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 JUNE 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 0-16322
EVANS ENVIRONMENTAL CORPORATION
(Name of small business issuer as specified in its charter)
COLORADO 84-1061207
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
99 S.E. FIFTH STREET,
FOURTH FLOOR, MIAMI, FLORIDA 33131
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (305) 374-8300
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days:
Yes [X] No [ ]
As of August 18, 1995, the Company had a total of 15,657,060 shares of common
stock, $.003 par value, outstanding.
Transitional Small Business Disclosure format (check one): Yes [ ] No [X]
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Consolidated balance sheets
- June 30, 1995 and March 31, 1995 3
Consolidated statements of operations
- Three Months Ended June 30, 1995 and 1994 4
Consolidated statements of cash flows
- Three months ended June 30, 1995 and 1994 5-6
Notes to financial statements 7-10
Item 2. Management's discussion and analysis of
financial condition and results of
operations 11-15
PART II. OTHER INFORMATION
Item 1. Legal proceedings 16
Item 2. Changes in securities 16
Item 3. Defaults upon senior securities 16
Item 4. Submission of matters to a vote of security holders 16
Item 5. Other information 16
Item 6. Exhibits and reports on form 8-K 16
SIGNATURES 17
Page 2 of 17
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<TABLE>
<CAPTION>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1995 AND MARCH 31, 1995
(UNAUDITED)
JUNE 30, 1995 MARCH 31, 1995
------------- --------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 76,993 $ 300,743
Restricted cash 141,729 141,729
Accounts receivable, net 1,876,611 1,863,038
Inventory 410,993 392,928
Laboratory sale proceeds due 166,683 -
Prepaid expenses & other 475,443 411,964
----------- -----------
Total current assets 3,148,452 3,110,402
Amounts due under state reimbursement
program 979,759 995,088
Property & equipment, net 863,803 900,972
Goodwill, net 1,499,033 1,532,280
Other assets 49,502 49,765
----------- -----------
Total assets $ 6,540,549 $ 6,588,507
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,120,201 $ 2,075,178
Accrued expenses 900,040 1,097,790
Delinquent payroll taxes 1,053,730 1,068,864
Current portion of capital lease
obligations & notes payable 1,092,285 1,141,668
----------- -----------
Total current liabilities 5,166,256 5,383,500
Capital lease obligations & notes payable 459,335 472,151
Commitments & contingencies
Stockholders' equity:
Preferred stock:
$.001 par value, $.64 liquidation
preference, 5,000,000 authorized,
249,475 issued and outstanding 250 -
Common stock:
$.003 par value, 25,000,000 authorized,
issued and outstanding:
June 30, 1995 - 16,157,060
March 31, 1995 - 13,009,610 48,471 39,029
Additional paid in capital 6,253,703 5,760,097
Retained deficit (5,387,466) (5,066,270)
----------- -----------
Total stockholders' equity 914,958 732,856
----------- -----------
Total liabilities &
stockholders' equity $ 6,540,549 $ 6,588,507
=========== ===========
</TABLE>
See accompanying notes
Page 3 of 17
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<TABLE>
<CAPTION>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
------------ ------------
<S> <C> <C>
Revenues:
Environmental consulting $ 1,790,811 $ 1,660,601
Environmental laboratory - 744,728
Cable products 1,243,379 860,468
------------ ------------
Total revenues 3,034,190 3,265,797
Operating costs & expenses:
Environmental services:
Direct labor & employee
benefit costs 477,185 1,042,405
Other direct costs 388,933 680,413
------------ ------------
Cost of environmental services 866,118 1,722,818
Cost of cable products 948,449 644,972
------------ ------------
Total direct costs & expenses 1,814,567 2,367,790
------------ ------------
Gross profit 1,219,623 898,007
General, administrative &
other operating costs 1,345,991 1,274,863
------------ ------------
Operating loss (126,368) (376,856)
Interest, net (43,094) (5,737)
------------ ------------
Loss before income taxes (169,462) (382,593)
Provision for income taxes - -
------------ ------------
Loss before extraordinary item (169,462) (382,593)
Extraordinary loss (151,766) -
------------ ------------
Net loss $ (321,228) $ (382,593)
============ ============
