<PAGE>
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ________ to ________
Commission File Number 0-1561
GREEN ISLE ENVIRONMENTAL SERVICES, INC.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0780999
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
410 - 11th Avenue South, Hopkins, Minnesota 55343
--------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
612/935-7798
--------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during past 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 August 10, 1995 there were outstanding 3,191,520 shares of the
registrant's common stock, par value $.18-3/4 per share.
Traditional Small Business Disclosure Format (check one)
Yes X . No. .
--- ---
1
<PAGE>
PART I. FINANCIAL INFORMATION.
------------------------------
ITEM 1. FINANCIAL STATEMENTS.
-----------------------------
GREEN ISLE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
1995 1994 1995 1994
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net sales $3,070,189 $3,134,195 $6,050,963 $6,865,479
Less:
Cost of sales 2,389,218 2,268,319 4,608,430 5,264,275
Depreciation 149,309 151,430 298,479 305,030
------------ ------------ ------------ -----------
GROSS PROFIT 531,662 714,446 1,144,054 1,296,174
Selling, general and administrative expenses 594,003 459,744 1,147,138 925,780
Depreciation 28,605 22,634 55,560 44,840
------------ ------------ ------------ -----------
OPERATING INCOME (90,946) 232,068 (58,644) 325,554
Other income (expenses):
Interest income 2,346 1,915 4,621 4,763
Interest expense (101,569) (97,078) (195,554) (186,632)
Management fees 30,000 30,000 60,000 60,000
Other, net 15,165 14,984 41,777 (8,708)
------------ ------------ ------------ -----------
TOTAL OTHER EXPENSE (54,058) (50,179) (89,156) (130,577)
------------ ------------ ------------ -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (145,004) 181,889 (147,800) 194,977
------------ ------------ ------------ -----------
Discontinued Operations:
Loss from discontinued waste processing operations (539,270) (539,300) (1,077,678) (1,197,700)
------------ ------------ ------------ -----------
NET LOSS ($684,274) ($357,411) ($1,225,478) ($1,002,723)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Net loss per common share data:
Income (loss) from continuing operations ($0.04) $0.06 ($0.04) $0.06
Loss from discontinued operations (0.17) (0.17) (0.34) (0.37)
------------ ------------ ------------ -----------
NET LOSS PER SHARE ($0.21) ($0.11) ($0.38) ($0.31)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Weighted average number of shares outstanding 3,191,520 3,191,520 3,191,520 3,191,520
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
2
<PAGE>
GREEN ISLE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($3,205) $209,192
Investments, restricted 250,000 250,000
Accounts receivable, net of allowances of $7,862 at
June 30, 1995 and $20,685 at December 31, 1994 1,446,262 1,387,124
Inventories 1,330,038 917,329
Other current assets 13,448 23,828
Other assets held for sale 50,000 50,000
-------------- ------------
TOTAL CURRENT ASSETS 3,086,543 2,837,473
Net property, plant and equipment 4,451,552 4,425,257
Other assets 485,683
-------------- ------------
TOTAL ASSETS $8,023,778 $7,262,730
-------------- ------------
-------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Debt of Eden Prairie facility guaranteed by parent
company, including accrued interest of $2,195,393
and $1,117,716 at June 30, 1995 and
December 31, 1994, respectively $17,703,756 $16,626,079
Current maturities of long-term debt 170,301 151,981
Borrowings under line of credit 1,891,927 2,063,477
Accounts payable, trade 1,010,634 602,340
Accrued expenses 899,343 613,157
-------------- ------------
TOTAL CURRENT LIABILITIES 21,675,961 20,057,034
Long-term debt, less current maturities 389,620 267,385
Other long-term liabilities 488,373 243,009
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, par value $.01 per share;
authorized 2,500,000 shares; none issued
Common stock, par value $.1875 per share;
authorized 9,000,000 shares; issued and
outstanding: 3,191,520 shares at June 30, 1995
and December 31, 1994 598,410 598,410
Additional paid-in capital 13,710,596 13,710,596
Accumulated deficit (28,839,182) (27,613,704)
-------------- ------------
TOTAL STOCKHOLDERS' DEFICIT (14,530,176) (13,304,698)
-------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $8,023,778 $7,262,730
-------------- ------------
-------------- ------------
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE>
GREEN ISLE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents For the Six Months Ended June 30,
