<PAGE>
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 December 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 Number: 0-15891
GDC GROUP, INC.
--------------------------
(Exact Name of Registrant as Specified in Charter)
COLORADO 84-0891674
- -------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1580 Lincoln Street, Suite 900
Denver, Colorado 80203
---------------------------------------------
(Mailing Address of Principal Executive Offices)
(303) 840-6585
--------------------------------------------------
(Registrant's Telephone Number Including Area Code)
DK, Industries, Inc., 1580 Lincoln St., Suite 1125, Denver, Colorado
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 No x
------- -------
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of the close of the period covered by this report.
Number of Shares
Outstanding As of
Class December 31, 1996
- -------------------------------- -----------------
Common Stock $.02 Par Value 6,407,437
This Form 10-Q consists of 14 pages.
<PAGE>
INDEX
Page
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS*
Balance Sheets at December 31, 1996 and
September 30, 1996................................... F-1
Statement of Operations for the Three Months
Ended December 31, 1996 and 1995..................... F-2
Statement of Cash Flows for the Three Months
Ended December 31, 1996 and 1996..................... F-3
Note to the Financial Statements...................... F-4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION......... 3
PART II. OTHER INFORMATION
ITEMS 1 - 6........................................... 10
SIGNATURE PAGE............................................. 10
*The accompanying interim financial statements have not been audited by an
independent certified public accountant, and are so noted as "Unaudited" where
applicable. Only those statements corresponding to a fiscal year-end (September
30) are audited.
2
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
GDC GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
------------- -------------
ASSETS (Unaudited)
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 224,859 $1,298,361
Accounts receivable, trade 624,223 412,248
Other receivables 633,625 329,168
Inventory 177,234 177,234
Prepaid expenses 251,597 195,561
Other current assets 60,365 4,936
----------- -----------
Total Current Assets 1,971,903 2,417,508
Property & equipment, net 8,670,847 7,655,891
Debt restructure costs, net 872,131 922,501
Goodwill, net 4,735,837 ---
Other assets 118,265 161,675
----------- -----------
$16,368,983 $11,157,575
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
- --------------------------------------
Current Liabilities:
Short-term debt $ 3,373,738 $ 241,726
Current maturities of LT debt 4,328,924 4,254,724
Accounts payable & accrued expenses 6,067,502 3,755,813
----------- ----------
Total Current Liabilities 13,770,164 8,252,263
Long-term debt, net of current portion 794,538 95,552
Deferred income taxes 82,145 82,145
Stockholders' Equity:
Common stock, 70,000,000 shares
authorized, $0.2 par value, 5,628,412
shares issued and outstanding as of
September 30, 1996, and 6,407,437
shares issued and outstanding as of
December 31, 1996 128,149 112,568
Additional paid-in capital 4,215,060 3,588,518
Accumulated deficit (2,621,073) (973,471)
----------- ---------
Total Stockholders' Equity 1,722,136 2,727,615
----------- ---------
$16,368,983 $11,157,575
=========== ===========
</TABLE>
See Notes to Financial Statements
F-1
<PAGE>
GDC GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS MONTHS ENDED DECEMBER 31, 1996 AND 1995
(Unaudited)
Three Months Ended
December 31,
1996 1995
------------ ------------
Contract Revenue $ 1,565,226 $1,142,460
Cost of Contract Revenue 1,746,987 662,089
------------ ------------
Gross Profit (Loss) (181,761) 480,371
Selling, General &
Administrative Expenses 1,044,215 574,120
Other Expenses 183,731 ---
------------ ------------
Net Operating Income (Loss) (1,409,707) (93,749)
Other Income (Expenses):
Interest expense (146,215) (135,346)
Amortization expense (89,541) (23,369)
Other, net (2,139) 2,468
------------ ------------
(237,895) (156,247)
------------ ------------
Income (Loss) Before Taxes (1,647,602) (249,996)
Income Tax (Expense) Benefit 0 76,000
------------ ------------
Net (Loss) ($1,647,602) ($173,996)
============ ============
Net (Loss) per Common Share ($0.268) ($0.137)
