UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
[x] Annual Report Under Section 13 or 15 (d) of the Securities Exchange Act of
1934
For the calendar year ended December 31, 1995
---------------------------------
[ ] Transition Report Under Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the transition period from _____________________ to ______________________
Commission file number 0-23054
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LIGHT SAVERS U.S.A., INC.
-------------------------
(Name of Small Business Issuer in its Charter)
New York 11-3096379
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
509 Madison Avenue, Suite 1114, New York, New York 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 212-223-0699
-----------------------
Securities registered under Section 12 (b) of the Exchange Act: NONE
Securities registered under Section 12 (g) of the Exchange Act: Common Stock,
par value $.01
per share.
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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.
[ X ] YES [ ] NO
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The Registrant's revenues for the fiscal year ended December 31, 1995 were
$4,980,291.
<PAGE>
The aggregate market value for the 1,694,100 shares of Common Stock, $.01
par value per share (the "Common Stock"), held by non-affiliates of the
Registrant as of April 12, 1996 was approximately $3,489,846.
ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS:
Check whether the Registrant has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
[ ] YES [ ] NO.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
The number of shares of Common Stock outstanding as of April 12, 1996 was
7,125,655.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
LIGHT SAVERS U.S.A., INC.
Form 10-KSB/A
Calendar Year Ended December 31, 1995
TABLE OF CONTENTS
Page No.
--------
PART I
Item 1. Description of Business..............................................2
Item 2. Description of Properties............................................4
PART II
Item 6. Management Discussion and Analysis of Financial Condition and
Results of Operations..............................................4
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act..................9
Item 10. Executive Compensation..............................................10
Item 12. Certain Relationships and Related Transactions......................12
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
- -------
Light Savers U.S.A., Inc. (the "Company") was formed under the laws of the
State of New York in October 1991. In January 1994, the Company consummated an
initial public offering of its Common Stock. Since inception, the Company's
principal line of business was to design and market decorative, energy efficient
lighting fixtures for the hotel and hospitality industry. The Company
manufactured its ceiling, table and floor lamps, wall arms and wall sconces, and
vanity light fixtures to individual customer specifications. The fixtures
utilized compact fluorescent tubes known as "PL bulbs," which complement their
cosmetic beauty and use less energy.
The Company's primary marketing tool was the utilization of Con Edison's
Applepower Rebate Program (the "Con Edison Rebate Program"), under which Con
Edison offered rebates to those who utilized energy saving devices for a
substantial amount, if not all, of the cost of the fixtures, which left the
customer responsible for payment of a small portion, if any, of the cost. All
Company customers in the New York City area had participated in the Con Edison
Rebate Program and the Company sold its products to an insignificant number of
customers who did not live in the New York City area and in an area where their
local utility company did not provide for a rebate program.
In 1994, Con Edison substantially reduced the Con Edison Rebate Program,
making it less advantageous for the Company to use the Con Edison Rebate Program
as a marketing tool. As a result, the Company's revenues were substantially
reduced.
In August 1995, the Company's wholly-owned subsidiary, Hospitality
Restoration and Builders, Inc., a New York corporation ("HRB") acquired
substantially all of the assets and business and assumed certain liabilities of
AGF Interior Services Co., a Florida corporation that provides renovation
services to the hospitality industry ("AGF"), in a stock and cash transaction
from Watermark Investments Limited, a Delaware corporation ("Watermark"). In
December 1995, the Company's Board of Directors, in an effort to focus the
Company in a more strategic direction, determined to begin to dispose of the
Company's lighting division and concentrate the Company's efforts in HRB.
On February 26, 1996, the Company, HRB, Watermark Investments Limited, a
Bahamian international business company ("Watermark-Bahamas"), Watermark, a
wholly-owned subsidiary of Watermark-Bahamas, AGF, Tova Schwartz, Alan G.
