UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended July 31, 1998
( ) 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 -17072
WINDSWEPT ENVIRONMENTAL GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2844247
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
100 Sweeneydale Avenue, Bay Shore, New York 11706
(Address of principle executive offices)
(516) 694-7060
(Issuer's telephone number)
Indicate by check mark whether the issuer (1) 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 ___
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Common Stock, Par Value $.0001 12,844,463
(Title of Each Class) (Outstanding at August 31, 1998)
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WINDSWEPT ENVIRONMENTAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31,
1998 April 30,
(Unaudited) 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 65,732 $ 33,915
Accounts receivable, net of allowance for doubtful
accounts of $120,000 and $280,000, respectively 2,560,254 2,517,517
Inventories 149,226 161,266
Costs and estimated earnings in excess of billings on uncompleted contracts 138,000 55,352
Prepaid and other current assets 247,432 325,061
------------ ------------
Total current assets 3,160,644 3,093,111
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$2,155,876 and $1,953,634, respectively 2,633,759 2,799,191
OTHER ASSETS
Goodwill, net of accumulated amortization of $38,893 and $36,526, respectively 83,133 85,500
Note receivable, net of current portion of $81,833 and $80,460, respectively 194,126 209,245
Other assets 152,841 167,642
------------ ------------
TOTAL ASSETS $ 6,224,503 $ 6,354,689
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 3,206,428 $ 3,361,578
Revolving credit note payable 1,583,462 --
Advances from factor -- 1,505,968
Billings in excess of costs and estimated earnings on uncompleted contracts 195,000 266,000
Payroll taxes payable 246,308 641,790
Current portion of long-term debt 703,281 955,367
Obligations of unconsolidated subsidiary, net 196,112 196,112
------------ ------------
Total current liabilities 6,130,591 6,926,815
OTHER LIABILITIES
Convertible notes 790,000 800,000
Long-term debt, net of current portion 666,166 227,604
Other liabilities -- 37,000
------------ ------------
Total liabilities 7,586,757 7.991,419
------------ ------------
COMMITMENTS AND CONTINGENCIES
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
par value $.01; 1,300,000 shares issued and outstanding 1,300,000 1,300,000
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 par value,
10,000,000 shares authorized -- --
Common stock, $.0001 par value,
50,000,000 shares authorized;
12,369,750 and 11,552,374 shares issued and outstanding, respectively 1,237 1,155
Additional paid-in capital 28,357,638 28,126,648
Accumulated deficit (30,966,659) (30,989,396)
Less deferred compensation (54,470) (75,137)
------------ ------------
Total stockholders' equity (deficit) (2,662,254) (2,936,730)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 6,224,503 $ 6,354,689
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Unaudited)
<TABLE>
<CAPTION>
July 31, July 31,
1998 1997
------------ ------------
<S> <C> <C>
Revenues $ 3,443,463 $ 3,295,363
Cost of revenues 2,321,157 3,184,914
------------ ------------
Gross profit 1,122,306 110,449
Selling, general and administrative expenses 838,595 1,176,220
------------ ------------
Income (loss) from operations 283,711 (1,065,771)
------------ ------------
Other income (expense):
Interest expense (276,306) (308,237)
Gain on disposal of equipment 15,332 --
------------ ------------
Total other income (expense) (260,974) (308,237)
------------ ------------
Net income (loss) 22,737 (1,374,008)
Dividends on Series A Convertible Preferred Stock 19,500 23,146
------------ ------------
Net income (loss) attributable to common shareholders 3,237 (1,397,154)
------------ ------------
Basic and diluted net income (loss) per common share $ .00 $ (.14)
------------ ============
Weighted average number of common shares outstanding 12,185,528 9,835,410
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JULY 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
--------------------------- Additional
Number of Par Paid-in Accumulated Deferred
Shares Value Capital Deficit Compensation Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1998 11,552,374 $ 1,155 $ 28,126,648 $(30,989,396) $ (75,137) $ (2,936,730)
Proceeds from private placements of
common stock 425,000 42 67,958 -- -- 68,000
Note conversion 20,000 2 9,998 -- -- 10,000
Issuance of common stock for services 247,376 25 124,147 -- -- 124,172
Issuance of common stock for
employee and director compensation 125,000 13 48,387 -- -- 48,400
Amortization of deferred compensation -- -- -- -- 20,667 20,667
Dividends paid -- -- (19,500) -- -- (19,500)
Net income -- -- -- 22,737 -- 22,737
------------ ------------ ------------ ------------ ------------ ------------
Balance at July 31, 1998 12,369,750 $ 1,237 $ 28,357,638 $(30,966,659) $ (54,470) $ (2,662,254)
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
(Unaudited)
<TABLE>
<CAPTION>
