<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from _____________ to ____________
Commission file number: 000-28112
MOTORVAC TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
STATE OF DELAWARE 33-0522018
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1431 S. VILLAGE WAY
SANTA ANA, CALIFORNIA 92705
(Address of Principal Executive Offices)
(714) 558-4822
(Issuer's Telephone Number, Including Area Code)
N/A
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ______
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
<TABLE>
<CAPTION>
Title Date Outstanding
<S> <C> <C>
Common Stock, $.01 par value September 30, 1996 4,514,918
</TABLE>
Transitional Small Business Disclosure Format (check one);
Yes No X
--- ---
<PAGE> 2
MOTORVAC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
SEPT. 30 SEPT. 30 SEPT. 30 SEPT. 30
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $2,650,581 $1,483,804 $5,821,421 $3,527,599
COST OF SALES 1,607,794 1,004,243 3,432,220 2,227,250
------------- ------------- ------------- -------------
GROSS PROFIT 1,042,787 479,561 2,389,201 1,300,349
OPERATION EXPENSES
Selling, General and Administrative Expenses 1,167,833 914,473 3,097,050 2,861,331
Research and Development Expenses 18,387 67,670 63,223 298,616
------------- ------------- ------------- -------------
1,186,220 982,143 3,160,273 3,159,947
------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (143,433) (502,582) (771,072) (1,859,598)
INTEREST EXPENSE TO RELATED PARTIES/(INTEREST REVENUE) (16,531) 144,794 165,234 385,795
------------- ------------- ------------- -------------
LOSS BEFORE PROVISION FOR INCOME TAXES (126,902) (647,376) (936,306) (2,245,393)
PROVISION FOR INCOME TAXES 0 0 0 0
------------- ------------- ------------- -------------
NET LOSS ($126,902) ($647,376) ($936,306) ($2,245,393)
============= ============= ============= =============
PROFORMA DATA (NOTE 3)
Historical Loss ($126,902) ($936,306)
Proforma reduction in interest expense 0 132,416
------------- -------------
PRO FORMA NET LOSS ($126,902) ($803,890)
============= =============
PROFORMA NET LOSS PER COMMON SHARE ($0.03) ($0.20)
============= =============
WEIGHTED AVERAGE OUTSTANDING
COMMON AND COMMON EQUIVALENT SHARES 4,514,918 4,010,831
============= =============
</TABLE>
<PAGE> 3
MOTORVAC TECHNOLOGIES, INC
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $5,008 $3,739,435
Accounts receivable, net of allowance for doubtful accounts of $186,599
(December 31,1995) and $55,070 (September 30, 1996) 773,329 1,254,571
Inventories, net 1,109,250 961,294
Other Current Assets 166,778 216,288
-------------- ----------------
Total Current Assets 2,054,365 6,171,588
PROPERTY AND EQUIPMENT, net 288,527 249,371
INTANGIBLE ASSETS, net of accumulated amortization of $152,095
(December 31, 1995) and $425,761 (September 30, 1996) 1,672,348 1,401,530
OTHER ASSETS 25,000 25,000
-------------- ----------------
$4,040,240 $7,847,489
============== ================
LIABILITIES AND STOCKHOLDERS (DEFICIENCY) EQUITY
CURRENT LIABILITIES
Accounts payable and other accrued liabilities $1,364,490 $1,246,812
Accrued interest-related parties 649,901 63,005
Amounts payable to ex-licensor 219,250 200,059
-------------- ----------------
Total current liabilities 2,233,641 1,509,876
AMOUNTS PAYABLE TO EX-LICENSOR 219,295 0
NOTES PAYABLE TO RELATED PARTIES 5,273,872 1,420,000
COMMITMENTS AND OTHER CONTINGENCIES
STOCKHOLDERS' (DEFICIENCY) EQUITY
Cumulative Series A preferred stock ($.01 par); 95,295 shares authorized; and
95,295 and 0 shares outstanding as of December 31, 1995 and September 30,1996, 953 0
respectively; (liquidation preference $4,764,750 at December 31, 1995)
Cumulative Series B preferred stock ($.01 par); 55,000 shares authorized; and
54,300 and 0 shares outstanding as of December 31, 1995 and September 30, 1996,
