U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 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.
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(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
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(Address of Principal Executive Offices)
(617) 326-4100
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(Issuer's Telephone Number, Including Area Code)
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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 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, $0.01par value 4,712,795 shares at November 14, 1995
Traditional Small Business Disclosure Format (check one):
Yes ____ No ____
FORM 10-QSB QUARTERLY REPORT
BABYSTAR, INC. AND SUBSIDIARY
INDEX
PAGE
----
Part I: FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets - September 30, 1995
and December 31, 1994 3
Consolidated Statements of Operations -Three Months
and Nine Months Ended September 30, 1995 and 1994 4
Consolidated Statement of Stockholders' Equity 5
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1995 and 1994 6
Notes to Financial Statements 7-10
Item 2.
Management's Discussion and Analysis of Financial
Conditions and Operations 11-13
Part II: OTHER INFORMATION
Items 1-6. 14
Signatures 15
2
BABYSTAR, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1995 1994
CURRENT ASSETS ------------- ------------
Cash $48,659 $2,404,000
Accounts receivable 3,880,397
Inventories 7,153,259
Note receivable 50,000 241,000
Other current assets 305,484 24,000
----------- ----------
Total current assets 11,437,799 2,669,000
PROPERTY AND EQUIPMENT, AT COST
Furniture, equipment, and leasehold
improvements 222,521 29,000
Less accumulated depreciation (99,272) (27,000)
----------- ----------
Property and equipment, net 123,249 2,000
OTHER ASSETS
Security deposit 8,618 7,000
Goodwill, net of accumulated amortization 1,119,152
----------- ----------
Total other assets 1,127,770 7,000
----------- ----------
$12,688,818 $2,678,000
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Note payable, bank $2,532,427 $139,000
Accounts payable 6,603,341
Accrued expenses and other accrued
liabilities 279,387 97,000
Current portion of capital leases
obligations 12,770
----------- ----------
Total current liablilities 9,427,925 236,000
OTHER LIABILITIES
Capital lease obligations, net of
current portion 7,963
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 September 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) (5,599,449) (5,090,000)
----------- ----------
Total stockholders' equity 3,252,930 2,442,000
----------- ----------
$12,688,818 $2,678,000
=========== ==========
See Notes to Financial Statements.
3
BABYSTAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $6,637,356 $0 $18,364,853
COST OF SALES 5,714,800 0 15,858,113
---------- --------- ----------- -----------
GROSS PROFIT 922,556 0 2,506,740 0
Service Revenue 247,415 288,921
---------- --------- ----------- -----------
TOTAL REVENUES 1,169,971 0 2,795,661 0
OPERATING EXPENSES 1,292,793 27,882 2,953,215 58,224
---------- --------- ----------- -----------
OPERATING INCOME(LOSS) (122,822) (27,882) (157,554) (58,224)
OTHER INCOME (EXPENSE):
Rental/Other income 9,945 24,933
Non-recurring loss on disposal of building (47,000)
Interest income (expense) (91,172) 22,460 (153,193) 71,363
---------- --------- ----------- -----------
Total other income (expense) (81,227) 22,460 (128,260) 24,363
---------- --------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES (204,049) (5,422) (285,814) (33,861)
PROVISION FOR STATE INCOME TAXES 10,540 31,480
---------- --------- ----------- -----------
INCOME(LOSS) FROM CONTINUING OPERATIONS (214,589) (5,422) (317,294) (33,861)
INCOME(LOSS) FROM DISCONTINUED OPERATIONS 0 (282,578) (192,632) (1,630,139)
---------- --------- ----------- -----------
NET INCOME (LOSS) ($214,589) ($288,000) ($509,926) ($1,664,000)
========== ========= =========== ===========
Weighted average number of shares 4,712,795 3,512,795 4,579,462 3,512,795
Earnings (loss) per share:
Continuing operations ($0.05) ($0.00) ($0.07) ($0.01)
Discontinued operations $0.00 ($0.08) ($0.04) ($0.46)
---------- --------- ----------- -----------
Net ($0.05) ($0.08) ($0.11) ($0.47)
---------- --------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
4
BABYSTAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
SEPTEMBER 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 9 months
ended September 30, 1995 (509,926) ($509,926)
Issuance of shares under
merger agreement 1,200,000 12,000 1,308,000 $1,320,000
-------- ------- --------- ------- ---------- ----------- ---------
Balance-September 30, 1995 0 $0 4,712,795 $47,128 $8,805,251 ($5,599,449) $3,252,930
======== ======= ========= ======= ========== =========== =========
</TABLE>
See Notes to Financial Statements.
