<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
--- Act of 1934 for the quarterly period ended June 30, 1995.
/ / Transition Report Under to Section 13 or 15(d) of the Exchange Act for
--- the transition period from to .
----------- -----------
Commission File Number 1-10361
NDE ENVIRONMENTAL CORPORATION
-----------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 95-3634420
-------- ----------
(State of Incorporation) (IRS Employer Identification No.)
8906 Wall Street, Suite 306, Austin, Texas 78754
------------------------------------------------
(Address of Principal Executive offices)
Issuer's telephone number, including area code (512) 719-4633
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the 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 ninety
days.
YES X NO
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT JULY 31, 1995
------ ----------------------------
<S> <C>
Common 2,273,420
</TABLE>
Transitional Small Business Disclosure Format (check one): Yes No X
----- -----
This report consists of 39 sequentially numbered pages.
Page 1
<PAGE> 2
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
Page Number
<S> <C>
PART I Financial Information
ITEM 1 Financial Statements (Unaudited).................................. 3
Condensed Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994............................... 4
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1995 and 1994......................... 5
Condensed Consolidated Statements of Operations -
Six Months Ended June 30, 1995 and 1994........................... 6
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994........................... 7
Notes to Condensed Consolidated Financial Statements.............. 9
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 11
PART II Other Information
ITEM 5 Other Information................................................. 16
ITEM 6 Exhibits and Reports on Form 8K................................... 17
Signatures........................................................ 25
</TABLE>
Page 2
<PAGE> 3
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
ASSETS (Unaudited) (Note)
<S> <C> <C>
CURRENT ASSETS
Cash $ 230,026 $ 244,491
Trade accounts receivable, less allowance for
doubtful accounts of $416,138 in 1995 and $425,077 1,604,164 1,459,631
in 1994
Inventories 124,460 128,032
Prepaid expenses and other current assets 310,867 408,136
---------- ----------
TOTAL CURRENT ASSETS 2,269,517 2,240,290
EQUIPMENT AND IMPROVEMENTS, net of accumulated
depreciation of $5,312,354 in 1995 and $4,680,964 in 1994 4,644,236 5,110,632
INTANGIBLE ASSETS
Patents, net of accumulated amortization of $209,494
in 1995 and $186,947 in 1994 176,901 199,448
License, net of accumulated amortization of $176,926
in 1995 and $143,971 in 1994 747,191 779,621
Other Intangibles, net of accumulated amortization
of $109,294 in 1995 and $82,411 in 1994 63,342 90,225
Deposits and other assets 68,624 50,983
---------- ----------
$7,969,811 $8,471,199
========== ==========
</TABLE>
Note: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See accompanying notes to condensed consolidated financial
statements.
Page 3
<PAGE> 4
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
LIABILITIES AND STOCKHOLDER'S EQUITY (Unaudited) (Note)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 643,239 $ 709,559
Accrued liabilities 737,900 915,587
Accrued payroll and payroll taxes 616,924 521,489
Current maturities of notes payable and
long-term debt 2,274,834 530,807
Current portion of capital lease obligation 71,974 100,321
------------ ------------
TOTAL CURRENT LIABILITIES 4,344,871 2,777,763
LONG TERM DEBT (SEE NOTE 3)
Notes payable and other long-term debt 2,628,738 4,301,589
Other accrued liabilities 27,762 41,640
------------ ------------
TOTAL LIABILITIES 7,001,371 7,120,992
------------ ------------
STOCKHOLDERS' EQUITY (SEE NOTE 2)
Series AAA Convertible Preferred Stock, $.0001 par value; authorized, 400
shares; issued and outstanding 1 share at June 30, 1995, and 257.5 shares
at December 31, 1994, stated at liquidation value of $5,000 per share 5,000 1,287,500
Series BBB Convertible Preferred Stock, $.0001 par value; authorized, 253
shares; issued and outstanding 0 shares at June 30, 1995, 253 shares at
December 31, 1994, 100 shares stated at liquidation value of $5,000 per
share, 153 shares stated at liquidation value of $7,516.34 per share - 1,650,000
Series CCC Convertible Preferred Stock, $.0001 par value; authorized,
issued and outstanding 0 shares at June 30, 1995, 60 shares at December 31,
1994, stated at liquidation value of $5,000 per share - 300,000
Series DDD Convertible Preferred Stock, $.0001 par value; authorized, 300
shares; issued and outstanding, 210.7 shares at June 30, 1995; 0 shares at
December 31, 1994, stated at liquidation value of $5,000 per share 1,053,410 -
Common stock, $.0001 par value; authorized, 10,000,000 shares; issued and
outstanding 2,273,420 shares at June 30, 1995, and 1,462,420 December 31, 1994 227 146
Additional paid-in capital 25,133,216 21,883,298
Accumulated deficit (25,223,413) (23,770,737)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 968,440 1,350,207
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,969,811 $ 8,471,199
============ ============
</TABLE>
Note: See note at bottom of page 5.
Page 4
<PAGE> 5
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
REVENUES - Testing services $ 2,830,499 $ 2,459,980
Other 90,720 0
COSTS AND EXPENSES
Cost of sales and testing services 1,818,671 1,584,141
Selling, general and administrative 1,320,186 1,633,804
Provision for doubtful accounts 64,107 58,921
----------- -----------
TOTAL COSTS AND EXPENSES 3,202,964 3,276,866
----------- -----------
OPERATING LOSS ($ 281,745) ($ 816,886)
Other income (expense):
Interest income 22 29
Interest expense (204,702) (153,510)
----------- -----------
NET LOSS ($ 486,425) ($ 970,367)
=========== ===========
NET LOSS PER SHARE ($ 0.25) ($ 0.80)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
(See Note 2) 1,946,112 1,230,420
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for the
complete financial statements
See accompanying notes to condensed consolidated financial statements.
Page 5
<PAGE> 6
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
REVENUES - Testing services $ 4,995,581 $ 4,306,173
Other 90,720 95,082
COSTS AND EXPENSES
Cost of sales and testing services 3,293,825 2,949,049
Selling, general and administrative 2,723,685 3,196,249
Provision for doubtful accounts 115,333 101,355
----------- -----------
TOTAL COSTS AND EXPENSES 6,132,843 6,246,653
----------- -----------
OPERATING LOSS ($1,046,542) ($1,845,398)
Other income (expense):
Interest income 158 462
Interest expense (406,292) (214,675)
----------- -----------
NET LOSS ($1,452,676) ($2,059,611)
=========== ===========
NET LOSS PER SHARE ($ 0.85) ($ 1.70)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
(See Note 2) 1,708,160 1,230,420
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 6
<PAGE> 7
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($1,452,676) ($2,059,611)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED
IN OPERATING ACTIVITIES:
Depreciation 653,232 634,276
Amortization of discount on notes payable 70,613 -
Amortization of intangibles 82,385 188,590
Provision for doubtful accounts 121,224 101,355
Gain on sale of equipment (34,334) -
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Trade receivables (265,757) (370,717)
Inventories 3,572 48,049
Prepaid expenses 97,269 201,219
Deposits (17,641) (14,792)
Accounts payable (66,320) 129,322
Accrued liabilities (219,327) (117,090)
Accrued payroll and accrued payroll taxes 95,435 139,608
---------- -----------
NET CASH USED IN OPERATING ACTIVITIES (932,325) (1,119,791)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 7
<PAGE> 8
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
INVESTING ACTIVITIES:
Purchases of licenses (525) ($ 20,551)
Additions to equipment and improvements (229,312) (242,402)
Proceeds from sale of equipment 87,000 --
-------------------------------
Net cash used in investing activities (142,837) (262,953)
FINANCING ACTIVITIES:
Proceeds from SVB Line of Credit 748,050 310,247
Principal payments under note and capital
lease payable (508,968) (242,105)
Proceeds from issuance of Preferred Stock 250,000 300,000
Proceeds from Term Loan -- 750,000
Proceeds from issuance of notes payable 571,615 --
Net cash provided by financing activities 1,060,697 1,118,142
Net (decrease) in cash (14,465) (264,602)
Cash and cash equivalents at beginning of
period 244,491 295,077
----------- -----------
Cash and cash equivalents at end of period $ 230,026 $ 30,475
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 249,376 $ 20,517
=========== ===========
Income taxes -- --
=========== ===========
</TABLE>
Page 8
<PAGE> 9
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: ACCOMPANYING UNAUDITED FINANCIAL STATEMENTS
Basis of Presentation: The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial reporting and with the instructions
to Form 10-QSB. Accordingly, they do not include all of the information and
disclosures required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, the accompanying unaudited financial statements
for the six months ended June 30, 1995 and 1994 contain all adjustments,
consisting of only normal recurring accruals, necessary to present fairly the
financial position of the Company as of June 30, 1995 and 1994 and the results
of operations for the three and six months then ended and cash flows for the six
months then ended.