Friedberg and Guillermo A. Montero entered into a Divestiture, Settlement and
Reorganization Agreement (the "Divestiture Agreement") pursuant to which (i) the
Company sold its lighting business to Tova Schwartz, the Company's former
President and Chief Executive Officer; (ii) Ms. Schwartz resigned from her
positions as a director and officer of the Company and HRB; (iii) the Company
repurchased 500,000 shares of Common Stock from Ms. Schwartz for $250,000; (iv)
Ms. Schwartz granted to the Company the option to purchase an additional
1,000,000 shares of Common Stock; (v) the Company retained Ms. Schwartz as a
consultant for a period of three years at a salary of $100,000 per year; (vi)
Ms. Schwartz, the sole remaining director of the Company (since Howard G.
Anders, Moshe Greenfield and Moise Hendeles resigned from their positions as
directors of the Company effective February 25, 1996), appointed Mr. Friedberg
and Robert A. Berman to the Company's Board of Directors and the parties
appointed Mr. as the Company's President and Chief Executive Officer; (vii) the
Company entered into three-year employment agreements with each of Messrs.
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<PAGE>
Friedberg and Montero; and (viii) the Company engaged Resource Holdings
Associates ("Resource Holdings") as its financial advisor. Subsequently, on
March 25, 1996, Mr. Berman resigned from the Company's Board of Directors and
the Board elected Scott A. Kaniewski as Watermark's representative to the Board
of Directors.
The Company's only line of business currently is providing a complete
package of renovation resources to the hospitality industry ranging from
pre-planning and scope preparation of a project to performing the renovation
requirements and delivering furnished rooms. HRB offers hospitality maintenance
services to hotels and hotel chains throughout the continental United States.
For over sixteen years, HRB, through its predecessor, AGF, has provided to the
hospitality industry renovation and improvements such as vinyl, paint,
wallpaper, carpet, installation of new furniture, light carpentry, and masonry
work. HRB generally provides its renovation services in an on time, on budget
manner, while causing little or no disruption to the ongoing operation of a
hotel. HRB has successfully responded to the hotel industry's efforts to
increase occupancy, room rates and market share through cosmetic upgrades, which
are generally required every four to seven years.
The Company currently maintains its executive offices at 969 Third Avenue,
New York, New York 10022, and its telephone number is (212) 223-0699. HRB
maintains its principal office at 1800 Century Park East, Los Angeles,
California 90067, and its telephone number is (310) 286-6400.
Marketing
- ---------
Marketing efforts are directed by the Company's Chief Executive Officer and
Executive Vice President of Sales and Marketing. Sales efforts are directed
primarily to the owners of major hotel chains throughout the United States. The
Company believes that it provides necessary services to major hotel chains and
feels confident it will be able to benefit from its strategic focus in the
hospitality industry.
Competition
- -----------
The hospitality maintenance industry is highly fragmented and is made up
largely of small, local companies. HRB has approximately 2% of the market share,
while another large company in the industry has approximately 3% of the market
share. The Company does not know of any other companies in the industry that
have a significant share of the market. Competition in the hospitality
restoration industry is significant and is based largely on the price and
service. In the future, the Company's competitors may be larger and have greater
financial resources than HRB.
Permits and Licenses
- --------------------
The Company is required to obtain state-wide licenses in many of the states
in which it provides services. The Company currently has licenses in 20 states.
The Company's management believes that it has sufficient licenses to conduct its
business, and that it would easily be able to obtain additional licenses if it
were required to do so. In connection with such licenses, the Company is
required to, and believes it does, comply with all environmental laws.
Dependence on Customers
- -----------------------
During the year ended December 31, 1995, Beverly Hilton, Omni Atlanta,
Crown Plaza Worcester and Prime Hospitality each accounted for greater than 10%
of the Company's revenues.
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<PAGE>
Employees
- ---------
As of December 31, 1995, the Company employed 12 full time employees. A
typical renovation project is staffed by a field supervisor, who hires
subcontractors and laborers specifically for the particular project. Each
project is staffed by trade subcontractors that may or may not be unionized. The
Company purchases workman's compensation insurance for each of its projects.
Every contractor and subcontractor is required to sign the Company's standard
contract before working on a project. None of the Company's employees are
represented by labor unions and the Company believes that its relationship with
its employees is good.
