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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
AMENDMENT NO. 2
(Mark one)
X
---
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-26433
ENVIRO-CLEAN OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0386415
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
211 PARK AVENUE
HICKSVILLE, NY 11801
(Address of principal executive offices)
(516) 931-4455
(Issuer's telephone number, including area code)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X
---
No
---
State the number of shares outstanding of each of the issuer's classes of
Common Stock as of the latest practicable date: The total number of shares of
Common Stock, par value $0.01 per share, outstanding as of November 12, 1999 was
4,351,000.
Transitional Small Business Disclosure Format (check one) Yes No X
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ENVIRO-CLEAN OF AMERICA, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet as of September 30, 1999 (Unaudited)................................. 2
Consolidated Statement of Earnings for the Nine Months Ended September 30, 1999 and 1998
(Unaudited).................................................................................... 3
Consolidated Statement of Earnings for the Three Months Ended September 30, 1999 and 1998
(Unaudited).................................................................................... 4
Consolidated Cash Flow Statement for the Nine Months Ended September 30, 1999 and 1998 5
(Unaudited)....................................................................................
Consolidated Statement of Shareholders' Equity for the Nine Months Ended September 30, 1999 6
(Unaudited)....................................................................................
Notes to the Consolidated Financial Statements (Unaudited)...................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....... 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................................................... 21
Item 2. Changes in Securities....................................................................... 21
Item 4. Submission of Matters to a Vote of Security Holders......................................... 21
Item 5. Other Information and Subsequent Events..................................................... 21
Item 6. Exhibits and Reports on Form 8-K............................................................ 23
SIGNATURES............................................................................................. 25
</TABLE>
i
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash & cash equivalents $ 2,174,553
Accounts receivable 935,151
Merchandise Inventory 689,781
Loan receivable-affiliate 179,836
Prepaid expenses & other 67,542
-----------
Total current assets $ 4,046,863
Property, Plant & Equipment - At cost 1,263,280
Less: Accumulated Depreciation 999,187 264,093
-----------
Other Assets
Goodwill 6,963,175
Investment in unconsolidated affiliate 178,506
Other 24,374
-----------
Total other assets 7,166,055
----------------
TOTAL ASSETS $11,477,011
================
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable & accrued expenses $ 1,294,283
Current maturities of long-term debt 855,358
-----------
Total current liabilities $ 2,149,641
Long Term Liabilities
Notes payable - Subordinated 2,401,172
Long-term debt, less current maturities 1,260,718
-----------
Total long-term liabilities 3,661,890
Stockholder's equity
Preferred stock Series A-$.001 par value; stated value $5.00;
authorized, issued and outstanding 500,000 shares 2,500,000
Preferred stock Series D-$.001 par value; stated value $5.00;
authorized, issued and outstanding 320,000 shares 1,600,000
Preferred stock Series E-$.001 par value; stated value $2.50;
authorized, issued and outstanding 70,000 shares 175,000
Common stock-$.001 par value; authorized 20,000,000 shares;
issued and outstanding 4,351,000 shares 4,351
Additional paid-in capital 4,641,040
Retained earnings (deficit) (5,329,911)
Common stock to be issued 2,075,000
-----------
Total stockholders' equity 5,665,480
----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,477,011
================
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
<S> <C> <C>
Net Sales $ 3,513,056 $1,376,053
Cost of sales 1,674,624 721,314
----------- ----------
Gross profit 1,838,432 654,739
----------- ----------
Operating expenses
Salaries 621,165 147,811
Professional fees 405,790 32,775
Rent 114,922 29,306
Marketing 58,168 6,878
Amortization of goodwill 294,634 -
Depreciation 39,334 28,213
Other 563,409 374,838
----------- ----------
2,097,422 619,821
----------- ----------
Operating profit (loss) (258,990) 34,918
----------- ----------
Other income (expense)
Equity in loss of unconsolidated subsidiary (1,190,198)
Interest expense (252,631) (46,497)
Interest and other income 30,113 -
----------- ----------
(1,412,716) (46,497)
----------- ----------
Loss before income taxes (1,671,706) (11,579)
Income taxes 27,360 1,000
----------- ----------
Net loss (1,699,066) (12,579)
Preferred stock dividends (102,270) -
----------- ----------
Net loss attributable to common stockholders (1,801,336) (12,579)
=========== ==========
Loss per share-basic and diluted $ (0.43) $ -
=========== ==========
Weighted average number of shares outstanding 4,207,000 3,400,000
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
<S> <C> <C>
Net Sales $ 1,690,681 $ 456,602
Cost of sales 818,015 225,652
----------- ----------
Gross profit 872,666 230,950
----------- ----------
Operating expenses
Salaries 329,299 68,414
Professional fees 281,912 7,200
Rent 80,566 8,427
Marketing 43,484 942
Amortization of goodwill 145,774 -
Depreciation 16,777 8,952
Other 222,365 144,656
----------- ----------
1,120,177 238,591
----------- ----------
Operating loss (247,511) (7,641)
----------- ----------
Other income (expense)
Equity in loss of unconsolidated subsidiary (1,190,198)
Interest expense (185,849) (11,867)
Interest and other income 22,504 -
----------- ----------
(1,353,543) (11,867)
----------- ----------
Loss before income taxes (1,601,054) (19,508)
Income taxes 21,960 -
----------- ----------
Net loss (1,623,014) (19,508)
Preferred stock dividends (49,645) -
----------- ----------
Net loss attributable to common stockholders (1,672,659) (19,508)
=========== ==========
Loss per share-basic and diluted $ (0.38) $ (0.01)
=========== ==========
Weighted average number of shares outstanding 4,351,000 3,400,000
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net Loss $(1,699,066) $ (19,508)
----------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 39,334 28,213
Amortization of goodwill 294,634 -
Amortization of note discount 79,844 -
Equity in loss of unconsolidated 1,190,198
