SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES ACT OF 1934
MAINTENANCE DEPOT, INC.
--------------------------------------------------------------------------------
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Florida 65-0329380
----------------------------------------- ------------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
516 Monceaux Rd W. Palm Beach FL 33405
----------------------------------------- ------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(561) 659-9006
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------
--------------------------------- ------------------------------------
--------------------------------- ------------------------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.0001 PAR VALUE PER SHARE
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(TITLE OF CLASS)
<PAGE>
TABLE OF CONTENTS
PART I
Description of Business 1
Description of Property 4
Directors , Executive Officers and Significant Employees 5
Remuneration of Directors and Officers 5
Securityholders 6
Options Warrants and Rights of Management and Certain Shareholders 6
Interest of Management and Others in Certain Transactions 6
Description of Securities 7
PART II
Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters 8
Legal Proceedings 9
Changes in and Disagreements with Accountants 9
Recent Sales of Unregistered Securities 9
Indemnification of Directors and Officers 10
PART F/S: Financial Statements
PART III
Index and Description of Exhibits
SIGNATURES
<PAGE>
PART I
The issuer has elected to follow Form 10-SB, Disclosure Alternative 2.
ITEM 6. DESCRIPTION OF BUSINESS
The Company, a Florida corporation organized in August 1990, commenced
operations in 1992 as a Master Distributor of janitorial supplies, paper and
equipment. A "Master Distributor" is a company who inventories other
manufacturers lines of products for sale to distributors. Operating out of a
central warehouse in West Palm Beach, Florida, MDI has, since 1993,
manufactured its own line of cleaning products and chemicals which it sells to
distributors in addition to the products of other manufacturers. The Company's
customer base is mainly composed of food service, industrial, janitorial, safety
and export distributors located principally in the Southeastern United States.
The Company has grown from gross sales of approximately $2,000,000 in 1995 to
over $7,000,000 in 1999.
The Company offers a wide variety of janitorial and food service supplies,
paper products and other cleaning services equipment exclusively to wholesale
distributors of such products. By maintaining a large inventory of a wide
variety of products, the Company is able to offer its customers, wholesale
distributors, the convenience of "one stop" shopping and the ability to keep
their own inventories low.
The raw materials used by the Company in manufacturing its products
are widely available in the market and are not unique to any one or group of
suppliers. There are no material agreements with the Company's suppliers of
manufactured goods; the type of goods produced by other manufacturers and resold
by the Company are generally available in the marketplace.
The products offered by the Company are manufactured both in-house by the
Company and by outside manufacturers.
<TABLE>
<CAPTION>
(Principal Products Manufactured by Others) Percentage of Total Sales
-------------------------------------------------------------------------- -------------------------
<S> <C>
Paper goods, such as toilet paper, paper towels, napkins, etc. 30%
Plastic liners, such as garbage bags 20%
Mops, brooms, brushes, etc. 5%
Cleaning equipment such as floor buffers, carpet cleaners, vacuums 5%
Aerosols, such as glass cleaners, furniture polish, disinfectants 10%
Other related products 5%
Principal Products Manufactured by MDI
Cleaning products such as dish soaps, hand soaps, detergent, disinfectants 25%
</TABLE>
Most of the products are disposable, thus assuring on-going reorders and
inventory turnover.
The Company's in-house lines of cleaning products and chemicals and related
products are sold under the names "Remington", "Dro" and "Maintenance Pro". In
addition to selling products under Company trade names, MDI offers a private
labeling program for distributors who wish to market the Company's chemicals,
powders and aerosols under their own brand names.
1
<PAGE>
Until recently, the Company has operated out of a 31,000 square foot
central warehouse in Delray Beach, Florida which houses its executive offices as
well as its chemical manufacturing and warehouse operations. On or about April
1, 1999, the Company moved its executive offices, warehouse facilities and its
chemical manufacturing to a new facility of approximately 73,000 square feet
located at 516 Monceaux Road, West Palm Beach, Palm Beach County, Florida.
MDI is a stockholder/member of Advantage Marketing Associates ("AMA"), a
marketing group based in San Antonio, Texas, which is made up of fourteen Master
Distributors of janitorial supplies, paper products and equipment. MDI owns 125
shares of AMA out of a total of 1,500 shares issued (8.33%). The Company paid
$7,500 for its interest in AMA. New members are currently required to pay
$25,000 for membership and must be approved by the current shareholders.
Each AMA member has a designated market area in which to sell its products
and does not compete with other members. The Company's designated market area is
the Southeastern United States, which includes Georgia, Alabama, Florida, the
Caribbean and Central and South America. The Company is permitted and does sell
to other parts of the country but does not sell AMA products in those areas. The
principal benefits to the Company of membership in AMA are (i) receipt of large
volume discounts from manufacturers of products when purchasing as part of the
AMA group, (ii) participation in AMA's national advertising campaigns, (iii)
sales of Company manufactured products to AMA members, and (iv) participation in
the development and sale of new products in conjunction with AMA and its other
members. The Company and AMA have developed lines of products under the AMA's
trade names "ReNature" and "ProNature" , which products are primarily paper
products such as towels, napkins, and tissues, and a comparable line of
recycled paper products.
The Company's product offerings are changed and varied based upon it's
research carried on by (1) attendance at trade shows and review of trade
publications and product offerings of its competitors, (2) regular discussions
with its suppliers and their competitors and (3) continuous surveys by its
sales personnel of the desires and needs of its customers and prospective
customers. The Company carries on no other material research.
The Company concentrates its marketing efforts on providing value-added
services to resellers. The Company distributes products that are generally
available at similar prices from multiple sources, and most of its customers
purchase their products from more than one source. As a result, the Company
seeks to differentiate itself from its competitors through a broader product
offering, a higher degree of product availability, a variety of high quality
customer services and timely distribution capabilities. MDI attempts to
accomplish these goals through beneficial ratio's of sales personnel to
customers, well informed, high quality sales and service personnel, advertising
in trade publications, fliers, and the increases in warehouse and distribution
facilities resulting from the new facility. The Company employs salespersons
and an independent contractor who supervises and deals in export sales, which
sales are not significant at this time. The Company's products are delivered to
its customers by common carrier and/or United Parcel Services (UPS) or the
customers may pick up the products at the Company warehouse.
MDI's customer base is diversified over a relatively large number of
customers. Only one customer represents more than 10% of the Company's 1999
sales revenue (said customer accounted for approximately 12% of 1999 sales).
