<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 June 30, 2000
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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
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STAR STRUCK, LTD.
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(Exact name of small business issuer as specified in its charter)
Delaware 36-1805030
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1865 Palmer Avenue
Larchmont, NY 10538
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 833-0649
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-------------------------------------------------------------------------------
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 August 2, 2000.
----------------------------------------------------
<PAGE>
STAR STRUCK, LTD
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INDEX
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JUNE 30, 2000
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PART I. FINANCIAL INFORMATION Page No.
-------
ITEM 1.
Consolidated Balance Sheet
June 30, 2000 1 & 2
Consolidated Statements of Income-
Six Months Ended June 30, 2000 and 1999 3
Consolidated Statements of Income-
Three Months Ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements-
June 30, 2000 6
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations-
June 30, 2000 7 & 8
PART II. OTHER INFORMATION 9 & 10
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
STAR STRUCK, LTD
----------------
CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
JUNE 30, 2000
-------------
A S S E T S
-----------
<TABLE>
<CAPTION>
CURRENT ASSETS:
--------------
<S> <C>
Cash $ -----
Accounts Receivable, Less Allowance for Doubtful
Accounts of $108,000 785,000
Inventories 3,237,000
Prepaid Expenses and Other Current Assets 504,000
Assets Held for Sale 21,000
----------
TOTAL CURRENT ASSETS 4,547,000
-------------------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
--------------------------------------
Land, Building and Improvements 1,235,000
Machinery and Equipment 896,000
----------
2,131,000
Less: Accumulated Depreciation 837,000
----------
PROPERTY, PLANT AND EQUIPMENT, NET 1,294,000
---------------------------------- ----------
INTANGIBLE ASSETS AND GOODWILL, NET 630,000
----------------------------------- ----------
TOTAL ASSETS $ 6,471,000
------------ =========
</TABLE>
- 1 -
<PAGE>
STAR STRUCK, LTD
----------------
CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
JUNE 30, 2000
-------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
-------------------
<S> <C>
Accounts Payable and Accrued Expenses $ 2,281,000
Current Portion of Notes Payable 69,000
---------
TOTAL CURRENT LIABILITIES 2,350,000
------------------------- ---------
OTHER LIABILITIES:
-----------------
Borrowings Under Line of Credit 1,574,000
Notes Payable 581,000
---------
TOTAL LIABILITIES 4,505,000
----------------- ---------
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 (4,404,000)
---------
TOTAL SHAREHOLDERS' INVESTMENT 1,966,000
------------------------------ ---------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 6,471,000
---------------------------------------------- =========
</TABLE>
-2-
<PAGE>
STAR STRUCK, LTD
----------------
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-----------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
NET SALES $ 5,561,000 $ 5,389,000
---------
Cost of Sales 2,763,000 2,563,000
-------- ---------
GROSS PROFIT ON SALES 2,798,000 2,826,000
--------------------- -------- ---------
OPERATING EXPENSES:
------------------
Selling, General and Administrative 2,588,000 2,762,000
Depreciation and Amortization 196,000 164,000
---------- ---------
TOTAL OPERATING EXPENSES 2,784,000 2,926,000
----------------------- ---------- ---------
OPERATING PROFIT (LOSS) 14,000 (100,000)
-----------------------
Interest Expense, Net 123,000 106,000
---------- ---------
Loss from Continuing Operations Before Income Taxes (109,000) (206,000)
Provision For Income Taxes ----- -----
---------- ---------
Loss from Continuing Operations (109,000) (206,000)
Income (Loss) from Discontinued Operations 2,000 (70,000)
---------- ---------
NET LOSS $ (107,000) $ (276,000)
-------- ---------- ---------
PER SHARE (Note 1)
---------
Basic and Diluted Loss per Common Share:
Loss from Continuing Operations $ (.05) $ (.10)
Loss from Discontinued Operations ----- (.03)
---------- ---------
Net Loss per Common Share $ (.05) $ (.13)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
----------------------------------------
Basic and Diluted 2,026,000 2,026,000
========== =========
</TABLE>
-3-
<PAGE>
STAR STRUCK, LTD
-----------------
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
-------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
NET SALES $ 2,894,000 $ 2,728,000
---------
Cost of Sales 1,408,000 1,272,000
--------- ---------
GROSS PROFIT ON SALES 1,486,000 1,456,000
--------------------- --------- ---------
OPERATING EXPENSES:
------------------
Selling, General and Administrative 1,317,000 1,490,000
Depreciation and Amortization 101,000 82,000
--------- ---------
TOTAL OPERATING EXPENSES 1,418,000 1,572,000
------------------------ --------- ---------
