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[video] Crumbs Sweetens Future With Credit Facility

Tickers in this article: CRMB

NEW YORK ( The Deal ) -- A few months after warning that it needed to raise financing to fund its cash flow needs, Crumbs Bake Shop   has obtained a $5 million senior secured credit facility, but the nation's largest cupcake store chain isn't going to open new stores.

It will continue closing underperforming ones and is exploring a strategic relationship with a formerly bankrupt ice cream maker.

The New York-based retailer known for its oversized cupcakes, which has 69 locations in 12 states and the District of Columbia, i s getting the credit facility from its nearly 15%-owner, Fischer Enterprises , which bought beaded ice cream maker Dippin' Dots  out of bankruptcy in 2012 and now wants to create synergies between the two holdings, Crumbs said on Wednesday.

For Crumbs, milking its relationship with Fischer isn't a bad idea. In the company's latest financial report, filed with the Securities and Exchange Commission on Nov. 14, Crumbs warned that it needed additional capital to fund its cash flow requirements.

Besides having only $1.66 million cash on its balance sheet as of Sept. 30, Crumbs reported a $9.52 million net loss for the first nine months of 2013. It also has a $20.195 million accumulated deficit.

Crumbs disclosed in the report for the third quarter that it had used $6.575 million in cash in the nine months ending Sept. 30 to open new stores. The filing noted that "management does not anticipate opening any new stores in the near future and has begun a process of closing underperforming stores."

Crumbs, which had $24.53 million in assets and $18.01 million in liabilities as of Sept. 30, sells a variety of cupcakes, cakes, cookies, other baked goods and beverages. With Dippin' Dots, which flash freezes its ice cream, Crumbs will explore synergies such as co-branding, cross-branding and distribution, said Scott Fischer, the president of Dippin' Dots and COO of Fischer Enterprises, in an e-mailed statement on Thursday.

"It is our hope that these possible synergies will allow opportunities that could result in a win-win situation for both companies," Fischer wrote. "While no specific plans have been developed or agreements entered into, we believe the areas of operation and sales concepts for the two companies are complementary and thereby could potentially result in increased market exposure for Dippin' Dots and Crumbs."

Fischer Enterprises, which is an investment firm founded by Mark Fischer, the CEO of Oklahoma City-based Chaparral Energy , has agreed to provide Crumbs with a $5 million loan to help it "implement the new business plan that Crumbs has been developing over the last two quarters," the Crumbs statement said.

The company has received $3 million of the loan and will receive another $1.5 million by April 1.