<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 July 31, 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 (IRS 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 July 31, 1995
------------ --------------
$.0001 par value 2,369,565 shares
<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 14
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
JULY 31, OCTOBER 31,
1995 1994
-------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 220,362 $ 353,465
Accounts receivable, less allowance for
doubtful accounts of $82,383 and
$55,961 respectively 1,771,107 1,588,951
Inventories 1,138,723 1,168,630
Cost and estimated earnings in excess of
billings on uncompleted contracts 101,459 50,972
Restricted cash 167,894
Prepaid expenses and other 156,350 87,212
---------- ----------
Total current assets 3,555,895 3,249,230
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 150,797 150,797
Building and improvements 1,823,825 1,823,825
Equipment 2,664,790 2,593,301
---------- ----------
4,639,412 4,567,923
Less: Accumulated depreciation and
amortization (2,287,852) (2,148,633)
---------- ----------
Total property, plant and
equipment, net 2,351,560 2,419,290
---------- ----------
OTHER ASSETS
Investment in joint venture 11,634 8,630
Restricted cash 0 167,894
Goodwill, net of amortization of $30,760
and $26,917 respectively 71,436 75,279
Other, net 28,896 166,738
---------- ----------
Total other assets 111,966 418,541
---------- ----------
TOTAL ASSETS $ 6,019,421 $ 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
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
JULY 31, OCTOBER 31,
1995 1994
-------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Revolving loan $ 894,665 $ 933,530
Current portion of long-term debt 866,060 692,209
Accounts payable 1,738,996 1,464,319
Billings in excess of costs and estimated
earnings on uncompleted contracts 101,392 52,615
Accrued salaries and wages 143,799 203,387
Accrued commissions 72,206 37,996
Accrued expenses, other 554,454 406,285
---------- ----------
Total current liabilities 4,371,572 3,790,341
---------- ----------
LONG-TERM LIABILITIES
long-term debt, less current portion 698,675 2,649,783
---------- ----------
Total liabilities 5,070,247 6,440,124
---------- ----------
Commitments and contingencies 0 0
---------- ----------
STOCKHOLDER'S EQUITY (DEFICIENCY)
Common stock, par value $.0001 per share;
20,000,000 shares authorized;
2,465,144 shares issued. 247 247
Preferred stock, .001 par value; 5,000 shares
authorized; Class of 10% cumulative
convertible senior preferred stock,
10,500 shares authorized, 7,500 shares
issued and outstanding; Class of Series B
cumulative convertible senior preferred
stock, 16,000 shares authorized issued
and outstanding 1995; No shares issued,
1994. 2,262,150 662,150
Additional paid in capital 1,877,784 1,877,784
Deficiency (3,191,007) (2,893,244)
Less: Treasury stock, 95,579 shares
at cost 0 0
---------- ----------
Total stockholder's equity (deficiency) 949,174 (353,063)
LIABILITIES AND STOCKHOLDER'S EQUITY
(DEFICIENCY) $6,019,421 $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 Nine months ended
------------------ -----------------
July 31, July 31,
------------------ -----------------
1995 1994 1995 1994
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $3,303,288 $3,289,381 $9,327,789 $9,025,095
Cost of goods sold 2,671,522 3,066,890 7,779,787 8,094,511
---------- --------- ---------- ----------
Gross profit 631,766 222,491 1,548,002 930,584
---------- --------- ---------- ----------
Selling, general and
administrative expenses 474,550 378,355 1,417,840 1,217835
---------- --------- ---------- ----------
Income (loss) from operations 157,216 (155,864) 130,162 (287,251)
---------- --------- ---------- ----------
Other income 5,034 10,311 39,423 57,959
Other expense - write-off of
deferred finance charges 0 0 (86,569) 0
Interest expense, net (63,048) (93,537) (230,820) (316,056)
---------- --------- ---------- ----------
Net income (loss before
preferred dividends
earned 99,202 (239,090) (147,804) (545,348)
Preferred dividends earned (58,874) 0 (149,959) 0
---------- --------- ---------- ----------
Net income (loss) attributable
to Common Shareholders $ 40,328 $ (239,090) $ (297,763) $ (545,348)
---------- --------- ---------- ----------
---------- --------- ---------- ----------
Earnings (loss) per common share:
Primary $ 0.02 $ (0.10) $ (0.13) $ (0.23)
---------- --------- ---------- ----------
---------- --------- ---------- ----------
Fully diluted $ 0.02 $ (0.10) $ (0.13) $ (0.23)
---------- --------- ---------- ----------
---------- --------- ---------- ----------
Weighted average
shares outstanding 2,369,565 2,369,565 2,369,565 2,359,411
---------- --------- ---------- ----------
Fully diluted 2,369,565 2,369,565 2,369,565 2,359,411
---------- --------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
5
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1995 1994
-------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $147,804 $545,348
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 139,219 203,761
Write-off of deferred acquisition costs 86,569 0
NET (INCREASE) DECREASE IN NONCASH CURRENT
ASSETS:
Accounts receivable (182,156) (141,209)
Inventories 29,907 113,552
Costs and estimated earning in excess of
billings on uncompleted contracts (50,487) 606,053
Prepaid expenses and other (69,138) (19,348)
NET INCREASE (DECREASE) IN NONDEBT CURRENT
LIABILITIES:
Accounts payable 274,677 (520,664)
Billings in excess of costs and
estimated earnings on uncompleted
contracts 48,777 16,172
Accrued salaries, wages and commissions (25,378) (694)
Accrued expenses, other 149,008 543,844
Increase (decrease) in other assets 51,273 0
-------- --------
Net cash provided by operating activities 304,467 256,119
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property (71,489) (85,712)
-------- --------
Net cash used in investing activities (71,489) (85,712)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Net (repayments) advances under revolving
loan agreement (38,865) (106,894)
Proceeds from the issuance of long-term
debt 0 0
Payment of long-term debt (177,257) (44,731)
Preferred dividends paid (149,959) 0
Proceeds from issuance of capital stock 12,500
Increase in restricted cash 0 (167,894)
-------- --------
Net cash (used) in financing activities (366,081) (307,019)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (133,103) (136,612)
CASH AND CASH EQUIVALENTS, beginning of period 353,465 186,722
-------- --------
CASH AND CASH EQUIVALENTS, end of period $220,362 $ 50,110
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
6
<PAGE>
GLOBAL ENVIRONMENTAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1995 1994
-------- -----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
NONCASH FINANCIAL ACTIVITIES
Renaissance conversion of 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 NINE MONTHS ENDED JULY 31, 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 nine months
ended July 31, 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 and air pollution
control 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 inventory is work-in-process of $661,557 at July 31,
1995 and $616,665 at October 31, 1994.
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
8
<PAGE>
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
executed a written commitment to extend the existing Loan Agreement
until January 28, 1997.
In addition, although the mortgage debt of $369,269 on the Company's
premises became due in full on April 1, 1995, the lender has granted the
Company an extension to October 31, 1995. Discussions are continuing
regarding the refinancing of the mortgage with the current lender. The
Company continues to abide by the terms of the extended mortgage and was
current as July 31, 1995 and as of the date this report. The Company
expects to finalize the mortgage refinancing with the current lender in
the near future. As of this date the mortgage refinancing has not been
finalized.
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.
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
received an oral waiver of these defaults and a written waiver is
expected by September 30, 1995.
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
--------
9
<PAGE>
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 July 31, 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 third quarter of 1995, Global
received contracts for a bulk solids conveying system, including
environmental control equipment, having an aggregate value exceeding
$500,000. 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.
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 three 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.
