SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------- ---------
Commission File No. 0-23590
SUPER VISION INTERNATIONAL, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 59-3046866
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
2442 Viscount Road
Orlando, Florida 32809
(Address of Principal Executive Offices)
(407) 857-9900
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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.
Yes X No
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at June 30, 1996:
Class A Common Stock, $.001
par value 1,428,466 shares
Class B Common Stock, $.001
par value 3,375,134 shares
Traditional Small Business Disclosure Format
Yes X No
<PAGE>
SUPER VISION INTERNATIONAL, INC.
INDEX TO FORM 10-QSB
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Financial Statements:
Condensed Balance Sheets as of June 30, 1996 and December 31,
1995 1
Condensed Statements of Operations for the Three and Six Months
Ended June 30, 1996 and 1995 2
Condensed Statement of Stockholders' Equity 3
Condensed Statements of Cash Flows for the Six Months
Ended June 30, 1996 and 1995 5
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security-Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 11
<PAGE>
SUPER VISION INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
<TABLE>
June 30, December 31,
ASSETS 1996 1995
--------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,123,372 $ 2,327,775
Trade accounts receivable, less allowance for doubtful
accounts of $17,659 and $19,952 731,164 330,570
Inventory, less reserve for excess inventory of $33,340
and $28,340 1,332,518 899,348
Advances to employees 34,200 16,390
Other assets 78,918 51,236
-------------- --------------
Total current assets 4,300,172 3,625,319
-------------- --------------
Equipment and Furniture 1,606,386 1,404,368
Accumulated depreciation (230,194) (172,697)
-------------- --------------
Net equipment and furniture 1,376,192 1,231,671
-------------- --------------
Other Assets 75,705 59,176
-------------- --------------
$ 5,752,069 $ 4,916,166
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable to officer $ 22,968 $ 22,968
Accounts payable 629,308 344,853
Accrued liabilities 23,936 22,443
Accrued warranty 40,000 --
Payments in excess of costs and recognized profit on
uncompleted contracts -- 10,333
Deposits 529,445 50,834
-------------- --------------
Total current liabilities 1,245,657 451,431
-------------- --------------
Stockholders' Equity:
Preferred stock, $.001 par value, 5,000,000 shares
authorized; none issued - -
Class A common stock, $.001 par value, authorized 16,610,866
shares, 1,431,466 issued and outstanding 1,431 1,429
Class B common stock, $.001 par value, 3,389,134
shares authorized, 3,375,134 issued and outstanding 3,375 3,375
Additional paid-in capital 5,688,171 5,669,423
Retained earnings (1,186,565) (1,209,492)
---------------- --------------
Total stockholders' equity 4,506,412 4,464,735
---------------- --------------
$ 5,752,069 $ 4,916,166
================ ==============
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
SUPER VISION INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
------ ------ ------ -----
<S> <C> <C> <C> <C>
Revenues:
Net Sales $1,134,655 $745,033 $2,503,644 $1,239,494
Licensing and royalty
fees - 45,000 - 45,000
---------- -------- ---------- ----------
Total Revenues 1,134,655 790,033 2,503,644 1,284,494
---------- -------- ---------- ----------
Costs and Expenses:
Cost of sales 734,435 494,351 1,605,794 792,271
Selling, general and
administrative 472,998 272,343 836,595 659,738
Research and development 17,443 42,199 80,236 96,078
---------- -------- ---------- ----------
Total costs and
expenses 1,224,876 808,893 2,522,625 1,548,087
---------- -------- ---------- ----------
Operating Loss (90,221) (18,860) (18,981) (263,593)
--------- -------- ---------- ----------
Non-Operating Income
(Expenses):
Interest income 27,619 48,776 50,931 105,753
Interest expense (734) (715) (1,480) (1,508)
Gain (loss) on
disposal of assets (7,230) 11,357 (7,543) 11,357
---------- -------- --------- ----------
Total
non-operating
income
(expenses) 19,655 59,418 41,908 115,602
---------- -------- --------- ----------
Net Income (Loss) $ (70,566) $ 40,558 $ 22,927 $ (147,991)
========== ========= ========= ===========
Income (Loss) Per Common
Share:
Primary $ (0.04) $ 0.02 $ 0.01 $ (0.08)
========== ======== ======== =========
Weighted Average Shares
of Common Stock
Outstanding:
Primary 1,886,292 1,882,100 1,886,196 1,882,100
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
SUPER VISION INTERNATIONAL, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
Common Stock
----------------------------------------------------------------
Class A Class B Additional Retained
----------------------------- ----------------------------- Paid-In Earnings
<S> <C> <C> <C> <C> <C> <C>
Shares Amount Shares Amount Capital (Deficit)
------------ ------------ ----------- ------------- -------------- ----------
