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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ------------------- to ------------------
Commission file number 0-19082
OPTIMAX INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Colorado 84-1059458
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(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
132 Lincoln Street, Boston, Massachusetts 02111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 695-2950
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $.02 Par Value
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. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB.[ ]
The Registrant's revenues for the year ended December 31, 1996 were $470,518.
As of March 31, 1997, the aggregate market value of the Common Stock of the
Registrant based upon the average of the closing bid and asked prices of the
Common Stock as quoted on the Automated Quotation Service ("NASDAQ") of the
National Association of Securities Dealers, Inc., ("NASD") under the symbol
"OPMX" held by non-affiliates of the Registrant was approximately $2.875. As
of March 31, 1997, 6,020,591 shares of the Common Stock of the Registrant were
outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
The Registrant hereby incorporates herein by reference the following
documents:
PART IV - EXHIBITS
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1. Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1992.
2. Incorporated by reference from current report on Form 8-K/A-1 reporting
an event of September 30, 1993.
3. Incorporated by reference from the Proxy Statement for Annual Meeting of
Shareholders held January 5, 1995.
4. Incorporated by reference from current report on Form 8-K dated January
20, 1995.
5. Incorporated by reference from an amendment to the Company's registration
statement on Form S-1, Commission file no. 33-38531, filed with the
Commission on the date specified.
6. Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1993.
7. Incorporated by reference from current report on Form 8-K dated February
13, 1995.
8. Incorporated by reference from the Company's registration statement on
Form S-8, S.E.C. File Number 0-19082 filed October 26, 1994.
9. Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1994.
10. Incorporated by reference from current report on Form 8-K dated July 31,
1995.
11. Incorporated by reference from the Company's two (2) registration
statement on Form S-8, S.E.C. File Number 0-19082 filed March 20, 1995.
12. Incorporated by reference from the Company's registration statement on
Form S-8, S.E.C. File Number 0-19082 filed August 10, 1995.
13. Incorporated by reference from an amendment to the Company's registration
statement on Form S-3, Commission file no. 33-98270, filed with the
Commission on October 17, 1995.
14. Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1995.
15. Incorporated by reference the Company's Current Report on Form 8-K dated
July 23, 1996.
16. Incorporated by reference the Company's Registration Statement on
Form S-3, S.E.C. File No. 333-15691, as filed with the Commission on
November 22, 1996.
FORWARD-LOOKING STATEMENTS
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In addition to historical information, this Annual 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 Condition 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.
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PART I
ITEM 1. BUSINESS
Optimax Industries, Inc., formerly known as Plants For Tomorrow, Inc.
(the "Company") was organized under the laws of the State of Colorado on
February 23, 1987 under the name of Grizzly Capital, Inc. ("Grizzly"). In
May, 1988, Grizzly completed its initial public offering of 137,500 Units
resulting in gross proceeds to the Company of $137,500.
On January 5, 1995, the shareholders of the Company approved an amendment
to the Company's Articles of Incorporation to change the name of the Company
to "Optimax Industries, Inc." Articles of Amendment were filed on January 10,
1995 effectuating such change. The Company presently serves as a holding
company for four (4) wholly-owned operating divisions (Horticultural,
Giftware, Truck Parts Accessories and Property Development).
HORTICULTURAL DIVISION
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BACKGROUND AND OVERVIEW
On June 22, 1990, pursuant to an Asset Purchase Agreement, the Company
issued 987,500 shares of its Common Stock in exchange for all of the assets of
Plants for Tomorrow and South Florida Seed Supply and changed its name to
"Plants for Tomorrow, Inc." As a result of the acquisition, the Company
entered the environmental sciences business, concentrating on the propagation
and growing of more than 400 species of native and aquatic plants and plant
seeds for the re-vegetation of wetlands and landscaping in the southeastern
United States.
On June 29, 1992, the Company acquired all of the outstanding capital
stock of Central Florida Lands and Timber, Inc. ("CFLT"), of Perry, Florida,
in exchange for $500,000 cash and 40,649 shares of the Company's restricted
Common Stock. At the time of the acquisition, CFLT owned an 80 acre nursery
in Mayo, Florida and 80 acres of timberland in northern Florida. Effective
September, 1993, CFLT's timber division was sold. As of December 31, 1994,
the nursery facilities, property and inventory were encumbered by debts to the
Barnett Bank of North Central Florida in the total amount of approximately
$300,000. On July 29, 1994, the Company executed an Asset Purchase Agreement
for the sale of all assets related to the CFLT nursery operations to Lafayette
County Enterprises, Inc., a Florida corporation ("LCE") owned and operated by
Marvin E. Buchanan. The sale was approved by the shareholders of the Company
on January 5, 1995 and consummated on January 20, 1995. In consideration for
the transfer and conveyance of such assets, the Company received $91,365 in
cash, $166,365 in an unsecured promissory note accruing interest at the rate
of 6.0% per year payable in two annual installments, LCE's assumption of all
indebtedness to the Barnett Bank of North Central Florida of approximately
$300,000, and LCE's assumption of certain accounts payable. In February,
1996, the remaining original note balance, plus accrued interest, was
renegotiated to $170,000. Of this amount, $125,000 was paid in February,
1996, leaving a balance due, at that time of $45,000. The note contained a
provision requiring the note signer to sell 16,876 shares of Optimax
Industries, Inc. common stock, at the request of the Company, and apply the
net proceeds toward the remaining note balance. During March, 1996,
approximately one-third of the shares were sold for $15,278, which was
credited to the balance of the note, with the remaining unpaid balance then
equaling $29,722. Prior to December 31, 1996, the remaining shares were sold
in transactions that resulted in the net proceeds being applied to the note
balance and the note being satisfied and cancelled.
In July, 1996, the Company acquired one hundred percent (100%) of the
outstanding shares of common stock of Vine Street, Inc., a Massachusetts
corporation ("Vine Street"), in exchange for 1,500,000 shares of the Company's
common stock. The transaction was accounted for as a pooling of interests.
Founded in 1995, Vine Street owns and operates cut-flower, plant and foliage
retail concessions located within mass merchandisers and discount retailers in
the Northeastern United States. The Company believes there are numerous
profitable opportunities available in seeking and procuring additional retail
concessions and expects to significantly increase sales and profitability as
it undertakes to vertically integrate, to the extent possible, its
Horticultural Division from the initial growing stage at the operating nursery
level to the point of sale at the retail level.
PRODUCTS
The Company had specialized in the propagation and growing of more than
400 species of terrestrial and aquatic plants and plant seeds that are native
to Florida. Historically, the Company had been a leading source of supply for
certain varieties. Native plants are those plants that occur naturally in the
environment, as opposed to foliage plants that are more commonly grown in
nurseries. In addition to growing native plants in its nurseries, the Company
had also gathered seeds, seedlings, and plants from various sites throughout
the State of Florida when necessary to complete installation jobs or to
restock its nurseries. The nursery located in Loxahatchee, Florida, can
produce up to approximately 3,000,000 plants per year for use in landscape,
beach and re-vegetation facilities.
The Company's operations had been realizing operating losses and net
losses as a result of various factors. In many cases, these have resulted
from underbidding jobs and inadequate cost accounting controls. The Board of
Directors made certain significant changes in an effort to rectify certain of
the problems that have resulted in such losses. Thus, in July, 1996, the
Company decided to transform the nursery from an environmental sciences and
mitigation installer to a laterally-integrated combined Florida foliage
plants, beach re-vegetation and mangrove restoration growing facility, where
the Company has identified greater opportunities. In addition, the Company
purchases and resells on a wholesale basis, foliage and plant products grown
by non-affiliated nurseries and consolidated for sale at the Company's nursery
to mass merchandisers, supermarket chains and other national and regional
nursery products retailers.
The Company's business is not inherently hazardous, but does from time to
time require persons to work within swampy areas and marshes. Although the
Company takes every precaution to ensure that its personnel are properly
equipped and trained for such activities, all possible eventualities cannot be
precluded. The Company maintains workers' compensation insurance through the
State of Florida and it believes that this insurance is adequate in the case
of an accident. In addition, the Company does maintain general liability
insurance.
DISTRIBUTION METHODS
The Company sells, delivers and propagates foliage plants. The Company
no longer seeks bids for new installation contracts. The operations of the
horticultural division are limited to the propagation and sale of foliage and
other nursery products and to new business endeavors which may be acquired.
COMPETITION
Growing foliage plants requires less expertise from that required for
terrestrial and aquatic plants. There are other nurseries in Florida that
produce many of the same species of foliage plants as the Company. However,
the Company believes that a combination of new management, installed in July,
1996 and a reorganization and rebuilding of the Company's nursery facility in
Loxahatchee, Florida will enhance its ability to profitably compete in the
foliage plant industry.
AVAILABILITY OF RAW MATERIALS
In the past, the Company has not experienced difficulty in obtaining a
sufficient supply of seeds, seedlings, cuttings or plants, for either its
prior terrestrial and aquatic plant operation or its current foliage plant
production, and, at this time, it has no reason to anticipate difficulty in
the future.
PRINCIPAL CUSTOMERS
The Company had no customers during 1996 or 1995 upon which it was
dependent for a significant portion of its revenues on a continuing basis.
GOVERNMENT REGULATION
The activities of the Company are subject to federal and state
environmental laws and regulations which impose limitations on the discharge
of pollutants into the air and water and which establish standards for the
treatment, storage and disposal of solid and hazardous waste. Management
believes that the Company is substantially in compliance with such laws and
regulations, and there are no pending proceedings which question the Company's
compliance with all applicable environmental, health and safety laws.
The Company's activities are also subject to the federal Occupational
Safety and Health Act ("OSHA") and comparable state statutes relating to the
health and safety of the Company's employees. The Company believes that it is
in substantial compliance with such laws and regulations.
The Company's operations are subject to state and federal laws and
regulations governing discharge of runoff, storm water, process waste water
and the provision of drinking water to employees. The Company believes that it
is operating in compliance with the requirements of the Clean Water Act and
has not received any notice of a violation of that Act or any water protection
statute.
Management anticipates that increasingly strict laws and regulations
relating to the environment, natural resources, and health and safety will
result in increased costs, additional capital expenditures and reduced
operating flexibility. Although the Company does not consider current laws
and regulations relating to such matters to be materially burdensome, there
can be no assurances that future legislative or governmental actions or
judicial decisions will not adversely affect the Company or its ability to
continue to conduct its activities and operations as currently conducted.
EMPLOYEES
The Horticultural Division currently employs 11 employees, 9 of which are
employed on a full-time basis.
SUBSEQUENT EVENT
On March 4, 1997, the Company consummated the purchase of an 18-acre
nursery located in Homestead, Florida. The purchase included the real estate,
and all buildings, structures and improvements, including irrigation systems,
located on the property. The purchase price for the Homestead, Florida
nursery was $482,000, of which approximately $283,000 was paid in cash at
closing, with a balance of $199,000 evidenced by an eight percent promissory
note payable in 48 monthly installments. In addition, the Company purchased
the existing inventory on the nursery in consideration of future payments due
upon liquidation of that inventory.
