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 January 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 10,946,574
(Title of Each Class) (Outstanding at February 28, 1998)
Transitional Small Business Disclosure Format (check one): Yes___ No _X_
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31,
1998 April 30,
(Unaudited) 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 153,682 $ 654,377
Accounts receivable, net of allowance for doubtful
accounts of $175,395 and $200,000 at January 31,
1998 and April 30, 1997, respectively 2,437,112 2,195,284
Inventories 163,957 158,714
Costs in excess of billings on contracts in progress 118,190 --
Due from officer 73,455 --
Other current assets 207,327 426,220
------------ ------------
Total current assets 3,153,723 3,434,595
------------ ------------
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization 2,966,353 2,841,783
------------ ------------
OTHER ASSETS
Goodwill, net 1,411,288 1,529,320
Notes receivable, net of current portion 224,056 200,282
Other assets 196,110 233,271
------------ ------------
TOTAL ASSETS $ 7,951,530 $ 8,239,251
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Note payable to bank $ 703,675 $ --
Accounts payable and accrued expenses 3,706,785 2,573,708
Payroll taxes payable 581,014 347,404
Current portion of long-term debt 606,599 765,432
Billings in excess of cost on contracts in progress 56,000 18,765
Obligations of unconsolidated subsidiary, net 196,112 196,112
------------ ------------
Total current liabilities 5,850,185 3,901,421
OTHER LIABILITIES
Convertible notes 800,000 800,000
Long-term debt, net of current portion 309,785 454,560
Other liabilities 75,000 --
------------ ------------
Total liabilities 7,034,970 5,155,981
------------ ------------
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; 1,300,000
Series A redeemable convertible shares issued and outstanding -- --
Common stock, $.0001 par value,
50,000,000 shares authorized;
10,715,086 shares issued, 10,695,086 outstanding 1,072 979
Additional paid-in capital 28,057,366 27,318,031
Treasury stock, 20,000 shares at cost (10,000) (10,000)
Accumulated deficit (28,316,240) (25,379,601)
Less deferred compensation (115,638) (146,139)
------------ ------------
Total stockholders' equity (deficit) (383,440) 1,783,270
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 7,951,530 $ 8,239,251
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
1
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
January 31, January 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 2,840,676 $ 4,016,481 $ 9,737,411 $ 12,268,023
Cost of revenues 2,413,511 3,420,747 8,367,363 9,383,515
------------ ------------ ------------ ------------
Gross profit 427,165 595,734 1,370,048 2,884,508
Selling, general and administrative 1,236,740 974,627 3,819,853 3,181,305
Special charges -- 150,000 -- 1,343,000
------------ ------------ ------------ ------------
Loss before other
income(expense) (809,575) (528,893) (2,449,805) (1,639,797)
------------ ------------ ------------ ------------
Other income (expense):
Settlement of legal claims, net 102,993 -- 102,993 296,654
Losses on investments -- -- -- (295,071)
Gain on sale of assets, net -- -- 1,735 221,710
Interest expense (90,366) (21,138) (591,562) (48,721)
------------ ------------ ------------ ------------
Total other income (expense) 12,627 (21,138) (486,834) 174,572
------------ ------------ ------------ ------------
Net loss $ (796,948) $ (550,031) $ (2,936,639) $ (1,465,225)
============ ============ ============ ============
Loss per common share $ (.08) $ (.06) $ (.29) $ (.16)
============ ============ ============ ============
Weighted average number of
common shares outstanding 10,475,481 9,727,371 10,147,194 9,125,444
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED JANUARY 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
------------------ Additional
Number of Par Paid-in Treasury Accumulated Deferred
Shares Value Capital Stock Deficit Compensation Total
--------- ----- ------- ----- ------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1997 9,766,074 $ 979 $27,318,031 $(10,000) $(25,379,601) $(146,139) $ 1,783,270
Issuance of common stock for services 630,112 63 263,203 -- -- (15,000) 248,266
Issuance of stock options for services -- -- 10,000 -- -- -- 10,000
Issuance of common stock for
employee and director compensation 207,558 21 141,513 -- -- (150,000) (8,466)
Issuance of common stock to settle
legal obligations 91,342 9 40,561 -- -- -- 40,570
Accretion of discount on convertible
notes -- -- 356,154 -- -- -- 356,154
Amortization of deferred compensation -- -- -- -- -- 195,501 195,501
Dividends -- -- (72,096) -- -- -- (72,096)
Net loss -- -- -- -- (2,936,639) -- (2,936,639)
---------- ------ ----------- -------- ------------ --------- -----------
Balance at January 31, 1998 10,695,086 $1,072 $28,057,366 $(10,000) $(28,316,240) $(115,638) $ (383,440)
========== ====== =========== ======== ============ ========= ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
(Unaudited)
<TABLE>
<CAPTION>
January 31, January 31,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,936,639) $(1,465,225)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 1,329,463 529,125
Provision for doubtful accounts 80,187 93,000
Issuance of common stock and stock options for services 138,246 240,945
Losses on investment -- 295,071
Special charges -- 251,000
Gain on settlement of lawsuit (102,993) --
Gain on sale of assets (1,735) (221,710)
Other, net -- 25,000
Changes in operating assets and liabilities:
Accounts receivable (322,016) (369,996)
Other current assets 360,623 (226,421)
Inventories (5,242) --
Other assets (10,181) 22,652
Accounts payable and accrued expenses 1,311,451 560,007
Payroll taxes payable 233,610 (188,434)
Costs in excess of billings on contracts in progress, net (80,955) --
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (6,181) (454,986)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Obligations of unconsolidated subsidiary, net -- 145,055
Proceeds from sale of assets 14,614 221,710
Collection of notes receivable 43,903 (265,000)
Due from officer (73,455) --
Acquisition of fixed assets and leasehold improvements (623,692) (774,311)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (638,630) (672,546)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable -- 100,000
Proceeds from long term debt -- 566,419
Principal payments of long-term debt (536,213) (277,662)
Proceeds from revolving bank line, net 703,675 --
Dividends paid on redeemable preferred stock (23,346) --
Proceeds from issuance of common stock -- 1,129,413
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 144,116 1,518,170
----------- -----------
NET INCREASE (DECREASE) IN CASH (500,695) 390,638
CASH - BEGINNING 654,377 282,933
----------- -----------
CASH - ENDING $ 153,682 $ 673,571
=========== ===========
Cash paid during the period for:
Interest $ 142,422 $ 50,699
=========== ===========
Taxes $ -- $ 346
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 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 30,1997.
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 periods presentation.
3. LIQUIDITY AND BUSINESS RISKS
As of January 31, 1998 the Company has an accumulated deficit of
$28,316,240 and has not generated positive cash flow from operations to
date. The Company has financed its operations to date primarily through
issuances of debt and equity securities. At January 31, 1998, the Company
had $153,682 in cash, and a working capital deficit of $2,696,462 (
inclusive of the $703,675 note payable to bank). In addition, as of January
31, 1998, the Company was in arrears with respect to certain payroll tax
obligations of approximately $581,000. As of February 28, 1998 this was
amount was reduced to $556,000, as part of an arrangement with federal
payroll tax authorities. See Note 7.
In May 1997, the Company entered into a revolving bank credit facility to
obtain a revolving credit line of $1,500,000, secured by certain of the
Company's assets. Borrowings remain at a maximum of $750,000.
On February 13, 1998 the Company and its lender, North Fork Bank, entered
into an agreement to amend its current revolving credit facility with the
bank. Under the agreement, the Company agreed to pay off all amounts due
the bank in excess of $200,000. The $200,000 balance was then converted to
a term note over two years at prime plus 3%. The Bank agreed to release its
lien on the Company's accounts receivable and take a secondary position
thereon, but maintained its lien on all the Company's equipment and other
assets. In addition, the bank secured the personal guaranty of the
Company's chief executive officer. The Company then entered into an initial
six month factoring arrangement on its accounts receivable and paid off the
bank approximately $550,000. As of March, 1998 the factor had advanced
approximately $1,000,000 to the Company.
The Company is presently in discussions to obtain other secured debt
financing to satisfy its outstanding payroll and other working capital
obligations. The Company has recently implemented major cost saving
measures to improve its gross margin and control its selling, general, and
administrative expenses. There can be no assurance, however, that changes
in the Company's plans or other events effecting 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 will
depend on numerous factors, including, but no limited to: (I) the ability
to generate positive cash flow from operations, and (ii) general economic
conditions.
4. EQUITY TRANSACTIONS
On December 24, 1997, the Company filed an S-8 Registration statement for
its 1997 Incentive Plan ("Plan"). Under the Plan, the Company is permitted
to grant up to a maximum of 1,000,000 common stock awards, incentive stock
options and options not so qualifying. As of February 28, 1998 no incentive
stock options have been issued.
5
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 1998
(Unaudited)
4. EQUITY TRANSACTIONS (CONT.)
On December 29, 1997, the Company issued non-qualified stock options to all
of its employees (1,341,394 options), officers (220,800 options), and
directors (300,000 options), exercisable at $.22 per share. The options
vest after a two year holding period. In addition, 150,000 non-qualified
stock options exercisable at $.22 per share were issued to its Chief
Financial Officer in connection with his employment. The Board of Directors
also authorized the repricing of all options exercisable above $.22 to
current officers, directors, and employees previous to December 29, 1997,
to $.22.
On March 13, 1998 certain employees of the Company were issued 285,000
non-qualified stock options exercisable at $.13. These options were issued
to replace the 262,306 options forfeited in the current fiscal year.
5. RELATED PARTY TRANSACTIONS
Due from officer represent interest bearing (8%) advances to the Company's
chief executive officer due upon demand.
The Company purchased materials and supplies of $166,232 for the nine
months ended January 31, 1998, and had an outstanding balance payable of
$92,884 to Eastco Industrial Safety Corp., of which one of it's directors
is affiliated. The same director is owed $100,000 on a 12% convertible note
payable in full on December 1999. Accrued interest of $15,500 on this note
is included in accrued expenses.
6. STATEMENTS OF CASH FLOWS
During the nine months ended January 31, 1998, the Company financed the
acquisition of certain machinery and office equipment of approximately
$126,000 through various capital lease transactions and certain vehicle
financing, and recorded approximately $106,000 of prepaid insurance
premiums which it financed.
The Company utilized 424,876 shares of its common stock (valued at
approximately $242,000) to repay liabilities of $227,000 and prepaid
certain public relations expenses in the amount of $15,000.
In connection with an employment agreement reached during the first quarter
of fiscal 1998 the Company recorded deferred compensation of $150,000 after
issuing 100,000 shares of its common stock valued at $75,000 and recording
an other liability of $75,000 for the shares to be issued on the employment
anniversary date. Additionally, the Company accrued $48,750 of dividends,
of which $39,000 are in arrears on the redeemable preferred stock.
7. COMMITMENTS AND CONTINGENCIES
The United States Attorney for the Eastern District of New York has not
concluded the investigation of the Company it began in October 1996.
The Company is awaiting the decision of the Securities and Exchange
Commission concluding as to whether it will follow a staff recommendation
that an enforcement action be filed seeking an injunction against future
violations by the Company 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 has previously reached certain short term agreements on certain
of its past due federal payroll withholding taxes. The Company is presently
negotiating to extend the short term agreement into a longer term
arrangement covering all past due withholding taxes. It is the Company's
intent to clear up the balance of these taxes as soon as it can obtain the
necessary financing. No assurance can be given that the tax authorities
will not immediately seek payment of the taxes, or that the tax authorities
will not commence an action or file a lien against the Company in order to
recover the taxes.
