<PAGE> 1
FORM 10-QSB/A
AMENDMENT NO. 2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- --------------
Commission File No. 0-19670
--------------------------------------------
OCEAN OPTIQUE DISTRIBUTORS, INC.
--------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 65-0052592
- --------------------------------------- ---------------------------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
Incorporation or Organization)
14250 S.W. 119 Ave.
Miami, Florida 33186
- ---------------------------------------- ---------------------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: 305-255-3272
------------
Indicate by check mark whether the Issuer (1) 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 and (2) has been subject to such filing requirements for
the past 90 days.
Y E S X N O
--- ---
State the number of shares outstanding of each of the Issuer's classes of
common equity as of the latest practicable date: At November 10, 1995 there
were outstanding 1,619,420 shares of Common Stock, no par value.
Transitional Small Business Disclosure Format: YES NO X
--- ---
1
<PAGE> 2
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB/A
AMENDMENT NO. 2
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
------ --------------------- ----
<S> <C>
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets as of
September 30, 1995 and June 30, 1995 (Unaudited). 3
Condensed Consolidated Statements of Income for the
Three Months Ended September 30, 1995 and 1994
(Unaudited). 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended September 30, 1995 and 1994
(Unaudited). 5
Notes to Condensed Consolidated
Financial Statements (Unaudited). 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 7
PART II OTHER INFORMATION
------- -----------------
Item 6. Exhibits and Reports on Form 8-K. 8
Signatures. 10
</TABLE>
2
<PAGE> 3
Ocean Optique Distributors, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and June 30, 1995
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
1995 1995
---- ----
(Unaudited)
-----------
<S> <C> <C>
Current assets
Cash & cash equivalents $ 1,717,653 1,748,781
Certificate of deposit - restricted 65,000 65,000
Short-term investments 938,849 1,018,308
Accounts receivable (net of allowance for doubtful accounts
of $206,541 and $214,693 respectively) 3,043,983 2,571,026
Inventory 7,461,950 7,373,705
Prepaid expenses & other current assets 452,485 376,627
Deferred income taxes 181,626 166,626
Income tax receivable 155,020 257,240
----------- ----------
Total current assets 14,016,566 13,577,313
Property and equipment, net 362,174 328,702
Security deposits 14,728 14,728
Debt issue cost, net 168,337 176,013
Intangible assets, net 3,590,345 3,673,207
----------- ----------
Total assets $18,152,150 17,769,963
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank line of credit 3,397,800 3,173,800
Accounts payable 1,226,456 1,350,708
Due to related parties 1,105,197 920,000
Due to foreign currency dealer 1,533,556 1,254,008
Accrued expenses 51,635 124,048
Notes payable to related party, current portion 391,975 391,975
Notes payable, current portion 87,526 71,275
Capital lease obligations, current portion 46,143 46,143
----------- ----------
Total current liabilities 7,840,288 7,331,957
8% Convertible subordinated debentures 1,575,000 1,575,000
Notes payable to related party, long-term portion 681,477 736,699
Notes payable, long-term portion - 17,317
Capital lease obligations, long-term portion 24,551 33,356
Deferred income taxes 124,168 124,168
----------- ----------
Total liabilities 10,245,484 9,818,497
Commitments and contingencies - -
Stockholders' equity:
Series A Cumulative Convertible 3% Preferred Stock; 5,000,000
shares authorized, 450,000 shares issued and outstanding
(liquidation value - $1,575,000) 1,474,398 1,474,398
Series B 2% Convertible Preferred Stock; 5,000,000
shares authorized, 230,000 shares issued and outstanding
(liquidation value - $1,150,000) 1,150,000 1,150,000
Common Stock, no par value; 10,000,000 shares
authorized, 1,619,420 issued and outstanding 6,099,228 6,099,228
Retained earnings (accumulated deficit) (816,960) (772,160)
----------- ----------
Total stockholders' equity 7,906,666 7,951,466
Total liabilities and stockholders' equity $18,152,150 17,769,963
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
Ocean Optique Distributors, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Net sales $3,858,939 2,226,152
Cost of goods sold 2,339,903 1,201,044
---------- ----------
Gross profit 1,519,036 1,025,108
Selling, general and administrative expenses 1,473,005 1,048,954
---------- ----------
46,031 (23,846)
Interest expense, net (94,018) (30,253)
---------- ----------
Income (loss) before income taxes (47,987) (54,099)
Income tax (benefit) expense (15,000) (16,200)
---------- ----------
Net income (loss) $ (32,987) (37,899)
Dividends paid on convertible preferred stock 11,813 -
---------- ----------
Net income (loss) applicable to common
stockholders $ (44,800) (37,899)
========== ==========
Net income (loss) per share of common stock $ (0.03) (0.02)
========== ==========
Weighted average number of common shares
outstanding 1,869,420 1,660,645
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
Ocean Optique Distributors, Inc. and Subsidiares
