<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000 Commission file number 0-5223
YELLOWAVE CORPORATION
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(Exact name of registrant as specified in its charter)
New York 11-1771806
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11777 San Vicente Blvd, Los Angeles, California 90049
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(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
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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 April 10, 2000 is 2,827,486 Transitional
Small Business Disclosure: Yes [ ] No [X]
<PAGE> 2
YELLOWAVE CORPORATION
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Page
------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
March 31, 2000 and June 30, 1999 (Audited) 1 - 2
Consolidated Statements of Operations --
Nine Months and Three Months Ended March 31,
2000 and 1999 3 - 4
Consolidated Statement of Shareholders
Equity -- Nine Months Ended March 31, 2000 5
Consolidated Statements of Cash Flows --
Nine Months Ended March 31, 2000 and 1999 6
Notes to Unaudited Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 5. Other Information 9
(a) Change in business
(b) Sale of assets
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
<PAGE> 3
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
----------- -----------
(unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents (NOTE 2) $ 4,506,967 $ 1,528,108
Marketable securities 0 844,903
Accounts receivable, net (NOTE 2) 340,000 150,861
Note receivable -- related party (NOTE 4) $ 1,385,000 0
----------- -----------
Total current assets $ 6,231,967 2,523,872
----------- -----------
Property and equipment 21,990 0
Accumulated depreciation (2,356) 0
----------- -----------
19,634 0
Assets from Discontinued Operations (NOTE 2) 583,000 624,000
----------- -----------
Other assets:
Deposits $ 6,790 0
----------- -----------
$ 6,841,391 $ 3,147,872
=========== ===========
</TABLE>
(CONTINUED)
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS
-1-
<PAGE> 4
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
---------- ----------
(Unaudited) (Audited)
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 97,740 $ 233,123
Regis Corporation deposit 3,300,000 0
Income taxes payable 1,000 31,558
---------- ----------
Total current liabilities $3,398,740 264,681
---------- ----------
Shareholders' Equity:
Common stock, $.03 par value; authorized
15,000,000 shares; issued 2,827,486 shares and
2,541,375, respectively (NOTE 3) 84,825 76,241
Additional paid-in capital 1,411,579 912,913
Retained earnings 1,946,247 1,894,037
---------- ----------
Total Equity: 3,422,651 2,883,191
---------- ----------
$6,841,391 $3,147,872
========== ==========
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS
-2-
<PAGE> 5
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Interest and dividend Income $ 94,001 $ 84,562
Other Income 14,135 136,667
----------- -----------
$ 108,136 $ 221,229
Cost and expenses:
General and Administrative expenses (762,926) (733,407)
----------- -----------
Loss from continuing operations before income taxes (654,790) (512,178)
----------- -----------
Income taxes (1,000) (1,200)
----------- -----------
Loss from continuing operations (655,790) (513,378)
----------- -----------
Income from discontinuing operations, net of
income taxes and including gain on sale of
assets in 1999 708,000 $ 1,146,000
----------- -----------
Net Income 52,210 $ 632,622
----------- -----------
Basic Loss per common share -- continuing operations ($ 0.26) ($ 0.21)
----------- -----------
Basic Earnings per common share -- discontinuing operations $ 0.27 $ 0.47
----------- -----------
Weighted average number of common shares outstanding
(NOTE 3) 2,510,000 2,397,369
=========== ===========
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS
-3-
<PAGE> 6
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Interest and Dividend Income $ 27,702 $ 21,041
Other Income 31,413 8,642
----------- -----------
$ 59,115 $ 29,683
----------- -----------
Cost and expenses:
General and administrative expenses (66,885) (200,547)
---------- ----------
Income from continuing operations before income taxes (7,770) (170,864)
Income taxes (1,000) (1,000)
Loss from continuing operations (6,770) (171,864)
----------- -----------
Income from discontinuing operations, net of
income tax and including gain on sale of assets -- NOTE 2 329,000 681,000
----------- -----------
Net Income 322,230 $ 509,136
----------- -----------
