SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UTOPIA MARKETING, INC.
(Name of Small Business Issuer in Its Charter)
Florida
(State or other jurisdiction of incorporation)
3140 94-3060101
(Primary Standard Industrial (I.R.S Employer
Classification Code Number) Identification Number
312 Clematis Street, Suite 500
West Palm Beach, Florida 33401
(561) 835-9998
(Address and Telephone Number of Registrant's Principal
Executive Offices and Principal Place of Business)
Samuel Edelman
312 Clematis Street, Suite 500
West Palm Beach, Florida 33401
(561) 835-9998
(Name, Address and Telephone Number of Agent for Service)
(copy to)
Steven Sonberg, Esq
Holland & Knight LLP
701 Brickell Avenue, Suite 3000
Miami, Florida 33131
(305) 374-8500
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effectiveness of this Registration Statement.
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. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the earlier offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class of Proposed Maximum Proposed Maximum
Securities To Be Amount to be Offering Price per Aggregate Offering Amount of Registration
Registered Registered Share (1) Price Fee
<S> <C> <C> <C> <C>
Common Stock 5,000,000 shares $0.15 $750,000 $198
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
based upon the average of the bid and asked price for the Common
Stock on the over-the-counter market on May 1, 2000.
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>
SUBJECT TO COMPLETION, DATED MAY 5, 2000
PROSPECTUS
5,000,000 Shares
UTOPIA MARKETING, INC.
Common Stock
We are offering up to 2,000,000 shares of our common stock and certain
selling shareholders of Utopia Marketing, Inc., identified elsewhere in this
prospectus or to be identified by amendment to this prospectus, are offering
up to 3,000,000 shares of our common stock for sale to the public.
We will not receive any proceeds from the sale of shares of our common
stock by the selling shareholders. We are paying the expenses of this
offering.
Our common stock is traded on the OTC Bulletin Board under the symbol
"UTPM". On May 1, 2000, the closing bid price of the common stock on the
OTC Bulletin Board was $0.15.
Our business involves significant risks. These risks are described
under the caption "Risk Factors" beginning on page 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is accurate or complete. Any representation to the contrary
is a criminal offense.
Per share Total
--------- -----
Public Offering Price $0.15 $750,000
Proceeds to Utopia Marketing, Inc. $0.15 $300,000
Proceeds to the selling shareholders $0.15 $450,000
_________________________
[THE FOLLOWING TEXT APPEARS ALONG THE LEFT HAND SIDE OF THIS PAGE:]
The information in this Prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This
Prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these secuities in any state where the
offer or sale is not permitted.
This Prospectus is dated _________, 2000
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Table of Contents
Page
----
FORWARD LOOKING STATEMENTS.......................................... 2
PROSPECTUS SUMMARY.................................................. 3
RISK FACTORS........................................................ 4
USE OF PROCEEDS..................................................... 9
MARKET FOR COMMON STOCK............................................. 9
MANAGEMENT'S DISCUSSION AND ANALYSIS................................ 10
BUSINESS............................................................ 12
DIRECTORS AND EXECUTIVE OFFICERS.................................... 16
EXECUTIVE COMPENSATION.............................................. 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
MANAGEMENT AND SELLING SECURITY HOLDERS............................. 19
PLAN OF DISTRIBUTION................................................ 20
DESCRIPTION OF SECURITIES........................................... 21
CHANGES IN ACCOUNTANTS.............................................. 23
EXPERTS............................................................. 23
LEGAL MATTERS....................................................... 23
WHERE YOU CAN FIND MORE INFORMATION................................. 24
REPORTS TO SECURITY HOLDERS......................................... 24
FINANCIAL STATEMENTS................................................ 1
________________________________
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. The offer to sell, and the solicitation
of offers to buy, shares of common stock in this prospectus is made only in
jurisdictions where such offers and sales are permitted. The information
contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any
sale of common stock.
________________________________
FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements that address, among
other things, our future business strategy, acquisition and expansion
strategy, plans for development of new products and services, projected
capital expenditures, liquidity, development of additional revenue sources,
development and maintenance of profitable marketing and distribution
alliances. These statements may be found in the sections of this prospectus
entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and
in this prospectus generally. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of
various factors, including all the risks discussed in "Risk Factors" and
elsewhere in this prospectus.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus. You should read this entire document
carefully. You should consider the information set forth under
"Risk Factors" and our financial statements and accompanying
notes that appear elsewhere in this prospectus.
Company: Utopia Marketing, Inc., a Florida corporation.
Our principal place of business is located at
312 Clematis Street, Suite 500, West Palm
Beach, Florida 33401.
Overview: We are in the business of developing and
commercializing footwear products. In 1991, we
completed a public offering of our stock. On
July 2, 1996 we sold certain intellectual
property rights to Maxwell Shoe Company Inc.
From July 1996 until December 1998, we did not
engage in any revenue generating business
activities. In January 1999, we commenced the
design and commercialization of a new line of
fashion footwear under the Naked Feet[TM] brand.
On October 6, 1999, we purchased certain assets
of Ipanema Shoe Corporation, including the
Ipanema brand name. We are currently promoting
our Naked Feet[TM] and Ipanema[R] brands of footwear
products. Our products are sold through
independent sales representatives who generally
spend all of their business efforts selling our
products to national and independent retailers.
Strategy: Our long-term objective is to develop and
commercialize leading brands of women's fashion
footwear products. The key elements of our
operating strategy are:
* Develop and promote recognizable brand names
for our products.
* Distribute products through selected
national and independent accounts.
* Maintain flexibility in manufacturing.
* Continually update our product designs.
THE OFFERING
Common Stock: We are offering 2,000,000 shares of our common
stock and certain shareholders of Utopia
Marketing, Inc. identified elsewhere in this
prospectus or to be identified by amendment to
this prospectus are offering up to 3,000,000
shares of our common stock.
Use of Proceeds: We intend to use the proceeds received by us
for working capital. Pending utilization of
the proceeds, we intend to invest the net
proceeds in short-term, investment grade
securities, certificates of deposit or direct
or guaranteed obligations of the U.S.
government or a combination thereof. We will
not receive any proceeds from the sale of our
common stock by the selling shareholders. See
"Use of Proceeds".
Risk Factors: An investment in our common stock involves a
high degree of risk. You should not purchase
our common stock if you cannot afford the loss
of your entire investment. See "Risk Factors".
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RISK FACTORS
An investment in our common stock involves a high degree of
risk. In addition to the other information contained in this
prospectus, you should carefully consider the following risk
factors before making an investment decision concerning our
common stock. The risks and uncertainties described below are
not the only ones facing our company. Additional risks and
uncertainties not presently known to us or that we currently
consider immaterial may also impair our operations. If any of
the following risks were to materialize, our business, financial
condition or results of operations could be materially adversely
affected. Were that to occur, the trading price of our common
stock could decline, and you could lose all or part of your
investment. You should not purchase our common stock if you
cannot afford the loss of your entire investment.
Our operating business is in an early stage of development and
we may not become profitable.
With respect to our newly established business, we have not
yet generated significant revenues from product sales to offset
our expenses. We are dedicating most of our financial resources
to the development of new footwear products and general and
administrative expenses. We expect to incur significant
operating losses for at least the next 12 months. Our ability
to achieve profitability will depend, among other things, on our
successfully completing development of our products,
establishing or sourcing manufacturing, sales and marketing
capabilities, achieving market acceptance for our products and
maintaining sufficient funds to finance our activities. There
can be no assurance that we will be able to achieve
profitability or that profitability, if achieved, can be
sustained.
We will require substantial additional funds in order to develop
and commercialize our lines of footwear products and until we
achieve positive cash flows.
The extent to which we will be required to obtain
additional funding from third parties will primarily depend on
the time required for us to develop our product lines and the
rate at which we are able to generate sales of our products once
they are developed. Our capital requirements will depend on
several additional factors, including the problems, delays,
expenses and complications frequently encountered by companies
in a development stage; the progress of our design and
development of products; the costs and timing of establishing
trademarks or other proprietary rights; the success of our sales
and marketing programs; the extent and terms of any
manufacturing, marketing or other arrangements; and changes in
economic or competitive conditions of our planned business.
Estimates about the adequacy of funding for our activities are
based on certain assumptions, including the assumption that
development of our products can be conducted at projected costs
and within projected time frames and that our products receive
market acceptance.
To satisfy our capital requirements, we may seek to raise funds
in the public or private capital markets.
Our ability to raise additional funds in the public or
private markets will be adversely affected if the results of our
business operations are not favorable, or if any products
developed are not well-received. We may seek additional funding
through corporate collaborations and other financing vehicles or
from loans or investments by our controlling shareholders.
There can be no assurance that any such funding will be
available to us, or if available, that it will be available on
acceptable terms. If adequate funds are not available, we will
not be able to complete the commercialization of any products
that we may have developed. As a result, we may be required to
discontinue our operations without obtaining any value for our
products under development, thereby eliminating shareholder
equity, or we could be forced to relinquish rights to some or
all of our products under development in return for an amount
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substantially less than we expended to develop such products.
If we are successful in obtaining additional financing, the
terms of the financing may have the effect of diluting the
holdings or adversely affecting the rights of the holders of
common stock.
We may not be able to develop a recognizable brand or otherwise
promote our products adequately.
There can be no assurance that we will be able to profit
from the development or manufacture of our products as planned,
or that we will be successful in promoting such products to
potential vendors. We do not have an established brand name
under which we will market any of our products under
development. The establishment of a recognizable brand name
that will enable us to successfully commercialize our products
under development generally requires the expenditure of
substantial financial resources for advertising and promotional
activities. We do not currently have sufficient resources to
conduct a national advertising campaign or otherwise promote our
products under development on a widescale basis. As a result,
we will be required to promote our products and brand name
through alternative and creative promotional efforts. There can
be no assurance that we will be able to successfully promote our
products or brand names.
Our products may not be accepted by vendors or retail
purchasers.
Our ability to successfully commercialize our products will
depend in part on the acceptance of our products by vendors and
retail customers. The failure of vendors to purchase our
products or the failure of retail customers to purchase our
products would have a material adverse effect on our business,
results of operations and financial condition. Unfavorable
publicity concerning us or any of our products could have an
adverse effect on our ability to achieve acceptance of our
products by vendors and retail customers and to commercialize
our products, which could have a material adverse effect on our
business, results of operations and financial condition.
We may not be able to manage our growth effectively.
Our growth, including growth as a result of our acquisition
and development of the Ipanema brand, has placed and will
continue to place a significant strain on our managerial,
operational and financial resources. Failure to manage our
growth effectively could have a material adverse effect on our
business, results of operations and financial condition. In
order to manage our growth effectively, we need to:
* improve our financial and management controls, reporting
systems and procedures;
* expand, train and manage our work force for production
and post-production, marketing and sales, and product
development; and
* manage multiple relationships with various customers,
suppliers, manufacturers and other third parties.
We have limited sales and marketing experience.
We intend to market our footwear lines through a specialty
sales force consisting primarily of independent contractors.
