UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1997
Commission File Number 0-21613
ECOMAT, INC.
----------------
(Exact name of small business issuer as specified in its
charter)
Delaware 13-3865026
--------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
147 Palmer Avenue, Mamaroneck, NY 10543
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(Address of principal executive offices)(Zip Code)
(914) 777-3600
----------------------
(Issuer's telephone number, including area code)
Check whether the issuer (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 ___
The number of shares outstanding of the Issuer's
Common Stock, par value $.0001 per share, as of May 15,
1997 was 3,603,000.
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ECOMAT, INC.
INDEX
Page
Part I. Financial Information
Condensed Consolidated Balance Sheets
March 31, 1997 (unaudited) and December 31, 1996 1
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996 (unaudited) 2
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 (unaudited) 3
Notes to Condensed Consolidated Financial
Statements 4-5
Management's Discussion and Analysis of Financial
Conditions and Results of Operations 6-7
<PAGE>
ECOMAT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS MARCH 31, DECEMBER 31,
- ------ 1997 1996
---------- ----------
(UNAUDITED) *
Current Assets
Cash and cash equivalents $2,585,255 $4,307,955
Accounts receivable 64,033 45,126
Franchise fees receivable 290,504 26,054
Prepaid expenses 78,811 69,186
--------- ---------
Total current assets 3,018,603 4,448,321
Franchise Fees Receivable 66,196 66,196
Property and equipment, net 714,743 644,796
Other assets 166,594 35,505
--------- ---------
$3,966,136 $5,194,818
__________ __________
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Note payable, current portion - $1,000,000
Accounts payable and
accrued expenses 154,405 280,744
Prepaid laundry revenue 19,275 11,934
--------- ---------
Total current liabilities 173,680 1,292,678
Notes payable, net of current portion 391,340 392,597
Deferred rent payable 179,830 179,830
Deferred franchise revenue 580,018 373,085
--------- ---------
1,324,868 2,238,190
Commitments and contingency
Stockholders' equity
Preferred stock, $.0001 par value
Common stock, $.0001 par value 360 360
Additional paid-in capital 6,376,127 6,441,467
Accumulated deficit (3,735,219) (3,485,199)
---------- ----------
Total Stockholders' Equity 2,641,268 2,956,628
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$3,966,136 $5,194,818
__________ __________
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* Derived from audited financial statements
See accompanying notes to the condensed consolidated financial
statements.
F-1
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ECOMAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
----------------------------
1997 1996
Revenues ------ -------
Cleaning and laundry services $ 102,526 $ 102,770
Franchise revenue 98,500 -
---------- ----------
201,026 102,770
__________ __________
---------- ----------
Costs and expenses
Facilities operating costs:
Compensation and related 78,927 61,061
Advertising and promotion 3,754 12,621
Supplies 11,350 1,428
Rent and related 43,077 28,616
Utilities 20,145 25,731
Other 33,483 4,359
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Total Facilities Operating Costs 190,736 133,816
---------- ----------
Advertising and promotion,
franchise sales 17,189 8,600
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General and administrative expenses
Compensation 80,778 95,341
Rent 17,381 18,951
Professional and consulting fees 66,420 31,696
Other 87,814 80,557
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Total General and Administrative
Expenses 252,393 226,545
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Depreciation and amortization 32,898 30,744
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Total costs and expenses 493,216 399,705
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Operating loss (292,190) (296,935)
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Other income (expense)
Interest income 44,670 -
Interest expense - (18,446)
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44,670 (18,446)
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Loss before provision for income taxes (247,520) (315,381)
Income taxes 2,500 3,560
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Net loss $(250,020) $(318,941)
__________ ___________
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Net loss per share $(.07) $(.13)
_______ _____
------- -----
Weighted average number of
shares outstanding 3,601,500 2,400,000
___________ ___________
----------- -----------
See accompanying notes to the condensed consolidated financial
statements.
