FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to ____________________
Commission File No. 000-30011
TMI HOLDINGS, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
FLORIDA 65-0309540
- ------------------------------- -----------------------------
(State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification No.)
3141 W. HALLANDALE BEACH BOULEVARD
HALLANDALE, FLORIDA 33009
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(Address of Principal Executive Offices)
Issuer's telephone number, including area code: (954) 985-8430
THRIFT MANAGEMENT, INC.
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(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 or 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 [ ]
State the number of shares outstanding of each of the Issuer's classes of common
equity as of the latest practical date: At May 13, 2002, there were outstanding
3,047,210 shares of Common Stock, $.01 par value.
Transitional Small Business Disclosure Format: YES [ ] NO [X]
TMI HOLDINGS, INC.
(FORMERLY THRIFT MANAGEMENT, INC.)
INDEX TO FORM 10-QSB
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of March 31, 2002................................................. 3
Statements of Operations for the Three Months Ended
March 31, 2002 and April 1, 2001 (unaudited)....................................... 4
Statements of Cash Flows for the Three Months Ended March 31, 2002
and April 1, 2001 (unaudited)...................................................... 5
Notes to Financial Statements (unaudited).......................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................ 9
PART II - OTHER INFORMATION
Item 2. Changes in Securities.............................................................. 12
Item 6. Exhibits and Reports on Form 8-K................................................... 12
Signatures ................................................................................... 13
2
TMI HOLDINGS, INC.
(FORMERLY THRIFT MANAGEMENT, INC.)
BALANCE SHEET
March 31, 2002
-------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,831
Escrow receivable from termination of non-binding letter of
intent that would have resulted in a change of control 25,000
Stockholder interest receivable 57,571
Prepaid insurance 2,269
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TOTAL CURRENT ASSETS 86,671
STOCKHOLDER NOTE RECEIVABLE - NON-CURRENT 1,175,000
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TOTAL ASSETS $ 1,261,671
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LIABILITIES AND STOCKHOLDERS' EQUITY
ACCRUED EXPENSES $ 92,705
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TOTAL LIABILITIES 92,705
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock: $.01 par value, authorized 1,500,000
shares, issued and outstanding 250,000 shares 2,500
Common stock: $.01 par value, authorized 15,000,000
shares, issued and outstanding 3,047,210 shares 30,472
Additional paid-in capital 4,472,088
Accumulated deficit (3,336,094)
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TOTAL STOCKHOLDERS' EQUITY 1,168,966
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,261,671
===========
See accompanying notes.
3
TMI HOLDINGS, INC.
(FORMERLY THRIFT MANAGEMENT, INC.)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
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MARCH 31, APRIL 1,
2002 2001
--------------------- ---------------------
Net sales $ -- $ 2,498,858
Cost of goods sold -- 1,351,618
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GROSS PROFIT -- 1,147,240
Selling, general and administrative expenses 38,129 1,104,255
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TOTAL OPERATING EXPENSES 38,129 1,104,255
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(LOSS) INCOME FROM OPERATIONS (38,129) 42,985
Loss on disposal of fixed assets -- 137,316
Interest expense -- 17,453
Interest income (24,673) (9,347)
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(LOSS) BEFORE EXTRAORDINARY ITEM (13,456) (102,437)
Extraordinary gain on convertible debenture settlement -- 408,552
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NET (LOSS) INCOME $ (13,456) $ 306,115
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Basic income per share:
(Loss) before extraordinary item $ -- $ (0.03)
Extraordinary item, net of tax -- 0.14
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Net income per share $ -- $ 0.11
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Diluted income per share:
(Loss) before extraordinary item $ -- $ (0.04)
Extraordinary item, net of tax -- 0.14
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Net income per share $ -- $ 0.10
=========== ===========
Weighted average number of shares:
Basic: 3,047,210 2,897,210
=========== ===========
Diluted: 3,047,210 2,944,647
=========== ===========
See accompanying notes.
4
TMI HOLDINGS, INC.
