U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995, due on August 14, 1995,
actually filed on August 29, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number 33-76634
ENERGY CONSERVATION INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Florida 59-3223766
(State of Incorporation) (IRS Employer ID No.)
503 Barnes Drive
Brandon, Florida 33511
(Address of principal executive offices)
(813) 689 1041
(Issuer's Telephone Number)
Vision Marketing Group, Inc. 28870 U.S. 19 North, Suite 300 Clearwater, FL
34621 12/31 (Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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
DOCUMENTS INCORPORATED BY REFERENCE
None
Common stock, $0.01 par value per share; 2,540,834 shares outstanding as of
8/15/96
<PAGE>
ENERGY CONSERVATION INTERNATIONAL, INC.
Table of Contents
Page No.
PART I Financial Information
Item 1 Financial Statements
Index to Financial Statements F-1
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
Item 2 Managements' Discussion and Analysis 12
PART II Other Information
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
<PAGE>
ENERGY CONSERVATION INTERNATIONAL, INC.
PART I Financial Information
Item 1 Financial Statements
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets............................................................ F-2
Statements of Operations................................................. F-3
Statements of Stockholders' Equity....................................... F-4
Statements of Cash Flows................................................. F-4
Notes to Financial Statements............................................ F-6
F-1
<PAGE>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Balance Sheets
December 31, June 30,
1994 1995
ASSETS (Unaudited)
CURRENT ASSETS
Cash $ 10,797 1,839
Accounts receivable 0 0
------------- ------------
Total Current Assets 10,797 1,839
------------- ------------
PROPERTY AND EQUIPMENT (note 1b)
Vehicles 16,000 16,000
Less - Accumulated depreciation (13,235) (13,696)
------------- ------------
Total Property and Equipment 2,765 2,304
------------- ------------
OTHER ASSETS
Note receivable from stockholder 25,158 20,343
(note 7) Intangible assets, net 3,212 3,165
of amortization (note 1c) ------------- ------------
Total Other Assets 28,370 23,508
------------- ------------
Total Assets $ 41,932 27,651
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 493 845
Deferred income tax liability
(note 8) 576 576
Payroll taxes payable 19,612 21,430
Income and intangible taxes payable 2,088 2,088
------------- ------------
Total Current Liabilities 22,769 24,939
------------- ------------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value;
Authorized 50,000,000 shares; issued
and outstanding 2,505,833 (note 2) 25,058 25,058
Preferred stock, no par value;
Authorized 10,000,000 shares; issued
and outstanding 0 (none) (note 2) 0 0
Additional paid in capital 57,563 57,563
Retained earnings (deficit) (63,458) (79,909)
------------- ------------
Total Stockholders' Equity 19,163 2,712
------------- ------------
Total Liabilities and Stockholders' Equity $ 41,932 27,651
============= ============
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Statements of Operations
<TABLE>
<S> <C> <C> <C> <C>
3 months ended June 30, 6 months ended June 30,
1994 1995 1994 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUES
Product sales $ 137,861 0 137,861 0
Commissions 22,882 0 43,157 0
Other 0 1 0 504
------------- -------------- ------------- --------------
Total Revenue 160,743 1 181,018 504
------------- -------------- ------------- --------------
Cost of goods sold 500 0 69,103 500
------------- -------------- ------------- --------------
Gross profit 160,243 1 111,915 4
------------- -------------- ------------- --------------
EXPENSES
Advertising 6,257 0 6,257 0
Amortization 47 0 47 47
Automotive 249 147 673 2,357
Bad debt (note 5) 0 0 0 0
Bank charges 27 36 27 185
Commissions 0 0 0 0
Contributions 0 0 0 0
Depreciation 461 461 922 461
Initial public offering costs 0 2,550 0 2,750
Insurance 391 0 391 0
Office supplies and expenses 1,200 616 1,883 1,118
Professional fees 0 0 300 70
Rent 182 274 457 547
Salaries 7,000 0 17,500 0
Payroll taxes, penalties, interest, licenses 0 0 0 1,818
Samples 550 0 550 457
Travel and entertainment 682 300 1,432 1,251
Telephone 915 639 1,790 1,670
Miscellaneous 146 1,324 396 3,724
------------- -------------- ------------- --------------
Total expenses 11,177 6,347 32,625 16,455
------------- -------------- ------------- --------------
Net income (loss) before taxes 149,066 (6,346) 79,290 (16,451)
------------- -------------- ------------- --------------
Provision for income tax expense
(benefit) 0 0 15,209 0
------------- -------------- ------------- --------------
