SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
- ---- Act of 1934 for the quarterly period ended September 30, 1996
Transition report pursuant to Section 13 or 15(d) of the Securities
- ---- Exchange Act of 1934
For the transition period from to
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Commission file number 0-20317
Global Spill Management, Inc.
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(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.)
2300 Computer Avenue (Bldg. G-25), Willow Grove, Pennsylvania 19090
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(Address of principal executive offices)
(215) 830-1351
(Issuer's telephone number)
Indicate by check mark whether the Issuer: (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 No X
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The number of shares outstanding of the Issuer's Common Stock, $.001 Par Value,
as of February 25, 1997 was 2,516,468.
Transitional small business disclosure format:
Yes No X
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GLOBAL SPILL MANAGEMENT, INC.
Form 10-QSB
INDEX
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PART I - FINANCIAL INFORMATION
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Page
----
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
September 30, 1996 and June 30, 1996 3
Consolidated Statements of Operations - Three months ended
September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows - Three months ended
September 30, 1996 and 1995 5-6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-11
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 12-15
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16-19
Item 6. Exhibits and Reports on From 8-K 19
Signatures 20
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Global Spill Management, Inc.
and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
===============================================================================
September 30, June 30,
1996 1996
- -------------------------------------------------------------------------------
Assets
Current assets
Cash $ 11,190 $ 62,016
Net assets available for sale - 805,000
- -------------------------------------------------------------------------------
Total current assets $ 11,190 $ 867,016
===============================================================================
Liabilities and Capital Deficit
Current liabilities
Notes payable, bank $ - $ 1,134,553
Current maturities of long-term debt 100,000 117,255
Accounts payable 257,058 532,023
Notes payable, stockholder 25,000 50,000
Accrued expenses - 281,732
Notes payable, other - 932,727
- -------------------------------------------------------------------------------
Total current liabilities 382,058 3,048,290
- -------------------------------------------------------------------------------
Commitments and contingencies
Capital deficit
Preferred stock, $.001 par value
Authorized 5,000,000 shares, none issued - -
Common stock, $.001 par value,
Authorized 25,000,000 shares
Issued and outstanding 1,716,468
and 1,466,468 1,716 1,466
Additional paid-in capital 12,713,213 12,498,463
Deficit (13,085,797) (14,681,203)
- -------------------------------------------------------------------------------
Total capital deficit (370,868) (2,181,274)
- -------------------------------------------------------------------------------
Total liabilities and capital deficit $ 11,190 $ 867,016
===============================================================================
The accompanying notes are an integral part of these statements.
3
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Global Spill Management, Inc.
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
===============================================================================
Three months ended September 30, 1996 1995
- -------------------------------------------------------------------------------
Revenues $ - $ 5,833,000
- -------------------------------------------------------------------------------
Costs of expenses
Cost of services provided to customers - 4,619,000
Selling, general and administrative expenses - 1,324,000
Interest expense - 83,000
- -------------------------------------------------------------------------------
Total costs and expenses - 6,026,000
- -------------------------------------------------------------------------------
(Loss) from operations - (193,000)
Gain from debt forgiveness, net of
administrative costs 1,595,406 -
- -------------------------------------------------------------------------------
Net income (loss) $ 1,595,406 $ (193,000)
===============================================================================
Net income (loss) per share $ 1.01 $ (.32)
Weighted average number of common
shares outstanding 1,580,598 598,900
===============================================================================
The accompanying notes are an integral part of these statements.