2
<PAGE>
TRADEMARKS AND SERVICE MARKS
The Company has registered the trademark "Maintenance Depot" and "Dro" on
the United States Patent and Trademark Office principal register. While the
Company believes that its trademarks and service marks can be and are adequately
protected by statutory and common law, there can be no assurance that others may
not successfully challenge the Company's right to its trademarks and service
marks. Further, the Company has not secured patent protection for the cleaning
products and chemicals that it manufactures. There can be no assurance that the
confidentiality of its trade secrets will be maintained or that others will not
independently develop or obtain access to the same, comparable or superior
products.
THE INDUSTRY
It is the management of the Company's experience that distributors of
janitorial supplies, paper products and equipment generally buy from wholesalers
such as the Company rather than directly from manufacturers. By purchasing
product in such a manner, distributors can access a vast array of inventory on a
timely basis, thereby keeping their inventory costs low while not sacrificing
accessibility. In addition, the Company believes that distributors receive
competitive prices and much improved services when purchasing from wholesalers
rather than directly from manufacturers.
COMPETITION
The Company is involved in a highly competitive and changing industry. The
Company competes, and can be expected to compete, against well-established
companies with substantially greater product and name recognition and with
substantially greater financial marketing and distribution capabilities than
those of the Company, as well as against a large number of local establishments
that offer similar or competitive products.
The Company faces competition, in the Southeast and nationally, from other
Master Distributors as well as from manufacturers who sell directly to
distributors and end-users. Competitors on the wholesale level include Sweet
Paper Co., the Company's major competitor in the Southeast, Bunzi Distribution,
USA Inc., a St. Louis based master distributor with a presence in the Southeast,
national wholesalers Lagasse Brothers and United Facility Supply Co., which are
divisions of United Stationers, Inc. and ResourceNet International, a division
of International Paper Corp., which concentrates principally in the Northeast.
The Company does not have a material share of the market.
Management believes that the Company's ability to manufacture and sell
products under its own brand names and under private labels as well as its
ability to offer its customers high quality products and services, sets it apart
from its competitors. In addition, the strong South Florida market provides an
excellent base for the Company to establish itself and from which it can grow.
Management anticipates that the Company will face more intense competition as it
expands out of Florida and as competing wholesalers intensify their efforts in
the Company's home territory.
GOVERNMENT REGULATIONS
3
<PAGE>
Management believes that compliance with Federal, Florida state and local
provisions regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, does not and will not
have a material effect upon the capital expenditure, earnings, and the
competitive position of the Company. The Company is not a chemical manufacturer
in the true sense of the word. MDI combines certain materials in order to form a
finished product such as dish soap. This process does not result in any
by-products which must be disposed of. The Company rinses its blending tanks
after the batching process is complete and has been granted a permit to dispose
of this wastewater into the sanitary sewer. On July 10, 1996, the Company
received notification from the City of Delray Beach, Florida, indicating that,
in light of the Company's past cooperation with the City of Delray Industrial
Pretreatment Program and satisfactory analysis results over the previous two
years, MDI is no longer required to test the Delray Beach warehouse site for
compliance with local environmental ordinances. Based on its own investigations
and consultations with Delray Beach Environmental Services, the City of West
Palm Beach has verbally advised the Company that it requires no waste disposal
permit for the new facility. The Environmental Compliance Department of West
Palm Beach has indicated that it will, from time to time, perform spot checks of
wastewater discharge. There can be no assurance, however, that testing or other
requirements will not be imposed in the future. Management believes that the
Company is in compliance with Palm Beach County ordinances and the Company holds
a current environmental permit from the county. In addition, the Company
registers its disinfectant products annually with the State of Florida.
EMPLOYEES
At December 31, 1999, the Company had 20 full time employees and 1 part
time employee. The Company has never experienced a work stoppage and no
employees are represented by any labor union. The company believes that its
employee relations are good.
ITEM 7. DESCRIPTION OF PROPERTY
The Company's executive offices as well as its chemical manufacturing and
warehouse operations were located at 1295 SW 4th Avenue, Delray Beach, Palm
Beach County, Florida in a 31,000 square foot central warehouse leased by the
Company. The lease commenced on March 1, 1993 and expires August, 2003, with a
renewal option for an additional five years. Monthly rent (base) is
approximately $12,600. On or about April 1, 1999, the Company moved its
executive offices, warehouse facilities and chemical manufacturing to a new
facility of approximately 73,000 square feet located at 516 Monceaux Road, West
Palm Beach, Palm Beach County, Florida owned by the Company. Over one-half of
the facility has ceilings in excess of 28 feet, which enables merchandise to be
warehoused in an efficient manner and has 20 loading docks thereby easing
delivery. The facility is expected to be adequate for the Company's needs for
the foreseeable future. The Company has subleased its former quarters in Delray
Beach, Florida.
4
<PAGE>
ITEM 8. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of MDI and their respective ages and
positions with MDI are set forth in the following table.
NAME AGE POSITION
---- --- --------
William J. Mercur 44 President, Director
Philip Seid 48 Vice President-Financial and
Manufacturing,
Director
Members of the Board of Directors are elected for one-year terms and until their
successors are duly elected and qualified. There are no arrangements or
understandings between them or between them and any other persons as to their
serving as Directors.
William J. Mercur, a co-founder of the Company, has been the President and a
director since its inception. He has been in the janitorial and chemical sales
industry for approximately 20 years.
Philip Seid, a co-founder of the Company, has been Vice President of Finance and
Manufacturing and a director of the Company since its inception. Mr. Seid has
over 24 years of experience in accounting and finance.
No officer, director, key personnel or principal shareholders are related by
blood or marriage.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth, for the year ended December 31, 1999, annual
compensation, including salary and bonuses paid by MDI to each executive officer
and all executive officers as a group. No compensation has been paid to any
individual in the capacity of a director.
NAME OF INDIVIDUAL OR CAPACITIES IN REMUNERATION AGGREGATE
IDENTITY OF GROUP WAS RECEIVED REMUNERATION
Officers and Directors as a $ 162,250
group (2)
William Mercur Officer $ 92,650
Philip Seid Officer $ 69,600
5
<PAGE>
William J. Mercur and Philip Seid have, as of January 1, 2000, entered into
employment contracts with the Company which provide for an initial base annual
salary of $124,800 and $105,300 respectively. The contracts provide for (a) an
initial term of five years, (b) a minimum annual increase in the base salary of
10% and (c) an annual bonus of between 10% and 50%, to be determined by the
Board of Directors of the Company.
