x |
Annual
Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
|
o |
Transition
Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
|
Nevada
|
88-0450923
|
|
(State
or Other Jurisdiction
|
(I.R.S.
Employer
|
|
of
Incorporation or Organization)
|
Identification
No.)
|
PART
I
|
1
|
|
ITEM
1.
|
Description
of Business
|
1
|
ITEM
2.
|
Description
of Property
|
10
|
ITEM
3.
|
Legal
Proceedings
|
11
|
ITEM
4.
|
Submission
of Matters to a Vote of Security Holders
|
12
|
ITEM
5.
|
Market
for Common Equity and Related Stockholder Matters
|
13
|
ITEM
6.
|
Management’s
Discussion and Analysis of Financial Condition and
|
|
|
Results
of Operation
|
14
|
ITEM
7.
|
Financial
Statements
|
F-1
|
ITEM
8.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosures
|
30
|
ITEM
8A.
|
Controls
and Procedures
|
30
|
ITEM
8B.
|
Other
Information
|
31
|
ITEM
9.
|
Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance with
Section
16(a) of the Exchange Act.
|
32
|
ITEM
10.
|
Executive
Compensation
|
32
|
ITEM
11.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
32
|
ITEM
12.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
32
|
ITEM
13.
|
Exhibits
|
32
|
ITEM
14.
|
Principal
Accountant Fees and Services
|
32
|
ITEM
1.
|
Description
of Business
|
ITEM
2.
|
Description
of Property
|
ITEM
3.
|
Legal
Proceedings
|
ITEM
4.
|
Submission
of Matters to a Vote of Security
Holders
|
ITEM 5. |
Market
for Common Equity and Related Stockholder
Matters
|
High
|
Low
|
||||||
Year
Ended December 31, 2005
|
|||||||
First
Quarter
|
$
|
17.11
|
$
|
1.16
|
|||
Second
Quarter
|
$
|
25.52
|
$
|
4.64
|
|||
Third
Quarter
|
$
|
10.10
|
$
|
6.98
|
|||
Fourth
Quarter
|
$
|
8.85
|
$
|
4.75
|
|||
Year
Ended December 31, 2006
|
|||||||
First
Quarter
|
$
|
6.21
|
$
|
4.90
|
|||
Second
Quarter
|
$
|
6.70
|
$
|
4.92
|
|||
Third
Quarter
|
$
|
5.45
|
$
|
4.33
|
|||
Fourth
Quarter
|
$
|
4.46
|
$
|
1.50
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and
rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|||||||
Equity
compensation plans
approved
by security holders (1)
|
335,500 | $ | 5.75 | 2,164,500 | ||||||
Equity
compensation plans not
approved
by security holders
|
--
|
--
|
--
|
|||||||
Total
|
335,500 | $ | 5.75 | 2,164,500 |
ITEM 6. |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
·
|
On
March 31, 2006, we entered into a Letter of Intent with Global Fashion
Group, SA (“Global Fashion Group”) to form a new joint venture company
which would have a license to produce, manufacture and distribute
apparel
and accessories for our three principal brands, Antik
Denim,
Taverniti
So Jeans
and Yanuk,
throughout Europe and other territories. The initial term of the
license
was for two years, with automatic renewal for an additional three-year
term if the joint venture achieved target net sales and was not in
breach
of the license. Under the terms of the Letter of Intent, the joint
venture
would pay to us a royalty of fifteen percent (15%) of all net sales
of the
licensed products and would pay guaranteed minimum royalties on an
annual
basis in the aggregate amount of €13.4 million through 2010 assuming the
license to the joint venture is renewed. The Letter of Intent provided
for
an upfront initial license fee of €200,000. The joint venture would have a
right of first refusal to license future brands developed by us and
neither the joint venture nor Global Fashion Group would be permitted
to
engage in competitive activities with respect to the products licensed
to
the joint venture during the term of the license. On October 5, 2006,
we
agreed to terminate the Letter of Intent previously entered into
with
Global Fashion Group because we were unable to come to an agreement
with
Global Fashion Group on the final terms of the license to be held
by the
joint venture company contemplated under the Letter of
Intent.