affiliate
Common stock issued in consideration of professional fees 125,000 -
(Increase) decrease in accounts (227,762) (18,616)
receivable
(Increase) decrease in prepaid expenses and other assets (4,083) (39,254)
(Increase) decrease in inventories (539,668) (16,100)
Increase (decrease) in accounts payable 760,016 (68,107)
----------- ---------
Total adjustments 1,717,513 (113,864)
----------- ---------
Net cash provided(used) by operating activities 18,447 (133,372)
----------- ---------
Cash flows from investing activities:
Cash paid for acquisitions (1,552,451) -
Cash acquired from subsidiaries 314,334 -
Loans receivable-affiliate (179,836) -
Loans receivable-other 21,320 -
Purchase of fixed assets (12,350) (5,646)
----------- ---------
Net cash used by investing activities (1,408,983) (5,646)
----------- ---------
Cash flows from financing activities:
Net cash received (paid) on notes payable 1,671,441 (81,760)
Common stock issued 386 211
Preferred stock issued 175,000 -
Additional paid-in capital on issuance of warrants 678,672 -
Additional paid-in capital on issuance of common stock 964,614 212,058
Preferred stock dividends (102,270) -
----------- ---------
Net cash provided by financing 3,387,843 130,509
activities ----------- ---------
Net increase (decrease) in cash and equivalents 1,997,307 (8,509)
Cash and cash equivalents, beginning 177,246 39,919
----------- ---------
Cash and cash equivalents, Ending $ 2,174,553 $ 31,410
=========== =========
Supplemental information:
Cash paid during the period for:
Interest $ 45,287 $ 46,497
=========== =========
Taxes $ 2,298 $ -
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. GENERAL:
The accompanying financial statements, footnotes and discussions should be
read in conjunction with the financial statements, related footnotes and
discussions contained in the Company's Annual Report and Quarterly Report
filed with Form 10-SB for the year ended December 31, 1998 and the six
months ended June 30, 1999.
The financial information contained herein is unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature.
The results of operations for the three and nine months ended September 30,
1999 and 1998, are not necessarily indicative of the results to be expected
for the full year.
2. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements include the accounts of
Enviro-Clean of America, Inc and its Subsidiaries (collectively the
"Company"). All significant intercompany balances and transactions have
been eliminated in consolidation.
The principal business activity of the Company is manufacturing and the
wholesale distribution of sanitary maintenance supplies and paper products.
The Company also provides buying services and group discounts to wholesale
distributors of sanitary maintenance supplies, paper goods and related
products.
The Company considers all highly liquid instruments purchased with a
maturity of three months or less to be cash equivalents.
Property and equipment are recorded at cost. Depreciation is provided for
by the straight-line method over the estimated useful lives of the property
and equipment.
Inventories consisting of raw materials, work in process and finished goods
are valued at the lower of cost or market. Cost is determined using the
first-in, first-out method.
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates by management.
Actual results could differ from these estimates.
At each balance sheet date, the Company evaluates the period of
amortization of intangible assets. The factors used in evaluating the
period of amortization include: (i) current operating results, (ii)
projected future operating results, and (iii) any other material factors
that effect the continuity of the business.
5
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Preferred stock dividends in arrears, which represent dividends declared,
but unpaid at September 30, 1999, totals $52,270. Preferred stock dividends
declared for nine months totals $102,270. As of October 1, 1999, all
dividends declared through September 30, 1999, have been paid in full.
Earnings per share ("EPS") is computed by dividing net income or loss by
the weighted-average number of common shares outstanding for the year.
Diluted EPS is not presented because the Company had no dilutive securities
outstanding at September 30, 1999. At September 30, 1999, there were
750,000 shares of common stock to be issued in connection with the NISSCO
Acquisition (note 3), 50,000 shares of common stock to be issued in
connection with the Superior Acquisition (note 3), and warrants to acquire
720,000 shares of common stock outstanding. These amounts have not been
taken into account in the computation of earnings per share because the
effect would be anti-dilutive.
Management does not believe that any recently issued, but not yet
effective, accounting standards, if currently adopted, would have a
material effect on the accompanying financial statements.
3. ACQUISITIONS
On January 1, 1999, the Company and Kandel & Son, Inc. ("Kandel"), a New
York-based sanitary supply distribution company agreed to merge. Richard
Kandel, the sole stockholder and chief executive officer ("CEO") of Kandel
is the majority stockholder and CEO of the Company. The Company paid
$1,350,000 in cash and exchanged 500,000 shares of Series A Preferred Stock
for all of the outstanding common stock of Kandel. The $1,350,000 cash was
distributed as follows: $684,404 went directly to Mr. Kandel, and $665,596
paid obligations of Kandel as follows: $99,914 bank line of credit,
$382,353 stockholder loan owed to Mr. Kandel, and $183,329 of miscellaneous
accruals. This acquisition has been accounted for at historical cost in a
manner similar to a pooling of interest, because Richard Kandel is the
majority stockholder of the Company. As such, the excess of cost over book
value of net assets acquired of approximately $3,377,000 will be deemed a
distribution to Richard Kandel. The historical results of operations of
Kandel & Son, Inc. for the period from January 1, 1998 to September 30,
1998, have been retroactively restated and included in the results of
operations of Enviro-Clean of America, Inc. & Subsidiaries for the period
from January 1, 1998, to September 30, 1998, in a manner similar to a
pooling of interests.
On January 1, 1999, the Company entered into an agreement to purchase all
of the stock of NISSCO/Sunline, Inc. ("NISSCO"), a Florida-based company
engaged in group marketing of sanitary/janitorial supplies. The aggregate
purchase price for this acquisition is $3,000,000, consisting of $500,000
in cash and 1,000,000 shares of the Company's common stock. The common
stock will be issued to the seller in installments, as defined in the
agreement. This acquisition is accounted for as a purchase.
