<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 29, 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 NUMBER: 0-22834
SUCCESSORIES, INC.
(Exact name of registrant as specified in its charter)
ILLINOIS 36-3760230
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2520 DIEHL ROAD
AURORA, ILLINOIS 60504
(Address of principal executive offices) (Zip Code)
(630) 820-7200
(Registrant's telephone number, including area code)
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
--- ---
Registrant had 6,949,716 shares of common stock, $.01 par value,
outstanding as of June 2, 2000.
================================================================================
<PAGE>
SUCCESSORIES, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets ........................ 3
Consolidated Statements of Operations and
Comprehensive Loss ............................... 4
Consolidated Statement of Stockholders' Equity ..... 5
Consolidated Statements of Cash Flows .............. 6
Notes to Consolidated Financial Statements ......... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ...... 15
Item 3. Quantitative and Qualitative Disclosures
About Market Risk .................................. 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................. 20
Item 6. Exhibits and Reports on Form 8-K ................... 20
SIGNATURES ............................................................. 21
INDEX TO EXHIBITS
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
SUCCESSORIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
April 29, January 29,
2000 2000
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,078,000 $ 1,239,000
Accounts and notes receivable, net of allowance
of $484,000 and $549,000, respectively 3,541,000 3,430,000
Inventories, net 8,078,000 7,998,000
Prepaid catalog expenses 1,673,000 1,539,000
Other prepaid expenses 282,000 130,000
------------ ------------
Total current assets 14,652,000 14,336,000
Property and equipment, net 7,348,000 7,933,000
Notes receivable 215,000 295,000
Deferred financing costs, net 281,000 303,000
Deferred income taxes 5,199,000 5,199,000
Intangibles and other assets, net 1,773,000 1,683,000
------------ ------------
TOTAL ASSETS $ 29,468,000 $ 29,749,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt $ 4,035,000 $ 3,250,000
Accounts payable 3,727,000 3,789,000
Accrued expenses 1,858,000 1,746,000
------------ ------------
Total current liabilities 9,620,000 8,785,000
Long-term debt, net of current portion 2,658,000 3,374,000
------------ ------------
Total liabilities 12,278,000 12,159,000
------------ ------------
Minority interest in subsidiaries -- 47,000
------------ ------------
Stockholders' equity:
Convertible preferred stock, $.01 par value; 1,000,000
shares authorized; 503,092 of Series A and 101,667 of
Series B shares issued and outstanding 6,000 6,000
Common stock, $.01 par value; 20,000,000 shares
authorized; 6,949,716 and 6,933,213 shares issued
and outstanding, respectively 69,000 69,000
Common stock warrants 2,324,000 2,291,000
Notes receivable from stockholders (165,000) (165,000)
Additional paid-in capital 28,998,000 28,969,000
Accumulated deficit (13,979,000) (13,563,000)
Accumulated other comprehensive loss (63,000) (64,000)
------------ ------------
Total stockholders' equity 17,190,000 17,543,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,468,000 $ 29,749,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
SUCCESSORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
April 29, May 1,
2000 1999
------------ ------------
<S> <C> <C>
Net product sales $ 12,319,000 $ 12,056,000
Cost of goods sold 5,357,000 5,262,000
------------ ------------
Gross profit on product sales 6,962,000 6,794,000
Fees, royalties and other income 215,000 155,000
------------ ------------
Gross margin 7,177,000 6,949,000
Operating expenses 7,209,000 7,124,000
------------ ------------
Loss from operations (32,000) (175,000)
------------ ------------
Other income (expense):
Interest expense (284,000) (363,000)
Minority interests in subsidiaries (48,000) (30,000)
Interest income 5,000 9,000
Other, net (2,000) 2,000
------------ ------------
Total other expense (329,000) (382,000)
------------ ------------
Loss before income tax (361,000) (557,000)
Income tax -- --
------------ ------------
Net loss $ (361,000) $ (557,000)
============ ============
Dividend to preferred stockholders $ 55,000 $ --
============ ============
Loss available to common stockholders $ (416,000) $ (557,000)
============ ============
Foreign currency translation adjustment $ 1,000 $ --
============ ============
Comprehensive loss $ (360,000) $ (557,000)
============ ============
Loss per share:
Basic and diluted $ (.06) $ (.08)
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
SUCCESSORIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Notes
Preferred Stock Common Stock Common Receivable
------------------- -------------------- Stock From
Shares Amount Shares Amount Warrants Stockholders
------ ------ ------ ------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 29, 2000 604,759 $6,000 6,933,213 $69,000 $2,291,000 $(165,000)
Net loss -- -- -- -- -- --
Foreign currency translation
adjustment -- -- -- -- -- --
Stock warrants revaluation -- -- -- -- 33,000 --
Common stock transactions:
Sales of common shares -- -- 16,503 -- -- --
Preferred stock transactions:
Preferred stock dividends -- -- -- -- -- --
------- ------ --------- ------- ---------- ---------
Balance at April 29, 2000 604,759 $6,000 6,949,716 $69,000 $2,324,000 $(165,000)
======= ====== ========= ======= ========== =========
<CAPTION>
Accumulated
Additional Other Total
Paid-In Accumulated Comprehensive Stockholders'
Capital Deficit Loss Equity
----------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Balance at January 29, 2000 $28,969,000 $(13,563,000) $(64,000) $ 17,543,000
Net loss -- (361,000) -- (361,000)
Foreign currency translation
adjustment -- -- 1,000 1,000
Stock warrants revaluation -- -- -- 33,000
Common stock transactions:
Sales of common shares 29,000 -- -- 29,000
Preferred stock transactions:
Preferred stock dividends -- (55,000) -- (55,000)
----------- ------------ -------- ------------
Balance at April 29, 2000 $28,998,000 $(13,979,000) $(63,000) $ 17,190,000
=========== ============ ======== ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
SUCCESSORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
April 29, May 1,
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (361,000) $ (557,000)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 687,000 510,000
Amortization of debt discount 72,000 42,000
Minority interests in subsidiaries 48,000 30,000
---------- ----------
446,000 25,000
Changes in operating assets and liabilities:
Accounts and notes receivable (67,000) 407,000
Inventories (80,000) 984,000
Prepaid catalog expenses (134,000) (277,000)
Other prepaid expenses (152,000) (46,000)
Accounts payable (62,000) 45,000
Accrued expenses 57,000 (177,000)
Intangibles and other assets (90,000) (155,000)
---------- ----------
Net cash (used in) provided by operating activities (82,000) 806,000
---------- ----------
Cash flows from investing activities:
Proceeds from notes receivable issued in connection with
sale of property and equipment 36,000 17,000
Purchase of property and equipment (32,000) (106,000)
---------- ----------
Net cash provided by (used in) investing activities 4,000 (89,000)
---------- ----------
Cash flows from financing activities:
Proceeds from sale of common stock 29,000 21,000
Net borrowings (repayments) on revolving credit loan 741,000 (528,000)
Repayments of long-term debt (711,000) (344,000)
Payment of minority interests in subsidiaries (142,000) (81,000)
---------- ----------
Net cash used in financing activities (83,000) (932,000)
---------- ----------
Net decrease in cash (161,000) (215,000)
Cash and cash equivalents, beginning of period 1,239,000 1,615,000
---------- ----------
Cash and cash equivalents, end of period $1,078,000 $1,400,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
SUCCESSORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. DESCRIPTION OF THE BUSINESS
Successories, Inc. and its subsidiaries (collectively the "Company") design,
manufacture, and market proprietary and licensed motivational products. The
Company considers itself a single line of business with products that are
marketed primarily under the SUCCESSORIES trade name through direct marketing
(catalog, electronic commerce and telemarketing), retail (Company-owned
stores), sales to franchisees and wholesale distribution channels. The
Company operates a chain of Successories retail stores located in the United
States and Canada. The Company also operates a franchising program whereby it
sells franchises to market the Company's products under the SUCCESSORIES
trademark.
