U.S. 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 Exchange
Act of 1934
For the quarterly period ended May 31, 2001
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to ____________
COMMISSION FILE NUMBER 33-98682
AMERICAN COMMERCE SOLUTIONS, INC.
f/k/a JD AMERICAN WORKWEAR, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 05-0460102
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1400 Chamber Dr., Bartow, Florida 33830
(Address of Principal Executive Offices)
(863) 533-0326
(Issuer's Telephone Number, Including Area Code)
N/A
(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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
Common Stock, $.002 par value per share, 10,784,178 shares outstanding at
June 20, 2001.
Transitional Small Business Disclosure Format (check one) Yes [X] No [ ]
AMERICAN COMMERCE SOLUTIONS, INC.
INDEX TO FORM 10-QSB
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of May 31, 2001 3
Consolidated Statements of Operations for the three months
ended May 31, 2001 and May 31, 2000 5
Consolidated Statements of Cash Flows for the three months
ended May 31, 2001 and May 31, 2000 6
Notes to the Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submissions of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
May 31, 2001
------------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 25,928
Accounts Receivable, Net of Allowance $41,045 191,075
Inventory 687,739
Short Term Loans Receivable 296,525
Other Current Assets 20,328
-----------
Total Current Assets 1,221,595
Property and Equipment, Net 5,366,878
Intangible Assets, Net 67,496
Real Property for Resale 243,000
Equipment for Resale 481,000
-----------
TOTAL ASSETS $ 7,379,969
===========
The accompanying notes are an integral part of these
Consolidated Financial Statements.
3
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- CONTINUED
(Unaudited)
May 31, 2001
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long-Term Debt $ 167,690
Accounts Payable 735,143
Accrued Expenses 179,903
Accrued Payroll 489,248
Accrued Interest 145,291
Short-Term Loans 361,252
-----------
Total Current Liabilities 2,078,527
Long-Term Debt, Net of Current Portion 1,915,450
STOCKHOLDERS' EQUITY:
Preferred Stock, total authorized 1,000,000 shares:
Series A, cumulative and convertible, $.001 par value,
110 shares issued and outstanding, liquidating preference
$361,400 Series B, cumulative and convertible, authorized
3,950 shares, $.001 par value, 3,207 shares issued and
outstanding 3
Series C, cumulative and convertible, $.001 par value,
4,800 shares issued and outstanding, liquidating preference
$9,800,000 5
Common Stock, $.002 par value, authorized 30,000,000 shares,
10,718,432 issued and outstanding 21,437
Additional Paid-In Capital 12,442,973
Stock Receivable (242,000)
Accumulated Deficit (8,836,426)
-----------
Total Stockholders' Equity 3,385,992
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,379,969
===========
The accompanying notes are an integral part of these
Consolidated Financial Statements.
4
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
May 31, 2001 May 31, 2000
------------ ------------
Net Sales $ 579,841 $ 26,873
Cost of Goods Sold 258,390 7,025
------------ -----------
Gross Profit 321,451 19,848
Selling, General and Administrative Expenses:
Payroll and Payroll Taxes 412,015 105,783
Consulting Expenses 101,050 89,359
Depreciation and Amortization 80,367 12,681
Professional Fees 148,266 9,272
Other 143,433 29,735
------------ -----------
Total Selling, General and Administrative Expenses 885,131 246,830
------------ -----------
Loss from Operations (563,680) (226,982)
Interest Expense (42,052) (12,548)
Other Expenses (6,066)
------------ -----------
Net loss (611,798) (239,530)
Accretion of Discount and Dividends on Mandatory
Redeemable Preferred Stock (143,803)
------------ -----------
Net Loss to Common Shareholders (611,798) (383,333)
============ ===========
Net Loss per Common Shareholders, Basic and Diluted $ (0.06) $ (0.14)
============ ===========
Weighted Average Number of Common Shares Outstanding 10,897,217 2,815,910
============ ===========
The accompanying notes are an integral part of
these Consolidated Financial Statements.
