<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
-------------------------------------------------
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to_____________________________________
Commission File Number 1-8912
---------------------------------------------------------
STAR STRUCK, LTD.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 36-1805030
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1865 Palmer Avenue
Larchmont, NY 10538
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 833-0649
-------------------------------------------------------
________________________________________________________________________________
Former name, former address and former fiscal year, if changed
since last report.
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No _
---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS: Check whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by court. Yes ___
No ___
APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of
each of the issuer's classes of common equity, as of the latest practicable
date: $1.00 par value - 2,025,899 shares at November 2, 1999.
------------------------------------------------------
<PAGE>
STAR STRUCK, LTD.
-----------------
INDEX
-----
SEPTEMBER 30, 1999
------------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
-------
<S> <C>
ITEM 1.
Consolidated Balance Sheet
September 30, 1999 1 & 2
Consolidated Statements of Income-
Nine Months Ended September 30, 1999 and 1998 3
Consolidated Statements of Income-
Three Months Ended September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows-
Nine Months Ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements-
September 30, 1999 6
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations-
September 30, 1999 7 & 8
PART II. OTHER INFORMATION 9
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
STAR STRUCK, LTD.
-----------------
CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
SEPTEMBER 30, 1999
------------------
A S S E T S
-----------
<TABLE>
<CAPTION>
CURRENT ASSETS:
- ---------------
<S> <C>
Cash $ -----
Accounts Receivable, Less Allowance for Doubtful
Accounts of $108,000 1,960,000
Inventories 3,242,000
Prepaid Expenses and Other Current Assets 264,000
----------
TOTAL CURRENT ASSETS 5,466,000
-------------------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
- ---------------------------------------
Land, Building and Improvements 1,235,000
Machinery and Equipment 1,298,000
----------
2,533,000
Less: Accumulated Depreciation 1,067,000
----------
PROPERTY, PLANT AND EQUIPMENT, NET 1,466,000
---------------------------------- ----------
INTANGIBLE ASSETS AND GOODWILL, NET 587,000
- ----------------------------------- ----------
TOTAL ASSETS $ 7,519,000
------------ ==========
</TABLE>
-1-
<PAGE>
STAR STRUCK, LTD.
-----------------
CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
SEPTEMBER 30, 1999
------------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
- -------------------
<S> <C>
Accounts Payable and Accrued Expenses $ 1,893,000
Deferred Income 15,000
Current Portion of Borrowings Under Lines of Credit 225,000
Current Portion of Notes Payable 256,000
-----------
TOTAL CURRENT LIABILITIES 2,389,000
------------------------- -----------
OTHER LIABILITIES:
- -----------------
Borrowings Under Lines of Credit 1,845,000
Notes Payable 633,000
-----------
TOTAL LIABILITIES 4,867,000
----------------- -----------
SHAREHOLDERS' INVESTMENT:
- ------------------------
Preferred Shares, $1 Par Value - 500,000 Shares
Authorized; Issued and Outstanding - 0 Shares -----
Common Shares, $1 Par Value - 5,000,000 Shares
Authorized; Issued and Outstanding -
2,026,000 Shares 2,026,000
Paid-in Surplus 4,344,000
Accumulated Deficit (3,718,000)
----------
TOTAL SHAREHOLDERS' INVESTMENT 2,652,000
------------------------------ ----------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 7,519,000
---------------------------------------------- ==========
</TABLE>
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<PAGE>
STAR STRUCK, LTD.