(FORMERLY THRIFT MANAGEMENT, INC.)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
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MARCH 31, APRIL 1,
2002 2001
--------------------- ---------------------
Cash flows from operating activities:
Net (loss) income $ (13,456) $ 306,115
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization -- 39,642
Loss on disposal of fixed assets -- 137,316
Amortization of prepaid consulting expenses paid
with common stock and warrants -- 66,771
Extraordinary gain on convertible debenture settlement -- (408,552)
Changes in assets and liabilities:
(Increase) in stockholder interest receivable (24,592)
Decrease (increase) in prepaid expenses 1,744 (67,774)
Increase in accounts payable -- 81,375
Increase (decrease) in accrued expenses 10,336 (115,606)
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Total adjustments (12,512) (266,828)
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NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (25,968) 39,287
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Cash flows from investing activities:
Purchase of property and equipment -- (287)
Proceeds from disposal of fixed assets -- 8,000
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NET CASH PROVIDED BY INVESTING ACTIVITIES -- 7,713
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Cash flows from financing activities:
Cash payment - convertible debenture settlement -- (200,000)
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NET CASH (USED IN) FINANCING ACTIVITIES -- (200,000)
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NET (DECREASE) IN CASH (25,968) (153,000)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 27,799 396,836
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CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,831 $ 243,836
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest -- --
Income taxes -- --
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$ -- $ --
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See accompanying notes.
5
TMI HOLDINGS, INC.
(FORMERLY THRIFT MANAGEMENT, INC.)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. However, such information
reflects all adjustments (consisting solely of normal recurring adjustments),
which are, in the opinion of management, necessary for a fair statement of
results for the interim periods.
The results of operations for the three months ended March 31, 2002 and April 1,
2001 are not necessarily indicative of the results to be expected for the full
year.
These statements should be read in conjunction with the financial statements and
notes thereto included in the Form 10-KSB for the year ended December 30, 2001
of TMI Holdings, Inc. (the "Company").
(2) ORGANIZATION
As a result of the sale of its business units that was completed on August 27,
2001 (see Note 5), the Company no longer has any subsidiaries or active business
operations. The accompanying Statement of Operations for the three months ended
March 31, 2002 reflect none of the Company's former business operations.
(3) STOCKHOLDERS' EQUITY
In January 2001, a lawsuit was filed in the U. S. District Court for the
Southern District of New York against the Company and other unnamed individuals
regarding the Company's alleged failure to register the shares of the Company's
Common Stock issuable upon conversion of a 7% convertible debenture with a
principal amount of $1,000,000 (the "Debenture") and failure to pay the
resulting penalties due.
In March 2001, the Company entered into a settlement agreement which provided
for the dismissal of this lawsuit, without prejudice, in exchange for the
payment by the Company of $200,000 cash, the issuance of 200,000 shares of
common stock valued at $32,000 (the fair market value of the shares as of the
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date of the agreement) and the delivery of a three-year 10% promissory note in
the principal amount of $300,000 secured by a security interest in the Company's
inventory and personally guaranteed by the Company's president. As a result of
the settlement, the debenture was deemed paid in full and satisfied.
In consideration for personally guaranteeing the promissory note, the Company's
Board of Directors granted the president five-year warrants to purchase 500,000
shares of the Company's Common Stock at an exercise price of $.0625 per share
(the fair market value of the Common Stock as of date of the settlement
agreement).
All remaining capitalized expenses related to the debenture not amortized (which
totaled $130,410) were included in the calculation of the gain on the debenture
settlement in the three month period ended April 1, 2001. Reversal of the
accrued debenture interest expense in the amount of $70,962 was also included as
part of the calculation of the gain on the debenture settlement recorded in the
first quarter of 2001. The gain on the Debenture settlement agreement recorded
in the first quarter of 2001 amounted to $408,552.
(4) STOCK OPTION PLAN
During the three months ended March 31, 2002, the Company granted a total of
20,000 stock options to its outside directors under the Company's 1996 Stock
Option Plan at exercise prices equal to the fair market value of the Common
Stock on dates of the grant. These options vest within the next year and expire
no later than 2007.
