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 January 31, 1998
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
-------
JLM COUTURE, INC.
------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3337553
-------- ----------
(State or other jurisdiction of (IRS Employer)
incorporation or organization) Identification No.)
225 West 37th Street, New York, New York 10018
-----------------------------------------------------
(212) 921-7058
-----------------------------------------------------
(Registrant's telephone number, including area code)
-----------------------------------------------------
(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: 1,828,973 shares of common stock, par value $.0002 per
share.
<PAGE>
JLM COUTURE, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at January 31, 1998 and
October 31, 1997........................................3-4
Consolidated Statements of Income for the three
months ended January 31, 1998 and 1997....................5
Consolidated Statements of Cash Flows for the
three months ended January 31, 1998 and 1997..............6
Notes to Consolidated Financial Statements................7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........10-11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K...................11
Signature..................................................12
PART I. FINANCIAL INFORMATION
JLM COUTURE, INC.
CONSOLIDATED BALANCE SHEETS AS OF
(Unaudited)
ASSETS
January 31, October 31,
1998 1997
----------- -----------
Current assets:
Cash and cash equivalents $ 286,694 $ 473,694
Accounts receivable, net of allowance
for doubtful accounts and trade dis-
counts - $315,000 at January 31, 1998
and $355,000 at October 31, 1997 3,078,205 2,542,782
Inventories 2,076,980 1,912,049
Prepaid expenses and other current assets 263,483 364,991
--------- ---------
Total current assets 5,705,362 5,293,516
Property and equipment - at cost net of ac-
cumulated depreciation and amortization
of $381,846 at January 31, 1998 and $364,465
at October 31, 1997 269,058 286,439
Goodwill 278,172 281,693
Other assets 386,253 361,653
--------- ---------
$6,638,845 $6,223,301
========= =========
See accompanying notes to financial statements
JLM COUTURE, INC.
CONSOLIDATED BALANCE SHEETS AS OF
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
January 31, October 31,
1998 1997
----------- -----------
Current liabilities
Revolving line of credit $1,185,832 $ 792,707
Accounts payable 992,014 956,849
Current portion of long-term debt 19,428 19,428
Income taxes payable 289,032 430,485
Accrued expenses and
other current liabilities 99,391 164,722
--------- ---------
Total current liabilities 2,585,697 2,364,191
--------- ---------
Long-term debt 62,388 64,523
Other liabilities 59,045 61,581
--------- ---------
121,433 126,104
--------- ---------
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 1,828,973
at January 31, 1998 and 1,828,973
at October 31, 1997 365 365
Additional paid-in capital 2,678,774 2,678,774
Accumulated earnings 1,319,641 1,120,932
--------- ---------
3,998,780 3,800,071
Less: Note receivable and accrued
interest (62,075) (62,075)
1,667 shares held in treasury (4,990) (4,990)
--------- ---------
Total shareholders' equity 3,931,715 3,733,006
--------- ---------
$6,638,845 $6,223,301
========= =========
See accompanying notes to financial statements
JLM COUTURE, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
(Unaudited)
1998 1997
---------- ----------
Net sales $3,318,089 $3,202,533
Cost of goods sold 1,975,701 1,962,887
--------- ---------
Gross profit 1,342,388 1,239,646
Selling, general and
administrative ex-
penses 984,826 856,728
--------- ---------
Income from continu-
ing operations before
provision for income
taxes 357,562 382,918
Provision for income
taxes 158,853 187,630
--------- ---------
Net income $ 198,709 $ 195,288
========= =========
Net income per com-
mon and common equi-
valent share
Primary $ 0.10 $ .10
========= =========
Fully diluted $ 0.10 $ .10
========= =========
See accompanying notes to financial statements
JLM COUTURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
JANUARY 31, 1998 and 1997
(Unaudited)
1998 1997
--------- ---------
Cash Flows from Operating Activities
Net Income $ 198,709 $ 195,288
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 20,902 12,425
Provision for doubtful accounts
and trade discounts (40,000) 3,868
Changes in operating assets and liabilities
(Increase) in accounts receivable (495,423) (716,288)
(Increase) in inventories (164,931) (102,498)
(Increase) decrease in prepaid
expenses and other current assets 101,508 (56,198)
(Increase) decrease in security deposits
and other assets (24,600) 80,213
Increase in accounts payable 35,165 411,459
(Decrease) in taxes payable and
other current liabilities (206,784) (171,989)
(Decrease) in long term liabilities (4,671) (169)
------- -------
Net Cash (used in) Operating Activities (580,125) (343,889)
------- -------
Cash Flows From Investing Activities
Purchase of property and equipment - (26,494)
------- -------
Net Cash used in Investing Activities - (26,494)
------- -------
Cash Flows from Financing Activities
Net proceeds from
short term borrowing 393,125 406,239
Net proceeds from sale of common stock - 300,979
Proceeds from exercise of options - 5,376
------- -------
Net Cash provided by Financing Activities 393,125 712,594
------- -------
Net increase (decrease) in cash (187,000) 342,211
Cash, beginning of year 473,694 83,807
------- -------
Cash, end of period $ 286,694 $ 426,018
======= =======
See accompanying notes to financial statements
JLM COUTURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.
The consolidated balance sheets as of January 31, 1998, the
consolidated statements of income for the three month periods ended
January 31, 1998 and 1997 and the consolidated statements of cash
flows for the three month periods ended January 31, 1998 and 1997
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
January 31, 1998 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, 1997 which was
filed with the Securities and Exchange Commission.