6
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The fair value of assets acquired and liabilities assumed amounted to
$584,078 and $561,291 respectively, which resulted in an excess of cost
over the fair value of the net assets acquired (goodwill), of $2,977,213
which is being amortized over 10 years. Assets and liabilities acquired,
at fair value include:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 17,259
Accounts receivable 507,331
Property & equipment 57,487
Other assets 2,001
Accounts payable (419,670)
Loans payable (141,621)
----------
Net Assets 22,787
Goodwill $2,977,213
----------
Total consideration $3,000,000
----------
Cash $ 500,000
Common stock $2,500,000
</TABLE>
The operations of NISSCO are included in the consolidated financial
statements from January 1, 1999, the date of acquisition.
The seller received 250,000 shares on January 15, 1999 and will receive
250,000 shares on January 15, 2000, and 500,000 shares on January 15, 2001.
All shares have been valued at $2.50, the fair market value of the
Company's common stock on January 1, 1999. If on January 15, 2001, the
Company's Average Bid Price Per Share for the ten days preceding January
15, 2001, is not at least $5.00, the Company shall issue additional shares
of common stock to the seller such that the aggregate value of the shares
issued on January 15, 2001, shall be $2,500,000. The value of any
contingently issuable shares has not been accounted for in the valuation of
the NISSCO acquisition. Any additional shares issued would be expensed at
the time of issuance.
On August 1, 1999, the Company entered into an agreement to purchase all of
the stock of Cleaning Ideas, Inc. & Subsidiary, a Texas-based manufacturer
and distributor of cleaning supplies. The aggregate purchase price for
this acquisition is $3,000,000, consisting of $500,000 in cash, $900,000 in
promissory notes and 320,000 shares of Series D Preferred Stock for all of
the outstanding stock of Cleaning Ideas. The estimated fair market value
on the acquisition date was approximately $5.50 per share. Because of a
lack of trading volume or tradability, a discount of approximately 8% was
taken into account when valuing the stock issued relating to the
acquisition. A lower discount was used for this acquisition than was used
for the other acquisition on the same date because of the higher value
placed on the stock as a result of the preferred stock dividends attached
to the transaction. This acquisition is accounted for as a purchase. The
Series D Stock (i) pay an annual dividend of 8.75%, (ii) are convertible
into Common Stock at a conversion price of $5.00 per share of Common Stock,
and (iii) may be
7
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
redeemed at the option of the Company at any time at a redemption price of
$5.00, plus any accrued and unpaid dividends per share.
The fair value of assets acquired and liabilities assumed amounted to
$982,630 and $753,620, respectively, which resulted in an excess of cost
over the fair value of the net assets acquired (goodwill), of $2,770,990
which is being amortized over 10 years.
Assets and liabilities acquired, at fair value, include:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 238,190
Accounts receivable 248,544
Inventory 395,482
Property & equipment 72,853
Other assets 27,561
Accounts payable (353,620)
Loans payable (400,000)
----------
Net Assets 229,010
Goodwill 2,770,990
----------
Total consideration $3,000,000
----------
Cash & notes $1,400,000
Preferred stock $1,600,000
</TABLE>
The operations of Cleaning Ideas are included in the consolidated financial
statements from August 1, 1999, the date of acquisition.
On August 1, 1999, the Company entered into an agreement to purchase all of
the stock of Superior Chemical & Supply, Inc. a Kentucky-based distributor
of cleaning supplies. The aggregate purchase price for this acquisition is
$1,800,000, consisting of$400,000 in cash, $1,200,000 in promissory notes
and 50,000 shares of the Company's common stock, valued at $4.00 per share.
The estimated fair market value on the acquisition date was approximately
$5.50 per share. Because of the lack of trading volume or tradability, a
discount of approximately 25% was taken into account when valuing the
common stock to be issued relating to acquisition. The common stock will
be issued to the seller in installments, as defined in the agreement. This
acquisition is accounted for as a purchase.
The fair value of assets acquired and liabilities assumed amounted to
$435,330 and $144,937, respectively, which resulted in an excess of cost
over the fair value of the net assets acquired (goodwill), of $1,509,607
which is being amortized over 10 years.
8
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Assets and liabilities acquired, at fair value include:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 8,098
Accounts receivable 198,270
Inventory 192,821
Property & equipment 36,141
Accounts payable (127,488)
Loans payable ( 17,449)
----------
Net Assets 290,393
Goodwill 1,509,607
----------
Total consideration $1,800,000
----------
Cash & notes $1,600,000
Common stock $ 200,000
</TABLE>
The operations of Superior Chemical & Supply, Inc. are included in the
consolidated financial statements from August 1, 1999, the effective date
of acquisition.
The seller will receive 10,000 shares within 90 days of the end of each
fiscal year ended December 31st, provided Superior's target amount is met
each year. The target amount is pre-tax earnings of Superior amounting to
$250,000 per annum pro rated for the period ended December 31, 1999, and
increased by 5% for each year under the agreement. If the target amount is
not met in any year, the number of shares to be delivered from escrow shall
be equal to the product of 10,000 multiplied by a fraction, the numerator
of which shall be the Superior's pre-tax earnings for such year and the
denominator of which shall be the target amount for such year. In the
event that Superior does not meet the target amount in any year, and
Superior exceeds the target amount in the next year, Superior may apply an
amount equal to the extent by which the Superior's pre-tax earnings exceed
the target amount for such year, to the prior year's target amount and
cause a proportionate amount of the escrowed shares that were withheld the
prior year to be released to the shareholders. In no event shall the
aggregate number of shares issued in respect of any two-year period exceed
20,000.