|
·
|
On
June 19, 2006, we entered into an Agreement and Plan of Merger (the
“Merger Agreement”) with LR Acquisition Corporation, a District of
Columbia corporation and our wholly-owned subsidiary (“LR Acquisition”),
Long Rap, Inc., a District of Columbia corporation (“Long Rap”), the
stockholders of Long Rap and Charles Rendelman, as the Long Rap
stockholders’ representative, pursuant to which LR Acquisition would merge
(the “Merger”) with and into Long Rap with Long Rap surviving the Merger
as our wholly-owned subsidiary. Each holder of an outstanding share
of the
common stock of Long Rap would receive, as merger consideration,
(1) an
amount of cash equal to $16,000,000 divided by the outstanding shares
of
the common stock of Long Rap on a fully-diluted basis, and (2) that
number
of shares obtained by dividing (A) $16,000,000 divided by the closing
price of a share of our common stock, as quoted on the NASDAQ Capital
Market, over the ten trading days immediately preceding the effective
time
of the merger by (B) the number of shares of the common stock of
Long Rap
on a fully-diluted basis. On October 10, 2006, we mutually agreed
with
Long Rap to terminate the Merger Agreement. We determined, along
with Long
Rap, that it would not be in the best interests of our respective
stockholders to proceed with the
Merger.
|
·
|
On
September 15, 2006, we entered into a Joint Venture Agreement Term
Sheet
with Philippe Naouri and Alexandre Caugant, the members of Life &
Death, LLC, pursuant to which we acquired 50% of the membership interests
of L&D. L&D owns the Life
& Death
trademark application and designs, develops, manufactures and distributes
knit apparel under the brand Life
& Death.
We share 50% in the profits and losses of L&D based on our membership
interest in L&D. Alexandre Caugant and Philippe Naouri are the
principal designers of Life
& Death.
|
·
|
On
December 4, 2006, Antik entered into a binding Licensing Term Sheet
with
North Star International, Inc., pursuant to which the parties agree
to
enter into a Licensing Agreement whereby North Star, or its designee,
will
obtain a license to distribute Antik’s knit apparel and hats in all
categories for men and women bearing the Antik Denim trademark in
the
United States and internationally. The license will have a term of
66
months commencing on October 1, 2006, and will be subject to five
renewal
options for one-year terms. Pursuant to the terms of the Licensing
Term
Sheet, upon execution of the Licensing Term Sheet North Star paid
Antik a
fee of $180,000 as an advance against royalties. North Star will
also pay
Antik royalties of 4.5% of net sales up to $4 million, and 10% of
net
sales thereafter, during the first 18 months of the term, and 10%
of all
net sales thereafter. North Star has also guaranteed certain minimum
net
sales during the term of the license. For each renewal term, the
minimum
net sales guaranty will increase by 10% over the previous year’s minimum
net sales guaranty. The Licensing Term Sheet also provides that disputes
involving the license shall be settled by binding
arbitration.
|
Total
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
Thereafter
|
||||||||||
Guaranteed
Minimum Royalties
|
2,702,500
|
275,000
|
752,500
|
1,212,500
|
312,500
|
150,000
|
-
|
|||||||||||||||
Employment
contracts
|
1,326,452
|
480,000
|
480,000
|
366,452
|
0
|
0
|
-
|
|||||||||||||||
Lease
obligations
|
5,573,161
|
554,758
|
569,401
|
584,449
|
576,860
|
592,757
|
2,694,936
|
|||||||||||||||
Total
contractual obligations
|
9,602,113
|
1,309,758
|
1,801,901
|
2,163,401
|
889,360
|
742,757
|
2,694,936
|
· |
successfully
market, distribute and sell our products or enter into agreements
with
third parties to perform these functions on our behalf;
and
|
· |
obtain
the financing required to implement our business
plan.