6
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 1998
(Unaudited)
7. COMMITMENTS AND CONTINGENCIES (CONT.)
On December 10, 1997 the Company settled a lawsuit relating to $250,000
which former management advanced during fiscal 1994 to the Mohave Shores
Development, Inc. (Mohave) in anticipation of developing land on an Indian
reservation in Arizona under a joint venture agreement. The Company expects
to receive $120,000 over a four year period under a non-interest bearing
arrangement with payments once a year.
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, based
on advice of counsel, the final outcome of such matters will not have a
materially adverse effect on the Company's consolidated financial position,
results of operations and cash flows of the Company.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion of the fiscal quarters ended January 31, 1998 and 1997,
should be read in conjunction with the Condensed Consolidated Financial
Statements contained herein.
RESULTS OF OPERATIONS
Net loss and loss per share for the quarter and nine months ended January 31,
1998 was $796,948 and $.08 and $2,936,639 and $.29, respectively, compared to a
net loss and loss per share for the quarter and nine months ended January 31,
1997 of $550,031 and $.06 and $1,465,225 and $.16, respectively.
Revenues for the quarter ended January 31, 1998 decreased $1,175,905, or 29%, to
$2,840,676 from $4,016,481. Gross margins were comparable at 15%. The decline in
quarterly revenues is reflective of approximately $1,400,000 generated in the
comparable quarter in fiscal 1997 on the 60 Broad Street Asbestos Project. The
current fiscal quarter includes $341,000 of revenues generated by North Atlantic
Laboratories purchased by the Company in February 1997 (and therefore not in the
prior comparative quarter). Revenues generated by North Atlantic Laboratories
for the nine months ended January 31, 1998 were $1,251,000. Revenues for the
first nine months of fiscal 1998 decreased by $2,530,612, or 21%, to $9,737,411
from $12,268,023 , while gross margins declined to 14% compared to 24% for the
first nine months of fiscal 1997. In the quarters ended July 31, 1996 and
October 31, 1996 the Company generated revenues of $2,400,000 on a New York City
Housing Authority paint removal project. Revenue generated by New York City
Agencies approximated 20% of total revenues in fiscal 1997. The Company has been
prohibited from bidding on these projects in fiscal 1998 due to the ongoing
Eastern District Investigation described in Note 7 to the accompanying financial
statements. This is the most significant reason for the decline in revenue in
fiscal 1998. The decrease in gross margin was a result of the effect of higher
labor and benefit (including worker's compensation insurance) 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 for the quarter ended January 31,
1998 increased by $262,113, or 27%, to $1,236,740 from $974,627. Selling,
general and administrative expenses for the nine month period increased by
$638,548, or 20%, to $3,819,853 from $3,181,305. The Company has hired various
engineering, technical consulting, business development and marketing personnel
to develop and extend various lines of business for which the Company has set
its strategic focus. The Company intends to provide various additional
value-added services to its existing clientele and to significantly enhance its
service offering to more profitable business areas. These expenses were
partially offset by a reduction in promotion, consulting and legal expenses in
the prior comparative nine month period. Additional selling, general and
administrative expenses incurred in the nine month period which exceed those of
the prior comparative period are: $118,000 of goodwill amortization expense
related to the North Atlantic Laboratories acquisition, $100,000 in additional
occupancy expenses, and $37,000 in additional payroll tax penalties.
On December 10, 1997 the Company settled a lawsuit relating to $250,000 which
former management advanced during fiscal 1994 to the Mohave Shores Development,
Inc. (Mohave) in anticipation of developing land on an Indian reservation in
Arizona under a joint venture agreement. The Company will receive $120,000 over
a four year period under a non-interest bearing arrangement with payments once a
year. $102,993 represents the present value of those payments.
Interest expense reflects the $356,000 accretion of the discount on the $700,000
of convertible notes, approximately $59,000 of interest on the convertible
notes, and approximately $53,000 of interest related to the credit line with the
bank. The balance represents amortization of debt issue costs and fees
associated with the current bank facility as well as normal interest charges
related to its outstanding equipment loans and insurance obligations.
LIQUIDITY AND CAPITAL RESOURCES
As of January 31, 1998 the Company has an accumulated deficit of $28,316,240 and
has not generated positive cash flow from operations to date. The Company has
financed its operations to date primarily through issuances of debt and equity
securities. At January 31, 1998, the Company had $153,682 in cash, and a working
capital deficit of $2,696,462 (inclusive of the $703,675 note payable to bank).
In addition, as of February 28, 1998 and January 31, 1998, the Company was in
arrears with respect to certain payroll tax obligations of approximately
$556,000 and $581,000, respectively. During the nine months ended January 31,
1998, the Company invested approximately $624,000 in its property and equipment.
Of this amount $460,000 was spent on leasehold improvements relating to the new
Bay Shore headquarters and central operations facility, $60,000 in
transportation equipment and $104,000 on various other machinery and equipment.
The Company also paid down approximately $536,000 of equipment loans and paid
$23,346 in dividends to the holders of mandatorily redeemable convertible
preferred stock. The Company has not paid the September 15, 1997 and December
15, 1997 dividend payments, totaling $39,000, to the holders of the
aforementioned preferred stock and is presently accruing interest on the payment
which it has also accrued.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (cont,).
LIQUIDITY AND CAPITAL RESOURCES (CONT.)
In May 1997, the Company entered into a revolving bank credit facility to obtain
a revolving credit line of $1,500,000, secured by certain of the Company's
assets. Borrowings remain at a maximum of $750,000.
On February 13, 1998 the Company and its lender, North Fork Bank, entered into
an agreement to amend its current revolving credit facility with the bank. Under
the agreement, the Company agreed to pay off all amounts due the bank in excess
of $200,000.The $200,000 balance was then converted to a term note over two
years at prime plus 3%. The bank agreed to release its lien on the Company's
accounts receivable and take a secondary position thereon, but maintained its
lien on all the Company's equipment and other assets. In addition, the bank
secured the personal guaranty of Michael O'Reilly, the Company's chief executive
officer. The Company then entered into an initial six month factoring
arrangement on its accounts receivable and paid the bank approximately $550,000.
As of March, 1998 the factor had advanced approximately $1,000,000 to the
Company.
The Company is presently in discussions to obtain secured debt financing to
satisfy its outstanding payroll and other working capital obligations.
Management believes there will be alternative debt and/or equity sources
available to the Company. In addition, the Company is striving to improve its
gross margin and control its selling, general, and administrative expenses..
Management has already reduced health insurance and advertising costs and is
reducing the selling and administrative workforce. Cost reductions to date are
expected to save the Company an estimated $800,000 annually, and further cost
saving measures are planned. 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 will depend on numerous
factors, including, but no limited to: (I) the ability to generate positive cash
flow from operations, and (ii) general economic conditions.
The Company has previously reached certain short term agreements on certain of
its past due federal payroll withholding taxes. The Company is presently
negotiating to extend those short term agreements into a longer term arrangement
covering all of its past due federal tax withholdings. It is the Company's
intent to clear up the balance of these taxes as soon as it can obtain the
necessary financing. No assurance can be given that the tax authorities will not
immediately seek payment of the taxes, or that the tax authorities will not
commence an action or file a lien against the Company in order to recover the
taxes.
Statements contained in this Quarterly Report on Form 10-QSB that are not based
upon historical fact are "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. 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 or 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 and expenses, the Company's ability to
raise capital, the competitive environment within the Company's industry,
dependence on key personnel and the other factors and information disclosed and
discussed in this "Item 2. Management's Discussion and Analysis or Plan of
Operation" and in other sections of this Form 10-QSB. 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.
9
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The United States Attorney for the Eastern District of New York has not
concluded the investigation of the Company it began in October 1996.
The Company is awaiting the decision of the Securities and Exchange
Commission concluding 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.
On December 10, 1997 the Company settled a lawsuit relating to $250,000
which former management advanced during fiscal 1994 to the Mohave Shores
Development, Inc. (Mohave) in anticipation of developing land on an Indian
reservation in Arizona under a joint venture agreement. The Company expects
to receive $120,000 over a four year period under a non-interest bearing
arrangement with payments once a year.
Item 2. Changes in Securities
Under Delaware law the Company is restricted from the payment of dividends
to the holders of the Series A redeemable convertible preferred stock until
it has the sufficient surplus (as defined by Delaware law) or net profits
in the year the dividend is declared or the preceding year.
Item 3. Defaults Upon Senior Securities
The Company has not paid its September and December quarterly dividend
payments and is in arrears on its Series A redeemable convertible preferred
stock in the amount of $39,000 plus accrued interest thereon.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Kevin J. Phillips, P.E., Ph.D., has joined the Board of Directors. Dr.
Phillips is a Principal in Fanning, Phillips, and Molnar, a prominent
engineering firm located in Long Island, New York. Dr. Phillips has a M.S.
degree from the Massachusett Institute of Technology and a Ph.D. from the
Polytechnic Institute of New York. Dr. Phillips is a licensed professional
engineer with over 21 years experience in geohydrology and environmental
engineering.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.04 - Purchase and Sale Agreement between Prestige Capital
Corporation and Trade-Winds Environmental Restoration
Inc.
Exhibit 10.05 - Purchase and Sale Agreement between Prestige Capital
Corporation and North Atlantic Laboratories Inc.
Exhibit 10.06 - Purchase and Sale Agreement between Prestige Capital
Corporation and New York Testing Inc.
Exhibit 10.07 - Amendment No.1 to Revolving Credit Agreement dated
February 6, 1998 between Windswept Environmental
Group, Inc.
Exhibit 10.08 - Promissory Note for $200,000 dated February 6, 1998
between Windswept Environmental Group Inc. and North
Fork Bank.
Exhibit 10.09 - Personal Guaranty of all Liability between Michael
O'Reilly and North Fork Bank.
Exhibit 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.
10
<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: March 13, 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, CPA
Chief Financial Officer
11
Prestige Capital Corporation
- --------------------------------------------------------------------------------
2 EXECUTIVE DRIVE FORT LEE, NEW JERSEY 07024 (201) 944-4455
Purchase and Sale Agreement
1. ASSIGNMENT. PRESTIGE CAPITAL CORPORATION
("Prestige") hereby buys and TRADE--WINDS ENVIRONMENTAL
RESTORATION INC.
("Seller") hereby sells, transfers and assigns all of Seller's right, title and
interest in and to those specific accounts receivable owing to Seller as set
forth on the assignment forms provided by Prestige (the "Assignments") together
with all rights of action accrued or to accrue thereon, including without
limitation, full power to collect, sue for, compromise, assign or in any other
manner enforce collection thereof in Prestige's name or otherwise. (All of
Seller's accounts receivable and contract rights which are presently or at any
time hereafter assigned by Seller, and accepted by Prestige, are collectively
referred to as the "Accounts".)
2. DISCOUNT. Prestige's purchase of the Accounts from Seller is at a discount
fee of ELEVEN percent ( 11 % ) from the face value of each Account.
