U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _______________.
Commission File No. 0-23226
ROCHEM ENVIRONMENTAL, INC.
(Exact name of Registrant as specified in charter)
Utah 76-0422968
(State of (IRS Employer
Incorporation) Identification Number)
610 N. Milby St.
Houston, Texas 77003
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 224-7626
Indicate by check mark whether the registrant (1) has filed all reports
required 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 [ ]
As of April 19, 1996, the registrant had 18,834,751 shares of Common
Stock, par value $.001 per share, issued and outstanding.
Transitional Small Business Disclosure Format.(Check one):
Yes [ ] No [X]
<PAGE>
ROCHEM ENVIRONMENTAL, INC.
FORM 10-QSB REPORT INDEX
10-QSB Part and Item No.
Part I Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated balance sheet as of
March 31, 1996. . . . . . . . . . . . . . . . . . . 3
Consolidated statement of operations for the three
months ended March 31, 1996 and 199....................4
Consolidated statement of operations for the six
months ended March 31, 1996 and 1995. . . . . . . . . 5
Consolidated statement of cash flows for the six
months ended March 31, 1996 and 1995 . . . . . . . . 6
Notes to consolidated financial statements . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . 8
Part II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities .. . . .. . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders. . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 11
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
ROCHEM ENVIRONMENTAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
as of March 31, 1996
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 64,887
Restricted cash 11,732
Trade accounts receivable 23,383
Prepaid expenses 14,818
-------
Total current assets 114,820
Inventory 197,876
Property and equipment, net 1,536,519
Intangible assets, net 4,714,084
Other assets 27,286
Total assets $ 6,590,585
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $173,957
Accrued expenses 24,536
Notes Payable 0
Payable to related parties 29,411
Notes payable to related parties 75,000
Deferred Revenue 48,750
--------
Total current liabilities 351,654
Stockholders' equity:
Common stock, $.001 par value, 50,000,000
shares authorized, 18,834,751 issued and
outstanding 18,835
Preferred stock, no par value, 10,000,000 shares
authorized, none outstanding 0
Additional paid-in capital 10,246,430
Accumulated deficit (4,026,334)
---------
Total stockholders' equity 6,238,931
----------
Total liabilities and stockholders' equity $6,590,585
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
ROCHEM ENVIRONMENTAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three months ended March 31,
____________________________
1996 1995
----------------------------
Revenues:
Service $330,479 $469,850
Product sales 0 1,634
--------- ----------
Total revenues 330,479 471,484
Cost of sales:
Service 195,911 360,667
Product sales 0 3,166
--------- ----------
Total cost of sales 195,911 363,833
--------- ----------
Gross profit 134,568 107,651
Selling, general and administrative expenses:
Depreciation and amortization expense 128,120 191,245
Other expenses 246,284 279,584
--------- -----------
Total selling, general and
administrative expenses 374,404 470,829
Interest expense, net 11,509 133
--------- -----------
Net loss (251,345) (363,311)
--------- -----------
Net loss applicable to common stock $(251,345) $(363,311)
--------- -----------
Net loss per share $(0.01) $(0.02)
---------- -----------
Weighted average shares outstanding 18,834,751 14,634,751
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
ROCHEM ENVIRONMENTAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Six months ended March 31,
---------------------------
1996 1995
--------- ---------
Revenues:
Service $537,038 $795,671
Product sales 9,630 152,534
--------- ---------
Total revenues 546,668 948,205
Cost of sales:
Service 356,490 619,906
Product sales 0 86,799
--------- ----------
Total cost of sales 356,490 706,705
--------- ----------
Gross profit 190,178 241,500
Selling, general and administrative expenses:
Depreciation and amortization expense 256,240 383,880
Other expenses 426,393 591,824
---------- -----------
Total selling, general and
administrative expenses 682,633 975,704
Interest expense, net 19,065 663
--------- -----------
Net loss (511,520) (734,867)
--------- -----------
Net loss applicable to common stock $(511,520) $(734,867)
---------- -----------
Net loss per share $(0.03) $(0.05)
--------- -----------
Weighted average shares outstanding 17,334,751 14,634,751
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
ROCHEM ENVIRONMENTAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six months ended March 31,
--------------------------
1996 1995
--------- ---------
Cash flows from operating activities:
Net loss $(511,520) $(734,867)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 342,950 463,296
Changes in assets and liabilities:
Trade accounts receivable (2,318) 17,282
Inventory 6,387 70,219
Prepaid expenses 36,951 57,388
Other assets (1,707) 36,361
Accounts payable 5,932 22,034
Accrued expenses (51,538) 23,838
Deferred revenues 48,750 (75,000)
Payable to related party (136,514) 63,281
---------- ---------
Net cash (used in) provided by operating activities (262,627) (56,168)
Cash flows from investing activities:
Capital expenditures 0 (90,644)
--------- ---------
Net cash used in investing activities 0 (90,644)
--------- ---------
Cash flows from financing activities:
Decrease in restricted cash 23,595 0
Payables converted to common stock 150,000 0
Proceeds from sale of common stock 50,000 0
Proceeds from notes payable to rel. party 75,000 100,000
Payments on loans (50,000) 0
--------- --------
Net cash provided by financing activities 248,595 100,000
Net increase (decrease) in cash and cash equivalents (14,032) (46,812)
Cash and cash equivalents beginning of period 78,919 52,248
-------- --------
Cash and cash equivalents end of period $64,887 $5,436
-------- --------
Supplemental disclosure of cash flow information:
Interest paid $19,294 -
Income tax paid 0 -
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
1. General:
The accompanying consolidated financial statements are unaudited, but,
in the opinion of management, include all adjustments necessary for a
fair presentation of consolidated financial position and results of
operations for the periods presented. Please refer to the audited
financial statements for the year ended September 30, 1995, for
details of accounting policies and accounts.
