UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission file number 0001027484
TILDEN ASSOCIATES, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 11-3343019
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1325 Franklin Avenue, Suite 165 Garden City, NY 11530
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(Address of principal executive offices)
(516) 746-7911
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) 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 each of the issuer's classes of common
equity, as of the latest practicable date: November 9, 2000, was 9,519,028
shares of Common Stock - $.0005 par value.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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Table of Contents for Form 10-QSB
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet 3
Consolidated Statement of Income 5
Consolidated Statement of Cash Flows 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE 10
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
September 30, December 31,
2000 1999
---------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 171,979 $ 373,398
Accounts receivable, net 203,750 141,012
Notes and loans receivable 132,072 167,169
Prepaid expense 82,773 117,949
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Total Current Assets 590,574 799,528
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PROPERTY, PLANT AND EQUIPMENT
Property and equipment, net 330,234 319,946
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OTHER ASSETS
Intangible assets, net 514,990 504,816
Security deposits 72,502 64,002
Notes and loans receivable, net of current portion 524,832 581,014
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Total Other Assets 1,112,324 1,149,832
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Total Assets $2,033,132 $2,269,306
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<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
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LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable and accrued expenses $ 106,729 $ 104,406
Deposits on franchise acquisitions 40,000 40,000
Income taxes payable 22,917 7,798
Payroll and other taxes payable 8,270 14
Notes payable 69,257 58,372
Deferred income -- 7,875
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Total Current Liabilities 247,173 218,465
----------- -----------
Non-Current Liabilities
Notes payable, net of current portion 353,312 374,253
Income taxes payable - deferred 51,169 66,525
Security deposits 48,469 41,969
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Total Non-current Liabilities 452,950 482,747
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Shareholders' Equity
Common stock, $.0005 par value; 30,000,000 shares authorized
9,450,903 shares issued and outstanding in 2000 and 1999 4,725 4,725
Additional paid in capital 1,576,204 1,576,204
Retained earnings (deficit) (227,920) 7,165
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1,353,009 1,588,094
Less: treasury stock - 40,000 shares, stated at cost 20,000 20,000
----------- -----------
Total Shareholders' Equity 1,333,009 1,568,094
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Total Liabilities and Shareholders' Equity $ 2,033,132 $ 2,269,306
=========== ===========
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Nine Months Ended
----------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Initial franchise acquisition fees $ -- $ 55,000 $ 50,000 $ 130,000
Area developer fees -- 50,000 50,000 50,000
Royalty fees 120,633 125,216 390,736 329,340
Sales from operation of company stores 44,060 13,612 44,060 105,571
Sale of equipment purchased for resale 1,644 95,247 7,865 233,588
Advertising income 12,815 12,901 30,602 29,827
Rental income 50,180 6,341 144,192 6,341
Miscellaneous income 2,942 -- 6,799 3,030
------------ ------------ ------------ ------------
Total Revenue 232,274 358,317 724,254 887,697
------------ ------------ ------------ ------------
COST OF OPERATIONS
Broker's fees -- 8,091 6,000 19,225
Franchise development fees 18,554 27,671 63,605 56,739
Costs of operation of company stores 26,068 4,802 26,268 63,081
Costs of equipment for resale 933 85,160 10,046 220,364
Rent from realty corporations 42,759 6,500 101,752 6,500
------------ ------------ ------------ ------------
Total Operating Costs 88,314 132,224 207,671 365,909
------------ ------------ ------------ ------------
Gross Profit 143,960 226,093 516,583 521,788
Selling, general and administrative expenses 306,986 264,548 753,548 728,666
------------ ------------ ------------ ------------
Income (loss) from operations
before other income and expenses (163,026) (38,455) (236,965) (206,878)
OTHER INCOME (EXPENSES)
Gain on sale of assets -- 45,744 -- 270,619
Interest income 6,950 14,427 31,409 27,204
Interest expense (9,266) (4,175) (29,524) (21,656)
Total other income (expenses) (2,316) 55,996 1,885 276,167
------------ ------------ ------------ ------------
Income (loss) before income taxes (165,342) 17,541 (235,080) 69,289
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Net Income (Loss) $ (165,342) $ 17,541 $ (235,080) $ 69,289
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE
Basic (0.017) 0.002 (0.025) 0.008
============ ============ ============ ============
Diluted (0.017) 0.002 (0.025) 0.007
============ ============ ============ ============
DIVIDENDS DECLARED PER COMMON SHARE N/A N/A N/A N/A
