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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark one)
X
----- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
----- 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 $0.001 per share, outstanding as of August 11, 2000 was
6,417,282.
Transitional Small Business Disclosure Format (check one) Yes No X
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TABLE OF CONTENTS
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Page
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PART I - FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2000 (Unaudited)
and December 31, 1999 (Audited)............................................................ 2
Condensed Consolidated Statements of Operations for the six months ended June 30,
2000 and 1999 (Unaudited)................................................................. 3
Condensed Consolidated Statement of Operations for the three months ended June 30,
2000 and 1999 (Unaudited).................................................................. 4
Condensed Consolidated Cash Flow Statement for the six months ended June 30, 2000
and 1999 (Unaudited)....................................................................... 5
Notes to the Condensed Consolidated Financial Statements (Unaudited)........................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................................................... 11
Item 2. Changes in Securities........................................................................... 11
Item 3. Defaults Upon Senior Securities................................................................. 12
Item 4. Submission of Matters to a Vote of Security Holders............................................. 12
Item 5. Other Information and Subsequent Events......................................................... 12
Item 6. Exhibits and Reports on Form 8-K................................................................ 13
SIGNATURE................................................................................................. 16
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
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ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, DECEMBER 31,
2000 1999
(unaudited) (audited)
ASSETS
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Current assets
Cash $ 3,432,267 $ 1,833,478
Accounts receivable 2,229,697 1,547,567
Inventory 1,822,414 1,683,220
Marketable securities-available for sale 3,562,500
Loan receivable-related party - 835,992
Prepaid expenses and other current assets 122,752 78,160
----------- -----------
Total current assets 11,169,630 5,978,417
----------- -----------
Property, plant & equipment - at cost 1,640,295 1,602,505
Less: accumulated depreciation 1,286,714 1,246,793
----------- -----------
Net property, plant & equipment 353,581 355,712
----------- -----------
Goodwill 7,906,965 8,651,571
----------- -----------
TOTAL ASSETS $19,430,176 $14,985,700
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 1,655,122 $ 1,543,776
Income taxes payable 609,996 -
Notes payable-related parties 1,120,707 1,274,306
Current maturities of long-term debt 20,239 8,365
----------- -----------
Total current liabilities 3,406,064 2,826,447
----------- -----------
Long-term liabilities
Notes payable - subordinated 1,409,128 2,461,055
Notes payable-related parties 1,089,395 1,859,028
Long-term debt, less current maturities 20,282 5,645
----------- -----------
Total liabilities 5,924,869 7,152,175
----------- -----------
Redeemable preferred stock-$.001 par value; authorized 5,000,000 shares
70,000 shares of convertible stock designated as Series E stock-
$2.50 stated value; issued and outstanding 70,000 shares 175,000 175,000
----------- -----------
Stockholder's equity
Preferred stock Series A-$.001 par value; stated value $5.00;
authorized, issued and outstanding shares -0- and 500,000 - 2,500,000
Preferred stock Series B-$.001 par value; stated value $100.00;
authorized 80,000 shares; issued and outstanding shares -0- and 25,590 - 2,559,000
Preferred stock Series D-$.001 par value; stated value $5.00;
authorized, issued and outstanding shares -0- and 320,000 - 1,600,000
Common stock-$.001 par value; authorized 20,000,000 shares;
issued and outstanding 6,607,682 and 4,451,000 shares 6,608 4,451
Additional paid-in capital 10,772,208 3,772,236
Accumulated other comprehensive income 2,559,500 -
Retained earnings (deficit) (208,009) (4,852,162)
Common stock to be issued 200,000 2,075,000
----------- -----------
Total stockholders' equity 13,330,307 7,658,525
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $19,430,176 $14,985,700
=========== ===========
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See Notes to Consolidated Financial Statements
2
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ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(unaudited)
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2000 1999
Net Sales $8,147,763 $1,822,375
Cost of sales 4,496,803 856,609
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Gross profit 3,650,960 965,766
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Operating expenses:
Salaries 1,508,449 291,866
Professional fees 273,214 135,878
Depreciation and amortization 75,387 22,557
Amortization of goodwill 444,606 148,860
Marketing 183,413 14,684
Rent 303,966 34,356
Interest 420,395 66,782
Other 928,414 329,044
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Total operating expenses 4,137,844 1,044,027
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Operating (loss) (486,884) (78,261)
Other income 6,849,139 7,609
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Income (loss) before income tax expense 6,362,255 (70,652)
Income tax expense 1,597,431 5,400
---------- ----------
Net income (loss) 4,764,824 (76,052)
Preferred stock dividends (120,671) (52,625)
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Net income (loss) attributable to common 4,644,153 (128,677)