2. Significant Customers and Related Party:
The Company had sales constituting approximately 95% of revenue from
two customers during the six months ended March 31, 1996. In May 1996,
the Company was awarded a four-year extension of a contract to treat
waste waterproduced during catalyst changes at the Chevron Refinery in
Pascagoula, MS.
3. Deposit On Pending Sale
Cash flow statements reflect receipt of $48,750 from a customer as a
deposit to hold the equipment which the Company anticipates selling to
this customer.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Rochem Environmental, Inc. provides equipment and services to treat waters
for the petroleum, remediation and related industries. The Company operates
offices in Houston, TX and Baton Rouge, LA.
The Company's consolidated revenues of $330,479 for the three months ended
March 31, 1996 were 30% less than the $471,484 for the three months ended
March 31, 1995. The lower revenue was offset by lower cost of sales which
resulted in a 25% increase in gross profit from $107,651 for the three
months ended March 31, 1995 to $134,568 for the three months ended
March 31, 1996. Gross profit as a percent of revenue increased from 23% to
41% for the three months ended March 31 in 1995 and 1996, respectively.
Selling, general and administrative (SG&A) expenses decreased from $470,829
to $374,404, of which approximately $191,245 and $128,120, respectively, were
non cash expenses associated with amortization and depreciation. The SG&A
expenses included the costs for the transition period between the employment
of Erick Neuman as the President and CEO on January 1, 1996 and the
resignation of Kenneth Miller on January 31, 1996. Including these transition
costs, the SG&A was reduce by 20% over the previous period a year ago.
Interest expense increased from $133 for the three months ended March 31, 1995
to $11,509 for the three months ended March 31, 1996. This increase was due
primarily to the interest expense associated with the factoring arrangement
with Citizens Bank and loans with Lefco, Rochem AG and Citizens Bank.
For the six month periods ended March 31, 1995 and 1996, the revenues were
down from $948,205 to $546,668, respectively. The net loss for these same
periods was also reduced from $734,867 to $511,520. The lower revenue is
mainly due to less revenue from on-site testing and product sales. Efforts
are now being focused to regain this revenue source through direct sales.
In addition, a deposit of $48,750 has been received from a customer to hold
the equipment which the Company anticipates selling to this customer.
The revenues of the Company have been derived primarily from two customers.
These customers have provided 92% of the revenue during the six months ended
March 31, 1996. In May 1996, the Company was awarded a four year extension of
the contract to treat waste water produced during catalyst changes at the
Chevron refinery in Pascagoula, MS. In performing the contract services over
the past 12 months, during which hurricanes and a fire interupted scheduled
operations, the Company generated approximately $810,000 in revenue. It is
management's goal to maintain and expand these relationships with the
significant customers but increased focus is being given to broadening the
customer base. The Rochem technology is applicable to many waste waters that
currently are being transported off-site for treatment and disposal. Management
is directing sales efforts towards these waste waters with the expectation that
these customers will be driven more rapidly by economic advantages to the use
of the Disc-Tube trademark system.
As of March 31, 1996, the Company had a total of 10 employees, 6 of whom were
involved in field operating activities and testing, 2 devoted full time to
sales activities and 2 involved in the general administration and financial
areas.
Liquidity and Capital Resources
As of March 31, 1996, the Company had a working capital deficit of $236,834.
Net cash used for operating activities during the six months ended March 31,
1996 was $262,627. Net cash from financing activities provided $248,595
primarily through the conversion of debt into Common Stock and loan facilities
with related parties.
