1
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES
For the fiscal year ended December 31, 1998
Commission file number 0-17165
SUNSTYLE CORPORATION
(Exact name of Registrant as specified in its charter)
Florida 59-2905386
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
36460 US 19 N Palm Harbor, Florida 34684
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (727) 789-8899
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $.10)
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 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-K (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-k or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of
the registrant as of September 30, 1998: $10,960.
Number of Common shares outstanding (September 30, 1998): 1,096,014
SUNSTYLE CORPORATION
December 31, 1998
PART I
Item 1. Business
COMPANY
Sunstyle Corporation is a Florida corporation whose only asset
currently is its 100% ownership of Sunstyle Homes Corporation, which
in turn has several consolidated subsidiaries including Sunstyle Homes
Corporation of Citrus County and Briarwood Enterprises. The consoli-
dated entity is hereafter collectively referred to as "Sunstyle" or
the "Company". Sunstyle has been principally engaged in real estate
acquisition and development and the construction of single family
housing on the west coast of Florida.
In May of 1991, the Company finished construction on its final
house and ceased construction activities. During 1993 and 1992 the
Company sold its remaining lots in Pinellas and Manatee counties to
other developers and builders. During 1995, the company sold its
office/storage building in Largo, Florida. The Company's President
has continued to manage the affairs of the Company while pursuing
other business interests.
The Company continues to seek a possible merger with another
company and continue operations as the general economy improves or the
Board of Directors may decide to proceed with a liquidation and
distribute the proceeds, if any, to its shareholders.
Item 2. Properties
The company does not own any property or land as of December 31,
1998.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Securities and Related Security
Holder Matters
The Company's stock is traded on the Over-The-Counter market. The
following table sets forth for the periods indicated the high and low
prices for the Company's common stock:
1998 1997
-------- --------
Quarter ended High Low High Low
------------- ------ ------ ------ ------
All $.25 $.01 $.005 $.005
The Company does not intend to pay dividends on its common stock
except in the possible case of a liquidating dividend. Should the
Company merge with another company and retain its shares, its future
dividend policy will be determined by its Board of Directors in light
of the Company's earnings and financial position.
Item 6. Selected Financial Data
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
(dollar figures in thousands, except per share information)
Operating Results:
Revenues (1) $ 10 $ 10 $ 9 $ 61 $ 5
Net Income (loss) $ 14 $ 3 $ (1) $ 10 $ (50)
Net income (loss)
per share $ .01 $ .003 $(.001) $ .01 $(.05)
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
(dollar figures in thousands, except per share information)
Financial Condition:
Total assets $ 208 $ 207 $ 205 $ 206 $ 178
Notes payable:
Former Parent $ 255 $ 255 $ 255 $ 255 $ 255
Banks 0 0 0 0 0
Total notes -------- -------- -------- -------- -------
payable $ 255 $ 255 $ 255 $ 255 $ 255
======== ======== ======== ======== =======
Stockholders'
equity (deficit) $ (144) $ (158) $ (161) $ (160) $ (170)
Book value par
share (2) $ (0.13) $ (0.14) $ (0.15) $ (0.15) $ (0.15)
(1) Including revenues of unconsolidated partnerships, revenues were
$10,000, $10,000, $9,000, $61,000, and $5,000 for the years ended
December 31, 1998, 1997, 1996, 1995, and 1994, respectively.
(2) The per share information is based upon 1,096,014 shares of
Common Stock for the years ended December 31, 1998, 1997, 1996, 1995, and
1994.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998, COMPARED TO THE YEAR ENDED DECEMBER 31,
1997
The Company's revenues of $9,625 for 1998 consisted of $9,625 interest
earned on savings accounts. The Company's only activity in the year
ended December 31, 1998, was administrative.
General and administrative expenses totaled $10,571 for the year ended
December 31, 1998, combined with $14,500 of accounts payable which
were written off against expenses, resulting in net income for the
year of $13,554.
