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 March 31, 1997
[ ] 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 May 12, 1997:
Class A Common Stock, $.001 par value 1,680,946
Class B Common Stock, $.001 par value 483,264
Traditional Small Business Disclosure Format
Yes X No
----- -----
SUPER VISION INTERNATIONAL, INC.
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 March 31, 1997 and
December 31, 1996 1
Condensed Statements of Operations for the Three Months
Ended March 31, 1997 and 1996 2
Condensed Statement of Stockholders' Equity 3
Condensed Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 4
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 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security-Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
SUPER VISION INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
MARCH 31, DECEMBER 31,
ASSETS 1997 1996
--------- ------------
Current Assets:
Cash and cash equivalents $3,030,045 $3,327,965
Investments 107,667 107,667
Trade accounts receivable,
less allowance for
doubtful accounts of
$46,909 and $41,866 892,351 1,310,057
Inventory, less reserve
for excess inventory
of $81,628 2,505,299 1,921,103
Advances to employees 29,555 25,524
Deferred tax asset 160,533 185,865
Cost and recognized
profit in excess
of billings 184,370 -
Other assets 134,806 72,781
----------- -----------
Total current assets 7,044,626 6,950,962
----------- -----------
Equipment and Furniture 1,788,988 1,764,706
Accumulated depreciation (379,371) (325,957)
----------- -----------
Net equipment
and furniture 1,409,617 1,438,749
----------- -----------
Other Assets 241,406 229,489
----------- -----------
$8,695,649 $8,619,200
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $1,192,515 $1,020,478
Accrued liabilities 143,000 194,247
Accrued compensation
and benefits 32,000 139,769
Payments in excess
of costs and
recognized profit
on uncompleted
contracts - 53,702
Deposits 19,669 51,814
Income tax payable 35,000 19,388
----------- -----------
Total current liabilities 1,422,184 1,479,398
----------- -----------
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, 1,680,946
issued and outstanding 1,681 1,681
Class B common stock,
$.001 par value, 3,389,134
shares authorized, 483,264
and 3,375,134 issued and
outstanding 483 3,375
Additional paid-in capital 7,621,545 7,633,653
Retained earnings (deficit) (350,244) (498,907)
----------- -----------
Total stockholders' equity 7,273,465 7,139,802
----------- -----------
$8,695,649 $8,619,200
=========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.
1
SUPER VISION INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS
ENDED MARCH 31,
1997 1996
---- ----
Revenues $2,203,871 $1,368,989
---------- ----------
Costs and Expenses:
Cost of sales 1,320,352 871,359
Selling, general
and administrative 666,409 363,597
Research and development 48,819 62,793
---------- ---------
Total costs and expenses 2,035,580 1,297,749
---------- ---------
Operating Income 168,291 71,240
---------- ---------
Non-Operating Income (Expenses):
Interest income 38,316 23,312
Interest expense - (746)
Loss on disposal of assets - (313)
---------- ---------
Total non-operating income 38,316 22,253
---------- ---------
Income Before Income Taxes 206,607 93,493
Income Tax Expense 57,944 -
---------- ---------
Net Income $ 148,663 $ 93,493
========== ==========
Income Per Common Share:
Primary $ 0.07 $ 0.05
========== ==========
Weighted Average Shares
of Common Stock Outstanding:
Primary 2,012,483 1,886,100
========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.
2
SUPER VISION INTERNATIONAL, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON STOCK
------------------------------------------
CLASS A CLASS B ADDITIONAL RETAINED
------------------- ------------------- PAID-IN EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT)
--------- ------ ---------- ------ ------- ----------
Balance, December 31, 1996 1,680,946 $1,681 3,375,134 $ 3,375 $7,633,653 $(498,907)
Retirement of Class B Escrow Shares - - (2,891,870) (2,892) 2,892 -
Issuance Costs for Shares Underlying
Class A and B Warrants - - - - (15,000) -
Net Income for the Three Months
Ended March 31, 1997 - - - - - 148,663
--------- ------- ------------ -------- ----------- -----------
Balance, March 31, 1997 1,680,946 $1,681 483,264 $ 483 $7,621,545 $(350,244)
========= ======= ============ ======== =========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.