5
BABYSTAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
(Unaudited)
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($509,926) ($1,664,000)
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 92,254 12,000
Provision for decline in receivables 24,000
Changes in assets and liabilities:
Accounts receivable (3,322,939)
Inventories (3,707,215) 111,000
Other assets 24,882 112,000
Accounts payable 4,559,689 223,000
Bankers Acceptances Payable (41,000)
Other liabilities (12,044) (84,000)
--------- -----------
Total adjustments (2,365,373) 404,000
--------- -----------
Net cash provided by (used in)
operating activities (2,875,299) (1,260,000)
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 (78,708) (2,000)
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 (319,275) 621,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit agreement 1,907,852
Note payable, stockholder (1,059,161)
Payments on capital lease obligations (9,458)
--------- -----------
Net cash provided by
financing activities 839,233 0
--------- -----------
NET INCREASE (DECREASE) IN CASH (2,355,341) (639,000)
CASH, BEGINNING OF PERIOD 2,404,000 2,894,000
--------- -----------
CASH, END OF PERIOD $48,659 $2,255,000
========= ===========
See Notes to Financial Statements.
6
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 September 30, 1995 has been fully
reserved against and therefore no asset relating thereto is reported on the
Company's Balance Sheet as of September 30, 1995. The maker is currently in
default of the terms of the promissory note and the Company has notified the
maker that it's rights under the related License Agreement have been
terminated as a result.
Effective on February 1, 1995, the Company acquired all of the
outstanding common stock 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
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(Loss) per share is computed by dividing net income by the
weighted average number of shares issued and outstanding during each period.
Earnings per share do not give effect to certain outstanding warrants issued
by the Company which are considered to 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 September 30, 1995 and for the three and
nine month periods ended September 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 nine months ended September 30,
1995 are not necessarily indicative of operations for the full year ending
December 31, 1995.
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 $4,500,000, or 75% 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. The
availability under the note and related Revolving Credit Agreement was reduced
by mutual agreement between the Company and it's lender from a total of
$6,000,000 to $4,500,000 in October 1995 as a result of the Company's failure to
maintain certain leverage and income covenants set forth in the Revolving Credit
Agreement. These defaults continue and have not been cured and have not been
waived by the bank as of this date. The Company is in the process of attempting
to negotiate these covenants or to obtain a waiver therefor from the bank.
8
BABYSTAR INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(Continued)
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
The Company's wholly-owned subsidiary has recently entered into a lease
for a new office and warehouse facility consisting of approximately 77,230
square feet under an operating lease which commences in January 1996. Minimum
annual rentals through expiration are as follows:
Year ending December 31, 1995 $ 0
Year ending December 31, 1996 $ 212,384
Year ending December 31, 1997 $ 274,167
Year ending December 31, 1998 $ 312,782
Year ending December 31, 1999 $ 328,228
Year ending December 31, 2000 $ 339,812
Balance of lease term $1,791,736
The above referenced lease also contains a provision allowing the Company
to terminate said lease at the end of the fifth year in exchange for a payment
of $50,000.00 payable by election of the company within a specified time frame
prior to the end of the fifth year of the lease term.
