-----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, DPvlR2OaHdDVLObTZN0Y2i0YvV5JGPoaHj8WoYicVBFEAlRsFfCwSd5MPvrdmtZ7 VwXfbypU/lL+zg/A1gckZA== 0000950112-96-001530.txt : 19960701 0000950112-96-001530.hdr.sgml : 19960701 ACCESSION NUMBER: 0000950112-96-001530 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOLAR-MATES INC CENTRAL INDEX KEY: 0000940183 STANDARD INDUSTRIAL CLASSIFICATION: 3851 IRS NUMBER: 112396918 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-13756 FILM NUMBER: 96566892 BUSINESS ADDRESS: STREET 1: 8125 25TH COURT EAST 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 SOLAR-MATES, INC. 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: March 31, 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 May 8, 1996. Transitional Small Business Disclosure Format. YES: NO: X Solar-Mates, Inc. Index Part I ------ Item 1. Financial Statements Consolidated Balance Sheet as of March 31, 1996 3 Consolidated Statements of Operations and Retained Earnings (Deficit) for the Three Months Ended March 31, 1996 and 1995 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996 and 1995 5 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 6. Exhibits and Reports on Form 8-K 12 Signatures 13 PART I - FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements -------------------- Solar-Mates, Inc. Consolidated Balance Sheets March 31, 1996 (Unaudited) ASSETS - - ------ Current Assets: Cash $ 1,033,586 Trading securities 1,065,096 Other marketable securities 284,878 Accounts receivable - less allowance for doubtful accounts of $100,000 2,851,652 Inventories 2,856,039 Prepaid expenses 663,061 ----------- Total current assets 8,754,312 Fixed assets - net of accumulated depreciation 327,642 Other assets 374,315 ----------- $ 9,456,269 =========== LIABILITIES AND STOCKHOLDERS' EQUITY - - ------------------------------------ Current liabilities: Note payable - bank $ 1,500,000 Note payable - stockholder 188,737 Advances from stockholders 92,879 Accounts payable 1,927,218 Other current liabilities 598,210 ----------- Total current liabilities 4,307,044 Notes payable - stockholder 146,785 Long-term debt 34,755 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 4,279,276 Retained earnings 686,025 ----------- Total stockholders' equity 4,967,685 ----------- $ 9,456,269 =========== See accompanying notes to financial statements 3 Solar-Mates, Inc. Consolidated Statements of Operations and Retained Earnings (Deficit) For The Three Months Ended March 31, 1996 and 1995 (Unaudited) 1996 1995 ---- ---- Net sales $ 3,123,909 $ 2,395,097 Cost of sales 2,052,379 1,606,856 ----------- ----------- Gross profit 1,071,530 788,241 ----------- ----------- Operating expenses: Selling expenses 365,921 177,179 General and administrative expenses 315,357 280,396 ----------- ----------- 681,278 457,575 ----------- ----------- Income from operations 390,252 330,666 Other (expense): Interest expense (112,260) (89,133) ----------- ----------- Income before income taxes 277,992 241,533 Provision for income taxes Current 102,800 ----------- ----------- Net income 175,192 241,633 Retained earnings (deficit) - beginning of period 603,198 (1,074,140) S-corporation distribution (92,365) ----------- ----------- Retained earnings (deficit) - end of period $ 686,025 $ (832,607) =========== =========== Per share information: Weighted average shares outstanding 2,384,000 1,280,000 =========== =========== Net income per share $ 0.07 $ 0.19 =========== =========== Pro forma net income Net income $ 241,533 Pro forma provision for income taxes: Long-term debt 89,400 ----------- Pro forma net income $ 152,133 =========== Pro forma income per share $ 0.12 =========== See accompanying notes to financial statements 4 Solar-Mates, Inc. Consolidated Statements of Cash Flows For The Three Months Ended March 31, 1996 and 1995 (Unaudited) 1996 1995 ---- ---- Cash flows from operating activities $ 687,867 $ 651,205 Cash flows from investing activities: Acquisition of patents and trademarks (3,500) (2,701) (Acquisition) of other assets (747) (3,500) Purchase of fixed assets (28,966) - ----------- ----------- Net cash used by investing activities (33,213) (6,201) ----------- ----------- Cash flows from financing activities: (Increase) decrease in accounts receivable stockholders (291) 20,796 Principal payments on notes payable (3,226) (459,864) S corporation distribution (92,365) - Repayments on advances from stockholders (4,442) - (Increase) in deferred offering cost - (209,401) ----------- ----------- Net cash used by financing activities (100,324) (648,469) ----------- ----------- Net increase (decrease) in cash 554,330 (3,465) Beginning - cash balance 479,256 18,301 ----------- ----------- Ending - cash balance $ 1,033,586 $ 14,836 =========== =========== 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 three month periods ended March 31, 1996 and 1995 the Company made sales to Wal-Mart Stores, Inc. in the amounts of $2,474,000 and $2,117,000 respectively. 