-----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, IC/pX/zdz6mr9FCZAeGIM5GZJUCi6jqkk07FChGa+OKNsZZvWXp/RHJTcy4JkX6H FY6ifclT2wHaF6JtU0MZnQ== 0000950170-97-001440.txt : 19971117 0000950170-97-001440.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950170-97-001440 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OCEAN OPTIQUE DISTRIBUTORS INC CENTRAL INDEX KEY: 0000876235 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES [5040] IRS NUMBER: 650052592 STATE OF INCORPORATION: FL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-11063 FILM NUMBER: 97721403 BUSINESS ADDRESS: STREET 1: 14250 S W 119 AVENUE CITY: MIAMI STATE: FL ZIP: 33186 BUSINESS PHONE: 3052553272 MAIL ADDRESS: STREET 1: 14250 S W 119TH AVE CITY: MIAMI STATE: FL ZIP: 33186 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSIONS WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended SEPTEMBER 30, 1997 OR [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ Commission File No. 0-19670 --------------------------------------- OCEAN OPTIQUE DISTRIBUTORS, INC. (Exact Name of Small Business Issuer as Specified in Its Charter) FLORIDA 65-0052592 - ------------------------------- -------------------------- (State of Other Jurisdiction of (I.R.S. Employer I.D. No.) Incorporation or Organization) 2 N.E. 40th Street MIAMI, FLORIDA 33137 - --------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Issuer's telephone number, including area code: 305-573-0222 Indicate by check mark whether the Issuer (1) 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 and (2) has been subject to such filing requirements for the past 90 days. YES X NO ___ State the number of shares outstanding of each of the Issuer's classes of common equity as of the latest practicable date: At November 1, 1997 there were outstanding 7,784,879 shares of Common Stock, no par value. Transitional Small Business Disclosure Format: YES__ NO X OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES INDEX TO FORM 10-QSB PART I FINANCIAL INFORMATION PAGE Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 1997 and June 30, 1997 (Unaudited) 3 Condensed Consolidated Statement of Income Three Months Ended September 30, 1997 and 1996 (unaudited) 4 Condensed Consolidated Statement of Cash Flows Three Months Ended September 30, 1997 and 1996 (unaudited) 5 Notes to the Condensed Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 2
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND JUNE 30, 1997 (Unaudited) ASSETS SEPTEMBER 30, JUNE 30, 1997 1997 ------------- ---------- Current assets Cash and cash equivalents 111,114 54,868 Certificate of deposit - restricted 65,000 65,000 Accounts receivable (net of allowance for doubtful accounts of $309,548 and $289,865 respectively) 2,152,267 2,535,435 Inventory 5,603,899 4,994,655 Prepaid expenses and other current assets 229,143 89,929 Deferred income taxes 130,229 130,229 ------------- ---------- Total current assets 8,291,652 7,870,116 Property, plant and equipment, net 422,093 370,795 Security deposits and other assets 23,983 23,983 Debt issue costs, net 70,671 76,522 Deferred income taxes 4,303 4,303 Intangible assets 1,961,654 1,928,980 ------------- ---------- Total assets 10,774,356 10,274,699 ============= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Line of credit 3,302,917 3,233,534 Accounts payable and accrued expenses 3,386,881 2,977,841 Income tax payable 84,513 94,029 Current portion of long-term debt 543,512 614,693 Note payable- officers 140,000 140,000 ------------- ---------- Total current liabilities 7,457,823 7,060,097 8% Convertible subordinated debentures 260,000 341,250 Long-term debt 128,084 56,869 Deferred income taxes 96,432 96,432 ------------- ---------- Total liabilities 7,942,339 7,554,648 Stockholders' equity Preferred stock, no par value, 5,000,000 shares authorized; shares issued: Series A cumulative convertible 3% preferred stock, 214,500 shares outstanding (liquidation value-$536,250) 95,151 95,151 Series B-1, 2% convertible preferred stock, 162,478 shares outstanding (liquidation value-$812,390) 64,016 64,016 Series C non-cumulative convertible preferred stock, 1,000,000 shares outstanding 1,697,037 1,697,037 Common stock, no par value; 10,000,000 shares authorized, 7,618,792 issued and outstanding - - Paid-in-capital 827,015 744,265 Retained earnings 148,798 119,582 ------------- ---------- Total stockholders' equity 2,832,017 2,720,051 ------------- ---------- Total liabilities and stockholders' equity 10,774,356 10,274,699 ============= ==========