3. RESERVE. Upon Prestige's receipt and acceptance of each Assignment, Prestige
shall pay to Seller SEVENTY--FIVE percent ( 75 % ) of the net face value of the
Accounts therein described (the "Down Payment"). Prestige will hold in reserve
the difference between the Purchase Price (hereinafter defined) and the Down
Payment (the "Reserve") and will pay to Seller the Reserve, less any sums due
Prestige hereunder, on the Friday following the week in which all Accounts set
forth on the applicable Assignment have been collected in good funds, charged
back and/or deemed collected by Prestige due to an account debtor's (hereinafter
defined) insolvency. For purposes of this Agreement, the term "Purchase Price"
shall mean the net face value of Accounts, less: Prestige's discount fee
described in paragraph 2 above; returns, credits, allowances and discounts on
the shortest or, at Prestige's option, on alternative terms of sale offered by
Seller to account debtors; and less all other sums charged or chargeable to
Seller's account.
4. REBATES. As an inducement to Seller to facilitate the prompt payment of the
Accounts from Seller's customers ("account debtor"), Prestige agrees to return
to Seller, a rebate of EIGHT percent ( 8 %) if the accounts are paid to Prestige
within 30 days, a rebate of SEVEN percent ( 7 %) if the Accounts are paid to
Prestige within 50 days, a rebate of SIX percent ( 6 %) if the Accounts are paid
to Prestige within 60 days, a rebate of FIVE percent ( 5 %) if the Accounts are
paid to Prestige within 70 days, a rebate of FOUR percent ( 4 %) if the Accounts
are paid to Prestige within 80 days, and a rebate of THREE PERCENT (3% )if the
Accounts are paid to Prestige within 90 days; a rebate of ONE percent (1%) if
the accounts are paid to Prestige within 100 days.
5. WARRANTIES, REPRESENTATIONS AND COVENANTS. As an inducement for Prestige's
entering into this Agreement and with full knowledge that the truth and accuracy
of the warranties, representations and covenants in this Agreement are being
relied upon by Prestige, instead of the delay of a complete credit
investigation, Seller warrants, represents and covenants that:
(a) Seller is properly licensed and authorized to operate the business of
environmental restoration;
(b) Seller is the sole and absolute owner of the Accounts and has the full
legal right to make said sale, assignment and transfer;
(c) The correct amount of each Account will be set forth on the
Assignments;
(d) Each Account is an accurate and undisputed statement of indebtedness
from an account debtor for a sum certain, without offset or
counterclaim and which is due and payable in ninety days or less;
(e) Each Account is an accurate statement of a bona fide sale, delivery
and acceptance of merchandise or performance of service by Seller to
an account debtor;
(f) Seller does not own, control or exercise dominion in any way
whatsoever, over the business of any account debtor;
(g) All financial records, statements, books or other documents shown to
Prestige by Seller at any time either before or after the signing of
this Agreement are true and accurate;
(h) Seller will not under any circumstance or in any manner whatsoever,
interfere with any of Prestige's rights under this Agreement;
(i) Seller has not and will not, at any time, permit any lien, security
interest or encumbrance to be created upon any of its accounts
receivable and/or its inventory without the prior written consent of
Prestige;
(j) Seller will not change or modify the terms of the Accounts with any
account debtor unless Prestige first consents in writing;
(k) Seller will notify Prestige in writing in advance of: any change in
Seller's place of business; Seller having or acquiring more than one
place of business; any change in Seller's chief executive office;
and/or any change in the office or offices where Seller's books and
records concerning accounts receivable are kept;
(l) Seller will immediately notify Prestige of any proposed or actual
change of the Seller's and/or any account debtor's identity, legal
entity or corporate structure.
(m) All invoices will state plainly on their face that the Accounts
represented thereby have been sold and assigned to Prestige and are
payable only and directly to Prestige; and
(n) No Account shall be on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase
or return basis;
The warranties, representations and covenants contained in this paragraph 5
shall be continuous and be deemed to be renewed each time Seller assigns
Accounts to Prestige. Notwithstanding the provisions contained in paragraph 6 of
this Agreement, Prestige shall have recourse against the Seller in the event
that any of the warranties, representations and covenants set forth in this
paragraph 5 are breached.
<PAGE>
6. NO RECOURSE. Prestige shall have recourse against Seller in all instances
except if payments are not received due to the "Insolvency" of an account debtor
within 120 days of invoice date. For purposes of the foregoing, Insolvency shall
be deemed to have occurred only when: (a) a voluntary or involuntary bankruptcy
proceeding for the relief of an account debtor under either Chapter 7 or Chapter
11 shall have been instituted in a United States Bankruptcy Court; (b) a
receiver is appointed for the whole or any part of the property of an account
debtor; (c) an account debtor's assets shall have been sold under a writ of
execution or attachments, or a writ of execution shall have been returned
unsatisfied; (d) an account debtor shall have absconded; or (e) an account
debtor's assets shall have been sold under levy by any taxing authority or by a
landlord.
7. CHARGE-BACK. In the event that any account is not paid within 100 days of
invoice date for any reason whatsoever (other than as a result of an account
debtor's Insolvency), including, without limitation, any alleged defense,
counterclaim, offset, dispute or other claim (real or merely asserted) whether
arising from or relating to the sale of goods or rendition of services or
arising from or relating to any other transaction or occurrence, then in any
such event Prestige shall have the right to chargeback such Account to Seller.
No chargeback shall be deemed a reassignment to Seller of the Account involved.
Seller acknowledges that all amounts chargeable to Seller's account under this
Agreement shall be payable by Seller on demand.
8. NOTICE OF DISPUTE. Seller must immediately notify Prestige of any disputes
between any account debtor and Seller.
9. SETTLEMENT OF DISPUTE. Prestige may, at its option, settle any dispute with
any account debtor. Such settlement does not relieve Seller of any of its
obligations under this Agreement.
10. SOLE PROPERTY. Once Prestige has purchased the Accounts, the payment from
account debtors relative to the Accounts is the sole property of Prestige. Any
interference by Seller with this payment will result in civil and/or criminal
liability.
11. SECURITY INTEREST. As a further inducement for Prestige to enter into this
Agreement, and as security for the prompt performance, observance and payment of
all obligations owing by Seller to Prestige herein, Seller hereby grants to
Prestige a continuing security interest in and lien upon the following (herein
collectively referred to as the "Collateral"): all accounts, instruments,
documents, chattel paper and general intangibles (as such terms are defined in
the Uniform Commercial Code), whether now owned or hereafter created or acquired
by Seller, wherever located, and all replacements and substitutions therefore,
accessions thereto, and products and proceeds thereof, and all property of
Seller at any time in Prestige's possession.
12. FINANCING STATEMENTS. Seller will, at its expense perform all acts and
execute all documents requested by Prestige at any time to evidence, perfect,
maintain and enforce Prestige's security interest and other rights in the
Collateral and the priority thereof. Upon request, at any time and from time to
time, Seller will execute and deliver to Prestige one or more UCC financing
statements (in form and substance satisfactory to Prestige and its counsel).
13. HOLD IN TRUST. Seller will hold in trust and safekeeping, as the property of
Prestige and immediately turn over to Prestige, the identical check or other
form of payment received by Seller if payment on the Accounts comes into
Seller's possession. Should Seller come into possession of a check comprising
payments owing to both Seller and Prestige, Seller shall turn over said check to
Prestige. Thereafter, Prestige will refund Seller's portion, if any, to Seller.
14. FINANCIAL RECORDS. Seller will furnish to Prestige financial statements and
such other information as is, from time to time, requested by Prestige.
15. BOOK ENTRY. Seller will immediately, upon the sale of the Accounts, make the
proper entry on its books and records disclosing the absolute sale of the
Accounts to Prestige.
16. POWER OF ATTORNEY. In order to implement this Agreement, Seller irrevocably
appoints Prestige its special attorney in fact or agent with power to:
(a) Strike out Seller's address on any correspondence to any account
debtor and put on Prestige's address;
(b) Receive and open all mail addressed to Seller via Prestige's address;
(c) Endorse the name of Seller or Seller's trade name on any checks or
other evidences of payment that may come into the possession of
Prestige in connection with the Accounts;
(d) In Seller's name, or otherwise, demand, sue for, collect any and all
monies due in connection with the Accounts; and
(e) Compromise, prosecute or defend any action, claim or proceeding
relative to the Accounts;
The authority granted to Prestige shall remain in full force and effect until
the Accounts are paid in full and the entire indebtedness of Seller to Prestige
is discharged.
17. NOTIFICATION; VERIFICATION OF ACCOUNTS
(a) Without in any way limiting the terms and provisions of paragraph
5 (m) hereinabove, Prestige may at any time and from time to time, in its
sole discretion, notify any account debtor to make payment on any of
Seller's open invoices to Prestige; and
(b) Prestige, may at any time verify the Accounts utilizing an audit
control company, any agent of Prestige or any other means deemed
appropriate by Prestige.
18. NO ASSUMPTION. Nothing contained in this Agreement shall be deemed to impose
any duty or obligation upon Prestige in favor of any account debtor and/or any
other party in connection with the Accounts.
19. FUTURE ASSIGNMENTS. Seller may from time to time, at Seller's option, sell,
transfer and assign different Accounts to Prestige. The future sale of any
Accounts shall be subject to and governed by this Agreement and such Accounts
shall be identified by separate and subsequent Assignments.
20. DISCRETION. Nothing contained in this Agreement shall be construed to impose
any obligation upon Prestige to purchase Accounts from Seller. Prestige shall at
its sole discretion determine which Accounts it shall purchase. Further,
Prestige shall have the absolute right at any time to cease accepting any
further assignments from Seller.
<PAGE>
21. LEGAL FEES; EXPENSES. Seller will pay on demand any and all collection
expenses and reasonable attorneys' fees that Prestige incurs in the event it
should become necessary for Prestige to enforce its rights under this Agreement.
In addition, Seller will pay on demand all costs and expenses incurred by
Prestige in connection with the preparation, execution and delivery of this
Agreement and any supplement or modification thereof, and in any way relating to
the transactions contemplated by this Agreement, including, without limitation,
all reasonable attorneys' fees, Federal Express costs (or similar expenses),
wire transfer costs, certified mail costs, facsimile transmission costs and lien
search costs.
22. BINDING ON FUTURE PARTIES. This Agreement shall inure to the benefit of and
is binding upon the heirs, executors, administrators, successors and assigns of
the parties hereto, except that Seller may not assign or transfer any or all of
its rights and obligations under this Agreement to any party without the prior
written consent of Prestige.
23. WAIVER; ENTIRE AGREEMENT. No failure or delay on Prestige's part in
exercising any right, power or remedy granted to Prestige herein, will
constitute or operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right set forth herein. This
Agreement contains the entire agreement and understanding of the parties hereto
and no amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement, will in any event be effective unless the same is
in writing and signed and delivered by Prestige.
24. NEW JERSEY LAW. This agreement shall be deemed executed in the State of New
Jersey and, in all respects, shall be governed and construed in accordance with
the laws of the State of New Jersey.
25. INDEMNITY. Seller shall hold Prestige harmless from and against any action
or other proceeding brought by any account debtor against Prestige arising from
Prestige's collecting or attempting to collect any of the Accounts.
