UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 000-27467
FLEETCLEAN SYSTEMS, INC.
Exact name of Registrant as specified in is charter
TEXAS 76-0196431
State of Incorporation IRS Employer Identification Number
P.O. BOX 727, HWY 834 EAST .7 MILES
HARDIN, TEXAS 77561
936-298-9835
Address and telephone number of principal executive offices
Indicate by check mark whether the Registrant (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 filing
requirements for the past 90 days.
Yes X No .
----- -----
The number of shares of common stock of the Registrant outstanding at October
15, 2000 was 15,929,987
<PAGE>
FLEETCLEAN SYSTEMS INC
BALANCE SHEETS
ITEM 1. FINANCIAL STATEMENTS
ASSETS
September 30 December 31
2000 1999
------------- ------------
UNAUDITED AUDITED
CURRENT ASSETS:
Cash $ 3,487 $ 1,404
Accounts Receivable - Net 194,701 159,654
Employee Advances 7,201 4,789
Inventory 174,807 151,722
Prepaid Expenses 33,093 14,054
Deferred Tax Asset 22,421 22,421
------------- ------------
Total Current Assets 435,710 354,044
PROPERTY, PLANT, AND EQUIPMENT: - NET 1,447,950 1,391,988
OTHER ASSETS:
Other Assets 8,020 2,345
Intangible Asset - Net 181,141 191,270
------------- ------------
Total Other Assets 189,161 193,615
------------- ------------
TOTAL ASSETS $ 2,072,821 $ 1,939,647
============= ============
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FLEETCLEAN SYSTEMS INC
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30 December 31
2000 1999
------------- ------------
UNAUDITED AUDITED
CURRENT LIABILITIES:
Accounts Payable $ 140,018 $ 181,995
Advance From Officer 167,859
Notes Payable 262,025 251,640
Payroll Taxes Payable 2,127 4,904
Insurance Payable 26,253 8,405
Sales Tax Payable 14,054 15,581
Accrued Expenses 22,986 60,266
------------- ------------
Total Current Liabilities 467,463 690,650
LONG-TERM LIABILITIES:
Deferred Tax Liability 28,883 28,882
Notes payable - Net of Current Portion 666,697 674,229
------------- ------------
Total Long-Term Liabilities 695,580 703,111
------------- ------------
TOTAL LIABILITIES 1,163,043 1,393,761
------------- ------------
STOCKHOLDERS' EQUITY:
Common Stock - $.01 par value
Authorized 50,000,000 shares
Issued and Outstanding - 15,929,987 & 10,590,014
at 2000 and 1999, Respectively 159,300 105,900
Paid in Capital 1,263,416 817,318
Retained Earnings -512,938 -377,332
------------- ------------
Total Stockholders' Equity 909,778 545,886
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,072,821 $ 1,939,647
============= ============
2
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<TABLE>
<CAPTION>
FLEETCLEAN SYSTEMS INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE NINE AND THREE MONTHS ENDED SEPT 30, 2000 AND 1999
Nine Nine Three Three
Months Months Months Months
2000 1999 2000 1999
---------- ---------- ---------- ----------
Unaudited Unaudited Unaudited Unaudited
<S> <C> <C> <C> <C>
REVENUES:
Net Sales $1,076,391 $ 780,449 $ 373,806 $ 238,374
Less: Cost of Goods Sold 290,978 164,118 96,775 64,734
---------- ---------- ---------- ----------
Gross Profit 785,413 616,331 277,031 173,640
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries 329,872 296,959 105,499 102,361
Payroll Taxes 41,022 34,187 15,362 14,844
Advertising 17,690 4,895 9,128 3,670
Auto Expense 49,854 41,326 16,062 16,965
Depreciation and Amortization 125,680 111,629 41,893 38,993
Dues & Subscriptions 1,053 2,737 266 1,708
Entertainment 383 697 227 58
Equipment Repairs 6,432 584 6,432 584
Insurance 63,913 51,699 21,359 21,917
Investor Relations 30,832 7,788 1,466 2,658
Interest Expense 78,344 46,889 25,626 23,346
Licenses & Fees 1,755 2,836 450 1,728
Office Expense 11,550 12,003 3,805 7,206
Postage/Freight 13,056 12,279 3,108 6,012
Professional Fees 40,964 158,344 4,234 144,333
Rent 17,963 12,510 6,075 1,860
Shop Expense 16,142 16,208 255 9,700
Taxes - Other 5,960 5,870 1,504 3,146
Telephone & Utilities 45,745 21,020 12,827 8,815
Trailer Expense 1,374 1,353 187 382
Training 533 2,386 0 1,239
Travel 27,903 27,381 9,131 9,884
---------- ---------- ---------- ----------
Total General and Administrative Expenses 928,020 871,580 284,896 421,409
---------- ---------- ---------- ----------