3
SUPER VISION INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS
ENDED MARCH 31,
1997 1996
---- ----
Cash Flows from Operating Activities:
Net income $ 148,663 $ 93,493
----------- -----------
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 54,601 44,245
Loss on disposal of fixed assets - 313
(Increase) decrease in:
Accounts receivable, net 417,706 (391,074)
Inventory (584,196) (9,620)
Other assets (229,287) (86,182)
Increase (decrease) in:
Accounts payable 172,037 (34,797)
Accrued and other liabilities (197,106) 30,413
Deposits (32,145) 4,050
----------- -----------
Total adjustments (398,390) (442,652)
----------- -----------
Net cash used in
operating activities (249,727) (349,159)
----------- -----------
Cash Flows from Investing Activities:
Acquisition of patents and trademarks (8,911) (5,656)
Purchase of equipment and furniture (24,282) (152,525)
Proceeds from disposal of equipment
and furniture - 400
----------- -----------
Net cash used in
investing activities (33,193) (157,781)
----------- -----------
Cash Flows from Financing Activities:
Issuance costs (15,000) -
----------- -----------
Net cash used in
financing activities (15,000) -
----------- -----------
Net Decrease in Cash and Cash Equivalents (297,920) (506,940)
Cash and Cash Equivalents, beginning of
period 3,327,965 2,327,775
----------- -----------
Cash and Cash Equivalents, end of period $3,030,045 $1,820,835
=========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.
4
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
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 26, 1997, 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 following table summarizes activity of the stock option plan for
the period ended March 31, 1997:
Options Number Option
Available for of Price
Future Grant Shares Per Share
------------- ---------- -------------
Balance, December 31, 1996 69,769 176,131 $5.00-$9.25
Options granted (50,200) 50,200
Options exercised - -
Options cancelled 1,800 (1,800)
---------- ----------
Balance, March 31, 1997 21,369 224,531
---------- ----------
Options granted vest ratably over a three-year period. As of March
31, 1997, 167,501 options were vested and exercisable.
5
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
3. INCOME TAXES:
The components of the net deferred tax asset recognized in the
accompanying balance sheet at March 31, 1997 are as follows:
Deferred tax liability $(58,746)
Deferred tax asset 282,001
Valuation allowance (62,722)
----------
$ 160,533
==========
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 March 31, 1997, the Company had approximately $334,000 in net
operating loss carryforwards for federal and state income tax
purposes, which expire in 2011.
5. INVENTORY:
Inventory at March 31, 1997 and December 31, 1996 consisted of the
following components:
March 31, December 31,
1997 1996
-------- ------------
Raw materials $1,804,896 $1,334,429
Work in progress 35,595 50,122
Finished goods 746,436 618,180
----------- -----------
2,586,927 2,002,731
Less: Reserve for
excess inventory (81,628) (81,628)
----------- -----------
$2,505,299 $1,921,103
=========== ===========
6
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
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, 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", "expect", "believe",
"estimate", "anticipate", "continue", 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 and the
evolving nature of the Company's fiber optic technology.
Results of Operations
Revenues are derived primarily from the sale of fiber optic SIDE GLOW(TM) and
END GLOW(TM) 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 March 31, 1997 ("1997 quarter") were
$2,203,871, as compared to $1,368,989 for the three months ended March 31, 1996
("1996 quarter"), an increase of 61%. The increase in revenues is primarily
attributable to sales of fiber optic cables and light sources in the
international lighting market. Revenues in the domestic lighting, sign and pool
markets were lower than expected due to severe weather conditions in portions of
the United States. The increase in revenues during the 1997 quarter is also
attributable to approximately $830,000 of revenue recognized under a long-term
contract expected to be completed in May, 1997 for what the Company believes to
be the world's largest custom fiber optic display. Management believes that
efforts to penetrate the traditional markets for neon and other conventional
lighting have resulted in increased market awareness of the Company's products
and the Company intends to pursue expansion of the distribution of these
products both domestically and internationally.
Cost of sales were approximately $1,320,000, or 60% of revenues, during the 1997
quarter, compared to approximately $871,000, or 64% of revenues in the 1996
quarter. The 1997 gross margin was favorably impacted by the effects of volume
purchase discounts of product components. The Company has increased inventory
levels of standard product components in order to take advantage of quantity
discounts. These components are common to many of the Company's product lines
and are not associated with one particular product or market. Additionally, the
gross margin improved due to the implementation of improved manufacturing flow
methods, particularly relating to the Company's light source products lines,
which have resulted in lower unit overhead costs.
