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 March 31, 2000
[ ] 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
(State or other jurisdiction of incorporation or organization)
33-0803552
(IRS Employer Identification No.)
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 March 31, 2000, Enova Holdings, Inc. had 5,149,712 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes __ No X
TABLE OF CONTENTS
ENOVA HOLDINGS, INC. AND SUBSIDIARIES
Report on Form 10-QSB
For quarter ended
March 31, 2000
Page
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2000 (Unaudited)
and December 31, 1999 .....................................3
Consolidated Statement of Operations - Quarter ended
March 31, 2000 and 1999 (Unaudited) .......................4
Consolidated Statement of Cash Flows - Quarter ended
March 31, 2000 and 1999 (Unaudited) .......................5
Notes to the Consolidated Financial Statements .............6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................7-8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................8
Item 2. Changes in Securities ........................................8
Item 3. Defaults upon Senior Securities ..............................8
Item 4. Submission of Matters to Vote of Security Hoders .............8
Item 5. Other Information ............................................8
Item 6. Exhibits and Reports on Form 8-K .............................8
Signatures ...................................................9
ENOVA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000
AND DECEMBER 31, 1999
(Unaudited) (Audited)
MARCH 31, DECEMBER 31,
2000 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 132,119 $ 60,373
Accounts receivable, net 1,176,024 1,177,544
Inventory 657,041 830,783
Other current assets 3,509 16,494
Total current assets 1,968,693 2,085,194
PROPERTY AND EQUIPMENT 1,326,136 1,343,883
OTHER ASSETS
Investment 1,200,000 1,506, 250
Intangible, net 725,321 734,930
Receivable from affiliate 65,780 65,780
Total other assets 1,991,101 2,306,960
TOTAL ASSETS $ 5.285,930 $ 5,736,037
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 996.740 $ 1,061,720
Lines of credit 256,000 250,000
Accrued expenses 446,628 520.248
Notes payable, current portion 973,589 877,156
Capital lease obligations, current portions 13,390 13,112
Total current liabilities 2,686,347 2,722,236
NOTES PAYABLE, NET OF CURRENT PORTION 1,468,387 1,468,828
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 69,180 71,530
TOTAL LIABILITIES 4,223,914 4,262,594
SHAREHOLDERS' EQUITY
Preferred stock, $,001 par value, 25,000,000 shares
authorized, 250 shares issued and outstanding
Common stock. $.001 par value, 75,000,000 shares
authorized, 5,149,712 shares issued and outstanding 5,150 5,150
Additional paid-in capital 2.332,862 2,332,862
Accumulated other comprehensive income 125,000 431,250
Accumulated deficit (1,400,996) (1,295,818)
Total shareholders' equity 1,062,016 1,473,443
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $ 5,285,930 $ 5,736,037
See accompanying notes to financial statements.
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ENOVA HOLDINGS, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (CONSOLIDATED)
AND MARCH 31,1999 (COMBINED)
(Unaudited) (Unaudited)
2000 1999
NET SALES $ 1,706,116 $ 1,888,764
COST OF SALES 1,104,794 1,077,945
GROSS PROFIT 601,322 810,819
OPERATING EXPENSES
Sales and marketing 332,594 200,643
General and administrative 288,034 424,502
Total operating expenses 620,628 625,145
LOSS FROM OPERATIONS (19,306) 185,674
OTHER (INCOME) EXPENSES
Interest income (1) (507)
Interest expense 82,672 27,366
Total other (income) expenses 82,671 26,859
NET LOSS BEFORE INCOME TAXES (101,977) 158,815
Income taxes 3,200 -
NET LOSS (105,177) 158,815
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized loss on investment (308,250)
COMPREHENSIVE LOSS $ (411,427) $ 158,815
Net loss per common share - basic and diluted $ (0.02) $ 0,03
Weighted average shares outstanding - basic and diluted 5,142,936 5,142,936
See accompanying notes to financial statements.