26. TERM. This Agreement Will remain in effect until July 1, 1998 (the "Term").
Thereafter, the Term will be automatically extended for successive periods of
one (1) year each unless either party provides the other with a written notice
of cancellation at least sixty (60) days prior to the expiration of the initial
Term or any renewal Term; provided, however, Prestige may cancel this Agreement
at any time upon sixty (60) days notice to Seller. In the event of a breach by
Seller of any term or provision of this Agreement or upon Seller's Insolvency or
the insolvency of any guarantor of Seller's obligations herein, Prestige shall
have the right to cancel this Agreement without notice to Seller, and all of
Seller's obligations to Prestige herein shall be immediately due and payable. In
the event of cancellation, the provisions of this Agreement shall remain in full
force and effect until all of the Accounts have been paid in full.
27. INVALID PROVISIONS. If any provision of this Agreement shall be declared
illegal or contrary to law, it is agreed that such provision shall be
disregarded and this Agreement shall continue in force as though said provision
had not been incorporated herein.
28. EFFECTIVE. This Agreement shall become effective when it is accepted and
executed by an authorized officer of Prestige.
29. JURY WAIVER. The parties hereto hereby mutually waive trial by jury in the
event of any litigation with respect to any matter connected with this
agreement.
Executed this day of ,19
TRADE--WINDS ENVIRONMENTAL RESTORATION INC.
By: /s/MICHAEL O'REILLY
-------------------------------------------------
MICHAEL O'REILLY, President Title
Accepted this day of ,19
PRESTIGE CAPITAL CORPORATION
By: /s/HARVEY L. KAMINSKI
-------------------------------------------------
HARVEY L. KAMINSKI, President Title
Each of the undersigned hereby personally guarantees and shall be jointly and
severally liable for any damages suffered by Prestige Capital Corporation by
virtue of the breach of any warranty, representation or convenant made by Seller
in paragraph 5 above. Each of the undersigned also personally waives presentment
for payment, demand, protest, notice of protest, notice of dishonor and notice
of every nature whatsoever.
Date: By: /s/MICHAEL O'REILLY
---------------------- --------------------------------------------
MICHAEL O'REILLY Individually
Date: By:
---------------------- --------------------------------------------
Individually
Prestige Capital Corporation
- --------------------------------------------------------------------------------
2 EXECUTIVE DRIVE FORT LEE, NEW JERSEY 07024 (201) 944-4455
Purchase and Sale Agreement
1. ASSIGNMENT. PRESTIGE CAPITAL CORPORATION ("Prestige") hereby buys and NORTH
ATLANTIC LABORATORIES' INC.
("Seller") hereby sells, transfers and assigns all of Seller's right, title and
interest in and to those specific accounts receivable owing to Seller as set
forth on the assignment forms provided by Prestige (the "Assignments") together
with all rights of action accrued or to accrue thereon, including without
limitation, full power to collect, sue for, compromise, assign or in any other
manner enforce collection thereof in Prestige's name or otherwise. (All of
Seller's accounts receivable and contract rights which are presently or at any
time hereafter assigned by Seller, and accepted by Prestige, are collectively
referred to as the "Accounts".)
2. DISCOUNT. Prestige's purchase of the Accounts from Seller is at a discount
fee of ELEVEN percent (11%) from the face value of each Account.
3. RESERVE. Upon Prestige's receipt and acceptance of each Assignment, Prestige
shall pay to Seller SEVENTY--FIVE percent (75%) of the net face value of the
Accounts therein described (the "Down Payment"). Prestige will hold in reserve
the difference between the Purchase Price (hereinafter defined) and the Down
Payment (the "Reserve") and will pay to Seller the Reserve, less any sums due
Prestige hereunder, on the Friday following the week in which all Accounts set
forth on the applicable Assignment have been collected in good funds, charged
back and/or deemed collected by Prestige due to an account debtor's (hereinafter
defined) insolvency. For purposes of this Agreement, the term "Purchase Price"
shall mean the net face value of Accounts, less: Prestige's discount fee
described in paragraph 2 above; returns, credits, allowances and discounts on
the shortest or, at Prestige's option, on alternative terms of sale offered by
Seller to account debtors; and less all other sums charged or chargeable to
Seller's account.
4. REBATES. As an inducement to Seller to facilitate the prompt payment of the
Accounts from Seller's customers ("account debtor"), Prestige agrees to return
to Seller, a rebate of EIGHT percent (8%) if the accounts are paid to Prestige
within 30 days, a rebate of SEVEN percent (7%) if the Accounts are paid to
Prestige within 50 days, a rebate of SIX percent (6%) if the Accounts are paid
to Prestige within 60 days, a rebate of FIVE percent (5%) if the Accounts are
paid to Prestige within 70 days, a rebate of FOUR percent (4%) if the Accounts
are paid to Prestige within 80 days, and a rebate of THREE percent (3%) if the
Accounts are paid to Prestige within 90 days; a rebate of ONE percent (1%) if
the accounts are paid to Prestige within 100 days.
5. WARRANTIES, REPRESENTATIONS AND COVENANTS. As an inducement for Prestige's
entering into this Agreement and with full knowledge that the truth and accuracy
of the warranties, representations and covenants in this Agreement are being
relied upon by Prestige, instead of the delay of a complete credit
investigation, Seller warrants, represents and covenants that:
(a) Seller is properly licensed and authorized to operate the business of
environmental testing;
(b) Seller is the sole and absolute owner of the Accounts and has the full
legal right to make said sale, assignment and transfer;
(c) The correct amount of each Account will be set forth on the
Assignments;
(d) Each Account is an accurate and undisputed statement of indebtedness
from an account debtor for a sum certain, without offset or
counterclaim and which is due and payable in ninety days or less;
(e) Each Account is an accurate statement of a bona fide sale, delivery
and acceptance of merchandise or performance of service by Seller to
an account debtor;
(f) Seller does not own, control or exercise dominion in any way
whatsoever, over the business of any account debtor;
(g) All financial records, statements, books or other documents shown to
Prestige by Seller at any time either before or after the signing of
this Agreement are true and accurate;
(h) Seller will not under any circumstance or in any manner whatsoever,
interfere with any of Prestige's rights under this Agreement;
(i) Seller has not and will not, at any time, permit any lien, security
interest or encumbrance to be created upon any of its accounts
receivable and/or its inventory without the prior written consent of
Prestige;
(j) Seller will not change or modify the terms of the Accounts with any
account debtor unless Prestige first consents in writing;
(k) Seller will notify Prestige in writing in advance of: any change in
Seller's place of business; Seller having or acquiring more than one
place of business; any change in Seller's chief executive office;
and/or any change in the office or offices where Seller's books and
records concerning accounts receivable are kept;
(1) Seller will immediately notify Prestige of any proposed or actual
change of the Seller's and/or any account debtor's identity, legal
entity or corporate structure.
(m) All invoices will state plainly on their face that the Accounts
represented thereby have been sold and assigned to Prestige and are
payable only and directly to Prestige; and
(n) No Account shall be on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase
or return basis;
The warranties, representations and covenants contained in this paragraph 5
shall be continuous and be deemed to be renewed each time Seller assigns
Accounts to Prestige. Notwithstanding the provisions contained in paragraph 6 of
this Agreement, Prestige shall have recourse against the Seller in the event
that any of the warranties, representations and covenants set forth in this
paragraph 5 are breached.
<PAGE>
6. NO RECOURSE. Prestige shall have recourse against Seller in all instances
except if payments are not received due to the "Insolvency" of an account debtor
within 120 days of invoice date. For purposes of the foregoing, Insolvency shall
be deemed to have occurred only when: (a) a voluntary or involuntary bankruptcy
proceeding for the relief of an account debtor under either Chapter 7 or Chapter
11 shall have been instituted in a United States Bankruptcy Court; (b) a
receiver is appointed for the whole or any part of the property of an account
debtor; (c) an account debtor's assets shall have been sold under a writ of
execution or attachments, or a writ of execution shall have been returned
unsatisfied; (d) an account debtor shall have absconded; or (e) an account
debtor's assets shall have been sold under levy by any taxing authority or by a
landlord.
7. CHARGE-BACK. In the event that any Account is not paid within 100 days of
invoice date for any reason whatsoever (other than as a result of an account
debtor's Insolvency), including, without limitation, any alleged defense,
counterclaim, offset, dispute or other claim (real or merely asserted) whether
arising from or relating to the sale of goods or rendition of services or
arising from or relating to any other transaction or occurrence, then in any
such event Prestige shall have the right to chargeback such Account to Seller.
No chargeback shall be deemed a reassignment to Seller of the Account involved.
Seller acknowledges that all amounts chargeable to Seller's account under this
Agreement shall be payable by Seller on demand.
8. NOTICE OF DISPUTE. Seller must immediately notify Prestige of any disputes
between any account debtor and Seller.
9. SETTLEMENT OF DISPUTE. Prestige may, at its option, settle any dispute with
any account debtor Such settlement does not relieve Seller of any of its
obligations under this Agreement.
10. SOLE PROPERTY. Once Prestige has purchased the Accounts, the payment from
account debtors relative to the Accounts is the sole property of Prestige. Any
interference by Seller with this payment will result in civil and/or criminal
liability.
11. SECURITY INTEREST. As a further inducement for Prestige to enter into this
Agreement, and as security for the prompt performance, observance and payment of
all obligations owing by Seller to Prestige herein, Seller hereby grants to
Prestige a continuing security interest in and lien upon the following (herein
collectively referred to as the "Collateral"): all accounts, instruments,
documents, chattel paper and general intangibles (as such terms are defined in
the Uniform Commercial Code), whether now owned or hereafter created or acquired
by Seller, wherever located, and all replacements and substitutions therefore,
accessions thereto, and products and proceeds thereof, and all property of
Seller at any time in Prestige's possession.
12. FINANCING STATEMENTS. Seller will, at its expense perform all acts and
execute all documents requested by Prestige at any time to evidence, perfect,
maintain and enforce Prestige's security interest and other rights in the
Collateral and the priority thereof. Upon request, at any time and from time to
time, Seller will execute and deliver to Prestige one or more UCC financing
statements (in form and substance satisfactory to Prestige and its counsel).
13. HOLD IN TRUST. Seller will hold in trust and safekeeping, as the property of
Prestige and immediately turn over to Prestige, the identical check or other
form of payment received by Seller if payment on the Accounts comes into
Seller's possession. Should Seller come into possession of a check comprising
payments owing to both Seller and Prestige, Seller shall turn over said check to
Prestige. Thereafter, Prestige will refund Seller's portion, if any, to Seller.
14. FINANCIAL RECORDS. Seller will furnish to Prestige financial statements and
such other information as is, from time to time, requested by Prestige.
15. BOOK ENTRY. Seller will immediately, upon the sale of the Accounts, make the
proper entry on its books and records disclosing the absolute sale of the
Accounts to Prestige.
16. POWER OF ATTORNEY. In order to implement this Agreement, Seller irrevocably
appoints Prestige its special attorney in fact or agent with power to:
(a) Strike out Seller's address on any correspondence to any account
debtor and put on Prestige's address;
(b) Receive and open all mail addressed to Seller via Prestige's address;
(c) Endorse the name of Seller or Seller's trade name on any checks or
other evidences of payment that may come into the possession of
Prestige in connection with the Accounts;
(d) In Seller's name, or otherwise, demand, sue for, collect any and all
monies due in connection with the Accounts; and
(e) Compromise, prosecute or defend any action, claim or proceeding
relative to the Accounts;
The authority granted to Prestige shall remain in full force and effect until
the Accounts are paid in full and the entire indebtedness of Seller to Prestige
is discharged.