Net income (loss) $ 149,066 (6,346) 64,081 (16,451)
============= ============== ============= ==============
Net income per share $ 0.06 0.01 0.03 0.01
============= ============== ============= ==============
Shares outstanding 2,505,833 2,505,833 2,505,833 2,505,833
============= ============== ============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Statements of Stockholders' Equity
<S> <C> <C> <C> <C> <C>
Additional Retained Total
Common Paid In Preferred Earnings/ Stockholders'
Stock Capital Stock (Deficit) Equity
BALANCE, December 31, 1994 25,058 57,563 0 (63,458) 19,163
Net loss 0 0 0 (16,451) (16,451)
----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1995 (unaudited) $ 25,058 57,563 0 (79,909) 2,712
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Statements of Cash Flows
<TABLE>
<S> <C> <C>
6 months ended June 30,
1994 1995
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited) (Unaudited)
Net income/loss $ 64,081 (16,451)
Adjustments to reconcile net loss to
net cash used for operating activities:
Amortization 0 47
Depreciation 922 461
Stock issued for services 0 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (122,662) 0
Increase (decrease) in accounts payable 61,619 352
Increase in deferred income tax liability 13 0
Increase in payroll taxes payable 0 1,818
Increase in income taxes payable 15,196 0
------------- -------------
Net cash (used) provided by operating activities 19,169 (13,773)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Stockholder advance repayment 0 22,394
Funds advanced to stockholder 0 (17,579)
------------- -------------
Net cash provided (used) by investing activities 0 4,815
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
None
Net increase (decrease) in cash 19,169 (8,958)
-------------- ------------
CASH, beginning of period 2,925 10,797
-------------- ------------
CASH, end of period 22,094 1,839
============== ============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
None
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Notes to Financial Statements
(Unaudited)
(1) Summary of Significant Accounting Principles
The Company Energy Conservation International, Inc. ("the Company") was
chartered by the State of Florida on December 9, 1992 and conducts business from
its headquarters in Clearwater, Florida. Some of the Company's national accounts
are Home Shopping Network, QVC network, Fingerhut, Comb Liquidators and Damark.
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the dates of the statements of
financial condition and revenues and expenses for the years then ended. Actual
results could differ significantly from those estimates. The financial
statements for the six months ended June 30, 1994 and 1995 include all
adjustments which in the opinion of management are necessary for fair
presentation.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Revenue recognition The Company currently has two distinctly different
revenue streams. These are:
1) Commission sales - The Company acts in the capacity of a manufacturers
representative by receiving orders for products supplied by the companies it
represents and receives commissions for these sales. The Company normally
receives a commission percentage of approximately 5% on sales of products sold
on a recurring basis. It receives a higher percentage, approximately 8% to 10%
on one time sales, such as closeouts. The Company normally accrues commission
income at the time the customer accepts a shipment, as the customer reserves the
right to modify or cancel the order prior to acceptance of the shipment. Net
commission sales for the six months ended June 30, 1994 were approximately
$43,157 and $0, for the six months ended June 30, 1995.
2) Product sales - The Company recognizes the revenue on these sales when
the sales were invoiced, which was at delivery of goods to the purchasers. As
these sales were final with no right of return, no reserves were established.
Current sales of goods are FOB shipper dock and are invoiced at time of
notification to the Company of shipment by the manufacturer.
b) Fixed assets Fixed assets are stated at cost. Depreciation is computed
by the straight line method over the estimated useful lives of the assets,
generally five and seven years. Expenditures for maintenance and repairs are
charged to operations as incurred. Depreciation was $922 and $461 for the six
months ended June 30, 1994 and 1995.
c) Intangible assets Intangible assets are composed of the rights to
commercialize US Patent 5,081,171 issued January 14, 1992. The Company purchased
these rights in February 1993 for 90,000 shares of stock valued at $3,586. These
rights are being amortized over their remaining 16 year life using the
straight-line method. Amortization amounted to $47 for the six months ended June
30, 1994 and 1995.