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 9,450,903 9,325,258 9,450,903 9,023,761
============ ============ ============ ============
Diluted 9,450,903 10,658,033 9,450,903 10,354,536
============ ============ ============ ============
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended
--------------------------
September 30, September 30,
2000 1999
--------------------------
<S> <C> <C>
CASH PROVIDED BY (REQUIRED FOR) OPERATING ACTIVITIES
Net income $(235,080) $ 69,289
Noncash items deducted from (included in) income:
Depreciation and amortization 52,375 47,201
Provision for bad debt 125,861 42,000
Stock issued for services rendered -- 10,125
(Increase) decrease in:
Accounts receivable (121,939) (134,961)
Inventory -- (1,000)
Prepaid expenses 35,176 35,844
Security deposits (8,500) (26,015)
Increase (decrease) in:
Accounts payable and accrued expenses 2,323 (7,078)
Deposits on franchise acquisitions -- 140,000
Payroll and other taxes payable 8,019 (27,226)
Deferred income (7,875) --
Security deposits 6,500 25,500
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Net Cash Provided by (Required for) Operating Activities (143,140) 173,679
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CASH PROVIDED BY (REQUIRED FOR) INVESTING ACTIVITIES
Issuance of notes and loans receivable (150,000) (308,900)
Repayment of notes and loans receivable 174,615 (46,184)
Purchase of intangible asset (55,747) (276,564)
Purchase of property and equipment (17,090) (10,000)
Proceeds on sale of equipment -- 38,589
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Net Cash Provided by (Required for) Investing Activities (48,222) (603,059)
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CASH PROVIDED BY (REQUIRED FOR) FINANCING ACTIVITIES
Repayment of notes payable (10,057) (61,567)
Proceeds on stock issuance, net of issue costs -- 613,750
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Net Cash Provided by (Required for) Financing Activities (10,057) 552,183
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Net Increase (decrease) in Cash (201,419) 122,803
Cash and cash equivalents
at beginning of the period 373,398 452,124
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Cash and cash equivalents
at end of the period $ 171,979 $ 574,927
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid 29,524 21,656
Income taxes paid 2,883 9,203
</TABLE>
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Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of financial condition and
results of operations should be read in conjunction with the Company's
consolidated financial statements and notes thereto included elsewhere herein.
The statements disclosed herein include 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. The Company's actual results
could differ materially from those projected in the forward-looking statements
as a result of certain risks and uncertainties, including, but not limited to,
the Company's historical lack of profitability, the Company's need for
additional financing, competition in the finance industry for franchising
companies and retail automobile and truck repair service, and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission.
OVERVIEW
Tilden Associates, Inc. (the "Company") is a Delaware Corporation. Its
principal business is to sell automotive franchises and to administer and
support full service automotive repair centers carrying its trademarks. The
Company's operations are based at 1325 Franklin Avenue, Suite 165, Garden City,
New York, 11530.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2000 vs Three Months Ended September 30, 1999
Revenue decreased to $232,000 in the third quarter of 2000 from
$358,000 in the third quarter of 1999, representing a 35% decrease. The decrease
in revenue during the third quarter of 2000 was predominately attributed to the
greater level of sales in 1999 of new area and individual franchises as well as
the greater volume of equipment sales to franchisees during that period, offset
by increases in retail sales by Company owned stores and rental income during
the year 2000.
Operating costs decreased to $88,000 in the third quarter of 2000 from
$132,000 in the third quarter of 1999, a 33% decrease. As a percentage of
revenue, operating costs increased minimally to 38% in the third quarter of 2000
from 37% in the third quarter of 1999.
Selling, general and administrative expenses increased to $307,000 in
the third quarter of 2000 from $265,000 in the third quarter of 1999, a 16%
increase. This increase is primarily due to increases in bad debt expense of
$48,000, and professional fees of $31,000, offset by decreases in fees of
$11,000, salaries of $9,000, the cost of operations of Company owned stores of
$5,000, printing of $5,000 and telephone expenses of $4,000. The increase in bad
debt expense was due to a more conservative policy toward evaluating the
Company's receivables, as well as to an increase in the volume of receivables
generated from royalty income. The increase in profession fees was primarily
attributable to the cost of pursuing non-performing trade and notes receivables.
The decrease in fees was attributable to mortgage costs and greater filing fees
in 1999. The decrease in salaries was primarily due to a reduction in salaries
taken by officers and to personnel hired in 1999 in connection with Company
owned stores. The decrease in cost of operations of Company owned stores was due
to the sale of two stores during the second and third quarter of 1999.