Balance, December 31, 1995 1,428,966 $ 1,429 3,375,134 $ 3,375 $ 5,669,423 $ (1,209,492)
Exercise of Class A Warrants 2,500 2 - - 18,748 -
Net Income for the Three Months
Ended June 30, 1996 - - - - - 22,927
------------ ------------ ----------- ------------- ------------ -------------
Balance, June 30, 1996 1,431,466 $ 1,431 3,375,134 $ 3,375 $ 5,688,171 $ (1,186,565)
============ ============ =========== ============= ============ ===========
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
SUPER VISION INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
Six Months
Ended June 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 22,927 $ (147,991)
--------------- ---------------
Adjustments to reconcile net increase (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 77,281 58,955
(Gain) loss on disposal of fixed assets 7,543 (11,357)
Increase in:
Accounts receivable, net (400,594) (193,790)
Inventory (433,170) (154,885)
Other assets (61,092) (55,792)
Increase in:
Accounts payable 284,455 190,393
Accrued and other liabilities 31,160 1,422
Deposits 478,611 13,658
--------------- ---------------
Total adjustments (15,806) (151,396)
--------------- ---------------
Net cash provided by (used in)
operating activities 7,121 (299,387)
--------------- ---------------
Cash Flows from Investing Activities:
Acquisition of patents and trademarks (12,642) --
Purchase of equipment and furniture (224,681) (89,634)
Proceeds from disposal of equipment and furniture 7,049 34,700
--------------- ---------------
Net cash used in investing activities (230,274) (54,934)
--------------- ---------------
Cash Flows form Financing Avctivities:
Issuance of common stock, gross 18,750 --
--------------- ---------------
Net cash provided by financing activities 18,750 --
--------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents (204,403) (354,321)
Cash and Cash Equivalents, beginning of period 2,327,775 3,626,290
--------------- ---------------
Cash and Cash Equivalents, end of period $ 2,123,372 $ 3,271,969
=============== ===============
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Three-Month and Six-Month Period Ended June 30, 1996 and 1995
1. BASIS OF PRESENTATION:
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the Company's financial position,
results of operations and cash flows for the periods presented. The
results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
The condensed financial statements should be read in conjunction with
the financial statements and the related disclosures contained in the
Company's Form 10-KSB dated March 25, 1996, filed with the Securities
and Exchange Commission.
2. STOCK OPTION PLAN:
On December 27, 1993, the Company adopted a stock option plan that
provides for the grant of incentive stock options and nonqualified
stock options, and reserved 150,000 shares of the Company's Class A
common stock for future issuance under the plan. The option price must
be at least 100% of market value at the date of the grant. The Company
applies APB Opinion 25 and related Interpretations in accounting for
its plan. Accordingly, no compensation cost has been recognized for its
stock option plan.
The following table summarizes activity of the stock option plan for
the period ended June 30, 1996:
<TABLE>
Number
Options of Shares Option
Available for Under Price
Future Grant Option Per Share
------------ ------ ---------
<S> <C> <C> <C>
Balance, December 31, 1995 38,809 107,091 $5.00-$7.38
Options granted (38,400) 38,400
Options exercised -- --
Options cancelled 6,100 (6,100)
------- --------
Balance, June 30, 1996 6,509 139,391
======= =======
</TABLE>
Options granted vest ratably over a three-year period. As of June 30,
1996, 84,484 options were vested and exercisable.
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<PAGE>
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
For the Three-Month and Six-Month Periods Ended June 30, 1996 and 1995
3. INCOME TAXES:
The components of the net deferred tax liability recognized in the
accompanying balance sheet at June 30, 1996 are as follows:
Deferred tax liability $ -
Deferred tax asset $ 504,593
Valuation allowance $(504,593)
----------
$ -
==========
The types of temporary differences between the tax basis of assets and
liabilities and their financial statement reporting amounts are
attributable principally to depreciation methods, deferred gains, and
different accounting methods used.
As of June 30, 1996, the Company had approximately $1,074,000 in net
operating loss carryforwards for federal and state income tax purposes,
which expire in 2009 and 2010.
4. INVENTORY:
Inventory at June 30, 1996 and December 31, 1995 consisted of the
following components:
June 30, December 31,
1996 1995
---- ----
Raw Materials $1,024,042 $ 665,441
Work in progress 27,456 8,729
Finished goods 314,360 253,518
------------ -----------
1,365,858 927,688
Less reserve for excess
inventory (33,340) (28,340)
------------ -----------
$1,332,518 $ 899,348
------------ -----------
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this report.
