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, 1997Commission 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, 1997 is 9,106,365 shares all of one class of $.032 par
value common stock and 75,000 shares of convertible preferred stock with a
$10.00 par value.
<PAGE>
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
INDEX
PAGE
PART I FINANCIAL INFORMATION
Consolidated Balance Sheet - December 31, 1997 1
Consolidated Statements of Operations - Three Months
Ended December 31, 1997 and December 31, 1996 2
Consolidated Statement of Cash Flows - Three Months
Ended December 31, 1997 and December 31, 1996 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, 1997
Assets
Current Assets
Cash $ 32
Total Current Assets 32
Total Assets $ 32
Liabilities and Stockholders' Deficit
Current Liabilities
Unsecured creditors of subsidiary $ 239,885
Class III Creditors 53,014
Class IV Creditors 812,649
Accrued Administrative Expense 8,381
Total Current Liabilities 1,113,929
Stockholders' Deficit
Common stock, par value $.032 per share; authorized
10,000,000 shares, issued and outstanding 9,106,365 291,404
Convertible preferred stock, authorized 1,000,000
shares, par value $10.00; 75,000 shares issued
And outstanding(convertible and subject to
reorganization) 750,000
Additional paid in capital 3,166,718
Retained deficit (October 1, 1993) (59,033)
Retained deficit, subsequent to quasi-reorganization (5,262,986)
Total Stockholders' Deficit (1,113,897)
Total Liabilities and Stockholders' Deficit $ 32
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the
Three Months Ended
December 31,
1997 1996
Contract Revenues Earned $ - $ 967,260
Other fees and income - -
Total Revenue - 967,260
Cost of contract revenues earned - 822,028
Gross Profit 144,232
Operating Expenses
Selling and administrative expenses 8,381 174,383
Depreciation and amortization - 28,896
Interest expense - 16,502
Provision for bad debts - 2,000
Loss from operating activities (8,381) (77,549)
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 $( 8,381) $ 1,213,711)
(Loss) per share $ ( .0009) $ (.132)
Weighted average shares outstanding 9,106,365 9,181,565
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended
December 31,
1997 1996
OPERATING ACTIVITIES
Cash Flows Used In Operating Activities:
Net loss from operations $ (8,381) $(77,549)
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
Provision for bad debts - 2,000
(Increase) decrease in accounts receivable - (60,716)
(Decrease) in accounts payable and accrued
expenses 8,284 160,090
Increase in accrued interest - 16,502
(97) 50,973
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:
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 (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)
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
For the Three Months Ended
December 31,
1997 1996
FINANCING ACTIVITIES
Cash Flows Used In Financing Activities:
(Repayment) of stockholder loans - -
Proceeds from loan payable - related parties
(net) - -
(Decrease) increase in notes payable (net) - -
- -
Net (decrease) in cash and cash equivalents (97) (1,528)
Cash and cash equivalents, beginning of the period 129 1,657
Cash and cash equivalents, end of the period $ 32 $ 129
<PAGE>
GULFSTAR INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
(For three months ended December 31, 1997 and 1996)
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, 1997 are
not necessarily indicative of the results that may be expected for the
year ended September 30, 1998. 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-KSB for the year ended September 30, 1997.
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
GULFSTAR INDUSTRIES, INC AND SUBSIDIARIES
(FORMERLY TIER ENVIRONMENTAL SERVICES, INC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
(For the three months ended December 31, 1997 and 1996)
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, 1997 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 remained at September 31,1996 and December 31,1995
which represented the balance on the acquisition note after such
reduction, bearing interest at 8%; interest was accrued on this note offer
the termination of the president and during the quater ended March 31,1997
this note was reversed aganist the abandonment of the PTS assets including
Goodwill, Fixed Assets and Database and recorded as cancelation of
indebtnessess income.
<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 THAT WERE DISCONTINUED DURING THE YEAR ENDED
SEPTEMBER 30,1997
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 during the year ended September
30,1996.
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. During the quarter
ended March 31,1997 the Company recorded the discontinuation of the
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
operations of this subsidary, recording the abandonment of Goodwill,
Database, Fixed Assets, net of the calculation of the liabilities directly
associated with these assets.
RESULTS OF OPERATIONS
Three Months Ended December 31, 1997 vs. December 31, 1996
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. The loss from operations for the three months ended December 31,1997
represent administrative expenses of $8,381.
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. At December 31,1997
the company had a working capital deficit of $1,113,897.
As a result of the above, management believes the filing of the plan of
reorganization under Chapter 11 offers the best opportunity to restore
shareholder value to the Company's stockholders in light of the results of
operations and the financial condition of the Company.
Forward looking and other statements
Forward looking statements above and elsewhere in this report that suggest that
the company will increase revenues, become profitable and achieve significant
growth through acquisitions are subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations and cash flows. These statements are
identified by words such as "believes," "expects," "anticipates" or similar
expressions. Such forward looking statements are based on the beliefs of
Gulfstar Industries Inc. and its Board of Directors in which they attempt to
analyze the Company's competitive position in its industry and the factors
affecting its business. Stockholders should understand that each of the
foregoing risk factors, in addition to those discussed elsewhere in this
document and in the documents which are incorporated by reference herein,
could affect the future results Gulfstar Industries Inc. and could cause
those results to differ materially from those expressed in the forward-
looking statements contained or incorporated by reference herein. In addition
there can be no assurance that Gulfstar Industries Inc. and its Board have
correctly identified and assessed all of the factors affecting the Company's
business.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On May 15, 1996 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 19, 1999
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