Substantial resources will be required for us to promote the
sale of our footwear products. There can be no assurance that
we will be able to establish an effective sales and marketing
organization or that we will be able to achieve market
acceptance. Our failure to establish an effective marketing and
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sales force or our failure to expend the resources to adequately
promote any of our products under development could have a
material adverse effect on us.
We depend on key personnel and we may not be able to attract and
retain qualified employees.
Our success will be largely dependent, in particular, upon
the services of Samuel L. Edelman, our President and Chief
Executive Officer. If Mr. Edelman is unable to provide services
to us for whatever reason, our business would be adversely
affected. Because Mr. Edelman is involved in all aspects of our
business, there can be no assurance that a suitable replacement
could be found if he was unable to perform services for us. As
a consequence, the loss of Mr. Edelman or other key personnel
could have a material adverse effect upon our business, results
of operations and financial condition.
In addition, our ability to market our products and to
achieve profitability will depend on our ability to attract and
retain highly talented design personnel and other employees. We
face intense competition for personnel from other companies.
There can be no assurance that we will be successful in
attracting and retaining key personnel. The loss of key
personnel, or the inability to attract and retain the
additional, highly-talented employees required for the
development and commercialization of our products, could
adversely affect our results of operations and our business.
We face intense competition.
Competition in the women's footwear industry is intense.
The growth in the sales of fashionable footwear has encouraged
the entry of many new competitors and increased competition from
established companies. We will compete with numerous designers,
brands and manufacturers of women's footwear, including Kenneth
Cole, Nine West, DKNY, Sketchers, Nike and Guess, many of which
will have substantially greater financial, distribution,
marketing and other resources than us. We will also have to
compete for the limited shelf-space available for the display of
our products to the consumer. The principal elements of
competition in the footwear market include product style and
color selection, price, value, comfort, quality (both in
material and production), brand awareness, brand positioning,
advertising, marketing and distribution. Our business will
depend on our ability to stimulate and respond to changing
consumer preferences while remaining competitive in quality and
price. There can be no assurance that any products developed by
us will be able to compete successfully with the products of our
competitors.
We may not be able to protect our proprietary rights and may
infringe on the proprietary rights of others.
Establishment of trademarks and other proprietary rights is
important to our success and our competitive position.
Accordingly, we intend to devote substantial resources to the
establishment and protection of trademarks and other proprietary
rights. There can be no assurance that the actions taken by us
to establish and protect any trademarks or other proprietary
rights will be adequate to prevent imitation of our products by
others or to prevent others from prohibiting sales of any
products we may develop in violation of the trademarks and
proprietary rights of others. Moreover, no assurance can be
given that others will not assert rights in, or ownership of,
trademarks and other proprietary rights we may establish or
acquire or that we will be able to successfully resolve such
conflicts.
We may not be able to anticipate or respond to changing fashion
trends.
Our success will depend in significant part upon our
ability to anticipate and respond to women's product and fashion
trends as well as to anticipate, gauge and react to changing
consumer demands in a timely manner. There can be no assurance
that our products will correspond to the changes in taste and
demand or that we will be able to successfully market products
which respond to such trends. If we misjudge the market for our
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products, we may be faced with significant excess inventories
for some products and missed opportunities with others, which
could have a material adverse effect on our business, results of
operations and financial condition.
Our business will be adversely affected by a recessionary
economy.
The fashion footwear industry in which we operate is
cyclical, with purchases tending to decline during recessionary
periods when disposable income is low. Purchases of fashion
footwear tend to decline during recessionary periods and may
also decline at other times. A recession in the national or
regional economies or uncertainties regarding future economic
prospects, among other things, could affect consumer spending
habits and have a material adverse effect on our business,
results of operations and financial condition.
Consolidation in our industry could make it more difficult for
us to sell our products.
In recent years, the retail industry has experienced
consolidation and other ownership changes. In the future,
retailers in the United States and in foreign markets may
consolidate, undergo restructurings or reorganizations, or
realign their affiliations, any of which could decrease the
number of stores available to carry our products or increase the
ownership concentration within the retail industry. There can
be no assurance that the future effect of any such changes will
not affect our business, results of operations and financial
condition.
We may not be able to effectively manage our inventory.
Our ability to manage our inventories properly is an
important factor in our operations. Inventory shortages can
adversely affect the timing of shipments to customers and
diminish brand loyalty. Conversely, excess inventories can
result in increased interest costs as well as lower gross
margins due to the necessity of providing discounts to
retailers. Our inability to effectively manage our inventory
would have a material adverse effect on our business, results of
operation and financial condition.
Our reliance on foreign manufacturers for the manufacture of our
products may put us at risk for interruptions or slow downs in
our business.
As is common in the footwear industry, we contract for the
manufacture of many of our products through foreign or other
unaffiliated manufacturers. We will not own or operate any
manufacturing facilities and will therefore be dependent upon
independent third parties for the manufacture of all our
products. Risks inherent in foreign operations include work
stoppages, transportation delays and interruptions, changes in
social, political and economic conditions which could result in
the disruption of trade from the countries in which potential
manufacturers or suppliers are located, the imposition of
additional regulations relating to imports, the imposition of
additional duties, taxes and other charges on imports,
significant fluctuations of the value of the dollar against
foreign currencies, or restrictions on the transfer of funds,
any of which could have a material adverse effect on our
business, results of operations and financial condition. Any
products we import will also be subject to United States customs
duties which will comprise a material portion of the cost of
merchandise. The United States and the countries in which our
products are produced may, from time to time, impose new quotas,
duties, tariffs, or other restrictions, or may adversely adjust
prevailing quota, duty or tariff levels, any of which could have
a material adverse effect on our business, results of operations
and financial condition. The inability of a manufacturer to
ship our orders of products in a timely manner or to meet our
quality standards could cause us to miss the delivery date
requirements of customers, which could result in cancellation of
orders, refusal to accept deliveries or a reduction in purchase
prices, any of which could have a material adverse effect on our
business, results of operations and financial condition.
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There is currently no active trading market for our common
stock.
Our common stock is traded in the non-Nasdaq over-the-
counter markets through the OTC Bulletin Board. There is
currently no active trading market for our common stock. There
can be no assurance that an active trading market will develop
or be maintained. Trading of securities on the OTC Bulletin
Board is generally limited and is effected on a less regular
basis than that effected on other exchanges or quotation systems
(such as the Nasdaq Stock Market), and accordingly investors who
own or purchase securities will find that the liquidity or
transferability of our securities is limited. Additionally, a
shareholder may find it more difficult to dispose of, or obtain
accurate quotations as to the market value, of our securities.
There can be no assurance that our common stock will ever be
included for trading on any stock exchange or through any other
quotation system (including, without limitation, the Nasdaq
Stock Market). In addition, our securities may be subject to
the Securities and Exchange Commission penny stock rules. These
rules may have the effect of reducing the level of trading
activity, if any, in the secondary market for our common stock.
Our founding shareholders control 43.9% of our common stock and
their interests may be different from and conflict with yours.
Samuel L. Edelman and Louise B. Edelman, the founders of
Utopia, together beneficially own approximately 36.3% of our
outstanding Common Stock and control an additional 7.6% of our
outstanding Common Stock. Accordingly, these shareholders will
likely be able to control the outcome of shareholder votes,
including votes concerning the election of directors, the
adoption or amendment of provisions in our Articles of
Incorporation, and the approval of mergers and other significant
corporate transactions. This level of concentrated ownership
may have the effect of delaying or preventing a change in our
management or voting control of Utopia.
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USE OF PROCEEDS
Before deducting offering expenses, we will receive
estimated proceeds from the sale of the 2,000,000 shares of
Common Stock offered by us of approximately $300,000 at an assumed
public offering price of $0.15 per share, based on the last
reported sale price of the Common Stock on the over-the-counter
market on May 1, 2000. We will not receive any of the
proceeds from the sale of 3,000,000 shares of Common Stock
offered by the Selling Shareholders. We intend to use the
proceeds received by us for working capital. We have reviewed
various strategic acquisition opportunities and have held
discussions with a number of such acquisition candidates. We
are not a party to any agreements regarding any acquisitions as
of the date of this Prospectus. Pending utilization as
described above, we intend to invest the net proceeds in short-
term, investment grade securities, certificates of deposit or
direct or guaranteed obligations of the U.S. government, or a
combination thereof.
MARKET FOR COMMON STOCK
Our common stock is not listed on any stock exchange. Our
stock is traded over-the-counter under the symbol "UTPM".
The following table sets forth the high and low closing
sales prices for the shares for the periods indicated, as
reported by the National Quotation Bureau, LLC.
Fiscal 1999 High Low
--------------------------------------------------------
First Quarter $0.375 $0.10
Second Quarter $0.468 $0.125
Third Quarter $0.65 $0.375
Fourth Quarter $0.562 $0.343
Fiscal 1998 High Low
--------------------------------------------------------
First Quarter $0.09 $0.01
Second Quarter $0.06 $0.01
Third Quarter $0.16 $0.01
Fourth Quarter $.1875 $0.01
These quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent
actual transactions.
At April 10, 2000, we had 1,029 shareholders of record. We
have no shares of any class of capital stock outstanding other
than our common stock. We have not paid any cash dividends on
our common stock since our inception, other than distributions
to Samuel L. Edelman, Louise B. Edelman and Stuart L. Kreisler
during the period that we were an S Corporation and in
connection with the termination of our status as an S
Corporation in 1991. We currently anticipate that any future
earnings will be retained for development of our business and do
not anticipate paying any dividends on our common stock in the
foreseeable future.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with
the consolidated financial statements and related notes which
appear elsewhere in this prospectus. The following discussion
contains forward- looking statements that involve risks and
uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a
result of certain factors, including those discussed below and
elsewhere in this prospectus, particularly under the heading
"Risk Factors."
Utopia Marketing, Inc., formerly known as Sam & Libby,
Inc., was founded in October 1987, primarily for the purpose of
developing and commercializing footwear products. In 1991, we
completed a public offering of our common stock. On July 2,
1996, we entered into an agreement with Maxwell Shoe Company
Inc. ("Maxwell") pursuant to which we sold our brand names,
trademarks, trade names and certain other intellectual property
rights to Maxwell, and received approximately $5.5 million. The
sale of our trade names and intellectual property to Maxwell
effectively terminated our then current operating business.
Since the sale of our trade names and intellectual property
to Maxwell, our management had been primarily involved in the
investigation of new business opportunities. During that time,
management had investigated possible acquisitions and mergers
and explored various start-up ventures. A number of
developments prompted our Board of Directors to conclude in
December 1998 that we should reenter the footwear business.
Since then, we have been developing and marketing women's
fashion footwear under the brand names "Naked Feet" and more
recently, "Ipanema".