4
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Global Spill Management, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
===============================================================================
Three months ended September 30, 1996 1995
- -------------------------------------------------------------------------------
Cash flows from operating activities
Net income (loss) $ 1,595,406 $ (193,000)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities
Gain from debt forgiveness (1,595,406) -
Depreciation and amortization - 137,000
(Increase) decrease in assets
Accounts receivable - (277,000)
Inventories - 15,000
Prepaid expenses and other assets - (42,000)
Increase (decrease) in liabilities
Accounts payable and accrued expenses (180,421) 449,000
- -------------------------------------------------------------------------------
Net cash (used in) provided by operating
activities (180,421) 89,000
- -------------------------------------------------------------------------------
Cash flows from investing activities
Purchases of equipment - (9,000)
Decrease in amounts due to related parties - (32,000)
Acquisitions - (24,000)
Deposits for acquisition - (220,000)
Sale of subsidiaries 805,000 -
- -------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 805,000 (285,000)
- -------------------------------------------------------------------------------
Cash flows from financing activities
Borrowings (repayments) on line of credit, net (855,000) 70,000
(Repayments) of long-term debt (10,405) (111,000)
(Payments) of deferred equity financing costs - (99,000)
(Repayments) of borrowings from shareholder (25,000) -
Issuance of common stock, net of expenses 215,000 220,000
Proceeds from common stock receivable, net
of expenses - 80,000
- -------------------------------------------------------------------------------
Net cash (used in) provided by financing
activities (675,405) 160,000
- -------------------------------------------------------------------------------
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Global Spill Management, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
===============================================================================
Three months ended September 30, 1996 1995
- -------------------------------------------------------------------------------
Net increase (decrease) in cash $ (50,826) $ (36,000)
Cash, at beginning of year 62,016 184,000
- -------------------------------------------------------------------------------
Cash, at end of year $ 11,190 $ 148,000
===============================================================================
Supplemental disclosures of cash flow
information
Cash paid (refunded) during the period for
Interest expense $ - $ 56
Income taxes $ - $ (12,000)
Noncash investing activities
Stock issued pursuant to acquisition
earnout $ - $ 64,000
===============================================================================
See accompanying notes to consolidated financial statements.
6
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Global Spill Management, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Unaudited
1. The accompanying unaudited consolidated financial statements, which
are for an interim period, do not include all disclosures provided in
the annual consolidated financial statements. These unaudited
consolidated financial statements should be read in conjunction with
the consolidated financial statements and footnotes thereto contained
in the Annual Report on Form 10-KSB for the year ended June 30, 1996 of
Global Spill Management, Inc. ("Global"), as filed with the Securities
and Exchange Commission. The June 30, 1996 balance sheet was derived
from audited consolidated financial statements, but does not include
all disclosures required by generally accepted accounting principles.
2. In the opinion of Global, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial
statements. The results of operations for the three months ended
September 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
3. During 1996, as a result of significant losses from Global's
operations and an inability to obtain sufficient working capital, Gobal
discontinued all operating activities of its environmental contracting
and consulting companies and related businesses. Global sold Land N'
Sea Environmental Services, Inc. ("LNS"), GSM Environmental, Inc.
("GSME") and Global Environmental, Inc. ("GE") and agreed to sell
Allied Environmental, Inc., Allied Environmental Services West, Inc.
and Professional Pipe Services Corporation ("Propipe"). Global's other
operating subsidiary, Environmental Disposal Options Corporation
("EDOC"), was shut down in March 1996. EDOC was subsequently put into
involuntary bankruptcy by its creditors and is currently liquidating
its assets in accordance with Chapter 7 of the United States Bankruptcy
Code.
On June 28, 1996, Global sold all of the issued and outstanding stock
of its subsidiaries, LNS, GSME and GE for $175,000 in cash. LNS was
purchased by a former employee and stockholder of Global for $75,000.
GSME and GE were purchased by Global's former chairman of the board and
chief executive officer for $100,000.
On June 28, 1996, Global entered into an agreement to sell the assets
net of substantially all of the liabilities of Allied Environmental,
Inc. and Allied Environmental Services, West, Inc., in exchange for
Common Stock of the purchaser, Eastern Environmental Services, Inc.
(EESI") valued at $700,000. The sale was consummated in July 1996.
On June 30, 1996, Global signed an agreement to sell the assets, net of
substantially all of the liabilities, of Propipe to a former employee
and stockholder of Global for $105,000 in cash. The sale was completed
in July 1996.
All of the proceeds from the sale of the subsidiaries, including
$700,000 received upon sale of the EESI shares, which amounted to
$980,000, were used to pay down the notes payable, bank.
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In June 1996, Global's bank agreed to release its liens for a payment
of $1,200,000. The payments to the bank included $980,000, which
represented the total proceeds from the sales of the subsidiaries
discussed above and an additional payment by Global of $220,000, of
which $50,000 was made in July 1996. The release took place in July
1996, at which time approximately $280,000 was forgiven by the Bank.
The gain from forgiveness was recorded in July 1997.
4. Per share data was calculated by dividing the net loss by the
weighted average number of shares outstanding during the period.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
Global's business strategy, as discussed in previous public filings, proved to
be an abysmal failure. Global's total revenues (while growing in recent years),
which amounted to in excess of $19 million for the fiscal year and ended June
30, 1995, were achieved at the expense of operating profit. Global has reported
net losses aggregating approximately $5 million for the three fiscal years ended
June 30, 1995. The absence of operating profits dictated that Global attempt to
meet its obligations by repeated resort to the equity and debt markets. Such
method of financing proved to be no longer feasible after the end of the third
quarter ended March 31, 1996. (See Plan of Reorganization, below.)
