UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-K/A
(Amendment No. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2003
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- -----------.
Commission File No.: 0-19000
---------
JLM COUTURE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3337553
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
225 West 37th Street, 5th Floor, New York, NY 10018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 921-7058
-----------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered under Section 12(g) of the Act:
Common Stock, par value $.0002 per share
--------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer:
Yes [ ] No [ X ]
The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant computed by
reference to the closing sale price of the Common Stock on January
16, 2004 as reported by NASDAQ) was approximately $5,051,336.96.
As of October 31, 2003 the issuer had 1,912,694 shares of Common Stock,
par value $.0002 per share outstanding.
The Proxy Statement of the registrant to be filed on or before February
28, 2004 is incorporated herein by reference.
TABLE OF CONTENTS
PART I
PAGE
--------
Item 1. Business. 3
Item 2. Properties. 6
Item 3. Legal Proceedings. 7
Item 4. Submission of Matters to a Vote of 7
Security Holders.
PART II
Item 5. Market for Registrant's Common Equity and 8
Related Stockholder Matters.
Item 6. Selected Financial Data. 12
Item 7. Management's Discussion and Analysis of 13
Financial Condition and Results of Operation.
Item 7A. Quantitative and Qualitative Disclosures 17
About Market Risk.
Item 8. Financial Statements and Supplementary Data. 17
Item 9. Changes in and Disagreements with Registered
Public Accounting Firm on Accounting and
Financial Disclosure. 17
Item 9A. Controls and Procedures. 17
PART III
Incorporated by reference to the Proxy Statement 18
of the Company to be filed with the Securities
and Exchange Commission on or before February 28, 2004.
PART IV
Item 10. Exhibits, Financial Statement Schedules and 19
Reports on Form 8-K.
Signatures 21
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. For example, statements
included in this report regarding the Company's financial position,
business strategy and other plans and objectives for future
operations, and assumptions and predictions about future product
demand, supply, manufacturing, costs, marketing and pricing factors
are all forward-looking statements. When this report contains words
like "intend," "anticipate," "believe," "estimate," "plan" or
"expect," the Company is making forward-looking statements. The
Company believes that the assumptions and expectations reflected in
such forward-looking statements are reasonable, based on information
available to the Company on the date hereof, but the Company cannot
assure anyone that these assumptions and expectations will prove to
have been correct or that it will take any action that it may
presently be planning. The Company has disclosed certain important
factors that could cause the Company's actual results to differ
materially from its current expectations elsewhere in this report.
The reader should understand that forward-looking statements made in
this report are necessarily qualified by these factors. The Company
is not undertaking to publicly update or revise any forward-looking
statement if the Company obtains new information or upon the
occurrence of future events or otherwise.
PART I
Item 1. Business.
Background. JLM Couture, Inc. (the "Company"), a Delaware
corporation whose name was changed from Jim Hjelm's Private
Collection, Ltd. in July 1997, was organized in April 1986 to design,
manufacture and market high quality bridal wear and related
accessories, including bridesmaid gowns. In 1993 the Company launched
the Lazaro bridal division. In May 1997, the Company acquired Alvina
Valenta Couture Collection, Inc. ("Alvina"), which designs,
manufactures and markets couture-quality bridal wear. In 1999, the
Company set up a sales office in England to penetrate the European
market. In 2000, the Company launched Lazaro Ensembles and Jim Hjelm
Just Separates as new bridesmaid divisions.
Business. The Company operates primarily in one business
segment: the design, manufacture and distribution of bridal gowns,
veils and bridesmaid gowns. For financial information relating to the
Company's business segment, please refer to the Financial Statements
contained elsewhere herein.
The Company's couture lines of bridal gowns, bridesmaid gowns,
veils and related items (the "Jim Hjelm," "Lazaro" and "Alvina
Valenta" lines) emphasize contemporary and traditional styles
characterized by ankle or floor length gowns, with or without trains,
and are principally constructed in satin, silk and lace. The
Company's designs reflect its emphasis on quality and design
originality. Wholesale prices for the Company's bridesmaid and bridal
gowns range from $90 to $150 and $500 to $3,000, respectively, with
suggested retail prices ranging from $180 to $300 for bridesmaid gowns
and $1,000 to $6,000 for bridal gowns.
The Company also produces a line of less expensive bridal gowns
called "Visions", which is styled similarly to the Company's couture
lines, but is constructed from less expensive fabrics. The wholesale
prices for bridal gowns in the "Visions" line range from $395 to $600
and the retail prices range from $800 to $1,200.
The Company manufactures its products at both its own facilities
and through hiring independent contractors. The Company uses its best
efforts to maintain quality control over its independent contractors
and supplies these contractors with cut pattern pieces. There are
generally no written agreements between the Company and these
contractors, enabling the Company to utilize each contractor on an as-
needed basis. The Company also performs custom alterations on its
basic designs at a customer's request. The Company generally charges
the customer for custom alterations.
The Company utilizes bridal boutiques or bridal departments in
women's clothing and department stores to market its gowns. During
its fiscal year ended October 31, 2003 ("Fiscal 2003"), October 31,
2002 ("Fiscal 2002") and October 31, 2001 ("Fiscal 2001"), no customer
accounted for more than ten percent (10%) of the Company's sales.
The Company's lines of gowns for each season are typically
introduced at fashion shows held at the Company's showroom. The
Company also displays its products at regional markets. Additionally,
new collections are often featured at "trunk shows", which are fashion
shows held at a retail customer's store, and which may include a
personal appearance by the designer. These trunk shows are generally
supported with local advertising paid for by the local retail
customer.
Other designers of the Company's products include Lazaro Perez
(who designs under the name Lazaro) and Victoria McMillan. Lazaro's
designs enabled the Company to diversify and add depth to its product
lines. In both 1997 and 1999 Lazaro was awarded the Distinctive
Excellence in Bridal Industry (DEBI) Award in the category of Style
Innovator for bridal gowns.
Ms. McMillan designs the Company's Alvina Valenta line of upscale
wedding gowns which was acquired by the Company in 1997. Ms. McMillan
has been the designer for Alvina since 1989.
The Company's designers are frequently featured in articles and
advertisements published in Bride's and Your New Home and Modern Bride
magazines as well as Martha Stewart, Weddings. Major fashion
department stores and bridal boutiques have featured all three
designers and their work in advertisements, in store customer
showings, and in retail area displays.
The Company also markets its products through its five internet
sites and generates customer demand through distribution of its bridal
and bridesmaids catalogs.
The Company's designers generally participate in the Company's
marketing efforts by appearing at seasonal bridal fashion shows and
trunk shows, and otherwise being available for showing the Company's
lines of bridal products. The Company also employs a full-time sales
staff of 10 persons supervised by Mr. Murphy.
The Company advertises its products in periodicals and other
publications dealing with the bridal industry in advance of and during
each bridal season. The Company's dresses have been advertised in
Bride's and Your New Home, Modern Bride, Martha Stewart, Weddings, and
Elegant Bride magazines. This advertising is directed toward
displaying the Company's products in a manner that enhances the
general perception of the quality of the Company's gowns and the
Company's reputation.
The primary raw materials necessary for the Company's
business are quality fabrics, such as silks, taffetas and laces.
The Company maintains a minimum inventory of these raw materials.
The Company obtains its raw materials domestically and from
overseas. Generally, the Company has been able to obtain
necessary materials relatively easily.
Although the bridal industry is seasonal, with showings to
retail buyers in advance of the Spring and Fall seasons, the
Company's business has only experienced slight seasonal
fluctuations, with a slight decrease in its fourth quarter.
The bridal wear industry is highly competitive. In
marketing its bridalwear and bridesmaid gowns, the Company
competes directly with the numerous domestic and foreign bridal
houses. In its marketing efforts, the Company emphasizes the
couture quality of its products and the public recognition of its
trademarks Jim Hjelm, Lazaro, and Alvina Valenta. In
management's view, the ability of the Company to continue to
successfully compete is dependent upon the continued development
and maintenance of a line of high quality and fashionable bridal
wear. Equally important is the continued enhancement of the
images of the Jim Hjelm, Lazaro and Alvina Valenta designer
labels.
