<PAGE>
U.S. 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 DECEMBER 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________to_____________.
Commission file number 0-24152
K.L.S. ENVIRO RESOURCES, INC.
-----------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 75-2460365
------ ----------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
5500 East Loop 820 South, Suite 100, Fort Worth, Texas 76119
-------------------------------------------------------------
(Address of principal executive offices and zip code)
(817) 624-4844
--------------
(Issuer's telephone number, including area code)
3220 North Freeway, Fort Worth, Texas 76111
--------------------------------------------
(Issuer's former address)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of February 9, 1998, the Registrant had outstanding 17,670,222 shares of its
common stock, par value $.0001.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
K.L.S. ENVIRO RESOURCES, INC.
INDEX TO FINANCIAL INFORMATION
DECEMBER 31, 1997
Page No.
--------
Condensed Consolidated Balance Sheets as of December 31, 1997
(unaudited) and September 30, 1997 (audited)......................... 3
Condensed Consolidated Statements of Operations (unaudited)
for the Three Months Ended December 31, 1997 and 1996................ 4
Condensed Consolidated Statements of Cash Flows (unaudited) for
the Three Months Ended December 31, 1997 and 1996.................... 5
Notes To Consolidated Financial Statements........................... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 7
2
<PAGE>
K.L.S. Enviro Resources, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 1997 (unaudited) and September 30, 1997 (audited)
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
-------------------- -------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 221,677 $ 351,961
Accounts receivable-trade, net of allowance for doubtful
accounts of $45,000 1,230,140 1,233,487
Other receivables 26,713 -
Inventory 749,671 721,197
Prepaid expenses 89,750 120,609
-------------------- -------------------
Total current assets 2,317,951 2,427,254
Property, plant and equipment, net 6,004,480 6,236,402
Other assets
Intangible assets, net of accumulated amortization of
$81,505 and $79,960, respectively 37,574 39,118
Deposits and other 25,951 25,837
-------------------- -------------------
Total other assets 63,525 64,955
-------------------- -------------------
$8,385,956 $8,728,611
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 508,387 $ 508,387
Notes payable-related parties 86,156 37,543
Current maturities of long-term notes 181,959 182,802
Accounts payable 564,096 647,624
Accounts payable-related parties 334,760 122,151
Accrued expenses and other current liabilities 472,695 492,018
Deferred revenues 17,457 8,838
-------------------- -------------------
Total current liabilities 2,165,510 1,999,363
Long-term notes 528,881 581,700
Long-term notes-related party 2,267,651 2,223,483
-------------------- -------------------
Total liabilities 4,962,042 4,804,546
-------------------- -------------------
Shareholders' equity:
Cumulative convertible preferred stock,
Series A, $.0001 par value; 1,000,000
shares authorized; 100,000 shares issued
and outstanding; Redeemable at $5.00 per share 10 10
Common stock, $.0001 par value; 50,000,000 shares
authorized; 17,420,222 and 17,170,997 shares
issues, respectively 1,742 1,717
Additional paid-in capital 10,035,025 9,923,898
Accumulated deficit (6,570,150) (5,958,847)
Foreign currency translation adjustments (4,213) (4,213)
-------------------- -------------------
3,462,414 3,962,565
Treasury stock-common shares held in the treasury, at cost (38,500) (38,500)
-------------------- -------------------
Total shareholders' equity 3,423,914 3,924,065
-------------------- -------------------
$8,385,956 $8,728,611
==================== ===================
</TABLE>
3
The notes to Consolidated Financial Statements are an integral part of these
statements.
