-----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, UvDZWFg0RwoeDoJ2CZM8ZZoqpTZay1W9yrndXdYTnmI89wV4SCS6qcx8jtcuErRD uo6Z548mZeaMfgP5I5JysQ== 0000891554-96-000604.txt : 19960923 0000891554-96-000604.hdr.sgml : 19960923 ACCESSION NUMBER: 0000891554-96-000604 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960920 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOLAR MATES INC CENTRAL INDEX KEY: 0000940183 STANDARD INDUSTRIAL CLASSIFICATION: OPHTHALMIC GOODS [3851] IRS NUMBER: 112396918 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-89752-A FILM NUMBER: 96632769 BUSINESS ADDRESS: STREET 1: 8125 25TH COURT E CITY: SARASOTA STATE: FL ZIP: 34243 BUSINESS PHONE: 9413593599 MAIL ADDRESS: STREET 1: 800 THIRD AVENUE CITY: NNEW YORK STATE: NY ZIP: 10022 10QSB 1 QUARTERLY REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB [ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 1996 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from: to: Commission file number: 0-26022 Solar-Mates, Inc. (Exact Name of Small Business Issuer as specified in its charter) New York 11-2396918 (State or other jurisdiction (IRS Employer Identi- of incorporation or organization) fication Number) 8125 25th Court East Sarasota, Florida 34243 (Address of principal executive offices) (941) 359-3599 (Issuer's telephone number, including area code) Check whether the Issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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: APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. YES: NO: APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 2,384,000 shares of Common Stock, $.001 par value, as of August 12, 1996. Transitional Small Business Disclosure Format. YES: NO: X Solar-Mates, Inc. Index Part I ------ Item 1. Financial Statements Consolidated Balance Sheet as of June 30, 1996 3 Consolidated Statements of Operations and Retained Earnings (Deficit) for the Six Months and Three Months Ended June 30, 1996 and 1995 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1996 and 5 1995 Notes to Consolidated Financial Statements 6 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 11 Part II ------- Item 4 Submission of Matters to a Vote of Security Holders 12 - 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Solar-Mates, Inc. Consolidated Balance Sheets June 30, 1996 (Unaudited) ASSETS Current Assets: Cash ..................................................... $ 514,760 Trading securities ....................................... 1,070,521 Other marketable securities .............................. 284,878 Accounts receivable - less allowance for doubtful accounts of $100,000 ........................... 2,755,159 Inventories .............................................. 3,073,833 Prepaid expenses ......................................... 433,522 ---------- Total current assets .................................. 8,132,673 Fixed assets - net of accumulated depreciation .............. 441,641 Other assets ................................................ 493,713 ---------- $9,068,027 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable - bank ...................................... $1,500,000 Note payable - stockholder ............................... 183,697 Advances from stockholders ............................... 88,372 Accounts payable ......................................... 1,560,536 Other current liabilities ................................ 620,461 ---------- Total current liabilities ............................. 3,953,066 Notes payable - stockholder ................................. 80,014 Long-term debt .............................................. 47,751 Commitments and contingencies ............................... -- Stockholders' equity: Preferred stock, 1,000,000 shares authorized ................ -- Common stock, $.001 par value, 10,000,000 shares authorized, 2,384,000 shares issued and outstanding ................. 2,384 Additional paid in capital .................................. 4,264,276 Retained earnings ........................................... 720,536 ---------- Total stockholders' equity ............................ 4,987,196 ---------- $9,068,027 ========== See accompanying notes to financial statements 3 Solar-Mates, Inc. Consolidated Statements of Operations and Retained Earnings (Deficit) For The Six Months and Three Months Ended June 30, 1996 and 1995 (Unaudited)
Six Months Ended Three Months Ended 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Net sales .................................................. $ 5,541,273 $ 4,572,405 $ 2,417,364 $ 2,177,308 Cost of sales .............................................. 3,563,727 3,055,151 1,511,348 1,448,295 ----------- ----------- ----------- ----------- Gross profit ............................................... 1,977,546 1,517,254 906,016 729,013 ----------- ----------- ----------- ----------- Operating expenses: Selling expenses .......................................... 883,424 376,110 517,503 198,931 General and administrative expenses ....................... 649,590 543,682 334,233 263,286 ----------- ----------- ----------- ----------- 1,533,014 919,792 851,736 462,217 ----------- ----------- ----------- ----------- Income from operations ..................................... 444,532 597,462 54,280 266,796 Other (expense): Interest expense .......................................... (140,428) (155,956) (28,168) (66,823) ----------- ----------- ----------- ----------- Income before income taxes ................................. 304,104 441,506 26,112 199,973 Provision for income taxes Current ................................................... 94,400 (8,400) ----------- ----------- ----------- ----------- Net income ................................................. 