In an effort to establish a presence in Europe, the Company
retains a sales representative located in England to market its
Occasions and Lazaro bridesmaid's gowns to the European
community. Sales from this operation comprised approximately
3% in each of the last three fiscal years.
As of January 31, 2004 and January 31, 2003 the Company's
backlog of firm orders was approximately $4,500,000 and
$5,000,000, respectively. This backlog is comprised of the
normal delay between receipt of an order and the manufacture of
the order. All orders were delivered or expect to be completed
within the applicable fiscal year.
The Company employs approximately 70 full-time employees.
The Company has registered "Jim Hjelm A Private Collection",
"Alvina Valenta", "Jim Hjelm Occasions", "Lazaro", and "Jim
Hjelm" as trademarks with the U.S. Patent and Trademark Office
(the "USPTO"). It has also filed applications for "Just
Separates" and "Occasions" with the USPTO. There is no assurance
that any of these marks will be allowed to be registered.
ITEM 2. Property.
The Company's executive offices and manufacturing facility
are located at 225 West 37th Street, New York, New York. This
space is located in Manhattan's "garment center", which area is
primarily devoted to garment manufacturers and other business
tenants. The premises are occupied pursuant to two leases with
an unaffiliated party, both of which expire on February 28, 2013.
The Company's manufacturing facility consists of a fully-equipped
design and production area, which includes cutting tables, sewing
machines and other equipment required to manufacture the
Company's products. The Company also leases space at 525 Seventh
Avenue under a lease terminating February 28, 2012 with an
unaffiliated party. This space is utilized to display the
Company's products to buyers and for marketing activities.
ITEM 3. Legal Proceedings.
The Company is not a party to any material pending legal
proceedings, and to the best knowledge of the Company, no such
proceedings have been threatened.
ITEM 4. Submission of Matters to a Vote of Security Holders.
On October 28, 2003, the Company held its Annual Meeting of
Shareholders (the "Meeting"). The Company solicited proxies for
the meeting pursuant to Regulation 14A of the Securities Exchange
Act of 1934 (the "Act"); each of the Company's nominees for
director was elected and there was no solicitation in opposition
to management's state of nominees. Messrs. Daniel Sullivan and
Keith Cannon were elected to serve as two Class II directors
until the 2006 Annual Meeting of Stockholders and until their
successors are elected and qualify.
Messrs. Joseph L. Murphy and Joseph E. O'Grady, the
Company's other two directors, terms of office continue until
2004 and 2005, respectively.
The shareholders also voted on proposals to approve the
adoption of the Company's 2003 Stock Incentive Plan and to ratify
the appointment of Goldstein Golub Kessler LLP as the Company's
independent registered public accounting firm for its fiscal year
ended October 31, 2003. The following table sets forth the
results of each vote:
Affirmative Negative Broker
Proposal Votes Votes Abstention Non Votes
-------- ----------- -------- ---------- ---------
Approval of 2003 1,009,002 64,932 2,449 769,701
Stock Incentive
Plan
Ratification of 1,836,935 634 2,466 -
the appointment
of Goldstein Golub
Kessler LLP as the
company's independent
registered public
accounting firm for
its fiscal year ended
October 31, 2003
PART II
ITEM 5. Market for the Company's Common Equity and Related
Stockholder Matters and Issuer Purchases of Equity
Securities.
(a) Market Information. The Common Stock of the Company
(the "Common Stock") is traded on the Nasdaq Small Cap Market.
The following table sets forth, for the Company's last two
fiscal years, the range of high and low bid quotations for its
Common Stock. The market quotations represent prices between
dealers, do not include retail markup, markdown, or commissions
and may not necessarily represent actual transactions.
Price range of
Common Stock
Quarter Ended High Bid Low Bid
------------- -------- -------
Fiscal 2003
-----------
January 31, 2003 $4.41 $2.96
April 30, 2003 7.18 3.53
July 31, 2003 8.81 5.14
October 31, 2003 7.60 4.69
Price range of
Common Stock
Quarter Ended High Bid Low Bid
------------- -------- -------
Fiscal 2002
-----------
January 31, 2002 $2.38 $1.86
April 30, 2002 2.40 2.01
July 31, 2002 3.75 2.13
October 31, 2002 3.70 2.30
On February 3, 2004, the closing bid and ask prices in the
Over-the-Counter market for the Common Stock as reported by
Nasdaq were $4.61 and $4.84, respectively.
(b) Holders. As of February 3, 2004, there were
approximately 132 holders of record of the Common Stock. The
Company believes that there are significantly more beneficial
holders of the Common Stock as many of the shares of Common Stock
are held in "street" names.
(c) Dividends. No cash dividends have been paid on the
Common Stock for the past two fiscal years, and the Company does
not anticipate paying cash dividends in the foreseeable future.
(d) Securities Authorized for Issuance Under Equity
Compensation Plans.
The following table provides information as of October 31,
2003 with respect to the Company's compensation plans under which
equity securities of the Company are authorized for issuance:
Equity Compensation Plan Information
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(a) (b) (c)
--------------------------------------------------------------------------
Plan category Number of Weighted-average Number of
Securities to exercise price of securities
be issued outstanding remaining
upon exercise options, warrants available for
of outstanding and rights future issuance
options, warrants under equity
and rights compensation
plans (excluding
securities
reflected in
column (a))
--------------------------------------------------------------------------
Equity
compensation
plans approved
by security
holders 64,000 $2.64 180,000
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Equity
compensation
plans not
approved
by security
holders 140,000 $2.05 0
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Total 204,000 $2.22 180,000
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Issuer Purchases of Equity Securities.
Period (a) Total (b) Average (c) Total (d) Maximum
Number Price Paid Number Number
Of Shares per share of Shares (or App-
(or Units) (or Unit) (or Units) roximate
Purchased Purchased Dollar
as part of Value) of
Publicly Shares (or
Announced Units)
Plans or that may
Programs yet be
purchased
under the
Plans or
Programs
--------------------------------------------------------------------
August 1, to
August 31, 2003 - - - -
September 1, to
September 30, 2003 - - - -
October 1 to
October 31, 2003 - - - -
Total - - - -
---------------------------------------------------------------------
ITEM 6. Selected Financial Data
The financial data set forth below should be read in conjunction
with Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated
financial statements and the related notes included elsewhere in this
Form 10-K.
Consolidated Statement Of Operations Data
(000's omitted)
Year Ended October 31,
------------------------------------------
1999 2000 2001 2002 2003
------ ------ ------ ------ ------
Net sales 18,623 20,621 22,092 25,406 26,781
Net income 880 749 666 1,109 808
Net income per common share
(basic) .44 .37 .34 .54 .42
Net income per common share
(diluted) .43 .36 .34 .53 .40
Weighted average number of shares
Outstanding (diluted) 2,055 2,057 1,986 2,099 1,996
Dividends - - - - -
Consolidated Balance Sheet Data
(000's omitted)
At October 31,
------------------------------------------
1999 2000 2001 2002 2003
------ ------ ------ ------ ------
Working capital 4,283 4,867 6,092 6,803 7,210
Total assets 7,633 8,755 8,739 9,816 10,551
Long-term debt 48 34 8 - -
Shareholder's equity 5,135 5,725 6,228 7,122 7,825
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Disclosure Regarding Forward Looking Statements
The following discussion should be read in conjunction with
the Company's financial statements and notes thereto appearing
elsewhere in this Form 10-K. In addition to the historical
information contained herein, the discussion in this Form 10-K
contains certain forward looking statements that involves risks
and uncertainties, such as statements of the Company's plans,
objectives, expectations and intentions. The Company's actual
results could differ materially from management's current
expectations.
Results of Operations - Fiscal 2003 as Compared to Fiscal 2002.