5
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
May 31, 2001 May 31, 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(611,798) $(239,530)
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Depreciation and Amortization 80,367 12,681
Changes in Operating Assets and Liabilities:
Accounts Receivable 63,424 32,218
Inventory 29,970 6,604
Prepaid Expenses (69,046) 78,879
Other Assets (8,172) (25,622)
Accounts Payable 102,335 (11,559)
Accrued Expenses 177,849 62,841
--------- ---------
Net Cash Used in Operating Activities (228,966) (71,929)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES: -- --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances on Notes Payable and Long-Term Debt 27,435 38,645
Repayments on Notes Payable and Long-Term Debt (33,626) (6,239)
Exercise of Stock Options and Warrants 221,200 28,000
Proceeds Received on Common Stock Receivable 5,000
--------- ---------
Net Cash Provided by Financing Activities 220,009 60,406
--------- ---------
Net Decrease in Cash (8,957) (11,523)
Cash and Cash Equivalents - Beginning of Period 34,885 11,523
--------- ---------
Cash and Cash Equivalents - End of Period $ 25,928 $ 0
========= =========
The accompanying notes are an integral part of
these Consolidated Financial Statements.
6
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
For the Three Months Ended
May 31, 2001 May 31, 2000
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During the Period for Interest $ 138 $ --
======== =====
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Property Surrendered for Note Repayment $133,416 $ --
======== =====
Securities Issued for Debt Repayment $ 7,843 $ --
======== =====
The accompanying notes are an integral part of
these Consolidated Financial Statements.
7
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
May 31, 2001
NOTE 1: THE COMPANY
The Company was incorporated in Rhode Island in 1991 under the name Jaque
Dubois, Inc. and was re-incorporated in Delaware in 1994. In July 1995, the
Company's name was changed to JD American Workwear, Inc. In December 2000 the
shareholders voted at the annual shareholders' meeting to change the name of the
Company to American Commerce Solutions, Inc. The Company is primarily a holding
company whose wholly-owned subsidiaries are engaged in the machining and
fabrication of parts used in industry, parts sales and service for heavy
construction equipment, and paving and concrete installation.
NOTE 2: GOING CONCERN
The Company has incurred substantial operating losses since inception. The
Company recorded losses from operations of $563,680 and $226,982 for the three
month periods ended May 31, 2001 and 2000, respectively. Current liabilities
exceed current assets by $856,932 and $818,312 at May 31, 2001 and 2000.
Additionally, the Company has been unable to meet obligations to its creditors
as they have become due. The ability of the Company to continue as a going
concern is dependent upon its ability to reverse negative operating trends,
raise additional capital and obtain debt financing.
Management has revised its business strategy to include expansion into
other lines of business through acquisition of other companies in exchange for
the Company's stock. Management is currently negotiating new debt financing, the
proceeds from which would be used to settle outstanding debts at more favorable
terms, to finance operations and to complete additional business acquisitions.
However, there can be no assurance that the Company will be able to raise
capital, obtain debt financing or improve operating results sufficiently to
continue as a going concern. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
recorded assets or the amounts and classification of liabilities that might be
necessary if the Company is unable to continue as a going concern.
NOTE 3: BASIS OF PRESENTATION
The interim financial statements are prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. The interim financial
information included herein is unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) that are, in the
opinion of management, necessary to a fair presentation of the Company's
financial position, results of operations and cash flows for the interim
periods. The accompanying financial statements do not contain all of the
disclosures required by generally accepted accounting principles and should be
read in conjunction with the financial statements and related notes included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended February
28, 2001. The results of operations for the interim periods shown in this report
are not necessarily indicative of results to be expected for the fiscal year
ending February 28, 2002.
NOTE 4: SEGMENT AND RELATED INFORMATION
The Company's reportable segments are manufacturing construction management
and product marketing.
MANUFACTURING offers the production, maintenance and repair of certain
heavy industrial parts and equipment, and the repair and sale of parts and the
service for their installation. International Machine and Welding, Inc. began
operations on June 1, 2000.
8
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
May 31, 2001
NOTE 4: SEGMENT AND RELATED INFORMATION (continued)
CONSTRUCTION MANAGEMENT offers installation and repair of concrete
structures and commercial and residential paving. On a limited basis this sector
also sells commercial vehicles and heavy equipment and supplies. The operating
company in this segment is Rhode Island Truck and Equipment Corp.
PRODUCT MARKETING offers the design, manufacture, marketing and selling of
commercial and industrial work-wear products. The Board of Directors determined
to sell the assets and discontinue the operations of this subsidiary, effective
May 31, 2001. Management immediately entered into negotiations with the
President of the subsidiary to purchase the assets of the subsidiary.
The accounting policies of the reportable segments are the same as those
described in Note 1 to the Company's financial statements and related notes
contained in the Company's Annual Report on Form 10-KSB. The Company evaluates
the performance of its operating segments based upon income before taxes and
non-recurring charges such as beneficial conversion features and extraordinary
items.