4
ENOVA HOLDINGS, INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (CONSOLIDATED)
AND MARCH 31, 1999 (COMBINED)
(Unaudited) (Unaudited)
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (105,177) $ 158,815
Adjustments to reconcile net profit to net cash provided
by (used in) operating activities:
Depreciation & amortization 27,355 14,714
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 1,520 (80,349)
(Increase) decrease in inventory 173,742 67,907
(Increase) decrease in other assets 12,985 (7,572)
Increase in accounts payable (64,981) (237,988)
Increase (decrease) in accrued expenses 8,950 85,286
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 54,394 813
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment - (10,631)
Repayment of advances to affiliate - 15,767
NET CASH USED IN INVESTING ACTIVITIES - 5,136
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from lines of credit 6,000 -
Proceeds from notes payable 11,352 -
Payments on notes payable - (130,122)
Payments on capital lease _ (2,293)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 17,352 (132,415)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 71,746 (126,466)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 60,373 345,114
CASH AND CASH EQUIVALENTS, MARCH 31 $ 132,119 $ 218,648
See accompanying notes to financial statements.
5
ENOVA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2999
(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 March 31, 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.
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ENOVA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2999
(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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
Results of Operations
Comparison of the Three Months Ended March 31, 2000 to Three Months Ended March
31, 1999:
The accompanying financial statements of Enova for the quarter ended March 31,
2000 include operations of Enova, Pego and PPI. The accompanying financial
statements for the quarter ended March 31, 1999 include operations of Pego and
PPI.
Sales. Sales decreased by approximately $182,600 or 10% during the three months
ended March 31, 2000 when compared with the same period in 1999. This decrease
in sales resulted primarily due to Enova not able to complete the shipments of
major engineering packages due to back ordered parts.
Cost of sales. Cost of sales increased by approximately $26,800 or 2% during the
three months ended March 31, 2000 when compared to the same period in 1999. Cost
of sales as a percentage of sales increased to approximately 65% of sales during
the three months ended March 31, 2000 as compared to approximately 57% of sales
for the same period in 1999. The increase in cost of sales was primarily due to
sale of product mix with lower gross margin during the three months ended March
31, 2000 compared to sale of product mix during the same period in 1999.
Sales and marketing. Sales and marketing expenses increased by approximately
$132,000 or 66% during the three months ended March 31, 2000 when compared to
the same period in 1999. Sales and marketing expenses as a percentage of sales
increased to approximately 20% of sales during the three months ended March 31,
2000 as compared to approximately 11% of sales for the same period in 1999. Such
increase was primarily due to Enova expanding direct sales, increased
advertising and marketing activities during the three months ended March 31,
2000 as compared to the same period in 1999.
7
General and administrative. General and administrative expenses decreased by
approximately $136,500 or 32% during the three months ended March 31, 2000 when
compared to the same period in 1999. General and administrative expenses as a
percentage of sales decreased to approximately 17% of sales during the three
months ended March 31, 2000 when compared to approximately 23% of sales for the
same period in 1999. Such decrease was primarily due to the increased
administrative expenses, legal and accounting costs, and payroll expenses
incurred in connection with the organization of Enova during the three months
ended March 31, 1999 as compared to the same period in 2000.
Interest Expense. Interest expense increased by approximately $55,300 during the
three months ended March 31, 2000 when compared to the same period in 1999. The
increase in interest expense was primarily due to the higher rate of interest
charged to Enova on loans outstanding to the bank and third party during the
three months ended March 31, 2000 as compared to the same period in 1999.
Liquidity and Capital Resources
At March 31, 2000, Enova had cash and cash equivalents of approximately $132,000
and working capital deficiency of approximately $717,600. 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 in part, in payment for 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.
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
27.1 Financial Data Schedule
(b) Reports on Form 8-K - None during the quarter.
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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: May 19, 2000 By: /s/ Alan V. Phan
---------------------------------------
Dr. Alan V. Phan
Chairman of the Board and President
9