For Fiscal 2003, revenues were $26,781,400 as compared to
$25,405,702 in Fiscal 2002, an increase of $1,375,698 or 5%.
This increase was a result of the Company's sale of bridal gowns,
bridesmaids' dresses and evening wear to more retail stores
during the year (an increase in the Company's customer base).
The Company's gross profit margin decreased in Fiscal 2003
to 42.2% from 44.7% in Fiscal 2002. The primary reason for this
decrease was that the Company's product mix for Fiscal 2003
included a higher percentage of lower margin bridesmaids' dresses
as compared to Fiscal 2002 when sales represented a higher
percentage of bridal gowns with higher mark ups. This resulted in
approximately a 1.5% decrease in the margin. Additionally, costs
of goods sold in Fiscal 2003 included approximately $125,000 of
occupancy costs above Fiscal 2002 levels due to the expansion of
the Company's production facilities and approximately $100,000
additional payroll-related costs as the Company added a new
designer (and associated staff) in the latter part of Fiscal
2003.
Selling, general and administrative ("SG&A") expenses
increased to $9,899,846 or 37% of net sales in Fiscal 2003 from
$9,300,939 or 36.6% of sales in Fiscal 2002, an increase of $
598,907. The Company's efforts in cost controls that resulted in
a decrease in approximately $500,000 of expenses in office,
telephone, travel, and salaries was offset by an increase of
$1,000,000 in promotional expenses, as well as a $208,000 expense
relating to cancelling certain stock options.
The Company generated net income of $807,752, or $0.42 per
share-basic and $0.40 per share-diluted for Fiscal 2003 as
compared to net income of $1,109,133, or $0.54 per share-basic
and $0.53 per share-diluted for Fiscal 2002.
Results of Operations - Fiscal 2002 as Compared to Fiscal 2001.
For Fiscal 2002, revenues were $24,701,566 as compared to
$21,420,342 in Fiscal 2001, an increase of $3,281,224 or 15.3%.
This increase was due to increased market penetration of the
Company's products.
The Company's gross profit margin increased in Fiscal 2002
to 43.2% from 42.2% in Fiscal 2001. The Company attributes the
increase in its gross profit margin to better costs controls.
Selling, general and administrative ("SG&A") expenses
decreased to 34.8% of net sales in Fiscal 2002 as compared to
36.6% of sales in Fiscal 2001. The decrease was a result of the
company's efforts to control costs. Advertising costs as well as
costs associates with its European operations were better
controlled in fiscal 2002.
The Company generated net income of $1,109,133, or $.54 per
share-basic and $.53 per share-diluted for Fiscal 2002 as
compared to net income of $666,363, or $0.34 per share basic and
diluted for Fiscal 2001.
Liquidity and Capital Resources
The Company's working capital increased to $7,210,049 at
October 31, 2003 from $6,803,455 at October 31, 2002, an increase
of $406,594. The Company's current ratio was 4.4 to 1 at October
31, 2003 and 2002.
During Fiscal 2003, net cash provided by the Company's
operating activities was $742,192 as compared to cash provided by
operating activities of $1,841,085 in Fiscal 2002. In Fiscal
2003, the Company increased its inventory in excess of $200,000
over Fiscal 2002 levels and purchased raw materials in
preparation of introducing its new Alvina Valenta bridesmaid line
of dresses, as well as other new product lines. In addition, the
Company reduced its obsolescence inventory reserve by $110,000.
The reduction included use of inventory that had been previously
reserved for, as well as the disposition of approximately $75,000
of inventory for which the Company received approximately
$25,000. The $50,000 difference is reflected in cost of goods
sold.
Cash used in investing activities in Fiscal 2003 was
$320,373 as compared to $341,149 in Fiscal 2002, as the Company
incurred costs in 2002 associated with the relocation of its
showroom and in 2003 associated with the expansion of its
production facility.
Cash used in financing activities in Fiscal 2003 was
$161,566 as compared to $745,773 in Fiscal 2002. This was
primarily a result of the Company paying off its revolving credit
loan in 2002 as well as repurchasing less treasury stock in 2003
as compared to 2002.
The Company's working capital increased to $6,803,455 at
October 31, 2002 from $6,091,587 at October 31, 2001, an increase
of $711,868. The Company's current ratio was 4.4 to 1 at October
31, 2002 as compared to 4.2 to 1 at October 31, 2001.
During Fiscal 2002, net cash provided by the Company's
operating activities was $1,841,085 as compared to cash provided
by operating activities of $272,298 in Fiscal 2001. The increase
was primarily due to the increase in net income. Additionally,
certain expenses, including taxes, incurred in Fiscal 2002 were
not payable until Fiscal 2003.
Cash used in investing activities in Fiscal 2002 was
$341,149 as compared to $40,356 in Fiscal 2001, as the Company
incurred cost associated with its relocation of its showroom.
Cash used in financial activities in Fiscal 2002 was
$745,773 as compared to $182,629 in Fiscal 2001. This was
primarily a result of the Company eliminating its revolving
credit borrowings in Fiscal 2002 of $1,250,000 as well as
increased purchases of treasury stock.
The Company has a loan agreement with Israel Discount Bank
of New York (the "Credit Line"). The Credit Line provides for
interest to be charged at the prime interest rate. The Credit
Line is secured by a first lien on all of the Company's accounts
receivable, inventories, cash, securities, deposits and general
intangibles.
Funds generated from operations along with the Credit Line
are expected to be sufficient for the Company to meet its cash
flow requirements in the foreseeable future, including all
contractual obligations as disclosed in Note 13 to the financial
statements.
Off-Balance Sheet Arrangements
------------------------------
The Company has no off-balance sheet arrangements.
Contractual Obligations
-----------------------
The following is a summary of the Company's significant
contractual cash obligations for the periods indicated that
existed as of October 31, 2003 and is based on information
appearing in the notes to the consolidated financial statements:
Contractual
Obligations 2004 2005 2006 2007 2008 Thereafter Total
----------- ---- ---- ---- ---- ---- ---------- -----
Operating
Lease $551,05 $577,445 $572,170 $562,796 $587,401 $2,452,066 $5,302,929
Employment
Agreement 627,500 481,475 329,834 341,068 352,691 1,342,666 3,475,234
Total
Contractual $1,178,551 $1,058,920 $902,004 $903,864 $940,092 $3,794,792 $8,778,163
Obligations ========== ========== ======== ======== ======== ========== ==========
Critical Accounting Policies
----------------------------
The preparation of the Company's consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and judgments that affect the reported amounts of
assets and liabilities, net sales and expenses, and the related
disclosures. Management bases its estimates on historical
experience, its knowledge of economic and market factors and
various other assumptions that it believes to be reasonable under
the circumstances. Actual results may differ from these estimates
under different assumptions or conditions. Management believes
the following critical accounting policies are affected by
significant estimates, assumptions and judgments used in the
preparation of the Company's consolidated financial statements.
Revenue Recognition
-------------------
Revenue is recognized when persuasive evidence of an
arrangement exists, (i.e. the product has been delivered, the
rights and risks of ownership have passed to the customer, the
price is fixed and determinable, and collection of the resulting
receivable is reasonably assured). For arrangements which include
customer acceptance provisions, revenue is not recognized until
the terms of acceptance are met. Reserves for sales returns and
allowances are estimated and provided for at the time revenue is
recognized.
Allowances for Doubtful Accounts
--------------------------------
The Company maintains an allowance for doubtful accounts for
losses that it estimates will arise from its customers inability
to make required payments. Management makes its estimates of the
uncollectability of its accounts receivable by analyzing
historical bad debts, specific customer creditworthiness and
current economic trends. At October 31, 2003 the allowance for
doubtful accounts was $301,000 and at October 31, 2002 it was
$326,000.
