<PAGE>
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-QSB
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from __________________ to_________________
Commission file number 0-19082
OPTIMAX INDUSTRIES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84- 1059458
- ------------------------ --------------------
(State of incorporation) (IRS Employer
Identification No.)
1118 Avenue J Brooklyn, New York 11230
--------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(718) 258-3204
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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.[x] Yes [] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [] Yes [] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 30, 1997, Registrant had 6,020,591 shares of common
stock, $.02 par value, outstanding.
<PAGE>
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997
(unaudited) and December 31, 1996 (audited)
Consolidated Statement of Operations, Three Months Ended
September 30, 1997 and 1996 (unaudited)
Consolidated Statement of Operations, Nine Months Ended
September 30, 1997 and 1996 (unaudited)
Consolidated Statement of Cash Flows, Three Months Ended
September 30, 1997 and 1996 (unaudited)
Consolidated Statement of Cash Flows, Nine Months Ended
September 30, 1997 and 1996 (unaudited)
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
ITEM 2. Changes in Securities
ITEM 3. Defaults Upon Senior Securities
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on Form 8-K
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
September 30,
1997 December 31,
(unaudited) 1996
-------------- -------------
<S> <C> <C>
Current assets
Cash $ 4,734 $ 312,867
Accounts receivable 78,812 181,506
Inventories 425,300 300,811
Prepaid expenses 9,277 8,549
------------- -------------
Total current assets 518,123 803,733
Property and equipment, net of accumulated
depreciation of $957,405 and $380,158 2,628,170 2,594,286
Goodwill, net of accumulated amortization
of $175,351 and $26,303 - 151,971
Organization costs, net of accumulated
amortization of $7,889 and $3,499 24,729 21,959
Security deposits and other assets 413 6,607
------------- -------------
Total assets $ 3,171,435 $ 3,578,556
============ =============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30,
1997 December 31,
(unaudited) 1996
-------------- -------------
<S> <C> <C>
Current liabilities
Payroll taxes payable $ 173,575 $ 182,053
Accounts payable and accrued expenses 613,653 335,963
Current portion of notes payable 1,656,777 218,842
------------- -------------
Total current liabilities 2,444,005 736,858
Long-term liabilities
Notes payable, net of current portion 485,546 378,526
------------- -------------
Total liabilities 2,929,551 1,115,384
------------- -------------
Stockholders' equity
Preferred shares - $.001 par value,
5,000,000 shares authorized; none
issued and outstanding - -
Common shares - $.02 par value,
20,000,000 shares authorized;
6,020,591 issued and outstanding 120,412 120,412
Additional paid-in capital 9,863,583 9,864,750
Accumulated deficit (9,742,111) (7,521,990)
------------- -------------
Total stockholders' equity 241,884 2,463,172
Total liabilities and stockholders' equity $ 3,171,435 $ 3,578,556
============= =============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended September 30,
(Unaudited)
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Sales $ 173,633 $ 131,385
Cost of sales 126,662 69,277
------------- -------------
Gross profit 46,971 62,108
Operating expenses
Depreciation and amortization 167,829 2,600
Salaries, not included in cost of sales 86,918 6,701
Other operating expenses 238,548 54,751
------------- -------------
Total operating expenses 493,295 64,052
------------- -------------
Net loss before other income (expenses) (446,324) (1,944)
Other income (expense)
Provisions for discontinued operations
And writedown of assets (786,885) -
Interest expense, net of income (41,636) 2,980
Other non-operating income - 780
------------- -------------
Total other income (expense) (828,521) 3,760
------------- -------------
NET INCOME (LOSS) $(1,274,845) $ 1,816
============= =============
NET INCOME (LOSS) PER SHARE $ (.21) $ -
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 6,020,591 3,288,700
============= =============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the nine months ended September 30,
(Unaudited)
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Sales $ 779,381 $ 378,326
Cost of sales 648,331 233,428
------------- -------------
Gross profit 131,050 144,898
Operating expenses
Depreciation and amortization 230,234 36,653
Salaries, not included in cost of sales 562,291 139,934
Other operating expenses 705,026 151,768
------------- -------------
Total operating expenses 1,497,551 328,355
------------- -------------
Net loss before other income (expenses) (1,366,501) (183,457)
Other income (expense)
Provisions for discontinued operations
and writedown of assets (786,885) -
Interest expense, net of income (65,894) (1,607)
Other non-operating income 181 39,412
------------- -------------
Total other income (expense) (852,598) 37,805
------------- -------------
Net loss $(2,219,099) $ (145,652)
============= =============
Net loss per share $ (.37) $ (.03)
============= =============
Weighted average shares outstanding 6,020,591 4,703,091
============= =============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three months ended September 30,
(Unaudited)
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,274,845) $ 1,816
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 167,829 2,600
Provision for discontinued opera-