|
·
|
the
timing of our introduction of new product
lines;
|
·
|
the
level of consumer acceptance of each new product
line;
|
·
|
general
economic and industry conditions that affect consumer spending and
retailer purchasing;
|
·
|
the
availability of manufacturing
capacity;
|
·
|
the
seasonality of the markets in which we
participate;
|
·
|
the
timing of trade shows;
|
·
|
the
product mix of customer orders;
|
·
|
the
timing of the placement or cancellation of customer
orders;
|
·
|
the
weather;
|
·
|
transportation
delays;
|
·
|
quotas
and other regulatory matters;
|
·
|
the
occurrence of charge backs in excess of reserves;
and
|
·
|
the
timing of expenditures in anticipation of increased sales and actions
of
competitors.
|
·
|
Political
instability or acts of terrorism, which disrupt trade with the countries
in which our contractors, suppliers or customers are
located;
|
·
|
Local
business practices that do not conform to legal or ethical
guidelines;
|
·
|
Adoption
of additional or revised quotas, restrictions or regulations relating
to
imports or exports;
|
·
|
Additional
or increased customs duties, tariffs, taxes and other charges on
imports;
|
·
|
Significant
fluctuations in the value of the dollar against foreign
currencies;
|
·
|
Increased
difficulty in protecting our intellectual property rights in foreign
jurisdictions;
|
·
|
Social,
legal or economic instability in the foreign markets in which we
do
business, which could influence our ability to sell our products
in these
international markets; and
|
·
|
Restrictions
on the transfer of funds between the United States and foreign
jurisdictions.
|
·
|
anticipating
and quickly responding to changing consumer
demands;
|
·
|
developing
innovative, high-quality products in sizes and styles that appeal
to
consumers;
|
·
|
competitively
pricing our products and achieving customer perception of value;
and
|
·
|
the
need to provide strong and effective marketing
support.
|
·
|
the
markets in which we operate;
|
·
|
holiday
seasons;
|
·
|
consumer
demand;
|
·
|
climate;
|
·
|
economic
conditions; and
|
·
|
numerous
other factors beyond our control.
|
·
|
make
it difficult for any party to acquire us, even though an acquisition
might
be beneficial to our stockholders;
|
·
|
delay,
defer or prevent a change in control of our
company;
|
·
|
discourage
bids for the common stock at a premium over the market price of our
common
stock;
|
·
|
adversely
affect the voting and other rights of the holders of our common stock;
and
|
·
|
discourage
acquisition proposals or tender offers for our
shares.
|
ITEM
7.
|
Financial
Statements
|
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
F-2 | |
Consolidated
Balance Sheets as of December 31, 2006 and 2005
|
F-3 | |
Consolidated
Statements of Operations for the Years Ended December 31, 2006 and
2005
|
F-4 | |
Consolidated
Statements of Changes in Stockholders’ Equity from
for
the Years Ended December 31, 2006 and 2005
|
F-5 | |
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2006 and
2005
|
F-6 | |
Notes
to the Consolidated Financial Statements
|
F-7 |
2006
|
2005
