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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(XX) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1996
-------------------------------------------------
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from---------------------------To--------------------
Commission file number 1-12130
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GREAT PINES WATER COMPANY, INC.
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(Exact name of small business issuer as specified in its charter)
TEXAS 76-0203752
- ------------------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 N. SHEPHERD, SUITE #303 HOUSTON, TX. 77007
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(Address of Principal executive offices) (Zip Code)
(Issuer's telephone number) (713) 864-6688
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(Former name, former address and former fiscal year,
if changed since last report)
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.
X YES NO
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the ExchangE Act after the distribution of
securities under a plan confirmed by a court.
YES NO
- ------------ -----------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
CLASS OUTSTANDING AS OF JUNE 30, 1996
- -------------------------------------- ---------------------------------------
(Common Stock, $.01 per value) 2,417,400 Shares
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GREAT PINES WATER COMPANY, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
1996 1995
---------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 298 $ 62
Accounts receivable - trade (net) 632 628
Inventory 79 85
Prepaid sales commissions 2 10
Prepaid insurance 112 168
Other prepaid expenses 16 5
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Total current assets 1,139 958
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PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment 8,659 8,636
Accumulated depreciation (3,492) (3,043)
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Total property, plant and equipment 5,167 5,593
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OTHER ASSETS 64 55
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TOTAL ASSETS $ 6,370 $ 6,606
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 255 $ 271
Customer deposits 778 767
Accrued liabilities and other
current liabilities 198 154
Note payable 70 143
Current maturities of long-term debt 736 779
Current portion of capital lease
obligations 105 126
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Total current liabilities 2,142 2,240
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LONG TERM DEBT 2,941 3,207
CAPITAL LEASE OBLIGATIONS 131 183
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value;
1,000,000 shares authorized; no
shares outstanding at June 30, 1996
and December 31, 1995 -- --
Common stock $.01 par value; 10,000,000
shares authorized, 2,417,400 and
2,378,700 shares outstanding
outstanding at June 30, 1996 and
December 31, 1995, respectively 24 24
Additional paid-in-capital 3,119 2,988
Retained deficit (1,980) (2,029)
Treasury stock (7) (7)
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Total shareholders' equity 1,156 976
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 6,370 $ 6,606
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--------- ----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 1
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GREAT PINES WATER COMPANY, INC.
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
NET SALES:
Water $ 2,333 $ 2,087 $ 1,264 $ 1,125
Equipment rental 1,276 1,201 613 586
Other 96 78 52 42
-------- -------- -------- --------
3,705 3,366 1,929 1,753
-------- -------- -------- --------
COST AND EXPENSES:
Transportation costs 834 763 407 376
Depreciation and amortization 526 576 261 298
Operating costs 676 597 361 347
Commissions and other selling 305 403 234 283
-------- -------- -------- --------
2,341 2,339 1,263 1,304
-------- -------- -------- --------
INCOME FROM OPERATIONS 1,364 1,027 666 449
OTHER EXPENSES:
General and Administrative
costs 935 858 455 443
Interest expense (net) 208 197 98 116
Other Expenses 173 76 133 34
-------- -------- -------- --------
1,316 1,131 686 593
-------- -------- -------- --------
INCOME BEFORE TAXES 48 (104) (20) (144)
TAX EXPENSE 0 0 0 0
-------- -------- -------- --------
NET INCOME $ 48 $ (104) $ (20) $ (144)
-------- -------- -------- --------
-------- -------- -------- --------
NET INCOME PER SHARE $ 0.02 $ (0.04) $ (0.01) $ (0.06)
-------- -------- -------- --------
-------- -------- -------- --------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,386 2,374 2,392 2,374
-------- -------- -------- --------
-------- -------- -------- --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 2
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GREAT PINES WATER COMPANY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30,
--------------------
1996 1995
-------- --------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 48 $ (104)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 535 576
Loss on disposal of fixed assets 8 0
Noncash charges 119 0
Changes in current operating assets and liabilities 89 90
-------- --------
Net cash provided by operating activities 799 562
-------- --------
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of property and equipment (126) (96)
Sale of property and equipment 27 0
-------- --------
Net cash used in investing activities (99) (96)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable and long term debt 101 405
Payments on note payable and long term debt (577) (715)
Issuance of common stock 12 --
-------- --------
Net cash used in financing activities (464) (310)
-------- --------
INCREASE IN CASH 236 156
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 62 177
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 298 $ 333
-------- --------
-------- --------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 3
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GREAT PINES WATER COMPANY, INC.
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE A - BASIS OF PRESENTATION
Great Pines Water Company, Inc. (the "Company") was incorporated in November
1986 and is engaged in the bottling, distributing and sale of bottled
drinking, purified, and spring water and rental of related dispensing
equipment under the "Texas Premium Waters" proprietary brand name.
