<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of earliest event reported: October 27, 1999
-------------------
ENVIRO-CLEAN OF AMERICA, INC.
-----------------------------
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 0-26433 88-0386415
---------------------------- ---------------- -----------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
211 Park Avenue, Hicksville, NY 11801
-------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 931-4455
--------------
N/A
---
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Acquisition of June-Supply-San Antonio Inc.
- -------------------------------------------
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").
This Form 8-K/A amends Item 7 of the current report on Form 8-K filed by
the Company on November 10, 1999, to include financial statements that were not
available at the time of the filing of the initial report.
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
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.
<PAGE>
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.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
<PAGE>
JUNE SUPPLY - SAN ANTONIO, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1999
DECEMBER 31, 1998 AND 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors.................................. 1
Consolidated Balance Sheets..................................... 2
Consolidated Statements of Income............................... 3
Consolidated Statements of Statements of Shareholders' Equity... 4
Consolidated Statements of Cash Flows........................... 5
Notes to the Consolidated Financial Statements.................. 6-10
</TABLE>
<PAGE>
FISHER, HERBST & KEMBLE, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
4242 MEDICAL DRIVE, SUITE 500
SAN ANTONIO, TEXAS 78229
(210) 614-2284 FAX (210) 614-2285
REPORT OF INDEPENDENT AUDITORS
Board of Directors
June Supply - San Antonio, Inc.
San Antonio, Texas
We have audited the accompanying consolidated balance sheets of June Supply -
San Antonio, Inc. as of August 31, 1999, December 31, 1998 and 1997, and the
related statements of income, shareholders' equity and cash flows for the eight
months ended August 31, 1999 and the years ended December 31, 1998 and 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits based on generally accepted auditing standards. These
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of June Supply - San Antonio, Inc.
as of August 31, 1999, December 31, 1998 and 1997, and the results of its
operations and its cash flows for the eight months ended August 31, 1999 and the
years ended December 31, 1998 and 1997, in conformity with generally accepted
accounting principles.
/s/ Fisher, Herbst & Kemble, P.C.
Fisher, Herbst & Kemble, P.C.
San Antonio, TX
November 4, 1999
1
<PAGE>
JUNE SUPPLY - SAN ANTONIO, INC.
CONSOLIDATED BALANCE SHEETS
===============================================================================
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash $ 728,376 $ 387,456 $ 312,010
Trade accounts receivable 1,044,114 882,485 817,241
Less: allowance for bad debt 206,718 212,584 151,696
---------- ---------- ----------
Trade accounts receivable, net 837,396 669,901 665,545
---------- ---------- ----------
Inventory 998,627 979,386 789,623
Prepaid expenses 6,070 47,456 2,200
Other current assets 14 212 28,287
---------- ---------- ----------
Total current assets 2,570,483 2,084,411 1,797,665
---------- ---------- ----------
Furniture and Equipment 315,171 315,171 242,013
Less: accumulated depreciation 191,229 159,371 135,034
---------- ---------- ----------
Total furniture and equipment, net 123,942 155,800 106,979
---------- ---------- ----------
Other assets 8,464 8,265 -
---------- ---------- ----------
Total assets $2,702,889 $2,248,476 $1,904,644
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 282,876 $ 211,095 $ 207,969
Accrued expenses 121,677 72,746 90,507
Taxes payable 272,338 148,638 32,225
Current portion of long-term debt 20,365 12,196 6,853
---------- ---------- ----------
Total current liabilities 697,256 444,675 337,554
---------- ---------- ----------
Long-term debt, less current portion - 15,658 8,724
Other - - 12,022
---------- ---------- ----------
Total liabilities 697,256 460,333 358,300
---------- ---------- ----------
Shareholders' Equity
Common stock, $1 par value per share, 500,000
shares authorized, 1,000 issued and outstanding 1,000 1,000 1,000
Additional paid-in capital 16,723 16,723 16,723
Retained earnings 1,987,910 1,770,420 1,528,621
---------- ---------- ----------
Total shareholders' equity 2,005,633 1,788,143 1,546,344
---------- ---------- ----------
Total liabilities and shareholders' equity $2,702,889 $2,248,476 $1,904,644
========== ========== ==========
</TABLE>
See Report of Independent Auditors and notes to the consolidated financial
statements.
