SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996 or
___ Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 0-20317
Global Spill Management, Inc.
(Exact name of registrant as specified in its charter)
Nevada 88-0270266
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
77 Wells Road, Parker Ford, PA 19457
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-495-3000
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 and 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
As of May 7, 1996, there were 18,494,028 shares of Common Stock,
$.001 par value, outstanding.
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GLOBAL SPILL MANAGEMENT, INC.
INDEX
PART I - FINANCIAL INFORMATION
PAGE
Consolidated Balance Sheets - March 31
1996 and June 30, 1995 3
Consolidated Statements of Operations -
Nine months ended March 31, 1996 and 1995 4-5
Three months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows -
Nine months ended March 31, 1996 and 1995 6-7
Notes to Consolidated Financial Statements 8-11
Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-
16
PART II - OTHER INFORMATION 16
SIGNATURES 17
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GLOBAL SPILL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS March 31, 1996 June 30, 1995
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 20,000 $ 184,000
Accounts receivable, net of allowance for
doubtful accounts of $348,000 and $302,000 2,873,000 3,962,000
Inventories 96,000 114,000
Notes receivable 90,000 90,000
Other current assets 322,000 451,000
Total current assets 3,401,000 4,801,000
PROPERTY AND EQUIPMENT: Net of accumulated
depreciation of $1,218,000 and $1,026,000 952,000 1,195,000
GOODWILL: Net of accumulated amortization of
$253,000 and $178,000 3,390,000 4,581,000
OTHER ASSETS 123,000 180,000
NOTE RECEIVABLE - RELATED PARTIES 170,000 170,000
Total Assets $8,037,000 $10,927,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit 1,350,000 1,080,000
Current portion of long-term debt 279,000 235,000
Accounts payable 3,241,000 3,382,000
Accrued income taxes - 3,000
Accrued payroll 108,000 67,000
Other accrued expenses 370,000 300,000
Current portion of notes payable - related parties 144,000 167,000
Total current liabilities 5,492,000 5,234,000
LONG-TERM DEBT 337,000 510,000
DEFERRED TAXES 14,000 14,000
NOTES PAYABLE - RELATED PARTIES 855,000 988,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, authorized
5,000,000 shares, none issued - -
Common Stock, $.001 par value, authorized
40,000,000 shares, issued and outstanding
18,494,028 at March 31, 1996 and
15,973,877 at June 30, 1995 18,000 16,000
Additional paid-in capital 9,810,000 9,283,000
Accumulated deficit (8,114,000) (4,620,000)
1,714,000 4,679,000
Subscriptions Receivable (375,000) (498,000)
Total stockholders' equity 1,339,000 4,181,000
Total Liabilities and Stockholders' Equity $8,037,000 $10,927,000
The accompanying notes are an integral part of these statements.
</TABLE>
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<TABLE>
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GLOBAL SPILL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
March 31,
_________________________
1996 1995
_________________________ <S>
<C> <C>
REVENUES
Service $12,772,000 $11,076,000
Product - 950,000
12,772,000 12,026,000
COST OF REVENUES
Service 9,639,000 8,241,000
Product - 726,000
9,639,000 8,967,000
Gross Profit 3,133,000 3,059,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,611,000 3,265,000
RESTRUCTURING EXPENSE 380,000 -
Operating Income (loss) from continuing (858,000) (206,000)
operations
INTEREST EXPENSE (251,000) (91,000)
FORFEITED ACQUISITION COSTS (315,000) -
OTHER INCOME (EXPENSE), net 5,000 (79,000)
Loss from continuing operations
before income taxes (1,419,000) (376,000)
INCOME TAX BENEFIT - 46,000
LOSS FROM CONTINUING OPERATIONS (1,419,000) (330,000)
LOSS FROM DISCONTINUED OPERATIONS:
Loss from Operations (747,000) (342,000)
Write down of Goodwill (1,328,000) -
(2,075,000) (342,000)
NET (LOSS) $(3,494,000) $( 672,000)
NET (LOSS) PER SHARE FROM CONTINUING OPERATIONS $ (.08) $ (.03)
NET (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS (.11) (.03)
NET INCOME (LOSS) PER SHARE $ (.19) $ (.06)
SHARES USED IN COMPUTING NET
(LOSS) PER SHARE 18,494,028 10,797,217
The accompanying notes are an integral part of these statements.