For further information refer to the consolidated financial statements and
footnotes included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1994. The results of operations for the Company's interim
periods are not necessarily indicative of the results to be expected for the
entire year.
Certain amounts shown in the 1994 financial statements have been reclassified
to conform to the 1995 presentation.
NOTE 2: STOCKHOLDERS' EQUITY
In June 1995, the Company reached an agreement with Proactive Partners, L.P.
("Proactive"), a significant shareholder, regarding a refinancing arrangement
(the "June Refinancing"). The June Refinancing includes the issuance of 210.7
share of Series DDD Preferred Stock at $5,000 per share (total proceeds of
$1,053,410) convertible at $0.21875 per share into 4,815,586 shares of Common
Stock. The June refinancing also includes a $250,000 commitment to purchase
additional preferred stock convertible into 666,667 shares of common stock at
$0.375 per share. The $1,053,410 in DDD Preferred Stock was issued as
consideration for the conversion of certain debt as well as for $250,000 cash.
See Note 3 to the Condensed Consolidated Financial Statements.
In May 1995, 253 shares of the Series AAA Convertible Preferred Stock with a
liquidation value of $1,260,000 was converted into an aggregate of 504,000
shares of Common Stock at a price per share of $2.50. In September 1994 and
January 1995, a total of 119 shares of Series AAA Preferred Stock with
liquidation value totaling $595,000 had been converted into a total of 238,000
shares of Common Stock at a price per share of $2.50. At June 30, 1995 there
remains outstanding 1 share of Series AAA Preferred Stock with a liquidation
value of $5,000.
Page 9
<PAGE> 10
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Also in May 1995, all outstanding Series BBB Convertible Preferred Stock and
Series CCC Convertible Preferred Stock were converted into Common Stock. 253
shares of The Series BBB Convertible Preferred Stock with a liquidation value of
$1,650,000 were converted into a total of 253,000 shares of Common Stock at an
average price per share of $6.52. 60 shares of the Series CCC Convertible
Preferred Stock with a liquidation value of $300,000 were converted into 48,000
shares of Common Stock at a price per share of $6.25.
On August 2, 1994, at the Company's annual shareholder's meeting,
stockholders approved the amendment of the Company's Certificate of
Incorporation to effect a 1 for 10 reverse stock split by converting and
reconstituting each outstanding share of Common Stock into one-tenth of one
share, and to have any resulting fractional shares rounded up to the nearest
whole share (the "Reverse Stock Split"). The Company is currently authorized to
issue 10,000,000 shares of Common Stock and 10,000 shares of Preferred Stock.
All share and per share amounts included in these financial statements reflect
the Reverse Stock Split.
NOTE 3: DEBT
Financing Agreement
In September 1993, the Company entered into a Loan and Security Agreement (the
"Prior Agreement") with Silicon Valley Bank ("SVB") for borrowings up to a
maximum of $750,000. In 1994, the Company amended this agreement to increase the
maximum borrowings to $1,500,000 and to extend the expiration date to May 5,
1995. As of March 27, 1995, the Company entered into a new financing agreement
(the "Financing Agreement") with SVB that provided a line of credit up to
$1,000,000 based on eligible accounts receivable balances, as defined, not to
exceed 80% of gross receivable balances. The financial agreement expires on
April 30, 1996. Advances under the Financing Agreement originally accrued
interest at 1.75% per month, plus an administrative fee of 0.5% per month. The
initial advance under the Financing Agreement was received in April 1995, and
was used to pay off other outstanding debt. All borrowings under the Financing
Agreement are due upon demand. On June 20, 1995, the borrowing limit under the
Financing Agreement was increased from $1,000,000 to $1,500,000. The Financing
Agreement expires in March 1996.
In addition, SVB provides the Company with a $750,000 term loan (the "Term
Loan"). The Term Loan bears interest at 2.5% over SVB's prime rate. The
principal balance will be payable in full April 30, 1996 with payment guaranteed
by Proactive.
In February 1995, the Company reached an agreement with Gilbarco, Inc.
("Gilbarco") to extend the due dates of the three payments due in 1995 on the
$2,450,000 note. These three payments of $122,500 each have been rescheduled to
the end of the note payment period, or March 2000.
Page 10
<PAGE> 11
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED) - UNAUDITED
June Refinancing
In January and February 1995, the Company received $200,000 and $300,000,
respectively, pursuant to a promissory note agreement with Proactive (the
"Bridge Loan"). Interest on The Bridge Loan was at the rate of prime plus 4%.
The Bridge Loan was originally due April 30, 1995; Proactive extended the due
date of the Bridge Loan to June 30, 1995. In June 1995, as part of the June
Refinancing, Proactive converted the Bridge Loan into shares of Series DDD
Preferred Stock. Also converted into shares of Seried DDD Preferred Stock was a
note and accrued interest payable to Proactive in the amount of $277,766 (the
"Subordinated Debt"). See Note 2 to the condensed consolidated financial
statements.
Sale/Leaseback
In April 1995, the Company entered into an agreement with Enterprise Leasing
Corporation ("Enterprise") whereby the Company sold to Enterprise 19 of its
testing vehicles for approximately $70,000. The Company then leased back the
same vehicles under two-year capital lease agreements.
NOTE 4: SUBSEQUENT EVENTS
Malaysian Equipment Sale and Licensing Agreement
In July 1995, the Company completed a transaction with a licensee in Malaysia
whereby the Company sold probes and related test equipment for a purchase price
of approximately $165,000. The Company also will receive processing fees on an
ongoing basis for test review and technical support services.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The Company had a net loss of $486,425 for the three months ended June 30,
1995, compared to a net loss of $970,367 for the three months ended June 30,
1994. The Company had a net loss of $1,452,676 for the six months ended June 30,
1995, compared to $2,059,611 for the six months ended June 30, 1994. An
explanation of the variances between periods for each of the major categories
follows.
