Tanknology-NDE International, Inc. and Subsidiaries
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, 1998.
[ ] Transition Report Under to Section 13 or 15(d) of the Exchange Act for
the transition period from to .
Commission File Number 1-10361
Tanknology-NDE International, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 95-3634420
(State of Incorporation) (IRS Employer Identification No.)
8900 Shoal Creek Blvd., Bldg. 200 Austin, Texas 78757
(Address of Principal Executive offices)
Issuer's telephone number, including area code (512) 451-6334
Checkwhether 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.
Class Outstanding at June 30, 1998
-------------- -----------------------------------
Common 16,154,166
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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Tanknology-NDE International, Inc. and Subsidiaries
INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PART I Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
June 30, 1998 (Unaudited) and December 31, 1997 ...........................................3
Condensed Consolidated Statements of Operations (Unaudited)
Three Months and Six Months Ended June 30, 1998 and June 30, 1997..........................4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1998 and June 30, 1997...........................................5
Notes To Condensed Consolidated Financial Statements (Unaudited)...............................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .........9
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K..............................................................12
</TABLE>
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Tanknology-NDE International, Inc. and Subsidiaries
PART I Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
----------------- -----------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and equivalents................................................. $ 76,729 $ 193,627
Trade accounts receivable, less allowance for doubtful accounts of
$1,218,895 at June, 1998 and $1,066,331 at December 31, 1997...... 11,603,399 9,856,826
Inventories.......................................................... 622,447 482,107
Prepaid expenses and other current assets............................ 795,409 1,149,950
----------------- -----------------
Total Current Assets.............................................. 13,097,984 11,682,510
Restricted cash...................................................... 3,000,000 3,000,000
Equipment and improvements, net of accumulated depreciation of
$12,296,000 at June 30, 1998 and $11,052,586 at
December 31, 1997................................................. 5,439,049 4,812,500
Patents, licenses and other intangible assets, net of accumulated
amortization of $1,416,322 at June 30, 1998 and $1,169,104 at
December 31, 1997................................................. 1,214,673 1,604,194
Deferred financing costs, net........................................ 683,583 649,614
----------------- -----------------
Total Assets...................................................... $ 23,435,289 $ 21,748,818
================= =================
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT
Accounts payable .................................................... $ 3,002,466 $ 2,675,345
Accrued liabilities.................................................. 2,203,362 2,249,208
Accrued payroll and payroll taxes.................................... 2,344,514 1,959,273
Current portion of long-term debt.................................... 4,493,584 4,055,072
----------------- -----------------
Total Current Liabilities......................................... 12,043,926 10,938,898
Long term debt, less current portion ................................ 10,529,543 10,589,252
Deferred license revenue............................................. 228,334 525,000
Redeemable convertible preferred stock, at redemption value.......... 1,500,000 1,500,000
Stockholders' Deficit:
Series AAA Convertible Preferred Stock, $.0001 par value;
authorized 400 shares; issued and outstanding 1 share stated
at liquidation, value of $5,000................................. 5,000 5,000
Common stock, $.0001 par value; authorized, 50,000,000 shares;
issued and outstanding 16,154,166 shares at June 30, 1998,
and 15,978,610 shares at December 31, 1997..................... 1,615 1,598
Warrants.......................................................... 291,000 291,000
Additional paid-in capital........................................ 27,503,429 27,578,446
Accumulated deficit............................................... (28,650,521) (29,659,297)
Cumulative foreign currency translation adjustment................ (17,037) (21,079)
----------------- -----------------
(866,514) (1,804,332)
----------------- -----------------
Total Liabilities, Redeemable Convertible Preferred Stock and
Stockholders' Deficit............................................. $ 23,435,289 $ 21,748,818
================= =================
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
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Tanknology-NDE International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues ................................ $ 15,409,481 $ 8,055,755 $ 27,107,429 $ 15,518,398
Cost of services ........................ 11,209,129 6,198,605 20,214,363 11,800,713
------------- ------------- ------------- -------------
Gross Margin ....................... 4,200,352 1,857,150 6,893,066 3,717,685
Selling, general and administrative ..... 2,803,953 2,047,901 5,120,755 4,118,345