The Homestead, Florida nursery was acquired by the Company through its
newly-formed wholly-owned subsidiary, Flying Cow Farms II, Inc. The nursery
will be utilized in a similar manner to its Loxahatchee, Florida nursery held
by Plants for Tomorrow, Inc.
GIFTWARE DIVISION
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BACKGROUND AND OVERVIEW
In November, 1996, the Company, through a newly-founded and organized,
wholly-owned subsidiary, Art Smart, Inc., a Nevada corporation, purchased
certain personal property and business assets of a picture framing and
giftware manufacturing facility. The purchase price paid by the Company was
$215,641, of which $40,641 was paid in cash at the closing and the remaining
balance of $167,180, giving effect to purchase price adjustments at closing,
was evidenced by two promissory notes, payable in equal monthly installments
of 28 months and 48 months, respectively.
The Company announced in October, 1996 that it had established an
operation, which it consolidated the following month with its wholly-owned
subsidiary, Art Smart, Inc., to design, develop and distribute floral and non-
floral related giftware, such as ceramic pottery, wicker baskets and
decorative boxes, and would market the resulting products, to the extent
possible, with foliage and plant products grown or consolidated for sale at
the Company's plant nursery in Loxahatchee, Florida. Although there can be no
assurances that new products can be developed and sold in combination with
other products either grown or manufactured by the Company, the Company
believes that such possibilities exist.
PRODUCTS
The Company is principally involved in the design, development, selection
and manufacturing of art, art-related gift items, picture frames, shadow
boxes, mirrors and three-dimensional art products. The Company exhibits at
trade shows within the giftware, visual arts and home furnishings industries
and has available, to date, a database of over one thousand corporate
customers, all of whom receive marketing information from the Company on an
on-going basis. All of the Company's products are manufactured within an
11,000 square foot manufacturing facility located in Boston, Massachusetts.
COMPETITION
The giftware and home furnishings industries are tremendously large in
scope, with many different types of manufacturers and other suppliers capable
of supplying products that compete with items manufactured by the Company.
Most of the Company's existing and future customers are mass merchandisers,
department stores and home furnishings retailers. Since the emphasis of the
Company's products is one of original concept and design, the Company believes
that competitors are unable to match the uniqueness and manufacturing quality
of the Company's products.
PRIVATE LABEL MANUFACTURING
The Company announced in March, 1997 that it had entered into a private
label manufacturing arrangement with a major retailer for the design and
production of art, picture frame and other home furnishing products to be sold
in all of the major retailer's locations. The Company further announced that
it was pursuing and expects to enter into other private label manufacturing
arrangements with selected home furnishings retailers, although there can be
no assurances that such arrangements will be consummated.
CREDIT FACILITY
In connection with its announcement to commence private label
manufacturing for a major retailer, the Company further announced in March,
1997 that it had entered into an accounts receivable factoring line of credit
in the amount of $2 million with Finova Capital Corporation. The Company
believes that this credit facility is adequate to satisfy the anticipated
increase in business that will result from the announced private label
manufacturing arrangement and, possibly, from additional manufacturing
arrangements and agreements that may occur during the next year.
EMPLOYEES
The Giftware Division currently employs 15 full-time employees.
TRUCK PARTS ACCESSORIES DIVISION
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BACKGROUND AND OVERVIEW
On February 13, 1995, the Company closed upon and consummated the
acquisition of all issued and outstanding common stock of Taylor-Built
Industries, Inc., a Texas corporation ("TBI"), pursuant to an Agreement and
Plan of Reorganization dated January 20, 1995 (the "Agreement"). The
Agreement was between and among the Company, Polyphase Corporation, a Nevada
corporation ("Polyphase"), and TBI. The acquisition was structured in a
manner calculated to qualify as a tax-free reorganization under Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. Under the
terms of the Agreement, the Company acquired from Polyphase all issued and
outstanding shares of common stock of TBI in exchange for 200,000 shares of
the Company's $0.02 par value Common Stock. The number of shares exchanged
for the TBI stock was the result of arm's-length negotiations between the
Company and Polyphase, and considered several factors, including the net
equity contribution of TBI of approximately $200,000, the public trading price
of the Company's Common Stock, the relative assets, equity, liabilities and
working capital of both corporations, the operating histories of both
corporations, and the market potential of each entity's products.
In August, 1996, the Company established a new, wholly-owned subsidiary,
Dyno-Might Truck Accessories, Inc. ("DMTA"), a Texas corporation, to commence
the manufacturing and sale of a new product, bed liners for the inside of
pick-up trucks and the sale of private-labeled tool boxes, marketed under the
names "Dyno-Cover" and "Dyno-Box," respectively.
Both corporations will operate as wholly-owned subsidiaries of the
Company, with the Company serving as a holding company and performing certain
administrative functions.
PRODUCTS
TBI's product is an electronically activated hard cover for the back of
pick-up trucks. The product is marketed under the names "Truk'n'Trunk",
"Power Security Cover," and "Dyno-Cover." The product is comprised of a
motor, a box, and interlocking aluminum slats which travel on tracks along the
side of the bed of the pick-up truck. When closed, the cover provides a solid
surface cover for the bed and the cover locks to secure the contents of the
bed. When opened by the operation of an electronic motor, the cover retracts
into a box at the front of the bed. The motor may be activated with a key
from inside the cab or at the rear of the bed. The cover may also be
activated by a remote switch.
DMTA's primary product is a chemical-based, synthetic material that is
applied to the inside of pick-up trucks to prevent deterioration and extend
the useful life of the bed liner. The product is marketed under the name
"Dyno-Liner." The Company also markets a tool box under the name "Dyno-Box"
with the product being manufactured for the Company under a private-label
manufacturing arrangement.
COMPETITION
There are numerous options available for pick-up truck bed covers, bed
liners and tool boxes. The Company believes that its products are
competitively priced and provide a combination of security, convenience and
base of operation unmatched by its competitors.
PRODUCT DEVELOPMENT
The Company, on a continuing basis, redesigns or modifies its products to
produce their unit costs and improve their marketability and profitability.
The Company intends to add complimentary truck part accessories to its product
base, either internally developed, manufactured or acquired by purchase;
however there can be no assurances that the Company can either develop,
manufacture or acquire any additional products or, further, that any
developed, manufactured or acquired products can be profitably sold.
PATENTS AND LICENSES
The TBI product is the subject of U.S. Patent No. 4,786,099 titled "Truck
Bed Cover Device". TBI manufactures and markets the product under an
exclusive, world-wide license from the patent holder. The terms of such
license call for the payment of royalties for each unit sold, and the sale of
a minimum number of units per year after the third year of the license.
Subject to compliance with its terms, including certain minimum sales and
production royalties, the license shall continue for the life of the patent,
as extended or renewed, unless earlier terminated for cause.
In the past, the licensor of the patent covering the truck bed cover
device manufactured by TBI has asserted, but never pursued various claims and
allegations that the license in favor of TBI may not be in full force and
effect. The Company is of the view that the license is enforceable in
accordance with its terms. Nevertheless, the Company is in the process of
developing alternative solutions for the retractable truck bed cover that
would not require use of the licensed patent, in the event the enforceability
of the license is disputed in the future. Nevertheless, should a dispute with
the licensor arise in the future, such a dispute could have an adverse impact
upon the business operations of TBI.
EMPLOYEES
The Truck Parts Accessories Division employs 6 persons in its Dallas,
Texas facility on a full-time basis.
PROPERTY DEVELOPMENT DIVISION
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BACKGROUND AND OVERVIEW
On July 21, 1996 and concurrent with the Company's acquisition of Vine
Street Stores, Inc., the Company, through a newly-formed and wholly-owned
subsidiary, Colchestor Property Investors, L.L.C. ("CPI"), a Colorado limited
liability company, purchased twelve (12) acres of undeveloped real property
located in Colchester, Connecticut. The contract to purchase the property was
assigned by Vine Street Stores, Inc. to CPI as part of the concurrent
closings. As consideration, the Company paid to the sellers of the real
property approximately $433,000, the funds of which were obtained from the net
proceeds of the Company's initial closing of a private offering of its
securities in July, 1996, and the issuance to the sellers of an aggregate of
1,280,000 shares of Series A Convertible Preferred Stock. Each share of the
Series A Convertible Preferred Stock was convertible, at the option of the
holder, into one (1) share of common stock for the period commencing one year
from the date of issue and ending five years from the date of issue. Each
share of Series A Convertible Preferred Stock was subsequently converted into
one share of common stock on November 25, 1996, the effective date of a
Registration Statement, registering for sale under the Securities Act of 1933,
as amended, the shares of common stock issuable upon such conversion.
DEVELOPMENT
The Company is in the later stages of determining a final development
plan for the real property, which tentatively provides for the commercial
development and construction of various-sized buildings to be pre-leased to
credit-worthy tenants, principally fast food or restaurant operators, and,
possibly, the additional development of a motel and family entertainment
center. Final development plans must be approved by the appropriate local
town selectmen and zoning officials. Although the Company believes it will
obtain the necessary approvals to develop the real property, there can be no
assurances that such approvals will be received. Furthermore, in order to
commence construction of the various buildings, the Company will need to
obtain interim and permanent commercial real estate financing, neither of
which the Company has secured.
EMPLOYEES
The Company has no employees that are devoted, full-time, to the
development of the property, however, the Company's President is involved on
an as-needed basis. In addition, the Company has retained individual,
independent contractors, namely architects, surveyors, zoning advisors and
marketing professionals to advise and assist the Company's President with the
development of the property.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's executive offices are located under a month-to-month
tenancy agreement from the President of the Company and are located in Boston,
Massachusetts.
The Company's horticultural operations are based on a ten-acre nursery,
owned by the Company, in Loxahatchee, near West Palm Beach, Florida.
Improvements on the property include nursery beds, three greenhouses, an
extensive irrigation system and the Company's 6,000 square foot office
building and mechanical area. This property is subject to a mortgage
collateralizing a loan guaranteed by the Small Business Administration, which
loan was in default in 1995, however, the Company recently agreed to a
modification of the loan with monthly installment payments to commence in
June, 1994. Therefore, the loan is no longer considered in default at
December 31, 1996.
During 1990, the Company purchased approximately ten acres of nursery
land in Highlands County, Florida (near Avon) for $123,107. Effective March
31, 1995, this property was sold, with the Company realizing an accounting
loss of approximately $49,000.