The franchisee purchases for resale Company manufactured products or products
from others that are Company-approved. Due to the proprietary nature of most of
the Company's products, the Company is the only available source for many
products sold by franchisees. The franchise agreements have an initial term of
five years with a renewal option for three additional successive terms of five
years each. Franchisees pay a royalty to the Company of 2% of franchised retail
stores gross sales. At April 29, 2000, there were 24 Company-owned retail stores
and 50 franchised retail stores. And, at May 1, 1999, there were 33
Company-owned retail stores and 50 franchised retail stores.
NOTE 2. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared, without
audit, in accordance with generally accepted accounting principles for interim
financial information and in conjunction with the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring matters) considered necessary for a fair
presentation have been included. Certain prior year amounts have been
reclassified to conform with the current year presentation.
The Company's fiscal year ends on the Saturday closest to January 31. References
to the three months ended April 29, 2000, and May 1, 1999, refer to the thirteen
weeks ended on the dates indicated.
The results of operations for the three months ended April 29, 2000 are not
necessarily indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the Company's financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended January 29, 2000.
7
<PAGE>
NOTE 3. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
April 29, January 29,
2000 2000
----------- -----------
<S> <C> <C>
Finished goods $ 5,664,000 $ 5,835,000
Raw materials 2,738,000 2,487,000
----------- -----------
8,402,000 8,322,000
Less: reserve for obsolescence (324,000) (324,000)
----------- -----------
$ 8,078,000 $ 7,998,000
=========== ===========
</TABLE>
NOTE 4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
April 29, January 29,
2000 2000
----------- -----------
<S> <C> <C>
Bank borrowings:
Term loan, net of unamortized debt discount of
$758,000 and $782,000 $ 3,467,000 $ 4,133,000
Revolving credit loan 2,860,000 2,119,000
Fixed rate loan, net of unamortized debt discount
of $185,000 and $200,000 315,000 300,000
Capital lease obligations 51,000 72,000
----------- -----------
6,693,000 6,624,000
Less: current portion (4,035,000) (3,250,000)
----------- -----------
Long-term debt $ 2,658,000 $ 3,374,000
=========== ===========
</TABLE>
On June 20, 1997, the Company entered into a credit facility agreement with The
Provident Bank (the "Bank"). Per the agreement, as amended most recently on
April 6, 2000, the facility is comprised of a $7.5 million term loan and a
revolving credit loan. The revolving credit loan provides for maximum borrowings
of $9 million through May 1, 2000 and for each succeeding July 1 through
December 31. The maximum borrowings at all other times is $6 million. Borrowings
under the revolving credit loan are limited to 85% of eligible receivables plus
57% of eligible inventory, as defined, provided that from February through April
eligible inventory is limited to $5 million through the year 2000 and $3 million
in years thereafter. A commitment fee of 0.5% is payable on the daily unused
amount of the maximum revolving credit commitment. The facility expires in June
2003, and borrowings under the facility are secured by substantially all the
assets of the Company. The interest rates on the term loan and revolving credit
loan borrowings generally fluctuate based on the margin ratio, as defined, from
a minimum of prime plus 0.50% to a maximum of prime plus 3.00% on the term loan,
and a minimum of prime to a maximum of prime plus 3.00% on the revolving credit
loan. Interest is payable monthly. The interest rate on the term loan was 10.25%
and the interest rate on the revolving credit loan was 9.75% at April 29, 2000.
The term loan is payable in quarterly installments of $312,500 through June 1,
2000, and $375,000 thereafter. Prepayments on the loans are required in certain
cases including, among others, equity offerings and asset dispositions. Further,
the Company must annually prepay the loans in an amount equal to 60% of excess
cash flow, as defined. As of April 29, 2000, available borrowings on the
revolving credit loan were $6,140,000. On June 20, 1997, warrants to purchase
150,000 shares of the Company's common stock
8
<PAGE>
were issued to the Bank as part of this agreement. Initially these warrants had
exercise prices ranging from $6.19 to $9.73 and expiration dates in June 2001;
however, the exercise prices were subsequently adjusted to $2.00 and the
expiration dates were extended to June 2005.