In addition, prior management subverted Global's announced business strategy by
engaging in transactions that effectively belied Global's stated business
purpose. Thus: Global's announced business theory was that, because of the risks
inherent in any business having environmental overtones (as, for example, see
the business history of Johns Manville), Global would itself remain a
non-operating holding company, actual operations would be conducted only by and
through wholly-owned subsidiaries, and a firm, unimpeachable dichotomy would
exist between the non-operating parent and the operating subsidiaries. This
concept was substantially impaired when prior management caused Global to, among
other things, guaranty the employment contracts of subsidiary managers, guaranty
contractual obligations of subsidiaries and guaranty as co-surety
performance/completion indemnity bonds required to be delivered by the
subsidiaries in the normal course of business. None of these actions was
disclosed to the independent members of the Board of Directors; and none of
these actions was the subject of disclosure in previously filed public
documents.
As a direct consequence of the implementation of the Plan of Reorganization
described below, Global has (as of June 30, 1996) disposed of all of its
operations and may today be fairly characterized as a non-operating "shell"
corporation. Therefore, there is no need for discussion herein of prior results
of operations, of year-to-year operating results and comparisons, and of
liquidity and capital resources. As of the date hereof, Global is able to meet
its debts as they mature, which obligations (giving effect to the completion of
the Plan of Reorganization described in Part I hereinabove) consist (except for
approximately $150,000 of disputed items) exclusively of legal, accounting and
miscellaneous expenses endemic to any public company.
Management believes that its principal focus today should be directed toward
the (a) realization of the cash value of Global's remaining assets and
(b) acquisition of a going concern that will provide stability of operation and
cash flow. Management also recognizes the importance of the reliance it places
upon the provider of funds previously utilized to liquidate creditor claims to
fulfill its commitment to furnish such additional amounts as are required to
eliminate in full the remaining approximate $150,000 of creditor claims.
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<PAGE>
PLAN OF REORGANIZATION
In April, 1996, because of a demonstrable inability to meet its debts as they
matured, Global and its designated financial advisors determined to undertake a
comprehensive Plan of Reorganization (the "Plan"). Such Plan included the
(a) sale of the four operating subsidiaries for cash consideration only,
(b) liquidation of the debt due to the senior secured creditor (Meridian Bank),
(c) elimination of debt in its entirety, and (d) reclassification of the issued
and outstanding shares of Common Stock. The Plan also included the acquisition
by Global of a going business, one that would permit Global to satisfy the then
continuous listing standards of NASDAQ (on which Small Cap market shares of
Global Common Stock were listed). The results of the implementation of the Plan
were as follows:
Sale of Subsidiaries
On June 28, 1996 (as to three subsidiaries) and effective June 30, 1996 (as to
one subsidiary), Global sold either the capital stock or the assets (subject to
liabilities) of its then four operating subsidiaries. The proceeds of such four
sales amounted to $980,000. Such $980,000, plus $170,000 paid by Global, plus
$50,000 paid prior to September 30, 1996, by one of its former subsidiaries,
amounting in the aggregate to $1,200,000, was paid to Meridian Bank in full and
complete satisfaction of the secured indebtedness of Global to Meridian Bank in
the principal amount of approximately $1,480,000 (including accrued interest as
at June 30, 1996). Global was a co-maker and co-guarantor of the Note of a
former subsidiary, in the principal amount of $100,000, issued to Meridian Bank
under date of June 28, 1996. Such note provided for a discount of $50,000 if
paid prior to September 30, 1996. The co-maker paid such $50,000 prior to
September 30, 1996; Global repaid $37,500 of such $50,000 to the co-maker prior
to September 30, 1996. The balance of $12,500 is being withheld by Global
pending the resolution by the co-maker of certain litigation to which each of
the co-maker and Global is a party (and which Global believes is the
responsibility of the co-maker pursuant to the June 28, 1996, sale agreement).
Meridian Bank released its lien and executed a General Release in favor of
Global in July 1996.
As a result of such sales, Global ceased to be an operating company.
Elimination of Debt
In addition to the discharge of all obligations due to Meridian Bank, Global
also undertook the elimination of all other debt. Employment contracts (under
which Global was obligated in the amounts of $1,230,600 for 1996 and $848,000
for 1997, respectively), were terminated, lease obligations were canceled and
general, unsecured creditors (other than those owed minimal amounts or those
professionals and firms continuing to provide necessary services for Global),
were resolved with an offer of 37.5 cents on the dollar.
