<PAGE> 1
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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 quarterly period ended September 30, 2000
[ ] 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)
8210 Presidents Drive
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 November 8, 2000:
Class A Common Stock, $.001
par value 2,065,543 shares
Class B Common Stock, $.001
par value 483,264 shares
Transitional Small Business Disclosure Format
Yes [ ] No [X]
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<PAGE> 2
SUPER VISION INTERNATIONAL, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2000
(unaudited) and December 31, 1999 1
Condensed Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 2000 and 1999 (unaudited) 2
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2000 and 1999 (unaudited) 3
Notes to Condensed Consolidated Financial Statements
(unaudited) 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
<PAGE> 3
SUPER VISION INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,243,485 $ 1,172,855
Investments 386,830 369,916
Trade accounts receivable, less allowance for
doubtful accounts of $106,740 at September 30, 2000 and
$133,819 at December 31, 1999 1,523,318 2,039,042
Inventories, less reserve of $447,948 at September 30, 2000 and
$300,686 at December 31, 1999 2,473,480 2,254,533
Advances to employees 2,828 3,081
Prepaid expense 76,003 14,251
Other assets 15,403 12,557
------------ ------------
Total current assets 5,721,347 5,866,235
------------ ------------
Property and Equipment 6,822,186 6,739,717
Accumulated depreciation and amortization (2,149,640) (1,641,034)
------------ ------------
Net property and equipment 4,672,546 5,098,683
Deposits on equipment 12,559 --
Investments 997,710 997,740
Goodwill, less accumulated amortization of $3,743 at September 30,
2000 and $936 at December 31, 1999 22,460 25,268
Patents and trademarks, less amortization of $36,984 at September 30,
2000 and $29,441 at December 31, 1999 107,941 113,456
Other assets 125,853 172,273
------------ ------------
$ 11,660,416 $ 12,273,655
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 659,662 $ 922,245
Accrued compensation and benefits -- 69,104
Deposits 22,620 30,542
Current portion of obligation under capital lease 57,445 46,788
------------ ------------
Total current liabilities 739,727 1,068,679
Obligation Under Capital Lease 3,083,809 3,128,944
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, 2,065,543 and 2,054,102 issued
and outstanding, respectively 2,066 2,054
Class B common stock, $.001 par value, authorized
3,389,134 shares, 483,264 issued and outstanding 483 483
Additional paid-in-capital 10,469,304 10,374,565
Accumulated deficit (2,634,973) (2,301,070)
------------ ------------
Total stockholders' equity 7,836,880 8,076,032
------------ ------------
$ 11,660,416 $ 12,273,655
============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
1
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SUPER VISION INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 2,371,050 $ 2,284,842 $ 7,648,531 $ 6,953,962
Cost and Expenses:
Cost of sales 1,556,409 1,394,844 5,353,641 4,487,473
Selling, general and administrative 722,030 705,932 2,168,859 2,170,132
Research and development 126,117 140,344 334,823 434,783
----------- ----------- ----------- -----------
Total costs and expenses 2,404,556 2,241,120 7,857,323 7,092,388
Operating Income (Loss) (33,506) 43,722 (208,792) (138,426)
Non-Operating Income (Expense):
Interest income 47,685 32,067 133,437 99,612
Interest expense (109,488) (109,299) (329,721) (333,271)
Other income 42,102 -- 83,570 --
Gain on sale of investments 293 -- 3,135 --
Loss on disposal of fixed assets (15,956) -- (15,531) (2,464)
----------- ----------- ----------- -----------
Total non-operating expense (35,364) (77,232) (125,110) (236,123)
Loss Before Income Taxes (68,870) (33,510) (333,902) (374,549)
Income Tax Expense -- -- -- --
----------- ----------- ----------- -----------
Net Loss $ (68,870) $ (33,510) $ (333,902) $ (374,549)
=========== =========== =========== ===========
Net Loss Per Common Share:
Basic $ (0.03) $ (0.01) $ (0.13) $ (0.15)
=========== =========== =========== ===========
Diluted $ (0.03) $ (0.01) $ (0.13) $ (0.15)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
2
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SUPER VISION INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (333,902) $ (374,549)