In July 1997, the agreement for the credit facility was amended to include an
additional $500,000 fixed rate loan. The loan bears interest at 12% and is due
in June 2003. Warrants to purchase an additional 72,464 shares of the Company's
common stock were issued to the Bank in connection with this amendment and
initially had an exercise price of $6.90 and an expiration date of July 2003;
however, the exercise price was subsequently adjusted to $2.00 and the
expiration date was extended to July 2005.
The credit facility agreement contains, among other provisions, requirements for
maintaining certain earnings levels and financial ratios, limits on capital
expenditures and additional indebtedness, and restrictions on the payment of
dividends.
On April 6, 2000, the agreement was amended to waive the earnings before
interest, taxes, depreciation and amortization ("EBITDA"), interest coverage
ratio and fixed charge coverage for the year ended January 29, 2000, and to
adjust certain other covenants and limitations prospectively. The amended
agreement requires that (i) adjusted EBITDA, as defined, which is based on a
rolling four quarter period, may not be less than $3,050,000 for the quarter
ended April 29, 2000, $3,200,000 for the quarter ended July 29, 2000, $3,350,000
for the quarter ended October 28, 2000, $3,480,000 for the year ended February
3, 2001, and $3,600,000 for each quarter and year ended thereafter; (ii) the
interest coverage ratio, as defined, may not be less than 2.60 to 1.00 for the
quarter ended April 29, 2000, 2.75 to 1.00 for the quarter ended July 29, 2000,
3.15 to 1.00 for the quarter ended October 28, 2000 and 3.40 to 1.00 for each
quarter and year ended thereafter; (iii) the fixed charge coverage, as defined,
not applicable for the quarter ended April 29, 2000, may not be less than 1.25
to 1.00 for the quarter ended July 29, 2000, 1.15 to 1.00 for the quarter ended
October 28, 2000, 1.10 to 1.00 for each quarter and year ended through July 31,
2001, and 1.15 to 1.00 for each quarter and year ended thereafter. Also, the
limitation on the borrowings against eligible inventory, as defined, of 57% was
extended through the end of the credit agreement term.
In conjunction with the April 6, 2000 amendment, the exercise price of the
warrants to purchase 300,000 shares of common stock previously issued to the
Bank were reduced to $2.00. The impact of revaluation of warrants was additional
debt discount expense of approximately $33,000 to be recognized from fiscal 2000
through fiscal 2003.
On April 28, 1999, the agreement was amended to waive the earnings before
interest, taxes, depreciation and amortization ("EBITDA"), interest coverage
ratio, fixed charge coverage, debt to EBITDA ratio, and capital expenditure
limitation covenants for the year ended January 30, 1999, and adjust certain
other covenants prospectively. The amended agreement required that (i) adjusted
EBITDA, as defined, which is based on a rolling four quarter period, may not be
less than a loss of $1,565,000 for the four quarters ended May 1, 1999, and
increases each subsequent quarter to $6,800,000 for the four quarters ended
October 31, 2000; and for each quarter thereafter; (ii) the interest coverage
ratio, as defined, may not be less than 0.75 to 1.0 at October 30, 1999, and
increases each subsequent quarter to 5.0 to 1.0 for the quarter ended April 29,
2000 and for each quarter thereafter; (iii) the fixed charge coverage, as
defined, may not be less than 2.6 to 1.0 at January 29, 2000, and 1.5 to 1.0
thereafter; and (iv) the debt to EBITDA ratio, as defined, may not be greater
than 3.0 to 1.0 at January 29, 2000 and thereafter. Also, in certain cases where
prepayments on the loans are made in connection with equity offerings, the
amendment provided that certain quarterly installments on the term loan will be
deferred and the limits on borrowings relating to eligible inventory under the
revolving credit loan will be increased.
9
<PAGE>
In conjunction with the April 28, 1999 amendment, warrants to purchase an
additional 300,000 shares of the Company's Common Stock were issued to the Bank
at an exercise price of $2.50 that expire in July 2005, the expiration dates of
the 150,000 warrants previously issued to the bank on June 20, 1997 were
extended an additional two years to June 2005 and the Company paid the bank an
amendment fee of $82,000. The impact of issuance of additional warrants and
revaluation of certain existing warrants was an additional debt discount expense
of approximately $503,000 to be recognized from fiscal 1999 through fiscal 2003.
On May 14, 1998, the agreement was amended to waive the earnings before
interest, taxes, depreciation and amortization ("EBITDA") and interest coverage
ratio covenants for the year ended January 31, 1998, and adjust certain other
covenants. The amended agreement required that (i) EBITDA, which is based on a
rolling four quarter period, may not be less than $4 million for the four
quarters ended May 2, 1998, and increases each subsequent quarter to $6.8
million for the four quarters ended February 3, 2001 and each quarter thereafter
and (ii) the interest coverage ratio, as defined, not be less than 3.0 to 1.0
from May 2, 1998 through October 31, 1998, 4.0 to 1.0 at January 30, 1999, 4.5
to 1.0 at May 1, 1999 and July 31, 1999, and 5.0 to 1.0 thereafter. In addition,
on September 1, 1998, the agreement was again amended to waive the EBITDA
covenant, the interest charge coverage ratio and other related covenants for the
second quarter of fiscal 1998 provided that EBITDA for the third quarter of
fiscal 1998 was not less than $1.6 million. On December 11, 1998, the Company
obtained a waiver from the bank for the EBITDA and interest coverage covenants
for the third quarter ended October 31, 1998.
In conjunction with the May 14, 1998 amendment, the exercise prices of the
warrants to purchase 222,464 shares of common stock previously issued to the
Bank were reduced to $5.85 and their expiration dates were extended for one
year. In conjunction with the September 1, 1998 amendment, the exercise prices
of these warrants were reduced to $3.00 and their expiration dates were extended
for another year. In conjunction with the waiver obtained on December 11, 1998,
the exercise prices of these warrants were reduced to $2.00. The impact of
issuance of additional warrants and revaluation of certain existing warrants was
an additional debt discount expense of approximately $204,000 to be recognized
from fiscal 1998 through fiscal 2003.
The stock warrants issued in conjunction with the credit facility and certain
other financing transactions were assigned a fair value using the Black-Scholes
option pricing model. The fair value of the warrants have been reflected as a
discount on the debt and are being amortized as interest expense over the terms
of the related debt. Interest expense related to these warrants amounted to
$72,000 and $42,000 for the three months ended April 29, 2000 and May 1, 1999,
respectively.
