<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, 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 October 27, 2000.
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<PAGE>
STAR STRUCK, LTD.
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INDEX
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SEPTEMBER 30, 2000
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PART I. FINANCIAL INFORMATION Page No.
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ITEM 1.
Consolidated Balance Sheet
September 30, 2000 1 & 2
Consolidated Statements of Income-
Nine Months Ended September 30, 2000 and 1999 3
Consolidated Statements of Income-
Three Months Ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows-
Nine Months Ended September 30, 2000 and 1999 5
Notes to Consolidated Financial Statements-
September 30, 2000 6 & 7
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations-
September 30, 2000 8 & 9
PART II. OTHER INFORMATION 10
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
STAR STRUCK, LTD.
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CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
SEPTEMBER 30, 2000
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A S S E T S
-----------
CURRENT ASSETS:
--------------
Cash $ -----
Accounts Receivable, Less Allowance for Doubtful
Accounts of $108,000 1,000,000
Inventories 3,204,000
Prepaid Expenses and Other Current Assets 459,000
------------
TOTAL CURRENT ASSETS 4,663,000
-------------------- ------------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
--------------------------------------
Land, Building and Improvements 1,235,000
Machinery and Equipment 899,000
------------
2,134,000
Less: Accumulated Depreciation 874,000
------------
PROPERTY, PLANT AND EQUIPMENT, NET 1,260,000
---------------------------------- ------------
INTANGIBLE ASSETS AND GOODWILL, NET 571,000
----------------------------------- ------------
TOTAL ASSETS $ 6,494,000
------------ ============
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STAR STRUCK, LTD.
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CONSOLIDATED BALANCE SHEET - UNAUDITED
--------------------------------------
SEPTEMBER 30, 2000
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES:
-------------------
Accounts Payable and Accrued Expenses $ 1,346,000
Current Portion of Notes Payable 70,000
------------
TOTAL CURRENT LIABILITIES 1,416,000
------------------------- ------------
OTHER LIABILITIES:
-----------------
Borrowings Under Line of Credit 1,865,000
Notes Payable 563,000
Notes Payable-Shareholders 705,000
------------
TOTAL LIABILITIES 4,549,000
----------------- ------------
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 4,654,000
Accumulated Deficit (4,735,000)
------------
TOTAL SHAREHOLDERS' INVESTMENT 1,945,000
------------------------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 6,494,000
---------------------------------------------- ============
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STAR STRUCK, LTD.
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CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
-----------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
NET SALES $ 7,572,000 $ 8,382,000
---------
Cost of Sales 3,728,000 4,089,000
------------ ------------
GROSS PROFIT ON SALES 3,844,000 4,293,000
--------------------- ------------ ------------
OPERATING EXPENSES:
------------------
Selling, General and Administrative 3,760,000 4,137,000
Depreciation and Amortization 298,000 246,000
------------ ------------
TOTAL OPERATING EXPENSES 4,058,000 4,383,000
------------------------ ------------ ------------
OPERATING LOSS (214,000) (90,000)
--------------
Interest Expense, Net 226,000 169,000
------------ ------------
Loss from Continuing Operations Before Income Taxes (440,000) (259,000)
Provision For Income Taxes ----- -----
------------ ------------
Loss from Continuing Operations (440,000) (259,000)
Income (Loss) from Discontinued Operations 2,000 (121,000)
------------ ------------
NET LOSS $ (438,000) $ (380,000)
-------- ------------ ------------
PER SHARE (Note 1)
---------
Basic and Diluted Loss per Common Share:
Loss from Continuing Operations $ (.21) $ (.12)
Loss from Discontinued Operations ----- (.06)
------------ ------------
Net Loss per Common Share $ (.21) $ (.18)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
----------------------------------------
Basic and Diluted 2,026,000 2,026,000
============ ============
</TABLE>
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<PAGE>
STAR STRUCK, LTD.
