<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 2
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
[FEE REQUIRED]
For the fiscal year ended August 31, 1998
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
[NO FEE REQUIRED]
For the transition period from to
0-05531
Commission File Number
GERALD STEVENS, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C>
DELAWARE 41-0719035
- --------------------------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
No.)
of incorporation or organization)
301 EAST LAS OLAS BOULEVARD, SUITE 300
FT. LAUDERDALE, FLORIDA 33301
- --------------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(954) 713-5000
---------------------------
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common stock par value of $.01
------------------------------
(Title of class)
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 [__]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[ ]
State issuers' revenues for its most recent fiscal year $13,391,000.
On October 7, 1998, the aggregate market value of the Common Stock based
upon the average bid and asked prices as reported by the NASD held by
nonaffiliates was approximately $13,416,000, based upon the assumption that only
officers, directors and 10% shareholders are affiliates.
As of October 7, 1998, 7,929,223 common shares were outstanding.
Documents Incorporated by Reference
Portions of the Company's definitive proxy statement relating to the 1998
annual meeting of shareholders are incorporated by reference into Part III of
this form 10-KSB.
Transitional Small Business Disclosure Format (Check One): Yes [ ]; No [X]
<PAGE> 2
GERALD STEVENS, INC.
EXPLANATORY NOTE TO AMENDMENT NO. 2 ON FORM 10-KSB/A
This Amendment No. 2 on Form 10-KSB/A is being filed for the purpose of
amending Gerald Stevens, Inc.'s (formerly known as Florafax International, Inc.,
the "Registrant") Annual Report on Form 10-KSB for the fiscal year ended August
31, 1998, as amended by Amendment No. 1 on Form 10-KSB/A, filed with the
Securities and Exchange Commission on April 12, 1999 ("Amendment No. 1," and
together with the Registrant's Annual Report on Form 10-KSB for the fiscal year
ended August 31, 1998, the "1998 Annual Report"), to: (1) include the Report of
Independent Certified Public Accountants of Arthur Andersen LLP ("Arthur
Andersen") (the "Andersen Report") pursuant to Item 7 of Form 10-KSB and (2)
amend the Report of Independent Certified Public Accountants of Ernst & Young
LLP ("Ernst & Young") dated as of October 8, 1998 (the "Ernst Report"). The
Andersen Report relates to Arthur Andersen's audit of the Registrant's restated
financial statements for the fiscal year ended August 31, 1998 (the "1998
Financial Statements"), which were filed with Amendment No. 1 and which are
included herein for your reference. Previously, Ernst & Young LLP provided the
Ernst Report in connection with the Registrant's filing of their 1998 Annual
Report relating to the Registrant's 1998 financial statements as well as to the
Registrant's financial statements for the fiscal year ended 1997 (the "1997
Financial Statements").
On May 12, 1999, the Registrant dismissed Ernst & Young as its independent
auditor. On May 13, 1999, the Registrant engaged Arthur Andersen as its
independent auditor. The Registrant's change of independent auditors is reported
on their Current Report on Form 8-K, which was filed with the Commission on May
13, 1999. The Andersen Report supercedes the Ernst Report to the extent that the
Ernst Report relates to the 1998 Financial Statements appearing in the
Registrant's 1998 Annual Report. The Report of Independent Certified Public
Accountants provided herein by Ernst & Young amends the Ernst Report to delete
all references to the 1998 Financial Statements.
The items of Form 10-KSB, as amended by Amendment No. 1 on Form 10-KSB/A,
affected by this Amendment No. 2 on Form 10-KSB/A are as follows:
Item 7. Financial Statements
Report of Independent Certified Public Accountants of
Arthur Andersen LLP
Report of Independent Certified Public Accountants of
Ernst & Young LLP
Item 13. Exhibits and Reports on Form 8-K:
Exhibit 23.1 -- Consent of Ernst & Young LLP
Exhibit 23.2 -- Consent of Arthur Andersen LLP
Exhibit 27 -- Financial Data Schedule
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Florafax International, Inc.:
We have audited the accompanying consolidated balance sheet of Florafax
International, Inc. (a Delaware corporation) and subsidiaries as of August 31,
1998, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Florafax International, Inc. and subsidiaries as of August 31, 1998, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida
May 13, 1999
3
<PAGE> 4
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Florafax International, Inc.
We have audited the consolidated balance sheets of Florafax International,
Inc. as of August 31, 1997 and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the two years in the period
ended August 31, 1997. These financial statements are the responsibility of the
management of Florafax International, Inc. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Florafax International, Inc. at August 31, 1997, and the consolidated results of
its operations and its cash flows for each of the two years in the period August
31, 1997, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Tampa, Florida
October 8, 1998
4
<PAGE> 5
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31
-------------------------
1998 1997
------------ -------
(IN THOUSANDS, EXCEPT
SHARE DATA)
(RESTATED
SEE
NOTE 15)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,438 $ 4,170
Restricted cash........................................... 106 97
Accounts receivable:
Trade, less allowances of $482 at August 31, 1998 and $509
at August 31, 1997........................................ 1,421 1,317
Charge card issuers.................................... 211 343
Other.................................................. 110 94
------- -------
1,742 1,754
Deferred tax asset, net of allowance........................ 301 264
Prepaid and other assets.................................... 165 40
------- -------
Total current assets................................... 5,752 6,325
------- -------
Property and equipment, at cost:
Fixtures and equipment.................................... 1,594 1,324
Computer systems.......................................... 977 798
Communication systems..................................... 1,121 1,010
Land, building and leasehold improvements................. 1,282 524
------- -------
4,974 3,656
Accumulated depreciation and amortization................. 2,992 2,713
------- -------
1,982 943
------- -------
Other assets:
Excess of cost over net assets of acquired businesses....... 1,995 1,995
Marketing techniques, net of accumulated amortization of
$50....................................................... 100 --
Deferred tax asset, net of allowance........................ 1,881 1,236
Other intangible assets..................................... 176 95
------- -------
4,152 3,326
------- -------
Total assets........................................... $11,886 $10,594
======= =======
</TABLE>
See accompanying notes.
