U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission File Number 1-13984
WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC.
(Exact name of small business issuer as specified in its charter)
New York 13-3832215
(State of other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
533 W. 47th Street
New York, NY 10036
(Address of principal executive offices)
(212) 586-7600
(Issuer's telephone number)
Check whether the issuer (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 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 ______
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: As of May 15, 1996, there were
2,560,000 shares of common stock, par value $.001 per share, outstanding.
<PAGE>
WILLIAM GREENBERG JR. DESSERT AND CAFES, INC.
FIRST QUARTER REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements ................................. 3
Item 2. Management's Discussion and Analysis ................. 10
2 of 17
<PAGE>
WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC.
BALANCE SHEETS
(Unaudited)
A S S E T S
March 31, December 31,
1996 1995
----------- -----------
Current assets:
Cash and cash equivalents $ 1,371,451 $ 2,169,999
Accounts receivable, net of allowance
for doubtful accounts of $18,500 133,541 222,623
Inventory 150,125 91,631
Prepaid expenses and other current assets 127,125 100,532
----------- -----------
Total current assets 1,782,242 2,584,785
----------- -----------
Property and equipment, at cost, less
accumulated depreciation and amortization
of $58,711 and $37,702, respectively 1,791,138 1,477,062
----------- -----------
Other assets:
Covenant not to compete 106,250 112,500
Goodwill 887,490 903,060
Security deposits 113,772 77,772
----------- -----------
Total other assets 1,107,512 1,093,332
----------- -----------
$ 4,680,892 $ 5,155,179
=========== ===========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 392,005 $ 387,630
Accrued expenses and other current liabilities 128,400 64,240
----------- -----------
Total current liabilities 520,405 451,870
----------- -----------
Deferred rent 31,484 23,207
----------- -----------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock - $.001 par value
Authorized - 2,000,000 shares
Issued - none
Common stock - $.001 par value
Authorized - 10,000,000 shares
Issued and outstanding - 2,560,000 shares 2,560 2,560
Additional paid-in capital 6,597,342 6,597,342
Accumulated deficit (2,470,899) (1,919,800)
----------- -----------
Total stockholders' equity 4,129,003 4,680,102
----------- -----------
$ 4,680,892 $ 5,155,179
=========== ===========
3 of 17
<PAGE>
WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three
Months Ended
March 31,
---------------------------
1996 1995
----------- -----------
Net sales $ 825,790 $ --
----------- -----------
Cost and expenses:
Cost of sales 605,634 --
Selling and administrative expenses 800,339 19,613
----------- -----------
Total cost and expenses 1,405,973 19,613
----------- -----------
Loss from operations (580,183) (19,613)
Other income:
Interest income 29,084 --
----------- -----------
Net loss (551,099) (19,613)
Accumulated deficit at beginning of period (1,919,800) (58,579)
----------- -----------
Accumulated deficit at end of period ($2,470,899) ($ 78,192)
=========== ===========
Net loss per common share (.20) ($ .02)
=========== ===========
Weighted average number of
common shares outstanding 2,723,404 1,170,000
=========== ===========
4 of 17
<PAGE>
WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 551,099) ($ 19,613)
----------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 42,829 --
Deferred rent 8,277 --
Increase (decrease) in cash flows as
a result of changes in asset and
liability account balances:
Accounts receivable 89,082 --
Inventory (58,494) --
Prepaid expenses and other current assets (26,593) --
Security deposits (36,000) --
Accounts payable 4,375 --
Accrued expenses and other current liabilities 64,160 --
----------- -----------
Total adjustments 87,636 --
----------- -----------
Net cash used in operating activities (463,463) (19,613)
----------- -----------
Cash flows used in investing activities:
Capital expenditures (335,085) --
----------- -----------
Cash flows provided by financing activities:
Increase in amount due officer/stockholder -- 19,613
----------- -----------
Net decrease in cash and cash equivalents (798,548) --
Cash and cash equivalents at beginning of period 2,169,999 --
----------- -----------
Cash and cash equivalents at end of period $ 1,371,451 $-
=========== ===========
Supplemental Information:
Cash payments for the period:
Interest expense $ -- $ --
=========== ===========
Income taxes $ 10,079 $ --
=========== ===========
</TABLE>
5 of 17
<PAGE>
WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
NOTE 1 - PREPARATION OF UNAUDITED FINANCIAL STATEMENTS.