RESULTS OF OPERATIONS
Revenues are derived primarily from the sale of fiber optic side-glowTMand end
glowTMcable and light sources, custom fiber optic displays, point of purchase
fiber optic signs and sales of component parts. Total revenues for the three
months ("1996 quarter") and six months ended June 30, 1996 ("1996 six months")
were approximately $1,135,000 and $2,504,000, respectively. This represented a
44% and 95% increase, respectively, over the three months ("1995 quarter") and
six months ended June 30, 1995 ("1995 six months"). The increase in revenues
during the 1996 quarter is primarily attributable to sales of the Company's
swimming pool and spa product line. The Company did not have sales of this
product line during the 1995 quarter. Additionally, sales of the Company's
standard products through the Company's distribution network continued to show
improvements in sales volume as compared to the comparable prior period. The
increase in revenues during the 1996 six months is also attributable to $710,000
of revenue recognized by the Company as a result of the completion of a large
contract for delivery of a custom fiber optic display. The contract was
completed in March 1996.
Cost of sales were approximately $734,000 or 65% of revenues, during the 1996
quarter, compared to 66% in the 1995 quarter. The gross margin was 35% for the
1996 six months and 34% for the 1995 six months. The 1996 margin was negatively
impacted due to entrance into the swimming pool market which included the
granting of price discounts to introduce builders and distributors to the
Company's product line. Further, the Company discounted prices in the swimming
pool market to meet price decreases initiated by competitors reacting to the
Company's entrance into this market. These discounts were given in order to
obtain market recognition and market share. The Company believes that as volume
sales of these products increase and market share is obtained, the discounts
will no longer be granted. Additionally, as the volume of sales of the Company's
products increase management believes that the costs of the products will
decrease, leading to potential gross margin improvements. The decreases in
margins experienced in the swimming pool market were offset by margin
improvements in the Company's other standard product lines, particularly the
Company's architectural lighting products, and in the Company's custom endpoint
fiber optic display products.
Selling, general and administrative expenses were approximately $473,000 and
$837,000 during the 1996 quarter and six months, respectively, as compared to
approximately $272,000 and $660,000 for the 1995 quarter and six months,
respectively. This represented increases of 74% and 27%, respectively. During
the 1996 quarter, the Company incurred increased expenses in connection with
trade show attendance in the swimming pool and spa lighting market prior to the
summer construction season. Additionally, the Company undertook an intensive
-7-
<PAGE>
training program to educate its representation network in the pool and spa
lighting market prior to the installation season. Additionally, the Company
incurred expenses in new literature and advertising for this market. Further
increases in selling expenses were incurred in the formulation of training
programs for electrical contractors and sign companies. The Company has
targeted electrical contractors as a key group in the Company's marketing
strategy to penetrate the residential lighting market.
Research and development costs were approximately $17,000 and $80,000 during the
1996 quarter and six months as compared to approximately $42,000 and $96,000 for
the 1995 quarter and six months, respectively. This represented decreases of 59%
and 16%, respectively. The Company continues to achieve successful new product
introductions and product enhancements with lower research costs. This has been
made possible due to prior research efforts which have formed the basis for
current product development efforts. The Company continues research into the
improvement of its fiber optic side glowTM cables, as well as new lamp
technologies and materials which may yield improvements in the brightness of the
Company's fiber optic products. The Company expects that these efforts will
require an increase in research expenditures. Additionally, during the 1996
quarter the Company was awarded a patent on its light source and reflector
design, as well as several key components related to the coupling of fiber optic
cables to light sources. The Company believes this patent may afford the Company
a market advantage in the ease of installation of fiber optics in the field.
Interest income is derived from the short term investment of the proceeds of the
Company's initial public offering in March 1994. Net interest income for the
1996 quarter and 1996 six months was approximately $28,000 and $51,00,
respectively, as compared to approximately $49,000 and $106,000 for the 1995
quarter and six months, respectively. The decrease is attributable to reduced
cash balances available for investment. At the end of 1995, the Company paid
approximately $850,000 for its fiber optic cabling and extrusion equipment.
Additionally, cash was invested in the expansion of inventory and receivables in
support of the higher revenue levels experienced during the 1996 quarter and six
months.
Income taxes for the 1996 six months include a provision for income taxes which
was offset by tax benefits as a result of the carryforward of prior year tax
losses.
The net loss for the 1996 quarter was approximately ($70,600) or ($.04) per
common share, as compared to net income of approximately $40,600, or $.02 per
common share, in the 1995 quarter. The decrease is due to increased sales and
marketing expenses incurred by the Company which Management believes are
necessary to sustain future revenue growth.
-8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of $3,054,515.
