<PAGE>
EdgarPlus FORM-TYPE: 10-Q FILING DATE: December 14, 1999
COMPANY: WORLD OF SCIENCE, INC.
TICKER: WOSI
EXCHANGE: NMS
FORM-TYPE: 10-Q
DOCUMENT DATE: October 30, 1999
FILING DATE: December 14, 1999
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 October 30, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No: 000-22679
WORLD OF SCIENCE, INC.
(Exact name of Registrant as specified in this charter)
NEW YORK 16-0963838
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
900 Jefferson Road, Building 4, Rochester, New York 14623
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (716)475-0100
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 X NO
Common stock outstanding as of November 30, 1999: 4,736,105 shares of common
stock.
1
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WORLD OF SCIENCE, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations............................... 3
Condensed Consolidated Balance Sheets......................................... 4
Condensed Consolidated Statements of Cash Flows............................... 5
Notes to Condensed Consolidated Financial Statements.......................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................... 7-12
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk - None
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings - None
ITEM 2. Changes in Securities and Use of Proceeds - None
ITEM 3. Defaults Upon Senior Securities - None
ITEM 4. Submission of Matters to a Vote of Security Holders - None
ITEM 5. Other Information............................................................. 12
ITEM 6. Exhibits and Reports on Form 8-K.............................................. 12
SIGNATURE..................................................................... 13
</TABLE>
2
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WORLD OF SCIENCE, INC.,
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
OCTOBER 30, OCTOBER 31, OCTOBER 30, OCTOBER 31,
1999 1998 1999 1998
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 10,571 $ 10,594 $ 28,484 $ 27,051
COST OF SALES AND OCCUPANCY
EXPENSES 9,269 8,281 24,749 21,698
---------- -------- -------- --------
GROSS PROFIT 1,302 2,313 3,735 5,353
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 4,933 4,440 13,138 11,260
---------- -------- -------- --------
OPERATING LOSS (3,631) (2,127) (9,403) (5,907)
INTEREST INCOME (EXPENSE), NET (246) (173) (370) (161)
---------- -------- -------- --------
LOSS BEFORE INCOME TAXES (3,877) (2,300) (9,773) (6,068)
INCOME TAX BENEFIT (1,551) (916) (3,909) (2,428)
---------- -------- -------- --------
NET LOSS $ (2,326) $ (1,384) $ (5,864) $ (3,640)
========== ======== ======== ========
NET LOSS PER SHARE (BASIC) $ (0.49) $ (0.28) $ (1.23) $ (0.73)
========== ======== ======== ========
NET LOSS PER SHARE (DILUTED) $ (0.49) $ (0.28) $ (1.23) $ (0.73)
========== ======== ======== ========
WEIGHTED AVERAGE SHARES (BASIC) 4,739 4,868 4,754 5,009
WEIGHTED AVERAGE SHARES (DILUTED) 4,739 4,868 4,754 5,009
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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WORLD OF SCIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 30, JANUARY 30, OCTOBER 31,
1999 1999 1998
----------- ----------- -------------
<S> <C> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 95 $ 3,543 $ 88
ACCOUNTS RECEIVABLE 548 443 272
INVENTORIES 20,837 10,225 20,083
PREPAID EXPENSES AND OTHER CURRENT ASSETS 1,000 739 1,003
TAXES RECEIVABLE 3,980 2,482
DEFERRED INCOME TAXES 664 664 551
----------- ----------- -------------
TOTAL CURRENT ASSETS 27,124 15,614 24,479
PROPERTY, EQUIPMENT AND
LEASEHOLD IMPROVEMENTS, NET 10,755 9,678 8,760
DEFERRED INCOME TAXES 872 872 658
----------- ----------- -------------
TOTAL ASSETS $ 38,751 $ 26,164 $ 33,897
=========== =========== =============
CURRENT LIABILITIES:
LINE OF CREDIT $ 13,525 $ $ 11,960
CURRENT INSTALLMENTS OF LONG TERM DEBT 1,388 14
CURRENT INSTALLMENTS OF OBLIGATIONS
UNDER CAPITAL LEASES 121 94 112
ACCOUNTS PAYABLE 4,965 1,362 3,179
ACCRUED EXPENSES 1,172 647 977
ACCRUED INCOME TAXES 1,245
----------- ----------- -------------
TOTAL CURRENT LIABILITIES 21,171 3,348 16,242
LONG TERM DEBT, EXCLUDING CURRENT INSTALLMENTS 565