F-2
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ECOMAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
1997 1996
--------- --------
Cash flows from operating activities
Net loss $(250,020) $(318,941)
Adjustment to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 32,898 30,744
Changes in assets and liabilities
Accounts receivable and
prepaid expenses (292,982) (38,073)
Other assets (76,089) (137,868)
Accounts payable and
accrued expenses (126,339) 205,889
Accrued interest - 18,484
Deferred revenue 206,933 145,247
Other current liabilities 7,341
Other long term liabilities - 4,050
--------- --------
Net cash used in operating activities (498,258) (90,468)
--------- --------
Cash flows from investing activities
Payments for acquisition of subsidiary (65,000)
Purchase of property and equipment (77,845) (5,182)
--------- --------
Net cash used in investing activities (142,845) (5,182)
--------- --------
Cash flows from financing activities
Proceeds from the issuance of
shares in a public offering,
net of related costs (80,340) -
Payment of note payable (1,001,257) -
Proceeds from notes payable - 112,500
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Net cash provided by (use in)
financing activities (1,081,597) 112,500
---------- ---------
Net increase (decrease) in cash
and cash equivalents (1,722,700) 16,850
Cash and cash equivalents -
beginning of period 4,307,955 10,447
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Cash and cash equivalents -
end of period $2,585,255 $ 27,297
__________ ___________
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See accompanying notes to the condensed consolidated financial
statements.
F-3
<PAGE>
ECOMAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - In the opinion of management of Ecomat, Inc. and
Subsidiaries (the "Company"), the accompanying unaudited
condensed consolidated financial statements as of March 31, 1997
include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation. The statements
should be read in conjunction with the consolidated financial
statements and the related notes included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996 and do
not include all the information and footnote disclosures required
by generally accepted accounting principles for complete
financial statements.
The results of operations for the three months ended March
31, 1997 are not necessarily indicative of the results to be
expected for the full year.
Note B - Notes Payable March 31, Dec. 31
1997 1996
Notes payable consist of the following:
Note payable- majority stockholder $215,000 $1,215,000
Note payable - officer/stockholder 71,836 71,836
Accrued interest 104,504 105,761
-------- ----------
391,340 1,392,597
-------- ----------
Less: current portion of Notes payable - 1,000,000
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$391,340 $392,597
________ __________
-------- ----------
The Company's notes payable to two officers/principal
stockholder/directors in the amount of $215,000 and $71,836 at
March 31, 1997, bear interest at 7% per annum and are due in
December 1998. The Notes are convertible into common stock at a
price equal to the book value of the Company within certain
limitations as defined in the notes.
During January 1997, the Company paid $1,000,000 to its majority
stockholders as a partial repayment of the note payable.
Note C-Acquisition of Subsidiary
In February 1997, the Company purchased assets of a cleaner
in Ridgefield, Connecticut. The Company agreed to issue 3,000
shares (valued at $15,000) to the seller and to pay cash
consideration of $65,000. The subsidiary is not considered
significant to the Company's financial
F-4
<PAGE>
ECOMAT,INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note C - (Cont.)
statements. The terms of the agreement provide that an additional
12,000 shares will be issued contingent upon performance of the
acquired unit, as defined. Such contingency consideration will
be recorded as additional purchase price if and when the
performance goals are achieved.
The accompanying condensed consolidated financial statements
include activity of the acquisition from February 12, 1997 to
March 31, 1997. Such activity is not material to the Company's
operations and as such no pro forma information has been
presented.
Note D- New Accounting Pronouncement - In February 1997, the
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share,
which is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Early adoption of
the new standard is not permitted. The new standard eliminates
primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together
with disclosure of how the per share amounts were computed. The
adoption of this new standard is not expected to have a material
impact on the disclosure of earnings per share in the financial
statements.
Note E - Subsequent Events
In March 1997 the Company entered into a contract to
purchase the assets of White Glove Valet Cleaners in New York,
New York for approximately $200,000. The closing is expected to
occur in the second quarter of 1997.
F-5
<PAGE>
ECOMAT, INC.
Management's Discussion & Analysis of Financial Condition and
Results of Operations
Ecomat, Inc., is a Delaware corporation ("Ecomat"
or the "Company") that has been formed to develop
the Ecomat concept nationally and internationally which,
management believes, provides the first environmentally
sound solution to current dry cleaning methods in the
United States and is currently the only franchiser of
this concept. Ecomat currently has four Company-owned
facilities in New York City, Mamaroneck, NY, Scarsdale,
NY and Ridgefield CT.
There are currently signed franchise agreements for seven
cluster franchises, two in New Jersey, and one each in
Long Island, NY, Brooklyn, NY, Austin, TX, Westchester
County, NY and Boulder, Co. In addition, there is one
Ecomat self-service laundromat and drop-off facility
franchise in Manhattan, NY. As of March 31, 1997 there
were 2 Westchester route franchise clusters in
operation (two (2) drop sites) and one other facility
in operation in Long Island. In addition, the Company
has signed three master franchise agreements for
various parts of Europe, Indonesia and Malaysia/Brunei.