Segment information for the three months ended May 31, 2001 and 2000 was as
follows:
For three months ended May 31, 2001:
CONSTRUCTION PRODUCT
MANUFACTURING MANAGEMENT MARKETING
------------- ---------- ---------
Revenue $ 494,980 $ 49,808 $ 35,053
Income (loss) from operations (26,369) (9,093) (46,180)
Depreciation and amortization 70,367 10,000
Total assets $ 6,540,806 $ 263,393 $ 517,843
For three months ended May 31, 2000:
CONSTRUCTION PRODUCT
MANUFACTURING MANAGEMENT MARKETING
------------- ---------- ---------
Revenue $ $ $ 26,873
Income (loss) from operations (214,301)
Depreciation and amortization 12,681
Total assets $ 1,336,807
Reconciliation of consolidated amounts:
FOR THREE MONTHS
ENDED MAY 31,
----------------------
2001 2000
---- ----
Revenues
Total revenues reportable segments $ 579,841 $ 26,873
Other revenues
Total revenues from operations $ 579,841 $ 26,873
9
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
May 31, 2001
NOTE 4: SEGMENT AND RELATED INFORMATION (continued)
Income (loss) from continuing operations
Segments $ (81,642) $(226,982)
Unallocated amounts (482,038) (143,803)
Interest expense (42,052) (12,548)
Other expense (6,066)
Net loss per common shareholder $(611,798) $(383,333)
Reconciliation of consolidated amounts:
FOR THREE MONTHS
ENDED MAY 31,
------------------
2001 2000
---- ----
Assets
Total assets for reportable segments $7,322,042 $1,336,807
Other assets 57,927
Total assets $7,379,969 $1,336,807
NOTE 5: SUBSEQUENT EVENT
JD AMERICAN WORKWEAR, INC. - On May 18, 2001, the Board of Directors
determined to sell the assets and discontinue the operations of this subsidiary,
effective June 1, 2001. Management immediately entered into negotiations with
the President of the subsidiary to purchase the assets of the subsidiary. As of
the date of this filing, the negotiations have not been finalized, but are
expected to be before the end of July 2001.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
This report contains 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. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth in this report, the Company's Annual Report on Form 10-KSB and other
reports and documents that the Company files with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
Since its inception, the Company has been involved in the design and
development of its products, the development of its relationships with its
suppliers and manufacturing contractors and the marketing of its products
through various distribution channels. First commercial shipments of JD Safety
Work Jeans were made in September 1992. First commercial shipments of an early
version of JD Safety Uniform Pants were made during 1994. Following the
Company's initial public offering in January 1995, the Company significantly
increased its expenditures for inventory, salaries, advertising and marketing
expenditures and other costs to increase its level of production. In March 1995,
relatively small quantities of a later version of JD Safety Uniform Pants were
sold, and this version became the working prototype for the JD Safety Uniform
Pants currently distributed by the Company.
The acquisition of Patina Corp. and its subsidiary International Machine
and Welding, Inc. provided a full service welding and machine shop with
expertise in metal fabrication, various types of welding, machining and boring
operations. The subsidiary is particularly strong in the re-manufacturing of
large, complex shaped heavy components, pumps, valves, bearings, shafts etc. The
company's boring mill is one of the largest in the Southeast allowing the
company to machine items up to 20 feet in diameter and 55 feet in length.
Other operations housed at International Machine and Welding include an
independent full service repair facility capable of repairing most heavy
construction equipment, including rebuilding engines, transmissions, torque
converters, undercarriage and tracks for crawler tractors. The Company has a
fleet of field service trucks capable of doing most repairs in the field.
Coupled with these operations is a direct to the consumer parts sales operation
for heavy construction equipment.
Rhode Island Truck and Equipment Corp. has provided commercial truck, heavy
equipment and supply sales in Rhode Island. In January 2000, the operations were
expanded to include paving and concrete work that had been done individually by
family members associated with the Company. The current expansion, in the
Northeast of building trades, road construction and repair, and a booming
construction economy that allows individuals to make repairs or improvements to
their properties made this expansion feasible.
11
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 31, 2001
AND 2000.
