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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended April 30, 2003
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _______________ to _______________.
Commission file number 0-23001
SIGNATURE EYEWEAR, INC.
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(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 95-3876317
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
498 NORTH OAK STREET
INGLEWOOD, CALIFORNIA 90302
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(Address of Principal Executive Offices)
(310) 330-2700
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(Registrant's Telephone Number, Including Area Code)
Indicate by check whether the registrant: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 stock, as of the latest practicable date: Common Stock, par value $0.001
per share, 5,976,889 shares issued and outstanding as of June 30, 2003.
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SIGNATURE EYEWEAR, INC.
INDEX TO FORM 10-Q
PART I FINANCIAL INFORMATION PAGE
----
Item 1 Financial Statements
Consolidated Balance Sheets 3 - 4
Consolidated Statements of Operations 5 - 6
Consolidated Statements of Cash Flows 7 - 8
Notes to the Consolidated Financial Statements 9 - 20
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 20
Item 3 Quantitative and Qualitative Disclosures about Market Risk 29
PART II OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds 30
Item 3 Defaults Upon Senior Securities 30
Item 6 Exhibits and Reports on Form 8-K 30
2
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIGNATURE EYEWEAR, INC.
BALANCE SHEETS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
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ASSETS
April 30, October 31,
2003 2002
------------ ------------
(unaudited)
CURRENT ASSETS
Cash and cash equivalents, including restricted
cash of $377,946 (unaudited) and $127,946 $ 1,456,878 $ 1,077,388
Accounts receivable - trade, net of allowance for
doubtful accounts of $549,667 (unaudited) and
$543,884 2,712,078 3,142,949
Inventories, net of reserves for obsolete inventories
of $2,423,739 (unaudited) and $2,799,940 4,488,617 5,514,702
Income taxes refundable 2,704 2,704
Promotional products and materials 56,087 87,912
Prepaid expenses and other current assets 87,301 49,862
------------ ------------
Total current assets 8,803,665 9,875,517
PROPERTY AND EQUIPMENT, net 1,500,002 1,825,085
TRADEMARK, net of accumulated amortization of
$0 (unaudited) and $16,882 -- 130,897
DEPOSITS AND OTHER ASSETS 121,833 112,706
------------ ------------
TOTAL ASSETS $ 10,425,500 $ 11,944,205
============ ============
The accompanying notes are an integral part of these financial statements.
3
SIGNATURE EYEWEAR, INC.
BALANCE SHEETS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
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LIABILITIES AND SHAREHOLDERS' DEFICIT
April 30, October 31,
2003 2002
------------ ------------
(unaudited)
CURRENT LIABILITIES
Accounts payable - trade $ 3,375,355 $ 7,108,449
Accrued expenses and other current liabilities 1,440,681 1,980,003
Reserve for customer returns 2,394,757 2,286,934
Line of credit -- 2,317,134
Current portion of long-term debt 606,163 5,533,149
------------ ------------
Total current liabilities 7,816,956 19,225,669
LONG-TERM DEBT, net of current portion 6,599,867 1,714,981
------------ ------------
Total liabilities 14,416,823 20,940,650
------------ ------------
COMMITMENTS
SHAREHOLDERS' DEFICIT
Preferred stock, $0.001 par value
5,000,000 shares authorized
Series A 2% convertible preferred stock
1,360,000 shares authorized
1,200,000 (unaudited) and 0 shares issued
and outstanding 1,200 --
Common stock, $0.001 par value
30,000,000 shares authorized
5,556,889 (unaudited) and 5,556,889 shares
issued and outstanding 5,557 5,557
Additional paid-in capital 15,231,421 14,432,621
Accumulated deficit (19,229,501) (23,434,623)
------------ ------------
Total shareholders' deficit (3,991,323) (8,996,445)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 10,425,500 $ 11,944,205
============ ============
The accompanying notes are an integral part of these financial statements.
4
SIGNATURE EYEWEAR, INC.
STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2003 AND 2002 (UNAUDITED)
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For the Three Months Ended For the Six Months Ended
April 30, April 30,
--------------------------- ---------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
NET SALES $ 5,775,576 $ 8,806,211 $ 13,018,695 $ 17,327,872
COST OF SALES 1,836,133 3,936,770 4,746,635 7,271,183
------------ ------------ ------------ ------------
GROSS PROFIT 3,939,443 4,869,441 8,272,060 10,056,689
------------ ------------ ------------ ------------
OPERATING EXPENSES
Selling 1,837,726 2,499,611 3,798,620 4,890,612
General and administrative 2,282,176 2,891,923 4,613,043 5,783,121
Depreciation and amortization 161,115 110,147 319,094 219,897
------------ ------------ ------------ ------------
Total operating expenses 4,281,017 5,501,681 8,730,757 10,893,630
------------ ------------ ------------ ------------
INCOME (LOSS) FROM
OPERATIONS (341,574) (632,240) (458,697) (836,941)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Sundry income 199,457 23,212 202,326 53,079
Interest expense, net (51,691) (171,263) (150,856) (387,182)
Gain on sale of asset 469,103 -- 469,103 -
------------ ------------ ------------ ------------
Total other income (expense) 616,869 (148,051) 520,573 (334,103)
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION FOR
(BENEFIT FROM) INCOME TAXES 275,295 (780,291) 61,876 (1,171,044)
PROVISION FOR (BENEFIT FROM)
INCOME TAXES 548 -- 604 (110)
------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements.
5
SIGNATURE EYEWEAR, INC.
STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2003 AND 2002 (UNAUDITED)
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For the Three Months Ended For the Six Months Ended
April 30, April 30,
--------------------------- ---------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
INCOME BEFORE EXTRAORDINARY
ITEM $ 274,747 $ (780,291) $ 61,272 $ (1,170,934)
EXTRAORDINARY ITEM
Gain on extinguishment of debt 4,143,851 -- 4,143,851 --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 4,418,598 $ (780,291) $ 4,205,123 $ (1,170,934)
============ ============ ============ ============
BASIC AND DILUTED EARNINGS
PER SHARE
Before extraordinary item $ 0.05 $ (0.14) $ 0.01 $ (0.22)
Extraordinary item 0.75 -- 0.75 --
------------ ------------ ------------ ------------
TOTAL BASIC AND DILUTED
EARNINGS PER SHARE $ 0.80 $ (0.14) $ 0.76 $ (0.22)
============ ============ ============ ============
WEIGHTED-AVERAGE COMMON
SHARES OUTSTANDING 5,556,889 5,556,889 5,556,889 5,418,767
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
6
SIGNATURE EYEWEAR, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2003 AND 2002 (UNAUDITED)
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2003 2002
------------ ------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 4,205,123 $ (1,170,934)
Adjustments to reconcile net income (loss) to net cash
used in operating activities
Depreciation and amortization 325,083 219,899
Provision for bad debts 5,783 --
Provision for inventory write-down (376,201) --
Gain on sale of assets (469,103) --
Gain on extinguishment of debt (4,332,536) --
(Increase) decrease in
Accounts receivable - trade 425,088 2,201,905
Inventories 1,402,286 2,298,763
Income taxes refundable -- (2,704)
Promotional products and materials 31,825 108,461
Prepaid expenses and other current assets (37,439) (47,838)
Deposits and other assets (9,127) --
Increase (decrease) in
Accounts payable - trade (1,435,095) (2,849,895)
Accrued expenses and other current liabilities (128,323) (848,948)
Reserve for customer returns 107,823 --
------------ ------------
Net cash used in operating activities (284,813) (91,291)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment -- (17,176)
Proceeds from sale of USA Optical -- 500,000
Proceeds from sale of trademark 600,000 --
------------ ------------
Net cash provided by investing activities 600,000 482,824
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments) on line of credit (1,846,977) (295,575)
Net borrowings (payments) on long-term debt 1,299,965 (521,825)
Payments on debt financing fees (188,685) --
Issuance of preferred stock 1,200 --
------------ ------------
Net cash provided by (used in) financing activities (734,497) (817,400)
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The accompanying notes are an integral part of these financial statements.
7
SIGNATURE EYEWEAR, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2003 AND 2002 (UNAUDITED)
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2003 2002
------------ ------------
(unaudited) (unaudited)
Net increase (decrease) in cash and cash equivalents $ (419,310) $ (425,867)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,077,388 1,443,496
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 658,078 $ 1,017,629
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
INTEREST PAID $ 150,856 $ 229,668
============ ============
INCOME TAXES PAID $ -- $ 2,594
============ ============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the six months ended April 30, 2003, cash from operations and financing
activities exclude the effect of a gain on extinguishment of debt, accounts
payable, and accrued expenses for $4,332,536.
