SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended March 31, 1999 Commission File Number 0 - 18064
YES CLOTHING CO.
(Exact name of registrant as specified in its charter)
Nevada 95-3768671
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
4695 MacArthur Court, Suite 530, Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 833-2094
______________________
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to
Section 12 (g) of the Act: Common Stock, No Par Value
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 Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
Registrant was required to file such reports), and [2] has been subject to such
filing requirements for the past 90 days. YES NO X
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid price and asked prices of such stock, as of March 1, 2000, was
approximately $1,021,000.
Class Outstanding at March 15, 2000
Common Stock, No par value 12,786,492
Documents Incorporated by Reference: None
<PAGE>
YES CLOTHING COMPANY
INDEX TO ANNUAL REPORT ON FORM 10-KSB
Page
PART I.
Item 1. Business........................................................3
Item 2. Properties......................................................6
Item 3. Legal Proceedings...............................................6
Item 4. Submission of Matters to a Vote of Security Holders.............6
PART II.
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters.....................................7
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................7
Item 7. Financial Statements............................................9
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............................9
PART III.
Item 9. Directors, Executive Officers, Promoters and Control
Persons of the Company; Compliance with Section 16(A)
of the Exchange Act............................................10
Item 10. Executive Compensation.........................................12
Item 11. Security Ownership of Certain Beneficial Owners and
Management.....................................................13
Item 12. Certain Relationships and Related Transactions ................14
Item 13. Exhibits and Reports on Form 8-K...............................14
2
<PAGE>
PART I
Item 1. Business
YES Clothing Co.(R) (the "Company") was incorporated in California in 1982.
Through July 1997, our company designed, contracted for the manufacture of, and
marketed diversified lines of, apparel for women in junior sizes, and for young
men. Our garments were manufactured predominantly in the United States, and were
sold to retail department stores and specialty chains and stores throughout
North America.
On June 4, 1996, Guy Anthome was named chief executive officer in an
attempt to bring our company to profitable operations. On this date, Georges
Marciano and affiliates sold to Mr. Anthome 3,515,000 shares of common stock at
a purchase price of $0.01 per share. Mr. Marciano resigned as a director and
Chairman of the board and agreed to cancel the option and warrant issued in his
favor. Mr. Anthome agreed to become chairman of the board and chief executive
officer. In July 1997, we ceased operations in an effort to reduce our operating
losses due to significant cash deficiencies. At the time we ceased operations,
our liabilities exceeded our assets by approximately $4 million.
On December 17, 1997, we filed for protection from our creditors pursuant
to Chapter 11 of the United States Bankruptcy Code. We requested that the matter
be dismissed in order for us to execute our plan of reorganization with our
creditors, without the assistance of the court.
In January 1998, we added certain members of NuVen Advisors as members of
the board of directors. We needed the corporate finance skills of Mr. Fred Luke,
Jr. to assist us in completing our plan of reorganization. Mr. Luke formed a
plan with certain secured creditors to settle the outstanding claims without the
assistance of the Bankruptcy Court. On March 11, 1998, our petition under
Chapter 11 of the U.S. Bankruptcy Code was dismissed by the Bankruptcy Court.
NuVen Advisors, Inc. ("NuVen"), a company controlled by Mr. Luke, satisfied the
obligations of the Company to Republic Factors Corp., the senior secured
creditor in connection with our factoring agreement. On April 8, 1998, we
satisfied the senior secured creditors totaling $420,000 due to NuVen in
exchange for the YES(R) trademarks. On or about June 30, 1999, NuVen sold its
rights to the YES(R) trademarks to an affiliated company, Scientific NRG
("SNRG").
Our future depends on our ability to execute a plan of reorganization which
consists of the satisfaction of our obligations primarily through the issuance
of shares of common stock. Upon the completion of our plan of reorganization, we
intend to reacquire the Yes Clothing Co. trademarks from SNRG. This will pave
the way for us to raise capital through a private or public offering of
securities; however, there are no assurances that we will be successful in
raising such capital. Upon completing a raise of capital, we plan to secure
licenses for rights to manufacture, distribute and sell clothing and accessories
containing the Yes trademark. We do not intend to operate in the day-to-day
operations of manufacturing, distributing and marking products containing the
Yes brand.
Our principal executive offices are located at 4695 MacArthur Court, Suite
530, Newport Beach, California 92660, and our telephone number at that address
is (949) 833-2094.
3
<PAGE>
The following discusses the historical operations of our company.
Historical Business Strategy
We licensed a number of trademarks and designs (including the GM Surf and
Misfits brands) from Marble Sportswear, Inc., a company controlled by Mr.
Marciano. These licenses were terminated on May 1, 1996. We reformulated our
design and merchandising strategy. Our modified strategy was to increase sales
by reintroducing the YES(R) label into the junior market, by shifting its
product focus from shirts, pants, shorts, vests, T-shirts and sweatshirts made
principally with denim and knit/woven cotton, to production of dresses, skirts,
pants, jackets and tank tops made primarily with cotton/spandex knits and cotton
jersey.
Apparel and Apparel Design
We offered clothing for the women's "junior" market and young men's
markets. Our business was generally divided among five retail selling seasons:
Spring, Summer, Fall, Back-to-School, and Holiday. For each selling season, we
introduced a separate apparel collection each year. Seasonal factors caused some
variance in production and sales levels among fiscal quarters in any fiscal
year, but we do not regard our overall business as highly seasonal.