/TABLE
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<TABLE>
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GLOBAL SPILL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
_________________________
1996 1995
_________________________
<S> <C> <C>
REVENUES $2,939,000 $4,308,000
COST OF REVENUES 2,345,000 3,597,000
Gross Profit 594,000 711,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,011,000 1,328,000
Operating Income (loss) from continuing operations (417,000) (617,000)
INTEREST EXPENSE (81,000) (41,000)
FORFEITED ACQUISITION COSTS (315,000) -
OTHER INCOME (EXPENSE), net 8,000 (89,000)
Loss from continuing operations (805,000) (747,000)
LOSS FROM DISCOUNTED OPERATIONS:
Loss from Operations (385,000) (228,000)
Write down of Goodwill (1,328,000) -
1,713,000 (228,000)
NET (LOSS) $(2,518,000) $ (975,000)
NET (LOSS) PER SHARE FROM CONTINUING OPERATIONS $ (.04) $ (.06)
NET (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS (.09) (.02)
NET (LOSS) PER SHARE $ (.13) $ (.08)
SHARES USED IN COMPUTING NET
LOSS PER SHARE 18,494,028 12,239,503
The accompanying notes are an integral part of these statements.
/TABLE
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<TABLE>
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GLOBAL SPILL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31,
_________________________
1996 1995
_________________________
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(3,494,000) $ 673,000
Adjustments to reconcile net income (loss) to
net cash used in operating activities -
Depreciation and amortization 479,000 329,000
Loss on disposal of assets 12,000
Write down of Goodwill 1,328,000 -
Increase in allowance for doubtful accounts 47,000 55,000
(Increase) decrease in assets -
Accounts receivable 1,042,000 476,000
Inventories 18,000 (28,000)
Prepaid expenses and other assets 170,000 (297,000)
(Decrease) increase in liabilities -
Accounts payable (142,000) (661,000)
Accrued expenses and other current liabilities 110,000 (117,000)
Net cash used in operating activities (442,000) (904,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (16,000) (350,000)
Sales of equipment 33,000 -
Increase (decrease) in amounts due to/from related parties - (20,000)
Acquisitions and divestitures, net of cash paid (25,000) (283,000)
Increase in other assets - 54,000
Net cash provided by (used in) investing activities (8,000) (599,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit, net 270,000 377,000
Proceeds (repayments) from long-term debt, net (128,000) 51,000
Payment to related party - Allied acquisition (157,000) (1,242,000)
Issuance of common stock, net of expenses 178,000 1,403,000
Proceeds from common stock receivables, net of expenses 123,000 1,000,000
Net cash provided by (used in) financing activities 286,000 1,590,000
NET DECREASE IN CASH (164,000) 87,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 184,000 166,000
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 20,000 $ 253,000
The accompanying notes are an integral part of these statements.
</TABLE>
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GLOBAL SPILL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31,
_________________________
1996 1995
_________________________
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash (received) paid during the period for -
Interest expense $279,000 $ 120,000
Income taxes (refunds) - (49,000)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCIAL ACTIVITIES:
Common stock issued in exchange for notes receivable (380,000) 2,227,000
Capital leases for equipment
Stock issued due to acquisition earnout 233,000 122,000
ACQUISITIONS OF COMPANIES
Fair value of assets acquired - 6,410,000
Liabilities assumed - (2,881,000)
Stockholders' deficit - -
Stock issued - (500,000)
Notes payable - (3,029,000)
SPIN OFF OF COMPANY
Assets - (1,332,000)
Liabilities - 60,000
Acquisition of treasury stock - (1,264,000)
Retirement of treasury stock - 1,264,000
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
GLOBAL SPILL MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL:
The consolidated financial statements of Global Spill
Management, Inc. (the "Company") as of and for the three and nine
months ended March 31, 1996 and 1995 are unaudited and include
all adjustments which, in the opinion of management, are
necessary to present fairly the results of operations for the
periods then ended. All such adjustments are of a normal
recurring nature. These financial statements do not include all
of the information and footnote disclosures normally included in
financial statements prepared in accordance with general accepted
accounting principles and should be read in conjunction with the
financial statements and notes thereto included in the Company's
Form 10-K, filed with the Securities and Exchange Commission,
which includes financial statements as of and for the years ended
June 30, 1995, 1994 and 1993, respectively.
The results of the Company's operations for any interim
period are not necessarily indicative of the results of the
Company's operations for any other interim period or for a full
year.
2. LINES OF CREDIT:
The Company had a $1,150,000 line of credit with a
commercial bank that expired on October 31, 1995.
