SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
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[x] QUARTERLY REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 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)
ncorporation 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 August 12, 1997
Class A Common Stock, $.001
par value 1,721,714
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
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Financial Statements:
Condensed Balance Sheets as of June 30, 1997 and
December 31, 1996 1
Condensed Statements of Operations for the Three Months
and Six Months Ended June 30, 1997 and 1996 2
Condensed Statement of Stockholders' Equity 3
Condensed Statements of Cash Flows for the Six Months
Ended June 30, 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 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security-Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Super Vision International, Inc.
Condensed Balance Sheets
June 30, December 31,
Assets 1997 1996
------------------ ------------------
Current Assets:
Cash and cash equivalents $ 2,393,086 $ 3,327,965
Investments 107,667 107,667
Trade accounts receivable, less allowance for doubtful
accounts of $46,909 and $41,866 1,742,686 1,310,057
Inventory, less reserve for excess inventory of $74,061 2,097,759 1,921,103
Advances to employees 29,031 25,524
Deferred tax asset 137,353 185,865
Other assets 108,749 72,781
------------------ ------------------
Total current assets 6,616,331 6,950,962
------------------ ------------------
Equipment and Furniture 1,818,780 1,764,706
Accumulated depreciation (432,404) (325,957)
------------------ ------------------
Net equipment and furniture 1,386,376 1,438,749
------------------ ------------------
Other Assets 199,643 229,489
------------------ ------------------
Deposits on Equipment 386,999 -
------------------ ------------------
$ 8,589,349 $ 8,619,200
================== ==================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 723,266 $ 1,020,478
Accrued liabilities 188,000 194,247
Accrued compensation and benefits 32,000 139,769
Payments in excess of costs and recognized profit on
uncompleted contracts - 53,702
Deposits 63,424 51,814
Income tax payable 58,915 19,388
------------------ ------------------
Total current liabilities 1,065,605 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, 1,685,213 issued and outstanding 1,685 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 7,643,876 7,633,653
Retained earnings (deficit) (122,300) (498,907)
------------------ ------------------
Total stockholders' equity 7,523,744 7,139,802
------------------ ------------------
$ 8,589,349 $ 8,619,200
================== ==================
See accompanying notes to condensed financial statements.
Super Vision International, Inc.
Condensed Statements of Operations
Three Months Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
----------------- ----------------- ---------------- ---------------
Revenues $ 2,541,851 $ 1,134,655 $ 4,745,722 $ 2,503,644
----------------- ----------------- ---------------- ---------------
Costs and Expenses:
Cost of sales 1,524,263 734,435 2,844,615 1,605,794
Selling, general and administrative 634,029 472,998 1,300,438 836,595
Research and development 83,176 17,443 131,995 80,236
----------------- ----------------- ---------------- ---------------
Total costs and expenses 2,241,468 1,224,876 4,277,048 2,522,625
----------------- ----------------- ---------------- ---------------
Operating Income (Loss) 300,383 (90,221) 468,674 (18,981)
----------------- ----------------- ---------------- ---------------
Non-Operating Income (Expenses):
Interest income 37,456 27,619 75,772 50,931
Interest expense - (734) - (1,480)
Loss on disposal of assets - (7,230) - (7,543)
----------------- ----------------- ---------------- ---------------
Total non-operating income 37,456 19,655 75,772 41,908
----------------- ----------------- ---------------- ---------------
Income (Loss) Before Income Taxes 337,839 (70,566) 544,446 22,927
Income Tax Expense 109,894 - 167,838 -
----------------- ----------------- ---------------- ---------------
Net Income (Loss) $ 227,945 $ (70,566) $ 376,608 $ 22,927
================= ================= ================ ===============
Income (Loss) Per Common Share:
Primary $ 0.10 $ (0.04) $ 0.17 $ 0.01
================= ================= ================ ===============
Weighted Average Shares of
Common Stock Outstanding:
Primary 2,198,575 1,886,292 2,183,168 1,886,196
================= ================= ================ ===============
See accompanying notes to condensed financial statements.
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) -
Exercise of Employee Stock
Options 4,267 4 - - 22,331 -
Net Income for the Six Months
Ended June 30, 1997 - - - - - 376,607
------------- ------------ ------------- ----------- -------------- --------------
Balance, June 30, 1997 1,685,213 $ 1,685 483,264 $ 483 $ 7,643,876 $ (122,300)
============= ============ ============= =========== ============== ==============
See accompanying notes to condensed financial statements.
Super Vision International, Inc.