============ =============
Weighted Average Shares
Outstanding 6,147,762 1,271,387
============ ============
See Notes to Financial Statements
F-2
<PAGE>
GDC GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(Unaudited)
Three Months Ended
December 31,
1996 1995
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($1,647,602) ($173,996)
Adjustments to reconcile net loss
from operating activities:
Depreciation and amortization 427,059 196,151
Deferred income taxes 0 (76,000)
Changes in operating assets and
liabilities, net of effects from
purchase of Walsh:
Receivables (360,247) 1,269,645
Prepaid expenses (42,939) (123,456)
Other current assets (55,429) (231,318)
Accounts payable & accrued expenses (944,545) (155,750)
Other assets 21,754 6,176
----------- ---------
Net Cash Provided by (Used in) Operations (2,601,949) 711,452
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (940,342) (64,335)
Net cash acquired upon purchase of Walsh 13,529 ---
----------- ---------
Net Cash Provided by (Used in) Investing
Activities (926,813) (64,335)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long term debt 4,256,343 195,095
Principal payments on long-term debt (2,443,206) (853,367)
Proceeds from sale of common stock 642,123 ---
----------- ---------
Net Cash Provided by (Used in) Financing
Activities 2,455,260 (658,272)
----------- ---------
INCREASE (DECREASE) IN CASH (1,073,502) (11,155)
CASH, beginning of period 1,298,361 115,919
----------- ---------
CASH, end of period $224,859 $104,764
=========== =========
SUPPLEMENTARY CASH FLOW DISCLOSURES:
Cash paid for interest $59,330 $146,329
=========== =========
Net liabilities assumed upon acquisition
of Walsh $4,751,458 ---
=========== =========
See Notes to Financial Statements.
F-3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. In September 1996, GDC Holdings Corporation, (GDCH) a wholly owned subsidiary
of Registrant, completed a reorganization between it and TVIES, Inc., (TVIES)
by which TVIES became a wholly owned subsidiary of GDCH. See Form 8-K Filing
of Registrant Dated September 30, 1996.
2. In November 1996, registrant held a special meeting of shareholders. A proxy
statement was mailed to all shareholders and the meeting was held on November
14, 1996. At the meeting three proposals were approved.
a) The name of the company was changed from DK Industries, Inc. to GDC
Group, Inc.
b) The Articles of Incorporation were amended to increase the number of
authorized shares of common stock from 30,000,000 to 70,000,000, and to
increase the number of authorized shares of preferred stock from
10,000,000 to 20,000,000.
c) Ratified the adoption of a stock option plan and certain options
granted thereunder.
3. On December 13, 1996, the Registrant, acquired 100% of the membership
interest of Walsh Remedial Construction Services, LLC., ("WRCS") a Colorado
Limited Liability Company. The interests were acquired from James P. Walsh &
Associates, Inc., a Colorado corporation, doing business under the name of
Walsh Environmental Engineers, Inc. ("Walsh Environmental") and from William
T. Spear, one of the WRCS' managers. See Form 8-K filing of Registrant dated
November, 14, 1996.
4. In June 1996, the company filed its Form 10-KSB which included the audited
financial statements for the fiscal year end September 30, 1996. This report
is incorporated herein by reference, and the footnotes to the audited
financial statement should be read in conjunction with these financial
statements.
5. The financial statements presented in this 10-QSB for the period ending
December 31, 1996 are management prepared, unaudited, consistently applied
and include normal reoccurring accruals..
6. In August 1997, the senior secured lender Finova Capital Corporation (Finova)
sent a letter to GDC Enviro-Solutions, Inc. (Borrower) and to GDC Holdings
Corporation, and GDC Group, Inc. (Guarantors) giving notice of an event of
default and declaring the entire loan immediately due and payable. The
current outstandings under the Finova loan are approximately $3,500,000.
Finova agreed to waive its acceleration if the company brought the loan
current, approximately $350,000. The company continues to discuss its default
with Finova and is attempting to secure adequate funds through the
liquidation of certain assets and raising additional funds from outside third
parties in order to bring the Finova loan current.