2
<PAGE>
JUNE SUPPLY - SAN ANTONIO, INC.
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
<TABLE>
<CAPTION>
EIGHT MONTHS YEARS
ENDED ENDED
AUGUST 31, DECEMBER 31,
1999 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
NET REVENUE
Sales $4,632,189 $7,951,644 $5,625,816
Cost of goods sold 2,972,571 5,475,051 3,506,277
---------- ---------- ----------
Gross profit 1,659,618 2,476,593 2,119,539
---------- ---------- ----------
OTHER EXPENSES
Salaries and benefits 862,681 1,625,344 1,453,809
Lease expense 100,141 151,812 118,637
Insurance 20,243 33,636 18,111
Supplies and postage 9,835 29,463 37,844
Other 322,428 268,411 314,131
---------- ---------- ----------
Total other expenses 1,315,328 2,108,666 1,942,532
---------- ---------- ----------
Net income before taxes 344,290 367,927 177,007
Income taxes 126,800 122,128 60,225
---------- ---------- ----------
NET INCOME $ 217,490 $ 245,799 $ 116,782
========== ========== ==========
</TABLE>
See Report of Independent Auditors and notes to the consolidated financial
statements
3
<PAGE>
JUNE SUPPLY - SAN ANTONIO, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
----- ------- -------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 1,000 $ 16,723 $ 1,415,839 $ 1,433,562
Net income - - 116,782 116,782
Dividends - - 4,000 4,000
------- ---------- ----------- -----------
Balance at December 31, 1997 1,000 16,723 1,528,621 1,546,344
Net income - - 245,799 245,799
Dividends - - 4,000 4,000
------- ---------- ----------- -----------
Balance at December 31, 1998 1,000 16,723 1,770,420 1,788,143
Net income - - 217,490 217,490
------- ---------- ----------- -----------
Balance at August 31, 1999 $ 1,000 $ 16,723 $ 1,987,910 $ 2,005,633
======= ========== =========== ===========
</TABLE>
See Report of Independent Auditors and notes to the consolidated fianncial
statements.
4
<PAGE>
JUNE SUPPLY - SAN ANTONIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Eight Months Years
Ended Ended
August 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 217,490 $ 245,799 $ 116,782
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 31,858 45,879 38,735
Loss on the sale of assets - 365 -
Increase in trade accounts receivable (167,495) (4,356) (132,099)
Decrease (increase) in inventory (19,241) (189,763) 157,738
Decrease (increase) in prepaid expenses 41,386 (45,256) (2,200)
Decrease (increase) in other assets (1) 19,810 17,263
Increase (decrease) in accounts payable and
accrued expenses 244,412 89,756 (33,876)
--------- --------- ---------
Net cash provided by operating activities 348,409 162,234 162,343
--------- --------- ---------
INVESTING ACTIVITIES
Purchase of furniture, fixtures, and vehicles - (67,065) (29,870)
--------- --------- ---------
Net cash used by investing activities - (67,065) (29,870)
--------- --------- ---------
FINANCING ACTIVITIES
Cash payments on long-term debt (7,489) (15,723) (7,081)
Cash dividends paid - (4,000) (4,000)
--------- --------- ---------
Net cash used by financing activities (7,489) (19,723) (11,081)
--------- --------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 340,920 75,446 121,392
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 387,456 312,010 190,618
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 728,376 $ 387,456 $ 312,010
========= ========= =========
</TABLE>
See Report of Independent Auditors and notes to the consolidated fianncial
statements.
5
<PAGE>
JUNE SUPPLY - SAN ANTONIO, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1999 and December 31, 1998 and 1997
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accounting and reporting policies of June
---------------------
Supply - San Antonio, Inc. conform to generally accepted accounting
principles and to general practices.
