-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PsKsLJsa/vmjj2mMkUqwpBaATVFX9JrdhMPiEUW1PIE+fiUngfIk3LEjfPpMbgmY TGuzfcBWilWLsI8qTyOxdg== 0000085149-99-000008.txt : 19990517 0000085149-99-000008.hdr.sgml : 19990517 ACCESSION NUMBER: 0000085149-99-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSES HOLDINGS INC CENTRAL INDEX KEY: 0000085149 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 562043000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00631 FILM NUMBER: 99624443 BUSINESS ADDRESS: STREET 1: 150 EAST 52ND STREET 21ST FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2128131500 MAIL ADDRESS: STREET 1: 150 EAST 52ND ST STREET 2: 21ST FL CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: ROSES STORES INC DATE OF NAME CHANGE: 19920703 10-Q 1 ROSE'S HOLDINGS, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Commission File Number 0-631 ROSE'S HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 56-2043000 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 150 East 52nd Street, 21st Floor New York, New York 10022 (Address and zip code of principal executive offices) 877-431-2942 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ( ) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes (X) No ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Class Outstanding at April 26, 1999 Common Stock, par value $.001 4,336,399 Shares ROSE'S HOLDINGS, INC. AND SUBSIDIARIES FORM 10-Q INDEX PART I--FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited): Condensed Consolidated Balance Sheets March 31, 1999 and December 31, 1998......................... 2 Condensed Consolidated Statements of Operations for the three months ended March 31, 1999 and the thirteen weeks ended May 2, 1998......................... 3 Condensed Consolidated Statements of Cash Flow for the three months ended March 31, 1999 and the thirteen weeks ended May 2, 1998......................... 4 Notes to Condensed Consolidated Financial Statements......... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................... 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk... 9 PART II--OTHER INFORMATION Item 1. Legal Proceedings............................................ 10 Item 2. Changes in Securities........................................ 10 Item 3. Defaults Upon Senior Securities.............................. 10 Item 4. Submission of Matters to a Vote of Security Holders.......... 10 Item 5. Other Information............................................ 10 Item 6. Exhibits and Reports on Form 8-K............................. 10 Signatures............................................................. 11 PART I--FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Amounts in thousands except per share amounts) ROSE'S HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands except per share amounts) (Unaudited)
March 31, December 31, 1999 1998 Assets: Cash and cash equivalents ...................... $ 11,080 $ 8,681 Cash restricted in escrow ...................... 331 2,018 Investment securities available for sale ....... 2,038 2,081 Prepaid expenses ............................... 80 33 Commercial loans, net of allowance for loan Losses of $26 and $0 ........................ 2,443 1,081 Accrued interest receivable .................... 54 41 Property and equipment, net .................... 104 116 Other assets ................................... 201 196 Goodwill, net of accumulated amortization of $73 and $41 .............................. 1,701 1,733 ------- ------- $ 18,032 $ 15,980 ======= ======= Liabilities: Demand deposits ................................ $ 100 $ 105 Time deposits .................................. 2,612 -- Accounts payable and accrued expenses .......... 306 326 Income taxes payable to subsidiary's former parent ............................... 309 309 ------- ------- Total liabilities before minority interests ........ 3,327 740 Minority interests ................................. 512 553 Stockholders' Equity: Preferred stock, authorized 10,000 shares; none issued .......................... -- -- Common stock, authorized 50,000 shares; $.001 par value; issued 4,229 and 4,310 at 3/31/99 and 12/31/98, respectively ........ 4 4 Paid-in capital ................................ 36,155 36,155 Accumulated deficit ............................ (21,966) (21,472) ------- ------- Total stockholders' equity ......................... 14,193 14,687 ------- ------- $ 18,032 $ 15,980 ======= ======= See accompanying notes to condensed consolidated financial statements.
