Nine Months Ended September 30, 2009 vs Nine Months Ended September 30, 2008
Revenue increased to approximately $1,067,000 through the third quarter of 2009 from approximately $928,000 through the third quarter of 2008, representing a 15% increase. The increase in overall revenue recorded through the first nine months of 2009 as compared with the first nine months of 2008 was primarily attributed to increases in rental income, sales of Company owned locations, and market area sales of
approximately $73,000, $64,000 and $50,000, respectively. These increases were partially offset by a decrease in royalty fees of approximately $48,000 for the third quarter of 2009 in comparison to the third quarter of 2008. The increase in rental income was attributable to an increase in the number of locations subleased to franchisees through the third quarter of 2009. The increase in sales of Company locations is attributable to the Company’s sale of two locations through
September 2009 as compared with no sales of Company locations through September 2008. The increase in market area sales was attributable to a sale of rights to develop one market area through the third quarter of 2009 compared to no rights sold through the third quarter of 2008. The decrease in royalty fees recorded during the third quarter of 2009 compared with the third quarter of 2008 was attributable to 1) an decrease in the number of franchisees liable to the Company for royalty
fees and 2) a decrease in royalty fee income attributable to a settlement with a franchisee booked during the third quarter of 2008.
Cost of revenues increased to approximately $450,000 through the third quarter of 2009 from approximately $382,000 through the third quarter of 2008, representing an 18% increase. As a percentage of revenue, cost of revenues were 42% and 41%, respectively for the periods reported. The overall increase was attributable to increases in rent paid for real estate sublet and in the cost of company owned locations
sold of approximately $42,000 and $30,000, respectively offset by a decrease in franchise development fees of approximately $5,000. The increase in rent paid for real estate sublease was a result of an increase during the first nine months of 2009, in the number of locations, which the Company sublets to franchisees. The increase in cost of Company locations sold was a result of the cost incurred in the sale of two Company locations during the first nine months of 2009. The Company did
not sell a Company location through the third quarter of 2008 and accordingly incurred no cost of Company locations sold during the period. The decrease in franchise development fees was related to the decrease in royalty fee income, through the third quarter of 2009, as market area developers are paid a percentage of income earned in their respective market areas.
Selling, general and administrative expenses decreased to approximately $535,000 through the third quarter of 2009 from approximately $583,000 through the third quarter of 2008, representing a 8% decrease. The changes in the composition of selling, general and administrative expenses through the third quarter were primarily attributed to decreases in insurance, bad debt expense and professional fees of
approximately $18,000, $13,000 and $11,000, respectively. The decrease in insurance through the third quarter of 2009 was primarily attributable to a cancellation of a directors and officers policy during the third quarter of 2008. The decrease in bad debt was attributable to a decrease in the number of franchises requiring reserve and write-off through the third quarter of 2009. The decrease in professional fees was in attributable to a decrease in legal fees incurred through the third
quarter of 2009 as compared with the corresponding period 2008.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 2009 was approximately $473,000, compared to working capital of approximately $380,000 at December 31, 2008. The ratio of current assets to current liabilities was 2.0:1 at September 30, 2009 and 1.9:1 at December 31, 2008. Cash flow used for operations through the third quarter of 2009 was approximately $17,000 compared to the cash flow used for operations through the third
quarter of 2008 of approximately $4,000.
Cash and accounts and notes receivable increased to approximately $1,017,000 at September 30, 2009 from approximately $870,000 at December 31, 2008, while accounts payable and accrued expenses decreased to approximately $208,000 at September 30, 2009 from approximately $250,000 at December 31, 2008.
Although the Company plans to continue to expand to the extent that resources are available, the Company has no firm commitments for capital expenditures in other areas of its business. The Company’s current business plan and objective is to continue expanding the number of franchises in its system through sales of new franchises, as well as through acquisitions of other franchises similar to the
acquisitions they have done in the past.
The Company has not paid any dividends in the past and does not contemplate paying any in the foreseeable future.
Some of the Company’s subsidiaries lease properties on which franchisees are located. The franchisees typically pay rent to these subsidiaries and, in some cases, may pay rent directly to the lessor.
The Company has approximately $473,000 in working capital. The Company believes that its working capital and cash generated by operations will be sufficient to implement its business plan.
The Company has secured a $250,000 line of credit. As of September 30, 2009, the Company has not utilized the line.
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In addition, several franchisees are significantly in arrears in the payment of royalties. Management, however, has addressed these arrearages and resolutions are negotiated with the franchisees on an individual basis.
Critical Accounting Policies:
Our significant accounting policies are described in Note 1 to the financial statements included in our annual report on Form 10-K. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The following policies, we believe, are our most critical accounting policies and are explained below.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from the estimates.
Revenue Recognition
The Company recognizes revenue in several ways: Initial fees from sale of franchises, market area sales to market developer partners, royalties (as a percentage of gross revenues) from franchisees, equipment sales, rental of premises to franchisees and the operation of Company owned automotive repair centers which are developed for potential sale to franchisees.
Franchise fee revenue for initial franchise fees and from market area sales to market developer partners is recognized upon the execution of a franchise agreement and when all material services or conditions relating to the sale have been successfully completed by the Company. Market developer partners receive a percentage of royalty fees for development and management of their market and are responsible for
substantially all training and other services required in opening new franchises in their regions.
Equipment sales are recorded upon delivery and installation of equipment to franchisees.
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ITEM 3. CONTROLS AND PROCEDURES
a) Evaluations of disclosure controls and procedures.
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Based on an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days of the filing date of this quarterly report, the Chairman, Chief Executive Officer and Chief Financial Officer, who is the same person, concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the
Company’s periodic SEC filings.
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b) Changes in internal control.
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Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
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There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
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
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(a)
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Exhibits
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99.1 - Certification of the Chief Executive officer and Acting Chief Financial Officer pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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(b)
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Reports on Form 8-K
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None.
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F-14
TILDEN ASSOCIATES, INC. AND SUBSIDIARIES
SIGNATURES
In accordance with section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed by the undersigned, thereunto duly authorized.
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Date: November 18, 2009
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TILDEN ASSOCIATES, INC.
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By: /s/ ROBERT BASKIND
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Robert Baskind
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President and
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Chief Executive Officer
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In accordance with the Exchange Act, this report has been signed below by the following person on behalf of the Registrant and in the capacity and on the date indicated.
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Signatures
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Titles
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Date
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By:
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/s/ ROBERT BASKIND
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Chairman of the Board, President
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November 18, 2009
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Robert Baskind
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Chief Executive Officer (Principal Executive and Financial Officer)
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F-15
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