<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 March 31, 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>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ECOMAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Assets
Current Assets 3/31/98 12/31/97
------- --------
<S> <C> <C>
Cash and cash equivalents $ 474,006 $ 377,764
Investments 420,715 415,055
Accounts Receivable, net of allowance of $3386 48,534 31,478
Franchise fees receivable 15,360 15,360
Notes Receivable 8,079 8,079
Prepaid expenses 42,772 62,430
----------- -----------
Total current assets $1,009,466 $ 910,166
Property and equipment, net $1,013,414 $1,068,084
Franchise fees receivable 282,240 282,240
Notes Receivable 180,447 188,120
Other assets 138,622 134,980
----------- -----------
Total Assets $ 2,624,189 $ 2,583,590
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable, current portion $ 1,383,410 $ 663,341
Accounts payable and accrued expenses 671,735 696,756
Prepaid laundry revenue 12,000 12,000
----------- -----------
Total current liabilities $ 2,067,145 $ 1,372,097
Notes payable, net of current portion $ 139,388 $ 202,385
Deferred rent payable 204,756 204,756
Deferred franchise revenue 605,256 609,006
Other deferred revenue 0 0
----------- -----------
Total liabilities $ 3,016,545 $ 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 (6,797,094) (6,209,392)
----------- -----------
Total stockholders' equity ($ 392,356) $ 195,346
----------- -----------
Total liabilities and stockholders' equity $ 2,624,189 $ 2,583,590
=========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
2
<PAGE>
<PAGE>
ECOMAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------------
1998 1997
---- ----
<S> <C> <C>
Revenues
Cleaning and laundry services $ 87,239 $ 102,526
Franchise revenue 6,655 98,500
Royalty revenue 6,084 0
----------- -----------
Total revenue $ 99,978 $ 201,026
Costs and expenses
Facilities operating costs
Compensation $ 102,999 $ 78,927
Advertising and promotion 4,651 3,754
Supplies 6,304 11,350
Rent 42,623 43,077
Utilities 20,720 20,145
Other 47,314 33,483
----------- -----------
$ 224,611 $ 190,736
----------- -----------
Advertising and promotion-franchise sales $ 29,379 $ 17,189
----------- -----------
General and administrative expenses
Compensation $ 91,731 $ 80,778
Rent 10,566 17,381
Professional and consulting fees 98,342 66,420
Other 160,444 87,814
----------- -----------
$ 361,083 $ 252,393
----------- -----------
Depreciation and amortization $ 63,524 $ 32,898
----------- -----------
Total costs and expenses $ 678,597 $ 493,216
----------- -----------
Loss on disposition of assets $ 0 $ 0
----------- -----------
Operating loss ($ 578,619) ($ 292,190)
----------- -----------
Other income (expense)
Other income $ 7,811 $ 44,670
Interest expense (14,995)
----------- -----------
($ 7,184) $ 44,670
----------- -----------
Loss before provision for income taxes ($ 585,803) ($ 247,520)
----------- -----------
Income taxes $ 1,900 $ 2,500
----------- -----------
Net loss ($ 587,703) ($ 250,020)
=========== ===========
Net loss per share ($ 0.16) ($ 0.07)
=========== ===========
Weighted average shares outstanding 3,606,800 3,601,500
========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
<PAGE>
ECOMAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended March 31
-------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss ($ 587,703) ($ 250,020)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization $ 63,524 $ 32,898
Changes in assets and liabilities
Accounts receivable and prepaid expenses 2,602 (292,982)
Other assets 4,031 (76,089)
Accounts payable and accrued expenses (including accrued interest) (17,741) (126,339)
Deferred revenue (3,750) 206,933
Other current liabilities 7,341
----------- -----------
Net cash used in operating activities ($ 539,037) ($ 498,258)
Cash flows from investing activities
Purchase of property and equipment ($ 8,853) ($ 77,845)
Acquisition of subsidiaries 0 (65,000)
Investment in certificate of deposit (5,660)
----------- -----------
Net cash used in investing activities ($ 14,513) ($ 142,845)
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 $ 650,000
Payment of note payable (208) (1,001,257)
----------- -----------
Net cash provided by financing activities $ 649,792 ($1,081,597)
Net (decrease) increase in cash and cash equivalents $ 96,242 ($1,722,700)
Cash and cash equivalents-beginning of year $ 377,764 $ 4,307,955
----------- -----------
Cash and cash equivalents-end of period $ 474,006 $ 2,585,255
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
<PAGE>
ECOMAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
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, 1998 include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation. The statements
should be 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 operations for the three months ended March 31, 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>
MARCH 31, DECEMBER 31,
1998 1997
------- ----
<S> <C> <C>
Note payable - majority stockholder (a) $ 865,000 $ 215,000
Note payable - officer/stockholer(b) 70,870 70,870
Chase term loan payable (c) 166,667 176,667
Chase business revolving credit account (d) 194,732 181,234
Notes payable (auto) (2) - Ford Credit (e) 32,523 34,324
Note payable (auto) - Chase (f) 7,287 9,192
Note payable - Medallion (g) 46,199 46,199
Accrued interest 139,520 132,240
--------- -------
1,522,798 865,726
Less current portion 1,383,410 663,341
--------- -------
Notes payable, net of current portion 139,388 202,385
</TABLE>
The Company's notes payable to two officers/principal
stockholder/directors in the amount of $865,000 and $70,870 at March 31, 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.