-----------------
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
-----------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
NET SALES $ 8,904,000 $ 9,393,000
- ---------
Cost of Sales 4,448,000 5,293,000
--------- ---------
GROSS PROFIT ON SALES 4,456,000 4,100,000
--------------------- --------- ---------
OPERATING EXPENSES:
- ------------------
Selling, General and Administrative 4,368,000 4,103,000
Depreciation and Amortization 278,000 252,000
---------- ----------
TOTAL OPERATING EXPENSES 4,646,000 4,355,000
------------------------ --------- ---------
OPERATING LOSS (190,000) (255,000)
--------------
OTHER INCOME (EXPENSES):
- ----------------------
Interest Expense, Net (190,000) (153,000)
---------- ----------
Loss Before Income Taxes (380,000) (408,000)
Provision For Income Taxes ----- -----
---------- ----------
NET LOSS $ (380,000) $ (408,000)
-------- ---------- ----------
PER SHARE (Note 1)
- ---------
Basic and Diluted:
Net Loss per Common Share $ (.18) $ (.20)
----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
- ----------------------------------------
Basic and Diluted 2,026,000 2,026,000
=========== ==========
</TABLE>
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<PAGE>
STAR STRUCK, LTD.
-----------------
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
NET SALES $ 3,161,000 $ 3,281,000
- ---------
Cost of Sales 1,635,000 1,894,000
--------- ---------
GROSS PROFIT ON SALES 1,526,000 1,387,000
--------------------- --------- ---------
OPERATING EXPENSES:
- ------------------
Selling, General and Administrative 1,464,000 1,346,000
Depreciation and Amortization 93,000 84,000
--------- ---------
TOTAL OPERATING EXPENSES 1,557,000 1,430,000
------------------------ --------- ---------
OPERATING LOSS (31,000) (43,000)
--------------
OTHER INCOME (EXPENSES):
- ----------------------
Interest Expense, Net (73,000) (53,000)
--------- ---------
Loss Before Income Taxes (104,000) (96,000)
Provision For Income Taxes ---- ----
--------- ---------
NET LOSS $ (104,000) $ (96,000)
-------- --------- ---------
PER SHARE (Note 1)
- ---------
Basic and Diluted:
Net Loss per Common Share $ (.05) $ (.05)
--------- ---------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
- ----------------------------------------
Basic and Diluted 2,026,000 2,026,000
========= =========
</TABLE>
-4-
<PAGE>
STAR STRUCK, LTD.
-----------------
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
-------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
-----------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (380,000) $ (408,000)
------- -------
Adjustments to reconcile net loss to cash (used in)
provided by operating activities:
Depreciation and amortization 278,000 252,000
Changes in operating assets and liabilities:
Accounts receivable (482,000) 37,000
Inventories 19,000 (337,000)
Prepaid expenses and other current assets 16,000 (207,000)
Accounts payable and accrued expenses 338,000 662,000
Deferred income ---- 16,000
------- -------
Total Adjustments 169,000 423,000
------- -------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (211,000) 15,000
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (39,000) (76,000)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (39,000) (76,000)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Revolving Line of Credit 405,000 100,000
Proceeds from Equipment Loan ---- 24,000
Payment on Notes Payable (176,000) (154,000)
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 229,000 (30,000)
------- -------
NET DECREASE IN CASH (21,000) (91,000)
CASH AT BEGINNING OF PERIOD 21,000 91,000
------- -------
CASH AT END OF PERIOD $ ---- $ ----
------- -------
</TABLE>
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<PAGE>
STAR STRUCK, LTD.
-----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1999
------------------
(1) Summary of Major Accounting Policies
------------------------------------
The consolidated financial statements heretofore presented have been prepared by
Star Struck, Ltd., (formerly SBM Industries, Inc.) ("the Company" or "SSL"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Effective May 3, 1999, the Company changed its name from
SBM Industries, Inc. to Star Struck, Ltd. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's latest
annual report on Form 10-KSB. The interim figures presented are unaudited and
are subject to any adjustments which may result from the year-end examination of
the Company's financial statements. However, in the opinion of management, the
information furnished reflects all adjustments necessary to fairly state the
consolidated financial statements for the interim periods presented.
Net income (loss) per share is computed based on the weighted average number of
shares outstanding during each period. The average number of shares used in the
computation of earnings per share was 2,026,000 for 1999 and 1998.
The profit and loss information for the interim periods presented are not
necessarily indicative of results to be expected for the year.
