Attached files
file | filename |
---|---|
EXCEL - IDEA: XBRL DOCUMENT - Crumbs Bake Shop, Inc. | Financial_Report.xls |
EX-31.2 - EXHIBIT 31.2 - Crumbs Bake Shop, Inc. | c21437exv31w2.htm |
EX-32.1 - EXHIBIT 32.1 - Crumbs Bake Shop, Inc. | c21437exv32w1.htm |
EX-31.1 - EXHIBIT 31.1 - Crumbs Bake Shop, Inc. | c21437exv31w1.htm |
EX-32.2 - EXHIBIT 32.2 - Crumbs Bake Shop, Inc. | c21437exv32w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2011
or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-35220
57th Street General Acquisition Corp.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 27-1215274 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
110 West 40th Street, Suite 2100 | 10018 | |
(Address of Principal Executive Offices) | (Zip Code) | |
Registrants Telephone Number, Including Area Code (212) 221-7105 |
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to
submit and post such files). þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller Reporting Company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o Noþ
As of August 12, 2011, the registrant had 5,505,885 shares of Common Stock outstanding.
TABLE OF CONTENTS
Table of Contents
PART I
ITEM 1. FINANCIAL STATEMENTS
57TH STREET GENERAL ACQUISITION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash |
$ | 11,514,486 | $ | 655,022 | ||||
Trade receivables |
322,738 | 248,061 | ||||||
Inventories |
394,437 | 240,965 | ||||||
Prepaid rent |
528,225 | 386,718 | ||||||
Deferred financing costs |
215,302 | |||||||
Other current assets |
408,442 | 81,631 | ||||||
Total current assets |
13,168,328 | 1,827,699 | ||||||
Property and equipment, net |
9,396,764 | 8,784,505 | ||||||
Other Assets |
||||||||
Deferred tax asset |
4,773,500 | |||||||
Restricted cash |
605,000 | 30,000 | ||||||
Intangible assets, net |
402,997 | 429,238 | ||||||
Deposits |
280,612 | 276,513 | ||||||
Other |
69,469 | 35,951 | ||||||
Total other assets |
6,131,578 | 771,702 | ||||||
$ | 28,696,670 | $ | 11,383,906 | |||||
LIABILITIES, MEMBERS EQUITY AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities |
||||||||
Accounts payable and accrued expenses |
$ | 1,694,499 | $ | 2,615,481 | ||||
Payroll liabilities |
200,191 | 141,337 | ||||||
Sales tax payable |
69,639 | 47,580 | ||||||
Gift cards and certificates outstanding |
124,430 | 120,002 | ||||||
Total current liabilities |
2,088,759 | 2,924,400 | ||||||
Long-term liabilities |
||||||||
Deferred rent |
2,210,755 | 1,863,243 | ||||||
Payable to related parties pursuant to tax receivable agreement |
2,386,750 | |||||||
Total liabilities |
6,686,264 | 4,787,643 | ||||||
Members equity |
6,596,263 | |||||||
Stockholders equity |
||||||||
Preferred stock, $.0001 par value; 1,000,000 shares authorized;
390,000 shares issued and outstanding at June 30, 2011 |
39 | |||||||
Common stock, $.0001 par value; 100,000,000 shares authorized;
7,100,469 shares issued, 5,505,885 outstanding at June 30, 2011 |
710 | |||||||
Additional paid-in capital |
30,297,103 | |||||||
Accumulated deficit |
(851,054 | ) | ||||||
Treasury stock, at cost |
(15,913,948 | ) | ||||||
Total 57th Street General Acquisition Corp. stockholders equity |
13,532,850 | |||||||
Non-controlling interest |
8,477,556 | |||||||
Total stockholders equity |
22,010,406 | | ||||||
$ | 28,696,670 | $ | 11,383,906 | |||||
See accompanying notes to condensed consolidated interim financial statements.
1
Table of Contents
57TH STREET GENERAL ACQUISITION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net sales |
$ | 10,294,163 | $ | 7,915,127 | $ | 20,012,768 | $ | 15,039,594 | ||||||||
Cost of sales |
4,334,020 | 3,240,258 | 8,393,854 | 6,129,526 | ||||||||||||
Gross profit |
5,960,143 | 4,674,869 | 11,618,914 | 8,910,068 | ||||||||||||
Operating expenses |
||||||||||||||||
Selling expenses |
399,877 | 345,452 | 793,356 | 602,901 | ||||||||||||
Staff expenses |
3,258,071 | 2,029,329 | 6,108,257 | 3,977,580 | ||||||||||||
Occupancy expenses |
1,799,899 | 1,264,369 | 3,422,040 | 2,370,589 | ||||||||||||
General and administrative |
650,781 | 306,658 | 1,045,543 | 579,855 | ||||||||||||
Depreciation and amortization |
345,405 | 200,397 | 675,199 | 400,793 | ||||||||||||
6,454,033 | 4,146,205 | 12,044,395 | 7,931,718 | |||||||||||||
Income from (loss) operations |
(493,890 | ) | 528,664 | (425,481 | ) | 978,350 | ||||||||||
Other income (expense) |
||||||||||||||||
Interest and other income |
73 | 27 | 272 | 47 | ||||||||||||
Abandoned lease projects |
(14,044 | ) | (13,444 | ) | (8,486 | ) | ||||||||||
(13,971 | ) | 27 | (13,172 | ) | (8,439 | ) | ||||||||||
Net income (loss) attributable to the
controlling and non-controlling interests |
(507,861 | ) | 528,691 | (438,653 | ) | 969,911 | ||||||||||
Less: Net (income) loss attributable to
non-controlling interest |
210,559 | 181,866 | ||||||||||||||
Net income (loss) attributable to stockholders |
$ | (297,302 | ) | $ | 528,691 | $ | (256,787 | ) | $ | 969,911 | ||||||
Net income (loss) per common share, basic
and diluted |
$ | (0.05 | ) | $ | 0.19 | $ | (0.05 | ) | $ | 0.57 | ||||||
Weighted average number of common
shares outstanding, basic and diluted |
5,599,274 | 2,770,548 | * | 5,141,082 | 1,710,607 | * | ||||||||||
* | The weighted average number of common shares outstanding is that of 57th Street General
Acquisition Corp. |
See accompanying notes to condensed consolidated interim financial statements.