Loss per common share:
Loss before extraordinary item $ (.02) $ (.04)
Extraordinary loss (.01) -
------------ ------------
Loss per share $ (.03) $ (.04)
============ ============
</TABLE>
See accompanying notes
Page 4 of 17
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<TABLE>
<CAPTION>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (321,228) $ (382,593)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Depreciation & amortization 91,330 120,029
Non-cash expenses 29,913 -
Changes in operating assets &
liabilities, net of effects
of acquisitions
Accounts receivable (256,503) (360,124)
Inventory (18,065) 5,241
Income tax receivable - 110,345
Prepaid expenses & other 63,474 (173,657)
Amounts due under reimbursement
program 15,329 248,772
Other assets 263 (26,858)
Accounts payable 45,023 326,126
Accrued expenses (197,750) 4,043
Payroll taxes (15,134) 100,048
------------ ------------
Total adjustments (242,120) 353,965
------------ ------------
Net cash used in
operating activities (563,348) (28,628)
Cash flows provided by (used in) investing activities:
Payments for acquisition,
including acquisition costs,
less cash acquired - (7,500)
Laboratory sale proceeds 76,279 -
Purchases of equipment (25,436) (105,634)
------------ ------------
Net cash provided by (used in)
investing activities 50,843 (113,134)
</TABLE>
See accompanying notes
Page 5 of 17
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<TABLE>
<CAPTION>
EVANS ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
------------ ------------
<S> <C> <C>
Cash flows provided by financing activities:
Original issuance of stock $ 476,500 $ -
Costs associated with issuance
of stock (125,546) -
Increase in notes payable - 250,000
Payments on capital lease obligations
and notes payable (62,199) (95,346)
------------ ------------
Net cash provided by
financing activities 288,755 154,654
------------ ------------
Net increase (decrease) in cash (223,750) 12,892
Cash, beginning of period 300,743 322,465
------------ ------------
Cash, end of period $ 76,993 $ 335,357
============ ============
Non-cash activities:
In a non-cash transaction, the Company issued, in May 1995, 650,000 shares of
common stock in exchange for services, valued at $152,344 and which is being
amortized over a twelve month period.
</TABLE>
See accompanying notes
Page 6 of 17
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EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS
The Company is primarily engaged, through its wholly-owned subsidiaries, in
environmental consulting and other environmental related services (the
"Environmental Division") and the production and sale of cable products (the
"Cable Products Division").
2. SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The consolidated balance sheet
as of March 31, 1995 has been derived from the audited financial statements
as of the period ended March 31, 1995, but does not include all disclosures
required by generally accepted accounting principles. In the opinion of
management, these statements reflect all adjustments, consisting of normal
recurring adjustments, considered necessary for a fair presentation for the
periods presented. Operating results for the three months ended June 30,
1995 and 1994 are not necessarily indicative of the results that may be
expected for the year ended March 31, 1996. These statements should be read
in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-KSB for the period ended March 31,
1995.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany balances and
transactions have been eliminated.
PER SHARE DATA
Per share data is based on the weighted average number of shares of common
stock, 10,859,185 and 9,798,422 for the quarters ended June 30, 1995 and
June 30, 1994, respectively. Common stock equivalents, including 3,000,000
shares issued for notes receivable in October 1994, have not been included
in the weighted average number of shares as they are anti-dilutive for all
periods presented.
3. BUSINESS SEGMENTS
The Company's operations are classified into two segments: environmental
consulting and other environmental related services and the production and
sale of cable products. Identifiable assets by segment are those tangible
and intangible assets that are used in the operation of that unit.
