<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
- --------------------------------------------------------------------------------
For Quarter Ended March 31, 1999 Commission File Number 0-20404
ENVIROGEN, INC.
---------------
(Exact name of registrant as specified in its charter)
Delaware 22-2899415
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4100 Quakerbridge Road
Princeton Research Center
Lawrenceville, NJ 08648
-----------------------
(Address of principal executive offices)
(609) 936-9300
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
The number of shares outstanding of the Registrant's Common Stock, $.01 par
value, as of March 31, 1999 was 3,965,951.
1
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ENVIROGEN, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. CONDENSED FINANCIAL STATEMENTS
Consolidated Balance Sheets at March 31, 1999 (Unaudited)
and December 31, 1998 3
Consolidated Statements of Operations for the Three
Months Ended March 31, 1999 and 1998 (Unaudited) 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1999 and 1998 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements
(Unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General 8
Results of Operations 9
Liquidity and Capital Resources 10
Other Matters 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURE PAGE 15
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENVIROGEN, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $3,064,525 $3,407,910
Accounts receivable, net 5,147,084 6,327,599
Unbilled revenue 3,545,607 4,028,183
Inventory 148,878 185,553
Prepaid expenses and other current assets 522,186 681,683
------------ ------------
Total current assets 12,428,280 14,630,928
Property and equipment, net 1,378,470 1,478,003
Restricted cash 309,300 309,300
Investment in and advances to joint venture 102,865 101,336
Intangible assets, net 1,119,457 1,183,024
Other assets 234,930 243,288
------------ ------------
Total assets $15,573,302 $17,945,879
============ ============
LIABILITIES
Current liabilities:
Accounts payable $2,228,755 $3,441,114
Accrued expenses and other liabilities 593,266 1,121,917
Reserve for claim adjustments and warranties 3,980,384 4,150,133
Deferred revenue 915,012 759,060
Current portion of capital lease obligations 7,372 7,222
------------ ------------
Total current liabilities 7,724,789 9,479,446
Capital lease obligations, net of current portion 2,771 4,644
------------ ------------
Total liabilities 7,727,560 9,484,090
------------ ------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock 39,759 39,759
Additional paid-in capital 59,671,189 59,671,189
Accumulated deficit (51,859,256) (51,243,209)
Less: Treasury stock, at cost (5,950) (5,950)
------------ ------------
Total stockholders' equity 7,845,742 8,461,789
------------ ------------
Total liabilities and stockholders' equity $15,573,302 $17,945,879
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
ENVIROGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
----------------------------
1999 1998
----------- -----------
Revenues:
Commercial operations $4,380,514 $5,809,926
Research and development services 686,610 714,520
----------- -----------
Total revenues 5,067,124 6,524,446
----------- -----------
Cost of commercial operations 3,777,620 4,416,238
Research and development costs 695,692 720,500
Marketing, general and administrative expenses 1,237,640 1,985,833
----------- -----------
Total costs and expenses 5,710,952 7,122,571
----------- -----------
Other income (expense):
Interest income 37,026 51,447
Interest expense (2,649) (6,943)
Equity in income (loss) of joint venture 1,529 (2,203)
Other, net (8,125)
----------- -----------
Other income, net 27,781 42,301
----------- -----------
Net loss ($616,047) ($555,824)
=========== ===========
Basic and diluted net loss per share ($0.16) ($0.14)
=========== ===========
Weighted average number of shares of
Common Stock used in computing basic
and diluted net loss per share 3,965,951 3,882,483
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
ENVIROGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($616,047) ($555,824)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 203,712 508,454
Provision for claim adjustments and warranties 157,301 109,329
Provision for doubtful accounts 76,708 41,071
Equity in (income) loss of joint venture (1,529) 2,203
Other 8,125
Changes in operating assets and liabilities:
Accounts receivable 1,103,807 846,444
Unbilled revenue 482,576 (367,069)
Inventory 36,675 12,998
Prepaid expenses and other current assets 159,497 1,495
Other assets 8,358 7,142
Accounts payable (1,212,359) (1,185,142)
Accrued expenses and other liabilities (528,651) (500,982)
Reserve for claim adjustments and warranties (327,050) (303,059)
Deferred revenue 155,952 261,484
----------- -----------
Net cash used in operating activities (292,925) (1,121,456)
----------- -----------
Cash flows from investing activities:
Capital expenditures (52,107) (46,403)
Proceeds from sale of property and equipment 3,370
----------- -----------
Net cash used in investing activities (48,737) (46,403)
----------- -----------
Cash flows from financing activities:
Capital lease principal repayments (1,723) (4,212)
----------- -----------
Net cash used in financing activities (1,723) (4,212)
----------- -----------
Net decrease in cash and cash equivalents (343,385) (1,172,071)
Cash and cash equivalents at beginning of period 3,407,910 4,863,658
----------- -----------
Cash and cash equivalents at end of period $3,064,525 $3,691,587
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $9,945 $19,567
=========== ===========
Cash refunded for income taxes ($9,764) $0
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
ENVIROGEN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting, pursuant to the rules and regulations of the Securities and
Exchange Commission. 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.
