x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
||
For
the quarterly period ended June 30, 2007
|
||
OR
|
||
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
||
For
the transition period from ________________ to
________________
|
Delaware
|
33-0851302
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
1160
Commerce Avenue, Bronx, New York
|
11462
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Class
|
Outstanding
at July 31, 2007
|
|
Common
Stock, $.001 par value per share
|
49,003,372
|
Page
No.
|
||
PART
I. FINANCIAL
INFORMATION
|
||
Item
1-
|
||
Balance
Sheets at June 30, 2007 (unaudited) and
|
||
December
31, 2006 (audited)
|
2
|
|
Statements
of Operations for the Three and Six Months
|
|
|
Ended
June 30, 2007 and 2006 (unaudited)
|
3
|
|
Statement
of Stockholders’ Equity for the Six
|
||
Months
Ended June 30, 2007 (unaudited)
|
4
|
|
Statements
of Cash Flows for the Six Months Ended
|
|
|
June
30, 2007 and 2006 (unaudited)
|
5
|
|
Notes
to Financial Statements (unaudited)
|
6
|
|
|
||
Item
2
|
Management's
Discussion and Analysis of Financial Condition
|
|
and
Results of Operations
|
10
|
|
Item
3
|
Quantitative
and Qualitative Disclosures about Market Risk
|
16
|
Item
4
|
Controls
and Procedures
|
16
|
|
||
PART
II. OTHER
INFORMATION
|
|
|
|
||
Item
6
|
Exhibits
|
16
|
17
|
June
30,
|
December
31,
|
||||||
2007
|
2006
|
||||||
Unaudited
|
Derived
from audited financial statements
|
||||||
ASSETS
|
|||||||
CURRENT
ASSETS:
|
|||||||
Cash
and equivalents
|
$
|
438
|
$
|
346
|
|||
Accounts
receivable-net
|
4,065
|
7,922
|
|||||
Inventory
|
4,773
|
9,104
|
|||||
Due
from vendors
|
144
|
83
|
|||||
Prepaid
expenses and other current assets
|
182
|
615
|
|||||
Deferred
income taxes
|
60
|
151
|
|||||
Total
current assets
|
9,662
|
18,221
|
|||||
PROPERTY
AND EQUIPMENT - NET
|
705
|
752
|
|||||
DEFERRED
INCOME TAXES
|
158
|
67
|
|||||
OTHER
ASSETS
|
67
|
77
|
|||||
TOTAL
|
$
|
10,592
|
$
|
19,117
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Notes
payable - bank
|
$
|
4,728
|
$
|
7,201
|
|||
Accounts
payable
|
3,859
|
8,532
|
|||||
Current
portion of long term obligations
|
6
|
11
|
|||||
Accrued
expenses and other current liabilities
|
118
|
99
|
|||||
Total
current liabilities
|
8,711
|
15,843
|
|||||
DEFERRED
LEASE OBLIGATIONS
|
47
|
40
|
|||||
LONG
TERM OBLIGATIONS
|
1
|
4
|
|||||
STOCKHOLDERS'
EQUITY:
|
|||||||
Series
A Convertible Non-Redeemable Preferred Stock, $.001 par value; 8,513
and
8,530 shares authorized; 244 and 262 shares issued and outstanding
at June
30, 2007 and December 31, 2006, respectively
|
-
|
-
|
|||||
Common
stock, $.001 par value; 100,000 shares authorized; 49,003 and 48,721
shares issued and outstanding at June 30, 2007 and December 31, 2006,
respectively
|
49
|
49
|
|||||
Additional
paid-in capital
|
3,503
|
3,415
|
|||||
Accumulated
deficit
|
(1,719
|
)
|
(234
|
)
|
|||
Total
stockholders’ equity
|
1,833
|
3,230
|
|||||
TOTAL
|
$
|
10,592
|
$
|
19,117
|
Three
Months
|
|
Six
Months
