As filed with the Securities and Exchange Commission on January__, 2000
Registration No. 333-78493
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Amendment No. 1
Registration Statement
Under
THE SECURITIES ACT OF 1933
Americlean, Inc.
(Exact name of registrant as specified in charter)
Delaware
5087 98-0185622
(State or other jurisdiction (Primary Standard Classi- (IRS Employer
of incorporation) fication Code Number) I.D. Number)
200 Burrard St.
Suite 1650
Vancouver, British Columbia V6C 3L6
604-682-6996
(Address and telephone number
of principal executive offices)
3931 Glenwood Drive
Charlotte, North Carolina 28208
(Address of principle place of business or
intended principle place of business)
Andrew Hromyk
200 Burrard St.
Suite 1650
Vancouver, British Columbia V6C 3L6
604-682-6996
(Name, address and telephone number of agent for service)
Copies of all communications, including all communications sent
to the agent for service, should be sent to:
William T. Hart, Esq.
Hart & Trinen
1624 Washington Street
Denver, Colorado 80203
303-839-0061
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement
Page 1 of Pages
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
Class of Maximum Maximum
Securities Securities Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Unit (1) Price Fee (3)
- ---------- ---------- --------- --------- --------------
Common Stock (2) 2,240,000 $1.41 $3,158,400 $834
- ------------------------------------------------------------------------------
Total 2,240,000 $3,158,400 $834
- ------------------------------------------------------------------------------
(1) Offering price computed in accordance with Rule 457(c).
(2) Amount represents:
(i) 200,000 shares of common stock to be offered by Americlean, Inc. for public
sale at prevailing market prices.
(ii)Shares of common stock issuable upon conversion of Company's Series A
Preferred Stock (includes additional shares which may be issued due to
potential adjustments to conversion rate),
(iii) Shares of common stock issuable upon the exercise of warrants and options
granted to a sales agent and to consultants (includes additional shares
which may be issued due to potential adjustments to conversion rate),
(iv) Shares of common stock offered by certain selling shareholders,
(3) A fee of $834 was paid upon the initial filing of this registration
statement.
<PAGE>
Pursuant to Rule 416, this Registration Statement includes such
indeterminate number of additional securities as may be required for issuance
upon the conversion of the Series A preferred Stock or upon the exercise of the
warrants or options as a result of any adjustment in the number of securities
issuable by reason of the anti-dilution provisions of the Series A Preferred
Stock, the warrants or the options.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of l933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
AMERICLEAN, INC.
Common Stock
Americlean sells laundry and dry cleaning supplies and equipment in North
Carolina, South Carolina, Virginia, Tennessee, Georgia, and Flordia.
Americlean's main distriburtion center is located in Charlotte, North Carolina,
with branches in Jacksonville and St.
Petersburg, Flordia.
Americlean's executive offices are located at 200 Burrard St.,Suite 1650,
Vancouver, British Columbia, V6C 3L6. Americlean's telephone number is
604-682-6996.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
These securities are speculative and involve a high degree of risk. For a
description of certain important factors that should be considered by
prospective investors, see "Risk Factors" beginning on page _____ of this
Prospectus
Americlean's common stock trades in the over-the-counter market under the
symbol "AMCX". On January __, 2000 the closing bid price of Americlean's common
stock was $_____.
The date of this prospectus is January __, 2000.
<PAGE>
PROSPECTUS SUMMARY
Americlean sells laundry and dry cleaning supplies and equipment to
customers in North Carolina, South Carolina, Virginia, Tennessee, Georgia, and
Flordia. The supplies include hangers, poly bags, detergents, bleaches, solvent
spotters, perc, production control tags, packing and various other items. The
equipment sold by Americlean includes dry cleaning machines, shirt finishing
presses, boilers, and conveyers. Americlean also provides parts, installations
and service to its customers. Americlean has a customer base of approximately
2,000 dry cleaners, laundries, hospitals, nursing homes, and hotels; none of
which accounts for more than 2% of total sales. Americlean employs approximately
forty people and operates its own fleet of delivery trucks and service vans.
Americlean's main distribution center is located in Charlotte, North Carolina,
with branches in Jacksonville and St. Petersburg Florida.
The Offering
This prospectus relates to the sale of:
o 200,000 shares of Americlean's common stock which will be offered for
public sale at prevailing market prices
o 566,000 shares of Americlean's common stock which shares are issuable
upon the conversion of Americlean's preferred stock, assuming a
conversion price of $1.06 per share.
o 39,600 shares of common stock issuable upon the exercise of warrants
granted to a sales agent as partial compensation for the sale of
Americlean's preferred stock
o 350,000 shares of Americlean's common stock issuable upon the exercise of
options granted to consultants to Americlean, and
o 1,036,151 shares offered by certain of Americlean's shareholders
The 200,000 shares offered by Americlean will be sold from time to time at
prevailing market prices. The shares will be sold by Americlean's officers and
directors and by selected broker/dealers and sales agents on a "best efforts"
basis. There is no firm commitment by any person to purchase or sell any of
these shares and there is no assurance that any of the 200,000 shares offered
will be sold. There is no minimum number of shares which are required to be sold
by Americlean and all proceeds from the sale of any of these shares will be
immediately available to Americlean.
Americlean will pay a commission not to exceed 10% of the amount received
from the sale of the 200,000 shares to broker/dealers and sales agents who
participate in the sale of such shares. The proceeds from the sale of these
shares, if any, will be used to fund Americlean's operations.
<PAGE>
The owners of the 1,036,151 shares of Americlean's common stock, as well
as the holders of the preferred shares, the warrants and the options, to the
extent they convert their preferred shares into shares of common stock or
exercise the warrants or options, are referred to in this prospectus as the
selling shareholders. Americlean will not receive any funds upon the conversion
of the preferred shares since Americlean received $600,000 upon the sale of the
preferred shares.
If the warrants and options issued to the sales agent and the consultants
are exercised, Americlean will receive approximately $592,000, which will be
used to fund Americlean's operations. Americlean will not receive any proceeds
from the sale of the shares by the selling shareholders.
As of January 15, 2000, Americlean had 6,252,734 shares of common stock
issued and outstanding. Following this offering, and assuming all shares offered
by this prospectus are sold, Americlean will have 7,408,334 issued and
outstanding shares of common stock. The number of outstanding shares before and
after this offering does not give effect to certain other shares which may be
issued upon the exercise of options previously granted by Americlean. See
"Dilution and Comparative Share Data".
RISK FACTORS
An investment in Americlean's securities involves substantial risks, some
of which are summarized below. Prospective investors should carefully consider
the following risk factors relating to Americlean and this offering prior to
making an investment.
Americlean has experienced losses from inception.
Since the date of its formation and through September 30, 1999 Americlean
incurred net losses of approximately $(4,960,000). Americlean has relied
principally upon the proceeds of private sales of securities to finance its
activities to date. There can be no assurance that Americlean will generate any
profits or that the securities offered will have any value. Americlean's
independent accountants have stated in their report on Americlean's financial
statements for the year ended March 31, 1999 that due to Americlean's working
capital deficiency, recurring losses from operations, stockholder's deficit and
the termination of its revolving credit facility there is substantial doubt as
to Americlean's ability to continue as a going concern.
Americlean's business involves environmental risks.
Americlean's plan of business involves the supply and distribution of
hazardous chemicals including perc. These chemicals are subject to strict
regulation and persons or entities which allow same to be released into the
environment are generally required to bear the costs of redemption. These costs
can easily exceed Americlean's financial resources rendering Americlean
insolvent. In addition, regulation of hazardous materials is presently evolving
and there can be no guarantee that regulations will not be imposed in the future
which would have a material adverse impact on Americlean's business and proposed
business.
<PAGE>
Americlean has insufficient capital to implement its growth strategy.
Americlean's plans call for acquiring distributors of dry cleaning
supplies and building dry cleaning supply plants in the United States.
Americlean also plans to manufacture or otherwise supply a variety of products
to the dry cleaning industry. Americlean's plans in this regard will require
substantial capital. Although Americlean was not, as of the date of this
prospectus, committed to any future acquisitions, Americlean nevertheless
anticipates spending approximately $3,000,000 toward the acquisition of dry
cleaning businesses and equipment during the twelve month period ending December
31, 2000. Americlean will attempt to raise the capital needed for future
acquisitions through the sale of its capital stock or debt financing. However,
no one has made any commitment to provide Americlean with any capital and there
can be no assurance that Americlean will be able to obtain the additional
capital needed to expand its business or, even if such capital is obtained that
Americlean's expansion plans will be successful.
Since March 1999 Americlean has had a secured revolving line of credit
agreement which provides for borrowings of up to $3,000,000. The amount which
Americlean can borrow under the line of credit is limited to certain percentages
of Americlean's eligible accounts receivable and inventory. All borrowings under
the line of credit are payable on demand. The lender providing the line of
credit has indicated that the line of credit will terminate on February 15, 2000
and all amounts due under the line of credit will be due on that date. As of
January 26, 2000 Americlean had borrowed $1,154,000 under the line of credit.
Although Americlean is attempting to arrange substitute financing, there can be
no assurance that Americlean will be able to repay the amounts which are due to
the lender on February 15, 2000.
There is only a limited market for the securities of Americlean, and there
is no assurance that such a market will continue.
The average daily trading volume of Americlean's common stock over the
past year was less than 15,000 shares. As a result, a stockholder may be unable
to sell Americlean's common stock at the quoted bid price if a substantial
number of shares were offered for sale. In addition, due to the limited market
for Americlean's common stock, even limited trading may have a significant
impact on the price of Americlean's common stock.
Trades of Americlean's common stock are presently subject to Rule 15g-9 of
the Securities and Exchange Commission, which rule imposes certain requirements
on broker/dealers who sell securities subject to the rule to persons other than
established customers and accredited investors. For transactions covered by the
rule, brokers/dealers must make a special suitability determination for
purchasers of the securities and receive the purchaser's written agreement to
the transaction prior to sale. The Securities and Exchange Commission also has
rules that regulate broker/dealer practices in connection with transactions in
"penny stocks". Penny stocks generally are equity securities with a price of
less than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume
information with respect to transactions in that security is provided by the
exchange or system). The penny stock rules require a broker/dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that provides
information about penny stocks and the nature and level of risks in the penny
<PAGE>
stock market. The broker/dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker/dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker/dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation. These disclosure requirements have the effect
of reducing the level of trading activity in the secondary market for
Americlean's common stock. As a result of the foregoing, investors in this
offering may find it more difficult to sell their shares.
DILUTION AND COMPARATIVE SHARE DATA
As of January 15, 2000, the present shareholders of Americlean owned
6,252,734 shares of common stock. The following table illustrates the
comparative stock ownership of the present shareholders of Americlean, as
compared to the investors in this offering, assuming all shares offered are
sold. All historical share data in this Prospectus has been adjusted to reflect
a 1-for-4 reverse split which was effective in January 1999.
Number of Note
Shares Reference
Shares offered by this prospectus:
Shares offered by Americlean 200,000
Shares issuable upon conversion of
preferred stock, assuming
conversion price of $1.06 per share 566,000 A
Shares issuable upon exercise of sales agent
warrants, assuming warrant exercise price 39,600 B
of $1.06 per share
Shares issuable upon exercise of vested options
granted to consultants 350,000 C
Shares offered by selling shareholders 1,036,151 D
Shares outstanding as of January 15, 2000 6,252,734
Shares which will be outstanding, assuming
sale of all shares offered by Americlean,
conversion of all preferred shares and the
exercise of all warrants and options listed
above (1) 7,408,334
<PAGE>
Pro forma negative net tangible book value per
share as of September 30,1999 (2) $(0.11)
Percentage of Americlean's common stock
represented by shares offered by this
prospectus, assuming conversion of all
preferred shares and the exercise of all
options and warrants listed above 29%
(1) Amount excludes 1,036,151 shares offered by existing shareholders and
shares which may be issued upon the exercise of other options previously
granted by Americlean. See table below.
(2) Assumes conversion of preferred stock and exercise of warrants and options
listed above.
"Net tangible book value" is the amount that results from subtracting the
total liabilities and intangible assets of Americlean from its total assets.
Tangible assets exclude goodwill. The purchasers of the securities offered by
this prospectus will suffer dilution in their investment if the price paid for
the shares offered by this prospectus is greater that the net tangible book
value of Americlean's common stock at the time of such purchase.
Other Shares Which May Be Issued:
The following table lists additional shares of Americlean's common stock
which may be issued as the result of the exercise of outstanding options granted
by Americlean:
Number of
Shares Note Reference
Shares issuable upon exercise of options granted 100,000 C
to consultants and not vested
Shares issuable upon exercise of options granted 154,500 E
to Americlean's officers, directors, and employees
Notes
A. In March 1999 Americlean sold 600 shares of its preferred stock for
$600,000. Thirty days after the date of this prospectus each preferred
share will convert into shares of Americlean's common stock equal in
number to the amount determined by dividing $1,000 by 75% of the average
price of Americlean's common stock for the five trading days preceding the
conversion date. The actual number of shares to be issued upon the
conversion of the preferred shares may be greater than 566,000 shares and
will depend upon the price of Americlean's common stock at the time of
conversion.
<PAGE>
B. In connection with the sale of the preferred shares, Anthony Advisors, the
sales agent for such offering, received a cash commission of $42,000, plus
warrants to purchase $42,000 worth of Americlean's common stock (the "sales
agent warrants"). The number of shares issuable upon the exercise of the
sales agents warrants is determined by dividing $42,000 by 75% of the
average price of Americlean's common stock during the five trading days
preceding the warrant exercise date. The sales agent warrants are
exercisable at any time prior to February 22, 2000 at a price equal to 75%
of the average price of Americlean's common stock during the five trading
days preceding the date the warrant is exercised.
C. Americlean has granted options for the purchase of 450,000 shares of common
stock to three financial consultants in consideration for services provided
to Americlean. Options for the purchase of 50,000 shares are exercisable at
a price of $5.00 per share and expire in 2001. Options for the purchase of
400,000 shares are exercisable at a price of $1.00 per share and expire in
2000. Options for the purchase of 350,000 shares, 50,000 of which are
exercisable at $5.00 per share and 300,000 of which are exercisable at
$1.00 per share, were vested as of January 15, 2000 and the shares issuable
upon the exercise of these options are being registered for public sale by
means of this prospectus.
D. Shares are being offered by existing shareholders of Americlean.
E. See "Management - Stock Option Plans" for information concerning these
options.
The shares referred to in notes A, B, C (limited to 350,000 shares in case
of note C) and D above are being offered for sale to the public by means of this
prospectus. See "Selling Shareholders"
MARKET FOR AMERICLEAN'S COMMON STOCK
As of January 15, 2000, there were approximately 60 record holders of
Americlean's common stock. Americlean believes the number of beneficial owners
is greater due to shares held by brokers, banks, and others for the benefit of
their customers. Between February 1998 and August 1999 Americlean's common stock
was traded on the National Association of Securities Dealers OTC Bulletin Board.
Since August 1999 Americlean's common stock has traded in the over-the-counter
market. Set forth below are the range of high and low bid quotations for the
periods indicated as reported by the NASD and Bloomberg L.P. The market
quotations reflect interdealer prices, without retail mark-up, mark-down or
commissions and may not necessarily represent actual transactions. Americlean's
common stock began trading in February 1998. The market quotations have been
adjusted to reflect a one-for-four reverse stock split which was effective in
January 1999.
Common Stock
Quarter Ending High Low
3/31/98 $9.76 $7.00
6/30/98 $9.36 $6.52
9/30/98 $8.12 $3.76
<PAGE>
12/3l/98 $2.88 $1.12
3/31/99 $3.94 $2.93
6/30/99 $3.71 $2.12
9/30/99 $3.12 $1.12
12/3/99 $3.00 $0.63
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of
Americlean's assets after payment of liabilities. The Board of Directors is not
obligated to declare a dividend. Americlean has not paid any dividends on its
common stock and Americlean does not have any current plans to pay any common
stock dividends.
The provisions in Americlean's Articles of Incorporation relating to
Americlean's Preferred Stock would allow Americlean's directors to issue
Preferred Stock with rights to multiple votes per share and dividends rights
which would have priority over any dividends paid with respect to Americlean's
common stock. The issuance of Preferred Stock with such rights may make the
removal of management difficult even if such removal would be considered
beneficial to shareholders generally, and will have the effect of limiting
shareholder participation in certain transactions such as mergers or tender
offers if such transactions are not favored by incumbent management.
The average daily trading volume of Americlean's common stock over the
past year was less than 15,000 shares. As a result, a stockholder may be unable
to sell Americlean's common stock at the quoted bid price if a substantial
number of shares were offered for sale. In addition, due to the limited market
for Americlean's common stock, even limited trading may have a significant
impact on the price of Americlean's common stock.
Management's discussion and Analysis
or plan of operation
The following selected financial data should be read in conjunction with
the more detailed financial statements, related notes and other financial
information included elsewhere in this prospectus.
Americlean was incorporated in March 1997. Except for an isolated sale of
perc to a single customer in 1998, the operations of Americlean prior to March
1999 were limited to developing a business model for the dry cleaning and
commercial laundry supply industry and negotiating to acquire companies in the
dry cleaning industry.
<PAGE>
On March 3, 1999 Americlean acquired substantially all of the assets of
Boggs & Company, Inc. and JKG Group, Inc. (collectively "Boggs"). The Statement
of Operations for the year ended March 31, 1999 reflects the operations of
Americlean for the year and the operations of Boggs from March 3, 1999 to March
31, 1999. The Pro Forma Statement of Operations for the year ended March 31,
1999 gives effect to the acquisition of Boggs as if it occurred on April 1,
1998.
Since Americlean had minimal operations prior to the acquisition of Boggs,
the discussion of operations for the year ended March 31, 1999 is based upon the
pro forma statement of operations for that period.
Although Americlean reports in U.S. dollars, a portion of its business is
conducted in currencies other than the American dollar, primarily the Canadian
dollar. As a result, fluctuations in the value of the U.S. dollar relative to
the Canadian dollar could adversely affect operating results. Foreign currency
translation gains and losses arising from normal business operations are
credited to or charged against operations in the period incurred. Americlean
does not hedge against risks associated with currency fluctuations.
Americlean currently derives all of its revenues from the sale and
servicing of dry cleaning and commercial laundry equipment and supplies.
Statement of Operations Data:
Years Ended March 31, Six Months Ended
----------------------------------- September 30, 1999
1998 1999 1999
(Pro Forma)
Sales $1,111,374 $1,165,751 $13,102,265 $5,565,494
Cost of Sales (1,020,931) (911,002) (9,842,743) (4,004,524)
Operating Expenses (397,843) (4,056,250) (7,782,876) (2,259,262)
Interest Expense (Net) -- (9,638) (181,894) (58,694)
--------------------------------------------------------
Net Loss $(307,400) $(3,811,139) $(4,705,288) $(756,986)
========== ============ ============ ==========
Balance Sheet Data:
March 31,1999 September 30, 1999
Current Assets $3,714,445 $3,304,562
Total Assets 5,301,962 4,949,966
Current Liabilities 6,364,158 4,431,404
Total Liabilities 6,465,859 5,046,849
Working Capital (Deficit) (2,649,713) (1,126,842)
Shareholders' Equity (Deficit) (1,163,897) (96,883)
<PAGE>
No common stock dividends have been declared by Americlean since its
inception.
