FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997
OR
[ ]] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ------ to -------.
Commission file number 0-19000
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JLM COUTURE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3337553
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(State or other jurisdiction of (IRS Employer)
incorporation or organization) Identification No.)
225 West 37th Street, New York, New York 10018
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(212) 921-7058
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Registrant's telephone number, (including area code)
JIM HJELM'S PRIVATE COLLECTION, LTD.
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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 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
-- --
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 1,815,402 shares of common stock, par value $.0002 per share.
<PAGE>
JLM COUTURE, INC.
INDEX
Part 1. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at July 31, 1997 and
October 31, 1996. . . . . . . . . . . . . . . . . . . .3-4
Consolidated Statements of Income for the three
and nine months ended July 31, 1997 and 1996. . . . . . .5
Consolidated Statements of Cash Flows for the
nine months ended July 31, 1997 and 1996. . . . . . . . .6
Notes to Consolidated Financial Statements. . . . . . . .7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 9-10
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . .. . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . 11
Signature . . . . . . . . . . . . . . . . . . . . . . . . 12
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<PAGE>
JLM COUTURE, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS
(Unaudited)
ASSETS
July 31, October 31,
1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 266,577 $ 83,807
Accounts receivable, net of allowance
for doubtful accounts and trade dis-
counts - $240,176 at July 31, 1997 and
$196,308 at October 31, 1996 3,487,044 2,590,706
Inventories 1,865,339 1,734,491
Prepaid expenses and other current assets 354,390 289,522
--------- ---------
Total current assets 5,973,350 4,698,526
Property and equipment - at cost net of ac-
cumulated depreciation and amortization
of $399,009 at July 31, 1997 and $353,599
at October 31, 1996 243,873 231,244
Other assets 217,012 194,695
--------- ---------
$6,434,235 $5,124,465
========= =========
See accompanying notes to financial statements.
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<PAGE>
JLM COUTURE, INC.
<CAPTION>
BALANCE SHEETS (continued)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
July 31, October 31,
1997 1996
----------- -----------
<S> <C> <C>
Current liabilities
Note payable $ 921,507 $1,064,955
Accounts payable 1,249,816 850,596
Payroll taxes payable 8,508 97,728
Income taxes payable 230,373 263,946
Accrued expenses and other
current liabilities 571,894 436,134
--------- ---------
Total current liabilities 2,982,098 2,713,359
--------- ---------
Other liabilities 75,836 71,937
--------- ---------
Shareholders' equity
Preferred stock - $.0001 par value,
authorized 1,000,000 shares;
issued and outstanding- none - -
Common stock - $.0002 par value,
authorized 10,000,000 shares;
issued and outstanding 1,808,203 at
July 31, 1997 and 1,637,823 at
October 31, 1996 361 328
Additional paid-in capital 2,455,492 2,071,572
Accumulated earnings 984,188 331,009
--------- ---------
3,440,041 2,402,909
Less: Note receivable and accrued
interest (58,750) (58,750)
5,000 shares held in treasury (4,990) (4,990)
-------- ---------
Total shareholders' equity 3,376,301 2,339,169
--------- ----------
$6,434,235 $5,124,465
========= ==========
See accompanying notes to financial statements.
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<PAGE>
JLM COUTURE, INC.
<CAPTION>
STATEMENT OF INCOME
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 1997 AND 1996
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $4,280,275 $3,902,308 $11,445,427 9,182,059
Cost of goods sold 2,575,531 2,650,996 7,050,485 6,044,636
--------- ---------- ---------- ----------
Gross profit 1,704,744 1,251,312 4,394,942 3,137,423
Selling, general and
administrative ex-
penses 1,170,576 962,512 3,028,666 2,518,526
--------- ---------- --------- ---------
Income from continu-
ing operations before
provision for income
taxes 534,168 288,800 1,366,276 618,897
Provision for income
taxes 261,742 130,000 669,475 250,000
--------- ---------- --------- ---------
Net income $ 272,426 $ 158,800 $ 696,801 $368,897
======== ======== ========= =========
Net income per common
and common equivalent
share
Primary $ 0.14 $ 0.11 $ 0.36 $ 0.26
======== ======== ========= =========
Fully diluted $ 0.14 $ 0.10 $ 0.36 $ 0.23
======== ======== ========= =========
See accompanying notes to financial statements.
