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 August 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, 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, 10,784,178 shares outstanding at
October 6, 2001.
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 August 31, 2001 3
Consolidated Statements of Operations for the Three Months
Ended August 31, 2001 and August 31, 2000 5
Consolidated Statements of Operations for the Six Months
Ended August 31, 2001 and August 31, 2000 6
Consolidated Statements of Cash Flows for the Six Months
Ended August 31, 2001 and August 31, 2000 7
Notes to 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 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)
August 31, 2001
---------------
ASSETS
Current Assets:
Cash and cash equivalents $ 18,695
Accounts receivable, net of allowance $35,114 258,619
Inventory 307,711
Short term loans receivable 249,732
----------
Total current assets 834,757
Real property for resale 243,150
Equipment for resale 476,000
Property and equipment, net 5,276,821
Intangible assets, net 16,912
----------
TOTAL ASSETS $6,847,640
==========
The accompanying notes are an integral part of these
Consolidated Financial Statements.
3
AMERICAN COMMERCE SOLUTIONS, INC.
BALANCE SHEET -- CONTINUED
(Unaudited)
August 31, 2001
---------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $ 421,497
Accounts payable 641,399
Accrued expenses 805,660
Shareholder loans 29,569
Short-term loans 193,985
------------
Total current liabilities 2,092,110
Long-Term Debt, Net of Current Portion 1,875,838
STOCKHOLDERS' EQUITY (DEFICIT):
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,
$.001 par value, 3,207 shares issued and outstanding,
liquidating preference $3,303,210 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,
10,718,432 issued and 9,993,432 outstanding 21,437
Additional paid-in capital 14,281,208
Stock receivable (242,000)
Accumulated deficit (10,759,994)
Treasury stock (420,967)
------------
Total Stockholders' equity (deficit) 2,879,692
------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) 6,847,640
============
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
---------------------------------
August 31, 2001 August 31, 2000
--------------- ---------------
Net sales $ 738,873 $ 645,662
Cost of goods sold 469,132 307,538
------------ ------------
Gross profit 269,741 338,124
Selling, general and administrative expenses:
Payroll and payroll taxes 153,534 150,085
Consulting expenses 20,329 104,654
Professional fees 127,037 45,218
Other 73,347 149,774
------------ ------------
Total selling, general and administrative expenses 374,247 449,731
------------ ------------
Loss from operations (104,506) (111,607)
Other income 15,344
Income from the disposal of assets 14,547
Interest expense, net (70,591) (55,265)
------------ ------------
Net income (loss) (145,206) (166,872)
Accretion of discount and dividends on mandatory
redeemable preferred stock (99,772)
------------ ------------
Net income (loss) to common shareholders $ (145,206) $ (266,644)
============ ============
Net income (loss) per common shareholders, basic and diluted $ (.01) $ (.09)
============ ============
Weighted average number of common shares outstanding 10,659,346 2,899,000
============ ============
The accompanying notes are an integral part of these
Consolidated Financial Statements.
5
AMERICAN COMMERCE SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Six Months Ended
---------------------------------
August 31, 2001 August 31, 2000
--------------- ---------------
Net sales 1,283,661 $ 736,707
Cost of goods sold 713,765 353,382
------------ ------------
Gross profit 569,896 383,325
Selling, general and administrative expenses:
Payroll and payroll taxes 565,549 296,572
Consulting expenses 120,579 162,259
Professional fees 274,437 57,826
Other 231,337 207,421
------------ ------------
Total selling, general and administrative expenses 1,191,902 724,078
Loss from operations (622,006) (340,753)
Other income 15,344
Other income from disposition of assets 14,547
Interest expense, net (112,643) (68,687)
------------ ------------
(704,758) (409,440)
Less: Profit on purchased segment prior to date of acquisition 3,038
------------ ------------
Net loss from continuing operations (704,758) (406,402)
Loss from discontinued operations (45,214)
Accretion of discount and dividends on mandatory redeemable
preferred shares (243,575)
------------ ------------
Net loss per common shareholder $ (749,972) $ (649,977)
============ ============
Net loss per common shareholders, basic and diluted $ (.07) $ (.22)
============ ============
Weighted average number of common shares outstanding 10,659,346 2,899,000
============ ============
The accompanying notes are an integral part of these
Consolidated Financial Statements.
