UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended October 31, 1999
( ) 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)
(631) 434-1300
(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 38,456,254
- --------------------------------------------------------------------------------
(Title of Each Class) (Outstanding at December 15, 1999)
Transitional Small Business Disclosure Format (check one): Yes___ No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WINDSWEPT ENVIRONMENTAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31,
1999 April 30,
(Unaudited) 1999
--------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,150,849 $ 46,336
Accounts receivable, net of allowance for doubtful
accounts of $210,000 and $100,000, respectively 2,965,192 2,249,198
Due from officer - 100,000
Inventories 153,193 129,620
Costs and estimated earnings in excess of billings
on uncompleted contracts 93,589 157,000
Prepaid and other current assets 454,967 379,970
-------------- -------------
Total current assets 5,817,790 3,062,124
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$3,248,476 and $2,798,662, respectively 1,966,191 2,333,530
OTHER ASSETS
Goodwill, net of accumulated amortization of $50,653
and $45,994, respectively 71,373 76,032
Notes receivable, net of current portion of $107,853 and
$105,764, respectively 84,469 110,912
Other assets 186,084 162,524
-------------- -------------
TOTAL ASSETS $ 8,125,907 $ 5,745,122
============== =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable and accrued expenses $ 4,170,642 $ 3,558,041
Notes payable - other 229,725 -
Note payable to affiliate 100,000 -
Revolving credit note payable - 1,200,596
Billings in excess of costs and estimated earnings on
uncompleted contracts 176,460 226,000
Payroll taxes payable 126,426 107,570
Sales taxes payable 581,703 481,826
Current portion of long-term debt 388,963 1,033,502
Obligations of unconsolidated subsidiary, net 210,007 196,112
------------- -------------
Total current liabilities 5,983,926 6,803,647
OTHER LIABILITIES
Convertible notes 2,680,000 790,000
Long-term debt, net of current portion 154,580 198,732
-------------- -------------
Total liabilities 8,818,506 7,792,379
-------------- -------------
COMMITMENTS AND CONTINGENCIES
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
par value $.01; 1,300,000 shares issued
and outstanding 1,300,000 1,300,000
-------------- -------------
REDEEMABLE COMMON STOCK 152,096 -
-------------- -------------
STOCKHOLDERS' DEFICIT
Preferred Stock, 10,000,000 shares authorized -
1,300,000 Series A; 50,000 Series B; 8,650,000
not designated
Series B, par value $.01 issued
and outstanding 9,346 and -0- shares, respectively 93 -
Common Stock, $.0001 par value,
50,000,000 shares authorized; 38,443,254 and
14,135,073 shares issued and outstanding,
respectively 3,844 1,414
Additional paid-in capital 31,839,076 28,948,201
Accumulated deficit (33,987,708) (32,296,872)
-------------- -------------
Total stockholders' deficit (2,144,695) (3,347,257)
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 8,125,907 $ 5,745,122
============== =============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
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<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Unaudited)
<TABLE>
<CAPTION>
October 31, October 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenues $ 3,186,392 $ 4,516,847
Cost of revenues 2,680,776 3,206,378
------------ ------------
Gross profit 505,616 1,310,469
Selling, general and administrative expenses 1,702,586 864,755
------------ ------------
(Loss) income from operations (1,196,970) 445,714
------------ ------------
Other income (expense):
Interest expense (364,760) (157,745)
Other, net 10,690 12,500
------------ ------------
Total other (expense) (354,069) (145,245)
------------ ------------
(Loss) income before extraordinary item and
income tax benefit (1,551,039) 300,469
Income tax benefit - (275,000)
------------ ------------
Net (loss) income before extraordinary item (1,551,039) 575,469
Extraordinary item:
Loss on extinguishment of debt 100,000 -
------------ ------------
Net (loss) income (1,651,039) 575,469
Dividends on Series A Convertible Preferred Stock 19,500 19,500
------------ ------------
Net (loss) income attributable to common shareholders $(1,670,539) $ 555,969
============ ============
Basic net (loss) income per common share
before extraordinary item $ (.09) $ .04
Extraordinary item (.01) -
------------ ------------
Basic net (loss) income per share $ (.10) $ .04
============ ============
Diluted net (loss) per common share $ (.10) $ .03
============ ============
Weighted average number of common shares outstanding:
Basic 16,453,166 12,800,778
============ ============
Diluted 16,453,166 17,562,677
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
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<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
(Unaudited)
<TABLE>
<CAPTION>
October 31, October 31,
1999 1998
------------ --------------
<S> <C> <C>
Revenues $ 5,967,923 $ 7,760,310
Cost of revenues 4,668,489 5,527,535
------------ -------------
Gross profit 1,299,434 2,432,775
Selling, general and administrative expenses 2,353,928 1,703,350
----------- -------------
(Loss) income from operations (1,054,494) 729,425
------------ -------------
Other income (expense):
Interest expense (547,213) (434,051)
Other, net 10,871 27,832
------------ -------------
Total other (expense) (536,342) (406,219)
(Loss) income before extraordinary item and
income tax benefit (1,590,836) 323,206
Income tax benefit - (275,000)
------------ -------------
Net (loss) income before extraordinary item (1,590,836) 598,206
Extraordinary item
Loss on extinguishment of debt 100,000 -
------------ -------------
Net (loss) income (1,690,836) 598,206
Dividends on Series A Convertible Preferred Stock 39,000 39,000
------------ -------------
Net (loss) income attributable to common shareholders $(1,729,836) $ 559,206
============ =============
Basic net (loss) income per common share
before extraordinary item $ (.10) $ .04
Extraordinary item (.01) -
------------ -------------
Basic net (loss) income per share $ (.11) $ .04
============ =============
Diluted net (loss) per common share $ .(11) $ .04
============ =============
Weighted average number of common shares outstanding:
Basic 15,558,485 12,463,486
============ =============
Diluted 15,558,485 17,192,329
============ =============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
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<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED OCTOBER 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------ --------------- Additional