17. NOTIFICATION; VERIFICATION OF ACCOUNTS
(a) Without in any way limiting the terms and provisions of paragraph 5 (m)
hereinabove, Prestige may at any time and from time to time, in its sole
discretion, notify any account debtor to make payment on any of Seller's open
invoices to Prestige; and
(b) Prestige, may at any time verify the Accounts utilizing an audit
control company, any agent of Prestige or any other means deemed appropriate by
Prestige.
18. NO ASSUMPTION. Nothing contained in this Agreement shall be deemed to impose
any duty or obligation upon Prestige in favor of any account debtor and/or any
other party in connection with the Accounts.
19. FUTURE ASSIGNMENTS. Seller may from time to time, at Seller's option, sell,
transfer and assign different Accounts to Prestige. The future sale of any
Accounts shall be subject to and governed by this Agreement and such Accounts
shall be identified by separate and subsequent Assignments.
20. DISCRETION. Nothing contained in this Agreement shall be construed to impose
any obligation upon Prestige to purchase Accounts from Seller. Prestige shall at
its sole discretion determine which Accounts it shall purchase. Further,
Prestige shall have the absolute right at any time to cease accepting any
further assignments from Seller.
<PAGE>
21. LEGAL FEES; EXPENSES. Seller will pay on demand any and all collection
expenses and reasonable attorneys' fees that Prestige incurs in the event it
should become necessary for Prestige to enforce its rights under this Agreement.
In addition, Seller will pay on demand all costs and expenses incurred by
Prestige in connection with the preparation, execution and delivery of this
Agreement and any supplement or modification thereof, and in any way relating to
the transactions contemplated by this Agreement, including, without limitation,
all reasonable attorneys' fees, Federal Express costs (or similar expenses),
wire transfer costs, certified mail costs, facsimile transmission costs and lien
search costs.
22. BINDING ON FUTURE PARTIES. This Agreement shall inure to the benefit of and
is binding upon the heirs, executors, administrators, successors and assigns of
the parties hereto, except that Seller may not assign or transfer any or all of
its rights and obligations under this Agreement to any party without the prior
written consent of Prestige.
23. WAIVER; ENTIRE AGREEMENT. No failure or delay on Prestige's part in
exercising any right, power or remedy granted to Prestige herein, will
constitute or operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right set forth herein. This
Agreement contains the entire agreement and understanding of the parties hereto
and no amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement, will in any event be effective unless the same is
in writing and signed and delivered by Prestige.
24. NEW JERSEY LAW. This agreement shall be deemed executed in the State of New
Jersey and, in all respects, shall be governed and construed in accordance with
the laws of the State of New Jersey.
25. INDEMNITY. Seller shall hold Prestige harmless from and against any action
or other proceeding brought by any account debtor against Prestige arising from
Prestige's collecting or attempting to collect any of the Accounts.
26. TERM. This Agreement Will remain in effect until July 1, 1998 (the "Term").
Thereafter, the Term will be automatically extended for successive periods of
one (1) year each unless either party provides the other with a written notice
of cancellation at least sixty (60) days prior to the expiration of the initial
Term or any renewal Term; provided, however, Prestige may cancel this Agreement
at any time upon sixty (60) days notice to Seller. In the event of a breach by
Seller of any term or provision of this Agreement or upon Seller's Insolvency or
the Insolvency of any guarantor of Seller's obligations herein, Prestige shall
have the right to cancel this Agreement without notice to Seller, and all of
Seller's obligations to Prestige herein shall be immediately due and payable. In
the event of cancellation, the provisions of this Agreement shall remain in full
force and effect until all of the Accounts have been paid in full.
27. INVALID PROVISIONS. If any provision of this Agreement shall be declared
illegal or contrary to law, it is agreed that such provision shall be
disregarded and this Agreement shall continue in force as though said provision
had not been incorporated herein.
28. EFFECTIVE. This Agreement shall become effective when it is accepted and
executed by an authorized officer of Prestige.
29. JURY WAIVER. The parties hereto hereby mutually waive trial by jury in the
event of any litigation with respect to any matter connected with this
agreement.
Executed this day of , 19
NORTH ATLANTIC LABORATORIES, INC.
By: /s/ THOMAS J. KLUENDER
--------------------------------------------
THOMAS J. KLUENDER, President Title
Accepted this day of , 19
PRESTIGE CAPITAL CORPORATION
By:
--------------------------------------------
HARVEY L. KAMINSKI, President Title
Each of the undersigned hereby personally guarantees and shall be jointly and
severally liable for any damages suffered by Prestige Capital Corporation by
virtue of the breach of any warranty, representation or convenant made by
Seller in paragraph 5 above. Each of the undersigned also personally waives
presentment for payment, demand, protest, notice of protest, notice of dishonor
and notice of every nature whatsoever.
Date: By /s/ MICHAEL O'REILLY
----------------------------- ------------------------------------------
MICHAEL O'REILLY Individually
Date: By
----------------------------- ------------------------------------------
Individually
Prestige Capital Corporation
- --------------------------------------------------------------------------------
2 EXECUTIVE DRIVE FORT LEE, NEW JERSEY 07024 (201) 944-4455
Purchase and Sale Agreement
1. ASSIGNMENT. PRESTIGE CAPITAL CORPORATION ("Prestige") hereby buys and NEW
YORK TESTING LABS, INC.
("Seller") hereby sells, transfers and assigns all of Seller's right, title and
interest in and to those specific accounts receivable owing to Seller as set
forth on the assignment forms provided by Prestige (the "Assignments") together
with all rights of action accrued or to accrue thereon, including without
limitation, full power to collect, sue for, compromise, assign or in any other
manner enforce collection thereof in Prestige's name or otherwise. (All of
Seller's accounts receivable and contract rights which are presently or at any
time hereafter assigned by Seller, and accepted by Prestige, are collectively
referred to as the "Accounts".)
2. DISCOUNT. Prestige's purchase of the Accounts from Seller is at a discount
fee of ELEVEN percent ( 11 % ) from the face value of each Account.
3. RESERVE. Upon Prestige's receipt and acceptance of each Assignment, Prestige
shall pay to Seller SEVENTY--FIVE percent (75%) of the net face value of the
Accounts therein described (the "Down Payment"). Prestige will hold in reserve
the difference between the Purchase Price (hereinafter defined) and the Down
Payment (the "Reserve") and will pay to Seller the Reserve, less any sums due
Prestige hereunder, on the Friday following the week in which all Accounts set
forth on the applicable Assignment have been collected in good funds, charged
back and/or deemed collected by Prestige due to an account debtor's (hereinafter
defined) insolvency. For purposes of this Agreement, the term "Purchase Price"
shall mean the net face value of Accounts, less: Prestige's discount fee
described in paragraph 2 above; returns, credits, allowances and discounts on
the shortest or, at Prestige's option, on alternative terms of sale offered by
Seller to account debtors; and less all other sums charged or chargeable to
Seller's account.
4. REBATES. As an inducement to Seller to facilitate the prompt payment of the
Accounts from Seller's customers ("account debtor"), Prestige agrees to return
to Seller, a rebate of EIGHT percent (8%) if the accounts are paid to Prestige
within 30 days, a rebate of SEVEN percent (7%) if the Accounts are paid to
Prestige within 50 days, a rebate of SIX percent (6%) if the Accounts are paid
to Prestige within 60 days, a rebate of FIVE percent (5%) if the Accounts are
paid to Prestige within 70 days, a rebate of FOUR percent (4%) if the Accounts
are paid to Prestige within 80 days, and a rebate of THREE percent (3%) if the
Accounts are paid to Prestige within 90 days; a rebate of ONE percent (1%) if
the accounts are paid to Prestige within 100 days.
5. WARRANTIES, REPRESENTATIONS AND COVENANTS. As an inducement for Prestige's
entering into this Agreement and with full knowledge that the truth and accuracy
of the warranties, representations and covenants in this Agreement are being
relied upon by Prestige, instead of the delay of a complete credit
investigation, Seller warrants, represents and covenants that:
(a) Seller is properly licensed and authorized to operate the business of
environmental testing;
(b) Seller is the sole and absolute owner of the Accounts and has the full
legal right to make said sale, assignment and transfer;
(c) The correct amount of each Account will be set forth on the
Assignments;
(d) Each Account is an accurate and undisputed statement of indebtedness
from an account debtor for a sum certain, without offset or
counterclaim and which is due and payable in ninety days or less;
(e) Each Account is an accurate statement of a bona fide sale, delivery
and acceptance of merchandise or performance of service by Seller to
an account debtor;
(f) Seller does not own, control or exercise dominion in any way
whatsoever, over the business of any account debtor;
(g) All financial records, statements, books or other documents shown to
Prestige by Seller at any time either before or after the signing of
this Agreement are true and accurate;
(h) Seller will not under any circumstance or in any manner whatsoever,
interfere with any of Prestige's rights under this Agreement;
(i) Seller has not and will not, at any time, permit any lien, security
interest or encumbrance to be created upon any of its accounts
receivable and/or its inventory without the prior written consent of
Prestige;
(j) Seller will not change or modify the terms of the Accounts with any
account debtor unless Prestige first consents in writing;
(k) Seller will notify Prestige in writing in advance of: any change in
Seller's place of business; Seller having or acquiring more than one
place of business; any change in Seller's chief executive office;
and/or any change in the office or offices where Seller's books and
records concerning accounts receivable are kept;
(1) Seller will immediately notify Prestige of any proposed or actual
change of the Seller's and/or any account debtor's identity, legal
entity or corporate structure.
(m) All invoices will state plainly on their face that the Accounts
represented thereby have been sold and assigned to Prestige and are
payable only and directly to Prestige; and
(n) No Account shall be on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase
or return basis;
The warranties, representations and covenants contained in this paragraph 5
shall be continuous and be deemed to be renewed each time Seller assigns
Accounts to Prestige. Notwithstanding the provisions contained in paragraph 6 of
this Agreement, Prestige shall have recourse against the Seller in the event
that any of the warranties, representations and covenants set forth in this
paragraph 5 are breached.
<PAGE>
6. NO RECOURSE. Prestige shall have recourse against Seller in all instances
except if payments are not received due to the "Insolvency" of an account debtor
within 120 days of invoice date. For purposes of the foregoing, Insolvency shall
be deemed to have occurred only when: (a) a voluntary or involuntary bankruptcy
proceeding for the relief of an account debtor under either Chapter 7 or Chapter
11 shall have been instituted in a United States Bankruptcy Court; (b) a
receiver is appointed for the whole or any part of the property of an account
debtor; (c) an account debtor's assets shall have been sold under a writ of
execution or attachments, or a writ of execution shall have been returned
unsatisfied; (d) an account debtor shall have absconded; or (e) an account
debtor's assets shall have been sold under levy by any taxing authority or by a
landlord.
7. CHARGE-BACK. In the event that any Account is not paid within 100 days of
invoice date for any reason whatsoever (other than as a result of an account
debtor's insolvency), including, without limitation, any alleged defense,
counterclaim, offset, dispute or other claim (real or merely asserted) whether
arising from or relating to the sale of goods or rendition of services or
arising from or relating to any other transaction or occurrence, then in any
such event Prestige shall have the right to chargeback such Account to Seller.
No chargeback shall be deemed a reassignment to Seller of the Account involved.