Page 11
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NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Results of Operations - Continued:
The following table reflects the percentage relationship to net sales of
certain items included in the company's statement of operations for the three
and six month periods ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
3 Months Ended
------------------------------
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Revenues 100% 100%
Costs and Expenses
Cost of Sales and Testing 62% 64%
Selling, General and Administrative 45% 66%
Provision for Doubtful Accounts 2% 3%
Interest Expense 7% 6%
--- ---
Total Costs and Expenses 116% 139%
--- ---
Net Loss (16%) (39)%
=== ===
</TABLE>
<TABLE>
<CAPTION>
6 Months Ended
------------------------------
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Revenues 100% 100%
Costs and Expenses
Cost of Sales and Testing 65% 67%
Selling, General and Administrative 54% 73%
Provision for Doubtful Accounts 2% 3%
Interest Expense 8% 5%
--- ---
Total Costs and Expenses 129% 148%
--- ---
Net Loss (29%) (48)%
=== ===
</TABLE>
Page 12
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NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Revenues
Revenues for the three months ended June 30, 1995 were $2,921,219, an
increase of $461,239, or 19%, compared to the three months ended June 30, 1994.
Revenues for the six months ended June 30, 1995 were $5,086,301, an increase of
$685,046, or 16%, compared to the six months ended June 30, 1994. Average
revenue per van day (revenue from domestic UST testing and tank management
divided by van days worked) decreased from approximately $1,088 for the three
months ended June 30, 1994 to $1,074 for the three months ended June 30, 1995.
Average revenue per van day was $1,018 for the six months ended June 30, 1995, a
decrease of 10% from the approximately $1,130 achieved for the six months ended
June 30, 1994. Total volume increased by 12%, from 2,174 van days worked in the
second quarter of 1994 to 2,434 in the second quarter of 1995. Total volume
increased by 25% to 4,587 during the six months ended June 30, 1995 from 3,663
for the six months ended June 30, 1994.
The decrease in revenue per van day was due to a decrease in pricing. The
decreased pricing is attributable to increased competitive pressures caused by
an increase in the number of smaller testing companies in the market. NDE's
increased volume (van days sold) was due primarily to the increased capacity
obtained from the acquisition of GB ESD ("Gilbarco Environmental Services
Division") in April 1994.
Also contributing to the increased volume in 1995 were growing acceptance of
the Company's proprietary UST test reporting and tank management system and an
increase in the number of Stage II vapor recovery tests.
Cost of Sales and Testing Services
Cost of sales and testing services for the three months ended June 30, 1995
was $1,818,671 (62% of revenue), an increase of $234,530, or 15%, compared to
$1,584,141 (64% of revenue), for the three months ended June 30, 1994. Cost of
sales and testing services for the six months ended June 30, 1995 was $3,293,825
(65% of revenue), an increase of $344,776, or 12%, compared to $2,949,049 (67%
of revenue) for the six months ended June 30, 1994. The increase in cost of
sales was due primarily to the increase in the number of van days sold. The
decrease in the cost of sales as a percent of revenue was due to the more
efficient geographic coverage obtained with the GB ESD acquisition. The gross
margin was $1,102,548 (38% of revenue) for the three months ended June 30, 1995,
compared to $875,839 (36% of revenue) the three months ended June 30, 1994. The
gross margin was $1,792,476 (35% of revenue) for the six months ended June 30,
1995, compared to $1,452,206 for the six months ended June 30, 1994 (33% of
revenue). The increased margins were due to higher utilization of the Company's
fleet.
Page 13
<PAGE> 14
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Selling, General and Administrative
Selling, general and administrative expense for the three months ended June 30,
1995 was $1,320,186 (45% of revenue), a decrease of $313,618 or 19%, compared to
the three months ended June 30, 1994. Selling, general and administrative
expense for the six months ended June 30, 1995 was $2,723,865 (54% of revenue),
a decrease $472,564 or 15% compared to the six months ended June 30, 1994. The
improvement was due to the Company's assimilation of the GB ESD fleet of 31
vehicles with the addition of only two non-field personnel and to the
implementation of more effective cost controls.
Provision for Doubtful Accounts
The provision for doubtful accounts for the three months ended June 30, 1995
was $64,107, or 2% of sales, an increase of $5,186 compared to $58,921 for the
three months ended June 30, 1995, which was also 2% of sales. The provision for
doubtful accounts for the six months ended June 30, 1995 was $115,333 (2% of
sales), an increase of $13,978 compared to the six months ended June 30, 1994.
The increase was due to an increase in sales.
Interest Expense
Interest expense for the three months ended June 30, 1995 was $204,702, an
increase of $51,192, or 33%, compared to the three months ended June 30, 1994.
Interest expense for the six months ended June 30, 1995 was $406,292, an
increase of $191,617, or 89%, compared to the six months ended June 30, 1994.
The increase in interest expense was attributable to the interest expense
associated with increased borrowing under the Financing Agreement with SVB, and
notes issued in connection with the acquisition of GB ESD.
Write-off of Goodwill
During 1994, the Company wrote-off goodwill of $2,562,000 related to the
acquisition of certain of the tank testing assets of Kaneb Metering Corporation
in April, 1991. Accordingly, there was no amortization expense associated with
the write-off of goodwill for the three or six months ended June 30, 1995. For
the three and six month periods ended June 30, 1994, amortization expense
associated with the write-off of goodwill amounted to $56,925 and $113,850,
respectively.
Page 14
<PAGE> 15
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net Loss
For the three months ended June 30, 1995, the Company incurred a net loss of
$486,425, a decrease of $483,942, or 50% compared to the net loss of $970,367
for the three months ended June 30, 1994. For the six months ended June 30,
1995, the Company insured a net loss of $1,452,676, a decrease of $606,935, or
29%, compared to the net loss of $2,059,611 for the six months ended June 30,
1994. The decrease in net loss was due, in part, to an increase in testing
volume by 25% over the comparable period of 1994. However, the decline in the
average revenue per van day of approximately 10% eroded the bottom-line benefit
of some of this increased market penetration. In spite of the price pressure,
the Company was able to improve its operating margin through more efficient
geographic coverage and better cost controls.
Liquidity and Capital Resources
At June 30, 1995, the Company had a working capital deficit of $2,075,354
compared to $537,473 at December 31, 1994. The increase of $1,537,881 comprises
primarily an increase in the amount borrowed from SVB under the Financing
Agreement of approximately $748,000 and the classification of the $750,000 due
under the Term Loan (which is due in April 1996) as a current liability.
On March 23, 1995 the Company entered into a financing agreement (the
"Financing Agreement") with SVB that will provide a line of credit up to
$1,000,000 based on qualified and eligible accounts receivable balances not to
exceed 80% of the gross receivable balance. In June 1995, this limit was
increased to $1,500,000. The initial advance under this Financing Agreement was
used to pay off the existing line of credit with SVB in the amount of
approximately $271,000 in April 1995 and to pay off the one year note to
Gilbarco in the amount of $400,000 due April 1995. The Financing Agreement
expires in March 1996. In addition, the Company amended the $750,000 term note
agreement with SVB to extend the maturity to April 30, 1996
At June 30, 1995, the Company had outstanding long-term debt (including
current maturities) of $4,903,572, compared to $4,832,396 at December 31, 1994.
At June 30, 1995, the Company had promissory notes payable in the amount of
$467,365 to principal stockholder JLR and to Spears, Benzak, Soloman and Farrell
("SBSF") due in five equal annual installments from 1996 through 2000. Interest
on the notes accrues at 8% per annum, and is payable quarterly. The Company also
had outstanding approximately $137,000 in notes payable to Ford Motor Credit at
June 30, 1995. The principal on these notes is payable monthly through 1998.
In February 1995, the Company amended its note payable agreement with
Gilbarco to extend $367,500 of debt maturities previously scheduled to be paid
in 1995 to March 2000. See Note 3 to the Condensed Consolidated Financial
Statements.