The accompanying unaudited condensed financial statements have been prepared
in accordance with Generally Accepted Accounting Principles for interim
financial information and with the instructions to Form 10-QSB and rule 10-01
of Regulation S-X. They do not include all information and notes required by
Generally Accepted Accounting Principles for complete financial statements.
The accompanying financial statements include all adjustments which in the
opinion of management are necessary in order to make the financial statements
not be misleading.
The accompanying condensed financial statements should be read in conjunction
with the Audited Financial Statements for the Year Ended December 31, 1995
and the notes thereto contained in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1995.
The results of operations for the six month period ended June 30, 1996, are
not necessarily indicative of the results to be expected for the full year.
NOTE B - STOCKHOLDERS' EQUITY
The Company issued 3,000 shares of common stock to a former employee under
the Company's 1993 Stock Option Plan during March 1996 as the employee
exercised vested options.
During the Second Quarter of 1996, the Company issued 3,200 shares of common
stock to employees under the Company's 1993 Stock Option Plan for exercised
vested options and 10,000 shares of common stock to a consultant under the
Company's 1995 Incentive Stock Plan for legal services rendered. The Company
also authorized 22,500 shares of common stock to be issued during the Third
Quarter of 1996 under the 1995 Incentive Stock Plan for consulting fees
incurred and as settlement in a lawsuit regarding a former director of the
Company.
NOTE C - STOCK OPTION PLANS
The Company's Stock Option Plan ("Option Plan") was adopted in 1993. An
aggregate of 225,000 shares of common stock were reserved for issuance
pursuant to the Option Plan. The Option Plan is administered by the
Compensation Committee established by the Board of Directors (the
"Committee"). The Committee determines, subject to the provisions of the
Option Plan, the employees to whom options are granted and the number of
options to be granted. The Committee may grant (i) "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, and
(ii) "non-qualified stock options" (options which do not meet the
requirements of Section 422).
Incentive stock options granted under the Option Plan must have an exercise
price equal to at least the fair market value of the common stock at the date
the option is granted. Each option granted under the Option Plan may have a
term of up to ten years, except that incentive stock options granted
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to a shareholder who, at the time of grant, owns more than 10% of the voting
stock of the Company may have a term of up to five years. The exercise price
of incentive stock options granted to shareholders possessing more than 10%
of the total combined voting power of all classes of stock of the Company
must be not less than 110% of the fair market value of the Company's common
stock on the date of grant. As of June 30, 1996, stock options to acquire
221,000 shares of the Company's common stock have been granted under the
Option Plan at an exercise price of $2.00 to $2.375 per share. The options
become exercisable beginning March 30, 1995 through December 28, 1998. As of
June 30, 1996, 169,000 of these options are exercisable and 6,200 options had
been exercised.
The Company's Non-Employee Director Stock Option Plan ("Non-Employee Director
Plan") was also adopted in 1993. An aggregate of 25,000 shares of common
stock were reserved for issuance pursuant to the Non-Employee Director Plan.
Options to purchase 5,000 shares of common stock are automatically granted to
each person elected for the first time as director of the Company, who is not
an employee of the Company. An option to acquire an additional 1,000 shares
is automatically granted each year thereafter that such director is
re-elected. Options granted under the Non-Employee Director Plan will not
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986. Options granted under the Non-Employee
Director Plan expire ten years after date of grant. As of June 30, 1996,
12,000 options have been granted under the Non-Employee Director Plan at an
exercise price of $2.00 to $3.375 per share. None of these options are
exercisable as of June 30, 1996.
The Company's Incentive Stock Plan ("Incentive Plan") was adopted in 1995.
An aggregate of 500,000 shares of common stock were reserved for issuance
pursuant to the Incentive Plan. The Incentive Plan is administered by the
Committee. The Committee determines, subject to the provisions of the
Incentive Plan, the employees to whom incentives are awarded. The Committee
may award (i) "incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, (ii) "non-qualified stock options"
(options which do not meet the requirements of Section 422), (iii) shares
of "restricted stock", and (iv) "stock bonuses". Subject to the terms of the
Incentive Plan, the Committee will also determine the prices, expiration
dates and other material features of the incentive awards. As of June 30,
1996, 15,000 shares of common stock were issued under the Incentive Plan to
consultants and an additional 22,500 were authorized to be issued during the
Third Quarter.
NOTE D - TREASURY STOCK
The Company purchased 2,000 shares of its' common stock for $10,000 at the
end of the Second Quarter of 1994. During the Second and Third Quarters of
1994 and the First Quarter of 1995, the Company issued 700 shares out of
treasury to various customers.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed financial
statements.