OBLIGATIONS UNDER CAPITAL LEASES, EXCLUDING
CURRENT INSTALLMENTS 105 82 108
ACCRUED OCCUPANCY EXPENSE 994 911 885
TOTAL LIABILITIES 22,835 4,341 17,235
----------- ----------- -------------
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, $.01 PAR VALUE
AUTHORIZED 5,000,000 SHARES;
NO SHARES ISSUED AND OUTSTANDING
COMMON STOCK, $.01 PAR VALUE
AUTHORIZED 10,000,000 SHARES;
ISSUED 5,079,955 SHARES AT 10/30/99,
1/30/99, AND 10/31/98 51 51 51
ADDITIONAL PAID-IN CAPITAL 11,398 11,398 11,398
RETAINED EARNINGS 5,159 11,023 5,863
----------- ----------- -------------
TOTAL CAPITAL AND RETAINED EARNINGS 16,608 22,472 17,312
LESS: TREASURY STOCK, AT COST (692) (649) (650)
----------- ----------- -------------
TOTAL STOCKHOLDERS' EQUITY 15,916 21,823 16,662
----------- ----------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 38,751 $ 26,164 $ 33,897
=========== =========== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
WORLD OF SCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
OCTOBER 30, OCTOBER 31, OCTOBER 30, OCTOBER 31,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $ (2,326) $ (1,384) $ (5,864) $ (3,640)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 515 431 1,415 1,143
CHANGE IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLE (218) 275 (105) (159)
INVENTORIES (4,274) (5,614) (10,612) (9,679)
PREPAID EXPENSES AND OTHER
CURRENTS ASSETS (40) 59 (261) (470)
TAXES RECEIVABLE (1,558) (967) (3,980) (2,482)
(DECREASE) INCREASE IN:
ACCOUNTS PAYABLE 1,535 262 3,603 1,859
ACCRUED EXPENSES 553 440 525 407
INCOME TAXES PAYABLE (1,245) (1,400)
ACCRUED OCCUPANCY EXPENSE 27 35 83 106
-------------- ------------ ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES: (5,786) (6,463) (16,441) (14,315)
-------------- ------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES--
CAPITAL EXPENDITURES, NET (504) (945) (2,335) (3,472)
-------------- ------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
PURCHASE OF TREASURY STOCK (32) (650) (43) (650)
PROCEEDS FROM ADVANCES ON LINE OF CREDIT 6,138 8,135 15,478 11,960
PRINCIPAL PAYMENTS ON LONG-TERM DEBT (18) (55)
PRINCIPAL PAYMENTS ON CAPITAL LEASES (30) (44) (107) (122)
-------------- ------------ ----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 6,076 7,423 15,328 11,133
-------------- ------------ ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (214) 15 (3,448) (6,654)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 309 73 3,543 6,742
-------------- ------------ ----------- -----------
END OF PERIOD $ 95 $ 88 $ 95 $ 88
============== ============ =========== ===========
CASH PAID DURING PERIOD FOR:
INTEREST $ 73 $ 173 $ 149 $ 228
INCOME TAXES $ - $ 54 $ 1,245 $ 1,457
============== ============ =========== ===========
NONCASH INVESTING AND FINANCING ACTIVITY:
ACQUISITION OF EQUIPMENT UNDER A CAPITAL LEASE $ - $ - $ 157 $ -
============== ============ =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
WORLD OF SCIENCE, INC.,
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1. - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements and are subject to year-end
adjustments. However, in the opinion of management, all known adjustments (which
consist primarily of normal recurring accruals) have been made to present fairly
the financial position and operating results for the unaudited periods. This
financial information should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Form 10-K as most
recently filed with the Securities and Exchange Commission.
Due to the seasonal nature of the Company's business, results for the first nine
months of fiscal 1999 are not necessarily indicative of the results to be
expected for the full fiscal year ending January 29, 2000.
6
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
General
The Company operated 87 permanent stores and 75 seasonal stores as of October
30, 1999 as compared to 70 permanent stores and 90 seasonal stores as of October
31, 1998. Six permanent stores were opened in the third quarter of fiscal 1999
as compared to three new permanent stores opened in the third quarter of fiscal
1998. The Company had a net increase of 11 seasonal stores in the third quarter
of fiscal 1999 as compared to a net increase of 34 seasonal stores in the third
quarter of fiscal 1998.