Adjustments to reconcile net loss to net cash provided by (used in)
Operating activities:
Depreciation and amortization 531,051 427,818
Loss on disposal of fixed assets 15,531 2,464
Accretion of capital lease obligation -- (2,563)
Increase in inventory reserve 147,262 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade accounts receivable, net 515,724 (570,746)
Inventories (366,209) (264,233)
Prepaid expense (61,753) --
Other assets 43,828 62,694
Increase (decrease) in:
Accounts payable (262,583) 703,040
Accrued compensation and benefits (69,104) (105,676)
Deposits (7,922) 40,063
----------- -----------
Total adjustments 485,825 292,861
----------- -----------
Net cash provided by (used in) operating
activities 151,923 (81,688)
Cash Flows from Investing Activities:
Purchase of property and equipment (114,213) (251,182)
Purchase of investments (16,884) --
Acquisition of patents and trademarks (2,028) (4,075)
Proceeds from disposal of property and equipment 4,118 1,053
Deposits on equipment (12,559) 24,161
----------- -----------
Net cash used in investing activities (141,566) (230,043)
Cash Flows from Financing Activities:
Cost on issuance of common stock 36,174 68,220
Payments on capital lease obligation (34,478) --
Proceeds from exercise of employee stock options 58,577 5,897
----------- -----------
Net cash provided by financing activities 60,273 74,117
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 70,630 (237,614)
Cash and Cash Equivalents, beginning of period 1,172,855 2,798,142
----------- -----------
Cash and Cash Equivalents, end of period $ 1,243,485 $ 2,560,528
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
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SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Super
Vision International, Inc. and its wholly owned subsidiary Oasis
Waterfalls, LLC (collectively, the "Company"). All significant
inter-company balances and transactions have been eliminated.
On October 18, 1999, Super Vision International, Inc. entered into an
Asset Purchase Agreement with Oasis Falls International, Inc. and Maas
Industries to acquire substantially all of the assets of these
businesses in the amount of $132,812, in exchange for 31,250 shares of
the Company's Class A Common Stock, par value $.001 per share. The
assets acquired included inventory, tooling, machinery and certain
intangible assets relating to tooling and intellectual property rights.
Proforma consolidated results of operations were not prepared as if the
acquisition had occurred at the beginning of fiscal year 1999 since the
acquisition was not significant. The acquisition has been accounted for
under the purchase method of accounting with assets acquired recorded
at fair market value as of the effective acquisition date, and the
operating results of the acquired business included in the Company's
consolidated financial statements from that date. The excess of the
purchase price over the fair value of the net assets acquired
(goodwill) aggregated approximately $26,000, and is being amortized on
a straight-line basis over 7 years.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting
only of normal recurring accruals necessary to present fairly the
Company's consolidated 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 consolidated 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 29, 2000, filed with
the Securities and Exchange Commission.
BUSINESS
The Company is engaged in the design, manufacture and marketing of
SIDE-GLOW(R) and END GLOW(R) fiber optic lighting cables, light
sources, waterfalls and "point-to-point" fiber optic signs and
displays. The Company's products have a wide variety of applications in
the signage, swimming pool, architectural, advertising and retail
industries.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
4
<PAGE> 7
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
RESEARCH AND DEVELOPMENT
Research and development costs to develop new products are charged to
expense as incurred.
ADVERTISING
Advertising costs, included in selling, general and administrative
expenses, are expensed when the advertising first takes place.
RECLASSIFICATIONS
Certain prior year's amounts have been reclassified to conform to the
current year's presentations. These reclassifications had no impact on
operating results previously reported.