<TABLE>
<CAPTION>
ITEM 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
as of August 18, 2000
NAME AND ADDRESS OF AMOUNT OF COMMON STOCK AMOUNT OF SERIES "A" PERCENT OF CLASS
OWNER OWNED PREFERRED STOCK OWNED(1) OF COMMON STOCK
<S> <C> <C> <C>
William Mercur 785,000 396,900 30%(1)
1515 S. Flagler Dr
W. Palm Beach, FL 33401
Philip Seid 601,563 303,000 23%(1)
4964 NW 110 Terrace,
Coral Springs, FL 33706
Solana Venture Group, LP 558,663 21%(2)
990 Highland Dr.
Solana Beach, CA 92075
All Officers and Directors 1,386,563
as a Group (2)
<FN>
(1) Messrs Mercur and Seid own 100% of the issues and outstanding Series "A" preferred
stock; the percentage shown does not take into consideration the conversion of the
Series "A" Preferred Stock. See "Description of Securities".
(2) On June 20, 2000 the Company and Solana Venture Group, LP entered into a Securities
Purchase Agreement which calls for the sale and purchase of 1,005,590 shares in three
installments at a price of $1.79; as of August 18th , 2000, 558,663 Shares have been
purchased. Luke D'Angelo, a shareholder of the Company, is President of the general
partner of Solana Venture Group, Inc.
</TABLE>
There are no other shareholders who own more than 10% of any class of the
Company's securities.
OPTIONS WARRANTS AND RIGHTS OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
as of August 18th, 2000
none
6
<PAGE>
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS
Interest of Management Regarding Certain Guarantees
--------------------------------------------------------
William J. Mercur and Philip Seid, officers, directors and controlling
shareholders of the Company, have personally guaranteed and/or co-signed certain
debt and obligations of MDI. The said indebtedness totals, as of December 31,
1999, $1,143,708, and is further described in the Notes to the Financial
Statements.
ITEM 12. DESCRIPTION OF SECURITIES
The Company is authorized to issue 50,000,000 shares of all classes of
stock, consisting of 40,000,000 shares of Common Stock, $.0001 par value and
10,000,000 shares of preferred stock, $.0001 par value. There are 2,644,214
Shares of the Company's Common Stock issued and outstanding and 699,900 shares
of Series "A" Preferred Stock issued and outstanding. Of the 2,085,551 Shares
issued and outstanding, all shares were offered and sold in private
transactions, exempt from registration with the United States Securities and
Exchange Commission.
William Mercur, and Philip Seid own 100% of the issued and outstanding Series
"A" Preferred Stock. Should either of these individuals be terminated for cause
as set forth in paragraph 8 (c) of their employment contracts during the five
year period commencing with their purchase of the Series "A" Preferred stock,
the Company has the right to repurchase their Series "A" Preferred stock at
their purchase price .The Series "A" Preferred Stock has the right to elect a
majority of the Board of Directors, and is convertible to common stock, at the
election of the shareholder no sooner than five years from the date of purchase,
at the ratio of one share of preferred to two shares of common. It has no other
voting rights, shall not participate in dividends, and shall have no preference
in dissolution.
7
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock has been publicly traded in the over-the-counter
market and quoted on the NASDAQ electronic OTC Bulletin Board from August, 1999
until January, 2000 under the trading symbol "MDPO". The OTC Bulletin Board is
an electronic quotation service that displays real-time quotes, last sale prices
and volume information in certain domestic and foreign issuers whose securities
are traded in the over-the-counter market.
No dividends on the Company's common stock have been declared or paid since
The Company's inception. The Company intends to retain earnings to finance
the growth and development of its business and does not anticipate paying cash
dividends on its common stock in the foreseeable future. As of May 1, 2000 there
were approximately 25 holders of record of the Company's common stock.
The following states the range of high and low bid prices for each quarter from
the time the shares of the Company was quoted on the OTC Bulletin Board:
Calendar Quarter Closing High Low
----------------- ------- ---- ---
Q3 1997 2.625 3 2.375
Q4 2 3 2
Q1 1998 1.0625 2.25 0.75
Q2 0.625 1.375 0.625
Q3 0.4375 0.625 0.375
Q4 1.8125 2.375 0.21875
Q1 1999 1.875 2.215 1.02
Q2 2.5 2.625 1.5313
Q3 1.375 2.5 1.125
Q4 2.6563 4.25 1.25
Q1 2000* 2.6563 1.5
*trading on OTCBB ceased on January 18, 2000
The High/Low bid prices for each quarter of the last fiscal year were obtained
from NASDAQ Trading and Market Services. The quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.
Pursuant to NASD Eligibility Rule 6530 (the "Rule") issued on January 4, 1999,
issuers who do not make current filings pursuant to Sections 13 and 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") are ineligible for listing
on the NASDAQ Over-the-Counter Bulletin Board ("OTCBB"). Pursuant to the Rule,
issuers who are not current with such filings are subject to having the
quotation of the ir securities removed from the OTCBB pursuant to a phase in
schedule depending on each issuer's trading symbol as reported on January 4 ,
1999 and thereafter may quote its common stock on the National Quotation Bureau
"Pink Sheets."
8
<PAGE>
As of August 18th, 2000, the Company has not complied with the Rule, and in the
past, has not made filings pursuant to Sections 13 and 15(d) of the Exchange
Act. The Company has filed this registration statement on Form 10SB to become a
reporting Company and therefore comply with the Rule. However, the Company will
remain subject to having quotation of its securities on the Pink Sheets, until
such time as the Securities and Exchange Commission (the "Commission") has
reviewed the Company's Form 10SB and has stated that it has no further comments.
Once the Company has complied with the Rule, it will once again become eligible
for quotation on the OTCBB and will seek to be reinstated on the OTCBB or other
appropriate exchange.
ITEM 2. LEGAL PROCEEDINGS
As of the date of this filing, there are no material legal proceedings pending.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
There have been no disagreements of any sort or kind with Auditors or
Accountants respecting any matter or item reflected in the financial statements
of this Issuer.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years, the Company has sold the following securities
without registering them under the Securities Act of 1933 (the "Securities
Act"), all without underwriters or commissions or discounts:
Common Shares:
Date of Sale
--------------
(i) Sept. 1 , 1999 As of March 3,1999, the Company entered into a Promissory
Note Agreement, whereby the Company was loaned $201,000,
bearing interest in the fixed amount of $20,000, interest
being due and payable when the principal becomes due.