Number of Par Number of Par Paid-in Accumulated
Shares Value Shares Value Capital Deficit Total
---------- ------- --------- ----- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1999 14,135,073 $ 1,414 $ 28,948,201 $(32,296,872) $(3,347,257)
Proceeds from private placements of
common and preferred stock 23,167,017 2,317 9,346 93 2,639,940 2,642,350
Exercise of stock option 7,000 1 2,624 2,625
Issuance of common stock for services 863,450 86 201,723 201,809
Issuance of common stock for employee
and director compensation 25,000 2 5,076 5,078
Compensation related to officer options 138,080 138,080
Issuance of common stock for accrued
preferred stock dividends and related
interest 225,714 22 70,514 70,536
Note conversion 20,000 2 9,998 10,000
Dividends on preferred stock - - (39,000) (39,000)
Net loss - - - (1,690,836) (1,690,836)
---------- ------- ------ ----- -------------- -------------- ------------
Balance at October 31, 1999 38,443,254 $ 3,844 9,346 $ 93 $ 31,839,076 $ (33,987,708) $(2,144,695)
========== ======= ====== ===== ============== ============== ============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-5-
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
(Unaudited)
<TABLE>
<CAPTION>
October 31, October 31,
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) income $(1,690,836) $ 598,206
Adjustments to reconcile net (loss) income to net cash
used by operating activities:
Depreciation and amortization 473,998 505,886
Provision for doubtful accounts 110,000 15,393
Issuance of common stock for director compensation 5,078 -
Compensation related to officer options and redeemable
common stock 152,096 -
Issuance of common stock for services 201,809 59,662
Issuance of common stock for dividends and
related interest on redeemable preferred stock 70,536 -
Gain on disposal of equipment - (15,332)
Deferred income taxes - (275,000)
Changes in operating assets and liabilities:
Accounts receivable (825,994) (541,015)
Due from officer 100,000 -
Inventories (23,573) (2,267)
Costs and estimated earnings in excess of billings on uncompleted contracts 63,411 17,352
Prepaid and other current assets (74,997) 92,525
Accounts payable and accrued expenses 612,601 131,721
Payroll and sales taxes payable 118,733 (533,803)
Obligations of unconsolidated subsidiary 13,895 -
Billings in excess of costs and estimated earnings on uncompleted contracts (49,540) (103,500)
------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (742,783) (50,172)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Collection of notes receivable 26,443 28,137
Other assets (43,085) -
Proceeds from insurance settlement - 20,332
Purchases of property and equipment (82,475) (188,405)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (99,117) (139,936)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of long-term debt and factor advances (788,691) (2,230,286)
Payments of revolving bank line, net (1,200,596) 1,984,420
Proceeds from equipment term loan - 595,000
Proceeds from private placements 2,642,350 -
Proceeds from issuance of short term notes 238,779 -
Payments on short term notes (9,054) -
Proceeds from notes due affiliate 2,100,000 -
Dividends paid on redeemable preferred stock (39,000) (19,500)
Proceeds from exercise of stock options 2,625 -
Proceeds from issuance of Common Stock - 130,000
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,946,413 459,634
------------ -----------
NET INCREASE IN CASH 2,104,513 269,526
CASH - BEGINNING 46,336 33,915
------------ -----------
CASH - ENDING $ 2,150,849 $ 303,441
=========== ===========
Cash paid during the period for:
Interest $ 566,797 $ 385,152
=========== ==========
Taxes $ - $ 2,750
=========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-6-
<PAGE>
WINDSWEPT ENVIRONMENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1999
(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 financial statement presentation. 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, 1999.
2. LIQUIDITY AND BUSINESS RISKS
The Company's financial statements have been prepared assuming
that the Company will continue as a going concern. As of October 31,
1999 the Company has a stockholders' deficit of $2,144,695 and an
accumulated deficit of $33,987,708. The Company has financed its
operations to date primarily through issuances of debt and equity
securities. At October 31, 1999 the Company had $2,150,849 in cash, and
a working capital deficit of $166,136. In addition, as of October 31,
1999, the Company was in arrears with respect to certain payroll and
sales tax obligations of approximately $90,000 and $550,000,
respectively. In addition, the Company is in arrears with many of its
vendors. These factors raise substantial doubt about the Company's
ability to continue as a going concern. These financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
On October 29, 1999 the Company consummated an equity and debt financing
transaction with Spotless Plastics (USA), Inc. (see Note 6 ) that
significantly improved the Company's liquidity and cash position.
Management believes the Company will require positive cash flow from
operations to meet its working capital needs over the next twelve months.
In the event that positive cash flow from operations is not generated, the
Company may be required to seek additional financing to meet its working
capital needs. The Company currently has no credit facility. Revenue growth
is expected in new and existing service areas. As is common in the
environmental services industry, payments for services rendered are
generally received pursuant to specific draw schedules after services are
rendered. Thus, pending the receipt of payments for services rendered, the
Company must typically fund project costs, including labor and bonding
costs, from financing sources within and outside the Company. Certain
contracts, in particular those with state or federal agencies, may provide
for payment terms of up to 90 days or more and may require the posting of
performance bonds which are generally not released until completion of the
project. The Company is striving 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
affecting the Company's operations will not result in accelerated or
unexpected cash requirements, or that it will be successful in achieving
positive cash flow from operations or obtaining additional financing. The
Company's future cash requirements are expected to depend on numerous
factors, including, but not limited to: (i) the ability to successfully bid
on environmental or related construction contracts, (ii) the ability to
generate positive cash flow from operations, and the extent thereof, (iii)
the ability to raise additional capital or obtain additional financing, and
(iv) economic conditions.
