<PAGE> 1
As filed with the Securities and Exchange Commission on July 2, 1996
SEC Registration No. 33-98678
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OCEAN OPTIQUE DISTRIBUTORS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0052592
---------------------------------------
(I.R.S. Employer Identification Number)
14250 S.W. 119th Avenue
Miami, Florida 33186
Telephone: (305) 255-3272
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Neil B. Lande
Chairman of the Board
14250 S.W. 119th Avenue
Miami, Florida 33186
Telephone: (305) 255-3272
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Nina S. Gordon, P.A.
Broad and Cassel
Miami Center
201 South Biscayne Boulevard, Suite 3000
Miami, Florida 33131
Telephone: (305) 373-9400
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
================================================================================
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================
Proposed
Maximum Proposed
Offering Maximum
Amount Price Aggregate Amount of
Title of Each Class of Securities To Be To Be Per Offering Registration
Registered Registered Share(1) Price(2) Fee(2)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock(1) . . . . . . . . . . . . . 533,333 $2.50 $1,333,333 $460
=======================================================================================================
</TABLE>
- ----------------------
(1) These shares are being registered on behalf of certain selling
stockholders of the Registrant. See "Selling Stockholders" in the
Prospectus included herein. Pursuant to Rule 416(c) promulgated under the
Securities Act of 1933, as amended, this Registration Statement also
covers an indeterminate amount of securities to be offered or sold as a
result of any adjustments from stock splits, stock dividends or similar
events.
(2) Estimated pursuant to Rule 457(c), solely for the purpose of calculating
the registration fee, on the basis of the average of the bid and asked
closing prices of the Registrant's Common Stock reported on the Nasdaq
SmallCap Market on June 28, 1996. This amount was previously paid with
the original filing of this Form S-3 Registration Statement on October 30,
1995 and with the filing of Amendment No. 1 thereto on October 24, 1995.
-------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
-------------
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 2, 1996
OCEAN OPTIQUE DISTRIBUTORS, INC.
533,333 SHARES
COMMON STOCK
Ocean Optique Distributors, Inc. (the "Company" or the "Registrant")
hereby registers up to 533,333 shares (the "Shares") of its common stock, no
par value (the "Common Stock"), for the account of certain selling stockholders
(the "Selling Stockholders") in connection with the proposed resale by the
Selling Stockholders of such shares. See "Selling Stockholders" and
"Description of Securities - Common Stock."
The Company will not receive any of the proceeds from the sale of
Shares by the Selling Stockholders. See "Selling Stockholders."
The Company will pay all of the expenses of this offering, except that
the Selling Stockholders will bear the cost of any brokerage commissions or
discounts incurred in connection with the sale of the Shares and their
respective legal expenses. The Shares may be sold by Selling Stockholders
directly or through underwriters, dealers or agents in market transactions or
in privately negotiated transactions. See "Plan of Distribution."
The Common Stock is quoted on the automated quotation system of the
National Association of Securities Dealers, Inc. ("Nasdaq") SmallCap Market
under the symbol "OPTQ." On June 28, 1996, the average of the bid and asked
closing prices of the Common Stock was $2.50 per share.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE DISCUSSION UNDER
"RISK FACTORS," ON PAGE 5 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is June __, 1996
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C., and at its following
regional offices: Suite 788, 1375 Peachtree St. N.E., Atlanta, Georgia 30367;
Suite 1400, 500 West Madison Street, Chicago, Illinois; and 7 World Trade
Center, New York, New York. Copies of such material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Act with respect to the securities being offered by this
Prospectus. This Prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits thereto. For further information
about the Company and the securities offered hereby, reference is made to the
Registration Statement and to the exhibits filed as a part thereof. The
statements contained in this Prospectus as to the contents of any contract or
other document identified as exhibits in this Prospectus are not necessarily
complete and, in each instance, reference is made to a copy of such contract or
document filed as an exhibit to the Registration Statement, each statement
being qualified in any and all respects by such reference. The Registration
Statement, including exhibits, may be inspected without charge at the principal
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part thereof may be obtained
upon payment of fees prescribed by the Commission from the Public Reference
Section of the Commission at its principal office in Washington, D.C. set forth
above.
The Company's Common Stock is quoted on Nasdaq SmallCap Market under
the symbol "OPTQ." All of the reports required to be filed by the Company with
Nasdaq and other information concerning the Company can be inspected at 1735 K
Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are hereby
incorporated by reference in this Prospectus: (1) the Company's Annual Report
on Form 10-KSB for the fiscal year ended June 30, 1995, as amended; (2) the
Company's Quarterly Reports on Form 10-QSB, as amended, for the quarters ended
September 30, 1995 and December 31, 1995; (3) the Company's Quarterly Report on
Form 10-QSB for the quarter ended March 31, 1996; and (4) the Company's Current
Report on Form 8-K dated June 21, 1995, as amended on Form 8-K/A dated
September 1, 1995. Each document filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date of this
Prospectus but prior to the termination of this offering to which this
Prospectus relates, shall be deemed to be incorporated by reference in this
Prospectus and made a part of this Prospectus from the date any such document
is filed. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents described above, other than exhibits to such
documents (unless such exhibits have been specifically incorporated by
reference therein). Requests for such copies should be directed to the Company
at 14250 S.W. 119th Avenue, Miami, Florida 33186, attention: Corporate
Secretary; telephone (305) 255-3272.
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<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information, financial statements and related notes appearing
elsewhere in this Prospectus. Each investor is urged to read this Prospectus in
its entirety. Investors should carefully consider the information set forth
under the heading "Risk Factors."
THE COMPANY
The Company is engaged in importing, marketing and distributing high
quality ophthalmic (or eyeglass) frames and sunglasses in the mid- and
premium-priced categories. The Company's products, which are currently
manufactured in Europe and the Far East, include more than 400 styles in metal
or plastic in an array of colors and sizes. The Company is currently the
exclusive or non-exclusive licensee (with respect to eyewear) of several
well-recognized labels, including Revlon, Crayola, Gitano, J.H. Collectibles,
Chevrolet and Jacques Fath, and is the exclusive distributor for Carl Zeiss
Optical eyeglass frames and sunglasses in the United States.
The Company maintains its executive offices at 14250 S.W. 119th
Avenue, Miami, Florida 33186. Its telephone number is (305) 255-3272.
SECURITIES OFFERED
Up to 533,333 shares of the Company's Common Stock are being
registered hereunder for the account of the Selling Stockholders.(1)
USE OF PROCEEDS
The Company will not receive any proceeds from sales of the Shares by
the Selling Stockholders.
OUTSTANDING SHARES
As of June 28, 1996, the Company had 2,789,698 shares of Common Stock
outstanding.(2) As of June 28, 1996, holders of the Company's 8% Five Year
Convertible Subordinated Debentures (the "Debentures") totaling $481,250 in
aggregate principal amount have converted their Debentures into 291,668 shares
of Common Stock and holders of $306,250 in aggregate principal amount of
Debenture have provided notice to the Company of their intention to convert
their Debentures into an aggregate of 185,606 shares of Common Stock.
- ----------------------------
(1) These shares were issued in connection with the Company's
acquisition of 100% of the outstanding capital stock of
European Manufacturers Agency, Inc. ("EMA"). 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.
(2) Excludes up to 750,000 shares of Common Stock issuable upon
exercise of options granted and to be granted pursuant to the
Company's 1991 Stock Option Plan; up to 150,000 shares of
Common Stock issuable upon exercise of outstanding warrants;
up to 860,000 shares of Common Stock issuable upon conversion
of outstanding shares of convertible preferred stock; and the
shares of Common Stock issuable upon conversion of Debentures
remaining outstanding. See "Description of Securities."
-3-
<PAGE> 6
SUMMARY FINANCIAL DATA
The summary financial data set forth below is derived from the
consolidated financial statements included in the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1995, as amended, and the
Company's Form 10-QSB for the quarter ended March 31, 1996, incorporated herein
by reference. The following information should be read in conjunction with the
Company's consolidated financial statements, including the notes thereto, set
forth elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
MARCH 31, JUNE 30,
------------------------- ----------------------
1996 1995 1995 1994
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING DATA:
Net sales . . . . . . . . . . . . . . . . $10,644,836 $6,640,156 $9,752,264 $9,985,578
Cost of goods sold . . . . . . . . . . . 7,989,156 3,478,172 5,680,055 5,405,193
Gross profit . . . . . . . . . . . . . 2,655,680 3,161,984 4,072,209 4,580,385
Selling, general and admin-
istrative expenses . . . . . . . . . . . 4,282,532 3,079,122 4,694,571 4,490,773
----------- ---------- ---------- ----------
(1,626,852) 82,862 (622,362) 89,612
Interest expense, net . . . . . . . . . . (404,895) (204,061) (257,687) (321,880)
Other income . . . . . . . . . . . . . . -- 12,926 -- 7,275
Income (loss) before income taxes . . (2,031,747) (108,273) (880,049) (224,993)
Income tax benefit (expense) . . . . . . -- 51,000 (145,000) (65,033)
Net income (loss) . . . . . . . . . . (2,031,747) (57,273) (735,049) (159,960)
Dividends paid on preferred stock . . . . 35,632 -- 47,439 --
----------- ---------- ---------- ----------
Net income (loss) applicable to
Common Stock . . . . . . . . . . . . $(2,067,379) $ (57,273) $ (782,488) $ (159,960)
=========== ========== ========== ==========
Net income (loss) per common share . . . $ (0.95) $ (0.03) $ (0.48) $ (0.12)
=========== ========== ========== ==========
Weighted average number of common
shares outstanding . . . . . . . . . . . 2,126,818 1,661,050 1,619,602 1,330,716
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
----------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . $12,651,717 $13,577,313
----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,867,036 $17,769,963
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 8,424,518 7,331,957
----------- -----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 10,582,949 9,818,497
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 6,284,087 7,951,466
----------- -----------
Total liabilities and
stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . $16,867,036 $17,769,963
=========== ===========
</TABLE>
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<PAGE> 7
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk. Therefore, in evaluating the Company and its business
prospects, prospective investors should carefully consider the following risk
factors, in addition to the other information set forth elsewhere in this
Prospectus, before acquiring shares of Common Stock. This Prospectus contains,
in addition to historical information, forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially.
Factors that could cause or contribute to such differing results include, but
are not limited to, those discussed below, as well as those discussed elsewhere
in this Prospectus.
RESULTS OF OPERATIONS; HISTORY OF LOSSES
The Company incurred net losses of $2,031,747 for the nine months
ended March 31, 1996, $735,049 for the fiscal year ended June 30, 1995 and
$159,960 for the fiscal year ended June 30, 1994. No assurance can be given
that the Company will be able to reduce its net losses or achieve profitability
for the full 1996 fiscal year and/or the long term. The Company may require,
depending on then-current levels of cash flow generated from operations,
additional financing in the near and/or long term. No assurance can be given
that the Company would be able to procure such necessary financing, or if
available, would be able to procure financing on terms deemed favorable by the
Company. In the event the Company is unable to generate sufficient cash flow
from operations, the Company may be forced in the future to reduce its level of
operations.
LICENSING AGREEMENTS
The Company is the exclusive and/or non-exclusive licensee with
respect to eyewear of several well-recognized labels, including Revlon,
Crayola, Gitano, J.H. Collectibles, Chevrolet and Jacques Fath, and is the
exclusive distributor for Carl Zeiss Optical eyeglass frames and sunglasses in
the United States. The Company's license agreement with Revlon has been renewed
for an additional one-year term ending December 31, 1996. No assurance can be
given that any existing licensing agreements to which the Company is a party
will not expire or be cancelled in the future. In the event that certain of
such licensing agreements terminate, the Company's results of operations may be
negatively impacted in the future.
COMPETITION
The Company competes with a large number of entities, most of which
are much larger, better capitalized and have greater resources than the
Company. In addition, some of the Company's competitors are vertically
integrated, producing and distributing their own eyewear products.
POTENTIAL FUTURE RULE 144 SALES
Of the shares of the Company's Common Stock currently outstanding,
approximately 1,379,487 of such shares are "restricted securities" within the
meaning of the Act and the rules and regulations promulgated thereunder and,
generally, may only be sold in compliance with Rule 144 under the Act. Under
Rule 144, a person who has held "restricted securities" for a period of two
years may sell a limited number of such shares in the public market. Sales made
pursuant to Rule 144 by the Company's existing
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<PAGE> 8
shareholders may have a depressive effect on the price of the Common Stock in
the public market. As a result, such sales could adversely affect the Company's
ability to raise capital at that time through the sale of its equity
securities.
DIVIDENDS
The Company has not paid any cash dividends on the Common Stock and,
in view of its financial condition, contemplated financial requirements and
future plans, does not anticipate paying any cash dividends on Common Stock in
the foreseeable future.
DEPENDENCE ON CERTAIN CUSTOMERS
For the nine months ended March 31, 1996, the Company had one customer
whose net sales represented approximately 10% of the Company's total net sales
for the period. No other customers accounted for more than 10% of the Company's
sales in the period. The loss of such customer could have a material adverse
effect on the business of the Company.
CONTROL BY MANAGEMENT; ESCROW OF SELLING STOCKHOLDERS' SHARES
As of June 20, 1996, the officers and/or directors of the Company
beneficially owned an aggregate of 1,122,260 shares of Common Stock (or
approximately 36.3% of the shares of Common Stock outstanding). Of such shares,
533,333 Shares beneficially owned by officers and directors are included herein
for sale. See "Selling Stockholders." Accordingly, assuming the sale of all of
the Shares hereunder, present management will beneficially own 588,927 shares
of Common Stock or approximately 5.25% of the total shares of Common Stock
outstanding.