---------------------------------------------------------------------------------------------------
1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,225,478) ($1,002,723)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization 393,356 349,870
Gain on sales of assets (10,204) (146,496)
Provision for writedown of assets of discontinued operations
held for sale and accrual of holding period costs 253,837
Provision for writedown of inventories / equipment 74,639
Changes in operating assets and liabilities:
Accounts receivable (59,137) (469,916)
Inventories (412,709) 466,029
Other assets (19,620) 45,189
Accounts payable 408,294 (276,619)
Accrued expenses (primarily interest) 1,309,227 872,974
---------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 383,729 166,784
---------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment 35,000 279,450
Cash paid to purchase Sollami product line (195,000)
Additions to property, plant and equipment (179,106) (103,419)
---------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (339,106) 176,031
---------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term debt (85,469) (60,800)
Proceeds from short term borrowings 5,875,202 6,501,475
Repayment of short term borrowings (6,046,753) (6,737,188)
---------------------------------------------------------------------------------------------------
Net Cash Used by Financing Activities (257,020) (296,513)
---------------------------------------------------------------------------------------------------
Net Increase (decrease) in Cash and Cash Equivalents (212,397) 46,302
Cash and Cash Equivalents, Beginning of Period 209,192 321,963
---------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period ($3,205) $368,265
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for interest $192,970 $185,825
Noncash investing and financing activities:
Purchase of equipment in exchange for notes payable $226,024
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE>
Green Isle Environmental Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. FINANCIAL STATEMENTS:
The unaudited consolidated financial statements of Green Isle Environmental
Services, Inc., and Subsidiaries (the Company) for the three and six month
periods ended June 30, 1995 and 1994 reflect, in the opinion of management,
all adjustments (which include only normal recurring adjustments except as
described below) necessary to fairly state the results of the operations
(including discontinued operations) for the interim period. The
consolidated results of operations for any interim period are not
necessarily indicative of results expected for the full year. The
unaudited consolidated interim financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Company's 1994 Form 10-KSB.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. SELECTED BALANCE SHEET INFORMATION:
Inventories:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
Raw material and supplies $ 324,400 $ 340,631
Work in process 1,005,638 576,698
----------- ------------
$ 1,330,038 $ 917,329
Property, plant & equipment:
Land and related improvements $ 206,995 $ 206,995
Building 3,044,442 2,980,608
Machinery and equipment 7,243,724 7,071,605
Office equipment 635,245 602,537
Molds, fixtures and tooling 31,869
Autos and trucks 42,112 42,112
----------- ------------
Total $11,204,387 $10,903,857
Less: accumulated depreciation 6,752,835 6,478,600
----------- ------------
$ 4,451,552 $ 4,425,257
----------- ------------
----------- ------------
</TABLE>
5
<PAGE>
2. SELECTED BALANCE SHEET INFORMATION (cont'd):
Other assets held for sale:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
Container manufacturing equipment $ 50,000 $ 50,000
Total $ 50,000 $ 50,000
----------- ------------
----------- ------------
Accrued Expenses:
Interest, excluding accrued interest associated
with Eden Prairie debt $ 30,827 $ 28,243
Payroll, benefits and related taxes 373,902 291,699
Legal and accounting 83,039 104,850
Accrued container warranty 136,195 140,000
Product acquisition expenses 115,760
Accrued retirement and consulting 60,504 38,496
Accrued real estate taxes 78,902
Other 20,214 9,869
----------- ------------
Total $899,343 $613,157
----------- ------------
----------- ------------
</TABLE>
3. DISCONTINUED OPERATIONS AND RELATED DEBT:
As described in Notes 2 and 3 of the Notes to Consolidated Financial
Statements in the 1994 Form 10-KSB, the Company ceased operations of its
Eden Prairie facility (EPR) effective January 1, 1994 and has undertaken a
formal plan to dispose of its other remaining waste processing operations.