Inventory Valuation
-------------------
Management regularly assesses the valuation of the Company's
inventories and writes down those inventories which are obsolete
or in excess of management forecasted usage to their estimated
realizable value. Management estimates of realizable value are
based upon its analyses, and assumptions include, but are not
limited to, forecasted sales levels by product, expected product
lifecycle, product development plans and future demand
requirements. If market conditions are less favorable than
forecasts, or actual demand from customers is lower than
management estimates, the Company may be required to record
additional inventory write-downs. If demand is higher than
expected, the Company may sell its inventories that had
previously been written down. At October 31, 2003 and 2002 the
Company maintained an obsolescence reserve of $150,000 and
$260,000 respectively.
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 lender under
the Credit Line.
ITEM 7A. Quantitative and Qualitative Disclosures about Market
Risk.
Not Applicable.
ITEM 8. Financial Statements and Supplementary Data.
The financial statements listed below are included on pages
F-1 through F-26 following the signature page.
Title of Document Page
-------------------- ----
Report of Independent Registered Public
Accounting Firm F-1
Consolidated Balance Sheets as of October 31,
2003 and 2002
F-2 - F-3
Consolidated Statements of Income for the
Years Ended October 31, 2003, 2002 and 2001 F-4
Consolidated Statements of Shareholders' Equity
for the Years Ended October 31, 2003, 2002
and 2001 F-5 - F-6
Consolidated Statements of Cash Flows for the
Years Ended October 31, 2003, 2002 and 2001 F-7 - F-8
Notes to Consolidated Financial Statements F-9 - F-26
ITEM 9. Changes in and Disagreements with Registered Public
Accounting Firm on Accounting and Financial Disclosure.
None.
ITEM 9A. Controls and Procedures.
The Company maintains "disclosure controls and procedures",
as such term is defined in Rules 13a-15e and 15d-15e of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that are designed to ensure that information required to be
disclosed in its reports, pursuant to the Exchange Act, is
recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to its management,
including its Chief Executive Officer and Principal Accounting
Officer, as appropriate, to allow timely decisions regarding the
required disclosures. In designing and evaluating the disclosure
controls and procedures, management has recognized that any
controls and procedures, no matter how well designed and
operated, can provide only reasonable assurances of achieving the
desired control objectives, and management necessarily is
required to apply its judgment in evaluating the cost benefit
relationship of possible controls and procedures.
The Company's Chief Executive Officer and Principal
Accounting Officer (its principal executive officer and principal
accounting officer, respectively) have evaluated the
effectiveness of its "disclosure controls and procedures" as of
the end of the period covered by this Annual Report on Form 10-K.
Based on their evaluation, the principal executive officer and
principal financial officer concluded that its disclosure
controls and procedures are effective. There were no significant
changes in its internal controls or in other factors that could
significantly affect these controls subsequent to the date the
controls were evaluated.
PART III
The information required by Items 10, 11, 12, 13 and 14 of
this Part will be incorporated by reference to the Proxy
Statement of the Company to be filed with the Securities and
Exchange Commission on or before February 28, 2004.
PART IV
ITEM 10. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a) Financial Statement Schedules
(b) Reports on Form 8-K
None.
(c) Exhibits
3.1 The Company's Certificate of Incorporation, 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 (the "1995 10-KSB").
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").
4.1 Form of First Amended and Restated 1996 Stock
Option Plan, Incorporated by reference to Exhibit
99 of Registration Statement No. 333-56434 filed on
Form S-8.
4.2 Form of 2003 Stock Incentive Plan, as amended, incor-
porated by reference to Exhibit 4.2 of the Company's
Annual Report on Form 10-K for its fiscal year ended
October 31,2003.
10.1 Security Agreement between Israel Discount Bank of
New York and JLM Couture, Inc. dated March 1998
incorporated by reference to Exhibit 10.3 of the
1998 Form 10-KSB.
10.2 Pledge Agreement dated as of December 22, 1998
between Joseph L. Murphy and the Company
incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-KSB for its
fiscal year ended October 31, 1999 (the "1999 10-
KSB").
10.3 Subscription Agreement dated as of December 22,
1998 between Joseph L. Murphy and the Company
incorporated by reference to Exhibit 10.6 to the
1999 10-KSB.
10.4 Promissory Note dated as of December 22, 1998 by
Joseph L. Murphy to the Company incorporated by
reference to Exhibit 10.7 to the 1999 10-KSB.
21 List of Subsidiaries of the Company.
23.1 Consent of Goldstein Golub Kessler LLP dated June 14, 2004.
31.1 Certification pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: June 10, 2004 By:/s/Joseph L. Murphy
-------------------
Joseph L. Murphy,
President
Pursuant to the requirement of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Company and in the capacities and on the
dates indicated:
Name Capacity Date
/s/Daniel M. Sullivan Chairman of the Board June 10, 2004
--------------------- of Directors
Daniel M. Sullivan
/s/Joseph L. Murphy President and Director June 10, 2004
------------------- (principal executive
Joseph L. Murphy officer)
/s/Joseph E. O'Grady Secretary and Director June 10, 2004
--------------------
Joseph E. O'Grady
/s/Jerrold Walkenfeld Principal Accounting June 10, 2004
--------------------- Officer (principal
Jerrold Walkenfeld Financial officer)
/s/Keith Cannon Director June 10, 2004
---------------
Keith Cannon
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To JLM Couture, Inc.
We have audited the accompanying consolidated balance sheets
of JLM Couture, Inc. (a Delaware corporation) and Subsidiaries as
of October 31, 2003 and 2002 and the related consolidated
statements of income, shareholders' equity and comprehensive
income and cash flows for each of the three years in the period
ended October 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with standards of the
public company accounting oversight board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of JLM Couture, Inc. and Subsidiaries as of
October 31, 2003 and 2002 and the results of their operations and
their cash flows for each of the three years in the period ended
October 31, 2003 in conformity with United States generally
accepted accounting principles.
/s/GOLDSTEIN GOLUB KESSLER LLP
------------------------------
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
January 21, 2004
JLM COUTURE, INC. AND
SUBSIDIARIES
Consolidated Balance Sheets as of
October 31, 2003 and 2002
2003 2002
---------- ----------
Current assets:
Cash and cash equivalents $ 1,219,063 $ 958,810
Accounts receivable, net of
allowance for doubtful
accounts, of $301,000 at
October 31, 2003 and $326,000
at October 31, 2002 3,610,523 3,596,205
Inventories, net 4,070,192 3,747,357
Prepaid expenses and other
current assets 325,283 531,712
Deferred income taxes 20,000 -
Prepaid taxes 76,188 -
---------- ---------
Total current assets 9,321,249 8,834,084
Equipment and leasehold
improvements, net of accumulated
depreciation and amortization of
$515,333 at October 31, 2003 and
$412,053 at October 31, 2002 677,357 460,264
Goodwill, net of accumulated
amortization of $70,421 at
October 31, 2003 and 2002 211,272 211,272
Samples, net of accumulated
amortization of $108,190 at
October 31, 2003 and
$133,493 at October 31, 2002 247,120 261,037
Other assets 94,416 49,540
---------- ---------
$10,551,414 $9,816,197
========== =========
The accompanying notes to consolidated financial statements are
an integral part of these financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets as of
October 31, 2003 and 2002
(continued)
2003 2002
---------- ---------
Current liabilities:
Accounts payable $ 1,193,570 $1,014,241
Accrued expenses and
other current liabilities 917,630 786,099
Income taxes payable - 157,289
Deferred income taxes - 73,000
---------- ---------
Total current liabilities 2,111,200 2,030,629
---------- ---------
Deferred income taxes 615,000 664,000
---------- ---------
Total liabilities 2,726,200 2,694,629
---------- ---------
Commitments and contingencies (Note 11)
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 2,344,530 at October 31, 2003
and 2,330,530 at October 31, 2002;
Outstanding 1,912,694 at
October 31, 2003 and 1,964,360
at October 31, 2002 465 465
Additional paid-in capital 3,679,542 3,653,642
Retained earnings 5,879,980 5,072,228
---------- ---------
9,559,987 8,726,335
Less: Deferred compensation (248,750) (335,000)
Note receivable and
accrued interest (317,960) (365,265)
Treasury stock, at cost:
431,836 shares at October 31,
2003 and 366,170 shares at
October 31, 2002 (1,142,968) (904,502)
Accumulated other comprehensive
loss (25,095) -
---------- ---------
Total shareholders' equity 7,825,214 7,121,568
---------- ---------
$10,551,414 $9,816,197
========== =========
The accompanying notes to consolidated financial statements are
an integral part of these financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the Years Ended
October 31, 2003, 2002 and 2001
2003 2002 2001
---------- ---------- ----------
Net sales $26,781,400 $25,405,702 $22,092,392
Cost of goods sold 15,487,372 14,038,477 12,385,206
---------- ---------- ----------
Gross profit 11,294,028 11,367,225 9,707,186
Selling, general and
administrative expenses 9,899,846 9,273,739 8,502,994
---------- ---------- ----------
Operating income 1,394,182 2,066,286 1,204,192
Interest income (expense),
net of interest expense of
$8,249 for 2003 and interest
income of $17,810 and $5,111
for 2002 and 2001, respectively 8,448 (10,153) (51,389)
Income before provision for ---------- ---------- ----------
income taxes 1,402,630 2,056,133 1,152,803
Provision for income taxes 594,878 947,000 486,440
---------- ---------- ----------
Net income $ 807,752 $ 1,109,133 $ 666,363
========== ========== ==========
Net income per weighted
average number of common
shares:
Basic $0.42 $0.54 $0.34
========== ========== ==========
Diluted $0.40 $0.53 $0.34
========== ========== ==========
Weighted average number of
common shares outstanding:
Basic 1,914,392 2,043,907 1,980,200
========== ========== ==========
Diluted 1,995,823 2,098,981 1,985,833
========== ========== ==========
The accompanying notes to consolidated financial statements are an
integral part of these financial statements.
