<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ________________ to __________________
Commission file number 1-13856
Sel-Leb Marketing, Inc.
(Exact name of small business issuer as
specified in its charter)
New York 11-3180295
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
495 River Street, Paterson, NJ 07524
(Address of principal executive offices)
973-225-9880
(Issuer's telephone number)
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 report(s)), 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: 1,128,259 shares of common
stock as of May 14, 1999.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
SEL-LEB MARKETING, INC. AND SUBSIDIARY
PAGE
----
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at March 31, 1999
(Unaudited) and December 31, 1998 1
Condensed Consolidated Statements of Operations Three Months
Ended March 31,1999 and 1998 (Unaudited) 2
Condensed Consolidated Statement of Changes in Stockholders'
Equity Three Months Ended March 31, 1999 (Unaudited) 3
Condensed Consolidated Statements of Cash Flows Three Months
Ended March 31, 1999 and 1998 (Unaudited) 4
Notes to Condensed Consolidated Financial Statements 5-9
Item 2. Management's Discussion and Analysis or Plan of Operation 10-12
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<PAGE>
SEL-LEB MARKETING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
March December
ASSETS 31, 1999 31, 1998
------ ------------ ------------
(Unaudited) (Note 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 205,925 $ 504,060
Accounts receivable, less allowance for doubtful accounts
of $204,270 and $171,456 4,096,686 3,530,312
Inventories 7,080,542 6,496,298
Deferred tax assets 254,095 254,095
Prepaid expenses and other current assets 730,394 696,855
------------ ------------
Total current assets 12,367,642 11,481,620
Property and equipment, at cost, net of accumulated depreciation
and amortization of $649,168 and $590,368 582,372 607,650
Goodwill, net of accumulated amortization of $103,846 and
$95,236 241,922 250,532
Other assets 97,433 101,483
------------ ------------
Totals $ 13,289,369 $ 12,441,285
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Note payable to bank $ 2,545,932 $ 2,328,241
Current portion of long-term debt 150,895 150,509
Accounts payable 1,735,839 1,341,602
Accrued expenses and other liabilities 721,116 588,765
------------ ------------
Total current liabilities 5,153,782 4,409,117
Long-term debt, net of current portion 840,497 859,396
------------ ------------
Total liabilities 5,994,279 5,268,513
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized; none issued -- --
Common stock, $.01 par value; 40,000,000 shares authorized;
1,089,551 and 1,089,083 shares issued and outstanding 10,896 10,891
Additional paid-in capital 6,441,962 6,440,095
Retained earnings 887,232 766,786
Less receivable in connection with equity transactions (45,000) (45,000)
------------ ------------
Total stockholders' equity 7,295,090 7,172,772
------------ ------------
Totals $ 13,289,369 $ 12,441,285
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
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SEL-LEB MARKETING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net sales $ 4,424,315 $ 4,019,008
----------- -----------
Operating expenses:
Cost of sales 3,079,667 2,967,800
Selling, general and administrative expenses 1,087,635 1,345,460
----------- -----------
Totals 4,167,302 4,313,260
----------- -----------
Operating income (loss) 257,013 (294,252)
----------- -----------
Other income (expense):
Interest expense, net of interest income of $1,862 and $4,519 (61,667) (52,209)
Unusual item - gain on sale of portion of minority interest
in subsidiary 75,729
Other (2,004)
----------- -----------
Totals (61,667) 21,516
----------- -----------
Income (loss) before provision (credit) for income taxes 195,346 (272,736)
Provision (credit) for income taxes 74,900 (97,049)
----------- -----------
Net income (loss) $ 120,446 $ (175,687)
=========== ===========
Basic net earnings (loss) per share $ .11 $ (.16)
=========== ===========
Basic weighted average shares outstanding 1,089,180 1,088,588
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
SEL-LEB MARKETING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Receivable in
Common Stock Additional Connection Total
---------------------- Paid-in Retained with Equity Stockholders'
Shares Amount Capital Earnings Transactions Equity
--------- -------- ---------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 1,089,083 $ 10,891 $6,440,095 $766,786 $(45,000) $7,172,772
Net proceeds from exercise
of stock options 468 5 1,867 1,872
Net income 120,446 120,446
--------- -------- ---------- -------- -------- ----------
Balance, March 31, 1999 1,089,551 $ 10,896 $6,441,962 $887,232 $(45,000) $7,295,090