The weighted average interest rates on borrowings outstanding as of April 29,
2000 and May 1, 1999 were 11.3% and 9.1%, respectively.
NOTE 5. INCOME TAXES
Realization of the net deferred tax asset is largely dependent upon the Company
generating sufficient taxable income prior to the expiration of the net
operating loss carryforwards. However, the amount of such realization could be
reduced in the near term if estimates of future taxable income during the
carryforward period are changed. To the extent the net operating loss
carryforwards and existing deductible temporary differences are not offset by
the existing taxable temporary differences reversing within the carryforward
period, the remaining loss carryforwards are expected to be realized by
achieving future profitable operations. Although the Company has incurred a net
loss in the past two years and has an accumulated deficit of $13,979,000 as of
April 29, 2000 and realization of the net
10
<PAGE>
deferred tax asset is not assured, management believes that it is more likely
than not that the net deferred tax asset will be realized.
NOTE 6. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures to the statements of cash flows are as follows:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
April 29, May 1,
2000 1999
---------- ----------
<S> <C> <C>
Cash paid during the period for:
Income taxes $ 18,000 $ 40,000
Interest 212,000 312,000
Non-cash investing and financing activities:
Preferred stock dividends $ 55,000 --
Revaluation of stock warrants 33,000 --
</TABLE>
NOTE 7. LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
April 29, May 1,
2000 1999
---------- ----------
<S> <C> <C>
Basic and diluted loss per share:
Net loss $ (361,000) $ (557,000)
Preferred stock dividend (55,000) --
---------- ----------
Loss available to common
stockholders $ (416,000) $ (557,000)
========== ==========
Weighted-average shares 6,936,296 6,921,923
========== ==========
Basic and diluted loss per share $ (0.06) $ (0.08)
========== ==========
</TABLE>
The diluted computations did not assume the exercise of stock options and
warrants, nor the conversion of preferred stock due to their antidilutive effect
on the loss per share.
NOTE 8. SEGMENT AND RELATED INFORMATION
The Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information" as of January 30, 1999. This Statement establishes
standards for the way public business enterprises report information about
operating segments in annual financial statements and in interim financial
reports issued to shareholders.
The Company's reportable segments are the various distribution channels used to
market its products. The Company's products have similar purposes and uses in
each channel of distribution, but profitability
11
<PAGE>
varies among the channels. The Company considers itself a single line of
business with products that are marketed through direct marketing (catalog,
electronic commerce and telemarketing), retail (Company-owned stores),
wholesale and sales to franchisees. The Company has five reportable segments -
Direct Marketing - SUCCESSORIES, Direct Marketing - Golf, Retail Company-owned
stores, Wholesale and Sales to Franchisees.
The accounting policies of the reportable segments are the same as those
described in Note 2 of Notes to Consolidated Financial Statements in the
Company's 10-K. The Company evaluates the performance of its operating segments
based on income (loss) before other income (expense) and income taxes.
Summarized financial information concerning the Company's reportable segments is
shown in the following table. The "Other" row includes corporate related items
not allocated to reportable segments.
<TABLE>
<CAPTION>
Net Segment Total Capital Depreciation
Sales Profit (Loss) Assets Expenditures and Amortization
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED APRIL 29, 2000:
Direct Marketing SUCCESSORIES $ 8,558,000 $ 1,150,000 $ 3,692,000 $ -- $ 48,000
Direct Marketing Golf 52,000 28,000 443,000 -- --
Retail Company-owned stores 2,408,000 9,000 4,292,000 2,000 226,000
Wholesale 137,000 26,000 61,000 -- --
Sales to Franchisees 1,164,000 255,000 1,410,000 -- 8,000
Other -- (1,829,000) 19,570,000 30,000 405,000
----------- ----------- ----------- ----------- -----------
CONSOLIDATED $12,319,000 $ (361,000) $29,468,000 $ 32,000 $ 687,000
---------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MAY 1, 1999:
Direct Marketing SUCCESSORIES $ 7,318,000 $ 994,000 $ 2,308,000 $ -- $ --
Direct Marketing Golf 257,000 64,000 784,000 -- --
Retail Company-owned stores 3,004,000 (110,000) 5,585,000 8,000 163,000
Wholesale 373,000 (23,000) 781,000 -- --
Sales to Franchisees 1,104,000 262,000 1,508,000 -- 5,000
Other -- (1,744,000) 22,462,000 98,000 342,000
----------- ----------- ----------- ----------- -----------
CONSOLIDATED $12,056,000 $ (557,000) $33,428,000 $ 106,000 $ 510,000
</TABLE>
The Company utilizes its facilities and the majority of its assets
interchangeably among each distribution channel. Assets that relate specifically
to a reportable segment have been included in the above table. Assets identified
to the reportable segments are primarily cash, receivables, inventory, prepaid
catalog expenses, property and equipment, and intangibles.
12
<PAGE>
The following table presents the details for "Other":
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
April 29, May 1,
2000 1999
---------- ----------
<S> <C> <C>
Corporate expenses $1,095,000 $1,020,000
Unallocated depreciation and
amortization expense 405,000 342,000
Other expenses 329,000 382,000
---------- ----------
$1,829,000 $1,744,000
========== ==========
</TABLE>
Corporate expenses are primarily charges for those functions not specifically
attributable to any specific segment; these functions include product
development, merchandising, information systems, accounting, legal, human
resource and executive departments. Included in the expenses associated with
these functions are payroll and related costs, professional fees, information
system maintenance costs, office occupancy costs, and property and casualty
insurance.
The Company's operations are principally in North America. Operations outside of
North America are primarily in the United Kingdom. No single foreign country or
geographic area is significant to the consolidated operations. Foreign
operations' net sales were $71,000 and $55,000, respectively, for the three
months ended April 29, 2000 and May 1, 1999. Long-lived assets are all located
in North America.
