U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
For the quarterly period ended March 31, 1999
--------------
Transition report under Section 13 or 15(d) of the Exchange Act for the
transition period from __________ to ___________.
Commission file number 01-13470
BIG SMITH BRANDS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3005371
------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7100 West Camino Real, Suite 402, Boca Raton, Florida 33433
-----------------------------------------------------------
(Address of Principal Executive Offices)
(561) 367-8283
--------------
(Issuer's Telephone Number, Including Area Code)
N/A
---------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of common stock outstanding as of May 17, 1999: 8,613,546
---------
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Pages
-----
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Balance Sheet as of March 31, 1999 3
Statements of Operations for the three
months ended March 31, 1999 and 1998 5
Statement of Stockholders' (Deficit) Equity for the
three months ended March 31, 1999 6
Statements of Cash Flows for the three months
ended March 31, 1999 and 1998 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION 20
SIGNATURE 24
EXHIBIT INDEX 25
</TABLE>
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<PAGE>
BIG SMITH BRANDS, INC.
CONSOLIDATED BALANCE SHEET
March 31, 1999
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash $33.647
Temporary investments 7,991
Accounts receivable, less allowance
for doubtful accounts of $56,717 1,302,917
Inventories 3,648,718
Prepaid expenses 60,158
------------
Total current assets 5,053,431
------------
PROPERTY AND EQUIPMENT, At Cost
Land 20,000
Buildings 600,317
Equipment 1,948,221
Vehicles 46,471
------------
2,615,009
Less accumulated depreciation 1,662,673
------------
Net property and equipment 952,336
OTHER ASSETS
Security deposits 41,640
Certificate of Deposit 200,000
Non-compete expense, less accumulated amortization of $0.00 112,554
Deferred finance charges, less accumulated amortization of $195,650 555,573
Trademarks, less accumulated amortization of $126,099 389,761
-----------
Total other assets 1,299,528
-----------
Total assets $7,305,295
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Revolving line-of-credit $2,784,281
Current maturities of long-term debt 284,176
Checks outstanding in excess of bank balance 67,821
Accounts payable 2,711,878
Accrued restructuring/litigation 81,053
Accrued litigation workwear 2,141
Accrued expenses 418,251
Note Payable Stockholder 250.000
------------
Total current liabilities 6,599,061
------------
(Continued on next page)
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<PAGE>
(Continued) BIG SMITH BRANDS, INC.
CONSOLIDATED BALANCE SHEET
March 31, 1999
(Unaudited)
LONG-TERM DEBT
Long-term debt 574,056
Litigation/Royalties 664,587
Note payable - stockholder 200,000
------------
Total Long-term debt 1,438,633
------------
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value; authorized 10,000,000 shares:
issued and outstanding 8,613,546 shares 86,135
Additional paid-in capital 10,088,910
Accumulated Deficit (10,907,444)
------------
Total stockholders' deficit (732,399)
------------
Total liabilities and stockholders' deficit $ 7,305,295
============
See Notes to Consolidated Financial Statements
</TABLE>
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<PAGE>
BIG SMITH BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
NET SALES $ 2,132,322 $ 2,263,917
COST OF GOODS SOLD 1,817,537 1,802,510
----------- -----------
GROSS PROFIT 314,785 461,407
----------- -----------
OPERATING EXPENSES
Selling 315,859 366,991
General and administrative 348,932 468,480
----------- -----------
664,791 835,471
----------- -----------
LOSS FROM OPERATIONS (350,006) (374,064)
----------- -----------
OTHER INCOME (EXPENSE)
Miscellaneous expense (120,361) (34,754)
Amortization of debenture discount (606,204)
Interest expense (129,348) (121,786)
----------- -----------
(249,709) (762,744)
----------- -----------
LOSS BEFORE INCOME TAXES (599,715) (1,136,808)
PROVISION FOR INCOME TAXES 0 0
----------- -----------
NET LOSS $ (599,715) $(1,136,808)
=========== ===========
NET LOSS PER SHARE $ (0.07) $ (0.16)
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,613,546 4,829,844
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
-5-
<PAGE>
BIG SMITH BRANDS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
Common Stock,
$.01 par value
<TABLE>
<CAPTION>
Additional Retained
Common Paid-in earnings
Shares Stock capital (deficit) Total
------ ----- ------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance (deficit), January 1, 1999 7,354,683 $ 73,547 $ 9,130,767 $(10,307,727) $(1,103,413)
Debit Issuance Costs (8,268) (8,268)
Private Placement with warants 1,100,000 11,000 968,000 979,000
Conversion of Accounts Payable
Info Common Stock 158,863 1,589 (1,589) 0
Net loss- March 31, 1999 - - - (599,717) (599,717)
------------- ------------ ------------- ------------ -----------
Balance (deficit), March 31, 1999 8,613,546 $ 84,547 $ 10,088,910 $(10,907,444) $ (732,398)
</TABLE>
See Notes to Consolidated Financial Statements
-6-
<PAGE>
BIG SMITH BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (599,715) $(1,136,808)
Items not requiring cash:
Depreciation and amortization 119,026 97,119
Amortization of debenture discount 606,204
Changes in:
Accounts receivable (1,025,815) 829,143
Inventories 307,977 (1,116,441)
Prepaid expenses (62,645) (125,514)
Other assets 131,604 14,559
Accounts payable and accrued expenses 107,153 47,964
-------------- -----------
Net cash used in operating activities (1,022,415) (773,775)
-------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (4,506) (6,630)
Reductions of temporary investments 3,192 70,649
------------ -----------
Net cash provided (used) in investing activities (1,314) 64,019
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Checks outstanding in excess of bank balance (113,775) 273,342
Net borrowings (repayments) under line-of-credit
agreement 1,127,035 (132,622)
Principal payments on long-term debt (18,801) (14,834)
------------- -------------
Net cash provided by financing activities 944,459 125,886
------------- -------------
DECREASE IN CASH (79,270) (134,759)
CASH, BEGINNING OF PERIOD 112,917 170,551
------------- -------------
CASH, END OF PERIOD $ 33,647 $ 35,792
============= =============
</TABLE>
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<PAGE>
BIG SMITH BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Company
- ----------------------
Big Smith Brands, Inc. (the "Company") manufactures and sells quality work
apparel and sportswear under a variety of brand names, including Big Smith,
Smith Mountain Classics and Big Smith Vintage. The Company markets its products
to national chains and local stores worldwide.