On October 6, 1999, we acquired the rights from Ipanema
Shoe Corporation ("Ipanema") to market and commercialize
footwear under the brand name Ipanema[R]. In exchange for these
rights, we issued 1,000,000 shares of our common stock to
Ipanema and a convertible note for $500,000 plus interest due
October 5, 2002. Interest accrues under the note at prime rate
plus 1%. Additionally, in connection with the Ipanema asset
purchase, we entered into a Collection Services Agreement with
Ipanema, which expired on March 31, 2000, pursuant to which we
assisted in collecting Ipanema's outstanding accounts receivable
of approximately $2,000,000 in exchange for Ipanema's payment to
us of 30% of the gross collections of such accounts receivable.
As of January 1, 2000, we had received approximately $807,000
under the Collection Services Agreement.
Results of Operations
Years Ended January 1, 2000 and January 2, 1999
Revenues. We generated net revenues of $2,070,000 during
the second half of fiscal 1999. These revenues were generated
solely from the sales of women's footwear under the brand name
Naked Feet[TM]. We also had $807,000 of revenue in connection with
a Collection Services Agreement with Sumitomo Corporation of
America and Ipanema Shoe Corporation. This revenue will not
continue to be earned in the next fiscal year. Additionally,
interest income of $43,000 was generated from our excess cash in
a money market account, which was transferred to our factor (the
"Factor") as part of a factoring arrangement entered into on
April 1, 1999. The amount of our cash invested with the Factor
at January 1, 2000 was $185,000, which was included in cash and
cash equivalents. Due to the lack of revenue-generating
activities during the year ended January 2, 1999, our only
revenue was interest income of $122,000. This interest income
was earned as a result of our holding funds in a money market
account.
Gross Profit. We generated gross profit of $633,000 or
30.5% of net sales during the year ended January 1, 2000. We
did not generate any gross profit during the year ended January
2, 1999, as we did not conduct any operating business.
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Selling, General and Administrative Expenses. Selling,
general, and administrative expenses increased to $3,146,000 for
the year ended January 1, 2000 from $571,000 for the year ended
January 2, 1999, an increase of $2,575,000 primarily as a result
of our developing and marketing the new "Naked Feet[TM]" brand name.
The increase was attributable to sales commissions of $635,000,
sample costs of $162,000, officers' salaries of $250,000,
increases in personnel costs by $428,000, travel and
entertainment costs of $318,000, increases in rent by $57,000,
marketing and advertising costs of $100,000, postage and
shipping of $102,000, increases in technology costs by $83,000,
increases in telephone costs by $70,000 and depreciation and
amortization of $22,000.
Liquidity and Capital Resources
We relied on funds held in a money market account for
operating working capital in 1999. We invested approximately
$109,000 in computers and software during the fiscal year ended
January 1, 2000. On April 1, 1999, we entered into a factoring
agreement to finance growth in accounts receivable and
inventory. We invest our cash balances with this Factor. The
Factor purchases our accounts receivable and allows us to borrow
up to 85% of the uncollected accounts receivable. As of January
1, 2000, we had not borrowed from the Factor against these
uncollected accounts receivable. As of April 13, 2000, we had
borrowed $1,561,000 from the Factor against approximately
$2,365,000 of factored accounts receivable.
On October 5, 1999, we entered into a Collection Services
Agreement with Ipanema Shoe Corporation and its parent company,
Sumitomo Corporation of America, pursuant to which we were
providing services for the collection of certain accounts
receivables owned by Ipanema in exchange for 30% of the
receivables collected. In fiscal 1999 we received $807,000 in
revenue under the Collection Services Agreement. We will not
continue to earn revenues under this Agreement in the next
fiscal year.
We currently anticipate that we will require additional
capital to fund our working capital needs until we have positive
cash flows. During 1999, we depleted the money market
investment previously relied on for working capital. During the
start-up phase of our new operations, our cash requirements will
be substantial and may exceed the amount of working capital
available to us. Our ability to fund our operating requirements
and maintain an adequate level of working capital until we
achieve positive cash flows will depend primarily on our ability
to design, develop and market products that are accepted by the
market and generate rapidly increasing levels of sales. Our
failure to design, develop and market well-received products and
other events, including the costs and timing of establishing
trademarks and other proprietary rights; our ability to
manufacture products at an economically feasible cost; the
extent and terms of any collaborative manufacturing, marketing
or other arrangement; and changes in economic or competitive
conditions of our planned business, could cause us to require
additional capital prior to achieving positive cash flows. In
the event that we must raise additional capital to fund our
working capital needs, we may seek to raise such capital through
loans or the issuance of debt or equity securities. To the
extent we raise additional capital by issuing equity securities
or obtaining borrowings convertible into equity, ownership
dilution to existing shareholders will result, and future
investors may be granted rights superior to those of existing
shareholders. There can be no assurance that any additional
capital will be available to us on acceptable terms, or at all.
11
<PAGE>
BUSINESS
Overview
Utopia Marketing, Inc., formerly known as Sam & Libby,
Inc., was incorporated in Florida in October 1987, primarily for
the purpose of developing and commercializing footwear products.
In 1991, we completed a public offering of our common stock. On
July 2, 1996, we entered into an agreement with Maxwell pursuant
to which we sold our brand names, trademarks, trade names and
certain other intellectual property rights to Maxwell, and
received approximately $5.5 million. The sale of our trade
names and intellectual property to Maxwell effectively
terminated our then current operating business. Since the sale
of our trade names and intellectual property to Maxwell, our
management had been primarily involved in the investigation of
new business opportunities. During this time, management had
investigated possible acquisitions and mergers and explored
various start up ventures. From July 1996 until December 1998,
we did not engage in any revenue generating business activities.
A number of developments during the fourth quarter of 1998
prompted our Board of Directors to conclude that we should
reenter the footwear business. In January 1999, we commenced
the design and commercialization of a new line of fashion
footwear under the Naked Feet[TM] brand.
On October 6, 1999, we completed the purchase of certain
assets, including certain trademarks, of Ipanema Shoe
Corporation pursuant to the terms of an Asset Purchase Agreement
dated as of October 5, 1999. Under the Asset Purchase
Agreement, we acquired rights to the Ipanema brand name.
Industry Overview
The fashionable footwear industry is highly competitive.
Our competitors include specialty shoe companies as well as
companies with diversified footwear product lines. The recent
substantial growth in the sales of fashionable footwear has
encouraged the entry of many new competitors and increased
competition from established companies. Most of these
competitors, including Kenneth Cole, Nine West, DKNY, Sketchers,
Nike and Guess, have significantly greater financial and other
resources than us. We believe effective advertising and
marketing, fashionable styling, high quality and value are the
most important competitive factors and we intend to employ these
elements as we develop our products.
Acquisition of Assets of Ipanema
On October 6, 1999, we completed the purchase of certain
assets, including certain trademarks, of Ipanema pursuant to the
terms of an Asset Purchase Agreement dated as of October 5,
1999. As the purchase price for the assets, we issued
1,000,000 shares of our common stock and we issued a
subordinated convertible promissory note in the principal amount
of $500,000 due on October 5, 2002. In connection with the
acquisition, we entered into a Collection Services Agreement
with Ipanema and its parent company, Sumitomo Corporation of
America, which expired on March 31, 2000, pursuant to which we
were providing services for the collection of certain accounts
receivable owned by Ipanema. As compensation for the collection
services provided by us under the Collection Services Agreement,
we received 30% of all accounts receivables collected under the
Collection Services Agreement.
Strategy
Our long-term objective is to develop and commercialize
leading brands of women's fashion footwear. The key elements of
our operating strategy are as follows:
12
<PAGE>
* Develop and promote a recognizable brand names for our
footwear products. We believe that we can continue to
develop our Naked Feet[TM] and Ipanema[R] brands and
generate broad recognition in our target markets by
participating in trade shows, fashion shows and other
industry events.
* Distribute Products through Selected National
Retailers and Independent Accounts. We sell our
products through selected national retailers and
through independent retailers. Our Naked Feet[TM] brand
is sold primarily through high-end or exclusive
retailers and our Ipanema[R] brand is sold primarily
through higher volume retailers.
* Maintain Flexibility in Manufacturing. We utilize
third-party foreign manufacturers for the manufacture
of our products. We believe that we can maintain a
current inventory by having our products developed in
small lots.
* Continually Update our Product Designs. We design all
of our products internally. Our management is
actively involved in the product design process and is
continually identifying leading fashion trends to
incorporate into our product designs. We engage
third-parties to conduct product testing for us and we
participate in trade shows and preview our product
development ideas and designs with selected national
accounts.
Design and Development
We are constantly engaged in the process of updating the
designs of our lines of fashion footwear. The design process
for a new product typically begins about nine months before the
start of the season for the product. The major influences upon
the design process include the designer's impression of current
worldwide lifestyle and clothing trends and shoe fashions, as
well as the history of a particular shoe or fashion style in the
target market. Other factors include the availability of raw
materials, the capabilities of the factories that will
manufacture the products and the target retail cost of the
product.
We currently design all of our products internally. Our
senior management is actively involved in the analysis of
fashion trends and the design process. We attempt to minimize
the risks relating to changing fashion trends and product
acceptance by testing various styles before each selling season,
evaluating trade acceptance before commencing volume
manufacture, and closely monitoring retail sales trends after
retail introduction. From time to time we preview our new
product designs at trade shows and similar events, and we permit
some of our national retail accounts the opportunity to view of
product designs prior to ordering our products.
Marketing and Promotion
We are currently promoting our Naked Feet[TM] and Ipanema[R]
brands of footwear products. Our strategy is to develop an
image and awareness of our product brands. We advertise, market
and promote our products through a variety of means, including
trade journal advertising, product packaging and cooperative
advertising. Senior management is directly involved in shaping
our image and our advertising and promotional activities. We
currently are focusing our efforts on marketing our products
only in the United States.
Our products are sold through independent sales
representatives who generally spend all of their business
efforts selling our products to national and independent
retailers. Currently, two sales representatives sell our Naked
FeetT brand of footwear products and two sales representatives
sell our Ipanema[R] brand of footwear products. Our Naked Feet[TM]
brand is generally promoted to and sold by higher-end retailers
and our Ipanema[R] brand is generally promoted to and sold by
13
<PAGE>
higher volume retailers whose customers are more price
sensitive.
Manufacturing
We do not currently manufacture any products. All of our
products are manufactured by third-party foreign manufacturers.
We have implemented a quality control program to ensure that
goods bearing our trademarks meet our standards. Because our
products are manufactured by third-parties, we inspect
prototypes of each product prior to manufacture by such third-
parties, through our employees or sourcing agents, we inspect
the manufacturing facilities, and product samples are inspected
prior to shipment from our distributors to our customers.
A wide range of materials are used in the production of our
products. We may from time to time experience significant
manufacturing delays caused by the unavailability of raw
materials. Moreover, the dependence on foreign manufacturers
subjects us to the general conditions and risks of doing
business internationally, including reduction in the
availability of production capacity, errors in complying with
product specifications, insufficient quality control, failure to
meet production deadlines, and increases in manufacturing costs.
We can not predict whether the conditions under which we plan to
conduct business abroad will remain favorable or whether any
events will occur that could adversely affect the availability
of independent foreign manufacturing on terms satisfactory to
us.
