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Previous: FPA MEDICAL MANAGEMENT INC, SC 13G, 1997-02-20 |
Next: ENERGY CONSERVATION INTERNATIONAL INC, 10QSB/A, 1997-02-20 |
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 November 30, 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, FL 33511
(Address of principal executive offices)
(813) - 662 - 9330
(Issuer's telephone number)
N/A
(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; 3,387,779 shares
outstanding as of 1/14/97.
Page 1
ENERGY CONSERVATION INTERNATIONAL, INC.
Table of Contents
PART I Financial Information Page No.
Item 1 - Financial Statements
- -Index to Financial Statements F-1
- -Consolidated Balance Sheets F-2
- -Consolidated Statements of Income F-3
- -Consolidated Statements of F-4
Stockholders' Equity
- -Consolidated Statements of Cash F-5
Flows
- -Notes to Consolidated Financial F-6
Statements
Item 2 - Management's' Discussion 9
and Analysis
PART II - Other Information
Item 1 - Legal Proceedings 11
Item 2 - Changes in Securities 11
Item 3 - Defaults Upon Senior 11
Securities
Item 4 - Submission of Matters to a 11
Vote of Security Holders
Item 5 - Other Information 11
Item 6 - Exhibits and Reports on 11
Form 8-K
SIGNATURES 12
Page 2
ENERGY CONSERVATION INTERNATIONAL, INC.
PART I Financial Information
Item 1 Financial Statements
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-3
Consolidated Statements of F-4
Stockholders' Equity
Consolidated Statements of Cash F-5
Flows
Notes to Consolidated Financial F-6
Statements
F-1
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Consolidated Balance Sheets
Nov. 30, May 31,
1996 1996
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
-Cash $ 4,227 $ 0
-Accounts receivable 9,987 0
-Inventory 87,652 0
-Prepaid expenses
17,487 0
Total Current Assets
119,353 0
PROPERTY AND EQUIPMENT
-Property & Equipment 198,907 16,000
-Less-accumulated depreciation (5,925) (15,846)
Total Property and Equipment 192,982 154
OTHER ASSETS 28,423 13,742
Total Assets $340,758 $13,896
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
-Accounts Payable $98,517 $13,225
-Accrued Expenses 26,755 5,457
Total Current Liabilities 125,272 18,682
LONG TERM LIABILITIES
-Note Payable 0 15,049
DUE TO RELATED PARTIES 212,141 0
Total Liabilities 337,413 33,731
STOCKHOLDERS' EQUITY
-Common stock, $0.01 par
value; Authorized 50,000,000
shares; issued and outstanding
2,505,833 at May 31, 1996 and 33,878 25,058
issued and outstanding
3,387,779 at November 30, 1996
-Preferred stock, no par
value; Authorized 10,000,000 0 0
shares; issued and outstanding
0 (none)
-Additional paid-in-capital 267,219 57,563
-Retained earnings (deficit) (297,752) (102,456)
Total Stockholders' Equity 3,345 (19,835)
Total Liabilities and $340,758 $13,896
Stockholders' Equity ======== ========
See notes to the Consolidated Financial Statements
F-2
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Consolidated Statements of Income
3 Months Ended 6 Months Ended
Nov. 30, Dec. 31, Nov. 30, Dec. 31,
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $ 15,077 $(10,240) $ 18,610 $ 2,001
Cost of sales 31,052 (3,516) 34,059 150
Gross Profit (15,975) (6,724) (15,449) 1,851
Selling and
operating expenses 106,333 13,068 172,311 29,163
Income (loss) from (122,308) (19,792) (187,760) (27,312)
operations
Interest expense (4,003) (771) (4,596) (771)
Other income
(expense) (1,755) (508) (2,944) (1,522)
Income (loss) (128,066) (21,071) (195,300) (29,605)
before taxes
Provision
(benefit) for 0 0 0 0
income taxes
Net income (loss) $(128,066) $(21,071) $(195,300) $(29,605)
======== ======== ======== ========
Net income per
weighted average $(0.047) $(0.008) $(0.074) $(0.012)
common shares ======== ======== ======== ========
Weighted average
common shares 2,745,590 2,505,833 2,641,314 2,505,833
outstanding ======== ======== ======== ========
See notes to the Consolidated Financial Statements
F-3
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Consolidated Statements of Stockholders' Equity