The Company's sales have been favorably impacted over the past two years by the
popularity of particular plush products. For the third quarter of fiscal 1999,
plush sales accounted for 8.2% of total sales as compared to 30.3% in the third
quarter of fiscal 1998. For the first nine months of fiscal 1999, plush sales
accounted for 11.3% of total sales as compared to 22.1% in the first nine months
of fiscal 1998. The impact of plush product sales on the fiscal 1999 third
quarter results is significantly greater, when compared to the prior year, due
to a special one-time purchase of fast selling plush items in the third quarter
of fiscal 1998 which had a positive effect on both sales and operating results.
Comparison of Three Months Ended October 30, 1999 to Three Months Ended October
31, 1998.
Sales. Sales were relatively unchanged at $10.6 million. Although total sales
were unchanged, $1.0 million was added to sales as a result of six new permanent
stores being opened during the third quarter of fiscal 1999 and the net increase
in sales of 27 new permanent stores not in operation as of the beginning of the
prior year. This was offset by a $719,000 decline in comparable store sales and
a $325,000 decline in seasonal store sales. Comparable permanent store sales
declined 12.7% for the thirteen-week period ended October 30, 1999 from the
prior year period.
Cost of Sales and Occupancy Expenses. Cost of sales and occupancy expenses,
which include distribution center costs and other expenses associated with
acquiring inventory, increased to $9.3 million from $8.3 million, an increase of
11.9%. As a percentage of sales, it increased to 87.7% from 78.2%. The dollar
increase was due to increased store occupancy expenses from more permanent
stores in operation in the third quarter of fiscal 1999 and increased cost of
sales due to higher sales. The increase as a percentage of sales of 9.5% was
attributable to a 7.1% increase in occupancy expenses caused primarily by flat
sales volume and a 2.2% increase in cost of products sold as a result of
increased sales promotions. Distribution center costs increased .2%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $4.9 million from $4.4 million, an increase
of 11.1%. Selling, general and administrative expenses increased to support
higher sales levels and an increased number of permanent stores. As a percentage
of sales, it increased to 46.7% from 41.9%, primarily as a result of flat third
quarter sales.
7
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Interest Expense, Net. Net interest expense increased to $246,000 in the third
quarter of fiscal 1999 from $173,000 in the third quarter of fiscal 1998. This
fluctuation is primarily a result of earlier borrowings this year required due
to increased inventory purchases earlier in the year.
Net Loss. Net loss increased to $2.3 million, or 22.0% of sales, in the third
quarter of fiscal 1999 from $1.4 million, or 13.1% of sales in the third quarter
of fiscal 1998.
Comparison of Nine Months Ended October 30, 1999 to Nine Months Ended October
31, 1998.
Sales. Sales increased to $28.5 million from $27.1 million, or 5.3%. Of the $1.4
million increase in sales: $3.1 million was attributable to sales of 13 new
permanent stores opened during the first nine months of fiscal 1999 and the net
increase in sales of 20 new permanent stores not in operation as of the
beginning of the prior year. This was offset by a $1.5 million decline in
comparable store sales and a $236,000 decline in seasonal store sales.
Comparable permanent store sales declined 9.2% for the nine month period ended
October 30, 1999 from the prior year period.
Cost of Sales and Occupancy Expenses. Cost of sales and occupancy expenses,
which include distribution center costs and other expenses associated with
acquiring inventory, increased to $24.7 million from $21.7 million, an increase
of 13.8%. As a percentage of sales, it increased to 86.9% from 80.2%. The dollar
increase was due to increased store occupancy expenses from more permanent
stores in operation in the first nine months of fiscal 1999 and increased cost
of sales due to higher sales. The increase as a percentage of sales of 6.7% was
attributable to a 6.8% increase in occupancy expenses caused by flat sales and a
.2% increase in cost of product sold. Distribution center costs decreased .3%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $13.1 million from $11.3 million, an
increase of 16.7%. Selling, general and administrative expenses increased to
support higher sales levels and an increased number of permanent stores. As a
percentage of sales, it increased to 46.1% from 41.6%, primarily as a result of
lower average sales per store.
Interest Expense, Net. Net interest expense amounted to $370,000 in the first
nine months of fiscal 1999 as compared to a net interest expense of $161,000 in
the first nine months of fiscal 1998. This fluctuation is primarily a result of
earlier borrowings required due to increased inventory purchases and lower cash
balance at the beginning of the fiscal year.
