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 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
DATATREND SERVICES, 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.)
1515 Washington Street, Braintree, MA
(Address of Principal Executive Office)
(617) 691-1200
(Issuer's Telephone Number, Including Area Code)
BABYSTAR, INC.
(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 November 14, 1995
Traditional Small Business Disclosure Format (check one):
Yes X No _____
<PAGE 1>
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
<PAGE 2>
DATATREND SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1995 1994
-------------------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 48,659 $ 2,015
Accounts receivable 3,880,397 2,073,213
Inventories 7,153,259 3,286,875
Note receivable 50,000
Other current assets 305,484 493,632
------------------------------
Total current assets 11,437,799 5,855,735
PROPERTY AND EQUIPMENT, AT COST
Furniture, equipment, and leasehold
improvements 222,521 138,373
Less accumulated depreciation (99,272) (54,072)
------------------------------
Property and equipment, net 123,249 84,301
OTHER ASSETS
Organizational costs 40,284 9,670
Other 8,618 1,600
------------------------------
Total other assets 48,902 11,270
------------------------------
$11,609,950 $5,951,306
==============================
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Note payable, bank $ 2,532,427 $ 416,517
Accounts payable 6,603,341 2,727,322
Accrued expenses and other accrued
liabilities 279,387 308,455
Current portion of capital leases
obligations 12,770 12,382
------------------------------
Total current liablilities 9,427,925 3,464,676
OTHER LIABILITIES
Capital lease obligations, net of
current portion 7,963 17,809
Note Payable, stockholder 1,743,567
------------------------------
7,963 1,761,376
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share -
20,000,000 authorized; 4,712,795 shares
issued and outstanding at September 30,
1995 and 1,000 shares authorized, issued
and outstanding at December 31, 1994 47,138 10
Additional paid-in capital 2,343,606
Retained earnings(deficit) (216,682) 725,244
-----------------------------
Total stockholders' equity 2,174,062 725,254
-----------------------------
$11,609,950 $5,951,306
=============================
</TABLE>
See Notes to Financial Statements.
<PAGE 3>
DATATREND SERVICES, INC.
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 $16,796,218 $19,805,727 $28,897,544
COST OF SALES 5,714,800 15,479,441 17,143,041 26,198,071
--------------------------------------------------------------------
GROSS PROFIT 922,556 1,316,777 2,662,686 2,699,473
Service Revenue 247,415 288,921
--------------------------------------------------------------------
1,169,971 1,316,777 2,951,607 2,699,473
OPERATING EXPENSES 1,275,370 741,826 3,154,774 2,020,428
--------------------------------------------------------------------
OPERATING INCOME(LOSS) (105,399) 574,951 (203,167) 679,045
OTHER INCOME (EXPENSE);
Rental/Other income 9,945 5,943 26,281 17,552
Interest income (expense) (103,702) (131,209) (193,684) (315,190)
--------------------------------------------------------------------
Total other income (expense) (93,757) (125,266) (167,403) (297,638)
--------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES (199,156) 449,685 (370,570) 381,407
PROVISION FOR INCOME TAXES 10,540 23,985 35,980 23,985
--------------------------------------------------------------------
NET INCOME(LOSS) FROM CONTINUING OPERATIONS (209,696) 425,700 (406,550) 357,422
INCOME(LOSS) FROM DISCONTINUED OPERATIONS 12,530 55,963
--------------------------------------------------------------------
NET INCOME (LOSS) ($ 197,166) $ 425,700 ($ 350,587) $ 357,422
====================================================================
Weighted average number of shares 4,712,795 4,189,262
Earnings (loss) per share:
Continuing operations ($ 0.04) ($ 0.10)
Discontinued operations $ 0.00 $ 0.01
----------------------------------------------------
Net ($ 0.04) ($ 0.08)
====================================================
</TABLE>
See Notes to Financial Statements.
