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, 2000
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 small business issuer 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
(Address of principal executive offices)
(212) 921-7058
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past
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
The number of shares outstanding of the issuer's common stock,
par value $.0002 per share, as of March 17, 2000 was 2,070,530.
<PAGE>
JLM COUTURE, INC.
INDEX
Part I. Financial Information:
Item 1. Financial Statements.
Consolidated Balance Sheets at
January 31, 2000 (unaudited) and
October 31, 1999 3-4
Consolidated Statements of Income
for the Three Months ended January 31,
2000 and 1999 (unaudited) 5
Consolidated Statements of Cash Flows
for the Three Months ended January 31,
2000 and 1999 (unaudited) 6-7
Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 10-12
Part II. Other Information:
Item 2. Changes in Securities and Use of Proceeds. 13
Item 6. Exhibits and Reports on Form 8-K. 13
Signature 14
PART I. FINANCIAL INFORMATION
JLM COUTURE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
January 31, October 31,
2000 1999
(Unaudited)
Current assets:
Cash and cash equivalents 122,031 180,716
Accounts receivable, net of allowance
for doubtful accounts and trade
discounts - $325,000 at January 31,
2000 and $300,000 at October 31, 1999 3,442,267 2,873,319
Inventories 3,352,119 3,241,480
Prepaid expenses and other current assets 363,995 336,346
Deferred income taxes 56,934 56,934
Note receivable-current portion - 45,000
Total current assets 7,337,346 6,733,795
Property and equipment - at cost net of
accumulated depreciation and amortization
of $520,787 at January 31, 2000 and
$502,656 at October 31, 1999 234,918 233,615
Goodwill, net 250,003 253,524
Samples, net of accumulated amortization
of $134,851 at January 31, 2000 and
$210,705 at October 31, 1999 248,979 324,833
Other assets 95,474 87,530
$8,166,720 $7,633,297
See accompanying notes to consolidated financial statements
JLM COUTURE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
January 31, October 31,
2000 1999
(Unaudited)
Current liabilities
Revolving line of credit 850,000 750,000
Accounts payable 1,067,521 693,253
Income taxes payable 677,276 707,712
Accrued expenses and
other current liabilities 192,899 313,568
Total current liabilities 2,787,696 2,464,533
Other liabilities 30,210 33,696
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 2,059,905 at January 31, 2000
and 2,012,905 at October 31, 1999;
Outstanding 2,059,905 at January 31,
2000 and 2,012,905 at October 31, 1999 411 411
Additional paid-in capital 3,175,237 3,175,237
Retained earnings 2,758,005 2,548,209
5,933,653 5,723,857
Less: Note receivable and accrued
interest (463,515) (467,465)
Treasury stock at cost:
47,000 shares at January 31,
2000 and October 31, 1999 (121,324) (121,324)
Total shareholders' equity 5,348,814 5,135,068
$8,166,720 $7,633,297
See accompanying notes to consolidated financial statements
JLM COUTURE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
(Unaudited)
2000 1999
Net sales $4,005,801 $3,762,110
Cost of goods sold 2,440,249 2,234,504
Gross profit 1,565,552 1,527,606
Selling, general and
administrative
expenses 1,181,629 1,178,814
Operating Income 383,923 348,792
Interest expense, net
of interest income of
$5,884 and $214 for 2000
and 1999, respectively 16,127 24,250
Income operations before
provision for income
taxes 367,796 324,542
Provision for income
taxes 158,000 137,930
Net income $ 209,796 $ 186,612
Net income per weighted
average number of common
and common equivalent
share:
Basic $ .10 $ 0.10
Diluted $ .10 $ 0.09
Weighted average number
of common and common
equivalent shares
outstanding:
Basic 2,012,905 1,942,311
Diluted 2,047,162 2,019,893
See accompanying notes to consolidated financial statements
JLM COUTURE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
JANUARY 31, 2000 and 1999
(Unaudited)
2000 1999
Cash Flows From Operating Activities
Net Income $209,796 $186,612
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 97,506 82,881
Provision for doubtful accounts and
trade discounts 25,000 110,000
Changes in operating assets and liabilities
Increase in accounts receivable (593,948) (884,386)
Increase in inventories (110,639) (352,264)
Increase in prepaid
expenses and other current assets (27,649) (17,151)
(Increase) decrease in other assets (7,944) 47,825
Increase in accounts payable 374,268 348,769
Increase (decrease) in income taxes
payable and accrued expenses and other
current liabilities (151,105) 137,007
Decrease in long term liabilities (3,486) (3,486)
Net Cash (Used In) Operating Activities (188,201) (344,193)
Cash Flows From Investing Activities
Purchase of property and equipment (19,434) -
Cash Flows from Financing Activities
Net proceeds from
revolving line of credit 100,000 350,000
Payment on notes received 48,950 -
Net Cash provided by Financing Activities 148,950 350,000
Net increase (decrease) in cash (58,685) 5,807
Cash, beginning of year 180,716 107,713
Cash, end of period $122,031 $113,520
See accompanying notes to consolidated financial statements
JLM COUTURE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
JANUARY 31, 2000 and 1999
(Unaudited)
Supplemental Disclosures of Cash Flow Information;
2000 1999
Cash paid during the year for:
Interest $ 16,118 $ 24,464
Income taxes 190,000 0
Non-cash transactions
Common Stock issued in exchange
for note receivable from employee $ 0 $450,000
See accompanying notes to consolidated financial statements
<PAGE>
JLM COUTURE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.