Junior's. Our clothing for the "junior" market incorporated current styles,
fabrics and colors with a look that was designed to appeal to a broad
cross-section of young women. Clothing for the junior market is characterized by
sizes tailored for youthful figured women. We used primarily denim and, to a
lesser degree, twill, for shirts, pants, shorts, vests, jackets and dresses and
knit and woven cotton for T-shirts, sweatshirts and other types of shirts. We
returned to using classic junior fabrics, primarily cotton and spandex knit,
cotton jersey and denim, in the production of dresses, skirts, pants, tank tops
and jackets. We had previously sought to diversify by licensing branded lines of
apparel, such as Audience and Into Reality. The Audience license was terminated
by us on April 11, 1997, and the Into Reality license was terminated effective
as of July 31, 1997.
Young Men's. We marketed casual apparel for young men under the Body Glove
label. The young men's line, with its distinctive and contemporary look, used
corduroy, cotton and rayon twill and nylon in the production of T-shirts,
sweatshirts, shirts, shorts and pants. We terminated our Body Glove license on
May 9, 1997.
Production
Manufacturing. We manufactured our garments using independent cutting and
sewing contractors located principally in the Los Angeles area. We produced high
quality garments through the use of quality fabrics, insistence on quality
workmanship and use of comprehensive fabric and garment inspection programs.
We acquired fabric from suppliers and supplied such fabric, together with
the garment pattern, to an independent contractor for cutting. The cut fabric
and any buttons, zippers and other trim to be used on the garments were then
delivered to independent sewing contractors. Under our supervision, these
contractors assembled and sewed the fabric and added trim in accordance with
production samples. We also employed a production coordinator and two full-time
production assistants who regularly visited our contractors to review the
quality of the work in progress. Prior to distribution, the garments were
delivered to our warehouse for final inspection in the Quality Control
Department.
4
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The lead time to fill new orders placed by us with our manufacturing
contractors generally ranged from three to six weeks for domestically produced
garments. We generally scheduled the manufacture of apparel based on orders
received to reduce the risk of obsolescence of its garment inventory. We
continuously monitored for obsolete and damaged inventory. Such inventory was
usually sold to customers who specialized in merchandising off-price clothing.
We had long-standing relationships with our cutting contractors and many of
our sewing production contractors but did not have written agreements with any
of our contractors. For its domestically produced garments, we utilized two
cutting contractors and approximately seven sewing contractors (all of whom were
located in the Los Angeles area).
Fabrics. The fabrics primarily used by us were novelty nylon/spandex,
cotton/spandex and stretch laces, all of which were available domestically.
We believe that during the fiscal year ended March 31, 1997, all our
expenditures for fabrics used in our domestically produced garments were paid to
suppliers located in the United States.
Sales and Marketing
We sold our apparel throughout the United States and to a lesser extent in
Mexico and Canada. Our customers were retail department stores, specialty chains
and specialty stores. Sales of our garments were made through independent sales
organizations and directly by our sales staff. We maintained showrooms in New
York City and Los Angeles for women's and men's apparel. We engaged the services
of independent sales organizations in Los Angeles, New York and Miami which
operated showrooms displaying our products. Sales representatives at each
showroom were responsible for marketing our apparel within an assigned
territory. Sales organizations were retained on a nonexclusive basis. Our
independent sales organizations were compensated on a commission basis on terms
consistent with industry practice. We never sold our garments on consignment.
Advertising and Promotion
Our advertising strategy was to promote an image associated with a
fashionable look and youthful style and to promote the YES Clothing Co.'s
brands. We did not advertise extensively in 1997 through 1999. The Company had
no cooperative advertising program for its retailers although, with advance
approval, we reimbursed our customers for advertising our products.
Brands and Trademarks
Our principal trademarks, YES Clothing Co.(R) YES(R), YES Men(R), YES Kids
(R) and YES Jeans(R) were lost to NuVen Advisors.
Competition
The segments of the apparel industry in which we competed are highly
fragmented. Competition is numerous, and varies in size and in the products they
design and manufacture. In addition, department stores, including some of our
customers, sells competing apparel under their own labels.
5
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The marketing of apparel is highly competitive. We believe that the ability
to gauge effectively and to respond to changes in consumer demands and tastes,
as well as the ability to produce and deliver its products on a timely basis are
necessary to compete successfully in the apparel industry. We believe that
consumer acceptance depends on the image, design, quality and price of its
garments, and that its continuity will depend on its ability to remain
competitive in these areas. The failure to design garments that meet with
acceptance in the marketplace in the future could result in the material
deterioration of customer loyalty and our image.
Employees
We are currently inactive and the day-to-day business affairs are handled
by NuVen, Fred G. Luke, in his capacity as President of the Company, and various
professional consultants. At present, we have no full-time employees.
Environmental Regulation
The cost and effect of complying with environmental regulations are not
material due to the nature of our business.
Item 2. Properties
Our principal executive offices are located in shared leased premises of
approximately 3,000 square feet in Newport Beach, California. These premises are
occupied by us under an agreement with NuVen.
Item 3. Legal Proceedings
We have been named as a defendant in lawsuits incident to the ordinary
course of business. We believe that the probable outcome of these contingencies
will not have a material effect on our financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders.
6
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Price Range of Common Stock
Market Prices
<TABLE>
<CAPTION>
Quarters Ending
March 31 Dec. 31 Sept. 30 June 30
<S> <C> <C> <C> <C>
Fiscal 1999
Low $ 0.01 $ 0.01 $ 0.04 $ 0.06
High 0.11 0.07 0.30 0.41
Fiscal 1998
Low $ 0.05 $ 0.13 $ 0.25 $ 0.06
High 0.63 0.30 1.00 0.50
</TABLE>
Approximate Number of Holders of Common Stock Securities
We had approximately 51 holders of record of common stock as of March 31,
2000.
