FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2002
OR
[ ]] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________.
Commission file number 0-19000
JLM COUTURE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3337553
(State or other jurisdiction of (IRS Employer)
incorporation or organization) Identification No.)
225 West 37th Street, New York, New York 10018
(Address of principal executive offices)
(212) 921-7058
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past
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
The number of shares outstanding of the issuer's common stock,
par value $.0002 per share, as of March 21, 2002 was 2,261,790.
JLM COUTURE, INC.
INDEX
Part I. Financial Information:
Item 1. Financial Statements.
Consolidated Balance Sheets at
January 31, 2002 (unaudited) and
October 31, 2001 3-4
Consolidated Statements of Income
for the Three Months ended January 31,
2002 and 2001 (unaudited) 5
Consolidated Statements of Cash Flows
for the Three Months ended January 31,
2002 and 2001 (unaudited) 6-7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 9-12
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K. 13
Signature 14
PART I. FINANCIAL INFORMATION
JLM COUTURE, INC. AND SUBSIDIARIES
116: CONSOLIDATED BALANCE SHEETS
ASSETS
January 31, October 31,
2002 2001
(Unaudited)
Current assets:
Cash $ 98,836 $ 204,647
Accounts receivable, net of allowance
for doubtful accounts, trade discounts
and allowances - $425,000 at January
31, 2002 and at October 31, 2001 4,182,168 3,434,528
Inventories, net 4,259,158 3,716,153
Prepaid expenses and other current assets 446,831 487,877
Deferred income taxes 4,000 4,000
Prepaid taxes 32,910 152,910
Total current assets 9,023,903 8,000,115
Property and equipment, net of
accumulated depreciation and amortization
of $662,055 at January 31, 2002 and
$645,548 at October 31, 2001 193,798 199,664
Goodwill, net of accumulated amortization
of $59,858 at January 31, 2002 and
$56,337 at October 31, 2001 221,835 225,356
Samples, net of accumulated amortization
of $211,759 at January 31, 2002 and
$139,853 at October 31, 2001 179,052 250,958
Other Assets 63,332 63,332
Total Assets $9,681,920 $8,739,425
See accompanying notes to consolidated financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
January 31, October 31,
2002 2001
(Unaudited)
Current liabilities:
Revolving line of credit $ 750,000 $ 450,000
Accounts payable 1,684,514 1,175,013
Accrued expenses and
other current liabilities 231,592 283,515
Total current liabilities 2,666,106 1,908,528
Deferred Income Taxes 594,000 594,000
Other Liabilities - 8,239
Total liabilities 3,260,106 2,510,767
Shareholders' equity:
Preferred stock - $.0001 par value,
authorized 1,000,000 shares; issued
and outstanding- none
Common stock - $.0002 par value,
authorized 10,000,000 shares;
issued 2,330,530 at January 31,
2002 and October 31, 2001;
Outstanding 2,098,210 at January 31,
2002 and at October 31, 2001 465 465
Additional paid-in capital 3,653,642 3,653,642
Retained earnings 4,130,939 3,963,095
7,785,046 7,617,202
Less: Deferred compensation (395,938) (421,250)
Note receivable and accrued
interest (432,135) (432,135)
Treasury stock at cost:
232,320 shares at January 31,
2002 and at October 31, 2001 (535,159) (535,159)
Total shareholders' equity 6,421,814 6,228,658
Total Liabilities and
Shareholders' Equity $9,681,920 $8,739,425
See accompanying notes to consolidated financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JANUARY 31, 2002 AND 2001
(Unaudited)
2002 2001
Net sales $4,500,276 $4,249,777
Cost of goods sold 2,684,820 2,645,712
Gross profit 1,815,456 1,604,065
Selling, general and
administrative
expenses 1,524,310 1,309,329
Operating income 291,146 294,736
Interest expense, net
of interest income of
$4,698 and $4,781 for 2002
and 2001, respectively 3,302 16,183
Income before provision
for income taxes 287,844 278,553
Provision for income
taxes 120,000 120,000
Net income $ 167,844 $ 158,553
Net income per weighted
average number of common
shares:
Basic $ 0.08 $ 0.08
Diluted $ 0.08 $ 0.08
Weighted average number
of common shares
outstanding:
Basic 2,098,210 1,968,164
Diluted 2,104,748 1,990,311
See accompanying notes to consolidated financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
JANUARY 31, 2002 and 2001
(Unaudited)
2002 2001
Cash Flows From Operating Activities:
Net Income $167,844 $158,553
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 91,934 97,716
Provision for doubtful accounts - (75,000)
Compensation expense on issuance of stock
options and common stock 25,312 -
Changes in operating assets and liabilities
Increase in accounts receivable (747,640) (289,387)
Increase in inventories (543,005) (297,947)
Decrease (Increase) in prepaid
expenses and other current assets 41,046 (93,491)
Decrease in prepaid taxes 120,000 -
Increase in other assets - (41,183)
Increase in accounts payable 509,501 281,286
Decrease in accrued expenses and other
current liabilities (51,923) (58,723)
Decrease in long term liabilities (8,239) (17,407)
Net Cash Used In Operating Activities (395,170) (335,583)
Cash Flows From Investing Activities -
Purchase of property and equipment (10,641) -
Cash Flows from Financing Activities:
Net proceeds from
revolving line of credit 300,000 300,000
Payment on notes receivable - 33,656
Purchase of treasury stock - (57,455)
Net Cash provided by Financing Activities 300,000 276,201
Net decrease in cash (105,811) (59,382)
Cash, beginning of period 204,647 155,334
Cash, end of period $ 98,836 $ 95,952
See accompanying notes to consolidated financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
JANUARY 31, 2002 and 2001
(Unaudited)
Supplemental Disclosures of Cash Flow Information:
2002 2001
Cash paid during the period for:
Interest $7,770 $ 9,830
Income taxes - 20,000
See accompanying notes to consolidated financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.