As noted above, in June 1992, the Company acquired CFLT which owned an
80-acre nursery in Mayo, Florida. The CFLT nursery had an office building,
maintenance shop, and a seedling packaging and shipping building, with a
combined total of 4,752 square feet. The nursery facilities, property and
inventory were encumbered by debts to the Barnett Bank of North Central
Florida in the total amount of approximately $300,000. On July 29, 1994, the
Company executed an Asset Purchase Agreement for the sale of all assets
related to the CFLT nursery operations to Lafayette County Enterprises. The
sale was consummated on January 20, 1995. In consideration for the transfer
and conveyance of such assets, the Company received $91,365 in cash, $166,365
in an unsecured promissory note accruing interest at the rate of 6.0% per year
payable in two annual installments, LCE's assumption of all indebtedness to
the Barnett Bank of North Central Florida of approximately $300,000, and LCE's
assumption of certain accounts payable. In February, 1996, the remaining
original note balance, plus accrued interest, was renegotiated to $170,000.
Of this amount, $125,000 was paid in February, 1996, leaving a balance due, at
that time of $5,000. The note contained a provision requiring the note signer
to sell 16,876 shares of Optimax Industries, Inc. common stock, at the request
of the Company, and apply the net proceeds toward the remaining note balance.
During March, 1996, approximately one-third of the shares were sold for
$15,278, which was credited to the balance of the note, with the remaining
unpaid balance then equaling $29,722. Prior to December 31, 1996, the
remaining shares were sold in transactions that resulted in the net proceeds
applied to the note balance and the note being satisfied and cancelled.
In June, 1996, the Company completed the purchase of approximately twelve
(12) acres of undeveloped real property located in Colchester, Connecticut, a
fast-growing, affluent suburb of Hartford. The property was acquired by
Colchester Property Investors, LLC, a wholly-owned limited liability company
formed and organized for the purpose of making the acquisition. The Company's
preliminary plans for the property include the commercial development and
construction of various buildings to be pre-leased to credit-worthy tenants,
subject to receiving advance necessary approval and permits from the
appropriate zoning and town officials. Although the Company believes it will
obtain such approvals and permits, there are no assurances that these can be
achieved.
In March, 1997, the Company purchased an 18-acre nursery located in
Homestead, Florida. The purchase included the real estate and all
improvements, as well as the existing foliage inventory. The Company plans to
operate the Homestead, Florida nursery in a manner similar to the operations
of the Loxahatchee, Florida nursery.
The Company leases manufacturing facilities and office space for its
giftware division in Boston, Massachusetts and its truck parts accessories
division in Dallas, Texas.
The Company considers all of its leased and owned facilities to be
adequate for their intended operations for the next year. In each operation,
the Company believes that its properties are adequately covered by liability
and comprehensive insurance.
ITEM 3. LEGAL PROCEEDINGS
As of December 31, 1996, the Company was a party to the following two
legal proceedings initiated by trade creditors demanding payment for past due
amounts:
Tu-Co Peat, Inc. v. Plants For Tomorrow, Inc.,
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pending in the County Court for Highlands County, Florida, Case No. CC94-114;
the Court entered judgment of $3,449 in April, 1995.
Jim Blackman Ford, Inc. v. Plants For Tomorrow, Inc.,
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pending in the County Court for Highlands County, Florida, Case No. CC94-64;
the Company has entered into a stipulation to pay $6,184.
In addition to the foregoing trade creditor lawsuits, the following
lawsuit is presently pending:
Devcon International Corp. v. Plants For Tomorrow, Inc.
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Devcon has sued the Company for breach of contract for the Orlando
International Airport project claiming unspecified damages for nonconforming
plant materials. The Company has counter-claimed for breach of contract for
$163,376, plus interest, based on Devcon's continual delays causing plant
materials to overgrow. The Company believes that it will prevail in this
lawsuit.
Barry Davis v. Optimax Industries, Inc. et al.,
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pending in the Supreme Court of the State of New York. In this suit, the
plaintiff is claiming entitlement based upon a verbal contract to provide
consulting services. The Company denies liability to the plaintiff and is
vigorously defending. The Company believes that the risk of an adverse
material judgment against it in this matter is extremely remote.
SWITCHGEAR SYSTEMS, INC.
On July 31, 1995, the Company closed upon the acquisition of certain
assets of Switchgear Systems, Inc., a Texas corporation ("SSI"), pursuant to
an Asset Purchase and Sale Agreement dated as of July 13, 1995 (the
"Agreement"). Following the closing, the Company engaged a firm of
independent public accountants who performed an audited examination of the
financial statements of SSI. Based upon the results of the audited
examination of the SSI financial statements, the Company discovered that there
existed a material and substantial variance between the audited financial
condition and historical results of operations of SSI and the information,
financial and otherwise, provided by SSI prior to Closing. In addition, the
audited examination of the SSI financial statements disclosed numerous
operational irregularities that had been effected by the prior owner of SSI
without the Company's knowledge and without disclosure prior to the closing.
Based upon these discoveries, the Company concluded that there existed facts
which would support a claim that the acquisition by the Company of the assets
of SSI had been induced by fraud on the part of the Seller both by
misrepresentation of material fact and by the omission to disclose material
information by the Seller. As a result, on November 22, 1995 the Company's
representative served notice upon SSI that the Company had elected to rescind
the transaction and would seek to recoup the capital investment that the
Company had made into the business prior to its discovery of the facts which
it believes constituted fraud in the inducement. On approximately November
28, 1995, litigation was commenced in the District Court of Dallas County,
Texas, Case Number 95-12444. In that civil action, claims for breach of
contract are asserted by SSI and its sole shareholder, David E. Muir ("Muir")
against the Company and its wholly-owned subsidiary, Switchgear Systems
International, Inc. ("SSII"), and the Company and SSII correspondingly are
asserting claims against SSI and Muir to enforce its election to rescind the
transaction, and for damages due to fraud in the transaction. In that civil
action, a preliminary injunction has been entered by the Court in favor of the
Company and against SSI and Muir from disposing or in any other way taking
control of the assets of SSI pending further order of the Court. SSII is no
longer in operation. The assets have been seized and sold on foreclosure of a
lien for unpaid rent by the owner of the business premises in which it had
been a subtenant. The proceeds of the sale were used to pay rent arrearage,
with a balance having been paid to the Internal Revenue Service for accrued
and unpaid payroll taxes. It is unlikely that SSII will resume operations as
a going concern in the future. Based upon the foregoing, the Company is
vigorously pursuing enforcement of its rescission of the acquisition of SSI
and pursuing other remedies for damages which it believes it has against the
principals of SSI and is defending itself against the claims of SSI and Muir,
which it believes are without merit.
SEC INVESTIGATION
During 1995, the Company received requests for information from the U.S.
Securities and Exchange Commission ("SEC") related to an investigation begun
by the SEC during 1994 into various matters, including certain transactions in
securities by the Company and one of its officers and directors. As of March
31, 1997, neither management of the Company nor the Company's legal counsel
have been informed of the results, if any, of the SEC's investigation or of
any timetable for the SEC to complete its investigation. There is no way to
predict what, if any, effect the outcome of this matter will have on the
financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the year ending December 31, 1996.
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock is traded on the over-the-counter market and
quoted on the Automated Quotation Service ("NASDAQ") of the National
Association of Securities Dealers, Inc. ("NASD"), under the symbol, "OPMX."
Before the Company's name change, the trading symbol was "PFTI." The ranges
of high and low bid quotations for the Company's Common Stock for the last two
fiscal years and the current fiscal year are provided below. All quotes have
been adjusted to account for the one-for-twenty reverse split.
<TABLE>
<CAPTION>
High bid Low bid
-------- -------
<C> <S> <S>
1995
----
First Quarter $2.88 $1.50
Second Quarter $3.88 $1.50
Third Quarter $3.25 $1.25
Fourth Quarter $2.56 $1.00
1996
----
First Quarter $3.13 $1.50
Second Quarter $1.875 $1.625
Third Quarter $2.8125 $1.5625
Fourth Quarter $3.50 $2.00
1997
----
First Quarter $3.00 $2.125
</TABLE>
The bid price of the Company's Common Stock as of March 31, 1997,
was approximately $2.875. The foregoing quotations represent interdealer
prices which do not include retail markup, markdown or commissions. As a
result, they do not necessarily represent prices paid in actual transactions.
The number of recordowners of the Company's Common Stock on March
31, 1997 was approximately 333.
DIVIDENDS
The Company has never paid dividends on its Common Stock and does
not anticipate the payment of such dividends in the foreseeable future.
STOCK OPTIONS AND WARRANTS
To date, the Company has not implemented a Stock Incentive Plan
pursuant to which it would be authorized to grant Incentive Stock Options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
During 1995, the Company did not grant any Non-Qualified Stock
Options to any directors, officers or consultants.
At December 31, 1996, the Company had outstanding Class BB Common
Stock Purchase Warrants ("BB Warrants") exercisable to purchase, in the
aggregate, 2,129,124 shares of the Company's Common Stock. The exercise price
of the BB Warrants was reduced to $3.00 per share by the Board of Directors on
October 16, 1995. The BB Warrants are exercisable until April 1, 1999.
On March 12, 1996, the Company issued BB Warrants exercisable to
purchase 100,000 shares to Stephen G. Calandrella in consideration of services
to the Company. Further, on March 12, 1996, the Company issued BB Warrants
exercisable to purchase 100,000 shares of Common Stock to Allan H. Applestein
as partial compensation under a Financial Advisory Agreement. The $3.00 per
share exercise price of the BB Warrants was substantially higher than the fair
market value of the Company's Common Stock on the date of grant. As a result
of the foregoing grants, there are currently BB Warrants outstanding
exercisable to purchase in the aggregate 2,129,124 shares of Common Stock.
In addition to the foregoing, the Company has outstanding Warrants
exercisable to purchase an aggregate of 27,500 shares of Common Stock at an
average exercise price of $22.10 per share. These Warrants were granted in
1992 and 1993 to various consultants to the Company and are substantially "out
of the money."
In addition, the Company granted to the D.C.A. Grantor Trust (the
"DCA Trust") Warrants exercisable to purchase an additional 150,000 shares of
Common Stock at an exercise price of $2.00 per share. The exercise of the DCA
Trust Warrants has been registered on a Registration Statement on Form S-3
filed under the Securities Act of 1933, as amended, which Registration
Statement was declared effective by the Commission in 1995.
The Company has outstanding Non-Qualified Stock Options which it
issued to former directors exercisable to purchase, in the aggregate, 20,000
shares of the Company's Common Stock at an exercise price of $15.63 per share.
The exercise price of these Non-Qualified Stock Options is substantially above
the fair market value of the Company's Common Stock.
On March 12, 1996, the Company granted Non-Qualified Stock Options
exercisable to purchase for five (5) years an aggregate of 137,500 shares of
Common Stock at an exercise price of $1.50 per share, the market price of the
Company's Common Stock on the date of grant. The Non-Qualified Stock Options
were issued for services rendered to the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
report.
LIQUIDITY AND CAPITAL RESOURCES: DECEMBER 31, 1996 VERSUS DECEMBER 31, 1995.