<PAGE 4>
DATATREND SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
-----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 350,587) $ 357,422
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating acitvities:
Depreciation and amortization 51,035 28,701
Changes in assets and liabilities:
Accounts receivable (1,857,184) (5,026,688)
Inventories (3,866,384) 1,838,435
Other current assets 188,148 (349,083)
Accounts payable 3,876,019 1,562,873
Other current liabilities (29,068) (12,050)
-----------------------------
Total adjustments (1,637,434) (1,957,812)
-----------------------------
Net cash provided by (used in)
operating activities (1,988,021) (1,600,390)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (84,148) (42,708)
Other assets (43,467) (1,000)
-----------------------------
Net cash used in investing activities (127,615) (43,708)
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable, Advances 18,180,438 31,880,133
Note payable, Payments (17,808,095) (30,688,256)
Payments on capital lease obligations (9,458) (8,393)
Shareholder distribution (137,000) (227,920)
Purchase of subsidiary treasury stock (210,000)
Proceeds from business merger 2,146,395
-----------------------------
Net cash provided by (used in)
financing activities 2,162,280 955,564
-----------------------------
NET INCREASE (DECREASE) IN CASH 46,644 (688,534)
CASH, BEGINNING OF PERIOD 2,015 689,747
-----------------------------
CASH, END OF PERIOD $ 48,659 $ 1,213
=============================
</TABLE>
See Notes to Financial Statements.
<PAGE 5>
DATATREND SERVICES. INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Retained
--------------------- Paid-In Treasury Earnings
Shares Amount Capital Stock (Deficit) Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance-December 31, 1994 1,000 $ 10 $725,244 $ 725,254
Distribution to S-Corporation Shareholders (137,000) ($ 137,000)
Purchase of Treasury Stock (210,000) ($ 210,000)
Retirement of Treasury Stock (500) (5) 210,000 (210,000) ($ 5)
Termination of S-Corporation Status 244,339 (244,339) $ 0
Business Acquisition 3,512,295 35,133 2,099,267 $2,134,400
Additional Shares Issued in Connection
with Merger 1,200,000 12,000 $ 12,000
Net (loss) for the 9 months
ended September 30, 1995 (350,587) ($ 350,587)
------------------------------------------------------------------------------
Balance-September 30, 1995 4,712,795 $47,138 $2,343,606 $ 0 ($216,682) $2,174,062
==============================================================================
</TABLE>
See Notes to Financial Statements
<PAGE 6>
BABYSTAR INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
Note 1 - The Company
In January of 1995, Datatrend, Inc., through a reverse acquisition, was
merged with Babystar, Inc., a publicly held company (the "Merger"). At that
time Babystar, Inc. no longer had any operations, having sold its operating
subsidiary in November 1994. Babystar's net loss for the eight months ended
September 30, 1995 is included in the Company's results for the nine month's
ended September 30, 1995.
In connection with the Merger, certain former Datatrend, Inc. shareholders
received 1,200,000 shares of the Company's common stock, and may receive an
additional 1,200,000 shares if after tax earnings reach certain levels.
The Company also has 4,265,200 stock warrants and options outstanding, which
have exercise prices between $.5625 and $4.69 per share, with expiration
dates between July 1997 and June, 1998.
Note 2 - Accounting Policies and Disclosures
Basis of Presentation -The results of operations for the interim periods
shown in this report are not necessarily indicative of the results to be
expected for the fiscal year. In the opinion of management, the information
contained herein reflects all adjustments necessary to make the results of
operations for the interim periods a fair statement of such operations. All
such adjustments are of a normal recurring nature.
The accompanying financial statements do not contain all of the disclosures
required by generally accepted accounting principals and should be read in
conjunction with the financial statements and related notes included in the
Company's annual report on form 10-KSB for the year ended December 31, 1994.
Revenue Recognition - The Company recognizes revenue when its products are
shipped to its customers.
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.
<PAGE 7>
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.
Note 4 - Contingencies
The Company has filed an action in United States District Court against a
supplier of computer products, Jabil Circuit, Inc. for breach of contract
and related damages. The Company is seeking damages in excess of one half
million dollars. Jabil Circuit Inc. has filed a counterclaim against the
Company seeking damages in excess of 2 million dollars. The Company
believes it will not be materially affected by the outcome of this lawsuit.
Note 5 - 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, 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.
<PAGE 8>
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 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, 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.
Note 6 - 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 carry forwards 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.