Dividends
We have never paid, nor do we intend to pay, cash dividends on our common
equity.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Fiscal Years 1999 and 1998
In July 1997, due to a lack of trade credit and working capital, we
temporarily suspended our operations pending receipt of additional capital or
third party credit. We began liquidating our inventory and other assets at below
cost. On December 17, 1997, we filed for protection from our creditors pursuant
to Chapter 11 of the United States Bankruptcy Code. In March 1998, we were
dismissed from our bankruptcy proceedings.
There were no operations during fiscal 1999. As a result, there were no
revenues or cost of revenues were incurred. In fiscal 1998, net revenues
decreased by $1,638,000 or 47.9% to $1,778,000 due to the suspension of the
Company's operations.
7
<PAGE>
Total selling, general and administrative ("SG&A") expenses decreased 68.1%
from $1,923,000 in fiscal 1998 to $613,000 in fiscal 1999. The decrease is
attributed to the suspension of the Company's operations resulting in reductions
in payroll, rent, insurance, depreciation and sales-related expenses.
SG&A expenses decreased 36.7% from $3,039,000 in fiscal 1997 to $1,923,000
in fiscal 1998. The decrease is a result of the suspension of our operations in
July of fiscal 1998 as mentioned previously.
Interest expense decreased 21.3% from $160,000 in fiscal 1998 to $126,000
in fiscal 1999 due to a halt in borrowings from the factor during fiscal 1998.
Interest expense in fiscal 1999 entirely represents interest on a letter of
credit facility. Interest expense decreased 12.7% from $183,000 in fiscal 1997
to $160,000 in fiscal 1998. The decrease is due to a reduction in borrowings
from the factor.
In November 1996, we filed for and received a federal income tax refund of
$971,000. In fiscal 1998, the Internal Revenue Service notified us that the net
operating loss carryback claim had been denied. As a result, we established a
liability for the tax refund amount, plus penalties and interest, in fiscal
1998. We have appealed the decision and are currently awaiting the outcome.
Capital Resources and Liquidity
We have incurred net losses and negative cash flows from operating
activities since inception. On December 17, 1997, we filed for protection from
our creditors pursuant to Chapter 11 of the United States Bankruptcy Code. In
January 1998, we added certain members of NuVen Advisors as members of the board
of directors. We needed the work-out skills of Mr. Fred Luke to assist us
in completing our plan of reorganization. Mr. Luke formed a plan for certain
secured creditors to settle the outstanding claims without the assistance of the
Bankruptcy Court. We requested that the matter be dismissed in order for us to
execute our plan of reorganization with our creditors, and on March 11, 1998,
our petition under Chapter 11 of the U.S. Bankruptcy Code was dismissed by the
Bankruptcy Court. As of March 31, 1998, we had a working capital deficit
exceeding $4 million. On April 8, 1998, we sold the Yes(R)
8
<PAGE>
trademark for $420,000 to NuVen to raise capital sufficient to settle our
outstanding senior credit facility, and, on the same date, we reached a
settlement agreement with Republic Factors Corp., the senior secured creditor in
connection with our factoring agreement. On or about June 30, 1999, NuVen sold
its rights to the Yes trademarks to an affiliated company, Scientific NRG
("SNRG").
At March 31, 1999, through the date of this filing, our liabilities exceed
our assets by approximately $4.0 million. We currently receive financial support
from NuVen. Our future depends on our ability to execute a plan of
reorganization which consists of the satisfaction of our obligations primarily
through the issuance of shares of common stock. Upon the completion of our plan
of reorganization, if successful, we intend to reacquire the Yes Clothing Co.
trademarks from SNRG. This will pave the way for us to raise capital through a
private or public offering of securities; however, there are no assurances that
we will be successful in raising such capital. Upon completing a raise of
capital, we plan to secure licenses for rights to manufacture, distribute and
sell clothing and accessories containing the Yes trademark. These contracts
will, if successful, generate license acquisition fees to provide working
capital. We do not intend to operate in the day-to-day operations of
manufacturing, distributing and marketing products containing the Yes brand.
These factors discussed above raise substantial doubt about our ability to
continue as a going concern. As such, our independent auditors have modified
their report to include an explanatory paragraph with respect to such
uncertainty. There were no adjustments made to the financial statements as a
result of such uncertainty.
Item 7. Financial Statements
Financial statements included elsewhere herein are referred to in Item 13
(a) and are listed in the Index to financial statements filed as a part of this
Annual Report on Form 10-KSB.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The auditing practice of Grobstein, Horwath & Company LLP, resigned as the
Company's independent accountant. Grobstein, Horwath & Company LLP previously
issued an unqualified report dual dated June 2 and June 5, 1997, for the year
ended March 31, 1997 assuming the Company will continue as a going concern,
which did not contain any adverse opinion or disclaimer of opinion, or any
qualification as to uncertainty, audit scope or accounting principles. There
were no disagreements with Grobstein, Horwath & Company LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
On July 6, 1999, the auditing practice of McKennon Wilson & Morgan, LLP was
engaged to perform an audit of our financial statements as of March 31, 1999 and
for the two years then ended, included in this Annual Report on Form 10-KSB for
the year ended March 31, 1999.
The decision to change principal independent accountants was made by our
Board of Directors.
9
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons of the
Company; Compliance with Section 16(A) of the Exchange Act
(a) Identification of Directors and Executive Officers.