During the six months ended April 30, 2002, the Company entered into a Stock
Issuance and Release Agreement on December 20, 2001, whereby the Company issued
500,000 shares of common stock and paid $3,000 to Springer Capital Corporation
in satisfaction of the purchase price adjustment relating to the Great Western
Optical acquisition. The fair value of the settlement amount of $68,000 was
included in accrued expenses and other current liabilities at October 31, 2001.
The accompanying notes are an integral part of these financial statements.
8
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
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NOTE 1 - ORGANIZATION AND LINE OF BUSINESS
General
-------
Signature Eyewear, Inc. (the "Company") designs, markets, and
distributes eyeglass frames throughout the United States and
internationally. Primary operations are conducted from leased
premises in Inglewood, California, with a warehouse and sales office
in Belgium.
Sale of Stock by Principal Shareholder
--------------------------------------
In April 2003, the Weiss Family Trust, the principal shareholder of
the Company, sold its entire shareholding in the Company of
2,075,337 shares of common stock, representing approximately 37% of
the outstanding common stock of the Company, for $0.012 per share.
Dartmouth Commerce purchased 1,600,000 shares, and Michael Prince,
the Company's Chief Executive Officer/Chief Financial Officer,
purchased 475,337 shares. Dartmouth Commerce, which is wholly owned
by the Company's new Chairman of the Board, is now the largest
shareholder of the Company, holding approximately 28.7% of the
outstanding common stock of the Company as of April 2003. Dartmouth
Commerce has agreed with Bluebird (see Note 5) that until April
2008, it will not sell or transfer any of these shares without
Bluebird's prior consent.
Changes in Management
---------------------
In April 2003, Bernard L. Weiss resigned as Chairman of the Board,
Chief Executive Officer, and Director, positions he held since
founding the Company in 1983, and Seth Weiss resigned as an
Executive Vice President. Richard M. Torre was appointed as Chairman
of the Board and Director, and Ted Pasternack, Edward Meltzer, and
Drew Miller were appointed as Directors. In addition, Michael Prince
was named Chief Executive Officer and President. Michael Prince will
continue to occupy the position of Chief Financial Officer until a
replacement is hired.
NOTE 2 - RESTRUCTURING OF DEBT
In April 2003, the Company entered into various agreements with
certain of its creditors and commercial banks, which resulted in the
restructuring of its capital structure. As a result, the Company
recognized a gain on extinguishment of debt of $4,143,851, net of
related expense of $188,685. This gain has been recorded as an
extraordinary item in the financial statements. Income taxes are not
allocable to this gain as the Company has net operating losses to
offset this gain.
9
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States of America for interim financial information and with
the instructions to Form 10-Q and Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of
management, all normal, recurring adjustments considered necessary
for a fair presentation have been included. These financial
statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended October 31, 2002. The results of
operations for the three months ended April 30, 2003 are not
necessarily indicative of the results that may be expected for the
year ended October 31, 2003.
Property and Equipment
----------------------
Property and equipment are recorded at cost. Depreciation and
amortization are provided using the straight-line method over the
estimated useful lives of the assets as follows:
Office furniture and equipment 7 years
Computer equipment 3 years
Software 3 years
Machinery and equipment 5 years
Machinery and equipment held under
capital lease agreements 3 to 5 years
Leasehold improvements term of the lease
Trademark
---------
The Dakota Smith trademark is recorded at cost, less accumulated
amortization. Amortization is provided using the straight-line
method over the estimated useful life of the trademark of 20 years.
The Company continually evaluates whether events or circumstances
have occurred that indicate the remaining estimated value of the
trademark may not be recoverable. When factors indicate that the
value of the trademark may be impaired, the Company estimates the
remaining value and reduces the trademark to that amount. The
trademark was sold and licensed back in February 2003 (see Note 7).
Fair Value of Financial Instruments
-----------------------------------
For certain of the Company's financial instruments, including cash
and cash equivalents, accounts receivable and accounts payable -
trade, the carrying amounts approximate fair value due to their
short maturities. The amounts shown for long-term debt also
approximate fair value because current interest rates offered to the
Company for debt of similar maturities are substantially the same.
10
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings per Share
------------------
The Company calculates earnings per share in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per
Share." Basic earnings per share is computed by dividing the income
available to common shareholders by the weighted-average number of
common shares outstanding. Diluted earnings per share is computed
similar to basic earnings per share except that the denominator is
increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been
issued and if the additional common shares were dilutive. The
Company did not have any dilutive shares for the three or six months
ended April 30, 2003 and 2002.
The following potential common shares have been excluded from the
computations of diluted loss per share for the three and six months
ended April 30, 2003 and 2002 because the effect would have been
anti-dilutive:
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
APRIL 30, APRIL 30,
------------------------- -------------------------
2003 2002 2002 2002
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Stock options 346,700 445,700 275,600 413,000
Warrants 50,000 230,000 150,000 230,000
----------- ----------- ----------- -----------
TOTAL 396,700 675,700 425,600 643,000
=========== =========== =========== ===========
Estimates
---------
The preparation of financial statements 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
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
11
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
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NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at October 31, 2002 and April 30, 2003
consisted of the following:
April 30, October 31,
2003 2002
---------- ----------
(unaudited)
Office furniture and equipment $ 912,756 $ 912,756
Computer equipment 1,472,556 1,472,556
Software 1,121,288 1,121,288
Machinery and equipment 434,690 440,680
Machinery and equipment held under capital
lease agreements 294,609 294,609
Leasehold improvements 1,195,190 1,195,190
---------- ----------
5,431,089 5,437,079
Less accumulated depreciation and amortization
(including accumulated depreciation and
amortization of $254,724 (unaudited) and
$231,022 for equipment under capital
lease agreement) 3,931,087 3,611,994
---------- ----------
TOTAL $1,500,002 $1,825,085
========== ==========
Depreciation and amortization expense was $325,083 (unaudited) and
$219,899 (unaudited) for six months ended April 30, 2003 and 2002,
respectively, (including depreciation and amortization expense of
$23,702 (unaudited) and $74,729 (unaudited), respectively, on
machinery and equipment held under capital leases).
NOTE 5 - CREDIT FACILITIES
Lines of Credit
---------------
The Company had a credit facility with a commercial bank (the
"Bank"), consisting of an accounts receivable and inventory
revolving credit line and a term note payable, which were secured by
substantially all of the assets of the Company. Under the credit
line, the Company could obtain advances up to an amount equal to 60%
of eligible accounts receivable and 30% of eligible inventories up
to a maximum of $4,500,000. The advances on the line of credit bore
interest at the Company's option at either the Bank's prime rate or
2.5% in excess of the London Inter-Bank Offering Rate ("LIBOR"). The
credit facility matured on September 30, 2000.
12
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
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NOTE 5 - CREDIT FACILITIES (CONTINUED)
Lines of Credit (Continued)
---------------
The Company defaulted on the credit facility for various reasons,
including the nonpayment of the line of credit at maturity as well
as noncompliance with various covenants and conditions. Since
September 30, 2000, the interest rate on the credit line has been 5%
per annum in excess of the original rate. The Company entered into a
forbearance agreement with the Bank in December 2000, which was
extended many times. In April 2003, the Company settled its
obligations under the line of credit (see Note 2).
Home Loan Investment Company Credit Facility
--------------------------------------------
In April 2003, the Company obtained a $3,500,000 credit facility
from the Home Loan Investment Company ("HLIC"). The credit facility
is secured by all of the assets of the Company and includes a
$3,000,000 term loan and a $500,000 revolving line of credit.
The term loan bears interest at 10% per annum, is payable interest
only for the first year of payments, with payments of principal and
interest on a 10-year amortization commencing in the second year,
and is due and payable in April 2008. The revolving credit facility
bears interest at a rate of 1% per month, payable monthly, with all
advances subject to approval of HLIC, and is due and payable in
April 2008. The Company may prepay the credit facility without
premium or penalty at any time.
As additional security for the credit facility, an irrevocable
letter of credit was issued in favor of HLIC by a commercial bank in
the amount of $1,250,000, subject to reduction if the credit
facility is less than $1,250,000. The letter of credit delivered to
obtain the credit facility was secured by a related party.