Sales and Distribution
We have contracted with an independent warehouse facility
to provide us with importation, warehouse, distribution,
inspection and other services. The primary distribution channel
for our products is sales through national and regional
retailers, as well as independent specialty stores. We do not
currently intend to own or operate our own retail stores.
Competition
The fashion footwear industry is highly competitive. We
compete with a number of domestic and foreign designers and
manufacturers of footwear. Almost all of our competitors have
significantly greater financial resources than us, and many have
full lines of product offerings, compete with us for
manufacturing sources and spend substantially more resources on
product advertising than we are able to spend. Although Utopia
and its management have experience in the footwear industry, we
are, and are perceived by the market as, a new entrant to the
footwear industry. Our products are marketed and sold to image
conscious consumers and our failure to accurately predict and
target future trends or to maintain a fashionable image could
have a material adverse impact on our ability to generate
product sales or develop a recognizable brand name. There can
be no assurance that we will be able to develop and market well-
received products.
Intellectual Property
Our significant trademarks are our Naked Feet[TM] brand name
and the Ipanema[R] brand that we recently acquired. We are in
the process of registering our ownership and right to use of the
Naked Feet[TM] name with the United States Patent and Trademark
office and the trademark registration for the Ipanema[R] name has
been assigned to us. We believe that trademarks and other
proprietary rights are important to our success and our
competitive position. Accordingly, we intend to devote
substantial resources to the establishment and protection of
trademarks and other proprietary rights. There can be no
assurance that the actions taken by us to establish and protect
any trademarks or other proprietary rights will be adequate to
prevent imitation of our products by others or to prevent others
from prohibiting sales of any products we may develop in
14
<PAGE>
violation of the trademarks and proprietary rights of others.
Moreover, no assurance can be given that others will not assert
rights in, or ownership of, trademarks and other proprietary
rights that we may establish or acquire, or that we will be able
to successfully resolve such conflicts.
Employees & Contractors
As of March 21, 2000, we had 10 full-time employees. Most
of our sales efforts are conducted by third-party contractors.
We have engaged four independent contractors to undertake sales
efforts on our behalf. We believe our employee relations are
good.
Legal Proceedings
There are no material legal proceedings against us or our
properties, or to which we are a party.
Properties
Our executive office is located in West Palm Beach,
Florida, where we lease approximately 2,700 square feet of
office space. We believe that our facilities are adequate for
our current needs and that additional facilities can be leased
to meet future needs. Our executive offices are located at 312
Clematis Street, Suite 500, West Palm Beach, Florida 33401, and
our telephone number is (561) 835-9998.
15
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Our current directors and executive officers are listed below.
Name Age Position
- ---- --- --------
Samuel L. Edelman 48 Chairman of the Board, President
and Chief Executive Officer
Louise B. Edelman 46 Director, Executive Vice-President
of Corporate Development and Secretary
Vance Kistler 28 Chief Financial Officer
Joel Solomon 53 Acting Chief Operating Officer and
Director
Bruce Oberfest 52 Director
Robert Wildrick 48 Director
Stuart Kreisler 53 Director
Samuel L. Edelman, a co-founder of the Company, has since
our inception served as our Chairman of the Board, President
and Chief Executive Officer. From April 1983 to July 1987, Mr.
Edelman served as the President of the Esprit Footwear Division
of Esprit De Corp., an apparel and footwear company ("Esprit").
Prior to April 1983, Mr. Edelman occupied various executive
positions, including Executive Vice President of Kenneth Cole
Productions, a footwear company.
Louise B. Edelman, a co-founder of the Company, has served
as a director since our founding. She served as Senior Vice
President - Image from our founding until the second quarter of
1992. Since that time, Ms. Edelman has served as Executive Vice
President - Corporate Development. Prior to 1987, Ms. Edelman
held various positions, including National Sales Manager for
Esprit Kids Shoes, Director of Public Relations for Calvin
Klein, Ltd., a fashion company, and Senior Fashion Editor of
Seventeen, Mademoiselle and Harper's Bazaar magazines.
Vance Kistler serves as our Chief Financial Officer. Mr.
Kistler is a certified public accountant. From September 1994
until his employment by us in June 1998, Mr. Kistler worked with
Arthur Andersen LLP as a senior auditor.
Joel Solomon has served as a director since March 20, 1998.
For more than five years prior to 1996 Mr. Solomon was the
President, a director and principal shareholder of San Francisco
Shoe Works, Inc., an importer of lady's and children's footwear
and accessories to the United States for Esprit Shoes &
Accessories Far East, Ltd., of which he was a managing director
for more than five years.
Bruce Oberfest has been a Certified Public Accountant and
principal owner of the accounting and consulting firm of Bruce
D. Oberfest & Associates for more than the past five years. Mr.
Oberfest was elected as a director on October 6, 1997.
Robert Wildrick has served as a director since June 22,
1999. Mr. Wildrick also serves as a director and as the
president and Chief Executive Officer of Joseph A. Banks, Inc.,
a retail clothing store chain. From 1995 through 1998, Mr.
Wildrick was the Chairman, President and Chief Executive Officer
of Venture Stores, a national department store chain. For more
than five years prior to 1995, Mr. Wildrick served as Executive
Vice President of Belk Stores, a national department store
chain.
Stuart Kreisler has served as a director since June 22,
1999. From December 1996 through February 1999, Mr. Kreisler
served as the President and Chief Operating Officer of Moore's
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<PAGE>
Retail Group, a men's retail and manufacturing company. Prior
to December 1996, Mr. Kreisler was a self-employed private
investor.
With the exception of Sam Edelman and Libby Edelman, who
are married to each other, there is no family relationship among
directors or executive officers of the Company.
In January 1998, Venture Shoes filed a petition under
Chapter 11 of the federal bankruptcy laws. At the time of the
Chapter 11 filing, Robert Wildrick was Chairman, President and
Chief Executive Officer of Venture Shoes.
EXECUTIVE COMPENSATION
The following table summarizes the compensation during the
fiscal years ended January 1, 2000, January 2, 1999 and January
3, 1998, earned by our Chief Executive Officer.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------------ ------------------------- -------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation(1)
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------ ---- ------ ----- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Samuel L. Edelman 1999 0(1) - - - - - -
President and CEO 1998 0 - - - - - -
1997 0 - - - - - -
</TABLE>
(1) Mr. Edelman did not receive a salary in connection with
his efforts on behalf of the Company from 1996 through the first
quarter of 1999. Mr. Edelman began accruing an annual salary of
$150,000 as of February 1, 1999.
Employee Benefit Plans
1999 Long-Term Incentive Plan. We have adopted the Utopia
Marketing, Inc. 1999 Long-Term Incentive Plan (the "1999 Plan")
which provides for the grant of both nonstatutory stock options
and stock options intended to be treated as incentive stock
options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. The 1999 Plan is intended to
provide incentives to, and rewards for, certain of our employees
and non-employee directors. Those eligible are people who have
contributed and will continue to contribute to our success.
Incentive stock options granted under the 1999 Plan are non-
transferable other than by will or by the laws of descent and
distribution. The 1999 Plan may be amended at any time by the
Board, although the Board may condition any amendment on the
approval of our shareholders if such approval is necessary or
advisable with respect to tax, securities or other applicable
laws. The total number of shares of common stock reserved for
issuance under the 1999 Plan is 1,500,000. We have granted
under the 1999 Plan stock options to acquire 150,000 shares of
common stock, 50,000 of which are currently exercisable. The
1999 Plan terminates in September 2009.
1991 Stock Option Plan. In September 1991, the Board of
Directors approved the 1991 Stock Option Plan (the "1991 Plan"),
which allows for the grant of incentive stock options (as
defined in Section 422 of the Internal Revenue Code) to
employees and nonstatutory stock options to both employees and
17
<PAGE>
outside Directors. An aggregate of 1,500,000 shares of Common
Stock have been reserved for issuance under the 1991 Plan. We
have issued 1,210,200 options under the 1991 Plan of which
580,200 have been exercised. Although we are authorized to
grant up to 289,800 additional options under the 1991 Plan, the
Board of Directors has determined that no additional options
will be awarded under the 1991 Plan.
Under the 1991 Plan, stock options intended to qualify as
incentive stock options under Section 422 of the Internal
Revenue Code were granted to employees at prices not less than
the fair market value of the common stock on the date of grant.
The 1991 Plan permitted, and we have granted, from time to time,
non-statutory stock options at exercise prices less than the
fair market value of the common stock on the date of grant. The
1991 Plan specifies that our outside Directors are to receive a
stock option grant of 5,000 shares on the date first elected to
the Board and an additional 5,000 shares each year thereafter
that they continue to serve as directors. Such options were
granted at the fair market value of the common stock on the date
of the grant, vested over four years, and are exercisable only
while the outside Director remains a Director. The 1991 Plan
also permits us to grant rights to purchase common stock at a
price which is at least 50% of the fair market value of the
common stock on the date of grant. The offer of a right must be
accepted within six months of its grant by the execution of a
restricted stock purchase agreement between the Company and the
offeree and the payment of the purchase price of the shares.
Employment Agreements
In 1998, we entered into an employment agreement with Vance
Kistler, who currently serves as our Chief Financial Officer.
The agreement provides, among other things, for an annual salary
of approximately $80,000, 150,000 stock options, which vest
50,000 per year beginning June 1999, expense reimbursements, a
bonus up to 10% of salary based on annual sales of the Company
in fiscal year 1999 and 2000, severance pay, and a covenant not
to compete.
Compensation of Directors
Each of our non-employee directors is entitled to receive a
fee of $10,000 per year and $500 for attendance at each meeting
of the Board of Directors. In addition, each non-employee
director is entitled to receive $500 for attendance at each
meeting of a committee of the Board of Directors. However, each
of non-employee director has waived these fees for 1999. No
decision has yet been made as to whether the non-employee
directors will be waiving these fees for the 2000 calendar year.
Each of our non-employee directors is entitled to receive
options to purchase 5,000 shares of common stock upon their
appointment to the Board of Directors and is entitled to receive
an option to purchase 5,000 shares of common stock annually
thereafter, so long as they continue to serve on the Board of
Directors.
All directors are reimbursed for out of pocket expenses
incurred in connection with attending meetings of the Board of
Directors.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND
SELLING SECURITY HOLDERS
The table below lists information about the beneficial
ownership of our common stock as of April 10, 2000 and as
adjusted to reflect the sale of the shares of common stock
offered in this prospectus by:
* each person whom we know to own beneficially more than 5%
of the common stock;
* each of our directors,
* by each of our executive officers named above;
* all of our directors and executive officers as a group;
and
* the selling shareholders identifiable on the date of this
prospectus.
Except as otherwise noted, the persons named in the table
have sole voting and investment power with respect to all shares
of common stock shown as beneficially owned by them, subject to
community property laws where applicable.