GENERAL
The Company's revenues consist of sales of the Company's bottled water
products, rental of water dispensers and sales of cups and other
miscellaneous items. The Company's strategy has been to use all available
capital for expansion and increasing its customer base. During periods of
the growth the Company experiences book losses due to expensing all selling
and commission costs. This growth in customer accounts has been accompanied
by increased revenues during 1994 and 1995 and the First Quarter and Second
Quarter of 1996 The Company attributes the growth in customer accounts in
1994 and 1995 to aggressive marketing, increased bottled water consumption, a
change in the type of closed water system and an effective customer retention
program. The Company anticipates that its customer base and revenues will
continue to expand as sales of bottled water increase and the Company
continues to penetrate the Houston and Dallas/Ft. Worth bottled water
markets. Some of the factors that the Company believes may affect the rate
of increase in bottled water sales include the public perception of the
quality of municipal supplies and general health concerns.
Transportation expenses include fuel, insurance, repair and maintenance
expenses associated with the delivery trucks and vans. Driver and supervisor
salaries are also included in transportation expense.
Depreciation and amortization consist of depreciation of the Company's
delivery trucks and vans, water dispensers and bottles and the bottling
plants.
Operating expenses included plant expenses, rent, direct production employee
costs and raw materials.
Commission and other selling expenses comprise the largest controllable
component of expenses. Selling expenses consist primarily of commissions
paid to the sales force and telemarketing expenses. Commissions paid on
customer accounts are expensed as they are incurred. Commissions represent a
higher percentage of total expenses during periods when the Company is adding
accounts at an accelerated rate when compared to other expenses, which are
not variable.
General and administrative expenses include centralized administration and
overhead expenses and support costs including utilities, printing, postage,
and liability insurance.
Other expenses include bad debt, a provision for lost coolers and cash
over/short. Other expenses also include all nonrecurring expenses which are
not incurred in the normal course of operations.
Certain reclassifications to prior years' balances were made to conform with
the current years' presentation.
PAGE 6
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THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues for the three month period ended June 30, 1996 (the "Second Quarter
of 1996") increased 10% to $1,929,000 versus $1,753,000 during the three
month period ended June 30, 1995 (the "Second Quarter of 1995"). The
principal reason for the increase in revenues was the increase in the number
of customer accounts from the Second Quarter of 1995 to the Second Quarter of
1996 and price increases during October 1995 and April 1996.
Transportation expenses increased 8% during the Second Quarter of 1996
compared to the Second Quarter of 1995, $407,000 and $376,000 respectively.
The increase in transportation expenses is due to increased water sales and
increased fuel cost.
Depreciation and amortization expenses decreased 12% during the Second
Quarter of 1996 from the Second Quarter of 1995, to $261,000 from $298,000,
as a result of certain fixed assets of the Company becoming fully depreciated
for book purposes during 1995 and the First Quarter and Second Quarter of
1996.
Operating expenses increased 4% during the Second Quarter of 1996 from the
Second Quarter of 1995, to $361,000 from $347,000, primarily due to increased
production of water caused by increased sales. The increase is not
proportional to the increase in revenues due to improved efficiencies in its
operations. Commissions and other selling expenses decreased 17% during
the Second Quarter of 1996 from the Second Quarter of 1995, to $234,000 from
$283,000. The Company decreased the marketing costs and growth of the
Company during the First Quarter of 1996 in order to improve its working
capital and financial position. The Company began its 1996 marketing program
in June.
General and administrative expenses increased 3% during the Second Quarter of
1996 from the Second Quarter of 1995, to $455,000 from $443,000 due to
increased support costs caused by increased sales.
Interest expenses decreased 16% during the Second Quarter of 1996 from the
Second Quarter of 1995, to $98,000 from $116,000. The decrease is caused by
the retirement of debt and capital leases during the Second Quarter of 1996.
Other expenses increased 291% during the Second Quarter of 1996 compared to
the Second Quarter of 1995, $133,000 and $34,000 respectively. The primary
reason for the increase is due to the Company settling a lawsuit with a
former director of the Company regarding stock options and a consulting
agreement. The amount of the settlement was paid in cash and stock issued
under the Company's 1995 Incentive Plan in July 1996.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues for the six month period ended June 30, 1996 increased 10% to
$3,705,000 versus $3,366,000 during the six month period ended June 30, 1995.
The principal reason for the increase in revenues was the increase in the
number of customer accounts from the Second Quarter of 1995 to the Second
Quarter of 1996 and price increases.
Transportation expenses increased 9% during the six month period ended June
30, 1996 compared to the six month period ended June 30, 1995, $834,000 and
$763,000 respectively. The increase in transportation expenses is due to
increased water sales and increased fuel cost.
