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 November 30, 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, FL 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, 10,768,497 shares outstanding at
January 15, 2002.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
AMERICAN COMMERCE SOLUTIONS, INC.
INDEX TO FORM 10-QSB
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of November 30, 2001 3
Consolidated Statements of Operations for the Three Months
ended November 30, 2001 and November 30, 2000 5
Consolidated Statements of Operations for the Nine Months
ended November 30, 2001 and November 30, 2000 6
Consolidated Statements of Cash Flows for the Nine Months
ended November 30, 2001 and November 30, 2000 7
Notes to Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submissions of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN COMMERCE SOLUTIONS, INC.
BALANCE SHEET
(Unaudited)
November 30, 2001
-----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 10,697
Accounts receivable, net of allowance $35,114 208,033
Inventory 280,516
Real property for resale 243,150
Equipment for resale 476,000
Short term loans receivable 282,258
----------
Total current assets 1,500,654
Property and equipment, net 4,897,645
----------
TOTAL ASSETS $6,398,299
==========
The accompanying notes are an integral part of these
Consolidated Financial Statements.
3
AMERICAN COMMERCE SOLUTIONS, INC.
BALANCE SHEET -- CONTINUED
(Unaudited)
November 30, 2001
-----------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFI CIT)
Current liabilities:
Current portion of long-term debt $ 438,918
Accounts payable 570,386
Accrued expenses 837,656
Short-term loans 395,214
Shareholder loans 122,815
------------
Total current liabilities 2,364,989
Long-term debt, net of current portion 1,569,321
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, total authorized 1,000,000 shares:
Series A, cumulative and convertible, $.001 par value,
102 shares issued and outstanding, liquidating
preference $343,494 --
Series B, cumulative and convertible, authorized 3,950
shares, $.001 par value, 3,303 shares issued and
outstanding, liquidating preference $3,303,301 3
Series C, cumulative and convertible, $.001 par value,
4,800 shares issued and outstanding, liquidating
preference $4,800,000 5
Common stock, $.002 par value, authorized 30,000,000 shares,
10,768,497 issued and 9,798,432 outstanding 21,437
Additional paid-in capital 14,281,208
Stock receivable (242,000)
Treasury stock (577,499)
Accumulated deficit (11,019,165)
------------
Total Stockholders' equity (deficit) 2,463,989
------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 6,398,299
============
The accompanying notes are an integral part of these
Consolidated Financial Statements.
4
AMERICAN COMMERCE SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
----------------------------
November 30, November 30,
2001 2000
------------ ------------
Net sales 472,205 794,455
Cost of goods sold 289,891 383,411
------------ ------------
Gross profit 182,314 411,044
Selling, general and administrative expenses 343,031 520,062
------------ ------------
(160,717) (109,018)
Other income 1,978
Interest expense (42,890) (52,031)
------------ ------------
Net loss from continuing operations (201,629) (161,049)
Loss from discontinued operations (14,136)
Loss on disposal of discontinued operations (16,840)
Accretion of discount and dividends on
mandatory redeemable preferred shares (66,515)
Gain on extinguishment of mandatory
redeemable preferred stock 1,815,519
------------ ------------
Net gain (loss) to common stockholders $ (232,605) $ 1,587,955
============ ============
Net gain (loss) per common shareholders,
basic and diluted $ (.02) $ .54
============ ============
Weighted average number of common
shares outstanding 10,682,938 2,945,393
============ ============
The accompanying notes are an integral part of these
Consolidated Financial Statements.