Furthermore, the Company purchased a $250,000 debenture from HLIC as
additional security. This debenture will earn interest at 3% per
annum, adjusted annually to the one-year debenture rate offered by
HLIC, and will remain as collateral until the credit facility is
paid in full.
The terms of the agreement include certain financial and
non-financial covenants, which include that the Company must
maintain inventories, accounts receivable, and cash of not less than
$7,000,000; and that the Company cannot incur any additional debt,
engage in any merger or acquisition, or pay any dividends or make
any distributions to shareholders other than stock dividends without
the consent of HLIC.
As further consideration for the credit facility, the Company also
granted HLIC warrants to purchase 100,000 shares of common stock.
The warrants vest immediately, expire on April 30, 2008, and have an
exercise price of $0.67 per share.
13
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
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NOTE 5 - CREDIT FACILITIES (CONTINUED)
Bluebird Credit Facility
------------------------
In April 2003, the Company obtained from Bluebird Finance Limited
("Bluebird") a credit facility of up to $4,150,000 secured by the
assets of the Company. The credit facility includes a revolving
credit line in the amount of $2,900,000 and support for the
$1,250,000 letter of credit securing the HLIC credit facility. The
loan bears interest at 5% per annum, payable annually for the first
two years, with payments of principal and interest on a 10-year
amortization schedule commencing in the third year, and is due and
payable in April 2015 (see Note 6).
Bluebird's loan commitment will be reduced by $72,500 in July 2005
and by the same amount every three months thereafter. This loan is
subordinate to the HLIC credit facility. The Company must comply
with certain financial and non-financial covenants, which include
that without the consent of Bluebird it may not make any acquisition
or investment in excess of an aggregate of $150,000 each fiscal year
outside the ordinary course of business or enter into any merger or
similar reorganization.
NOTE 6 - LONG-TERM DEBT
Long-term debt at October 31, 2002 and April 30, 2003 consisted of
the following:
April 30, October 31,
2003 2002
------------ ------------
(unaudited)
Term note payable to a commercial bank in the original
amount of $3,500,000, secured by substantially all
of the assets of the Company, payable in monthly
installments of $72,917, plus interest at LIBOR,
plus 7.5% per annum, which includes the 5% default
penalty since September 2000. In April 2003, the
term note payable was repaid. $ -- $ 1,895,856
Obligation to a frame vendor in the original amount of
$4,195,847, less an unamortized discount of
$639,043, unsecured, payable in monthly
installments of $50,000, including interest
imputed at 7.37% per annum. This obligation was in
default at January 31, 2003. In April 2003, the
Company paid $2,350,000 to settle this and other
obligations to the frame vendor
(see Note 7). -- 3,207,291
14
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
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NOTE 6 - LONG-TERM DEBT (CONTINUED)
April 30, October 31,
2003 2002
------------ ------------
(unaudited)
Note payable to lessor of the Company's principal
offices and warehouse in the original amount of
$240,000, unsecured, payable in monthly
installments of $4,134, including interest at 10%
per annum, maturing on May 1, 2005. $ 95,487 $ 112,541
Note payable to lessor of the Company's principal
offices and warehouse, unsecured, payable in
monthly installments of $3,757, including interest
at 8% per annum, maturing on May 1, 2005. 86,244 89,405
Note payable to California Design Studio, Inc. ("CDS"),
unsecured, payable in monthly installments of
between $8,333 and $17,042, with a final payment
of any principal plus interest remaining in May
2007, including interest at 7% per annum, maturing
on May 23, 2007. In February 2003, the Company
paid $500,000 to settle all liabilities with CDS,
including this note and the obligation assumed in
conjunction with the acquisition of CDS and
extension of the consulting agreement. -- 938,258
Obligation assumed in conjunction with acquisition of
CDS and extension of consulting agreement, payable
in monthly installments of $15,000, including
interest imputed at 10% per annum, maturing on
July 1, 2003. This obligation was
settled in February 2003. -- 104,876
Note payable to commercial bank, secured by certain
property and equipment, bearing interest at 4% per
annum, payable in 39 monthly installments of
$13,812, commencing March 31, 2003, with the
remaining principal and accrued interest
due and payable in full on February 28, 2008. 725,923 750,000
15
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 6 - LONG-TERM DEBT (CONTINUED)
April 30, October 31,
2003 2002
------------ ------------
(unaudited)
Liability for machinery and equipment under various
capital lease agreements, secured by certain
machinery and equipment, bearing interest ranging
from 8.19% to 11.4% per annum, maturing through
August 2004. In March and April 2003, the Company
paid $58,162 in full settlement of $89,550 of
this liability. $ 58,376 $ 149,903
Term note payable to Home Loan credit facility in the
original amount of $3,000,000, secured by
substantially all of the assets of the Company,
bearing interest at 10% per annum, payable in
full in April 2008. 3,000,000 --
Credit facility from Bluebird of up to $4,150,000, which
includes a $2,900,000 revolving credit line,
secured by all of the assets of the Company,
bearing interest at 5% per annum, payable annually
for the first two years, with payments of
principal and interest of $72,500 every three
months on a 10-year period
commencing July 1, 2005. 2,900,000 --
Non interest-bearing note payable to a licensor in the
original amount of $400,000, secured by the
related inventory, payable in 11 payments of
$30,000 and one payment of $70,000,
maturing in March 2004. 340,000 --
------------ ------------
7,206,030 7,248,130
Less current portion 606,163 5,533,149
------------ ------------
LONG-TERM PORTION $ 6,599,867 $ 1,714,981
============ ============
16
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 6 - LONG-TERM DEBT (CONTINUED)
Future maturities of long-term debt at April 30, 2003 were as
follows:
12 Months
Ending
April 30,
-----------
(unaudited)
2004 $ 606,163
2005 598,577
2006 755,594
2007 743,787
2008 744,409
Thereafter 3,757,500
------------
TOTAL $ 7,206,030
============
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Frame Purchase Agreement
------------------------
In conjunction with the asset acquisition of CDS, the Company
entered into a purchase agreement with one of CDS' frame vendors,
whereby the Company agreed to purchase the following amounts of
eyeglass frames during the periods indicated: (i) $2,400,000 from
the closing of the acquisition through July 31, 2000; (ii)
$3,000,000 during the 12 months ending July 31, 2001; and (iii)
$3,000,000 during the 12 months ending April 30, 2003. The Company
did not meet the minimum purchase requirement for the year ended
July 31, 2002, or for the period through April 30, 2003. In April
2003, the Company paid $2,350,000 to retire all obligations with
this frame vendor and terminate this frame purchase agreement.
Sale and License Back of Dakota Smith Trademark and Inventory
-------------------------------------------------------------
In February 2003, the Company sold all of its rights to its Dakota
Smith eyewear trademark for $600,000 and the related inventory for
$400,000. Concurrently, the Company entered into a three-year
exclusive license agreement, with a two-year renewal option, with
the purchaser to use the trademark for eyeglass frames sold and
distributed in the United States and certain other countries. The
license agreement specifies certain guaranteed minimum royalties per
annum. The Company also repurchased the Dakota Smith inventory for a
non-interest-bearing note in the amount of $400,000. The note is
secured by the inventory and payable in monthly installments through
March 2004.
17
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
License Agreements
------------------
In December 2002, the Company extended its license agreement with
Hart Schaffner & Marx for a period of three years until December 31,
2005. The license agreement requires specified minimum net sales and
royalties per annum.
In December 2002, the Company extended its license agreement with
Nicole Miller until March 31, 2006. Under the terms of the extension
agreement, the Company will have the option to renew the license
agreement for an additional term of three years, if and only if (i)
the Company is in compliance with the terms and conditions of the
license agreement at the time of this extension and on March 31,
2006 and (ii) the Company pays the guaranteed minimum royalty for
each of the three years ended March 31, 2006.
Reduction in Trade Payables
---------------------------
In April 2003, the Company used a portion of the proceeds from the
Bluebird credit facility to retire approximately $775,000 of trade
payables for an aggregate payment of approximately $327,000.
Reduction in Capital Lease Obligations
In April 2003, the Company used a portion of the proceeds from the
Bluebird credit facility to settle $89,550 of a liability for
machinery and equipment under various capital leases for a payment
of $58,162.
Consulting Agreements
---------------------
In April 2003, the Company entered into a three-year consulting
agreement with Dartmouth Commerce, a related party wholly owned by
the Company's new Chairman of the Board, Richard M. Torre, for
compensation of $55,000 per year.
