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, 1999
|_| 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
----------------------------------------------------
(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, 2,569,427 shares outstanding at
January 7, 2000.
Transitional Small Business Disclosure Format (check one)
Yes |_| No |X|
1
<PAGE>
JD AMERICAN WORKWEAR, INC.
INDEX TO FORM 10-QSB
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of November 30, 1999 and February 28, 1999 3
Statements of Operations for the three months ended November 30, 1999
and November 30, 1998 5
Statements of Operations for the nine months ended November 30, 1999
and November 30, 1998 6
Statements of Cash Flows for the nine months ended November 30, 1999
and November 30, 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
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
<PAGE>
JD AMERICAN WORKWEAR, INC.
BALANCE SHEETS
(unaudited)
November 30, 1999 February 28, 1999
-------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 14,976 $ 174,472
Accounts receivable, net of allowance 197,689 751,397
Inventories 1,496,643 1,267,628
Prepaid expenses, current portion 181,149 181,149
Loans receivable, employees 7,787 20,193
------------------------------
Total current assets 1,898,243 2,394,839
Property and equipment, net 238,498 269,323
Intangible assets, net 61,341 61,341
Prepaid expenses, long-term 33,621 154,540
Other assets, net 800 4,998
------------------------------
TOTAL ASSETS $2,232,503 $2,885,041
==============================
See notes to Financial Statements
3
<PAGE>
JD AMERICAN WORKWEAR, INC.
BALANCE SHEETS -- CONTINUED
(unaudited)
<TABLE>
<CAPTION>
November 30, 1999 February 28, 1999
----------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current liabilities:
Current portion of long-term debt $ 200,000 $ 306,674
Accounts payable and accrued expenses 335,994 284,900
Accrued interest on notes payable 47,547 30,366
Short-term loans 106,458 --
---------------------------------
Total current liabilities 689,999 621,940
---------------------------------
Long-term debt, net of current portion 163,996 205,756
---------------------------------
Stockholders' equity:
Preferred stock, authorized 1,000,000 shares:
Series A, $.001 par value 191 shares issued and
outstanding, (liquidating preference $447,500); -- --
Series B, $.001 par value 2,343 shares issued and
outstanding, (liquidating preference $2,928,750) 3 3
Common stock, $.002 par value; authorized, 7,500,000
shares; issued and outstanding, 2,569,427 and 2,248,241
shares at November 30, 1999 and February 28, 1999,
respectively 4,947 4,496
Additional paid-in capital 5,335,810 5,046,177
Detachable warrant 3,196,000 3,196,000
(112,500)
Accumulated deficit (7,038,626) (6,189,331)
---------------------------------
Total Stockholders' equity: 1,378,508 2,057,345
---------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,232,503 $ 2,885,041
=================================
</TABLE>
See notes to Financial Statements
4
<PAGE>
JD AMERICAN WORKWEAR, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Three months ended November 30, 1999 November 30, 1998
----------------------------------------
<S> <C> <C>
Revenues
Net sales $ 76,360 $ 264,619
Cost of goods sold 143,513 169,188
---------------------------------
Gross profit (67,154) 95,431
Operating Expenses:
Payroll and payroll taxes 69,841 137,994
Selling Expenses 40,938 37,071
Consulting Expenses 76,831 80,419
Contract Labor 2,000 250
Depreciation and amortization 14,326 6,176
Employee benefits 8,256 10,401
Freight and delivery 2,324 17,058
Professional fees 23,419 30,961
Rent 1,693 10,805
Supplies 1,242 9,421
Telephone 2,143 5,072
Travel and entertainment 6,657 38,314
Other 22,416 34,514
---------------------------------
Total operating expenses 272,084 418,455
---------------------------------
Operating loss (339,238) (323,024)
Interest income (expense) (28,586) 7,170
---------------------------------
NET LOSS $ (367,824) $ (315,854)
=================================
Net loss per common share $ (.14) $ (.16)
=================================
Weighted average number of common shares outstanding 2,569,427 2,034,800
</TABLE>
See notes to Financial Statements
5
<PAGE>
JD AMERICAN WORKWEAR, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Nine months ended November 30, 1999 November 30, 1998
---------------------------------------
<S> <C> <C>
Revenues
Net sales $ 545,304 $ 406,273
Cost of goods sold 486,840 260,685
---------------------------------
Gross profit 58,463 145,588
Operating Expenses:
Payroll and payroll taxes 318,044 239,925
Selling Expenses 53,075 59,324
Consulting Expenses 146,143 148,574
Contract Labor 10,823 550
Depreciation and amortization 28,358 12,986
Employee benefits 37,372 18,889
Freight and delivery 35,473 29,994
Professional fees 69,668 106,399
Rent 6,488 18,275
Supplies 5,856 12,110
Telephone 12,760 10,113
Travel and Entertainment 30,451 49,184
Other 62,283 61,869
---------------------------------
Total operating expenses 893,623 748,192
---------------------------------
Operating loss (835,160) (622,604)
Interest income (expense) (28,586) (21,178)
---------------------------------
NET LOSS $ (863,746) $ (643,782)
=================================
Net loss per common share $ (.33) $ (.32)
=================================
Weighted average number of common shares outstanding 2,569,427 2,009,849
</TABLE>
See notes to Financial Statements
6
<PAGE>
JD AMERICAN WORKWEAR, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the nine months ended November 30, 1999 November 30, 1998
--------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (863,746) $ (643,782)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation and amortization 28,358 12,986