The following table sets forth certain information concerning our directors
and executive officers:
<TABLE>
<CAPTION>
Position Held with Date First
Name Age the Company Elected or Appointed
<S> <C> <C> <C>
Fred G. Luke 52 President December 1998 to Present
Director December 1998 to Present
John L. Lawver 60 Secretary January 1998 to Present
Director March 1998 to Present
</TABLE>
All directors serve until our next Annual Meeting of Shareholders and until
their successors are elected and qualified. Our officers serve at the discretion
of the board of directors. Our directors generally consider the status of the
officers at the meeting of our directors following each annual meeting of
shareholders.
(b) Business Experience
The following is a brief account of the business experience during the past
five years of each director and executive officer of our company, including
principal occupations and employment during that period and the name and
principal business of any corporation or other organization in which such
occupation and employment were carried on.
Fred G. Luke. Mr. Luke has been our President and CEO since December 1998.
Mr. Luke has more than twenty-nine (29) years of experience in domestic and
international financing and the management of privately and publicly held
companies. Since 1982, Mr. Luke has provided consulting services and has served
as Chief Executive Officer and/or Chairman of the Board of various publicly held
and privately held companies in conjunction with such financial and corporate
restructuring services. In addition to his position with the Company, Mr. Luke
currently serves as Chairman and Chief Executive Officer of NuOasis Resorts,
Inc., (formerly, Nona Morelli's II, Inc.) ("NuOasis Resorts"), Chairman and
President of NuVen, Chairman and President of Hart Industries, Inc. ("Hart"),
and Chairman and President of Diversified Land & Exploration Co. ("DL&E") and
Scientific NRG, Incorporated, and NetCommerce, Inc. among others. NuVen provides
managerial, acquisition and administrative services to public and private
companies including Yes. NuVen, which is controlled by Fred G. Luke, as Trustee
of the Luke Family Trust, is an affiliate of ours. Mr. Luke received a Bachelor
of Arts Degree in Mathematics from California State University, San Jose in
1969.
10
<PAGE>
Jon L. Lawver. Mr. Jon L. Lawver has been Secretary and a Director of our
company since January and March 1999, respectively. Mr. Lawver has 22 years of
experience in the area of bank financing where he has assisted medium size
companies ($5 million to $15 million) by providing expertise in documentation
preparation and locating financing for expansion requirements. Mr. Lawver was
with Bank of America from 1961 to 1970, ending his employment as Vice President
and Manager of one of its branches. From 1970 to present Mr. Lawver has served
as President and a Director of J.L. Lawver Corp., a financial consulting firm.
Since 1988, Mr. Lawver has served as President and a Director of Eurasia, a
private finance equipment leasing company specializing in oil and gas industry
equipment. Mr. Lawver also serves as a director of NetCommerce, SNRG, Hart and
NuVen.
(c) Identification of Certain Significant Employees.
None.
(d) Family relationships
None.
(e) Involvement in Certain Legal Proceedings.
During the past five years, no director or officer of ours has:
1. Filed or has had filed against him a petition under the federal
bankruptcy laws or any state insolvency law, nor has a receiver, agent
or similar officer been appointed by a court for the business or
property of such person, or any partnership in which he was a general
partner, or any corporation or business association of which he was an
executive officer at or within two years before such filings.
2. Been convicted in a criminal proceeding.
3. Been the subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining such person from,
or otherwise limiting his involvement in any type of business,
securities or banking activities.
4. Been found by a court of competent jurisdiction in a civil action, the
Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated any federal or state securities or
commodities law, which judgment has not been reversed, suspended, or
vacated.
11
<PAGE>
(f) Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that our directors and officers and persons who own more than ten
percent of our equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Directors,
officers and greater than ten-percent shareholders are required by SEC
regulations to furnish us with copies of all Section 16(a) reports filed.
Based solely on its review of the copies of the reports it received from
persons required to file, we believe that during the period from April 1, 1998
through March 31, 1999, all filing requirements applicable to our officers,
directors and greater than ten-percent shareholders were complied with.
Item 10. Executive Compensation
(a) Summary Compensation Table.
The following summary compensation table sets forth in summary form the
compensation received during each of our last two completed years by our
president and four most highly paid officers ("Named Executive Officers"). There
were no officers who earned in excess of $100,000 per annum:
<TABLE>
<CAPTION>
Name and Principal Salary Other Annual Options
Position Year ($) (1) Compensation($) Granted(#)(2)
<S> <C> <C> <C> <C>
Fred G. Luke 1999 - N/A N/A
President and CEO 1998 -
(12-98 to Present)
Guy Anthome 1998 - N/A N/A
Former Chairman and
CEO
(June 1996 to
December 1998)
Jon L. Lawver 1999 12,000 N/A N/A
Secretary 1998 12,000 N/A N/A
(1-98 to Present)
</TABLE>
(1) The accrued but unpaid value of base salary (cash and non-cash).
(2) Except for stock option plans, we do not have in effect any plan that
is intended to serve as incentive for performance to occur over a
period longer than one year. No stock options are currently
outstanding.
12
<PAGE>
(b) Stock Options
None.
(c) Long-Term Incentive Plans Table
There were no long-term incentive plans during the last two years.
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) and (b) Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding ownership of
the Company's common stock as of March 31, 1999. The table includes (a) each
person known by the Company to be the beneficial owner of more than 5% of the
Company's common stock, (b) each director, (b) each director individually, (c)
the named executive officer, and (d) the directors and officers as a group.
Unless otherwise indicated, the persons named in the table possess sole voting
and investment power with respect to the shares listed (except to the extent
such authority is shared with spouses under applicable law).
