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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
Amendment No. 2
ANNUAL REPORT PURSUANT to SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(as amended)
For the period ended January 27, 1996. Commission File Number 0-21910
KIDS MART, INC.
(F/K/A FROST HANNA ACQUISITION GROUP, INC.)
(Exact name of registrant as specified in its charter)
Florida 65-0406710
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
801 Sentous Avenue, City of Industry, California 91748
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (818) 854-3166
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Common Stock, par value $0.0001 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES. [ X ] NO. [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
AS OF SEPTEMBER 4, 1996, THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NON-AFFILIATES OF THE ISSUER BASED ON THE AVERAGE BID AND ASK PRICES OF $1.50
AND $2.75, RESPECTIVELY, OF SUCH COMMON STOCK IS $6,916,161 BASED UPON AN
AVERAGE PRICE OF $2.125 MULTIPLIED BY 3,254,664 SHARES OF COMMON STOCK
OUTSTANDING ON SUCH DATE HELD BY NON-AFFILIATES.
AS OF SEPTEMBER 4, 1996, THE ISSUER HAD A TOTAL OF 4,943,000 SHARES OF COMMON
STOCK, PAR VALUE $0.0001 PER SHARE, OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
KIDS MART, INC.
By /s/ BERNARD TESSLER
-----------------------
Bernard Tessler,
Chief Executive Officer
Date: December 4, 1996
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------------------- ---------------------------------------- ------------------
<S> <C> <C>
/s/ BERNARD TESSLER Chairman, Chief Executive Officer, December 4, 1996
- --------------------------------------- and Director
Bernard Tessler
/s/ ROBERT S. KELLEHER Vice President, Chief Operating Officer, December 4, 1996
- --------------------------------------- and Chief Financial Officer
Robert S. Kelleher
/s/ JEFFREY KOFFMAN Director December 4, 1996
- ---------------------------------------
Jeffrey Koffman
/s/ STEPHEN L. PISTNER Director December 4, 1996
- ---------------------------------------
Stephen L. Pistner
/s/ ERIC M. SPECTER Director December 4, 1996
- ---------------------------------------
Eric M. Specter
/s/ DONALD S. ROSENBERG Director December 4, 1996
- ---------------------------------------
Donald S. Rosenberg
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Exhibit Page
- ------ ---------------------- ----
<S> <C> <C>
2.1 Agreement and Plan of Merger and Reorganization dated
May 31 1995, by and between the Company and LFS
Acquisition Corp. (incorporated by reference to Exhibit
A-1 to the Company's Proxy Statement dated December 14,
1995).
3.1 Articles of Incorporation of the Company (incorporated
by reference to Exhibit 3.1 to the Company's
Registration Statement on Form SB-2, File No.
33-63736-A, filed with the Securities and Exchange
Commission on July 2, 1993).
3.2 Amended and Restated Articles of Incorporation of the
Company (incorporated by reference to Exhibit C-1 to
the Company's Proxy Statement dated December 14, 1995).
3.3 Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on
Form SB-2, File No. 33-63736-A, filed with the
Securities and Exchange Commission on July 2, 1993).
9 Stockholders' Agreement, dated May 30, 1995, among LFS
Acquisition Corp., Bernard Tessler, Sentani Trading
Ltd., Jeffrey Koffman, Allison Koffman, Jack Koffman,
Janice Payson, Barbara Koffman, Tech Aerofoam, Inc.,
David Koffman, Ruthanne Koffman, Whitehorn, Inc.,
Financo, Inc. and Marvin Traub (incorporated by
reference to Exhibit 9 to the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31,
1995).
10.1 1995 Stock Option Plan of the Company (incorporated by
reference to Exhibit B-1 to the Company's Proxy
Statement dated December 14, 1995).
10.2 Employment Agreement between LFS Acquisition Corp. and
Bernard Tessler dated May 31, 1995, (incorporated by
reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 1995).
10.3 Transitional Services Agreement between LFS Acquisition
Corp. and Woolworth Corporation dated as of May 31,
1995 (incorporated by reference to Exhibit 10.3 to the
Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1995).