(2) Business Segments
-----------------
The Company's operations by business segment for the periods ended September 30,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Battery
& Watch Strap Sports Apparel Distribution Leather
1999 Distribution Distribution Subtotal Manufacturing Total
- ---- ------------ ------------ -------- ------------- -----
<S> <C> <C> <C> <C> <C>
Net Sales $ 6,907,000 $ 1,475,000 $ 8,382,000 $ 522,000 $ 8,904,000
Operating Profit/(Loss) $ 128,000 $ (218,000) $ (90,000) $ (100,000) $ (190,000)
Identifiable Assets $ 7,873,000 $ (354,000) $ 7,519,000
Depreciation
& Amortization $ 246,000 $ 32,000 $ 278,000
Capital Expenditures $ 39,000 $ 0 $ 39,000
<CAPTION>
Battery
& Watch Strap Sports Apparel Distribution Leather
1998 Distribution Distribution Subtotal Manufacturing Total
- ---- ------------ ------------ -------- ------------- -----
<S> <C> <C> <C> <C> <C>
Net Sales $ 7,729,000 $ 1,131,000 $ 8,860,000 $ 533,000 $ 9,393,000
Operating Loss $ (41,000) $ (18,000) $ (59,000) $ (196,000) $ (255,000)
Identifiable Assets $ 7,411,000 $ (24,000) $ 7,387,000
Depreciation
& Amortization $ 221,000 $ 31,000 $ 252,000
Capital Expenditures $ 73,000 $ 3,000 $ 76,000
</TABLE>
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<PAGE>
STAR STRUCK, LTD.
-----------------
ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
-----------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------
COMPARED TO
-----------
NINE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------
Sales. Sales from continuing operations decreased $489,000, or 5%, to
$8,904,000 in the first nine months of 1999. Star Struck, Inc.'s sales for the
period were $8,382,000, down $478,000, or 5.4%, from $8,860,000 for the first
nine months of 1998. RC Manufacturing, Inc.'s sales of $522,000 showed a
decrease of $11,000, or 2%, from sales for the first nine months of 1998 of
$533,000.
Gross Profit. Gross profit increased by $356,000 to $4,456,000 in the first
nine months of 1999. Gross margin increased to 50% in the first nine months of
1999 compared to 43.6% for the same period in 1998. For the first nine months of
1999, Star Struck, Inc. had a gross margin of 51.2%, while RC Manufacturing
showed a gross margin of 31.2%. These figures represent an increase in gross
margin for both Star Struck, Inc. and RC Manufacturing, Inc., compared to the
same period in 1998.
Star Struck's increase in gross margin is attributable to increased sales in the
sports apparel line, which operates at a higher gross margin than the other
product lines distributed by Star Struck, Inc., as well as volume discounts
offered by some of Star Struck, Inc.'s vendors.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $265,000 to $4,368,000 in the first nine
months of 1999. As a percentage of sales, selling, general and administrative
expenses increased by 5.3% to 49% in the first nine months of 1999 compared to
43.7% for the same period in 1998. For the first nine months of 1999, Star
Struck, Inc.'s selling, general and administrative expenses represented 46.2% of
total sales, while RC Manufacturing, Inc.'s and SSL's expenses were 2.6% and .2%
of total sales, respectively, for the first nine months of 1999.
Operating Loss. Operating loss decreased $65,000 to show a loss of $190,000 for
the first nine months of 1999.
Net Loss. Net loss for the first nine months of 1999 decreased $28,000 to show
a loss of $380,000.
-7-
<PAGE>
STAR STRUCK, LTD.
-----------------
ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------
COMPARED TO
-----------
THREE MONTHS ENDED SEPTEMBER 30, 1998
-------------------------------------
Sales. Sales from continuing operations decreased $120,000, or 3.7%, to
$3,161,000 in the third quarter of 1999. Star Struck, Inc.'s sales for the
period were $2,993,000, down $41,000, or 1.4%, from $3,034,000 for the third
quarter of 1998. RC Manufacturing, Inc.'s sales of $168,000 showed a decrease of
$79,000, or 32%, from sales for the third quarter of 1998 of $247,000.