-7-
<PAGE>
3. INCOME TAXES
No provision (benefit) for income tax was recorded for the three and six
month periods ended October 31, 1999 due to a net loss being incurred. Any
deferred tax assets which may have arisen during the period would have a
full valuation allowance provided such asset.
4. EQUITY TRANSACTIONS
Stock Options
On June 28, 1999 the Company's Board of Directors granted options to
purchase 750,000 shares of Common Stock to the directors of the Company,
which included 250,000 options to the Chief Executive Officer. All of these
options are exercisable immediately at an exercise price of $.1875, and
expire June 27, 2004.
On July 20, 1999 the Company granted options to purchase 171,407 shares of
Common Stock to employees. All of these options are exercisable two years
after date of grant at an exercise price of $.3438, and expire July 19,
2004.
On August 18, 1999 and August 27, 1999 the Company granted options to
purchase 10,000 and 50,000 shares of Common Stock at exercise prices of
$.3906 and $.3125, respectively, to employees. These options are
exercisable two years and one year after date of grant, respectively, and
expire five years after date of grant.
On October 29,1999 options to purchase 2,000,000 shares of Common Stock,
previously granted, vested. The Company recorded compensation expense in
the amount of $138,080. Additionally, options to purchase 2,674,714 and
2,811,595 shares of Common Stock were granted to Michael O'Reilly (see Note
6).
Issuances of Common and Preferred Stock and Warrants
During the six months ended October 31, 1999 the Company issued 882,334
shares of Common Stock and warrants to purchase 200,000 additional shares
of the Company's Common Stock exercisable at $.20 per share in private
placement transactions for proceeds of $142,350. The warrants expire on
July 22, 2004.
On July 29, 1999 a former employee exercised options to purchase 7,000
common shares at an exercise price of $.375 per share.
On September 10, 1999 the Company issued 223,988 shares of common stock in
payment of dividends and accumulated interest aggregating $69,996 on its
Series A redeemable convertible preferred stock.
On October 29, 1999 the Company issued 9,346 shares of Series B preferred
stock and 22,284,683 shares of Common Stock in a transaction with Spotless
Plastics (USA), Inc. and its subsidiary for consideration of $2,500,000
(see Note 6).
On November 16, 1999 a former employee exercised options to purchase 13,000
common shares at an exercise price of $.375 per share.
Issuance of Convertible Debt
On October 29,1999 the Company borrowed $2,000,000 from Spotless Plastics
(USA), Inc. and issued a secured promissory note convertible into
25,304,352 shares of Common Stock or 25,305 shares of Series B Preferred
(see Note 6).
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<PAGE>
5. COMMITMENTS AND CONTINGENCIES
Litigation
In October 1996, the United States Attorney for the Eastern District of New
York obtained a federal grand jury indictment against, among others, the
Company's former Chief Operating Officer, Leo Mangan, and former Special
Securities Counsel, James Nearen, on charges that include violations of
federal securities law, including fraudulent issuances of 700,000 shares of
the Company's Common Stock. Mr. Mangan and Mr. Nearen both subsequently
pleaded guilty to the charges in the Federal indictment. In addition, the
Securities and Exchange Commission also instituted an investigation of the
Company. To date, no charges have been filed against the Company or any
other current member of management as a result of the Eastern District
investigation. On June 9, 1999, the Company's Board of Directors approved
making a settlement offer with the Securities and Exchange Commission
pursuant to which the Company neither admits nor denies any allegations. On
November 22, 1999 the Securities and Exchange Commission accepted the
settlement offer in its "Order Instituting Public Administrative
Proceedings, Making Findings, Imposing Remedial Sanctions and Issuing
Cease-and-Desist Order." Under the terms of the order the Company will not
incur any monetary fines. The order requires the Company to develop and
institute certain policies, procedures and manuals that will improve its
corporate governance, including the adaptation of a formal conflict of
interest policy and a formal employee handbook. The order also requires the
Company to obtain a secure off site storage facility to store its backup
data files and system software and to make certain reporting disclosures.
The Company is currently in the process of implementing such policies,
procedures and manuals. Additionally, the Company's special defense counsel
has advised the Company that an Assistant United States Attorney confirmed
that the Government, at this time, does not intend to proceed further with
its investigation of the Company.
The Company is a defendant in a litigation matter whereby one or more
plaintiffs claim to be entitled to additional wages while working for a
subcontractor of the Company. The amount of the claim has not been
specified. Management believes that the case is without merit, and intends
to defend the action vigorously.
The Company is party to other litigation matters and claims which are
normal in the course of its operations, and while the results of such
litigation and claims cannot be predicted with certainty, management
believes that the final outcome of such matters will not have a materially
adverse effect on the consolidated financial position, results of
operations and cash flows of the Company.
Other Proceedings
In January 1996 Laboratory Testing Services, Inc. ("LTS"), a wholly-owned
subsidiary of the Company, filed a Chapter 11 petition in United States
Bankruptcy Court in the Eastern District of New York. Subsequently, this
case was converted to a Chapter 7 Bankruptcy proceeding. LTS is in process
of liquidation through these bankruptcy proceedings. Management believes
that the Company's financial condition and results of operations will not
be materially affected by this proceeding.
6. SALE OF CONTROLLING INTEREST AND REFINANCING
On October 26, 1999 the Board of Directors of Windswept Environmental
Group, Inc. ("the "Company") created a class of 50,000 shares of preferred
stock, par value $.01 per share, designated as the Series B Convertible
Preferred Stock (the "Series B Preferred"). Each share of Series B
Preferred has a liquidation preference of $79.04, is initially convertible
into 1,000 shares of Common Stock, par value $.0001 per share, of the
Company (the "Common Stock") (subject to adjustment) and is entitled to
cast 1,000 votes, together with the Common Stock and the Series A Preferred
Stock, par value $.01 per share, on any matters subject to a vote of the
holders of the Common Stock.
