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Previous: ELECTRONIC DATA SYSTEMS CORP /DE/, 8-K, 1998-08-07 |
Next: CNS BANCORP INC, 10QSB, 1998-08-07 |
<PAGE>
<PAGE>
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, 1998
Commission File Number 0-21613
ECOMAT, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 133865026
(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 No X
------ ------
The number of shares outstanding of the Issuer's Common Stock, par value
$.0001 per share, as of June 30, 1998 was 3,606,800.
<PAGE>
<PAGE>
ECOMAT, INC.
INDEX
Page
----
Part I. Financial Information
Condensed Consolidated Balance Sheets
June 30, 1998 (unaudited) and December 31, 1997 1
Condensed Consolidated Statements of Operation
Three Months Ended June 30, 1998 and 1997 (unaudited) 2
Condensed Consolidated Statements of Operation
Six Months Ended June 30, 1998 and 1997 (unaudited) 3
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998 and 1997 (unaudited) 4
Notes to Condensed Consolidated Financial
Statements 5-6
Management's Discussion and Analysis of Financial
Conditions and Results of Operations 7-8
<PAGE>
<PAGE>
ECOMAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Assets
------
6/30/98 12/31/97
------- --------
Current Assets (Unaudited)
- --------------
<S> <C> <C>
Cash and cash equivalents $ 47,807 $ 377,764
Investments 415,055
Accounts Receivable, net of allowance of $3386 72,644 31,478
Franchise fees receivable 15,360 15,360
Notes Receivable 8,435 8,079
Prepaid expenses 56,473 62,430
----------- -----------
Total current assets $ 200,719 $ 910,166
Property and equipment, net $ 976,920 $ 1,068,084
Franchise fees receivable 266,880 282,240
Notes Receivable 185,187 188,120
Other assets 143,664 134,980
----------- -----------
Total Assets $ 1,773,370 $ 2,583,590
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
- -------------------
Notes payable, current portion $ 1,215,787 $ 663,341
Accounts payable and accrued expenses 537,093 696,756
Prepaid laundry revenue 12,000 12,000
----------- -----------
Total current liabilities $ 1,764,880 $ 1,372,097
Notes payable, net of current portion $ 70,669 $ 202,385
Deferred rent payable 204,438 204,756
Deferred franchise revenue 605,256 609,006
----------- -----------
Total liabilities $ 2,645,243 $ 2,388,244
Commitments and contingency
Stockholders' equity
Preferred stock, $.0001 par value; authorized 1,000,000 shares;
no shares issued and outstanding
Common stock, $.0001 par value; authorized, 25,000,000 shares;
issued and outstanding, 3,606,800 shares $ 361 $ 361
Additional paid-in capital 6,404,377 6,404,377
Accumulated deficit (7,276,611) (6,209,392)
----------- -----------
Total stockholders' equity ($ 871,873) $ 195,346
----------- -----------
Total liabilities and stockholders' equity $ 1,773,370 $ 2,583,590
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE>
<PAGE>
ECOMAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended June 30
--------------------------
1998 1997
---- ----
<S> <C> <C>
Revenues
Cleaning and laundry services $ 60,357 $ 125,344
Franchise revenue 3,393 13,318
Royalty revenue 3,064
----------- -----------
Total revenue $ 66,814 $ 138,662
Costs and expenses
Facilities operating costs
Compensation $ 52,152 $ 111,774
Advertising and promotion 2,394 5,325
Supplies 2,017 2,703
Rent 76,914 38,267
Utilities 15,811 19,384
Other 40,231 37,250
----------- -----------
$ 189,519 $ 214,703
----------- -----------
Advertising and promotion-franchise sales ($ 10,391) $ 38,257
----------- -----------
General and administrative expenses
Compensation $ 55,111 $ 103,273
Rent 37,338 34,711
Professional and consulting fees 89,589 86,406
Other 89,853 145,086
----------- -----------
$ 271,891 $ 369,476
----------- -----------
Depreciation and amortization $ 68,256 $ 42,171
----------- -----------
Total costs and expenses $ 519,275 $ 664,607
----------- -----------
Loss on disposition of assets $ 0 $ 0
----------- -----------
Operating loss ($ 452,461) ($ 525,945)
----------- -----------
Other income (expense)
Other income $ 3,090 $ 25,891
Interest expense (13,146) (10,581)
