UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 1999
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 No.: 0-19616
UTOPIA MARKETING, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 94-3060101
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification number)
312 Clematis Street, Suite 500, West Palm Beach, Florida 33401
(Address of Principal Executive Offices, Including Zip Code)
(561) 835-9998
(Registrant=s Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed a
reports to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the past twelve 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 ___
As of May 13, 1999, there were 14,216,367shares of Common
stock outstanding.
UTOPIA MARKETING, INC.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Balance Sheets as of April 3, 1999
(unaudited) and March 28, 1998 (unaudited) 2
Condensed Statements of Operations for the three months
ended April 3, 1999 (unaudited) and March 28, 1998
(unaudited) 3
Condensed Statements of Cash Flows for the three months
ended April 3, 1999 (unaudited) and March 28, 1998
(unaudited) 4
Notes to Condensed Financial Statements 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 9
1
PART I
ITEM 1. FINANCIAL STATEMENTS
UTOPIA MARKETING, INC.
BALANCE SHEETS
ASSETS
THREE MONTHS ENDED
-------------------------
April 3, March 28,
1999 1998
---------- -----------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
CURRENT ASSETS:
Cash and cash equivalents.................................. $ 1,420 $ 2,372
Accounts receivable........................................ 0 0
Miscellaneous receivable................................... 0 6
Merchandise inventories.................................... 0 0
Prepaid expenses........................................... 17 0
--------- ---------
TOTAL CURRENT ASSETS......................................... 1,437 2,378
Property and equipment, net................................ 63 0
Other assets............................................... 0 0
--------- ---------
TOTAL ASSETS........................................... $ 1,500 $ 2,378
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................. $ 39 $ 0
Accrued expenses............................................. 60 25
----------- ----------
TOTAL CURRENT LIABILITIES.............................. 99 25
----------- ----------
LONG-TERM OBLIGATIONS........................................ 0 0
----------- ----------
SHAREHOLDERS' EQUITY:
Common stock.............................................. 14 14
Additional paid-in capital................................ 32,947 32,947
Accumulated deficit....................................... (31,560) (30,608)
TOTAL SHAREHOLDERS' EQUITY............................ 1,401 2,353
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......... $ 1,500 $ 2,378
=========== ==========
See Notes to Financial Statements.
2
UTOPIA MARKETING, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
--------------------------
April 3, March 28,
1999 1998
---------- -----------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
Net revenue......................................... $ 0 $ 0
Cost of sales....................................... 0 0
----------- ------------
GROSS PROFIT...................................... 0 0
Selling, general and administrative expenses........ (544) (54)
Sale of trademark, net.............................. 0 0
------------ ------------
Operating (loss).................................... (544) (54)
Interest income/(expense)........................... 21 33
------------ ------------
Income (loss) before income
taxes and extraordinary item....................... (523) (21)
Income taxes........................................ 0 0
------------ ------------
NET INCOME (LOSS) (523) (21)
------------ ------------
------------ ------------
Net (loss) ......................................... $ (523) $ (21)
------------ ------------
------------ ------------
Net income per share................................ $ (0.04) $ (0.00)
Weighted average shares outstanding................. 14,216 13,866
------------ ------------
------------ ------------
See Notes to Financial Statements
3
UTOPIA MARKETING, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
--------------------------
APRIL 3, MARCH 28,
1999 1998
----------- -----------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................ $ (523) $ (21)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.................................. 0 0
Deferred compensation expense.................................. 0 0
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable.......................................... 0 33
Merchandise inventories...................................... 0 0
Prepaid expenses............................................. 51 0
Other assets................................................. 0 0
Accounts payable, accrued expenses........................... 13 (30)
Other current liabilities.................................... 0 0
----------- -----------
Net cash provided by (used in) operating activities.............. (459) (18)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............................ (63) 0
----------- -----------
Net cash provided by (used in) investing activities.............. (63) 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term obligations............................. 0 0
Proceeds from issuance of common stock, net.................... 0 0
----------- -----------
Net cash (used in) provided by financing activities.............. 0 0
----------- -----------
Net (decrease) in cash and cash equivalents...................... (522) (18)
Cash and cash equivalents:
Beginning of period............................................ 1,942 2,389
End of period.................................................. $ 1,420 $ 2,371
----------- -----------
----------- -----------
See Notes to Financial Statements
4
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements
have been prepared from the records of the Company without audit
and, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary to
fairly present the Company=s financial position at April 3, 1999
and March 28, 1998 and the results of operations and its cash
flows for the three month periods ended April 3, 1999 and March
28, 1998.