respectively; (liquidation preference $2,715,000 at December 31, 1995) 543 0
Common Stock, $.01 par value; 10,000,000 shares authorized;
948,000 shares issued and outstanding at December 31, 1995
4,514,918 shares issued and outstanding at September 30, 1996 9,480 45,149
Additional paid in capital 6,995,448 16,501,762
Accumulated deficit (10,692,992) (11,629,298)
-------------- ----------------
Total Shareholders' (deficiency) equity (3,686,568) 4,917,613
-------------- ----------------
$4,040,240 $7,847,489
============== ================
</TABLE>
<PAGE> 4
MOTORVAC TECHNOLOGIES, INC
STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
SEPT. 30 SEPT. 30 SEPT. 30 SEPT. 30
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATION ACTIVITIES:
Net Loss ($126,902) ($647,366) ($936,306) ($2,245,393)
Discounts earned for early payment to ex-licensor (79,993) (79,993)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 117,403 44,117 348,264 145,811
Loss on disposal of long term assets 0 0 0 0
Net change in operation assets and liabilities:
Accounts receivable (230,865) (497,655) (481,242) (341,933)
Inventories 47,315 178,810 147,956 130,909
Other current assets, intangibles and other assets (94,508) 14,193 (52,358) (65,122)
Interest payable to related parties 36,340 122,571 (586,896) 377,085
Accounts payable and other current liabilities 9,750 46,821 (117,678) (252,444)
------------- ------------- ------------- -------------
Net cash used in operating activities (321,460) (738,509) (1,758,253) (2,251,087)
------------- ------------- ------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of equipment (8,916) (59,249) (35,442) (105,450)
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from issuance of 1,210,000 common stock (25,867) 0 5,130,187 0
Proceeds from issuance of notes payable to related parties 0 533,801 680,000 2,080,264
(Increase) decrease in receivable from licensor 0 20,154 0 188,701
Payments to ex-licensor (44,736) 0 (158,493) 0
Repayment of notes to related parties 0 0 (123,572) 0
------------- ------------- ------------- -------------
Net cash provided by financing activities (70,603) 553,955 5,528,122 2,268,965
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (400,979) (243,803) 3,734,427 (87,572)
CASH AND CASH EQUIVALENTS, Beginning of period 4,140,414 216,594 5,008 60,363
------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS, End of period $3,739,435 ($27,209) $3,739,435 ($27,209)
============= ============= ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest paid 0 0 836,423 0
============= ============= ============= =============
Income taxes paid 0 0 0 0
============= ============= ============= =============
Conversion of Preferred Series A Stock to Common Stock (net) 4,659,499
=============
Conversion of Preferred Series B Stock to Common Stock (net) 2,170,425
=============
Conversion of Notes Payable to related parties to Common Stock 4,410,300
=============
Non Cash reduction in payable to ex-licensor 79,993 79,993
============= =============
</TABLE>
<PAGE> 5
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Notes to Unaudited Consolidated Financial Statements:
1. Basis of Presentation
The information set forth in these consolidated financial statements
as of September 30, 1996 is unaudited and may be subject to normal
year-end adjustments. In the opinion of management, the unaudited
financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the
financial position of MotorVac Technologies, Inc. (the "Company" or
"MTI") for the period indicated. Results of operations for the
interim period ended September 30, 1996 are not necessarily indicative
of the results of operations for the full fiscal year.
Certain amounts in the prior years' Consolidated Financial Statements
have been reclassified to conform to the current fiscal year's
presentation.
