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, 2002
[ ] Transition 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.
(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, 18,556,344 shares outstanding at June
10, 2002
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE) YES [X] NO [ ]
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of May 31, 2002 3
Consolidated Statements of Operations for the three months
ended May 31, 2002 and May 31, 2001 5
Consolidated Statements of Cash Flows for the three months
ended May 31, 2002 and May 31, 2001 6
Notes to the Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submissions of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
May 31, 2002
------------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 10,078
Accounts Receivable, Net of Allowance $8,732 184,289
Inventory 282,931
Other Receivables 244,878
Other Current Assets 8,810
-----------
Total Current Assets 730,986
Property and Equipment, Net of Depreciation $591,451 5,294,521
Real Property for Resale 170,000
Equipment for Resale 243,150
-----------
TOTAL ASSETS $ 6,438,657
===========
The accompanying notes are an integral part of these
Consolidated Financial Statements.
3
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET -- CONTINUED
(Unaudited)
May 31, 2002
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long-Term Debt $ 1,682,831
Accounts Payable 532,462
Accrued Expenses 152,435
Accrued Payroll Taxes 335,041
Accrued Interest 291,282
Due to Stockholders 83,674
------------
Total Current Liabilities 3,077,745
Long-Term Debt, Net of Current Portion 973,368
STOCKHOLDERS' EQUITY:
Preferred Stock, total authorized 1,000,000 shares:
Series A, cumulative and convertible, authorized
600 shares, $.001 par value, 102 shares issued and
outstanding, liquidating preference $ 376,125
Series B, cumulative and convertible, authorized
3,950 shares, $.001 par value, 3,609 shares issued and
outstanding, liquidating preference $3,609,595 3
Common Stock, $.002 par value, authorized 30,000,000 shares,
18,556,344 issued and 17,974,344 outstanding 37,043
Additional Paid-In Capital 14,676,703
Stock Receivable (20,000)
Treasury Stock (265,526)
Accumulated Deficit (12,040,679)
------------
Total Stockholders' Equity 2,387,544
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,438,657
============
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, 2002 *May 31, 2001
------------ ------------
Net Sales $ 516,056 $ 494,980
Cost of Goods Sold 301,485 266,702
------------ ------------
Gross Profit 214,571 228,278
Selling, General and Administrative Expenses:
Payroll and Payroll Taxes 316,258 215,265
Consulting Expenses 96,800 100,250
Depreciation 19,601 19,483
Professional Fees 201,571
Other 182,933 124,517
------------ ------------
Total Selling, General and Administrative
Expenses 615,592 661,086
------------ ------------
Loss from Operations (401,021) (432,808)
Other income 8,827
Interest Expense (77,477) (52,706)
------------ ------------
Loss from Continuing Operations (469,671) (485,514)
Loss from Discontinued Operations (126,284)
------------ ------------
Net Loss to Common Shareholders (469,671) (611,798)
============ ============
Loss Per Share:
Basic + Fully Diluted Loss Per
Common Share from Continuing Operations $ (0.03) $ (0.04)
Basic + Fully Diluted Loss Per
Common Share from Discontinued Operations $ (0.02)
------------ ------------
Net Loss per Common Shareholders,
Basic and Diluted $ (0.03) $ (0.06)
============ ============
Weighted Average Number of
Common Shares Outstanding 17,678,844 10,897,217
============ ============
*As Restated
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, 2002 May 31, 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(469,671) $(611,798)
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Depreciation and Amortization 70,719 80,367
Stock Issued for Services 273,900
Gain On sale of Assets 6,105
Changes in Operating Assets and Liabilities:
Accounts Receivable (14,969) 63,424
Inventory (14,901) 29,970
Prepaid Expenses 2,544 (69,046)
Other Assets (8,172)
Accounts Payable (40,494) 102,335
Accrued Expenses 136,196 177,849
--------- ---------
Total Adjustments 412,995 382,832
Net Cash Used in Operating Activities (56,676) (228,966)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment Purchased (5,979)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances on Notes Payable and Long-Term Debt 149,007 27,435
Repayments on Notes Payable and Long-Term Debt (90,482) (33,626)
Exercise of Stock Options and Warrants 221,200
Proceeds Received on Common Stock Receivable 5,000
--------- ---------
Net Cash Provided by Financing Activities 58,525 220,009
--------- ---------
Net Decrease in Cash (4,130) (8,957)
Cash and Cash Equivalents - Beginning of Period 14,208 34,885
--------- ---------
Cash and Cash Equivalents - End of Period $ 10,078 $ 25,928
========= =========
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, 2002 May 31, 2001
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During the Period for Interest $ 19,298 $ 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, 2002
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 2001 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 subsidiary is engaged in the machining and
fabrication of parts used in industry and parts sales and service for heavy
construction equipment.