2
Table of Contents
57TH STREET GENERAL ACQUISITION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
From January 1, 2010 through June 30, 2011
Total 57th Street | ||||||||||||||||||||||||||||||||||||||||||||
General Acquisition | Total | Total | ||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional | Accumulated | Treasury | Corp. | Non-Controlling | Stockholders | Members | ||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Paid-in-capital | Deficit | Stock | Stockholders Equity | Interest | Equity | Equity | ||||||||||||||||||||||||||||||||||
Balances, January 1, 2010 |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | 6,152,065 | ||||||||||||||||||||||||||
Capital distributions |
(352,173 | ) | ||||||||||||||||||||||||||||||||||||||||||
Net income |
796,371 | |||||||||||||||||||||||||||||||||||||||||||
Balances, December 31, 2010 (audited) |
6,596,263 | |||||||||||||||||||||||||||||||||||||||||||
Merger of Crumbs Holdings LLC into
57th Street General Acquisition Corp. |
454,139 | 45 | 6,089,075 | 609 | 28,781,303 | (594,267 | ) | 28,187,690 | 10,083,317 | 38,271,007 | (6,596,263 | ) | ||||||||||||||||||||||||||||||||
Common stock tender of 1,594,584 shares
pusuant to Offer to Purchase at $9.98 per share |
(15,913,948 | ) | (15,913,948 | ) | (15,913,948 | ) | ||||||||||||||||||||||||||||||||||||||
Warrants exchanged for common stock pursuant
to Insider Warrant Exchange Agreement |
370,000 | 37 | (37 | ) | ||||||||||||||||||||||||||||||||||||||||
Liquidity shares redeemed for
common stock pursuant to Exchange and
Support Agreement |
(64,139 | ) | (6 | ) | 641,394 | 64 | 1,515,837 | 1,515,895 | (1,423,895 | ) | 92,000 | |||||||||||||||||||||||||||||||||
Net loss |
(256,787 | ) | (256,787 | ) | (181,866 | ) | (438,653 | ) | ||||||||||||||||||||||||||||||||||||
Balances, June 30, 2011 (unaudited) |
390,000 | $ | 39 | 7,100,469 | $ | 710 | $ | 30,297,103 | $ | (851,054 | ) | $ | (15,913,948 | ) | $ | 13,532,850 | $ | 8,477,556 | $ | 22,010,406 | $ | | ||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
Table of Contents
57TH STREET GENERAL ACQUISITION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended June 30, | 2011 | 2010 | ||||||
Cash flows from operating activities |
||||||||
Net income (loss) |
$ | (438,653 | ) | $ | 969,911 | |||
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
675,199 | 400,793 | ||||||
Abandoned lease projects |
13,444 | 8,486 | ||||||
Changes in operating assets and liabilities: |
||||||||
Trade receivables |
(53,016 | ) | 21,302 | |||||
Inventories |
(153,472 | ) | (56,401 | ) | ||||
Prepaid rent |
(141,507 | ) | 45,951 | |||||
Other current assets |
(326,811 | ) | (58,145 | ) | ||||
Deposits |
(4,099 | ) | (45,837 | ) | ||||
Accounts payable and accrued expenses |
(934,623 | ) | 7,712 | |||||
Payroll liabilities |
58,854 | (14,705 | ) | |||||
Sales tax payable |
22,059 | (8,097 | ) | |||||
Gift cards and certificates outstanding |
4,428 | 11,416 | ||||||
Deferred rent |
347,512 | 209,969 | ||||||
Net cash provided by (used in) operating activities |
(930,685 | ) | 1,492,355 | |||||
Cash flows from investing activities |
||||||||
Purchase of restricted certificate of deposit |
(575,000 | ) | ||||||
Purchases of property and equipment |
(1,224,731 | ) | (1,088,529 | ) | ||||
Proceeds from sales of property and equipment |
135,550 | |||||||
Purchases of intangible assets |
(38,882 | ) | (16,050 | ) | ||||
Purchases of other assets |
(44,566 | ) | ||||||
Net cash used in investing activities |
(1,883,179 | ) | (969,029 | ) | ||||
Cash flows from financing activities |
||||||||
Proceeds retained from reverse merger |
13,752,985 | |||||||
Capital distributions |
(79,657 | ) | (318,098 | ) | ||||
Net cash provided by (used in) financing activities |
13,673,328 | (318,098 | ) | |||||
Net increase in cash |
10,859,464 | 205,228 | ||||||
Cash, beginning of period |
655,022 | 838,528 | ||||||
Cash, end of period |
$ | 11,514,486 | $ | 1,043,756 | ||||
Supplemental disclosure of non-cash financing activities |
||||||||
Net assets acquired in reverse merger |
$ | 2,087,468 | $ | | ||||
Exchange of New Class B Exchangeable Units for common stock
of the Company |
$ | 1,423,895 | $ | | ||||
See
accompanying notes to condensed consolidated interim financial
statements.
4
Table of Contents
57TH STREET GENERAL ACQUISITION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. Nature of business and summary of significant accounting policies
Unaudited Interim Financial Information
The accompanying condensed consolidated interim financial information of 57th Street
General Acquisition Corp (57th Street) and Crumbs Holdings LLC and its wholly-owned
subsidiaries (Crumbs) (together, the Company) as of June 30, 2011 and for the three and six
months ended June 30, 2011 and 2010 is unaudited and has been prepared on the same basis as the
audited condensed consolidated financial statements. In the opinion of management, such unaudited
financial information includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the interim information. Operating results for the three and
six months ended June 30, 2011 and 2010 are not necessarily indicative of results that may be
expected for the year ending December 31, 2011. The accompanying unaudited condensed consolidated
interim financial statements should be read in conjunction with the audited financial statements
and notes thereto included in 57th Streets Third Amended and Restated Offer to
Purchase, dated April 18, 2011 (as amended and supplemented on each of April 21, 2011, April 25,
2011, April 26, 2011, April 27, 2011 and May 5, 2011), filed with the Securities and Exchange
Commission (the SEC).
