<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
(Mark One)
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1995
/ / Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________________ to ___________________
Commission file number 0-15929
BABYSTAR, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 11-2726109
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
165 University Ave, Westwood, MA 02090
(Address of Principal Executive Offices)
(617) 326-4100
(Issuer's Telephone Number, Including Area Code)
(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 a 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 last practicable date: Common Stock, $0.01 par value
4,712,795 shares at August 15, 1995
Traditional Small Business Disclosure Format (check one):
Yes ________ No ________
<PAGE>
FORM 10-QSB/A QUARTERLY REPORT
BABYSTAR, INC. AND SUBSIDIARY
INDEX
PAGE
----
PART I: FINANCIAL INFORMATION
ITEM 1.
Consolidated Balance Sheets - June 30, 1995
and December 31, 1994 3
Consolidated Statements of Operations - Three Months
and Six Months Ended June 30, 1995 and 1994 4
Consolidated Statement of Stockholders' Equity 5
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1995 and 1994 6
Notes to Financial Statements 7-10
ITEM 2.
Management's Discussion and Analysis of Financial
Conditions and Operations 11-14
PART II: OTHER INFORMATION
ITEMS 1-6. 15
Signatures 16
2
<PAGE>
BABYSTAR, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS June 30, December 31,
1995 1994
CURRENT ASSETS --------- ------------
Cash $78,655 $2,404,000
Accounts receivable 2,610,896
Inventories 6,427,081
Note receivable 50,000 241,000
Other current assets 70,358 24,000
----------- ----------
Total current assets 9,236,990 2,669,000
PROPERTY AND EQUIPMENT, AT COST
Furniture, equipment, and leasehold
improvements 206,863 29,000
Less accumulated depreciation (83,472) (27,000)
----------- ----------
Property and equipment, net 123,391 2,000
OTHER ASSETS
Security deposit 6,873 7,000
Goodwill, net of accumulated amortization 1,138,673
----------- ----------
Total other assets 1,145,546 7,000
----------- ----------
$10,505,927 $2,678,000
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Note payable, bank $3,414,551 $139,000
Accounts payable 3,294,230
Accrued expenses and other accrued
liabilities 305,647 97,000
Current portion of capital leases
obligations 12,770
----------- ----------
Total current liabilities 7,027,198 236,000
OTHER LIABILITIES
Capital lease obligations, net of
current portion 11,210
STOCKHOLDERS' EQUITY
Non-designated preferred stock, par value
$.01 per share - 5,000,000 authorized;
no shares issued and outstanding
Common stock, par value $.01 per share -
20,000,000 authorized; 4,712,795 shares
issued and outstanding at June 30, 1995
and 3,512,795 shares at December 31, 1994 47,128 35,000
Additional paid-in capital 8,805,251 7,497,000
Retained earnings(deficit) (5,384,860) (5,090,000)
----------- ----------
Total stockholders' equity 3,467,519 2,442,000
----------- ----------
$10,505,927 $2,678,000
----------- ----------
----------- ----------
See Notes to Financial Statements.
