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 March 26, 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 May 1, 2000: 11,532,220
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NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES
MARCH 26, 2000
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 26, 2000 and
December 26, 1999.............................................................. -3-
Condensed Consolidated Statements of Operations for the three months
ended March 26, 2000 and March 28, 1999........................................ -4-
Condensed Consolidated Statements of Cash Flows for the three months
ended March 26, 2000 and March 28, 1999........................................ -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 MARCH 26, 2000......................... -8-
PART II: OTHER INFORMATION...................................................................... -11-
SIGNATURES............................................................................. -12-
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NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
CONSOLIDATED BALANCE SHEETS
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March 26, December 26,
2000 1999
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ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents................................... $ 2,351,378 $ 2,880,342
Franchise and other receivables, net........................ 2,283,207 2,011,398
Current maturities of notes receivables..................... 1,959,454 1,959,454
Inventories................................................. 2,043,790 1,845,354
Prepaid expenses and other current assets................... 272,114 275,694
Deferred income taxes 500,000 500,000
Assets held for resale...................................... 1,559,580 1,595,036
--------- ---------
Total current assets..................................... 10,969,523 11,067,278
Property, plant and equipment, net.............................. 6,761,658 7,017,513
Notes and other receivables, net................................ 1,058,328 1,143,073
Trademarks, net................................................. 15,852,148 15,988,993
Goodwill, net................................................... 2,286,303 2,312,645
Deferred income taxes 6,000,000 6,000,000
Deposits and other assets....................................... 492,510 495,296
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Total Assets $ 43,420,470 $ 44,024,798
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................ $ 2,059,117 $ 2,014,703
Accrued expenses............................................ 3,335,563 4,554,880
Current portion of long-term debt........................... 2,840,492 2,840,492
Current portion of obligations under capital leases......... 184,864 163,359
Other current liabilities 2,458 49,642
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Total current liabilities................................ 8,422,494 9,623,076
Long-term debt.................................................. 15,539,181 15,557,416
Obligations under capital leases................................ 88,345 230,692
Deferred rent................................................... 227,321 227,065
Other liabilities............................................... 5,958,600 6,014,784
Stockholders' equity:
Preferred stock, $.001 par value; 2,000,000
shares authorized; 0 issued and outstanding.............. - -
Series A convertible preferred stock, $.001 par value; 400
shares authorized; 0 shares issued and outstanding -
Series B convertible preferred stock, $.001 par value;
225 Shares authorized, 0 shares outstanding.............. - -
Common stock, $.001 par value; 50,000,000 shares
Authorized; 11,438,346 and 11,313,508 shares
issued and outstanding................................... 11,438 11,314
Additional paid-in capital.................................. 34,868,724 34,706,849
Accumulated deficit......................................... (21,695,633) (22,346,398)
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Total stockholders' equity............................... 13,184,529 12,371,765
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Total liabilities and stockholders' equity............... $ 43,420,470 $ 44,024,798
=============== ===============
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NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIRST QUARTER ENDED MARCH 26, 2000 AND MARCH 28, 1999
UNAUDITED
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March 26, March 28,
2000 1999
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Revenues:
Manufacturing revenues................................. $ 6,150,638 $ 6,044,207
Franchise related revenues............................. 1,774,944 1,205,628
Retail sales........................................... 1,220,500 2,330,002
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Total revenues............................................. 9,146,082 9,579,837
Cost of sales.......................................... 5,860,051 6,892,180
General and administrative expenses.................... 1,585,173 1,511,171
Depreciation and amortization.......................... 571,915 542,714
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Income from operations..................................... 1,128,943 633,772
Interest expense, net...................................... 478,178 290,889
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Net income................................................. $650,765 $342,883
======== ========
Net income per common share - Basic $ .06 $ .03
========= =========
Net income per common share - Diluted $ .06 $ .03
========= =========
Weighted average number of common shares outstanding:
Basic 11,386,777 9,907,587
========== =========
Diluted 11,684,286 10,163,443
========== ==========
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NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIRST QUARTER ENDED MARCH 26, 2000 AND MARCH 28, 1998
UNAUDITED
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March 26, March 28,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................ $650,765 $342,883
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization..................................... 571,915 542,714
Gain on sale of fixed assets...................................... - (219,585)
Increase/(decrease) in cash as a result of changes in operating assets
and liabilities:
Receivables (271,807) (697,731)
Inventories (198,435) (124,289)
Prepaid expenses 3,580 51,664
Deposits and other assets 2,785 193,506
Receipts of notes receivable 84,745 171,095
Additions to notes receivable - (57,500)
Accounts payable 44,415 242,279
Accrued expenses (424,302) (1,358,732)
Deferred rent 256 7,514
Other liabilities (110,558) (157,587)
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Net cash provided by/(used in) operating activities.... 353,359 (1,063,769)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................... (101,975) (325,070)
Addition to assets held for resale (15,437) -
Proceeds from the sale of fixed assets - 452,935
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Net cash provided by/(used in) investing activities.... (117,412) 127,865
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net of issuance costs 161,999 335,064
Payment of liabilities in connection with acquired assets (787,833) -
Repayments of capital leases (120,842) (149,301)
Repayment of notes payable............................................. (18,235) (24,701)
-------- --------
Net cash provided by/(used in) financing activities.... (764,911) 161,062
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Net decrease in cash................................... (528,964) (774,842)
CASH, beginning of period.................................................. 2,880,342 5,269,627
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CASH, end of period........................................................ 2,351,378 4,494,785
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................................... 857,921 366,352
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NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
Noted to Consolidated Financial Statements
(Unaudited)