Reverse Merger
On January 9, 2011, 57th Street, 57th Street Merger Sub LLC (Merger Sub), Crumbs, all the members
of Crumbs immediately prior to the consummation of the Merger (as described below) (individually, a
Member or, collectively, the Members), and the representatives of Crumbs and the Members,
entered into a Business Combination Agreement, amended on each of February 18, 2011, March 17, 2011
and April 7, 2011 (the Business Combination Agreement) pursuant to which 57th Street acquired
Crumbs. Pursuant to the terms of the Business Combination Agreement, among other things, Merger Sub
merged with and into Crumbs with Crumbs surviving as a non-wholly owned subsidiary of 57th Street
(the Merger) in exchange for consideration in the form of cash, newly issued preferred stock of
57th Street, and newly issued exchangeable units of Crumbs. The Merger was consummated
on May 5, 2011. Management has concluded that Crumbs is the accounting acquirer based on its
evaluation of the facts and circumstances of the acquisition. The entity surviving the Merger kept
the Crumbs name. 57th Street intends to change its name to Crumbs Bake Shop, Inc. in the
near future.
Pursuant to the Business Combination Agreement, upon consummation of the Merger, Crumbs amended and
restated its limited liability company operating agreement to replace the various classes of its
existing membership interests with two new classes of membership interests:
| a new class A voting membership interests (the New Crumbs Class A Voting Units); and |
||
| a new class B exchangeable membership interests (the New Crumbs Class B Exchangeable Units). |
Upon
consummation of the Merger, Crumbs issued to the Members an aggregate of
4,541,394 New Crumbs Class B Exchangeable Units, which have limited voting rights. The New Crumbs
Class B Exchangeable Units are exchangeable for shares of 57th Streets common stock on
a one for one basis (subject to certain adjustments related to organic dilution) at the request
from time to time of any holder of such units pursuant to the terms of an Exchange and Support
Agreement (Exchange and Support Agreement) between the Members, 57th Street, and the
Company. 57th Street accordingly reserved 4,541,394 shares of its common stock for issuance to the Members upon their exchange of New Crumbs Class B Exchangeable Units.
Additionally,
57th
Street issued to the Members 454,139.4 shares of Series A Voting Preferred
Stock of
57th Street (the Series A Voting Preferred Stock).
Holders of Series A Voting Preferred Stock have the right to vote on all
matters submitted to a vote of
57th Streets common stockholders, voting together with the holders of common stock as a single class, each share of Series A Voting Preferred Stock held on the record date for determining stockholders initially will be entitled to 10 votes (subject to adjustment for organic dilution).
Upon exchange of the New
Crumbs Class B Exchangeable Units in accordance with the Exchange and Support Agreement, a
proportionate amount of shares of Series A Voting Preferred Stock will be automatically redeemed
and cancelled at the current ratio of 1:10, subject to the availability of lawful funds, for its
par value of $0.0001 per share and become authorized but unissued preferred stock. Except in
connection with the exchange of the New Crumbs Class B Exchangeable Units, the 57th Street Series A
Voting Preferred Stock will not be redeemable. Except as provided in the Exchange and Support
Agreement and the Business Combination Agreement, of 57th Street Series A Voting Preferred Stock
will have no other conversion, preemptive or other
subscription rights with respect to the 57th Street Series A Voting Preferred Stock and there are
no sinking fund provisions applicable to the Series A Voting Preferred Stock.
5
Table of Contents
57TH STREET GENERAL ACQUISITION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
1. Nature of business and summary of significant accounting policies (continued)
Reverse Merger (continued)
Upon consummation of the Merger, Crumbs issued to 57th Street 4,494,491 New Crumbs Class
A Voting Units. Holders of New Crumbs Class A Voting Units possess all voting rights in Crumbs on
ordinary matters. 57th Street is the sole holder of New Crumbs Class A Voting Units. In
the event Members exchange their New Crumbs Class B Exchangeable Units for the common stock of
57th Street, 57th Street will be issued New Crumbs Class A Voting Units equal
to the number of New Crumbs Class B Exchangeable Units being exchanged pursuant to the Exchange and
Support Agreement.
The aggregate amount of cash consideration paid by 57th Street pursuant to the Business
Combination Agreement was $22,086,060.
Nature of Business
The Company specializes in the sale of comfort-oriented and elegant baked goods, with more than 150
varieties of goods baked fresh daily, but is specifically known for its line of gourmet cupcakes.
Other items sold include beverages and logoed merchandise. Sales are primarily conducted through
retail locations in New York, California, Illinois, Connecticut, New Jersey, Virginia and Washington D.C.,
while a small percentage of baked goods sales stem from wholesale distribution and catering sales
to several metropolitan area vendors. The Company also commenced its e-commerce business
in early 2009 enabling nationwide cupcake sales.
Crumbs Holdings LLC was the sole member of 50 limited liability companies, all operating under the
trade name Crumbs Bake Shop, as of June 30, 2011. A new limited liability company is formed for
each retail location and business, and as of June 30, 2011, 35 retail locations, the wholesale
business, e-commerce and catering business were in operation.
Basis of Presentation
The
condensed consolidated interim financial statements have been prepared in conformity with the
accounting principles generally accepted in the United States of America (GAAP).
Principles of Consolidation
The accompanying condensed consolidated interim financial statements include the accounts of
57th Street General Acquisition Corp., Crumbs Holdings LLC, and all of Crumbs Holdings
LLCs wholly owned subsidiaries. Intercompany transactions and balances have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements, disclosures
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.
6
Table of Contents
57TH STREET GENERAL ACQUISITION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
1. Nature of business and summary of significant accounting policies (continued)
Restricted Cash
As of June 30, 2011 and 2010, Crumbs had $575,000 and $30,000, respectively, of cash
restricted from withdrawal and held by banks as certificates of deposit securing letters of credit
(See Note 4). The letters of credit are required as security deposits
for certain of the Crumbs non-cancellable retail store operating leases.
