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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 September 30, 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
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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 November 13, 2000
was 6,167,282.
Transitional Small Business Disclosure Format (check one) Yes No X
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<TABLE>
<CAPTION>
ENVIRO-CLEAN OF AMERICA, INC.
TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2000 (Unaudited)
and December 31, 1999 (Audited)............................................................... 2
Condensed Consolidated Statement of Operations for the nine months ended
September 30, 2000 and 1999 (Unaudited)....................................................... 3
Condensed Consolidated Statement of Operations for the three months ended
September 30, 2000 and 1999 (Unaudited)....................................................... 4
Condensed Consolidated Cash Flow Statement for the nine months ended
September 30, 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........... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................................................... 11
Item 2. Changes in Securities........................................................................... 11
Item 3. Defaults Upon Senior Securities................................................................. 11
Item 4. Submission of Matters to a Vote of Security Holders............................................. 11
Item 5. Other Information and Subsequent Events......................................................... 12
Item 6. Exhibits and Reports on Form 8-K................................................................ 13
SIGNATURE.................................................................................................. 14
</TABLE>
1
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets
Cash $ 1,136,948 $ 1,833,478
Accounts receivable 1,827,458 1,547,567
Inventory 1,938,080 1,683,220
Marketable securities-available for sale 2,843,750 -
Loan receivable-related party - 835,992
Loans receivable-other 1,024,696 -
Prepaid expenses and other current assets 329,672 78,160
----------- -----------
Total current assets 9,100,604 5,978,417
----------- -----------
Property, plant & equipment - at cost 1,435,809 1,602,505
Less: accumulated depreciation 1,095,437 1,246,793
----------- -----------
Net property, plant & equipment 340,372 355,712
----------- -----------
Goodwill 5,228,460 8,651,571
----------- -----------
TOTAL ASSETS $14,669,436 $14,985,700
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 1,493,636 $ 1,543,776
Notes payable-related parties 1,120,707 1,274,306
Current maturities of long-term debt 32,249 8,365
----------- -----------
Total current liabilities 2,646,592 2,826,447
----------- -----------
Long-term liabilities
Notes payable - subordinated 1,441,825 2,461,055
Notes payable-related parties 809,218 1,859,028
Long-term debt, less current maturities 50,749 5,645
----------- -----------
Total liabilities 4,948,384 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 $5.00;
authorized, issued and outstanding shares -0- and 500,000 - 2,500,000
Preferred stock Series B-$.001 par value; stated value $100.00;
authorized 80,000 shares; issued and outstanding shares -0- and 25,590 - 2,559,000
Preferred stock Series D-$.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
6,607,682 and 4,451,000; outstanding 6,107,682 and 4,451,000 shares 6,608 4,451
Less: Treasury stock-500,000 shares at cost (1,000,000)
Additional paid-in capital 10,772,208 3,772,236
Accumulated other comprehensive income 1,840,750 -
Retained earnings (deficit) (2,273,514) (4,852,162)
Common stock to be issued 200,000 2,075,000
----------- -----------
Total stockholders' equity 9,546,052 7,658,525
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,669,436 $14,985,700
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
2
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Net Sales $10,942,966 $2,330,624
Cost of sales 6,517,135 1,238,870
----------- ----------
Gross profit 4,425,831 1,091,754
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Operating expenses:
Salaries 2,154,437 511,490
Professional fees 359,847 340,053
Depreciation and amortization 91,927 35,584
Amortization of goodwill 666,910 294,634
Marketing 198,832 52,476
Rent 434,185 96,698
Interest 549,075 252,631
Other 1,126,227 354,303
----------- ----------
Total operating expenses 5,581,440 1,937,869
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Operating loss (1,155,609) (846,115)
Other income 6,900,945 30,113
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Income (loss) before income tax expense 5,745,336 (816,002)
Income tax expense 768,367 27,360
----------- ----------
Net income (loss) from continuing operations 4,976,969 (843,362)
Income from operation of discontinued division 113,310 334,494
Loss on disposal of division (2,389,649)
----------- ----------
Net income (loss) 2,700,630 (508,868)