Recent Developments
- -------------------
On February 26, 1996, the Company engaged Resource Holdings as its
financial advisor until December 31, 1997. As compensation for such engagement,
the Company granted to Resource Holdings a five year option to purchase 500,000
shares of Common Stock at an exercise price of $2.00 per share and agreed to pay
to Resource Holdings a retainer of $10,000 per month for a period of at least
one year.
On April 8, 1996, the Company consummated a private placement (the "Private
Placement") of 500,000 shares of Common Stock to accredited investors at a price
of $1.00 per share, for aggregate gross proceeds of $500,000.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company maintains its executive office and showroom facilities in a
22-story brick multipurpose office building at 509 Madison Avenue, Suite 1114,
New York, New York 10022, where it occupies approximately 1,100 square feet. The
Company has entered into a three-year lease, which expires April 30, 1999 with
an unaffiliated landlord pursuant to which it currently pays annual fixed rental
of $36,766.00 (exclusive of rent adjustments).
HRB maintains offices at 1800 Century Park East, 3rd Floor, Los Angeles,
California, 90067 where it occupies approximately 3,336 square feet in a
multi-story office complex. HRB has entered into a five year lease, which
expires in January 1999, with an annual fixed rental of approximately $66,800
(exclusive of rent adjustments).
PART II
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
- --------
In February 1995, the Company's management realized that the change in the
Con Edison Rebate Program had seriously impacted its ability to promote and
build its decorative energy efficient lighting business and began to seek either
a joint venture partner or an acquisition opportunity. In August 1995, the
Company's wholly-owned subsidiary, HRB, acquired substantially all of the assets
and business and assumed certain liabilities of AGF, a company that provides
renovation services to the hospitality
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<PAGE>
industry. In December 1995, the Company determined to focus its resources on its
hospitality restoration business and discontinue its lighting business.
In February 1996, the Company sold its lighting business to Tova Schwartz,
the Company's former President and Chief Executive Officer.
Asset Purchase
- --------------
Pursuant to an Asset Purchase Agreement (the "Agreement") dated as of
August 1, 1995 (the "Acquisition Date"), the Company acquired substantially all
of the assets (the "Acquisition") of AGF, including contract rights, through its
newly formed subsidiary corporation, HRB. HRB provides interior and exterior
cosmetic renovations and maintenance for leading hotel and hospitality customers
nationwide.
The aggregate consideration for the Acquisition pursuant to the Agreement
was subject to final determination subsequent to the Acquisition Date. As
finally determined on April 12, 1996, the purchase price consisted of a
$2,150,000 promissory note (the "Note Payable") payable to AGF over five years,
bearing interest at 8% per annum, and 2,500,000 shares of Common Stock delivered
to AGF and issued in the name of AGF's sole stockholder, Watermark. The
Acquisition resulted in goodwill of approximately $6,600,000, which is being
amortized on a straight-line basis over its estimated life of 17 years. The
Acquisition was accounted for as a purchase method of accounting with the
results of HRB included in the consolidated financial statements from the
Acquisition Date.
On May 23, 1995, the Company loaned AGF $2,500,000, secured by a promissory
note (the "Note Receivable"), payable over five years and bearing interest at
8%. The Note Receivable is currently due from Watermark, and is included in the
accompanying financial statements.
On April 12, 1996, the Company and Watermark agreed to offset the
$2,150,000 Note Payable and the $2,500,000 Note Receivable, with a net balance
of $350,000 payable to the Company over five years at a rate of 7% per annum,
with payments commencing January 1997. The Company believes that the 7% interest
rate accurately reflects the cost of money at the time of such adjustment.
As noted above, the Company's Board of Directors determined that it was in
the best interest of the Company and its shareholders to discontinue the
decorative lighting business. Tova Schwartz acquired the lighting business from
the Company on the following terms:
1) The Company repurchased from Ms. Schwartz 500,000 shares of Common
Stock at a price of $.50 per share or $250,000.