6
AMERICAN COMMERCE SOLUTIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
----------------------------------
August 31, 2001 August 31, 2000
--------------- ---------------
Cash flows from operating activities
Net loss $(749,972) $(409,440)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 196,554 89,296
Securities issued for services rendered 10,992 165,698
Gain on sale of assets (14,457)
Changes in operating assets and liabilities:
Accounts receivable (4,120) (55,152)
Notes receivable, stockholder 2,635
Inventory 409,998 (41,067)
Other assets 47,262 (78,254)
Bank overdraft 20,885
Accounts payable (12,293) 77,165
Accrued expenses 169,067 176,141
--------- ---------
Net cash used in operating activities 73,916 (72,978)
--------- ---------
Cash flows from investing activities
Capital expenditures (2,271) --
Investment in loans receivable (41,925)
--------- ---------
Net cash used by investing activities (44,196) --
--------- ---------
Cash flows from financing activities
Advances on notes payable and long-term debt 70,000 65,603
Repayments on notes payable and long-term debt (40,643) (21,315)
Exercise of stock options and warrants 28,000
Net repayment of stockholder loans (75,267)
--------- ---------
Net cash provided by financing activities (45,910) 72,288
--------- ---------
Net decrease in cash (16,190) (690)
Cash and cash equivalents - beginning of period 34,885 11,523
--------- ---------
Cash and cash equivalents - end of period $ 18,695 $ 10,833
========= =========
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 Six Months Ended
---------------------------------
August 31, 2001 August 31, 2000
--------------- ---------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 32,910 $ --
======== ====
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Property surrendered for note repayment $133,416 $ --
======== ====
Securities issued for debt repayment $ 7,000 $ --
======== ====
Notes payable refinanced $221,229 $ --
======== ====
Treasury stock acquired in sale of operation $420,967 $ --
======== ====
Stock options issued for compensation $221,000 $ --
======== ====
Stock option issued in sale of operation $ 4,700 $ --
======== ====
Equipment purchased for notes payable $ 61,745 $ --
======== ====
The accompanying notes are an integral part of these
Consolidated Financial Statements
8
AMERICAN COMMERCE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
August 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 $704,758 and $406,402 for the six
month periods ended August 31, 2001 and 2000, respectively. Current liabilities
exceed current assets by $1,257,353 and $392,214 at August 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.
9
AMERICAN COMMERCE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
August 31, 2001
NOTE 4: SEGMENT AND RELATED INFORMATION
The Company's reportable segments are manufacturing and construction
management. The product marketing segment has been discontinued and its assets
were sold June 1, 2001 for certain considerations and the return of 725,000
shares of the Company's common stock owned by the prior president of the
Company.
MANUFACTURING offers the production, maintenance and repair of certain
heavy industrial parts and equipment, and the repair and sale of parts and
installation service. International Machine and Welding, Inc. began operations
on June 1, 2000.
CONSTRUCTION MANAGEMENT offers installation and repair of concrete surfaces
plus commercial and residential paving. This segment also has a license to sell
used equipment and vehicles issued by the State of Rhode Island. International
Paving is the operating subsidiary of Rhode and Truck and Equipment Corp. that
is the operator in this segment.
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 six months ended August 31, 2001 and 2000 was
as follows:
For six months ended August 31, 2001:
CONSTRUCTION
MANUFACTURING MANAGEMENT
------------- ------------
Revenue $1,051,694 $ 231,967
Income (loss) from operations 3,285 26,526
Depreciation and amortization 170,790 20,179
Total assets 6,578,091 337,399
For six months ended August 31, 2000:
CONSTRUCTION
MANUFACTURING MANAGEMENT
------------- ------------
Revenue $ 543,581 $ 147,378
Income (loss) from operations 103,991 1,796
Depreciation and amortization 44,213 19,723
Total assets 6,005,818 314,443
10
AMERICAN COMMERCE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
August 31, 2001
NOTE 4: SEGMENT AND RELATED INFORMATION (continued)
Reconciliation of consolidated amounts:
FOR THE SIX MONTHS
ENDED AUGUST 31,
--------------------------
2001 2000
----------- -----------
Revenues
Total revenues reportable segments $ 1,283,661 $ 736,707
Other revenues
Total revenues from operations $ 1,283,661 $ 736,707
Income (loss) from continuing operations
Segments $ 29,811 $ (162,172)
Unallocated amounts (636,473) (463,660)
Interest expense (112,901) (28,075)
Interest income 258 892
Gain on sale of assets 14,547
(Loss) from discontinued operations (45,214)
Net loss per common shareholder $ (749,972) $ (653,015)
Reconciliation of consolidated amounts:
FOR THE SIX MONTHS
ENDED AUGUST 31,
--------------------------
2001 2000
----------- -----------
Assets
Total assets for reportable segments $ 6,915,490 $ 7,523,007
Other assets (67,850) 78,440
Total assets $ 6,847,640 $ 7,601,447
NOTE 5: DISCONTINUED OPERATIONS
In May 2001, the Board of Directors determined to discontinue the
operations of this subsidiary as of June 1, 2001. The operations were sold for
the to the President of the Subsidiary in exchange for 725,000 shares of the
Company's common valued at $420,967. The fair value of the net 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 license agreement with the President of the Subsidiary.
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.
11
RESULTS OF OPERATIONS
With the sale of the assets of the JD American Workwear, Inc. subsidiary
and the discontinuance of further operations the Company is radically different
from previous reports. The significant losses and negative cash flow have ceased
and the operations of the subsidiaries below are marginally profitable.
