-----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, P4WIyLi5NFj9INtcbdvAXuaK7lZ36f0qeWPUSegdCHE4htAr1X9FJqOjIDaYF3qs CsGkjqiKEIMtedFtbWAruA== 0000950159-97-000135.txt : 19970515 0000950159-97-000135.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950159-97-000135 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRESCENT CAPITAL INC / DE CENTRAL INDEX KEY: 0000874017 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 133645694 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-39759 FILM NUMBER: 97604491 BUSINESS ADDRESS: STREET 1: 6701 DEMOCRACY BLVD STE 300 STREET 2: PENDERGRAST KIMBERLY CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3018974870 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-QSB Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended March 30, 1997 Commission File Number 33-39759 CRESCENT CAPITAL, INC. (Exact name of registrant as specified in its charter) Delaware 13-3645694 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6701 Democracy Boulevard Suite 300 Bethesda, Maryland 20817 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (301) 530-1708 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities and 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 ___ As of April 30, 1997, 2,545,800 shares of common stock par value, $0.001 per share were outstanding. CRESCENT CAPITAL, INC. FORM 10-QSB QUARTERLY REPORT For the Period Ended March 30, 1997 INDEX Part I: FINANCIAL INFORMATION Item 1 : Financial Statements Condensed Consolidated Balance Sheets as of March 30, 1997 [Unaudited] 3-4 Condensed Consolidated Statements of Operations for the three months ending March 30, 1997 and March 31, 1996 [Unaudited] 5 Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 30, 1997 [Unaudited] 6 Condensed Consolidated Statements of Cash Flows for the three months ended March 30, 1997 [Unaudited] 7 Notes to Condensed Consolidated Financial Statements 8 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 Part II: OTHER INFORMATION 12 SIGNATURES 13 o o o o o o o o o o CRESCENT CAPITAL, INC. CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 30, 1997 March 30, December 31, 1997 1996 [Unaudited] ASSETS: Current Assets: Cash $415,349 $657,880 Trade Accounts Receivable - Net 2,220,180 2,278,638 Franchisee Loans 1,035,803 1,008,990 Other Receivables 332,349 51,475 Inventories 860,508 865,131 Prepaid Expenses and Accrued Income 633,958 778,834 Officer Loan Receivable 124,701 125,016 Due from Related Parties [D] 1,349,577 1,471,997 Deposits 303,375 637,562 ----------- ----------- Total Current Assets 7,275,800 7,875,523 ----------- ----------- Property and Equipment - Net 2,853,692 2,757,386 ----------- ----------- Other Assets: Master Franchise Agreement - Net 846,000 864,000 Rights to Store Leases - Net 109,612 112,519 Goodwill - Net 10,611 11,260 Deferred Offering Cost 100,000 100,000 Consulting Agreements - Net [C] -- -- Store Franchise Agreement - Net 56,073 45,830 Store Development Costs - Net 66,825 74,344 Net Assets of Discontinued Operations 629,446 666,156 ----------- ----------- Total Other Assets 1,818,567 1,874,109 ----------- ----------- Total Assets 11,948,059 $12,507,018 ----------- ----------- The Accompanying Notes are an Integral Part of these Condensed Consolidated Financial Statements. 3 CRESCENT CAPITAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 30, 1997.