<TABLE>
<CAPTION> Shares Beneficially Owned Shares to Shares Beneficially Owned
Name and Address Before the Offering (1) be Sold After the Offering
- ---------------- ------------------------- --------- -------------------------
Number % Number %
------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Samuel L. Edelman (2)(5) 6,684,982 43.9% -0- 6,684,982 43.9%
Louise B. Edelman (3) 5,519,482 36.3% -0- 5,519,482 36.3%
Joel Solomon 710,000 4.7% -0- 710,000 4.7%
Bruce Oberfest -0- * -0- -0- *
Stuart Kreisler (5) 1,165,500 7.7% -0- 1,165,500 7.7%
Robert Wildrick -0- * -0- -0- *
Joseph Wascura -0- * -0- -0- *
Vance Kistler (4) 50,000 * -0- 50,000 *
All officers and directors
as a group (8 persons)(6) 7,444,982 48.8% -0- 7,444,982 48.8%
5% Shareholders:
Lane International Trading, Inc. 1,358,608 8.9% -0- 1,358,608 8.9%
31284 San Antonio Street
Hayward, CA 94544
Braha Industries, Inc. 1,339,260 8.8% -0- 1,339,260 8.8%
1 East 33rd Street
New York, NY 10016
Selling Shareholder:
Sumitomo Corporation of America (7) 1,000,000 6.6% 1,000,000 -0- *
600 Third Avenue
New York, New York 10116
_______________________
* Less than 1%.
</TABLE>
(1) Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission,
based on factors including voting and investment power
with respect to shares, subject to the applicable
community property laws. The percentage of beneficial
ownership is based on 15,216,367 shares of common stock
outstanding as of April 10, 2000. Also, shares of common
stock subject to options or warrants currently
exercisable, or exercisable within 60 days of April 10,
2000, are deemed outstanding for the purpose of computing
the percentage ownership of the person holding such
options or warrants, but are not deemed outstanding for
computing the percentage ownership of any other person.
(2) Includes 2,538,250 shares owned by Louise B. Edelman
over which Mr. Edelman shares control, and 400,160 shares
owned by Mr. Edelman's relatives with respect to which he
does not admit beneficial ownership.
(3) Includes 2,581,072 shares owned by Samuel L. Edelman
over which Ms. Edelman shares control, and 400,160 shares
owned by Ms. Edelman's relatives with respect to which
she does not admit beneficial ownership.
(4) Includes 50,000 options, which are currently
exercisable.
(5) Stuart Kreisler holds 1,165,000 shares of common stock
of the Company under an Amended and Restated Shareholders
Agreement. The Agreement terminates on April 30, 2002.
Pursuant to this Agreement, Samuel L. Edelman effectively
exercises voting control over all of the shares of common
stock held by Stuart Kreisler.
(6) Includes 50,000 options awarded to one officer which
are currently exercisable.
(7) On October 5, 1999, we entered into a Collection
Services Agreement with Ipanema Shoe Corporation, a
subsidiary of Sumitomo Corporation of America, pursuant
to which we agreed to provide services for the collection
of certain accounts receivable owned by Ipanema in
exchange for 30% of the receivables collected.
19
<PAGE>
PLAN OF DISTRIBUTION
The distribution of shares of common stock by the selling
shareholders and Utopia is not subject to any underwriting
agreement. The selling shareholders may, from time to time,
sell all or a portion of the shares of common stock on any
market upon which the common stock may be quoted, in privately
negotiated transactions or other wise, at fixed prices that may
be changed, at market prices prevailing at the time of sale, at
prices related to such market prices or at negotiated prices.
The shares may be sold by one or more of the following methods,
without limitation:
* a block trade in which the broker or dealer so engaged
will attempt to sell the shares as agent, but may
position and resell a portion of the block as principal
to facilitate the transaction;
* purchases by a broker or dealer as principal and resale
by the broker or dealer for its account pursuant to this
prospectus;
* ordinary brokerage transactions and transactions in
which the broker solicits purchasers; and
* privately negotiated transactions;
* a combination of any of these methods of sale.
In effecting sales, brokers and dealers engaged by a
selling shareholder may arrange for other brokers or dealers to
participate. Brokers or dealers may receive commissions or
discounts from the selling shareholder, or, if any such broker-
dealer acts as agent for the purchaser of such shares, from such
purchaser, in amounts to be negotiated. These commissions or
discounts are not expected to exceed those customary in the
types of transactions involved.
The selling shareholders and any broker-dealers or agents
that participate with the selling shareholders in the sales of
the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 (the
"Securities Act") in connection with those sales. In such
event, any commissions received by such broker-dealers or agents
and any profit on the resale of the shares of common stock
purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act.
The shares of Common Stock to be sold by us may be offered
and sold by us directly or through agents designated by us from
time to time. Unless otherwise indicated in an amendment to this
prospectus, any such agent or agents will be acting on a best
efforts basis for the period of its or their appointment. Any
agent participating in the distribution of the Common Stock may
be deemed to be an "underwriter", as that term is defined in the
Securities Act, of the Securities so offered and sold. The
Securities also may be sold to dealers at the applicable price
to the public set forth in the prospectus. Such dealers may be
deemed to be "underwriters" within the meaning of the Act .
Sales of Common Stock also may be effected from time to time in
one or more types of transactions (which may include block
transactions, special offerings, exchange distributions,
secondary distributions or purchases by a broker or dealer) on
any other national securities exchange on which our stock is
then listed, in the over-the-counter market, in negotiated
transactions, through options transactions relating to the
shares, or a combination of such methods of sale, at market
prices prevailing at the time of sale, at negotiated prices or
at fixed prices. Such transactions may or may not involve
underwriters, brokers or dealers. Underwriters and agents may
be entitled, under agreements entered into with us, to
indemnification by us against certain civil liabilities,
including liabilities under the Securities Act.
We are required to pay all fees and expenses incident to
the registration of the shares of common stock under this
prospectus.
20
<PAGE>
DESCRIPTION OF SECURITIES
Our authorized capital consists 45,000,000 shares of common
stock and 5,000,000 of preferred stock. As of February 1, 2000,
the common stock was held by approximately 1,029 shareholders of
record and we had issued no shares of our authorized preferred
stock.
Common Stock
Each shareholder is entitled to one vote on all matters
submitted to a vote of shareholders for each share of common
stock held. Cumulative voting for the election of directors is
not provided for in our articles of incorporation, which means
that a plurality of the shares of common stock voted can elect
all of the directors then standing for election. Subject to any
preferences as may apply to preferred stock outstanding at the
time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available
for dividends, at such times and in such amounts as our board of
directors deems appropriate. The common stock is not entitled
to preemptive rights and is not subject to conversion or
redemption.
Preferred Stock
The board of directors is authorized, subject to any
limitations prescribed by the general corporation law of
Florida, to:
* provide for the issuance of shares of preferred stock in
one or more series;
* establish the number and designation of shares to be
included in each series; and
* determine or alter the rights, preferences, privileges
and restrictions granted to or imposed upon each series.
The board of directors may authorize the issuance of preferred
stock with voting or conversion rights that could adversely
affect the voting power or other rights of the holders of common
stock. Therefore, the issuance of preferred stock may have the
effect of delaying, deterring or preventing a change in control.
Anti-Takeover Effects of Certain Provisions of Florida Law and
our Articles of Incorporation and Bylaws
Certain provisions of our Articles and Bylaws summarized
below may be deemed to have an anti-takeover effect and may
discourage, delay, defer or prevent a tender offer or takeover
attempt that a shareholder might consider in its best interest,
including those attempts that might result in a premium over the
market price for the shares held by the shareholders.
Authorized but Unissued Shares. Subject to the applicable
requirements of the exchange or automated quotation service on
which our shares may be listed or traded, the authorized but
unissued shares of common stock and preferred stock are
available for future issuance without shareholder approval.
These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise
additional capital, corporate acquisitions or employee benefit
plans. The existence of authorized but unissued and unreserved
common stock and preferred stock may enable the board of
directors to issue shares to persons friendly to current
management which could render more difficult or discourage an
attempt to obtain control of Utopia by means of a proxy contest,
tender offer, merger or otherwise, and thereby protect the
continuity of our management.
21
<PAGE>
Meetings of Shareholders. The Bylaws provide that special
meetings of shareholders may be called by our President, the
Board, or the holders of at least 50% percent of all shares of
our stock entitled to vote at the meeting. Only business that
is related to the purpose stated in the notice of the special
meeting may be considered at that special meeting.
Indemnification and Limitation of Liability. The Articles
and Bylaws provide that our directors, officers, employees and
agents shall be indemnified by us to the full extent permitted
by Florida law, as it now exists or may be amended in the
future, against all expenses and liabilities reasonably incurred
in connection with service for or on our behalf. The Bylaws
also provide that the right of any person to indemnification
shall be a contract right and shall not be exclusive of any
other right to which such person may be entitled. The Articles
contain a provision permitted by Florida law that generally
eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, unless the
director has breached his or her duty of loyalty, failed to act
in good faith, engaged in intentional misconduct or a knowing
violation of law, paid a dividend or approved a stock repurchase
in violation of Florida law or obtained an improper personal
benefit. This provision does not alter a director's liability
under the federal securities laws. In addition, this provision
does not affect the availability of equitable remedies, such as
injunction or rescission, for breach of fiduciary duty.
Amendment of Bylaws. The Articles provide that the Bylaws
may be amended or repealed by the Board of Directors. The
Bylaws provide that they may be amended or repealed by the Board
of Directors or the holders of a majority of our shares entitled
to vote. Both the Articles and the Bylaws provide that the
Board may not amend or repeal bylaws adopted by the shareholders
if the shareholders specifically provide that such bylaws may
not be so amended or repealed.
Statutory Business Combination Provisions. We are subject
to anti-takeover provisions under Florida law that apply to a
public corporation organized under Florida law, unless such
corporation has elected, by provisions in its articles of
incorporation or bylaws, that such anti-takeover provisions not
apply to it. The Florida Control Share Act generally provides
that shares acquired above specified thresholds will not possess
any voting rights unless such voting rights are approved by the
board of directors or a majority of a corporation's
disinterested shareholders. Florida law also contains an
"affiliated transaction" provision that prohibits a publicly-
held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate
transactions with an "interested shareholder," unless: (i) the
transaction is approved by a majority of disinterested directors
before the person becomes an interested shareholder; (ii) the
interested shareholder has owned at least 80% of the
corporation's outstanding voting shares for at least five years;
or (iii) the transaction is approved by the holders of two-
thirds of the corporation's voting shares other than those owned
by the interested shareholder. An interested shareholder is a
person who together with affiliates and associates beneficially
owns more than 10% of our outstanding voting shares. The
Florida Control Share Act and the "affiliated transaction"
statute are applicable to us.
22
<PAGE>
CHANGES IN ACCOUNTANTS
Effective as of March 15, 1999, our Board of Directors
determined that Michael, Adest & Blumenkrantz (the "Former
Accountant") would not continue to serve as our independent
public accounting firm. Effective as of such date, our Board of
Directors also engaged Rachlin, Cohen & Holtz to audit our
financial statements for the fiscal year ended January 2, 1999
and to serve as our independent public accounting firm for our
next fiscal year.