The 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 historically provided commercial
truck, heavy equipment and supply sales in Rhode Island. In January 2001, 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 economy that allows individuals to make repairs or improvements to
their properties made this expansion feasible.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31,
2001 AND 2000.
Net sales for the three months ended August 31, 2001 increased 14.4% to
$738,873 from $645,662 for the three months ended August 31, 2000. The increase
is directly attributable to the increase in the manufacturing segment's revenues
of $13,133 and the increase in revenue $80,078 in the construction management
segment. Cost of goods sold for the three months ended August 31, 2001 was
$469,132 compared to $307,538 for the three months ended August 31, 2000. Gross
margin for the three months ended August 31, 2001 was $269,741 compared to
$338,124 for the three months ended August 31, 2000. The gross profit margin
percentage decreased to 36.5% for the three months ending August 31, 2001 from a
52.3% gross profit margin percentage for the three months ended August 31, 2000.
The decrease is due to the lower gross profit margins of the construction
management sector due to increased asphalt costs for contracts completed in the
quarter that were entered into the previous year and the increase in
depreciation now included.
Operating expenses decreased to $374,247 for the three months ended August
31, 2001 from $382,976 for the three months ended August 31, 2000 as a result of
the reduction in consulting fees.
The net loss for the three months ended August 31, 2001 was $104,506 ($.01)
per common share compared to a net loss of $266,644 ($.09) per common share for
the three months ended August 31, 2000. The change was related to reductions in
consulting fees and other expenses that were partially offset by higher
depreciation expenses and professional fees. Additionally, there was no current
year requirement for accretion expenses.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED AUGUST 31, 2001
AND 2000.
Net sales for the six months ended August 31, 2001 increased 74.2% to
$1,283,661 from $736,707 for the six months ended August 31, 2000. The increase
is directly attributable to the inclusion of manufacturing and construction
management division revenues of $544,788 for the first fiscal quarter of 2001
and the increase in revenue during the second fiscal quarter of $93,211 over the
previous years second fiscal quarter ended August 31, 2000. Cost of goods sold
for the six months ended August 31, 2001 was $713,765 compared to $353,382 for
the six months ended August 31, 2000. Gross margin for the six months ended
August 31, 2001 was $569,896 compared to $383,325 for the six months ended
August 31, 2000. The gross profit margin decreased to 44.4% for the six months
ending August 31, 2001 an decrease of 7.6% over the 52% gross profit margin for
the six months ended August 31, 2000. The decrease in the gross profit margin is
primarily due to the decrease in the gross profit margin of paving due to
increased asphalt prices that could not be passed on to the customer and change
in the product mix in the manufacturing sector.
12
Operating expenses increased to $1,191,902 for the six months ended August
31, 2001 from $724,078 for the six months ended August 31, 2000. The increase is
due to the addition of parent company personnel adding $120,000, professional
fees that increased $216,605 and depreciation that rose $107,258 for the six
months ended August 31, 2001 as compared to the six months ended August 31,
2000.
The net loss for the six months ended August 31, 2001 was $749,972 ($.07
per common share) compared to a net loss of $649,977 ($.22 per common share) for
the six months ended August 31, 2000. The increase is directly attributable to
increased interest; payroll and depreciation expense for the six months ended
August 31, 2001 as compared to the six months ended August 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $73,916 for the six months
ended August 31, 2001 compared to $72,978 net cash used in operating activities
for the six months ended August 31, 2000. Accounts receivable increased $4,120
from February 28, 2001 to August 31, 2001 as a result of increased sales and
diligent collection efforts. Inventory of continuing operating segments
decreased $31,120.
Cash flow from operations and short-term loans provided the working capital
needs and principal payments on long-term debt through the six months ended
August 31, 2001. 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, 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 August 31, 2001, the Company has experienced substantial losses,
and at August 31, 2001 had an accumulated deficit of $10,759,994. 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 $508,460 from machining operations, $381,794
from parts sales operations, and $161,440 from heavy equipment service and
rental operations for the six months ended August 31, 2001 as compared to
$173,217 from machining operations, $261,152 from the parts sales operation, and
$109,212 from the heavy equipment service operations for the six months ended
August 31, 2000. Cost of goods sold were $605,643 for the six months ended
August 31, 2001 as compared to $248,808 from the division for the six months
ended August 31, 2000. General and administrative expenses were $442,766 for the
six months ended August 31, 2001 as compared to $150,729 for the six months
ended August 31, 2000. The increase in all categories relates to an additional
three months of operations that were not included in the comparative period
ended August 31, 2000.
RESULTS OF OPERATIONS - CONSTRUCTION MANAGEMENT
Construction management revenue increased by 57.4%, or $84,910 to $231,967
for the six months ended August 31, 2001 from $147,378 due to increased
municipal paving contracts. Cost of goods sold increased by 68.3%, or $43,874 to
$108,122 for the six months ended August 31, 2001 due to the increased sales and
the additional cost increases in asphalt. General and administrative expenses
increased $17,436 to $97,319 for the six months ended August 31, 2001.
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: October 18, 2001 (Principal Accounting Officer)
15