(5) SALE OF BUSINESS UNITS
In 2001, the Company's shareholders approved (with all the shares held by the
President and his affiliates voting with the majority of all other outstanding
shares) the sale of substantially all of the assets used by the Company in the
conduct of its retail thrift store and charitable donation collection business
and its web-site in development to Thrift Ventures Inc. ("Thrift Ventures"), a
corporation owned by Marc Douglas, the Company's principal shareholder. On
August 27, 2001, the Company closed the sale of the assets to Thrift Ventures.
As consideration for the purchase of these business units, Thrift Ventures paid
to the Company $1,175,000 in the form of a three-year promissory note bearing
interest at the prime rate plus 1.5% (the "Purchase Note"). The Purchase Note is
secured by a security interest in the assets sold. The excess of the purchase
price of the business units over the carrying value of such business units
totaled $385,589 and has been accounted for as a capital contribution.
(6) SUBSEQUENT EVENT
In May 2002, Thrift Ventures agreed to prepay the initial interest payment of
$98,926 due on the Purchase Note in four equal monthly installments beginning on
May 31, 2002 and ending on August 27, 2002, the original due date of the initial
interest payment. Thrift Ventures agreed to this prepayment in order to provide
the Company with additional working capital with which to pay its ongoing
expenses resulting from the Company's public company reporting requirements and
other related corporate expenses. In consideration of Ventures' agreement to
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make the prepayment, the Company's Board of Directors granted to Marc Douglas,
the controlling stockholder of Thrift Ventures and the Company's principal
holder, 416,667 shares of the Company's Common Stock, which had a fair market
value as of the date of grant of $.06 per share.
The Board of Directors also agreed to begin reimbursing Thrift Ventures for
certain services that had been provided to the Company on a cost-free basis
since the closing of the sale of the business units. These services have to date
included: (a) office space and all related amenities such as telephones,
copiers, facsimile machines and office supplies; (b) all necessary accounting
and bookkeeping services related to the Company's public reporting requirements;
(c) other administrative services, such as receptionist and bill-paying
services; and (d) the assistance of Mr. Douglas in identifying a possible
acquisition candidate for the Company, as well as negotiating a definitive
agreement and completing a transaction with such an acquisition candidate. In
exchange for Thrift Ventures' and Mr. Douglas' agreement to continue providing
these services to the Company, the Company will reimburse Thrift Ventures $5,000
per month beginning in May 2002. This monthly reimbursement amount will be
offset against any interest payments (including prepayments) received by the
Company.
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TMI HOLDINGS, INC.
(FORMERLY THRIFT MANAGEMENT, INC.)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is an analysis of the results of operations of TMI Holdings, Inc.
(the "Company"), and its liquidity and capital resources. The Company cautions
readers that certain important factors may affect the Company's actual results
and could cause such results to differ materially from any forward-looking
statements that may be deemed to have been made in this Report or that are
otherwise made by or on behalf of the Company. For this purpose, any statements
contained in this Report that are not statements of historical fact may be
deemed to be forward-looking statements which involve risks and uncertainties.
Without limiting the generality of the foregoing, words such as "may," "expect,"
"believe," "anticipate," "intend," "could," "estimate," or "continue" or the
negative or other variations thereof or comparable terminology are intended to
identify forward-looking statements. Factors that may affect the Company's
results include, but are not limited to, the identification and number of
possible acquisition candidates; reliance on current management; general
economic conditions; and other factors discussed herein or from time to time in
the Company's other filings with the Securities and Exchange Commission.
The following discussion and analysis should be read in conjunction with the
financial statements and the related notes thereto of the Company included
elsewhere herein.
GENERAL
Until August 2001, the Company had managed and operated retail outlets known as
thrift stores, which dealt in new and used articles of clothing, miscellaneous
household items, furniture, bric-a-brac and antiques at discounted prices. In
2001, the Company operated six thrift stores, all of which were located in
Florida. These and all of the Company's other business units were sold on August
27, 2001, in a transaction involving the sale of substantially all of the
Company's assets to Thrift Ventures Inc. ("Thrift Ventures"), a corporation
controlled by the Company's principal shareholder.
Currently, the Company has no operating business units or subsidiaries. The
Company's sole activities since the sale transaction have been identifying
possible acquisition candidates and attempting to negotiate and complete an
acquisition of an operating business. There can be no assurances that the
Company will be able to identify other acquisition candidates or that it will be
able to successfully negotiate and complete an acquisition of an operating
business.