------------- ------------- ------------- -------------
Operating Income (Loss) ............ $ 1,396,399 $ (190,751) $ 1,772,311 $ (400,660)
Other income (expense):
Interest income .................... 29,776 -- 61,796 --
Interest expense ................... (400,822) (826,218) (796,339) (1,671,364)
Other income (expense), net ........ 4,194 -- 4,905 --
------------- ------------- ------------- -------------
Net Income (Loss) Before Provision
for Income Taxes ................... 1,029,547 (1,016,969) 1,042,673 (2,072,024)
Provision for income taxes .............. 29,497 -- 33,897 25,300
------------- ------------- ------------- -------------
Net Income (Loss) ................. 1,000,050 (1,016,969) 1,008,776 (2,097,324)
Less - Preferred stock dividends ........ 37,500 -- 75,000 --
------------- ------------- ------------- -------------
Net Income (Loss) Available to
Common Shareholders ................ $ 962,550 $ (1,016,969) $ 933,776 $ (2,097,324)
============= ============= ============= =============
Basic income (loss) per share ...... $ 0.06 $ (0.06) $ 0.06 $ (0.13)
============= ============= ============= =============
Diluted income (loss) per share .... $ 0.04 $ (0.06) $ 0.04 $ (0.13)
============= ============= ============= =============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
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Tanknology-NDE International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) ........................................... $ 1,008,776 $ (2,097,324)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By
(Used in) Operating Activities
Depreciation and amortization ............................... 1,435,403 2,020,060
Amortization of discounts and financing costs ............... 138,698 727,978
Deferred license revenue earned ............................. (91,666) --
Gain on sale of equipment ................................... -- (29,758)
Other ....................................................... 4,042 (707)
Changes in Operating Assets and Liabilities
(Increase) in trade accounts receivable .................... (1,746,573) (740,463)
(Increase) in inventories ................................... (140,340) (134,889)
Decrease in prepaid expenses and other current assets ....... 354,541 10,459
Increase (decrease) in accounts payable ..................... 327,121 (208,307)
(Decrease) in accrued liabilities ........................... (45,846) (1,686,536)
Increase (decrease) in accrued payroll and payroll taxes .... 385,241 (94,283)
------------- -------------
Net cash provided by (used) in operating activities ......... 1,629,397 (2,233,770)
Cash Flows from Investing Activities
Proceeds from sale of USTMAN ................................ -- 5,250,000
Proceeds from sale of licenses ............................. -- 1,147,500
Additions to equipment and improvements ..................... (1,872,022) (837,193)
Proceeds from sale of equipment ............................. -- 79,758
Other ....................................................... (5,409) (5,456)
------------- -------------
Net cash provided by (used in) investing activities ......... (1,877,431) 5,634,609
Cash Flows from Financing Activities
Net proceeds from revolving line of credit .................. 807,333 --
Preferred stock dividends ................................... (75,000) --
Proceeds from long-term debt ................................ 797,942 1,450,000
Restricted cash ............................................. -- (3,000,000)
Payments on long-term debt .................................. (1,255,476) (3,840,089)
Deferred financing costs .................................... (143,663) --
------------- -------------
Net cash provided by (used in) financing activities ......... 131,136 (5,390,089)
Net decrease in cash and equivalents ........................ (116,898) (1,989,250)
Cash and equivalents at beginning of period ................. 193,627 2,412,233
------------- -------------
Cash and equivalents at end of period ....................... $ 76,729 $ 422,983
============= =============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
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Tanknology-NDE International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1: ACCOMPANYING UNAUDITED FINANCIAL STATEMENTS
Basis of Presentation: The consolidated financial statements of
Tanknology-NDE International, Inc. and its subsidiaries (the "Company") included
herein have been prepared without audit pursuant to the rules and regulations of
the Securities and Exchange Commission, and, in the opinion of management,
reflect all adjustments necessary to present fairly the results of operations
for such interim periods. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations; however, management believes that the disclosures are adequate to
make the information presented not misleading. The accompanying unaudited
financial statements for the three and six month periods ended June 30, 1998 and
1997 contain all adjustments, consisting of only normal recurring accruals,
necessary to present fairly the financial position of the Company as of June 30,
1998 and 1997 and the results of operations and cash flows for the periods then
ended. The results of operations for the Company's interim periods are not
necessarily indicative of the results to be expected for the entire year. It is
suggested that these financial statements be read in conjunction with the
audited financial statements and notes thereto included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1997.