Net Loss. Net loss increased to $5.9 million, or 20.6% of sales, in the first
nine months of fiscal 1999 from $3.6 million, or 13.5% of sales, in the first
nine months of fiscal 1998.
Seasonality
The Company's business is subject to substantial seasonal variations in demand.
Historically, a significant portion of the Company's sales and all of its net
income have been realized during the months of November and December, and levels
of sales and net income have generally been substantially lower from January
through October, resulting in losses in the first three fiscal quarters.
In preparation for its holiday selling season, the Company significantly
increases inventories and related indebtedness, hires an increased number of
temporary employees in its stores and distribution center, and incurs costs in
setting up seasonal store locations. If, for any reason, the Company's sales
were to be substantially below seasonal norms during the months of November and
December, or if the Company could not hire a sufficient number of qualified
employees during the peak periods, the Company's business, financial condition
and results of
8
<PAGE>
operations would be adversely affected. Quarterly results are also affected by
the timing of new store openings and the amount of revenue contributed by
permanent and seasonal stores.
Liquidity and Capital Resources
The primary sources of the Company's cash for working capital and capital
expenditures have been net cash flows from operating activities, capital lease
financings and bank borrowings. Seasonal working capital needs have been met
through short-term borrowings under a revolving line of credit.
The Company's primary capital requirements and working capital needs are related
to capital expenditures for new stores, purchase and upgrade of management
information systems and the purchase of inventory to meet seasonal needs,
particularly inventory for the holiday selling season. Cash flow used in
operations amounted to $5.8 million in the third quarter of fiscal 1999 as
compared to $6.5 million in the third quarter of fiscal 1998 due to a slower
build-up of inventories and an increase in current liabilities. Cash flow
utilized by operations increased to $16.4 million in the first nine months of
fiscal 1999 from $14.3 million in the first nine months of 1998 due to a greater
loss, increased levels of inventories and other working capital items in the
first nine months of fiscal 1999.
The Company has a revolving line of credit for inventory financing, secured by
the Company's inventory. Under this line, the Company may borrow up to the
lesser of $24.0 million, or 40% to 75% of the Company's inventory book value
depending on the time of year. The line expires on February 28, 2002 and bears
interest at the bank's prime rate of LIBOR plus 150 basis points. The credit
agreement for this line of credit prohibits the payment of cash dividends or
purchase or redemption of the Company's capital stock in excess of $650,000 in
the aggregate in any fiscal year. As of October 31, 1999, there was $13.5
million outstanding under this line of credit, against total borrowing capacity
of $15.6 million as of that date based on 75% of the Company's inventory book
value. Primarily as a result of the holiday selling season, the Company
experiences significant seasonal fluctuations in its financing needs.
The Company also has a sub limit for up to $4.0 million for multiple term loans
to be used for new store construction, leasehold improvements and equipment.
Under this sub limit there was $2.0 million outstanding as of October 31, 1999.
As of October 31, 1999, outstanding capital lease obligations and total term
debt amounted to $2.2 million of which $226,000 represented capital lease
obligations. The capital lease obligations and long-term debt have terms
expiring in fiscal 2002.
Capital expenditures in the first nine months of fiscal 1999, net of landlord
build-out allowances, amounted to $2.3 million as compared to $3.5 million in
the first nine months of fiscal 1998. The decrease resulted from the
construction of seven fewer seasonal store locations in fiscal 1999.
In April 1998, the Company's Board of Directors authorized a stock repurchase
program of up to $650,000 of the Company's common stock. The shares may be
repurchased, from time to time for a period of up to 24 months, through open
market purchases and privately negotiated transactions, subject to the
availability of shares and other market and financial conditions. In conjunction
with the stock repurchase program, the Company received approval under its
credit agreement to acquire up to $650,000 of the Company's common stock. The
Company repurchased 318,800 shares in the third quarter of fiscal 1998 for
$649,000. In December 1998, the Company's Board of Directors authorized and
received bank approval for a second repurchase program of up to $650,000 of the
Company's common stock under terms similar to the previous stock repurchase
program. The Company repurchased 25,050 shares under the second repurchase
program during the second and third quarter of fiscal 1999 for $43,000.