In April 2003, the Company entered into an 18-month consulting
agreement with the former Chairman of the Board/Chief Executive
Officer for total compensation of $20,000.
Employment Agreement
--------------------
In April 2003, the Company entered into a new five-year employment
agreement with Michael Prince, the Company's President/Chief
Executive Officer/Chief Financial Officer, which superseded his
existing employment agreement. Under the new employment agreement,
he receives a salary of $240,000 per year, subject to annual review
for increase. He also received 420,000 shares of common stock, which
he must forfeit if certain conditions are not met as follows:
(i) 210,000 shares must be forfeited if the Company has not
achieved positive net income from ordinary operations in
at least one fiscal year in the period 2003 to 2006 and
18
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Employment Agreement (Continued)
--------------------
(ii) 210,000 shares must be forfeited if the Company does not
have net income from ordinary operations of at least
$250,000 in at least one of the three fiscal years
following the fiscal year it achieves positive net
income.
If prior to March 31, 2008, Mr. Prince's employment is terminated
without cause or he terminates his employment for "good reason":
(i) he will be entitled to a lump sum payment of all salary
to which he would have been entitled under the
employment agreement from the date of termination
through March 31, 2008 and
(ii) any of the 420,000 shares which have not vested will
vest and be free of the risk of forfeiture.
Litigation
----------
The Company is involved in certain legal proceedings and claims
which arise in the normal course of business. Management does not
believe that the outcome of these matters will have a material
effect on the Company's financial position or results of operations.
NOTE 8 - SERIES A 2% CONVERTIBLE PREFERRED STOCK
In April 2003, the Company designated a new series of preferred
stock, designated "Series A 2% Convertible Preferred Stock" (the
"Series A Preferred"), authorizing 1,360,000 shares. In addition, in
April 2003, the Company issued 1,200,000 shares to Bluebird for
$800,000, or $0.6667 per share. The Series A Preferred provides for
cumulative dividends at the rate of 2% per annum payable in cash or
additional shares of Series A Preferred and has a liquidation
preference equal to its original purchase price plus accrued and
unpaid dividends. The Company has the right to redeem the Series A
Preferred, commencing April 2005 at the liquidation preference, plus
accrued and unpaid dividends, plus a premium of $450,000.
The Company must redeem the Series A Preferred upon certain changes
of control, as defined in the agreement, to the extent the Company
has the funds legally available at the same redemption price, unless
the change of control occurs before April 2005, in which event the
premium is 10% of either the consideration received by the Company's
shareholders or the market price, as applicable. The Series A
Preferred is convertible into common stock on a share-for-share
basis, subject to adjustments for stock splits, stock dividends, and
similar events, at any time commencing May 2005.
19
SIGNATURE EYEWEAR, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002 AND APRIL 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 8 - SERIES A 2% CONVERTIBLE PREFERRED STOCK (CONTINUED)
The holders of the Series A Preferred do not have voting rights,
except as required by law, provided, however, that at any time two
dividend payments are not paid in full, the Board of Directors will
be increased by two and the holders of the Series A Preferred,
voting as a single class, will be entitled to elect the additional
directors. Bluebird received demand and piggyback registration
rights for the shares of common stock into which Series A Preferred
may be converted.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis, which should be read in
connection with the Company's Consolidated Financial Statements and accompanying
footnotes, contain forward-looking statements that involve risks and
uncertainties. Important factors that could cause actual results to differ
materially from the Company's expectations are set forth in "Factors That May
Affect Future Results" in this Item 2 of this Form 10-Q, as well as those
discussed elsewhere in this Form 10-Q. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by "Factors That May Affect
Future Results." Those forward-looking statements relate to, among other things,
the Company's plans and strategies, new product lines, and relationships with
licensors, distributors and customers, distribution strategies and the business
environment in which the Company operates.
The following discussion and analysis should be read in connection with
the Company's Consolidated Financial Statements and related notes and other
financial information included elsewhere in this Form 10-Q.
RECENT RECAPITALIZATION
In April 2003 the Company completed a recapitalization which materially
impacted its financial condition. The key elements of the recapitalization and
certain other material transactions in the quarter ended April 30, 2003 were:
Credit Facility with Home Loan and Investment Company. The Company
obtained a $3.5 million credit facility from Home Loan and Investment Company
("HLIC"). The credit facility includes a $3,000,000 term loan and a $500,000
revolving line of credit and is secured by all of the assets of the Company. The
term loan bears interest at a rate of 10% per annum, is payable interest only
for the first year with payments of principal and interest on a 10-year
amortization schedule commencing the second year, and is due and payable in
April 2008. The revolving credit facility bears interest at a rate of 1% per
month, payable monthly, with all advances subject to approval of HLIC, and is
due and payable in April 2008. The Company must maintain inventory, accounts
receivable and cash of not less than $7,000,000. In addition, the Company must
comply with certain other covenants, including that it may not, without the
consent of HLIC, incur any additional debt, engage in any merger or acquisition,
or pay any dividends or make any distributions to shareholders other than stock
dividends. The Company may prepay the credit facility without premium or
penalty. The Company also purchased a $250,000 debenture issued by HLIC which is
additional collateral for the credit facility. The debenture bears interest at
3% per annum, adjusted annually to the one-year debenture rate offered by HLIC.
Additional credit enhancement for the credit facility is a $1,250,000 letter of
credit issued in favor of HLIC by a commercial bank. As further consideration
for the credit facility, the Company issued to HLIC five-year warrants to
purchase 100,000 shares of Common Stock for $0.67 per share.
Issuance of Preferred Stock. The Company created a new series of
preferred stock, designated "Series A 2% Convertible Preferred Stock" (the
"Series A Preferred"), and issued 1,200,000 shares to Bluebird Finance Limited,
a British Virgin Islands corporation ("Bluebird"), for $800,000, or $0.67 per
share. The Series A Preferred provides for cumulative dividends at the rate of
2% per annum payable in cash or additional shares of Series A Preferred and has
a liquidation preference equal to its original purchase price plus accrued and
unpaid dividends. The Company has the right to redeem the Series A Preferred
commencing April 2005 at the liquidation preference plus accrued and unpaid
dividends plus a premium of $450,000. The Company must redeem the Series A
Preferred upon certain changes of control to the extent the Company has the
funds legally available therefor, at the same redemption price, unless the
change of control occurs before April 2005, in which event the premium is 10% of
either the consideration received by the Company's shareholders or the market
price, as applicable. The Series A Preferred is convertible into Common Stock on
a share-for-share basis (subject to adjustment for stock splits, stock dividends
and similar events) at any time commencing May 2005. The holders of the Series A
Preferred have no voting rights except as required by law, provided, however,
that at any time two dividend payments are not paid in full, the Board of
Directors will be increased by two and the holders of the Series A Preferred,
voting as a single class, will be entitled to elect the additional directors.
Bluebird received demand and piggyback registration rights for the shares of
Common Stock into which Series A Preferred may be converted.
20
Bluebird Credit Facility. The Company obtained from Bluebird a credit
facility of up to $4,150,000 secured by the assets of the Company. The credit
facility includes a revolving credit line in the amount of $2,900,000 and
support for the $1,250,000 letter of credit securing the HLIC credit facility.
The loan bears interest at the rate of 5% per annum, payable annually for the
first two years, with payments of principal and interest on a 10-year
amortization schedule commencing in the third year, and is due and payable in
April 2013. Bluebird's loan commitment will be reduced by $72,500 in July 2005
and by the same amount every three months thereafter. This loan is subordinate
to the HLIC credit facility. The Company must comply with certain covenants
including among others that without the consent of Bluebird it may not make any
acquisition or investment in excess of an aggregate of $150,000 each fiscal year
outside the ordinary course of business, or enter into any merger or similar
reorganization.
Retirement of Bank Credit Facility. The Company retired its bank credit
facility with City National Bank which had been in default since September 30,
2000.
Retirement of Obligations to Frame Vendor. The Company retired its
obligations to a frame vendor in the aggregate amount of approximately $5.8
million (some of which were assumed in connection with the Company's acquisition
of California Design Studio, Inc. ("CDS") in 1999) for a payment of $2,475,000
to Dartmouth Commerce of Manhattan, Inc. ("Dartmouth"). Dartmouth had purchased
this obligation from the frame vendor for $2,350,000. The Company recognized a
net gain of approximately $3.3 million in connection with this transaction.