Robert and Mary Winn, directors of the Company and executive officers
of EMA, received the Shares offered hereby in connection with the Company's
acquisition of EMA in June 1995, 500,000 of which are currently being held in
escrow and are to be released upon each of the next four anniversaries of the
closing of the acquisition in amounts that are subject to adjustment in the
event of certain conditions, as set forth in the acquisition agreement. See
"Selling Stockholders."
POSSIBLE VOLATILITY OF COMMON STOCK PRICES
The market price of the Company's Common Stock may be significantly
affected by various factors, including, but not limited to, the Company's
results of operations, general economic conditions and conditions specific to
the industry in which the Company is engaged. In addition, sales of all or a
part of the 533,333 Shares of Common Stock being registered hereunder on behalf
of Selling Stockholders may have a depressive effect on the market price of
the Common Stock. See "Plan of Distribution."
DILUTION
In the event the Company seeks to obtain additional financing through
the sale and issuance of its securities, the then-current shareholders of the
Company may suffer immediate and substantial dilution in their percentage of
ownership of shares of the Company's Common Stock. In addition, the future
issuance of shares below the then-current market price of the Company's Common
Stock may have a depressive effect in the future market price of the Common
Stock, although such market price is subject to numerous factors, many of which
are beyond the Company's control, including general economic
-6-
<PAGE> 9
business conditions and the then-current economic condition of the industries
in which the Company engages. The issuance of additional shares of the
Company's Common Stock may also trigger certain anti-dilution provisions set
forth in the various instruments evidencing certain outstanding derivative
securities of the Company, and may result in the issuance of additional shares
of the Company's Common Stock upon conversion and/or exercise thereof, further
diluting the present shareholders' equity position in the Company.
CONTINUED LISTING ON NASDAQ SMALLCAP MARKET IS NOT ASSURED
The National Association of Securities Dealers, Inc. has imposed
certain financial criteria for continued listing on Nasdaq SmallCap Market,
including capital and surplus requirements, and minimum stock price standards.
The inability of the Company to meet these listing maintenance criteria in the
future may result in the discontinuance of the inclusion of the Company's
Common Stock on Nasdaq SmallCap Market. In such an event, an investor may find
it more difficult to dispose of, or to obtain accurate quotations as to the
market value of, the Company's Common Stock. The Commission has also
promulgated regulations that define a "penny stock" to be any equity security
that has a market price of less than $5.00 per share, subject to certain
exceptions. Such regulations impose various sales practice requirements on
broker-dealers who sell securities governed by the rule to persons other than
established customers and accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. Such broker-dealers must also, prior to the
purchase, provide the customer with risk disclosure documents that identify
certain risks associated with investing in "penny stocks" and that describe the
market therefor as well as a customer's legal remedies. The broker-dealer must
also obtain a signed and dated acknowledgement from its customers demonstrating
that the customers have actually received the required risk disclosure
documents before their first transaction in a penny stock. Consequently, the
rule may have an adverse effect on the ability of broker-dealers to sell the
Company's Common Stock and may affect the ability of holders to sell their
shares in the secondary market.
While many Nasdaq SmallCap Market-listed securities are covered by the
definition of penny stock, transactions in a Nasdaq SmallCap Market-listed
security are exempt for (i) issuers who have $2,000,000 in net tangible assets
($5,000,000 if the issuer has not been in continuous operation for three
years), (ii) transactions in which the customer is an institutional accredited
investor, and (iii) transactions that are not recommended by the broker-dealer.
In addition, transactions in a Nasdaq SmallCap Market security directly with a
Nasdaq SmallCap Market-maker for such securities are subject only to the
disclosure with respect to commissions to be paid to the broker-dealer and the
registered representative. No assurance can be given, however, that the current
regulations and statutes may not be amended or revised, which could negatively
impact the market for the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
A substantial amount of the outstanding Common Stock is available for
sale in the public marketplace. Also outstanding are various Company
Debentures, preferred stock and warrants that are convertible into or
exercisable for shares of Common Stock at various conversion rates and exercise
prices per share. To the extent that these derivative securities are exercised
or converted, the interests of the Company's shareholders will be diluted. As
of June 28, 1996, holders of the Company's Debentures totaling $481,250 in
aggregate principal amount have converted their Debentures into 291,668
shares of Common Stock and holders of $306,250 in aggregate principal amount
of Debentures have provided notice to the Company of their intention to convert
their Debentures into an aggregate of 185,606 shares of Common Stock. No
prediction can be made as to the effect, if any, that sales of any of such
shares of Common Stock or the availability of such shares for sale will have
on the market prices of the Common Stock prevailing from time to time.
-7-
<PAGE> 10
The possibility that substantial amounts of Common Stock may be sold in the
public market may adversely affect prevailing market prices for the Common
Stock, and could impair the Company's ability to raise capital through the sale
of its equity securities. See "Description of Securities."
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares of Common Stock being offered by the Selling Stockholders.
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
being registered under the Registration Statement (of which this Prospectus
forms a part) on behalf of each of the Selling Stockholders listed below
(including their transferees and/or assignees) and the approximate percentage
of the Common Stock outstanding (assuming that no outstanding options,
warrants, debentures or preferred stock have been exercised or converted).
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OFFERING OWNED AFTER OFFERING
--------------------- SHARES --------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- ---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Robert D. Winn(2) . . . . . . . 266,667 12.2% 266,667(1) - -
Mary S. Winn(3) . . . . . . . . 266,666 12.2% 266,666(1) - -
------- -------
TOTAL . . . . . . . . . . . . . 533,333 533,333
- ----- ======= =======
</TABLE>
(1) These shares were issued in connection with the Company's acquisition of
100% of the outstanding capital stock of EMA. 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.
(2) Robert D. Winn is a director of the Company and President of EMA.
(3) Mary S. Winn is a director of the Company and Vice President of EMA.
-8-
<PAGE> 11
PLAN OF DISTRIBUTION
The Common Stock included in this Prospectus may be sold from time to
time directly by the Selling Stockholders and their transferees and/or
assignees. The Selling Stockholders and any broker-dealers that act in
connection with the sale of the Common Stock may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Act, and any commissions received by
them and any profit on the resale of the shares of Common Stock as principal
may be deemed to be underwriting discounts and commissions under the Act.
In order to comply with certain state securities laws, if applicable,
the Shares will not be sold in a particular state unless such securities have
been registered or qualified for sale in such state or any exemption from
registration or qualification is available and complied with.
The Company will pay the registration expenses incident to the
offering and sale of the Shares by the Selling Stockholders to the public. Such
expenses include legal and accounting expenses attributable to the Company,
filing fees payable to the Securities and Exchange Commission, applicable state
"blue sky" filing fees and printing expenses. The Company, however, will not
pay for any expenses, commissions or discounts of underwriters, dealers or
agents or the fees and expenses of counsel for the Selling Stockholders.
-9-
<PAGE> 12
DESCRIPTION OF SECURITIES
GENERAL
Set forth below is a summary of certain terms and provisions of the
Company's capital stock, which is qualified in its entirety by reference to the
Company's Restated Articles of Incorporation and to the Statements of
Designation setting forth the resolutions establishing the rights and
preferences of the outstanding series of Preferred Stock. Copies of the
Articles of Incorporation and Statements of Designation have been filed as an
exhibit to, or incorporated by reference into, the Registration Statement of
which this Prospectus forms a part.
Under the Articles of Incorporation, the authorized but unissued and
unreserved shares of the Company's capital stock will be available for
issuance for general corporate purposes, including, but not limited to,
possible stock dividends, future mergers or acquisitions, or private or public
offerings. Except as may otherwise be required, shareholder approval will not
be required for the issuance of those shares.
The Company is authorized to issue 10,000,000 shares of Common Stock,
no par value, and 5,000,000 shares of Preferred Stock. As of June 5, 1996,
there were 2,365,574 shares of the Company's Common Stock issued and
outstanding and 860,000 shares of Preferred Stock issued and outstanding.
COMMON STOCK
Holders of shares of Common Stock are entitled to share ratably in
such dividends and distributions as may from time to time be declared by the
Board of Directors of the Company from funds legally available therefor, and
upon liquidation will be entitled to share ratably in any assets of the Company
legally available for distribution to holders of the Common Stock, subject to
any preference given to the holders of the Company's preferred stock. The
Company's Restated Articles of Incorporation, as amended, and Bylaws do not
confer any preemptive, subscription, redemption or conversion rights on the
holders of Common Stock. Holders of Common Stock are entitled to cast one vote
for each share held of record on each matter submitted to a vote of
shareholders. There is no cumulative voting, which means that holders of a
majority of the voting power may elect all of the Directors.
DIVIDENDS ON COMMON STOCK
To date, the Company has not paid any cash dividends on its Common
Stock. The payment of dividends, if any, in the future is within the discretion
of the Board of Directors and will depend upon the Company's earnings, capital
requirements and financial condition, and other factors deemed relevant by the
Board of Directors.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock in one or more series and to fix the number of shares
constituting any such series, the voting powers, designation, preferences and
relative participation, option or other special rights and qualifications,
limitations or restrictions thereof, including the dividend rights and dividend
rate, terms of redemption (including sinking fund provisions), redemption price
or prices, conversion rights and liquidation preferences of the shares
constituting any series, without any further vote or action by the shareholders.
SERIES A PREFERRED STOCK. The Company has designated 800,000 shares of
Preferred Stock as Series A Cumulative Convertible 3% Preferred Stock ("Series
A Preferred Stock"), of which 450,000 shares were issued and outstanding as of
June 20, 1996. Holders of the Series A Preferred Stock are entitled to receive
cumulative cash dividends or, in the Company's sole discretion, cash equivalent
stock dividends in the form of shares of Common Stock, at the annual rate of
$0.075 per share. Each share of Series A Preferred Stock is convertible at any
time into one share of Common Stock, subject to adjustment in certain events,
including: the issuance of stock as a dividend on the Common Stock; stock
splits, subdivisions or combinations of the Common Stock; or the distribution
to all holders of the Common Stock of evidences of indebtedness of the Company,
cash (excluding ordinary cash dividends), other assets or rights or warrants to
subscribe for or purchase any securities (other than those referred to above).
The Series A Preferred Stock may not be redeemed by the Company.
Holders of the Series A Preferred Stock do not vote on matters submitted to the
Company's shareholders generally, except as may otherwise be required by law.
SERIES B PREFERRED STOCK. The Company has designated 230,000 shares of
Preferred Stock as Series B Cumulative 2% Preferred Stock ("Series B Preferred
Stock"), all of which shares are issued and outstanding as of June 20, 1996.
Holders of the Series B Preferred Stock are entitled to receive cumulative cash
dividends at the annual rate of $0.10 per share. Each share of Series B
Preferred Stock is convertible at any time after November 30, 1996 into one
share of Common Stock, subject to adjustment in certain events, including the
issuance of shares as a dividend on the Common Stock, or stock splits,
subdivisions or combinations of the Common Stock. In the event that the market
price per share (as defined) of the Common Stock on the date of conversion is
less than $5.00 per share, then the Company shall issue such shares of Common
Stock upon conversion of the Series B Preferred Stock equal to (i) the number
of shares of Series B Preferred Stock then issued and outstanding multiplied by
$5.00, (ii) divided by the then-current market price per share of the Common
Stock. The "market price per share" of the Common Stock shall equal the average
asked prices of the Common Stock during the 30 consecutive business days
immediately prior to the date of conversion.
The Series B Preferred Stock may be not redeemed by the Company.
Holders of the Series B Preferred Stock do not vote on matters submitted to the
Company's shareholders generally, except as may otherwise be required by law.
WARRANTS
As of June 20, 1996, the Company had outstanding warrants to purchase
an aggregate of 200,000 shares of the Company's Common Stock ("Warrants"). One
Warrant is exercisable for 50,000 shares of Common Stock at an exercise price
of $2.00 per share and one Warrant, as modified by the Company's Board of
Directors in May 1996, is exercisable for 150,000 shares of Common Stock at
$1.65 per share. Both of such Warrants expire on July 14, 2001. The Warrants
may not be redeemed by the Company. Holders of the Warrants will be protected
against dilution upon the occurrence of certain events, including, but not
limited to, stock dividends, stock splits, reclassifications,
recapitalizations, stock combinations or similar transactions. Holders of the
Warrants have no voting rights and are not entitled to dividends. In the event
of liquidation, dissolution or winding up of the Company, holders of Warrants
will not be entitled to participate in any distribution of the Company's assets.
CONVERTIBLE DEBENTURES
The Debentures are unsecured debt securities, subordinated in right of
payment to any debt of the Company (defined in the Debentures as any
indebtedness, borrowed money or guarantee of such indebtedness) except debt that
by its terms is not senior ("Senior Debt") in right of payment to the
Debentures. The Debentures bear interest at the annual rate of 8%, and mature
in 1999. Interest is payable semi-annually in arrears on June 30 and December
31 of each year, provided, however, that the Company may, in its sole
discretion, defer payment of any installment of interest for a period of six
months until the next interest payment date. Pursuant to the terms of the
Debentures as originally issued, the Debentures were convertible into shares of
Common Stock at the rate of one share of Common Stock for each $3.50 of
principal amount, subject to adjustment in the event of certain events,
including: dividends or distributions on the Common Stock payable in shares of
Common Stock; subdivisions, combinations or certain reclassifications of Common
Stock; distributions to all holders of the Common Stock of certain rights to
purchase Common Stock at less than the current market price at the time; or
distributions to such holders of Common Stock of assets or debt securities of
the Company or certain rights to purchase securities of the Company (excluding
cash dividends or distributions from current retained earnings).
