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Financial Information
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Super Vision Annual Report |
Report of Indepedent Accountants |
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Statement of Operations |
Statement of Stockholders' Equity |
Statements of Cash Flows |
Financial Notes |
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and
no disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form I O-KSB or any amendment
to this Form 1 O-KSB.
State issuer's revenues for its most recent fiscal year. $2,538,459.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of March
25, 1996. $10,005,000.
State the number of shares outstanding of each of the issuer's
common equity as of March 25, 1996. 1,428,966 shares of Class
A Common Stock, $.001 par value and 3,375,134 shares of Class
B Common Stock, $.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
See Part III hereof with reference to incorporation by reference
from the registrant's definitive proxy statement to be filed pursuant
to Regulation 14A under the Exchange Act.
Item 1. Description of Business
General
Super Vision International, Inc. (the "Company") is
engaged in the design, manufacture and marketing of Side Glow
(tm) fiber optic lighting cable, light sources 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. The Company completed an initial
public offering of its securities in March 1994.
The Company was incorporated in Delaware on December 16, 1993
and is the successor by merger to a Florida corporation of the
same name which was incorporated in January 1991. The Company's
executive offices are located at 2442 Viscount Row, Orlando, Florida
32809 and its telephone number is (407) 857-9900.
Products and Services
Side-Glow (tm) and End Glow (tm) Cables
The Company's Side Glow (tm) fiber optic lighting cables utilize
a patented reflective center core in the manufacturing process
to produce a plastic cable which gives off light along its length,
rather than just at the end points. The Company markets these
cables with a variety of halogen or metal-halide light sources
as an alternative to neon lighting for indoor and outdoor architectural
accents, signs, underwater lighting and large displays. While
the Company's Side Glow (tm)' cable currently does not achieve
the level of brightness of neon, the Company believes its benefits
outweigh the brightness factor for a large segment of the current
neon market. Side Glow (tm) fiber optic lighting cable is flexible
and easy to install, is not prone to the breakage associated with
glass neon tubes and is energy efficient, providing significant
savings in electrical costs. In addition, when combined with the
Company's light sources, unlike neon, the Company's products are
capable of changing color. The Company currently sells Side Glow
(tm) cables in four diameters designed to meet customer needs
and specifications. Additionally, during the fourth quarter the
Company introduced a line of End Glow (tm) cables designed for
underwater spot lighting and interior task down lighting.
To date, the Company's Side Glow (tm) and End Glow (tm) cables
have been used in major installations worldwide. Additionally,
as a result of the expansion of the Company's international distribution
network and other distribution channels in various markets the
Company's products have been introduced to the mainstream lighting
market. The Company also filed for Patent Cooperation Treaty protection
of its Side Glow (tm) fiber optic cables in over 20 foreign countries
during 1995.
In December 1995, the Company completed the acquisition of custom-.for-Super
Vision fiber optic cabling and extrusion equipment which will
be utilized by the Company to manufacture its Side Glow(tm) and
End Glow (tm) cables in house. The Company believes that the vertical
integration of processes formerly performed by subcontractors
will allow the Company to achieve significant cost reductions
in this product line.
During 1995, Side Glow (tm) and End Glow (tm) cable products accounted
for approximately 38% of the Company's total revenues. The Company
believes that this product area offers the largest growth potential
and therefore, the Company intends to devote the majority of its
engineering and sales and marketing efforts to expand this area
of its business and the related light source product line described
below.
Light Sources
The Company manufactures and markets a proprietary line of internally
manufactured light sources, each designed for specialized applications.
During 1995, the Company expanded its light source product offerings
from its original two SV2000 Series metal halide sources to five
metal halide and halogen light sources targeted to meet specific
market needs. Each model is produced to meet a variety of voltage
needs and indoor or outdoor uses. The Company also produces a
line of light source controllers which allow multiple light sources
to be sequenced in simple or complex links to simulate an array
of special lighting effects.
In addition to the introduction of its proprietary light source
line, the Company perfected a new method of coupling fiber optic
cables to its light sources. This fiber head system allows for
a much simpler installation of fiber optic cables than has ever
been possible with competing fiber optic systems. The Company
has a patent pending on this system, and believes the system will
afford a significant competitive advantage over existing market
systems.
Although several of these light source products were only on the
market for a short period of time during 1995, sales of the Company's
light sources represented approximately 34% of the Company's total
revenue during 1995. The Company's light source products are complementary
to the Company's Side Glow (tm) and End Glow (tm) fiber optic
cables, and the Company plans to devote significant resources
to continue development of these products and markets.
Endpoint Signs and Displays
The Company manufactures endpoint fiber optic signs and custom
displays for advertising, signage and point of purchase displays.
Fiber optic strands are used with customized light sources to
create a virtually limitless combination of designs, patterns
and effects. The Company has utilized this technology to create
custom designs for clients such as Planet Hollywood, Walt Disney
World and Coca Cola. The Company entered into a contract in the
fourth quarter of 1995 to produce what is believed to be the world's
largest fiber optic sign, which is scheduled to be completed in
March, 1996. While these types of displays are produced on a custom
only basis, the Company believes this type of contract will enhance
the visibility of fiber optics in the advertising and sign market,
and provide a marketing platform for the Company's standard fiber
optic products. The Company utilizes the same technology used
in large scale custom displays in the manufacture of its point
of purchase displays. Point of purchase signs are utilized by
retailers and advertisers in the promotion of their products and
services. The Company has produced point of purchase signs for
many Fortune 500 clients.
During 1995, endpoint signs and displays accounted for approximately
28% of the Company's total revenues.
Sales and Marketing
The Company's products are utilized in a wide variety of markets
and applications, including: Architectural Lighting; Signage; Advertising;
Swimming Pool and Spa Lighting; Tasklighting (i.e., conference
room down lighting); and Specialty Theme Lighting. The Company
previously relied on internally generated sales efforts for the
majority of revenues. During 1995, the Company continued development
of its distribution channels in the aforementioned markets, and
expended significant resources to acquire, educate, and train
international distributors, domestic lighting agents, pool lighting
contractors, and to promote the Company's products to major sign
manufacturers. Consequently, the majority of 1995 revenues were
derived through these distribution channels. The Company will
also continue to directly market custom endpoint displays and
signs, as a method of increasing revenues and to expand overall
exposure to fiber optic lighting technology.
Manufacturing, Suppliers, and Quality Control
The fiber optic strands used in the Company's endpoint signs and
displays as well as the production of its Side Glow (tm) and End
Glow (tm) cables are purchased exclusively from a Japanese company.
In October 1994, the Company entered into a contract for the design
and purchase of customized cabling and extrusion equipment in
order to produce its Side Glow (tm) and End Glow (tm) cables.
