SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
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 0-28663
AMERICAN JEWELRY CORP.
(Exact name of small business issuer as specified in its charter)
DELAWARE 84-1516192
(State of other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
131 West 35th Street
New York, New York 10001
(Address of principal executive offices)
(212) 736-0880
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 |X| No
|_|
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: Common Stock, $.001 par value per
share - 337,564,057 shares outstanding as of March 31, 2001; Series A Preferred
Stock, $.001 par value per share - 200,000 shares outstanding as of March 31,
2001.
AMERICAN JEWELRY CORP.
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2001
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements.
Consolidated Balance Sheets as of March 31, 2001 F-1
Consolidated Statements of Operations for the Three Months
ended March 31, 2001 and March 31, 2000 F-2
Consolidated Condensed Statements of Cash Flows for the Three
Months ended March 31, 2001 and March 31, 2000 F-3
Notes to Financial Statements F-4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 5
PART 11. OTHER INFORMATION
Item 1. Legal Proceedings. 6
Item 2. Changes in Securities and Use of Proceeds. 6
Item 3. Defaults upon Senior Securities. 6
Item 4. Submission of Matters to a Vote of Security Holders. 6
Item 5. Other Information. 6
Item 6. Exhibits and Reports on Form 8-K. 6
BALANCE SHEET
AMERICAN JEWELRY CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 2001
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash $ 2,029
Accounts receivable-net 1,224,736
Inventories 8,650,960
Prepaid expenses 5,900
------------------
TOTAL CURRENT ASSETS 9,883,625
==================
PROPERTY AND EQUIPMENT, net 441,407
OTHER ASSETS :
Intangible assets 318,750
Other 36,257
------------------
$ 10,680,039
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 968,027
Loans payable 520,000
Convertible debentures 1,052,161
------------------
TOTAL CURRENT LIABILITIES 2,540,188
------------------
DUE TO STOCKHOLDERS 81,093
------------------
STOCKHOLDERS' EQUITY:
Common Stock, $.001 par value - 350,000,000 shares authorized,
337,564,057 shares issued and outstanding 337,564
Preferred stock, $.001 par value - 5,000,000 shares authorized,
200,000 Series A shares issued and outstanding 200
Additional paid-in capital 43,467,337
Accumulated deficit (35,746,343)
------------------
TOTAL STOCKHOLDERS' EQUITY 8,058,758
------------------
$ 10,680,039
==================
See notes to consolidated financial statements
F-1
AMERICAN JEWELRY CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
----------------------------
2001 2000
-------------------- ----------------
Net sales $ 1,375,681 $ 1,473,400
Cost of goods sold 1,112,150 1,178,720
-------------------- ----------------
Gross profit 263,531 294,680
Selling, general and administrative expenses 623,144 357,403
-------------------- ----------------
(359,613) (62,723)
Interest expense - 47,412
Interest expense - non-cash 232,384 345,422
-------------------- ----------------
Net income (loss) $ (591,997) $ (455,557)
==================== ================
Basic and diluted net income (loss) per common share: $ (0.00) (0.01)
==================== ================
Weighted average common shares outstanding 323,867,559 42,921,871
==================== ================
See notes to consolidated financial statements
F-2
AMERICAN JEWELRY CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
----------------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES :
Net Income (loss) $ (591,997) $ (455,557)
------------------ ------------------
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 32,740 35,000
Amortization 18,750 -
Officers' compensations contributed to capital 112,500 -
Interest expenses on conversion benefit 212,384 -
Accounts receivable 509,399 (2,019,161)
Inventories 267,860 4,475,262
Other assets (1,257) 48,112
Accounts payable and accrued expenses 76,213 (90,045)
------------------ ------------------
Total adjustments 1,228,589 2,449,168
------------------ ------------------
Net cash provided by (used in) operating activities 636,592 1,993,611
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable - financial instituions - (665,580)
Proceeds from convertible debentures 100,000 (691,760)
Repayment of loan payable (833,871) (130,000)
Increase in restricted cash - (1,200,000)
Increase in deferred financing costs - 51,249
Stock subscription received - 157,582
Proceeds from issuance of stock - 701,678
Repayment to stockholders - 84,092
------------------ ------------------
Net cash (used in) provided by financing activities (733,871) (1,692,739)
------------------ ------------------
Net increase in cash (97,279) 300,872
Cash - beginning of period 99,308 97,465
------------------ ------------------
Cash - end of period $ 2,029 $ 398,337
================== ==================
NON-CASH FINANICING AND INVESTING ACTIVITIES:
Issuance of stock for settlement of debt $ 52,160 $ -
================== ==================
See notes to consolidated financial statements
F-3
AMERICAN JEWELRY CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed financial statements have been prepared in
accordance with generally accounting principles for interim financial
information and with instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The
results of operations for the three-month period ended March 31, 2001 are
not necessarily indicative of the results to be expected for the year ended
December 31, 2001.
