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 June 30, 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
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(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 August 15, 1997 was
3,606,000.
<PAGE>
ECOMAT, INC.
INDEX
Page
Part I. Financial Information
Condensed Consolidated Balance Sheets
June 30, 1997 (unaudited) and December 31, 1996 1
Condensed Consolidated Statements of Operations
Three Months & Six Months Ended June 30,1997 and 1996 (unaudited) 2
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 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 JUNE 30, DECEMBER 31,
- ------ 1997 1996
---------- ----------
(UNAUDITED) *
Current Assets
Cash and cash equivalents $1,668,014 $4,307,955
Certificate of deposit 400,000 -
Accounts receivable 55,459 45,126
Franchise fees receivable 372,066 26,054
Prepaid expenses 101,657 69,186
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Total current assets 2,597,196 4,448,321
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Franchise fees receivable 66,196 66,196
Other receivable 92,421 -
Property and equipment, net 1,036,704 644,796
Other assets 200,341 35,505
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1,395,662 746,497
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$3,992,858 $5,194,818
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Note payable, current portion $ 196,667 $1,000,000
Accounts payable and
accrued expenses 313,886 280,744
Prepaid laundry revenue 15,462 11,934
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Total current liabilities 526,015 1,292,678
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Notes payable, net of current portion 435,868 392,597
Deferred rent payable 179,830 179,830
Deferred franchise revenue 720,512 373,085
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1,336,210 945,512
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1,862,225 2,238,190
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Stockholders' equity
Preferred stock, $.0001 par value;
authorized 1,000,000 shares:
none issued
Common stock, $.0001 par value;
authorized 25,000,000 shares;
issued and outstanding 3,603,000
and 3,600,000 shares, respectively
360 360
Additional paid-in capital 6,376,127 6,441,467
Accumulated deficit (4,245,854) (3,485,199)
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Total Stockholders' Equity 2,130,633 2,956,628
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$3,992,858 $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)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues
Cleaning and laundry services $ 125,344 $ 106,463 $ 227,870 $ 209,233
Franchise revenue 13,318 - 111,818 -
---------- ---------- ---------- --------
138,662 106,463 339,688 209,233
---------- ---------- ---------- --------
Costs and expenses
Facilities operating costs:
Compensation and related 111,774 37,181 190,701 98,242
Advertising and promotion 5,325 9,339 9,079 21,960
Supplies 2,703 5,677 14,053 7,105
Rent and related 38,267 27,973 81,344 56,589
Utilities 19,384 9,435 39,529 35,166
Other 37,250 49,816 70,733 54,175
---------- ---------- --------- --------
Total Facilities Operating Costs 214,703 139,421 405,439 273,237
---------- ---------- --------- --------
Advertising and promotion,
franchise sales 38,257 1,530 55,446 10,130
---------- ----------- --------- --------
General and administrative expenses
Compensation 103,273 89,827 184,051 185,168
Rent 34,711 15,548 52,092 34,499
Professional and consulting fees 86,406 3,280 152,826 34,976
Other 145,086 165,060 232,900 245,617
---------- ----------- --------- --------
Total General and
Administrative Expenses 369,476 273,715 621,869 500,260
---------- ----------- --------- --------
Depreciation and amortization 42,171 28,895 75,069 59,639
---------- ----------- --------- --------
Total costs and expenses 664,607 443,561 1,157,823 843,266
---------- ----------- --------- --------
Operating loss (525,945) (337,098) (818,135) (634,033)
---------- ----------- --------- ---------
Other income (expense)
Interest income 25,891 - 70,561 353
Interest expense (10,581) (21,206) (10,581) (40,005)
---------- ----------- --------- ---------
15,310 (21,206) 59,980 (39,652)
---------- ----------- --------- ---------
Loss before provision for income taxes (510,635) (358,304) (758,155) (673,685)
Income taxes - 325 2,500 3,885
---------- ----------- --------- ---------
Net loss $(510,635) $ (358,629) $(760,655) $(677,570)
---------- ----------- --------- ---------
---------- ----------- --------- ---------
Net loss per share $(.14) $(.15) $(.21) $(.28)
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Weighted average number of
shares outstanding 3,603,000 2,400,000 3,602,250 2,400,000
----------- ---------- ---------- ----------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-2
<PAGE>
ECOMAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
1997 1996
--------- --------
Cash flows from operating activities
Net loss $ (760,655) $ (677,750)
Adjustment to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 75,069 59,639
Changes in assets and liabilities
Accounts receivable and
prepaid expenses (388,816) (60,631)
Other assets & receivables (257,257) 519
Accounts payable and
accrued expenses 33,412 351,158
Deferred revenue 347,427 177,500
Other current liabilities 3,528 -
Other long term liabilities - 8,376
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Net cash used in operating activities (947,292) (141,189)
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Cash flows from investing activities
Payments for acquisition of subsidiary (65,000) -
Purchase of property and equipment (385,990) (10,849)
Investment in certificates of deposit (400,000) -
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Net cash used in investing activities (850,990) (10,849)
--------- ----------
Cash flows from financing activities
Proceeds from the issuance of
shares in a public offering,
net of related costs (80,340) (50,000)
Payment of note payable (1,004,590) -
Proceeds from notes payable 243,271 213,736
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Net cash provided by (use in)
financing activities (841,659) 163,736
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Net increase (decrease) in cash
and cash equivalents (2,639,941) 11,698
Cash and cash equivalents -
beginning of period 4,307,955 10,447
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Cash and cash equivalents -
end of period $1,668,014 $ 22,145
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See accompanying notes to the condensed consolidated financial statements.
