UNITES STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 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
(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) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act of 1934 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
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: As of
September 13, 2000, there were 2,120,530 shares of common stock,
par value $.0002 per share.
Transitional small business disclosure format (check one)
Yes No X
Page 1 of 14.
There is no Exhibit Index.
INDEX
Page
69: Part I. Financial Information:
72: Item 1. Consolidated Financial Statements.
75: Consolidated Balance Sheets at July 31, 2000 and
October 31, 1999 3-4
79: Consolidated Statements of Income for the three
and nine months ended July 31, 2000 and 1999 5
83: Consolidated Statements of Cash Flows for the
nine months ended July 31, 2000 and 1999 6-7
8-9
90: Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation. 10-12
94: Part II. Other Information:
13
13
14
PART I. FINANCIAL INFORMATION
114: <TABLE>
JLM COUTURE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
119: <CAPTION>
July 31, October 31,
2000 1999
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 240,345 $ 180,716
Accounts receivable, net of allowance
for doubtful accounts and trade
discounts - $450,000 at July 31,
2000 and $300,000 at October 31, 1999 4,230,573 2,873,319
Inventories 3,551,681 3,241,480
Prepaid expenses and other current assets 434,044 336,346
Deferred income taxes 56,934 56,934
Note receivable-current portion - 45,000
Total current assets 8,513,577 6,733,795
Property and equipment - at cost net of
accumulated depreciation and amortization
of $560,541 at July 31, 2000 and
$502,656 at October 31, 1999 200,847 233,615
Goodwill, net 242,961 253,524
Samples, net of accumulated amortization
of $285,677 at July 31, 2000 and
$134,851 at October 31, 1999 210,232 324,833
Other assets 165,615 87,530
$9,333,232 $7,633,297
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
JLM COUTURE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
July 31, October 31,
2000 1999
(Unaudited)
<S> <C> <C>
Current liabilities
Revolving line of credit $ 550,000 $ 750,000
Accounts payable 1,455,978 693,253
Income taxes payable 1,009,276 707,712
Accrued expenses and
other current liabilities 300,547 313,568
Total current liabilities 3,315,801 2,464,533
Other liabilities 23,239 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 2,109,905 at July 31, 2000
and 2,059,905 at October 31, 1999;
Outstanding 2,029,405 at July 31,
2000 and 2,012,905 at October 31,
1999 421 411
Additional paid-in capital 3,253,977 3,175,237
Retained earnings 3,380,734 2,548,209
6,635,132 5,723,857
Less: Note receivable and accrued
interest (441,715) (467,465)
Treasury stock at cost:
80,500 shares at April 30,
2000 and 47,000 at October
31, 1999 (199,225) (121,324)
Total shareholders' equity 5,994,192 5,135,068
$9,333,232 $7,633,297
214: See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
JLM COUTURE, INC.
STATEMENT OF INCOME
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 2000 AND 1999
(Unaudited)
218: <CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $6,022,139 $5,409,904 $15,593,508 $14,341,425
Cost of goods sold 3,689,937 3,268,123 9,666,484 8,722,521
Gross profit 2,332,202 2,141,781 5,927,024 5,618,904
Selling, general and
administrative
expenses 1,776,585 1,632,034 4,411,792 4,169,934
Operating income 555,617 509,747 1,515,232 1,448,970
Interest expense, net
of interest income 12,269 18,739 42,707 72,435
Income from operations
before provision for
income taxes 543,348 491,008 1,472,525 1,376,535
Provision for income
taxes 240,000 204,624 640,000 585,410
Net income $ 303,348 $ 286,384 $ 832,525 $ 791,125
Net income per common
and common equivalent
share
Basic $ 0.15 $ 0.14 $ 0.41 $ 0.39
Diluted $ 0.15 $ 0.14 $ 0.41 $ 0.38
Weighted average number
of common equivalent
shares
Basic 2,014,823 2,043,181 2,013,626 2,011,020
Diluted 2,041,459 2,097,724 2,044,571 2,074,387
265: See accompanying notes to financial statements.
</TABLE>
<TABLE>
JLM COUTURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
NINE MONTHS ENDED
JULY 31,
2000 1999
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 832,525 $ 791,125
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 219,280 212,694
Provision for doubtful accounts and trade
discounts 150,000 25,000
Changes in operating assets and liabilities
(Increase) in accounts receivable (1,507,254) (1,146,492)
(Increase) in inventories (310,201) (961,240)
Decrease (increase) in prepaid expenses
and other current assets (97,698) 268,742
(Increase) decrease in other assets and
samples (35,560) 50,814
Increase in accounts payable 762,725 256,712
Increase (decrease) in income taxes
payable and other current liabilities 288,543 528,447
(Decrease) in long term liabilities (10,457) (10,586)
Net Cash (used in) provided by Operating
Activities 291,903 15,216
Cash Flows From Investing Activities
Purchase of property and equipment (25,123) 0
Net Cash used in Investing Activities (25,123) 0
Cash Flows from Financing Activities
Net (decrease) increase in short term
borrowing (200,000) 50,000
Payments of notes receivable 70,750 0
Purchase of treasury stock (77,901) (23,948)
Net Cash provided by Financing Activities (207,151) 26,052
Net increase (decrease) in cash 59,629 41,268
Cash, beginning of year 180,716 107,713
Cash, end of period $ 240,345 $ 148,981
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JLM COUTURE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
JULY 31, 1999 and 1998
(Unaudited)
Supplemental Disclosures of Cash Flow Information;
<CAPTION>
2000 1999
<S> <C> <C>
Cash paid during the year for:
Interest $ 58,697 $ 96,452
Income taxes $340,000 $150,000
Non-cash transactions
Common Stock issued in exchange
for note receivable from employee $ - $450,000
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
JLM COUTURE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.