June Supply - San Antonio, Inc. is in the wholesale and retail sale of
janitorial, plumbing, electrical and swimming pool products to apartment
communities and business entities. The Company operates as June Supply -San
Antonio, Inc. and June Supply - Dallas, Inc. collectively referred to as
the Company. June Supply - San Antonio serves Bexar County and South Texas.
June Supply - Dallas, Inc. is a wholly-owned subsidiary of June Supply -San
Antonio, Inc. and serves the greater Dallas metro-plex.
Basis of Consolidation - All significant intercompany transactions between
----------------------
June Supply - San Antonio, Inc. and June Supply - Dallas, Inc. have been
eliminated in the consolidation.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as
of the dates of the balance sheets and income and expenses for the periods.
Actual results could differ significantly from those estimates. Material
estimates that are particularly susceptible to significant change in the
near-term relate to the determination of the allowance for bad debt and
inventory valuations.
Results of the Company through August 31, 1999 may not be representative of
results on a calendar basis due to variance of sales from month to month.
Cash and Cash Equivalents - The Company considers all bank deposits and
-------------------------
short-term securities with a maturity of three months or less to be cash
equivalents.
Equipment - Equipment is stated at cost less accumulated depreciation based
---------
on the estimated useful lives of the assets, as follows:
Furniture and equipment 3-10 years
Vehicles 3-5 years
Depreciation is computed using the straight-line method for financial
reporting, and the declining-balance method for federal income tax
purposes. When an asset is sold, retired, or otherwise disposed of, cost
and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in current operations.
Repairs and maintenance are charged to expense as incurred and expenditures
for renewals and betterments are capitalized. Upon retirement or
replacement, the cost of capitalized assets and the related accumulated
depreciation is eliminated with the resulting gain or loss recognized.
6
<PAGE>
JUNE SUPPLY - SAN ANTONIO, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1999 and December 31, 1998 and 1997
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Allowance for Bad Debt - The Company establishes an allowance for bad debt
----------------------
for all accounts receivable greater than 120 days past due. Management does
not anticipate any significant amounts of uncollectible accounts receivable
for accounts less than 120 days past due.
Income Taxes - The Company accounts for income taxes under the asset and
------------
liability method which requires that deferred income taxes be recognized
for the tax consequences of temporary differences (differences between the
financial statement carrying amount and the tax bases of assets and
liabilities) at the enacted statutory tax rates applicable to the future
years in which those differences are expected to reverse. The effect on
deferred tax assets and liabilities of a change in tax rate is recognized
in income in the period that includes enactment date.
Inventory - Inventory consists of merchandise held for resale and is valued
---------
at the lower of cost or market. Cost is determined on the first-in first-
out method. Cost of goods sold is accounted for based on the periodic
method.
Revenue Recognition - Substantially all revenue is recognized when
-------------------
merchandise is shipped to customers of the Company.
Financial Instruments with Off-balance-Sheet Risk - Financial instruments
-------------------------------------------------
that potentially subject the Company to concentration of credit risk
consists primarily of demand deposit accounts with financial institutions
that exceed federally insured limits.