Page 7 of 17
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. BUSINESS SEGMENTS (Continued)
A summary of the Company's operations by segment as of and for the three
months ended June 30, 1995 is as follows:
<TABLE>
<CAPTION>
ENVIRON-
MENTAL CABLE CORPORATE TOTAL
----------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net sales $ 1,790,811 $1,243,379 $ - $3,034,190
Operating income (loss) (103,159) 84,916 (108,125) (126,368)
Identifiable assets 5,001,761 1,299,099 239,689 6,540,549
Capital expenditures 17,196 8,240 - 25,436
Depreciation &
amortization 80,960 10,370 - 91,330
</TABLE>
4. WAIVERS, CONSENTS & NOTES PAYABLE
In April 1995, the Company issued additional warrants to its subordinated
lender, in connection with certain waivers and consents related to the
outstanding credit facility. A total of 12,500 shares of common stock and
761,731 shares of series A preferred stock are issuable under the warrants.
The warrants to purchase the preferred stock are exercisable until the year
2002 at an exercise price of $.675 per each underlying share of common
stock, subject to certain adjustments. The preferred stock is convertible
into 9,140,772 shares of common stock. The new warrants to purchase common
stock are exercisable at $.675 per share until the year 2002. In connection
with this transaction, the exercise price of the then existing common stock
warrants was also reduced to $.675 per share, the then market price of the
Company's common stock.
5. DISPOSAL OF LABORATORY OPERATIONS
In May 1995, the Company divested itself of the laboratory operations of
the Environmental Division. The purchaser bought all the assets and
essentially all operating liabilities of the laboratory operations. The
Company received no direct cash proceeds from the sale, but received free
laboratory services and significant proceeds from the sold receivables. As
of March 31, 1995, the Company had reserved for the loss and impairment on
fixed and other assets related to this divestiture. The Company still has
certain contingent obligations regarding its former laboratories' leases and
loans which aggregate approximately $250,000. During the three months ended
June 30, 1995, the Company received cash or cash equivalents of
approximately $76,279 in connection with the sale.
Page 8 of 17
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. EXTRAORDINARY ITEM
During the year ended March 31, 1995, the Environmental Division became
delinquent in certain of its payroll tax deposits. As of June 30, 1995, the
Company owed approximately $1,373,000 to the Internal Revenue Service for
payroll taxes, interest and penalties. In June 1995, the Company and the
Internal Revenue Service agreed to a payment schedule and other agreements.
Later in June 1995, the Company received a bank cashiers check for payment
on a Regulation S offering of the Company's preferred stock. The Company
gave this cashiers check to the Internal Revenue Service to discharge all of
the tax obligations. The cashiers check was not honored by the bank, which
denied its validity. A fee of approximately $151,000 was paid to finders in
this transaction. The Company has demanded repayment of the fee and
continues to discuss all possible courses of action with the Internal
Revenue Service, various law enforcement agencies, its attorneys and
advisers. The preferred stock certificate issued in this transaction has
been recovered. The Company and the Internal Revenue Service are currently
negotiating a revised payment schedule to be met out of current operations
and other agreements, although no assurance can be given that such an
agreement can be reached. Since March 31, 1995, the Company has made all
required payroll tax deposits for the current periods.
Although, the Company has demanded repayment of the finders fee, the Company
has expensed, as an extraordinary item, the full amount of the finders fee
issued in this transaction.
7. SUBSEQUENT EVENTS
In August 1995, in connection with a full and final settlement of the notes
receivable issued in October 1994, the Company agreed to revise the purchase
price per share from $.75 to approximately $.24; reduce the number of shares
purchased to 2,500,000; and, to issue, at a price of $1.91 per unit, 249,745
units pursuant to Regulation S, each unit consisting of one share of Series
A preferred stock and ten shares of common stock. The overall effect of this
settlement is that the Company has issued 249,745 Series A preferred stock,
convertible into 2,996,940 shares of common stock and 4,997,450 shares of
common stock at a purchase price of $1,100,000 or approximately $.14 per
share. As of June 30, 1995, the Company had received $476,500 of the
$1,100,000. As of August 23, 1995, the balance of $623,500 is scheduled to
be paid in a combination of cash and equities in other U.S. publicly traded
companies, a portion of said equities having been received. The Company
intends to liquidate these securities in an orderly manner during the next
90 days. The Company incurred costs and fees totalling approximately
$350,780 in association with these series of transactions.