Gross Profit. Gross profit increased by $139,000 to $1,526,000 in the third
quarter of 1999. Gross margin increased to 48.3% in the third quarter of 1999
compared to 42.3% for the same period in 1998. For the third quarter of 1999,
Star Struck, Inc. had a gross margin of 49%, while RC Manufacturing showed a
gross margin of 35.2%. These figures represent an increase in gross margin for
both Star Struck, Inc. and RC Manufacturing, Inc., compared to the same period
in 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $118,000 to $1,464,000 in the third quarter of
1999. As a percentage of sales, selling, general and administrative expenses
increased by 5.3% to 46.3% in the third quarter of 1999 compared to 41% for the
same period in 1998. For the third quarter of 1999, Star Struck, Inc.'s selling,
general and administrative expenses represented 43.3% of total sales, while RC
Manufacturing, Inc.'s and SSL's expenses were 2.9% and .1% of total sales,
respectively, for the second quarter of 1999.
Operating Loss. Operating loss decreased $12,000 to show a loss of $31,000 for
the third quarter of 1999.
Net Loss. Net loss for the third quarter of 1999 increased $8,000 to show a
loss of $104,000.
Liquidity and Capital Resources. The Company has $2,225,000 available in line
of credit agreements with two of its banks. These agreements for $2,000,000 and
$225,000 extend through October 2001 and January 2000, respectively. At
September 30, 1999, the Company had $2,070,000 outstanding under these lines of
credit.
The Company believes that it has adequate funds available to conduct and
continue its business and to repay the approximate $256,000 in long-term debt
which will mature in the next twelve months.
At September 30, 1999 net working capital was $3,077,000.
Year 2000 Compliance. The Company has addressed and evaluated the overall year
2000 issue. Necessary changes to the Company's computer systems have been
identified and are being implemented. Date sensitive computer programs that do
not properly recognize the year 2000 could generate incorrect data or cause a
system to fail, resulting in business interruption. Costs incurred, which were
immaterial relative to the year 2000 issue, have been expensed.
The year 2000 issue is expected to affect the systems of suppliers and vendors
with which the Company interacts. There can be no assurance that any potential
year 2000 noncompliance within the systems of these other companies will not
have a material adverse effect on the Company.
-8-
<PAGE>
PART II - OTHER INFORMATION
---------------------------
STAR STRUCK, LTD.
----------------
SEPTEMBER 30, 1999
------------------
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
See attached
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27-Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 1999
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STAR STRUCK, LTD.
Date: November 4, 1999 By: /s/ Kenneth Karlan
---------------------------------
Kenneth Karlan, President
Date: November 4, 1999 By: /s/ Keith Sessler
---------------------------------
Keith Sessler, Vice President
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STAR STRUCK,
LTD.'S QUARTERLY REPORT TO STOCKHOLDERS FOR THE QUARTERLY PERIOD ENDED SEPTEMBER
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 2,068,000 0
<ALLOWANCES> 108,000 0
<INVENTORY> 3,242,000 0
<CURRENT-ASSETS> 5,466,000 0
<PP&E> 2,533,000 0
<DEPRECIATION> 1,067,000 0
<TOTAL-ASSETS> 7,519,000 0
<CURRENT-LIABILITIES> 2,389,000 0
<BONDS> 0 0
0 0
0 0
<COMMON> 2,026,000 0
<OTHER-SE> 626,000 0
<TOTAL-LIABILITY-AND-EQUITY> 7,519,000 0
<SALES> 8,904,000 9,393,000
<TOTAL-REVENUES> 8,904,000 9,393,000
<CGS> 4,448,000 5,293,000
<TOTAL-COSTS> 4,646,000 4,355,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 190,000 153,000
<INCOME-PRETAX> (380,000) (408,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (380,000) (408,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (380,000) (408,000)
<EPS-BASIC> 0 0
<EPS-DILUTED> (.18) (.20)
</TABLE>
