-----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, Ao/k/a9zyxuL/qOszLl0qzvv3NvYvqQNGMCcBhdIxtSa1VD/3Xmac9UkA0WEK028 BHVUDAl0yEl0HQ+X3HFXVw== 0001042910-00-000064.txt : 20000202 0001042910-00-000064.hdr.sgml : 20000202 ACCESSION NUMBER: 0001042910-00-000064 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991130 FILED AS OF DATE: 20000114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GERALD STEVENS INC/ CENTRAL INDEX KEY: 0000037525 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 410719035 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05531 FILM NUMBER: 507411 BUSINESS ADDRESS: STREET 1: 301 EAST LAS OLAS BLVD STREET 2: SUITE 300 CITY: FT LAUDERDALE STATE: FL ZIP: 33301 BUSINESS PHONE: 5615630263 MAIL ADDRESS: STREET 1: 301 EAST LAS OLAS BLVD STREET 2: SUITE 300 CITY: FT LAUDERDALE STATE: FL ZIP: 33301 FORMER COMPANY: FORMER CONFORMED NAME: FLORAFAX INTERNATIONAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SPOTTS FLORAFAX CORP DATE OF NAME CHANGE: 19740924 FORMER COMPANY: FORMER CONFORMED NAME: SPOTTS CORP DATE OF NAME CHANGE: 19671205 10-Q 1 QUARTERLY REPORT 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 November 30, 1999 or |_| 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: 0-05531 Gerald Stevens, Inc. -------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 41-0719035 -------- ---------- (State of Incorporation) (IRS Employer Identification No.) 301 East Las Olas Boulevard, Suite 300 Ft. Lauderdale, Florida 33301 ----------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (954) 713-5000 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) 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 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 |_| On January 10, 1999 the registrant had 45,255,769 outstanding shares of common stock, par value $.01 per share.
GERALD STEVENS, INC. INDEX PART I. FINANCIAL INFORMATION Page No. Item 1. Financial Statements Condensed Consolidated Balance Sheets as of November 30, 1999 and August 31, 1999 3 Condensed Consolidated Statements of Operations for the Three Months Ended November 30, 1999 and 1998 4 Condensed Consolidated Statement of Changes in Stockholders' Equity for the Three Months ended November 30, 1999 5 Condensed Consolidated Statements of Cash Flows for the Three Months ended November 30, 1999 and 1998 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 24 Signatures 25
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PART I. FINANCIAL INFORMATION GERALD STEVENS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) November 30, August 31, 1999 1999 -------------- ------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,996 $ 4,602 Accounts receivable, net of allowance for doubtful accounts of $1,990 and $1,872 at November 30, 1999 and August 31, 1999, respectively 15,424 10,074 Inventories 11,431 8,454 Prepaid and other current assets 4,799 2,653 -------------- ------------- Total current assets 33,650 25,783 -------------- ------------- PROPERTY AND EQUIPMENT, net 21,636 15,953 -------------- ------------- OTHER ASSETS: Intangible assets, net 148,488 129,897 Other 1,516 1,390 -------------- ------------- Total other assets 150,004 131,287 -------------- ------------- Total assets $ 205,290 $ 173,023 ============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 450 $ 2,009 Accounts payable 17,695 12,551 Accrued liabilities 17,291 15,567 Deferred revenue 2,073 2,164 -------------- ------------- Total current liabilities 37,509 32,291 -------------- ------------- LONG-TERM DEBT 26,740 4,340 -------------- ------------- OTHER 762 419 -------------- ------------- Total liabilities 65,011 37,050 -------------- ------------- COMMITMENTS AND CONTINGENCIES (Note 8) STOCKHOLDERS' EQUITY: Preferred stock, $10 par value, 600,000 shares authorized, none issued - - Common stock, $0.01 par value, 250,000,000 shares authorized, 44,995,216 and 44,011,401 shares issued and outstanding on November 30, 1999 and August 31, 1999, respectively 450 440 Additional paid-in capital 163,819 155,224 Accumulated deficit (22,374) (18,075) Treasury stock, 519,975 shares at cost (1,616) (1,616) -------------- ------------- Total stockholders' equity 140,279 135,973 -------------- ------------- Total liabilities and stockholders' equity $ 205,290 $ 173,023 ============== =============
The accompanying notes are an integral part of these condensed consolidated statements. 3
GERALD STEVENS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three Months Ended November 30, ------------------------------- 1999 1998 ---------- -------------- REVENUE: Product sales, net $ 37,457 $ 8,695 Service and other revenue 11,747 4,528 ---------- ------------- 49,204 13,223 ---------- ------------- OPERATING COSTS AND EXPENSES: Cost of product sales 14,007 3,848 Operating expenses 20,222 4,333 Selling, general and administrative expenses 18,877 5,359 Merger expenses - 85 ---------- ------------- 53,106 13,625 ---------- ------------- Operating loss (3,902) (402) ---------- ------------- OTHER INCOME (EXPENSE): Interest expense (394) (68) Interest income 16 107 Other (19) 30 ---------- ------------- (397) 69 ---------- ------------- Loss before provision (benefit) for income taxes (4,299) (333) PROVISION (BENEFIT) FOR INCOME TAXES - - ---------- ------------- Net loss $ (4,299) $ (333) ========== ============= BASIC LOSS PER SHARE $ (0.10) $ (0.01) ========== ============= DILUTED LOSS PER SHARE $ (0.10) $ (0.01) ========== ============= WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Basic 44,364 28,753 ========== ============= Diluted 44,364 28,753 ========== =============
The accompanying notes are an intergral part of these condensed consolidated statements. 4
GERALD STEVENS, INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) (In thousands) Common Stock Additional Par Paid-In Accumulated Treasury Shares Value Capital Deficit Stock Total -------- --------- ---------- ------------- --------- ---------- BALANCE, August 31, 1999 44,011 $ 440 $ 155,224 $ (18,075) $ (1,616) $ 135,973 Sale of common stock, net 234 2 662 - - 664 Common stock, options and warrants issued in acquisitions 750 8 7,933 - - 7,941 Net loss - - - (4,299) - (4,299) -------- --------- ---------- ------------- -------- ---------- BALANCE, November 30, 1999 44,995 $ 450 $ 163,819 $ (22,374) $ (1,616) $ 140,279 ======== ========= ========== ============= ======== ==========
The accompanying notes are an integral part of these condensed consolidated statements. 5
GERALD STEVENS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended November 30, ------------------------------- 1999 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (4,299) $ (333) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,914 432 Provision for doubtful accounts 76 - Changes in assets and liabilities, net of acquisitions: Accounts receivable (4,093) (1,200) Inventories (721) (206) Prepaid and other current assets (2,024) 542 Other assets (139) 427 Accounts payable 2,017 (195) Accrued liabilities 598 (37) Deferred revenue (136) - Other long-term liabilities 343 (228) ---------- ---------- Net cash used in operating activities (6,464) (798) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (5,441) (500) Payments for acquisitions, net of cash acquired (11,465) (20,560) ---------- ---------- Net cash used in investing activities (16,906) (21,060) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term debt (2,150) (1,071) Proceeds from issuance of common stock, net 664 20,698 Receipts from stock subscription receivables - 4,183 Proceeds from credit facility 46,130 - Payment of credit facility (23,880) - ---------- ---------- Net cash provided by financing activities 20,764 23,810 ---------- ---------- Net (decrease) increase in cash and cash equivalents (2,606) 1,952 CASH AND CASH EQUIVALENTS, beginning of period 4,602 7,148 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $ 1,996 $ 9,100 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 193 $ 18 ========== ========== Cash paid for income taxes $ - $ 30 ========== ========== SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES: Common stock, options and warrants issued in acquisitions $ 7,941 $ 17,986 ========== ========== Subscription receivable $ - $ (4,183) ========== ==========