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (44,800) (37,899)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 116,092 79,288
Deferred income taxes, net (15,000) (16,200)
Changes in assets and liabilities:
Decrease (increase) in short-term investments 79,459 (571,185)
Decrease (increase) in accounts receivable, net (472,957) 39,831
Decrease (increase) in inventory (88,245) 87,563
Increase in prepaid expenses, security deposits
and intangible assets (75,858) (80,244)
Decrease in accounts payable and accrued expenses (196,665) (285,794)
Increase in due to related parties 185,197 -
Increase (decrease) in income taxes 102,220 (13,067)
------------- ------------
Net cash used in operating activities (410,557) (797,707)
------------- ------------
Cash flows from investing activities:
Goodwill adjustments (2,889) -
Capital expenditures (56,137) (3,972)
------------- ------------
Net cash used in investing activities (59,026) (3,972)
------------- ------------
Cash flows from financing activities:
Net borrowings (payments) on bank line of credit and notes payable 167,712 (692,024)
Proceeds from borrowings from foreign currency dealer 279,548 -
Payments under capital lease obligation (8,805) (9,563)
Payments from the exercise of stock warrants - (17,667)
------------- ------------
Net cash provided by (used in) financing
activities 438,455 (719,254)
------------- ------------
Net decrease in cash and cash equivalents (31,128) (1,520,933)
Cash and cash equivalents, beginning of period 1,748,781 1,849,746
------------- ------------
Cash and cash equivalents, end of period $ 1,717,653 328,813
============= ============
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for income taxes, net $ (98,000) 13,067
============= ============
Cash paid during the period for interest, net $ 91,031 30,253
============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
OCEAN OPTIQUE DISTRIBUTORS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-QSB
and do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. However, such information reflects all adjustments
(consisting solely of normal recurring adjustments), which are, in the
opinion of Management, necessary for a fair statement of results for
the interim periods.
The results of operations for the three months ended September 30,
1995 are not necessarily indicative of the results to be expected for
the full year.
These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-KSB, as
amended, for the fiscal year ended June 30, 1995.
(2) ORGANIZATION
Ocean Optique Distributors, Inc. (the "Company") was incorporated
under the laws of the State of Florida on May 31, 1988. The Company
is an importer and distributor of eyeglass frames.
On June 21, 1995, the Company acquired 100 percent of the capital
stock of European Manufacturers Agency, Inc. ("EMA"), a Florida
corporation. EMA is engaged in the business of distributing and
marketing private label ophthalmic frames and related items and
continues to conduct such business as a wholly-owned subsidiary of the
Company.
(3) BANK LINE OF CREDIT
On June 29, 1994, and as subsequently amended in September 1995, the
Company refinanced its credit facility. The new line of credit, which
expires in September 1996, allows the Company to borrow up to
$3,500,000, is secured by a pledge of all the Company's assets.
Borrowings under this agreement are limited to the sum of 75 percent
of accounts receivable, and 50 percent of inventory on hand, not to
exceed $2,000,000. Interest on the line of credit is 3/4% above the
bank's prime lending rate.
(4) CALCULATION OF EARNINGS PER SHARE
The Company calculates its earnings per share without including the
500,000 shares held in escrow pursuant to the terms of the EMA
acquisition agreement.
The EMA acquisition agreement provides for the escrow of 500,000 of
the 533,333 total shares of the Company's Common Stock issued in
exchange for the EMA shares, with a portion of such escrowed shares
to be released to the former EMA shareholders, Robert D. Winn and
Mary S. Winn, on each of the first, second, third and fourth
anniversaries of the acquisition date. The acquisition agreement
provides that the number of shares to be released on any such date
will be determined by dividing 375,000 by the then-current market
value of the Company's Common Stock, provided that the number of
shares to be released on any anniversary date will not be less than
62,500 shares nor more than 150,000 shares. In the event that the
number of shares of the Company's Common Stock to be released from
escrow on an anniversary date is greater than the number of shares
then held in escrow, the acquisition agreement provides that the
Company will issue additional shares in the amount of any such
shortfall, and such shares will be deemed to be issued as part of the
original purchase price set forth in the acquisition agreement. Any
shares of Common Stock remaining in escrow subsequent to the fourth
anniversary of the acquisition date will be released to and cancelled
by the Company. The acquisition agreement further provides that the
Winns, as beneficial owners of the escrowed shares, are entitled to
all voting, dividend and liquidation rights, preferences and
privileges applicable to all of the escrowed shares, but will be
unable to transfer such shares until released from escrow.