The Company's revenues of $9,602 for 1997 consisted of $9,602 interest
earned on savings accounts. The Company's only activity in the year
ended December 31, 1997, was administrative.
General and administrative expenses totaled $6,198 for the year ended
December 31, 1997, resulting in a net income for the year of $3,404.
YEAR ENDED DECEMBER 31, 1997, COMPARED TO THE YEAR ENDED DECEMBER 31,
1996
The Company's revenues of $9,602 for 1997 consisted of $9,602 interest
earned on savings accounts. The Company's only activity in the year
ended December 31, 1997, was administrative.
General and administrative expenses totaled $6,198 for the year ended
December 31, 1997, resulting in a net income for the year of $3,404.
The Company's revenues of $9,119 for 1996 consisted of $9,119 interest
earned on savings accounts. The Company's only activity in the year
ended December 31, 1996, was administrative.
General and administrative expenses totaled $10,380 for the year ended
December 31, 1996, resulting in net loss for the year of $1,261.
LIQUIDITY AND CAPITAL RESOURCES
Due to continuing losses in a depressed market, the Company ceased
construction activities and terminated all employees during May of
1991. All remaining real estate assets have been sold.
The Company's liabilities are primarily to its former Parent in
the form of an unsecured note ($255,000), interest on the note and
other payables. The Company is currently negotiating the settlement
of its outstanding debt to its former Parent.
In addition to the uncertainty discussed above, the Company has
sustained substantial net losses and has a deficit net worth at
December 31, 1998 of $143,975. These issues raise considerable doubt
as to the Company's ability to continue operations. Management has
not adopted a plan of liquidation and is currently exploring several
possibilities, including selling a major interest in the Company. The
consolidated financial statements do not include any adjustments that
may result from any of the above events.
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Sunstyle Corporation
Largo, Florida
We have audited the accompanying consolidated balance sheets of
Sunstyle Corporation and Subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of operations, changes
in stockholders' deficit and cash flows for each of the three years in
the period ended December 31, 1998. These consolidated 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
the audit to obtain reasonable assurance about whether the
consolidated 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 Sunstyle Corporation and Subsidiaries as of
December 31, 1998 and 1997, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern.
As described more fully in Note 5 to the consolidated financial
statements, the Company's substantial net losses and deficit net worth
of $143,975 raise considerable doubt as to the Company's ability to
continue operations. The consolidated financial statements do not
include any adjustments regarding this uncertainty.
Spence, Marston, Bunch, Morris & Co.
Certified Public Accountants
Clearwater, Florida
Date: May 22, 2000
CONSOLIDATED BALANCE SHEETS
December 31,
1998 1997
----------- -----------
ASSETS
Cash $ 208,477 $ 207,423
------------ ------------
$ 208,477 $ 207,423
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Note Payable to Former Parent $ 255,000 $ 255,000
Interest Payable to Former Parent 93,452 93,452
Accounts Payable and Accrued Expenses 4,000 16,500
------------ ------------
352,452 364,952
------------ ------------
Stockholders' Deficit:
Common Stock; $.10 Par Value;
Authorized 10,000,000 Shares;
Issued and Outstanding
1,096,014 Shares 109,601 109,601
Additional Paid-In Capital 1,341,221 1,341,221
Accumulated Deficit (1,594,797) (1,608,351)
------------ ------------
(143,975) (157,529)
------------ ------------
$ 208,477 $ 207,423
============ ============
The accompanying notes are an integral part of
these financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
1998 1997 1996
----------- ----------- -----------
Revenues:
Interest Income $ 9,625 $ 9,602 $ 9,119
Other Income 12,500 0 0
