<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2000 Commission File No. 00019678
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INFRACORPS, INC.
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(Exact name of registrant as specified in its charter)
Virginia 54-1414643
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State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7400 Beaufont Springs Drive, Suite 415, Richmond, VA 23225
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(Address) (Zip Code)
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Registrant's telephone number, including area code (804) 272-6600
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(Former name, former address and former fiscal year
if changed since last report)
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 and (2) has been subject to the filing
requirements for the past 90 days.
Yes x No
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Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the close of the period covered by this report.
Class Number of Shares Outstanding
------------------------------ ----------------------------
Common Stock 16,392,387
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INFRACORPS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, 2000 March 31, 2000
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ASSETS (unaudited) (audited)
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 134,437 449,429
Accounts receivable:
Trade (net of allowance of $50,000 at June 30, 2000 and
March 31, 2000) 4,367,253 3,829,893
Other 22,917 24,317
Costs and estimated earnings in excess of billings
on uncompleted contracts 958,104 1,007,464
Notes receivable - current 177,952 177,952
Inventory 1,180,843 1,166,796
Prepaid expenses 65,956 62,897
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Total current assets 6,907,462 6,718,748
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Property, plant and equipment:
Furniture and fixtures 369,236 369,236
Machinery, tools and equipment 6,988,571 6,920,993
Vehicles 2,007,335 1,898,952
Leasehold improvements 307,663 307,663
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9,672,805 9,496,844
Less accumulated depreciation 4,491,871 4,366,147
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Total property, plant and equipment, net 5,180,934 5,130,697
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Other assets:
Restricted cash 600,000 600,000
Notes receivable 159,158 169,205
Cash value of life insurance 23,469 23,469
Assets under contractual arrangements (net of
valuation allowance of $858,000) 183,051 183,051
Other assets 198,944 206,021
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Total other assets 1,164,622 1,181,746
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Total assets $ 13,253,018 $ 13,031,191
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</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 2000 March 31, 2000
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(unaudited) (audited)
<S> <C> <C>
Current liabilities:
Bank overdraft $ 0 97,322
Notes payable to bank 1,250,000 1,000,000
Notes payable to affiliates 945,820 602,019
Current portion of long-term debt 867,797 867,797
Accounts payable 2,739,146 3,750,104
Accrued expenses and other current liabilities 323,224 372,154
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Total current liabilities 6,125,987 6,689,396
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Long-term liabilities:
Long-term debt 2,694,442 1,881,900
Liabilities of business transferred under contractual
arrangements 112,848 140,339
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Total liabilities 8,933,277 8,711,635
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Stockholders' equity:
Preferred stock, no par value, authorized 5,000,000 shares:
4% cumulative Series A, $1 convertible, 1,850,000 shares
outstanding at June 30, 2000 and March 31, 2000
(liquidation value of $1,850,000) 830,311 830,311
8% Series B, 15,421 shares outstanding at June 30, 2000 and
March 31, 2000 (liquidation value of $1,542,100) 1,542,100 1,542,100
6% Series C, 751 shares outstanding at June 30, 2000 and
March 31, 2000 (liquidation value of $751,000) 713,317 713,317
Common stock, no par value; authorized 30,000,000
shares; issued and outstanding 16,392,387
at June 30, 2000 and March 31, 2000 5,933,226 5,933,226
Retained earnings (accumulated deficit) (4,699,213) (4,699,398)
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Total stockholders' equity 4,319,741 4,319,556
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Total liabilities and stockholders' equity $ 13,253,018 $ 13,031,191
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</TABLE>
<PAGE>
INFRACORPS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended
June 30, 2000 June 30, 1999
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(unaudited) (unaudited)
<S> <C> <C>
Contract Revenues - Commercial $ 6,379,305 $ 4,934,009
Cost of goods and services 5,578,064 4,270,668
Selling, general and administrative expenses 644,841 583,850
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156,400 79,491
Interest income 10,131 10,152
Interest expense (125,738) (56,095)
Gain on sale of equipment 1,500 695
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Net income before income taxes 42,293 34,243
Provision for income taxes -- --
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Net income $ 42,293 $ 34,243
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Earnings per common share:
Basic $ .00 $ .00
Diluted $ .00 $ .00
Average shares of common stock used for above computation:
Basic 16,392,387 16,492,043
Diluted 18,430,358 18,309,043
</TABLE>
<PAGE>
INFRACORPS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Preferred Preferred Preferred
Stock Stock Stock
Series A Series B Series C Common Stock
----------------------------------------------------------------- Accumulated
Amount Amount Amount Shares Amount Deficit Total
----------- ------------ ------------ ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at March 31, 2000 $ 830,311 $ 1,542,100 $ 713,317 16,392,387 $ 5,933,226 $(4,699,398) $ 4,319,556
Dividends - - - - - (42,108) (42,108)
Net income - - - - - 42,293 42,293
