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, 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.
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(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
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(Address of Principal Executive Offices)
(407) 857-9900
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(Issuer's Telephone Number, Including Area Code)
Not Applicable
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(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 1, 2000:
- ------------------------------------- ---------------------------
Class A Common Stock, $.001 par value 2,059,302 shares
Class B Common Stock, $.001 par value 483,264 shares
Transitional Small Business Disclosure Format
Yes [ ] No [X]
SUPER VISION INTERNATIONAL, INC.
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION Page
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2000 (unaudited)
and December 31, 1999 1
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2000 and 1999 (unaudited) 2
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 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 8
PART II. OTHER INFORMATION
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
SUPER VISION INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2000 1999
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,267,628 $ 1,172,855
Investments 375,940 369,916
Trade accounts receivable, less allowance for
doubtful accounts of $141,731 at March 31, 2000 and $133,819
at December 31, 1999 1,853,944 2,039,042
Inventories less reserve of $257,948 at March 31, 2000 and
$300,686 at December 31, 1999 2,026,864 2,254,533
Advances to employees 4,136 3,081
Prepaid expense 111,446 14,251
Other assets 12,557 12,557
------------ ------------
Total current assets 5,652,515 5,866,235
------------ ------------
Property and Equipment 6,774,972 6,739,717
Accumulated depreciation and amortization (1,808,480) (1,641,034)
------------ ------------
4,966,492 5,098,683
Construction in progress 1,378 --
------------ ------------
Net property and equipment 4,967,870 5,098,683
Investments 996,940 997,740
Goodwill, less accumulated amortization of $1,872 at March 31, 2000
and $936 at December 31, 1999 24,332 25,268
Patents and trademarks, less amortization of $31,378 at March 31, 2000
and $29,441 at December 31, 1999 113,547 113,456
Other Assets 172,274 172,273
------------ ------------
$ 11,927,478 $ 12,273,655
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 657,393 $ 922,245
Accrued compensation and benefits 6,325 69,104
Deposits 13,063 30,542
Current portion of obligation under capital lease 48,433 46,788
------------ ------------
Total current liabilities 725,214 1,068,679
Obligation Under Capital Lease 3,116,201 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, 2,059,202 and 2,054,102 issued
and outstanding, respectively 2,060 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 10,399,251 10,374,565
Accumulated deficit (2,315,731) (2,301,070)
------------ ------------
Total stockholders' equity 8,086,063 8,076,032
------------ ------------
$ 11,927,478 $ 12,273,655
============ ============
See accompanying notes to unaudited condensed consolidated financial statements.
1
SUPER VISION INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months
Ended March 31,
2000 1999
----------- -----------
Revenues $ 2,527,281 $ 2,328,248
Cost and Expenses:
Cost of sales 1,794,821 1,450,772
Selling, general and administrative 594,833 627,721
Research and development 100,457 144,223
----------- -----------
Total costs and expenses 2,490,111 2,222,716
Operating Income 37,170 105,532
Non-Operating Income (Expense):
Interest income 42,987 36,398
Interest expense (110,318) (111,087)
Other Income 15,500 --
----------- -----------
Total non-operating income (expense) (51,831) (74,689)
----------- -----------
Income (Loss) Before Income Taxes (14,661) 30,843
Income Tax Expense -- --
----------- -----------
Net Income (Loss) $ (14,661) $ 30,843
=========== ===========
Net Income (Loss) Per Common Share:
Basic $ (0.01) $ 0.01
=========== ===========
Diluted $ (0.01) $ 0.01
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
2
SUPER VISION INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Three Months
Ended March 31,
2000 1999
----------- -----------
Cash Flows from Operating Activities:
Net income (loss) $ (14,661) $ 30,843
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation 170,319 146,728
Accretion of capital lease obligation -- 6,623
Decrease in inventory reserve (42,738) --
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade accounts receivable, net 185,098 (488,072)
Inventories 270,407 (371,080)
Prepaid expense (97,195) (13,614)
Other assets (1,056)
Increase (decrease) in:
Accounts payable (264,852) 964,616
Accrued compensation and benefits (62,779) (58,969)
Deposits (17,479) 83,312
----------- -----------
Total adjustments 139,725 269,544
----------- -----------
Net cash provided by operating activities 125,064 300,387
Cash Flows from Investing Activities:
Purchase of property and equipment (35,255) (140,273)
Purchase of investments (5,224) --
Acquisition of patents and trademarks (2,028) (759)
Deposits on equipment (1,378) 46,193
----------- -----------
Net cash used in investing activities (43,885) (94,839)
Cash Flows from Financing Activities:
Cost on issuance of common stock (10) 19,822
Payments on capital lease obligation (11,098) --
Proceeds from exercise of employee stock options 24,702 1,113
----------- -----------
Net cash provided by financing activities 13,594 20,935
----------- -----------
Net Increase in Cash and Cash Equivalents 94,773 226,483
Cash and Cash Equivalents, beginning of period 1,172,855 2,798,142
----------- -----------
Cash and Cash Equivalents, end of period $ 1,267,628 $ 3,024,625
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
3
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 include inventory, tooling, machinery and certain
intangible assets relating to tooling and intellectual property rights.