William Greenberg Jr. Desserts and Cafes, Inc. (the "Company")
was incorporated in the State of New York on November 12, 1993 as CIP,
Inc. On August 23, 1994, its name was changed to Desserts and Cafes,
Inc. and in August 1995, its name was changed to William Greenberg Jr.
Desserts and Cafes, Inc. Since its inception through July 10, 1995,
the Company was a development stage company and did not generate any
revenues and did not carry on any significant operations. Management's
efforts were directed toward the development and implementation of a
plan to generate sufficient revenues in the bakery industry to cover
all of its present and future costs and expenses. On July 10, 1995,
the Company acquired the net operating assets of Greenberg Dessert
Associates Limited Partnership ("Greenberg's-L.P.") at which time the
Company commenced operations and ceased being a development stage
enterprise. The deficit accumulated during the development stage
aggregated $100,112.
In the opinion of the Company, the accompanying unaudited
condensed financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the
financial position as of March 31, 1996 and the results of operations
for the three month periods ended March 31, 1996 and 1995 and of cash
flows for the three months ended March 31, 1996 and 1995. The results
of operations for the three months ended March 31, 1996 are not
necessarily indicative of results that may be expected for any other
interim period or for the full year.
These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31,
1995 appearing in the Company's Annual Report on Form 10-KSB for the
year then ended.
6 of 17
<PAGE>
NOTE 2 - ACQUISITION OF GREENBERG DESSERT ASSOCIATES LIMITED PARTNERSHIP.
On June 2, 1995, the Company entered into an agreement to
purchase the operating assets (net of $155,700 in assumed
liabilities), properties and rights of Greenberg's-L.P. for
$2,000,000, consisting of $1,967,300 in cash and a promissory note in
the amount of $32,700 ("the Acquisition"). The Acquisition, which was
consummated on July 10, 1995, was accounted for as a purchase. The
excess of the purchase price over the value of the net assets acquired
was recorded as goodwill. In addition, the Company incurred legal fees
of $26,000, which related to the Acquisition.
Assuming the operating assets of Greenberg's-L.P. had been
acquired at January 1, 1995, the results of operations on a proforma
basis for the three months ended March 31, 1995 would have been as
follows:
Net sales $ 685,572
Cost of sales 440,111
Selling, general and
administrative expenses 517,951
Depreciation and
amortization expenses 13,069
---------
971,131
---------
Loss from operations (285,559)
Interest expense (4,070)
---------
Net loss ($289,629)
=========
NOTE 3 - PROPERTY AND EQUIPMENT.
Property and equipment at March 31, 1996 consist of:
Furniture and fixtures $ 81,276
Equipment 599,401
Leasehold improvements 951,710
Construction in progress 217,462
----------
1,849,849
----------
Less: Accumulated depreciation 58,711
----------
$1,791,138
==========
7 of 17
<PAGE>
NOTE 4 - SEGMENT INFORMATION.
