-----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, VsMydGKQrxq/0dpcDHvA+bBeqMILysJjVUKdULCMWrufDrUBWQIZMspVBuwrKVNA KHIkpEU+0udm794ksmPM8g== 0000912057-96-025635.txt : 19961113 0000912057-96-025635.hdr.sgml : 19961113 ACCESSION NUMBER: 0000912057-96-025635 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAM & LIBBY INC CENTRAL INDEX KEY: 0000880241 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 943060101 STATE OF INCORPORATION: CA FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19616 FILM NUMBER: 96659035 BUSINESS ADDRESS: STREET 1: 58 WEST 40TH STREET 3RD FLR CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2129444830 MAIL ADDRESS: STREET 1: 58 WEST 40TH ST CITY: NEW YORK STATE: NY ZIP: 10018 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 28, 1996 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 0-19616 UTOPIA MARKETING, INC. (Exact name of registrant as specified in its charter) CALIFORNIA 94-3060101 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 58 WEST 40TH STREET, NEW YORK, NEW YORK 10018 (Address of principal executive offices, including zip code) (212) 944-4830 (Registrant's telephone number, including area code) 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 No X ------- ------- As of November 1, 1996 there were 13,741,367 shares of Common Stock outstanding. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UTOPIA MARKETING, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) _______________________________________________________________________________ SEPTEMBER 28, DECEMBER 30, 1996 1995 (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 144 $ 128 Due from factor, less allowance of $700 4,937 -- Accounts receivable, less allowances of $258 and $157 908 2,427 Due from shareholders -- 168 Merchandise inventories 225 5,692 Prepaid expenses 30 212 -------- -------- Total current assets 6,244 8,627 Property and equipment, net 171 581 Other assets 25 267 -------- -------- TOTAL ASSETS $ 6,440 $ 9,475 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Due to factor $ -- $ 1,684 Accounts payable 1,274 4,985 Accrued expenses 308 967 Other current liabilities -- 2 -------- -------- Total current liabilities 1,582 7,638 -------- -------- LONG-TERM OBLIGATIONS 62 91 -------- -------- SHAREHOLDERS' EQUITY: Common stock 15 11 Additional paid-in capital 32,883 30,780 Accumulated deficit (28,102) (28,390) Deferred compensation -- (655) -------- -------- Total shareholders' equity 4,796 1,746 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,440 $ 9,475 -------- -------- -------- -------- See notes to condensed consolidated financial statements. -2- UTOPIA MARKETING, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT PER SHARE DATA, UNAUDITED) _______________________________________________________________________________
THREE MONTHS ENDED NINE MONTHS ENDED, ------------------------------ ------------------------------ SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28, September 30, 1996 1995 1996 1995 Net revenue $ 7,034 $12,688 $24,344 $34,918 Cost of sales 7,010 8,013 20,788 23,550 ------- ------- ------- ------- Gross profit 24 4,675 3,556 11,368 Selling, general and administrative expense (2,720) (3,595) (7,958) (9,094) Sale of trademark, net 4,100 4,100 ------- ------- ------- ------- Operating income (loss) before extraordinary item, interest and taxes 1,404 1,080 (302) 2,274 Interest expense (194) (418) (648) (751) ------- ------- ------- ------- Income (loss) before income taxes and extraordinary item 1,218 662 (950) 662 Income taxes 50 30 50 30 ------- ------- ------- ------- Net income (loss) before extraordinary item $ 1,160 $ 632 $(1,000) $ 1,493 ------- ------- ------- ------- ------- ------- ------- ------- Extraordinary gain, net of income taxes 1,288 1,288 ------- ------- ------- ------- Net income $ 2,448 $ 632 $ 288 $ 1,493 ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) per share before extraordinary income $ .09 $ .06 $ (.07) $ .13 Extraordinary income per share .09 .09 ------- ------- ------- ------- Net income per share $ .18 $ .06 $ .02 $ .13 ------- ------- ------- ------- ------- ------- ------- ------- Weighted average shares outstanding 13,741 11,386 13,741 11,379 ------- ------- ------- ------- ------- ------- ------- -------
See notes to condensed consolidated financial statements. -3- UTOPIA MARKETING, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 28, 1996 AND JULY 1, 1995 (IN THOUSANDS, UNAUDITED) _______________________________________________________________________________ NINE MONTHS ENDED, SEPTEMBER 28, SEPTEMBER 30, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 288 $ 1,493 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 244 318 Deferred compensation expense 655 545 Changes in assets and liabilities: Due from factor, net (6,621) (104) Accounts receivable 1,519 (351) Due from shareholder 168 -- Merchandise inventories 5,467 (5,372) Prepaid expenses 182 353 Other assets 236 -- Accounts payable and accrued expenses (4,370) 2,778 Other current liabilities (2) (18) ------- ------- Net cash used by operating activities (2,234) (358) CASH FLOWS FROM INVESTING ACTIVITIES: Net loss on disposal (purchase) of property and equipment 166 (152) Refund of other assets 6 -- ------- ------- Net cash provided by (used in) investing activities 172 (152) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term obligations (29) (56) Proceeds from issuance of common stock, net 2,107 38 ------- ------- Net cash provided by (used in) financing activities 2,078 (18) ------- ------- NET