<PAGE>
K.L.S. Enviro Resources, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Three Months Ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---------------- ---------------
<S> <C> <C>
Net sales and revenues:
Drilling and repair service revenues $ 1,353,874 $ 1,573,318
Cost of drilling and repair services 885,021 727,126
---------------- ---------------
Gross profit 468,853 846,192
---------------- ---------------
Operating expenses
Salaries, wages and related costs 198,585 135,874
Legal and professional fees 119,096 97,132
Rents 23,624 12,737
Repairs and maintenance 16,372 15,001
Taxes, licenses and permits 6,830 7,612
Advertising 14,667 1,816
Travel and lodging 25,395 46,630
Consulting 31,155 33,889
Development costs 36,036 40,740
Other operating expenses 235,951 229,279
Depreciation and amortization 218,637 95,549
---------------- ---------------
Total operating expenses 926,348 716,259
---------------- ---------------
Income (loss) from operations (457,495) 129,933
Other income (expenses):
Interest expense (133,656) (77,953)
Interest and other income, net 279 2,534
Gain on sale of assets 692 -
Loss from foreign currency translation (13,625) (4,063)
---------------- ---------------
Net other income or (expense) (146,310) (79,482)
---------------- ---------------
Income (loss) before income taxes (603,805) 50,451
Income taxes - -
---------------- ---------------
Net income (loss) (603,805) 50,451
Dividend on preferred stock 7,500 7,500
---------------- ---------------
Net income (loss) applicable to common stock $ (611,305) $ 42,951
================ ===============
Earnings per share:
Basic earnings (loss) per share $ (0.035) $ 0.004
Diluted earnings (loss) per share $ (0.035) $ 0.004
================ ===============
Common stock outstanding:
Basic 17,319,173 10,933,040
Diluted 17,319,173 13,207,652
================ ===============
</TABLE>
4
The Notes to Consolidated Financial Statements are an integral part of these
statements.
<PAGE>
K.L.S. Enviro Resources, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (603,805) $ 50,453
Adjustments to reconcile net income (loss) to cash
used in operating activities:
Common stock for services 15,412 487
Depreciation and amortization 218,636 95,548
Gain on disposal of equipment (692) -
Translation loss 13,625 4,063
Changes in:
Accounts and other receivables (23,261) 215,915
Inventory (27,770) (194,073)
Prepaid expenses 25,825 (282,169)
Other assets (96) 65
Accounts payable (80,111) 363,890
Accounts payable-related parties 225,098 -
Accrued expenses (44,002) (44,000)
Deferred revenue 7,242 22,850
--------------- ----------------
Net cash provided by (used in) operating activities (273,899) 233,029
--------------- ----------------
Cash flows from investing activities:
Purchases of property, plant and equipment (478) (539,214)
Proceeds from sale of equipment 16,000 -
--------------- ----------------
Net cash (used in) provided by investing activities 15,522 (539,214)
--------------- ----------------
Cash flows from financing activities:
Net change in notes payable - related parties 48,614 50,619
Payments of long-term notes (553,662) (55,129)
Proceeds from long-term notes - related parties 544,168
Sale of common stock, net of offering cost 89,000 2,810,478
--------------- ----------------
Net cash provided by financing activities 128,120 2,805,968
--------------- ----------------
Effect of exchange rate changes on cash (27) 40
--------------- ----------------
Increase (decrease) in cash (130,284) 2,499,823
Cash at beginning of period 351,961 300,767
--------------- ----------------
Cash at end of period $ 221,677 $ 2,800,590
=============== ================
</TABLE>
5
The Notes to Consolidated Financial Statements are an integral part of these
statements.
<PAGE>
K.L.S. ENVIRO RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The accompanying unaudited consolidated financial statements of K.L.S.
Enviro Resources, Inc. ("KLS") and Subsidiaries (collectively the "Company")
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
in accordance with Item 310 of Regulation S-B. Accordingly, such unaudited
financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The Company suggests that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-KSB for the year ended September 30, 1997.
In the opinion of management, all adjustments, consisting of normal recurring
adjustments and eliminations of material intercompany sales and purchases
necessary to present fairly the financial condition, results of operations and
cash flows for the Company for the interim periods presented, have been
included. Operating results for the three months ended December 31, 1997, are
not necessarily indicative of the results that may be expected for the year
ending September 30, 1998.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include all the accounts of KLS and its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated in
consolidation. The consolidated group is referred to as the "Company."