========= ======== ========== ======== ======== ==========
</TABLE>
3
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
SEL-LEB MARKETING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Operating activities:
Net income (loss) $ 120,446 $(175,687)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 67,410 57,178
Allowance for doubtful accounts 32,814 85,000
Net gain on sale of interest in subsidiary (75,729)
Changes in operating assets and liabilities:
Accounts receivable (599,188) (949,144)
Inventories (584,244) 406,688
Prepaid expenses and other current assets (33,539) (82,190)
Other assets 4,050 (6,194)
Accounts payable, accrued expenses and other
liabilities 526,588 473,196
--------- ---------
Net cash used in operating activities (465,663) (266,882)
--------- ---------
Investing activities - purchases of property and equipment (33,522) (232,510)
--------- ---------
Financing activities:
Proceeds from notes payable to Bank 217,691 300,000
Repayments of long-term debt (18,513) (446)
Net proceeds from exercise of warrants and stock options 1,872
--------- ---------
Net cash provided by financing activities 201,050 299,554
--------- ---------
Net decrease in cash and cash equivalents (298,135) (199,838)
Cash and cash equivalents, beginning of period 504,060 249,688
--------- ---------
Cash and cash equivalents, end of period $ 205,925 $ 49,850
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
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SEL-LEB MARKETING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Organization and basis of presentation:
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments,
consisting of normal recurring accruals, necessary to present fairly
the financial position of Sel-Leb Marketing, Inc. ("Sel-Leb") and
its 80%-owned subsidiary, Ales Signature, Ltd. ("Ales"), as of March
31, 1999, its results of operations and cash flows for the three
months ended March 31, 1999 and 1998 and its changes in
stockholders' equity for the three months ended March 31, 1999.
Sel-Leb and Ales are referred to together herein as the "Company."
Information included in the condensed consolidated balance sheet as
of December 31, 1998 has been derived from the audited consolidated
balance sheet included in the Company's Form 10-KSB for the year
ended December 31, 1998 (the "10-KSB") previously filed with the
Securities and Exchange Commission (the "SEC"). Pursuant to rules
and regulations of the SEC, certain information and disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted from these consolidated financial statements unless
significant changes have taken place since the end of the most
recent fiscal year. Accordingly, these unaudited condensed
consolidated financial statements should be read in conjunction with
the consolidated financial statements, notes to consolidated
financial statements and the other information in the 10-KSB.
The consolidated results of operations for the three months ended
March 31, 1999 are not necessarily indicative of the results to be
expected for the full year.
Note 2 - Reverse split:
The numbers of common shares and the per share amounts set forth
herein have been retroactively adjusted, where appropriate, for a
1-for-8 reverse split effected on June 19, 1998.
Note 3 - Earnings per share
As further explained in Note 1 in the 10-KSB, the Company has adopted
the provisions of Statement of Financial Accounting Standards No.
128, Earnings per Share ("FAS 128"), which require the presentation
of "basic" and, if appropriate, "diluted" earnings (loss) per common
share.
5
<PAGE>
SEL-LEB MARKETING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 - Earnings per share (concluded):
Since the exercise prices of substantially all of the Company's
outstanding options and warrants exceeded the fair market value of
the Company's common stock, the assumed exercise of those options
and warrants and the application of the treasury stock method would
not result in an increase in the weighted average number of common
shares outstanding for the three months ended March 31, 1999 and
1998 and, accordingly, dilutive per share amounts have not been
presented in the accompanying unaudited condensed consolidated
statements of operations.
Note 4 - Note payable under revolving line of credit:
The balance of the note payable of $2,545,932 as of March 31, 1999
arose from borrowings under a revolving credit agreement with
Merrill Lynch Business Financial Services, Inc. (see Note 4 in the
10-KSB). Borrowings bear interest, payable monthly, at 2.65% above
the 30-day commercial paper rate (7.75% at March 31, 1999). Pursuant
to an amendment to the agreement, the maximum borrowings will
temporarily increase to $3,800,000 during the period from April 20,
1999 to October 31, 1999 and will revert to $3,300,000 until the
expiration of the agreement on October 31, 2000.
