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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 March 31, 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 March 12, 2000 was
5,922,195.
Transitional Small Business Disclosure Format (check one) Yes ____ No _____
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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
Condensed Consolidated Balance Sheets as of March 31,2000 (Unaudited)
and December 31, 1999 (Audited).......................................................... 2
Condensed Consolidated Statements of Income of Operations for the three months ended March
31, 2000 and 1999 (Unaudited)............................................................ 3
Condensed Consolidated Statement of Shareholders' Equity as of March 31, 2000
(Unaudited).............................................................................. 4
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 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........................................................... 12
SIGNATURE............................................................................................. 15
</TABLE>
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[LOGO OF GOLDSTEIN GOLUB KESSLER LLP]
ACCOUNTANT'S REVIEW REPORT
To the Board of Directors
Enviro-Clean of America, Inc.
We have reviewed the accompanying consolidated balance sheet of Enviro-Clean of
America, Inc. and Subsidiaries as of March 31, 2000, and the related
consolidated statements of operations, cash flows, and changes in stockholders'
equity for the three-month period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the condensed financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
/s/ GOLDSTEIN GOLUB KESSLER LLP
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
May 8, 2000
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------------- ----------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets
Cash $ 8,179,739 $ 1,833,478
Accounts receivable 1,754,277 1,547,567
Inventory 1,658,833 1,683,220
Loan receivable-related party - 835,992
Prepaid expenses and other current assets 83,171 78,160
----------- -----------
Total current assets 11,676,020 5,978,417
----------- -----------
Property, plant & equipment - at cost 1,628,941 1,602,505
Less: accumulated depreciation 1,244,952 1,246,793
----------- -----------
Net property, plant & equipment 383,989 355,712
----------- -----------
Goodwill 8,129,268 8,651,571
----------- -----------
TOTAL ASSETS $20,189,277 $14,985,700
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 1,540,205 $ 1,543,776
Income taxes payable 1,615,782 -
Notes payable-related parties 1,120,708 1,274,306
Current maturities of long-term debt 20,239 8,365
----------- -----------
Total current liabilities 4,296,934 2,826,447
----------- -----------
Long-term liabilities
Notes payable - subordinated 2,520,938 2,461,055
Notes payable-related parties 1,369,571 1,859,028
Long-term debt, less current maturities 25,336 5,645
----------- -----------
Total liabilities 8,212,779 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 $5.00;
authorized, issued and outstanding 500,000 shares 2,500,000 2,500,000
Preferred stock Series B-$.001 par value; stated value $100.00;
authorized 80,000 shares; issued and outstanding 25,590 shares 2,559,000 2,559,000
Preferred stock Series D-$.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 4,946,000 and 4,451,000 shares 4,946 4,451
Additional paid-in capital 5,376,741 3,772,236
Retained earnings (deficit) (89,189) (4,852,162)
Common stock to be issued 1,450,000 2,075,000
----------- -----------
Total stockholders' equity 11,801,498 7,658,525
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $20,189,277 $14,985,700
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ---------------
<S> <C> <C>
Net Sales $3,615,207 $ 784,140
Cost of sales 2,002,825 329,721
---------- ----------
Gross profit 1,612,382 454,419
---------- ----------
Operating expenses:
Salaries 750,898 143,577
Professional fees 144,835 47,068
Depreciation and amortization 35,096 11,639
Amortization of goodwill 222,303 74,430
Marketing 36,991 28,472
Rent 152,630 16,854
Interest 212,925 12,500
Other 398,822 94,093
---------- ----------
Total operating expenses 1,954,500 428,633
---------- ----------
Operating income (loss) (342,118) 25,786
Other income 6,784,646 671
---------- ----------
Income before income tax expense 6,442,528 26,457
Income tax expense 1,612,171 2,850
---------- ----------
Net income 4,830,357 23,607
Preferred stock dividends (67,384) -
---------- ----------
Net income attributable to common stockholders 4,762,973 23,607
========== ==========
Income per share-basic and diluted $ 0.98 $ 0.01
========== ==========
Weighted average number of shares outstanding 4,883,307 3,956,667
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Number of Number of
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Balance at January 1, 2000: 4,451,000 $4,451 845,590 $ 6,659,000
Issuance of common stock and warrants for cash 245,000 245 - -
Redemption of Series D preferred stock (320,000) (1,600,000)
Common stock issued in connection with acquisition
of Nissco/Sunline, Inc. 250,000 250 - -
Preferred stock dividends - - - -
Net income - - - -
------------------------------------------------------------
Balance at March 31, 2000 4,946,000 $4,946 525,590 $ 5,059,000
============================================================
<CAPTION>
Additional Retained
Paid-in Earnings Common Stock Stockholders'
Capital (Deficit) To Be Issued Equity
<S> <C> <C> <C> <C>
Balance at January 1, 2000: $3,772,236 $(4,852,162) $2,075,000 $ 7,658,525
Issuance of common stock and warrants for cash 979,755 - - 980,000
Redemption of Series D preferred stock (1,600,000)
Common stock issued in connection with acquisition
of Nissco/Sunline, Inc. 624,750 - (625,000) -
Preferred stock dividends - (67,384) - (67,384)
Net income - 4,830,357 - 4,830,357
-------------------------------------------------------------
Balance at March 31, 2000 $5,376,741 $ (89,189) $1,450,000 $11,801,498
=============================================================
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 4,830,357 $ 23,607
----------- ---------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 35,096 11,639
Amortization of goodwill 222,303 74,430
Non-cash interest expense 59,883 -
Gain on sale of investment (6,747,000)
(Increase) in accounts receivable (206,710) (261,037)
