UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission File No.: 0-19616
UTOPIA MARKETING, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 94-3060101
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification number)
312 Clematis Street, Suite 500, West Palm Beach, Florida 33401
(Address of Principal Executive Offices, Including Zip Code)
(561) 835-9998
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past twelve months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
As of November 14, 2000, there were 15,216,367 shares of Common stock
outstanding.
<PAGE>
UTOPIA MARKETING, INC.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Balance Sheets as of September 30, 2000
(unaudited) and January 1, 2000 2
Condensed Statements of Operations for the three and nine months
ended September 30, 2000 (unaudited) and October 2, 1999 (unaudited) 3
Condensed Statements of Cash Flows for the nine months
ended September 30, 2000 (unaudited) and October 2, 1999 (unaudited) 4
Notes to Condensed Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 10
<PAGE> 1
PART I
------
ITEM 1. FINANCIAL STATEMENTS
UTOPIA MARKETING, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, January 1,
2000 2000
---------- -----------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 149 $ 185
Due from factor, net of allowance......................... 1,640 550
Merchandise inventories................................... 489 1,418
Other current assets...................................... 0 54
---------- ----------
TOTAL CURRENT ASSETS........................................ 2,278 2,207
Property and equipment, net............................... 82 98
Intangible assets......................................... 620 648
---------- ----------
TOTAL ASSETS................................................ $ 2,980 $ 2,953
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 779 $ 1,716
Accrued expenses.......................................... 352 317
Due to factor............................................. 1,427 0
---------- ----------
TOTAL CURRENT LIABILITIES................................... 2,558 2,033
---------- ----------
LONG-TERM OBLIGATIONS....................................... 500 468
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock.............................................. 15 15
Additional paid-in capital................................ 33,147 33,147
Accumulated deficit....................................... (32,240) (32,710)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY.................................. (78) 452
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $ 2,980 $ 2,953
========== ==========
</TABLE>
See Notes to Condensed Financial Statements.
<PAGE> 2
UTOPIA MARKETING, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- --------------------------
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
---------- ----------- ---------- -----------
(IN THOUSANDS EXCEPT (IN THOUSANDS EXCEPT
PER SHARE DATA) PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenue......................................... $ 1,955 $ 1,123 $ 6,644 $ 1,357
Cost of sales....................................... 1,567 762 4,622 900
---------- ---------- ---------- ----------
GROSS PROFIT...................................... 388 361 2,022 457
Selling, general and administrative expenses........ 817 756 2,446 2,099
---------- ---------- ---------- -----------
Operating Income (loss)............................. (429) (395) (424) (1,642)
Interest income/(expense)........................... (38) 5 (107) 39
---------- ---------- ---------- -----------
Income (loss) before income
taxes .................................... (467) (390) (531) (1,603)
Income taxes........................................ 0 0 0 0
---------- ---------- ---------- -----------
NET INCOME (LOSS) $ (467) (390) (531) (1,603)
========== ========== ========== ===========
NET INCOME (LOSS) PER SHARE $ (0.03) $ (0.03) $ (0.03 (0.11)
========== ========== ========== ===========
Weighted average shares outstanding................. 15,216 14,229 15,216 14,229
========== ========== ========== ===========
</TABLE>
See Notes to Condensed Financial Statements
<PAGE> 3
UTOPIA MARKETING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $ ( 531) $ (1,208)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 75 3
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable..................................... (1,089) (209)
Merchandise inventories................................. 929 (315)
Prepaid expenses........................................ 0 68
Other assets............................................ 54 (1)
Accounts payable, accrued expenses...................... (901) 360
---------- ----------
Net cash provided by (used in) operating activities....... (1,463) (1,302)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment..................... (0) (63)
---------- ----------
Net cash provided by (used in) investing activities....... (0) (63)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from factor................................ 1,427 0
---------- ----------
Net cash (used in) provided by financing activities....... 0 0
---------- ----------
Net (decrease) in cash and cash equivalents............... (36) (1,365)
Cash and cash equivalents:
Beginning of period..................................... 185 1,942
End of period........................................... $ 149 $ 577
========== ==========
</TABLE>
See Notes to Condensed Financial Statements
<PAGE> 4
UTOPIA MARKETING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND OCTOBER 2, 1999
(UNAUDITED)
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements have been
prepared from the records of the Company without audit and, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary to fairly present the Company's financial position at
September 30, 2000 and January 1, 2000 and the results of operations and its
cash flows for the three and nine month periods ended September 30, 2000 and
October 2, 1999. The accompanying financial statements have not been reviewed
by the Company's independent auditors.
Accounting policies followed by the Company are described in Note 1 to
the audited financial statements for the year ended January 1, 2000. As
permitted by the rules and regulations of the Securities & Exchange Commission,
certain information and footnote disclosures included in the annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted for the purposes of these condensed interim
financial statements. The unaudited condensed interim financial statements
included herein should be read in conjunction with the audited financial
statements and the notes thereto included in the Company's Form 10-KSB for the
year ended January 1, 2000.
The results of operations and cash flows for the nine-month period
ended September 30, 2000 are not necessarily indicative of the results of
operations or cash flows to be expected for any other period or for the full
year.
<PAGE> 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Utopia Marketing, Inc., formerly known as Sam & Libby, Inc. (the
"Company"), was founded in October 1987, primarily for the purpose of
developing and commercializing footwear products. In 1991, the Company
completed a public offering of its common stock. On July 2, 1996, the Company
entered into an agreement with Maxwell Shoe Company Inc. ("Maxwell") pursuant
to which the Company sold its brand names, trademarks, trade names and certain
other intellectual property rights to Maxwell, and received approximately $5.5
million.