5
<PAGE> 6
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
<TABLE>
<CAPTION>
AUGUST 31
----------------------
1998 1997
-------- --------
(IN THOUSANDS, EXCEPT
SHARE DATA)
(RESTATED
SEE
NOTE 15)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt........................ $ 80 $ --
Accounts payable............................................ 3,986 3,754
Accrued member benefits..................................... 116 147
Accrued credit card fees.................................... 440 359
Other accrued liabilities................................... 637 949
------- -------
Total current liabilities.............................. 5,259 5,209
Long-term debt, less current maturities..................... 2,018 80
Membership security deposits................................ 52 52
------- -------
Total liabilities...................................... 7,329 5,341
------- -------
Stockholders' equity:
Preferred stock ($10 par value, 600,000 shares authorized at
August 31, 1998 and 1997)................................. -- --
Common stock ($0.01 par value, 70,000,000 shares authorized,
8,449,198 and 8,253,004 issued at August 31, 1998 and
1997, respectively)....................................... 85 83
Additional paid-in capital.................................. 10,211 10,108
Accumulated deficit......................................... (4,123) (3,500)
Treasury stock, at cost (519,975 and 480,975 shares at
August 31, 1998 and 1997, respectively)................... (1,616) (1,438)
------- -------
Total stockholders' equity............................. 4,557 5,253
------- -------
Total liabilities and stockholders' equity............. $11,886 $10,594
======= =======
</TABLE>
See accompanying notes.
6
<PAGE> 7
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
----------------------
1998 1997
--------- -------
(IN THOUSANDS, EXCEPT
SHARE DATA)
(RESTATED
SEE
NOTE 15)
<S> <C> <C>
Net revenues:
Member dues and fees...................................... $ 2,778 $ 2,392
Floral order processing................................... 7,189 6,162
Directory and advertising fees............................ 1,476 1,405
Charge card processing.................................... 1,822 1,618
Other revenue............................................. 126 32
------- -------
13,391 11,609
------- -------
Expenses:
General and administrative................................ 6,524 5,838
Selling, advertising and promotion........................ 4,085 3,209
Directory publishing...................................... 315 383
Contract modification charge.............................. 3,495
Depreciation and amortization............................. 403 261
------- -------
14,822 9,691
------- -------
Operating income (loss)..................................... (1,431) 1,918
------- -------
Other income (expense):
Interest expense.......................................... (82) (6)
Interest income........................................... 165 183
Other..................................................... 43 819
------- -------
126 996
------- -------
Income (loss) before income taxes........................... (1,305) 2,914
------- -------
Income tax (expense) benefit:
Current income taxes........................................ -- (118)
Deferred income taxes....................................... 682 637
------- -------
682 519
------- -------
Net income (loss)........................................... $ (623) $ 3,433
======= =======
Weighted average common and common equivalent shares
outstanding:
Basic..................................................... 7,824 8,076
Diluted................................................... 7,824 8,715
Basic earnings (loss) per share:
Net income................................................ $ (.08) $ 0.43
Diluted earnings (loss) per share:
Net income................................................ $ (.08) $ 0.39
</TABLE>
See accompanying notes.
7
<PAGE> 8
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ADDITIONAL
NUMBER OF PAR PAID-IN ACCUMULATED TREASURY
SHARES ISSUED VALUE CAPITAL STOCK STOCK TOTAL
------------- ----- ---------- ----------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at August 31, 1996........ 8,233 $83 $10,087 $(6,933) $ -- $ 3,237
Issuance of common stock.......... 20 -- 21 -- -- 21
Purchase of treasury stock........ -- -- -- -- (1,438) (1,438)
Net income........................ -- -- -- 3,433 -- 3,433
----- --- ------- ------- ------- -------
Balance at August 31, 1997........ 8,253 83 10,108 (3,500) (1,438) 5,253
Issuance of common stock.......... 196 2 27 -- -- 29
Purchase of treasury stock........ -- -- -- -- (178) (178)
Compensation expense under stock
option plan..................... -- -- 76 -- -- 76
Net income........................ -- -- -- (623) -- (623)
----- --- ------- ------- ------- -------
Balance at August 31, 1998
(Restated See Note 15).......... 8,449 $85 $10,211 $(4,123) $(1,616) $(4,557)
===== === ======= ======= ======= =======
</TABLE>
See accompanying notes.