On October 29, 1999 the Company entered into a subscription agreement with
Spotless Plastics (USA), Inc., a Delaware corporation ("Spotless" or
"Affiliate"), pursuant to which the Company sold to Windswept
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<PAGE>
Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Spotless ("Acquisition Corp."), 22,284,683 shares of Common
Stock, and 9,346 shares of Series B Preferred, for an aggregate
subscription price of $2,500,000 (the "Purchase Price") or $.07904 per
share of Common Stock and $79.04 per share of Series B Preferred. At
October 31, 1999 Acquisition Corp's Common Stock holdings equate to 58%
of the Company's issued and outstanding common shares. If Acquisition Corp.
were to convert the shares of Series B Preferred stock to Common Stock,
it would hold 66.2% of the Company's issued and outstanding common shares.
In addition, the Company and Trade-Winds Environmental Restoration, Inc.,
North Atlantic Laboratories, Inc. and New York Testing Laboratories, Inc.,
each of which is a wholly-owned subsidiary of the Company, as joint and
several obligors (collectively, the "Obligors"), borrowed $2,000,000 from
Spotless (the "Loan") pursuant to a secured convertible promissory note
dated October 29, 1999 (the "Note") which bears interest at a rate equal to
LIBOR plus one percent (1%). The Note matures on October 29, 2004, and is
convertible into either 25,304,352 shares of Common Stock or 25,305 shares
of Series B Preferred shares at Spotless' option. Additionally Spotless has
the right to defer the maturity date of the note for one year. At October
31, 1999 the common shares issuable upon conversion of the Note would
represent 39.7% of the Company's issued and outstanding common shares. In
connection with the note, each of the Obligors granted Spotless a security
interest in substantially all of their respective assets pursuant to a
Security Agreement dated October 29, 1999.
Upon the occurrence of the change in control of the Company described
above, options to purchase 2,000,000 shares of Common Stock exercisable at
$.01 per share granted to Michael O'Reilly on September 12, 1996 have
vested and become exercisable over a five-year period. The Company recorded
compensation expense in the amount of $138,080 due to this change in
control.
The Board of Directors has approved an amendment to the Company's
certificate of incorporation increasing the number of authorized shares of
Common Stock from 50,000,000 to 100,000,000 (the "Amendment"). The
Amendment is expected to become effective promptly after the Company's
compliance with Section 14(c) of the Exchange Act and the rules and
regulations thereunder, approval by the stockholders of the Company and
filing with the Secretary of State of the State of Delaware.
In addition, on October 29, 1999, the Company entered into an Employment
Agreement with Michael O'Reilly. This agreement is for a term of five
years, calls for a base salary of $260,000 per year and a bonus equal to
2.5% of the Company's pre-tax income (as that term is defined in the
Employment Agreement). Upon the termination of Mr. O'Reilly's employment by
the Company (other than termination for cause, death or disability or his
resignation without good reason, as defined in the Employment Agreement).
Mr. O'Reilly will be entitled to sell, in a single transaction, any or all
of shares of Common Stock held by him as of October 29, 1999 and all shares
of Common Stock underlying options to purchase shares of Common Stock of
the Company held by him as of October 29, 1999 (collectively, the "O'Reilly
Shares"), to the extent vested and exercisable, back to the Company (or
pursuant to the Letter Agreement [as defined below], to Spotless to the
extent that the Company's capital would be impaired by such a repurchase)
at a mutually agreeable price. If the parties are not able to agree upon a
purchase price, then the purchase price will be determined based upon a
procedure using the appraised value of the Company at the time such
obligation to purchase arises. Similarly, pursuant to a letter agreement,
dated as of October 29, 1999, by and between Michael O'Reilly and Spotless
(the "Letter Agreement"), Michael O'Reilly has the right, upon receipt of
notice that Spotless and any of its affiliates has acquired a beneficial
ownership of more than seventy-five percent (75%) of the outstanding shares
of Common Stock (on a fully diluted basis), to require Spotless to
purchase, in a single transaction, the O'Reilly Shares. The purchase price
applicable to any such purchase shall be at a price mutually agreed upon.
If the parties are not able to agree upon a purchase price, then the
purchase price will be determined based upon a procedure using the
appraised value of the Company at the time such obligation to purchase
arises. As a condition precedent to requiring the Company or Spotless, as
the case may be, to repurchase the O'Reilly Shares, Michael O'Reilly must
forfeit the Conversion Date Option (as defined below), except to the extent
that the Conversion Date Option is at that time vested and exercisable.
Based upon the terms of the Employment Agreement, the Company recorded
compensation expense in the amount of $14,016 based upon the fair market
value of the Common Stock held by Michael O'Reilly.
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<PAGE>
The Company has granted to Mr. O'Reilly an option to purchase 2,674,714
shares of Common Stock, which vests and becomes exercisable, to the extent
of one third of the option grant, on each of the first, second and third
anniversaries of October 29, 1999. The Company has also granted to Mr.
O'Reilly an option to purchase 2,811,595 shares of Common Stock (the
"Conversion Date Option") which are exercisable on or after October 29,
2006; provided, that the exercisability of such option will be accelerated
if and to the extent that Spotless converts or exchanges the Note. These
options are exerciseable at $.07904 per share of Common Stock, representing
the fair market value of the stock on the date of grant.
On October 29, 1999 the Company used some of the proceeds from the equity
and debt financing with Spotless to repay the revolving credit note and
term loan with Business Alliance Capital Corporation ("BACC"). The related
security agreement with BACC was simultaneously terminated. The prepayment
penalty of $100,000 paid to BACC is presented as an extraordinary item in
the Consolidated Statements of Operations.
In September 1999, the Company borrowed $100,000 from Spotless Plastics
(USA), Inc. The borrowings bore interest at a rate of 6% and was repaid
with accrued interest in November 1999.
-11-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion of the three and six month periods ended October 31,
1999 and 1998, should be read in conjunction with the Consolidated Financial
Statements contained herein, including the notes thereto.
