Crumbs Bake Shop, Inc. Reports Second Quarter 2013 Financial Results

  Crumbs Bake Shop, Inc. Reports Second Quarter 2013 Financial Results

                    Company Updates 2013 Financial Outlook

Business Wire

NEW YORK -- August 8, 2013

Crumbs Bake Shop, Inc. (“Crumbs”) (NASDAQ: CRMB), the largest cupcake
specialty store chain in the U.S., today reported financial results for the
second quarter ended June 30, 2013.

Highlights of the Second Quarter 2013 Compared to the Second Quarter 2012:

  *Net sales increased 11.5% to $12.4 million from $11.1 million.
  *Store operating weeks increased 38.2% to 916 from 663.
  *Gross profit increased 6.2% to $6.7 million from $6.3 million.
  *Net loss attributable to stockholders was $(2.8) million or $(0.23) per
    share compared to $(0.4) million or $(0.08) per share.
  *Adjusted EBITDA^1, a non GAAP measure, was $(2.1) million compared to
    $(0.5) million.

1. See financial tables for a reconciliation of adjusted EBITDA (earnings
before interest, taxes, depreciation and amortization), a non-GAAP measure, to
GAAP results.

Julian R. Geiger, President and Chief Executive Officer, said, “While we are
not pleased with our performance, we remain focused on the initiatives and
strategies that we have discussed in the past and which we still believe will
be the vehicles that will ultimately change the trajectory and vitality of our
business in the future.”

Second Quarter 2013 Financial Results

Net sales increased 11.5% to $12.4 million from $11.1 million in the second
quarter of 2012. The increase was primarily attributable to $2.9 million in
sales from the 32 stores not in the same store sales base offset by a $1.7
million decrease in sales from the 49 stores in the same store sales base.
Same store sales represent the change in sales for stores after their 15^th
full calendar month of operation. Four stores moved into the same store sales
base during the quarter itself. Store operating weeks increased 38.2% to 916
from 663 in the second quarter last year.

Cost of sales was $5.7 million compared to $4.8 million in the second quarter
of 2012 and increased 270 basis points to 45.8% as a percentage of net sales.
Gross profit increased 6.2% to $6.7 million from $6.3 million in the second
quarter of last year.

Staff expenses were $4.1 million compared to $3.3 million in the second
quarter of 2012 and increased 265 basis points to 32.9% as a percentage of net
sales.

Occupancy expenses were $3.3 million compared to $2.4 million in the second
quarter of last year and increased 480 basis points to 26.7% as a percentage
of net sales.

General and administrative expenses were $1.0 million compared to $0.8 million
in the second quarter of 2012 and increased 90 basis points to 8.5% as a
percentage of net sales.

Adjusted EBITDA was $(2.1) million compared to $(.05) million in the second
quarter of last year. See financial tables for a reconciliation of adjusted
EBITDA (earnings before interest, taxes, depreciation and amortization), a
non-GAAP measure, to GAAP results.

Net loss attributable to the stockholders was $(2.7) million, or $(0.23) per
basic and diluted share, compared to a net loss of $(0.4) million, or $(0.08)
per basic and diluted share, last year. The weighted average number of common
shares outstanding was 11.7 million in the second quarter of 2013 and 5.5
million in the second quarter of 2012.

Store Portfolio

In the first half of the year we have opened a total of 18 mall-based stores,
including 10 in line stores and 8 kiosks. During the second quarter of 2013,
Crumbs opened 7 mall-based stores and 3 kiosks in, or adjacent to, current
trading areas.

The Company has also expressed its intention to close certain street-level
stores in California, Connecticut, Illinois, Metropolitan New York City, and
Washington D.C that management believes will be unable to reach acceptable
levels of financial performance. Although none of those stores were closed
during the second quarter, Crumbs has reached agreements and expects to close
at least five stores in Connecticut, California, Illinois and Metropolitan New
York City by the end of the year.

2013 Outlook

Based upon actual results through the first half of 2013 along with its
revised outlook for the balance of the year, Crumbs is lowering its annual
expectations to net sales of approximately $53 million from $57 million and
adjusted EBITDA of approximately $(4.9) million from $(3.9) million. The
Company’s updated sales projection reflects continued weakness at street-level
stores that is being only partially offset by positive contributions from
newer mall-based stores and kiosks. Any additional store closures would also
further impact both sales and adjusted EBITDA.

See financial tables for a reconciliation of projected adjusted EBITDA
(earnings before interest, taxes, depreciation and amortization), a non-GAAP
measure, to projected GAAP results.

The Company has opened 21 mall-based stores and kiosks within its current
geographic footprint in 2013 and anticipates opening one additional location
by the end of the year.

Earnings Call

Crumbs will host an earnings call to discuss second quarter 2013 financial
results today at 5:00 PM Eastern Time. Hosting the call will be Julian R.
Geiger, President and Chief Executive Officer, and John D. Ireland, Senior VP
of Finance, Chief Financial Officer and Treasurer.