10
<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 third quarter of fiscal 1995 were
$3,303,288 compared to $3,289,381 for the same quarter last year, a
increase of .4%. Sales revenues for the nine months ended July 31, 1995
were $9,327,789 compared to sales revenues of $9,025,095 at the end of
July 1994, which represented an increase of $302,694 or a 3.4%. The
gross margin for the third quarter of fiscal 1995 was 19.1% vs. 6.8% for
the same quarter last year vs. 8.2% for the fiscal year ended October
31, 1994. The gross margin for the nine months ended July 31, 1995 was
16.6% vs. 10.3% for the nine month period in 1994. The increase is a
direct effect of improvement in overall production efficiency in the
third quarter of fiscal 1995 relative to fiscal 1994.
Consolidated bookings for the third quarter of fiscal 1995 were
approximately $3,000,000. 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 $96,195 over the
same quarter last year and $200,005 over the same nine month period
ended July 31, 1994. The Company's ratio of selling, general and
administrative costs expressed as a percentage of net sales was 14.4%
for the third quarter vs. 11.5% for the same period last year vs. 14.5%
for the year ended October 31, 1994. The ratio for the nine months
ended July 31, 1995 was 15.2% vs. 13.5% for the nine month period in
1994. The increase was due to sales commission and staffing to support
and increase current revenue. The Company continues to monitor its
costs in an effort to improve these ratios.
Interest expense during the third quarter of fiscal 1995 decreased by
$30,489 compared to the same period last year and $85,236 for the nine
month period ended July 31, 1995 as compared to the nine 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 third
quarter and the nine months ending July 31, 1995 was as follows:
July 31,1995 July 31, 1994
------------ -------------
Third Quarter $ 99,202 ($239,090)
Nine Months (147,804) ( 545,348)
At the present time, the Company's overall business prospects appear to
be stable. The Company's bookings of new business during the third
quarter of fiscal 1995 was approximately $3,000,000 which included a
turnkey bulk solids conveying air pollution control project totaling
$500,000. Global also received several other smaller contracts which
also contributed to the booking level for the quarter.
The Company also has approximately $12,000,000 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.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by approximately $133,103 from
October 31, 1994 to July 31,1995. Accounts receivable and other current
assets at July 31, 1995 increased $251,294 from October 31, 1994 due to
increased business levels. Inventories decreased by $29,907 primarily
as a result of completing several major jobs and working closely with
our vendors.
Other assets decreased by approximately $306,575 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 decreased by $38,865 due to the normal
business activity the Company is currently experiencing.
Accrued expenses increased by $148,169 from October 31, 1994 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 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 $815,677 at July 31,
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
received an oral waiver of default concerning these defaults and a
written waiver is expected from Fremont by September 30, 1995.
The Company has recently negotiated with Fremont Financial and executed
a commitment to extend the existing Loan Agreement until January 28,
1997.
The Company intends to refinance the mortgage on the Company's
Bedminster facility. The mortgage became due on April 1, 1995, but the
lender has granted the Company an extension to October 31, 1995.
Discussions are continuing regarding the refinancing of the mortgage
with the current lender. As of the date of this report, the mortgage
refinancing has not been finalized although the Company is current in
its payments under the extended terms. 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 July 31, 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
12
<PAGE>
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 three 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.
13
<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 was paid on June
15, 1995.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Shareholders on May 22, 1995.
William V. Rice, Russell Cleveland and William L. Pryor III were elected
directors for a term of one year. Shareholders also approved the
appointment of Rudolph, Palitz LLP to act as the Company's independent
public accountants for the fiscal year ending October 31, 1995. No
other matters were acted on at the Annual Meeting.
The Shareholders voted to approve the matters referenced above as
follows:
ELECTION OF DIRECTORS:
Name No. For No. Against No. Withheld
-------------------- ----------- ----------- ------------
William V. Rice 5,752,655.5 0 7,390.0
Russell G. Cleveland 5,752,610.5 0 7,435.0
William L Pryor III 5,752,610.5 0 7,435.0
APPOINTMENT OF PUBLIC ACCOUNTANT:
Rudolph, Palitz LLP 5,754,080.5 3,257.0 2,708.0
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Incorporated by reference
Exhibit No. Description or Filed herewith
----------- ----------- -------------------------
10.1 Extension to Loan Agreement Filed herewith
between Fremont Financial
Corporation and the Company
dated June 23, 1995
(b) Reports on Form 8-K - None
14
<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.