Preferred stock dividends (121,983) (102,270)
----------- ----------
Net income (loss) attributable to common stockholders 2,578,647 (611,138)
=========== ==========
Income (loss) per share from continuing operations $ 0.85 $ (0.23)
=========== ==========
Income (loss) per share from discontinued operations $ (0.40) $ 0.08
----------- ----------
Net income (loss) per share - basic and diluted $ 0.45 $ (0.15)
----------- ----------
Weighted average number of shares outstanding 5,727,902 4,207,000
=========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
3
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Net Sales $ 3,853,567 $1,451,509
Cost of sales 2,539,847 765,524
----------- ----------
Gross profit 1,313,720 685,985
----------- ----------
Operating expenses:
Salaries 712,944 300,026
Professional fees 125,988 262,297
Depreciation and amortization 19,040 15,527
Amortization of goodwill 222,304 145,774
Marketing 15,419 42,094
Rent 142,137 75,392
Interest 128,680 185,849
Other 419,880 188,599
----------- ----------
Total operating expenses 1,786,392 1,215,558
----------- ----------
Operating loss (472,672) (529,573)
Other income 51,806 21,130
----------- ----------
Loss before income tax expense (420,866) (508,443)
Income tax expense (benefit) (829,064) 2,860
----------- ----------
Net income (loss) from continuing operations 408,198 (511,303)
Income (loss) from operations of discontinued division (82,743) 78,487
Loss on disposal of division (2,389,649)
----------- ----------
Net loss (2,064,194) (432,816)
Preferred stock dividends (1,312) (49,645)
----------- ----------
Net loss attributable to common stockholders (2,065,506) (482,461)
=========== ==========
Income (loss) per share from continuing operations $ 0.06 $ (0.12)
=========== ==========
Income (loss) per share from discontinued operations $ (0.38) $ 0.01
=========== ==========
Net income loss per share-basic and diluted $ (0.32) $ (0.11)
=========== ==========
Weighted average number of shares outstanding 6,357,682 4,351,000
=========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
ENVIRO-CLEAN OF AMERICA, INC. & SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) $ 2,700,630 $ (508,868)
----------- -----------
Adjustments to reconcile net income or (loss) to net cash
provided by operating activities:
Depreciation and amortization 94,427 39,334
Amortization of goodwill 666,910 294,634
Non-cash interest expense 152,463 79,844
Common stock issued in consideration of professional fees - 125,000
Gain on sale of investment (6,747,000) -
Loss on sale of Subsidiary 2,389,649 -
(Increase) in accounts receivable (279,891) (227,762)
(Increase) in prepaid expenses and other current assets (251,512) (4,083)
(Increase) in inventories (254,860) (539,668)
Increase (decrease) in accounts payable and accrued expenses (50,140) 760,016
----------- -----------
Total adjustments (4,279,954) 527,315
----------- -----------
Net cash provided by (used in) operating activities (1,579,324) 18,447
----------- -----------
Cash flows from investing activities:
Cash paid for acquisitions - (1,552,451)
Cash acquired from subsidiaries - 314,334
Investment in marketable securities (1,000,000) -
(Increase) in notes receivable (188,704) (158,516)
(Purchase) disposition of property and equipment-net 12,993 (12,350)
Net proceeds on sale of investment 6,750,000 -
----------- -----------
Net cash provided by (used in) investing activities 5,574,289 (1,408,983)
----------- -----------
Cash flows from financing activities:
Repayment of notes payable-related parties (865,987) -
Net cash received on notes payable 1,671,441
Net proceeds from issuance of preferred stock 175,000
Net proceeds from issuance of common stock 1,876,475 965,000
Preferred stock redeemed (4,580,000) -
Purchase of treasury stock (1,000,000) -
Dividends paid (121,983) (102,270)
Additional paid-in capital on issuance of warrants - 678,672
----------- -----------
Net cash provided by (used in) financing activities (4,691,495) 3,387,843
----------- -----------
Net increase (decrease) in cash (696,530) 1,997,307
Cash- beginning 1,833,478 177,246
----------- -----------
Cash- ending $ 1,136,948 $ 2,174,553
=========== ===========
Supplemental information:
Cash paid during the period for:
Interest $ 473,757 $ 45,287
=========== ===========
Income taxes $ 1,031,193 $ 2,298
=========== ===========
Supplemental schedule of non-cash investing and financing activities:
Fixed asset financing obligations incurred $ 74,043 $ -
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
5
ENVIRO-CLEAN OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 and Quarterly Report filed
with Form 10-KSB 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 nine months ended September 30, 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 provided 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 September 30, 2000 totals $1,312. Preferred stock dividends
declared for nine months totals $121,983. As of October 1, 2000, all dividends
declared through September 30, 2000 have been paid in full.