The consolidated balance sheets as of July 31, 2000, the
consolidated statements of income for the nine month periods ended
July 31, 2000 and 1999 and the consolidated statements of cash
flows for the nine month periods ended July 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
July 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
July 31, 2000 October 31, 1999
Raw materials $2,293,876 $2,094,866
Work-in-process 347,669 128,564
Finished Goods 910,136 1,018,050
$3,551,681 $3,241,480
Note 3. Revolving Line of Credit
The Company had 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 July 31, 2000 and
October 31, 1999 the Company had borrowed $550,000 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.
Note 5. Bad Debt Expense
During the quarter ended July 31, 1999, a former significant
customer of the Company sold substantially all of its assets to a
new entity pursuant to a foreclosure. As a result of that event,
management determined that it was unlikely that it would collect
its outstanding receivables from that customer. The Company had
previously reserved $100,000 against these receivables and recorded
an additional $100,000 pretax bad debt expense in the most recent
quarter, resulting in fully expensing this loss. The entity that
acquired this former customer's assets continues to do substantial
business with the Company and is current in its obligations to the
Company.
Note 6. Issuance of Common Stock
On June 5, 2000, pursuant to an employment agreement the
company issued 50,000 unregistered shares to an employee of the
company. The employment agreement expires on October 31, 2008.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Nine months ended July 31, 2000 as compared to nine months
ended July 31, 1999 and three months ended July 31, 2000 as
compared to three months ended July 31, 1999.
For the first nine months of the Company's fiscal year ending
October 31, 2000 ("Fiscal 2000"), revenues increased to $15,593,508
from $14,341,425, an increase of 8.7% over the same period a year
ago. This increase was due to increased market penetration of the
Company's products, as well as the contribution from the Company's
new line of Lazaro bridesmaids gowns. Gross profit as a percentage
of sales fell to 38.0% from 39.2% as there was a larger
contribution to sales from the more moderately priced bridesmaids
gowns in the current period. Net income was $832,525, an increase
of 5.2% over net income of $791,125 in the first nine months of
Fiscal 1999. Per share earnings for this period was $0.41 per
basic and diluted share, as compared to $0.39 per basic share and
$0.38 per diluted share a year ago. Selling, general and
administrative ( SG&A") expenses as a percentage of sales decreased
to 28.3% of sales as compared to 29.1%.
For the quarter ended July 31, 2000 ("3Q FY2000"), revenues
increased to $6,022,139 from $5,409,904, an increase of 11.3% over
the same period a year ago. This increase was due to increased
market penetration of the Company's products, as well as the
contribution from the new line of Lazaro bridesmaids gowns. Gross
profit as a percentage of sales fell to 38.7% from 39.6% as there
was a larger contribution to sales from the more moderately priced
bridesmaids gowns in the current period. Net income was $303,348,
an increase of 5.9% over net income of $286,384 in the third
quarter of Fiscal 1999. Per share earnings for this period was
$0.15 per basic and diluted share, as compared to $0.14 per basic
and diluted share a year ago. SG&A expenses as a percentage of
sales decreased to 29.5% of sales as compared to 30.2%.
Liquidity and Capital Resources
The Company's working capital increased to $5,197,776 at July
31, 2000 from $4,269,262 at October 31, 1999. The Company's
current ratio decreased modestly to 2.6 to 1 at July 31, 2000 from
2.7 to 1 at October 31, 1999.
During the nine months ended July 31, 2000, the Company
provided $291,903 of cash from operating activities, as compared to
$15,216 in the year earlier period. This difference is primarily
due to the large investment the Company made in inventory during
the nine months last year. The Company used $25,123 of cash in
investing activities in the current year compared to not using any
cash a year ago. The Company used $207,151 of cash from financing
activities during the nine months ended July 31, 2000, as compared
to providing $26,052 of cash in the year earlier period. In the
current year, the Company has reduced by $200,000 its revolving
loan as compared to an increase of $50,000 during the prior year
nine month period.
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 effect 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 or 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 lender.
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities.
On June 5, 2000, the Company issued 50,000 restricted
shares of its Common Stock to a key employee in
accordance with his employment agreement with the
Company. The employment agreement expires on October 31,
2008.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Certificate of Incorporation of the Company as amended
dated December 30, 1994, 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 ("1995
10-K").
3.2 The Company's By-Laws are incorporated by reference to
Exhibit 3.03 of Registration Statement No. 33-10278 NY
filed on Form S-18 ("Form S-18").
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
<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
By:/s/Joseph L. Murphy
Joseph L. Murphy, President
(Duly authorized officer)
Dated: September 18, 2000