UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
------------
{X} QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1996
OR
{ } TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
Commission File Number 0-22388
EIF HOLDINGS, INC.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
HAWAII 99-0273889
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15201 Pipeline Lane, Ste. B
Huntington Beach, California 92649
----------------------------------------
(Address of principal executive offices)
(714) 897-9000
---------------------------
(Issuer's telephone number)
475 N. Muller St., Anaheim, CA 92801
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year if changed since last report
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 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as the latest practicable date.
Class Outstanding at August 11, 1997
----- ------------------------------
Common stock, no par value 24,618,201
Transitional Small Business Disclosure Format (Check one):
Yes ; No X
----- -----
Page 1 of 17
<PAGE>
This form 10-QSB/A, Amendment Number 1, amends and supplements the form 10-QSB
(the "Original Form 10-QSB") filed by EIF Holdings, Inc. on August 26, 1997.
This Amendment Number 1 is to amend and restate Part I: Item 1 and Item 2, Part
II Item 1, Item 5, Item 6 and Exhibit 27 of the Original Form 10-QSB. The
Original Form 10-QSB is hereby amended and restated to read in its entirety as
follows. This Form 10-QSB/A should also be read in conjunction with all
subsequent filings with the Securities and Exchange Commission which disclose
significant developments.
EIF HOLDINGS INC.
Table of Contents
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of December 31, 1996
and September 30, 1996............................................ 3
Consolidated Statements of Operations for the Three Months
Ended December 31, 1996 and 1995.................................. 4
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1996 and 1995.................................. 5
Notes to Consolidated Interim Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................... 9
Item 5. Other Information................................................... 9
Item 6. Exhibits and Reports on Form 8-K.................................... 9
Signatures..........................................................10
Page 2 of 17
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EIF HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1996 1996
------------ ------------
(Unaudited) Audited
ASSETS
Current assets:
Cash........................................... $ 378,548 $ 178,231
Accounts receivable, net....................... 5,109,148 7,299,059
Costs and estimated earnings on contracts
in progress in excess of billings............. 289,748 326,343
Supplies inventory............................. 505,296 478,370
Prepaid assets................................. 717,854 85,816
------------ ------------
Total current assets...................... 7,000,594 8,367,819
Machinery and equipment, net...................... 1,368,922 1,275,087
Other noncurrent assets:
Goodwill....................................... 786,691 881,680
Other assets................................... 692 50,917
------------ ------------
787,383 932,597
------------ ------------
Total assets................................... $ 9,156,899 $ 10,575,503
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses........... $ 8,831,347 $ 6,428,112
Notes payable................................... 2,333,237 1,856,751
Billings in excess of costs and estimated
earnings on contracts in progress.............. 1,067,561 737,476
Note payable due to shareholder................. 6,203,120 4,908,317
Reserve for contingencies....................... 962,000 --
Current maturities of long-term debt............ -- 144,311
------------ ------------
19,397,265 14,074,967
Long term debt................................... -- 73,882
Stockholders' deficit
Common stock................................... 3,019,246 3,019,246
Additional paid-in capital..................... 804,696 804,696
Accumulated deficit............................ (14,064,308) (7,397,288)
------------ ------------
Total stockholders' deficit.............. (10,240,366) (3,573,346)
------------ ------------
Total liabilities and stockholders' deficit... $ 9,156,899 $ 10,575,503
============ ============
The balance sheet at September 30, 1996 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 statement presentation.