The Company's assets increased from $1,236,059 at December 31, 1995
to $3,578,556 at December 31, 1996, an increase of $2,342,497. This increase
was principally attributable to a combination of the successful completion of
a private offering of securities by the Company in August, 1996, the
acquisition of Vine Street Stores, Inc. in July, 1996 and the acquisition of
twelve (12) acres of real property, to be held for development, located in
Colchester, Connecticut. The Company's cash increased from $0 at December 31,
1995 to $312,867 at December 31, 1996 resulting from the private offering of
securities. A note receivable of $170,000 at December 31, 1995 was
renegotiated and subsequently satisfied, in full, thus reducing the amount
outstanding to $0 at December 31, 1996. Current assets increased from
$618,101 at December 31, 1995 to $803,733 at December 31, 1996 resulting from
expanded business operations and new business developments.
The Company's investment in property, plant and equipment increased
from $435,827 at December 31, 1995 to $2,594,286 at December 31, 1996, an
increase of $2,158,459. The increase was principally attributable to the
acquisition of the real property, held for development, located in Colchester,
Connecticut and to extensive renovations undertaken at the Company's
horticultural nursery located in Loxahatchee, Florida.
The Company's liabilities decreased from $1,217,970 at December 31,
1995 to $1,115,384 at December 31, 1996, a decrease of $102,586 or 8.4%. This
decrease is principally attributable to the availability of cash, resulting
from the completion of a private offering of securities, to negotiate and
settle, at substantial discounts, various trade payables. The Company has
been able to restructure certain long-term debts, all of which were in default
at December 31, 1995, therefore, the current portion of notes payable has
increased from $0 at December 31, 1995 to $378,526 at December 31, 1996.
Accordingly, current liabilities have decreased from $1,217,970 at
December 31, 1995 to $736,858 at December 31, 1996, a decrease of $481,122 or
39.5%.
The Company's working capital increased from a deficit of $599,869
at December 31, 1995 to a positive position of $66,875 at December 31, 1996.
The Company's current ratio increased from 0.5 at December 31, 1995 to 1.09 at
December 31, 1996.
During 1995, the Company sold an aggregate of 740,624 shares of
common stock pursuant to the exercise of Warrants issued to various
consultants to the Company. As a result of those stock sales, the Company
realized an increase in capital of $867,284; however, due to the net loss for
the year ended December 31, 1995 of $(1,858,668), stockholders' equity
decreased from $1,900,473 at December 31, 1994 to $18,089 at December 31,
1995.
As a result of the issuance of new stock during the year ended
December 31, 1995, equity capital investment increased from $6,323,517 at
December 31, 1994, to $7,190,801 at December 31, 1995. Unfortunately, this
equity investment of $867,284 was more than offset by net losses which
increased the accumulated deficit to $(7,172,712). Total stockholders' equity
decreased from $1,009,473 at December 31, 1994, to $18,089 at December 31,
1995.
In August, 1996, the Company successfully completed a private
offering ("Private Offering") of its securities in which it sold an aggregate
of 1,500,000 units, each unit consisting of one (1) share of the Company's
common stock, $.02 par value, and one (1) Class BB warrant at a Private
Offering price of $1.25 per unit and from which the Company realized net
proceeds of approximately $1,356,000. Of the net proceeds, approximately
$433,000 was disbursed in partial payment of the acquisition of the real
property to be held for development, located in Colchester, Connecticut. The
balance of the acquisition was paid by the issuance of 1,280,000 shares of
Series A Convertible Preferred Stock which, upon the filing of a Form S-3 with
the U.S. Securities and Exchange Commission that was declared effective on
November 22, 1996, were converted on a one-for-one basis to 1,280,000 shares
of the Company's common stock.
Stockholders' equity increased from $18,089 at December 31, 1995 to
$2,463,172 at December 31, 1996. This increase of $2,445,083 was attributable
to the completion of the Private Offering, the issuance of preferred stock in
partial payment of the Company's purchase of the Connecticut real property and
the Company's ability to recommence previously suspended operations and
undertake new business opportunities.
Completion of the Company's acquisition of Vine Street Stores, Inc.,
the purchase of the Connecticut real property for development and the Private
Offering had a material, positive impact upon the Company's liquidity and
capital resources at December 31, 1996 and is expected to have a material
positive impact upon its future results of operations.
Other than the foregoing, the Company knows of no trends, demands,
commitments, or uncertainties that will result in or are reasonably likely to
result in the Company's liquidity increasing or decreasing in any material
way, and the Company knows of no material trends, demands, commitments, events
or uncertainties that will result in or that are reasonably likely to result
in a change in the mix or cost of such resources.
RESULTS OF OPERATIONS: DECEMBER 31, 1996 COMPARED TO DECEMBER 31, 1995.
The Company's revenue increased from $454,857 in 1995 to $470,518 in
1996, an increase of $15,661 or 3.4%. This increase resulted from the
recommencement of operations at the Company's horticultural nursery in
Loxahatchee, Florida, the acquisition of Vine Street Stores, Inc. and the
commencement of operations at the Company's newly-formed software division.
Cost of goods sold decreased from $777,375 in 1995 to $292,006 in 1996, a
decrease of $485,369 or 62.4%. This decrease resulted from significant cost
productions and reorganization measures undertaken at the Company's operating
subsidiaries in Loxahatchee, Florida and Dallas, Texas. Due to the foregoing,
gross profit (loss) increased from a negative ($322,518) in 1995 to $178,512
in 1996, an increase of $501,000. This increase was principally attributable
to the operating profitability of Vine Street Stores, Inc., a new Company
subsidiary as of July 23, 1996, and the achievement of profitable sales within
the Company's software division.
Operating expenses decreased sharply from $1,474,040 in 1995 to
$722,146 in 1996, a decrease of $751,894 or 51.0%. This decrease was
principally attributable to returned checks and the writeoff of certain
investments in 1995 that were of a one-time nature and did not occur in 1996,
reductions in salaries and other operating expenses resulting from significant
cost reductions, reorganization measures, a decrease in the provision for bad
debts due to the implementation of new customer credit policies, and the
writedown of certain inventory.
Net interest expense decreased from $36,019 in 1995 to $1,451 in
1996, a decrease of $34,568 or 95.9%. This reduction is attributable to
certain business property, sold by the Company in 1995, and the assignment of
related mortgage debt and interest income on the temporary investment of the
net proceeds from a private offering of the Company's common stock, which
closed in August, 1996. Gain on settlements of trade payables increased from
$0 in 1995 to $216,921 in 1996. These settlements were realized by the
Company's successful negotiating with numerous creditors to satisfy
outstanding trade payables at significant discounts. The cash necessary to
fund the settlements with creditors was obtained from the net proceeds of the
private offering that closed in August, 1996.
Based on the foregoing, the net loss for the year ended December 31,
1996 of $349,278 compares favorably to a net loss of $1,858,668 for the year
ended December 31, 1996. Correspondingly, the Company's loss per share
decreased from $(1.64) in 1995 to $(.06) in 1996, a decrease of $(1.58) or
96.3%.
Other than the foregoing, the Company knows of no trends, demands,
or uncertainties that will result in or are reasonably likely to result in a
change in the Company's operations.
ITEM 7. FINANCIAL STATEMENTS.
Report of Independent Certified Public Accountants
Balance Sheets - December 31, 1996 and 1995
Statements of Operations - Years ended December 31, 1996 and
1995
Statements of Stockholders' Equity - Years ended December 31,
1996 and 1995
Statements of Cash Flows - Years ended December 31, 1996 and
1995
Notes to Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There were no changes in or disagreements with the Company's
accountants which must be reported under this Item during the years ended
December 31, 1996 or 1995. The Company's accountants are Schumacher &
Associates, Inc.
<PAGE>
<PAGE> OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
AND
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
DECEMBER 31, 1996 AND 1995
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
TABLE OF CONTENTS
<CAPTION>
PAGE
- ---------------------------------------------------------------------------
<S> <C>
Report of Independent
Certified Public Accountants F-3
Consolidated Financial Statements:
Consolidated Balance Sheets F-4 and F-5
Consolidated Statements of Operations F-6
Consolidated Statements of Changes in
Stockholders' Equity F-7
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-9
</TABLE>
<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
The Board of Directors
Optimax Industries, Inc.
Boston, Massachusetts
We have audited the consolidated balance sheets of Optimax Industries, Inc.
and subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
the years ended December 31, 1996 and 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Optimax Industries, Inc. and subsidiaries as of December 31, 1996 and 1995
and the consolidated results of its operations, its changes in stockholders'
equity and its cash flows for the years ended December 31, 1996 and 1995 in
conformity with generally accepted accounting principles.
The Company is involved in certain litigation as described in Note 6. The
amount, if any, of additional assets or liabilities that may ultimately be
realized from this litigation cannot presently be determined.
SCHUMACHER & ASSOCIATES, INC.
