-----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, D8f2tgPW+wQjhhBc1w20/DTjzCCILl5mfAGsuXIZq9BhW4ZOiTWNCkcTHsEjVLIq lnYoTBLlpRZgwfO4KD155A== 0000950144-96-000105.txt : 19960117 0000950144-96-000105.hdr.sgml : 19960117 ACCESSION NUMBER: 0000950144-96-000105 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960116 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLORAFAX INTERNATIONAL 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-05531 FILM NUMBER: 96503368 BUSINESS ADDRESS: STREET 1: 8075 20TH STREET CITY: VERO BEACH STATE: FL ZIP: 32966 BUSINESS PHONE: 4075630263 MAIL ADDRESS: STREET 1: 8075 20TH STREET CITY: VERO BEACH STATE: FL ZIP: 32966 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 FORMER COMPANY: FORMER CONFORMED NAME: SPOTTS MAILING CORP DATE OF NAME CHANGE: 19671205 10QSB 1 FLORAFAX INTERNATIONAL 10QSB 11-30-95 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended November 30, 1995 ----------------- [ ] Transition Report Under Section 13 or 15(d) of the Exchange Act For the transition period from to ------------ ------------- Commission File Number: 0-5531 FLORAFAX INTERNATIONAL, INC. ------------------------------ (Exact name of small business issuer as specified in its charter) Delaware 41-0719035 - ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8075 20th Street, Vero Beach, Florida 32966 - -------------------------------------------------------------------------------- (Address of principal executive offices) 407-563-0263 ------------ (Issuer's telephone number) -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 --- --- The registrant had 5,922,973 shares of common stock, $0.01 par value, outstanding at November 30, 1995. Transitional Small Business Disclosure Format (Check one): Yes ; No X ----- ----- 2 INDEX PART I FINANCIAL INFORMATION Page No. Item 1. Financial Statements (Unaudited): Consolidated Balance Sheets November 30, 1995 and August 31, 1995 1 - 2 Consolidated Statements of Income and Accumulated Deficit Three Months Ended November 30, 1995 and November 30, 1994 3 Consolidated Statements of Cash Flows Three Months Ended November 30, 1995 and November 30, 1994 4 - 5 Notes to Consolidated Financial Statements 6 -7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 10 PART II OTHER INFORMATION Item 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 3. Defaults Upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 - 12 Signatures 13 3 FLORAFAX INTERNATIONAL, INC. Consolidated Balance Sheets
(In Thousands) Assets November 30 August 31 1995 1995 ----------- --------- (Unaudited) Current assets: Cash and cash equivalents $2,206 $1,972 Restricted cash and investments 577 566 Accounts receivable: Members, less allowances of $631 at November 30, 1995 and $706 at August 31, 1995 1,613 1,289 Charge card issuers 235 225 Other 34 ------ ------ 1,848 1,548 Prepaid and other assets 153 31 ------ ------ Total current assets 4,784 4,117 Property and equipment, at cost: Fixtures and equipment 1,352 1,347 Computer systems 1,138 1,114 Communication systems 1,515 1,516 Leasehold improvements 323 311 ------ ------ 4,328 4,288 Accumulated depreciation and amortization 3,994 3,919 ------ ------ 334 369 Other assets: Excess of cost over net assets of acquired business 1,995 1,995 Other 343 371 ------ ------ 2,338 2,366 ------ ------ Total assets $7,456 $6,852 ====== ======
See accompanying notes. 1 4 FLORAFAX INTERNATIONAL, INC. Consolidated Balance Sheets
(In Thousands) Liabilities and stockholders' net capital deficiency November 30 August 31 1995 1995 ----------- --------- (Unaudited) Current Liabilities: Current maturities of long-term debt 2,957 466 Accounts payable 4,290 3,919 Accrued liabilities: Member benefits 156 150 Other 1,086 980 ------- ------- Total current liabilities 8,489 5,515 Long-term debt, less current maturities: 9 1/2% convertible subordinated notes 2,567 Other 426 467 ------- ------- 426 3,034 Membership security deposits 49 59 Unearned directory income 86 ------- ------- Total liabilities 9,050 8,608 Stockholders' net capital deficiency: Preferred stock (par value $10, 600,000 shares authorized, none issued) Common stock - ( par value $.01, 18,000,000 shares authorized, 5,945,973 and 5,793,874 issued at November 30, 1995 and August 31, 1995, respectively, 5,922,973 and 5,770,874 outstanding at November 30, 1995 and August 31, 1995 59 58 Additional paid-in capital 7,385 7,381 Accumulated deficit (9,038) (9,195) ------- ------- Total stockholders' net capital deficiency (1,594) (1,756) ------- ------- Total liabilities and stockholders' net capital deficiency $ 7,456 $ 6,852 ======= =======
See accompanying notes. 2 5 FLORAFAX INTERNATIONAL, INC. Consolidated Statements of Income and Accumulated Deficit (In Thousands Except per Share Data)
Three Months Ended November 30 November 30 1995 1994 ----------- ----------- (Unaudited) Net revenues: Member dues and fees $470 $476 Floral and other order processing 584 366 Directory and advertising fees 295 292 Charge card processing 309 394 Other revenue 24 10 ------- ------- 1,682 1,538 Expenses: Member support, general and administrative 1,127 1,109 Selling, advertising and promotion 156 150 Directory publishing 77 78 Depreciation, amortization and retirements 103 110 ------- ------- 1,463 1,447 ------- ------- Operating income 219 91 Other income (expense): Interest expense (77) (76) Interest income 20 Other 1 5 ------- ------- (56) (71) ------- ------- Net income before income taxes 163 20 Federal income tax 6 ------- ------- Net income 157 20 Accumulated deficit at beginning of year (9,195) (9,902) ------- ------- Accumulated deficit at end of quarter ($9,038) ($9,882) ======= ======= Weighted average shares outstanding 5,806 5,549 Primary and fully diluted earnings per share $0.03 $0.00