Six months ended September 30, 1999
Sales: Gross sales during the six months ended September 30, 1999 were all
derived from the operations of Boggs. During the six months ended September 30,
1998 Americlean did not have any revenues. Gross margin during the six months
ending September 30, 1999 was 28% compared to a gross margin for the year ended
March 31, 1999 (on a pro forma basis) of 24%. Following the acquisition of
Boggs, Americlean began to eliminate unprofitable and low-margin accounts in
order to increase gross margins. Although the reduction of these accounts will
reduce gross revenues, the resulting increase in gross margin, coupled with
reduced operating expenses, should have a positive effect on profitability.
Losses during the current period were also the result of low margins
realized on the sale of cleaning chemicals. To address this problem Americlean
entered into an agreement with an existing distributor which allows Americlean
to purchase sanitation and cleaning products at favorable prices. The
distributor also agreed to transfer to Americlean its direct ship accounts in
proportion to the increase in Americlean's sales of the distributor's products.
Through increased sales to new accounts and the reduced cost of sanitation and
cleaning products, Americlean expects its gross margins from the sale of
cleaning chemicals to increase.
Operating Expenses: During the current period selling, general and
administrative expenses represented 97% of Americlean's operating expenses.
Approximately $225,000 of selling, general and administrative expenses related
to administrative costs associated with the operation of Americlean's offices in
Vancouver, British Columbia and an additional $185,000 represented consulting
fees. Management expects to significantly reduce both of these expense
categories through the closure of its office in Vancouver and the concentration
of all administrative functions in Charlotte, North Carolina.
The largest components of selling, general and administrative expenses for
the six month period ended September 30, 1999 were salaries ($1,005,968) and
transportation related expenses ($113,307). Americlean is in the process of
installing a new computer system which is expected to improve Americlean's
accounting systems and internal controls, thereby allowing Americlean to
significantly reduce internal accounting staff as well as third party accounting
and auditing expenses. In a further effort to reduce expenses, senior management
of Boggs has agreed to a reduction in compensation.
Year ended March 31, 1999
Sales: During the year ended March 31, 1999 Americlean and Boggs, on a pro forma
basis, had gross revenues of $13,102,265, all of which resulted from sales by
Boggs of dry-cleaning equipment and supplies. Pro forma gross margin during
fiscal 1999 was 24% compared to pro forma gross margin of 22% for fiscal 1998.
<PAGE>
Operating Expenses: Pro forma selling, general and administrative expenses for
the twelve months ending March 31, 1999 increased approximately $3,700,000 from
the prior period due primarily to the following:
Stock Based Compensation $2,150,000
Advertising and Promotion 625,775
General and Administrative,
Vancouver office 799,322
Auditing Expenses, year ended March 31, 1999 173,285
----------
$3,748,382
==========
Stock Based Compensation consisted one time expenses of $1,800,000 related
to the issuance of 3,000,000 shares of common stock to two officers of
Americlean and $350,000 related to the issuance of below-market stock options
granted pursuant to a consulting agreement which has since been terminated. The
3,000,000 shares were issued for services rendered in designing and implementing
Americlean's business plan and in negotiating the acquisition of Boggs.
Advertising and promotional expenses pertained to the creation and
distribution of public relations materials and the production of a television
interview with Americlean's senior management who, during the course of the
interview, described the nature of Americlean's business plan and its goals.
Americlean's advertising and promotional campaign was designed to create
awareness of Americlean in the financial community, generate acquisition
opportunities in the dry-cleaning industry and inform the general public of the
merits of Americlean's business. Having completed the transition from a start-up
enterprise to an operating entity, Americlean expects that future advertising
and promotional expenses will be substantially less than those incurred in
fiscal 1999.
As mentioned in the discussion of operations pertaining to the six months
ending September 30, 1999, Americlean is taking steps to reduce auditing
expenses and to eliminate general and administrative expenses associated with
its Vancouver office.
Year ended March 31, 1998
Sales: During the year ended March 31, 1998 Americlean's gross revenues of
$1,111,374 were from one sale of perc to a single customer.
Operating Expenses: Administrative and selling expenses increased primarily due
to the increased activity of Americlean's management team in developing the
business model as well as outside contracting for engineering and consulting
services in conjunction with the development of the business model and hazardous
waste recycling processes. Due to potential environmental liability, Americlean
has abandoned its plans to recycle hazardous waste.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of January 15, 2000, Americlean has invested approximately $800,000
into Boggs to retire debt, acquire inventory and equipment and pay professional
fees.
Americlean expects to become profitable by January 2000 as the result of
higher gross margins, lower general and administrative expenses, the elimination
of chronically delinquent accounts and the implementation of stronger financial
controls and a customer service program.
Between April 1997 and April 1999 Americlean sold 348,623 shares of common
stock to private investors and received cash proceeds of $1,272,167 from the
sale of these shares.
In March 1999 Americlean entered into agreements with two creditors
pursuant to which debts totaling $206,507 were settled by the issuance of
413,014 shares of common stock.
In March 1999 Americlean sold 600 shares of its Series A Preferred stock
to a group of private investors at a price of $1,000 per share.
In October 1999 Americlean entered into agreements with three creditors
pursuant to which debts totaling $490,644 were settled by the issuance of
490,644 shares of Americlean's common stock.
In October of 1999 Americlean sold 300,000 shares of common stock to
private investors for $300,000.
The Company's sources and (uses) of cash during the year ended March 31, 1999
and the six months ended September 30, 1999 were:
Year Ended Six Months Ended
March 31, 1999 September 30, 1999
Cash used in operations $(1,218,741) $(597,945)
Cash used for acquisition of Boggs (43,039) --
Purchase of equipment (5,707) (132,232)
Payment on line of credit (138,289) (26,425)
Borrowings from related and other
third parties (262,686) 263,665
Sale of common stock 1,024,816 24,000
Sale of preferred stock 520,500 --
Increase (decrease) in cash fo
the period 400,260 (468,939)
<PAGE>
In order to increase revenues Americlean plans to acquire additional
distributors of dry cleaning supplies and equipment. The acquisition of one or
more dry cleaning distributors will require additional financing and/or the
willingness of the owners of the distributors to accept shares of Americlean's
common stock in full or partial payment of the purchase price of the
distributor's business. Americlean does not have any agreements relating to the
acquisition of additional dry cleaning distributors. There can be no assurance
that Americlean will be able to obtain the additional capital needed to expand
its business or, even if such capital is obtained that Americlean will be able
to acquire any additional distributors of dry cleaning supplies.
Since March 1999 Americlean has had a secured revolving line of credit
agreement which provides for borrowings of up to $3,000,000. The amount which
Americlean can borrow under the line of credit is limited to certain percentages
of Americlean's eligible accounts receivable and inventory. All borrowings under
the line of credit are payable on demand. The lender providing the line of
credit has indicated that the line of credit will terminate on February 15, 2000
and all amounts due under the line of credit will be due on that date. As of
January 26, 2000 Americlean had borrowed $1,154,000 under the line of credit.
Although Americlean is attempting to arrange substitute financing, there can be
no assurance that Americlean will be able to repay the amounts which are due to
the lender on February 15, 2000.
Americlean will need additional capital to expand its operations and fund
operating losses. As of the date of this prospectus Americlean did not have any
commitments from any source to provide additional capital.
YEAR 2000 ISSUE
The "Year 2000 Issue" is a term used to describe a problem encountered by
certain computer programs which use dates written with two digits rather than
four. Computer programs that have date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations causing disruptions of operations including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities. Americlean has not
experienced any problems to date, and does not expect to experience any future
problems, with respect to the Year 2000 Issue.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The preceding discussion contains various forward-looking statements that are
based on our beliefs as well as assumptions made by and information currently
available to us. When used in this report, the words "believe," "expect,"
"anticipate," "estimate" and similar expressions are intended to identify
forward-looking statements. Such statements may include statements regarding
seeking business opportunities, payment of operating expenses, and the like, and
are subject to certain risks, uncertainties and assumptions which could cause
actual results to differ materially from projections or estimates contained
herein. Factors which could cause actual results to differ materially are
discussed at length under the heading "Risk Factors". Should one or more of the
enumerated risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially form those anticipated,
estimated or projected. Investors should not place undue reliance on
forward-looking statements all of which speak only as of the date made.
<PAGE>
BUSINESS
Americlean sells laundry and dry cleaning supplies and equipment to
customers in North Carolina, South Carolina, Virginia, Tennessee, Georgia and
Florida. The supplies include hangers, poly bags, detergents, bleaches, solvent
spotters, perc, production control tags, packing and various other items. The
equipment sold by Americlean includes dry cleaning machines, shirt finishing
presses, boilers, and conveyers. Americlean also provides parts, installations
and service to its customers. Americlean has a customer base of approximately
2,000 dry cleaners, laundries, hospitals, nursing homes, and hotels; none of
which accounts for more than 2% of total sales. Americlean employs over forty
people, operates its own fleet of delivery trucks and service vans. Americlean's
main distribution center is located in Charlotte, North Carolina, with branches
in Jacksonville and St. Petersburg, Florida.
At the present time, Americlean does not manufacture any of the products
which it distributes, but rather purchases these products from approximately 100
vendors.
With the exception of labor, the products distributed by Americlean
represent the largest percentage of an average dry cleaner's operating expenses.
Americlean was incorporated in Delaware on March 3, l997. In March l997
Americlean, in exchange for 1,250,000 shares of Americlean's Common Stock,
acquired an affiliated Canadian corporation which was involved in the treatment
of a dry cleaning solvent known as perc. The Canadian corporation, Americlean
Western Canada Ltd., operated a perc treatment center in Canada between June and
September 1996. Except for an isolated sale of perc to a single customer during
fiscal 1998, the operations of Americlean were limited prior to March 1999. On
March 3, 1999 Americlean acquired substantially all of the assets of Boggs &
Company, Inc. and JKG Group, Inc. ("Boggs"). Prior to its acquisition by
Americlean, Boggs was a distributor of laundry and dry cleaning supplies and
equipment in the southern United States.
FUTURE OPERATIONS
Americlean intends to combine two separate revenue streams: manufacturing
and distribution, which to date, have not been combined. The North American dry
cleaning industry is represented by over 36,000 licensed dry cleaning plants and
over 400 wholesale distributors. The economics of distribution force the
manufacturers of products to utilize the multi-tier distribution channel that is
currently in place. Americlean intends to improve upon this distribution model
by acquiring or building plants within metropolitan regions that represent 69%
of the $7.2 billion market.
Americlean plans to distribute its own line of wire clothes hangers and
all of the associated cardboard accessories, as well as polyethylene (poly)
plastic covers used by dry cleaners. Americlean's strategy is to supply 100% of
<PAGE>
its own internal hanger needs, thereby reducing its dependence on third party
manufactured goods, as well as to market its products to unrelated, secondary
markets to diversify its revenue base and maintain the highest possible
production throughout.
ACQUISITION OF DRY CLEANING SUPPLY DISTRIBUTORS
Americlean plans to acquire additional distributors of dry cleaning
supplies and equipment. Initially Americlean will concentrate its efforts on
distributors serving customers in the eastern United States and which have
annual sales of at least $10,000,000 and at least 500 customers.
The acquisition of one or more dry cleaning distributors will require
additional financing and/or the willingness of the owners of the distributors to
accept shares of Americlean's Common Stock in partial payment of the purchase
price of the distributor's business. Americlean does not have any agreements
relating to the acquisition of additional dry cleaning distributors. There can
be no assurance that Americlean will be able to acquire any additional
distributors of dry cleaning supplies.
CONSTRUCTION OF DRY CLEANING SUPPLY PLANTS
Americlean, contingent upon the availability of additional financing,
plans to establish a number of dry cleaning and laundry supply plants in the
United States. Americlean's plants will supply a variety of items which are used
in the day-to-day operation of a dry cleaning establishment, including chemical
supplies, detergents, carbon filters, hangers and plastic polyethylene covers.
Americlean expects that it will require three to six months and cost
between $1,200,000 and $1,500,000 to construct and equip each plant. At the
present time Americlean does not have sufficient capital to build any plants.
Accordingly, there can be no assurance that Americlean will ever be able to
construct one or more of its proposed plants.
HANGERS
The average dry cleaner uses 50,000 hangers per year. The cost of wire
hangers is the single largest expense of goods consumed by the typical dry
cleaning plant. Americlean has begun to assemble the principal components
required to construct a wire hanger manufacturing plant, including the purchase
of two wire bending machines. The cost of the hardware acquired to date is
approximately $92,500. Americlean plans to have this equipment operational by
the fourth quarter of 2000. If sufficient capital is available, Americlean
intends to acquire distribution facilities and equipment that manufactures the
wire used by hanger machines. This wire fabrication equipment strips wire from
larger cables, which reduces the cost of raw materials by 25%. The hangers will
be manufactured and supplied with either custom printed paper sleeves, or as
plain, painted hangers.
<PAGE>
POLY BAGS
Polyethylene plastic covers ("poly bags") are used extensively in the dry
cleaning industry to protect cleaned garments pending their delivery to the
customer. Initially, Americlean will use third parties to manufacture the poly
bags that it will supply to its dry cleaning customers. However, based on
preliminary research, Americlean believes that it may be cost effective to
manufacture its own poly bags for distribution to its customers.
SALES, MARKETING AND COMPETITION
The $7.2 billion North American dry cleaning market is dependable with
modest growth. Virtually all dry cleaning plant owner/operators are independent
with little chain influence. The competition is independent and fractionated for
both plant owners and distributors. The products and equipment sold for the most
part have very little or no obsolescence.
The only segment of the market that experiences some periodic expansion
and contraction is equipment sales. Since the summer of 1997 sales of dry
cleaning machines have been soft due to some user concerns as to solvent
regulations. However, as new machines and solvent enter the market Americlean
believes sales of machinery will improve.
Many firms distribute dry cleaning supplies, with no one organization
being a dominant force in the industry. Many companies supply equipment and
hardware while maintaining a limited inventory of chemicals and peripheral
products. However, limited resources are expended to market and promote these
products since these distributors do not consider the sale of dry cleaning
chemicals and detergents as a primary business activity. Americlean plans to
focus on marketing and customer service to increase sales.
ACQUISITION OF BOGGS
In March 1999 Americlean acquired substantially all of the assets of Boggs
& Company, Inc. and JKG Group, Inc. (collectively "Boggs") for $100,000 in cash
and 80,723 shares of Americlean's Common Stock. As part of this acquisition
Americlean assumed approximately $725,000 of liabilities in excess of assets
purchased. An additional 80,723 shares of Common Stock are being held in escrow
and will be delivered to Boggs in the event that certain representations
concerning the liabilities of Boggs prove to be accurate.
As part of the acquisition of Boggs, Americlean agreed to employ two of
Boggs' officers for five years at a collective annual salary of $136,000 and to
issue to such officers options which would permit them to purchase up to 54,500
shares of Americlean's Common Stock at a price of $4.00 per share at any time
prior to March 3, 2004. The two officers of Boggs have subsequently agreed to
reduce the salaries payable pursuant to their employment agreements.
Prior to its acquisition by Americlean, Boggs was a distributor of laundry
and dry cleaning supplies and equipment in the southern United States.
See Management's Discussion and Analysis and the financial statements in
this Prospectus for financial information of Boggs.
<PAGE>
EMPLOYEES
As of January 15, 2000 Americlean had approximately 40 full-time
employees. Contingent upon Americlean raising sufficient capital, Americlean
plans to hire additional employees as may be required by the level of
Americlean's operations.
PROPERTIES
Americlean's corporate and administrative offices are located at 200
Burrard St., Suite 1650, Vancouver, British Columbia, Canada V6C 3L6.
Americlean's dry cleaning supply and distribution center is located in
Charlotte, North Carolina and consists of 27,000 square feet of office and
warehouse space. Americlean also maintains branch offices in Jacksonville and
St. Petersburg, Florida.
Management
Name Age Position with Americlean
Andrew Hromyk 33 President, Chief Executive Officer,
Treasurer, and a Director
Brett Walker 33 Vice President and a Director
Jose Lourenco 45 Vice President and a Director
Donald R. Senior 58 Chief Financial and Accounting Officer
Douglas Porter 53 Director
Valerie Moschetti 44 Secretary
Andrew Hromyk has been an officer and director of Americlean since March
l997. Since July 1995 Mr. Hromyk has also been the President and a director of
AmericleanWestern Canada Ltd., Americlean's predecessor. Since November l993,
Mr. Hromyk has been the president of Century Capital Management Ltd., a
financial and business consulting firm. From September l995 to March l996, Mr.
Hromyk was the vice president of Canadian Solvent Recovery, Ltd. From November
l99l to May l992, Mr. Hromyk was a consultant to the General Motors Special
Products Division. From July l989 to November l992, Mr. Hromyk owned and
operated various car dealerships in Vancouver, British Columbia which
specialized in the sale of foreign and collectible automobiles.
Brett Walker has been an officer and director of Americlean since March
l997. Since June l995 Mr. Walker has been the vice president of Americlean
Western Canada Ltd., Americlean's predecessor. From June l992 to December l995
Mr. Walker was Director of Production and Distribution for Petrovalve
International, Inc., a company engaged in the distribution of oil and gas
products. From 1990 to 1992 Mr. Walker was an officer of Eros Environmental
Technologies, Ltd. an oil spill recovery firm.
<PAGE>
Jose Lourenco has been an officer and director of Americlean since March
l997. Mr. Lourenco has been an independent consultant to the chemical industry
since August 1999. Between l997 and August 1999 Mr. Lourenco was the President
of Aquasol Technologies Inc., a corporation which is engaged in the development
of waste water treatment technology. From l993 to l996 Mr. Lourenco was Vice
President of AquaTex Corporation, a company engaged in the treatment of water
and waste-water. From l991 to l993 Mr. Lourenco was president of Noralto Metal
Fabrications, a company engaged in sheet metal, piping and pressure vessel
fabrication. In l982 Mr. Lourenco received a degree in chemical engineering from
the Technical University of Nova Scotia.
Donald R. Senior has been Americlean's Chief Financial and Accounting
Officer since June 1999. Between 1987 and 1999 Mr. Senior was employed in
various capacities by First Union Corp. in its commercial lending division.
Valerie Moschetti has been the Secretary of Americlean since October of
1998. Ms. Moschetti has acted as a corporate secretary for various public
companies and has provided administrative services to various corporate
organizations since 1987.
Doug Porter has been a director of Americlean since September of 1998. Mr.
Porter has been the President of Douglas Chemical, a formulary and dry cleaning
chemical manufacturer, since 1988 and owns and operates nine retail dry cleaning
plants. Mr. Porter has more than twenty years of dry cleaning and industry
experience.
Each director holds office until his successor is duly elected by the
stockholders. Executive officers serve at the pleasure of the Board of
Directors.
EXECUTIVE COMPENSATION
The following table sets forth in summary form the compensation received
by Americlean's Chief Executive Officer. No executive officer of Americlean
received in excess of $100,000 in cash compensation during the fiscal year ended
March 31, 1999.