Income Taxes
The Company complies with FASB ASC 740, Income Taxes, which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income tax assets and
liabilities are computed for differences between financial statement and tax bases of assets and
liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and
rates applicable to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
The Company is required to determine whether its tax positions are more likely than not to be
sustained upon examination by the applicable taxing authority, including resolution of any related
appeals or litigation processes, based on the technical merits of the position. The tax benefit
recognized is measured as the largest amount of benefit that has a greater than fifty percent
likelihood of being realized upon ultimate settlement with the relevant taxing authority.
De-recognition of a tax benefit previously recognized results in the Company recording a tax
liability that reduces ending stockholders equity. Based on its analysis, the Company has determined
that it has not incurred any liability for unrecognized tax benefits as of June 30, 2011 and 2010.
However, the Companys conclusions may be subject to review and adjustment at a later date based on
factors including, but not limited to, on-going analyses of and changes to tax laws, regulations
and interpretations thereof.
The Company recognizes interest and penalties related to unrecognized tax benefits in interest
expense and other expenses, respectively. No interest expense or penalties have been recognized as
of and for the three and six months ended June 30, 2011 and 2010.
The Company files an income tax return in the U.S. federal jurisdiction, and may file income tax
returns in various U.S. states. Generally, the Company is subject to income tax examinations by
major taxing authorities since inception.
The Company may be subject to potential examination by U.S. federal or U.S. states authorities
in the areas of income taxes. These potential examinations may include questioning the timing and
amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S.
federal and U.S. state tax laws. The Companys management does not expect that the total amount of
unrecognized tax benefits will materially change over the next twelve months.
Tax Receivable Agreement
Crumbs intends to make an election under Section 754 of the Internal Revenue Code (the Code)
effective for each taxable year in which an exchange of New Crumbs Class B Exchangeable Units for
shares of the Companys common stock as described above occurs, which may result in an adjustment
to the tax basis of the assets of Crumbs at the time of an exchange of New Crumbs Class B
Exchangeable Units. As a result of both the initial purchase of New Crumbs Class B Exchangeable
Units from the Members in connection with the Merger and these subsequent exchanges,
57th Street will become entitled to a proportionate share of the existing tax basis of
the assets of Crumbs. In addition, the purchase of New Crumbs Class B Exchangeable Units and
subsequent exchanges are expected to result in increases in the tax basis of the assets of Crumbs
that otherwise would not have been available. Both this proportionate share and these increases in tax basis may reduce the
amount of tax that 57th Street would otherwise be required to pay in the future. These
increases in tax basis may also decrease gains (or increase losses) on future dispositions of
certain capital assets to the extent tax basis is allocated to those capital assets.
7
Table of Contents
57TH STREET GENERAL ACQUISITION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
1. Nature of business and summary of significant accounting policies (continued)
Tax Receivable Agreement (continued)
57th Street entered into a tax receivable agreement with Crumbs that will provide for
the payment by 57th Street to the Members an amount equal to 50% of the amount of the
benefits, if any, that the Company is deemed to realize as a result of (i) the existing tax basis
in the intangible assets of Crumbs on the date of the Merger, (ii) these increases in tax basis and
(iii) certain other tax benefits related to our entering into the tax receivable agreement,
including tax benefits attributable to payments under the tax receivable agreement. These payment
obligations are obligations of 57th Street and not of Crumbs. For purposes of the tax
receivable agreement, the benefit deemed realized by 57th Street will be computed by
comparing the actual income tax liability of 57th Street (calculated with certain
assumptions) to the amount of such taxes that 57th Street would have been required to
pay had there been no increase to the tax basis of the assets of Crumbs as a result of the purchase
or exchanges, had there been no tax benefit from the tax basis in the intangible assets of Crumbs
on the date of the Merger and had 57th Street not entered into the tax receivable agreement. The
term of the tax receivable agreement will continue until all such tax benefits have been utilized
or expired, unless 57th Street exercises its right to terminate the tax receivable
agreement for an amount based on the agreed payments remaining to be made under the agreement or
57th Street breaches any of its material obligations under the tax receivable agreement,
in which case all obligations will generally be accelerated and due as if 57th Street
had exercised its right to terminate the agreement.
Fair Value of Financial Instruments
The Companys financial instruments consist primarily of cash in banks, certificates of deposit,
and accounts receivable. The carrying amounts for cash and cash equivalents and accounts receivable
approximate fair value due to the short term nature of the instruments.
Net loss per common share
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per
Share. Net loss per common share is computed by dividing net loss applicable to common
stockholders by the weighted average number of common shares outstanding for the period. At June
30, 2011, the Company did not have any dilutive securities and other contracts that could,
potentially, be exercised or converted into common stock and then share in the earnings of the
Company. As a result, diluted loss per common share is the same as basic loss per common share for
the period.
Recently issued accounting standards
The Company does not believe that the adoption of any new recently issued accounting standards will
have a material impact on its financial position and results of operations.
Reclassifications
Certain reclassifications have been made to the prior year financial statements in order for them
to be in conformity with the current year presentation. Such reclassifications have no effect on
reported net income.
8
Table of Contents
57TH STREET GENERAL ACQUISITION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
2. Inventories
Inventories are valued at the lower of cost or market, with cost being determined using the average
cost method. At June 30, 2011 and December 31, 2010,
inventories consisted of the following:
Unaudited | Audited | |||||||
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Packaging |
$ | 202,623 | $ | 54,980 | ||||
E-Commerce packaging |
131,411 | 117,445 | ||||||
Merchandise |
18,343 | 45,599 | ||||||
Store supplies |
42,060 | 22,941 | ||||||
Total Inventory |
$ | 394,437 | $ | 240,965 | ||||
Packaging inventory consists of labels, boxes, bags and gel packs for packaging and shipping baked
goods, while merchandise inventory consists of logoed hats, t-shirts and aprons primarily used as
employee uniforms, and mugs, books and plastic tiers for sale in the retail stores. Store supplies
consist of paper goods, decorating materials, and other miscellaneous supplies purchased in bulk
and consumed in daily operations.