March 30, December 31, 1997 1996 [Unaudited] Liabilities and Stockholders' Equity: Current Liability: Trade Accounts Payable $3,274,042 $3,704,523 Accrued Expenses 841,610 1,186,168 Other Payables and Accrued Interest 260,839 29,785 Obligations Under Capital Leases 204,409 217,691 Other Taxes Payable 502,007 415,771 Current Portion of Long Term Debt 247,201 321,621 ------------ ------------ Total Current Liabilities 5,330,108 5,875,559 ------------ ------------ Long-Term Liabilities 433,594 460,240 ------------ ------------ Minority Interest 2,052,515 2,015,233 ------------ ------------ Stockholders' Equity: $.01 Par Value, Preferred Stock, 1,000,000 Shares Authorized, No Shares Issued and Outstanding -- -- $.001 Par Value, Class A Common Stock, 5,000,000 Shares Authorized and 545,200 Shares Issued and Outstanding 546 546 $.001 Par Value, Convertible Class B Common Stock - 2,000,000 Shares Authorized, Issued and Outstanding 2,000 2,000 Additional Paid-in-Capital 6,209,214 6,209,214 Retained Earnings 414,614 322,246 Cumulative Foreign Currency Translation Adjustment 163,888 250,400 Note Receivable for Stock (1,882,275) (1,852,275) Cost of Common Stock Held in Treasury 51,743 shares in 1996 (776,145) (776,145) ------------ ------------ Total Stockholders' Equity 4,131,842 4,155,986 ------------ ------------ Total Liabilities and Stockholders' Equity $11,948,059 $12,507,018 ------------ ------------
The Accompanying Notes are an Integral Part of these Condensed Consolidated Financial Statements. 4 CRESCENT CAPITAL, INC. CONDENSED STATEMENTS OF OPERATIONS. [UNAUDITED]
For the Three Months December 30, 1996 to January 1, 1996 March 30, 1997 to March 31, 1996 Revenue: Sales by Company Owned Stores $908,725 $1,063,214 Commissary Sales 3,919,040 2,423,766 Franchise Fees 133,277 42,848 Rental Income 491,351 328,119 Royalty Sales 886,774 635,186 Computer Sales 278,523 157,800 Other Operating Income 76,709 166,528 ----------- ----------- Total Revenue $6,694,399 $4,817,461 ----------- ----------- Cost of Sales Company Owned Stores 562,357 762,856 Food, Packaging & Distribution 3,389,404 2,272,872 Other Cost of Sales 1,010,931 624,271 ----------- ----------- Total Cost of Sales 4,962,692 3,659,999 ----------- ----------- Gross Margin 1,731,707 1,157,462 ----------- ----------- Administrative Expenses 1,403,011 1,316,550 Amortization and Depreciation 185,621 244,908 Gain on the Sale of Fixed Assets -- 275,933 ----------- ----------- Operating Income (Loss) 143,075 (128,063) Other Income (Expense) Interest Income 85,002 20,370 Interest Expense (30,073) (25,696) ----------- ----------- Total Other Income 54,929 (5,326) Minority Interest in Net Income (Loss) (57,788) 37,494 ----------- ----------- Income (Loss) from Continuing Operations 140,216 (95,895) Loss From Discontinued Operations after Minority Interest (47,848) (288,710) ----------- ----------- Net Income (Loss) $92,368 ($384,605) ----------- ----------- Earnings (Loss) Per Share $0.04 ($0.15) ----------- ----------- Income From Continuing Operations $0.06 ($0.04) Loss From Discontinued Operations (0.02) (0.11) Net Income (Loss) Per Share 0.04 (0.15) ----------- ----------- Weighted Average Number of Shares Outstanding 2,545,800 2,545,200 ----------- -----------
The Accompanying Notes are an Integral Part of these Condensed Consolidated Financial Statements. 5 CRESCENT CAPITAL, INC. CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY [UNAUDITED]
Cumulative Foreign Common Stock Additional Currency Note Total Number of Paid-in Retained Translation Treasury Receivable Stockholders' Shares Amount Capital Earnings Adjustments Stock For Stock Equity Balance - December 31, 1996 2,545,800 2,546 6,209,214 322,246 250,400 (776,145) (1,852,275) 4,155,986 Accrued Interest on Stock Receivable -- -- -- -- -- (30,000) (30,000) Foreign Currency Translation Adjustment -- -- -- -- (86,512) -- -- (86,512) Net Income for the quarter ended March 30, 1997 -- -- -- 92,368 -- -- -- 92,368 ---------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance - March 30, 1997 2,545,800 $2,546 $6,209,214 $414,614 $163,888 (776,145) $(1,882,275) $4,131,842 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Foreign Currency Translation The functional currency for the Company's foreign operations is the British pound sterling. The translation from the British pound sterling into U.S. dollars is performed for balance sheet accounts using the current exchange rate in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The gains or losses resulting from such translations are included in stockholders' equity. Equity transactions are denominated in British Pound sterling have been translated into U.S. dollars using the effective rate of exchange at date of issuance. The Accompanying Notes are an Integral Part of these Condensed Consolidated Financial Statements 6 CRESCENT CAPITAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