The Company's operations are classified into two segments, retail
and wholesale. The following is a summary of segmented information as
of March 31, 1996 and for the three month period ended March 31, 1996
(actual) and March 31, 1995 (on a proforma basis which reflects the
purchase of the business of Greenberg's-L.P. as if it had accrued on
January 1, 1994):
For the Three
Months Ended
March 31,
-----------------------------
1996 1995
--------- ---------
(Actual) (Proforma)
Operating data:
Net sales:
Retail $ 574,966 $ 498,781
Wholesale 250,824 186,791
--------- ---------
825,790 685,572
--------- ---------
Loss from operations:
Retail (373,809) (215,849)
Wholesale (206,374) (69,710)
--------- ---------
(580,183) (285,559)
Less: General corporate
income (expense) 29,084 (4,070)
--------- ---------
Net loss ($551,099) ($289,629)
========= =========
Balance sheet data:
As of
March 31,
1996
----------
Identifiable assets:
Retail $1,379,521
Wholesale 606,183
----------
1,985,704
General corporate assets 2,695,188
----------
Total assets $4,680,892
==========
NOTE 5 - STOCKHOLDERS' EQUITY.
(a) Per Share Data:
Net loss per share for the three months ended March 31, 1996 was
computed by the weighted average number of shares outstanding during
the period and the assumed conversion of a warrant issued in
connection with the financing for the Acquisition into 163,404 shares
of common stock.
Net loss per share for the three months ended March 31, 1995 was
computed by the weighted average number of shares outstanding during
the period.
8 of 17
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY. (Continued)
(b) Stock Options:
On January 13, 1996, stock options to purchase up to 20,000
shares of the Company's common stock were issued to a consultant
and are exercisable at $5.50 per share for a two year period as
follows:
(i) Options to purchase 5,000 shares of the Company's common stock
are immediately exercisable.
(ii) Options to purchase the additional 15,000 shares of the Company's
common stock are exercisable in increments of 5,000 shares at
such time as the closing price of the Company's common stock as
reported by Nasdaq is $7.50, $9.00 and $10.50 per share,
respectively.
(c) Common Stock:
In March 1996, the Company's former Chairman Willa Rose Abramson
pledged 400,000 common shares of the Company to a third party as
collateral for a loan made to her spouse. The loan matures in March
1997.
NOTE 7 - CONSULTING AGREEMENT.
On January 13, 1996, the Company entered into a consulting
agreement with an unrelated party to provide financial public
relations services for a period of two years at a monthly fee of
$2,500 and an option to purchase 20,000 shares of the Company's
common stock (see Note 6). The agreement may be terminated by either
party thereto upon thirty days notice prior to the expiration of the
first six months of the agreement.
NOTE 8 - SUBSEQUENT EVENT.
Effective April 15, 1996, Ms. Abramson resigned as a member of
the Board of Directors and from the offices of Chairman of the Board,
Chief Financial Officer and Secretary and pursuant to the terms of an
agreement between the Company and Ms. Abramson, the Company has agreed
to continue to pay Ms. Abramson her salary and benefits at their
current levels for a period of up to 16 months.
9 of 17
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OR PLAN OF OPERATIONS
(a) General:
The Company was incorporated in November 1993 and was in the
development stage through July 1995. From April 1994 through June
1995, the Company assembled its core management, raised approximately
$600,000 from equity financing, and negotiated a definitive agreement
to purchase the operating assets and business of Greenberg's-L.P. In
July 1995, the Company completed the Acquisition for a purchase price
of $1,967,300 in cash and a promissory note for $32,700. In connec-
tion with the Acquisition, the Company obtained a $2,000,000 term loan
and applied a portion of the net proceeds from its initial public
offering, consummated in October 1995, to pay in full the principal
and accrued interest under the term loan. The Acquisition was
accounted for as a purchase and the excess of the purchase price over
the value of the net assets acquired was recorded as goodwill.
Additionally, to the extent the Company may have taxable income
in future periods, there is available a net operating loss for federal
income tax purposes of approximately $1,950,000 which can be used to
reduce the tax on income up to that amount through the year 2010.