Page 15
<PAGE> 16
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
In January and February 1995, the Company received loans of $200,000
and $300,000, respectively, from Proactive Partners in exchange for its
promissory note. In June 1995, the Company reached an agreement with Proactive
consisting of (i) an extension of Proactive's guaranty on the $750,000 term loan
with SVB through June 1997; (ii) the issuance of $1,053,410 of Series DDD
Preferred Stock, convertible at $0.21875 per share into 4,815,586 shares of
Common Stock; and (iii) a $250,000 irrevocable standby commitment to purchase
additional preferred stock convertible into Common Stock at $0.375 per share.
The issuance of the $1,053,410 of Series DDD Preferred Stock represents (i)
conversion of the $500,000 loan received from Proactive in January and February
1995 plus $25,644 of accrued interest; (ii) conversion of $273,038 of notes
payable to Proactive; and (iii) the purchase of $250,000 of Series DDD Preferred
Stock by Proactive for cash.
Liquidity and Capital Resources - Continued
At June 30, 1995, the Company has $2,140,826 of debt that matures
within the next twelve months. Because Proactive has agreed to extend its
guaranty on the $750,000 Term Loan to April 1997, management believes that the
Term Loan can be extended. However, management of the Company expects that cash
in addition to Proactive's commitment to purchase an additional $250,000 worth
of Series DDD Preferred Stock may be required to fund the operations of the
Company. Although management of the Company is devoting substantial effort to
the pursuit of funding sources, there is no assurance that such efforts will
continue to be successful.
If the Company's cash flow from operations and other capital resources
are insufficient to meet its debt maturities, the Company may be required to
take other actions including cost reduction measures, dispositions of assets or
a combination of these and other actions which are not currently foreseeable.
Such other actions could have an adverse effect on the Company's financial
condition and results of operations.
PART II OTHER INFORMATION
ITEM 5: OTHER INFORMATION
Officer Changes
In June 1995, A. Daniel Sharplin was named President and Chief
Executive Officer, replacing Jay Allen Chaffee, who remains Chairman of The
Board. Mr. Sharplin previously was President and Chief Operating Officer of the
Company. Also in June 1995, Eric J. (Rick) Hopkins was named Vice President and
Chief Financial Officer, also replacing Mr. Chaffee. Mr. Hopkins was previously
Vice President, Operations and Controller.
Page 16
<PAGE> 17
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ITEM 5: OTHER INFORMATION - CONTINUED
NASDAQ DELISTING
In July 1995, the Company was delisted from the NASDAQ Small-Cap Market for
failure to meet listing requirements. These requirements include (1) failure to
maintain a minimum bid price of $1.00 for 10 consecutive trading days, or (2)
failure to maintain minimum capital and surplus of $2,000,000. The Company now
trades on the OTC Bulletin Board; the trading symbol remains NDEC. The Company
expects to reapply for listing when it returns to the level of eligibility.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith or incorporated herein by
reference:
No. Exhibit
----- -------
10.36 Rights Agreement, dated July 10, 1990, between NDE Testing and the
Series A Purchasers (incorporated by reference from Exhibit 28.9 to the
July, 1990 8-K)
10.37 Registration Rights Agreement, dated July 10, 1990, between the
registrant and the Series A Purchasers (incorporated by reference from
Exhibit 28.10 to the July, 1990 8-K).
10.38 Stockholders Agreement, dated July 10, 1990, by and among the
Registrant, John R. Mastandrea and the Series A Purchasers
(incorporated by reference to Exhibit 28.11 to the July 1990 8-K).
10.39 Consulting and financial Advisory Agreement, dated July 10, 1990,
between the Registrant and SBSF (incorporated by reference to Exhibit
28.12 to the July 1990 8-K).
10.40 Warrant Certificate, dated July 10, 1990,. issued by the Registrant in
favor of SBSF (incorporated by reference to Exhibit 28.13 to the July
1990 8-K).
10.41 Proprietary Rights and Secrecy Agreement, dated July 10, 1990, between
the Registrant and John R. Mastandrea (incorporated by reference to
Exhibit 28.14 to the July 1990 8-K).
10.42 Agreement of Merger, dated March 28, 1991, among the Registrant, NDE
Testing, KMC Merger No. 1, Kaneb Metering Corporation and Kaneb
Services, Inc. ("Kaneb") (incorporated by reference to Exhibit 10.42 to
the 1990 10-K).
Page 17
<PAGE> 18
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
10.43 Voting Agreement, dated March 28, 1991, between Kaneb and John R.
Mastandrea (incorporated by reference to Exhibit 10.43 to the 1990
10-K).
10.44 Voting Agreement, dated March 28, 1991, among the Registratn, NDE
Testing and the holders of the Registrant's Series A Preferred Stock
(including forms of warrants granted to such holders attached as
exhibits thereto) (incorporated by reference to Exhibit 10.44 to the
1990 10-K).
10.45 Description of Purchase Rights granted by the Registrant to holders of
record of the Registrant's Common Stock at April 12, 1991 (incorporated
by reference to Exhibit 10.45 to the 1990 10-K).
10.46 Purchase Rights Option Agreement, dated March 28, 1991, between the
Registrant and John R. Mastandrea (incorporated by reference to Exhibit
10.46 to the 1990 10-K).
10.47 Convertible Note Purchase Agreement, dated August 8, 1991, among the
Registrant and the purchasers of the notes and warrants listed on
Exhibit A thereto, together with exhibits including the forms of the
notes and warrants issuable thereunder (incorporated by reference to
Exhibit 1 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1991 (the "June 1991 10-Q")).
10.48 Executive Consulting Agreement, dated May 30, 1991, (the "Executive
Consulting Agreement") between the Registrant and Bunker Hill, an
affiliate of Jay Allen Chaffee, the President of the Registrant,
together with the form of Stock Registration Agreement attached as an
exhibit thereto (incorporated by reference to Exhibit 2 to the June
1991 10-Q).
10.49 Form of Promissory Note in the principal face amount of $250,000 and
warrant to purchase up to 25,000 shares of Common Stock, both dated
September 6, 1991, issued to SBSF, together with Pledge and guaranty of
John R. Mastandrea securing the Note. Substantially equivalent notes
and warrants were issued to the Louis Marx, Jr. Trust, on September 30,
1991, and SBSF on October 2, 1991, in the respective amounts of
$100,000 and 10,000 shares and $250,000 and 25,000 shares, together
with substantially equivalent pledges and guaranties (incorporated by
reference to Exhibit 10.49 to the Registrant's annual report on Form
10-K for the year ended December 31, 1991 (the "1991 10-K").
10.50 Series B Convertible Preferred Stock Purchase Agreement, dated November
7, 1991 (incorporated by reference to Exhibit 19.01 to the September
1991 10-Q).
10.51 Financial Advisory Services Agreement, dated October 31, 1991
(incorporated by reference to Exhibit 19.02 to the September 1991
10-Q).
Page 18
<PAGE> 19
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
10.52 Series AA Preferred Stock Holders Agreement, Waiver and Consent, dated
November 7, 1991 (incorporated by reference to Exhibit 19.03 to the
September 1991 10-Q).
10.53 Amendment No. 2 to John R. Mastandrea's Employment Agreement, dated
November 3, 1991 ("Mastandrea Amendment No. 2") (incorporated by
reference to Exhibit 19.04 to the September 1991 10-Q).
10.54 Agreement to Vote, dated November 6, 1991, executed in connection with
Mastandrea Amendment No. 2 (incorporated by reference to Exhibit 10.54
to the 1991 10-K).
10.55 1989 Stock Option Plan, as amended with the approval of the
stockholders, together with a further amendment approved by the Board
of Directors subject to stockholder approval at the 1992 annual meeting
(incorporated by reference to Exhibit 10.55 to the 1991 10-K).
