UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the Quarter ended December 31, 1996Commission File No. 133-16736
Gulfstar Industries, Inc. (formerly TIER Environmental Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 23-2442288
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
20505 U.S. 19N. #12-283, Clearwater, FL 34624
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (813) 441 - 4442
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934,
during the preceding 12 months (or for shorter period that the registrant
was required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes: No: X
Transitional Small Business Disclosure Format:
Yes: X No:
The number of shares outstanding of each of the registrant's classes of common
stock as of December 31, 1996 is 9,106,365 shares all of one class of $.032 par
value common stock.
<PAGE>
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
INDEX
PAGE
PART I FINANCIAL INFORMATION
Consolidated Balance Sheet - December 31, 1996 1
Consolidated Statements of Operations - Three Months
Ended December 31, 1996 and December 31, 1995 2
Consolidated Statement of Cash Flows - Three Months
Ended December 31, 1996 and December 31, 1995 3-4
Notes to the Consolidated Financial Statements 5-6
Management's Discussion and Analysis of financial
conditions and results of operations 7-8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of 9
Security Holders
Item 5. Other Information 9
Item 6. Exhibits on Reports on Form 8-K 9
Signature Page 10
<PAGE>
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996
Assets
Current Assets
Cash $ 129
Accounts receivable, net of allowance for
doubtful accounts of $8,000 237,433
Other receivables and escrow deposits 73,163
Total Current Assets 310,725
Property and equipment, at cost, net of accumulated
depreciation and amortization of $279,531 57,996
Other Assets
Database, net of accumulated amortization of $89,285 410,715
Goodwill, net of accumulated amortization of $35,700 535,444
Idle equipment 685,525
Total Assets $2,000,405
<PAGE>
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED BALANCE SHEETS - (Continued)
DECEMBER 31, 1996
Liabilities and Stockholders' Deficit
Current Liabilities
Accounts payable and accrued expenses $ 496,013
Amounts due to related parties 805,765
Note payable to stockholder - current portion 476,139
Accounts payable and accrued expenses - Mexican Project 630,842
Total Current Liabilities 2,408,759
Note payable to stockholder, net of current portion 450,000
Stockholders' Deficit
Common stock, par value $.032 per share; authorized
10,000,000 shares, issued and outstanding 9,181,365 291,404
Convertible preferred stock, authorized 1,000,000
shares, par value $10.00; 75,000 shares issued
in 1995 750,000
Additional paid in capital 3,166,718
Retained deficit (October 1, 1993) (59,033)
Retained deficit, subsequent to quasi-reorganization (5,007,443)
Total Stockholders' Deficit (858,354)
Total Liabilities and Stockholders' Deficit $2,000,405
<PAGE>
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the
Three Months Ended
December 31,
1996 1995
Contract Revenues Earned $ 967,260 $1,585,107
Other fees and income - 22,269
Total Revenue 967,260 1,607,376
Cost of contract revenues earned 822,028 1,332,631
Gross Profit 144,232 274,745
Operating Expenses
Selling and administrative expenses 174,383 322,492
Depreciation and amortization 28,896 83,003
Interest expense 16,502 33,989
Acquisition expenses - 28,405
Provision for bad debts 2,000 -
Loss from operating activities (77,549) (193,144)
Loss from discontinued operation of Florida
environmental subsidiary including $1,101,929
impairment of goodwill, $38,946 of bad debts,
$16,403 abandonment of fixed assets,
$196,132 cancellation of indebtedness income
and $213,961 loss from operations during the
phase out period (1,136,162) -
Provision for taxes - -
Net Loss $(1,213,711)$ (193,144)
(Loss) per share $ (.132) $ (.023)
Weighted average shares outstanding 9,181,365 8,474,123
<PAGE>
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended
December 31,
1996 1995
OPERATING ACTIVITIES
Cash Flows Used In Operating Activities:
Net loss from operations $ (77,549) $(193,144)
Adjustments to reconcile net loss to cash
used in operating activities:
Expense reduction due to the rescission of
common stock (18,250) -
Depreciation and amortization 28,896 83,003
Provision for bad debts 2,000 -
(Increase) in contracts in progress - (168,138)
(Increase) decrease in accounts receivable (60,716) 103,433
(Increase) decrease in other accounts
receivable and escrow deposits - 10,020
(Increase) in contracts receivable - (25,666)
(Decrease) in accounts payable and accrued
expenses 160,090 (92,838)
Increase in contracts payable - 168,138
(Increase) decrease in deposits and
prepaid expenses - 10,138
Increase in accrued interest 16 502 -
50,973 (105,054)
DISCONTINUED OPERATING ACTIVITIES:
Cash Flows (Used In) Discontinued Operating
Activities:
Net loss (1,136,162) -
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization - -
Expense paid by issuance of common stock - -
Allowance for escrow loss 38,946 -