July 31, July 31,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 22,737 $(1,374,008)
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization 255,077 542,562
Provision for doubtful accounts -- 76,997
Issuance of common stock for director compensation 11,400 60,776
Gain on disposal of equipment (15,332) --
Changes in operating assets and liabilities:
Accounts receivable (42,737) (916,108)
Inventories 12,040 (18,479)
Costs and estimated earnings in excess of billings on uncompleted contracts (82,648) --
Due from officer -- (49,053)
Prepaid and other current assets 78,822 149,468
Other assets -- (9,567)
Accounts payable and accrued expenses (30,979) 420,620
Payroll taxes payable (395,482) 180,311
Billings in excess of costs and estimated earnings on uncompleted contracts (71,000) 213,035
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (258,102) (723,446)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Collection of notes receivable 13,926 4,157
Proceeds from insurance settlement 20,332 --
Purchases of property and equipment (56,810) (390,091)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (22,552) (385,934)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of long-term debt and factor advances (1,914,491) (150,154)
Proceeds from revolving bank line, net 1,583,462 745,930
Proceeds from equipment term loan 595,000 --
Dividends paid on redeemable preferred stock (19,500) (23,346)
Proceeds from issuance of common stock 68,000 --
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 312,471 572,430
----------- -----------
NET INCREASE (DECREASE) IN CASH 31,817 (536,950)
CASH -BEGINNING 33,915 654,377
----------- -----------
CASH - ENDING $ 65,732 $ 117,427
=========== ===========
Cash paid during the period for:
Interest $ 299,386 $ 34,027
=========== ===========
Taxes $ 1,500 $ --
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JULY 31, 1998
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of the Company have been prepared by management in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and
Item 310 of Regulation S-B. Accordingly, they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full
year. These consolidated interim financial statements should be read
in conjunction with the financial statements and notes thereto
included in the Company's Form 10-KSB for the fiscal year ended April
30, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassifications - Certain amounts included in the prior year's
consolidated financial statements have been reclassified to conform
with the current period presentation.
3 LIQUIDITY AND BUSINESS RISKS
The Company's financial statements have been prepared assuming that
the Company will continue as a going concern. As of July 31, 1998 the
Company has a stockholders' deficit of $2,662,254 and an accumulated
deficit of $30,966,659. The Company has financed its operations to
date primarily through issuances of debt and equity securities. At
July 31, 1998, the Company had $65,732 in cash, and a working capital
deficit of $2,969,947. In addition, as of August 31, 1998 and July
31, 1998, the Company was in arrears with respect to certain payroll
tax obligations of approximately $211,000 and $246,000, respectively,
and as of July 31, 1998 with respect to preferred stock dividends of
$70,775. These factors raise substantial doubt about the Company's
ability to continue as a going concern. These financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
In June 1998, the Company entered into a revolving credit facility to
obtain a revolving credit line of $2,445,000, secured by certain of
the Company's assets. The current quarter's results reflect efforts
to improve the Company's overall gross margins and control its
selling, general, and administrative expenses. Revenue growth is
expected to continue and further expense reductions are planned;
however, no assurance can be given in this regard. The Company is
currently engaged in various discussions with potential investors
regarding possible equity transactions. There can be no assurance,
however, that changes in the Company's plans or other events
affecting the Company's operations will not result in accelerated or
unexpected cash requirements, or that it will be successful in
obtaining the additional financing to meet its obligations as they
become due. The Company's future cash requirements are expected to
depend on numerous factors, including, but not limited to: (i) the
ability to successfully bid on environmental or construction
contracts (ii) the ability to generate positive cash flow from
operations, and the extent thereof, (iii) the ability to raise
additional capital or obtain additional financing, and (iv) economic
conditions.
4. EQUITY TRANSACTIONS
On August 18, 1998 the Company's Board of Directors granted options
to purchase 750,000 shares of common stock to the directors of the
Company, which included 250,000 to the Chief Executive Officer. In
addition, options to purchase 100,000 shares of common stock were
issued to the Company'sChief Financial Officer. All of these options
are exercisable immediately at an exercise price of $.34, and expire
August 17, 2003.
