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UNITED STATES SECURITIES & 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 quarterly period ended December 31, 1996
Commission File Number: 0-17204
INFINITY, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1070066
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
211 West 14th Street, Chanute, Kansas 66720
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(Address of principal executive offices including zip code)
(316) 431-6200
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No___
As of December 31, 1996, 9,477,228 shares of common stock, $.001 par value per
share, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X
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INFINITY, INC.
FORM 10-QSB
INDEX
Page
PART I: FINANCIAL INFORMATION Number
Item 1. Financial Information:
Condensed Consolidated Balance Sheets................ 3
Condensed Consolidated Statements of Operations......4-5
Condensed Consolidated Statements of Cash Flows......6-7
Notes to Financial Statements........................8-10
Item 2. Management's Discussion and Analysis
or Plan of Operations...............................11-14
PART II: OTHER INFORMATION.................................... 15
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INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, March 31,
1996 1996 (Note)
ASSETS
CURRENT ASSETS
Cash $ 300,524 $ 183,402
Accounts receivable, less allowance
for doubtful accounts 324,062 466,128
Inventories 184,687 208,979
Prepaid expenses 23,203 23,885
TOTAL CURRENT ASSETS $ 832,476 $ 882,394
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation 4,252,051 4,633,976
OIL AND GAS PROPERTIES NOT SUBJECT TO
AMORTIZATION using the full cost method 1,193,170 662,730
INTANGIBLE ASSETS, at cost, less
accumulated amortization 255,442 271,082
$ 6,533,139 $ 6,450,182
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 435,092 $ 514,164
Accrued expenses 332,130 342,296
Current portion of deferred revenue 60,000 60,000
Notes payable - -
Current portion of long-term debt 316,177 287,913
TOTAL CURRENT LIABILITIES $ 1,143,399 $ 1,204,373
LONG-TERM LIABILITIES
Long-term debt, less current portion above $ 1,985,552 $ 2,262,058
Note payable, related party 309,968 309,968
Deferred revenue, less current portion above 176,611 206,208
TOTAL LIABILITIES $ 3,615,530 $ 3,982,607
STOCKHOLDERS' EQUITY
CAPITAL CONTRIBUTED
Common stock, par value $.0001, authorized
300,000,000 shares, issued and outstanding
9,477,228 shares; 8,731,395 shares $ 948 $ 873
Additional paid-in capital 7,697,893 7,115,468
TOTAL CAPITAL CONTRIBUTED $ 7,698,841 $ 7,116,341
RETAINED EARNINGS(DEFICIT) $(4,781,232) $(4,648,766)
TOTAL STOCKHOLDERS' EQUITY $ 2,917,609 $ 2,467,575
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,533,139 $ 6,450,182
The consolidated balance sheet at March 31, 1996 has been derived from the
audited financial statements at that date.
See Notes to Financial Statements.
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INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended December 31,
1996 Restated 1995
NET SALES $ 1,201,872 $1,009,675
COST OF GOODS SOLD 632,825 630,541
GROSS PROFIT 569,047 379,134
OPERATING EXPENSES
Salaries 148,252 202,349
Taxes 45,634 52,728
Consulting fees 8,583 6,936
Professional services 6,608 21,993
Research & development 1,461 16,997
Travel & entertainment 6,712 10,461
Insurance 57,589 73,760
Advertising 1,659 4,720
Office supplies and expense 11,471 11,550
Telephone 24,076 27,618
Rent & utilities 30,999 44,135
Depreciation & amortization 169,060 171,221
Other expenses 21,949 25,712
TOTAL OPERATING EXPENSES $ 534,054 $ 670,180
OPERATING INCOME (LOSS) 34,993 (291,046)
OTHER INCOME (EXPENSE)
Interest income & finance charges 29 705
Interest expense (69,973) (75,361)
Rent income 16,556 -
Gain (Loss) on sales of assets 31,126 (6,121)
TOTAL OTHER INCOME (EXPENSE) $ (22,262) $ (80,777)
NET INCOME (LOSS) $ 12,731 $ (371,823)
NET LOSS PER COMMON SHARE $ (0.00) $ (0.05)
Weighted Average Shares Outstanding 9,453,315 7,920,052
See Notes to Financial Statements.