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3 of 17
<PAGE>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months ended
December 31,
----------------------------
1996 1995
------------ ------------
Revenue........................................... $ 6,364,431 $ 6,278,060
Cost of services.................................. 8,368,212 4,193,713
------------ ------------
Gross profit..................................... (2,003,781) 2,084,347
Selling, general and administrative expenses...... 4,276,213 2,326,093
------------ ------------
(6,279,994) (241,746)
Other:
Other (income) expense........................... -- (51,031)
Interest expense................................. 387,028 101,504
------------ ------------
Loss before income taxes......................... (6,667,022) (292,219)
Income taxes...................................... -- 3,000
------------ ------------
Net loss.......................................... $ (6,667,022) $ (295,219)
============ ============
Net loss per share................................ $ (0.27) $ (0.02)
============ ============
Weighted average number of common
shares outstanding.............................. 24,618,201 14,618,201
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
Page 4 of 17
<PAGE>
EIF HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months ended
December 31,
----------------------------
1996 1995
------------ ------------
Net cash (used in) provided by operating
activities.................................... $ (1,148,572) $ 151,990
Cash flow from investing activities
Purchase of machinery and equipment........... (204,207) (8,469)
------------ ------------
Net cash used in investing activities............. (204,207) (8,469)
Cash flow from financing activities
Net advances (payment) on notes payable........ 332,175 10,241
Net advances on notes due to shareholder....... 1,294,803 --
Net payments on long-term debt................. (73,882) (284,420)
Increase in outstanding checks payable......... -- 86,684
------------ ------------
Net cash provided by (used in)
financing activities............................ 1,553,096 (187,495)
------------ ------------
Net increase (decrease) in cash................... 200,317 (43,974)
Cash, beginning of period......................... 178,231 70,775
------------ ------------
Cash, end of period............................... $ 378,548 $ 26,801
============ ============
Supplemental disclosure of Non-cash Investing and Financing Activities
During the three months ended December 31, 1995, the Company acquired $150,212
of machinery and equipment under capitalized leases.
The accompanying notes are an integral part of these consolidated financial
statements.
Page 5 of 17
<PAGE>
EIF HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared by EIF Holdings, Inc., (the "Company"), in accordance with generally
accepted accounting principles pursuant to Regulation SB of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in audited financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. Accordingly,
these interim consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements and related notes as
contained in Form 10KSB for the year ended September 30, 1996. In the opinion of
management, the interim consolidated financial statements reflect all
adjustments, including normal recurring adjustments, necessary for fair
presentation of the interim periods presented. The results of operations for the
three month period ended are not necessarily indicative of results of operations
to be expected for the full year.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries; P.W. Stephens Contractors, Inc., QHI
Stephens Contractors, Inc. and P.W. Stephens Residential, Inc., (collectively
referred to as "P.W. Stephens"), P.W. Stephens Contractors, Inc. and P.W.
Stephens Services, Inc., formerly known as VonGuard Holdings, Inc., (now
collectively referred to as "P.W. Stephens St. Louis") and Kelar Controls, Inc.,
("Kelar").
Net Loss Per Share Information. The net loss per share amounts have been
computed by dividing net loss by the weighted-average number of common shares
outstanding during the respective periods.
In February 1997, The Financial Accounting Standards Board Issued Statement No.
128, Earnings Per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of statement 128 on the calculation
of fully diluted earnings per share is not expected to be material.
Note 2 - RESTATEMENT OF PREVIOUSLY FILED 10-QSB
During the first quarter, the Company began a conversion of its computer
accounting system to a new software application. The initial conversion efforts
failed and it took the Company approximately six months to resolve the problems
and complete the conversion. In September 1997, as a result of the initial
failed system conversion attempt, the Company determined that beginning in the
quarter ended December 31, 1996 it had inadvertently under-recorded certain
accounts payable and accrued liabilities primarily related to direct and
indirect contract service costs. The Company also determined that certain
contingencies should have been recognized in quarters one and two. These factors
resulted in an understatement of the Company's liabilities, direct costs and
operating expenses as of and for the quarters ended December 31, 1996 and March
31, 1997. Accordingly, the Company has restated its financial statements for
these two quarters.
NOTE 3 - TRANSACTIONS WITH SHAREHOLDER
During 1996, the Company entered into a line of credit with a major shareholder,
American Eco Corporation (AEC). The line of credit carries a maximum amount of
$5,250,000, interest at the prime rate plus 2% per annum, is unsecured and
matures on July 31, 1997. Total interest accrued on this line of credit amounted
to $283,000 as of December 31, 1996. See Item 2., Management's Discussion and
Analysis of Financial Condition, Liquidity and Capital Resources, for further
discussion.
Pursuant to an agreement effective October 1, 1996 between AEC and the Company.