The accompanying notes are an integral part of these condensed consolidated statements. 6 GERALD STEVENS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (ALL AMOUNTS AND RELATED DISCLOSURES APPLICABLE TO THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998 ARE UNAUDITED) 1. General and Summary of Significant Accounting Policies Organization and Operations Gerald Stevens, Inc. ("Gerald Stevens" or the "Company") is a leading integrated retailer and marketer of flowers, plants and complementary gifts and decorative accessories. We operate the largest company-owned network of floral specialty retail stores, with locations in 30 markets in the United States and Canada as of November 30, 1999. We are building a national brand and transforming the retail floral industry by integrating our operations throughout the floral supply chain, from product sourcing to delivery, and by managing every interaction with the customer, from order generation to order fulfillment. We own and operate our own import operation and have relationships with leading growers around the world. Our national sales and marketing division permits us, through multiple distribution channels, including the Internet, dial-up numbers and direct mail, to serve customers who do not visit or phone our retail stores. Basis of Presentation The accompanying condensed consolidated financial statements of the Company have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The information in this report should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1999, as amended (the "Form 10-K"). The unaudited condensed consolidated financial statements included herein reflect all material adjustments (consisting only of normal, recurring adjustments) which are, in the opinion of the Company's management, necessary for a fair presentation of the information for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Interim results of operations for the three months ended November 30, 1999 and 1998 are not necessarily indicative of operating results for the full fiscal years or for any future periods. 7
Intangible Assets Intangible assets consisted of the following: November 30, August 31, 1999 1999 ------------- ------------ (In thousands) Goodwill $ 146,462 $ 126,999 Other 5,002 4,926 --------- --------- 151,464 131,925 Less: Accumulated amortization (2,976) (2,028) --------- --------- $ 148,488 $ 129,897 ========= =========
Goodwill consists of the excess of purchase price over the fair value of assets and liabilities acquired in acquisitions accounted for under the purchase method of accounting. (See Note 2.) Included in goodwill for both periods is $2.0 million from an acquisition prior to October 31, 1970 which is not required to be amortized. Otherwise, goodwill is amortized over periods ranging from 20 to 40 years, which management believes is a reasonable life in light of the characteristics present in the floral industry, such as the significant number of years that the industry has been in existence, the continued trends by consumers in purchasing flowers for many different occasions and the stable nature of the customer base. Other intangible assets consist primarily of customer lists, telephone numbers and contractual rights related to yellow page advertisements that were acquired by the Company from floral businesses that have discontinued their operations. Other intangible assets are amortized over periods ranging from 5 to 10 years. Amortization expense related to goodwill and other intangible assets was $0.9 million and $0.2 million for the three months ended November 30, 1999 and 1998, respectively. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of, the Company periodically analyzes the carrying value of its goodwill and other intangible assets to assess recoverability from future operations using an undiscounted projected cash flow approach. Impairments are recognized in operating results to the extent that carrying value exceeds fair value. Income Taxes The Company has significant operating loss carryforwards available to offset future taxable income. Because of the uncertainty of future period 8 income, the Company has provided a full valuation allowance against its related net deferred tax asset accounts. Accordingly, the Company has recorded no income tax provision or benefit for the three months ended November 30, 1999 and 1998. Gerald Stevens' future effective tax rate will depend on various factors, including the mix between state taxable income or losses, amounts of nondeductible goodwill, and the timing of adjustments to the valuation allowance on our net deferred tax assets. Seasonality The floral industry has historically been seasonal, with higher revenue generated during holidays such as Thanksgiving, Christmas, Valentine's Day, Easter and Mother's Day. Conversely, during the summer months, floral retailers tend to experience a decline in revenue. In addition, the floral industry in general may be affected by economic conditions and other factors, including floral promotions, competition and the weather conditions in key flower-growing regions. Comprehensive Income The Company has no components of comprehensive income. Accordingly, net loss equals comprehensive net loss for all periods presented. Impact of Recently Issued Accounting Standards In June 1999, the Financial Accounting Standards Board ("FASB") issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement No. 133. SFAS No. 137 defers for one year the effective date of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 will now apply to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. The Company will adopt SFAS No. 133 as required for its first quarterly filing of fiscal year 2001. We believe the adoption of this Statement will not have a material effect on the earnings and financial position of the Company. 