209,704 441,506 34,512 199,973 Retained earnings (deficit) - beginning of period .......... 603,198 (1,074,140) 686,025 (832,607) S-corporation distribution ................................. (92,365) ----------- ----------- ----------- ----------- Retained earnings (deficit) - end of period ............... $ 720,537 $ (632,634) $ 720,537 $ (632,634) =========== =========== =========== =========== Per share information: Weighted average shares outstanding ....................... 2,384,000 1,280,000 2,384,000 1,280,000 =========== =========== =========== =========== Net income per share ...................................... $ 0.09 $ 0.34 $ 0.01 $ 0.16 =========== =========== =========== =========== Pro forma net income Net income ................................................ $ 441,506 $ 199,973 Pro forma provision for income taxes: Long-term debt ............................................. 163,000 73,600 ----------- ----------- Pro forma net income ...................................... $ 278,506 $ 126,373 =========== =========== Pro forma income per share ................................ $ 0.22 $ 0.10 =========== ===========
See accompanying notes to financial statements 4 Solar-Mates, Inc. Consolidated Statements of Cash Flows For The Six Months Ended June 30, 1996 and 1995 (Unaudited)
1996 1995 ----------- ----------- Cash flows from operating activities ......................................... $ 351,895 $ 1,235,655 Cash flows from investing activities: Purchase of trading securities ............................................. (8,374) Acquisition of patents and trademarks ...................................... (4,644) (8,867) (Acquisition) disposition of other assets ................................. (13,183) 700 Purchase of fixed assets ................................................... (163,663) (35,482) ----------- ----------- Net cash used by investing activities .................................. (189,864) (43,649) ----------- ----------- Cash flows from financing activities: Decrease in accounts receivable stockholders ............................... 45,215 8,190 Long term borrowing ........................................................ 24,324 Principal payments on notes payable ........................................ (79,752) (606,237) S corporation distribution ................................................. (92,365) -- Repayments on advances from stockholders ................................... (8,949) -- Offering cost .............................................................. (15,000) (127,820) (Increase) in deferred offering cost ....................................... -- (348,107) ----------- ----------- Net cash used by financing activities .................................. (126,527) (1,073,974) ----------- ----------- Net increase (decrease) in cash .............................................. 35,504 118,032 Beginning - cash balance ..................................................... 479,256 18,301 ----------- ----------- Ending - cash balance ........................................................ $ 514,760 $ 136,333 =========== ===========
See accompanying notes to financial statements 5 Solar-Mates, Inc. Notes to Consolidated Financial Statements (Unaudited) Note A. Basis of presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and Item 310(b) of Regulation SB. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements of the Company as of December 31, 1995 and 1994 and for the two years then ended, including notes thereto. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Solartechnics (HK) Ltd. Intercompany transactions and balances have been eliminated in consolidation. Note B. Inventory Inventory consisted principally of finished goods. Note C. Commitments and Contingencies Concentration of credit risk/major customer During the six month periods ended June 30, 1996 and 1995 the Company made sales to Wal-Mart Stores, Inc. in the amounts of $3,557,000 and $3,444,000 respectively. During the three month ended June 30, 1996 and 1995 the Company made sales to Wal-Mart Stores, Inc. in the amounts of $1,283,000 and $1,327,000 respectively Approximately $1,146,000 (42%) of the accounts receivable at June 30, 1996 are due from Wal-Mart Stores, Inc. and are unsecured. This 6 Solar-Mates, Inc. Notes to Consolidated Financial Statements (Unaudited) (Continued) customer is a major national retailer and the Company has not experienced collection problems with this customer. Note E. Income taxes Prior to the completion of its public offering the Company had elected to be treated as an "S" Corporation under the provisions of the Internal Revenue Code and state statutes. Under these provisions no income taxes are incurred on a corporate level. Instead, shareholders of the Company include their pro-rata share of income or loss on their individual income tax returns. The provision for income taxes for 1996 and the pro forma provision for income taxes for 1995 have been computed in accordance with Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes. There are no material differences between financial statement income and taxable income. The amounts shown for income taxes in the statements of operations differ from amounts that would be derived from computing income taxes at federal statutory rates (34%) primarily as a result of state income taxes net of the federal benefit (3%). Subsequent to the completion of the public offering of the Company's common stock in August 1995, the Company became subject to corporate income taxes. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Prior to the 1980's, the Company manufactured its own sunglasses for sale to the wholesale trade. As manufacturers in the Far East began playing greater roles in the sunglass industry in the late 1970's, the Company began importing its products and in 1980 discontinued its manufacturing operations completely. Since 1978, the Company has focused primarily on the sale of sunglasses and sunglass products to mass merchandisers such as large retail chain stores. In the late 1980's, the Company began developing programs for mass merchants designed to enhance their sale of sunglasses. The Company continually adds new products and develops new marketing programs for its product lines. In late 1992, the Company introduced its line of Solar*X(R) sunglasses, which feature a ground and polished lens, comparable to optical quality sunglasses, at popular prices. This product is currently the predominant line of the Company and has contributed significantly to the sales growth of the Company. The Company continues to introduce new products. Recently the Company introduced a higher priced line of sunglasses under the brand name H2Optix(R). The Company is not marketing this line to mass merchants but rather to specialty retailers. This is intended to reduce the Company's dependence on its current customer base. The Company expects its Solar*X(R) line of sunglasses to remain its predominant line during the introduction of H2Optix(R) and other new product lines which may be developed. S Corporation Status and Pro Forma Adjustments From its inception until closing of its initial public offering in August 1995 (the "Termination Date"), the Company had been treated for federal and certain state tax purposes as an S Corporation under the Internal Revenue Code and comparable state tax laws. As a result, the Company's earnings through the day preceding the Termination Date have been taxed, with certain exceptions, for federal and certain state income tax purposes directly to the Company's shareholders. Since the Termination Date, the Company is no longer treated as an S Corporation and accordingly, is fully taxable pursuant to federal and state income tax laws. The following discussion gives pro forma retroactive effect to the termination of the Company's S Corporation status as if the Company had been taxed as a C Corporation for the relevant periods discussed. Results of Operations Net sales increased 21% from $4,572,405 for the six months ended June 30, 1995 to $5,541,273 for the six months ended June 30, 8 1996, and increased 11% from $2,177,308 for the three months ended June 30, 1995 to $2,417,364 for the three months ended June 30, 1996. These increases were due primarily to the introduction of new products including the Company's H2Optix(R) line of sunglasses. In 1996 the Company began aggressively marketing this line. Sales from the H2Optix(R) line were approximately $450,000 and $318,000 for the six months and three months ended June 30, 1996, respectively. Additionally, approximately $578,000 of the increase for the six months ended June 30, 1996 was due to sales of the Company's Outa Limitz(TM) line of sunglasses which did not exist during the same period in 1995; $976,000 of the increase resulted from increased activity of Solar*X(TM). However, the increase in revenues for such period was offset by a decrease of approximately $1,086,000 in sales of Bonjour(R), a brand no longer marketed by the Company. Approximately $318,000 of the increase for the three months ended June 30, 1996 was due to sales from H2Optix(R); $325,000 of the increase resulted from sales of the Company's Outa Limitz(TM) line of sunglasses; revenues were offset by and a decrease of approximately $487,000 in sales of Bonjour(R). Selling expenses increased by $507,314 or 135%, from $376,110 for the six months ended June 30, 1995 to $883,424 for the six months ended June 30, 1996 and increased by $318,572 or 160% from $198,931 for the three months ended June 30, 1995 to $517,503 for the three months ended June 30, 1996. The increase in both the six month and three month periods resulted primarily from increased advertising and marketing cost associated with the launch of H2Optix(R). The Company anticipates continued increases in selling expenses related to H2Optix(R) during the remainder of 1996. General and administrative expenses increased by $105,908 or 19%, from $543,682 for the six months ended June 30, 1995 to $649,590 for the six months ended June 30, 1996 and increased by $70,947 or 27% from $263,286 for the three months ended June 30, 1995 to $334,233 for the three months ended June 30, 1996. The increase in both the six month and three month periods resulted primarily from increased personnel cost associated with the general growth of the Company. The Company's net interest expenses decreased $15,528 or 10% from $155,956 for the six months ended June 30, 1995 to $140,428 for the six months ended June 30, 1996 and decreased $38,655 or 58% from $66,823 for the three months ended June 30, 1995 to $28,168 for the three months ended June 30, 1996. The decreases resulted primarily from interest earned on investment of the proceeds of the Company's public offering and the reduction of debt. Liquidity and Capital Resources The Company is financing its operations primarily through the proceeds of an initial public offering completed in August 1995, 9 its cash flow and revolving line of credit. The Company has a revolving line of credit in the amount of $1,500,000 from SunTrust Bank (the "Credit Facility"). Interest on outstanding loans under the Credit Facility accrue at a rate equal to 1.5% above the prime rate. The Credit Facility is secured by a lien on all of the Company's assets. Pursuant to the Credit Facility, the Company may borrow up to 70% of accounts receivable under 61 days old and up to 25% of