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INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended December 31,
1996 Restated 1995
NET SALES $ 3,899,613 $ 3,423,783
COST OF GOODS SOLD 2,084,434 2,427,740
GROSS PROFIT 1,815,179 996,043
OPERATING EXPENSES
Salaries 493,343 662,963
Taxes 158,710 295,582
Consulting fees 32,238 36,235
Professional services 51,917 94,396
Research & development 4,638 53,974
Travel & entertainment 27,779 66,443
Insurance 200,021 211,206
Advertising 7,430 10,921
Office supplies and expense 42,301 49,752
Telephone 79,780 90,554
Rent & utilities 102,596 126,965
Depreciation & amortization 505,941 513,223
Other expenses 84,387 75,406
TOTAL OPERATING EXPENSES $ 1,791,081 $ 2,287,620
OPERATING INCOME (LOSS) 24,098 (1,291,577)
OTHER INCOME (EXPENSE)
Interest income & finance charges 5,168 7,357
Interest expense (209,414) (202,012)
Rent income 16,556 -
Gain (Loss) on sales of assets 31,126 (123,142)
TOTAL OTHER INCOME (EXPENSE) $ (156,564) $ (317,797)
NET INCOME (LOSS) $ (132,466) $(1,609,374)
NET LOSS PER COMMON SHARE $ (0.01) $ (0.20)
Weighted Average Shares Outstanding 8,832,335 7,889,945
See Notes to Financial Statements.
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INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended December 31,
1996 Restated 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $ 12,729 $ (371,823)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 169,060 171,221
Loss (Gain) on Sale of Assets (31,126) 6,121
(Increase) decrease in operating assets
Accounts receivable 1,409 367,961
Inventories 2,931 17,165
Prepaid expenses 5,698 (51,254)
Increase (decrease) in operating liabilities
Accounts payable (39,344) (203,443)
Accrued expenses 17,857 (23,012)
Deferred revenue (5,167) (1,934)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 134,047 (88,998)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchasing of property and equipment (43,219) (50,456)
Proceeds of equipment sold 96,548 12,171
Investment in Oil and Gas Properties (291,957) -
Investment in intangible assets (25,667) (2,266)
NET CASH USED IN INVESTING ACTIVITIES (264,295) (40,551)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of note payable - -
Increase (Decrease) in notes payable (96,000) 87,000
Increase in long-term debt - -
Proceeds from issuance of common stock 187,500 4,701
Repayment of long-term debt (90,498) (32,808)
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,002 58,893
NET INCREASE (DECREASE) IN CASH (129,246) (70,656)
CASH, BEGINNING OF PERIOD 429,770 266,655
CASH, END OF PERIOD $ 300,524 $ 195,999
See Notes to Financial Statements.
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INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended December 31,
1996 Restated 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $ (132,466) $ (1,609,374)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 505,941 513,223
Loss (Gain) on Sale of Assets (31,126) 123,142
(Increase) decrease in operating assets
Accounts receivable 142,066 (33,742)
Inventories 24,292 4,108
Prepaid expenses 682 (38,330)
Increase (decrease) in operating liabilities
Accounts payable (79,072) 98,256
Accrued expenses (10,166) (109,637)
Deferred revenue (29,597) (24,357)
NET CASH USED IN OPERATING ACTIVITIES 390,554 (1,076,711)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchasing of property and equipment (128,670) (238,808)
Proceeds of equipment sold 96,548 132,811
Investment in Oil and Gas Properties (535,401) -
Investment in intangible assets (40,167) (18,160)
NET CASH USED IN INVESTING ACTIVITIES (607,690) (124,157)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of note payable - (28,632)
Increase (Decrease) in notes payable - 87,000
Increase in long-term debt - 2,572,500
Proceeds from issuance of common stock 582,500 77,627
Repayment of long-term debt (248,242) (1,541,911)
NET CASH PROVIDED BY FINANCING ACTIVITIES 334,258 1,166,584
NET INCREASE (DECREASE) IN CASH 117,122 (34,284)
CASH, BEGINNING OF PERIOD 183,402 230,283
CASH, END OF PERIOD $ 300,524 $ 195,999
See Notes to Financial Statements.
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INFINITY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Infinity, Inc. (Infinity) was organized under the laws of the
State of Colorado on April 2, 1987, primarily for the purpose of engaging in
any lawful business, but intending to acquire business opportunities.
Principles of consolidation - The accompanying consolidated financial
statements include the accounts of the following companies:
PARENT COMPANY
Infinity, Inc.
WHOLLY-OWNED SUBSIDIARIES
Infinity Research and Development, Inc.