stockholders ========== ==========
Income (loss) per share-basic and $ 0.86 $ (0.03)
diluted ========== ==========
Weighted average number of shares outstanding 5,409,553 4,135,000
========== ==========
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See Notes to Consolidated Financial Statements
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ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(unaudited)
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2000 1999
Net Sales $4,532,556 $1,038,235
Cost of sales 2,493,978 526,888
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Gross profit 2,038,578 511,347
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Operating expenses:
Salaries 757,551 148,289
Professional fees 128,379 88,810
Depreciation and amortization 40,291 10,918
Amortization of goodwill 222,303 74,430
Marketing 146,422 (13,788)
Rent 151,336 17,502
Interest 207,470 54,282
Other 529,592 234,951
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Total operating expenses 2,183,344 615,394
---------- ----------
Operating loss (144,766) (104,047)
Other income 64,493 6,938
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Loss before income tax expense (80,273) (97,109)
Income tax expense (14,740) 2,550
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Net loss (65,533) (99,659)
Preferred stock dividends (53,287) (52,625)
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Net loss attributable to common stockholders (118,820) (152,284)
========== ==========
Loss per share-basic and diluted $ (0.02) $ (0.04)
========== ==========
Weighted average number of shares outstanding 5,935,797 4,226,667
========== ==========
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See Notes to Consolidated Financial Statements
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ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(unaudited)
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2000 1999
Cash flows from operating activities:
Net Income (loss) $ 4,764,824 $ (76,052)
----------- ----------
Adjustments to reconcile net income or (loss) to net cash
provided by operating activities:
Depreciation and amortization 75,387 22,556
Amortization of goodwill 444,606 148,861
Non-cash interest expense 119,766 19,961
Gain on sale of investment (6,747,000) -
(Increase) decrease in accounts receivable (682,130) 48,436
(Increase) in prepaid expenses and other current assets (44,592) (24,831)
(Increase) decrease in inventories (139,134) 24,613
Increase in accounts payable and accrued expenses 111,346 176,550
Increase in income taxes payable 609,996 3,102
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Total adjustments (6,251,755) 419,248
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Net cash provided by (used in) operating activities (1,486,931) 343,196
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Cash flows from investing activities:
Acquisition deposits - (800,000)
Investment in marketable securities (1,000,000)
Decrease in notes receivable 835,992 21,320
Purchase of property and equipment (47,789) -
Net proceeds on sale of investment 6,750,000 -
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Net cash provided by (used in) investing activities 6,538,203 (778,680)
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Cash flows from financing activities:
Repayment of notes payable-related parties (628,287) -
Repayment of line of credit - (98,918)
Proceeds from notes payable-subordinated 3,000,000
Net proceeds from issuance of common stock 1,876,475 925,000
Preferred stock redeemed (4,580,000) -
Dividends paid (120,671) (52,625)
Distribution - (294,224)
----------- ----------
Net cash provided by (used in) financing activities (3,452,483) 3,479,233
----------- ----------
Net increase in cash 1,598,789 3,043,749
Cash- beginning 1,833,478 177,246
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Cash- ending $ 3,432,267 $3,220,995
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Supplemental information:
Cash paid during the period for:
Interest $ 363,205 $ 15,259
=========== ==========
Income taxes $ 1,028,080 $ 2,298
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Supplemental schedule of non-cash investing and financing activities:
Fixed asset financing obligations incurred $ 31,566 $ -
=========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
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ENVIRO-CLEAN OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000.
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-KSB for the year ended December 31, 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 six months ended June 30, 2000 and 1999,
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.
Preferred stock dividends in arrears, which represent dividends declared,
but unpaid at June 30, 2000 totals $1,313. Preferred stock dividends declared
for six months totals $120,671. As of July 1, 2000, all dividends declared
through June 30, 2000 have been paid in full.
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Earnings per share ("EPS") is computed by dividing net income or loss by
the weighted-average number of common shares outstanding for the year. Both
basic and diluted net income per share are the same because the effect of the
Company's outstanding warrants and options is 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. Investment in Affiliate
The Company and the members of the Company's Board of Directors have
invested in b2bstores.com, Inc., a California based company which designs
Internet-based electronic commerce programs. b2bstores.com, Inc. has assisted
the Company to develop the Company's eCommerce website. The Company has entered
into an agreement with b2bstores.com, Inc. in which b2bstores.com, Inc. 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 b2bstores.com, Inc. During the 6 months ended June 30, 2000, the
Company was repaid working capital loans to b2bstores.com, Inc. totaling
$1,399,836 plus interest equal to 8% per annum.