tions and writedown of assets 786,885 -
Increase in accounts payable and
accrued expenses (56,240) -
Decrease (increase) in accounts
receivable 105,123 (66,477)
Decrease in inventories 309,218 8,093
Decrease (increase) in prepaid
expenses and other assets 54,386 (24,577)
Net cash provided by (used in) operating
activities 92,356 (78,545)
------------- -------------
Cash flows from investing activities:
Purchase of marketable securities - (201,953)
(Acquisition) disposition of property
and equipment (228,750) (2,033,615)
Increase in organizational costs (649) -
Decrease in security deposits and
other assets 9,541 -
------------- -------------
Net cash used in investing activities (219,858) (2,235,568)
Cash flows from financing activities:
Issuance of notes payable 95,937 -
Repayment of notes payable (11,860) -
Issuance of stock and capital
contributions - 2,880,681
------------- -------------
Net cash provided by financing activities 84,077 2,880,681
------------- -------------
Increase (decrease) in cash (43,425) 566,568
Cash, July 1, 48,159 13,802
------------- -------------
Cash, September 30, $ 4,734 $ 580,370
============= =============
Interest paid $ 5,000 $ -
============= =============
Income taxes paid $ - $ -
============= =============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ended September 30,
(Unaudited)
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,219,099) $ (145,652)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 230,234 36,653
Provisions for discontinued opera-
tions and writedown of assets 786,885 -
Increase in accounts payable and
accrued expenses 269,213 82,903
(Increase) decrease in accounts
receivable 102,694 (89,921)
(Increase) decrease in inventories (124,489) 17,292
(Increase) decrease in prepaid
expenses and other assets (728) 2,602
------------- -------------
Net cash used in operating activities (955,290) (96,123)
Cash flows from investing activities:
Purchase of marketable securities - (201,953)
Acquisition of property and equipment (892,399) (2,007,897)
Increase in organization costs (9,383) -
Decrease in security deposits and
other assets 6,174 1,756
------------- -------------
Net cash used in investing activities (895,608) (2,208,094)
Cash flows from financing activities:
Issuance of common stock and capital
contributions - 2,880,681
Payment of deferred financing costs (1,167) -
Issuance of notes payable 1,552,255 3,906
Repayment of notes payable (8,323) -
------------- -------------
Net cash provided by financing activities 1,542,765 2,884,587
------------- -------------
Increase (decrease) in cash (308,133) 580,370
Cash, January 1, 312,867 -
------------- -------------
Cash, September 30, $ 4,734 $ 580,370
============= =============
Interest paid $ 56,662 $ 4,587
============= =============
Income taxes paid $ - $ -
============= =============
</TABLE>
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
--------------------------
In addition to historical information, this Quarterly Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are, thus, prospective. The forward-looking
statements contained herein are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reflected in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, competitive pressures, changing economic
conditions, those discussed in the Section entitled "Management's Discussion
and Analysis of Financial Conditions and Results of Operations", and other
factors, some of which will be outside the control of the Company. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements
to reflect events or circumstances that arise after the date hereof. Readers
should refer to and carefully review the information in future documents the
Company files with the Securities and Exchange Commission.
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The financial statements reflect the financial condition and results of
operations of Optimax Industries, Inc. and its wholly-owned operating
divisions (hereinafter referred to as the "Company"). The balance sheets at
September 30, 1997 and the statements of operations and cash flows for the
three month and nine month periods ended September 30, 1997 and 1996,
respectively, have been prepared by the Registrant without audit.
In the opinion of management, all adjustments (which include only normal
recurring transactions) necessary to present fairly the financial position,
results of operations and cash flows and changes in stockholders' equity for
all periods presented have been made. Balance sheet information at
December 31, 1996 was derived from the Company's audited financial statements
contained in its Annual Report on Form 10-KSB.
LIQUIDITY AND CAPITAL RESOURCES: SEPTEMBER 30, 1997 VERSUS
DECEMBER 31, 1996
- -----------------------------------------------------------
The Company's assets decreased from $3,578,556 at December 31, 1996 to
$3,171,435 at September 30, 1997, a decrease of $407,121. This decrease was
principally attributable to the Company's decision to record provisions for
the writedown of property and equipment and inventory in anticipation of
discontinuing operations at both the Company's foliage nursery in Loxahatchee,
Florida and giftware manufacturing facility in Boston, Massachusetts. The
Company's cash decreased from $312,867 at December 31, 1996 to $4,734 at
September 30, 1997 resulting principally from the investment of cash resources
into the Company's remaining operating divisions and the utilization of cash
to support continuing net operating losses during the nine month period ended
September 30, 1997. Accounts receivable decreased from $181,506 at December
31, 1996 to $78,812 at September 30, 1997.