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<PAGE>
JLM COUTURE, INC.
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
JULY 31,
1997 1996
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<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 696,801 $ 368,897
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 45,410 29,835
Accrued interest on note receivable - (2,625)
Provision for doubtful accounts and trade
discounts 43,868 136,330
Changes in operating assets and liabilities
Increase in accounts receivable (940,206) (885,671)
(Increase) decrease in inventories (130,848) 53,314
Decrease in note receivable - 8,505
Decrease in deferred income taxes - 45,556
(Increase) decrease in prepaid expenses
and other current assets (83,484) 31,219
(Increase) in security deposits
and other assets (22,317) (5,096)
Increase in accounts payable 399,220 423,941
Increase (decrease) in payroll taxes
payable and other current liabilities 12,967 (133,484)
Increase (decrease) in long term
liabilities 3,899 (15,377)
--------- ---------
Net Cash (used in) Operating Activities 25,310 55,344
--------- ---------
Cash Flows From Investing Activities
Purchase of property and equipment (58,039) (54,308)
Investment in Subsidiary (25,000) -
-------- ---------
Net Cash used in Investing Activities (83,039) (54,308)
-------- ---------
Cash Flows from Financing Activities
Net (reductions) from short term
borrowing (143,448) (66,039)
Proceeds from sale of common stock 300,979 50,000
Proceeds from exercise of options 82,968 -
-------- ---------
Net Cash (used) provided by Financing Activities 240,499 (16,039)
-------- ---------
Net increase (decrease) in cash 182,770 (15,003)
Cash, beginning of year 83,807 36,645
-------- ---------
Cash, end of period $ 266,577 $ 21,642
========= =========
See accompanying notes to financial statements.
</TABLE>
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<PAGE>
JLM COUTURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(continued)
Note 1.
The balance sheet as of July 31, 1997, the statements of income for the nine
month periods July 31, 1997 and 1996 and the statements of cash flows for
the nine month periods ended July 31, 1997 and 1996 have been prepared by
the company, without audit. In the opinion of management, all adjustments
necessary to present fairly the financial position, results of operations
and cash flows, as of July 31, 1997 and for all periods presented have been
made. The results of operations are not necessarily indicative of the
results to be expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-KSB for its fiscal year ended
October 31, 1996 which was filed with the Securities and Exchange
Commission.
Note 2.
Composition of Inventory
Fiscal Quarter Ended Fiscal Year Ended
July 31, 1997 October 31, 1996
-------------------- -----------------
Raw materials $ 1,022,190 $ 755,536
Work - in - process 181,363 103,056
Finished Goods 661,786 875,899
--------- ---------
$ 1,865,339 $ 1,734,491
--------- ---------
Note 3. Notes Payable
In February 1996, the Company entered into a $1,500,000 revolving loan
agreement (the "Credit Line") with CBC of New York Inc. (the "Bank"), which
bears interest at the rate of 12.25% per annum. The Credit Line was
increased to $1,700,000 in July 1996. The Bank is secured by a first lien
on all of the Company's accounts receivable and the personal guaranties of
Jim Hjelm, Joseph L. Murphy and Joseph O'Grady, officers and/or shareholders
of the Company. The balances outstanding as of July 31, 1997 and October
31, 1996 were $921,507 and $1,064,955, respectively.
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<PAGE>
JLM COUTURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(continued)
Note 4. Acquisition
On May 1, 1997, the Company acquired all of the outstanding shares of
stock of Alvina Valenta Couture Collection, Inc. ("Alvina Valenta") for
36,400 shares of Common Stock of the Company and $25,000.
The operations of Alvina Valenta are included in the Company's
financial statements as of the date of acquisition.
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<PAGE>
JLM COUTURE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Results of Operations
Three months ended July 31, 1997 as compared to three months ended July 31,
1996 and nine months ended July 31, 1997 as compared to nine months ended
July 31, 1996.
