CRMB: Investor Group Says Crumbs to Seek Sale in Chapter 11 -- 2nd Update 7/11/14
By Sara Randazzo
Days after abruptly closing its dozens of cupcake stores, Crumbs Bake Shop Inc. filed for Chapter 11 protection Friday evening with plans to sell itself to an investor group that includes CNBC host Marcus Lemonis and Dippin' Dots owner Fischer Enterprises.
The company, which once sold four-inch, frosting-laden cupcakes for as much as $4.50 each, listed assets and liabilities of between $10 million and $50 million each in a filing made Friday in U.S. Bankruptcy Court in New Jersey.
In a statement, the investor group said it plans to provide Crumbs with financing to complete the Chapter 11 process and, subject to court approval, intends to acquire Crumbs' assets to create a new, privately held company that will reopen Crumbs stores.
The company's hoped-for savior has made a name for himself in bailing out distressed companies. In his TV show "The Profit," Mr. Lemonis invests his own money into struggling small businesses in an attempt to turn them around. He is the chief executive of retailer Camping World and owns several other dessert-focused companies that he said will play a role in any Crumbs revival.
"Our goal is to create a viable business model by making Crumbs the nation's 'sweet and snack' destination," Mr. Lemonis said in a statement.
Oklahoma energy executive Mark Fischer and his son Scott Fischer are behind Fischer Enterprises, which bought Dippin' Dots out of bankruptcy in 2012 and is a lender to Crumbs.
"Crumbs is known for its high-quality cupcakes, which will remain a mainstay in the new company but will be supplemented by a much improved product mix to broaden its appeal to a larger customer base," Scott Fischer, the chief operating officer of Fischer Enterprises, said in a statement.
Days before the Monday closure of its stores, Crumbs said in a regulatory filing that it had defaulted on $9.3 million in senior secured notes issued after entering into a loan agreement with Fischer in January.
Crumbs went public three years ago at the height of the gourmet-cupcake boom. Since then, its finances have worsened amid years of losses, a dwindling cash supply and a food craze that some say is petering out.
The Chapter 11 filing was made with the consent of Crumbs's board of directors, according to court filings.
Monday afternoon, less than a week after the Nasdaq Stock Market suspended trading of Crumbs shares, the New York-based company notified employees that it would be shutting down at the close of business.
Crumbs had roughly 48 stores in 10 states and the District of Columbia, according to the company's website, though the number of stores operating as of Monday may have been lower. The company had been closing underperforming stores for the past year, including nine closures at the end of 2013 and at least six in 2014, leaving employees without jobs.
"I'm now without a steady income," said Giovany Vasquez, who until Monday had been a part-time manager at a Crumbs shop in lower Manhattan. Mr. Vasquez, 22 years old, said he and his sister both worked at Crumbs stores to help support their family.
Crumbs got its start in 2003 with a shop on the Upper West Side of Manhattan, founded by a husband-and-wife team, Jason and Mia Bauer. A shell company bought Crumbs in 2011 and took it public that June.
But the popularity of high-end cupcakes embodied by chains such as New York's Magnolia Bakery and Los Angeles-based Sprinkles has waned in recent years, even as new players crowded into the field. Crumbs posted a loss of $18.2 million last year, layered on top of a $10.3 million loss in 2012, according to regulatory filings. Its cash on hand fell to $893,000 at the end of 2013, down from $6.3 million the prior year.
In one bright spot, the company reported an increase in net sales last year, to $47.2 million from $43 million in 2012.
The company went through a management change at the end of last year after then-President and Chief Executive Julian Geiger resigned. Its new chief executive, Edward Slezak a former Aéropostale executive who joined Crumbs in August 2013 as chief legal officer oversaw the creation of a licensing program to sell Crumbs-branded products in other stores, the closure of struggling locations, and other initiatives aimed at stemming the company's losses.
Mr. Slezak will remain with Crumbs throughout the bankruptcy process, the company said late Friday.