(2) Stockholders' equity The Company has authorized 50,000,000 shares of
$0.01 par value common stock, and 10,000,000 of no par value preferred stock. On
November 10, 1992 the founder of the Company entered into an agreement to issue
200,000 shares of the then future company's common stock in exchange for certain
legal services related to the founding of the Company and the patent rights
negotiations. The founder valued
F-6
<PAGE>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Notes to Financial Statements, Continued
(2) Stockholders' equity, continued these services at $200. On December 9,
1992 the Company entered into an agreement with the owner of the Predecessor to
exchange 55%, (2,200,000 shares), of the authorized shares of its common stock
to the owner to effect a tax-free reorganization from a sole proprietorship to a
corporation under the Internal Revenue Code Section 368(a)(1)(F). This
transaction was effected at close of business December 31, 1992, with a
valuation of $43,835.
In February, 1993 the Company entered into two agreements to exchange
90,000 shares of the Company's common stock for the rights to commercialize US
Patent 5,081,171, and for the recipient of the shares to terminate a then
existing joint-venture formed for the purpose of commercializing said patent.
The rights received by the Company were valued by the Board of Directors and the
individual at $3,586.
In March, 1993 the Company sold 3,333 shares of its' common stock for cash
at a price of $3.00 per share, for a total of $10,000. In September, 1993 the
Company sold 12,500 shares of its' common stock for cash at a price of $2.00 per
share, for a total of $25,000.
(3) Common stock public offering On November 10, 1992 the Board of
Directors authorized the Company to sell up to 400,000 shares of the Company's
common stock in a "self-underwritten" public offering pursuant to a Registration
Statement on Form SB-2 under the Securities Act of 1933. On December 16, 1993
the Board of Directors voted to increase the number of shares offered hereby to
700,000. This offering is being made with a 35,000 share minimum, and is
effective for one year from the effective date of the registration (June 7,
1995). The stock included in this offering is priced at $6.00 per share. This
offering price was determined in a completely arbitrary manner and bears no
relation to any recognized standard of value. The minimum required to be sold by
the Company before it has access to the funds is $210,000 at the offering price,
with a net to the Company of $182,700 after sales commissions and
unaccountables, assuming all 35,000 shares are sold through a NASD
broker/dealer. (No sales commissions and unaccountables will be paid to any
officer or director). The maximum proceeds of this offering are $4,200,000, or
$3,654,000 net of sales commissions and unaccountables, assuming all shares are
sold through NASD broker/dealers.
In September 1994 the Company entered into a Letter of Intent with
Donnellan Haylett & Co., Inc. of Sarasota, FL to be the Underwriter on a "best
efforts" basis for this offering. The terms of this Letter call for the
Underwriter to receive commissions of 10% and a non-accountable expense
allowance of 3% for each share sold. The Company also agreed to sell a warrant
to the Underwriter, for $70, which allows the Underwriter to purchase one share
for every ten shares sold by the Underwriter or certain dealers. The exercise
price of the warrant is $7.20 per share, and is exercisable until 5 PM, EST,
September 1, 1999. In July 1994 the Company terminated an agreement with another
company which provided for marketing and related services related to the
Company's self-underwriting of its offering. This agreement was canceled due to
the negotiations with Donnellan Haylett, which resulted in the Letter of Intent.
In January 1995, as a result of the merger between Donnellan Haylett & Co.,
Inc. and Executive Securities, Inc. in which Donnellan Haylett became a wholly
owned subsidiary of Executive, a new underwriting agreement was executed between
the Company and Executive Securities. This agreement bears exactly the same
terms and conditions as the previous agreement with Donnellan Haylett.