5
AMERICAN COMMERCE SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine Months Ended
----------------------------
November 30, November 30,
2001 2002
------------ ------------
Net sales $ 1,523,899 $ 1,531,162
Cost of goods sold 895,534 671,118
------------ ------------
Gross profit 628,365 860,044
Selling, general and administrative expenses 1,437,614 1,333,434
------------ ------------
(809,249) (473,390)
Other income 17,323
Loss on disposal of assets 14,547
Interest expense (155,533) (120,719)
------------ ------------
(932,912) (594,109)
Less: Profit (loss) on purchased segment
prior to date of acquisition (3,038)
------------ ------------
Net loss from continuing operations (932,912) (591,071)
Loss from discontinued operations (59,350)
Loss on disposal of discontinued operations (16,840)
Accretion of discount and dividends on
mandatory redeemable preferred shares (310,090)
Gain on extinguishment of mandatory
redeemable preferred stock 1,815,519
------------ ------------
Net gain (loss) per common shareholder $ (1,009,102) $ 914,358
============ ============
Net gain (loss) per common share,
basic and diluted $ (.09) $ .31
============ ============
Weighted average number of common
shares outstanding 10,682,938 2,945,393
============ ============
The accompanying notes are an integral part of these
Consolidated Financial Statements.
6
AMERICAN COMMERCE SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
--------------------------
November 30, November 30,
2001 2000
----------- -----------
Cash flows from operating activities
Net loss $(1,009,102) $ (591,071)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 280,511 156,051
Securities issued for services 217,843 255,877
Gain on sale of assets (14,547)
Loss on disposal of subsidiaries 16,840
Changes in operating assets and liabilities:
Accounts receivable (31,753) (144,988)
Notes receivable, stockholder (55,152)
Inventory 3,403 (36,325)
Other assets (3,212) (76,652)
Accounts payable 161,150 116,536
Accrued liabilities 366,631 321,082
----------- -----------
Net cash used in operating activities (12,236) (54,642)
----------- -----------
Cash flows from investing activities
Cash surrendered in disposal of subsidiaries (61,259)
Collections from notes 16,753
Investment in notes (55,307)
Capital expenditures (10,033) --
----------- -----------
Net cash provided by investing activities (109,846) --
----------- -----------
Cash flows from financing activities
Proceeds from debt 159,015 65,603
Repayment of debt (76,121) (45,378)
Proceeds from stock receivable 15,000 28,000
----------- -----------
Net cash provided by financing activities 97,894 48,225
----------- -----------
Net increase decrease in cash (24,188) (6,417)
Cash and cash equivalents - beginning of period 34,885 11,523
----------- -----------
Cash and cash equivalents - end of period $ 10,697 $ 5,106
=========== ===========
The accompanying notes are an integral part of these
Consolidated Financial Statements.
7
AMERICAN COMMERCE SOLUTIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
For the Nine Months Ended
----------------------------
November 30, November 30,
2001 2000
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 34,111 $ --
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Property sold for mortgage payoff and receivable $165,000 $ --
======== ========
Securities issued for debt repayment $ 7,000 $ --
======== ========
Notes payable refinanced $221,229 $ --
======== ========
Treasury stock acquired in sale of operation $577,499 $ --
======== ========
Stock option issued in sale of operation $ 47,000 $ --
======== ========
Equipment purchased for notes payable $ 65,388 $ --
======== ========
The accompanying notes are an integral part of these
Consolidated Financial Statements.
8
AMERICAN COMMERCE SOLUTIONS, INC.
Notes to Financial Statements
(Unaudited)
November 30, 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 were engaged in the machining and
fabrication of parts used in industry, parts sales and service for heavy
construction equipment, and paving and concrete installation. The Company sold
its paving and concrete subsidiary on October 31, 2001.
NOTE 2: GOING CONCERN
The Company has incurred substantial operating losses since inception. The
Company recorded losses from operations of $932,912 and $591,071 for the nine
month periods ended November 30, 2001 and 2000, respectively. Current
liabilities exceed current assets by $864,335 at November 30, 2001.
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.
9
AMERICAN COMMERCE SOLUTIONS, INC.