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
|
$
|
109,031
|
$
|
228,127
|
|||
Due
from factor, net of reserves of $178,801 and $96,849,
respectively
|
1,366,588
|
693,474
|
|||||
Accounts
receivable, net of reserves of $901,941 and $484,421,
respectively:
|
|||||||
-
Purchased by factor with recourse
|
7,662,198
|
4,287,163
|
|||||
-
Others
|
19,312
|
2,504
|
|||||
Inventories,
net of reserves of $1,742,893 and $0, respectively
|
5,394,006
|
9,925,162
|
|||||
Due
from related parties
|
-
|
15,974
|
|||||
Income
taxes receivable
|
2,030,919
|
-
|
|||||
Deferred
income taxes
|
2,488,082
|
492,574
|
|||||
Prepaid
expenses and other current assets
|
396,810
|
351,919
|
|||||
Total
current assets
|
19,466,946
|
15,996,897
|
|||||
Deferred
income taxes
|
-
|
1,671,135
|
|||||
Property
and equipment, less accumulated depreciation
|
1,611,171
|
198,927
|
|||||
Total
assets
|
$
|
21,078,117
|
$
|
17,866,959
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Bank
overdraft
|
$
|
266,788
|
$
|
616,020
|
|||
Accounts
payable
|
2,820,024
|
2,911,598
|
|||||
Short-term
borrowings
|
10,026,814
|
4,583,936
|
|||||
Due
to related parties
|
710,153
|
372,311
|
|||||
Advances
from majority shareholder
|
1,876,991
|
96,875
|
|||||
Income
taxes payable
|
-
|
650,468
|
|||||
Accrued
expenses and other current liabilities
|
2,133,932
|
599,166
|
|||||
Total
current liabilities
|
17,834,702
|
9,830,374
|
|||||
|
|||||||
Stockholders'
equity:
|
|||||||
Common
stock $0.001 par value,
|
|||||||
75,000,000
shares authorized,
|
|||||||
26,057,200
shares issued and outstanding
|
26,057
|
26,057
|
|||||
Additional
paid-in capital
|
4,964,091
|
4,996,752
|
|||||
Retained
earnings (deficit)
|
(1,746,733
|
)
|
3,013,776
|
||||
Total
stockholders' equity
|
3,243,415
|
8,036,585
|
|||||
Total
liabilities and stockholders' equity
|
$
|
21,078,117
|
$
|
17,866,959
|
2006
|
2005
|
||||||
Net
sales
|
$
|
48,996,375
|
$
|
36,365,205
|
|||
Cost
of goods sold
|
35,921,394
|
18,384,869
|
|||||
Gross
profit
|
13,074,981
|
17,980,336
|
|||||
Selling,
distribution & administrative expenses
|
17,082,936
|
10,490,023
|
|||||
Income
(loss) before other expenses and
|
|||||||
provision
for income taxes
|
(4,007,955
|
)
|
7,490,313
|
||||
Other
expenses:
|
|||||||
Interest
expense
|
993,814
|
122,434
|
|||||
Expenses
relating to abandoned acquisition of Long Rap, Inc.
|
437,010
|
-
|
|||||
Expenses
relating to exchange transaction
|
-
|
527,617
|
|||||
Total
other expenses
|
1,430,824
|
650,051
|
|||||
Income
(loss) before provision for income taxes
|
(5,438,779
|
)
|
6,840,262
|
||||
Provision
(benefit) for income taxes
|
(678,270
|
)
|
1,700,651
|
||||
Net
income (loss)
|
$
|
(4,760,509
|
)
|
$
|
5,139,611
|
||
Net
income (loss) per common share, basic and diluted
|
$
|
(0.18
|
)
|
$
|
0.20
|
||
Weighted
average shares outstanding, basic and diluted
|
26,057,200
|
25,698,539
|
|
|
|
|
Shares
Issued
|
|
|
|
|
|
|
||||||||||||
|
|
Members
Equity
|
|
|
|
Par
Value
|
|
Additional
Paid
In
|
|
Retained
|
|
|
|
|||||||||
|
|
Antik
|
|
Taverniti
|
|
Number
|
|
0.001
|
|
Capital
|
|
Earnings
|
|
Total
|
||||||||
Balance,