Note 5 - Sale of minority interest in subsidiary:
On March 31, 1998, the Company, which at that date owned a 90%
interest in Ales, entered into an agreement whereby it reduced its
interest to 80% by selling an additional 10% interest to the
minority stockholder for total consideration of $81,137 (see Note 2
in the 10-KSB). As a result of the sale, the Company recognized a
gain of $75,729, before giving effect to any related income tax
effects, which has been reflected separately as an unusual item in
the accompanying 1998 condensed consolidated statement of
operations.
The minority interest in the net equity of Ales as of March 31, 1999
and the minority interest in the results of its operations in the
three months ended March 31, 1999 and 1998 were immaterial.
Note 6 - Preferred stock, stock options and warrants:
Preferred stock:
On May 27, 1998, the Company's stockholders approved an amendment
to the Company's Certificate of Incorporation which authorizes the
issuance by the Company of up to 10,000,000 shares of preferred
stock with a par value of $.01 per share. No shares of preferred
stock had been issued by the Company as of March 31, 1999.
Stock option plans and warrants:
Descriptions of the Company's stock option plans and other
information related to stock options and warrants are included in
Note 6 in the 10-KSB. Certain information related to options and
warrants outstanding at March 31, 1999 and changes in options and
warrants outstanding during the three months ended March 31, 1999
are summarized below.
6
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SEL-LEB MARKETING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6 - Stock options and warrants (continued):
Shares subject to options:
A summary of the status of the Company's shares subject to
options as of March 31, 1999 and changes during the three months
then ended is presented below:
Weighted
Shares Average
or Exercise
Price Price
------- -----
Outstanding, at January 1, 1999 207,406 $4.94
Granted (A) 42,500 3.09
Canceled (A) (6,250) 6.50
Exercised (468) 4.00
-------
Outstanding, at March 31, 1999 243,188 $4.58
======= =====
Options exercisable, at March 31, 1999 147,664
=======
Weighted average fair value of options
granted during the three months
ended March 31, 1999 $3.00
=====
(A) Options granted and canceled include options for
the purchase of 6,250 shares for which the
exercise price was reduced from $6.50 to $4.00
per share.
Shares subject to warrants:
At March 31, 1999, the Company had warrants outstanding for the
purchase of 725,496 shares of common stock of which 677,785 are
exercisable through July 12, 1999 and the balance are exercisable
through March 21, 2000. The warrants are exercisable at prices
ranging from the equivalent of $2.50 to $16.00 per share.
Shares reserved for issuance:
At March 31, 1999, shares of common stock were reserved for the
following:
Exercise of outstanding stock options 243,188
----------
Exercise of stock options available for grant:
Option Plan 184,469
Directors' Plan 28,125
----------
Total 212,594
----------
Exercise of warrants 725,496
----------
Total 1,181,278
==========
7
<PAGE>
SEL-LEB MARKETING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7- Segment information:
During 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 131, Disclosures about Segments
of an Enterprise and Related Information ("SFAS 131"). Pursuant to
the provisions of SFAS 131, the Company is reporting segment sales
and gross margins in the same format reviewed by the Company's
management (the "management approach"). The Company has two
reportable segments: "Opportunity" and "Cosmetics". The Opportunity
segment is comprised of the operations connected with the
acquisition, sale and distribution of name-brand and off-brand
products which are purchased from close-out, overstocked and/or
change-of-packaging brand name items. The Cosmetics segment is
comprised of the acquisition, sale and distribution of all other
products, including "celebrity endorsed" and "tie-in" cosmetic and
health and beauty aid products and designer and all other
fragrances.