INCREASE (DECREASE) IN CASH 16 (528) CASH: Beginning of period 128 683 ------- ------- End of period $ 144 $ 155 ------- ------- ------- ------- See notes to condensed consolidated financial statements. -4- UTOPIA MARKETING, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NINE-MONTH PERIODS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995 (UNAUDITED) _______________________________________________________________________________ 1. SALE OF TRADEMARK On July 2, 1996, the Company entered into an agreement with Maxwell Shoe Company Inc. (the "Purchaser" or "Maxwell") to sell all worldwide rights to the Company's trademarks, trade names and intellectual property rights free and clear of all liens, mortgages, encumbrances and security interests for $5.5 million in cash. In August 1996, the Company received $5.3 million. The balance of $.2 million is being held in escrow until April 1997. The Purchaser will not assume any of the Company's liabilities or obligations. On September 11, 1996 the Company changed its name to Utopia Marketing, Inc. The Company is undecided as to the nature of its future operations, however, management is considering various investment alternatives. 2. SUMMARY OF ACCOUNTING POLICIES The accompanying unaudited condensed consolidated financial statements have been prepared from the records of the Company without audit and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary to fairly present the Company's financial position at September 28, 1996 and the results of its operations and its cash flows for the nine-month periods ended September 28, 1996 and September 30, 1995. The condensed consolidated balance sheet as of December 30, 1995, presented herein, has been prepared from the audited consolidated balance sheet of the Company. Accounting policies followed by the Company are described in Note 1 to the audited consolidated financial statements for the year ended December 30, 1995. As permitted by the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted for the purposes of these condensed consolidated interim financial statements. The condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, for the year ended December 30, 1995. The results of operations for the three- and nine-month periods ended September 28, 1996 are not necessarily indicative of the results to be expected for any other period or for the full year. 3 COMPOSITION AND CONVERSION AGREEMENT At June 26, 1996, the Company had approximately $4.9 million of accounts payable with two of its major vendors. On that date, the Company entered into an agreement with those vendors whereby the vendors agreed to forgive $1.3 million of indebtedness and convert $2.0 million of indebtedness to 2.6 million shares of common stock, $.001 par value, at a conversion debt purchase price of $.75 per share. -5- The remaining aggregate debt due to these vendors of $1.6 million was paid in the quarter ended September 28, 1996. ****** -6- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL The following discussion of the Company's results of operations for the three-and nine-month periods ended September 28, 1996 and September 30, 1995 includes the consolidated results of operations of Sam & Libby, Inc. and its three wholly-owned subsidiaries, Sanders Importacao E. Exportacao Ltda. ("Sam & Libby Brazil"), Sam & Libby (HK) Limited, ("Sam & Libby Hong Kong"), and Sam & Libby Outlets, Inc. The Hong Kong subsidiary was liquidated in connection with the Company's discontinued apparel operation. In the fourth quarter of 1995, the Company terminated operations in Brazil. RESULTS OF OPERATIONS NET REVENUE Net revenue for the three months and nine months ended September 28, 1996 decreased 45% and 30%, respectively, compared to the same period of last year. For the three month period, sales declined because of the Company's sale of its trademarks and the resultant sale of lower priced inventory, as well as the poor reception of the product line by customers and the inability to obtain sufficient financing for the production of goods ordered by customers. GROSS PROFIT Gross profit as a percentage of net revenue for the three months ended September 28, 1996 was 0.3% compared to 36.8% for the same period of 1995. This steep decline is due to the significant off-price sales incurred by the Company to reduce its inventory position, additional inventory markdowns to net realizable value, and the effect of allocating fixed production costs over a smaller sales base. These factors caused the gross margin as a percentage of sales for the nine months ended September 28, 1996 and September 30, 1995, respectively, to reduce to 14.6% from 32.6%. SALE OF TRADEMARK The company has sold all worldwide rights to the Company's trademarks, trade names and intellectual property rights for $5.5 million. The Company's current operations are limited to collecting its receivables and selling the balance of its inventory. Management is considering various investment alternatives, such as either acquiring a business or commencing a new business. In connection with the sale of its trademarks, the Company has recognized various reserves, expenses and loss on disposal of approximately $1.4 million. These adjustments include the acceleration of the Deferred Compensation because of the change of control (as defined) that occurred ($.3 million), the write-off of the unamortized portion of trademark costs previously capitalized ($.1 million), loss on assets disposed ($.2 million), additional warehouse fees ($.2 million), additional professional fees ($.2 