In February, 1996, the Company exercised its option to utilize $50,000 of an
$100,000 credit facility provided by Rochem AG. The Company currently has
$25,000 available under the Rochem AG credit facility. The Company also has
$50,000 available under a credit facility provided by Lefco to meet working
capital needs during the 1996 fiscal year.
Management believes that working capital available pursuant to existing credit
facilities as well as cash flow from operations will be sufficient to fund
operations for the remainder of the 1996 fiscal year. Accordingly, the Company
does not anticipate a need for any additional financing during the balance of
the 1996 fiscal year and, therefore, has no specific plans or commitments with
respect thereto. In the event additional funding is required, the Company will
consider alternatives to do so through a combination of efforts or methods
including joint ventures, equity investors, venture capital groups,
institutions, issuance of convertible or subordinated debt or a form of
business combinations. Should the need arise for the use of any of these
methods to raise capital, there can be no assurance that any of these will be
available to the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
The following matters were submitted to a vote of
shareholders during the Annual Meeting of Stockholders held on
March 28, 1996.
On March 28, 1996, the holders of a majority of shares
of Common Stock of the Company approved the election of five directors for
the coming year.
For Withheld Abstain
William E. Bracken 14,537,454 727,900 0
Ralph H. Isham 14,537,454 727,900 0
David A. LaMonica 14,537,454 727,900 0
Philip LeFevre 14,537,354 728,000 0
Erick J. Neuman 14,537,454 727,900 0
On March 28, 1996, the holders of a majority of shares
of Common Stock of the Company approved the ratification of Coopers &
Lybrand L.L.P. as independent auditors.
For Against Abstain
15,265,354 0 0
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are incorporated by reference thereto:
Exhibit
Number Identification of Exhibit
2.1(1) - Reorganization Agreement
3.1(2) - Amended and Restated Articles of Incorporation
3.2(5) - Bylaws
4.1(5) - Common Stock Specimen
4.2(4) - Certificate of Designation of Preferences, Rights and
Limitations of Series A Preferred Stock
4.3(4) - Certificate of Designation of Preferences, Rights and
Limitations of Series B Preferred Stock
10.1(2) - Distributor Agreement
10.2(4) - Asset Purchase Agreement
10.3(2) - Term Sheet
10.4(6) - Facilities Lease Agreement
10.5(6) - Termination Agreement Between Company and GH
Venture Group
10.6(6) - Agreement Between Company and Lefco Environmental
Technology, Inc.
10.7(6) - Agreement Between Company and Rochem Separation
Systems, Inc.
10.8(6) - Agreement Between Company and Rochem AG
10.9(7) - Employment Agreement With Erick Neuman
16.1(3) - Letter regarding change in certifying accountant
16.2(3) - Letter regarding change in certifying accountant
____________________
(1) Previously filed as an exhibit on Form 8-K dated July 20, 1993.
(2) Previously filed as an exhibit on Form 8-K dated September 30,1993.
(3) Previously filed as an exhibit on Form 8-K dated November 5, 1993.
(4) Previously filed as an exhibit on Form 8-K dated November 19, 1993.
(5) Previously filed as an exhibit on Form 8-K dated January 13, 1994.
(6) Previously filed as an exhibit on Form 10-KSB for the fiscal year
ended September 30, 1995.
(7) Filed herewith.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ROCHEM ENVIRONMENTAL, INC.
(Registrant)
Date: May 15, 1996 By: /s/ Erick J. Neuman
Erick J. Neuman, President;
Secretary; Chief Executive Officer,
Chief Financial Officer, and Principal
Accounting Officer
Date: May 15, 1996 By: /s/ William E. Bracken
William E. Bracken, Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The finanial data schedule contains summary financial information extracted from
the quarterly report and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 76,619
<SECURITIES> 0
<RECEIVABLES> 23,383
<ALLOWANCES> 0
<INVENTORY> 197,876
<CURRENT-ASSETS> 114,820
<PP&E> 2,276,688
<DEPRECIATION> 740,169
<TOTAL-ASSETS> 6,590,585
<CURRENT-LIABILITIES> 351,654
<BONDS> 0
0
0
<COMMON> 18,834,751
<OTHER-SE> 6,238,931
<TOTAL-LIABILITY-AND-EQUITY> 6,590,585
<SALES> 330,479
<TOTAL-REVENUES> 330,479
<CGS> 195,911
<TOTAL-COSTS> 195,911
<OTHER-EXPENSES> 374,404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,509
<INCOME-PRETAX> (251,345)
<INCOME-TAX> 0
<INCOME-CONTINUING> (251,345)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (251,345)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
