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 May 31, 2000
[ ] 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.
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(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, 2,605,427 shares outstanding at
July 17, 2000.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
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JD AMERICAN WORKWEAR, INC.
INDEX TO FORM 10-QSB
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of May 31, 2000 and February 29, 2000 3
Statements of Operations for the three months ended
May 31, 2000 and May 31, 1999 5
Statements of Operations for the nine months ended
May 31, 2000 and May 31, 1999 6
Statements of Cash Flows for the nine months ended
May 31, 2000 and May 31, 1999 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
2
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JD AMERICAN WORKWEAR, INC.
BALANCE SHEETS
(UNAUDITED)
May 31, 2000 February 29, 2000
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ASSETS
Current Assets:
Cash and cash equivalents $ 0 $ 7,013
Accounts receivable, net of allowance $55,024 39,936 72,233
Inventories 680,138 691,543
Short term loans receivable 92,417 59,329
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Total Current Assets 812,491 830,118
Property and equipment, net 189,612 205,382
Intangible assets, net 51,093 52,360
Other assets, net 387,364 412,333
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TOTAL ASSETS $1,440,560 $1,500,193
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See notes to Financial Statements
3
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JD AMERICAN WORKWEAR, INC.
BALANCE SHEETS -- CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
May 31, 2000 February 29, 2000
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current liabilities:
Current portion of long-term debt $ 244,228 244,228
Accounts payable and accrued expenses 413,004 352,569
Accrued interest on notes payable 469,221 277,378
Short-term loans 220,674 143,229
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Total current liabilities 1,347,127 1,017,404
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Long-term debt, net of current portion 128,813 135,960
Series B Preferred, as debt 2,500,000 2,500,000
Stockholders' equity
Preferred stock, authorized 1,000,000 shares:
Series A, $.001 par value 154 shares issued and
outstanding, (liquidating preference $385,000) -- --
Series B, $.001 par value 2,843 shares issued and
outstanding, (liquidating preference $2,928,750) 3 3
Common stock, $.002 par value; authorized , 7,500,000
shares; issued and outstanding, 2,605,427 and 2,605,427
shares at May 31, 2000 and February 29, 2000, respectively 5,211 5,211
Additional paid-in capital 7,361,392 7,361,392
Unearned Warrants (150,000) (150,000)
Accumulated deficit (9,751,986) (9,369,777)
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Total Stockholders' equity: (2,535,380) (2,153,171)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,440,560 $ 1,500,193
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</TABLE>
See notes to Financial Statements
4
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JD AMERICAN WORKWEAR, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three months ended May 31, 2000 May 31, 1999
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Revenues
Net sales $ 25,883 $ 105,465
Cost of goods sold 11,834 80,422
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Gross profit 14,049 25,043
Operating Expenses
Payroll and payroll taxes 105,382 151,632
Selling Expenses 0 10,666
Consulting Expenses 12,730 44,014
Contract Labor 2,042 7,317
Depreciation and amortization 42,006 9,351
Employee benefits 0 14,805
Freight and delivery 4,082 29,560
Professional fees 9,272 11,781
Rent 3,055 1,370
Supplies 556 3,717
Telephone 2,763 4,743
Travel and entertainment 4,240 14,755
Other 19,876 18,836
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Total operating expenses 206,004 322,547
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Operating loss (191,955) (297,504)
Interest income (expense) (190,254) (2,820)
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NET LOSS $ (382,209) $ (300,324)
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Net loss per common share $ (.15) $ (.13)
=========== ===========
Weighted average number of common shares
outstanding 2,605,427 2,254,773
See notes to Financial Statements
5
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JD AMERICAN WORKWEAR, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three months ended May 31, 2000 May 31, 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(382,209) $(300,324)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation and amortization 42,006 9,351
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 32,297 283,675
(Increase) in inventories 11,405 (134,055)
(Increase) decrease in other assets (33,088) 60,933
Increase in accounts payable 252,278 (57,148)
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Net cash (used in) operating activities (77,311) (137,568)
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures -- (4,074)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal advances on notes payable and
long-term debt 70,298 --
Sale of preferred stock -- --
Repayments on notes payable and long-term debt -- (13,170)
Costs of raising capital -- --
Sale of common stock -- --
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Net cash (used in) provided by financing
activities 70,298 (13,170)
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NET INCREASE (DECREASE) IN CASH (7,013) (154,812)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 7,013 174,472
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CASH - END OF PERIOD $ 0 $ 19,660
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See notes to Financial Statements
6
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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 re-incorporated 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 February, 28, 2001. The Company
anticipates meeting its future cash requirements through direct to the consumer
sales via our Internet site, traditional sales and licensing of products and
obtaining additional financing. The Company will also acquire various entities
to fulfill its desire to become a broader based, cash flow positive profitable
company. 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 10-QSB. 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 cash flows 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, 2000. 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, 2001.