(4) Commitments In February, 1993 the Company entered into a sales
agreement with Pro-Tech Laboratories, Inc. of Reddington Beach, California for
the sale of various products based on US Patent 5,081,171. This agreement
includes provisions requiring minimum annual purchases, as well as limiting the
market available to Pro-Tech for such sales. In February, 1993 the Company
entered into an agreement with the owner of US,
F-7
<PAGE>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Notes to Financial Statements, Continued
(4) Commitments, continued as described in note (2). Further, this
agreement includes payment of licensing royalties to said owner under Patent
5,081,171 the following schedule: for patented products - 9% of the first
$500,000 of sales, 6% of the next $1,500,000 of sales, 5% of the next $3,000,000
of sales and 4% of sales exceeding $5,000,000; for unpatented products the
percentages are 5%, 4%, 3% and 2% with exactly the same levels of sales. The
Company is also granted the right of first refusal for any other patents granted
to the inventor.
In July, 1993 the Company entered into a manufacturing agreement with
European Research Laboratories of Pompano Beach, Florida for the production of a
line of cosmetic, skin and hair care products exclusively using the product
label "Andre Collard". This agreement has no minimum purchase requirements.
(5) Allowance for bad debts During October 1994 the Company evaluated the
accounts receivable balances of its three principal customers. In the course of
working with one of the customers it discovered two significant items. First,
this customer had been forced to close the business by a governmental regulatory
body. As a result it had canceled an order with the manufacturer on the day the
goods were being shipped. The manufacturer had failed to notify the Company,
which resulted in an overstatement of sales in the first two quarters of the
year by $59,400. The Company reflected this adjustment as a reduction of sales
in the third quarter.
The Company also established a reserve of $62,886 against the remaining
balance of this customer's account receivable at that time. The Company
collected $27,795 of this reserve. At year end the Company determined that the
remaining balance of $35,091 was uncollectible and wrote off this amount.
Also, there was a dispute between another customer (commission basis) and
the Company. The customer stated it owed the Company $14,488 less than the
Company believed was owed. Due to this disagreement, which relates to a June
transaction, the Company has established a reserve of $14,488 against this
account receivable. The Company recovered $13,042 of this amount. At year end
the Company determined that the remaining balance of $1,446 was uncollectible
and wrote off this amount.
As of December 31, 1994 the Company had recovered $40,837 of the amounts
reserved against accounts receivable, which originally totaled $77,374. The
Company believes that significant doubt exists as to the collectability of the
remaining balance, therefore the Company chose to write-off the $36,537 balance
remaining. As of June 30, 1995 the Company has not collected any additional
amounts of this balance. The Company intends to fully review all accounts
receivable on an at least a quarterly basis in the future to determine the
necessity of establishing reserves.
(6) Industry Segment Information The Company has three distinct industry
segments, of which two make up Product sales, and the third is the sole segment
within the Commissions revenue stream. The Company sells household products
strictly on commission for third-party manufacturers. The Product sales revenue
stream is currently composed of its automotive products, but expects to sell its
cosmetics line beginning in early 1995.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Household Products Automotive Products Cosmetics
6 months ended June 30, 1995 1994 1995 1994 1995 1994
Revenue $ 0 43,157 0 137,861 0 0
Profitability $ 0 43,157 0 68,758 0 0
Identifiable assets $ 0 0 3,586 3,586 0 0
Depreciation $ 0 230 231 231 230 0
Capital expenditures $ 0 0 0 0 0 0
</TABLE>
F-8
<PAGE>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Notes to Financial Statements, Continued
(7) Note receivable from stockholder The Company has loaned the principal
stockholder, Mr. Baker, $20,343 at June 30, 1995. This loan has been made
without the benefit of collateral, nor does it carry a stated interest rate or
maturity date.
(8) Income taxes The Company had a deferred income tax asset of $0 at June
30, 1994 and $31,600 at June 30, 1995 resulting from net operating loss
carryforwards totalling $79,900. The deferred tax asset is composed of $27,200
for federal and $4,400 for state. These loss carryforwards expire in 2010. As
the Company has had limited profitability, it has established a valuation
allowance of $31,600.
F-9
<PAGE>
ENERGY CONSERVATION INTERNATIONAL, INC.
(f/k/a Vision Marketing Group, Inc.)