Notes to Financial Statements
(Unaudited)
November 30, 2001
NOTE 4: SEGMENT AND RELATED INFORMATION (Continued)
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 Nine months ended November 30, 2001 and 2000
was as follows:
For Nine months ended November 30, 2001:
MANUFACTURING
-------------
Revenue $ 1,523,899
Operating gain (loss) (50,425)
Depreciation and amortization (256,185)
Total assets 6,185,486
For Nine months ended November 30, 2000:
MANUFACTURING
-------------
Revenue $ 1,126,538
Operating gain (loss) 278,676
Depreciation and amortization (88,426)
Total assets 6,089,001
Reconciliation of consolidated amounts:
FOR THE NINE MONTHS
ENDED NOVEMBER 30,
---------------------------
2001 2000
----------- -----------
Revenues
Total revenues reportable segments $ 1,523,899 $ 1,126,538
Other revenues
Total revenues from operations $ 1,523,899 $ 1,126,538
Profit (loss) from operations
Segments $ 178,279 $ 278,676
Depreciation and amortization (256,185) (88,426)
Unallocated amounts (775,663) 1,203,107
Interest expense (155,533) (120,719)
Net gain (loss) per common shareholder $(1,009,102) $ 914,358
10
AMERICAN COMMERCE SOLUTIONS, INC.
Notes to Financial Statements
(Unaudited)
November 30, 2001
NOTE 4: SEGMENT AND RELATED INFORMATION (Continued)
Reconciliation of consolidated amounts:
FOR THE NINE MONTHS
ENDED NOVEMBER 30,
------------------------
2001 2000
---------- ----------
Assets
Total assets for reportable segments $6,185,486 $6,089,001
Other assets 212,813
Total assets $6,398,299 $6,089,001
NOTE 5: GAIN ON EXTINGUISHMENT OF MANDATORY REDEEMABLE PREFERRED STOCK
On October 23, 2000 an agreement was completed with the holder of the
Series B 12% Mandatory Redeemable Preferred Stock in which the holder
relinquished all mandatory conversion rights. This amendment allows the Company
to classify all the value of the preferred stock as equity. The gain of
$1,815,519 recorded is a direct correlation of the carrying value subtracted
from the fair market value of the underlying shares at the date of the
transaction.
NOTE 6: CAPITALIZATION
The Company has 30,000,000 common shares and 1,000,000 preferred shares
authorized.
NOTE 7: DISCONTINUED OPERATIONS
On June 1, 2001, the Company discontinued the operations of JD American
Workwear, its product marketing segment and sold the net assets to the
subsidiary's founder and President, a related party, in exchange for 725,000
shares of the Company's common stock valued at $420, 967. The fair value of the
assets sold was $337,967. In addition, the Company issued stock options valued
at $47,000 and a note payable for $36,000 to the President of the subsidiary. In
connection with the transaction, the Company assumed the lease on the Rhode
Island facility and entered into a product license agreement. Revenues from the
subsidiary amounted to $35,884 and $132,111 for the nine months ended November
30, 2001 and 2000, respectively.
On October 31, 2001, the Company discontinued the operations of Rhode
Island Truck and Equipment and International Paving, its paving and concrete
installation subsidiaries. The net assets were sold to the subsidiary's founder
and President in exchange for 195,000 of the Company's common stock. The fair
value of the assets sold was $156,532 and the Company recorded a loss of $16,840
resulting from the write off of goodwill. Revenues from the discontinued
operations amounted to $461,192 and $272,513 for the nine months ended November
30, 2001 and 2000, respectively.
11
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
The Company completed the discontinuance of all Rhode Island operation effective
November 1, 2001 with the sale of Rhode Island Truck and Equipment Corp. to its
former owners. Although the manufacturing sector had a weakening during the
fiscal third quarter ended November 30, 2001 due to the soft economy the
significant negative cash flows of the past have now been disposed of.
Current operations consist of International Machine and Welding, Inc. an
independent full service repair facility capable of repairing most heavy
construction equipment, including rebuilding engines, transmissions, torque
converters, plus undercarriage and tracks for crawler tractors. A fleet of field
service trucks provides the capacity to do most repairs at the customer site.