See accompanying notes. 3 6 FLORAFAX INTERNATIONAL, INC. Consolidated Statements of Cash Flows (In Thousands)
Three months ended November 30 1995 1994 ---- ---- (Unaudited) Operating activities Net income $157 $20 Adjustments to reconcile net income to net cash provided by operating activities Depreciation, amortization, and retirements 75 110 Provision for doubtful accounts 40 55 Increase (decrease) in cash flows due to changes in: Accounts receivable (340) 167 Prepaid and other assets (122) (13) Other assets 28 25 Accounts payable 371 160 Accrued liabilities 112 (47) Unearned directory income 86 86 Membership security deposits (10) (2) ----- ----- Net cash provided by operating activities 397 561 Investing activities Capital expenditures (40) (91) Deposit of restricted cash (11) ----- ----- Net cash used in investing activities ($51) ($91)
(Continued) 4 7 FLORAFAX INTERNATIONAL, INC. Consolidated Statements of Cash Flows (In Thousands)
Three months ended November 30 1995 1994 ------- ------- (Unaudited) Financing activities Proceeds from issuing debt --- $ 63 Proceeds from issuing stock 5 Reduction in bank overdraft --- (976) Payments of debt (117) (12) ----- ----- Net cash used in financing activities (112) (925) ----- ----- Net increase (decrease) in cash and cash equivalents 234 (455) Cash and cash equivalents at beginning of year 1,972 558 ----- ----- Cash and cash equivalents at end of period $2,206 $ 103 ===== ===== Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 14 $ 6 Cash paid during the period for income tax $ 6 --- ===== =====
See accompanying notes. 5 8 FLORAFAX INTERNATIONAL, INC. Notes to Consolidated Financial Statements Three Months Ended November 30, 1995 Note (1) Management's Opinion and Accounting Policies The accompanying interim financial statements should be read in conjunction with the Florafax International, Inc. (the Company's) Form 10-KSB for the year ended August 31, 1995. In the opinion of Management the unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company's consolidated financial position as of November 30, 1995 and the consolidated results of operations and cash flows for the three months ended November 30, 1995. Historically, the Company's flowers-by-wire operation is seasonal in that its member florists send a much larger volume of orders during Thanksgiving, the Christmas season, Valentine's Day, Easter and Mother's Day. Therefore, the results of operations of an interim period may not necessarily be indicative of the results expected for a full year. In an effort to increase orders to member florists the Company continues to engage in non traditional campaigns through it's wholly owned subsidiary, The Flower Club. The Flower Club, Inc. was formed to generate additional orders by pursuing relationships with nationally recognized corporations. The Company engages in joint marketing campaigns with these corporations not only during holidays, but also during non seasonal periods in an effort to provide member florists with orders during slow periods of the year. Floral orders and handling fees generated through The Flower Club have become significant, representing 57% of gross floral order revenue for the quarter ended November 30, 1995 compared to 42% for the quarter ended November 30, 1994. Management expects the upward trend in orders generated by The Flower Club to continue. The Company continues to focus on its basic core business, which is primarily flowers by wire and processing credit cards. Note (2) Contingencies Florafax International, Inc. vs. Bellerose Floral Inc. and GTE Market Resources Inc., et al. In October 1989, Bellerose Floral, Inc. (Bellerose) of Bayside, N.Y., an affiliate of 800-FLOWERS, Inc. became a Florafax member florist, and Florafax agreed to provide certain telecommunication services to Bellerose for a fee. GTE Market Resources, Inc. (GTE/MR) was engaged by Florafax to provide order-entry services for Florafax and to customers of Florafax, including Bellerose. 6 9 FLORAFAX INTERNATIONAL, INC. Notes to Consolidated Financial Statements Three Months Ended November 30, 1995 In 1990 certain disputes arose among Florafax, Bellerose and GTE/MR regarding the services to be performed by GTE/MR. As a result, in 1990, Florafax filed an action in Tulsa County (Oklahoma) District Court against GTE/MR and Bellerose. Bellerose then filed an action in New York Federal Court against Florafax. Subsequently, Florafax and Bellerose settled their claims against each other. Florafax pursued its claim against GTE/MR for damages suffered as a result of GTE/MR's breach of the telecommunications service agreement. On November 23, 1993 a jury awarded Florafax $1,481,000 in net damages against GTE/MR. GTE/MR appealed this case and posted bond with the Court in order to do so. On December 22, 1994 this case was assigned