Significant Accounting Policies
- -------------------------------
The accounting policies followed by the Company are set forth in Note 1 to the
Company's consolidated financial statements included in its Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1998.
NOTE 2: INTERIM FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-QSB of the Securities and Exchange
Commission and in accordance with generally accepted accounting principles
applicable to interim financial statements and do not include all of the
information and footnotes required by generally accepted accounting principles
for audited financial statements. The financial statements should be read in
conjunction with the audited consolidated financial statements and accompanying
notes of the Company for the year ended December 31, 1998, which are included in
its Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998.
In the opinion of the management of the Company, the accompanying consolidated
financial statements reflect all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of March 31, 1999 and the results of its operations, stockholders'
equity and cash flows for the three month period then ended.
The results of operations for the period ended March 31, 1999, are not
necessarily indicative of the results to be expected for the entire year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Seasonality."
NOTE 3: INCOME PER SHARE INFORMATION
Earnings per share are computed based on the weighted average number of common
shares outstanding during the year. Stock warrants and options outstanding are
common stock equivalents and are included in the calculation of earnings per
share to the extent they are dilutive using the treasury-stock method. Basic and
diluted earnings per share are the same.
NOTE 4: CONVERTIBLE DEBENTURES
In March 1998, the convertible long-term debt was converted into 2,900,000
shares of common stock. At the date of conversion there was $606,204 remaining
of unamortized discount which had been netted against the principal amount at
December 31, 1997. Upon conversion this unamortized portion resulted in a
non-cash, non-recurring charge against income of $606,204 in the period ended
March 31, 1998.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Forward Looking-Statements. When used in this report, press
releases and elsewhere by the management of the Company from time to time, the
words "believes", "anticipates", and "expects" and similar expressions are
intended to identify forward-looking statements that involve certain risks and
uncertainties. Additionally, certain statements contained in this discussion may
be deemed forward-looking statements that involve a number of risks and
uncertainties. Among the factors that could cause actual results to differ
materially are the following: the ability of the Company to meet its working
capital and liquidity needs, the status of relations between the Company, its
primary customers and distributors, the availability of long-term credit,
unanticipated changes in the U.S. and international economies, business
conditions and growth in the sportswear, childrenswear and ladieswear industry
and the level of growth in retail sales generally, the timely development and
acceptance of new products, the impact of competitive products and pricing,
changes in the cost of raw materials, changes in product mix, the outcome of
litigation in which the Company is involved, along with product delays and other
risks detailed from time to time in the Company's SEC reports, including but not
limited to the Form 10-KSB. Readers are cautioned not to place undue reliance on
these forward-looking statements which speak only as of the date thereof. The
Company undertakes no obligation to publicly release the results of any events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
PRO FORMA FINANCIAL INFORMATION
On April 20, 1999 a majority of holders of the 7,354,683 shares entitled
to vote at the Annual Meeting of Stockholders voted in favor of a sale of the
workwear business to Walls Industries, Inc., Cleburne, Texas and on April 22,
1999, we completed the sale of our workwear product lines to Walls. We have sold
to Walls our entire inventory of workwear products and raw materials along with
the machinery and equipment used in the manufacture of those workwear products
(excluding only certain computer equipment). We leased Walls our facilities in
Carthage, Missouri and will allow Walls to use certain of our retained computer
equipment while they are involved in the transition of the business from us to
them. Walls has assumed our leases for properties used in the manufacture and
distribution of workwear products and has hired substantially all of our
employees who were involved in our workwear business. We retained substantially
all of the assets currently used in our sportswear business, and we also
retained our childrenswear products.
In addition, we transferred all of our trademarks at closing to a
subsidiary, Big Smith Holdings, Inc. ("Holdings"). Holdings has granted to Walls
a royalty-free, perpetual license to use the Big Smith trademark and certain
related tradenames in connection with the manufacture, sale and licensing of
workwear products. Holdings granted to us a royalty-free, perpetual license to
use the Big Smith trademark and certain related tradenames for sportswear and,
subject to certain approval rights of Walls, for all other purposes. Any other
licenses granted by Holdings will require the unanimous vote of its Board of
Directors including one director appointed by Walls.
Because of this transfer of our workwear business at the beginning of
the second fiscal quarter of 1999, the actual results of operations for the
first fiscal quarter do not accurately reflect our current financial position or
what may be expected for our future. The following pro forma financial
information is based on our unaudited Financial Statements and the related Notes
thereto for the three months ended March 31, 1999 appearing in this quarterly
report. This pro forma financial information is presented to assist you in
analyzing the impact of the sale and license to Walls on our Balance Sheet and
Statement of Operations. You should not assume, however, that the following pro
forma information reflects what our financial condition or results of operations
actually would have been if the sale and license to Walls had occurred on March
31, 1999 (Balance Sheet) or April 1, 1999 (Statement of Operations).
-9-
<PAGE>
BIG SMITH BRANDS, INC.