3
<PAGE>
BABYSTAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1995 1994 1995 1994
---- ---- ---- ----
SALES $7,846,143 $0 $11,727,497
COST OF SALES 6,763,493 0 10,143,313
----------- --------- ----------- -------------
GROSS PROFIT 1,082,650 0 1,584,184 0
Service Revenue 41,506 41,506
----------- --------- ----------- -------------
TOTAL REVENUES 1,124,156 0 1,625,690 0
OPERATING EXPENSES 1,086,865 22,342 1,660,422 30,342
----------- --------- ----------- -------------
OPERATING INCOME(LOSS) 37,291 (22,342) (34,732) (30,342)
OTHER INCOME (EXPENSE);
Rental/Other income 10,145 14,988
Non-recurring loss
on disposal of
building (47,000)
Interest income
(expense) (42,147) 20,903 (62,021) 48,903
----------- --------- ----------- -------------
Total other
income (expense) (32,002) 20,903 (47,033) 1,903
----------- --------- ----------- -------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 5,289 (1,439) (81,765) (28,439)
PROVISION FOR STATE
INCOME TAXES 12,020 20,940
----------- --------- ----------- -------------
INCOME(LOSS) FROM
CONTINUING OPERATIONS (6,731) (1,439) (102,705) (28,439)
INCOME(LOSS) FROM
DISCONTINUED
OPERATIONS 104,192 (856,561) (192,632) (1,347,561)
----------- --------- ----------- -------------
NET INCOME (LOSS) $97,461 ($858,000) ($295,337) ($1,376,000)
----------- --------- ----------- -------------
----------- --------- ----------- -------------
Weighted average
number of shares 4,712,795 3,512,795 4,512,795 3,512,795
Earnings (loss) per
share:
Continuing
operations ($0.00) ($0.00) ($0.02) ($0.01)
Discontinued
operations $0.02 ($0.24) ($0.04) ($0.38)
----------- --------- ----------- -------------
Net $0.02 ($0.24) ($0.06) ($0.39)
----------- --------- ----------- -------------
----------- --------- ----------- -------------
See Notes to Financial Statements.
4
<PAGE>
BABYSTAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
JUNE 30, 1995
<TABLE>
<CAPTION>
Additional Retained
Preferred Stock Common Stock Paid-In Earnings
Shares Amount Shares Amount Capital (Deficit) Total
------ ------ ------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance-January 1, 1995 0 $0 3,512,795 $35,128 $7,497,251 ($5,089,523) $2,442,856
Net (loss) for the 6 months
ended June 30, 1995 (295,337) ($295,337)
Issuance of shares under
merger agreement 1,200,000 12,000 1,308,000 $1,320,000
----- ----- ---------- ------- ---------- ----------- ----------
Balance-June 30,1995 0 $0 4,712,795 $47,128 8,805,251 ($5,384,860) $3,467,519
----- ----- ---------- ------- ---------- ----------- ----------
----- ----- ---------- ------- ---------- ----------- ----------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
BABYSTAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1994
(Unaudited)
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($295,337) ($1,376,000)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Loss on disposal of building 47,000
Depreciation and amortization 56,934 9,000
Provision for decline in receivables 25,000
Changes in assets and liabilities:
Accounts receivable (2,053,438)
Inventories (2,981,037) 91,000
Other assets 261,753 76,000
Accounts payable 1,250,578 13,000
Bankers Acceptances Payable (41,000)
Other liabilities 14,215 83,000
---------- -----------
Total adjustments (3,450,995) 303,000
---------- -----------
Net cash provided by (used in)
operating activities (3,746,332) (1,073,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Collection of notes receivable 191,000 1,050,000
Issuance of notes receivable (350,000)
Acquisition of property and equipment (63,050) (3,000)
Payments related to disposal of building (77,000)
Costs related to purchase of business (86,374)
Cash acquired upon purchase of business 1,807
Payments for liabilities assumed in
purchase of business (347,000)
---------- -----------
Net cash provided by (used in)
investing activities (303,617) 620,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable, bank 2,789,976
Note payable, stockholder (1,059,161)
Payments on capital lease obligations (6,211)
---------- -----------
Net cash provided by
financing activities 1,724,604 0
---------- -----------
NET INCREASE (DECREASE) IN CASH (2,325,345) (1,073,000)
CASH, BEGINNING OF PERIOD 2,404,000 2,894,000
---------- -----------
CASH, END OF PERIOD $78,655 $1,821,000
---------- -----------
---------- -----------
See Notes to Financial Statements.
6
<PAGE>
BABYSTAR INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
In November 1994, the Company sold its wholly-owned subsidiary, Travel
Safety Children's Products, Inc. to an entity whose principal was a former
consultant to the Company for approximately $776,000, comprised of $136,000 in
cash and $640,000 in the form of a promissory note. The promissory note bears
interest at a rate of 8.5% and is due in 14 equal monthly installments
commencing in December of 1994. The principal balance due of approximately
$503,000 under the promissory note as of June 30, 1995 has been fully reserved
against and therefore no asset relating thereto is reported on the Company's
Balance Sheet as of June 30, 1995.