to the Oklahoma Court of Appeals by the Oklahoma Supreme Court. On April 4, 1995 the Court of Appeals of the State of Oklahoma released for publication its decision on the appeal filed by GTE/MR. The award to the Company of $743,117 for consequential damages was affirmed. To the extent that the Company was awarded lost profits for two years in the amount of $750,000, the judgment was reversed and remanded for a determination of lost profits as limited by Oklahoma law. The award to GTE/MR of a set-off amount of $88,750 for unpaid invoices was affirmed, a contractual rate of 18% per annum applied for prejudgment interest was applied and the case remanded for a determination of an award of GTE's reasonable attorney's fees, expenses and other collection costs incurred in recovering the unpaid invoice amounts, but not their fees or expenses in defending against the claims of the Company or in pursuing other unsuccessful aspects of GTE/MR's counterclaim. The denial of the Company's request for attorney's fees was affirmed. The Company and GTE/MR have each petitioned the Oklahoma Supreme Court for writ of certiorari to review the portions of the Oklahoma Court of Appeals decision adverse to their respective interests, and both of the parties appeals have been granted. There are no assurances that the Company will obtain a favorable ruling from the Oklahoma Supreme Court. The Company's legal counsel has tried this case on a contingency fee basis and, accordingly, the Company has incurred minimal expenses related to this litigation. However, the agreement between the Company and its legal counsel stipulates that the Company's attorneys are to receive 40% of the net proceeds now that the case has reached the appellate court. Consequently, the Company is to receive 60% of the ultimate proceeds. Recognition of any of these amounts will not be reflected in the financial statements until ultimate resolution. Other The Company is involved in various disputes involving routine business matters, the resolution of all of which in management's opinion will not have a material adverse effect upon the Company. 7 10 FLORAFAX INTERNATIONAL, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Sources of cash to meet future requirements are existing cash balances and internally generated funds. Management is currently pursuing options that may give the Company access to additional working capital. In addition, as discussed in Note 2, the Company is hopeful that they will reach a settlement with GTE/MR during the current year, which could provide an additional source of working capital. However, there is no guaranty that the Company will receive any funds as a result of the GTE/MR judgment. The Company continues to generate positive cash flow from operations. Cash provided by operations for the Quarter ended November 30, 1995 was $397,000 compared to $561,000 for the quarter ended November 30, 1994. For the quarter ended November 30, 1995 the Company reported a total increase in cash of $234,000 compared to an overall cash decrease of ($455,000) for the quarter ended November 30, 1994. Operating cash flows historically have been generated primarily from processing floral orders and charge card transactions for the Company's member florists, as well as collecting dues, fees and directory advertising from the members. Floral order processing may require settlement with the fulfilling florist before collection of funds from the sending florist. The terms of the Company's receivables are 30 days, which management believes are consistent within the industry. Charge card processing, however, generally allows the Company to collect funds from the charge card issuer prior to settlement with the merchant. Since in both types of transactions the Company is both collecting and settling funds, the timing of these cash flows has a significant impact on the Company's liquidity. As discussed in Note 1 to the consolidated financial statements the Company continues to engage in non traditional campaigns through it's wholly owned subsidiary, The Flower Club. This has helped to improve the Company's cash flow as the majority of orders generated through The Flower Club are paid for by credit cards. This allows the Company to receive its funds within days after processing the transaction. For the quarter ended November 30, 1995 floral orders and handling fees generated through The Flower Club amounted to approximately $2,667,000 compared to $1,392,000 for the quarter ended November 30, 1994, an increase of 92%. 