Net sales for the three months ended May 31, 2001 increased by 2058.0% to
$579,841 from $26,873 for the three months ended May 31, 2000. The increase is
directly attributable to the addition of the manufacturing and construction
segments' operating revenues beginning June 1, 2000. Cost of goods sold for the
three months ended May 31, 2001 was $258,390 compared to $7,025 for the three
months ended May 31, 2000. Gross margin for the three months ended May 31, 2001
was $321,451 compared to $19,848 for the three months ended May 31, 2000. The
gross profit margin percentage decreased to 55.4% for the three months ending
May 31, 2001 from a 73.9% gross profit margin percentage for the three months
ended May 31, 2000. The decrease is due to the lower gross profit margins of the
manufacturing and construction segments.
Operating expenses increased to $885,131 for the three months ended May 31,
2001 from $246,830 for the three months ended May 31, 2000 as a result of the
addition of the manufacturing and construction segments.
The net loss for the three months ended May 31, 2001 was $611,798 ($.06 per
common share) compared to a net loss of $383,333 ($.14 per common share) for the
three months ended May 31, 2000. The increase is directly attributable to a low
sales activity in the product marketing segment and an increase in
administrative costs for the three months ended May 31, 2001 as compared to the
three months ended May 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $228,966 for the three months
ended May 31, 2001 compared to $71,929 for the three months ended May 31, 2000.
Accounts receivable increased $16,609 from May 31, 2000 to May 31, 2001 as a
result of increases in sales volume due to the addition of the manufacturing and
construction segments. Inventory also increased with the addition of the
manufacturing and construction segments during the first three months of fiscal
2001.
Cash flow from operations and short-term loans provided the working capital
needs and principal payments on long-term debt through the three months ended
May 31, 2001. However, the Company requires additional financing to provide for
working capital needs and principal payments on long-term debt during the year
ended February 28, 2002 and to meet its business strategy of achieving
significant expansion in revenue for all divisions and to expand through
strategic acquisitions and alliances. The Company has been actively seeking
additional debt and/or equity financing; however, there can be no assurance that
financing will be available to the Company on acceptable terms, if at all.
Through May 31, 2001, the Company has experienced substantial losses, and
at May 31, 2001 had an accumulated deficit of approximately $8,836,426. The
Company has not been able to pay all of its obligations as they have become due,
and expects to incur much smaller additional losses before it achieves
profitable operations. The receipt of funding from any current commitments will
allow the Company to continue its restructuring plan.
12
RESULTS OF OPERATIONS - MANUFACTURING
Manufacturing revenues were $256,256 from machining operations, $171,027
from the parts sales operation, and $67,697 from the heavy equipment service
operations for the three months ended May 31, 2001. Cost of goods sold were
$215,818 from the division for the three months ended May 31, 2001. General and
administrative expenses were $279,162 for the three months ended May 31, 2001.
There are no comparable amounts in fiscal year 2000, as the operation did not
exist.
RESULTS OF OPERATIONS - CONSTRUCTION MANAGEMENT
Construction management revenues were $49,808 for the three months ended
May 31, 2001. During fiscal year 2000, the division changed its focus from
commercial vehicle sales to providing paving and concrete services that produced
revenues of $44,190 during this period. Cost of goods sold were $28,815 for the
three months ended May 31, 2001. General and administrative expenses were
$20,993 for the three months ended May 31, 2001. There are no comparable amounts
in fiscal year 2000, as the segment was not acquired until June 2000.
RESULTS OF OPERATIONS - PRODUCT MARKETING
Product marketing revenue increased by 30.4%, or $8,180 to $35,053 for the
three months ended May 31, 2001 from $26,873 due to the change in its direction
from product sales to product licensing. Cost of goods sold increased by 95.8%,
or $6,732 to $13,757 for the three months ended May 31, 2001 due to the
increased sales of merchandise. General and administrative expenses declined by
72.7%, or $179,354 to $67,476 for the three months ended May 31, 2001. This
decrease is directly related to the reduction of salaries and benefits, travel,
consulting, freight and delivery, and miscellaneous expenses that comprise
$134,262 of the reduction in the three months ended May 31, 2001 when compared
to the three month period ending May 31, 2000.
13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
N/A
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
ITEM 5. OTHER INFORMATION
N/A
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
N/A
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN COMMERCE SOLUTIONS, INC.
By: /s/ Steven D. Smith
-------------------------------------------
Steven D. Smith, President
(Principal Executive Officer)
/s/ Frank D. Puissegur
-------------------------------------------
Frank D. Puissegur, Chief Financial Officer
Date: July 20, 2001 (Principal Accounting Officer)
15