4. INVESTMENT IN AFFILIATE
On June 29, 1999, the Company and Messrs. Kandel, Davis and Etra have
invested in b2bstores.com,Inc. ("b2b"), a California-based company which
designs Internet-based electronic commerce programs. b2b has assisted the
Company to develop the Company's eCommerce website. The Company has
entered into an agreement with b2b in which b2b will host five on-line
stores at their website and the Company will receive 2-5% of the top line
revenues on each product sold at such stores. Mr. Kandel, the Chairman and
Chief Executive Officer of the Company, serves as Chairman of the Board of
b2b. During the 9 months ended September 30, 1999, with board approval,
the Company has advanced working capital loans to b2b totaling $179,836
with interest equal to 8% per annum.
9
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The Company invested $6,000 in b2b, initially representing approximately
55% of the outstanding common stock of b2b. Subsequently, others have
invested in b2b lowering the Company's direct interest to approximately 49%
of the outstanding common stock at September 30, 1999. The Company's
principal stockholder owns additional shares of b2b, such that Mr. Kandel
has effective control of both companies. The Company has accounted for its
direct investment in b2b on the equity method of accounting. Shares of
stock sold to outsiders have been recorded as a capital contribution to the
Company pursuant to Staff Accounting Bulletin Topic 5H.
The Company has guaranteed certain debt of b2b. As of September 30, such
debt is less than $45,000. Additionally, the Company is guarantor on b2b's
office lease, though August, 2001, in the amount of $77,000 per year.
Through January 17, 2000, the Company had agreed to fund b2b for amounts up
to $1,500,000.
5. NOTES PAYABLE
On June 1, 1999, the Company received $3,000,000 in exchange for 300 units.
Each unit is comprised of a $10,000 face value note. The notes are due
April 1, 2002, and pay interest in arrears quarterly on the face amount, at
a rate of 12.75% per annum. Issued along with each unit were warrants to
purchase 2,400 shares of common stock (720,000 shares in aggregate) of the
Company. The warrants are exercisable at any time after November 27, 1999,
through June 1, 2003, at an exercise price of $4.25 per share. Based upon
the fair value of the warrants on the date of issue, the Company has
discounted the carrying value of the notes by $678,672, which represents
the fair value of the warrants on the date of issue. The discount is being
amortized as additional interest over the term of the notes.
In August of 1999, a secured promissory note in the principal amount of
$900,000 was issued pursuant to the stock purchase agreement of Cleaning
Ideas, Inc. & Subsidiary. The note was issued to Charles H. Davis and is
payable over two years in eight equal quarterly installments of $112,500
plus interest at 8 3/4% per annum. The note is secured by the assets of
Cleaning Ideas, Inc. and Subsidiary, the companies acquired from him.
In August of 1999, a promissory note in the principal amount of $1,200,000
was issued pursuant to the stock purchase agreement of Superior Chemical &
Supply, Inc. The note was issued to Stephen Haynes and is payable over
three years in twelve equal quarterly installments of $100,000 plus
interest at 8% per annum. The note is secured by the accounts receivable
and inventory of Superior Chemical & Supply, Inc., the company acquired
from him.
6. STOCKHOLDERS' EQUITY
In January 1999, the Company issued 70,000 shares of common stock for an
aggregate price of $175,000.
10
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
In March 1999, the Company issued 100,000 shares of common stock for an
aggregate price of $250,000.
In April 1999, the Company issued 50,000 shares of common stock for an
aggregate price of $125,000.
In May 1999, the Company issued 100,000 shares of common stock for an
aggregate price of $250,000.
In June 1999, the Company issued 50,000 shares of common stock for an
aggregate price of $125,000.
In July 1999, the Company issued 16,000 shares of common stock for an
aggregate price of $40,000.
In July 1999, the Company issued 25,000 shares of common stock to
Harrington, Ocko & Monk, LLP, outside counsel to the Company, at a price of
$5.00 per share in consideration for legal services rendered.
7. SERIES A STOCK
Effective on September 30, 1999, the Company entered into an agreement with
Richard Kandel, Chairman, Chief Executive Officer and Treasurer of the
Company, pursuant to which Mr. Kandel, as sole holder of the Series A
Stock, consented to the amendment of the Certificate of Designation for the
Series A Stock to remove the ability of the holder of the Series A Stock to
put the Series A Stock to the Company at any date after January 15, 2001
and to increase the conversion price of the Series A Stock from $2.50 to
$5.00.
8. STATEMENT REGARDING COMPUTATION OF LOSS PER SHARE
Net loss per share for the nine months ended September 30, 1999 $(.12)
Preferred stock dividends per share (.03)
-----
Net loss per share attributable common to stockholders (.15)
-----
9. PRO FORMA STATEMENT OF OPERATIONS
The following unaudited pro forma consolidated statement of operations has
been prepared by combining the consolidated statement of operations of
Enviro-Clean of America, Inc. & Subsidiaries (the Company), Cleaning Ideas,
Inc. & Subsidiary and Superior Chemical & Supply, Inc. for the nine months
ended September 30, 1999. The Acquisitions are accounted for using the
purchase method of accounting as if the Acquisitions had occurred on
January 1, 1999. No cost savings and synergies which the Company expects
to realize as a result of the Acquisitions have been recognized in the pro
forma consolidated statements of earnings.
11
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The pro forma consolidated statement of operations does not purport to
represent what the Company's results of operations actually would have been
had the Acquisitions been completed on the dates for which the Acquisitions
are being given effect, nor is it necessarily indicative of future
financial position or operating results of the Company. The pro forma
consolidated statement of operations should be read in conjunction with the
historical financial statements of the respective companies and the related
notes thereto. Certain reclassifications have been made to the historical
financial statements of the Company and in order to provide classifications
appropriate to the pro forma financial statements.
