-----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, WvjIZVgPSiqW6RFFsKed+f6BbBiCdTvq7GxFPx6xs1lBd2NPoKhJz/EnLB+x0fi2 SdZN8Tz0UB6BaZ4Su7Ze/A== 0000912057-97-028094.txt : 19970815 0000912057-97-028094.hdr.sgml : 19970815 ACCESSION NUMBER: 0000912057-97-028094 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: YES CLOTHING CO CENTRAL INDEX KEY: 0000856979 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 953768671 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18064 FILM NUMBER: 97663837 BUSINESS ADDRESS: STREET 1: 1380 WEST WASHINGTON BLVD CITY: LOS ANGELES STATE: CA ZIP: 90007 BUSINESS PHONE: 2137657800 MAIL ADDRESS: STREET 1: 1380 WEST WAHINGTON BLVD CITY: LOS ANGELES STATE: CA ZIP: 90007 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________________ TO _________________________ Commission File Number 0 - 18064 YES CLOTHING CO. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 95-3768671 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 1380 WEST WASHINGTON BOULEVARD, LOS ANGELES, CALIFORNIA 90007 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE) Registrant's telephone number, including area code: (213) 765-7800 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 August 11, 1996: 7,036,492 YES CLOTHING CO. INDEX PAGE NO. PART I. FINANCIAL INFORMATION Balance Sheets 3 Statements of Operations 4 Statements of Cash Flows 5 Notes to Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 4: Submission of Matters to a Vote of Security Holders 8 Item 6: Exhibits and Reports on Form 8-K 8 Signatures 9 2 PART I. FINANCIAL INFORMATION YES CLOTHING CO. BALANCE SHEETS
June 30 March 31 1997 1997 (unaudited) ASSETS Current Assets: Cash $7,000 $80,000 Due from factor -- 49,000 Accounts receivable, non-factored-net 73,000 1,000 Due from officers 4,000 4,000 Other receivables and deposits 8,000 7,000 Inventories 122,000 644,000 Prepaid expenses 31,000 34,000 ------------ ------------ Total current assets 245,000 819,000 Property and equipment, at cost, net of accumulated depreciation and amortization 418,000 447,000 Due from officers, net of current portion 126,000 120,000 Other assets 74,000 73,000 ------------ ------------ TOTAL ASSETS $863,000 $1,459,000 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) Current Liabilities: Accounts payable $1,112,000 $954,000 Accrued expenses and other current liabilities 369,000 345,000 Due to factor 283,000 -- Note payable 1,189,000 1,175,000 Due to related party -- 65,000 Contracts payable 62,000 84,000 ------------ ------------ Total current liabilities 3,015,000 2,623,000 ------------ ------------ Long-term liabilities: Contracts payable, net of current portion 27,000 26,000 ------------ ------------ Total long-term liabilities 27,000 26,000 ------------ ------------ Shareholder's Equity: Preferred stock, no par; 2,000,000 shares authorized; no shares issued and outstanding -- -- Common stock, no par; 20,000,000 shares authorized; 7,036,000 issued and outstanding 11,308,000 11,308,000 Accumulated deficit (13,487,000) (12,498,000) ------------ ------------ Total shareholder's equity/(deficit) (2,179,000) (1,190,000) ------------ ------------ TOTAL LIABILITIES/SHAREHOLDER'S EQUITY/(DEFICIT) $863,000 $1,459,000 ------------ ------------ ------------ ------------
See Notes to Financial Statements 3 YES CLOTHING CO. STATEMENT OF OPERATIONS (Unaudited)
THREE MONTHS ENDED June 30 ----------------------- 1997 1996 ---- ---- Net Sales $1,401,000 $1,030,000 Cost of Sales 1,636,000 481,000 ---------- ---------- Gross Profit / (Loss) (235,000) 549,000 Operating expenses: Selling, general & administrative 709,000 669,000 ---------- ---------- Loss from operations (944,000) (120,000) Gain on sale of assets -- 54,000 Interest income(expense) -- net (45,000) (75,000) ---------- ---------- Loss before income tax (989,000) (141,000) Provision for income taxes -- -- Net loss (989,000) (141,000) ---------- ---------- ---------- ---------- Loss per share $(0.14) $(0.02) ---------- ---------- ---------- ---------- Average number of shares outstanding 7,036,000 7,036,000 ---------- ---------- ---------- ----------
See Notes to Financial Statements 4 YES CLOTHING CO. STATEMENTS OF CASH FLOWS Three Months Ended June 30, 1997 and 1996 (Unaudited) Increase/(Decrease) in Cash