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Depreciation and amortization expenses decreased 9% during the six month
period ended June 30, 1996 from the six month period ended June 30, 1995, to
$526,000 from $576,000, as a result of certain fixed assets of the Company
becoming fully depreciated for book purposes during 1995 and the six month
period ended June 30, 1996.
Operating expenses increased 13% during the six month period ended June 30,
1996 from the six month period ended June 30, 1995, to $676,000 from
$597,000, primarily due to increased production of water caused by increased
sales.
Commissions and other selling expenses decreased 24% during the six month
period ended June 30, 1996 from the six month period ended June 30, 1995, to
$305,000 from $403,000. The Company decreased the marketing costs and growth
of the Company during the six month period ended June 30, 1996 in order to
improve its working capital and financial position. The Company began a
marketing program during the Second Quarter of 1996.
General and administrative expenses increased 9% during the six month period
ended June 30, 1996 from the six month period ended June 30, 1995, to
$935,000 from $858,000 due to increased support costs caused by increased
sales and legal expenses incurred in the six month period ended June 30,
1996.
Interest expenses increased 6% during the six month period ended June 30,
1996 from the six month period ended June 30, 1995, to $208,000 from
$197,000. The increase is caused by the addition of subordinated debt during
the Second Quarter of 1995 and financing for plant additions and general
liability and workman's compensation insurance incurred during the First
Quarter of 1996.
Other expenses increased 128% during the six month period ended June 30, 1996
compared to the six month period ended June 30, 1995, $173,000 and $76,000
respectively. The primary reason for the increase is due to the Company
settling a lawsuit with a former director of the Company regarding stock
options and a consulting agreement. The amount of the settlement was paid in
cash and stock issued under the Company's 1995 Incentive Plan in July 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has typically financed operations from a combination of vendor
financing, bank loans and leases, placement of securities and cash generated
from operations. The Company generated cash of $2,322,500 from its initial
public offering in 1993. During 1993 and 1994, approximately $500,000 of the
proceeds were used for expansion and overhead costs to enter the Dallas/Fort
Worth market place, approximately $1,500,000 was used for commissions and
selling costs to increase the customer base and approximately $300,000 was
used for working capital. The Company acquires water coolers and cooler
equipment through vendor financing. The Company leases its water processing
and bottling plants and various trucks from financial institutions under
capital lease arrangements. Additional trucks and equipment are obtained
under operating leases.
Net cash from operating activities for the six month period ended June 30,
1996 and the six month period ended June 30, 1995 was $799,000 and $562,000
respectively. The increase is due to decreased marketing expenses and
increased sales.
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Working capital at June 30, 1996 and December 31, 1995 can be shown as
follows:
June 30, Dec. 31,
1996 1995
---------- ----------
Cash $ 298,000 $ 62,000
Accounts receivable, net 632,000 628,000
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Subtotal 930,000 690,000
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Accounts payable 255,000 271,000
Accrued liabilities 198,000 154,000
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Subtotal 453,000 425,000
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Working capital $ 477,000 $ 265,000
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During the six month period ended June 30, 1996, the Company made capital
expenditures of $147,000 for plant equipment, water bottles and truck
improvements. No significant capital expenditures are anticipated in the near
future.
As of June 30, 1996, the Company's long-term debt amounted to $549,000 in
bank debt, $2,683,000 in vendor financing and $445,000 in convertible
subordinated debt. The Company has capital lease commitments of $236,000.
During the first quarter of 1996, the Company was in default of the net worth
covenant of a bank loan agreement. The loan balance was refinanced with a
new bank to cure the default position. The note is due in monthly
installments with interest at prime plus 2%, adjusted quarterly, through
October 1998. The note is collateralized by accounts receivable, inventory,
equipment vehicles, the assignment of a life insurance policy on a
shareholder and 400,000 shares held by a principal shareholder. The note is
guaranteed by a corporation related through common ownership up to 37.5% of
the outstanding balance and is guaranteed by the Small Business
Administration up to 75% of the outstanding balance. The agreement contains
no financial covenant restrictions.
During the Second Quarter of 1996, the Company obtained bank financing of
$21,600 for the purchase of plant equipment previously financed as a capital
lease. The principal balance is due in monthly payments of $600 with
interest at prime plus 2%.
On May 1, 1996 the Company applied $45,000 in accrued interest to the
principal balance of the convertible subordinated debt as per the loan
agreement with a cooler manufacturer located in Europe.
Management's strategy is based on increasing the value of the Company by
increasing the customer base. Expenses related to new customer acquisitions
were greatly decreased during the Fourth Quarter of 1995 and the first
quarter of 1996 in order to improve the Company's working capital position.