10.56 Employment Agreement between the Registrant and John T. Hanratty, dated
December 31, 1991 (incorporated by reference to Exhibit 10.56 to the
1991 10-K).
10.57 Termination Agreement between the Registrant and William H. Willenberg,
dated April 8, 1992 (incorporated by reference to Exhibit 10.57 to the
1991 10-K).
10.59 Series AAA and BBB Preferred Stock and Secured Convertible Note
Purchase Agreement (the "Purchase Agreement"), dated as of May 26,
1992, among the Registrant, its subsidiary, JLR Holdings, Inc.
("JLR"),Spears Benzak Salomon & Farrell ("SBSF"), Proactive Partners,
L.P. ("Proactive"), Lagunitas Partners, L.P. ("Lagunitas"), and other
purchasers of the Initial Convertible Secured Notes issued by the
Registrant pursuant to the Purchase Agreement (the "Purchasers"); and
the Approval and Addendum, dated as of June 22, 1992, among the
Registrant, and other Purchasers represented by it, Proactive,
Lagunitas, JLR, Josephthal Lyon & Ross Incorporated ("Josephthal"),
John R. Mastandrea, Kaneb Services, Inc. ("KSI"), and Kaneb Metering
Corporation ("KMC"); together with the following exhibits to that
Purchase Agreement (incorporated by reference from Exhibit to the
Registrants current report on Form 8-K filed July 17, 1992, the ("July
1992 8-K")).
10.60 Conversion and Exchange Agreement and Consent, dated as of May 26,
1992, among the Registrant and holders of the Registrant's outstanding
Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock (incorporated by reference from Exhibit 10.02 to the July 1992
8-K).
Page 19
<PAGE> 20
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
10.61 Voting Agreement, dated as of May 26, 1992, among the Registrant, RLR,
Josephthal, SBSF, Proactive, Lagunitas, KSI, KMC and SBSF NDE Group,
Limited Partnership; Cancellation of Voting Agreement and Release,
dated May 26, 1992, among KSI, KMC and John R. Mastandrea; and
Modification Agreement and Consent, dated as of May 26, 1992, among the
Registrant, its subsidiary, KSI and KMC (incorporated by reference to
Exhibit 10.03 from the July 1992 8-K).
10.62 Settlement Agreement dated as of May 26, 1992, among the Registrant,
its subsidiary and John R. Mastandrea; together with the following
exhibits thereto (incorporated by reference to Exhibit 10.04 to the
July 1992 8-K).
10.63 Non-Competition and Non-Solicitation Agreement, dated as of May 26,
1992, among the Registrant, its subsidiary and John R. Mastandrea
(incorporated by reference to Exhibit 10.05 to the July 1992 8-K).
10.64 Consulting and Services Agreement, dated as of May 26, 1992, among the
Registrant, John R. Mastandrea and Advanced Leak Detection Corporation
("LAD"); and Addendum to Consulting Services Agreement, dated as of
June 4, 1992, among the Registrant, John R. Mastandrea and LAD
(incorporated by reference to Exhibit 10.06 to the July 1992 8-K).
10.65 Third Amended and Restated Registration Rights Agreement, dated as of
May 26, 1992, among the Registrant and certain holders of the
Registrant's securities (incorporated by reference to Exhibit 10.07 to
the July 1992 8-K).
10.66 Security Agreement, dated as of May 26, 1992, among the Registrant, its
subsidiary and the Purchasers (incorporated by reference to Exhibit
10.08 to the July 1992 8-K).
10.67 Form of Initial Convertible Secured Note of the Registrant
(incorporated by reference to Exhibit 10.09 to the July 1992 8-K).
10.68 Form of Secured Convertible Note of the Registrant (incorporated by
reference to Exhibit 10.10 to the July 1992 8-K).
10.69 Form of Warrant Certificate with respect to the warrants to be issued
by the Registrant pursuant to the Purchase Agreement (incorporated by
reference to Exhibit 10.11 to the July 1992 8-K).
Page 20
<PAGE> 21
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
10.70 1989 New Warrant Agreement, dated as of April 30, 1992, among the
Registrant, Josephthal and other holders of warrants issued by the
Registrant in connection with its initial public offering in 1989;
together with (a) Exhibit A, the form of New Warrant Certificate for
the warrants issued pursuant to the foregoing agreement; and (b)
Exhibit B, Third Amended and Restated Registration Rights Agreement
(incorporated by reference to Exhibit 10.12 to the July 1992 8-K).
10.71 Form of BBB Convertible Secured Note issued by the Registrant pursuant
to the Purchase Agreement; and BBB Security Agreement, dated as of May
26, 1992, among the Registrant, its subsidiary and the holders of the
foregoing secured notes (incorporated by reference to Exhibit 10.13 to
the July 1992 8-K).
10.72 Asset Purchase Agreement dated January 8, 1993 between the Registrant
and ProEco. The Registrant will furnish supplementally to the
Commission upon request a copy of any omitted schedule or exhibit to
this Exhibit 2.1 and Exhibits 2.2 and 2.3 (incorporated by reference to
Exhibit 2.1 to the Registrant's current report on Form 8-K filed
January 22, 1993, the ("January 1993 8-K")).
10.73 License Agreement dated January 8, 1993 between the Registrant and
ProEco (incorporated by reference to Exhibit 2.2 to the January 1993
8-K).
10.74 Form of Non competition Agreement dated January 8, 1993 entered into
between the Registrant and each of ProEco, ProEco's stockholders and
ProEco's affiliate, EcoAm, Inc. (incorporated by reference to Exhibit
2.3 to the January 1993 8-K).
10.75 Shareholder Rights Agreement dated January 8, 1993, between the
Registrant and ProEco (incorporated by reference to Exhibit 28.2 to the
January 1993 8-K).
10.76 Stock Purchase Agreement, dated as of December 11, 1993, among the
Registrant, Jim R. Clare and Donald Valverde
10.77 Loan and Security Agreement, dated September 27, 1993, between the
Registrant and Silicon Valley Bank.
10.78 Amendment to Loan Agreement, dated April 7, 1994 between the Registrant
and Silicon Valley Bank
10.79 Asset Purchase Agreement, dated as of February 24, 1994, between the
Registrant and Silicon Valley Bank
10.80 Warrant Certificate to purchase 200,000 shares of the Registrant's
Common Stock issued by the Registrant to Gilbarco Inc. on April 11,
1994
Page 21
<PAGE> 22
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
10.81 Non-Interest Bearing Promissory Note, dated April 11, 1994, issued by
the Registrant to Gilbarco Inc. in the principal amount of $400,000
10.82 Irrevocable Standby Letter of Credit, dated April 11, 1994, issued by
Silicon Valley Bank to Gilbarco Inc. securing payment of the
Non-Interest Bearing Promissory Note attached hereto as Exhibit 10.81
10.83 Secured Promissory Note, dated April 11, 1994, issued by the Registrant
to Gilbarco Inc. in the principal amount of $2,450,000
10.84 Security Agreement, dated as of April 11, 1994, between the Registrant
and Gilbarco Inc. securing payment of the Secured Promissory Note
attached hereto as Exhibit 10.83.
10.85 Sub license Agreement, dated as of April 11, 1994, between the
Registrant and Gilbarco Inc.
10.86 Patent License Agreement, dated as of April 11, 1994, between the
Registrant and Gilbarco Inc.
10.87 Amendment to Loan and Security Agreement, dated as of March 17, 1995,
between the Registrant and Silicon Valley Bank.