1997 1996 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(989,000) $(141,000) Reconciliation of net loss to net cash flows from operating activities: Depreciation and amortization 28,000 (52,000) Increase (decrease) in credits due customers and allowance for doubtful accounts 15,000 (36,000) Increase (decrease) in cash due to changes in assets and liabilities: Due from factor 117,000 538,000 Accounts receivable, nonfactored (43,000) (247,000) Other receivables and deposits (7,000) (65,000) Inventories 522,000 530,000 Prepaid expenses 3,000 (11,000) Other assets 1,000 (5,000) Accounts payable 158,000 (741,000) Accrued expenses 24,000 (12,000) --------- --------- Net cash used in operating activities (171,000) (242,000) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment -- 320,000 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on contracts payable (21,000) (15,000) Borrowing (repayment) from/to related party (65,000) (119,000) Advances from factor -- net 170,000 (3,240,000) Borrowing from bank 14,000 475,000 Contributions of capital -- 2,735,000 --------- --------- Net cash provided (used) by financing activities 98,000 (164,000) --------- --------- NET INCREASE (DECREASE) IN CASH 73,000 (86,000) CASH AND CASH EQUIVALENTS, Beginning of period 80,000 103,000 --------- --------- CASH AND CASH EQUIVALENTS, End of period $7,000 $17,000 --------- --------- --------- --------- SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period: For interest $45,000 $75,000 --------- ---------
See Notes to Financial Statements 5 YES CLOTHING CO. NOTES TO FINANCIAL STATEMENTS NOTE 1 -- BASIS OF PRESENTATION: The accompanying financial statements are unaudited but, in the opinion of management of the Company, contain all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position at June 30, 1997, and the results of operations and changes in cash flows for the three (3) months ended June 30, 1997 and 1996. Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997 as filed with the Securities and Exchange Commission. The results of operations for the three (3) months ended June 30, 1997 are not necessarily indicative of the results of operations to be expected for the fiscal year ending March 31, 1998. NOTE 2 -- DUE FROM/TO FACTOR The amount due to factor is net of estimated customer returns, allowances and discounts as follows: June 30, 1997 March 31, 1997 Unmatured receivables (with and without recourse) $693,000 $810,000 Advances (618,000) (448,000) Open credits (358,000) (313,000) ---------- -------- $ (283,000) $49,000 ---------- -------- ---------- -------- NOTE 3 -- INVENTORIES Inventories consisted of the following: June 30, 1997 March 31, 1997 Raw materials $50,000 $176,000 Work-in-process 24,000 277,000 Finished goods 48,000 191,000 ------ ------- $122,000 $644,000 -------- -------- -------- -------- NOTE 4 -- INTEREST INCOME (EXPENSE) - NET: Net interest income consisted of the following: Income Expense Net ------ ------- --- Three months ended June 30, 1997 $ 0 $(45,000) $(45,000) Three months ended June 30, 1996 $ 0 $(75,000) $(75,000) 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS YES Clothing Co. (the "Company") designs, contracts for the manufacture of and markets diversified lines of apparel for women in junior sizes, and for young men. The Company's garments are manufactured predominantly in the United States, and are sold to retail department stores and specialty chains and stores throughout North America. RESULTS OF OPERATIONS The Company terminated its license agreements with AUDIENCE and CS SPORTSWEAR, INC., on April 14, 1997, and July 31, 1997, respectively. The Company continued to sell existing AUDIENCE inventory through May 1997. The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in the Company's Statements of Operations. PERCENTAGE OF NET SALES ----------------------- Three Months Ended June 30 1997 1996 ---- ---- Net sales 100.0 100.0 Cost of sales 116.8 46.7 ----- ----- Gross profit/(loss) from sales (16.8) 53.3 Operating expenses 50.6 64.9 ----- ----- Loss from operations (67.4) (11.6) Gain on sale of asset 0 5.2 Interest expense -- net (3.2) (7.3) ----- ----- Loss before income