Reduction in Trade Payables and Restructuring of Equipment Lease. The
Company retired $775,000 of trade payables for approximately $372,000, resulting
in a gain of approximately $400,000. In addition, the Company purchased certain
leased property and equipment, including its computer system, for $750,000,
thereby terminating the lease with aggregate future obligations of approximately
$1.7 million. To fund this payment, the Company obtained a $750,000 loan from a
commercial bank secured by the purchased assets and bearing interest at 4% per
annum payable in monthly installments of approximately $14,000 with the balance
due in February 2008.
Sale of Stock by Weiss Family Trust. The Weiss Family Trust, the
principal shareholder of the Company, sold all of the shares of the Common Stock
of the Company which it held (2,075,337 shares, representing approximately 37%
of the outstanding Common Stock of the Company) for $0.012 per share. Dartmouth
purchased 1,600,000 shares and Michael Prince purchased 475,337 shares.
Dartmouth, which is wholly owned by Richard M. Torre, is now the largest
shareholder of the Company holding approximately 28.7% of the outstanding Common
Stock of the Company. Dartmouth has agreed with Bluebird that until April 2008
it will not sell or transfer any of these shares without the prior consent of
Bluebird.
Management and Board Changes. Bernard L. Weiss resigned as Chairman of
the Board, Director and Chief Executive Officer, positions he held since
founding the Company in 1983. Richard M. Torre was appointed as Director and
Chairman of the Board and Ted Pasternack, Edward Meltzer and Drew Miller were
appointed as Directors. In addition, Michael Prince was named Chief Executive
Officer and President. The Company has also entered into a three-year consulting
agreement with Dartmouth for compensation of $55,000 per year.
Sale/License Back of Dakota Smith Trademark. In February 2003, the
Company completed a "sale/license back" of its "Dakota Smith" trademark. In the
transaction, the Company sold to an unaffiliated entity all of its rights to the
"Dakota Smith" trademark and its Dakota Smith Eyewear inventory for $1,000,000.
Concurrently, the Company entered into a three-year exclusive license agreement,
with a two-year renewal option, to use the trademark for eyeglass frames sold
and distributed in the United States and certain other countries. Signature also
repurchased the Dakota Smith inventory for a non-interest bearing promissory
note in the amount of $400,000 payable in monthly installments though March 2004
and secured by the Company's Dakota Smith inventory.
Settlement with CDS. In February 2003, the Company entered into a
settlement agreement with CDS and CDS's sole shareholder of all remaining
obligations between the parties emanating from the Company's purchase in 1999 of
all the assets of CDS. The remaining obligations included obligations under a
consulting agreement with the CDS shareholder and the promissory note given as
part of the purchase price. The Company's net book value for these obligations
was approximately $1.1 million as of the closing. In the settlement, the Company
paid $500,000 to CDS and the CDS shareholder and the parties executed a mutual
21
general release. The Company recognized a gain of approximately $600,000 in
connection with this settlement.
The recapitalization significantly improved the Company's financial
condition and liquidity through decreasing the shareholders' deficit by
approximately $5.7 million, increasing capital, reducing liabilities and
replacing current obligations with long-term obligations. Although the Company
continues to have a stockholders' deficit, the Company believes that for at
least the following 12 months, assuming there are no unanticipated material
adverse developments, no material decrease in revenues and continued compliance
with its credit facilities, it will be able pay its debts and obligations as
they mature. However, the Company's long-term viability will depend on its
ability to return to profitability on a consistent basis, which will depend in
part on its ability to increase revenues.
OVERVIEW
The Company derives revenues primarily through the sale of eyeglass
frames under licensed brand names, including Laura Ashley Eyewear, Eddie Bauer
Eyewear, Hart Schaffner & Marx Eyewear, bebe eyes, Nicole Miller Eyewear, Dakota
Smith Eyewear and under its proprietary brands Signature.
The Company's best-selling product lines are Laura Ashley Eyewear and
Eddie Bauer Eyewear. Net sales of Laura Ashley Eyewear and Eddie Bauer Eyewear
together accounted for 61% and 64% of the Company's net sales in fiscal 2001 and
fiscal 2002, respectively.
The Company's cost of sales consists primarily of payments to foreign
contract manufacturers that produce frames and cases to the Company's
specifications. The complete development cycle for a new frame design typically
takes approximately twelve months from the initial design concept to the
release. Generally, at least six months are required to complete the initial
manufacturing process.
Following many years of profitability, the Company incurred operating
losses in each of its last four fiscal years. and for the six months ended April
30, 2003. The principal reason for these losses was the change in October 1999
by the Company in its method of distributing its products to independent optical
retailers in the United States from distributors to a direct sales force. In
addition, in fiscal 2001 and the first quarter of fiscal 2002, the Company's
revenues were adversely affected by a general downturn in the optical frame
business, the aftermath of the September 11th World Trade Center tragedy, the
reluctance of retailers to purchase large inventories of the Company's products
due to concerns about the Company's viability and the discontinuation of certain
product lines. The aftermath of the September 11 tragedy included reduced sales
orders resulting in inventory build-up, slowed collection of accounts receivable
and higher return rates due to the uncertain future retail environment.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated selected
statements of operations data shown as a percentage of net sales.
22
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30 APRIL 30
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net sales....................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales................................... 31.8 44.7 36.5 42.0
----------- ----------- ----------- -----------
Gross profit.................................... 68.2 55.3 63.5 58.0
----------- ----------- ----------- -----------
Operating expenses:
Selling...................................... 31.8 28.4 29.2 28.2
General and administrative................... 39.5 32.8 35.4 33.4
Depreciation and amortization................ 2.8 1.3 2.5 1.3
----------- ----------- ----------- -----------
Total operating expenses................ 74.1 62.5 67.1 62.9
----------- ----------- ----------- -----------
Income (loss) from operations................... (5.9) (7.2) (3.5) (4.8)
----------- ----------- ----------- -----------
Other income (expense), net..................... 10.7 (1.7) 4.0 (1.9)
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes. 4.8 (8.9) 0.5 (6.8)
----------- ----------- ----------- -----------
Provision (benefit) for income taxes............ 0 0 0 0
Gain on extinguishment of debt ................. 71.7 0 31.8 0
=========== =========== =========== ===========
Net income (loss)............................... 76.5% (8.9)% 32.3% (6.8)%
=========== =========== =========== ===========
NET SALES. Net sales decreased by $3.0 million or 34.4% from the
quarter ended April 30, 2002 (the "2002 Quarter") to the quarter ended April 30,
2003 (the "2003 Quarter") and $4.3 million or 24.9% from the six months ended
April 30, 2002 (the "2002 Six Months") to the six months ended April 30, 2003
(the "2003 Six Months"). The following table shows certain information regarding
net sales for the periods indicated:
THREE MONTHS ENDED APRIL 30 SIX MONTHS ENDED APRIL 30
--------------------------------- ---------------------------------
2003 2002 CHANGE 2003 2002 CHANGE
--------------- --------------- ----------- --------------- --------------- -----------
Laura Ashley Eyewear....... $ 1,816 31.4% $ 2,560 29.1% (29.1)% $ 4,307 33.1% $ 5,800 33.5% (25.7)%
Eddie Bauer Eyewear........ 1,230 21.3 2,159 24.5 (24.5)% 3,248 24.9 4,658 26.9 (30.3)%
Nicole Miller.............. 1,036 17.9 1,431 16.3 (16.3)% 1,949 15.0 2,481 14.3 (21.4)%
Other Sales (1)............ 1,694 29.3 2,656 30.2 (36.2)% 3,515 27.0 4,389 25.3 (19.9)%
--------------- --------------- --------------- ---------------
Total...................... $ 5,776 100.0% $ 8,806 100.0% (34.4)% $13,019 100.0% $17,328 100.0% (24.9)%
=============== =============== =============== ===============
- ---------------
(1) Includes net sales of other designer eyewear and private label frames.
Net sales in the 2003 Six Months were adversely affected by a general
downturn in the optical frame business and the reluctance of retailers to
purchase large inventories of the Company's products due to concerns about the
Company's viability.
Net sales reflect gross sales less a reserve for product returns
established by the Company. The Company has a product return policy which it
believes is standard in the optical industry. Under that policy, the Company
generally accepts returns of non-discontinued product for credit, upon
presentment and without charge. The Company's product returns for the 2002 Six
Months and the 2003 Six Months amounted to 23% and 21% of gross sales,
respectively. Historically, returns have been higher from independent optical
retailers in the United States and lower from optical retail chains and
international customers.