EARNINGS PER SHARE - In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, Earnings per Share
(SFAS 128). SFAS 128 became effective for financial statements with interim and
annual periods ending after December 15, 1997. Accordingly, the Company has
adopted SFAS 128 for the quarter ended December 31, 1997.
SFAS 128 established a different method of computing earnings (loss) per share
than was required under the provisions of Accounting Principles Board Opinion
No. 15. Under SFAS 128, entities with publically held common stock are required
to present basic earnings (loss) per share and diluted earnings (loss) per
share. Basic earnings per share is the amount of earnings (loss) for the period
available to each share of common stock outstanding during the reporting period.
Diluted earnings per share is the amount of earnings (loss) for the period
available to each share of common stock outstanding during the reporting period
and to each share that would have been outstanding assuming the issuance of
common shares for all dilutive potential of conversion to common shares of
options, warrants and convertible preferred outstanding during the period.
Prior periods have been restated for presentation in accordance with SFAS 128.
NOTE 2. NOTES PAYABLE - RELATED PARTY
At December 31, 1997, the Company had an unsecured note payable to a director of
the Company in the amount of $50,000, bearing interest at 12 percent, due March
1, 1998. Subsequent to December 31, 1997, the director loaned an additional
$40,000 on the same terms.
At December 31, 1997, the Company had an unsecured note payable to a corporation
related through common directors and significant shareholders, bearing interest
at 12 percent, due July 15, 1999, in the amount of $850,000.
At December 31, 1997, the Company had a note payable to an entity related
through common directors and significant shareholders, bearing interest at 12
percent, due July 15, 1999, collateralized by all assets of the Company, except
real estate, in the amount of $1,417,651 with interest accrued thereon in the
amount of $115,169.
6
<PAGE>
NOTE 4. COMMITMENTS AND CONTINGENCIES
- --------------------------------------
KLS, Dateline Drilling, Inc. ("Dateline") and Dateline Internacional S.A. de
C.V. ("DIMSA"), subsidiaries of KLS, engaged in a dispute with a former customer
over a contract entered into between Dateline and the former customer. The
matter was settled, whereby Dateline and DIMSA have agreed to pay $325,000, of
which $140,000 has been paid. $90,000 is due on May 1, 1998 and $95,000 is due
on November 1, 1998. KLS has guaranteed the settlement payments. The Company
accrued the $325,000 settlement costs and expensed all other costs associated
with this lawsuit during fiscal 1997. Payment of the settlement amount is
secured by a drill rig of the Company.
The Company is involved in various claims and actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not materially affect the consolidated financial position or
results of operations of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
- ---------------------
Three Months Ended December 31, 1997 Compared With Three Months Ended December
31, 1996
The Company had a net loss for the three months ended December 31, 1997 of
$603,805 compared to a net income of $50,451 for the three months ended December
31, 1996. Revenues decreased and expenses increased during the three months
ended December 31, 1997, resulting in an increase in net loss of $654,256, as
compared to the three months ended December 31, 1996.
Total revenues from continuing operations for the three months ended
December 31, 1997 were $1,353,874, a decrease of $219,444 or approximately 14
percent, from the three months ended December 31, 1996. The decrease in
revenues is primarily attributable to a decrease in drilling services revenues
from operations in Mexico due to the effect on mining companies of depressed
market prices of base metals. Drilling services revenues from operations in
Mexico decreased $380,702 from $894,308 for the three months ended December 31,
1996 to $513,606 for the three months ended December 31, 1997. Drilling
services revenues from operations in the United States increased from $485,178
for the three months ended December 31, 1996 to $659,598 for the three months
ended December 31, 1997. Revenues from hydraulic services were $180,670 and
$193,832 for the three months ended December 31, 1997 and 1996, respectively.