Nine Months Ended September 30, 2000 vs Nine Months Ended September 30, 1999
Revenue decreased to $724,000 through the third quarter of 2000 from
$888,000 through the third quarter of 1999, representing an 18% decrease. The
decrease in revenue during the first nine months of 2000 was predominately
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attributed to the greater level of equipment sales to franchisees through the
third quarter of 1999, the greater volume of sales of new area and individual
franchises in 1999, and the decline of retail sales of Company owned stores
during the year 2000. These decreases were significantly offset by increases in
rental income and royalties.
Operating costs decreased to $208,000 during the first nine months of
2000 from $366,000 during the same period of 1999, a 43% decrease. As a
percentage of revenue, operating costs decreased to 29% during the first nine
months of 2000 from 41% during the same period of 1999. The decrease is
primarily attributable to equipment sales in 1999. This equipment was sold to
franchisees at minimal gross profit. Accordingly, these sales, amounting to
$234,000, decreased revenues with an equal corresponding decrease in cost of
sales. This resulted in a decrease in the Company's overall gross profit
percentage.
Selling, general and administrative expenses increased to $754,000 for
the first nine months of 2000 from $729,000 during the first nine months of
1999, a 3% increase. This increase is primarily due to increases in professional
fees of $80,000, and bad debt expense of $83,000 offset by decreases in the cost
of operations of Company owned stores of $66,000, the loss on sale of
subsidiaries of $53,000 and salaries of $15,000. The increase in professional
fees was primarily due to greater than anticipated costs in connection with the
audit of the Company's 1999 financial statements, preparation of Form 10 to
become a reporting entity in compliance with SEC regulations, and the increase
in costs to pursue non-performing trade and notes receivables. The increase in
bad debt expense was due to the Company's change to a more conservative policy
in evaluating receivables, as well as to an increase in the volume of
receivables generated from royalty income. The decrease in the cost of
operations of Company owned stores was due to the sale of two Company owned
stores during the second and third quarters of 1999. The loss on sale of
subsidiaries corresponds to the sale of a subsidiary during July of 1999. The
decrease in salaries was primarily due to a reduction in salaries taken by
officers and to personnel hired in 1999 in connection with Company owned stores.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 2000 was $345,000, compared to working
capital of $581,000 at December 31, 1999. The ratio of current assets to current
liabilities was 2.4:1 at September 30, 2000 and 3.7:1 at December 31, 1999. Cash
flow used for operations through the third quarter of 2000 was $143,000,
compared to cash flow provided by operations through the third quarter of 1999,
of $174,000.
Accounts receivable - trade increased to $314,000 at September 30, 2000
from $199,000 at December 31, 1999.
Accounts payable decreased to $83,000 at September 30, 2000 from
$104,000 at December 31, 1999.
Although the Company plans to continue to expand to the extent that
resources are available, the Company has no firm commitments for capital
expenditures in other areas of its business.
The Company believes that it may not have sufficient liquidity to meet
its operating cash requirements for the current level of operations during the
remainder of 2000. Accordingly, the Company may require additional financing.
There can be no assurance that financing will be available, or if available, on
terms acceptable to the Company. If the Company is unable to fund its operating
cash flow needs, the Company may be required to substantially curtail
operations.
The Company currently has a bank line of credit amounting to $200,000.
At September 30, 2000, all of the credit line was available.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
a) On July 12, 2000 we initiated an action in the U.S. District
Court, Eastern District of New York for a declaratory judgment
and to enjoin a threatened termination of franchise by
Wick-Fraser, a Minnesota franchisee, which franchise was
acquired from American Brake Service. The action is still
pending.
b) On September 15, 2000 we initiated an action in the U.S.
District Court for the Eastern District of New York against
Douglas Claeys, a Minnesota franchisee, for declaratory
judgment and to enjoin termination of a franchise, which
franchise was acquired from American Brake Service. The action
is still pending.
c) On September 23, 2000 we initiated an arbitration proceeding
before the American Arbitration Association to recover royalty
payments due from Davy's Locker, a Georgia franchisee. The
matter is still pending.
d) On August 2, 2000 we commenced a proceeding before the
American Arbitration Association for royalties from Joseph
Golden III, a Massachusetts franchisee, which franchise was
acquired from American Brake Service. The matter is still
pending.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
1) The Company filed a Form 8-K with the Securities
Exchange Commission dated August 4, 2000 to disclose
change of the Company's accounting firm.
2) The Company filed a Form 8-K/A with the Securities
Exchange Commission dated August 14, 2000 to change
misstated information on Form 8-K filed on August 4,
2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TILDEN ASSOCIATES, INC.
Date: November 14, 2000
/s/ ROBERT BASKIND
---------------------------------
Robert Baskind
Chairman of the Board, President,
and Chief Executive Officer
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