ROSE'S HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands except per share amounts)
For the Three For the Thirteen Months Ended Weeks Ended March 31, 1999 May 2, 1998 Interest and fees on commercial loans ................ $ 37 $ -- Interest on cash and cash equivalents ................ 117 208 Interest investment securities available for sale .... 36 -- ---------- ---------- Total interest income ........................ 190 208 Interest expense ..................................... 15 -- ---------- ---------- Net interest income before loan loss provision 175 -- Loan loss provision .................................. 26 -- ---------- ---------- Net interest income after loan loss provision 149 208 ---------- ---------- Non interest income: Gain on sale of commercial loan ...................... 172 -- Other income ......................................... 15 -- ---------- ---------- Total non interest income .................... 187 -- Non interest expenses: Salaries ............................................. 410 -- Occupancy ............................................ 52 -- Goodwill amortization ................................ 32 -- Selling, general and administrative .................. 377 248 ---------- ---------- Total non interest expenses .................. 871 248 Loss before minority interests ............... (535) (40) ---------- ---------- Loss attributable to minority interests .............. 41 -- ---------- ---------- Net loss ..................................... $ (494) $ (40) ========== ========== Basic and diluted net loss per share ................. $ (.12) $ (.01) Weighted average number of common shares and common share equivalents, basic and diluted ........ 4,246,314 4,316,000 See accompanying notes to condensed consolidated financial statements.
ROSE'S HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (Amounts in thousands)
For the Three For the Thirteen Months Ended Weeks Ended March 31, 1999 May 2, 1998 Cash flows from operating activities: Net loss ..................................................... $ (494) $ (40) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Minority interest .......................................... (41) -- Depreciation and amortization .............................. 16 -- Gain on sale of commercial loan ............................ (172) -- Loan loss provision ........................................ 26 -- Amortization of loan premiums .............................. 6 -- Amortization of goodwill ................................... 32 -- Amortization of premiums for available-for-sale securities . 27 -- Cash restricted in escrow .................................. 1,687 -- Net changes in: Prepaid expenses ...................................... (47) -- Accrued interest receivable ........................... (13) -- Other assets .......................................... (5) (34) Accounts payable and accrued expenses ................. (20) 2 ------- ------- Net cash provided by (used in) operating activities 1,002 (72) Cash flows from investing activities: Principal payments received on available-for-sale securities 220 -- Purchase of available-for-sale securities .................. (204) Purchase of property and equipment ......................... (4) -- Funding and purchases of loans ............................. (3,534) -- Sale of loans .............................................. 2,291 -- Proceeds from principal payments received on loans ......... 21 -- Net cash used in investing activities ............... (1,210) -- Cash flows provided by financing activities- net increase in deposits ................................... 2,607 -- Net increase (decrease) in cash and cash equivalents ......... 2,399 (72) Cash and cash equivalents at beginning of period ............. 8,681 13,465 ------- ------- Cash and cash equivalents at end of period ................... $ 11,080 $ 13,393 ======= ======= Supplemental disclosure of additional cash activities: Cash paid for interest ..................................... $ 15 $ -- See accompanying notes to condensed consolidated financial statements.
ROSE'S HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended March 31, 1999 and Year Ended December 31, 1998 (Amounts in thousands except per share amounts) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation--The accompanying interim condensed consolidated financial statements of Rose's Holdings, Inc. and subsidiaries (the "Company") are unaudited and have been prepared in conformity with the requirements of Regulations S-X promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), particularly Rule 10-01 thereof, which governs the presentation of interim financial statements. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying interim condensed consolidated financial statements should be read in conjunction with the Company's significant accounting policies is set forth in Note 1 to the consolidated financial statements in the 1998 Annual Report on Form 10-K. In the opinion of management, all adjustments are comprised of normal recurring accruals necessary for the fair presentation of the interim financial statements. Operating results for the quarter ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. ORGANIZATION AND RELATIONSHIPS The Company was incorporated in August 1997. In December 1997, the Company consummated the sale of all the outstanding capital stock of Rose's Stores, Inc. ("Stores"), then the Company's only operating subsidiary, to Variety Wholesalers, Inc. (Variety"). Currently, the Company owns 90% of WebBank Corporation ("WebBank"), a Utah-chartered industrial loan corporation, and Praxis Investment Advisors, Inc. ("Praxis"), a California-based company that operates primarily as an investment advisor, providing research and development of financial products. The Company is a party to a management agreement with Praxis and Andrew Winokur, the owner of the remaining 10% interests in WebBank and Praxis, under which Praxis has agreed to provide management services to the Company in connection with its ownership and operation of WebBank. Mr. Winokur serves as the president and chief executive officer of Praxis pursuant to an employment agreement. 