2. Acquisitions From September 1, 1999 through November 30, 1999, we acquired 34 retail florist businesses located in existing markets, plus one new market in the United States and one new market in Canada for aggregate consideration of $18.9 million, consisting of $11.0 million in cash and 749,993 shares of our common stock valued at share prices ranging from $9.49 to $11.53 per share. All of the acquisitions were accounted for as business combinations under the purchase method of accounting and accordingly, are included in our condensed consolidated financial statements from the date of acquisition. During the first quarter of fiscal 2000, we also acquired certain intangible assets related to floral businesses that discontinued their 9 operations. The acquired intangible assets consisted principally of customer lists, telephone numbers and yellow page advertising contractual rights. Aggregate consideration paid for all such intangible asset acquisitions was $53,000 in cash. Our strategic plan contemplates the closing or relocation of a number of our acquired retail stores within each of our targeted market areas. An assessment of which retail stores to close or relocate for all acquisitions consummated prior to December 31, 1998 has been completed. As a result of such assessment, additional purchase liabilities of approximately $1.6 million for costs associated with the shut down and consolidation of certain acquired retail stores were recorded (considering existing contractual lease obligations and management's estimate of future operating lease costs). For acquisitions consummated after December 31, 1998, management is in the process of completing such assessement. We expect to complete our assessemnt of retail store closures and relocations for all acquisitions consummated through August 31, 1999 by February 2000. Once management finalizes its assessment of the remaining retail stores to be closed or relocated, additional purchase liabilities are expected to be recognized. During the three months ended November 30, 1999, $10,000 was paid and charged against the established liability. The preliminary purchase price allocation for businesses acquired during the first quarter of fiscal year 2000 under the purchase method of accounting is as follows:
November 30, 1999 ----------------- (in thousands) Tangible assets (includes cash acquired of $328) $ 5,309 Intangible assets 18,702 Liabilities (5,039) ------------ $ 18,972 ============
The pro forma results of operations, assuming each of the acquisitions described above was consummated as of the beginning of the periods presented, and each of the fiscal year 1999 acquisitions was consummated as of the beginning of the three month periods ended November 30, 1999 and 1998,respectively are as follows: 10
For the Three Months Ended November 30, 1999 1998 ------------- --------------- (In thousands, except per share data) Revenue $ 55,439 $ 55,026 ============= ============== Net income (loss) $ (4,130) $ 66 ============= ============== Diluted net income (loss) per share $ (0.09) $ 0.00 ============= ==============
3. Property and Equipment, Net Property and equipment consisted of the following:
November 30, August 31, 1999 1999 ------------ ------------- (In thousands) Land, building and leasehold improvements $ 9,918 $ 8,502 Furniture, fixtures and equipment 5,293 3,497 Computer hardware and software 8,677 6,036 Communication systems 1,834 1,526 Vehicles 1,334 925 ------------ ------------- 27,056 20,486 ------------ ------------- Less: Accumulated depreciation and amortization (5,420) (4,533) ------------ ------------- $ 21,636 $ 15,953 ============ =============
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4. Accrued Liabilities Accrued liabilities consisted of the following: November 30, August 31, 1999 1999 ---------- ---------- (In thousands) Salaries and benefits $ 3,441 $ 3,787 Wire service 2,975 3,104 Store closure costs 1,622 1,632 Acquired business consideration 1,916 1,459 Other 7,337 5,585 ---------- --------- $ 17,291 $ 15,567 ========== =========
5. Debt Notes Payable Notes payable at November 30, 1999 and August 31, 1999 were $0.5 million and $2.0 million, respectively. The effective interest rates associated with these notes range from 7.00% to 10.12%. Notes payable for both periods consist principally of mortgage notes and installment notes for vehicles, equipment, and leasehold improvements assumed by the Company in connection with acquisitions completed during the latter part of each fiscal quarter. The Company pays substantially all these notes in full periodically, following the close of acquisitions. Long-Term Debt At November 30, 1999, outstanding borrowings under the Company's $40 million credit facility were $26.7 million and the Company was in compliance with all debt covenants. The effective Eurodollar borrowing rate and base rate as of November 30, 1999 were 8.38% and 9.5%, respectively. 6. Stockholders' Equity From September 1, 1999 to November 30, 1999, the Company issued 749,993 shares of its common stock with an aggregate value of $7.9 million to fund the non-cash portion of the total consideration for acquisitions completed during the period. Additionally, a total of 233,822 shares of common stock were issued for total consideration of $0.7 million in connection with stock options and warrants exercised during this same period. 12 7. Earnings Per Share Basic and diluted earnings per share in the accompanying condensed consolidated statements of operations are based upon the weighted average shares outstanding during the applicable period. The impact of common stock equivalents has not been included for the loss periods presented as they are anti-dilutive. The components of basic and diluted earnings per share are as follows:
For the Three Months Ended November 30, 1999 1998 --------- -------- (In thousands) Basic Average Shares Outstanding 44,364 28,753 Common Stock Equivalents - - --------- -------- Diluted Average Shares Outstanding 44,364 28,753 ========= ======== Common stock equivalents not included in the calculation of diluted earnings per share because their impact is antidilutive 2,177 2,005 ========= ========
8. Commitments and Contingencies Supply Agreement On October 1, 1998, the Company entered into a five-year supply agreement with certain flower farms (the "Farms"). The agreement requires that the Farms provide to the Company a certain percentage of their flowers on a consignment basis. The Farms must produce and deliver a minimum number of stems for the Company during the growing year commencing on October 1, and ending on September 30. Each July, during the term of the agreement, the parties will meet to establish the minimum stem obligation for each flower type for the upcoming growing year. The Company has no obligation to pay for any flowers it receives from the Farms unless and until such flowers are sold by the Company. Business Combinations The Company may be required to make additional payments of up to $1.1 million to the sellers of three of the businesses that it acquired. Because the outcome of the contingencies underlying these payments are not yet determinable, the payments have not been recorded as a component of the cost of these acquisitions at November 30, 1999. 13 Litigation There are various claims, lawsuits, and pending actions against Gerald Stevens incident to the operations of its businesses. It is the opinion of management, after consultation with counsel, that the ultimate resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. 9. Business Segments Gerald Stevens operates in two principal business segments: retail and order generation. The Company's reportable segments are strategic business units that offer different products and services. The Company evaluates the performance of its segments based on revenue and operating income. The Company's retail segment consists of the retail florists acquired as well as its import business. The Company's order generation business consists primarily of Florafax, National Flora, Calyx & Corolla and on-line businesses. There is no material intersegment revenue. The following table presents financial information regarding the Company's different business segments as of and for the three months ended November 30:
1999 1998 --------- -------- (In thousands) Net revenue: Retail $ 39,137 $ 9,467 Order generation 10,067 3,756 -------- ------- $ 49,204 $13,223 ======== ======= Operating income (loss): Retail $ 1,208 $ 539 Order generation (266) 734 Corporate (4,844) (1,675) -------- ------- $ (3,902) $ (402) ======== ======= Identifiable assets: Retail $179,848 $48,158 Order generation 16,513 11,259 Corporate 8,929 5,680 -------- ------- $205,290 $65,097 ======== =======
14 10. SUBSEQUENT EVENTS Business Combinations From December 1, 1999 through January 10, 2000, we acquired 15 retail florist businesses for total consideration of $3.6 million, consisting of $2.0 million in cash and 195,139 shares of our common stock valued at prices ranging from $7.44 to $10.35 per share. 15 Item 2. Management's Discussion And Analysis ------------------------------------ Of Financial Condition And Results Of Operations ------------------------------------------------ General Gerald Stevens, Inc. ("Gerald Stevens," or the "Company"), formerly known as Florafax International, Inc., is a leading integrated retailer and marketer of flowers, plants, and complementary gifts and decorative accessories. The Company operates the largest company-owned network of floral specialty retail stores with locations in 30 markets in the United States and Canada as of November 30, 1999. We are building a national brand and transforming the retail floral industry by integrating our operations throughout the floral supply chain, from product sourcing to delivery, and by managing every interaction with the customer, from order generation to order fulfillment. The Company owns and operates its own import operation and has relationships with leading growers around the world. Our national sales and marketing division permits us, through multiple distribution channels including the Internet, dial-up numbers and direct mail, to serve customers who do not visit or phone our retail stores. On April 30, 1999, Gerald Stevens and Gerald Stevens Retail, Inc. ("Gerald Stevens Retail"), completed a merger accounted for as a pooling of interests. This Management's Discussion and Analysis of Financial Condition and Results of Operations gives retroactive effect to the merger, and should be read in conjunction with our accompanying unaudited condensed consolidated financial statements. In the merger, we issued approximately 28.1 million shares of our common stock to the stockholders of Gerald Stevens Retail, resulting in the former Gerald Stevens Retail stockholders owning approximately 77.5% of the shares of our common stock immediately following the merger. Forward-Looking Statements This Quarterly Report on Form 10-Q, as well as our other reports filed with the SEC and our press releases and other communications, contain forward-looking statements which reflect the Company's current views with respect to future events and financial performance. Forward-looking statements include all statements regarding our expected financial position, results of operations, cash flows, dividends, financing plans, strategy, budgets, capital and other expenditures, competitive positions, growth opportunities, benefits from new technology, plans and objectives of management, and markets for stock. In addition to general economic, business and market conditions, we are subject to risks and uncertainties that could cause such forward-looking statements to prove incorrect, including those stated in the "Risk Factors" section of the Form 10-K and the following: o Our ability to accomplish our anticipated growth strategies and to integrate acquired businesses. o Our need to improve our information systems. 16 o Unexpected liabilities incurred in our acquisitions. o Our dependence on additional capital for growth. o A decline in customer discretionary spending. o Weather, governmental regulations, transportation problems or other factors that could prevent us from obtaining sufficient products when needed. o Our ability to maintain business relationships within the industry, including relationships with wire services, wholesalers, growers, importers and other florist shops. o Our ability to develop relationships with supermarkets, mass merchants, department stores and other businesses to expand our store-in-store operations. o Our ability to develop a profitable Internet business. Acquisitions In October and November, 1998, we entered the retail distribution segment of the floral industry by acquiring 10 retail florist businesses located in 9 markets throughout the United States for aggregate consideration of $37.2 million, consisting of $20.8 in cash and 4,644,514 shares of our common stock valued at prices ranging from $3.52 to $4.44 per share. During the period from December 1, 1998 to August 31, 1999 we acquired an additional 59 retail florist businesses located in existing markets and 19 new markets throughout the United States for aggregate consideration of $61.5 million, consisting of $46.1 million in cash and 2,416,420 shares of our common stock valued at prices ranging from $4.94 to $15.30 per share. During the three-month period ended November 30, 1999, we acquired an additional 34 retail florist businesses located in existing markets and two new markets for total consideration of $18.9 million, consisting of $11.0 million in cash and 749,993 shares of our common stock valued at prices ranging from $9.49 to $11.53 per share. Additionally, in October 1998, we acquired AGA Flowers, Inc., a floral import business, for total consideration of $2.9 million, consisting of $1.5 million in cash and 417,078 shares of our common stock valued at $3.52 per share. In March 1999, we acquired National Flora, a floral order generation business, for total consideration of $19.7 million, consisting of $10.0 million in cash and 1,552,500 shares of our common stock valued at $6.30 per share. In July 1999, we acquired Calyx & Corolla, Inc., a catalog and Internet-based floral order generation business for total consideration of $11.6 17 million, consisting of approximately $.1 million in cash, 934,435 shares of our common stock valued at $10.80 per share, and the assumption of stock option and warrant obligations which converted into rights to acquire 152,081 shares of our common stock at exercise prices ranging from $0.36 to $9.44 per share. All of the acquisitions discussed in the preceding paragraphs were accounted for as business combinations under the purchase method of accounting and accordingly, have been included in the consolidated financial statements from the date of acquisition. During the year ended August 31, 1999 and the three months ended November 30, 1999, we also acquired certain intangible assets related to floral businesses that discontinued their operations. The acquired intangible assets consisted principally of customer lists, telephone numbers and yellow page advertising contractual rights. Aggregate consideration paid for all such intangible asset acquisitions during the year ended August 31, 1999 was $4.5 million, consisting of $2.8 million in cash and 159,823 shares of our common stock at a price of $10.14 per share. Aggregate consideration paid for intangible asset acquisitions during the three months ended