The sale of the business units described above has not affected any of the
Company's outstanding securities, and the Company intends to use its best
efforts to maintain its status as a reporting company and to maintain the
listing of its common stock on the OTC Bulletin Board.
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RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND
APRIL 1, 2001
With no business operations, during the three months ending March 31, 2002, the
Company had no revenues, as compared to revenues of $2,498,858 generated by the
six stores for the three months ending April 1, 2001. There also was no gross
profit for the three months ending March 31, 2002, as compared to $1,147,240
gross profit generated by the six stores for the three months ending April 1,
2001.
The operating expenses for the three months ending March 31, 2002 were $38,129,
which included professional fees related to the Company's public reporting
obligations and directors' liability insurance, as compared to $1,104,255 for
the three months ending April 1, 2001, which included expenses related to six
stores, the Company's start-up internet company, and corporate overhead. The
Company recorded $24,673 of interest income related to its stockholder note
receivable, resulting in a net loss for the three months ending March 31, 2002
of $13,456. This compares to $306,115 in net income for the three months ending
April 1, 2001, which included a $137,316 loss on disposal of fixed assets,
$17,453 of interest expense, $9,347 of interest income, and a $408,552
extraordinary gain on the convertible debenture settlement.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, the Company had negative working capital of ($6,034) as
compared to working capital of $7,422 at December 30, 2001.
Cash and cash equivalents at March 31, 2002 totaled $1,831, as compared to
$27,799 at December 30, 2001, a decrease of $25,968. Net cash used in
operating activities totaled $25,968 for the three months ending March 31, 2002,
as compared to $39,287 of net cash provided by operating activities for the
three months ending April 1, 2001. There were no investing activities for the
three months ending March 31, 2002, as compared to $7,713 of net cash provided
by the sale of property and equipment for the three months ending April 1, 2001.
There were no financing activities in the three months ending March 31, 2002, as
compared to $200,000 of net cash used in financing activities in the three
months ending April 1, 2001, reflecting a cash payment for the Debenture
settlement.
Since the sale of its business units on August 27, 2001, the Company has had no
ongoing business operations other than activities undertaken to identify and
complete a transaction involving a sale or other change in control of the
Company and activities necessary to maintain the Company's reporting company
status with the Securities and Exchange Commission. The Company has reached an
agreement with Thrift Ventures pursuant to which Thrift Ventures will prepay the
initial interest payment on the note given to the Company in the sale of its
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business units (the "Purchase Note"). This interest payment would be due on
August 27, 2002 and will total $98,926. Thrift Ventures has agreed to prepay
this interest payment in four equal monthly installments beginning on May 31,
2002 and ending on August 27, 2002. The Company believes that the foregoing
prepayments will be sufficient to meet the Company's currently anticipated
working capital requirements through 2002. There can be no assurances, however,
that such will be the case.
INFLATION AND SEASONALITY
The Company has sold all business units effective August 27, 2001 and, as a
result, does not expect at this time to be impacted by inflation or seasonality.
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PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
In May 2002, the Company's Board of Directors granted to Marc Douglas, the
Company's principal holder, 416,667 shares of Common Stock in consideration for
the agreement by Thrift Ventures, a corporation controlled by Mr. Douglas, to
prepay the initial interest payment due on the Purchase Note. The shares had a
fair market value of $.06 per share on the date of grant.
The foregoing issuance was undertaken in accordance with the exemption from
registration set forth in Section 4(2) of the Securities Act, in that no general
solicitation was involved and the transaction was undertaken with an existing
security holder of the Company. The Company did not pay any fees or commissions
in connection with such issuance.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Statement re: computation of per share earnings
(b) Reports on Form 8-K:
The Company did not file any current reports on Form 8-K during the quarter
ended March 31, 2002.
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SIGNATURE
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.
TMI HOLDINGS, INC.
BY: /s/ JAY M. HAFT
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Jay M. Haft, Chairman of the Board of Directors
(Principal Executive, Financial and Accounting
Officer)
Date: May 15, 2002 BY: /s/ HOWARD L. ROTHCHILD
------------------------------------------------
Howard L. Rothchild, Director
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