Balance October 31, 2,120,530 $423 $3,294,984 $3,296,732 (101,250) $(432,135) (132,420) $(333,747) $5,725,007
2000
Purchase of Treasury
Stock (99,900) (201,412) (201,412)
Exercise of Stock 10,000 2 8,698 8,700
Options
Accrued Interest on
Notes Receivable (10,083) (10,083)
Payments on Notes Receivable 10,083 10,083
Employee Stock Grant 200,000 40 349,960 (350,000) -
Amortization of Deferred 30,000 30,000
Compensation
Net Income 666,363 666,363
--------- --- --------- --------- -------- --------- -------- ------- ----------
Balance October 31,
2001 2,330,530 $465 $3,653,642 $3,963,095 $(421,250)$(432,135)(232,320) $(535,159) $6,228,658
========= === ========= ========= ======== ======== ======= ======= ==========
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
For the Years Ended October 31, 2003 and 2002
Notes Total
Additional Receivable Share-
Common Stock Paid-in Retained Deferred and Accrued Treasury Stock holders'
Shares Amount Capital Earnings Compensation Interest Shares Amount Equity
-----------------------------------------------------------------------------------------------------------------------
Balance October 31,
2001 2,330,530 $465 $3,653,642 $3,963,095 (421,250) $(432,135) (232,320) $(535,159) $6,228,658
Purchase of Treasury
Stock (133,850) (369,343) (369,343)
Accrued Interest on
Notes Receivable (6,700) (6,700)
Payments on Notes Receivable
73,570 73,570
Amortization of Deferred
Compensation 86,250 86,250
Net Income 1,109,133 1,109,133
--------- --- --------- ---------- -------- --------- -------- --------- ----------
Balance October 31, 2,330,530 $465 $3,653,642 $5,072,228 $(335,000) $(365,265) (366,170) $(904,502) $7,121,568
2002 ========= === ========= ========= ======== ========= ======= ========= ==========
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity and Comprehensive Income
For the Years Ended October 31, 2003 and 2002
Accumulated
Other Notes Total
Additional Compre- Receivable Share-
Common Stock Paid-in Retained hensive Deferred and Accrued Treasury Stock holders'
Shares Amount Capital Earnings Loss Compensation Interest Shares Amount Equity
-----------------------------------------------------------------------------------------------------------------------------------
Balance October 31,
2002 2,330,530 $465 $3,653,642 $5,072,228 (335,000) $(365,265) (366,170) $(904,502) $7,121,568
Net Income 807,752 807,752
Foreign currency translation (25,095) (25,095)
--------
Comprehensive Income 782,657
---------
Shares tendered upon option
exercise 24,205 (4,666) (24,205)
Purchase of Treasury
Stock (61,000) (214,261) (214,261)
Exercise of Stock 1,695 1,695
Options
Accrued Interest on
Notes Receivable (3,695) (3,695)
Payments on Notes Receivable 51,000 51,000
Amortization of Deferred
Compensation 86,250 86,250
--------- ---- --------- --------- -------- -------- -------- ------- ---------- ---------
Balance October 31,
2003 2,330,530 $465 $3,679,542 $5,879,980 $(25,095) $(248,750) $(317,960) (431,836)$(1,142,968)$7,825,214
========= ==== ========= ========= ======== ========= ======== ======= ========== ==========
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended October 31, 2003, 2002 and 2001
2003 2002 2001
------- --------- --------
Cash flows from operating activities:
Net income 807,752 1,109,133 666,363
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 103,280 94,633 86,230
Provision for doubtful accounts 50,000 - (75,000)
Foreign currency translation (25,095) - -
Accrued interest income on note
receivable (3,695) (6,700) (10,083)
Compensation expense on issuance
of stock options and common stock 86,250 86,250 30,000
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (64,318) (161,677) 115,223
Increase in inventories (322,835) (31,204) (43,619)
(Increase) decrease in prepaid
expenses and other current assets 206,429 109,075 (146,185)
Increase in prepaid taxes (76,188) - (152,910)
(Increase) decrease in samples
and other assets (30,959) 3,713 62,360
Increase (decrease) in accounts
payable 179,329 (160,772) (160,654)
Increase (decrease) in
accrued expenses and other
current liabilities 131,531 502,584 (42,605)
Increase (decrease) in income taxes
payable (157,289) 157,289 (884,108)
Increase (decrease) in deferred
income taxes (142,000) 147,000 852,721
Decrease in other long-term
liabilities - (8,239) (25,435)
Net cash provided by --------- --------- --------
operating activities 742,192 1,841,085 272,298
--------- --------- --------
Cash flows from investing activities:
Purchase of property and equipment (320,373) (341,149) (40,356)
Net cash used in investing activ- --------- --------- --------
ities (320,373) (341,149) (40,356)
--------- --------- --------
The accompanying notes to consolidated financial statements are an
integral part of these financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended October 31, 2003, 2002 and 2001
(Continued)
2003 2002 2001
-------- --------- ---------
Cash flows from financing activities:
Net reductions of revolving
line of credit $ - $(450,000) $ -
Payments on note receivable 51,000 73,570 10,083
Proceeds from stock option exercise 1,695 - 8,700
Purchase of treasury stock (214,261) (369,343) (201,412)
--------- -------- --------
Net cash used in financing activities (161,566) (745,773) (182,629)
--------- -------- --------
Net increase in cash 260,253 754,163 49,313
Cash and cash equivalents,
beginning of year 958,810 204,647 155,334
--------- -------- --------
Cash and cash equivalents, end of year $1,219,063 $ 958,810 $204,647
========= ======== ========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest $ 4,553 $30,107 $ 51,373
======== ======= =======
Income taxes $970,000 $490,000 $655,622
======= ======= =======
The accompanying notes to consolidated financial statements are an
integral part of these financial statements.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Note 1. The Company
JLM Couture, Inc. and Subsidiaries (the "Company") is
engaged in the design and manufacture of traditional,
high quality bridal wear and related accessories,
including bridesmaid gowns. Products are sold to
specialty bridal shops located throughout the
continental United States and England. The Company
operates in one segment.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the
accounts of JLM Couture, Inc. and its wholly-owned
subsidiaries, Alvina Valenta Couture Collection, Inc.
and JLM Europe Ltd. All significant intercompany
balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally
accepted in the United States of America requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Foreign Currency Translation
All assets and liabilities of foreign subsidiaries are
translated into U.S. dollars at fiscal year-end
exchange rates. Income and expense items are
translated at average exchange rates prevailing during
the fiscal year.