8
<PAGE> 9
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
---------------------
1998 1997
-------- -------
(IN THOUSANDS)
(RESTATED
SEE
NOTE 15)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................................... $ (623) $3,433
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Deferred income tax expense (benefit).................. (682) (637)
Depreciation........................................... 279 179
Amortization........................................... 124 82
Compensation expense under stock option plan........... 76 --
Provision for doubtful accounts........................ 127 170
Changes in operating assets and liabilities:
Accounts receivable.................................... (115) (323)
Prepaid and other assets............................... (125) 14
Other assets........................................... (205) 84
Accounts payable....................................... 232 (159)
Accrued liabilities and member benefits................ (262) 249
Membership security deposits........................... (1)
------- ------
Net cash provided by (used in) operating activities....... (1,174) 3,091
------- ------
INVESTING ACTIVITIES
Capital expenditures...................................... (1,318) (844)
Change in restricted cash................................. (9) 2
Investment in common stock................................ (100) --
------- ------
Net cash used in investing activities..................... (1,427) (842)
------- ------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt.................. 2,500 --
Proceeds from exercise of stock options and warrants...... 29 21
Purchase of treasury stock................................ (178) (1,438)
Payments on long-term debt................................ (482) (333)
------- ------
Net cash used in financing activities..................... 1,869 (1,750)
------- ------
Net increase (decrease) in cash and cash equivalents...... (732) 499
Cash and cash equivalents at beginning of year............ 4,170 3,671
------- ------
Cash and cash equivalents at end of year.................. $ 3,438 $4,170
======= ======
Supplemental disclosures of cash flow information:
Cash paid during the year for interest................. $ 53 $ 1
======= ======
Cash paid during the year for income taxes............. $ 82 $ 52
======= ======
</TABLE>
See accompanying notes.
9
<PAGE> 10
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Florafax
International, Inc. and its wholly-owned subsidiaries (the Company). All
significant intercompany accounts and transactions have been eliminated in
consolidation. Florafax International, Inc. is principally engaged in the
flowers-by-wire business of generating floral orders and providing floral order
placement services to retail florists throughout the United States. The Company
is also engaged in the business of credit and charge card processing for
third-party companies.
(B) CASH AND CASH EQUIVALENTS
The Company considers as cash equivalents all highly liquid overnight
investing accounts at banking institutions plus other interest bearing deposits
having original maturities of less than three months.
(C) RESTRICTED CASH
Restricted cash at August 31, 1998 and 1997 pertains to the Company's
credit card processing agreement with its sponsoring bank totaling $106 and $97,
respectively.
(D) FLORAL ORDER PROCESSING -- REVENUE RECOGNITION
Floral order processing net revenues consist primarily of two types of
transactions. First, there are orders placed through the Company's order center,
which are recorded at the time the order is placed which coincides with
delivery. Second, there are orders sent between the Company's member florists,
which are recorded upon receipt of the reporting document, prepared by the
delivering florist, that confirms delivery.
(E) MEMBER DUES AND FEES AND DIRECTORY AND ADVERTISING FEES
At the time a florist applies for membership they are billed a non
refundable account set up fee. The account set up fee is ninety-nine dollars,
and is recognized as revenue at the time the florist is accepted as a member to
offset costs incurred. Once a florist has been accepted as a member, they are
billed dues and advertising fees on a monthly basis, and those billings are
recognized as income at that time. Monthly dues and advertising fees are billed
at different rates and amounts, depending on the location of the florist and the
size of the advertisement placed by the florist. The benefits of membership
include the ability to send and receive orders to and from other members,
receive orders generated by the Company via fax or telephone, the ability to
send gift baskets anywhere in the country, and certain other benefits. A florist
may cancel their membership at any time, but are responsible for monthly dues
and advertising fees as long as they remain in the membership directory.
Billings for directories occur twice per year, while the actual directories are
produced and distributed several times per year. Directory revenues are deferred
until the directories are distributed to member florists.
(F) CHARGE CARD PROCESSING
Charge card processing revenue represents fees for processing credit card
transactions for members and others. Revenues are recognized when the service is
provided.
10
<PAGE> 11
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
(G) CONCENTRATION OF CREDIT RISK
A significant portion of the Company's accounts receivables are
concentrated in the floral wire service industry. Credit risk is inherent in the
floral wire service industry. Consequently, to reduce this risk the Company
reviews new member applications for credit worthiness. If a florist applying for
membership does not meet certain credit standards the florists application for
membership is usually declined. Once a florist has been accepted as a member,
the account is monitored by accounts receivable analysts who maintain continuous
direct contact with the florist. If the account becomes delinquent, the florist
is turned over to a collection agency to begin immediate collection procedures.
(H) PROPERTY AND EQUIPMENT DEPRECIATION
The provisions for depreciation and amortization are computed using the
straight-line method for financial reporting purposes with the following
estimated useful lives:
<TABLE>
<CAPTION>
DESCRIPTION ESTIMATED USEFUL LIVES
- ----------- ----------------------
<S> <C>
Fixtures and equipment.................................. 2 to 10 years
Computer systems........................................ 3 to 10 years
Communication systems................................... 2 to 5 years
Building and leasehold improvements..................... 3 to 30 years
</TABLE>
(I) AMORTIZATION OF EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESSES
(GOODWILL)
Goodwill of $1,995 arose prior to October 31, 1970 and, therefore, is not
required to be amortized.
In accordance with FASB 121, Accounting for the Impairment of Long-Lived
Assets and Assets to be disposed of, the Company periodically analyzes the
carrying value of its goodwill and other long-lived assets for indicators of
impairment, using an undiscounted projected cash flow approach. If such cash
flows indicate an impairment is present, the Company would make adjustments to
the carrying value of long-lived assets based upon appraisals, discounted cash
flows, or otherwise as the Company considers appropriate. After reviewing the
results and considering other qualitative factors, management is of the opinion
that the carrying amount of the goodwill has not been impaired.
