<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
-----------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-17430
GLOBAL ENVIRONMENTAL CORP.
(Exact name of registrant as specified in its charter)
New York 13-3431486
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 1300, Unit 1 Apple Tree Lane 18949
Plumsteadville, PA (Zip Code)
(Address of principal executive offices)
(215) 766-2730
(Registrant's telephone number, including area code)
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 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 ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Common Stock April 30, 1995
--------------------- -----------------
$.0001 par value 2,369,565 shares
1
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
INDEX
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 11
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 15
2
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 329,920 $ 353,465
Restricted cash 167,894 0
Accounts receivable, less allowance
for doubtful accounts of $71,883 and
and $55,691, respectively 2,039,835 1,588,951
Inventories 1,263,188 1,168,630
Costs and estimated earnings in excess
of billings on uncompleted contracts 234,726 50,972
Prepaid expenses and other 114,701 87,212
----------- -----------
Total current assets 4,150,264 3,249,230
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 150,797 150,797
Building and improvements 1,823,825 1,823,825
Equipment 2,658,423 2,593,301
----------- -----------
4,633,045 4,567,923
Less: Accumulated depreciation
and amortization (2,241,075) (2,148,633)
----------- -----------
Total property, plant and equipment, net 2,391,970 2,419,290
----------- -----------
OTHER ASSETS
Investment in joint venture 11,634 8,630
Restricted cash 0 167,894
Goodwill, net of amortization of $29,472 and
$26,917 respectively 72,724 75,279
Other, net 42,030 166,738
----------- -----------
Total other assets 126,388 418,541
----------- -----------
TOTAL ASSETS $ 6,668,622 $ 6,087,061
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Revolving loan $ 967,019 $ 933,530
Current portion of long-term debt 679,397 692,209
Accounts payable 2,013,241 1,464,319
Billings in excess of costs and estimated
earnings on uncompleted contracts 39,858 52,615
Accrued salaries and wages 230,932 203,387
Accrued commissions 57,576 37,996
Accrued expenses, other 836,197 406,285
----------- -----------
Total current liabilities 4,824,220 3,790,341
----------- -----------
LONG-TERM LIABILITIES
Long-term debt, less current portion 935,556 2,649,783
----------- -----------
Total liabilities 5,759,776 6,440,124
----------- -----------
Commitments and contingencies 0 0
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.001 par value; 5,000,000
shares authorized; Class of 10% cumulative
convertible senior preferred stock,
7,550 shares issued and outstanding;
Class of Series B cumulative convertible
senior preferred stock, 16,000 shares
authorized, issued and outstanding 2,262,150 662,150
Common stock, par value $.0001 per share
20,000,000 shares authorized, 2,465,144
shares issued 247 247
Additional paid in capital 1,877,784 1,877,784
Deficit (3,231,335) (2,893,244)
Less: Treasury stock, 95,579 shares at cost 0 0
----------- -----------
Total stockholders' equity (deficit) 908,846 (353,063)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 6,668,622 $ 6,087,061
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
------------------------ -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $3,322,744 $3,414,105 $6,024,501 $5,735,714
Cost of Goods Sold 2,667,049 2,912,447 5,108,265 5,027,621
---------- ---------- ---------- ----------
GROSS PROFIT 655,695 501,658 916,236 708,093
Selling, General and
Administrative Expenses 499,746 422,729 943,290 839,480
---------- ---------- ---------- ----------
INCOME (LOSS) FROM
OPERATIONS 155,949 78,929 (27,054) (131,387)
Other Income 20,249 (16,438) 34,389 47,648
Other expense - write-off of
deferred finance charges 0 (86,569)
Interest Expense, Net (67,404) (127,188) (167,772) (222,519)
---------- ---------- ---------- ----------
NET INCOME (LOSS) BEFORE
PREFERRED DIVIDENDS PAID 108,794 (64,697) (247,006) (306,258)
Preferred dividends earned (66,759) 0 (91,085) 0
---------- ---------- ---------- ----------
Net income (loss) attributable
to Common Shareholders $ 42,035 $ (64,697) $ (338,091) $ (306,258)
========== ========== ========== ==========
Earnings (loss) per common
share $ 0.02 $ (0.03) $ (0.14) $ (0.13)
========== ========== ========== ==========
Fully diluted $ 0.02 $ (0.03) $ (0.14) $ (0.13)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER
OF SHARES 2,369,565 2,331,295 2,369,565 2,331,295
========== ========== ========== ==========
FULLY DILUTED 7,079,565 2,331,295 2,369,565 2,331,295
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30,
----------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) $ (247,006) $ (306,258)
Adjustments to reconcile net (loss) to
net cash provided by operating activities:
Depreciation and amortization 92,442 134,470
Write-off deferred acquisition costs 86,569 0
Net (increase) decrease in noncash current assets
Accounts receivable (450,884) (866,990)