The loss from discontinued operations in the second quarter of 1995
includes accrued interest (including default rate interest) through
June 30, 1995. The Company will continue to accrue interest in future
periods through the date of a final settlement of the debt. The loss from
discontinued operations for the three months ended June 30, 1995 consists
of accrued interest of $539,270.
As previously announced, the Company closed on the sale of all of the
assets of EPR for $3.8 million on September 1, 1994. A gain of $1,914,534
on the sale of the EPR assets was recorded in the third quarter of 1994.
The net proceeds of $3,768,809 from the sale have been used to repay a
portion of the debt underlying the EPR facility. The Company has retained
all liabilities of EPR, including the balance of the loan underlying the
facility which is guaranteed by the Company.
As previously announced, on September 12, 1994, the Company entered into a
settlement agreement with the lender of the debt underlying EPR whereby
the lender agrees not to pursue its rights against the Company under the
parent guarantee of the EPR debt in return for the following:
6
<PAGE>
1. A Senior Subordinated Secured Note to the lender for $2,750,000 with
interest at 8% per year. Interest will be payable monthly on the
principal balance from time to time remaining unpaid. Principal
payments of $75,000 will be payable quarterly beginning in 1997 and
ending on July 1, 1999, when all outstanding principal and interest
is due.
2. A Junior Subordinated Secured Note to the lender for $1,000,000 with
interest to accrue at 8% per year; principal and interest will be
paid from excess cash flow from operations, if any, with all
outstanding principal and accrued interest due on July 1, 1999.
3. A Net Operating Loss Sharing Agreement under which the Company will
make annual payments to the lender of an amount equal to any tax
savings related to use of up to $15,000,000 in net operating loss
carryforwards.
The Company has also preliminarily agreed to issue to the lender, a
warrant to purchase 3,178,780 shares of Common Stock, exercisable
only in the event of an "ownership change" with respect to the
Company for purposes of Section 382(g) (1) of the Internal Revenue
Code of 1986, as amended. The ownership change would effectively
eliminate the net operating loss sharing Agreement obligation
((3) above) and result in the effective contribution of any remaining
balance of the NOL Sharing Agreement obligation to contributed
capital (shareholders' equity).
Management is currently negotiating definitive agreements with the lender,
although there can be no assurance that a definitive agreement will be
reached.
4. ACQUISITION OF PRODUCT LINE:
On January 9, 1995, the Company purchased the assets, inventory, patents
and patent applications, trademarks and goodwill associated with the Rotary
Vane Actuator business of The Sollami Company. The purchase price was
$326,154 plus contingent payments equal to 8% of net sales made each month,
for the 48 months beginning in February 1995, of rotary vane actuators and
related parts. The total cumulative guaranteed minimum contingent payments
are $295,000, with scheduled amounts due in each of the 4 years. To the
extent cumulative monthly contingent payments do not equal the guaranteed
minimum contingent payment for any 12 month period, the Company will be
required to make an additional payment sufficient to achieve the guaranteed
minimum payment for that year. The excess of acquisition cost over amounts
assigned to the net identifiable assets acquired (goodwill) is being
amortized on a straight line basis over fifteen years. Other identifiable
intangible assets include value assigned to patents, and a covenant not to
compete. Values assigned to patents are carried at cost less accumulated
amortization calculated on a straight line basis over their estimated
useful lives, which range from seven to fourteen years. The value assigned
to the covenant not
7
<PAGE>
to compete is being amortized on a straight line basis over seven years.