January 1, 2005
|
$
|
39,056
|
$
|
(143,581
|
)
|
-
|
-
|
-
|
-
|
(104,525
|
)
|
|||||||||||
Contributions
|
1,886,200
|
-
|
-
|
-
|
- | - |
1,886,200
|
|||||||||||||||
Issuance
of shares upon reverse merger
|
- |
-
|
24,447,783
|
24,448
|
(24,448
|
)
|
-
|
-
|
||||||||||||||
Old
Marine Jet shares
|
- |
-
|
1,007,338
|
1,007
|
(1,007
|
)
|
-
|
-
|
||||||||||||||
Change
in tax status of Antik from LLC to Corp. -
|
- |
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||
upon
exchange transaction
|
(1,925,256
|
)
|
-
|
-
|
-
|
3,057,010
|
(1,131,754
|
)
|
-
|
|||||||||||||
Shares
issued to Finder
|
-
|
-
|
102,079
|
102
|
177,515
|
-
|
177,617
|
|||||||||||||||
Acquisition
of Taverniti
|
-
|
-
|
500,000
|
500
|
-
|
(750,500
|
)
|
(750,000
|
)
|
|||||||||||||
Change
in tax status of Taverniti from LLC to Corp.-
|
-
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||
upon
exchange transaction
|
-
|
143,581
|
-
|
-
|
100,000
|
(243,581
|
)
|
-
|
||||||||||||||
Estimated
deferred tax benefit arising from -
|
-
|
-
|
-
|
-
|
-
|
-
|
- | |||||||||||||||
combination
of Taverniti
|
-
|
-
|
-
|
-
|
1,687,682
|
-
|
1,687,682
|
|||||||||||||||
Net
Income for the year
|
-
|
-
|
-
|
-
|
-
|
5,139,611
|
5,139,611
|
|||||||||||||||
Balance,
December 31, 2005
|
-
|
-
|
26,057,200
|
$
|
26,057
|
4,996,752
|
3,013,776
|
8,036,585
|
||||||||||||||
Fair
value of options granted
|
-
|
-
|
-
|
-
|
200,684
|
-
|
200,684
|
|||||||||||||||
Finalization
of deferred tax benefit -
|
||||||||||||||||||||||
arising
from combination of Taverniti
|
-
|
-
|
-
|
-
|
(233,345
|
)
|
-
|
(233,345
|
)
|
|||||||||||||
Net
Income for the year
|
-
|
-
|
-
|
-
|
-
|
(4,760,509
|
)
|
(4,760,509
|
)
|
|||||||||||||
Balance,
December 31, 2006
|
$
|
-
|
$
|
-
|
26,057,200
|
$
|
26,057
|
$
|
4,964,091
|
$
|
(1,746,733
|
)
|
$
|
3,243,415
|
2006
|
2005
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
Income (loss)
|
$
|
(4,760,509
|
)
|
$
|
5,139,611
|
||
Adjustments
to reconcile net income to cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
219,220
|
18,399
|
|||||
Stock
based exchange transaction expense
|
-
|
177,617
|
|||||
Fair
value of stock options granted
|
200,684
|
-
|
|||||
Changes
in assets and liabilities:
|
|||||||
Accounts
receivable
|
(3,391,843
|
)
|
(4,163,994
|
)
|
|||
Due
from factor
|
(673,114
|
)
|
(314,880
|
)
|
|||
Income
taxes receivable
|
(2,030,919
|
)
|
-
|
||||
Inventories
|
4,531,156
|
(7,782,543
|
)
|
||||
Due
to related parties
|
337,842
|
(107,046
|
)
|
||||
Due
from related parties
|
15,974
|
(14,391
|
)
|
||||
Deferred
income taxes
|
(557,718
|
)
|
(475,742
|
)
|
|||
Prepaid
expenses and other current assets
|
(44,891
|
)
|
(213,795
|
)
|
|||
Income
tax payable
|
(650,468
|
)
|
650,468
|
||||
Bank
overdraft
|
(349,232
|
)
|
616,020
|
||||
Accounts
payable
|
(91,574
|
)
|
1,852,417
|
||||
Due
to customers
|
605,578
|
(103,434
|
)
|
||||
Other
current liabilities
|
929,188
|
544,609
|
|||||
Net
cash used in operating activities
|
(5,710,626
|
)
|
(4,176,684
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Purchase
of equipment
|
(1,631,464
|
)
|
(199,960
|
)
|
|||