7. The lack of funds available to operating companies has resulted, as of the
date of this report, in the suspension of operations of Walsh Remedial
Construction Services, Inc., Enviro-Scope, Inc., and TVIES, Inc. The
company's other operating subsidiary, GDC Enviro-Solutions, Inc. has very
significantly reduced its staff and is currently operating at only one
facility - the Shell Oil facility at Norco, Louisiana.
8. Due to lack of cash flow and lack of liquidity, coupled with demands being
made by lenders and creditors, management is discussing various options
including sale of certain assets, closure of certain subsidiaries or other
more drastic measures which could include filing of a petition of bankruptcy
at one or more subsidiary companies. There is no assurance that the company
will succeed in working out any of its plans that would enable it to continue
in business.
F-4
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
-------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At December 31, 1996, the Company had a working capital deficiency of
$11,798,261, compared with a working capital deficit of $5,834,755 at September
30, 1995. This decrease is primarily due to continued operating losses as well
as a decrease in accounts receivable and an increase in accounts payable and
accrued expenses, an increase in short term debt and a decrease in cash and
cash equivalents. These major impacts were due to operating losses on projects
and due to the aquisition of Walsh Remedial Constuction Services, LLC.
Net cash used by operating activities was $2,601,949 for the quarter ended
December 31,1996, compared with $711,452 provided by operating activities for
the three months ended December 31,1995. In the quarter, the decrease in net
cash provided by operating activities was primarily due to the increase in
accounts payable and accrued expenses and the decrease in accounts receivable,
and a significantly larger loss from continuing operations and, the decrease in
deferred taxes and prepaid expenses.
Net cash used in investing activities was $926,813 in the quarter, compared
with net cash provided by investing activities of $64,335 during the quarter
ended December 31, 1995. This change was principally due to the purchase of
property, plant and equipment used in connection with the Company's projects at
the Winnfield, Louisiana and Elizabeth, New Jersey sites.
Net cash provided by financing activities was $2,455,343 in the quarter,
compared with net cash used in financing activities of $658,272 during the three
months ended December 31, 1995. This change was principally due to the
Company's sale of common stock, long term debt issued, offset somewhat by
principal payments on long-term debt.
The Company has significant immediate cash requirements resulting
principally from (i) working capital and equipment needs for remediation and
dredging projects; (ii) the assumption of significant obligations in connection
with recent acquisitions as well as significant costs incurred in consummating
such acquisitions; (iii) high start-up costs on certain new projects,
particularly with respect to equipment purchases and mobilization; (iv)
significant repayment obligations on loans, including loans in default; (v) the
termination of material projects and a delay in the receipt of payments due to
the Company thereunder; (vi) the expiration of contracts with key customers and
(vii) significant financing costs, including loan
3
<PAGE>
origination fees, commissions to a placement agent and professional fees. In
addition, the Company has past due payroll taxes of approximately $750,000. As a
result of the foregoing, the Company is currently in default of certain of its
obligations to lenders and vendors, and has significant short-term cash needs
which it will not be able to satisfy without raising significant funds from
current private offerings of securities as well as other proposed financings.
The Company (through GDC Solutions) has financed its operations in the
quarter ended December 31, 1996, in part through (i) an existing $3.5 million
equipment credit facility from FINOVA Capital Corporation ("FINOVA"), (ii) a
$2.5 million revolving credit facility from Coast Business Credit ("Coast"), and
(iii) a $400,000 equipment loan from Ally Capital Corporation and Environmental
Allies N.V. (collectively, "Ally"). As of December 31, 1996 the Company was in
default of the FINOVA facility and thereby had certain cross-defaults with Coast
and other lenders. In March 1997, following Coast's termination of its credit
facility and acceleration of the Company's indebtedness thereunder, the Company
paid the Coast facility in full (approximately $679,000 inclusive of principal,
interest and fees). As of the date of this report, the Company remains in
default of both the FINOVA and the Ally loan facilities, and these loans are
recorded as current liabilities in the Company's financial statements.