The Company's products include distinctive lines of wall decor, desktop art,
books and greeting cards, computer and audio products, personalized gifts and
awards, and mugs. In addition, the Company sells other motivational products
supplied by third parties. At April 29, 2000 and May 1, 1999, sales by product
categories comprised of approximately 48% and 44% wall decor, 18% and 23%
desktop art, 16% and 17% books and greeting cards, 16% and 9% personalized gifts
and awards, and 2% and 7% other products, respectively.
NOTE 9. COMMITMENTS AND CONTINGENCIES
LEGAL MATTERS
In May 1998, Wascher Corporation ("Wascher"), a franchisee of the Company, filed
a Demand for Arbitration dated May 26, 1998 with the American Arbitration
Association (Case No. 51-114-00227-98). Wascher alleges the following causes of
action against the Company: breach of contract, breach of good faith and fair
dealing, common law fraud, unfair competition, Robinson-Patman Act violation,
tortious interference with contract and violation of the Wisconsin Fair
Dealership Act. In support thereof, Wascher alleges that the Company has not
followed its agreement with Wascher or observed reasonable commercial standards
and good business practices. Wascher alleges and seeks an award in an amount in
excess of $250,000 plus costs, disbursements and attorney's fees, an award of
both treble and punitive damages, and such other relief deemed just and
equitable.
The hearing dates for Wascher were originally scheduled in January 1999. The
Company and Wascher have postponed the hearing and are involved in settlement
negotiations. If a settlement is not reached with Wascher, the Company intends
to vigorously defend itself against the claims. Given the phase of this
13
<PAGE>
proceeding, the Company has determined that a reasonable assessment with respect
to the financial impact, if any, cannot be made at this point in time.
Except as noted above, there are no other material pending legal proceedings
against the Company. The Company is, however, involved in routine litigation
arising in the ordinary course of its business and, while the results of the
proceedings cannot be predicted with certainty, the Company believes that the
final outcome of such matters will not have a materially adverse effect on the
Company's consolidated financial position or results of operations.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in
its entirety by, the Consolidated Financial Statements and Notes thereto
included elsewhere in this Report.
Successories is a direct mail catalog company, specialty retailer and wholesaler
that designs, assembles and markets a diverse range of motivational and
self-improvement products, many of which are the Company's own proprietary
designs. The Company's products include distinctive lines of wall decor, desktop
accessories, books, personalized gifts and awards, greeting cards and mugs. In
addition, the Company sells other motivational products supplied by third
parties. In-house designers create proprietary art work and designs that can be
used in conjunction with a wide variety of products. The Company will also
customize products to fulfill customers' special needs.
The Company's products are marketed primarily under its SUCCESSORIES trade name
through direct marketing (catalog, electronic commerce and telemarketing),
retail channel (Company-owned stores), sales to franchisees and wholesale
distribution. Although the Company utilizes multiple distribution channels for
its products, the Company's products have similar purposes and uses in each
channel of distribution. The profitability varies among products and
distribution channels. The Company utilizes its facilities interchangeably for
each distribution channel. Furthermore, the marketing channels are directed at a
single customer base located primarily in the United States. Currently, the
Company is focusing its future growth on its core motivational products business
and its two most profitable distribution channels: direct marketing of
SUCCESSORIES and franchised retail stores.
For the three months ended April 29, 2000 and May 1, 1999, net product sales for
the various distribution channels, as a percentage of total net product sales,
were as follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------
April 29, May 1,
2000 1999
--------- ------
<S> <C> <C>
Direct marketing - Successories 69.5% 60.7%
Direct marketing - Golf 0.5% 2.1%
Retail Company-owned stores 19.5% 24.9%
Wholesale distribution 1.1% 3.0%
Sales to franchisees 9.4% 9.3%
</TABLE>
The gross profit margins for retail sales attributable to Company-owned stores
are slightly lower than for direct marketing due to more non-proprietary
products being sold in the retail stores. The gross profit margin for wholesale
distribution sales, including sales to franchisees, is lower than other channels
since these sales are generally made at a significant discount from retail
price.
15
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the results of operations for the three
months ended April 29, 2000 and May 1, 1999.
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Increase (Decrease)
---------------------------------------- --------------------
April 29, 2000 May 1, 1999
---------------- ------------------
Amount % Amount % Amount %
------- ----- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net product sales $12,319 100.0 $12,056 100.0 $263 2.2
Cost of goods sold 5,357 43.5 5,262 43.7 95 1.8
------- ----- ------- ----- ---- -----
Gross profit on product sales 6,962 56.5 6,794 56.3 168 2.5
Fees, royalties and other income 215 1.7 155 1.3 60 38.7
------- ----- ------- ----- ---- -----
Gross margin 7,177 58.2 6,949 57.6 228 3.3
Operating expenses 7,209 58.5 7,124 59.1 85 1.2
------- ----- ------- ----- ---- -----
(Loss) income from operations (32) (0.3) (175) (1.5) 143 81.7
Interest and other expenses 329 2.6 382 3.1 (53) (13.9)
------- ----- ------- ----- ---- -----
(Loss) income before income taxes (361) (2.9) (557) (4.6) 196 35.2
Income tax expense -- -- -- -- -- --
------- ----- ------- ----- ---- -----
Net (loss) income $ (361) (2.9) $ (557) (4.6) $196 35.2
------- ----- ------- ----- ---- -----
------- ----- ------- ----- ---- -----
</TABLE>
THREE MONTHS ENDED APRIL 29, 2000, COMPARED TO THREE MONTHS ENDED MAY 1, 1999
Net product sales were $12,319,000 for the three months ended April 29, 2000,
compared to $12,056,000 for the corresponding three months ended May 1, 1999.
The $263,000 or 2.2% increase in sales was comprised of an increase in direct
marketing-SUCCESSORIES sales of $1,240,000 or 16.9%, and sales to franchises of
$60,000 or 5.4%, offset by a decrease in direct marketing-golf sales of $205,000
or 79.8%, retail Company-owned store sales of $596,000 or 19.8%, and wholesale
sales of $236,000 or 63.3%.