In addition, the Company recorded approximately $26,000 in goodwill.
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
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED 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 years 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-sales are included in investment
income. There were no material unrealized gains or losses on securities
at March 31, 2000 or 1999.
At March 31, 2000 investments were comprised of U.S. Corporate
Securities and equity securities of approximately $997,000 and $376,000
respectively. The investment in U.S. Corporate Securities matures in
2001.
2. INVENTORIES:
Inventories at March 31, 2000 and December 31, 1999 consisted of the
following components:
(UNAUDITED)
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
Raw materials $ 1,632,758 $ 1,770,519
Work in progress 152 105,428
Finished goods 651,902 679,272
----------- -----------
2,284,812 2,555,219
Less: Reserve for excess inventory (257,948) (300,686)
----------- -----------
$ 2,026,864 $ 2,254,533
=========== ===========
5
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
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, and became effective June 15, 1997, extending 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 (564,851)
----------
$2,516,149
==========
Future minimum annual lease payments for remainder of and years
subsequent to March 31, 2000 in the aggregate are as follows:
2000 $ 436,140
2001 598,481
2002 610,596
2003 620,664
2004 641,127
2005 and thereafter 5,271,591
-----------
Minimum lease payments 8,178,599
Less amount representing interest and executory costs (5,013,965)
-----------
Present value of net minimum lease payments under capital lease $ 3,164,634
===========
Deposits paid under this lease agreement totaled $58,167 at March 31,
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 three-month period ended March 31, 2000:
OPTIONS NUMBER OPTION
AVAILABLE FOR OF PRICE
FUTURE GRANT SHARES PER SHARE
------------- ------- -------------
Balance, January 1, 2000 103,984 288,279 $3.00 - $9.31
Options granted (53,200) 53,200 $5.16 - $9.31
Options exercised -- (5,000) $3.81 - $7.82
Options cancelled 29,083 (29,083) $3.81 - $7.65
------- -------
Balance, March 31, 2000 79,867 307,396
======= =======
Options granted vest ratably over a three-year period or vest based on
achievement of certain performance criteria. As of March 31, 2000,
182,081 options were vested and exercisable.
6
SUPER VISION INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
5. EARNINGS (LOSS) PER SHARE:
The following table sets forth the computation of basic and diluted
earnings (loss) per share in accordance with SFAS No. 128, "Earnings
per Share."
FOR THE THREE MONTHS ENDED
MARCH 31,
2000 1999
----------- ----------
Numerator:
Net income (loss) (numerator for basic and
diluted earnings (loss) per share) $ (14,661) $ 30,843
Denominator:
Denominator for basic earnings (loss) per share
-weighted average shares 2,564,644 2,477,609
Effect of dilutive securities:
Options -- 9,020
Warrants -- 5,654
----------- ----------
Dilutive potential shares -- 14,674
Denominator for diluted earnings (loss) per share
-adjusted weighted average shares 2,564,644 2,492,283
=========== ==========
Basic earnings (loss) per share $ (0.01) $ 0.01
=========== ==========
Diluted earnings (loss) per share $ (0.01) $ 0.01
=========== ==========
Certain warrants are not included in the computation of earnings (loss)
per share because the related shares are contingently issuable or to do
so would have been anti-dilutive for the periods presented.
7
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.
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 March 31, 2000 were approximately
$2,527,000 as compared to approximately $2,328,000 for the three months ended
March 31, 1999 an increase of approximately $199,000 or 9%. The increase was
primarily the result of growth in the pool and spa market, up approximately
$603,000 or 115% from the prior year revenues due to the Company's exclusive
marketing and sales partner in the pool and spa market, Hayward Pool Products,
Inc. Increased revenues in the pool and spa market were principally offset by
declines in the architectural and international markets of approximately
$404,000 and $126,000 respectively. Oasis Waterfalls, LLC, contributed
approximately $85,000 in revenue for the quarter ended March 31, 2000.