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Interest of Class(1)
<S> <C> <C> <C>
No par value Georges Marciano Trust
Common Stock 9756 Wilshire Blvd.
Beverly Hills, CA 90212 2,700,000 21%
NewBridge Capital, Inc.
4695 MacArthur Court, Suite 530
Newport Beach, California 92660 3,514,693 27%
Cede & Co.
P.O. Box 20 Bowling Green
New York, NY 10004 6,303,244 49%
No par value NuVen Advisors L.P.
Preferred Stock 4695 MacArthur Court, Suite 530
Newport Beach, California 92660 1,277,005 100%
</TABLE>
Directors and Officers
<TABLE>
<CAPTION>
<S> <C> <C> <C>
All Officers and Directors as a
group - -
</TABLE>
(1) Based on 12,786,492 common shares and 1,277,005 preferred shares
outstanding, as appropriate.
13
<PAGE>
Item 12. Certain Relationships and Related Transactions
Effective January 21, 1998, we entered into an Advisory and Management
Agreement (the "Advisory Agreement") with NuVen, the predecessor of NuVen
Advisors Limited Partnership, for the engagement of NuVen to perform
professional and advisory services. We had approximately $103,000 due to NuVen
as of March 31, 1999.
ITEM 13. Exhibits and Reports on Form 8-K.
(a) Financial Statements
The Financial Statements included in this Item are indexed on Page F-1,
"Index to Financial Statements."
(b) Financial Statement Schedules
None.
(c) Exhibits
Item
No. Description
3.1 Restated Articles of Incorporation of the Company
3.2 Restated Bylaws of the Company
4.1 Specimen Common Stock Certificate
10.1 Advisory and Management Agreement with NuVen Advisors, Inc.
now NuVen Advisors, L.P.
27.1 Financial Data Schedule
All exhibts have been previously filed with the Securities and Exchange
Commission.
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SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act of
1934, we have duly caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
YES CLOTHING CO.
Date: April 7, 2000 By: /s/ Fred G. Luke
Fred G. Luke, President
In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of our
Company and in the capacities and on the dates indicated.
YES CLOTHING CO.
Date: April 7, 2000 By: /s/ Fred G. Luke
Fred G. Luke, Director
Date: April 7, 2000 By: /s/ Jon L. Lawver
Jon L. Lawver, Director
15
<PAGE>
YES CLOTHING CO.
INDEX TO FINANCIAL STATEMENTS
Page
Description
Independent Auditors' Report.............................................F-2
Balance Sheet as of March 31, 1999.......................................F-3
Statements of Operations for the Years Ended March 31, 1999 and 1998.....F-4
Statements of Stockholders' Deficit for the Years Ended
March 31, 1999 and 1998................................................F-5
Statements of Cash Flows for the Years Ended March 31, 1999 and 1998.....F-6
Notes to Financial Statements............................................F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
YES Clothing Co.
We have audited the accompanying balance sheet of YES Clothing Co. as of
March 31, 1999 and the related statements of operations, changes in
shareholders' deficit and cash flows for each of the years in the two-year
period ended March 31, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of YES Clothing Co. as of March
31, 1999, and the results of its operations and its cash flows for each of the
years in the two-year period ended March 31, 1999, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred operating losses, has a deficit
of working capital and tangible net worth, and other adverse financial
indicators. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters are also
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ McKennon, Wilson & Morgan LLP
McKennon, Wilson & Morgan LLP
Irvine, California
December 8, 1999
F-2
<PAGE>
YES CLOTHING CO.
BALANCE SHEET
March 31, 1999
ASSETS
Current assets $ -
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable 1,180,000
Accrued expenses 460,000
Income taxes payable 971,000
Due to affiliate 103,000
Total current liabilities 2,714,000
Commitments and contingencies (Note 4) -
Shareholders' deficit (Note 6):
Series A convertible preferred stock, no par;
2,000,000 shares authorized; 1,277,005 shares issued
and outstanding; convertible
into 41,694,213 shares of common stock 1,409,000
Common stock, no par; 20,000,000 shares authorized;
12,786,492 shares issued and outstanding 11,949,000
Accumulated deficit (16,072,000)
Total shareholders' deficit (2,714,000)
$ -
See Notes to Financial Statements
F-3
<PAGE>
YES CLOTHING CO.
STATEMENTS OF OPERATIONS
For the Years Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net sales $ - $ 1,778,000
Cost of sales - 1,798,000
Gross loss - (20,000)
Expenses: - 115,000
Royalty expense
Selling, general and administrative 613,000 1,923,000
Loss from operations (613,000) (2,058,000)
Other income (expense):
Interest expense (126,000) (160,000)
Loss on sale of assets - (67,000)
Other - 1,000
Loss before income taxes and extraordinary item (739,000) (2,284,000)
Income tax expense - 971,000
Loss before extraordinary item (739,000) (3,255,000)
Extraordinary Item - gain on settlement of debt, net 420,000 -
Net loss $ (319,000) $(3,255,000)
Basic and diluted earnings (loss) per share:
Loss before extraordinary gain $ (.06) $ (.36)
Extraordinary gain $ .03
Net loss $ (.03) $ (.36)
Basic and diluted weighted average common shares
outstanding 12,361,182 9,086,368
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
YES CLOTHING CO.