Consolidated Industrial Services, Inc.
(incorporated during the year ended March 31, 1994)
L.D.C. Food Systems, Inc.
(acquired during the year ended March 31, 1994)
CIS Oil and Gas, Inc.
(incorporated during the year ended March 31, 1996)
OTHER SUBSIDIARIES
Infinity Oil and Gas, Inc.
(incorporated during the year ended March 31, 1996)
(2) EARNING (LOSS) PER SHARE
Loss per share is based on the weighted average number of shares outstanding.
The number of shares used in the calculation was 9,453,315, and 7,920,052 for
the three month periods and 8,832,335 and 7,889,945 for the nine month periods
ended December 31, 1996 and 1995, respectively. Common stock equivalents are
not included in the computation because their inclusion would be anti-dilutive.
On November 30, 1993, the Company executed a 1 for 12 reverse stock split. All
share and per share amounts have been adjusted to reflect the reverse split.
(3) ACQUISITIONS
On December 15, 1993, Infinity, Inc. acquired all of the outstanding stock of
L.D.C. Food Systems, Inc., a New Jersey corporation, in exchange for the
issuance of 74,405 shares of Infinity, Inc.'s common stock. This transaction
has been accounted for as a pooling-of-interests, and accordingly, prior
period financial statements have been restated as if the entities had been
combined since inception. Since both companies were development stage
enterprises prior to the acquisition, neither company had recorded revenues
prior to December 1993.
In January 1994, the Company's wholly-owned subsidiary, Consolidated
Industrial Services, Inc., purchased substantially all of the assets,
operating rights and liabilities of Consolidated Oil Well Services, Inc. The
consolidated statements of operations include the results of operations
related to this acquisition for the period subsequent to January 1, 1994.
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INFINITY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
(4) SHORT-TERM BORROWINGS
At December 31, 1996, the Company's subsidiary, Consolidated Industrial
Services, Inc. (CIS), had a $100,000 line of credit available which expires
March 1997. The line of credit is collateralized by certain equipment with
interest at 2% above the lender's corporate base rate. As of December 31,
1996, CIS had no balance drawn on the line of credit.
(5) LONG-TERM DEBT
On May 31, 1995, the Company obtained $2,500,000 in long-term financing from
Seymour, Inc. (Seymour) collateralized by substantially all of the tangible
property and equipment of its wholly owned subsidiary, Consolidated Industrial
Services, Inc. The note required monthly payments of interest at 10% for a
period of six months beginning July 1995. Thereafter, monthly payments of
principal and interest in the amount of $41,503 are due until maturity, June
1998. The agreement also contains certain restrictive covenants with respect
to dividends, acquisitions and capital expenditures. Proceeds from the note
were used to refinance $1,500,000 in short-term borrowings and provide
additional working capital for the Company.
In connection with the agreement, the Company issued a warrant to Seymour to
purchase up to 1,250,000 shares of the Company's common stock at an exercise
price of $2.00 per share. The warrant expires 90 days after the payment of
all principal and interest due on the Seymour note.
During September 1995, the Company agreed to pay to the Federal Highway
Administration $72,500 in twenty four monthly installments of $3,116.14 to
settle a fine originally assessed by the Department of Transportation in the
amount of $233,100.
(6) BASIS OF PRESENTATION
The accompanying audited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. 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.
(7) FINANCIAL STATEMENT
In connection with the Consolidated Oil Well Services, Inc. (COWS)
acquisition, the Company issued two notes totaling $2,000,000. The Company
repaid one note with a principal amount of $600,000 during the year ended
March 31, 1994. The principal amount of the second note, $1,400,000, together
with accrued interest, was originally due September 1994. The maturity date
was extended to December 1994, at which time the holder of the note agreed to
accept a payment of $750,000 and $100,000 in additional oil well service
credit in full satisfaction of the note and related accrued interest.
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INFINITY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
As a result of the note reduction, the original purchase price of the COWS
assets was decreased by $538,910 and the consolidated financial statements for
the year ended March 31, 1994 were retroactively restated to reflect this
adjustment. The effect of the adjustment, net of deferred income taxes, was
to decrease the total assets by $525,437, decrease total liabilities by
$549,688 and to increase stockholders' equity by $24,251. After further
review, the company determined that this note reduction should have been
recorded as a gain from refinancing. Accordingly, the consolidated financial
statements for the year ended March 31, 1995 were retroactively restated to
reflect this adjustment. The effect of this adjustment at March 31, 1995, net
of deferred income taxes, was to increase total assets and increase total
stockholders' equity by $471,546. The following table reconciles quarterly
prior year information, as previously reported, with information subsequent to
the adjustment for the gain on refinancing for the three month and nine month
periods ended December 31, 1995.