The equipment became operational in December 1995. The Company
believes the equipment may reduce the manufacturing costs of its
Side Glow (tm) and End Glow (tm) cables, and therefore allow the
Company to offer its products to the market at prices competitive
with neon lighting. The Company maintains outside manufacturing
capabilities for these products in the event additional capacity
is required. The Company manufactures the light sources and control
systems used with its Side Glow (tm) and End Glow (tm) cables
and endpoint displays in its facility in Orlando, Florida. The
designs of the light sources are considered proprietary and the
Company has a U.S. patent application pending with respect to
this design. All endpoint displays are manufactured directly by
the Company based on the clients' specifications, or designed
jointly with the Company's highly experienced personnel. The Company
believes its ability to offer a full range of products and design,-engineering
and support services are unique in the market place, and are important
in the future prospects for growth.
The Company's strategy is to continue to strive for lower manufacturing
costs and reduce its dependence on outside suppliers by expanding
its manufacturing capabilities and engineering its products around
off the shelf components combined in proprietary designs. The
Company continues to perform research and development to further
lower the cost of production of all existing products. The Company
also plans to develop additional products and identify new markets
and distribution channels. These efforts resulted in the introduction
of the Company's Swimming Pool and Spa line in the fourth quarter
of 1995. These products are designed to be price competitive with
traditional under water lighting products, while offering the
advantages of voltage free light and color changing in the water.
The Company also introduced a line of fiber optic landscape, feature
and accent lights for the pool and architectural lighting markets.
The Company will continue to purchase the fiber optic strands
from its sole source Japanese supplier. While the Company believes
alternative sources for fiber optics are available to enable it
to produce its endpoint signs and displays, the Side Glow (tm)
and End Glow (tm) cables requires fiber optic material of a higher
quality than the Company believes is currently available elsewhere.
Accordingly, the loss of this supplier or delays in obtaining
shipments would have a material adverse affect on the Company's
operations until such time, if ever, as an alternative supplier
could be found which could provide the quality level in the amounts
the Company' requires (one possible supplier has been identified)
or the Company could implement its own production capabilities.
The Company has implemented a quality control (QC) system based
on total quality models, and joined a Florida round table consortium
of companies working towards certification of their QC systems
under IS09000. The Company believes certification is important
in the achievement of a quality conscious manufacturing environment,
and may be critical in further expansion of overseas market acceptance.
While their can be no assurance that the Company will achieve
certification, the Company believes the implementation of this
integrated QC system could have a positive impact on the quality
of its products and services.
Research and Product Development
The Company's engineering, research and product development staff
is responsible for the design of standard and custom products
developed to meet specific market needs identified by the Company
and requested by its customers. The Company considers its ability
to constantly improve existing products, rapidly introduce new
products to fill identified needs, and design solutions for custom
applications to be critical to the growth of the Company. The
Company believes this responsiveness to the market to be an important
differentiating factor, and will continue to seek rapid response
to market trends.
During 1995, the Company spent approximately $234,000 on engineering
and product development activities. The Company believes its success
will depend, in large part, on its ability to continue to improve
and enhance its existing products (for example, by increasing
the level of brightness of its Side Glow (tm) and End Glow (tm)
cables, increasing the temperature resistance of its fiber optic
products and extending the life of the lamp in its light source)
and to develop new products and applications for its technologies.
Competition
The Company currently faces competition from both traditional
lighting technologies such as neon and florescent lighting, and
from competitors specifically engaged in fiber optic lighting.
Traditional lighting technologies have the advantage of a long
history of market acceptance and familiarity as compared to the
Company's products. The Company is actively seeking to educate
its target markets as to the advantages of fiber optic lighting
systems. The Company believes that achievement of this objective
is critical to the Company's future. The Company must also compete
with traditional lighting on the issues of maintenance costs,
safety issues, energy usage, price and brightness.
The Company believes its products can effectively compete against
traditional lighting in the areas of maintenance, safety and energy
consumption. The Company's lighting systems offer the advantage
of centralized light source maintenance for lamp replacement.
This feature is superior to other lighting systems, such as neon,
which require maintenance through out the lighting system. Additionally,
the Company's Side Glow (tm) and End Glow (tm) cables are virtually
maintenance and breakage free, as opposed to neon and other comparable
lighting products which experience high field and in shipment
breakage rates. This reduced breakage also favorably compares
in the area of safety. Further, the Company's products result
in a voltage free light, which is particularly beneficial in wet
and under water applications where risk of shock from electricity
in the lighted path is an issue. The Company's products also eliminate
the majority of heat and radiation at the light output, which
can be advantageous in applications where these factors may not
be desirable, such as task lighting and display case lighting.
The Company's products may not favorably compete with traditional
lighting on the basis of price for smaller lighting systems and
in particular with neon systems in smaller scale applications,
which comprise a large portion of the available market. Additionally,
fiber optic lighting systems do not equal neon brightness in a
cost effective manner for many applications. In applications calling
for maximum brightness and competitive cost, the Company's products
may not be able to compete effectively with traditional lighting
products.
Competitors in the traditional lighting markets include such companies
as General Electric, Philips, Cooper Industries, American Products
and other large companies with greater financial resources than
those possessed by the Company. Additionally, the Company's products
compete with many local and regional neon manufacturers and installers
with established market presence.
The Company currently faces competition from a defined number
of companies directly involved in the field of fiber optic lighting
addressed by the Company's Side Glow (tm) and End Glow (tm) cables
and light source products. These companies utilize a similar technology
to that used by the Company and compete generally on the basis
of price and quality. The Company believes it has the lowest price
structure of all current competitors in this industry, and may
compete favorably in markets where price is the central issue.
The Company's Quality Control system will also allow the Company
to compete on the basis of quality of product and services delivered.
There can be no assurance, however, that the current competitors
directly involved in this industry will not develop processes
or technology which will allow them to decrease their costs, and
consequently, erode the Company's price advantage. Additionally,
there can be no assurance that a large, conventional lighting
company will not enter the market and utilize its resources to
capture significant market share and adversely affect the Company's
operating results.
The Company's endpoint signs and displays compete with numerous
smaller companies utilizing the same or similar technologies.
In the area of custom displays and signs, the Company's expertise
in the field and history of major installations may allow the
Company to achieve a position as the leader in this field. The
Company's smaller point of purchase signs compete directly on
a price basis with these smaller companies, including several
foreign competitors whose lower labor costs allow them to achieve
a price advantage over the Company's products. These point of
purchase products also compete to some extent with customary signage
which is considerably less expensive than fiber optic products.
The Company believes that the quality of its products is equal
to or superior to those offered by its competitors and that its
products offer unique advantages over customary signage, such
as color changing, aesthetically pleasing special effects, and
motion.