Net sales, cost of sales and other related segment information for
the three months ended March 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net sales:
Opportunity $1,850,754 $1,771,607
Cosmetics 2,573,561 2,247,401
---------- ----------
Total net sales 4,424,315 4,019,008
---------- ----------
Cost of sales:
Opportunity 1,590,786 1,523,802
Cosmetics 1,488,881 1,443,998
----------- ---------
Total cost of sales 3,079,667 2,967,800
Selling, general and administrative expenses 1,087,635 1,345,460
---------- ----------
Total operating expenses 4,167,302 4,313,260
---------- ----------
Operating income (loss) 257,013 (294,252)
---------- ----------
Other income (expense):
Interest expense, net (61,667) (52,209)
Unusual item - gain on sale of portion
of minority interest - 75,729
Other - (2,004)
---------- ----------
Totals (61,667) 21,516
---------- ----------
Income (loss) before provision (credit)
for income taxes $ 195,346 $ (272,736)
========== ==========
</TABLE>
8
<PAGE>
SEL-LEB MARKETING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8 - Subsequent events:
During the period from April 1, 1999 to May 14, 1999, the Company
received proceeds of $55,242 upon the exercise of options and
warrants to purchase 38,708 shares of common stock at exercise
prices ranging from $.87 to $4.25 per share. In addition, the
Company granted options to purchase 52,900 shares of common stock at
exercise prices ranging from $4.75 to $7.88 per share.
* * *
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of the Company's results of
operations, liquidity and financial condition should be read in conjunction with
the Consolidated Financial Statements of the Company and related notes thereto.
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements due to a number of factors, including but not limited
to general trends in the retail industry, the ability of the Company to
successfully implement its expansion plans, including its planned website,
consumer acceptance of any products developed and sold by the Company, the
ability of the Company to develop its "celebrity" product business and other
factors set forth herein or in reports and other documents filed by the Company
with the SEC.
Consolidated Results of Operations: Three Month Period Ended March 31, 1999
Compared to the Corresponding Period Ended March 31, 1998
The Company has two principal business segments (see Note 7 to the
Company's condensed consolidated financial statements): opportunity and
cosmetics. Net sales for the three months ended March 31, 1999 were $4,424,315
compared to $4,019,008 for the three months ended March 31, 1998, representing
an increase of 10.1%. This increase in net sales resulted primarily in the
cosmetics segment, which increased approximately 14.5%, while the opportunity
segment increased by 4.4%.
As a result of the increase in sales, cost of sales also increased from
$2,967,800 for the three month period in 1998 to $3,079,667 for the same period
in 1999. However, the cost of goods as a percentage of sales decreased from
73.8% in 1998 to 69.6% in 1999. The primary reasons for this decrease were (1)
the increase in sales of the Company's cosmetic products as a percentage of
total sales, which products typically generate a higher gross margin and (2) the
Company `s having continued its effort during the three months ended March 31,
1999 to dispose of merchandise which generated lower margins. In addition,
senior management spent increased time on purchases, production and inventory
management which resulted in a greater proportion of expenses being allocated to
cost of sales.
Selling, general and administrative ("SG&A") expenses decreased from
$1,345,460 for the three month period ended March 31, 1998 to $1,087,635 for the
same period in 1999. Generally, the principal components of the Company's SG&A
expenses are payroll, rent, commission, insurance, legal, accounting and other
fees paid to third parties and travel and promotional expenses. During the
latter half of 1998, and continuing into early 1999, the Company realigned
management and support responsibilities whereby more time of senior management
was spent on purchasing, production and inventory management. As a result of
this realignment, a greater proportion of costs were allocated to production as
opposed to SG&A. In addition, more sales were generated by non-commission, in
house personnel for the three month period ended March 31, 1999 as compared to
the three month period ended March 31,1998.
As a result of the decrease in SG&A expenses, which was partially
offset by the increase in the cost of sales, total operating expenses decreased
from $4,313,260 in the three month period ended March 31, 1998 to $4,167,302 in
the three month period ended March 31, 1999. As a result of these decreased
operating expenses, operating income increased by $551,265 from a loss of
$294,252 for the period ended March 31, 1998 to a profit of $257,013 for the
comparable period in 1999.
During the three months ended March 31, 1998, the Company recognized a
gain on the sale of 10% interest in Ales in the amount of $75,729 and received a
total consideration of $81,137.