NET LOSS FROM OPERATIONS -142,607 -255,249 -7,865 -247,769
OTHER INCOME/EXPENSE:
Miscellaneous Income - Net 1,879 17,877 506 13,988
Gain on Sales of Asset 5,122 -1,500 693 -1,500
---------- ---------- ---------- ----------
Total Other Income 7,001 16,377 1,199 12,488
---------- ---------- ---------- ----------
NET LOSS BEFORE INCOME TAXES -$135,606 -$238,872 -$6,666 -$235,281
Provision for Income Taxes 0 0 0 0
---------- ---------- ---------- ----------
NET LOSS -135,606 -238,872 -6,666 -235,281
RETAINED EARNINGS/(DEFICIT) BEGINNING OF PERIOD -377,332 16,435 -506,272 12,844
---------- ---------- ---------- ----------
RETAINED EARNINGS/(DEFICIT) END OF PERIOD -$512,938 -$222,437 -$512,938 -$222,437
========== ========== ========== ==========
Net Loss Per Common Share
Basic -$0.01 -$0.01 -$0.01 -$0.01
Diluted -$0.01 -$0.01 -$0.01 -$0.01
</TABLE>
3
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<TABLE>
<CAPTION>
FLEETCLEAN SYSTEMS INC.
STATEMENT OF STOCKHOLDERS' EQUITY
December 31, 1998 to Additional Total Stock-
September 30, 2000 Common Stock Paid In Retained Holders'
Shares Value Capital Earnings Equity
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Stockholders' Equity
As of December 31, 1998` 4,736,758 $ 47,367 $ 368,091 $ 16,435 $431,893
Sale of Common Stock (Feb. 1999) 200,000 2,000 48,000 50,000
Stock Issued for Acquisition of Tri-State 300,000 3,000 147,000 150,000
Sale of Common Stock (March 1999) 200,000 2,000 48,000 50,000
Conversion of Debt ( March 1999) 42,668 427 9,573 10,000
Syndication Costs -39,300 -39,300
Net Loss January-March 1999 -7,005 -7,005
-------------------------------------------------------------
Total Stockholders' Equity -------------------------------------------------------------
As of March, 1999 5,479,426 54,794 581,364 9,430 645,588
------------------------------------------
Net Loss April-June 1999 3,414 3,414
-------------------------------------------------------------
Total Stockholders' Equity 5,479,426 54,794 581,364 12,844 649,002
As of June, 1999
------------------------------------------
Conversion of Debt 1,450,991 14,510 125,490 140,000
Stock Issued for Services Rendered 1,577,455 15,775 110,422 126,197
Syndication Costs -52,888 -52,888
Net Loss July-September 1999 -235,281 -235,281
-------------------------------------------------------------
Total Stockholders' Equity
As of September 30, 1999 8,507,872 85,079 764,388 -222,437 627,030
------------------------------------------
Conversion of Debt 1,290,476 12,905 37,096 50,001
Stock Issued for Services Rendered 791,666 7,916 15,834 23,750
Net Loss October-December 1999 -154,895 -154,895
-------------------------------------------------------------
Total Stockholders' Equity
As of December 31, 1999 10,590,014 105,900 817,318 -377,332 545,886
------------------------------------------
Sale of Common Stock (March 2000) 1,450,000 14,500 275,500 290,000
Stock Issued for Services Rendered 100,000 1,000 19,000 20,000
Net Loss January-March 2000 -76,031 -76,031
-------------------------------------------------------------
Total Stockholders' Equity
As of March 31, 2000 12,140,014 $ 121,400 $1,111,818 -$453,363 $779,855
------------------------------------------
Net Loss April-June 2000 -$52,909 -$52,909
-------------------------------------------------------------
Total Stockholders' Equity
As of June 30, 2000 12,140,014 121,400 1,111,818 -506,272 726,946
------------------------------------------
Sale of Common Stock (July 2000) 249,999 2,500 10,000 12,500
Sale of Common Stock (July 2000) 3,539,974 35,400 141,598 176,998
Net Loss July-September 2000 -6,666 -6,666
Total Stockholders' Equity
As of September 30, 2000 15,929,987 159,300 1,263,416 -512,938 909,778
------------------------------------------ =============================================================
</TABLE>
4
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FLEETCLEAN SYSTEMS INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPT 30
2000 1999
---------- ----------
Unaudited Unaudited
OPERATING ACTIVITIES:
Net Loss -$135,606 -$238,870
Adjustments to Reconcile Net Loss to Net
Cash Used by Operating Activities:
Stock Issued for Conversion of Debt 176,999
Stock Issued for Services Rendered 20,000 126,196
Depreciation and Amortization 125,680 111,629
(Increase)/Decrease in Accounts Receivable -35,047 -34,435
(Increase)/Decrease in Employee Advances -2,412
(Increase)/Decrease in Inventories -23,085 -79,815
(Increase)/Decrease in Prepaid Expenses -19,039 -32,386
(Increase)/Decrease in Other Assets -5,675
Increase/(Decrease) in Accounts Payable -41,977 177,077
Increase/(Decrease) in Payroll Taxes Payable -2,777 3,211
Increase/(Decrease) in Insurance Payable 17,848 35,883
Increase/(Decrease) in Sales Tax Payable -1,527 5,109
Increase/(Decrease) in Accrued Expenses -37,280 -10,568
---------- ----------
Net Cash Used for Operating Activities 36,102 63,031
INVESTING ACTIVITIES:
Purchase of Property, Plant, and Equipment -171,513 -345,547
Acquisition of Tri State Chemex -100,000
---------- ----------
Net Cash Used for Investing Activities -171,513 -445,547
FINANCING ACTIVITIES:
Increase/(Decrease) in Notes Payable 2,853 229,805
Increase/(Decrease) in Advance from Officer -167,859
Issuance of Common Stock - net 302,500 100,000
---------- ----------
Net Cash Provided by Financing activities 137,494 329,805
Net Increase/(Decrease) in Cash 2,083 -52,711
Cash at beginning of period 1,404 54,383
---------- ----------
Cash at end of period $ 3,487 $ 1,672
========== ==========
Supplemental Disclosures of Cash Flow Information
cash paid during the periods ended, Sept 2000 2000 1999
---------- ----------
Interest Expense $ 78,344 $ 46,889
Income Tax 0 0
Acquisition of Tri-State Chemex:
Assets Acquired $ 46,638
Purchase of Property Tank Wash Hahnville, Louisiana $ 450,000
Purchase of Property in Hahnville, Louisiana $ 100,000
5
<PAGE>
FLEETCLEAN SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1 - BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared by
Fleetclean Systems Inc. (the "Company") in accordance with generally accepted
accounting principles for interim financial statements and with the instructions
to Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include
all of the information and disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation have been included. Results of operations for the
nine-month period ended September 30, 2000 are not necessarily indicative of
future financial results. For further information, refer to the financial
statements and footnotes thereto for the fiscal year ended December 31, 1999,
included with the Company's Form 10-KSB, as filed with the Securities and
Exchange Commission.
NOTE 2 - EMPLOYEE STOCK OPTION PLAN:
At the annual meeting of shareholders in May 2000 the shareholders adopted
the "2000 Stock Option Plan" which had previously been adopted by the Board of
Directors in March 2000. The plan has 5,000,000 shares of Company common stock
reserved for issuance. As of September 30, 2000, no options have been granted
pursuant to the plan.
NOTE 3 - COMMITMENTS AND CONTINGENT LIABILITIES:
On February 10, 2000, the Company entered into a one-year consulting
agreement with OTC Financial Network ("OTC"). OTC is to provide consultation
with, but not limited to, the development, implementation, and maintenance of an
ongoing program to increase the investment community's awareness of the
Company's activities and to stimulate the investment community's interest in the
Company. As compensation for this agreement, the Company has issued to OTC
100,000 shares of restricted common stock and warrants to purchase an aggregate
of 1,400,000 shares of Company common stock at an exercise price of $0.10 per
share (see Note 4). This agreement is terminable by either party on thirty days
notice beginning May 11, 2000.
On May 15, 2000 the Company entered into a one year consulting agreement
with Scott Sellers. Sellers is to provide additional consultation for
development, implementation, and maintenance of an ongoing program to increase
the investment community's interest in the Company. As compensation for this
agreement, the Company has issued Seller's warrants to purchase an aggregate of
250,000 shares of Company common stock at an exercise price of $0.10 per share
(see Note 4). This agreement expires May 15, 2001.