In February 1995, the Company acquired all of the assets of Datatrend,
Inc. for a purchase price of $1,406,000. The purchase price consisted of
1,200,000 shares of common stock valued at $1,320,000 and acquisition costs of
$86,000. The purchase price was allocated to the assets acquired and the
liabilities assumed as follows:
Inventory $3,446,000
Accounts payable and accrued expenses (2,100,000)
Accounts and notes payable to stockholders (1,406,000)
Excess of cost over acquired net assets 1,171,000
Notes payable and capital leases (655,000)
Accounts receivable 557,000
Other assets 310,000
Fixed Assets 83,000
-----------
$ 1,406,000
-----------
-----------
The excess of cost over acquired net assets is being amortized over 15 years.
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiary, Datatrend, Inc. All intercompany accounts and
transactions are eliminated in consolidation. Since discontinuing its car seat
business in November of 1994 as referenced above, the Company's operations
consist solely of the operations of its wholly-owned subsidiary acquired on
February 1, 1995, which is engaged in the sale and distribution of computers and
peripherals. Income and expenses related to the Company's car seat business are
reported as Income(Loss) from Discontinued Operations.
7
<PAGE>
BABYSTAR INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories, which consist primarily of computer hardware, are stated at
the lower of cost or market. Cost is determined utilizing the first-in,
first-out (FIFO) method.
Property and Equipment
Items capitalized as property and equipment are stated at cost.
Depreciation is computed using accelerated methods calculated to depreciate the
cost of assets over their estimated useful lives.
Earnings(Loss) per Share
Earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding. Earnings per share do not give
effect to the outstanding warrants for the purchase of shares of common stock as
these warrants would be antidilutive.
Adjustments Included in Preparing Interim Financial Statements Pursuant to Item
310(b) Instruction 2 of Regulation S-B
The financial statements as of June 30, 1995 and for the three and six
month periods ended June 30, 1995 are unaudited. Pursuant to Item 310(b)
Instruction 2 of Regulation S-B, in management's opinion, all adjustments
necessary in order to make the financial statements not misleading have been
made. Results of operations for the six months ended June 30, 1995 are not
necessarily indicative of operations for the full year ending December 31, 1995.
8
<PAGE>
BABYSTAR INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 3 - NOTE PAYABLE, BANK
The Company's wholly-owned subsidiary, Datatrend, Inc., has a promissory
note and Revolving Credit Agreement with a financial institution which permits
borrowing of up to the lesser of $5,000,000, or 70% of eligible accounts
receivable plus 40% of eligible inventory. The promissory note bears interest
at prime rate plus 1% or LIBOR Rate plus 3.5%, at the Company's election and is
collateralized by substantially all of the assets of the Company. As a part of
the revolving Credit Agreement, the Company also has an available
"overadvance" facility of $1,000,000 which allows short term borrowings of up
to $1,000,000 in excess of the result of the limit derived from the $5,000,000
cap or the collateral calculation referenced above. This "overadvance" facility
must be paid off for a consecutive period of five days every thirty days and is
therefore only intended to finance the Company's short term cash needs.
NOTE 4 - LEASE COMMITMENTS
The Company was party to a lease for office premises in New York pursuant
to a lease expiring in July 1997. Since the Company no longer anticipated the
use of these offices and has terminated all employees and business activities at
said premises, the Company accrued the sum of $72,000 as of December 31, 1994,
representing the approximate present value of all future payments due pursuant
to that lease. The Company has negotiated a settlement of the entire lease
obligation for those premises in consideration of a final payment of $7,500 and
forfeiture of its security deposit and payment of monthly rent through September
1995. As a result of this transaction, the Company has eliminated the liability
for the future lease payments which is reflected in the Company's financial
statement as income from discontinued operations. The expenses relating to the
settlement are included as expenses from discontinued operations.