Net product sales from the two core channels, direct marketing - SUCCESSORIES
and sales to franchisees, reflected a strong growth of 15.4% in the current year
three months ended April 29, 2000 (first quarter 2000) in comparison to the
prior year three months ended May 1, 1999 (first quarter 1999). The increase in
direct marketing - SUCCESSORIES sales can be attributed to the refinement of the
catalog circulation strategy, increase in catalog page count and enhanced
merchandising in the current year. Sales in channels being de-emphasized, retail
Company-owned stores, wholesale and direct marketing-golf, decreased by 28.5% in
the current year. The overall decrease in retail Company-owned store sales was
due to nine fewer stores in operation in the current year compared to the prior
year. The comparable same store sales in retail Company-owned stores increased
by 7.3% in the current year compared to the prior year. The decrease in
wholesale and direct marketing - golf channel sales in the current year can be
attributed to the planned reduction in the scope of business. The increase in
sales to franchisees and comparable same store sales for Company-owned stores is
the result of enhanced merchandising and new product introductions in the
current year. Internet sales, which are included in the direct marketing -
SUCCESSORIES channel, were 13.5% of the direct marketing domestic sales for the
first quarter 2000. Customer interest in the website has steadily increased and
the Company believes the internet offers a significant marketing and sales
opportunity.
Gross margin, as a percentage of net product sales, was 58.2% for the first
quarter 2000 in comparison to 57.6% for the first quarter 1999. Gross margin
increased in the current year to $7,177,000 from
16
<PAGE>
$6,949,000 in the prior year. The improvement in gross margin can be attributed
to an increase in net product sales and a change in sales mix from the various
distribution channels in the current year.
Operating expenses, as a percentage of net product sales, improved in the first
quarter 2000 to 58.5% from 59.1% in the first quarter 1999, as a result of
streamlining the operations. Operating expenses increased in the current year to
$7,209,000 from $7,124,000 in the prior year, primarily due to the increases in
variable operating expenses related to the increases in net product sales in the
current year.
Interest expense was $284,000 for the first quarter 2000 in comparison to
$363,000 for the first quarter 1999. The decrease in interest expense can be
attributed to a reduction in the outstanding debt in the current year in
comparison to the prior year. Included in interest expense is the amortization
of the debt discount which is a non-cash expense. This non-cash interest expense
amounted to $72,000 and $42,000 for the first quarter 2000 and first quarter
1999, respectively.
The net loss of $361,000 for the current year first quarter 2000 was less than
the net loss of $557,000 for the prior year first quarter 1999, primarily due to
an increase in net product sales. As a percentage of net product sales, the net
loss decreased to 2.9% in the current year, as compared to a net loss of 4.6% in
the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ongoing cash requirements are for working capital, capital
expenditures and debt service. The Company expects to rely on cash generated
from its operations, supplemented by borrowings available on the revolving
credit loan, to fund its cash requirements.
Operating activities used cash of $82,000 in the current year for the three
months ended April 29, 2000 (first quarter 2000), compared to cash provided of
$806,000 for the three months ended May 1, 1999 (first quarter 1999). In the
prior year, cash flow from operating activities was primarily provided by
reduction in accounts receivable and inventory as a result of delayed
collections and management's planned efforts to reduce excess inventory levels
from the fiscal year ended January 30, 1999.
Investing activities provided cash of $4,000 in the first quarter 2000, compared
to cash used of $89,000 in the first quarter 1999. The principal use of cash in
investing activities is capital expenditures. The Company's credit facility
limits capital expenditures to $1 million for the fiscal year.
Financing activities used cash of $83,000 in the first quarter 2000, compared to
$932,000 in the first quarter 1999. Scheduled debt repayments on the term note
and net repayments on the revolving credit loan were the principal uses of cash.
Proceeds from net borrowings on the revolving credit loan were the primary
source of cash.
On June 20, 1997, the Company entered into a credit facility agreement with The
Provident Bank (the "Bank"). Per the agreement, as amended most recently on
April 6, 2000, the facility is comprised of a $7.5 million term loan and a
revolving credit loan. The revolving credit loan provides for maximum borrowings
of $9 million through May 1, 2000 and for each succeeding July 1 through
December 31. The maximum borrowings at all other times is $6 million. Borrowings
under the revolving credit loan are limited to 85% of eligible receivables plus
57% of eligible inventory, as defined, provided that from February through April
eligible inventory is limited to $5 million through the year 2000 and $3 million
in years thereafter. A commitment fee of 0.5% is payable on the daily unused
amount of the maximum revolving credit commitment. The facility expires in June
2003, and borrowings under the facility are
17
<PAGE>
secured by substantially all the assets of the Company. The interest rates on
the term loan and revolving credit loan borrowings generally fluctuate based on
the margin ratio, as defined, from a minimum of prime plus 0.50% to a maximum of
prime plus 3.00% on the term loan, and a minimum of prime to a maximum of prime
plus 3.00% on the revolving credit loan. Interest is payable monthly. The
interest rate on the term loan was 10.25% and the interest rate on the revolving
credit loan was 9.75% at April 29, 2000. The term loan is payable in quarterly
installments of $312,500 through June 1, 2000, and $375,000 thereafter.
Prepayments on the loans are required in certain cases including, among others,
equity offerings and asset dispositions. Further, the Company must annually
prepay the loans in an amount equal to 60% of excess cash flow, as defined. As
of April 29, 2000, available borrowings on the revolving credit loan were
$6,140,000. In July 1997, the agreement for the credit facility was amended to
include an additional $500,000 fixed rate loan. The loan bears interest at 12%
and is due in June 2003.
The credit facility also contains other provisions, including limits on capital
expenditures and additional indebtedness, and restrictions on the Company's
payment of cash dividends.