2) The Company engaged Ms. Schwartz as a consultant for a three year term
at a rate of $100,000 a year. Under the terms of Ms. Schwartz'
engagement, the Company is to use its best efforts to direct lighting
business to Ms. Schwartz, provided, however, that Ms. Schwartz is not
obligated to accept any such referrals. Ms. Schwartz will pay 10% of
the net invoice price of all sales referred to Ms. Schwartz by the
Company.
The closing sale price of the Common Stock on Nasdaq immediately following
the purchase was $.875 a share.
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<PAGE>
Ms. Schwartz, further granted the Company an option (the "Option") to
purchase an additional 1,000,000 shares of Common Stock at a 33% discount from
the average trading price on Nasdaq for the prior 20 trading days. The Option is
exercisable as to 500,000 shares of Common Stock for a period of 18 months,
commencing on August 26, 1996, at a minimum exercise price of $1.00 per share.
The Option is exercisable as to an additional 500,000 shares of Common Stock for
a period of 12 months, commencing on February 26, 1997, at a minimum exercise
price of $1.50 per share. During the exercise period for the Option, Ms.
Schwartz will have the ability to request the Company to purchase the relevant
optioned shares at a 50% discount to market. If the Company does not purchase
the relevant optioned shares, the Option will be cancelled with respect to such
shares.
Results of Operations: Fiscal 1995 Compared to Fiscal 1994
- ----------------------------------------------------------
Revenues for the year ended December 31, 1995 were $4,980,291, compared to
$524,231 for the same period last year. Contributing to the significant increase
in revenues in fiscal 1995 was the addition of the revenues of AGF, which was
acquired on August 1, 1995.
Costs of revenues for the year ended December 31, 1995 were $3,823,779,
compared to $327,942 for the same period last year. The increase in the cost of
revenues was also related to the Acquisition. Gross profit as a percentage of
revenues was 23% for the year ended December 31, 1995, compared to 40% for the
same period last year. The decline in the gross profit was attributable to the
addition of the costs associated with the renovation business.
Selling, general and administrative expenses were $1,619,189 for the fiscal
year ended 1995, compared to $575,649 for the same period last year. The high
selling, general and administrative expenses in fiscal 1994 as a percentage of
the Company's revenues were a result of the Company investing heavily in sales
and marketing activities in an attempt to gain a presence in the lighting
industry away from the Con Edison Rebate Program.
Interest income for the year ended December 31, 1995 was $120,257, compared
to $145,894 for the same period last year. The reduction in interest income in
1995 was a result of the Company using $2,500,000 of cash for the Acquisition in
August 1995. Interest expense for the year ended December 31, 1995 was $13,007,
compared to $299,124 for the same period last year. In 1994, approximately
$293,500 of the interest expense was due to non-cash charges related to the
Common Stock issued to those individuals who participated in a private placement
prior to the Company's initial public offering.
Loss from operations for the year ended December 31, 1995 was $462,677,
compared to $575,649 for the same period last year.
Loss from continuing operations for the year ended December 31, 1995 was
$380,427, compared to $1,300,744 for the same period last year. Contributing to
the significant loss in fiscal 1994 was the requirement to recognize as
compensation expense $877,500 associated with the Company's initial public
offering.
Net loss for the year ended December 31, 1995 was $1,115,969, compared to
$1,284,798 for the same period last year. Contributing to the loss in 1995 was
$735,542 in costs associated with the discontinued operations of the lighting
division.