------------ ----------- -----------
Total Revenues 22,125 9,602 9,119
------------ ----------- -----------
Cost and Expense:
General and Administrative 8,571 6,198 10,380
---------- ----------- -----------
Total Expenses 8,571 6,198 10,380
------------ ----------- -----------
Net Income (Loss) $ 13,554 $ 3,404 $ (1,261)
============ =========== ===========
Net Income (Loss) Per Share $ .01 $ .003 $ (.001)
============ =========== ===========
Number of Common Shares
Outstanding 1,096,014 1,096,014 1,096,014
============ ============ ===========
The accompanying notes are an integral part of
these financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Common Stock Additional
----------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
------- ------- --------- ----------- -----
Balances at
December 31, 1995 1,096,014 $109,601 $1,341,221 $(1,610,494) $(159,672)
Net Loss - 1996 0 0 0 (1,261) (1,261)
--------- -------- ---------- ----------- --------
Balances at
December 31, 1996 1,096,014 109,601 1,341,221 (1,611,755) (160,933)
Net Income - 1997 0 0 0 3,404 3,404
--------- -------- --------- ---------- --------
Balances at
December 31, 1997 1,096,014 109,601 1,341,221 (1,608,351) (157,529)
Net Income - 1998 0 0 0 13,554 13,554
--------- -------- --------- ---------- ---------
Balances at
December 31, 1998 1,096,014 $109,601 $1,341,221 $(1,594,797) $(143,975)
========= ======== ========= =========== =========
The accompanying notes are an integral part of
these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
1998 1997 1996
------- ------- -------
Cash Flow from Operating Activities:
Net Income (Loss) $ 13,554 $ 3,404 $ (1,261)
Adjustments to Reconcile Net Income --------- --------- ---------
(Loss) to Net Cash Provided by
(Used In) Operating Activities:
(Increase) Decrease in Operating
Assets:
Notes Receivable 0 0 7,680
Increase (Decrease) in Operating
Liabilities:
Accounts Payable and Accrued
Expenses (12,500) (1,000) 0
---------- ---------- ----------
Total Adjustments (12,500) (1,000) 7,680
---------- ---------- ----------
Net Cash Provided by
Operating Activities 1,054 2,404 6,419
---------- ---------- ----------
Net Increase in Cash 1,054 2,404 6,419
Cash at Beginning of Period 207,423 205,019 198,600
---------- ---------- ----------
Cash at End of Period $ 208,477 $ 207,423 $ 205,019
========== ========== ==========
The accompanying notes are an integral part of
these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
NOTE 1 - ORGANIZATION AND OPERATIONS:
Sunstyle Homes Corporation ("Sunstyle") was incorporated in 1976
for the purpose of purchasing and subdividing tracts of land for the
sale of developed lots and the construction of single and multi-family
residential units on the west coast of Florida.
On August 25, 1988 the former Parent incorporated a new wholly-
owned subsidiary, Sunstyle Corporation. All 500 shares of Sunstyle
Homes Corporation were exchanged for 1,096,024 shares of Sunstyle
Corporation. On the same date, the Board of Directors of the former
Parent declared a distribution of Sunstyle Corporation's stock to
shareholders of the former Parent in the form of a tax-free spin-off.
The effective date of the spin-off was September 30, 1988 and the
distribution was made on October 6, 1988. Sunstyle Corporation became
a separate, publicly traded entity and has discontinued substantially
all relationships with the former Parent.
Sunstyle Corporation, including its consolidated subsidiaries
consisting of Sunstyle and Sunstyle - Citrus, are collectively
referred to as the "Company".
Due to continuing losses in a depressed market, the Company
terminated all employees and ceased construction activities in May of
1991. The Company, including all of its consolidated subsidiaries, is
inactive. The Board of Directors has not adopted a plan of
liquidation and is considering several options, including selling a
majority interest in the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The Company utilizes the accrual basis of accounting whereby
revenues are recognized when earned and expenses are recognized as
obligations are incurred.