CASH EQUIVALENTS
Temporary cash investments with an original maturity of three months or
less are considered to be cash equivalents.
INVESTMENTS
Marketable equity securities and debt securities are classified as
available-for-sale. Available-for-sale securities are carried at fair
value, with the unrealized gains and losses, net of tax, reported in a
separate component of stockholders' equity. The amortized costs of debt
securities in this category is adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization is included
in investment income. Realized gains and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are
included in investment income. The cost of securities sold are based on
the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in investment
income. There were no material unrealized gains or losses on securities
at September 30, 2000 or December 31, 1999.
At September 30, 2000 investments were comprised of U.S. Corporate
Securities and equity securities of approximately $998,000 and
$387,000, respectively. The investment in U.S. Corporate Securities
matures in 2001.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. ("SAB 101"), "Revenue Recognition in
Financial Statements". SAB 101 summarizes the SEC's views in applying
generally accepted accounting principles to revenue recognition in
financial statements. The Company is required to adopt SAB 101 in the
fourth quarter of fiscal 2000. Management does not expect the adoption
of SAB 101 to have a material effect on the Company's operations or
financial position.
5
<PAGE> 8
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
RECENT ACCOUNTING PRONOUNCEMENTS - CONTINUED
In April 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving
Stock Compensation, an interpretation of APB Opinion No. 25." Among
other issues, that interpretation clarifies the definition of employees
for purposes of applying Opinion No. 25, the criteria for determining
whether a plan qualifies as a non-compensatory plan, the accounting
consequence of various modifications to the terms of a previously fixed
stock option or award and the accounting for an exchange of stock
compensation awards in a business combination. This interpretation is
effective July 1, 2000, but certain conclusions in the interpretation
cover specific events that occur after either December 15, 1998 or
January 12, 2000. To the extent that this interpretation covers events
occurring during the period after December 15, 1998, or January 12,
2000, but before the effective date of July 1, 2000, the effect of
applying this interpretation is recognized on a prospective basis from
July 1, 2000. The implementation of this interpretation does not have a
material impact on the Company's financial statements.
2. INVENTORIES:
Inventories at September 30, 2000 and December 31, 1999 consisted of
the following components:
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
Raw materials $ 2,174,445 $ 1,770,519
Work in progress 75 105,428
Finished goods 746,908 679,272
----------- -----------
2,921,428 2,555,219
Less: Reserve for excess inventory (447,948) (300,686)
----------- -----------
$ 2,473,480 $ 2,254,533
=========== ===========
</TABLE>
3. CAPITAL LEASE:
The Company leases its operating facility from a corporation owned by
the Company's Chief Executive Officer. The lease has a fifteen-year
term, became effective June 15, 1997 and extends through June 15, 2012.
Assets recorded under capital lease and included in property and
equipment are as follows:
Office/Warehouse building $ 3,081,000
Less accumulated amortization (667,553)
---------------
$ 2,413,447
===============
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<PAGE> 9
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
3. CAPITAL LEASE (CONTINUED):
Future minimum annual lease payments for remainder of and years
subsequent to September 30, 2000 in the aggregate are as follows:
<TABLE>
<S> <C>
2000 $ 145,380
2001 598,481
2002 610,596
2003 620,664
2004 641,127
2005 and thereafter 5,271,591
-----------
Minimum lease payments 7,887,839
Less amount representing interest and executory costs (4,746,585)
-----------
Present value of net minimum lease payments under capital lease $ 3,141,254
===========
</TABLE>
Deposits paid under this lease agreement totaled $58,167 at September
30, 2000.
4. STOCK OPTION PLAN:
The Company has a stock option plan that provides for the grant of
incentive stock options and nonqualified stock options for up to
450,000 shares of the Company's Class A common stock under the plan.
The option price must be at least 100% of market value at the date of
the grant.