Patents and Proprietary Rights
The Company considers its technology and procedures proprietary
and relies primarily on patent and trade secret laws and confidentiality
agreements to protect its technology and innovations. Employees
and commissioned salespersons of the Company, as well as technical
consultants which from time to time may be hired, enter into confidentiality
and/or invention assignment agreements providing for non-disclosure
of proprietary and trade secret information of the Company and
the assignment to the Company of all inventions, improvements,
technical information and suggestions relating in any way to the
business of the Company (whether patentable or not) which the
employee or consultant develops during the period of their employment
or association with the Company. Despite these restrictions, it
may be possible for competitors or customers to copy one or more
aspects of the Company's products or obtain information that the
Company regards as proprietary. Furthermore, there can be no assurance
that others will not independently develop products similar to
those sold by the Company.
The Company has been issued a United States patent relating to
the reflective center core used in the process of manufacturing
its Side Glow (tm) cables and has filed for Patent Cooperation
Treaty protection of this patent overseas. Additionally, the Company
has acquired a United States patent related to the method of manufacture
of a fiber optic image magnification device. While there is no
guarantee that this patent can be developed into a commercially
viable product, the Company believes that expansion of the applications
for its fiber optic technologies are important to the possible
achievement of future growth objectives. The Company has a third
patent pending related to its light source technology and a device
for connecting fiber optic cables to the light source.
The Company will continue to seek patent protection where appropriate
for future developments, improvements and enhancements to its
technology. There can be no assurance, however, that the Company's
patent, or patents which may be issued in the future, will provide
the Company with sufficient protection in the case of an infringement
of its technology or that others will not independently develop
technology comparable or superior to the Company's. Although the
Company believes that the products sold by it do not and will
not infringe upon the patents or violate the proprietary rights
of others, it is possible that such infringement or violation
has occurred or may occur. In the event that products sold by
the Company are deemed to infringe upon the patents or proprietary
rights of others, the Company could be required to modify its
products or obtain a license for the manufacture and/or sale of
such products.
The Company has obtained approval for a registered trademark for
the "Super Vision" name. Additionally, the Company has
obtained a trademark on the brand names Side Glow (tm) and End
Glow (tm) related to the Company's fiber optic cables. The Company
believes the trademarks may help in its efforts to achieve brand
recognition, although there can be no assurance to such effect.
Employees
At March 11, 1996, the Company had 23 full-time employees, of
which two were in research and development, seven were involved
in sales, marketing and customer service, three were involved
in finance and administration and eleven were involved in production
and quality control. None of the Company's employees is currently
covered by a collective bargaining agreement and the Company considers
its employee relations to be good. The Company also utilizes temporary
and part time employees as required by the volume of business,
primarily in the area of production.
Executive Officers of the Company
The executive officers of the Company are as follows:
Name: Brett M. Kingstone
Age: 36
Position: Chairman of the Board, Chief Executive Officer and President
Name: John P. Stanney
Age: 32
Position: Chief Operating Officer, Chief Financial Officer and
Secretary
Brett M. Kingstone has been the Chairman of the Board,
Chief Executive Officer and President of the Company since he
founded the Company in January 199 1. From October 1985 until
January 1991, Mr. Kingstone acted as an independent consultant
in the area of fiber optic technology. From December 1988 until
October 1989, he served as President of Fibermedia Corporation
in Boulder, Colorado. From January 1984 to August 1985, he was
a partner in Kingstone Prato, Inc., a venture capital partnership
in Boulder, Colorado. From August 1981 through December 1983,
he served as Vice President of Sales of Gekee Fiber Optics, Inc.
in Palo Alto, California. Mr. Kingstone is a graduate of Stanford
University and the author of two books -The Student Entrepreneur's
Guide (McGraw-Hill) and The Dynamos (John Wiley & Sons; Koksaido
Press).
John P. Stanney joined the Company as Chief Operating Officer,
Chief Financial Officer and Secretary in May 1994. From August
1992 until joining the Company, Mr. Stanney, a certified public
accountant, served as Controller of Graseby Electro Optics, Inc.
From July 1989 until July 1992, Mr. Stanney was a certified public
accountant with Greenwalt Sponsel & Company in Indianapolis,
Indiana. From July 1986 to July 1989, he served as an auditor
for Ernst & Young in San Jose, California.
Item 2. Description of Property.
The Company's executive offices and production facility are located in an
approximately 11,000 square foot space in Orlando, Florida which
is occupied pursuant to a lease which expires in March 1999 and
provides for a base monthly rental of approximately $8,300. An
entity controlled by Kingstone, the Chairman, Chief Executive
Officer and President of the Company, owns the building which
houses the Company's facilities.
Item 3. Legal Proceedings.
There are currently no material legal proceedings to which the
Company is a party.
Item 4. Submission of Matters to a Vote of Security-Holders.
No matters were submitted during the fourth quarter of the fiscal
year covered by this report to a vote of the security holders
of the Company.
Item 5. Market for Common Equity and Related Stockholder Matters.
(a) The Company's Class A Common Stock has traded on the Nasdaq
SmallCap Market under the symbol SUPVA since March 22, 1994. The
following sets forth the average of the high and low bid prices
of the Class A Common Stock for the fiscal years ended December
31, 1994 and 1995 as reported by The Nasdaq Stock Market, Inc.
Bid Prices | |||
High | Low | ||
Year Ended | |||
31-Dec-94 | |||
First Quarter (Commencing March 22, 1994) | 4.25 | 3 | |
Second Quarter | 3.625 | 3.25 | |
Third Quarter | 6.125 | 4.88 | |
Fourth Quarter | 6.5 | 6 | |
Year ended | |||
31-Dec-95 | |||
First Quarter | 7.25 | 6.25 | |
Second Quarter | 7 | 6 | |
Third Quarter | 8 | 6.75 | |
Fourth Quarter | 7.75 | 6.75 |
Last Update: 4/24/96
(b) The number of holders of record of the Company's Class A Common
Stock as of March 11, 1995 is 25.
(c) The Company has never paid a cash dividend on its Common Stock
and intends to continue to follow a policy of retaining earnings
to finance future growth. Accordingly, the Company does not anticipate
the payment of cash dividends to holders of Common Stock in the
foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Liquidity and Capital Resources
At December 31, 1995, the Company had working capital of $3,173,888.