Three Months Nine Months
Net (loss), as previously reported $ (358,350) $(1,568,955)
Adjustment to depreciation expense (13,473) ( 40,419)
Net (loss), as restated $ (371,823) $(1,609,374)
Net (loss) per share, as previously reported $ (.05) $ (.20)
Adjustment to depreciation expense $ (.00) $ (.00)
Net (loss) per share, as restated $ (.05) $ (.20)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Company was organized as a Colorado corporation on April 2, 1987, for
the purpose of searching for and acquiring a business combination candidate.
On March 10, 1992, the Company acquired Infinity Research & Development, Inc.,
then named Phoenix Research & Development Corporation ("PRD"). This
acquisition was accounted for as a reverse acquisition.
On December 15, 1993, Infinity, Inc. acquired all of the outstanding
stock of L.D.C. Food Systems, Inc., a New Jersey Corporation, in exchange for
the issuance of 74,405 shares of Infinity, Inc.'s common stock. This
transaction has been accounted for as a pooling-of-interests, and accordingly,
prior period financial statements have been restated as if the entities had
been combined since inception. Since both companies were development stage
enterprises prior to the acquisition, neither company had recorded revenues
prior to December 1993.
In January 1994, the Company's wholly-owned subsidiary, Consolidated
Industrial Services, Inc., purchased substantially all of the assets, oper-
ating rights and certain liabilities of Consolidated Oil Well Services, Inc.
The consolidated statements of operations include the results of operations
related to this acquisition for the period subsequent to January 1, 1994.
In September, 1995, the Company's newly formed subsidiary, Infinity Oil
and Gas, Inc. began seeking joint interest partners and prospective properties
to expand the Company's activities to include exploration, development and
operation of gas producing properties.
In December, 1995, a newly formed wholly-owned subsidiary, CIS Oil and
Gas, Inc., entered into an agreement to develop and operate a coal methane gas
producing property in southeastern Colorado. Significant development activity
has occurred and revenues are expected from gas sales prior to March 31, 1997.
RESULTS OF OPERATIONS
The oil field services segment of the Company generated $1,137,676 in
revenues and $588,879 in cost of sales during the three months ended December
31, 1996, compared to $1,010,293 in revenues and $586,610 in cost of sales for
the three months ended December 31, 1995. The operating expenses incurred by
the oil field services segment of the Company were $380,636 for the three
months ended December 31, 1996 and $377,932 for the three months ended
December 31, 1995. Net operating income for this segment improved to a profit
of $168,161 for the three months ended December 31, 1996 from a profit of
$45,751 for the three months ended December 31, 1995.
The oilfield services segment generated $3,633,068 in revenues and
$1,891,586 in cost of sales during the nine months ended December 31,1996,
compared to $2,838,770 in revenues and $1,640,628 in cost of sales for the
nine months ended December 31, 1995. Operating expenses were $1,173,653 for
the nine months ended December 31, 1996 and $1,259,013 for the nine months
ended December 31, 1995. Net operating income for this segment improved to a
profit of $544,079 for the nine months ended December 31, 1996 from a loss of
($60,871) for the nine months ended December 31, 1995. Depreciation and
amortization expense included in operating expenses for the oil field services
division was $126,197 for the three months ended December 31, 1996, and
$127,132 for the three months ended December 31, 1995, $372,107 for the nine
months ended December 31, 1996, and $381,569 for the nine months ended
December 31, 1995. The improved results of the
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oil field services segment are due primarily to increased activity in Colorado
and Oklahoma. During the nine months ended December 31, 1996, revenues from
Oklahoma and Colorado increased approximately $960,000 over 1995 amounts,
approximately double the prior year activity in those areas.
The environmental services segment of the Company which includes all
water treatment activities, generated $64,196 in revenues, $16,556 in rental
income and $43,.026 in cost of sales during the three months ended December
31, 1996, compared to $29,412 in revenues and $43,931 in cost of sales for the
three months ended December 31, 1995. Operating expenses incurred by the
environmental services division were $54,265 for the three months ended
December 31, 1996, and $180,864 for the three months ended December 31, 1995,
including depreciation and amortization expense of $41,686 for the three
months ended December 31, 1996 and $41,067 for the three months ended December
31, 1995. Net operating income for this segment improved to an operating loss
of ($16,539) for the three months ended December 31, 1996 from an operating
loss of ($224,211) for the three months ended December 31, 1995.
