SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported) May 23, 1996
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Manhattan Bagel Company, Inc.
-----------------------------
(Exact Name of Company as Specified in its Charter)
New Jersey 0-24388 22-2981539
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization File Number)
Identification Number)
246 Industrial Way West, Eatontown, New Jersey 07724
(Address of principal executive office) (Zip- Code)
Company's telephone number, including area code (908) 544-0155
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 7. Financial Statements and Exhibits
On May 23,1996, Manhattan Bagel Company, Inc. (the "Company") reported that
it had completed the acquisition of Specialty Bakeries, Inc. ("SBI").
The transaction was reported in a Form 8-K and was accounted for as a
pooling of interests. The required financial statements and the pro forma
information were not available at that time.
The following financial statements are filed as a part of this amendment to Form 8-K; Page
SBI, unaudited Balance Sheet as of March 31,1996. 1-2
SBI, unaudited Consolidated Statements of Operations for the three months ended March 31,1996 and
and March 31,1995. 3
SBI, audited Balance Sheets as of December 31,1995 and December 31,1994. 6
SBI, audited Consolidated Statements of Operations for the years ended December 31,1995 and
December 31,1994. 7
SBI, audited Consolidated Statements of Stockholders' Equity for the years ended December 31,1995
and December 31,1994. 7
SBI, audited Consolidated Statements of Cash Flows for the years ended December 31,1995 and
December 31,1994. 8
SBI, audited Notes to The Consolidated Financial Statements for the years ended December 31,1995
and December 31,1994. 9-12
Manhattan Bagel Company, Inc. and Subsidiaries unaudited Pro Forma Balance Sheets as of
March 31,1996 and December 31,1995. 13-14
Manhattan Bagel Company, Inc. and Subsidiaries unaudited Pro Forma Consolidated Statements of
Operations for the three months ended March 31,1996 and March 31,1995. 15
Manhattan Bagel Company, Inc. and Subsidiaries unaudited Pro Forma Consolidated Statements of
Operations for the years ended December 31,1995 and December 31,1994. 16
SPECIALTY BAKERIES, INC.
BALANCE SHEET
(Unaudited)
March 31,1996
ASSETS
Current Assets
Cash and cash equivalents ($8,246)
Accounts receivable 284,456
Inventories 70,232
Prepaid expenses and other current assets 36,742
-
Total current assets 383,184
Property and equipment, net of accumulated
depreciation of $987,804 238,739
Other assets
Notes receivable-related parties 30,000
Security deposits 29,694
Other assets 3,187
-
Total Assets $684,804
=
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $161,554
Accounts payable and accrued expenses 583,772
Unearned franchise fee income 45,000
Income taxes payable (1,300)
-
Total current liabilities 789,026
-
Other liabilities
Long-term debt, net of current maturities 258,099
-
Stockholders' equity
Common stock, no par value, 2,500 shares
authorized, 934 issued and outstanding 97,012
Retained (deficit) (344,333)
-
(247,321)
Less: Treasury Stock (232 shares) at cost 115,000
-
Total stockholders' equity (362,321)
-
Total liabilities and stockholders' equity $684,804
=
SPECIALTY BAKERIES, INC.
STATEMENTS OF OPERATIONS
UNAUDITED
For the Three Months Ended
March 31,
1996 1995
----
Revenues
Product sales $688,711 $707,633
Franchise &license related revenue 177,949 67,925
Other income
Total revenue 866,660 775,558
Operating expenses
Cost of goods sold 288,427 265,235
Selling, general &administrative expenses 550,705 630,359
Interest expense (income), net 3,315 9,467
Total operating expenses 842,447 905,061
Earnings before provision for income taxes 24,213 (129,503)
Provision for income taxes
Net income $24,213 ($129,503)
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-3-
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders
Specialty Bakeries, Inc.
Moorestown, New Jersey
We have audited the accompanying balance sheets of Specialty Bakeries, Inc.
as of December 31, 1995 and 1994, and the related statements of operations and
retained earnings (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Specialty Bakeries, Inc. as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
Rainer & Company
February 2, 1996
RAINER & COMPANY
A PROFESSIONAL- CORPORATION
Certified Public Accountants
INDEX
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Title Page No.