NOTE 2: INCOME (LOSS) PER SHARE CALCULATIONS
The following table sets forth the calculation of basic and diluted income
(loss) per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ---------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) ........................... $ 1,000,050 $ (1,016,969) $ 1,008,776 $ (2,097,324)
Preferred stock dividends ................... 37,500 -- 75,000 --
------------ ------------ ------------ ------------
Numerator for basic income (loss) per share
-income available to common shareholders ... 962,550 (1,016,969) 933,776 (2,097,324)
Effect of dilutive securities - preferred
stock dividends ............................ 37,500 -- 75,000 --
------------ ------------ ------------ ------------
Numerator for diluted income (loss) per
share - income available to common
shareholders ............................... $ 1,000,050 $ (1,016,969) $ 1,008,776 $ (2,097,324)
</TABLE>
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Tanknology-NDE International, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ---------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Denominator:
Denominator for basic income (loss) per
share - weighted-average shares ......... $ 16,154,166 $ 15,978,610 $ 16,150,286 $ 15,978,610
Effect of dilutive securities:
Stock options ............................. 3,983,344 -- 3,916,003 --
Warrants .................................. 3,288,687 -- 3,251,433 --
Convertible preferred stock ............... 1,490,566 -- 1,461,367 --
------------ ------------ ------------ ------------
Dilutive potential common shares .......... 8,762,597 -- 8,628,803 --
Denominator for diluted earnings (loss) per
share - adjusted weighted- average shares
and assumed conversions .................. $ 24,916,763 -- 24,779,089 --
============ ============ ============ ============
Basic income (loss) per share ............. $ 0.06 $ (0.06) $ 0.06 $ (0.13)
============ ============ ============ ============
Diluted income (loss) per share ........... $ 0.04 $ (0.06) $ 0.04 $ (0.13)
============ ============ ============ ============
</TABLE>
NOTE 3: COMPREHENSIVE INCOME
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS 130
requires disclosure of total non-stockholder changes in equity in interim
periods and additional disclosures of the components of non-stockholder changes
in equity on an annual basis. Total non-stockholder changes in equity includes
all changes in equity during a period except those resulting from investments by
and distributions to stockholders. Total comprehensive income for the three and
six month periods ended June 30, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ---------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) ............................... $ 1,000,050 $(1,016,969) $ 1,008,776 $(2,097,324)
Foreign currency translation gain (loss)......... 13,376 (5,462) 4,042 (17,103)
------------ ------------ ------------ ------------
Total comprehensive income (loss) ........... $ 1,013,426 $(1,022,431) $ 1,012,818 $(2,114,427)
============ ============ ============ ============
</TABLE>
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Tanknology-NDE International, Inc. and Subsidiaries
NOTE 4: COMMITMENTS AND CONTINGENCIES
There have been no material changes in the information reported as of
December 31, 1997 as reported on Form 10-KSB in Footnote 12 accompanying the
financial statements.
NOTE 5: IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
None.
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Tanknology-NDE International, Inc. and Subsidiaries
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following table reflects the percentage relationship to net revenue of
certain items included in the Company's statements of operations for the three
month and six month periods ended June 30, 1998 and 1997. The results of
operations for the 1997 periods include the results of operations of USTMAN
Industries ("USTMAN") which was sold in May 1997 and certain Canadian operations
("Canada") that were sold in February 1997.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- ---------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues ...................... 100% 100% 100% 100%
Cost of Sales ................. 73% 77% 74% 76%
-------- -------- -------- --------
Gross Margin .................. 27% 23% 26% 24%
Selling, General and
Administrative ................ 18% 26% 19% 27%
-------- -------- -------- --------
Operating Income (Loss) ....... 9% (3)% 7% (3)%
Interest Expense .............. 3% 10% 3% 11%
-------- -------- -------- --------
Net Income (Loss) ............. 6% (13)% 4% (14)%
======== ======== ======== ========
</TABLE>
Revenues
Revenues for the three months ended June 30, 1998 were $15,409,481 compared
to $8,055,755 in the 1997 period, an increase of $7,353,726 or 91%. Revenues in
the 1997 period included $422,696 of revenues from USTMAN. Excluding the
revenues from this sold entity, comparable revenues for 1997 were $7,633,059.