During the three months ended December 31, 1997, direct costs of drilling
and repair services were $885,021, an increase of $157,896 over the three months
ended December 31, 1996. As a percentage of revenue, this represents an
increase of approximately 19 percent when compared to the three months ended
December 31, 1996. This increase in direct costs as a percentage of revenue is
attributable to increases in repair and maintenance of equipment, rig
transportation costs and subsistence pay due to a decrease in revenues per
drilling rig.
Total operating expenses for the three months ended December 31, 1997 were
$926,348 an increase of $210,089 over the three months ended December 31, 1996.
The increase in operating expenses was primarily attributable to increases in
salaries, wages and related costs of $62,711 and deprecation of $123,088.
Total operating expenses were approximately 66 and 46 percent of total revenues,
respectively, for the three months ended December 31, 1997 and 1996.
The Company recorded a net loss from operations of $457,495 for the three
months ended December 31, 1997 and a net income of $129,935 for the three
months ended December 31, 1996. This increase in net loss is attributable to
decreases in revenues, an increase in costs of services and increased operating
expenses as described above.
Net other expense increased $66,828 for the three months ended December 31,
1997 over the three months ended December 31, 1996. This is primarily
attributable to an increase in interest expense of $55,703 over the comparable
reporting period.
7
<PAGE>
Financial Condition
- -------------------
At December 31, 1997, the Company's current assets exceeded its current
liabilities by $152,441 as compared with current assets exceeding current
liabilities by $427,891 at September 30, 1997. The current ratio of assets to
liabilities was 1.07 at December 31, 1997 as compared with 1.21 at September 30,
1997. Current assets decreased by $109,303 to $2,317,951 from September 30,
1997 to December 31, 1997. Current liabilities increased by $166,147 during the
same period. The decrease in working capital over this period is due primarily
to a decrease in cash and increases in accounts payable.
Total assets were $8,385,956 at December 31, 1997 as compared to $8,728,611
at September 30, 1997. The decrease of $342,655 is attributable to a decrease
in cash and the depreciation of property, plant and equipment.
For the three months ended December 31, 1997, the Company had a negative
cash flow from operations. The Company anticipates increases in revenues and
cash flow from operations due to its recently expanded fleet of drill rigs.
Three drill rigs with support equipment were purchased and an additional two
rigs were constructed in-house and placed into service during the year ended
September 30, 1997. The expansion increases the Company's fleet of drill rigs
to fourteen. There were no new drill rigs purchased or constructed by the
Company in the three month period. As the Company continues to expand, it
endeavors to achieve a positive cash flow from operations, although there can be
no assurance that the Company will be successful in achieving that objective.
The Company has sustained ongoing losses during the three months ended December
31, 1997 as well as the fiscal years ended September 30, 1996 and September 30,
1997. While the Company anticipates that its recently expanded fleet of drill
rigs and increased marketing efforts will result in increased revenues, there
can be no assurance that losses of the magnitude suffered in prior periods will
not continue. The Company must secure additional financing to fund losses from
operations. However, should precious metal prices continue to be depressed, the
Company's mining customers may not require the Company's drilling services at
current or expected levels and may reduce such requirements. Thus, there can be
no assurance that drilling revenues will increase. Additional funding may come
from debt or the sale of the Company's equity securities, but there can be no
assurance that the Company will obtain the funds needed to supplement any
shortfall in its cash flow as and when needed or on terms that will be
satisfactory to the Company.
During the three months ended December 31, 1997, the Company received net
cash proceeds of $89,000 from the issuance of 222,500 shares of the Company's
restricted Common Stock as the result of the exercise of warrants. The Company
also issued 21,333 shares of its restricted Common Stock for services and
issued 5,392 restricted shares in exchange for debt.
Forward-looking Statements and Certain Risk Factors
- ---------------------------------------------------
Statements which are not historical facts contained in this report are
forward-looking statements. Section 27A of the Securities Act of 1933, as
amended, provides a safe harbor for forward-looking statements. In order to
comply with the terms of the safe harbor, the Company cautions that a variety of
factors could cause the Company's actual results to differ materially from
anticipated results or other expectations expressed in this report. The
forward-looking statements contained in this Management's Discussion and
Analysis of Financial Condition and Results of Operations involve a number of
risks and uncertainties that could cause actual results to differ from projected
or anticipated results. Some of the risks and uncertainties are set forth below.