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CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
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<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
NET SALES $ 2,011,000 $ 2,993,000
---------
Cost of Sales 965,000 1,526,000
------------ -----------
GROSS PROFIT ON SALES 1,046,000 1,467,000
--------------------- ------------ -----------
OPERATING EXPENSES:
------------------
Selling, General and Administrative 1,172,000 1,375,000
Depreciation and Amortization 102,000 82,000
------------ -----------
TOTAL OPERATING EXPENSES 1,274,000 1,457,000
------------------------ ------------ -----------
OPERATING PROFIT (LOSS) (228,000) 10,000
----------------------
Interest Expense, Net 103,000 63,000
------------ -----------
Loss from Continuing Operations Before Income Taxes (331,000) (53,000)
Provision For Income Taxes ----- -----
------------ -----------
Loss from Continuing Operations (331,000) (53,000)
Loss from Discontinued Operations ----- (51,000)
------------ -----------
NET LOSS $ (331,000) $ (104,000)
-------- ------------ -----------
PER SHARE (Note 1)
---------
Basic and Diluted Loss per Common Share:
Loss from Continuing Operations $ (.16) $ (.03)
Loss from Discontinued Operations ----- (.02)
------------ -----------
Net Loss per Common Share $ (.16) $ (.05)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
----------------------------------------
Basic and Diluted 2,026,000 2,026,000
============ ===========
</TABLE>
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STAR STRUCK, LTD.
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CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
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<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (438,000) $ (380,000)
----------- ----------
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 298,000 246,000
Amortization of debt discount 15,000 -----
(Income) loss from discontinued operations (2,000) 121,000
Changes in operating assets and liabilities:
Accounts receivable 9,000 (521,000)
Inventories 149,000 17,000
Prepaid expenses and other current assets (128,000) 8,000
Accounts payable and accrued expenses (622,000) 359,000
Deferred contract fees (215,000) -----
Changes in discontinued operations (220,000) (60,000)
Other 2,000 (1,000)
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Total Adjustments (714,000) 169,000
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NET CASH USED IN OPERATING ACTIVITIES (1,152,000) (211,000)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (33,000) (39,000)
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (33,000) (39,000)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Revolving Line of Credit 253,000 405,000
Proceeds from Shareholder Investment 1,000,000 -----
Payment on Notes Payable (124,000) (176,000)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 1,129,000 229,000
----------- ----------
NET DECREASE IN CASH (56,000) (21,000)
CASH AT BEGINNING OF PERIOD 56,000 21,000
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CASH AT END OF PERIOD $ ----- $ -----
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</TABLE>
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<PAGE>
STAR STRUCK, LTD.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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SEPTEMBER 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 September 30,
2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Battery
& Watch Strap Sports Apparel
2000 Distribution Distribution Total
---- ------------ ------------ -----
<S> <C> <C> <C>
Net Sales $ 5,916,000 $ 1,656,000 $ 7,572,000
Operating Profit/(Loss) $ 118,000 $ (332,000) $ (214,000)
Identifiable Assets $ 6,493,000
Depreciation
& Amortization $ 298,000
Capital Expenditures $ 33,000
<CAPTION>
Battery
& Watch Strap Sports Apparel
1999 Distribution Distribution Total
---- ------------ ------------ -----
<S> <C> <C> <C>
Net Sales $ 6,907,000 $ 1,475,000 $ 8,382,000
Operating Profit/(Loss) $ 128,000 $ (218,000) $ (90,000)
Identifiable Assets $ 6,929,000
Depreciation
& Amortization $ 246,000
Capital Expenditures $ 39,000
</TABLE>
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<PAGE>
STAR STRUCK, LTD.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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SEPTEMBER 30, 2000
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(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 September 30, 2000,
the Company had $1,865,000 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 September 30, 2000, the Company was not in
compliance with two of its financial covenants.
(4) Notes Payable-Shareholders
--------------------------
In August 2000, the Company entered into promissory notes, (the "Notes") with
three of the Company's shareholders, two of which are members of the Company's
management, for an aggregate of $1,000,000. Each loan bears interest at 10%, due
quarterly, and the principle amount matures in August 2003. In connection with
these loans, the Company issued warrants for the purchase of 500,000 shares of
the Company's common stock at an exercise price of $2.00 per share. The
intrinsic value of these warrants of $310,000 has been recorded as original
issue discount, resulting in a reduction in the carrying value of this debt. The
original issue discount will be amortized into interest expense over the period
of the debt. For the three months and nine months ended September 30, 2000,
$15,000 has been amortized and is included in interest expense in the
accompanying statements of operations as of September 30, 2000. These loans are
subordinate to the Company's borrowings under line of credit.
(5) 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.
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<PAGE>
STAR STRUCK, LTD.
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ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
-----------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 2000
------------------------------------
COMPARED TO
-----------
NINE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------
Sales. Sales from continuing operations decreased $810,000, or 9.7%, to
$7,572,000 in the first nine months of 2000. Sports apparel sales increased
$181,000, or 12.3%, to $1,656,000 from 1999's first nine month's sales of
$1,475,000. This increase was offset by a decrease in battery and watch strap
sales of $991,000, or 14.4%, from $6,907,000 to $5,916,000 in the first nine
months of 2000.