The increase in comparable revenues of $7,776,422 or 102% from 1997 is primarily
due to the following factors; i) revenues of $2,221,492 generated by the
Construction Services Division which did not begin operations until the third
quarter of 1997, ii) continuation of a large upgrade program for a major
customer that began in the second half of 1997, iii) an over 170% increase in
cathodic protection installation, maintenance, repair and inspection revenues
and iv) an over 250% increase in compliance management services revenues.
For the six months ended June 30, 1998, revenues were $27,107,429 compared
to $15,518,398 in the 1997 period, an increase of $11,589,031, or 75%. Revenues
in the six months of 1997 included $105,787 of revenues from Canada and
$1,884,361 of revenues from USTMAN. Excluding the revenues from these two sold
entities, comparable revenues for 1997 were $13,528,250. The increase in
comparable revenues of $13,579,179 or 100% from 1997 is primarily due to the
following factors; i) revenues of $4,008,215 generated by the Construction
Services Division which did not begin operations until the third quarter of
1997, ii) continuation of a large upgrade program for a major customer that
began in the second half of 1997, iii) an over 200% increase in cathodic
protection installation, maintenance, repair and inspection revenues and iv) an
over 200% increase in compliance management services revenue.
Cost of Services
Cost of services for the three months ended June 30, 1998 were $11,209,129
or 73% of revenue compared to $6,198,605 or 77% of revenue in 1997, an increase
of $5,010,524, or 81%. Gross margin was $4,200,352 or 27% of revenue for 1998,
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Tanknology-NDE International, Inc. and Subsidiaries
compared to $1,857,150 or 23% of revenue for 1997. The increase in gross margin
percentage is primarily due to lower depreciation and higher capacity
utilization.
For the six months ended June 30, 1998, cost of services totaled
$20,214,363 compared to $11,800,713 in the 1997 period, an increase of
$8,413,650 or 71%. Gross margin was $6,893,066 or 26% of revenue in 1998,
compared to $3,717,685 or 24% of revenue in 1997. The increase in gross margin
percentage is primarily due to lower depreciation and higher capacity
utilization.
Selling, General and Administrative
Selling, general, and administrative expense for the three months ended
June 30, 1998 was $2,803,953 or 18% of revenue compared to $2,047,901 in 1997 or
26% of revenue, an increase of $756,052 or 37% compared to the three months
ended June 30, 1997. The increase in selling, general, and administrative
expenses is due to additional sales and administrative resources to support the
growth in revenue and varieties of services offered. Adjusting for the disposals
of USTMAN and Canada, comparable SG&A expense in 1997 was $1,980,346 or 26% of
comparable revenue. The decrease in the percentage of sales from 26% to 18% is
due primarily to the growth in revenue without having to add proportionately to
SG&A expenses and to a lesser extent reductions in insurance and
telecommunications costs.
For the six months ended June 30, 1998, selling, general, and
administrative expense were $5,120,755 or 19% of revenue compared to $4,118,345
in 1997 or 27% of revenue, an increase of $1,002,410 or 24% compared to the 1997
period. The increase in selling, general, and administrative expense is due to
the addition of sales and administrative resources to support both the growth in
revenue and the varieties of services offered by the Company. Adjusting for the
disposals of USTMAN and Canada, comparable SG&A expense in 1997 was $3,957,228
or 29% of comparable revenue. The decrease in the percentage of sales from 29%
to 19% is due primarily to the growth in revenue without having to add
proportionately to SG&A expenses and to a lesser extent reductions in insurance
and telecommunications costs.