Note 2. Composition of Inventory
Fiscal Quarter Ended Fiscal Year Ended
January, 31, 1998 October 31, 1997
------------------- ------------------
Raw materials $1,051,110 $1,180,107
Work-in-process 279,240 145,670
Finished Goods 746,630 586,272
--------- ---------
$2,076,980 $1,912,049
--------- ---------
Note 3. Revolving Line of Credit
The Company had an available line of credit of up to
$1,700,000 with a financial institution. At January 31, 1998 and
October 31, 1997, the Company had borrowed $1,185,832 and
$1,792,707, respectively, under the line of credit.
On March 12, 1998, the Company refinanced the line of credit
with another financial institution in the amount of $2,000,000.
Borrowings are collateralized by the Company's accounts receivable,
chattel paper and general intangibles.
JLM COUTURE, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 4. Acquisition of Business
On May 1, 1997, the Company acquired Alvina Valenta Couture
Collection, Inc. for a combination of cash and shares of the
Company's common stock. The cash portion of the purchase price
totaled $25,000 and the stock portion of the purchase price
totalled $172,900 and consisted of 36,400 shares of the Company's
common stock valued at $4.75 per share (market price of the
Company's common stock immediately preceding the acquisition date).
The acquisition was accounted for using the purchase method of
accounting, and, accordingly, the purchase price has been allocated
to the assets purchased and the liabilities assumed based upon the
fair values at the date of acquisition. The results of operations
of the acquired business prior to its acquisition is not material
to the Company's consolidated statements of operations. The table
below summarizes the purchase price allocation --
Current assets $98,000
Equipment and leasehold
improvements 2,000
Current liabilities (59,000)
Debt (93,000)
The excess purchase price over net assets acquired (goodwill)
of approximately $282,000 includes $30,000 of transaction costs and
has been reflected in the accompanying consolidated balance sheets
as of October 31, 1997 and January 31, 1998. The results of the
acquired business have been reflected in the accompanying
consolidated statement of operations for the quarter ended January
31, 1998.
<PAGE>
JLM COUTURE, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 5. Long-Term Debt
Long-term debt, which was assumed in connection with the
acquisition of Alvina Valenta Couture Collection, Inc. (See Note
4), consists of the following at October 31, 1997 and January 31,
1998 --
October 31 January 31
1997 1998
Small Business Administration
note payable dated December 20,
1996, with interest payable at
8.25% per annum. Monthly
principal payments of $952
through December 2003. $71,951 $71,816
Small Business Administration
note payable dated May 4, 1994,
with interest payable at 8.5%
per annum. Monthly principal
payments of $667 through May
1999. $12,000 $10,000
------ ------
83,951 81,816
Current portion of long-term
debt (19,428) (19,428)
------ ------
Long-term debt $64,523 $62,388
====== ======
<PAGE>
JLM COUTURE, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Three months ended January 31, 1998 as compared to three
months ended January 31, 1997.
For the first three months of the Company's fiscal year ending
October 31, 1998 ("Fiscal 1998"), revenues increased to $3,318,089
from $3,202,533, an increase of 3.6% over the same period a year
ago. Net income was $198,709 or $.10 per share for this period as
compared to net income of $195,288 or $.10 per share in the first
three months of Fiscal 1997. Gross profit as a percentage of sales
increased to 40.5% from 38.7% in the first three months of the
prior year largely due to the product mix. Selling, general and
administrative expenses as a percentage of net sales was 29.6% in
the current period as compared to 26.8% in the prior period. The
increase in the current period was due to increased marketing
costs.
Liquidity and Capital Resources
The Company's working capital increased to $3,119,665 at
January 31, 1998 from $2,929,325 at October 31, 1997. The
Company's current ratio remained at 2.2 to 1 at January 31, 1998
from 2.2 to 1 at October 31, 1997.
During the three months ended January 31, 1998, the Company
used $580,125 from operating activities as compared to using
$343,989 during the year earlier period. During last year's fiscal
first quarter there was a significant use of funds to reduce
accounts payable. The Company did not use any cash in investing
activities during the three months ended January 31, 1998 as
compared to $26,494 in the year earlier period. The Company
generated $393,125 from financing activities during the three
months ended January 31, 1998 as compared to $712,594 in the year
earlier period. This was due to the sale of the Company's Common
Stock during the prior period.
Safe Harbor Statement
Statements which are not historical facts, including
statements about the Company's confidence and strategies and its
expectations about new and existing products, technologies and
opportunities, market and industry segment growth, demand and
acceptance of new and existing products are forward looking
statements that involve risks and uncertainties. These include,
but are not limited to, product demand and market acceptance risks;
the impact of competitive products and pricing; the results of
financing efforts; the loss of any significant customers of any
business; the effect of the Company's accounting policies; the
effects of economic conditions and trade, legal, social, and
economic risks, such as import, licensing, and trade restrictions;
the results of the Company's business plan and the impact on the
Company of its relationship with its lenders.
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
None.
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
Dated: March 19, 1998 JLM COUTURE, INC.,
Registrant
By: s/Joseph L. Murphy
Joseph L. Murphy
President (Authorized officer
and Principal Financial Officer)
WP51\HJELM\10Q.198
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 286,694
<SECURITIES> 0
<RECEIVABLES> 3,078,205
<ALLOWANCES> 315,000
<INVENTORY> 2,076,980
<CURRENT-ASSETS> 5,705,362
<PP&E> 269,058
<DEPRECIATION> 381,846
<TOTAL-ASSETS> 6,638,845
<CURRENT-LIABILITIES> 2,585,697
<BONDS> 0
0
0
<COMMON> 365
<OTHER-SE> 2,678,774
<TOTAL-LIABILITY-AND-EQUITY> 6,638,845
<SALES> 3,318,089
<TOTAL-REVENUES> 3,318,089
<CGS> 1,975,701
<TOTAL-COSTS> 984,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 357,562
<INCOME-TAX> 158,853
<INCOME-CONTINUING> 198,709
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 198,709
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