GROSS PROFIT AND GROSS MARGIN. Gross profit decreased $0.9 million or
19.0% from the 2002 Quarter to the 2003 Quarter and $1.8 million or 17.8% from
the 2002 Six Months to the 2003 Six Months due to lower unit sales and
write-down of obsolete inventory. The gross margin increased from 58.0% in the
2002 Six Months to 63.5% in the 2003 Six Months due principally to adjustments
to the reserve of obsolete inventory.
SELLING EXPENSES. Selling expenses decreased $0.7 million or 26.5% from
the 2002 Quarter to the 2003 Quarter and $1.1 million or 22.2% from the 2002 Six
Months to the 2003 Six Months. The change in the second quarter was due
primarily to decreases in premiums expense of $0.3 million and salaries of $0.2
23
million. The change in the six month periods was due primarily to decreases in
salaries of $0.5 million, point of purchase expenses of $0.2 million and
advertising expenses of $0.1, offset in part by a $0.2 million increase in
promotions expense.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased $0.6 million or 21.1% from the 2002 Quarter to the 2003
Quarter and $1.2 million or 20.2% from the 2002 Six Months to the 2003 Six
Months. The change in the second quarter was due primarily to decreases of
salaries of $0.3 million and operating lease expenses of $0.3 million. The
change in the six months was due primarily to decreases in salaries of $0.6
million and operating lease expenses of $0.5 million. The operating lease
expense decreases were due to the purchase of equipment and property, including
the Company's computer system, which previously was leased, which purchase also
had the effect of increasing depreciation and amortization expense.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased in the 2003 Six Months because of the additional equipment and
property from the purchase of previously leased property and equipment.
OTHER INCOME (EXPENSE), NET. The Company's sundry income increased
$176,000 in the 2003 Quarter and $149,000 in the 2003 Six Months due to
negotiated discounts of trade payables. Interest expense decreased in these
periods due to declining market interest rates, principal paydowns and cessation
of interest to on an obligation to a frame vender following a standstill
agreement with the vendor. The Company recognized a gain of $0.5 million in the
2003 Quarter from the sale of the Dakota Smith Trademark.
EXTRAORDINARY ITEM. The Company recognized an gain on the settlement of
debt of $4.1 million in connection with its recapitalization.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company did not incur income
tax expense with respect to its net income in the 2003 Six Months because of its
net operating loss carryforwards. The Company believes that the recapitalization
in April 2003 may have resulted in "ownership change" under the Internal Revenue
Code, in which event the Company's utilization of the net operating loss
carryforwards would be significantly limited.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's accounts receivable (net of allowance for doubtful
accounts) decreased from $3.1 million at October 31, 2002 to $2.7 million at
April 30, 2003 due to lower sales.
The Company's inventories (net of obsolescence reserve) decreased from
$5.5 million at October 31, 2002 to $4.5 million at April 30, 2003 as part of
implementation of the Company's turnaround strategy to reduce inventory and
improve inventory turnover by better matching frame purchases with customer
orders and notwithstanding a decrease of $0.4 million in the reserve for
obsolescent inventory as a result of inventory reductions.
The Company retired most of its long-term debt as part of its
recapitalization. At April 30, 2003, the Company's long-term debt included
primarily: (i) a $3.0 term loan from HLIC; (ii) a $2.9 million credit facility
from Bluebird; (iii) a $0.7 million note payable to a commercial bank secured by
certain equipment, including the Company's computer system; and (iv) a note with
a remaining principal balance of $340,000 delivered in connection with the
repurchase of the Dakota Smith inventory sold to the purchaser of the Dakota
Smith trademark. See Notes 5 and 6 of Notes to Consolidated Financial Statements
and "Recent Recapitalization."
Of the Company's accounts payable at April 30, 2003, $0.8 million were
payable in foreign currency. To monitor risks associated with currency
fluctuations, the Company on a weekly basis assesses the volatility of certain
foreign currencies and reviews the amounts and expected payment dates of its
purchase orders and accounts payable in those currencies. Based on those
factors, the Company may from time to time mitigate some portion of that risk by
purchasing forward commitments to deliver foreign currency to the Company. The
Company held no forward commitments for foreign currencies at April 30, 2003.
The Company's bad debt write-offs and recoveries were $28,601 and
($2,916) during the 2003 Six Months and 2002 Six Months, respectively. As part
of the Company's management of its working capital, the Company performs most
customer credit functions internally, including extensions of credit and
collections.
24
Historically, the Company has generated cash primarily through product
sales in the ordinary course of business, its bank credit facility and the sales
of equity securities. Following the default on its bank credit facility in
September 2000, and as a condition to numerous forbearances extended by its
bank, the Company had to regularly reduce its aggregate borrowings under its
bank credit facility, from $ 6.0 million at October 31, 2001 to $3.1 million
when the facility was repaid in April 2003. This, coupled with declining sales
and corresponding inability to raise equity capital, materially adversely
affected the Company's liquidity and working capital. To address this problem,
the Company reduced operating expenses through reduction in personnel and
subletting office space, negotiated vendor discounts and deferred payments of
trade payables, sold obsolete inventory at a deep discount, sold its USA Optical
product line and completed a sale/license back of its Dakota Smith trademark and
inventory.
The recapitalization materially improved the Company's liquidity by
replacing current obligations to its bank and a frame vendor with long-term
indebtedness and through discounted payoffs of trade payables. The Company
believes that for at least the next twelve months, assuming there are no
unanticipated material adverse developments, no material decrease in revenues
and continued compliance with its credit facilities it will be able pay its
debts and obligations as they mature. However, the Company's current sources of
funds are not sufficient to provide the working capital for material growth, and
it would be required to obtain additional debt or equity financing to support
such growth.
INFLATION
The Company does not believe its business and operations have been
materially affected by inflation.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The following is a discussion of certain factors that may affect the
Company's financial condition and results of operations, and takes into account
the recapitalization described under "Subsequent Events".
NEED TO INCREASE REVENUES AND TO RETURN TO PROFITABILITY; GOING CONCERN
QUALIFICATION
The Company suffered material operating losses in its last four fiscal
years, causing a significant deterioration in its financial condition. While the
recapitalization significantly reduced the Company's shareholders' deficit, the
Company continues to have a shareholders' deficit, which was $3.9 million at
April 30, 2003. The Company's long-term viability will depend on its ability to
return to profitability on a consistent basis.
During the past several years, the Company has significantly reduced
its general, administrative and other expenses to the extent that it does not
believe further material reductions are possible. Accordingly, the ability of
the Company to return to profitability will depend most significantly on its
ability to increase its revenues. The Company's revenues during the past several
years have been adversely affected by the significant downturn in the optical
frame industry and its inability to hire a direct sales force sufficient to
replace its distributor network following its conversion to direct sales in
2000. This problem has been exacerbated by the Company's impaired financial
condition which in the Company's opinion resulted in retailers being reluctant
to purchase large inventories of the Company's products due to concerns about
the Company's viability. In addition, the Company's revenues were adversely
impacted for some time following the September 11, 2001 tragedy. While the
Company is hopeful that the recapitalization will generate greater customer
confidence and increase its ability to hire qualified sales personnel, no
assurance can be given that this will occur or that the Company will be able to
generate materially greater revenues or to return to consistent profitability.
SUBSTANTIAL DEPENDENCE UPON LAURA ASHLEY AND EDDIE BAUER LICENSES
Net sales of Laura Ashley Eyewear and Eddie Bauer Eyewear accounted for
60% and 62% of the Company's net sales in fiscal years 2001 and 2002,
respectively. While the Company intends to continue reducing its dependence on
the Laura Ashley Eyewear and Eddie Bauer Eyewear lines through the development
and promotion of Nicole Miller Eyewear, Dakota Smith Eyewear, bebe eyes and its
Signature line, the Company expects the Laura Ashley and Eddie Bauer Eyewear
lines to continue to be the Company's leading sources of revenue for the near
future. The Laura Ashley license is automatically renewed through January 2008
so long as the Company is not in breach of the license agreement and the royalty
payment for the prior two contract years exceeds the minimum royalty for those
25
years. Laura Ashley may also terminate the license agreement if minimum sales
requirements are not met in any two years. The Company did not meet the minimum
sales requirement for the license year ended January 2003, but Laura Ashley
waived noncompliance. The Company markets Eddie Bauer Eyewear through an
exclusive license which terminates in December 2005, but may be renewed by the
Company at least through 2007 so long as the Company is not in material default
and meets certain minimum net sales and royalty requirements. Each of Laura
Ashley and Eddie Bauer may terminate its respective license before its term
expires under certain circumstances, including a material default by the Company
or certain defined changes in control of the Company.