STATEMENTS OF SHAREHOLDERS' DEFICIT
For the Years Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Series A Convertible
Preferred Stock Common Stock Accumulated
Shares Amount Shares Amount Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Balances, March 31, 1997 - $ - 7,036,492 $11,308,000 $(12,498,000) $(1,190,000)
Issuance of common
stock for services - - 2,050,000 123,000 - 123,000
Net loss - - - - (3,255,000) (3,255,000)
Balances, March 31, 1998 - - 9,086,492 11,431,000 (15,753,000) (4,322,000)
Issuance of Series A
convertible preferred
stock in satisfaction of
debt 1,277,005 1,409,000 - - - 1,409,000
Issuance of common
stock for services - - 2,200,000 - 308,000
Exercise of stock options - - 1,500,000 210,000 - 210,000
Net loss - - - - (319,000) (319,000)
Balances, March 31, 1999 1,277,005 $1,409,000 12,786,492 $11,949,000 $(16,072,000) $(2,714,000)
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
YES CLOTHING CO.
STATEMENTS OF CASH FLOWS
For the Years ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (319,000) $(3,255,000)
Reconciliation of net loss to net cash used in
operating activities:
Depreciation and amortization - 115,000
Issuance of common stock for services 308,000 123,000
Loss on sale of property and equipment - 67,000
Gain on settlement of debt (420,000) -
Increase (decrease) in cash due to changes in
operating assets and liabilities:
Accounts receivable - 355,000
Allowance and reserve - (354,000)
Due from officers - 4,000
Other receivables - 7,000
Inventories - 644,000
Prepaid expenses - 34,000
Accounts payable - 225,000
Accrued expenses 141,000 208,000
Income taxes payable - 971,000
Net cash used in operating activities (290,000) (856,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment - 265,000
Due from officers - 120,000
Decrease in other assets - 74,000
Net cash provided by investing activities - 459,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from factor - 469,000
Payments on contracts payable - (110,000)
Increase (decrease) in Due to Affiliate 80,000 (42,000)
Proceeds from exercise of stock options 210,000 -
Net cash provided by financing activities 290,000 317,000
Net decrease in cash - (80,000)
Cash, at beginning of year - 80,000
Cash, at end of year $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES -
Issuance of preferred stock for note payable $ 1,409,000 $ -
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 and 1998
Note 1. Organization
Yes Clothing Co. (the "Company") was incorporated on July 1, 1982, in the
State of California. Through July 1997, the Company designed, manufactured and
marketed a diversified line of apparel primarily for women and young men. The
Company sold its garments throughout the United States and Canada to retail
department stores, specialty chains and specialty stores.
In June 1996, the Company's principal shareholder sold approximately 50% of
the Company's outstanding shares to an individual who assumed the position of
Chairman and Chief Executive Officer of the Company. In July 1997, due to a lack
of trade credit and working capital, the Company temporarily suspended its
operations pending receipt of additional capital or third party credit. In
December 1997, the Company filed for protection from its creditors pursuant to
Chapter 11 of the United States Bankruptcy Code. In March 1998, the Bankruptcy
Court dismissed the Company's bankruptcy proceedings.
In April 1998, the Company relinquished its rights to the YES(R) trademarks
in connection with a purchase and sale agreement whereby an affiliate of the
Company satisfied certain senior secured debt on behalf of the Company (see Note
7).
Note 2. Summary of Significant Accounting Policies
Going Concern
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. The Company has experienced recurring losses since
1992. At March 31, 1999, the Company has liabilities in excess of assets
totaling approximately $2.7 million. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management intends to
execute its plan of reorganization, which contemplates that the Company will
satisfy substantially all its obligations through the issuance of common stock,
among other things. The Company is currently appealing an income tax liability
(Note 5) with the Internal Revenue Service. In the event management is able to
effect the plan of reorganization, they will seek capital through a private or
public offering of debt or equity securities. A portion of the proceeds will be
used to repurchase the YES(R) trademarks, and to market the Company's licenses
for apparel and accessories bearing the brand. There are no assurances that the
Company will be successful in completing its plan of reorganization and/or
seeking capital to resume operations. No adjustments have been made to the
accompanying financial statements as a result of these uncertainties.
Provision for Income Taxes
The Company accounts for its income taxes under an asset and liability
method whereby deferred tax assets and liabilities are determined based on
temporary differences between bases used for financial reporting and income tax
reporting purposes. Income taxes are provided based on the enacted tax rates in
effect at the time such temporary differences are expected to reverse. A
valuation allowance is provided for certain deferred tax assets if it is more
likely than not that the Company will not realize tax assets through future
operations.
F-7
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 and 1998
Note 2. Summary of Significant Accounting Policies (continued)
Significant Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Financial Instruments
At March 31, 1999, the Company has no assets considered financial
instruments. Financial liabilities with carrying values approximating fair value
include accounts payable and other liabilities. The ultimate satisfaction of
such liabilities is expected to result in settlements at a fraction of the
carrying value in the accompanying balance sheet, the ultimate amount of which
is unknown.
Stock-Based Compensation
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," which defines a fair value based method of accounting for
stock-based compensation. However, SFAS 123 allows an entity to continue to
measure compensation cost related to stock and stock options issued to employees
using the intrinsic method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."
Entities electing to remain with the accounting method of APB 25 must make pro
forma disclosures of net income (loss) and earnings (loss) per share, as if the
fair value method of accounting defined in SFAS 123 had been applied. The
Company has determined to continue to account for stock-based compensation under
the prior standard, as management believes the effect of the new accounting
standard will not be significant.
Loss Per Common Share
The Company adopted SFAS 128, "Earnings per Share" ("EPS") during fiscal
1998. SFAS 128 requires dual presentation of basic EPS and diluted EPS on the
face of all income statements issued after December 15, 1997, for all entities
with complex capital structures. The Company's capital structure is not complex
and adoption had no impact on prior amounts reported. Basic EPS is computed as
net income (loss) divided by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur from common shares issuable through stock options, warrants, and
other convertible securities. Due to the net losses incurred in fiscal 1999 and
1998, all common stock equivalents outstanding were considered anti-dilutive and
were excluded from the calculations of diluted net loss per share.