The financial information presented reflects all adjustments consisting of
normal recurring accruals which are, in the opinion of management, necessary for
a fair statement of the results for the interim periods. The results for the
interim periods are not necessarily indicative of the results to be expected for
the entire year.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Form 10-K for the fiscal year ended December 31, 1998. Certain reclassifications
have been made to conform prior year's presentation with the 1999 financial
statement presentation.
Since the Company incurred net losses for the three months ended March 31, 1999
and 1998, both basic and diluted per share calculations are the same. The
inclusion of additional shares assuming the exercise of stock options and
warrants would have been antidilutive. There were options and warrants to
purchase 516,658 and 645,877 shares of common stock outstanding at March 31,
1999 and 1998, respectively.
2. LITIGATION
The Company is currently involved in litigation relating to remediation services
previously provided at a customer site. This customer filed a claim against the
Company for professional malpractice, breach of warranty of professional
services contract and misrepresentation. No specific damages have been claimed
by this customer and, at the present time, management of the Company is unable
to predict the outcome of this matter or to determine whether the outcome of
this matter will materially affect the Company's results of operations, cash
flows or financial position.
The Company is also subject to other claims and lawsuits in the ordinary course
of its business. In the opinion of management, such other claims are either
covered by insurance or, if not insured, will not individually or in the
aggregate result in a material adverse effect on the consolidated financial
condition of the Company.
6
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3. SEGMENT INFORMATION
Information about reported segments for the three months ended March 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
Research and
Commercial Development
Operations Services Other Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1999
Revenues $4,380,514 $686,610 -- $5,067,124
Segment profit (loss) 602,894 (9,082) (1,209,859) (616,047)
1998
Revenues $5,809,926 $714,520 -- $6,524,446
Segment profit (loss) 1,393,688 (5,980) (1,943,532) (555,824)
</TABLE>
The following table presents the details of "Other" segment for the three months
ended March 31, 1999 and 1998:
1999 1998
----------- -----------
Marketing, general and
administrative expenses ($1,237,640) ($1,985,833)
Interest income 37,026 51,447
Interest expense (2,649) (6,943)
Equity in income (loss) of joint venture 1,529 (2,203)
Other, net (8,125) --
----------- -----------
($1,209,859) ($1,943,532)
=========== ===========
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the Company's
unaudited consolidated financial statements and notes thereto included in this
Quarterly Report and the consolidated financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the Company's Form 10-K for the fiscal year ended December 31,
1998.
Certain statements made herein are forward-looking and are made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties which may cause results to differ
materially from those set forth in these statements. In particular,
unanticipated changes in the economic, competitive, governmental, technological,
marketing and other factors identified herein and in the Company's other filings
with the Securities and Exchange Commission could affect such results.