Certain information normally included in footnote disclosures to the
financial statements has been condensed or omitted in accordance with
the rules and regulations of the Securities and Exchange Commission.
2. Initial Public Offering
On May 1, 1996, the Company completed an initial public offering of
1,100,000 shares of its common stock at $5.375 per share, netting
proceeds to the Company, after underwriter's discounts and expenses,
of approximately $5,143,875. On June 13, 1996, the Company completed
the sale to the underwriter upon exercise of the underwriter's
overallotment option of an additional 110,000 shares at $5.375 per
share, netting to the Company, after underwriter's discounts and
expenses, an additional amount of approximately $514,388. Proceeds to
the Company were used to repay approximately $836,000 of accrued
interest and approximately $124,000 of offering expense reimbursement
to the Company's major shareholder. The remaining proceeds are
anticipated to be used to expand the Company's advertising and
marketing efforts, acquire related products or product lines, and for
working capital.
3. Pro Forma Data
Pro Forma Net Loss
Pro forma net loss represents the results of operations adjusted to
reflect the impact of the elimination of interest expense related to
the $4,410,300 in debt due Erin Mills International Investment
Corporation ("EMIIC"), a related party, and The WH & NC Eighteen
Corporation ("WH & NC"), an affiliate of EMIIC, which was exchanged
for common stock immediately prior to the consummation of the initial
public offering.
Pro Forma Net Loss Per Share
Historical net income per common share is not presented for the
periods prior to January 1, 1996 because it is not indicative of the
ongoing entity. Pro forma net loss per share has been computed by
dividing pro forma net loss by the weighted average number of shares
of common stock and common stock equivalent shares outstanding during
the period.
<PAGE> 6
Both the number of shares and the net loss per share are actual, not
pro forma, for the three months ended September 30, 1996.
4. Inventories
Inventories, which include materials, supplies, labor and
manufacturing overhead, are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1996
----------------- ------------------
<S> <C> <C>
Materials and supplies 617,741 830,920
Work in process 100,750 100,751
Finished product 390,759 29,623
----------------- -----------------
1,109,250 961,294
================= =================
</TABLE>
5. Restatement of Results
During the 1996 year-end, the Company discovered a cost of sales
adjustment that affected the quarterly results for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996, as previously
filed on Form10-QSB. The results, as previously reported and as
restated for the quarter ended June 30, 1996, and the nine months
ended September 30, 1996, are as follows:
<TABLE>
<CAPTION>
3 Months Ended 9/30/96 9 Months Ended 9/30/96
---------------------- ----------------------
As Previously As As Previously As
Statement of Operations Reported Restated Reported Restated
----------------------- -------- -------- -------- ---------
<S> <C> <C> <C>
Sales 2,650,581 2,650,581 5,821,421 5,821,421
Cost of sales 1,546,676 1,607,794 3,113,784 3,432,220
Gross profit 1,103,905 1,042,787 2,707,637 2,389,201
Loss from operations (82,315) (143,433) (452,636) (771,072)
Net loss (65,784) (126,902) (617,870) (936,306)
Balance Sheet
-------------
Inventory 1,279,730 961,294
Total current assets 6,490,024 6,171,588
Total assets 8,165,925 7,847,489
Accumulated deficit (11,310,862) (11,629,298)
Total Stockholders'
(Deficiency) Equity 5,236,049 4,917,613
Total Liabilities and
Stockholders' (Deficiency) Equity 8,165,925 7,847,489
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
<PAGE> 7
GENERAL
MotorVac Technologies, Inc. (the "Company") designs, develops,
assembles, markets and sells the MotorVac CarbonClean System for the diagnosis,
maintenance and repair of internal combustion engine fuel systems primarily for
the automotive after-market repair and service industry. The Company markets
and sells its fuel system cleaning machines and detergents through various
distribution channels, both in the United States and Canada ("Domestic") under
the trade name MotorVac, and outside the United States and Canada
("International") under the trade name CarbonClean.