November 30, 1999 was $53,000 in cash. Results of Operations Upon consummation of our merger with Gerald Stevens Retail, we redefined the manner in which we evaluate and report the operating results of our newly combined business for internal purposes. In this regard, we have chosen to break down our component businesses into two segments: (1) Retail and (2) Order Generation. The Retail segment consists of all retail and import businesses and operations while the Order Generation segment consists of all non-retail order generation and fulfillment businesses and operations. The tables below present the results of operations through operating income (loss) of Gerald Stevens' Retail and Order Generation segments and Corporate for the three months ended November 30, 1999 and 1998. The Retail segment 1999 results include the operating results of the 69 retail florist businesses and one import business acquired during the year ended August 31, 1999 and the post-acquisition operating results of the 34 retail florist businesses acquired during the three months ended November 30, 1999. The Retail segment 1998 results include only the post-acquisition operating results of the initial 10 retail florist businesses and one import business acquired by the Company during October and November 1998. The Order Generation segment 1999 and 1998 results include the operating results of the Company's wire service, credit and charge card processing and The Flower Club business units. The Order Generation segment 1999 results additionally include the operating results of National Flora and Calyx & Corolla and the operating results of Gerald Stevens' recently formed Internet-based order generation businesses. Prior to the acquisition of its initial retail florist and import businesses on October 1, 1998, the Company operated only in the Order Generation segment. Results in the three-month period ended November 30, 1999, compared to the three-month period ended November 30, 1998, were significantly impacted by (i) a full three months of operations in the 1999 period of the businesses acquired on October 1, 1998 and (ii) acquisitions of businesses after November 30, 1998. 18 The tables below present the results of operations through operating income (loss) of the Company's Retail and Order Generation segments and Corporate for the three months ended November 30, 1999 and 1998, respectively.
Three Months Ended November 30, 1999 --------------------------------------------------------- (In thousands) Order Retail Generation Corporate Total ------ ---------- --------- ----- Revenue: Product sales, net $ 35,184 $ 2,273 $ $ - $ 37,457 Service and other revenue 3,953 7,794 - 11,747 --------------------------------------------------------- 39,137 10,067 - 49,204 Operating Costs and Expenses: Cost of product sales 13,174 833 - 14,007 Operating expenses 20,222 - - 20,222 Selling, general and administrative expenses 4,533 9,500 4,844 18,877 --------------------------------------------------------- 37,929 10,333 4,844 53,106 --------------------------------------------------------- Operating income (loss) $ 1,208 $ (266) $ (4,844) $(3,902) =========================================================
Three Months Ended November 30, 1998 --------------------------------------------------------- (In thousands) Order Retail Generation Corporate Total ------ ---------- --------- ----- Revenue: Product sales, net $ 8,695 $ - $ - $ 8,695 Service and other revenue 772 3,756 - 4,528 --------------------------------------------------------- 9,467 3,756 - 13,223 Operating Costs and Expenses: Cost of product sales 3,848 - - 3,848 Operating expenses 4,333 - - 4,333 Selling, general and administrative expenses 747 3,022 1,590 5,359 Merger expenses - - 85 85 --------------------------------------------------------- 8,928 3,022 1,675 13,625 --------------------------------------------------------- Operating income (loss) $ 539 $ 734 $ (1,675) $ (402) =========================================================
Retail Segment. Product sales within the Retail segment include sales of floral and gift products at retail businesses and sales of floral product by the Company's import business. Service and other revenue within the Retail segment is generated at the Company's retail businesses and consists of delivery and other service fees charged to customers and commissions on orders transmitted to and fulfilled by other retail florists. Total Retail segment revenue for the three months ended November 30, 1999 increased by $29.7 million to $39.1 million, compared to the same period in the prior year due principally to revenue generated at newly acquired businesses. 19 Cost of product sales within the Retail segment includes the cost of products sold at retail businesses and at the Company's import business. Cost of product sales for the three months ended November 30, 1999 increased by $9.3 million to $13.2 million compared to the same period in the prior year due principally to cost of goods sold incurred by newly acquired businesses. Retail segment gross margins as a percentage of total revenue for the three months ended November 30, 1999 increased by 6.9% to 66.3% compared to the same period in the prior year. The majority of the gross margin percentage increase is related to a period-to-period change in mix between revenue at the Company's retail stores and revenue at its import business. As a result of acquisitions, higher margin retail store revenue has increased significantly more than lower margin import revenue over the past year. To a lesser extent, gross margins have improved due to the recent implementation of various national product purchasing programs at the Company's retail stores, including the sourcing of floral product from the Company's import business. Retail segment operating expenses for the three months ended November 30, 1999 increased by $15.9 million to $20.2 million compared to the same period in the prior year due principally to operating expenses incurred by newly acquired businesses. Retail segment operating expenses as a percentage of total revenue for the three months ended November 30, 1999 increased by 5.9% to 51.7% compared to the same period in the prior year. The majority of the percentage increase is related to the aforementioned period-to-period change in mix between the Company's retail store and import businesses and the fact that operating expenses as a percentage of revenue are significantly higher at the Company's retail stores compared to its import business. Retail segment selling, general and administrative expenses for the three months ended November 30, 1999 increased by $3.8 million to $4.5 million compared to the same period in the prior year due principally to expenses incurred by newly acquired businesses. Retail segment selling, general and administrative expenses as a percentage of total revenue for the three months ended November 30, 1999 increased by 3.7% to 11.6% compared to the same period in the prior year due principally to increases in wire commission, advertising and insurance expenses. Order Generation Segment. Product sales within the Order Generation segment for the three months ended November 30, 1999 reflect $2.3 million of sales made by Calyx & Corolla. Service and other revenue within the Order Generation segment consists of order generation commissions and processing fees, wire service dues and fees, and credit card processing fees. Total Order Generation segment service and other revenue for the three months ended November 30, 1999 increased by $4.0 million to $7.8 million compared to the same period in the prior year. This significant increase in revenue is due primarily to our acquisition of National Flora, which generated $3.0 million in revenue during the current period. Additionally, continued increases in The Flower Club revenue, revenue from the Company's recently formed Internet-based order generation business unit, and other revenue generated at Calyx & Corolla also contributed to the current period's service and other revenue increase. Cost of goods sold within the Order Generation segment for the three months ended November 30, 1999 reflect $.8 million of costs incurred at Calyx & Corolla. Calyx & Corolla gross margins as a percentage of total revenue was 64.4% during the current period. 