Principal and interest due and payable on August 31,
1999. At the time of issuance, said promissory note
agreement provided that the debt was into shares of the
common stock of the Company at the price of $2.00 per
share. The loan was fully satisfied by the conversion
of the principal and interest into 110,550 shares of the
Company's common stock.
(ii) July. 27, 1999 12,500 shares at a price of $2; purchase by a single
accredited investor.
(iii) Sept. 21, 1999 55,000 shares at a price of $2 plus $10,000 of services;
purchase by a single accredited investor.
(iv) Nov. 1 1999 37,500 shares at a price of $2; purchased by a single
accredited investor.
(v) June 20, 2000 1,005,590 shares at a price of $1.79; purchased a single
accredited investor pursuant to a Securities Purchase
Agreement which calls for the sale and purchase of said
shares in three installments. As of August 18th , 2000,
558,663 Shares have been purchased.
9
<PAGE>
The Company relies on exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended in that the transactions detailed in
subparagraphs (a)(i) (ii), (iii) and (v) are a private placement of said
securities to an accredited investor who is acquiring the securities for its own
account and not with a view to sale or resale, distribution or transfer.
Each of the purchasers described in subparagraphs (a)(i), (ii), (iii) and (v)
above is an accredited investor and has confirmed this to the Company in
writing. The Company relies on exemption from registration under Regulation S
of the Securities Act of 1933, as amended with regard to the securities
detailed in subparagraph (iv).
Series "A" Preferred Shares:
The officers and directors of the Company (2) purchased 100% of the Series
"A" Preferred shares issued and outstanding for consideration of $.015 per share
plus modification of their employment contracts in May 2000.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company's Articles of Incorporation provide: This Corporation shall
indemnify and shall advance expenses on behalf of its officers and directors to
the fullest extent permitted by law in existence either now or hereafter.
As of August 18, 2000, the Company does not have, but reserves the right
to purchase and maintain, directors and officers insurance insuring its
directors and officers against any liability arising out of their status as
such, regardless of whether the Company has the power to indemnify such persons
against such liability under applicable law.
Insofar as indemnification for liabilities arising under the Securities
Exchange Act of 1934 may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
10
<PAGE>
PART F/S
FINANCIAL STATEMENTS
MAINTENANCE DEPOT, INC.
Balance Sheets
ASSETS
------
June 30 December 31,
2000 1999
---------- ------------
(Unaudited)
CURRENT ASSETS
Cash $ 241,863 $ 4,505
Accounts receivable, net (Note 1) 1,361,046 1,158,196
Inventory (Note 1) 1,166,712 1,369,092
Prepaids and other current assets 94,975 90,837
---------- ------------
Total Current Assets 2,864,596 2,622,630
---------- ------------
FIXED ASSETS (Notes 1 and 2) 377,562 373,544
---------- ------------
TOTAL ASSETS $3,242,158 $ 2,996,174
========== ============
F 1
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<TABLE>
<CAPTION>
MAINTENANCE DEPOT, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, December 31,
2000 1999
------------ --------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Cash overdraft $ 26,698 $ 137,201
Line of credit (Note 5) 1,391,796 1,143,708
Accounts payable 1,294,244 1,480,014
Accrued expenses 4,753 83,103
Notes payable - current portion (Note 3) 5,377 11,388
------------ --------------
Total Current Liabilities 2,722,868 2,855,414
------------ --------------
LONG-TERM DEBT
Notes payable - long term (Note 3) 112,414 112,414
------------ --------------
Total Long-Term Debt 112,414 112,414
------------ --------------
Total Liabilities 2,835,282 2,967,828
------------ --------------
COMMITMENTS (Note 4)
STOCKHOLDERS' EQUITY
Preferred stock: $0.001 par value, 10,000,000 shares
authorized; 700,000 and -0- shares issued and
outstanding, respectively 700 -
Common stock: $0.001 par value, 40,000,000 shares
authorized; 2,309,019 and 2,085,551 shares issued
and outstanding, respectively 2,309 2,086
Additional paid-in capital 1,484,389 1,074,814
Accumulated deficit (1,080,522) (1,048,554)
------------ --------------
Total Stockholders' Equity 406,876 28,346
------------ --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,242,158 $ 2,996,174
============ ==============
</TABLE>
F 2
<PAGE>
<TABLE>
<CAPTION>
MAINTENANCE DEPOT, INC.
Statements of Operations
(Unaudited)
For the For the
Six Months Ended Three Months Ended
June 30, June 30,
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES, NET $4,709,242 $3,246,791 $2,304,197 $1,600,984
COST OF GOODS SOLD 3,576,455 2,403,582 1,737,625 1,156,867
Gross Margin 1,132,787 843,209 566,572 444,117
OPERATING EXPENSES
General and administrative
expenses 988,125 729,955 530,499 380,561
Depreciation expense 48,771 40,133 21,063 19,128
----------- ----------- ----------- -----------
Total Operating Expenses 1,036,896 770,088 551,562 399,689
----------- ----------- ----------- -----------
Income from Operations 95,891 73,121 15,010 44,428
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Bad debt expense (741) (30,972) (376) (15,164)
Interest expense (127,118) (87,894) (68,643) (48,700)
----------- ----------- ----------- -----------
Total Other Income (Expense) (127,859) (118,866) (69,019) (63,864)
----------- ----------- ----------- -----------
INCOME TAX BENEFIT - - - -
----------- ----------- ----------- -----------
NET LOSS $ (31,968) $ (45,745) $ (54,009) $ (19,436)
=========== =========== =========== ===========
BASIC LOSS PER SHARE $ (0.02) $ (0.02) $ (0.03) $ (0.01)
=========== =========== =========== ===========
</TABLE>
F 3
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<TABLE>
<CAPTION>
MAINTENANCE DEPOT, INC.
