<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________to________.
Commission File No. 0-23900
IDM ENVIRONMENTAL CORP.
------------------------
(Exact Name of Registrant as Specified in Its Charter)
New Jersey 22-2194790
---------------- ----------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
396 Whitehead Avenue, South River, New Jersey 08882
----------------------------------------------------
(Address of principal executive offices)
(908) 390-9550
---------------
(Registrant's Telephone Number, Including Area Code)
---------------------------------------------------
(Former name, former address and formal 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.
Yes X No
--- ---
As of August 12, 1996, 8,968,067 shares of Common Stock of the issuer
were outstanding.
<PAGE>
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995. . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations - For the
six months ended June 30, 1996 and June 30, 1995 . . . 2
Consolidated Statements of Operations - For the
three months ended June 30, 1996 and June 30, 1995 . . 3
Consolidated Statements of Cash Flows - For the
six months ended June 30, 1996 and June 30, 1995 . . . 4
Notes to Consolidated Financial Statements . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 9
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
------------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $2,920,814 $83,286
Accounts receivable, net of allowance for doubtful accounts of $200,000 7,777,938 6,616,130
Notes receivable - current 1,804,113 1,596,559
Inventory 1,482,517 1,482,517
Costs and estimated earnings in excess of billings 4,551,460 3,634,052
Prepaid expenses 628,812 710,706
Bonding deposits 500,000 883,163
Deferred income taxes 414,992 652,600
Recoverable income taxes 1,095,167 1,114,442
Due from officers 57,263 548,488
Other current assets 52,916 55,238
------------------- -----------------
Total Current Assets 21,285,992 17,377,181
------------------- -----------------
Notes Receivable - long term 1,596,559 1,596,559
Deferred Issuance Costs, net 49,237 506,586
Property, Plant and Equipment, net 2,943,696 2,547,406
------------------- -----------------
$25,875,484 $22,027,732
------------------- -----------------
------------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $354,905 $327,974
Accounts payable and accrued expenses 3,660,634 5,836,510
Billings in excess of costs and estimated earnings 194,032 919,575
------------------- -----------------
Total Current Liabilities 4,209,571 7,084,059
------------------- -----------------
Long-Term Debt 801,628 4,004,142
------------------- -----------------
Commitments and Contingencies
Stockholders' Equity:
Common stock, authorized 20,000,000 shares $.001 par value, issued
and outstanding 8,660,317 in 1996 and 5,783,334 in 1995 8,660 6,200
Additional paid-in capital 22,762,280 13,693,895
Retained earnings (deficit) (1,906,655) (2,760,564)
------------------- -----------------
20,864,285 10,939,531
------------------- -----------------
$25,875,484 $22,027,732
------------------- -----------------
------------------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements 1
<PAGE>
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
-------------- ---------------
<S> <C> <C>
Revenue:
Sale of equipment $152,800 $979,548
Contract income 14,631,854 17,435,204
Sale of scrap 328,746 170,185
-------------- ---------------
15,113,400 18,584,937
-------------- ---------------
Cost of Sales:
Cost of equipment sales 72,844 388,054
Direct job costs 10,018,263 15,648,259
-------------- ---------------
10,091,107 16,036,313
-------------- ---------------
Gross Profit 5,022,293 2,548,624
-------------- ---------------
Operating Expenses:
General and administrative expenses 3,590,010 3,736,485
Depreciation and amortization 382,245 225,924
-------------- ---------------
3,972,255 3,962,409
-------------- ---------------
Income (Loss) from Operations 1,050,038 (1,413,785)
Other Income (Expense):
Interest income(expense) 15,871 178,249
-------------- ---------------
Income (Loss) before Provision (Credit) for Income Taxes 1,065,909 (1,235,536)
Provision (Credit) for Income Taxes 212,000 (490,000)
-------------- ---------------
Net Income (Loss) $853,909 ($745,536)
-------------- ---------------
-------------- ---------------
Earnings (Loss) per Share:
Primary earnings (loss) per share $0.12 ($0.13)
-------------- ---------------
-------------- ---------------
Fully diluted earnings (loss) per share $0.12 ($0.13)
-------------- ---------------
-------------- ---------------
Primary common shares outstanding 7,006,780 5,783,334
-------------- ---------------
-------------- ---------------
Fully diluted common shares outstanding 7,006,780 5,783,334
-------------- ---------------
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements 2
<PAGE>
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1996 1995
-------------- ---------------
<S> <C> <C>
Revenue:
Sale of equipment $152,800 $465,757
Contract income 7,215,056 12,002,006
Sale of scrap 263,699 107,945
-------------- ---------------
7,631,555 12,575,708
-------------- ---------------
Cost of Sales:
