UNITED 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 April 30, 2000
[ ] 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
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed
since last report)
The number of shares outstanding of the issuer's common stock,
par value $.0002 per share, as of June 12, 2000 was 2,120,530.
Transitional Small Business Disclosure Format (check one):
Yes No X
Page 1 of 15
The Exhibit Index is located on page 15.
JLM COUTURE, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements.
Balance Sheets at April 30, 2000 and
October 31, 1999 3-4
Statements of Income for the three and six
months ended April 30, 2000 and 1999 5
Statements of Cash Flows for the
six months ended April 30, 2000 and 1999 6-7
Notes to Financial Statements 8-9
Item 2. Management's Discussion and Analysis
or Plan of Operation. 10-12
PART II. OTHER INFORMATION:
Item 2. Changes in Securities. 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
April 30, October 31,
2000 1999
(Unaudited)
Current assets:
Cash and cash equivalents $ 134,152 $ 180,716
Accounts receivable, net of allowance
for doubtful accounts and trade
discounts - $375,000 at April 30,
2000 and $300,000 at October 31, 1999 3,986,227 2,873,319
Inventories 3,406,338 3,241,480
Prepaid expenses and other current assets 449,453 336,346
Deferred income taxes 56,934 56,934
Note receivable-current portion - 45,000
Total current assets 8,033,104 6,733,795
Property and equipment - at cost net of
accumulated depreciation and amortization
of $539,559 at April 30, 2000 and
$502,656 at October 31, 1999 221,829 233,615
Goodwill, net 246,482 253,524
Samples, net of accumulated amortization
of $222,364 at April 30, 2000 and
$134,851 at October 31, 1999 273,545 324,833
Other assets 85,203 87,530
$8,860,163 $7,633,297
See accompanying notes to consolidated financial statements
JLM COUTURE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
April 30, October 31,
2000 1999
(Unaudited)
Current liabilities
Revolving line of credit $ 650,000 $ 750,000
Accounts payable 1,598,874 693,253
Income taxes payable 769,276 707,712
Accrued expenses and
other current liabilities 168,599 313,568
Total current liabilities 3,186,749 2,464,533
Other liabilities 26,724 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 April 30, 2000
and 2,059,905 at October 31, 1999;
Outstanding 2,003,905 at April 30,
2000 and 2,012,905 at October 31, 1999 411 411
Additional paid-in capital 3,175,237 3,175,237
Retained earnings 3,077,386 2,548,209
6,253,034 5,723,857
Less: Note receivable and accrued
interest (464,215) (467,465)
Treasury stock at cost:
56,000 shares at April 30,
2000 and 47,000 at October
31, 1999 (142,129) (121,324)
Total shareholders' equity 5,646,690 5,135,068
$8,860,163 $7,633,297
See accompanying notes to consolidated financial statements
JLM COUTURE, INC.
STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS
ENDED APRIL 30, 2000 AND 1999
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
2000 1999 2000 1999
Net sales $5,565,568 $5,169,411 $9,571,369 $8,931,521
Cost of goods sold 3,536,298 3,219,894 5,976,547 5,454,398
Gross profit 2,029,270 1,949,517 3,594,822 3,477,123
Selling, general and 1,453,578 1,359,086 2,635,207 2,537,900
administrative ex-
penses
Operating income 575,692 590,431 959,615 939,223
Interest expense, net of 14,311 29,446 30,438 53,696
interest income
Income from operations 561,381 560,985 929,177 885,527
before provision for
income taxes
Provision for income
taxes 242,000 242,856 400,000 380,786
Net income $ 319,381 $ 318,129 $ 529,177 $ 504,741
Net income per com-
mon and common equi-
valent share
Basic $ 0.16 $ 0.16 $ 0.26 $ 0.25
Diluted $ 0.16 $ 0.15 $ 0.26 $ 0.24
Weighted average number
of common equivalent
shares
Basic 2,011,817 2,048,799 2,012,361 1,994,673
Diluted 2,043,760 2,106,776 2,045,461 2,062,452
See accompanying notes to financial statements.