10.88 Third Amendment to NDE Environmental Corporation's Secured Notes, dated
as of March 31, 1995, between the Registrant and Proactive Partners;
Spears, Benzak, Salomon, & Farrell; Dan Purjes; Peter Sheib; Lawrence
Rice; and Joan Taylor.
10.89 Second Amendment to NDE Environmental Corporation's Subordinated Note,
dated as of March 31, 1995, between the Registrant and Spears, Benzak,
Salomon, and Farrell.
10.90 First Amendment to NDE Environmental Corporation's Subordinated Secured
Promissory Note, dated as of February 28, 1995, between the Registrant
and Gilbarco, Inc.
10.91 Certificate of Designations, Preferences and Rights of Series CCC
Preferred Stock of NDE Environmental Corporation
10.92 Proxy materials for August 2, 1994 annual meeting of the shareholders
of NDE Environmental Corporation, including 1-for-10 Reverse Stock
Split and Conversion of Series AAA Preferred Stock
Page 22
<PAGE> 23
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
10.93 Lease agreements dated December 10, 1993, April 1, 1994 and April 20,
1994 between the registrant and MV Wall Street, LTD.
10.94 Promissory note, dated as of January 17, 1995, between the Registrant
and Proactive Partners, L.P.
10.95 Financing Agreement, dated as of March 27, 1995, between the registrant
and Silicon Valley Financial Services.
10.96 First Amendment of "The Promissory Note dated January 17, 1995",
Amendment dated April 30, 1995, between the registrant and the
Proactive Partners L. P.
10.97 First Amendment of the Financing Agreement between the registrant and
Silicon Valley Financial Services, dated June 20, 1995.
10.98 Notice of Conversion regarding Series AAA Preferred Stock between the
registrant and Proactive Partners, L.P.; Lagunitas Partners, L.P.; and
A. Daniel Sharplin, dated as of April 17, 1995.
10.99 Notice of Conversion regarding Series BBB Preferred Stock between the
registrant and Proactive Partners, L.P.; Lagunitas Partners, L.P.; and
A. Daniel Sharplin, dated as of April 17, 1995.
10.100 Notice of Conversion regarding Series CCC Preferred Stock between the
registrant and Proactive Partners, L.P.; Lagunitas Partners, L.P.; and
A. Daniel Sharplin, dated as of April 17, 1995.
(b) There were no reports filed on form 8-K for the quarter ended December
31, 1994.
Page 23
<PAGE> 24
NDE ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NDE ENVIRONMENTAL CORPORATION
(Registrant)
/s/A. DANIEL SHARPLIN
Date: August 11, 1995 ------------------------------------------
A. Daniel Sharplin
President and Chief Executive Officer
/s/RICK J. HOPKINS
Date: August 11, 1995 ------------------------------------------
Rick J. Hopkins
Vice President and Chief Financial Officer
Page 24<PAGE> 25
INDEX TO EXHIBITS
Exhibit Description
------- -----------
10.97 First Amendment of the Financing Agreement between the registrant and
Silicon Valley Financial Services, dated June 20, 1995.
10.98 Notice of Conversion regarding Series AAA Preferred Stock between the
registrant and Proactive Partners, L.P.; Lagunitas Partners, L.P.; and
A. Daniel Sharplin, dated as of April 17, 1995.
10.99 Notice of Conversion regarding Series BBB Preferred Stock between the
registrant and Proactive Partners, L.P.; Lagunitas Partners, L.P.; and
A. Daniel Sharplin, dated as of April 17, 1995.
10.100 Notice of Conversion regarding Series CCC Preferred Stock between the
registrant and Proactive Partners, L.P.; Lagunitas Partners, L.P.; and
A. Daniel Sharplin, dated as of April 17, 1995.
<PAGE> 1
EXHIBIT 10.97
FACTORING MODIFICATION AGREEMENT
This Factoring Modification Agreement is entered into as of June 20,
1995, by and between NDE Environmental Corporation (the "Seller") whose address
is 8906 Wall Street, Suite 306, Austin, TX 78754 and Silicon Valley Financial
Services, a division of Silicon Valley Bank ("Buyer"), whose address is 2880
Lakeside Drive, Suite 205, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which
may be owing by Seller to Buyer, Seller is indebted to Buyer pursuant to, among
other documents, a Factoring Agreement, dated March 27, 1995 by and between
Seller and Buyer (the "Factoring Agreement"). Capitalized terms used without
definition herein shall have the meanings assigned to them in the Factoring
Agreement.
Hereinafter, all indebtedness owing by Seller to Buyer shall be referred to as
the "Indebtedness" and the Factoring Agreement and any and all other documents
executed by Seller in favor of Buyer shall be referred to as the "Existing
Documents."
2. DESCRIPTION OF CHANGE IN TERMS:
A. Modification(s) to Factoring Agreement effective as of the date
first written above:
1. Increase gross factoring line to One Million Eight Hundred
Seventy Five and No/100 Dollars ($1,875,000.00)
3. CONSISTENT CHANGES. The Existing Documents are each hereby amended
wherever necessary to reflect the changes described above.
4. NO DEFENSES OF SELLER. Seller agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Indebtedness.
5. CONTINUING VALIDITY. Seller understands and agrees that in modifying
the existing Indebtedness, Buyer is relying upon Seller's representations,
warranties, and agreements, as set forth in the Existing Documents. Except as
expressly modified pursuant to this Factoring Modification Agreement, the terms
of the Existing Documents remain unchanged and in full force and effect. Buyer's
agreement to modifications to the existing Indebtedness pursuant to this
Factoring Modification Agreement in no way shall obligate Buyer to make any
future modifications to the Indebtedness. Nothing in this Factoring Modification
Agreement shall constitute a satisfaction of the Indebtedness. It is the
intention of Buyer and Seller to retain as liable parties all makers and
endorsers of Existing Documents, unless the party is expressly released by Buyer
in writing. No maker, endorser, or guarantor will be released by virtue of this
Factoring Modification Agreement. The terms of this paragraph apply not only to
this Factoring Modification Agreement, but also to any subsequent factoring
modification agreements.
<PAGE> 2
This Factoring Modification Agreement is executed as of the date first written
above.
Seller: Buyer:
NDE Environmental Corporation SILICON VALLEY BANK
By: By:
-------------------- --------------------
Name: Jay Allen Chaffee Name: Lee. A. Shodise
Title: Chairman Title: AVP
<PAGE> 1
EXHIBIT 10.98
Notice of Conversion
To: NDE Environmental Corporation
8906 Wall Street, Suite 306
Austin, TX 78754
A. Daniel Sharplin ("Sharplin") is the assignee of Spears, Benzak,
Salomon & Farrell, Inc. (SBSF). SBSF participated in the 1992 AAA financing by
investing $630,000, which investment initially entitled SBSF to receive a
Secured Convertible Note issued by NDE Environmental Corporation (the "Company")
in the principal amount of $472,500 payable to the order of SBSF and 32 shares
of the Company's AAA Preferred Stock (the "AAA Holdings"). Sharplin, as assignee
of SBSF, is entitled to continue to hold 126 AAA Preferred Shares. Sharplin, as
assignee of SBSF, and the Company ackowledge that certain of the documents
evidencing the AAA Holdings were not issued to and/or delivered to Sharplin
and/or to SBSF. This document is to serve as written notice to the Company for
delivery to Continental Stock Transfer Company, the Transfer Agent for the
Common Stock of the Company, of Sharplin's election to convert all of the AAA
Holdings into 252,000 shares of the Company's Common Stock in accordance with
the provisions of such Note and the Certificate of Designation and the terms of
the 1994 reverse stock split. Please cause the certificate or certificates for
the shares of Common Stock issued upon the conversion to be registered in
Sharplin's name and delivered to Sharplin at the address set forth below. This
notice shall be effective December 31, 1994.