3. Letters of credit
In lieu of security deposits required pursuant to the terms of several operating leases, Crumbs has
chosen to obtain letters of credit issued by two financial institutions, where such substitution is
allowed by the landlords. As of June 30, 2011 and 2010, issued and unused letters of credit
totaled $569,425 and $529,425, respectively. In May 2011, Crumbs entered into a loan agreement in
connection with the letters of credit issued by one of the institutions in the form of a $575,000
revolving line of credit, with a variable rate based on the Wall Street Journal Prime Rate. Prior
to entering into this agreement, the letters of credit were guaranteed by a Crumbs member. Letters
of credit amounting to $539,425 and $499,425 were reserved under this line of credit as of June 30,
2011 and 2010, respectively, and therefore cannot exceed $575,000. The line of credit is secured
by a certificate of deposit. A $30,000 letter of credit issued by the second institution is also
secured by a certificate of deposit. No amounts were outstanding at June 30, 2011 and 2010.
The certificates of deposit used to secure the letters of credit are recorded as restricted cash in
the balance sheet (See Note 1).
4. Related party
In 2010, Crumbs leased building space for seven of its retail locations as a sub-lease from Bauer
Holdings, Inc., formerly known as Crumbs, Inc., a member of Crumbs. Crumbs paid the original
unrelated lessor directly at the original term of the agreements. Two of these sub-leases were
terminated during 2010, and the remaining five sub-leases were assigned to their respective
successor entities in the second quarter of 2011.
For the three and six months ended June 30, 2011 and 2010, the Company paid approximately $165 and
$4,585, and $6,783 and $17,206, respectively, in fees, unrelated to
audits, to an accounting firm in which an officer of the Company is a part owner.
9
Table of Contents
57TH STREET GENERAL ACQUISITION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
4. Related party (continued)
Additionally, for the three and six months ended June 30, 2011 and 2010, the Company paid
approximately $5,175 and $10,350, and $4,545 and $8,710, respectively, in rent to a landlord that
is partially owned by an officer of the Company.
5. Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with such designations,
voting and other rights and preferences as may be determined from time to time by the Board of
Directors. In connection with the Merger (see Reverse Merger in Note 1), the Members were issued
4,541,394 of New Crumbs Class B Exchangeable Units and 454,139.4
Series A Voting Preferred Stock of
57th Street. Upon exchange of the New Crumbs Class B
Exchangeable Units in accordance with the Exchange and Support Agreement, shares of 57th Street
common stock will be issued at the current ratio of 1:1 (subject to certain adjustments related to
organic dilution), and concurrently, a proportionate amount of shares
of Series A Voting Preferred
Stock will be automatically redeemed and cancelled at the current ratio of 1:10, subject to the
availability of lawful funds, for its par value of $0.0001 per share and become authorized but
unissued preferred stock. Except in connection with the exchange of the New Crumbs Class B
Exchangeable Units, the 57th Street Series A Voting Preferred Stock will not be redeemable.
In June 2011, 641,394 New Crumbs Class B Exchangeable Units were exchanged for 641,394 shares of
common stock, and in turn, 64,139.4 shares of Series A Voting Preferred Stock were automatically
redeemed and cancelled pursuant to the Exchange and Support Agreement.
10
Table of Contents
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of
the Securities Exchange Act of 1934, as amended (the Exchange Act). The words believe,
expect, anticipate, project, target, optimistic, intend, aim, will or similar
expressions are intended to identify forward-looking statements. Such statements include, among
others, those concerning our expected financial performance and strategic and operational plans, as
well as all assumptions, expectations, predictions, intentions or beliefs about future events.
These statements are based on the beliefs of our management as well as assumptions made by and
information currently available to us and reflect our current view concerning future events. As
such, they are subject to risks and uncertainties that could cause our results to differ materially
from those expressed or implied by such forward-looking statements. Such risks and uncertainties
include, among many others: the risk that the businesses of Crumbs will not be integrated
successfully; the risk that the benefits anticipated from the business transaction with Crumbs may
not be fully realized or may take longer to realize than expected; the risk that any projections,
including earnings, revenues, expenses, synergies, margins or any other financial items are not
realized, the risk of disruption from the business transaction making it more difficult to maintain
relationships with customers, employees or suppliers; a reduction in industry profit margin; the
inability to continue the development of the Crumbs brand; changing interpretations of generally
accepted accounting principles; continued compliance with government regulations; changing
legislation and regulatory environments; the ability to meet the NASDAQ Stock Market continued
listing standards; a lower return on investment; the inability to manage rapid growth; requirements
or changes affecting the business in which Crumbs is engaged; the general volatility of the market
prices of our securities and general economic conditions; our ability to successfully implement new
strategies; operating hazards; competition; the loss of key personnel; any of the factors in the
Risk Factors section of our Registration Statement on
Form S-3 (File No. 333-175408); other risks
identified in this Report; and any statements of assumptions underlying any of the foregoing. You
should also carefully review other reports that we file with the Securities and Exchange
Commission. We assume no obligation and do not intend to update these forward-looking
statements, except as required by law.
11
Table of Contents
Overview
About the Company and Crumbs Holdings LLC
57th Street General Acquisition Corp. (57th Street) was formed in Delaware in October
2009. 57th Street entered into a Business Combination Agreement dated as of January 9,
2011 and amended on each of February 18, 2011, March 17, 2011 and April 7, 2011 (as amended, from
time-to-time, the Business Combination Agreement), by and among 57th Street,
57th Street Merger Sub LLC, a Delaware limited liability company and wholly-owned
subsidiary of 57th Street (Merger Sub), Crumbs Holdings LLC, a Delaware limited
liability company (Crumbs), the members of Crumbs immediately prior to the consummation of the
Merger (the Members) and the representatives of the Members and Crumbs pursuant to which, subject
to the terms and conditions contained therein, Merger Sub was merged with and into Crumbs with
Crumbs surviving the merger as a non-wholly owned subsidiary of 57th Street (the Merger). The
entity surviving the Merger kept the Crumbs Holdings LLC name, and is referred to herein as Crumbs.