The aggregate effect of translation adjustments has
been deferred and is reflected as a separate component
of shareholders' equity as of October 31, 2003.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
No material year-end foreign currency translation
adjustments were necessary at October 31, 2002 and
2001.
Cash Equivalents
For purposes of the statement of cash flows, the
Company considers all highly liquid investments
purchased with an original maturity of three months or
less to be cash equivalents.
Concentration of Credit Risk
The Company maintains cash in bank deposit account
which, at times, exceed federally insured limits. The
Company has not experienced any losses on these
accounts.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is determined based
upon estimates made by management and maintained at a
level considered adequate to provide for future
uncollectable amounts. Actual results could differ
from these estimates.
Inventories
Inventories are valued at the lower of cost (first-in,
first-out) or market and include material, labor and
overhead.
Prepaid Advertising and Marketing Costs
Prepaid advertising and marketing costs
include costs of advertisements that have not been
published. Upon publishing of an advertisement, the
related cost is expensed by the Company. Advertising
and promotional costs for the years ended October 31,
2003, 2002 and 2001 were $3,080,784, $2,054,861 and
$2,251,308, respectively.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Equipment and Leasehold Improvements
Depreciation of equipment is computed using the
straight-line method over the estimated useful lives of
the respective assets, which range from five to ten
years. Amortization of leasehold improvements and
leased equipment is computed using the straight-line
method over the lesser of the lease term or estimated
useful lives of the assets. Major additions and
improvements are capitalized, and repairs and
maintenance are charged to operations as incurred.
Goodwill
Goodwill represents the excess of the purchase price
over the fair value of the net assets of the business
acquired and was being amortized on a straight-line
basis over 20 years until November 1, 2002 at which
time the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, Goodwill and
Other Intangible Assets. See "New Accounting Standards"
below for additional information relating to goodwill.
Samples
The Company produces trunk show samples of each dress
line to be used for displaying at trunk shows (fashion
shows in customers' stores). These dresses are shipped
from customer to customer to be used at numerous trunk
shows throughout the year. These dresses are amortized
over a one-year period.
In addition, the Company produces production samples
which are used by contractors in manufacturing dresses
as they are ordered by customers. These production
samples are amortized over their useful life of 4
years. Based on historical sales patterns, a dress
style is typically sold for approximately four years
after its introduction. Sample costs include all costs
of manufacturing the samples, which primarily consist
of fabric and trim, as well as contract labor and
allocated overhead. The Company reviews its
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
samples on a regular basis for any styles that have
been discontinued. Discontinued samples are written
off and charged to operations in the period in which
they are discontinued.
Long-Lived Assets
The Company reviews its long-lived assets and certain
related intangibles for impairment whenever changes in
circumstances indicate that the carrying amount of an
asset may not be fully recoverable. As a result of its
review, the Company does not believe that any such
change has occurred. If such changes in circumstance
are present, a loss is recognized to the extent the
carrying value of the asset is in excess of the sum of
the undiscounted cash flows expected to result from the
use of the asset and its eventual disposition.
See "New Accounting Standards" below regarding
additional information covering Long-Lived Assets.
Fair Value of Financial Instruments
The fair value of the Company's short-term debt is
estimated based on the current rates offered to the
Company for debt of similar terms and maturities.
Revenue Recognition
Revenue is recognized when persuasive evidence of an
arrangement exists, (i.e. the product has been
delivered, the rights and risks of ownership have
passed to the customer, the price is fixed and
determinable, and collection of the resulting
receivable is reasonably assured). For arrangements
which include customer acceptance provisions, revenue
is not recognized until the terms of acceptance are
met. Reserves for sales returns and allowances are
estimated and provide for at the time revenue is
recognized.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Freight And Delivery Costs
The Company's freight and delivery costs are included
in selling, general and administrative expenses and
amounted to approximately $773,000, $715,000 and
$712,000 for the years ended October 31, 2003, 2002 and
2001, respectively. Amounts charged to customers for
freight and delivery are included in revenues.
Reclassifications
For comparability, certain 2002 and 2001 amounts have
been reclassified, where appropriate, to conform to the
financial statement presentation used in 2003.
Income Taxes
Income taxes are accounted for in accordance with
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"). Under SFAS
109, an asset and liability approach is required. Such
approach results in the recognition of deferred tax
assets and liabilities for the expected future tax
consequences of temporary differences between the book
carrying amounts and the tax basis of assets and
liabilities.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based
Compensation," establishes a fair value based method of
accounting for an employee stock option or similar
equity instrument. However, SFAS 123 allows an entity
to continue to measure compensation cost for employee
stock-based compensation plans using the intrinsic
value method of accounting prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees,"
("APB 25"). Entities electing to continue to follow
the accounting under APB 25 are required to make pro
forma disclosures of net income and earnings per share
as if the fair value based method of accounting under
SFAS 123 had been applied.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
The Company has elected to apply APB 25 and related
interpretations in accounting for its stock options
issued to employees (intrinsic value) and has adopted
the disclosure-only provisions of SFAS 123. Had the
Company elected to recognize compensation cost based on
the fair value of the options granted at the grant date
as prescribed by SFAS 123, the Company's net income and
income per common share would have been as follows:
Year Ended October 31, 2003 2002 2001
----------------------------------------------------------------
Net income - as reported $807,752 $1,109,133 $666,363
Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects 57,663 35,690 71,404
----------------------------------------------------------------
Year Ended October 31, 2003 2002 2001
----------------------------------------------------------------
Net income - pro forma $750,089 $1,073,440 $594,959
================================================================
Basic income per share -
as reported $0.42 $0.54 $0.34
================================================================
Basic income per share -
pro forma $0.39 $0.53 $0.30
================================================================
Diluted income per share -
as reported $0.40 $0.53 $0.34
================================================================
Diluted income per share -
pro forma $0.38 $0.51 $0.30
================================================================
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
The fair value of issued stock options was estimated
at the date of grant using the Black-Scholes option
pricing model incorporating the following assumptions
for options granted:
For The Years Ended
October 31,
-----------------------
2003 2002 2001
----- ---- ------
Weighted average
market price at
date of grant $3.66 $2.10 $1.75
Risk free interest
rate 4.50% 4.50% 4.57%
Volatility factor 100% 100% 100%
Expected life of
the stock options 5.0 yrs 5.0 yrs 3.0 yrs
Expected dividends $ - $ - $ -
Earnings per Share
SFAS No. 128, "Earnings Per Share", which the Company
adopted effective November 1, 1998, establishes
standards for computing and presenting earnings per
share ("EPS"). The standard requires the presentation
of basic EPS and diluted EPS. Basic EPS is calculated
by dividing income available to common shareholders by
the weighted average number of common shares
outstanding during the period. Diluted EPS is
calculated by dividing income available to common
shareholders by the weighted average number of common
shares outstanding, adjusted to reflect potentially
dilutive securities. Certain options and warrants have
been excluded from the calculation of diluted EPS, as
their effect is anti-dilutive.
A reconciliation of the weighted average number of
shares of common stock outstanding to the weighted
average number of shares of common stock outstanding
assuming dilution is as follows:
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Years Ended October 31,
-------------------------------
2003 2002 2001
--------- --------- ---------
Basic weighted average 1,914,392 2,043,907 1,980,200
common shares outstanding
Effect of dilutive securities:
Stock options 81,796 55,074 5,633
Diluted weighted average --------- --------- ---------
common shares outstanding 1,996,188 2,098,981 1,985,833
========= ========= =========
Comprehensive Income
In 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 130, "Reporting Comprehensive
Income". This standard establishes requirements for the
reporting and display of comprehensive income and its
components in a full set of general purpose financial
statements. Comprehensive income is the total of net
income and all other non owner changes in equity. The
objective of this statement is to report a measure of
all changes in equity of a company that result from
transactions and other economic events in the period
other than transactions with owners. The Company
adopted SFAS No. 130 during the first quarter of Fiscal
1999.
