-----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, L37hRT6A1Huevi6b8LmZFpl929aGj8cj7sec9gHIRIRKGQFf62OPt/eJQx1SR9Jl UX1MwCjvw3KLmDNTiok0CA== 0001047469-97-006395.txt : 19971202 0001047469-97-006395.hdr.sgml : 19971202 ACCESSION NUMBER: 0001047469-97-006395 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971201 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: SEC FILE NUMBER: 000-18064 FILM NUMBER: 97730555 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 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 SEPTEMBER 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 BLVD., 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 November 11, 1997: 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 9 Item 6: Exhibits and Reports on Form 8-K 10 Signatures 10 2 PART I. FINANCIAL INFORMATION YES Clothing Co. BALANCE SHEETS September 30 March 31 1997 1997 (unaudited) ASSETS Current Assets: Cash $ 4,000 $ 80,000 Accounts receivable, non-factored-net 79,000 1,000 Other receivables and deposits 149,000 131,000 Due to Factor 49,000 Inventories 644,000 Prepaid expenses 26,000 34,000 ------------- ------------- Total current assets 258,000 $ 939,000 Equipment, net 331,000 447,000 Other Assets 69,000 73,000 ------------- ------------- TOTAL ASSETS $ 658,000 $ 1,459,000 ------------- ------------- ------------- ------------- LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities: Accounts payable $ 1,124,000 $ 954,000 Accrued expenses and other current liabilities 365,000 345,000 Due to factor 359,000 Income Taxes payable 971,000 Advances from affiliate 65,000 Note payable 1,189,000 1,175,000 Contract payables 49,000 84,000 ------------- ------------- Total current liabilities 4,057,000 2,623,000 ------------- ------------- Long-term liabilities: Contract payables 22,000 26,000 ------------- ------------- Total long-term liabilities 22,000 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; 7,036,492 issued and outstanding 11,308,000 11,308,000 Retained deficit (14,729,000) (12,498,000) ------------- ------------- Total shareholder's equity (3,421,000) (1,190,000) ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 658,000 $ 1,459,000 ------------- ------------- ------------- ------------- See Notes to Financial Statements 3 YES Clothing Co. STATEMENT OF OPERATIONS (Unaudited)
SIX MONTHS ENDED THREE MONTHS ENDED September 30 September 30 ---------------------------- ---------------------------- 1997 1996 1997 1996 ------------- ------------- ------------- ------------- Net Sales $ 1,667,000 $ 1,611,000 $ 268,000 $ 581,000 Cost of Sales 1,921,000 1,001,000 130,000 520,000 ------------- ------------- ------------- ------------- Gross Profit (254,000) 610,000 138,000 61,000 Operating expenses: Selling, general & administrative 1,023,000 1,597,000 311,000 927,000 ------------- ------------- ------------- ------------- Loss from operations (1,277,000) (987,000) (173,000) (866,000) Gain on Sale of Assets 77,000 54,000 78,000 0 Interest income (expense) -- net (60,000) (102,000) (15,000) (28,000) ------------- ------------- ------------- ------------- Loss before income tax (1,260,000) (1,035,000) (110,000) (894,000) Provision for income taxes 971,000 0 971,000 0 ------------- ------------- ------------- ------------- Net loss (2,231,000) (1,035,000) (1,081,000) (894,000) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Loss per share $ (0.32) $ (0.15) $ (0.15) $ (0.13) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Average number of shares outstanding 7,036,000 7,036,000 7,036,000 7,036,000 ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
See notes to financial statements. 4 YES Clothing Co. STATEMENTS OF CASH FLOWS Six Months Ended September 30, 1997 and 1996 (Unaudited) Increase (Decrease) in Cash 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,231,000) $ (1,035,000) Reconciliation of net loss to net cash flows from operating activities: Depreciation and amortization 115,000 115,000 Increase (decrease) in credits due customers and allowance for doubtful accounts (254,000) (109,000) Increase (decrease) in cash due to changes in assets and liabilities: Due from factor 728,000 498,000 Accounts receivable, nonfactored (78,000) 320,000 Other receivables and deposits (18,000) 78,000 Inventories 644,000 (811,000) Prepaid expenses 8,000 (158,000) Other assets 4, 000 (9,000) Trademarks 0 0 Accounts payable 170,000 (545,000) Accrued expenses 20,000 51,000 ------------- ------------- Net cash used in operating activities (892,000) (779,000) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment 0 (247,000) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on contracts payable (39,000) (24,000) Borrowing (repayment) from(to) related party (65,000) (119,000) IRS refund 971,000 0 Borrowing from bank 14,000 1,140,000 Contributions of capital 0 2,735,000 Advance from factor - net (65,000) (3,346,000) ------------- ------------- Net cash provided (used) by