Other Re-
Annual stricted
Compen- Stock Options
Name and Fiscal Salary Bonus sation Awards Granted
Principal Position Year (1) (2) (3) (4) (5)
- ------------------ ---- -------- ------- ------- ------- --------
Andrew Hromyk, 1999 -- -- $17,500 $1,530,000 25,000
President and Chief 1998 -- -- $23,500 -- --
Executive Officer 1997 -- -- $ 3,000 -- --
(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received.
<PAGE>
(3) Any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
Amounts in the table represent consulting fees paid to Century Capital
Management Ltd., a corporation controlled by Mr. Hromyk.
(4) The value of the shares of Americlean's common stock issued as compensation
for services. The shares were issued in the name of Century Capital
Management, Ltd., a Company controlled by Mr. Hromyk.
The table below shows the number of shares of Americlean's common stock
owned by Mr. Hromyk and the value of such shares as of March 31, 1999.
Name Shares Value
Andrew Hromyk 3,084,375 $5,120,000
(5) The shares of common stock to be received upon the exercise of all stock
options granted during the year ending March 31, 1999.
Proposed Compensation
The following shows the amount which Americlean expects to pay to its
executive officers during the twelve months ending March 31, 2000 and the time
which Americlean's executive officers plan to devote to Americlean's business.
Proposed Time to be Devoted
Name Compensation To Company's Business
Andrew Hromyk $125,000 75%
Brett Walker $100,000 100%
Donald R. Senior $ 75,000 100%
Jose Lourenco Nil 20%
Valerie Moschetti Nil 20%
Americlean's Board of Directors may increase the compensation paid to
Americlean's officers depending upon the results of Americlean's future
operations.
EMPLOYMENT AGREEMENTS
Except as provided below Americlean does not have any written employment
contracts with any of its executive officers and does not have any compensatory
plan or arrangement that results or will result from the resignation,
retirement, or any other termination of any executive officer's employment with
Americlean or from a change in-control of Americlean or a change in an executive
officer's responsibilities following a change in-control.
<PAGE>
In March 1999 Americlean acquired the dry cleaning business formerly owned
by Boggs & Company and JGK Group, Inc. In connection with this acquisition
Americlean entered into employment agreements with Jay Shinn and James Hynoski,
two executive officers of Boggs. Mr. Shinn was a director of Americlean between
July and December 1999. Each employment agreement provide for a term of five
years and an annual salary of $68,000. Mr. Shinn and Mr. Hynoski were also
granted incentive stock options which allow Mr. Shinn and Mr. Hynoski to
purchase 29,500 and 25,000 shares respectively of the Company's common stock.
The options are exercisable at a price of $4.00 per share at any time prior to
March 2004. Mr. Shinn and Mr. Hynoski have since agreed to reduce their salaries
payable pursuant to the employment agreements.
LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
None.
EMPLOYEE PENSION, PROFIT SHARING OR OTHER RETIREMENT PLANS
Americlean does not have a defined benefit, pension plan, profit
sharing or other retirement plan, although Americlean may adopt one or more of
such plans in the future.
COMPENSATION OF DIRECTORS
Standard Arrangements
At present Americlean does not pay its directors for attending meetings of
the Board of Directors, although Americlean expects to adopt a director
compensation policy in the future. Americlean has no standard arrangement
pursuant to which directors of Americlean are compensated for any services
provided as a director or for committee participation or special assignments.
Other Arrangements
During the year ending March 31, 1999 Americlean granted options to
purchase 25,000 shares of Common Stock to each of Americlean's four directors.
See "Stock Option Plans" below for information concerning these options.
Except as disclosed elsewhere in this Prospectus no director of Americlean
received any form of compensation from Americlean during the year ended March
31, 1999.
STOCK OPTION PLANS
Americlean has an Incentive Stock Option Plan and a Non-Qualified Stock
Option Plan. A summary description of each Plan follows. In some cases these two
Plans are collectively referred to as the "Plans".
<PAGE>
Incentive Stock Option Plan
The Incentive Stock Option Plan authorizes the issuance of options to
purchase up to 250,000 shares of Americlean's Common Stock. The Incentive Stock
Option Plan became effective on January 1, 1999 and will remain in effect until
January 1, 2009 unless terminated earlier by action of the Board. Only officers,
directors and key employees of Americlean may be granted options pursuant to the
Incentive Stock Option Plan.
In order to qualify for incentive stock option treatment under the
Internal Revenue Code, the following requirements must be complied with:
1. Options granted pursuant to the Plan must be exercised no later than:
(a) The expiration of thirty (30) days after the date on which an
option holder's employment by Americlean is terminated.
(b) The expiration of one year after the date on which an option
holder's employment by Americlean is terminated, if such
termination is due to the employee's disability or death.
2. In the event of an option holder's death while in the employ of
Americlean, his legatees or distributees may exercise (prior to the option's
expiration) the option as to any of the shares not previously exercised.
3. The total fair market value of the shares of Common Stock (determined
at the time of the grant of the option) for which any employee may be granted
options which are first exercisable in any calendar year may not exceed
$100,000.
4. Options may not be exercised until one year following the date of
grant. Options granted to an employee then owning more than 10% of the Common
Stock of Americlean may not be exercisable by its terms after five years from
the date of grant.
5. The purchase price per share of Common Stock purchasable under an
option is determined by the Board of Directors but cannot be less than the fair
market value of the Common Stock on the date of the grant of the option (or 110%
of the fair market value in the case of a person owning Americlean's stock which
represents more than 10% of the total combined voting power of all classes of
stock).
Non-Qualified Stock Option Plan
The Non-Qualified Stock Option Plan authorizes the issuance of options to
purchase up to 250,000 shares of Americlean's Common Stock. The Non-Qualified
Stock Option Plan became effective on July 6, 1998. Americlean's employees,
directors, officers, consultants and advisors are eligible to be granted options
pursuant to the Non-Qualified Stock Option Plan, provided however that bona fide
services must be rendered by such consultants or advisors and such services must
not be in connection with the offer or sale of securities in a capital-raising
transaction. The option exercise price is determined by the Board of Directors.
<PAGE>
Options granted pursuant to the Non-Qualified Stock Option Plan terminate
on the date established by the Board of Directors when the option was granted.
Other Information Regarding the Plans
The Plans are administered by Americlean's Board of Directors. The Board
of Directors has the authority to interpret the provisions of the Plans and
supervise the administration of the Plans. In addition, the Board of Directors
is empowered to select those persons to whom options are to be granted, to
determine the number of shares subject to each grant of an option and to
determine when, and upon what conditions or options granted under the Plans will
vest or otherwise be subject to forfeiture and cancellation.
In the discretion of the Board of Directors, any option granted pursuant to
the Plans may include installment exercise terms such that the option becomes
fully exercisable in a series of cumulating portions. The Board of Directors may
also accelerate the date upon which any option (or any part of any options) is
first exercisable. Any options granted pursuant to the Incentive Stock Option
Plan or the Non-Qualified Stock Option Plan will be forfeited if the "vesting"
schedule established by the Board of Directors at the time of the grant is not
met. For this purpose, vesting means the period during which the employee must
remain an employee of Americlean or the period of time a non-employee must
provide services to Americlean. At the time an employee ceases working for
Americlean (or at the time a non-employee ceases to perform services for
Americlean), any options not fully vested will be forfeited and cancelled. In
the discretion of the Board of Directors payment for the shares of Common Stock
underlying options may be paid through the delivery of shares of Americlean's
Common Stock having an aggregate fair market value equal to the option price,
provided such shares have been owned by the option holder for at least one year
prior to such exercise. A combination of cash and shares of Common Stock may
also be permitted at the discretion of the Board of Directors. Options are
generally non-transferable except upon death of the option holder.
The Board of Directors of Americlean may at any time, and from time to
time, amend, terminate, or suspend one or more of the Plans in any manner it
deems appropriate, provided that such amendment, termination or suspension
cannot adversely affect rights or obligations with respect to shares or options
previously granted.
The Plans are not qualified under Section 401(a) of the Internal Revenue
Code, nor are they subject to any provisions of the Employee Retirement Income
Security Act of 1974.
<PAGE>
Summary
The following sets forth certain information as of January 15, 2000,
concerning the stock options granted by Americlean. Each option represents the
right to purchase one share of Americlean's common stock.
Total Shares
Options Reserved for Remaining
Reserved Outstanding Options
Name of Plan Under Plan Options Under Plan
Incentive Stock Option Plan 250,000 54,500 195,500
Non-Qualified Stock Option Pla 250,000 100,000 150,000
The outstanding options in the table are exercisable at a price of $4.00
per share and expire at various dates between April 2004 and January 2009.
Options Granted
The following tables set forth information concerning the
options granted, during the fiscal year ended March 31, 1999 to Company's
officers and directors, and the fiscal year-end value of all unexercised options
(regardless of when granted) held by these persons.
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted (#) Fiscal Year Share Date
Andrew Hromyk 25,000 16% $4.00 01/01/2009
Brett Walker 25,000 16% $4.00 01/01/2009
Jose Lourenco 25,000 16% $4.00 01/01/2009
Douglas Porter 25,000 16% $4.00 01/01/2009
Jay Shinn 29,500 19% $4.00 03/03/2004
<PAGE>
Option Exercises and Fiscal Year End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- -------------
Andrew Hromyk -- -- 25,000/-- -/-
Brett Walker -- -- 25,000/-- -/-
Jose Lourenco -- -- 25,000/-- -/-
Douglas Porter -- -- 25,000/-- -/-
Jay Shinn -- -- 29,500/-- -/-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Americlean has issued shares of its common stock to the following
persons, who are or were affiliated with Americlean:
Date of Number
Name Issuance of Shares Consideration
Andrew Hromyk 3/97 625,000(1) 50% of the issued and out-
standing shares of American
Western Canada Ltd.
Current Investments Ltd. 3/97 625,000(2) 50% of the issued and out-
standing shares of American
Western Canada Ltd.
Brett Walker 3/97 125,000 $10,000
Mark Harrison 3/97 125,000 $10,000
Bona Vista West Ltd. 3/99 363,014 Settlement of loan in the
amount of $181,507
Current Investments Ltd. 3/99 50,000 Settlement of loan in the
amount of $25,000
Andrew Hromyk 4/99 2,550,000 Services rendered
Brett Walker 4/99 450,000 Services rendered
Current Investments Ltd. 10/99 100,000 $100,000
Current Investments Ltd. 10/99 140,000 Settlement of loan in the
principal amount of $140,000
(1) Shares were issued to Century Capital Management Ltd., a corporation
controlled by Mr. Hromyk. In September 1997 Century Capital Management Ltd.
transferred 362,500 of these shares to three persons, none of whom are
affiliated with Americlean. In November 1999 Century Capital Management
transferred 534,375 shares to two persons, none of which are affiliated
with Americlean. Century Capital Management relied upon the
exemptionprovided by Section 4(1) of the Securities Act of 1933 in
connection with the transfer of these shares.
<PAGE>
(2) Subsequent to March 1997 Current Investments Ltd. transferred 575,000 of
these shares to persons unrelated to Americlean.
During the year ended March 31, 1999 Americlean paid Century Capital
Management Ltd. $169,090 in consulting, rent and administrative and reimbursed
Century Capital Management Ltd. for expenses incurred on behalf of Americlean.
Century Capital Ltd. is controlled by Andrew Hromyk, an officer and director of
the Company.
Principal Shareholders
The following table sets forth, as of January 15, 2000, information with
respect to the only persons owning beneficially 5% or more of Americlean's
outstanding common stock and the number and percentage of outstanding shares
owned by each director and officer and by the officers and directors as a group.
Unless otherwise indicated, each owner has sole voting and investment powers
over his shares of common stock.
Shares of Percent of
Name and Address Common Stock Class (1)
Andrew Hromyk 2,550,000 (2) 41%
2190 Argyle Street, Suite 103
West Vancouver, B.C.
Canada V7V 1G6
Brett Walker 575,000 9%
2405 W. 2nd Ave., Suite 303
Vancouver, B.C.
Canada V6V 1S5
Jose Lourenco -- --
367 Lessard Drive
Edmonton, Alberta
Canada T6M 1A6
Donald R. Senior -- --
3931 Glenwood Drive
Charlotte, North Carolina 28208
Valerie Moschetti -- --
834 East 15th Avenue
Vancouver, B.C.
V5T 2R9
Douglas Porter -- --
1627 West Main Street
Suite 143
Bozeman, Montana 59715
<PAGE>
Shares of Percent of
Name and Address Common Stock Class (1)
Bona Vista West Ltd. 363,014 6%
P.O. Box 62
2001 Leeward Highway
Turks and Caicos Islands
British West Indies
All Officers and Directors 3,125,000 50%
as a Group (5 persons)
(1) Number of shares owned excludes shares issuable upon the exercise of options
held by the following persons.
Name Shares Subject to Option
Andrew Hromyk 25,000
Jose Lourenco 25,000
Brett Walker 25,000
Douglas Porter 25,000
(2) Shares are registered in the name of Century Capital Management Ltd., a
corporation controlled by Mr. Hromyk.
SELLING SHAREHOLDERS
In March 1999 Americlean raised $600,000 from the sale of 600 shares of
Americlean's preferred stock. The preferred shares will convert into shares of
Americlean's common stock 30 days after the date of this prospectus. As partial
consideration for the sale of the preferred shares, the Company issued common
stock purchase warrants to Anthony Advisors, the sales agent for the offering.
The shares of common stock issuable upon the conversion of the preferred shares
and the exercise of the sales agent's warrants are being offered to the public
by means of this prospectus.
This prospectus also relates to the sale of up to 350,000 shares of
Americlean's common stock issuable upon the exercise of options granted to
consultants to Americlean, as well as 1,036,151 shares offered by certain
shareholders of Americlean.
The owners of the 1,036,151 shares of Amerclean's common stock, as well as
the holders of the preferred shares, the sales agent warrants and the options,
to the extent they convert their preferred shares into shares of common stock or
exercise the warrants or options, are referred to in this prospectus as the
selling shareholders. Americlean will not receive any proceeds from the sale of
the shares by the selling shareholders.
<PAGE>
The names of the selling shareholders are:
<TABLE>
<S> <C> <C> <C> <C> <C>
Shares Which
May Be Shares Which
Acquired Upon May Be
Conversion of Acquired Shares to Share
Shares Series A Upon Exercise be Sold Ownership
Beneficially Preferred of Warrants in this After
Name Owned Shares (1) or Options Offering (2) Offering (5)
- --- ------------ ---------- ------------ ------------ -------------
Anthony James Stavros -- 47,170 -- 47,170 --
Susan C. Buescher -- 47,170 -- 47,170 --
Karron L. Heathman,
Trustee -- 47,170 -- 47,170 --
Allan J. Brda -- 18,868 -- 18,868 --
James David Bommarito -- 23,584 -- 23,584 --
D. Michael McDaniel -- 23,584 -- 23,584 --
So. County Investors -- 70,754 -- 70,754 --
Anthony D. Cupini,
IRA Acct. -- 33,019 -- 33,019 --
Britannia Development
Company Limited -- 42,452 -- 42,452 --
Armory Facilities -- 23,584 -- 23,584 --
Thomas C. Hullverson,
IRA Acct. -- 188,680 -- 188,680 --
Anthony Advisors 10,000 -- 39,600 (2) 49,600 --
Victor Nostas 7,000 -- 25,000 (3) 32,000 --
John Faessel 7,000 -- 25,000 (3) 32,000 --
Tony Francel 15,000 -- 150,000 (4) 165,000 --
Todd Hilditch -- -- 150,000 (4) 150,000 --
Gibralter Capital Corp. 100,000 -- -- 100,000 --
Cody Capital
Corporation 100,000 -- -- 100,000 --
Current Investments
Ltd. 290,000 -- -- 265,000 25,000
Trinity Capital
Limited 110,644 -- -- 110,644 --
Ascent Financial
Incorporated 240,000 -- -- 240,000 --
Bona Vista West Ltd 363,014 -- -- 181,507 181,507
-------- ------- -------- -------
566,037 389,600 1,991,786
======= ======= =========
</TABLE>
(1) The actual number of shares issuable upon the conversion of each preferred
share will be determined by dividing $1,000 by 75% of the average price of
Americlean's common stock during the five trading days preceding the
conversion date. The average price of Americlean's common stock used in
computing the shares shown in the table was $1.41.
(2) The actual number of shares issuable upon the exercise of the warrants held
by Anthony Advisors will be determined by dividing $42,000 by 75% of the
average price of Americlean's common stock during the five trading days
preceding the warrant exercise date. The warrants expire on February 22,
2000 and are exercisable at a price equal to 75% of the average price of
Americlean's common stock during the five trading days preceding the date
the warrant is exercised. The average price of Americlean's common stock
used computing the shares issuable upon the exercise of these warrants was
$1.41.
(3) The options are exercisable at a price of $5.00 per share and expire in
2002.
(4) The options are exercisable at a price of $2.50 per share and expire in
2000.
(5) The shares owned by Current Investments Ltd. after this offering will
represent less than 1% of Americlean's outstanding shares of common stock.
The shares owned by Bona Vista West Ltd. after this offering will represent
approximately 2.5% of Americlean's outstanding shares of common stock.
Plan of Distribution
The shares of common stock which may be acquired by the Selling
Shareholders may be offered and sold by means of this Prospectus from time to
time as market conditions permit in the over-the-counter market, or otherwise,
at prices and terms then prevailing or at prices related to the then-current
market price, or in negotiated transactions. These shares may be sold by one or
<PAGE>
more of the following methods, without limitation: (a) a block trade in which a
broker or dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) face-to-face transactions between sellers and purchasers without a
broker/dealer. In making sales, brokers or dealers engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate. These
brokers or dealers may receive commissions or discounts from Selling
Shareholders in amounts to be negotiated.
The costs of registering the shares offered by the Selling Shareholders
are being paid by Americlean. The Selling Shareholders will pay all other costs
of the sale of the shares offered by them.
From time to time one or more of the Selling Shareholders may transfer,
pledge, donate or assign the shares received upon the conversion of the Series A
Preferred Stock or the warrants or options referred to above (the "Conversion
Shares") to lenders or others and each of such persons will be deemed to be a
Selling Shareholder for purposes of this Prospectus. The number of Conversion
Shares beneficially owned by those Selling Shareholders will decrease as and
when they transfer, pledge, donate or assign the Conversion Shares. The plan of
distribution for the Conversion Shares sold by means of this Prospectus will
otherwise remain unchanged, except that the transferees, pledgees, donees or
other successors will be Selling Shareholders for purposes of this Prospectus.
A Selling Shareholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of Americlean's
common stock in the course of hedging the positions they assume with such
Selling Shareholder, including, without limitation, in connection with the
distribution of Americlean's common stock by such broker-dealers. A Selling
Shareholder may also enter into option or other transactions with broker-dealers
that involve the delivery of the common stock to the broker-dealers, who may
then resell or otherwise transfer such common stock. A Selling Shareholder may
also loan or pledge the common stock to a broker-dealer and the broker-dealer
may sell the common stock so loaned or upon default may sell or otherwise
transfer the pledged common stock.
Broker-dealers, underwriters or agents participating in the distribution
of Americlean's common stock as agents may receive compensation in the form of
commissions, discounts or concessions from the Selling Shareholders and/or
purchasers of the common stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation as to a
particular broker-dealer may be less than or in excess of customary
commissions). Selling Shareholders and any broker-dealers who act in connection
with the sale of common stock hereunder may be deemed to be "Underwriters"
within the meaning of the Securities Act, and any commissions they receive may
be deemed to be underwriting discounts and commissions under the Securities Act.