For the first nine months of the Company's fiscal year ending October
31, 1997 ("Fiscal 1997"), revenues increased to $11,445,427 from $9,182,059
an increase of 24.6% over the same period a year ago. Net income was
$696,801 or $.36 per share for this period as compared to net income of
$368,897 or $.26 per share in the first nine months of Fiscal 1996. Gross
profit as a percentage of sales increased to 38.4% from 34.2% in the first
nine months of the prior year largely due to volume efficiencies. Selling,
general and administrative expenses ("SGA Expenses") as a percentage of net
sales decreased to 26.5% in the current period as compared to 27.4% in the
prior period due to a faster increase in net sales as compared to SGA
Expenses.
For the quarter ended July 31, 1997, revenues increased to $4,280,275
from $3,902,308, an increase of 9.6% over the comparable period a year ago.
Net income increased to $272,426 for the quarter ended July 31, 1997 as
compared to $158,800 for the period ended July 31, 1996. Gross profits as
a percentage of sales increased to 39.8% in the quarter ended July 31, 1997
from 32.1% in the year ago. SGA Expenses as a percentage of sales increased
to 27.3% in the current quarter from 24.7% in the comparable period a year
ago due to increased costs relating to the acquisition of the new
subsidiary.
Liquidity and Capital Resources
The Company's working capital increased to $2,991,252 at July 31, 1997
from $1,985,167 at October 31, 1996. The Company's current ratio increased
to 2.0 to 1 at July 31, 1997 from 1.73 to 1 at October 31, 1996.
During the nine months ended July 31, 1997 the Company generated cash
from operating activities of $25,310 as compared to generating $55,344
during the year earlier period. The Company used cash in investing
activities during the nine months ended July 31, 1997 of $83,039 as compared
to $54,308 in the year earlier period. The increase was due to an
investment in a subsidiary. The Company generated cash in financing
activities during the nine months ended July 31, 1997 of $240,499 as
compared to using $16,039 in the year earlier period. The increase was
largely due to increased sales of Common Stock and the exercise of options.
This was partially offset by a greater reduction in short-term borrowings.
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<PAGE>
JLM COUTURE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (Cont.)
During the first quarter of Fiscal 1997, the Company through a private
placement offering consisting of an aggregate of 75,000 shares of Common
Stock and 22,500 warrants to purchase additional shares of Common Stock at
prices ranging from $4.37 to $6.62 were issued for net proceeds of $300,979
(after private placement offering expenses). These funds along with the
Credit Line are expected to be sufficient for the Company to meet its cash
flow requirements.
In the event the Bank does not renew the Credit Line in February 1998,
when it expires, and the Company is unable to obtain a substitute line of
credit, the Company would likely experience a working capital shortage which
could materially disrupt its operations.
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<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On June 25, 1997, at the Company's Annual Meeting of Shareholders, the
Company's shareholders elected management's slate of directors, which
included Messrs. Daniel M. Sullivan, Joseph E. O'Grady and Joseph L. Murphy.
Messrs. Sullivan, O'Grady, and Murphy each received 1,387,460 votes for and
0 votes against. The Company's shareholders approved the Company's adoption
of the 1996 Stock Option Plan by a vote of 906,661 for and 50,314 against.
Finally, the Company's shareholders approved the motion to change the
Company's name to JLM Couture, Inc. by a vote of 1,354,470 for and 31,806
against.
Item 6. Exhibits and reports on Form 8-K.
None.
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<PAGE>
Signature
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JLM COUTURE, INC.
Registrant
s/Joseph L. Murphy
Dated: September 17, 1997 By: -------------------------------------
Joseph L. Murphy
President
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hjelm\897-10q
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 266,577
<SECURITIES> 0
<RECEIVABLES> 3,727,220
<ALLOWANCES> 240,176
<INVENTORY> 1,865,339
<CURRENT-ASSETS> 5,973,350
<PP&E> 642,882
<DEPRECIATION> 399,009
<TOTAL-ASSETS> 6,434,235
<CURRENT-LIABILITIES> 2,982,098
<BONDS> 0
0
0
<COMMON> 361
<OTHER-SE> 3,375,940
<TOTAL-LIABILITY-AND-EQUITY> 6,434,235
<SALES> 4,280,275
<TOTAL-REVENUES> 4,280,275
<CGS> 2,575,531
<TOTAL-COSTS> 1,170,576
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 534,168
<INCOME-TAX> 261,742
<INCOME-CONTINUING> 272,426
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 272,426
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