Agreed and Acknowledged this A. Daniel Sharplin
day of , 1995
------- --------- -------------------------
(Signature)
NDE Environmental Corporation
By: Date:
--------------------------- --------------------
Jay Allen Chaffee, Chairman
and Chief Executive Officer SSN:
--------------------
Address: 3509 Needles Drive
Austin, TX 78746
<PAGE> 2
Notice of Conversion
To: NDE Environmental Corporation
8906 Wall Street, Suite 306
Austin, TX 78754
Lagunitas Partners, L.P. ("Lagunitas") participated in the 1992 AAA
financing by investing $196,000, which investment initially entitled Lagunitas
to receive a Secured Convertible Note issued by NDE Environemtnal Corporation
(the "Company") in the principal amount of $147,000 payable to the order of
Lagunitas and 9.80 shares of the Company's AAA Preferred Stock (the "AAA
Holdings"). Lagunitas is entitled to continue to hold 39.2 AAA Preferred Shares.
Lagunitas and the Company acknowledge that certain of the documents evidencing
the AAA Holdings were not issued to and/or delivered to Lagunitas. This document
is to serve as written notice to the Company for delivery to Continental Stock
Transfer Company, the Transfer Agent for the Common Stock of the Company, of
Lagunitas' election to convert all of the AAA Holdings into 78,400 shares of the
Company's Common Stock in accordance with the provisions of such Note, the
Certificate of Designation and the terms of the 1994 reverse stock split. Please
cause the certificate or certificates for the shares of Common Stock issued upon
the conversion to be registered in Lagunitas' name and delivered to Lagunitas at
the address set forth below. This notice shall be effective December 31, 1994.
Agreed and Acknowledged this Lagunitas Partners, L.P.
day of , 1995
------- -------
NDE Environmental Corporation
By: By:
--------------------------- ------------------------
Jay Allen Chaffee, Chairman
and Chief Executive Officer Title: Chairman/General Partner
Date: April 7, 1995
Tax ID:: 94-3137757
Address: 50 Osgood Place,
Penthouse
San Francisco, CA 94153
<PAGE> 3
Notice of Conversion
To: NDE Environmental Corporation
8906 Wall Street, Suite 306
Austin, TX 78754
Proactive Partners, L.P. ("Proactive") participated in the 1992 AAA
financing by investing $434,000, which investment initially entitled Proactive
to receive a Secured Convertible Note issued by NDE Environemtnal Corporation
(the "Company") in the principal amount of $325,500 payable to the order of
Proactive and 21.70 shares of the Company's AAA Preferred Stock (the "AAA
Holdings"). Proactive is entitled to continue to hold 86.8 AAA Preferred Shares.
Proactive and the Company acknowledge that certain of the documents evidencing
the AAA Holdings were not issued to and/or delivered to Proactive. This document
is to serve as written notice to the Company for delivery to Continental Stock
Transfer Company, the Transfer Agent for the Common Stock of the Company, of
Proactive's election to convert all of the AAA Holdings into 173,600 shares of
the Company's Common Stock in accordance with the provisions of such Note, the
Certificate of Designation and the terms of the 1994 reverse stock split. Please
cause the certificate or certificates for the shares of Common Stock issued upon
the conversion to be registered in Proactive's name and delivered to Proactive
at the address set forth below. This notice shall be effective December 31,
1994.
Agreed and Acknowledged this Proactive Partners, L.P.
day of , 1995 By: Proactive Investment Managers, L.P.
------ --------- Its General Partner
NDE Environmental Corporation
By: By:
------------------------------ ------------------------------
Jay Allen Chaffee, Chairman
and Chief Executive Officer Title: General Partner
Date: April 7, 1995
Tax ID:: 94-3137757
Address: 50 Osgood Place, Penthouse
San Francisco, CA 94153
<PAGE> 1
EXHIBIT 10.99
Notice of Conversion
To: NDE Environmental Corporation
8906 Wall Street, Suite 306
Austin, TX 78754
A. Daniel Sharplin ("Sharplin") is the assignee of Spears, Benzak,
Salomon & Farrell, Inc. (SBSF). SBSF participated in the 1992 BBB financing by
investing $1,400,000, which investment initially entitled SBSF to receive shares
of the Company's BBB Preferred Stock issued by NDE Environmental Corporation
(the "Company") (the "BBB Holdings"). Sharplin as assignee of SBSF, is entitled
to continue to hold 202.97 BBB Preferred Shares. Sharplin, as assignee of SBSF,
and the Company ackowledge that certain of the documents evidencing the BBB
Holdings were not issued to and/or delivered to SBSF or Sharplin. This document
is to serve as written notice to the Company for delivery to Continental Stock
Transfer Company, the Transfer Agent for the Common Stock of the Company, of
Sharplin's election to convert all of the BBB Holdings into 203,000 shares of
the Company's Common Stock in accordance with the provisions of the Subscription
Agreemnet, the Certificate of Designation and the terms of the 1994 Reverse
Stock Split. Please cause the certificate or certificates for the shares of
Common Stock issued upon the conversion to be registered in Sharplin's name and
delivered to Sharplin at the address set forth below. This notice shall be
effective December 31, 1994.
Agreed and Acknowledged this A. Daniel Sharplin
day of , 1995
------ -------- --------------------------------
(Signature)
NDE Environmental Corporation
By: Date:
------------------------- ----------------------
Jay Allen Chaffee, Chairman
and Chief Executive Officer SSN:
----------------------
Address: 3509 Needles Drive
Austin, TX 78746
<PAGE> 2
Notice of Conversion
To: NDE Environmental Corporation
8906 Wall Street, Suite 306
Austin, TX 78754
Lagunitas Partners, L.P. ("Lagunitas") participated in the 1992 BBB
financing by investing $125,000, which investment initially entitled Lagunitas
to receive shares of the Company's BBB Preferred Stock issued By NDE
Environmental Corporation (The "Company") (the "BBB Holdings"). Lagunitas is
entitled to continue to hold 25 BBB Preferred Shares. Lagunitas and the Company
acknowledge that certain of the documents evidencing the BBB Holdings were not
issued to and/or delivered to Lagunitas. This document is to serve as written
notice to the Company for delivery to Continental Stock Transfer Company, the
Transfer Agent for the Common Stock of the Company, of Lagunitas' election to
convert all of the BBB Holdings into 25,000 shares of the Company's Common Stock
in accordance with the provisions of the Subscription Agreement, the Certificate
of Designation and the terms of the 1994 Reverse Stock Split. Please cause the
certificate or certificates for the shares of Common Stock issued upon the
conversion to be registered in Lagunitas' name and delivered to Lagunitas at the
address set forth below. This notice shall be effective December 31, 1994.
Agreed and Acknowledged this Lagunitas Partners, L.P.
day of , 1995
------- -------
NDE Environmental Corporation
By: By:
--------------------------- --------------------------
Jay Allen Chaffee, Chairman
and Chief Executive Officer Title: Chairman/General Partner
Date: April 7, 1995
Tax ID:: 94-3137757
Address: 50 Osgood Place, Penthouse
San Francisco, CA 94153
<PAGE> 3
Notice of Conversion
To: NDE Environmental Corporation
8906 Wall Street, Suite 306
Austin, TX 78754
Proactive Partners, L.P. ("Proactive") participated in the 1992 BBB
financing by investing $125,000, which investment initially entitled Proactive
to receive shares of the Company's BBB Preferred Stock issued by NDE
Environemtnal Corporation (the "Company") (the "BBB Holdings"). Proactive is
entitled to continue to hold 25 BBB Preferred Shares. Proactive and the Company
acknowledge that certain of the documents evidencing the BBB Holdings were not
issued to and/or delivered to Proactive. This document is to serve as written
notice to the Company for delivery to Continental Stock Transfer Company, the
Transfer Agent for the Common Stock of the Company, of Proactive's election to
convert all of the BBB Holdings into 25,000 shares of the Company's Common Stock
in accordance with the provisions of the Subscription Agreement, the Certificate
of Designation and the terms of the 1994 Reverse Stock Split. Please cause the
certificate or certificates for the shares of Common Stock issued upon the
conversion to be registered in Proactive's name and delivered to Proactive at
the address set forth below. This notice shall be effective December 31, 1994.
