000 compared with net cash provided
by operating activities of $113,981 for the comparable 1999 period. The increase
is primarily the result of higher net income for the period to date.
The Company had net cash used in investing activities of $21,277,125 for
the year to date period ended September 24, 2000 compared with net cash used in
investing activities of $2,372,262 for the comparable 1999 period. The increase
in cash used reflects the Company's acquisition strategy combined with the
purchase of marketable securities (see note 8).
The Company had net cash provided by financing activities of $18,224,762
for the year to date period ended September 24, 2000 compared with net cash
provided by financing activities of $186,428 for the comparable 1999 period. The
increase primarily reflects the completion of a private placement and sale of
Series D Preferred Stock.
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 and/or
flour, acquisitions by the Company of existing stores, existing and additional
competition, marketing programs, weather, and variations in the number of store
openings. The Company has few employees at the minimum wage level and therefore
believes that an increase in the minimum wage would have little impact on its
operations and financial condition.
<PAGE>
PART II - OTHER INFORMATION
NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
SEPTEMBER 24, 2000
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
During the second quarter of 2000, the Company's board of directors
designated 500,000 shares of preferred stock as Series C Preferred Stock.
During the third quarter of 2000, the Company's board of directors
designated 25,000 shares of preferred stock as Series D Preferred Stock
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.
On September 1, 2000, the Company filed a form 8-K relating to the issuance
of Series D Preferred Stock and related matters.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
Date: November 13, 2000 By:/s/ R. Ramin Kamfar
-------------------
R. Ramin Kamfar
Chairman and Chief Executive Officer
Date: November 13, 2000 By:/s/ Jerold E. Novack
--------------------
Jerold E. Novack
Chief Financial Officer