After the sale to Maxwell, the Company's management had been primarily
involved in the investigation of new business opportunities for the Company.
During this time, management investigated possible acquisitions and mergers and
explored various start-up ventures. Since December 1998, the Company has been
developing and commercializing a line of fashion footwear products under the
Company's NAKEDFEET TM brand name.
On October 6, 1999, the Company acquired the rights from Ipanema Shoe
Corporation ("Ipanema") to market and commercialize footwear under the brand
name IPANEMA TM. In exchange for these rights, the Company issued 1,000,000
shares of its 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, the
Company entered into a Collection Services Agreement with Ipanema, pursuant to
which the Company assisted in collecting Ipanema's outstanding accounts
receivable of approximately $3,300,000 in exchange for Ipanema's payment to
the Company of 30% of the gross collections of such accounts receivable. As
of April 1, 2000 the Company had received $990,000 under the Collection
Services Agreement. The Company does not expect to earn any additional
revenues under this Agreement.
For the past several months, management of the Company investigated the
sources of additional capital available to the Company and concluded that the
Company would not be able to raise additional funding to continue to finance
its operations. During October 2000, due to the Company's inability to raise
additional capital to fund its continuing operations and the competitive market
conditions in the Company's line of business, the Company discontinued its
business operations, and on November 3, 2000, management filed in the Circuit
Court in Palm Beach County an assignment for the benefit of creditors pursuant
to Florida Statute Section 727. The Company retained Michael Moecker &
<PAGE> 6
Associates as the "Assignee" of all of Utopia's remaining assets. Under the
assignment, the "Assignee" is charged with the orderly liquidation of Utopia's
assets and the payment of Utopia's creditors in accordance with the priority
of their respective claims.
Results of Operations
Nine months ended September 30, 2000 and October 2, 1999
Revenues. The Company generated net revenues of $6,644,000 through the
sale of its product lines under the brand names NAKEDFEET TM and IPANEMA TM
during the nine months ended September 30, 2000 compared with $1,123,000 for
the same period ended October 2, 1999. Net revenues increased as a result of
a full nine months of shipping and the addition of the IPANEMA product line.
Interest expense for the nine-month period ended September 30, 2000 was
$107,000 compared with interest income of $39,000 for the period ended
October 2, 1999. Interest expense for the first nine months of 2000 was on
various borrowing from the Company's factor and a $500,000 note due to the
Sumitomo Corporation in connection with the purchase certain IPANEMA assets.
Interest income for the first nine months of 1999 was earned as a result of
the Company holding funds in a money market account.
Gross Profit. Gross profit of $2,022,000 for the nine months ended
September 30, 2000 includes $405,000 of first-cost commissions. Gross profit
of $95,000 for the nine months ended October 2, 1999 includes $24,000 of
first-cost commissions. First-cost commissions are generated when the Company
acts as an agent for its customers.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $2,446,000 for the nine months ended
September 30, 2000 as compared to $2,099,000 for the nine months ended October
2, 1999. Selling, general and administrative expenses for the nine months ended
September 30, 2000 increased as a result of the addition of the IPANEMA
division and consisted primarily of $640,000 in personnel costs; $386,000 for
sales representatives; $181,000 for travel and entertainment; $402,000 for
trade shows; $195,000 for product development; and $94,000 for professional
fees.
Liquidity and Capital Resources
On November 3, 2000, the Company announced that it had filed in the
Circuit Court for Palm Beach County an assignment for the benefit of creditors
pursuant to Florida Statute Section 727. The Board of Directors of Utopia
<PAGE> 7
<PAGE>
authorized management to retain Moecker & Associates as the "Assignee" of all
of Utopia's remaining assets. Under the assignment, the "Assignee" is charged
with the orderly liquidation of Utopia's assets and the payment of Utopia's
creditors in accordance with the priority of their respective claims. Utopia
recently discontinued its operating business activities and now has only two
remaining employees for the purpose of winding down the Company's operations.
Among the reasons for Utopia's decision to discontinue its business operations
were the company's inability to raise additional capital to fund its continuing
operations and the competitive market conditions in the Company's line of
business. The Company does not believe that it has sufficient assets to
satisfy the claims of all of its creditors. Therefore, the Company does not
expect that any of its assets will be available for distribution to its
shareholders.
<PAGE> 8
<PAGE>
PART II. - OTHER INFORMATION
----------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
3.1* Articles of Incorporation of the Company.
3.2* Bylaws of the Company.
4.1 See Exhibits 3.1 and 3.2 for provisions of the
Articles of Incorporation and Bylaws of the Company
defining the rights of holders of Common Stock of the
Company.
27. Financial Data Schedule
b. Current Reports on Form 8-K
There were no reports filed on Form 8-K during the
quarter ended September 30, 2000.
-------------------
* Filed with the Company's Annual Report on Form 10-KSB , filed with the
Securities and Exchange Commission on April 17, 1999, and incorporated
herein by reference.
<PAGE> 9
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
UTOPIA MARKETING, INC.
(Registrant)
Dated: November 14, 2000 BY:/s/ Samuel L. Edelman
----------------------------------------
Samuel L. Edelman, Chairman of the Board
Chief Executive Officer
Dated: November 14, 2000 BY:/s/ Vance F. Kistler
-----------------------------------------
Vance F. Kistler, Chief Financial Officer
<PAGE> 10