57th Street intends to change its name to Crumbs Bake Shop, Inc. in the near future.
57th Street, together with Crumbs and its subsidiaries, is referred to herein as the
Company or we.
We, through Crumbs and its wholly-owned subsidiaries, operate our business under the trade name of
Crumbs Bake Shop. We offer a wide variety of cupcakes, cakes, pies, cookies and other baked
treats. Cupcake sales have historically comprised the majority of our business. Crumbs believes
that its baked goods appeal to a wide demographic of customers who span every socio-economic class.
Crumbs operates in urban, suburban, commercial, and residential markets. More recently, it has
expanded into transportation hubs, such as Union Station in Washington, D.C. and the Continental
Airlines Terminal at Newark Liberty International Airport in Newark, New Jersey.
As of June 30, 2011, there were 35 Crumbs retail stores across six states and Washington, D.C.,
including 15 locations in New York City. Crumbs sales are primarily conducted through its retail
locations in New York, California, Illinois, Connecticut, New Jersey, Virginia and Washington, D.C.
However, a small percentage of baked goods sales are from Crumbs wholesale distribution business
and catering sales to several New York metropolitan area vendors. Crumbs e-commerce division at
http://www.crumbs.com, which allows cupcakes to be shipped nationwide, is expanding. Crumbs has
followed and intends to continue to follow a strategy of expanding its store locations in existing
markets and opening stores in select new markets, with a goal of operating approximately 200 Crumbs
stores in the United States by the end of 2014.
2011 Highlights
Store Development. During the six months ended June 30, 2011 we opened 2 new Crumbs Bake Shop
store locations. Upon consummation of the Merger and the transactions contemplated thereby, our
management began to identify new potential locations to further our expansion efforts. As of
August 1, 2011, we had executed 14 leases for upcoming store locations and were in the process of
negotiating 7 additional leases. We anticipate opening a total of 16 to 18 new stores prior to
December 31, 2011, bringing the total number of stores in operation at year end 2011 from 35 to 49-
51.
Sales Growth. Total sales grew from approximately $15.0 million to approximately $20.0 million for
the first six months of 2011 compared to the same period in 2010, an increase of 33%.
12
Table of Contents
New Supplier. We recently named Dawn Foods as Crumbs consolidated supplier of raw materials for
our contract bakery manufacturers throughout the country. We see several advantages to our
business in partnering with Dawn Foods. First, we will now have one consistent bakery supplier for
both existing and future markets, affording us even more quality control and consistency. Second,
we will be better able to use our growing buying power to negotiate pricing. Third, we will also
be able to reduce breaks in our supply chain. Fourth, Dawn Foods will purchase inventory and
distribute specific ingredients for our recipes to our manufacturers, allowing us to maintain and
further improve product quality. And finally, working with Dawn will afford us greater control
over cost of goods sold through the increased transparency of the price of goods entering our
bakery partners.
Results of Operations and Known Future Trends
Our results of operations as a percentage of revenue and period-over-period variances are discussed
in the following sections.
Revenue
Although cupcakes represented 77% of Crumbs sales during the three and six months ended June 30,
2011, each Crumbs store offers more than 150 different baked goods daily. Products include a full
line of breakfast items, such as danishes, scones, croissants and muffins, as well as other popular
desserts including brownies, cakes, pies and cookies. The stores also carry beverages including
whole leaf teas, espresso based drinks, drip coffees, hot chocolate, homemade sodas, and fresh
squeezed lemonade. Beverages represented 9% of Crumbs sales during the three and six months ended
June 30, 2011. The remaining sales are primarily attributable to delivery and handling charges.
Revenue reported for the three and six months ended June 30, 2011 was $10.3 million and $20.0
million, respectively, an increase of 30% and 33% as compared to $7.9 million and $15.0 million,
respectively, for the same periods in 2010. The increase in revenue is largely attributable to new
store openings. Revenue reported for the three and six months ended June 30, 2011 for the stores
not in the comparable store base was $2.8 million and $5.6 million, respectively. Revenue
reported from our catering, e-commerce and wholesale operations for the six months ended June 30,
2011 was $1.3 million, an increase of 9% as compared to $1.2 million for the same period in 2010,
while the revenue remained approximately the same at $0.6 million for the three months ended 2011
and 2010. The primary contributor to the increase for the six months ended June 30, 2011 was the
growth of our e-commerce operation.
Cost of Sales
Product purchases for resale comprise the majority of cost of sales. Baked goods are delivered to
Crumbs stores by independent commercial bakeries. In each major market, Crumbs contracts with a
bakery able to exclusively supply proprietary products to Crumbs stores within a two hour drive.
As of the date of this filing, Crumbs had relationships with commercial bakeries in New York, Los
Angeles, Northern Virginia and Illinois. Beverage materials and packaging are purchased from both
national and local vendors. Delivery expenses for the stores are handled by local couriers. The
e-commerce operation utilizes a fulfillment company in New York for both shipping and handling.
Cost of sales reported for the three and six months ended June 30, 2011 were $4.3 million and $8.4
million, respectively, an increase of 34% and 37% as compared to $3.2 million and $6.1 million,
respectively, for the same periods in 2010. Cost of Sales as a
percentage of sales increased 1.2% for both the three and six month
periods
ended June 30, 2011. The increase was primarily attributable to increases
in packaging and beverage costs, excess inventory during periods of bad weather and increased
percentage of revenue from suburban stores, which maintain more excess baked goods inventory than
our urban stores.
13
Table of Contents
Operating Expenses
Selling expenses include merchant account fees, fees paid to a public relations consultant,
advertising (most of Crumbs advertising expenses are related to the e-commerce operation) and
product promotional giveaways.