Statements of Stockholders' Equity
Additional
Preferred Stock Common Stock
---------------------------- -------------------------------------
Shares Amount Shares Amount Capital Deficit
------- ------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 - $ - 1,870,001 $ 1,870 $ 685,213 $ (637,302)
Net loss for the year ended
December 31, 1998 - - - - - (26,744)
------- ------- ---------- ---------- ----------- ------------
Balance, December 31, 1998 - - 1,870,001 1,870 685,213 (664,046)
Conversion of notes payable
and interest to common stock
at $2.00 per share - - 110,550 111 220,989 -
Common stock issued for
cash and services at $2.00
per share - - 105,000 105 209,895 -
Stock offering costs - - - - (41,283) -
Net loss for the year ended
December 31, 1999 - - - - - (384,508)
------- ------- ---------- ---------- ----------- ------------
Balance, December 31, 1999 - - 2,085,551 2,086 1,074,814 (1,048,554)
Common stock issued for
cash at $1.79 per share
(unaudited) - - 223,468 223 399,777 -
Preferred stock issued for
cash at $0.015 per share
(unaudited) 700,000 700 - - 9,798 -
Net loss for the six months
ended June 30, 2000
(unaudited) - - - - - (31,968)
------- ------- ---------- ---------- ----------- ------------
Balance, June 30, 2000
(unaudited) 700,000 $ 700 2,309,019 $ 2,309 $1,484,389 $(1,080,522)
======= ======= ========== ========== =========== ============
</TABLE>
F 4
<PAGE>
<TABLE>
<CAPTION>
MAINTENANCE DEPOT, INC.
Statements of Cash Flows
(Unaudited)
For the For the
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (31,968) $ (45,745) $ (54,009) $ (19,436)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Allowance for bad debts - 30,000 - 15,000
Depreciation and amortization 48,771 40,133 21,063 19,128
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (202,850) (148,955) 14,931 (11,315)
(Increase) decrease in inventory 202,380 (261,440) 59,408 (323,814)
(Increase) decrease in prepaids (8,154) 29,488 (6,614) (61,872)
(Increase) decrease in deposits 4,016 (83,113) (14,499) (51,448)
Increase (decrease) in accounts payable (185,770) 448,954 15,750 243,089
Increase (decrease) in accrued expenses (78,350) (65,395) 360 (644)
Increase (decrease) in other current
liabilities - 201,000 - -
Increase (decrease) in cash overdraft (110,503) 97,325 (143,272) 133,364
---------- ----------- ---------- ----------
Net Cash (Used) by Operating Activities (362,428) 242,252 (106,882) (57,948)
---------- ---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (52,789) (172,767) (19,932) (28,274)
---------- ---------- ----------- ----------
Net Cash (Used) by Investing Activities (52,789) (172,767) (19,932) (28,274)
---------- ---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from cash sale of common stock 400,000 - 400,000 -
Proceeds from cash sale of preferred stock 10,498 - 10,498 -
Proceeds from revolving credit notes payable 248,088 - - -
Principal payments on notes payable (6,011) (6,000) (2,607) (3,000)
Payments on revolving credit notes payable - (61,595) (46,337) (30,374)
---------- ---------- ----------- ----------
Net Cash Provided by Financing Activities 652,575 (67,595) 361,554 (33,374)
---------- ---------- ----------- ----------
NET INCREASE (DECREASE) IN CASH 237,358 1,890 234,740 (119,596)
CASH AT BEGINNING OF PERIOD 4,505 - 7,123 121,486
---------- ---------- ----------- ----------
CASH AT END OF PERIOD $ 241,863 $ 1,890 $ 241,863 $ 1,890
========== ========== =========== ==========
CASH PAID FOR:
Interest expense $ 127,118 $ 87,894 $ 68,643 $ 48,700
Income taxes $ - $ - $ - $ -
</TABLE>
F 5
<PAGE>
MAINTENANCE DEPOT, INC.
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
PS Industries, Inc. (the Company) was incorporated in the state of
Florida on August 6, 1990 for the primary purpose of distributing and
wholesaling janitorial supplies, paper and equipment. On July 11,
1991, the Company changed its name to Maintenance Depot, Inc. In
addition to the wholesale distribution of over, 4,000 nationally
recognized brands, the Company also formulates, packages and
distributes over 200 of its own branded cleaning products and
chemicals. The Company also offers a private labeling program to
distributors who wish to purchase chemicals, powders and aerosols
under their own label.
The Company presently houses its manufacturing, warehouse, laboratory
and offices in a 70,000 square foot facility in West Palm Beach,
Florida. The Company's current customer base includes food service,
industrial, janitorial, safety and export distributors throughout the
United States.
2. Cash Equivalents
The Company considers all highly liquid investments and deposits with
a maturity of three months or less when purchased to be cash
equivalents.
3. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has adopted a calender year end.
Sales revenue is recognized when the product is shipped to the
customer and expenses are recognized as incurred.
4. Inventories
Inventories consisting principally of janitorial supplies, paper and
equipment are stated at the lower of average cost or market value.
Cost is determined by the first-in, first-out (FIFO) method.
5. Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful life or lease
term of the related asset.
Computer equipment 5 years
Equipment 7 years
Furniture and fixtures 7 years
Leasehold improvements 5 years
F 6
<PAGE>
MAINTENANCE DEPOT, INC.
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Basic Net Loss Per Share
For the Six
Months Ended
June 30, 2000
---------------------------------------
(Denominator)
Weighted
(Numerator) Average Net
(Loss) Number of (Loss) Per
Amounts Shares Share
------------ ----------- ----------
Net Loss $ (31,968) 2,110,381 $ (0.01)
------------ ----------- ----------
$ (31,968) 2,110,381 $ (0.01)
============ =========== ==========
For the Six
Months Ended
June 30, 2000
---------------------------------------
(Denominator)
Weighted
(Numerator) Average Net
(Loss) Number of (Loss) Per
Amounts Shares Share
------------ ----------- ----------
Net loss $ (45,745) 1,870,001 $ (0.02)
------------ ----------- ----------
$ (45,745) 1,870,001 $ (0.02)
============ =========== ==========
g. Income Taxes
As of June 30, 2000, the Company had a net operating loss carryforward
for federal income tax purposes of approximately $466,000 that may be
used in future years to offset taxable income. The net operating loss
carryforward will begin to expire in 2020. The tax benefit of the
cumulative carryforwards has been offset by a valuation allowance of
the same amount.
h. Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful
accounts. The allowance was $100,000 at June 30, 2000.
i. 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 reporting period. Actual results could differ
from those estimates.
j. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
F 7
<PAGE>
MAINTENANCE DEPOT, INC.
Notes to the Financial statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Unaudited Financial Statements
The accompanying unaudited financial statements include all of the
adjustments which, in the opinion of management, are necessary for a
fair presentation. Such adjustmetns are of a normal recurring nature.