The Company's wholly-owned subsidiary leases an office and warehouse
facility under an operating lease which expires in May 1996. Minimum annual
rentals through expiration are as follows:
Year ending December 31, 1995 $161,720
Year ending December 31, 1996 $ 63,780
9
<PAGE>
BABYSTAR INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 5 - INCOME TAXES
Effective January 1, 1993, the Company adopted Financial Accounting
Standard No. 109, "Accounting for Income Taxes." At December 31, 1994 the
Company has a tax asset of approximately $1,680,000 attributable to a net
operating loss carryforward of approximately $4,200,000 of which $2,400,000 will
expire in 2008 and $1,800,000 in 2009. The Company has established a full
valuation reserve against such asset since the likelihood of realization cannot
be determined. As a result of more than a 50% change in ownership, as defined
in section 382 of the Internal Revenue Code, due to the public offering of the
Company's common stock on June 23, 1993, utilization of the net operating loss
carryforwards of approximately $1,800,000 relating to the periods prior to the
public offering to offset future income is limited to approximately $200,000 per
annum, based on managements estimates.
NOTE 6 - CONTINGENT STOCK ISSUANCE FOR ACQUISITION OF DATATREND, INC.
Effective On February 1, 1995, the Company acquired all of the capital
stock of Datatrend, Inc. ("DTI") by merging a wholly owned subsidiary of the
Company into DTI. Pursuant to the terms of the Agreement and Plan of Merger
dated January 31, 1995, in exchange for the merger, the holders of DTI stock
received 1,200,000 shares of the Company's Common Stock as well as the right to
receive an aggregate of 1,200,000 additional shares if certain earnings tests
are met over a period of approximately two years.
10
<PAGE>
BABYSTAR INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESERVES
Working Capital was $2,218,790 at June 30, 1995 as compared to $2,433,000
at December 31, 1994, which represents a decrease of $214,200. The decrease in
working capital resulted primarily from a loss relating to discontinuance of
operations of the Company's prior subsidiary and closure of its New York
offices. The results of the Company's continuing operations were basically
break even during the second quarter, and the Company experienced a profit from
discontinued operations as a result of certain non-recurring items (see
"Discontinued Operations"), resulting in a profit for the overall second
quarter. The Company entered into a Revolving Credit Agreement with a financial
institution in June 1995 which increased the Company's available line of credit
from $2,500,000 at March 31, 1995 to $6,000,000 (see Note 3 to Financial
Statements). Based upon the increased availability under the Revolving Credit
Agreement combined with the Company's working capital and reasonable expected
levels of future revenues, the Company's management believes that it will be
able to meet the Company's capital needs through 1995.
Results of Operations
In November 1994, the Company divested itself of its principal operating
subsidiary. The operations of this subsidiary are treated as discontinued in
the Company's financial statements. The Company also negotiated the termination
of an employment contract with its prior President, terminated all employees,
and negotiated the termination of a lease for its former offices in New York.
Expenses related to this termination of its New York offices are treated as
Income(Loss) from Discontinued Operations in the Company's financial
statements.
Effective On February 1, 1995, the Company acquired all of the capital
stock of Datatrend, Inc. ("DTI") by merging a wholly owned subsidiary of the
Company into DTI. DTI is a Massachusetts corporation incorporated under the
laws of the Commonwealth of Massachusetts in 1993. DTI is engaged in the
wholesale and retail distribution of new, used and refurbished computer hardware
and components. Substantially all of the Company's business operations are
currently conducted by its wholly-owned subsidiary, DTI.
The Company's revenues and expenses from operations (exclusive of
income(loss) from discontinued operations) for the six months ended June 30,
1995, reflect the operations of DTI only from the date of acquisition. The
revenues and expenses for the six months ended June 30, 1994, reflect the
business operations of the Company's subsidiary which was disposed of in
November of 1994. Since the business of the Company has substantially changed
in nature for these two periods, no meaningful comparison of financial
operations for these periods is possible.