The accompanying notes are an integral part of this statement. 3
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) 9/30/97 9/30/96 ----------- ----------- Net Sales $ 2,698,353 $ 561,824 Cost of goods sold 1,480,764 365,828 ----------- ----------- Gross profit 1,217,589 195,996 Selling, general and admistrative expenses 1,050,481 130,422 ----------- ----------- 167,108 65,570 Interest expense 136,892 1,234 Income before income taxes 30,216 64,340 Income tax expense - (3,654) ----------- ----------- Net income 30,216 60,686 Dividends on convertible preferred stock 1,000 - ----------- ----------- Net income applicable to common stockholders $ 29,216 $ 60,686 ----------- ----------- Net income per share of common stock $ - $ 0.01 ----------- ----------- Weighted average number of common shares outstanding 15,775,498 10,293,035 =========== ============
The accompanying notes are integral part of these statements. 4
OCEAN OPTIQUE DISTRIBUTORS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (Unaudited) Three Months Ended Three Months Ended 9/30/97 9/30/96 ------------ ------------ Cash Flows From Operating Activities: Net income $ 29,216 $ 60,687 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for inventory obsolescence 40,500 - Depreciation and amortization 79,170 4,474 Bad debt expense 62,749 - Changes in operating assets and liabilities: Decrease(increase) in: Accounts receivable 320,419 48,250 Inventory (649,744) (42,744) Prepaid expenses and other current assets (139,214) 1,350 Increase(decrease) in: Accounts payable and accrued expenses 409,040 (23,951) Income tax payable (9,516) 3,654 ------------ ------------ Net cash provided by (used in) operating activities 142,620 51,720 ------------ ------------ Cash Flows From Investing Activities: Expenditures for property and equipment (75,908) - Advances to affiliates - (21,829) Cash for acquisition of business (81,383) - Acquisition costs - - ------------ ------------ Net cash used in investing activities (157,291) (21,829) ------------ ------------ Cash Flows From Financing Activities: Proceeds from notes payable 145,908 (17,956) Repayments of notes payable (145,874) - Proceeds from line of credit 2,197,514 Repayments of line of credit (2,128,131) Contributions 1,500 ------------ ------------ Net cash provided by (used in) financing activities 70,917 (17,956) ------------ ------------ Increase (Decrease) in Cash 56,246 11,935 Cash, Beginning 54,868 7,360 ------------ ------------ Cash, Ending 111,114 19,295 ============ ============ Supplemental Disclosure of Cash Flows Information: Cash paid during the period for interest $ 136,892 $ 1,234 ============ ============ Taxes paid during the year $ 9,516 $ - ============ ============ Non-cash financing and investing activities: Conversion of debt to equity $ 81,250 $ - ============ ============
5 OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of Management necessary for a fair statement of results for the interim periods. The results of operations for the three months ended September 30, 1997 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-KSB, for the fiscal year ended June 30, 1997. (2) ORGANIZATION Ocean Optique Distributors, Inc. (the "Company") was incorporated under the laws of the State of Florida on May 31, 1988. The Company is an importer and distributor of eyeglass frames. Effective June 27, 1997, the Company consummated the acquisition of Solovision Optical, Inc. ("Solovision"), a privately held, Miami-based company engaged in importing, exporting, marketing and distributing low to moderately priced eyeglass frames and importing and distributing optical equipment. In connection with the acquisition of Solovision (the "Solovision Acquisition"), the Company issued to the shareholders of Solovision shares of the Company's Common Stock and the Company's Series C Non-Cumulative Convertible Preferred Stock (the "Series C Preferred Stock") with an aggregate voting power equal to 60% of the outstanding voting capital stock of the Company, on a fully diluted basis, after giving effect to the Solovision Acquisition. The Company consummated the Solovision Acquisition pursuant to the Agreement and Plan of Merger dated as of June 26, 1997 (the "Solovision Agreement and Plan of Merger") by and among the Company, Ocean Acquisition Corporation ("OAC"), Solovision, Solomon Ovadia, Leon Wildstein, and Ovadia Family Trust. The Solovision Acquisition was effected as follows: (1) Solovision and an affiliated corporation, Sorrento Eyewear, Inc. ("Sorrento"), were