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 September 30, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number 000-29069
Enova Holdings, Inc.
(Exact name of small business issuer as specified in its character)
Nevada 33-0803552
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1196 E. Willow Street, Long Beach California 90806
(Address of principal executive offices)
(562) 426-1321
(Issuer's telephone number)
Check whether the issuer (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 .
---
As of September 30, 2000, Enova Holdings, Inc. had 3,812,212 shares of Common
Stock outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
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1
TABLE OF CONTENTS
ENOVA HOLDINGS, INC. AND SUBSIDIARIES
Report on Form 10-QSB
For the Three Months and Nine Months ended
September 30, 2000
Page
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 2000
(Unaudited) and December 31, 1999 5 - 6
Consolidated Statement of Operations - Three Months
And Six Months Ended September 30, 2000 and 1999 (Unaudited) 7
Consolidated Statement of Cash Flows - Six Months Ended
September 30, 2000 and 1999 (Unaudited) 8
Notes to the Consolidated Financial Statements (Unaudited) 9 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Charges in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
ENOVA HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
3
ENOVA HOLDINGS, INC.
AND SUBSIDIARIES
CONTENTS
PAGE 5 - 6 CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2000
(UNAUDITED) AND DECEMBER 31, 1999
PAGE 7 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
PAGE 8 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
PAGES 9 - 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4
ENOVA HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
September 30, 2000 December 31, 1999
(Unaudited)
------------------ -----------------
CURRENT ASSETS
Cash $ 25,140 $ 60,373
Accounts receivable, net 674,857 1,177,544
Inventories 623,508 830,783
Prepaid expenses and other assets 5,909 16,494
------------- --------------
Total Current Assets 1,329,414 2,085,194
------------- --------------
PROPERTY AND EQUIPMENT - NET 1,291,683 1,343,883
------------- --------------
OTHER ASSETS
Investments 525,050 1,506,250
Intangibles, net 710,696 734,930
Receivable from affiliate 70,599 65,780
------------- --------------
Total Other Assets 1,306,345 2,306,960
------------- --------------
TOTAL ASSETS $ 3,927,442 $ 5,736,037
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable $ 1,100,836 $ 1,061,720
Lines of credit 262,000 250,000
Accrued expenses 443,561 520,248
Notes payable, current portion 1,124,195 877,156
Capital lease obligations, current portion 14,261 13,112
------------- --------------
Total Current Liabilities 2,944,853 2,722,236
NOTES PAYABLE, NET OF CURRENT PORTION 1,431,684 1,468,828
CAPITAL LEASE OBLIGATIONS, NET OF
CURRENT PORTION 61,825 71,530
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TOTAL LIABILITIES 4,438,362 4,262,594
------------- --------------
5
ENOVA HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
STOCKHOLDERS' (EQUITY)
Preferred stock, $.001 par value, - -
25,000,000 shares authorized, 250
shares issued and outstanding
Common stock, $.001 par value, 5,150 5,150
75,000,000 shares authorized,
5,149,712 shares issued and outstanding
Additional paid in capital 2,332,862 2,332,862
Accumulated other comprehensive income (549,950) 431,250
Accumulated deficit (2,298,982) (1,295,819)
------------- --------------
Total Stockholders' Equity (Deficiency) (510,920) 1,473,443
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS'
- ----------------------------------- $ 3,927,442 $ 5,736,037
EQUITY (DEFICIENCY) ============= ==============
- --------------------
See accompanying notes to consolidated financial statements.
