SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 1997
or
Transition report pursuant to Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file Number 0-17805
NEW RETAIL CONCEPTS, INC.
(Exact name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3275369
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) identification No.)
2975 Westchester Avenue, Purchase, New York 10577
(Address of Principal Executive Offices) (Zip Code)
(914)694-8888
(Issuer's Telephone Number, Including Area Code)
(Former name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 of 15(d) of the Exchange Act 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
APPLICABLE ONLY TO CORPORATE ISSUER
Shares of Common Stock outstanding at February 14, 1998: 5,693,639
Transitional Small Business Disclosure Format (check one):
YES NO X
NEW RETAIL CONCEPTS, INC.
INDEX TO FORM 10-QSB
FOR THE PERIOD ENDED DECEMBER 31, 1997
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Balance Sheet at December 31, 1997 (unaudited) 3-4
Condensed Statements of Operations for the Nine Months and
Three Months Ended December 31, 1997 and 1996 (unaudited) 5
Condensed Statements of Cash Flows for the Nine Months
Ended December 31, 1997 and 1996 (unaudited) 6
Notes to Interim Financial Statements 7-8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
PART II - Other Information 11
ITEM 1. Legal Proceedings 11
ITEM 2. Exhibits and Reports on Form 8-K 11
2
NEW RETAIL CONCEPTS, INC.
CONDENSED BALANCE SHEET
DECEMBER 31, 1997
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 396,968
Marketable securities 76,923
Accounts receivable - net 16,255
Note receivable - NES 171,832
Other current assets 17,164
Total current assets 679,142
FIXED ASSETS - AT COST:
Furniture and equipment 101,657
Less accumulated depreciation (101,657)
-
Note receivable - NES 374,990
Investment in Candie=s, Inc. 1,871,939
2,246,929
$ 2,926,071
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
3
NEW RETAIL CONCEPTS, INC.
CONDENSED BALANCE SHEET
DECEMBER 31, 1997
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable - current $ 200,000
Accounts payable - trade 10,000
Accrued expenses and other current
liabilities 169,157
Total current liabilities 379,157
DEFERRED INCOME TAXES 100,000
STOCKHOLDERS' EQUITY:
Preferred stock - par value $.01; authorized,
1,000,000 shares, no shares issued -
Common stock - par value $.01; authorized,
25,000,000 shares; issued 6,423,493 shares 64,235
Additional paid-in capital 3,468,534
Accumulated deficit (663,883)
2,868,886
Less:
Common stock in treasury at cost;
729,854 shares 421,972
2,446,914
$ 2,926,071
THE ACCOMPANYING STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS
4
NEW RETAIL CONCEPTS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended Three Months Ended
December 31, December 31,
1997 1996 1997 1996
Revenues:
License and marketing fees $ 315,668 $ 498,661 $ 50,983 $ 66,367
Costs and expenses:
Selling, general
and administrative 436,369 469,880 128,981 148,472
Interest expense 11,250 13,106 3,750 3,750
Total costs and expenses 447,619 482,986 132,731 152,222
Operating (loss) income (131,951) 15,675 (81,748) (85,855)
Other income (expense):
Equity in gains (losses)
of affiliate 274,857 (78,182) 48,790 0
Interest and other income 32,359 78,872 7,679 20,706
307,216 690 56,469 20,706
Income (loss) before provision
for income taxes 175,265 16,365 (25,279) (65,149)
Provision (credit) for income
taxes 3,009 5,982 (1,991) 0
NET INCOME (LOSS) $ 172,256 $ 10,383 $ (23,288) $ (65,149)
Net income (loss) per share
of common stock:
Basic $0.03 $ 0.00 $(0.00) $ (0.01)
Diluted $0.03 $ 0.00 $(0.00) $ (0.01)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
5
NEW RETAIL CONCEPTS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
December 31,
1997 1996
Cash flows from operating activities:
Net cash provided by
operating activities $ 43,228 $ 138,096
Cash flows from investing activities:
Net cash provided by investing
activities 55,680 90,274
Cash flows from financing activities:
Net cash used in financing
activities (162,974) (151,053)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (64,066) 77,317
Cash and cash equivalents at beginning of period 461,034 245,616
Cash and cash equivalents at end of period $ 396,968 $ 322,933
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
6
NEW RETAIL CONCEPTS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A - ORGANIZATION AND BASIS FOR PRESENTATION
New Retail Concepts, Inc. ("NRC" or the "Company"), is engaged in
managing its existing corporate assets and in seeking other business
opportunities for acquisition or merger.
The condensed financial statements included herein are unaudited and
include all adjustments which are, in the opinion of management, necessary
for a fair presentation of the results of operations of the interim period
pursuant to the rules and regulations of the U.S. Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures in such financial statements are adequate to make the
information presented not misleading. These condensed financial statements
should be read in conjunction with the Company's Financial Statements and the
notes thereto included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1997.
The Company has no full-time employees and two part-time employees
which include the Chairman of the Board and President and the Chief Financial
Officer of the Company.
NOTE B - CORPORATE ASSETS
The Company owns 1,227,696 shares of the common stock of Candie's,
Inc. ("Candie's"), a Delaware corporation whose shares are traded on the
NASDAQ National Market System, warrants to purchase 700,000 additional shares
of such common stock exercisable at an initial price of $1.2375 per share and
an option to purchase for $1.15 per share 100,000 additional shares of such
common stock. The Company's holding in Candie's is recorded on the equity
method of accounting. At December 31, 1997, such holding was carried at
$1,871,939, including approximately $540,000 of goodwill (net of
amortization), which is being amortized over a ten-year period. Equity in
gains (losses) of affiliate for the nine months ended December 31, 1997 and
1996 only include the affiliate's results from operations for the seven
months ended October 31, 1997 and 1996. Revenues, gross profit and net
income of Candie's for the nine months ended October 31, 1997 are as follows:
Net Revenues $70,367,254
Gross Profit $17,832,544
Net Income $ 3,826,781
The other corporate assets involving management by the Company
include an account receivable from No Excuses Sportswear, Ltd. ("NES"), a
license agreement calling for the payment of royalties to the Company for the
use of the NO EXCUSES(R) trademark, and the trademark CRAYONS(R).