During the Second Quarter of 1996 the Company reestablished it's marketing
team and began adding new customers. The marketing program is being funded
by internally generated cash from operations. Because the Company records the
marketing expense associated with the implementation of its growth strategy
in the period in which such expenses are incurred, the Company's earnings
will initially decrease for a period in which the Company experiences rapid
growth. Despite the short-term effect of growth on earnings, the Company
believes that its strategy of increasing the size of its customer base will
enhance shareholder value and improve the financial performance of the
Company.
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The Company will not be able to expand significantly or enter into new
markets until additional financing is acquired. There can be no assurance
that such arrangements will become available on terms acceptable to the
Company.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits.
Exhibit No. Description of Exhibit
- ----------- ----------------------
10.1 Loan Agreement, dated November 1, 1988, by and between Great
Pines Water Company, Inc. and Bank One Texas, National
Association, as amended. Exhibit 10.1 to the Company's
Registration Statement (#33-63022) on Form SB-2 ("The
Registration Statement"), is incorporated herein by reference.
10.2 Authorization and Loan Agreement with the United
States Small Business Administration. Exhibit 10.2 to the
Registration Statement is incorporated herein by reference.
10.3 Lease Agreement, dated April 1, 1990, with DBH Investment
Partners No. 3, as Amended. Exhibit 10.3 to the Registration
Statement is incorporated herein by reference.
10.4 1993 Stock Option Plan of Great Pines Water Company, Inc.
Exhibit 10.4 to the Registration Statement is incorporated
herein by reference.
10.5 1993 Non-Employee Director Stock Option Plan of Great Pines
Water Company, Inc. Exhibit 10.5 to the Registration Statement
is incorporated herein by reference.
10.6 Form of Loan Agreement by and between Great Pines Water
Company, Inc. and Dependable Acceptance Company for the
purchase of equipment. Exhibit 10.6 to the Company's annual
report on Form 10-KSB for the fiscal year ended December 31,
1994 is incorporated herein by reference.
10.7 Amendment dated December 31, 1994 to Loan Agreement, dated
November 1, 1988 by and between Great Pines Water Company, Inc.
and Bank One Texas, N.A. Exhibit 10.7 to the Company's annual
report on Form 10-KSB for the fiscal year ended December 31,
1994 is incorporated herein by reference.
10.8 1995 Incentive Stock Plan of Great Pines Water Company, Inc.
Exhibit 10.8 to the Company's quarterly report on Form 10-QSB is
incorporated by reference.
10.9 Convertible Debenture, dated April 21, 1995, together
will Form of Convertible Note, by and Between Great Pines Water
Company, Inc. and EBAC Systems Inc. Exhibit 10.9 is filed
herewith by reference.
10.10 Promissory Note dated October 13, 1995 between Great Pines
Water Company, Inc. and Metrobank, N.A. for the assumption of
equipment loans previously with Bank One Texas, N.A. Exhibit
10.10 to the Company's annual report on Form 10-KSB for the
fiscal year ended December 31, 1995 in incorporated by
reference.
10.11 Assignment dated March 22, 1996 of the SBA loan dated October 19,
1991 to SunBelt National Bank, N.A. from Bank One Texas, N.A.
Exhibit 10.10 to the Company's annual report on Form 10-KSB for
the fiscal year ended December 31, 1995 in incorporated by
reference.
10.12 Amendment dated March 22, 1996 to the loan agreement, dated
November 1, 1988 by and between Great Pines Water Company, Inc.
and Bank One Texas, N.A. Exhibit 10.10 to the Company's annual
report on Form 10-KSB for the fiscal year ended December 31,
1995 in incorporated by reference.
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10.13 Amendment to the Lease Agreement dated April, 1 1990,
with DBH Investment Partners No. 3. Exhibit 10.10 to the
Company's annual report on Form 10-KSB for the fiscal year
ended December 31, 1995 in incorporated by reference.
10.14 Promissory Note dated June 12, 1996 between GPWC and SunBelt
National Bank for the purchase of plant equipment. Exhibit
10.14 is filed herein.
b) No reports on Form 8-K were filed during the quarter ended June
30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Great Pines Water Company, Inc.
Date: August 12, 1996 By: David G. Williams
--------------- --------------------
David G. Williams
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
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- ------------------------------------------------------------
GREAT PINES WATER COMPANY, INC. SUNBELT NATIONAL BANK
100 NORTH SHEPHERD, SUITE 303 P. O. BOX 55869
HOUSTON, TX 77007 HOUSTON, TX 77255-5869
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS
"I" includes each borrower "You" means the lender,
above, joint and severally. its successors and assigns.
