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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
| þ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal quarter ended April 30, 2006
or
| ¨ | 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 000-06649
JILCO INDUSTRIES, INC.
(Exact name of Small Business Issuer as specified in its charter)
| California | 95-2075885 | |
| (State of incorporation) | (I.R.S. employer identification no.) | |
P. O. Box 10539 Beverly Hills, CA | 90213 | |
| (Address of principal executive offices) | (Zip code) | |
310-274-1986
(Registrant’s telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ¨ No x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þ No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS
On August 17, 2006 there were 449,991 shares outstanding of the issuer’s common stock.
Transitional Small Business Disclosure Format (check one): Yes ¨ No x
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JILCO INDUSTRIES, INC.
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| Item 1. | Financial Statements. |
BALANCE SHEETS
(UNAUDITED)
| April 30, 2006 | July 31, 2005 | |||||||
| ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 554 | $ | 671 | ||||
TOTAL CURRENT ASSETS | 554 | 671 | ||||||
TOTAL ASSETS | $ | 554 | $ | 671 | ||||
| LIABILITIES & SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Other Accrued Payables | — | $ | 800 | |||||
Interest payable | 141,621 | $ | 133,009 | |||||
Notes payable | 76,000 | 76,000 | ||||||
Notes payable shareholder | 57,166 | 56,166 | ||||||
Total current liabilities | 274,787 | 265,975 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common stock, no par value | ||||||||
1,500,000 shares authorized | ||||||||
449,991 shares issued and outstanding | 749,950 | 749,950 | ||||||
Accumulated deficit | (1,024,184 | ) | (1,015,254 | ) | ||||
Total shareholders’ deficit | (274,234 | ) | (265,304 | ) | ||||
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | $ | 554 | $ | 671 | ||||
STATEMENTS OF LOSSES
(UNAUDITED)
| Three Months Ended April 30, | Nine Months Ended April 30, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
EXPENSES | ||||||||||||||||
Fees and licenses | $ | 67 | $ | 47 | $ | 151 | $ | 113 | ||||||||
Interest expense | 2,880 | 2,799 | 8,612 | 8,397 | ||||||||||||
Sundry and other | 150 | — | 150 | — | ||||||||||||
Total expenses | 3,097 | 2,846 | 8,913 | 8,510 | ||||||||||||
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES | (3,097 | ) | (2,846 | ) | (8,913 | ) | (8,510 | ) | ||||||||
PROVISION FOR INCOME TAXES | — | 116 | 16 | 116 | ||||||||||||
NET INCOME (LOSS) | ($3,097 | ) | ($2,962 | ) | ($8,929 | ) | ($8,626 | ) | ||||||||
BASIC INCOME (LOSS) PER SHARE | ($0.01 | ) | ($0.01 | ) | ($0.02 | ) | ($0.02 | ) | ||||||||
DILUTED INCOME (LOSS) PER SHARE | ($0.01 | ) | ($0.01 | ) | ($0.02 | ) | ($0.02 | ) | ||||||||
WEIGHTED-AVERAGE SHARES OUTSTANDING | 449,991 | 449,991 | 449,991 | 449,991 | ||||||||||||
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STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended April 30, | Nine Months Ended April 30, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||
Net income (loss) | ($3,097 | ) | ($2,962 | ) | ($8,929 | ) | ($8,626 | ) | ||||||||
Increase in accrued interest | 2,880 | 2,799 | 8,612 | 8,397 | ||||||||||||
Increase (decrease) in accrued expenses | — | (800 | ) | (800 | ) | (800 | ) | |||||||||
Net cash used in operating activities | (217 | ) | (963 | ) | (1,117 | ) | (1,029 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||
Proceeds from notes payable | — | 916 | 1,000 | 916 | ||||||||||||
Net cash provided by financing activities | 0 | 916 | 1,000 | 916 | ||||||||||||
NET INCREASE (DECREASE) IN CASH | (217 | ) | (47 | ) | (117 | ) | (113 | ) | ||||||||
CASH, BEGINNING OF PERIOD | 771 | 718 | 671 | 784 | ||||||||||||
CASH, END OF PERIOD | $ | 554 | $ | 671 | $ | 554 | $ | 671 | ||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||||||||||
INTEREST PAID | — | — | — | — | ||||||||||||
INCOME TAXES PAID | — | 800 | $ | 800 | $ | 800 | ||||||||||
See Notes to Financial Statements
NOTE 1 – Description of the Business and Summary of Significant Accounting Policies
Description of the Business
Jilco Industries, Inc. (the “Company”) has been inactive since April 2, 1968 when it was discharged from bankruptcy under its previous name of Sportways, Inc. It has not engaged in any revenue generating activities since that time nor since the last filing of its form 10-KSB on November 15, 1999 for the year ended July 31, 1999. The expenses the Company has incurred since that time represent those necessary to keep the Company in good standing in its state of residence.
