UNITED STATES
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, 2013
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 1-13984

 

BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.

(Exact name of registrant as specified in its charter)

 

New York		13-3832215
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

 

	2070 Central Park Avenue 2nd Fl. Yonkers, NY 10710
(Address of principal executive offices)

(914) 361-1420

(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 proceeding 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 o

 

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). Yes o  No o

 

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 (check one): Large Accelerated filer o Accelerated filer o Non-accelerated filer (do not check if a smaller reporting company) o Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

 

As of May 14 , 2013, there were 1,139,208 shares of the registrant’s common stock, par value $0.025 per share, outstanding.

INDEX

PART I. FINANCIAL INFORMATION
	Item 1.	Financial statements:
		Balance Sheets as of March 31, 2013 (unaudited) and December 31, 2012		1
		Statements of Operations for three months ended March 31, 2013 and 2012 (unaudited)		2
		Statements of Cash Flows for the three months ended March 31, 2013 and 2012 (unaudited)		3
		Notes to Financial Statements (unaudited)		4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		7
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		8
	Item 4	Controls and Procedures		9
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings		10
	Item 1A.	Risk Factors		10
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		10
	Item 3.	Defaults Upon Senior Securities		10
	Item 4.	Mine Safety Disclosures		10
	Item 5.	Other Information		10
	Item 6.	Exhibits		11
SIGNATURES				12
CERTIFICATIONS

PART I. FINANCIAL INFORMATION

 

Item 1. Financial statements

 

BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.
BALANCE SHEETS

 

		March 31, 2013				December 31, 2012
		(Unaudited)				(1)
ASSETS
Current assets:
Cash		$	1,078			$	1,078
Accounts receivable – related party			37,350				34,350
Total current assets			38,428				35,428
Other assets:
Trademark, net of amortization			23,625				25,125
Total other assets			23,625				25,125
Total assets		$	62,053			$	60,553
LIABILITIES AND STOCKHOLDERS’ (DEFICIENCY)
Current liabilities:
Accounts payable		$	15,899			$	19,453
Accrued expense			19,684				17,350
Advances payable – stockholder			73,935				64,623
Total current liabilities			109,518				101,426
Stockholders’ (deficiency):
Preferred stock $.001 par value, authorized 5,000,000 shares, none issued			—				—
Common stock, $.025 par value, authorized 75,000,000 shares, issued and outstanding 1,139,208 shares			28,482				28,482
Additional paid in capital			13,585,672				13,585,672
Accumulated deficit			(13,661,619	)			(13,655,027	)
Total stockholders’ (deficiency)			(47,465	)			(40,873	)
Total liabilities and stockholders’ (deficiency)		$	62,053			$	60,553

 

(1) Derived from Audited Financial Statements.

 

See notes to unaudited financial statements.

BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

 

		Three Months
		Ended March 31
		2013				2012
Licensing fees – related party		$	3,000			$	3,360
Selling, general and administrative expenses			9,592				9,069
Net loss		($	6,592	)		($	5,709	)
Earnings per common share:
Basic and diluted:		$	(.01	)		$	(.01	)
Weighted average number of common shares outstanding			1,139,208				1,139,208

 

See notes to unaudited financial statements.

 

BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.

STATEMENTS OF CASH FLOWS
(UNAUDITED)

 

		Three Months
		Ended March 31
		2013				2012
Operating activities:
Net loss		($	6,592	)		($	5,709	)
Amortization			1,500				1,500
Increase (decrease) in operating assets and liabilities:
Accounts receivable – related party			(3,000	)			(3,360	)
Accounts payable			(3,554	)			629
Accrued expenses			2,334				5,748
Net cash used in operating activities			(9,312	)			(1,192	)
Financing activities:
Advances from stockholder			9,312				2,250
Net cash provided by financing activities			9,312				2,250
Net increase in cash and cash equivalents			0				1,058
Cash and cash equivalents, beginning of period			1,078				20
Cash and cash equivalents, end of period		$	1,078			$	1,078
Supplemental disclosures:
Cash paid during the year for:
Taxes:		$	—			$	—
Interest:		$	—			$	—

 

See notes to unaudited financial statements.

BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

 

1.	Basis of presentation:
	The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. 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 management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on April 3, 2013.
	The results of operations for the three ended March 31, 2013 are not necessarily indicative of the results for the full fiscal year ending December 31, 2013.
	Accounting standards have been issued or proposed by the FASB and other standards-setting bodies that are not expected to have a material impact on the financial statements for the period ending March 31, 2013 upon adoption.
2.	Description of business and going concern:
	The Company was a manufacturer of baking and confectionery products, which were sold to supermarkets, food distributors, educational institutions, restaurants, mail order and to the public. Although the Company sold its products throughout the United States, its main customer base was on the East Coast of the United States. The Company has now become a holder and licensor of intellectual property.
	The accompanying financial statements are prepared assuming the Company will continue as a going concern. At March 31, 2013, the Company had an accumulated deficit of $13,661,619, and a working capital deficiency of $71,090. Additionally, for the three months ended March 31, 2013, the Company incurred a net loss from operations of $6,592 and had negative cash flows from operations in the amount of $9,312. The ability of the Company to continue as a going concern is dependent upon increasing licensing fees and obtaining additional capital and financing. While the Company believes in the viability of its strategy to increase licensing fees and in its ability to raise additional funds, there can be no assurances to that effect.
3.	Summary of significant accounting policies:
	Cash and cash equivalents:
	For the purpose of the statement of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.
	Accounts receivable and allowances:
	Accounts receivable are reported at net realizable value. Management considers the need for an allowance for doubtful accounts related to its accounts receivable that are deemed to have potential collectability issues. Management reviews its accounts receivable on a quarterly basis. The Company includes any receivables balances determined to be uncollectible along with a general reserve for doubtful accounts. No allowance was considered necessary at March 31, 2013.
	Use of estimates:
	The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

 

3.	Summary of significant accounting policies (continued):
	Net (Loss) Income per Share:
	The Company computes basic net (loss) income per share based on the weighted average common shares outstanding during the same period. Diluted net (loss) income per share adjusts the weighted average for potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock, which would then share in the earnings of the Company. At March 31, 2013, the Company had no such securities outstanding.
	Revenue Recognition:
	Income from licensing fees are recognized from the sale by our licensee of goods bearing the Brooklyn Cheesecake & Desserts Company, Inc. trademark. The Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Fees are computed at 1% of trademark products sold by our customer.
	Income Taxes:
	Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax asset and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than changes in the tax law or rates. A valuation allowance is recorded when it is deemed more likely than not that a deferred tax asset will not be realized.
	Impairment of Long-Lived Assets:
	The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. The recoverability of assets held and used in operations is measured by a comparison of the carrying amount of the assets to the future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
	Fair Value of Financial Instruments:
	The Company’s financial instruments consist of accounts receivable, accounts payable, accrued expenses, and advances payable. The carrying amounts of the financial instruments reported in the balance sheet approximate fair value based on the short-term maturities of these instruments.
	Recent accounting pronouncements:
	The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2013
(UNAUDITED)

 

4.	Trademark and licensing agreements:
	On March 7, 2002, the Company purchased the rights to the trademarks Brooklyn Cheesecake Company, Inc. and Brooklyn Cheesecake and Desserts Company, Inc. and the related corporate logo in exchange for 300,000 shares of the Company’s common stock, valued on the purchase date at $90,000. The trademark rights are being amortized on the straight-line basis over a fifteen-year term. Amortization expense was $1,500 and $1,500 for the three months March 31, 2013 and 2012, respectively.
	On March 28, 2006, the Company entered into a licensing agreement with its former Chairman and CEO, whereby a one percent of sales fee would be charged for the use of the Brooklyn Cheesecake & Desserts Company, Inc. trademarks. Licensing fees were $3,000 and $3,360 for the three months ended March 31, 2013 and 2012, respectively.

 

		March 31				December 31
		2013				2012
Trademark		$	90,000			$	90,000
Less: Accumulated Amortization			(66,375	)			(64,875	)
Trademark, Net		$	23,625			$	25,125

 

The following is a schedule of future amortization of the trademark:

 

2013			6,000
2014			6,000
2015			6,000
2016			5,625
		$	23,625

 

5.	Advances payable - stockholder:
	During the period ended March 31, 2013, Ronald L. Schutté the former Chairman and CEO advanced $9,312 to the Company. The advances were used for operating expenses. Total advances through March 31, 2013 were $73,935. These advances bear no interest and are payable on demand.
6.	Business Concentrations
	During the 3 months ended March 31, 2013 and 2012, the Company derived 100% of its revenues from a single customer. At March 31, 2013 and December 31, 2012, 100% of accounts receivable are due from a single customer. The customer is a related party (Note 7.)
7.	Related Party Transactions:
	During the three months ended March 31, 2013 and 2012, Ronald Schutte, a former Chairman and Chief Executive Officer of the Company, who is also a Stockholder of the Company, advanced to the Company $9,312 and $2,250, respectively, for working capital. At March 31, 2013 and December 31, 2012, the Company owed Mr. Schutte $73,935 and $64,623 respectively. Also see Note 5.
	The Company licenses its trademark to a company controlled by Mr. Schutte and earns licensing fees equal to 1% of sales of products bearing the Brooklyn Cheesecake & Desserts Company, Inc. trademark. During the three months ended March 31, 2013 and 2012, the Company earned license fees from this related party of $3,000 and $3,360 respectively. At March 31, 2013 and December 31, 2012, the Company had accounts receivable from this related party of $37,350 and $34,350, respectively. Also see Note 6.