Condensed Statements of Cash Flows
Six Months
Ended June 30,
1997 1996
----------------- -----------------
Cash Flows from Operating Activities:
Net income $ 376,608 $ 22,927
----------------- -----------------
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 109,182 77,281
Gain on disposal of fixed assets - 7,543
(Increase) decrease in:
Accounts receivable, net (432,629) (400,594)
Inventory (176,656) (433,170)
Other assets 48,559 (61,092)
Increase (decrease) in:
Accounts payable (297,212) 284,455
Accrued and other liabilities (128,188) 31,160
Deposits 11,610 478,611
----------------- -----------------
Total adjustments (865,334) (15,806)
----------------- -----------------
Net cash provided by (used in) operating activities (488,726) 7,121
----------------- -----------------
Cash Flows from Investing Activities:
Acquisition of patents and trademarks (12,411) (12,642)
Purchase of equipment and furniture (54,074) (224,681)
Proceeds from disposal of equipment and furniture - 7,049
Deposits on equipment (386,999) -
----------------- -----------------
Net cash used in investing activities (453,484) (230,274)
----------------- -----------------
Cash Flows from Financing Activities:
Issuance costs (15,000) 18,750
Proceeds from exercise of employee stock options 22,331 -
----------------- -----------------
Net cash provided by financing activities 7,331 18,750
----------------- -----------------
Net Decrease in Cash and Cash Equivalents (934,879) (204,403)
Cash and Cash Equivalents, beginning of period 3,327,965 2,327,775
----------------- -----------------
Cash and Cash Equivalents, end of period $ 2,393,086 $ 2,123,372
================= =================
See accompanying notes to condensed financial statements.
Super Vision International, Inc.
Notes to Condensed Financial Statements
For the Six-Month Periods Ended June 30, 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:
The Company has a stock option plan that provides for the grant of
incentive stock options and nonqualified stock options for up to 250,000
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
period ended June 30, 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 (53,900) 53,900
Options exercised - (4,267)
Options cancelled 8,933 (8,933)
------------ ------------
Balance, June 30, 1997 24,802 216,831
============ ============
Options granted vest ratably over a three-year period. As of June 30,
1997, 175,400 options were vested and exercisable.
Super Vision International, Inc.
Notes to Condensed Financial Statements - Continued
For the Six-Month Periods Ended June 30, 1997 and 1996
3.Income Taxes:
The components of the net deferred tax asset recognized in the
accompanying balance sheet at June 30, 1997 are as follows:
Deferred tax liability $ (55,353)
Deferred tax asset 234,521
Valuation allowance (41,815)
----------------
$ 137,353
================
The types of temporary differences between the tax basis of assets and
liabilities and their financial statement reporting amounts are
attributable principally to depreciation methods, deferred gains, and
different accounting methods used.
As of June 30, 1997, the Company had approximately $232,479 in net
operating loss carryforwards for federal and state income tax purposes,
which expire in 2011.
5.Inventory:
Inventory at June 30, 1997 and December 31, 1996 consisted of the
following components:
June 30, December 31,
1997 1996
-------------- -------------
Raw materials $ 1,478,038 $ 1,334,429
Work in progress 5,586 50,122
Finished goods 688,196 618,180
-------------- -------------
2,171,820 2,002,731
Less: Reserve for excess inventory (74,061) (81,628)
-------------- -------------
$ 2,097,759 $ 1,921,103
============== =============
6.Recent Accounting Pronouncements:
In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings Per Share. This statement, which is effective
for the Company's annual report for the year ended December 31, 1997,
establishes new requirements for the calculation, presentation and
disclosure of earnings per share. The Company estimates that earnings per
share presented in accordance with Statement No. 128 would not differ
materially from what is currently presented.
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 ("1997 quarter") and six months ended June 30,
1997 ("1997 six months") were approximately $2,542,000 and $4,746,000,
respectively, as compared to approximately $1,135,000 and $2,504,000 for the
three months ("1996 quarter") and six months ended June 30, 1996 ("1996 six
months"). This represented increases of 124% and 90%, respectively. The increase
in revenues is primarily attributable to strong sales of the Company's pool and
spa lighting products, and continued growth in the sign market segment. Sales in
the pool and spa market rebounded strongly after a prolonged lull in the
construction market due to weather conditions. The summer building season
resulted in strong demand for this product line. The Company also noted growth
in the sign market as the Company continued expansion of marketing efforts
targeted to this industry. The increase in revenues during the 1997 six months
is also attributable to approximately $830,000 of revenue recognized under a
long-term contract completed in May 1997 for what the Company believes to be the
world's largest custom fiber optic display. Management believes the overall
market available to fiber optic lighting products is increasing as the lighting,
sign and pool and spa industries become aware of the benefits and applications
of fiber optics in these market segments.
