10-K 1 form10k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 2003 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . ------------- ------------ Commission File No.: 0-19000 -------- JLM COUTURE, INC. --------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3337553 --------------------------------------------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 225 West 37th Street, 5th Floor, New York, NY 10018 --------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 921-7058 -------------- Securities registered pursuant to Section 12(b) of the Act: None ------- Securities registered under Section 12(g) of the Act: Common Stock, par value $.0002 per share -------------------------------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer: Yes [ ] No [ X ] The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the closing sale price of the Common Stock on January 16, 2004 as reported by NASDAQ) was approximately $5,051,336.96. As of October 31, 2003 the issuer had 1,912,694 shares of Common Stock, par value $.0002 per share outstanding. The Proxy Statement of the registrant to be filed on or before February 28, 2004 is incorporated herein by reference. TABLE OF CONTENTS PART I PAGE -------- Item 1. Business. 3 Item 2. Properties. 6 Item 3. Legal Proceedings. 7 Item 4. Submission of Matters to a Vote of 7 Security Holders. PART II Item 5. Market for Registrant's Common Equity and 8 Related Stockholder Matters. Item 6. Selected Financial Data. 12 Item 7. Management's Discussion and Analysis of 13 Financial Condition and Results of Operation. Item 7A. Quantitative and Qualitative Disclosures 17 About Market Risk. Item 8. Financial Statements and Supplementary Data. 17 Item 9. Changes in and Disagreements with Accountants 17 on Accounting and Financial Disclosure. Item 9A. Controls and Procedures. 17 PART III Incorporated by reference to the Proxy Statement 18 of the Company to be filed with the Securities and Exchange Commission on or before February 28, 2004. PART IV Item 10. Exhibits, Financial Statement Schedules and 19 Reports on Form 8-K. Signatures 21 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This report includes "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. For example, statements included in this report regarding the Company's financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future product demand, supply, manufacturing, costs, marketing and pricing factors are all forward-looking statements. When this report contains words like "intend," "anticipate," "believe," "estimate," "plan" or "expect," the Company is making forward-looking statements. The Company believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to the Company on the date hereof, but the Company cannot assure anyone that these assumptions and expectations will prove to have been correct or that it will take any action that it may presently be planning. The Company has disclosed certain important factors that could cause the Company's actual results to differ materially from its current expectations elsewhere in this report. The reader should understand that forward-looking statements made in this report are necessarily qualified by these factors. The Company is not undertaking to publicly update or revise any forward-looking statement if the Company obtains new information or upon the occurrence of future events or otherwise. PART I Item 1. Business. Background. JLM Couture, Inc. (the "Company"), a Delaware corporation whose name was changed from Jim Hjelm's Private Collection, Ltd. in July 1997, was organized in April 1986 to design, manufacture and market high quality bridal wear and related accessories, including bridesmaid gowns. In 1993 the Company launched the Lazaro bridal division. In May 1997, the Company acquired Alvina Valenta Couture Collection, Inc. ("Alvina"), which designs, manufactures and markets couture-quality bridal wear. In 1999, the Company set up a sales office in England to penetrate the European market. In 2000, the Company launched Lazaro Ensembles and Jim Hjelm Just Separates as new bridesmaid divisions. Business. The Company operates primarily in one business segment: the design, manufacture and distribution of bridal gowns, veils and bridesmaid gowns. For financial information relating to the Company's business segment, please refer to the Financial Statements contained elsewhere herein. The Company's couture lines of bridal gowns, bridesmaid gowns, veils and related items (the "Jim Hjelm," "Lazaro" and "Alvina Valenta" lines) emphasize contemporary and traditional styles characterized by ankle or floor length gowns, with or without trains, and are principally constructed in satin, silk and lace. The Company's designs reflect its emphasis on quality and design originality. Wholesale prices for the Company's bridesmaid and