AEC has agreed to provide certain services to the Company in exchange for a
management fee to be paid on a quarterly basis. The services include providing
the Company with management guidance as well as quaranteeing certain of the
Company's obligations with its creditors, in order to allow the Company to
receive favorable terms from these creditors. The agreement provides for a
quarterly payment of $1,000,000. See exhibit 10.1 for complete agreement.
NOTE 4 - NOTES PAYABLE
On December 1, 1996 the Company borrowed $300,000 under a promissory note
payable to an investor group. The terms of the note, which matures on March 13,
1997, provide for an interest rate of 12% per annum. In connection with the
note, the Company committed to issue 150,000 warrants to purchase the common
stock of the Company subject to shareholder approval of an increase in the
authorized number of outstanding shares.
On September 30, 1996 the Company obtained a $1,300,000 line of credit facility
from an investor group. The terms of the revolving credit facility provide for
an interest rate of 10% per annum and a maturity of March 1, 1998. During the
current quarter the Company borrowed $145,000 under the credit facility. The
outstanding balance under the facility as of December 31, 1996 was $370,000.
NOTE 5 - RESERVE FOR CONTINGENCIES
See Part II, Item 1. Legal Proceedings.
Page 6 of 17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations:
- ----------------------
Revenue:
Revenue for the three months ended December 31, 1996 increased 1.4% to
$6,364,000 from $6,278,000 for the same period in 1995. The increase in revenue
was the combined result of a 57.3% increase in revenue from P.W. Stephens
St.Louis of $723,000 offset by a decrease in revenue from P.W. Stephens and
Kelar of ($306,000) or (6.8%) and ($68,000) or (25.3%) respectively. The
increase in revenue for P.W. Stephens St. Louis was primarily due to an
increased sales effort and the awarding of new contracts. The decrease in
revenue for P.W. Stephens and Kelar was the result of normal fluctuations in
being awarded new contracts and the timing of the commencement of new work.
Kelar was also affected by a reduction in revenue in the current quarter from a
large ongoing energy savings contract compared to the same period in 1995.
Gross Profit:
Gross profit as a percentage of revenue for the three month period ended
December 31, 1996 was a negative (31.5)% compared to a positive 33.2% for the
same period in 1995. The decrease in the gross profit margin was primarily due
to P.W. Stephens which had a negative gross margin of (59.6)% during the
quarter ended December 31, 1996, compared to a positive 38.3% for the same
period in 1995. The decrease in gross profit margin reflects the impact of the
Company's estimates of several large jobs which it expects to experience
significant losses through completion. As a partial offset to P.W. Stephens'
decrease in gross profit, P.W. Stephens St. Louis achieved a gross profit of
20.3% compared to 14.3% during the three month periods ended December 31, 1996
and 1995 respectively resulting from operating efficiencies recognized from the
consolidation of branches which occurred in the spring of 1996. Kelar's gross
profit for the three months ended December 31, 1996, was 35.7%. This gross
profit percentage includes revenue from shared energy savings contracts. Once
initial work is completed, these projects produce ongoing revenue while
incurring minimal costs.
Selling, general and administrative expenses:
Selling, general and administrative expenses (SG&A) for the three months ended
December 31, 1996 increased to $4,476,000 from $2,326,000 for the same period in
1995. The increase in SG&A expenses is the combined result of management fees
incurred during the period of $1,000,000, an increase in litigation and
contingency reserves of $962,000 and an increase in the reserves for trade
receivables of $220,000. Without the impact of these items, the Company's SG&A
expenses as a percentage of revenue has remained consistent at 37%.
Other Expenses
Interest expense during the three months ended December 31, 1996, was $387,000
compared to $101,000 for the same period in 1995. The increase was primarily due
to additional borrowings under the line of credit from its principal
shareholder, American Eco Corp.
Net Loss
The net loss for the three months ended December 31, 1996 increased to
($6,867,000) compared to a net loss of ($295,000) during the same period in
1995. Losses during the current period reflect the combined result of
significant losses relating to several large jobs, the management fees incurred
in the current period and the increase in litigation and contingency reserves.