11
<PAGE>
The Company's current operations have basically been at break even in the
second quarter of operation. The combined results of operations for the first
and second quarters still results in a small loss for the six months ended June
30, 1995. Management attributes this loss to several factors. During the first
quarter of 1995 the management of DTI devoted a significant amount of its
efforts during the first part of this quarter to the transaction involving the
merger of DTI. As a result, sales and operational aspects of the Company for
the first quarter were adversely affected. The Company also believes that the
business for the first and second quarters involve certain seasonal fluctuations
affecting its sales activities. Sales and revenues for the second quarter did in
fact increase over the first quarter. The sales volume increased by
approximately 2.5 million dollars over the first quarter (including
pre-acquisition January sales of DTI which are not reflected in the Consolidated
Statement of Operations). There is no assurance that future sales increases
will occur.
Although these sales figures have in fact increased in the quarter ended
June 30, 1995 as compared to the quarter ended March 31, 1995, management still
feels that sales during the second quarter have been adversely effected by
certain changes in the focus of the Company's management and their efforts.
During 1993 and 1994, the Company relied heavily on sales to mass merchants such
as Damark International Inc. and Computer City. During 1995, sales to these
customers have significantly decreased. Sales to Computer City during 1995 were
negligible as compared to constituting approximately 21% of the Company's
revenue during 1994. Sales to Damark International, Inc. for the six months
ended June 30, 1995 constituted less than 10% of the Company's revenue, as
compared to 12% in 1994 and 56% in 1993. These mass merchant sales have
decreased primarily as a result of market conditions, but also have somewhat
resulted from the Company's decision to improve it's profit margin on sales.
The Company is attempting to increase margins and decrease its dependence on
major customers by focusing its efforts on developing a broader customer base at
higher profit margins. Sales to mass merchants are typically at much lower
margins and as a result of these lower margins and potential product returns,
are considered to be far less profitable in management's opinion. During the
second quarter of 1995, the Company has devoted significant time and effort in
attempting to developing certain retail computer outlets in furtherance of
increasing profit margins as well as decreasing dependency on mass merchant
sales. Although the Company's initial trial efforts have been somewhat
successful, there is no assurance that such efforts will derive enough revenues
to replace the volume of mass merchant sales lost and these efforts have
required significant time and efforts on the part of certain key sales
employees, affecting their ability to focus on other aspects of Company sales.
The Company has also devoted significant efforts during the second
quarter of 1995 towards the improvement of its product purchasing function,
product lines and the consistency of its product base. The Company feels that
the development of a steady and consistent supply of product from major name
brand manufacturers could not only improve its purchasing ability, but could
also increase sales volume, profit margins and possibly increase the
effectiveness of related advertising and other costs. There is no assurance
that these positive effects will in fact result
12
<PAGE>
from such efforts. The Company has traditionally purchased a large volume of
its product from numerous sources, including manufacturers and other re-sellers.
A large portion of the products purchased consisted of end of life models,
excess inventories, close outs and other such items. The Company also purchases
incomplete, defective and returned products which require refurbishing or
remanufacture in order to be resold. The typical number of product purchases is
usually a relatively small number of transactions of large quantities of
product. The purchases of product on many occasions result from a bid type
procedure with the highest or most "responsible" bidder being awarded the
purchase. The product consists of name brand as well as "no name" computer
products. There are numerous other companies in competition for this product,
both within and without the United States. Although the Company still purchases
a large volume from these sources utilizing these "bid" methods and still
purchases volumes of "no name" products, the Company, in an attempt to try and
be more competitive and to provide its sales base with a more steady stream of
product, has concentrated significant efforts in the area of developing asset
recovery plans to meet the needs of certain major name brand manufacturers of
computer equipment. This asset recovery concept primarily focuses on the
purchase of products which require refurbishing or remanufacture in order to be
resold. The Company has invested significant efforts in improving it's ability
to refurbish and remanufacture these products efficiently. As a result, the
Company has begun to develop certain contractual and non-contractual
relationships with several large manufacturers largely based on its ability to
meet these concerns of the manufacturers by providing quality warranty services,
re-channeling the products in a manner not adversely affecting the manufacturers
distributor relationships, and generally meeting the challenges of each
manufacturer with respect to any given product and the related concerns. These
contractual relationships do not typically contain any guaranty of the amount of
product available to the Company, nor do they typically make the Company the
exclusive channel or purchaser for such product. These contractual arrangements
are also typically terminable by a relatively short form of notice by the
manufacturer. The Company's ability to maintain and further develop these
relationships is dependent upon the Company's performance, the level of
competition, as well as general market conditions and the decisions of the
manufacturer's themselves to continue to outsource these functions. These
relationships are terminable by the manufacturer and there is no assurance that
these relationships will continue or that the Company's asset recovery focus
will be successful.
