-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LTJ0xluRD0MIOmX125JYaAoLoGmAWpUX76KOogpr6Pbma1IvW1b3wPNLITVOc7/Z FE12Jyf+ai4f+kp35lsuHA== 0001047469-98-020868.txt : 19980518 0001047469-98-020868.hdr.sgml : 19980518 ACCESSION NUMBER: 0001047469-98-020868 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC COAST APPAREL CO INC CENTRAL INDEX KEY: 0001005185 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-APPAREL, PIECE GOODS & NOTIONS [5130] IRS NUMBER: 954536683 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-28760 FILM NUMBER: 98626594 BUSINESS ADDRESS: STREET 1: 1920 S LOS ANGELES STREET CITY: LOS ANGELES STATE: CA ZIP: 90015 BUSINESS PHONE: 2137489724 MAIL ADDRESS: STREET 1: 1920 S LOS ANGELES STREET CITY: LOS ANGELES STATE: CA ZIP: 90015 10QSB 1 10QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission file number 0-28760 PACIFIC COAST APPAREL COMPANY, INC. ------------------------------------ (Exact name of registrant as specified in its charter) CALIFORNIA 95-4536683 ---------- ----------- (State or other Jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1620 SO. LOS ANGELES ST. LOS ANGELES, CA 90015 ------------------------ ------- (Address of principal office) (Zip Code) Registrant's telephone number, including area code: (213) 748-9724 ------------- INAPPLICABLE ------------ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Number of shares of common stock outstanding as of March 31, 1998: 2,958,000 Transactional Small Business Disclosure Format Yes /X/ No / / 1 PACIFIC COAST APPAREL CO., INC. STATEMENT OF OPERATIONS
Three Months Ended March 31 --------------------------- 1998 1997 ---- ---- NET SALES $1,349,148 $407,606 COST OF GOOD SOLD 668,925 284,404 GROSS (LOSS) PROFIT 680,223 123,202 OPERATING EXPENSES Design and production 189,335 87,799 Selling 232,451 263,239 Shipping 54,497 8,509 General and administrative 314,892 710,033 Interest (income) expense 14,138 (25,354) Total Operating Expenses 805,313 1,044,226 LOSS BEFORE INCOME TAXES (125,090) (921,024) PROVISION FOR INCOME TAXES 0 (800) NET LOSS ($125,090) ($921,824) NET LOSS PER SHARE (0.04) (0.31) WEIGHTED AVERAGE NUMBER OF 2,958,000 3,012,000 COMMON SHARES OUTSTANDING
See notes to condensed financial statements 2 PACIFIC COAST APPAREL CO., INC. BALANCE SHEET MARCH 31, 1997
ASSETS CURRENT ASSETS Cash and cash equivalents $38,851 Due from factors $329,862 Accounts receivable $59,052 Inventories $793,780 Prepaid expenses and other current assets $55,146 Note receivable, stockholder $10,000 Total current assets $1,286,691 PROPERTY AND EQUIPMENT - at cost, net of $124,218 accumulated depreciation OTHER ASSETS $26,542 $1,437,451 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $272,658 Accrued expenses $219,571 Current maturities of long-term debt $108,000 Total current liabilities $600,229 LONG TERM DEBT, LESS CURRENT MATURITIES $165,462 NEGATIVE GOODWILL $166,798 STOCKHOLDERS' EQUITY Preferred stock Authorized, 600,000 shares No shares outstanding Common stock - no par value $5,452,718 Authorized, 1,000,000 shares Issued and outstanding 2,958,000 shares Additional paid-in capital $479,860 Deficit ($5,427,616) Total stockholders' equity $504,962 $1,437,451
See notes to condensed financial statements 3 Page 1 of 2 PACIFIC COAST APPAREL CO., INC. CONDENSED STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH
Three Months Ended March 31 --------------------------- 1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net loss ($125,090) ($921,824) Adjustments to reconcile net loss to cash used by operating activities: Depreciation $9,247 $13,038 Amortization of negative goodwill ($2,884) Changes in assets and liabilities, net of effect of assets and liabilities acquired: Increase in due from factors ($102,914) ($129,547) Decrease in accounts receivable ($24,130) Increase in inventories $116,721 ($589,510) Increase in prepaid expenses and ($14,001) ($141,975) other current assets Increase in other assets ($5,000) Increase in accounts payable ($52,824) $227,048 Increase (decrease) in accrued expenses $19,351 $62,817 Total Adjustments ($56,434) ($558,129) Net Cash Used By Operating Activities ($181,524) ($1,479,953)
See notes to condensed financial statements 4 Page 2 of 2 PACIFIC COAST APPAREL CO., INC. CONDENSED STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH
Three Months Ended March 31 --------------------------- 1998 1997 ---- ---- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ($3,401) ($170,685) Decrease in short term investments $1,737,654 Net Cash (used) Provided by ($3,401) $1,566,969 Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long term debt ($27,342) Reacquisition of common stock ($144,966) Net Cash Used by Financing Activities ($27,342) ($144,966) NET DECREASE IN CASH AND CASH EQUIVALENTS ($212,267) ($57,950) CASH AND CASH EQUIVALENTS, beginning as previously stated $251,118 $109,977 CASH AND CASH EQUIVALENTS, beginning, as restated $251,118 $109,977 CASH AND CASH EQUIVALENTS, ending $38,851 $52,027
See notes to condensed financial statements 5 PACIFIC COAST APPAREL CO., INC. CONDENSED STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
Three Months Ended March 31 --------------------------- 1998 1997 ---- ---- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during period for: Interest $14,138 $10,921 Income Taxes $800
See notes to condensed financial statements 6 PACIFIC COAST APPAREL CO., INC. NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 1997 1 - ACCOUNTING POLICIES Although the interim condensed financial statements of the Company are unaudited, it is the opinion of the Company's management that all normal recurring adjustments necessary for a fair statement of the results have been reflected therein. Operating revenues and net earnings for any interim period are not necessarily indicative of results that may be expected for the entire year. These statements should be read in conjunction with the financial statements and reflected notes which are incorporated by reference in the Company's Annual Report on Form 10 -KSB for the year ended September 30, 1997 See notes to condensed financial statements 7 PACIFIC COAST APPAREL CO., INC. CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY YEAR ENDED SEPTEMBER 30, 1997 AND THE SIX MONTHS ENDED MARCH 31, 1998
Common stock Preferred stock Additional Total ---------------------- ------------------------ Paid-in Stockholders' Shares Amount Shares Amount Capital Deficit Equity Balance, October 1, 1996 3,070,000 $5,920,118 $162,500 ($2,136,808) $3,945,810 Issuance of stock for services 9,000 $4,500 $4,500 Reacquisition of stock during the year ended September 30, 1997 (121,000) ($471,900) $317,360 ($154,540) Net loss for the year ended September 30, 1997 ($3,035,423) ($3,035,423) ---------- ----------- ------- ------- --------- ----------- ----------- Balance, September 30, 1997, 2,958,000 $5,452,718 0 $0 $479,860 ($5,172,231) $760,347 as previously reported Prior period adjustment, (Note 2) $81,085 $81,085 ---------- ----------- ------- ------- --------- ----------- ----------- Balance, September 30, 1997, 2,958,000 $5,452,718 0 $0 $479,860 ($5,091,146) $841,432 as restated Net loss for the six months ended March 31, 1997 ($336,470) ($336,470) ---------- ----------- ------- ------- --------- ----------- ----------- Balance, March 31, 1997 2,958,000 $5,452,718 0 $0 $479,860 ($5,427,616) $504,962
See notes to condensed financial statements Item 2. Management's discussion and analysis or plan of operation Introduction The Company was formed in April 1995 with the business strategy of reintroducing the Aca Joe apparel brand through major department stores in the United States. The Company's focus initially was to capitalize on the strength of the Aca Joe name and the perceived value of the apparel products. To date, the Company has not been successful in placing product in the target market of the major department stores nor has it been successful in placing significant product in the secondary market which is the specialty store base. The Company believes that it's lack of success is due to a number of factors including, lack of direction in the design of the apparel and the continued erosion of smaller vendors from the department store matrix system. In addition, the continued prolific growth of the major men's designers; which include Polo, Nautica and Tommy Hilfiger, in the category in which the Company competes has limited the floor space available to potential new vendors. The department store buyers are more likely to give additional floor space to successful existing vendors that historically have produced significant dollar sales per square foot than they are to use their resources to test new vendors. After the disappointing results for Aca Joe from the major men's show in February, the Company has decided to funnel it's resources into the continued development of the Cotton Stuff men's line. Orders that were taken for Aca Joe styles during and immediately after the February show were converted to corresponding styles of items in the Cotton Stuff men's line which proved to be successful since both the Cotton Stuff and Aca Joe men's lines were targeted to the same market. In February, the