Forward Looking Statements

 

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those in our other Securities and Exchange Commission filings, including our Annual Report on Form 10K filed on March 30, 2013. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report.

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

From March 2002 through March 2006, we were a manufacturer of baking and confectionary products. In March 2006, we entered into an Exchange Agreement pursuant to which we exchanged our baking equipment and other fixed assets and JM Specialties, Inc., our wholly owned subsidiary, for the satisfaction and assumption of approximately $1,145,000 of outstanding liabilities and obligations owed to Ronald L. Schutté, our former president and chief executive officer. We retained our trademarks and now license these trademarks to a New Jersey corporation formed by Mr. Schutté to continue the baking operations that were transferred to him pursuant to the Exchange Agreement.

 

We presently do not have sufficient cash to implement our business plan.

 

Although we are hopeful that licensing fees will increase in the future and be sufficient to pay related expenses, we will also look for additional opportunities, such as joint ventures, partnerships, strategic alliances or business combinations. The Company is not currently considering any such opportunities.

 

The following discussion and analysis should be read in conjunction with the financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q.

 

Critical Accounting Policies

 

Revenue Recognition:

 

Income from licensing fees are recognized from the sale by our licensee of goods bearing the Brooklyn Cheesecake & Desserts Company, Inc. trademark. The Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.

Results of Operations

 

Three Months Ended March 31, 2013 Compared to the Three Months Ended March 31, 2012

 

Licensing fees aggregated $3,000 and $3,360 for the three months ended March 31, 2013 and 2012. The decrease of $360 or 10% was due to a decrease in sales of our trademark products.

 

Selling, general and administrative expenses totaled $9,592 and $9,069 for the three months ended March 31, 2013 and 2012. The increase of $523 or 5% was the result of higher legal fees and public company related expenses.

 

Liquidity and Capital Resources

 

Since inception, our only source of working capital has been the $8,455,000 received from the sale of our securities.

 

As of March 31, 2013, we had negative working capital of $71,090 as compared to negative working capital of $65,998 at December 31, 2012.

 

Net Cash Used in Operating Activities during the three months ended March 31, 2013 of $9,312 was due to our net loss of $6,592 and amortization expense of $1,500. This was offset by an increase in accounts receivable of $3,000, a decrease in accounts payable of $3,554, and an increase in accrued expenses of $2,334.

 

Net Cash Provided by Financing Activities during the three months ended March 31, 2013 of $9,312 was due to advances from our stockholder.

 

Inflation and Seasonality

 

Licensing revenue will vary since it is tied to peak baking seasons. Revenues are generally higher during holiday seasons such as Thanksgiving, Christmas, Jewish New Year, Easter and Passover than they are during other times of the year.

 

Off-Balance Sheet Arrangements

 

There were no off-balance sheet arrangements during the three ended March 31, 2013 that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

This disclosure is not required for a smaller reporting company.

 

Item 4. Controls and Procedures

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

 

As of March 31, 2013, we carried out an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) under the supervision and with the participation of our management, including Anthony J. Merante, our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, Mr. Merante concluded that our disclosure controls and procedures are effective at a reasonable assurance level to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.

 

CHANGES IN INTERNAL CONTROLS

 

During the quarter ended March 31, 2013, there was no change in the issuer’s internal control over financial reporting that has materially affected, or is reasonable likely to materially affect, the issuer’s internal control over financial reporting.

 

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS.

 

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected. The Company conducts periodic evaluations of its internal controls to enhance, where necessary, its procedures and controls.

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time we may be a party to legal proceedings occurring in the ordinary course of business. We are not currently involved in any legal proceedings.

 

Item 1A. Risk Factors

 

This disclosure is not required for a smaller reporting company.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None

 

Item 3. Defaults Upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosure

 

Item 5. Other Information

 

None.

Item 6. Exhibits

 

(a) Exhibits

 

	31.1	Certification dated May 14 , 2013 pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes Oxley-Act of 2002 by Anthony J. Merante, Chairman, President, Chief Executive Officer, and Chief Financial Officer.
	32.1	Certification dated May 14 , 2013 pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by Anthony J. Merante, Chairman, President, Chief Executive Officer, and Chief Financial Officer.

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.

 

Brooklyn Cheesecake & Desserts Company, Inc.

 

By: /s/ Anthony J. Merante
Anthony J. Merante
Chairman, President, Chief Executive Officer, and Chief Financial Officer
Date: May 14 , 2013