This Item 2 and other items in this Form 10-QSB contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The Company's actual results
could differ materially from those set forth in the forward-looking statements.
Forward-looking statements included in this Form 10-QSB involve known and
unknown risks, uncertainties and other factors which could cause actual results,
performance (financial and operating) or achievements expressed or implied by
such forward looking statements not to occur or be realized. Such forward
looking statements generally are based upon the best estimates by the Company of
future results, performance or achievement, based upon current conditions and
the most recent results of operations. Forward looking statements may be
identified by the use of forward looking terminology such as "may", "will",
"expect", "believe", "estimate", "anticipate", "continue", or similar terms,
variations of those terms or the negative of those terms. Potential risks and
uncertainties include, among other things, such factors as the amount of the
Company's revenues, the success of the Company in limiting or reducing its
expenses, the frequency and magnitude of environmental disasters or disruptions,
the effects of new laws or regulations relating to environmental remediation,
the Company's ability to raise capital, the competitive environment within the
Company's industry, dependence on key personnel, economic conditions, and the
other factors and information disclosed and discussed in other sections in this
Form 10-QSB, and in the Company's annual report on Form 10-KSB for the year
ended April 30, 1999. Readers of this Form 10-QSB should carefully consider such
risks, uncertainties and other information, disclosures and discussions which
contain cautionary statements identifying important factors that could cause
actual results to differ materially from those provided in the forward looking
statements.
RESULTS OF OPERATIONS
Net loss and net loss per share before extraordinary item for the three and six
month periods ended October 31,1999 was ($1,551,039) and ($.09) and ($1,590,836)
and ($.10), respectively, compared to a net income and income per share before
extraordinary item for the three and six-month periods ended October 31, 1998 of
$575,469 and $.04 and $598,206 and $.04, respectively. Extraordinary item and
extraordinary item per share for both the three and six month periods ended
October 31, 1999 was a loss of $100,000 or ($.01). There was no extraordinary
item in the comparable three and six month periods ended October 31, 1998. Net
loss and net loss per share for the three and six month periods ended October
31,1999 was ($1,651,039) and ($.10) and ($1,690,836) and ($.11), respectively,
compared to a net income and income per share for the three and six-month
periods ended October 31, 1998 of $575,469 and $.04 and $598,206 and $.04,
respectively.
Three Months Ended October 31, 1999 and 1998
Revenues for the quarter ended October 31, 1999 decreased by $1,330,455, or 29%,
to $3,186,392 from $4,516,847 for the quarter ended October 31. 1998. The
decrease in revenues for the quarter ended October 31, 1999 was primarily
attributable to the Company's Trade-Winds Environmental Restoration Inc.
subsidiary, where revenues decreased in construction and renovation by
approximately $1,107,000. During this period, revenue from asbestos and lead
abatement declined by $788,000 which was partially offset by increases in
emergency response and other services. The Company's cash flow difficulties and
interest cost considerations limited its ability to fund additional construction
and abatement projects. Additionally, the revenues for the Company's North
Atlantic Laboratory subsidiary decreased by approximately $351,000 due to a loss
of key personnel and the non-renewal of a major contract.
Gross margins for the three months ended October 31, 1999 decreased to 16% from
29% for the three months ended October 31, 1998. Approximately 6% of the
decrease in gross margins is attributable to disproportionately higher labor
costs during the three months ended October 31, 1999 resulting from the change
in the composition of the contract performed during the period. Labor costs vary
with the mix of services provided. The decline in gross margins is also
attributable to certain indirect costs remaining constant despite lower
revenues.
-12-
<PAGE>
Selling, general and administrative expenses for the quarter ended October 31,
1999 increased by $837,831, or 97%, to $1,702,586 from $864,755 in the quarter
ended October 31, 1998. The increase was primarily attributable to the following
items: bad debt expense of $110,000, a provision for litigated and disputed
items of $160,000, accounting fees of $52,000, state and local taxes, penalties
and interest of approximately $230,000, legal and consulting fees related to the
equity and debt financing with Spotless Plastics (USA) Inc. of $182,381, the
compensatory effect of redeemable common stock and the vesting of options
previously granted to Mr. Michael O'Reilly of $152,096 and compensation
authorized by the Board of Directors to Mr. O'Reilly for his role as Chairman
of the Board of Directors of $100,000. This increase was partially offset
by a reduction in the sales force which decreased costs in the quarter by
approximately $142,000.
Interest expense for the three months ended October 31, 1999 increased by
$207,015, to $364,760, from $157,745 for the three months ended October 31,
1998. The increase in interest expense is attributable to higher average loan
balances, higher average interest rates during the period from the Company's
principal lender and the incurrence of interest on both payroll and sales taxes
in arrears. The Company anticipates significantly lower interest costs in future
periods as a result of the equity and debt transaction with Spotless Plastics
(USA) Inc.
The extraordinary item - loss on the extinguishment of debt of $100,000 in the
three months ended October 31, 1999 is due to a prepayment penalty paid to
Business Alliance Capital Corporation, the Company's former principal lender.
Six Months Ended October 31, 1999 and 1998
Revenues for the first six months of fiscal year 2000 decreased by $1,792,387,
or 23%, to $5,967,923 from $7,960,310 for the first six months of fiscal year
1999. The decrease in revenues for the six months ended October 31, 1999 was
primarily attributable to the Company's Trade-Winds Environmental Restoration
Inc. subsidiary, where revenues decreased in construction and renovation by
approximately $1,234,000. During this period revenue from asbestos and lead
abatement declined by approximately $2,106,000, which was partially offset by
increases in emergency response and other services. The Company's cash flow
difficulties and interest cost considerations limited its ability to fund
additional construction and abatement projects. Additionally, the revenues for
the Company's North Atlantic Laboratory subsidiary decreased by approximately
$567,000 due to a loss of key personnel and the non-renewal of a major contract.