F-3
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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 June 30, 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 and six months
ended June 30, 1997 are not necessarily indicative of the results
to be expected for the full year.
Note B-Acquisition of Subsidiary
In February 1997, the Company purchased assets of a cleaner
in Ridgefield, CT. 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 statements. The terms of
the agreement provide that an additional 12,000 shares will be
F-4
<PAGE>
ECOMAT,INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note B - (Cont.)
issued contingent upon performance of the acquired unit, as
defined. Such contingent consideration will be recorded
as additional purchase price if and when the performance
goals are achieved.
In May 1997, the Company purchased the assets of White Glove Valet
Cleaners in New York, NY for $200,000.
In June 1997, the Company purchased assets of a cleaner in Wilton,
CT. The Company agreed to pay cash consideration of $10,000. In
addition the Company agreed to issue a maximium of 1,000 shares
(valued at $5,000)and additional cash of $15,000 contingent upon
performance of the acquired unit, as defined. Such contingent
consideration will be recorded as additional purchase price if
and when the performance goals are achieved.
Note C- 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.
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 five Company-owned
facilities in New York City, Mamaroneck, NY, Ridgefield,
CT, and Wilton, CT.
There are currently signed franchise agreements for three
cluster franchises, one each in New Jersey, Brooklyn, NY,
and Austin, TX. In addition, there are two Ecomat self-service
laundromat and drop-off facility franchises in operation.
The Company has signed four master franchise agreements for
various parts of Europe, Indonesia, Malaysia/Brunei, and Australia.
Revenues. Total operating revenues, for the three month
period ending June 30, 1997 increased by $32,199 as compared
to the corresponding period in 1996. This represents an
increase of 30% as compared to the period ended June 30,1996.
This increase was due to franchise revenue recognized by the
Company in the three months ended June 30, 1997 and new
operating facilities. The Company actually received cash
payments of $72,250 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.
Total operating revenues for the six month period ending
June 30, 1997 increased by $130,455 or 62% as compared to the
corresponding period in the prior year. The increase for the
six month period is due primarily to recognition of franchise
revenue of $111,818. The balance of the revenue increase is
mainly from the Ridgefield, CT facility.
Facility operating costs increased from $139,421 for the
second quarter of 1996 to $214,703 for the second quarter
of 1997, an increase of 54%. This increase is primarily
due to new costs associated with the operations for the
Ridgefield, CT facility, and the opening of two new facilities.
Costs for the six month period of 1997 increased $132,202
or 48% from the corresponding period of 1996. Increases are
attributable to the opening and conversions of three company-owned
facilities.
General & Administrative Expenses. The Company's General
and Administrative expenses increased from $273,715 to
$369,476, an increase of 35% for the three month period ending
June 30, 1996 and June 30, 1997, respectively. This increase is
primarily due to the increase in professional fees and the
expenses associated with our expansion and responsibilities of
being a publicly-held entity.
Expenses for the six months ending June 30, 1997 increased
$121,609 or 24% from the corresponding period of 1996. These
increases are basically attributable to the same reasons as for
the three month period.
F-6
<PAGE>
Other income amounted to $25,891 and $70,561 for the three
months and six months ended June 30, 1997 respectively, due
to interest income earned from the net proceeds of the initial
public offering that occurred in December 1996.
Net Loss. The net loss for the quarter ended June 30, 1997
was $510,635 ($.14 per share) as compared to a net loss of
$358,629 ($.15 per share) for the corresponding quarter in
1996.
The net loss for the six month period ended June 30, 1997
was $760,655 ($ 0.21 per share) as compared to a net loss of
$677,570 ($.28 per share)for the same period of the prior year.
Liquidity and Capital Resources
The Company's liquidity position at June 30, 1997 included
cash and cash equivalents of approximately $1,668,014. In
addition, the Company has a certificate of deposit of
$400,000 which matures in less than one year.
Net cash used in operating activities was $947,292 and
$141,189 for the six months ended June 30, 1997 and 1996,
respectively. The cash used in operating activities
was primarily due to the net loss of $760,655 and an
increase in franchise fees receivable.
Net cash used in operating activities for 1996 was primarily
due to the net loss of $677,750.
Net cash used in investing activities for the six months
ended June 30, 1997 was due to the acquisition of a certificate
of deposit of $400,000 and the purchase of property and equipment
for $385,990 which was primarily used for cleaning equipment for
new and existing facilities.
Net cash used in financing activities for the six months ended
June 30, 1997 totaling $841,659 was primarily due to the partial
repayment of $1,000,000 on the note payable to the major stock-
holder of the company.
During 1996 cash received from financing activities was due to
proceeds on notes payable from stockholders for $213,736.
In total, net cash and equivalents decreased by $841,659 for
the six months ended June 30, 1997 and increased $11,698 for the
six months ended June 30, 1996.
F-7
<PAGE>
PART II. Other information
Item 6. Exhibits and Reports on Form 8-K
b. Reports on Form 8-K. The registrant filed a
Form 8-K on May 27, 1997 involving the purchase of
an existing facility in New York, NY. (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: August 19, 1997