(Increase) decrease in prepaid expenses and other current assets (8,011) 28,938
Decrease in inventories 24,387 9,913
Increase (decrease) in accounts payable and accrued expenses (3,571) 373,831
Increase in income taxes payable 1,615,782 20,500
----------- ---------
Total adjustments (5,007,841) 258,214
----------- ---------
Net cash provided by (used in) operating activities (177,484) 281,821
----------- ---------
Cash flows from investing activities:
Investment in subsidiaries-net - (70,418)
(Increase) decrease in loans receivable 835,992 (21,320)
Purchase of property and equipment-net (31,807) -
Net proceeds on sale of investment 6,750,000 -
----------- ---------
Net cash provided by (used in) investing activities 7,554,185 (91,738)
----------- ---------
Cash flows from financing activities:
Repayment of notes payable-related parties (343,056) (198,169)
Net proceeds from issuance of common stock 980,000 175,000
Proceeds from issuance of preferred stock - 175,000
Preferred stock redeemed (1,600,000) -
Dividends paid (67,384) -
----------- ---------
Net cash provided by (used in) financing activities (1,030,440) 151,831
----------- ---------
Net increase in cash 6,346,261 341,914
Cash- beginning 1,833,478 159,988
----------- ---------
Cash- ending $ 8,179,739 $ 501,902
=========== =========
Supplemental information:
Cash paid during the period for:
Interest $ 174,975 $ 12,418
=========== =========
Income taxes $ 23,280 $ 1,149
=========== =========
Supplemental schedule of non-cash investing and financing activities:
Fixed asset financing obligations incurred $ 31,566 $ -
=========== =========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
ENVIRO-CLEAN OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 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 filed with Form 10K-SB 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 three months ended March 31, 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 March 31, 2000 totals $67,384. Preferred stock dividends declared
for three months totals $67,384. As of April 1, 2000, all dividends declared
through March 31, 2000 have been paid in full.
6
<PAGE>
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 Messrs. Kandel, Davis and Etra 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 3 months ended March, 31, 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.
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.
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 $492,000 was
redeemed for cash and the balance 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.
7
<PAGE>
6. Business Segment
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 three
months ended March 31, 2000 is as follows:
Revenue:
Products $ 3,169,974
Services 445,233
-----------
Total Revenue $ 3,615,207
-----------
Profit from product sales $ 236,062
Profit from services 99,705
-----------
Total profit by segment 335,767
Overhead (income) expense
Amortization of goodwill 222,303
Interest expense 207,654
Professional fees 144,835
Corporate Overhead-salaries 100,000
Corporate Overhead- taxes 1,612,171
Corporate Overhead-income (6,781,553)
-----------
Net income $ 4,830,357
-----------
Interest expense:
Products $ 5,271
Services -
Corporate Overhead 207,654
-----------
Total interest expense $ 212,925
-----------
Depreciation and amortization:
Products $ 33,846
Services 1,250
-----------
Total depreciation and amortization $ 35,096
-----------
Total Assets:
Products $ 3,971,642
Services 452,095
Corporate Overhead 15,765,540
-----------
Total assets $20,189,277
-----------
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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
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. 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 three-month period ended March 31, 2000 and
1999:
The net sales increased $2,831,067 for the three-month period ended March
31, 2000 ("2000") as compared to the three-month period ended March 31, 1999
("1999") from $784,140 to $3,615,207. 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. Net sales of Kandel & Son and NISSCO
are comparable for each period, as both price and volume remained relatively
constant.
The gross profit percentage decreased from 58% 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 $428,633 for 1999 to $1,954,500 for 2000,
approximately 356%. The majority of this increase, approximately $1,526,000, was
due to the inclusion of Cleaning
9
<PAGE>
Ideas, Superior and June in 2000. Additionally, amortization of goodwill was
recorded on the acquisitions of approximately $222,000 during 2000 and $74,000
during 1999. Kandel & Son's and NISSCO's expenses were comparable between 2000
and 1999.
The Company had net income in 2000 of $4,830,357, as compared to net income
of $23,607, 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 three-month period ended March 31, 2000, the Company
issued a total of 245,000 shares of Common Stock for $980,000. 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 loan receivable from b2bstores.com, Inc for
net proceeds of approximately $836,000. The Company's only significant use of
cash during the quarter was the balance of cash paid for the redemption of the
Series D Preferred Stock.
For the three-month period ended March 31, 2000, the Company's cash flows
from operations was negative $177,484, as a result of net income of $4,830,357
and adjustments to arrive at cash provided by operating activities of
depreciation and amortization and non-cash interest of $317,282, an increase in
accounts payable and income taxes payable of $1,612,211, a decrease in
inventory of $24,387, offset by a gain on sale of b2bstores.com, Inc, of
$6,747,000, an increase in accounts receivable of $206,710 and an increase in
prepaid expenses and other assets of $8,011.
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.
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.
10
<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
In mid-January, 2000, the Company began a new private placement of a
maximum of 137,500 units at $8.00 per unit, each unit consisting of two (2)
shares of Common Stock and one (1) 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 in reliance upon the exemption from registration
provided by Rule 506 of Regulation D. The Company closed the private placement
on February 29, 2000. The Company will use the proceeds from this offering to
continue its acquisition program as well as for working capital purposes.