6
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 9 months ended September 30, 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. Sale of Assets:
Effective September 30, 2000, the Company sold the assets of it's buying
group subsidiary, Nissco/Sunline, Inc. for a total of $100,000. As a result, a
net loss on the sale of $2,389,649 is included in the financial statements for
the nine months ended September 30, 2000.
5. 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.
In June 2000, the Company began a program to convert it's subordinated
notes payable. Under the program, the notes could be converted into common
shares. As of June 30, 2000, a total of $1,362,000 of debt was converted into
453,987 common shares and $39 cash in lieu of fractional shares.
In June 2000, the Company issued 281,500 shares of common stock for an
aggregate price of $844,500.
7
Effective August 15, 2000, Thomas Haines, head of Nissco/Sunline, Inc, a
wholly owned Subsidiary, retired. At that time the Company redeemed his 500,000
shares of stock in the Company for a total of $1,000,000.
6. 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 $480,000
was redeemed for cash and the balance of $2,079,000 was 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. Subsequent Events:
In September 2000, the Company began a new private placement of a minimum
of 320,000 and a maximum of 2,000,000 shares of Common Stock at $1.25 per share.
The Company intends to close the private placement during February 2001. The
stock will be restricted securities as defined under Rule 144 promulgated by the
Commission under the Securities Act (Rule 144). Accordingly, purchasers of the
Common Stock may only resell or otherwise transfer the Common Stock, or any
dividend thereon pursuant to an effective registration statement, or an
exemption from registration, including a sale in compliance with Rule 144 which,
among other restrictions, imposes a holding period of at least one year before
public resales of securities may be made. The Company will use the proceeds from
this offering for working capital purposes.
8. Business Segments:
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. With the Company's sale of Nissco, the company again operates in
one industry segment.
Item 2. Management's Discussion and Analysis or Plan of Operation
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.
8
This item should be read in conjunction with the financial statements and
other items 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 nine-month period ended September 30, 2000
and 1999:
The net sales increased $8,612,342 for the nine-month period ended
September 30, 2000 ("2000") as compared to the nine-month period ended September
30, 1999 ("1999") from $2,330,624 to $10,942,966. 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.
The gross profit percentage decreased from 47% for 1999 to 40% 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 $1,937,869 for 1999 to $5,581,440 for
2000, approximately 188%. The majority of this increase, approximately
$3,644,000, was due to the inclusion of Cleaning Ideas, Superior and June in
2000. Additionally, amortization of goodwill was recorded on the acquisitions of
approximately $666,900 during 2000 and $295,000 during 1999. Kandel & Son's
expenses were comparable between 2000 and 1999.
The Company had net income in 2000 of $2,700,630, as compared to a net loss
of $508,868 in 1999.
9
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 nine-month period ended September 30, 2000, the
Company issued a total of 526,500 shares of Common Stock for $1,824,500. 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 note receivable to
b2bstores.com, Inc for net proceeds of approximately $836,000. The Company's
only significant use of cash during the nine months was the balance of cash paid
for the redemption of the Series A, B and D Preferred Stock and $1,000,000 for
the redemption of 500,000 shares of Common Stock.
For the nine-month period ended September 30, 2000, the Company's cash
flows from operations was negative $1,579,324, as a result of net income of
$2,700,630 and adjustments to arrive at cash provided by operating activities of
depreciation and amortization and non-cash interest of $913,800, a loss on the
sale of assets of Nissco/Sunline, Inc of $2,389,649, offset by a gain on sale of
b2bstores.com, Inc, of $6,747,000, an increase in accounts receivable of
$279,891, an increase in inventory of $251,512, an increase in prepaid expenses
and other assets of $254,860 and a decrease in accounts payable and accrued
expenses of $50,140.
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
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
On September 14, 2000, the Company began a new private placement of a
minimum of 320,000 and maximum of 2,000,000 shares of Common Stock at $1.25 per
share. The offering is being conducted in reliance upon the exemption from
registration provided by Rule 506 of Regulation D. The Company may close the
private placement anytime after the minimum number of shares is sold, but no
later than February 28, 2001. The Company is conducting this offering in order
to provide working capital.
The sale of securities in this transactions is being 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 will not involve general solicitation or
advertising and all of the certificates issued will bear a restrictive legend as
described in the subscription agreements.
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 September 30, 2000.
ITEM 5. Other Information and Subsequent Events
On September 29, 2000, the Company sold the assets of NISSO/Sunline, Inc.
to ebuyxpress.com L.L.C. The details of the sale were filed with the SEC on Form
8-K on October 13, 2000.