The environmental services segment of the Company generated $266,545 in
revenues and $190,444 in cost of sales during the nine months ended December
31, 1996, compared to $585,013 in revenues and $785,910 in cost of sales for
the nine months ended December 31, 1995. Operating expenses were $245,535 for
the nine months ended December 31,1996 and $658,837 for the nine months ended
December 31, 1995, including depreciation and amortization expense of $123,820
for the nine months ended December 31, 1996 and $123,197 for the nine months
ended December 31, 1995. Net operating income for this segment improved to an
operating loss of ($152,878) for the nine months ending December 31, 1996 from
an operating loss of ($859,735) for the nine months ended December 31, 1995.
The substantial decreases in cost of sales and operating expenses were the
result of a reduction in research and development activities, changes in the
operation of the wastewater treatment plant in Cheyenne, Wyoming, and the
transfer in October 1996 of operating responsibility for all water treatment
facilities to a third party.
On October 22, 1996, the Company entered into a five year management and
lease agreement which transfers operating responsibility for this segment to
an outside party. The Company will receive initial payments of $80,000 per
year plus a percentage of revenues of certain levels.
The oil and gas production segment of the Company incurred expenses of
$42,766 during the three months ended December 31, 1996 and $131,701 during
the nine months ended December 31, 1996. Corresponding expenses incurred in
the three and nine month periods ended December 31, 1995 were $34,982 and
$56,423, respectively. During the last twelve months, this segment invested
$1,193,170 to acquire property rights and drill twenty gas wells. The company
expects to complete these wells and the related pipeline system and to begin
earning revenue from the production of gas during March 1997.
Expenses incurred in corporate activities were $56.388 for the three
months ended December 31, 1996, $76,402 for the three months ended December
31, 1995, $242,596 for the nine months ended December 31,1996 and $313,046 for
the nine months ended December 31, 1995. This reduction was substantially
achieved by the reduction of consulting fees, professional services and
facility costs.
Other income increased due to the sale of certain assets and the rental
income received from the new operators of the water treatment facilities.
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LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company had a working capital deficit of
($310,923) compared to a working capital deficit of ($321,979) at March 31,
1996. The stability in working capital is primarily due to the improvement of
operating results and the use of proceeds of sales of common stock to develop
gas properties in southeastern Colorado.
The Company presently has outstanding warrants to purchase shares of
Common Stock which, if all were to be exercised, could result in gross
proceeds of approximately $2,465,616. The Company intends to file an
amendment to the registration statement relating to the warrants during the
next nine months; however, there is no assurance that the Company will be
successful in obtaining the exercise of any of the warrants.
In addition, the Company also issued warrants in conjunction with the
long-term financing on May 31, 1995 which, if exercised, would result in gross
proceeds of $2,500,000. These warrants can be exercised any time prior to
August 31, 1998.
During the three month period ended December 31, 1996, cash generated by
operating activities was $134,047 compared to cash used of ($88,998) for the
three months ended December 31, 1995. During the nine months ended December
31, 1996, cash generated by operating activities was $390,554, compared to
cash used of ($1,076,711) for the nine months ended December 31, 1995. The
improvement in the amount of cash generated was due to reduction of research
and development activities, reduction of water treatment activities and
emphasis on the improving oil field services activities. A decrease of
$142,066 in the accounts receivable balance contributed to this improvement,
offset by decreases amounts owed for accounts payable and accrued expenses
totaling $89,238.
Net cash provided by operations of the oil field services segment was
$916,186 for the nine months ended December 31, 1996. Net cash used by
operations of the environmental services segment was ($45,614). Net cash used
by operations of the oil and gas segment was ($107,005). Net cash used by
corporate activities was ($233,528) plus $209,414 of net interest expense.
Cash flows used in investing activities during the three months ended
December 31, 1996, were ($264,295) compared to ($40,551) for the comparable
period of 1995. The change was primarily due to the investment of $291,957 in
gas production properties. Cash flows used in investing activities during the
nine months ended December 31, 1996 were ($607,690) compared to ($124,157) for
the nine months ended December 31, 1995. The change also is primarily due to
the investment of $535,401 in gas production properties which are expected to
begin production during March 1997.