Page 7 of 17
<PAGE>
Liquidity and Capital Resources:
- --------------------------------
The Company's borrowings from American Eco Corp. (AEC) remained its major source
of capital. The balance due to AEC as of December 31, 1996 was $6,203,000, an
increase of $1,295,000 from the September 30, 1996 fiscal year end balance. The
original terms of the AEC facility provided for a maximum borrowing amount of
$5,250,000. Discussions are continuing regarding a potential exchange of the AEC
credit line for additional shares of the Company's common stock. In conjunction
with those discussions, AEC has allowed the outstanding borrowings to exceed the
maximum amount of the facility. Prior to any exchange of part or all of the line
of credit to common stock, the terms of the exchange must be negotiated and the
Company must receive shareholder approval to increase its authorized number of
outstanding shares. There is no assurance that this can be achieved.
The Company utilized factoring arrangements as a significant source of cash
during the quarter ended December 31, 1996. P.W. Stephens St. Louis factored
contract receivables in the amount of $1,860,000 during the period. Under the
factoring arrangement, P.W. Stephens St. Louis received 65% of the factored
receivables and incurred an annualized effective interest rate of approximately
28%.
During the quarter ended December 31, 1996, the Company also borrowed $300,000
under a promissory note payable to an investor group. The terms of the note,
which matures on March 13, 1997, provide for an interest rate of 12% per annum.
In connection with the note, the Company committed to issue 150,000 warrants to
purchase the common stock of the Company subject to shareholder approval of an
increase in the authorized number of outstanding shares.
The Company also borrowed an additional $145,000 in the current quarter from its
existing revolving credit facility with an investor group. The terms of the
$1,300,000 revolving credit facility provide for an interest rate of 10% per
annum and matures on March 1, 1997.
Neither the Company nor any of its subsidiaries have a bank line of credit from
which to borrow. As part of the management agreement between AEC and the
Company, AEC has agreed to assist the Company in obtaining favorable financing,
including but not limited to providing any necessary guarantees. There is no
assurance that financing can be obtained. P.W. Stephens continues to pay off its
expired credit facility at a rate of $200,000 per month. As of December 31,
1996, the outstanding balance on that facility was $800,000.
Page 8 of 17
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The nature and scope of the Company's business operations bring it into regular
contact with the general public, a variety of businesses and government
agencies. These activities inherently subject the Company to the hazards of
litigation, which are defended in the normal course of business. The Company is
currently involved in several litigations and investigations including
regulatory compliance. Although the outcome of these claims is not clearly
determinable at the present time, Management believes that such proceedings are
either adequately covered by insurance, or if uninsured, by the estimated losses
it has recorded to date. The resolution of such claims, however, could have a
material effect on the Company's results of operations or cash flows. The
reserves for litigation and contingencies recorded by the Company as of December
31, 1996 total $962,000.
ITEM 5. OTHER INFORMATION
On October 22, 1996, Mr. Joel J. Thomas was hired as Chief Financial Officer of
the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 10.1 Management Agreement effective October 1, 1996 between
the Company and American Eco Corp.
Exhibit 10.2 Promissory Note dated December 13, 1996 between the
Company and Truman Harty
Exhibit 10.3 Revolving Line of Credit dated September 1, 1996 between
the Company and Turner Holdings, Inc.
Exhibit 27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 1996.
Page 9 of 17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized.
EIF HOLDINGS, INC.
------------------
Registrant
January 13, 1998 By: /S/ J. Drennan Lowell
-----------------------------
J. Drennan Lowell
Vice President, Chief Financial Officer,
Treasurer and Secretary
Page 10 of 17
<PAGE>
EIF HOLDINGS, INC.
EXHIBIT INDEX
Exhibit Description Page
------- ----------- ----
Exhibit 10.1 Management Agreement Effective 10/1/96
between the Company and American Eco Corp....... 12
Exhibit 10.2 Promissory Note dated December 13, 1996
between the Company and Truman Harty............ 14
Exhibit 10.3 Revolving Line of Credit dated September 1, 1996
between the Company and Turner Holdings, Inc.... 15
Exhibit 27 Financial Data Schedule......................... 17
Page 11 of 17
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (the "Agreement"), EFFECTIVE AS OF October 1,
1996, is made and entered into by and between EIF Holdings, Inc.. a Hawaii
Corporation ("EIFH"), and American Eco Corporation, an Ontario Canada
Corporation ("AEC").