Gross margin for the quarter ended March 31, 2000 was approximately $732,000 or
29% as compared to approximately $877,000 or 38% for the three months ended
March 31, 1999. The gross margin is dependent, in part, on product mix, which
fluctuates from time to time. The decline in gross margin from the first
quarter of 1999 was primarily due to a higher mix of light source product sales
during the three months ended March 31, 2000, which typically generate lower
gross margin, as compared to other products offered by the Company.
Selling, general and administrative expenses were approximately $595,000 during
the three months ended March 31, 2000 as compared to approximately $628,000 for
the same period ended 1999, a decrease of approximately $33,000 or 5%. The
decrease was principally due to lower selling and marketing costs in the
architectural lighting market of approximately $102,000, offset by higher
selling costs of approximately $36,000 related to the Company's participation
in a major trade show for the international market as well as increased legal
fees of approximately $35,000. The reduced selling expense in the architectural
market was the direct result of selling through the Company's marketing
partner, Cooper Lighting Inc., a division of Cooper Industries, Inc. during the
first quarter of 2000 as opposed to the expense of an in-house sales and
marketing support staff incurred during the first three months of 1999. Under
the Company's distribution agreement with Cooper Lighting Inc., responsibility
for all costs of selling and marketing the Company's architectural products in
the exclusive markets throughout the United States and Canada was assumed by
Cooper Lighting Inc.
Research and development costs were approximately $100,000 during the three
months ended March 31, 2000 as compared to approximately $144,000 during the
same period in 1999, a decrease of 31%. The decrease was primarily due to the
cancellation of three product development efforts in mid 1999 that are no
longer in process.
8
Interest expense of approximately $110,000 for the quarter ended March 31, 2000
as compared to approximately $111,000 for the same period last year relates to
the capital lease in connection the Company's facility in Orlando, Florida.
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 March 31, 2000 and 1999
respectively.
The net loss for the three months ended March 31, 2000 was approximately
$(15,000) or $(0.01) per basic and diluted common share, as compared to net
income of approximately $31,000, or $0.01 per basic and diluted common share,
for the quarter ended March 31, 1999. The decrease is primarily due to lower
margin sales partly offset by reduced operating expenses.
Liquidity and Capital Resources
At March 31, 2000 the Company had working capital of approximately of
$4,927,000.
Net cash provided by operations amounted to approximately $125,000 for the
quarter ended March 31, 2000 as compared to approximately $300,000 for the
first quarter of 1999. The most significant sources of cash were generated by
the reductions in inventories and trade accounts receivable. Inventories
decreased by approximately $270,000 during the first quarter of 2000 primarily
due to the increase in sales, trade accounts receivable was reduced by
approximately $185,000 mainly through an increase in cash collections. The most
significant use of cash was the decrease in accounts payable of approximately
$265,000 due to the timing of supplier payments. Net cash used in investing
activities for the quarter ended March 31, 2000 amounted to approximately
$44,000. The purchase of computer equipment (approximately $17,000) and office
furniture (approximately $8,000) primarily accounted for the use of cash in
investing activities. Net cash provided by financing activities for the three
months ended March 31, 2000 amounted to approximately $14,000. Proceeds in the
amount of approximately $25,000 from the exercise of employee stock options
were offset by payments of approximately $11,000 on the capital lease
obligation related to the Company's facility.
9
PART II
Item 5. Other Information
The Annual Meeting of Stockholders for the fiscal year ended December
31, 1999 will be held on June 20, 2000 at the principal executive
offices of the Company, 8210 Presidents Drive, Orlando, Florida 32809.
Item 6. Exhibits and Reports on Form 8-K
(a) 10.9 Amendment to Stock Purchase Agreement with Hayward
Industries, Inc.
(b) 27 Financial data schedule
(c) Reports on Form 8-K. The Company did not file any report on
Form 8-K during the first quarter of 2000.
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 4, 2000
-------------------------------------------
Brett M. Kingstone, Chief Executive Officer
(Principal Executive Officer)
By: /s/ Larry J. Calise Date: May 4, 2000
-------------------------------------------
Larry J. Calise, Chief Financial Officer
(Principal Financial and Accounting Officer)
11