The conference call can be accessed live over the phone by dialing
888-208-1812 or for international callers by dialing 719-325-2481. A replay
will be available one hour after the call and can be accessed by dialing
877-870-5176 or 858-384-5517 for international callers; the password is
6013500. The replay will be available until August 22, 2013.

The call will also be webcast live from the Company’s Web site at
www.crumbs.com under the Investor Relations section. An archived webcast will
be available beginning approximately one hour after the end of the call.

About Crumbs Bake Shop, Inc.

The first Crumbs bake shop opened in March 2003 on the Upper West Side of
Manhattan and is well known for its innovative and oversized gourmet cupcakes.
The Company currently has 78 locations in 12 states and the District of
Columbia.

Forward Looking Statements

Some of the statements in this press release constitute forward-looking
statements within the meaning of the federal securities laws. Words such as
“anticipate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,”
“aim,” “will” and words and terms of similar substance and any financial
projections used in connection with any discussion of future plans,
strategies, objectives, actions, or events 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 views 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 any projections,
including earnings, revenues, expenses, synergies, margins or any other
financial items that form the basis for management’s plans and assumptions are
not realized; the risk of disruption from being a public company, 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; the timing of and ability to achieve
profitability of new stores; the inability to manage or fund rapid growth;
requirements or changes affecting the business in which Crumbs Bake Shop, Inc.
and Crumbs Holdings LLC and its wholly-owned subsidiaries are engaged; our
ability to successfully implement new strategies; operating hazards; and
competition and the loss of key personnel; 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’s continued listing standards; a lower return on
investment; and the general volatility of the market prices of our securities
and general economic conditions. These and other risks are discussed in detail
in the periodic reports that Crumbs Bake Shop, Inc. files with the Securities
and Exchange Commission (the “SEC”), including in the “Risk Factors” section
of its Annual Report on Form 10-K for the year ended December 31, 2012, and
investors are urged to review those periodic reports and its other filings
with the SEC, which are accessible on the SEC’s website at www.sec.gov, before
making an investment decision. Crumbs Bake Shop, Inc.’s forward-looking
statements may also be subject to other risks and uncertainties, including
those that it may discuss elsewhere in this news release or in its filings
with the SEC. We assume no obligation to update these forward-looking
statements except as required by law.

Non-GAAP Information

This press release includes certain numerical measures that are or may be
considered “non-GAP financial measures” under the SEC’s Regulation G. “GAAP”
refers to generally accepted accounting principles in the United States. The
reconciliations of such measures to the most comparable GAAP figures, in
accordance with Regulation G, are included herein. Crumbs presents its results
in the way it believes will be most meaningful and useful, as well as most
transparent, to the investing public, including use of Adjusted EBITDA as a
financial measure, which also facilitates comparisons to our historical
performance.

The Company is providing Adjusted EBITDA information, which is defined as net
income of the combined company, including net income attributable to any
non-controlling interest, determined in accordance with all applicable and
effective GAAP pronouncements up to December 31, 2010, before interest income
or expense, income taxes and any gains or losses resulting from the change in
estimate relating to our tax receivable agreement, depreciation, amortization,
deferred rent expense, losses or gains resulting from adjustments to the fair
value of the contingent consideration, stock-based compensation expense,
extraordinary or non-recurring expenses and all other extraordinary non-cash
items for the applicable period as a compliment to GAAP results. Adjusted
EBITDA measures are commonly used by management and investors as a measure of
leverage capacity, debt service ability and liquidity. Adjusted EBITDA is not
considered a measure of financial performance under GAAP, and the items
excluded from Adjusted EBITDA are significant components in understanding and
assessing our financial performance. Adjusted EBITDA should not be considered
in isolation or as an alternative to, or superior to, such GAAP measures as
net income, cash flows provided by or used in operating, investing or
financing activities or other financial statement data presented in our
consolidated financial statements as an indicator of financial performance or
liquidity. Reconciliations of non-GAAP financial measures are provided in the
accompanying tables. Since Adjusted EBITDA is not a measure determined in
accordance with GAAP and is susceptible to varying calculations, Adjusted
EBITDA, as presented, may not be comparable to other similarly titled measures
of other companies.

CRUMBS BAKE SHOP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
                                                               
                                                                      
                       Three Months Ended June 30,   Six Months Ended June 30,
                          2013          2012          2013         2012   
                                                                      
                                                                      
Net sales              $  12,350       $ 11,081      $  24,430      $ 22,358
                                                                      
Cost of sales            5,651        4,775        11,008      9,537  
                                                                      
Gross profit             6,699        6,306        13,422      12,821 
                                                                      
Operating expenses
Selling expenses          542            397            1,113         686
Staff expenses            4,060          3,350          7,892         6,745
Occupancy expenses        3,302          2,427          6,177         4,793
General and               1,049          838            2,022         1,629
administrative
New store expenses        271            72             391           181
Depreciation and          631            467            1,190         915
amortization
Loss on sale of          58           14           100         14     
property and equipment
                                                                      