Neither Americlean nor any Selling Shareholder can presently estimate the amount
of such compensation. Americlean knows of no existing arrangements between any
Selling Shareholder, any other stockholder, broker, dealer, underwriter or agent
relating to the sale or distribution of Americlean's common stock.
The Selling Shareholders and any broker/dealers who act in connection with
the sale of the Shares hereunder may be deemed to be "underwriters" within the
meaning of ss.2(11) of the Securities Acts of 1933, and any commissions received
by them and profit on any resale of the Shares as principal might be deemed to
be underwriting discounts and commissions under the Securities Act.
Americlean has advised the Selling Shareholders that they and any
securities broker/dealers or others who may be deemed to be statutory
underwriters will be subject to the Prospectus delivery requirements under the
Securities Act of 1933. Americlean has also advised the Selling Shareholders
that in the event of a distribution of the shares owned by the Selling
<PAGE>
Shareholder, such Selling Shareholders, any affiliated purchasers, and any
broker/dealer or other person who participates in such distribution may be
subject to Rule 102 under the Securities Exchange Act of 1934 ("1934 Act") until
their participation in that distribution is completed. A distribution is defined
in Rule 102 as an offering of securities "that is distinguished from ordinary
trading transactions by the magnitude of the offering and the presence of
special selling efforts and selling methods". Americlean has also advised the
Selling Shareholders that Rule 102 under the 1934 Act prohibits any "stabilizing
bid" or "stabilizing purchase" for the purpose of pegging, fixing or stabilizing
the price of the Common Stock in connection with this offering. Rule 101 makes
it unlawful for any person who is participating in a distribution to bid for or
purchase stock of the same class as is the subject of the distribution.
DESCRIPTION OF SECURITIES
COMMON STOCK
Americlean is authorized to issue 50,000,000 shares of common stock, (the
"Common Stock"). Holders of common stock are each entitled to cast one vote for
each share held of record on all matters presented to shareholders. Cumulative
voting is not allowed; hence, the holders of a majority of the outstanding
common stock can elect all directors.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available for dividends
and, in the event of liquidation, to share pro rata in any distribution of
Americlean's assets after payment of liabilities. The board is not obligated to
declare a dividend. It is not anticipated that dividends will be paid in the
foreseeable future.
Holders of common stock do not have preemptive rights to subscribe to
additional shares if issued by Americlean. There are no conversion, redemption,
sinking fund or similar provisions regarding the common stock. All of the
outstanding shares of common stock are fully paid and nonassessable and all of
the shares of common stock issued upon the conversion of the Series A Preferred
Stock or the exercise of the warrants or options described in this prospectus
will be, upon issuance, fully paid and non-assessable.
PREFERRED STOCK
Americlean is authorized to issue up to 5,000,000 shares of Preferred
Stock. Americlean's Articles of Incorporation provide that the Board of
Directors has the authority to divide the Preferred Stock into series and,
within the limitations provided by Delaware statute, to fix by resolution the
voting power, designations, preferences, and relative participation, special
rights, and the qualifications, limitations or restrictions of the shares of any
series so established. As the Board of Directors has authority to establish the
terms of, and to issue, the Preferred Stock without shareholder approval, the
Preferred Stock could be issued to defend against any attempted takeover of
Americlean.
<PAGE>
In March 1999, Americlean's Board of Directors established Americlean's
Series A Preferred Stock and authorized the issuance of up to 600 shares of
Series A Preferred Stock as part of this series. Upon any liquidation or
dissolution of Americlean, each outstanding share of Series A Preferred Stock is
entitled to distribution of $1,000 per share prior to any distribution to the
holders of Americlean's common stock. The Series A Preferred Shares are not
entitled to any dividends or voting rights. In April 1999, Americlean sold 600
shares of its Series A Preferred Stock to a group of private investors for
$1,000 per share. Thirty days after the date of this Prospectus each Series A
Preferred Share will convert into shares of Americlean's common stock equal in
number to the amount determined by dividing $1,000 by 75% of the average price
of Americlean's common stock for the five trading days preceding the conversion
date. The shares issuable upon the conversion of the Series A Preferred Shares
are being offered for sale to the public by means of this Prospectus. See
"Selling Shareholders".
LITIGATION
Americlean is named as a defendant under a lawsuit launched by the estate
of a former employee on September 11, 1998. The plaintiff has claimed
approximately $500,000 and 87,500 free trading shares of Americlean's common
stock for settlement of this action. Americlean believes that it has a
meritorious defense to the claims of the former employee and that the ultimate
resolution of this action will not have a material adverse effect on
Americlean's financial condition or results of operations.
Americlean has also had a default judgement entered against it for
approximately $30,000 in favour of an Alberta company which disposed of certain
waste products for Americlean. Americlean has entered into an agreement to
settle this judgement by paying approximately $25,000 to the Alberta company in
stages.
Other than the foregoing, Americlean is not a party to any pending legal
proceeding.
EXPERTS
Ernst & Young LLP, independent auditors, have audited Americlean's
consolidated financial statements at March 31, 1999 and 1998, and for the years
then ended, as set forth in their report, which contains an explanatory
paragraph describing conditions that raise substantial doubt about Americlean's
ability to continue as a going concern as described in Note 1 to the
Consolidated Financial Statements. Americlean has included its financial
statements in this prospectus and elsewhere in the registration statement, in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
The Combined Balance Sheets of Boggs & Company, Inc. and JKG Group, Inc.
("Boggs & JKG") as of September 30, 1998 and 1997, and the Combined Statements
of Operations and Retained Earnings (Deficit) and Cash Flows for two years then
ended have been included herein in reliance on the report of Bullard &
Blanchard, P.L.L.C., independent accountants, given on the authority of that
firm as experts in accounting and auditing. The report of Bullard & Blanchard
P.L.L.C. contains an explanatory paragraph describing conditions that raise
substantial doubt about the ability of Boggs & JKG to continue as a going
concern as described in Note 11 to the Combined Financial Statements of Boggs &
JKG.
INDEMNIFICATION
Americlean's bylaws authorize indemnification of a director, officer,
employee or agent of Americlean against expenses incurred by him in connection
with any action, suit, or proceeding to which he is named a party by reason of
his having acted or served in such capacity, except for liabilities arising from
<PAGE>
his own misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent of Americlean who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling Americlean pursuant to the foregoing provisions, Americlean has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
AVAILABLE INFORMATION
Americlean has filed with the Securities and Exchange Commission a Registration
Statement on Form SB-2 together with all amendments and exhibits, under the
Securities Act of 1933, as amended with respect to the securities offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement. The Registration
Statement and amendments and exhibits may also be reviewed at the Internet Web
Site maintained by the Securities and Exchange Commission at www.sec.gov.
<PAGE>
Consolidated Financial Statements
Americlean, Inc.
Years ended March 31, 1999 and 1998
with Report of Independent Auditors
<PAGE>
Americlean, Inc.
Consolidated Financial Statements
Years ended March 31, 1999 and 1998
Contents
Report of Independent Auditors.........................................1
Audited Consolidated Financial Statements
Consolidated Balance Sheets............................................2
Consolidated Statements of Operations..................................4
Consolidated Statements of Stockholders' Equity (Deficit)..............5
Consolidated Statements of Cash Flows..................................6
Notes to Consolidated Financial Statements.............................7
<PAGE>
Report of Independent Auditors
The Board of Directors
Americlean, Inc.
We have audited the accompanying consolidated balance sheets of Americlean, Inc.
as of March 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Americlean, Inc.
at March 31, 1999 and 1998, and the consolidated results of its operations and
its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United Sates.
As discussed in Note 1 to the consolidated financial statements, the Company's
recurring losses from operations, working capital deficiency, stockholders'
deficit and termination of its revolving line of credit facility raise
substantial doubt as to its ability to continue as a going concern (management's
plans as to these matters are also described in Note 1). The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
June 25, 1999
except for Notes 1 and 6
as to which the date is November 17, 1999
Charlotte, North Carolina
<PAGE>
Americlean, Inc.
Consolidated Balance Sheets
March 31
1998 1999
---------------------------
Assets
Current assets:
Cash $ 115,879 $ 516,139
Trade accounts receivable, less allowance
for doubtful accounts of $0 and $1,000 in
1998 and 1999, respectively 780,778 1,390,328
Inventories - 1,704,735
Employee advances - 33,613
Prepaid expenses and other current assets - 60,454
Due from related party - 9,176
---------------------------
Total current assets 896,657 3,714,445
Property and equipment, net 9,969 238,027
Goodwill -- 1,349,490
--------- ----------
$ 906,626 $5,301,962
========= ==========
<PAGE>
March 31
1998 1999
----------------------------
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 846,689 $4,691,348
Revolving line of credit - 1,395,577
Due to related parties 14,518 250,738
Current portion of capitalized lease - 26,495
obligation
---------- ---------
Total current liabilities 861,207 6,364,158
Due to related party - 80,286
Long term portion of capitalized lease - 21,415
obligation
Stockholders' equity (deficit):
Common Stock, $0.0001 par value, 50,000,000
shares authorized; 1,539,538 in 1998 and
2,423,090 in 1999 shares issued and 154 242
outstanding
Convertible Preferred Stock, $0.0001 par value,
5,000,000 shares authorized, no shares issued
and outstanding in 1998 and 1999, and 600 shares
subscribed and paid in 1999 - -
Additional paid-in capital 436,781 3,038,516
Accumulated deficit (391,516) (4,202,655)
----------------------------
Total stockholders' equity (deficit) 45,419 (1,163,897)
----------------------------
$906,626 $5,301,962
============================
See accompanying notes.
<PAGE>
Americlean, Inc.
Consolidated Statements of Operations
Year ended March 31
1998 1999
----------------------------------
Sales $1,111,374 $ 1,165,751
Cost of goods sold 1,020,931 911,002
----------------------------------
Gross profit 90,443 254,749
Selling, general and administrative 395,848 4,042,866
expenses
Depreciation 1,995 7,863
Amortization - 5,521
---------------------------------
Operating income (307,400) (3,801,501)
Interest income - 5,873
Interest expense - (15,511)
----------------------------------
Net loss $ (307,400) $(3,811,139)
==================================
Basic and diluted loss per weighted
average common share (Note 14) $ (0.20) $ (2.18)
==================================
See accompanying notes.
<PAGE>
Americlean, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Convertible
Common Stock Preferred Stock
------------------- -----------------
Additional Accumulated
Shares Amount Shares Amount Paid in Deficit Total
Capital
-------------------- -------------------------------------------------------
Balance at March 31, 1997 $150 - $ - $ 189,406 $ (84,116) $ 105,440
1,500,000
Net loss - - - - - (307,400) (307,400)
Issuance of common stock 39,538 4 - - 247,375 - 247,379
-------------------- --------------- -----------------------------------
Balance at March 31, 1998 1,539,538 154 - - 436,781 (391,516) 45,419
Net loss - - - - - (3,811,139) (3,811,139)
Convertible preferred
stock subscribed and - - 600 - 481,125 - 481,125
paid
Issuance of common stock 883,552 88 - - 2,120,610 - 2,120,698
----------------- -------------- ------------------------------------
Balance at March 31, 1999 2,423,090 $242 600 $ - $3,038,516 $(4,202,655) $(1,163,897)
================= ============== ======================================
</TABLE>
See accompanying notes.
<PAGE>
Americlean, Inc.
Consolidated Statements of Cash Flows
Year ended March 31
1998 1999
-----------------------------
-----------------------------
Operating activities
Net loss $(307,400) $(3,811,139)
Adjustments to reconcile net loss to
net cash used in continuing
operations:
Depreciation 1,995 7,863
Amortization - 5,521
Valuation allowance on mortgage 169,188 -
receivable
Non-cash compensation and advisory
services expense related to equity - 2,150,000
issuances
Loss on disposal of property and 3,228 -
equipment
Changes in operating assets and
liabilities:
Trade accounts receivable (780,778) 737,765
Inventories - 175,473
Employee advances - 3,293
Prepaid expenses and other current - 13,492
assets
Accounts payable and accrued
liabilities 821,874 (501,009)
-----------------------------
Net cash used in operating activities (91,893) (1,218,741)
Investing activities
Acquisition of Boggs and Company, Inc.,
net of cash acquired - (43,039)
Purchases of property and equipment (8,518) (5,707)
-----------------------------
-----------------------------
Net cash used in investing activities (8,518) (48,746)
<PAGE>
Financing activities
Capitalized leases - (1,966)
Advance from related party - 56,179
Issuance of debt - 206,507
Advances to related parties (31,089) -
Net payments on line of credit - (138,289)
Convertible preferred stock subscribed - 520,500
and paid
Issuance of common stock 247,379 1,024,816
-----------------------------
Cash provided by financing activities 216,290 1,667,747
-----------------------------
Increase in cash 115,879 400,260
Cash at beginning of year - 115,879
-----------------------------
Cash at end of year $ 115,879 $ 516,139
=============================
Debt of $206,507 was extinguished during 1999 by the issuance of 413,014 shares
of the Company's common stock.
See accompanying notes.
<PAGE>
Americlean, Inc.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
1. Going Concern
During 1999, Americlean, Inc. (the "Company") continued to incur losses and
negative cash flow from operations which resulted in a working capital
deficiency and a stockholders' deficit. These losses related to the acquisition
of Boggs and Company, Inc. (see Note 3) which generated losses in the
post-acquisition period and corporate general and administrative costs incurred
while formulating the Company's business plan, raising capital, and evaluating
potential acquisition targets. Additionally, the Company was given notice on
November 17, 1999 that its line of credit will be terminated effective February
15, 2000 (See Note 6).
The ability of the Company to continue as a going concern and to realize the
carrying values of its assets and discharge its liabilities when due is
dependent upon the successful completion of actions that the Company has
initiated or plans to take which management believes will mitigate the adverse
conditions and events. These plans include the implementation of an improved
management information system to more effectively manage the Company's working
capital, the reduction of general and administrative expenses, and securing
additional debt and equity financing sufficient to fund the Company's operations
and acquisition strategy.
The Company's plan of business includes the acquisition and consolidation of
additional dry-cleaning supply and equipment distributors in various markets in
the United States, thereby reducing unit operating costs. The Company's plan
also includes the acquisition of manufacturers of certain dry-cleaning products
distributed by the Company, including poly bags, hangers, and cleaning solvents,
as well as the provision of a service which recycles certain of these solvents.
Financing of these acquisitions and expanded operations, as well as the funds
required to continue the operation of the Company, will be sought by the Company
on a case-by-case basis, and the Company has engaged the services of an
investment bank in this regard. There is, however, no certainty that these
actions or other strategies will be sufficient to permit the Company to continue
or that financing, if available, will be on terms acceptable to the Company.
<PAGE>
2. Summary of Significant Accounting Policies
Description of Business
Americlean, Inc. is a provider of supplies and equipment in the dry cleaning
industry as well as a service provider for repairs regarding such equipment.
Americlean, Inc. was incorporated on March 3, 1997 in Delaware. Americlean, Inc.
has two wholly owned subsidiaries: Americlean Western Canada Ltd. ("AWCL"),
which is inactive and was dissolved subsequent to March 31, 1999, and Boggs and
Company, Inc.
Advertising Costs
Advertising costs are expensed as incurred. During fiscal 1998 and 1999, $47,540
and $243,650, respectively, of advertising costs were charged to selling,
general, and administrative expenses.
Comprehensive Income
In 1999 the Company adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income. This statement established rules for the
reporting of comprehensive income and its components. The adoption of this
statement had no impact on total shareholders' equity. Consolidation
The consolidated financial statements include the accounts of Americlean, Inc.
and its subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation.
Fair Value of Financial Instruments
The carrying amount of cash, trade accounts and notes receivable, and other
current and long-term liabilities approximates their respective fair values.
Foreign Currency Translation
The Company's functional currency is the U.S. dollar. Foreign entities remeasure
monetary assets and liabilities at the current exchange rate in effect at the
balance sheet date and non-monetary assets and liabilities at the historical
rate. Sales and expenses are translated using average exchange rates. In 1999,
the remeasurement losses of $42,331 are included in other income.
<PAGE>
Goodwill
Goodwill represents the excess of cost over assigned fair market value of net
assets acquired and is being amortized on a straight-line basis over an
estimated useful life of 20 years. Goodwill is shown net of accumulated
amortization of $5,521 at March 31, 1999. The carrying amount of goodwill is
reviewed if facts and circumstances suggest that it may be impaired. If this
review indicates that goodwill will not be recoverable, as determined based on
the expected future undiscounted cash flow of the entity acquired over the
remaining amortization period, the carrying amount of the goodwill is reduced to
its fair value.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out method.
Long-Lived Assets
The Company assesses long-lived assets for impairment under Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. This statement
requires impairment losses to be recorded when indications of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying value
Loss per Share
In 1998, the Company adopted Statement of Financial Accounting Standards No.
128, Earnings Per Share ("SFAS 128".) Under SFAS 128, basic earnings per share
("EPS") is computed by dividing the income/loss available to common shareholders
by the weighted-average number of common shares outstanding for the year. No
adjustments to net loss were necessary for fiscal years 1998 and 1999 to arrive
at loss available to common shareholders. Diluted EPS reflects the potential
dilution that could occur if securities and other contacts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock. When dilutive, stock options and warrants, and convertible
preferred stock are included as share equivalents in computing diluted EPS using
the treasury stock method and the if-converted method, respectively.
Average shares outstanding for basis EPS were 1,519,769 and 1,746,208 for fiscal
years 1998 and 1999, respectively. Diluted and basic loss per share are
equivalent due to the antidilution provisions of SFAS 128. Equivalent average
common shares of dilutive securities of 0 and 582,767 are not included in the
calculation of diluted EPS in the years ended March 31, 1998 and 1999, because
they are antidilutive.
<PAGE>
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed principally
using the straight-line method based upon the estimated useful lives of the
related assets, ranging from 3 to 39 years.
Reclassification
Certain amounts in the 1998 financial statements have been reclassified in order
to conform with the 1999 presentation.
Revenue Recognition
The Company recognizes revenues at the time products are delivered. The Company
recognizes fees from installation and repair services when such services are
provided to customers.
2. Summary of Significant Accounting Policies (continued)
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"). Under APB 25, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the measurement date over the exercise price.
The Company has adopted the disclosure only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
123").
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Impact of Recently Issued Accounting Standards
On March 31, 1999, the Company adopted FASB Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"). The new rules
establish revised standards for public companies relating to the reporting of
financial and descriptive information about their operating segments in
financial statements. The adoption of SFAS 131 did not have a material effect on
Americlean, Inc.'s primary financial statements or the related disclosures, as
the Company has only one reportable segment. Substantially all of the Company's
revenues and long-lived assets are based in the U.S.
3. Business Acquisitions
On March 3, 1999, the Company completed the acquisition of Boggs & Company, Inc.