2. INCOME TAXES
Federal income tax consisted of the following for the eight months ended
August 31, 1999 and years ended December 31, 1998 and 1997:
1999 1998 1997
---- ---- ----
Federal income taxes current $ 125,587 $ 123,279 $ 57,176
Deferred taxes (credit) relating to:
Depreciation and other 1,213 (1,151) 3,049
--------- --------- --------
Total income tax expense $ 126,800 $ 122,128 $ 60,225
========= ========= ========
7
<PAGE>
JUNE SUPPLY - SAN ANTONIO, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1999 and December 31, 1998 and 1997
- --------------------------------------------------------------------------------
2. INCOME TAXES (continued)
Federal income tax for financial reporting purposes differs from the amount
computed by applying the statutory income tax rate of 34% to income before
federal income taxes as follows:
1999 1998 1997
---- ---- ----
Tax expense at statutory rate $ 117,059 $ 125,095 $ 60,182
Increases (decreases) from the effects of:
Other 9,741 (2,967) 43
--------- --------- -------
Total income tax expense $ 126,800 $ 122.128 $ 60,225
========= ========= ========
As of August 31, 1999 and December 31, 1998 and 1997, the Company had
deferred tax assets and liabilities as follows:
1999 1998 1997
------ ------ ------
Deferred Tax assets:
Charitable tax carryforward $ - $ - $ 1,851
Fixed asset depreciation 7,251 8,464 -
--------- --------- --------
Total gross deferred tax assets 7,251 8,464 1,851
--------- --------- --------
Deferred tax Liabilities:
Fixed asset depreciation - - 13,673
--------- --------- --------
Total gross deferred tax liabilities - - 13,673
--------- --------- --------
Net deferred tax asset (liability) $ 7,251 $ 8,464 $(11,822)
========= ========= ========
No valuation allowance is considered necessary as net deferred tax assets
are estimated more likely than not to be realized subsequent to August 31,
1999. The net deferred tax asset is included in other assets and the net
deferred tax liability is included in other liabilities. Income taxes paid
totaled $18,000, $36,000 and none in 1999, 1998 and 1997, respectively.
Interest paid in 1997 as a result of prior year tax audits totaled $10,924.
8
<PAGE>
JUNE SUPPLY - SAN ANTONIO, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1999 and December 31, 1998 and 1997
- --------------------------------------------------------------------------------
3. PROFIT SHARING PLAN AND TRUST
Effective January 1, 1986, the Company adopted an Internal Revenue Code
401(k) profit sharing plan and trust (the Plan). The Plan allows qualified
employees to contribute up to 10% of their pre-tax income and not less than
2%. The Company, at its discretion, may contribute to the Plan on behalf of
the employees' additional amounts not to exceed 15% of the qualified
employees' compensation. Benefits of the plan vest to the employee after
two years of service at 20% per year over five years. The Company made
profit sharing contributions to the Plan totaling $0, $44,558, and $30,000
for the eight months ended August 31, 1999 and the years ended December 31,
1998 and 1997, respectively.
4. LEASES
Minimum future rental expense related to leased space on noncancelable
operating lease agreements are as follows:
1999 - 4 months $ 13,857
2000 41,571
2001 10,299
Lease expense paid to owners of the Company totaled $72,320, $107,860 and
$99,300 for the eight months ended August 31, 1999 and the years ended
December 31, 1998 and 1997, respectively. The related party leases have
been on a month to month basis.
Subsequent to August 31, 1999 and effective October 31, 1999, two five-year
leases were signed by the Company with related parties to rent warehouse
and office space in San Antonio, Texas for a total of $9,040 a month.
5. CURRENT DEBT
Current debt consists of the following as of August 31, 1999:
<TABLE>
<CAPTION>
Monthly Interest Payable
Collateral Payment Rate Through 1999
---------- ------- ---- ------- ----
<S> <C> <C> <C> <C>
Truck $ 884 8.50% 2001 $ 14,860
Truck $ 452 9.25% 2000 5,505
--------
20,365
Less current portion of long-term debt (20,365)
--------
Long-term debt, less current portion $ -
========
</TABLE>
9
<PAGE>
JUNE SUPPLY - SAN ANTONI
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1999 and December 31, 1998 and 1997
- --------------------------------------------------------------------------------
5. CURRENT DEBT (continued)
Interest paid on debt totaled $1,902, $1,324 and $1,988 in 1999, 1998 and
1997, respectively. All debt is classified as current as management repaid
all debt in full subsequent to August 31, 1999.
6. NON-CASH TRANSACTION
The Company purchased and financed a truck in 1998 totaling $28,000 during
the year ended December 31, 1998. A truck was also traded-in for the
purchase of the new vehicle.
7. YEAR 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The
year 2000 problem is pervasive and complex as virtually every computer
operation will be affected in some way by the rollover of the two digit
year value to 00. The issue is whether computer systems will properly
recognize date sensitive information when the year changes to 2000. Systems
that do not properly recognize such information could generate erroneous
data or cause a system to fail.