Selling expenses reported for the three and six month periods ended June 30, 2011 were $0.4 million
and $0.8 million, respectively, an increase of 16% and 32% as compared to $0.3 million and $0.6
million, respectively, for the same periods in 2010. This increase is due to additional expenses associated with our growth particularly in the new markets of Washington, DC
and Chicago, and is consistent with our growth in revenue.
Staff expenses include salaries and wages for both Crumbs retail store employees and corporate
positions, guaranteed payments to the members of Crumbs, as well as employment taxes, medical
insurance and workers compensation insurance.
Staff expenses reported for the three and six month periods ended June 30, 2011 were $3.3 million
and $6.1 million, respectively, an increase of 61% and 54% as compared to $2.0 million and $4.0
million, respectively, for the same periods in 2010. Of the totals, $2.2 million and $4.3 million,
respectively, were attributable to store staff expenses for the three and six month periods ended
June 30, 2011. For the three and six month periods ended June 30, 2010, $1.4 million and $2.7
million, respectively, were attributable to store staff expenses.
Crumbs leases all of its retail store locations and its corporate offices. The leases range in
term from five to 15 years, many with options to extend up to 20 years. Most of the leases include
periods of free rent and monthly rental rate escalation clauses. Crumbs amortizes the total rent
to be paid during the lease term on a straight line basis over the entire base period of each
lease. This treatment causes a non-cash expense in the early years of the leases. Expenses
related to the leases, such as real estate taxes, common area maintenance fees, insurance,
advertising and commissions are included. Other expenses, such as utilities, cleaning, licenses,
kosher certification, maintenance, property and liability insurance are also included.
Occupancy expenses reported for the three and six month periods ended June 30, 2011 were $1.8
million and $3.4 million, respectively, an increase of 42% and 44% as compared to $1.3 million and
$2.4 million, respectively, for the same periods in 2010. Of the total increases, $49,000 and
$95,000, respectively, was attributable to increased rent for the corporate offices, including the
New York office, which moved to a larger space in December of 2010. Expenses related to leases were
$0.5 million and $0.8 million,
respectively, for the three and six month periods ended June 30, 2011, an increase of 67% and 60% as
compared to $0.3 million and $0.5 million, respectively, for the same periods in 2010.
General and Administrative expenses include retail store based expenses for miscellaneous supplies,
uniforms and quality control. The category also includes corporate expenses such as office
supplies, travel, professional fees and bank service charges
General and Administrative expenses reported for the three and six month periods ended June 30,
2011 were $0.7 million and $1.0 million, respectively, an increase of 112% and 80% as compared to
$0.3 million and $0.6 million, respectively, for the same periods in 2010. While some store
related expenses are included, most of these expenses are corporate. Approximately $190,000 of
the increase for the three months ended June 30, 2011 is attributable to expenses associated with
being a public company, $78,000 of which is not expected to reoccur. Over $72,000 are fees
associated with recruiting for a vice president of real estate position and other management
positions.
14
Table of Contents
Depreciation and amortization expenses reported for the three and six month periods ended June 30,
2011 were $0.3 million and $0.7 million, respectively, an increase of 72% and 68% as compared to
$0.2 million and $0.4 million, respectively, for the same periods in 2010. Depreciation increased
as a result of new store buildout additions from those stores opened in the second half of 2010
and, to a lesser degree, first year expense for stores opened in 2011.
General Economic Trends and Seasonality
Our results of operations are generally affected by the economic trends in our market areas due to
the dependence on our customers discretionary spending. Weakness in the national or regional
economy in our market areas, combined with other factors including inflation, labor and healthcare
costs and the availability of suitable locations for future stores, may negatively impact our
business. If consumer activities associated with the consumption of our products decline or the business
activities of our corporate customers decrease, our revenues and sales volumes may decline.
Our results to date have not been significantly impacted by inflation. If we experience high
inflation in labor or leased real estate, we may not be able to pass on all of these higher costs
to our customers in the short term. Although we believe that we will be able to pass on higher
costs to our customers over longer periods of time, there can be no assurance that we will be
successful in such efforts.
While Crumbs business is not highly seasonal, it is impacted by weather. Extreme hot and cold
weather may cause decreased sales in the affected locations and could impact the daily delivery of
its baked goods. On occasion, severe ice and snow conditions have caused Crumbs to close stores
during normal business hours.
Liquidity and Capital Resources
As a
result of the Merger, which was consummated on May 5, 2011,
approximately $13.7 million was
contributed towards the future expansion of Crumbs. Crumbs primary source of liquidity from
operations is cash generated from the sale of baked goods, beverages and merchandise. Crumbs
primary uses of cash are cost of sales, operating expenses, capital expenditures, and tax distributions by Crumbs to certain of Crumbs members
subject to individual level taxation on profits and payments to members under the tax benefit
agreement.
For
the period ended June 30, 2011, the Companys working
capital was approximately $11.1 million.
The Company intends to use working capital to embark on an aggressive investment in store growth.
As a result of entering into several real estate leases following the consummation of the Merger,
we anticipate incurring approximately $5.0 million of additional costs by December 31, 2011
associated with the construction and buildout of new store locations, as well as the purchase/lease
of equipment necessary to operate our new stores.
15
Table of Contents
Cash Flows
Crumbs net cash used in operating activities was $0.9 million for the six months ended June 30,
2011, as compared to $1.5 million provided by operating activities for the same period of the
prior year. The increase in operating cash outflows for the six months ended June 30, 2011 was
partially due to operating expense increases, inventory increases attributable to additional stores
and additional packaging related to e-commerce shipments of new products, a $124,000 increase in
prepaid rent as a result of payments due pursuant to nine new leases executed in 2011, a $115,000
increase in prepaid insurance related to directors and officers liability coverage, and a $0.9
million reduction in accounts payable primarily attributable to construction costs from stores
opened in late 2010.