Net
cash used in investing activities
|
(1,631,464
|
)
|
(199,960
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Short-term
borrowings
|
5,442,878
|
4,583,936
|
|||||
Contribution
of capital
|
-
|
686,200
|
|||||
Distribution
upon Taverniti combination
|
-
|
(750,000
|
)
|
||||
Advances
from majority shareholder
|
1,780,116
|
-
|
|||||
Net
cash provided by financing activities
|
7,222,994
|
4,520,136
|
|||||
Net
(decrease) increase in cash
|
(119,096
|
)
|
143,492
|
||||
Cash
at beginning of period
|
228,127
|
84,635
|
|||||
Cash
at end of the year
|
$
|
109,031
|
$
|
228,127
|
|||
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
|||||||
Cash
paid for income tax
|
$
|
2,551,605
|
$
|
1,565,000
|
|||
Cash
paid for interest
|
$
|
993,814
|
$
|
122,434
|
|||
SUPPLEMENTAL
DISCLOSURE OF NON-CASH FINANCING AND INVESTING
ACTIVITIES:
|
|||||||
Inventory
contributed by a stockholder at its historical cost
|
$
|
-
|
$
|
1,200,000
|
|||
|
|||||||
Value
of common stock issued for finders fee relating to exchange
transaction
|
$
|
-
|
$
|
177,617
|
|||
Deferred
tax asset realized from the combination of Taverniti
|
$
|
233,345
|
$
|
1,687,682
|
Net
income as reported
|
$
|
5,139,611
|
||
Deduct:
total stock-based employee
|
||||
compensation
expense determined under
|
||||
the
fair value method for all vested
|
||||
awards,
net of related taxes
|
(727,554
|
)
|
||
Pro-forma
net income
|
$
|
4,412,057
|
||
Net
income as reported
|
$
|
0.20
|
||
Pro-forma
net income
|
$
|
0.17
|
Dividend
yield
|
—
|
|||
Risk-free
interest rate
|
4.50
|
%
|
||
Expected
volatility
|
46.01
|
%
|
||
Expected
life of options
|
5
years
|
December
31,
|
|
December
31,
|
|
||||
|
|
2006
|
|
2005
|
|||
Raw
Materials
|
$
|
3,583,019
|
$
|
3,850,916
|
|||
Work-in-Process
|
991,775
|
2,842,531
|
|||||
Finished
Goods
|
2,562,105
|
3,231,715
|
|||||
$
|
7,136,899
|
$
|
9,925,162
|
||||
Less:
Inventory valuation allowance
|
(1,742,893
|
)
|
-
|
||||
TOTAL
|
$
|
5,394,006
|
$
|
9,925,162
|
December
31,
|
|
December
31,
|
|
||||
|
|
2006
|
|
2005
|
|||
Furniture
|
$
|
14,294
|
$
|
11,217
|
|||
Leasehold
Improvements
|
1,219,094
|
44,600
|
|||||
Computer
Equipment
|
616,551
|
162,659
|
|||||
1,849,939
|
218,476
|
||||||
Less:
Accumulated depreciation and Amortization
|
(238,768
|
)
|
(19,549
|
)
|
|||
$
|
1,611,171
|
$
|
198,927
|
2006
|
2005
|
||||||
Current
|
|||||||
Federal
|
$
|
(160,360
|
)
|
$
|
1,690,595
|
||
State
|
39,808
|
485,798
|
|||||
Deferred
|
|||||||
Federal
|
(387,312
|
)
|
(397,330
|
)
|
|||
State
|
(170,406
|
)
|
(78412
|
)
|
|||
Provision
for income tax expense
|
$
|
(678,270
|
)
|
$
|
1,700,651
|
2006
|
2005
|
||||||
Statutory
federal rate
|
(34.0
|
%)
|
34.0
|
%
|
|||
State
taxes, net of federal benefit
|
(5.6
|
)
|
3.9
|
||||
Income
not taxed at the Company level
|
0.0
|
(13.9
|
)
|
||||
Change
in valuation allowance
|
25.4
|
0.0
|
|||||
Permanent
differences
|
.4
|
1.2
|
|||||
Other
|
1.3
|
(.4
|
)
|
||||
Effective
tax rate
|
(12.5
|
%)
|
24.8
|
%
|
2006
|
2005
|
||||||
Deferred
tax asset:
|
|||||||
Current:
|
|||||||
Allowance
for doubtful accounts
|
362,920
|
195,554
|
|||||
State
