Item 1. Business
COMPANY
Sunstyle Corporation is a Florida corporation whose only asset currently is its 100% ownership of Sunstyle Homes Corporation, which in turn has several consolidated subsidiaries including Sunstyle Homes Corporation of Citrus County and Briarwood Enterprises. The consoli- dated entity is hereafter collectively referred to as "Sunstyle" or the "Company". Sunstyle has been principally engaged in real estate acquisition and development and the construction of single family housing on the west coast of Florida.
In May of 1991, the Company finished construction on its final house and ceased construction activities. During 1993 and 1992 the Company sold its remaining lots in Pinellas and Manatee counties to other developers and builders. During 1995, the company sold its office/storage building in Largo, Florida. The Company's President has continued to manage the affairs of the Company while pursuing other business interests.
The Company continues to seek a possible merger with another company and continue operations as the general economy improves or the Board of Directors may decide to proceed with a liquidation and distribute the proceeds, if any, to its shareholders.
Item 2.
Item 2. Properties
The company does not own any property or land as of December 31, 1998.
Item 3.
Item 3. Legal Proceedings
None.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None. PART II
Item 5.
Item 5. Market for the Registrant's Securities and Related Security Holder Matters
The Company's stock is traded on the Over-The-Counter market. The following table sets forth for the periods indicated the high and low prices for the Company's common stock:
1998 1997 -------- -------- Quarter ended High Low High Low - ------------- ------ ------ ------ ------ All $.25 $.01 $.005 $.005
The Company does not intend to pay dividends on its common stock except in the possible case of a liquidating dividend. Should the Company merge with another company and retain its shares, its future dividend policy will be determined by its Board of Directors in light of the Company's earnings and financial position.
Item 6.
Item 6. Selected Financial Data
1998 1997 1996 1995 1994 ----- ----- ----- ----- ----- (dollar figures in thousands, except per share information) Operating Results: Revenues (1) $ 10 $ 10 $ 9 $ 61 $ 5
Net Income (loss) $ 14 $ 3 $ (1) $ 10 $ (50) Net income (loss) per share $ .01 $ .003 $(.001) $ .01 $(.05)
1998 1997 1996 1995 1994 ----- ----- ----- ----- ----- (dollar figures in thousands, except per share information) Financial Condition: Total assets $ 208 $ 207 $ 205 $ 206 $ 178 Notes payable: Former Parent $ 255 $ 255 $ 255 $ 255 $ 255 Banks 0 0 0 0 0 Total notes -------- -------- -------- -------- ------- payable $ 255 $ 255 $ 255 $ 255 $ 255 ======== ======== ======== ======== ======= Stockholders' equity (deficit) $ (144) $ (158) $ (161) $ (160) $ (170) Book value par share (2) $ (0.13) $ (0.14) $ (0.15) $ (0.15) $ (0.15)
(1) Including revenues of unconsolidated partnerships, revenues were $10,000, $10,000, $9,000, $61,000, and $5,000 for the years ended December 31, 1998, 1997, 1996, 1995, and 1994, respectively.
(2) The per share information is based upon 1,096,014 shares of Common Stock for the years ended December 31, 1998, 1997, 1996, 1995, and 1994.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998, COMPARED TO THE YEAR ENDED DECEMBER 31,
The Company's revenues of $9,625 for 1998 consisted of $9,625 interest earned on savings accounts. The Company's only activity in the year ended December 31, 1998, was administrative.
General and administrative expenses totaled $10,571 for the year ended December 31, 1998, combined with $14,500 of accounts payable which were written off against expenses, resulting in net income for the year of $13,554.
The Company's revenues of $9,602 for 1997 consisted of $9,602 interest earned on savings accounts. The Company's only activity in the year ended December 31, 1997, was administrative.
General and administrative expenses totaled $6,198 for the year ended December 31, 1997, resulting in a net income for the year of $3,404.
YEAR ENDED DECEMBER 31, 1997, COMPARED TO THE YEAR ENDED DECEMBER 31,
The Company's revenues of $9,602 for 1997 consisted of $9,602 interest earned on savings accounts. The Company's only activity in the year ended December 31, 1997, was administrative.
General and administrative expenses totaled $6,198 for the year ended December 31, 1997, resulting in a net income for the year of $3,404.
The Company's revenues of $9,119 for 1996 consisted of $9,119 interest earned on savings accounts. The Company's only activity in the year ended December 31, 1996, was administrative.
General and administrative expenses totaled $10,380 for the year ended December 31, 1996, resulting in net loss for the year of $1,261.