Company amended it's exclusive license agreement with Action Down Under, Ltd, the owners of the Aca Joe trademark, to allow for the sub-licensing of the boy's line to Happy Kids Ltd. a manufacturer and licensor of branded children's wear. The Company is guaranteed $12,500 per year as a minimum payment and will receive 2.5% of the revenues generated from the sale of boy's apparel under the Aca Joe label. In conjunction with this agreement, the Company was able eliminate the cost of development of the boy's line. The Company continues to develop both the Cotton Stuff men's and the Cotton Stuff women's line. The Company purchased the assets of Cotton Stuff in August 1997. The Cotton Stuff lines are sold through better catalogs such as Saks Folio, better specialty stores such as Fred Siegel, Neiman Marcus and Bloomingdales. On 10, March 1998, the Company announced the signing of a letter of intent to purchase CMG a privately owned, Los Angeles based designer and manufacturer of women's and men's apparel. CMG revenues were in excess of $65 million in 1997. CMG sells to department stores including Federated, Dayton Hudson, Dillard's and Proffit's under the company's brand name Chazzz. In addition to it's branded business, CMG produces private label apparel for J.C. Penney, Sears, Mervyn's and other major chains. CMG headquarters in Los Angeles and has offices in Hong Kong and Mexico. The companies plan to integrate their operations upon closing. The companies currently share warehouse and administrative facilities in Los Angeles. The Company is in the process of identifying an investment banker, drafting a definitive purchase agreement and obtaining financing to complete the acquisition of the assets of CMG. There is no certainty that the Company will be successful in closing this acquisition. QUARTER END MARCH 31, 1998 The results of the quarter ended March 31, 1998 reflect an increase in Cotton Stuff revenues over the comparable period ended March 1997 of approximately 14.1 %. Revenues from the Aca Joe line are the results of selling off the majority of out of season fabrics and finished goods to wholesalers. No significant retail sales were generated from the Aca Joe brand. The Company has eliminated the majority of the overhead which was associated with the development of the Aca Joe line. LIQUIDITY AND CAPITAL RESOURCES In September 1996, the Company realized net proceeds of approximately $5,267,000 from the initial public offering of common stock and warrants to purchase common stock. A portion of these proceeds was used to repay the approximately $550,000 of indebtedness then outstanding. The Company has experienced cumulative losses from operations of $(5,302,526) for the period from April 28, 1995 (inception) through March 31, 1998. In February the Company was notified that it was out of compliance of the net tangible asset requirement which became effective February 23, 1998 for maintaining it's listing on NASDAQ SmallCap Market. The CEO and Controller of the Company made an oral presentation before a NASDAQ Listing and Qualifications Panel in Washington DC on March 25, 1998 to discuss the violation and it's plan for compliance. On April 15, 1998 the Company was notified by counsel to the NASDAQ Listing and Qualifications Panel, that it had been granted an exemption to the requirement and would be allowed to continue it's listing. The exemption expires May 15, 1998 at which time the Company must meet the net tangible asset requirement. May 13, 1998 the Company contacted the NASDAQ Hearings Qualifications Panel and requested an extension to the exemption stating that it had not been able to meet the net tangible asset requirement. The hearings panel requested that the Company provide information necessary for the panel to evaluate its request. The Company has complied with the panel's request. As of this filing the Company has not received a decision regarding its request for an extension to the exemption from the NASDAQ Qualifications Hearings Panel. In the event the panel does not award an extension, the Company's securities could cease to be listed on the NASDAQ Small Cap Market. The securities would be listed on the OTC Bulletin Board. During the exemption the Company's NASDAQ Symbol has been ACAJC. The Company's warrant is listed as ACAWC. EX-27 2 EXHIBIT 27
5 6-MOS SEP-30-1997 JAN-01-1998 MAR-31-1998 38,851 0 388,914 0 793,780 1,286,691 124,218 0 1,437,451 600,229 0 0 0 5,452,718 (4,947,756) 1,437,451 1,349,148 1,349,148 668,925 680,223 0 0 0 (125,090) 0 (125,090) 0 0 0 (125,090) (.04) 0
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