The Former Accountant's report on our financial statements
for the fiscal year ended January 3, 1998 did not contain an
adverse opinion or a disclaimer of opinion, nor was it qualified
or modified as to uncertainty, audit scope, or accounting
principles. During our fiscal year ended January 2, 1999, and
during the period January 3, 1999 through March 15, 1999, there
were no disagreements between us and our Former Accountant on
any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if
not resolved to the satisfaction of the Former Accountant, would
have caused the Former Accountant to refer to the subject matter
of the disagreement in connection with the report. During our
fiscal year ended January 2, 1999, and during the period January
3, 1999 through March 15, 1999: (i) the Former Accountant did
not advise us of the lack of internal controls necessary to
develop reliable financial statements; (ii) the Former
Accountant did not advise us that it could no longer rely on
representations of our management or that it was unwilling be
associated with the financial statements prepared by our
management; (iii) the Former Accountant did not advise us of the
need to significantly expand the scope of its audit or of the
existence of information that if further investigated could
materially impact the fairness or reliability of audited reports
or financial statements or cause the accountant to be unable to
rely on management's representation; and (iv) the Former
Accountant did not advise us of information that, in the opinion
of the Former Accountant, materially impacted the fairness or
reliability of a previously issued audit report or underlying
financial statement.
EXPERTS
Our consolidated financial statements at January 2, 1999,
and for the year in the period ended January 2, 1999, appearing
in this Prospectus and Registration Statement have been audited
by Rachlin Cohen & Holtz LLP, independent auditors, and our
consolidated financial statements for the year in the period
ended January 3, 1998, appearing in this Prospectus and
Registration Statement have been audited by Michael, Adest &
Blumenkrantz, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and are included in
reliance upon such reports given on the authority of such firms
as experts in accounting and auditing.
LEGAL MATTERS
Holland & Knight LLP, Miami, Florida will pass upon the
validity of the common stock offered by this prospectus for us.
23
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and special reports, proxy
statements, and other information with the Securities and
Exchange Commission. Such reports, proxy and other information
can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at its regional
offices located at 7 World Trade Center, New York, New York
10048 and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Commission maintains a Web
site that contains all information filed electronically by us.
The address of the Commission's Web site is
(http://www.sec.gov.).
This prospectus constitutes a part of a registration
statement on Form SB-2 filed by us with the Commission under the
Securities Act, with respect to the securities offered in this
prospectus. This prospectus does not contain all the
information that is in the registration statement. Certain parts
of the registration statement are omitted as allowed by the
rules and regulations of the Commission. We refer to the
registration statement and to the exhibits to such registration
statement for further information with respect to Utopia
Marketing, Inc. and the securities offered in this prospectus.
Copies of the registration statement and the exhibits to such
registration statement are on file at the offices of the
Commission and may be obtained upon payment of the prescribed
fee or may be examined without charge at the public reference
facilities of the Commission described above.
Statements contained in this prospectus concerning the
provisions of documents are necessarily summaries of the
material provisions of such documents, and each statement is
qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
REPORTS TO SECURITY HOLDERS
We distribute to our shareholders annual reports containing
audited financial statements and will make available copies of
quarterly reports for the first three quarters of each fiscal
year containing unaudited interim financial information
24
<PAGE>
FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants...................... F-2
Balance Sheet at January 1, 2000........................................ F-3
Statements of Operations for the years ended January 1, 2000 and
January 2, 1999......................................................... F-4
Statements of Shareholders' Equity for the period January 3, 1998
to January 1, 2000...................................................... F-5
Statements of Cash Flows for the years ended January 1, 2000 and
January 2, 1999......................................................... F-6
Notes to Financial Statements........................................... F-7
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Utopia Marketing, Inc.
We have audited the accompanying balance sheet of Utopia
Marketing, Inc., as of January 1, 2000, and the related
statements of operations, stockholders' equity, and cash flows
for the years ended January 1, 2000 and January 2, 1999. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform 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 disclosed in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Utopia Marketing, Inc. as of January 1, 2000, and the results
of its operations and its cash flows for the years ended January
1, 2000 and January 2, 1999, in conformity with generally
accepted accounting principles.
RACHLIN COHEN & HOLTZ LLP
Fort Lauderdale, Florida
February 11, 2000
F-2
<PAGE>
UTOPIA MARKETING, INC.
BALANCE SHEET
January 1, 2000
(In thousands)
ASSETS
------
Current Assets:
Cash and cash equivalents $ 185
Due from factor, net of allowance 550
Merchandise inventories 1,418
Other 54
--------
Total Current Assets 2,207
Property and Equipment 98
Intangible Assets 648
--------
Total Assets $ 2,953
========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts Payable $ 1,716
Accrued expenses, primarily accrued
officers' salaries 317
--------
Total current liabilities 2,033
--------
Note Payable 468
--------
Commitments, Contingencies and Other Matters -
Shareholders' Equity:
Preferred stock, $.001 par value; 5,000,000
shares authorized; none issued and
outstanding -
Common stock, $.001 par value; 45,000,000
shares authorized; 15,216,367 shares issued
and outstanding 15
Additional paid-in capital 33,147
Deficit (32,710)
--------
Total shareholders' equity 452
--------
Total liabilities and shareholders equity 2,953
========
See Notes to Financial Statements
F-3
<PAGE>
UTOPIA MARKETING, INC.
STATEMENTS OF OPERATIONS
Years Ended January 1, 2000 (1999) and January 2, 1999 (1998)
(In thousands except per share data)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net Sales $ 2,070 $ -
Cost of Sales 1,437 -
---------- ----------
Gross Profit 633 -
Selling, general and administrative expenses 3,146 571
---------- ----------
Operating loss (2,513) (571)
---------- ----------
Other Income (Expense):
Collection fees 807 -
Interest expense (10) -
Interest income 43 122
---------- ----------
840 122
---------- ----------
Net Loss (1,673) (449)
========== ==========
Net Loss Per Common Share $ (0.12) $ (0.03)
========== ==========
Weighted Average Shares Outstanding 14,457 14,216
========== ==========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
UTOPIA MARKETING, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Common Stock Additional
-------------------- Paid-In
Shares Amount Capital Deficit Total
------ ---------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance, January 3, 1998 14,216 $ 14 $ 32,947 $ (30,588) $ 2,373
Year Ended January 2, 1999:
Net loss - - - (449) (449)
------ ---------- --------- ---------- -------
Balance, January 2, 1999 14,216 14 32,947 (31,037) 1,924
Year Ended January 1, 2000:
Issuance of common stock
related to acquisition 1,000 1 200 201
Net loss - - - (1,673) (1,673)
------ ---------- --------- ---------- -------
Balance, January 1, 2000 15,216 $ 15 $ 33,147 $ (32,710) $ 452
====== ========== ========= ========== =======
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
UTOPIA MARKETING, INC.
STATEMENTS OF CASH FLOWS
Years Ended January 1, 2000 (1999) and January 2, 1999 (1998)
(In thousands)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (1,673) $ (449)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 32 -
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable - 25
Due from factor (550) -
Merchandise inventories (1,418) -
Other 14 (54)
Increase in:
Accounts payable and accrued liabilities 1,947 31
---------- ----------
Net cash used by operating activities (1,648) (447)
Cash Flows from Investing Activities:
Purchase of property and equipment (109) -
Net Decrease in Cash and Cash Equivalents (1,757) (447)
Cash and Cash Equivalents, Beginning 1,942 2,389
---------- ----------
Cash and Cash Equivalents, Ending $ 185 $ 1,942
========== ==========
Supplemental Disclosures:
Cash paid for interest $ 3
==========
Non Cash Investing and Financing Activities:
Acquisition of intangibles through issuance
of debt and common stock $ 659
==========
</TABLE>
See Notes to Financial Statements
F-6
UTOPIA MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 1, 2000 AND JANUARY 2, 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Capitalization
On June 16, 1998, Utopia Marketing, Inc., a Florida
corporation, was incorporated as a wholly-owned
subsidiary of Utopia Marketing, Inc., a California
corporation. On July 30, 1998, an agreement and plan of
merger was entered into by the companies, whereby the
Florida corporation was surviving corporation. Each
share of the California corporation common stock was
exchanged for one share of the Florida corporation common
stock, and the California corporation ceased to exist.
The Company's Articles of Incorporation authorize the
Company to issue and have outstanding at any one time
45,000,000 shares of common stock with a par value of
$0.001 and 5,000,000 shares of preferred stock with a par
value of $0.001. The Board of Directors is authorized to
fix the rights, preferences, and privileges of the
preferred stock.
Business
In December 1998, the Company finalized plans to begin
designing, developing and marketing women's footwear
under the trademark NakedFeet[TM]. Until that decision,
the Company was inactive following a sale in July 1996 of
all of the Company's trademarks, trade names, and
intellectual property.
Fiscal Year
The Company has a 52/53 week fiscal year ending on the
Saturday closest to December 31 of each year.
Cash and Cash Equivalents
The Company considers all highly liquid debt and equity
instruments with original maturities of three months or
less to be cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject the
Company to concentrations of credit risk consist
primarily of cash and cash equivalents and the due from
factor.
Cash and Cash Equivalents
From time to time during the year, the Company had
deposits in financial institutions in excess of the
federally insured limits. At January 1, 2000, the Company
did not have deposits in excess of federally insured
limits. The Company maintains its cash with a high
quality financial institution which the Company believes
limits these risks.
F-7
<PAGE>
UTOPIA MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of Credit Risk
Due from Factor
The Company maintains cash balances with the factor which
purchases accounts receivable. These cash balances earn
interest at 2% below Wall Street Journal prime rate (6.5%
at January 1, 2000), but are not insured in any way.
The factor purchases substantially all eligible accounts
receivable, primarily without recourse (see Note 3). The
Company can draw funds as required. This amount due from
factor is not insured in any way. The Company believes
that the credit risk is limited by the financial strength
of the factor.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Although these estimates are based on management's
knowledge of current events and actions it may undertake
in the future, they may ultimately differ from actual
results. Estimates which are particularly susceptible to
change in the near term are adjustments for markdowns,
returns, cooperative advertising and allowances for
doubtful accounts with regard to amounts due from factor
in connection with receivables factored.
Inventories
Inventories, which consist primarily of finished goods,
are stated at the lower of cost or market, with cost
determined on the average cost method.
Property and Equipment
Property and equipment are recorded at cost and
depreciated using the straight-line method over the
estimated useful lives of the related assets. When assets
are sold or retired, the cost and related accumulated
depreciation are removed from the accounts and any gain or
loss is recognized currently. Repairs and maintenance are
charged to expense as incurred.
Revenue Recognition
Revenue from the sale of merchandise and private label
commissions is recognized upon shipment to the customer,
net of returns and allowances.
F-8
<PAGE>
UTOPIA MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based Compensation
The Company accounts for stock-based compensation issued
to employees and directors using the intrinsic value
method prescribed in Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees.