Pro Forma Balance Sheet
March 31, 1999
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS After
March 31, 1999 Sale of Assets Other Non-Compete Transaction Note #
<S> <C> <C> <C> <C> <C> <C>
Cash $ 33,647 $ $ 32,000 $ 400,000 $ 465,647 1,3a &3c
Temporary Investments 7,991 7,991
Accounts Receivable, less allowance
for doubtful accounts of $56,717 1,302,918 (90,000) 1,302,918
Due from Seller - Miami Security Deposits 4,060 4,060 3c
A/R Non-Compete 400,000 400,000 1
A/R Rental Income 22,000 22,000 3a & 3b
Inventories 3,648,718 (3,209,357) 439,361 2a
Prepaid Expenses 60,157 60,157
-------------- ------------- ---------- ---------- ------------
Total current assets 5,053,431 (3,299,357) 58,060 800,000 2,612,134
-------------- ------------- ---------- ---------- ------------
PROPERTY AND EQUIPMENT, At Cost
Land 20,000 20,000
Buildings 600,317 (11,000) 589,317 2b
Equipment 1,918,221 (1,462,030) 486,191 2b
Vehicles 46,471 (46,471) 46,471 2b
-------------- ------------- ---------- ---------- ------------
2,615,009 (1,473,030) 1,141,979
Less accumulated depreciation (1,662,673) 1,239,611) (423,061) 2b
-------------- ------------- ---------- ---------- ------------
Net property and equipment 952,336 (233,419) 718,918
-------------- ------------- ---------- ---------- ------------
OTHER ASSETS
Certificate of Deposit 200,000 200,000
Security Deposits 41,640 (4,970) 36,670 3c, 4
Deferred finance charges, less
accumlated amortization of $195,650 555,572 555,572
Trademark, less accumulated
amortization of $126,099 389,760 389,760
-------------- ------------- ---------- ---------- ------------
Total other assets 112,551 (4,970) 112,551
-------------- ------------- ---------- ---------- ------------
Total Assets $ 7,305,293 $(3,487,776) $ 53,090 $ 800,000 $ 4,665,637
============== ============= ========== ========== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Revolving line-of-credit $ 2,784,281 $(1,962,506) $ $ $ 821,775 2c
Current maturities of long term debt 284,176 (160,952) 123,224 2c
Checks outstanding in excess of bank
balance 67,821 67,821
Accrued restructuring/litigation 81,053 81,053
Deferred income 22,000 22,000 1, 3a & 3b
Accrued royalties 664,588 664,588
Account Payable 2,711,875 (710,528) 30,060 2,031,407 2c,3a
Accrued Expenses 419,852 (48,759) 371,093
Note payable-stockholder 250,000 (250,000) 0
-------------- ------------- ---------- ---------- ------------
Total current liabilities 7,263,646 (3,132,745) 52,060 4,182,961
-------------- ------------- ---------- ---------- ------------
LONG-TERM DEBT 774,046 (389,702) - - 536,630
-------------- ------------- ---------- ---------- ------------
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value; authorized
10,000,000 shares: issued and 86,135 86,135
outstanding 8,613,546
Additional paid-in capital 10,088,910 10,088,910
Accumulated Deficit (10,907,444) 29,701 1,030 800,000 (10,076,713)
-------------- ------------- ---------- ---------- ------------
Total stockholders' deficit (732,399) 29,701 1,030 800,000 98,332
-------------- ------------- ---------- ---------- ------------
Total liabilities and $7,305,293 $(3,198,505) $ 53,090 $ 800,000 $ 4,959,878
============== ============= ========== ========== ============
</TABLE>
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<PAGE>
BIG SMITH BRANDS, INC.
PRO FORMA STATEMENT OF OPERATIONS
Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
Sale of After
March 31, 1999 Adjustments Assets Other Non-Compete Transaction Note #
-------------- ----------- ------ ----- ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $2,132,332 $ (1,909,290) $ 0 $ 0 $ 0 $ 223,032
Cost of Goods Sold 1,817,537 (1,524,318) 293,219
----------- ------------ ----------- ----------- ---------- -----------
Gross Profit 314,785 (384,972) 0 0 0 (70,187)
----------- ------------ ----------- ----------- ---------- -----------
Operating Expenses
Selling 315,859 (223,758) 0 0 0 92,101 4
General & Administrative 348,932 (240,763) 0 60 0 108,229 3a
Bad debts 0 0 0
----------- ------------ ----------- ----------- ---------- -----------
Total operating expenses 664,791 (464,521) 0 60 0 200,330
----------- ------------ ----------- ----------- ---------- -----------
Gain/(Loss) from operations (350,006) (79,549) 0 (60) 0 (270,517)
----------- ------------ ----------- ----------- ---------- -----------
Other Income (Expenses)
Royalty Income 0 0
Interest income 0 0
Interest expense (129,348) 74,913 (54,435)
Non-compete income 800,000 800,000 1
Rental Income 54,000 54,000 3a & 3b
Gain/(Loss) sale of assets 29,701 29,701 2b
Amortization of trademarks and loan fees (47,725) (47,725)
Amortization of debenture discount 0 0 0
Depreciation (71,301) (71,301)
Loss on sale of equipment 0 0 0
Other income (1,235) 0 1,235
----------- ------------ ----------- ----------- ---------- -----------
(249,609) 74,913 29,701 54,000 800,000 709,005
----------- ------------ ----------- ----------- ---------- -----------
Gain/(Loss) before Income Taxes (599,615) 154,462 29,701 53,940 800,000 438,488
Provision for Income Taxes - - - - - -
----------- ------------ ----------- ----------- ---------- -----------
Net Gain/(Loss) $ (599,615) $ 154,462 $ 29,701 $53,940 $ 800,000 $ 438,488
=========== ============ =========== =========== ========== ==========
Net Gain/(Loss) per share $ (0.07) $ 0.05
=========== ==========
Weighted Average
Common shares outstanding 8,613,546 8,613,546
=========== ==========
</TABLE>
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<PAGE>
Big Smith Brands, Inc.
Notes To Pro Forma Financial Statements
December 31, 1998
1. Accounting treatment for the transaction:
The various elements of the transaction were recorded in their entirety
as though the transaction had been consummated as of March 31, 1999 (Balance
Sheet) and April 1, 1999 (Statement of Operations). In most instances the
various elements of the transaction were recorded on a cash basis. At March 31,
1999, approximately $3,128,206 would have been due upon the closing of the
transaction (the "Closing") for the workwear inventory and fixed assets. The
payments under the non-compete agreement extend over a period of eight (8)
years, with $400,000 due upon Closing and an additional $400,000 due six (6)
months thereafter. Walls Industries, Inc., Cleburne, Texas ("Walls") will rent
certain retained computer equipment at $10,000 per month for a minimum of three
(3) months. Walls will also rent the Company's facilities in Carthage, Missouri
for $2,000 per month for a minimum of twelve (12) months. The first month's rent
for the Carthage, Missouri facilities and three (3) months computer rental
payments aggregating $32,000 are due at Closing. The assumption of the leases
for the Miami, Oklahoma facilities will effect the return of the $4,060 security
deposits relating thereto. All expenses related to the transaction were
recorded. At March 31, 1999, the total cash due at Closing would have been
$3,530,829.