On August 20, 1998 the Company's Board of Directors approved the
Company's 1998 Stock Incentive Plan ("Plan"). Under the Plan, the
Company is permitted to grant awards up to a maximum of 2,000,000
shares of common stock as restricted stock, incentive stock options,
non-qualified options, phantom stock and otherwise.
5
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JULY 31, 1998
(Unaudited)
4. EQUITY TRANSACTIONS (cont.)
During the quarter ended July 31, 1998 the Company received $68,000
from a group of private accredited investors for 425,000 shares, or
$.16 per common share. In addition, a convertible noteholder
converted a $10,000 note into20,000 shares of common stock. The
Company issued 247,376 shares valued at $124,172 related to prior
fiscal year obligations for legal and consulting services. The
Company issued 100,000 shares of common stock valued at $37,000 to
its Vice President of Business Development which it had been
contractually obligated to issue. The Company's five directors were
issued 5,000 shares each valued at $11,400 in the aggregate.
In August 1998, the Company issued 474,713 shares for services,
including 324,713 common shares for legal and consulting services. In
addition, the Company issued 150,000 common shares to an accredited
investor in a private placement for which the Company received
$30,000, or $.20 per common share.
5. RELATED PARTY TRANSACTIONS
The Company purchased materials and supplies of $32,483, and had an
outstanding balance payable at July 31, 1998 of $54,364 to a Company
with which one of its directors is affiliated. The same director is
owed $100,000 on a 12% convertible note payable in full in December
1999.
6. DEBT
On June 1, 1998 the Company entered into a two-year Loan and Security
Agreement ("LSA") with Business Alliance Capital Corporation
("BACC"). The LSA consisted of two parts, a term loan of $595,000
collateralized by the Company's equipment and revolving advances up
to a maximum of $1,850,000, collateralized by the Company's accounts
receivable, subject to a borrowing base of 80% of the Company's
eligible accounts, as defined. Interest on the LSA is at 3% above
prime. The term loan carries a five year principal amortization.
Interest is calculated on a monthly minimum daily average loan
balance of $750,000. The LSA carries an annual fee of 1% and a
servicing fee of .5% monthly (to be adjusted to .3% after the Company
satisfies certain conditions, as defined) of the average outstanding
balance of the advances. The Company is required to maintain a
$250,000 life insurance policy on its CEO with BACC named as an
irrevocable beneficiary. The Company's CEO has given BACC an
unlimited personal guaranty on the LSA. In the event of a default, as
defined, the Company is required to pay interest at 8% above the
prime rate to BACC. In conjunction with the LSA, the Company utilized
approximately $218,000 of the proceeds of the term loan to repay in
full the outstanding note payable to the bank and certain other
equipment related capital lease obligations. The Company further
utilized $200,000 of the proceeds to effect an agreement with the
Internal Revenue Service relating to its overdue payroll taxes. On
July 1, 1998, the Company terminated its factoring agreement and
transferred its receivable collaterization to BACC. The Factor was
paid $1,432,638 in full satisfaction of the Company's outstanding
liability to it. The Company received an additional advance of
$210,000, for a total initial advance of $1,642,638.
7. STATEMENTS OF CASH FLOWS
During the quarter ended July 31, 1998, the Company's non cash
operating activities included the payment of $124,172 in current
liabilities utilizing its common stock. The Company also utilized
$37,000 in common stock to satisfy a previous contractual obligation.
See Note 4.
6
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JULY 31, 1998
(Unaudited)
8. COMMITMENTS AND CONTINGENCIES
Litigation
In October 1996, the United States Attorney for the Eastern District
of New York obtained a federal grand jury indictment against, among
others, the Company's former Chief Operating Officer, Leo Mangan, and
former Special Securities Counsel, James Nearen, on charges that
include violations of federal securities law, including fraudulent
issuances of 700,000 shares of the Company's common stock. Mr. Mangan
and Mr. Nearen both subsequently pleaded guilty to the charges in the
Federal indictment. To date, no charges have been filed against the
Company or any other member of management as a result of the Eastern
District investigation. The Company is awaiting the decision of the
Securities and Exchange Commission as to whether it will follow a
staff recommendation that an enforcement action be filed seeking an
injunction against future violations of the securities laws. The
Company has vigorously opposed this recommendation on the grounds
that all employees accused of wrongdoing have been terminated and
other adequate remedial measures have been taken voluntarily by the
Company.