million) and additional bad debt expense ($.4 million). -7- SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative (SG&A) expense decreased for the three- and nine-month periods ended September 28, 1996 and September 30, 1995, respectively, due to an overall reduction of expense levels, principally the reduction of payroll expense, partially offset by the additional reserves for collectibility of certain assets. SG&A as a percentage of sales increased to 38.7% from 28.3% for the three-month period and increased to 32.7% from 26.0% for the nine month period because the benefit of the overall reduction of expense levels was limited by the decreased sales base. INTEREST EXPENSE Interest expense for the three months and nine months ended September 28, 1996 was $194,000 and $418,000 compared to $648,000 and $751,000 for the same period of last year. This decrease in interest expense is related primarily to the payoff of the Company's factor advance with the proceeds of the Maxwell transaction. This payoff eliminated the Company's factor advance and consequently significantly reduced interest expense. For the nine month period, the decrease for the last three months was partially offset by advances received from the Company's factor to meet working capital requirements in the first six months. In addition, the Company's borrowing rate increased due to its overadvance position. Factor advances were significantly lower throughout the first six months of 1995 as the Company maintained funds sufficient to meet working capital needs. EXTRAORDINARY GAIN During the three months ended September 28, 1996, the Company recognized $1.3 million of extraordinary income for the forgiveness of debt agreed to by two major vendors in connection with the composition and conversion agreement. That agreement included the debt forgiveness ($1.3 million) and the conversion of $2.0 million of indebtedness to 2.6 million shares of common stock, $.001 par value, at a conversion debt purchase price of $.75 per share. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of cash for the nine months ended September 28, 1996 was from the sale of inventory and conversion of debt to equity, as well as the sale of the trademark. This cash was used to decrease payables, increase the balance due from factor, and increase cash balances. On May 31, 1996, the Board of Directors authorized the Company to enter into an agreement with Maxwell Shoe Company Inc. (the "Purchaser" or "Maxwell") to sell all worldwide rights to Sam & Libby's trademarks, trade names and intellectual property rights free and clear of all liens, mortgages, encumbrances and security interests for $5.5 million in cash. The Purchaser will not assume any of the Company's liabilities or obligations. In August 1996, the Company received $5.3 million. The balance of $.2 million is being held in escrow until April 1997. In connection with the sale of its trademark, the Company changed its name to Utopia Marketing, Inc. At June 26, 1996, the Company had approximately $4.9 million of accounts payable with two of its vendors. On that date, the Company entered into an agreement with those vendors whereby the vendors agreed to forgive $1.3 million of indebtedness and to convert $2.0 million of indebtedness to 2.6 million shares of common stock, $.001 par value, at a conversion debt purchase price of $.75 per share. At June 29, 1996, the Company recorded the conversion of debt to equity. The remaining aggregate debt due to these vendors of $1.6 million was paid in August 1996. -8- The Company has not decided on the nature of its future operations subsequent the sale of its trademark. However, the Company is considering various investment alternatives, such as either acquiring a business or commencing a new business. The Company's continued existence is dependent upon its ability to maintain sufficient liquidity during 1996 to acquire a successful business or commence a successful new business. Management's plans to improve its liquidity to have sufficient cash for its various investment alternatives include: i) reducing inventory levels by sale of existing inventory, and ii) collection of existing receivables. The Company believes it can improve its liquidity to have sufficient cash for a successful investment alternative. Management believes execution of those steps will provide sufficient liquidity for its to continue as a going concern in its present form. Accordingly, the consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern in its present form. However, there can be no assurance that all of these steps, if successfully completed, can improve the Company's liquidity and that the investment alternative will be successful. -9- UTOPIA MARKETING, INC. PART II. OTHER INFORMATION _______________________________________________________________________________ ITEMS 1 AND 2. NOT APPLICABLE ITEM 3. DEFAULTS UPON SENIOR SECURITIES ITEMS 4 AND 5. NOT APPLICABLE -10- UTOPIA MARKETING, INC. SIGNATURES _______________________________________________________________________________ Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned thereto duly authorized. UTOPIA MARKETING, INC. (Registrant) Date: November 11, 1996 _________________________________________ Kenneth Sitomer Chief Operating Officer Chief Financial Officer -11- EX-27.1 2 EXHIBIT 27.1 (FDS)
5 1,000 9-MOS DEC-28-1996 JUN-30-1996 SEP-28-1996 144 0 6803 958 225 6244 1490 1319 6440 1582 0 0 0 15 4781 6440 24344 24344 20788 7958 0 0 648 (950) 50 (1,000) 0 1,288 0 288 .02 0
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