("Boggs"), located in Charlotte, North Carolina. Boggs provides supplies and
equipment for the dry cleaning industry as well as services and repairs
equipment principally in the southeastern United States. The purchase price of
$630,000 consisted of 161,446 shares of the Company's common stock valued at
$500,000, $100,000 in cash, and $30,000 in acquisition costs. The Company's
consolidated financial statements for the year ended March 31, 1999 include the
operating results of Boggs for the period March 3, 1999 to March 31, 1999. The
acquisition was accounted for as a purchase business combination with the
purchase price allocated as follows:
Cash $ 86,961
Current assets 3,338,275
Equipment 230,214
Goodwill 1,355,011
Liabilities assumed (4,380,461)
==================
$ 630,000
==================
<PAGE>
3. Business Acquisitions (continued)
The unaudited pro forma results of operations for the years ended March 31, 1998
and 1999 (reflecting all adjustments which, in the opinion of management, are
necessary for fair presentation) as if the acquisition of Boggs was consummated
on April 1, 1997 and April 1, 1998, are as follows:
1998 1999
---------------------------
Pro forma total revenues $ 15,231,083 $ 13,102,265
Pro forma net loss (465,132) (4,705,288)
Pro forma loss per common share (0.31) (2.69)
4. Inventories
1998 1999
---------------------------
Machinery $ - $ 497,055
Parts - 415,997
Supplies and other - 791,683
--------- --------
$ - $1,704,735
$ - $7,704,735
========= ==========
5. Property and Equipment
1998 1999
---------------------------
Leasehold improvements $ - $ 75,989
Machinery and equipment 12,744 113,369
Automobiles - 59,128
---------------------------
12,744 248,486
Less : Accumulated depreciation 2,775 10,459
-------------------------
$ 9,969 $238,027
===========================
6. Financing Arrangement
On March 18, 1999, the Company's subsidiary, Boggs & Company (1998), Inc.,
entered into a secured revolving line of credit agreement with the CIT Group
which provides for borrowings of up to $3 million. The line of credit, which is
an annual agreement, is limited to certain percentages of the Company's eligible
accounts receivable and inventory. All borrowings under the line of credit are
payable on demand. Interest rates are the greater of 7% or the prevailing Chase
Manhattan Bank rate plus 2%, in each instance computed on the greater of
$1,000,000 or the average of the net balances owed by the Company. Interest paid
during 1999 was $13,078. No interest was paid in 1998.
On November 17, 1999, the CIT Group elected to terminate the above revolving
line of credit agreement effective February 15, 2000.
<PAGE>
7. Operating Lease Commitments
The Company leases office facilities, automobiles, and office equipment under
non-cancelable operating leases. Future minimum lease payments under
non-cancelable leases (with minimum or remaining lease terms in excess of one
year) for fiscal years subsequent to March 31, 1999 are as follows:
2000 $175,472
2001 152,178
2002 130,416
2003 73,292
2004 24,011
Thereafter 2,121
-----------
$557,490
===========
Rent expense amounted to approximately $9,000 and $68,000 for the years ended
March 31, 1998 and 1999, respectively.
8. Capital Lease Obligations
Various equipment and automobiles, with a cost of approximately $65,000 and
accumulated amortization of approximately $2,000 at March 31, 1999 have been
acquired under lease contracts which will transfer ownership at the end of the
lease terms. The equipment and automobiles were recorded at the present value of
these lease payments. Amortization of assets under capital leases is included in
depreciation expense.
The following is a schedule by year of the future minimum lease payments under
the capital leases, together with the present value of the net minimum lease
payments as of March 31, 1999:
Year ending March 31:
2000 $29,584
2001 16,025
2002 7,281
-----------
Total minimum lease payments 52,890
Less amount representing interest 4,980
-----------
Present value of net minimum lease
payments 47,910
Less current portion 26,495
===========
$21,415
===========
<PAGE>
9. Income Taxes
The Company has federal net loss carryovers of approximately $2.4 million, the
benefits of which have not been recognized in the financial statements. The loss
carryovers begin expiring in the year 2019.
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The Company has recognized a
valuation allowance equal to the deferred tax assets due to the uncertainty of
realizing the benefits of the assets. Significant components of the Company's
deferred tax assets as of March 31, 1999 are as follows:
1998 1999
----------------------------------
Deferred tax assets:
Net operating loss carryforwards $ 99,000 $1,070,000
Depreciation and amortization 1,250 1,000
Other foreign - 2,000
Mortgage valuation allowance 76,000 -
----------------------------------
Total deferred tax assets 176,250 1,073,000
Valuation allowance (176,250) (1,073,000)
==================================
Net deferred taxes $ - $ -
==================================
No taxes were paid in 1998 or 1999.
10. Stockholders' Equity
Common Stock
Effective January 14, 1999, the Company's major stockholders authorized a
one-for-four reverse stock split to shareholders of record on such date.
Shareholders' equity has been restated to give retroactive recognition to the
reverse stock split for all periods presented by reclassifying from the par
value of common stock to additional paid in capital. In addition, all references
in the financial statements to number of shares, per share amounts, and stock
option data have been restated.
Preferred Stock
In April 1999, the Company issued 600 shares of Series A Non-Voting, Convertible
Preferred Stock in consideration for $1,000 per share. All shares were
subscribed and paid in March 1999. The Preferred Stock is convertible into
shares of the Company's common stock at any time after October 5, 1999 and, in
any event, will be deemed to convert into common stock on the later of (i) the
date which is 30 days after the effective date of a registration statement filed
in respect of the common stock underlying the Preferred Stock or (ii) November
5, 1999. The Preferred Stock shall convert into common stock on the basis of a
25% discount to the average closing bid price of the common stock for the five
trading days immediately prior to the date of conversion. In addition, the
Preferred Stock does not pay dividends. The Company has the right to repurchase
<PAGE>
10. Stockholders' Equity (continued)
the convertible stock until August 3, 1999 at a 20% premium to the issuance
price. The Preferred Stock carries no dividend rights. The Company has valued
the embedded conversion feature of the preferred stock at $200,000 and has
recorded this as additional paid-in capital.
Warrants
Pursuant to the terms of a consulting agreement between the Company and Anthony
& Company, Inc., ("Anthony Advisors") dated February 1999, the Company appointed
Anthony Advisors as its exclusive agent for the issuance of up to 600 shares of
Series A Convertible Preferred Stock at a price of $1,000 per share for gross
proceeds to the Company of $600,000. Pursuant to the terms of this agreement,
the Company paid to Anthony Advisors a cash commission of $42,000, being 7% of
the gross proceeds of Series A Convertible Preferred Stock to the Company.
Furthermore, the Company reduced paid-in capital by $37,500 in March 1999,
relating to the issuance of 10,000 common shares issued to Anthony Advisors
subsequent to year end as additional compensation for such services. In
addition, the Company reduced preferred stock paid in capital and increased
common stock paid-in capital by $39,375 in relation to the issuance of warrants
to Anthony Advisors for the purchase of up to 42,000 shares of the Company's
common stock at any time until February 22, 2000 at a price per share equal to
75% of the average market price of the Company's common stock for the five
trading days immediately prior to the exercise date.
Stock Options
During 1999, the Company adopted two stock option plans. The Non-Qualified Stock
Option Plan provides that options for 250,000 shares of the common stock of the
Company can be granted to selected officers, directors and key employees. The
option price under this plan is established by the Board of Directors. The
Incentive Stock Option Plan provides that options for 250,000 shares of the
Company's common stock can be granted to officers and employees. The option
price under the plan is the fair market value at the grant date. The vesting
periods and terms of options granted for both plans are established by the Board
of Directors. The term of the option cannot exceed 10 years.
During January and March 1999, 100,000 and 54,500 options were granted and
outstanding under the Non-Qualified Stock Option Plan and the Incentive Stock
Option Plan, respectively, at a grant price of $4. No options were exercised,
canceled or forfeited. At March 31, 1999, 154,500 options were exercisable at a
weighted average exercise price of $4. The weighted average remaining
contractual life of the options is 8.1 years.
The Company applies APB 25 and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for stock
options granted to employees, officers or directors. Had compensation cost for
stock options been determined based on the fair value at the grant dates
consistent with SFAS 123, the Company's net loss and loss per share would have
been $2,492,298 or $1.43 per share. All options granted in 1999 vested
<PAGE>
10. Stockholders' Equity (continued)
immediately and the total compensation expense has been recognized in the 1999
pro forma amounts. These pro forma amounts may not be representative of future
disclosures because additional options granted in future years may have
different vesting periods.
Using the Black-Scholes option valuation model, the weighted average fair value
of the options granted during 1999 was $1.76. The following weighted average
assumptions were used in applying the Black-Scholes model: risk-free interest
rate of 5.5%, expected life of options of 4.1 years, expected dividend rate of
0% and expected volatility of the Company's common stock of 1.143.
Stock Options (continued)
During January 1999, the Company provided 200,000 options to a vendor with an
exercise price of $2. These options have a four-year life and vested
immediately. No options were exercised in 1999. The Company recorded the fair
value of these options of $350,000 as a charge to expense in the current year.
The fair value of these options was calculated using the Black-Scholes model and
the following assumptions: risk-free interest rate of 5.5%, expected life of
options of 2 years, expected dividend rate of 0% and expected volatility of the
Company's common stock of 1.143.
Pursuant to a three-month consulting agreement dated June 1, 1999 between the
Company and two advisors, the Company agreed to issue 7,000 shares of its common
stock to the advisors. In addition, the Company granted 100,000 options, of
which 25,000 vested on June 1, 1999, to these advisors with an exercise price of
$5.00 per share. The advisors also receive monthly compensation throughout the
term of the agreement. The Company has the option to renew this agreement for
three, subsequent three-month terms, in which case the Company will issue to the
advisors an additional 7,000 shares and an additional 25,000 options shall vest
for each term.
On June 8, 1999, the Company entered into a six-month consulting agreement with
another advisor. Pursuant to the terms of this agreement, the Company agreed to
issue 15,000 shares of its common stock to the advisor and also granted 200,000
options, of which 100,000 vested on June 1, 1999, to the advisor with an
exercise price of $2.50 per share. The advisor also receives monthly
compensation throughout the term of the agreement. The Company has the option to
renew this agreement for two subsequent three-month terms, in which case options
for an additional 50,000 shares shall vest for each term.
In an additional consulting agreement dated June 8, 1999 with a three-month
term, the Company granted another advisor 200,000 options, of which 50,000
vested on June 1, 1999, to purchase common stock with an exercise price of $2.50
per share. The advisor also receives monthly compensation throughout the term of
the agreement. The Company has the option to renew this agreement for three,
subsequent three-month terms, in which case options for an additional 50,000
shares shall vest for each term.
<PAGE>
11. Related-Party Transactions
Related party balances consist of advances made to employees and notes payable
to an employee in relation to the sale of a business. At March 31, 1999, the
Company had two notes payable with such employees. The notes are secured by
certain fixed assets and inventory and bear interest at a rate of 8%. The notes
commenced March 31, 1998 and are payable in annual installments through 2002. At
March 31, 1999, the total notes payable balance was $148,738 with a current
portion of $68,452.
Combined amounts of maturities for such notes during each of the following five
years are as follows:
2000 $68,452
2001 38,544
2002 41,742
--------------
$148,738
==============
No interest was paid on these obligations during either 1999 or 1998. At March
31, 1999, $12,345 was accrued as interest payable on these obligations.
The Company also rents a building from the aforementioned employee. Accrued rent
on such building at March 31, 1999 was $47,961. In addition, the Company owed
this employee $43,196 for purchased merchandise and commissions.
The Company has significant transactions with its major shareholder Century
Capital Management Ltd. ("Century") involving the payment of expenses in common
or on behalf of the Company. At March 31, 1999, the Company had a receivable of
$9,176 and a payable of $78,784 with Century. The Company also paid $169,090 and
$36,350 during the years ended March 31, 1999 and 1998, respectively, to Century
for reimbursements of office expenses, consulting, and administrative fees.
For the year ended March 31, 1999, the Company recorded compensation expense of
$1.8 million related to the issuance of shares to two of its officers as noted
in Note 14.
12. Concentrations of Credit Risk
Financial instruments that potentially subject the Company to a concentration of
credit risk consist principally of temporary cash investments. The Company
places its temporary cash investments with high-credit-quality financial
institutions. During 1998, all of the sales and related accounts receivable
related to one customer.
<PAGE>
13. Commitments and Contingencies
The Company is named as a defendant under a lawsuit filed by the estate of a
former employee. The plaintiff has claimed $500,000 and 87,500 free trading
shares of the Company for settlement of this action. Management believes it has
a meritorious defense to this claim and the ultimate resolution of this action
will not have a material adverse effect on the Company's financial condition or
results of operations.
14. Subsequent Events
Acquisition of Universal EnviroClean Systems, Inc.
On April 28, 1999, the Company acquired all issued and outstanding shares of
Universal EnviroClean Systems, Inc. ("Universal") for $1.00. Universal is a
California-based company engaged in the business of distributing environmentally
friendly hydrocarbon-based cleaning solvents and which, prior to the
acquisition, owned nominal assets. The Company also agreed to invest a total of
$180,000 into Universal, in stages, to fund the development and operations of
Universal. Universal has two key employees, and the Company has agreed to
guarantee their employment contracts for a period of one year and has granted
them options to purchase 20,000 shares of common stock. The options, which
expire on April 28, 2000, have an exercise price of $3.25 per share.
Issuance of Common Shares
On April 15, 1999, the Company issued an aggregate of 3,000,000 shares of its
common stock to its founding principals, Mr. Andrew Hromyk and Mr. Brett Walker.
These shares were issued as consideration for services provided during fiscal
1999 including financing the Company, designing and implementing the Company's
business plan as described in Note 1, and locating and analyzing suitable
acquisition targets such as Boggs & Company, Inc. and closing on these
acquisitions. The Company has obtained an independent valuation for these shares
at $1.8 million and has included this amount as an operating expense for the
year ended March 31, 1999. The accrual of this compensation has been included in
current liabilities as of March 31, 1999. This accrual was reclassified to
common stock upon subsequent issuance of the shares on April 15, 1999.
<PAGE>
Consolidated Financial Statements
Americlean, Inc.
September 30, 1999
<PAGE>
Americlean, Inc.
Consolidated Financial Statements
September 30, 1999
Contents
Management Prepared Consolidated Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity (Deficit) 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 12
<PAGE>
Americlean, Inc.
Consolidated Balance Sheets
September 30, 1999 March 31, 1999
---------------- ---------------
Assets
Current assets:
Cash $ 47,200 $ 516,139
Accounts receivable, net 1,234,077 1,390,328
Inventories 1,939,728 1,704,735
Employee advances -- 42,789
Prepaid expenses and other assets 83,557 60,454
------------------------------------
Total current assets 3,304,562 3,714,445
Property & Equipment, net 330,041 238,027
Goodwill 1,315,363 1,349,490
-----------------------------------
$ 4,949,966 $ 5,301,962
================================
See accompanying notes.
<PAGE>
Americlean, Inc.
Consolidated Balance Sheets
September 30, 1999 March 31, 1999
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 3,035,098 $ 4,691,348
Revolving line of credit 1,369,152 1,395,577
Due to related parties -- 250,738
Current portion of long-term debt 27,154 26,495
------------------------------------
Total current liabilities 4,431,404 6,364,158
Due to related parties 458,593 80,286
Long-term portion of debt 156,852 21,415
Stockholder's equity (deficit)
Common Stock, $0.0001 par value,
50,000,000 shares authorized:
2,423,090 at March 31, 1999 and 5,445,090
at September 30, 1999 issued and
outstanding 544 242
Convertible Preferred Stock, $0.0001 par value,
5,000,000 shares authorized, no shares issued
and outstanding at March 31, 1999, and 600
shares issued and outstanding at September 30, 1999 -- --
Additional paid-in capital 4,862,214 3,038,516
Accumulated deficit (4,959,641) (4,202,655)
------------------------------------
Total stockholder's equity (deficit) (96,883) (1,163,897)
------------------------------------
$ 4,949,966 $ 5,301,962
====================================
<PAGE>
Americlean, Inc.
Consolidated Statements of Operations
Six months ended September 30,
1998 1999
Sales $ 5,565,494 $ --
Cost of goods sold (4,004,524) --
-----------------------------------
Gross profit 1,560,970 --
Other Income -- (490)
Selling, general and administrative 2,184,916 930,681
expenses
Depreciation 40,218 --
Amortization 34,128 --
------------------------------------
Operating Income (698,292) (930,191)
Interest income 28,558 --
Interest expense (87,252) --
Translation adjustment -- (63,772)
------------------------------------
Net loss $ (756,986) $ (993,963)
===================================
Basic and diluted loss per weighted
average common share $ (.15) $ (.65)
===================================
Three months ended September 30,
1998
1999
Sales $ 2,584,571 $ --
Cost of goods sold (1,881,663) --
------------------------------------
Gross profit 702,908
Other income (490)
Selling, general and administrative 996,023 473,787
expenses
Depreciation 19,926 --
Amortization 17,064 --
------------------------------------
Operating income (330,105) (473,297)
Interest income 21,945 --
Interest expense (40,887) --
Net loss $ (349,047) $ (473,297)
------------------------------------
Basic and diluted loss per weighted
average common share $ (.07) $ (.31)
------------------------------------
<PAGE>
Americlean, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock Convertible Preferred Stock
Additional Accumulated
Shares Amount Shares Amount Paid in Capital Deficit Total
Balance at March 31, 1997 1,500,000 $ 150 -- $ -- $189,406 $ (84,116) $ 105,440
Net Loss -- -- (307,400) (307,400)
Issuance of common stock 39,538 4 -- -- 247,375 247,379
--------------------------------------------------------------------------------------------
Balance at March 31, 1998 1,539,538 154 -- -- 436,781 (391,515) 45,419
Net Loss -- -- -- -- (3,811,139) (3,811,139)
Convertible preferred
stock -- -- 600 -- 481,125 -- 481,125
subscribed and paid
Issuance of common 883,552 88 -- -- 2,120,610 -- 2,120,698
stock
-----------------------------------------------------------------------------------------------
Balance at March 31, 1999 2,423,090 242 600 -- 3,038,516 (4,202,655) (1,163,897)
Issuance of common
stock 3,022,000 302 1,823,698 1,824,000
Net Loss (756,986) (756,986)
-----------------------------------------------------------------------------------------------
Balance at September 30,
1999 5,445,090 $ 544 600 $ -- $4,862,214 $(4,956,641) $ (96,883)
-----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Americlean, Inc.
Consolidated Statement of Cash Flows
Six Months Ended Six Months Ended
September 30, 1999 September 30, 1998
Operating activities
Net loss $ (756,986) $ (930,191)
Adjustments to reconcile net loss to
net cash used in continuing operations:
Depreciation 40,218
Amortization 34,127
Changes in operating assets and
liabilities:
Trade accounts receivable 156,251 780,778
Inventories (234,993)
Employee advances 42,789
Prepaid expenses and other assets (23,103) (49,146)
Accounts payable and accrued
liabilities 143,750 (820,810)
-----------------------------------
Net cash used in operating activities (597,945) (1,019,369)
-----------------------------------
Investing activities
Acquisition of Boggs & Company --
Purchase of property and equipment (132,232) (37,245)
------------------------------------
Net cash in investing activities (132,232) (37,245)
-----------------------------------
Financing activities
Advances from related parties 127,569
Net (payment) on Line of Credit (26,425) 104,191
Issuance of debt 136,096
Shares subscriptions received -- 134
Issuance of stock 24,000 962,249
-----------------------------------
Cash provided by financing activities 261,240 1,066,574
-----------------------------------
Effect of exchange rate changes on cash (63,772)
Increase (decrease) in cash (468,939) (53,813)
Cash at beginning of period 516,139 115,879
-----------------------------------
Cash at end of period $ 47,200 $ 62,066
-----------------------------------
<PAGE>
Americlean, Inc.