9
<PAGE>
In response to softness in year-to-date sales activity within our product
segment, management developed a cash flow model projecting cash proceeds against
working capital needs through the remainder of the fiscal year. At December 14,
1999 the Company appears to be on plan with its cash flow estimates, however,
management continues actively exploring additional sources of financing for
potential working capital needs for the balance of the fiscal year and into
fiscal 2000. There are no assurances that such financings will be available.
Year 2000 Matters
The Year 2000 Issue
Many existing computer programs utilized globally use only two digits to
identify a year in the date field. These programs, if not corrected, could fail
or create erroneous results after the century date changes on January 1, 2000 or
when otherwise dealing with dates later than December 31, 1999. This "Year 2000"
issue is believed to affect virtually all companies and organizations, including
the Company.
The Company relies on computer-based technology and utilizes a variety of
third-party hardware and software. The Company's retail functions, such as
merchandise procurement and distribution, inventory management, point of sale
systems and credit card account servicing exclusively use third party software.
The Company's administrative functions, such as accounting, payroll and human
resource management also exclusively use third-party software. Third parties
with whom the Company has commercial relationships, including merchandise
vendors, banks, telecommunications services, and utilities are also highly
reliant on computer-based technology.
The Company has been in the process of resolving all significant Year 2000
issues since 1996. Since almost all the Company's information systems software
is licensed software from established software vendors, resolution is being
accomplished by means of upgrading existing software to versions which are Year
2000 compliant. At present, the Company is Year 2000 compliant with its own
internal systems with the exception of the warehouse inventory system which is
scheduled to be upgraded by December 31, 1999. All of the Company's computer
hardware is already Year 2000 compliant.
The Company's Compliance Program
Third Party Information Technology Systems
The Company has instituted a strategy of identifying and addressing Year 2000
issues affecting third-party information technology systems used by the Company
which includes contacting all third-party providers of computer hardware and
software to secure appropriate representations to the effect that such hardware
or software is or will timely be Year 2000 compliant. The Company has received
Year 2000 compliant versions of almost all third party software and has
developed contingency plans as to third-party software used by the Company in
respect of which the Company has not received adequate assurance of compliance
to date.
Non-Information Technology (IT) Systems
The Company has undertaken a review of its non-IT Systems and has implemented a
remediation program in respect of such systems that are within the control of
the Company. In addition, the Company's centralized real-estate department has
communicated with the developers, landlords and property managers of
substantially all of the Company's properties. The Company's expectation is that
the systems utilized in the management and operation of such properties which
are not within the Company's control are or will timely be Year 2000 compliant.
10
<PAGE>
Non-Information Technology (IT) Vendors and Suppliers
The Company procures its merchandise for resale and supplies for operational
purposes from a vast network of vendors located both within and outside the
United States. As a part of its contingency planning effort, the Company has
made inquires as to the Year 2000 readiness of selected vendors in order to
identify any significant exposures that may exist and established alternate
sources or strategies where necessary.
Costs
Since the cost of resolving the Year 2000 issue is included in most cases,
through existing software maintenance contracts, the incremental cost to the
Company is minimal and not material.
Risks Associated with Year 2000 Issues
The Company's Year 2000 compliance program is directed primarily towards
ensuring that the Company will be able to continue to perform three critical
functions: (i) effect sales, (ii) order, receive and distribute merchandise, and
(iii) pay its employees and vendors. It is difficult, if not impossible, to
assess with any degree of accuracy the impact on any of these three areas of the
failure of one or more aspects of the Company's compliance program.
The novelty and complexity of the issues presented and the proposed solutions
thereof and the Company's dependence on the technical skills of employees and
independent contractors and on the representations and preparedness of third
parties are among the factors that could cause the Company's efforts to be less
than fully effective.
Moreover, Year 2000 issues present a number of risks that are beyond the
Company's reasonable control, such as the failure of utility companies to
deliver electricity, the failure of telecommunications companies to provide
voice and data services, the failure of financial institutions to process
transactions and transfer funds, the failure of vendors to deliver merchandise
or perform services required by the Company and the collateral effects on the
Company of the effects of Year 2000 issues on the economy in general or on the
Company's business partners and customers in particular. Although the Company
believes that its Year 2000 compliance program is designed to appropriately
identify and address those Year 2000 issues that are subject to the Company's
reasonable control, there can be no assurance that the Company's efforts in this
regard will be fully effective or that Year 2000 issues will not have a material
adverse effect on the Company's business, financial condition or results of
operations. While the Company expects to be fully compliant with the Year 2000
with its own systems, a material financial risk could result if the Company's
vendors are unable to resolve such processing issues in a timely manner.