10
<PAGE>
Giving effect to (a) the satisfaction of the indebtedness due Meridian Bank and
(b) the liabilities assumed by the purchasers of the four operating
subsidiaries, being treated herein as having occurred on June 28, 1996, Global
remained, as of June 30, 1996, with fixed liabilities of $591,000. Commencing in
July 1996, Global, as an alternative to creditor proceedings that would have
involved legal and accounting costs disproportionate to the dollar amount of its
remaining liabilities, commenced a voluntary plan of payment at a discount.
Creditors were offered an immediate settlement equal to 37.5% on the dollar
(except for claims under $100 (which were liquidated in full)). Such offer,
denominated as a common law composition, required that all creditors be treated
equally. Such offer resulted, as of October 1, 1996, in $565,000 in the
aggregate of claims being settled for the sum of $238,000. As of January 31,
1997, total liabilities of Global were approximately $150,000, of which $130,000
is represented by the claim of one creditor (Global's former securities counsel)
with whom Global is in litigation. Global intends to assert counterclaims with
respect to certain of the legal work performed by such creditor. (See "Legal
Proceedings" hereinafter.)
To assist Global in the completion of its internal reorganization plan adopted
on June 28, 1996, including the sale of the operating subsidiaries, the
liquidation of the senior secured creditor, the composition plan with general
unsecured creditors, the obtaining of a funding commitment for a minimum of
$900,000, and the termination of employment contracts, lease obligations,
acquisition debt and sundry other payables, Global retained the law firm of
Adelman Lavine Gold & Levin and The Fulcrum Group and IDIICO (as consultants) to
assist in the implementation and resolution of these matters. From June 28,
1996, through December 31, 1996, the law firm has billed $70,357 and has been
paid $46,567; and the Fulcrum Group has billed $56,250 and has been paid in
full. In addition, Global retained its former CFO to bring its books and records
current, discharge accounting obligations incurred pursuant to the contracts of
sale of the four subsidiaries and provide the accounts payable information
incident to the composition of the claims of general, unsecured creditors. From
June 28, 1996, through the date hereof Global paid such former CFO the sum of
$53,612.
As of the date hereof, Global has total indebtedness of approximately $150,000,
which includes one creditor in the amount of $130,000. Such amount does not
encompass any sums Global may be forced to pay as a result of current
litigation. (See "Legal Proceedings" hereinafter.)
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Global is a defendant in several lawsuits in which the principal defendant is
the former Global subsidiary that performed allegedly negligent remediation work
for the particular plaintiff. Global is vigorously defending all such suits, on
the basis that Global is not a proper party defendant because Global entered
into no contractual relationship with the particular plaintiff and bears no
responsibility to such plaintiff.
Prior to June 30, 1995, Global (upon the advice of former counsel that sales of
Common Stock for promissory notes was legal under Nevada law), sold to Corporate
Relations Group, Orlando, Florida (CRG), and to Financial Asset Management,
Phoenix, Arizona (FAM), 1,150,000 and 300,000 shares, respectively, of Global's
pre-reverse split authorized and unissued Common Stock. CRG is indebted to
Global today in the amount of $677,000 and FAM is indebted to Global today in
the amount of $209,375, each such amount representing the remaining balance on
the purchase price for such shares. Global believes that all such shares have
been sold by CRG and FAM. Global has instructed counsel to pursue diligently the
collection of both amounts.
On August 30, 1995, Global sold an aggregate of 750,000 shares of its
pre-reverse split, authorized and unissued Common Stock to Fondo de
Adquisiciones E Inversionnes (FONDO), a Costa Rican entity, for the sum of
$220,000. Such shares were sold pursuant to a purchase agreement that provided
for the filing of a Registration Statement on Form S-3 pertaining thereto. When
such filing could not be timely effected, an additional 75,000 shares were
issued to FONDO (the penalty for non-filing provided for in the purchase
agreement). On October 9, 1995, FONDO executed an Offshore Securities
Subscription Agreement, thereby converting the transaction into a Regulation S
(Reg S) transaction. The $220,000 received by Global was paid to American
Marine, Inc. (AMI) pursuant to a contract entered into by Global with AMI to
acquire the latter. Global's sale of Common Stock to FONDO was arranged by CRG;
and counsel for CRG executed the documents delivered to Global by FONDO. Global
apparently received assurances from CRG that Global would be paid the
outstanding promissory notes previously issued to Global by CRG, as well as that
CRG would assist Global in obtaining the balance of the AMI purchase price. CRG
arranged that CKN Holding Corporation (CKN) would provide the funding required
by Global for the completion of the AMI purchase. To accomplish such funding,
Global issued to CKN an aggregate of 5,274,818 shares of pre-reverse split,
authorized, unissued Global Common Stock. CRG failed to pay the remaining
balance on its promissory notes to Global and CKN failed to provide any funding
for Global. (The CKN shares were retired by Global on August 14, 1996.) Global,
as a direct result of such failures, defaulted in its obligations to AMI and,
thereby, forfeited the sum of $220,000 deposited with AMI.