In May 1996, the Company's Board of Directors authorized a change in
the conversion rate of the Debentures to one share of Common Stock for each
$1.65 of principal amount of Debentures. As of June 28, 1996, holders of
Debentures totaling $481,250 in aggregate principal amount have converted
their Debentures into 291,668 shares of Common Stock and holders of $306,250
in aggregate principal amount of Debentures have provided notice to the
Company of their intent to convert their Debentures into an aggregate of 185,606
shares of Common Stock.
The Debentures may not be redeemed by the Company. Holders of the
Debentures do not have voting rights and are not entitled to dividends. In the
event of liquidation, dissolution or winding up of the Company, holders of
Debentures will be junior to the holders of Senior Debt of the Company in any
distribution of the Company's assets, but will be senior to the holders of the
shares of the Company's Common Stock or Preferred Stock.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
The Transfer Agent for the Common Stock is North American Transfer
Co., 147 West Merrick Road, Freeport, New York 11520.
LIMITATION ON DIRECTORS' LIABILITY
The Company's Restated Articles of Incorporation, as amended, include
a provision eliminating the monetary liability of directors for monetary
damages to the fullest extent permissible under Florida law. The provision does
not otherwise affect a Director's liability for breach of the fiduciary duties
of care and loyalty, failure to act in good faith, receipt of an improper
personal benefit, engagement in intentional misconduct or participation in the
payment of a dividend, in a stock redemption or in a purchase prohibited by
Florida law. Also, the provision does not affect a Director's liability for
violation of federal or state securities law.
-10-
<PAGE> 13
EXPERTS
The consolidated financial statements for the Company as of June 30,
1995 and for the year then ended included in the Registration Statement of
which this Prospectus forms a part have been so included in reliance on the
report of Grant Thornton LLP, independent certified public accountants, given
on the authority of said firm as experts in auditing and accounting. The
consolidated financial statements for the Company as of June 30, 1994 and for
the year then ended have been so included in the Registration Statement of
which this Prospectus forms a part in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, and upon the authority
of said firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
the Company by Broad and Cassel, a partnership including professional
associations.
-11-
<PAGE> 14
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports of Independent Certified Public Accountants . . . . . . . . . . . . . . . . F-1 to F-2
Consolidated Balance Sheets at June 30, 1995 and 1994 . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations
For the Years Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity
For the Years Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows
For the Years Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . F-6 to F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . F-8 to F-23
Condensed Consolidated Balance Sheets as of
March 31, 1996 and June 30, 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . F-24
Condensed Consolidated Statements of Operations
For the Nine Months Ended
March 31, 1996 and 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . F-25
Condensed Consolidated Statements of Operations
For the Three Months Ended
March 31, 1996 and 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . F-26
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended
March 31, 1996 and 1995 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . F-27
Notes to the Condensed Consolidated
Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . F-28
</TABLE>
-12-
<PAGE> 15
[GRANT THORNTON LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
Ocean Optique Distributors, Inc.
We have audited the accompanying consolidated balance sheet of Ocean Optique
Distributors, Inc. and Subsidiaries as of June 30, 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ocean Optique
Distributors, Inc. and Subsidiaries as of June 30, 1995, and the consolidated
results of their operations and their consolidated cash flows for the year then
ended, in conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
- ----------------------
Miami, Florida
September 22, 1995
F-1
<PAGE> 16
KPMG Peat Marwick LLP
One Biscayne Tower Telephone 305 358 2300 Telefax 305 577 0544
Suite 2900
2 South Biscayne Boulevard
Miami, FL 33131
Independent Auditors' Report
The Board of Directors and Stockholders
Ocean Optique Distributors, Inc.
and Subsidiary:
We have audited the accompanying consolidated balance sheet of Ocean Optique
Distributors, Inc. and subsidiary as of June 30, 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the 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 audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ocean Optique
Distributors, Inc. and subsidiary, as of June 30, 1994, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Miami, Florida
August 29, 1994
F-2
<PAGE> 17
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30,
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- -----------
Current assets
<S> <C> <C> <C>
Cash and cash equivalents
Certificate of deposit - restricted
Short-term investments
Accounts receivable (net of allowance for doubtful accounts $ 1,748,781 $ 1,784,746
of $214,693 in 1995 and $82,424 in 1994) 65,000 65,000
Inventory 1,018,308 944,647
Prepaid expenses and other current assets
Deferred income taxes 2,571,026 1,670,518
Income tax receivable 7,373,705 5,497,557
376,627 366,380
Total current assets 166,626 102,016
257,240 159,553
Property and equipment, net ----------- -----------
Security deposits 13,577,313 10,590,417
Debt issue costs, net
Intangible assets, net 328,702 307,464
14,728 13,893
176,013 205,168
Total assets 3,673,207 1,688,281
----------- -----------
$17,769,963 $12,805,223
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank line of credit $ 3,173,800 $ 2,541,592
Accounts payable 1,350,708 842,300
Due to related parties 920,000 881,000
Due to foreign currency dealer 1,254,008 -
Accrued expenses 124,048 186,613
Note payable to related party, current portion 391,975 -
Notes payable, current portion 71,275 160,165
Capital lease obligations, current portion 46,143 45,394
----------- -----------
Total current liabilities 7,331,957 4,657,064
8% Convertible subordinated debentures 1,575,000 1,587,500
Note payable to related party, long-term portion 736,699 -
Notes payable, long-term portion 17,317 -
Capital lease obligations, long-term portion 33,356 75,750
Deferred income taxes 124,168 127,656
----------- -----------
Total liabilities 9,818,497 6,447,970
Commitments and contingencies - -
Stockholders' equity
Preferred stock, no par value, 5,000,000 shares
authorized; shares issued:
Series A cumulative convertible 3% preferred stock
(liquidation value - $1,575,000 in 1995 and $1,587,500 in 1994) 1,474,398 1,486,898
Series B 2% convertible preferred stock
(liquidation value - $1,150,000) 1,150,000 -
Common stock, no par value; 10,000,000 shares
authorized 2,119,420 and 1,658,547 issued and
outstanding in 1995 and 1994, respectively 6,099,228 4,860,027
Retained earnings (accumulated deficit) (772,160) 10,328
----------- -----------
Total stockholders' equity 7,951,466 6,357,253
----------- -----------
Total liabilities and stockholders' equity $17,769,963 $12,805,223
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 18
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30,
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Net sales $9,752,264 $9,985,578
Cost of goods sold 5,680,055 5,405,193
---------- ----------
Gross profit 4,072,209 4,580,385
Selling, general and administrative expenses 4,694,571 4,490,773
---------- ----------
(622,362) 89,612
Interest expense, net (257,687) (321,880)
Other income - 7,275
---------- ----------
Loss before income taxes (880,049) (224,993)
Income tax (benefit) expense (145,000) (65,033)
---------- ----------
Net loss (735,049) (159,960)
Dividends paid on convertible preferred stock 47,439 -
---------- ----------
Net loss applicable to common stockholders $ (782,488) $ (159,960)
========== ==========
Net loss per share of common stock $ (0.48) $ (0.12)
========== ==========
Weighted average number of common shares outstanding 1,619,602 1,330,716
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 19
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
Series A Series B
Preferred Stock Preferred Stock Common Stock
---------------------- -------------------------- ---------------------
Number of Number of Number of
Shares Amount Shares Amount Shares Amount
--------- ------ -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1993 - $ - - $1,320,000 $3,789,399
Issuance of Series A
preferred stock proceeds
of private placement 635,000 1,486,898 - - - -
Exercise of Series A
warrants, net - - - - 338,547 1,070,628
Net loss - - - - -
----- ---------- ------- --------------- --------- ---------
Balance, June 30, 1994 635,000 1,486,898 - - 1,658,547 4,860,027
Exercise of Series A
warrants, net - - - - 2,540
Repurchase and cancellation
of common stock - - - - (75,000) (318,750)
Issuance of Series B
preferred stock for debt - - 230,000 1,150,000 - -
Redemption of Series A
preferred stock (5,000) (12,500) - - - -
Dividends paid on Series A
preferred stock - - - - - -
Issuance of common stock
for acquisition of EMA - - - - 533,333 1,600,000
Net loss - - - - - -
------- ---------- -------- --------------- -------- ----------
Balance, June 30, 1995 630,000 $1,474,398 230,000 $ 1,150,000 2,119,420 $6,099,228
======= ========== ======== =============== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Retained
Earnings Total
(Accumulated Stockholders'
Deficit) Equity
--------------- -------------
<S> <C> <C>
Balance, July 1, 1993 $ 170,288 $3,959,687
Issuance of Series A
preferred stock proceeds
of private placement - 1,486,898
Exercise of Series A
warrants, net 1,070,628
Net loss (159,960) (159,960)
--------- ----------
Balance, June 30, 1994 10,328 6,357,253
Exercise of Series A
warrants, net (42,049)
Repurchase and cancellation
of common stock - (318,750)
Issuance of Series B
preferred stock for debt - 1,150,000
Redemption of Series A
preferred stock - (12,500)
Dividends paid on Series A
preferred stock (47,439) (47,439)
Issuance of common stock
for acquisition of EMA - 1,600,000
Net loss (735,049) (735,049)
--------- ----------
Balance, June 30, 1995 $(772,160) $7,951,466
========= ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 20
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (735,049) $ (159,960)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Loss on disposal of fixed assets - 38,192
Depreciation and amortization 320,343 300,973
Deferred income taxes, net (68,097) 13,835
Changes in assets and liabilities, net of
effects from acquisition of business
Increase in short-term investments (73,661) (944,647)
(Increase) decrease in accounts receivable, net (670,845) 276,319
(Increase) decrease in inventory 261,350 (285,637)
Decrease in prepaid expenses, security deposits
and intangible assets 41,461 49,407
Decrease in accounts payable and accrued
expenses, net (235,802) (998,464)
Increase (decrease) in due to related parties 39,000 (133,000)
Increase in income taxes (97,687) (399,835)
---------- -----------
Net cash provided by (used in) operating activities (1,218,987) (2,242,817)
Cash flows from investing activities:
Goodwill adjustments - 136,781
Cash received from acquisition of business 103,703 -
Capital expenditures (86,848) (57,312)
Net disposal of fixed assets - 14,353
---------- -----------
Net cash provided by investing activities 16,855 93,822
Cash flows from financing activities:
Net borrowings (payments) on line of credit 387,042 (177,129)
Proceeds from borrowings from foreign currency dealer 1,584,213 -
Repayments of borrowings from foreign currency dealer (330,205) -
Payments under capital lease obligations (41,645) (19,706)
Proceeds from exercise of stock warrants, net (42,049) 1,070,628
Repurchase of common stock (318,750) -
Redemption of 8% convertible subordinated debentures (12,500) -
Repurchase of Series A 3% preferred stock (12,500) -
Dividends paid on Series A 3% preferred stock (47,439) -
Net proceeds from the issuance of 8% convertible
subordinated debentures - 1,374,183
Net proceeds from the issuance of Series A
3% preferred stock - 1,486,898
---------- ----------
Net cash (used in) provided by financing activities 1,166,167 3,734,874
---------- ----------
Net increase (decrease) in cash and cash equivalents (35,965) 1,585,879
Cash and cash equivalents, beginning of year 1,784,746 198,867
---------- ----------
Cash and cash equivalents, end of year $1,748,781 $1,784,746
========== ==========
</TABLE>
(continued)
F-6
<PAGE> 21
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED JUNE 30,
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for income taxes, net $ 13,066 $ (65,178)
========== =========
Cash paid during the period for interest, net $ 426,217 $ 370,341
========== =========
Noncash investing and financing activities:
Capital lease obligations incurred $ - $ 140,850
========== =========
Acquisition of business
Fair value of assets acquired $2,566,631 $ -
========== =========
Liabilities assumed $2,733,911 $ -
========== =========
Cost in excess of net assets of business acquired,
and covenant not to compete agreement, net $2,167,280 $ -
========== =========
Issuance of common stock to acquire business $1,600,000 $ -
========== =========
Conversion of accounts payable to Series B
2% convertible preferred stock $1,150,000 $ -
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE> 22
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 1 - 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 ("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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS FOR CONSOLIDATION
The consolidated financial statements include the accounts of Ocean
Optique Distributors, Inc., and it's wholly owned subsidiaries, Classic
Optical, Inc. ("Classic") and EMA. The results of operations of EMA are
included in the statement of operations for the period from June 21,
1995 (the date of acquisition) through June 30, 1995. All significant
intercompany transactions and balances have been eliminated.
(B) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on deposit at banks, money market
funds, short-term highly liquid investments with original maturities of
three months or less and foreign currency.
(C) FOREIGN CURRENCY TRANSACTION
The Company purchases inventory from certain foreign vendors in foreign
currency. Foreign currency totalling $1,328,101 at June 30, 1995 is
carried at current market exchange rates. Gains or losses from changes
in exchange rates are recognized in the consolidated statement of
operations in the period of occurrence.
(D) SHORT-TERM INVESTMENTS
In fiscal 1994 the Company adopted Statement of Financial Accounting
Standards No. 115, which requires that investments in debt and equity
securities for which the Company does not have the positive intent to
hold to maturity, be reported at fair market value. Accordingly,
short-term investments, which include corporate bonds and United States
government securities, are carried at their market value at June 30,
1995 and 1994, as such securities are classified by the Company as
trading securities with unrealized gains and losses recognized in the
statement of operations in the period of occurrence.
(continued)
F-8
<PAGE> 23
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
(E) INVENTORY
Inventory consists of finished goods and is stated at the lower of cost
or market. Cost is determined by the first-in, first-out (FIFO) method.
(F) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated
over the estimated useful lives (ranging from five to seven years) of
the assets using the straight line method. Property and equipment
acquired through acquisitions are stated at fair market value as of the
date acquired.