(J) INCOME TAXES
The Company accounts for income taxes using Financial Accounting Standard
Board (FASB) Statement No. 109, Accounting for Income Taxes. FASB Statement No.
109 requires the asset and liability method of accounting for income taxes.
Under the asset and liability method of FASB Statement No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
recovered or settled. Under FASB Statement No. 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recorded in income in the
period that includes the enactment date.
(K) WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
The weighted average number of shares outstanding is adjusted to recognize
the dilutive effect, if any, of outstanding stock options and warrants.
11
<PAGE> 12
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
(L) RECLASSIFICATION OF PRIOR YEAR BALANCES
Certain prior year balances have been reclassified in order to conform to
current year presentation.
(M) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
(N) IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued Statement No. 128, Earnings per Share,
which is effective for years ending after December 15, 1997. As a result, the
Company was required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements, primary
earnings per share is replaced with basic earnings per share which excludes the
dilutive effect of stock options and other common stock equivalents. Basic
earnings (loss) per share is higher than primary earnings per share by $.(.01)
and $.03 for the fiscal years ending August 31, 1998 and 1997, respectively.
Diluted earnings per share was not different than fully diluted earnings per
share.
SEGMENTS
In June 1997, the FASB issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related Information, which supersedes FASB Statement No.
14. The Statement uses a management approach to report financial and descriptive
information about a company's operating segments. Operating segments are
revenue-producing components of the enterprise for which separate financial
information is produced internally for the Company's management. The Statement
is effective for financial statements for fiscal years beginning after December
15, 1997 and, accordingly, will apply to the Company's fiscal year ended August
31, 1999. The Company believes that its current segment disclosures will not be
materially affected upon adoption.
COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income. The Statement requires that total comprehensive income and comprehensive
income per share be disclosed with equal prominence as net income and earnings
per share. Comprehensive income is defined as all changes in stockholders'
equity exclusive of transactions with owners such as capital contributions and
dividends. The statement is effective for fiscal years beginning after December
15, 1997, and accordingly will apply to the Company's fiscal year ended August
31, 1999. Currently, the Company believes that the future tax benefits for
compensation deductions, related to the Management Plan (Note 5), in excess of
amounts recorded for accounting purposes, which are reflected as additions to
paid-in capital are the only differences between net income and comprehensive
income.
(O) STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with APB
No. 25, Accounting for Stock Issued to Employees, and, in cases where fixed plan
exercise prices equal or exceed fair market value, recognizes no compensation
expense for the stock option grants.
12
<PAGE> 13
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
In cases where exercise prices are less than fair value, compensation is
recognized over the period of performance or the vesting period or, in cases of
the variable plan, compensation expense is recognized at the time when both
exercise price and the number of shares are determinable.
(P) ADVERTISING COSTS
Advertising costs associated with related to the cost of coupons included
in corporate partner advertising campaigns are expensed upon first showing.
Advertising expense amounted to $1,350 and $881 in 1998 and 1997, respectively.
2. LONG-TERM DEBT
At August 31, 1998, long-term debt consisted of a bank line of credit in
the amount of $2,018 with interest payable monthly at the prime rate of the
lending institution, currently 8 1/2%, collateralized by substantially all
assets of the Company. Under the terms of the note, the Company may borrow up to
$5,000 until February 16, 2000. No principal payments are due until February 16,
2000, at which time any principal amounts outstanding at the end of this period
will convert to a 36-month fully amortizing loan based on level principal
payments plus interest. A one-time commitment fee related to this note amounted
to $13. Approximately $2,982 is available for future borrowings under the bank
line of credit.
At August 31, 1998 and 1997, current maturities of long-term debt included
a 5% subordinate debenture in the amount of $80, maturing on December 27, 1998
with interest payable annually on December 31.
Scheduled maturities of notes payable at August 31, 1998 for each of the
next five years and thereafter are as follows:
<TABLE>
<S> <C>
1999........................................................ $ 80
2000........................................................ 336
2001........................................................ 673
2002........................................................ 673
2003........................................................ 336
------
2,098
Current portion............................................. 80
------
$2,018
======
</TABLE>
3. LEASES
Noncancelable lease obligations of the Company for annual payments under
various operating leases for buildings and equipment are as follows:
<TABLE>
<CAPTION>
MINIMUM
LEASE
PAYMENTS
--------
<S> <C>
1999........................................................ $ 84
2000........................................................ 56
2001........................................................ 49
2002........................................................ 47
2003........................................................ 2
----
$238
====
</TABLE>
13
<PAGE> 14
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LEASES -- (CONTINUED)
Total rental expense for years 1998 and 1997, which includes other than
noncancelable agreements, was $156 and $261, respectively. Of these amounts,
annual rentals for office facilities for years 1998 and 1997 were $49 and $155,
respectively. Until January 1998 the Company's building lease for its Vero Beach
location (annual rental $33 plus sales tax) was with a relative of the Chairman
of the Board of Directors. In January 1998, the company purchased this property
(see note 8 to the consolidated financial statements).
4. CONTINGENCIES
During 1990, the Company filed a lawsuit against GTE Market Resources, Inc.
(GTE/MR) for failure on the part of GTE/MR to fulfill certain contractual
telecommunication services on behalf of the Company. On November 23, 1993, a
jury awarded the Company $1,481. GTE/MR appealed the case. In 1997 the Oklahoma
Supreme Court upheld the decision of the trial court, and ruled in favor of the
Company. The Company recognized a pretax gain, net of related legal fees, of
$1,041 resulting from the award, which is included in other income in the
Consolidated Statement of Income for 1997.