Agreed and Acknowledged this Proactive Partners, L.P.
day of , 1995 By: Proactive Investment Managers, L.P.
------ -------- Its General Partner
NDE Environmental Corporation
By: By:
--------------------------- -----------------------------
Jay Allen Chaffee, Chairman
and Chief Executive Officer Title: General Partner
Date: April 7, 1995
Tax ID:: 94-3137757
Address: 50 Osgood Place, Penthouse
San Francisco, CA 94153
<PAGE> 1
EXHIBIT 10.100
Notice of Conversion
To: NDE Environmental Corporation
8906 Wall Street, Suite 306
Austin, TX 78754
A. Daniel Sharplin ("Sharplin") is the assignee of Spears, Benzak,
Salomon & Farrell, Inc. (SBSF). SBSF participated in the 1994 CCC financing by
investing $150,000, which investment initially entitled SBSF to receive shares
of the Company's CCC Preferred Stock issued by NDE Environmental Corporation
(the "Company") (the "CCC Holdings"). Sharplin as assignee of SBSF, is entitled
to continue to hold 30 CCC Preferred Shares. Sharplin, as assignee of SBSF, and
the Company acknowledge that certain of the documents evidencing the CCC
Holdings were not issued to and/or delivered to SBSF or to Sharplin. This
document is to serve as written notice to the Company for delivery to
Continental Stock Transfer Company, the Transfer Agent for the Common Stock of
the Company, of Sharplin's election to convert all of the CCC Holdings into
24,000 shares of the Company's Common Stock in accordance with the provisions of
the Subscription Agreement, the Certificate of Designation and the terms of the
1994 Reverse Stock Split. Please cause the certificate or certificates for the
shares of Common Stock issued upon the conversion to be registered in Sharplin's
name and delivered to Sharplin at the address set forth below. This notice shall
be effective March 31, 1995.
Agreed and Acknowledged this A. Daniel Sharplin
day of , 1995
------- ------ ------------------------------
(Signature)
NDE Environmental Corporation
By: Date:
--------------------------- ------------------------
Jay Allen Chaffee, Chairman
and Chief Executive Officer SSN:
-------------------------
Address: 3509 Needles Drive
Austin, TX 78746
<PAGE> 2
Notice of Conversion
To: NDE Environmental Corporation
8906 Wall Street, Suite 306
Austin, TX 78754
Lagunitas Partners, L.P. ("Lagunitas") participated in the 1994 CCC
financing by investing $50,000, which investment initially entitled Lagunitas to
receive shares of the Company's CCC Preferred Stock Issued By NDE Environmental
Corporation (The "Company") (the "CCC Holdings"). Lagunitas is entitled to
continue to hold 10 CCC Preferred Shares. Lagunitas and the Company acknowledge
that certain of the documents evidencing the CCC Holdings were not issued to
and/or delivered to Lagunitas. This document is to serve as written notice to
the Company for delivery to Continental Stock Transfer Company, the Transfer
Agent for the Common Stock of the Company, of Lagunitas' election to convert all
of the CCC Holdings into 8,000 shares of the Company's Common Stock in
accordance with the provisions of the Subscription Agreement, the Certificate of
Designation and the terms of the 1994 Reverse Stock Split. Please cause the
certificate or certificates for the shares of Common Stock issued upon the
conversion to be registered in Lagunitas' name and delivered to Lagunitas at the
address set forth below. This notice shall be effective March 31, 1995.
Agreed and Acknowledged this Lagunitas Partners, L.P.
day of , 1995
----- -------- -------------------------------------
(Signature)
NDE Environmental Corporation
By: Date:
--------------------------- --------------------------------
Jay Allen Chaffee, Chairman
and Chief Executive Officer SSN:
--------------------------------
Address: 50 Osgood Place, Penthouse
San Francisco, CA 94153
<PAGE> 3
Notice of Conversion
To: NDE Environmental Corporation
8906 Wall Street, Suite 306
Austin, TX 78754
Proactive Partners, L.P. ("Proactive") participated in the 1994 CCC
financing by investing $100,000, which investment initially entitled Proactive
to receive shares of the Company's CCC Preferred Stock issued by NDE
Environmental Corporation (the "Company") (the "CCC Holdings"). Proactive is
entitled to continue to hold 20 CCC Preferred Shares. Proactive and the Company
acknowledge that certain of the documents evidencing the CCC Holdings were not
issued to and/or delivered to Proactive. This document is to serve as written
notice to the Company for delivery to Continental Stock Transfer Company, the
Transfer Agent for the Common Stock of the Company, of Proactive's election to
convert all of the CCC Holdings into 16,000 shares of the Company's Common Stock
in accordance with the provisions of the Subscription Agreement, the Certificate
of Designation and the terms of the 1994 Reverse Stock Split. Please cause the
certificate or certificates for the shares of Common Stock issued upon the
conversion to be registered in Proactive's name and delivered to Proactive at
the address set forth below. This notice shall be effective March 31, 1995.
Agreed and Acknowledged this Proactive Partners, L.P.
day of , 1995
----- -------- -------------------------------------
(Signature)
NDE Environmental Corporation
By: Date:
--------------------------- --------------------------------
Jay Allen Chaffee, Chairman
and Chief Executive Officer SSN:
---------------------------------
Address: 50 Osgood Place, Penthouse
San Francisco, CA 94153
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
NDE Testing & Equipment, Inc., a Florida corporation, incorporated on
December 23, 1987, is a wholly owned subsidiary of NDE Environmental Corporation
and does business under the name NDE Testing & Equipment, Inc.
NDE Environmental Canada Corporation was incorporated on May 21, 1993
under the Business Corporations Act of Alberta, is a wholly owned subsidiary of
NDE Environmental Corporation and does business under the name NDE Environmental
Canada Corporation.
ProEco, Inc., a Delaware corporation, incorporated as Tank Testing
International, Inc. on March 19, 1990, changed its name to ProEco, Inc. on July
26, 1991, is a wholly owned subsidiary of NDE Environmental Corporation and does
business under the name ProEco, Inc.
EcoAm, Inc., a Florida corporation, incorporated on July 15, 1991, is
a wholly owned subsidiary of NDE Environmental Corporation and does business
under the name EcoAm, Inc.
ProEco, Ltd., a United Kingdom corporation, incorporated in October
16, 1992, as EcoAm, Ltd., is a wholly owned subsidiary of NDE Environmental
Corporation and does business under the name ProEco, Ltd.
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 230,026
<SECURITIES> 0
<RECEIVABLES> 2,020,302
<ALLOWANCES> 416,138
<INVENTORY> 124,460
<CURRENT-ASSETS> 2,269,517
<PP&E> 9,956,590
<DEPRECIATION> 5,312,354
<TOTAL-ASSETS> 7,969,811
<CURRENT-LIABILITIES> 4,344,871
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1,053,410
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<TOTAL-LIABILITY-AND-EQUITY> 7,969,811
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