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Independent Auditors' Report 1
Balance Sheets 2
Statements of Operations and Retained Earnings (Deficit) 3
Statements of Cash Flows 4
Notes to Financial Statements 5-8
-- 4 --
RAINER &COMPANY -2-
A Professional CORPORATION
Certified Public Accountants
SPECIALTY BAKERIES, INC.
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BALANCE SHEETS
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DECEMBER 31, 1995 AND 1994
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ASSETS 1995 1994
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Current:
Cash $ 22,361 $ 54,914
Accounts Receivable 244,827 151,542
Inventories 51,134 39,980
Prepaid Expenses 51,838 51,770
Note Receivable - Franchisee 0 11,035
TOTAL CURRENT ASSETS 370, 160 309,241
Property and Equipment, Net of
Accumulated Depreciation 261,539 300,666
Other:
Note Receivable - Franchisee 0 41,680
Note Receivable - Stockholder 30,000 30,000
Deposits 29,694 14,650
Intangible Assets, Net of Accumulated
Amortization of $563 in 1995 3, 187 0
Equipment Held For Sale 17,023 0
TOTAL OTHER ASSETS 79,904 86,330
TOTAL ASSETS $ 711,603 $ 696,237
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LIABILITIES
-----------
Current:
Notes Payable $ 51,554 $ 117,504
Accounts Payable 426,033 181,191
Sales Taxes Payable 9,857 10,766
Accrued Expenses 212,329 25,497
Franchise Advertising Funds 805 30,965
Deferred Franchise Fee Revenue 127,000 0
TOTAL CURRENT LIABILITIES 827,578 365,923
,
Long-Term:
Notes Payable, Net of Current Portion 270,559 290, 154
TOTAL LIABILITIES 1,098, 137 656,077
STOCKHOLDERS' EQUITY
--------------------
Common Stock - No Par Value, 2,500 Shares Authorized,
934 Shares Issued and Outstanding 97,012 97,012
Retained Earnings (Deficit) (368,546) 58, 148
(271,534) 155, 160
Less:
Treasury Stock (232 Shares), at Cost 115,000 115,000
TOTAL STOCKHOLDERS' EQUITY (386,534) 40, 160
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 711,603 $ 696,237
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The accompanying notes are an integral part of this statement.
RAINER &COMPANY -3-
A PROFESSIONAL CORPORATION
Certified Public Accountants
SPECIALTY BAKERIES, INC.
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STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
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FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
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1995 1994
Revenues:
Net Product Sales $ 2,727,195 $2,710,220
Cost of Sales 1,384,342 1,234,771
GROSS PROFIT 1,342,853 1,475,449
Other Operating Revenue:
Royalty Fees 183,364 146,988
Initial Franchise Fees 41,250 93,500
Other Revenues 47,316 41,927
TOTAL OTHER OPERATING REVENUE 271,930 282,415
INCOME BEFORE OPERATING EXPENSES 1,614,783 1,757,864
Operating Expenses 2,020,392 1,687,141
OPERATING INCOME (LOSS) (405,609) 70,723
Other Income (Expense):
Interest Income 78 2,996
Gain on Sale of Assets 0 62,170
Miscellaneous Income 13,806 0
Interest Expense (34, 969) (28,462)
TOTAL OTHER INCOME (EXPENSE) (21,085) 36,704
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (426,694) 107,427
Provision for Income Taxes 0 6,663
NET INCOME (LOSS) (426,694) 100,764
Retained Earnings (Deficit) - Beginning 58, 148 (42,616)
RETAINED EARNINGS (DEFICIT) - ENDING $ (368,546) $ 58,148
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The accompanying notes are an integral part of this statement.
RAINER &COMPANY -4-
A ProFessional corporation
Certified Public Accountants
SPECIALTY BAKERIES, INC.