5. STOCKHOLDERS' EQUITY
The Company has authorized a total of 600,000 shares of preferred stock
with a par value of ten dollars. At August 31, 1998 and 1997, there were no
shares of preferred stock issued.
On October 26, 1995, the Board of Directors approved a Nonemployee
Directors' Stock Option Plan ("Director Plan"). On January 30, 1996, the
shareholders of the Company approved the Director Plan. Under the terms of the
Director Plan each nonemployee director shall be granted an option to purchase
20,000 shares at fair market value as of the date the Director is elected as a
Board member. After the initial grant to the directors, each director shall be
granted additional options to purchase 20,000 shares upon each respective
reelection to the Board of Directors. At August 31, 1998, 500,000 shares of the
Company's common stock were authorized under the Director Plan, options covering
260,000 shares have been granted which expire on various due dates through
January 30, 2008. As of August 31, 1998, none of the options have been
exercised.
On October 26, 1995, the Board of Directors approved a Management Incentive
Stock Plan ("Management Plan"). On January 30, 1996, the shareholders of the
Company approved the Management Plan. Under the terms of the Management Plan,
the Board of Directors, at their discretion, may grant options to purchase
common shares of the Company to various employees of the Company. The maximum
number of options which may be granted under the Management Plan is 1,000,000.
As of August 31, 1998, options covering 355,000 shares have been granted which
expire on various dates through November 13, 2006. Options exercised under this
plan during 1998 and 1997 were 11,000 and 1,000, respectively.
Options granted to employees under the Management Plan vest 25% upon
issuance with additional vesting of 25% after each year of continuous
employment. As of August 31, 1998 and 1997, options exercisable under the
Management Plan totaled 199,000 and 119,000, respectively.
On November 16, 1996 the Board of Directors granted options to purchase
50,000 shares of common stock at fair market value to a Board member. This
option vested 25% upon issuance with additional vesting of 25% each year. As of
August 31, 1998, none of these options had been exercised.
On June 25, 1997, the Board of Directors granted options for the purchase
of 305,000 shares of common stock at fair market value to officers and key
employees of the Company at an exercise price of $4 per share. These options
vest in 25% increments when the market price of the Company's common stock
reaches $5.00, $7.50, $10.00 and $12.50 per share, respectively, for twenty
consecutive trading days. Unexercised vested options expire in 2006. The portion
of unvested options, if any, expire in the year 2002. Compensation expense for
these variable plan options is recorded when the option vests, at the amount
that the targeted market price
14
<PAGE> 15
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. STOCKHOLDERS' EQUITY -- (CONTINUED)
exceeds the exercise price. As of August 31, 1998, 76,000 of these shares had
vested and were exercisable (none at August 31, 1997). Compensation expense of
$76 was recorded for the year ended August 31, 1998 (none at August 31, 1997).
On January 28, 1997 the shareholders approved an increase in the number of
shares of authorized common stock from 18,000,000 to 70,000,000.
In connection with the issuance of a previous financing, the Company issued
warrants to purchase 650,000 shares of its common stock with an exercise price
of $1.00 per share. During fiscal year 1997, 19,000 warrants were exercised for
total proceeds of $19. During fiscal year 1998, 219,000 warrants were exercised
in a cashless exercise, as allowed in the warrant agreement for 174,000 shares
of common stock. Additionally, 9,000 warrants were exercised for total proceeds
of $9. At August 31, 1998, the Company had 403,000 warrants outstanding, all of
which are currently exercisable. All of these warrants expire on January 1,
2001.
Information regarding stock options for years 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
NUMBER EXERCISE PRICE TOTAL
OF SHARES RANGE PER SHARE EXERCISE PRICE
--------- --------------- --------------
<S> <C> <C> <C>
Shares under option at August 31,
1998............................................... 957,000 $1.41 to $5.88 $2,978
1997............................................... 888,000 $1.41 to $4.00 $2,529
Options granted during year ended August 31,
1998............................................... 80,000 $5.88 $ 470
1997............................................... 668,000 $2.66 to $4.00 $2,204
Options exercised during year ended August 31,
1998............................................... 11,000 $1.41 to $2.66 $ 20
1997............................................... 1,000 $1.41 $ 1
Options expired or canceled during year ended
August 31,
1998............................................... 1,000 $1.41 $ 1
1997............................................... -- -- $ --
Options exercisable at August 31, 1998............. 560,000 $1.41 to $5.88 $1,651
Shares reserved at August 31, 1998 for:
Director stock option plan....................... 500,000
---------
Management stock option plan..................... 988,000
---------
1,488,000
=========
</TABLE>
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, Accounting and Disclosure of Stock-Based Compensation
(Statement 123), which encourages, but does not require companies to recognize
stock awards based on their fair value at the date of grant.
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted subsequent to December 31, 1994, under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1998 and 1997: risk free interest rates of 6.0%; dividend yield
of zero; volatility factors of the expected market price of the Company's common
stock based on historical trends; and weighted-average expected lives of the
options from four to ten years.