6
ENOVA HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For The Three Months For The Three Months For The Nine Months For The Nine Months
Ended September 30, Ended September 30, Ended September 30, Ended September 30,
2000 1999 2000 1999
---------------------- ---------------------- ---------------------- -----------------------
REVENUES $ 893,479 $ 1,457,506 $ 4,136,147 $ 5,364,579
COST OF SALES 798,340 794,634 2,837,077 3,216,125
------------------ -------------------- ------------------- -----------------------
GROSS PROFIT 95,139 662,872 1,299,070 2,148,454
------------------ -------------------- ------------------- -----------------------
OPERATING EXPENSES
Selling and marketing 256,794 132,198 640,814 476,168
General and administrative 753,965 735,440 1,471,828 1,614,662
------------------ -------------------- ------------------- -----------------------
Total Operating Expenses 1,010,759 867,638 2,112,642 2,090,830
------------------ -------------------- ------------------- -----------------------
INCOME (LOSS) FROM OPERATIONS (915,620) (204,766) (813,572) 57,624
------------------ -------------------- ------------------- -----------------------
OTHER INCOME (EXPENSE)
Interest expense (9,524) (45,627) (192,194) (100,298)
Other income - -
Other expense (1,533) - 5,803 546
------------------ -------------------- ------------------- -----------------------
Total Other Income (Expense) (11,057) (45,627) (186,391) (99,752)
------------------ -------------------- ------------------- -----------------------
LOSS BEFORE INCOME TAXES (926,677) (250,393) (999,963) (42,128)
------------------ -------------------- ------------------- -----------------------
FEDERAL AND STATE INCOME TAX 800 789 3,200 52,026
------------------ -------------------- ------------------- -----------------------
NET INCOME (LOSS) (927,477) (251,182) (1,003,163) (94,154)
- -----------------
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) on investments (293,700) - (981,200) -
------------------ -------------------- ------------------- -----------------------
COMPREHENSIVE INCOME (LOSS) $ (1,221,177) $ (251,182) $ (1,984,363) $ (94,154)
------------------ -------------------- ------------------- -----------------------
Net loss per share -
basic and diluted $ (0.24) $ (0.05) $ (0.39) $ (0.02)
================== ==================== =================== =======================
Weighted average number of
shares outstanding - basic and 5,149,712 5,145,247 5,149,712 5,145,247
diluted ================== ==================== =================== =======================
See accompanying notes to consolidated financial statements.
7
ENOVA HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Nine For The Nine
Months Months
Ended September Ended September
30, 2000 30, 1999
------------------ --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,003,163) $ (94,154)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and Amortization 76,433 92,871
(Increase) decrease in accounts receivable 502,687 161,772
(Increase) decrease in inventories 207,275 120,222
(Increase) Decrease in prepaid expenses
and other assets 10,585 3,990
Increase (Decrease) in accounts payable
and accrued expenses (37,570) (243,473)
-------------- ---------------
Net Cash Provided By (Used In)
Operating Activities (243,753) 41,228
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment - (18,218)
Notes receivable (4,819) (54,582)
-------------- ---------------
Net Cash Used In Investing Activities (4,819) (72,800)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on notes payable 209,895 (315,818)
Line of credit proceeds 12,000 200,000
Payment on capital lease obligation (8,556) (2,293)
-------------- ---------------
Net Cash Provided By (Used In)
Financing Activities 213,339 (118,111)
-------------- ---------------
NET INCREASE (DECREASE) IN CASH (35,233) (149,683)
CASH, BEGINNING OF PERIOD 60,373 345,114
-------------- ---------------
CASH, END OF PERIOD $ 25,140 $ 195,431
============== ===============
See accompanying notes to consolidated financial statements.
8
ENOVA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
Note 1. Organization
Enova Holdings, Inc. ("Enova" or the "Company") is engaged in the
distribution, service, and manufacturing of custom process equipment
packages for the air and gas handling equipment industry. The Company
operates through two operating subsidiaries: Pego Systems, Inc.
("Pego") and Pacific Pneumatics, Inc. ("PPI").
Note 2. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
and the rules and regulations of the Securities and Exchange Commission
for interim financial information. Accordingly, they do not include all
the information and footnotes necessary for a comprehensive
presentation of financial position and results of operations.
It is management's opinion, however, that all material adjustments
(consisting of normal recurring adjustments) have been made which are
necessary for a fair financial statement presentation. The results for
the interim period are not necessarily indicative of the results to be
expected for the year.
For further information, refer to the consolidated financial statements
and footnotes of Enova Holdings, Inc. and Subsidiaries included in the
Company's Form 10 - SB/A for the year ended December 31, 1999.
Note 3. Legal Matters
On January 14, 2000, the bank with whom the Company had its line of
credit and a term loan, demanded payment in full of these obligations
in the amount of $924,636, and filed a complaint against the Company
for alleged no-payment of the promissory note and breach of the
security agreement. This amount is recorded as a liability on the
Company's financial statements at September 30, 2000. Management and
counsel have reviewed the complaint and have interposed numerous
defenses. The Company continues to believe that there is no legal basis
for the prosecution of this action.
Note 4. Going Concern
The Company continues to be in violation of certain debt covenants in
connection with certain notes payable to a bank. In addition, the
Company has continuing losses from operations. The ability of the
Company to continue as a going concern is dependent on the Company's
ability to raise additional capital or obtain debt financing and
generate income from operations. The financial statements do not
include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
9
ENOVA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
Note 4. Going Concern (continued)
Management plans to sell its investment in Hartcourt common stock upon
effectiveness of a registration statement filed by Hartcourt, however,
it is not currently known when this might occur. Management continues
to believe, however, that actions presently being taken to generate
cash and thus pay the bank loans provide the opportunity for the
Company to continue as a going concern.