NOTE 2 - FIXED ASSETS
Fixed assets at June 30, 2000 and December 31, 1999 consisted of the
following:
June 30, December 31,
2000 1999
---------- ----------
(Unaudited)
Computer equipment $ 225,566 $ 190,734
Equipment 363,287 348,286
Furniture and fixtures 65,920 62,963
Leasehold improvements 39,723 39,723
---------- ----------
694,496 641,706
Less accumulated depreciation and amortization (316,934) (268,162)
---------- ----------
Net Property and Equipment $ 377,562 $ 373,544
========== ==========
Depreciation expense for the six months ended June 30, 2000 and the
year ended December 31, 1999 was $48,771 and $77,283, respectively.
NOTE 3 - LONG-TERM DEBT
Long-term debt at June 30, 2000 and December 31, 1999 consists of the
following:
June 30, December 31,
2000 1999
---------- ----------
(Unaudited)
Note payable to an individual, payable in
monthly interest only payments at 12%
through March 2002, unsecured. $ 100,000 $ 100,000
Note payable to an individual, payable in
monthly installments of $1,000 including
interest at 8% through January 2002,
unsecured. 17,791 23,802
---------- ----------
117,791 123,802
Less current portion (5,377) (11,388)
---------- ----------
$ 112,414 $ 112,414
========== ==========
F 8
<PAGE>
MAINTENANCE DEPOT, INC.
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 3 - LONG-TERM DEBT (Continued)
Future maturities of long-term debt are as follows:
2000 $ 5,377
2001 11,420
2002 100,994
-----------
Total $ 117,791
===========
NOTE 4 - OPERATING LEASES
In 1999, the Company relocated it operations and leases its new
facilities on a month-to-month basis. The monthly rental payment for
the lease is $9,011.
The Company is obligated to lease its prior facilities under an
operating lease through 2003. The following is a schedule of future
minimum rental payments under the operating lease at June 30, 2000.
2000 $ 122,334
2001 176,400
2002 176,400
2003 176,400
-----------
Total $ 651,534
===========
As of December 31, 1999, the Company has sublet certain portions of
its prior facilities to third parties under subleases that expire in
November 2003. The monthly rental income from the subleases is
$12,830.
NOTE 5 - REVOLVING CREDIT NOTE PAYABLE
The Company has a revolving credit note with First Capital Corporation
which provides that it may borrow up to $1,500,000 at a varying rate
of interest which is five and one-half percent (5.5%) per annum above
the higher of seven and one-quarter percent (7.25%) or the highest
prime rate published daily in The Wall Street Journal under "Money
------------------------
Rates". As security for this note, the lender has a security interest
in all machinery, equipment, furniture, fixtures, inventory and
accounts receivable.
As additional provisions of the loan agreement, the Company has agreed
to the following covenants:
1. Maintain an indebtedness to tangible net worth ratio of not more
than 7.5 to 1.
2. Maintain a current assets to current liabilities ratio of at least
1.2 to 1.
3. Not allow its working capital from the funding date until the note
has been paid in full to be less than $180,000.
4. Not allow its tangible net worth from the funding date until the
note has been paid in all to be less than $115,000.
5. Not allow its cumulative quarterly cash flows to drop below zero.
First Capital Corporation periodically monitors the Company's
compliance with these covenants and financial ratios. This revolving
credit note was executed on April 15, 1999 and as of June 30, 2000 the
loan balance was $1,391,796 and the Company was in default of various
provisions of the loan covenants.
On February 15, 2000, First Capital Corporation increased the line of
credit from $1,000,000 to $1,500,000 and extended the term of the
credit note to February 14, 2001.
F 9
<PAGE>
MAINTENANCE DEPOT, INC.
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 6 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company does not have
significant cash or other material assets, nor have revenues been
sufficient to cover its operating costs and to allow it to continue as
a going concern. It is the intent of the Company to complete a limited
offering of its common stock. In the interim, management is committed
to meeting the operational cash flow needs of the Company.
NOTE 7 - COMMON STOCK TRANSACTIONS
During the year ended December 31, 1999, the Company completed an
offering whereby it sold 105,000 shares of its common stock at $2.00
per share for cash proceeds of $200,000 and services of $10,000.
During the year ended December 31, 1999, the Company incurred cost of
$41,283 in connection with the raising of additional capital. These
costs were changed to paid in capital.
During the year ended December 31, 1999, the Company issued $201,000
of notes payable which, with $20,100 of accrued interest, were
converted to 110,550 shares of the Company's common stock at $2.00 per
share.
During the six months ended June 30, 2000, the Company issued 223,468
shares of common stock for cash at $1.79 per share for a total of
$440,000.
NOTE 8 - PREFERRED STOCK TRANSACTIONS
During the six months ended June 30, 2000, the Company issued 700,000
shares of preferred stock at $0.015 per share for a total of $10,498.
NOTE 9 - STOCK PURCHASE AGREEMENT
On June 20, 2000, the Company entered into a stock purchase agreement
with an investor. The Company has authorized the sale and issuance of
1,005,590 shares of common stock at $1.79 per share for a total of
$1,800,000. As of June 30, 2000, the Company has issued 223,468 shares
of common stock and received $400,000 as compensation.
F 10
<PAGE>
MAINTENANCE DEPOT, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . 3
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 6
Statements of Stockholders' Equity . . . . . . . . . . . . . . . . . . . 7
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . 8
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . 9
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Maintenance Depot, Inc.
West Palm Beach, Florida
We have audited the accompanying balance sheet of Maintenance Depot, Inc. as of
December 31, 1999 and the related statements of operations, stockholders' equity
and cash flows for the years ended December 31, 1999 and 1998. 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 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 Maintenance Depot, Inc. as of
December 31, 1999 and the results of its operations and its cash flows for the
years ended December 31, 1999 and 1998 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has a deficit in working capital and
significant losses from operations which raises substantial doubt about its
ability to continue as a gong concern. Management's plans in regard to these
matters are also described in Note 6. The financial statements do not include
any adjustments that might result from the outcome of the uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
March 31, 2000
F 3
<PAGE>
<TABLE>
<CAPTION>
MAINTENANCE DEPOT, INC.
Balance Sheet
ASSETS
------
December 31,
1999
-------------
<S> <C>
CURRENT ASSETS
Cash $ 4,505
Accounts receivable, net (Note 1) 1,158,196
Inventory (Note 1) 1,369,092
Prepaids and other current assets 90,837
-------------
Total Current Assets 2,622,630
-------------
FIXED ASSETS (Notes 1 and 2) 373,544
-------------
TOTAL ASSETS $ 2,996,174
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F 4
<PAGE>
<TABLE>
<CAPTION>
MAINTENANCE DEPOT, INC.
Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31,
1999
--------------
<S> <C>
CURRENT LIABILITIES
Cash overdraft $ 137,201
Line of credit (Note 5) 1,143,708
Accounts payable 1,480,014
Accrued expenses 83,103
Notes payable - current portion (Note 3) 11,388
--------------
Total Current Liabilities 2,855,414
--------------
LONG-TERM DEBT
Notes payable - long term (Note 3) 112,414
--------------
Total Long-Term Debt 112,414
--------------
Total Liabilities 2,967,828
--------------
COMMITMENTS (Note 4)
STOCKHOLDERS' EQUITY
Preferred stock: $0.001 par value, 10,000,000 shares
authorized; no shares issued and outstanding -
Common stock: $0.001 par value, 40,000,000 shares
authorized; 2,085,551 shares issued and outstanding 2,086
Additional paid-in capital 1,074,814
Accumulated deficit (1,048,554)
--------------
Total Stockholders' Equity 28,346
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,996,174
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F 5
<PAGE>
<TABLE>
<CAPTION>
MAINTENANCE DEPOT, INC.
Statements of Operations
For the Years Ended
December 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
REVENUES
Sales, net $7,226,367 $6,139,975
Cost of sales 5,508,292 4,565,590
----------- -----------
Gross Profit 1,718,075 1,574,385
----------- -----------
EXPENSES
General and administrative 1,674,640 1,335,251
Depreciation and amortization 77,283 71,152
Litigation settlement expense (Note 8) 65,000 -
----------- -----------
Total Expenses 1,816,923 1,406,403
----------- -----------
INCOME (LOSS) FROM OPERATIONS (98,848) 167,982
----------- -----------
OTHER INCOME (EXPENSE)
Bad debt expense (71,079) (10,000)
Interest expense (214,581) (184,726)
----------- -----------
Total Other Income (Expense) (285,660) (194,726)
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES - -
PROVISION FOR INCOME TAXES - -
----------- -----------
NET LOSS $ (384,508) $ (26,744)
=========== ===========
BASIC LOSS PER SHARE $ (0.20) $ (0.01)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F 6
<PAGE>
<TABLE>
<CAPTION>
MAINTENANCE DEPOT, INC.
Statements of Stockholders' Equity
Additional
Common Stock Paid-in Accumulated
-----------------
Shares Amount Capital Deficit
--------- ------ ----------- ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 1,870,001 $1,870 $ 685,213 $ (637,302)
Net loss for the year ended
December 31, 1998 - - - (26,744)
--------- ------ ----------- ------------
Balance, December 31, 1998 1,870,001 1,870 685,213 (664,046)
Conversion of notes payable
and interest to common stock
at $2.00 per share 110,550 111 220,989 -
Common stock issued for
cash and services at $2.00
per share 105,000 105 209,895 -
Stock offering costs - - (41,283) -
Net loss for the year ended
December 31, 1999 - - - (384,508)
--------- ------ ----------- ------------
Balance, December 31, 1999 2,085,551 $2,086 $1,074,814 $(1,048,554)
========= ====== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F 7
<PAGE>
<TABLE>
<CAPTION>
MAINTENANCE DEPOT, INC.
Statements of Cash Flows
For the Years Ended
December 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(384,508) $ (26,744)
Adjustments to reconcile net (loss) to net cash
used in operating activities:
Allowance for bad debts 60,000 10,000
Depreciation and amortization 77,283 71,152
Common stock issued for interest 20,100 -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (361,612) (234,044)
(Increase) decrease in inventory (532,809) (54,773)
(Increase) decrease in prepaids 46,046 54,239
(Increase) decrease in deposits 3,611 (5,719)
Increase (decrease) in accounts payable 791,206 125,761
Increase (decrease) in accrued expenses 17,897 (277,559)
Increase (decrease) in cash overdraft 88,648 48,553
---------- ----------
Net Cash (Used) by Operating Activities (174,138) (289,134)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (304,019) (24,123)
---------- ----------
Net Cash (Used) by Investing Activities (304,019) (24,123)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 201,000 -
Proceeds from revolving credit notes payable 121,838 306,782
Principal payments on notes payable (8,893) (11,899)
Proceeds from sale of common stock 200,000 -
Stock offering costs (31,283) -
---------- ----------
Net Cash Provided by Financing Activities 482,662 294,883
---------- ----------
NET INCREASE (DECREASE) IN CASH 4,505 (18,374)
CASH AT BEGINNING OF YEAR - 18,374
---------- ----------
CASH AT END OF YEAR $ 4,505 $ -
========== ==========
CASH PAID FOR:
Interest expense $ 206,762 $ 171,270
Income taxes $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for fund raising services $ 10,000 $ -
Conversion of notes payable and interest to common stock $ 221,100 $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
F 8
<PAGE>
MAINTENANCE DEPOT, INC.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
PS Industries, Inc. (the Company) was incorporated in the state of
Florida on August 6, 1990 for the primary purpose of distributing and
wholesaling janitorial supplies, paper and equipment. On July 11,
1991, the Company changed its name to Maintenance Depot, Inc. In
addition to the wholesale distribution of over, 4,000 nationally
recognized brands, the Company also formulates, packages and
distributes over 200 of its own branded cleaning products and
chemicals. The Company also offers a private labeling program to
distributors who wish to purchase chemicals, powders and aerosols
under their own label.
The Company presently houses its manufacturing, warehouse, laboratory
and offices in a 70,000 square foot facility in West Palm Beach,
Florida. The Company's current customer base includes food service,
industrial, janitorial, safety and export distributors throughout the
United States.
b. Cash Equivalents
The Company considers all highly liquid investments and deposits with
a maturity of three months or less when purchased to be cash
equivalents.
c. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has adopted a calendar year end.
Sales revenue is recognized when the product is shipped to the
customer and expenses are recognized as incurred.
d. Inventories
Finished goods $ 1,319,094
Raw materials 49,998
------------
$ 1,369,092
============
Inventories consisting principally of janitorial supplies, paper and
equipment are stated at the lower of average cost or market value.
Cost is determined by the first-in, first-out (FIFO) method.
F 9
<PAGE>
MAINTENANCE DEPOT, INC.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful life or lease
term of the related asset.