The pro forma consolidated statement of operations does not take into
account any modifications to the Acquisitions which may be required to
address any gain-out contingencies or future redemption of the Company's
stock issued to selling shareholders.
12
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
1999 ACQUISITIONS
CLEANING
ENVIRO-CLEAN IDEAS SUPERIOR
OF AMERICA, INC. INC & CHEMICAL
& SUBSIDIARIES SUBSIDIARY & SUPPLY, INC. PROFORMA PROFORMA
1/1/99-7/31/99 1/1/99-7/31/99 ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C>
Net Sales $3,513,056 $2,498,214 $1,032,054 $ - $7,043,324
Cost of sales 1,674,624 1,357,955 603,468 - 3,636,047
----------- ---------- ---------- ---------- -----------
Gross profit 1,838,432 1,140,259 428,586 - 3,407,277
----------- ---------- ---------- ---------- -----------
Operating expenses
Salaries 621,165 500,228 159,678 - 1,281,071
Professional fees 405,790 4,197 1,060 - 411,047
Rent 114,922 213,811 18,990 - 347,723
Marketing 58,168 21,363 - - 79,531
Amortization of goodwill 294,634 - - 249,702 (a) 544,336
Depreciation 39,334 9,794 10,024 - 59,152
Other 563,409 425,777 116,166 - 1,105,352
----------- ---------- ---------- ---------- -----------
2,097,422 1,175,170 305,918 249,702 3,828,212
----------- ---------- ---------- ---------- -----------
Operating profit (loss) (258,990) (34,911) 122,668 (249,702) (420,935)
----------- ---------- ---------- ---------- -----------
Other income (expense)
Equity in loss of
unconsolidated subsidiary (1,190,168) - - - (1,190,168)
Interest expense (252,631) (19,087) (226) (101,938)(b) (373,882)
Interest and other income 30,113 - - - 30,113
----------- ---------- ---------- ---------- -----------
(1,412,716) (19,087) (226) (101,938) (1,533,937)
----------- ---------- ---------- ---------- -----------
Income(loss) before income taxes (1,671,706) (53,998) 122,442 (351,640) $(1,954,872)
Income taxes 27,360 1,000 12,300 - 40,660
----------- ---------- ---------- ---------- -----------
Net income(loss) $(1,801,336) $ (54,998) $ 110,142 $(351,640) $(1,995,532)
=========== ========== ========== ========== ===========
Basic loss per common share $(0.43) $(0.47)
=========== ===========
Weighted average number of
common shares outstanding 4,207,000 4,257,000
=========== ===========
(a) amortization of goodwill on acquisitions with an estimated life of 10 years
(b) interest expense on acquisition indebtedness
</TABLE>
13
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosure contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Company from time to time.
The discussion of the Company's liquidity, capital resources and results of
operations, including forward-looking statements pertaining to such
matters, does not take into account the effect of any changes to the
Company's operations. Accordingly, actual results could differ materially
from those projected in the forward-looking statements as a result of a
number of factors, including those identified herein.
This item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.
Plan of Operations
The Company intends to substantially expand its business through the
completion of several acquisition transactions. An acquisition program
such as that being conducted by the Company requires virtually constant
access to capital in order to enable the Company to purchase companies.
Assuming the Company is successful in identifying acquisition targets and
completing acquisitions according to its plan, the Company will require
additional funding of approximately $6,000,000 prior to the end of calendar
1999. The Company has begun negotiations with various investment banking
sources regarding such a transaction. Based upon these negotiations, the
Company believes it will be successful in attracting such capital on
acceptable terms prior to the end of 1999. If the Company continues to be
successful in implementing its business plan, there will be a need for
additional capital sometime in the first six months of calendar 2000. If
the Company is not successful in completing acquisitions according to the
schedule contemplated by its current business plan, the Company's need for
additional capital will be reduced or delayed.
There can be no assurance that the Company will be successful in attracting
the requisite capital on terms favorable to the Company or at all. Failure
to attract such capital would seriously impair the Company's ability
according to its current plans and to attain its revenue and profit
targets.
On October 27, 1999, the Company signed a definitive agreement to purchase
all the capital stock of June Supply-San Antonio, Inc. ("June") located in
San Antonio, Texas, for approximately $4,800,000 in cash, promissory notes
and common stock of the Company. June is a leading distributor of
industrial equipment, janitorial supplies and light bulbs. June operates
four locations in San Antonio, Dallas, McAllen and Corpus Christi, Texas.
The Company has plans to open a fifth location during the first quarter of
The acquisition, if consummated, will be accounted for as a purchase. In
October 1999, acquisition deposits of $400,000 were disbursed to the
stockholders of June.
14
<PAGE>
The Company's additions to plant and equipment will be incident to the
acquisitions that have been previously discussed. If the Company is
successful in completing its acquisitions as planned, the number of
employees of the Company, including its subsidiaries, could expand to as
many as approximately 250 by the end of calendar 2000.
Results of Operations
The historical results of operations of Kandel & Son, Inc. for the period
from January 1, 1998, to September 30, 1998, have been retroactively
restated and included in the results of operations of Enviro-Clean of
America, Inc. & Subsidiaries for the period from January 1, 1998, to
September 30, 1998, in a manner similar to a pooling of interests.
Results of operations for the nine-month period ended September 30, 1999
and 1998:
The net sales increased $2,137,003 for the nine-month period ended
September 30, 1999 ("1999") as compared to the nine-month period ended
September 30, 1998 ("1998") from $1,376,053 to $3,513,056. This increase
is attributable to the operations of three acquired companies being
consolidated with the Company in 1999. NISSCO was acquired in January1999,
while Cleaning Ideas and Superior were acquired in August 1999. Net sales
of Kandel & Son are comparable for each period, as both price and volume
remained relatively constant.