For the Three Months January 1, 1997 to January 1, 1996 to March 30, 1997 March 30, 1996 Net Cash from Continuing Operations 136,017 (98,571) Net Cash from Discontinued Operations (68,355) (247,956) ----------- ----------- Net Cash - Operating Activities $67,662 ($346,527) ----------- ----------- Investing Activities: Purchase of Property, Equipment and Capitalized Costs (344,927) (511,610) Proceeds on Disposal of Property and Equipment 44,585 259,386 Repayment of Loan to Officer -- Loan to Related Party 128,099 -- ----------- ----------- Net Cash - Investing Activities (172,243) (252,224) ----------- ----------- Financing Activities: Capital Repayments Made (40,594) (52,742) Payment of Debt (79,049) (71,097) Proceeds from Sale of Common Stock -- ----------- ----------- Net Cash - Financing Activities (119,643) (123,839) ----------- ----------- Effect of Exchange Rate Changes on Cash (18,307) (6,814) Net [Decrease] in Cash and Cash Equivalents (242,531) (729,404) Cash and Cash Equivalents - Beginning of Periods 657,880 1,072,363 ----------- ----------- Cash and Cash Equivalents - End of Periods $415,349 $342,959 ----------- ----------- Supplemental Disclosures of Cash Flow Information: Cash paid during the periods for: Interest Paid ($23,905) $46,862 Taxes Paid -- Supplemental Disclosures of Non-Cash Financing and Investing Activities: Fixed Assets acquired under Capital Leases $29,889 $248,620
The Accompanying Notes are an Integral Part of these Condensed Consolidated Financial Statements. 7 CRESCENT CAPITAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED] [A] Significant Accounting Policies Significant accounting policies of Crescent Capital, Inc. are set forth in the Company's Form 10-KSB for the year ended December 31, 1996, as filed with the Securities and Exchange Commission. Crescent Capital's strategic objective is to invest in business ventures which will maximize the return to the shareholders. Currently, Crescent Capital, Inc.'s only operations are the 70% ownership of International Franchise Systems, Inc. Crescent Capital, Inc. and International Franchise Systems, Inc. [including its wholly owned subsidiaries] are collectively referred to as "the Company." [B] Basis of Reporting The balance sheet as of March 30, 1997, the statements of operations for the period January 1, 1997 to March 30, 1997, and for the period January 1, 1997 to March 30, 1997, the statement of stockholders' equity for the period January 1, 1996 to September 30, 1996 and the statements of cash flows for the period January 1, 1996 to March 30, 1997 and for the period January 1, 1996 to March 30, 1997 have been prepared by the Company without audit. The accompanying interim condensed unaudited financial have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions of Form 10-QSB and Regulation SB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the management of the Company, such statements include all adjustments [consisting only of normal recurring items] which are considered necessary for a fair presentation of the financial position of the Company at March 30, 1997, and the results of its operations and cash flows for the nine months then ended. It is suggested that these unaudited financial statements be read in conjunction with the financial statements and notes contained in the Company's Form 10-KSB for the year ended December 31, 1996. Certain reclassifications may have been made to the 1996 financial statements to conform to classification used in 1997. [C] Assignment Of Consulting Agreements The three consulting agreements entered into by International Franchise Systems, Inc. ("IFS") were assigned to Woodland Limited Partnership at their net book value on April 1, 1996. IFS received shares of Crescent Capital, Inc. in return for consideration. The shares are reflected as "Treasury Stock" in the shareholders equity section of the Company's balance sheet. [D] Due From Related Parties Woodland Limited Partnership is a partnership controlled by members of the Colin Halpern family. Mr. Colin Halpern is the President of Crescent. At March 30, 1997, $1,349,577 was due from Woodland for funds advanced by the Company and its subsidiaries. These funds are to be repaid on a short term basis and bear