Earnings before Depreciation, Amortization, Interest and Taxes (EBITDA)
For the three months ended June 30, 1998, EBITDA was $2,141,016 or 14% of
revenues compared to $859,352 or 11% of revenues in 1997. Adjusting for the
disposals of USTMAN and Canada, comparable EBITDA in the 1997 period was
$901,117 or 12% of revenues. The increase in EBITDA, as adjusted, of $1,239,899
or 138% was primarily due to the increased revenues in the 1998 period compared
to the 1997 period.
For the six months ended June 30, 1998, EBITDA was $3,207,714 or 12% of
revenues compared to $1,619,400 or 10% of revenues in 1997. Adjusting for the
disposals of USTMAN and Canada, comparable EBITDA in the first six months of
1997 was $966,428 or 7% of revenues. The increase in EBITDA, as adjusted, of
$2,241,286 or 232% was primarily due to the increased revenues in the first six
months of 1998 compared to the first six months of 1997.
EDITDA represents net income before depreciation, amortization, interest
expense and income taxes. The Company believes that EDITDA is a meaningful
measure of performance because it is commonly used to analyze and compare
companies on the basis of operating performance, leverage and liquidity.
However, EDITDA is not intended to be a performance measure that should be
regarded as an alternative to, or more meaningful than, either operating income
tor net income as an indicator of operating performance or cash flows as a
measure of liquidity, as determined in accordance with generally accepted
accounting principles. Also, EBITDA, as computed by the Company, is not
necessarily comparable to similarly titled amounts of other companies.
Interest Expense
Interest expense for the three months ended June 30, 1998 was $400,822 or
3% of revenue compared to $826,218 or 10% of revenue in 1997, a decrease of
$425,396 or 51%. The decrease in interest expense is due to; i) continued pay-
down of long-term debt, ii) the refinancing of subordinated debt in December
1997 reduced related accretion expense for the second quarter of 1998 by
$150,000, reduced the interest rate from 13% to 10% which reduced comparable
interest costs by approximately $41,000, and replaced $1.5 million of the
previous debt with convertible redeemable preferred stock which eliminated
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Tanknology-NDE International, Inc. and Subsidiaries
approximately $48,000 of interest costs for the comparable period, iii) the
retirement of the warrants with put options which occurred as part of the
December 1997 refinancing eliminated related accretion expense totaling $200,250
in the second quarter of 1997.
For the six months ended March 31, 1998, interest expense was $796,339 or
3% of revenue compared to $1,671,364 or 11% of revenue in 1997, a decrease of
$875,025 or 52%. The decrease in interest expense is due to; i) continued
pay-down of long-term debt, ii) the refinancing of subordinated debt in December
1997 reduced related accretion expense for the first two quarters of 1998 by
$295,000, reduced the interest rate from 13% to 10% which reduced interest costs
by approximately $82,000, and replaced $1.5 million of the debt with convertible
redeemable preferred stock which eliminated approximately $96,000 of interest
costs for the comparable period, iii) the retirement of the warrants with put
options which occurred as part of the December 1997 refinancing eliminated
accretion expense totaling $400,500 in the first two quarters of 1997.
Net Income (Loss)
For the three months ended June 30, 1998, the Company had net income of
$1,000,050 before preferred stock dividend requirements compared to a loss of
$1,016,969 in 1997, an improvement of $2,017,019. Adjusting for the disposals of
USTMAN and Canada, the comparable net loss in the 1997 period was $873,062 or11%
of comparable revenues. The decrease in the net loss of $1,873,112 was primarily
due to the increased revenues in the 1998 period compared to the 1997 period and
the debt refinancing that occurred in December 1997.
For the six months ended June 30, 1998, the Company had net income of
$1,008,776 before preferred stock dividend requirements compared to a loss of
$2,097,324 in 1997, an improvement of $3,106,100. Adjusting for the disposals of
USTMAN and Canada, the comparable net loss in the first six months of 1997 was
$2,464,216 or 18% of comparable revenues. The decrease in the net loss of
$3,472,992 was primarily due to the increased revenues in the first six months
of 1998 compared to the first six months of 1997 and the debt refinancing that
occurred in December 1997.