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
1. Going Concern
The Company sustained losses of $3,811,139 for the fiscal year ended March
31, 1999, and $756,986 for the six months ended September 30,1999. The
Company had a deficit net worth of $1,163,897 at March 31, 1999, and a
deficit net worth of $96,883 at September 30, 1999. In addition, the
Company was in default on certain covenants relating to the revolving line
of credit which in any event will terminate on February 15, 2000. These
facts raise substantial doubt about the Company's ability to continue as a
going concern.
Considerations which tend to mitigate the question of going concern include
management's successful efforts in raising funds through private
placements, the ability to renegotiate and restructure long-term financing
with major creditors, past and present efforts to convert debt to equity
and the ability to acquire, restructure and develop the laundry supply and
equipment business which it believes will be able to achieve profitable
operations. The Company intends to seek and consummate acquisitions of
companies in the laundry supply and equipment business and allied products
business. No assurance can be given that the Company will be successful in
identifying potential acquisitions or, if made, that such acquisitions will
have a beneficial effect on the Company. The Company has no current
agreement to acquire any business or property, or intent to acquire any
specific business or property. The Company believes that these factors
provide meaningful evidence as to the Company's ability to continue in
operation for the next fiscal year and support the going concern
presentation in the accompanying consolidated financial statements in favor
of the liquidation basis. There can be no assurance, however, that
management will continue to be able to raise sufficient capital or convert
existing debt to equity or to achieve profitable operations going forward.
2. Businesses and Summary of Significant Accounting Policies
The interim consolidated financial statements are prepared pursuant to the
requirements for reporting on Form 10-QSB. The March 31, 1999 consolidated
balance sheet data was derived from the audited consolidated financial
statements and together with the interim consolidated financial statements
and notes thereto should be read in conjunction with the annual
consolidated financial statements and notes included in the Company's
financial statements for the year ended March 31, 1999. In the opinion of
management, the interim consolidated financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of
the results for interim periods. The current period results of operations
are not necessarily indicative of results, which ultimately will be
reported for the full fiscal year.
Americlean, Inc. is a provider of supplies and equipment in the dry
cleaning industry as well as a service provider for repairs regarding such
equipment. Americlean, Inc. was incorporated on March 3, 1997, in Delaware.
Americlean, Inc. has one wholly owned subsidiary, which is Boggs and Company
(1998), Inc. Consolidation
<PAGE>
The consolidated financial statements include the accounts of Americlean,
Inc., its subsidiary. All significant intercompany accounts and
transactions are eliminated in consolidation.
Fair Value of Financial Instruments
The carrying amount of cash, trade accounts and notes receivable, and
other current and long-term liabilities approximates their respective fair
values.
Foreign Currency Translation
The Company's functional currency is the U.S. dollar. Foreign entities
remeasure monetary assets and liabilities at the current exchange rate in
effect at the balance sheet date and non-monetary assets and liabilities
at the historical rate. Sales and expenses are translated using average
exchange rates. The remeasurement losses of $40,272 during the six months
ending September 30, 1999 are included in other income.
Goodwill
Goodwill represents the excess of cost over assigned fair market value of
net assets acquired and is being amortized on a straight-line basis over
an estimated useful life of 20 years. Goodwill is shown net of accumulated
amortization of $34,127 at September 30, 1999. The carrying amount of
goodwill is reviewed if facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be recoverable,
as determined based on the expected future undiscounted cash flow of the
entity acquired over the remaining amortization period, the carrying
amount of the goodwill is reduced to its fair value.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method.
Loss per Share
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 128, Earnings Per Share ("SFAS 128"). Under SFAS 128, basic earnings
per share ("EPS) are computed by dividing the income/loss available to
common shareholders by the weighted-average number of common shares
outstanding for the year. No adjustments to net loss were necessary for
fiscal years 1998 and 1999 to arrive at loss available to common
<PAGE>
2. Businesses and Summary of Significant Accounting Policies (continued)
shareholders. Diluted EPS reflects the potential dilution that could occur
if securities and other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock.
When dilutive, stock options and warrants, and convertible preferred stock
are included as share equivalents in computing diluted EPS using the
treasury stock method and the if-converted method, respectively.
Average shares outstanding for basic EPS were 1,539,558 and 5,191,161 for
quarters ended September 30, 1998 and 1999, respectively. Diluted and
basic losses per share are equivalent due to the antidilution provisions
of SFAS 128. Equivalent average common shares of dilutive securities of
zero and 582,767 are not included in the calculation of diluted EPS in the
quarters ended September 30, 1998 and 1999, because they are antidilutive.
Property and Equipment
Property and Equipment is recorded at cost. Depreciation is computed
principally using the straight-line method based upon the estimated useful
lives of the related assets, ranging from 3 to 39 year.
Reclassification
Certain amounts in the 1998 financial statements have been reclassified in
order to conform with the 1999 presentation.
Revenue Recognition
The Company recognizes revenues at the time products are delivered. The
Company recognizes fees from installation and repair services when such
services are provided to customers.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25"). Under APB 25,
compensation cost for stock options is measured as the excess, if any, of
the quoted market price of the Company's stock at the measurement date,
over the exercise price. The Company has adopted the disclosure only
provisions of Statements of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation ("SFAS 123").
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
<PAGE>
3. Inventories
September 30, 1999 March 31, 1999
Machinery $ 412,186 $ 497,055
Parts 348,227 415,997
Supplies 1,179,315 791,683
----------------------------------------------
$ 1,939,728 $ 1,704,735
==============================================
4. Property and Equipment
September 30, 1999 March 31, 1999
Leasehold improvements $ 75,989 $ 75,989
Machinery and equipment 245,540 113,369
Automobiles 59,128 59,128
Less accumulated depreciation (50,616) (10,459)
---------------------------------------
$ 330,041 $ 238,027
=======================================
5. Financing Arrangement
On March 18, 1999, the Company's subsidiary, Boggs & Company (1998), Inc.,
entered into a secured revolving line of credit agreement which provides
for borrowings of up to $3 million. The line of credit, which is an annual
agreement, is limited to certain percentages of the Company's eligible
accounts receivable and inventory. All borrowings under the line of credit
are payable on demand. Interest rates are the greater of 7% or the
prevailing Chase Manhattan Bank Prime rate at (September 30, 1999) plus 2%
in each instance computed on the greater of $1,000,000 or the average of
the net balances owed by the Company. Interest of $87,253 and $40,887 was
respectively paid during the six months and three months ended September
1999.
This asset-based lender has elected to terminate its lending relationship
with Boggs & Company effective February 15, 2000.
6 Stockholders' Equity
Preferred Stock
In April 1999, the Company issued 600 shares of Series A Non-Voting,
Convertible Preferred Stock in consideration for $1,000 per share. All
shares were subscribed and paid in March 1999. The Preferred Stock is
convertible into shares of the Company's common stock at any time after
October 5, 1999, and, in any event, will be deemed to convert into common
stock on the later of (i) the date, which is 30 days after the effective
date of a registration statement filed in respect of the common stock
underlying the Preferred Stock
<PAGE>
6. Stockholders' Equity (continued)
or (ii) November 5, 1999. The Preferred Stock shall convert into common
stock on the basis of a 25% discount to the average closing bid price of
the) common stock for the five trading days immediately prior to the date
of conversion. In addition, the Preferred Stock does not pay dividends.
The Preferred Stock carries no dividend rights.
Issuance of Common Shares
On April 15, 1999, the Company issued an aggregate of 3,000,000 shares of
its common stock to its founding principles, Mr. Andrew Hromyk and Mr.
Brett Walker. These shares were issued as consideration for services
provided during fiscal 1999 including financing the Company, designing and
implementing the Company's business plan, and locating and analyzing
suitable acquisition targets such as Boggs & Company (1998), Inc. and
closing on these acquisitions. The Company has obtained an independent
valuation for these shares at $1.8 million and has included this amount as
an operating expense for the year ended March 31, 1999. The accrual of
this compensation has been included in current liabilities as of March 31,
1999. This accrual was reclassified to common stock upon subsequent
issuance of the share on April 15, 1999.
Consulting Agreements
Pursuant to a three-month consulting agreement dated June 1, 1999, between
the Company and two advisors, the Company agreed to issue 7,000 shares of
its common stock to the advisors. In addition, the Company granted 100,000
options, of which 25,000 vested on June 1, 1999, to these advisors with an
exercise price of $5.00 per share. The advisors also receive monthly
compensation throughout the term of the agreement. The Company has the
option to renew this agreement for three subsequent three month terms, in
which case the Company will issue to the advisors an additional 7,000
shares and an additional 25,000 options shall vest for each term.
On June 8, 1999, the Company entered into a six month consulting agreement
with another advisor. Pursuant to the terms of this agreement, the Company
agreed to issue 15,000 shares of its common stock to the advisor and also
granted 200,000 options, of which 100,000 vested on June 1,1999, to the
advisor with an exercise price of $2.50 per share. The advisor also
receives monthly compensation throughout the term of the agreement. The
Company has the option to renew this agreement for two subsequent
three-month terms, in which case options for an additional 50,000 shares
shall vest for each term.
In an additional consulting agreement dated June 8, 1999, with a
three-month term, the Company granted another advisor 200,000 options, of
which 50,000 vested on June 1, 1999, to purchase common stock with an
exercise price of $2.50 per share. The advisor also receives monthly
compensation throughout the term of the agreement. The Company has the
option to renew this agreement for three subsequent three-month terms, in
which case options for an additional 50,000 shares shall vest for each
term.
In January 1999 the Company granted to a consultant options to purchase
200,000 shares at a price of $2.00 per share. As a result of this grant
the Company incurred an investor
<PAGE>
6. Stockholders' Equity (continued)
relations expense of $350,000 for the fiscal year ended March 31, 1999. On
September 20, 1999 the Company terminated the agreement pursuant to which
these options were granted for lack of performance. The Company will
record a gain of $350,000 at such time as an adjudicated settlement is
obtained in this matter.
Stock Options
During 1999, the Company adopted two stock option plans. The Non-Qualified
Stock Option Plan provides that options for 250,000 shares of the common
stock of the Company can be granted to selected officers, directors and
key employees. The Board of Directors establishes the option price under
this plan. The Incentive Stock Option provides that options for 250,000
shares of the Company's common stock can be granted to officers and
employees. The option price under the plan is the fair market value at the
grant date. The Board of Directors establishes the vesting periods and
terms of options granted for both plans. The term of the option cannot
exceed 10 years.
Pursuant to the Incentive Stock Option Plan options to purchase a total of
54,500 shares at a price of $4.00 per share are outstanding and pursuant
to the Non-Qualified Stock Option Plan to purchase a total of 100,000
shares at a price of $4.00 per share are outstanding.
Warrants
Pursuant to the terms of a consulting agreement between the Company an
Anthony & Company, Inc. (Anthony Advisors) dated February 1999, the
Company appointed Anthony Advisors as it exclusive agent for the issuance
of up to 600 shares of Series A Convertible Preferred Stock at a price of
$1,000 per share for the gross proceeds to the Company of $600,000.
Pursuant to the terms of this agreement, the Company paid to the Anthony
Advisors a cash commission of $42,000 being 7% of the gross proceeds of
Series A Convertible Preferred Stock to the Company. Furthermore the
Company reduced paid in capital by $37,500 in March 1999, relating to the
issuance of 10,000 command shares issued to Anthony Advisors subsequent to
the year end as additional compensation for such services. In addition the
Company reduced preferred stock paid in capital and increased common stock
paid in capital by $39,375 in relation to the issuance of warrants to
Anthony Advisors for the purchased of up to 42,000 shares of the Company's
common stock at any time until February 22, 2000, at a price per share
equal to 75% of the average market price on the Company's common stock for
the five trading days immediately prior to exercise date.
7. Concentrations of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of temporary cash
investments. The Company places its temporary cash investments with high
credit quality financial institutions. During 1998, all of the sales and
related accounts receivable related to one customer.
<PAGE>
8. Commitments and Contingencies
The Company is named as a defendant under a lawsuit filed by the estate of
a former employee. The plaintiff has claimed $500,000 and 87,500 free
trading shares of the Company for settlement of this action. Management
believes it has a meritorious defense to this claim and the ultimate
resolution of this action will not have a material adverse effect on the
Company's financial condition or results of operations.
9. Year 2000 Issue
The "Year 2000 Issue" is a term used to describe a problem encountered by
certain computer programs which use dates written with two digits rather
than four. Computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in system failures or miscalculations causing disruptions
of operations including, among other things, a temporary inability to
process transactions, send invoices, or engage in similar normal business
activities. The Company has not experienced any problems to date, and does
not expect to experience any future problems, with respect to the Year 2000
Issue.
10. Subsequent Events
Private Placement
The Company has undertaken a private placement of up to 500,000 shares of
its common stock at a price of $1.00 per share. To date the Company has
received subscriptions for a total of 300,000 shares.
Consulting Agreements
In October 1999 the Company issued to a consultant 10,000 shares of its
common stock at a deemed value of $1.00 per share in satisfaction of monies
owing for services rendered.
The Company has also renewed the June 1, 1999 consulting agreement referred
to in Note 6 for an additional three-month term, and has issued additional
7,000 shares at a deemed price of $1.00 to the consultants pursuant to the
terms of this agreement. As a condition of the three-month renewal
previously granted options to purchase an additional 25,000 shares have
vested with the consultants.
The company has also renewed the June 8, 1999 three-month consulting
agreement for an additional three-month term and, as a condition of the
three-month renewal previously granted options to purchase an additional
50,000 shares have vested with the consultant.
Extinguishing Debt
Debt of $ 697,151 was extinguished during 1999 by the issuance of 903,658
shares of the Company's common stock. In October 1999 the Company issued
490,644 shares of common stock to extinguish debt of $490,644.
<PAGE>
Boggs & Company, Inc.
and
JKG Group, Inc.
Combined Financial Statements
Years Ended
September 30, 1998 and 1997
together with
Independent Auditors' Report
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Table of Contents
Independent Auditors' Report 3
Combined Financial Statements:
Balance Sheets 4
Statements of Operations and Retained Earnings (Deficit) 5
Statements of Cash Flows 6
Summary of Significant Accounting Policies 7-8
Notes to Financial Statements 9-15
<PAGE>
Independent Auditors' Report
Board of Directors and Shareholders
Boggs & Company, Inc. and JKG Group, Inc.
Charlotte, North Carolina
We have audited the accompanying combined balance sheets of Boggs & Company,
Inc. (a North Carolina corporation) and JKG Group, Inc. (a Florida corporation)
as of September 30, 1998 and 1997, and the related combined statements of
operations and retained earnings, and cash flows for the respective years then
ended. These financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Boggs & Company, Inc. and JKG
Group, Inc. as of September 30, 1998 and 1997, and the results of their combined
operations and their combined cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Companies will continue as going concerns. As discussed in Note 11 to the
financial statements, the Companies have suffered recurring losses from
operations, and have both negative working capital and a net capital deficiency
that raise substantial doubt about their ability to continue as going concerns.
Management's plan in regard to these matters is also described in Note 11. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
December 16, 1998 Bullard & Blanchard, P.L.L.C.
Charlotte, North Carolina
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Combined Balance Sheets
September 30, 1998 1997
Assets
Current:
Cash $ 70,048 $ 16,772
Accounts and note receivable, less allowance for
doubtful accounts of $263,000 and $138,000,
respectively (Note 3) 1,874,173 1,871,607
Inventories (Note 3) 1,802,230 2,260,845
Due from related party (Note 12) -- 71,816
Other 41,026 50,956
---------- ----------
Total current assets 3,787,477 4,271,996
--------- ---------
Property and equipment (Notes 4 and 5):
Machinery and equipment 277,451 260,830
Transportation equipment 137,776 137,776
Furniture and fixtures 33,422 33,422
Leasehold improvements 137,926 137,926
Assets under capital lease 102,435 102,435
------- -------
689,010 672,389
Less accumulated depreciation and amortization 417,305 327,038
------- -------
Net property and equipment 271,705 345,351
Intangible asset (Note 2) 44,633 57,385
--------------------------
$4,103,815 $4,674,732
==========================
<PAGE>
September 30,
1998 1997
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Checks issued against future deposits $ -- $ 315,769
Notes payable to financial institution (Note 3) 1,782,122 1,934,860
Accounts payable 2,345,765 1,928,338
Accrued expenses 146,688 65,253
Due to related party (Note 12) 71,390 --
Current maturities of long-term debt (Note 4) 48,400 78,330
Current obligations under capitalized
leases (Note 5) 18,776 17,644
---------- ----------
Total current liabilities 4,413,141 4,340,194
Long-term debt, less current maturities (Note 4) 117,665 151,201
Obligations under capitalized leases,
less current obligations (Note 5) 30,430 50,794
---------- ---------
Total liabilities 4,561,236 4,542,189
Commitments and contingencies (Notes 7 and 11)
Shareholders' equity (deficit):
Common stock (Note 9) 76,200 76,200
Additional paid-in capital 21,262 21,262
Retained earnings (deficit) (554,883) 35,081
----------- ----------
Total shareholders' equity (deficit) (457,421) 132,543
---------- ----------
$4,103,815 $4,674,732
========== ==========
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Combined Statements of Operations and Retained Earnings (Deficit)
Year Ended September 30,
1998 1997
Sales $13,926,182
$15,094,518
Cost of products sold 10,306,873 11,664,193
----------- -----------
Gross margin 3,619,309 3,430,325
Selling, general and administrative expenses 4,008,913 3,716,091
----------- -----------
Operating loss (389,604) (285,766)
----------- ------------
Nonoperating expense (income):
Interest expense 264,802 225,728
Interest income (54,846) (78,814)
Other items (9,596) --
Unusual items (Note 10) -- 131,705
------------ ------------
Total nonoperating expense 200,360 278,619
------------ -----------
Loss before income taxes (589,964) (564,385)
Income tax expense (Note 6) -- 31,267
Net loss (589,964) (595,652)
Retained earnings, beginning of year 35,081 630,733
-------------- -----------
Retained earnings (deficit), end of year $ (554,883) $ 35,081
============= ===========
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Statements of Cash Flows
Year Ended September 30,
1998 1997
Cash flows from operating activities:
Net loss $ (589,964) $ (595,652)
Adjustments of net loss to net cash
provided by operating activities:
Depreciation and amortization 103,019 78,302
Deferred income tax provision -- 31,267
Provision for allowance for doubtful accounts 125,000 76,000
Gain on the sale of fixed assets -- 3,657
(Increase) decrease in:
Accounts and notes receivable (127,566) (2,733)
Inventories 458,615 (172,473)
Other current assets 9,930 15,578
Increase (decrease) in:
Checks issued against future deposits (315,769) (54,482)
Accounts payable 417,427 503,536
Accrued expenses 81,435 46,378
-----------------------
Net cash used in operating activities 162,127 (70,622)
-----------------------
Cash flows from investing activities:
Purchases of property and equipment (16,621) (49,434)
Proceeds from sale of property and equipment -- 7,875
Net cash paid for acquired business and
intangible asset (Note 13) -- (207,240)
Loans (to) from related party 143,206 (71,816)
---------- ------------
Net cash used in investing activities 126,585 (320,615)
---------- -----------
Cash flows from financing activities:
Net proceeds (payments) on notes payable to
financial institution (152,738) 448,093
Payments on long-term debt (63,466) (31,225)
Payments on capital leases (19,232) (19,633)
----------- ----------
Net cash provided by financing activities (235,436) 397,235
--------- --------
Net increase in cash 53,276 5,998
Cash, beginning of year 16,772 10,774
-------- ---------
Cash, end of year $ 70,048 $ 16,772
========== ========
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Summary of Significant Accounting Policies
Business and Credit
Concentration Boggs & Company, Inc. and JKG Group, Inc. (the Company)
sell supplies and equipment to entities engaged in laundry
and dry cleaning activities and install, service and
repair equipment used in these activities.