Selling, general and administrative expenses were approximately $666,000 during
the 1997 quarter as compared to approximately $364,000 for the 1996 quarter, an
increase of 83%. The Company greatly increased the level of marketing activities
in the architectural lighting and sign markets, primarily through trade show
attendance, trade advertising, new marketing literature and videos, in an effort
to expand market share in these areas. Management believes these increased
expenses are necessary to achieve future revenue increases in these target
markets. Additionally, the Company increased personnel levels in the sales,
marketing and customer service areas to support increased requests for
information regarding the Company's products, which increased selling and
marketing expense.
7
Research and development costs were approximately $49,000 during the 1997
quarter as compared with approximately $63,000 during the 1996 quarter, a
decrease of 22%. The Company has concentrated on rapid, low cost development of
commercially viable product lines utilizing previously performed research to
shorten the time and decrease the costs involved in bringing new products to
market. Management believes that research and development costs may increase as
the Company intends to continue the development of several new product lines as
well as focus product development on improving the brightness of the Company's
fiber optic cables and light sources in future periods.
Interest income is derived from the short-term investments of liquid cash
balances in low risk commercial paper and money market funds. Net interest
income for the 1997 quarter was approximately $38,000 as compared to
approximately $24,000 for the 1996 quarter. The increase is attributable to
increased cash balances available for investment during the 1997 quarter,
primarily as a result of the sale by the Company of 249,480 shares of Class A
Common Stock for an aggregate amount of $1,945,480, net of issuance costs, in
September, 1996.
Income taxes for the 1997 quarter include a provision for income taxes of
approximately $78,000 which was offset by tax benefits of approximately
$20,000 as a result of the carryforward of prior year tax losses.
The net income for the 1997 quarter was approximately $149,000, or $.07 per
common share, as compared to approximately $93,000, or $.05 per common share,
in the 1996 quarter. The increase is due to higher sales volumes and
improvements in gross margins.
Liquidity and Capital Resources
At March 31, 1997, the Company had working capital of $5,622,442.
Cash decreased by approximately $298,000 during the 1997 quarter, primarily as a
result of expansion of product components inventory by approximately $584,000.
Inventory was expanded in order to take advantage of volume purchase discounts.
Accounts receivable decreased by approximately $418,000 due to a reduction in
credit extended to customers in order to finance the aforementioned inventory
expansion. Other assets increased by approximately $229,000, primarily as a
result of the recognition of revenues under a long-term contract accounted for
under the percentage of completion method. Accounts payable increased by
approximately $172,000 related to the expansion of inventory. Accrued and other
liabilities decreased by approximately $197,000 primarily due to the payment of
compensation amounts accrued as of December 31, 1996 which were paid in the 1997
quarter.
The Company has signed a lease for an approximately 70,000 square foot
headquarters and production facility in Orlando. Management expects to incur
approximately $850,000 in costs relating to the interior buildout and related
equipment purchased for the facility. Completion and relocation to the new
facility is expected in July, 1997.
8
Escrowed Shares
In January, 1994, the Company and certain stockholders of the Company entered
into an agreement providing for the escrow of 2,918,000 shares held by such
individuals (the "Escrow Shares"). In the event any of the shares were released
from escrow to officers, directors and other employees of the Company,
compensation expense would be recorded for financial reporting purposes as
required by GAAP. As of March 31, 1997, the President and Chairman, Mr. Brett
Kingstone, voluntarily retired 2,891,870 of his Escrow Shares. These shares of
Class B Common Stock were returned to the Company treasury. 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 remaining
26,130 Escrow Shares, such release will be deemed additional compensation
expense of the Company. Accordingly, the Company will, in the event of the
release of such shares from escrow, recognize during the period in which the
earnings threshold are met or are probable of being met or such minimum bid
prices attained, charges which would have the effect of increasing the Company's
loss or reducing earnings, if any, at such time.
9
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 March 31, 1997.
10
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: May 15, 1997
------------------------------------
Brett M. Kingstone, President and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ John P. Stanney Date: May 15, 1997
------------------------------------
John P. Stanney, Chief Financial Officer
(Principal Financial and Accounting Officer)
11
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: Date: May 15, 1997
-----------------------------------------
Brett M. Kingstone, President and
Chief Executive Officer
(Principal Executive Officer)
By: Date: May 15, 1997
-----------------------------------------
John P. Stanney, Chief Financial Officer
(Principal Financial and Accounting Officer)
12