New Accounting Standards
In July 2001, the Financial Accounting Standards Board
issued SFAS No. 142, "Goodwill and Other Intangible Assets".
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 for fiscal years beginning after
December 15, 2001. SFAS No. 142 supersedes APB Opinion
No. 17, "Intangible Assets." The Company adopted its
provisions for its fiscal year beginning November 1,
2002.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
In August 2001, the Financial Accounting Standards Board
issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long- Lived Assets". 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 adopted its provisions for its fiscal year
beginning November 1, 2002.
Management does not believe that any recently issued,
but not yet effective, accounting standards if
currently adopted would have a material effect on the
accompanying financial statements.
Cost of Goods Sold
The cost of goods sold include all materials used in
producing dresses, labor costs (inclusive of fringe
benefits), production sample costs, as well as inbound
freight charges, purchasing and receiving costs,
inspection costs, warehousing costs, internal transfer
costs and other costs of the Company's distribution
network.
Selling, General & Administrative Costs
The Company's selling, general & administrative costs
("SG&A") include, advertising and promotional costs,
sales expenses, freight and delivery, office expenses,
computer related costs, travel and entertainment,
credit and collection costs as well as bad debts. All
salary costs (as well as related fringe benefits) not
directly related to the production of dresses are
charged to SG&A.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Note 3. Inventories
Inventories consisted of the following:
October 31,
------------------------
2003 2002
--------- ---------
Raw materials $3,319,321 $2,782,515
Work-in-process 180,816 354,114
Finished goods 570,055 610,728
--------- ---------
$4,070,192 $3,747,357
========= =========
Raw materials are shown net of a $150,000 and $260,000
obsolescence reserve at October 31, 2003 and 2002
respectively.
Note 4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets
consisted of the following:
October 31,
------------------------
2003 2002
--------- ---------
Prepaid advertising and $ 285,948 $ 493,586
marketing costs
Other 39,335 38,126
--------- ---------
$ 325,283 $ 531,712
========= =========
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Note 5. Equipment and Leasehold Improvements
Equipment and leasehold improvements are summarized as
follows:
October 31,
-----------------------
2003 2002
--------- --------
Furniture and equipment $ 542,608 $ 450,770
Leasehold improvements 601,259 421,547
Transportation equipment 48,823 -
--------- --------
1,192,690 872,317
Less: Accumulated
depreciation and
amortization (515,333) (412,053)
--------- --------
Equipment and leasehold
improvements, net $ 677,357 $ 460,264
========= ========
Note 6. Goodwill
Effective November 1, 2002, the Company adopted SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS No. 142 requires that an
intangible asset with a definite life be amortized over its useful
life and that goodwill and intangible assets with indefinite lives
are not to be amortized and the remaining book value is to be
tested for impairment at least annually at the reporting unit level
using a two-step impairment test. To accomplish this, the Company
determined the fair value of the reporting unit and compared it to
the carrying amount of the reporting at that date. No impairment
charges resulted from this evaluation since the fair value of the
reporting unit exceeded the carrying amount.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
The following pro-forma information reconciles net income
reported for the years ended October 31, 2003, 2002 and 2001 to
adjusted net income reflecting the adoption of SFAS No. 142.
2003 2002 2001
------- --------- -------
Reported net income $807,752 $1,109,133 $666,363
Addback: Goodwill
amortization - 14,084 14,084
------- --------- -------
Adjusted net income $807,752 $1,123,217 $680,447
======= ========= =======
Basic income per share:
Reported net income 0.42 0.54 0.34
Addback: Goodwill
amortization - 0.01 -
------- --------- -------
Adjusted net income 0.42 0.55 0.34
======= ========= =======
Diluted income per share:
Reported net income 0.40 0.53 0.34
Addback: Goodwill
and amortization - 0.01 -
------- --------- -------
Adjusted net income 0.40 0.54 0.34
======= ========= =======
Note 7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are
summarized as follows:
October 31,
------------------------
2003 2002
--------- ---------
Payroll and related
expenses $ 420,738 $ 569,694
Other 496,892 216,405
--------- ---------
$ 917,630 $ 786,099
========= =========
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Note 8. Revolving Line of Credit
The Company has a line of credit agreement with Israel
Discount Bank of New York ("IDB"). The proceeds of the
credit facility were initially used to repay amounts
outstanding under the Company's previous line of credit
facility. Credit availability is based on eligible
amounts of accounts receivable, as defined, up to a
maximum of $1,250,000. Based on eligible accounts
receivable at October 31, 2003, $1,250,000 was
available for future borrowing. The line of credit
facility is secured by the Company's cash, accounts
receivable, inventory, securities, deposits and general
intangibles. Interest is charged at the prime rate (4%
at October 31, 2003). The line of credit agreement
will automatically renew each year unless either party
provides 60 days notice to terminate the line of credit
agreement. Interest expense charged to operations
related to the IDB line of credit facility totaled
$21,623 and $53,167 for the years ended October 31,
2002 and 2001, respectively. At October 31, 2003 and
2002, the Company had no outstanding borrowings under
the line of credit agreement.
Note 9. Income Taxes
The provision for income taxes for the years ended
October 31, 2003, 2002 and 2001, consist of the
following:
2003 2002 2001
-------- -------- --------
Current:
Federal $564,665 $592,183 $380,898
State and local 172,213 206,817 121,814
-------- -------- --------
$736,878 $799,000 $502,712
-------- -------- --------
Deferred:
Federal (93,000) 113,000 246,020
State and local (49,000) 35,000 (262,292)
-------- -------- --------
(142,000) 148,000 (16,272)
-------- -------- --------
$594,878 $947,000 $486,440
======== ======== ========
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Note 9. Income Taxes (continued)
A reconciliation of the statutory Federal income tax rate to
the effective income tax rate for the years ended October
31, 2003, 2002 and 2001, is as follows:
2003 2002 2001
---- ---- ----
Statutory federal income tax at
applicable rates 34% 34% 34%
State and local taxes, net of
federal tax benefit 8% 7% 6%
Nondeductible expenses 2% 3% 3%
Other (2%) 2% (1%)
--- --- ---
42% 46% 42%
=== === ===
The components of deferred income tax assets and liabilities are
as follows:
October 31,
-------------------------
2003 2002
---------- ----------
Deferred tax assets:
Allowance for doubtful accounts $ 132,000 $ 133,000
Other liabilities and accruals 14,000 13,000
---------- ----------
Total deferred tax assets 146,000 146,000
---------- ----------
Deferred tax liabilities:
Prepaid advertising and
marketing expenses (126,000) (219,000)
Intercompany reimbursement taxed
in different period (593,000) (664,000)
Accumulated depreciation and
amortization (22,000) -
---------- ----------
Total deferred tax liabilities (741,000) (883,000)
---------- ----------
Net deferred tax liability $ (595,000) $ (737,000)
========== ==========
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Deferred income taxes are provided on temporary
differences between financial statement and taxable
income. Realization of deferred income tax assets is
dependent on generating sufficient taxable income in
the future.
Note 10. Shareholders' Equity
During 2003, 2002 and 2001, the Company repurchased
61,000, 133,850 and 99,900 shares of Common Stock,
respectively, in the open market at a cost of $214,261,
$369,343 and $201,412, respectively.
Stock Option Plans
On August 26, 1996, the Company adopted a Stock Option
Plan (the "1996 Plan"). The 1996 Plan provides for the
issuance of incentive and nonstatutory stock options to
employees, consultants, advisors and/or directors for a
total of up to 100,000 shares of Common Stock. In
September 1999, the 1996 Plan was amended to increase
the number of shares available for grant to 250,000
shares. The exercise price of options granted may not
be less than the fair market value of the shares on the
date of grant (110% of such fair market value for a
holder of more than 10% of the Company's common stock).