merged pursuant to Florida law, with Solovision as the surviving corporation (the "Solovision-Sorrento Merger"); (2) immediately thereafter, Solovision was merged with and into OAC pursuant to Florida law, with Solovision as the surviving corporation (the "Merger"); and (3) the shares of the common stock, $1.00 par value per share, of Solovision (the Solovision Common Stock") outstanding at the effective time of the Merger were converted into an aggregate of 3,137,977 shares of the Company's Common Stock and 1,000,000 shares of Series C Preferred Stock (each share of Solovision Common Stock being converted as a result of the Merger into 21,346.78 shares of Common Stock and 6,802.72 shares of Series C Preferred Stock). Each share of Series C Preferred Stock will be 6 entitled to vote together with the Common Stock as a single class on all matters presented to a vote of shareholders, except as provided by law, with each share of Series C Preferred Stock entitled to 7.155058 votes. Each share of Series C Preferred Stock will be automatically converted into 7.155058 shares of Common Stock upon the filing of an amendment to the Company's Articles of Incorporation increasing the number of authorized shares of Common Stock to not less than 25,000,000 shares. As a result, the shareholders of Solovision received, on a pro rata basis, shares with an aggregate voting power equal to 60% of the outstanding voting capital stock of the Company, on a fully diluted basis, after giving effect to the Solovision Acquisition. For accounting purposes, the Solovision Acquisition has been treated as an acquisition of Ocean and its subsidiaries, Classic and EMA, by Solovision. The presentation of the Company's Condensed Consolidated Financial Statements included in this report reflects the consummation of the Solovision Acquisition on June 27, 1997. (3) BANK LINE OF CREDIT On May 28, 1997, the Company refinanced its credit facility through a Loan and Security Agreement with Coast Business Credit, a division of Southern Pacific Thrift & Loan Association ("Coast"). Loans outstanding under this agreement at any time may not exceed the lesser of either: (a) $4,000,000 or (b) the sum of: (i) 70% of the Company's receivables deemed by Coast to be eligible for borrowing (which may be increased to 75% if dilution is less than 15%, subject to certain restrictions); and (ii) the lesser of up to 55% of the value of the Company's inventory deemed by Coast to be eligible for borrowing, or $2,000,000. The interest rate on all loans made under the credit facility is 2% above the prime rate, with a minimum monthly interest amount equal to said rate charged on an outstanding daily balance of $2,000,000. The maturity date is June 30, 2000, subject to automatic renewal for additional one-year terms upon payment of a renewal fee. The Company also issued to Coast warrants to acquire 187,500 shares of Common Stock at an exercise price of $1.625 per share. The credit facility is secured by all of the Company's assets. (4) CALCULATION OF EARNINGS PER SHARE Net (loss) income per share of common stock is computed based upon the weighted average number of common shares and common stock equivalents outstanding during the year. Included in the weighted average number of shares calculation is the retroactive effect of the 3,137,977 Common shares and the 1,000,000 Series C non-cumulative Convertible Preferred shares issued in the Solovision Acquisition. 7 OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is an analysis of the Company's results of operations and its liquidity and capital resources. To the extent that such analysis contains statements that are not of a historical nature, such statements are forward-looking statements, which involve risks and uncertainties. These risks include: risks of increases in the costs of the Company's products; the Company's relationships with its suppliers and licensors; the financial condition and operations of the Company's customers; changes in fashions and preferences of purchasers of eyewear; competitive and general economic factors in the markets where the Company's products are manufactured or sold; the impact of, and changes in, government regulations such as trade restrictions or prohibitions, or import and other charges and taxes; and other factors discussed in the Company's filings with the Securities and Exchange Commission. The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the related notes thereto of Ocean Optique Distributors, Inc. and subsidiaries (collectively, the "Company"), included elsewhere herein. OVERVIEW With the consummation of the Solovision Acquisition in June 1997, the Company acquired an additional operating subsidiary and strengthened its management team. The Company is in the process of assimilating its new subsidiary, including coordination of accounting and computer systems and deployment of personnel. The Company is not able at this time to estimate the timetable for completion of such assimilation. Therefore, there can be no assurances of the Company's ability to realize significant operating efficiencies, if any, from the Solovision Acquisition in the near future. See "Note 2. Notes to Condensed Consolidated Financial Statements." Effective November 14, 1997, the Company announced the appointment of Ronald L. Darata to serve on the Company's Board of Directors and as the Company's President and Chief Operating Officer. Mr. Darata has 30 years' experience in the optical industry, most recently as Executive Vice President and a director of Physician's Eyecare Network, Inc., a Concord, California management services organization providing executional expertise and capital for networks of eye care providers. During February 1997, the Company's license agreement with Revlon was terminated. Nevertheless, management currently believes that the Company's overall gross margin will be enhanced with the termination of this contract, as all of the Company's other lines carry larger margins than did the Revlon product. In addition, JH Collectibles, one of the Company's other licensors, filed for bankruptcy relief under Chapter 11 of the Bankruptcy Code during the first quarter of 1997. The Company's licensing agreement with JH Collectibles expired on March 31, 1997, and as a result of the bankruptcy, was not renewed. The Company believes that there will be no material adverse effect on the Company's long-term future business from the loss of this licensing agreement. Additionally, the Company has been in negotiations with Chevrolet and Gitano with regard to license renewals, although such negotiations have not as yet resulted in any definitive agreement, and there can be no assurances that such licenses will be renewed. In May 1997, the Company refinanced its credit facility. See "Liquidity and Capital Resources," below. RESULTS OF OPERATIONS - For the three months ended September 30, 1997 and 1996. Net sales for the three months ended September 30, 1997 were $2,698,353, an increase of $2,136,529 or 380.3% from the same period in 1996. The increase was due primarily to the impact of the Solovision Acquisition. Net sales at Solovision and the Company for the three months ended September 30, 1997 totaled $1,102,465 and $1,595,888, respectively. The Company gross profit for the three months ended September 30, 1997 increased by $1,021,593, or 521.23%, when compared to the same period in 1996, mainly due to the merger. The Company's gross profit margin increased from 34.9% for the three months ended September 30, 1996 to 45.1% for the three months ended September 30, 1997. This increase was mainly due to more sales to direct accounts, through which the Company obtains better margins. 8 SG&A expenses for the three months ended September 30, 1997 increased by $920,059 (705.4%) over the same period last year. This increase is mainly due to the impact of the Solovision Acquisition, and to a lesser extent is due to additional interest of $135,658 and an increase in amortization and depreciation of $74,696. SG&A as a percentage of net sales increased to 38.9% from 23.2% for the three months ended September 30, 1997 and 1996, respectively. This increase was mainly due to the merger with Solovision Acquisition, and the additional expenses as mentioned above. For the three months ended September 30, 1997, the Company had a net profit of $30,216 compared to a net profit of $60,686 for the same period last year. This decrease in profits is primarily due to the increase in interest expense of $135,658, the increase of amortization and depreciation of $74,696, and to the increases normal operating expenses related to the Solovision Acquisition. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1997, the Company's working capital was $838,132, and its current ratio was 1.11:1, as compared to the working capital of $810,069 and a current ratio of 1.11:1 as of June 30, 1997. The change in net cash provided by operating activities was primarily due to the net profit from operations of $29,216, depreciation of $79,170, a decrease in accounts receivable of $320,419, an increase in prepaid expenses and other current assets of $139,214 and an increase in accounts payable and accrued expenses of $409,040 and an increase in inventory of $649,744. The change in net cash provided by financing activities was primarily due to the net increase in proceeds from the Company's credit line of $69,383. In May 1997, the Company refinanced its credit facility through a Loan and Security Agreement with Coast Business Credit, a division of Southern Pacific Thrift & Loan Association ("Coast"). Loans outstanding under this agreement at any time may not exceed the lesser of either: (a) $4,000,000 or (b) the sum of: (i) 70% of the Company's receivables deemed by Coast to be eligible for borrowing (which may be increased to 75% if dilution is less than 15%, subject to certain restrictions); and (ii) the lesser of up to 55% of the value of the Company's inventory deemed by Coast to be eligible for borrowing, or $2,000,000. The interest rate on all loans made under the credit facility is 2% above the prime rate, with a minimum monthly interest amount equal to said rate charged on an outstanding daily balance of $2,000,000. The maturity date is June 30, 2000, subject to automatic renewal for additional one-year terms upon payment of a renewal fee. The Company also issued to Coast warrants to acquire 187,500 shares of Common Stock at an exercise price of $1.625 per share. The credit facility is secured by all of the Company's assets. Inability to repay the loans under the credit facility in a timely manner as they become due would have a materially adverse effect on the Company's ability to continue its operations and could cause the Company to lose most of its assets. There can be no assurances that income generated from operations will be sufficient to cover all operating expenses and meet present and future debt service payments. In October 1997, the Company's Chairman of the Board invested $250,000 in shares of a new series of the Company's convertible preferred stock, the terms of which are being finalized. Management currently believes that cash from operations and from available credit sources is sufficient for the Company to maintain its operations at current levels, including the operations acquired in the Solovision Acquisition and EMA acquisition. The Company is at the present time seeking other sources of financing to provide additional working capital. There can be no assurances that such other financing will be available and, if available, will be at terms favorable to the Company. 9 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits. 11.1 Statement re: computation of per share earnings. 27.1 Financial Data Schedule (B) Reports on Form 8-K An amendment to the Company's current report on Form 8-K dated June 27, 1997 was filed on September 12, 1997, setting forth audited and pro forma financial statements and notes thereto reflecting the Solovision Acquisition. 10 OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES FORM 10-QSB SEPTEMBER 30, 1997 S I G N A T U R E S 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. OCEAN OPTIQUE DISTRIBUTORS, INC. /s/ Leon Wildstein -------------------------------- BY: LEON WILDSTEIN Chairman of the Board November 14, 1997 --------------------------------- DATE /s/ Kenneth Gordon --------------------------------- BY: KENNETH GORDON Principal Financial and Accounting Officer November 14, 1997 --------------------------------- DATE 11 OCEAN OPTIQUE DISTRIBUTORS, INC. FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997 INDEX TO EXHIBITS EXHIBIT NUMBER - ------ 11.1 Calculations of earnings per share....... 27.1 Financial Data Schedule.................. EX-11.1 2 Exhibit 11.1 Statement re: Computation of per share earnings THREE MONTHS ENDED 9/30/97 9/30/96 ---------- ---------- Common Stock 14,768,498 10,293,035 Common Stock Equivalents Dilutive Stock Options 234,000 - Common Stock Equivalents Dilutive Stock Warrants 773,000 - ---------- ---------- Weighted Average Shares and Common Stock Equivalents 15,775,498 10,293,035 ========== ========== Earnings Per Common Share Net Income $ - $ 0.01 ========== ========== EX-27.1 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF OCEAN OPTIQUE DISTRIBUTORS, INC. FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JUN-30-1998 SEP-30-1997 176 0 2,462 310 5,604 8,296 1,135 713 10,774 7,458 0 0 1,856 0 976 10,774 2,698 2,698 1,218 1,218 1,050 0 137 30 0 30 0 0 0 29 0 0
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