9
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
BABYSTAR INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Reserves
Working Capital was $2,009,874 at September 30, 1995 as compared to
$2,433,000 at December 31, 1994, which represents a decrease of $423,126. The
decrease in working capital resulted from a loss relating to discontinuance of
operations of the Company's prior subsidiary and closure of its New York
offices, as well as the results of the Company's continuing operations
suffering a loss primarily during the third 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). The
Revolving Credit Agreement was subsequently modified and the availability has
been decreased to $4,500,000 as a result of the Company's failure to maintain
certain leverage and income covenants set forth in the Revolving Credit
Agreement. These defaults continue and have not been cured and have not been
waived by the bank as of this date. The Company is in the process of attempting
to negotiate these covenants or to obtain a waiver therefor from the bank.
Based upon the 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, so long as the company is successful in its
negotiations with its bank lender.
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 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 nine months ended September
30, 1995, reflect the operations of
11
DTI only from the date of acquisition. The revenues and expenses for the
nine months ended September 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.
The Company's current operations have resulted in a loss in the third
quarter of operation. The combined results of operations for the first three
quarters results in a loss for the nine months ended September 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 previously expected that
first and second quarters involve certain seasonal fluctuations affecting its
sales activities and that sales would in fact increase in the third quarter.
Sales and revenues for the second quarter did in fact increase over the first
quarter. The sales volume for the second quarter 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). Despite this belief, sales for the third quarter decreased by
approximately 1.2 million dollars.
The Company believes that this decrease is reflective of a decrease in
pure trading or spin deals and the Company's increased focus on
remanufacturing. 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 nine months ended September 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 resulted from the Company's
decision to improve it's profit margin on sales. The Company is attempting
to increase margins and decrease 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.
The Company has again devoted significant efforts during the third
quarter of 1995 towards the improvement of its product purchasing function,
product lines and the consistency of its product base. The Company still
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 long range 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 from such
efforts. The Company has traditionally purchased a large volume of its
product from numerous sources, including manufacturers and other re-sellers. A
12
large portion of the products purchased consisted of end of life models,
excess inventories, close outs and other such items. The Company is no longer
focusing on these types of purchases as its main source of product. The
Company is concentrating on the purchase of what it believes is a large volume
of returned products which require refurbishing or remanufacture in order to
be resold. The Company continues to concentrate 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 returned to the manufacturer
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 developed certain contractual and non-contractual relationships
with several 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. 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
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 no payments under the
promissory note during the third quarter of 1995. Travel is currently in
default of the terms of the promissory note and the Company has terminated
Travel's rights under the License Agreement. 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 September 30, 1995 is not related to the
sale of Travel Safety Children's Products, Inc.
13
BABYSTAR, INC. AND SUBSIDIARY
Part II: OTHER INFORMATION
Item 1. Legal Proceedings
The Company has filed an action in the United States district Court
against a supplier of computer products, Jabil Circuit, Inc. For breach of
contract and related damages. The action is entitled Datatrend, Inc. v.
------------------
Jabil Circuit, Inc. (Civil Action No. 95-11764DPW). Jabil Circuit, Inc. has
- -------------------
filed a counterclaim against the Company alleging breach of contract, quantum
meruit and unjust enrichment, seeking an unspecified sum of damages, plus
interest and costs.
The Company is not currently involved in any other 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 third
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.
14
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
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 48,659
<SECURITIES> 0
<RECEIVABLES> 3,880,397
<ALLOWANCES> 0
<INVENTORY> 7,153,259
<CURRENT-ASSETS> 11,437,799
<PP&E> 222,521
<DEPRECIATION> 99,272
<TOTAL-ASSETS> 12,688,818
<CURRENT-LIABILITIES> 9,427,925
<BONDS> 0
<COMMON> 47,128
0
0
<OTHER-SE> 3,205,802
<TOTAL-LIABILITY-AND-EQUITY> 12,688,818
<SALES> 18,364,853
<TOTAL-REVENUES> 18,678,707
<CGS> 15,858,113
<TOTAL-COSTS> 2,953,215
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153,193
<INCOME-PRETAX> (285,814)
<INCOME-TAX> 31,480
<INCOME-CONTINUING> (317,294)
<DISCONTINUED> (192,632)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (509,926)
<EPS-PRIMARY> ($0.11)
<EPS-DILUTED> ($0.11)
</TABLE>