Inventories increased from $300,811 at December 31, 1996 to $425,300 at
September 30, 1997, resulting principally from the initial purchase, in March,
1997, of an inventory of foliage plants at the Homestead, Florida nursery.
Current assets decreased from $803,733 at December 31, 1996 to $518,123 at
September 30, 1997, resulting from the provision for the writedown of certain
inventories and the utilization of cash to support continuing net operating
losses.
The Company's investment in property, plant and equipment increased from
$2,594,286 at December 31, 1996 to $2,628,170 at September 30, 1997, an
increase of $33,884. This net increase was principally attributable to the
acquisition, in March, 1997, of eighteen (18) acres of real property, utilized
as a plant foliage nursery, located in Homestead, Florida and the purchase of
equipment and vehicles for utilization at the Homestead, Florida nursery and a
provision for the writedown of property and equipment at the Loxahatchee,
Florida plant foliage nursery and the Boston, Massachusetts giftware
manufacturing facility, in anticipation of discontinuing operations at both
subsidiary locations.
The Company's liabilities increased from $1,115,384 at December 31, 1996
to $2,929,551 at September 30, 1997, an increase of $1,814,167. This increase
is principally attributable to the issuance of various notes payables for the
acquisition of the Homestead, Florida real property, initial foliage plant
inventory at the Homestead, Florida nursery and general working capital,
including funds to support continuing net operating losses, for the Company's
operating divisions.
The Company's working capital decreased from $66,875 at December 31, 1996
to a deficit of $(1,925,882) at September 30, 1997. The Company's current
ratio decreased from 1.09 at December 31, 1996 to 0.2 at September 30, 1997.
Stockholders' equity decreased from $2,463,172 at December 31, 1996 to
$241,884 at September 30, 1997, a decrease of $2,221,288, attributable to the
Company's net operating losses for the nine month period ended September 30,
1997.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
- -----------------------------------------
The Company's sales were $173,633 and $779,381 for the three and nine
month periods ended September 30, 1997 compared to $131,385 and $378,326 for
the comparable reporting period ended September 30, 1996, representing
increases of $42,248 and $401,055, respectively. The sales increases were
principally attributable to product sales in 1997 from the Company's new
horticultural and giftware business activities for which there were no
operations or product sales during the comparable prior reporting period.
Gross profits were $46,971 (27.0% of sales) and $131,050 (16.8% of sales)
for the three and nine month periods ended September 30, 1997 compared to
$62,108 (47.3% of sales) and $144,898 (38.3% of sales) for the comparable
reporting periods ended September 30, 1996, representing a decrease of $15,137
and $13,848, respectively. The gross profits decreases were principally
attributable to the introduction of new merchandise products, higher raw
material costs for inventories resulting from lower volume purchases and
higher labor costs.
Operating and non-operating expenses, exclusive of interest income and
expense, were $493,295 and $1,497,370 for the three and nine month periods
ended September 30, 1997 compared to $63,272 and $288,943 for the comparable
reporting periods ended September 30, 1996, representing increases of $430,023
and $1,208,427, respectively. The Company aggressively invested its available
cash resources into sales and marketing activities for its operating
divisions, particularly for its horticultural and giftware businesses. In
light of the Company's inability to achieve profitable, sustainable operations
and its continuing net operating losses, the Company has suspended certain
subsidiary operations, recorded provisions for the writedown of certain
property, equipment and inventories in anticipation of discontinuing these
operations and taken other downsizing actions and cost reduction measures in
light of the Company's significantly constrained working capital resources.
The Company's net losses were $(1,274,845) and $(2,219,099) for the three
and nine month periods ended September 30, 1997 compared to net income of
$1,816 and a net loss of $(145,652) for the comparable reporting periods
ended September 30, 1996.
SUBSEQUENT EVENTS
- -----------------
The Company has executed a definitive agreement on November 6, 1997 to
acquire The Forgotten Woman, Inc. (OTC Bulletin Board: TFWI), a chain of
specialty retail stores operating under the name "The Forgotten Woman," which
cater to selling high-end name brand, designer and private label dresses,
women's suits and other fashions and accessories in larger sizes.
The acquisition, if consummated, would entail the issuance of one share
of the Company's common stock for each share of capital stock of TFWI. In
addition, all outstanding warrants and options of TFWI (for approximately 2.75
million underlying shares) will be assumed by the Company and will be
convertible into the Company's options and warrants. The exchange ratio
contemplates that the Company will consummate a reverse stock split based upon
its capitalization at the time of closing. On closing, TFWI's shareholders
will own in excess of seventy-five percent (75%) of the Company's capital
stock and the Company's Board of Directors and management will be designated
by TFWI. The transaction is subject to certain remaining conditions, namely,
approvals, if required, of Boards of Directors and shareholders of both
companies and NASDAQ approval, including the Company's continued listing on
the NASDAQ Small Cap Market. If all conditions are satisfied, of which there
is no assurance, the Company expects to consummate the acquisition by January,
1998.
