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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 March 31, 1997
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.
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(Exact name of registrant as specified in its charter)
Nevada 88-0270266
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(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)
(610) 495-8413
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(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 May 14, 1997 was 2,966,463.
Transitional small business disclosure format:
Yes No X
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<PAGE>
GLOBAL SPILL MANAGEMENT, INC.
Form 10-QSB
INDEX
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
March 31, 1997 and June 30, 1996 3
Consolidated Statements of Operations - Nine months
ended March 31, 1997 and 1996 and Three months ended
March 31, 1997 and 1996 4-5
Consolidated Statements of Cash Flows - Nine months ended
March 31, 1997 and 1996 6-7
Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13-14
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15-18
Item 6. Exhibits and Reports on From 8-K 18
Signatures 19
<PAGE>
Global Spill Management, Inc.
and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
================================================================================
March 31, June 30,
1997 1996
- --------------------------------------------------------------------------------
Assets
Current assets
Cash $ -- $ 62,016
Net assets available for sale -- 805,000
- --------------------------------------------------------------------------------
Total current assets $ -- $ 867,016
================================================================================
Liabilities and Capital Deficit
Current liabilities
Notes payable, bank $ -- $ 1,134,553
Current maturities of long-term debt -- 117,255
Accounts payable 115,173 532,023
Notes payable 12,500 50,000
Accrued expenses 2,429 281,732
Notes payable, other -- 932,727
- --------------------------------------------------------------------------------
Total current liabilities 130,102 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 3,016,468
and 1,466,468 3,016 1,466
Additional paid-in capital 13,228,413 12,498,463
Deficit (13,111,531) (14,681,203)
Less: subscriptions receivable (250,000) --
- --------------------------------------------------------------------------------
Total capital deficit (130,102) (2,181,274)
- --------------------------------------------------------------------------------
Total liabilities and capital deficit $ -- $ 867,016
================================================================================
The accompanying notes are an integral part of these statements.
3
<PAGE>
Global Spill Management, Inc.
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Nine months ended March 31, 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ -- $12,772,000
Costs of revenues -- 9,639,000
- -----------------------------------------------------------------------------------------
Gross profit -- 3,133,000
Selling, general and administrative expenses -- 3,611,000
Restructuring expense -- 380,000
- -----------------------------------------------------------------------------------------
(Loss) from operations -- (858,000)
Interest expense -- (251,000)
Forfeited acquisition costs -- (315,000)
Other income, net -- 5,000
- -----------------------------------------------------------------------------------------
Net (loss) from continuing operation -- (1,419,000)
Gain (loss) from discontinued operations
Gain from debt forgiveness, net of administrative costs 1,569,672 --
Loss from operations -- (748,000)
Writedown of goodwill -- (1,328,000)
- -----------------------------------------------------------------------------------------
1,569,672 (2,075,000)
- -----------------------------------------------------------------------------------------
Net income (loss) $1,569,672 $(3,494,000)
=========================================================================================
Net (loss) per share from continuing operations $ -- $ (2.30)
Net income (loss) per share from discontinued operations .72 (3.37)
- -----------------------------------------------------------------------------------------
Net income (loss) per share $ .72 $ (5.67)
=========================================================================================
Weighted average number of common shares outstanding 2,178,877 616,468
=========================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Global Spill Management, Inc.
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Three months ended March 31, 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ -- $ 2,939,000
Costs of revenues -- 2,345,000
- ---------------------------------------------------------------------------------------
Gross profit -- 594,000
Selling, general and administrative expenses -- 1,011,000
- ---------------------------------------------------------------------------------------
(Loss) from operations -- (417,000)
Interest expense -- (81,000)
Forfeited acquisitions costs -- (315,000)
Other income, net -- 8,000
- ---------------------------------------------------------------------------------------
Net (loss) from continuing operations -- (805,000)
(Loss) from discontinued operations
Administrative costs, net of gain from debt forgiveness (14,710) --
(Loss) from operations -- (385,000)
Writedown of goodwill -- (1,328,000)
- ---------------------------------------------------------------------------------------
(14,710) (1,713,000)
- ---------------------------------------------------------------------------------------
Net (loss) $ (14,710) $(2,518,000)
=======================================================================================
Net (loss) per share from continuing operations $ -- $ (1.31)
Net (loss) per share from discontinued operations (.01) (2.78)
- ---------------------------------------------------------------------------------------
Net (loss) per share $ (.01) $ (4.09)
=======================================================================================
Weighted average number of common shares outstanding 2,649,801 616,468
=======================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Global Spill Management, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Nine months ended March 31, 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 1,569,672 $(3,494,000)
Adjustments to reconcile net income (loss) to
net cash (used in) operating activities
Gain from debt forgiveness (1,569,672) --
Increase in allowance for doubtful accounts -- 47,000
Depreciation and amortization -- 479,000
Writedown of goodwill -- 1,328,000
(Increase) decrease in assets
Accounts receivable -- 1,042,000
Inventories -- 18,000
