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, 1999 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 530, Newport Beach, California 92660
(Address of principal executive offices, including zip code)
(949) 833-2094
(Registrant's telephone number, including area code)
N/A
(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.
YES X NO___
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 September 30, 1999
Common Stock, $.01 par value 12,786,492
<PAGE>
YES CLOTHING CO.
INDEX
Page
PART I
Item 1. Financial Information
Balance Sheets................................................... 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 Sheets
As of September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
September 30, 1999 March 31, 1999
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets $ - $ -
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable $ 1,180,000 $ 1,180,000
Accrued expenses 465,000 460,000
Income taxes payable 971,000 971,000
Due to affiliate 199,000 103,000
Total current liabilities 2,815,000 2,714,000
Shareholder's Deficit:
Series A convertible preferred stock, no par;
2,000,000shares authorized; 1,277,005
shares issued and outstanding; convertible
into 41,694,213 shares of common stock 1,409,000 1,409,000
Common stock, no par; 20,000,000 shares authorized;
12,786,492 issued and outstanding 11,949,000 11,409,000
Accumulated deficit (16,173,000) (16,072,000)
Total shareholders' deficit (2,815,000) (2,714,000)
$ - $ -
</TABLE>
See accompanying notes to these condensed financial statements.
3
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YES CLOTHING CO.
CONDENSED STATEMENTS OF OPERATIONS
For the Six Months and Three Months Ended
September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Sales $ - $ - $ - $ -
Cost of Sales - - - -
Gross loss - - - -
Operating expenses:
Selling, general & administrative 101,000 110,000 53,000 90,000
Loss from operations (101,000) (110,000) (53,000) (90,000)
Other income (expense)
Interest expense - (126,000) - (10,000)
Loss before income taxes and
Extraordinary item (101,000) (236,000) (53,000) (100,000)
Income tax expense - - - -
Loss before extraordinary item (101,000) (236,000) (53,000) (100,000)
Extraordinary item-gain on
settlement of debt-net - 420,000 - 420,000
Net income (loss) $ (101,000) $ 184,000 $ (53,000) $ 320,000
Basic and diluted earnings (loss) per
share:
Loss before extraordinary gain $ (.01) $ (.02) $ (.01) $ (.01)
Extraordinary gain $ .04 $ .04
Net income (loss) $ (.01) $ .02 $ (.01) $ .03
Basic and diluted weighted average
Common shares outstanding 12,786,492 10,011,492 12,786,492 10,936,492
</TABLE>
See accompanying notes to these condensed financial statements
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YES CLOTHING CO.
Condensed Statements of Cash Flows
For the Six Months Ended
September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (101,000) $ 184,000
Reconciliation of net loss to net cash used in
operating activities:
Issuance of common stock for services - 308,000
Gain on settlement of debt - (420,000)
Increase in cash due to changes in
operating assets and liabilities:
Accrued expenses 5,000 10,000
Net cash used in operating activities (96,000) 82,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in Due to Affiliate 96,000 (128,000)
Proceeds from exercise of stock options - 210,000
Net cash provided by financing activities 96,000 82,000
Net decrease in cash - -
Cash, at beginning of year - -
Cash, at end of year $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES -
Issuance of preferred stock for note payable $ - $1,409,000
</TABLE>
See accompanying notes to these condensed financial statements
5
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NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1999
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.
Note 2. 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, 1999, the Company has liabilities in excess of assets
totaling approximately $2.8 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.
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<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Six Months and Three Months Ended September 30, 1999 versus September 30 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 first half of fiscal 2000, and 1999. As a
result, there were no revenues or cost of revenues were incurred.
Total selling, general and administrative ("SG&A") expenses were $101,000
in fiscal 2000 as compared to $110,000 in fiscal 1999. The accrued expenses were
for services that began in the second quarter of fiscal 1999.
There was no interest in fiscal 2000 as there were no borrowing from factor
or credit facility in place. Interest expense in fiscal 1999 entirely represents
interest on a letter of credit facility, which was settled in the fiscal 1999
second quarter.
Capital Resources and Liquidity
We have incurred net losses and negative cash flows from operating
activities since inception. At September 30, 1999, through the date of this
filing, our liabilities exceed our assets by approximately $2.8 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. 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 3. Quantitative and Qualitative Disclosures about Market Risk
N/A
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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, 1999.
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.
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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: June 27, 2000 By: /s/ Fred G. Luke
Fred G. Luke
President
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