The Company is a defendant in a litigation matter whereby one or more
plaintiffs claim to be entitled to additional wages while working for
a subcontractor of the Company. The amount of the claim has not been
specified. Management believes that the case is without merit, and
intends to defend the action vigorously.
The Company is party to other litigation matters and claims which are
normal in the course of its operations, and while the results of
litigation and claims cannot be predicted with certainty, management
believes that the final outcome of such matters will not have a
materially adverse effect on the consolidated financial position,
results of operations and cash flows of the Company.
Other Proceedings
In January 1996 Laboratory Testing Services, Inc. ("LTS"), a
wholly-owned subsidiary, filed a Chapter 11 petition in United States
Bankruptcy Court in the Eastern District of New York. Subsequently,
this case was converted to a Chapter 7 Bankruptcy proceeding. LTS is
in process of liquidation through these bankruptcy proceedings.
Management believes that the Company's financial condition and
results of operations will not be materially affected by this
proceeding.
Sales tax examination
The Company is presently undergoing a New York State sales tax
examination for the period March 1, 1994 through September 28, 1997.
The examination is still in progress and the findings are as yet
inconclusive.
Settlement with IRS
In June 1998, the Company reached a tentative settlement with the
Internal Revenue Service ("IRS") relating to its outstanding payroll
tax liability. The Company has paid the IRS $305,000 through
September 2, 1998, and is expected to remit an additional $105,000 in
three monthly installments of $35,000 through December 1998.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion of the fiscal quarters ended July 31, 1998 and 1997,
should be read in conjunction with the Consolidated Financial Statements
contained herein, including the notes thereto.
This Item 2 and other items in this Form 10-QSB contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The Company's actual results
could differ materially from those set forth in the forward-looking statements.
Forward-looking statements included in this Form 10-QSB involve known and
unknown risks, uncertainties and other factors which could cause actual results,
performance (financial and operating) or achievements expressed or implied by
such forward looking statements not to occur or be realized. Such forward
looking statements generally are based upon the best estimates by the Company of
future results, performance or achievement, based upon current conditions and
the most recent results of operations. Forward looking statements may be
identified by the use of forward looking terminology such as "may", "will",
"expect", "believe", "estimate", "anticipate", "continue", or similar terms,
variations of those terms or the negative of those terms. Potential risks and
uncertainties include, among other things, such factors as the amount of the
Company's revenues, the success of the Company in limiting or reducing its
expenses, the frequency and magnitude of environmental disasters or disruptions,
the effects of new laws or regulations relating to environmental remediation,
the Company's ability to raise capital, the competitive environment within the
Company's industry, dependence on key personnel, economic conditions, and the
other factors and information disclosed and discussed in other sections in this
Form 10-QSB, and in the Company's annual report on Form 10-KSB for the year
ended April 30, 1998. Readers of this Form 10-QSB should carefully consider such
risks, uncertainties and other information, disclosures and discussions which
contain cautionary statements identifying important factors that could cause
actual results to differ materially from those provided in the forward looking
statements.
RESULTS OF OPERATIONS
Net income and net income per share were $22,737 and $0 for the three-month
period ended July 31, 1998 compared to net loss and net loss per share of
$(1,374,008) and $(.14) during the same period in 1997. Revenues increased by
$148,100, or 4%, from $3,295,363 to $3,443,463, while gross margins increased to
33% compared to 3% for the first quarter of fiscal 1998. Growth in the revenue
of the Company's subsidiaries, North Atlantic Laboratories Inc. and New York
Testing Laboratories Inc., accounted for 83% of the increased revenue. The
increased margins were attributable primarily to management efforts during the
past year to provide a broader and more profitable mix of services at its
Trade-Winds subsidiary, whose margins increased to 29% from negligible levels.
In addition, management has become more proficient in estimating its project
costs and has turned down work where competitive factors would lead to projected
project losses. The gross margins in the period ended July 31, 1997 were a
result of the recognition of losses in that period related to certain
longer-term contracts with projected losses, the effect of higher labor costs
due to unionization in June 1996, and cost overruns on certain fixed price
contracts during the quarter ended July 31, 1997.