7
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Since its inception, the Company has been involved in the design and
development of its products, the development of its relationships with its
suppliers and manufacturing contractors and the marketing of its products
through various distribution channels. First commercial shipments of JD Safety
Work Jeans were made in September 1992. First commercial shipments of an early
version of JD Safety Uniform Pants were made during 1994. Following the
Company's initial public offering in January 1995, the Company significantly
increased its expenditures for inventory, salaries, advertising and marketing
expenditures and other costs to increase its level of production. In March 1995,
relatively small quantities of a later version of JD Safety Uniform Pants were
sold, and this version became the working prototype for the JD Safety Uniform
Pants currently manufactured by the Company.
The Company's losses to date have principally been the result of
product design, testing and development expenses, marketing expenses, initial
production, administrative costs and professional fees. In addition, the Company
incurred higher than expected costs of goods sold because of the low level of
production (and commensurately low volume of raw materials purchased), a higher
proportion of sample goods to goods available for sale, and the initial sewing
and cutting of garments at prices significantly higher than are now available to
the Company.
The Company's business has been subject to seasonal trends based upon
climate, because highly durable denim in JD Safety Work Jeans is heavier (and
consequently warmer) than the materials used in conventional work jeans. Sales
volume for JD Safety Work Jeans is higher during the fall and winter seasons and
declines to lower levels during the spring and summer seasons. Sales of JD
Safety Uniform Pants and the conventional workwear now offered by the Company
are less sensitive to the seasonal trends which affect JD Safety Work Jeans.
For the reasons stated above, the Company believes that its results of
operations for the three-month periods ended May 31, 2000 and 1999 are not
necessarily indicative of the Company's future results of operations.
THREE MONTHS ENDED MAY 31, 2000 COMPARED TO THREE MONTHS ENDED MAY 31,
1999. Net sales for the three-month period ended May 31, 2000 decreased
approximately 75% to $25,883 from $105,465 for the three-month period ended May
31, 1999. The decrease is directly attributable to a decrease in unit volume as
a result of the change in direction of the Company. Cost of goods sold for the
three months ended May 31, 2000 was $11,834 compared to $80,422 for the three
months ended May 31, 1999. Gross margin for the three-month period ended May 31,
2000 was $14,049 compared to $25,043 for the three months ended May 31, 1999.
The decrease in gross profit of 44% is primarily due to the reduction in unit
8
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sales although the gross profit percentage increased as a result of the majority
of sales being direct to the consumer.
Operating expenses decreased to $206,004 for the three months ended May
31, 2000 from $322,547 for the three months ended May 31, 1999. Cost cutting
measures were implemented in many categories including approximately $46,000
decrease in payroll costs and $10,000, each, in travel and selling related
costs.
The net loss for the three months ended May 31, 2000 was $382,209 ($.15
per share) compared to a net loss of $300,324 ($.13 per share) for the three
months ended May 31, 1999. The increase is directly attributable to the interest
charges on the Series B Preferred stock in excess of $180,000 for the period and
the amortization of the debt discount in the amount of $24,969. These changes
were required to comply with GAAP. A prior period adjustment to the Form 10-KSB
for the period ending February 29, 2000 was made but was not applied to any
particular quarter.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $77,311 for the three months
ended May 31, 2000 compared to $137,568 for the three months ended May 31, 1999.
The Company is continuing to reduce its levels of inventory. Accounts receivable
decreased approximately 45% to $39,936 from February 29, 2000 to May 31, 2000 as
a result of reduced sales and the collection of certain older receivables.
Inventory decreased approximately 2% during the first three months of fiscal
2001.
The Company made no capital expenditures for the three months ended May
31, 2000, compared to $4,074 for the three months ended May 31, 1999.
Cash flow from operations and short-term loans provided the working
capital needs and principal payments on long-term debt through the three months
ended May 31, 2000. However, the Company will be required to seek additional
financing to provide for working capital needs and principal payments on
long-term debt during the year ended February 28, 2001 and to meet its business
strategy of achieving significant market penetration of its JD workwear
products. Also, additional capital will be required if adequate levels of
revenue are not realized, if higher than anticipated costs are incurred in
maintaining the Company's manufacturing and marketing activities, or if product
demand exceeds expected levels. The Company's inability to timely pay vendors
and service providers as a result of a cash flow shortage has and will continue
to adversely affect the Company's operations. The Company has been actively
seeking additional debt and/or equity financing; however, there can be no
assurance that financing will be available to the Company on acceptable terms,
if at all.
Through May 31, 2000, the Company has experienced substantial losses,
and at May 31, 2000 had an accumulated deficit of approximately $9,751,986. The
Company has not been able to pay all of its obligations as they have become due,
and expects to incur additional losses before it achieves profitable operations.
The receipt of funding from any current commitments will allow the Company to
continue its restructuring plan.
Inflation is not expected to have a major impact on the Company's
operations.
9
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ACQUISITIONS
PATINA CORP.