Page 9 of 17
<PAGE>
EVANS ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. PREFERRED STOCK
The Series A Convertible Preferred Stock, $.001 par value per share (the
"Preferred Stock") is entitled to receive cumulative preferential dividends
at the rate of $.0512 per share, per annum, payable either in cash or in
common stock of the Company. Each share of the Preferred Stock is
convertible into 12 shares of the Company's common stock. The Preferred
Stock contains certain liquidation rights in the event of any liquidation,
dissolution or winding up of the Company. The liquidation value is $.64 per
share of Preferred Stock, plus any accrued and unpaid dividends. The Company
may redeem the Preferred Stock at a price of $.64 per share of Preferred
Stock, in whole or in part, at any time commencing 2 years after its
issuance.
9. GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company's
audited consolidated financial statement as of and for the two years in the
period ended March 31, 1995 contained a going concern qualification due to
the significant net losses for the year ended March 31, 1995 and delinquent
payroll tax deposits, interest and penalties, as of March 31, 1995, of
approximately $1,450,000. Furthermore, the timing of collections on amounts
expected to be received from the State of Florida pursuant to services
performed by the Company to assist in the clean up of sites eligible for
reimbursement by the Florida Inland Protection Trust Fund (the "Program") is
presently uncertain because the State of Florida has placed a moratorium on
the Program and has not resolved how such Program will operate in the
future. In addition, the Company violated certain provisions of its credit
agreement with its principal lender during the year. Although the Company
has received a waiver of past and certain potential future covenant
violations through September 30, 1995, there can be no assurances that the
principal lender will grant continued forbearance under the credit agreement
and not demand immediate repayment of amounts due subsequent to September
30, 1995. The Company does not presently have the cash resources to satisfy
such a demand. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might result should the uncertainties
be unfavorably resolved or the Company is unable to continue as a going
concern. Management is attempting to raise additional financing through a
private placement of its equity securities to fund its current operations.
In addition, management is continuing to evaluate the need for future cost
saving measures with particular emphasis on its under-performing offices.
In the absence of achieving successful negotiations with its principal
lender, obtaining profitable operations, or obtaining additional debt or
equity financing, the Company may not have sufficient funds to continue
operations in 1996.
Page 10 of 17
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
During the year ended March 31, 1995 ("Fiscal 1995"), the Company, mainly
through its Environmental Division, experienced a net loss of $4,732,301. The
Company's ability to survive is based on returning the Environmental Division to
profitability, obtaining additional financing and scheduling workouts with
certain of its creditors. The losses, which began in fiscal 1994 and which
continued through June 30, 1995, are attributable to the Company's inability to
balance revenue growth with a proper level of associated labor, other
operational costs and the write-down of certain assets. The Company took certain
significant cost saving actions during Fiscal 1995 and continues to do so,
including the divestiture of the Environmental Division's underperforming
laboratory operations. Although these cost savings, which included significant
labor reductions, restructuring of underperforming offices and divisions and
other cost saving measures have not yet returned the Company to profitability,
management believes that the Company can return to sustained and profitable
revenue growth, although no assurances can be given. Management will continue to
evaluate the need for future cost saving measures on a monthly basis, with
particular emphasis on underperforming offices. While management will continue
to evaluate such cost saving measures, additional focus will be on new marketing
efforts to increase revenue from existing offices. During Fiscal 1995, the
Company utilized substantially all of its existing commercial lines of credit to
finance these continued losses.
In May 1995, the Company divested the Environmental Division's laboratory
operations (the "Laboratory Divestiture"). The purchaser bought all the assets
and essentially all operating liabilities of the laboratory operations. The
Company received no direct cash proceeds from the sale, but received free
laboratory services and significant proceeds from the sold receivables. The
quarter ended June 30, 1995 contains immaterial amounts related to current
period operating loss and impairment on fixed and other assets related to the
Laboratory Divestiture since the impairment was recorded as of March 31, 1995.