(b) Results of Operations:
Historical:
The Company from its inception on November 12, 1993 through July
10, 1995 was in the development stage and did not carry on any
significant operations nor generate any revenues. Management's efforts
were directed toward the development and implementation of a plan to
generate sufficient revenues in the baking industry to cover all of
its costs and expenses. During the three months ended March 31, 1995,
the Company incurred costs and expenses of $20,000 in implementing its
plan. $17,500 of these costs were paid to a consultant who became the
Company's President in 1995. The Company did not generate any revenues
until July 10, 1995 when it acquired the net operating assets of
Greenberg's-L.P. The Company's revenues aggregated $826,000 for the
three months ended March 31, 1996. Management believes that its
revenues during this period were adversely affected by the severe
winter storms which affected the New York City area during the period.
The cost of goods sold were $606,000 during the period and selling,
general and administrative expenses were $800,000 (96.9% of sales).
For the three months ended March 31, 1996, the Company had
interest income of $29,000 which arose from investing a portion of the
net proceeds it received upon the consummation of the initial public
offering in highly liquid cash equivalents.
As a result, the net loss for the three months ended March 31,
1996 was $551,000.
10 of 17
<PAGE>
(b) Results of Operations: (Continued)
Historical: (Continued)
Insofar as the Company had no revenues prior to the Acquisition
in July 1995, management is of the opinion that a discussion of the
results of operations of the Company (and Greenberg's-L.P.) on a
pro-forma basis would be more informative than a comparative
discussion of the Company on a historical basis. Therefore,
management's discussion of the Company's results of operations for the
three months ended March 31, 1996 as compared with March 31, 1995 are
based on the pro- forma segmental information found below and reflects
the purchase of Greenberg's-L.P. as if it had occurred at the
beginning of the periods presented.
(c) Proforma:
Retail Segment:
The retail segment presently consists of four retail stores
located in Manhattan, New York including its cafe located in Macy's
Herald Square. The Company's fifth retail store opened in Manhattan on
May 1, 1996. All baking is done at the Company's bakery which is
located on West 47th Street, New York, New York. From this location,
baked goods are supplied to retail stores as well as to wholesale
customers.
The results of the retail segment is presented a proforma basis
and reflects the Acquisition as if it has occurred as of the beginning
of the periods presented.
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, Percentage
----------------------------------- Change (as
1996 % 1995 % Change a % of Sales)
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 575,000 100.0% $ 499,000 100.0% $ 76,000 - %
Cost of sales 381,000 66.3 296,000 59.3 85,000 7.0
--------- ----- --------- ----- --------- -----
Gross profit 194,000 33.7 203,000 40.7 (9,000) (7.0)
Selling, general and
administrative 538,000 93.6 413,000 82.8 125,000 10.8
Depreciation and
amortization 30,000 5.2 5,000 1.0 25,000 4.2
--------- ----- --------- ----- --------- -----
Loss from operations ($374,000) (65.1%) ($215,000) (43.1) ($159,000) (22.0%)
========= ===== ========= ===== ========= =====
</TABLE>
The 15.2% increase in net sales during the three months ended
March 31, 1996 as compared to the same period in 1995 was primarily
due to the opening of a cafe at Macy's Herald Square in November 1995
and a general increase in same store sales. Management believes that
its net sales for the three months ended March 31, 1996 were adverse-
ly affected by the severe weather storms which affected the New York
City area during the period.
11 of 17
<PAGE>
(c) Proforma: (Continued)
Retail Segment: (Continued)
The increase in cost of sales as a percentage of sales for the
three months ended March 31, 1996 as compared to the same period in
1995 is attributable to (i) an increase in baking personnel and labor
rates, (ii) increased costs in the development of new baked products,
and (iii) increases in the cost of ingredients and packaging mate-
rials. The Company was unable to pass most of these increased costs
on to its customers.
The retail and wholesale divisions sell similar products which
are baked at the Company's centralized baking facility. Costs are
allocated to each division based upon the standard costs of the items
sold. Such costs consist of ingredients, direct labor and overhead.
Prior to the Acquisition, the wholesale division was considered an
outgrowth of the retail business and was therefore not considered a
separate business segment. Subsequent to the Acquisition, management
has concentrated their efforts on running the wholesale segment as a
separate and distinct business.