(G) INTANGIBLE ASSETS
Intangible assets are comprised of goodwill and the cost of covenant not
to compete agreements. Goodwill results from corporate acquisitions
accounted for using the purchase method of accounting and includes the
excess of cost over the fair market value of the net assets of the
acquired businesses. As of June 30, 1995, all goodwill is being
amortized over periods of twenty-five years on a straight line basis.
The Company had goodwill associated with the acquisition of Classic in
October 1992 of $1,467,038, net of accumulated amortization of $191,833
and $1,532,726, net of accumulated amortization of $126,145 as of June
30, 1995 and 1994, respectively. At June 30, 1995, the Company had
goodwill associated with the acquisition of EMA in June 1995 of
$1,817,280, with no accumulated amortization expense. The cost of the
Company's covenant not to compete agreements of $350,000 each, related
to the acquisitions of Classic and EMA, are being amortized on a
straight-line basis over their terms of three years and five years,
respectively. At June 30, 1995 and 1994, accumulated amortization
related to the Classic covenant not to compete agreement was $311,111
and $194,444, respectively. There was no accumulated amortization
related to the EMA covenant not to compete agreement at June 30, 1995.
On an ongoing basis, management reviews the valuation and amortization
of intangible assets. As part of this review, the Company considers
both the current and future undiscounted cash flows generated by the
related subsidiaries acquired to determine whether impairment has
occurred. The Company measures impairment of intangible assets as the
deficiency of the undiscounted cash flows compared to the carrying value
of the related intangible asset. Any write-downs of intangible assets
due to impairment are charged to operations at the time that impairment
is identified by management.
(continued)
F-9
<PAGE> 24
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
(G) INTANGIBLE ASSETS - CONTINUED
The Financial Accounting Standards Board has recently issued Statement
of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." SFAS 121 establishes guidance for when to recognize and
how to measure impairment losses of long-lived assets and certain
identifiable intangible assets, such as goodwill. The Statement is
effective for fiscal years beginning after December 15, 1995. The
Company does not expect the implementation of SFAS 121 to have a
material effect on the Company's financial position or results of
operations.
(H) INCOME TAXES
Deferred income taxes have been provided for elements of income and
expense which are recognized for financial reporting purposes in periods
different than such items are recognized for income tax purposes. The
Company accounts for deferred taxes utilizing the liability method,
which applies the enacted statutory rates in effect at the balance sheet
date to differences between the book and tax basis of assets and
liabilities. The resulting deferred tax liabilities and assets are
adjusted to reflect changes in tax laws.
(I) REVENUE RECOGNITION
Revenue is recognized when earned as goods are shipped to customers.
(J) ADVERTISING
The costs of advertising, promotion and marketing programs are charged
to operations in the year incurred.
(K) NET (LOSS) INCOME PER SHARE OF COMMON STOCK
Net (loss) income per share of common stock is computed based upon the
weighted average number of common shares outstanding during the year.
Common stock issued and placed in escrow (the "Escrow Shares") as
described in Note 11, are treated as common stock equivalents for
purposes of computing net (loss) income per share of common stock.
Common stock equivalents are excluded from the net (loss) per share of
common stock computation due to their anti-dilutive effect in fiscal
1995 and 1994.
(continued)
F-10
<PAGE> 25
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
(L) RECLASSIFICATIONS
Certain 1994 balances have been reclassified to conform with the 1995
financial statement presentation.
NOTE 3 - ACQUISITIONS
On June 21, 1995, the Company acquired 100% of the capital stock of EMA.
The purchase price consisted of the following:
<TABLE>
<S> <C>
Cash $ 400,000
Market value of common stock issued 1,600,000
Expenses incurred 11,902
----------
Total $2,011,902
==========
The acquisition was accounted for using the purchase method. The cost of the
acquisition has been allocated on the basis of the estimated fair value of
the assets acquired and liabilities assumed, at the date of acquisition as
follows:
Current assets $2,494,540
Other assets 83,993
Current liabilities (2,733,911)
Covenant not to compete agreement 350,000
Cost in excess of net assets acquired 1,817,280
----------
Total $2,011,902
==========
</TABLE>
The covenant not to compete agreement is being amortized on a straight line
basis over it's five year term. The cost in excess of net assets acquired
is being amortized over twenty-five years on a straight line basis.
EMA's results of operations have been included in the Company's consolidated
results of operations since the date of acquisition.
The following summarized, unaudited pro forma results of operations for the
fiscal years ended June 30, 1995 and 1994, assume the acquisition occurred
as of the beginning of the respective periods:
(continued)
F-11
<PAGE> 26
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 3 - ACQUISITIONS - CONTINUED
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Net Sales $ 12,960,815 $13,689,679
Net (loss) income $ (1,338,430) $ 79,190
Net (loss) income per share of common stock $ (0.81) $ 0.03
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at June 30, 1995 and 1994:
1995 1994
------------ -----------
Furniture and fixtures $ 245,785 $ 180,967
Machinery and equipment 339,591 303,669
Leasehold improvements 22,244 22,244
Automobiles 80,936 8,586
------------ -----------
688,556 515,466
Less: Accumulated depreciation 359,854 208,002
------------ -----------
Property and equipment, net $ 328,702 $ 307,464
============ ===========
</TABLE>
Included in machinery and equipment are various assets held under capital
leases with a net book value at June 30, 1995 and 1994 of approximately
$106,000 and $127,000, respectively. Assets under capital lease obligation
are amortized using a straight line method over the estimated useful lives,
or term of the lease, which ever is shorter.
NOTE 5 - INCOME TAXES
Components of income tax (benefit) expense are as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------- ------------------------------
Current Deferred Total Current Deferred Total
--------- --------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Federal $ (84,620) $ (65,381) $ (150,001) $ (93,868) $ 11,740 $ (82,128)
State 7,277 (2,716) 5,001 15,000 2,095 17,095
--------- --------- ---------- --------- -------- ---------
Total (benefit)
expense $ (77,343) $ (68,097) $ (145,000) $ (78,868) $ 13,835 $ (65,033)
========= ========= ========== ========= ======== =========
</TABLE>
(continued)
F-12
<PAGE> 27
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 5 - INCOME TAXES - CONTINUED
The provision for Federal income taxes for the years ended June 30, 1995 and
1994 differs from that computed at the statutory federal corporate tax rate
as follows:
<TABLE>
<CAPTION>
1995 1994
------------------- --------------------
Amount Percent Amount Percent
-------- ------- --------- -------
<S> <C> <C> <C> <C>
Provision at statutory rate $(301,946) (34.3)% $ (76,497) (34.0)%
State income taxes,
net of Federal benefit 7,277 0.8 11,282 5.0
Over accrual of prior year
tax refund 70,020 7.9 - -
Expiration of replacement
period for involuntary
conversion of assets 37,630 4.3 - -
Goodwill amortization 28,480 3.3 5,194 2.3
Other 13,539 1.5 (5,012) (2.2)
--------- ----- --------- -----
$(145,000) (16.5)% $ (65,033) (28.9)%
========= ===== ========= =====
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due
to allowance for doubtful accounts
and sales returns $ 73,850 $ 30,909
Inventories, principally due to additional
costs inventoried for tax purposes pursuant
to the Tax Reform Act of 1986 and reserve
for slow-moving inventories 324,738 65,667
Net operating loss carry forwards 338,670 306,000
Other 45,278 5,440
--------- ---------
Total gross deferred tax assets 782,536 408,016
Less: Valuation allowance (692,870) (306,000)
--------- ---------
Net deferred tax assets 89,666 102,016
</TABLE>
(continued)
F-13
<PAGE> 28
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 5 - INCOME TAXES - CONTINUED
<TABLE>
<CAPTION>
1995 1994
--------- ----------
<S> <C> <C>
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation and the deferral
of gain recognized from insurance proceeds
on damage to property and equipment $ (47,209) $ (127,656)
--------- ----------
Total gross deferred tax liabilities (47,209) (127,656)
--------- ----------
Net deferred tax assets (liabilities) $ 42,457 $ (25,640)
========= ==========
</TABLE>
In connection with the acquisition of Classic, the Company has net operating
loss carryforwards for federal income tax purposes of approximately $900,000
at June 30, 1995 which expire in fiscal year 2008. Since such carryforwards
were acquired, any future benefit will be recorded as an adjustment to
goodwill.
In fiscal 1994, the Company realized tax benefits of $182,372 related to the
purchase of Classic. This amount was recorded as an adjustment to goodwill
in the accompanying financial statements.
NOTE 6 - LINES OF CREDIT AND NOTES PAYABLE
Prior to June 29, 1994, the Company had a bank line of credit which limited
borrowings to the sum of 70 percent of accounts receivable, and 40% of
inventory, not to exceed $1,750,000. This line of credit was also
collateralized by a pledge of all the Company's assets. Interest on the line
of credit was 2 1/4% above the bank's prime lending rate.
On June 29, 1994, the Company refinanced its credit facility. The new line
of credit which allows the Company to borrow up to $3,500,000, is
collateralized by a pledge of all of the Company's assets. Borrowings under
this agreement are limited to the sum of 75% of accounts receivable, and 50%
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, which was 9% at June 30,
1995. The undrawn balance of the credit facility at June 30, 1995 was
$326,200. This credit facility, which matured on June 27, 1995, was renewed
subsequent to June 30, 1995 with a new maturity of September 1996. In
connection with the renewal, the Company agreed to pay-off the $150,000 line
of credit, as described below, collateralized by EMA's assets by December
31, 1995.
(continued)
F-14
<PAGE> 29
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 6 - LINES OF CREDIT AND NOTES PAYABLE - CONTINUED
The Company has a $150,000 line of credit collateralized by all of the
assets of EMA. As of June 30, 1995, the Company was at the maximum
borrowings under the line of credit, which has a renewal date of November
30, 1995. Interest on the line of credit is at 1% above the bank's prime
interest rate which was 9% at June 30,1995.
Notes payable as of June 30, 1995 and 1994 are comprised of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C> <C>
Note payable to bank bearing interest at 3%
over the certificate of deposit rate, due on demand,
collateralized by certificate of deposit of $65,000. $ 65,000 $ 65,000
Note payable to vendor bearing interest at 8%,
payable in quarterly installments of $31,722,
matured in January 1995. - 95,165
Note payable to bank bearing interest at 8.5%,
payable in monthly installments of $225
including interest, maturing in July 1997. 5,092 -
Note payable to bank bearing interest at 11.1%,
payable in monthly installments of $483
including interest, maturing in August 1999. 18,500 -
Note payable due to vendor (related party),
non interest bearing, payable monthly in equal
installments of $39,804, maturing in February
1998, net of unamortized discount of $145,060. 1,128,674 -
---------- ---------
1,217,266 160,165
Less: Current portion (463,250) (160,165)
---------- ---------
Long-term portion $ 754,016 $ -
========== =========
The aggregate maturities of notes payable at June 30, 1995 are summarized as follows:
1996 $ 463,250
1997 433,492
1998 314,782
1999 5,263
2000 479
----------
$1,217,266
==========
</TABLE>
F-15
<PAGE> 30
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 7 - CAPITAL LEASE OBLIGATIONS
The Company leases office equipment under various capital leases. The
following schedule represents future minimum lease payments under capital
leases together with the present value of the net minimum lease payments as of
June 30, 1995:
Year ending June 30,
--------------------
1996 $58,104
1997 29,734
-------
Total minimum lease payments 87,838
Less: Amounts representing interest (8,339)
-------
Present value of minimum lease payments 79,499
Less: Current portion (46,143)
-------
Long-term portion $33,356
=======
NOTE 8 - MAJOR CUSTOMER
Sales to one customer amounted to 11% and 10% of the Company's net sales for
the years ended June 30, 1995 and 1994, respectively. Sales to another
customer amounted to 13% of the Company's net sales for the year ended June
30, 1995. Sales to that same customer represented less than 10% of the
Company's net sales for the year ended June 30, 1994.
NOTE 9 - RELATED PARTY TRANSACTIONS
During the years ended June 30, 1995 and 1994, the Company purchased
approximately $3,687,000 and $3,435,000, respectively, of eyeglass frames
from a party affiliated through the ownership of common stock. Due to
related parties at June 30, 1995 and 1994 includes approximately $520,000
and $881,000, respectively, of amounts due to this affiliated party for
these purchases.
Management brought to the attention of the selling shareholders of Classic
the devaluation of certain inventory sold during the fiscal year ended June
30, 1994. As a result, the selling shareholders paid $200,000 to the
Company in April 1994. This amount is included in cost of goods sold for
the year ended June 30, 1994 in the accompanying financial statements as the
related inventory was sold in the 1994 fiscal year.
Due to related parties at June 30, 1995 includes $400,000 due to the selling
principals of EMA in connection with the Company's acquisition of EMA. This
balance was paid by the Company in July 1995.
F-16
<PAGE> 31
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 10 - PROFIT-SHARING PLAN
The Company adopted a qualified profit-sharing plan effective July 1, 1989,
covering all employees who have attained twenty-one years of age and have
completed one year of employment. The plan permits the Company to
contribute, at its election, up to 15% of the annual compensation of all
participants. During the years ended June 30, 1995 and 1994, the Company
elected not to contribute to the profit-sharing plan. Participant vesting
in Company contributions is as follows:
<TABLE>
<CAPTION>
Years of Service Vested Percent
---------------- --------------
<S> <C>
1 0%
2 20
3 40
4 60
5 80
6 and thereafter 100
</TABLE>
NOTE 11 - CAPITAL TRANSACTIONS
On September 24, 1991, the Company sold 300,000 units of the Company's
securities at a price of $10.25 per unit. Each unit consists of two shares
of common stock, no par value and one Series A Warrant. Each Series A
Warrant entitles the holder to purchase one common share for $6.50 during
the three year exercise period ended September 24, 1995. The warrants are
transferable immediately upon issuance and are redeemable by the Company in
whole, but not in part, at a redemption price of $.01 per warrant upon 30
days' written notice, commencing 18 months from the date of the registration
statement at such time as the market price of the common stock has exceeded
the warrant exercise price by 10% for a period of 20 consecutive business
days. The warrants may be exercised anytime prior to the expiration of a 30
day redemption notice period.