- ------------------------------------------------------------
- ---------------------------
ACCOUNT #: 229/400
Loan Number
---------------
Date JUNE 12, 1996
----------------------
Maturity Date JUNE 12, 1999
--------------
Loan Amount $21,592.75
-----------------
Renewal Of
-----------------
: RLR/MMA/JCH
- ---------------------------
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of TWENTY ONE THOUSAND FIVE HUNDRED NINETY TWO
AND 75/100 ********** Dollars $21,592.75
SINGLE ADVANCE: I will receive all of this principal sum on JUNE 12, 1996. No
additional advances are contemplated under this note.
MULTIPLE ADVANCE: The principal sum shown above is the maximum amount of
principal I can borrow under this note. On _____________________ I will
receive the amount of $________________ and future principal advances are
contemplated.
CONDITIONS: The conditions for the future advances are _______________________
______________________________________________________________________________
______________________________________________________________________________
/ / OPEN END CREDIT: You and I agree that I may borrow up to the maximum
amount of principal more than one time. This feature is subject to all
other conditions and expires on ________________________________.
/ / CLOSED END CREDIT: You and I agree that I may borrow up to the maximum
only one time (and subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from
JUNE 12, 1996 at the rate of 10.250% per year until FIRST CHANGE DATE.
/X/ VARIABLE RATE: This rate may then change as stated below.
/X/ INDEX RATE: The future rate will be 1.000% OVER the following index rate:
SUNBELT NATIONAL BANK PRIME RATE
______________________________________________________________________________
______________________________________________________________________________
/X/ CEILING RATE: The interest rate calling for this note is the WEEKLY
calling rate announced by the Credit Commissioner from time to time.
/X/ FREQUENCY AND TIMING: The rate on this note may change as often as DAILY.
A change in the interest rate will take affect ON THE SAME DAY.
/ / LIMITATIONS: During the term of this loan, the applicable annual interest
rate will not be more than _________________% or less than _____________%.
The rate may not change more than ______________% each __________________.
EFFECT OF VARIABLE RATE: A change in the interest rate will have the
following effect on the payments:
/X/ The amount of each scheduled payment will change. /X/ The amount of the
final payment will change.
/ / ________________________________________________________________________.
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/360 basis.
FIRST MATURITY RATE: I agree to pay interest on the unpaid balance of this
note owing after maturity, and until paid in full, as stated below:
/ / on the same fixed or variable basis in affect before maturity (as
indicated above).
/X/ at a rate equal to HIGHEST RATE PERMITTED BY LAW.
/ / LATE CHARGE: If a payment is made more than ______________days after it
is due, I agree to pay a late charge of _____________________________________.
/ / ADDITIONAL CHARGES: In addition to interest, I agree to pay the following
charges which / / are / / are not included in the principal amount above:
____________________________________________________________________________.
PAYMENTS: I agree to pay this note as follows:
/X/ INTEREST: I agree to pay accrued interest ON DEMAND, BUT IF NO DEMAND IS
MADE THEN ON THE 12TH DAY OF EACH MONTH BEGINNING JULY 12, 1996 AND ON JUNE
12, 1999.
/X/ PRINCIPAL: I agree to pay the principal ON DEMAND, BUT IF NO DEMAND IS
MADE THEN $600.00 ON THE 12TH DAY OF EACH MONTH BEGINNING JULY 12, 1996,
BALANCE DUE JUNE 12, 1999.
/ / INSTALLMENTS: I agree to pay this note in ____________payments. The first
payment will be in the amount of $__________________________ and will be due
____________________. A payment of $____________________will be due___________
________________________________________thereafter. The final payment of the
enire unpaid balance of principal and interest will be due __________________.
ADDITIONAL TERMS:
FIRST SECURITY INTEREST IN STEELHEAD SUPER MINI WATER BOTTLING SYSTEM WITH
ATTACHMENTS AND ACCESSORIES, TOGETHER WITH ALL ADDITIONS, PARTS, REPAIRS,
IMPROVEMENTS, REPLACEMENTS AND SUBSTITUTES THERETO.
/X/ SECURITY: This note is separately secured by (describe separate
document by type and date): SECURITY AGREEMENT DATED JUNE 12, 1996
(This section is for your interest rate. Failure to list a
separate security document does not mean the agreement will not
secure this note.)
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL PURPOSE: The purpose of
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE this loan is BUSINESS:
CONTRADICTED BY EVIDENCE OF PRIOR, EXERCISE LEASE PURCHASE
CONTEMPORANEOUS, OR SUBSEQUENT ORAL OPTION.
AGREEMENTS OF THE PARTIES.
SIGNATURES: I AGREE TO THE
THERE ARE NOT UNWRITTEN ORAL TERMS OF THIS NOTE
AGREEMENTS BETWEEN THE PARTIES. INCLUDING THOSE ON PAGE 2).