The Company still has certain contingent obligations regarding its former
laboratories' leases and loans which aggregate approximately $250,000. During
the quarter ended June 30, 1995, the Company received cash or cash equivalents
of approximately $76,279 in connection with the Laboratory Divestiture.
The Company's revenue decreased from $3,265,797 for the quarter ended June 1994
(the "94 Quarter") to $3,034,190 for the quarter ended June 30, 1995 (the "95
Quarter"), a decrease of $231,607 or 7.1%. However, the 95 Quarter does not
contain any laboratory revenue, which in the 94 Quarter was $744,728. Consulting
revenue increased from $1,660,601 in the 94 Quarter to $1,790,811 in the 95
Quarter, an increase of $130,210 or 7.8%. The Cable Products Division's sales
increased from $860,468 in the 94 Quarter to $1,243,379 in the 95 Quarter, an
increase of $382,911 or 44.5%. Therefore, total comparable revenue increased by
$513,121 or 20.1% from $2,521,069 in the 94 Quarter as compared to $3,034,190 in
the 95 Quarter.
Page 11 of 17
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The increase of $130,210 in environmental consulting during the comparative
quarters is significant since the Company only operated seven offices during the
95 Quarter as opposed to nine offices in the 94 Quarter. Comparable consulting
office revenue increased by $265,332 or 17.4% from $1,525,479 in the 94 Quarter
to $1,790,811 in the 95 Quarter. This increase is in spite of the fact that
consulting revenue generated by the Yonkers office in the 95 Quarter in
comparison to the 94 Quarter has been significantly reduced due to the Company's
cash constraints. Pricing for the Company's consulting services has not
significantly increased, and in many cases, due to competitive situations, has
decreased, compared to the comparable period in the 94 Quarter. Substantially
all revenue growth in the 95 Quarter over the 94 Quarter is attributable to
increased number and size of contracts. These increases are due to improved
marketing efforts. Future expansion of additional offices is dependent on future
economic and business conditions and the availability of capital.
Total revenue for the Cable Products Division was $1,243,379 for the 95 Quarter,
as compared to $860,468 for the 94 Quarter, an increase of $382,911 or 44.5%.
This increase in revenue is attributable to the introduction of certain new
products and increased market penetration of the Cable Products Division's fiber
optic products. The Cable Products Division's operating costs and expenses are
comprised of cost of product and overhead. The Cable Products Division's gross
margin was 23.7% and 25.0% for the 95 and 94 Quarters, respectively. This
decrease in gross margin is largely attributable to the Cable Products
Division's change in product mix and the high cost of bringing new products to
market.
Direct costs of environmental services were $866,118 for the 95 Quarter,
representing a decrease of $856,700 or 49.7% over the 94 Quarter. However, the
95 Quarter does not contain any laboratory direct costs, which in the 94 Quarter
was $492,838. Direct costs attributable to consulting services decreased by
$363,862 or 29.6% from $1,229,980 in the 94 Quarter. Direct costs consist of all
labor, employee benefit costs and other expenses directly related to the
production of revenue on a project. All other labor, including unbillable
professional time, employee benefits and other expenses are recorded under
general, administrative and other operating costs. Other direct costs include
sub-contractors, suppliers and other revenue generating expenses.
The Environmental Division's gross margin was 51.6% and 28.4% for the 95 and 94
Quarters, respectively. This increase in gross margin is directly attributable
to the Laboratory Divestiture, closing of unprofitable offices and other cost
saving measures, including layoffs. As of June 30, 1995, the Environmental
Division, excluding laboratory personnel, had 100 employees on staff as opposed
to 129 on staff as of June 30, 1994, a decrease of 29 employees or 22.5%. Better
utilization of billable staff and the reduction of staff significantly
contributed to the overall reduction of expenses.
