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Previous: CROSS A T CO, SC 13D, 2000-02-16 |
Next: VERITAS DGC INC, SC 13G, 2000-02-16 |
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OR 1934
For Quarter Ended December 31, 1999 Commission file number 0-5223
YELLOWAVE CORPORATION
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 11-1771806
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11777 San Vicente Blvd, Los Angeles, California 90049
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 979-8055
-------------
CutCo Industries, Inc., 6900 Jericho Turnpike, Syosset, New York 11791
------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since
last report.
* Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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
Number of common shares outstanding at February 7, 2000 is 942,500
Transitional Small Business Disclosure: Yes No X
<PAGE>ii
YELLOWAVE CORPORATION
FORM 10-QSB
INDEX
Page
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unauditied)
Consolidated Balance Sheets -
December 31, 1999 and June 30, 1999(Audited) 1 - 2
Consolidated Statements of Operations -
Six Months and Three Months Ended December 31,
1999 and 1998 3 - 4
Consolidated Statement of Shareholders
Equity - Six Months Ended December 31, 1999 5
Consolidated Statements of Cash Flows -
Six Months Ended December 31, 1999 and 1998 6
Notes to Unaudited Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
<PAGE>1
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<S> <C> <C>
December 31 June 30
1999 1999
------------ -----------
(unaudited) (audited)
Current assets:
Cash and cash equivalents $ 1,330,284 $ 1,528,108
Marketable securities 0 844,903
Notes and accounts receivable, net 396,742 433,182
Prepaid expenses, taxes and miscellaneous receivables 59,560 38,989
Note receivable - related party 1,385,000 0
------------ ------------
Total current assets 3,171,586 2,845,182
------------ ------------
Property and equipment:
Furniture, fixtures and equipment 67,208 130,253
------------ ------------
Less accumulated depreciation and amortization (25,666) (108,505)
------------ ------------
41,542 21,748
------------ ------------
Other assets:
Notes receivable 0 258,234
Deposits 29,498 22,708
------------ ------------
29,498 280,942
------------ ------------
3,242,626 $3,147,872
============= =============
</TABLE>
(Continued)
See notes to unaudited financial statements
<PAGE>2
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
December 31 June 30
1999 1999
----------- ----------
(Unaudited) (Audited)
Current liabilities:
Accounts payable and accrued expenses $ 120,341 $ 233,123
Income taxes payable 0 31,558
---------- ----------
Total current liabilities 120,341 264,681
---------- ----------
Total liabilities 120,341 264,681
---------- ----------
Shareholders' Equity:
Common stock, $.10 par value, authorized
5,000,000 shares, issued 942,500 shares and
847,123, respectively 94,250 84,713
Additional paid-in capital 1,402,018 904,441
Retained earnings 1,626,017 1,894,037
----------- ----------
Total Equity: 3,122,285 2,883,191
$ 3,242,626 $ 3,147,872
============ ============
</TABLE>
See notes to unaudited financial statements
<PAGE>3
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<S> <C> <C>
SIX MONTHS ENDED DECEMBER 31
----------------------------
1999 1998
------------ -----------
Revenues:
Owned retail stores $ 0 $ 3,343,620
Sales of equipment and products 70,622 111,140
Royalties, service fees and franchise income 597,943 830,091
----------- -----------
668,565 4,284,851
Cost and expenses:
Direct costs of owned retail stores 0 3,197,207
Costs of equipment and products sold 41,754 95,102
Depreciation and amortization 3,550 126,583
Selling, general and administrative expenses 941,302 900,426
Provision for doubtful accounts and notes receivable 0 30,000
----------- -----------
986,606 4,349,318
Other income (loss):
Interest and dividend income 66,299 61,521
Other income(loss), net (17,278) 128,025
----------- -----------
49,021 189,546
----------- -----------
Income (loss) before income taxes (294,523) 125,079
Income taxes (1,000) (1,593)
----------- -----------
Net income (loss) ($268,020) $123,486
----------- -----------
Earnings (loss) per common share ($0.30) $0.16
----------- -----------
Weighted average number of common shares outstanding 894,000 795,454
=========== ===========
</TABLE>
See notes to unaudited financial statements
<PAGE>4
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<S> <C> <C>
THREE MONTHS ENDED DECEMBER 31
------------------------------
1999 1998
------------- ------------
Revenues:
Owned retail stores $ 0 $ 1,707,982
Sales of equipment and products 43,842 73,842
Royalties, service fees and franchise income 319,465 384,504
------------- ------------
363,307 2,166,328
------------- ------------
Cost and expenses:
Direct costs of owned retail stores 0 1,636,142
Costs of equipment and products sold 20,946 64,202
Depreciation and amortization 1,775 62,607
Selling, general and administrative expenses 332,395 458,623
Provision for doubtful accounts and notes receivable 0 15,000
------------- ------------
(355,116) (2,236,574)
Other income (loss):
Interest and dividend income 38,102 30,004
Other income(loss), net (17,278) 52,771
------------- ------------
(20,824) 82,775
------------- ------------
Income before income taxes 29,015 12,529
Income taxes 1,000 (1,360)
------------- ------------
Net income $ 28,015 $13,889
------------- ------------
Earnings (loss) per common share $ 0.03 $ 0.02
------------- ------------
Weighted average number of common shares outstanding 894,000 806,125
============= ============
</TABLE>
See notes to unaudited financial statements
<PAGE>5
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C>
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
--------- ----------- ------------ ----------- -----------
Balance at July 1, 1999 847,125 $ 84,713 $ 904,441 $1,894,037 $2,883,191