10
<PAGE>
The Company's net income, as a result of all of the above, increased
by $296,133 from a loss of $175,687 for the three month period ended March 31,
1998 to a profit of $120,446 for the comparable period in 1999.
Liquidity and Capital Resources
At March 31, 1999, the Company had working capital of $7,213,860,
including cash and cash equivalents in the amount of $205,925. The Company's
principal cash requirements are for the acquisition of inventory and the
financing of receivables. Receivables increased from $3,530,312 at December 31,
1998 to $4,096,686 at March 31, 1999, representing an increase of $566,374.
Inventory increased from $6,496,298 at December 31, 1998 to $7,080,542 at March
31, 1999, representing an increase of $582,244. These increases in receivables
and inventory were financed by increased borrowings under the Company's
revolving credit arrangement in the amount of $217,691, an increase in accounts
payable in the amount of $394,237 and a decrease in cash of $298,135.
During December 1998, the Company entered into a new credit facility
("Facility") with Merrill Lynch Business Financial Services Inc. ("Merrill
Lynch") which replaced the Company's previous arrangement with Summit Bank. The
Facility consists of both a revolving line of credit and a $900,000 term loan,
which is payable in monthly installments through January 2006, at which time the
unpaid balance is due. The revolving line of credit provides for maximum
borrowings of $3,300,000 (see note 4 to the Company's consolidated financial
statements) against the Company's eligible accounts receivable and inventories,
through October 31, 2000. On April 20, 1999, the Company obtained a temporary
line of credit increase with Merrill Lynch increasing the Facility to a maximum
borrowing of $3,800,000. The increase is effective through October 31, 1999, at
which time the maximum line will revert back to $3,300,000. Outstanding
borrowings under the Facility are secured by substantially all of the Company's
assets. Funds available under the loan were used to replace the previous loans
with Summit Bank as well as provide funds for the working capital needs of the
Company. As of March 31, 1999, the outstanding balance of the working capital
facility was $2,545,932 and $857,143 on the term loan. As of May 12, 1999, the
outstanding balance under the working capital facility was $2,954,751 and
$835,715 on the term loan. The Facility contains certain restrictive covenants
which, among other things, require the maintenance of certain financial ratios
and limitations on future indebtedness.
On September 26, 1997, in connection with the previous relocation of
its office and warehouse facilities to Paterson, New Jersey, the Company
borrowed $100,000 from the Paterson Restoration Corporation. The loan, which
bears interest at 6% per annum, provides for monthly payment of principal and
interest in the amount of $1,461 through October 1, 2004 and is secured by a
second priority lien on all new machinery and equipment purchased by the
Company. The proceeds of the loan were used for the purchase of fixed assets.
The Company anticipates that its working capital, together with
anticipated cash flow from the Company's operations, will be sufficient to
satisfy the Company's cash requirements for at least twelve months. In the event
the Company's plans change (due to unanticipated expenses or difficulties or
11
<PAGE>
otherwise), or if the working capital and projected cash flow otherwise prove
insufficient to fund operations, the Company could be required to seek
additional financing sooner than currently anticipated. Except for the Facility,
which expires on October 31, 2000, the Company has no current arrangements with
respect to, or sources of, additional financing. Accordingly, there can be no
assurance that additional financing will be available to the Company when
needed, on commercially reasonable terms, or at all. The Company's inability to
obtain such additional financing could have a material adverse effect on the
Company's long-term liquidity.
The Company recognized the need to assure that its operations will not
be adversely impacted by Year 2000 (Y2K) software failures. The impact on
operations continues to be evaluated. Management has already begun to identify
the revisions needed to be made to ensure that the Company will be able to
process information beyond 1999 without disruption. New hardware and software
has been purchased and the Company's accounting programs are presently being
upgraded and revised to reduce the possibility of Y2K failure. The installation
and testing of the new programs and systems should be completed by the third
quarter 1999. The Company is assessing the Y2K status of its major suppliers to
also reduce the likelihood of Y2K failure. Y2K compliance is not anticipated to
have any material adverse effect on the Company's financial position or results
of operations and the cost associated with completing the Y2K compliance are not
expected to be material.