The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for the year 2000 compliance.
All reprogramming and testing of critical systems will be completed by
December 31, 1999. The results of the testing will be evaluated and
necessary modifications made. Corrections of systems as a result of these
tests may be necessary. If such modifications and corrections are not
completed timely, the year 2000 problem may have a material impact on the
operations of the Company. Management is developing and testing contingency
plans for the possibility of computer systems not working in the year 2000.
8. SUBSEQUENT EVENTS
Effective on August 31, 1999, the Company was acquired by Enviro-Clean of
America, Inc. in consideration for $2,264,951 in cash, $1,175,000 in a note
payable over three years, and 100,000 shares of common stock of Enviro-
Clean of America, Inc. There are additional cash payments through the year
2004 contingent upon the Company reaching certain goals established in the
purchase agreement.
Interest on the note is based on Chase Manhattan Bank, N. A. prime rate and
is payable quarterly. Principal is payable in twelve equal quarterly
payments. The note payable is secured by common stock of the Company.
10
<PAGE>
(b) Pro Forma Consolidated Financial Statements for the year ended December 31,
1998 and for the period ended September 30, 1999.
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma consolidated balance sheet has been prepared
by combining the consolidated balance sheets of Enviro-Clean of America, Inc. &
Subsidiaries (the Company) and June Supply-San Antonio, Inc. & Subsidiary as of
September 30, 1999. The Acquisition is accounted for using the purchase method
of accounting as if the Acquisition had occurred on September 30, 1999.
The following unaudited pro forma consolidated statements of operations have
been prepared by combining the consolidated statements of operations of the
Company for the fiscal year ended December 31, 1998 and for the nine months
ended September 30, 1999. The Acquisition is accounted for using the purchase
method of accounting as if the Acquisition had occurred on January 1, 1998. 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 operations.
The pro forma consolidated financial statements do not purport to represent what
the Company's consolidated financial position or results of operations actually
would have been had the Acquisition been completed on the dates for which the
Acquisition is being given effect, nor is it necessarily indicative of future
financial position or operating results of the Company. The pro forma
consolidated financial statements 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 financial statements do not take into account any
modifications to the Acquisition which may be required to address any gain-out
contingencies or future redemption of the Company's stock issued to selling
shareholders.
Effective September 1, 1999, the Company acquired June Supply-San Antonio, Inc.
and its wholly owned subsidiary, June Supply-Dallas, Inc. Assets acquired and
liabilities assumed, at fair value include:
11
<PAGE>
Cash $ 728,376
Accounts receivable 837,396
Inventory 998,627
Property and equipment 123,942
Other assets 14,548
Accounts payable (404,553)
Taxes payable (72,338)
Loans payable (0,365)
----------
Net Assets 2,005,633
Goodwill 1,934,318
----------
Total consideration $3,939,951
----------
Cash $2,264,951
Notes $1,175,000
Common stock $ 500,000
12
<PAGE>
Enviro-Clean of America, Inc. and Subsidiaries
Proforma Consolidated Balance Sheet
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Enviro-Clean June Supply - Proforma
of America, Inc San Antonio, Inc. Proforma Combined
Assets & Subsidiaries & Subsidiary Adjustments Balance Sheet
<S> <C> <C> <C> <C>
Current Assets
Cash & Cash Equivalents $ 2,174,553 $ 691,346 $(2,264,951) $ 600,948
Accounts Receivable 935,151 757,452 - 1,692,603