NOTE 4 - ISSUANCE OF WARRANTS:
In connection with the aforementioned contract with OTC Financial the
following warrants have been issued as part of compensation:
a warrant to purchase 700,000 shares of Company common stock expiring
February 10, 2001. These warrants are subject to the future marketability
of the common stock. The warrants are to purchase fully paid and non-
assessable shares of the common stock, par value $.01 per share at a
purchase price of $.10 per share. Such transactions may occur in whole or
in part, but must never amount to less than 100 shares. These warrants,
however, are not exercisable until and unless the shares of the Company's
Common Stock trade at a minimum of $.50 per share as quoted by the OTC
Electronic Bulletin Board or any other nationally recognized exchange for a
minimum of twenty consecutive trading days.
6
<PAGE>
a warrant to purchase 700,000 shares of Company common stock expiring
February 10, 2001. These warrants are subject to the future marketability
of the common stock. The warrants are to purchase fully paid and
non-assessable shares of the common stock, par value $.01 per share at a
purchase price of $.10 per share. Such transactions may occur in whole or
in part, but must never amount to less than 100 shares. These warrants,
however, are not exercisable until and unless the shares of the Company's
Common Stock trade at a minimum of $1.00 per share as quoted by the OTC
Electronic Bulletin Board or any other nationally recognized exchange for a
minimum of twenty consecutive trading days.
In connection with the aforementioned contract with Scott Sellers, the
following warrants have been issued as compensation.
a warrant to purchase 125,000 shares of Company common stock expiring May
15, 2001. These warrants are subject to the future marketability of the
common stock. The warrants are to purchase fully paid and non-assessable
shares of the common stock, par value $.01 per share at a purchase price of
$.10 per share. Such transactions may occur in whole or in part, but must
never amount to less than 100 shares. These warrants, however, are not
exercisable until and unless the shares of the Company's Common Stock trade
at a minimum of $.50 per share as quoted by the OTC Electronic Bulletin
Board or any other nationally recognized exchange for a minimum of twenty
consecutive trading days
a warrant to purchase 125,000 shares of Company common stock expiring May
15, 2001. These warrants are subject to the future marketability of the
common stock. The warrants are to purchase fully paid and non-assessable
shares of the common stock, par value $.01 per share at a purchase price of
$.10 per share. Such transactions may occur in whole or in part, but must
never amount to less than 100 shares. These warrants, however, are not
exercisable until and unless the shares of the Company's Common Stock trade
at a minimum of $.75 per share as quoted by the OTC Electronic Bulletin
Board or any other nationally recognized exchange for a minimum of twenty
consecutive trading days.
On April 20, 2000 the Company entered into an advertising agreement with
Multi-Media Group, Inc. ("MMG"). MMG will create a commercial relating to the
Company's business to be aired in the near future. Compensation for this
agreement includes warrants to purchase 125,000 shares of the Company's common
stock at a purchase price of $0.10 per share. The warrants expire April 20,
2001.
On July 18, 2000 the Company issued warrants to purchase 200,000 shares of
Company common stock to Eugene Snowden. The warrants are to purchase fully paid
and non-assessable shares of the common stock, par value $.01 per share at a
purchase price of $.05 per share. The warrants expire as follows: one-third on
December 15,2001; one-third on December 15, 2002; and one-third on December 15,
2003. The Company issued the warrants as consideration for Mr. Snowden
extending the due date of a $35,000 note payable.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis as of September 30, 2000 and for
the three-month and nine month periods ended September 30, 2000 and 1999 should
be read in conjunction with the unaudited condensed consolidated financial
statements and notes thereto set forth in Item 1 of this report.
The information in this discussion contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are based upon current expectations that involve risks and uncertainties. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking statements. For example, words such as, "may,"
"will," "should," "estimates," "predicts," "potential," "continue," "strategy,"
"believes," "anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking statements. Our actual
results and the timing of certain events may differ significantly from the
results discussed in the forward-looking statement. Factors that might cause or
contribute to such a discrepancy include, but are not limited to, the risks
discussed in our other SEC filings, including those in our annual report on Form
10-KSB for the year ended December 31, 1999. These forward-looking statements
speak only as of the date hereof. We expressly disclaim any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in our expectations with
regard thereto or any change in events, conditions or circumstances on which any
such statement is based.