The Company entered into an agreement in November 1994 for the
acquisition of certain equipment related to the production of
its fiber optic cables. The purchase and installation price for
the equipment is approximately $814,000. The-Company paid a deposit
of $252,000 upon signing the agreement. The equipment was delivered
and tested in November 1995, and became operational in December
1995. Upon delivery, the Company paid an additional $432,000 on
the contract. Costs related to site preparation of approximately
$80,000 were also incurred. As of December 31, 1995, the equipment
was in operation, but several modifications were required under
the terms of the agreement. Accordingly, a retainage of $50,000
against final approval is being withheld by the Company pending
final settlement of the contractual obligations by the vendor.
The Company believes this equipment will enhance its production
capability and reduce lead times in the manufacture of its fiber
optic cable products, and could reduce costs of manufacturing
these products. Due to the limited operating history of the equipment,
however, no estimate of the potential cost reductions can be made
at this time. The Company also used approximately $203,000 of
funds in the acquisition of computer systems and tooling designed
to aid in the automation of several of its other product lines,
and in the redesign of its office area.
The Company expended approximately $37,000 during the year ended
December 315 1995 in the acquisition and filing of patents and
trademarks designed to aid in the protection of the Company's
proprietary technologies and attempt to achieve brand recognition
for the Company's products.
During the year ended December 31, 1995, the Company used proceeds
from the Company's initial public offering in March 1994 to expand
inventory by approximately $319,000. This expansion was due to
the addition of three new light sources and three additional sizes
of fiber optic cables to the Company's product line. The Company
also modified existing products and added a line of landscape,
accent, and feature lights in order to enter the fiber optic pools
and spa lighting market, which further increased inventory levels.
Management believes the increased levels are necessary to support
anticipated revenue growth, and support the short lead time required
by the pool and spa lighting market.
The Company believes that available cash, together with funds
expected to be generated from operations, will be sufficient to
finance the Company's working capital requirements as well as
planned expansion.
Charge to Income in the Event of Release of Escrowed Shares
In January 1994, the Company and certain stockholders of the Company
entered into an agreement providing for the escrow of a portion
of the shares held by such individuals (the "Escrow Shares").
In the event any shares are released from escrow to persons who
are officers and other employees of the Company, compensation
expense will be recorded for financial reporting purposes as required
by GAAP. Therefore, in the event the Company attains any of the
earnings thresholds or the Company's Class A Common Stock meets
certain minimum bid prices required for the release of the Escrow
Shares, such release will be deemed additional compensation expense
of the Company. Accordingly, the Company will, in the event of
the release of shares from escrow, recognize during the period
in which the earnings thresholds are met or are probable of being
met or such minimum bid prices attained, what will likely be one
or more substantial charges which would have the effect of substantially
increasing the Company's loss or reducing or eliminating earnings,
if any, at such time. Although the amount of compensation recognized
by the Company will not affect the Company's total stockholder's
equity or its working capital, it may have a depressive effect
on the market price of the Company's securities.
Results of Operations
Fiscal 1995 Compared to Fiscal 1994
Revenues are derived primarily from the sales of Side Glow (tm)
and End Glow (tm) fiber optic cables, light sources, fiber optic
displays and point of purchase signage. Revenues for the year
ended December 31, 1995 ("1995") were approximately
$2,538,000. This represented a 79% increase over the year ended
December 31, 1994 ("1994"). Revenues for 1995 increased
primarily as a result of the expansion of the Company's product
lines in the area of light sources and Side Glow (tm) and End
Glow (tm)' fiber optic cables. Three new light sources were added
during 1995, as well as two new fiber optic cables. The Company
also added a line of landscape, accent and feature lights which
are used in combination with the Company's cables and light sources.
The introduction of these new products combined with the continued
expansion of the Company's international distribution system,
the formation of a domestic lighting agency representation network
and the addition of a pool and spa lighting group accounted for
the majority of the revenue increase. Sales of these product lines
accounted for a combined 72% of total revenues for 1995 as compared
to 53% in 1994. Sales of endpoint signs and displays were 28%
of total 1995 revenues as compared to 40% of 1994 total revenues.
The Company believes that this decline in sales of endpoint signs
and displays as a percentage of total revenue is a result of strong
sales in its expanding cable and light source product lines, and
is not indicative of weaker sales in the endpoint product areas.
Included in 1995 revenues is approximately $107,000 recognized
under the percentage of completion method related to a contract
to produce a large scale custom fiber optic sign. The total contract
value is approximately $816,000, and completion is anticipated
in the first quarter of 1996. Additionally, the Company signed
a licensing agreement with one of its international distributors
for the manufacture of one of the Company's point of purchase
signage products pursuant to which the Company received a fee
of $45,000. The agreement has a fifteen year term, and calls for
the payment of royalties to the Company based on direct sales
of the licensed product by the distributor. The Company is also
guaranteed a fixed unit price on purchases of the licensed product
for resale by the Company, if the Company chooses to do so. Fees
recognized during the 1995 nine months represented payment for
initial training of the distributor by the Company. The Company
has no further obligation related to these fees. Further revenues
from the license, if any, are dependent on sales of the licensed
product by the distributor, which Management cannot predict.
The gross margin increased 14% from 21% in 1994 to 35% in 1995.
The 1995 gross margin experience was favorably impacted by the
higher relative sales mix of Side Glow (tm) and End Glow (tm)
fiber optic cables and related light source products, as well
as custom fiber optic endpoint displays. These products have higher
margins than the point of purchase signage products. The 1994
gross margin contained a higher relative mix of point of purchase
signage. The Company continues research into new methods of manufacturing
point of purchase products. Additionally, the aforementioned licensing
agreement may also reduce costs of this product due to lower offshore
labor costs; however, Management is unable to determine the extent
to which, if any, these proposed manufacturing methods or the
licensing agreement may reduce costs, if at all. During December
1995, the Company received delivery of its custom-for-Super Vision
fiber optic cabling and extrusion equipment. The equipment is
utilized in the manufacture of the Company's Side Glow (tm) and
End Glow (tm) fiber optic cables, and may reduce the manufacturing
costs of these products due to the integration of processes formerly
performed by subcontractors. Additionally, the Company is conducting
research into the use of the same equipment to manufacture certain
other items in its product lines which are currently purchased
from outside vendors. If this research is successful, Management
believes costs reductions in other products are also possible.
As the equipment was received late in 1995, however, data to quantify
the possible cost reductions, if any, are not available.
Selling, general and administrative expenses were approximately
$1,440,000 for 1995 as compared to approximately $949,000 for
1994, an increase of 52%. Increases in selling and marketing expenses
included printed materials designed specifically for the Company's
recently formed lighting agency representation network as well
as product literature required with the introduction of the Company's
new products. The Company also provided training at the agents'
sites in order to increase awareness relating to the capabilities
of the Company's products and in an effort to increase revenues
through these agents. Additionally, the Company increased the
levels of advertising and trade show attendance in order to introduce
new products and attract additional lighting representatives.