On December 29, 1995 the Company negotiated an increase in
this line of credit to $1,350,000 and extended the maturity date
to January 31, 1996. A condition to extending the line of credit
required the Company to obtain by January 15, 1996 a commitment
letter from another lender sufficient to payoff the bank. The
Company received on January 26, 1996, a commitment from this
other lender for a revolving line of credit of $3.0 million
collateralled by substantially all the assets of the Company.
Borrowings under this new line of credit are limited to 80% of
the value of eligible accounts receivable, as defined, and up to
$3.0 million bears interest at the prime rate plus 3.0%.
Due to an unexpected drop in business and, therefore,
eligible accounts receivable, the Company lacked sufficient
collateral to repay the $1,350,000 owed to the lender. On April
25, 1996 the Company entered into a forebearance agreement with
the commercial bank, its' primary lender, extending the line of
credit to May 31, 1996.
Under the terms of the forebearance agreement, the Company
has agreed to remit collections of the accounts receivable of its
Environmental Disposal Options Corporation ("EDOC") subsidiary as
a permanent reduction of the line of credit (see Note 6 -
Discontinued Operations). At March 31, 1996 EDOC's total
accounts receivable were approximately $150,000 (net of
allowances). In addition, the Company must provide the bank a
repayment plan suitable to the bank by May 31, 1996, which may
include the sale of some or all of the assets of the Company.
If the Company falls into default of the forebearance
agreement and the Company's lender demands repayment of its Line
of Credit, it would negatively impact the Company's ability to
continue as a going concern.
3. LONG TERM DEBT:
In October 1995, the Company issued a $100,000 Subordinated
Convertible Debenture which bears interest at 13.75% per annum
payable monthly. This debenture is due on November 1, 1998 and
is convertible into Common Stock of the Company after August 31,
1996 at a rate of $.35 per share.
4. LITIGATION:
In October 1995 the Company received a binding commitment
for new financing from CKN Holdings Corporation ("CKN") which
would provide $1.5 million of new common equity and a one year
convertible loan amounting to $1.5 million bearing interest at
11.5%. Proceeds of $2.0 million were to be applied to the
acquisition of American Marine, Inc. and $1.0 million were to be
used for general working capital purposes. On November 14, 1995
the Company and CKN executed a Stock Subscription Agreement,
which would be completed upon the transfer of $3.0 million to the
Company. On November 15, 1995 CKN defaulted on its commitment
under the Stock Subscription Agreement. On December 28, 1995 the
Company filed two separate Complaints against CKN due to CKN's
failure to fund its' commitment under the Stock Subscription
Agreement. In the first Complaint, the Company sought an
immediate return of the stock and promissory note which had been
previously delivered to CKN pursuant to the terms of the Stock
Subscription Agreement. In the second Complaint, the Company
sought a declaration that it held title to the stock and
promissory note and further sought damages against CKN for
violation of the Stock Subscription Agreement.
As a result of the litigation, CKN returned the stock and
promissory note to the Company. CKN failed to answer or
otherwise plead in response to either of the Complaints. On
February 4, 1996, the Company filed a Motion for the Entry of
Default Judgment with respect to the second Complaint. The Court
has entered a default judgment as to liability in favor of the
Company. Collection of the judgment is highly doubtful.
As a result of CKN's failure to fund, the Company is in
default of its purchase agreement for American Marine, Inc.
("AMI"). Accordingly, the Company has written-off $315,000 of
costs related to the AMI acquisition.
In addition, as a result of CKN's failure to fund, the
Company had to discontinue the operations of it's EDOC subsidiary
as a result of the lack of the working capital needed to expand
its business to attain profitability (see Note 6 - Discontinued
Operations).
5. STOCKHOLDERS EQUITY:
During the first quarter ended September 30, 1995, the
Company sold 825,000 shares of common stock to an investor in a
private placement. The proceeds of this transaction were
$220,000.
6. DISCONTINUED OPERATIONS:
Due to the lack of profitability and the shortage of working
capital as a result of CKN's failure to fund its' equity
investment, the Company discontinued operations of its EDOC
subsidiary as of March 28, 1996. As a result the Company has
recorded a $1,328,000 write down of goodwill associated with
EDOC.
The result of operations of EDOC have been reported
separately as discontinued operations in the Consolidated
Statement of Operations. All of the assets of EDOC are pledged
as collateral to the Company's primary lender. Under the terms
of the forebearance agreement with the lender, the Company has
agreed to remit the collection of EDOC's accounts receivable to
the lender as partial repayment of the loan (see Note 2 - Lines
of Credit). In addition, the Company intends to liquidate the
remaining assets of EDOC in an effort to repay the lender.