<PAGE 9>
BABYSTAR INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Working Capital and Liquidity
Cash provided (used) in operations for the nine months ended September 30,
1995 and 1994 was ($1,988,021) and ($1,600,390) respectively. Cash used by
operations in 1994 was directly related to the expansion of credit given to
Datatrend customers in the third quarter. The use of cash in 1995 was
primarily for the purchase of inventory and increased accounts receivable,
some of the purchases were offset with additional vendor credit. The
increase in inventory in 1995 can be attributed to seasonal sales cycles and
availability of inventory for purchase.
Cash provided (used ) by investing activities for the nine months ended
September 30, 1995 and 1994 was ($127,615) and ($43,708). A majority of the
cash used by investing activities in 1995 was related to the costs of the
merger that were accounted for as other assets and the purchase of fixed
assets.
Cash provided (used) by financing activities for the nine months ended
September 30, 1995 and 1994 was $2,162,280 and $955,564 respectively. In
the period ended September of 1994 the Company used cash from financing
activities to fund the extension of credit to customers. In the nine months
ended September 30, 1995 cash from financing activities increased primarlry
because of the proceeds from the merger.
Based on the increase in equity from the merger, the increased vendor credit
and the existing line of credit from a bank, management feels that the
company has sufficient capital to meet its short and long term capital
needs.
Results of Operations
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. For
financial reporting purposes, the Merger of Babystar, Inc and DTI had been
treated as if DTI acquired Babystar, Inc. Any references to the Company made
in this management discussion and in the accompanying financial statements
shall apply to Datatrend, Inc or DTI. DTI survives as the sole operating
subsidiary of the company.
<PAGE 10>
The Company's revenues and expenses from operations (exclusive of losses
from discontinued operations) for the nine months ended September 30, 1995,
reflect the operations of DTI and Datatrend, Inc. The revenues and expenses
for the nine months ended September 30, 1994, reflect the business
operations of the Datatrend, Inc.
Sales for the three months ended September 30, 1995 were $6,637,356, down
60.5%, gross margins as a percentage of sales increased from 7.8% to 17.6%,
and operating costs are up 71.9% compared with the same period one year
earlier.
Substantially all of the Company's assets are included in inventory and
accounts receivable. Inventory values are $7,153,000 and $3,286,000, at
September 30, 1995 and December 31, 1994, respectively. This represents an
increase of $3,867,000, or 118 % over the three quarters of 1995. This
increase is due primarily to the receipt of a large quantity of inventory in
the third quarter. Accounts receivable were $3,880,000 and 2,073,000 at
September 30, 1995 and December 31, 1994, respectively, an increase of
$1,807,000, or 87%. This increase can be attributed to the change in the
customer base. The Company has reduced its dependance on "pure spin" deals
to mass merchants, which were typically done with little or no credit terms.
The new customer base includes more companies that are being given terms to
purchase product. Other current assets, including advances to vendors,
decreased $138,000 to $355,000 at September 30, 1995 from $494,000 at
December 31, 1994. This decrease is primarily due to the reduction in
advances to vendors as a result of the receipt of the associated inventory.
Accounts payable at September 30, 1995 and December 31, 1994 were $6,603,000
and $2,727,000 respectively, an increase of $3,876,000, or 142%. The
Company has increased its notes payable in the three quarters of 1995 by
$2,116,000. The increase in accounts payable and notes payable was
anticipated, due to the increase in inventory and accounts receivable.
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 believed that first and second quarter results involved 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). Despite this belief,
sales for the third quarter decreased by approximately 1.2 million dollars
as compared to the second quarter of 1995.
<PAGE 11>
The Company believes that this decrease is reflective of a decrease in pure
trading or spin deals (large volume transactions whereby the Company
essentially acts as a broker and does not remanufacture or reconfigure the
product) 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. These significant efforts
consist primarily of hiring/assigning additional qualified personnel
designated to assist Mr. Hanson in the purchasing function, as well as
attempting to develop longer term. relationships with manufacturers thereby
allowing the Company to improve product lines and consistency. 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 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 out source 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.
<PAGE 12>
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.
<PAGE 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.
<PAGE 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
<PAGE 15>