The sale of securities in this private placement 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.
11
<PAGE>
On March 14, 2000, the Board of Directors approved a resolution allowing
the Company to redeem 320,000 shares of the Company's Series D Cumulative
Convertible Preferred Stock (the "Series D Stock") at a redemption price of
$5.00 per share. The Series D Stock had been senior in rights to the Common
Stock in terms of dividends and liquidation preferences. The redemption resulted
in a payment of $1,600,000 for the outstanding 320,000 shares of the Series D
Stock and a total of $29,071.04 for the accrued dividends on the Series D Stock.
The Series D Stock had been issued to Randall K. Davis and Charles Davis, the
father of Randall K. Davis and employee of a wholly owned subsidiary of the
Company, in conjunction with the acquisition of Cleaning Ideas, Inc. and its
subsidiaries as described in the Company's 8-K filed on September 3, 1999.
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
There have been no matters submitted to a vote of security holders during
the quarter ended March 31, 2000.
ITEM 5. Other Information and Subsequent Events
On April 1, 2000, upon approval of the Board of Directors, 20,790
outstanding shares of the Series B Cumulative Convertible Preferred Stock (the
"Series B Stock") plus accrued and unpaid dividends, were converted to the
Company's Common Stock at a conversion price of $5.00 per share of Common Stock.
This resulted in an issuance of 426,195 shares of the Common Stock. In addition,
the remaining 4,800 outstanding shares of Series B Stock were redeemed at the
conversion price of $100 per share of Series B Stock plus accrued and unpaid
dividends, for total cash proceeds of $492,000.
On April 1, 2000, subsequent to the conversion and redemption of all Series
B Stock and upon approval of the Board of Directors, Enviro-Clean redeemed
500,000 shares of the outstanding Series A Convertible Preferred Stock (the
"Series A Stock") at a redemption price of $5.00 per share, plus accrued and
unpaid dividends. Upon the redemption of the Series A Stock, Richard Kandel,
Chairman of the Board and Chief Operating Officer of Enviro-Clean, received
$2,500,000, plus accumulated and unpaid dividends of $25,000.
Both the Series B Stock and the Series A Stock had been senior in rights to
the Common Stock in terms of dividends and liquidation preferences.
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 indicated by any footnote, exhibits which were previously filed are
incorporated by reference.
Exhibit No. Description
- ----------- ----------
12
<PAGE>
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)
3(iii) Certificate of Designation for the Company's Series A Stock
(Exhibit 4(i)). (1)
3(iv) Certificate of Designation for the Company's Series E Stock
(Exhibit 4(ii)). (1)
3(v) Certificate of Designation for the Company's Series D Preferred
Stock (Exhibit 4(i)). (2)
3(vi) Certificate of Amendment to the Certificate of Designation for the
Company's Series A Stock (Exhibit 3(v)). (3)
3(vii) Certificate of Designation for the Company's Series B Stock.
(Exhibit 3(xi)).(6)
4(i) Form of 12.75% Subordinate Note (Exhibit 3(vi)). (3)
4(ii) Form of the Warrant Certificate-June 1999 (Exhibit 3(vii)). (3)
4(iii) Form of Warrant Certificate-December 1999.*
4(iv) Form of Warrant Certificate-February 2000.*
27(i) Financial data schedule.*
99(i) Form of Lock-up Agreement executed by Enviro-Clean of America,
Inc., Richard Kandel, Randall K. Davis and Steven Etra. (Exhibit
99(i)). (5)
99(ii) Waiver of Lock-Up Agreement for one million shares of
b2bstores.com, Inc. stock held by Enviro-Clean of America, Inc.
(Exhibit 99(i)). (5)
99(iii) Stock Purchase Agreement dated March 13, 2000 between ZERO.NET,
Inc. and Enviro-Clean of America, Inc. for the sale of one million
shares of b2bstores.com, Inc. (Exhibit 99(i)). (5)
13
<PAGE>
* Filed Herewith.
(1) Incorporated by reference to the Company's Form 10-SB filed with the SEC on
June 18, 1999.
(2) Incorporated by reference to the Company's Report on Form 8-K filed with
the SEC on September 3, 1999.
(3) Incorporated by reference to the Company's Report on Form 10-SB/A filed
with the SEC on October 22, 1999.
(4) Incorporated by reference to the Company's Report on Form 8-K filed with
the SEC on November 10, 1999.
(5) Incorporated by reference to the Company's Current Report on Form 8-K filed
with the SEC on March 20, 2000.
(6) Incorporated by reference to the Company's Report on Form 10-SB/A filed
with the SEC on December 16, 1999.
(b) Reports on Form 8-K:
The Company filed an 8-K on March 20, 2000, to report the sale and
disposition of 1,000,000 shares of b2bstores.com, Inc. common stock held by the
Company under Item 2, and the redemption for cash, by the Company, of 320,000
shares of Series D Cumulative Convertible Preferred Stock under Item 5.
14
<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.
May 12, 2000 Enviro-Clean of America, Inc.