Seller acknowledges that all amounts chargeable to Seller's account under this
Agreement shall be payable by Seller on demand.
8. NOTICE OF DISPUTE. Seller must immediately notify Prestige of any disputes
between any account debtor and Seller.
9. SETTLEMENT OF DISPUTE. Prestige may, at its option, settle any dispute with
any account debtor. Such settlement does not relieve Seller of any of its
obligations under this Agreement.
10. SOLE PROPERTY. Once Prestige has purchased the Accounts, the payment from
account debtors relative to the Accounts is the sole property of Prestige. Any
interference by Seller with this payment will result in civil and/or criminal
liability.
11. SECURITY INTEREST. As a further inducement for Prestige to enter into this
Agreement, and as security for the prompt performance, observance and payment of
all obligations owing by Seller to Prestige herein, Seller hereby grants to
Prestige a continuing security interest in and lien upon the following (herein
collectively referred to as the "Collateral"): all accounts, instruments,
documents, chattel paper and general intangibles (as such terms are defined in
the Uniform Commercial Code), whether now owned or hereafter created or acquired
by Seller, wherever located, and all replacements and substitutions therefore,
accessions thereto, and products and proceeds thereof, and all property of
Seller at any time in Prestige's possession.
12. FINANCING STATEMENTS. Seller will, at its expense perform all acts and
execute all documents requested by Prestige at any time to evidence, perfect,
maintain and enforce Prestige's security interest and other rights in the
Collateral and the priority thereof. Upon request, at any time and from time to
time, Seller will execute and deliver to Prestige one or more UCC financing
statements (in form and substance satisfactory to Prestige and its counsel).
13. HOLD IN TRUST. Seller will hold in trust and safekeeping, as the property of
Prestige and immediately turn over to Prestige, the identical check or other
form of payment received by Seller if payment on the Accounts comes into
Seller's possession. Should Seller come into possession of a check comprising
payments owing to both Seller and Prestige, Seller shall turn over said check to
Prestige. Thereafter, Prestige will refund Seller's portion, if any, to Seller.
14. FINANCIAL RECORDS. Seller will furnish to Prestige financial statements and
such other information as is, from time to time, requested by Prestige.
15. BOOK ENTRY. Seller will immediately, upon the sale of the Accounts, make the
proper entry on its books and records disclosing the absolute sale of the
Accounts to Prestige.
16. POWER OF ATTORNEY. In order to implement this Agreement, Seller irrevocably
appoints Prestige its special attorney in fact or agent with power to:
(a) Strike out Seller's address on any correspondence to any account
debtor and put on Prestige's address;
(b) Receive and open all mail addressed to Seller via Prestige's address;
(c) Endorse the name of Seller or Seller's trade name on any checks or
other evidences of payment that may come into the possession of
Prestige in connection with the Accounts;
(d) In Seller's name, or otherwise, demand, sue for, collect any and all
monies due in connection with the Accounts; and
(e) Compromise, prosecute or defend any action, claim or proceeding
relative to the Accounts;
The authority granted to Prestige shall remain in full force and effect until
the Accounts are paid in full and the entire indebtedness of Seller to Prestige
is discharged.
17. NOTIFICATION; VERIFICATION OF ACCOUNTS
(a) Without in any way limiting the terms and provisions of paragraph 5 (m)
hereinabove, Prestige may at any time and from time to time, in its sole
discretion, notify any account debtor to make payment on any of Seller's open
invoices to Prestige; and
(b) Prestige, may at any time verify the Accounts utilizing an audit
control company, any agent of Prestige or any other means deemed appropriate by
Prestige.
18. NO ASSUMPTION. Nothing contained in this Agreement shall be deemed to impose
any duty or obligation upon Prestige in favor of any account debtor and/or any
other party in connection with the Accounts.
19. FUTURE ASSIGNMENTS. Seller may from time to time, at Seller's option, sell,
transfer and assign different Accounts to Prestige. The future sale of any
Accounts shall be subject to and governed by this Agreement and such Accounts
shall be identified by separate and subsequent Assignments.
20. DISCRETION. Nothing contained in this Agreement shall be construed to impose
any obligation upon Prestige to purchase Accounts from Seller. Prestige shall at
its sole discretion determine which Accounts it shall purchase. Further,
Prestige shall have the absolute right at any time to cease accepting any
further assignments from Seller.
<PAGE>
21. LEGAL FEES; EXPENSES. Seller will pay on demand any and all collection
expenses and reasonable attorneys' fees that Prestige incurs in the event it
should become necessary for Prestige to enforce its rights under this Agreement.
In addition, Seller will pay on demand all costs and expenses incurred by
Prestige in connection with the preparation, execution and delivery of this
Agreement and any supplement or modification thereof, and in any way relating to
the transactions contemplated by this Agreement, including, without limitation,
all reasonable attorneys' fees, Federal Express costs (or similar expenses),
wire transfer costs, certified mail costs, facsimile transmission costs and lien
search costs.
22. BINDING ON FUTURE PARTIES. This Agreement shall inure to the benefit of and
is binding upon the heirs, executors, administrators, successors and assigns of
the parties hereto, except that Seller may not assign or transfer any or all of
its rights and obligations under this Agreement to any party without the prior
written consent of Prestige.
23. WAIVER; ENTIRE AGREEMENT. No failure or delay on Prestige's part in
exercising any right, power or remedy granted to Prestige herein, will
constitute or operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right set forth herein. This
Agreement contains the entire agreement and understanding of the parties hereto
and no amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement, will in any event be effective unless the same is
in writing and signed and delivered by Prestige.
24. NEW JERSEY LAW. This agreement shall be deemed executed in the State of New
Jersey and, in all respects, shall be governed and construed in accordance with
the laws of the State of New Jersey.
25. INDEMNITY. Seller shall hold Prestige harmless from and against any action
or other proceeding brought by any account debtor against Prestige arising from
Prestige's collecting or attempting to collect any of the Accounts.
26. TERM. This Agreement will remain in effect until July 1, 1998 (the "Term").
Thereafter, the Term will be automatically extended for successive periods of
one (1) year each unless either party provides the other with a written notice
of cancellation at least sixty (60) days prior to the expiration of the initial
Term or any renewal Term; provided, however, Prestige may cancel this Agreement
at any time upon sixty (60) days notice to Seller. In the event of a breach by
Seller of any term or provision of this Agreement or upon Seller's Insolvency or
the Insolvency of any guarantor of Seller obligations herein, Prestige shall
have the right to cancel this Agreement without notice to Seller, and all of
Seller obligations to Prestige herein shall be immediately due and payable. In
the event of cancellation, the provisions of this Agreement shall remain in full
force and effect until all of the Accounts have been paid in full.
27. INVALID PROVISIONS. If any provision of this Agreement shall be declared
illegal or contrary to law, it is agreed that such provision shall be
disregarded and this Agreement shall continue in force as though said provision
had not been incorporated herein.
28. EFFECTIVE. This Agreement shall become effective when it is accepted and
executed by an authorized officer of Prestige.
29. JURY WAIVER. The parties hereto hereby mutually waive trial by jury in the
event of any litigation with respect to any matter connected with this
agreement.
Executed this day of , l9
NEW YORK TESTING LABS, INC.
By: /s/ ALOIS M. WALLNER President
--------------------------------------------------------
ALOIS M. WALLNER, President Title
Accepted this day of , l9
PRESTIGE CAPITAL CORPORATION
By:
--------------------------------------------------------
HARVEY L. KAMINSKI, President Title
Each of the undersigned hereby personally guarantees and shall be jointly and
severally liable for any damages suffered by Prestige Capital Corporation by
virtue of the breach of any warranty, representation or convenant made by Seller
in paragraph 5 above. Each of the undersigned also personally waives presentment
for payment, demand, protest, notice of protest, notice of dishonor and notice
of every nature whatsoever.
Date: By /s/ MICHAEL O'REILLY
----------------------------- -----------------------------------------
MICHAEL O'REILLY Individually
Date: By /s/
----------------------------- -----------------------------------------
Individually
AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT
This Amendment to Revolving Credit Agreement (this "Amendment") is made as
of this 6th day of February, 1998 by and between:
WINDSWEPT ENVIRONMENTAL GROUP, INC., a corporation organized under the laws
of the State of Delaware (the "Borrower"); and
NORTH FORK BANK, a banking corporation chartered under the laws of New York
(the "Bank").
W I T N E S S E T H:
WHEREAS:
(A) The Borrower and the Bank are parties to a Revolving Credit Agreement,
dated as of May 22, 1997 (as amended through the date hereof, the "Agreement");
(B) The Borrower has requested the Bank to release its lien on certain
accounts receivable and to subordinate its lien upon certain other accounts
receivable of the Borrower and certain of its affiliates in order to permit the
Borrower and such affiliates to enter into Purchase and Sale Agreements with
Prestige Capital Corporation ("Prestige") pursuant to which the Borrower and
such affiliates will sell to Prestige, and Prestige shall purchase from the
Borrower and such affiliates, certain accounts receivable of such entities for
cash.
(C) The Bank is willing to release its lien on certain accounts receivable
and subordinate its lien upon certain other accounts receivable of the Borrower
and certain of its affiliates in order to permit such entities to sell such
released accounts receivable to Prestige subject to the terms and provisions
hereof.
(D) Any capitalized terms not defined herein shall have the meanings
ascribed thereto in the Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1. Amendments to Revolving Credit Agreement.
This Amendment shall be deemed to be an amendment to the Agreement and
shall not be construed in any way as a replacement or substituting therefore.
All of the terms and provisions of this Amendment are hereby incorporated by
reference into the Agreement as if such terms and provisions were set forth in
full herein.
<PAGE>
Section 1.1. As of the date hereof, the Borrower shall no longer be
entitled to borrow from the Bank pursuant to Article 2 of the Agreement, and the
outstanding principal balance of the Loans, after repayment of all sums in
excess of $200,000.00, shall be converted to a term loan and shall be governed
by the terms of Article 2A of the Agreement.
Section 1.2. The Agreement is hereby amended by inserting the following
Article 2A therein immediately before Article 3:
ARTICLE 2A. THE TERM LOAN
Section 2A.1. Generally. On February 6, 1998, $200,000.00, being the
remaining outstanding principal balance of the Loans, shall be converted to
a two year term loan (the "Term Loan"). The Term Loan shall bear interest
at a variable rate equal to the Prime Rate plus three & 00/100 (3.00%) per
cent per annum, as said rate may change from time to time. Interest shall
be payable monthly on the date set forth for payments of principal.
Section 2A.2. Amortization of Term Loan. The principal amount of Term
Loan shall be repaid in twenty four (24) consecutive and substantially
equal monthly installments of principal in the amount of $8,333.34, with
interest thereon, commencing on March 1, 1998 and continuing on the first
Banking Day of each calendar month thereafter, with a final installment of
all unpaid principal and interest with respect thereto being due and
payable on February 1, 2000.