Issuance of new shares 100,000 $ 10,000 $ 527,500 $ 537,500
Net Loss (268,020) ($295,523)
Acquisition and retirement of
common stock average cost
of $6.57 4,625 (463) (29,923) ($30,386)
-------- ----------- ------------ ----------- -----------
Balance at December 31,
1999 (unaudited) 942,500 $ 94,250 $ 1,402,018 $1,626,017 $3,094,782
-------- ----------- ------------ ----------- -----------
</TABLE>
<PAGE>6
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<S> <C> <C>
SIX MONTHS ENDED DECEMBER 31,
-----------------------------
1999 1998
------------ --------------
Cash flows from operating activities:
Net income (loss) ($268,020) $ 123,486
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 3,550 126,583
Provision for doubtful accounts and notes receivable 0 15,000
Changes in operating assets and liabilities, net of effect of
acquisition and sale:
Merchandise inventory 0 (12,277)
Prepaid expenses, taxes and miscellaneous receivables (20,571) 52,287
Deposits and assets held for sale (6,792) 115,699
Accounts payable and accrued expenses (112,782) (220,441)
Income taxes payable (31,558) (24,456)
Other (7,096) (7,000)
------------- -----------
Net cash provided (used) by operating activities (443,269) 169,194
------------- -----------
Cash flows from investing activities:
(Purchases) of property and equipment (16,244) (24,456)
Decrease,(Increase) in marketable securities 844,903 (4,313)
(Increase), decrease in notes receivable 294,674 (248,731)
Related party note receivable (1,385,000) 0
------------ ---------
Net cash used in investing activities (261,667) (277,500)
------------ ---------
Cash flows from financing activities:
Issuance of common stock 537,500 0
Acquitision of treasury stock 30,386 0
------------ ---------
Net cash provided by financing activities 507,114 0
------------ ---------
Increase (decrease) in cash and cash equivalents (197,822) (111,316)
Cash and cash equivalents at beginning of period 1,528,106 753,658
------------ ---------
Cash and cash equivalents at end of period 1,330,284 642,342
------------ ---------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest paid $ 0 $ 0
Income taxes paid $ 31,558 $ 0
</TABLE>
See notes to unaudited financial statements
<PAGE>7
YELLOWAVE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared without audit
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of the Securities
and Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended December 31,
1999 are not necessarily indicative of the results that may be expected for the
year ending June 30, 2000. For further information, refer to the consolidated
financial statements and footnotes as of June 30, 1999 included in the Company's
Annual Report on Form 10-KSB for the Company's fiscal year then ended.
<PAGE>8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Six Months Ended December 31, 1999
LIQUIDITY AND CAPITAL RESOURCES:
Cash and cash equivalents were $1,330,284 at December 31, 1999, as compared to
$1,528,000 at June 30, 1999. In addition, as of December 31, 1999, the Company
had sold its portfolio of marketable securities, for approximately $825,000.
The Company issued 100,000 shares of common stock for $537,500.
At December 31, 1999 commitments for capital expenditures and other investments
did not exceed $20,000. The Company believes its cash resources and liquidity
are adequate for its present short and long-term business requirements.
In August 1999, the Company made a $1,385,000 loan with a one year maturity to a
related party.
RESULTS OF OPERATIONS
In the six months ended December 31, 1999, revenues from Company-owned salon
operations were 0 as compared to the six months ended December 31, 1998
($3,300,000). The decrease in revenues is attributable to sale, closure and
abandonment of all company-owned stores as of June 30, 1999.
In the six and three month periods ended December 31, 1999 franchise income
decreased by 17% ($319,465) and 28% ($597,943), respectively, as compared to the
prior periods. At December 31, 1999 there were 148 salons under license as
compared to 176 salons at December 31, 1998.
For the six and three month periods ending December 31, 1999 interest income
increased $5,000 and $8,000 as compared to the prior period. These increases
largely resulted from new interest on note receivable from related party less
income lost from the disposal of marketable securities.
<PAGE>9
Selling, general and administrative expenses for the three month period ended
December 31, 1999 of $332,395 reflects a 8% decrease from comparative period.
Such decline reflects cost reduction program of new management.
The Company's franchising activities, including its sales of franchises, are not
materially affected by seasonal fluctuations, in the volume of business.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Not Applicable
<PAGE>10
YELLOWAVE CORPORATION AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
YELLOWAVE CORPORATION
(Registrant)
/s/ RICHARD ARONS
--------------------------------
Richard Arons
President
/s/ LAURA BALLEGEER
--------------------------------
Laura Ballegeer
Secretary
DATE: February 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED BY THE 10-QSB FOR
THE PERIOD ENDED DECEMBER 31, 1999 FOR YELLOWAVE CORPORATIION AND IS QUALIFIED
BY ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 1,330,284
<SECURITIES> 0
<RECEIVABLES> 1,781,742
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,171,586
<PP&E> 67,208
<DEPRECIATION> 25,666
<TOTAL-ASSETS> 3,242,626
<CURRENT-LIABILITIES> 120,341
<BONDS> 0
0
0
<COMMON> 942,500
<OTHER-SE> 3,028,035
<TOTAL-LIABILITY-AND-EQUITY> 3,242,626
<SALES> 668,565
<TOTAL-REVENUES> 717,586
<CGS> 986,606
<TOTAL-COSTS> 986,606
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (294,523)
<INCOME-TAX> (1,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (268,020)
<EPS-BASIC> (.30)
<EPS-DILUTED> (.30)
</TABLE>
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