SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 2000 Commission File Number 0 - 18064
YES CLOTHING CO.
(Exact name of registrant as specified in its charter)
California
(State or other jurisdiction of incorporation or organization)
95-376867
(I.R.S. Employer I.D. No.)
4695 MacArthur Court, Suite 1450, Newport Beach, California 92660
(Address of principal executive offices, including zip code)
(949) 833-2094
(Registrant's telephone number, including area code)
4695 MacArthur Court, Suite 530, Newport Beach, California 92660
(Former Address, if changed since last report)
N/A
(Former telephone number, if changed since last report)
Indicate by check mark whether the Registrant [1] has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the Company was
required to file such reports), and [2] has been subject to such filing
requirements for the past 90 days.
NO___ YES X
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of capital stock, as of the latest practicable date.
Class Outstanding at October 31, 2000
Common Stock, $.01 par value 127,865
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YES CLOTHING CO.
INDEX
Page
PART I
Item 1. Financial Information
Balance Sheet..................................................... 3
Statements of Operations.......................................... 4
Statements of Cash Flows.......................................... 5
Notes to Financial Statements..................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 7
Item 3. Quantitative and Qualitative Disclosures
about Market Risk........................................... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 8
Item 2. Changes in Securities.............................................. 8
Item 3. Defaults Upon Senior Securities.................................... 8
Item 4. Submission of Matters to a Vote of
Security Holders............................................ 8
Item 5. Other Information.................................................. 8
Item 6. Exhibits and Reports on Form 8-K................................... 8
Signatures......................................................... 9
2
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YES CLOTHING CO.
CONSOLIDATED CONDENSED BALANCE SHEET
As of September 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Prepaid Taxes $ 1,600
Current Assets $ 1,600
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable $ 1,215,877
Accrued expenses 482,785
Due to affiliate 282,120
Total current liabilities 1,980,782
Shareholder's Deficit:
Series A convertible preferred stock, no par;
2,000,000 shares authorized; 1,277,005 shares
issued and outstanding; convertible into
416,942 shares of common stock 1,409,000
Common stock, no par; 20,000,000 shares
authorized; 127,865 issued and outstanding 11,949,000
Accumulated deficit (15,337,182)
Total shareholders' deficit (1,979,182)
$ 1,600
</TABLE>
See accompanying notes to these condensed financial statements.
3
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YES CLOTHING CO.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
September 30, September 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ - $ - $ - $ -
Expenses:
Selling, general and
administrative 57,327 101,000 37,327 53,000
Loss from operations (57,327) (101,000) (37,327) (53,000)
Other income (expense):
Loss before income taxes (57,327) (101,000) (37,327) (53,000)
Income tax expense 855 - 855 -
Loss before
extraordinary items (58,182) (101,000) (38,182) (53,000)
Extraordinary gain from
forgiveness of debt,
net of income taxes
of $0 971,000 - 971,000 -
Net income (loss) $ 912,818 $ (101,000) $ 932,818 $ (53,000)
Basic and diluted
income (loss) per
share:
Loss from continuing
operations $ (0.46) $ (0.79) $ (0.30) $ (0.41)
Extraordinary gain 7.59 - 7.59 -
Net income (loss) $ 7.14 $ (0.79) $ 7.30 $ (0.41)
Weighted average number
of shares
outstanding 127,865 127,865 127,865 127,865
</TABLE>
See accompanying notes to these condensed financial statements.
4
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YES CLOTHING CO.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
September 30,
2000 1999
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (loss) $ 912,818 $ (101,000)
Reconciliation of net income
(loss) to net cash used by
operating activities:
Gain on extinguishment of debt (971,000) -
Increase (decrease) in cash
due to changes in operating
assets and liabilities:
Prepaid expenses (1,600) -
Accounts payable 35,887 -
Accrued expenses (2,225) 5,000
Net cash used by operating activities (26,120) (96,000)
Cash Flows from Financing Activities:
Increase in due to affiliate 26,120 96,000
Net cash provided by financing activities 26,120 96,000
Net change in cash - -
Cash, at beginning of period - -
Cash, at end of period $ - $ -
</TABLE>
See accompanying notes to these condensed financial statements
5
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YES CLOTHING CO.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2000
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).
On October 9, 2000, the Company was merged into Yes Clothing Company, Inc., a
Nevada corporation formed by it on July 31, 2000, and changed its name from Yes,
Clothing Co. At that time, the newly formed Nevada corporation exchanged one (1)
share for every one hundred (100) shares of YES Clothing Co. The merger was
recorded at historical costs since the companies were under common control, and
all amounts, including share information, have been retroactively restated for
the years presented.
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 September 30, 2000, the Company has liabilities in excess of assets
totaling approximately $2.0 million. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management intends to
execute a plan of reorganization, which contemplates that the Company will
satisfy substantially all its obligations through the issuance of common stock,
among other things. Once the liabilities can be satisfied, the Company can seek
capital through a private or public of equity securities. There are no
assurances that a plan of reorganization can be completed or that funds will be
available to the Company to effect its business plan.
6
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YES CLOTHING CO.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2000
Unaudited Interim Financial Statements
In the opinion of management, the unaudited financial statements include all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the Company's results of operation for the three and six months ended
September 30, 2000 and 1999 and cash flows for the six months ended September
30, 1999 and 2000. These results are not necessarily indicative of the results
expected for the year ending March 31, 2001.
Restatement of Shares Outstanding
All historical share and per share amounts have been restated to reflect the one
for one hundred exchange of shares resulting from the Company reincorporating in
Nevada and effecting the merger on October 9, 2000 (Note 1).
Note 3. Extraordinary Item
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. Accordingly, the Company recorded a
liability for the $971,000. The Company appealed the audit assessment and in the
second quarter of fiscal 2001, entered into a settlement agreement with the IRS,
whereby the assessment was reversed.
As a result of the agreement, the Company recognized extraordinary income of
$971,000 in the second quarter of fiscal 2001.
Note 4. Subsequent Event
In September 2000, the Company was notified by Newbridge Capital, Inc. ("NBRG")
of its intention to convert 177,005 shares of the Company's Series A Preferred
into common stock. Upon issuance of the common shares, NBRG will own
approximately 49% of the outstanding common shares of the Company.
7
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Item 2: Management's Discussion and Analysis of Financial Condition
And Results of Operations
Results of Operations
Quarter Ended September 30, 2000 versus September 30 1999
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 second quarter of fiscal 2001, and 2000. As a
result, there were no revenues or cost of revenues were incurred.
Total selling, general and administrative ("SG&A") expenses for the second
quarter were $37,000 in fiscal 2001 as compared to $53,000 in fiscal 2000. The
expenses were primarily attributed to accrued expenses for services that began
in the second quarter of fiscal 1999 and the fluctuation is not considered
significant.
Extraordinary Item
As noted in Note 3, as a result of settlement agreement with the IRS, the
Company recognized extraordinary income of $971,000 in the second quarter of
fiscal 2001.
Capital Resources and Liquidity
We have incurred net losses and negative cash flows from operating activities
since inception. At September 30, 2000, through the date of this filing, our
liabilities exceed our assets by approximately $2.0 million. These factors
discussed above raise substantial doubt about our ability to continue as a going
concern. 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. 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
N/A
8
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
No change from that which was reported in the Form 10K for the year
ended March 31, 2000.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
9
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SIGNATURES
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.
YES CLOTHING CO.
Dated: November 20, 2000 By: /s/ Jon L. Lawver
Jon L. Lawver
Treasurer, Secretary and Director