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STATEMENTS OF CASH FLOWS
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FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
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1995 1994
Cash Flows From Operating Activities:
Net Income (Loss) $ (426,694) $ 100,764
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 105,443 119,960
Gain on Sale of Assets 0 (62,170)
Decrease (Increase) in:
Accounts Receivable (93,285) (136,542)
Inventories (11,154) (7,410)
Prepaid Expenses (68) (28,372)
Deposits (15,044) (11,950)
Intangible Assets (3,750) 0
Equipment Held For Sale (17,023) 0
Increase (Decrease) in:
Accounts Payable 244,842 32,282
Sales Tax Payable (909) 263
Accrued Expenses 186,832 14,369
Franchise Advertising Funds (30, 160) 15,493
Deferred Franchise Fee Revenue 127,000 0
NET CASH PROVIDED BY OPERATING ACTIVITIES 66,030 36,687
Cash Flows From Investing Activities:
Purchase of Property and Equipment (65,753) (52,461)
Proceeds from Sale of Assets 0 29,500
NET CASH (USED) BY INVESTING ACTIVITIES (65,753) (22,961)
Cash Flows From Financing Activities:
Proceeds from Borrowing 0 150,000
Payment of Debt Obligations (85,545) (137,805)
Proceeds From Note Receivable Franchisee 52,715 7,785
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (32,830) 19,980
NET INCREASE (DECREASE) IN CASH (32,553) 33,706
Cash - Beginning 54,914 21,208
CASH - ENDING $ 22,361 $ 54,914
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Supplemental Disclosures of Cash Flow Information:
--------------------------------------------------
Cash Paid During the Year for:
Interest 34,969 28,462
Taxes 5,306 0
Schedule of Non-Cash Financing Activities:
- ------------------------------------------
The company financed a note receivable from a franchisee
for the purchase of equipment in the amount of $ 60,500
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During the year the company refinanced long-term debt
into a term loan of $330,000
The accompanying notes are an integral part of this statement.
RAINER &COMPANY - 5 -
A PROFESSIONAL CORPORATION
Certified Public Accountants
SPECIALTY BAKERIES, INC.
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NOTES TO FINANCIAL STATEMENTS
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DECEMBER 31, 1995 AND 1994
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NOTE 1 - Organization
- ------- ------------
Company's Activity - The company was founded as a partnership in 1985 and
- -----------------------
incorporated on October 15, 1986 in the State of New Jersey. The company is
engaged in the business of operating bagel bakeries and restaurants and, in
1992, began franchising additional restaurant locations under franchise
agreements with third parties. The company grants credit to franchised outlets
in the normal course of business.
NOTE 2 - Summary of Significant Accounting Policies
- ------- ------------------------------------------
Inventories - Inventories are stated at lower of cost (first-in, first-
----------------
out), or market.
Property and Equipment - Property and equipment are carried at cost.
- -----------------------------
Depreciation is calculated by the straight-line and accelerated methods over the
estimated useful lives of the assets. Maintenance and minor repairs are charged
to operations as incurred. Gains and losses on dispositions are recorded in
current operations.
Depreciation is provided over the following estimated lives:
Leasehold Improvements 10 Years
Machinery and Equipment 5-7 Years
Revenue Recognition - Revenue from sales of individual franchises is
- ------------------------
recognized, net of an allowance for uncollectible amounts, when substantially
all significant services to be provided by the company have been performed. When
an individual franchise is sold, the company agrees to provide certain services
to the franchisee. Generally, these services include assistance in site
selection and training.
Use of Estimates - The preparation of financial statements in conformity
- ---------------------
with generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Intangible Assets - The cost of certain legal fees are being amortized over
- ----------------------
the remaining useful
life. Amortization expense for the year amounted to $563.
Income Taxes - The company has elected to be treated as an S Corporation as
- -----------------
defined under section 1371 of the Internal Revenue Code. In 1995, the company
elected to be treated as an S Corporation for the State of New Jersey.
Therefore, income taxes are the liability of the individual stockholders. State
income taxes are provided for those states which do not recognize S Corporation
status.
RAINEIL &COMPANY -6-
A PROFESSIONAL CORPORATION
Certified Public Accountants
SPECIALTY BAKERIES, INC.
------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1995 AND 1994
--------------------------
NOTE 3 - Property and Equipment
- ------- ----------------------
Property and equipment consist of the following:
1995 1994
Leasehold Improvements Machinery and Equipment
TOTAL PROPERTY AND EQUIPMENT
Less: Accumulated Depreciation
NET PROPERTY AND EQUIPMENT
Depreciation expense for the years ended December 31, 1995 and 1994 were
$104,880 and $119,960, respectively.