Gross margins for the six months ended October 31, 1999 decreased to 22% from
31% for the six months ended October 31, 1998. Approximately 2% of the decrease
in gross margins is attributable to disproportionately higher labor costs during
the six months ended October 31, 1999 resulting from the change in the
composition of the contract performed during the period. Labor costs vary with
the mix of services provided. The decline in gross margins is also attributable
to certain indirect costs remaining constant despite lower revenues.
Selling, general and administrative expenses for the six months ended October
31, 1999 increased by $650,578, or 38%, to $2,353,928 from $1,703,350 in the six
months ended October 31, 1998. The increase was primarily attributable to the
following items: bad debt expense of $110,000, a provision for litigated and
disputed items of $160,000, accounting fees of $52,000, and state and local
taxes, penalties and interest of approximately $230,000, legal and consulting
fees related to the equity and debt financing with Spotless Plastics (USA) Inc.
of $182,381, the compensatory effect of redeemable common stock and the vesting
of options previously granted to Mr . Michael O'Reilly of $152,096 and
compensation authorized by the Board of Directors to Mr. O'Reilly for his
role as Chairman of the Board of Directors of $100,000. This increase was
offset by a reduction in the sales force and advertising costs which decreased
costs in the six months by approximately $267,000 and $61,000, respectively.
Interest expense for the three months ended October 31, 1999 increased by
$113,162, to $547,213, from $434,051 for the six months ended October 31, 1998.
The increase in interest expense is attributable to higher average loan
balances, higher average interest rates during the period from the Company's
principal lender and the incurrence of interest on both payroll and sales taxes
in arrears. The Company anticipates significantly lower interest costs in future
periods as a result of the equity and debt transaction with Spotless Plastics
(USA) Inc.
The extraordinary item - loss on the extinguishment of debt of $100,000 in the
six months ended October 31, 1999 is due to a prepayment penalty paid to
Business Alliance Capital Corporation, the Company's former principal lender.
-13-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. As of October 31, 1999 the Company has a
stockholders' deficit of $2,144,695 and an accumulated deficit of $33,987,708.
The Company has financed its operations to date primarily through issuances of
debt and equity securities. At October 31, 1999 the Company had $2,150,849 in
cash, and a working capital deficit of $166,136. In addition, as of October 31,
1999, the Company was in arrears with respect to certain payroll and sales tax
obligations of approximately $90,000 and $550,000, respectively. In addition,
the Company is in arrears with many of its vendors. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
On October 29, 1999 the Company consummated an equity and debt financing
transaction with Spotless Plastics (USA), Inc. that significantly improved the
Company's liquidity and cash position. The Company received $2,500,000 in
exchange for equity and $2,000,000 of debt financing. Management believes the
Company will require positive cash flow from operations to meet its working
capital needs over the next twelve months. In the event that positive cash flow
from operations is not generated, the Company may be required to seek additional
financing to meet its working capital needs. The Company currently has no credit
facility. Revenue growth is expected in new and existing service areas. As is
common in the environmental services industry, payments for services rendered
are generally received pursuant to specific draw schedules after services are
rendered. Thus, pending the receipt of payments for services rendered, the
Company must typically fund project costs, including labor and bonding costs,
from financing sources within and outside the Company. Certain contracts, in
particular those with state or federal agencies, may provide for payment terms
of up to 90 days or more and may require the posting of performance bonds which
are generally not released until completion of the project. The Company is
striving 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 affecting the Company's operations will not
result in accelerated or unexpected cash requirements, or that it will be
successful in achieving positive cash flow from operations or obtaining
additional financing . The Company's future cash requirements are expected to
depend on numerous factors, including, but not limited to: (i) the ability to
successfully bid on environmental or related construction contracts, (ii) the
ability to generate positive cash flow from operations, and the extent thereof,
(iii) the ability to raise additional capital or obtain additional financing,
and (iv) economic conditions.
In September 1999, the Company borrowed $100,000 from Spotless Plastics (USA),
Inc. The borrowings bore interest at a rate of 6% and was repaid with accrued
interest in November 1999.
CASH FLOW
Net cash used by operating activities was $742,783 in the six months ended
October 31, 1999. The amount used by operating activities is primarily
attributable to the net loss after adjusting for noncash items; increases and
decreases in the assets and liabilities used approximately $65,000 of cash. Cash
used in investing activities for the six months ended October 31, 1999 was
primarily due to capital expenditures and other assets of approximately $82,000
and $43,000 respectively. The net cash provided by financing activities for the
six months ended October 31, 1999 was $2,946,413. Of this amount $1,968,000 was
provided from the transaction with Spotless Plastics (USA) Inc., described
above; after paying off the indebtedness to the Company's previous lender of
approximately $2,622,000 and a short-term $100,000 loan .
THE YEAR 2000
The Company has taken actions to make its systems, services and infrastructure
Year 2000 compliant. Specifically, the Company believes that its accounting
system, estimating system, and all corporate office computers are Y2K compliant.
The Company also believes that the mechanical and navigational systems on its
fleet of floating vessels, are Y2K compliant. The Company has inquired of its
vendors in the laboratory and consulting division regarding the Company's
equipment being Y2K compliant. The Company now estimates the total costs related
to Y2K compliance to be approximately $25,000 and the Company expects to pay
these costs out of working capital.
-14-
<PAGE>
The Company has made inquires and been advised that its banks' and primary
lender's systems are Y2K compliant. As an emergency response provider, the
Company keeps a full inventory of supplies and other materials available at all
times. The Company's inquiries of its largest vendors have led to indications
that they are or expect to be, Y2K compliant by December 31, 1999.