10.4 Settlement Agreement between LFS Acquisition Corp. and
Woolworth Corporation and Kinney Shoe Corporation dated
as of May 30, 1996.
10.5 Loan and Security Agreement by and between LFS
Acquisition Corp. and Foothill Capital Corporation
dated as of May 31, 1995, and amendments thereto.
10.6 Sale/leaseback agreement between Kids Mart, Inc. and
Computer Sales International, Inc. dated as of July 24,
1996.
10.7 Agreement between Kids Mart, Inc. and Be Bop Clothing, Inc.
dated September 11, 1996.(1)
10.8 Exchange Agreement and Investment representation Agreement
between Kids Mart, Inc. and Be Bop Clothing, Inc. dated
September 11, 1996.
27 Financial Data Schedule
- -------------
(1) Filed pursuant to a request for confidential treatment.
</TABLE>
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EXHIBIT 10.7
ALL SECTIONS MARKED WITH TWO ASTERISKS ("* *") REFLECT PORTIONS WHICH HAVE
BEEN REDACTED AND WILL BE FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION BY KIDS MART, INC. AS PART OF A REQUEST FOR CONFIDENTIAL TREATMENT.
AGREEMENT
Michael A. Harb
BE BOP CLOTHING, INC.
5833 Avalon Blvd.
Los Angeles, CA 90003
Dear Mr. Harb:
SECTION 1
The parties to this Agreement are Be Bop Clothing, Inc., a California
corporation and Kids Mart, Inc., a Florida corporation. This Agreement is also
contingent upon the parties executing an Exchange Agreement and Investment
Representation Agreement. Pursuant to that contingency and also in exchange for
the following agreed upon consideration, the parties agree as follows:
SECTION 2
Currently, there exists an open Accounts Receivable owed to Be Bop
Clothing, Inc. in the sum of Five Hundred Eighty Six Thousand Four Hundred
Twenty-three Dollars and Thirteen Cents ($586,423.13). It is anticipated that
an additional Sixty Three Thousand Five Hundred Six Dollars and Eighty Seven
Cents ($63,576.87) of merchandise will be shipped to Kids Mart, Inc. to
comprise a total "investment" of Six Hundred Fifty Thousand Dollars
($650,000.00). That amount will be the total "investment" by Be Bop Clothing,
Inc., which will then be given non-registered Common Stock of Kids Mart, Inc.
at a price per share (with respect to the Exchange Agreement) of One Dollar and
Fifty Cents ($1.50). The Common Stock of Kids Mart, Inc. is currently quoted on
the OTC Bulletin Board.
SECTION 3
As long as Be Bop Clothing, Inc. does not reduce its investment in Kids
Mart, Inc. as set forth in Section 2 above, Kids Mart, Inc. will use its best
efforts to maintain Ten Million Dollars ($10,000,000) in annual sales from Be
Bop Clothing, Inc. beginning January 1, 1997, as per the attached "Volume
Breakdown and Mark-up Goal" which is hereby incorporated by reference and made a
part of this Agreement. Until Kids Mart, Inc. receives factor support, the terms
of payment for the Ten Million Dollars annual sales will be based upon mutual
agreement between Be Bop Clothing, Inc. and Kids Mart, Inc., for each purchase
order. If the parties are unable to agree upon mutually agreeable terms, either
party has the option to cancel this agreement upon thirty (30) days written
notice. However, until Kids Mart, Inc. receives factor support, Kids Mart, Inc.
agrees to net 45 day terms. At the time Kids Mart, Inc. receives factor support,
Be Bop Clothing, Inc. will grant Kids Mart, Inc. net sixty (60) day terms.
Should Kids Mart, Inc. not be prompt in paying said accounts on these terms,
said failure would constitute a breach of this Agreement.
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SECTION 4
Kids Mart, Inc. agrees that a senior executive officer and primary
shareholder of Be Bop Clothing, Inc. will be installed on the Board of
Directors of Kids Mart, Inc. within three (3) months of the execution of this
Agreement to serve until the next Annual Meeting of Shareholders. Thereafter,
unless Be Bop Clothing, Inc. has reduced its above-stated investment by more
than Fifty Percent (50%), Kids Mart, Inc. shall nominate said senior executive
officer of Be Bop Clothing, Inc. to the Board of Directors to be voted upon by
the shareholders at each annual meeting.