Significant Accounting Policies
Fair Value of Financial Instruments
For certain of the Company’s financial instruments including cash and other accrued expenses, the carrying amounts approximate fair value due to their short maturities. The amounts shown as notes payable also approximate fair value because current interest rates and terms offered to the Company for notes payable of similar maturities are substantially the same.
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Cash and Cash Equivalents
For purpose of reporting cash flows, the Company includes cash on deposit, cash on hand, and financial instruments purchased with an original maturity of three months or less to be cash equivalents.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Accordingly, actual results could differ from those estimates.
Income Taxes
The Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.
Basis of Presentation
The financial statements of the Company have been prepared on the basis on the Company continuing as a going concern, which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.
The company has suffered recurring losses and has a deficiency in net assets that raise substantial doubt about its ability to continue as a going concern. The Company’s continued existence is dependent upon its ability to raise additional capital. However, Affiliates of the Company have, for a number of years, and will continue during the next twelve months, to lend the Company all funds necessary for it to maintain its corporate and filing status.
The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes (FIN 48), which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. FIN 48 will be effective for the Company beginning November 1, 2007. The
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Company is in the process of determining the effect, if any, this statement will have on its financial statements.
In March 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 156,Accounting for Servicing of Financial Assets – An Amendment of FASB Statement No. 140 (SFAS 156), which requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract under certain situations at fair value, if practicable, and permits the subsequent measurement of servicing assets and servicing liabilities at fair value. SFAS 156 will be effective for the Company beginning November 1, 2006. The Company does not expect the adoption of this statement to have a material impact on its financial statements.
These and other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants (“AICPA”), and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
NOTE 2 - LOSS PER SHARE
The Company calculates basic loss per share using the weighted-average number of shares outstanding for the period. Diluted loss per share includes both the weighted-average number of shares and any common share equivalents such as options or warrants in the calculation. As the Company had no common share equivalents outstanding during any periods presented, basic and diluted loss per share are the same.
NOTE 3 - NOTES PAYABLE TO SHAREHOLDER
Notes payable to shareholder at April 30 consisted of the following, which were in compliance with their terms:
9% Note - Revolving unsecured note payable, interest accrues at 9% per annum. Principal and accrued interest are due on demand.
10% Note - Revolving unsecured note payable, interest accrues at 10% per annum. Principal and accrued interest are due on demand.
11% Note - Revolving unsecured note payable, interest accrues at 11% per annum. Principal and accrued interest are due on demand.
SCHEDULE OF NOTES PAYABLE SHAREHOLDER
AS OF APRIL 30, 2006
| 9% Note | 10% Note | 11% Note | |||||||
Ending Balance January 31, 2006 | $ | 40,000 | $ | 5,000 | $ | 12,166 | |||
Funds Advanced during Fiscal Quarter Ending April 30, 2006 | 0 | 0 | 0 | ||||||
Ending Balance April 30, 2006 | $ | 40,000 | $ | 5,000 | $ | 12,166 | |||
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NOTE 4 - NOTES PAYABLE
There are three Notes Payable, each of which is unsecured and in favor of an affiliate of the controlling shareholder of the Company and principal on each is due on July 31, 2007. Interest accrues at 8% per annum and is payable on July 31, 2007. Each note is currently in compliance with its terms.