LIQUIDITY AND CAPITAL RESOURCES
Due to continuing losses in a depressed market, the Company ceased construction activities and terminated all employees during May of 1991. All remaining real estate assets have been sold.
The Company's liabilities are primarily to its former Parent in the form of an unsecured note ($255,000), interest on the note and other payables. The Company is currently negotiating the settlement of its outstanding debt to its former Parent.
In addition to the uncertainty discussed above, the Company has sustained substantial net losses and has a deficit net worth at December 31, 1998 of $143,975. These issues raise considerable doubt as to the Company's ability to continue operations. Management has not adopted a plan of liquidation and is currently exploring several possibilities, including selling a major interest in the Company. The consolidated financial statements do not include any adjustments that may result from any of the above events.
Item 8.
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of Sunstyle Corporation Largo, Florida
We have audited the accompanying consolidated balance sheets of Sunstyle Corporation and Subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, changes in stockholders' deficit and cash flows for each of the three years in the period ended December 31, 1998. These consolidated 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 consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sunstyle Corporation and Subsidiaries as of December 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described more fully in Note 5 to the consolidated financial statements, the Company's substantial net losses and deficit net worth of $143,975 raise considerable doubt as to the Company's ability to continue operations. The consolidated financial statements do not include any adjustments regarding this uncertainty.
Spence, Marston, Bunch, Morris & Co. Certified Public Accountants
Clearwater, Florida Date: May 22, 2000
CONSOLIDATED BALANCE SHEETS
December 31,
1998 1997 ----------- ----------- ASSETS
Cash $ 208,477 $ 207,423 ------------ ------------ $ 208,477 $ 207,423 ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Note Payable to Former Parent $ 255,000 $ 255,000 Interest Payable to Former Parent 93,452 93,452 Accounts Payable and Accrued Expenses 4,000 16,500 ------------ ------------ 352,452 364,952 ------------ ------------ Stockholders' Deficit: Common Stock; $.10 Par Value; Authorized 10,000,000 Shares; Issued and Outstanding 1,096,014 Shares 109,601 109,601 Additional Paid-In Capital 1,341,221 1,341,221 Accumulated Deficit (1,594,797) (1,608,351) ------------ ------------ (143,975) (157,529) ------------ ------------
$ 208,477 $ 207,423 ============ ============
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
1998 1997 1996 ----------- ----------- ----------- Revenues: Interest Income $ 9,625 $ 9,602 $ 9,119 Other Income 12,500 0 0 ------------ ----------- ----------- Total Revenues 22,125 9,602 9,119 ------------ ----------- ----------- Cost and Expense: General and Administrative 8,571 6,198 10,380 ---------- ----------- ----------- Total Expenses 8,571 6,198 10,380 ------------ ----------- -----------
Net Income (Loss) $ 13,554 $ 3,404 $ (1,261) ============ =========== ===========
Net Income (Loss) Per Share $ .01 $ .003 $ (.001) ============ =========== =========== Number of Common Shares Outstanding 1,096,014 1,096,014 1,096,014 ============ ============ ===========
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Common Stock Additional ----------------- Paid-In Accumulated Shares Amount Capital Deficit Total ------- ------- --------- ----------- -----
Balances at December 31, 1995 1,096,014 $109,601 $1,341,221 $(1,610,494) $(159,672)
Net Loss - 1996 0 0 0 (1,261) (1,261) --------- -------- ---------- ----------- -------- Balances at December 31, 1996 1,096,014 109,601 1,341,221 (1,611,755) (160,933)
Net Income - 1997 0 0 0 3,404 3,404 --------- -------- --------- ---------- -------- Balances at December 31, 1997 1,096,014 109,601 1,341,221 (1,608,351) (157,529)
Net Income - 1998 0 0 0 13,554 13,554 --------- -------- --------- ---------- --------- Balances at December 31, 1998 1,096,014 $109,601 $1,341,221 $(1,594,797) $(143,975) ========= ======== ========= =========== =========
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
1998 1997 1996 ------- ------- ------- Cash Flow from Operating Activities: Net Income (Loss) $ 13,554 $ 3,404 $ (1,261) Adjustments to Reconcile Net Income --------- --------- --------- (Loss) to Net Cash Provided by (Used In) Operating Activities: (Increase) Decrease in Operating Assets: Notes Receivable 0 0 7,680 Increase (Decrease) in Operating Liabilities: Accounts Payable and Accrued Expenses (12,500) (1,000) 0 ---------- ---------- ---------- Total Adjustments (12,500) (1,000) 7,680 ---------- ---------- ---------- Net Cash Provided by Operating Activities 1,054 2,404 6,419 ---------- ---------- ----------
Net Increase in Cash 1,054 2,404 6,419
Cash at Beginning of Period 207,423 205,019 198,600 ---------- ---------- ---------- Cash at End of Period $ 208,477 $ 207,423 $ 205,019 ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998
NOTE 1 - ORGANIZATION AND OPERATIONS:
Sunstyle Homes Corporation ("Sunstyle") was incorporated in 1976 for the purpose of purchasing and subdividing tracts of land for the sale of developed lots and the construction of single and multi-family residential units on the west coast of Florida.