General, administrative and other costs were $1,345,991 for the 95 Quarter, an
increase of $71,128 or 5.6% over the 94 Quarter. Penalties and interest accrued
to the Internal Revenue Service were $54,387 in the 95 Quarter as compared to
$10,000 in the 94 Quarter, an increase of $44,387. Professional fees, including
legal, accounting, consulting and other, during the 95 Quarter were $156,914, an
increase of $95,338 over the 94 Quarter.
Page 12 of 17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The operating loss for the 95 Quarter was $126,368, a decrease in the operating
loss of $250,488 or 66.5% over the 94 Quarter. The operating loss was comprised
of an Environmental Division loss of $103,159, a Cable Products Division profit
of $84,916 and corporate expenses of $108,125. During the 95 Quarter, due to
extensive use of the Company's lines of credit, the Company incurred $43,094 of
net interest expense as compared to $5,737 in the 94 Quarter.
Both the loss before income taxes and the loss before extraordinary item were
$169,462 for the 95 Quarter compared to $382,593 in the 94 Quarter, a decrease
in the loss of $213,131 or 55.7%.
In the 95 Quarter, in connection with a Regulation S offering of the Company's
preferred stock, a fee of $151,766 was paid to finders. The Regulation S
transaction was never completed when the check purportedly issued by the
Regulation S purchaser, on the Company's behalf, was not honored by the bank.
The Company has demanded repayment of the fee and continues to discuss all
possible courses of action with various law enforcement agencies, its attorneys
and advisers. Although, the Company has demanded repayment of the finders fee,
the Company has expensed, as an extraordinary item, the full amount of the fee
issued in this transactions.
Net loss for the 95 Quarter was $321,228, a $61,365 decrease in the loss when
compared to the 94 Quarter net loss of $382,593.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital ratio increased to .61 at June 30, 1995 from .58
at March 31, 1995. As of June 30, 1995, the Company had a net working capital
deficit of $2,017,804, representing a $255,294 reduction in the March 31, 1995
working capital deficit of $2,273,098. The decrease in the working capital
deficit is primarily attributable to reduced operating losses and the issuance
of the Company's preferred and common stock for cash.
Net cash decreased during the 95 Quarter by $223,750 compared to a $12,892
increase during the 94 Quarter. One of the major components of the net cash
decrease is the $151,766 cash fraud loss. Cash flow used by operating activities
in the 95 Quarter excluding the cash fraud loss was $411,582. The significant
uses of this operating cash deficit were the net loss before extraordinary item
and a net reduction in accrued expenses.
The Company reduced expenditures on capital and investment activities during the
95 Quarter, as compared to the 94 Quarter resulting in a net cash saving in the
comparable periods of $163,977. The Company continues to review all current
operations and assets for potential reorganizations, sale or liquidation in
order to raise additional capital or lower costs.
During the 95 Quarter, the Company repaid its $25,000 line of credit with a
commercial bank for the Environmental Division's working capital purposes. The
Cable Products Division does not maintain any outside working capital
facilities. The Cable Products Division has established a $100,000 letter of
credit with a commercial bank collateralized by a certificate of deposit.
Page 13 of 17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
During the 95 Quarter, the Company raised net proceeds of approximately $351,000
from the sale of preferred and common stock.
In July 1994, the Company established a $2,500,000 subordinated line of credit
with a private lender. This additional line of credit, which is subordinated to
the Company's commercial banking line of credit, expires July 1996 and bears
interest at 15%. This facility is collateralized by a first lien on the
outstanding stock of all the Company's subsidiaries and a second lien interest
on all assets of the Company. In April 1995, the Company issued additional
warrants to its subordinated lender, in connection with certain waivers and
consents related to the outstanding credit facility. A total of 12,500 shares of
common stock and 761,731 shares of series A preferred stock are issuable under
the warrants. The warrants to purchase the preferred stock are exercisable until
the year 2002 at an exercise price of $.675 per each underlying share of common
stock, subject to certain adjustments. The preferred stock is convertible into
9,140,772 shares of common stock. The new warrants to purchase common stock are
exercisable at $.675 per share until the year 2002. In connection with this
transaction, the exercise price of the then existing common stock warrants was
also reduced to $.675 per share, the then market price of the Company's common
stock.