Cost of equipment sales 72,844 167,767
Direct job costs 5,454,122 10,106,087
-------------- ---------------
5,526,966 10,273,854
-------------- ---------------
Gross Profit 2,104,589 2,301,854
-------------- ---------------
Operating Expenses:
General and administrative expenses 1,937,227 1,832,834
Depreciation and amortization 171,084 129,297
-------------- ---------------
2,108,311 1,962,131
-------------- ---------------
Income (Loss) from Operations (3,722) 339,723
Other Income (Expense):
Interest income(expense) 13,046 81,303
-------------- ---------------
Income (Loss) before Provision (Credit) for Income Taxes 9,324 421,026
Provision (Credit) for Income Taxes 2,000 170,000
-------------- ---------------
Net Income (Loss) $7,324 $251,026
-------------- ---------------
-------------- ---------------
Earnings (Loss) per Share:
Primary earnings (loss) per share $0.00 $0.04
-------------- ---------------
-------------- ---------------
Fully diluted earnings (loss) per share $0.00 $0.04
-------------- ---------------
-------------- ---------------
Primary common shares outstanding 7,372,627 5,783,334
-------------- ---------------
-------------- ---------------
Fully diluted common shares outstanding 7,372,627 5,783,334
-------------- ---------------
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements 3
<PAGE>
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1996 1995
-------------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $853,909 ($745,536)
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Deferred Taxes 237,608 -
Depreciation and amortization 382,245 225,924
Decrease (Increase) In:
Accounts receivable (1,161,808) 402,971
Inventory - 318,590
Notes receivable (207,554) -
Costs and estimated earnings in excess of billings (917,408) (2,691,985)
Prepaid expenses and other current assets 81,894 (233,358)
Bonding deposits 383,163 529,682
Recoverable income taxes 19,275 14,037
Due from officers (179,355) -
Other current assets 2,322 -
Increase (Decrease) In:
Accounts payable and accrued expenses (2,108,564) (1,643,561)
Billings in excess of costs and estimated earnings (725,543) 611,572
Income taxes payable - (477,600)
-------------- ---------------
Net cash (used in) operating activities (3,339,816) (3,689,264)
-------------- ---------------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (538,523) (474,361)
Increase (decrease) of officers loans - (129,048)
-------------- ---------------
Net cash (used in) investing activities (538,523) (603,409)
-------------- ---------------
Cash Flows from Financing Activities:
Principal payments and current maturities of long-term debt (197,521) (85,826)
Issuance of common stock upon exercise of stock options and warrants 6,913,388 -
-------------- ---------------
Net cash provided by (used in) financing activities 6,715,867 (85,826)
-------------- ---------------
Increase (Decrease) in Cash and Cash Equivalents 2,837,528 (4,378,499)
Cash and Cash Equivalents, beginning of period 83,286 5,068,325
-------------- ---------------
Cash and Cash Equivalents, end of year $2,920,814 $689,826
-------------- ---------------
-------------- ---------------
Supplementary Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest expense $24,833 $11,676
-------------- ---------------
-------------- ---------------
Supplemental Disclosure of Noncash Investing and Financing Activities:
Property, plant and equipment financing $163,605 $16,421
-------------- ---------------
-------------- ---------------
Conversion of convertible promissory notes to common stock $2,157,457 -
-------------- ---------------
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements 4
<PAGE>
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The interim consolidated financial statements are prepared pursuant to the
requirements for reporting on Form 10-Q. These statements include the
accounts of IDM Environmental Corp. and its majority owned subsidiary
companies. The December 31, 1995 balance sheet data was derived from
audited financial statements but does not include all disclosures required
by generally accepted accounting principles. The interim financial
statements and notes thereto should be read in conjunction with the
financial statements and notes included in the Company's Form 10-K for the
year ended December 31, 1995. In the opinion of management, the interim
financial statements reflect all adjustments of a normal recurring nature
necessary for a fair statement of the results for the interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full year
ending December 31, 1996.
2. On June 28, 1996 IDM granted to Arle L. Pierro a non qualified option for
50,000 shares of its Common Stock at $3.23125 per share pursuant to a
consulting agreement that expires on June 30, 1997.
3. On July 11, 1996, IDM entered into an exclusive license agreement with LIFE
INTERNATIONAL PRODUCTS (Life) pursuant to which IDM shall market and employ
Life's patented environmental remediation technology for long term
bioremediation of contaminated groundwater throughout North America. IDM
also acquired a ten percent interest in Life for a payment of $1,187,500 on
the same date.