Cash and Cash Equivalents
It is the Company's policy to include all money market funds
with an original maturity of three months or less in Cash and Cash
Equivalents.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consists principally of cash investments
in excess of federally insured limits. The Company places its cash invest-
ments with high credit quality financial institutions and in a money
market mutual fund that is managed by a wholly owned subsidiary of
Raymond James Financial, Inc.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of estimates
that affect certain reported amounts and disclosures. These estimates
are based on management's knowledge and experience. Accordingly,
actual results could differ from these estimates.
Income Taxes
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(FAS 109). Under FAS 109, the liability method is used in accounting
for income taxes. Under this method, deferred tax assets and
liabilities are determined based on the difference between financial
reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
As of December 31, 1998, the Company had a net operating loss
carryforward of approximately $2,885,000 for tax purposes which will
expire beginning in 2003.
NOTE 3 - NOTES PAYABLE
Notes payable at December 31, 1998 and 1997 consisted of the
following:
1998 1997
Note payable to former Parent, ----- -----
unsecured, principal payable on
demand $ 255,000 $ 255,000
========== ==========
Sunstyle has an interest bearing demand note payable to Raymond
James Financial, Inc., the Company's former parent. The note bears
interest at prime plus one percent. Raymond James Financial, Inc. has
an allowance for doubtful accounts for the total amount of interest
income receivable from Sunstyle because they do not consider payment
of the interest probable. For the same reason, no interest is being
accrued on Sunstyle's books for the note payable. There is an
understanding between the parties that the note will be paid, as cash
becomes available or upon the Company's sale.
NOTE 4 - FEDERAL AND STATE INCOME TAXES:
Substantial losses have been sustained by the Company which
raise considerable doubt as to its ability to continue operations. As
a result, it is unlikely that the Company will be able to benefit from
the deferred tax asset which consists of tax loss carryforwards
available as of December 31, 1998. Therefore, a valuation allowance
has been established at the full amount of the deferred tax asset.
1998
-----
Deferred tax asset $ 1,163,446
Less: valuation allowance (1,163,446)
------------
$ 0
============
The change in the valuation allowance during 1998 was as
follows:
Balance at beginning of year $ 1,168,800
Decrease due to decrease in deferred
tax asset 5,354
----------
Balance at end of year $ 1,163,446
==========
NOTE 5 - CONTINGENCIES AND OTHER EVENTS:
The Company is currently negotiating the settlement of its
outstanding debt to its former Parent. Although it is possible a
settlement could result in the transfer of essentially all remaining
assets to its former Parent, the effect of a final settlement cannot
be determined at this time.
In addition to the uncertainty discussed above, the Company has
sustained substantial net losses and has a deficit net worth at
December 31, 1998 of $143,975. These issues raise considerable doubt
as to the Company's ability to continue operations. Management has
not adopted a plan of liquidation and is currently exploring several
possibilities including selling a majority interest in the Company.
The consolidated financial statements do not include any adjustments
that may result from any of the above events.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as to persons who
serve as directors and Executive Officers of the Company. As provided
in the By-laws of the Company the term of office of each Director is
one year.
Principal Occupation Director
Name Age And Other Directorships Since
Thomas A. James 57 Chairman of the Board and 1988
Chief Executive Officer of
Raymond James Financial, Inc.;
Chairman of the Board of
Raymond James & Associates,
Ralph W. 63 Inc. 1988
Quartetti President of Sunstyle
Corporation, President of
Sunketch Construction.
Unless otherwise indicated, the directors have held the same
principal occupations for at least five years.
Committees of the Board of Directors
The Company has two standing committees of the Board. Set forth
below is a description of the functions of those committees and the
members of the Board who served on such committees.
Audit Committee: The responsibilities of the audit committee
include recommending to the Board the independent certified public
accountants to conduct the annual audit of the books and accounts of
the Company, reviewing the proposed scope of the audit and approving
the audit fees to be paid. The audit committee also reviewed with the
independent certified public accountants and with the Company's
financial staff the adequacy and effectiveness of the internal
accounting and financial controls of the Company. The audit committee
consists of Mr. James.