General
The Company's revenues to date have been from (i) commercial operations,
consisting of revenue from remediation services, conventional treatment systems
and soil vapor extraction systems and the Company's biological degradation
systems (including both in situ and ex situ bioremediation), and (ii) funds
received from third parties and government agencies to conduct specific research
and development programs. While the Company has realized significant commercial
revenues for several years from remediation services and from traditional
remediation systems such as soil vapor extraction systems, it has only recently
seen the first substantial revenues from sales of full-scale biological
degradation systems for the treatment of contaminated air and water. Although
great strides have been made in the commercialization of these systems,
significant expenditures will be required for continued research and
development, additional marketing activities and ultimately the development of
manufacturing capabilities for the further commercialization of the Company's
biodegradation systems. The amount and timing of such expenditures will vary
depending on several factors, including the progress of development and testing,
funding from third parties, the level of enforcement of environmental
regulations by federal and state agencies, technological advances, changing
competitive conditions and determinations with respect to the commercial
potential of the Company's systems. The amount and timing of such expenditures
cannot be predicted.
On April 10, 1997, the Company acquired Fluid Management, Inc. ("FMI"), a
full-service environmental consulting and engineering firm that is now operated
as the Company's Wisconsin Operations Group (the "Group"). Remediation services
and installation of traditional remediation systems are the Group's core
business and generate the greatest portion of the Group's revenues. Pursuant to
the Wisconsin Petroleum Environmental Cleanup Fund Act ("PECFA"), a program
funded by the State of Wisconsin for cleaning up underground storage tanks, the
Group's clients (or their lending banks) are entitled to seek reimbursement for
a majority of the remediation costs paid to the Group. The Wisconsin Department
of Commerce ("DCOM") reviews claims for reimbursement under PECFA to determine
the extent to which submitted claims will be reimbursed. Typically the DCOM
review process is not completed until one to three years after the expense has
been incurred and paid by the Group's client (or its bank). This exposes the
client to the risk that remediation expenses it incurred and paid ultimately may
be disallowed for PECFA reimbursement by DCOM. The Group has historically
reimbursed its clients (or their lending banks) for the remediation costs for
services provided by the Group which ultimately were determined by DCOM to be
8
<PAGE>
ineligible for reimbursement under PECFA. In certain instances, the Company has
written guarantees to banks which, under certain conditions, could obligate the
Company to reimburse the bank for items disallowed under the program. Since the
Company acquired FMI, the Company has reimbursed its clients and their lending
banks an aggregate of $977,161. At March 31, 1999, the Company had $3,611,803 in
reserves with respect to potential ineligible claims related to approximately
$55 million in claims that had not yet been fully reviewed by DCOM. There can be
no assurance that the amount of such reserve, which was determined by management
based on historic reimbursement disallowance rates under the PECFA program, will
be adequate.
On April 17, 1998, the State of Wisconsin adopted new emergency rules
("Emergency Rules") with regard to PECFA which effectively reduced the expected
revenue per site that the Wisconsin Operations Group can capture under the
program for the foreseeable future. The State of Wisconsin's stated intent for
issuance of the Emergency Rules was to reduce the amount of funds being paid for
cleanup efforts under the PECFA program. Until the issuance of the Emergency
Rules, the Wisconsin Department of Natural Resources ("DNR") determined the
appropriate remedial activity for each site under the program in every instance.
Per the Emergency Rules, DNR's authority extends only to sites where groundwater
contamination is evident. Where contamination of soil exists without groundwater
contamination, DCOM administers the remedial program with no DNR involvement.
Under the Emergency Rules, lower-cost natural attenuation is mandated unless
certain conditions exist which would indicate that active remediation is
necessary. This is a significant change, since natural attenuation was
previously not an approved option and virtually all sites were actively
remediated. Based upon the Company's experience, it is estimated that the active
remediation approach under PECFA resulted in revenues ranging from $50,000 to
$1,000,000 per site. Since the adoption of the Emergency Rules, the Company's
revenues from a typical site were reduced to approximately $40,000 to $100,000.
This regulatory event has resulted, and is expected to continue to result, in a
dramatic decrease in revenue, net income and cash flow from the Wisconsin
Operations Group. The Company is not aware of any proposed or pending changes to
the PECFA program that would have a materially favorable impact on the business
of the Wisconsin Operations Group.