During March 2000, the Company sold one half of its investment, 1,000,000
shares of b2bstores.com, Inc., netting $6,750,000 in proceeds through a private
sale to ZERO.NET, Inc.
During the quarter ended March 31, 2000, the Company and the sellers of
June Supply, adjusted the purchase price of June by $300,000. As a result, both
the notes payable to the sellers and the corresponding goodwill were reduced by
$300,000 during the quarter.
On May 31, 2000, the Company purchased 300,000 shares of Class B common
stock, par value $0.001 from equip2move.com ("equip2move") for $75,000, 70,000
shares of b2bstores.com common stock held by the Company and an agreement to
fund equip2move with additional capital for its web site creation.
4. Stockholders' Equity
In January 2000, the Company began a new private placement of a maximum of
137,500 Units at $8.00 per unit, each consisting of two shares of Common Stock
and one common stock purchase warrant. The warrants have an exercise price of
$4.25 and are exercisable for a three year period which began upon issuance. On
February 29, 2000, the Company sold an aggregate of 122,500 units to
approximately 18 accredited investors for aggregate proceeds to the Company of
$980,000. The Company closed the private placement on February 29, 2000. The
Company will use the proceeds from this offering to continue its acquisitions
program as well as for working capital purposes.
On May 30, 2000, the Company began a new private placement of a minimum of
285,000 and maximum of 1,000,000 shares of Common Stock at $3.00 per share. The
offering was designed to sell the Common Stock in exchange for cash or for the
Company's outstanding 12.75% subordinated promissory notes (the "Notes") which
were purchased in a previous offering by the Company in June 1999. On June 15,
2000, at the first closing, the Company sold an aggregate of 636,822 shares of
Common Stock to approximately 29 accredited investors. The aggregate proceeds to
the Company were $820,500 in cash and $1,090,000 worth of Notes. To avoid
issuing fractional shares, the Company issued checks in the aggregate amount of
$34 to various former Note holders who participated in the offering. A second
closing took place on June 30, 2000, when the Company sold an aggregate of
98,665 shares of Common
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Stock to approximately 8 accredited investors. The aggregate proceeds to the
Company were $24,000 in cash and $272,000 worth of Notes. To avoid issuing
fractional shares, the Company issued checks in the aggregate amount of $5 to
various former Note holders who participated in the offering. The Company
conducted this offering in order to reduce debt and will use the cash proceeds
from the offering for working capital purposes.
5. Preferred Stock
On March 16, 2000, the Company redeemed all of its outstanding shares of
Series D Preferred Stock for a total of $1,600,000 plus unpaid accrued dividends
of $29,071.04.
During March, 2000, the Company began a program to convert all of its
Series B Cumulative Convertible Preferred Stock. Under the program, the
stockholders could either convert their shares plus accrued dividends into
common shares or redeem them for cash. On April 1, 2000, a total of $480,000 was
redeemed for cash and the balance of $2,079,000 was converted into 426,195
common shares.
On April 1, 2000, with Board approval, all of the outstanding shares of
the Series A Preferred Stock, were redeemed for a total of $2,500,000, plus
unpaid accrued dividends of $25,000.
6. Business Segments
Prior to the Company's acquisition of NISSCO in January 1999, the Company
operated in one industry segment. Subsequent to the NISSCO acquisition, the
Company operated in two segments, the wholesale distribution of sanitary
maintenance products and providing buying services and group discounts to
wholesalers. Summarized financial information by business segment for the six
months ended June 30, 2000 is as follows:
Revenue:
Products $ 7,089,399
Services 1,058,364
Total Revenue $ 8,147,763
Profit from product sales $ 683,031
Profit from services 197,908
Total profit by segment 880,939
Overhead (income) expense
Amortization of goodwill 444,606
Interest expense 404,912
Professional fees 273,214
Corporate Overhead-salaries 200,000
Corporate Overhead- taxes 1,635,400
Corporate Overhead-income (6,842,017)
Net income $ 4,764,824
Interest expense:
Products $ 15,373
Services 110
Corporate Overhead 404,912
Total interest expense $ 420,395
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Depreciation and amortization:
Products $ 72,887
Services 2,500
Total depreciation and amortization $ 75,387
Total Assets:
Products $ 4,402,314
Services 572,242
Corporate Overhead 14,455,620
Total assets $19,430,176
7. Subsequent Events
On July 28, 2000, the Company entered into an Amended and Restated
Settlement Agreement (the "Settlement Agreement") with Thomas B. Haines, the
President of NISSCO/Sunline, Inc., one of the Company's subsidiaries. Pursuant
to the Settlement Agreement, the Company entered into a Stock Repurchase
Agreement with Mr. Haines, in which the Company agreed to purchase 500,000
shares of the Company's Common Stock held by Mr. Haines. On July 31, 2000, the
Company purchased 250,000 shares of the shares of Common Stock held by Mr.
