-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U+IMOb+xKLXTMyKnqYz9F4SB0uloUR2Riea+u5HvnsGBt5YwtfVWLXdLH91Gxa82 1tvffDrjVMq9VIZDcKyB+w== 0000950135-99-002834.txt : 19990519 0000950135-99-002834.hdr.sgml : 19990519 ACCESSION NUMBER: 0000950135-99-002834 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FANTASMA LLC CENTRAL INDEX KEY: 0001067354 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-JEWELRY, WATCHES, PRECIOUS STONES & METALS [5094] STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-61119-05 FILM NUMBER: 99629591 BUSINESS ADDRESS: STREET 1: 500 GEORGE WASHINGTON HWY CITY: SMITHFIELD STATE: RI ZIP: 02917 BUSINESS PHONE: 4012313800 MAIL ADDRESS: STREET 1: 500 GEORGE WASHINGTON HWY CITY: SMITHFIELD STATE: RI ZIP: 02917 10-Q 1 FANTASMA, LLC 1 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 April 3, 1999. [ ] 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 333-61119-05 FANTASMA, LLC ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 11-3340245 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 500 GEORGE WASHINGTON HIGHWAY SMITHFIELD, RI 02917 (Address of principal executive offices) (Zip code) (410)231-3800 (Registrant's telephone number, including area code) Indicate by checkmark 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. YES: [X] NO: [ ] Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. TITLE OF EACH CLASS OUTSTANDING AT MAY 18, 1999 ------------------- --------------------------- None None The registrant meets the conditions set forth in General Instruction H of Form 10-Q, as modified by grants of non-action relief to the registrant and unrelated third parties, and is therefore filing this form with the reduced disclosure format. 2 FANTASMA, LLC PART I. - FINANCIAL INFORMATION PAGE ITEM 1. CONDENSED FINANCIAL STATEMENTS Condensed Balance Sheets as of January 2, 1999 and April 3, 1999 3 Condensed Statements of Operations for the three months ended April 4, 1998 and April 3, 1999 4 Condensed Statements of Cash Flows for the three months ended April 4, 1998 and April 3, 1999 5 Notes to Condensed Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 10 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings 10 ITEM 2. Changes in Securities and Use of Proceeds 10 ITEM 3. Defaults Upon Senior Securities 10 ITEM 4. Submission of Matters to a Vote of Security Holders 10 ITEM 5. Other Information 10 ITEM 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 12 2 3 Fantasma, LLC (A Mostly Owned Subsidiary of AAI.FosterGrant, Inc.) Condensed Balance Sheets (In thousands)
ASSETS JANUARY 2, APRIL 3, 1999 1999 (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 104 $ 12 Accounts receivable less reserves of approximately $373 and $532 5,088 1,896 Inventories 3,878 3,599 Prepaid expenses and other current assets 203 267 ------- ------- Total current assets 9,273 5,774 ------- ------- Property and equipment, net 24 21 Other assets, net 4,357 4,254 ------- ------- Total assets $13,654 $10,049 ======= ======= LIABILITIES AND MEMBERS' EQUITY CURRENT LIABILITIES: Note payable to member $ 7,088 $ 5,946 Accounts payable and accrued liabilities 1,960 452 ------- ------- Total current liabilities 9,048 6,398 Members' Equity 4,606 3,651 ------- ------- Total liabilities and members' equity $13,654 $10,049 ======= =======
The accompanying notes are an integral part of these condensed financial statements 3 4 Fantasma, LLC (A Mostly Owned Subsidiary of AAI.FosterGrant, Inc.) Condensed Statements of Operations (In thousands) THREE MONTHS ENDED APRIL 4, APRIL 3, 1998 1999 (Unaudited) NET SALES $3,031 $1,677 COST OF GOODS SOLD 1,672 1,532 ------ ------ Gross profit 1,359 145 OPERATING EXPENSES: Selling 648 686 General and administrative 591 360 ------ ------ Income (loss) from operations 120 (901) Interest expense (103) (84) Other income, net -- 30 ------ ------ Net income (loss) $ 17 $ (955) ====== ====== The accompanying notes are an integral part of these condensed financial statements. 4 5 Fantasma, LLC (A Mostly Owned Subsidiary of AAI.FosterGrant, Inc.) CONDENSED STATEMENTS OF CASH FLOWS (In thousands)
THREE MONTHS ENDED APRIL 4, APRIL 3, 1998 1999 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 17 $ (955) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Depreciation and amortization 4 119 Changes in assets and liabilities - Accounts receivable 2,469 3,192 Inventories 64 279 Prepaid expenses and other current assets (32) (64) Accounts payable and accrued expenses (1,070) (1,508) ------- ------- Net cash provided by operating activities 1,452 1,063 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Increase in other assets -- (13) Purchases of property and equipment (2) -- ------- ------- Net cash used in investing activities (2) (13) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments under note payable to member (3,764) -- Advances payable to member 2,076 (1,142) ------- ------- Net cash used in financing activities (1,688) (1,142) ------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS (238) (92) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 238 104 ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ -- $ 12 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for- Interest $ 360 $ -- ======= =======