As a result of this event, the Company reviewed the carrying value of the
long-lived assets associated with its acquisition of FMI and recorded a non-cash
charge of $21,670,028 in the second quarter of 1998 representing the impairment
of the goodwill. This charge is based on the amount by which the book value
exceeded the current estimated fair market value of the goodwill. The current
estimated fair market value was determined primarily using the anticipated cash
flows of the Wisconsin Operations Group discounted at a rate commensurate with
the risk involved. The impairment charge fully eliminated the remaining carrying
value of the goodwill associated with the FMI acquisition.
Results of Operations
Three Months Ended March 31, 1999 Compared to
Three Months Ended March 31, 1998
For the three months ended March 31, 1999, revenues decreased 22% to $5,067,124
from $6,524,446 from the same period in 1998. The net loss in the period
increased 11% to $616,047 from $555,824, while the basic and diluted net loss
per share was $0.16 compared to $0.14 in the same period in 1998.
9
<PAGE>
Commercial revenues decreased 25% to $4,380,514 in the first quarter of 1999
from $5,809,926 in the same period in 1998, while revenues from corporate
research and development contracts decreased 4% to $686,610 from $714,520 in the
same period in 1998. The decreased commercial revenues are due primarily to
reduced revenues under the PECFA program related to the adoption of the
Emergency Rules in April 1998.
Revenues from corporate and government research and development contracts
decreased primarily due to the timing of work associated with the Phase II
government projects that the Company is actively working on.
Total costs and expenses decreased 20% to $5,710,952 in the first quarter of
1999 from $7,122,571 in the same period in 1998. The cost of commercial
operations decreased 14% to $3,777,620 from $4,416,238 due to the decreased
revenue levels. Research and development expenses decreased 3% to $695,692 from
$720,500 due primarily to the decrease in research and development funding from
third parties and government agencies. Marketing, general and administrative
expenses decreased 38% to $1,237,640 from $1,985,833 due primarily to headcount
reductions, purchasing efficiencies from the integration of FMI and the
elimination of the amortization of goodwill associated with the FMI acquisition
after taking an impairment charge in the second quarter of 1998.
Liquidity and Capital Resources
The Company has funded its operations to date primarily through revenues from
commercial operations, research grants from government agencies, research and
development agreements with major industrial companies and public offerings and
private placements of equity securities. At March 31, 1999, the Company had cash
and cash equivalents of $3,064,525 and working capital of $4,703,491.
Additionally, the Company had restricted cash of $309,300 that was being used to
collateralize a bond for a large commercial project. Cash and cash equivalents
decreased $343,385 from December 31, 1998 to March 31, 1999 primarily a result
of cash used by operations of $292,925 and capital expenditures of $52,107. The
Company expects to incur additional capital expenditures in connection with the
continued development and commercialization of its technologies. The timing and
amount of such expenditures will fluctuate depending on the timing of field
tests, systems development activity, the rapidity with which the Company's
biodegradation technology can be further commercialized and the availability of
capital. Furthermore, future projects may require the Company to set aside
additional capital to collateralize performance bonds.
From December 31, 1998 to March 31, 1999, accounts receivable decreased by
$1,180,515 and accounts payable decreased by $1,212,359 primarily due to the
reduced revenue levels and related subcontractor charges as well as shifts in
the timing of project expenses in the first quarter of 1999 as compared to the
last quarter of 1998. Accrued expenses and other liabilities decreased by
$528,651 from December 31, 1998 to March 31, 1999 primarily due to the payment
in the first quarter of 1999 of bonuses related to prior years and the timing of
payroll related accruals. On March 31, 1999, the Company had $3,980,384 in
reserve for claim adjustments and warranties, $3,611,803 of which is
attributable to potential PECFA claim adjustments related to approximately $55
million in unsettled PECFA submittals and $368,581 of which is attributable to
potential systems warranty claims and other contract issues.
