UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2002
[ ] 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
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed
since last report)
The number of shares outstanding of the issuer's common stock,
par value $.0002 per share, as of June 12, 2002 was 2,027,300.
Transitional Small Business Disclosure Format (check one):
Yes No X
Page 1 of 13
The Exhibit Index is located on page 12.
JLM COUTURE, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements.
Consolidated Balance Sheets at April 30,
2002 (unaudited) and October 31, 2001 3-4
Consolidated Statements of Income for
the Three and Six Months ended April 30,
2002 and 2001 (unaudited) 5
Consolidated Statements of Cash Flows for the
Six Months ended April 30, 2002 and 2001
(unaudited) 6-7
Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis
or Plan of Operation. 10-12
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
CONSOLIDATED BALANCE SHEETS
ASSETS
April 30, October 31,
2002 2001
__________ __________
(Unaudited)
Current assets:
Cash and cash equivalents $ 178,828 $ 204,647
Accounts receivable, net of allowances
for doubtful accounts and trade
discounts - $550,000 at April 30,
2002 and $425,000 at October 31, 2001 5,012,743 3,434,528
Inventories 3,977,939 3,716,153
Prepaid expenses and other current assets 381,518 487,877
Deferred income taxes 4,000 4,000
Prepaid taxes - 152,910
__________ _________
Total current assets 9,555,028 8,000,115
Property and equipment - at cost net of
accumulated depreciation and amortization
of $685,713 at April 30, 2002 and
$645,548 at October 31, 2001 328,429 199,664
Goodwill, net of accumulated amortization
of $63,378 at April 30, 2002 and 56,337 at
October 31, 2002 218,314 225,356
Samples, net of accumulated amortization
of $264,172 at April 30, 2002 and
$139,853 at October 31, 2001 207,889 250,958
Other assets 63,332 63,332
___________ __________
$10,372,992 $8,739,425
=========== ==========
See accompanying notes to consolidated financial statements
JLM COUTURE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
April 30, October 31,
2002 2001
__________ ____________
(Unaudited)
Current liabilities
Revolving line of credit $ 650,000 $ 450,000
Accounts payable 2,091,612 1,175,013
Income taxes payable 103,090 -
Accrued expenses and
other current liabilities 273,470 283,515
_________ _________
Total current liabilities 3,118,172 1,908,528
_________ _________
Deferred income taxes 594,000 594,000
Other liabilities - 8,239
Total liabilities 3,712,172 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 April 30, 2002
and 2,330,530 at October 31, 2001;
Outstanding 2,027,270 at April 30,
2002 and 2,098,210 at October 31, 2001 465 465
Additional paid-in capital 3,653,642 3,653,642
Retained earnings 4,511,898 3,963,095
_________ _________
8,166,005 7,617,202
Less: Deferred compensation (370,625) (421,250)
Note receivable and accrued
interest (432,135) (432,135)
Treasury stock at cost:
303,260 shares at April 30,
2002 and 232,320 at October
31, 2001 (702,425) (535,159)
_________ _________
Total shareholders' equity 6,660,820 6,228,658
$10,372,992 $8,739,425
========== ==========
See accompanying notes to consolidated financial statements
JLM COUTURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS
ENDED APRIL 30, 2002 AND 2001
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
2002 2001 2002 2001
Net sales $7,608,472 $6,302,085 $12,108,748 $10,551,862
Cost of goods sold 4,808,220 3,883,871 7,493,040 6,529,583
__________ __________ ___________ ___________
Gross profit 2,800,252 2,418,214 4,615,708 4,022,279
Selling, general and
administrative ex-
penses 2,132,581 1,860,803 3,656,891 3,170,132
__________ __________ __________ __________
Operating income 667,671 557,411 958,817 852,147
Interest expense, net of
interest income 6,712 18,880 10,014 35,063
_________ _________ _________ _________
Income from operations
before provision for
income taxes 660,959 538,531 948,803 817,084
Provision for income
taxes 280,000 225,000 400,000 345,000
__________ __________ ___________ ___________
Net income $ 380,959 $ 313,531 $ 548,803 $ 472,084
========== ========== =========== ===========
Net income per weighted
average number of common
shares
Basic $ 0.19 $ 0.16 $ 0.27 $ 0.24
========== ========== =========== ===========
Diluted $ 0.19 $ 0.16 $ 0.27 $ 0.24
========== ========== =========== ===========
Weighted average number
of common shares
Basic 2,027,333 1,936,834 2,063,359 1,952,759
========= ========= ========= =========
Diluted 2,035,560 1,960,018 2,070,741 1,975,424
========= ========= ========= =========
See accompanying notes to financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
APRIL 30, 2002 and 2001
2002 2001
Cash Flows from Operating Activities
Net income $ 548,803 $ 472,084
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and goodwill amortization 47,206 43,613
Amortization of deferred compensation 50,626 5,625
Provision for doubtful accounts
and trade discounts 125,000 (25,000)
Changes in operating assets and liabilities
(Increase) in accounts receivable (1,703,215) (889,766)
(Increase) in inventories (261,786) (461,483)
(Increase) decrease in prepaid expenses
and other current assets 106,359 (376,123)
Decrease in samples 43,069 46,648
(Increase) in other assets - (31,882)
Increase in accounts payable, accrued
expenses and other current liabilities 906,554 964,741
Increase in taxes payable 256,000 157,663
(Decrease) in long term liabilities (8,239) (20,893)
________ ________
Net cash provided by (used in)
Operating Activities 110,377 (114,773)
________ ________
Cash Flows From Investing Activities
Purchase of property and equipment (168,930) (36,349)