We are a national retail distributor of truck washing equipment and
chemicals to operators of large trucking fleets. In 1994, we acquired the
assets and business accounts of Chemex Southwestern Inc. and began to
manufacture equipment and chemicals for retail distribution. During 1994, we
opened a distribution warehouse in Statesville, North Carolina. In January
1996, we acquired the Kentucky operations, including a distribution warehouse
and customer accounts, of Fleetcleaning Supply Company, Inc. In February 1999,
we acquired the assets and ongoing business accounts of Tri-State Chemex Corp of
Providence, Rhode Island. All equipment is manufactured in Texas, with chemical
mixing facilities operating in Texas and Rhode Island. Distribution and
customer service is by our employees who service specific geographic regions.
In March 1999 we acquired an internal tank cleaning facility in Hahnville
Louisiana, which opened for business August 21, 1999 after substantial
remodeling.
We generate revenues from: (a) the sales of chemicals for use with our
hand-held truck washing equipment, (b) sales of our drive-thru truck washing
system, and (c) from our internal tank cleaning operations. We recognize
revenues at the point of sale.
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE QUARTER AND
NINE MONTHS ENDED SEPTEMBER 30, 1999
Revenues
Total revenues increased to $373,806 for the quarter ended September 30,
2000 compared with $238,374 for the quarter ended September 30, 1999. The
increase of 56.8% was primarily attributable to increased internal tank cleaning
revenues from the Hahnville facility during the third quarter. Additionally,
chemical revenues increased by 8.5% in the third quarter, from $222,883 in 1999
to $241,931 in 2000. Year to date revenues increased to $1,076,391 for the
nine-month period ended September 30, 2000 compared with $780,449 for the
nine-month period ended September 30, 1999. The increase of 37.9% was due to
increased revenue from the Hahnville facility and increased chemical sales.
8
<PAGE>
Cost of goods sold
For the quarter ended September 30, 2000, cost of goods sold increased to
$96,775 from $64,734 during the quarter ended September 30,1999. The increase
of 49.5% was attributable to increased direct labor and associated costs at the
Hahnville facility resulting from a full three months of operations, and
increased raw materials cost resulting from the increase in chemical sales. Our
gross margin as a percent of revenue increased for the quarter ended September
30, 2000 to 74.1% from 72.8% for the quarter ended September 30,1999. The
increase in gross margin percentage was due to continued revenue increases in
the Hahnville facility while direct costs increase slightly. Year to date cost
of sales increased to $290,978 for the nine-month period ended September 30,
2000 compared with $164,118 for the nine-month period ended September 30, 1999.
The increase of 77.3% was due to the increase in revenue in Hahnville and
chemical sales. Gross margin as a percent of revenue decreased for the
nine-month period ended September 30, 2000 to 72.9% from 79% for the six month
period ended June 30, 1999. The decline in gross margin percentage was due to
the lower margins received from our internal tank washing revenues in the
Hahnville facility.
General and Administrative Expenses
For the three-month period ended September 30, 2000, general and
administrative expenses decreased to $284,896 from $421,409 during the quarter
ended September 30, 1999. For the nine-month period ended September 30, 2000,
general and administrative expenses increased to $928,020 from $871,580 for the
nine-month period ended September 30, 1999. The three month decrease of 67.6%
was primarily due to reduction of $140,000 in professional fees, and the
nine-month increase of 10.7% was primarily due to the following which offset the
reduction of professional fees:
- the costs associated with the first year of operation of the Hahnville
facility which include increased depreciation expense, increased insurance
expense, and increased telephone and utility expenses;
- added interest expense from our increased debt;
- an increase in investor relations expense resulting from a contract for
public relations services; and
- an increase in the number of personnel employed due to adding seven
additional hires from the Hahnville facility.
Net Loss
For the three-month period ended September 30, 2000, our net loss was
$6,666 compared to a net loss of $235,281 for the three-month period ended
September 30, 1999. For the nine-month period ended September 30, 2000, our net
loss was $135,606 compared to a net loss of $238,872 for the nine-month period
ended September 30, 1999. The loss was primarily attributable to the increase
in general and administrative expenses as described above, which was not offset
by increased revenues for the period.
Cash Flows
Our operating activities used net cash of $36,102 in the nine-month period
ended September 30, 2000 compared to $63,031 in the nine-month period ended
September 30, 1999. Net cash used by operating activities in the nine-month
period ended September 30, 2000 resulted primarily from net operating losses for
the period. Additionally, the Company used comparatively greater cash to pay its
outstanding accounts payable during the nine-month period ended September 30,
2000, than during the previous nine-month period. These cash flow uses were
partially offset by a $196,999 increase in cash resulting from issuance of
common stock in a conversion of debt and exercise of warrants during the
nine-month period ended September 30, 2000.