In addition, the risk factors discussed in Part I, Item 1 ("Business") and in
the "Management's Discussion and Analysis of Operations" (Item 6) of the
Company's annual report on Form 10-KSB for the fiscal year ending September 30,
1997 may also affect actual operating results, as could the following:
General Operations Risks
The Company has experienced and expects to continue to experience
significant fluctuations in its results of operations. Factors that affect the
Company's results of operations or that could cause actual results to differ
materially include, among others, the Company's ability to successfully bid on
new contracts, its ability to perform under the terms of drilling contracts on a
timely basis, its access to suitable used or new equipment to fulfill contract
obligations, the
8
<PAGE>
ability to hire and retain skilled and properly trained employees, industry
conditions and world demand for base and industrial metals, as well as prices
for such metals, the results of financing efforts and financial market
conditions and other factors discussed in the Form 10-KSB mentioned above and
the additional factors discussed below. Such factors are beyond the control of
the Company and there can be no assurance that the Company's results and
financial condition will not be adversely affected by such factors.
Foreign Operations Risks
The Company recently has expanded much of its operations to meet increased
demand for its services both in the United States and abroad. There are
numerous risks associated with conducting business in foreign countries. The
distance from corporate headquarters and the often remote locations of drilling
and mining sites in these foreign countries exacerbates the difficulties
referred to above. In addition, problems associated with possible political
risks, instability of local governments, safety of personnel and equipment, the
lack of spare parts or adequate service assistance, the need for skilled labor
and supervision, lack of infrastructure and accessability to sources of power
and other supplies necessary for operations, high inflation and currency
fluctuations which may erode profitability levels, and the difficulty of
obtaining and enforcing judgments in foreign courts and under foreign legal
systems that differ substantially from the United States, all add to the risk of
foreign operations.
Dependence on Base Metals Mining Industry
The Company's operations are largely dependent upon the levels of activity
in exploration and development drilling for the precious, base and industrial
metals industries. Such activity levels are affected by trends in the base
metals industry and base metals prices. Historically, prices for base metals
have been volatile and are subject to wide fluctuations in response to changes
in the supply of and demand for base metals, market uncertainty, the performance
of certain major mining companies and a variety of political, economic and other
factors beyond the control of the Company. The Company cannot predict future
price movements with any certainty. Any prolonged reduction in base metals
prices, however, will depress the level of exploration, development and
production activity and result in a corresponding decline in the demand for the
Company's services and, therefore, have a material adverse effect on the
Company's revenues and profitability.
Competition
The contract drilling industry is a highly competitive and cyclical
business characterized by high capital and maintenance costs. Although
conditions in recent years in the base metals mining industry have precipitated
consolidation of drilling industry participants, the Company believes the
competition for drilling contracts will continue to be intense for the
foreseeable future because of contractors' ability to move rigs from areas of
low activity and day rates to areas of greater activity and relatively higher
rates. In addition, there are a number of inactive rigs that are being
reactivated and upgraded, and additional rigs that could be reactivated and
upgraded, and new rigs that could be constructed, to meet an increase in demand
for drilling rigs in any given market. Such movement, reactivation, new
construction or a decrease in drilling activity in any major market could
depress rates and could adversely affect utilization of the Company's rigs even
in an environment of stronger base metals prices. Many of the Company's
principal competitors are substantially larger, have substantially greater
resources and have spent considerably larger sums of capital than the Company
for equipment, including drill rigs, development and operations. These factors
may enable those competitors to better withstand industry downturns, compete on
the basis of price, build new rigs or acquire existing rigs that become
available for purchase.
Risk of Potential Conflicts of Interest
Three of the nine members of the Company's board of directors are also
indirect owners of and control a significant shareholder of the Company and a
corporation providing management and strategic planning services to the Company.