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In July 1996, FONDO instituted an action against Global in Florida state court
seeking the return of $220,000. Global has filed a motion to dismiss the Florida
action on jurisdictional and procedural grounds. That motion is pending as of
the date hereof. The gravamen of FONDO's complaint appears to be that Global
failed to register the 825,000 shares under the 1933 Act. Global's position is
that the agreement with FONDO provided solely and exclusively for the issuance
of an additional 75,000 shares of Global Common Stock by Global to FONDO and for
no monetary compensation. Subsequent to the initiation by FONDO of its Florida
action, Global discovered documents indicating that, under date of December 29,
1995, Global, FONDO and CKN entered into an agreement pursuant to which FONDO
agreed to sell its shares to CKN for the sum of $354,750 and to release Global
from any other claims by FONDO.
Dependent upon the resolution of the presently pending motion to reargue the
motion to dismiss, Global intends to assert, either in the pending action or in
any other action commenced by FONDO or in a separate action to be instituted by
Global, that FONDO, CRG and CKN were and are "affiliates" (as that term is
defined by the 1933 Act), that CRG has not liquidated its own promissory note to
Global, that CRG and CKN are directly responsible for Global's loss of the sum
of $220,000 deposited with AMI, and that FONDO, CRG and CKN violated Rule 10b-5
promulgated under the 1934 Act in failing to apprise Global of the relationship
between FONDO and CRG and in failing to advise Global that CKN had no
demonstrable ability to provide the balance of the financing necessary to
complete the AMI transaction.
In September, 1996, Global was sued for the sum of $130,000 by its former
securities counsel. At a meeting held on November 15, 1996, with such law firm,
Global again proposed that such law firm accept the 37.5% settlement accepted by
virtually all other general, unsecured creditors. (See Plan of Reorganization
hereinabove.) Global also advised such law firm that, were the matter to
proceed, at least five specific transactions to which Global was a party and
which were undertaken during the period such law firm represented Global, would
be asserted by Global as affirmative defenses and/or counterclaims to such law
firm's claim. As of the date hereof, Global has received an extension of time in
which to file its answer to such complaint, during which period of time Global
is to furnish such law firm with additional information relevant to the proposed
settlement offer and claims to be asserted in defense of the action.
Global has been threatened with litigation by Peter V. White, a former Global
Executive Vice President, Chief Financial Officer and Treasurer. Mr. White
(through his attorneys) has demanded payment to him by Global of amounts
allegedly due pursuant to a termination agreement entered into between Mr. White
and Global upon Mr. White's resignation of all positions with Global as of June
30, 1995. (Global's alleged liability under such termination amounts to
$57,000.) Mr. White deferred instituting such litigation, upon information and
belief, until Global, as of September 30, 1996, discharged the sum of $98,816
due and payable by Global to Great West Indemnity (GW). GW had been Global's
medical insurance carrier for all covered employees of Global. Prior management
had defaulted in Global's monetary obligations to GW. The Plan of Reorganization
included the resolution of all amounts due GW; the $98,816 was paid to GW; and
all employee medical claims through and including April 30, 1996 (the GW cut-off
date (with notification thereof tendered to all Global employees)) are now being
paid by GW. One of such claimants is Mr. White; and he is expected to receive an
amount in excess of approximately $102,904 from GW. Global had advised counsel
for Mr. White that, apart from causing GW to pay Mr. White's medical claims,
Global will make no further payments of any kind whatsoever to Mr. White, that
the termination agreement between Mr. White and Global is ultra vires,
13
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and that counterclaims will be asserted against Mr. White by Global (should
litigation be instituted by the latter) raising matters commencing in 1992 (to
the extent that the same are not barred by any relevant Statute of Limitations).