The Company continues to monitor the recent governmental activities in the State
of Florida with respect to proposed changes in the Florida Inland Protection
Trust Fund program, which provides for the remediation of contamination related
to the storage of petroleum and petroleum products. In Fiscal 1995,
approximately 7% of the Company's business was currently related, directly or
indirectly, to this state-funded reimbursement program.
As of June 30, 1995, the Company had no additional availability under its
commercial lines of credit. Availability under the Company's commercial lines of
credit are based upon eligibility of the Company's accounts receivable and other
conditions. As of June 30, 1995, the Company had approximately $235,000 of
available credit under its funding agreements for receivables under the Florida
Inland Protection Trust program.
In August 1995, in connection with a full and final settlement of the notes
receivable issued in October 1994, the Company agreed to revise the purchase
price per share from $.75 to approximately $.24; reduce the number of shares
purchased to 2,500,000; and, to issue, at a price of $1.91 per unit, 249,745
units pursuant to Regulation S, each unit consisting of one share of Series A
preferred stock and ten shares of common stock. The overall effect of this
settlement is that the Company has issued 249,745 Series A preferred stock,
convertible into 2,996,940 shares of common stock and 4,997,450 shares of common
stock at a purchase price of $1,100,000 or approximately $.14 per share. As of
June 30, 1995, the Company had received $476,500 of the $1,100,000. As of August
23, 1995, the balance of $623,500 is scheduled to be paid in a combination of
cash and equities in other U.S. publicly traded companies, a portion of said
equities having been received. The Company intends to liquidate these securities
in an orderly manner during the next 90 days. The Company incurred costs and
fees totalling approximately $350,780 in association with these series of
transactions.
Page 14 of 17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company has no material commitments for capital expenditures.
The Company intends to fund its current operations from a combination of cash on
hand, cash generated from operations, proceeds from the settlement of the notes
receivable, potential new equity or a sale of assets. These sources of capital
are expected to fund the Company's current operations through December 31, 1995.
Management expects a return to profitability in Fiscal 1996. However, if the
Company does not return to profitability, or cannot collect the settlement
proceeds of the notes receivable, absent alternative sources of financing, there
would be a material adverse effect on the financial condition, operations and
business prospects of the Company. The Company has no arrangements in place for
alternative sources of financing, and no assurance can be given that such
financing will be available at all or on terms acceptable to the Company.
Page 15 of 17
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS None
ITEM 2. CHANGES IN SECURITIES None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS None
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. None
Page 16 of 17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EVANS ENVIRONMENTAL
CORPORATION
August 25, 1995 By: /S/ SCOTT E. SALPETER
--------------------------------
Scott E. Salpeter, Vice President
on behalf of the Registrant and as
Principal Accounting Officer
Page 17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000818675
<NAME> EVANS ENVIRONMENTAL CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 76,993
<SECURITIES> 0
<RECEIVABLES> 1,876,611
<ALLOWANCES> 0
<INVENTORY> 410,993
<CURRENT-ASSETS> 3,148,452
<PP&E> 863,803
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,540,549
<CURRENT-LIABILITIES> 5,166,256
<BONDS> 0
<COMMON> 48,471
0
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<OTHER-SE> 6,253,703
<TOTAL-LIABILITY-AND-EQUITY> 6,540,549
<SALES> 3,034,190
<TOTAL-REVENUES> 3,034,190
<CGS> 1,814,567
<TOTAL-COSTS> 3,160,558
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,094
<INCOME-PRETAX> (169,462)
<INCOME-TAX> 0
<INCOME-CONTINUING> (169,462)
<DISCONTINUED> 0
<EXTRAORDINARY> (151,766)
<CHANGES> 0
<NET-INCOME> (321,228)
<EPS-PRIMARY> (.03)
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</TABLE>