Basic Loss per common share -- continuing operations 0 ($ 0.07)
----------- -----------
Basic earnings per common share -- discontinued operations $ 0.13 $ 0.28
----------- -----------
Weighted average number of common shares outstanding --
NOTE 3 2,510,000 2,418,000
=========== ===========
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS
-4-
<PAGE> 7
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1999 2,541,375 76,241 912,913 1,894,037 $ 2,883,191
Issuance of new shares 300,000 9,000 528,250 537,250
Net Income -- Nine months --
3/31/2000 52,210 52,210
Acquisition and retirement of
common stock average cost
of $2.19 (13,875) (416) (29,584) (32,000)
----------- ----------- ----------- ----------- -----------
Balance at March 31,
2000 (unaudited) 2,827,486 84,825 1,411,579 1,946,247 $ 3,422,651
=========== =========== =========== =========== ===========
</TABLE>
See notes to unaudited financial statements
-5-
<PAGE> 8
YELLOWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 52,210 $ 632,622
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 2,356 176,434
Changes in operating assets and liabilities,
net of effect of acquisition and sale:
Discontinued Operations 35,113 360,147
Miscellaneous receivables (169,139) 67,210
Accounts payable and accrued expenses (135,383) (346,362)
Accrued and withheld taxes, other than
Income taxes 0 (116,351)
Income taxes payable 30,558 35,036
----------- -----------
Net cash provided (used) by operating activities (245,401) (87,992)
Cash flows from investing activities:
(Purchases) of property and equipment (21,990) (31,399)
Decrease,(Increase) in marketable securities 824,000 (568,615)
(Increase), decrease in notes receivable 0 1,580,000
Related party note receivable (1,385,000) 0
Sale of franchising business - Deposit 3,300,000 0
----------- -----------
Net cash used in investing activities 2,717,010 979,986
----------- -----------
Cash flows from financing activities:
Issuance of common stock 537,250 0
Acquisition of treasury stock (30,000) 0
----------- -----------
Net cash provided by financing activities 507,250 625
----------- -----------
Increase (decrease) in cash and cash equivalents 2,978,859 892,619
Cash and cash equivalents at beginning of period 1,528,108 753,658
----------- -----------
Cash and cash equivalents at end of period $ 4,506,967 $ 1,646,277
----------- -----------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest paid $ 0 $ 0
----------- -----------
Income taxes paid $ 0 $ 0
----------- -----------
</TABLE>
SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS
-6-
<PAGE> 9
YELLOWAVE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2000
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 nine month period ended March 31, 2000
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.
NOTE 2 -- DISCONTINUED OPERATIONS
In March 2000, the Company agreed to sell its franchise business to Regis
Corporation for $3.6 million (3.3 million deposit) and previously sold its
company owned stores for $1.6 million. Accordingly, the financial statements for
2000 and 1999 are restated to reflect continuing operations.
A. Information related to discontinued operations and assets have been
restated for all prior periods presented.
<TABLE>
<CAPTION>
Operations: Nine months Ended Three Months Ended
---------------------------------- ---------------------------------
March 31, 2000 March 31, 1999 March 31, 2000 March 31, 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue $ 999,000 $ 5,653,000 $ 410,000 $ 327,000
Cost of Sales (109,000) (4,547,000) (63,000) (39,000)
Selling, general & administrative (104,000) (542,000) (42,000) (230,000)
------------- ------------- ------------- -------------
Operating Income $ 786,000 564,000 365,000 58,000
Gain on disposition of company-owned
stores 0 709,000 0 709,000
Income taxes (78,000) (127,000) (36,000) (86,000)
------------- ------------- ------------- -------------
Net Income $ 708,000 $ 1,146,000 $ 329,000 $ 681,000
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 2000 As of June, 30, 1999
----------------- -----------------
<S> <C> <C>
Assets:
Receivables -- net $ 503,000 $ 580,000
Inventories 11,000 0
Other current assets 23,000 0
Property -- net 18,000 22,000
Other non-current assets 28,000 22,000
----------------- -----------------
$ 583,000 $ 624,000
----------------- -----------------
</TABLE>
NOTE 3 -- STOCK SPLIT
During the quarter ended March 31, 2000, the Company split the common stock on a
3 for 1 basis and reduced the par value of $.03 per share. All amounts have been
restated to reflect new shares.