Securities issued for services rendered 40,000 194,500
Securities issued for interest payments --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 553,708 (170,276)
(Increase) decrease in inventories (229,015) (392,193)
(Increase) decrease in other assets 139,295 (58,917)
Increase (decrease) in accounts payable 68,202 (147,073)
---------------------------------
Net cash (used in) operating activities (263,125) (1,204,755)
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,467) (61,478)
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal advances on notes payable and long-term
debt --
Sale of preferred stock 0 2,500,000
Repayments on notes payable and long-term debt (41,904) (151,339)
Costs of raising capital (166,442)
Exercise of stock options 148,000 --
---------------------------------
Net cash (used in) provided by financing
activities 106,096 2,182,219
---------------------------------
NET INCREASE (DECREASE) IN CASH (159,496) 915,986
Cash and cash equivalents - beginning of period 174,472 16,932
---------------------------------
CASH - END OF PERIOD $ 14,976 $ 932,918
=================================
</TABLE>
See notes to Financial Statements
7
<PAGE>
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, 2000. 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 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
28, 1999. 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 29, 2000.
8
<PAGE>
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 experienced during
fiscal 1999 and 1998, and expects that it will continue to experience during all
or a portion of fiscal 2000, substantial fluctuations in production volume,
order receipt and shipments due to overall product demand, inventory levels,
working capital availability and ordering and payment patterns of new and
existing customers.
The Company's losses to date have principally been the result of product
design, testing and development expenses, marketing expenses, initial production
and 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 purchases), 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. As
the Company's revenue mix has shifted to include greater uniform sales volume,
overall seasonality has reduced.
Historically, the Company used a team of independent sales
representatives, regional sales directors, and sales agents to generate sales.
The Company established a representative network based principally upon industry
grouping of the account types which the representative may solicit. During the
fiscal year ended February 1999, the Company shifted focus and added three
full-time, in-house salaried executives to its sales force. These sales
executives brought a variety of sales and marketing experience to the Company,
and enabled the Company to target traditional and new markets for the Company's
products. Due to cash flow shortages, however, the Company was forced to lay off
its sales force during the fiscal year ended February 2000,
9
<PAGE>
For the reasons stated above, the Company believes that its results of
operations for the nine month periods ended November 30, 1999 and 1998 are not
necessarily indicative of the Company's future results of operations.
Three months ended November 30, 1999 compared to three months ended
November 30, 1998. Net sales for the three month period ended November 30, 1999
decreased approximately 71% to $76,360 from $264,619 for the three month period
ended November 30, 1998. The decrease is directly attributable to a decrease in
unit volume as a result of the reduction in the Company's sales force. Cost of
goods sold for the three months ended November 30, 1999 was $143,513 compared to
$169,188 for the three months ended November 30, 1998. Gross margin for the
three month period ended November 30, 1999 was negative compared to 36.0% for
the three months ended November 30, 1998. The negative gross profit is primarily
due a recovery of inventory during the quarter to settle old accounts
receivable. In an effort to collect and/or reduce outstanding accounts
receivable, the Company has in certain cases agreed to accept a return of its
own inventory in satisfaction of older receivables, resulting in a charge
against gross profit of approximately $90,000 during the quarter.
Operating expenses decreased to $272,084 for the three months ended
November 30, 1999 from $418,455 for the three months ended November 30, 1998.
Cost cutting measures were implemented in many categories including
approximately $68,000 decrease in payroll costs. Interest expense increased to
$28,586 due to increases in short-term borrowings.
The net loss for the three months ended November 30, 1999 was $367,824
($.14 per share) compared to a net loss of $315,854 ($.16 per share) for the
three months ended November 30, 1998.
Nine months ended November 30, 1999 compared to nine months ended November
30, 1998. Net sales for the nine month period ended November 30, 1999 increased
approximately 34% to $545,304 from $406,273 for the nine month period ended
November 30, 1998. The increase is directly attributable to an increase in unit
volume. Cost of goods sold for the nine months ended November 30, 1999 was
$486,840 compared to $260,685 for the nine months ended November 30, 1998. Gross
margin for the six month period ended November 30, 1999 was 11% compared to
35.8% for the nine months ended November 30, 1998. The decrease in gross profit
percentage is primarily due to a shift from direct marketing and sales to higher
volume retailers, catalog merchants and rental customers, all of whom are
resellers rather than consumers of these products, as well as accepting return
of its own inventory in satisfaction of certain older receivables.