JLM COUTURE, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
APRIL 30, 2000 and 1999
2000 1999
Cash Flows from Operating Activities
Net income $ 529,177 $ 504,741
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 131,464 115,438
Provision for doubtful accounts
and trade discounts 75,000 125,000
Changes in operating assets and liabilities
(Increase) in accounts receivable (1,187,908) (1,151,676)
(Increase) in inventories (164,858) (651,063)
(Increase) decrease in prepaid expenses
and other current assets (113,107) 25,093
(Increase) in security deposits
and other assets (33,898) (16,002)
Increase in accounts payable 905,621 681,203
(Decrease) Increase in taxes payable
and other current liabilities (83,405) 234,093
(Decrease) in long term liabilities (6,972) (7,111)
Net cash provided by (used in)
Operating Activities 51,114 (140,284)
Cash Flows From Investing Activities
Purchase of property and equipment (25,123) -
Net cash used in Investing Activities (25,123) -
Cash Flows from Financing Activities
Net proceeds from (reduction of) short
term borrowing (100,000) 150,000
Payments of notes receivable 48,250 -
Purchase of Treasury Stock (20,805) (23,948)
Net Cash provided by (used in) Financing
Activities (72,555) 126,052
Net (decrease) in cash (46,564) (14,232)
Cash, beginning of year 180,716 107,713
Cash, end of period $ 134,152 $ 93,481
See accompanying notes to financial statements.
JLM COUTURE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
APRIL 30, 2000 and 1999
(Unaudited)
Supplemental Disclosures of Cash Flow Information;
2000 1999
Cash paid during the year for:
Interest $ 43,504 $ 78,275
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
JLM COUTURE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.
The consolidated balance sheets as of April 30, 2000, the
consolidated statements of income for the six month periods ended
April 30, 2000 and 1999 and the consolidated statements of cash
flows for the six month periods ended April 30, 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
April 30, 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
April 30, 2000 October 31, 1999
Raw materials $2,097,913 $2,094,866
Work-in-process 497,156 128,564
Finished Goods 811,269 1,018,050
$3,406,338 $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 April 30, 2000
and October 31, 1999 the Company had borrowed $650,000 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 requires annual principal payments of $45,000, with
accrued interest.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Six months ended April 30, 2000 as compared to six months
ended April 30, 1999 and three months ended April 30, 2000 as
compared to three months ended April 30, 1999.
For the first six months of the Company's fiscal year ending
October 31, 2000 ("Fiscal 2000"), revenues increased to $9,571,369
from $8,931,521, an increase of 7.2% over the same period a year
ago. This increase was due to increased market penetration of the
Company's products. Gross profit as a percentage of sales fell to
37.6% from 38.9% as there was a larger contribution to sales from
the more moderately priced "Occasions" line in the current period.
Net income was $529,177, an increase of 4.8% over net income of
$504,741 in the first six months of the Company's fiscal year ended
October 31, 1999 ("Fiscal 1999"). Per share earnings for this
period were $0.26 per basic and diluted share, as compared to $0.25
per basic share and $0.24 per diluted shared a year ago. Selling,
general and administrative ("SG&A") expenses as a percentage of
sales decreased to 27.5% of sales as compared to 28.4%, due to
increased marketing costs in the first quarter of Fiscal 1999.
For the quarter ended April 30, 2000, revenues increased to
$5,565,568 from $5,169,411, an increase of 7.7% over the same
period a year ago. This increase was due to increased market
penetration of the Company's products. Gross profit as a
percentage of sales fell to 36.5% from 37.7% as there was a larger
contribution to sales from the more moderately priced "Occasions"
line in the current period. Net income was $319,381, an increase
of less than 1% over net income of $318,129 in the first quarter of
Fiscal 1999. Per share earnings for this period were $0.16 per
basic share and diluted share, as compared to $0.16 per basic share
and $0.15 per diluted share a year ago. SG&A expenses as a
percentage of sales decreased moderately to 26.1% of sales as
compared to 26.3%.
Liquidity and Capital Resources
The Company's working capital increased to $4,846,355 at April
30, 2000 from $4,269,262 at October 31, 1999 reflecting the profits
for the six months ended April 30, 2000. The Company's current
ratio decreased to 2.5 to 1 at April 30, 2000 from 2.7 to 1 at
October 31, 1999.
During the six months ended April 30, 2000, the Company
provided $51,114 of cash for operating activities, as compared to
using $140,284 during the year earlier period. Accounts
receivable and accounts payable were substantially higher at April
30, 2000 due largely to seasonality factors. 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
$72,555 of cash from financing activities during the six months
ended April 30, 2000, as compared to providing $126,052 a year
earlier.
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 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 shares of Common
Stock to Lazaro Perez pursuant to his employment agreement with the
Company dated November 1, 1998.
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 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
Dated: June 14, 2000 By:s/Joseph L. Murphy
Joseph L. Murphy
President (Authorized officer
and Principal Financial
Officer)
<PAGE>
EXHIBIT INDEX
27 Financial Data Schedule