bridal gowns range from $90 to $150 and $500 to $3,000, respectively, with suggested retail prices ranging from $180 to $300 for bridesmaid gowns and $1,000 to $6,000 for bridal gowns. The Company also produces a line of less expensive bridal gowns called "Visions", which is styled similarly to the Company's couture lines, but is constructed from less expensive fabrics. The wholesale prices for bridal gowns in the "Visions" line range from $395 to $600 and the retail prices range from $800 to $1,200. The Company manufactures its products at both its own facilities and through hiring independent contractors. The Company uses its best efforts to maintain quality control over its independent contractors and supplies these contractors with cut pattern pieces. There are generally no written agreements between the Company and these contractors, enabling the Company to utilize each contractor on an as- needed basis. The Company also performs custom alterations on its basic designs at a customer's request. The Company generally charges the customer for custom alterations. The Company utilizes bridal boutiques or bridal departments in women's clothing and department stores to market its gowns. During its fiscal year ended October 31, 2003 ("Fiscal 2003"), October 31, 2002 ("Fiscal 2002") and October 31, 2001 ("Fiscal 2001"), no customer accounted for more than ten percent (10%) of the Company's sales. The Company's lines of gowns for each season are typically introduced at fashion shows held at the Company's showroom. The Company also displays its products at regional markets. Additionally, new collections are often featured at "trunk shows", which are fashion shows held at a retail customer's store, and which may include a personal appearance by the designer. These trunk shows are generally supported with local advertising paid for by the local retail customer. Jim Hjelm, the eponymous bridal wear designer who co-founded the company with Mr. Joseph L. Murphy in 1986, occasionally represents the Company at trunk shows and during the Company's in-house fashion shows. Other designers of the Company's products include Lazaro Perez (who designs under the name Lazaro) and Victoria McMillan. Lazaro's designs enabled the Company to diversify and add depth to its product lines. In both 1997 and 1999 Lazaro was awarded the Distinctive Excellence in Bridal Industry (DEBI) Award in the category of Style Innovator for bridal gowns. Ms. McMillan designs the Company's Alvina Valenta line of upscale wedding gowns which was acquired by the Company in 1997. Ms. McMillan has been the designer for Alvina since 1989. The Company's designers are frequently featured in articles and advertisements published in Bride's and Your New Home and Modern Bride magazines as well as Martha Stewart, Weddings. Major fashion department stores and bridal boutiques have featured all three designers and their work in advertisements, in store customer showings, and in retail area displays. The Company also markets its products through its five internet sites and generates customer demand through distribution of its bridal and bridesmaids catalogs. The Company's designers generally participate in the Company's marketing efforts by appearing at seasonal bridal fashion shows and trunk shows, and otherwise being available for showing the Company's lines of bridal products. The Company also employs a full-time sales staff of 10 persons supervised by Mr. Murphy. The Company advertises its products in periodicals and other publications dealing with the bridal industry in advance of and during each bridal season. The Company's dresses have been advertised in Bride's and Your New Home, Modern Bride, Martha Stewart, Weddings, and Elegant Bride magazines. This advertising is directed toward displaying the Company's products in a manner that enhances the general perception of the quality of the Company's gowns and the Company's reputation. The primary raw materials necessary for the Company's business are quality fabrics, such as silks, taffetas and laces. The Company maintains a minimum inventory of these raw materials. The Company obtains its raw materials domestically and from overseas. Generally, the Company has been able to obtain necessary materials relatively easily. Although the bridal industry is seasonal, with showings to retail buyers in advance of the Spring and Fall seasons, the Company's business has only experienced slight seasonal fluctuations, with a slight decrease in its fourth quarter. The bridal wear industry is highly competitive. In marketing its bridalwear and bridesmaid gowns, the Company competes directly with the numerous domestic and foreign bridal houses. In its marketing efforts, the Company emphasizes the couture quality of its products and the public recognition of its trademarks Jim Hjelm, Lazaro, and Alvina