On October 31, 2000, equip2move.com, Inc. ("E2M") and the Company executed
an amendment to the Promissory Note (the "Note") in which E2M agreed to extend
the First Maturity Date of the Note from November 1, 2000 to December 1, 2000,
in exchange for an extension penalty charge equal to the aggregate interest
payment from November 1, 2000 to December 1, 2000 or the date in which E2M has
received at least $1,000,000 in outside financing, whichever is shorter.
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits:
11
The following is a list of exhibits filed as part of this Form 10-QSB.
Where so, exhibits which were previously filed are incorporated by reference.
Exhibit No. Description
----------- -----------------------------------------------------------------
2(i) Stock Purchase Agreement among Enviro-Clean of America, Inc.,
Enviroacq I Co. and Kandel & Son dated as of January 1, 1999
(Incorporated by reference to the Company's Form 10-SB filed with
the SEC on June 18, 1999).
2(ii) Stock Purchase Agreement among Enviro-Clean of America, Inc.
Enviroacq II Co. and NISSCO/Sunline, Inc. dated as of January 1,
1999 (Incorporated by reference to the Company's Form 10-SB filed
with the SEC on June 18, 1999).
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
(Incorporated by reference to the Company's Report on Form 8-K
filed with the SEC on September 3, 1999).
2(iv) Stock Purchase Agreement among Enviro-Clean of America, Inc.,
SCS Acquisition Corp., Superior Chemical & Supply, Inc. and
Stephen Hayes (Incorporated by reference to the Company's Report
on Form 8-K filed with the SEC on September 3, 1999).
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 (Incorporated by
reference to the Company's Report on Form 8-K filed with the SEC
on November 10, 1999).
3(i) Articles of Incorporation of the Company (Incorporated by
reference to the Company's Form 10-SB filed with the SEC on June
18, 1999).
3(ii) By-Laws of the Company (Incorporated by reference to the
Company's Form 10-SB filed with the SEC on June 18, 1999).
3(iii) Certificate of Designation for the Company's Series A Stock
(Incorporated by reference to the Company's Form 10-SB filed with
the SEC on June 18, 1999).
3(iv) Certificate of Designation for the Company's Series E Stock
(Incorporated by reference to the Company's Form 10-SB filed with
the SEC on June 18, 1999).
3(v) Certificate of Designation for the Company's Series D Preferred
Stock (Incorporated by reference to the Company's Report on Form
8-K filed with the SEC on September 3, 1999).
3(vi) Certificate of Amendment to the Certificate of Designation for
the Company's Series A Stock (Incorporated by reference to the
Company's Report on Form 10-SB/A filed with the SEC on October
22, 1999).
12
3(vii) Certificate of Designation for the Company's Series B Stock.
(Incorporated by reference to the Company's Report on
Form 10-SB/A filed with the SEC on December 16, 1999).
4(i) Form of 12.75% Subordinate Note (Incorporated by reference to
the Company's Report on Form 10-SB/A filed with the SEC on
October 22, 1999).
4(ii) Form of the Warrant Certificate (Incorporated by reference to
the Company's Report on Form 10-SB/A filed with the SEC on
October 22, 1999).
10(i) Asset Purchase Agreement between ebuyxpress.com L.L.C.,
NISSCO/Sunline, Inc. and Enviro-Clean of America, Inc., dated
September 29, 2000 (Incorporated by reference to the Company's
Report on Form 8-K filed with the SEC on October 13, 2000).
10(ii) Amendment to Promissory Note between equip2move.com, Inc., as
Maker and Enviro-Clean of America, Inc., as Payee, dated
October 31, 2000.*
27(i) Financial data schedule.*
* Filed Herewith.
(b) Reports on Form 8-K:
(1) The Company filed an 8-K on September 19, 2000, to report the
signing of a binding letter of intent with ebuyxpress.com L.L.C. for the sale of
NISSCO/Sunline, Inc., a wholly-owned subsidiary of the Company, and the
execution of a letter of intent to purchase all outstanding capital stock of
Gemini Capital Corporation, a Delaware corporation, under Item 5 of the
Form 8-K.
(2) The Company filed an 8-K on October 13, 2000, to report the sale
and disposition of NISSCO/Sunline, Inc., a wholly owned subsidiary of the
Company, to ebuyxpress.com L.L.C. under Item 2 of the Form 8-K.
13
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.
November 14, 2000 Enviro-Clean of America, Inc.