Global has been advised by David R. Stith, a director, that Mr. Stith has claims
against Global for unpaid medical expenses and for amounts due pursuant to an
employment contract with a subsidiary of Global. The amount claimed thereunder
is $150,000. All amounts due Mr. Stith pursuant to his claim for medical expense
reimbursement have been paid. (See the paragraph immediately preceding.) On June
28, 1996, the Board adopted a resolution pursuant to which the Camden, New
Jersey property owned by Global would be transferred to Mr. Stith in exchange
for a General Release from Mr. Stith. Mr. Stith later rejected such offer. On
November 15, 1996, the Board and Mr. Stith agreed to offset the employment claim
against the cancellation of a note receivable from Mr. Stith.
In November 1996, Global was sued by Alpine Petroleum Company/Raymond Kerwood
(Plaintiff) pursuant to a certain consulting agreement entered into between
Global and Plaintiff on December 1, 1994. Plaintiff claims it is due the amount
of $51,000 through August 1, 1996. Global intends to defend vigorously such
lawsuit upon the basis that such consulting agreement was entered into in
connection with Global's acquisition of Professional Pipe Services Corporation
(Propipe) on December 1, 1994; that such consulting agreement was a disguised
attempt to increase the acquisition cost of Propipe by Global; that Common Stock
of Global was issued to Plaintiff as a shareholder of Propipe (and that
Plaintiff executed a Stock Restriction Agreement) with respect to the shares of
Global Common Stock received by Plaintiff as a shareholder of Propipe; that
Plaintiff performed no services for Global pursuant to such consulting
agreement; that the execution and delivery of the disputed consulting agreement
to Plaintiff was an ultra vires act on the part of Global; that Plaintiff has
been fully compensated by its receipt of shares of Global Common Stock in
exchange for its interest in Propipe; and that (in any event) the sale by Global
of Propipe to the latter's former principal shareholder on June 28, 1996,
effectively rescinded such alleged consulting agreement.
On November 6, 1996, judgment was entered against Global in the amount of
$37,500 in favor of Walter Benjamin (WB) by a New Jersey Superior Court. WB had
been a judgment creditor of American Industrial Marine Services, Inc. (AIMS).
Global had purchased AIMS on February 9, 1993, in exchange for shares of Global
Common Stock. During the period in which Global owned AIMS the latter suffered
significant operating losses. On April 4, 1994, Global sold AIMS to Omnicorp
Corporation (OMNI) in exchange for a $200,000 promissory note and shares of OMNI
capital stock. The $200,000 note was issued in connection with Global's
simultaneous injection of an additional $200,000 in cash into AIMS. When such
$200,000 note was not paid, OMNI caused AIMS to convey a parcel of real estate
in Plainfield, New Jersey, to Global. WB was able to convince the New Jersey
Superior Court that such conveyance represented a fraudulent conveyance. Global
has not yet determined whether to appeal the judgment. Global believes that the
value of the parcel exceeds the amount of the judgment.
In November, 1996, Global was sued by Suisse in New York State Supreme Court
(trial court). Suisse alleges that it funded $1.3 million upon the receipt of
Global Debentures executed and delivered to Suisse by the Phoenix designees.
Suisse further alleges that such amount was wire transferred to a Phoenix
account maintained in a Queens County, New York, bank. Global held no Board
meetings between June 28 and September 30, 1996 (the later being disputed): and,
the minutes prepared for such disputed meeting by Phoenix' designee as counsel
contain no mention of Suisse, of the prior issuance of Global debentures to
Suisse, or of the receipt by Phoenix of $1.3 million of Suisse funding. Global
intends to
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defend vigorously such action, on the basis that Global's Board did not
authorize any Reg S transaction or any other funding by Suisse, any Global
documents delivered to Suisse were fraudulently executed and delivered by
Phoenix nominees, none of the alleged Suisse funding was received by Global and
the rescission agreement between Global and Phoenix specifically provides that
the liability for any Suisse proceeds rests with Phoenix.
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Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other information
The History of the Proposed Transaction with Phoenix Wrecking
Corporation
Because Global would not, as a result of such Plan, (a) be an operating company,
and (b) remain in compliance with NASDAQ continuous listing requirements,
Global, on June 28, 1996 (the date on which the sales of the operating
subsidiaries was effected), agreed to acquire 100% of the issued and outstanding
shares of capital stock of Phoenix Wrecking Corporation (Phoenix), a New York
corporation which was also engaged in the remediation business. The proposed
acquisition of Phoenix, which was publicly announced on July 1, 1996, was
rescinded nunc pro tunc on November 6, 1996.