Haines at a price of $2.00 per share for an aggregate amount of $500,000. In
addition, under the terms of the Settlement Agreement, the Company is obligated
to purchase or use its best efforts to assist Mr. Haines in the sale of his
remaining 250,000 shares of Common Stock by August 15, 2000.
On July 31, 2000, the Company entered into an Amendment to the
Shareholders' Agreement (the "Amendment") between the Company, equip2move and
various shareholders of equip2move in which the Company agreed to loan
equip2move $1,000,000, such sum to be repaid as equip2move raises additional
capital. If sufficient capital is not raised by certain timelines as presented
in the Amendment, then the balance of the loan will be converted into equity.
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. The Company has
obtained much of the capital needed for fiscal year 2000 through the private
sale in March 2000 of 1,000,000 of its shares of b2bstores.com, Inc for $7.00
per share which netted $6,750,000 in proceeds.
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These net proceeds will also be utilized in liquidating some of the long-term
debt, enabling the Company to drastically reduce the cost related to that debt.
The aforementioned transactions should satisfy the Company's cash
requirements for the fiscal year, including acquisitions and working capital.
The Company has no material research and development expenditures nor does
it anticipate that it will have any such expenditures in the next twelve months.
The Company's additions to plant and equipment will be incident to the
acquisitions that have been previously discussed.
Results of Operations
Results of operations for the six-month period ended June 30, 2000 and
1999:
The net sales increased $6,325,388 for the six-month period ended June 30,
2000 ("2000") as compared to the six-month period ended June 30, 1999 ("1999")
from $1,822,375 to $8,147,763. This increase is attributable to the operations
of three acquired companies being consolidated with the Company in 2000.
Cleaning Ideas and Superior were acquired in August 1999, while June Supply was
acquired effective October 1999.
The gross profit percentage decreased from 53% for 1999 to 45% for 2000.
This decrease is mostly attributable to the inclusion of the new acquisitions in
2000 and the emergence of much stronger competition in 2000, therefore realizing
a lower mark-up on the sale of product.
Operating expenses increased from $1,044,027 for 1999 to $4,137,844 for
2000, approximately 296%. The majority of this increase, approximately
$3,094,000, was due to the inclusion of Cleaning Ideas, Superior and June in
2000. Additionally, amortization of goodwill was recorded on the acquisitions of
approximately $444,600 during 2000 and $149,000 during 1999. Kandel & Son's and
NISSCO's expenses were comparable between 2000 and 1999.
The Company had net income in 2000 of $4,764,824, as compared to a net loss
of $76,052 in 1999.
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 six-month period ended June 30, 2000, the Company
issued a total of 526,500 shares of Common Stock for $1,824,500. In addition, as
of March 14, 2000, the Company sold 1,000,000 shares of its restricted stock in
b2bstores.com, Inc for net proceeds of $6,750,000. The Company also received
proceeds from the liquidation of its note receivable to b2bstores.com, Inc for
net proceeds of approximately $836,000. The Company's only significant use of
cash during the six months was the balance of cash paid for the redemption of
the Series A, B and D Preferred Stock and a $1,000,000 estimated federal income
tax payment, due to the gain on the sale of the b2bstores.com stock.
For the six-month period ended June 30, 2000, the Company's cash flows from
operations was negative $1,486,931, as a result of net income of $4,764,824 and
adjustments to arrive at cash provided by operating activities of depreciation
and amortization and non-cash interest of $639,759, an increase in accounts
payable and income taxes payable of $721,342, offset by a gain on sale of
b2bstores.com, Inc, of
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$6,747,000, an increase in accounts receivable of $682,130, an increase in
inventory of $139,134 and an increase in prepaid expenses and other assets of
$44,592.