Merchandise Inventory 689,781 924,812 - 1,614,593
Loan receivable-affiliate 179,836 - - 179,836
Other 67,542 14 - 67,556
----------- ---------- ----------- -----------
Total Current Assets 4,046,863 2,373,624 (2,264,951) 4,155,536
----------- ---------- ----------- -----------
Property, Plant & Equipment- Net 264,093 119,920 - 384,013
----------- ---------- ----------- -----------
Other Assets
Goodwill 6,963,175 - 1,937,832 8,901,007
Other 24,374 8,464 - 32,838
----------- ---------- ----------- -----------
6,987,549 8,464 1,937,832 8,933,845
----------- ---------- ----------- -----------
Total Assets $11,298,505 $2,502,008 $ (327,119) $13,473,394
=========== ========== =========== ===========
Liabilities & Stockholders' Equity
Current Liabilities
Accounts Payable & Accrued Expenses $ 1,294,283 $ 480,583 $ - $ 1,774,866
Loans Payable 855,358 19,306 391,667 1,266,331
Income Taxes Payable - - - -
----------- ---------- ----------- -----------
Total Current Liabilities 2,149,641 499,889 391,667 3,041,197
----------- ---------- ----------- -----------
Long-Term Liabilities
Notes Payable - Subordinated 2,401,172 - - 2,401,172
Long-term debt, less current maturities 1,260,718 - 783,333 2,044,051
----------- ---------- ----------- -----------
3,661,890 - 783,333 4,445,223
----------- ---------- ----------- -----------
Stockholders' Equity
Preferred Stock 4,275,000 - - 4,275,000
Common Stock 4,351 1,000 (900) 4,451
Additional Paid in Capital 3,272,336 16,723 483,177 3,772,236
Retained Earnings(Deficit) (4,139,713) 1,984,396 (1,984,396) (4,139,713)
Common Stock to be Issued 2,075,000 - - 2,075,000
----------- ---------- ----------- -----------
Total Stockholders' Equity 5,486,974 2,002,119 (1,502,119) 5,986,974
----------- ---------- ----------- -----------
Total Liabilities & Stockholders' Equity $11,298,505 $2,502,008 $ (327,119) $13,473,394
=========== ========== =========== ===========
(a)
</TABLE>
(a) all adjustments relate to the assets acquired and
liabilities assumed on the acquisition of
June Supply-San Antonio, Inc. & Subsidiary
13
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998
(unaudited)
<TABLE>
<CAPTION>
ENVIRO-CLEAN JUNE SUPPLY -
OF AMERICA, INC. SAN ANTONIO, INC PROFORMA PROFORMA
& SUBSIDIARIES & SUBSIDIARY ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Net Sales $9,715,909 $7,951,644 $ - $17,667,553
Cost of sales 4,518,226 5,475,051 - 9,993,277
---------- ---------- ----------- -----------
Gross profit 5,197,683 2,476,593 - 7,674,276
---------- ---------- ----------- -----------
Operating expenses
Salaries 1,924,516 1,280,852 - 3,205,368
Professional fees 130,037 32,983 - 163,020
Rent 471,971 151,812 - 623,783
Marketing 206,150 88,857 - 295,007
Amortization of goodwill 416,077 - 193,783 (a) 609,860
Depreciation 80,636 45,879 - 126,515
Other 1,810,362 514,227 - 2,324,589
---------- ---------- ----------- -----------
5,039,749 2,114,610 193,783 7,348,142
---------- ---------- ----------- -----------
Operating earnings 157,934 361,983 (193,783) 326,134
---------- ---------- ----------- -----------
Other income (expense)
Interest expense (253,743) (2,517) (87,391) (b) (343,651)
Other income 142,139 8,461 - 150,600
---------- ---------- ----------- -----------
(111,604) 5,944 (87,391) (193,051)
---------- ---------- ----------- -----------
Earnings before income taxes 46,330 367,927 (281,174) 133,083
Income taxes 12,000 122,128 (87,300) (c) 46,828
---------- ---------- ----------- -----------
Net earnings $ 34,330 $ 245,799 $(193,874) $ 86,255
========== ========== =========== ===========
Basic earnings per common share .01 $ .02
========== ===========
Weighted-average number of
common shares outstanding 3,504,072 3,604,072
========== ===========
</TABLE>
(a) amortization of goodwill on acquisition with an estimated life of 10 years.
(b) interest expense on acquisition indebtedness.
(c) pro forma tax effect on consolidation of acquisition.