The Company has numerous customer relationships. The Company's current customers
will not necessarily be the same as those in the Year 2000 due to the nature of
its business. However, the Company's inquiries of its largest and most likely
continuing clients indicate that they are in the process of becoming Y2K
compliant and many believe that they are already Y2K compliant. If this were not
the case, the Company's services may be more difficult to provide to these
customers. Increased difficulties would also arise if electric power or wireless
communications systems failed.
The Company has a computer consultant devoted to assessing and analyzing Y2K
issues and arranging for their final resolution. Although at this time, the
Company believes that it has resolved the most significant issues, the Company
may encounter some Y2K impact, which at this time is unforeseen. Due to the
nature of the Company's business, which is primarily labor based, management
believes that it is taking the necessary steps to resolve Year 2000 issues;
however, there can be no assurance that a failure to resolve any such issue
would not have a material adverse effect on the Company. The Company has
developed a Y2K contingency plan to the extent deemed appropriate. In December
1999 all data in the Company's systems will be backed up onto media that will be
stored offsite. All programs have been checked for Y2K compliance and all
deficient software has been upgraded to Y2K compliant versions. All hardware has
been tested and was found to be Y2K compliant.
SEASONALITY
Since the Company and its subsidiaries are able to perform their services
throughout the year, the business is not considered seasonal in nature. However,
it is affected by the timing of large contracts in certain of its service areas,
i.e., asbestos abatement and construction, as well as the timing of
catastrophes.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 5 to the Condensed Consolidated Financial Statements.
Item 2. Changes in Securities
On October 29, 1999, the Company entered into a subscription agreement with
Spotless Plastics (USA), Inc., a Delaware corporation ("Spotless"),
pursuant to which the Company sold to Windswept Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of Spotless
("Acquisition Corp."), 22,284,683 shares of Common Stock, and 9,346 shares
of Series B Preferred, for an aggregate subscription price of $2,500,000
(the "Purchase Price") or $.07904 per share of Common Stock and $79.04 per
share of Series B Preferred. The issuance of these shares of Common Stock
and Series B Preferred were private transactions exempt from registration
under Section 4(2) of the Securities Act.
On October 29,1999 the Company borrowed $2,000,000 from Spotless Plastics
(USA), Inc. and issued a secured promissory note convertible into
25,304,352 shares of Common Stock or 25,305 shares of Series B Preferred.
The issuance of the secured convertible promissory note was a private
transaction exempt from registration under Section 4(2) of the Securities
Act.
On October 29, 1999 the Company granted to Mr. Michael O'Reilly an option
to purchase 2,674,714 shares of Common Stock, which vests and becomes
exercisable, to the extent of one third of the option grant, on each of the
first, second and third anniversaries of the grant. The Company also
granted to Mr. O'Reilly an option to purchase 2,811,595 shares of Common
Stock (the "Conversion Date Option") which are exercisable on or after
October 29, 2006; provided, that the exercisability of such option will be
accelerated if and to the extent
-15-
<PAGE>
that Spotless Plastics (USA), Inc. converts or exchanges the secured
convertible promissory note. These options are exercisable at $.07904
per share of Common Stock. The issuance of these options were private
transactions exempt from registration under Section 4(2) of the Securities
Act.
See Note 6 to Condensed Consolidated Financial Statements.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
1. The Board of Directors has approved an amendment to the Company's
certificate of incorporation increasing the number of authorized shares of
Common Stock from 50,000,000 to 100,000,000 (the "Amendment"). The
Amendment is expected to become effective promptly after the Company's
compliance with Section 14(c) of the Exchange Act and the rules and
regulations thereunder, approval by the stockholders of the Company and
filing with the Secretary of State of the State of Delaware.
2. On October 26, 1999, the Board of Directors of the Company, pursuant to
the By-laws of the Company, increased the size of the Board of Directors
from five directors to nine directors. In connection with this transaction,
JoAnn O'Reilly resigned as a director of the Company effective October 26,
1999 and four nominees of Spotless, Brian S. Blythe, Ronald B. Evans, Peter
A. Wilson and Charles L. Kelly, have been elected to the Board of Directors
of the Company. A fifth nominee of Spotless, John J. Bongiorno, is expected
to be elected to the Board of Directors of the Company upon compliance by
the Company with Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the rules and regulations thereunder.
-16-
<PAGE>
Item 5. Other Information
Pursuant to the requirements of the Securities and Exchange Commission's
Order Instituting Public Administrative Proceedings, Making Findings, Imposing
Remedial Sanctions and Issuing Cease-and-Desist Order dated November 22, 1999
(the "Consent Order"), the following table presents salaries, bonuses, stock
and stock options received from the Company over the past three fiscal years
by each member of Mr. Michael O'Reilly's immediate family (as defined in Item
404 of Regulation S-K).
<TABLE>
<CAPTION>
Name/ Year-Ended Common Stock Exercise Exercise Expiration
Relationship April 30, Salaries Stock Options Date Price Date
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arzuaga, Gustavo 1997 $82,815 - 18,027 12/03/98 $.22 12/02/01
Brother-in-law 1998 73,983 - 14,196 12/29/99 $.22 12/28/02
1999 79,715 - -
McConnell, Shane 1997 $3,000 2,311 12/03/98 $.22 12/02/01
Step son 1998 9,825 - (2,311) LAPSED
1999 14,250 - -
Mullady, Jenny 1997 $22,905 - 8,533 12/03/98 $.22 12/02/01
Sister-in-law 1998 36,181 - 7,758 12/29/99 $.22 12/28/02
1999 41,403 - -
O'Reilly, Christine 1997 $33,742 - 7,627 12/03/98 $.22 12/02/01
Daughter 1998 10,457 - 1,500 12/29/99 $.22 12/28/02
(9,127) LAPSED
1999 $2,977 - -
O'Reilly, Eric 1997 $9,520 - -
Son 1998 39,206 - 8,200 12/29/99 $.22 12/28/02
1999 49,521 - -
O'Reilly, Tiffany 1997 $24,938 - 6,240 12/3/98 $.22 12/02/01
Daughter 1998 24,889 - 5,500 12/29/99 $.22 12/28/02
1999 26,984 - -
O'Reilly, Joann 1997 $ - 1,000 50,000 9/26/96 $.22 09/25/01
Wife 1998 - 5,000 50,000 12/29/97 $.22 12/28/02
1999 - - - 100,000 8/18/98 $.34 08/17/03
</TABLE>
No bonuses were paid to any of the above persons. The Company believes that
all compensation paid to the above persons was no more favorable to such persons
than would be awarded to persons performing similar functions who had no family
relationship with Mr. O'Reilly.