By: /s/ Randall K. Davis
-------------------------------
Randall K. Davis, President
/s/ Jan Pasternack
-------------------------------
Jan Pasternack, Chief
Financial Officer
15
<PAGE>
EXHIBIT 4(iii)
--------------
[FORM OF WARRANT CERTIFICATE]
[FACE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED TO THE
REGISTERED OWNER IN RELIANCE UPON WRITTEN REPRESENTATION THAT THESE SECURITIES
HAVE BEEN TAKEN FOR INVESTMENT. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD TRANSFERRED OR
ASSIGNED UNLESS AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SHALL HAVE
BEEN RECEIVED BY THE COMPANY TO THE EFFECT THAT SUCH SALE, TRANSFER OR
ASSIGNMENT WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS THEREUNDER, AND OTHER APPLICABLE STATE SECURITIES
LAWS.
THE STOCK ISSUABLE UPON EXERCISE OF THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED UNLESS AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SHALL HAVE
BEEN RECEIVED BY THE COMPANY TO THE EFFECT THAT SUCH SALE, TRANSFER OR
ASSIGNMENT WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS THEREUNDER AND OTHER APPLICABLE SECURITIES LAWS.
No. [ ] [ ] Warrants
CALLABLE WARRANT CERTIFICATE
ENVIRO-CLEAN OF AMERICA, INC.
This Warrant Certificate certifies that [ ], or
registered assigns, is the registered holder of [ ]
Warrants (the "Warrants") to purchase shares of Common Stock, par value $.001
per share (the "Common Stock"), of ENVIRO-CLEAN OF AMERICA, INC., a Nevada
corporation (the "Company"). Each Warrant entitles the holder to purchase from
the Company at any time on or after [_______________________, 1999] until
[________________, 2004] (the "Expiration Date"), one fully paid and non-
assessable share of Common Stock (a "Share", or, if adjusted, the "Shares",
which may also include any other securities or property purchasable upon
exercise of a Warrant, such adjustment and inclusion each as provided in the
Warrant Agreement) at the exercise price as may be adjusted as provided in the
Warrant Agreement (initially $5.00 per Warrant) (the "Exercise Price") upon
surrender of this Warrant Certificate and payment of the Exercise Price at any
office or agency maintained for that purpose by the Company (the "Warrant Agent
Office"), subject to the conditions set forth herein and in the Warrant
Agreement.
The Exercise Price shall be payable by cash, certified check or official
bank check or by such other means as is acceptable to the Company in the lawful
currency of the United States of America which as of the time of payment is
legal tender for payment of public or private debts. The number
<PAGE>
of Shares issuable upon exercise of the Warrants ("Exercise Rate") is subject to
adjustment upon the occurrence of certain events set forth in the Warrant
Agreement.
Any Warrants not exercised on or prior to [_________________, 2004] shall
thereafter be void.
Reference is hereby made to the further provisions, including the call
provision, on the reverse hereof which provisions shall for all purposes have
the same effect as though fully set forth at this place. Capitalized terms used
in this Warrant Certificate but not defined herein shall have the meanings
ascribed thereto in the Warrant Agreement.
This Warrant Certificate shall not be valid unless authenticated by the
Warrant Agent, term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
WITNESS the facsimile seal of the Company and facsimile signatures of its
duly authorized officers.
Dated:
ENVIRO-CLEAN OF AMERICA, INC.
[Seal] By:
-------------------------------------
Name:
Title:
Attest:
By:
--------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Warrant Agreement:
INTERWEST TRANSFER CO., INC.
as Warrant Agent
By:
--------------------------------
Authorized Signatory
2
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
ENVIRO-CLEAN OF AMERICA, INC.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, each of which represents the right to purchase at
any time on or after [________________, 1999], until [______________________,
2004], one share of Common Stock of the Company, subject to adjustment as set
forth in the Warrant Agreement. The Warrants are issued pursuant to a Warrant
Agreement dated as of [_______________, 1999] (the "Warrant Agreement"), duly
executed and delivered by the Company to Interwest Transfer Co., Inc. as Warrant
Agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants. Warrants may be exercised by (i) surrendering at any Warrant
Agent Office this Warrant Certificate with the form of Election to Exercise set
forth hereon duly completed and executed and (ii) paying in full the Warrant
Exercise Price for each such Warrant exercised and any other amounts required to
be paid pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 2:00 p.m., New York,
New York time, on a Business Day, the exercise of the Warrant to which such
items relate will be effective on such Business Day. If any items referred to
in the last sentence of the preceding paragraph are received after 2:00 p.m.,
New York, New York time, on a Business Day, the exercise of the Warrants to
which such item relates will be deemed to be effective on the next succeeding
Business Day. Notwithstanding the foregoing, in the case of an exercise of
Warrants on the Expiration Date, if all of the items referred to in the last
sentence of the preceding paragraph are received by the Warrant Agent at or
prior to 5:00 p.m., New York, New York time, on such Expiration Date, the
exercise of the Warrants to which such items relate will be effective on the
Expiration Date.
Subject to the terms of the Warrant Agreement, as soon as practicable after
the exercise of any Warrant or Warrants, the Company shall issue or cause to be
issued to or upon the written order of the registered holder of this Warrant
Certificate, a certificate or certificates evidencing the Share or such holder
pursuant to the Election to Exercise, as set forth on the reverse of this
Warrant Certificate. Such certificate or certificates evidencing the Share or
Shares shall be deemed to have been issued and any persons who are designated to
be named therein shall be deemed to have become the holder of record of such
Share or Shares as of the close of business on the date upon which the exercise
of this Warrant was deemed to be effective as provided in the preceding
paragraph.