If the Company's computer systems fail with respect to the Y2K issue,
the Company's internal and external reporting process could be affected causing
a material adverse effect on the business and financial condition of the
Company. In addition, there can be no assurance that the systems of the other
companies upon which the Company's systems rely will be converted or that a
failure to convert by another company would not have a material adverse effect
on the business and financial condition of the Company.
12
<PAGE>
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K
A. Exhibits
10.1 Temporary WCMA Line of Credit Increase
27.1 Financial Data Schedule
B. Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
three month period ended March 31, 1999.
Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SEL-LEB MARKETING, INC.
/s/ Jan S. Mirsky
----------------------
Jan S. Mirsky
Executive Vice President - Finance
Dated: May 14, 1999 as both duly authorized officer of the registrant
and as principal financial officer of registrant.
<PAGE>
Private Client Group
Merrill Lynch Business
Financial Services Inc.
[GRAPHIC] Merril Lynch 222 North LaSalle Street
17th Floor
Chicago, Illinois 60601
(312) 269-4438
FAX: (312)499-3256
April 20, 1999
Sel-Leb Marketing, Inc.
495 River Street
Paterson, NJ 07524
Re: Temporary WCMA Line of Credit Increase
Ladies & Gentlemen:
This Letter Agreement will serve to confirm certain agreements of Merrill Lynch
Business Financial Services Inc. ("MLBFS") and Sel-Leb Marketing, Inc.
("Customer") with respect to: (i) that certain WCMA AND TERM LOAN AND SECURITY
AGREEMENT NO. 9811551601 between MLBFS and Customer (including any previous
amendments and extensions thereof), and (ii) all other agreements between MLBFS
and Customer or any party who has guaranteed or provided collateral for
Customer's obligations to MLBFS ("Guarantor") in connection therewith
(collectively, the "Loan Documents"). Capitalized terms used herein and not
defined herein shall have the meaning set forth in the Loan Documents.
Subject to the terms hereof, effective as of the "Effective Date" (as defined
below) the Loan Documents are hereby amended as follows:
1. During the period between the Effective Date and October 31, 1999 (the
"Increase End Date"), the term "Maximum WCMA Line of Credit" shall mean as of
any date of determination thereof, an amount equal to the lesser of: (A)
$3,800,000.00, or (B) 80% of Customer's Accounts and Chattel Paper, as shown on
its regular books and records (excluding Accounts over 90 days old, Chattel
Paper with installments or other sums more than 90 days past due, and Accounts
and Chattel Paper directly or indirectly due from any person or entity not
domiciled in the United States or from any shareholder, officer or employee of
Customer or any affiliated entity) and 50% of Customer's Inventory, as shown on
its regular books and records, less the outstanding balance of Customer's Term
Loan No. 9811551601.
2. Commencing on the first Business Day immediately following the Increase End
Date, and continuing thereafter to and including the Maturity Date, the "Maximum
WCMA Line of Credit" shall be reduced to an amount equal to the lesser of: (A)
$3,300,000.00, or (B) 80% of Customer's Accounts and Chattel Paper, as shown on
its regular books and records (excluding Accounts over 90 days old, Chattel
Paper with installments or other sums more than 90 days past due, and Accounts
and Chattel Paper directly or indirectly due from any person or entity not
domiciled in the United States or from any shareholder, officer or employee of
Customer or any affiliated entity) and 50% of Customer's Inventory, as shown on
its regular books and records, less the outstanding balance of Customer's Term
Loan No. 9811551601. PRIOR TO THE CLOSE OF BUSINESS ON THE INCREASE END DATE,
CUSTOMER SHALL REPAY ANY AMOUNT OUTSTANDING IN EXCESS OF SUCH REDUCED MAXIMUM
WCMA LINE OF CREDIT.
<PAGE>
Merrill Lynch Business Financial Services Inc.
Sel-Leb Marketing, Inc.
April 20, 1999
Page No. 2
3. In connection with said temporary increase, Customer agrees to pay MLBFS a
fee of $10,000.00. Customer hereby authorizes and directs MLBFS to charge the
said fee to WCMA Account No. 885-07E38 on or at any time after the Effective
Date.