Contingency Plans
The Company has accessed the readiness of all relevant parties associated with
its Year 2000 compliance program, and, as can best be determined, assessed the
risks associated with Year 2000 non-compliance upon its operations. A
contingency plan has been formulated to handle any foreseen potential problems
which may result. The Company has formulated a back-up emergency plan of action
in case of any unforeseen problems which may occur on January 1, 2000.
11
<PAGE>
Forward-Looking Information
This report contains forward-looking statements regarding, among other matters,
the Company's future strategy, store opening plans, merchandising strategy and
growth. The forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Act of 1995. Forward-looking
statements address matters which are subject to a number of risks and
uncertainties. In addition to the general risks associated with the operation of
specialty retail stores in a highly competitive environment, the success of the
Company will depend on a variety of factors, such as consumer spending which is
dependent on economic conditions affecting disposable consumer income such as
employment, business conditions, interest rates and taxation. The Company's
continued growth also depends upon the demand for its products, which in turn is
dependent upon various factors, such as the introduction and acceptance of new
products and the continued popularity of existing products, as well as the
timely supply of all merchandise. Reference is made to the Company's filings
with the Securities and Exchange Commission for further discussion of risks and
uncertainties regarding the Company's business.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On September 3, 1999, the Company received notice from the Nasdaq Stock Market
of its intent to remove the Company's stock from the Nasdaq National Market
System as a result of the Company's non-compliance with certain maintenance
criteria because the market value of the Company's public float does not meet
the Nasdaq National Market requirement. While the Company is appealing that
determination, no assurance can be given that the Company's stock will continue
to be listed on the National Market System. In the event the Company is not
successful in its appeal, the Company will request that its common stock be
listed on The Nasdaq Small Cap Market.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
Exhibit 11 Computation of Per Share Net Loss
Exhibit 27 Financial Data Schedule
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed with the Securities and Exchange Commission
during the third quarter of fiscal 1999.
12
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SIGNATURE
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.
Dated: December 13, 1999
WORLD OF SCIENCE, INC.
(Registrant)
/s/ Charles A. Callahan
Charles A. Callahan
Vice President of Finance
Chief Financial Officer and Assistant Secretary
(Signed on behalf of the registrant and as Principal
Accounting and Financial Officer)
13
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EXHIBIT 11
COMPANY: WORLD OF SCIENCE, INC.
TICKER: WOSI
EXCHANGE: NMS
FORM-TYPE: 10-Q
Exhibit 11. Statement re Computation of Per Share Net Loss
FILING-DATE: December 14, 1999
Exhibit 11
WORLD OF SCIENCE, INC.
COMPUTATION OF PER SHARE NET LOSS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended
-------------
Basic Loss Per Share: October 30, 1999 October 31, 1998
---------------- ----------------
<S> <C> <C>
Net loss $(2,326) $(1,384)
Weighted average common shares outstanding 4,739 4,868
Basic loss per share $ (0.49) $ (0.28)
======= =======
Diluted Loss Per Share:
Net loss $(2,326) $(1,384)
Weighted average common shares outstanding 4,739 4,868
Diluted loss per share $ (0.49) $ (0.28)
======= =======
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> OCT-30-1999
<CASH> 95
<SECURITIES> 0
<RECEIVABLES> 548
<ALLOWANCES> 0
<INVENTORY> 20,837
<CURRENT-ASSETS> 27,124
<PP&E> 18,453
<DEPRECIATION> 7,698
<TOTAL-ASSETS> 38,751
<CURRENT-LIABILITIES> 21,171
<BONDS> 0
0
0
<COMMON> 51
<OTHER-SE> 16,557
<TOTAL-LIABILITY-AND-EQUITY> 38,751
<SALES> 28,484
<TOTAL-REVENUES> 28,484
<CGS> 24,749
<TOTAL-COSTS> 24,749
<OTHER-EXPENSES> 13,138
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 386
<INCOME-PRETAX> (9,773)
<INCOME-TAX> (3,909)
<INCOME-CONTINUING> (5,864)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,864)
<EPS-BASIC> (1.23)
<EPS-DILUTED> (1.23)
</TABLE>