I have received a copy on
today's date.
Signature for Lender GREAT PINES WATER COMPANY, INC.
________________________________________ BY: /s/ ROBERT A. HAMMOND
ROGER L. RUSSELL/SENIOR VICE PRESIDENT
________________________________________ __________________________________
__________________________________
<PAGE>
DEFINITIONS: As used on page 1, "/X/" means the terms that apply to this
loan. "I," "me" or "my" means each Borrower who signs this note and each
other person of legal entity (including guarantors, endorsers, and sureties)
who agrees to pay this note (together referred to as "us"). "You" or "your"
means the Lender and its successors and assigns.
APPLICABLE LAW: The law of the state of Texas will govern this note. Any term
of this note which is contrary to applicable law will not be effective,
unless the law permits you and me to agree to such a variation. If any
provision of this agreement cannot be enforced according to its terms, this
fact will not affect the enforceability of the remainder of this agreement.
No modification of this agreement may be made without your express written
consent. Time is of the essence in this agreement.
PAYMENTS: Each payment I make on this note will first reduce the amount I owe
you for charges which are neither interest nor principal. The remainder of
each payment will then reduce accrued unpaid interest, and then unpaid
principal. If you and I agree to a different application of payments, we will
describe our agreement on this note. I may prepay a part of, or the entire
balance of this loan without penalty, unless we specify to the contrary on
this note. Any partial prepayment will not excuse or reduce any later
scheduled payment until this note is paid in full (unless, when I make this
prepayment, you and I agree in writing to the contrary).
INTEREST: Interest accrues on the principal remaining unpaid from time to
time, until paid in full. If I receive the principal in more then one
advance, each advance will start to earn interest only when I receive the
advance. The Interest rate in effect on this note at any given time will
apply to the entire principal advanced at that time. Notwithstanding anything
to the contrary, I do not agree to pay and you do not intend to charge any
rate of interest that is higher then the maximum rate of interest you could
charge under applicable law for the extension of credit that is agreed to
here (either before or after maturity). If any notice of interest accrual is
sent and is in error, we mutually agree to correct it, and if you actually
collect more interest than allowed by law and this agreement, you agree to
refund it to me.
INDEX RATE: The index will serve only as a device for setting the rate on
this note. You do not gurantee by selecting this index, or the margin, that
the rate on this note will be the same rate you charge on any other loans or
class of loans to me or other borrowers.
ACCRUAL METHOD: The amount of interest that I will pay on this loan will be
calculated using the interest rate and accrual method stated on page 1 of
this note. For the purpose of interest calculation, the accrual method will
determine the number of days in a "year," if no accrual method is stated,
then you may use any reasonable accrual method for calculating interest.
POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate"
(shown on page 1) applies, the term "maturity" means the date of the last
scheduled payment indicated on page 1 of this note or the date you accelerate
payment on the note, whichever is earlier.
SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that
you will make only one advance of principal. However, you may add other
amounts to the principal if you make any payments described in the "PAYMENTS
BY LENDER" paragraph below.
MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect
that you will make more then one advance of principal. If this is closed and
credit, repaying a part of the principal will not entire me to additional
credit.
PAYMENTS BY LENDER: If you are authorized to pay, on my behalf, charges I am
obligated to pay (such as property insurance premiums), then you may treat
those payments made by you as advances and add them to the unpaid principal
under this note, or you may demand immediate payments of the charges.
SET-OFF: I agree that you may set off any amount due and payable under this
note against any right I have to receive money from you.
"Right to receive money from you" means:
(1) any deposit account balance I have with you;
(2) any money owed to me on an Item presented to you or in your possession
for collection or exchange; and
(3) any repurchase agreement or other nondeposit obligation.
"Any amount due and payable under this note" means the total amount of
which you are entitled to demand payment under the terms of this note at the
time you set off. This total includes any balance the due date for which you
properly accelerate under this note.
If my right to receive money from you is also owned by someone who has not
agreed to pay this note, your right of set-off will apply to my interest in
the obligation and to any other amounts I could withdraw on my sole request
or endorsement. Your right of set-off does not apply to an account or other
obligation where my rights are only as a representative. It also does not
apply to any Individual Retirement Account or other tax-deferred retirement
account.
You will not be liable for the dishonor of any check when the dishonor
occurs because you set off this debt against any of my accounts. I agree to
hold you harmless from any such claims arising as a result of your exercise
of your right to set-off.
REAL ESTATE OR RESIDENCE SECURITY: If this note is secured by real estate or
a residence that is personal property, the existence of a default and your
remedies for such a default will be determined by applicable law, by the
terms of any separate instrument creating the security interest and, to the
extent not prohibited by law and not contrary to the terms of the separate
security instrument, by the "Default" and "Remedies" paragraphs herein.