|
|
||||||||||
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|||||
NET
SALES
|
$
|
12,499
|
$
|
13,268
|
$
|
28,772
|
$
|
26,587
|
|||||
COST
OF GOODS SOLD
|
11,516
|
11,617
|
26,209
|
23,377
|
|||||||||
GROSS
PROFIT
|
983
|
1,651
|
2,563
|
3,210
|
|||||||||
OPERATING
COSTS AND EXPENSES:
|
|||||||||||||
Selling
and administrative expenses
|
1,697
|
1,446
|
3,622
|
2,721
|
|||||||||
Terminated
transaction costs
|
-
|
-
|
-
|
257
|
|||||||||
Other
income
|
-
|
(109
|
)
|
-
|
(109
|
)
|
|||||||
Total
operating expenses
|
1,697
|
1,337
|
3,622
|
2,869
|
|||||||||
(LOSS)
INCOME FROM OPERATIONS
|
(714
|
)
|
314
|
(1,059
|
)
|
341
|
|||||||
Interest
expense
|
178
|
186
|
426
|
374
|
|||||||||
(LOSS)
INCOME BEFORE PROVISION FOR (BENEFIT FROM) INCOME
TAXES
|
(892
|
)
|
128
|
(1,485
|
)
|
(33
|
)
|
||||||
Provision
for (benefit from) income taxes
|
-
|
55
|
-
|
(13
|
)
|
||||||||
NET
(LOSS) INCOME
|
$
|
(892
|
)
|
$
|
73
|
$
|
(1,485
|
)
|
$
|
(20
|
)
|
||
Net
loss per share - basic and diluted
|
$
|
(0.02
|
)
|
$
|
0.00
|
$
|
(0.03
|
)
|
$
|
0.00
|
|||
Weighted
average common shares outstanding -
|
|||||||||||||
Basic
|
49,000
|
48,721
|
48,861
|
48,445
|
|||||||||
Diluted
|
49,000
|
50,772
|
48,861
|
48,445
|
Additional
|
Total
|
|||||||||||||||||||||
Preferred
Stock A
|
|
Common
Stock
|
Paid
in
|
Accumulated
|
Shareholders’
|
|||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||
Balance,
January 1, 2007
|
262
|
$
|
-
|
48,721
|
$
|
49
|
$
|
3,415
|
$
|
(234
|
)
|
$
|
3,230
|
|||||||||
Conversion
of Series A
|
||||||||||||||||||||||
Preferred
Stock into
|
||||||||||||||||||||||
Common
Stock
|
(18
|
)
|
-
|
282
|
-
|
-
|
-
|
-
|
||||||||||||||
Stock
option
|
||||||||||||||||||||||
compensation
expense
|
88
|
88
|
||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(1,485
|
)
|
(1,485
|
)
|
|||||||||||||
Balance,
June 30, 2007
|
244
|
$
|
-
|
49,003
|
$
|
49
|
$
|
3,503
|
$
|
(1,719
|
)
|
$
|
1,833
|
2007
|
2006
|
||||||
OPERATING
ACTIVITIES:
|
|||||||
Net
loss
|
$
|
(1,485
|
)
|
$
|
(20
|
)
|
|
Adjustments
to reconcile net loss to net cash provided by operating activities:
|
|||||||
Deferred
rent
|
7
|
27
|
|||||
Depreciation
and amortization
|
108
|
64
|
|||||
Provision
for doubtful accounts
|
40
|
26
|
|||||
Stock
option compensation expense
|
88
|
111
|
|||||
Amortization
of deferred financing costs
|
58
|
60
|
|||||
Deferred
income taxes
|
-
|
(15
|
)
|
||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
3,817
|
1,252
|
|||||
Inventory
|
4,331
|
273
|
|||||
Due
from vendors
|
(61
|
)
|
392
|
||||
Prepaid
acquisition and proposed offering costs
|
-
|
162
|
|||||
Prepaid
expenses and other current assets
|
9
|
(158
|
)
|
||||
Accounts
payable
|
(4,673
|
)
|
(335
|
)
|
|||
Accrued
expenses and other current liabilities
|
19
|
(244
|
)
|
||||
Net
cash provided by operating activities
|
2,258
|
1,595
|
|||||
INVESTING
ACTIVITIES:
|
|||||||
Purchase
of property and equipment
|
(61
|
)
|
(154
|
)
|
|||
Proceeds
from insurance claim