Compensation cost of stock options, if any, is measured
as the excess of the estimated market price of the
Company's common stock at the date of grant, over the
amount the recipient must pay to acquire the common
stock.
Statement of Financial Accounting Standards ("SFAS") No.
123, Accounting for Stock-Based Compensation, established
accounting and disclosure requirements using a fair-
value-based method of accounting for stock-based employee
compensation plans. The Company has elected to retain
its current method of accounting as described above, and
has adopted the disclosure requirements of SFAS No. 123.
Advertising Costs
Advertising costs are expense as incurred. Advertising
costs incurred in 1999 and 1998 are approximately $24,000
and $48,000, respectively.
Income Taxes
The Company accounts for its income taxes using SFAS No.
109, Accounting for Income Taxes, which requires the
recognition of deferred tax liabilities and assets for
expected future tax consequences of events that have been
included in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets
are determined based on the difference between the
financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.
Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet
financial instruments approximated their fair value.
These instruments include cash and cash equivalents.
Fair values were assumed to approximate carrying values
for these financial instruments since they are short-term
in nature and their carrying amounts approximate fair
values or they are receivable or payable on demand.
Net Loss Per Common Share
The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings Per Share, which
provides for the calculation of basic and diluted
earnings per share.
F-9
<PAGE>
UTOPIA MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Net Loss Per Common Share
Basic net loss per share is computed by dividing income
available to common stockholders by the weighted average
number of common shares outstanding for the period.
Diluted earnings per share assumes exercising outstanding
options and warrants granted. Diluted net loss for
fiscal years 1999 and 1998 is not presented, as the
effect of the conversion is anti-dilutive.
The weighted average number of common shares outstanding
(in thousands) during the years were as follows:
January 1, 2000 14,457
January 2 1999 14,216
NOTE 2. LIQUIDITY
As discussed in Note 1, the Company is developing a new
brand name after having been inactive for over two years.
Management has significant experience in the footwear
industry and, through July 1996, the Company operated in
the footwear industry. Successful operations in the future
will depend on management's ability to secure trade credit,
short-term financing or equity financing to allow the
Company to achieve its business plan. The eventual outcome
and success of management's plans in this regard cannot be
ascertained with any degree of certainty.
NOTE 3. SALE OF RECEIVABLES
On April 1, 1999, the Company entered into a factoring
agreement, which expires April 1, 2001, to sell an
undivided interest in all accounts receivable. The
agreement calls for the sale of receivables without
recourse and with recourse. Payments are remitted to the
Company when customer payments are received by the factor.
The gross amount due from the factor at January 1, 2000,
$746,000, represents the uncollected payments from
customers. As of January 1, 2000, approximately $81,000 of
the uncollected receivables represents receivables with
recourse. The Company has established an allowance of
approximately $196,000 for returns, markdowns and doubtful
accounts relating to the uncollected receivables. The
agreement also allows the Company to borrow up to 85% of
the uncollected receivables. At January 1, 2000, the
Company has not borrowed any funds against the outstanding
receivables. In addition, the Company has pledged
inventory, equipment, and intangibles as required by the
factoring agreement.
Due from factor - uncollected receivables $746,000
Less allowance for returns, markdowns
and doubtful accounts 196,000
--------
Due from factor, net $550,000
========
F-10
<PAGE>
UTOPIA MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 4. PROPERTY AND EQUIPMENT
Estimated Useful
Lives (Years)
----------------
Computers and software 5 $ 109,347
Less accumulated depreciation 11,023
---------
$ 98,324
=========
Depreciation expense for 1999 was $11,023.
NOTE 5. ACQUISTION OF ASSETS
On October 5, 1999, the Company purchased certain
intangible assets of Ipanema Shoe Corporation (Ipanema),
including tradenames, trademarks, brand names, customer
lists, supplier lists, database information, proprietary
software and related goodwill. In exchange for these
assets, the Company issued 1,000,000 shares of Company
common stock and a subordinated convertible promissory note
in the amount of $500,000. The promissory note, which
matures October 5, 2002, provides for interest at prime
plus 1% commencing October 5, 2000. The Company recorded
the purchase of the intangible assets at a value of
$658,000, the sum of the fair value of the promissory note
discounted at 9-1/2% ($457,000) and the 1,000,000 shares of
common stock issued at a value of $.201 per share
($201,000). The intangible assets are being amortized
using a life of fifteen years.
In connection with the acquisition, the Company entered
into a collection services agreement with Ipanema whereby
the Company is to receive an amount equal to 30% of all
accounts receivable collected. The Company earned and
received approximately $807,000 pursuant to this agreement
during 1999.
NOTE 6. MAJOR CUSTOMERS AND SUPPLIERS
During 1999, sales from four customers accounted for
approximately 58% of total sales. In addition, four
vendors accounted for approximately 70% of the total
inventory purchases in 1999.
NOTE 7. TRANSACTIONS WITH RELATED PARTIES
Stockholder
The Company frequently sends employees to New York for
business engagements. Employees lodge at a stockholder
owned apartment during their stay. The Company remits the
monthly rent directly to the landlord for the use of the
apartment. The Company remitted approximately $18,000 in
1999 for the New York apartment.
F-11
<PAGE>
UTOPIA MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 8. INCOME TAXES
The following table reconciles the income tax provision
(benefit) at the U.S. Statutory rate to that in the
financial statements:
1998 1997
---- ----
(in thousands) (in thousands)
Federal benefit computed at 34% $(489) $(154)
State benefit, net of federal benefit (72) (25)
Valuation allowance 558 179
----- -----
Income tax provision (benefit) $ - $ -
===== =====
The net tax effects of temporary differences between the
carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax
purposes are reflected in deferred income taxes.
Significant components of the Company's deferred tax assets
as of January 1, 2000 (in thousands) are as follows:
Benefit of net operating loss carry forwards $ 9,258
Less valuation allowance (9,258)
--------
Net deferred tax asset $ -
========
At January 1, 2000, the Company had a net operating loss
carryforward for federal income tax purposes of
approximately $24,900,000, which is available to offset
future federal taxable income, if any, through 2019.
As of January 1, 2000, sufficient uncertainty exists
regarding the realizability of the full amount of the net
operating loss carryforward, and accordingly, a valuation
of $9,258,000 has been established.
The valuation allowance for deferred tax assets as of
January 1, 2000 and January 1, 1999 was $9,258,000 and
$8,700,000, respectively. The net change in valuation
allowance for the years ended January 1, 2000 and
January 2, 1999 was an increase of $558,000 and an increase
of $179,000, respectively.
F-12
<PAGE>
UTOPIA MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 9. COMMITMENTS, CONTINGENCIES, AND OTHER MATTERS
Stock Option Plans
1999 Long-Term Incentive Plan
During 1999, the Company adopted the Utopia Marketing,
Inc. 1999 Long-Term Incentive Plan (the "1999 Plan")
which provides for the grant of both nonstatutory stock
options and stock options intended to be treated as
incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended.
The 1999 Plan is intended to provide incentives to, and
rewards for, certain of the Company's employees and
non-employee directors. Those eligible are people who
have contributed and will continue to contribute to the
Company's success. Incentive stock options granted
under the 1999 Plan are non-transferable other than by
will or by the laws of descent and distribution. The
1999 Plan may be amended at any time by the Board,
although the Board may condition any amendment on the
approval of our shareholders if such approval is
necessary or advisable with respect to tax, securities
or other applicable laws. The total number of shares
of common stock reserved for issuance under the 1999
Plan is 1,500,000. The Company has granted under the
1999 Plan stock options to acquire 155,000 shares of
common stock, at an exercise price ranging from $.35 to
$.50, none of which are exercisable as of January 1,
2000. The 1999 Plan terminates in September 2009.
1991 Stock Option Plan
In September 1991, the Board of Directors approved the
1991 Stock Option Plan (the "1991 Plan"), which allows
for the grant of incentive stock options (as defined in
Section 422 of the Internal Revenue Code) to employees
and nonstatutory stock options to both employees and
outside Directors. The Board of Directors has reserved
1,500,000 shares of common stock for issuance under the
1991 Plan. Stock options intended to qualify as
incentive stock options under Section 422 of the
Internal Revenue Code are granted to employees at
prices not less than the fair market value of the
common stock on the date of grant. The 1991 Plan
permits and the Company has granted, from time to time,
non-statutory stock options at exercise prices less
than the fair market value of the common stock on the
date of grant. The 1991 Plan specifies that the
Company's outside Directors are to receive a stock
option grant of 5,000 shares on the date first elected
to the Board and an additional 5,000 shares each year
thereafter. Such options are granted at the fair
market value of the common stock on the date of grant,
vested over four years, and are exercisable only while
the outside Director remains a Director.
The 1991 Plan also permits the Company to grant rights
to purchase common stock at a price which is least 50%
of the fair market value of the common stock on the
date of grant. The offer of a right must be accepted
within six months of its grant by the execution of a
restricted stock purchase agreement between the Company
and the offeree and the payment of the purchase price
of the shares. Activity for the 1991 Plan for years
ended January 2, 1999 and January 1, 2000 was as
follows:
F-13
<PAGE>
Shares Prices
------- ------
Outstanding, January 3, 1998 150,000 $.10
Options exercised 0
Options canceled 0
-------
Outstanding, January 2, 1999 150,000 $.10
Options granted 325,000 $.062 to $.375
-------
Outstanding, January 1, 2000 475,000 $.062 to $.375
=======
Fair Value Disclosures
The Company calculated the compensation cost for the plan
based on the fair value at the grant date under SFAS No.
123. The Company used the Black-Scholes option pricing
model to determine the fair value of grants made in 1999.
The pro forma net effect was not material for 1999 and,
therefore, the disclosures ordinarily required by SFAS 123
are not presented.
Employment Agreements
During 1998, the Company entered into an employment
agreement with Vance Kistler who currently serves as
Chief Financial Officer. The agreement provides, among
other things, for an annual salary of approximately
$80,000, options to purchase 150,000 shares of common
stock, which vest 50,000 per year beginning June 1999,
expense reimbursements, a bonus up to 10% of salary based
on annual sales of the Company in fiscal year 1999 and
2000, severance pay, and a covenant not to compete. No
bonuses were paid for fiscal year 1999.
Independent Agent Agreements
In March 1999, the Company entered into three independent
agent agreements in connection with the sale of its
products. These non-exclusive agreements which are for a
term of up to two years with an option to renew, provide
for, among other things, for a draw against commissions
earned, commissions of up to 5%, and options to purchase
up to 300,000 shares of Company common stock for $.35 per
share. Commission expense for 1999 was approximately
$635,000.
F-14
<PAGE>
UTOPIA MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 9. COMMITMENTS, CONTINGENCIES, AND OTHER MATTERS (Continued)
Operating Leases
The Company has entered into an agreement to lease its
facilities from April 1, 1999 until March 31, 2002, which
requires monthly payments of approximately $6,000. In
addition, the Company is responsible for all taxes,
insurance, maintenance and utilities relating to the
facilities.