Inventories (94,558) 2,577
Costs and estimated earnings in excess
of billings on uncompleted contracts (183,754) 532,425
Prepaid expenses and other (27,489) (20,190)
NET INCREASE (DECREASE) IN NONDEBT
CURRENT LIABILITIES
Accounts payable 548,922 714,717
Billings in excess of costs and estimated
earnings on uncompleted contracts (12,757) 357,680
Accrued salaries, wages and commissions 47,125 39,786
Accrued expenses, other 429,463 20,923
Increase (decrease) in other assets 38,139 0
----------- -----------
Net cash provided (used in) operating activities 226,212 609,140
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment (65,122) (13,615)
----------- -----------
Net cash used in investing activities (65,122) (13,615)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Net advances (repayments) under revolving
loan agreement 33,489 (7,381)
Payment of long-term debt (127,039) (16,768)
Preferred dividends paid (91,085) 0
Proceeds from issuance of capital stock 0 12,500
Increase in restricted cash 0 (167,894)
----------- -----------
Net cash provided (used) in financing activities (184,635) (179,543)
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (23,545) 415,982
CASH AND CASH EQUIVALENTS, beginning of period 353,465 186,722
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 329,920 $ 602,704
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30,
---------------------------
1995 1994
----------- ----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
NONCASH FINANCING ACTIVITIES
Conversion of Renaissance debt
to preferred stock $ 1,600,000 $ 0
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED APRIL 30, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The unaudited interim consolidated financial statements and related notes have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission and in the opinion of management, all adjustments necessary
for a fair presentation of such financial statements have been included. Such
adjustments consisted only of normal recurring items. Accordingly, certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations.
The accompanying unaudited interim consolidated financial statements and related
notes should be read in conjunction with the financial statements and related
notes included in the Company's Form 10-K for the year ended October 31, 1994.
Certain amounts in the prior period financial statements have been reclassified
to conform to the current period presentation. The results of operations for the
six months ended April 30, 1995 are not necessarily indicative of results to be
expected for the full year.
The corporate structure consists of four companies including Global
Environmental Corp. (Global), the parent corporation. The subsidiaries
include Global Environmental Holdings, Inc. (Global Holdings), Danzer Metal
Works Company, Inc. (Danzer) and Rage Inc. (Rage). Danzer and Rage
are wholly owned subsidiaries of Global Holdings.
REVENUE RECOGNITION
Danzer is principally engaged in the design, manufacture and installation of
sheet metal products and fabrications. Products are normally produced based upon
specifications received from customers. Revenues are recognized when products
are shipped to the customer. Rage is an engineering firm engaged primarily in
the design and assembly of conveying systems for the handling of bulk materials
for industry. Revenues are recognized utilizing the percentage of completion
"cost-to-cost" method of accounting for its contracts.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
Included in inventory is work-in-process of $661,557 at April 30, 1995 and
$616,665 at October 31, 1994.
8
<PAGE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is depreciated on the straight-line method over
the following estimated useful lives:
Building and improvements 10 to 30 years
Equipment 5 to 20 years
2. LONG-TERM DEBT
On May 28, 1993, Danzer entered into a Loan and Security Agreement with Fremont
Financial Corporation (the "Loan Agreement") creating a security position in
Danzer's Accounts Receivable, Inventory, and Real Estate. The agreement permits
Danzer (subject to Fremont's approval) to borrow funds against Accounts
Receivable and Inventory on a Revolving Credit basis up to a maximum advance of
$1,150,000. In addition, Danzer executed a secured Promissory Note (term loan)
with Fremont collateralized by Danzer's machinery and equipment in the amount of
$350,000. As a result, the maximum availability under the Loan and Security
Agreement is $1,500,000. Principal on the term loan is payable in 60 equal
consecutive monthly installments of $5,830.00 commencing July 1, 1993. Interest
under the Loan and Security Agreement (including the term loan) accrues at a
rate of 4.5% above the reference rate announced by Bank of America, NT & SA, San
Francisco, California. It is anticipated that this reference rate will
approximate prime rate. The reference rate as of the date of execution of the
Agreement was 6% per annum. The Company has recently negotiated with Fremont
Financial and received an oral commitment to extend the existing Loan Agreement
until January 28, 1997. The Company expects to execute a loan extension
agreement before July 1, 1995.