SCHEDULE OF NOTES PAYABLE
AS OF APRIL 30, 2006
Ending Balance January 31, 2006 | $ | 76,000 | |
Funds Advanced during Fiscal Quarter Ending April 30, 2006 | 0 | ||
Ending Balance April 30, 2006 | $ | 76,000 |
NOTE 5 - INCOME TAXES
For the years ended July 31, 2000 - 2005, the Company did not provide a provision for income taxes due to the net losses incurred. At July 31 in each of those years the Company had approximately net operating loss carryforwards for federal and state income tax purposes as shown in the table below, that began to expire in 2000. The components of the Company’s deferred tax assets and liabilities for income taxes consisted of a deferred tax asset relating to the net operating loss carryforwards for such years as shown in the table below. The other components of the Company’s deferred tax assets and liabilities are immaterial. The Company has established a valuation allowance as shown in the table below for the years ended July 31, 2000 - 2005, to fully offset its deferred tax assets as the Company does not believe the recoverability of these deferred tax assets is more likely than not. The valuation allowance increased as shown in the table during the years ended July 31, 2000 - 2005.
Annual Net Tax Losses Sustained and Applied and Deferred Recoverable Assets
Tax Year | Loss Sustained | Loss Previously Applied | Loss Remaining | Valuation Allowance | Deferred Recoverable Tax Assets | ||||||||||
July 31, 1992 | $ | 950 | $ | 0 | $ | 950 | $ | 950 | $ | 0 | |||||
July 31, 1993 | $ | 920 | $ | 0 | $ | 920 | $ | 920 | $ | 0 | |||||
July 31, 1994 | $ | 2,002 | $ | 0 | $ | 2,002 | $ | 2,002 | $ | 0 | |||||
July 31, 1995 | $ | 878 | $ | 0 | $ | 878 | $ | 878 | $ | 0 | |||||
July 31, 1996 | $ | 925 | $ | 0 | $ | 925 | $ | 925 | $ | 0 | |||||
July 31, 1997 | $ | 3,393 | $ | 0 | $ | 3,393 | $ | 3,393 | $ | 0 | |||||
July 31, 1998 | $ | 44,728 | $ | 0 | $ | 44,728 | $ | 44,728 | $ | 0 | |||||
July 31, 1999 | $ | 9,760 | $ | 0 | $ | 9,760 | $ | 9,760 | $ | 0 | |||||
July 31, 2000 | $ | 14,846 | $ | 0 | $ | 14,846 | $ | 14,846 | $ | 0 | |||||
July 31, 2001 | $ | 463 | $ | 0 | $ | 463 | $ | 463 | $ | 0 | |||||
July 31, 2002 | $ | 2,482 | $ | 0 | $ | 2,482 | $ | 2,482 | $ | 0 | |||||
July 31, 2003 | $ | 965 | $ | 0 | $ | 965 | $ | 965 | $ | 0 | |||||
July 31, 2004 | $ | 720 | $ | 0 | $ | 720 | $ | 720 | $ | 0 | |||||
July 31, 2005 | $ | 1,919 | $ | 0 | $ | 1,919 | $ | 1,919 | $ | 0 | |||||
TOTAL | $ | 84,951 | $ | 0 | $ | 84,951 | $ | 84,951 | $ | 0 | |||||
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NOTE 6 – CONTROLS AND PROCEDURES
As indicated in the certifications in Exhibits 31.1 and 32.1 of this Quarterly Report, the Company’s chief executive officer and principal financial officer have evaluated the Company’s disclosure controls and procedures as of April 30, 2006. Based on that evaluation, these officers have concluded that the Company’s disclosure controls and procedures are effective in ensuring that material information required to be in this quarterly report is made known to them on a timely basis. There were no changes since the Company’s last filed reports that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Item 2. | Management’s Discussion and Analysis or Plan of Operation. |
Our affiliates have for a number of years, and will continue during the foreseeable future, to lend us all funds necessary for us to maintain our corporate and filing status. The Statements of Cash Flows appearing in the financial statements of this Quarterly Report show funds lent to us during the fiscal quarters ending April 30, 2005 and April 30, 2006.