The consummation of the transaction also affected the outstanding
revolving line-of-credit and principal balances with NationsCredit Commercial
Funding, a NationsBank Company ("NationsCredit"). As a result of the
transaction, the revolving line-of-credit and the term loan was reduced to
$1,970,474 and $554,797 respectively, leaving a total balance due NationsCredit
of $2,525,271. This transaction effected a reduction of the Company's monthly
interest and loan payments of approximately $20,000.
The actual working capital deficit for the year ended March 31, 1999 was
$1.55 million. If the transaction had been consummated as of March 31, 1999, the
working capital deficit would have been $1.57 million.
2. The federal income tax consequences of the transaction:
Non-compete income $800,000
Rental income 54,000
Related expenses (30,060)
Security deposits (910)
Gain on sale of assets 29,701
-----------
Income before income taxes 852,740
Provision for income taxes 285,000
Benefit from NOL carryforward (285,000)
--------
Net income tax expense 0
--------
Net Income $852,740
========
The Company currently has net operating loss carryforwards of $3,825,509
which should be sufficient to offset all income received under the non-compete
agreement.
3. Notes to transaction recorded:
1. The Company will grant to Walls a royalty-free, perpetual license
to use the "Big Smith" trademark and certain related tradenames
in connection with the manufacture, sale and licensing of
workwear products. In consideration for the Company entering a
ten-year non-compete agreement, Walls will pay the Company a
total of $4,600,000, as follows:
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<PAGE>
Year 1 $800,000
Year 2 $700,000
Year 3 $700,000
Year 4 $600,000
Year 5 $600,000
Year 6 $400,000
Year 7 $400,000
Year 8 $400,000
Year one (1) payment is $400,000 at Closing and the remaining
$400,000 is due and payable six (6) months thereafter. The
subsequent year payments will be due and payable on the
anniversary of the Closing.
2. Sale of Assets:
a. Workwear:
Work in process $ 358,784
Piece goods 353,792
Trim 303,121
Finished Goods 2,193,660
-----------
Total $ 3,209,357
===========
The above figures are based on Company records as of March 31,
1999. The inventory has been financed by NationsCredit at an
advance rate of sixty percent (60%). At March 31, 1999, the
payment due to NationsCredit on the sale of the inventory would
have been $1,925,614. The Company has further agreed with
NationsCredit to reduce the revolving line-of-credit by
$1,962,506. These payments will reduce the Company's revolving
line-of-credit with NationsCredit to $821,775 and also will
reduce the Company's interest costs.
b. Machinery and equipment:
Factory Equipment $1,127,371
Furniture & Fixtures 345,659
Trucks 46,471
----------
Subtotal $1,473,030
Less depreciation $1,239,611
----------
Total $ 233,419
==========
Walls will pay to the Company for the assets purchased a price
that includes the appraised value (on a liquidated basis) of the
machinery and equipment sold which, at March 31, 1999, would have
been $263,120. At March 31, 1999, the net gain on the sale of the
machinery and equipment would have been $29,701.
The Company's obligation at March 31, 1999 to NationsCredit on
the term loan portion of the Credit Facility against the
machinery and equipment would have been $411,600, with a
remaining loan availability of $138,340. The original principal
amount of the loan was based on the forced liquidation value of
machinery and equipment at December 10, 1997 of $686,000, with an
advance of eighty percent (80%) and repayment over five (5)
years. The Company has been repaying the loan at the average rate
of $9,146 per month. At March 31, 1999, the pro forma repayment
to NationsCredit for the portion of the term loan based on the
value of the trademarks would have been $143,197. The Company
currently has one (1) other long-term
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<PAGE>
obligation to NationsCredit on the term loan portion of the
credit facility against the Carthage, Missouri real property of
$117,000 with a monthly payment of $2,600.
c. On a pro forma basis as of March 31, 1999, the cash
received for the sale of the Inventory and Machinery and
Equipment would have been $3,128,206. The distribution and
application of the cash received would have been as
follows:
Revolving line-of-credit $1,962,506
Machine & Equipment and Trademark loans 554,797
S. Peter Lebowitz loan 250,000
Accounts Payable 312,144
Other Accrued expenses 48,759
----------
Total Distribution $3,128,206
The first funds received pursuant to the non-compete
agreement and the rental income will be applied to working
capital. All accounts receivable, $1,302,918 at March 31,
1999, are security for the credit facility with
NationsCredit, and are expected to generate additional
working capital availability of approximately $195,438.
3. Rental Income and Miami Security Deposit:
a. Computer Rental:
Walls has agreed to rent the AS400 computer and RLM
program for a period of at least three (3) months at
$10,000 per month. The Company expends $10,020 on the
lease and service contract resulting in a loss of $20 per
month.
b. Building occupancy:
Walls has agreed to rent all of the Company's real
property located in Carthage, Missouri at a monthly rental
of $2,000 for at least twelve (12) months. This monthly
payment will be used to offset certain other costs related
to the ownership of this real property.
c. Miami, Oklahoma Security Deposits:
Walls has agreed to assume both of the leases covering the
Miami, Oklahoma facilities. Accordingly, all deposits
relating to these facilities will be refunded to the
Company.
4. Outlet and Retail Stores:
Other than the outlet store located in Carthage, Missouri which
is now being operated by Walls, the Company will retain ownership
of the outlet and retail stores and the leaseholds on the leased
properties related to these stores. The security deposits on the
Monett, Missouri and the Miami, Oklahoma outlet stores
aggregating $910 will be applied to last month's rents. The two
retained workwear outlet stores have been closed. The Miami,
Florida retail store will remain open for business.
-14-
<PAGE>
ACTUAL RESULTS
Going Concern
Our viability as a going concern is dependent upon our ability to raise
sufficient working capital and to meet any liquidity needs that may exceed our
availability under the Credit Facility. We experienced a loss from operations in
1998 and had a working capital deficit at December 31, 1998. We also experienced
a loss from operations of $599,715 for the fiscal quarter ended March 31, 1999
and had a working capital deficit of $1.55 million at March 31, 1999. Also, our
liquidity needs could exceed the amount of borrowings available under our Credit
Facility. See " -- Liquidity and Capital Resources" and "Legal
Proceedings--Caterpillar Litigation."