4. On July 23, 1996, IDM acquired the exclusive rights to the proprietary
Kocee Gas Generator waste treatment technology that converts Municipal
Solid Waste, including tires and plastics into electrical energy,
throughout the world except Canada. IDM acquired a majority stake (90%) in
Continental Waste Conversion, Inc.,the company that markets, owns and
operates the commercial gasification/power generation plants for a payment
of $600,000.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of Securities Exchange Act of
1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth in this
report.
SECOND QUARTER OF 1996 COMPARED WITH SECOND QUARTER OF 1995
The Company's total revenues decreased by approximately 39.3% from $12,576,000
for the quarter ended June 30, 1995 to $7,632,000 for the quarter ended June 30,
1996. Contract service income decreased during the quarter by 39.9% from
$12,002,000 in 1995 to $7,215,000 in 1996. The decrease in contract service
income and total revenues is attributable to the completion of the Company's
services during the quarter in connection with the FFC-Jordan Fertilizer
Project. The relative work load in connection with the commencement of the FFC-
Jordan Fertilizer Project during the second quarter of 1995 and the subsequent
completion of such project during the second quarter of 1996 resulted in
substantially higher revenues being reported during the early phase of the
project. The Surplus equipment and scrap sales revenues decreased by 27.6% from
$574,000 in 1995 to $416,000 in 1996. The decrease in surplus equipment and
scrap sales revenues was attributable to varying product mix and lower volume in
1996.
Direct job costs decreased by approximately 46.0% from $10,106,000 for the
quarter ended June 30, 1995 to $5,454,000 for the same period in 1996. The
primary elements of such decrease in job costs were job salaries and material
and supplies. The decrease in job costs was attributable to the decrease in
contract service revenues during the quarter. Cost of equipment sales decreased
from $168,000 in 1995 to $73,000 in 1996. The decrease in cost of equipment
sales was attributable to varying product mix and lower volume in 1996.
While total revenues decreased by 39.3% for the quarter, general and
administrative expenses increased from $1,833,000 during the quarter ended June
30, 1995 to $1,937,000 during the same period in 1995. The increase in general
and administrative expense was primarily attributable to an increase in salaries
due to hiring additional personnel.
In addition to its operating income and expenses, the Company reported net
interest income of $13,000 for the quarter ended June 30, 1996 as compared to
net interest income of $81,000 for the same period in 1995. The decrease in net
interest income/expense was attributable to $25,000 in interest expense which
accrued on $1,750,000 of indebtedness which remained outstanding during most of
the quarter out of the $5,000,000 of convertible notes issued in the third
quarter of 1995 and an increase in interest expense due to the additional
$450,000 in equipment financing compared to the same period last year.
As a result of the foregoing, the Company reported income before taxes of $9,000
and net income of $7,000 for the quarter ended June 30, 1996 as compared to a
income before taxes of $421,000 and net income of $251,000 for the same quarter
in 1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
Total revenues decreased by approximately 18.7% from $18,585,000 for the six
months ended June 30, 1995 to $15,113,000 for the same period in 1996. Contract
service income decreased during the period by 16.1% from $17,435,000 in 1995
to $14,632,000 in 1996. Surplus equipment and scrap sales revenues decreased
58.1% from $1,150,000 in 1995 to $482,000 in 1996. See the quarterly
comparison for discussion of the factors contributing to the decrease in surplus
equipment and scrap sales revenues.
Direct job costs decreased by approximately 36.0% from $15,648,000 for the six
months ended June 30, 1995 to $10,018,000 for the same period in 1996. See the
quarterly comparison for a discussion of the factors contributing to the
decrease in direct job costs.
Cost of equipment sales decreased from $388,000 in 1995 to $73,000 in 1996. The
decrease in cost of equipment sales was attributable to varying product mix and
lower volume.
6
<PAGE>
General and administrative expenses decreased 3.9% from $3,736,000 during the
six months ended June 30, 1995 to $3,590,000 during the same period in 1996.
The decrease was primarily attributable to two refunds in the first quarter of
insurance refunds totaling $90,000 as a result of audits on prior years
premiums.
The Company reported a decrease in net interest income/(expense) from $178,000
for the six months ended June 30, 1995 to $16,000 for the same period in 1995.
See the quarterly comparison for a discussion of the factors contributing to the
increase in net interest income/(expense).