The introduction of the Pool and Spa group and its related landscape
product line also contributed to increased marketing costs, particularly
for literature, product catalogs and demonstration equipment required
by distributors and representatives of the Company's products
in this market. The Company also held its first international
distributor training seminar in October 1995, in order to provide
centralized training on the Company's existing and new products
in the Orlando facility. General and administrative expenses increased
due to the expansion of the Company's facility from 6,000 to 11,000
square feet, and the subsequent overhead costs associated with
servicing and maintaining this facility. Finally, the Company
has experienced increased professional costs associated with becoming
a publicly held entity.
Research and development costs were approximately $234,000 for
1995 as compared to approximately $232,000 for 1994. The Company
introduced twelve new products during 1995, as well as adapting
existing products for new markets such as the Pool and Spa product
line. Additionally, the Company performed research on eight new
products to be introduced in early 1996. Despite these new product
introductions, research and development expenses remained constant
with 1994 levels. The Company was able to adapt previous efforts
and work closely with key vendors to decrease the time and costs
associated with these introductions. New costs were incurred in
the final testing and development of the Company's custom fiber
optic cabling equipment, including material and travel. Management
believes continued research into increasing the brightness of
the lighting cable, expanding the applications of fiber optic
lighting technology and new product development are critical for
the achievement of continuing sales growth.
The Company had net interest income for 1995 of approximately
$201,000 compared with approximately $128,000 for 1994. The 1995
amounts were favorably impacted by increased yields on the Company's
investments, despite decreased available cash balances for investment.
Net interest expense for 1995 was approximately $3,800 compared
to approximately $78,000 for 1994. The 1994 amount includes a
one-time charge of $65,000 for issuance costs relating to the
$500,000 bridge loan completed in January 1994, which was repaid
from the proceeds of the Company's initial public offering in
March 1994.
Income taxes for 1994 included a tax provision reflecting a change
in the Company's tax status from an S-corporation to a C-corporation,
which was offset by tax benefits as a result of the Company's
1994 tax losses. See Note 8 of Notes to Financial Statements.
The net loss for 1995 was approximately ($572,000) as compared
to a loss of approximately ($816,000) for 1994. The decreased
losses are attributable to higher revenue levels achieved through
the Company's distribution channels, as well as improved gross
margins resulting from the introduction of new products and overall
sales mix. Loss per common share decreased from $.53 in 1994 to
$.30 in 1995.
Item 7. Financial Statements
Report of Independent Accountants
Balance Sheets as of December 31, 1995 and 1994
Statements of Operations for the years ended December 31, 1995 and 1994
Statements of Stockholders' Equity for the years ended December 3 1, 1995 and 1994
Statements of Cash Flows for the years ended December 31, 1995 and 1994
Notes to the Financial Statements
This information appears in a separate section of this Report
following.
Part III.
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not Applicable.
The information called for by Item 9 (Directors, Executive Officers,
Promoters and Control Persons; Compliance with Section 16(a) of
the Exchange Act), Item 10 (Executive Compensation), Item 11 (Security
Ownership of Certain Beneficial Owners and Management), and Item
12 (Certain Relationships and Related Transactions) is incorporated
by reference from the Registrant's definitive proxy statement
to be filed pursuant to Regulation 14A.
Item 13. Exhibits, Lists and Reports on Form 8-K
(a) 3.1 Certificate of Incorporation (1)
3.2 Certificate of Amendment to Certificate of Incorporation (1)
3.3 Certificate of Merger (1)
3.4 By laws (1)
4.1 Form of Unit Purchase Option (1)
4.2 Form of Warrant Agreement (including Forms of Class A and
Class B Warrant Certificates) (1)
4.3 Escrow Agreement (1)
4.4 Form of Amendment to Escrow Agreement (1)
10.11994 Stock Option Plan (1)
10.2 Employment Agreement with Brett Kingstone (1)
10.3 Form of Indemnification Agreement (1)
10.4 Lease for Facility at Viscount Row (1)
10.5 Bank Loan Agreement with Barnett Bank (1)
(1) Incorporated by reference from the Company's Registration
Statement on Form SB-2 (File No. 33-74742)
(b) Reports on Form 8-K. No reports on Form 8-K have been filed
during the three months ended December 31, 1995.
(c) Consent of Independent Accountants
Report of Independent Accountants
Board of Directors
Super Vision International, Inc.
Orlando, Florida
We have audited the accompanying balance sheets of Super Vision
International, Inc. as of December 31, 1995 and 1994, and the
related statements of operations, stockholders' equity, and cash
flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Super
Vision International, Inc. as of December 31, 1995 and 1994, and
the results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
Orlando, Florida
February 16, 1996
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand
International, a limited liability association incorporated in
Switzerland.