On August 25, 1988 the former Parent incorporated a new wholly- owned subsidiary, Sunstyle Corporation. All 500 shares of Sunstyle Homes Corporation were exchanged for 1,096,024 shares of Sunstyle Corporation. On the same date, the Board of Directors of the former Parent declared a distribution of Sunstyle Corporation's stock to shareholders of the former Parent in the form of a tax-free spin-off. The effective date of the spin-off was September 30, 1988 and the distribution was made on October 6, 1988. Sunstyle Corporation became a separate, publicly traded entity and has discontinued substantially all relationships with the former Parent.
Sunstyle Corporation, including its consolidated subsidiaries consisting of Sunstyle and Sunstyle - Citrus, are collectively referred to as the "Company".
Due to continuing losses in a depressed market, the Company terminated all employees and ceased construction activities in May of 1991. The Company, including all of its consolidated subsidiaries, is inactive. The Board of Directors has not adopted a plan of liquidation and is considering several options, including selling a majority interest in the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The Company utilizes the accrual basis of accounting whereby revenues are recognized when earned and expenses are recognized as obligations are incurred.
Cash and Cash Equivalents
It is the Company's policy to include all money market funds with an original maturity of three months or less in Cash and Cash Equivalents.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consists principally of cash investments in excess of federally insured limits. The Company places its cash invest- ments with high credit quality financial institutions and in a money market mutual fund that is managed by a wholly owned subsidiary of Raymond James Financial, Inc.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates that affect certain reported amounts and disclosures. These estimates are based on management's knowledge and experience. Accordingly, actual results could differ from these estimates.
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). Under FAS 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
As of December 31, 1998, the Company had a net operating loss carryforward of approximately $2,885,000 for tax purposes which will expire beginning in 2003.
NOTE 3 - NOTES PAYABLE
Notes payable at December 31, 1998 and 1997 consisted of the following: 1998 1997 Note payable to former Parent, ----- ----- unsecured, principal payable on demand $ 255,000 $ 255,000 ========== ==========
Sunstyle has an interest bearing demand note payable to Raymond James Financial, Inc., the Company's former parent. The note bears interest at prime plus one percent. Raymond James Financial, Inc. has an allowance for doubtful accounts for the total amount of interest income receivable from Sunstyle because they do not consider payment of the interest probable. For the same reason, no interest is being accrued on Sunstyle's books for the note payable. There is an understanding between the parties that the note will be paid, as cash becomes available or upon the Company's sale.
NOTE 4 - FEDERAL AND STATE INCOME TAXES:
Substantial losses have been sustained by the Company which raise considerable doubt as to its ability to continue operations. As a result, it is unlikely that the Company will be able to benefit from the deferred tax asset which consists of tax loss carryforwards available as of December 31, 1998. Therefore, a valuation allowance has been established at the full amount of the deferred tax asset.
----- Deferred tax asset $ 1,163,446 Less: valuation allowance (1,163,446) ------------ $ 0 ============ The change in the valuation allowance during 1998 was as follows:
Balance at beginning of year $ 1,168,800 Decrease due to decrease in deferred tax asset 5,354 ---------- Balance at end of year $ 1,163,446 ========== NOTE 5 - CONTINGENCIES AND OTHER EVENTS:
The Company is currently negotiating the settlement of its outstanding debt to its former Parent. Although it is possible a settlement could result in the transfer of essentially all remaining assets to its former Parent, the effect of a final settlement cannot be determined at this time.
In addition to the uncertainty discussed above, the Company has sustained substantial net losses and has a deficit net worth at December 31, 1998 of $143,975. These issues raise considerable doubt as to the Company's ability to continue operations. Management has not adopted a plan of liquidation and is currently exploring several possibilities including selling a majority interest in the Company. The consolidated financial statements do not include any adjustments that may result from any of the above events.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as to persons who serve as directors and Executive Officers of the Company. As provided in the By-laws of the Company the term of office of each Director is one year. Principal Occupation Director Name Age And Other Directorships Since Thomas A. James 57 Chairman of the Board and 1988 Chief Executive Officer of Raymond James Financial, Inc.; Chairman of the Board of Raymond James & Associates, Ralph W. 63 Inc. 1988 Quartetti President of Sunstyle Corporation, President of Sunketch Construction. Unless otherwise indicated, the directors have held the same principal occupations for at least five years.