April 14, 1997
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
ASSETS
------
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash $ 312,867 $ -
Accounts receivable, net of allowance
for doubtful accounts of $2,500 and
$245,143 181,506 75,852
Advances to related parties (Note 9) - 24,319
Inventories 300,811 345,606
Note receivable (Note 1) - 170,000
Prepaid expenses 8,549 2,324
___________ _____________
Total Current Assets 803,733 618,101
Property and equipment, net of
accumulated depreciation of $358,602
and $639,523 (Notes 1 and 2) 2,594,286 435,827
Contract retainage, net of allowance for
doubtful accounts of $0 and $176,005 - 18,470
Goodwill, net of accumulated amortization
of $23,380 and $11,690 (Note 1) 151,971 163,661
Organization costs,
net of accumulated amortization of
$1,926 and $0 21,959 -
Security deposits 6,607 -
___________ _____________
TOTAL ASSETS $ 3,578,556 $ 1,236,059
=========== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Outstanding checks in excess of
amounts reported by banks $ - $ 5,786
Payroll taxes payable 182,053 129,966
Accounts payable and accrued expenses 335,963 598,080
Current portion of notes payable 218,842 441,882
Advances payable - 42,256
___________ ___________
Total Current Liabilities 736,858 1,217,970
Long-term Liabilities
Notes payable, net of current portion
(Note 4) 378,526 -
___________ ___________
Total Liabilities 1,115,384 1,217,970
___________ ___________
Commitments and contingencies
(Notes 5, 6, 8, 10 and 11)
Stockholders' Equity (Notes 1 and 3):
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 and 1,503,091
issued and outstanding 120,412 30,062
Additional paid in capital 9,864,750 7,160,739
Accumulated deficit (7,521,990) (7,172,712)
___________ ___________
Total Stockholders' Equity 2,463,172 18,089
___________ ___________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,578,556 $ 1,236,059
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales $ 470,518 $ 454,857
Cost of sales 292,006 777,375
___________ ____________
Gross profit (Loss) 178,512 (322,518)
___________ ____________
Expenses
Bad debts 13,244 129,172
Nonsufficient checks received
(Note 5) - 117,495
Depreciation and amortization 102,393 108,373
Loss from investment write-off
(Note 1) - 223,980
Salaries, not included in cost
of sales 152,918 263,153
Loss from writedown of inventory 155,176 --
Other operating expenses 294,397 631,867
___________ ____________
Total expenses 722,146 1,474,040
___________ ____________
Net loss before other income
(expenses) and provision for
state income taxes (543,634) (1,796,558)
Other income (expenses)
Interest expense, net of income (1,451) (36,019)
Gain on settlements ot trade payables 216,921 -
Loss on disposition of equipment (20,328) (26,091)
___________ ____________
Total other income (expenses) 195,142 (62,110)
___________ ____________
Net loss before provision for
state income taxes (348,492) (1,858,668)
Provision for state income taxes 786 -
___________ ____________
NET LOSS $ (349,278) $ (1,858,668)
=========== ============
NET LOSS PER SHARE $ (0.06) $ (1.64)
WEIGHTED AVERAGE SHARES OUTSTANDING $ 3,126,591 1,132,779
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FROM DECEMBER 31, 1994 THROUGH DECEMBER 31, 1996
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
NO./SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- ------ ------- ------------ ------
<S> <C> <C> <C> <C> <C>
Balance at December 31,1994 762,467 $ 15,249 $ 6,308,268 $ (5,314,044) $ 1,009,473
Common stock issued 740,624 $ 14,813 $ 852,471 - $ 867,284
Net (loss) for the year ended
December 31, 1995 - - - $ (1,858,668) $ (1,858,668)
----------- ----------- ----------- ----------- -----------
Balance at December 31,1995 1,503,091 $ 30,062 $ 7,160,739 $ (7,172,712) $ 18,089
Common stock issued,
net of offering costs 4,517,500 $ 90,350 $ 2,704,011 - $ 2,794,361
Net (loss) for the year ended
December 31, 1996 - - - $ (349,278) $ (349,278)
----------- ----------- ----------- ----------- -----------
Balance at December 31,1996 6,020,591 $ 120,412 $ 9,864,750 $ (7,521,990) $ 2,463,172
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
<TABLE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $ (349,278) $ (1,858,668)
Adjustments to reconcile net (loss)
to net cash used
in operating activities
Depreciation and amortization 104,402 108,373
Gain on settlement of trade
payables (216,921) -
Loss on disposition of equipment 20,328 -
Increase (decrease) in accounts
payable and accrued expenses (210,030) 361,462
Decrease in outstanding checks
in excess of amounts
reported by banks (5,786) -
Stock issued for professional
services - 30,000
Increase (decrease) in accounts
receivable (105,654) 266,507
Decrease in contract retainage 18,470 -
Decrease in inventories 44,795 91,371
(Increase) decrease in prepaid
expenses (6,225) 84,573
__________ __________
Net cash (used in) operating activities (705,899) (916,382)
__________ __________
Cash Flows from Investing Activities:
(Acquisition) disposition of
property, plant and equipment (2,158,459) 308,172
Decrease in notes receivable 170,000 87,730
Increase in organization costs (21,959) -
Advances to related parties 24,319 (24,319)
Increase in security deposits (6,607) -
_____________ _____________
Net cash provided by (used in)
investing activities (1,992,706) 371,583
__________ __________
Cash Flows from Financing Activities:
Issuance of common stock and
capital contributions 2,898,242 637,284
Repayment of advances from
related parties (42,256) (55,285)
Issuance of notes payable 160,399 -
Repayment of notes payable (4,913) (93,021)
__________ __________
Net cash provided by
financing activities 3,011,472 488,978
__________ __________
Increase (Decrease) in Cash 312,867 (55,821)
Cash, January 1, - 55,821
__________ __________
Cash, December 31, $ 312,867 $ -
========== ==========
Interest Paid $ - $ -
========== ==========
Income Taxes Paid $ - $ -
========== ==========
<FN>
Note: During 1995, the Company issued 200,000 shares of its common stock as
payment for the purchase of Taylor-Built Industries, Inc.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<PAGE>
OPTIMAX INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
(A) GENERAL
-------
Optimax Industries, Inc. ("Optimax" or "Company"), formerly known as
Plants for Tomorrow, Inc. ("Plants"), was organized under the laws of the
State of Colorado on February 23, 1987. In January, 1995, the Company changed
its name to Optimax Industries, Inc. and formed a new Colorado corporation
named Plants for Tomorrow, Inc. All of the operating assets and liabilities
of the Company's horticultural division, located in Loxahatchee, Florida, were
assigned to the new Plants for Tomorrow, Inc.
On January 20, 1995, the Company acquired what it believed to be
100% ownership of Taylor-Built Industries, Inc. (TBI) in exchange for 200,000
shares of the Company's common stock. For accounting purposes, the business
combination was considered to be a purchase and, as such, all of the acquired
assets and liabilities of TBI were revalued, as of the date of acquisition, to
fair values. The market value of the Company's common stock was discounted by
50%, due to its restrictive nature, and the resulting reduced amount was used
as the value of the shares issued. This resulted in goodwill of approximately
$175,000 which is currently being amortized, on a straight-line basis, over
fifteen years. TBI is in the business of manufacturing electronic bed covers
for pick-up trucks.
After acquiring TBI, the Company was informed that another entity
may have had an option to acquire 20% of TBI even though the seller
represented that he had 100% ownership. It is management's contention that,
to the extent an option exits, the claimed optionholder's recourse is, solely,
to the seller. The claimed optionholder has made no demands on the Company
regarding this matter. The results of operations of TBI since the Company's
acquisition and its assets and liabilities as of December 31, 1996 and 1995
have been included in the consolidated financial statements.
Effective April 17, 1993, TBI entered into an exclusive license
agreement with an Illinois limited partnership granting TBI the exclusive
right to manufacture and sell electronically-activated, retractable covers for
truck vehicles. TBI paid advance royalties of $10,000, which were to be
applied against earned royalties. Royalty fees range between $6.60 and $12.60
per unit sold, depending upon production costs, with an additional $3.00 per
unit royalty due if sales exceed 5,000 units per year.
Included in the consolidated financial statements are the accounts
of Flora Fauna, Inc. (FFI), formerly known as Central Florida Lands & Timber,
Inc., a wholly-owned subsidiary. FFI was an inactive subsidiary during 1996
and 1995. Effective December 31, 1994, but closing in January, 1995, FFI sold
its horticultural nursery operation located in north central Florida for
$257,730. The terms of the sale included cash of $91,365, which was received
by the Company in January, 1995, and a promissory note from the Buyer in the
amount of $166,365. The note originally carried an interest rate of 6% per
annum and was payable in two equal annual installments of $91,520, including
interest, on December 31, 1995 and 1996, respectively.
In February, 1996, the remaining original note balance, plus accrued
interest, was re-negotiated to $170,000. Of this amount, $125,000 was paid in
February, 1996, leaving a balance due, at that time, of $45,000. The note
contained a provision requiring the note signer to sell 16,876 shares of
Optimax Industries, Inc. common stock, at the request of the Company, and
apply the net proceeds toward the remaining note balance. During March, 1996,
approximately one-third of the shares were sold for $15,278, which was
credited to the balance of the note, with the remaining unpaid balance then
equaling $29,722. Prior to December 31, 1996, the remaining shares were sold
in transactions that resulted in the net proceeds applied to the note balance
and the note being satisfied and cancelled.
During 1995, the Company formed Switchgear Systems International,
Inc. for the purpose of acquiring the assets of Switchgear Systems, Inc. The
Company closed on the transaction and subsequently discovered material
misrepresentations and fraudulent transactions relating to Switchgear Systems,
Inc. and subsequently, rescinded the transaction. Contingencies exist with
respect to this matter, the ultimate resolution of which cannot presently be
determined. See Note 6 which describes the pending litigation.
On July 23, 1996, the Company acquired one hundred percent (100%) of
the outstanding shares of capital stock of Vine Street Stores, Inc., ("Vine
Street"), a privately-held, Massachusetts corporation and approximately twelve
(12) acres of developable, real property located in Colchester, Connecticut
("Colchester Property"), pursuant to a certain Agreement and Plan of
Reorganization, dated May 3, 1996. The Company acquired Vine Street in
exchange for 1,500,000 shares of the Company's common stock. The transaction
was accounted for as a pooling of interests. The Company purchased the
Colchester Property in consideration of approximately $433,000 in cash and
issuance of 1,280,000 shares of Series A Convertible Preferred Stock. The
Preferred Stock was converted into common stock of the Company, based upon a
one-for-one share conversion, pursuant to a Form S-3 registration statement
that was declared effective on November 25, 1996.
Concurrent with the closing of the Agreement and the consummation of
the acquisitions of Vine Street and the Colchester Property, the Company
successfully completed a private offering ("Private Offering") in August, 1996
of its securities in which it sold an aggregate of 1,500,000 units, each unit
consisting of one (1) share of the Company's common stock, $.02 par value, and
one (1) Class BB warrant at a Private Offering price of $1.25 per unit and
from which the Company realized net proceeds of approximately $1,356,000. Of
the net proceeds, approximately $433,000 was disbursed to complete the
Colchester Property acquisition.
On November 22, 1996, the Company, through a newly-formed and
organized, wholly-owned subsidiary, Art Smart, Inc., a Nevada corporation,
purchased certain personal property and business assets (the "Property") in
connection with the Company's new giftware division. The purchase price for
the Property was $215,641, of which $40,601 was paid in cash at closing and
the remaining balance of $167,180 (giving effect to purchase price adjustments
at closing) was evidenced by two promissory notes: one in favor of a senior
secured lender in the principal amount of $112,305, payable in monthly
installments for a period of 28 months; and a second promissory note in favor
of a junior secured lender in the principal amount of $54,875, also payable in
monthly installments for a period of 48 months. The Property, which was
conveyed to the Company by bill of sale, consisted of certain manufacturing
machinery and equipment, assorted office equipment and raw materials which are
being utilized by the Company to manufacture picture framing and other
giftware lines and are being sold on a wholesale and retail basis. The
operations are being conducted by the Company under an assumed lease of a
manufacturing facility located in Boston, Massachusetts.
The Company's revenues separated by its lines of business are
summarized as follows:
<TABLE>
<S> <C>
Horticultural 76.9%
Truck Part Accessories 8.9%
Giftware 13.6%
Other .6%
________
100.0%
</TABLE>
All material intercompany transactions and account balances have
been eliminated in these consolidated financial statements. All references to
"Optimax" or the "Company" refer to Optimax Industries, Inc. and subsidiaries
on a consolidated basis.
(B) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
-----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
(C) CASH AND CASH EQUIVALENTS
-------------------------
For the purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents, which may include cash, money
market funds and other short-term investments.
(D) ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
------------------------------------
The Company provides an allowance for uncollectible accounts based
upon prior experience and management's assessment of the collectibility of
existing specific accounts. Provisions for uncollectible accounts amounted to
$13,245 and $129,172 for the years ended December 31, 1996 and 1995,
respectively.
