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 September 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
-------------------------------------------------
(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 October 31, 1997 was
3,606,750.
<PAGE>
ECOMAT, INC.
INDEX
Page
Part I. Financial Information
Condensed Consolidated Balance Sheets
September 30, 1997 (unaudited) and December 31, 1996 1
Condensed Consolidated Statements of Operations
Three Months & Nine Months Ended September 30, 1997
and 1996 (unaudited) 2
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 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 SEPTEMBER 30, DECEMBER 31,
- ------ 1997 1996
----------- ------------
(UNAUDITED) *
Current Assets
Cash and cash equivalents $1,095,286 $4,307,955
Certificate of deposit 400,000 -
Accounts receivable 78,377 45,126
Franchise fees receivable 334,066 26,054
Prepaid expenses 155,765 69,186
---------- ----------
Total current assets 2,063,494 4,448,321
---------- ----------
Franchise fees receivable 66,196 66,196
Other receivable 90,005 -
Property and equipment, net 1,050,243 644,796
Other assets 199,816 35,505
---------- ----------
1,406,260 746,497
---------- ----------
$3,469,754 $5,194,818
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Due to bank $ 377,183
Notes payable, current portion 13,614 $1,000,000
Accounts payable and
accrued expenses 240,839 280,744
Prepaid laundry revenue 14,839 11,934
---------- ----------
Total current liabilities 646,475 1,292,678
---------- ----------
Notes payable, net of current portion 425,179 392,597
Deferred rent payable 179,830 179,830
Deferred franchise revenue 719,245 373,085
---------- ----------
1,324,254 945,512
---------- ----------
1,970,729 2,238,190
---------- ----------
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 (4,877,462) (3,485,199)
----------- ----------
Total stockholders' equity 1,499,025 2,956,628
----------- ----------
$3,469,754 $5,194,818
----------- ----------
----------- ----------
* Derived from audited financial statements
See accompanying notes to the condensed consolidated financial statements.
F-1
<PAGE>
ECOMAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues
Cleaning and laundry services $ 126,820 $ 117,374 $ 354,690 $ 326,607
Franchise revenue - - 111,818 -
Royalties 1,679 - 1,679 -
---------- ----------- --------- ----------
128,499 117,374 468,187 326,607
---------- ----------- --------- ----------
Costs and expenses
Facilities operating costs:
Compensation and related 102,419 53,273 293,119 151,515
Advertising and promotion 6,943 3,834 16,022 25,794
Supplies 11,026 8,236 25,079 15,341
Rent and related 59,047 60,913 140,392 117,502
Utilities 24,270 31,461 63,799 66,627
Other 100,157 (13,328) 170,890 40,847
---------- ---------- --------- --------
Total Facilities Operating Costs 303,862 144,389 709,301 417,626
---------- ----------- --------- --------
Advertising and promotion,
franchise sales 107,572 21,191 163,017 31,321
---------- ----------- --------- --------
General and administrative expenses
Compensation 139,538 125,456 323,589 310,624
Rent 17,428 16,060 69,520 50,559
Professional and consulting fees 61,558 17,835 214,384 52,811
Other 89,092 33,841 321,992 279,458
---------- --------- --------- --------
Total General and
Administrative Expenses 307,616 193,192 929,485 693,452
---------- ---------- --------- --------
Depreciation and amortization 58,544 30,913 133,613 90,552
---------- ---------- --------- --------
Total costs and expenses 777,594 389,685 1,935,416 1,232,951
---------- ---------- --------- ---------
Operating loss (649,095) (272,311) (1,467,229) (906,344)
---------- ----------- ---------- ----------
Other income (expense)
Interest income 22,338 - 92,898 352
Interest expense (4,851) (23,310) (15,432) (63,314)
---------- ---------- ---------- ----------
17,487 (23,310) 77,466 (62,962)
---------- ---------- ---------- ----------
Loss before provision for income taxes (631,608) (295,621) (1,389,763) (969,306)
Income taxes - 2,500 3,885
---------- ---------- ----------- ----------
Net loss $(631,608) $ (295,621) $(1,392,263) $(973,191)
---------- ---------- ----------- ---------
---------- ---------- ----------- ---------
Net loss per share $(.18) $(.12) $(.39) $(.41)
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
Weighted average number of
shares outstanding 3,603,125 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)
Nine Months Ended September 30
1997 1996
------ ------
Cash flows from operating activities
Net loss $ (1,392,263) $ (973,191)
Adjustment to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 133,613 90,552