The gross profit percentage increased from 48% for 1998 to 52% for 1999.
This increase is mostly attributable to the inclusion of NISSCO in 1999.
NISSCO averages a gross profit percentage of approximately 70% because it
sells services rather than products.
Operating expenses increased from $619,821 for 1998 to $2,097,422 for 1999,
approximately 238%. The majority of this increase, approximately
$1,478,000, was due to the inclusion of NISSCO, Cleaning Ideas, and
Superior in 1999. Additionally, amortization of goodwill was recorded on
the acquisitions of approximately $295,000 during 1999. Kandel & Son's
expenses were comparable between 1999 and 1998.
The Company had a net loss in 1999 of $508,868 or $.12 per share, as
compared to a net loss of $12,579, or $.00 per share in 1998.
The operations of the Company for the nine-month period ended September 30,
1998, have been restated to include the operation of Kandel as if the
acquisition had occurred prior to January 1, 1998.
Results of operations for the three-month period ended September 30, 1999
and 1998:
The net sales increased $1,234,079 for the three-month period ended
September 30, 1999 ("1999") as compared to the three-month period ended
September 30, 1998 ("1998") from $456,602 to $1,690,681. This increase is
attributable to the operations of three acquired companies being
consolidated with the Company in 1999. NISSCO was acquired in January1999,
while Cleaning Ideas and Superior were acquired in August
15
<PAGE>
1999. Net sales of Kandel & Son are comparable for each period, as both
price and volume remained relatively constant.
The gross profit percentage increased from 50% for 1998 to 52% for 1999.
This increase is mostly attributable to the inclusion of NISSCO in 1999.
NISSCO averages a gross profit percentage of approximately 70% because it
sells services rather than products.
Operating expenses increased from $238,591 for 1998 to $1,120,177 for 1999,
approximately 369%. The majority of this increase, approximately $882,000,
was due to the inclusion of NISSCO, Cleaning Ideas, and Superior in 1999.
Additionally, amortization of goodwill was recorded on the acquisitions of
approximately $146,000 during 1999. Kandel & Son's expenses were
comparable between 1999 and 1998.
The Company had a net loss in 1999 of $432,816, or $.11 per share, as
compared to a net loss of $19,508, or $.01 per share in 1998.
The operations of the Company for the three-month period ended September
30, 1998, have been restated to include the operation of Kandel as if the
acquisition had occurred prior to January 1, 1998.
Liquidity and Capital Resources
The Company has funded its requirements for working capital and
acquisitions through a series of equity private placements and the issuance
of long-term debt. During the nine-month period ended September 30, 1999,
the Company issued a total of 386,000 shares of Common Stock for $965,000.
In addition, as of June 1, 1999, the Company issued $3,000,000 of 12.75%
promissory notes due April, 2001. Attached to the notes were common stock
warrants. The Company's only significant use of cash was the balance of
cash paid for acquisitions of $1,552,451.
For the nine-month period ended September 30, 1999, the Company's cash
flows from operations was positive $18,447, as a result of a net loss of
$508,868 and adjustments to arrive at cash provided by operating activities
of depreciation and amortization of $413,812, common stock issued in
consideration of professional fees of $125,000, an increase in accounts
receivable of $227,762, an increase in inventory of $539,668 and an
increase in accounts payable of $760,016, offset by an increase in prepaid
expenses of $4,083.
The Company expects its capital requirements to increase for the remainder
of 1999 and for 2000 as it continues its acquisition program and invests in
expanded administrative and sales and marketing infrastructure to support
increasing sales volume. The Company's future liquidity and capital
funding requirements will depend on many factors, including the extent to
which the Company is successful in implementing its acquisition program,
and the extent to which the Company is able to raise additional funds
through equity and debt issuances.
16
<PAGE>
The Company intends to structure its next financing transaction as a
private offering of convertible preferred stock. Until the terms of such
offering are set, it is not possible to determine the number of shares of
the Company's Common Stock that may be issuable upon conversion of the
preferred stock. It is also impossible currently to determine the number
of shares of Common Stock that will be issuable to Thomas B. Haines in
connection with the purchase by the Company of NISSCO. Under the terms of
Mr. Haines' agreement with the Company, the Company is obligated to issue
additional shares of Common Stock to Mr. Haines in the event that the bid
price per share of the Company's Common Stock is less than $5.00 for ten
(10) trading days immediately preceding January 15, 2001 (the "Average Bid
Price Per Share"). The number of shares to be issued is equal to the
number of shares necessary so that the dollar amount of additional shares,
valued at the Average Bid Price Per Share, issued to Mr. Haines on January
15, 2001, is equal to $2,500,000. If the fair market value of the stock is
less than $2.50 per share, Mr. Haines will receive additional shares such
that the aggregate number of shares held by him is no less than $2,500,000
in value. If the fair market value is above $2.50 per share, Mr. Haines
will receive no more than the 1,000,000 shares as originally agreed. The
Company is authorized to issue 20,000,000 shares of common stock, par value
$.001 per share ("Common Stock"), of which 4,351,000 are currently issued
and outstanding.
The Company's board has approved working capital loans to its affiliate
b2bstores.com, Inc. The board has approved advances up to an aggregate of
$1,500,000 with interest at 8% per annum. Through September 30, 1999,
total advances have been $179,836. Although there is no due date the
Company anticipates the balance will be advanced within the next twelve
months. The Company anticipates all advances to be repaid upon an IPO of
b2bstores.com, Inc. prior to September 30, 2000.
Year 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer
programs or hardware that have date-sensitive software or embedded chips
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in system failure 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 out-sources most of its computer functions. The
subsidiaries process most functions internally.