On June 1, 2000 the Company completed the acquisition of 100% of Patina
Corp., which includes assets of its subsidiary International Machine and
Welding, Inc. Patina Corp. is a holding corporation that acquires going concerns
and/or assets of various businesses. Patina Corp. was formed in April 1999 for
such functions and immediately undertook to find acquisitions and purchased its
first subsidiaries in August 1999. Patina Corp. immediately began to seek
funding using various assets of its demolition, construction and asbestos
abatement subsidiaries. Funding was not secured for the various contracts and
opportunities that arose between inception and May 31, 2000. On May 31, 2000 all
agreements related to the subsidiaries ceased and the assets were returned to
their respective owners. While Patina Corp. or JD American Workwear, Inc.
through its construction management division anticipates doing business with
these associates the original contract and the assets that were described in the
anticipated transaction announced in August 1999 are no longer under the control
of Patina Corp.
However, the assets acquired on June 1, 2000 in an agreement between
International Commerce and Finance, Inc. and Patina Corp. allows the terms and
conditions of the amended contract with Patina Corp. to close.
These assets include a 28,000 square foot machine shop and 38 acres of
commercially zoned land in Bartow, Florida and all the tools and machinery to
make this facility the largest machine shop South of Jacksonville, Florida. The
operation also includes a heavy equipment and parts sales operation. The
combined entities expect a minimum of $3 million in revenue in its first full
fiscal year. Certain management of the former business located at this site are
employees of the Company and are well known in the area. These management
personnel have been responsible for sales well in excess of the Company
projections, each year, over the last thirty years. It is anticipated that this
subsidiary will provide $500,000 in net operating profits in its first full
fiscal year.
The contract terms require up to $6,500,000 of assets to be included
based on the appraised value of the equipment, machinery, land buildings,
receivables and other assets and $3,000,000 in sales contracts or commitments to
be included.
Patina Corp. awaits the signing of a $3,000,000 contract to repair and
rehabilitate a structure for the New York State Department of Transportation.
The award letter has been received and all the requirements have been fulfilled
and have been returned to the agency. It is anticipated that the project will
begin in July 2000. This contract, when signed, will be managed by the JD
American construction management division. Simultaneous with the receipt of the
contract an additional $1 million dollars in heavy equipment will be added to
the asset base.
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The acquisition is being funded with 11,300 shares of a newly created
6% Series C Convertible Preferred Stock with a stated value $1,000 per share and
conversion rights into common stock at $1.00 per share when available. 1,500 of
these shares are issued and outstanding but held in escrow for use in paying the
earn-up provisions expected to be included in the employment agreements of the
management of the subsidiary. Additionally, the Preferred Shares pay a dividend
of 6% per annum payable in cash or in kind semi-annually. These shares have
voting rights equaling 3,562,500 shares.
INTERNATIONAL COMMERCE AND FINANCE, INC.
On June 1, 2000 the Company signed an option agreement with
International Commerce and Finance, Inc. to have the right of first refusal to
acquire any and all projects that are currently under contract or may be
conceived, acquired or partnered for two years for the sum of 25,000 restricted
common shares.
International Commerce and Finance, Inc. currently has the management
contract and an option to purchase a going concern with a one stop solution to
the banking industries needs and desire to integrate their branch banking system
with personal computer networks relieving themselves of expensive hardware,
programming and a technical staff to run the infrastructure. The solutions
company has been successful in maintaining an average of $5,000,000 in sales for
the last several years. The solutions company anticipates growth from newly
signed contracts to produce up to an additional $3,000,000 in revenue this
fiscal year with profit margins of 10% or greater. Additional contracts are in
the final negotiation stage.
RHODE ISLAND TRUCK AND EQUIPMENT CORP.
The Company completed the acquisition of Rhode Island Truck and
Equipment, Corp. on June 10, 2000. The Stock Purchase Agreement requires JD
American Workwear, Inc. to pay one share of restricted common stock for each
dollar of appraised value of the assets.
Rhode Island Truck and Equipment, Corp. provides sales of commercial
trucks and construction related equipment and tools. Additionally they provide
hauling, paving and commercial and demolition recycling. With an additional
bonding line substantial growth for its operations are expected. Total annual
revenues are expected to be $1,000,000 from the construction services sector and
$200,000 in construction equipment. Net pre tax profit is expected to be in the
10% to 20% range.
Founded in 1995 the operations reached sales of in excess of $500,000
with limited or no funding with profits of between 5% and 25% through their
operating history.
11
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has various legal proceedings to which it is a defendant,
all of which are directly related to the normal activities of the business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
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
On June 1, 2000 the Company completed two acquisitions and purchased an
option to acquire any or all activities of a third. The required, audited
financial statements and the accompanying proforma information will be submitted
to the Securities and Exchange Commission via filing a Form 8-K on or before
August 12, 2000 as required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
N/A
12
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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.
Date: July 19, 2000 By: /s/ David N. DeBaene
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David N. DeBaene, President
(Principal Executive Officer)