Valenta. In management's view, the ability of the Company to continue to successfully compete is dependent upon the continued development and maintenance of a line of high quality and fashionable bridal wear. Equally important is the continued enhancement of the images of the Jim Hjelm, Lazaro and Alvina Valenta designer labels. In an effort to establish a presence in Europe, the Company retains a sales representative located in England to market its Occasions and Lazaro bridesmaid's gowns to the European community. Sales from this operation comprised approximately 3% in each of the last three fiscal years. As of January 31, 2004 and January 31, 2003 the Company's backlog of firm orders was approximately $4,500,000 and $5,000,000, respectively. This backlog is comprised of the normal delay between receipt of an order and the manufacture of the order. All orders were delivered or expect to be completed within the applicable fiscal year. The Company employs approximately 70 full-time employees. The Company has registered "Jim Hjelm A Private Collection", "Alvina Valenta", "Jim Hjelm Occasions", "Lazaro", and "Jim Hjelm" as trademarks with the U.S. Patent and Trademark Office (the "USPTO"). It has also filed applications for "Just Separates" and "Occasions" with the USPTO. There is no assurance that any of these marks will be allowed to be registered. ITEM 2. Property. The Company's executive offices and manufacturing facility are located at 225 West 37th Street, New York, New York. This space is located in Manhattan's "garment center", which area is primarily devoted to garment manufacturers and other business tenants. The premises are occupied pursuant to two leases with an unaffiliated party, both of which expire on February 28, 2013. The Company's manufacturing facility consists of a fully-equipped design and production area, which includes cutting tables, sewing machines and other equipment required to manufacture the Company's products. The Company also leases space at 525 Seventh Avenue under a lease terminating February 28, 2012 with an unaffiliated party. This space is utilized to display the Company's products to buyers and for marketing activities. ITEM 3. Legal Proceedings. The Company is not a party to any material pending legal proceedings, and to the best knowledge of the Company, no such proceedings have been threatened. ITEM 4. Submission of Matters to a Vote of Security Holders. On October 28, 2003, the Company held its Annual Meeting of Shareholders (the "Meeting"). The Company solicited proxies for the meeting pursuant to Regulation 14A of the Securities Exchange Act of 1934 (the "Act"); each of the Company's nominees for director was elected and there was no solicitation in opposition to management's state of nominees. Messrs. Daniel Sullivan and Keith Cannon were elected to serve as two Class II directors until the 2006 Annual Meeting of Stockholders and until their successors are elected and qualify. Messrs. Joseph L. Murphy and Joseph E. O'Grady, the Company's other two directors, terms of office continue until 2004 and 2005, respectively. The shareholders also voted on proposals to approve the adoption of the Company's 2003 Stock Incentive Plan and to ratify the appointment of Goldstein Golub Kessler LLP as the Company's independent auditors for its fiscal year ended October 31, 2003. The following table sets forth the results of each vote: Affirmative Negative Broker Proposal Votes Votes Abstention Non Votes ------------- ----------- -------- ---------- --------- Approval of 2003 1,009,002 64,932 2,449 769,701 Stock Incentive Plan Ratification of 1,836,935 634 2,466 - the appointment of Goldstein Golub Kessler LLP as the Company's independent Auditors for its fiscal year ended October 31, 2003 PART II ITEM 5. Market for the Company's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities. (a) Market Information. The Common Stock of the Company (the "Common Stock") is traded on the Nasdaq Small Cap Market. The following table sets forth, for the Company's last two fiscal years, the range of high and low bid quotations for its Common Stock. The market quotations represent prices between dealers, do not include retail markup, markdown, or commissions and may not necessarily represent actual transactions. Price range of Common Stock Quarter Ended High Bid Low Bid ------------- -------- ------- Fiscal 2003 ----------- January 31, 2003 $4.41 $2.96 April 30, 2003 7.18 3.53 July 31, 2003 8.81 5.14 October 31, 2003 7.60 4.69 Price range of Common Stock Quarter Ended High Bid Low Bid ------------- -------- ------- Fiscal 2002 ----------- January 31, 2002 $2.38 $1.86 April 30, 2002 2.40 2.01 July 31, 2002 3.75 2.13 October 31, 2002 3.70 2.30 On February 3, 2004, the closing bid and ask prices in the Over-the-Counter market for the Common Stock as reported by