NOTE 4 - Notes Receivable
- ------- ----------------
Franchisee - Collateralized by equipment. Monthly installments of $1,198
-----------
which includes interest at 7%. Final payment due December 1999. The note
was repaid in 1995.
Stockholder - Due June 1997 without interest.
------------------
NOTE 5 - Notes Payable
- ------- -------------
1995 1994
Note Payable - Bank - Payable in equal! monthly principal
installments of $2,500 plus interest at prime plus 1%.
The note was refinanced in 1995 $ 0 $150,000
Note Payable - Bank - Term loan in the amount of $310,000
payable in equal principal installments of $5,167 plus
interest at prime plus 1.5%. The note was refinanced
in 1995 0 185,991
Note Payable - Bank - Payable in equal monthly principal
installments of $667 plus interest at prime plus 1.5%.
The note was refinanced in 1995 0 16,667
Note Payable - Bank - The note was refinanced in 1995 0 55,000
Note payable - Bank - Term loan in the amount of $330,000
payable in equal installments of $6,600 including interest
at 9.25%. The note is collateralized by substantially all
corporate assets and the personal guaranty of the stockholders
322, 1130
-
TOTAL 322, 113 407,658
Less: Current Maturities 51,554 117,504
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LONG-TERM DEBT $270,559 $290,154
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RAINER &COMPANY -7-
PROFESSIONAL CORPORATION
Certified Public Accountants
SPECIALTY BAKERIES, INC.
------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1995 AND 1994
--------------------------
NOTE 5 - Notes Payable (Continued)
- ------- --------------
Future maturities of long-term debt are:
1996 $ 51,554
1997 56,530
1998 61,987
1999 69,970
2000 82,072
TOTAL $322,113
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NOTE 6 - Commitments and Contingencies
- ------- -----------------------------
The company leases all of its facilities under noncancellable leases
expiring at various dates from July 1998 through January 2003. All of the leases
contain provisions requiring the payment of minimum annual rentals plus
percentage rentals on sales beyond certain stipulated levels at percentages
ranging from 6% to 8%. In addition to rentals, the company is responsible for
its share of common area maintenance charges under the leases.
Total rent expense and common area maintenance charges under all
noncancellable leases were $398,988 and $304,932 in 1995 and 1994, respectively.
Minimum annual future obligations under noncancellable leases in effect at
December 31, 1995 are as follows:
1996 $ 312,916
1997 339,129
1998 345, 128
1999 306, 217
2000 282,694
Subsequent 359, 183
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TOTAL $1,945,267
RAINER &COMPANY -8-
A PROFESSIONAL CORPORATION
Certified Public Accountants
SPECIALTY BAKERIES, INC.
------------------------
NOTES TO FINANCIAl STATEMENTS
-----------------------------
DECEMBER 31, 1995 AND 1994
--------------------------
NOTE 8 - Provision for Income Taxes
- ------- --------------------------
The provision for state income taxes for the years ended December 31, 1995
and 1994 is as follows:
1995 1994
State Tax $ 0 $ 6,663
----- -------
The company has available at December 31, 1995, approximately $188,000 of
unused operating loss carryforwards that may be applied against future state
taxable income and that expire in various years from 1996 to 2002.
NOTE 9 - Franchising Activities
- ------- ----------------------
During 1992, the company began franchising additional restaurant locations
under franchise agreements with third parties. The agreements generally provide
for payments to the company of a fixed initial licensing fee, continuing royalty
payments and payments to an advertising and promotion fund based on gross
receipts. The franchisee is authorized to use the name "Bagel Builders" in the
operation of the restaurant and is required to conduct business in accordance
with the terms of the franchise agreement and related documents. The company
provides assistance with regard to a proposed site's location, initial opening
and manager training. The company charged $950,058 and $997,361 for product and
royalties to its franchisee for the years ended December 31, 1995 and 1994,
respectively.