20 Total Order Generation segment selling, general and administrative expenses for the three months ended November 30, 1999 increased by $6.5 million to $9.5 million compared to the same period in the prior year. Selling, general and administrative expenses incurred by National Flora and Calyx & Corolla during the current period totaled $4.6 million and represent a significant portion of the current period expense increase. Additionally, start up costs of approximately $1.4 million were incurred in connection with the Company's recently formed Internet-based order generation business unit resulting in higher current period expenses. To a lesser extent, expense increases related to the expansion of The Flower Club business unit and expenses related to our acquired Flowerlink website also contributed to the higher current period expense levels. Corporate. Total Corporate selling, general and administrative expenses for the three months ended November 30, 1999 increased by $3.3 million to $4.8 million compared to the same period in the prior year due primarily to expenses incurred at Gerald Stevens' expanded corporate headquarters in Ft. Lauderdale, Florida and to the significant expansion of the Company into retail and other related segments of the floral industry. We plan to significantly expand our business over the next several years, largely through the acquisition of retail florist businesses. We also expect Corporate expenses to increase over this time period, due principally to integration costs planned to be incurred in connection with the development and implementation of centralized operational and financial systems and the establishment of the Gerald Stevens brand name. Interest. Interest expense for the three months ended November 30, 1999 was $.4 million compared to interest expense of $68,000 in the same period of the prior year. The increase in interest expense during the current period is due to increased borrowings under the Company's revolving credit facilities to finance the expansion of its business activities. Income Taxes. The Company has significant operating loss carryforwards available to offset future taxable income. Because of the uncertainty of future period income, the Company has provided a full valuation allowance against its related net deferred tax asset accounts. Accordingly, the Company has recorded no income tax provision or benefit for the three months ended November 30, 1999 and 1998. Gerald Stevens' future effective tax rate will depend on various factors, including the mix between state taxable income or losses, amounts of nondeductible goodwill, and the timing of adjustments to the valuation allowance on our net deferred tax assets. Liquidity and Capital Resources We had cash and cash equivalents of $2.0 million and $4.6 million as of November 30, 1999 and August 31, 1999, respectively. Cash and cash equivalents decreased by $2.6 million during the three months ended November 30, 1999 and increased by $2.0 million during the three months ended November 30, 1998. The major components of these changes are discussed below. Cash used in operating activities for the three months ended November 30, 1999 was $6.5 million compared to $.8 million for the same period last year. Cash usage increased during the current period as the result of higher net losses related to the Company's expansion into the retail distribution and Internet segments of the floral industry and increased seasonal working capital needs. 21 The cash portion of the purchase prices for all acquisitions completed by the Company, net of cash acquired, during the three months ended November 30, 1999 and 1998 aggregated $11.5 million and $20.6 million, respectively, as more fully described in the preceding section entitled "Acquisitions." Capital expenditures during the three months ended November 30, 1999 totaled $5.4 million compared to capital expenditures of $.5 million in the same period of the prior year. Capital expenditures primarily include computer hardware, software and communication system expenditures related to the expansion of our retail and order generation businesses. During the three months ended November 30, 1999, the Company issued a total of 233,822 shares of its common stock for total consideration of $.7 million in connection with the exercise of stock options and warrants. During the three months ended November 30, 1998, we issued 6,185,137 shares of our common stock in private placement transactions for total consideration of $20.6 million, net of placement fees and expenses, and also collected a $4.2 million stock subscription receivable balance related to the initial capitalization of Gerald Stevens Retail. During the three months ended November 30, 1999, the Company borrowed a net amount of $22.3 million on its existing revolving credit facility and repaid $2.1 million of debt incurred in connection with certain retail florist acquisitions. A total of $1.1 million of debt related to a prior revolving credit facility, which was terminated in June 1999, was repaid during the three months ended November 30, 1998. The outstanding balance on the Company's revolving credit facility at November 30, 1999 was $26.7 million. We are currently in discussions with a number of financial institutions regarding their participation in a proposed syndication of our bank credit facility. In this regard, we intend to increase the borrowing limits under our credit facility from $40.0 million to approximately $50.0 to $75.0 million. However, there can be no assurance that we will be successful in increasing such borrowing limits, or that any such increase can be made on terms comparable to our current credit facility. We believe that cash flows from operating activities, in addition to borrowings from our current credit facilities, will provide adequate funds to meet the ongoing cash requirements of our existing business over the next 12 months. However, failure to increase our current bank borrowing limits or otherwise raise additional capital could limit our ability to acquire new businesses or otherwise expand our existing business in accordance with our current operating plan. Further, we cannot provide assurance that the occurrence of unplanned events, including temporary or long-term adverse changes in global capital markets, will not interrupt or curtail our short-term or long-term growth plans. Year 2000 Issue The Company had successfully completed all Year 2000 remediation, replacement, and testing prior to January 1, 2000. Through January 10, 2000, the Company has experienced no Year 2000 problems that affected business operations. The Company's business partners have reported no Year 2000 problems. At this 22 time, the Company does not expect any future problems related to Year 2000 to materialize. However, the Company will continue to monitor the systems for potential issues over the next six months through normal operational and support processes. Impact of Recently Issued Accounting Standards In June 1999, The Financial Accounting Standards Board ("FASB") issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement No. 133. Statement No. 137 defers for one year the effective date of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 will now apply to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS Statement No. 