Pursuant to the acquisition agreement, EMA entered into employment
agreements with Robert Winn and Mary Winn relating to their continued
service as executive officers of EMA. Under the terms of the
acquisition agreement, if either of such employment agreements is
terminated by the Company without cause, all shares then maintained
in escrow in the name of the terminated executive officer will be
released and delivered to that person. If either such agreement is
terminated for cause or by the officer, the officer's shares will be
released from escrow according to the above-described schedule.
This escrow arrangement is intended primarily to assure the Company
of a remedy in the event of a claim by the Company to the
indemnification provided by the former EMA shareholders under the
acquisition agreement. Pursuant to the terms of the agreement, any
claim to such indemnification is to be first applied to the escrowed
shares. As of the date hereof, no such claim has been made by the
Company.
Future years' earnings per share calculations will include the shares
released from escrow, if any.
6
<PAGE> 7
OCEAN OPTIQUE DISTRIBUTORS, INC
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is an analysis of the Company's results of operations
and its liquidity and capital resources. To the extent that such analysis
contains statements that are not of a historical nature, such statements are
forward-looking statements, which involve risks and uncertainties. These
risks include: risks of increases in the costs of the Company's products; the
Company's relationships with its suppliers and licensors; the financial
condition and operations of the Company's customers; changes in fashions and
preferences of purchasers of eyewear; competitive and general economic factors
in the markets where the Company's products are manufactured or sold; the
impact of, and changes in, government regulations such as trade restrictions or
prohibitions, or import and other charges and taxes; and other factors
discussed in the Company's filings with the Securities and Exchange Commission.
The following discussion and analysis should be read in conjunction
with the Company's condensed consolidated financial statements and the related
notes thereto included elsewhere herein.
OVERVIEW
The fiscal years ended June 30, 1995 and June 30, 1994, were
significant in the development of the Company's operations, most noticeably in
connection with or as a result of the prior acquisition of Classic, in the
fiscal year ended June 30, 1993, and EMA in the fiscal year ended June 30,
1995. Through the use of the licenses to market products under the Revlon,
Crayola, Chevrolet, Gitano and J.H. Collectibles labels and employing the
efforts of a substantially larger sales force, the Company has expanded its
customer base and product lines, and has implemented a national marketing plan.
With the acquisition of EMA, the Company will continue to expand its customer
base and product lines through the sales of private label products to
retailers.
The Company's license agreement with Revlon has an expiration date of
December 31, 1995. Subsequent to September 30, 1995, and during the quarter
ended December 31, 1995, the Company's license agreement with Revlon was
renewed for a one-year term ending December 31, 1996. The license agreement
may be renewed for an additional three-year term if certain criteria are met.
No assurance can be given that such criteria will be met and that therefore
such renewals can be negotiated. However, the Company believes that there
would be no material adverse effect on the Company's long-term future business
should the agreement expire and not be renewed.
RESULTS OF OPERATIONS - For the three months ended September 30, 1995 and
1994.
7
<PAGE> 8
For the three months ended September 30, 1995, the Company had net
sales of $3,858,939, an increase of $1,632,787 (73.3%) over the same period in
1994. This increase is attributed to sales by EMA (acquired by the Company in
June 1995) totaling $1,156,474 and a $476,313 (21.4%) increase over last year's
core business. The increase in core business was due in a large part to the
increase in sales force and new product.
The Company's gross profit for the three months ended September 30,
1995 increased by $493,928 or 48.2% when compared to the same period in 1994,
mainly due to the increase in the sales volume in the current period. The
Company's gross profit margin decreased, however, from 46.0% for the three
months ended September 30, 1994, to 39.4% for the current three-month period
ended September 30, 1995. This decrease can mainly be attributed to
management's decision to be more price competitive in the marketplace by
lowering the prices of some existing product and lower markups of some new
product. The gross profit margin at EMA is traditionally lower than the
Company's gross profit margin, also contributing to a lower overall gross
margin.
Selling, general and administrative expenses ("SG&A") for the three
months ended September 30, 1995 increased by $424,051 (40.4%) over the same
period last year largely as a result of the SG&A expenses relating to EMA.
SG&A as a percentage of net sales decreased to 38.2% from 47.1% for the three
months ended September 1995 and 1994, respectively. This decrease is mainly
due to the increase in sales volume over last year.
For the three months ended September 30, 1995, the Company had a net
loss before preferred stock dividends of $32,987, compared to a net loss of
$37,899 for the same period last year. This $4,912 reduction in the Company's
net loss is mainly due to the increase in sales volume, and a lower percent of
SG&A expenses as they relate to sales as discussed above.