3. CONTINGENCIES As a result of the sale of Stores to Variety, the Company was relieved of liability for claims against Stores except to the extent of its indemnification obligation with respect to certain claims. On March 2, 1999 all known claims were settled and the balance of the escrowed amount of $2,041 was disbursed to the Company. In the opinion of management and counsel, all contingencies are either adequately covered by insurance or are without merit. On January 20, 1999 an escrow account in the amount of $331 was established to provide funds to buy back shares from holders of less than 250 shares. 4. DEPOSITS Deposits are summarized as follows (in thousands): March 31, 1999 December 31, 1998 -------------------- -------------------- Weighted Weighted average average interest Carrying interest Carrying rate value rate value -------- -------- -------- -------- Noninterest Bearing-Demand 0.00% $ 100 0.00% $ 105 Interest-Bearing Time Certificates of Deposit 4.70% 2,612 5.35% -- ------- ------- $ 2,712 $ 105 ======= ======= Aggregate amounts of accounts over $100,000 were $612 at March 31, 1999 and $0 at December 31, 1998, respectively. The table below sets forth the range of stated interest rates at March 31, 1999: Interest-Bearing-Time Certificates of Deposit 4.25% - 5.00% At March 31, 1999, certificates by maturity are as follows: Maturities within three months $ 612 Over three months to one year 2,000 -------- $ 2,612 ======== ROSE'S HOLDINGS, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjuction with the interim condensed consolidated financial statements of the Company and the Notes thereto. OVERVIEW Rose's Holdings, Inc. (the "Company") owns 90% of WebBank Corporation, an FDIC insured, Utah-chartered industrial loan corporation ("WebBank"), and 90% of Praxis Investment Advisors, Inc., a California-based company that operates as an investment advisor and developer of financial products. WebBank currently has agreements with two non-bank consumer lending companies to assist them in offering their financing products on a uniform basis nationwide. Under one agreement, the lending company provides short-term loans to individuals, which loans are secured by interests in paychecks (sometimes called single-pay or "payday" loans). Under the other agreement, the financing company provides lump-sum payments in return for interests in long-term revenue streams, such as from leases or lottery winnings. Such arrangements are known as structured settlements. WebBank is also attempting to establish other, similar relationships with other specialty finance companies in order to utilize its Utah industrial loan charter to provide benefits to such niche financing providers. WebBank has also begun to provide financing under guaranteed commercial loan programs of the U.S. government, and has made two loans under a program of the U.S. Department of Agriculture. It continues to pursue opportunities to provide financing under such programs. However, there can be no assurance that the Company will be able to enter into such relationships or provide financing under such programs, or that, once entered into, such relationships will be successful. RESULTS OF OPERATIONS Revenue--The Company reported net interest income after loan loss provision for the three months ended March 31, 1999 of $149,000 as a result of Bank earnings and investment income. Income from loan fees and gain on sale of commercial loan and other miscellaneous items and fees totaled $187,000. The Company had no operating revenue for the thirteen weeks ended May 2, 1998 except for interest income on cash and cash equivalents of $208,000. Costs and Expenses--Non-interest expenses totaled $871,000 for the three months ended March 31, 1999 and consisted primarily of salary and benefits, facilities rentals and professional fees. Non-interest expenses for the thirteen weeks ended May 2, 1998 consisted of selling, general, and administrative expenses. The increase in other non-interest expenses in 1999 reflects the increase in operating activities resulting from the acquisition of the Company's subsidiaries. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1999 the Company's cash and cash equivalents totaled approximately $11,080,000. As of December 31, 1998 the Company had cash and cash equivalents totaling approximately $8,681,000. This increase was due primarily to the disbursement to the Company on March 2, 1999 of the remaining $2,041,000 placed in escrow in connection with the sale of the Company's operating subsidiary to Variety in December 1997. Management believes that the Company's current cash and cash equivalent balances and expected operating cash flows are adequate to meet its liquidity needs. YEAR 2000 ISSUE The Year 2000 Issue is the result of computer programs using a two-digit format, as opposed to four digits, to indicate the year. Any of the Company's computer programs or other information systems that have time-sensitive software or embedded microcontrollers may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations. During fiscal 1998, the Company completed an initial review of its information and non- information technology systems. This review included its existing and planned computer software and hardware. The Company has made an initial determination, based on its initial review, that the costs and/or consequences associated with the Year 2000 issue are not expected to have a material effect on its business, operations or