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<PAGE>
THE RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995 ARE NOT INDICATIVE OF THE
COMPANY'S FUTURE OPERATING RESULTS SINCE THE COMPANY ACQUIRED THE ASSETS AND
BUSINESS OF AGF IN AUGUST 1995 AND DISCONTINUED ITS LIGHTING BUSINESS IN
DECEMBER 1995. THEREFORE, THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS REFLECTS THE COMPANY'S OPERATING
RESULTS ON A PRO FORMA CONSOLIDATED BASIS GIVING EFFECT TO THE ACQUISITION AND
THE DISCONTINUANCE OF THE LIGHTING BUSINESS AS IF SUCH TRANSACTIONS TOOK PLACE
ON JANUARY 1, 1994. THE PRO FORMA FINANCIAL INFORMATION IS BASED ON THE
HISTORICAL FINANCIAL STATEMENTS OF THE COMPANY AND AGF AND SHOULD BE READ IN
CONJUNCTION WITH SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED
ELSEWHERE HEREIN. THE PRO FORMA FINANCIAL INFORMATION IS UNAUDITED AND IS NOT
NECESSARILY INDICATIVE OF WHAT THE ACTUAL RESULTS OF OPERATIONS OF THE COMPANY
WOULD HAVE BEEN ASSUMING THE ACQUISITION AND THE DISCONTINUANCE OF THE LIGHTING
BUSINESS HAD BEEN COMPLETED AS OF JANUARY 1, 1994, AND NEITHER IS IT NECESSARILY
INDICATIVE OF THE RESULTS OF OPERATIONS FOR FUTURE PERIODS.
For the year ended December 31, 1995, net revenues increased 86% to
$7,159,035 from $3,843,734 for the same period last year. The sizable increase
in annual revenue was a result of the Company's increased sales and marketing
efforts. During 1995, the Company hired a new Executive Vice President of
Marketing and Sales and a new Regional Sales Manager, whose efforts, combined
with those of the Company's Chief Executive Officer, contributed to the increase
in revenues.
Gross profit for the year ended December 31, 1995 was 19%, compared to 44%
for the same period last year. The significant decrease in gross profit was due
to a management decision to accept a large volume project at less than the
normal gross profit to demonstrate the Company's capabilities to a new client.
Selling, general and administrative expenses for the year ended December
31, 1995 were $2,680,766, compared to $1,904,364 for the same period last year.
The 41% increase in selling, general and administrative expenses was a result of
the increased marketing and sales efforts, which had a positive effect on the
Company's ability to build its revenues.
Interest income for the year ended December 31, 1995 was $102,618, compared
to $70,394 for the same period last year. The increase in interest income in
1995 was a result of the Company using $2,500,000 of cash for the Acquisition in
August 1995. Interest expense for the year ended December 31, 1995 was $12,486,
compared to $299,124 for the same period last year. In 1994, approximately
$293,500 of the interest expense was due to non-cash charges related to the
Common Stock issued to those individuals who participated in a private placement
prior to the Company's initial public offering.
Loss from continuing operations was $1,225,475 for the year ended December
31, 1995, compared to $1,267,280 for the same period last year. Included in such
loss are $735,542 of expenses associated with the Company's discontinued
lighting business. The 1994 loss from continuing operations was $1,459,865. Also
included in the 1995 loss from continuing operations is $166,048, that portion
of amortization of goodwill that is associated with the acquisition of AGF.
Provision for income taxes in 1995 had little impact on the Company's
financial results, compared to 1994 when the Company had a $264,846 income tax
credit.
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<PAGE>
Net loss for the year ended December 31, 1995 was $1,961,017, compared to
$1,251,334 for the same period last year.
Liquidity and Capital Resources
- -------------------------------
Working capital (deficit) was approximately $(602,818) at December 31, 1995
compared to $4,059,491 at December 31, 1994. The decrease in working capital is
principally due to the use of cash ($2,500,000) for the Acquisition and the loss
sustained by the lighting division that has been discontinued.
Cash, cash equivalents and marketable securities at December 31, 1995 were
$1,105,102, compared to $3,926,146 at December 31, 1994. Accounts receivable at
December 31, 1995 were $1,586,836, compared to $220,831 at December 31, 1994.
The Company maintains checking account balance sufficient to meets its
operating needs.
On April 8, 1996, the Company consummated the Private Placement of 500,000
shares of Common Stock to accredited investors at a price of $1.00 per share,
for aggregate gross proceeds of $500,000. The Company will use the proceeds of
the Private Placement for working capital.
During the first quarter of 1996, the Company signed approximately $10
million of new contracts for the cosmetic renovation of nine hotels. Gross
profit budgeted for these projects range from 30% to 40%. In addition, the
Company is currently negotiating $3 million of additional contracts for cosmetic
renovation. All of the contracts discussed above are expected to be completed
during fiscal 1996. The Company believes it has sufficient resources to complete
these contracts in a timely and profitable manner.