It is anticipated that the Company's currently available cash and cash
equivalents and cash expected to be generated from operations will provide
sufficient operating capital for at least the next 18 to 24 months. The Company
may seek additional funds through equity or debt financing. However, there can
be no assurance that such additional funds will be available on terms favorable
to the Company, if at all.
10
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Other Matters
As of December 31, 1998, the Company had a net operating loss carryforward of
approximately $23,000,000 for federal income tax reporting purposes available to
offset future taxable income, if any, through 2018. The timing and manner in
which these losses may be utilized are limited under Section 382 of the Internal
Revenue Code of 1986 to approximately $1,700,000 per year based on preliminary
calculations of certain ownership changes to date and may be further limited in
the event of additional ownership changes.
The Year 2000 Issue - Readiness Disclosure
The Year 2000 issue is the result of computer systems and other equipment with
processors that identify a year with only two digits rather than four. If not
corrected, many computer applications and date sensitive equipment could fail or
create erroneous results before, during and after the Year 2000. The Company
utilizes information technology ("IT") systems such as computer networking
systems and non-IT devices such as building security equipment, that are subject
to potential failure due to the Year 2000 issue.
The Company has developed and implemented a plan to achieve year 2000 readiness
(the "Y2K Program"). The Y2K Program is coordinated at the corporate level and
is implemented by individuals in the Company's offices throughout the country.
The Y2K Program has been implemented in the following phases: (1) identification
and assessment of all critical IT systems and non-IT devices requiring
modification or replacement; (2) remediation or replacement and testing of
modifications to critical items; (3) evaluation of third parties; and (4)
development of contingency and business continuity plans to mitigate the effect
of any system or equipment failure to the Company's operations arising from the
Year 2000 issue. Progress reports on the Y2K Program have been, and will
continue to be, presented regularly to the Company's senior management and
periodically to the Audit Committee of the Company's Board of Directors.
The Company has identified its computer network in each of its offices as the
Company's only significant IT systems. The Company has completed its assessment
of its computer network and has identified certain areas of non-compliance that
are being addressed by upgrading non-compliant operating software, network
capabilities and hardware. Completion of the upgrade process is expected by June
1999. In addition, a standard compliance process is being used to certify that
all hardware and software being purchased for the Company's computer network is
Y2K compliant.
The Company has identified its telephone and communications systems in each of
its offices as its only significant non-IT system. The Company has completed its
assessment of its telephone and communications systems and has discovered that
the telephone systems in two of the Company's locations were non-compliant. The
Company intends to modify or, if necessary, replace such non-compliant systems
and expects to complete such modification or replacement by September 1999.
The Company's projects are predominantly labor oriented with little IT content
in what is provided to the Company's clients. With respect to completed
projects, the Company does not believe that the systems and equipment provided
to its customers (not considering any modification made to such systems and
equipment by these customers, for which the Company is not responsible) are
likely to fail as a result of the Year 2000 issue. With respect to current and
ongoing projects, the Company relies directly and indirectly on external systems
utilized by its suppliers and on equipment and materials provided by those
suppliers
11
<PAGE>
and used for the Company's business. In accordance with the Y2K Program, the
Company has established a procedure for reviewing Year 2000 compliance by its
suppliers. As part of that process, the Company has identified approximately 150
critical suppliers and is currently assessing the level of compliance for each.
In those limited circumstances where equipment delivered to the Company or the
Company's clients has some IT or non-IT components with potential Y2K exposure,
the Company requires its suppliers to certify and guarantee Year 2000 compliance
of their systems and equipment provided. Given the number of suppliers utilized
by the Company, compliance assessment is ongoing. Although initial reviews
indicate that Year 2000 compliance by the Company's suppliers should not have a
material adverse affect on the Company's operations, there can be no assurance
that suppliers will resolve all Year 2000 issues with their systems and
equipment in a timely manner.
The Company has identified certain of its customers that are expected to be
customers of the Company through the Year 2000. The Company is currently
assessing whether such customers are Y2K compliant and whether any
non-compliance by such customers would have an impact on the Company's business.