Operating expenses increased to $893,623 for the nine months ended
November 30, 1999 from $748,192 for the nine months ended November 30, 1998,
reflecting, among other things, increases in payroll and related expenses during
earlier quarters. Interest expense increased to $28,586 for the nine months
ended November 30, 1999 from $21,178 for the nine months ended November 30, 1998
The net loss for the nine months ended November 30, 1999 was $863,746
($.33 per share) compared to a net loss of $643,782 ($.32 per share) for the
nine months ended November 30, 1998.
10
<PAGE>
Liquidity and Capital Resources
Net cash used in operating activities was $263,125 for the nine months
ended November 30, 1999 compared to $1,204,755 for the nine months ended
November 30, 1998. The Company is continuing to reduce its levels of inventory
and has steadily decreased its levels of production over the first nine months
of the fiscal year. Accounts receivable decreased approximately 74% to $197,689
from February 28 to November 30, 1999 as a result of the acceptance by the
Company of a return of its inventory in satisfaction of certain older
receivables. Accordingly, inventory increased approximately 18% during the first
nine months of fiscal 2000.
The Company made no capital expenditures for the nine months ended
November 30, 1999, compared to $61,478 for the nine months ended November 30,
1998.
Cash flow from operations and the investment by ULLICO provided for
working capital needs and principal payments on long-term debt through the year
ended February 28, 1999. 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 29, 2000 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. As a result of the expansion of inventory in
contemplation of sales to union workers and the failure of the union to support
marketing activities to union members, the Company has and continues to
experience cash flow shortages. 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 November 30, 1999, the Company has experienced substantial losses,
and at November 30, 1999 had an accumulated deficit of approximately $7,038,626.
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, which raises substantial doubt about the Company's ability to
continue as a going concern.
Inflation is not expected to have a major impact on the Company's
operations.
Year 2000 Issue
The Company incurred no material expese as a result of so-called "Y2K"
issue.
Acquisition of Patina Corporation
On December 27, 1999 the Company completed the purchase of 100% of the
outstanding stock of Patina Corporation for 3,329 shares of Series C 6%
Convertible Preferred Stock. In addition, the Company agreed to issue, when
available, 5,000,000 restricted common shares for earn-up provisions, as defined
in Patina Corporation agreements. See Form 8-K/A of the Company as filed with
the Commission on January 13, 2000. Patina Corporation consists of the parent
and three wholly owned subsidiaries: Owosso Corporation that provides commercial
building demolition, Chitacqua Corporation that provides asbestos abatement
services, and Foster Jordan, Inc. providing commercial and marine construction
services. Patina Corporation assets consist of various heavy equipment,
machinery, vehicles,
11
<PAGE>
and office furnishings with appraised values exceeding $3,329,000. Patina
Corporation has had no business through the period ending November 30, 1999.
The agreements with Patina Corporation are contingent on the Company
receiving financing of $2,500,000 on or before January 22, 2000. In the event
the Company has not received said financing, the parties have agreed to an
orderly disengagement.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
N/A
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 December 27, 1999 the Company completed the purchase of 100% of the
outstanding stock of Patina Corporation for 3,329 shares of Series C 6%
Convertible Preferred Stock. In addition, the Company agreed to issue, when
available, 5,000,000 restricted common shares for earn-up provisions, as defined
in Patina Corporation agreements. See Form 8-K/A of the Company as filed with
the Commission on January 13, 2000.
The agreements with Patina Corporation are contingent on the Company
receiving financing of $2,500,000 on or before January 22, 2000. In the event
the Company has not received said financing, the parties have agreed to an
orderly disengagement.
Item 6. Exhibits and Reports on Form 8-K
n/a
12
<PAGE>
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/ Norman Birmingham
------------------------------------
Norman Birmingham, President
(Principal Executive Officer)
------------------------------------
Date: January 19, 2000
JD AMERICAN WORKWEAR
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-END> NOV-30-2000
<CASH> 14,976
<SECURITIES> 0
<RECEIVABLES> 244,889
<ALLOWANCES> 52,200
<INVENTORY> 1,496,643
<CURRENT-ASSETS> 1,931,964
<PP&E> 509,498
<DEPRECIATION> 271,000
<TOTAL-ASSETS> 2,232,503
<CURRENT-LIABILITIES> 689,999
<BONDS> 0
0
3
<COMMON> 4,947
<OTHER-SE> 1,373,558
<TOTAL-LIABILITY-AND-EQUITY> 2,232,503
<SALES> 76,360
<TOTAL-REVENUES> 76,360
<CGS> 143,513
<TOTAL-COSTS> 143,513
<OTHER-EXPENSES> 272,084
<LOSS-PROVISION> (339,238)
<INTEREST-EXPENSE> (28,586)
<INCOME-PRETAX> (367,824)
<INCOME-TAX> (367,824)
<INCOME-CONTINUING> (367,824)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (367,824)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