----------- -----------
($ 10,056) $ 15,310
----------- -----------
Loss before provision for income taxes ($ 462,517) ($ 510,635)
----------- -----------
Income taxes $ 17,000 $ 0
----------- -----------
Net loss ($ 479,517) ($ 510,635)
----------- -----------
----------- -----------
Net loss per share ($ 0.13) ($ 0.14)
----------- -----------
----------- -----------
Weighted average shares outstanding 3,606,800 3,601,500
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
<PAGE>
ECOMAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months ended June 30
--------------------------
1998 1997
---- ----
<S> <C> <C>
Revenues
Cleaning and laundry services $ 147,596 $ 227,870
Franchise revenue 10,047 111,818
Royalty revenue 9,148 0
----------- -----------
Total revenue $ 166,791 $ 339,688
Costs and expenses
Facilities operating costs
Compensation $ 155,152 $ 190,701
Advertising and promotion 7,045 9,079
Supplies 8,322 14,053
Rent 119,537 81,344
Utilities 36,532 39,529
Other 87,546 70,733
----------- -----------
$ 414,134 $ 405,439
----------- -----------
Advertising and promotion-franchise sales $ 18,988 $ 55,446
----------- -----------
General and administrative expenses
Compensation $ 146,842 $ 184,051
Rent 47,905 52,092
Professional and consulting fees 187,931 152,826
Other 250,291 232,900
----------- -----------
$ 632,969 $ 621,869
----------- -----------
Depreciation and amortization $ 131,780 $ 75,069
----------- -----------
Total costs and expenses $ 1,197,871 $ 1,157,823
----------- -----------
Loss on disposition of assets $ 0 $ 0
----------- -----------
Operating loss ($1,031,080) ($ 818,135)
----------- -----------
Other income (expense)
Other income $ 10,901 $ 70,561
Interest expense (28,141) (10,581)
----------- -----------
($ 17,240) $ 59,980
----------- -----------
Loss before provision for income taxes ($1,048,320) ($ 758,155)
----------- -----------
Income taxes $ 18,900 $ 2,500
----------- -----------
Net loss ($1,067,220) ($ 760,655)
=========== ===========
Net loss per share ($ 0.30) ($ 0.21)
=========== ===========
Weighted average shares outstanding 3,606,800 3,601,500
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
<PAGE>
ECOMAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended June 30
------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss ($1,067,220) ($ 760,655)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization $ 131,780 $ 75,069
Changes in assets and liabilities
Accounts receivable and prepaid expenses (35,565) (388,816)
Other assets 8,426 (257,257)
Accounts payable and accrued expenses (159,663) 33,412
Other current liabilities 3,528
Deferred revenues and other liabilities (4,067) 347,427
----------- -----------
Net cash used in operating activities ($1,126,309) ($ 947,292)
Cash flows from investing activities
Purchase of property and equipment ($ 39,433) ($ 385,990)
Acquisition of subsidiaries (65,000)
Sale of certificate of deposit 420,715
Investment in certificate of deposit (5,660) (400,000)
----------- -----------
Net cash provided/(used) in investing activities $ 375,622 ($ 850,990)
Cash flows from financing activities
Proceeds from the issuance of shares in a public offering,
net of related costs ($ 80,340)
Proceeds from shareholder contributions 750,000
Payment of note payable (343,712) (1,004,590)
Proceeds from notes payable 14,442 243,271
----------- -----------
Net cash provided/(used) by financing activities $ 420,730 ($ 841,659)
Net decrease in cash and cash equivalents ($ 329,957) ($2,639,941)
Cash and cash equivalents-beginning of year $ 377,764 $ 4,307,955
----------- -----------
Cash and cash equivalents-end of period $ 47,807 $ 1,668,014
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
<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 June 30, 1998 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
related notes included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1997 and do not include all the information and footnote
disclosures required by generally accepted accounting principles for complete
financial statements.