The following discussion and analysis addresses the results of the
Company's operations for the nine months ended September 30, 1996, and for the
three months ended September 30, 1996, as compared to the Company's results of
operations for the nine months ended September 30, 1995, and for the three
months ended September 30, 1995. On May 1, 1996, the Company consummated an
initial public offering (the "IPO") of 1,100,000 shares of its common stock,
resulting in gross proceeds of approximately $5,912,500. On June 13, 1996, the
Company completed the sale of an additional 110,000 shares of its Common Stock
upon exercise of the underwriter's overallotment option (the "Overallotment"),
resulting in gross proceeds to the Company of approximately $591,250.
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, and the Company intends
that such forward-looking statements be subject to the safe harbors created
thereby. The Company may experience significant fluctuations in future
operating results due to a number of factors, including, among other things,
the size and timing of customer orders, new or increased competition, delays in
new product enhancements and new product introductions, quality control
difficulties, changes in market demand, market acceptance of new products,
product returns, seasonality in product purchases by distributors and end
users, and pricing trends in the automotive after-market industry in general,
and in the specific markets in which the Company is active. Any of these
factors could cause operating results to vary significantly from prior periods.
Significant variability in orders during any period may have a material adverse
impact on the Company's cash flow or work flow, and any significant decrease in
orders could have a material adverse impact on the Company's results of
operations and financial condition. As a result, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as any indication of future
performance. Fluctuations in the Company's operating results could cause the
price of the Company's Common Stock to fluctuate substantially.
Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market conditions, all
of which are difficult or impossible to predict accurately, and many of which
are beyond the control of the Company. In addition, the business and
operations of the Company are subject to substantial risks which increase the
uncertainty inherent in the forward-looking statements. In light of the
significant uncertainties inherent in the forward-looking information included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved.
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 1996 and 1995
Net Sales. Net sales for the three months ended September 30, 1996
increased $1,166,777 (approximately 78.6%) to $2,650,581 from $1,483,804 for
the three months ended September 30, 1995. This sales increase was due to
increases in both Domestic and International sales, with Domestic sales up
111.6% and International sales up 12.1% from the same period last year. This
sales increase was due to an increase in machine sales to the Company's largest
customer in the U.S., the addition of John Bean Company as a distributor in the
U.S., and an increase in machine and detergent sales to a number of
International customers.
<PAGE> 8
For the three months ended September 30, 1996, Domestic sales were
$2,100,212 and International sales were $550,369. For the three months ended
September 30, 1995, Domestic sales were $992,752, and International sales were
$491,052.
Cost of Sales. Cost of sales for the three months ended September 30,
1996 increased by $603,551 (approximately 60.1%) to $1,607,794 from $1,004,243
for the three months ended September 30, 1995. The primary reason for the
increase is the sales increase of approximately 78.6% for the same period.
Gross Profit. Gross profit for the three months ended September 30,
1996 increased by $563,226 (approximately 117.4%) to $1,042,787 from $479,561
for the three months ended September 30, 1995. The primary reason for the
increase was the increase in the sales volume, and reductions in royalties,
freight and labor, which were partially offset by a cost increase of one
component which affected costs of sales late in the quarter.
Operating Expenses. Operating expenses increased by $204,077
(approximately 20.8%) from $982,143 for the three months ended September 30,
1995, to $1,186,220 for the three months ended September 30, 1996. The
increase was primarily attributable to legal and litigation costs associated
with the DeCarbon Australia Pty Ltd. litigation (see Part II, Item 1), which
accounted for $195,179 of the $204,077 increase.
Loss From Operations. As a result of the above, the loss from
operations for the three months ended September 30, 1996 of $143,433 improved
by $359,149 (approximately 71.4%) from a loss of $502,582 for the three months
ended September 30, 1995.