The following table summarizes activity of the stock option plan for
the nine month period ended September 30, 2000:
<TABLE>
<CAPTION>
OPTIONS NUMBER OPTION
AVAILABLE FOR OF PRICE
FUTURE GRANT SHARES PER SHARE
------------- ------- -------------
<S> <C> <C> <C>
Balance, January 1, 2000 103,984 288,279 $3.28 - $9.25
Options granted (82,950) 82,950 $5.75 - $9.31
Options exercised -- (11,341) $3.69 - $7.82
Options cancelled 30,016 (30,516) $3.81 - $8.94
------- -------
Balance, September 30, 2000 51,050 329,372
======= =======
</TABLE>
Options granted vest ratably over a three year period or vest based on
achievement of certain performance criteria. As of September 30, 2000,
196,142 options were vested and exercisable.
7
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SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. LOSS PER SHARE:
The following table sets forth the computation of basic and diluted
loss per share in accordance with SFAS No. 128, "Earnings per Share."
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Net loss (numerator for basic and
diluted earnings per share) $ (68,870) $ (33,510) $ (333,902) $ (374,549)
Denominator:
Denominator for basic earnings per share
-weighted average shares 2,572,095 2,478,076 2,568,556 2,478,076
Effect of dilutive securities:
Options -- -- -- --
Warrants -- -- -- --
----------- ----------- ----------- -----------
Dilutive potential shares -- -- -- --
Denominator for diluted earnings per share
-adjusted weighted average shares 2,572,095 2,478,076 2,568,556 2,478,076
=========== =========== =========== ===========
Basic loss per share $ (0.03) $ (0.01) $ (0.13) $ (0.15)
=========== =========== =========== ===========
Diluted loss per share $ (0.03) $ (0.01) $ (0.13) $ (0.15)
=========== =========== =========== ===========
</TABLE>
Certain warrants are not included in the computation of loss per share
because the related shares are contingently issuable or to do so would
have been anti-dilutive for the periods presented.
8
<PAGE> 11
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
6. COMMITMENTS
On November 23, 1998, the Company entered into a Stock Purchase
Agreement with Cooper Lighting, Inc. ("Cooper"), a subsidiary of Cooper
Industries, Inc. (a New York Stock Exchange Company trading under the
symbol "CBE"), pursuant to which the Company sold to Cooper 250,369
shares of its Class A Common Stock, for a purchase price of $2,000,000.
In addition, the Company entered into a Distributorship Agreement (the
"Distributorship Agreement") with Cooper and Cooper Industries,
(Canada), Inc. ("Cooper Canada"), another subsidiary of Cooper
Industries, Inc., pursuant to which Cooper and Cooper Canada were
collectively granted the exclusive distribution rights in the United
States and Canada (the "Territory's Exclusive Market") to the Company's
fiber optic products in the commercial, residential, industrial,
institutional, and public transportation markets, including, but not
limited to, any and all lighting applications in or related to
architectural lighting, accent lighting, down lighting, display cases,
landscaping, confinement, explosion-proof, clean rooms, traffic
signals, signage, outdoor area and emergency /exit lighting. In
consideration for these rights, Cooper and Cooper Canada collectively
agreed, in accordance with the terms of the Distributorship Agreement,
to purchase up to $47,075,000 of the Company's products over a
five-year period.
Effective July 10, 2000, Cooper notified the Company that Cooper did
not meet its minimum purchase commitment for the year ended December
31, 1999 and will not meet its purchase commitment for the year ending
December 31, 2000, and further advised the Company that Cooper will not
make up the deficiencies pursuant to its option in the Distributorship
Agreement to maintain its exclusive sales rights in the Territory's
Exclusive Market for the Company's products. Upon this notification,
the Company exercised its option to not excuse the deficiency and
terminate Cooper's exclusive rights to distribute, market and sell the
Company's products within the Territory's Exclusive Market. Effective
midnight on October 31, 2000, Cooper's exclusive rights for sale of the
Company's products in the Territory's Exclusive Market terminated.