financing activities 816,000 434,000 ------------- ------------- NET INCREASE (DECREASE) IN CASH (76,000) (98,000) CASH AND CASH EQUIVALENTS, Beginning of period 80,000 103,000 ------------- ------------- CASH AND CASH EQUIVALENTS, End of period $ 4,000 $ 5,000 ------------- ------------- ------------- ------------- SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period: For interest $ 60,000 $ 102,000 ------------- ------------- ------------- ------------- 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, they contain all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position at September 30, 1997, and the results of operations and changes in cash flows for the six months ended September 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 six months ended September 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 TO/FROM FACTOR The amount due to/from factor is net of estimated customer returns, allowances and discounts as follows: September 30, 1997 March 31, 1997 Unmatured receivables $ 82,000 $ 810,000 Advances (382,000) (448,000) Open credits (59,000) (313,000) ------------- ------------- $ (359,000) $ 49,000 ------------- ------------- ------------- ------------- NOTE 3 ---- INVENTORIES Inventories consisted of the following: September 30, 1997 March 31, 1997 Raw materials $ 000 $ 176,000 Work-in-process 000 277,000 Finished goods 000 191,000 ------------- ------------- $ 000 $ 644,000 ------------- ------------- ------------- ------------- NOTE 4 ---- INTEREST INCOME (EXPENSE) - NET: Net interest income consisted of the following:
Income Expense Net ------------- ------------- ------------- Six months ended September 30, 1997 $ 0 $ 60,000 $ (60,000) Six months ended September 30, 1996 $ 0 $ 102,000 $ (102,000) Three months ended September 30, 1997 $ 0 $ 15,000 $ (15,000) Three months ended September 30, 1996 $ 0 $ 28,000 $ (28,000)
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. 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 RECENT DEVELOPMENTS. In July 1997, due to a lack of trade credit and working capital, the Company temporarily suspended it's operations pending receipt of additional capital or third party credit (see Capital Resources and Liquidity). The following tables 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 ---------------------------------------------------------- Six Months Ended Three Months Ended September 30 September 30 1997 1996 1997 1996 ------------- ------------- ------------- ------------- Net Sales 100.0 100.0 100.0 100.0 Cost of Sales 115.2 62.1 48.5 89.5 ------------- ------------- ------------- ------------- Gross profit from sales (15.2) 37.9 51.5 10.5 Commission income 0 0 - - ------------- ------------- ------------- ------------- Gross operating income (15.2) 37.9 51.5 10.5 Operating expenses 61.4 99.1 116.0 159.5 ------------- ------------- ------------- ------------- Loss from operations (76.6) (61.2) (64.5) (149.0) Gain on Sale of assets 4.6 3.3 29.0 - Trademark acquisition - - - - Interest expense -- net (3.5) (6.3) (5.6) (4.8) ------------- ------------- ------------- ------------- Loss before income taxes (75.5) (64.2) (41.1) (153.8) Tax provision 58.2 - 362.3 - ------------- ------------- ------------- ------------- Net loss (133.7) (64.2) (403.4) (153.8) ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
SIX MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30, 1996 Net sales for the six months ended September 30, 1997 were $1,667,000 as compared to $1,611,000 for the same period in 1996. This represented an increase of 3.4% in net sales for the period. The increase was mainly due to a reduction in the Company's reserve for future chargebacks. Gross profit as a percentage of net sales decreased to (15.0)% for the six months ended September 30, 1997 from 37.9% for the six months ended September 30, 1996. The decrease was due to the suspension of the Company's operations and the sale of inventory at below cost. Operating expenses consisting of selling, general and administrative expenses decreased by $574,000 or 35.9% to $1,023,000 for the six months ended September 30, 1997 from $1,597,000 in 7 the same period in 1996. The decrease in S, G & A was primarily due to reductions in payroll, insurance, depreciation, legal and professional expenses and sales-related expenses. Interest expense decreased from $102,000 for the six months ended September 30, 1996 to $60,000 for the comparable period in 1996 due to a reduction in borrowings from the factor (SEE LIQUIDITY AND CAPITAL RESOURCES). THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996 Net sales for the three months ended September 30, 1997 were $268,000 as compared to $581,000 for the same period in 1996. This represented a decrease of $313,000 or 53.8% in net sales for the period primarily due to the reasons stated in the discussion of the six-month period. Gross profit as a percentage of net sales increased to 51.5% for the three