Except as expressly amended hereby, the Loan Documents shall continue in full
force and effect upon all of their terms and conditions.
By their execution of this Letter Agreement, the below-named Guarantors hereby
consent to the foregoing modifications to the Loan Documents, and hereby agree
that the "Obligations" under their Unconditional Guaranty shall extend to and
include the Obligations of Customer under the Loan Documents, as amended hereby.
Customer and said Guarantors acknowledge, warrant and agree, as a primary
inducement to MLBFS to enter into this Agreement, that: (a) no Default or Event
of Default has occurred and is continuing under the Loan Documents; (b) each of
the warranties of Customer in the Loan Documents are true and correct as of the
date hereof and shall be deemed remade as of the date hereof; (c) neither
Customer nor any of said Guarantors have any claim against MLBFS or any of its
affiliates arising out of or in connection with the Loan Documents or any other
matter whatsoever; and (d) neither Customer nor any of said Guarantors have any
defense to payment of any amounts owing, or any right of counterclaim for any
reason under, the Loan Documents.
The obligations of MLBFS under this Letter Agreement are subject to its receipt
(where applicable) and satisfaction with the following:
Verification that Customer has an open and active lockbox for collection of
its receivables, in addition to a copy of the executed lockbox agreement;
The February 28, 1999 accounts receivable aging of Ales Signature, Ltd.;
and
An updated Certificate of Insurance evidencing a policy or policies of
physical damage insurance on the tangible collateral described in the Loan
Documents, and providing that losses shall be payable to us as our
interests may appear pursuant to a Lender's Loss Payable Endorsement.
Provided that no Event of Default, or event which with the giving of notice,
passage of time, or both, would constitute an Event of Default, shall then have
occurred and be continuing under the terms of the Loan Documents, and the
condition specified above shall have been met to our satisfaction, the
amendments and agreements in this Letter Agreement will become effective on the
date (the "Effective Date") upon which: (a) Customer and the Guarantors shall
have executed and returned the duplicate copy of this Letter Agreement and the
other documents enclosed herewith; and (b) an officer of MLBFS shall have
reviewed and approved this Letter Agreement and such other documents as being
consistent in all respects with the original internal authorization hereof.
Notwithstanding the foregoing, if Customer and the Guarantors do not execute and
return the duplicate copy of this Letter Agreement and said other documents
within 14 days from the date hereof, or if for any other reason (other than the
sole fault of MLBFS) the Effective Date shall not
<PAGE>
Merrill Lynch Business Financial Services Inc.
Sel-Leb Marketing, Inc.
April 20, 1999
Page No. 3
occur within said 14-day period, then all of said amendments and agreements
will, at the sole option of MLBFS, be void.
Very truly yours,
Merrill Lynch Business Financial Services Inc.
By: /s/ Dustin Van Peursem
-----------------------------
Dustin Van Peursem
Senior Portfolio Manager
Accepted:
Sel-Leb Marketing, Inc.
By: /s/ Jan Minsky
--------------------------------------
Printed Name: Jan Minsky
---------------------------
Title: Executive Vice President - Finance
----------------------------------
Approved:
Ales Signature Ltd.
By: /s/Jan Minsky
--------------------------------------
Printed Name: Jan Minsky
---------------------------
Title: Executive Vice President - Finance
----------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 205,925
<SECURITIES> 0
<RECEIVABLES> 4,096,686
<ALLOWANCES> 204,270
<INVENTORY> 7,080,542
<CURRENT-ASSETS> 12,367,642
<PP&E> 582,372
<DEPRECIATION> 649,168
<TOTAL-ASSETS> 13,289,369
<CURRENT-LIABILITIES> 5,153,782
<BONDS> 0
0
0
<COMMON> 10,896
<OTHER-SE> 6,441,962
<TOTAL-LIABILITY-AND-EQUITY> 13,289,369
<SALES> 4,424,315
<TOTAL-REVENUES> 4,424,315
<CGS> 3,079,667
<TOTAL-COSTS> 4,167,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,667
<INCOME-PRETAX> 195,346
<INCOME-TAX> 74,900
<INCOME-CONTINUING> 120,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,446
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