Nasdaq were $4.61 and $4.84, respectively. (b) Holders. As of February 3, 2004, there were approximately 132 holders of record of the Common Stock. The Company believes that there are significantly more beneficial holders of the Common Stock as many of the shares of Common Stock are held in "street" names. (c) Dividends. No cash dividends have been paid on the Common Stock for the past two fiscal years, and the Company does not anticipate paying cash dividends in the foreseeable future. (d) Securities Authorized for Issuance Under Equity Compensation Plans. The following table provides information as of October 31, 2003 with respect to the Company's compensation plans under which equity securities of the Company are authorized for issuance:

ITEM 6. Selected Financial Data The financial data set forth below should be read in conjunction with Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's consolidated financial statements and the related notes included elsewhere in this Form 10-K.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Disclosure Regarding Forward Looking Statements The following discussion should be read in conjunction with the Company's financial statements and notes thereto appearing elsewhere in this Form 10-K. In addition to the historical information contained herein, the discussion in this Form 10-K contains certain forward looking statements that involves risks and uncertainties, such as statements of the Company's plans, objectives, expectations and intentions. The Company's actual results could differ materially from management's current expectations. Results of Operations - Fiscal 2003 as Compared to Fiscal 2002. For Fiscal 2003, revenues were $26,041,407 as compared to $24,701,566 in Fiscal 2002, an increase of $1,339,841 or 5%. This increase was due to increased market penetration of the Company's products. The Company's gross profit margin decreased in Fiscal 2003 to 40.5% from 43.2% in Fiscal 2002. The Company attributes the decrease in its gross profit margin to higher production costs including costs associated with the development of new product lines as well as additional occupancy costs incurred in 2003 as the Company expanded its production facility. Selling, general and administrative ("SG&A") expenses increased to 35.2% of net sales in Fiscal 2003 as compared to 34.8% of sales in Fiscal 2002. The increase was a result of the Company's increased promotional activity. The Company generated net income of $807,752, or $0.42 per share-basic and $0.40 per share-diluted for Fiscal 2003 as compared to net income of $1,109,133, or $0.54 per share-basic and $0.53 per share-diluted for Fiscal 2002. Results of Operations - Fiscal 2002 as Compared to Fiscal 2001. For Fiscal 2002, revenues were $24,701,566 as compared to $21,420,342 in Fiscal 2001, an increase of $3,281,224 or 15.3%. This increase was due to increased market penetration of the Company's products. The Company's gross profit margin increased in Fiscal 2002 to 43.2% from 42.2% in Fiscal 2001. The Company attributes the increase in its gross profit margin to better costs controls. Selling, general and administrative ("SG&A") expenses decreased to 34.8% of net sales in Fiscal 2002 as compared to 36.6% of sales in Fiscal 2001. The decrease was a result of the company's efforts to control costs. Advertising costs as well as costs associates with its European operations were better controlled in fiscal 2002. The Company generated net income of $1,109,133, or $.54 per share-basic and $.53 per share-diluted for Fiscal 2002 as compared to net income of $666,363, or $0.34 per share basic and diluted for Fiscal 2001. Liquidity and Capital Resources The Company's working capital increased to $7,210,049 at October 31, 2003 from $6,803,455 at October 31, 2002, an increase of $406,594. The Company's current ratio was 4.4 to 1 at October 31, 2003 and 2002. During Fiscal 2003, net cash provided by the Company's operating activities was $742,192 as compared to cash provided by operating activities of $1,841,085 in Fiscal 2002. The decrease was primarily due to the decrease in net income as well as an increase in inventory. Additionally, certain expenses, including taxes, incurred in Fiscal 2002 were not payable until the Company's fiscal year ending October 31, 2003. Cash used in investing activities in Fiscal 2003 was $320,373 as compared to $341,149 in Fiscal 2002, as the Company incurred costs in 2002 associated with the relocation of its showroom and in 2003 associated with the expansion of its production facility. Cash used in financing activities in Fiscal 2003 was $161,566 as compared to $745,773 in Fiscal 2002. This was primarily a result of the Company paying off its revolving credit loan in 2002 as well as repurchasing less treasury stock in 2003 as compared to 2002. The Company's working capital