1. The March 26, 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.
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", "believe",
"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 10-KSB
for its 1999 fiscal year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 26 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
March 26, 2000 the Company's retail system consisted of approximately 361
stores, including 13 Company-owned and 348 franchised and licensed stores.
The Company is vertically integrated with bagel dough and cream cheese
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.
Fiscal Quarter Ended March 26, 2000 Compared to Fiscal Quarter Ended March
28, 1999
Revenues.
Total revenues decreased 4.5% to $9,146,082 for the fiscal quarter ended March
26, 2000 from $9,579,837 for the comparable 1999 period. The decrease in
revenues was wholly attributable to a 47.6% decline in Retail Sales. Retail
Sales decreased to $1,220,500 or 13.3% of total revenues for the fiscal quarter
ended March 26, 2000 from $2,330,002 or 24.3% of total revenues for the
comparable 1999 period as the Company continued its strategy of converting
Company-owned stores into franchised units. Manufacturing revenues increased
1.8% to $6,150,638 or 67.3% of total revenues for the fiscal quarter ended March
26, 2000 from $6,044,207 or 63.1% of total revenues for the comparable 1999
period. Franchise related revenues increased 47.2% to $1,774,944 or 19.4% of
total revenues for the fiscal quarter ended March 26, 2000 from $1,205,628 or
12.6% of total revenues for the comparable 1999 period. The increase in
franchise related revenues was primarily attributable to additional revenues
from the Chesapeake Bagel Bakery brand which was acquired in August, 1999
combined with a higher royalty base as the Company continued its strategy of
converting Company-owned stores to franchised units.
Costs and Expenses.
Cost of Sales as a percentage of related manufacturing and retail sales
decreased to 79.5% for the fiscal quarter ended March 26, 2000 from 82.3% for
the comparable 1999 period. The reduction in costs was attributable to a more
profitable product mix as the Company continued to shift to a predominantly
manufacturing-based sales mix.
General and administrative expenses increased to $1,585,173 or 17.3% of total
revenues for the fiscal quarter ended March 26, 2000 from $1,511,171 or 15.8% of
total revenues for the comparable 1999 period. The increase was primarily
attributable to marketing and operational staff additions required in order to
service the Company's additional brands.
Depreciation and amortization expenses increased by 5.4% to $571,915 or 6.3% of
total revenues for the fiscal quarter ended March 26, 2000 from $542,714 or 5.7%
of total revenues for the comparable 1999 period. The increase was primarily
attributable to depreciation on infrastructure improvements that the Company
made during the second half of fiscal 1999.
Interest expense, net for the fiscal quarter ended March 26, 2000 increased to
$478,178, or 5.2% of total revenues from $290,889 or 3.0% of total 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.
Net Income.
Net income for the fiscal quarter ended March 26, 2000 increased to $650,765 or
7.1% of total revenues from $342,883 or 3.6% of total revenues for the
comparable 1999 period. This increase is primarily a result of increased
franchise related revenues of $569,316 which were offset by additional interest
expense of $187,289 as well as a $74,002 increase in general and administrative
expenses.
Liquidity and Capital Resources
The Company plans to satisfy any of its capital requirements in 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.
At March 26, 2000 the Company had a working capital surplus of $2,547,029
compared to a working capital surplus of $1,444,202 at December 26, 1999.
The Company had net cash provided by operating activities of $353,359 for
the first quarter of 2000 compared with net cash used in operating activities of
$1,063,769 for the first quarter of 1999. The improvement in cash provided from
operating activities was the primarily attributable to the improvement in net
income for the quarter and the fact that certain non-recurring liabilities were
paid during the first quarter of 1999.
The Company had net cash used in investing activities of $117,412 for the
first quarter of 2000 compared with net cash provided by investing activities of
$127,865 for the first quarter of 1999.
The Company had net cash used in financing activities of $764,911 for the
first quarter of 2000 compared with net cash used in financing activities of
$161,062 for the first quarter of 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 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, 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 - MANHATTAN BAGEL, INC.
MARCH 26, 2000
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
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. None
<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: May 10, 2000 By: /s/ R. Ramin Kamfar
---------------------------
R. Ramin Kamfar
Chairman & CEO
Date: May 10, 2000 By: /s/ Jerold E. Novack
---------------------------
Jerold E. Novack
Chief Financial Officer
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<CIK> 0000949373
<NAME> New World Coffee-Manhattan Bagel, Inc.
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-START> DEC-27-1999
<PERIOD-END> MAR-26-2000
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