In January 2000, the Company began a new private placement of a maximum of
137,500 units at $8.00 per unit, consisting of two shares of common stock and
one common stock purchase warrant. The Company closed the new private placement
as of February 29, 2000 at which time it had sold 122,500 units to approximately
18 accredited investors for gross aggregate proceeds of $980,000.
In June, 2000, the Company began a new private placement of a minimum of
285,000 and a maximum of 1,000,000 shares of common stock. The Company had a
final closing on July 20, 2000 and sold an aggregate of 735,487 shares of common
stock in exchange for proceeds of $2,206,461 in cash and Notes.
The Company expects its capital requirements to increase for the remainder
of 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.
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 May 30, 2000, the Company began a new private placement of a minimum of
285,000 and maximum of 1,000,000 shares of Common Stock at $3.00 per share. The
offering was designed to sell the Common Stock in exchange for cash or for the
Company's outstanding 12.75% subordinated promissory notes (the "Notes") which
were purchased in a previous offering by the Company in June 1999. On June 15,
2000, at the first closing, the Company sold an aggregate of 636,822 shares of
Common Stock to approximately 29 accredited investors. The aggregate proceeds to
the Company were $820,500 in cash and $1,090,000 worth of Notes. To avoid
issuing fractional shares, the Company issued checks in the aggregate amount of
$34 to various former Note holders who participated in the offering. A second
closing took place on June 30, 2000, when the Company sold an aggregate of
98,665 shares of Common Stock to approximately 8 accredited investors. The
aggregate proceeds to the Company were $24,000 in cash and $272,000 worth of
Notes. To avoid issuing fractional shares, the Company issued checks in the
aggregate amount of $5 to various former Note holders who participated in the
offering. The offering was made in reliance upon the exemption from registration
provided by Rule 506 of Regulation D. The Company closed the private placement
on July 20, 2000. There were no additional sales between the second and final
closing. The Company conducted this offering to relieve some of the Company's
outstanding debt represented by the Notes and will use the cash proceeds from
the offering for working capital purposes.
The sale of securities in this transactions was made pursuant to
subscription agreements and investor questionnaire containing representations
and warranties, and eliciting information intended to enable the Company to
establish the facts and circumstances entitling the Company to rely upon the
exemptions from the registration requirements of the Securities Act under Rule
506 of Regulation D.
In addition, the Rule 506 offering did not involve general solicitation or
advertising and all of the certificates issued bore a restrictive legend as
described in the subscription agreements.
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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.
ITEM 4. Submission of Matters to a Vote of Security Holders
An annual meeting of shareholders of the Company was held on June 14, 2000.
Richard Kandel, Randall K. Davis, Steven Etra, Gary C. Granoff and Mark A. Rice
were elected as directors of the Company, each to hold office until the next
annual meeting of shareholders or until his successor has been elected and
qualified, subject to earlier resignation or removal. Additionally, the
shareholders approved the Enviro-Clean of America, Inc. 2000 Employee Stock
Incentive Plan and ratified the appointment of Goldstein, Golub Kessler L.L.P.
as independent certified public accountants for the 2000 fiscal year. The
results of the voting at the annual shareholders meeting held on June 14, 2000
were as follows:
Proposal No. 1
(Election of Directors)
Company Nominee For Against Withheld
---------------- --- ------- --------
Richard Kandel 3,974,018 - 100
Randall K. Davis 3,974,018 - 100
Steven Etra 3,974,018 - 100
Gary C. Granoff 3,974,018 - 100
Mark A. Rice 3,974,018 - 100
Proposal No. 2
(Approval of Enviro-Clean of America, Inc. 2000 Employee Stock Incentive Plan)
For Against Abstain Non-Votes
3,945,318 24,600 4,200 -
Proposal No. 3
(Ratification of Goldstein, Golub Kessler L.L.P. as independent certified public
accountants)
For Against Abstain Non-Votes
3,966,743 3,175 4,200 -
ITEM 5. Other Information and Subsequent Events
On July 28, 2000, the Company entered into an Amended and Restated
Settlement Agreement (the "Settlement Agreement") with Thomas B. Haines, the
President of NISSCO/Sunline, Inc., one of the Company's subsidiaries. Pursuant
to the Settlement Agreement, the Company entered into a Stock Repurchase
Agreement with Mr. Haines, in which the Company agreed to purchase 500,000
shares of the Company's Common Stock held by Mr. Haines. On July 31, 2000, the
Company purchased 250,000 shares of the shares of Common Stock held by Mr.