________ ________
Net cash used in Investing Activities (168,930) (36,349)
________ ________
Cash Flows from Financing Activities
Net proceeds from short term borrowing 200,000 300,000
Payments of notes receivable - 33,656
Purchase of treasury stock (167,266) (133,080)
_________ __________
Net cash provided by Financing Activities 32,734 200,576
_________ __________
Net increase (decrease) in cash (25,819) 49,454
Cash, beginning of period 204,647 155,334
________ __________
Cash, end of period $ 178,828 $ 204,788
========== ===========
See accompanying notes to financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
APRIL 30, 2002 and 2001
(Unaudited)
Supplemental Disclosures of Cash Flow Information;
2002 2001
Cash paid during the year for:
Interest $ 27,257 $27,280
Income taxes $140,000 $40,000
See accompanying notes to consolidated financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The consolidated balance sheet as of April 30, 2002, the
consolidated statements of income for the three and six month
periods ended April 30, 2002 and 2001 and the consolidated
statements of cash flows for the six month periods ended April 30,
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 April 30, 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:
April 30, 2002 October 31, 2001
Raw materials $1,984,899 $2,302,754
Work-in-process 639,872 176,823
Finished Goods 1,353,168 1,236,576
$3,977,939 $3,716,153
Raw materials are shown net of $260,000 obsolescence reserve at
April 31, 2002 and October 31, 2001.
Note 3. Revolving Line of Credit
The Company had 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 April 30, 2002
and October 31, 2001 the Company had borrowed $650,000 and
$450,000, respectively, under the revolving line of credit.
Note 4. Treasury Stock
During the three month period ended April 30, 2002 the Company
purchased 70,940 shares of Common Stock at a total cost of
$167,266. Treasury stock is reflected on the balance sheet as a
reduction of shareholder equity.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Six months ended April 30, 2002 as compared to six months
ended April 30, 2001 and three months ended April 30, 2002 as
compared to three months ended April 30, 2001.
For the first six months of the Company's fiscal year ending
October 31, 2002 ("Fiscal 2002"), revenues increased to $12,108,748
from $10,551,862, an increase of 14.8% over the same period a year
ago. This increase was due to increased market penetration of the
Company's products. Gross profit as a percentage of sales remained
at 38.1%. Net income was $548,803, an increase of 16% from net
income of $472,084 in the first six months of Fiscal 2001 due to
the increased sales. Per share earnings for this period was $0.27
per basic and diluted share, as compared to $0.24 per basic share
and diluted shared a year ago. Selling, general and administrative
expenses as a percentage of sales increased to 30.2% of sales as
compared to 30.0% in Fiscal 2001.
For the quarter ended April 30, 2002, revenues increased to
$7,608,472 from $6,302,085, an increase of 20.7% over the same
period a year ago. This increase was due to increased market
penetration of the Company's products. Gross profit as a
percentage of sales fell to 36.8% from 38.3% as there was a larger
contribution to sales from moderately priced dresses. Net income
was $380,959, an increase of 21.5% from net income of $313,531 in
the second quarter of Fiscal 2001, as sales increased. Per share
earnings for this period was $0.19 per basic and diluted share,
compared to $0.16 per basic and diluted share last year. Selling,
general and administrative expenses as a percentage of sales
decreased to 28% of sales as compared to 29.5% due to efficiencies
associated with increased sales.
Liquidity and Capital Resources
The Company's working capital increased to $6,436,856 at April
30, 2002 from $6,091,587 at October 31, 2001. The Company's
current ratio decreased to 3.1 to 1 at April 30, 2002 from 4.2 to
1 at October 31, 2001.
During the six months ended April 30, 2002, the Company
provided $110,377 of cash from operating activities, as compared to
using $114,773 during the year earlier period, reflecting the
increased income. The Company used $168,930 of cash in investing
activities in the current year compared to using $36,349 cash a
year ago. This was primarily due to the capital costs associated
with the Company's relocation of their primary showroom in April
2002. The Company was provided $32,734 of cash from financing
activities during the six months ended April 30, 2002, as compared
to $200,576 a year earlier, as the Company borrowed $100,000 less
from its revolving credit facility during the current period.
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 April 30, 2002 and October 31, 2001 was
$383,000 and $374,000 respectively. The annual principal payment
of $45,000 due on December 22, 2001 remains unpaid.
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.
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141, Business
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, effective with fiscal years beginning after
December 15, 2001. 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
dated December 30, 1994, 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 ("1995
10-K").
3.2 The Company's By-Laws are incorporated by reference to
Exhibit 3.03 of Registration Statement No. 33-10278 NY
filed on Form S-18 ("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.
JLM COUTURE, INC.,
Registrant
Dated: June 19, 2002 By:/s/Joseph L. Murphy
Joseph L. Murphy
President (Authorized officer
and Principal Financial
Officer)