10
Part 1 Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
Results of Operations
The accompanying financial statements of Enova for the three months and nine
months ended September 30, 2000 include operations of Enova, Pego and PPI. The
accompanying financial statements for the three months and Nine months ended
September 30, 1999 include operations of Pego and PPI.
Comparison of the Three Months and Nine Months Ended September 30, 2000 to Three
Months and Nine Months Ended September 30, 1999:
Sales: Sales decreased by approximately $564,027 and $1,228,432 during the three
months and nine months ended September 30, 2000 when compared to the same
periods in 1999. The decrease in sales resulted primarily due to not being able
to purchase products for resale in similar quantities and at similar prices as
previously because of cash constraints..
Cost of Sales. Cost of sales increased by approximately $3,706 and decreased
$379,048 during the three months and nine months ended September 30, 2000 when
compare to the same periods in 1999. Cost of Sales as a percentage of sales
increased to approximately 89% and increased to 68% of sales during the three
months and nine months ended September 30, 2000 as compared to approximately 54%
and 60% of sales for the same periods in 1999. The increase in cost of sales was
primarily due to sale of product mix with lower gross margin at higher costs
during the three months ended September 30, 2000 compared to the sale of product
mix during the same periods in 1999.
Sales and marketing: Sales and marketing expenses increased by approximately
$124,596 and increased by $164,646 during the three months and six months ended
September 30, 2000 when compared to the same periods in 1999. Sales and
marketing expenses as a percentage of sales increased to approximately 28% of
sales and increased to 15% of sales during the three months and nine months
ended September 30, 2000 as compared to approximately 9% and 9% of sales for the
same periods in 1999. Such increase was primarily due to maintaining the same
level of sales and marketing staff and attendant costs during a sharp diminution
in sales during the three months ended September 30, 2000 as compared to the
same period in 1999. Sales and marketing expense increased due to Enova
expanding direct sales and increased advertising and marketing expense in the
final three months of the nine months ended September 30, 2000 as compared to
the same period in 1999.
General and administrative expenses. General and administrative expenses
increased by approximately $18,525 and decreased by $142,834 during the three
months and nine months ended September 30, 2000 when compared to the same
periods in 1999. General and administrative expenses as a percentage of sales
increased to approximately 84% and decreased to 35% of sales during the nine
months ended September 30, 2000 when compared to approximately 50% and 30% of
sales for the same periods in 1999. Such decrease was primarily due to the
increased administrative, legal and accounting costs, and payroll expenses
incurred in connection with the organization of Enova as well as decrease in
sales while maintaining high employee count during the three months and nine
months ended September 30, 1999 compared to the same periods in 2000.
11
Interest Expense: Interest expense decreased by approximately $36,103 and
increased $91,896 during the three months and nine months ended September 30,
2000 when compared to the same periods in 1999. The decrease in interest expense
for the three months ended September 30, 2000 was primarily due to a change in
the accruals for interest expense on the Bank Line in litigation that was not
effected until this three month period while the nine month period ending
September 30, 2000 included the prior accruals of interest as compared to the
same periods in 1999.
Liquidity and Capital Resources: At September 30, 2000, Enova had cash and cash
equivalents of approximately $25,140 and working capital deficiency of
approximately $1,615,439. The company believes that its existing working capital
deficit together with funds generated from operations will not be sufficient to
provide for its planned operations for the foreseeable future. Enova regularly
examines opportunities for strategic acquisitions of other companies or lines of
businesses and anticipates that it may from time to time issue additional debt
and/or equity securities either as direct consideration for such acquisitions or
raise additional funds to be used, in whole or part, in payment of acquired
securities or assets. The issuance of such securities could be expected to have
a dilutive impact on Enova's shareholders, and there can be no assurances as to
whether or when any acquired business would contribute positive operating
results commensurate with the associated investment.
12
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
There have been no changes since the Company's last report in Item 3,
"Legal Proceedings" of Form 10-SB/A for the year ended December 31, 1999.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None.
(b) Reports on Form 8-K - None during the quarter.
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ENOVA HOLDINGS, INC.
Date: November 17, 2000 By: /s/ Frederic Cohn
-------------------------------
Frederic Cohn
Chairman of the Board
14