Super Vision International, Inc. | ||
Balance Sheets | ||
December | December | |
Assets | 1995 | 1994 |
Current Assets: | ||
Cash and cash equivalents | $2,327,775 | $3,626,290 |
Trade accounts receivable, less allowance for doubtful accounts of $19,952 and $4,803 | $330,570 | $218,303 |
Inventories, less reserve for excess inventory of $28,340 in 1995 | $899,348 | $580,393 |
Advances to employees | $16,390 | $4,623 |
Other assets | $51,236 | $71,383 |
Total current assets | $3,625,319 | $4,500,992 |
Property and Equipment: | ||
Machinery and equipment | $1,013,016 | $191,843 |
Furniture and fixtures | $93,551 | $76,453 |
Computers | $142,758 | $114,864 |
Vehicles | $16,581 | $16,581 |
Leasehold improvements | $138,462 | $46,469 |
$1,404,368 | $446,210 | |
Less accumulated depreciation | ($172,697) | ($85,910) |
Net property and equipment | $1,231,671 | $360,300 |
Other Assets | $59,176 | $22,572 |
Deposits on Equipment | - | $252,000 |
$4,916,166 | $5,135,864 | |
Liabilities and Stockholders' Equity | ||
Current Liabilities: | ||
Note payable to officer | $22,968 | $22,968 |
Accounts payable | $344,853 | $70,230 |
Accrued liabilities | $22,443 | $18,852 |
Payments in excess of costs and recognized profit on uncompleted contracts | $10,333 | - |
Deposits | $50,834 | $7,193 |
Total current Liabilities | $451,431 | $119,243 |
Commitments | ||
Stockholders' Equity | ||
Preferred stock; $.001 par value, 5,000,000 shares authorized; none issued | - | - |
Class A common stock, $.001 par value, authorized 16,610,866 shares, 1,428,966 and 1,410,966 issued and outstanding | $1,429 | $1,411 |
Class B common stock, $.001 par value, 3,389,134 shares authorized, 3,375,134 and 3,389,134 issued and outstanding | $3,375 | $3,389 |
Additional paid-in capital | $5,669,423 | $5,649,427 |
Retained earnings (deficit) | ($1,209,492) | ($637,606) |
Total stockholders' equity | $4,464,735 | $5,016,621 |
$4,916,166 | $5,135,864 |
Last Update: 4/22/96
Super Vision International, Inc. | ||
Statement of Operations | ||
December | December | |
1995 | 1994 | |
Revenues: | ||
Net Sales | $2,493,459 | $1,414,542 |
Licensing and royalty fees | $45,000 | - |
Total revenues | $2,538,459 | $1,414,542 |
Costs and Expenses: | ||
Cost of sales | $1,649,130 | $1,111,679 |
Selling, general and administrative | $1,440,106 | $948,861 |
Research and development | $233,916 | $232,265 |
Total costs and expenses | $3,323,152 | $2,292,805 |
Operating Loss | ($784,693) | ($878,263) |
Non-Operating Income (Expenses): | ||
Interest income | $201,408 | $128,443 |
Interest expense | ($3,754) | ($78,473) |
Gain on disposal of assets | $15,153 | $12,331 |
Total non-operating income | $212,807 | $62,301 |
Loss Before Income Taxes | ($571,886) | ($815,962) |
Income Taxes | - | - |
Net Loss | ($571,886) | ($815,962) |
Loss Per Common Share: | ||
Primary | ($0.30) | ($0.53) |
Weighted Average Shares of Common Stock Outstanding: | ||
Primary | $1,883,799 | $1,534,824 |
Last Update: 4/22/96
Super Vision International, Inc. | ||||||
Statement of Stockholders' Equity | ||||||
Years Ended December 31, 1995 and 1994 | ||||||
Common Stock: Class A | Common Stock: Class B | |||||
Shares | Amount | Shares | Amount | Additional Paid-In Capital | Retained Earnings (Deficit) | |
Balance, December 31, 1993 | - | - | 3,420,000 | $3,420 | $57 | $178,356 |
Sale of common stock, net of offering costs | 1,380,000 | 1,380 | - | - | 5,648,870 | - |
Exercise of employee stock options | 100 | - | - | - | 500 | - |
Conversion of Class B common stock to Class A common stock | 30,866 | 31 | (30,866) | (31) | - | - |
Net loss | - | - | - | - | - | ($815,962) |
Balance, December 31, 1994 | 1,410,966 | 1,411 | 3,389,134 | 3,389 | 5,649,427 | ($637,606) |
Conversion of Class B common stock to Class A common stock | 14,000 | 14 | (14,000) | (14) | - | - |
Exercise of employee stock options | 4,000 | 4 | - | - | 19,996 | - |
Net loss | - | - | - | - | - | ($571,886) |
Balance, December 31, 1995 | 1,428,966 | $1,429 | 3,375,134 | $3,375 | $5,669,423 | ($1,209,492) |
Last Update: 4/22/96
Super Vision International, Inc. | ||
Statements of Cash Flows | ||
December | December | |
1995 | 1994 | |
Cash Flows from Operating Activities: | ||
Net loss | ($571,886) | ($815,962) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation | $102,665 | $52,884 |
Gain on disposal of fixed assets | ($15,153) | ($12,331) |
Amortization of intangible assets | $30,012 | $22,749 |
Decrease (increase) in: | ||
Accounts receivable | ($112,267) | ($143,171) |
Inventories | ($318,955) | ($458,610) |
Cost and estimated earnings in excess of billings on uncompleted contracts | - | $17,055 |
Other assets | ($21,035) | ($111,261) |
(Decrease) increase in: | ||
Accounts payable | $224,623 | $33,049 |
Accrued liabilities | $3,591 | ($14,488) |
Deposits | $43,641 | ($2,807) |
Payments in excess of costs and recognized profit on uncompleted contracts | $10,333 | - |
Total adjustments | ($52,545) | ($616,931) |
Net cash used in operating activities | ($624,431) | ($1,432,893) |
Cash Flows from Investing Activities: | ||
Acquisition of patents | ($36,101) | ($5,640) |
Purchase of equipment and furniture | ($714,817) | ($349,079) |
Acquisition of trademarks | ($1,100) | - |
Deposits on equipment | - | ($252,000) |
Proceeds from disposal of equipment and furniture | $57,934 | $19,500 |
Net cash used in investing activities | ($694,084) | ($587,219) |
Cash Flows from Financing Activities: | ||
Proceeds from line of credit | - | $14,563 |
Repayment of line of credit | - | ($74,563) |
Sale of common stock | - | $6,900,000 |
Cost of issuance of common stock | - | ($1,214,450) |
Proceeds from exercised stock options | $20,000 | $500 |
Proceeds from bridge loan | - | $500,000 |
Repayment of bridge loan | - | ($500,000) |
Net cash provided by financing activities | $20,000 | $5,626,050 |
Net Increase (Decrease) in Cash and Cash Equivalents | ($1,298,515) | $3,605,938 |
Cash and Cash Equivalents, Beginning of Year | $3,626,290 | $20,352 |
Cash and Cash Equivalents, End of Year | $2,327,775 | $3,626,290 |
Last Update: 4/22/96
Notes to Financial Statements
Years Ended December 31, 1995 and 1994
1. Summary of Significant Accounting Policies:
Organization - Super Vision International, Inc. (the "Company")
was originally incorporated as a Florida corporation on January
21, 1991. On December 16, 1993, the Company was merged into Super
Vision International, Inc., a newly formed Delaware corporation,
to carry on the business of the Florida corporation. At that time,
the merged companies were recapitalized, and the sole stockholder
of the Florida corporation contributed all of his stock to the
Company in exchange for newly issued shares of the Delaware corporation.
References to the Company in these financial statements and notes
thereto include the activities of the Florida corporation.
The Company is engaged in the design, manufacture and marketing
of Side Glow' fiber optic lighting cable, fight sources 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.
Revenue Recognition - Generally, the Company recognizes revenue
for its products upon delivery to customers. A portion of the
Company's 1995 income is derived from a sales contract accounted
for on the percentage of completion method whereby the Company
recognizes income on the basis of costs incurred during the period
plus profit earned, measured by the percentage of direct labor
incurred relative to total direct labor budgeted. When contract
cost estimates indicate costs in excess of the contract price,
the Company records the entire loss. The paid portion of the contract
in excess of cost incurred and gross profit recognized is included
in current liabilities as Payments in Excess of Costs and Recognized
Profit on Uncompleted Contracts.
Licensing and royalty fees are recorded when amounts become payable
to the Company based on royalty agreements and the services required
as set forth in royalty agreements have been rendered.