increased to $6,803,455 at October 31, 2002 from $6,091,587 at October 31, 2001, an increase of $711,868. The Company's current ratio was 4.4 to 1 at October 31, 2002 as compared to 4.2 to 1 at October 31, 2001. During Fiscal 2002, net cash provided by the Company's operating activities was $1,841,085 as compared to cash provided by operating activities of $272,298 in Fiscal 2001. The increase was primarily due to the increase in net income. Additionally, certain expenses, including taxes, incurred in Fiscal 2002 were not payable until Fiscal 2003. Cash used in investing activities in Fiscal 2002 was $341,149 as compared to $40,356 in Fiscal 2001, as the Company incurred cost associated with its relocation of its showroom. Cash used in financial activities in Fiscal 2002 was $745,773 as compared to $182,629 in Fiscal 2001. This was primarily a result of the Company eliminating its revolving credit borrowings in Fiscal 2002 of $1,250,000 as well as increased purchases of treasury stock. The Company has a loan agreement with Israel Discount Bank of New York (the "Credit Line"). The Credit Line provides for interest to be charged at the prime interest rate. The Credit Line is secured by a first lien on all of the Company's accounts receivable, inventories, cash, securities, deposits and general intangibles. Funds generated from operations along with the Credit Line are expected to be sufficient for the Company to meet its cash flow requirements in the foreseeable future. Critical Accounting Policies The preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, net sales and expenses, and the related disclosures. Management bases its estimates on historical experience, its knowledge of economic and market factors and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies are affected by significant estimates, assumptions and judgments used in the preparation of the Company's consolidated financial statements. Allowances for Doubtful Accounts The Company maintains an allowance for doubtful accounts for losses that it estimates will arise from its customers inability to make required payments. Management makes its estimates of the uncollectability of its accounts receivable by analyzing historical bad debts, specific customer creditworthiness and current economic trends. At October 31, 2003 the allowance for doubtful accounts was $301,000 and at October 31, 2002 it was $326,000. Inventory Valuation Management regularly assesses the valuation of the Company's inventories and writes down those inventories which are obsolete or in excess of management forecasted usage to their estimated realizable value. Management estimates of realizable value are based upon its analyses, and assumptions include, but are not limited to, forecasted sales levels by product, expected product lifecycle, product development plans and future demand requirements. If market conditions are less favorable than forecasts, or actual demand from customers is lower than management estimates, the Company may be required to record additional inventory write-downs. If demand is higher than expected, the Company may sell its inventories that had previously been written down. At October 31, 2003 and 2002 the Company maintained an obsolescence reserve of $150,000 and $260,000 respectively. Safe Harbor Statement Statements which are not historical facts, including statements about the Company's confidence and strategies and its expectations about new and existing products, technologies and opportunities, market and industry segment growth, demand and acceptance of new and existing products are forward looking statements that involve risks and uncertainties. These include, but are not limited to, product demand and market acceptance risks; the impact of competitive products and pricing; the results of financing efforts; the loss of any significant customers of any business; the effect of the Company's accounting policies; the effects of economic conditions and trade, legal, social, and economic risks, such as import, licensing, and trade restrictions; the results of the Company's business plan and the impact on the Company of its relationship with its lender under the Credit Line. ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk. Not Applicable. ITEM 8. Financial Statements and Supplementary Data. The financial statements listed below are included on pages F-1 through F-26 following the signature page. Title of Document Page ----------------- ---- Report of Independent Public Accountants F-1 Consolidated Balance Sheets as of October 31, 2003 and 2002 F-2 - F-3 Consolidated Statements of Income for the Years Ended October 31, 2003, 2002 and 2001 F-4 Consolidated Statements of Shareholders' Equity for the Years Ended October 31, 2003, 2002 and 2001 F-5 - F-6 Consolidated Statements of Cash Flows for the Years Ended October 31, 2003, 2002 and 2001 F-7 - F-8 Notes to Consolidated Financial Statements F-9 - F-26 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. ITEM 9A. Controls and Procedures. The Company maintains "disclosure controls and procedures", as such term is defined in Rules 13a-15e and 15d-15e of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are designed to ensure that information required to be disclosed in its reports, pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Principal Accounting Officer, as appropriate, to allow timely decisions regarding the required disclosures. In designing and evaluating the disclosure controls and procedures, management has recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures. The Company's Chief Executive Officer and Principal Accounting Officer (its principal executive officer and principal accounting officer, respectively) have evaluated the effectiveness of its "disclosure controls and procedures" as of the end of the period covered by this Annual Report on Form 10-K. Based on their evaluation, the principal executive officer and principal financial officer concluded that its disclosure controls and procedures are effective. There were no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date the controls were evaluated. PART III The information required by Items 10, 11, 12, 13 and 14 of this Part will be incorporated by reference to the Proxy Statement of the Company to be filed with the Securities and Exchange Commission on or before February 28, 2004. PART IV ITEM 10. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) Financial Statement Schedules (b) Reports on Form 8-K. None. (c) Exhibits 3.1 The Company's Certificate of Incorporation, as amended, dated December 30, 1994, incorporated by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-KSB filed for its fiscal year ended October 31, 1995 (the "1995 10-KSB"). 3.2 The Company's By-Laws are incorporated by reference to Exhibit 3.03 of Registration Statement No. 33- 10278 NY filed on Form S-18 ("Form S-18"). 4.1 Form of First Amended and Restated 1996 Stock Option Plan, Incorporated by reference to Exhibit 99 of Registration Statement No. 333-56434 filed on Form S-8. 4.2 Form of 2003 Stock Incentive Plan, as amended. 10.1 Security Agreement between Israel Discount Bank of New York and JLM Couture, Inc. dated March 1998 incorporated by reference to Exhibit 10.3 of the 1998 Form 10-KSB. 10.2 Pledge Agreement dated as of December 22, 1998 between Joseph L. Murphy and the Company incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-KSB for its fiscal year ended October 31, 1999 (the "1999 10- KSB"). 10.3 Subscription Agreement dated as of December 22, 1998 between Joseph L. Murphy and the Company incorporated by reference to Exhibit 10.6 to the 1999 10-KSB. ITEM 10. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Continued). (c) Exhibits 10.4 Promissory Note dated as of December 22, 1998 by Joseph L. Murphy to the Company incorporated by reference to Exhibit 10.7 to the 1999 10-KSB. 21 List of Subsidiaries of the Company. 23.1 Consent of Goldstein Golub Kessler LLP dated February 6, 2004. 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. JLM COUTURE, INC. Dated: February 5, 2004 By:/s/Joseph L. Murphy -------------------- Joseph L. Murphy, President Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated: Name Capacity Date ---- -------- ------ /s/Daniel M. Sullivan Chairman of the Board February 5, 2004 ---------------------- of Directors Daniel M. Sullivan /s/Joseph L. Murphy President and Director February 5, 2004 ----------------------- (principal executive Joseph L. Murphy officer) /s/Joseph E. O'Grady Secretary and Director February 5, 2004 ----------------------- Joseph E. O'Grady /s/Jerrold Walkenfeld Principal accounting February 5, 2004 ------------------------ officer (principal Jerrold Walkenfeld financial officer) /s/Keith Cannon Director February 5, 2004 -------------------------- Keith Cannon REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To JLM Couture, Inc. We have audited the accompanying consolidated balance sheets of JLM Couture, Inc. (a Delaware corporation) and Subsidiaries as of October 31, 2003 and 2002 and the related consolidated statements of income, shareholders' equity and comprehensive income and cash flows for each of the three years in the period ended October 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of JLM Couture, Inc. and Subsidiaries as of October 31, 2003 and 2002 and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2003 in conformity with accounting principles generally accepted in the United States of America. /s/GOLDSTEIN GOLUB KESSLER LLP ------------------------------ GOLDSTEIN GOLUB KESSLER LLP New York, New York January 21, 2004 JLM COUTURE, INC. AND SUBSIDIARIES

JLM COUTURE INC 10-K