During the first half of 1999, the Company and its subsidiaries completed
their assessment of the various computer software and hardware used in
connection with their operations. This review indicated that significantly
all of the computer programs used are off-the-shelf "packaged" computer
programs which are easily upgraded to be Year 2000 compliant. In addition,
to the extent that custom programs are utilized by the Companies, such
custom programs are Year 2000 compliant.
Following the completion of their assessment of the computer software and
hardware, the Companies began upgrading those systems which required
upgrading. To date,
17
<PAGE>
significantly all of these systems have been upgraded. The Company has to
date not borne, nor is it expected that the Company will bear, any
significant costs in connection with the upgrade of those systems requiring
remediation.
To date, the Company is not aware of any external agent with the Year 2000
issue that would materially impact the Company's results of operations,
liquidity or capital resources. However, the Company has no means of
ensuring that external agents will be Year 2000 compliant. The Company
does not believe that the inability of external agents to complete their
Year 2000 resolution process in a timely manner will have a material impact
on the financial position or results of operations of the Company.
However, the effect of non-compliance by external agents is not readily
determinable. The Company has contacted all material parties out-sourced
and response by these third parties have represented to the Company that
they are all Year 2000 compliant. The Company has not and does not plan to
develop any contingency plans with respect to out-sourced compliance
functions.
18
<PAGE>
PART II-OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is not currently a party to any pending legal proceeding, nor
is any of the Company's property subject to any pending legal proceeding.
ITEM 2. Changes in Securities
On September 30, 1999, Richard Kandel and the Company entered into an
agreement to amend the terms of the Series A Convertible Redeemable Preferred
Stock (the "Preferred Stock"). Pursuant to and subsequent to the Agreement, an
amendment to the Preferred Stock was filed with the Nevada Secretary of State.
This Amendment deleted the redemption feature of the Preferred Stock, which
enabled the holder, Mr. Kandel, to put the shares to the Company. The Amendment
also changed the conversion price of the Preferred Stock from $2.50 to $5.00,
thereby eliminating 500,000 shares of the Company's underlying common stock, par
value $.001, and changed the designation of the Preferred Stock to "Series A
Convertible Preferred Stock."
ITEM 3. Defaults Upon Senior Securities
There have been no material defaults with respect to any indebtedness of
the Company required to be disclosed pursuant to this item. At September 30,
1999, preferred stock dividend in arrears totaled $52,270. As of October 1,
1999, all dividends declared through September 30, 1999 have been paid in full.
ITEM 4. Submission of Matters to a Vote of Security Holders
There have been no matters submitted to a vote of security holders during
the period ended September 31, 1999.
ITEM 5. Other Information and Subsequent Events
On December 16, 1999, Enviro-Clean of America, Inc. (the "Company")
consummated the acquisition of June Supply-San Antonio, Inc., a Texas
corporation ("June Supply"), pursuant to the Stock Purchase Agreement entered
into on October 27, 1999, among June Supply and June Supply Corp., a Nevada
corporation and a wholly owned subsidiary of the Company formed specifically for
the purposes of effecting the acquisition of June Supply ("JSC"), and Michael
Rose and Alan Stafford as the only shareholders of June Supply (the
"Shareholders").
Upon closing, June Supply was merged with and into JSC and JSC remains a
wholly owned subsidiary of the Company. In consideration of their agreement to
the transaction, the Shareholders received the following consideration from the
Company: (i) $ 2,264,951 in cash (the "Cash Payment"), including $400,000 paid
as a deposit (the "Deposit") upon the signing of the Stock Purchase Agreement,
(ii) 100,000 shares of the Company's common stock, par value $.001 (the
"Purchase Price Shares"), and (iii) two secured promissory notes, one payable to
19
<PAGE>
Michael Rose and one payable to Alan Stafford, each in the principal amount of
$587,500, payable in twelve equal quarterly principal payments of $48,958.33,
bearing interest at a rate equal to the prime rate of Chase Manhattan Bank, N.A.
at the closing per annum and maturing three years from its date of issuance (the
"June Notes").
In addition, the Company will pay an annual earn-out payment to the
Shareholders pursuant to the terms of the Agreement. The earn-out payments will
total up to $50,000 for 1999, $150,000 for each of fiscal years 2000, 2001,
2002, and 2003, and $100,000 for fiscal year 2004, except that these amounts
will be subject to adjustments based on the JSC's actual pre-tax earnings in
accordance with the terms of the Agreement.
The Purchase Price Shares shall be increased if the average bid price of
the Company's common stock, par value $.001 (the "Common Stock"), is less than
$5.00 per share for the 20 trading days preceding the first anniversary of the
Closing Date. If such circumstances occur, the Company will grant to the
Shareholders an additional amount of Common Stock so that the aggregate market
value of the Purchase Price Shares (including the value of the initial 100,000
shares of Common Stock) will remain at $500,000.
Repayment of the June Notes are secured by a security interest in the
capital stock of June Supply. Each promissory note is secured by 50% of such
collateral. Pursuant to a Pledge and Security Agreement, in the event of a
default in any payment on the June Notes and the expiration of a 90 day cure
period as specified in the Pledge and Security Agreement, the secured party may
accelerate the entire indebtedness then outstanding. If such events occur, the
secured party must wait an additional 30 days from the event of default which
triggered the acceleration of the indebtedness, before exercising rights as a
secured creditor.
This acquisition is financed partially through the Company's working
capital; however, the majority of funding is being provided through proceeds
from a private placement of securities.