the Company's inventory to a maximum of $1,500,000. Advances under the facility have been used for general working capital purposes. The Credit Facility is guaranteed, jointly and severally, by certain shareholders of the Company. The Company's cash flow requirements are greatest during the fourth quarter of each year primarily as a result of inventory acquisition and the introduction of new product lines for the upcoming sunglass season which traditionally occurs in the later part of the fourth quarter. The Company believes that cash flow generated from operations, supplier credit and the Credit Facility will be sufficient to satisfy its requirements. To the extent that such sources are not sufficient, the Company may be required to obtain short-term loans as it has done in the past. The Company's working capital decreased from $4,357,962 at December 31, 1995 to $4,170,607 at June 30, 1996. This resulted primarily from purchase of assets utilized in the growth of the business, the reduction of debt and an "S" corporation distribution in respect of the 1995 earnings and profits. The Company purchased capital assets of approximately $164,000 during the six month period ended June 30, 1996 and does not anticipate that it will incur any significant capital expenditures during the remainder of 1996. The Company anticipates, based on its current plans, that the net proceeds of the public offering completed in August, 1995 will be sufficient to satisfy its anticipated cash requirements for the marketing of the H2Optix(R) line for approximately 24 months from that date. Foreign Currency Exchange The Company presently transacts business internationally in United States currency. To date, the Company has not been affected significantly by currency exchange fluctuations. However, future currency fluctuations in countries in which the Company does business could adversely affect the Company by resulting in pricing that is not competitive with prices denominated in local currencies. 10 Seasonality The seasonality of the Company's business generally follows the selling activity of its largest customer, Wal-Mart Stores, Inc. The Company's strongest quarter in terms of sales is the fourth quarter followed by the first, second and third quarters. 11 PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) On May 16, 1996, the Company held its annual meeting of shareholders to vote on the election of directors, to ratify and approve the selection of independent auditors and to approve an amendment to the Company's Certificate of Incorporation which would waive an anti-takeover of the New York Business Corporation Law. (b) The following individuals were elected to serve as directors until the next annual meeting: Votes Votes for against election election -------- -------- Stephen Nevitt 2,126,219 3,100 Milton Nevitt 2,126,219 3,100 Michael J. Guccione 2,126,219 3,100 David B. Newman 2,126,219 3,100 L. Philips Reames 2,126,219 3,100 These individuals constituted the entire Board of Directors and all served as directors as of December 31, 1995. (C) In addition the shareholders approved the appointment of Winter, Scheifley & Associates, P.C. as its independent auditors for 1996. The results of the vote on the appointment was as follows: 2,120,269 shares of common stock voted for the appointment and 0 shares of common stock voted against the appointment. In addition, the shareholders approved an amendment to the Company's Certificate of Incorporation which waives the provisions of Section 505 of the New York Business Corporation Law. Section 505 allows a public corporation to treat options or rights granted to "interested shareholders" differently than those granted to other shareholders. As an exception to the general rule of parity among securities of a same series, Section 505 would permit a corporation to include in the terms of options restrictions prohibiting the exercise of, or even voiding, those options held by an interested shareholder. An "interested shareholder" is defined as any person that (a) is the beneficial owner of twenty percent or more of the outstanding voting stock of the corporation or (b) is an affiliate or associate of the 12 corporation that at any time during the five years prior was the beneficial owner, directly or indirectly, of twenty percent or more of the then outstanding voting stock. Section 505 enables target companies to ward off unwanted suitors by allowing shareholders to purchase additional shares at a discount by means of exercising options while disallowing a would-be acquirer the same. Not only would a takeover become more expensive because of the additional outstanding shares the acquirer must purchase, but the shares already purchased by the acquirer would be diluted. The results of the vote on the amendment was as follows: 1,264,424 shares of common stock voted for the amendment and 8,905 shares of common stock voted against the amendment. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. None. (b) Reports on Form 8-K. None 13 SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Solar-Mates, Inc. (Registrant) Dated: August 13, 1996 By: /s/ Stephen Nevitt ------------------------- ----------------------------------- Stephen Nevitt President (Principal Executive Officer) Dated: August 13, 1996 By: /s/ Jeffrey Rubin ------------------------- ----------------------------------- Jeffrey Rubin Controller (Chief Financial Officer) EX-27 2 FDS
5 6-MOS DEC-31-1996 JUN-30-1996 514,760 1,355,399 2,755,159 0 3,073,833 8,132,673 659,655 218,014 9,068,027 3,953,066 0 0 0 2,384 4,984,812 9,068,027 5,541,273 5,541,273 3,563,727 1,533,014 0 0 140,428 304,104 94,400 209,704 0 0 0 209,704 0.07 0
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