Our investing activities used net cash of $171,513 in the nine-month period
ended September 30, 2000 compared to $445,547 in the nine-month period ended
September 30, 1999. The decrease in our investing activities in the first nine
months of 2000 when compared with the first nine months of 1999 results from
fewer capital projects or acquisitions in the first nine months of 2000 compared
with the first nine months of 1999 when the acquisition of Tri-State Chemex
Corp. occurred, and the development of the Hahnville tank wash facility began.
The $171,513 investment in the nine-month period ended September 30, 2000 is the
purchase of land for expansion of the Hahnville facility plus improvements.
9
<PAGE>
Our financing activities provided cash of $137,494 in the nine-month period
ended September 30, 2000 compared to $329,805 in the nine-month period ended
September 30, 1999. The decrease of $192,311 in the nine-month period ended
September 30, 2000 resulted primarily from the issuance of stock for cash in the
amount of $302,500 less a $167,859 decrease in advances from certain officers of
the company, compared to the nine-month period ended September 30, 1999 which
provided $329,805 by issuance of common stock and an increase in notes payable.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, we had cash of $3,487 and negative working
capital of $31,753. We do expect to receive cash flow from operations during
the current fiscal year as the Hahnville facility begins to generate positive
cash flows, which has occurred every month since June 2000. Revenues are
expected to continue to increase as a new contract becomes effective during the
last quarter of 2000. We have only operated the Hahnville facility since August
1999, and there is no assurance that our estimates will prove to be correct, and
that we will continue to generate positive cash flow from the facility. We
estimate our monthly operating expenditure for the remainder of fiscal 2000 will
be approximately $125,000, although unexpected expenses may increase our monthly
outlays. In addition, we intend to make additional acquisitions during the
year, which will cause increased expenditures.
As of September 30, 2000, we had notes payable aggregating $928,722 to
financial institutions and entities due through September 2008 at interest rates
ranging from 9.0% to 14.7%. Of these notes payable, $254,328 is due during the
twelve-month period ending September 30, 2001. In addition, we have lease
commitments of approximately $3,150 for fiscal 2000 and we are currently leasing
several other properties on a month-to-month basis with aggregate lease payments
of $1,500 per month. During the nine-month period ended September 30, 2000
$176,999 was advanced by certain officers of the company, and subsequently
converted to equity during the three-month period ended September 30, 2000.
We do not have any significant credit facilities available with financial
institutions or other third parties and until we can generate significant cash
flow from operations, we will be dependent upon external sources of financing.
In addition, although we have received advances from our officers in the past,
we do not expect that we will be able to rely on such advances in the future.
We received preliminary approval for a $1,050,000 twenty-three year Rural
Development Loan in November 1999 through Economic Development Capital. This
loan will not close for undetermined reasons, and we have been notified that our
$11,000 commitment fee is being returned.
We have arranged other short term external financing, and are continuing to
seek additional long term financing as we bring cash flows into balance.
However there is no assurance that we will be able to obtain additional
financing on favorable terms, if at all. We believe our current financial
situation is due to our rapid growth, which we believe is important to our
ongoing success, but which we are unable to adequately finance internally. We
believe we can sustain our current operations if we curtail growth expenditures,
and use all cash flows from operations to fund our current operations.
10
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PART II
OTHER INFORMATION
Pursuant to the Instructions to Part II of the Form 10-QSB, Items 1, 3, 4,
and 5 are omitted.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The following information sets forth certain information for all securities
we issued during the quarter ended September 30, 2000, without registration
under the Act, excluding any information "previously reported" as defined in
Rule 12b-2 of the Securities Exchange Act of 1934. There were no underwriters
in any of these transactions, nor were any sales commissions paid thereon.
During the quarter ended September 30, 2000, we issued Kenneth A. Phillips
249,999 shares of common stock on the exercise of a warrant at an exercise of
$.05 per share, and 3,539,974 shares of common stock upon the conversion of debt
in the amount of $177,000. We believe these transactions were exempt from
registration pursuant to Section 4(2) of the Act, as the issuance was to an
accredited investor.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
Exhibit 27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Fleetclean Systems, Inc.
Date: November 14, 2000 By: /s/ Kenneth A. Phillips
------------------------------
Kenneth A. Phillips, President
11
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EXHIBIT INDEX
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
Exhibit 27 Financial Data Schedule
12
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