taxes (70.6) (13.7) Tax provision 0 0 ----- ----- Net loss (70.6) (13.7) ----- ----- THREE (3) MONTHS ENDED JUNE 30, 1997, COMPARED TO THREE (3) MONTHS ENDED JUNE 30, 1996 NET SALES for the three (3) months ended June 30, 1997 were $1,401,000 as compared to $1,030,000 for the same period in 1996. This represents an increase of $371,000 or 36% in net sales for the period primarily due to the introduction of the AUDIENCE and CS SPORTSWEAR apparel lines. GROSS PROFIT AS A PERCENTAGE OF NET SALES decreased to (16.8)% for the three (3) months ended June 30, 1997 from 53.3% for the three months ended June 30, 1996. The decrease in gross profit as a percentage of gross sales was primarily due to higher development costs and lower than anticipated sales price per unit of the AUDIENCE and CS SPORTSWEAR apparel lines. OPERATING EXPENSES comprised of selling, general and administrative expenses ("S, G & A") increased by $40,000 to $709,000 for the three (3) months ended June 30, 1997, from $669,000 in the same period in 1996. The increase in S, G & A was primarily due to increases in payroll and sales-related expenses. 7 INTEREST EXPENSES decreased by $30,000, from $75,000 to $45,000, for the three (3) month period ended June 30, 1997 due a reduction in the average outstanding loan balance from the Company's factor. CAPITAL RESOURCES AND LIQUIDITY As of June 30, 1997, the Company had a net working capital deficit of $2,771,000, as compared to a deficit of $390,000 as of June 30, 1996. The Company's current ratio as of June 30, 1997 was 0.08, as compared to 0.77 as of June 30, 1996. The decreases in working capital and current ratio are primarily due to continued operating losses. Inventories at June 30, 1997 were $122,000 as compared to $868,000 at June 30, 1996, a decrease of $746,000. The decrease in inventory levels was primarily due to the Company's difficulty in securing trade credit. The Company's open-order backlog as of June 30, 1997 was approximately $400,000, compared to a nil open-order backlog as of June 30, 1996. In June 1996, the Company entered into an agreement with Imperial Bank which supplied the Company with a $1,200,000 credit facility secured by a standby letter of credit provided by an unaffiliated third party. The credit facility has now been paid off and extinguished following the negotiation of the referenced standby letter of credit. The Company and the unaffiliated third party are currently negotiating the terms of a replacement obligation. The Company has funded its business activities principally from factor advances, a federal income tax refund of $971,000 received by the Company on November 20, 1996, and the referenced credit facility from Imperial Bank. The Company believes that the financial sources available to it will not provide sufficient resources to finance the Company's currently anticipated working capital needs and capital expenditures. The Company requires additional borrowings and/or infusions of capital to avoid a negative impact on the Company's continued future operations. The Company has continued to cut its payroll and reduce its operating costs, and is continuing to actively seek additional sources of investment capital. Notwithstanding the foregoing, the Company anticipates that it may not be profitable for the fiscal year ending March 31, 1998. Moreover, absent additional capital or third party credit, the Company may need to consider such measures as temporarily suspending its business operations pending the receipt of additional funding. Part II. OTHER INFORMATION Item 4 -- Submission of Matters to a Vote of Security Holders: None Item 6 -- Exhibits and Reports on Form 8-K: None 8 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. YES CLOTHING CO. BY: /s/ Guy Anthome ---------------------------- GUY ANTHOME Chairman of the Board and Chief Executive Officer BY: /s/ Jeffery P. Busse ---------------------------- JEFFREY P. BUSSE Chief Financial Officer and Secretary Dated: August 11, 1997 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 7 0 0 0 122 245 2520 2102 863 3015 0 0 0 11,308 (13,487) (2,179) 1,401 1,401 1,636 1,636 0 0 45 (989) 0 (989) 0 0 0 (989) (0.14) (0.14)
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