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Balances at June 30, 2000 $ 830,311 $ 1,542,100 $ 713,317 16,392,387 $ 5,933,226 $(4,699,213) $ 4,319,741
================================================================================================
</TABLE>
<PAGE>
INFRACORPS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Three months ended
June 30, 2000 June 30, 1999
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(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 42,293 $ 34,243
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 125,724 107,324
Gain on sale of fixed assets (1,500) (695)
Increase/decrease in operating assets and liabilities:
Accounts receivable (535,960) (43,291)
Costs and estimated earnings in excess of billings on uncompleted contracts 49,360 29,203
Inventories (14,047) (36,361)
Prepaid expenses (3,059) (9,181)
Accounts payable (1,010,958) (429,678)
Accrued expenses and other liabilities (48,930) (78,095)
Other assets 7,077 (4,058)
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Net cash used in operating activities (1,390,000) (430,589)
Cash flow from investing activities:
Purchase of property, plant and equipment (174,461) (652,628)
Notes receivable decrease (increase) 10,047 (6,263)
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Net cash used in investing activities (164,414) (658,891)
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
Three months ended
June 30, 2000 June 30, 1999
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(unaudited) (unaudited)
<S> <C> <C>
Cash flows from financing activities:
Bank overdraft (decrease) (97,322) (225,135)
Principal payments on long-term debt and notes payable
to affiliates (118,657) (73,555)
Proceeds from line of credit 250,000 950,000
Proceeds from notes payable affiliates 400,000 0
Proceeds from long-term debt 875,000 287,500
Payments on notes payable 0 (2,500)
Payment on liabilities transferred under contractual arrangements (27,491) --
Dividend paid (42,108) (20,841)
Proceeds from sale of preferred shares 0 100,000
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Net cash provided by financing activities 1,239,422 1,015,469
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Decrease in cash and cash equivalents (314,992) (74,011)
Cash and cash equivalents at beginning of year 1,049,429 872,259
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Cash and cash equivalents at end of period $ 734,437 $ 798,248
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</TABLE>
Supplemental disclosures of cash flow information and noncash investing
activities: Interest paid on notes payable and long-term debt was $125,738 and
$56,095 for the three months ended June 30, 2000 and June 30, 1999 respectively.
<PAGE>
INFRACORPS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The unaudited financial statements have been prepared by the Company, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such SEC rules and regulations; nevertheless, the Company
believes that the disclosures are adequate to make the information presented not
misleading. These financial statements and the notes hereto 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 year ended March 31, 2000. In the
opinion of the Company, all adjustments, including normal recurring adjustments
necessary to present fairly the financial position of Infracorps, Inc. and
Subsidiaries as of June 30, 2000 and the results of its operations and cash
flows for the quarter then ended, have been included. The results of operations
for the interim period are not necessarily indicative of the results for the
full year.
NOTE B--PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of INFRACORPS, Inc.
and its wholly-owned subsidiaries, IC Subsidiary, Inc. (formerly ETS, Inc.), ETS
Analytical Services, Inc., InfraCorps of Virginia, Inc. (formerly ETS Water And
Waste Management, Inc.) and its subsidiary InfraCorps of Florida, Inc. (formerly
ETS Liner, Inc.), InfraCorps Technology, Inc. and InfraCorps International, Inc.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
NOTE C--EARNINGS PER SHARE
Earnings per share have been computed on the basis of the weighted average
number of shares outstanding, after giving appropriate effect for common stock
issued. Stock options and warrants have been included as common stock
equivalents when they result in dilution of earnings per share.
NOTE D--CASH AND CASH EQUIVALENTS
Restricted cash of $600,000 is not included in current cash and cash
equivalents, as it is restricted for a performance bond relating to the
Company's contract with China Steel Corporation (the "China Steel Contract").
Potential issues have been brought to current management's attention regarding
the budget to meet certain of the performance specifications of the China Steel
Contract and the overall viability of the Limestone Emission Control (LEC)
technology for wide-scale commercialization. If the LEC technology does not meet
contract specifications, China Steel Corporation may seek to impose financial
penalties or attempt to recover damages or obtain other relief under the
contract, including drawing down on the $600,000 performance bond posted by the
Company. See note E of Notes to Consolidated Financial Statements for additional
information.
<PAGE>
NOTE E--CONTINGENT LIABILITIES AND OTHER MATTERS
The Company entered into a Management Agreement with Air Technologies, Inc.
("ATI"), a newly formed firm based in Roanoke, Virginia, to provide management
services with respect to the Company's China Steel Contract. ATI and CCTI agreed
to accept responsibility for any potential liabilities associated with the China
Steel Contract and to provide its best effort to have the contract transferred
from the Company to ATI. ETS Acquisition, Inc., CCTI and ATI are owned by three
former executive officers of the Company or ETS and former members of the
Company's Board of Directors.
If the LEC technology does not meet contract specifications China Steel
Corporation may seek to impose financial penalties or attempt to recover damages
or obtain other relief under the contract, including drawing down on the
$600,000 performance bond posted by the Company. See note D of Notes to
Consolidated Financial Statements for additional information.