7. RESTRUCTURING AND CONSOLIDATION PLAN:
In December 1995 the Company commenced a consolidation and
restructuring plan aimed at reducing overhead and streamlining
the operations in an effort to more efficiently use personnel and
equipment. The consolidation and restructuring plan entailed
replacing the Company's President, and eliminating the Chief
Operating Officer position by merging his responsibilities into
the workforce of other members of management.
As a result of the changes noted above, the Company expects
to save over $600,000 in cash in calendar 1996.
Included in the Statement of Operations for the nine months
ended March 31, 1996 is a one time non-recurring restructuring
expense of $380,000. This expense relates to a $280,000 of non-
cash expenses related to write down of intangibles whose future
benefit is questionable, expenses already incurred and paid for,
and the accrual of $100,000 expected severance benefits, legal
and consultant fees related to the consolidation. Management is
continuing to evaluate the need for future cost savings, with an
emphasis on reducing facility and personnel costs.
8. GOING CONCERN:
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. However a severe shortage in working capital, as a
result of large losses for the past three years and the failure
of CKN to fund its equity investment, have created uncertainty in
the ability of the Company to continue as a going concern. In
addition, the Company has been in default, from time to time, of
its Line of Credit Agreement with its primary lender. And,
although the Company has been able to negotiate forebearance
agreements in the past, there can be no assurance the primary
lender will grant continued forebearance under the line of credit
agreement beyond its latest expiration date of May 31, 1996. The
Company does not presently have the cash resources to satisfy the
lender if demand for repayment is made.
Management is attempting to raise additional capital through
a private placement of equity securities in addition to
evaluating the sale of less strategic assets.
In the absence of achieving an accommodation from its
primary lender, or obtaining additional debt or equity financing
and attaining profitable operations, the Company may not have
sufficient funds to continue operations.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
General
The Company's operations are affected by a number of
factors, including, without limitation, the enactment of new, and
the enforcement of existing, Federal, state and local
environmental laws and regulations; general economic conditions;
weather conditions in specific locations; and the
unpredictability of significant spill activity. While spills are
unpredictable, management believes the number of spills increase
in periods of severe climatic changes. Since these factors are
beyond the control of the Company, it is difficult for the
Company to predict the specific time frame within which spills
will occur, if any, and the revenues derived therefrom. These
factors will continue to have a significant effect on the future
financial condition and results of operations of the Company.
The Company's revenues are derived principally from a wide
range of environmental contracting services such as emergency
spill response and recovery, tank removal, liquid and solid waste
disposal, contaminated soil remediation and pipeline maintenance
and repair.
The gross profit contribution from the environmental
services business is directly influenced by the mix of projects.
Some of the variable factors, other than the economy, which can
contribute to the fluctuation in gross margins are the (i) number
of employees utilized on a specific project and the time
considerations imposed by the customer or regulatory authorities
(i.e., intensity of labor), (ii) utilization of specialized
equipment, and (iii) costs associated with the transportation and
disposal of the contaminated material. For example, it has been
the Company's experience that emergency spill recovery may
contribute substantially more gross margin than soil remediation
and disposal.
Additionally, management believes that (i) to comply with
Federal, state and local regulations, (ii) to minimize potential
liability to the Company and (iii) to assure the customer that
the service performed complies with the various environmental
laws and regulations, a highly trained workforce is both
necessary and appropriate. The costs associated with the work
force are fixed over short periods of time and, depending on the
mix of projects in process at any one time, can significantly
impact gross margins.
Three Months Ended March 31, 1996 Compared to Three Months Ended
March 31, 1995
Revenues of $2,939,000 for the three months ended March 31,
1996 ("3rd Quarter Fiscal 1996") decreased $1,369,000 or 31.8% as
compared to the same period in 3rd Quarter Fiscal 1995. Most of
the reduction in sales, approximately $1,287,000 were
attributable to lower sales at the Company's Allied Environmental
Services ("Allied") subsidiary. Allied's business is the
transportation and disposal of petroleum contaminated soil.
Severe weather in the Northeast United States and Northern
California, Allied's primary geographic markets, negatively
impacted their business because of diminished contracting
activity.