Pursuant to the Agreement, JSC entered into employment agreements with
Michael Rose, as President, and Alan Stafford, as Vice-President, each for a
period of five years. Under the employment agreements, Michael Rose and Alan
Stafford are to be paid a base salary of $50,000 with additional earn-out
bonuses as described in the Agreement. Both contracts provide that if Mr. Rose's
or Mr. Stafford's employment is terminated by JSC for cause (as defined in the
employment agreement), he is not entitled to any severance compensation. In the
event of termination without cause, both Mr. Rose and Mr. Stafford would be
entitled to severance compensation in an amount ranging from six weeks' pay to
twelve months' pay, depending on the length of service prior to the termination.
Repayment of the June Notes are secured by a security interest in the
capital stock of June Supply. Each promissory note is secured by 50% of such
collateral. Pursuant to a Pledge and Security Agreement, in the event of a
default in any payment on the June Notes and the expiration of a 90 day cure
period as specified in the Pledge and Security Agreement, the secured party may
accelerate the entire indebtedness then outstanding. If such events occur, the
secured party must wait an additional 30 days from the event of default which
triggered the acceleration of the indebtedness, before exercising rights as a
secured creditor.
20
<PAGE>
Although the parties have entered into the Agreement on October 27, the
parties have agreed that the Agreement will be deemed effective on August 31,
1999 as stipulated in Articles 2.01, 2.02, 3.36, 7.10, 9.02, and 10.02, and the
cover page of the Agreement.
Details of the acquisition and subsequent merger can be viewed in the
Company's Current Report on Form 8-K filed on November 10, 1999 and as amended
on January 11, 2000.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The following is a list of exhibits filed as part of this Form 10-Q. Where
so indicated, any footnote and exhibits which were previously filed are
incorporated by reference.
Exhibit No. Description
- ----------- ----------------------------------------------------------------
2(i) Stock Purchase Agreement among Enviro-Clean of America, Inc.,
Enviroacq I Co. and Kandel & Son dated as of January 1, 1999
(Exhibit 2(i)). (1)
2(ii) Stock Purchase Agreement among Enviro-Clean of America, Inc.
Enviroacq II Co. and NISSCO/Sunline, Inc. dated as of January 1,
1999 (Exhibit 2(ii)). (1)
2(iii) Agreement & Plan of Merger among Enviro-Clean of America, Inc.,
Cleaning Ideas, Inc., Cleaning Ideas Corp., Charles Davis,
Carolyn Davis and Randall Davis dated as of August 1, 1999
(Exhibit 2(i)). (2)
2(iv) Stock Purchase Agreement among Enviro-Clean of America, Inc., SCS
Acquisition Corp., Superior Chemical & Supply, Inc. and Stephen
Hayes (Exhibit 2(iii)). (2)
2(v) Stock Purchase Agreement among Enviro-Clean of America, Inc. ,
June Supply Corp., June Supply-San Antonio, Inc. and Michael Rose
and Alan Stafford dated as of August 31, 1999 (Exhibit 2(i)). (4)
3(i) Articles of Incorporation of the Company (Exhibit 3(i)). (1)
3(ii) By-Laws of the Company (Exhibit 3(ii)). (1)
4(i) Certificate of Designation for the Company's Series A Stock
(Exhibit 4(i)). (1)
4(ii) Certificate of Designation for the Company's Series E Stock
(Exhibit 4(ii)). (1)
4(iii) Subscription Agreement between the Company and Steven C. Etra
21
<PAGE>
regarding the purchase and sale of the Series E Stock (Exhibit
3(iii)). (3)
4(iv) Certificate of Designation for the Company's Series D Preferred
Stock (Exhibit 4(i)). (2)
4(v) Certificate of Amendment to the Certificate of Designation for
the Company's Series A Stock (Exhibit 3(v)). (3)
22
<PAGE>
Exhibit No. Description
- ----------- ----------------------------------------------------------------
4(vi) Form of 12.75% Subordinate Note (Exhibit 3(vi)). (3)
4(vii) Form of the Warrant Certificate (Exhibit 3(vii)). (3)
4(viii) Pledge and Security Agreement between the Company and Charles H.
Davis (Exhibit 4(viii)). (2)
4(ix) Security Agreement between the Company and Stephen Haynes
(Exhibit 2(i)). (2)
4(x) Registration Rights Agreement among the Company, Charles H. Davis
and Randall K. Davis (Exhibit 4(ii)). (2)
4(xi) Pledge and Security Agreement between the Company and Michael
Rose (Exhibit 2(ii)). (4)
4(xii) Pledge and Security Agreement between the Company and Alan
Stafford (Exhibit 2(iii)). (4)
27(i) Financial data schedule (Exhibit 27(i)). (5)
_______________________________
(1) Incorporated by reference to the Company's Form 10-SB filed with the
Commission on June 16, 1999.
(2) Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on September 3, 1999.
(3) Incorporated by reference to the Company's Current Report on Form 10-SB/A
filed with the Commission on October 22, 1999.
(4) Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on November 10, 1999.
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
filed with the Commission on November 15, 1999 and as amended on December
8, 1999.
(b) Reports on Form 8-K:
The Company filed an 8-K on September 9, 1999 to report the acquisition of
Cleaning Ideas, Inc. and subsidiary and the acquisition of Superior Chemical and
Supply, Inc. under Item 2. The following financial statements were subsequently
filed on Form 8-K/A on October 29, 1999:
(1) Financial Statements of Cleaning Ideas for the fiscal year ended September
30, 1997, September 30, 1998 and for the period ended July 31, 1999.
(2) Financial Statements of Superior for the fiscal year ended December 31,
1997, December 31, 1998 and for the period ended July 31, 1999.
23
<PAGE>
(3) Pro Forma Consolidated Financial Statements for the year ended December 31,
1998 and for the period ended June 30, 1999.
24
<PAGE>
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, as
amended, the Issuer has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
January 28, 2000 Enviro-Clean of America, Inc.
By: /s/ RICHARD KANDEL
-----------------------------------------
Richard Kandel, Chairman of the Board and
Chief Executive Officer
25
