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, 1997
-----------------
[ ] 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
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(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
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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, 1,955,398 shares outstanding at
January 8, 1998.
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
Balance Sheets as of November 30, 1997 and February 28, 1997 3-4
Statements of Operations for the three months and nine months
ended November 30, 1997 and November 30, 1996 5-6
Statements of Cash Flows for the nine months ended November
30, 1997 and November 30, 1996 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
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submissions of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
JD AMERICAN WORKWEAR, INC.
BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
November 30, 1997 February 28, 1997
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 9,944 $ 7,634
Accounts Receivable 388,484 221,983
Inventories 812,047 828,891
Other current assets 164,170 9,094
----------------------------------
Total Current Assets 1,374,646 1,067,602
Property and equipment at cost, less accumulated depreciation of $127,363
and $106,975 at November 30, 1997 and February 28, 1997, respectively. 80,960 100,559
Intangible Assets, at cost, less accumulated amortization of $211,949 and
$192,725 at November 30, 1997 and February 28, 1997, respectively. 83,666 91,483
Other assets, net 76,524 9,928
----------------------------------
TOTAL ASSETS $ 1,615,795 $ 1,269,572
----------------------------------
</TABLE>
See notes to Financial Statements
JD AMERICAN WORKWEAR, INC.
BALANCE SHEETS -- CONTINUED
(unaudited)
<TABLE>
<CAPTION>
November 30, 1997 February 28, 1997
----------------- -----------------
<S> <C> <C>
LIABILITIES AND CAPITAL DEFICIT
Liabilities
Current liabilities:
Accounts payable $ 323,846 $ 219,529
Accrued expenses 15,024 15,024
Accrued interest on notes payable 89,254 57,497
Current portion of notes payable and long-term debt 627,431 277,134
---------------------------------
Total Current Liabilities 1,055,556 569,184
Notes payable and long-term debt, less current portion 551,598 840,199
---------------------------------
Total Liabilities 1,607,154 1,409,383
Stockholders' Equity (Capital Deficit)
Preferred stock, $.001 par value; 1,000,000 shares authorized;
issued and outstanding, 0 shares 0 0
Common stock, $.002 par value; authorized , 4,500,000 shares;
issued and outstanding, 1,955,398 shares and 1,708,433 shares
at November 30, 1997 and February 28, 1997, respectively.
3,911 3,417
Additional paid-in capital 4,012,946 3,191,229
Accumulated deficit (4,008,216) (3,334,457)
---------------------------------
Total Stockholders' Equity (Capital Deficit) 8,641 (139,811)
---------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIT) $ 1,621,795 $ 1,269,572
---------------------------------
</TABLE>
See notes to Financial Statements
JD AMERICAN WORKWEAR, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months ended November 30, 1997 1996
----------- -----------
<S> <C> <C>
Revenues
Net sales $ 164,093 $ 161,309
Cost of goods sold 99,796 89,244
---------------------------
Gross profit 64,297 72,065
Operating Expenses:
Payroll and payroll taxes 70,857 67,319
Selling Expenses 41,032 26,095
Consulting Expenses 88,234 19,555
Contract Labor 71 1,958
Depreciation and amortization 6,995 21,755
Employee benefits 9,996 0
Freight and delivery 7,570 7,520
Professional fees 18,304 17,491
Rent 7,950 9,400
Supplies 3,986 3,511
Telephone 3,880 4,837
Travel and Entertainment 14,495 12,814
Other 16,384 19,663
---------------------------
Total operating expenses 289,755 211,916
---------------------------
Operating loss (225,458) (139,851)
Interest expense (37,551) (26,196)
Interest income 0 875
---------------------------
NET LOSS $ (263,009) $ (165,173)
---------------------------
Net loss per common share $ (.13) $ (.10)
---------------------------
Weighted average number of common shares 1,955,000 1,706,422
</TABLE>
See notes to Financial Statements
JD AMERICAN WORKWEAR, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months ended November 30, 1997 1996
----------- -----------
<S> <C> <C>
Revenues
Net sales $ 476,253 $ 386,406
Cost of goods sold 277,091 207,869
---------------------------
Gross profit 199,162 178,537
Operating Expenses:
Payroll and payroll taxes 186,733 144,449
Selling Expenses 75,054 32,331
Consulting Expenses 208,944 48,457
Contract Labor 1,520 163
Depreciation and amortization 20,388 40,523
Employee benefits 20,886 0
Freight and delivery 20,785 11,714
Professional fees 86,499 45,940
Rent 23,200 14,235
Supplies 9,563 12,829
Telephone 11,632 10,247
Travel and Entertainment 34,632 21,514
Other 57,519 33,742
---------------------------
Total operating expenses 757,353 416,145