|
401
|
-
|
|||||
Increase
in other assets
|
-
|
(59
|
)
|
||||
|
|||||||
Net
cash provided by (used in) investing activities
|
340
|
(213
|
)
|
||||
FINANCING
ACTIVITIES:
|
|||||||
Proceeds
from note payable - bank
|
28,480
|
25,363
|
|||||
Repayments
of note payable - bank
|
(30,953
|
)
|
(26,917
|
)
|
|||
Payment
of deferred financing costs
|
(25
|
)
|
-
|
||||
Payment
of long-term obligations
|
(8
|
)
|
(6
|
)
|
|||
Net
cash used in financing activities
|
(2,506
|
)
|
(1,560
|
)
|
|||
(DECREASE)
INCREASE IN CASH AND EQUIVALENTS
|
92
|
(178
|
)
|
||||
CASH
AND EQUIVALENTS, BEGINNING OF PERIOD
|
346
|
252
|
|||||
CASH
AND EQUIVALENTS, END OF PERIOD
|
$
|
438
|
$
|
74
|
|||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|||||||
Cash
paid during the period for:
|
|||||||
Interest
|
$
|
418
|
$
|
340
|
|||
Income
taxes
|
$
|
15
|
$
|
86
|
Three
Months ended March 31,
|
|||||||||||||
2007
|
2006
|
||||||||||||
(unaudited;
dollars in thousands)
|
|||||||||||||
Net
sales
|
$
|
12,499
|
100.0
|
%
|
$
|
13,268
|
100.0
|
%
|
|||||
Cost
of goods sold
|
11,516
|
92.1
|
%
|
11,617
|
87.5
|
%
|
|||||||
Gross
profit
|
983
|
7.9
|
%
|
1,651
|
12.5
|
%
|
|||||||
Operating
costs and expenses:
|
|||||||||||||
Selling
and administrative expenses
|
1,697
|
13.6
|
%
|
1,446
|
10.9
|
%
|
|||||||
Other
income
|
-
|
-
|
%
|
(109
|
)
|
(0.8
|
)%
|
||||||
Total
operating costs and expenses
|
1,697
|
13.6
|
%
|
1,337
|
10.1
|
%
|
|||||||
(Loss)
income from operations
|
(714
|
)
|
(5.7
|
)%
|
314
|
2.4
|
%
|
||||||
Interest
expense
|
178
|
1.4
|
%
|
186
|
1.4
|
%
|
|||||||
Loss
before benefit from income taxes
|
(892
|
)
|
(7.1
|
)%
|
128
|
1.0
|
%
|
||||||
Provision
for income taxes
|
-
|
-
|
%
|
55
|
0.4
|
%
|
|||||||
Net
loss
|
$
|
(892
|
)
|
(7.1
|
)%
|
$
|
73
|
0.6
|
%
|
Six
months ended June 30,
|
|||||||||||||
2007
|
2006
|
||||||||||||
(unaudited;
dollars in thousands)
|
|||||||||||||
Net
sales
|
$
|
28,772
|
100.0
|
%
|
$
|
26,587
|
100.0
|
%
|
|||||
Cost
of goods sold
|
26,209
|
91.1
|
%
|
23,377
|
87.9
|
%
|
|||||||
Gross
profit
|
2,563
|
8.9
|
%
|
3,210
|
12.1
|
%
|
|||||||
Operating
costs and expenses:
|
|||||||||||||
Selling
and administrative expenses
|
3,622
|
12.6
|
%
|
2,721
|
10.2
|
%
|
|||||||
Terminated
transaction costs
|
-
|
-
|
%
|
257
|
1.0
|
%
|
|||||||
Other
income
|
-
|
-
|
%
|
(109
|
)
|
(0.4
|
)%
|
||||||
Total
operating costs and expenses
|
3,622
|
12.6
|
%
|
2,869
|
10.8
|
%
|
|||||||
(Loss)
income from operations
|
(1,059
|
)
|
(3.7
|
)%
|
341
|
1.3
|
%
|
||||||
Interest
expense
|
426
|
1.5
|
%
|
374
|
1.4
|
%
|
|||||||
Loss
before benefit from income taxes
|
(1,485
|
)
|
(5.2
|
)%
|
(33
|
)
|
(0.1
|
)%
|
|||||
Benefit
from income taxes
|
-
|
-
|
%
|
(13
|
)
|
(0.0
|
)%
|
||||||
Net
loss
|
$
|
(1,485
|
)
|
(5.2
|
)%
|
$
|
(20
|
)
|
(0.1
|
)%
|
By: | /s/ Jay Gelman | |
Jay
Gelman
|
||
CEO
and Chairman of the Board
|
By: | /s/ Stephen Agress | |
Stephen
Agress
|
||
Executive
Vice President and Chief Financial
Officer
|