In fiscal 1994, the Company reduced the exercise price of the Series A
warrants (the "Warrants"), issued in connection with the Company's initial
public offering in September 1991, from $5.42 per share to $3.125 per share.
The Company set a call date of May 31, 1994. Warrants not exercised by
such date were redeemed at $.01 per warrant, and ceased to exist. The
Company issued 338,547 shares of common stock, and raised $1,070,628 from
the exercise of these warrants.
(continued)
F-17
<PAGE> 32
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 11 - CAPITAL TRANSACTIONS - CONTINUED
On March 14, 1994 the Company completed a private placement consisting of
Series A Cumulative Convertible 3% Preferred Stock (the "Preferred Stock")
and $12,500 Principal Amount 8% Five Year Convertible Subordinated
Debentures (the "Debentures"). As a result of the private placement, the
Company raised, net of fees, $2,821,000. Each share of Preferred Stock is
convertible into one share of the Company's common stock. The Debentures
are convertible into the Company's common stock at $3.50 per share or 285.71
shares per $1,000 principal amount of the Debentures. In the event of any
liquidation, the holders of shares of the preferred stock, are entitled to
receive out of assets of the Company available for distribution to
stockholders before any distribution of assets is made to holders of common
stock, liquidating distribution in the amount of $2.50 per share plus
accumulated and unpaid dividends.
Effective as of June 21, 1995, the Company consummated the acquisition
through its wholly-owned subsidiary, Ocean Private Label, Inc. ("Ocean
Private Label"), of all of the issued and outstanding capital stock of
European Manufacturers Agency, Inc. ("EMA"). In accordance with the terms
of that certain Agreement and Plan of Reorganization (the "Agreement"),
dated as of June 21, 1995, by and among the Company, Ocean Private Label and
the shareholders of EMA, the acquisition of the capital stock of EMA was
structured as a tax free reorganization within the meaning of the Internal
Revenue Code of 1986, as amended. Pursuant to said Agreement, EMA was
merged into Ocean Private Label and Ocean acquired all of the issued and
outstanding capital stock of EMA in exchange for an aggregate 533,333 shares
of Common Stock of Ocean (the "Ocean Shares") and $400,000 in cash,
representing a purchase price of approximately $2,000,000.
With respect to the Ocean shares, 500,000 of said Ocean Shares were placed
in escrow (the "Escrow Shares"). The Escrow Shares were issued in the name
of the Selling Shareholders of EMA, who possess all voting, dividend and
liquidation rights, preferences and privileges for all of the 500,000 shares
at June 30, 1995. The Escrow Shares are to be released on each of the four
subsequent anniversary dates of the closing in accordance with a specified
formula, providing for a minimum of 250,000 shares and a maximum of 600,000
shares, depending on the average market price of the stock, as defined.
Concurrent with the sale of EMA, the Selling Shareholders separately entered
into employment agreements with EMA providing for a minimum four year term
and bonuses based upon the operational results of EMA. With regard to the
Escrow Shares, in the event that either Selling Shareholder's employment is
terminated by the Company with cause, or is terminated by said Selling
Shareholder voluntarily, the Escrow Shares will be
(continued)
F-18
<PAGE> 33
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 11 - CAPITAL TRANSACTIONS - CONTINUED
released in accordance with the anniversary dates and terms described above.
In the event either Selling Shareholder's employment is terminated by the
Company without cause, any and all Escrow Shares maintained in escrow shall
be released and delivered to said Selling Shareholder. The Company has
agreed to file a registration statement covering the Escrow Shares, and has
agreed to repurchase certain Escrow Shares from the holders thereof at a
price of $3.00 per share ( the approximate market price per share of the
Ocean Shares at the date of the EMA acquisition) in the event the
registration statement is not declared effective by the Securities and
Exchange Commission within one year after the closing of the acquisition.
D'Arrigo Moda Italia ("D'Arrigo"), a major supplier of EMA, agreed to
exchange $1,150,000 of EMA's accounts payable balance for $1,150,000 in
Series B Convertible 2% Preferred Stock. Each share of Preferred Stock is
convertible into one share of the Company's common stock. In the event of
any liquidation, the holders of shares of the Preferred Stock are entitled
to receive out of assets of the Company available for distribution to
stockholders before any distribution of assets is made to holders of common
stock, liquidating distribution in the amount of $5.00 per share. In
addition, the remaining accounts payable balance at June 30, 1995 of
$1,523,734 was converted into a non-interest bearing note payable due to
D'Arrigo of $1,273,734, payable in 32 equal monthly payments, and $250,000
in cash.
NOTE 12 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses include approximately $719,000
and $1,002,000 of commissions expense, $1,282,000 and $1,194,000 of salaries
expense, and $488,000 and $405,000 of advertising expense during the years
ended June 30, 1995 and 1994, respectively.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Company currently leases their main office and warehouse space, on a
five year term, at a monthly rent of $7,383. In addition, the Company
leases a small warehouse storage facility, at a monthly rent of $865. This
six month lease is renewable, and expires in November 1995. EMA currently
leases it's main offices and warehouse space under a renewable lease which
expires in December 1995.
The following is a schedule of future minimum lease payments as of June 30,
1995, for operating leases having initial noncancelable lease terms in
excess of one year:
(continued)
F-19
<PAGE> 34
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 13 - COMMITMENTS AND CONTINGENCIES - CONTINUED
Year ending June 30,
--------------------
1996 $ 96,460
1997 92,251
1998 53,813
--------
Total minimum payments $242,524
========
Rent expense charged to operations was approximately $101,000 and $107,000
for the years ended June 30, 1995 and 1994, respectively.
The Company has acquired the exclusive rights to use certain trade names and
trademarks, for use in the manufacture and sale of certain optical products.
The agreements require the Company to maintain specified levels of product
liability insurance, and to pay royalties of 3 to 7 percent on the sales of
the specified license products with guaranteed minimum royalties aggregating
as follows:
Year ending June 30,
--------------------
1996 $348,500
1997 $310,850
1998 $135,000
On September 29, 1993, the Company and Revlon, Inc. amended the license
agreement between the parties made as of July 6, 1992, to extend the
territory of the Company's exclusive license to encompass the world. The
Company intends to sublicense these rights in certain countries to
distributors of eyeglass frames. In consideration for the expansion of the
license, the Company agreed to pay Revlon a non-refundable fee of Five
Hundred Thousand Dollars (U.S. $500,000), payable in full by the end of the
1995 calendar year as follows: $100,000 was paid during fiscal 1994, and
the balance of Four Hundred Thousand Dollars ($400,000) to be paid in
incremental amounts equal to the signing fees received by the Company from
foreign sublicenses. As of June 30, 1995, the Company had not received any
signing fees from foreign sublicenses. The Company's license agreement with
Revlon, Inc. has an expiration date of December 31, 1995. Although the
Company believes that the license agreement has been renewed for an
additional one year term, no assurance can be given that Revlon, Inc. will
share the Company's position. However, management believes that there would
be no material adverse effect on the Company's long-term future business
should the contract be deemed not to have been renewed.
(continued)
F-20
<PAGE> 35
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 13 - COMMITMENTS AND CONTINGENCIES - CONTINUED
In April 1994, the Company entered into three-year agreements with its
executive officers at base annual salaries ranging from $46,000 each for its
two Vice Presidents to $175,000 for its Chief Executive Officer. The
executive officers may participate in such profit-sharing, pension or other
incentive compensation plans as may be provided by the Company to its
executives.
In June 1995, EMA entered into a four year employment agreement with its
President, Robert D. Winn, and it's Vice President, Mary S. Winn. Pursuant
to their employment agreements, the President and Vice President of EMA are
to receive annual compensation of $104,000 each. In addition to the annual
compensation set forth in the employment agreements, the President and Vice
President shall be entitled to an annual bonus during the term of employment
equal to 7.5% of the earnings before income tax in excess of $300,000
generated by EMA for each given fiscal year. If either the President or
Vice President was employed by EMA for less than a full year, then the
amount of any said bonus shall be prorated. In the event either the
President or Vice President dies or is deemed permanently disabled during
his/her term of employment with EMA, then the annual compensation of the
surviving executive shall be increased to $150,000 per annum.
NOTE 14 - STOCK OPTION PLAN
In July 1991, the board of directors and stockholders of the Company adopted
a Stock Option Plan (the "1991 Plan"), pursuant to which 54,000 (adjusted
for stock dividend) shares of common stock of the Company were reserved for
issuance. In November 1992, the Board adopted a new plan (the "1992 Plan";
the 1991 Plan and the 1992 Plan are jointly known as the "Plan"), which was
approved by the stockholders in February 1993, and which provided the
issuance of 240,000 (adjusted for stock dividend) shares. The number of
shares issuable under the 1992 Plan was increased to 750,000 at the
Company's Annual Shareholders' Meeting held in December 1993. Both Plans
are intended to promote the growth and profitability of the Company, to
provide employees of the Company who are largely responsible for the
management, growth and protection of its business with an incentive to
continue to make substantial contributions to the success of the Company,
and to provide those key employees with an equity interest in the Company.
The Plans are administered by a Stock Option Committee appointed by the
Company's board of directors (the "Committee"). The Committee has the
authority to designate the key employees eligible to participate in the
Plan, to prescribe the terms of award, to interpret the Plan, and to make
all other determinations for administering the Plans.
(continued)
F-21
<PAGE> 36
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 14 - STOCK OPTION PLAN - CONTINUED
The Plan provides for granting of stock options that may be either
"Incentive Stock Options" within the meaning of Section 422A of the Internal
Revenue Code of 1986 (the "Code"), or "Non-Statutory Stock Options", which
do not satisfy the provisions of Section 422A of the Code. Incentive Stock
Options are required to be issued at an option exercise price per share
equal to the fair market value of a share of common stock on the date of
grant, except that the exercise price of options granted to any employee who
owns (or under pertinent Code provisions, is deemed to own) more than 10% of
the outstanding common stock must equal at least 110% of fair market value
at the date of grant. Non-Statutory Stock Options may be issued at such
option exercise price as the Committee determines. Exercise of a stock
option will be subject to terms and conditions established by the Committee
and set forth in the instrument evidencing the stock option. Stock options
may be exercised with either cash or shares of the Company's common stock or
any other form of payment authorized by the Committee. The date of
expiration of a stock option will be fixed by the Committee but may not be
longer than ten years from the date of the Plan.
In September and November of 1993, the Company issued 200,000 and 100,000
stock options, respectively. Due to the lower market price of the Company's
stock, the Company canceled and repriced all of the outstanding stock
options, and issued 414,000 options (an approximate 20% reduction in the
number of shares originally issued) in May 1994, at the lower market price
of $3.125 per share (which approximated the market value of the Company's
stock at the grant date), as a further incentive for the key employees of
the Company.
The following table is a summary of Stock Options:
<TABLE>
<CAPTION>
Number Exercise Price
of Options Per Option
---------- ----------------
<S> <C> <C>
Outstanding at July 1, 1993 257,800 $4.0630 - 5.6145
Non-Statutory Stock Options
Granted during fiscal year ended
June 30, 1994 714,000 $3.1250 - 6.0500
Expired or canceled during
fiscal year ended June 30, 1994 (557,800) $4.0630 - 6.0500
----------
Outstanding at June 30, 1994 414,000 $3.1250
</TABLE>
(continued)
F-22
<PAGE> 37
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JUNE 30, 1995 AND 1994
NOTE 14 - STOCK OPTION PLAN - CONTINUED
<TABLE>
<CAPTION>
Number Exercise Price
of Options Per Option
---------- ----------------
<S> <C> <C>
Non-Statutory Stock Options
Granted during fiscal year ended
June 30, 1995 330,000 $2.0000 - 3.6250
Expired or canceled during
fiscal year ended June 30, 1995 (2,361) $3.1250 - 3.6250
----------
Outstanding at June 30, 1995 741,639 $2.0000 - 3.6250
==========
Exercisable at June 30, 1995 741,639 $2.0000 - 3.6250
==========
</TABLE>
NOTE 15 - FOURTH QUARTER ADJUSTMENTS
The Company recorded fourth quarter adjustments in fiscal year 1995 of
approximately $125,000 to increase the provision for slow-moving inventory,
approximately $55,000 to increase the provision for doubtful accounts
receivable, approximately $219,000 to expense certain prepaid assets, and an
income tax benefit of approximately $145,000 to adjust income tax accounts
based upon the Company's results of operations.