BANKRUPTCY OF EDDIE BAUER
Eddie Bauer Diversified Sales LLC, the licensor on the Eddie Bauer
Eyewear license, and its parent Speigel, Inc and other affiliates, have filed
voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. As a result, the licensor has the rights of a debtor under the Bankruptcy
Code with respect to executory contracts such as the Eddie Bauer Eyewear
license, including the right to assume or reject the license. The rejection of
the license would have a material adverse affect on the Company. The Company has
received no indication or notice from the licensor regarding the licensor's
intentions with respect to the license agreement.
DEPENDENCE UPON SALES TO RETAIL OPTICAL CHAINS
Net sales to major optical retail chains amounted to 29% and 35% of net
sales in fiscal years 2001 and 2002, respectively. Net sales to Eyecare Centers
of America in fiscal 2002 amounted to 12% and 13% of the Company's net sales for
such fiscal years. The loss of one or more major optical retail chains as a
customer would have a material adverse affect on the Company's business.
APPROVAL REQUIREMENTS OF BRAND-NAME LICENSORS
The Company's business is predominantly based on its brand-name
licensing relationships. Each of the Company's licenses requires mutual
agreement of the parties for significant matters. Each of these licensors has
final approval over all eyeglass frames and other products bearing the
licensor's proprietary marks, and the frames must meet the licensor's general
design specifications and quality standards. Consequently, each licensor may, in
the exercise of its approval rights, delay the distribution of eyeglass frames
bearing its proprietary marks. The Company expects that each future license it
obtains will contain similar approval provisions. Accordingly, there can be no
assurance that the Company will be able to continue to maintain good
relationships with each licensor, or that the Company will not be subject to
delays resulting from disagreements with, or an inability to obtain approvals
from, its licensors. These delays could materially and adversely affect the
Company's business, operating results and financial condition.
LIMITATIONS ON ABILITY TO DISTRIBUTE OTHER BRAND-NAME EYEGLASS FRAMES
Each of the Company's licenses limits the Company's right to market and
sell products with competing brand names. The Laura Ashley license prohibits the
Company from selling any range of designer eyewear that is similar to Laura
Ashley Eyewear in price and style, market position and market segment. The Eddie
Bauer license and the bebe license prohibit the Company from entering into
license agreements with companies which Eddie Bauer and bebe, respectively,
believe are its direct competitors. The Hart Schaffner & Marx license prohibits
the Company from marketing and selling another men's brand of eyeglass frames
under a well-known fashion name with a wholesale price in excess of $40. The
Company expects that each future license it obtains will contain some
limitations on competition within market segments. The Company's growth,
therefore, will be limited to capitalizing on its existing licenses in the
prescription eyeglass market, introducing eyeglass frames in other segments of
the prescription eyeglass market, and manufacturing and distributing products
other than prescription eyeglass frames such as sunglasses. In addition, there
can be no assurance that disagreements will not arise between the Company and
its licensors regarding whether certain brand-name lines would be prohibited by
their respective license agreements. Disagreements with licensors could
adversely affect sales of the Company's existing eyeglass frames or prevent the
Company from introducing new eyewear products in market segments the Company
believes are not being served by its existing products.
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DEPENDENCE UPON CONTRACT MANUFACTURERS; FOREIGN TRADE REGULATION
The Company's frames are manufactured to its specifications by a number
of contract manufacturers located outside the United States, principally in Hong
Kong/China, Japan and Italy. The manufacture of high quality metal frames is a
labor-intensive process which can require over 200 production steps (including a
large number of quality-control procedures) and from 90 to 180 days of
production time. These long lead times increase the risk of overstocking, if the
Company overestimates the demand for a new style, or understocking, which can
result in lost sales if the Company underestimates demand for a new style. While
a number of contract manufacturers exist throughout the world, there can be no
assurance that an interruption in the manufacture of the Company's eyeglass
frames will not occur. An interruption occurring at one manufacturing site that
requires the Company to change to a different manufacturer could cause
significant delays in the distribution of the styles affected. This could cause
the Company to miss delivery schedules for these styles, which could materially
and adversely affect the Company's business, operating results and financial
condition.
In addition, the purchase of goods manufactured in foreign countries is
subject to a number of risks, including foreign exchange rate fluctuations,
economic disruptions, transportation delays and interruptions, increases in
tariffs and duties, changes in import and export controls and other changes in
governmental policies. For frames purchased other than from Hong Kong/China
manufacturers, the Company pays for its frames in the currency of the country in
which the manufacturer is located and thus the costs (in United States dollars)
of the frames vary based upon currency fluctuations. Increases and decreases in
costs (in United States dollars) resulting from currency fluctuations generally
do not affect the price at which the Company sells its frames, and thus currency
fluctuations can impact the Company's gross margin and results of operations.
In fiscal 2002, Signature used manufacturers principally in Hong Kong/China,
Japan and Italy.
INTERNATIONAL SALES
International sales accounted for approximately 11.3% and 10.5% of the
Company's net sales in fiscal years 2001 and 2002, respectively. These sales
were primarily in England, Canada Australia, New Zealand, Holland and Belgium.
The Company's international business is subject to numerous risks, including the
need to comply with export and import laws, changes in export or import
controls, tariffs and other regulatory requirements, the imposition of
governmental controls, political and economic instability, trade restrictions,
the greater difficulty of administering business overseas and general economic
conditions. Although the Company's international sales are principally in United
States dollars, sales to international customers may also be affected by changes
in demand resulting from fluctuations in interest and currency exchange rates.
There can be no assurance that these factors will not have a material adverse
effect on the Company's business, operating results and financial condition.
PRODUCT RETURNS
The Company has a product return policy which it believes is standard
in the optical industry. Under that policy, the Company generally accepts
returns of non-discontinued product for credit, upon presentment and without
charge. The Company's product returns for fiscal years 2001 and 2002 amounted to
23% and 22% of gross sales (sales before returns), respectively. The Company
anticipates that product returns may increase as a result of the downturn in the
optical frame industry and general economic conditions. The Company maintains
reserves for product returns which it considers adequate; however, an increase
in returns that significantly exceeds the amount of those reserves would have a
material adverse impact on the Company's business, operating results and
financial condition.
AVAILABILITY OF VISION CORRECTION ALTERNATIVES
The Company's future success could depend to a significant extent on
the availability and acceptance by the market of vision correction alternatives
to prescription eyeglasses, such as contact lenses and refractive (optical)
surgery. While the Company does not believe that contact lenses, refractive
surgery or other vision correction alternatives materially and adversely impact
its business at present, there can be no assurance that technological advances
in, or reductions in the cost of, vision correction alternatives will not occur
in the future, resulting in their more widespread use. Increased use of vision
correction alternatives could result in decreased use of the Company's eyewear
products, which would have a material adverse impact on the Company's business,
operating results and financial condition.
27
ACCEPTANCE OF EYEGLASS FRAMES; UNPREDICTABILITY OF DISCRETIONARY
CONSUMER SPENDING
The Company's success will depend to a significant extent on the
market's acceptance of the Company's brand-name eyeglass frames. If the Company
is unable to develop new, commercially successful styles to replace revenues
from older styles in the later stages of their life cycles, the Company's
business, operating results and financial condition could be materially and
adversely affected. The Company's future growth will depend in part upon the
effectiveness of the Company's marketing and sales efforts as well as the
availability and acceptance of other competing eyeglass frames released into the
marketplace at or near the same time, the availability of vision correction
alternatives, general economic conditions and other tangible and intangible
factors, all of which can change and cannot be predicted. The Company's success
also will depend to a significant extent upon a number of factors relating to
discretionary consumer spending, including the trend in managed health care to
allocate fewer dollars to the purchase of eyeglass frames, and general economic
conditions affecting disposable consumer income, such as employment business
conditions, interest rates and taxation. Any significant adverse change in
general economic conditions or uncertainties regarding future economic prospects
that adversely affect discretionary consumer spending generally, and purchasers
of prescription eyeglass frames specifically, could have a material adverse
effect on the Company's business, operating results and financial condition.