8 11 FLORAFAX INTERNATIONAL, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS General Comments The Company's return to profitability during fiscal 1995 appears to be continuing in fiscal 1996, as net income for the quarter ended November 30, 1995 was $157,000 compared to $20,000 for the quarter ended November 30, 1994. In addition, total revenues increased by 9% during the quarter ended November 30, 1995 when compared to the same period in the prior year while operating expenses increased by only 1%. Net Revenues Revenues from member dues and fees remained relatively constant during the quarter ended November 30, 1995 when compared to the same period in the prior year. Management believes that the number of orders that the Company is now providing to it's members has allowed the Company to maintain it's membership base. Floral order revenue increased by 60% for the quarter ended November 30, 1995 when compared to the same period in the previous year. This increase is primarily a result of orders generated by The Flower Club. Orders generated by The Flower Club increased by 92% during the quarter ended November 30, 1995 when compared to the same period in the previous year. Management expects the upward trend in orders generated by The Flower Club to continue. Net revenues from credit card operations decreased by 22% for the quarter ended November 30, 1995 when compared to the same quarter in the previous year. The gross dollar amount of credit cards processed actually increased by 27%, however there were four primary factors that caused a decrease in net revenues, as follows. First, the Company lowered it's discount rate to be more competitive in certain markets. Second, the Company experienced an increase in the cost to clear credit card transactions as well as an increase in data capture and authorization fees. Third, certain credit card companies began settling credit card transactions directly with a segment of the Company's merchants, which eliminated the Companies ability to charge a discount rate on these transactions. Fourth, the Company no longer processes the credit card transactions for the Oklahoma State Treasurers office. Expenses Member support, general and administrative expenses increased slightly (2%) for the quarter ended November 30, 1995 when compared to the same quarter in the previous year. Certain 9 12 FLORAFAX INTERNATIONAL, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations expenses such as salaries and telephone expense experienced an increase. A portion of these increases were due to orders generated by The Flower Club as each order has two associated long distance phone calls as well as the need for an operator to take the order and often times to place the order. Other costs such as consulting fees, bank service charges, and bad debt expense declined. Selling and advertising expenses increased by 4% for the quarter ended November 30, 1995 when compared to the same quarter in the previous year. The main component of this increase was an increase in advertising costs. Now that the Company is operating at a profit management has begun to focus on increasing membership which required expenditures for advertising. The Company may continue to incur advertising costs in an effort to increase membership. Other income (expense) The Company is reporting interest income of $20,000 for the quarter ended November 30, 1995 compared to no interest income for the quarter ended November 30, 1994. The current year interest income is a result of the Companies improved cash position when compared to the same period last year. 10 13 PART II OTHER INFORMATION Item 1. Legal Proceedings For a summary of legal proceedings, reference is made to Item 3, Legal Proceedings, included in the Company's annual report on Form 10-KSB for the year ended August 31, 1995 and to Note 2 of the Notes to Consolidated Financial Statements included in this filing. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. The Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K The following items have been included as exhibits in filings by the Company in a previous year and, accordingly, are incorporated here by reference except for Exhibit 27. Exhibit Reference (10) Material Contracts (a) Convertible subordinated notes due to Clark Estates maturing June 30, 1996. (b) Subordinated debentures maturing in 1998. 11 14 (c) Agreement dated December 3 1993, Addendum, Second Addendum, Third Addendum, Fourth Addendum and Fifth Addendum thereto by and between the Registrant and Citizens Fidelity Bank and Trust Company (now PNC Bank, Kentucky, Inc.). (d) Purchase Agreement for certain assets formerly owned by Savannah Floral Services, Inc. dated March 10, 1994. (e) Note Payable to Andrew Williams dated March 10, 1994. (f) Promissory Note to Citrus Bank dated November 9, 1993. (g) Promissory Note to Citrus Bank dated November 17, 1993. (h) Promissory Note to Citrus Bank dated January 25, 1994. (i) Loan to James H. West, Director, President and Chief Financial Officer, dated August 28, 1994. (j) Consulting agreement with David Harper of Ventura County California dated December 10, 1993. (k) Promissory Note to Citrus Bank dated August 31, 1995. (l) Operating lease agreement between Registrant and Alvin Wunderlich dated April 1995. (22) Subsidiaries of the Registrant (27) Financial Data Schecule (for SEC use only) (3) Articles of incorporation and Bylaws of the Registrant, as amended. Reports on Form 8-K No reports on Form 8-K were filed during the first quarter of fiscal 1996. 12 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Florafax International, Inc. Date: January 11, 1996 James H. West ---------------- ------------- James H. West President and Chief Financial Officer 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS AUG-31-1996 SEP-01-1995 NOV-30-1995 2,783,000 0 2,479,000 631,000 0 4,784,000 4,328,000 3,994,000 7,456,000 8,489,000 426,000 0 0 59,000 (1,653,000) 7,546,000 0 1,682,000 0 0 1,463,000 40,000 77,000 163,000 6,000 157,000 0 0 0 157,000 0.03 0.03
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