Compensation Committee: In prior years, the compensation
committee recommended to the Board the salaries of the executive
officers of the Company and approved the salaries of all other
officers and certain other employees. It also determined, subject to
further approval of the Board, the fees for directors, and supervised
the administration of all benefit plans and other matters affecting
executive compensation. The compensation committee, which is now
inactive, included Mr. James and a former director, Mr. Krusen.
Director Compensation
During 1998, no fees or expenses were paid to the directors
because there were no Board or Committee meetings. Both of the
current directors are significant owners.
Item 11. Executive Compensation
No executive officer received cash or other compensation during
1998.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information is provided below with respect to the beneficial
ownership of Sunstyle Common Stock, as of December 31, 1998, of (i)
persons owning more than 5% of the Company, (ii) each director of the
Company, and (iii) all officers and directors of the Company as a
group.
Shares
Name Beneficially Owned Percent
Thomas A. James (1) 447,466 (2) (3) 40.9%
Christopher W. James (1) 116,894 (2) 10.6%
Carr Securities Corporation 107,229 (4) 9.8%
Golda Meir Endowment
Corporation 61,500 (7) 5.6%
Ralph W. Quartetti 59,193 (5) 5.4%
Herbert E. Ehlers 58,898 (6) 5.4%
All Directors & Officers
As a Group (2 Persons) 507,222 46.3%
(1) Messrs. Thomas A. James and Christopher W. James are brothers.
Their address is 880 Carillon Parkway, St. Petersburg, FL 33716.
(2) Includes (i) 111,320 shares owned by the Robert A. James Trust,
established for the benefit of members of the James family, (ii)
4,474 shares owned by the James Grandchildren's Trust, for which
trusts Thomas A. and Christopher W. James serve as co-trustees,
and (iii) 563 shares owned by Mary S. James.
(3) Includes 66,792 shares owned by the James' Children Annuity
Trust, for which Thomas A. James serves as sole trustee.
(4) On February 12, 1991, Carr Securities filed Form 13G with the
Securities and Exchange Commission advising that the firm had
acquired 109,232 shares in the ordinary course of business as a
Broker or Dealer registered under the Securities Exchange Act of
1934 and the shares were not acquired to influence or control the
issuer. Carr Securities has sole voting power of these shares.
The address of Carr Securities is One Penn Plaza, Suite 4720, New
York, NY 10119.
(5) On December 6, 1988, the Board of Directors of Sunstyle agreed to
grant to Mr. Quartetti options to purchase 54,588 shares of
Sunstyle Common Stock pursuant to the Sunstyle Corporation
Incentive Stock Option Plan. The address of Mr. Quartetti is
36460 U.S. Highway 19 North, Palm Harbor, FL 34684.
(6) Mr. Ehlers' address is 2502 Rocky Point Drive, Suite 500, Tampa,
FL 33607.
(7) On October 23, 1989, Charles I. Rutenberg filed a Schedule 13-D
with the Securities and Exchange Commission advising that he
acquired 55,500 shares of Sunstyle Corporation common stock
through purchases on the open market. On November 1, 1992, Mr.
Rutenberg transferred 61,500 shares to the Golda Meir Center
Endowment Corporation, a charitable corporation. These shares
are held for investment purposes only.
Item 13. Certain Relationships and Related Transactions
The Company owes interest to Raymond James related to outstanding
debt. During 1998, the Company did not engage in any transactions
with related parties.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
a) Financial statements included with this filing.
b) None
c) None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Palm Harbor, State of Florida, on the 4th
day of October, 2000.
SUNSTYLE CORPORATION
By /s/Ralph W. Quartetti
Ralph W. Quartetti, 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
/s/Ralph W. Quartetti President October 4, 2000
Ralph W. Quartetti
/s/Thomas A. James Director October 4, 2000
Thomas A. James