In March 1999, the Company entered into an agreement to
lease certain office equipment. The term of the lease is
three years, which requires monthly payments of
approximately $380. In April 1999, the Company entered
into an agreement to lease a vehicle from April 7, 1999
to April 6, 2002, which requires monthly payments of
approximately $950.
Minimum future lease payments on these leases are as
follows:
Year Ending:
December 30, 2000 $ 80,000
December 29, 2001 83,000
January 4, 2002 20,000
----------
Total $ 183,000
==========
Rent expense was approximately $59,000 and $11,000 for
the years ended January 1, 2000 and January 2, 1999,
respectively.
Other Commitments
As of January 1, 2000, the Company has outstanding
purchase orders from retailers and has placed several
purchase orders to vendors. Customer purchase orders
from retailers, to date, total approximately $4,000,000.
The Company has placed several purchase orders totaling
approximately $4,000,000 with manufacturers in Brazil and
Asia for footwear production.
F-15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The Florida Business Corporation Act, as amended, provides
that, in general, a business corporation may indemnify any
person who is or was a party to any proceeding (other than an
action by, or in the right of, the corporation) by reason of the
fact that he or she is or was a director or officer of the
corporation, against liability incurred in connection with such
proceeding, including any appeal thereof, provided certain
standards are met, including that such officer or director acted
in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation,
and provided further that, with respect to any criminal action
or proceeding, the officer or director had no reasonable cause
to believe his or her conduct was unlawful. In the case of
proceedings by or in the right of the corporation, the Florida
Business Corporation Act provides that, in general, a
corporation may indemnify any person who was or is a party to
any such proceeding by reason of the fact that he or she is or
was a director or officer of the corporation against expenses
and amounts paid in settlement actually and reasonably incurred
in connection with the defense or settlement of such
proceeding, including any appeal thereof, provided that such
person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made in
respect of any claim as to which such person is adjudged liable
unless a court of competent jurisdiction determines upon
application that such person is fairly and reasonably entitled
to indemnity. To the extent that any officers or directors are
successful on the merits or otherwise in the defense of any of
the proceedings described above, the Florida Business
Corporation Act provides that the corporation is required to
indemnify such officers or directors against expenses actually
and reasonably incurred in connection therewith. However, the
Florida Business Corporation Act further provides that, in
general, indemnification or advancement of expenses shall not be
made to or on behalf of any officer or director if a judgment or
other final adjudication establishes that his or her actions, or
omissions to act, were material to the cause of action so
adjudicated and constitute: (i) a violation of the criminal law,
unless the director or officer had reasonable cause to believe
his or her conduct was lawful or had no reasonable cause to
believe it was unlawful; (ii) a transaction from which the
director or officer derived an improper personal benefit; (iii)
in the case of a director, a circumstance under which the
director has voted for or assented to a distribution made in
violation of the Florida Business Corporation Act or the
corporation's articles of incorporation; or (iv) willful
misconduct or a conscious disregard for the best interests of
the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder.
Our Bylaws provides that we shall indemnify any director,
officer or employee or any former director, officer or employee
to the fullest extent permitted by law.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the fees and expenses in
connection with the issuance and distribution of the securities
being registered hereunder.
Securities and Exchange Commission Registration Fee.... $ 198
Accounting Fees and Expenses........................... $ 10,000
Legal Fees and Expenses................................ $ 20,000
Miscellaneous.......................................... $ 4,802
Total....................................... $ 35,000
II-1
<PAGE>
All amounts are estimated except for the SEC registration
fee. The selling shareholders will not pay any of the expenses
of this offering.
Item 26. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this
Registration Statement, we have sold the following securities
that were not registered under the Securities Act of 1933, as
amended (the "Securities Act").
On October 6, 1999, we completed the purchase of certain
assets, including certain trademarks, of Ipanema pursuant to the
terms of an Asset Purchase Agreement dated as of October 5,
1999. As a portion of the purchase price for the assets, we
issued 1,000,000 shares of our common stock to Ipanema. The
issuance of the shares of common stock to Ipanema were issued in
reliance on the exemption from registration provided in Section
4(2) of the Securities Act of 1933, as amended.
Item 27. Exhibits.
Exhibits:
The following exhibits are filed as part of this
registration statement:
Exhibit
Number Description
3.1 Amended and Restated Articles of Incorporation*
3.2 Amended and Restated Bylaws*
4.1 See Exhibits 3.1 and 3.2 for provisions of the
Articles of Incorporation and Bylaws of Utopia
Marketing, Inc. defining the rights of holders of the
Common Stock
5 Form of Opinion of Holland & Knight LLP regarding the
validity of the securities offered
10.1 1999 Utopia Long-Term Incentive Plan**
10.2 Asset Purchase Agreement, dated as of October 5, 1999,
by and among Utopia Marketing, Inc., Ipanema Shoe
Corporation and Sumitomo Corporation of America***
10.3 Subordinated Convertible Promissory Note, dated
October 5, 1999, issued by Utopia Marketing, Inc., to
Ipanema Shoe Corporation***
10.4 Collection Services Agreement, dated as of October 5,
1999, between Utopia Marketing, Inc., Ipanema Shoe
Corporation and Sumitomo Corporation of America***
16 Letter, dated March 17, 1999, from Michael Adest &
Blumenkrantz addressed to the Securities and Exchange
Commission****
23.1 Consent of Rachlin, Cohen & Holtz LLP
23.2 Consent of Holland & Knight LLP (included in Exhibit 5)
24 Power of Attorney (included on the signature page of
this Registration Statement)
27 Financial Data Schedule
* Filed with the Company's Annual Report on Form 10-KSB,
filed with the Securities and Exchange Commission on
April 19, 1999, and incorporated herein by reference.
** Filed in a Form 10-K which was filed with the Securities
and Exchange Commission on April 17, 2000, and
incorporated herein by reference.
*** Filed in a Form 8-K which was filed with the Securities
and Exchange Commission on October 20, 1999, and
incorporated herein by reference.
**** Filed in a Form 8-K which was filed with the
Securities and Exchange Commission on March 18, 1999,
and incorporated herein by reference.
II-2
<PAGE>
Item 28. Undertakings.
The Registrant hereby undertakes to:
(1) file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration
statement to:
(i) include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental
change in the information set forth in this
Registration Statement;
(iii) include any additional or changed material
information on the plan of distribution.
(2) for determining liability under the Securities Act,
treat each such post-effective amendment as a new registration
of the securities offered, and the offering of such securities
at that time to be the initial bona fide offering; and
(3) file a post-effective amendment to remove from
registration any of the securities that remain unsold at the
termination of this offering.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that
in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant 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 Registrant
will, unless in the option 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 Securities Act and will by governed by the final
adjudication of such issue
II-3
<PAGE>
SIGNATURES
In accordance with 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 of filing on
Form SB-2 and authorized this registration statement to be
signed on its behalf by the undersigned, in the City of West
Palm Beach, State of Florida, on May 5, 2000.
UTOPIA MARKETING, INC.
/s/Samuel L. Edelman
By: Samuel L. Edelman
Its: President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Samuel L.
Edelman, and Vance Kistler, and each of them, his or her true and
lawful attorney-in-fact and agent, with full power of
substitution and revocation, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this
Registration Statement, and to sign any Registration Statement
(and any and all amendments thereto) related to this Registration
Statement and filed pursuant to Rule 462(b) promulgated by the
Securities and Exchange Commission, and to file the same with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to
be done as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of
1933, this registration statement has been signed by the
following persons in the capacities and on the dates indicated:
Signature Title Date
/s/Samuel L. Edelman
Samuel L. Edelman President, Chief Executive Officer, May 5, 2000
and Director (Principal Executive
Officer)
/s/Vance Kistler
Vance Kistler (Principal Financial and Principal May 5, 2000
Accounting Officer)
/s/Louise Edelman
Louise B. Edelman Executive Vice President of May 5, 2000
Corporate Development, Secretary
and Director
/s/Joel Solomon
Joel Solomon Director May 5, 2000
/s/Bruce Oberfest
Bruce Oberfest Director May 5, 2000
/s/Robert Wildrick
Robert Wildrick Director May 5, 2000
Stuart Kreisler
Stuart Kreisler Director May 5, 2000
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
5 Form of Opinion of Holland & Knight LLP
23.1 Consent of Rachlin, Cohen & Holtz LLP
23.2 Consent of Holland & Knight LLP (included
in Exhibit 5)
27 Financial Data Schedule
[HOLLAND & KNIGHT LLP LETTERHEAD]
_________, 2000
Utopia Marketing, Inc.
312 Clematis Street, Suite 500
West Palm Beach, Florida 33401
Re: Registration Statement on Form SB-2
(File No. __-______)
Gentlemen:
We refer to the Registration Statement (the "Registration
Statement") on Form SB-2 (File No. __-______), filed by Utopia
Marketing, Inc. (the "Company"), with the Securities and
Exchange Commission, for the purpose of registering under the
Securities Act of 1933 an aggregate of 5,000,000 shares (the
"Shares") of the authorized common stock, par value $.001 per
share (the "Common Stock"), of the Company being offered to the
public, consisting of 2,000,000 shares of Common Stock to be
issued by the Company and 3,000,000 shares of Common Stock to be
offered and sold by selling shareholders.
In connection with the foregoing registration, we have
acted as counsel for the Company, and have examined originals,
or copies certified to our satisfaction of all such corporate
records of the Company, certificates of public officials and
representatives of the Company, and other documents as we deemed
it necessary to require as a basis for the opinion hereafter
expressed.
Based on the foregoing, and having regard for legal
considerations that we deem relevant, it is our opinion that the
Shares are duly authorized, legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit
5 to the Registration Statement, and to the reference to this
firm under the caption "Legal Matters" in the Registration
<PAGE>
Utopia Marketing, In.c
_________, 2000
Page 2
Statement. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required
under Section 7 of the Securities Act.
Very truly yours,
Holland & Knight LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Registration Statement on
Form SB-2 of our report dated February 11, 2000 relating to the
financial statements of Utopia Marketing, Inc. appearing in such
Registration Statement.
RACHLIN COHEN & HOLTZ
Fort Lauderdale, Florida
May 5, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto
incorporated in this Form SB-2 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JAN-01-2000
<CASH> 185
<SECURITIES> 0
<RECEIVABLES> 550
<ALLOWANCES> 0
<INVENTORY> 1,418
<CURRENT-ASSETS> 2,207
<PP&E> 98
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,953
<CURRENT-LIABILITIES> 2,033
<BONDS> 468
0
0
<COMMON> 15
<OTHER-SE> 437
<TOTAL-LIABILITY-AND-EQUITY> 2,953
<SALES> 2,070
<TOTAL-REVENUES> 2,070
<CGS> 1,437
<TOTAL-COSTS> 3,146
<OTHER-EXPENSES> (807)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (33)
<INCOME-PRETAX> (1,673)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,673)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,673)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