Write to Sara Randazzo at sara.randazzo@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
> Dow Jones Newswires
July 11, 2014 23:55 ET (03:55 GMT)
By Sara Randazzo
Days after abruptly closing its dozens of cupcake stores, Crumbs Bake Shop Inc. filed for Chapter 11 protection Friday evening with plans to sell itself to an investor group that includes CNBC host Marcus Lemonis and Dippin' Dots owner Fischer Enterprises.
The company, which once sold four-inch, frosting-laden cupcakes for as much as $4.50 each, listed assets and liabilities of between $10 million and $50 million each in a filing made Friday in U.S. Bankruptcy Court in New Jersey.
In a statement, the investor group said it plans to provide Crumbs with financing to complete the Chapter 11 process and, subject to court approval, intends to acquire Crumbs' assets to create a new, privately held company that will reopen Crumbs stores.
The company's hoped-for savior has made a name for himself in bailing out distressed companies. In his TV show "The Profit," Mr. Lemonis invests his own money into struggling small businesses in an attempt to turn them around. He is the chief executive of retailer Camping World and owns several other dessert-focused companies that he said will play a role in any Crumbs revival.
"Our goal is to create a viable business model by making Crumbs the nation's 'sweet and snack' destination," Mr. Lemonis said in a statement.
Oklahoma energy executive Mark Fischer and his son Scott Fischer are behind Fischer Enterprises, which bought Dippin' Dots out of bankruptcy in 2012 and is a lender to Crumbs.
"Crumbs is known for its high-quality cupcakes, which will remain a mainstay in the new company but will be supplemented by a much improved product mix to broaden its appeal to a larger customer base," Scott Fischer, the chief operating officer of Fischer Enterprises, said in a statement.
Days before the Monday closure of its stores, Crumbs said in a regulatory filing that it had defaulted on $9.3 million in senior secured notes issued after entering into a loan agreement with Fischer in January.
Crumbs went public three years ago at the height of the gourmet-cupcake boom. Since then, its finances have worsened amid years of losses, a dwindling cash supply and a food craze that some say is petering out.
The Chapter 11 filing was made with the consent of Crumbs's board of directors, according to court filings.
Monday afternoon, less than a week after the Nasdaq Stock Market suspended trading of Crumbs shares, the New York-based company notified employees that it would be shutting down at the close of business.
Crumbs had roughly 48 stores in 10 states and the District of Columbia, according to the company's website, though the number of stores operating as of Monday may have been lower. The company had been closing underperforming stores for the past year, including nine closures at the end of 2013 and at least six in 2014, leaving employees without jobs.
"I'm now without a steady income," said Giovany Vasquez, who until Monday had been a part-time manager at a Crumbs shop in lower Manhattan. Mr. Vasquez, 22 years old, said he and his sister both worked at Crumbs stores to help support their family.
Crumbs got its start in 2003 with a shop on the Upper West Side of Manhattan, founded by a husband-and-wife team, Jason and Mia Bauer. A shell company bought Crumbs in 2011 and took it public that June.
But the popularity of high-end cupcakes embodied by chains such as New York's Magnolia Bakery and Los Angeles-based Sprinkles has waned in recent years, even as new players crowded into the field. Crumbs posted a loss of $18.2 million last year, layered on top of a $10.3 million loss in 2012, according to regulatory filings. Its cash on hand fell to $893,000 at the end of 2013, down from $6.3 million the prior year.
In one bright spot, the company reported an increase in net sales last year, to $47.2 million from $43 million in 2012.
The company went through a management change at the end of last year after then-President and Chief Executive Julian Geiger resigned. Its new chief executive, Edward Slezak a former Aéropostale executive who joined Crumbs in August 2013 as chief legal officer oversaw the creation of a licensing program to sell Crumbs-branded products in other stores, the closure of struggling locations, and other initiatives aimed at stemming the company's losses.
Mr. Slezak will remain with Crumbs throughout the bankruptcy process, the company said late Friday.
Write to Sara Randazzo at sara.randazzo@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
> Dow Jones Newswires
July 11, 2014 23:55 ET (03:55 GMT)