The Company believes its present cash position is sufficient to meet its
short term operating needs.
New Accounting Standards
- ------------------------
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
that certain long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. The adoption of this pronouncement does not have a significant
impact on the Company's financial statements.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation," which allows a choice of either the intrinsic value method or the
fair value method of accounting for employee stock options. The Company expects
to select the option to continue the use of the current intrinsic value method.
Both standards are effective for fiscal years that begin after December 15,
1995.
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<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Directors and Executive Officers
- --------------------------------
The directors and executive officers of the Company and their positions
with the Company are set forth below.
Name Age Position
- ---- --- --------
Alan G. Friedberg 37 Chief Executive Officer, President
and Director
Guillermo A. Montero 36 Vice President-Operations, Chief
Operating Officer and Director
Howard G. Anders 52 Chief Financial Officer, Executive
Vice President and Secretary
Scott A. Kaniewski 32 Director
ALAN G. FRIEDBERG has been the Chief Executive Officer, President and a
director of the Company since February 1996. He became the Chief Executive
Officer of HRB in August 1995. Prior thereto, Mr. Friedberg was the founder and
Chief Executive Officer of AGF. Mr. Friedberg is third generation in the
construction industry. In 1979, he formed AGF, a contract installation company
and expanded it to a full service "turn-key" operation in
construction/installation specializing in hotels. He has applied his extensive
experience and hands on management approach to successfully complete the
renovation of over 100,000 guestrooms. Completed projects include work performed
for Marriott, Loews, Nikko, Holiday Inn Worldwide, Ritz Carlton and many more.
GUILLERMO A. MONTERO has been the Vice President-Operations, Chief
Operating Officer and a director of the Company since February 1996. In August
1995, he became the Senior Vice President of HRB. Prior thereto, he was the
President of AGF. Originally from Maracaibo, Venezuela, Mr. Montero has strong
ties in the design/construction industry. Mr. Montero attended Oglethorpe
University and Georgia Tech, receiving a B.A. degree in 1982. He became
associated with AGF in 1979. Completed projects include work performed for the
Embassy & Crown Sterling Suites, Hilton & International Chain and Prime
Properties.
HOWARD G. ANDERS has been the Executive Vice President, Chief Financial
Officer and Secretary of the Company since February 1996 and was the Executive
Vice President, Chief Operating Officer and a director of the Company from
October 1994 to November 1995. From December 1995 to February 1996, Mr. Anders
was an independent consultant. Prior to joining the Company, Mr. Anders served
as Vice President and Chief Financial Officer of Alpine Lace Brands, Inc. in
Maplewood, New Jersey from April 1992 to October 1994. From April 1983 to April
1992, Mr. Anders was President and Chief Operating Officer of North Hills
Electronic, Inc. in Glen Cove, New York. Mr. Anders is a 1965 graduate of
Rutgers University and attended the Harvard Business School PMD Program in 1979.
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<PAGE>
SCOTT A. KANIEWSKI has been a director of the Company since March 1996 and
has been a director of Watermark since February 1995. From December 1988 to
February 1995, Mr. Kaniewski held several positions with VMS Realty Partners
("VMS"), including Vice President of Hotel Investments where he was responsible
for the development of fee for service programs targeting institutions and
private investors. He also directed the asset management of VMS' hotel
portfolio. He graduated from the Indiana University School of Business with a
Bachelor of Science Degree in Finance in December 1986 and is Certified Public
Accountant and a member of the Illinois CPA Society.