In addition, although the mortgage debt of $369,269 on the Company's premises
became due in full on April 1, 1995, the lender had granted the Company a
two-month extension during which discussions were scheduled pertaining to the
possible refinancing of the mortgage with the current lender. The Company was
"current" on April 30, 1995 with respect to this debt. The Company expects to
finalize the mortgage refinancing with the current lender before July 15, 1995.
On December 31, 1994, Renaissance exchanged its 12.5% Convertible Debentures in
the principal amount of $1.6 million (The "Debentures") for 16,000 shares of the
Company's Series B Cumulative Convertible Senior Preferred Stock (the "Series B
Preferred Stock"). The Company also issued Renaissance a 10% Term Note due
December 31, 1997 in the principal amount of approximately $211,635 for unpaid
accrued interest on the Debentures and paid Renaissance $50,000 (representing
interest on the Debentures from October 1, 1994 through December 31, 1994).
Renaissance currently may convert the Series B Preferred Stock into 3,200,000
shares of the Company's common stock at the rate of $.50 per share, subject to
adjustment.
Renaissance may vote the Series B Preferred Stock together with the holders of
the common stock and the 10% Preferred Stock as a single class on all matters
submitted to the vote of the common stockholders, and is entitled to cast the
number of votes equal to the number of shares into which the Series B Preferred
Stock is then convertible. In addition, Renaissance, as the sole holder of the
Series B Preferred Stock, has the right to vote separately as a class to elect
one member of the Board of Directors.
9
<PAGE>
During the fiscal year ended October 31, 1994, Danzer was in default of certain
loan covenants with Fremont. These defaults primarily concerned delivery of
financial statements within 90 days of year-end, limitation on increase in
officers' compensation and the acquisition of certain manufacturing equipment.
The Company has not received a waiver of default concerning these defaults, and
is having discussions with Fremont regarding the defaults and an extension of
the Loan Agreement.
3. COMMITMENTS AND CONTINGENCIES:
Subsidiaries of Global have entered into leases for various equipment and
facilities. Future minimum lease payments under these agreements are as follows
for the years ended October 31:
1995 . . . . $ 4,083
1996 . . . . 3,062
1997 . . . . 0
1998 . . . . 0
1999 . . . . 0
-------
$ 7,145
=======
4. COMMON STOCK:
Under the Company's stock option plan, 800,000 shares of the Company's common
stock have been reserved for issuance pursuant to the plan. As of April 30,
1995, five employees and directors and one former employee have received options
issued under the plan representing a total of 400,000 shares.
5. EARNINGS (LOSS) PER SHARE:
Net income (loss) per share and fully diluted net income (loss) per share
attributable to common shareholders is based on the weighted average number of
shares of common stock and common stock equivalent outstanding during the period
(including the assumed conversion of convertible stock, options and warrants
unless such assumed conversion is anti-dilutive).
6. OPERATIONS AND MANAGEMENT PLANS:
The Company is maximizing its efforts to improve sales revenue and profitability
for fiscal 1995. During the second quarter of 1995, Global received a contract
for a bulk solids conveying system, including environmental control equipment,
having a value exceeding $700,000. The Company continues to aggressively market
the Morrison Truck Body line of equipment to maximize its market share in the
industry. The above should have a positive effect on revenues and profitability.
However, due to the unpredictable direction of the U.S. economy and the lack of
environmental regulation enforcement, the realization of revenue growth cannot
be assured.
10
<PAGE>
If efforts to increase the level of business or obtain additional capital are
unsuccessful, the Company may need to consider additional steps to generate
working capital and improve operating efficiencies to sustain its operations.
Such steps may involve the sale of certain assets, the consolidation of
operating activities, the sale or discontinuance of a line of business,
reductions in staff or other measures, the effect of which is the reduction of
expenses, conservation of cash , and/or generation of working capital. The
Company is continuing to limit cash outlays, aggressively collect accounts
receivable and channel all available resources into its sales function in order
to continue all operations on the basis that it can further increase its backlog
and sales revenue. Based on sales activity in the first two quarters of fiscal
1995, it appears that Global's business is improving, a trend which, if
sustained, should have a favorable impact on fiscal 1995 results. The Company
believes that the long term prospects for the industry in which the Company
operates are positive and therefore offer Global opportunity for revenue growth.