NOTE 4 -- SHERA CORPORATION NOTE RECEIVABLE
In August 1999, the company loaned Shera Corporation, an entity controlled by
the companies majority shareholder and Chairman, $1,385,000 at 8% per annum
interest payable monthly and principal due August 2000
-7-
<PAGE> 10
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Nine Months Ended March 31, 1999
LIQUIDITY AND CAPITAL RESOURCES:
Cash and cash equivalents were $4,506,967 at March 31, 2000, as compared to
$1,646,000 at March 31, 1999. The increase is principally due to a $3,300,000
deposit received in March 2000 pursuant to a sales agreement with Regis
Corporation for sale of the companies franchise operations for $3,600,000. The
company sold its marketable securities during fiscal year 2000 ($847,000) at
March 31, 1999 at a loss of approximately $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
Due to the March 1999 sale of company-owned stores and the March 2000 sale of
the companies franchise operations (163 stores at March 31, 1999) the financial
statements reflect income from discontinued operations and loss from continuing
operations of $655,790and $6,770 for the nine and three months ended March 31,
2000, respectively. The company operations consist of interest income used for
the general expenses. The company is seeking several acquisitions of operating
companies at this time.
-8-
<PAGE> 11
PART II -- OTHER INFORMATION
Item 5. Other Information
A. Change in Business
Yellowave Corporation is making the transition from hair salon franchisor to an
incubator of high-tech companies focusing on wireless, telecommunications, fiber
optics, embedded systems and mobile commerce. The company is concentrating on
Israeli companies as acquisition targets. Yellowave is seeking companies that
have successful high technology products and effective management teams that are
capable of growing at an accelerated pace. Yellowave Corporation has reached
agreements in principle and signed letters of intent to acquire Israeli
companies Mobix Communications and FibroLAN Ltd. Both acquisitions are in the
due diligence stage and will be completed by issuance of Company stock. The
majority of the shares to be paid to Mobix Communications and FibroLAN are
contingent on the companies reaching agreed upon financial targets.
Mobix Communications, founded in 1994 provides numerous state-of-the-art
software engines, development tools and solutions for the fast growing market
for wireless data transmission, serving mobile workers and mobile commerce.
Mobix software engines are used to implement new software applications and to
add mobility to embedded systems and terminals via the most widely used
networks. Mobix revenues in 1999 were approximately $551,000.
FibroLAN Ltd. founded in 1996. Makes fiber optic broad-band devices used in two
fast growing segments of the data communications market: local area networks
(LANs) and broad-band access. FibroLAN's technology makes it easy and cost
effective to use a mix of fiber optic cable and copper wire when building a data
network. FibroLAN products are also used to build broad-band networks, whose
explosive growth is being fueled by the worldwide demand for high-speed internet
access. FibroLAN is developing additional products that advance its current
technology and are optimized for broad-band access market. FibroLAN revenues in
1999 were approximately $1,859,444.
B. Sale of Assets
On March 9, 2000, the Registrant agreed to sell substantially all of its assets
relating to its hair care salon business to a wholly-owned subsidiary of Regis
Corporation for $3,6000,000. Of the $3,600,000, the sum of $300,000 was placed
in an escrow account for ninety days pending completion of certain due
diligence requirements. The sale was an arms-length transaction to a
non-affiliate of the Registrant. No brokers or finders fees were paid in regard
to the sale.
The sale was approved by the Registrant's Board of Directors and is being
presented to the shareholders for their approval at a special Meeting of
Shareholders to be held on June 7, 2000.
After completion of the sale, the Registrant intends to pursue its previously
announced strategy of acquiring companies and products involved in high
technology industries.
Item 6. Exhibits and Reports on Form 8-K
a) Not Applicable
b) Reports on Form 8-K
None
-9-
<PAGE> 12
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: APRIL 14, 2000
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000026379
<NAME> YELLOWAVE CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 4,506,967
<SECURITIES> 0
<RECEIVABLES> 1,725,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,231,967
<PP&E> 21,990
<DEPRECIATION> (2,356)
<TOTAL-ASSETS> 6,841,391
<CURRENT-LIABILITIES> 3,398,740
<BONDS> 0
2,827,486
0
<COMMON> 0
<OTHER-SE> 1,946,247
<TOTAL-LIABILITY-AND-EQUITY> 6,841,391
<SALES> 0
<TOTAL-REVENUES> 108,136
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (654,790)
<INCOME-TAX> (1,000)
<INCOME-CONTINUING> (655,790)
<DISCONTINUED> 708,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,210
<EPS-BASIC> ($0.26)
<EPS-DILUTED> ($0.26)
</TABLE>