9
<PAGE> 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
unaudited Condensed Financial Statements and Notes thereto appearing elsewhere
in this report.
The following discussion contains certain forward-looking statements within the
meaning of the "safe-harbor" provisions of the Private Securities Litigation
Reform Act of 1995, as amended, the attainment of which involve various risks
and uncertainties. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may", "will", "should", "expect", "plan",
"believe", "estimate", "anticipate", "continue", "predict", "forecast",
"intend", "potential", or similar terms, variations of those terms or the
negative of those terms. The Company's actual results may differ materially from
those described in these forward-looking statements due to, among other factors,
competition in each of the Company's product areas, dependence on suppliers, the
Company's limited manufacturing experience, the condition of the international
marketplace and the evolving nature of the Company's fiber optic technology.
Additional information concerning these or other factors which could cause
actual results to differ materially from those contained or projected in, or
even implied by, such forward-looking statements is contained in this report and
also from time to time in the Company's other Securities and Exchange Commission
filings. Although the Company believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
information will prove to be accurate.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO 1999
Results of Operations
Revenues are derived primarily from the sale of fiber optic Side Glow(R) and End
Glow(R) cable and light sources, point of purchase fiber optic signs and
displays and sales of fiber optic landscape and task lighting systems. Total
revenues for the three months ended September 30, 2000 were approximately
$2,371,000 as compared to approximately $2,285,000 for the three months ended
September 30, 1999, an increase of approximately $86,000 or 4%. The increase was
primarily the result of growth in the architectural and pool and spa market, up
approximately $255,000 or 35% and approximately $234,000 or 110% respectively,
from the prior year revenue levels. Increased revenues in the architectural and
pool and spa market were principally offset by a decline in the sign and
international markets of approximately $ 286,000 or 45% and $ 256,000 or 36%,
respectively. Oasis Waterfalls, LLC, contributed approximately $ 100,000 in
revenue for the quarter ended September 30, 2000.
Gross margin for the quarter ended September 30, 2000 was approximately $815,000
or 34% as compared to approximately $890,000 or 39% for the three months ended
September 30, 1999. The gross margin is dependent, in part, on product mix,
which fluctuates from time to time. The decrease in gross margin from the third
quarter of 1999 was primarily due to an increase to the inventory reserve for
potentially slow-moving / obsolete inventory in the amount of approximately
$65,000. The reduction in gross margin percentage is mainly due to a higher mix
of sales to Hayward Pool Products ("Hayward"), which typically generate lower
gross margin, due to discount levels established in the Company's current
distributor agreement with Hayward. Excluding the increase in the inventory
reserve, gross margin for the quarter ended September 30, 2000 was approximately
$880,000 or 37%.
Selling, general and administrative expense was approximately $ 722,000 during
the three months ended September 30, 2000 as compared to approximately $ 706,000
for the same period ended 1999, an increase of approximately $ 16,000 or 2%.
Legal fees related to patent infringement of the Company's fiber optic cable,
offset by lower selling expense, was the principal reason for the increase in
expense over 1999. Selling, general and administrative expense as a percentage
of revenue was approximately 30% for the three months ended September 30, 2000
as compared to approximately 31% for the same period in 1999, a decrease of
approximately 1%.
Research and development costs were approximately $126,000 during the three
months ended September 30, 2000 as compared to approximately $140,000 during the
same period in 1999, a decrease of approximately 10%. The reduction was
primarily due to the cancellation of three product development efforts in
mid-1999. Research and development expense represented approximately 5% of
revenue for the quarter compared to approximately 6% for the same quarter of
1999.
Interest expense of approximately $109,000 for the quarter ended September 30,
2000 was unchanged from the
10
<PAGE> 13
same period last year and related to the capital lease in connection with the
Company's facility in Orlando, Florida.
Other income of $42,000 consisted primarily of proceeds received from the
sub-lease of the warehouse portion of the facility.