Reflected herein is the discount of the non-interest-bearing note
payable to related party to reflect an appropriate interest rate. The effect
of recognizing interest expense and adjusting amortization was a net decrease
in the Company's profit by $23,238 for the three months ended September 30,
1995.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company's working capital was $6,176,278,
and its current ratio was 1.8:1, as compared to the working capital of
$6,157,874 and a current ratio of 1.8:1 as of June 30, 1995.
The change in net cash used in operating activities was primarily due
to the net loss from operations of $44,800, depreciation and amortization
(including goodwill) of $116,092, a decrease in short-term investments of
$79,459, an increase in accounts receivable of $472,957 and an increase in
inventory of $88,245. The change in goodwill relates to the adjustment made at
June 30, 1995 to reduce the note payable to related party and to reduce
goodwill for the imputed interest on the note. Subsequent to the three months
ended September 30, 1995, the Company realized it had amortized goodwill based
on a gross goodwill amount prior to the imputed interest mentioned above.
Therefore, there is an amount added back to goodwill to reflect this change.
The increase in accounts receivable is due to the increase in sales during
this period. The accounts receivable department has specific individuals who
monitor and collect on any account
8
<PAGE> 9
that extends to 60 or 90 day delinquency. The increase in inventory was due to
the addition of new product to our line. Societe Francaise de Lunetterie
("SFL") and D'Arrigo Moda Italia ("Arrigo"), the related parties, are both
principal shareholders of the Company and are major European suppliers of
product to the Company.
During the Company's 1995 fiscal year, it maintained a $3,500,000 line
of credit agreement with Republic National Bank ("RNB"). As of September 30,
1995, total available credit under this line was $273,000. Interest on the
line of credit is 3/4% above the prime lending rate. The Company has a
$150,000 line of credit with Barnett Bank that matures in November, 1995. On
September 27, 1995 the credit facility with RNB was renewed through September
1996. In connection with the renewal, EMA was added to the loan agreement as a
co-borrower and the Company agreed to pay off the Barnett Bank loan by December
31, 1995. Pursuant to an understanding with RNB, the Company paid off the line
of credit with Barnett Bank subsequent to December 31, 1995.
Management currently believes that cash from operations and from
available credit sources are sufficient for the Company to maintain its
operations at current levels, including the operations acquired in the EMA
acquisition.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits.
11.1 Statement re: computation of per share earnings.
27.1 Financial Data Schedule (for SEC use only)
(B) Reports on Form 8-K.
On September 1, 1995, the Company filed an amendment to its Form 8-K
dated June 21, 1995 relating to the EMA acquisition.
9
<PAGE> 10
OCEAN OPTIQUE DISTRIBUTORS, INC.
AND SUBSIDIARIES
FORM 10-QSB/A
AMENDMENT NO. 2
SEPTEMBER 30, 1995
S I G N A T U R E S
In accordance with the requirements of the Exchange Act, the Company
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Ocean Optique Distributors, Inc.
By: /s/ Kenneth Gordon
----------------------------
Kenneth Gordon
Principal Financial and
Accounting Officer
August 7, 1996
------------------------------
Date
10
<PAGE> 11
OCEAN OPTIQUE DISTRIBUTORS, INC.
FORM 10-QSB/A
AMENDMENT NO. 2
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Page
- -------- -------------
<S> <C> <C>
11.1 Statement re: Computation of per share earnings ................
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT 11.1
<TABLE>
<CAPTION>
Three Months Ended
09/30/95 09/30/94
---------- ----------
<S> <C> <C>
Common Stock 1,619,420 1,660,645
Common Stock Equivalents
Dilutive Stock Options -- --
Common Stock Equivalents
Dilutive Stock Warrants -- --
---------- ----------
Weighted Average Shares and
Common Stock Equivalents 1,619,420 1,660,645
========== ==========
Earnings per Common Share
Net Income $ (0.03) $ (0.02)
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF OCEAN OPTIQUE DISTRIBUTORS, INC. FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 2,722
<SECURITIES> 0
<RECEIVABLES> 3,251
<ALLOWANCES> 207
<INVENTORY> 7,462
<CURRENT-ASSETS> 14,017
<PP&E> 928
<DEPRECIATION> 566
<TOTAL-ASSETS> 18,152
<CURRENT-LIABILITIES> 7,840
<BONDS> 0
0
2,624
<COMMON> 6,099
<OTHER-SE> (817)
<TOTAL-LIABILITY-AND-EQUITY> 18,152
<SALES> 3,859
<TOTAL-REVENUES> 3,859
<CGS> 2,340
<TOTAL-COSTS> 2,340
<OTHER-EXPENSES> 1,473
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> (48)
<INCOME-TAX> 15
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