7
NOTE C - MAJOR LICENSEES (CUSTOMERS)
Two major licensees (customers) accounted for 80.3% and 14.7%,
respectively, of total revenues for the nine months ended December 31, 1997.
Two major licensees accounted for 83.0% and 17.0%, respectively, of total
revenues for the nine month period ended December 31, 1996.
NOTE D - MARKETABLE SECURITIES
Marketable securities consist primarily of common equity securities
of a publicly traded company. The Company accounts for marketable securities
using Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). This
standard requires that certain debt and equity securities be adjusted to
market value at the end of each accounting period. At December 31, 1997, all
securities covered under SFAS No. 115 were designated as available for sale
and are stated at market value. Market value of securities approximated
their cost and, accordingly, no realized market gains or losses were reported
in a separate component of shareholders' equity. Realized gains and losses
on sales of investments will be determined on a specific identification
basis.
NOTE E - SUBSEQUENT EVENT
On January 30, 1998, the Company entered into a letter of intent
with Candie's, Inc. pursuant to which the Company would merge with and into
Candie's, Inc. Each issued and outstanding common share of the Company's
stock is expected to be converted into .405 shares of Candie's Common stock.
The completion of the transaction is subject to the execution and negotiation
of a definitive merger agreement, registration of the Candie's shares to be
issued in the transaction under the Securities Act of 1933, as amended, and
other customary conditions including stockholder approval of the transaction
by both the Company and Candie's.
NOTE F - NET INCOME (LOSS) PER SHARE
During the quarter, the Company adopted the provisions of Statement
of Financial Accounting Standards NO. 128, "Earnings Per Share." Basic
earnings per share excludes dilution and is computed by dividing income
available to common shareholders by the weighted average common shares
outstanding for the period. Diluted earnings per share reflect the weighted
average common shares outstanding plus the potential dilutive effect of
securities or contracts which are convertible to common shares.
The weighted average number of shares outstanding for the period
presented is as follows:
Nine Months Ended Three Months Ended
December 31, December 31,
1997 1996 1997 1996
Basic Shares 5,709,000 5,800,000 5,694,000 5,725,000
Effect of Dilutive Securities 593,000 225,000
Diluted Shares 6,302,000 6,025,000 5,694,000 5,725,000
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
Results of Operations
Nine Months Ended December 31, 1997 and 1996
Total revenues for the nine months ended December 31, 1997 were
$315,668 as compared to $498,661 for the corresponding period ended December
31, 1996. This decrease is primarily attributable to a decrease in reported
shipments and royalty rate of its licensee for No Excuses footwear and the
expiration of the Company's license for children's sportswear at July 31,
1997.
Net income for the nine months ended December 31, 1997 was $172,256
or $0.03 per share of Common Stock, as compared to net income of $10,383 or
$0.00 per share of Common Stock, for the nine months ended December 31, 1996.
This increase in net income is principally due to the equity in the gains of
Candie's, Inc.
Selling, general and administrative expenses decreased from
$469,880 for the nine months ended December 31, 1996 to $436,369 for the nine
months ended December 31, 1997. This decrease was primarily attributable to
decreases in advertising, royalty and professional fee expenses.
Interest expense for the six months ended December 31, 1997 was
$11,250 as compared to $13,106 for the nine months ended December 31, 1996.
This decrease is due to a reduction in notes payable.
Three Months Ended December 31, 1997 and 1996
Total revenues for the three months ended December 31, 1997 were $50,983
as compared to $66,367 for the corresponding period ended December 31, 1996.
This decrease is primarily attributable to a decrease in reported shipments
and royalty rate of the Company's footwear licensee and the expiration of the
Company's license for children's sportswear at July 31, 1997.
Net loss for the three months ended December 31, 1997 was $(23,288) or
$(0.00) per share of Common Stock, as compared to a net loss of $(65,149) or
$(0.01) per share of Common Stock, for the three months ended December 31,
1996. This decrease in net loss is principally due to a decrease in
operating expenses and an increase in the gains of Candie's, Inc.
Selling, general and administrative expenses decreased from $148,472 for
the three months ended December 31, 1996 to $128,981 for the three months
ended December 31, 1997. This decrease was primarily attributable to a
decrease in payroll expenses during the period.
Interest expense for the three months ended December 31, 1997 was $3,750
as compared to $3,750 for the three months ended December 31, 1996.
9
Liquidity and Capital Resources
At December 31, 1997 the Company had working capital of $299,985 as
compared to working capital of $335,760 at March 31, 1997. This decrease in
working capital arose primarily as a result of an operating loss for the
period.
The Company satisfies its present working capital and other
financial needs from royalties earned on its licensing agreements and the
proceeds from the sale of certain licensing rights. Management of the
Company believes that the Company will generate sufficient cash flow for the
next twelve months from its current cash position and licensing fees as the
sublicensor of the NO EXCUSES(R) trademark.
10
NEW RETAIL CONCEPTS, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
ended December 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
NEW RETAIL CONCEPTS, INC.
DATED: February 14, 1998 BY: /s/ Neil Cole
Neil Cole
President
Chairman
Chief Executive Officer
Chief Accounting Officer
11
EXHIBIT INDEX
Exhibit No. Description Page
27 Financial Data Schedule 13