Cash Equivalents - Temporary cash investments with an original
maturity of three months or less are considered to be cash equivalents.
Inventories - Inventories are stated at the lower of cost (first-in,
first-out method), or market. Provision is made for any inventory
deemed excessive or obsolete.
Property and Equipment - Property and equipment are stated at
cost. Depreciation is computed by the straight-line method and
is charged to operations over the estimated useful lives of the
assets. Maintenance and repairs are charged to expense as incurred.
The carrying amount and accumulated depreciation of assets which
are sold or retired are removed from the accounts in the year
of disposal and any resulting gain or loss is included in results
of operations.
Intangible Assets - Intangible assets, which are recorded at cost,
consist of patents and trademarks which are owned by the Company
and are being amortized over their contractual lives using the
straight-line method.
Deposits - Payments received by the Company for services to be
provided in the following year are deferred and recognized as
revenue in the period the services are provided.
Research and Development - Research and development costs to develop
new products are charged to expense as incurred.
Income Taxes - Effective January 1, 1994, the Company was required
to elect C-corporation status for income tax reporting purposes
and at this time adopted Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes (FAS 109).
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently
due plus deferred taxes resulting from temporary differences.
Such temporary differences result from differences in the carrying
value of assets and liabilities for tax and financial reporting
purposes. The deferred tax assets and liabilities represent the
future tax consequences of those differences, which will either
be taxable or deductible when the assets and liabilities are recovered
or settled. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and liabilities.
Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles 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.
Net Income (Loss) Per Share - Primary loss per share is computed
by dividing net loss by the weighted average number of shares
of common stock outstanding during each period after giving effect
to the stock splits and excluding the shares placed in escrow
(Note 9).
New Pronouncements - Effective December 15, 1995, the Company was
required to comply with the provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation
(FAS 123). FAS 123 establishes fair value-based financial accounting
and reporting standards for arrangements under which employees
receive shares of stock of an employer. The Company will elect
the disclosure-only provisions as outlined in FAS 123. The proforma
effects for 1995 have not been calculated as of December 31, 1995.
Reclassifications - For comparability purposes, certain reclassifications have been made to the 1994 financial statements to conform with the 1995 financial statement presentation.
2. Inventories
Inventories consist of the following at December 31, 1995 and 1994:
1995 | 1994 | |||
Raw materials | $665,441 | $218,134 | ||
Work in process | $8,729 | $48,484 | ||
Finished goods | $253,518 | $313,775 | ||
$927,688 | $580,393 | |||
Less: Reserve for excess inventory | ($28,340) | - | ||
Net inventory | $899,348 | $580,393 |
Last Update: 4/23/96
3. Commitments:
The Company leases warehouse and office space and a vehicle under operating leases expiring from October, 1997 to March, 1999.
At December 31, 1995, the future minimum lease payments under these operating leases are as follows:
Year Ending December 31, | |
1996 | $114,249 |
1997 | $121,201 |
1998 | $119,641 |
1999 | $19,547 |
2000 | - |
$374,638 |
Included in future minimum lease payments are payments due to a corporation owned by the President of the Company totalling $359,463 (see Note 5).
Total rent expenses amounted to $97,145 and $51,246 for the fiscal years ended December 31, 1995 and 1994, respectively.
In 1994, the Company entered into a contract for the purchase of fiber optic cabling and extrusion machinery. The equipment was installed and in operation in December, 1995, and was undergoing final certification. the remaining balance on the contract is scheduled to be paid upon certification of the equipment, subject to certain performance criteria specified in the agreement. An installment payment of $252,000 had been made on the contract and is included as a deposit on the balance sheet as of December 31, 1994.
The Company has a consulting agreement with the underwriter of the public offering to act as an investment banker to the Company for a two-year period for an annual fee of $30,000. The agreement expires in March, 1996.
4. Note Payable to Officer:
Note payable to officer consists of a demand note payable owed
to the president of the Company. This note may only be repaid
from the proceeds of the exercise of the Class B warrants. Interest
accrued to date at an annual interest rate of 13% was $22,443
and $18,852 at December 31, 1995 and 1994, respectively.
5. Related-Party Transactions:
The Company leases operating facility space from a corporation
owned by the president of the Company. Rents paid under this lease
agreement were $88,722 and $47,700 for the years ended December
31, 1995 and 1994, respectively.
6. Concentration of Risk:
The Company's financial instruments that are exposed to concentrations
of credit risk consist of cash and cash equivalents. The Company
places its cash and cash equivalents with high credit quality
institutions. At times such investments may be in excess of the
FDIC insurance limit. The Company also places its cash and cash
equivalents in money market funds with a major brokerage firm.
These money market funds are uninsured. The total amount invested
in money market funds at December 31, 1995 and 1994 was $2,269,183
and $3,576,552, respectively.
The Company relies on a Japanese company as a sole suppliers for
fiber optics. While the Company believes alternative sources for
fiber optics are available, the loss of this supplier or significant
delays in obtaining shipments could have a material adverse affect
on the Company's operations until such time as an alternative
supplier could be found or the Company could implement its own
production capabilities.
7. Supplemental Disclosures of Cash Flow Information:
Cash paid for interest for the year ended December 31, 1994 was
$76,174. No interest was paid in 1995. Interest paid in 1994 includes
$65,000 of issuance costs related to the $500,000 bridge loan
completed in January, 1994.
Accounts payable at December 31, 1995 includes $50,000 incurred
in connection with the acquisition of equipment (see Note 3).
8. Income Taxes:
Prior to January 1, 1994, the Company had elected to be taxed
as an S-corporation and thus, all income of the Company was passed
through to the sole stockholder and taxed at his level. Effective
January 1, 1994, the Company was required to elect C-corporation
status for income tax reporting purposes and at this time adopted
Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes (FAS 109). To account for this change in tax
status, the Company recorded deferred expense in the amount of
$43,445. This provision reflected the temporary differences between
the tax basis of assets and liabilities and their financial statement
carrying values. The tax expense has been offset by benefits generated
in 1994 from operating losses leaving no provision for income
tax expense in 1994. There was no valuation allowance established
upon the adoption of FAS 109.
The provision (benefit) for income taxes for the period ended December 31, 1995 and 1994 are as follows:
1995 | 1994 | |
Current: | ||
Federal | - | - |
State | - | - |
Total | - | - |
Deferred: | ||
Federal | - | - |
State | - | - |
Total | - | - |
Total provision | - | - |
Last Update: 4/23/96
As of December 31, 1995 and 1994, the Company had approximately
$1,159,000 and $703,000 in net operating loss carryforwards for
federal and state income tax purposes, which expire in 2010 and
2009, respectively.
