U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended August 31, 1996
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number 33-98682
--------------------------------------------------------
JD AMERICAN WORKWEAR, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 05-0460102
- -------------------------------------- -------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
46 Old Flat River Road, Coventry, Rhode Island 02816
----------------------------------------------------
(Address of Principal Executive Offices)
(401) 397-6800
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
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(Former Name, Former Address and Former Fiscal Year, 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 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date.
Common Stock, $.002 par value per share, 1,705,432 shares outstanding
at September 25, 1996.
Transitional Small Business Disclosure Format (check one)
Yes No X
--- ---
JD AMERICAN WORKWEAR, INC.
INDEX TO FORM 10-QSB
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of August 31, 1996 and
February 29, 1996............................................ 3
Condensed Statements of Operations for the three and six
months ended August 31, 1996 and August 31, 1995............. 5
Condensed Statements of Cash Flows for the six months ended
August 31, 1996 and August 31, 1995.......................... 7
Notes to Condensed Financial Statements....................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 10
Item 2. Changes in Securities................................ 10
Item 3. Defaults Upon Senior Securities...................... 10
Item 4. Submissions of Matters to a Vote of Security Holders. 10
Item 5. Other Information.................................... 10
Item 6. Exhibits and Reports on Form 8-K..................... 10
(a) Exhibit 11 - Computation of earnings per share
for the six months ended August 31, 1996 and
August 31, 1995................................. 12
(b) Reports on Form 8-K................................ 10
JD AMERICAN WORKWEAR, INC.
CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
August 31, February 29,
1996 1996
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 258,810 $1,220,758
Accounts receivable, net 129,217 8,431
Inventories 782,223 627,480
Other current assets 18,384 320
---------- ----------
Total Current Assets 1,188,634 1,856,989
---------- ----------
Furniture, fixtures, equipment and leasehold
improvements at cost less accumulated
depreciation and amortization of $104,460
at August 31, 1996 and $77,257 at February
29, 1996 113,263 101,505
Intangible Assets, net of accumulated
amortization of $186,382 at August 31, 1996
and $172,941 at February 29, 1996 90,826 104,667
---------- ----------
TOTAL ASSETS $1,392,723 $2,063,161
========== ==========
</TABLE>
See notes to Condensed Financial Statements
JD AMERICAN WORKWEAR, INC.
CONDENSED BALANCE SHEETS -- CONTINUED
(unaudited)
<TABLE>
<CAPTION>
August 31, 1996 February 29, 1996
--------------- -----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
Liabilities
Current liabilities:
Accounts payable $ 145,641 $ 173,071
Accrued expenses 35,606 171,348
Accrued interest on notes payable 37,657 136,657
Current portion of notes payable and
long-term debt 169,726 655,941
----------- -----------
Total Current Liabilities 388,630 1,137,017
Notes payable and long-term debt, less
current portion 768,171 1,002,565
----------- -----------
Total Liabilities 1,156,801 2,139,582
----------- -----------
Stockholders' Equity (Deficiency)
Preferred stock, $.001 par value; 1,000,000
shares authorized; no shares issued
and outstanding 0 0
Common stock, $.002 par value; 4,500,000
shares authorized; 1,564,225 shares
issued and outstanding at February 29,
1996; and 1,705,433 shares issued and
outstanding at August 31, 1996 3,411 3,128
Additional paid-in capital 3,126,735 2,450,700
Accumulated deficit (2,894,224) (2,530,249)
----------- -----------
Total Stockholders' Equity (Deficiency) 235,922 (76,421)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 1,392,723 $ 2,063,161
=========== ===========
</TABLE>
See notes to Condensed Financial Statements
JD AMERICAN WORKWEAR, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months ended
August 31,
---------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues
Net sales $ 142,063 $ 18,642
Cost of goods sold 75,438 9,456
----------- -----------
Gross profit 66,625 9,186
----------- -----------
Operating Expenses
Payroll and payroll taxes 68,433 51,092
Selling Expenses 4,100 44,591
Consulting Expenses 7,271 69,848
Contract Labor 163 2,536
Depreciation and amortization 27,302 164,784
Freight and delivery 4,084 1,588
Professional fees 24,575 26,741
Rent 8,235 6,000
Supplies 4,219 3,161
Telephone 4,309 6,531
Travel and Entertainment 7,594 12,745
Other 24,364 23,848
----------- -----------
Total operating expenses 184,650 413,465
----------- -----------
Operating loss (118,025) (404,279)
Interest expense (28,658) (26,157)
Interest income 3,395 0
----------- -----------
NET LOSS $ (143,288) $ (430,436)
=========== ===========
Net loss per common share $ (0.09) $ (0.34)
Weighted average number of
common shares 1,684,056 1,262,305
=========== ===========
</TABLE>
See notes to Condensed Financial Statements
JD AMERICAN WORKWEAR, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Six Months ended
August 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues
Net sales $ 225,259 $ 30,883
Cost of goods sold 118,625 22,997
----------- ----------
Gross profit 106,634 7,886
----------- ----------
Operating Expenses
Payroll and payroll taxes 144,449 98,865
Selling Expenses 32,331 48,018
Consulting Expenses 48,457 74,873