Selling, general and administrative expenses of the retail
segment consist of (i) expenses incurred in each of the four retail
stores and (ii) expenses allocated from the Company's centralized
operating facility which are based primarily on sales volume. The
increase in selling, general and administrative expenses during the
three months ended March 31, 1996 as compared to the same period in
1995 was primarily the result of (i) salaries paid to sales personnel
in its Cafe in Macy's Herald Square, (ii) the allocation to the retail
segment of salaries of additional management and administrative
personnel, and (iii) increased compensation paid to prior management
personnel pursuant to consulting agreements entered into by the
Company upon consummation of the Acquisition in July 1995.
The increase in depreciation and amortization for the first
quarter of 1996 as compared with the same period in 1995 is
attributable to depreciation on the Macy's Herald Square Cafe as well
as on the write up of the assets purchased from Greenberg's-L.P. to
appraised values and amortization of goodwill during 1995.
The increase in the net loss for the first quarter of 1996 as
compared with the same period in 1995 is primarily attributed to the
increases in the cost of products sold and additional compensation
paid to officers and managerial personnel under their respective
employment and consulting agreements, which were entered into after
the first quarter of 1995.
12 of 17
<PAGE>
(d) Wholesale Segment:
The results of the wholesale segment is presented on a pro-forma
basis and reflects the Acquisition as if it had occurred at the
beginning of the periods presented:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, Percentage
----------------------------------------- Change (as
1996 % 1995 % Change a % of Sales)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 251,000 100.0% $ 187,000 100.0% $ 64,000 -%
Cost of sales 211,000 84.1 144,000 77.0 67,000 7.1
--------- --------- --------- --------- --------- ---------
Gross profit 40,000 15.9 43,000 23.0 (3,000) (7.1)
Selling, general and
administrative 233,000 92.8 108,000 57.8 125,000 35.0
Depreciation and
amortization 13,000 5.2 5,000 2.7 8,000 2.5
--------- --------- --------- --------- --------- ---------
Loss from operations ($206,000) (82.1%) ($ 70,000) (37.5%) ($136,000) (44.6%)
========= ========= ========= ========= ========= =========
</TABLE>
The Company, through its institutional/wholesale segment,
distributes pastries, cakes, pies and other desserts to hotels,
country clubs, gourmet markets, restaurants, food shops and corporate
dining facilities. All products are baked at the Company's baking
facility located in N.Y.C.
The 34.2% increase in the wholesale segment's net sales for the
first quarter of 1996 as compared to the same period in 1995 is
attributable to the increase in shipments to two nationwide restaurant
chains.
Cost of sales as a percentage of sales increased by 7.1% during
the first quarter of 1996 as compared to the same period in 1995. Such
increase was attributable to increases in both baking personnel and
wage rates, an increase in the cost of developing new baked products,
and increases in the cost of ingredients and packaging materials. Most
of these cost increases could not be passed on to the Company's
customers.
Selling, general and administrative expenses of the wholesale
segment for the first quarter of 1996 increased by $125,000 (115.7%)
over the same period in 1995. Such increases were primarily the result
of an allocation to the wholesale segment of the salaries of
additional management and administrative personnel, as well as
increased compensation paid to prior management personnel. The
additional management personnel and the additional compensation paid
to prior personnel was the result of the various employment and
consulting agreements entered into by the Company after the first
quarter of 1995.
13 of 17
<PAGE>
(d) Wholesale Segment: (Continued)
The increase in depreciation and amortization for the first
quarter of 1996 as compared with the same period in 1995 is
attributable to depreciation on newly acquired property asset
additions and the write up of property assets purchased from
Greenberg's-L.P. to appraised values and amortization of goodwill in
connection with the Acquisition.