One of the Company's major suppliers accounts for 10-15
percent of purchases.
The Company's customers are concentrated in the
southeastern region of the United States. No single
customer accounted for a significant portion of the
Company's sales or accounts receivable as of September
30, 1998 or 1997. The Company reviews a customer's
credit history before extending credit. An allowance for
doubtful accounts is established based upon factors
surrounding the credit risk of specific customers,
historical trends and other information. To reduce
credit risk, the Company generally requires a down
payment on large equipment orders.
Inventories Inventories are valued at the lower-of-cost or market,
cost being determined on the first-in, first-out (FIFO)
method.
Property and Equipment
and Depreciation Property and equipment are stated at cost.
Depreciation for financial statements and income tax
purposes is principally computed using accelerated
methods over the estimated useful life of the respective
assets.
Income Taxes Income taxes are calculated using the liability method
specified by Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes."
Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual
results could differ from those estimates.
Advertising Cost incurred for producing and communicating advertising
are expensed when incurred.
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Notes to Combined Financial Statements
Principles of
Combination In December 1996, JKG Group, Inc. was formed for the purpose
of acquiring the operations of Cleaners Equipment Corporation
(a Florida corporation) located in St. Petersburg, Florida.
The acquisition was effective March 31, 1997 as more fully
described in Note 1.
Although, JKG Group, Inc.'s ownership is different than
Boggs & Company, Inc., 70% of the ownership is the same
as Boggs & Company, Inc. and the Companies are
controlled by the same management.
1.Business Acquisition Effective March 31, 1997, JKG Group,
Inc. purchased the operations of Cleaners Equipment
Corporation (the "Business") located in St. Petersburg,
Florida. The Business was engaged in the sale of laundry
and dry cleaning equipment and installed, serviced and
repaired equipment used in those activities.
The purchase price included $143,479 of cash, interest
bearing notes (Note 4) totaling $221,977, and $63,761 of
expenses incurred in connection with the acquisition.
The acquisition has been accounted for by the purchase
method of accounting, and accordingly, the purchase
price has been allocated to assets acquired based on the
estimated fair values at the date of acquisition. In
addition, the results of operations of the business are
included in the financial statements since the date of
acquisition. The estimated fair values of assets
acquired are summarized as follows:
Fixed assets $ 78,498
Inventories $286,958
Funds for payment of the purchase price were obtained
through loans from Boggs & Company, Inc., borrowings
under the revolving credit agreement (Note 3), issuance
of debt to a related party and an assumption of debt.
2. Intangible Asset Intangible asset is summarized as follows:
September 30, 1998 1997
----------------------------------------------------
Excess of acquisition costs
over fair value of net assets
acquired $ 63,761 $ 63,761
Accumulated amortization (19,128) (6,376)
$ 44,633 $ 57,385
========= =========
<PAGE>
3. Notes Payable to
Financial Institution The Companies have revolving credit
agreements with a financial institution through May 1998
and continuing on a year-to-year basis thereafter. The
agreements may be terminated by either party by giving
proper notification. Advances under these arrangements
bear interest at the financial institution's prime rate
(8.25 percent at September 30, 1998) plus 2.0 percent,
but not less than 8 percent.
Borrowings may not exceed $3,000,000 and are limited to
a percentage of qualified accounts receivable and
inventories. The agreements require a minimum loan
balance of $600,000. These agreements are collateralized
by accounts receivable and inventories. Each of the
Companies' 20% or more shareholders have personally
guaranteed up to $250,000 of the advances.
4. Long-Term Debt Long-term debt is as follows:
September 30, 1998 1997
Notes payable to financial
institutions, due in various
monthly installments through
December 1999, including
interest ranging from 8.8%
to 11.5% $ 17,327 $ 55,340
Notes payable to related party,
due in various monthly install-
ments through March 2002,
including interest at 8%
(Note 1) 148,738 174,191
Current maturities (48,400) (78,330)
-----------------------
$ 117,665 $ 151,201
========== =========
Equipment and vehicles with a net book value of $64,000 are pledged as
collateral on the above notes payable. In addition, the notes payable to related
party is collateralized by certain accounts receivable and inventories; and is
subordinated to the revolving credit agreement (Note 3).
The aggregate annual maturities of long-term debt are as follows:
September 30,
1999 $ 48,400
2000 37,376
2001 38,544
2002 41,745
----------
Total $166,065
========
<PAGE>
5. Lease Obligations The Companies lease certain real
estate and automotive equipment used in their
operations. The automotive leases include provisions for
operating and maintenance expenses to be provided by the
lessor. In addition, the automotive leases contain
provisions for contingent rental payments based on miles
traveled.
The Companies lease their Charlotte and St. Petersburg
offices from their shareholders. The leases are
accounted for as operating leases. The Company rents the
Charlotte facility on a month-to-month basis for $4,700
a month; and rents the St. Petersburg facility under a
lease agreement for $3,500 a month. The St. Petersburg
lease agreement's initial term expires March 31, 2002,
with two 10 year renewal options. The leases provide for
the payment of real estate taxes and other related
expenses.
Certain transportation, office, and computer equipment
are leased under capital leases with imputed interest
rates varying from 9 percent to 11 percent.
Future minimum rental payments under non-cancelable
leases at September 30, 1998, are as follows:
Operating Capitalized
Fiscal Year Ending Leases Leases
1999 $ 148,158 22,744
2000 147,275 19,778
2001 136,366 13,098
2002 100,783 300
2003 74,200 --
Thereafter 62,300 --
---------- -------------
Total $ 669,082 $ 55,920
========= ========
Less imputed interest 6,714
Obligations under capitalized leases $ 49,206
Rental expenses relating to the above operating leases
(including related parties) for the years ended
September 30, 1998 and 1997, approximated $273,000 and
$256,000, respectively.
<PAGE>
6. Income Taxes Income tax expense, in the statement of
operations, is made up of the following components:
Year Ended September 30, 1998 1997
------------------------------------------------------
Current $ -- $ --
Deferred -- 31,267
----------- ---------
$ -- $ 31,267
=========== ========
The differences between book and taxable income are
generated principally from bad debt reserves and
inventory costs.
Deferred tax assets are comprised of the following:
September 30, 1998 1997
-----------------------------------------------------
Inventory costs 9,000 9,000
Bad debt reserves 67,000 31,000
Loss carry forwards 361,000 160,000
------- -------
Gross deferred tax assets 437,000 200,000
Deferred tax assets valuation
allowance (437,000) (200,000)
$ - $ --
===========================
The changes in the valuation allowance for deferred tax
assets were due to the substantial losses incurred in
1998 and 1997. Approximately $1,000,000 of Boggs &
Company, Inc.'s loss carry-forwards remain at September
30, 1998. Their use is limited to future taxable
earnings of Boggs & Company, Inc. The carry-forwards
expire in varying amounts through 2013.
JKG Group, Inc. has elected to be taxed under Subchapter S of the Internal
Revenue Code. Accordingly, 1998 and 1997 operations of the Company, were
reported to the shareholders who are responsible for payment of taxes, as
applicable.
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Notes to Combined Financial Statements
7. Commitments and
Contingencies
In October 1990, the Division of Environmental Management (DEM) of the
North Carolina Department of Environment, Health and Natural Resources issued a
Notice of Violation to the Company. The notice identified the Company as a
potentially responsible party, following DEM's earlier inspection of the
Charlotte facilities, which are leased by the Company from its shareholders. The
Company responded to the notice and retained consultants to conduct a
preliminary assessment of the soil and groundwater. The preliminary results were
presented to DEM at a meeting in December 1990 and based on these preliminary
findings, a second Notice of Violation was issued by DEM. The Company has
undertaken soil remediation but a full ground water assessment has not been
completed. As of December 1998, no fines or penalties have been assessed by DEM,
and the Company has complied with all violation notices. Neither the Company nor
its consultants are able to estimate either the necessity or costs of any
further remediation efforts. Since a full site assessment study has not been
completed, management is unable to determine the Company's ultimate liability,
if any. The Company is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position of the Company.
8. Profit Sharing Plan The Company maintains a profit
sharing plan for all eligible employees. The plan
qualifies under Internal Revenue Code Section 401(k).
Contributions by the Company are discretionary.
Contributions in the amounts of $7,200 and $0 were made
during the fiscal years ended September 30, 1998 and
1997, respectfully.
<PAGE>
9. Common Stock Boggs & Company, Inc. and JKG Group, Inc. are related through
substantially common ownership. The common stock accounts
consists of the following:
Boggs & Company, Inc.
$100 par value;
5,000 shares authorized;
762 shares issued and outstanding $ 76,200
JKG Group, Inc.
$1 par value;
1,000 shares authorized;
1,000 shares issued and
outstanding 1,000
Amount receivable from shareholders
of JKG Group, Inc. for purchase of
issued shares (1,000)
----------
$76,200
========
10. Unusual item
During the year ended September 30, 1997, Boggs & Company, Inc. recorded
unusual expenses of $113,705, before taxes. This is presented separately as a
component of non-operating expense in the Combined Statement of Operations. The
charges related to $115,985 incurred in connection with settlement of litigation
surrounding a non-compete claim by a competitor; and, $15,720 incurred in
connection with settlement of litigation filed by neighboring property owners in
connection with alleged contamination of their soil by chemicals previously sold
by Boggs & Company, Inc.
11.Liquidity
The accompanying combined financial statements have been prepared assuming
that the Companies will continue as going concerns. The Companies have
experienced significant losses in 1998 and 1997 and show negative working
capital and negative net worth as of September 30, 1998. Such matters raise
substantial doubt about the Companies' ability to continue as going concerns.
Subsequent to September 1998, the Companies entered into negotiations with a
publically held company to dispose of all assets and liabilities.
<PAGE>
The accompanying financial statements do not include any
adjustments relating to the reasonability and
classification of reported asset amounts or the amounts
and classification of liabilities that might be
necessary should the Companies be unable to continue as
a going concern.
12. Due from/to
Related Party The due from/to related party reflects amounts
advanced from/to a minority shareholder of JKG Group,
Inc. Such amount bears no interest and there are no
written repayment terms.
13.Supplemental Cash Year Ended September 30, 1998 1997
Flow Information Interest paid $ 267,091 $ 214,819
Non-cash investing and financing activity:
Cash flow information related to the 1997 business
acquisition discussed in Note 1 is as follows:
Fair value of current assets acquired $286,958
Fair value of non-current assets
acquired, excluding intangible
assets 78,498
Intangible assets 63,761
Liabilities assumed and created (221,977)
Net cash paid for acquired business and
intangible asset $207,240
Capital lease obligations of $64,855 were incurred in
1997 when the Companies entered into leases for new
equipment.
14. Reclassifications Certain 1997 items have been
reclassified to conform with 1998 presentation.
<PAGE>
Boggs and Company, Inc. and JKG Group, Inc.
Combined Balance Sheets
March 2, 1999
Assets:
Current:
Cash $ 86,961
Accounts and notes receivable, less allowance
for doubtful accounts of $ 278,000 1,347,315
Inventories 1,880,208
Other 110,752
Total current assets 3,425,236
Property and equipment:
Machinery and equipment 277,451
Transportation equipment 137,776
Furniture and fixtures 33,422
Leasehold improvements 137,926
Assets under capital lease 102,435
------------
689,010
Less accumulated depreciation and amortization 458,796
Net property and equipment 230,214
Goodwill --
$ 3,655,450
Current liabilities:
Checks issued against future deposits $ --
Notes payable to financial institution 1,533,666
Accounts payable 2,472,332
Accrued expenses 175,849
Due to related party --
Current maturities of long-term debt 48,400
Current obligations under capital leases 18,776
- -------------------------------------------------------------------------------
Total current liabilities 4,249,023
Long-term debt, less current maturities 103,984
Obligations under capitalized leases,
less current maturities 27,454
Total liabilities 4,380,461
Committmenmts and contingencies
Shareholders' equity (deficit):
Common stock 76,200
Additional paid-in capital 21,262
Retained earnings (deficit) (822,473)
Total shareholders' equity (deficit) (725,011)
-----------
$ 3,655,450
=============
<PAGE>
Boggs and Company, Inc. and JKG Group, Inc.
Combined Statement of Operations
Five months ended
March 2, 1999
Sales $5,381,181
Cost of products sold 4,035,033
Gross profit 1,346,148
Selling, general and administrative expenses 1,549,779
Operating loss (203,631)
Interest expense (86,445)
Interest income 22,486
Net loss before income taxes (267,590)
Income tax expense --
Net loss (267,590)
Retained earnings, beginning of year (554,883)
Retained earnings (deficit), end of period $(822,473)
=============
<PAGE>
Boggs and Company, Inc. and JKG Group, Inc.
Combined Statement of Cash Flows
For the five months ended March 2, 1999
Cash flows from operating activities:
Net loss $ (267,590)
Adjustments of net loss to net cash
provided by operating activities:
Depreciation and amortization 86,124
Provision for allowance for doubtful accounts 15,000
(Increase) decrease in:
Accounts and notes receivable 511,858
Inventories (77,978)
Other current assets (69,726)
Increase (decrease) in:
Accounts payable 126,567
Accrued expenses 29,161
Net cash provided by operating activities 353,416
-----------
Cash flows from investing activities:
Loans from related party (71,390)
Net cash used in investing activities (71,390)
--------------
Cash flows from financing activities:
Net payments on notes payable to
financial institution (248,456)
Payments on long-term debt and capital leases (16,657)
Net cash used in investing activities (265,113)
-----------
Net increase in cash 16,913
Cash, beginning of period 70,048
Cash, end of period $ 86,961
==========
<PAGE>
Boggs and Company, Inc. and JKG Group, Inc.
Notes to Combined Financial Statements
1. Summary of Significant Accounting Policies
Business and Credit These interim combined financial statements are
Concentration prepared, by management, pursuant to the requirements
for reporting on Form SB-2. The combined financial
statements and notes thereto should be read in
conjunction with the September 30, 1998, annual
combined financial statements of Boggs & Company, Inc
and JKG Group, Inc. and the March 31, 1999, annual
consolidated financial statements of Americlean Inc.
and notes included in the Companys' respective annual
reports filed with the Form SB-2. In the opinion of
management, the interim combined financial statements
reflect all adjustments of a normal recurring nature
necessary for a fair statement of the results for
interim periods.
Boggs & Company, Inc. and JKG Group, Inc. (the
Company) sell supplies and equipment to entities
engaged in laundry and dry cleaning activities and
install, service and repair equipment used in these
activities.
The Company's customers are concentrated in the
southeastern region of the United States. No single
customer accounted for a significant portion of the
Company's sales or accounts receivable. The Company
reviews a customer's credit history before extending
credit. An allowance for doubtful accounts is
established based upon factors surrounding the credit
risk of specific customers, historical trends and
other information. To reduce credit risk, the Company
generally requires a down payment on large equipment
orders.
Inventories Inventories are valued at the lower-of-cost or
market, cost being determined on the first-in,
first-out (FIFO) method.
Property and Equipment Property and equipment are stated at cost.
and Depreciation Depreciation for financial statements and income tax
purposes is principally computed using accelerated
methods over the estimated useful life of the
respective assets.
Fair Value of Financial The carrying amount of cash, trade accounts and notes
Instruments receivable, and other current and long-term
liabilities approximates their respective fair values.
Estimates The preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements
and the reported amounts of revenues and expenses
during the reported period. Actual results could
differ from those estimates.
Advertising Cost incurred for producing and communicating
advertising are expensed when incurred.
<PAGE>
Boggs and Company, Inc. and JKG Group, Inc.
Notes to Combined Financial Statements
Principles of Combination The combined financial statements
include the accounts of Boggs & Company, Inc. and JKG
Group, Inc. All significant intercompany accounts and
transactions are eliminated in combination.
Business Disposition On March 3, 1999, the Company completed
the sale of it's operations to Americlean, Inc. All
assets and liabilities recorded in the accompanying
balance sheet were assumed by Americlean, Inc. The
sales price of $600,000 consisted of 161,446 shares of
Americlean's common stock valued at $500,000 and
$100,000 in cash.
2. Income Taxes Income tax expense, in the statement of
operations, is made up of the following components:
Five months ended March 2, 1999
-----------------------------------------------------
Current $ -
Deferred -
-----------------------------------------------------
$ -
-----------------------------------------------------
The differences between book and taxable income are
generated principally from bad debt reserves and
inventory costs.
Deferred tax assets are comprised of the following:
March 2, 1999
-----------------------------------------------------
Inventory costs $ 9,000
Bad debt reserves 73,000
Loss carryforwards 400,000
-----------------------------------------------------
Gross deferred tax assets 482,000
Deferred tax assets
valuation allowance (482,000)
-----------------------------------------------------
$ -
=========
The changes in the valuation allowance for deferred
tax assets were due to the substantial losses incurred
in 1999, 1998 and 1997. Approximately $1,200,000 of
Boggs & Company, Inc.'s loss carryforwards remain at
March 2, 1999. Their use is limited to future taxable
earnings of Boggs & Company, Inc. The carryforwards
expire in varying amounts through 2014.
JKG Group, Inc. has elected to be taxed under
Subchapter S of the Internal Revenue Code.
Accordingly, operations of the Company, were reported
to the shareholders who are responsible for payment
of taxes, as applicable.
<PAGE>
Boggs and Company, Inc. and JKG Group, Inc.
Notes to Combined Financial Statements
3. Commitments and In October 1990, the Division of Environmental
Contingencies Management (DEM) of the North Carolina Department of
Environment, Health and Natural Resources issued a
Notice of Violation to the Company. The notice
identified the Company as a potentially responsible
party, following DEM's earlier inspection of the
Charlotte facilities, which are leased by the Company
from its shareholders. The Company responded to the
notice and retained consultants to conduct a
preliminary assessment of the soil and groundwater.
The preliminary results were presented to DEM at a
meeting in December 1990 and based on these
preliminary findings, a second Notice of Violation was
issued by DEM. The Company has undertaken soil
remediation but a full ground water assessment has not
been completed. As of December 1998, no fines or
penalties have been assessed by DEM, and the Company
has complied with all violation notices. Neither the
Company nor its consultants are able to estimate
either the necessity or costs of any further
remediation efforts. Since a full site assessment
study has not been completed, management is unable to
determine the Company's ultimate liability, if any.
Such liability, if any, was not assumed by Americlean,
Inc., in connection with their acquisition of the
assets and recorded liabilities of Boggs & Company,
Inc. and JKG Group, Inc., previously disclosed.