(E) INVENTORIES
-----------
Inventories are stated at the lower of cost or market on a first-in,
first-out basis and consist of raw materials, manufactured and purchased
goods, and growing foliage plants and nursery stock. Manufactured goods are
valued using an average cost method and includes raw materials, direct labor
and allocable overhead. Growing foliage plants and nursery stock are valued
at specified percentages of their respective wholesale selling prices.
(F) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment are recorded at cost. Minor additions
and renewals are expensed in the year incurred. Major additions and renewals
are capitalized and depreciated over their estimated useful lives.
Depreciation is calculated by straight-line and accelerated methods. Total
depreciation for the years ended December 31, 1996 and 1995 was $104,402 and
$108,373 respectively.
(G) INTANGIBLE ASSETS
-----------------
Amortizable assets are recorded at cost. Amortization is calculated
by the straight-line method over the estimated useful lives of the assets.
Total amortization for the years ended December 31, 1996 and 1995 was $1,926
and $0, respectively.
(H) INCOME TAXES
------------
The Company has net operating loss carryovers of approximately
$7,500,000 expiring in the year 2011. Recent changes in stock ownership or
changes in control of the Company have reduced or eliminated the Company's
ability to utilize these net operating loss carryovers. As of December 31,
1996, the Company has total deferred tax assets of approximately $1,125,000
due to the operating loss carryovers. However, because of the uncertainty of
potential realization of the tax assets, the Company has provided a valuation
allowance for the entire amount. Therefore, no tax assets have been recorded
in the financial statements as of December 31, 1996 and 1995.
(2) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment at December 31, 1996 consist of the
following:
<TABLE>
<S> <C>
Property held for development $ 2,029,831
Land, building and building improvements 468,793
Equipment 273,045
Furniture, office equipment and computers 122,013
Vehicles 59,206
__________
2,952,888
Less: accumulated depreciation ( 358,602)
__________
$ 2,594,286
==========
</TABLE>
(3) SECURITIES OF THE COMPANY
-------------------------
The Company has 20,000,000 common shares and 5,000,000 preferred shares
authorized. The Board of Directors has the right to issue common and
preferred stock and designate the terms and preferences.
In December, 1995, the Company issued 25,000 shares of its common stock,
valued at $30,000, for the payment of professional services. During 1995,
515,624 shares of the Company's common stock were issued for $637,284 through
various Form S-8 offerings and other private transactions. In addition,
200,000 shares of common stock were issued in connection with the acquisition
of Taylor-Built Industries, Inc.
In August, 1996, the Company successfully completed a private offering
("Private Offering") of its securities in which it sold an aggregate of
1,500,000 units, each unit consisting of one (1) share of the Company's common
stock, $.02 par value, and one (1) Class BB warrant at a Private Offering
price of $1.25 per unit and from which the Company realized net proceeds of
approximately $1,356,000.
As of December 31, 1996, the Company has warrants outstanding for the
purchase of 1,929,124 shares of its common stock with conversion prices
ranging from $1.25 to $22.10 per share.
As of December 31, 1996, the Company has 132,500 stock options
outstanding at exercise prices ranging from $1.50 per share to $15.63 per
share.
(4) NOTES PAYABLE
-------------
The following is a summary of notes payable at December 31, 1996:
<TABLE>
<S> <C>
Mortgage notes payable to
financial institutions, collateralized
by certain real property located in
Loxahatchee, Florida and certain
business assets, payable in total
monthly installments of $3,026, including
principal and interest, at rates ranging
from 8.5% to 10% per annum, due in
full in the year 2014. $ 269,688
Notes payable to two separate entities,
collateralized by inventory and certain
equipment, payable in total monthly
installments of $5,301, including
principal and interest at rates of 8%
and 9%, due through January, 2001. 164,059
Note payable to a bank, collateralized
by inventory. The note matured on
May 6, 1994, presently is in default and
the total principal balance is currently
due. 150,000
Note payable to a former owner of one
of the Company's subsidiaries. The note
matured, presently is in default and the
remaining principal balance is currently
due. 13,621
----------
Total notes payable 597,368
Less: Current portion due within one year 218,842
----------
$ 378,526
==========
</TABLE>
The Company has reached a tentative agreement with the U.S. Small
Business Administration (SBA) relating to a real estate mortgage on property
located in Loxahatchee, Florida. Under the terms of the agreement, the
outstanding balance of the mortgage will be repaid in monthly installments of
$2,691, commencing on June 19, 1997 at a fixed rate of 8.50%. The unpaid
accrued interest on this mortgage will be converted into a new non-interest
bearing note providing for monthly payments of $335, commencing on June 19,
1997.
Aggregate maturities required on debt at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1997 $ 218,842
1998 64,839
1999 50,588
2000 25,804
2001 11,573
Thereafter 225,722
_________
$ 597,368
=========
</TABLE>
(5) NON-SUFFICIENT CHECKS RECEIVABLE
--------------------------------
During 1995, the Company, pursuant to a Form S-8 registration statement,
issued 75,000 shares of common stock to a privately-held company in exchange
for checks totalling $150,000, which were never accepted by the Company's bank
due to non-sufficient funds. Of the total amount due, $38,100 was
subsequently received. At December 31, 1995, the Company recorded a
receivable for the remaining $111,900, plus a 5% penalty of $5,595, as
allowable under Florida statutes, for these dishonored checks. An allowance
for bad debts for the entire amount due of $117,495 has been provided. The
Company has commenced a legal action against the privately-held company and
one of its officers to recover the amount due. A contingency exists with
respect to the potential recovery of any amount related to this matter, which
cannot presently be determined.
(6) LEGAL MATTERS
-------------
During 1994, a shareholder of the Company filed a lawsuit against the
Company and certain of its officers and directors. In arriving at a
settlement in 1995, the Company agreed to grant the shareholder the right to
acquire 150,000 shares of the Company's common stock at $2 per share at any
time during the succeeding five years. Furthermore, the Company agreed to
register the underlying acquired shares, at the Company's expense, at any time
during the period of the grant.
The Company has been named as a defendant in a legal action instituted by
a customer that alleges breach of contract on a plant installation project.
The legal action claims unspecified damages for nonconforming plant materials.
The Company has counterclaimed for breach of contract in the amount of
$163,376, plus interest. The Company contends that the customer caused
continual delays on the project, which, in turn, caused the plant material to
overgrow and, subsequently, be deemed unacceptable for installation. The
Company has been served with a demand for judgment totalling approximately
$250,000. Under Florida law, if the demand is not paid and if a jury awards
an amount of 25% or more than the demand amount, the Company would be liable
for the plaintiff's legal costs and fees. The Company has responded that it
will not agree with the demand. The Company's legal counsel has rendered an
opinion that the Company has a defensible position, but that the outcome of
this matter cannot reasonably be determined. Accordingly, the Company has not
recorded a provision for this liability in the financial statements and a
contingency exists with respect to this matter.
In November, 1995, the Company and one of its subsidiaries were named as
defendants in a civil action relating to the Company's decision to rescind the
acquisition of certain assets and assumption of certain liabilities of
Switchgear Systems, Inc., pursuant to an Asset Purchase and Sale Agreement,
dated July 13, 1995. The plaintiff has claimed breach of contract and the
Company has counterclaimed to enforce its election to rescind the transaction
and to pursue remedies for damages, based upon the Company's assertion that it
was induced, by fraud, to enter into the acquisition both by misrepresentation
of material facts and by the omission, on the plaintiff's part, to disclose
material information. The Company recorded a provision to writeoff the entire
amount of its investment in the discontinued subsidiary during the year ended
December 31, 1995. The Company's legal counsel believes that the plaintiff's
claims are without merit and that the Company will ultimately prevail with its
counterclaim. A contingency exists with respect to this matter.
The Company and a director have been named as defendants in a lawsuit
filed in March, 1996. The plaintiff alleges breach of contract for consulting
and advisory services and seeks damages in the amount of $300,000. The
Company deems the claim made to be without merit and the Company's legal
counsel considers the likelihood of a material adverse judgment against the
Company to be extremely remote. A contingency exists with respect to this
matter.
In the ordinary course of conducting its business, the Company may be
subjected to loss contingencies arising from legal matters. Management
believes the outcome of such matters, if any, will not have a material impact
on the Company's financial position or results of future operations.
(7) RELATED PARTY TRANSACTIONS
--------------------------
At December 31, 1995, the Company had advances totalling $24,319 due from
related parties. These amounts were repaid, in full, during the year ended
December 31, 1996.
During 1994, a stockholder of the Company transferred certain real estate
owned by the stockholder to the Company's independent certified public
accountants as payment for past professional services. The properties were
transferred based on fair market values at that time with equity of
approximately $75,000. During 1995, the Company reimbursed the stockholder
for the full amount of the previously transferred equity.
The Company leases its corporate offices in Boston, Massachusetts from
the President of the Company on a month-to-month basis at the rate of $750 per
month. Rent paid by the Company amounted to $2,250 and $0 for the years ended
December 31, 1996 and 1995, respectively.
Prior to the commencement of an employment arrangement and during the
year ended December 31, 1996, the President of the Company received $2,000
from the Company as payment for the rendering of professional accounting
services.
(8) LIABILITIES FOR PRODUCT WARRANTIES
----------------------------------
In connection with the operation of the Company's former plant mitigation
and installation business, the Company provided certain warranties to
customers that the installed products would survive for certain specified
periods. Based upon prior management's estimates, the Company recorded,
during the calendar year ended December 31, 1995, a liability provision in the
amount of $92,500 to cover possible future product warranty losses. In late
1995, the Company decided to cease accepting new plant mitigation and
installation contracts due to its limited financial resources at that time.
Subsequently, the Company did not experience any claims or losses relating to
any prior product warranties. Accordingly, in light of the fact that the
Company is no longer operating in this line of business, current management
does not anticipate that the Company has any remaining liability for product
warranties at December 31, 1996 and has eliminated any excess provision from
the financial statements.
(9) ADVANCES TO RELATED PARTIES
----------------------------------
During 1995, the Company advanced $21,000 to an entity owned by a
director of the Company, of which $16,000 was remaining owed to the Company at
December 31, 1995. This advance was repaid, in full, during the year ended
December 31, 1996.
At December 31, 1995, the former President of the Company had been
advanced the amount of $8,319. This advance was repaid, in full, during the
months of January, 1996 through March, 1996, inclusive, by means of salary
reductions.
(10) LEASE COMMITMENTS
-----------------
The Company, as lessee, has two non-cancellable leases for certain
manufacturing and office facilities. The remainder of the Company's leased
facilities are occupied on a month-to-month basis.
The remaining annual minimum lease payments under the two non-cancellable
operating leases existing as of December 31, 1996 are:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1997 $ 37,697
1998 14,364
1999 14,364
-------
$ 66,425
=======
</TABLE>
Rent expense amounted to $56,895 during the year ended December 31, 1996.