taxes
|
4,510
|
164,356
|
|||||
Reserve
for chargebacks
|
71,945
|
39,096
|
|||||
Inventory
reserve and mark-downs
|
2,037,662
|
29,643
|
|||||
Other
|
11,045
|
63,925
|
|||||
Net
current deferred tax assets
|
2,488,082
|
492,574
|
|||||
Noncurrent:
|
|||||||
Taverniti
combination tax goodwill
|
1,336,440
|
1,671,135
|
|||||
Other
|
46,735
|
-
|
|||||
Valuation
allowance
|
(1,383,175
|
)
|
-
|
||||
Net
noncurrent deferred tax assets
|
-
|
1,671,135
|
|||||
Net
deferred tax asset
|
$
|
2,488,082
|
$
|
2,163,709
|
2005
|
||||
Income
taxes:
|
||||
As
reported
|
$
|
1,700,651
|
||
Proforma
|
2,428,205
|
|||
Net
Income (loss):
|
||||
As
reported
|
$
|
5,139,611
|
||
Proforma
|
4,412,057
|
Employment
Contracts
|
||||
Years
Ending December 31,:
|
||||
2007
|
480,000
|
|||
2008
|
480,000
|
|||
2009
|
480,000
|
|||
2010
|
366,452
|
|||
$
|
1,806,452
|
Lease
Obligations
|
||||
Years
Ending December 31,:
|
||||
2007
|
$
|
554,758
|
||
2008
|
569,401
|
|||
2009
|
584,449
|
|||
2010
|
576,860
|
|||
2011
|
592,757
|
|||
Thereafter
|
2,694,936
|
|||
$
|
5,573,161
|
(e)
|
Purchase
Commitments:
|
(f)
|
Royalty
Agreements:
|
Guaranteed
Minimum Royalties
|
||||||||||
Years
Ending December 31,:
|
"Yanuk"
|
"U"
|
Total
|
|||||||
2007
|
-
|
50,000
|
50,000
|
|||||||
2008
|
137,500
|
75,000
|
212,500
|
|||||||
2009
|
162,500
|
100,000
|
262,500
|
|||||||
2010
|
187,500
|
125,000
|
312,500
|
|||||||
2011
|
-
|
150,000
|
150,000
|
|||||||
$
|
487,500
|
500,000
|
987,500
|
At
December 31, 2006, options outstanding are as follows:
|
||||||||||
Number
of
options
|
Weighted
average exercise price
|
Value
|
||||||||
Balance
at January 1, 2005
|
-
|
|||||||||
Granted
|
427,000
|
|||||||||
Balance
at December 31, 2005
|
427,000
|
$
|
7.18
|
0
|
||||||
Granted
|
270,000
|
$
|
5.20
|
0
|
||||||
Exercised
|
-
|
-
|
||||||||
Cancelled
|
(361,500
|
)
|
$
|
5.20
|
0
|
|||||
Balance
at December 31, 2006
|
335,500
|
$
|
5.75
|
0
|
Options
outstanding
|
Options
exercisable
|
||||||||||||||||||
Exercise
price
|
Number
outstanding
|
Weighted
average
remaining
contractual
life (years)
|
Weighted
average exercise price
|
Number
exercisable
|
Weighted
average
exercise
price
|
||||||||||||||
$
|
8.10
|
62,000
|
8.43
|
$
|
8.10
|
22,000
|
$
|
8.10
|
|||||||||||
$
|
5.30
|
33,500
|
8.62
|
$
|
5.30
|
25,000
|
$
|
5.30
|
|||||||||||
$
|
5.20
|
240,000
|
9.00
|
$
|
5.20
|
-
|
-
|
||||||||||||
Total
|
$
|
5.20
- $8.10
|
335,500
|
8.86
|
$
|
5.75
|
47,000
|
$
|
6.61
|
Dividend
yield
|
—
|
|||
Risk-free
interest rate
|
4.50
|
%
|
||
Expected
volatility
|
46.01
|
%
|
||
Expected
life of options
|
5
years
|
ITEM 8. |
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosures
|
ITEM
8A.
|
Controls
and Procedures
|
ITEM
8B.
|
Other
Information
|
ITEM 9. |
Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance with Section 16(a) of the Exchange
Act.
|
ITEM
10.
|
Executive
Compensation
|
ITEM 11. |
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
ITEM
12.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
ITEM
13.
|
Exhibits
|
ITEM
14.
|
Principal
Accountant Fees and
Services
|
BLUE
HOLDINGS, INC.
|
||
|
|
|
By: |