The consolidated balance sheets as of January 31, 2002, the
consolidated statements of income for the three month periods ended
January 31, 2002 and 2001 and the consolidated statements of cash
flows for the three month periods ended January 31, 2002 and 2001
have been prepared by the Company, without audit. In the opinion
of management, all adjustments necessary to present fairly the
financial position, results of operations and cash flows, as of
January 31, 2002 and for all periods presented have been made. The
results of operations are not necessarily indicative of the results
to be expected for the full year.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been omitted. It is suggested
that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's
Form 10-KSB for its fiscal year ended October 31, 2001, which was
filed with the Securities and Exchange Commission.
Note 2. Inventories
Inventories are stated at the lower of cost (first-in, first-out)
or market and include material, labor and overhead.
Inventories consisted of the following:
January, 31, 2002
(Unaudited) October 31, 2001
Raw materials $2,124,705 $2,302,754
Work-in-process 840,102 176,823
Finished goods 1,294,351 1,236,576
$4,259,198 $3,716,153
Raw materials are shown net of a $260,000 obsolescence reserve
at January 31, 2002 and October 31, 2001.
Note 3. Revolving Line of Credit
The Company has an available line of credit of up to
$1,250,000 with a financial institution. Borrowings are
collateralized by the Company's cash, accounts receivable,
securities, deposits and general intangibles. At January 31, 2002
and October 31, 2001, the Company had borrowed $750,000 and
$450,000, respectively, under the revolving line of credit.
JLM COUTURE, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Three months ended January 31, 2002 as compared to three
months ended January 31, 2001.
For the first three months of the Company's fiscal year ending
October 31, 2002 ("Fiscal 2002"), revenues increased to $4,500,276
from $4,249,777, an increase of 5.9% over the same period a year
ago. The increase was due to increased market penetration of the
Company's products. Gross profit as a percentage of sales
increased to 40.3% from 37.7% as there was a larger contribution to
sales from the higher priced bridal gowns in the current period.
Net income was $167,844, an increase of 5.9% from net income of
$158,553 in the first three months of the prior fiscal year. Per
share earnings for this period was $0.08 per basic and diluted
share, the same as last year. Selling, general and administrative
expenses as a percentage of sales increased to 33.9% of sales as
compared to 30.8%, as there were increased marketing costs.
Liquidity and Capital Resources
The Company's working capital increased to $6,357,797 at
January 31, 2002 from $6,091,587 at October 31, 2001. The
Company's current ratio decreased to 3.4 to 1 at January 31, 2002
from 4.2 to 1 at October 31, 2001.
During the three months ended January 31, 2002, the Company
used $395,170 of cash from operating activities, as compared to
using $335,583 during the year earlier period. The Company used
$10,641 for investing activities in the current year compared to
using $0 a year ago. Cash provided by financing activities during
the three months ended January 31, 2002 was $300,000 as compared to
$276,201 a year earlier.
On December 22, 1998, the Company issued an executive of the
Company 200,000 shares of Common Stock at a price of $2.25 per
share, which was the fair value on the issuance date. The
executive executed a ten-year promissory note due to the Company in
the amount of $450,000, with $45,000 principal and accrued interest
payments due annually on December 22, until repaid. The promissory
note bears interest at 5% per annum. The outstanding principal and
interest balance at January 31, 2002 and October 31, 2001 was
$378,500 and $374,000 respectively. The annual principal payment
of $45,000 due on December 22, 2001 remains unpaid.