However, revenue growth cannot be assured. In order to sustain operations
through fiscal 1995, the Company will need increased revenues and possibly an
infusion of capital.
11
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Global's sales revenues for the second quarter of fiscal 1995 were $3,322,744
compared to $3,414,105 for the same quarter last year, a decrease of 2.7%. Sales
revenues for the six months ended April 30, 1995 were $6,024,501 compared to
sales revenues of $5,735,714 at the end of April 1994, which represented an
increase of $288,787 or 5.03%. The gross margin for the second quarter of fiscal
1995 was 19.7% vs. 14.7% for the same quarter last year vs. 8.2% for the fiscal
year ended October 31, 1994. The gross margin for the six months ended April 30,
1995 was 15.2% vs. 12.4% for the six month period in 1994. The increase is a
direct effect of improvement in overall production efficiency in the second
quarter of fiscal 1995 relative to fiscal 1994.
Consolidated bookings for the second quarter of fiscal 1995 were approximately
$2,500,000. Based on the current proposal levels, it is anticipated that
bookings will continue to increase for the balance of fiscal 1995. However,
there is no assurance this trend will continue.
Selling, general and administrative costs increased $77,017 over the same
quarter last year and $103,810 over the same six month period ended April 30,
1994. The Company's ratio of selling, general and administrative costs expressed
as a percentage of net sales was 15.0% for the second quarter vs. 12.4% for the
same period last year vs. 14.5% for the year ended October 31, 1994. The ratio
for the six months ended April 30, 1995 was 15.7% vs. 14.6% for the same six
month period in 1994. The increase was due to an unusually high sales commission
paid to sales representatives. The Company continues to monitor its costs in an
effort to improve these ratios.
Interest expense during the second quarter of fiscal 1995 decreased by $59,784
compared to the same period last year and $54,747 for the six month period ended
April 30, 1995 as compared to the six months for 1994. This was due to
conversion of long term debt to Preferred Stock.
The Company's net income (loss) before preferred dividends for the second
quarter and the first six months ending April 30, 1995 was as follows:
APRIL 30, 1995 APRIL 30, 1994
-------------- --------------
Second Quarter $108,794 ($ 64,697)
Six Months (247,006) ( 306,258)
At the present time, the Company's overall business prospects appear to be
trending upward. The Company's bookings of new business during the second
quarter of fiscal 1995 was approximately $2,500,000 which included a turnkey
bulk solids conveying - air pollution control project totaling $700,000. Global
also received several other smaller contracts which also contributed to the
booking level for the quarter.
12
<PAGE>
The Company also has approximately $10,000,000 of active proposals currently
outstanding, including several which are in excess of $1,000,000 in value.
Global's backlog could increase substantially if it is successful in obtaining
these significant contracts. Due to the unpredictable nature and timing of these
projects, it is extremely difficult to predict future bookings and sales volume
levels. Although quotation volume has remained active, there can be no assurance
that this will lead to increased bookings.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by approximately $23,545 from October 31,
1994 to April 30, 1995. Accounts receivable and other current assets at April
30, 1995 increased $478,373 from October 31, 1994 due to increased business
levels. Inventories increased by $94,558 primarily as a result of several major
jobs currently in process. Every effort is being made to receive favorable terms
of payment from customers and to work closely with our vendors.
Other assets decreased by approximately $292,153 primarily due to the write-off
from long term debt to current. The restricted cash will become unencumbered on
March 1, 1996 when the current collateralized letter of credit expires.
The revolving loan balance increased by $33,489 due to the increased business
activity the Company is currently experiencing.
Accrued expenses increased by $429,912 due to costs incurred on projects in
process.
Working capital decreased from October 31, 1994 primarily due to the use of cash
to fund the Company's operating loss. The working capital ratio remained
relatively unchanged from .86:1.00 at October 31, 1994 to April 30, 1995. The
Company's current cash position has led to tighter credit terms with some of its
vendors. Every effort is being made to receiving favorable payment terms from
customers to keep current in payments to vendors.
The Company had a working capital deficiency of approximately $673,956 at April
30, 1995, an increase from a deficiency of approximately $541,111 at October 31,
1994. The increase in the deficiency was primarily due to the reclassification
of the Bedminster facility mortgage due April 1, 1995 ($369,269) and the Fremont
Equipment Loan due May 28, 1995 ($169,167) from long-term to current debt. On
December 31, 1994, Renaissance Capital Partners, Ltd. exchanged the $1,600,000
principal amount of the Company's 12.5% Convertible Debentures for 16,000 shares
of the Company's Series B Cumulative Convertible Senior Preferred Stock.