MANHATTAN BAGEL COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEETS (Unaudited)
March 31,~1996 December 31,1995
------------------ -------
ASSETS
Current Assets
Cash and cash equivalents $1,196,032 $8,014,519
Marketable securities 25,715,290 22,625,000
Accounts receivable, net of allowance for
doubtful accounts of $14,564 and $10,000,
respectively 6,494,363 4,439,065
Inventories 1,032,608 810,238
Current maturities of notes receivable 71,860 67,008
Due from officer/stockholder 296, 164
Prepaid expenses and other current assets 665,544 1,058,007
Total current assets 35, 175,697 37,310,001
Property and equipment, net of accumulated
depreciation of $2,427,718 and $2,160,032,
respectively 11,147,309 9,735,865
Other assets
Notes receivable, net of current maturities 267,072 221,905
Notes receivable-related parties 189,827 111,400
Goodwill, net of accumulated amortization of
$51,304 and $30,356, respectively 3,531,567 482,013
Security deposits 663,558 530,639
Other assets 1,802,479 974,897
Total Assets $52,777,509 $49,366,720
-13-
MANHATTAN BAGEL COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEETS (Unaudited)
March 31,1996 December 31, 1995
-------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $1,748,703 $1,411,058
Current maturities of capital lease
obligations 151,238 137,929
Accounts payable and accrued expenses 4,217,544 3,715,295
Unearned franchise fee income 335,000 332,000
Franchise deposits 185,833 411,667
Current maturity of notes payable related
party 189,000
Income taxes payable 258,361 666,058
Deferred income taxes 7,700 7,700
Other current liabilities 52,649 61,189
Total current liabilities 6,957,028 6,931,896
Other liabilities
Long-term debt, net of current maturities 4,237,984 3,902,446
Capital lease obligations, net of current
maturities 526,814 526,005
Security deposits 361,167 349,047
Deferred income taxes and other liabilities 241,000 241,000
5,366,965 5,018,498
Stockholders' equity ......................
Preferred stock, 2,000,000 shares authorized,
no shares issued or outstanding
Common stock, no par value, 10,000,000 shares
authorized, 7,231,031 and 7,085,742,
respectively
issued and outstanding 37,123,884 34,980,522
Retained earnings 3,329,632 2,435,804
Total stockholders' equity 40,453,516 37,416,326
Total liabilities and stockholders' equity
$52,777,509 $49,366,720
-14-
MANHATTAN BAGEL COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME UNAUDITED
For the Three Months
Ended
March 31,
----------
1996 1995
Revenues
Product sales $6,612,305 $3,008,537
Franchise & license related revenue 2,379,141 933,820
Other income 70,118 44, 172
Total revenue 9,061,564 3,986,529
Operating expenses
Cost of goods sold 3,291,122 1,663,990
Selling, general & administrative expenses 4,651,287 2,148,536
Interest expense (income), net (217,390) 14,973
Total operating expenses 7,725,019 3,827,499
Earnings before provision for income taxes 1,336,545 159,030
Provision for income taxes 442,717 115,758
Net income $893,828 $43,272
Net income per share $0.12 $0.01
-----
Weighted average number of common &
common equivalent shares outstanding 7,563,416 5,351,975
--------- ---------
-15-
MANHATTAN BAGEL COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME UNAUDITED
For the Three Months Ended December 31, 1995 1994
Revenues
Product sales $16,747,070 $9,230,899
Franchise &license related revenue 5,229,619 3,289,997
Other income 189,917 258,859
Total revenue 22,166,606 12,779,755
Operating expenses
Cost of goods sold 9,223,823 4,686,483
Selling, general & administrative expenses 10,065,761 6,647,506
Interest expense (income), net (28,187) 95,215
Total operating expenses 19,261,397 11,429,204
----------
Earnings before provision for income taxes 2,905,209 1,350,551
Provision for income taxes 1,284,213 506,363
Net income $1,620,996 $844,188
Net income per share $0.28 $0.17
-----
Weighted average number of common &
common equivalent shares outstanding 5,692,311 5,059,297
-16-
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 thereto duly authorized.
MANHATTAN BAGEL COMPANY, INC.
Registrant
Date: August 5, 1996 By: S/N Jack Grumet
----------------
Jack Grumet
Chairman and Chief
Executive Officer