COMPETITION
The markets for prescription eyewear are intensely competitive. There
are thousands of frame styles, including hundreds with brand names. At retail,
the Company's eyewear styles compete with styles that do and do not have brand
names, styles in the same price range, and styles with similar design concepts.
To obtain board space at an optical retailer, the Company competes against many
companies, both foreign and domestic, including Luxottica Group S.p.A, Safilo
Group S.p.A., Marchon Eyewear, Inc., Marcolin S.p.A. and De Rigo S.p.A.
Signature's largest competitors have significantly greater financial, technical,
sales, manufacturing and other resources than the Company. They also employ
direct sales forces that have existed far longer, and are significantly larger
than the Company's. At the major retail chains, the Company competes not only
against other eyewear suppliers, but also against the chains themselves, which
license some of their own brand names for design, manufacture and sale in their
own stores. Luxottica, one of the largest eyewear companies in the world, is
vertically integrated, in that it manufactures frames, distributes them through
direct sales forces in the United States and throughout the world, and owns
LensCrafters, one of the largest United States retail optical chains. De Rigo
S.p.A. is also vertically integrated, in that it manufactures frames,
distributes them throughout the world, and owns Dollond & Atchitson, one of the
largert retail optical chains in the world.
The Company competes in its target markets through the quality of the
brand names it licenses, its marketing, merchandising and sales promotion
programs, the popularity of its frame designs, the reputation of its styles for
quality, and its pricing policies. There can be no assurance that the Company
will be able to compete successfully against current or future competitors or
that competitive pressures faced by the Company will not materially and
adversely affect its business, operating results and financial condition.
CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS
As of August 31, 2003, the directors and executive officers of the
Company owned beneficially approximately 51% of the Company's outstanding shares
of Common Stock. As a result, the directors and executive officers control the
Company and its operations, including the approval of significant corporate
transactions and the election of at least a majority of the Company's Board of
Directors and thus the policies of the Company. The voting power of the
directors and executive officers could also serve to discourage potential
acquirors from seeking to acquire control of the Company through the purchase of
the Common Stock, which might depress the price of the Common Stock.
NO DIVIDENDS ALLOWED
As a California corporation, under the California General Corporation
Law, generally the Company may not pay dividends in cash or property except (i)
out of positive retained earnings or (ii) if, after giving effect to the
distribution, the Company's assets would be at least 1.25 times its liabilities
and its current assets would exceed its current liabilities (determined on a
consolidated basis under generally accepted accounting principles). At April 30,
2003, the Company had an accumulated deficit of $19.1 million. As a result, the
Company will not be able to pay dividends for the foreseeable future. In
addition, the payment of dividends is prohibited under its credit facilities.
28
POSSIBLE ANTI-TAKEOVER EFFECTS
The Company's Board of Directors has the authority to issue up to
5,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the shareholders. The Preferred
Stock could be issued with voting, liquidation, dividend and other rights
superior to those of the Common Stock. The Company issued 1,200,000 shares of
Series A Preferred in the recapitalization, and has no present intention to
issue any other shares of Preferred Stock. However, the rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company, which may depress the market value of
the Common Stock. In addition, each of the Laura Ashley, Hart Schaffner & Marx,
Eddie Bauer and bebe licenses allows the licensor to terminate its license upon
certain events which under the license are deemed to result in a change in
control of the Company unless the change of control is approved by the licensor.
The licensors' rights to terminate their licenses upon a change in control of
the Company could have the effect of discouraging a third party from acquiring
or attempting to acquire a controlling portion of the outstanding voting stock
of the Company and could thereby depress the market value of the Common Stock.
ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks, which include foreign exchange
rates and changes in U.S. interest rates. The Company does not engage in
financial transactions for trading or speculative purposes.
FOREIGN CURRENCY RISKS. At any month-end during the quarter ended April
30, 2003, a maximum of $0.8 million were payable in foreign currency. These
foreign currencies included Japanese yen. Any significant change in foreign
currency exchange rates could therefore materially affect the Company's
business, operating results and financial condition. To monitor risks associated
with currency fluctuations, the Company on a weekly basis assesses the
volatility of certain foreign currencies and reviews the amounts and expected
payment dates of its purchase orders and accounts payable in those currencies.
Based on those factors, the Company may from time to time mitigate some portion
of that risk by purchasing forward commitments to deliver foreign currency to
the Company. The Company held no forward commitments for foreign currencies at
April 30, 2003.
International sales accounted for approximately 14% of the Company's
net sales in the six months ended April 30, 2003. Although the Company's
international sales are principally in United States dollars, sales to
international customers may also be affected by changes in demand resulting from
fluctuations in interest and currency exchange rates. There can be no assurance
that these factors will not have a material adverse effect on the Company's
business, operating results and financial condition. For frames purchased other
than from Hong Kong/China manufacturers, the Company pays for its frames in the
currency of the country in which the manufacturer is located and thus the costs
(in United States dollars) of the frames vary based upon currency fluctuations.
Increases and decreases in costs (In United States dollars) resulting from
currency fluctuations generally do not affect the price at which the Company
sells its frames, and thus currency fluctuation can impact the Company's gross
margin.
INTEREST RATE RISK. The Company's credit facilities existing at April
30, 2003 had fixed interest rates. See "Subsequent Events." Accordingly, the
Company does not believe it is subject to material interest rate risk.
In addition, the Company has fixed income investments consisting of
cash equivalents, which are also affected by changes in market interest rates.
The Company does not use derivative financial instruments in its investment
portfolio. The Company places its cash equivalents with high-quality financial
institutions, limits the amount of credit exposure to any one institution and
has established investment guidelines relative to diversification and maturities
designed to maintain safety and liquidity.
ITEM 14--CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer has
conducted an evaluation of the effectiveness of the Company's disclosure
controls and procedures pursuant to Rule 13a-14 under the Securities Exchange
Act of 1934, as amended, within 90 days of the filing of this quarterly report.
29
Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer believes that the Company's disclosure controls and procedures were
effective in ensuring that information required to be disclosed by the Company
in this quarterly report has been made known to them in a timely manner.
During the quarter ended April 30, 2003, there were no significant
changes in the Company's internal controls or in other factors that could
significantly affect those controls.
PART II.
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In April 2003, the Company issued 1,200,000 shares of Series A 2%
Convertible Preferred Stock to Bluebird Finance Limited, a British Virgin
Islands corporation ("Bluebird"), for $800,000, or $0.67 per share. The Company
issued the shares without registration under the Securities Act of 1933 in
reliance on the exemption from registration under Section 4(2) of the Act as a
transaction not involving any public offering. The purchaser represented that it
was acquiring the shares for its own account for investment purposes and was an
accredited investor, and the Company used no general advertising or solicitation
in the offering. No underwriters or brokers were involved in the transaction.
In April 2003, the Company issued 420,000 shares of Common Stock to
Michael Prince, Chief Executive Officer of the Company, for no consideration but
subject to vesting tied to the Company's future results of operations. The
Company issued the shares without registration under the Securities Act of 1933
in reliance on the exemption from registration under Section 4(2) of the Act as
a transaction not involving any public offering. The purchaser was an accredited
investor and represented that he was acquiring the shares for his own account
for investment purposes, and the Company used no general advertising or
solicitation in the offering. No underwriters or brokers were involved in the
transaction.
In April 2003, the Company issued warrants to purchase 100,000 shares
of Common Stock to Home Loan and Investment Company ("HLIC") in connection with
the $3.5 million credit facility provided by HLIC to the Company. The Company
issued the warrants without registration under the Securities Act of 1933 in
reliance on the exemption from registration under Section 4(2) of the Act as a
transaction not involving any public offering. HLIC represented that it was
acquiring the warrants for its own account for investment purposes and was an
accredited investor, and the Company used no general advertising or solicitation
in the offering. No underwriters or brokers were involved in the transaction.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The Company was in default under its bank credit facility during the
quarter ended April 30, 2002. This credit facility was paid off in April 2003
and, as of April 30, 2003, the Company was not in default under any credit
facility.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
See Exhibit Index Attached
Reports on Form 8-K
Form 8-K dated February 6, 2003 (Item 5)
Form 8-K dated April 21, 2003 (Item 5)
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: September 4, 2003 SIGNATURE EYEWEAR, INC.
By: /s/ Michael Prince
-----------------------
Michael Prince
Chief Executive Officer
Chief Financial Officer
31
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
31.1 Certification Pursuant to SEC Rule 13a-14(a)/15d-14(a)
32.1 Certification Pursuant to 18 U.S.C.ss.1350
32