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. The Company will adopt SFAS No. 133 as required for its first quarterly filing of fiscal year 2001. We believe the adoption of this Statement will not have a material effect on the earnings and financial position of the Company. 23 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. - ------- --------------------------------- (a) Exhibits. The following are being filed as exhibits to this Report: -- Non-plan Option Agreement, dated October 15, 1999, between Gerald Stevens, Inc. and Robert L. Johnson -- financial data schedule (b) Reports on Form 8-K. We filed no Reports on Form 8-K during the quarter ended November 30, 1999 and to date in the following quarter. 24 SIGNATURE --------- 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. GERALD STEVENS, INC. -------------------- (Registrant) Date: January 14, 2000 By /s/ Albert J. Detz -------------------------------- Albert J. Detz Senior Vice President and Chief Financial Officer (Principal Accounting Officer) 25 Gerald Stevens, Inc. Quarterly Report on Form 10-Q for the quarter ended November 30, 1999 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 10.1 Non-plan Option Agreement, dated October 15, 1999, between Gerald Stevens, Inc. and Robert L. Johnson 27 Financial Data Schedule 26 EX-10.1 2 NON-PLAN OPTION AGREEMENT Gerald Stevens, Inc. Non-Plan Option Agreement Name of Optionee: Robert L. Johnson Date of Grant: October 15, 1999 Number of Option Shares: 2,500 Exercise Price per Share: $10.4375 This Option is granted on the above date (the "Date of Grant") by Gerald Stevens, Inc. (the "Company") to the person named above (the "Optionee"), upon the following terms and conditions: 1. Grant of Option. The Company grants to the Optionee an option to purchase, on the terms and conditions stated herein, the number of shares specified above (the "Option Shares") of the Company's common stock, par value $0.01 per share (the "Common Stock"), at the exercise price per share specified above (the "Exercise Price"). 2. Period of Option and Right to Exercise. This Option shall become exercisable as to 25% of the total number of Option Shares on the first anniversary of the Date of Grant. This Option shall become exercisable as to an additional 25% of the total number of Option Shares on each subsequent anniversary of the Date of Grant. Once the right to purchase shares has accrued, such shares may thereafter be purchased at any time, or in part from time to time, until the termination date of this Option. Subject to the foregoing, and subject to subsections (a), (b) and (c) of this Section 2 which provide for earlier termination of the Option, the Option shall terminate upon the expiration of ten (10) years from the Date of Grant (the "Expiration Date"). In no event shall this Option be exercised after the Expiration Date. If the Optionee ceases to be a Director of the Company, the Option shall vest and terminate as follows: (a) Removal for Cause. If the Optionee is removed from office for cause, all Options granted hereunder shall immediately cease vesting and shall immediately terminate. (b) Death or Disability. If during the Optionee's service as a director the Optionee dies or is no longer able to serve as a director due to disability, the Option (whether or not exercisable immediately prior to the Optionee's death or disability) shall become immediately exercisable in full and may be exercised at any time prior to the Expiration Date or within one (1) year after the date of death or disability, whichever first occurs. Whether a director's service is terminated due to disability shall be determined at the sole discretion of the board of directors. If the Optionee dies after ceasing to be a director and during a period when the Option or any part thereof is exercisable, then that part of the Option which was exercisable by the Optionee immediately prior to the Optionee's death may be exercised at any time prior to the Expiration Date, or within one (1) year after the date of death, whichever first occurs. (c) Cessation of Directorship for Other Reasons. If the Optionee ceases to be a Director of the Company for any reason other than removal for cause, death, or disability, the Option shall immediately cease vesting and any part thereof which was exercisable by the Optionee immediately prior to ceasing to be a Director may be exercised at any time prior to the Expiration Date or within three (3) months after the date the Optionee ceases to be a Director, whichever first occurs. 3. Exercise. To the extent this Option is exercisable, it may be exercised by the Optionee or the legal representative of the Optionee or the legal representative of the Optionee's estate or the permitted transferee of the Optionee. Once this Option becomes exercisable, it may thereafter be exercised, wholly or in part, at any time prior to the Expiration Date (or such earlier date as specified herein). 4. Acceleration. Upon the occurrence of any of the following events prior to the Expiration Date, this Option shall become immediately and fully exercisable: (a) a change of control of the Company. For the purposes of the Option Agreement, a "Change of Control" shall mean: (i) the acquisition by any person, other than New River Capital Partners L.P. or its affiliates, of voting shares of the Company, if, as a result of the acquisition, such person, or any "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, of which such person is a part, owns at least 20% of the outstanding voting shares of the Company; or (ii) a change in the composition of the board of directors of the Company such that within any period of two consecutive years, persons who (1) at the beginning of such period constitute the board or (2) become - 2 - directors after the beginning of such period and whose election, or nomination for election by the stockholders of the Company, was approved by a vote of at least two-thirds of the persons who were either directors at the beginning of such period or whose subsequent election or nomination was previously approved in accordance with this clause (2), cease to constitute at least a majority of the board; or (b) a merger or consolidation with another corporation or entity, and the Company is not the surviving corporation; or (c) a sale by the Company of all of substantially all of the assets of the Company; or (d) the dissolution or liquidation of the Company. 