<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
Commission file Number 33-36125-D
SVI Holdings, Inc.
(Exact name of registrant as specified in its charter.)
Nevada 84-1131608
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9364 Cabot Drive, Suite B, San Diego, CA 92126
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(619) 693-4344
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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Common Stock, $0.0001 Par Value - 12,077,800 shares as of
March 31, 1996.
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
SVI Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<CAPTION>
Three months ended Six months ended
March 31 March 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
(10,000,000) (10,000,000) (10,000,000) (10,000,000)
Net Sales 3,493,876 129,431 3,684,153 268,675
Cost Of Goods Sold 2,754,116 15,146 2,765,114 27,656
------------ ------------ ------------ ------------
Gross Profit 739,760 114,284 919,039 241,018
Selling, General and
Administrative
Expenses 751,659 183,647 1,001,939 384,172
------------ ------------ ------------ ------------
Loss from operations (11,899) (69,363) (82,900) (143,154)
Net interest (20,638) (31,538) (67,287) (58,286)
Unrealized foreign
exchange gain 307,143 307,143
------------ ------------ ------------ ------------
Income/(Loss)from
continuing operations
before income taxes
and minority interests 274,606 (100,901) 156,956 (201,441)
Income Taxes (50,235) (50,235)
------------ ------------ ------------ ------------
Income / (loss) from
continuing operations
before minority
interests 224,371 (100,901) 106,721 (201,441)
Minority Interest (36,492) (36,492)
------------ ------------ ------------ ------------
Income / (loss) from
continuing operations 187,879 (100,901) 70,229 (201,441)
Discontinued
Operations:
Profit (loss) from
operations of Tango
Products USA, Inc. (7,392) 28,368 (35,421)
------------ ------------ ------------ ------------
Net Income/(loss) 187,879 (108,293) 98,597 (236,861)
Per share information:
Profit/(loss) from
continuing operations 0.02 (0.01) 0.01 (0.02)
Profit/(loss) from
discontinued
operations - - - -
------------ ------------ ------------ ------------
Net income/(loss)per
share 0.02 (0.01) 0.01 (0.02)
Weighted Average
Number of Common
Shares Outstanding 11,972,467 10,319,800 11,679,467 10,319,800
</TABLE>
<PAGE>
<TABLE>
SVI Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 September 30
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Pledged certificates of deposit 700,000 700,000
Cash 27,050 0
Accounts receivable 3,958,809 81,363
Inventories 1,540,018 738
Prepaid expenses and other current assets 166,111 81,683
------------ ------------
Total current assets 6,391,988 863,784
Furniture and equipment, net of accumulated
depreciation of $91,980 and $25,056 305,067 28,041
Due from affiliate, unsecured non-interest bearing 1,078,022 1,078,022
License rights, net of accumulated amortization
of $191,250 and $168,750 33,750 56,250
Note receivable 90,344 90,344
Other Assets 1,027 1,027
Goodwill arising on acquisition of subsidiary 1,578,430
Net assets of discontinued operations 3,003 148,454
------------ ------------
9,481,630 2,265,922
============ ============
LIABILITIES AND STOCKHOLDERS DEFICIT
Current liabilities
Lines of credit 699,400 699,399
Note payable 173,840
Short Term Bank Loans 1,146,885
Bank Overdraft 9,454
Accounts payable and accrued expenses 3,445,996 535,653
Due to stockholders 2,286,944 2,604,163
------------ ------------
Total current liabilities 7,579,225 4,022,509
Minority interest in subsidiary 3,094,491
Stockholders deficit
Preferred stock, $.0001 par value, 5,000,000
shares authorized, none issued
Common stock, $.0001 par value, 50,000,000
shares authorized, 12,077,800 issued and
outstanding 1,208 1,032
Additional paid in capital 5,747,736 4,757,227
Accumulated deficit (6,416,249) (6,514,846)
Cumulative translation adjustment (524,780)
------------ ------------
Total stockholders deficit (1,192,085) (1,756,587)
------------ ------------
9,481,631 2,265,922
============ ============
</TABLE>
<PAGE>
<TABLE>
SVI Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months ended March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net profit / (loss) from continuing operations 70,229 (201,439)
Net profit (loss) from discontinued operations 28,368 (35,421)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 28,618 26,225
Unrealized foreign exchange gain (307,143)