Meetings and Committees
- -----------------------
The Board held three meetings during the fiscal year ended December 31,
1995. From time to time during such fiscal year, the members of the Board acted
by unanimous written consent. The Company has no standing compensation or audit
committees. The typical functions of such committees are performed by the entire
Board of Directors.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to Tova Schwartz, who served as the
chief executive officer of the Company from its inception until February 1996
and Alan G. Friedberg and Howard G. Anders, the Company's two most highly
compensated officers (the "Named Executive Officers"). There is no other
executive officer of the Company whose salary and bonus exceeded $100,000 with
respect to the fiscal years ended December 31, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------------- -----------------
Other Annual Securities
Name and Compensation Underlying
Principal Position Year Salary($) Bonus($) ($)(1) Options(#)
------------------ ---- --------- -------- ------ ----------
<S> <C> <C> <C> <C> <C>
Tova Schwartz(2)..................... 1995 $103,992 -- -- --
1994 $100,000 $83,333(3) -- --
1993 $92,000 $75,000 -- --
Alan G. Friedberg(4)................. 1995 $110,520 -- -- --
1994 -- -- -- --
1993 -- -- -- --
Howard G. Anders(5).................. 1995 $128,333 -- -- 50,000
1994 $39,999 -- -- 50,000
1993 -- -- -- --
</TABLE>
- ---------------------
(1) Perquisites and other personal benefits, securities or property to each
executive officer did not exceed the lesser of $50,000 or 10% of such
executive's salary and bonus.
(2) Ms. Schwartz served as the Company's Chief Executive Officer and President
from its inception until she resigned in February 1996. Alan G. Friedberg
became the Company's Chief Executive Officer in February 1996.
(3) Reflects dollar amount earned in 1993 and paid in 1994.
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<PAGE>
(4) Mr. Friedberg joined the Company in August 1995 as the Chief Executive
Officer of HRB. In February 1996, he became the Chief Executive Officer and
a director of the Company.
(5) Mr. Anders joined the Company in October 1994 as Executive Vice President,
Chief Operating Officer and a director. In February 1996, he resigned as a
director of the Company and became the Chief Financial Officer, Executive
Vice President and Secretary of the Company.
The following table sets forth certain information regarding stock option
grants made to the Named Executive Officers during the fiscal year ended
December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/sh) Date
---- ---------- ----------- ------ ----
<S> <C> <C> <C> <C>
Tova Schwartz.............. -- -- -- --
Alan G. Friedberg.......... -- -- -- --
Howard G. Anders........... 50,000 50% $1.275 3/15/00
</TABLE>
The following table sets forth certain information regarding unexercised
stock options held by the Named Executive Officers as of December 31, 1995.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options at Value of Unexercised in-the-Money Options
December 31, 1995(#) at December 31, 1995 ($)(1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Tova Schwartz................. -- --
Alan G. Friedberg............. -- --
Howard G. Anders.............. 100,000/0 $ 0/0
</TABLE>
- ----------------
(1) On December 29, 1995, the last reported sales price of the Common Stock on
the Nasdaq SmallCap Market was $1.25 per share.
Board of Directors Compensation
- -------------------------------
The Company does not currently compensate directors who are also executive
officers of the Company for service on the Board of Directors. Directors are
reimbursed for their expenses incurred in attending meetings of the Board of
Directors.
-11-
<PAGE>
Long-Term Incentive and Pension Plans
- -------------------------------------
The Company does not have any long-term incentive or defined benefit
pension plans.
Other
- -----
No director or executive officer is involved in any material legal
proceeding in which he is a party adverse to the Company or has a material
interest adverse to the Company.
Employment Agreements
- ---------------------
Pursuant to the Divestiture Agreement, the Company and Tova Schwartz agreed
that Ms. Schwartz would provide consulting services to the Company on a
part-time basis (no more than four hours per month) for a term of three years,
to be compensated at a rate of $100,000 per year. As additional consideration
for the purchase of the lighting business, the Company agreed to refer lighting
business to Ms. Schwartz or an entity controlled by her and Ms. Schwartz agreed
to pay commissions to the Company for a period of three years at a rate of 10%
(or as negotiated), of the net invoice price of all sales referred to Ms.
Schwartz by the Company.
In addition, pursuant to the Divestiture Agreement, Mr. Friedberg and the
Company agreed on the terms of Mr. Friedberg's employment with the Company, for
an initial term of three years, subject to automatic renewal for successive
twelve-month periods unless either party provides the other with a notification
of non-renewal. The salary of Mr. Friedberg is to be determined by the Company's
Board of Directors and Mr. Friedberg has agreed not to compete with the Company
during the two year period after the termination of his employment with the
Company.