The accompanying notes are an integral part of these condensed financial statements. 5 6 FANTASMA, LLC NOTES TO FINANCIAL STATEMENTS Note 1 - Significant Accounting Policies (a) Interim Condensed Financial Statements The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosure required for complete financial statements are not included herein. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes of AAi.FosterGrant, Inc. ("AAi" or the "Company") and Fantasma LLC for the year ended January 2, 1999 as reported in the Company's Form 10-K filed with the SEC on April 2, 1999. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. The consolidated condensed balance sheet presented as of January 2, 1999 has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The results of operations for the period ended April 3, 1999 may not be indicative of the results that may be expected for the year ending January 1, 2000 or for any other future period. (b) Organization and Business Activity Fantasma LLC (Fantasma) was organized under the laws of the State of Delaware on August 22, 1996 and began business operations on September 1, 1996. Fantasma imports and wholesales licensed watches, clocks, and other novelties; and grants credit to customers located throughout the United States. Prior to September 1, 1996, Fantasma operated as a division of Overdrive Capital Corp. (formerly known as Good Stuff Corp.). Overdrive Capital Corp. (Overdrive) sold the division's operating assets to Fantasma LLC in exchange for a two-year, $3,764,366 note. Overdrive maintained a 67% ownership interest in Fantasma, with a former stockholder of Overdrive holding a 33% ownership interest. In June 1998, AAi acquired an 80% interest in Fantasma for approximately $4.1 million in cash. The remaining 20% interest in Fantasma is held by a previous member of Fantasma. As a result of the termination of the employment of this member in April 1999, the Company has the obligation to repurchase this interest for nominal consideration. Another employee of Fantasma has options to acquire up to a 2% interest in Fantasma and up to an additional 2% interest if certain earnings targets for Fantasma are met in 1999 and 2000. As of April 6 7 FANTASMA, LLC NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3, 1999, the exercise price of options to purchase member interests in Fantasma was equal to or greater than the fair market value; therefore no expense was recorded. (c) Inventory Inventories are stated at the lower of cost (first-in, first-out) or market and consist of finished goods for all years presented. Finished goods inventory consists of material and overhead. (d) Income Taxes Fantasma is treated as a partnership for federal and state income tax purposes, whereby the membership owners are taxed on their proportionate share of Fantasma's income. As a result, Fantasma has not provided for Federal income taxes. The provision for income taxes, if any, reflects New York City unincorporated Business Tax and New York State filing fees. Note 2 - Comprehensive Income Comprehensive net income was the same as net income for the periods presented. NOTE 3 - Segment Reporting Fantasma has adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, in the 1998 fiscal year. SFAS No. 131 establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS No. 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions now to allocate resources and assess performance. To date, Fantasma has viewed its operations and manages its business as principally one segment. 7 8 FANTASMA, LLC ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion may contain "forward-looking" statements and are subject to risks and uncertainties that could cause actual results to differ significantly from expectations. In particular, statements contained in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" section which are not historical facts, including, but not limited to, statements regarding the anticipated adequacy of cash resources to meet Fantasma's working capital and capital expenditure requirements and statements regarding the anticipated proportion of revenues to be derived from a limited number of customers, may constitute forward-looking statements. Although Fantasma believes the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors, which could cause actual results to differ materially from such expectations, are disclosed in Fantasma's Form 10-K filed with the SEC on April 2, 1999. OVERVIEW Fantasma designs, imports and wholesales licensed watches, clocks and other novelties to customers located primarily throughout the United States. Customers include mass merchandisers, department stores, chain drug stores, theme parks and private labels. Fantasma distributes products under numerous licensed names, including Winnie the Pooh(R), Sesame Street(R), the National