Revenues. Total operating revenues, for the period ending
March 31, 1997 increased by $98,256 as compared to the
corresponding period in 1996. This represents an
increase of 96% as compared to the period ending March
31, 1996. This increase principally was due to
franchise revenue recognized by the company in the
three months ended March 31, 1997. The company actually
received cash payments of $36,000 from master franchises that
was not recognized as revenue in the current quarter. These
revenues will be recognized in future periods, according to
the company's accounting policy.
Cleaning and laundry revenue remained constant for the three
months ended March 31, 1997 as compared to the
corresponding period in 1996. Ecomat acquired an
existing wet cleaning facility in Ridgefield, CT in
February 1997. The Company expects additional revenues
from this location to augment volume and revenue in the
next quarter. In addition the Company intends to
acquire a full service facility in Manhattan in the
second quarter of 1997. The Company intends to convert
the 72nd St. facility to a satellite location in the
second quarter and to open another satellite location
as well. Through these acquisitions, management
believes that greater economies of scale can be
achieved and management anticipates operations for its
company-owned facilities to reach break even by
December 31, 1997 or sooner.
Facility operating costs increased from $133,816 for the
first quarter of 1996 to $190,736 for the first quarter
of 1997, an increase of 43%. This increase is
primarily due to new costs associated with the
operations for the Ridgefield, CT facility, the
increase in rent for one of the companies drop sites,
and increased use of outside services for shirt
processing.
General & Administrative Expenses. The company's general
and administrative expenses increased from $226,545 to
$252,393, an increase of 11% from March 31, 1996 to
March 31, 1997. This increase is primarily due to the
increase in professional fees and recruiting fees
incurred in the hiring of a Controller and Director of
Operations. The Company anticipates greater control
over these costs in the second quarter.
F-6
<PAGE>
Other income amounted to $44,670 in 1997 due to interest
income earned from the net proceeds of the initial
public offering that occurred in December 1996.
Net Loss. The net loss was $250,020 ($0.07 per share) for
the quarter ended March 31, 1997, as compared to a net
loss of $318,941 ($ 0.13 per share) for the quarter
ended March 31, 1996.
The Company expects to continue to generate additional
revenue from franchise sales and/or substantial
revenues from the Company owned stores by December 31,
1997.
Liquidity and Capital Resources
The Company's liquidity position at March 31, 1997 included
cash and cash equivalents of approximately $2,585,255.
Net cash used in operating activities was $498,258 and
$90,468 for the three months ended March 31, 1997 and 1996,
respectively. The cash used in operating activities
was primarily due to the net loss of $250,020 and an
increase in franchise fees receivable, net of related
deferred revenue of 57,517. Franchise receivables
increased due to the signing of numerous domestic and
international franchise agreements. In addition,
accounts payable and accrued expenses decreased by
$126,339 from December 31, 1996.
Net cash used in operating activities for 1996 was primarily
due to the net loss of $318,941 and an increase in
accounts payable of $205,889.
Net cash used in investing activities for the three months
ended March 31, 1997 was due to the acquisition of a
subsidiary for $65,000 in cash and the purchase of
property and equipment for $77,845.
Net cash used in financing activities for the quarter ended
March 31, 1997 totaling $1,081,597 was primarily due
to the partial repayment of $1,000,000 on the note
payable to the major stockholder of the company.
During 1996 cash received from financing activities was due to
proceeds on notes payable from stockholders for $112,500.
In total, net cash and equivalents decreased by $1,722,700 for
the three months ended March 31, 1997 and increased
$16,850 for the three months ended March 31, 1996.
F-7
<PAGE>
PART II. Other information
Item 2. Change in Securities
c. On February 12, 1997 the Company issued 3,000
shares to Scott Sidell ("Seller") in connection with
the Company's purchase of an existing wet cleaning
facility in Ridgefield, Connecticut. The securities
issued were part of the purchase price paid to the
Seller. No underwriting discounts or commissions were
paid. The sale of such stock was made in reliance on
Section 4(2) of the Securities Act of 1933, as amended.
Item 6. Exhibits and Reports on Form 8-K
b. Reports on Form 8-K. The registrant filed a
Form 8-K on February 25, 1997 involving the purchase of
an existing wet cleaning facility in Ridgefield,
Connecticut (Item 2 (Acquisition or Disposition of Assets)
of such report).
<PAGE>
SIGNATURES
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.
ECOMAT, INC.
By: /s/ Diane Weiser
Name: Diane Weiser
Title: Chief Executive Officer
Dated: May 20, 1997