During the 1996 six months, the Company experienced an increase in accounts
receivable of approximately $401,000 as a result of the increase in revenue
levels. The Company increased inventory levels by approximately $433,000. This
increase resulted from the expansion of the Company's product lines,
particularly in the swimming pool and spa market. Additionally, the Company was
awarded a large contract for a custom fiber optic display during the 1996
quarter. The contract amount is approximately $1,007,000. Inventory of
approximately $250,000 was purchased during the 1996 quarter which is related to
this project. Although the contract will be accounted for on a percentage of
completion basis, no work had been performed as of June 30, 1996, and therefore,
no revenue from the contract has been included in the 1996 quarter or six
months. Accounts payable increased by approximately $284,000 related to the
expansion of inventory. Deposits increased by approximately $479,000 primarily
as a result of a deposit of $457,000 on the custom display contract, discussed
above. The Company also used approximately $225,000 in the expansion of capital
equipment, primarily in the upgrade of cabling equipment to achieve increases in
production speed and quality of product.
The Company acquired a patent related to its light source and reflector design
with a cost of approximately $13,000. Management believes these expenditures may
assist in the efforts to obtain a marketing advantage in the ease of use of
fiber optics for field installation.
The Company believes that available cash, together with funds expected to be
generated from operations, will be sufficient to finance the Company's working
capital requirements as well as continued expansion.
CHARGE TO INCOME IN THE EVENT OF RELEASE OF ESCROWED SHARES
In January 1994, the Company and certain stockholders of the Company entered
into an agreement providing for the escrow of a portion of the shares held by
such individuals (see "Escrow Shares"). In the event any shares are released
from escrow to persons who are officers and other employees of the Company,
compensation expense will be recorded for financial reporting purposes as
required by GAAP. Therefore, in the event the Company attains any of the
earnings thresholds or the Company's Class A Common Stock meets certain minimum
bid prices required for the release of the Escrow Shares, such release will be
deemed additional compensation expense of the Company. Accordingly, the Company
will, in the event of the release of shares from escrow, recognize during the
period in which the earnings thresholds are met or are probable of being met or
such minimum bid prices attained, what will likely be one or more substantial
charges which would have the effect of substantially increasing the Company's
loss or reducing or eliminating earnings, if any, at such time. Although the
amount of compensation recognized by the Company will not affect the Company's
total stockholders' equity or its working capital, it may have a depressive
effect on the market price of the Company's securities.
-9-
<PAGE>
PART II
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 4.1 - Form of Unit Purchase Option *
4.2 - Form of Warrant Agreement (including forms of Class A
and Class B Warrant Certificates) *
4.3 - Escrow Agreement *
4.4 - Form of Amendment to Escrow Agreement *
10.1 - 1994 Stock Option Plan *
10.2 - Employment Agreement with Brett Kingstone *
10.3 - Form of Indemnification Agreement *
10.4 - Lease for Facility at Viscount Row *
10.5 - Registrant's Bank Loan Agreements with Barnett Bank *
- ---------
* Incorporated by reference to the Company's Registration Statement on
Form SB-2 (file no. 33-74742)
(b) No reports on Form 8-K were filed during the three months ended
June 30, 1996.
-10-
<PAGE>
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunder duly authorized.
SUPER VISION INTERNATIONAL , INC.
By: /S/BRETT M. KINGSTONE Date: August 9, 1996
-----------------------------------------
Brett M. Kingstone, President and
Chief Executive Officer
(Principal Executive Officer)
By: /S/JOHN P. STANNEY Date: August 9, 1996
-----------------------------------------
John P. Stanney, Chief Financial
Officer
(Principal Financial and Accounting Officer)
-11-
August 12, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: SUPER VISION INTERNATIONAL, INC.
SEC FILE NO. 0-23590
Gentlemen:
On behalf of our client Super Vision International, Inc. (the
"Company"), pursuant to Regulation S-T, enclosed please find one copy of the
Company's Quarterly Report on Form 10-QSB for the period ended June 30, 1996
being filed herewith with the Commission via EDGAR.
Sincerely,
By: /s/Alison S. Newman
---------------------
Alison S. Newman
ASN/ea
Encls.
cc: Nasdaq Stock Market
John P. Stanney
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,123,372
<SECURITIES> 0
<RECEIVABLES> 748,823
<ALLOWANCES> 17,659
<INVENTORY> 1,332,518
<CURRENT-ASSETS> 4,300,172
<PP&E> 1,606,386
<DEPRECIATION> 230,194
<TOTAL-ASSETS> 5,752,069
<CURRENT-LIABILITIES> 1,245,657
<BONDS> 0
0
0
<COMMON> 4,806
<OTHER-SE> 4,501,606
<TOTAL-LIABILITY-AND-EQUITY> 5,752,069
<SALES> 2,503,644
<TOTAL-REVENUES> 2,503,644
<CGS> 1,605,794
<TOTAL-COSTS> 836,595
<OTHER-EXPENSES> 21,762
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,480
<INCOME-PRETAX> 22,927
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,927
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