Management believes that the existing potential liabilities under the China
Steel Contract make obtaining significant outside capital unlikely. However,
Management negotiated a line of credit from BB&T for $1,000,000 and was able to
increase the line to $1,250,000 effective March 31, 2000. The interest rate is
prime plus one percent payable monthly. Additional equity or credit is being
sought. Management's success in this regard will, to a large extent, depend upon
whether InfraCorps is able to accomplish the assignment without recourse of the
China Steel contract to ATI. While negotiations with China Steel Corporation are
on-going, there can be no assurance that such negotiations will be successful.
See notes D of Notes to Consolidated Financial Statements for additional
information.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that could significantly
affect the operations, performance, development and results of the Company's
business include, but are not limited to, the following: (i) changes in
legislative enforcement and direction, (ii) unusually bad or extreme weather
conditions, (iii) unanticipated delays in contract execution, (iv) project
delays or changes in project costs, (v) unanticipated changes in operating
expenses and capital expenditures, (vi) sudden loss of key personnel, (vii)
abrupt changes in competition or the political or economic climate, and (vi)
abrupt changes in market opportunities.
Results of operations
Three months ended June 30, 2000 compared to three months ended June 30, 1999
Revenues for the three month period ended June 30, 2000 ("first quarter
of fiscal 2001") were $6,379,305 compared to $4,934,009 for the three month
period ended June 30, 1999 ("first quarter of fiscal 2000") resulting in a 29%
increase in revenues. This increase is due to large contracts received near
fiscal year end 2000 as well as increase in construction and rehabilitation
activity in the region. Fiscal year 2001 includes the revenues from the newly
formed subsidiary InfraCorps Technology, Inc., which was just beginning
operations in the first quarter of fiscal 2000.
Cost of goods and services for the first quarter of fiscal 2001 were
$5,578,064 or 87.4% of sales, as compared to $4,270,668 or 86.5% for the first
quarter of fiscal 2000. Gross profits for the first quarter of fiscal 2001 were
$801,241 or 12.6% of sales, as compared to $663,341 or 13.5% of sales for the
first quarter of fiscal 2000. These decreases in gross profits are due to larger
contracts being awarded based on lower bids with a lower gross margin.
Selling, general and administrative expenses were $644,841 for the
first quarter of 2001, or 10.1% of net sales, as compared to $583,850 for the
first quarter of fiscal 2000, or 11.8% of net sales. The selling, general and
administrative expense increased in the first quarter, due to expenses related
to InfraCorps Technology, Inc., but there was an overall decrease in the
percentage of net sales due to higher revenues.
<PAGE>
Gain on sale of assets was $1,500 for the first quarter of fiscal 2001,
as compared to $695 for the first quarter of fiscal 2000. Interest expense for
the first quarter of fiscal 2001 was $125,738, compared to $56,095 for the first
quarter of fiscal 2000. Interest expense reflects interest paid on notes payable
and long-term debt, including credit lines and capital leases. The increase in
interest expense was due to an increase in outstanding debt and capital leases
as well as the increase in interest rates.
Profit before interest income expense and gains on sales of equipment
for the first quarter of fiscal 2001 was $156,400 compared to $79,491 for first
quarter of fiscal 2000. Net income for the first quarter of fiscal 2001 was
$42,293, compared to $34,243 for first quarter of fiscal 2000.
Liquidity And Capital Resources As Of June 30, 2000
In March 2000, the secured credit line was increased to $1,250,000. The
note that established the line calls for a monthly interest of prime plus 1%
over a three year term. At June 30, 2000, the balance owed under this line was
$1,250,000. The credit line is provided by BB&T.
Major components of cash flows used in operating activities include a
decrease in accounts payable of $1,010,958 and an increase of $535,960 in
accounts receivable. The credit line and notes payable were used to reduce
accounts payable. The increase in accounts receivable is due to the higher
volume of contract revenue discussed above. Adjustments to net cash flows are
depreciation and amortization of $125,724.
Net cash used in investing activities of $164,414 consisted mainly of
purchase of property, plant and equipment in the amount of $174,461. The net
cash from financing activities of $1,239,422 include, in part, proceeds from the
line of credit of $250,000, proceeds from notes payable of $875,000, proceeds
from notes payable affiliates of $400,000 and principle payments of $118,657.
The cash and cash equivalents at June 30, 2000 was $734,437, which includes the
$600,000 of restricted cash guaranteeing the bond for the China Steel contract.
New orders received for the first quarter of fiscal 2001 were
$7,491,666 compared to $8,827,164 for the first quarter of fiscal 2000. Backlog
at June 30, 2000 was $20,200,000, compared to $15,955,000 at June 30, 1999. New
orders are being received to keep pace with work being performed and maintain a
backlog.
<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.
(A) Exhibits
27 Financial Data Schedule
(B) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this registrations statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
INFRACORPS, INC.
DATE August 14, 2000 BY: /s/James B. Quarles
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James B. Quarles
Chairman and President
DATE August 14, 2000 BY: /s/Warren E. Beam, Jr.
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Warren E. Beam, Jr.
Secretary and Controller