Interest. Interest (net) revenue for the three months ended September
30, 1996 of $16,531 improved by $161,325 (approximately 111.4%) from interest
expense of $144,794 for the three months ended September 30, 1995. This
improvement was a result of the conversion of $4,410,300 of notes payable to
EMIIC which were converted to Common Stock at the IPO price on April 25, 1996,
and interest income the Company earned on the IPO proceeds.
Net Loss. The net loss for the three months ended September 30, 1996
of $126,902 improved by $520,474 (approximately 80.4%) from a net loss of
$647,376 for the three months ended September 30, 1995.
Comparison of Nine Months Ended September 30, 1996 and 1995
Net Sales. Net sales for the nine months ended September 30, 1996
increased $2,293,822 (approximately 65.0%) to $5,821,421 from $3,527,599 for
the nine months ended September 30, 1995. This sales increase was due to
increases in both Domestic and International sales, with Domestic sales up
92.4% and International sales up 28.9% from the same period last year.
Domestic sales for the nine months ended September 30, 1996 were
$3,862,797, and International sales for the same period were $1,958,624. For
the nine months ended September 30, 1995, Domestic sales were $2,007,819, and
International sales were $1,519,780.
Cost of Sales. Cost of sales for the nine months ended September 30,
1996 increased by $1,204,970 (approximately 54.1%) to $3,432,220 from
$2,227,250 for the nine months ended September 30, 1995. The primary reason
for the cost of sales increase was the 65% increase in sales for the same
period.
Gross Profit. Gross profit for the nine months ended September 30,
1996 increased $1,088,852 (approximately 83.7%) to $2,389,201 from $1,300,349
for the nine months ended September 30, 1995. The primary reason for this was
the increase in the sales volume, the improvement in the sales mix (with a
larger increase in detergent sales than machine sales), and a reduction in
royalties.
<PAGE> 9
Operating Expenses. Operating expenses for the nine months ended
September 30, 1996 of $3,160,273 increased by only $326 (approximately 0%) from
$3,159,947 for the nine months ended September 30, 1995. This increase was due
mostly to higher legal and litigation costs offset by reductions in numerous
other expense categories, mostly General and Administrative expenses.
Loss From Operations. As a result of the above, the loss from
operations for the nine months ended September 30, 1996 improved by $1,088,526
(approximately 58.5%) to a loss of $771,072 from a loss of $1,859,598 for the
nine months ended September 30, 1995.
Interest. Interest (net) expense for the nine months ended September
30, 1996 decreased by $220,561 (approximately 57.2%) to $165,234 from $385,795
for the nine months ended September 30, 1995. The primary reason for the
decrease was the conversion of the EMIIC debt at the time of the IPO and
interest earned on the IPO proceeds.
Net Loss. The net loss for the nine months ended September 30, 1996
improved by $1,309,087 (approximately 58.3%) to $936,306 from a loss of
$2,245,393 for the nine months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had working capital of
$4,980,144. At December 31, 1995, the Company had a working capital deficit of
$179,276.
For the Three Months Ended September 30, 1996
Cash and cash equivalents at July 1, 1996 was $4,140,414. Cash used
in operating activities during the three months ended September 30, 1996, which
includes current assets and current liabilities, was $321,460. This amount
includes a $79,993 non-cash reduction in amounts payable to ex-licensor due to
the First Amendment to the Purchase Agreement between the Company and its
ex-licensor. Under the terms of that Agreement dated September 30, 1996, the
Company paid in October 1996 a total of $200,059 to its ex-licensor, accepted
as full payment of $280,052, due under the Purchase Agreement, thereby
generating a gain to the Company of $79,993. No other amounts are due to the
ex-licensor after this payment. Cash used in investing activities was $8,916,
which represented the purchase of fixed assets. Cash used from financing
activities was $70,603 representing additional costs from the issuance of
1,210,000 common shares in the IPO and payments to ex-licensor of $44,736,
under the terms of the Purchase Agreement dated December 31, 1995. The net
decrease in cash for the three months ended September 30, 1996 was $400,979,
resulting in ending cash of $3,739,435.