14
<PAGE>
<TABLE>
<CAPTION>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
1999 ACQUISITION
JUNE SUPPLY -
SAN ANTONIO,
ENVIRO-CLEAN INC.
OF AMERICA, INC. & SUBSIDIARY PROFORMA PROFORMA
& SUBSIDIARIES 1/1/99-8/31/99 ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Net Sales $ 7,451,459 $4,643,289 $ - $12,083,648
Cost of sales 3,890,921 2,972,571 - 6,863,492
---------- ---------- --------- -----------
Gross profit 3,560,538 1,659,618 - 5,220,156
---------- ---------- --------- -----------
Operating expenses
Salaries 1,366,708 679,820 - 2,046,528
Professional fees 414,897 85,493 - 500,390
Rent 360,227 100,141 - 460,368
Marketing 80,751 9,753 - 90,504
Amortization of goodwill 560,485 - 129,118 (a) 689,603
Depreciation 63,174 31,858 - 95,032
Other 1,154,894 399,495 - 1,554,389
---------- ---------- --------- -----------
4,001,136 1,306,560 129,118 5,436,814
---------- ---------- --------- -----------
Operating profit (loss) (440,598) 353,058 (129,118) (216,658)
---------- ---------- --------- -----------
Other income (expense)
Interest expense (380,818) (9,917) (61,728) (b) (452,463)
Interest and other income 30,113 1,149 - 31,262
------------ ---------- --------- -----------
(350,705) (8,768) (61,728) (421,201)
------------ ---------- --------- -----------
Income(loss) before income taxes (791,303) 344,290 (190,846) $ (637,859)
Income taxes 40,660 126,800 (110,800) (c) 56,660
------------ ---------- --------- -----------
Net income(loss) $ (831,963) $ 217,490 $ (80,046) $ (694,519)
============ ========== ========= ===========
Basic loss per common share $ (0.20) $ (0.16)
============ ===========
Weighted average number of
common shares outstanding 4,257,000 4,357,000
============ ===========
(a) amortization of goodwill on acquisition with an estimated life of 10 years
(b) interest expense on acquisition indebtedness
(c) pro forma tax effect on consolidation of acquisition
</TABLE>
15
<PAGE>
(c) Exhibits
The following is a list of exhibits filed as part of this Form 8-K. Where
so indicated by footnotes, exhibits, which were previously filed, are
incorporated by reference.
Exhibit Number Description of Document
2(i) Stock Purchase Agreement among Enviro-Clean of America,
Inc., June Supply Corp., June Supply-San Antonio, Inc. and
Michael Rose and Alan Stafford, effective August 31, 1999*
2(ii) Pledge and Security Agreement in favor of Michael Rose*
2(iii) Pledge and Security Agreement in favor of Alan Stafford*
2(iv) Employment Agreement with Michael Rose*
2(v) Employment Agreement with Alan Stafford*
4(i) Promissory Note to Michael Rose*
4(ii) Promissory Note to Alan Stafford*
_______________________________________
* Previously filed as an exhibit to Form 8-K, filed on behalf of the Company
with the Securities and Exchange Commission on November 10, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENVIRO-CLEAN OF AMERICA, INC.
Date: January 11, 2000 By: /s/ Randall K. Davis
______________________________
Name: Randall K. Davis
Title: President
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description of Document
2(i) Stock Purchase Agreement among Enviro-Clean of America,
Inc., June Supply Corp., June Supply-San Antonio, Inc. and
Michael Rose and Alan Stafford, effective August 31, 1999*
2(ii) Pledge and Security Agreement in favor of Michael Rose*
2(iii) Pledge and Security Agreement in favor of Alan Stafford*
2(iv) Employment Agreement with Michael Rose*
2(v) Employment Agreement with Alan Stafford*
4(i) Promissory Note to Michael Rose*
4(ii) Promissory Note to Alan Stafford *
_________________________________________
* Previously filed as an exhibit to Form 8-K, filed on behalf of the Company
with the Securities and Exchange Commission on November 10, 1999.