(11) CONCENTRATION OF CREDIT RISK
-----------------------------
The Company maintains cash and short-term, liquid investments at several
financial institutions. The accounts are insured by either the Federal
Deposit Insurance Corporation or the Securities Investor Protection
Corporation, up to certain specified limits per financial institution. At
December 31, 1996 and 1995, the Company's cash balances and short-term, liquid
investments were fully insured.
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of unsecured, trade accounts
receivable and are limited due to the large number of customers comprising the
Company's customer base. The Company, in the ordinary course of business,
grants credit to customers, generally without collateral. Consequently, the
Company's ability to collect the amounts due from customers is affected by the
economic conditions within the market or geographic area in which the
customers are located. At December 31, 1996 and 1995, the Company had no
significant accounts receivable concentrations of credit risk.
(12) EMPLOYMENT AGREEMENT
--------------------
The Company entered into a written Employment Agreement in 1996 with an
individual to serve as President of the Company. The Agreement has a two-year
evergreen term during which the Company has agreed to pay this individual a
base salary of $100,000 per year, together with customary participation in
management bonus plans to the extent they are implemented by the Company's
Board of Directors. In addition, this individual is entitled to receive
annually a number of Incentive Stock Options to be granted under the Company's
proposed Stock Incentive Plan (the "Plan") sufficient to maintain the
individual's ownership of the Company's equity securities equal to 8.3% of the
total outstanding equity securities of the Company on a fully-diluted basis.
The Agreement also provides for 24 months of compensation payable to the
individual in the event his employment as President is terminated, either
voluntarily or involuntarily, due to a change in control of the Company.
(13) FOURTH QUARTER ADJUSTMENTS
--------------------------
The Company made approximately $300,000 in adjustments, principally
relating to the writedown of inventory, which were material to the fourth
quarter.
(14) SUBSEQUENT EVENT
----------------
On March 4, 1997, the Company consummated the purchase of an 18-acre
nursery located in Homestead, Florida. The purchase included the real estate,
and all structures and improvements, including irrigation systems, located on
the property. The purchase price for the nursery was $482,000, of which
approximately $283,000 was paid in cash at closing, with a balance of $199,000
evidenced by an eight percent promissory note payable in 48 monthly
installments. In addition, the Company purchased the existing inventory on
the nursery in consideration of future payments due upon liquidation of that
inventory.
The Homestead, Florida nursery was acquired by the Company through its
newly-formed wholly-owned subsidiary, Flying Cow Farms II, Inc. The nursery
will be utilized in a similar manner to its Loxahatchee, Florida nursery owned
by Plants for Tomorrow, Inc.
<PAGE>
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
MANAGEMENT
Giving effect to the consummation of the Vine Street Acquisition, the
executive officers and members of the Board of Directors of the Company and
their respective ages and terms are as follows:
<TABLE>
<CAPTION>
Name Age Title
- ----------------------------------------------------------------------------
<S> <C> <C>
David W. Dube 41 President, CEO, CFO and
Director
Stephen G. Calandrella 35 Director
Allan M. Huberman 54 Secretary
- --------------------------------
</TABLE>
No family relationship exists between or among any of the directors or
officers of the Company.
DAVID W. DUBE. Mr. Dube was a co-founder of Vine Street in 1995 and
has been Treasurer, Chief Financial Officer and a Director since such time.
From February, 1991, Mr. Dube had been the principal of Dube & Company, a
financial consulting firm specializing in early stage financing, strategic
financial planning and advisory services relating to mergers, acquisitions,
capital formation and restructurings for private and public companies. From
December, 1986 to February, 1991, Mr. Dube was Treasurer, Chief Financial
Officer and a Director of Inland Credit Industries, Inc., a mortgage finance
and investment firm. Mr. Dube currently is serving as a Director of American
Stock Exchange publicly-traded Helmstar Group, Inc. (merchant bank, mortgage
finance and real estate investments), two privately-held companies, FuTech
Designs, Inc. (apparel and accessories design firm) and Good Earth Farms, Inc.
(farm products retailer), and is also the managing partner of privately-held
Rivendell Winery Associates, LLP (real estate development). Mr. Dube holds
Bachelor of Science and Major of Science in Taxation degrees from Suffolk
University a Master of Science degree in Accountancy from Bentley College and
is a certified public accountant in the states of Massachusetts and New
Hampshire.
STEPHEN G. CALANDRELLA. Mr. Calandrella currently serves as
Chairman of the Company's Board of Directors. Mr. Calandrella has been
President and Director of The Rockies Fund, Inc. since February, 1991. The
Rockies Fund, Inc., a Colorado Springs, Colorado-based business development
company regulated under the Investment Company Act of 1940, makes investments
in, and managerial assistance available to, certain eligible portfolio
companies. Mr. Calandrella has served as a Director of Kelly Motors, Ltd., a
Fort Collins, Colorado-based manufacturer of specialty automobiles, Combined
Penny Stock Fund, Inc. and Redwood MicroCap Fund, Inc., both of which are
closed-end investment companies registered under the Investment Company Act of
1940, Good Times Restaurants, Inc., a publicly-held Denver, Colorado-based
company engaged in owning and operating Good Times Restaurants and Round-The-
Corner Restaurants, Southshore Corp., a publicly-traded family entertainment
company, Cogenco International, Inc., a publicly-traded financial services
company, Premier Concepts, Inc., a publicly-traded jewelry retail chain, and
Gold Capital Corporation, a publicly-traded mining company. Mr. Calandrella
also serves as Director and Interim President of Global Casinos, Inc., a
publicly-traded gaming company. Mr. Calandrella is also engaged in financing
and consulting activities for development stage companies, which consists of
advising public and private companies on capital formation methods, enhancing
shareholder valuations, mergers, acquisitions and corporate restructurings, as
well as arranging for bridge loans and equity purchases.
ALLAN M. HUBERMAN. Mr. Huberman was a co-founder of Vine Street in
1995 and has been President, Chief Executive Officer and a Director of Vine
Street since such time. Mr. Huberman has been President and a Director of M.
Huberman, Inc., a wholesale foliage grower, since 1975 and was General Manager
and a Director of such firm from 1958 to 1975. Mr. Huberman has also been
serving as Chief Executive Officer of Good Earth Farms, Inc., a farm products
retailer, since 1995. From 1985 to 1994, Mr. Huberman was Advisory Chairman
to the Massachusetts Joint Committee on Natural Resources and Agriculture. In
addition, Mr. Huberman served on the National Advisory Committee on
Horticulture of the American Farm Bureau Federation from 1986 to 1990 and was
President of the Massachusetts Flower Growers Association from 1980 to 1986.
Mr. Huberman attended Drew University and Boston University.
Directors of the Company serve until the Company's next annual
meeting of stockholders, and thereafter for such term as they may be re-
elected to serve.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the Securities Laws of the United States, the Company's
Directors, its Executive (and certain other) Officers, and any persons holding
more than ten percent (10%) of the Company's Common Stock are required to
report their ownership of the Company's Common Stock and any changes in that
ownership to the Securities and Exchange Commission and the NASDAQ stock
market. Specific due dates for these reports have been established and the
Company is required to report in this Annual Report any failure to file by
these dates during 1995 and 1996. Based upon information furnished to the
Company, all of these filing requirements were satisfied by its Officers and
Directors and ten percent holders.
ITEM 10. EXECUTIVE COMPENSATION.
The following tables and discussion set forth information with respect to
all plan and non-plan compensation awarded to, earned by, or paid to the
Company's Chief Executive Officer.
<PAGE>
<TABLE>
TABLE 1
SUMMARY COMPENSATION TABLE
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------
Long Term Compensation
Annual Compensation Awards Payouts
--------------------------------- ---------------------------------
Other
Name Annual Restricted
and Compen- Stock LTIP All Other
Principal Salary Bonus sation Award(s) Option/ Payouts Compensa-
Position Year ($) ($) ($) ($) SARs(#) ($) tion ($)
- ---------- ----- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David W. Dube, 1996 $15,385 -0- -0- -0- -0- -0- -0-
President
Paul Stevens, 1996 $ 0 -0- -0- -0- -0- -0- -0-
Former President 1995 $84,000 -0- -0- -0- *** -0- -0-
1994 $84,000 -0- -0- -0- 500,000 -0- -0-
<FN>
<F1> All executive officers of the Company participate in the Company's group health insurance plan. However,
no executive officer received perquisites and other personal benefits which, in the aggregate, exceeded
the lesser of either $50,000 or 10% of the total of annual salary and bonus paid during the respective
fiscal years.
</FN>
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENTS WITH CURRENT PRESIDENT
The Company entered into a written Employment Agreement in 1996 with
David W. Dube to serve as President of the Company. The Agreement has a two-
year evergreen term during which the Company has agreed to pay Mr. Dube a base
salary of $100,000 per year, together with customary participation in
management bonus plans to the extent they are implemented by the Company's
Board of Directors. In addition, Mr. Dube is entitled to receive annually a
number of Incentive Stock Options to be granted under the Company's proposed
Stock Incentive Plan (the "Plan") sufficient to maintain Mr. Dube's ownership
of the Company's equity securities equal to 8.3% of the total outstanding
equity securities of the Company on a fully-diluted basis. The Agreement also
provides for 24 months of compensation payable to Mr. Dube in the event his
employment as President is terminated, either voluntarily or involuntarily,
due to a change in control of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of March 31, 1997 the stock
ownership of (i) each person known by the Company to be the beneficial owner
of five percent (5%) or more of the Company's Common Stock, (ii) all officers
individually, and (iii) all directors individually. Each person has sole
voting and investment power with respect to the shares shown, except as noted.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
TITLE OF NAME & ADDRESS --------------------------
CLASS OF BENEFICIAL OWNER NUMBER<F2> PERCENT<F1>
- -------- ------------------- ---------- -----------
<S> <C> <C> <C>
$.02 par value David W. Dube<F3> 500,000 8.3%
Common Stock 132 Lincoln Street
Boston, MA 02111
" Allan M. Huberman<F4> 500,000 8.3%
132 Lincoln Street
Boston, MA 02111
" Stephen G.
Calandrella<F5> 327,691 5.3%
4465 Northpark Drive
CO Springs, CO 80907
" All directors and
officers 827,691 13.5%
as a group (2 persons)
------------------------------
<FN>
<F1> Shares not outstanding but being beneficially owned by virtue of the
individual's right to acquire them as of the Record Date, or within sixty
(60) days of such date, are treated as outstanding when determining the
percent of the class owned by such individual.
<F2> Gives effect to the conversion of 1,280,000 shares of Convertible
Preferred Stock into 1,280,000 shares of Common Stock on November 22,
1996.
<F3> Mr. Dube is President, Chief Executive Officer and Director of both the
Company and Vine Street. Reflects shares of Common Stock issued in
connection with the acquisition of Vine Street Stores, Inc.