Minority interests share in income 36,492
(Increase) decrease in:
Accounts receivable (2,694,237) (94,088)
Inventories (139,290) 436
Prepaid expenses and other current assets 40,249 (80,140)
Net current assets of discontinued operations 145,451 13,150
Increase (decrease) in:
Accounts payable and accrued expenses 1,290,690 54,872
------------ ------------
Net cash used in operating activities (1,500,573) (316,405)
Cash flows from investing activities:
Purchase of furniture and equipment (75,073) (1,517)
Disposal of furniture and equipment 4,645
------------ ------------
Net cash used in investing activities (70,428) (1,517)
Cash flows from financing activities:
Sale of common stock 990,685
Increase (decrease) in bank overdraft (9,454) (90,345)
(Decrease) increase in due to stockholders (net): (317,219) 463,000
Repayment of note payable (173,840)
Increase in short term bank loans 1,107,879
------------ ------------
Net cash provided by financing activities 1,598,051 372,655
Net increase (decrease) in cash 27,050 54,733
Cash and cash equivalents, beginning of period - -
------------ ------------
Cash and cash equivalents, end of period 27,050 54,733
============ ============
</TABLE>
<PAGE>
SVI HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Organization and Basis of Preparation
The accompanying consolidated financial statements have been prepared from
the unaudited records of SVI Holdings, Inc. and subsidiaries. In the opinion
of management, all adjustments necessary to present fairly the financial
position, results of operations and cash flows at March 31, 1996 and for all
the periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Accounting policies followed by the
Company are described in the notes to the financial statements in its Annual
Report on form 10-KSB for the year ended September 30, 1995. The financial
information included in this quarterly report should be read in conjunction
with the consolidated financial statements and related notes thereto in the
Company's form 10-KSB for the fiscal year ended September 30, 1995.
The results of operations for the three months and six months ended March
31, 1996 and 1995 are not necessarily indicative of the results to be expected
for the full year.
On December 8, 1995, the Company sold the net assets and related
operations of Tango Products USA, Inc., a wholly owned and fully consolidated
subsidiary. Operating results of Tango Products USA, Inc. for the quarters and
six months ended March 31, 1996 and March 31, 1995 are shown separately in the
accompanying statement of operations. Except as otherwise noted, all other
adjustments are of a continuing and recurring nature.
On June 18, 1996, the Company closed an agreement for the acquisition of
51% of Soft Line Holdings (Pty) Ltd and subsidiaries effective March 1, 1996.
Soft Line Holdings (Pty) Ltd. is a holding company with subsidiaries operating
as developers and distributors of computer software and distributors of
computers and related products. Soft Line Holdings (Pty) Ltd. is located in
South Africa. The wholly owned subsidiaries of Soft Line Holdings (Pty) Ltd.
are Soft Line Business Systems (Pty) Ltd. which operates as a developer and
distributor of computer software and distributors of computers and related
products, Vantage Distribution (Pty) Ltd which operates as a distributor of
hardware products to resellers, Soft Line Natal (Pty) Ltd and Soft Line Cape
(Pty) Ltd. Both Soft Line Natal (Pty) Ltd and Soft Line Cape (Pty) Ltd operate
as regional branches of Soft Line Business Systems (Pty) Ltd. On March 1, 1996
Soft Line Holdings (Pty) Ltd formed a new company, Computer Parts (Pty) Ltd in
which it has an 85% holding. Computer Parts (Pty) Ltd operates as a
distributor of computer memory chips, CPU's and peripheral products.
The acquisition of Soft-Line Holdings (Pty) Ltd was completed by a note
payable by SVI Holdings Inc. to Soft Line Holdings (Pty) Ltd for the amount of
R 14,285,714 payable in South African Rand. At the effective date of the
acquisition, March 1, 1996, the equivalent US Dollar amount was $ 3,671,428.
At the end of the quarter, March 31, 1996 the equivalent US Dollar amount was
$ 3,364,286 resulting in an unrealized foreign exchange gain for the quarter
of US$ 307,143.
The note payable is unsecured and interest free. The period of payment is
subject to closing of financing. The Company is currently negotiating the
raising of finance for the payment of the note by means of the private
placement of the Company's securities.