Selling, general and administrative expenses declined by $337,625, or 29%, from
$1,176,220 in the three-month period ended July 31, 1997 to $838,595 in the
three-month period ended July 31, 1998. The decline was primarily related to
approximate reductions as follows: bad debt expense, $77,000 (due to improved
internal controls and management collection efforts); legal expenses, $62,000
(due to a reduction in SEC investigation and compliance and other
non-operational type legal matters), health insurance, $37,000 (due to mandatory
contributions required of employees since the third quarter of fiscal 1998),
goodwill amortization expense of $36,000 (due to the impairment loss recorded in
the fourth quarter of fiscal1998), fines and penalties, $22,000 (reduced due to
the settlement agreement with the Internal Revenue Service), and sales salaries,
$86,000 (due to the staff reduction in February 1998).
Interest expense declined $31,931, or 10% , from $308,237 in the three-month
period ended July 31, 1997 to $276,306 in the three-month period ended July
31,1998. The substantial interest expense during the quarter ended July 31, 1998
was principally attributable to the high cost of receivable factoring in the
months of May and June 1998. The Company began its borrowing base agreement with
BACC as of July 2,1998. (See Note 6 to the Condensed Consolidated Financial
Statements). The LSA carries an annualized interest rate of approximately 18%.
During the quarter ended July 31, 1997 the Company incurred approximately
$240,000 of interest expense relating to the accretion of a discount on the
$700,000 of convertible notes issued in the fourth quarter of fiscal 1997.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. As of July 31, 1998 the Company has a
stockholders' deficit of $2,662,254 and an accumulated deficit of $30,966,659.
The Company has financed its operations to date primarily through issuances of
debt and equity securities. At July 31, 1998, the Company had $65,732 in cash,
and a working capital deficit of $2,969,947. In addition, as of August 31, 1998
and July 31, 1998, the Company was in arrears with respect to certain payroll
tax obligations of approximately $211,000 and $246,000, respectively, and as of
July 31, 1998 with respect to preferred stock dividends of $70,775. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. These financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
In June 1998, the Company entered into a revolving credit facility to obtain a
revolving credit line of $2,445,000, secured by certain of the Company's assets.
The current quarter's results reflect managements efforts to improve the
Company's gross margins and control its selling, general, and administrative
expenses. Revenue growth is expected to continue and further expense reductions
are planned; however, no assurance can be given in this regard. The Company is
currently engaged in various discussions with potential investors regarding
possible equity transactions. There can be no assurance, however, that changes
in the Company's plans or other events affecting the Company's operations will
not result in accelerated or unexpected cash requirements, or that it will be
successful in obtaining the additional financing to meet its obligations as they
become due. The Company's future cash requirements are expected to depend on
numerous factors, including, but not limited to: (i) the ability to successfully
bid on environmental or construction contracts (ii) the ability to generate
positive cash flow from operations, and the extent thereof, (iii) the ability to
raise additional capital or obtain additional financing, and (iv) economic
conditions.
The Company believes that its current resources together with anticipated
continued positive cash flow from operation, if any, and the LSA, should provide
sufficient cash to meet the Company's needs for approximately the next twelve
months.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 8 to the Condensed Consolidated Financial Statements.
Item 2. Changes in Securities
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 and Reports on Form 8-K
(a) Exhibits: 27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
for which this report is filed.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: September 21, 1998
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By:/s/ Michael O'Reilly
----------------------------------
MICHAEL O'REILLY, Chairman and
Chief Executive Officer
By:/s/ Alan W.Schoenbart
----------------------------------
ALAN W. SCHOENBART,
Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-1-1998
<PERIOD-END> JUL-31-1998
<CASH> 65,732
<SECURITIES> 0
<RECEIVABLES> 2,680,254
<ALLOWANCES> 120,000
<INVENTORY> 149,226
<CURRENT-ASSETS> 3,160,644
<PP&E> 4,789,635
<DEPRECIATION> 2,155,876
<TOTAL-ASSETS> 6,224,503
<CURRENT-LIABILITIES> 6,130,591
<BONDS> 1,456,166
1,300,000
0
<COMMON> 1,237
<OTHER-SE> (2,663,491)
<TOTAL-LIABILITY-AND-EQUITY> 6,224,503
<SALES> 3,443,463
<TOTAL-REVENUES> 3,443,463
<CGS> 2,321,157
<TOTAL-COSTS> 2,321,157
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276,306
<INCOME-PRETAX> 22,737
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,737
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,737
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