For the Nine Months Ended September 30, 1996
Cash and cash equivalents at January 1, 1996 was $5,008. Cash used in
operating activities for the nine months ended September 30, 1996 was
$1,758,253, including the $79,993 payable reduction discussed above. Cash used
in investing activities was $35,442, which represents the purchase of fixed
assets. Cash from financing activities was $5,528,122, which consisted of
$680,000 of proceeds from the issuance of notes payable to related parties, and
$5,130,187 of net proceeds from the issuance of 1,210,000 shares of common
stock at the IPO price of $5.375, less commissions, expenses and fees, and
repayment of notes payable to related parties of $123,572 and payments to
ex-licensor of $158,493, under the terms of the Purchase Agreement dated
December 31, 1995. The net increase in cash for the nine months ended
September 30, 1996 was $3,734,427, resulting in ending cash of $3,739,435.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
<PAGE> 10
Reference is hereby made to the discussion under the heading "Item 1.
Legal Proceedings" in the Company's Form 10-QSB for the quarter ended March 31,
1996 for information regarding the matter entitled DeCarbon Australia Pty. Ltd.
v. MotorVac Technologies, Inc. (Case No. 764248). The Company has filed
Cross-Complaints against both DeCarbon and Robert L. Fisher, alleging generally
breach of contracts, trademark infringement, misappropriation of trade secrets
and unfair competition. Fisher, in turn, has cross-complained against the
Company generally for libel, slander, unfair competition and breach of an
indemnity agreement.
On October 29, 1996, the Company obtained a preliminary injunction
against DeCarbon from using the names "CarbonClean," "MotorVac," "MTI"; from
falsely representing any of their products as being from MotorVac or
CarbonClean; from soliciting any dealers or distributors of MotorVac and from
disclosing or using MotorVac's proprietary information which DeCarbon had
obtained while a distributor. The Company also obtained a preliminary
injunction against Fisher from using or disclosing confidential information
which he obtained while he was an employee of MotorVac. On October 31, 1996,
the Company obtained dismissal of that portion of Fisher's Cross-Complaint
relating to his indemnity agreement.
Reference is hereby made to the discussion under the heading "Legal
Proceedings" contained on page 38 of the Company's Prospectus dated April 25,
1996 with regard to the action filed by the Company in the United States
District Court of the Northern District of Ohio, Eastern Division, against
Richard R. Green, individually and doing business as P&R Equipment Company,
Gregory M. Phillips, C.S.P. International, Inc. and certain other defendants,
and the counterclaim filed by certain of the defendants in connection with such
proceeding. Written discovery is currently scheduled for March, 1997 with a
preliminary court date set for July, 1997.
ITEM 5. RESTATEMENT OF RESULTS
During the 1996 year-end, the Company discovered a cost of sales
adjustment that affected the quarterly results for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996, as previously filed on Form10-QSB.
The results, as previously reported and as restated for the quarter ended June
30, 1996, and the nine months ended September 30, 1996, are as follows:
<TABLE>
<CAPTION>
3 Months Ended 9/30/96 9 Months Ended 9/30/96
---------------------- ----------------------
As Previously As As Previously As
Statement of Operations Reported Restated Reported Restated
----------------------- -------- -------- -------- ---------
<S> <C> <C> <C>
Sales 2,650,581 2,650,581 5,821,421 5,821,421
Cost of sales 1,546,676 1,607,794 3,113,784 3,432,220
Gross profit 1,103,905 1,042,787 2,707,637 2,389,201
Loss from operations (82,315) (143,433) (452,636) (771,072)
Net loss (65,784) (126,902) (617,870) (936,306)
Balance Sheet
-------------
Inventory 1,279,730 961,294
Total current assets 6,490,024 6,171,588
Total assets 8,165,925 7,847,489
Accumulated deficit (11,310,862) (11,629,298)
Total Stockholders'
(Deficiency) Equity 5,236,049 4,917,613
Total Liabilities and
Stockholders' (Deficiency) Equity 8,165,925 7,847,489
</TABLE>
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 3.1 Amended and Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit No. 3.1 to the Registrant's
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission (the "SEC") on February 29, 1996 (the "Form SB-2").