The following unaudited pro forma summary presents the consolidated
results of operations as if the acquisition of Soft Line Holdings (Pty) Ltd.
had occurred on October 1, 1994. These pro forma results have been prepared
for comparative purposes only and do not purport to be indicative of what
would have occurred had the acquisition been made as of those dates or of the
results which may occur in the future.
<TABLE>
SVI Holdings, Inc. and Subsidiaries
CONSOLIDATED PRO-FORMA STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<CAPTION>
Three months ended Six months ended
March 31 March 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales 5,194,860 1,253,591 6,554,852 2,062,488
============ ============ ============ ============
Income / (loss) from
discontinued
operations - (7,392) 28,368 (35,420)
Income / (loss) from
continuing operations 205,541 (70,973) 90,443 (149,658)
------------ ------------ ------------ ------------
Net income / (loss) 205,541 (78,365) 118,811 (185,078)
============ ============ ============ ============
</TABLE>
In the quarter ended December 31, 1995, the company sold 600,000 shares of
common stock through private placements with prices ranging from $0.50 to
$0.75 per share for a total consideration of $ 425,000. An option for the
purchase of 1,000,000 shares of common stock at an exercise price of $0.375
per share was exercised for a total consideration of $375,000.
In the quarter ended December 31, 1995, the company issued 391,810
employee options under the Company's stock incentive plan at an exercise price
of $0.50 per share. An additional 900,000 non-employee options were issued to
consultants of the company with exercise prices ranging from $0.30 to $0.75
per share.
In the quarter ended March 31, 1996, the company sold 21,800 shares of
common stock through private placements for $3.61 per share for a total
consideration of $ 78,698. Employees issued options for the purchase of shares
under the Company's stock incentive plan exercised their options to purchase a
total of 136,200 shares at prices ranging from $ 0.75 to $ 0.825 for a total
consideration of $ 111,990.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of operations
For the three months ended March 31, 1996, revenues from continuing
operations increased by $ 3,364,445 in comparison with the same period in the
previous year. This increase is attributable to the acquisition of Soft Line
Holdings (Pty) Ltd and subsidiaries ("Soft Line"). Results of the operations
of Soft Line are consolidated for one month in the quarter ended March 31,
1996.
Revenues per the Pro-Forma Statements of Operations for the quarter ended
March 31, 1996 increased by $ 3,941,269 in comparison with the same period in
the previous year. This increase is attributable to the addition of a number
of new agencies and products by Soft Line. The following factors contributed
significantly to this increase:
a) release of the Windows95 version of the Brilliant Accounting package in
March 1996.
b) entry by Soft Line into the distribution of computer memory and CPU's via
the newly formed Computer Parts subsidiary.
c) addition of new lines of hardware and software products including the
Olicom range of networking products and Hitachi monitors and storage devices.
Cost of sales increased relative to sales for the quarter ended March 31,
1996 in comparison with the same period of the previous year. This increase is
attributable to the acquisition of Soft Line and reflects the higher cost of
sales inherent in the development and distribution of software and the
distribution of hardware in comparison with the development and distribution
of computer training materials and site licenses.
Selling, General and Administrative expenses increased to $ 751,659 for
the quarter ended March 31, 1996 in comparison with $ 183,647 in the quarter
ended March 31, 1995. Significant factors contributing to this increase were
costs incurred in identifying and investigating Soft Line and other potential
acquisitions, and costs incurred in providing for additional infrastructure
required to promote and service additional product lines and distribution
agencies acquired by Soft Line.
Foreign income taxes of $ 50,235 were paid by Soft Line in the quarter
ended March 31, 1996. Net operating loss carry forwards available to SVI
Holdings are not available to offset the tax liabilities of the foreign
subsidiary.
An unrealized foreign exchange gain of $ 307,143 arose on the acquisition
of Soft Line. It is also expected that foreign exchange gains or losses will
arise in future as the result of transactions occurring between SVI and Soft
Line in the normal course of business.
Income from continuing operations of $ 187,879 was earned for the quarter
ended March 31, 1996 compared with a loss from continuing operations of
$ 108,293 for the quarter ended March 31, 1995. This reflects the increased
gross profit of $ 739,760 for the quarter ended March 31, 1996 ($ 114,284 for
the quarter ended March 31, 1995) and the unrealized foreign exchange gain
earned in this quarter, being offset by increased Selling, General and
Administrative expenditure.