<F4> Mr. Huberman is a Director of Vine Street Stores, Inc. Reflects shares
of Common Stock issued in the Company's acquisition of that subsidiary.
<F5> Mr. Calandrella is a Director and former Chief Financial Officer of the
Company. Includes 55,000 shares of Common Stock, 100,000 Class BB
Warrants and non-qualified stock options exercisable to purchase an
additional 25,000 shares of Common Stock at an exercise price of $1.50
per share owned by Mr. Calandrella. Also includes 135,191 shares of
Common Stock and 12,500 Class BB Warrants owned by Rockies Fund, Inc., of
which Mr. Calandrella is an officer and director and would be deemed to
exercise shared voting and investment power with respect to such
securities. Mr. Calandrella disclaims beneficial ownership of the
securities owned by Rockies Fund, Inc. for purposes of Section 16 of the
Securities Exchange Act of 1934.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
D.C.A. GRANTOR TRUST SETTLEMENT
By Agreement dated March 20, 1995, the Company settled certain pending
litigation which had been brought by the D.C.A. Grantor Trust and Allan H.
Applestein, individually, against the Company, its directors and other
parties. Pursuant to the terms of the settlement, the D.C.A. Grantor Trust
was granted Warrants exercisable to purchase, in the aggregate, 150,000 shares
of the Company's Common Stock at an exercise price of $2.00 per share. As
part of the Settlement Agreement, the Company guaranteed a gross profit of
$1.25 per share on the exercise of the first 50,000 Warrants (an aggregate of
$62,500); provided, however, that the Company's maximum liability for any
deficiency is $25,000. The Company has registered the exercise of the
foregoing Warrants by the D.C.A. Trust on a Registration Statement on Form S-3
which has been declared effective by the Securities and Exchange Commission.
As of December 31, 1995, none of the D.C.A. Grantor Trust Warrants had been
exercised and all were outstanding and exercisable in accordance with their
terms.
DEBT CONVERSION
On December 22, 1995, the Company's legal counsel, Neuman & Cobb, agreed
to accept in satisfaction of $30,000 accrued and unpaid charges for legal
services rendered the issuance of 25,000 shares of the Company's Common Stock,
valued at $1.20 per share. The conversion value per share was equal to the
fair market value of the Company's Common Stock on the date of the Agreement.
The shares issued in conversion of the outstanding account payable were
"restricted securities" under the Securities Act but granted to the holder
customary participatory or piggyback registration rights.
FINANCIAL ADVISORY AGREEMENT
On March 12, 1996, the Company entered into a Financial Advisory
Agreement with Allan H. Applestein pursuant to which Mr. Applestein agreed to
provide certain financial advisory services to the Company in connection with
the Company's efforts to seek additional financing as well as merger or
acquisition opportunities. Mr. Applestein is a principal of the D.C.A.
Grantor Trust. In consideration of his financial advisory services, the
Company granted to Mr. Applestein 75,000 shares of Common Stock and BB
Warrants exercisable to purchase, in the aggregate, an additional 100,000
shares of Common Stock at an exercise price of $3.00 per share. The foregoing
securities were "restricted securities" under the Securities Act of 1933, as
amended, but carried customary participatory or piggyback registration rights.
The Financial Advisory Agreement terminated on December 31, 1996.
STOCK FOR SERVICES
On March 12, 1996, the Company issued to Mr. Calandrella 50,000 shares of
Common Stock and Non-Qualified Stock Options exercisable to purchase an
additional 25,000 shares of Common Stock at an exercise price of $1.50 per
share. The foregoing securities were issued in consideration of Mr.
Calandrella's services to the Company as an executive officer and director.
On March 12, 1996, the Company granted and issued to Mr. Stevens 50,000
shares of Common Stock and Non-Qualified Stock Options exercisable to purchase
an additional 25,000 shares at an exercise price of $1.50 per share. The
foregoing securities were issued to Mr. Stevens in consideration of his
services as a director and executive officer of the Company.
On March 12, 1996, the Company granted and issued to Keith Prim Non-
Qualified Stock Options exercisable to purchase 50,000 shares at an exercise
price of $1.50 per share. Mr. Prim was formerly an executive officer of
Taylor-Built Industries, Inc. and the foregoing Options were granted in
consideration of his past services to that subsidiary.
On March 12, 1996, the Company granted and issued to Clifford L. Neuman
25,000 shares of Common Stock and Non-Qualified Stock Options exercisable to
purchase an additional 37,500 shares at an exercise price of $1.50 per share.
The foregoing securities were issued to Mr. Neuman in consideration of his
services to the Company as legal counsel.
The exercise price of $1.50 per share of the foregoing Non-Qualified
Stock Options issued to Messrs. Calandrella, Stevens, Prim and Neuman was
equal to the fair market value of the Company's Common Stock on the day of
grant.
All of the foregoing shares of Common Stock and Non-Qualified Stock
Options were "restricted securities" under the Securities Act, but granted to
the holders customary participatory or piggyback registration rights.
LOAN TO OFFICER AND DIRECTOR
During 1995, the Company loaned to Paul Stevens the sum of approximately
$42,000. The loan was unsecured and due on demand. However, throughout the
remainder of 1995, the Company continued to suffer from a lack of liquidity
and capital resources and was unable to pay Mr. Stevens' salary as President
of the Company on a continuing basis. As a result, the loan to Mr. Stevens
was off-set, in part, by accrued and unpaid salary.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
FINANCIAL STATEMENTS
The following financial statements are filed herewith as part of this report:
Report of Independent Certified Public Accountants
Balance Sheets - December 31, 1996 and 1995
Statements of Operations - Years ended December 31, 1996 and 1995
Statements of Stockholders' Equity - Years ended December 31, 1996
and 1995
Statements of Cash Flows - Years ended December 31, 1996 and 1995
Notes to Financial Statements
CURRENT REPORTS ON FORM 8-K
The Company did not file any current reports on Form 8-K during the
fourth quarter of the year ended December 31, 1996.
EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Title
- ---------- --------------------------------------------------------------
<S> <C>
2.1<F1> Contract for Sale and Purchase dated September 16, 1992
(acquisition of Central Florida Lands & Timber, Inc.);
2.2<F2> Asset Purchase and Sale Agreement dated July 29, 1994 (Sale of
CFLT).
2.3<F3> Exchange Agreement Dated as of February 9, 1995 between Optimax
Industries, Inc. and Plants For Tomorrow, Inc.;
2.4<F4> Agreement and Plan of Reorganization dated January 20, 1995
between Taylor-Built Industries, Inc. and Optimax Industries,
Inc. and Polyphase Corporation;
2.5<F5> Asset Purchase and Sale Agreement dated as of July 31, 1995
(Switchgear)
3(i).1<F6> Amended and Restated Articles of Incorporation and Certificate of
Correction;
3(i).2<F3> Articles of Amendment dated October 19, 1994 (increasing par
value of Common Stock to $0.02 per share);
3(i).3<F3> Articles of Amendment dated January 10, 1995 (name change);
3(ii)<F6> Bylaws;
10.1<F7> Employment Agreement with Paul Stevens effective January 1, 1994;
10.2<F6> Warrant Agreement with Respect to the Class BB Warrants;
10.3<F8> Neuman & Cobb, 1994 Consultation and Warrant Compensation
Agreement dated October 3, 1994;
10.4<F9> Swiss Euro Fund, Inc., 1995 Consultation and Warrant Compensation
Agreement;
10.5<F9> World Entertainment, Inc., 1995 Consultation and Warrant
Compensation Agreement;
10.6<F3> Agreement For Settlement of Litigation and Grant of Warrant dated
March 20, 1995;
10.7<F10> Charles V. Lemmon 1995 Consultation and Warrant Compensation
Agreement;
21 Subsidiaries of the Company.
__________________________________
<FN>
<F1> Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1992.
<F2> Incorporated by reference from the Proxy Statement for Annual Meeting of
Shareholders held January 5, 1995 and from current report on Form 8-K
dated January 20, 1995.
<F3> Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1994.
<F4> Incorporated by reference from current report on Form 8-K dated February
13, 1995.
<F5> Incorporated by reference from current report on Form 8-K dated July 31,
1995.
<F6> Incorporated by reference from an amendment to the Company's registration
statement on Form S-1, Commission file no. 33-38531, filed with the
Commission on the date specified.
<F7> Incorporated by reference from annual report on Form 10-KSB for the year
ended December 31, 1993.
<F8> Incorporated by reference from the Company's registration statement on
Form S-8, S.E.C. File Number 0-19082 filed October 26, 1994.
<F9> Incorporated by reference from the Company's two (2) registration
statements on Form S-8, SEC File Number 0-19082 filed March 20, 1995.
<F10> Incorporated by reference from the Company's two (2) registration
statements on Form S-8, SEC File Number 0-19082 filed August 10,
1995.
</FN>
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this annual
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
OPTIMAX INDUSTRIES, INC.
Date: 4/15/97 /s/ David W. Dube
-------------------- ---------------------------------
David W. Dube, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
President, Director
(Chief Executive Officer,
/s/ David W. Dube Chief Accounting Officer) 4/15/97
- --------------------------- ------------------------- -----------
David W. Dube
/s/ Allan M. Huberman Secretary 4/15/97
- --------------------------- -------------------------- ----------
Allan M. Huberman
/s/ Stephen G. Calandrella Director 4/15/97
- --------------------------- -------------------------- ----------
Stephen G. Calandrella
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT
OF OPERATIONS FOUND ON PAGES F-4 THROUGH F-6 OF THE COMPANY'S
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 312,867
<SECURITIES> 0
<RECEIVABLES> 184,006
<ALLOWANCES> (2,500)
<INVENTORY> 300,811
<CURRENT-ASSETS> 803,733
<PP&E> 2,952,888
<DEPRECIATION> (358,602)
<TOTAL-ASSETS> 3,578,556
<CURRENT-LIABILITIES> 736,858
<BONDS> 378,526
0
0
<COMMON> 120,412
<OTHER-SE> 2,342,760
<TOTAL-LIABILITY-AND-EQUITY> 3,578,556
<SALES> 470,518
<TOTAL-REVENUES> 470,518
<CGS> (292,006)
<TOTAL-COSTS> 108,902
<OTHER-EXPENSES> 20,328
<LOSS-PROVISION> 13,244
<INTEREST-EXPENSE> 1,451
<INCOME-PRETAX> (348,492)
<INCOME-TAX> 786
<INCOME-CONTINUING> (349,278)
<DISCONTINUED> 0
<EXTRAORDINARY> 216,921<F1>
<CHANGES> 0
<NET-INCOME> (349,278)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
<FN>
<F1>EXTRAORDINARY AMOUNTS, ITEM 37, OF 216,921 REPRESENTS A GAIN
ON SETTLEMENT OF
TRADE PAYABLES.
</FN>
</TABLE>