PART I Financial Information
Item 2 Management's Discussion and Analysis
Results of Operations - Second Quarter, 1995 and 1994
Revenue for the second quarter 1995, was non-existent and decreased 100% from
the second quarter 1994. This decrease is partly due to the Company's principal
customer for its automotive products ceasing operations in late 1994. The
Company continued the process of negotiating for placement of its cosmetics
product line in a variety of outlets. These efforts were expected to produce
purchase orders for product in the third quarter of 1995.
In addition, the principal of the Company was spending the majority of his time
trying to develop selling syndicate members for the Company's initial public
offering, by phone, fax, mail and personal visits.
The Company was also awaiting the proceeds from its offering to proceed with the
test marketing of its automotive product line, as the Company did not have the
funds to proceed on its own. Due to the inability of the Company to secure
bonding and/or other funding, business that was available could not be
concluded. As a result, the Company recorded no sales in the second quarter
1995.
Expenses fell 50.4% in the second quarter 1995, from the second quarter 1994. A
large portion of this decrease is due to the president not drawing a salary, as
the Company did not have the funds and there was virtually no revenue. The
president waived all rights to compensation for the second quarter 1995.
Plan of Operation
Management intends to use the net proceeds from its offering to further develop
and expand the Company's existing operations and markets. The Company currently
markets two product lines, the Slip brand of automotive products and a line of
cosmetics sold under the brand name Andree Collard. The Company intends to test
market the one minute commercial for the Slip products shortly after receipt of
the net proceeds of this offering. The Company intends to develop its 25 minute
infomercial for the Slip products upon completion of the one minute commercial
test. The Company has also been developing other channels of distribution for
the Slip products, such as new automobile dealerships, automobile manufacturers,
fleet vehicle operators and cable television shopping networks.
The Company has been marketing its cosmetics product line to several regional
and national retail department store chains. The Company also intends to develop
other channels of distribution for the cosmetics product line shortly after
receipt of the net proceeds of its offering. The Company also intends to hire
several additional key personnel shortly after receipt of the net proceeds of
its offering, to include an Automotive National Sales Manager, a Cosmetics
National Sales Manager and a Plant Manager, among others.
Liquidity and Capital Resources
The Company's lack of operating revenues has failed to provide sufficient cash
to meet the Company's ordinary and usual needs. The Company's liquidity was
severely affected by the events discussed in the Results of Operations. The
Company expects its liquidity to be constricted until either operating revenues
improve or the Company receives sufficient proceeds from its offering. The
Company is not expected to enter into any agreements or contracts for
expenditures beyond its current operating needs until sufficient proceeds from
the offering are available to meet those needs. There is no assurance that
sufficient funds will be received from the offering.
The Company's only known sources of capital are the proceeds from the sale of
the common stock and anticipated cash from operating revenues. The Company may
need to incur additional debt in the foreseeable future to fund operating
expenses
12
<PAGE>
ENERGY CONSERVATION INTERNATIONAL, INC.
(f/k/a Vision Marketing Group, Inc.)
PART II Other Information
Item 1 Legal Proceedings
The Company is not a party to any pending legal proceedings.
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
The Company is filing this report to the Securities and Exchange Commission
late. This report was due to have been filed on August 14, 1995, and it is
actually being filed on August 29, 1996.
Item 6 Exhibits and Reports on Form 8-K
None
13
<PAGE>
ENERGY CONSERVATION INTERNATIONAL, INC.
(f/k/a Vision Marketing Group, Inc.)
SIGNATURES
Pursuant to the registration requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Energy Conservation International, Inc.
(Registrant)
BY: /s/ Daniel S. Pena, Sr.
Daniel S. Pena, Sr.
Chairman of the Board
DATE: August 29, 1996
BY: /s/ Jose A. Alvarez, CPA
Jose A. Alvarez, CPA
President, Chief Executive Officer,
Chief Financial Officer
BY: /s/ Steven M. Alvarez
Steven M. Alvarez
Secretary
BY: /s/ Lucinda A. Burke
Lucinda A. Burke
Director
BY: /s/ David A. Reecher
David A. Reecher
Director
14