Prepaid expenses and other assets -- 170,000
Increase (decrease) in liabilities
Accounts payable and accrued expenses (278,454) (32,000)
- --------------------------------------------------------------------------------------
Net cash (used in) operating activities (278,454) (442,000)
- --------------------------------------------------------------------------------------
Cash flows from investing activities
Purchases of equipment -- (16,000)
Sales of equipment -- 33,000
Acquisitions and divestitures, net of cash paid -- (25,000)
Sale of subsidiaries 805,000 --
- --------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 805,000 (8,000)
- --------------------------------------------------------------------------------------
Cash flows from financing activities
Payments on notes payable (37,500) --
Borrowings (repayments) on line of credit, net (855,000) 270,000
(Repayments) of long-term debt (53,530) (128,000)
Issuance of common stock, net of expenses 481,500 178,000
Proceeds from common stock receivable, net of expenses -- 123,000
Payments to related party, Allied acquisition -- (157,000)
- --------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (464,530) 286,000
- --------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Global Spill Management, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Nine months ended March 31, 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
Net (decrease) in cash $ (62,016) $(164,000)
Cash and cash equivalents, at beginning of period 62,016 184,000
- ----------------------------------------------------------------------------------
Cash and cash equivalents, at end of period $ -- $ 20,000
==================================================================================
Supplemental disclosures of cash flow information
Cash paid (received) during the period for
Interest expense $ -- $ 279,000
Noncash investing activities
Common stock issued in exchange for notes receivable $ 250,000 $(380,000)
Stock issued pursuant to acquisition earnout $ -- $ 233,000
==================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
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 nine months and three
months ended March 31, 1997 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, Global
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.
8
<PAGE>
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.
9
<PAGE>
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 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 exclusively of legal,
accounting and miscellaneous expenses endemic to any public company and amount
to approximately $115,000.
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 $115,000 of miscellaneous payables.
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,
10
<PAGE>
(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.
11
<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 March 31, 1997,
total liabilities of Global were approximately $127,674, of which $61,731.07
includes the resolution of litigation described under "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.
12
<PAGE>
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.
The previous litigation to which Global was a party, instituted by FONDO and by
former securities counsel (as disclosed in the Form 10-QSB filed for the six
month period ended December 31, 1996), has been resolved. An order was entered
on March 13, 1997, dismissing the FONDO matter and the litigation with former
securities counsel was settled for the sum of $36,731. FONDO's appeal was heard
on May 2, 1997 and the dismissal was sustained.
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 an attempt to
disguise 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.
13
<PAGE>
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. Global
has made an offer to settle the judgment and related legal costs for the sum of
$25,000.
In November, 1996, Global was sued by Suisse Capital Complex (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 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. After taking pre-trial depositions, plaintiff has made a motion for
summary judgment, returnable May 8, 1997, against Phoenix and two affiliates
thereof (and not against Global). Such depositions demonstrated conclusively
that none of plaintiff's funds was received by Global.
14
<PAGE>
Item 2. Changes in Securities
On March 7, 1997, Global authorized the issuance of an aggregate of
500,000 shares of its Common Stock to a non-affiliated entity in
exchange for $250,000 of additional funding and a commitment to provide
a maximum of $250,000 additional funding. Such issuance increased the
number of fully paid and non-assessable shares of Common Stock to
3,016,463 shares. On April 20, 1997, 50,000 of the 750,000 shares
issued pursuant to the September, 1996, Form S-8 filing were returned
to Global for cancellation. (See Item 5 hereinafter.)
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
As of February 7, 1997, Global has caused to be filed with the SEC its
Form 10-KSB (for the fiscal year ended June 30, 1996) and its Form
10-QSB for the quarters ended September 30 and December 31, 1996. Such
filings rendered Global current in its filing obligations under the
1934 Act.
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.
15
<PAGE>
Since the shareholders of Phoenix gained voting control of Global pursuant to
the acquisition, Phoenix became the acquiring company. Accordingly, the
acquisition of Phoenix 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."
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
16
<PAGE>
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;
Global believes that, to the extent any of such aggregate of
1,135,000 shares purportedly 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 1,574,000 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 1,574,000 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 nunc 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.
17
<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 nunc 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 nunc 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 2,966,463 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:
Form 8-K, Filed April 15, 1997 (Incorporated herein
by reference)
18
<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: May 14, 1997 By: /s/ David R. Stith
-------------------------------
David R. Stith,
Acting President
Date: May 14, 1997 By: /s/ Allan Esrine
-------------------------------
Allan Esrine,
Acting Principal Financial
and Accounting Officer
19
<PAGE>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
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<ALLOWANCES> 0
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> (130)
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