General
The discussion and analysis set forth below is for the three months
ended March 31, 1999 and March 31, 1998. It should be read in conjunction with
our Financial Statements and the related Notes thereto appearing elsewhere in
this quarterly report. The information presented for the three months ended
March 31, 1999, was derived from unaudited financial statements which, in our
opinion, reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation. The three-month results of
operations are not necessarily indicative of the results of operations you may
expect for the full year for reasons including, without limitation, the
consummation of the Walls Sale and License as we have discussed above.
Overview
Following the consummation of the Walls Sale and License, our business
plan now focuses on refining our retained product lines and increasing
merchandising, sales and marketing of those retained products, particularly our
sportswear products. In order to achieve our objectives, our strategy currently
includes: (i) negotiating a joint venture for the design, manufacture,
marketing, sales and sourcing of Big Smith branded sportswear, (ii) continuing
enhancement of our retained product lines and (iii) increasing the value of the
Big Smith trademarks through direct consumer advertising. We plan to subcontract
all manufacturing and production activities for the foreseeable future but to
retain test and quality assurance functions until all subcontractors can be
certified with respect to quality. We have also signed a licensing agreement
with Amita, srl, an Italian company, for the production of sweaters and
outergarments to complement our sportswear products.
We have secured a facility to serve as executive office and warehouse
space in Deerfield, Florida. The executive office will be moved there and we
will begin warehouse operations at this facility this fall.
Our sportswear line is a full line of young men's top and bottomwear.
Currently, our sportswear products are sold through apparel stores such as
Gadzooks, J.C. Penney, Jean Country, Delia and Urban Outfitter. We are currently
in the process of developing a business plan to introduce a line of ladieswear
as a complement to our sportswear and childrenswear. We expect the ladieswear
products to benefit from the value of the Big Smith trademark in the workwear
and sportswear markets as well as our merchandising and marketing experience and
relationships in the apparel industry.
Prior to 1997 a substantial portion of our resources and efforts were
devoted to developing products under the licensed Caterpillar label. In June
1996 Caterpillar sought to terminate the license and we decided to refocus our
energies on products under our own labels. Since June 1996, we have focused on
the development of products under our Big Smith labels.
We have incurred substantial losses from operations, including losses
from operations during the three months ended March 31, 1999, and had a working
capital deficit of $1.55 million and an accumulated deficit of $732,399 at March
31, 1999. As a result, our Financial Statements are qualified by a going concern
opinion. We believe that the total income to be realized from the Walls Sale and
License will be sufficient to permit us to continue as a going concern.
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<PAGE>
On December 10, 1997, we obtained a revolving line-of-credit and term
loan credit facility (the "Credit Facility") with NationsCredit Commercial
Funding, a NationsBank Company ("NationsCredit") allowing for maximum
availability of $7,000,000, after an amendment related to the consummation of
the Walls Sale and License, based on a specified percentage of eligible accounts
receivable, inventories and real property. At December 31, 1998 and March 31,
1999, we had approximately $121,816 and $85,110, respectively, of unused
availability under the total credit facility. On April 23, 1999, after the
consummation of the Walls deal, our availability under the Credit Facility was
$75,000. The amount outstanding under the Credit Facility as of March 31, 1999
was $2.78 million, with $2.09 million on the revolving line-of-credit and
$690,000 under the term loan portion of the Credit Facility. After the
consummation of the Walls Sale and License, the amount outstanding under the
Credit Facility was $821,775, with $704,775 on the revolving line-of-credit and
$117,000 under the term loan portion. The loan bears interest at prime rate plus
1.875% (9.625% at March 31, 1999) and matures in December 2001. The agreement
also provides for additional interest under certain circumstances and other
fixed fees payable. The loan is secured by all of our retained assets which
includes, without limitation, accounts receivable, inventories and property and
equipment.
Eighty percent of our sales of sportswear are to three customers. Sales
to Gadzooks, J.C. Penney and Jean Country of sportswear products represented
approximately 39%, 22% and 20%, respectively, of our net sales of sportswear for
the year ended December 31, 1998 and 35%, 0% and 0%, respectively, for the three
months ended March 31, 1999. If any one or more of these three customers were to
cease or materially reduce its purchases from us, the financial condition of the
Company might be materially adversely affected. We have significant pending
orders for sportswear from two customers, Delia and Urban Outfitters. We expect
sales to these customers to continue and we will continue to enhance our product
line and increase the value of the Big Smith trademark through direct
advertising.
The majority of our sales of childrenswear are to three customers. Sales
to Busy Bee, Midstates, Inc. and Whealtbelt of childrenswear products
represented approximately 19%, 12% and 20%, respectively, of our net sales of
childrenswear for the year ended December 31, 1998 and 7%, 9% and 11%,
respectively, for the three months ended March 31, 1999. If any one or more of
these three customers were to cease or materially reduce its purchases from us,
the financial condition of the Company might be materially adversely affected.
We intend to continue to broaden the customer base for our childrenswear
products, lessening the concentration in any one customer or small group of
customers. The Company has secured the employment of a well seasoned
childrenswear salesman with numerous years of experience.
The Company is currently developing a business for the contracted
manufacture and sale of ladieswear products in the same or similar channels of
distribution through which it currently sells its sportswear products.
Our sales of workwear have been generally higher in the last six months
of the year as compared to the first six months of the year both in terms of
revenues generated and, to a lesser extent, total garments sold. This
seasonality was due to an increase in sales of winter weight garments, which
sell at higher prices, combined with continued sales of regular weight garments.
This seasonality had a significant impact on our cash flow because our inventory
levels tended to increase during the summer months in preparation for
anticipated higher sales levels in September, October and November. With the
consummation of the Walls Sale and License, we believe that our continuing
business will be less subject to seasonal variation than it historically has
been. Our sportswear and childrenswear products sell at a generally constant
rate with some acceleration of sales in the spring and fall.
In the following discussion, the figures presented for Big Smith
workwear and other branded workwear include our childrenswear which we have
retained. For the year ended December 31, 1998, childrenswear represented 1.4%
of net sales. For the three months ended March 31, 1999, childrenswear
represented 1.5% of net sales.