3.2 Third Amended and Restated Bylaws of Registrant (incorporated
by reference to Exhibit No. 3.2 to the Form SB-2).
3.3 Amendment to the Third Amended and Restated Bylaws of
Registrant (incorporated by reference to Exhibit No. 3.3 to Amendment No. 1 to
the Form SB-2 filed with the SEC on March 29, 1996) (the "Amendment No. 1 to
Form SB-2").
4.1 Form of Underwriter's Warrant Agreement by and between the
Registrant and Meridian Capital Group, Inc. (incorporated by reference to
Exhibit No. 4.1 to Amendment No. 2 to Form SB-2 filed with the SEC on April 25,
1996) (the "Amendment No. 2 to Form SB-2").
4.2 Form of certificate evidencing shares of Registrant's common
stock (incorporated by reference to Exhibit No. 4.2 to Amendment No. 1 to Form
SB-2).
10.1 Letter Agreement dated September 15, 1996, by and between the
Registrant and Automotive Diagnostics canceling the Products Distribution
Agreement dated November 16, 1995, along with the Product Labeling Agreement
(incorporated by reference to the Form 10-QSB for the period ended September
30, 1996, filed November 1, 1996).
10.2 Products Distribution Agreement dated September 15, 1996, by
and between the Registrant and Cartek International, Inc., covering the
territory of South and Central America and the Caribbean, with the exception of
Brazil, Mexico and Puerto Rico (incorporated by reference to the Form 10-QSB
for the period ended September 30, 1996, filed November 1, 1996).
10.3 First Amendment to Purchase Agreement dated September 30,
1996, between the Registrant, International Turbo Center, Inc., and
Enviromotive, Inc. (incorporated by reference to the Form 10-QSB for the period
ended September 30, 1996, filed November 1, 1996).
11.1 Statement of Calculation of Pro Forma Net Loss Per Share and
Net Loss Per Share.
27.1 Financial Data Schedule in accordance with Article 5 of
Regulation SX.
(b) No reports on Form 8-K were filed during the quarter ended September
30, 1996.
<PAGE> 12
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MOTORVAC TECHNOLOGIES, INC.,
a Delaware corporation
By: s/ Lee W. Melody
-----------------------------------------------------------
Lee W. Melody, President
Date: March 18, 1997
By: s/ Allan T. Maguire
-----------------------------------------------------------
Allan T. Maguire, Vice President of Finance,
Chief Financial Officer, Treasurer and Secretary
Date: March 18, 1997
<PAGE> 13
MOTORVAC TECHNOLOGIES, INC.
EXHIBIT INDEX
3.1 Amended and Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit No. 3.1 to the Registrant's
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission (the "SEC") on February 29, 1996 (the "Form SB-2").
3.2 Third Amended and Restated Bylaws of Registrant (incorporated
by reference to Exhibit No. 3.2 to the Form SB-2).
3.3 Amendment to the Third Amended and Restated Bylaws of
Registrant (incorporated by reference to Exhibit No. 3.3 to Amendment No. 1 to
the Form SB-2 filed with the SEC on March 29, 1996) (the "Amendment No. 1 to
Form SB-2").
4.1 Form of Underwriter's Warrant Agreement by and between the
Registrant and Meridian Capital Group, Inc. (incorporated by reference to
Exhibit No. 4.1 to Amendment No. 2 to Form SB-2 filed with the SEC on April 25,
1996) (the "Amendment No. 2 to Form SB-2").