The results of operation for the three months ended June 30, 1998
are not necessarily indicative of the results to be expected for the full year.
Note B - Notes Payable
Notes payable consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Note payable-majority stockholder (a) $ 965,000 $ 215,000
Note payable-officer/stockholder (b) 70,870 70,870
Chase term loan payable (c) -0- 176,667
Chase business revolving credit account (d) -0- 181,234
Notes payable (auto) (2) -- Ford Credit (e) 30,670 34,324
Notes payable (auto) (2) -- Chase (f) 20,749 9,192
Note payable -- Medallion (g) 43,621 46,199
Accrued interest 155,546 132,240
------- -------
1,286,456 865,726
Less current portion 1,215,787 663,341
--------- -------
Notes payable, net of current portion 70,699 202,385
</TABLE>
The Company's notes payable to two officers/principals
stockholder/directors in the amount of $965,000 and $70,870 at June 30, 1998
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 the second quarter, 1998, the Company sold its investment in
certificates of deposit and used the proceeds to retire the Chase term loan and
the Chase business revolving credit account.
5
<PAGE>
<PAGE>
Note C - Legal Proceedings
On June 23, 1998, Nancy Bernardin, on behalf of herself and PEB, Inc.,
the Huntington, New York franchisee of Ecofranchising, Inc., filed a complaint
with the Supreme Court of the New York, Nassau County, against Ecofranchising,
Inc., Astrid Hindemith and certain former executives of the Company claiming
breach of agreement and representations and requesting, among other matters,
monetary damages of $450,000 and exemplary damages of $2,000,000. The Company
believes that the complaint of Nancy Bernardin and PEB, Inc. is without merit
and intends to vigorously defend its position. In addition, on July 23, 1998,
Ecofranchising, Inc. and Astrid Hindemith counterclaimed against the plaintiffs
for nonpayment of $70,000 in franchising fees and requesting compensation for
additional damages in the amount of $1,000,000. The legal proceedings described
above are in a very early stage and no determination can be made at this time as
to their outcome.
6
<PAGE>
<PAGE>
ECOMAT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ---------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Revenues. Total operating revenues for the quarter ended June 30, 1998 decreased
by $72,000 as compared to the corresponding period in 1997. This represents a
decrease of 52% as compared to the period ending June 30, 1997. This was
primarily due to decreases of $65,000 in cleaning and laundry services and
$10,000 in franchise revenue. Royalty revenue increased from $0 in the second
quarter, 1997 to $3,000 in the second quarter, 1998.
Total operating revenues for the six months ended June 30, 1998 decreased by
$173,000 as compared to the corresponding period in 1997. This represents a
decrease of 51% as compared to the period ending June 30, 1997. This was
primarily due to decreases of $80,000 in cleaning and laundry services and
$102,000 in franchise revenue. Royalty revenue increased from $0 in the first
six months of 1997 to $9,000 in the corresponding period in 1998.
Facility operating costs decreased from $215,000 for the second quarter of 1997
to $190,000 for the second quarter of 1998, a decrease of 12%. This decrease can
be largely explained by costs saved by the closing of the Ridgefield, CT
($43,000) and Wilton, CT ($5,000) locations, offset by costs incurred by the
facility in Mahwah, NJ ($39,000) and an increase in costs in the North Moore
Street (NYC) location ($29,000). The former location was not yet operating in
the second quarter of 1997, while the latter location opened during the second
quarter, 1997. Cost controls at the Mamaroneck facility also resulted in $46,000
in expense savings during the current quarter as compared to the second quarter,
1997.
For the first six months of 1998, facility costs increased by $9,000, primarily
due to the current year costs incurred at the facilities which were not
operating during the first quarter, 1997 (Mahwah, Ridgefield, Wilton, North
Moore Street).
General and administrative expenses decreased 36% ($149,000, from $411,000 to
$262,000) for the quarter ended June 30, 1998 as compared to the corresponding
period in 1997. The primary decreases were in the expense categories of
compensation ($48,000) and advertising ($49,000). The company had instituted a
stringent cost-cutting system in March, 1998 which, as anticipated, generated
significant savings in expense categories across-the-board in the second
quarter, 1998.