future financial condition. A second, more in-depth analysis was also conducted, and included the testing of information systems. Based on these reviews, the Company presently believes that the Year 2000 Issue will not pose significant operational problems for its computer and other information systems. If required, the Company will utilize both internal and external resources to reprogram, or replace, and test the software and systems for Year 2000 modifications. If such modifications, conversions and/or replacements are not made, are not completed timely, or if any of the Company's suppliers or customers do not successfully deal with the Year 2000 Issue, the Year 2000 Issue could have a material impact on the operations of the Company and/or its subsidiaries. The severity of these possible problems would depend on the nature of the problem and how quickly it could be corrected or an alternative implemented, which is unknown at this time. While management has not yet specifically determined the costs associated with its Year 2000 readiness efforts, monitoring and managing the Year 2000 Issue will result in additional direct and indirect costs to the Company. Direct costs include potential charges by third-party software vendors for product enhancements, costs involved in testing software products for Year 2000 compliance and any resulting costs for developing and implementing contingency plans for critical software products which are not enhanced. Indirect costs will principally consist of the time devoted by existing employees in monitoring software vendor progress, testing enhanced software products and implementing any necessary contingency plans. Such costs have not been material to date. Both direct and indirect costs of addressing the Year 2000 Issue will be charged to earnings as incurred. After evaluating its internal compliance efforts as well as the compliance of third parties the Company has developed appropriate contingency plans to address situations in which various systems of the Company, or of third parties with which the Company does business, are not year 2000 compliant. Some risks of the Year 2000 Issue, however, are beyond the control of the Company and its suppliers and customers. For example, no preparations or contingency plan will protect the Company from a downturn in economic activity caused by the possible ripple effect throughout the entire economy caused by the Year 2000 Issue. CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS The following important factors, among others, could cause actual results to differ materially from those indicated by forward-looking statements made in this Quarterly Report of Form 10-Q and presented elsewhere by management. All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. A number of uncertainties exist that could affect the Company's future operating results, including, without limitation, general economic conditions, changes in interest rates, the company's ability to attract deposits, and the Company's ability to control costs. Because of these and other factors, past financial performance should not be considered an indication of future performance. The Company's future quarterly operating results may vary significantly. Investors should not use historical trends to anticipate future results and should be aware that the trading price of the Company's Common Stock may be subject to wide fluctuations in response to quarterly variations in operating results and other factors, including those discussed above. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company maintains an investment portfolio and participates in commercial loans. Both of these activities are subject to specific policies that are focused on preserving principal, maintaining proper liquidity to meet operating needs, and maximizing yields. The Company's operations may be subject to a variety of market risks, the most material of which is the risk of changing interest rates. Most generally, interest rate risk is the volatility in financial performance attributable to changes in market interest rates, which may result in either fluctuation of net interest income or changes to the economic value of the equity of the Company. ROSE'S HOLDINGS, INC. AND SUBSIDIARIES PART II--OTHER INFORMATION Item 1. Legal Proceedings. The registrant is not a party to any material legal proceedings. Item 2. Changes in Securities. Not applicable. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted to a vote of security holders during the period covered by this report. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits See exhibit index immediately following the signature page. (b) Reports on Form 8-K None. ROSE'S HOLDINGS, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ROSE'S HOLDINGS, INC. By /s/Warren G. Lichtenstein Warren G. Lichtenstein President By /s/ Jack L. Howard Jack L. Howard Vice President Date: May 14, 1999 EXHIBIT INDEX 11 Statement Regarding Computation of Net Loss Per Share 27 Financial Data Schedule Exhibit 11 ROSE'S HOLDINGS, INC. AND SUBSIDIARIES Statement Regarding Computation of Net Loss Per Share For the Three For the Thirteen Months Ended Weeks Ended March 31, 1999 May 2, 1998 Net loss ................................. $ (494) $ (40) Weighted average common shares outstanding 4,246,314 4,316,000 ---------- ---------- Shares used in computation ............... 4,246,314 4,316,000 ========== ========== Net loss per share ....................... $ (.12) $ (.01) ========== ========== EX-27 2 FDS ROSE'S HOLDINGS, INC.
5 FINANCIAL DATA SCHEDULE FOR ROSE'S HOLDINGS, INC. 0000085149 Rose's Holdings, Inc. 1,000 DOLLARS 3-MOS DEC-31-1999 JAN-1-1999 MAR-31-1999 1 11,080 2,038 54 26 0 16,031 104 28 18,032 758 0 0 0 4 14,189 18,032 0 187 0 0 871 0 0 (494) 0 (494) 0 0 0 (494) (.12) (.12)
-----END PRIVACY-ENHANCED MESSAGE-----