The 1996 Plan is scheduled to terminate on August 26,
2006.
On October 28, 2003, the Company adopted the 2003 Stock
Incentive Plan (the "2003 Plan"). Awards may be granted
under the Plan on and after its effective date (August
12, 2003). The 2003 Plan authorizes the grant of
incentive options, nonqualified options, SARs,
restricted awards and performance awards. Incentive
options may only be granted to employees of the
Company. The option price at which an option may be
exercised must be at least 100% of the fair market
value per share of the Common Stock on the date of
grant (or 110% of the fair market value with respect
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
to incentive options granted to an employee who owns
stock possessing more than 10% of the total voting
power of all classes of stock of the Company). The
maximum number of shares that may be issued pursuant to
awards granted under the 2003 Plan may not exceed the
sum of (a) 500,000 shares, plus (b) any shares of
Common Stock (1) remaining available for issuance as of
the effective date of the 2003 Plan under the 1996
Plan.
F-25
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
The following table summarizes data relating to non-incentive
plan options and incentive plan options:
Incentive
---------------------------------------------------
Average Average Average
Exercise Exercise Exercise
2003 Price 2002 Price 2001 Price
---------------------------------------------------
Options outstanding
at the beginning of
the year 48,000 2.10 122,500 3.32 132,500 3.28
Options granted 22,000 3.66 48,000 2.10 - -
Options expired (6,000) - (122,500) 3.32 (10,000) 2.75
Options exercised - 2.10 - - - -
------ ---- ------- ---- ------- ----
Options outstanding
at the end of the
year 64,000 2.64 48,000 2.10 122,500 3.32
====== ==== ======= ==== ======= ====
Options exercisable
at the end of the
year - - - - 122,500 3.32
====== ==== ======= ==== ======= ====
Non-Incentive
------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
2003 Price 2002 Price 2001 Price
-------------------------------------------------
Options outstanding
at the beginning of
the year 354,000 2.33 408,000 3.11 413,000 3.02
Options granted - - 124,000 2.10 30,000 1.75
Options expired 200,000) 2.56 (178,000) 3.95 (25,000) 0.87
Options exercised (14,000) 1.85 - - (10,000) 0.87
------- ---- ------- ---- ------- ----
Options outstanding
at the end of the
year 140,000 2.05 354,000 2.33 408,000 3.11
======= ==== ======= ==== ======= ====
Options exercisable
at the end of the
year 20,000 1.75 230,000 2.46 408,000 3.11
======= ==== ======= ==== ======= ====
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
The weighted average fair value of options granted during the
years ended October 31, 2003, 2002 and 2001 was $3.66, $1.20 and
$1.10, respectively.
The following table summarizes information about stock options
outstanding and exercisable at October 31, 2003:
Options Outstanding Options Exercisable
----------------------------------- --------------------
Weighted
Average Weighted Weighted
Remaining Average Number Average
Range of Number Contractual Exercise Exerc- Exercise
Exercise Price Outstanding Life Price isable Price
-------------- ----------- ----------- -------- ------- ---------
$1.75 - $2.10 182,000 3 years $2.06 20,000 $1.75
$3.66 - $3.66 22,000 4 years $3.66 - -
============== =========== =========== ======== ======= =========
At October 31, 2003, 680,000 shares of common stock were
reserved for future issuance of stock options.
Note 11. Related Party Transactions
Notes Receivable - Sale of Stock
On October 15, 1990, the Company's former president exercised a
stock option to purchase 36,458 shares of Common Stock at a
purchase price of $.96 per share. A $35,000 note was received
for the purchase. The note together with interest accruing at
a prime rate plus one percent per annum, is due on demand. The
outstanding principal and interest balance at October 31, 2003
and 2002 was $39,710 and $45,890, respectively.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
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 October 31, 2003
and 2002 was $278,250 and $319,375, respectively.
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 term 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 term of the employment agreement.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Note 12. Commitments and Contingencies
Lease Commitments
The Company leases office, production, and showroom facilities
under leases expiring through 2013. Minimum annual rentals
under such leases are as follows:
Year Ending October 31,
---------------------------
2004 $ 551,051
2005 577,445
2006 572,170
2007 562,796
2008 587,401
Thereafter 2,452,066
---------
$5,302,929
=========
Rent expense charged to operations for the foregoing lease and
short-term rentals for the years ended October 31, 2003, 2002
and 2001 amounted to $614,401, $520,640 and $419,305,
respectively.
The leases provide for scheduled increases in base rent. Rent
expense is charged to operations ratably over the term of the
leases which results in deferred rent payable which represents
cumulative rent expense charged to operations from inception of
these leases in excess of required lease payments.
At October 31, 2003 and 2002, the Company was committed under a
stand-by letter of credit issued by the bank on its behalf for
approximately $160,299.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Employment Agreements
The Company has employment agreements with four of
its key employees terminating from March 2004 to October 2013.
Total compensation expense under the terms of these agreements
for the years ended October 31, 2003, 2002 and 2001 was
$769,704, $941,650 and $678,026, respectively.
Future minimum commitments under these employment agreements
are as follows:
Year Ending October 31,
----------------------------
2004 $ 627,500
2005 481,475
2006 329,834
2007 341,068
2008 352,691
Thereafter 1,342,666
---------
$3,475,234
=========
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Note 13. Valuation and Qualifying Accounts
Years ended October 31, 2003, 2002 and 2001 (in 000's)
Balance at Charged to Charged Balance
Beginning costs and to other Deductions at end
of year expenses accounts (1) of year
----------- ---------- -------- ---------- -------
Year ended October 31, $326 $376 - $401 $301
2003, allowance for
doubtful accounts
(deducted from accounts
receivable)
Year ended October 31, $300 $294 - $268 $326
2002, allowance for
doubtful accounts
(deducted from accounts
receivable)
Year ended October 31, $375 $100 - $100 $300
2001, allowance for
doubtful accounts
(deducted from accounts
receivable)
(1) Accounts deemed to be uncollectible.
JLM COUTURE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended October 31, 2003, 2002 and 2001
Note 14. Interim Financial Information (Unaudited)
Three-Month Period Ended
----------------------------------------------------
2003 January 31 April 30 July 30 October 31
-------------------------------------------------------
Revenue $5,653,948 $8,021,560 $7,847,951 $5,257,941
Gross profit 2,241,137 3,120,905 3,084,764 2,107,229
Net income (loss) 200,505 392,985 481,105 (266,843)
Basic earnings per share 0.10 0.21 0.25 (0.14)
Diluted earnings per share 0.10 0.19 0.24 (0.13)
Three-Month Period Ended
----------------------------------------------------
2002 January 31 April 30 July 30 October 31
-------------------------------------------------------
Revenue $4,643,091 $7,801,100 $7,745,328 $5,216,183
Gross profit 1,815,456 2,800,252 2,896,517 3,150,864
Net income 167,844 380,959 475,569 84,761
Basic earnings per share 0.08 0.19 0.23 0.03
Diluted earnings per share 0.08 0.19 0.23 0.03
Three-Month Period Ended
----------------------------------------------------
2001 January 31 April 30 July 30 October 31
----------------------------------------------------
Revenue $4,373,945 $6,501,792 $6,550,415 $4,666,240
Gross profit 1,604,065 2,481,214 2,398,198 2,614,659
Net income (loss) 158,553 313,531 307,658 (113,379)
Basic earnings per share 0.08 0.16 0.16 (0.06)
Diluted earnings per share 0.08 0.16 0.16 (0.06)
EXHIBIT INDEX
4.2 Form of 2003 Stock Incentive Plan, as amended, incor-
porated by reference to Exhibit 4.2 of the Company's
Annual Report on Form 10-K for its fiscal year ended
October 31,2003.
21 List of Subsidiaries of the Company.
23.1 Consent of Goldstein Golub Kessler LLP dated
June 14, 2004.
31.1 Certification pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
F-30