Gross profit of $594,000 decreased primarily as a result of
a decrease in sales. The gross profit percentage for the 3rd
Quarter Fiscal 1996 was 20.2% as compared to 16.5% for the 3rd
Quarter Fiscal 1995. Gross profit percentage increased due to a
change in sales mix. Whereas, severe weather conditions reduced
Allied's sales revenues, there occurs a higher incident of spill
activity in bad weather. Spill response revenues carry a higher
margin than soil disposal revenues.
Selling, general and administrative expenses ("SG&A") for
the 3rd Quarter Fiscal 1996 of $1,010,000 decreased by $317,000
or 23.9% as compared to the 3rd Quarter Fiscal 1995. In December
1995 the Company instituted a restructuring and consolidation
plan aimed at reducing SG&A and to increase the efficiency of
company personnel and equipment. This plan is expected to result
in annual savings in excess of $600,000 in salaries. During the
3rd Quarter Fiscal 1996, the Company continued to reduce costs,
through the reduction of personnel. In addition, the Company
relocated its Corporate headquarters to its Parkerford,
Pennsylvania operating facility, saving the Company approximately
$100,000 in rent, equipment and additional personnel.
The Company had placed a deposit of $220,000 and incurred
$95,000 in other costs associated with the acquisition of
American Marine, Inc. ("AMI"). As a result of CKN's failure to
fund its equity investment, the Company has defaulted under its
purchase agreement of AMI. Accordingly, the Company has incurred
losses totalling $315,000 relating to AMI.
Interest expense for the 3rd Quarter Fiscal 1996 increased
by $41,000 as a result of an increased borrowings under the line
of credit and additional debt associated with the Allied
acquisition as of December 1994.
On March 28, 1996 the Company discontinued the operations of
its EDOC subsidiary. EDOC specialized in laboratory chemical
disposal, solvent recovery and identification of unknown
chemicals. Due to the Company's lack of working capital it
became too difficult to operate EDOC profitably. EDOC, because
of the lack of trade credit, was unable to generate sales because
of the lack of funds to transporters and disposal facilities, who
had to be paid in advance. Included in Loss from Discontinued
Operations is an operating loss of $384,000 for the 3rd Quarter
fiscal 1996 and a loss of $1,328,000 representing the unamortized
goodwill relating to EDOC's acquisition.
Nine Months Ended March 31, 1996 Compared to Nine Months Ended
March 31, 1995
Revenues of $12,771,000 for the nine months ended March 31,
1996 increased by $746,000 as compared to the same period in
1995. Approximately $8,690,000 of the total revenues for the
nine months ended March 31, 1996 were attributable to Allied
which was acquired December 1, 1994. Allied contributed
$4,497,000 of revenue for the same period in Fiscal 1995. Acme
Containment Group, Inc. ("Acme"), which was spun-off December 22,
1994 contributed $1,446,000 to Fiscal 1995 revenues. Revenues
for the other operations, when excluding Allied and Acme,
decreased $2,501,000 or 41.0%, from Fiscal 1995. The decrease in
sales is attributable to two factors. Included in the 1st Half
Fiscal 1995 were approximately $1.8 million in revenues from one
oil spill on the Delaware River ("July 1994 Spill"). The Company
did not have a similar event in 1st Half Fiscal 1996. The
Company, through its acquisition strategy, is diversifying its
service lines to lessen the impact of the unpredictability of
spill activity. During the first nine months of Fiscal 1996,
spill related revenues accounted for less than 15% of total
revenues. The second factor was the delay in funding from CKN
which negatively impacted revenues. Approximately $1.0 million
of the $3.0 million CKN financing was to be used for working
capital purposes. The lack of these funds inhibited the
company's ability to meet all of its customer demand for services
(see Working Capital and Liquidity).
Product revenues decreased by $950,000 or 100.0% for the
Fiscal 1996, as compared to the same period in Fiscal 1995
because of the sale of Acme.
Gross profit of $3,133,000 increased by $74,000, as compared
to the same period in Fiscal 1995. The gross profit percentage
decreased to 24.5% for the same period in Fiscal 1996 as compared
to 25.6% for the same period in Fiscal 1995.
Selling, general and administrative expense ("SG&A") for the
first nine months of Fiscal 1996 of $3,611,000 increased by
$346,000, or 10.6%, as compared to the same period in Fiscal
1995. SG&A increased due to the Allied acquisition. SG&A
attributable to Allied for the first nine months of Fiscal 1996
was $1,506,000. SG&A decreased, when removing Allied and Acme,
by $437,000 in the first nine months of Fiscal 1996 from the same
period in Fiscal 1995.
In December 1995 the Company initiated a restructuring and
consolidation plan which management expects will further reduce
SG&A by over $600,000 per year (as referred to above).