As a result of the foregoing, the Company reported income before taxes of
$1,066,000 and net income after tax of $854,000 for the six months ended June
30, 1996 as compared to a loss before taxes of $1,236,000 and a net loss after
taxes of $746,000 for the same period in 1995.
MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES.
At June 30, 1996, the Company had a backlog totaling approximately $52 million
compared to a backlog of approximately $58 million at June 30, 1995. The
largest component of the Company's backlog at June 30, 1996 was $25 million for
a paper plant relocation to the People's Republic of China.
In addition to its existing backlog, the Company is presently bidding on, and
intends to bid on numerous projects to replace revenues from projects which will
be completed during 1996 and to increase the total dollar volume of projects
under contract. Management anticipates that the Company's efforts to bid on and
secure new contracts will focus on projects which can be readily serviced from
the three regional offices opened by the Company during 1994 and 1995. In
addition, the Company has submitted proposals on several large international
plant relocation projects. The Company's regional offices, particularly the Oak
Ridge, Tennessee and Los Alamos, New Mexico offices are strategically located in
areas having a high concentration of prospective public and private remediation
sites. While bidding to perform services at such sites is expected to be highly
competitive, management believes that the Company's existing presence on
projects at these locations combined with its proven expertise and resources
will enhance the Company's chances of successfully bidding on substantial new
projects.
The Company had working capital of $ 17,076,000, including cash and cash
equivalents balances of $2,921,000 at June 30, 1996. This compares to working
capital of $10,293,000 and a cash balance of $83,000 at December 31, 1995. The
increase in working capital and cash is attributable to the exercise of
warrants and options totaling $6,913,000 during the period.
Approximately $500,000 of the Company's working capital at June 30, 1996
consisted of a cash performance bond which the Company had posted in connection
with the performance of a project which is expected to be released during
August.
Additionally, $1,483,000 of the Company's working capital at June 30, 1996
consisted of surplus equipment inventory. Such inventory level compares to the
same amount at December 31, 1995.
At June 30, 1996, the Company's only long term debt other than the convertible
notes was $657,000 in installment debt secured by job equipment.
On July 11, 1996 the company acquired a ten percent interest in Life
International Products (Life) for $1,187,500. The Company also entered into a
licensed agreement with Life whereby IDM shall market and employ Life's patented
environmental remediation technology for long term bioremediation of
contaminated groundwater throughout North America.
On July 23, 1996, the company acquired the exclusive rights to the proprietary
Kocee Gas Generator waste treatment technology that converts Municipal Solid
Waste, including tires and plastics into electrical energy, throughout the world
except Canada. IDM acquired a majority stake (90%) in Continental Waste
Conversion, Inc., the company that markets, owns and operates the commercial
gasification/power generation plants.
Other than funding the Company's bonding and other job costs the Company does
not anticipate any substantial demands on the liquidity or capital resources of
the Company during the following twelve months.
7
<PAGE>
Management believes that the Company's working capital is sufficient to meet the
Company's anticipated needs for at least the following twelve months, including
the performance of all existing contracts of the Company. However, as the
Company is presently pursuing bids on multiple large projects, the Company may
be required to seek new bank lines of credit or other financing in order to
facilitate the performance of jobs if the volume and size of projects being
performed by the Company increases substantially. While the Company is
conducting ongoing discussions with various potential lenders with a view to
establishing available bank lines of credit if and when needed to support future
growth, the Company presently has no commitments from any bank or other lender
to provide financing if such financing becomes necessary to support growth.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
Form 8-K dated April 1, 1996 - Item 5 Reporting Adoption of a
Shareholder's Rights Plan.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IDM ENVIRONMENTAL CORP.
Dated: August 16, 1996 By: /S/ Joel Freedman
-----------------------------------
Joel Freedman, President
Dated: August 16, 1996 By: /S/ Michael B. Killeen
-----------------------------------
Michael B. Killeen, Principal
Financial and Accounting Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2920
<SECURITIES> 0
<RECEIVABLES> 7978
<ALLOWANCES> 200
<INVENTORY> 1483
<CURRENT-ASSETS> 21286
<PP&E> 2944
<DEPRECIATION> 0
<TOTAL-ASSETS> 25875
<CURRENT-LIABILITIES> 4210
<BONDS> 802
0
0
<COMMON> 9
<OTHER-SE> 20855
<TOTAL-LIABILITY-AND-EQUITY> 25875
<SALES> 15113
<TOTAL-REVENUES> 15129
<CGS> 10091
<TOTAL-COSTS> 3972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1066
<INCOME-TAX> 212
<INCOME-CONTINUING> 854
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 854
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