The types of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts that give rise to the deferred tax assets (liabilities) are as follows:
December 31, | December 31, | |
1995 | 1994 | |
Inventory | $88,013 | $27,194 |
Accrued expenses | $8,865 | $7,686 |
Depreciation | ($19,023) | ($24,923) |
Other | ($18,044) | ($15,732) |
Net operating loss carryforwards | $457,925 | $278,076 |
$517,736 | $272,301 | |
Valuation allowance | ($517,736) | ($272,301) |
- | - |
Last Update: 4/23/96
The entire balance of the deferred tax asset has been offset by a valuation allowance due to the uncertainty of the realizability of the benefits of the tax net operating loss carryforward.
The following is a reconciliation of tax computed at the statutory Federal rate to the income tax expense in the statement of operations for the years ended December 31, 1995 and 1994:
1995 | 1994 | |||
Amount | % | Amount | % | |
Tax (benefit) computed at statutory Federal rate | ($194,441) | -34.00% | ($227,427) | 34.00% |
Effect of unused operating loss | $186,843 | 32.70% | $272,301 | 33.30% |
Non-deductible expenses | $7,598 | 1.30% | $5,645 | 0.70% |
Other, net | - | - | ($519) | - |
Income tax expense | - | - | - | - |
Last Update: 4/23/96
9. Capital Stock:
Initial Public Offering - On March 29, 1994, the Company completed
its initial public offering of 1,200,000 shares of its common
stock at $5.00 per share. On May 5, 1994, the Company sold an
additional aggregate 180,000 shares of its common stock to satisfy
the underwriter's over-allotment. The net proceeds, after expenses,
from the offering (including the sale of the over-allotment shares)
were approximately $5,650,000.
In connection with its initial public offering, the Company issued
to its underwriter options to purchase 120,000 units (each unit
including one share of Class A Common Stock, one Class A Warrant
and one Class B War-rant) at an exercise price of $7.50 per unit.
These unit purchase options are exercisable prior to March 29,
1999.
Stock Splits - On February 28, 1994, the Company's Board of Directors
approved a six-for-five stock split with respect to the common
stock. The earnings per share calculation and all share information
contained in these financial statements have been retroactively
adjusted to give effect to the stock split.
Class B Common Stock - Each share of Class B Common Stock is entitled
to five votes on all matters on which stockholders may vote, including
the election of directors. Shares of Class B Common Stock are
automatically convertible into an equivalent number of shares
of Class A Common Stock upon the sale or transfer of such shares.
Stock Warrants - In connection with the public offering, the Company
issued Class A and Class B Warrants to purchase shares of Class
A Common Stock. At December 31, 1995 and 1994, the following warrants
were outstanding:
Class | Number of Shares | Exercise Price | Expiration Date |
A | 1,680,000 | $7.50 | 29-Mar-99 |
B | 1,380,000 | $10.50 | 29-Mar-99 |
Last Update: 4/23/96
Under certain conditions, the Class A and Class B warrants are
redeemable by the Company at a redemption price of $.05 per share.
Escrowed Shares - In connection with the public offering, certain
stockholders agreed to place an aggregate of 2,918,000 shares
of their Class B Common Stock into escrow. The first 1,898,000
escrowed shares will be released to the stockholders on a pro
rata basis, if and only if, any of the following conditions are
met: minimum pretax income (as defined) is at least $5.0 million
for fiscal year 1996; $6.9 million for fiscal year 1997; $8.9
million for fiscal year 1998 or the bid price of the Company's
common stock averages, for 30 consecutive business days, in excess
of $13.30 during the 18-month period following the date of the
public offering or $16.65 during the 18-month period following
the 18-month period from the date of the public offering. Also,
if the Company is acquired or merged into another company for
which the stockholders receive per share consideration equal to
or greater than those stated above, the shares will be released.
The remaining 1,020,000 escrowed shares will be released to the
stockholders on a pro rata basis, if and only if, any of the following
conditions are met: minimum pretax income (as defined) is at least
$8.5 million for fiscal year 1996; $10.2 minion for fiscal year
1997; $12.7 million for fiscal year 1998 or the bid price of the
Company's common stock averages, for 30 consecutive business days,
in excess of $18.30 during the 18-month period following the date
of the public offering or $23.30 during the 18-month period following
the 18-month period from the date of the public offering. Also,
if the Company is acquired or merged into another company for
which the stockholders receive per share consideration equal to
or greater than those stated above, the shares will be released.
The escrowed shares will be transferred to the Company for no
consideration if the future earnings thresholds or stock bid price
levels are not achieved. In the event the Company attains any
of the earnings' thresholds or stock bid prices for the release
of escrowed shares to such stockholders, the Company will recognize
compensation expense at such time based on the fair market value
of the shares released to officers, directors and employees.
10. Stock Option Plan:
On December 27, 1993, the Company adopted a stock option plan that provides for the grant of incentive stock options and nonqualified stock options and reserved 150,000 shares of the Company's Class A Common Stock for future issuance under the plan. The option price must be at least 100% of market value at the date of the grant.
The following table summarizes activity of the stock option plan for the years ended December 31, 1995 and 1994:
Options Available for Future Grant | Number of Shares Under Option | Option Price Per Share | |
Balance, January 1, 1994 | $150,000 | - | $5.00 |
Options granted | ($81,840) | $81,840 | $5.00 - $6.25 |
Options exercised | - | ($100) | $5.00 |
Options cancelled | $15,620 | ($15,620) | - |
Balance, January 1, 1995 | $83,780 | $66,120 | $5.00 - $6.50 |
Options granted | ($54,971) | $54,971 | $5.00 - $7.38 |
Options exercised | - | ($4,000) | $5.00 |
Options cancelled | $10,000 | ($10,000) | $5.00 |
Balance, December 31, 1995 | $38,809 | $107,091 |
Last Update: 4/23/96
Options granted vest ratably over a three-year period or vest based on achievement of performance criteria. As of December 31, 1995, 43,957 and 17,966 options were vested and exercisable, respectively.
11. Major Customers/Export Sales:
Export sales for 1995 were 49% of net sales. The Company had sales totalling 11.2% of revenues to an international distributor of the Company's products for the year ended December 31, 1995, and 11.3% of revenues to a Japanese distributor of the Company's products for the year ended December 31, 1994.
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration Statement of Super Vision International, Inc. on Form SB-2 (File No. 33-74742) of our report dated February 16, 1996, on our audits of the financial statements of Super Vision International, Inc. as of December 31, 1995 and 1994 and for the years then ended, which report is included in this Annual Report on Form 10-KSB. We also consent to the reference to our Firm under the caption "Experts".
Orlando, Florida
March 26, 1996