The Company, at its option, may provide the holder of this Warrant written
notice (the "Call Notice") that this Warrant shall terminate on the 20th day
following the date of delivery of the Call Notice (such date being the "Early
Termination Date"), as described in the Warrant
3
<PAGE>
Agreement, at any time: (i) the Closing Per Share Market Price of the Common
Stock has been equal to or greater than 200% of the Warrant Exercise Price on
the date of delivery of the Call Notice and the 19 consecutive Trading Days
immediately preceding the date delivery of the Call Notice (the "Call Notice
Period") and (ii) after the Registration Statement has been declared effective
and has been effective for the Call Notice Period. In the event that the Warrant
is not exercised by the holder of this Warrant on or before the Early
Termination Date, this Warrant shall expire at 5:00 p.m., New York, New York
time, on the Early Termination Date, and the Company will remit to the holder of
the Warrant $.10 per Warrant upon such holder tendering to the Company the
expired Warrant Certificate.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that purpose,
a new Warrant Certificate evidencing in the aggregate a like number of Warrants
shall be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered holder
hereof as the absolute owner of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone) for the purpose of
any exercise hereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in New York,
New York, (ii) the principal national securities exchange or market on which the
Common Stock is listed or admitted to trading and (iii) the principal national
securities exchange or market on which the Warrants are listed or admitted to
trading are open for business.
4
<PAGE>
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise __________ of the Warrants
represented by this Warrant Certificate and purchase the whole number of Shares
issuable upon the exercise of such Warrants and herewith tenders payment for
such Shares in the amount of $______________ in cash or by certified or
official bank check, in accordance with the terms hereof. The undersigned
requests that a certificate representing such Shares be registered in the name
of _________________________ whose address is ______________________________ and
that such certificate be delivered to ___________________________ whose address
is ____________________________________. Any cash payments to be paid in lieu
of a fractional Share should be made to ______________________________ whose
address is ____________________________________ and the check representing
payment thereof should be delivered to ________________________ whose address is
___________________________ ____________________________________.
Dated ,
------------------------
Name of holder of
Warrant Certificate:
(Please Print)
Tax Identification or
Social Security Number:
Address:
Signature:
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever.
Dated ,
--------------------
5
<PAGE>
[FORM OF ASSIGNMENT]
For value received ______________ hereby sells, assigns and transfers unto
______________________________ the within Warrant Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint _________ attorney, to transfer said Warrant Certificate on the books of
the within-named Company, with full power of substitution in the premises.
Dated _________________, ______
Signature:
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever.
6
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON REGISTRATION
OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Enviro-Clean of
America, Inc.
This Certificate relates to ______________ Warrants held in certificated form by
______________ (the "Transferor").
The Transferor has requested the Warrant Agent by written order to register the
transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant,
the Transferor does hereby certify that the Transferor is familiar with the
Warrant Agreement relating to the above captioned Warrants and the restrictions
on transfers thereof as provided in Section 1.07 of such Warrant Agreement, and
------------
that the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "Act") because[*]:
[ ] Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Act), in reliance on Rule 144A or in
accordance with Regulation S under the Act.
[ ] Such Warrant is being transferred in accordance with Rule 144 under
the Act.
[ ] Such Warrant is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act, other than Rule
144A or Rule 144 or Regulation S under the Act. An opinion of counsel to the
effect that such transfer does not require registration under the Act
accompanies this Certificate.
[INSERT NAME OF TRANSFEROR]
By:
Date:
*Check applicable box.
7
<PAGE>
EXHIBIT C
Transferee Letter of Representation
Enviro-Clean of America, Inc.
211 Park Avenue
Hicksville, New York 11801-1408
Ladies and Gentlemen:
In connection with our proposed purchase of warrants to purchase Common
Stock, par value $.001 per share (the "Securities"), of Enviro-Clean of America,
Inc. (the "Company") we confirm that:
1. We understand that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") and, unless so
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Securities to offer, sell or otherwise transfer such Securities prior
to the date which is two years after the later of the date of original issue and
the last date on which the Company or any affiliate of the Company was the owner
of such Securities, or any predecessor thereto (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to a registration
statement which has been declared effective under the Securities Act, (c) so
long as the Securities are eligible for resale pursuant to Rule 144A, under the
Securities Act, to a person we reasonably believe is a qualified institutional
buyer under Rule 144A (a "QIB") that purchases for its own account or for the
account of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the
United States within the meaning of Regulation S under the Securities Act, (e)
to an institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is purchasing
for his own account or for the account of such an institutional "accredited
investor, or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
any requirement of law that the disposition of our property or the property of
such investor account or accounts be at all times within our or their control
and to compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Securities is proposed
to be made pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver a letter from the transferee
substantially in the form of this letter to the warrant agent under the Warrant
Agreement pursuant to which the Securities were issued (the "Warrant Agent")
which shall provide, among other things, that the transferee is an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act and that it is acquiring such Securities
for investment purposes and not for distribution in violation of the Securities
Act. The Warrant Agent and the Company reserve the right prior to any offer,
sale or other transfer prior to the Resale Restriction Termination Date of the
Securities pursuant to clause (e) or (f) above to require the delivery of a
8
<PAGE>
written opinion of counsel, certifications, and or other information
satisfactory to the Company and the Warrant Agent.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor." and we are acquiring the Securities for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act and we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and any accounts for which we
are acting are each able to bear the economic risk of our or its investment for
an indefinite period.