At March 31, 1996, SVI had a deferred tax asset of approximately
$ 2,256,000 ($ 2,296,000 at September 30, 1995) resulting from net operating
loss carry forwards, which has been offset in its entirety by a valuation
allowance. These carry forwards may be used to offset future taxable income,
expiring from the year 2005 to 2010.
Financial Condition
At March 31, 1996, the Company had a working capital surplus of
$ 1,099,707. This is an increase from the deficit of $554,562 at September 30,
1995. The increase in working capital of $1,654,269 is attributable to sales
of common stock of $990,685 issued in the six months ended March 31, 1996 and
increases in short term bank loans of $1,107,879 in the six months ended March
31, 1996. The bank loans comprise loan facilities made available to Soft Line
by commercial South African banks. The Company is seeking additional funding
through a private placement of the Companies' securities. In addition, the
Company is investigating various sources of loan financing. However, there can
be no assurances that the Companies' efforts to raise additional funds will be
successful.
PART II. - OTHER INFORMATION
Item 5. Other Information
On June 18, 1996, the Company closed an agreement for the acquisition of
51% Soft Line Holdings (Pty) Ltd and subsidiaries effective March 1, 1996.
Soft Line Holdings (Pty) Ltd. is a holding company with subsidiaries operating
as developers and distributors of computer software and distributors of
computers and related products. Soft Line Holdings (Pty) Ltd. is located in
South Africa. The wholly owned subsidiaries of Soft Line Holdings (Pty) Ltd.
are Soft Line Business Systems (Pty) Ltd. which operates as a developer and
distributor of computer software and distributors of computers and related
products, Vantage Distribution (Pty) Ltd which operates as a distributor of
hardware products to resellers, Soft Line Natal (Pty) Ltd and Soft Line Cape
(Pty) Ltd. Both Soft Line Natal (Pty) Ltd and Soft Line Cape (Pty) Ltd operate
as regional branches of Soft Line Business Systems (Pty) Ltd. On March 1, 1996
Soft Line Holdings (Pty) Ltd formed a new company, Computer Parts (Pty) Ltd in
which it holds 85% of the outstanding common stock. Computer Parts (Pty) Ltd
operates as a distributor of computer memory chips, CPU's and peripheral
products.
The acquisition of Soft-Line Holdings (Pty) Ltd was completed by the
issuance of a note payable by SVI Holdings Inc. to Soft Line Holdings (Pty)
Ltd in the amount of R 14,285,714 payable in South African Rand (the "Note").
At the effective date of the acquisition, March 1, 1996, the equivalent US
Dollar amount was $ 3,671,428. At the end of the quarter, March 31, 1996, the
equivalent US Dollar amount was $ 3,364,286 resulting in an unrealized foreign
exchange gain for the quarter of US$ 307,143.
The note is unsecured and bears no interest. The period of payment is
subject to closing of financing to pay the Note. The Company is currently
negotiating the financing for payment of the note by means of the private
placement of the Company's securities.
It is impractical at this time to provide financial statements and pro-
forma financial information with respect to this acquisition. The Company will
provide such information as soon as practicable.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
(a) Exhibits
<CAPTION>
Exhibit Description
<S> <C>
2.1 Asset Purchase Agreement dated as of October 1, 1994 among Cabinets
Galore, Inc., Cabinets Galore Orange County, Inc., Sabica Ventures,
Inc. and Barry Jacobs - Incorporated by reference to Exhibit 2.1 to
the Company's Annual Report on Form 10-KSB for the year ended
September 30, 1995.
3.1 Articles of Incorporation - Incorporated by reference to Exhibit 3.1
to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1993.
3.2 Bylaws - Incorporated by reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1993.
10.1 Incentive Stock Option Plan - Incorporated by reference to Exhibit
10.1 to the Company's Annual Report on Form 10-KSB for the year ended
September 30, 1994.
10.2 Distribution Agreement dated November 25, 1992 between Tango
Proprietary Limited and Tango Products USA, Inc. - Incorporated by
reference to Exhibit 10.2 to the Company's Annual Report on Form
10-KSB for the year ended September 30, 1994.
</TABLE>
SVI Holdings, Inc.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly cause this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SVI Holdings, Inc.
Registrant
June 24, 1996 Russell Schechter
Date Vice President / Secretary
Signing on behalf of the registrant
and as principal financial officer.