Provision for bad debts 16,403 -
Loss on assets disposed 1,101,929 -
Impairment losses 59,571 -
Cancellation of indebtedness 1,616,552 -
Decrease (increase) in contracts in progress 1,493,814 -
Decrease (increase) in accounts receivable 720,491 -
(Increase) decrease in other receivables and
escrow deposits 304,212 -
(Decrease) increase in contracts payable (1,493,814) -
(Decrease) increase in accounts payable and
accrued expenses (1,157,891) -
(Decrease) in deferred taxes - -
Decrease in escrow account - -
Decrease (increase) in other assets - -
Net cash (used in) discontinued operating
activities (52,501) -
INVESTMENT ACTIVITIES
Cash Flows Used In Investment Activities:
Capital expenditures - (2,896)
- (2,896)
<PAGE>
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
For the Three Months Ended
December 31,
1996 1995
FINANCING ACTIVITIES
Cash Flows Used In Financing Activities:
(Repayment) of stockholder loans - (28,769)
Proceeds from loan payable - related parties
(net) - 122,895
(Decrease) increase in notes payable (net) - (25,098)
- 69,028
Net (decrease) in cash and cash equivalents (1,528) (38,922)
Cash and cash equivalents, beginning of the period 1,657 63,763
Cash and cash equivalents, end of the period $ 129 $ 24,841
<PAGE>
A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months period ended December 31, 1996 are
not necessarily indicative of the results that may be expected for the
year ended September 30, 1997. Earnings per share are based on weighted
average shares outstanding for all periods presented giving effect to
75,000 convertible preferred shares treated as a common stock equivalent.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Registrant Company and Subsidiaries'
annual report on form 10-K for the year ended September 30, 1996.
B. PURCHASE OF SUBSIDIARIES
Acquisition and Discontinuation (during the Quarter Ending December 31,
1996) of Tier Environmental Services, Inc.
On September 26, 1994 Gulfstar Industries, Inc. acquired all of the common
stock of Tier Environmental Services, Inc. through an acquisition and
redemption by Tier Environmental Services, Inc. of its common stock
totaling approximately $2,982,400 in value, exclusive of acquisition
costs. Tier's principal business is to provide environmental remediation
services in the State of Florida, at petroleum contaminated sites
designated by the State of Florida as sites subject to authorized
reimbursement under the Inland Protective Trust Fund. The acquisition was
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16. The agreement also called for the additional issuance of
Gulfstar stock to Tier shareholders if the Company spun off a former
subsidiary, which in turn the Company did on September 25, 1995. As such,
the Company was required to issue an additional 357,133 shares which were
included in the accompanying balance sheet and valued at $142,855. The
excess (approximately $2,845,220) of the total acquisition cost over the
recorded value of assets acquired was allocated to goodwill and is being
amortized over 20 years. The statement of operations includes Tier's
results of operations for the three months ended December 31, 1995 since
Tier was acquired on September 26, 1994, and during the current quarter,
December 31, 1996, the company recorded the discontinuation of this
subsidiary.
Acquisition of Plant Technical Services, Inc.
Plant Technical Services, Inc. is engaged in the professional engineering
business, providing consulting, design, start-up support, operation,
maintenance, contract personnel and construction management service to
technical industries throughout the United States.
On September 29, 1995 Gulfstar acquired all of the common stock of Plant
Technical Services, Inc. (PTS) through an acquisition and redemption by
PTS of its stock with the issuance of 750,000 shares of Gulfstar common
stock, 75,000 shares of Gulfstar $10.00 preferred stock and cash and notes
of $1,220,000, exclusive of acquisition costs. The acquisition was
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16. The excess (approximately $1,278,000) of the total
acquisition cost over the recorded value of assets acquired was allocated
$500,000 to a proprietary database PTS developed and is expected to be
amortized over seven years and $571,144 to goodwill which is being
amortized over 20 years. The accompanying balance sheet includes assets
and liabilities of PTS at December 31, 1995. The statement of operations
for December 31, 1994 does not include PTS since PTS was acquired on
September 29, 1995.
C. RELATED PARTY TRANSACTIONS
During the quarter ending December 31, 1995, $162,600 was charged to
operations based upon the value ascribed to services of a director and
administrative assistant performed during the period for which they were
issued 242,500 shares.
Included in amounts due to related parties at December 31, 1996 for
expenses advanced by a company affiliated with a stockholder and director
of the company is $796,765 including $81,822 of accrued interest at 12%
and $9,000 advanced from a corporate stockholder.