On April 6, 2000, the agreement was amended to waive the earnings before
interest, taxes, depreciation and amortization ("EBITDA"), interest coverage
ratio and fixed charge coverage for the year ended January 29, 2000, and to
adjust certain other covenants and limitations prospectively. The amended
agreement requires that (i) adjusted EBITDA, as defined, which is based on a
rolling four quarter period, may not be less than $3,050,000 for the quarter
ended April 29, 2000, $3,200,000 for the quarter ended July 29, 2000, $3,350,000
for the quarter ended October 28, 2000, $3,480,000 for the year ended February
3, 2001, and $3,600,000 for each quarter and year ended thereafter; (ii) the
interest coverage ratio, as defined, may not be less than 2.60 to 1.00 for the
quarter ended April 29, 2000, 2.75 to 1.00 for the quarter ended July 29, 2000,
3.15 to 1.00 for the quarter ended October 28, 2000 and 3.40 to 1.00 for each
quarter and year ended thereafter; (iii) the fixed charge coverage, as defined,
not applicable for the quarter ended April 29, 2000, may not be less than 1.25
to 1.00 for the quarter ended July 29, 2000, 1.15 to 1.00 for the quarter ended
October 28, 2000, 1.10 to 1.00 for each quarter and year ended through July 31,
2001, and 1.15 to 1.00 for each quarter and year ended thereafter. Also, the
limitation on the borrowings against eligible inventory, as defined, of 57% was
extended through the end of the credit agreement term.
At April 29, 2000, the Company was in compliance with the debt covenant
requirements of the credit facility agreement.
The Company believes that internally generated funds and the credit facility
will be sufficient to meet its current operating needs, fund debt service and
make anticipated capital expenditures.
SEASONALITY
The Company generally experiences peak sales in the fourth quarter of its fiscal
year (November through January) due to the holiday season. The effects of
seasonality are greater in the Company's retail operations than the other
segments of its business. Most operating expenses are incurred evenly throughout
the year, although some selling and administrative expenses are variable
depending on sales, and direct marketing catalog advertising expenses as a
percentage of sales are higher in the first calendar quarter. The Company's
quarterly operating results may also vary depending upon such factors as
converting Company-owned stores to franchise stores, catalog mailings, and the
timing of new product introductions and promotions by the Company. The Company's
cash requirements generally reach a seasonal peak in the second half of the year
to finance increased inventory levels needed to meet the third and fourth
quarter sales demand.
18
<PAGE>
INFLATION
The Company does not believe that inflation has had a material impact on its
operations.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements which the Company believes
are within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such forward-looking
statements may be deemed to include, among other things, statements relating to
anticipated financial performance, the management team, management's long-term
performance goals, plans to divest the Company's golf catalog business and
convert retail locations to franchised stores, programs to reduce the Company's
costs and enhance asset utilization, the Company's generation of funds
sufficient to meet its current operating needs and to fund anticipated capital
expenditures, realization of deferred tax assets, as well as statements relating
to the Company's operational and growth strategies. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
accurate, and actual results could differ materially from those addressed in
forward-looking statements contained in this Form 10-Q. These risks and
uncertainties should be considered in evaluating forward-looking statements and
undue reliance should not be placed on such statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk associated with adverse changes in
interest rate and foreign currency exchange rates, but does not hold any market
risk sensitive instruments for trading purposes. The Company uses both fixed and
variable rate debt, as described in Note 4 of the Notes to Consolidated
Financial Statements. Principal exposed to interest rate risk is limited to
$7,085,000 in variable rate debt. The impact of a 1% change in interest rates on
the variable rate debt is approximately $71,000. The Company's exposure to
foreign currency exchange rate risk relates primarily to the financial position
and results of operations in Canada and United Kingdom. The Company's exposure
to foreign currency exchange rate risk is difficult to estimate due to factors
such as balance sheet accounts, and the existing economic uncertainty and future
economic conditions in the international marketplace.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In May 1998, Wascher Corporation ("Wascher"), a franchisee of the Company, filed
a Demand for Arbitration dated May 26, 1998 with the American Arbitration
Association (Case No. 51-114-00227-98). Wascher alleges the following causes of
action against the Company: breach of contract, breach of good faith and fair
dealing, common law fraud, unfair competition, Robinson-Patman Act violation,
tortious interference with contract and violation of the Wisconsin Fair
Dealership Act. In support thereof, Wascher alleges that the Company has not
followed its agreement with Wascher or observed reasonable commercial standards
and good business practices. Wascher alleges and seeks an award in an amount in
excess of $250,000 plus costs, disbursements and attorney's fees, an award of
both treble and punitive damages, and such other relief deemed just and
equitable.
The hearing dates for Wascher were originally scheduled in January 1999. The
Company and Wascher have postponed the hearing and are involved in settlement
negotiations. If a settlement is not reached with Wascher, the Company intends
to vigorously defend itself against the claims. Given the phase of this
proceeding, the Company has determined that a reasonable assessment with respect
to the financial impact, if any, cannot be made at this point in time.
Except as noted above, there are no other material pending legal proceedings
against the Company. The Company is, however, involved in routine litigation
arising in the ordinary course of its business and, while the results of the
proceedings cannot be predicted with certainty, the Company believes that the
final outcome of such matters will not have a materially adverse effect on the
Company's consolidated financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Index to Exhibits immediately following the Signatures page.
(b) On May 16, 2000 a Form 8-K reporting the change in the Company's
independent public accountants to audit its consolidated financial
statements and to perform audit related services was filed.
20
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
SUCCESSORIES, INC.
(Registrant)
Date: June 9, 2000 By: /s/ Gary J. Rovansek
--------------------
Gary J. Rovansek
President, Chief Executive Officer, Chief
Operating Officer and Director (Principal
Executive Officer)
Date: June 9, 2000 By: /s/ John C. Carroll
-------------------
John C. Carroll
Senior Vice President, and Chief Financial
Officer (Principal Financial and
Accounting Officer)
21
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.1 Articles of Incorporation of Registrant - Amended and Restated
as of October 28, 1999 (21)
3.3 By-laws of Registrant (1)
3.4 Amended and Restated Certificate of Designation of Series A and
Series B Convertible Preferred Stock (19)
4.1 Specimen Common Stock Certificate (18)
4.2 Specimen Series A Cumulative Convertible Preferred Stock
Certificate (20)
4.3 Specimen Series B Cumulative Convertible Preferred Stock
Certificate (20)
10.1 Form of Franchising Agreement (18)
10.2 Stock Option Instrument for Arnold M. Anderson dated November
19, 1991 (1)*
10.3 Celex Group, Inc. Stock Option Plan (1)
10.4 Joint Venture Agreement with Morrison DFW, Inc. and related
documents (4)
10.5 Indemnification Agreement dated April 7, 1999 between the
Company and Arnold M. Anderson (17)*
Indemnification Agreements in the form filed were also entered
into by the Messrs. Seamas T. Coyle, Timothy C. Dillon, C.