2. STOCKHOLDERS EQUITY
Convertible Debentures:
During the three months ended March 31, 2001, the Company received $100,000
for a debenture issued during the year ending December 31, 2000. Said
amount received has been converted to 24,562,667 shares of the Company's
common stock with recording of $194,544 beneficial convertible features.
Furthermore, the Company issued 5,000,000 shares for a settlement agreement
made on December 31, 2000 with the existing debenture holders.
3. SUBSEQUENT EVENT
On April 30, 2001 the Company elected to effect a 1:300 reverse stock split
of its common stock. Concurrent with the reverse split, the Company's
ticker symbol has changed to AMJC (OTC BB). The Company has also approved
to reduce the number of its authorized common stock to a number that has
not yet been determined.
F-4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED MARCH 31, 2001 COMPARED TO THREE-MONTH PERIOD ENDED
MARCH 31, 2000
Net sales amounted to $1,375,681 for the three-month period ended March
31, 2001, compared to $1,473,400 a decrease of $97,719 or 7% from the
three-month period ended March 31, 2000. The decline in sales is due to the
recognition of sales in 2000, as per certain GAAP and SEC requirements, of
certain sales shipped in 1999.
Gross profit decreased by $31,149, or 11%, to $263,531 for the
three-month period ended March 31, 2001 from $294,680 for the three-month period
ended March 31, 2000. Gross profit as a percentage of net revenues decreased to
19% for the three-month period ended March 31, 2001 from 20% for the three-month
period ended March 31, 2000.
Selling, General and Administrative expenses increased by $265,741, or
74% to $623,144, or 45% of net revenues, for the three-month period ended March
31, 2001, from $357,403 or 11% of net revenues for the three-month period ended
March 31, 2000. The principal increase in expenses was due to the recognition in
2001 of certain non-cash deferred expenses, that were not recognized in the
first three months of 2000, but were recognized in subsequent periods in 2000.
Interest expenses decreased to $214,544 for the three-month period
ended March 31, 2001 from $392,834 for the three-month period ended March 31,
2000. This decrease is primarily due to the reduction of outstanding debentures
payable.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Historically the Company financed operations principally through
collections of accounts receivable, loans from financing institutions, issuance
of stock and advances from officers. In the three months ended March 31, 2001,
the Company financed operations from proceeds from sales. We believe the Company
will be able to finance future operations from cash generated from operations.
Working capital increased by $7,088,000 to $7,343,000 at March 31,
2001, from $255,000 at March 31, 2000.
The Company's operating activities generated cash in the amount of
$637,000 for the three month period ended March 31, 2001 as compared to
$1,994,000 for the same period in 2000. There were no investing activities for
these periods.
The Company used net cash in financing activities in the amount of
$734,000 during the three month period ended March 31, 2001, as compared to
$1,693,000 during the three month period ended March 31, 2000. The principal use
of cash in financing activities for the three month period ended March 31, 2001
was repayment of debt to stockholders.
5
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
Incorporated by reference herein to the Company's Form 10-KSB for the
fiscal year ended December 31, 2000, as filed with the Securities and Exchange
Commission on April 17, 2001.
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
The holder of a certain 8% Convertible Debenture due 2002 of the
Company (the "Debenture") entered into a purchase agreement with a third party
to sell the Debenture for $1,000,000. The Company is in the process of
exchanging the Debenture with debentures that have been amended to extend the
maturity date an additional year and to amend the conversion price to the lower
of (i) 92% of the average of the closing sale price of the Company's Common
Stock for the five trading days prior to the applicable conversion rate or (ii)
$4.50 (after adjustment due to the Company's recent reverse stock split),
subject to further adjustment in the event of further stock splits and the like
($400,000 principal amount of debentures have been exchanged thus far). The
Company has also entered into an agreement with the purchasers of the amended
debentures, which provides for limitations on the amount of debentures to be
converted.
Item 3. Defaults Upon Senior Securities.
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
------------------
None.
Item 5. Other Information.
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None.
6
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: May 14, 2001
American Jewelry Corp.
By: /s/ Isaac Nussen
--------------------------
Name: Isaac Nussen
Title: President and Chief
Executive Officer
7