SECTION 5
Modification. Neither this Agreement nor any provision hereof shall be
modified, discharged or terminated except by an instrument in writing signed by
the party against whom any waiver, change, discharge or termination is sought.
SECTION 6
Notices. Any notice, demand or other communication which any party
hereto may be required, or may elect, to give to anyone interested hereunder
shall be sufficiently given if (a) deposited, a postage prepaid, in a United
States mail letter box, registered or certified mail, return receipt requested,
addressed to such address as may be given herein or (b) delivered personally at
such address.
SECTION 7
Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns. If the undersigned is more than one person, the obligations of the
undersigned shall be joint and several and the agreements, representations,
warranties and acknowledgments herein contained shall be deemed to be made by
and be binding upon each such person and his heirs, executors, administrators
and successors.
SECTION 8
Partial Agreement. This instrument contains the partial agreement of
the parties, and there are no representations, covenants or other agreements
except the Exchange Agreement and Investment Representation Agreement
referenced herein.
SECTION 9
Assignability. This Agreement is not transferable or assignable by the
parties unless agreed to in writing by all said parties.
2
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SECTION 10
Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
made and to be performed entirely within such state.
SECTION 11
Gender. All pronouns contained herein and any variations thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the parties hereto may require.
SECTION 12
Counterparts. This Agreement may be executed through the use of
separate signature pages or in any number of counterparts, and each of such
counterparts shall, for all purposes, constitute one agreement binding on all
the parties, notwithstanding that all parties are not signatories to the same
counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
11th day of September, 1996.
BE BOP CLOTHING INCORPORATED KIDS MART, INC.
By: /s/ Marcus Sphatt By: /s/ Bernard Tessler
- ---------------------------- ----------------------------
Marcus Sphatt Bernard Tessler
Vice President President
By: /s/ Michael Harb
- ----------------------------
Michael Harb
Chief Executive Officer
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VOLUME BREAKDOWN AND MARK-UP GOAL
Girls $ * * Million
* * % Denim * * % Mark-up
* * % Fashion
* * % Basic
* * % Knit Tops * * % Mark-up
* * % Basic
* * % Fashion
Boys and Infants $ * * Million * * % Mark-up
Delivery Availability
- ---------------------
We would expect on-time delivery of initial orders with delivery times on
reorders of 8 weeks or less.
Quality
- -------
Be Bop agrees to provide a level of quality which results in a defect rate of
less than 10% within a specific purchase order, as measured by Kids Mart.
Styling
- -------
We expect Be Bop to provide Kids Mart with styling that includes new trends
in fabrication and silhouettes.
Exclusivity
- -----------
The purchase commitment of $10.0 million, described in this agreement, includes
a component of fashion merchandise in the denim and knit top categories. Any
new item of Be Bop Clothing's fashion offering will be available on an exclusive
basis on "first come, first serve" terms, and will be provided to Kids Mart on
an exclusive basis provided the item is ordered by Kids Mart in quantities
representing an all store, all size range buy. Specific color selection and
designs provided by Kids Mart to Be Bop Clothing is exclusive unless otherwise
agreed upon as an exclusion. Upon Kids Mart receiving Credit Approval, these
garments will carry a label that indicates they were made by Be Bop
exclusively for Kids Mart.
In the interest of driving higher sales volume, at potentially lower initial
mark-ups, Kids Mart will review sales performance of Be Bop product through
July 1997 and, immediately following that analysis, provide Be Bop with
finished gross margin goals that are intended to increase sales and gross
margin dollar results to Kids Mart.
Due to certain changes in the terms of the Agreement, the Agreement will be
effective only upon final Board of Directors approval and receipt by Kids
Mart, Inc. of a fully executed copy of the letter of representation by
Be Bop Clothing, Inc.
ADDENDUM TO AGREEMENT