Cost of sales were approximately $1,524,000, or 60% of revenues, during the 1997
quarter and $2,845,000, or 60% of revenues, for the 1997 six months as compared
to $734,000, or 65% of revenues, for the 1996 quarter and $1,606,000, or 64% of
revenues, for the 1996 six months. The gross margin was 40% for both the 1997
quarter and 1997 six months, respectively, and 35% and 36%, respectively, for
the 1996 quarter and 1996 six months. Gross margins for the 1997 six months were
improved due to process improvements in the Company's fiber optic cabling and
extrusion production lines which improved product performance and resulted in
increased yields, thereby increasing margin experience. The 1997 gross margin
was also 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 product lines, which have
resulted in lower unit overhead costs.
Selling, general and administrative expenses were approximately $634,000 and
$1,300,000 during the 1997 quarter and 1997 six months, respectively, as
compared to approximately $473,000 and $837,000 for the 1996 quarter and 1996
six months, respectively. This represented increases of 34% and 55%,
respectively. During the 1997 quarter, the Company attended several trade shows
targeted towards expanding the sign market which resulted in increased
promotional and travel costs. The Company also experienced increased costs in
the area of investor and public relations, and other costs associated with the
public trading of the Company's securities. Additionally, the Company produced
new product catalogs to include newly introduced products, as well as a price
guide and marketing video. During the 1997 six months, 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 expenses.
Research and development costs were approximately $83,000 and $132,000 during
the 1997 quarter and 1997 six months, respectively, as compared to approximately
$17,000 and $80,000 during the 1996 quarter and 1996 six months, respectively.
This represented increases of 388% and 65%, respectively. The Company increased
personnel levels in the area of research and development in order to shorten
development time of several new light sources, as well as modifications to
existing products to meet market requests. In addition, the Company is actively
exploring several new market applications for its endpoint fiber optic
technology which required increased costs associated with developing prototypes
for field testing.
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 and 1997 six months was approximately $37,000 and
$76,000, respectively, as compared to approximately $28,000 and $51,000 for the
1996 quarter and 1996 six months, respectively. The increase is attributable to
increased cash balances available for investment during the 1997 quarter and
1997 six months, primarily as a result of the sale by the Company of 249,480
shares of Class A Common Stock for an aggregate amount of approximately
$1,945,000, net of issuance costs, in September 1996.
Income taxes for the 1997 six months include a provision for income taxes of
approximately $179,000 which was offset by tax benefits of approximately $42,000
as a result of the carryforward of prior year tax losses.
The net income for the 1997 quarter was approximately $228,000, or $.10 per
common share, as compared to a net loss of approximately $(71,000), or $(.04)
per common share, in the 1996 quarter. Net income is due to higher sales volumes
and improvements in gross margins.
Liquidity and Capital Resources
At June 30, 1997, the Company had working capital of approximately $5,551,000.
Cash decreased by approximately $935,000 during the 1997 six months. Accounts
receivable increased by approximately $433,000 during the 1997 six months,
primarily due to increased sales of the Company's pool and spa lighting products
to Hayward Pool Products in support of the summer building season. Inventory
increased by approximately $177,000 during the 1997 six months. Inventory was
expanded in order to take advantage of volume purchase discounts. Accounts
payable decreased by approximately $297,000 as the Company took advantage of
discounts for early payment in order to further increase gross margins. Accrued
and other liabilities decreased by approximately $128,000 primarily due to the
payment of compensation amounts accrued as of December 31, 1996 which were paid
in the 1997 six months.
The Company has signed a lease for an approximately 70,000 square foot
headquarters and production facility in Orlando, Florida. Cash of approximately
$453,000 has been paid to date for buildout costs and deposits on furniture and
equipment. Management expects to incur total costs of approximately $850,000
relating to the interior buildout and related equipment purchased for the
facility. Completion and relocation to the new facility is projected for August
1997.
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, Brett Kingstone, the President and
Chairman, voluntarily retired 2,891,870 shares of Class B Common Stock
previously held in the escrow account. These shares were returned to the Company
treasury. The Company currently has 26,130 shares of Class A Common Stock held
in escrow. 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, the Company may, 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 to earnings as compensation expense which would have
the effect of increasing the Company's loss or reducing earnings, if any, at
such time.
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
10.7 - Warrant Agreement dated as of March 31,
1997 between the Company and Brett M.
Kingstone
--------------
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunder duly authorized.
SUPER VISION INTERNATIONAL, INC.
By: /s/ Brett M. Kingstone Date: August 14, 1997
---------------------------------
Brett M. Kingstone, President and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ John P. Stanney Date: August 14, 1997
----------------------------------------
John P. Stanney, Chief Financial Officer
(Principal Financial and Accounting Officer)