Haines at a price of $2.00 per share for an aggregate amount of $500,000. In
addition, under the terms of the Settlement Agreement, the Company is obligated
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to purchase or use its best efforts to assist Mr. Haines in the sale of his
remaining 250,000 shares of Common Stock by August 15, 2000.
On May 31, 2000, the Company purchased 300,000 shares of Class B common
stock, par value $0.001 from equip2move.com ("equip2move") for $75,000, 70,000
shares of b2bstores.com common stock held by the Company and an agreement to
fund equip2move with additional capital for its web site creation. On July 31,
2000, the Company entered into an Amendment to the Shareholders' Agreement (the
"Amendment") between the Company, equip2move and various shareholders of
equip2move in which the Company agreed to loan equip2move $1,000,000, such sum
to be repaid as equip2move raises additional capital. If sufficient capital is
not raised by certain timelines as presented in the Amendment, then the balance
of the loan will be converted into equity.
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-QSB.
Where so, 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
(Incorporated by reference to the Company's Form 10-SB filed with
the SEC on June 18, 1999).
2(ii) Stock Purchase Agreement among Enviro-Clean of America, Inc.
Enviroacq II Co. and NISSCO/Sunline, Inc. dated as of January 1,
1999 (Incorporated by reference to the Company's Form 10-SB filed
with the SEC on June 18, 1999).
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
(Incorporated by reference to the Company's Report on Form 8-K
filed with the SEC on September 3, 1999).
2(iv) Stock Purchase Agreement among Enviro-Clean of America, Inc., SCS
Acquisition Corp., Superior Chemical & Supply, Inc. and Stephen
Hayes (Incorporated by reference to the Company's Report on Form
8-K filed with the SEC on September 3, 1999).
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 (Incorporated by
reference to the Company's Report on Form 8-K filed with the SEC
on November 10, 1999).
3(i) Articles of Incorporation of the Company (Incorporated by
reference to the Company's Form 10-SB filed with the SEC on June
18, 1999).
3(ii) By-Laws of the Company (Incorporated by reference to the
Company's Form 10-SB filed with the SEC on June 18, 1999).
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3(iii) Certificate of Designation for the Company's Series A Stock
(Incorporated by reference to the Company's Form 10-SB filed with
the SEC on June 18, 1999).
3(iv) Certificate of Designation for the Company's Series E Stock
(Incorporated by reference to the Company's Form 10-SB filed with
the SEC on June 18, 1999).
3(v) Certificate of Designation for the Company's Series D Preferred
Stock (Incorporated by reference to the Company's Report on Form
8-K filed with the SEC on September 3, 1999).
3(vi) Certificate of Amendment to the Certificate of Designation for
the Company's Series A Stock (Incorporated by reference to the
Company's Report on Form 10-SB/A filed with the SEC on October
22, 1999).
3(vii) Certificate of Designation for the Company's Series B Stock.
(Incorporated by reference to the Company's Report on Form 10-
SB/A filed with the SEC on December 16, 1999).
4(i) Form of 12.75% Subordinate Note (Incorporated by reference to the
Company's Report on Form 10-SB/A filed with the SEC on October
22, 1999).
4(ii) Form of the Warrant Certificate (Incorporated by reference to the
Company's Report on Form 10-SB/A filed with the SEC on October
22, 1999).
10(i) Subscription Agreement between Enviro-Clean of America, Inc. and
equip2move.com, Corporation, dated May 31, 2000. *
10(ii) Stockholders' Agreement between Enviro-Clean of America, Inc.,
equip2move.com, Corporation, and various shareholders of
equip2move.com Corporation, dated May 31, 2000.*
10(iii) Amendment to the Shareholders' Agreement between Enviro-Clean of
America, Inc., equip2move.com, Corporation, and various
shareholders of equip2move.com Corporation, dated July 31, 2000.*
10(iv) Promissory Note between Enviro-Clean of America, Inc. and
equip2move.com, Corporation, dated July 31, 2000.*
10(v) Amended and Restated Settlement Agreement between Enviro-Clean of
America, Inc. and Thomas B. Haines, dated July 28, 2000. *
10(vi) Stock Repurchase Agreement between Enviro-Clean of America, Inc.
and Thomas B. Haines, dated July 28, 2000. *
27(i) Financial data schedule.*
* Filed Herewith.
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(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the quarter.
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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.
August 11, 2000 Enviro-Clean of America, Inc.
By: /s/ Randall K. Davis
-------------------------------------------
Randall K. Davis, President
/s/ Jan Pasternack
-------------------------------------------
Jan Pasternack, Chief Financial Officer
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