Additional Retained Total
Common Preferred Paid-In Earnings/ Shareholders'
Stock Stock Capital (Deficit) Equity
BALANCE, May 31, $25,05 $ 0 $57,563 $(102,452) $(19,831)
1996
Issuance of 8,820 0 209,656 0 218,476
Common Stock
Net Loss 0 0 0 (195,300) (195,300)
BALANCE Nov. $33,878 $ 0 $267,219 $(297,752) $ 3,345
30,1996 ======= ===== ======== ========== =========
(Unaudited)
See notes to the Consolidated Financial Statements
F-4
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Consolidated Statements of Cash Flows
6 Months Ended
Nov. 30,1996 Dec. 31,1995
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING:
-Net income (loss) $(195,300) $ (29,605)
Adjustments to reconcile net
loss to net cash used for
operating activities:
-Depreciation and amortization 6,106 1,522
(Increase) / decrease in assets:
-Accounts receivable (9,987) 0
-Inventory (87,652) 0
-Prepaid expenses (17,487) 0
Increase / (decrease) in liabilities:
-Accounts Payable 85,292 13,382
-Accrued expenses 21,298 (5,364)
Net cash provided by (used in)
operating activities (197,730) (21,065)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property & equipment (198,907) 0
Proceeds from sale of assets 154 0
Other assets - net (14,704) 0
Loans to related parties & others (154) 0
Net cash provided by (used in)
investing activities (213,611) 0
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of 218,476 0
common stock
Related party debt - net 212,141 3,922
Borrowings of bank debt 0 15,249
Repayments of long term debt (15,049) 0
Net cash provided by (used in)
financing activities 415,568 19,171
Net increase (decrease) in cash 4,227 (1,894)
CASH, beginning of period 0 1,839
CASH, end of period $ 4,227 $ 55
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid in cash $ 5,443 $ 393
========= =========
See notes to the Consolidated financial statements
F-5
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Notes to Financial Statements
November 30, 1996 and December 31, 1995
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with the generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three months and six months ended
November 30,1996 are not necessarily indicative of the results
that may be expected for the year ended May 31,1997.
The company changed it's fiscal year end from December 31 to May
31. These financial statements have a current period covering
June thru November of 1996. It is not feasible or cost effective
to recast and we are comparing to July thru December of 1995.
Note - 2 Principles of Consolidation
The consolidated financial statements include the accounts of
ENERGY CONSERVATION INTERNATIONAL, INC. (f/k/a Vision Marketing
Group, Inc.) and its wholly owned subsidiary, Mor-Lite of North
America, Inc. which was started on June 13, 1996. All material
intercompany transactions have been eliminated.
Note - 3 Acquisition of Subsidiary and Assets
On June 12, 1996 the State of Florida approved the Articles of
Incorporation for Mor-Lite of North America, Inc. ("MLNA") a
wholly owned subsidiary of the Company, and on June 13, 1996 the
Company acquired some assets and U.S. Governmental part numbers
from a company in the business of energy-efficient lighting
products and elected to form this wholly owned subsidiary to
facilitate the acquisition and to transact this business on
behalf of the Company.
F-6
Item 2 Management Discussion and Analysis
Results of Operations - Second Quarter ended November 30, 1996
compared to quarter ended December 31, 1995
As previously reported, the Company changed its fiscal year end
from December 31 to May 31. This Form 10-Q has a current period
covering September thru November of 1996. It is not feasible or
cost-effective to recast and we are comparing it to October thru
December of 1995.
Revenues for the quarter ended November 30, 1996 were $15,077 as
compared to $(10,240) for the quarter ended December 31, 1995.
(There was a sales return of $10,240 in October of 1995.) Cost
of sales for the quarter ended November 30, 1996 were $31,052.