In addition, these three persons and two other members of the board of directors
sit together on the board of directors of another public company in an unrelated
industry. The CFO of the Company is also the CFO of the other public company.
Such associations and relationships may give rise to conflicts of interest from
time to time. If any such conflict does arise, the policy of the Company,
consistent with Section 78.140 of the Nevada Revised Statutes, requires
9
<PAGE>
that the director who has a conflict will disclose the same to a meeting of the
directors of the Company and will abstain from voting for or against approval of
any matter in which such director may have a conflict. Notwithstanding the
adoption of such a policy, there can be no assurance that all possible conflicts
of interest will be identified and appropriately resolved.
As a result of the foregoing and other factors, there can be no assurance
that the Company will not experience material fluctuations in future operating
results on a quarterly or annual basis which would materially and adversely
affect the Company's business, financial condition and results of operation.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In October and November, 1997, five separate individuals not affiliated
with the Company exercised warrants to purchase 222,500 shares of the Company's
restricted Common Stock. The warrants had an exercise price of $.40 per share.
As a result of the exercise, the Company received proceeds of $89,000. These
individuals acquired the warrants from SMD, LLC., a Utah limited liability
company ("SMD"), controlled by three persons who are also directors of the
Company. SMD received no consideration whatsoever from the transaction and
conveyed the warrants to these individuals to assist the Company in obtaining
the proceeds from exercise of the warrants to fund operating losses.
On November 25, 1997, the Company issued 1,333 shares of its restricted
Common Stock to Havenstrite Management Services in payment for services rendered
valued by the company at $1,663. .
On December 5, 1997, the Company issued 20,000 shares of its restricted
Common Stock to David Nahmias in payment for services rendered valued by the
company at $13,750.
On November 25, 1997, the Company issued 5,392 shares of its restricted
Common Stock to Bearman Talesnick & Clowdus in payment for an outstanding
payable in the amount $6,740.
On January 6, 1998, Sharpshooter Resources, Inc. ("Sharpshooter") exercised
warrants to purchase 250,000 shares of the Company's restricted Common Stock.
The warrants had an exercise price of $.40 per share. As a result of the
exercise, the Company received proceeds of $100,000. Sharpshooter acquired the
warrants from SMD. SMD received no consideration whatsoever from the transaction
and conveyed the warrants to Sharpshooter to assist the Company in obtaining the
proceeds from exercise of the warrants to fund operating losses. Sharpshooter is
an investment holding entity which owns 8.7% of the Company's Common Stock,
together with securities of other entities. Some of the shareholders of
Sharpshooter are also shareholders of the Company, including two directors of
the Company. Sharpshooter is not affiliated with SMD.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27--Financial Data Schedule
10
<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.
K.L.S. ENVIRO RESOURCES, INC.
Date: February 17, 1998 By: /s/ Raymond H. Kurzon
------------------------------------------
Raymond H. Kurzon, President/CEO
Date: February 17, 1998 By: /s/ Douglas L. Rex
------------------------------------------
Douglas L. Rex, Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 221,677
<SECURITIES> 0
<RECEIVABLES> 1,275,140
<ALLOWANCES> 45,000
<INVENTORY> 749,671
<CURRENT-ASSETS> 2,317,951
<PP&E> 8,168,088
<DEPRECIATION> 2,163,608
<TOTAL-ASSETS> 8,385,956
<CURRENT-LIABILITIES> 2,165,510
<BONDS> 0
0
10
<COMMON> 1,742
<OTHER-SE> 3,460,662
<TOTAL-LIABILITY-AND-EQUITY> 8,385,956
<SALES> 0
<TOTAL-REVENUES> 1,353,874
<CGS> 885,021
<TOTAL-COSTS> 926,348
<OTHER-EXPENSES> 146,310
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 133,656
<INCOME-PRETAX> (603,805)
<INCOME-TAX> 0
<INCOME-CONTINUING> (603,805)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (603,805)
<EPS-PRIMARY> (0.035)
<EPS-DILUTED> (0.035)
</TABLE>