The Company has provided a full valuation allowance against income tax benefits
resulting from losses incurred on operations and as a result there was no
provision for income tax during the three months ended September 30, 2000 and
1999, respectively.
The net loss for the three months ended September 30, 2000 was approximately
$69,000, and $0.03 per basic and diluted common share, as compared to a net loss
of approximately $34,000, and $0.01 per basic and diluted common share, for the
quarter ended September 30, 1999. The increase in the net loss was primarily due
to lower gross margin partially offset by lower non-operating expense.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO 1999
Results of Operations
Total revenues for the nine months ended September 30, 2000 were approximately
$7,649,000 as compared to approximately $6,954,000 for the nine months ended
September 30, 1999 an increase of approximately $695,000 or 10%. The increase
was primarily the result of growth in the pool and spa market, up approximately
$1,503,000 or 127% from prior year revenues due to the Company's exclusive
marketing and sales partner in the pool and spa market, Hayward. Increased
revenues in the pool and spa market were principally offset by reductions in the
international, architectural and sign markets of approximately $ 471,000, $
341,000 and $258,000 respectively. Oasis Waterfalls, LLC, contributed
approximately $ 305,000 in revenue for the nine months ended September 30, 2000.
Gross margin for the nine months ended September 30, 2000 was approximately
$2,295,000 or 30% as compared to approximately $2,467,000 or 35% for the nine
months ended June 30, 1999. The gross margin is dependent, in part, on product
mix, which fluctuates from time to time. The decrease in gross margin from the
first nine months of 1999 was primarily due to an increase of approximately
$190,000 in the reserve for potentially slow moving / obsolete inventory as well
as a higher mix of pool related product sales to Hayward. Hayward receives a
significant discount off list price based on the Company's current distributor
agreement with Hayward. Excluding the increase in the inventory reserve, gross
margin was approximately $ 2,485,000 or 32%.
Selling, general and administrative expense was approximately $ 2,169,000 during
the nine months ended September 30, 2000 as compared to approximately $
2,170,000, unchanged from the same period ended 1999. Increased legal fees
relating to the patent infringement of the Company's fiber optic cable were
offset by lower selling expense during the first nine months of 1999. Selling,
general and administrative expense as a percentage of revenue was approximately
28% for the nine months ended September 30, 2000 as compared to approximately
31% for the same period in 1999, a decrease of approximately 3%.
Research and development costs were approximately $335,000 during the nine
months ended September 30, 2000 as compared to approximately $435,000 during the
same period in 1999, a reduction of 23%. The decline was primarily due to the
cancellation of three product development efforts in mid 1999. Research and
development expense represented approximately 4% of revenue for the quarter
compared to approximately 6% for the same quarter of 1999.
Interest expense of approximately $330,000 for the nine months ended September
30, 2000, as compared to approximately $333,000 for the same period last year,
related to the capital lease in connection with the Company's facility in
Orlando, Florida.
Other income of approximately $84,000 consisted primarily of funds received in
connection with a supplier settlement in favor of the Company as well as
proceeds received from the sub-lease of the warehouse portion of the facility.
The Company has provided a full valuation allowance against income tax benefits
resulting from losses incurred on operations and as a result there was no
provision for income tax during the nine months ended September 30, 2000 and
1999, respectively.
The net loss for the nine months ended September 30, 2000 was approximately
$334,000, or $0.13 per basic and
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diluted common share, as compared to net loss of approximately $375,000, and
$0.15 per basic and diluted common share, for the nine months ended September
30, 1999. The decrease in loss was primarily due to reduced operating and
non-operating expenses partially offset by lower gross margin.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000 the Company had working capital of approximately of
$4,982,000.