The Company further announced on August 4, 1997, that it entered into a
non-binding letter of intent providing for a business combination with Lillie
Rubin Fashions, Inc., a privately-held chain of 38 retail stores that
specializes in better, "special occasion" women's apparel with a focus on
higher-priced fashions and accessories. If consummated, this transaction,
along with the acquisition of TFWI specified in the preceding paragraphs, will
initially represent businesses with 47 stores and projected annual revenues of
approximately $41 million. The acquisition price of this transaction, if
consummated, will be approximately $8.2 million, consisting of cash and the
issuance of securities by the Company. The transaction is subject to numerous
conditions, including the execution of a definitive agreement, approvals, if
required, of shareholders of the Company, NASDAQ approval, including the
Company's continued listing on the NASDAQ Small Cap Market, and financing. If
all conditions are satisfied, of which there is no assurance, the Company
expects to consummate this acquisition, contemporaneous with the acquisition
of TFWI, by January, 1998.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October, 1997, the Company and one of its subsidiaries were named
as defendants in an action relating to the Company's acquisition of certain
equipment, machinery and inventory for which the Company and it subsidiary
entered into a promissory note with the plaintiffs in November, 1996. The
Plaintiffs accelerated the promissory note, amounting to approximately
$54,000, subsequent to a demand for payment, and sued the Company after the
Company informed the Plaintiffs of its intentions to not pay the note. In
addition, the Company has countersued the Plaintiffs, claiming breach of
contract, fraud and unfair and deceptive acts in violation of applicable state
laws. The Company contends that the Plaintiffs have caused injuries in an
amount greater than the note and is requesting a jury trial.
ITEM 2. CHANGES IN SECURITIES
On July 11, 1997, the Board of Directors of the Company authorized a
reduction in the exercise price of the Company's outstanding Class BB Warrants
from $3.00 per share to $1.00 per share. All other terms of the Class BB
Warrants remain unchanged and the BB Warrants continue to be exercisable until
April 1, 1999, the expiration date.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
The Company is currently in default under several material promissory
notes and other obligations which, if they remain uncured, could have a
material adverse impact upon the Company's ability to continue as a going
concern.
The Company is currently in default under the SBA loan made to its
subsidiary, Plants For Tomorrow, Inc. ("Plants"). The obligation of Plants to
repay the loan is secured by a senior mortgage encumbering the Company's
nursery located in Loxahatchee, Florida. While the SBA has not initiated
foreclosure proceedings under the loan document, it has the right to foreclose
upon the nursery.
A separate subsidiary of the Company, Flying Cow Farms II, Inc.
("Flying Cow") is in default for non-payment under a $229,342 promissory note
issued in connection with the purchase by Flying Cow of its 18-acre nursery
located in Homestead, Florida. The obligation of Flying Cow under the
promissory note is secured by inventory located on the Homestead nursery.
While the holder of the note has not begun foreclosure proceedings, the loan
documents grant to the holder the right to do so. The Company has engaged in
continuing negotiations with thehHolder for either an extension of time to pay
or restructuring of the note. Although no agreement has been reached, the
Company believes, based upon negotiation to date, that an acceptable
arrangement may be accomplished to cure the default.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
Exhibit 27 Financial Data Schedule
Reports on Form 8-K:
Item 5: Other Events dated September 30, 1997
<PAGE>
<PAGE>
SIGNATURE
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 hereunto duly authorized.
OPTIMAX INDUSTRIES, INC.
Dated : November 19, 1997 By: /s/ Peter H. Siegel
----------------- -----------------------------------
Peter H. Siegel, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENT OF OPERATIONS ON PAGES 3 THROUGH 6 OF
THE COMPANY'S FORM 10-QSB FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 4,734
<SECURITIES> 0
<RECEIVABLES> 78,812
<ALLOWANCES> 0
<INVENTORY> 425,300
<CURRENT-ASSETS> 518,123
<PP&E> 2,628,170
<DEPRECIATION> 957,405
<TOTAL-ASSETS> 3,171,435
<CURRENT-LIABILITIES> 2,444,005
<BONDS> 0
0
0
<COMMON> 120,412
<OTHER-SE> 9,863,583
<TOTAL-LIABILITY-AND-EQUITY> 3,171,435
<SALES> 779,381
<TOTAL-REVENUES> 779,381
<CGS> 648,331
<TOTAL-COSTS> 1,497,551
<OTHER-EXPENSES> 852,598
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,894
<INCOME-PRETAX> (2,219,099)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,219,099)
<DISCONTINUED> (786,885)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,219,099)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
</TABLE>