F-23
<PAGE> 38
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, 1996 AND JUNE 30, 1995
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
----------- -----------
<S> <C> <C>
Current assets
Cash & cash equivalents.......................$ 1,448,755 $ 1,748,781
Certificate of deposit - restricted........... 65,000 65,000
Short-term investments........................ 148,469 1,018,308
Accounts receivable (net of allowance for
doubtful accounts of $136,103 and
$214,693 respectively)...................... 2,962,220 2,571,026
Inventory..................................... 7,453,272 7,373,705
Prepaid expenses & other current assets....... 252,355 376,627
Deferred income taxes......................... 166,626 166,626
Income tax receivable......................... 155,020 257,240
----------- -----------
Total current assets..................... 12,651,717 13,577,313
Property and equipment, net..................... 269,824 328,702
Security deposits............................... 14,728 14,728
Debt issue cost, net............................ 152,985 176,013
Intangible assets, net.......................... 3,777,782 3,673,207
----------- -----------
Total assets.............................$16,867,036 $17,769,963
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank line of credit...........................$ 3,362,000 $ 3,173,800
Accounts payable.............................. 1,675,009 1,350,708
Due to related parties........................ 1,431,420 920,000
Due to foreign currency dealer................ 1,258,583 1,254,008
Accrued expenses.............................. 151,925 124,048
Notes payable to related party, current
portion..................................... 419,241 391,975
Notes payable, current portion................ 84,393 71,275
Capital lease obligations, current portion.... 41,947 46,143
----------- -----------
Total current liabilities............... 8,424,518 7,331,957
8% Convertible subordinated debentures.......... 1,575,000 1,575,000
Notes payable to related party, long-term
portion..................................... 457,368 736,699
Notes payable, long-term portion................ - 17,317
Capital lease obligations, long-term portion.... 1,895 33,356
Deferred income taxes........................... 124,168 124,168
----------- -----------
Total liabilities....................... 10,582,949 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; 2,365,574 and 2,119,420 issued
and outstanding at March 31, 1996 and June 30,
1995, respectively............................ 6,499,228 6,099,228
Retained earnings (accumulated deficit)......... (2,839,539) (772,160)
----------- ----------
Total stockholders' equity.............. 6,284,087 7,951,466
Total liabilities and stockholders'
equity................................$16,867,036 $17,769,963
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE> 39
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Net sales................................ $10,644,836 $6,640,156
Cost of goods sold....................... 7,989,156 3,478,172
----------- ----------
Gross profit......................... 2,655,680 3,161,984
Selling, general and administrative
expenses......................... 4,282,532 3,079,122
----------- ----------
(1,626,852) 82,862
Interest expense, net.................... (404,895) (204,061)
Other income............................. - 12,926
----------- ----------
Income (loss) before income taxes.... (2,031,747) (108,273)
Income tax benefit (expense)............. - 51,000
----------- ----------
Net income (loss).................... $(2,031,747) $ (57,273)
Dividends paid on convertible preferred
stock............................ 35,632 -
----------- ----------
Net income (loss) applicable to
common stockholders.............. $(2,067,379) $ (57,273)
=========== ==========
Net income (loss) per share of common
stock............................ $ (0.95) $ (0.03)
=========== ==========
Weighted average number of common shares
outstanding...................... 2,126,818 1,661,050
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE> 40
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Net sales .................................. $3,740,919 2,300,046
Cost of goods sold.......................... 3,402,460 1,185,528
---------- ---------
Gross profit........................ 338,459 1,114,518
Selling, general and administrative
expenses............................ 1,391,672 981,356
---------- ---------
(1,053,213) 133,162
Interest expense, net....................... (150,545) (74,963)
Other income................................ - 3,584
---------- ---------
Income (loss) before income taxes... (1,203,758) 61,783
Income tax benefit (expense)................ - 17,000
---------- ---------
Net income (loss)................... $(1,203,758) 78,783
Dividends paid on convertible preferred
stock............................... 11,813 -
---------- ---------
Net income (loss) applicable to
common stockholders......... $(1,215,571) 78,783
========== =========
Net income (loss) per share of common
stock............................... $ (0.56) 0.05
========== =========
Weighted average number of common shares
outstanding......................... 2,149,175 1,661,087
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE> 41
OCEAN OPTIQUE DISTRIBUTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss .......................................... $(2,067,379) $ (57,273)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ..................... 324,674 244,685
Changes in assets and liabilities:
Decrease (increase) in short-term investments..... 869,839 (591,974)
Decrease (increase) in accounts receivable, net... (391,194) 36,853
Increase in inventory ............................ (79,567) (783,379)
Decrease (increase) in prepaid expenses, security
deposits and intangible assets .................. 124,272 (167,471)
Increase (decrease) in accounts payable and
accrued expenses................................. 352,178 (176,095)
Increase in due to related parties ............... 911,420 -
Increase (decrease) in income taxes .............. 102,220 (64,067)
------------ ------------
Net cash provided by (used in) operating
activities .................................. 146,463 (1,558,721)
------------ ------------
Cash flows from investing activities:
Goodwill adjustments ................................ (321,636) -
Capital expenditures ................................ (25,707) (51,068)
------------ ------------
Net cash used in investing activities ........ (347,343) (51,068)
------------ ------------
Cash flows from financing activities:
Net borrowings (payments) on bank line of credit
and notes payable .................................. (68,064) 319,474
Proceeds from borrowings from foreign currency
dealer ............................................. 4,575 -
Payments under capital lease obligation ............. (35,657) (29,447)
Buyback of common stock ............................. - (318,750)
Payments from the exercise of stock warrants ........ - (42,049)
----------- -----------
Net cash used in financing activities ........ (99,146) (70,772)
----------- -----------
Net decrease in cash and cash equivalents .... (300,026) (1,680,561)
Cash and cash equivalents, beginning of period ....... 1,748,781 1,849,746
----------- -----------
Cash and cash equivalents, end of period ............. $1,448,755 $ 169,185
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for
income taxes, net .................................. $ (98,000) $ 13,067
Issuance of common stock in settlement of
due to related parties ............................. 400,000 -
=========== ===========
Cash paid during the period for interest, net ....... $ 441,781 $ 181,411
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-27
<PAGE> 42
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 nine months ended March 31,
1996 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.
F-28
<PAGE> 43
<TABLE>
<S> <C>
=========================================================== ===========================================================
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN
AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO 533,333 SHARES
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR OCEAN OPTIQUE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO DISTRIBUTORS, INC.
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SALE
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE Common Stock
AFFAIRS OF THE COMPANY SINCE ANY OF THE DATES AS OF WHICH (No par value)
INFORMATION IS FURNISHED OR SINCE THE DATE OF THIS
PROSPECTUS.
-------------
PROSPECTUS
-------------
--------------------------------
TABLE OF CONTENTS
-----------------
PAGE
----
Available Information . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . 5
Use of Proceeds . . . . . . . . . . . . . . . . 8
Selling Stockholders. . . . . . . . . . . . . 8
Plan of Distribution . . . . . . . . . . . . . 9
Description of Securities . . . . . . . . . . . 10 June ___, 1996
Experts . . . . . . . . . . . . . . . . . . . . 11
Legal Matters . . . . . . . . . . . . . . . . . 11
Index to Financial Statements . . . . . . . . . 12
=========================================================== ===========================================================
</TABLE>
<PAGE> 44
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the Offering:
<TABLE>
<CAPTION>
AMOUNT*
------
<S> <C>
SEC Registration Fee . . . . . . . . . . . . . . . . . . . . . $ 460.00
Printing and Engraving . . . . . . . . . . . . . . . . . . . . $ 500.00
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . $15,000.00
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . $15,000.00
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . $ 1,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000.00
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,960.00
==========
</TABLE>
- ------------------------
* Estimated, except the SEC Registration Fee. None of the Selling Stockholders
will pay any of the expenses of this offering, but the Selling Stockholders
will bear the cost of any brokerage commissions or discounts incurred in
connection with the sale of their Common Stock and their respective legal
expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As authorized by Section 607.0831 of the Florida Business Corporation
Act, Directors and Officers of the Company are indemnified against liability
under certain circumstances. The Company's Restated Articles of Incorporation,
as amended, provide for the indemnification of the Company's Directors and
Officers.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
2.1 Agreement and Plan of Reorganization (a/k/a EMA
Acquisition Agreement).(1)
3.1 Restated Articles of Incorporation, as amended.(3)
3.3 Bylaws.(2)
5.1 Opinion of Broad and Cassel.(3)
23.1 Consent of Grant Thornton LLP.(3)
II-1
<PAGE> 45
(A) EXHIBITS (CONT'D.)
23.2 Consent of KPMG Peat Marwick LLP.(3)
23.3 Consent of Broad and Cassel (see Exhibit 5.1).(3)
27.1 Financial Data Schedules (for SEC use only).(3)
27.2 Financial Data Schedules (for SEC use only).(3)
- -----------------------------
(1) Incorporated by reference from the Company's Annual
Report on Form 10-KSB for fiscal year ended June 30,
1995.
(2) Incorporated by reference to the Company's Registration
Statement on Form S-18 (SEC File No. 33-41164).
(3) Filed herewith.
ITEM 17. UNDERTAKINGS.
(A) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act of 1933 (the
"Act");
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information in the
registration statement; or
(iii) Include any additional or changed material
information with respect to the plan of
distribution.
Provided, however, that paragraphs (A)(1)(i) and
(A)(1)(ii) above do not apply if the registration
statement is on Form S-3 or Form S-8 and the
information required to be included in a
post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) For the purposes of determining any liability under
the Securities Act of 1933, as amended, each
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE> 46
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in the
registration statement shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(B) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the small business issuer pursuant
to the foregoing provisions, or otherwise, the small business issuer
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment
by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 47
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of Florida,
on this 28th day of June, 1996.
OCEAN OPTIQUE DISTRIBUTORS, INC.
--------------------------------
Registrant
By: /s/ Neil B. Lande
------------------------------------
Neil B. Lande, Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Neil B. Lande Chairman of the Board and June 28, 1996
- ---------------------------------- Chief Executive Officer
Neil B. Lande
/s/ Ray Hyman, Jr. President and Director June 28, 1996
- ----------------------------------
Ray Hyman, Jr.
/s/ Kenneth J. Gordon Principal Accounting Officer June 28, 1996
- ---------------------------------- and Chief Financial Officer
Kenneth J. Gordon
/s/ H. James Daigle Director June 28, 1996
- ----------------------------------
H. James Daigle
/s/ Bruce Schindler Director June 28, 1996
- ----------------------------------
Bruce Schindler
/s/ Robert D. Winn Director June 28, 1996
- ----------------------------------
Robert D. Winn
/s/ Mary S. Winn Director June 28, 1996
- ----------------------------------
Mary S. Winn
</TABLE>
II-4
<PAGE> 48
OCEAN OPTIQUE DISTRIBUTORS, INC.
INDEX TO EXHIBITS*
<TABLE>
<CAPTION>
Sequentially Numbered
Exhibit No. Page
- ---------- ---------------------
<S> <C> <C>
3.1 Restated Articles of Incorporation, as amended . . . . . . . . . .
5.1 Opinion of Broad and Cassel . . . . . . . . . . . . . . . . . . . .
23.1 Consent of Grant Thornton LLP . . . . . . . . . . . . . . . . . . .
23.2 Consent of KPMG Peat Marwick . . . . . . . . . . . . . . . . . . .
23.3 Consent of Broad and Cassel (See Exhibit 5.1) . . . . . . . . . . .
27.1 Financial Data Schedules (for SEC use only) . . . . . . . . . . . .
27.2 Financial Data Schedules (for SEC use only) . . . . . . . . . . . .
</TABLE>
- ----------------------------
* All other exhibits listed in Item 16 of Part II of the Amendment No. 2
to Form S-3 Registration Statement have been previously filed or are
incorporated by reference to documents previously filed as indicated therein.
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
OCEAN OPTIQUE DISTRIBUTORS, INC.,
A FLORIDA CORPORATION
The undersigned, the President of Ocean Optique Distributors, Inc., a
Florida corporation (the "Corporation"), pursuant to Section 607.1007 of the
Florida Business Corporation Act, hereby adopts the following Restated Articles
of Incorporation:
ARTICLE I
CORPORATE NAME
The name of the Corporation is Ocean Optique Distributors, Inc.
ARTICLE II
PRINCIPAL OFFICE/MAILING ADDRESS
The principal office address and mailing address of the Corporation is
14250 S.W. 119th Avenue, Miami, Florida 33186.
ARTICLE III
NATURE OF CORPORATE BUSINESS
The Corporation may engage in or transact any or all activities or
business under the laws of the United States and of the State of Florida.
ARTICLE IV
AUTHORIZED CAPITAL
The Corporation's authorized capital shall consist of 10,000,000
shares of common stock and 5,000,000 shares of preferred stock, all without par
value. The Board of Directors may issue shares of preferred stock in one or
more series, from time to time, with such relative rights, limitations and
preferences as it may determine.
The Board of Directors has designated an aggregate of 800,000 shares
of the authorized but unissued shares of preferred stock of the Corporation, no
par value per share, as "Series A Cumulative Convertible 3% Preferred Stock"
with the rights and preferences set forth on the attached Statement of
Designation, which is incorporated by reference herein.
<PAGE> 2
The Board of Directors has designated an aggregate of 230,000 shares
of the authorized but unissued shares of preferred stock of the Corporation, no
par value per share, as "Series B Cumulative Convertible 2% Preferred Stock"
with the rights and preferences set forth on the attached Statement of
Designation, which is incorporated by reference herein.
ARTICLE V
EXISTENCE
The Corporation shall have perpetual existence unless sooner dissolved
according to law.
ARTICLE VI
LIABILITY OF DIRECTORS
Unless otherwise provided by statute, a director shall not be
personally liable for monetary damages to the Corporation or any other person
for any statement, vote, decision, or failure to act regarding corporate
management or policy.
ARTICLE VII
VOTING FOR DIRECTORS
Members of the Board of Directors shall be elected at the Annual
Meeting of the Corporation's shareholders, and shall be elected by the
affirmative vote of a majority of the shares entitled to vote thereat.