DEFAULT: I will be in default on this loan and any agreement securing this
loan if any one or more of the following occurs:
(1) I fail to perform any obligation which I have undertaken in this note
or any agreement securing this note; or
(2) you, in good faith, believe that the prospect of payment or the
prospect of my performance of any other of my obligations under this
note or any agreement securing this note is impaired.
If any of us are in default on this note or any security agreement, you
may exercise your remedies against any or all of us.
REMEDIES: If I am in default of this note you have, but are not limited to,
the following remedies:
(1) You may demand immediate payment of my debt under this note
(principal, accrued unpaid interest any other accrued charges).
(2) You may set off this debt against any right I have to the payment of
money from you, subject to the terms of this "Set-Off" paragraph herein.
(3) You may demand security, additional security, or additional parties to
be obligated to pay this note as a condition for not using any other
remedy.
(4) You may refuse to make advances to me or allow purchases on credit by
me.
(5) You may use any remedy you have under state or federal law.
By selecting any one or more of those remedies you do not give up your
right to later use any other remedy. By waiving your right to declare an
event to be a default, you do not waive your right to later consider the
event as a default if it continues or happens again.
COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection,
replevin or any other or similar type of cost if I am in default. In
addition, if you hire an attorney to collect this note, I also agree to pay
any fee you incur with such attorney plus court costs (except where
prohibited by law). To the extent permitted by the United States Bankruptcy
Code, I also agree to pay the reasonable attorney's fees and costs you incur
to collect this debt as awarded by any court exercising jurisdiction under
the Bankruptcy Code.
WAIVER: I give up my rights to require you to do certain things. I will not
require you to:
(1) demand payment of amounts due (presentment);
(2) obtain official certification of nonpayment (protest);
(3) give notice that amounts due have not been paid (notice of dishonor);
(4) give notice of intent to accelerate; or
(5) give notice of acceleration.
I waive any defenses I have based on suretyship or impairment of
collateral.
OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if
someone else has also agreed to pay it (by, for example, signing this form or
a separate guarantee or endorsement). You may sue me alone, or anyone else
who is obligated on this note, or any number of us together, to collect this
note. You may do so without any notice that it has not been paid (notice of
dishonor). You may without notice release any party to this agreement without
releasing any other party. If you give up any of your rights, with or without
notice, it will not affect my duty to pay this note. Any extension of new
credit to any of us, or renewal of this note by all or less than all of us
will not release me from my duty to pay it. (Of course, you are entitled to
only one payment in full.) I agree that you may at your option extend this
note or the debt represented by this note, or any portion of the note or
debt, from time to time without limit or notice and for any term without
affecting my liability for payment of the note. I will not assign my
obligation under this agreement without your prior written approval.
CREDIT INFORMATION: I agree and authorize you to obtain credit information
about me from time to time (for example, by requesting a credit report) and
to report to others your credit experience with me (such as a credit
reporting agency). I agree to provide you, upon request, any financial
statement or information you may deem necessary. I warrant that the financial
statements and information I provide to you are or will be accurate, correct
and complete.
NOTICE: Unless otherwise required by law, any notice to me shall be given by
delivering it or by mailing it by first class mail addressed to me at my last
known address. My current address is on page 1. I agree to inform you in
writing of any change in my address. I will give any notice to you by mailing
it first class to your address stated on page 1 of this agreement, or to any
other address that you have designated.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
DATE OF PRINCIPAL BORROWER'S PRINCIPAL PRINCIPAL INTEREST INTEREST INTEREST
TRANSACTION ADVANCE INITIALS PAYMENTS BALANCE RATE PAYMENTS PAID
(not required) THROUGH
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 298 298
<SECURITIES> 0 0
<RECEIVABLES> 632 632
<ALLOWANCES> 0 0
<INVENTORY> 79 79
<CURRENT-ASSETS> 1139 1139
<PP&E> 8659 8659
<DEPRECIATION> (3492) (3492)
<TOTAL-ASSETS> 6370 6370
<CURRENT-LIABILITIES> 2142 2142
<BONDS> 0 0
0 0
0 0
<COMMON> 24 24
<OTHER-SE> 1132 1132
<TOTAL-LIABILITY-AND-EQUITY> 6370 6370
<SALES> 3705 1929
<TOTAL-REVENUES> 3705 1929
<CGS> 0 0
<TOTAL-COSTS> 2341 1263
<OTHER-EXPENSES> 1106 586
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 208 98
<INCOME-PRETAX> 48 (20)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 48 (20)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 48 (20)
<EPS-PRIMARY> .02 (.01)
<EPS-DILUTED> 0 0
</TABLE>