Computer equipment 5 years
Equipment 7 years
Furniture and fixtures 7 years
Leasehold improvements 5 years
f. Basic Net Loss Per Share
For the Year Ended
December 31, 1999
------------------------------------
(Denominator)
Weighted
(Numerator) Average Net
(Loss) Number of (Loss) Per
Amounts Shares Share
---------- ------------ ----------
Net loss $(384,508) 1,939,571 $ (0.20)
---------- ------------ ----------
$(384,508) 1,939,571 $ (0.20)
========== ============ ==========
For the Year Ended
December 31, 1999
------------------------------------
(Denominator)
Weighted
(Numerator) Average Net
(Loss) Number of (Loss) Per
Amounts Shares Share
---------- ------------ ----------
Net loss $ (26,744) 1,870,001 $ (0.01)
---------- ------------ ----------
$ (26,744) 1,870,001 $ (0.01)
========== ============ ==========
g. Income Taxes
As of December 31, 1999, the Company had a net operating loss
carryforward for federal income tax purposes of approximately $434,000
that may be used in future years to offset taxable income. The net
operating loss carryforward will begin to expire in 2019. The tax
benefit of the cumulative carryforwards has been offset by a valuation
allowance of the same amount.
h. Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful
accounts. The allowance was $100,000 at December 31, 1999.
F 10
<PAGE>
MAINTENANCE DEPOT, INC.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
i. 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 reporting period. Actual results could differ
from those estimates.
j. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
NOTE 2 - FIXED ASSETS
Fixed assets at December 31, 1999 consisted of the following:
1999
-------------
Computer equipment $ 190,734
Equipment 348,286
Furniture and fixtures 62,963
Leasehold improvements 39,723
-------------
641,706
Less accumulated depreciation and amortization (268,162)
-------------
Net Property and Equipment $ 373,544
=============
Depreciation expense for the years ended December 31, 1999 and 1998
was $77,283 and $71,152, respectively.
NOTE 3 - LONG-TERM DEBT
Long-term debt at December 31, 1999 consists of the following:
1999
-------------
Note payable to an individual, payable in monthly
interest only payments at 12% through March 2002,
unsecured. $ 100,000
Note payable to an individual, payable in monthly
Installments of $1,000 including interest at 8%
through January 2002, unsecured. 23,802
-------------
123,802
Less current portion (11,388)
-------------
$ 112,414
=============
F 11
<PAGE>
MAINTENANCE DEPOT, INC.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 3 - LONG-TERM DEBT (Continued)
Future maturities of long-term debt are as follows:
2000 $ 11,388
2001 11,420
2002 100,994
-----------
Total $ 123,802
===========
NOTE 4 - OPERATING LEASES
In 1999, the Company relocated it operations and leases its new
facilities on a month-to-month basis. The monthly rental payment for
the lease is $9,011.
The Company is obligated to lease its prior facilities under an
operating lease through 2003. The following is a schedule of future
minimum rental payments under the operating lease at December 31,
1999.
2000 $ 176,400
2001 176,400
2002 176,400
2003 176,400
-----------
Total $ 705,600
===========
As of December 31, 1999, the Company has sublet certain portions of
its prior facilities to third parties under subleases that expire in
November 2003. The monthly rental income from the subleases is
$12,830.
NOTE 5 - REVOLVING CREDIT NOTE PAYABLE
The Company has a revolving credit note with First Capital Corporation
which provides that it may borrow up to $1,500,000 at a varying rate
of interest which is five and one-half percent (5.5%) per annum above
the higher of seven and one-quarter percent (7.25%) or the highest
prime rate published daily in The Wall Street Journal under "Money
------------------------
Rates". As security for this note, the lender has a security interest
in all machinery, equipment, furniture, fixtures, inventory and
accounts receivable.
As additional provisions of the loan agreement, the Company has agreed
to the following covenants:
1. Maintain an indebtedness to tangible net worth ratio of not more
than 7.5 to 1.
2. Maintain a current assets to current liabilities ratio of at least
1.2 to 1.
3. Not allow its working capital from the funding date until the note
has been paid in full to be less than $180,000.
4. Not allow its tangible net worth from the funding date until the
note has been paid in all to be less than $115,000.
5. Not allow its cumulative quarterly cash flows to drop below zero.
F 12
<PAGE>
MAINTENANCE DEPOT, INC.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 5 - REVOLVING CREDIT NOTE PAYABLE - (Continued)
First Capital Corporation periodically monitors the Company's
compliance with these covenants and financial ratios. This revolving
credit note was executed on April 15, 1999 and as of December 31, 1999
the loan balance was $1,143,708 and the Company was in default of
various provisions of the loan covenants.
On February 15, 2000, First Capital Corporation increased the line of
credit from $1,000,000 to $1,500,000 and extended the term of the
credit note to February 14, 2001.
NOTE 6 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company does not have
significant cash or other material assets, nor have revenues been
sufficient to cover its operating costs and to allow it to continue as
a going concern. It is the intent of the Company to complete a limited
offering of its common stock. In the interim, management is committed
to meeting the operational cash flow needs of the Company.
NOTE 7 - COMMON STOCK TRANSACTIONS
During the year ended December 31, 1999, the Company completed an
offering whereby it sold 105,000 shares of its common stock at $2.00
per share for cash proceeds of $200,000 and services of $10,000.
During the year ended December 31, 1999, the Company incurred cost of
$41,283 in connection with the raising of additional capital. These
costs were changed to paid in capital.
During the year ended December 31, 1999, the Company issued $201,000
of notes payable which, with $20,100 of accrued interest, were
converted to 110,550 shares of the Company's common stock at $2.00 per
share.
NOTE 8 - LITIGATION
During the year ended December 31, 1999, the Company settled a lawsuit
brought against it by a former employee. As a provision of the
settlement agreement, the Company agreed to pay the former employee
$40,000. Legal fees relative to the lawsuit totaled approximately
$25,000.
F 13
<PAGE>
INDEX OF EXHIBITS
(3) (i) Articles of Incorporation (ii) By-Laws
Incorporated by reference to the registrant's Form 1-A filed as
Exhibit 2 with the Securities and
Exchange Commission on March 8,1999, as amended, under File Number
24-4052.
(10) Material Contracts
(i) Employment contract of William Mercur
(ii) Employment contract of Philip Seid
(iii) Securities Purchase Agreement
(iv) Consulting and Sales Agreement
(27) Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MAINTENANCE DEPOT, INC.
By:
--------------------------
Date: August 2000 WILLIAM MERCUR, Director
Chief Executive Officer
Date: August 2000 By:
--------------------------
PHILIP SEID, Director
Chief Financial Officer
<PAGE>