Dated: September __, 1995 By:
---------------------------
President and
Chief Financial Officer
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.
By: /s/ William V. Rice
Dated: September __, 1995 --------------------------
President and
Chief Financial Officer
16
<PAGE>
GLOBAL ENVIRONMENTAL CORP AND SUBSIDIARY
Sequentially numbered
Exhibit No. Description Page
----------- --------------------------- ---------------------
10.1 Extension to Loan Agreement 17
between Fremont Financial
Corporation and the Company
dated June 23, 1995
27. Financial Data Schedule
17
<PAGE>
GLOBAL ENVIRONMENTAL CORP AND SUBSIDIARY
EXHIBIT NO. 10.1
THIRD AMENDMENT
TO LOAN AND SECURITY AGREEMENT
BETWEEN DANZER METAL WORKS COMPANY
AND FREMONT FINANCIAL CORPORATION
This THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is made as of June 23,1 995 by and between FREMONT FINANCIAL
CORPORATION ("Fremont") and DANZER METAL WORKS COMPANY ("Borrower"), in light
of the following:
WHEREAS, Borrower and Fremont entered into a Loan and Security
Agreement dated May 28, 1993 (as amended from time to time, the "Loan
Agreement": Capitalized terms used herein shall have them earnings set forth
in the Loan Agreement unless specifically defined herein); and
WHEREAS, Borrower and Fremont wish to amend the Loan Agreement as
set forth herein.
NOW THEREFORE, in consideration of the mutual promises and
agreements of the parties hereinafter set forth and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged the parties hereto agree as follows:
1. The first sentence of Section 3.1 of the Loan Agreement is
deleted in its entirely and replaced with the following:
3.1 This Agreement shall become effective upon acceptance by
Fremont and shall continue in full force and effect for a term ending January
31, 1997 (the Renewal Date) and from year to year thereafter, unless sooner
terminated pursuant to the terms hereof.
2. Borrower reaffirms, ratifies and confirms its Obligations
under the Loan Agreement, acknowledges that all the terms and conditions in
the Loan Agreement (except as amended herein) remain in full force and
effect and further acknowledges that the security interest granted to Fremont
in the Collateral is valid and perfected.
3. Borrower is not aware of any events which now constitute, or
with the passage of time or the giving of notice would constitute ,an Event
of Default under the Loan Agreement.
17
<PAGE>
4. This Amendment constitutes the entire agreement of the parties
in connection with the agreement of the parties in connection with the
subject matter of this Agreement and cannot be changed or terminated orally.
All prior agreements, understandings, representations, warranties and
negotiations regarding the subject matter hereof, if any, are merged into
this Amendment.
5. This Amendment may be executed in counterparts, each of which,
when so executed and delivered shall be deemed an original, and all of such
counterparts together shall constitute but one and the same agreement.
6. This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, Borrower and Fremont have executed this
Amendment as of the date first written above.
FREMONT FINANCIAL CORPORATION,
a California corporation,
By: ____________________________
Print Name:
Title/Capacity:
DANZER METAL WORKS COMPANY,
a Maryland corporation,
By: ____________________________
Print Name:
Title/Capacity:
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000825521
<NAME> vw3h$usn
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1994
<PERIOD-END> JUL-31-1995
<CASH> 220362
<SECURITIES> 0
<RECEIVABLES> 1771107
<ALLOWANCES> 82383
<INVENTORY> 1138723
<CURRENT-ASSETS> 3555895
<PP&E> 4639412
<DEPRECIATION> 2287852
<TOTAL-ASSETS> 6019421
<CURRENT-LIABILITIES> 4371572
<BONDS> 0
<COMMON> 247
0
2262150
<OTHER-SE> (1313223)
<TOTAL-LIABILITY-AND-EQUITY> 6019421
<SALES> 9327789
<TOTAL-REVENUES> 9327789
<CGS> 7779787
<TOTAL-COSTS> 7779787
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 230820
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (297763)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