Contract Labor 163 6,648
Depreciation and amortization 40,523 178,644
Freight and delivery 11,714 6,694
Professional fees 45,940 41,711
Rent 14,235 12,000
Supplies 12,829 6,247
Telephone 10,247 8,605
Travel and Entertainment 21,514 25,311
Other 33,742 41,025
----------- ----------
Total operating expenses 416,145 548,641
----------- ----------
Operating loss (309,511) (540,755)
Interest expense (65,003) (102,459)
Interest income 10,539 0
----------- ----------
NET LOSS $ (363,975) $ (643,214)
=========== ==========
Net loss per common share $ (0.22) $ (0.51)
Weighted average number of common shares 1,645,696 1,262,305
=========== ==========
</TABLE>
See notes to Condensed Financial Statements
JD AMERICAN WORKWEAR, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Six Months ended
August 31
------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (363,975) $ (643,214)
Adjustments to reconcile net loss to net
cash (used in) operating activities:
Depreciation and amortization 40,523 178,644
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (120,786) 15,976
(Increase) in inventories (154,743) (195,425)
(Increase) in other assets (18,064) (40,969)
Increase (decrease) in accounts payable (27,430) 66,062
Increase (decrease) in accrued expenses (234,742) 177,470
----------- -----------
Net cash (used in) operating activities (879,217) (441,456)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (24,521) (21,205)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal advances on notes payable and
long-term debt 0 637,895
Repayments on notes payable and long-term debt (734,528) (113,422)
Costs of raising capital (63,402) (65,251)
Sale of common stock 739,720 0
----------- -----------
Net cash (used in) provided by financing
activities (58,210) 459,222
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (961,948) (3,439)
Cash and cash equivalents - beginning of period 1,220,758 6,816
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 258,810 $ 3,377
=========== ===========
</TABLE>
See notes to Condensed Financial Statements
Notes to Condensed Financial Statements
Note 1 - The Company
JD American Workwear, Inc. (the "Company") was incorporated in May of
1991. The Company designs, markets and distributes commercial and
industrial workwear.
Substantial losses have been incurred since inception and additional
future losses are anticipated as the Company continues to expand operations
and establish itself in the market. The Company has partially funded
operations by borrowings. The Company also conducted an initial public
offering ("IPO") of common stock and warrants and received gross proceeds of
approximately $2,050,000. The Company is using the proceeds of the IPO to
provide working capital and to repay certain accrued expenses and
noteholders of the Company.
Note 2 - Basis of Presentation
The interim financial statements are prepared pursuant to the
requirements for reporting on Form 10-QSB. The February 29, 1996 balance
sheet data was derived from audited financial statements but does not
include all disclosures required by generally accepted accounting
principles. The interim financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely of
normal recurring adjustments) that are, in the opinion of management,
necessary to a fair presentation of the Company's financial position,
results of operations, and changes in financial position for the interim
periods.
The accompanying financial statements do not contain all of the
disclosures required by generally accepted accounting principles and should
be read in conjunction with the financial statements and related notes
included in the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 29, 1996. The results of operations for the interim periods
shown in this report are not necessarily indicative of results to be
expected for the fiscal year ending February 28, 1997.
Note 3 - Loss Per Share
Loss per share is calculated based on the weighted average number of
shares of common stock outstanding during the period. For the three and six
months ended August 31, 1995, pursuant to the requirements of the Securities
and Exchange Commission, common shares, or other potentially dilutive
instruments issued by the Company during the twelve months immediately
preceding the initial filing of the registration statement for the Company's
initial public offering at prices below the expected public offering price
have been included in the calculation as if they were outstanding for all
periods presented.
Note 4 - Conversion of Purchase Order Financing Note
On July 1, 1996, the holders of the Company's 15% Purchase Order
Financing Note agreed to convert the principal of $195,511 and all accrued
interest thereon of $58,250 into Common Stock at a conversion price of $4.00
per share, or an aggregate of 63,440 shares of Common Stock.
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months Ended August 31, 1996 Compared to Three Months Ended
August 31, 1995. Net sales for the three month period ended August 31, 1996
increased 662% to $142,063 from $18,642 for the three month period ended
August 31, 1995. The increase is directly attributable to an increase in
unit volume. The Company had lost manufacturing capability in the Fall of
1994 and was not able to solicit orders for the Spring of 1995.
Manufacturing was restored in the Fall of 1995 and the Company began to
solicit orders for the Spring and Fall of 1996. Cost of goods sold for the
three months ended August 31, 1996 was $75,438 compared to $9,456 for the
three months ended August 31, 1995. Gross margin for the three month period
ended August 31, 1996 was 46.9% compared to 49.3% for the three months ended
August 31, 1995.