interest at 8% per annum beginning January 1, 1996. Included in Prepaid Expenses and Accrued Income is accrued interest receivable of $121,030 on this balance. In connection with the issuance to Woodland of shares of IFS stock, IFS accepted a note receivable for $1,500,00 from Woodland at 8% per annum. This note receivable was transferred to Crescent pursuant to a Loan and Exchange Agreement between Crescent, IFS and Woodland. Accrued interest on this note receivable at March 30, 1997 was $382,275. o o o o o o o o o o 8 Item 2. Management's Discussion and Analysis of Financial Condition and Result of Operations Overview - Income for the quarter was higher than the same period of the previous year due to more new store openings which increased by six in the first quarter of 1997 as compared to one in the first quarter of 1996, an increase in same store sales year of 15%, its corresponding impact on royalties and commissary sales and higher computer system sales. As of March 30, 1997, the Company has opened a total of 133 Domino's units. This includes 127 delivery units (11 that are Company owned) and 6 units that are "call and collect". In September 1996, the Company sold one Haagen Dazs parlour back to the Master Franchisor in the UK. The Company is attempting to divest the two other Haagen Dazs units. The ice cream business is influenced by cold weather and the Company experienced losses from these 2 units during the first quarter 1997. The Company expects the margins to improve in the second quarter as the weather improves. The Company opened a sit down restaurant, Pizzazz, in December 1995, to further increase awareness of the Domino's brand. The Company did not receive assistance from Domino's Pizza International, Inc. in the site selection, restaurant layout and decor, menu design and pricing, or advertising and marketing. The restaurant was closed in June 1996 after the Company determined that they to discontinue this line of business as they believed the success of the concept would require too much management attention to be redirected from the Company's primary business. Accordingly, the Company reported the losses from Pizzazz discontinued operations in the 1996 financial statements. The Company has subleased the property commencing April 1997 and terminating December 2010. Results of Operations Comparison of the three month periods ended March 30, 1997 and March 31, 1996
For the Three Months Ended INCOME STATEMENT DATA March 30, 1997 March 31, 1996 Revenues: (%) (%) Company owned stores 13.6 22.1 Commissary Sales 58.5 50.3 Royalty Sales 13.3 13.2 All Other Revenues 14.6 14.4 ----- ----- Total Revenues 100.0 100.0 Cost of Sales Company Owned Stores (1) 61.9 71.8 Commissary/Distribution (1) 86.5 93.8 All Other Cost of Sales (1) 54.2 46.9 ----- ----- Total Cost of Sales 74.1 76.0 Gross Margin 25.9 24.0 Administrative (2) 21.0 27.3 Amoritzation/Depreciation (2) 2.8 5.1 Gain on Sale of Fixed Assets (2) -- 5.7 ----- ----- Operating Income 2.1 (2.7) Other Income (2) 0.8 (0.1) ----- ----- Income/(Loss) on Continuing Operations after Minority Interest 2.9 (2.0) Loss on Discontinued Operations after Minority Interest (0.7) (6.0) ----- ----- Net Income/(Loss) 1.9 (8.0)
Notes: (1) as a percentage of respective revenue (2) as a percentage of total revenue 9 Revenue Total revenue for the period ended March 30, 1997 was $6,694,399, an increase of $1,876,938 (39%) against the same period of 1996. The main constituents of this increase arose from royalty income which increased by $251,588, commissary sales which increased by $1,495,274, rental and other income which increased by $73,413 and computer system sales which increased by $120,974. Sales at Company owned stores decreased by $ 154,489. For the period ended March 30, 1997, system wide sales totaled $16,125,000 versus $11,550,000 in the first quarter of 1996. This represents a 39% improvement from the previous year. The decrease in comparative sales at Company owned stores resulted primarily from one less Haagen Dazs unit and the operating of more corporate stores under the dealer development program than the previous year. The increase in royalty income and commissary sales resulted almost entirely from the increase in system wide sales. Cost and Expenses The Company experienced an increase in cost of sales against the same period in 1996 from approximately $3.6 million to $5.0 million, an increase of $1,302,693 (36%). The cost of sales as a percentage of commissary sales decreased by 8% from the same period of the previous year because of better controls to ensure