5. ASSET-BASED SHORT-TERM FINANCING ARRANGEMENT:
In January 1995, the Company amended its loan and security agreement with
its asset based lender. The key elements to the amendment include reducing
the short-term demand line of credit to $4,500,000, increasing interest on
borrowings to prime plus 3.75%, and increasing available borrowing by
$125,000 by increasing the advance rate on the certificate of deposit which
partially collateralizes borrowings under the line of credit. Funds
available to the Company pursuant to terms of the line of credit agreement
are dependent upon the level of eligible accounts receivable and plant and
equipment, as defined. The Company is in violation of certain financial
and technical covenants of this agreement and a cross-default covenant due
to the defaults described in Notes 6 and 6(a) of the Notes to the
Consolidated Financial Statements in the Company's 1994 Form 10-KSB. As a
result of these default conditions, the lender may, at its sole discretion
declare the Company in default, discontinue making advances to the Company
and demand immediate repayment of borrowings under the line of credit. If
the lender will continue making advances to the Company, additional
borrowing capacity under this line of credit is approximately $54,000 at
August 8, 1995.
6. AGREEMENT TO SELL REUTER RECYCLING OF FLORIDA, INC.:
Effective June 1, 1995, the Company entered into an agreement to sell all
of its stock of Reuter Recycling of Florida, Inc., which had been pledged
by the Company to the construction lender of Reuter Recycling of Florida,
Inc., to an unrelated third party. As discussed in Note 4 to the
Consolidated Financial Statements contained in the 1994 Form 10-KSB,
because Reuter Recycling of Florida, Inc. had previously been
deconsolidated from the Company's consolidated financial statements and
the Company will receive no proceeds from the sale, the transaction will
have no impact on the Company's financial position or results of
operations. The management agreement between Green Isle and Reuter
Recycling of Florida, Inc. will be terminated upon the close of the sale.
7. RECLASSIFICATION:
Certain reclassifications have been made to the 1994 consolidated financial
statements in order to conform with the June 30, 1995 presentation. These
reclassifications did not change the Company's previously reported
financial position or results of operations.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
CONTINUING MANUFACTURING OPERATIONS:
Continuing operations consist primarily of the precision machining
business, which is primarily the manufacture of certain medical
products and other precision machined parts on a contract basis. The
Company has sold most of the equipment used in its plastics
manufacturing operations and substantially all plastics manufacturing
ceased effective August, 1994.
The Company's net revenues from continuing operations for the second
quarter of 1995 decreased by approximately 2% from the same period in
1994. The Company's net revenues for the six months ended June 30,
1995 were $6,050,963 compared to $6,865,479 for the same period in
1994, a decrease of approximately 12%. The decrease in both periods
was due primarily to the elimination of sales to Seagate Technology,
Inc. ("Seagate"), which effectively ceased after the first quarter
of 1994 coupled with reduced sales from the plastics manufacturing
operations which effectively ceased in August 1994.
Gross profit was 17.3% of net sales for the second quarter of 1995
compared to 22.8% of net sales for the second quarter of 1994. Gross
profit was 18.9% for the six month periods ending June 30, 1995 and
June 30, 1994, respectively. The lower gross profit for the quarter
ending June 30,1995 was primarily due to additional staffing
requirements to enhance the development of the Company's proprietary
products along with increases in manufacturing supplies used in the
production of industrial and proprietary products. The gross margin
for the six months ending June 30, 1995 and June 30, 1994 were the
same and mostly volume related. Medical product sales from the
Company's two principal customers accounted for over 68% of net sales
in the second quarter of 1995 compared to 65% of net sales in the
second quarter of 1994. For the six months ended June 30, 1995,
medical product sales accounted for 70% of net sales compared to 50%
of net sales for the same period in 1994.
Selling, general and administrative expenses were $622,608 for the
second quarter of 1995 compared to $482,378 for the same period in
1994. Selling, general and administrative expenses for the six
months ended June 30, 1995, were $1,202,698 compared to $970,620 for
the same period in 1994. The increase in these expenses is primarily
due to higher selling expenses related to marketing of proprietary
products (primarily oil centrifuge units) and legal and accounting
costs related to pursuing restructuring of the debt underlying the
EPR facility.