Net cash used in investing activities for the six months ended June 30, 2011 was $1.9 million as
compared to $1.0 million for the same period in 2010. Investing cash outflows for the six months
ended June 30, 2011 consisted primarily of total costs related to two new stores and construction
in progress costs for ten stores. Other investment outflows included approximately $36,000 of
intangible assets related to legal services rendered in defense of Crumbs trademarks and $0.6
million for the purchase of a certificate of deposit used as security for letters of credit issued
to several landlords in lieu of security deposit payments. Net investing cash outflows for the
six months ended June 30, 2010 included total costs related to two new stores and construction in
progress costs for twelve stores.
As a result of the consummation of the Merger on May 5, 2011, financing inflows for the six months
ended June 30, 2011 included $13.7 million in net proceeds. For the six months ended June 30, 2011
and 2010, respectively, approximately $80,000 and $0.3 million of net cash used in financing
activities was attributable to member capital
distributions for state income tax obligations, state estimated tax payments and member personal
expenses, treated as distributions.
Off-Balance Sheet Arrangements
Crumbs has no off-balance sheet arrangements that have or are reasonably likely to have a current
or future effect on its financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
Long-Lived Assets. Property and equipment are carried at cost and are being depreciated on
a straight-line basis over their useful lives of 10 to 15 years for leasehold improvements, and 5
to 10 years for furniture and equipment and 3 to 5 years for computer equipment. Leasehold
improvements are depreciated over the shorter of the lease term or the assets useful life.
Maintenance and repairs are charged to expense as incurred, while capital improvements that extend
the useful lives of the underlying assets are capitalized. Intangible assets include branding
costs and website design that are amortized over their useful lives, estimated to be 5 years.
Impairment of Long-Lived Assets. When facts and circumstances indicate that the carrying values of
long-lived assets may not be recoverable, Crumbs evaluates long-lived assets for impairment. Crumbs
first compares the carrying value of the asset to the assets estimated future cash flows
(undiscounted). If the estimated future cash flows are less than the carrying value of the asset,
an impairment loss is calculated based on the assets estimated fair value. The fair value of the
assets is estimated using a discounted cash flow model based on future store revenues and operating
costs, using internal projections. Property and equipment assets are grouped at the lowest level
for which there are identifiable cash flows when assessing impairment. Cash flows for retail assets
are identified at the individual store level. Long-lived assets to be disposed of are reported at
the lower of their carrying amount, or fair value less estimated costs to sell.
16
Table of Contents
Deferred Rent. Crumbs leases retail stores and office space under operating leases. Most lease
agreements contain tenant improvement allowances, rent holidays, lease premiums, rent escalation
clauses and/or contingent rent provisions. For purposes of recognizing incentives, premiums and
minimum rental expenses on a straight-line basis over the terms of the leases, Crumbs uses the date
of initial possession to begin amortization, which is generally when Crumbs enters the space and
begins to make improvements.
For tenant improvement allowances and rent holidays, Crumbs records a deferred rent liability in
other long-term liabilities and amortizes the deferred rent over the terms of the leases as
reductions to rent expense.
For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a
date other than the date of initial occupancy, Crumbs records minimum rental expenses on a
straight-line basis over the terms of the leases.
Revenue Recognition. Revenue is recognized when payment is tendered at the point of sale.
Revenues are reported net of sales, use or other transaction taxes that are collected from
customers and remitted to taxing authorities.
Income Taxes. The Company complies with FASB ASC 740, Income Taxes, which requires an asset and
liability approach to financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between financial statement and tax bases of
assets and liabilities that will result in future taxable or deductible amounts, based on enacted
tax laws and rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
Gift Certificates and Cards. In 2009, Crumbs stopped issuing gift certificates and replaced them
with a gift card system. Crumbs has recorded a current liability on the balance sheet for
outstanding gift certificates and cards.
Recent Accounting Pronouncements
We
have evaluated recent accounting pronouncements and do not believe the adoption of any
recently issued accounting standards will have a material impact on our financial position and
results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Upon consummation of the Merger, the net proceeds from the initial public offering held in trust
and invested in U.S. government treasury bills and money market funds were disbursed. As a result,
we are no longer exposed to interest rate risk from those investments.
There were no additional material changes in the quantitative and qualitative information about
market risk since the end of our most recent fiscal year.
17
Table of Contents
ITEM 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and procedures, as of the end
of the period covered by this report on Form 10-Q. This evaluation was carried out under the
supervision and with the participation of our management, including our president and chief
executive officer and our chief financial officer. Based upon that evaluation, management concluded
that our disclosure controls and procedures are effective to ensure that information required to be
disclosed in the reports that it files or submits under the Exchange Act is accumulated and
communicated to management (including the chief executive officer and chief financial officer) to
allow timely decisions regarding required disclosure and that our disclosure controls and
procedures are effective to give reasonable assurance that the information required to be disclosed
by us in reports that we file under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the Securities and
Exchange Commission.
As required by Rule 13a-15(d) of the Exchange Act, the Companys management, including its
principal executive officer and its principal financial officer, conducted an evaluation of the
internal control over financial reporting to determine whether any changes occurred during the
period covered by this Quarterly Report on Form 10-Q that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial reporting.
Based on that evaluation, the Companys principal executive officer and principal financial officer
concluded no such changes during the period covered by this Quarterly Report on Form 10-Q
materially affected, or were reasonably likely to materially affect, the Companys internal control
over financial reporting.
PART II
ITEM 6. EXHIBITS
31.1 | Certification by Chief Executive Officer pursuant to Exchange Act
Rule 13a-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
|||
31.2 | Certification by Chief Financial Officer pursuant to Exchange Act
Rule 13a-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
|||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|||
101.INS* | XBRL Instance Document |
|||
101.XSD* | XBRL Taxonomy Extension Schema Document |
|||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
|||
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
|||
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document |
|||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* | XBRL (Extensible Business Reporting Language) information is furnished and not filed
or a part of a registration statement or prospectus for purposes of Sections 11 or 12
of the
Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, and otherwise is not subject to
liability under these sections. |
18
Table of Contents
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.
Date: August 15, 2011 | 57th Street General Acquisition Corp. |
|||
By: | /s/ John D. Ireland | |||
John D. Ireland | ||||
Chief Financial Officer |
19