Liquidity and Capital Resources
At June 30, 1998, the Company had working capital of $1,054,058 compared to
working capital of $743,612 at December 31, 1997. Cash provided by operating
activities of $1,629,397 for the six months ended June 30, 1998 increased by
$3,863,167 as compared to cash used in operating activities of $2,233,770 in
1997. The cash provided by operating activities in the six months ended June 30,
1998 increased due to the increase in net income partially offset by the
decrease in depreciation and the increase in accounts receivable.
Cash used in investing activities (consisting primarily of capital
expenditures) totaled $1,877,431 for the six months ended June 30, 1998 compared
to cash provided by investing activities of $5,634,609 in the 1997 period. On
February 20, 1997, the Company sold substantially all of the operating assets of
its Canadian operation. The Company realized proceeds of $1,147,500 related to
the sale of the business and technology licenses and $50,000 from the sale of
the fixed assets of the Canadian operations. On May 22, 1997, the Company sold
USTMAN realizing proceeds of $5,250,000.
At June 30, 1998, the Company had outstanding long-term debt (including
current maturities) of $15,023,127 compared to $14,644,324 at December 31, 1997.
Required term-loan principal repayments of $600,000, a net $807,333 borrowings
on the revolving credit line and other debt repayments of $655,476 were made
during the first two quarters. At June 30, 1998, the Company had $2,155,000
available for additional borrowing under its revolving credit agreement. As of
June 30, 1998, the Company was in compliance with the financial debt covenants
related to its long-term financing agreements.
In July 1998, the Company renegotiated its revolving credit facility with
its senior lender. Significant modifications included an increase in the maximum
borrowings under the credit facility to $9 million from $5 million, extension of
the maturity of the credit line to December 31, 2000, suspension of monthly
payments due under the term loan agreement for six months, and a number of other
modifications that allow for continued expansion of the business.
This Form 10-Q contains statements which, to the extent that they are not
recitations of historical fact, constitute "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
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Tanknology-NDE International, Inc. and Subsidiaries
Securities Act of 1934. All forward looking statements involve risks and
uncertainties. The forward looking statements in this document are intended to
be subject to the safe harbor protection provided by Sections 27A and 21E. For a
discussion identifying some important factors that could cause actual results to
differ materially from those anticipated in the forward looking statements, see
the Company's Form 10-KSB page 13 "Management Discussion and Analysis" for the
fiscal year ended December 31, 1997.
Year 2000 Risks
The Company has reviewed its software for Year 2000 compliance. In
conjunction with that review, the Company has determined that its current
software is either Year 2000 compliant, or there are projects planned to either
upgrade or replace existing software prior to 2000. In accordance with the
Emerging Issues Task Force of the Financial Accounting Standards Board, the
projected costs associated with upgrading or revising the Company's software to
be Year 2000 compliant will be recorded as an expense of the period rather than
capitalized. The Company currently estimates that the costs associated with such
upgrades projects will not be material to its operating results.
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are filed herewith:
None.
Reports on Form 8-K:
None.
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.
Tanknology-NDE International, Inc.
(Registrant)
Date: August 13, 1998 /s/ DAVID G. OSOWSKI
------------------------ ------------------------------------------
David G. Osowski
Vice President and Chief Financial Officer
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Tanknology-NDE International, Inc. financial statements as of the six months
ended June 30, 1998.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jun-30-1998
<CASH> 76,729
<SECURITIES> 0
<RECEIVABLES> 12,822,294
<ALLOWANCES> 1,218,895
<INVENTORY> 622,447
<CURRENT-ASSETS> 13,097,984
<PP&E> 17,735,049
<DEPRECIATION> 12,296,000
<TOTAL-ASSETS> 23,435,289
<CURRENT-LIABILITIES> 12,043,926
<BONDS> 10,529,543
0
5,000
<COMMON> 1,615
<OTHER-SE> (873,112)
<TOTAL-LIABILITY-AND-EQUITY> 23,435,289
<SALES> 27,107,429
<TOTAL-REVENUES> 27,107,429
<CGS> 20,214,363
<TOTAL-COSTS> 5,120,755
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 796,339
<INCOME-PRETAX> 1,042,673
<INCOME-TAX> 33,897
<INCOME-CONTINUING> 1,008,776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,008,776
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.04
</TABLE>