The current default of the FINOVA facility relates to a monetary default of
approximately $400,000 as well as technical defaults due to the breach of
certain covenants and/or negative covenants set forth in the FINOVA loan
documents. The Company has received a default notice and demand for repayment
in connection with such breaches, there can be no assurance that FINOVA will
agree to deliver any required waivers or consents, or that FINOVA will not take
further actions under the loan due to the defaults thereunder. The default of
the Ally loan was due to the Company's failure to make the required monthly
installments for March - August 1997. Ally has accelerated the full amount due
under the loan, which is approximately $400,000. Acceleration of the loan may
have a material adverse effect on the Company due to the Company's working
capital deficiency and significant cash requirements for other past due and
current obligations. In addition, the FINOVA facility is guaranteed by GDC
Holdings (the sole stockholder of the Company's operating subsidiaries) and is
secured by substantially all of GDC Solutions' assets. The Ally loan is secured
by certain equipment of GDC Solutions, the personal guaranty of Kathleen J.
Elnaggar and the pledge of the assets of 3E Corporation of Louisiana,
4
<PAGE>
which corporation is wholly owned by Mrs. Elnaggar, individually, and in her
capacity as Trustee. The foreclosure by FINOVA and/or Ally upon their respective
security interests would likely have a material adverse effect on the Company.
The Company is in monetary default on a Subordinated Note, payable to Louisiana
Seed Capital Fund, L.P. and Louisiana Economic Development Corporation. The
default of the Note was due to the Company's failure to make the required
monthly installments for March - August 1997. The holders have given notice of
default. The Note is guaranteed by Kathleen J. Elnaggar, personally, and secured
by real estate owned by Mrs. Elnaggar, individually, and as trustee. The
remaining balance on the note is approximately $200,000.
In addition, as of the date of this report the Company has obligations to
vendors aggregating approximately $5,500,000 which are past due, principally
related to the Cape Fear project, the IT Subcontract and the WRCS Port Authority
projects. Furthermore, the Company has significant cash requirements for its
current business operations and in connection with short-term debt obligations.
The Company will require significant additional financings to meet its current
and future obligations and there can be no assurance that it will be able to
raise additional funds required or that such funds will be raised on
satisfactory terms. Furthermore, the Company cannot guarantee that it will have
sufficient revenues from operations or from financings to make the principal and
interest payments on the promissory notes issued to investors in its recent
financings (described below) or in the current debt financing of GDC Solutions.
Moreover, as described below under "Closing of Acquisition Loans," the
Company is also in default of promissory notes in the aggregate principal amount
of $3,000,000 held by two lenders who financed the Company's acquisition of
WRCS. The notes, on which principal of $750,000 (plus accrued interest) was
payable on April 1, 1997, and $750,000 payable on July 1, 1997, are secured by
the Company's ownership interest in WRCS. As a result of the Company's default
on such payments, the Company must also pay the lenders late payment fees of
$375,000. The lenders may foreclose upon their security interests unless the
Company fails to cure its defaults; there can be no assurance that the Company
will have funds available to pay the past due payments and late fees, as well as
the next $1,500,000 installment (due December 1, 1997). The default of the loans
and the Company's inability to obtain waivers or extensions from the lenders
related thereto, could enable the lenders to accelerate the maturity date of the
loan and foreclose upon their security
5
<PAGE>
interest in WRCS to the extent necessary to recover any unpaid amount then due.
As the Company has not raised sufficient proceeds through debt or equity
financings the Company has been forced to scale back its operations, and to
consider other alternatives including the sale or closure of one or more of its
operations.
CLOSING OF PRIVATE PLACEMENT. A private placement of 800 Units of the
Company was consummated between September 30, 1996 and November 8, 1996. The
majority of which closed and was recorded on September 30, 1996. The Units were
comprised of an aggregate of 4,000,000 shares of Common Stock, Class A Warrants
to purchase 4,000,000 shares of Common Stock at an initial exercise price of
$2.25, and Class B Warrants to purchase 4,000,000 shares of Common Stock at an
initial exercise price of $3.75. The Warrant exercise prices are subject to
automatic downward adjustments (i) based on specified anti-dilution provisions
in the Warrants and (ii) if the Company does not satisfy certain obligations,
including, among other things, the filing within 270 days of November 8, 1996 of
a registration statement covering the shares issued in the private placement and
the shares underlying the warrants. The offering resulted in net proceeds to the
Company of approximately $3,671,000 of which approximately $1,317,000 was used
to repay indebtedness incurred in prior bridge loan financings (inclusive of
principal and interest) and approximately $715,000 was used for offering costs
including the placement agent's commission, legal fees, state filing fees, costs
and expenses of the Placement Agent, and other expenses related to the offering.