OPERATING PROFIT (LOSS) 68,000 (116,000)
-----------------------
Interest Expense, Net 64,000 55,000
--------- ---------
Income (Loss) from Continuing Operations Before Income Taxes 4,000 (171,000)
Provision For Income Taxes ----- -----
--------- ---------
Income (Loss) from Continuing Operations 4,000 (171,000)
Income (Loss) from Discontinued Operations 2,000 (61,000)
--------- ---------
NET INCOME (LOSS) $ 6,000 $ (232,000)
---------------- --------- ---------
PER SHARE (Note 1)
---------
Basic and Diluted Loss per Common Share:
Income (Loss) from Continuing Operations $ .01 $ (.08)
Loss from Discontinued Operations ----- (.03)
--------- ---------
Net Income (Loss) per Common Share $ .01 $ (.11)
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
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FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-----------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (107,000) $ (276,000)
------- -------
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation and amortization 196,000 164,000
(Income) loss from discontinued operations (2,000) 70,000
Changes in operating assets and liabilities:
Accounts receivable 238,000 (148,000)
Inventories 116,000 (350,000)
Prepaid expenses and other current assets (173,000) (134,000)
Accounts payable and accrued expenses 264,000 642,000
Deferred contract fees (208,000) -----
Other 2,000 -----
------- -------
Total Adjustments 433,000 244,000
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 326,000 (32,000)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Assets 19,000 -----
Purchase of Fixed Assets (31,000) (33,000)
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NET CASH USED IN INVESTING ACTIVITIES (12,000) (33,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (Payment on) Revolving Lines of Credit (263,000) 161,000
Payment on Notes Payable (107,000) (117,000)
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (370,000) 44,000
------- -------
NET DECREASE IN CASH (56,000) (21,000)
CASH AT BEGINNING OF PERIOD 56,000 21,000
CASH AT END OF PERIOD $ ----- $ -----
------- -------
</TABLE>
-5-
<PAGE>
STAR STRUCK, LTD
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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JUNE 30, 2000
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(1) Basis of Presentation
---------------------
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 2000 and 1999.
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 June 30, 2000
and 1999 were as follows:
<TABLE>
<CAPTION>
Battery
& Watch Strap Sports Apparel
2000 Distribution Distribution Total
---- ------------ ------------ -----
<S> <C> <C> <C>
Net Sales $ 4,369,000 $ 1,192,000 $ 5,561,000
Operating Profit/(Loss) $ 206,000 $ (192,000) $ 14,000
Identifiable Assets $ 6,449,000
Depreciation
& Amortization $ 196,000
Capital Expenditures $ 31,000
</TABLE>
<TABLE>
<CAPTION>
Battery
& Watch Strap Sports Apparel
1999 Distribution Distribution Total
---- ------------ ------------ -----
<S> <C> <C> <C>
Net Sales $ 4,348,000 $ 1,041,000 $ 5,389,000
Operating Profit/(Loss) $ 49,000 $ (149,000) $ (100,000)
Identifiable Assets $ 7,141,000
Depreciation
& Amortization $ 164,000
Capital Expenditures $ 33,000
</TABLE>
(3) Borrowings Under Line of Credit
-------------------------------
The Company has $2,000,000 available in a line of credit agreement with one of
its banks. This agreement extends through October 2001. At June 30, 2000, the
Company had $1,574,000 outstanding under this line of credit. Under the terms of
the line of credit agreement, the Company is required to meet certain covenants
on a quarterly basis. As of June 30, 2000, the Company was not in compliance
with one of its financial covenants. The Company received a waiver from the
bank for this covenant as of June 30, 2000. The Company is in the process of
renegotiating the terms and covenants on their line of credit.
(4) Recent Accounting Pronouncements
--------------------------------
The Securities and Exchange Commission issued SAB No. 101, "Revenue
Recognition", in December 1999. SAB No. 101 expresses the views of the SEC staff
in applying generally accepted accounting principles to certain revenue
recognition issues. In June 2000, the SEC issued SAB No. 101B to defer the
effective date of the implementation of SAB No. 101 until the fourth quarter of
fiscal 2000. Management has concluded that the implementation of this SAB does
not have a material impact on its financial position or its results of
operations.
-6-
<PAGE>
STAR STRUCK, LTD
----------------
ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-----------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
------------------------------
COMPARED TO
-----------
SIX MONTHS ENDED JUNE 30, 1999
------------------------------
Sales. Sales from continuing operations increased $172,000, or 3.2%, to
$5,561,000 in the first six months of 2000. Sports apparel sales increased
$151,000, or 14.5%, to $1,192,000 from 1999's first six month's sales of
$1,041,000. This increase was combined with an increase in battery and watch
strap sales of $21,000, or .5%, from $4,348,000 to $4,369,000 in the first six
months of 2000.