On June 28, 1996, the Global Board adopted resolutions providing for the
purchase of 100% of the capital stock of Phoenix. Phoenix was acquired in
exchange for an aggregate of 6 million shares of Global Common Stock issued July
10, 1996. On June 28, 1996, two of the five members of the Board of Directors of
Global were replaced by designees of Phoenix (Karl Schwab and Roger Imperial)
and Mr. Schwab was named President (and CEO) of Global. It is a matter of
dispute whether, on September 30, 1996, two additional Phoenix nominees were
appointed to the Board (Charles Chillingworth, Esq. and George Weast).
Since the shareholders of Phoenix gained voting control of Global pursuant to
the acquisition, Phoenix became the acquiring company. Accordingly, the
acquisition of Phoenix which was to have been accounted for as a reverse
acquisition wherein the acquired company (Phoenix) would have been deemed to
have acquired the acquiring company (Global). Staff Accounting Bulletin Topic 2
Item (A)(2) and APB Opinion 16, Paragraph 70, under GAAP, states that:
"Acquiring Corporation...The Board concludes that presumptive
evidence of the acquiring corporation in combinations effected
by an exchange of stock is obtained by identifying the former
common stockholder interests of a combining company which
either retain or receive the larger portion of the voting
rights in the combined corporation. That corporation should be
treated as the acquired unless other evidence clearly
indicates that another corporation is the acquirer. For
example, a substantial investment of one company in common
stock of another before the combination may be evidence that
the investor is the acquiring corporation."
16
<PAGE>
During the period subsequent to June 28, 1996, in which two nominees of Phoenix
served on the Global Board and a nominee of Phoenix was appointed President of
Global, and three directors of Global remained on the Board of Global, it was
intended that, until all required SEC and NASDAQ filings were effected, until a
Form 10-K (with fully audited financials) would be filed by Global for its
fiscal year ended June 30, 1996 (consolidated with Phoenix), and until Rule
14f-1 promulgated under the Securities Exchange Act of 1934 (the "1934 Act") was
complied with, Phoenix would be operated as a wholly-owned subsidiary of Global,
would (by virtue of the reverse merger) designate counsel and accountants to and
for both Global and Phoenix, and would undertake no transactions not in the
ordinary course of business. Phoenix did in fact name such counsel and
accountants. However, despite the fact that no meetings of the Board of Global
were held subsequent to June 28, 1996, and prior to September 30, 1996 (the
validity of which meeting is questionable), the nominees of Phoenix to the Board
of Global and the nominee of Phoenix as President, executed, in the name of and
on behalf of Global, the following documents and caused to be issued the
following shares:
a) two Form S-8 filings with the SEC, on each of August 2 and
September 19, 1996, pursuant to which an aggregate of 385,000
shares and an aggregate of 750,000 shares, respectively, were
issued to persons selected by Phoenix. (Generally speaking,
Form S-8 provides a mechanism by which shares may be
registered under the 1933 Act for services to be rendered
pursuant to an employee benefit plan). At the time each such
Form S-8 was filed with the SEC, Global was not then "current"
in its filings with the SEC; therefore, pursuant to the
General Instructions to the use of Form S-8, such Form was not
available to Global as a means of registering securities under
the Securities Act of 1933 (the "1933 Act"). In addition, no
meetings of the Board of Global were held between June 28,
1996, and September 30, 1996 (the validity of which meeting is
in dispute), at which action would be required to have been
taken by the Board both to authorize such Form S-8 filings and
to provide the necessary resolutions to permit the Transfer
Agent to issue the aggregate of 1,135,000 shares purportedly
registered pursuant to such Form S-8 filings. Such filings
were prepared and filed by the law firm selected by Phoenix to
become counsel to Global. (The same law firm filed, on October
4, 1996, the Form 8-K required to have been filed within
fifteen days of June 28, 1996, to render Global "current" in
its filings.) On October 18, 1996, Global brought this matter
to the attention of the SEC when Global sought permission to
withdraw such two Form S-8 filings;
17
<PAGE>
Global believes that, to the extent any of such aggregate of
1,135,000 shares registered pursuant to such two Form S-8
filings may have been sold, the sellers thereof are required
to rescind such sales, return the consideration received
therefor and return the shares to Global for cancellation. To
the extent that any of such 1,135,000 shares may not have been
sold, Global, on October 21, 1996, advised its Transfer Agent
to impose stop transfer instructions thereagainst. Global has
made full disclosure, both orally and in writing, to each of
the SEC and NASDAQ with respect to the two S-8 filings; and,
b) Under date of September 26, 1996, the Phoenix nominees caused
to be issued an aggregate of 1,564,000 shares of Global's
Common Stock. Such shares were issued in the name of six
different persons. The six names were furnished to Phoenix by
Suisse Capital Complex (Suisse) of Indianapolis, Indiana. On
October 21, 1996, Global surrendered for cancellation all of
such 1,564,000 shares. Phoenix simultaneously advised Suisse
that it had taken such action because, upon information and
belief, the six different persons had violated Regulation S in
that the six were "affiliates" and were required to file a
13(d) with the SEC (and did not) and because, the total amount
of funding ($2 million) not having been received by Phoenix,
the issuance had never "come to rest" and that a continuous
offering may not be the basis for a Regulation S exempt
transaction. Notwithstanding, Suisse has instituted
proceedings seeking the recovery of the $1.3 million on the
basis that the Phoenix designees issued Global Debentures to
Suisse in that amount.