During the fiscal year ended October 31, 1994, Danzer was in default of certain
loan covenants with Fremont Financial Corporation. These defaults primarily
concerned delivery of financial statements within 90 days of year-end,
limitation on increase in officers' compensation and the acquisition of certain
manufacturing equipment. The Company did not receive a waiver of default
concerning these defaults.
The Company has recently negotiated with Fremont Financial and received an oral
commitment to extend the existing Loan Agreement until January 28, 1997. The
Company expects to execute a loan extension agreement before July 1, 1995.
13
<PAGE>
The Company intends to refinance the mortgage on the Company's Bedminster
facility. The mortgage became due on April 1, 1995, but the lender had granted
the Company a two-month extension during which discussions were scheduled
pertaining to the possible refinancing of the mortgage with the current lender.
The Company also intends to explore the possibility of obtaining a mortgage on
the Danzer facility to provide longer term financing for the Company. Under the
Fremont Loan and Security Agreement, the Danzer facility represents additional
back-up collateral for the revolving credit facility and term loan. If the
Company does obtain a mortgage on the Danzer facility, it is anticipated that an
adjustment in the collateral held by Fremont will be required.
In light of the Company's backlog at April 30, 1995, projected cash flow from
operations, the market for the Company's products and the amount of short-term
debt due in fiscal 1995, it is anticipated that the Company may need increased
sales, profit margins and/or an infusion of capital in order to sustain its
operations. The Company recognizes that the proceeds received from its recent
equity offering may not be sufficient to fund its current backlog and provide
sufficient working capital for the remainder of fiscal 1995. The Company's
ability to meet certain interest and principal payments, as well as working
capital needs to execute backlog and generate sales volume during the remainder
of fiscal 1995, will be dependent on the success of the Company's efforts to
increase sales volume, as well as the profitability of new business. If it
becomes likely that the Company is unable to meet its scheduled interest and
principal payments on its debt securities, the Company may need to examine the
restructuring of these instruments or the sale of certain assets to satisfy all
or a portion of these outstanding liabilities.
If efforts to increase the level of business, increase profitability or obtain
additional capital are unsuccessful, the Company may need to consider additional
steps to reduce costs, generate working capital and improve operating
efficiencies to sustain its operations. Such steps may involve the sale of
certain assets, the consolidation of operating activities, the sale or
discontinuance of a line of business, reductions in staff or other measures, the
effect of which is the reduction of expenses, conservation of cash, and/or
generation of working capital. The Company is also currently attempting to limit
outlays, aggressively collect accounts receivable and channel all available
resources into its sales function in order to continue all operations on the
basis that it can further increase its backlog and sales revenue. Based on sales
activity in the first two quarters of fiscal 1995, it appears that Global's
business is improving, a trend which, if sustained, should have a favorable
impact of fiscal 1995 results. The Company believes that the long term prospects
for the industry in which the Company operations are positive and therefore
offer Global opportunity for revenue growth. However, revenue growth cannot be
assured. In order to sustain operations through fiscal 1995, the Company will
need increased revenues and profitability.
14
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings.
In November 1994, Jonathan Daniels & Co. and Ray Vahab d/b/a Small Cap Research,
plaintiffs, filed a complaint against Global Environmental Corp. and William V.
Rice, its President, in the Supreme Court of the State of New York, County of
New York, Index No. 129426 (1994). The complaint claimed fees and commissions in
the amount of $500,000 in connection with plaintiff's alleged representation as
placement agent for a private placement that was never consummated. On April 13,
1995, the Company and the plaintiffs agreed to a settlement of $12,880 of which
50% ($6,440) was paid on May 1, 1995 and $6,440 is payable on or before June 15,
1995.
ITEM 6 Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - None
15
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Global Environmental Corp.
/s/ William V. Rice
Dated: June 13, 1995 By: -------------------------
President and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 497814
<SECURITIES> 0
<RECEIVABLES> 2111718
<ALLOWANCES> 71883
<INVENTORY> 1263188
<CURRENT-ASSETS> 4150264
<PP&E> 4633045
<DEPRECIATION> 2241075
<TOTAL-ASSETS> 6668622
<CURRENT-LIABILITIES> 4824220
<BONDS> 935556
<COMMON> 247
0
2262150
<OTHER-SE> (1353551)
<TOTAL-LIABILITY-AND-EQUITY> 6668622
<SALES> 6024501
<TOTAL-REVENUES> 6024501
<CGS> 5108265
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</TABLE>