The Consent Order requires the Company within 120 days of November 22, 1999
to comply with the following undertakings to:
1. Arrange for a secure off site storage facility to store backup
data files and system software.
2. Adopt a formal conflict of interest policy
3. Develop an Audit Committee charter that describes roles and
responsibilities, and have it approved by the Board of
Directors.
4. Develop a formal employee handbook that clearly defines
lines of employee authority, areas of responsibility, duties
and benefits.
On December 1, 1999, the Company's Board of Directors appointed Deloitte &
Touche LLP as the Company's independent certified public accounts, replacing BDO
Seidman, LLP.
-17-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1. Certificate of Designations for Series B Preferred Stock
(incorporated by reference to Exhibit 3.1 to Current Report on Form
8-K (Date of Report: October 29, 1999) filed with the SEC on November
12, 1999).
4.1. Specimen Series B Preferred Stock certificate (incorporated by
reference to Exhibit 4.1 to Current Report on Form 8-K (Date of
Report: October 29, 1999) filed with the SEC on November 12, 1999).
10.1 Subscription Agreement dated October 29, 1999 between the Registrant
and Spotless Plastics (USA), Inc. (incorporated by reference to
Exhibit 10.1 to Current Report on Form 8-K (Date of Report: October
29, 1999) filed with the SEC on November 12, 1999).
10.2 Convertible Promissory Note dated October 29, 1999 issued by the
Registrant to Spotless Plastics (USA), Inc. (incorporated by reference
to Exhibit 10.2 to Current Report on Form 8-K (Date of Report: October
29, 1999) filed with the SEC on November 12, 1999).
10.3. Form of Security Agreement dated October 29, 1999 between each
of the Registrant, Trade-Winds Environmental Remediation, Inc.,
North Atlantic Laboratories, Inc. and New York Testing, Inc. and
Spotless Plastics (USA), Inc. (incorporated by reference to Exhibit
10.3 to Current Report on Form 8-K (Date of Report: October 29, 1999)
filed with the SEC on November 12, 1999).
10.4. Employment Agreement dated October 29, 1999 between the Registrant
and Michael O'Reilly (incorporated by reference to Exhibit 10.4 to
Current Report on Form 8-K (Date of Report: October 29, 1999) filed
with the SEC on November 12, 1999).
10.5. Stock Option Agreement dated October 29, 1999 between the Registrant
and Michael O'Reilly (incorporated by reference to Exhibit 10.5 to
Current Report on Form 8-K (Date of Report: October 29, 1999) filed
with the SEC on November 12, 1999).
10.6. Stock Option Agreement dated October 29, 1999 between the Registrant
and Michael O'Reilly relating to options vesting upon exercise of the
convertible note (incorporated by reference to Exhibit 10.6 to Current
Report on Form 8-K (Date of Report: October 29, 1999) filed with
the SEC on November 12, 1999).
10.7. Letter Agreement dated October 29, 1999 between Michael O'Reilly
and Spotless Plastics (USA), Inc. (incorporated by reference
to Exhibit 10.7 to Current Report on Form 8-K (Date of Report: October
29, 1999) filed with the SEC on November 12, 1999).
16.1 Letter December 7, 1999 from BDO Seidman to the Securities and
Exchange Commission (incorporated by reference to Exhibit 16 to
Current Report on Form 8-K (date of Report: December 1, 1999) filed
with the SEC on December 8, 1999).
27. Restated Financial Data Schedule.
(b) Reports on Form 8-K:
i) Current report on Form 8-K (Date of Report: October 29, 1999) filed with
the SEC on November 12, 1999
ii) Current report on Form 8-K (Date of Report: December 1, 1999) filed with
the SEC on December 8, 1999
-18-
<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: April 21, 2000
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By: /s/ Michael O'Reilly
MICHAEL O'REILLY,
Chairman and Chief Executive Officer
By: /s/ Charles L. Kelly
CHARLES L. KELLY,
Chief Financial Officer
-19-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
FINANCIAL STATEMENTS FOR THE PERIOD ENDED OCTOBER 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Apr-30-2000
<PERIOD-START> May-1-1999
<PERIOD-END> Oct-31-1999
<CASH> 2,150,849
<SECURITIES> 0
<RECEIVABLES> 3,175,192
<ALLOWANCES> 210,000
<INVENTORY> 153,193
<CURRENT-ASSETS> 5,817,790
<PP&E> 5,214,667
<DEPRECIATION> 3,248,476
<TOTAL-ASSETS> 8,125,907
<CURRENT-LIABILITIES> 5,983,926
<BONDS> 0
1,300,000
93
<COMMON> 3,844
<OTHER-SE> (2,148,632)
<TOTAL-LIABILITY-AND-EQUITY> 8,125,907
<SALES> 5,967,923
<TOTAL-REVENUES> 5,967,923
<CGS> 4,668,489
<TOTAL-COSTS> 7,022,417
<OTHER-EXPENSES> (10,871)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 547,213
<INCOME-PRETAX> (1,590,836)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,590,836)
<DISCONTINUED> 0
<EXTRAORDINARY> 100,000
<CHANGES> 0
<NET-INCOME> (1,690,836)
<EPS-BASIC> (.11)
<EPS-DILUTED> (.11)
</TABLE>