Option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's employee
stock options have characteristics significantly different
15
<PAGE> 16
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. STOCKHOLDERS' EQUITY -- (CONTINUED)
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
pro forma information is as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------
(RESTATED
SEE NOTE 15)
<S> <C> <C>
Pro forma net income (loss)............................ $(1,120) $3,016
Pro forma earnings (loss) per share:
Basic............................................. $ (0.14) $ 0.37
Diluted........................................... (0.14) 0.35
Weighted average shares:
Basic............................................. 7,824 8,076
Diluted........................................... 7,824 8,715
</TABLE>
6. INCOME TAXES
The components of the income tax provision (benefit) as of August 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------------ -----
(RESTATED
SEE NOTE 15)
<S> <C> <C>
Current income taxes................................... $ -- $ 118
Deferred income taxes.................................. (682) (637)
----- -----
Income tax provisions.................................. $(682) $(519)
===== =====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred income taxes as of August 31, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------
(RESTATED
SEE NOTE 15)
<S> <C> <C>
Allowances for bad debts............................... $ 181 $ 191
Accrued liabilities and other.......................... 119 73
Depreciation and amortization.......................... 155 216
Net operating losses................................... 1,874 1,110
Compensation under stock option plan................... --
General business credits............................... 232 456
Basis difference in intangible assets.................. 26 --
------ ------
2,587 2,046
Valuation allowance.................................... (405) (546)
------ ------
Total deferred taxes.............................. $2,182 $1,500
====== ======
</TABLE>
FASB 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. At
August 31, 1998, the remaining valuation allowance of $405 consists primarily of
certain capital losses that do not meet the requirements for recognition as an
asset, as well as tax credits in the amount of
16
<PAGE> 17
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES -- (CONTINUED)
$155 that are not expected to be realized. This represents a change in the
valuation allowance for the current year of $ 141 as compared to a change of
$1,606 in the prior year.
As of August 31, 1998, the Company has available net operating loss
carryforwards of $4,980, which expire as follows:
<TABLE>
<CAPTION>
EXPIRATION DATE AMOUNT
- --------------- ------
<S> <C>
2002................................................... $ 135
2005................................................... 22
2007................................................... 1,473
2008................................................... 1,625
2009................................................... 486
2013................................................... 1,239
------
$4,980
======
</TABLE>
FASB 109 requires deferred tax assets related to net operating loss
carryforwards to be allocated between current and noncurrent based upon the
reversal date of the temporary differences. It was not anticipated that the
majority of the net operating losses would be used to offset income in 1998 and
1999, therefore the carryforwards were classified as non current as of August
31, 1998 and August 31, 1997.
7. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance
sheet for cash and cash equivalents approximate their fair values.
Accounts receivable and accounts payable: The carrying amounts reported in
the balance sheet for accounts receivable and accounts payable approximate their
fair value.
Long-term debt: The fair values of the Company's long-term debt are
estimated using discounted cash flow analyses based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements. The
carrying amounts reported in the balance sheet for long-term debt approximate
their fair value.
8. RELATED PARTY TRANSACTIONS
During 1998, the Company purchased the land and buildings used for its Vero
Beach operations for approximately $673. The transaction was financed with cash
from operations. The property was previously leased from a trust administered by
a relative of the Chairman of the Board.
9. FOURTH QUARTER ADJUSTMENTS
As more fully discussed in Note 6, the Company reduced its valuation
allowance against deferred tax assets 1997. The reduction resulted in a credit
to income of $637 in 1997. The reduction was recorded in the fourth quarter of
1997, when all of the information upon which to make the estimate became
available to management of the Company.
17
<PAGE> 18
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RETIREMENT PLAN
The Company sponsors a 401(k) retirement plan covering all full-time
employees who have completed one year of service. Eligible employees may elect
quarterly to contribute up to 15% of their compensation, up to the maximum
contribution allowed by law. The Company matches contributions up to a maximum
of 3% of compensation. In connection with the matching contribution, the
Company's contribution in 1998 and 1997 was $41 and $30, respectively.
11. OTHER INCOME
Other income in 1997 of $819 consists primarily of the GTE/MR lawsuit
settlement proceeds (see Note 4 to the consolidated financial statements),
reduced by a charge to earnings of the unamortized balance of a terminated
consulting agreement and a contingency reserve.
12. BUSINESS SEGMENTS
The Company operates in two business segments: Flowers-by-wire services and
charge card processing for member florists, and charge card processing for
customers outside the floral industry. Net revenues, operating income before and
after allocating general and administrative expenses, identifiable assets,
depreciation expense and capital expenditures for the two segments are provided
for below:
<TABLE>
<CAPTION>
1998 1997
------------ -------
(RESTATED
SEE NOTE 15)
<S> <C> <C>
Net revenues:
Flowers-by-wire........................................... $12,119 $10,416
Charge card processing.................................... 1,272 1,193
------- -------
$13,391 $11,609
======= =======
Operating profit (loss) after allocation of general and
administrative expenses:
Flowers-by-wire........................................... $ (52) $ 2,690
Charge card processing.................................... 68 98
------- -------
Operating profit before allocation of Corporate
overhead............................................... 16 2,788
------- -------
Corporate overhead........................................ 1,447 870
------- -------
Operating income (loss)..................................... $(1,431) $ 1,918
======= =======
Identifiable assets:
Flowers-by-wire........................................... $ 5,992 $ 4,139
Charge card processing.................................... 569 472
General corporate assets.................................. 5,325 5,983
------- -------
$11,886 $10,594
======= =======
Depreciation expense:
Flowers-by-wire........................................... $ 220 $ 146
Charge card processing.................................... 59 33
------- -------
$ 279 $ 179
======= =======
Capital expenditures:
Flowers-by-wire........................................... $ 1,021 $ 625
Charge card processing.................................... 297 219
------- -------
$ 1,318 $ 844
======= =======
</TABLE>
18
<PAGE> 19
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. MARKETING PROJECTS, INC. AGREEMENT
Prior to May 1, 1998, under the terms of an existing marketing services
agreement, the Company was required to pay Marketing Projects, Inc. ("MPI")
commissions on orders generated from marketing partners solicited by MPI. During
the years ended August 31, 1998, 1997 and 1996 the Company recorded commissions
expense of $1,050, $1,455 and $1,219 relative to the agreement.