Section 2A.3. Term Loan Note. The Term Loan shall be evidenced by a
single promissory note of the Borrower substantially in the form of Exhibit
A-1 hereto (the "Term Loan Note"), with appropriate insertions, payable to
the order of the Bank and representing the obligation of the Borrower to
pay the unpaid principal balance of the Term Loan with accrued and unpaid
interest thereon as provided herein. The Bank is hereby authorized to
record the date and amount of each payment or prepayment of principal
thereof, and the interest rate applicable thereto in such Bank's records
and/or on a schedule annexed to and constituting a part of the Term Loan
Note, and, absent manifest error, any such recordation shall constitute
conclusive evidence of the accuracy of the information so recorded;
provided, however, that the failure to make any such recordation shall not
affect the Borrower's obligations to repay outstanding amounts under the
Term Loan. The Term Loan Note shall (a) be dated February 6, 1998, (b) be
stated to mature in 24 consecutive and substantially equal monthly
installments of principal in the amount of $8,333.34, with interest
thereon, and (c) shall bear interest for a period from the date such Loan
is made on the unpaid principal amount thereof at the applicable rates per
annum specified herein.
2
<PAGE>
Section 2A.4. Use of Proceeds of the Term Loan. (i) The Borrower shall
use the proceeds of the Term Loan to refinance Loans hereunder.
(ii) The Borrower agrees to indemnify the Bank and its directors,
officers, employees, affiliates, agents or other representatives, and hold
the Bank and its respective directors, officers, employees, affiliates,
agents or other representatives, harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind (including,
without limitation, the reasonable fees and expenses of counsel for any
such Person in connection with any investigative, administrative or
judicial proceeding, whether or not such Person shall be designated a party
thereto) which may be incurred by any such Person, relating to or arising
out of this Agreement or any actual or proposed use of any proceeds of Term
Loan A hereunder; provided that the Borrower and its Subsidiaries shall not
be liable to any such Persons hereunder in connection with any matters
resulting from the gross negligence or willful misconduct of the Bank or
any such Persons.
Section 2A.5 Preconditions to Closing of Term Loan. The obligations of
the Bank to enter into this Amendment and to make the Term Loan are subject
to the conditions precedent that on the date of the execution of the Term
Loan Note or within five (5) days thereafter the Bank shall have received
(a) a guarantee executed by Michael O"Reilly of all liabilities of the
Borrower to the Bank under the Agreement, in the form annexed hereto as
Exhibit A-2, (b) an intercreditor agreement executed by the Bank and
Prestige with regard to the assets the lien on which are being released by
the Bank, (c) updates of the certificates referenced as Sections
5.1.A.ii.-v., and the opinion letter referenced as Section 5.1.A.xi., of
the Agreement, (d) a "good standing" certificate of the Borrower, and (e)
the prepayment of all sums in excess of $200,000.00, as referenced in
Section 1.1 above.
Section 1.3. Section 3.3.E, Section 3.4 and Section 7.8 of the Agreement
are hereby deleted. For so long as the Borrower in not in default of any of its
obligations under the Agreement, the Bank shall not charge any other fees in
connection with the Agreement.
Section 1.4. Article 9 of the Agreement is hereby deleted. The Borrower
hereby agrees to maintain all of its operating and other bank accounts with the
Bank.
Section 1.5. Section 10.1 of the Agreement is amended to delete the last
two calculations, and to substitute the following in their place and stead:
2/1/98-4/30/98 $0
5/1/98-7/31/98 $175,000
Each fiscal quarter thereafter The amount required as of
the prior quarter end plus
$100,000
3
<PAGE>
Section 1.6. Section 10.4 of the Agreement amended to delete the ratio
"1.50:1" therefrom and to the substitute the ratio ".50:1" in its place and
stead for the fiscal quarter ending 7/31/98, ".75:1" for the fiscal quarter
ending 10/31/98, and "1.00:1" for the fiscal quarter ending 1/31/99 and
thereafter.
ARTICLE 2. Representations and Warranties.
The Borrower hereby represents and warrants to the Bank that:
Section 2.1. Subject to Section 2.5 of this Amendment, each and every one
of the representations and warranties set forth in the Agreement is true as of
the date hereof with respect to the Borrower with the same effect as though made
on the date hereof, and is hereby incorporated herein in full by reference as if
fully restated herein in its entirety.
Section 2.2. No Default or Event of Default, as defined in the Agreement
now exists.
Section 2.3. The Borrower is not in default with respect to any agreement
to which it is a party or by which it is bound.
Section 2.4. No representation, warranty or statement by the Borrower
contained herein or in any other document to be furnished by the Borrower in
connection herewith contains, or at the time of delivery shall contain, any
untrue statement of material fact, or omits or at the time of delivery shall
omit to state a material fact necessary to make such representation, warranty or
statement not misleading.
Section 2.5. There is no claim, litigation, investigation or proceeding
pending or threatened against or otherwise materially affecting the Borrower's
business and except in the ordinary course of the Borrower's business which do
not, in the aggregate, affect materially and adversely the financial condition,
operations, properties or business of the Borrower.
Section 2.6. The Security Agreements continue to be in full force and
effect and secure all payment and other obligations of the Borrower under the
Agreement. The Borrower has not located assets in any new locations since the
execution and delivery of the Security Agreements.
ARTICLE 3. Miscellaneous.
This Amendment shall be governed by and construed in accordance with the
laws of the State of New York.
4
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed or caused to be
duly executed this Waiver as of the date first above written.
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By:/s/ Michael O'Reilly CEO
-------------------------------
Name:
Title:
NORTH FORK BANK
By:/s/ Daniel McGregor, AVP
-------------------------------
Name: Daniel McGregor
Title: Assistant Vice President
5
PROMISSORY NOTE
$200,000.00 February 6, 1998
WINDSWEPT ENVIRONMENTAL GROUP, INC. (the "Borrower"), for value received,
hereby promises to pay to the order of North Fork Bank (the "Bank"), or its
permitted successors or assigns, at the principal office of the Bank at 275
Broad Hollow Road, Melville, New York 11747, or its permitted successors or
assigns, in lawful money of the United States and in immediately available
funds, in accordance with the provisions of the Agreement (as hereinafter
defined) on or before the Final Maturity Date, the principal sum of Two Hundred
Thousand and no/100 Dollars ($200,000.00), payable in equal monthly installments
of principal of Eight Thousand Three Hundred Thirty Three and 34/100 Dollars
($8,333.34) commencing on the first day of March, 1998, and thereafter on the
first day of each succeeding calendar month through and including the first day
of February, 2000, with interest thereon at the rate of three (3.00%) Percent in
excess of the rate announced by the Bank from time to time as its prime lending
rate, as in effect from time to time, and which does not necessarily represent
the lowest or best rate charged by the Bank to any customer (such rate
constituting the "Interest Rate"). The Borrower promises to pay such interest on
the unpaid principal balance hereof, for the period such balance is outstanding,
at the principal office of the Bank, in like money, at the Interest Rate, on the
dates and in the manner provided in the Agreement.
The date and amount of each Loan, the date and amount of each payment of
principal thereof, the principal amount subject thereto and interest rate with
respect thereto shall be recorded by the Bank on its books and, prior to any
transfer of this Note (or, at the discretion of the Bank, at any other time),
endorsed by the Bank on the schedule attached hereto or any continuation
thereof.
If all or a portion of any payment required to be made to the holder of
this Note (whether pursuant to this Note, the Credit Agreement or any other
Facility Document) is not received on or before the tenth (10th) day after the
date such payment is due (without reference to any grace period provided for in
the Facility Documents), a late charge of four (4%) percent of the amount so
overdue ("Late Charge") shall immediately be due to said holder. Any such Late
Charge shall be secured by the security for this Note, shall be paid no later
than the due date of the next subsequent installment of interest payable under
this Note and, if not so paid, shall bear interest at the rate then in effect
with respect to the principal sum of this Note.
It is expressly agreed that, upon the failure of the Borrower timely to
make any payment due hereunder after any applicable grace or notice and cure
periods or upon the happening of any "Event of Default" under the Facility
Documents, the principal sum hereof, or so much thereof as may be outstanding,
together with accrued interest and all other expenses payable by Borrower under
the Facility Documents, including, but not limited to, reasonable attorneys'
fees for legal services incurred by the holder hereof in collecting or enforcing
payment hereof
<PAGE>
whether or not suit is brought, and if suit is brought, then through all
appellate actions, shall immediately become due and payable at the option of the
holder of the Note, notwithstanding the Final Maturity Date set forth herein.
Upon the stated or accelerated maturity of this Note, the Borrower agrees that
this Note shall bear interest at a per annum rate equal to the lower of five
(5%) percent in excess of the interest rate payable under the Agreement or the
highest rate of interest permitted under the laws of the State of New York until
the principal and any other sum due under this Note is fully paid (the
"Involuntary Rate"). For the purposes of the preceding sentence, the interest
rate in effect under this Note for any period following the Final Maturity Date
shall be the interest rate that was in effect on the Final Maturity Date. In
addition, if an Event of Default shall occur, the holder of this Note shall
have, and shall be entitled to exercise, such rights and remedies as are set
forth in the Facility Documents and/or as may be available at law or in equity.
This is the Note referred to in that certain Revolving Credit Agreement (as
amended from time to time, the "Agreement") dated as of May 22, 1997 and amended
as of the date hereof between the Borrower and the Bank, and is subject to all
of the terms and conditions contained therein. In addition, payment of the Note
is secured by security interests in certain assets and properties of the
Borrower pursuant to the Security Agreement. All terms not defined herein shall
have the meanings given to them in the Agreement.
The Agreement provides for the acceleration of the maturity of principal
and interest upon the occurrence of certain Events of Default, for mandatory and
voluntary prepayments on the terms and conditions specified therein and for
accrual of interest at the Default Rate in the circumstances provided in the
Agreement.
The Borrower waives presentment, notice of dishonor, protest and any other
notice or formality with respect to this Note.
This Note shall be governed by and interpreted and construed in accordance
with the laws of the State of New York, without giving effect to the principles
of conflicts of law thereof.
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By: /s/ Michael O'Reilly
--------------------------------
Name: Michael O'Reilly
Title: President
2
<PAGE>
Amount of Amount of Outstanding Balance By Notation
Date Loan Payment Interest
- --------------------------------------------------------------------------------
3
NORTH FORK BANK Date:
275 Broad Hollow Rd Borrower(s):
Melville, New York 11747 Guarantor(s):
PERSONAL GUARANTY OF ALL LIABILITY
In this Guaranty the words, 1, me, my and mine mean each and all of us who
signed it and our successors and assigns. The words you an yours mean NORTH FORK
BANK, and its successors, subsidiaries, endorsees and assigns.
GUARANTY: I hereby guaranty to you the prompt and unconditional payment of
claims of every nature you have against
(each and all of whom are called "Borrower") and every obligation and liability
of Borrower to you, which will be called "Obligations." Obligations means all
items described below.
OBLIGATIONS: Obligations means all amounts due to you of any nature, whether
they already exist, are incurred at this time, or are incurred in the fixture,
whether they are direct or indirect, whether they are absolute or contingent,
whether they are secured or unsecured whether they are matured or unmatured,
whether they were incurred by the Borrower alone or jointly and/or severally
with others, whether they were originally contracted with you and /or other(s)
and now or later owing to you, whether or not they are represented by purchase
or repurchase agreements. Obligations include, but are not limited to, all sums
just described, late charges, disbursements, legal fees, and any amount still
due after you take any existing collateral.
CONSIDERATION: I give this Guaranty to you in return for your doing and having
done the following for Borrower: making loans, advances, extensions, renewal,
acquiring notes and security documents and extending and other financial
accommodation.