                         9,913        7,565        18,885      14,963 
                                                                      
Loss from operations     (3,214  )     (1,259 )      (5,463  )    (2,142 )
                                                                      
Other income (expense)
Interest expense          (75     )      -              (75     )     -
Interest and other        5              10             7             18
income
Abandoned projects        (5      )      (32    )       (15     )     (45    )
Change in fair value     -            546          (109    )    109    
of warrant liability
                                                                      
                         (75     )     524          (192    )    82     
                                                                      
Net loss attributable
to the controlling and
non-controlling           (3,289  )      (735   )       (5,655  )     (2,060 )
interests
                                                                      
Less: Net loss
attributable to
non-controlling          537          296          929         182    
interest
                                                                      
Net loss attributable  $  (2,752  )    $ (439   )    $  (4,726  )   $ (1,878 )
to stockholders
                                                                      
                                                                      
Net loss per common    $  (0.23   )     (0.08  )    $  (0.41   )    (0.22  )
share, basic
                                                                      
Weighted average
number of common
shares outstanding,      11,719       5,506        11,569      5,506  
basic and diluted

CRUMBS BAKE SHOP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
                                                               
                                                                     
                                                    June 30,      December 31,
                                                    2013          2012
ASSETS
                                                                     
Current assets
Cash                                                $ 6,573       $  6,270
Trade receivables                                     657            259
Inventories                                           570            559
Prepaid rent                                          724            600
Other current assets                                 663          410     
                                                                     
Total current assets                                 9,187        8,098   
                                                                     
Property and equipment, net                          17,090       13,209  
                                                                     
Other Assets
Deferred tax asset                                    4,773          4,773
Restricted certificates of deposit                    673            673
Intangible assets, net                                298            367
Capitalized lease costs                               818            440
Deposits                                              282            289
Debt issuance costs                                   909            0
Other                                                19           38      
                                                                     
Total other assets                                   7,772        6,580   
                                                                     
                                                    $ 34,049     $  27,887  
                                                                     
LIABILITIES, MEMBERS' EQUITY AND STOCKHOLDERS' EQUITY
                                                                     
Current liabilities
Accounts payable and accrued expenses               $ 2,775       $  2,080
Payroll liabilities                                   337            357
Sales tax payable                                     251            110
Gift cards and certificates outstanding              221          234     
                                                                     
Total current liabilities                             3,584          2,781
                                                                     
Long-term liabilities
Deferred rent                                         4,374          3,791
Payable to related parties pursuant to tax receivable 2,387          2,387
agreement
Warranty liability                                    491            381
Convertible notes payable                            10,000       -       
                                                                     
Total liabilities                                    20,836       9,340   
                                                                     
Commitments and contingencies
                                                                     
Stockholders' equity
Preferred stock, $.0001 par value; 1,000 shares
authorized;
390 shares issued and outstanding at June 30, 2012
and December 31, 2012                                 -              -
Common stock, $.0001 par value; 100,000 shares
authorized;
7,372 shares issued, 5,777 outstanding at June 30,
2012 and
7,100 shares issued, 5,506 outstanding at December    1              1
31, 2011
Additional paid-in capital                            39,440         39,117
Accumulated deficit                                   (14,502 )      (9,776  )
Treasury stock, at cost                              (15,914 )     (15,914 )
                                                                     
Total Crumbs Bake Shop, Inc. stockholders' equity     9,025          13,428
                                                                     
Non-controlling interest                             4,188        5,117   
                                                                     
Total stockholders' equity                           13,213       18,545  
                                                                     
                                                    $ 34,049     $  27,885  

CRUMBS BAKE SHOP, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA TO NEAREST COMPARABLE GAAP MEASURE
(in thousands)
                                                             
                         Three Months Ended June       Six Months Ended June
                         30,                           30,
                         2013            2012        2013          2012   
                                                                      
Net income (loss)
attributed to the
controlling
   and
   non-controlling     $ (3,289  )     $  (735  )    $ (5,655  )    $ (2,060 )
   interest
   Depreciation and      631              467          1,190          915
   amortization
   Interest expense      75               -            75             -
   Interest income       (4      )        (2    )      (4      )      -
   Loss on disposal
   of property and       58               14           100            14
   equipment
   Abandoned             5                32           15             45
   projects
   Deferred rent         230              165          431            396
   expense
   Stock based           172              116          323            163
   compensation
   Change in fair
   value of warrant      -                (546  )      109            (109   )
   liability
   Non-recurring        -              4          -            8      
   expenses
Adjusted EBITDA        $ (2,122  )     $  (485  )    $ (3,416  )    $ (628   )

Contact:

Investor Relations:
ICR
Tom Ryan/Raphael Gross
646-478-9917
IR@crumbs.com
or
Media Relations:
Crumbs
Quinn Solomon, 212-221-7105
qsolomon@crumbs.com
 
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