---------------------------
Operating loss (558,191) (309,511)
Interest expense (115,677) (65,003)
Interest income 110 10,539
---------------------------
NET LOSS $ (673,759) $ (363,975)
---------------------------
Net loss per common share $ (.34) $ (.22)
---------------------------
Weighted average number of common shares 1,955,000 1,645,696
</TABLE>
See notes to Financial Statements
JD AMERICAN WORKWEAR, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months ended November 30, 1997 1996
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (673,759) $ (363,975)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Depreciation and amortization 39,612 40,523
Securities issued for services rendered 336,500 0
Securities issued for interest payments 23,211 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (166,501) (120,786)
(Increase) decrease in inventories 16,844 (154,743)
(Increase) decrease in other assets (221,672) (18,064)
Increase (decrease) in accounts payable 104,318 (27,430)
Increase (decrease) in accrued expenses 31,757 (234,742)
----------------------------
Net cash (used in) operating activities (509,690) (879,217)
----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (12,196) (24,521)
----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal advances on notes payable and long-term debt 230,000 0
Repayments on notes payable and long-term debt (118,303) (734,528)
Costs of raising capital 0 (63,402)
Sale of common stock 412,500 739,720
----------------------------
Net cash (used in) provided by financing activities 524,197 (58,210)
----------------------------
NET INCREASE (DECREASE) IN CASH 2,311 (961,948)
Cash - beginning of year 7,634 1,220,758
----------------------------
CASH - END OF PERIOD $ 9,944 $ 258,810
----------------------------
</TABLE>
See notes to Financial Statements
JD AMERICAN WORKWEAR, INC.
Notes to Financial Statements
Note 1 - The Company
- - --------------------
The Company was incorporated in Rhode Island in 1991 under the name Jaque
Dubois, Inc. and was reincorporated in Delaware in 1994. In July 1995, the
Company's name was changed to JD American Workwear, Inc. The Company is
primarily engaged in the business of designing, manufacturing, marketing and
selling commercial and industrial workwear products
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. Management believes that additional capital
will be required to sustain operations through 1998. The Company anticipates
meeting its future cash requirements through the sale of products and obtaining
additional financing. There can be no assurance that sufficient cash can be
generated from operations or financing activities or that the Company will be
able to operate profitably in the future.
Note 2 - Basis of Presentation
- - ------------------------------
The interim financial statements are prepared pursuant to the
requirements for reporting on Form 10- QSB. The February 28, 1997 balance sheet
data was derived from audited financial statements but does not include
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
28, 1997. 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, 1998.
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, 1997 Compared to Three Months Ended
November 30, 1996. Net sales for the three month period ended November 30, 1997
increased approximately 1.7% to $164,093 from $161,309 for the three months
ended November 30, 1996. The increase is directly attributable to an increase
in unit volume. Cost of goods sold for the three months ended November 30, 1997
was $99,796 compared to $89,244 for the three months ended November 30, 1996.
Gross margin for the three months ended November 30, 1997 was 39.2% compared to
44.7% for the three months ended November 30, 1996 reflecting a shift from
higher margin direct sale programs to traditional mass merchant retail
distribution at slightly lower margin.
Selling, general and administrative ( SG&A ) expenses increased 36.7% to
$289,755 for the three months ended November 30, 1997 from $211,916 for three
months ended November 30, 1996. A significant portion of the increase was
incurred in connection with options and warrants issued to consultants for
services. Interest expense increased to $37,551 from $26,196 due to an increase
in short term borrowings.
The net loss for the three months ended November 30, 1997 was $263,009 or
$ 0.13 per share compared to a net loss of $165,173 or $0.10 per share for the
three months ended November 30, 1996.
Nine Months Ended November 30, 1997 Compared to Nine Months Ended
November 30, 1996. Net sales for the nine month period ended November 30, 1997
increased approximately 23.3% to $476,253 from $386,406 for the nine months
ended November 30, 1996. The increase is directly attributable to an increase
in unit volume. Cost of goods sold for the nine months ended November 30, 1997
was $277,091 compared to $207,869 for the nine months ended November 30, 1996.