They include cost of materials and allocated overhead of $12,784.
However, due to the low volume of sales there was an additional
$18,268 of factory overhead not allocated to sales or inventory,
thus creating a negative gross profit of $15,795. Operating
expenses for the quarter ended November 30, 1996 totaled $106,333
- - an increase of 713.69% or $93,265 over the $13,068 of operating
expenses for the 3-month period ended December 31, 1995. The
majority of this increase can be attributed to the development
costs associated with the Company's new subsidiary (Mor-Lite of
North America, Inc. - MLNA) in the energy conservation field,
which is where the Company is concentrating its efforts. The
increase included payroll and sales representative costs
associated with the staffing of MLNA's management and sales team,
totaling $67,500.00, as compared to no payroll costs for the
quarter ended December 31, 1995. For the current quarter this
amount included accrued salaries of $19,500 to Mr. Jose A.
Alvarez, the Chief Executive Officer of the Company, and $3,000
to Mr. Steven Alvarez, the Corporate Secretary and Controller.
These salaries were not paid and Mr. Jose Alvarez and Mr. Steven
Alavarez will not draw these salaries until the proper funds are
available. The amount owed them is reflected as part of the `Due
to Related Parties'. In addition Mr. Elton R. Guffey did not
draw $10,000 of his salary, this amount is included in accrued
salaries.
This increase for the quarter ended November 30, 1996 also
included an additional $16,635 of selling and marketing expenses
for travel, trade shows, marketing materials and advertising to
present the Company's product to potential customers. There were
no selling and marketing expenses for the quarter ended December
31, 1995.
The Company's interest expense was $4,003, compared to $771 for
1995. Other expenses included $1,767 for general depreciation
and amortization, an increase of 247.83% or $1,259, compared to
$508 for 1995. Net loss for the quarter ended November 30, 1996
was $128,066 or $0.047 per share, versus a loss of $21,071 or
$0.008 per share for the quarter ended December 31,1995.
Plan of Operation
As disclosed in the U.S. Securities and Exchange Commission Form
10-KSB for the transition period from January 1, 1996 to May 31,
1996, the Company closed out its escrow on June 7, 1996. On June
12, 1996 the Board of Directors and the majority shareholders
authorized the use of the proceeds of the offering to transact
business in
the energy conservation field; also on this date the state of
Florida approved the Articles of Incorporation for Mor-Lite of
North America, Inc. ("MLNA"), a wholly owned subsidiary of the
Company. Moreover, on June 13, 1996 the Company acquired some
assets and U.S. Governmental part numbers from a company in the
business of energy efficient lighting products and elected to
form this wholly owned subsidiary to facilitate the acquisition
and transact business on behalf of the parent company -- Energy
Conservation International, Inc. (ECI).
The Company for the quarter and six months ended November 30,
1996 has been expending its funds including advances from the CEO
Mr. Jose Alvarez (see Liquidity and Capital Resources) to develop
and position its subsidiary MLNA to present and market its
products to potential customers including the Federal Government.
It included the hiring of its management and sales team led by
MLNA President Mr. Elton R. Guffey and Mr. Dale K. Adams, Vice
President and Director of Marketing. Mr. Adams has been involved
with energy conservation products for the past 26 years. The
Company has now obtained necessary equipment, inventory and
facilities to become fully operational.
Page 9
The Company's subsidiary, MLNA, is now operational with the same
directors as ECI, led by Chairman Daniel S. Pena, Sr. and CEO
Jose A. Alvarez. The executives of MLNA, as indicated, have many
years of industry experience in the energy conservation field, as
well as extensive knowledge of dealing with U.S. Government
contracts. The Company had started preliminary energy audits and
prepared bids on both commercial and Governmental contracts. The
Company had received an order at the end of November 30, 1996 for
$135,573.
The management of the Company intends to pursue other potential
mergers and acquisitions in the energy conservation field. This
will enable the Company to increase in size and revenues and thus
become a more dominant player in this dynamic field.