WHEREAS, EIFH is desirous of retaining AEC to obtain financing, provide
marketing services and manage day-to-day operations of EIFH, in accordance with
the terms and provisions of this Agreement; and
WHEREAS, AEC is desirous of entering into this Agreement for the purpose of
furnishing the personnel and services required pursuant to the terms hereof, and
AEC has the necessary expertise, personnel and other support services reasonably
necessary to perform the services described herein.
NOW, THEREFORE, in consideration of the premises recited above and the mutual
covenants and undertakings described below, it is agreed as follows:
1. AEC shall act on behalf of EIFH as a consultant to assist EIFH and its
personnel in conducting its operations, such as consulting services to include,
without limitation, the following:
i. Providing strategic planning and day-to-day management of operations;
ii. Assisting EIFH in obtaining favorable financing, including but not
limited to providing any necessary guarantees;
iii. Providing marketing services and support;
iv. Recruiting, hiring and training EIFH's management and personnel.
2. AEC shall have the exclusive right to designate the personnel who shall
perform the services on behalf of AEC hereunder, provided that such personnel
shall have necessary qualifications to perform said services on behalf of AEC
hereunder.
3. The compensation to be paid by EIFH to AEC for services to be performed
pursuant to this agreement shall be $1,000,000 per quarter.
4. Either EIFH or AEC may terminate this Agreement, after giving the other party
thirty (30) days notice. The compensation set forth in 3. Shall be pro-rated
through the effective date of termination.
5. EIFH hereby indemnifies, holds harmless and protects AEC from and against any
and all claims, causes of action, damages, expenses or losses whatsoever,
arising directly or indirectly out of any activity, undertaking, warranty or
agreement of EIFH accruing or in existence prior to the effective date of this
Agreement or with respect to any activity, undertaking warranty or agreement of
EIFH arising or accruing at any time without the prior notice, participation or
knowledge of AEC.
Page 12 of 17
<PAGE>
6. The provisions hereof shall be binding upon and inure the benefit of the
parties hereto and their respective legal representation, successors and
assigns.
7. The parties agree to, from time to time and at the request of either party,
to execute such other documents and matters to further evidence the agreements
and undertakings set forth herein.
8. This Agreement shall be governed by and enforceable under the laws of the
State of Texas.
9. Each party represents to the other that the party executing the Agreement has
proper corporate authorization to do so.
In evidence whereof, the parties have caused this Agreement to be duly executed
by their respective authorized representatives, as of the date set forth above.
EIF HOLDINGS, INC.
By: /s/ David L. Norris
------------------------
Name: David L. Norris
------------------------
Title: President & CEO
------------------------
AMERICAN ECO CORPORATION
By: /s/ Michael E. McGinnis
------------------------
Name: Michael E. McGinnis
------------------------
Title: President & CEO
------------------------
Page 13 of 17
PROMISSORY NOTE
U.S. $300,000.00 Beaumont, Texas December 13, 1996
FOR VALUE RECEIVED, the undersigned, EIF Holding, Inc., a Hawaii corporation
("Maker"), hereby promises to pay to the order of Truman Harty, Inc., a Texas
corporation ("Payee") in lawful money of the United States, the principal sum of
US Three Hundred Thousand and no/100's Dollars (U.S. $300.000.00), with interest
of twelve percent (12%) per annum on the unpaid principal balance hereof from
the date hereof unit maturity.
This note is secured by the full and faith and credit of the Maker and by the
unconditional guaranty of American Eco Corp., an Ontario corporation.
The principal amount hereof and all accrued and unpaid interest shall be due and
payable at the earlier of (i) the completion of the funding of the next public
or private placement of debt or equity securities by Maker, or (ii) ninety (90)
days after date hereof. All accrued and unpaid interest on this Note shall be
paid in cash at said date.
Past due payments hereunder shall bear interest at the highest rate provided by
federal or state law.