Net cash provided by operations amounted to approximately $152,000 for the nine
months ended September 30, 2000 compared to approximately $ 82,000 of cash used
by operating activities for the nine months of 1999. The most significant source
of cash was generated by the net reduction of approximately $516,000 in trade
accounts receivable, primarily through the increase in cash collections during
the first nine months of 2000. The most significant use of cash was the net
increase in inventories of approximately $366,000. The increase in inventory was
primarily due to the timing of fiber purchases as well as the purchase of
components to meet the projected demands of the following quarter. The decrease
of approximately $263,000 in accounts payable due to the timing of supplier
payments, also contributed to a significant use of cash during the first nine
months of 2000. Net cash used in investing activities for the nine months ended
September 30, 2000 amounted to approximately $142,000 mainly due to
approximately $114,000 of capital expenditures for the purchase of computer
equipment, furniture and fixtures, tooling and additional trade show booth
material. Net cash provided by financing activities for the nine months ended
September 30, 2000 amounted to approximately $60,000. Proceeds in the amount of
approximately $59,000 from the exercise of employee stock options account for
substantially all of the increase from December 31, 1999.
COOPER RELATIONSHIP
On November 23, 1998, the Company entered into a Stock Purchase Agreement with
Cooper Lighting, Inc. ("Cooper"), a subsidiary of Cooper Industries, Inc. (a New
York Stock Exchange Company trading under the symbol "CBE"), pursuant to which
the Company sold to Cooper 250,369 shares of its Class A Common Stock, for a
purchase price of $2,000,000. In addition, the Company entered into a
Distributorship Agreement (the "Distributorship Agreement") with Cooper and
Cooper Industries, (Canada), Inc. ("Cooper Canada"), another subsidiary of
Cooper Industries, Inc., pursuant to which Cooper and Cooper Canada were
collectively granted the exclusive distribution rights in the United States and
Canada (the "Territory's Exclusive Market") to the Company's fiber optic
products in the commercial, residential, industrial, institutional, and public
transportation markets, including, but not limited to, any and all lighting
applications in or related to architectural lighting, accent lighting, down
lighting, display cases, landscaping, confinement, explosion-proof, clean rooms,
traffic signals, signage, outdoor area and emergency /exit lighting. In
consideration for these rights, Cooper and Cooper Canada collectively agreed, in
accordance with the terms of the Distributorship Agreement, to purchase up to
$47,075,000 of the Company's products over a five-year period.
Effective July 10, 2000, Cooper notified the Company that Cooper did not meet
its minimum purchase commitment for the year ended December 31, 1999 and will
not meet its purchase commitment for the year ending December 31, 2000, and
further advised the Company that Cooper will not make up the deficiencies
pursuant to its option in the Distributorship Agreement to maintain its
exclusive sales rights in the Territory's Exclusive Market for the Company's
products. Upon this notification, the Company exercised its option to not excuse
the deficiency and terminate Cooper's exclusive rights to distribute, market and
sell the Company's products within the Territory's Exclusive Market. Effective
midnight on October 31, 2000, Cooper's exclusive rights for sale of the
Company's products in the Territory's Exclusive Market terminated.
As a result of this termination the Company will market and distribute its
product through a network of individual lighting agents covering the United
States and Canada. The Company has begun the process of recruiting lighting
agents for the distribution of the Company's products related to the
architectural lighting market and to date the Company has reached agreements to
rehire 81 lighting agents throughout the United States and Canada.
As a result of this change the Company does not expect any significant reduction
in its sales of fiber optics products in the architectural market.
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PART II
Item 6. Exhibits and Reports on Form 8-K
(a) 27 Financial data schedule
(b) The Company did not file any reports on Forms 8-K during the three
months ended September 30, 2000.
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SIGNATURES
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: November 8, 2000
--------------------------------------------
Brett M. Kingstone, Chief Executive Officer
(Principal Executive Officer)
By: /s/ Larry J. Calise Date: November 8, 2000
--------------------------------------------
Larry J. Calise, Chief Financial Officer
(Principal Financial and Accounting Officer)
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