Accounting policies followed by the Company are described in
Note 1 to the audited financial statements for the year ended
January 2, 1999. As permitted by the rules and regulations of the
Securities & Exchange Commission, certain information and footnote
disclosures included in the annual financial statements prepared
in accordance with generally accepted accounting principles have
been condensed or omitted for the purposes of these condensed
interim financial statements. The unaudited condensed interim
financial statements included herein should be read in conjunction
with the audited financial statements and the notes thereto
included in the Company's Form 10-KSB for the year ended January
2, 1999.
The results of operations and cash flows for the three month
period ended April 3, 1999 are not necessarily indicative of the
results of operations or cash flows to be expected for any other
period or for the full year.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Utopia Marketing, Inc., formerly known as Sam & Libby, Inc.
(the "Company") was founded in October 1987, primarily for the
purpose of developing and commercializing footwear products. In
1991, the Company completed a public offering of its common stock.
On July 2, 1996, the Company entered into an agreement with
Maxwell Shoe Company Inc. ("Maxwell") pursuant to which the
Company sold its brand names, trademarks, trade names and certain
other intellectual property rights to Maxwell, and received
approximately $5.5 million.
Since the sale to Maxwell, the Company's management has been
primarily involved in the investigation of new business
opportunities for the Company. During this time, management has
investigated possible acquisitions and mergers and explored
various start-up ventures. A number of developments in the fourth
quarter of 1998 prompted the Company's Board of Directors to
conclude in December 1998 that the Company should reenter the
footwear business. Thus, since December 1998, the Company has been
engaged in the business of developing and commercializing a line
of fashion footwear products under the Company's NAKEDFEET TM brand
name.
Results of Operations
Three months ended April 3, 1999 and March 28, 1998
Revenues. Due to the lack of revenue-generating activities
during the quarters ended April 3, 1999 and March 28, 1998, the
Company's only revenues were interest income of $21,000 and
$33,000 respectively. Interest income was earned as a result of
the Company holding its funds in a money market account.
Gross Profit. The Company earned no gross profit during the
quarters ended April 3, 1999 and March 28, 1998, because the
Company was either not conducting any operating business or its
operations were still in a start-up stage.
6
Selling, General and Administrative Expenses. Selling,
general and administrative expenses increased to $523,000 for the
quarter ended April 3, 1999 due to an increase in operations as
compared to $54,000 for the quarter ended March 28, 1998.
Selling, general and administrative expenses for the quarter ended
March 28, 1998 consisted primarily of administrative expenses in
connection with the search for investment opportunities.
The Company anticipates a substantial increase in selling,
general and administrative expenses during 1999 as a result of the
Company's commencement of the design and development of a line of
footwear. The Company anticipates these expenses will be incurred
as personnel is increased, marketing and sales activities are
begun and a variety of promotional programs are undertaken in
connection with the development and marketing of the Company's
products. The Company also expects to incur significant research
and development expenses as the Company attempts to develop and
commercialize its new line of footwear products.
Liquidity and Capital Resources
The Company's primary source of liquidity for the first
quarter of 1999 was funds held in a money market account. Because
the Company has been engaged primarily in the investigation of new
business opportunities, the Company made no capital expenditures
during its fiscal year ended January 2, 1999. The Company expects
1999 capital expenditures to increase as a result of the Board's
decision to attempt to develop and commercialize a line of
footwear. The Company purchased computer equipment and software
during the first quarter of 1999, totaling $63,241.