Joseph LaBonte, Steven B. Larrick, Michael H. McKee, Mervyn C.
Phillips, Jr., Guy E. Snyder, Gary J. Rovansek, R. Scott
Morrison, Jr., Jack Miller, Howard I. Bernstein, Lawrence A.
Hodges, and Leslie Nathanson Juris.
10.6 Form of Subordinated Note, Common Stock Purchase Warrant and
Subordination Agreement relating to issuance of $1,500,000
Subordinated Notes and Warrants to purchase 120,000 shares of
the Company's Common Stock (9)
10.7 Common Stock Option Agreement granted to Arnold M. Anderson and
Incentive Stock Option Agreement granted to Arnold M. Anderson
(9)*
10.8 (a) Employment Agreement with Arnold M. Anderson dated March 1, 1996
(10)*
10.8 (b) Employment Agreement with Arnold M. Anderson dated January 14,
1997 (21)*
10.8 (c) Addendum to Employment Agreement with Arnold M. Anderson dated
February 16, 2000 (21)*
10.9 Employment Agreement with Michael H. McKee dated June 1, 1999
(18)*
<PAGE>
10.10 Form of Subordinated Note Extensions, Stock Options and
Subordination Agreement relating to the extension of $1,250,000
of Subordinated Notes, and options to purchase 125,000 shares of
the Company's Common Stock (2)
10.11 Credit Agreement between the Company and The Provident Bank
dated as of June 20, 1997 (13)
10.12 First Amendment to Credit Agreement between the Company and The
Provident Bank dated as of July 16, 1997 (13)
10.13 Lease Agreement between LaSalle National Trust, N.A. as Trustee
under Trust No. 120358 and Celex Group, Inc. (14)
10.14 Second Amendment to Credit Agreement between the Company and The
Provident Bank dated as of May 14, 1998 (14)
10.15 Third Amendment to Credit Agreement between the Company and The
Provident Bank dated as of September 1, 1998 (15)
10.16 Employment Agreement with Gary Rovansek dated October 29, 1998
(15)*
10.17 Fourth Amendment to Credit Agreement between the Company and The
Provident Bank dated as of April 28, 1999 (17)
10.18 Warrants to Purchase Common Stock of the Company granted to The
Provident Bank dated as of April 29, 1999 (17)
10.19 Preferred Stock Purchase Agreement, dated as of May 28, 1999, by
and among the Company and the investors (16)
10.20 Registration Rights Agreement, dated as of May 28, 1999, by and
among the Company and the investors (16)
10.21 Preferred Stock Purchase Agreement, dated as of October 18,
1999, by and among the Company and the investors (19)
10.22 Registration Rights Agreement, dated as of October 18, 1999, by
and among the Company and the investors (19)
10.23 Fifth Amendment to Credit Agreement between the Company and The
Provident Bank dated as of April 6, 2000 (filed herewith)
21.1 Subsidiaries of the Registrant (4)
27.1 Financial Data Schedule (filed herewith)
--------------------------------------
</TABLE>
* Denotes management contract, or compensatory plan or arrangement required to
be filed as an exhibit.
<PAGE>
(1) Previously filed with the Company's Registration Statement on Form SB-2,
No. 33-76530C filed on August 17, 1993, and incorporated herein by
reference.
(2) Previously filed with the Company's Registration Statement of Form S-3,
No. 333-19313, and incorporated herein by reference.
(3) Previously filed with the Company's Post-effective Amendment No. 1 to the
Registration Statement of Form SB-2, No. 33-67530C filed on January 19,
1994, and incorporated herein by reference.
(4) Previously filed with the Company's Annual Report on Form 10-K for the
year ended April 30, 1994, and incorporated herein by reference.
(5) Previously filed with the Company's Form 10-Q/A-1 for the quarter ended
July 31, 1995, and incorporated herein by reference.
(6) Previously filed with the Company's Current Report on Form 8-K filed on
June 7, 1995, reporting date of event May 26, 1995, and incorporated
herein by reference.
(7) Previously filed with the Company's Annual Report on Form 10-K for the
year ended April 30, 1995, and incorporated herein by reference.
(8) Previously filed with the Company's Form 10-Q Report for the quarter
ended October 28, 1995, and incorporated herein by reference.
(9) Previously filed with the Company's Annual Report on Form 10-K for the
year ended February 3, 1996, and incorporated herein by reference.
(10) Previously filed with the Company's Form 10-Q Report for the quarter
ended August 3, 1996, and incorporated herein by reference.
(11) Previously filed with the Company's Form 10-Q Report for the quarter
ended November 2, 1996, and incorporated herein by reference.
(12) Previously filed with the Company's Annual Report on Form 10-K for the
year ended February 1, 1997, and incorporated herein by reference.
(13) Previously filed with the Company's Form 10-Q Report for the quarter
ended August 2, 1997, and incorporated herein by reference.
(14) Previously filed with the Company's Form 10-Q Report for the quarter
ended May 2, 1998, and incorporated herein by reference.
(15) Previously filed with the Company's Form 10-Q Report for the quarter
ended October 31, 1998, and incorporated herein by reference.
(16) Previously filed with the Company's Current Report on Form 8-K filed on
June 10, 1999, reporting date of event June 7, 1999, and incorporated
herein by reference.
(17) Previously filed with the Company's Form 10-Q Report for the quarter
ended May 1, 1999, and incorporated herein by reference.
(18) Previously filed with the Company's Form 10-Q Report for the quarter
ended July 31, 1999, and incorporated herein by reference.
(19) Previously filed with the Company's Current Report on Form 8-K filed on
November 4, 1999, reporting date of event October 18, 1999, and
incorporated herein by reference.
<PAGE>
(20) Previously filed with the Company's Form 10-Q Report for the Quarter
ended October 30, 1999, and incorporated herein by reference.
(21) Previously filed with the Company's Annual Report on form 10-K for the
year ended January 29, 2000, and incorporated herein by reference.