The increase in the net loss for the first quarter of 1996 as
compared with the same period in 1995 is primarily attributed to lower
margins caused by increases in ingredients, baking salaries and new
products coupled with additional compensation paid to officers and
managerial personnel under their respective employment and consulting
agreements entered into by the Company in connection with the
Acquisition of the business of Greenberg's-L.P. and the Company's
initial public offering.
(e) Plan of Operations:
In connection with the Acquisition, the Company in July 1995
implemented a business strategy designed to increase the retail,
institutional/wholesale and mail order operations of its business. The
Company's growth strategy is comprised of the following:
(1) Retail:
The Company intends to open additional retail facilities in the
North and Southeastern United States. These cafes and kiosks will
offer a broad section of what the Company believes are premium
quality baked goods and desserts as well as sandwiches, soups and
salads, espresso, cappuccino and specialty coffees and teas.
Since July 1995, the Company opened its first cafe at Macy's
Herald Square in November 1995 and on May 1, 1996 opened its
second cafe on Broadway and 8th Street in New York City. A third
cafe presently under construction is expected to open in August
of 1996. In addition, the Company's completed the manufacture of
its first four kiosks during the three months ended March 31,
1996 and is currently considering the placement of those kiosks.
(2) Institutional/Wholesale:
The Company plans to increase its penetration in the
institutional/wholesale food market by increasing its marketing
efforts to restaurants, hotels and corporate dining facilities
and by offering its products to supermarkets in New Jersey, New
York, Florida and other states and offering its products through
specialty food retailers and mail order catalogue businesses.
(3) Mail Order:
The Company is expanding its current mail order business by
offering additional catalogues and scheduling special mailings to
existing and prospective customers for specific occasions.
14 of 17
<PAGE>
(e) Plan of Operations: (Continued)
(4) Kosher Foods:
The Company is also seeking to capitalize on the growth of the
kosher food industry. The Company has a kosher certification and
believes it can capitalize on the projected growth of this market.
The Company estimates that new construction start-up costs for
its cafes will range from approximately $150,000 to $175,000 for a
small cafe (600-800 square feet) and approximately $200,000 to
$350,000 for a full size cafe (800-1,200 square feet) and estimates
that the cost of converting existing restaurant space into a cafe will
be approximately $75,000. In addition, the Company estimates the
start-up costs for a kiosk to be between approximately $50,000 to
$65,000.
The Company believes that the cost of funding new cafes and
kiosks will increase the Company's operating costs and expenses
primarily due to increased personnel and other corporate operating
costs required to operate the new cafes and kiosks. Each cafe and/or
kiosk will incur the pre-operating expenses, such as advertising and
promotional costs, in order to encourage new and repetitive consumer
traffic. Until consumer traffic at each location is sufficient to
generate revenues to cover each location's cost and a portion of the
overall corporate overhead, the Company believes that the initial
opening of each new location will have a positive effect on net
revenues but each new location will have an initial adverse effect on
earnings. For the three months ended March 31, 1996, the Company
incurred an aggregate of approximately $335,000 in capital
expenditures of which $128,000 relates to its cafe at Eighth Street
and Broadway which opened on May 1, 1996 and its cafe at 6th Avenue
and 10th Street which is presently under construction, $54,000 was
used on its four kiosks which were completed during April 1996 and
$65,000 was used for computer hardware and software.
(f) Liquidity and Capital Resources:
At March 31, 1996, the Company had working capital of
approximately $1,262,000 as compared to working capital of $2,133,000
at December 31, 1995, a decrease of $871,000. Since its inception, the
Company's primarily source of working capital has been the proceeds
received from the issuance of its common stock and notes.