Changes in assets and liabilities
Accounts receivable and
prepaid expenses (427,842) (122,593)
Other assets & receivables (254,316)
Accounts payable and
accrued expenses (39,905) 393,637
Deferred revenue 346,160 290,835
Other current liabilities 2,905
---------- --------
Net cash used in operating activities (1,631,648) (320,760)
----------- ---------
Cash flows from investing activities
Purchase of property and equipment (539,060) (1,784)
Investment in certificates of deposit (400,000)
---------- -------
Net cash used in investing activities (939,060) (1,784)
--------- --------
Cash flows from financing activities
Proceeds from the issuance of
shares in a public offering,
net of related costs (65,340)
Payment of deferred offering costs (60,154)
Payment of note payable (1,000,000)
Proceeds from bank loans and notes payable 423,379 521,818
---------- ---------
Net cash provided by (use in)
financing activities (641,961) 461,664
---------- ---------
Net increase (decrease) in cash
and cash equivalents (3,212,669) 139,120
Cash and cash equivalents -
beginning of period 4,307,955 10,447
----------- ---------
Cash and cash equivalents -
end of period $1,095,286 $ 149,567
----------- ---------
----------- ---------
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 September 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 nine months
ended September 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 a cleaner 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 two
cluster franchises, in New Jersey, and Austin, TX. In addition,
there are three 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 September 30, 1997 increased by $11,125 as compared
to the corresponding period in 1996. This represents an
increase of 9% as compared to the period ending September 30,1996.
The Company actually received cash payments of $41,703 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 nine month period ending
September 30, 1997 increased by $141,580 or 43% as compared to the
corresponding period in the prior year. The increase for the
nine month period is due primarily to recognition of franchise
revenue of $111,818.
Facility operating costs increased from $144,389 for the
third quarter of 1996 to $303,862 for the third quarter
of 1997, an increase of 110%. This increase is primarily
due to costs associated with the operations for the
new facilities.
Costs for the nine month period of 1997 increased $291,675 or 70%
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 $193,192 to
$307,616 an increase of 59% for the three month period ending
September 30, 1996 and September 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 nine months ending September 30, 1997 increased
$236,033 or 34% 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 $22,338 and $92,898 for the three
months and nine months ended September 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 September 30, 1997
was $631,608 ($.18 per share) as compared to a net loss of
$295,621($.12 per share) for the corresponding quarter in
1996.
The net loss for the nine month period ended September 30, 1997
was $1,392,263($0.39 per share) as compared to a net loss of
$973,191($.41 per share)for the same period of the prior year.
Liquidity and Capital Resources
The Company's liquidity position at September 30, 1997 included
cash and cash equivalents of approximately $1,095,286. 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 $1,631,648 and
$320,760 for the nine months ended September 30, 1997 and 1996,
respectively. The cash used in operating activities
was primarily due to the net loss of $1,392,263 and an
increase in franchise fees receivable.Net cash used in operating
activities for 1996 was primarily due to the net loss of $973,191.
Net cash used in investing activities for the nine months
ended September 30, 1997 was due to the acquisition of a certificate
of deposit of $400,000 and the purchase of property and equipment
for $539,060 which was primarily used for cleaning equipment for
new and existing facilities.
Net cash used in financing activities for the nine months ended
September 30, 1997 totaling $641,961 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 $521,818.
In total, net cash and equivalents decreased by $3,212,669 for
the nine months ended September 30, 1997 and increased $139,120 for the
nine months ended September 30, 1996.
F-7
<PAGE>
PART II. Other information
Item 2. Change in Securities
c. On August 12, 1997 the Company issued an aggregate of 750
shares to 13 employees as bonuses. 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.
<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: November 13, 1997