By: /s/ Randall K. Davis
----------------------------------------
Randall K. Davis, President
/s/ Jan Pasternack
----------------------------------------
Jan Pasternack, Chief Financial Officer
14
Exhibit 10(ii)
--------------
AMENDMENT TO PROMISSORY NOTE
This Amendment to that certain Promissory Note ("Note") dated July 28,
2000 between equip2move.com, Inc. ("Maker"), Enviro-Clean of America, Inc.
("Payee"), is entered into effective this 31st day of October, 2000 by and
between the Maker and Payee.
WITNESSETH
----------
WHEREAS, the Payee and the Maker both desire to amend certain terms of the
Note as set forth in detail herein; and
WHEREAS, the Payee and the Maker intend that all of the terms and
conditions of the Note remain in full force and effect, except as specifically
amended and/or restated herein;
NOW, THEREFORE, in consideration of the recitals and the mutual covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Payee and the
Maker hereby agree as follows:
I. The introductory paragraph of the Note is hereby amended and restated in
its entirety as follows:
"equip2move.com Corporation, a Delaware corporation (the "Company"),
the principal office of which is located c/o Koster Industries Inc., 555
Broadhollow Road, Melville, New York 11747, hereby promises to pay to
Enviro-Clean of America, Inc., a Nevada corporation, or its assigns (the
"Payee"), the principal amount of ONE MILLION DOLLARS ($1,000,000) (the
"Principal"), plus interest (calculated on the basis of a year of 365 days and
actual days elapsed) on the unpaid Principal of this Convertible Promissory Note
(the "Note") until such Principal has been paid in full, at the Prime Rate.
"Prime Rate" means the rate of interest publicly announced by Bank of America
(or its successor) as its prime lending rate. Amount(s) of the Principal shall
be deemed outstanding as of the date of this Note, and the outstanding balance
hereof shall be due and payable either: (i) in full by December 1, 2000 (the
"First Maturity Date"), if the Company has raised an aggregate of at least
$1,000,000 in capital (the "July to December Financing"); provided that all
capital received by the Company from the July to December Financing is
immediately due and payable to Payee as the Company receives such capital, or
(ii) if the aggregate total of the July to December Financing is less than
$1,000,000, then the total amount due by the First Maturity Date shall equal the
aggregate amount of the July to December Financing which shall be paid to the
Payee as it is received by the Company and the remaining balance under this Note
shall be due and payable on February 1, 2001 (the "Final Maturity Date"), as
described in Section 1 below. A check or checks for all payments hereunder shall
be delivered to the Payee at the address for such payments designated in writing
by the Payee to the Company. The Company may prepay all or any part of the
principal amount of this Note, together with accrued interest on the Principal
amount so prepaid,
at any time without premium or penalty. This Note shall be senior in repayment
to all other obligations of the Company."
II. As consideration for the extension of the First Maturity Date by the Maker
from November 1, 2000 to December 1, 2000, the Payee agrees to pay to the
Maker an extension penalty charge equal to the amount of interest on the
Principal due and payable by the Maker for the period from November 1, 2000
to the First Maturity Date; provided, however, that if the Principal and
-------- -------
Interest due on the Note is not paid in full by the First Maturity Date,
this Paragraph 2 to the Amendment to the Note shall not be applied.
EXECUTED this 31st day of October, 2000.
Equip2move.com, Inc Enviro-Clean of America, Inc.
By: By:
------------------------------ ------------------------------
Russell Koster, Richard Kandel,
President Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Enviro-Clean
of America Inc. & Subsidiaries and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> SEP-30-2000
<CASH> 1,136,948
<SECURITIES> 2,843,750
<RECEIVABLES> 1,983,807
<ALLOWANCES> 156,349
<INVENTORY> 1,938,080
<CURRENT-ASSETS> 9,100,604
<PP&E> 1,435,809
<DEPRECIATION> 1,095,437
<TOTAL-ASSETS> 14,669,436
<CURRENT-LIABILITIES> 2,646,592
<BONDS> 3,454,748
<PREFERRED-MANDATORY> 0
<PREFERRED> 175,000
<COMMON> 6,608
<OTHER-SE> 9,539,444
<TOTAL-LIABILITY-AND-EQUITY> 14,669,436
<SALES> 10,942,966
<TOTAL-REVENUES> 10,942,966
<CGS> 6,517,135
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,032,365
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 549,075
<INCOME-PRETAX> 5,745,336
<INCOME-TAX> 768,367
<INCOME-CONTINUING> 4,976,969
<DISCONTINUED> (2,276,339)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,700,630
<EPS-BASIC> 0.45
<EPS-DILUTED> 0
</TABLE>