The following discussion and analysis should be read in conjunction with
our financial statements appearing elsewhere in this quarterly report.
-16-
<PAGE>
Three Months Ended March 31, 1999 Compared to the Three Months Ended March 31,
1998
Net sales, for the three months ended March 31, 1999 decreased by $.13
million, or 5.8%, to $2.13 million from $2.26 million for the three months ended
March 31, 1998. Net sales for the three months ended March 31, 1999 of Big Smith
sportswear, Big Smith workwear and other branded workwear and private label
products were $.19 million, $1.72 million and $.22, respectively, as compared
with $.22 million, $1.83 million and $.21 million, respectively, for the three
months ended March 31, 1998. The decrease in sales resulted from the sale of
last season's sportswear inventory at a reduced rate.
Gross profit for the three months ended March 31, 1999 was $.31 million,
or 14.76% of net sales, compared to $.46 million, or 20.4% of net sales, for the
three months ended March 31, 1998. The decrease in gross profit percentage was
primarily due to the sale of prior season's sportswear inventory at cost or at a
smaller profit margin. For the three months ended March 31, 1999, Big Smith
sportswear, Big Smith workwear and other branded workwear and private label
products accounted for 8.9%, 80.7% and 10.4% of net sales, respectively, as
compared with 9.7%, 81% and 9.3% of net sales, respectively, for the three
months ended March 31, 1998.
Selling expenses decreased by $.06 million to $.31 million, or 14.8% of
net sales, for the three months ended March 31, 1999, from $.37 million, or
16.2% of net sales, for the three months ended March 31, 1998. This decrease in
selling expenses resulted principally from a reduction in sales personnel and a
redistribution of sales responsibility among existing administrative personnel.
General and administrative expenses were $.35 million, or 16.3% of net sales,
during the three months ended March 31, 1999, compared with $.47 million, or
20.7% of net sales, for the three months ended March 31, 1998. The decrease in
the general and administrative expenses as a percentage of net sales was
primarily due to restructuring of the accounting department and a continued
decrease in travel and entertainment expenses.
On March 19, 1998, the holders of the Company's 6% Convertible Preferred
Debentures due March 31, 2000 (the "Debentures") converted the remaining $1.63
million of the Debentures into 2,900,000 shares of Common Stock resulting in a
charge to earnings of $.61 million of related discount during the three months
ended March 31, 1998.
The Company's interest expense for the three months ended March 31, 1999
was $.13 million, or 6.1% of net sales, as compared with $.12 million, or 5.3%
of net sales, for the three months ended March 31, 1998. The increase in
interest expense was primarily due to financing of raw materials for the
workwear line through a line of credit with Actrade, a longtime supplier to the
Company.
As a result of the foregoing, the Company's net loss for the three
months ended March 31, 1999 was $.60 million compared to a net loss of $1.14
million for the three months ended March 31, 1998. Excluding the non-recurring
convertible debenture amortization discount of $.61 million, the Company's net
loss for the three months ended March 31, 1998 was $.53 million.
Year 2000 Compliance
We have initiated a Company-wide program to prepare our computer systems
and applications for year 2000 compliance. We expect to incur internal staff
costs as well as other expenses necessary to prepare our systems for the year
2000 ("Y2K"). We expect to replace some systems and upgrade others. Maintenance
or modification costs will be expensed as incurred. Specifically, our accounting
software must be upgraded to be Y2K compliant, the payroll system will be Y2K
compliant upon the purchase of a new personal computer unit and the Electronic
Data Information system, through which major customers electronically order
merchandise and invoices are electronically issued, is currently Y2K compliant.
We estimate the total cost of this effort to be approximately $75,000.
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<PAGE>
Liquidity and Capital Resources
The Company's viability as a going concern is dependent upon its ability
to raise sufficient working capital and to meet any liquidity needs that may
exceed the availability under the Credit Facility. The Company experienced a
loss from operations during the three months ended March 31, 1999 and in 1998
and 1997 and had a working capital deficiency at March 31, 1999, December 31,
1998 and December 31, 1997. Also, the Company's liquidity needs could exceed the
amount of borrowings available under the Credit Facility. At March 31, 1999,
December 31, 1998 and December 31, 1997, working capital deficiency was
approximately $1.55 million, $2.5 million and $1.5 million, respectively,
primarily as a result of the purported termination effective in January 1997 by
Caterpillar, Inc. ("Caterpillar") of the Company's license to manufacture and
sell workwear under the Caterpillar label (the "Caterpillar Termination"). As a
result, the Company has faced an on-going liquidity need. Working capital also
may vary from time to time as a result of seasonal inventory requirements, the
level of trade credit available and the level of accounts receivable balances.
The Company has taken several steps to obtain additional sources of liquidity.
The net proceeds of the proceeds of the Walls Sale and License improved
our capital structure. Additionally, the Walls Sale and License removes the
overhead and interest costs associated with the low-potential workwear business
allowing us to concentrate on the higher-margin sportswear business.
In order to fund its cash needs, on April 2, 1997, the Company completed
a Regulation S placement of $1.7 million of its 6% Convertible Preferred
Debentures due March 31, 2000. By March 1998, the Debentures had been converted
to 3,169,842 shares of the Company's Common Stock.
On December 10, 1997, the Company obtained a new revolving
line-of-credit and term loan credit facility (the "Credit Facility") with
NationsCredit Commercial Funding, a NationsBank Company ("NationsCredit")
allowing for maximum availability of $10,000,000 based on a specified percentage
of eligible accounts receivable, inventories, real property, equipment, and
trademarks. At December 31, 1998, the Company had approximately $121,816 of
unused availability under the total credit facility. The amount outstanding
under the Credit Facility as of December 31, 1998 was $4.65 million, with $3.91
million on the revolving line-of-credit and $0.74 under the term loan portion of
the Credit Facility. The loan bears interest at prime rate plus 1.875% (9.625%
at December 31, 1998) and matures in December 2000. The agreement also provides
for additional interest under certain circumstances and other fixed fees
payable. The loan is secured by all of the assets of the Company which includes,
without limitation, accounts receivable, inventories, property and equipment and
trademarks.