6 Solar-Mates, Inc. Notes to Consolidated Financial Statements (Unaudited) (Continued) Approximately $1,939,000 (68%) of the accounts receivable at March 31, 1996 are due from Wal-Mart Stores, Inc. and are unsecured. This 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 August 1995, the Company was 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 has 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 8 if the Company had been taxed as a C Corporation for the relevant periods discussed. Results of Operations Net sales increased 30% from $2,395,097 for the three months ended March 31, 1995 to $3,123,909 for the three months ended March 31, 1996. Approximately $132,000 of this increase was due to the launch of the Company's H2Optix(R) line of sunglasses. In 1996 the Company began aggressively marketing this line. Additionally, approximately $253,000 of the increase was due to sales of the Company's Outa Limitz(TM) line of sunglasses which did not exist during the same period in 1995; $165,000 results from sales through a Canadian distributor. Approximately $778,000 is attributable to increased activity and price of Solar*X(R) to Wal-Mart Stores, Inc., the Company's largest customer, offset by a decrease of approximately $599,000 in sales of Bonjour(R), a brand no longer marketed by the Company. Selling expenses increased by $188,742 or 107%, from $177,179 for the three months ended March 31, 1995 to $365,921 for the three months ended March 31, 1996. This increase 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 $34,961 or 12%, from $280,396 for the three months ended March 31, 1995 to $315,357 for the three months ended March 31, 1996, primarily from increased personnel cost associated with the general growth of the Company. The Company's interest expenses increased $23,127 or 26% from $89,133 for the three months ended March 31, 1995 to $112,260 for the three months ended March 31, 1996 as a result of increased borrowing during 1996. 9 Liquidity and Capital Resources The Company is financing its operations primarily through the proceeds of an initial public offering completed in August 1995, its cash flow and revolving lines 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 revolving 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 liquidity improved from working capital of $4,357,962 at December 31, 1995 to working capital of $4,447,268 at March 31, 1996. This resulted primarily from cash flow generated by operations. The Company did not incur any significant capital expenditures during the three-month period ended March 31, 1996 and does not anticipate that it will incur any significant capital expenditures during the remainder of 1996. The Company anticipates, based on its currently proposed plans, that the net proceeds of the public offering completed in 10 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. 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 6. EXHIBITS AND REPORTS ON FORM 8-K. -------------------------------- (a) Exhibits. None. (b) Reports on Form 8-K. On March 25, 1996, the Company filed a Form 8-K with the Securities and Exchange Commission which reported that the Company had determined not to change it fiscal year end as previously reported. 12 SIGNATURES ---------- In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Solar-Mates, Inc. (Registrant) Dated: May 9, 1996 By: /s/ Stephen Nevitt ------------- ----------------------------- Stephen Nevitt President (Principal Executive Officer) Dated: May 9, 1996 By: /s/ Jeffrey Rubin ------------- ----------------------------- Jeffrey Rubin Controller (Chief Financial Officer) 13 EX-27 2
5 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1,033,586 1,349,974 2,851,652 0 2,856,039 8,754,312 545,656 218,014 9,456,269 4,307,044 0 0 0 2,384 4,965,301 9,456,219 3,123,909 3,123,909 2,052,379 2,052,379 0 0 112,260 277,992 102,800 175,192 0 0 0 175,192 0.07 0.00
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