Note payable to stockholder (the former sole stockholder of PTS) includes
$7,145 of a non-interest bearing instrument. Additionally, this note has
been reduced by amounts reserved for the anticipated loss on long term
contract and $918,944 remains which represents the balance on the
acquisition note after such reduction, bearing interest at 8%. $18,380
and $0 of interest was accrued on this note and is included in interest
expense and accrued expenses for the three month periods ending December
31, 1995 and December 31, 1996, respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed financial
statements including the Company's Florida operating subsidiary, as well as
information relating to the plans of the Company's current management.
ABOUT THE SUBSIDIARIES
TIER Environmental Services, Inc.
The primary revenue of this environmental subsidiary came from its work in
direct cooperation with the Florida legislature towards reimbursement for
eligible sites for environmental clean-up. The Governor's executive order
dated March 8, 1995 in reference to the Inland Protection Trust Fund (the
"fund") referendum has caused some confusion over the past few months. For
the purpose of clearing this up and stating the facts, the fund is still very
much in place, claims are still being paid by the State, and the interests of
the contractors as well as those of the investors are still being met.
To be specific, on March 29, 1995 Governor Chiles signed into law 95-2, Laws of
Florida (SB 1290). This law revises Florida Statute 376 as it relates to
continued and future site rehabilitation tasks for eligible sites. Chapter 95-2
does not specifically amend or change the reimbursement regulations set forth in
Chapter 62-773, F.A.C. As of this date, the Legislature has not finalized the
fiscal year 1995-96 budget allocation and accompanying Legislative intent
regarding the IPTF (SB 2800; HB 2585). Therefore, the new Legislation primarily
affects what eligible sites can continue and start site rehabilitation tasks;
does not revise the allowable markups and handling fees in the Reimbursement
Rule; and does not provide any more certainty as to the actual date when a
Reimbursement Claim will be paid.
It should also be noted that the Legislature, DEP and representatives from the
petroleum clean-up industry worked during the last Legislative session to pay
off the entire outstanding backlog of reimbursement claims through a bond
issue. Discussions and negotiations concerning a bonding of the entire
backlog are continuing. One investment group interested in underwriting the
bond issue will be making a proposal to DEP and the Governor's office in an
attempt to bond out the backlog without any additional changes to statutory
language.
During the quarter ended December 31, 1996, due to the change in the method the
state provided funding of this program, the company discontinued operations in
this subsidiary and recorded a loss on all remaining assets of this subsidiary.
Plant Technical Services
The primary revenue sources of this subsidiary comes from utilities in North
America with high demands at peak periods for engineering professionals.
During the fourth quarter 1995 the Company's former president spent a
substantial portion of his time pursuing one acquisition in Mexico, the Hemyc
Group (see form 10-K for the fiscal year ended September 30, 1995) which in
turn, the Company has since rescinded. The Company has also continued to
attempt to resolve a joint venture with the Hemyc Group which was
substantially delayed as for the fiscal year ended September 30, 1995. This
subsidiary recorded a loss on the contract to the extent it has accrued costs
associated with the joint venture and charged the same loss to amounts due to
the former president shareholder. The remaining assets of this joint venture
are recorded as idle equipment as of December 31, 1996.
RESULTS OF OPERATIONS
Three Months Ended December 31, 1996 vs. December 31, 1995
The Company's historical results from operations for the three months ended
December 31, 1995 consisted a loss of $193,144 on total revenues of $1,607,376.
These included the operations of both the PTS and Tier subsidiary. The results
of operations for the three months ended December 31, 1996 includes the PTS
subsidiary with a net loss of $77,549 and the Tier Environmental subsidiary
reported its results as discontinued operations with a net loss of $1,136,162.
Liquidity and Working Capital
The Company's working capital continued to decline during the quarter ended
December 31, 1996. At September 30, 1996 the Company had a deficit of
$1,959,320 as compared to a deficit of $2,098,034 at December 31, 1996.
The Company has tried to increase its traditional volume of engineering services
of its PTS subsidiary and by obtaining a factoring agreement to assist the
funding of operations until such time the company can obtain profitability.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On May 15, 1995 the Company terminated and initiated legal action
against the former president and shareholder of its PTS subsidiary.
Both subsidiaries are defendants in various litigations with
debtors, over contract obligations and performance clauses.
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>
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.
GULFSTAR INDUSTRIES, INC.
FORMERLY TIER ENVIRONMENTAL SERVICES, INC.
Dated: December 31, 1998, By:/s/William O'Callaghan
and submitted with William O'Callaghan, Acting President
re-assigned access codes
February 12, 1999
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