3. We are acquiring the Securities purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
4. You, the Warrant Agent and your respective counsel are entitled to
rely upon this letter and you are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
(Name of Purchaser)
By:
Date:
Upon transfer the Securities would be registered in the name of the new
beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
9
<PAGE>
EXHIBIT 4(iv)
-------------
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS
THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Date: February 29, 2000 WARRANT NO. __
ENVIRO-CLEAN OF AMERICA, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, ___________________________(the
"Investor"), or its registered assigns, is entitled to purchase from ENVIRO-
CLEAN OF AMERICA, INC., a Nevada corporation (the "Company"), at any time or
-------
from time to time during the period specified in Section 2 hereof,
_______________ (_______) fully paid and nonassessable shares of the Company's
Common Stock, $.001 par value (the "Common Stock"), at an exercise price (the
------------
"Exercise Price") of $4.25 per share. The number of shares of Common Stock
- ---------------
purchasable hereunder (the "Warrant Shares") and the Exercise Price are subject
--------------
to adjustment as provided in Section 4 hereof. The term "Warrant" means this
-------
Warrant of the Company issued pursuant to the Subscription Agreement (as
hereinafter defined). The term "Warrant Period" as used herein means the period
--------------
commencing on the date this Warrant is issued and delivered pursuant to the
terms of that certain Subscription Agreement, by and between the Company and the
Investor (the "Subscription Agreement") and ending on the Expiration Date (as
----------------------
defined below).
This Warrant is subject to the following terms, provisions, and conditions:
1. MANNER OF EXERCISE, ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the holder,
in whole at any time, or in part from time to time, prior to the Expiration
Date, by the surrender of this Warrant, together with a completed exercise
agreement in the form attached hereto (the "Exercise Agreement"), to the Company
------------------
during normal business hours on any business day at the Company's principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), and upon (i) payment to the Company
in cash, by certified or official bank check or by wire transfer for the account
of the Company, of the Exercise Price for the Warrant Shares specified in the
Exercise Agreement or (ii) delivery to the Company of a written notice of an
election to effect a Cashless Exercise (as defined in Section 11(c) below) for
the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so
purchased shall be deemed to be issued to the holder hereof or such holder's
designee, as the
<PAGE>
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement shall
have been delivered, and payment shall have been made for such shares as set
forth above. Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding fifteen
(15) business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the holder a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised. Notwithstanding the foregoing,
if any such exercise is in connection with a registered public offering of
Warrant Shares to be received upon exercise, then the Exercise Agreement to be
delivered in connection with such exercise need not contain the agreement with
respect to the restrictive legend contained in the form of Exercise Agreement
attached hereto.
2. PERIOD OF EXERCISE. This Warrant may be exercised at any time on or
------------------
after the date hereof (the "Effective Date") and ending on the Expiration Date.
--------------
As used herein, "Expiration Date" means 5:00 p.m., New York time, on the third
---------------
anniversary from the date of issuance of this Warrant.
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
---------------------------------
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
-----------------------
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Warrant Period, the Company
---------------------
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of the
-------
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
2
<PAGE>
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of
--------------------------
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
----------------------
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.
4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES ISSUABLE. The number
----------------------------------------------------------
and kind of Shares purchasable upon the exercise of Warrants and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Stock Splits, Combinations. etc. In case the Company shall
-------------------------------
hereafter (A) pay a dividend or make a distribution on its Common Stock in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (B) subdivide its outstanding shares of Common Stock or (C)
combine its outstanding shares of Common Stock into a smaller number of shares,
the number of Shares purchasable upon exercise of each Warrant immediately prior
thereto shall be adjusted so that the holder of any Warrant thereafter exercised
shall be entitled to receive the number of Shares which such holder would have
owned immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this paragraph shall
become effective immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this paragraph, the holder of any Warrant thereafter exercised
shall become entitled to receive shares of two or more classes of capital stock
of the Company, the Board of Directors of the Company (whose determination shall
be conclusive) shall determine the allocation of the adjusted Exercise Price
between or among shares of such classes of capital stock.
(b) Reclassification, Combinations, Mergers, etc. In case of any
--------------------------------------------
reclassification or change of outstanding shares of Common Stock (other than as
set forth in Section 4(a) above and other than a change in par value, or from
------------
par value to no par value, or from no par value to par value, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger in which the Company is the continuing corporation and which does
not result in any reclassification or change of the then outstanding shares of
Common Stock or other capital stock of the Company (other than a change in par
3
<PAGE>
value, or from par value to no par value, or from par value to par value or as a
result of a subdivision or combination)) or in case of any sale or conveyance to
another corporation of all or substantially all of the assets of the Company,
then, as a condition of such reclassification, change, consolidation, merger,
sale or conveyance, the Company or such a successor or purchasing corporation,
as the case may be, shall forthwith make lawful and adequate provision whereby
the holder of such Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and enter
into a supplemental warrant agreement so providing. Such provisions shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4. If the issuer of
securities deliverable upon exercise of Warrants under the supplemental warrant
agreement is an affiliate of the formed, surviving or transferee corporation,
that issuer shall join in the supplemental warrant agreement. The above
provisions of this paragraph (b) shall similarly apply to successive
reclassifications; and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
In case of any such reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant Agreement to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such modifications as may be deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of shares of the Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 4. The foregoing provisions shall similarly apply to
successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets.