The consolidated balance sheets as of January 31, 2000, the
consolidated statements of income for the three month periods ended
January 31, 2000 and 1999 and the consolidated statements of cash
flows for the three month periods ended January 31, 2000 and 1999
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, 2000 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, 1999 which was
filed with the Securities and Exchange Commission.
Note 2. Composition of Inventory
Fiscal Quarter Ended Fiscal Year Ended
January, 31, 2000 October 31, 1999
Raw materials $1,956,018 $2,094,866
Work-in-process 311,664 128,564
Finished Goods 1,084,437 1,018,050
$3,352,119 $3,241,480
Note 3. Revolving Line of Credit
The Company has an available line of credit of up to
$2,000,000 with a financial institution. Borrowings are
collateralized by the Company's cash, accounts receivable,
securities, deposits and general intangibles. At January 31, 2000
and October 31, 1999 the Company had borrowed $850,000 and
$750,000, respectively, under the revolving line of credit.
JLM COUTURE, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 4. Sale of Common Stock
On December 22, 1998, an executive of the Company purchased
from the Company 200,000 shares of the Company's Common Stock at a
price of $2.25 per share, the market value of the Company's Common
Stock on that date. The purchase was financed by the executive
executing a ten year promissory note due to the Company in the
amount of $450,000. The promissory note bears interest at 5% per
annum and calls for annual principal payments of $45,000 with
accrued interest.
JLM COUTURE, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Three months ended January 31, 2000 as compared to three
months ended January 31, 1999.
For the first three months of the Company's fiscal year ending
October 31, 2000 ("Fiscal 2000"), revenues increased to $4,005,801
from $3,762,110, an increase of 6.5% over the same period a year
ago. The increase was due to increased market penetration of the
Company's products. Gross profit as a percentage of sales
decreased to 39.1% compared to 40.6% in the first three months of
the prior year. This was due to a greater sales increase in the more
moderately priced, Occassions bridesmaid line, as compared to the higher priced
bridal lines. Selling, general and administrative expenses as a
percentage of net sales was 29.5% in the current period as compared
to 31.3% in the prior period. Net income was $209,796 or $.10 per
basic share and diluted share for this period as compared to net
income of $186,612 or $.10 per basic share and $.09 per diluted
share in the first three months of Fiscal 1999.
Liquidity and Capital Resources
The Company's working capital increased to $4,549,650 at
January 31, 2000 from $4,269,262 at October 31, 1999. The
Company's current ratio decreased to 2.6 to 1 at January 31, 2000
from 2.7 to 1 at October 31, 1999.
During the three months ended January 31, 2000, the Company
used $188,201 from operating activities as compared to using
$344,193 during the year earlier period. This was as a result of the Company's
receivables and inventories growing at a lower amount in the current period
as compared to the year earlier period. The Company used $19,434
in investing activities during the three months ended January 31,
2000 as compared to $0 for January 31, 1999, as the Company purchased
equipment in the current fiscal quarter. The Company generated
$148,950 from financing activities during the three months ended
January 31, 2000 as compared to $350,000 in the year earlier
period, as the Company's need for increased short-term borrowings was less
in the current fiscal quarter.
On December 22, 1998, Mr. Joseph L. Murphy purchased from the
Company 200,000 shares of Common Stock at a price of $2.25 per
share, the market value of such shares on such date. The purchase
was financed by Mr. Murphy executing a ten year promissory note due
to the Company in the principal amount of $450,000. The promissory
note bears interest at 5% per annum and requires annual principal
payments of $45,000 with accrued interest. The purchase was
approved by the unanimous consent of the Board of Directors of the
Company. The Company sold these shares to Mr. Murphy because it
was deemed to be in the best interests of the Company for him to
increase his equity ownership in the Company to better align his
interest with that of the other shareholders of the Company.