Committees of the Board of Directors
The Company has two standing committees of the Board. Set forth below is a description of the functions of those committees and the members of the Board who served on such committees.
Audit Committee: The responsibilities of the audit committee include recommending to the Board the independent certified public accountants to conduct the annual audit of the books and accounts of the Company, reviewing the proposed scope of the audit and approving the audit fees to be paid. The audit committee also reviewed with the independent certified public accountants and with the Company's financial staff the adequacy and effectiveness of the internal accounting and financial controls of the Company. The audit committee consists of Mr. James.
Compensation Committee: In prior years, the compensation committee recommended to the Board the salaries of the executive officers of the Company and approved the salaries of all other officers and certain other employees. It also determined, subject to further approval of the Board, the fees for directors, and supervised the administration of all benefit plans and other matters affecting executive compensation. The compensation committee, which is now inactive, included Mr. James and a former director, Mr. Krusen.
Director Compensation
During 1998, no fees or expenses were paid to the directors because there were no Board or Committee meetings. Both of the current directors are significant owners.
Item 11.
Item 11. Executive Compensation
No executive officer received cash or other compensation during 1998.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information is provided below with respect to the beneficial ownership of Sunstyle Common Stock, as of December 31, 1998, of (i) persons owning more than 5% of the Company, (ii) each director of the Company, and (iii) all officers and directors of the Company as a group. Shares Name Beneficially Owned Percent Thomas A. James (1) 447,466 (2) (3) 40.9% Christopher W. James (1) 116,894 (2) 10.6% Carr Securities Corporation 107,229 (4) 9.8% Golda Meir Endowment Corporation 61,500 (7) 5.6% Ralph W. Quartetti 59,193 (5) 5.4% Herbert E. Ehlers 58,898 (6) 5.4%
All Directors & Officers As a Group (2 Persons) 507,222 46.3%
(1) Messrs. Thomas A. James and Christopher W. James are brothers. Their address is 880 Carillon Parkway, St. Petersburg, FL 33716.
(2) Includes (i) 111,320 shares owned by the Robert A. James Trust, established for the benefit of members of the James family, (ii) 4,474 shares owned by the James Grandchildren's Trust, for which trusts Thomas A. and Christopher W. James serve as co-trustees, and (iii) 563 shares owned by Mary S. James.
(3) Includes 66,792 shares owned by the James' Children Annuity Trust, for which Thomas A. James serves as sole trustee.
(4) On February 12, 1991, Carr Securities filed Form 13G with the Securities and Exchange Commission advising that the firm had acquired 109,232 shares in the ordinary course of business as a Broker or Dealer registered under the Securities Exchange Act of 1934 and the shares were not acquired to influence or control the issuer. Carr Securities has sole voting power of these shares. The address of Carr Securities is One Penn Plaza, Suite 4720, New York, NY 10119.
(5) On December 6, 1988, the Board of Directors of Sunstyle agreed to grant to Mr. Quartetti options to purchase 54,588 shares of Sunstyle Common Stock pursuant to the Sunstyle Corporation Incentive Stock Option Plan. The address of Mr. Quartetti is 36460 U.S. Highway 19 North, Palm Harbor, FL 34684.
(6) Mr. Ehlers' address is 2502 Rocky Point Drive, Suite 500, Tampa, FL 33607.
(7) On October 23, 1989, Charles I. Rutenberg filed a Schedule 13-D with the Securities and Exchange Commission advising that he acquired 55,500 shares of Sunstyle Corporation common stock through purchases on the open market. On November 1, 1992, Mr. Rutenberg transferred 61,500 shares to the Golda Meir Center Endowment Corporation, a charitable corporation. These shares are held for investment purposes only.
Item 13.
Item 13. Certain Relationships and Related Transactions
The Company owes interest to Raymond James related to outstanding debt. During 1998, the Company did not engage in any transactions with related parties.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a) Financial statements included with this filing.
b) None
c) None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Palm Harbor, State of Florida, on the 4th day of October, 2000.
SUNSTYLE CORPORATION
By /s/Ralph W. Quartetti Ralph W. Quartetti, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/Ralph W. Quartetti President October 4, 2000 Ralph W. Quartetti
/s/Thomas A. James Director October 4, 2000 Thomas A. James