(c) Subdivision or Combination of Shares. If the Company, at any time
------------------------------------
while the Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Exercise Price
shall be proportionately reduced (as at the effective date of such subdivision
or, if the Company shall take a record of holders of its Common Stock for the
purpose of such subdividing, as at the applicable record date, whichever is
earlier) to reflect the increase in the total number of shares of Common Stock
outstanding as a result of such subdivision, or (ii) in the case of a
combination of shares, the Warrant Exercise Price shall be proportionately
increased (as at the effective date of such combination or, if the Company shall
take a record of holders of its Common Stock for the purpose of so combining, as
at the applicable record date, whichever is earlier) to reflect the reduction in
the total number of shares of Common Stock outstanding as a result of such
combination.
(d) Certain Dividends and Distributions. If the Company, at any time while
-----------------------------------
the Warrant is outstanding, shall pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of, shares of
Common Stock, the Warrant Exercise Price shall be adjusted, as at the date the
Company shall take a record of the holders of the
4
<PAGE>
Common Stock for the purpose of receiving such dividend or other distribution
(or if no such record is taken as at the date of such payment or other
distribution), to that price determined by multiplying the Warrant Exercise
Price in effect immediately prior to such record date (or if no such record is
taken, then immediately prior to such payment or other distribution), by a
fraction (1) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(2) the denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution (plus in the event
that the Company has paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Company issued fractional
shares in connection with said dividends).
(e) Statement of Warrants. Irrespective of any adjustment in the
---------------------
number or kind of Shares issuable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued shall continue to express the same number and
kind of shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
(f) When Adjustment Not Required. If the Company shall take a record
----------------------------
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(g) Challenge to Good Faith Determination. Whenever the Board of
-------------------------------------
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Article V, such determination may be
challenged in good faith by holders holding a majority of the outstanding
Warrants (the "Majority Holders"), and any dispute shall be resolved by an
investment banking firm of national standing selected by the Company. The fee of
such investment banking firm shall be paid by the Company, unless such fair
market value as determined by the investment banking firm is more than 95% of
the fair market value determined by the Board of Directors of the Company, in
which case the challenging holders shall be jointly and severally liable for
such fee.
(h) Treasury Stock. The sale or other disposition of any issued
--------------
shares of Common Stock owned or held by or for the account of the Company shall
be deemed an issuance thereof and a repurchase thereof and designation of such
shares as treasury stock shall be deemed to be a redemption thereof for the
purposes of this Agreement.
(i) Notices to Warrant Holders. In connection with any adjustment
--------------------------
pursuant to this Section 4, the Company shall (i) promptly after such adjustment
cause to be filed with the Warrant Agent a certificate of an officer of the
Company setting forth the number of shares (or portion thereof) issuable after
such adjustment, upon exercise of a Warrant, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein, and
(ii) promptly after such adjustment cause to be given to each of the registered
holders of the Warrant Certificates at his address appearing on the Warrant
Register written notice of such adjustments by first class mail, postage
prepaid. The Warrant Agent shall be entitled to conclusively rely on
5
<PAGE>
the above referenced officer's certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same
from time to time to any holder desiring an inspection thereof during normal
business hours upon reasonable notice. The Warrant Agent shall not at any time
be under any duty or responsibility to any holder to determine whether any facts
exist that may require any adjustment of the number of Shares issuable on
exercise of the Warrants or the Exercise Price, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment or the validity or value (or the kind or amount) of
any Shares which may be issuable on exercise of the Warrants. The Warrant Agent
shall not be responsible for any failure of the Company to make any cash payment
or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other common stock or property upon the exercise of any Warrant.
The Company shall, in addition, promptly notify the holders of the
Warrants of any determination of its Board of Directors pursuant to Section 4(e)
------------
that any actions affecting its Common Stock will not require an adjustment to
the number of Shares for which a Warrant is exercisable, and shall specify in
such notice the reasons for such determination. In the event that the Majority
holders shall challenge any of the calculations set forth in such notice within
20 days after the Company's delivery thereof, the Company shall retain a firm of
independent certified public accountants or law firm of national standing
selected by the Company to prepare and execute a certificate verifying that no
adjustment is required. The Company shall promptly cause a signed copy of any
certificate prepared pursuant to this Section 4(i) to be delivered to each
------------
holder at his address appearing in the Warrant Register. The Company shall keep
at its office, at the office of the Warrant Agent, or another designated agency,
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours upon reasonable notice by
any holder or any prospective purchaser of a Warrant designated by a holder
thereof.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
---------
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO LIABILITIES AS A SHAREHOLDER. No provision of this Warrant, in the
-------------------------------
absence of affirmative action by the holder hereof to purchase Warrant Shares,
and no mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Exercise Price or as a
shareholder of the Company, whether such liability is asserted by the Company or
a creditor of the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
----------------------------------------------
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
-----------------------
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Section 7(f) hereof. Until due presentment for
registration of transfer on the books of the Company, the Company may treat
6
<PAGE>
the registered holder hereof as the owner and holder hereof for all purposes,
and the Company shall not be affected by any notice to the contrary.