Discontinued Operations
During the second quarter of 1995, the Company realized certain income from
discontinued operations. The income resulted primarily from two unrelated items.
First, the Company was able to negotiate the termination of a long term
lease on premises leased by the Company in New York. The Company had previously
accrued a liability of $72,000 for the balance of the remaining payments due
under that lease. The result of the settlement of the lease arrangement
eliminated this liability and resulted in a net savings of approximately
$50,000. This item of income will not re-occur.
13
<PAGE>
The Company previously sold its wholly-owned subsidiary to Travel Safety
Children's Products, Inc. As a part of the consideration therefore, the Company
received a non-negotiable promissory note in the amount of $640,000 payable over
14 months commencing December 26, 1994. There was no assurance that any sums
will be received under the promissory note and due to this uncertainty there is
a substantial bad-debt reserve against the principal amount of the promissory
note. The Company received payments under the promissory note during the second
quarter of 1995 in excess of the corresponding reserve for bad debts resulting
in a bad debt recovery of approximately $50,000. Travel is currently in default
of the terms of the promissory note and the Company has notified Travel of such
default. There is no assurance that any further payments will be received or
sums recovered under the promissory note, therefore, the balance remains fully
reserved. The note receivable reflected on the Company's balance sheet as of
June 30, 1995 is not related to the sale of Travel Safety Children's Products,
Inc.
14
<PAGE>
BABYSTAR, INC. AND SUBSIDIARY
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently involved in any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
On February 1, 1995 the Company acquired DTI. Pursuant to the terms of
the Agreement and Plan of Merger dated January 31, 1995, in exchange for the
merger, the holders of DTI stock received 1,200,000 shares of the Company's
Common Stock as well as the right to receive an aggregate of 1,200,000
additional shares if certain earnings tests are met over a period of
approximately two years.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the second
quarter of 1995.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
A report on form 8-K was filed on April 15, 1995 reporting financial
information for the subsidiary acquired by the Company effective February 1,
1995.
15
<PAGE>
BABYSTAR INC. AND SUBSIDIARY
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.
BABYSTAR INC.
/S/ Mark A. Hanson
--------------------------------------
Mark A. Hanson
President, Chief Executive Officer and
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 78,655
<SECURITIES> 0
<RECEIVABLES> 2,660,896
<ALLOWANCES> 0
<INVENTORY> 6,427,081
<CURRENT-ASSETS> 9,236,990
<PP&E> 206,863
<DEPRECIATION> 83,472
<TOTAL-ASSETS> 10,505,927
<CURRENT-LIABILITIES> 7,027,198
<BONDS> 0
<COMMON> 47,128
0
0
<OTHER-SE> 3,420,391
<TOTAL-LIABILITY-AND-EQUITY> 10,505,927
<SALES> 11,727,497
<TOTAL-REVENUES> 11,783,991
<CGS> 10,143,313
<TOTAL-COSTS> 1,660,422
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,021
<INCOME-PRETAX> (81,765)
<INCOME-TAX> 20,940
<INCOME-CONTINUING> (102,705)
<DISCONTINUED> (192,632)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (295,337)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