Liquidity and Capital Resources
The funds raised by the sale, at the closing of the escrow
mentioned above, of the 35,001 shares of common stock which
raised $210,006 - pursuant to the Offering and Prospectus dated
June 7, 1995 - have been used to start and develop the operation
of MLNA, with the proceeds used to market, purchase inventory and
some equipment, and hire personnel, as required, for MLNA to
become a fully operational company. The Company's lack of
operating revenues as it has been developing MLNA has failed to
provide sufficient cash to meet the Company's operational and
development costs. The Company was not able to secure from
financial institutions the funds to purchase the new equipment
needed to produce its product or finance its daily operations.
Since the Company needed this new equipment to be able to produce
its product, Mr. and Mrs. Jose A. Alvarez personally loaned
$150,000 from personal assets, and lent it to the corporation as
an unsecured loan to accomplish this. Mr. and Mrs. Alvarez also
lent the corporation an additional $30,568 thru November 30, 1996
for its daily operations. Whereas, these loans where absolutely
necessary for the corporation to continue its existence, the
Board of Directors (with Mr. Jose Alvarez obstaining) on November
8, 1996 resolved to issue Mr. and Mrs. Jose Alvarez 846,945
shares of common stock for $8,469.45 as part of the loan
agreement consideration and funds advanced.
The Company's sources of capital in the future should come from
operating revenues as it starts producing sales. The Company is
also continuing to seek financing sources and Mr. Alvarez will be
making additional fund advances.
Page 10
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
PART II Other Information
Item 1 Legal Proceedings
On October 14, 1996 the Company's subsidiary Mor-Lite of North
America, Inc. was named in a legal proceeding as "a successor
corporation" in a case versus Mor-lite, Inc., the company from
which some assets were purchased. This was an asset purchase and
there was no continuation of business nor any common
shareholders. The Company expects to be successful in being
dropped as a defendant since it did not assume any liabilities
nor was there a continuation of business.
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
On June 11, 1996, a special shareholders meeting approved by
majority vote of shareholders and proxy, the use of the proceeds
of the public offering to include the investment of $75,000 for
the purchase of certain assets of Mor-Lite, Inc.. All 2,223,501
shares represented at the meeting voted in favor of the action.
This is 87.5% of the 2,540,834 shares outstanding at the time.
This included approval of 100% (35,001 shares) purchased through
the public offering. Subsequently, on November 8, 1996, by
written consent to action of the shareholders ratified the above,
as well as, the election of the Board of Directors, corporate
name change, authorized shares, amended articles of
incorporation, and actions by the Board of Directors since June
11, 1996, as previously reported on May 31, 1996 - 10-KSB filed
on August 29, 1996 and on Form 8-K filed on August 29, 1996.
Item 5 Other Information (Additional Stock Issue)
See Liquidity and Capital Resources, Page 10
Item 6 Exhibits and Reports on Form 8-K
None
Page 11
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
BY: /s/ Jose A. Alvarez, CPA_________________________________
Jose A. Alvarez, CPA
President, Chief Executive Officer, Chief Financial Officer
DATED: February 20, 1997
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 4,227
<SECURITIES> 0
<RECEIVABLES> 9,987
<ALLOWANCES> 0
<INVENTORY> 87,652
<CURRENT-ASSETS> 119,353
<PP&E> 198,907
<DEPRECIATION> 5,925
<TOTAL-ASSETS> 340,758
<CURRENT-LIABILITIES> 125,272
<BONDS> 0
0
0
<COMMON> 33,878
<OTHER-SE> (30,533)
<TOTAL-LIABILITY-AND-EQUITY> 340,758
<SALES> 15,077
<TOTAL-REVENUES> 15,077
<CGS> 12,784
<TOTAL-COSTS> 31,052
<OTHER-EXPENSES> 108,088
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,003
<INCOME-PRETAX> (128,066)
<INCOME-TAX> 0
<INCOME-CONTINUING> (128,066)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,066)
<EPS-PRIMARY> (0.047)
<EPS-DILUTED> (0.047)
</TABLE>
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