On or about August 10, 1998, the Company sold Units to accredited
investors including warrants to purchase 20,000 shares of the Company's Common
Stock, and $200,000 of the Company's 12% promissory notes in a private placement
through D.L. Cromwell Investments, Inc. ("Cromwell"). Cromwell was paid a total
commission of $16,000. The Units were sold to accredited investors without
registration under the 1933 Act, or the securities laws of any state, in
reliance on the exemptions contained in Rule 506 of Regulation D promulgated
under the 1933 Act.
On February 18, 1999, the Company received the proceeds of a private
placement offering of 1,100,000 units (the "Units") of the Company's securities,
with each Unit consisting of one share of the Company's Common Stock and two
warrants each to purchase one share of the Company's Common Stock, one of which
is exercisable at a price of $1.50 per share and the second of which is
exercisable at a price of $1.75 per share. The warrants have a three-year term.
Cromwell was the placement agent for the offering. The Company paid Cromwell a
commission of 11% of the total aggregate purchase price and Cromwell also
received warrants to purchase 110,000 Units of the Company's securities as
described above at an exercise price of $1.20 per Unit. Pursuant to the terms of
the offering, we will effect a one for three reverse stock split. The terms of
the offering provided that the number and exercise prices of the warrants would
not be adjusted by virtue of the reverse stock
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<PAGE>
split. As a result, the Company believes that the holders of a substantial
portion of the warrants will exercise their warrants and that the Company will
realize further proceeds from such exercises.
In 1998, the Company financed its operations primarily with borrowings
under its Credit Facility with NationsCredit. Cash used in operating activities
totaled $1.02 million for the three months ended March 31, 1999 as compared with
cash used in operating activities of $0.77 million for the three months ended
March 31, 1998. This increase reflected primarily the buildling up of inventory
and the reduction of payables. The Company typically experiences negative cash
flow from operations during the first half of each year due to the build-up of
inventory in preparation for increased sales volume in the second half of each
year.
Capital Expenditures
Capital expenditures totaled $12,077 for the three months ended March
31, 1999. These expenditures consisted primarily of improvements to the
executive offices in Boca Raton, Florida to facilitate moving the accounting
department into those offices. The Company anticipates further capital
expenditures in 1999 connected with leasing and occupying the Deerfield, Florida
executive office and warehouse facility.
Intangible Assets
In 1995, the Company purchased the Big Smith trademark from Amita, srl
in the seven countries in Europe for which the Company did not previously have
trademark rights for an aggregate purchase price of $500,000 payable over four
years. A final payment of $50,000 is due in September 1999.
Seasonality
The Company's sales of workwear have been generally higher in the last
six months of the year as compared to the first six months of the year both in
terms of revenues generated and, to a lesser extent, total garments sold. This
seasonality was due to an increase in sales of winter weight garments, which
sell at higher prices, combined with continued sales of regular weight garments.
This seasonality has had a significant impact on the cash flow of the Company
because the Company's inventory levels tended to increase during the summer
months in preparation for anticipated higher sales levels in September, October
and November. With the consummation of the Walls Sale and License, the Company
believes that its continuing business will be less subject to seasonal variation
than it historically has been. The Company's sportswear, ladieswear and
childrenswear products sell at a generally constant rate with some acceleration
of sales in the spring and fall.
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<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Caterpillar Litigation
On June 25, 1996, Big Smith Global Ltd. ("BSG"), a wholly owned
subsidiary of the Company holding the rights to the Company's agreement (the
"Agreement") with Caterpillar licensing the use by the Company of the
Caterpillar and related trademarks, received a purported notice of termination
of the Agreement, citing purported violations of the Agreement.
On July 9, 1996, the Company was served with a summons and
complaint naming it, BSG and S. Peter Lebowitz, the Company's CEO, defendants in
a suit by Caterpillar in the U.S. District Court for the Central District Court
of Illinois (the "District Court"). The complaint alleges trademark
infringement, unfair competition, false advertising and breach of contract, and
seeks injunctive relief and unspecified damages in connection with the Company's
alleged violations of the Agreement and Caterpillar's proprietary marks.
On July 26, 1996, the defendants answered the complaint filing
responsive defenses of failure to assert a claim, waiver, amendment, promissory
estoppel, equitable estoppel, laches, failure to provide an opportunity to cure,
unclean hands and misuse. The Company and BSG (collectively, the "Corporate
Defendants") filed counterclaims for breach of contract, tortious interference
with contractual relations, interference with prospective business relations,
conspiracy, commercial disparagement and breach of franchise agreement in
connection with what the Corporate Defendants believe to be Caterpillar's
wrongful efforts to terminate the Corporate Defendants' license to use certain
Caterpillar trademarks on its apparel. S. Peter Lebowitz also filed a motion to
dismiss for failure to state a claim against him in his individual capacity.
On July 18, 1996, Caterpillar filed an emergency motion for
summary judgment seeking a declaratory judgment that the Agreement had been
properly terminated. On July 29, 1996, the Company filed a motion for a
preliminary injunction against Caterpillar's purported termination of the
Agreement. On August 19, 1996, the District Court entered an order (the "August
19th Order"), which was subsequently confirmed in a Reconsideration Order
denying the Corporate Defendants' motion for a preliminary injunction and
granting Caterpillar's motion for summary judgment on the basis of a finding
that the Agreement, by its terms, provided for termination by Caterpillar
following certain breaches of the Agreement by BSG regardless of whether or not
such breaches were material. On August 28, 1996, the District Court granted in
part Mr. Lebowitz's motion and dismissed him from the breach of contract and
declaratory judgment counts of the complaint.
On April 16, 1997, Big Smith filed an Amended Counterclaim adding
Overland Group, Ltd. and Stephen Palmer as counterdefendants seeking damages in
excess of $20 million plus costs. Thereafter, on October 31, 1997, a Corrected
Second Amended Counterclaim was filed by Big Smith naming Overland Footwear,
Limited as an additional counter-defendant. The Second Amended Counterclaim
alleges similar claims as in the original counterclaim and, among others, newly
alleges that Caterpillar was barred from terminating the Corporate Defendants'
license to use its marks since a common law franchise relationship existed
between the parties which could not be terminated absent good cause.