Interest expense increased by $161,000 due to increased
borrowing under the line of credit and the interest associated
with the Allied acquisition. Approximately $75,000 of the
increase in interest expense is related to Allied.
Liquidity and Capital Resources
Cash and cash equivalents as of March 31, 1996 were $20,000
compared to $184,000 as of June 30, 1995.
The Company had a working capital deficiency of $2,091,000
as of March 31, 1996 compared to a working capital deficiency of
$433,000 as of June 30, 1995.
Cash used in operating activities was $442,000 for the nine
months ended March 31, 1995 compared to $904,000 used in
operations for the same period in Fiscal 1995.
Cash flow used in investing activities was $8,000 for the
nine months ended March 31, 1995 compared to $599,000 of cash
used in investing activities for the same period in Fiscal 1995.
Capital expenditures for Fiscal 1996 were $16,000. The Company
does not anticipate capital expenditures in excess of $75,000 for
Fiscal 1996. The Company sold $33,000 of equipment in Fiscal
1996 and continues to pursue the sale of excess equipment to
raise cash and lower long term debt.
Included in Note Payable - Related Party as of March 31,
1996 was $944,000, of which $144,000 is current, and payable in
cash or in common stock.
During 1st Quarter Fiscal 1996, the Company sold 825,000
shares of Common Stock to an investment group in private
placement. The proceeds of this transaction was $220,000. In
addition the Company also collected $105,000 of common stock
subscription receivables in 1st Half Fiscal 1996.
As of March 31, 1996 the Company has $375,000 of
subscriptions receivable from various investment groups.
The Company had a $1,150,000 (increased to $1,350,000 in
December 1995) line of credit with a commercial bank, which
expired on October 31, 1995. The Company has been in default
from time to time of its Line of Credit due to technical
noncompliance with several financial covenants.
In December 1995 and again in April 1996 the lender agreed
to forebear through May 31, 1996 from exercising any rights and
remedies as a result of such technical defaults. The latest
forebearance agreement increased the interest rate to prime plus
3.0%.
A condition of the original line extension required the
Company obtain by January 15, 1996 a commitment from a new lender
to pay off the bank. The Company obtained this commitment on
January 26, 1996 and expects to receive funding under the new
line at the end of February 1996. Borrowings under the new line
of credit are limited to 80% of the value of eligible accounts
receivable, as defined, up to $3.0 million. As a result of an
unexpected downturn in sales and therefore eligible accounts
receivable, the Company did not have enough collateral to repay
its primary lender.
The failure of CKN to fund its obligation has caused a
liquidity problem that has hindered the Company's ability to pay
trade creditors timely. Slow payment and lack of credit terms
has negatively impacted the Company's profitability, and has
increased operating costs and lowered sales. In addition, the
Company has been in default from time to time of its Line of
Credit Agreement with its primary lender. And, although the
Company has been able to negotiate forebearance agreements in the
past, there can be no assurance the primary lender will grant
continued forebearance under the line of credit agreement beyond
its latest expiration date of May 31, 1996. The Company does not
presently have the cash resources to satisfy the lender if demand
for repayment is made.
Management is attempting to raise additional capital through
a private placement of equity securities in addition to
evaluating the sale of less strategic assets.
In the absence of achieving an accommodation from its
primary lender, or obtaining additional debt or equity financing
and attaining profitable operations, the Company may not have
sufficient funds to continue as a going concern.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K: None.
<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.
GLOBAL SPILL MANAGEMENT, INC.
/s/Robert K. Moskovitz
Robert K. Moskovitz, Vice
President, Finance and Chief
Financial Officer
Dated: May 10, 1996
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 20
<SECURITIES> 0
<RECEIVABLES> 3,221
<ALLOWANCES> (348)
<INVENTORY> 96
<CURRENT-ASSETS> 3,401
<PP&E> 2,170
<DEPRECIATION> (1,218)
<TOTAL-ASSETS> 8,037
<CURRENT-LIABILITIES> 4,801
<BONDS> 150
0
0
<COMMON> 18
<OTHER-SE> 1,321
<TOTAL-LIABILITY-AND-EQUITY> 8,037
<SALES> 12,772
<TOTAL-REVENUES> 12,772
<CGS> 9,639
<TOTAL-COSTS> 9,639
<OTHER-EXPENSES> 4,301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 251
<INCOME-PRETAX> (1,419)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,419)
<DISCONTINUED> (2,075)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,494)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