Effective May 1, 1998, the Company entered into an agreement with MPI that
(1) modified the rights and obligations of both parties under the marketing
servicing agreement and (2) provided for the acquisition of MPI's proprietary
marketing systems by the Company. Also on May 1, 1998, the Company entered into
a non-compete and non-disclosure agreement with MPI and the principal employees
of MPI. Total consideration of $3,670 was paid to MPI at the time of closing and
the Company is further obligated to pay up to $125 in cash in each of the
following eight fiscal quarters, contingent upon the attainment of quarterly
revenue targets.
Of total consideration paid, $150 has been allocated to the purchase of
MPI's proprietary marketing systems and $100 has been allocated to the
non-compete agreement, with amortization provided over useful lives of 1 and 2
years, respectively. These assets, net of accumulated amortization of $62, are
included in other intangible assets at August 31, 1998.
Under the original marketing services agreement, the Company was obligated
to pay MPI commissions equaling 8% of floral orders generated from marketing
partners solicited by MPI. This 8% commission was continuously payable to MPI
even in the event the marketing services agreement was terminated by either
party. As a result of the May 1, 1998 contract modification, the Company is no
longer obligated to pay any commissions to MPI on future floral orders generated
from marketing partners solicited by MPI prior to May 1, 1998.
The Company believes that this contract modification will result in the
realization of significant cost savings in future years due to the elimination
of the 8% MPI commission obligation. The Company further believes that its
future revenue stream and support requirements relative to these marketing
partner arrangements will be generally unaffected by the contract modification.
Further, the May 1, 1998 payment also served to compensate MPI for the loss of
commissions that would have otherwise been payable to them. Since the Company's
contractual relationship was directly with the respective marketing partners and
MPI was not expected to perform continuing services with regards to these
partners, the Company believes that the MPI contract modification represents the
termination of a marketing agreement.
Based upon the above, the Company determined that the remainder of the
consideration paid to MPI has no benefit to future periods and should be
expensed at the date of contract modification. Accordingly, $3,495 of the total
consideration paid has been recognized as a contract modification expense during
the year ended August 31, 1998.
The MPI contract modification further provided that any orders generated
from new marketing partners solicited by MPI after May 1, 1998 will be
commissionable at a 4% rate. Because this commission rate approximates the
current market rate within the floral industry and because of the uncertainty of
the amount of floral orders to be generated in the future on this reduced
commission basis, the Company allocated no value to this contract provision.
Since the quarterly contingent payments are based upon the attainment of
future revenue targets, the Company will record such payments as sales
commissions to the extent and at the time they become earned. For the quarter
ended August 31, 1998, the first contingent payment of $125 was earned and paid,
and is included within selling, advertising, and promotion expenses.
19
<PAGE> 20
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. SUBSEQUENT EVENT -- MERGER WITH GERALD STEVENS, INC.
On December 9, 1998, the Company and Gerald Stevens, Inc. entered into a
Merger Agreement that, if consummated, would result in Gerald Stevens, Inc.
becoming a wholly owned subsidiary of the Company. The merger is planned to be
effected by the issuance of our common stock. Depending on the market prices of
our common stock in effect at the time of consummation of this merger, the
Company will issue between 1.25 and 1.35 shares of our common stock for each
share of outstanding Gerald Stevens, Inc. Common Stock. Based upon the current
number of Gerald Stevens, Inc. common shares outstanding, the number of shares
of our common stock issued will range from approximately 26.0 million shares to
28.1 million shares.
15. RESTATEMENT OF 1998 CONSOLIDATED FINANCIAL STATEMENTS
As more fully discussed in Note 13, effective May 1, 1998 the Company
entered into a contract modification agreement with MPI. At that time the
contract was accounted for as a business combination. However, subsequent to the
original accounting of the transaction the Company had several discussions with
the Securities and Exchange Commission. As a result of these conversations, the
Company re-evaluated the facts and circumstances surrounding the MPI transaction
and concluded that the transaction should be accounted for as a contract
modification rather than a business combination. Consequently, the Company has
restated its financial statements to account for the transaction as a contract
modification.