Gross Profit. Gross profit decreased by $449,000 to $3,844,000 in the first nine
months of 2000. Gross margin decreased to 50.8% in the first nine months of 2000
compared to 51.2% for the same period in 1999. For the first nine months of
2000, sports apparel sales, which represented 21.9% of total revenue, had a
gross margin of 46.2%. This is a decrease from 1999's first nine month's gross
margin of 48.6%. Gross margin on battery and watch strap sales increased to
52.0% in the first nine months of 2000 compared to 51.8% for the same period in
1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $377,000 to $3,760,000 in the first nine
months of 2000. As a percentage of sales, selling, general and administrative
expenses increased by .3% to 49.7% in the first nine months of 2000 compared to
49.4% for the same period in 1999.
Operating Profit/(Loss). Operating loss increased $124,000 to show a loss of
$214,000 for the first nine months of 2000. The battery and watch strap
distribution segment showed an operating profit of $118,000 in the first nine
months of 2000. This is a decrease of $10,000 from 1999's first nine month's
operating profit of $128,000. The operating loss for sports apparel distribution
increased $114,000 from 1999's operating loss of $218,000 to show a loss of
$332,000 in the first nine months of 2000.
Net Loss. Net loss for the first nine months of 2000 increased $58,000 from
1999's loss of $380,000 to show a net loss of $438,000. Included in 1999's first
nine month's net loss is a $121,000 loss from discontinued operations relative
to RC Manufacturing, Inc.
-8-
<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, 2000 AND 1999
-----------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 2000
-------------------------------------
COMPARED TO
-----------
THREE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------
Sales. Sales from continuing operations decreased $982,000, or 32.8%, to
$2,011,000 in the third quarter of 2000. Sports apparel sales increased $30,000,
or 6.9%, to $464,000 from 1999's third quarter sales of $434,000. This increase
was offset by a decrease in battery and watch strap sales of $1,012,000, or
39.6%, from $2,559,000 to $1,547,000 in the third quarter of 2000.
Gross Profit. Gross profit decreased by $421,000 to $1,046,000 in the third
quarter of 2000. Gross margin increased to 52% in the third quarter of 2000
compared to 49% for the same period in 1999. For the third quarter of 2000,
sports apparel sales, which represented 23.1% of total revenue, had a gross
margin of 46.7%. This is a decrease from 1999's third quarter gross margin of
48.6%. Gross margin on battery and watch strap sales increased to 53.6% from
49.1% in the third quarter of 2000 compared to the same period in 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $203,000 to $1,172,000 in the third quarter of
2000. As a percentage of sales, selling, general and administrative expenses
increased by 12.4% to 58.3% in the third quarter of 2000 compared to 45.9% for
the same period in 1999.
Operating Profit/(Loss). Operating profit decreased $238,000 to show a loss of
$228,000 for the third quarter of 2000. The battery and watch strap distribution
segment showed an operating loss of $88,000 in the third quarter of 2000. This
is a decrease of $167,000 from 1999's third quarter operating profit of $79,000.
The operating loss for sports apparel distribution increased $71,000 from 1999's
operating loss of $69,000 to show a loss of $140,000 in the third quarter of
2000.
Net Income/(Loss). Net loss for the third quarter of 2000 increased $227,000
from 1999's loss of $104,000 to show a loss of $331,000. Included in 1999's
third quarter net loss is a $51,000 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 September 30, 2000, the Company had $1,865,000 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 September 30, 2000, the Company
was not in compliance with two of its financial covenants.
The Company believes that it has adequate funds available to conduct and
continue its business and to repay the approximate $70,000 in long-term debt
which will mature in the next twelve months.
The Company plans to renegotiate the terms of its line of credit agreement which
becomes due in October 2001. There can be no assurance that these negotiations
will be successful or will be on terms accceptable to the Company.
At September 30, 2000 net working capital was $3,247,000.
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.
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<PAGE>
PART II - OTHER INFORMATION
---------------------------
STAR STRUCK, LTD.
-----------------
SEPTEMBER 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
None
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
A report on Form 8-K dated August 29, 2000, reporting item
7, was filed on September 8, 2000. No financial statement
was filed with such report.
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 3, 2000 By: /s/ Kenneth Karlan
------------------
Kenneth Karlan, President
Date: November 3, 2000 By: /s/ Keith Sessler
-----------------
Keith Sessler, Vice President
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