During the start-up phase of the Company's new operations,
the Company's cash requirements will be substantial. The Company
currently anticipates that it will require additional capital to
fund its working capital needs until it has positive cash flows.
Until the Company raises this additional capital, it may not be
able to expand its product lines or market its products as quickly
or effectively as its competitors. The amount of additional
capital the Company will require before it achieves positive cash
flows will depend primarily on its ability to design, develop and
market products that are accepted by the market and generate
rapidly increasing levels of sales. The Company's failure to
design, develop and market well-received products and other
events, including the costs and timing of establishing trademarks
and other proprietary rights; the Company's ability to manufacture
products at an economically feasible cost; the extent and terms of
any collaborative manufacturing, marketing or other arrangement;
and changes in economic or competitive conditions of the Company's
7
planned business, could cause the Company to require additional
capital prior to achieving positive cash flows. In the event that
the Company must raise additional capital to fund its working
capital needs, it may seek to raise such capital through loans or
the issuance of debt or equity securities. To the extent the
Company raises additional capital by issuing equity securities or
obtaining borrowings convertible into equity, ownership dilution
to existing shareholders will result, and future investors may be
granted rights superior to those of existing shareholders. There
can be no assurance that any additional capital will be available
to the Company on acceptable terms, or at all.
FORWARD-LOOKING INFORMATION: CERTAIN CAUTIONARY STATEMENTS
Certain statements contained in this Form 10-QSB, principally
in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations," that are not related to
historical results, including statements relating to the design
and development of the Company's line of footwear, are forward-
looking statements. Actual results may differ materially from
those projected or implied in the forward-looking statements.
Further, certain forward-looking statements are based upon
assumptions of future events that may not prove to be accurate.
These forward-looking statements involve risks and uncertainties,
including but not limited to, the Company's ability to
successfully develop a line of footwear; the Company's future cash
flows, sales, gross margins and operating costs; the Company's
ability to devote the resources required to adequately market a
line of footwear; the Company's ability to recruit qualified
personnel; the effect of conditions in the footwear market and the
economy in general; and certain other risks. Forward-looking
statements contained in this report and in subsequent written and
oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their
entirety by cautionary statements in this paragraph and elsewhere
in this Form 10-QSB, in other reports filed by the Company with
the Securities and Exchange Commission and in the Company's Form
10-KSB for the year ended January 2, 1999, filed with the
Securities and Exchange Commission on April 19, 1999, under the
caption "Forward-Looking Information: Certain Cautionary
Statements".
8
PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
3.1 Articles of Incorporation of the Company.*
3.2 Bylaws of the Company.*
4.1 See Exhibits 3.1 and 3.2 for provisions of the
Articles of Incorporation and Bylaws of the
Company defining the rights of holders of Common
Stock of the Company.
27. Financial Data Schedule
a. The Company filed the following reports on Form 8-K
during the quarter ended April 3, 1999:
2. A report on Form 8-K filed February 1, 1999
relating to Item 5 - Other Events.
2. A report on Form 8-K filed March 18, 1999 relating
to Item 4 - Changes in Registrant's Certifying
Accountant.
- -------------------
* Filed with the Company's Annual Report on Form 10-KSB (File
No. 000-19616), filed with the Securities and Exchange
Commission on April 19, 1999, and incorporated herein by
reference.
9
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed by
the undersigned thereunto duly authorized.
UTOPIA MARKETING, INC.
(Registrant)
Dated: May 17, 1999 BY:/s/Samuel L. Edelman
Samuel L. Edelman,
Chairman of the Board
Chief Executive Officer
Dated: May 17, 1999 BY:/s/Vance F. Kistler
Vance F. Kistler, Controller