LIEN FOR LIABILITY OF GUARANTOR: I give to you a continuing lien for the amount
of all of my obligations and liabilities to you upon any and all of my property
including deposits and credits now or later held by you. My obligations and
liabilities to you, which will be called "Liabilities", mean all amount due to
you from me of any nature, including but not limited to amounts due under this
Guaranty whether they already exist, are incurred at this time, or are incurred
in the future, whether they are direct or indirect, whether they are absolute or
contingent, whether they are secured or unsecured, whether they are matured or
unmatured, whether they were incurred by me alone or jointly or severally with
others or whether they were originally contracted with you and/or others and are
now or later owing to you. Property held by you means all property which is in
your possession, whether held now or coming into your possession latter, or
whether received by you for safekeeping, custody, pledge, transmission,
collection or otherwise. I authorize you to apply any such property, deposits
or credits at any time without notice to my Liabilities to you, regardless of
whether security is held for such Liabilities. All property held by you is
called "Collateral Security".
BANK'S RIGHTS WITH RESPECT TO COLLATERAL SECURITY: You may do any of the
following without notice to me and I will continue to be fully liable under this
Guaranty which will remain in full force and effect:
(a) Renew, extend, modify, accelerate, compromise or release any of the
obligations or liabilities of Borrower or any co-guarantor or any other party
for or on any of the Obligations, Liabilities or Collateral Security in whole or
in part at any time or times;
(b) Exchange, sell, surrender, substitute, liquidate or release any or all
collateral or liens for any Obligations;
(c) Exchange, release, substitute or delay or fail to take action with respect
to ally Collateral Security, including but not limited to collect, demand
payment of, protest or give notice of non-payment or comply with legal
requirements with respect to establishing or maintaining the validity or
priority of liens;
(d) Register in your name or the name of your nominee any stocks, bonds or
securities held by you whether or not any default exists. You may exercise
without limitation all voting and corporate rights with respect to stocks, bonds
and securities whether or not you have registered them in your name and whether
or not default exists. These rights include, but are not limited to conversion,
exchange and subscription. You may file a proof of claim for the full amount of
any collateral security and rate the claim as you deem proper. Your liability
shall be only to account for property actually received by you. You shall have
no duty to exercise any of these rights and will not be responsible for any
failure to do so or delay in so doing;
(e) Sell all or any part of the Collateral Security deposited, pledged or held
by you for the Liabilities whether the Liabilities are absolute or contingent or
matured or unmatured whenever in your absolute and unrestricted discretion you
consider such sale necessary for your protection. You may sell in the manner
described below without notice or demand to me of any kind, including but not
limited to demands for additional Collateral Security or payment on account and
Notice of Sale or intention to sell. If you do give such Notice or Demand at any
time or times, this will not be considered a waiver of your right to sell
without Notice or Demand or of your right to accelerate the maturity of the
Liabilities.
DEFAULT AND ACCELERATION: My Liabilities shall become immediately due and
payable notwithstanding any inconsistent provision in any other document upon
the happening of any of the following:
1
<PAGE>
(a) My failure to perform any agreement contained in this Guaranty or any other
agreement delivered by me to you. Your determination of the occurence of any
failure shall be binding on me;
(b) Default in the prompt payment of any amount due upon any Obligation,
Liability, or Collateral Security;
(c) My death or the death of any co-guarantor or Borrower, if individuals, or my
dissolution or a change in my composition, if partnership, or a dissolution,
merger or consolidation, if a corporation, or my inability to manage my affairs
or the appointment of representative of any kind for me or my property;
(d) My seeking relief under any State or Federal Law affording relief to
debtors, including, but not limited to, Title 11 of the United States Code and
the New York State Debtor and Creditor Law, or the seeking of any such relief by
creditors against me;
(e) My making a bulk transfer of my property or liquidation my business;
(f) My failure to supply financial information upon request or to permit
examination of my books and records upon request or to supply any document
requested by you in connection with this Guaranty;
(g) Any representation made by me to you is false in any material respect;
(h) My failure to pay or withhold any tax(es) when due;
(i) The entry of any judgment or order of attachment against me or any of my
property;
(j) The occurrence of any other event or a material adverse change in my
financial affairs or condition which causes you to deem yourself insecure;
(k) Granting a security interest in any of my property;
(1) My failure to comply with Regulation U of the Federal Reserve Board as now
existing or as amended;
(m) The occurrence of any of the above events with respect to any Guarantor, the
Borrower or any party to the Obligations, Liabilities or Collateral Security.
All of the above shall be "events of default".
REMEDIES IN EVENT OF DEFAULT: If an event of default occurs, you may do any or
all of the following without notice or demand in addition to declaring my
Liabilities immediately due:
(a) Collect, receive and realize upon the Collateral Security by any means you
deem advisable, including but not limited to, public or private sales;
(b) Apply the net proceeds realized from Collateral Security to the payment in
whole or in part of any of my Liabilities you choose. I will remain liable for
any deficiency remaining after the application. "Net proceeds" means the net
amount realized after payment of all costs, disbursements and expenses incurred
with respect to the Collateral Security including an attorney's fee of 20% the
amount due to you;
(c) Exercise all rights and remedies of a secured creditor under the Uniform
Commercial Code;
WAIVER OF NOTICE: I waive notice of the following:
(a) Acceptance of this Guaranty and of the creation, renewal, extension of
accrual of any Obligation. All Obligations shall conclusively be presumed to
have been created and all transactions between Borrower and you shall
conclusively be presumed to have occurred in reliance on this Guaranty;
(b) Protest, demand for payment, notice of default and non-payment to any
Guarantor or Borrower or any other party responsible for the Obligations or
Liabilities.
NATURE OF GUARANTY: This Guaranty is an absolute, continuing and unconditioned
guaranty of payment. It is not dependent on any other writing or fact, including
but not limited to the validity, regularity or enforceability of any of the
Obligations or purported Obligations, the taking or failure to take a security
interest in any property, the bankruptcy of Borrower or any other Guarantor, or
the termination of any other guaranty. You do not have to take any action
against Borrower or any other guarantor or any security for the Obligations
before seeking payment from me. I will remain liable hereunder despite the
occurrence or non-occurrence of any event which would in the absence of this
provision be deemed an equitable or legal discharge of a guarantor. This
Guaranty may be terminated by written notice actually delivered to and received
by you at your office at 275 Broad Hollow Rd. Melville, New York 11747, but only
as to new Obligations of Borrower subsequently incurred. Termination shall be
effective upon execution and delivery to me of written and other Liabilities
arising out of same and this Guaranty shall continue in full force and effect
with respect to some. All payments made on account of or re-acknowledgment of
the Obligations of Borrower, or any other party liable therefore, including but
not limited to me, shall be deemed made on my behalf and shall start anew the
running of the applicable statue of limitations. The execution and delivery of
this Guaranty shall not terminate any other prior guaranties.
MISCELLANEOUS: All notices to or demands on me which you choose to make shall be
deemed effective when forwarded by mail, telegraph, telephone, cable radio or
otherwise to my last address or telephone number appearing on your books, if not
otherwise sooner given, and shall have the same effect as of notice was actually
delivered to and received by me in person. All of your rights and remedies under
this Guaranty are cumulative; you may exercise them singly or at the same time.
I waive the benefit of any homestead or other exemption to the extent permitted
by law. This Guaranty shall pass to and may be relied upon and enforced by any
of your successors or
2
<PAGE>
assignees and anyone who later holds any of the Obligations. The term "Borrower"
shall include (a) the Borrower listed above, successors and entitles to which
substantially all of the business and assets of Borrower have been transferred,
(c) in the case of a partner any new partnerships created by admission of a new
partner(s) or by dissolution by death, resignation or withdrawal and (d) in the
case corporation, any corporation into or with which Borrower has merged,
consolidated, reorganized or absorbed. If you employ an attorney enforce any of
your rights under this Guaranty or to obtain payment under this Guaranty,
whether by lawsuit or otherwise, I agree to reasonable attorney fees. I waive
trial by jury and the right to interpose counterclaims of all types in any
action by you against me, although I may raise these claims in a separate
lawsuit. You shall not be deemed to have waived any right or remedy and delay,
act, or omission waivers by you must be in writing and signed by you and shall
relate only to the matters set forth therein. No waiver by you or any
occ[ILLEGIBLE] shall act as a waiver with respect to any future occasion. This
Guaranty contains the understanding between you and me. All changes be in a
signed writing. No executory agreement shall be effective to change or modify or
to discharge this Guaranty. If more than person signs this or any other
Guaranty, each is jointly and severally liable; if a partnership, each partner
is bound jointly and severally. [ILLEGIBLE] jointly and severally liable with
any other guarantor or obligor of the obligation. If any portion of this
Guaranty is unenforceable remainder shall continue to be valid. This Guaranty
shall be construed in accordance with the laws of the State of New York (without
re[ILLEGIBLE] to its conflicts of laws rules) and I agree that service of
process of certified mail, return receipt requested, to my last address
appearing your books will be sufficient to conver personal liability on me.
RETAIL INSTALLMENT CONTRACT: If this Guaranty covers Obligations including a
Retail Installment Contract as defined by New York State Personal Property Law
ss. ss. 313, 420, then the following applies:
Identity of Contract: __________________________________________________________
Time Balance: (Total of Payments) $_____________________________________________
CLAIMS AND REPAYMENT: If a claim is ever made against you and you repay to any
person amounts by you on account of a Obligation, Liability or Collateral
Security, by reason of any judgement, settlement, or other disposition,
regardless of whether this Guaranty has been terminated or whether any
Obligation has been cancelled, I will be liable to you for all such amounts as
if they had never been [ILLEGIBLE] to you. Notwithstanding anything to the
contrary in this guaranty, I hereby irrevocably waive all rights I may have at
law or [ILLEGIBLE] (including without limit, any law subrogating me to your
rights) to seek contribution, indemnification, or any other form of
reimbursement from the Borrower, any other guarantor, or any other person now or
hereafter primarily or secondarily liable for any obligations of the Borrower to
you, for any payment or disbursement made by me under or in connection with this
guaranty or otherwise.
IN WITNESS WHEREOF, I have executed this document as of the date indicated
above:
Signature: /s/ MICHAEL O'REILLY
------------------------
Address:
STATE OF NEW YORK )
) SS.:
COUNTY 0E )
On the _____________ day of ______________, 199_, before me personally
appeared ______________ to me known to be the individual described in and who
executed the foregoing Guaranty, tend duly acknowle~ed the same.
------------------------
Notary Public
3
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 153,682
<SECURITIES> 0
<RECEIVABLES> 2,612,507
<ALLOWANCES> 175,395
<INVENTORY> 163,957
<CURRENT-ASSETS> 3,153,723
<PP&E> 4,728,394
<DEPRECIATION> 1,762,041
<TOTAL-ASSETS> 7,951,530
<CURRENT-LIABILITIES> 5,850,185
<BONDS> 1,184,785
1,300,000
0
<COMMON> 1,072
<OTHER-SE> (384,512)
<TOTAL-LIABILITY-AND-EQUITY> 7,951,530
<SALES> 9,737,411
<TOTAL-REVENUES> 9,737,411
<CGS> 8,367,363
<TOTAL-COSTS> 12,107,029
<OTHER-EXPENSES> (104,728)
<LOSS-PROVISION> 80,187
<INTEREST-EXPENSE> 591,562
<INCOME-PRETAX> (2,936,639)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,936,639)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,936,639)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