The Company received $582,500 from the issuance of common stock in the
exercise of options and warrants during the nine months ended December 31,
1996. This cash received from financing activities was reduced by the payment
of ($248,242) on long term debt.
On May 31, 1995, the Company obtained $2,500,000 in long-term financing
from Seymour, Inc. (Seymour) collateralized by substantially all of the
tangible property and equipment of its wholly owned subsidiary, Consolidated
Industrial Services, Inc. The note required monthly payments of interest at
10% for a period of six months beginning July 1995. Thereafter, monthly
payments of principal and interest in the amount of $41,503 are due until
maturity, June 1998. The
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agreement also contains certain restrictive covenants with respect to
dividends, acquisitions and capital expenditures. Proceeds from the note were
used to refinance $1,500,000 in short-term borrowings and provide additional
working capital for the Company.
Seymour, Inc. also holds a warrant which allows it to purchase up to
1,250,000 shares of the Company's common stock at a price of $2.00 per share.
This warrant is exercisable until ninety days after the promissory note is
fully paid.
The Company is presently completing a group of twenty gas wells in
southeastern Colorado and constructing an internal pipeline system to gather
the gas produced and transport it to interstate markets. This development and
construction is primarily funded by proceeds of recent sales of common stock
in the exercise of existing warrants and options. The company does not have
any other material commitments for capital expenditures as of the filing of
this Report. However, the Company is required to drill a number of gas wells
in its Raton Basin property in order to retain its rights to further develop
this leased property.
The Company drilled twenty gas wells in southeastern Colorado during the
last twelve months, and intends to drill at least ten additional wells during
each of the next four years. This pace of development will meet lease
requirements to allow the Company to continue to develop the property.
Financing for this future development will be necessary and is expected to be
obtained by borrowing based on the production and reserves of the existing
wells or by pre-selling the gas produced by these wells. However, there is no
assurance that the Company will be successful in obtaining such financing.
During the third and fourth quarters of the year ended March 31, 1996,
and continuing in subsequent months, the Company has made significant
reductions in operating expenses through reductions in personnel and
facilities. Expenses for research and development activities in the water
treatment areas have been contractually transferred to others under licensing
agreements. The operation of the water treatment facilities has been
transferred to a third party. Corporate and sales activities have been
consolidated into the operating facility in Chanute, Kansas, eliminating the
office in Lenexa, Kansas. Oil well service activity has improved
significantly in Oklahoma and Colorado and gas sales are expected to commence
soon.
Operations of the Company have generated adequate cash flow to service
continuing operations during the fourth quarter of the year ended March 31,
1996, and the nine months ended December 31, 1996. Management believes that
this level is suitable and adequate to service continuing operations and
obligations. Additional gas wells will be drilled and completed only when
additional financing is obtained specifically for that purpose.
During October 1996, the Company entered into a management and lease
agreement with an environmental services company which will operate the
Chanute, Kansas and Cheyenne, Wyoming water treatment facilities. The initial
term of the agreement is for five years with minimum lease payments to be
received of $80,000 per year. In addition, the lease calls for percentage
rents at 4-1/2% of revenues above a base level, and includes an option to
extend the lease term for two additional years at $85,000 per year, and a
second option to extend the lease for an additional seven years at $90,000 per
year.
-14-
<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) Exhibit 27 - Financial Data Schedule - Filed herewith
electronically
(b) Reports on Form 8-K - None.
-15-
<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.
INFINITY, INC.
By:/s/ Stanton E. Ross
Stanton E. Ross
President
Date: February 10, 1997
-16-
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- -----------------------------
27. FINANCIAL DATA SCHEDULE Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations found on
pages 3 and 5 of the Company's Form 10-QSB for the year to date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 300,524
<SECURITIES> 0
<RECEIVABLES> 324,062
<ALLOWANCES> 0
<INVENTORY> 184,687
<CURRENT-ASSETS> 832,476
<PP&E> 5,445,221
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,533,139
<CURRENT-LIABILITIES> 1,143,399
<BONDS> 0
<COMMON> 948
0
0
<OTHER-SE> 2,916,661
<TOTAL-LIABILITY-AND-EQUITY> 6,533,139
<SALES> 3,899,613
<TOTAL-REVENUES> 3,899,613
<CGS> 2,084,434
<TOTAL-COSTS> 2,084,434
<OTHER-EXPENSES> 1,791,081
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (209,414)
<INCOME-PRETAX> (132,466)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (132,466)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