9
<PAGE>
Other income (expense) did not change significantly for the quarters
ending June 30, 1995 and June 30, 1994, respectively. Other expense
for the six months ending June 30 1995 was $89,156 compared to
$130,577 for the six months ending June 30, 1994. The decrease was
attributable to the Company renting excess warehouse space beginning
in 1995 and also gains on the sale of some assets sold during 1995.
The Company had no taxable income, and accordingly, recorded no
provision for income taxes during the quarters ended June 30, 1995
and 1994.
During the second quarter of 1995, the Company's loss from continuing
operations was $145,004 or $.04 per share compared to income from
continuing operations of $181,889 or $.06 per share for the same
period in 1994. For the six months ended June 30, 1995, loss from
continuing operations was $147,800 or $.04 per share compared to
income from continuing operations of $194,977 or $.06 per share for
the same period in 1994. The loss from continuing operations for the
first six months of 1995 compared to the income in 1994 has been due
to revenue reductions (phaseout of revenues from Seagate and reduced
plastics revenues), staffing increases to enhance development and
marketing of proprietary products (oil centrifuges and rotary vane
actuators), and substantial professional expenses related to the
continuing troubled debt restructuring of the debt underlying the
Eden Prairie facility that is guaranteed by the Company.
10
<PAGE>
DISCONTINUED WASTE PROCESSING OPERATIONS:
As described in Notes 2 and 3 of the Notes to Consolidated Financial
Statements in the Company's 1994 Form 10-KSB, the Company undertook a
formal plan to dispose of its remaining waste processing and recycling
operation located in Eden Prairie, Minnesota during the fourth quarter
of 1993. The Company wrote-down the carrying value of this facility
to its estimated net realizable value, which resulted in a charge
against earnings of $10,800,000 in 1993. The Eden Prairie facility
ceased operations effective January 1, 1994 and on September 1, 1994
the Company closed on the sale of all of the assets of EPR, Inc., a
wholly owned subsidiary of the Company ("EPR") for approximately
$3.8 million.
The proceeds from the sale of the assets of EPR have been used to
repay a portion of the debt originally underlying the EPR facility.
The Company retained all liabilities of EPR, including the balance of
the loan underlying the facility (the "EPR loan") which is guaranteed
by the Company. The loss from discontinued operations during the
second quarter of 1995 consists of continuing interest accruals of
$539,270 related to the underlying debt. This accrual does not
include an accrual for estimated interest that will be incurred on the
debt underlying the EPR loan between July 1, 1995 and the date of
final settlement, due to uncertainty of the timing of the ultimate
settlement. As described in Note 3 "Discontinued Operations and
Related Debt" in this Form 10-QSB, the Company entered into a
preliminary settlement agreement with the lender of the debt
underlying EPR on September 12, 1994. Management is currently
negotiating definitive agreements with the lender, although there can
be no assurance that a definitive agreement will be reached. If final
settlement cannot be reached, management may elect to seek protection
under U.S. bankruptcy laws.
LIQUIDITY AND CAPITAL RESOURCES:
The Company currently has negative working capital and is in payment
and technical default of terms of the EPR loan and is in violation of
certain covenants of its demand line of credit agreement. The Company
had a working capital deficit of $18,589,418 at June 30, 1995,
compared to a working capital deficit of $17,219,561 at December 31,
1994. The current ratio was .14 and .14 at June 30, 1995 and
December 31, 1994, respectively. The working capital deficit includes
the Eden Prairie debt because the entire remaining balance of this
loan has been classified as a short-term liability as a result of the
payment, technical and other defaults described in Notes 2 and 6 of
the Notes to the Consolidated Financial Statements included in the
Company's 1994 Form 10-KSB. Until the restructuring agreement with
the lender to EPR is finalized, under the terms of the original loan
agreement, and as a result of the payment and technical defaults, the
lender has the right to demand repayment of the entire outstanding
balance of
11
<PAGE>
the loan. In addition, the lender can demand payment of
the default interest rate which is 2% higher than the stated interest
rate of 11.85%. Interest accruals reflecting the incremental charge
for the higher default rate have been established since 1992.