JLM COUTURE, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(Continued)
On June 5, 2000, pursuant to an employment agreement the
Company issued 50,000 unregistered shares to an employee of the
Company. The employment agreement expires on October 31, 2008.
Deferred compensation for the fair value of the related shares was
recorded in connection with this issuance. The unamortized portion
of such deferred compensation will be amortized over the remaining
life of the employment agreement.
On August 14, 2001, pursuant to an employment agreement the
Company issued 200,000 unregistered shares to an executive of the
Company. The employment agreement expires on April 30, 2006.
Deferred compensation for the fair value of the related shares was
recorded in connection with this issuance. The unamortized portion
of such deferred compensation will be amortized over the remaining
life of the employment agreement.
Introduction Of The Euro
On January 1, 2000, eleven of the fifteen member countries of
the European Union established fixed conversion rates between their
existing sovereign currencies and a new currency called the "Euro."
These countries agreed to adopt the Euro as their common legal
currency on that date. The Euro trades on currency exchanges and
is available for non-cash transactions. Until January 1, 2002, the
existing sovereign currencies remained legal tender in these
countries. On January 1, 2002, the Euro replaced the sovereign
legal currencies of these countries. The Company's initial
international expansion was in the United Kingdom, which has not
adopted the Euro. The Company will evaluate the impact the
implementation of the Euro will have on its business operations and
no assurances can be given that the implementation of the Euro will
not have a material adverse affect on the Company's business,
financial condition and results of operations. However, the
Company does not expect the Euro to have a material effect on its
competitive position. In addition, the Company cannot accurately
predict the impact the Euro will have on currency exchange rates or
the Company's currency exchange risk.
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141, Business
JLM COUTURE, INC. AND SUBSIDIARIES
(Continued)
Combinations" (SFAS No. 141) and Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets" (SFAS No.
142).
SFAS No. 141 addresses financial accounting and reporting for
business combinations. This statement requires the purchase method
of accounting to be used for all business combinations, and
prohibits the pooling-of-interests method of accounting. This
statement is effective for all business combinations initiated
after June 30, 2001 and supersedes APB Opinion No. 16, Business
Combinations" as well as FASB Statement of Financial Accounting
Standards No. 38, Accounting for Preacquisition Contingencies of
Purchased Enterprises."
SFAS No. 142 addresses how intangible assets that are acquired
individually or with a group of other assets should be accounted
for in financial statements upon their acquisition. This statement
requires goodwill to be periodically reviewed for impairment rather
than amortized, beginning on January 1, 2002. SFAS No. 142
supersedes APB Opinion No. 17, Intangible Assets." The Company is
currently evaluating the implications of adoption of SFAS No. 142
and anticipates adopting its provisions for its fiscal year
beginning November 1, 2002.
In August 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long- Lived Assets"
(SFAS No. 144). This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets.
This Statement supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," and amends the accounting and reporting provisions of
APB Opinion No. 30, Reporting the Results of Operations Reporting
the Effect of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business. The
provisions of SFAS No. 144 will be effective for fiscal years
beginning after December 15, 2001. The Company is currently
evaluating the implications of adoption of SFAS No. 144 and
anticipates adopting its provisions for its financial year
beginning November 1, 2002.
Safe Harbor Statement
Statements which are not historical facts, including
statements about the Company's confidence and strategies and its
expectations about new and existing products, technologies and
opportunities, market and industry segment growth, demand and
acceptance of new and existing products are forward looking
statements that involve risks and uncertainties. These include,
but are not limited to, product demand and market acceptance risks;
the impact of competitive products and pricing; the results of
financing efforts; the loss of any significant customers of any
business; the effect of the Company's accounting policies; the
effects of economic conditions and trade, legal, social, and
economic risks, such as import, licensing, and trade restrictions;
the results of the Company's business plan and the impact on the
Company of its relationship with its lenders.
PART II. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Certificate of Incorporation of the Company, as
amended, incorporated by reference to Exhibit 3.1
of the Company's Annual Report on Form 10-KSB filed
for its fiscal year ended October 31, 1995.
3.2 By-Laws of the Company incorporated by reference to
Exhibit 3.03 of Registration Statement No. 33-10278
NY filed on Form S-18.
(b) Reports on Form 8-K.
None.
SIGNATURE
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.
Dated: March 22, 2002 JLM COUTURE, INC.,
Registrant
By:/s/Joseph L. Murphy
Joseph L. Murphy
President (Authorized
officer and Principal
Financial Officer)