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Forward-Looking Statements
This Form 10-QSB may contain statements that are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “estimates,” “anticipates,” “plans,” “believes,” “projects,” “expects,” “intends,” “predicts,” “potential,” “future,” “may,” “contemplates,” “will,” “should,” “could,” “would” or the negative of such terms or other comparable terminology. These statements relate to our future operations and financial performance or other future events. Many of the forward-looking statements are based on current expectations, management beliefs, certain assumptions made by our management and estimates and projections.
Forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict with respect to timing, extent, likelihood and degree of occurrence. Therefore, actual events, results, performance or achievements may differ materially from the events, results, performance or achievements expressed, forecasted or contemplated by any such forward-looking statements.
| Item 3. | Controls and Procedures. |
We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed as the end of the period covered by this
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report, our chief executive officer and the principal financial officer concluded that our disclosure controls and procedures were adequate. There were no changes in our internal control over financial reporting identified in connection with the evaluation that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
OTHER INFORMATION
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
We did not sell any equity securities during the fiscal quarter ended April 30, 2006 that were not registered under the Securities Act of 1933.
We did not receive any “offering proceeds” within the meaning of Rule 463 under the Securities Act of 1933 during the period covered by this report.
| Item 4. | Submission of Matters to a Vote of Security Holders. |
No matter was submitted during the fiscal quarter ended April 30, 2006 to a vote of our security holders through the solicitation of proxies or otherwise.
| Item 6. |
| Exhibit Number | Description | |
| 3.1 | Articles of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 3(1) to the Company’s 1989 Form 10-K). | |
| 3.2 | By-laws of the Registrant, as amended (incorporated by reference to Exhibit 3(2) to the Company’s 1989 Form 10-K). | |
| 10.1 | Revolving Demand Note, dated November 10, 1995 , between the Company and TRACO (incorporated by reference to Exhibit 10(1) to the Company’s 1996 Form 10-K). | |
| 10.2 | Note Extension and Modification Agreement, dated December 1, 1992, between the Company and Leonard M. Ross. (incorporated by reference to Exhibit 10(1) to the Company’s 1993 Form 10-K). | |
| 10.3 | Revolving Demand Note, dated November 7, 1989, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(1) to the Company’s 1990 Form 10-K). | |
| 10.4 | Note Extension and Modification Agreement, dated December 1, 1992, between the Company and Leonard M. Ross. (incorporated by reference to Exhibit 10(1) to the Company’s 1993 Form 10-K). | |
| 10.5 | Note Extension and Modification Agreement, dated November 7, 1989, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(2) to the Company’s 1990 Form 10-K). | |
| 10.6 | Revolving Demand Note, dated December 18, 1987, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(1) to the Company’s 1989 Form 10-K). | |
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| Exhibit Number | Description | |
| 10.7 | Note Extension and Modification Agreement, dated November 7, 1989, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(4) to the Company’s 1990 Form 10-K). | |
| 10.8 | Note Extension and Modification Agreement, dated November 7, 1989, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(4) to the Company’s 1990 Form 10-K). | |
| 10.9 | Note Extension and Modification Agreement, dated July 13, 1988, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(2) to the Company’s 1989 Form 10-K). | |
| 10.10 | Promissory Note Extension Agreement, dated August 8, 1986, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(3) to the Company’s 1989 Form 10-K). | |
| 10.11 | Promissory Note, dated August 9, 1972, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(3) to the Company’s 1989 Form 10-K). | |
| 31.1 | Rule 13a-14(a) Certification. ** | |
| 32.1 | Section 1350 Certification. ** | |
| ** | Filed herewith. |
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In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| JILCO INDUSTRIES, INC. | ||||||||
Date: August 29, 2006 | /s/ Martha Kretzmer | |||||||
By: | Martha Kretzmer | |||||||
Principal Executive Officer, Principal Financial Officer and Chief Accounting Officer | ||||||||
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