Direct parts sales to the customer complete this portion of the operation. The
machine and welding operations contribute significant service capabilities
primarily to mining, marine and agricultural customers.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 30,
2001 AND 2000.
Net sales for the three months ended November 30, 2001 decreased 40% or
$322,250 to $472,205 from $794,455 or the three months ended November 30, 2000.
The decrease is directly attributable to the reduction in parts and service
sales and the discontinued operations of subsidiaries during 2001.
Correspondingly, cost of goods sold for the three months ended November 30, 2001
decreased $93,520 or 24% to $289,891 compared to $383,411 for the three months
ended November 30, 2000. Gross margin for the three months ended November 30,
2001 also decreased $228,830 to $182,314 (38.6%) from $411,044 (51.7%) for the
three months ended November 30, 2000. The decrease is due to the reduction in
parts and service sales and lower profit margins on certain customer jobs in the
machining operations and the effects of discontinued operations.
Operating expenses decreased $177,031 to $343,031 for the three months
ended November 30, 2001 down from $520,062 for the three months ended November
30, 2000 as a result of the reduction in salaries of the parent and cost
containments in employee benefits and wages for manufacturing operations and the
effects of discontinued operations.
The net loss from continuing operations for the three months ended November
30, 2001 was $201,629 compared to a loss of $161,049 for the three months ended
November 30, 2000. The increased loss is a result of decreased sales from the
manufacturing segment during the three months ended November 30, 2001. The loss
from operations discontinued during the three months ended November 30, 2001 was
$14,136.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED NOVEMBER 30,
2001 AND 2000.
Net sales for the nine months ended November 30, 2001 decreased $7,263 to
$1,523,899 from $1,531,162 for the nine months ended November 30, 2000. The
decrease is attributable to the discontinued operations. Cost of goods sold for
the nine months ended November 30, 2001 increased $188,416 (28%) from $671,118
to $895,534. Gross margin for the nine months ended November 30, 2001 was
$628,365 (41%) compared to $860,044 (56%) for the nine months ended November 30,
2000. The decrease in the gross profit margin is due to the lower margins of
machining jobs.
Operating expenses increased to $1,437,614 for the nine months ended
November 30, 2001 from $1,333,434 for the nine months ended November 30, 2000.
The increase is due to increased operating expenses of the manufacturing segment
for the nine months ended November 30, 2001 as compared to the period ended
November 30, 2000.
12
The loss from continuing operations for the nine months ended November 30,
2001 was $932,912 compared to a net loss form operations of $591,071 for the
nine months ended November 30, 2000, primarily a result of decreased
profitability of the machining operations. The loss from discontinued operations
was $59,350.
Liquidity and Capital Resources
Net cash used in operating activities was $12,236 for the nine months ended
November 30, 2001 compared to $54,642 for the nine months ended November 30,
2000. Accounts receivable increased $31,753 from February 28, 2001 to November
30, 2001.
Cash flow from operations and short-term loans provided the working capital
needs and principal payments on long-term debt through the nine months ended
November 30, 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 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 November 30, 2001, the Company has experienced substantial losses,
and at November 30, 2001 had an accumulated deficit of approximately
$11,019,165. 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.
RESULTS OF OPERATIONS - MANUFACTURING
Manufacturing revenues were $1,523,899 for the nine months ended November
30, 2001 compared to $1,126,538 for the six months ended November 30, 2000. The
segment began operations on June 1, 2000. The segment recognized a net loss of
$50,425 for the period ended November 30, 2001 compared to a net profit of
$278,676 for the period ended November 30, 2000. The loss results from lower
margins on machining jobs and higher operating expenses.
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
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/ Daniel L. Hefner
-------------------------------------------
Daniel L. Hefner, President
(Principal Executive Officer)
/s/ Frank D. Puissegur
-------------------------------------------
Frank D. Puissegur, Chief Financial Officer
Date: January 16, 2002 (Principal Accounting Officer)
14