On April 1, 1996, the Company entered into a two year employment agreement
with Mr. Anders, at a salary of $150,000 per annum. Pursuant to such agreement,
Mr. Anders has agreed not to compete with the Company during the term of the
agreement and for a period of two years thereafter.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
- --------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than ten percent
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file. During the year ended December
31, 1995, all of such forms were filed in a timely manner, except that Watermark
did not file a Form 3.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company hired Interstate Interior Services ("Interstate") as a
subcontractor on certain of its projects. Sheryl Smul, the President of
Interstate, is the sister of Alan G. Friedberg, the Company's Chief Executive
Officer. From August 1, 1995, the date of the Acquisition, to December 31, 1995,
the Company paid fees of $712,137 to Interstate. The Company solicits bids from
subcontractors and, based on its knowledge of the hospitality restoration
industry, knows that the fees paid to Interstate are as favorable to those which
might have been paid to non-affiliated parties.
-12-
<PAGE>
On February 26, 1996, the Company, HRB, Watermark-Bahamas, Watermark, AGF,
Tova Schwartz, Alan G. Friedberg and Guillermo A. Montero entered into the
Divesture Agreement pursuant to which (i) the Company sold its lighting business
to Tova Schwartz, the Company's former President and Chief Executive Officer;
(ii) Ms. Schwartz resigned from her positions as a director and officer of the
Company and HRB; (iii) the Company repurchased 500,000 shares of Common Stock
from Ms. Schwartz for $250,000; (iv) Ms. Schwartz granted to the Company the
option to purchase an additional 1,000,000 shares of Common Stock; (v) the
Company retained Ms. Schwartz as a consultant for a period of three years at a
salary of $100,000 per year; (vi) Ms. Schwartz, the sole remaining director of
the Company (since Howard G. Anders, Moshe Greenfield and Moise Hendeles
resigned from their positions as directors of the Company effective February 25,
1996), appointed Mr. Friedberg and Robert A. Berman to the Company's Board of
Directors and the parties appointed Mr. Friedberg as the Company's President;
(vii) the Company entered into three-year employment agreements with each of
Messrs. Friedberg and Montero; and (viii) the Company engaged Resource Holding
as its financial advisor. On March 25, 1996, Mr. Berman resigned from the
Company's Board of Directors and the Board elected Scott A. Kaniewski as
Watermark's representative to the Board of Directors. See "Employment
Agreements" for a description of the consulting/commission arrangement between
the Company and Ms. Schwartz.
On April 12, 1996, based upon provisions of the Agreement and a memorandum
agreement between the parties to the Agreement, the Company and Watermark agreed
to reduce the purchase price by $1,350,000 through a reduction in the Note
Payable. The Company and Watermark agreed to offset the $2,150,000 Note Payable
and the $2,500,000 Note Receivable, with a net balance of $350,000 payable to
the Company over five years at a rate of 7% per annum, with payments commencing
January 1997.
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of 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.
LIGHT SAVERS U.S.A., INC.
Dated: July 30, 1996 By: /s/ Alan G. Friedberg
---------------------
Alan G. Friedberg, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alan G. Friedberg and Howard G. Anders his true
and lawful attorneys-in-fact and agent, with full power of substitution and
resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign any or all amendments to this report, 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 necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his or her
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Alan G. Friedberg President, Chief Executive Officer July 30, 1996
- ------------------------- and Director (principal executive
Alan G. Friedberg officer)
/s/ Guillermo Montero Vice President, Chief Operating July 30, 1996
- ------------------------- Officer and Director
Guillermo Montero
/s/ Scott A. Kaniewski Director July 30, 1996
- -------------------------
Scott A. Kaniewski
/s/ Howard G. Anders Executive Vice President and Chief July 30, 1996
- ------------------------- Financial Officer (Principal financial
Howard G. Anders and accounting officer)
-14-