months ended September 30, 1997 from 10.5% for the three months ended September 30, 1996. The increase was primarily due to the reasons stated in the discussion of the six-month period. Operating expenses comprised of selling, general and administrative expenses ("S, G & A") decreased by $616,000 to $311,000 for the three months ended September 30, 1997 from $927,000 in the same period in 1996 principally due to the reasons stated above in the discussion of the six-month period. Interest expenses decreased by $13,000 from $28,000 to $15,000 for the three-month period ended September 30, 1997 due to decreased working capital requirements and borrowing from the Company's factor. (SEE LIQUIDITY AND CAPITAL RESOURCES). CAPITAL RESOURCES AND LIQUIDITY On June 4, 1996, control of the Company changed when approximately 50% of the Company's outstanding stock was acquired by Guy Anthome. The Company entered into a new factoring agreement with Republic Factors and a letter of credit facility with Republic National Bank of New York on May 15, 1995 (the financing bank) effective through March 1998. Both the old and new agreements are non-recourse (i.e., the factor purchases the Company's accounts receivable that it has preapproved, without recourse, except in cases where there are merchandise disputes in the normal course of business). Under the new factoring agreement, the Company sells substantially all of its trade accounts receivable, without recourse, and may request advances up to 80% on the net sales factored at any time before their maturity date. The factor is responsible for the accounting and collection of all accounts receivable sold to it by the Company and receives a commission of 0.9% of purchased net receivables. The agreements are collateralized by accounts receivable and assets of the Company. The Company or the factor may terminate the credit agreement on the anniversary date of the agreement with at least 60 days prior written notice. As of September 30, 1997, the Company had a net working capital deficit of $3,799,000, as compared to a deficit of $1,237,000 as of September 30, 1996. The Company's current ratio as of September 30, 1997 was 0.06, as compared to 0.56 as of September 30, 1996. The decreases in working capital and current ratio are primarily due to continued operating losses. 8 Inventories at September 30, 1997 were nil as compared to $644,000 at September 30, 1996, a decrease of $644,000. The decrease was due to the suspension of the Company's operations. In June 1996, the Company entered into an agreement with Imperial Bank which provided the Company with a $1,200,000 credit facility at an interest rate of 9.75% secured by a letter of credit provided by an unaffiliated third party. This credit facility was paid in June 1997 and extinguished following the negotiation of the referenced letter of credit. The Company and the unaffiliated third party are currently negotiating the terms of a replacement obligation. The Company filed for and received, on November 20, 1996, a federal income tax refund of $971,000. The Company was recently notified by the Internal Revenue Service that the Company's net operating loss carryback claim for fiscal 1996 has been denied. The Company will appeal the decision, and has, pending the outcome of the appeal, fully reserved the refund amount. In July 1997, the Company exhausted its available working capital, credit lines with its Factor and trade credit. The Company temporarily suspended its operations pending receipt of an infusion of equity capital or third party credit. The Company continues it's efforts to secure financing. The Company has suspended its operations, continued to cut its payroll and reduce its operating costs. The Company anticipates that it will not be profitable for the fiscal year ending March 31, 1998. Part II. OTHER INFORMATION Item 4 ---- Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders of the Company was held on September, 1996. (b) Not applicable (c) The following items were voted upon at the Annual Meeting of Shareholders (i) Elections of Directors AUTHORITY GIVEN WITHHELD Guy Anthome 3,524,000 Nil Jeffrey Busse 3,524,000 Nil Kristin Altamirano 3,524,000 Nil (ii) Ratification of Selection of Independent Auditors. 3,524,000 votes cast FOR Grobstein, Horwath & Co. as Independent Auditors Nil votes cast AGAINST Grobstein, Horwath & Co. as Independent Auditors Nil votes cast to ABSTAIN. 9 Item 6 ---- Exhibits and Reports on Form 8-K: None 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/ Jeffrey Busse -------------------------------- JEFFREY P. BUSSE Chief Financial Officer and Secretary Dated: November 24, 1997 10 EX-27 2 EXHIBIT 27
5 0000856979 YES CLOTHING CO. 1,000 6-MOS MAR-31-1998 APR-01-1997 SEP-30-1997 4 0 0 0 0 258 2,544 2,213 658 4,057 0 0 0 11,308 (14,729) (3,421) 1,667 1,667 1,921 1,921 0 0 60 (1,260) 971 0 0 0 0 (2,231) (0.32) (0.32)
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