5. Payment for Shares. Payment for shares purchased upon exercise of this Option shall be made in full at the time of exercise. Payment of the Exercise Price shall be made in cash, or by delivering Common Stock having a fair market value at least equal to the Exercise Price, or a combination of Common Stock and cash. The fair market value of a share of Common Stock on any date of reference shall mean the "Closing Price" (as defined below) of the Common Stock on the business day immediately preceding such date, unless the board of directors or an appropriate committee thereof in its sole discretion shall determine otherwise. For the purpose of determining fair market value, the "Closing Price" of a share of Common Stock on any business day shall be (i) if the Common Stock is listed or admitted for trading on any United States national securities exchange, or if actual transactions are otherwise reported on a consolidated transaction reporting system, the last reported per share sale price of the Common Stock on such exchange or reporting system, as reported in any newspaper of general circulation, (ii) if the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), or any similar system of automated dissemination of quotations of securities prices in common use, the last reported per share sale price of the Common Stock on such system or, if sales prices are not reported, the mean between the closing high bid and low asked quotations for such day of the Common Stock on such system, as reported in any newspaper of general circulation or (iii) if neither clause (i) or (ii) is applicable, the mean between the high bid and low asked quotations for the Common Stock as reported by the National Quotation Bureau, Incorporated if at least two securities dealers have inserted both bid and asked quotations for the Common Stock on at least five of the ten preceding days. If neither (i) , (ii) or (iii) above is applicable, then fair market value shall be determined in good faith by the board or directors or an appropriate committee thereof, and the board or such committee may determine such fair market value as of any date that is not more than one year prior to the date for which such determination is being made. - 3 - Payment in shares of Common Stock shall be made by delivering to the Company certificates, duly endorsed for transfer, representing shares of Common Stock having an aggregate fair market value (determined as aforesaid) on the date of exercise equal to that portion of the Exercise Price which is to be paid to the Company in Common Stock. Whenever payment of the Option Price would require delivery of a fractional share, the Optionee shall deliver the next lower whole number of shares of Common Stock, and a cash payment shall be made by the Optionee for the balance of the Exercise Price. 6. Method of Exercise. This Option may be exercised only by written notice given to the Company, which specifies the number of Option Shares which the holder of the Option elects to purchase, the number of Option Shares which the holder is paying for in cash and the number of Option Shares which the holder is paying for in shares of Common Stock of the Company. Such written notice shall be accompanied by a check payable to the order of the Company for the cash portion of the purchase price and, if applicable, by the delivery of certificates representing shares of Common Stock of the Company duly endorsed and otherwise in proper form for transfer to the Company of such number of shares of Common Stock as are required to equal the fair market value of the Option Shares being paid for in stock. Upon each exercise of this Option, the Company, as promptly as practicable, will mail or deliver to the person exercising this Option a certificate or certificates representing the shares then purchased. 7. Transferability. Unless otherwise permitted by the board of directors, this Option is not assignable or transferable other than by will, the laws of descent and distribution, or the terms of a qualified domestic relations order, as defined in the Internal Revenue Code of 1986 as amended, or Title I of the Employee Retirement Income Security Act, or the rules thereunder. During the Optionee's lifetime, this Option may be exercised only by the Optionee or his or her guardian or other legal representative, or the permitted transferee of the Optionee. 8. Provision for Taxes. It shall be a condition to the Company's obligation to issue or reissue shares of Common Stock upon exercise of this Option that the Optionee pay, or make provision satisfactory to the Company for payment of, any federal or state income or other taxes which the Company is obligated to withhold or collect with respect to the issuance or reissuance of such shares. 9. Listing And Registration. The Company, in its discretion, may postpone the issuance and delivery of shares, upon exercise of this Option, until completion of such stock exchange listing, or registration, or other qualification of such shares under any federal or state law, rule, or regulation, as the Company may consider appropriate. The Company may require any person exercising this Option to make such representations and to furnish such information as the Company may consider - 4 - appropriate in connection with the issuance of the shares in compliance with applicable law. 10. Adjustment. In the event the outstanding shares of Common Stock of the Company are increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or another corporation, through reorganization, merger, consolidation, liquidations, recapitalization, reclassification, stock split-up, combination of shares, or dividend payable in stock of the class of shares which is subject to this Option, appropriate adjustment in the number and kind of shares as to which this Option or portion thereof then unexercised shall be exercisable, and in the Exercise Price, shall be made such that the Optionee's proportionate interest under this Option shall be maintained. 11. Notices. Any notice hereunder by the holder of this Option shall be given to the Company in writing and such notice and any payment hereunder shall be deemed duly given or made only upon receipt thereof at the Company's principal office in Fort Lauderdale, Florida, or at such other place as the Company may designate by written notice to the holder of this Option. Any notice or other communication hereunder to the holder of this Option shall be in writing and shall be deemed duly given if mailed or delivered to the holder at such address as he or she may have on file with the Company. 12. Stockholder Rights. The holder of this Option shall have no rights as a stockholder with respect to any shares covered by this Option until the holder of this Option becomes a stockholder of record with respect to such shares. 13. Governing Law. This Option shall be governed by, construed and enforced in accordance with the internal laws of the state of incorporation of the Company, and, where applicable, the federal laws of the United States. IN WITNESS WHEREOF, the Company has caused this Option to be executed in duplicate. Accepted: Gerald Stevens, Inc. __________________________ By:__________________________ Name:_____________________ Name:________________________ - 5 - EX-27 3 FDS --
5 1,000 3-Mos Aug-31-2000 Sep-01-1999 Nov-30-1999 1,996 0 17,414 (1,990) 11,431 33,650 27,056 (5,420) 205,290 37,509 0 0 0 450 139,829 205,290 49,204 49,204 14,007 14,007 39,099 0 394 (4,299) 0 (4,299) 0 0 0 (4,299) (0.10) (0.10)
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