Anti-dilutive securities at March 31, 1999, which could be dilutive in
future periods include preferred stock convertible into approximately 41,694,000
shares of common stock (Note 6).
F-8
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 and 1998
Note 2. Summary of Significant Accounting Policies (continued)
Reporting Comprehensive Income
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting the components of
comprehensive income and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
included in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income includes net income, as well as
certain non-shareholder items that are reported directly within a separate
component of stockholders' equity and bypass net income. The Company has adopted
the provisions of this statement during the current fiscal year, with no impact
on the accompanying financial statements.
Disclosures about Segments of an Enterprise and Related Information
In June 1997, the FASB issued SFAS 131, "Disclosures of an Enterprise and
Related Information." The provisions of this statement require disclosures of
financial and descriptive information about an enterprise's operating segments
in annual and interim financial reports issued to stockholders. The statement
defines an operating segment as a component of an enterprise that engages in
business activities that generate revenue and incur expense, whose operating
results are reviewed by the chief operating decision-maker in the determination
of resource allocation performance, and for which discrete financial information
is available. Disclosure requirements under SFAS 131 will not impact the
Company's financial position or results of operations. At March 31, 1999, the
Company had no identifiable assets or operations constituting a segment as
defined by this statement.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Accordingly, the Company will adopt SFAS
No. 133 beginning on April 1, 2000. SFAS No. 133 establishes standards for the
accounting and reporting of derivative instruments and hedging activities,
including certain derivative instruments embedded in other contracts. Under SFAS
No. 133, entities are required to carry all derivative instruments at fair value
on their balance sheets. The accounting for changes in the fair value (i.e.,
gains or losses) of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging activity and the underlying
purpose for it. The Company does not believe that the adoption of SFAS No. 133
will have a significant impact on the Company's financial statements or related
disclosures.
Note 3. Note Payable
The Company had a credit facility with a bank, consisting of a $1.2 million
note payable secured by a standby letter of credit provided by a major customer.
During fiscal 1998, the standby letter of credit was drawn upon to repay the
bank. Under the replacement obligation, the Company owed approximately $1.4
million, including interest of approximately $220,000. In December 1998, the
Company's affiliate NuVen indemnified the Company of this obligation in
consideration for the issuance of 1,277,005 shares of the Company's preferred
stock (Note 6).
F-9
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 and 1998
Note 4. Commitments and Contingencies
Litigation
The Company has several money judgments against it as a result of past-due
trade accounts payable. The value of such judgments is included in accounts
payable. Management is unaware of any matters, pending or threatened, which may
have an impact on the financial statements. See Note 5 for discussion of a
matter involving the Internal Revenue Service ("IRS").
Note 5. Income Taxes
The Company's net deferred tax assets at March 31, 1999, consist of net
operating loss carryforwards for federal and state income tax reporting
amounting to approximately $20.9 million and $5.5 million, respectively. At
March 31, 1999, the Company provided a 100% valuation allowance for these net
operating loss carryforwards totaling approximately $7.4 million. During the
years ended March 31, 1998 and 1999, the Company's valuation allowance increased
approximately $130,000 and $1.3 million, respectively.
The Company recorded no benefit for income taxes during the periods
presented; however, the Company did record an income tax expense amounting to
$971,000 relating to a carryback claim (see below). The minimum federal income
tax rate of 34% was reduced to zero percent as the result of the Company
recording a 100% valuation allowance for its deferred tax assets.
In fiscal 1997, the Company filed a carryback claim for a refund of certain
taxes paid in prior periods totaling approximately $971,000. The Company was
notified in fiscal 1998 that the carryback claim was invalid and that the
Company is obligated to repay such monies. The Company is currently appealing
the audit assessment made by the IRS, and it has petitioned the U.S. Tax Court
to review this matter. As a result of this denial of the carryback claim in
fiscal 1998, the Company recorded a provision for income taxes for the
assessment in the fiscal 1998 financial statements.
Note 6. Shareholders' Deficit
Series A Convertible Preferred Stock
In December 1998, the Company issued 1,277,005 shares of Series A
Convertible Preferred Stock ("Preferred Stock") to an affiliate in consideration
for the settlement of $1,409,000 of the Company's debt. Each share of preferred
stock is convertible, at the option of the holder, into 32 65/100th shares, or
41,694,213 shares of the Company's common stock, notwithstanding any stock
dividend or reverse stock split by the Company. Such right to convert will
commence as of the issue date and continue thereafter for a period of five years
ending on the fifth anniversary of the issue date. As of March 31, 1999, no
Preferred Stock had been converted to common stock.
F-10
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 and 1998
Note 6. Shareholders' Deficit (continued)
The Preferred Stock has the same voting rights in all matters as the common
stock on a two-for-one basis. Additionally, the holders of the Preferred Stock
are entitled to receive common stock dividends when, as, and if declared by the
directors of the Company, at the rate of $0.20 per share to be paid in cash or
in market value of the Company's common stock. As of March 31, 1999, no
dividends had been paid by the Company.
At the option of its directors, the Company may at any time or from time to
time, subject to applicable provisions of California law, redeem the whole or
any part of the outstanding Preferred Stock. Upon redemption, the Company will
pay for each share redeemed, the amount of two dollars per share, payable in
cash, plus a premium to compensate the original purchaser for the investment
risk and cost of capital equal to the greater of (a) two dollars per share, or
(b) an amount per share equal to fifty percent of the market capitalization of
the Company on the date of notice of such redemption divided by 2,000,000.