CLOSING OF ACQUISITION LOANS. In December 1996, the Company borrowed $3.0
million from two lenders to finance the Company's purchase of WRCS. See
"Business-Acquisitions-Walsh Remedial Construction Services, LLC." The lenders
are stockholders of the Company, who both beneficially own more than 5% of the
Company's Common Stock (taking account of currently exercisable warrants held by
the lenders). The loans bear interest at the rate of 14% per annum. Principal
on the loan is payable in three installments, due on April 1, 1997 ($750,000),
July 1, 1997 ($750,000) and December 15, 1997 ($1,500,000). Accrued interest is
payable in four installments during the loan term. The Company is obligated to
make prepayments on the loan from (i) proceeds of securities offerings and
financings of GDC Group, Inc., (ii) account receivable financings of WRCS and
(iii) "excess" cash flow of WRCS (as defined). The lenders were paid loan
origination fees totalling $150,000 (5% of the loan amount) and issued Series AA
Warrants to purchase an aggregate of 750,000
6
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shares of Common Stock at an initial exercise price of $2.25 per share. The
Warrant exercise price is subject to automatic downward adjustments similar to
those of the Class A and Class B Warrants. These loans are currently in default.
CLOSING OF BRIDGE LOANS. Between January 30 and May 31, 1997, GDC
Solutions borrowed an aggregate of $3,158,985 from a group of investors (the
"Bridge Financing"). Certain of the lenders are stockholders of the Company
and, giving effect to shares issuable upon exercise of warrants acquired from
GDC, are the beneficial owners of 5% or more of the Company's Common Stock.
Loans in the original principal amount of $2,308,985 bear interest at 14% per
annum and loans in the principal amount of $850,000 bear interest at the
Applicable Federal Rate. Principal and interest on the loans, which are
unsecured, are payable in full on December 15, 1997. GDC Solutions is obligated
to make prepayments on the loans in the event GDC and/or any of its
subsidiaries, closes one or more public or private offerings of debt or equity
securities resulting in aggregate gross proceeds of at least $3,500,000
(exclusive of certain financings with FINOVA). GDC Solutions is obligated to
pay the lenders loan origination fees aggregating $255,898.50, plus Series AA
Warrants to purchase an aggregate of 626,348 shares of GDC Common Stock at an
initial exercise price of $2.25 per share. The Warrant exercise price is
subject to the automatic downward adjustments described above under the caption
"--Closing of Acquisition Loans." GDC Solutions failed to repay the loans on or
before July 1, 1997, and October 1, 1997, and may fail to pay the next
installment due December 15, 1997, on which failure it will be obligated to pay
certain lenders additional fees aggregating up to $69,580, $25,000 and $69,580,
respectively, plus Series AA Warrants to purchase an aggregate of 25,000 shares
of Common Stock of GDC on each of said dates. The imposition of such fees,
combined with the mandatory prepayment provisions described above (which could
hinder the ability of the Company to raise needed capital) could have a material
adverse effect on the Company and further impair its cash position. In addition,
if the loans are not repaid in full on the final maturity date, the lenders have
the right to convert all or part of the outstanding loan balance into Common
Stock of the Company at a conversion price equal to forty percent (40%) of the
average of the Market Prices (as defined) of the Common Stock. As described
below under "Warrant exercise price reduction," certain lenders "converted" the
sum of $1,520,831 payable by the Company under the promissory notes issued in
the Bridge Financing to pay the exercise price of Warrants held by such lenders.
Said "converted" amount includes $1,427,378
7
<PAGE>
principal amount of loans, with the balance constituting accrued interest and
unpaid loan origination fees.