When it became apparent that Phoenix would be unable to deliver a timely audited
financial statement to Global, would be unable to file a timely Form 10-KSB with
the SEC (with audited financials), would be unable to meet the representations
made by Phoenix in the June 27, 1996, acquisition agreement with Global, and
would be unable to assist Global in any meaningful manner, the Phoenix nominees
to the Global Board caused to be issued a press release, dated October 25, 1996.
Such press release announced that, of the 6 million shares of Global originally
issued for Phoenix, an aggregate of 2 million thereof would be retired and the
balance (4 million) would be converted into Convertible Preferred Stock (with no
conversion permitted for one year).
On or about October 20, 1996 (with the imminent expiration of the thirty-day
extension requested by Global from NASDAQ in which to file its 10-KSB for June
30, 1996), it became obvious that there existed no possibility of obtaining a
Phoenix audit for the period ended June 30, 1996. Accordingly, on November 6,
1996, the Global-Phoenix transaction was rescinded nune pro tunc, the Phoenix
designees to the Global Board resigned and Karl Schwab resigned as President of
Global. Such rescission was intended to cancel the Phoenix-Global transaction as
if the same had never occurred.
18
<PAGE>
The references in this subsection to the questionable and disputed Board meeting
of Global on September 30, 1996, are attributable to Rule 14f-1 promulgated
under the 1934 Act. Briefly stated: Rule 14f-1 provides that if, pursuant to any
arrangement or understanding with the person(s) acquiring securities in a
transaction subject to Section 13(d) of the 1934 Act, any persons are to be
named to the Board of the issuer and who thereby will constitute a majority of
the Board, and no meeting of the shareholders is called to cause such election
to the Board, a Proxy Statement complying with Regulation 14A of the 1934 Act
must be filed with the SEC. This was why, on June 28, 1996, only two nominees of
Phoenix were appointed to the Global Board and three nominees of Global
previously on the Board remained as directors. This is also why no purported
meeting of September 30, 1996, could have validly appointed any additional
Phoenix nominees to the Global Board. (The transaction that is subject to
Section 13(d) of the Act is the issuance of the 6 million shares of Global stock
to the shareholders of Phoenix on July 10, 1996, of which 6 million shares 4
million shares were issued to Begonia Corporation (a company controlled by the
majority shareholders of Phoenix)). Such 4 million shares represented more than
five (5%) percent of the issued and outstanding shares of Global Common Stock
commencing on July 10, 1996, and lasting until such shares were cancelled on or
about October 21, 1996. (And even when cancelled on or about October 21, 1996,
such shares were to be converted into $4 million principal amount of Preferred
Stock itself convertible into 4 million shares of Common Stock.) Begonia only
ceased to be a party subject to the filing requirements of Section 13(d) when
the transaction between Global and Phoenix was rescinded nune pro tunc on
November 6, 1996.
Upon the assumption that the 1,197,500 shares of Global still not returned for
cancellation (out of the 6 million shares originally issued on July 10, 1996,
for Phoenix) may be cancelled because the transaction with Phoenix has been
rescinded nune pro tunc, and upon the further assumption that the aggregate of
1,135,000 shares issued pursuant to the two improperly filed Form S-8 filings
are not validly issued, fully paid and non-assessable because such shares either
were not registered for public sale, or were issued without consideration
(because no services were rendered to Global by the recipients), or were not
authorized to be issued by the Global Board, the result is that Global would
have an aggregate of 2,516,463 shares of its Common Stock validly issued, fully
paid and non-assessable as of the date hereof.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
None
(B) Reports on Form 8-K:
None
19
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: February 28, 1997 /s/ David R. Stith
By:
-------------------------------
David R. Stith,
Acting President
Date: February 28, 1997 /s/ Allan Esrine
By:
-------------------------------
Allan Esrine,
Acting Principal Financial
and Accounting Officer
20
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