In the event of any liquidation, the Preferred Stock shareholders are
entitled to receive a preferential amount equal to two dollars per share plus
the redemption provisions as noted above.
Common Stock
In March 1998, the Company issued 2,050,000 shares of common stock valued
at $0.06 per share for services rendered in connection with various consulting
agreements (Note 8).
In April 1998, the Company issued 2,200,000 shares of common stock valued
at $0.14 per share for services rendered and to be rendered in connection with
various consulting agreements (Note 8).
Common Stock Purchase Options
The Company had a stock option plan (the "Plan") for key employees,
directors, officers and consultants of the Company. The Plan was terminated
effective March 31, 1999. Stock purchase options activity during fiscal 1999 and
1998 was as follows:
<TABLE>
<CAPTION>
Weighted
Range of Average
Exercise Exercise
Options Prices Price
<S> <C> <C> <C>
Outstanding and exercisable,
March 31, 1997 620,000 $0.07 - $3.38 $ 0.12
Granted 1,500,000 0.14 0.14
Canceled (620,000) 0.07 - 3.38 0.12
Outstanding and exercisable,
March 31, 1998 1,500,000 0.14 0.14
Exercised (1,500,000) 0.14 0.14
Outstanding and exercisable,
March 31, 1999 - -
</TABLE>
F-11
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 and 1998
Note 6. Shareholders' Deficit (continued)
During fiscal 1998, in connection with two engagement letter and fee
agreements for advisory and merger and acquisition services, the Company granted
options to purchase 750,000 shares each, of the Company's common stock at an
exercise price of 110% of the 10-day moving average bid price for the Company's
common stock or $0.14 per share. The fair market value of the underlying common
stock on the dates of grant was less than the exercise price, as such, no
additional compensation expense was recorded. All options pursuant to such
agreements were exercised during fiscal 1999.
The Company has not presented the pro forma impact on net loss and net loss
per share for each of the years in the two-year period ended March 31, 1999, as
if the fair value of the stock options granted were measured under SFAS 123, as
substantially all of the options granted in prior years have been canceled or
expired. In addition, the pro forma disclosures required by SFAS 123 would not
cause the pro forma information to be materially different from the historical
information.
Note 7. Extraordinary Item
The Company had an agreement with a factor under which the Company sold all
of its trade accounts receivable, without recourse, and was permitted advances
of 100% on the net sales factored at any time before their maturity date. The
agreement was secured by an interest in all of the Company's inventories and
accounts receivable. In connection with such agreement, the Company was indebted
for approximately $420,000 immediately prior to reaching a settlement. On April
3, 1998, in connection with a purchase and sale agreement, an affiliate of the
Company satisfied the debt and gained the rights to the Company's YES(R)
trademarks as consideration. Since the financial statements had no carrying
value for the trademarks, the Company recognized an extraordinary gain on the
settlement of this debt in fiscal 1999. No income taxes were allocated to this
extraordinary item since the Company has no income tax benefits recorded in the
financial statements.
Note 8. Related Party Transactions
In December 1998, the Company's affiliate NuVen indemnified the Company of
$1,409,000 in debt in consideration for the issuance of 1,277,005 shares of the
Company's Preferred Stock (Note 6).
On January 21, 1998, the Company entered into an advisory and management
agreement with NuVen to perform administrative, human resource, and merger and
acquisition services. Pursuant to such agreement, the Company agreed to pay
NuVen a monthly fee of $10,000, payable quarterly in advance, in cash or the
Company's common stock at 50% of the market value of such shares, as defined, on
the date NuVen agrees to accept such shares. The Company expensed $120,000 and
$30,000 during fiscal 1999 and 1998, respectively, issued 500,000 shares each
during fiscal 1999 and 1998 at $0.14 and $0.06 per share, respectively, and had
$50,000 due to NuVen as of March 31, 1999.
F-12
<PAGE>
YES CLOTHING CO.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 and 1998
Note 8. Related Party Transactions (continued)
On January 22, 1998, the Company entered into a consulting agreement with
Mr. J.L. Lawver, pursuant to which Mr. Lawver is to perform consulting services.
Pursuant to the agreement, the Company agreed to pay Mr. Lawver a monthly fee of
$3,000 payable, quarterly in advance, in the Company's common stock. No cash
payments were made to Mr. Lawver by the Company during fiscal 1999 and 1998. The
Company expensed $36,000 and $9,000 during fiscal 1999 and 1998, respectively,
issued 150,000 shares each during fiscal 1999 and 1998 at $0.14 and $0.06 per
share, respectively, and had $15,000 due to Mr. Lawver as of March 31, 1999.
On March 31, 1998, the Company entered into a consulting agreement with Mr.
Jonathan L. Small, pursuant to which Mr. Small is responsible for the Company's
business development. Pursuant to the agreement, the Company agreed to pay Mr.
Small a monthly fee of $3,000 payable, quarterly in advance, in the Company's
common stock. The Company expensed $36,000 during fiscal 1999, issued 150,000
shares at $0.14 per share, and had $15,000 due to Mr. Small as of March 31,
1999.
F-13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 2,714,000
<BONDS> 0
0
1,409,000
<COMMON> 11,949,000
<OTHER-SE> (16,072,000)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 613,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126,000
<INCOME-PRETAX> (739,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (739,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 420,000
<CHANGES> 0
<NET-INCOME> (310,000)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