4.2 Form of certificate evidencing shares of Registrant's common
stock (incorporated by reference to Exhibit No. 4.2 to Amendment No. 1 to Form
SB-2).
10.1 Letter Agreement dated September 15, 1996, by and between the
Registrant and Automotive Diagnostics canceling the Products Distribution
Agreement dated November 16, 1995, along with the Product Labeling Agreement
(incorporated by reference to the Form 10-QSB for the period ended September
30, 1996, filed November 1, 1996).
10.2 Products Distribution Agreement dated September 15, 1996, by
and between the Registrant and Cartek International, Inc., covering the
territory of South and Central America and the Caribbean, with the exception of
Brazil, Mexico and Puerto Rico (incorporated by reference to the Form 10-QSB
for the period ended September 30, 1996, filed November 1, 1996).
10.3 First Amendment to Purchase Agreement dated September 30,
1996, between the Registrant, International Turbo Center, Inc., and
Enviromotive, Inc. (incorporated by reference to the Form 10-QSB for the period
ended September 30, 1996, filed November 1, 1996).
11.1 Statement of Calculation of Pro Forma Net Loss Per Share.
27.1 Financial Data Schedule in accordance with Article 5 of
Regulation SX.
<PAGE> 1
MOTORVAC TECHNOLOGIES,INC.
CALCULATION OF PROFORMA NET LOSS PER SHARE
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
Sept. 30. 1996 Sept. 30. 1996
--------------- ---------------
<S> <C> <C>
Proforma Net Loss:
Net Loss ($126,902) ($936,306)
Proforma Reduction of Interest Expense 0 132,416
--------------- ---------------
Proforma Net Loss (126,902) (803,890)
--------------- ---------------
Proforma Weighted Average Outstanding Common and
Common Equivalent Shares:
Common Stock Outstanding, December 31, 1995 948,000 948,000
Common stock equivalents:
Conversion of Series A Preferred Stock 966,247 966,247
Conversion of Series B Preferred Stock 570,150 570,150
Common Shares Issued in Initial Public Offering 1,100,000 1,100,000
Weighting of Initial Public Offering Shares 1,100,000 638,321
Conversion of $4,410,300 of Notes Payable to Related party 820,521 820,521
Common stock issued in Overallotment on June 15,1995 110,000 110,000
Weighting of overallotment Stock 110,000 42,956
Common Stock Equivalents before below 4,514,918 3,986,195
Incremental Shares, assuming exercise of options granted
after Sept. 30, 1996 12,989 7,256
Weighting of incremental shares from options (eliminated
if increases loss per share) 0 0
Incremental Shares Related to repayment of Interest 0 24,636
--------------- ---------------
Total Incremental Shares 0 24,636
--------------- ---------------
Proforma Weighted Average Outstanding Common and
--------------- ---------------
Common Equivalent Shares 4,514,918 4,010,831
=============== ===============
Proforma Net Loss per Common Share and Common
Share Equivalent 0.03 0.20
=============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF MOTORVAC INCORPORATED AS OF AND FOR THE
PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,739,435
<SECURITIES> 0
<RECEIVABLES> 1,309,641
<ALLOWANCES> 55,070
<INVENTORY> 961,294
<CURRENT-ASSETS> 6,171,588
<PP&E> 511,576
<DEPRECIATION> 262,205
<TOTAL-ASSETS> 7,847,489
<CURRENT-LIABILITIES> 1,509,876
<BONDS> 0
0
0
<COMMON> 45,149
<OTHER-SE> 16,501,762
<TOTAL-LIABILITY-AND-EQUITY> 7,847,489
<SALES> 2,650,581
<TOTAL-REVENUES> 2,650,581
<CGS> 1,607,794
<TOTAL-COSTS> 1,607,794
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (16,531)
<INCOME-PRETAX> (126,902)
<INCOME-TAX> 0
<INCOME-CONTINUING> (126,902)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (126,902)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