For the six months ended June 30, 1998, general and administrative expenses
decreased by $25,000 from the corresponding period in 1997, due primarily to
decreases in advertising expenses ($36,000).
Depreciation expense increased from $42,000 in the first quarter, 1997 to
$68,000 in the same period in 1998 (an increase of 62%), primarily due to the
large investment in depreciable assets made by the company during 1997.
Other income decreased (88%), from $26,000 during the first quarter, 1997 to
$3,000 during the corresponding period in 1998. In the first six months of 1997,
the company earned substantial interest income from the net proceeds of the
initial public offering that occurred in December, 1996.
Interest expense increased by $17,000, from $11,000 during the first six months
of 1997 to $28,000 in the corresponding period in 1998, primarily due to the
large amount of loans ($750,000) made by the main shareholder during the period
ended June 30, 1998.
Net loss. The net loss was $480,000 ($.13 per share) for the quarter ended June
30, 1998, as compared to a net loss of $511,000 ($.14 per share) for the quarter
ended June 30, 1997. Year-to-date, the 1998 loss was $1,067,000 as compared with
$761,000 in the corresponding period in 1997.
7
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The company's liquidity position at June 30, 1998 included cash and cash
equivalents of approximately $48,000.
Net cash used in operating activities was $1,126,000 and $947,000 for the six
months ended June 30, 1998 and 1997, respectively. The cash used in operating
activities was primarily due to the net loss of $1,067,000, offset by $132,000
of depreciation. Cash was also used by decreasing accounts payable and accrued
expenses by $160,000 since December 31, 1997.
Net cash provided by investing activities for the six months ended June 30, 1998
was $375,000, primarily due to the sale of investments ($420,000), offset by the
purchase of property and equipment ($39,000).
Net cash provided by financing activities during the first six months of 1998
was $421,000 (compared with an $842,000 use of funds during the corresponding
period in 1997), due to the addition of $750,000 of loan proceeds from the
primary stockholder, offset by repayment of notes payable of $344,000. (During
the first quarter of 1997, the company had repaid the primary stockholder a
partial repayment of $1,000,000 notes payable.)
In total, net cash and equivalents decreased by $330,000 during the first six
months of 1998 and $2,640,000 in the corresponding period in 1997.
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.
Date: July 31, 1998 Ecomat, Inc.
By: /s/ Hans-Rudolph Kuchler
Hans-Rudolph Kuchler
President
Chief Operating Officer
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 47,807
<SECURITIES> 0
<RECEIVABLES> 84,465
<ALLOWANCES> 3,386
<INVENTORY> 0
<CURRENT-ASSETS> 200,719
<PP&E> 1,470,092
<DEPRECIATION> 493,172
<TOTAL-ASSETS> 1,773,370
<CURRENT-LIABILITIES> 1,764,880
<BONDS> 1,286,456
<COMMON> 361
0
0
<OTHER-SE> 6,404,377
<TOTAL-LIABILITY-AND-EQUITY> 1,773,370
<SALES> 63,750
<TOTAL-REVENUES> 66,814
<CGS> 0
<TOTAL-COSTS> 519,275
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,146
<INCOME-PRETAX> (462,517)
<INCOME-TAX> 17,000
<INCOME-CONTINUING> (479,517)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (479,517)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 47,807
<SECURITIES> 0
<RECEIVABLES> 84,465
<ALLOWANCES> 3,386
<INVENTORY> 0
<CURRENT-ASSETS> 200,719
<PP&E> 1,470,092
<DEPRECIATION> 493,172
<TOTAL-ASSETS> 1,773,370
<CURRENT-LIABILITIES> 1,764,880
<BONDS> 1,286,456
<COMMON> 361
0
0
<OTHER-SE> 6,404,377
<TOTAL-LIABILITY-AND-EQUITY> 1,773,370
<SALES> 157,643
<TOTAL-REVENUES> 166,791
<CGS> 0
<TOTAL-COSTS> 1,197,871
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,141
<INCOME-PRETAX> (1,048,320)
<INCOME-TAX> 18,900
<INCOME-CONTINUING> (1,067,220)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,067,220)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
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