ARTICLE VIII
REGISTERED AGENT AND REGISTERED OFFICE
The Corporation's Registered Agent and Registered Office in the State
of Florida shall continue as follows:
REGISTERED AGENT: Ray Hyman
REGISTERED OFFICE: 14250 S.W. 119th Avenue
Miami, Florida 33186
ARTICLE IX
TERM OF DIRECTORS
The number of directors of the Corporation shall be as set forth in
the Corporation's Bylaws. Effective as of the Annual Meeting of the
Shareholders in 1993, the Board of Directors shall be divided into three
classes, designated Class I, Class II and Class III, as nearly equal in number
as possible and the term of the office of one class shall expire at each Annual
Meeting of Shareholders, and in all cases as to each director until his
successor shall be elected and shall qualify, or until his earlier resignation,
removal from office, death or incapacity. Additional
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<PAGE> 3
directorships resulting from an increase in number of directors shall be
apportioned among the classes as equally as possible. The initial term of
office of directors of Class I shall expire at the Annual Meeting of
Shareholders in 1994, that of Class II shall expire at the Annual Meeting of
Shareholders in 1995, and that of Class III shall expire at the Annual Meeting
of Shareholders in 1996. At each Annual Meeting of Shareholders the number of
directors equal to the number of directors of the class whose term expires at
the time of such meeting (or, if less, the number of directors properly
nominated and qualified for election) shall be elected to hold office until the
third succeeding Annual Meeting of Shareholders after their election.
The foregoing Restated Articles of Incorporation were adopted by the
Board of Directors and the Shareholders of the Company as required by
applicable law.
OCEAN OPTIQUE DISTRIBUTORS, INC.,
A FLORIDA CORPORATION
By:/s/ Ray Hyman, Jr.
-------------------------------
Ray Hyman, Jr., President
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<PAGE> 4
STATEMENT OF DESIGNATION
OF THE
SERIES A CUMULATIVE CONVERTIBLE 3% PREFERRED STOCK
OF
OCEAN OPTIQUE DISTRIBUTORS, INC.
1. DESIGNATION. An aggregate of 800,000 shares of the authorized
but unissued shares of preferred stock of Ocean Optique Distributors, Inc., a
Florida corporation (the "Company"), no par value per share, is hereby
designated as "Series A Cumulative Convertible 3% Preferred Stock" (the
"Preferred Stock").
2. DIVIDENDS.
a. DIVIDEND RATE. Holders of shares of the Preferred Stock
are entitled to receive, when and if declared by the Board of Directors, out of
funds legally available therefor, cash dividends or, in the Company's sole
discretion, cash equivalent value stock dividends of Common Stock at the rate
of $0.075 per share per annum, payable in semi-annual installments on June 30th
and December 31st, commencing June 30, 1994.
b. CURRENT MARKET PRICE. The number of shares of Common
Stock to be issued as a stock dividend shall be determined by the current
market price of a share of Common Stock on the record date for such stock
dividend. The current market price of a share of Common Stock on the record
date shall be the closing sale price on such day as reported by Nasdaq or on
any other exchange on which the shares of Common Stock may be traded.
c. NO FRACTIONAL SHARES. No fractional shares will be issued
for dividends. The amount of any dividends represented by such fractional
shares will be payable in cash.
d. DIVIDENDS TO BE CUMULATIVE. Dividends on the Preferred
Stock will be cumulative from the date of initial issuance of the Preferred
Stock. Except as set forth above, unless full cumulative dividends on the
Preferred Stock have been paid, dividends (other than in Common Stock) may not
be paid or declared or set aside for payment and other distributions may not be
made upon the Common Stock or on any other stock of the Company ranking junior
to or on a parity with the Preferred Stock as to dividends, nor may any Common
Stock or any other stock of the Company ranking junior to or on a parity with
the Preferred Stock as to dividends be redeemed, purchased or otherwise
acquired for any consideration by the Company (except by conversion into or
exchange for stock of the Company ranking junior to the Preferred Stock as to
dividends).
e. HOLDERS OF RECORD. Dividends will be payable to holders
of record as they appear on the stock books of the Company on June 1st and
December 1st, respectively.
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<PAGE> 5
f. SURPLUS. Under Florida law, the Company may declare and
pay dividends on shares of its capital stock out of available surplus, which is
the amount by which the total assets of the Company exceed the sum of the total
debt of the Company and its stated capital.
g. PRO-RATA DISTRIBUTION. If dividends are not paid in full
upon the Preferred Stock and any other preferred stock ranking on a parity as
to dividends with the Preferred Stock, all dividends declared upon shares of
Preferred Stock and such other preferred stock will be declared pro rata so
that in all cases the amount of dividends declared per share on the Preferred
Stock and such other preferred stock bear to each other.
3. VOTING RIGHTS. Holders of shares of Preferred Stock will have
no voting rights until they convert their shares of Preferred Stock into Common
Stock.
4. CONVERSION RIGHTS.
a. MANNER OF CONVERSION. The Preferred Stock shall be
convertible at any time, at the option of the holder, upon not less than 15 nor
more than 30 days' prior written notice mailed, along with the Preferred Stock,
to the Company. Before any holder of Preferred Stock shall be entitled to
convert the same as provided herein, he shall surrender the certificate or
certificates for such Preferred Stock at the Company's duly appointed transfer
agent, or at the office of the Company if a transfer agent has not been
appointed, which certificate or certificates shall be duly endorsed to the
Company or in blank or accompanied by proper instruments of transfer to the
Company or in blank, unless the Company shall waive such requirement, and shall
give written notice to the Company at the aforesaid offices to convert said
Preferred Stock, and shall state in writing therein the name or names in which
he wishes the certificate or certificates for Common Stock to be issued. The
Company has agreed to forward the appropriate documentation to its transfer
agent within three business days of its receipt of the notice of conversion.
The Company will, as soon as practicable after such surrender of certificates
for Preferred Stock accompanied by the written notice and the statement above
prescribed, issue and deliver at the office of any transfer agent appointed as
aforesaid, or at such other office or offices, if any, to the person for whose
account such Preferred Stock was so surrendered, or to his nominee or nominees,
certificates for the highest number of whole shares of Common Stock, as the
case may be, to which he shall be entitled as aforesaid. Subject to the
following provisions of this paragraph, such conversion shall be deemed to have
been made as of the date of such surrender of the Preferred Stock to be
converted and the rights of the converting holder of the shares of the
Preferred Stock as such holder shall cease and the person or persons in whose
name or names the certificates for shares of Common Stock, as the case may be,
upon conversion of such Preferred Stock are to be issued shall be treated for
all purposes as the record holder or holders of such Common Stock at the close
of business on such date. The Company shall not be required to convert, and no
surrender of Preferred Stock shall be effective for that purpose, while the
stock transfer books of the Company are closed for any purpose; but the
surrender of Preferred Stock for conversion during any period while such books
are so closed shall become effective for conversion immediately upon the
reopening of such books, as if the conversion had been made on the date such
Preferred Stock was surrendered,
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<PAGE> 6
and at the conversion rate in effect at the date of such surrender. The
Preferred Stock may be converted in whole or in part, so long as at least 10%
of a holder's Preferred Stock are converted at any given time.
b. CONVERSION RATE. The conversion rate shall be one share
of the Company's Common Stock for each share of Preferred Stock, subject to
adjustment in certain events. On conversion, no payment or adjustment for
dividends shall be made. The conversion rate will be subject to adjustment in
certain events, including: the issuance of stock as a dividend on the Common
Stock; stock splits, subdivisions or combinations of the Common Stock; or the
distribution to all holders of Common Stock of evidences of indebtedness of the
Company, cash (excluding ordinary cash dividends), other assets or rights or
warrants to subscribe for or purchase any securities (other than those referred
to above). No fractional shares of Common Stock will be issued upon conversion
but, in lieu thereof, the Company at its option may round up the fractional
share or pay an appropriate amount in cash based upon the reported last sales
price of the shares of Common Stock on the day of conversion. Whenever the
conversion rate is adjusted as herein provided, the Company shall forthwith
file with any transfer agent or agents for the Preferred Stock appointed as
aforesaid a certificate signed by the President or one of the Vice Presidents
of the Company and by its Treasurer or an Assistant Treasurer, stating the
adjusted conversion rate determined as provided in this Section 4, and in
reasonable detail the facts requiring such adjustment. Such transfer agents
shall be under no duty to make any inquiry or investigation as to the
statements contained in any such certificate or as to the manner in which any
computation was made, but may accept such certificate as conclusive evidence of
the statements therein contained, and each transfer agent shall be fully
protected with respect to any and all acts done or action taken or suffered by
it in reliance thereon. No transfer agent in its capacity as transfer agent
shall be deemed to have any knowledge with respect to any change of capital
structure of the Company unless and until it receives a notice thereof pursuant
to the provisions of this Section 4 subparagraph b. and in the absence of any
such notice each transfer agent may conclusively assume that there has been no
such change.
c. RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification of the Common Stock, any consolidation of the Company with, or
merger of the Company into, any other entity, any merger of any entity into the
Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock),
any sale or transfer of all or substantially all of the assets of the Company
or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or other property then provision shall be made such that
the holder of each share of Preferred Stock then outstanding shall have the
right thereafter, during the period such share of Preferred Stock shall be
convertible, to convert such share only into the kind and amount of securities,
cash and other property receivable upon such reclassification, consolidation,
merger, sale, transfer or share exchange by a holder of the number of shares of
Common Stock into which such shares of Preferred Stock might have been
converted immediately prior to such reclassification, consolidation, merger,
sale, transfer or share exchange.
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<PAGE> 7
d. RIGHTS OF HOLDERS. Holders of the Preferred Stock
converted into Common Stock will be entitled to the same rights applicable at
the time of conversion to other holders of Common Stock. The holders of the
shares of the Preferred Stock have no preemptive rights with respect to any
securities of the Company.
e. RESERVATION OF SHARES. The Company shall at all times
reserve and keep available, out of its authorized and unissued or treasury
shares of Common Stock or other stock or securities deliverable upon conversion
pursuant to this Section, solely for the purpose of effecting the conversion of
the Preferred Stock, such number of shares as shall from time to time be
sufficient to effect the conversion of all shares of Preferred Stock from time
to time outstanding. The Company shall from time to time, in accordance with
the laws of Florida, increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued or treasury
shares of Common Stock shall not be sufficient to permit the conversion of all
the then outstanding Preferred Stock.
f. TAXES. The Company will pay any and all issue and other
taxes that may be payable in respect of any issue of delivery of shares of
Common Stock on conversion of Preferred Stock pursuant thereto. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of Common Stock in a name
other than that in which the Preferred Stock so converted was registered, and
no such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Company the amount of any such tax, or has
established, to the satisfaction of the Company, that such tax has been paid.
5. STATUS OF CONVERTED SHARES. Any shares of Preferred Stock
that at any time shall have been converted pursuant to Section 4 or that have
been otherwise repurchased by the Company shall, after such conversion or
repurchase, have the status of authorized but unissued shares of Preferred
Stock, without designation as to series until such shares are once more
designated as part of a particular series by the Board of Directors.
6. LIQUIDATION RIGHTS. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of shares of the Preferred Stock are entitled to receive out of assets
of the Company available for distribution to stockholders, before any
distribution of assets is made to holders of Common Stock or any other junior
stock, liquidating distributions in the amount of $2.50 per share plus
accumulated and unpaid dividends. If upon any liquidation, dissolution or
winding up of the Company, the assets distributable to the holders of the
Preferred Stock and any other preferred stock ranking as to any such
distribution on a parity with the Preferred Stock are insufficient to fully pay
the preferential amount, the holders of the Preferred Stock and of such other
preferred stock will share ratably in such distribution of assets in proportion
to the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of shares of the Preferred Stock will not be entitled to
any further participation in any distribution of assets by the Company.
Neither a consolidation or merger of the Company with another corporation nor a
sale or transfer of all
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<PAGE> 8
or part of the Company's assets for cash or securities will be considered a
liquidation, dissolution or winding up of the Company.
The right of the Company, and the rights of its creditors and
stockholders (including holders of the Preferred Stock), to participate in the
distribution of the assets of any subsidiary of the Company upon any
liquidation or reorganization of such subsidiary, or otherwise, will be subject
to the prior claims of creditors of such subsidiary (except to the extent the
Company may itself be a creditor with recognized claims against such
subsidiary).
7. REDEMPTION RIGHTS. The Preferred Stock may not be redeemed
by the Company.
8. NO SINKING FUND. The shares of Preferred Stock shall not be
entitled to the benefit of any sinking fund to be applied to the purchase or
redemption of such shares.
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<PAGE> 9
STATEMENT OF DESIGNATION
OF THE
SERIES B CUMULATIVE CONVERTIBLE 2% PREFERRED STOCK
OF
OCEAN OPTIQUE DISTRIBUTORS, INC.
1. DESIGNATION. An aggregate of 230,000 shares of the authorized
but unissued shares of preferred stock of Ocean Optique Distributors, Inc., a
Florida corporation (the "Company"), no par value per share, is hereby
designated as Series B Cumulative Convertible 2% Preferred Stock (the "Series B
Preferred Stock").