Year 2000 Compliance
The Company completed its project that addresses the Year 2000
(Y2K) issue of computer systems and other equipment with embedded
chips or processors not being able to properly recognize and
process date-sensitive information after December 31, 1999. The
Company has completed all programming changes required to make its
computer system Y2K complaint. JLM's computer systems recognize
date sensitive information with dates after December 31, 1999. The
total cost incurred to convert the system had a minimal impact on
earnings.
Introduction Of The Euro
On January 1, 1999, eleven of the fifteen member countries of
the European Union established fixed conversion rates between their
existing sovereign currencies and a new currency called the "Euro."
These countries agreed to adopt the Euro as their common legal
currency on that date. The Euro trades on currency exchanges and
is available for non-cash transactions. Until January 1, 2002, the
existing sovereign currencies will remain legal tender in these
countries. On January 1, 2002, the Euro is scheduled to replace
the sovereign legal currencies of these countries. The Company's
initial international expansion will be in the United Kingdom,
which has not adopted the Euro. The Company will evaluate the
impact the implementation of the Euro will have on its business
operations and no assurances can be given that the implementation
of the Euro will not have material adverse affect on the Company's
business, financial condition and results of operations. However,
the Company does not expect the Euro to have a material effect on
its competitive position. In addition, the Company cannot
accurately predict the impact the Euro will have on currency
exchange rates or the Company's currency exchange risk.
Recent Accounting Pronouncements
In 1997, the Financial Accounting Standards Board issued SFAS
No. 130, "Reporting Comprehensive Income." This standard
establishes requirements for the reporting and display of
comprehensive income and its components in a full set of general
purpose financial statements. Comprehensive income is the total of
net income and all other nonowner changes in equity. The objective
of this statement is to report a measure of all changes in equity
of a company that result from transactions and other economic
events in the period other than transactions with owners. This
standard is effective for the Company's fiscal year beginning
November 1, 1998. The Company does not have any transactions other
than with owners. As such, disclosure of comprehensive income is
not necessary. As this statement relates solely to disclosure
provisions, the Company believes that the adoption of this standard
will not have an effect on its financial position or results of
operations.
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information," ("SFAS 131"). This pronouncement establishes
standards for companies to report information about operating
segments in financial statements based on the approach that
management utilizes to organize the segments within the company for
management reporting and decision making. In addition, SFAS No.
131 requires that companies report disclosures about products and
services, geographic areas and major customers. SFAS No. 131 is
effective for the Company's fiscal year beginning November 1, 1998.
Financial statement disclosures for prior periods are required to
be restated. As this statement relates solely to disclosure
provisions, the Company believes that the adoption of this
statement will not have an effect on its financial position or
results of operations.
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.
<PAGE>
PART II. Other Information.
Item 2. Changes in Securities and Use of Proceeds.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Certificate of Incorporation of the Company, as
amended, incorporated by reference to Exhibit 3.1
of the Company's Annual Report on Form 10-KSB filed
for its fiscal year ended October 31, 1995.
3.2 By-Laws of the Company incorporated by reference to
Exhibit 3.03 of Registration Statement No. 33-10278
NY filed on Form S-18.
27 Financial Data Schedule
(b) 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 20, 2000 JLM COUTURE, INC.,
Registrant
By:s/Joseph L. Murphy
Joseph L. Murphy
President (Authorized
officer and Principal
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 122,031
<SECURITIES> 0
<RECEIVABLES> 3,767,267
<ALLOWANCES> 325,000
<INVENTORY> 3,352,119
<CURRENT-ASSETS> 7,337,346
<PP&E> 755,705
<DEPRECIATION> 520,787
<TOTAL-ASSETS> 8,166,720
<CURRENT-LIABILITIES> 2,787,696
<BONDS> 0
0
0
<COMMON> 411
<OTHER-SE> 5,348,403
<TOTAL-LIABILITY-AND-EQUITY> 8,166,720
<SALES> 4,005,801
<TOTAL-REVENUES> 4,005,801
<CGS> 2,440,249
<TOTAL-COSTS> 2,440,249
<OTHER-EXPENSES> 1,181,629
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,127
<INCOME-PRETAX> 367,796
<INCOME-TAX> 158,000
<INCOME-CONTINUING> 209,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,976
<EPS-BASIC> .10
<EPS-DILUTED> .10
</TABLE>