WARRANT EXERCISE PRICE REDUCTION. In March 1997, the Company reduced the
exercise price of its Series A and AA Warrants from $2.25 to $1.25 per share and
its Series B Warrants from $3.75 to $1.50 per share, effective (including
extensions) during the period March 13, 1997 through May 30, 1997. The Company
gave warrantholders the right to pay the exercise price of Warrants during this
period by "converting" the amount payable under promissory notes issued in the
Bridge Financing referred to above (inclusive of interest, principal, and loan
origination fees). Through May 30, 1997, Series A, AA and B Warrants to
purchase 108,000, 74,850 and 1,155,753 shares of GDC Common Stock were
exercised, resulting in net cash proceeds to the Company of $441,360 and a
reduction in indebtedness under promissory notes of $1,520,831 (inclusive of
accrued interest, principal and unpaid loan origination fees).
RESULTS OF OPERATIONS
QUARTER ENDED DECEMBER 31, 1996 COMPARED WITH THE THREE MONTHS ENDED
DECEMBER 31, 1995
Revenues increased by $422,766, or 37%, to $1,565,226 in the quarter
ended December 31, 1996, from $1,142,460, during the quarter ended December
31,1995. The increase resulted primarily from contract revenues earned from GDC
Enviro Solutions customers during the quarter ended December 31, 1996.
Gross profit decreased by $662,132, or 137%, to a loss of $181,761 for the
quarter from $480,371 during the quarter ended December 31, 1995. These
decreases resulted primarily from losses of approximately $2,000,000 incurred in
connection with the Company's Cape Fear, North Carolina Superfund project in
late fiscal 1996 for which the Company has a claim pending in excess of
$2,000,000.
Selling, general and administrative expenses increased by $470,095, or
82%, to $1,044,205 in the quarter, from $574,170 during the quarter ended
December 31, 1995. Such expenses as a percentage of revenues increased to
66.7% in the quarter from 50.2% for the quarter ended December 31, 1995.
The increase in expenses related principally to costs incurred during the
quarter in connection with private offerings and acquisitions.
8
<PAGE>
Other expenses increased by $81,648, or 52.3%, to $237,895 in the quarter
from $156,648 during the quarter ended December 31, 1995, principally as a
result of the increased amortization.
The Company had a loss before income taxes and cumulative effect of change
in accounting principle of $1,647,602, compared with loss before income taxes
of $249,996 during the quarter ended December 31, 1995.
The Company had no income tax benefits in the quarter compared with income
tax benefit of $76,000 during the quarter ended December 31, 1995.
The Company had a net loss per common share of $(0.268)in the quarter
compared with net loss per common share of $(0.137) during the quarter ended
December 31, 1995.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved through its subsidiary companies in numerous
legal actions arising in the normal course of business. It is management's
assessment that the range of loss related to any individual pending legal
actions will not have a material adverse effect on the Company's consolidated
financial position.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of Shareholders of Registrant was held on November 14,
1996. Proxy Statement of November 14, 1996 incorporated by reference herein.
All items on the Agenda for the special Meeting of shareholders were approved.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Registrant filed two reports on Form 8-K which pertain to the period
ending December 31, 1996. They were filed on October 24, 1997. Both of which are
incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: October 24, 1997.
/s/ James W. Muzzy
--------------------------------
James W. Muzzy, Vice President,
Principal Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S QUARTERLY REPORT ON FORM 10QSB 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-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 224,859
<SECURITIES> 0
<RECEIVABLES> 1,257,848
<ALLOWANCES> 0
<INVENTORY> 177,234
<CURRENT-ASSETS> 1,971,903
<PP&E> 8,670,847
<DEPRECIATION> 427,059
<TOTAL-ASSETS> 16,368,983
<CURRENT-LIABILITIES> 13,770,164
<BONDS> 0
0
0
<COMMON> 4,343,209
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,368,983
<SALES> 1,565,226
<TOTAL-REVENUES> 1,565,226
<CGS> 1,746,987
<TOTAL-COSTS> 1,044,215
<OTHER-EXPENSES> 183,731
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146,215
<INCOME-PRETAX> (1,647,602)
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