Counterdefendants have filed motions to dismiss the Second
Amended Counterclaim for failure to state a claim. Additionally, Palmer and the
Overland defendants have filed motions seeking dismissal for lack of
jurisdiction over them. On December 16, 1997, the Court heard oral arguments on
the motions to dismiss. To date the Court has not ruled on said motions.
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<PAGE>
Management intends to vigorously defend the claims of Caterpillar
and to diligently pursue its counterclaims and its claims against Palmer and the
Overland defendants. At this stage of litigation, it is not possible to evaluate
the likelihood of favorable or unfavorable outcome. There can be no assurance
that the outcome of this litigation will be favorable to the Company, that the
Company's defenses to the claims against it will be vindicated or that any of
its counterclaims will be found to be valid. If the outcome of the litigation is
not favorable, such outcome could have a material adverse effect on the
financial condition of the Company.
Other Litigation
The Company has been involved in litigation with a number of its
foreign distributors in connection with their refusal to pay royalties the
Company believed to be due in respect of sales by such distributors of
Caterpillar branded products prior to the Company's ceasing to sell such
products. Additionally, certain distributors made claims against the Company
relating to the effects of the purported termination of the Caterpillar license
on their arrangements with the Company. Most of these litigations have been
resolved. The Company has begun discussions with Selected Brands Shoe Company
seeking recovery of at least $73,000 of accounts receivable it believes are due
and payable and with Fashion Fever CC seeking recovery of an as yet undetermined
amount of royalties it believes are due and payable. These discussions are
preliminary to filing collection actions if satisfactory settlements cannot be
reached.
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.
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
EXHIBIT TABLE
Exhibit
No. Description
--- -----------
3(a) Form of Restated Certificate of Incorporation.*
(b) By-laws.*
10(c) Loan and Security Agreement, dated December __, 1997, between the
Company and National Credit Commercial Funding, Inc., a NationsBank
Company.***
(z) Amended and Restated Employment Agreement, dated January 1, 1998,
between the Company and S. Peter Lebowitz***
(ab) Warrant to Purchase Common Stock, dated as of April 2, 1997.**
(ac) Letter of Intent, dated February 10, 1998, from D.L. Cromwell
Investments, Inc. ("Cromwell") to Willora Company Limited ("Willora")
with respect to the conversion of the remaining Debentures.***
(ad) Letter Agreement, dated February 10, 1998, among the Company, Willora
and Cromwell, with respect to the conversion of the remaining
Debentures.***
(ae) Form of Subscription Agreement with respect to the 1999 private
placement offering through D.L. Cromwell Investments, Inc.****
(af) Form of Warrant to Purchase Common Stock with respect to the 1999
private placement offering through Cromwell.****
(ag) Form of Placement Agent's Agreement with respect to the 1999 private
placement offering through Cromwell.****
(ah) Asset Purchase Agreement, dated February 26, 1999, by and between
Walls Industries, Inc., Cleburne, Texas and the Company.****
(ai) Agreement Not to Compete, dated February 26, 1999, by and between
Walls Industries, Inc., Cleburne, Texas and the Company.****
(aj) Agreement Not to Compete, dated February 26, 1999, by and between
Walls Industries, Inc., Cleburne, Texas and S. Peter Lebowitz.****
27 Financial Data Schedule*****
- --------------------------
* Previously filed with, and incorporated herein by reference to, the
Registrant's Registration Statement on Form SB-2 (No. 33-85302), as
amended, declared effective on February 8, 1995 ("Form SB-2").
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<PAGE>
** Previously filed with, and incorporated herein by reference to, the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1996, filed on April 15, 1997.
*** Previously filed with, and incorporated herein by reference to, the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1997, filed on April 15, 1998.
**** Previously filed with, and incorporated herein by reference to, the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1998, filed on March 29, 1999.
***** Filed herewith.
(b) Reports on Form 8-K.
None.
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<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BIG SMITH BRANDS, INC.
Date: May 24, 1999 /s/ Susan A. Leonhardt
-----------------------------
By: Susan A. Leonhardt
Director of Accounting/Administration and
Authorized Registrant Signer
(Principal Accounting and Financial Officer)
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<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
--- -----------
3(a) Form of Restated Certificate of Incorporation.*
(b) By-laws.*
10(c) Loan and Security Agreement, dated December __, 1997, between the
Company and National Credit Commercial Funding, Inc., a NationsBank
Company.***
(z) Amended and Restated Employment Agreement, dated January 1, 1998,
between the Company and S. Peter Lebowitz***
(ab) Warrant to Purchase Common Stock, dated as of April 2, 1997.**
(ac) Letter of Intent, dated February 10, 1998, from D.L. Cromwell
Investments, Inc. ("Cromwell") to Willora Company Limited ("Willora")
with respect to the conversion of the remaining Debentures.***
(ad) Letter Agreement, dated February 10, 1998, among the Company, Willora
and Cromwell, with respect to the conversion of the remaining
Debentures.***
(ae) Form of Subscription Agreement with respect to the 1999 private
placement offering through D.L. Cromwell Investments, Inc.****
(af) Form of Warrant to Purchase Common Stock with respect to the 1999
private placement offering through Cromwell.****
(ag) Form of Placement Agent's Agreement with respect to the 1999 private
placement offering through Cromwell.****
(ah) Asset Purchase Agreement, dated February 26, 1999, by and between
Walls Industries, Inc., Cleburne, Texas and the Company.****
(ai) Agreement Not to Compete, dated February 26, 1999, by and between
Walls Industries, Inc., Cleburne, Texas and the Company.****
(aj) Agreement Not to Compete, dated February 26, 1999, by and between
Walls Industries, Inc., Cleburne, Texas and S. Peter Lebowitz.****
27 Financial Data Schedule*****
- --------------------------
* Previously filed with, and incorporated herein by reference to, the
Registrant's Registration Statement on Form SB-2 (No. 33-85302), as
amended, declared effective on February 8, 1995 ("Form SB-2").
** Previously filed with, and incorporated herein by reference to, the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1996, filed on April 15, 1997.
*** Previously filed with, and incorporated herein by reference to, the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1997, filed on April 15, 1998.
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<PAGE>
**** Previously filed with, and incorporated herein by reference to, the
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1998, filed on March 29, 1999.
***** Filed herewith.
-26-