Gross Profit. Gross profit decreased by $28,000 to $2,798,000 in the first six
months of 2000. Gross margin decreased to 50.3% in the first six months of 2000
compared to 52.4% for the same period in 1999. For the first six months of 2000,
sports apparel sales, which represented 21.4% of total revenue, had a gross
margin of 46.7%. This is a decrease from 1999's first six month's gross margin
of 48.6%. Gross margin on battery and watch strap sales decreased from 53.4% to
51.3% in the first six months of 2000 compared to the same period in 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $174,000 to $2,588,000 in the first six months
of 2000. As a percentage of sales, selling, general and administrative expenses
decreased by 4.8% to 46.5% in the first six months of 2000 compared to 51.3% for
the same period in 1999.
Operating Profit/(Loss). Operating profit increased $114,000 to show a profit of
$14,000 for the first six months of 2000. The battery and watch strap
distribution segment showed an operating profit of $206,000 in the first six
months of 2000. This is an increase of $157,000 from 1999's first six month's
operating profit of $49,000. The operating loss for sports apparel distribution
increased $43,000 from 1999's operating loss of $149,000 to show a loss of
$192,000 in the first six months of 2000.
Net Loss. Net loss for the first six months of 2000 decreased $169,000 from
1999's loss of $276,000 to show a net loss of $107,000. Included in 1999's first
six month's net loss is a $70,000 loss from discontinued operations relative to
RC Manufacturing, Inc.
-7-
<PAGE>
STAR STRUCK, LTD
----------------
ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
-----------------------------------------------
THREE MONTHS ENDED JUNE 30, 2000
--------------------------------
COMPARED TO
-----------
THREE MONTHS ENDED JUNE 30, 1999
--------------------------------
Sales. Sales from continuing operations increased $166,000, or 6.1%, to
$2,894,000 in the second quarter of 2000. Sports apparel sales increased
$62,000, or 8.8%, to $768,000 from 1999's second quarter sales of $706,000. This
increase was combined with an increase in battery and watch strap sales of
$104,000, or 5.1%, from $2,022,000 to $2,126,000 in the second quarter of 2000.
Gross Profit. Gross profit increased by $30,000 to $1,486,000 in the second
quarter of 2000. Gross margin decreased to 51.3% in the second quarter of 2000
compared to 53.4% for the same period in 1999. For the second quarter of 2000,
sports apparel sales, which represented 26.5% of total revenue, had a gross
margin of 47%. This is a decrease from 1999's second quarter gross margin of
48.9%. Gross margin on battery and watch strap sales increased to 50.8% from
45.1% in the second quarter of 2000 compared to same period in 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $173,000 to $1,317,000 in the second quarter
of 2000. As a percentage of sales, selling, general and administrative expenses
decreased by 9.1% to 45.5% in the second quarter of 2000 compared to 54.6% for
the same period in 1999.
Operating Profit/(Loss). Operating profit increased $184,000 to show a profit of
$68,000 for the second quarter of 2000. The battery and watch strap distribution
segment showed an operating profit of $153,000 in the second quarter of 2000.
This is an increase of $225,000 from 1999 's second quarter operating loss of
$72,000. The operating loss for sports apparel distribution increased $41,000
from 1999's operating loss of $44,000 to show a loss of $85,000 in the second
quarter of 2000.
Net Income/(Loss). Net income for the second quarter of 2000 increased $238,000
from 1999's loss of $232,000 to show a profit of $6,000. Included in 1999's
second quarter net loss is a $61,000 loss from discontinued operations relative
to RC Manufacturing, Inc.
Liquidity and Capital Resources. The Company has $2,000,000 available in a line
of credit agreement with one of its banks. This agreement extends through
October 2001. At June 30, 2000, the Company had $1,574,000 outstanding under
this line of credit.
Under the terms of the line of credit agreement, the Company is required to meet
certain covenants on a quarterly basis. As of June 30, 2000, the Company was not
in compliance with one of its financial covenants. The Company received a
waiver from the bank for this covenant as of June 30, 2000. The Company is in
the process of renegotiating the terms and covenants on their line of credit.
The Company believes that it has adequate funds available to conduct and
continue its business and to repay the approximate $69,000 in long-term debt
which will mature in the next twelve months.
At June 30, 2000 net working capital was $2,197,000.
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
----------------
JUNE 30, 2000
-------------
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
June 30, 2000
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: August 4, 2000 By: /s/Kenneth Karlan
-----------------
Kenneth Karlan, President
Date: August 4, 2000 By: /s/Keith Sessler
----------------
Keith Sessler, Vice President
-9-
<PAGE>
PART II - OTHER INFORMATION
---------------------------
STAR STRUCK, LTD
----------------
JUNE 30, 2000
-------------
a) Annual meeting held May 2, 2000
b) Directors elected at the Meeting:
Lawrence J. Goldstein
Kenneth Karlan
Robert J. Morris
Peter M. Nisselson
Arthur Salzfass
Keith Sessler
Michael Sweedler
c) Other matters voted on:
None
-10-