The following tables reflect the more significant effects of the
restatements on certain components of operations and financial condition:
<TABLE>
<S> <C>
EFFECTS ON OPERATIONS
Operating income, as previously reported.................... $ 2,178
Adjustment related to:
Adjustment to amortization expense........................ 11
Contingent commission expense............................. (125)
Contract modification expense............................. (3,495)
-------
Restated operating (loss)................................... (1,431)
=======
Net (loss) income, as previously reported................... $ 1,768
Adjustment related to:
Adjustment to amortization expense........................ 11
Contingent commission expense............................. (125)
Contract modification expense............................. (3,495)
Income tax effect of adjustments.......................... 1,218
-------
Restated net (loss) income.................................. (623)
=======
Basic income, per share, as previously reported............. $ 0.23
Adjustment related to:
Adjustment to amortization expense........................ --
Contingent commission expense............................. (0.02)
Contract modification expense............................. (.45)
Income tax effect of adjustments.......................... .16
-------
Restated basic income (loss) per share...................... (0.08)
=======
</TABLE>
20
<PAGE> 21
FLORAFAX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. RESTATEMENT OF 1998 CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C>
Diluted income, per share, as previously reported........... $ 0.20
Adjustment related to:
Dilutive impact no longer applicable...................... 0.03
Adjustment to amortization expense........................ --
Contingent commission expense............................. (0.02)
Contract modification expense............................. (0.40)
Income tax effect of adjustments.......................... .14
-------
Restated diluted income (loss) per share.................... (0.08)
=======
EFFECTS ON FINANCIAL CONDITION
Deferred tax assets-current, as previously reported......... $ 1,265
Adjustment related to:
Reclassification of net operating loss carryforwards...... (967)
Reclassification of tax credits........................... (247)
Reclassification of valuation allowance................... 250
-------
Restated deferred tax assets-current........................ 301
=======
Excess of cost over net assets of acquired businesses, net
of amortization, as previously reported................... $ 5,704
Adjustment related to:
Adjustment to amortization expense........................ 61
Restatement of goodwill related to MPI.................... (3,770)
-------
Restated excess of cost over net assets of acquired
businesses, net of amortization........................... 1,995
=======
Accumulated deficit, as previously reported................. $(1,732)
Adjustment related to:
Adjustment to amortization expense........................ 11
Contingent commission expense............................. (125)
Contract modification expense............................. (3,495)
Income tax effect of adjustments.......................... 1,218
-------
Restated accumulated deficit................................ (4,123)
=======
</TABLE>
21
<PAGE> 22
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.
GERALD STEVENS, INC.
By: /s/ GERALD R. GEDDIS
------------------------------------
Gerald R. Geddis
President and Chief Executive
Officer
Date: May 13, 1999
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
---------- ------ ----
<C> <S> <C>
/s/ GERALD R. GEDDIS President, Chief Executive Officer May 13, 1999
- ------------------------------------------------ and Director (Principal Executive
Gerald R. Geddis Officer)
/s/ ALBERT J. DETZ Senior Vice President and Chief May 13, 1999
- ------------------------------------------------ Financial Officer (Principal
Albert J. Detz Financial and Principal Accounting
Officer)
/s/ STEVEN R. BERRARD Director May 13, 1999
- ------------------------------------------------
Steven R. Berrard
/s/ THOMAS C. BYRNE Director May 13, 1999
- ------------------------------------------------
Thomas C. Byrne
/s/ KENNETH G. PUTTICK Director May 13, 1999
- ------------------------------------------------
Kenneth G. Puttick
Director
- ------------------------------------------------
Kenneth Royer
/s/ ANDREW W. WILLIAMS Director May 13, 1999
- ------------------------------------------------
Andrew W. Williams
</TABLE>
22
<PAGE> 23
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
23.1 Consent of Ernst & Young LLP
23.2 Consent of Arthur Andersen LLP
27 Financial Data Schedule
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 333-10057), (Form S-8 No. 333-07271), and (Form S-8 No.
333-07267) of Florafax International, Inc. and the related prospectuses of our
report dated October 8, 1998, with respect to the consolidated financial
statements of Florafax International, Inc. as of August 31, 1997 and the two
years then ended, included in this Amendment No. 2 on Form 10-KSB/A.
/s/ Ernst & Young LLP
Tampa, Florida
May 12, 1999
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report dated May 13, 1999, related to Florafax
International, Inc.'s financial statements as of August 31, 1998 and for the
year then ended, included in this Amendment No. 2 on Form 10-KSB/A, into
Florafax International, Inc.'s previously filed Registration Statements File
Nos. 333-10057, 333-07271 and 333-07267.
ARTHUR ANDERSEN LLP
Miami, Florida,
May 13, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> AUG-31-1999 AUG-31-1998
<PERIOD-START> SEP-01-1998 SEP-01-1997
<PERIOD-END> NOV-30-1998 AUG-31-1998
<CASH> 3,273,000 3,544,000
<SECURITIES> 0 0
<RECEIVABLES> 2,539,000 2,224,000
<ALLOWANCES> 462,000 482,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,851,000 5,752,000
<PP&E> 5,117,000 4,974,000
<DEPRECIATION> 3,078,000 2,992,000
<TOTAL-ASSETS> 11,975,000 11,886,000
<CURRENT-LIABILITIES> 5,913,000 5,259,000
<BONDS> 1,080,000 2,098,000
0 0
0 0
<COMMON> 86,000 85,000
<OTHER-SE> 4,844,000 4,472,000
<TOTAL-LIABILITY-AND-EQUITY> 11,975,000 4,557,000
<SALES> 0 0
<TOTAL-REVENUES> 3,755,000 13,391,000
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 3,146,000 14,822,000
<LOSS-PROVISION> 37,000 127,000
<INTEREST-EXPENSE> 26,000 82,000
<INCOME-PRETAX> 515,000 (1,305,000)
<INCOME-TAX> 228,000 (682,000)
<INCOME-CONTINUING> 287,000 (623,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 287,000 (623,000)
<EPS-PRIMARY> .04 (.08)
<EPS-DILUTED> .03 (.08)
</TABLE>