2. DIVIDENDS.
a. DIVIDEND RATE. Holders of shares of the Series B
Preferred Stock are entitled to receive, when and if declared by the Board of
Directors of the Company, out of funds legally available therefor, cash
dividends at a rate of $0.10 per share of Series B Preferred Stock per annum
payable in quarterly installments on September 30th, December 31st, March 31st
and June 30th of each year, commencing September 30, 1995.
b. DIVIDENDS TO BE CUMULATIVE. Dividends on the shares of
Series B Preferred Stock will be cumulative from the date of issuance. Unless
full cumulative dividends on the Company's Series A Cumulative Convertible 3%
Preferred Stock (the "Series A Preferred Stock") and on the Series B Preferred
Stock have been paid, dividends may not be paid or declared or set aside for
payment and other distributions may not be made upon the Common Stock or on any
other stock of the Company ranking junior to or on a parity with the Series B
Preferred Stock as to dividends or liquidation preference, nor may any Common
Stock or any other stock of the Company ranking junior to or on a parity with
the Series A Preferred Stock and Series B Preferred Stock as to dividends or
liquidation preference be redeemed, purchased or otherwise acquired for any
consideration by the Company (except by conversion into or exchange for stock
of the Company ranking junior to the Series A Preferred Stock and Series B
Preferred Stock as to dividends or liquidation preference).
c. HOLDERS OF RECORD. Dividends will be payable to holders
of record as they appear on the stock books of the Company on the first day of
the calendar month in which dividends are to be paid pursuant to Section 2.a,
unless such date is not a business day, in which event on the next succeeding
business day.
d. RANK; PRO-RATA DISTRIBUTION. Unless otherwise provided by
law or in any instrument evidencing the Series A Preferred Stock, the Series B
Preferred Stock will be of equal rank to the Series A Preferred Stock as to
payment of dividends and rights upon liquidation. If dividends are not paid in
full upon the Series B Preferred Stock and any other preferred stock ranking on
a parity as to dividends or liquidation preference with the Series B Preferred
Stock, all dividends (including any accumulation resulting from unpaid
dividends for
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<PAGE> 10
prior quarters) on shares of Series B Preferred Stock and such other preferred
stock will be declared pro rata so that in all cases the amount of dividends
declared per share on the Series B Preferred Stock and such other preferred
stock will be of equal proportion.
3. VOTING RIGHTS. Holders of shares of Series B Preferred Stock
will have no voting rights until they convert their shares of Series B
Preferred Stock into Common Stock.
4. CONVERSION RIGHTS.
a. MANNER OF CONVERSION. The Series B Preferred Stock shall
be convertible at any time after November 30, 1996, at the option of the
holder, upon not less than 15 nor more than 30 days' prior written notice
mailed, along with the certificate or certificates representing the shares of
Series B Preferred Stock to be converted, to the Company. Before any holder of
Series B Preferred Stock shall be entitled to convert the same as provided
herein, he shall surrender the certificate or certificates for such Series B
Preferred Stock at the Company's duly appointed transfer agent, or at the
office of the Company if a transfer agent has not been appointed, which
certificate or certificates shall be duly endorsed to the Company or in blank
with signatures medallion guaranteed, or accompanied by proper instruments of
transfer to the Company or in blank, with signatures medallion guaranteed,
unless the Company shall waive any of such requirements, and shall give written
notice to the Company at the aforesaid offices to convert said Series B
Preferred Stock stating therein the name or names in which he wishes the
certificate or certificates for Common Stock to be issued. The Company has
agreed to forward the appropriate documentation to its transfer agent after its
receipt of the notice of conversion. The Company will, as soon as practicable
after such surrender of certificates for Series B Preferred Stock accompanied
by the above-prescribed written notice, issue and deliver at the office of any
transfer agent appointed as aforesaid, or at such other office or offices, if
any, to the person for whose account such Series B Preferred Stock was so
surrendered, or to his nominee or nominees, certificates for the highest number
of whole shares of Common Stock, as the case may be, to which he shall be
entitled as aforesaid. Subject to the following provisions of this section and
provided that all appropriate documentation has been received, a conversion
shall be deemed to have been made as of the date of such surrender of the
Series B Preferred Stock to be converted and the rights of the converting
holder of the shares of the Series B Preferred Stock as a holder of Series B
Preferred Stock shall cease, and the person or persons to whom the certificates
representing the shares of Common Stock received upon conversion of such Series
B Preferred Stock are to be issued shall be treated for all purposes as the
record holder or holders of such Common Stock at the close of business on such
date. The Company shall not be required to convert, and no surrender of Series
B Preferred Stock shall be effective for that purpose, while the stock transfer
books of the Company are closed for any purpose; but the surrender of Series B
Preferred Stock for conversion during any period while such books are so closed
shall become effective for conversion immediately upon the reopening of such
books, as if the conversion had been made on the date such Series B Preferred
Stock was surrendered, and at the conversion rate in effect on the date of such
surrender. Any purported transfer or assignment of any shares of Common Stock
underlying the Series B Preferred Stock between the date of surrender of the
Series B Preferred Stock and the time of
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<PAGE> 11
issuance of the certificate representing the shares of Common Stock will be
effected by the Company only in the event such transfer or assignment is, in
the sole discretion of the Company, in accordance with applicable law.
b. CONVERSION RATE. The conversion rate shall be one share
of the Company's Common Stock for each share of Series B Preferred Stock,
subject to adjustment as provided herein. On conversion, no payment or
adjustment for dividends shall be made. In the event the market price per
share of Common Stock, as defined below, as of the effective date of conversion
is less than $5.00 per share, subject to adjustment in the event of stock
splits, stock dividends, recapitalizations or redemptions, then the Company
shall issue such shares of Common Stock upon conversion of the Series B
Preferred Stock equal to (i) the number of shares of Series B Preferred Stock
then issued and outstanding multiplied by $5.00, (ii) divided by the
then-current market price of the Common Stock. The market price per share of
the Company's Common Stock shall equal the average asked prices of the Common
Stock during the 30 consecutive business days immediately prior to the date of
conversion. The conversion rate will be subject to adjustment in certain
events, including the issuance of shares as a dividend on the Common Stock or
stock splits, subdivisions or combinations of the Common Stock. No fractional
shares of Common Stock will be issued upon conversion but, in lieu thereof, the
Company at its option may round up the fractional share or pay an appropriate
amount in cash based upon the reported last bid price of the shares of Common
Stock on the day of conversion. Whenever the conversion rate is adjusted as
herein provided, the Company shall forthwith file with any transfer agent for
the Series B Preferred Stock a certificate signed by the President or one of
the Vice Presidents of the Company and by its Treasurer or an Assistant
Treasurer, stating the adjusted conversion rate determined as provided in this
Section 4, and in reasonable detail the facts requiring such adjustment. Such
transfer agent shall be under no duty to make any inquiry or investigation as
to the statements contained in any such certificate or as to the manner in
which any computation was made, but may accept such certificate as conclusive
evidence of the statements therein contained. No transfer agent in its
capacity as transfer agent shall be deemed to have any knowledge with respect
to any change of capital structure of the Company unless and until it receives
a notice thereof pursuant to the provisions of this Section 4.b and in the
absence of any such notice, each transfer agent may conclusively assume that
there has been no such change.
c. RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification of the Common Stock, any consolidation of the Company with, or
merger of the Company into, any other entity, any merger of any entity into the
Company (other than a merger that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock),
any sale or transfer of all or substantially all of the assets of the Company
or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or other property, then provision shall be made such
that the holder of each share of Series B Preferred Stock then outstanding
shall have the right thereafter, during the period such share of Series B
Preferred Stock shall be convertible, to convert such share only into the kind
and amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, sale, transfer or share exchange by a
holder of the number of shares of
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<PAGE> 12
Common Stock into which such shares of Series B Preferred Stock might have been
converted immediately prior to such reclassification, consolidation, merger,
sale, transfer or share exchange.
d. RIGHTS OF HOLDERS. Holders of the Series B Preferred
Stock converted into Common Stock will be entitled to the same rights
applicable at the time of conversion to other holders of Common Stock. The
holders of the shares of the Series B Preferred Stock have no preemptive rights
with respect to any securities of the Company.
e. TAXES. The Company will pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock upon conversion of Series B Preferred Stock. The Company shall
not, however, be required to pay any tax that may be payable in respect of any
transfer involved in the issue and delivery of Common Stock in a name other
than that in which the Series B Preferred Stock so converted was registered,
and no such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Company the amount of any such tax, or
has established, to the satisfaction of the Company, that such tax has been
paid.
5. STATUS OF CONVERTED SHARES. Any shares of Series B Preferred
Stock that at any time shall have been converted pursuant to Section 4 or that
have been otherwise repurchased by the Company shall, after such conversion or
repurchase, have the status of authorized but unissued shares of preferred
stock, without designation as to series until such shares are once more
designated as part of a particular series by the Board of Directors.
6. LIQUIDATION RIGHTS. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of shares of the Series B Preferred Stock are entitled to receive out
of assets of the Company available for distribution to stockholders, before any
distribution of assets is made to holders of Common Stock or any other junior
stock, liquidating distributions in the amount of $5.00 per share plus
accumulated and unpaid dividends. If upon any liquidation, dissolution or
winding up of the Company, the assets distributable to the holders of the
Series B Preferred Stock and any other preferred stock ranking as to any such
distribution on a parity with the Series B Preferred Stock are insufficient to
fully pay the preferential amount, the holders of the Series B Preferred Stock
and of such other preferred stock will share ratably in such distribution of
assets in proportion to the full respective preferential amounts to which they
are entitled. After payment of the full amount of the liquidating distribution
to which they are entitled, the holders of shares of the Series B Preferred
Stock will not be entitled to any further participation in any distribution of
assets by the Company. Neither a consolidation or merger of the Company with
another corporation, nor a sale or transfer of all or part of the Company's
assets for cash or securities will be considered a liquidation, dissolution or
winding up of the Company.
The right of the Company, and the rights of its creditors and
stockholders (including holders of the Series B Preferred Stock), to
participate in the distribution of the assets of any subsidiary of the Company
upon any liquidation or reorganization of such subsidiary, or
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<PAGE> 13
otherwise, will be subject to the prior claims of creditors of such subsidiary
(except to the extent the Company may itself be a creditor with recognized
claims against such subsidiary).
7. REDEMPTION RIGHTS. The Series B Preferred Stock may not be
redeemed by the Company.
8. NO SINKING FUND. The shares of Series B Preferred Stock shall
not be entitled to the benefit of any sinking fund to be applied to the
purchase or redemption of such shares.
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<PAGE> 1
EXHIBIT 5.1
BROAD AND CASSEL
ATTORNEYS AT LAW
201 SOUTH BISCAYNE BOULEVARD
MIAMI CENTER, SUITE 3000
MIAMI, FLORIDA 33131
(305) 373-9400
June 28, 1996
Ocean Optique Distributors, inc.
14250 S.W. 119th Avenue
Miami, FL 33186
RE: OCEAN OPTIQUE DISTRIBUTORS, INC. (THE "COMPANY")
REGISTRATION STATEMENT ON FORM S-3
SEC FILE NO: 33-98678
Ladies and Gentlemen:
You have requested our opinion with respect to the shares (the
"Shares") of the Company's common stock, no par value (the "Common Stock"),
included in the Company's registration statement on Form S-3, SEC File No.
33-98678, as amended by Amendments No. 1 and 2 thereto (the Registration
Statement as amended is referred to herein as the "Registration Statement").
The Registration Statement has been filed with the U.S. Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), on behalf of certain selling shareholders as named therein.
As counsel to the Company, we have examined the original or certified
copies of such records of the Company, and such agreements, certificates of
public officials, certificates of officers or representatives of the Company
and others, and such other documents as we deem relevant and necessary for the
opinion expressed in this letter. In such examination, we have assumed the
genuineness of all signatures on original documents, and the conformity to
original documents of all copies submitted to us as conformed or photostatic
copies. As to various questions of fact material to such opinion, we have
relied upon statements or certificates of officials and representatives of the
Company and others.
Based on, and subject to the foregoing, we are of the opinion that the
Shares included in the Registration Statement are duly and validly issued,
fully paid and non-assessable.
In rendering this opinion, we advise you that members of this Firm are
members of the Bar of the State of Florida, and we express no opinion herein
concerning the applicability or effect of any laws of any other jurisdiction,
except the securities laws of the United States of America referred to herein.
<PAGE> 2
Ocean Optique Distributors, inc.
June 28, 1996
Page 2
This opinion has been prepared and is to be construed in accordance
with the Report on Standards for Florida Opinions, dated April 8, 1991, issued
by the Business Law Section of The Florida Bar (the "Report"). The Report is
incorporated by reference into this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the use of our name in the section
captioned "Legal Matters" in the Prospectus constituting part of the
Registration Statement. In giving such consent, we do not thereby admit that
we are included within the category of persons whose consent is required under
Section 7 of the Securities Act, or the rules and regulations promulgated
thereunder.
Very truly yours,
/s/ Broad and Cassel
--------------------
BROAD AND CASSEL
<PAGE> 1
Exhibit 23.1
We have issued our report dated September 22, 1995 accompanying the
consolidated financial statements of Ocean Optique Distributors, Inc. and
subsidiaries appearing in the Annual Report on Form 10-KSB for the year ended
June 30, 1995, as amended, which is incorporated by reference in this
Registration Statement. We consent to the incorporation by reference in the
Registration Statement of the aforementioned report and to the use of our name
as it appears under the caption "Experts."
/s/ Grant Thornton LLP
- ----------------------
GRANT THORNTON LLP
Miami, Florida
June 28, 1996
<PAGE> 1
EXHIBIT 23.2
Accountants' Consent
The Board of Directors and Stockholders
Ocean Optique Distributors, Inc. and Subsidiaries
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Miami, Florida
June 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF OCEAN OPTIQUE DISTRIBUTORS FOR THE TWELVE MONTHS ENDED
JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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<INVENTORY> 7,374
<CURRENT-ASSETS> 13,577
<PP&E> 872
<DEPRECIATION> 543
<TOTAL-ASSETS> 17,770
<CURRENT-LIABILITIES> 7,332
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0
2,624
<COMMON> 6,099
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<SALES> 9,752
<TOTAL-REVENUES> 9,752
<CGS> 5,680
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<LOSS-PROVISION> 0
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<INCOME-PRETAX> (880)
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<EPS-PRIMARY> (0.48)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF OCEAN OPTIQUE DISTRIBUTORS FOR THE NINE MONTHS ENDED
MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
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0
2,624
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<SALES> 10,645
<TOTAL-REVENUES> 10,645
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<EPS-PRIMARY> (.95)
<EPS-DILUTED> 0
</TABLE>