No such customer accounted for more than 10% of the Company's revenues in 1998
or 1997. The Company intends to assess the Y2K readiness of any major new
customer of the Company that is expected to be a customer of the Company through
the Year 2000.
The Company uses both internal and external resources in its Y2K Program. The
Company has estimated that to date it has spent less than $10,000, primarily on
software upgrades, on the Year 2000 issue. It anticipates spending an additional
$50,000 to $100,000 for additional software upgrades, hardware modifications and
administrative costs. The program will be funded out of working capital and
expensed as incurred. The Y2K Program has not affected any other IT initiatives.
This estimate was derived utilizing numerous assumptions, including the
assumption that the Company has already identified its most significant Year
2000 issues and that the plans of its third party suppliers will be fulfilled in
a timely manner without cost to the Company. These costs are the Company's best
estimate given other ongoing systems initiatives. However, there can be no
guarantee that these assumptions are accurate, and actual results could differ
materially from those anticipated.
The Company is developing contingency plans that narrow the focus on specific
areas of significant concern and concentrate resources to address them. We
currently believe that the most reasonably likely worst case scenario is that
there will be some localized disruptions of systems that will affect individual
business processes, facilities, customers or suppliers for a short time rather
than systemic or long-term problems affecting our business operations as a
whole. Our contingency planning will continue to identify systems or other
aspects of our business or those of our suppliers that we believe would be most
likely to experience Year 2000 problems as well as those business operations in
which a localized disruption could have the potential for causing a wider
problem by interrupting the flow of materials or data to customers or to other
offices. Because there is uncertainty as to which activities may be affected and
the exact nature of the problem that may arise, our contingency planning will
focus on minimizing the scope and duration of any disruptions by having
sufficient personnel and other resources in place to permit a flexible,
real-time response to specific problems as they may arise at individual
locations. Some of the actions may include the development of plans for the
allocation, stockpiling or re-sourcing of components and materials that may be
critical to our projects in process at December 31, 1999. Specific contingency
plans and resources for permitting the necessary flexibility of response are
expected to be identified and put into place commencing in late 1999 as projects
in process may not be identified until that time.
12
<PAGE>
The success of the Company's Y2K Program is subject to a variety of risks and
uncertainties, some of which are beyond the Company's control. Those risks and
uncertainties include, but are not limited to, availability of qualified
computer personnel, the Year 2000 readiness of third parties, the Year 2000
compliance of systems and equipment provided by suppliers and the affects of the
Year 2000 on the economy generally. No assurance can be given that the Company
will achieve Year 2000 readiness or that the non-compliance by third parties or
the affects of the Year 2000 on the economy generally will not have a material
adverse effect on the Company's results from operations, liquidity or financial
position. Further, there is the possibility that significant litigation may
occur due to business and equipment failures caused by the Year 2000 issue. It
is uncertain whether, or to what extent, the Company may be affected by such
litigation. The failure of the Company, its clients (including governmental
agencies), suppliers of computer systems and equipment, joint venture partners
and other third parties upon whom the Company relies, to achieve Year 2000
readiness could materially and adversely affect the Company's results from
operations, liquidity or financial position.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
On March 31, 1999, the Company filed a Current Report on Form 8-K
reporting an announcement that it had dismissed PricewaterhouseCoopers LLP
and selected Ernst & Young LLP to serve as its independent accountants.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENVIROGEN, INC.
(Registrant)
Date: May 13, 1999 By: /s/ Robert S. Hillas
-------------------------------
Robert S. Hillas
President and Chief Executive Officer
By: /s/ Mark J. Maten
-------------------------------
Mark J. Maten
Vice President of Finance
and Chief Financial Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,064,525
<SECURITIES> 0
<RECEIVABLES> 5,735,007
<ALLOWANCES> (587,923)
<INVENTORY> 148,878
<CURRENT-ASSETS> 12,428,280
<PP&E> 5,532,035
<DEPRECIATION> (4,153,565)
<TOTAL-ASSETS> 15,573,302
<CURRENT-LIABILITIES> 7,724,789
<BONDS> 0
0
0
<COMMON> 39,759
<OTHER-SE> 7,805,983
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