The financial statements for the period ended May 31, 2001 have been
restated to reflect the discontinued operations that had existed during this
period to aid in the comparative analysis of current operations.
NOTE 2: GOING CONCERN
The Company has incurred substantial operating losses since inception. The
Company recorded losses from operations of $469,671 and $485,514 for the
three-month periods ended May 31, 2002 and 2001, as restated, respectively.
Current liabilities exceed current assets by $2,346,759 at May 31, 2002.
Additionally, the Company has been unable to meet obligations to its creditors
as they have become due. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
Management has revised its business strategy to include expansion into
other lines of business through the 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. Subsequent to May 31, 2002, the Company has an agreement with a
lender that has agreed to a lump sum offer in the amount of $551,283 in
settlement of approximately $1.3 million, subject to SBA approval.
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.
8
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
May 31, 2002
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, 2002. 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, 2003.
Prior year financial information was restated to conform to the current
year presentation by removing discontinued operations.
NOTE 4: STOCK TRANSACTIONS
During the period, 750,000 options were granted and exercised by management
in lieu of $133,100 of compensation and $48,400 of consulting fees. In addition,
the Company issued 440,000 shares for $92,400 of services.
9
AMERICAN COMMERCE SOLUTIONS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
May 31, 2002
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 acquisition of 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.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 31, 2002
AND 2001.
Net sales for the three months ended May 31, 2002 increased by 4.8% to
$516,086 from $494,980 for the three months ended May 31, 2001. The increase is
directly attributable to the heavy equipment repair. Cost of goods sold for the
three months ended May 31, 2002 was $301,485 compared to $266,702 for the three
months ended May 31, 2001. Gross margin for the three months ended May 31, 2002
was $214,571 compared to $228,278 for the three months ended May 31, 2001. The
gross profit margin percentage decreased to 41.6% for the three months ending
May 31, 2002 from a 46% gross profit margin percentage for the three months
ended May 31, 2001. The decrease is due to the lower gross profit margins of the
parts used in heavy equipment repair.
10
Operating expenses decreased to $615,592 for the three months ended May 31,
2002 from $661,086 for the three months ended May 31, 2001 as a result the
reduction of salaries across all operations.
The net loss for the three months ended May 31, 2002 was $469,671 ($.03 per
common share) compared to a net loss of $485,514 ($.04 per common share) for the
three months ended May 31, 2001. The decrease is directly a reduction in
salaries offset by an increase interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $412,995 for the three months
ended May 31, 2002 compared to $228,961 for the three months ended May 31, 2001.
Receivables decreased $14,969 from May 31, 2001 to May 31, 2002 as a result of
increased collections and a change in payment terms to certain customers.
Inventory increased $14,901 in the manufacturing segment.
Short and long-term loans provided the working capital needs and principal
payments on long-term debt through the three months ended May 31, 2002. However,
the Company requires additional financing to provide for working capital needs
and principal payments on long-term debt during the year ending February 28,
2003 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, 2002, the Company has experienced substantial losses, and
at May 31, 2002 had an accumulated deficit of approximately $12,040,679. 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 $198,483 from machining operations, $99,823
from the parts sales operation, and $217,750 from the heavy equipment service
operations for the three months ended May 31, 2002 compared to $256,256, $67,697
and $171,027 for the three months ended May 31, 2001. Cost of goods sold were
$301,485 and $266,702 from the division for the three months ended May 31, 2002
and 2001, respectively. General and administrative expenses were $615,592 and
$661,086 for the three months ended May 31, 2002 and 2001, respectively.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
N/A
11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has defaulted on a total of $465,561 of notes payable. The
amount of principal payments in arrears was $115,897 with an additional amount
of $72,641 of interest due at May 31, 2002. These defaults were created by
failure to pay under the terms of the agreements.
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
The Company filed a Form 8K in June 2002 explaining the change in auditors
from Bella Hermida Gillman Hancock and Mueller to Pender Newkirk and Company,
CPA's.
There were no disagreements between the prior auditor and the Company over
accounting issues. Pender Newkirk and Company, CPA's had rendered no services to
the Company prior to being chosen as auditors for fiscal year 2003.
12
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 and Chief Executive Officer
(Principal Executive Officer)
/s/ Frank D. Puissegur
-------------------------------------
Frank D. Puissegur,
Chief Financial Officer
Date: July 10, 2002 (Principal Accounting Officer)