4. Supplemental Cash Five Months Ended March 2, 1999
Flow Information -----------------------------------------------------
Interest paid $ 85,000
========
<PAGE>
Americlean, Inc.
PRO FORMA COMBINED STATEMENTS OPERATIONS
[See Basis of Presentation - Note 1]
For 12 months ended March 31, 1999 Unaudited - Prepared by Management
Pro forma
---------------------------
Americlean Boggs & Acquisition Combined
Inc. Company, Adjustments
Inc. and [Note 2]
JKG Group,
Inc.
$ $ $ $
---------------------------------------------
Sales 1,165,751 11,936,514 13,102,265
Cost of Sales 911,002 8,931,741 9,842,743
- ------------------------------------------------------------------------------
Gross profit 254,749 3,004,773 3,259,522
- ------------------------------------------------------------------------------
Administrative and selling
expenses 4,056,250 3,664,751 61,875(a) 7,782,876
Interest expenses 15,511 217,607
233,118
Interest income (5,873) (45,351) (51,224)
- -------------------------------------------------------------------------------
4,065,888 3,837,007 7,964,770
Net loss for the year (3,811,139) (832,234) (4,705,288)
===============================================================================
Basic and diluted loss per (2.18) (2.69)
share [Note 3]
- ------------------------------------------------------------------------------
See accompanying notes
<PAGE>
Americlean, Inc.
NOTES TO THE UNAUDITED PRO FORMA
RESULTS OF OPERATIONS
1. Basis of Presentation
On March 3, 1999, Americlean Inc. ("Americlean") completed the acquisition of
Boggs & Company, Inc. The acquisition was accounted for as purchase business
combination. The accompanying unaudited pro forma financial statement of
Americlean has been prepared by management. The statement has been prepared to
reflect the pro forma results of operations of Americlean for the year ended
March 31, 1999, assuming the acquisition of Boggs and JKG had occurred on April
1, 1998 from information derived from the following statements:
o Audited Americlean financial statements for the year ended March 31, 1999
o Unaudited combined Boggs and JKG income statement for the period from April
1,1998 through March 2, 1999.
o Together with other information available to Americlean.
The unaudited pro forma financial statement should be read in conjunction with
the financial statements of Americlean and the combined financial statements of
Boggs and JKG referred to above. The unaudited pro forma financial statement is
not necessarily indicative of the results of operations which would have
occurred if the combination and reorganization had actually occurred on April
1 1998.
2. PRO FORMA ADJUSTMENTS WITH RESPECT TO THE REORGANIZATION AND BUSINESS
COMBINATION
Americlean was incorporated on March 3, 1997 in Delaware. The Company is engaged
in the business of recycling and selling dry cleaning products to North American
markets.
Boggs and Company (1998), Inc. (Boggs 1998) was incorporated on November 25,
1998 in North Carolina. The Company was incorporated for the purpose of
purchasing the assets and liabilities of Boggs and JKG.
Boggs and JKG sell supplies and equipment to entities engaged in laundry and dry
cleaning activities and install, service and repair equipment used in these
activities.
The unaudited pro forma Americlean financial statements give effect to the major
transaction of Boggs 1998 acquiring all of the assets and liabilities of Boggs
and JKG, as if it had occurred on April 1, 1998. The unaudited pro forma balance
sheet includes pro forma adjustments reflecting the following transactions:
<PAGE>
Americlean, Inc.
NOTES TO THE UNAUDITED
PRO FORMA RESULTS OF OPERATIONS
2. PRO FORMA ADJUSTMENTS WITH RESPECT TO THE REORGANIZATION AND BUSINESS
COMBINATION (continued)
(a) Amortization of goodwill on a straight-line basis over 20 years for an
additional 11 months.
3. SHARE STOCK
Basic and diluted loss per share are based on the following:
12 months ended
March 31, 1999
- ----------------------------------------------------------
Loss for the period $(4,705,288)
Weighted average number of common shares
used
in computation: 1,746,208
- ----------------------------------------------------------
Basic and diluted loss per share $(2.69)
- ----------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY .................................................
RISK FACTORS .......................................................
DILUTION AND COMPARATIVE SHARE DATA ................................
MARKET FOR AMERICLEAN'S COMMON STOCK ................................
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION .............................................
BUSINESS ...........................................................
MANAGEMENT .........................................................
PRINCIPAL SHAREHOLDERS .............................................
SELLING SHAREHOLDERS ...............................................
DESCRIPTION OF SECURITIES ..........................................
LITIGATION .........................................................
EXPERTS .............................................................
INDEMNIFICATION ....................................................
AVAILABLE INFORMATION...............................................
FINANCIAL STATEMENTS ................................................
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus, and
if given or made, such information or representations must not be relied upon as
having been authorized by Americlean. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any of the securities
offered in any jurisdiction to any person to whom it is unlawful to make such an
offer in such jurisdiction. Neither the delivery of this Prospectus nor any sale
made in this Prospectus shall, under any circumstances, create any implication
that the information in this prospectus is correct as of any time subsequent to
the date of this Prospectus or that there has been no change in the affairs of
Americlean since such date.
Until _________, 2000 all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a Prospectus. This in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>
PART II
Information Not Required in Prospectus
Item 24. Indemnification of Officers and Directors.
The Delaware Business Corporation Act and the Company's Bylaws provide that
the Company may indemnify any and all of its officers, directors, employees or
agents or former officers, directors, employees or agents, against expenses
actually and necessarily incurred by them, in connection with the defense of any
legal proceeding or threatened legal proceeding, except as to matters in which
such persons shall be determined to not have acted in good faith and in the best
interest of the Company.
Item 25. Other Expenses of Issuance and Distribution.
SEC Filing Fee $843
NASD Filing Fee 1,343
Blue Sky Fees and Expenses 2,000
Printing and Engraving Expenses 2,000
Legal Fees and Expenses 25,000
Accounting Fees and Expenses 10,000
Miscellaneous Expenses 3,814
-----
TOTAL $45,000
=======
All expenses other than the S.E.C. and NASD filing fees are estimated.
Item 26. Recent Sales of Unregistered Securities.
The following information sets forth all securities of the Company
which have been sold during the past three years and which securities were not
registered under the Securities Act of 1933, as amended. Unless otherwise
indicated, the consideration paid for the shares was cash. All share amounts
have been adjusted to reflect the Company's four-for-one reverse stock split was
effective in January 1999.
Shares of
Date of Sale Name Common Stock Consideration
04/10/97 Century Capital Management Ltd. 625,000 50% of the issued and
outstanding shares of
Americlean Western
Canada Ltd.
<PAGE>
Shares of
Date of Sale Name Common Stock Consideration
- ------------------------------------------------------------------------------
04/10/97 Current Investments Ltd. 625,000 50% of the issued and
outstanding shares
of Americlean
Western Canada Ltd.
04/10/97 Walker, Brett 125,000 $10,000
04/10/9 Harrison, Mark 125,000 10,000
04/15/97 Procopis, Plato 2,500 20,000
04/24/97 Mavrofrides, Christos 500 4,000
05/15/97 Josephson, Mark 125 1,000
05/16/97 Stahl, William A. and Noreen F. 625 5,000
05/25/9 Shaw, William A. 250 2,000
05/26/9 Andrews, Arthur R. and Cathy R. 175 1,400
05/28/97 Horsham Finance Limited - 75,000
to Whalen, Beliveau & Associates,
Inc. 18,750 150,000
05/29/9 James, Sonia J. 125 1,000
05/30/97 Hugessen, Alex 175 1,400
05/30/97 Long, Richard N. 250 2,000
05/30/9 McGaw, Ross 875 7,000
06/02/97 Proietti, Anthony M. 25 250
06/03/97 Verdi, James E. 25 250
06/04/97 Hadley, James C. Jr. 50 500
06/04/97 Halpern, Tyler J. 25 250
06/04/97 Pagano, T.J. 25 250
06/04/9 Siciliano, Stanley 25 250
06/05/97 Parent, James 25 250
06/05/97 Roberti, Adrienne J. 25 250
06/05/97 Roberti, Arnold J. 25 250
06/05/97 Roberti, Peter E. 25 250
06/05/97 Sohn, Bernie 25 250
06/05/97 Verdi, Mark S. 25 250
06/05/97 Wong, Whie L. 25 250
06/05/97 Yacono, Sam A. 25 250
06/06/97 Bowles, Tom 25 250
06/06/97 DeGeorge, Dawn Ann 25 250
06/06/97 Hoyt, Jeffrey C. 25 250
06/06/97 Kapil, Hari 1,562 12,500
06/06/9 Sakkalis, Nikanthros 3,411 27,288
06/06/97 Nuciola, Phillip 25 250
06/06/97 Shi, Hong Qing 25 250
06/07/97 Mouchecourt, Eric G. 25 250
06/10/97 Proietti, Anthony L. 25 250
10/24/97 Mills, Robert E. 5,000 20,000
10/24/97 Seedhouse, Jack 5,000 20,000
<PAGE>
Shares of
Date of Sale Name Common Stock Consideration
01/20/98 Pereira, Manuel D. 1,875 11,250
01/22/98 Dixon, Bryan J. 1,250 10,000
04-24-98 Skalko, James 25,000 100,000
04-28-9 Tradewinds Investments Ltd. 2,500 10,000
04-27-98 Lenz, Frederick A. 5,000 20,000
04-27-98 Britannia Development Company
Limited 5,000 20,000
04-27-9 Hassan Abdul S.A. 25,000 100,000
05-04-98 Nostradamus S.A. 25,000 100,000
05-04-98 Edwards Capital Corporation 15,000 60,000
05-06-98 Phoenix Capital 2,500 10,000
06-10-98 Dashguard Securities Limited 20,000 80,000
06-10-98 Malco L. Investments 2,500 10,000
07-01-98 Sure Lock Inc. 2,500 10,000
07-01-98 Edwards Capital Corporation 12,500 50,000
07-02-98 Matthew P.T. Holstein 1,875 7,500
07-02-98 Phillip M. Holstein 1,875 7,500
08-12-98 Keith A. Mazer 18,750 75,000
08-12-98 Matthew P.T. Holstein 12,500 50,000
08-12-98 Thundercloud Corporation
Money Purchase Pension Plan,
Philip M. Holstein, Jr. Trustee 6,250 25,000
08-12-98 Philip M. Holstein 6,250 25,000
08-12-98 Phoenix Capital Corporation 9,375 37,500
08-13-9 Edwards Capital Corporation 25,000 100,000
08-13-98 C. Jesse Reggio 6,250 25,000
03-10-9 Edwards Capital Corporation 5,000 5,000
03-10-99 Bona Vista West, Ltd. 70,000 70,000
03-31-99 Bona Vista West, Ltd. 363,014 Payment of loan in
principal amount of
$187,507
03-31-99 Current Investments Ltd. 50,000 Payment of loan in
principal amount of
$25,000
03-03-99 Boggs & Company, Inc. 124,637 Assets of Boggs &
Company, Inc.
03-03-99 JKG Group, Inc. 36,810 Assets of JKG
Group, Inc.
04-06-99 Andrew Hromyk 2,550,000 Services rendered
04-06-99 Brett Walker 450,000 Services rendered
06-01-99 Victor Nostas 3,500 Services rendered
06-01-99 John Faessel 3,500 Services rendered
06-08-9 Tony Francel 15,000 Services rendered
<PAGE>
Shares of
Date of Sale Name Common Stock Consideration
10-04-9 Anthony Advisors 10,000 Services Rendered
10-04-99 Victor Nostas 3,500 Services Rendered
10-04-99 John Faessel 3,500 Services Rendered
10-14-99 Gibralter Capital Corp. 100,000 $100,000
10-14-99 Cody Capital Corporation 100,000 $100,000
10-14-99 Current Investments Ltd. 100,000 $100,000
10-31-99 Trinity Capital Limited 110,644 Payment of loan in the
principal amount of
$110,644
10-31-99 Ascent Financial Incorporated 240,000 Payment of loan
in the principal
amount of $240,000
10-31-99 Current Investments Ltd 140,000 Payment of loan in the
principal amount of
$140,000
Shares of Series A
Date Name Preferred Stock Consideration
04-05-9 Anthony James Stavros 50 $50,000
04-05-99 Susan C. Buescher 50 $50,000
04-05-99 Karron L Heathman, Trustee 50 $50,000
04-05-9 Allan J. Brda 20 $20,000
04-05-99 James David Bommarito 25 $25,000
04-05-99 D. Michael McDaniel 25 $25,000
04-05-99 South County Investors 75 $75,000
04-05-99 Alpco for the benefit of
Anthony D. Cupini, IRA account 35 $35,000
04-05-99 Britannia Development Company Limited 45 $45,000
04-05-99 Armory Facilities 25 $25,000
04-05-99 Alpco for the benefit of
Thomas C. Hullverson, IRA account 200 $200,000
All sales of the Company's Common Stock prior to March 31, 1999 were
exempt from registration pursuant to Rule 504 of the Securities and Exchange
Commission.
All sales of the Company's common stock on and after March 31, 1999
were exempt from Registration pursuant to Section 4 (2) of the Securities Act of
1933. All shares of common stock issued on and after March 31, 1999 were
acquired for investment purposes only and without a view to distribution. All of
the persons who acquired these shares of common stock were fully informed and
advised about matters concerning the Company, including its business, financial
affairs and other matters. The purchasers of the Company's common stock acquired
the securities for their own accounts. The certificates evidencing the shares of
common stock bear legends stating that the shares represented by the
<PAGE>
certificates may not be offered, sold or transferred other than pursuant to an
effective registration statement under the Securities Act of 1933, or pursuant
to an applicable exemption from registration. All shares of common stock sold on
March 31,1999 are "restricted" securities as defined in Rule 144 of the Rules
and Regulations of the Securities and Exchange Commission.
All sales of the Company's Series A Preferred Stock were exempt from
registration pursuant to Rule 506 of the Securities and Exchange Commission. All
shares of the Preferred Stock were acquired for investment purposes only and
without a view to distribution. All of the persons who acquired the Company's
Preferred Shares were fully informed and advised about matters concerning the
Company, including its business, financial affairs and other matters. The
purchasers of the Company's Preferred Stock acquired the securities for their
own accounts. The certificates evidencing the Preferred Shares will bear legends
stating that they may not be offered, sold or transferred other that pursuant to
an effective registration statement under the Securities Act of 1933, or
pursuant to an applicable exemption from registration. All the Preferred Shares
are "restricted" securities as defined in Rule 144 of the Rules and Regulations
of the Securities and Exchange Commission.
<PAGE>
Item 27. Exhibits
Exhibits Page Number
1 Underwriting Agreement N/A
3.1 Certificate of Incorporation and Amendments Previously Filed
3.2 Certificate of Designation of Series A
Preferred Stock Previously Filed
3.3 Bylaws Previously Filed
4.1 Incentive Stock Option Plan Previously Filed
4.2 Non-Qualified Stock Option Plan Previously Filed
5 Opinion of Counsel
10 Asset Purchase Agreement - Boggs & Company Previously Filed
21 Subsidiaries _____________
23.1 Consent of Hart and Trinen
23.2 Consent of Ernst & Young LLP
23.3 Consent of Bullard & Blanchard, P.L.L.C. ____________
24. Power of Attorney Included as part of the
Signature Page
27. Financial Data Schedule ____________
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement.
(i) To include any Prospectus required by Section l0(a)(3) of the Securities
Act of l933;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
<PAGE>
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement,
including (but not limited to) any addition or deletion of a managing
underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act of l933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) To provide to the Underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of l933 may be permitted to directors, officers and controlling
persons of the Registrant, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with full
power to act alone, to file one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such agent
for service as attorney-in-fact, with full power to act alone, to execute in the
name and in behalf of the Registrant and any such person, individually and in
each capacity stated below, any such amendments to this Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Vancouver, British
Columbia and Charlotte, North Carolina, on the 2nd day of February, 2000.
AMERICLEAN, INC.
By /s/ Andrew Hromyk
Andrew Hromyk, President
By /s/ Donald Senior
Donald Senior, President,
Principal Financial Officer
and Chief Accounting Officer
Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Title Date
/s/ Andrew Hromyk
Andrew Hromyk Director February 2, 2000
/s/ Brett Walker
Brett Walker Director February 2, 2000
Jose Lourenco Director February 2, 2000
/s/ Douglas Porter
Douglas Porter Director February 2, 2000
<PAGE>
AMERICLEAN, INC.
AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
ON
FORM SB-2
EXHIBITS
February 1, 2000
Americlean, Inc.
Suite 1650 Waterfront Centre
200 Burrard Street
Vancouver, British Columbia
V6C 3L6
This letter will constitute an opinion upon the legality of the sale by
Americlean, Inc., a Delaware corporation (the "Company"), and by certain selling
shareholders of up to 2,240,000 shares of the Company's common stock, all as
referred to in the Registration Statement on Form SB-2 filed by the Company with
the Securities and Exchange Commission.
We have examined the Articles of Incorporation, the Bylaws and the minutes of
the Board of Directors of the Company and the applicable laws of the State of
Delaware, and a copy of the Registration Statement. In our opinion:
(1) The Company is authorized to issue the shares of common stock to be
sold by the Company and such shares, when issued, will represent
fully paid an non-assessable shares of the Company's common stock.
(2) The Company is authorized to issue the shares of common stock
issuable upon the conversion of the Company's Series A Preferred
Stock and/or the exercise of the warrants and options described in
the Registration Statement, and such shares, when issued, will
represent fully paid and non-assessable shares of the Company's
common stock.
(3) The shares of the Company's common stock to be sold by the Selling
Shareholders have been validly issued and represent fully paid and
non-assessable shares of the Company's common stock.
Very truly yours,
HART & TRINEN, LLP
William T. Hart
Denver, Colorado
February 1, 2000
The Company's only subsidiary, Boggs & Company (1998), Inc, is a North Carolina
corporation. Boggs & Company (1998), Inc. conducts business under
the name of Boggs & Company.
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement of Americlean, Inc. (the
"Company") whereby the Company and certain Selling Shareholders propose to sell
up to 2,240,000 shares of the Company's common stock. Reference is also made to
Exhibit 5 included in the Registration Statement relating to the validity of the
securities proposed to be sold.
We hereby consent to the use of our opinion concerning the validity of the
securities proposed to be issued and sold.
Very truly yours,
HART & TRINEN, LLP
William T. Hart
Denver, Colorado
February 1, 2000
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated June 25, 1999 (except Notes 1 and 6, as to which the
date is November 17, 1999) in Amendment No. 1 to the Registration Statement
(Form SB-2 No. 333-78493) and related Prospectus of Americlean, Inc. for the
registration of shares of its common stock.
/s/ Ernst & Young LLP
Charlotte, NC
January 31, 2000
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Americlean, Inc
Charlotte, North Carolina
We hereby consent to the use, in the Prospectus constituting part of this
Registration Statement on Form SB-2 (Americlean No. 1), of our report dated
December 16, 1998 relating to the combined financial statements of Boggs &
Company, Inc. and JKG Group, Inc. appearing in such Prospectus.
Our report contains an explanatory paragraph regarding uncertainties as to
the outcome of certain going concern issues. We also consent to the reference to
us under the caption "Experts" in such Prospectus.
/s/ Bullard & Blanchard PLLC
Charlotte, North Carolina
February 2, 2000
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