In June 1995, the Company issued 180,000 shares of common stock
to unrelated parties for $600,000 and in August 1995, the Company
issued 60,000 shares of its common stock to unrelated parties for
$200,000. In connection with the Acquisition of Greenberg'sL.P., the
Company received $2,000,000 from the sale of two notes to InterEquity
Capital Partners, L.P. ("InterEquity"). During October 1995, the
Company received net proceeds of $4,919,586 from the sale of 1,150,000
shares of its common stock in an initial offering to the public. Of
the net proceeds received from the initial public offering, $2,125,000
was used to repay the InterEquity debt including interest. In addition
to the repayment of the InterEquity debt, the Company intends to use
the net proceeds to fund its planned expansion strategy and for
general corporate purposes, including working capital.
15 of 17
<PAGE>
(f) Liquidity and Capital Resources: (Continued)
In October 1995, InterEquity converted $1,000 convertible note
into a six-year warrant to purchase 6% of the Company's issued and
outstanding capital stock on a fully diluted basis at the time of
exercise. Pursuant to the warrant, the Company has granted InterEquity
an option to put those shares acquired by InterEquity upon exercise of
the warrant to the Company at any time during the period from July 10,
2000 through July 31, 2005 if the shares of common stock have not been
listed or admitted to trade on a national securities exchange and/or
are not quoted on an automated quotation system at the time at a price
equal to a multiple of earnings as defined in the loan agreement
between the parties or a price established by independent appraisal.
Pursuant to the terms of the loan agreement, the Company has also
granted InterEquity unlimited "piggyback" registration rights upon
exercise of the warrant.
During the three months ended March 31, 1996, working capital was
used by the Company for the Acquisition of $335,000 in property assets
and to fund the operating loss incurred during the first quarter of
1996.
The Company and its directors, officers and principal
shareholders agreed with the managing underwriter of its initial
public offering (the "Representative") not to, directly or indirectly,
register, issue, offer, sell, offer to sell, contract to sell,
hypothecate, pledge or otherwise dispose of any shares of common
stock, or any securities convertible into or exercisable or
exchangeable for shares of common stock, for a period of one year from
October 12, 1996, without the prior written consent of the
Representative.
The Company's management believes that the proceeds from its
initial public offering together with the projected cash flows from
operations, if any, will be sufficient to fund operations, including
its planned expansion, for at least the next ten months. However,
there can be no assurance that the Company will not be required to
raise additional capital for its growth strategy prior to such date.
Although the Company has previously been successful in obtaining
sufficient cash and capital funds through issuances of common stock
and promissory notes, there can be no assurance that the Company will
be able to do so in the future.
(g) Inflation and Seasonality:
To date, inflation has not had a significant impact on the
Company's operations. The Company's revenues are affected by
seasonality with revenues anticipated to increase during holiday
seasons such as Thanksgiving, Christmas, Jewish New Year, Easter and
Passover.
16 of 17
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WILLIAM GREENBERG JR. DESSERTS AND CAFES, INC.
Date: May 20, 1996 /s/ MARIA MARFUGGI
---------------------------
Chairman of the Board,
Chief Executive Officer and Secretary
(Principal Financial Officer and
Officer duly authorized to sign
on behalf of the Registrant)
17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed balance sheet of William Greenberg Jr. Desserts and Cafes, Inc. as at
March 31, 1996 and the related condensed statement of operations for the three
months ended March 31, 1996 on Form 10-QSB and is qualified in its entirety
under such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,371,451
<SECURITIES> 0
<RECEIVABLES> 152,041
<ALLOWANCES> (18,500)
<INVENTORY> 150,125
<CURRENT-ASSETS> 1,782,242
<PP&E> 1,849,849
<DEPRECIATION> (58,711)
<TOTAL-ASSETS> 4,680,892
<CURRENT-LIABILITIES> 520,405
<BONDS> 0
0
0
<COMMON> 2,560
<OTHER-SE> 4,126,443
<TOTAL-LIABILITY-AND-EQUITY> 4,680,892
<SALES> 825,790
<TOTAL-REVENUES> 825,790
<CGS> 605,634
<TOTAL-COSTS> 1,405,973
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (551,099)
<INCOME-TAX> 0
<INCOME-CONTINUING> (551,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (551,099)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