Football League(R), and Peanuts(R). Approximately 63% of total net sales are generated from seven mass merchandisers during the first quarter of fiscal 1999. Fantasma outsources manufacturing for virtually all of its products to manufacturers in Asia with the remainder outsourced to independent domestic manufacturers. Costs associated with Fantasma's numerous royalty agreements, based on net sales, are classified in costs of goods sold. Accordingly, the two principal elements comprising Fantasma's cost of goods sold are the price of purchased manufactured goods and royalties. Fantasma believes outsourcing manufacturing allows it to reliably deliver competitively priced products to the retail market while retaining considerable flexibility in its cost structure. Operating expenses are comprised primarily of payroll, occupancy costs related to Fantasma's New York office and showroom, freight, depreciation and amortization. In June 1998, AAi acquired an 80% interest in Fantasma. The operating agreement under which Fantasma is managed provides AAi with sole voting rights on numerous significant matters. 8 9 FANTASMA, LLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage relationship to net sales of certain items included in Fantasma's Condensed Statements of Operations: THREE MONTHS ENDED APRIL 4, APRIL 3, 1998 1999 Net sales 100.0% 100.0% Cost of goods sold 55.2 91.3 ----- ----- Gross profit 44.8 8.7 Operating expenses 40.8 62.4 ----- ----- Income (loss) from operations 4.0 (53.7) Interest expense,net 3.4 (3.2) ----- ----- Net income (loss) 0.6% (56.9)% ===== ===== THREE MONTHS ENDED APRIL 3, 1999 COMPARED TO APRIL 4, 1998 Net Sales. Net sales were $1.7 million for the three months ended April 3, 1999 as compared to $3.0 million for the three months ended April 4, 1998, a decrease of 45% or $ 1.4 million. The decrease is primarily attributable to decreased sales of certain licensed analog watches in the first quarter of fiscal year ended 1998 as compared to the same period of the prior year. Gross Profit. Gross profit was $145,000 for the three months ended April 3, 1999 as compared to $1.4 million for the three months ended April 4, 1998 a decrease of $1.1 million. Gross profit as a percentage of net sales decreased to 9% for the three months ended April 3, 1999 from 45% for the three months ended April 4, 1998. The decrease is primarily due to increased promotional sales and increased royalty expenses due to a shift in product mix. Operating Expenses. Operating expenses were $1.0 million for the three months ended April 3, 1999 as compared to $1.2 million for the three months ended April 4, 1998. The decrease in operating expenses is primarily attributable to savings realized as a result of consolidating office and warehouse facilities partially offset by the amortization of intangible assets. 9 10 FANTASMA, LLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Interest Expense. Interest expense was $84,000 for the three months ended April 3, 1999 as compared to $103,000 for the three months ended April 4, 1998, a decrease of 18.4% or $ 19,000. This decrease is a result of a lower interest rate partially offset by a higher loan balance. Net Income (Loss). As a result of the factors discussed above, net loss was $955,000 for the three months ended April 3, 1999 as compared to net income of $17,000 for the three months ended April 4, 1998, a decrease of $ 972,000. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Omitted pursuant to General Instruction H of Form 10-Q (the Instructions). PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Omitted pursuant to the Instructions. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Omitted pursuant to the Instructions. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Omitted pursuant to the Instructions. ITEM 5. OTHER INFORMATION In April 1999, Roger Dryer, former president of the registrant, ceased his employment with FANTASMA. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EX-27.1 Financial Data Schedule 10 11 FANTASMA, LLC ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED) (b) Reports on Form 8-K The registrant filed no reports on form 8-K during the quarter ended April 3, 1999 11 12 FANTASMA, LLC 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 hereunto duly authorized. Fantasma, LLC (Registrant) Dated: MAY 18, 1999 /s/ Duane M. DeSisto ------------------------------------------ Duane M. DeSisto Assistant Secretary and Chief Financial Officer (Principal Financial Officer) 12 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED BALANCE SHEET AS OF APRIL 3, 1999 (UNAUDITED) AND THE CONDENSED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 3, 1999 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED IN FORM 10-K FOR THE TWELVE MONTHS ENDED JANUARY 2, 1999. 1,000 U.S. DOLLARS 3-MOS JAN-01-2000 JAN-02-1999 APR-03-1999 1 12 0 2,428 532 3,599 5,774 29 8 10,049 6,398 0 0 0 0 3,651 10,049 1,677 1,677 1,532 1,046 (30) 0 84 (955) 0 (955) 0 0 0 (955) 0 0
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