The Company has a $4.5 million line of credit arrangement with an
asset based lender which is collateralized by assets associated with
the manufacturing operations. The Company is in violation of certain
financial and technical covenants contained in this line of credit
agreement, which could result in the lender discontinuing advances and
demanding repayment of all outstanding borrowings. Due to the default
conditions discussed above and borrowing limits related to available
collateral, it is possible that the Company will not be able to borrow
sufficient amounts against this line to meet all the operating cash
needs of the Company. In addition, there can be no assurance that the
asset based lender will continue to disregard these covenant
violations in the future. If the lender takes any action to reduce
the availability of funds to the Company, there may not be sufficient
liquidity to continue operations. As of August 8, 1995, the Company
had borrowed approximately $2,393,000 and had additional availability
of approximately $54,000 under this line.
The Company had positive cash flow from operations for the six months
ending June 30, 1995 and June 30, 1994. However, its ability to meet
its continuing manufacturing operations cash flow requirements during
the remainder of 1995 and beyond, is dependent on continuing adequate
sales and margins in the manufacturing business. Management expects a
need for capital expenditures to support equipment upgrading and
growth in the Manufacturing Division. Any future expenditures will
depend on cash availability. In addition to cash flow generation from
operations, the Company expects to raise needed capital through vendor
or other asset based lending arrangements.
In summary, the Company currently has negative working capital and is
in default under the terms of two outstanding loan agreements. Either
of these two lenders could, at any time, demand full payment of the
underlying debt, which the Company would be unable to satisfy. The
Company's cash flow from operations may not be sufficient to meet the
Company's general operating needs. In the event that the Company
cannot generate sufficient cash flow to meet its commitments, it may
be forced to seek protection under U.S. Bankruptcy laws.
12
<PAGE>
PART II - OTHER INFORMATION
Item 3. Defaults upon Senior Security
See Footnote 3 to Notes to the Consolidated Financial Statements and
Management's Discussion and Analysis, included in Item 1 and 2 of this
report 10-QSB, for a description of the status of the defaults on the
loan underlying the Eden Prairie facility and the Company's line of
credit, which is incorporated herein by reference.
Arrearage (interest and principal) on the Eden Prairie debt as of
August 8, 1995, was approximately $6,000,000.
As of August 8, 1995, the Company had borrowed approximately
$2,393,000 and had additional availability of approximately $54,000
under its line of credit agreement.
13
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREEN ISLE ENVIRONMENTAL SERVICES, INC.
---------------------------------------
(Registrant)
Date: August 11, 1995 By: /s/ James W. Taylor
--------------- -------------------
James W. Taylor
President, Chief Executive Officer
and Chief Financial Officer
(principal executive and financial officer)
Date: August 11, 1995 By: /s/ William H. Johnson
--------------- ----------------------
William H. Johnson
Controller (principal accounting officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> (3,205)
<SECURITIES> 0
<RECEIVABLES> 1,446,262
<ALLOWANCES> 0
<INVENTORY> 1,330,038
<CURRENT-ASSETS> 3,086,543
<PP&E> 11,204,387
<DEPRECIATION> 6,752,835
<TOTAL-ASSETS> 8,023,778
<CURRENT-LIABILITIES> 21,675,961
<BONDS> 0
<COMMON> 598,410
0
0
<OTHER-SE> 13,710,596
<TOTAL-LIABILITY-AND-EQUITY> 8,023,778
<SALES> 6,050,963
<TOTAL-REVENUES> 6,050,963
<CGS> 4,906,909
<TOTAL-COSTS> 6,109,607
<OTHER-EXPENSES> 89,156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 195,554
<INCOME-PRETAX> (1,225,478)
<INCOME-TAX> 0
<INCOME-CONTINUING> (147,800)
<DISCONTINUED> (1,077,678)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,225,478)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> (.38)
</TABLE>
