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 November 30, 1996
-------------------
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
------------------ -----------------
Commission file number 33-98682
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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 Identification No.)
Incorporation or Organization)
46 Old Flat River Road, Coventry, Rhode Island 02816
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(Address of Principal Executive Offices)
(401) 397-6800
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(Issuer's Telephone Number, Including Area Code)
N/A
- ------------------------------------------------------------------------------
(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, 1,708,433 shares outstanding at
December 30, 1996.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
JD AMERICAN WORKWEAR, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of November 30, 1996 and February 29, 1996 3
Condensed Statements of Operations for the three and nine months ended
November 30, 1996 and November 30, 1995 5
Condensed Statements of Cash Flows for the nine months ended November
30, 1996 and November 30, 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
nine months ended November 30, 1996 and November 30, 1995 12
(b) Reports on Form 8-K 10
</TABLE>
JD AMERICAN WORKWEAR, INC.
CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
November 30, February 29,
1996 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 43,251 $ 1,220,758
Accounts receivable, net 207,649 8,431
Inventories 889,163 627,480
Other current assets 20,315 320
---------------------------
Total Current Assets 1,160,378 1,856,989
Furniture, fixtures, equipment and leasehold improvements at
cost less accumulated depreciation and amortization of
$97,226 at November 30, 1996 and $77,257 at February 29, 1996 108,308 101,505
Intangible Assets, net of accumulated amortization of $194,371
at November 30, 1996 and $172,941 at February 29, 1996 82,837 104,667
---------------------------
TOTAL ASSETS $ 1,351,523 $ 2,063,161
===========================
</TABLE>
See notes to Condensed Financial Statements
JD AMERICAN WORKWEAR, INC.
CONDENSED BALANCE SHEETS -- CONTINUED
(unaudited)
<TABLE>
<CAPTION>
November 30, February 29,
1996 1996
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Liabilities
Current liabilities:
Accounts payable $ 294,192 $ 173,071
Accrued expenses 35,606 171,348
Accrued interest on notes payable 26,107 136,657
Current portion of notes payable and long-term debt 162,248 655,941
---------------------------
Total Current Liabilities 518,153 1,137,017
Notes payable and long-term debt, less current portion 757,728 1,002,565
---------------------------
Total Liabilities 1,275,881 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 1,708,433 shares issued and outstanding at November 30, 1996 3,417 3,128
Additional paid-in capital 3,131,230 2,450,700
Accumulated deficit (3,059,004) (2,530,249)
---------------------------
Total Stockholders' Equity (Deficiency) 75,642 (76,421)
---------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 1,351,523 $ 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
November 30
--------------------------
1996 1995
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<S> <C> <C>
Revenues
Net sales $ 161,309 $ 11,131
Cost of goods sold 89,244 11,025
--------------------------
Gross profit 72,065 106
Operating Expenses
Payroll and payroll taxes 67,319 60,392
Selling Expenses 26,095 24,122
Consulting Expenses 19,555 7,301
Contract Labor 1,958 0
Depreciation and amortization 21,755 55,001
Freight and delivery 7,520 3,362
Professional fees 17,491 11,490
Rent 9,400 6,000
Supplies 3,511 3,574
Telephone 4,837 4,325
Travel and Entertainment 12,814 10,768
Other 19,663 30,097
--------------------------
Total operating expenses 211,916 216,432
--------------------------
Operating loss (139,851) (216,326)
--------------------------
Interest expense 26,196 102,058
Debt offering costs 0 38,270
Interest income 875 0
--------------------------
NET LOSS $ (165,173) $ (356,654)
==========================
Net loss per common share $ (0.10) $ (0.46)
Weighted average number of common shares 1,706,422 1,255,955
==========================
</TABLE>
See notes to Condensed Financial Statements
JD AMERICAN WORKWEAR, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months ended
November 30,
-------------------------
1996 1995
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<S> <C> <C>
Revenues
Net sales $ 386,406 $ 42,014
Cost of goods sold 207,869 34,022
-------------------------
Gross profit 178,537 7,992
Operating Expenses
Payroll and payroll taxes 211,768 159,257
Selling Expenses 52,021 72,140
Consulting Expenses 68,012 82,174
Contract Labor 2,120 6,648
Depreciation and amortization 62,278 233,645
Freight and delivery 17,945 10,056
Professional fees 63,431 53,201
Rent 23,635 18,000
Supplies 16,340 9,821
Telephone 15,084 12,930
Travel and Entertainment 34,328 36,079
Other 61,100 71,122
-------------------------
Total operating expenses 628,061 765,073
-------------------------
Operating loss (449,524) (757,081)
Interest expense (91,200) (204,517)
Interest income 11,969 0
-------------------------
NET LOSS $ (528,755) $ (999,868)
=========================
Net loss per common share $ (0.32) $ (0.51)
Weighted average number of common shares 1,665,791 1,260,122
=========================
</TABLE>
See notes to Condensed Financial Statements
JD AMERICAN WORKWEAR, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months ended
November 30,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (528,755) $ (999,868)
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Depreciation and amortization 62,278 233,645
Common Stock issued for services 4,500 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (199,218) 14,059
(Increase) in inventories (261,683) (199,732)
(Increase) in other assets (19,995) (34,388)
Increase (decrease) in accounts payable 121,121 22,294
Increase (decrease) in accrued expenses (246,292) 68,371
-----------------------------
Net cash (used in) operating activities (1,068,044) (895,619)
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (26,373) (28,975)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal advances on notes payable and long-term debt 0 1,291,168
Lease Obligation 0 5,403
Repayments on notes payable and long-term debt (759,408) (132,108)
Costs of raising capital (63,402) (113,706)
Sale of common stock 739,720 0
-----------------------------
Net cash (used in) provided by financing activities (83,090) 1,050,757
-----------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,177,507) 126,163
Cash and cash equivalents - beginning of period 1,220,758 6,816
-----------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 43,251 $ 132,979
=============================
</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 nine
months ended November 30, 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.