Gross margin for the nine months ended November 30, 1997 was 41.8% compared to
46.2% for the nine months ended November 30, 1996 reflecting a shift from
higher margin direct sale programs to traditional mass merchant retail
distribution at slightly lower margin.
Selling, general and administrative ( SG&A ) expenses increased
approximately 82% to $757,353 for the nine months ended November 30, 1997 from
$416,145 for nine months ended November 30, 1996. A significant portion of the
increase was incurred in connection with options and warrants issued to
consultants for services. Payroll expenses increased approximately 29.3% to
$186,733 reflecting additions to marketing and administrative staff. Interest
expense increased to $115,677 from $65,003 due to an increase in short term
borrowings.
The net loss for the nine months ended November 30, 1997 was $673,759 or
$0.34 per share compared to a net loss of $363,975 or $0.22 per share for the
nine months ended November 30, 1996.
Liquidity and Capital Resources
Net cash used in operating activities was $509,690 for the nine months
ended November 30, 1997 compared to $879,217 for the nine months ended November
30, 1996. The Company used resources to continue to build finished goods
inventory into its prime selling season. Cash flow from the exercise of stock
options and short term borrowings were used to finance growth in accounts
receivable, and to produce inventory and was offset partially by an increase in
accounts payable. Accounts receivable increased approximately 75% to $388,484
from February 28 to November 30, 1997. Inventory decreased slightly to $812,047
during the first nine months of fiscal 1998.
In August 1997, the Company defaulted in the payment of the interest due
to certain noteholders in the amount of $26,000. As of December 8, 1997, all
interest due and payable has been paid in full.
Capital expenditures for the nine months ended November 30, 1997 totaled
$ 12,196 compared to $24,521 for the nine months ended November 30, 1996.
During the quarter ended November 30, 1997, options to purchase 50,000
shares of common stock at $3.25 per share were exercised. Additionally, during
the quarters ended May 31, 1997 and August 31, 1997, options to purchase 40,000
common shares at $2.50 per share and 60,000 common shares at $2.50 per share
were exercised, respectively. As a result of these option exercises, the
Company has received proceeds of $412,500 during the nine months ending
November 30, 1997.
In December, 1997, the Company completed a private placement of 313
shares of Series A 10% Mandatorily Convertible Preferred Stock for gross
proceeds of $782,500. The proceeds of this offering were used to increase
production of finished goods inventory, repay principal and accrued interest on
outstanding short term borrowings, fund marketing and sales programs, settle
overdue accounts payable and accrued liabilities, and for working capital. The
Company will be required to seek additional financing to meet its business
strategy of achieving significant market penetration of its JD Uniform Safety
Pants. Also, additional capital may be required if adequate levels of revenue
are not realized, if higher than anticipated costs are incurred in the
expansion of the Company's manufacturing and marketing activities, or if
product demand exceeds expected levels. There can be no assurance that any
additional financing thereby necessitated will be available on acceptable terms
to the Company, if at all.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any litigation or governmental proceedings
that management believes would result in judgments or fines that would have a
material adverse effect on the Company.
Item 2. Changes in Securities
N/A
Item 3. Defaults Upon Senior Securities
See Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources for discussion of
payment of delinquent interest on 11% Subordinated Notes
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
None.
(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 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> NOV-30-1997
<CASH> 9,944
<SECURITIES> 0
<RECEIVABLES> 388,484
<ALLOWANCES> 0
<INVENTORY> 812,047
<CURRENT-ASSETS> 1,374,646
<PP&E> 208,323
<DEPRECIATION> 127,363
<TOTAL-ASSETS> 1,615,795
<CURRENT-LIABILITIES> 1,055,556
<BONDS> 0
0
0
<COMMON> 3,911
<OTHER-SE> 4,012,946
<TOTAL-LIABILITY-AND-EQUITY> 1,621,795
<SALES> 476,253
<TOTAL-REVENUES> 476,253
<CGS> 199,162
<TOTAL-COSTS> 199,162
<OTHER-EXPENSES> 757,353
<LOSS-PROVISION> (558,191)
<INTEREST-EXPENSE> 115,677
<INCOME-PRETAX> (673,759)
<INCOME-TAX> (673,759)
<INCOME-CONTINUING> (673,759)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (673,759)
<EPS-PRIMARY> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