Principal and interest are payable in lawful money of the United States of
America and in immediately available funds to payee at payee's principle place
of business in Beaumont, Texas, or at such other place as Payee may designate in
writing.
If this Note is placed in the hands of an attorney for collection, or if it is
collected through any legal proceedings, the Maker agrees to pay reasonable
attorneys' fees and other cost of the collection, including but not limited to
court costs, of the holder hereof.
The Maker waives presentment and demand for payment, protest, and notice of
protest, and notice protest, nonpayment and acceleration, and agrees that its
liability on this Note shall not be affected by any renewal or extension in the
time of payment hereof, by any indulgences, releases or changes, regardless of
the number of such renewals, extensions, indulgences, releases or changes.
EIF HOLDINGS, INC.
/s/ David Norris
-----------------------------------------
By David Norris
Its President
MAKER
Page 14 of 17
REVOLVING LINE OF CREDIT NOTE
$1,300,000 Houston, Texas September 30, 1996
FOR VALUE RECEIVED, the undersigned, EIF HOLDINGS, INC., a Hawaii corporation
("Maker"), hereby promises to pay to the order of TURNER HOLDINGS, INC., a Texas
corporation ("Payee"), in lawful money of the United States, up to the principal
sum of One Million Three Hundred Thousand Dollars (U.S.$1,300,000), with
interest at the rate of ten (10%) percent per annum on the unpaid and advanced
principal balance hereof from the date hereof until maturity.
Payee agrees, upon request by Maker, to make advances pursuant to this note,
which advances, in the aggregate, shall not exceed the sum of One Million Three
Hundred Thousand Dollars (U.S.$1,300,000).
Maker shall have the right, but shall not be required to, from time to time make
partial repayment of the outstanding principal balance hereof prior to maturity,
and in such event, Maker shall have the right to request re-advancement of such
partial repayments in accordance with the terms hereof.
The principal amount hereof and all accrued interest shall be due and payable as
follows:
On or before March 1, 1998.
Past due payments hereunder shall bear interest at the rate of twelve (12%)
percent per annum.
Both principal and interest are payable in lawful money of the United States of
America and in immediately available funds to Payee at Houston, Texas, or at
such other place as Payee may designate in writing.
If this Note is placed in the hands of an attorney for collection, or if it is
collected through any legal proceedings, the Maker agrees to pay reasonable
attorney's fees and other costs of the collection including but not limited to
court costs, of the holder hereof.
The Maker waives presentment and demand for payment, protest, and notice of
protest, nonpayment and acceleration, and agrees that its liability on this Note
shall not be affected by any renewal or extension in the time of payment hereof,
by any indulgences, releases or changes, regardless of the number of such
renewals, extensions, indulgences, releases or changes.
-----
Page 15 of 17
<PAGE>
MAKER:
EIF HOLDINGS, INC.
By: /s/ David L. Norris
----------------------------
Name: David L. Norris
----------------------------
Title: President & CEO
----------------------------
ACCEPTED AND AGREED TO:
PAYEE:
TURNER HOLDINGS, INC.
By: /s/ Tyrrell L. Garth
---------------------------
Name: Tyrrell L. Garth
---------------------------
Title: Auth Rep.
---------------------------
Page 16 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EIF HOLDINGS,
INC. FORM 10-QSB/A FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN
IT'S ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
Page 17 of 17
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 378,548
<SECURITIES> 0
<RECEIVABLES> 5,109,148
<ALLOWANCES> 289,748
<INVENTORY> 505,296
<CURRENT-ASSETS> 7,000,594
<PP&E> 5,520,638
<DEPRECIATION> 4,151,716
<TOTAL-ASSETS> 9,156,899
<CURRENT-LIABILITIES> 19,397,259
<BONDS> 0
0
0
<COMMON> 3,019,246
<OTHER-SE> (13,259,612)
<TOTAL-LIABILITY-AND-EQUITY> 9,156,899
<SALES> 6,364,430
<TOTAL-REVENUES> 6,364,430
<CGS> 8,368,212
<TOTAL-COSTS> 8,368,212
<OTHER-EXPENSES> 4,276,213
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 387,028
<INCOME-PRETAX> (6,667,022)
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