5
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Revenues. Total operating revenues for the quarter ended March 31, 1998
decreased by $101,000 as compared to the corresponding period in 1997. This
represents a decrease of 50% as compared to the period ending March 31, 1997.
This was primarily due to decreases of $92,000 in franchise revenue and $15,000
in cleaning and laundry services.
Facility operating costs increased from $191,000 for the first quarter of 1997
to $225,000 for the first quarter of 1998, an increase of 18%. This increase can
be largely explained by costs incurred by facilities in Mahwah, NJ ($9,000) and
New York City ($11,000), which were not yet operating in the first quarter of
1997. The Mamaroneck facility also incurred unusually large freight ($4,000) and
outside services ($6,000) expenses during the 1998 quarter.
General and administrative expenses increased 43% ($109,000, from $252,000 to
$361,000) for the quarter ended March 31, 1998 as compared to the corresponding
period in 1997. The primary increases were in the expense categories of supplies
($42,000), professional and consulting fees ($32,000) and dues and subscriptions
($22,000). The Company instituted a stringent cost-cutting system in March, 1998
which, it is anticipated, will generate significant savings in the second
quarter of 1998.
Depreciation expense increased from $33,000 (93%) in the first quarter of 1997
to $64,000 in the same period in 1998, primarily due to the large investment in
depreciable assets made by the Company during 1997.
Other income decreased (83%), from $45,000 during the first quarter of 1997 to
$8,000 during the corresponding period in 1998. In the first quarter of
1997, the Company earned substantial interest income from the net proceeds of
the initial public offering that occurred in December 1996.
Net loss. The net loss was $588,000 ($.16 per share) for the quarter ended March
31, 1998 as compared to a net loss of $250,000 ($.07 per share) for the quarter
ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity position at March 31, 1998 included cash and cash
equivalents of approximately $474,000.
Net cash used in operating activities was $407,000 and $498,000 for the three
months ended March 31, 1998 and 1997, respectively. The cash used in operating
activities in the 1998 period was primarily due to the net loss of $588,000,
offset by $64,000 of depreciation. Cash was also provided by an increase in
accounts payable and accrued expenses of $114,000.
Net cash used in investing activities for the quarter ended March 31, 1998 was
$15,000, primarily due to the purchase of property and equipment of $9,000.
Net cash provided by financing activities was $518,000, due to the addition of
$650,000 of loan proceeds from the principal stockholder, offset by repayment of
notes of $132,000. During the first quarter of 1997, the Company repaid
the principal stockholder a partial repayment of $1,000,000 of notes.
In total, net cash and equivalents increased by $96,000 in the first quarter of
1998 and decreased by $1,700,000 in the corresponding period in 1997.
6
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 -Financial Data Schedule (in EDGAR filing only)
b) The Company filed the following reports on Form 8-K during the period
covered by this Form 10-QSB:
1) Reports on form 8-K, filed on January 23, 1998 and February 5,
1998, relating to the resignation of the Company's President
and the appointment of a Special Committee; and
2) A Report on Form 8-K, filed February 24, 1998, relating to the
election of officers and directors and to the implementation of
cost-savings measurers.
7
<PAGE>
<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.
Date: July 2, 1998 ECOMAT, INC.
By: /s/ Astrid Hindemith
Astrid Hindemith
Chairman of the Board,
Chief Executive Officer and
Principal Financial Officer
and Principal Accounting Officer
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 474,006
<SECURITIES> 0
<RECEIVABLES> 59,999
<ALLOWANCES> 3,386
<INVENTORY> 0
<CURRENT-ASSETS> 1,009,466
<PP&E> 1,438,330
<DEPRECIATION> 424,916
<TOTAL-ASSETS> 2,264,189
<CURRENT-LIABILITIES> 2,067,145
<BONDS> 1,522,798
<COMMON> 361
0
0
<OTHER-SE> 6,404,377
<TOTAL-LIABILITY-AND-EQUITY> 2,624,189
<SALES> 93,894
<TOTAL-REVENUES> 99,978
<CGS> 0
<TOTAL-COSTS> 678,597
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,995
<INCOME-PRETAX> (585,803)
<INCOME-TAX> 1,900
<INCOME-CONTINUING> (587,703)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (587,703)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