Selling, general and administrative ("SG&A") expenses decreased 55.3%
to $184,650 for the three months ended August 31, 1996 from $413,465 for the
three months ended August 31, 1995. The decrease is primarily attributable
to a decrease in depreciation and amortization ($137,482), consulting
expenses ($62,577) and selling expenses ($40,491).
The net loss for the three months ended August 31, 1996 was $143,288
compared to a net loss of $430,436 for the three months ended August 31,
1995. The decreased loss is attributable to increased sales, resulting in
increased gross profit, and decreased SG&A expenses.
Six Months Ended August 31, 1996 Compared to Six Months Ended August
31, 1995. Net sales for the six month period ended August 31, 1996 increased
629.4% to $225,259 from $30,883 for the six months ended August 31, 1995.
The increase is directly attributable to an increase in unit volume. Cost of
goods sold for the six months ended August 31, 1996 was $118,625 compared to
$22,997 for the six months ended August 31, 1995. Gross margin for the six
months ended August 31, 1996 was 47.3% compared to 25.5% for the six months
ended August 31, 1995.
SG&A expenses decreased 24.1% to $416,145 for the six months ended
August 31, 1996 from $548,641 for the six months ended August 31, 1995. The
decrease is primarily attributable to a decrease in depreciation and
amortization ($138,121), consulting expenses ($26,416) and selling expenses
($15,687) partially offset by an increase in payroll ($45,584).
The net loss for the six months ended August 31, 1996 was $363,975
compared to a net loss of $643,214 for the six months ended August 31, 1995.
The decreased loss is attributable to increased sales, resulting in
increased gross profit, and decreased SG&A expenses.
Liquidity and Capital Resources
Net cash used in operating activities was $ 879,217 for the six months
ended August 31, 1996 compared to $441,456 for the six months ended August
31, 1995. The increase was primarily attributable to a reduction in accrued
expenses of $234,742 for the six months ended August 31, 1996 compared to an
increase in accrued expenses of $177,470 for the six months ended August 31,
1995. Capital expenditures for the six months ended August 31, 1996 were
$24,521 compared to $21,205 for the six months ended August 31, 1995.
During the quarter ended May 31, 1996, the Company received net
proceeds of $422,558 from the second and final closing of its IPO. Since the
Company sold less than the maximum number of units in the IPO, in order to
meet future capital needs, the Company may seek additional financing through
the exercise of the warrants issued in the IPO, a private placement,
purchase order financing or other financing alternatives.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. N/A
Item 2. Changes in Securities. N/A
Item 3. Defaults Upon Senior Securities. N/A
Item 4. Submissions of Matters to a Vote of Security Holders. N/A
Item 5. Other Information. N/A
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. Exhibit 11. Statement re computation of earnings
per share for the six months ended August 31, 1996 and August 31, 1995.
(b) Reports on Form 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JD AMERICAN WORKWEAR, INC.
By: /s/ David N. DeBaene
------------------------------------
David N. DeBaene, President
(Principal Executive Officer)
By: /s/ Thomas L. Zambelli
------------------------------------
Thomas L. Zambelli, Vice President
(Chief Financial Officer)
Date: October 14, 1996
EXHIBIT 11
JD American Workwear, Inc.
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31 August 31
--------------------------- ---------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Loss $ (143,288) $ (430,436) $ (363,975) $ (643,214)
Weighted average common shares outstanding(1) 1,684,056 875,000 1,645,696 873,850
"Cheap" stock issued December 1994 - May 1995 387,305 387,305
----------- ----------- ----------- -----------
1,684,056 1,262,305 1,645,696 1,261,155
=========== =========== =========== ===========
Loss per share(2) $ ( .09) $ ( .34) $ (.22) $ ( .51)
=========== =========== =========== ===========
- --------------------
<F1> Excludes "cheap" stock issued from December of 1994 through May of 1995
which is viewed as outstanding for all periods presented.
<F2> There is no difference between primary and fully diluted loss per share
for the three and six month periods ended August 31, 1996.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> AUG-31-1996
<CASH> 258,810
<SECURITIES> 0
<RECEIVABLES> 129,217
<ALLOWANCES> 0
<INVENTORY> 782,223
<CURRENT-ASSETS> 1,188,634
<PP&E> 217,723
<DEPRECIATION> 104,460
<TOTAL-ASSETS> 1,392,723
<CURRENT-LIABILITIES> 388,630
<BONDS> 0
0
0
<COMMON> 3,411
<OTHER-SE> 3,126,735
<TOTAL-LIABILITY-AND-EQUITY> 1,392,723
<SALES> 225,259
<TOTAL-REVENUES> 225,259
<CGS> 118,625
<TOTAL-COSTS> 118,625
<OTHER-EXPENSES> 416,145
<LOSS-PROVISION> (309,511)
<INTEREST-EXPENSE> 65,003
<INCOME-PRETAX> (363,975)
<INCOME-TAX> (363,975)
<INCOME-CONTINUING> (393,975)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (363,975)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