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months Ended November 30, 1996 Compared to Three Months Ended
November 30, 1995. Net sales for the three month period ended November 30,
1996 increased fourteen fold to $161,309 from $11,131 for the three month
period ended November 30, 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 November 30, 1996 was $89,244 compared to $11,025 for the
three months ended November 30, 1995. Gross margin for the three month period
ended November 30, 1996 was 44.7% compared to .1% for the three months ended
November 30, 1995.
Selling, general and administrative ("SG&A") expenses decreased slightly
to $211,916 for the three months ended November 30, 1996 from $216,432 for the
three months ended November 30, 1995. The increases in payroll and sales and
marketing were offset by decreases in depreciation and amortization.
The net loss for the three months ended November 30, 1996 was $165,173
compared to a net loss of $356,654 for the three months ended November 30,
1995. The decreased loss is attributable to increased sales, resulting in
increased gross profit.
Nine Months Ended November 30, 1996 Compared to Nine Months Ended
November 30, 1995. Net sales for the nine month period ended November 30, 1996
increased nine fold to $386,406 from $42,014 for the nine months ended
November 30, 1995. The increase is directly attributable to an increase in
unit volume. Cost of goods sold for the nine months ended November 30, 1996
was $207,869 compared to $34,022 for the nine months ended November 30, 1995.
Gross margin for the nine months ended November 30, 1996 was 46.2% compared to
19.0% for the nine months ended November 30, 1995.
SG&A expenses decreased 17.9% to $628,061 for the nine months ended
November 30, 1996 from $765,073 for the nine months ended November 30, 1995.
The decrease is primarily attributable to a decrease in depreciation and
amortization ($171,367), consulting expenses ($18,662) and selling expenses
($20,119) partially offset by an increase in payroll ($52,511).
The net loss for the nine months ended November 30, 1996 was $528,755
compared to a net loss of $999,868 for the nine months ended November 30,
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 $ 1,068,044 for the nine
months ended November 30, 1996 compared to $895,619 for the nine months ended
November 30, 1995. The increase was primarily attributable to a reduction in
accrued expenses of $246,292 for the nine months ended November 30, 1996
compared to an increase in accrued expenses of $68,371 for the nine months
ended November 30, 1995. Capital expenditures for the nine months ended
November 30, 1996 were $26,373 compared to $28,975 for the nine months ended
November 30, 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 and maintain current levels of production, the Company will be
required to 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 nine months ended November 30, 1996 and
November 30, 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/ ANTHONY P. SANTUCCI
-----------------------------------
Anthony P. Santucci, Vice President
(Chief Financial Officer)
Date: January 13, 1997
EXHIBIT 11
JD American Workwear, Inc.
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Loss $ (165,173) $ (356,654) $ (528,755) $ (999,868)
Weighted average common shares outstanding(1) 1,706,422 875,000 1,665,791 873,850
"Cheap" stock issued December 1994 - May 1995 387,305 387,305
---------------------------------------------------------
1,706,422 1,262,305 1,665,791 1,261,155
=========================================================
Loss per share(2) $ (.10) $ (.34) $ (.32) $ (.51)
=========================================================
<FN>
- --------------------
<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 November 30, 1996.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> NOV-30-1996
<CASH> 43,251
<SECURITIES> 0
<RECEIVABLES> 207,649
<ALLOWANCES> 0
<INVENTORY> 889,163
<CURRENT-ASSETS> 1,160,378
<PP&E> 205,534
<DEPRECIATION> 97,226
<TOTAL-ASSETS> 1,351,523
<CURRENT-LIABILITIES> 518,153
<BONDS> 0
0
0
<COMMON> 3,417
<OTHER-SE> 3,131,230
<TOTAL-LIABILITY-AND-EQUITY> 1,351,523
<SALES> 386,406
<TOTAL-REVENUES> 386,406
<CGS> 207,869
<TOTAL-COSTS> 207,869
<OTHER-EXPENSES> 628,061
<LOSS-PROVISION> (449,524)
<INTEREST-EXPENSE> 91,200
<INCOME-PRETAX> (528,755)
<INCOME-TAX> (528,755)
<INCOME-CONTINUING> (528,755)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (528,755)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