that Commissary pricing was adjusted for raw material price fluctuations, and lower distribution cost per delivery. The cost of sales as a percentage of Company owned stores sales decreased by approximately 10% because of one less Haagen Dazs unit and the operating of corporate stores under the dealer development program. The royalty percentage payable to Domino's increased from the prior year by one tenth of a percent. Administrative and corporate expenses as a percentage of total revenue decreased by 6.3% versus the same period of the previous year. The Company improved efficiencies and controlled expenses as the franchise system grew. Income Income from continuing operations (before minority interest) of $198,004 was achieved in the period against operating loss of $133,389 in the comparable period in 1996. This increase in profitability resulted from an increase in sales and lower expenses. Liquidity and Capital Resources At March 30, 1997, the Company's working capital of $1.9 million compared to $2.0 million at December 30, 1996 and $2.0 million for the first quarter of 1996. The Company's trade receivable has increased by $232,173 from the same period of the prior year, in addition loans to franchisees increased by $338,886 from the prior year. The Company's receivable from related parties decreased by $102,951 and inventories and other receivable have increased by $329,492. Total current liabilities have increased by $685,105 from the same period of the previous year. The Company believes that its working capital will be sufficient to satisfy its obligations over the next twelve months. The Company has started to negotiate on the purchase of land and the construction of a new commissary and headquarters building. The existing Commissary will adequately service the dough production needs of existing and projected new franchisees for the next twelve months. The Company has a general commitment from National Westminster Bank to provide financing for 70% of the total estimated cost of $4 million. The Company does not believe that projected cash flow will be able to support the development of new corporate stores and the Company's portion of the land/construction costs. The Company is exploring different ways to raise money for this project. The Company anticipates it will spend $800,000 to open additional corporate stores and acquire commissary equipment in 1997. The Company is not obligated to open any additional Company owned stores by December 1997 under the Master Franchise Agreement. If the Company's plans change or its assumptions or estimates prove to be inaccurate, the Company may require additional funds to achieve increased sales. If such funds are unavailable, the Company will have to reduce its operations to a level consistent with its available funding. Exchange Rates The weighted exchange rate for the three months ended March 30, 1997 ($1.645 per British pound sterling) was approximately 8% higher than the exchange rate during the comparable period in 1996 ($1.526 per British pound sterling). This difference has the effect of improving the Company's results by approximately 8% when expressed in U.S. dollars. 10 Inflation The primary inflationary factor affecting the Company's operations is the cost of food. As the cost of food has increased, the Company has historically been able to offset these increases through economies of scale and improved operating procedures, although there is no assurance that such offsets will continue. To date, inflation has not had a material effect on the Company's operations. 11 Part II OTHER INFORMATION Item 1. Legal Proceedings The Company is not a party to any litigation or governmental proceedings that management believes would result in judgements or fines that would have a material adverse effect on the Company. Item 2. Changes in Securities Not Applicable. Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Other Information Not Applicable. Item 5. Exhibits (a) Exhibits None. (b) Reports on Form 8-K No reports on Form 8-K were filed during the period covered by this report. 12 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. CRESCENT CAPITAL, INC. Date: May 13, 1997 By: /s/ Colin Halpern Colin Halpern, President 13 EX-27 2
5 0000874017 CRESCENT CAPITAL, INC. OTHER DEC-30-1997 DEC-30-1996 MAR-30-1997 415,349 0 2,220,180 0 332,349 7,275,800 2,853,692 0 11,948,059 5,330,108 0 546 0 0 0 11,948,059 908,725 6,694,399 4,962,692 4,962,692 1,403,011 0 (30,073) 140,216 0 140,216 (47,848) 0 0 92,368 $0.04 $0.04
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