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINA-TIONS. This Warrant
-------------------------------------------------
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock that may be purchased hereunder.
each of such new Warrants to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
---------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other then legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 7
(e) WARRANT REGISTER. The Company shall maintain, at its principal
----------------
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
-----------------------------------------
the surrender of this Warrant in connection with any transfer or exchange of
this Warrant, this Warrant shall not be registered under the Securities Act of
1933, as amended (the "Securities Act"), and under applicable state securities
or blue sky laws, the Company may require, as a condition of allowing such
transfer or exchange, (i) that the transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel (which opinion and
counsel shall be reasonably acceptable to the Company) to the effect that such
transfer or exchange may be made without registration under the Securities Act
and under applicable state securities or blue sky laws; provided that this
clause (i) shall not apply to any transfer to an affiliate of a holder, (ii)
that the transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company, and (iii) that the transferee be
an "accredited investor" as defined in Rule 501(a) promulgated under the
-------------------
Securities Act; provided that no such opinion, letter, or status as an
"accredited investor" shall be required in connection with a transfer pursuant
to Rule 144 under the Securities Act.
7
<PAGE>
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
-------------------
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement, dated as of January __. 2000 by and among the Company and the
Investor.
9. NOTICES. Any notices required or permitted to be given under the
-------
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
facsimile, and shall be effective five (5) days after being placed in the mail,
if mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company: Enviro-Clean of America, Inc.
Attention: Randall Davis
1023 Morales
San Antonio, Texas 78207
With copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Attn.: Alan Schoenbaum
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Facsimile: (210) 224-2035
and if to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as each such party furnishes by
written notice given in accordance with this Section 9.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
-------------
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
11. MISCELLANEOUS.
-------------
(a) AMENDMENTS. This Warrant and any provision hereof may only be
----------
amended by an instrument in writing signed by the Company and the holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
--------------------
sections of this Warrant are inserted for purposes of reference only and shall
not affect the meaning or construction of any of the provisions hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
-----------------
contained in this Warrant, this Warrant may be exercised in whole at any time or
in part from time to time by presentation and surrender of this Warrant to the
Company at its principal executive offices with a written notice of the holder's
intention to effect a cashless exercise, including a calculation of the number
of shares of Common Stock to be issued upon such
8
<PAGE>
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
-----------------
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder may, if the Common Stock is listed on a national securities exchange or
quoted in the NASDAQ system or in the over-the-counter market at the time,
surrender this Warrant (or portion hereof in respect of which is being
exercised) in exchange for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares to which it would otherwise be entitled
if this Warrant were exercised by paying the exercise price in cash by a
fraction, the numerator of which shall be the difference between the then
Current Market Value per share of the Common Stock and the per share purchase
Exercise Price, and the denominator of which shall be the then Current Market
Value per share of Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
Dated: ENVIRO-CLEAN OF AMERICA, INC.
By: __________________________
Name: Randall Davis
Title: President
[Seal]
Attest:
By:__________________________
Name:
Title:
Certificate of Authentication:
This is one of the Warrants
referred to in the within
Mentioned Warrant Agreement:
INTERWEST TRANSFER CO., INC.
As Warrant Agent
By:__________________________
Authorized Signatory
9
<PAGE>
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO
EXERCISE THE WARRANT)
The undersigned hereby irrevocably exercises the right to purchase of the
shares of Common Stock of Enviro-Clean of America, Inc., a Nevada corporation
(the "Company"), evidenced by the attached Warrant, and herewith makes payment
of the Exercise Price with respect to such shares in full, all in accordance
with the conditions and provisions of said Warrant.
i. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock if not registered
or if Rule 144(k) is unavailable.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF
COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS
SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT.
ii. The undersigned requests that stock certificates for such shares
be issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the holder and delivered to the
undersigned at the address set forth below.
Dated: _____________________ _______________________________
Signature of Holder
_______________________________
Name of Holder (Print)
Address:
_______________________________
_______________________________
_______________________________
10
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth herein
below, to:
Name of Assignee Address Number of Shares
- ---------------- ------- ----------------
, and hereby irrevocably constitutes and appoints _____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: _________________________
In the presence of:
_______________________________
Name: ______________________________________
Signature: _________________________________
Title of Signing Officer or Agent (if any):
____________________________________________
Address: ___________________________________
____________________________________________
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL EXTRACTED FROM THE QUARTERLY FINANCIAL
STATEMENTS OF ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES ENDING MARCH 31,
2000, CONTAINED HEREIN, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,179,739
<SECURITIES> 0
<RECEIVABLES> 1,910,626
<ALLOWANCES> 156,349
<INVENTORY> 1,658,833
<CURRENT-ASSETS> 11,676,020
<PP&E> 1,628,941
<DEPRECIATION> 1,244,952
<TOTAL-ASSETS> 20,189,277
<CURRENT-LIABILITIES> 4,296,934
<BONDS> 5,056,792
0
5,234,000
<COMMON> 4,946
<OTHER-SE> 6,737,552
<TOTAL-LIABILITY-AND-EQUITY> 20,189,277
<SALES> 3,615,207
<TOTAL-REVENUES> 3,615,207
<CGS> 2,002,825
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,741,575
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 212,925
<INCOME-PRETAX> 6,442,528
<INCOME-TAX> 1,612,171
<INCOME-CONTINUING> 4,830,357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,830,357
<EPS-BASIC> 0.98
<EPS-DILUTED> 0
</TABLE>
