UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended September 30, 1996
Commission File No. 33-68304
Green Oasis Environmental, Inc.
(Exact name of small business issuer as specified in its charter.)
Florida 57-0970282
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
184 East Bay Street
Suite 302
Charleston, South Carolina 29401
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (803) 722-5771
Check whether the issuer(1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the past 12 months, and (2) has been subject
to such filing requirements for the past 90 days.
YES [ X ] NO [ ]
State the number of shares outstanding of each of the
issuer's classes of Common Equity, as of the latest practicable
date.
Class of Common Stock Outstanding at September 30, 1996
--------------------- ---------------------------------
$.01 Par Value 5,612,026 shares
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
Index
Part I. Financial Information
Item 1.
Financial Statements (Unaudited) Page Number
Condensed Balance Sheets
September 30, 1996, and
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . .3
Condensed Statements of Operations
Three and nine months ended
September 30, 1996 and 1995, and
September 24, 1991 (Inception),
through September 30, 1996 . . . . . . . . . . . . . . . . . . . . 4
Condensed Statements of Cash Flows
Nine months ended September 30, 1996
and 1995, and September 24,
1991 (Inception), through
September 30, 1996. . . . . . . . . . . . . . . . . . . . . . . . .5
Notes to Condensed Financial Statements . . . . . . . . . . . . . 6-12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . . . . . .13-15
Part II. Other Information
Item 3. Preferred Stock Dividends in Arrears. . . . . . . . . . 16
Item 6(a). Exhibits . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 6(b). Reports on Form 8-k. . . . . . . . . . . . . . . . . . . 16
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
CONDENSED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
September 30, December 31,
1996 1995
------------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,000 $ 5,000
Prepaid expenses (Note C) 131,000 -
---------- ----------
Total current assets 133,000 5,000
PROPERTY AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION 87,000 56,000
OTHER ASSETS
Loans - related parties 141,000 141,000
Patent costs 47,000 47,000
Deferred offering costs 13,000 -
---------- ----------
TOTAL ASSETS $ 421,000 $ 249,000
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Notes payable (Note D) $ 280,000 $ 520,000
Accounts payable, trade (Notes C and D) 471,000 789,000
Accounts payable, professional
fees (Notes C and D) 99,000 655,000
Accrued interest (Notes C and D) 26,000 102,000
Accrued payroll taxes 71,000 71,000
Deposits received for equipment sales 80,000 80,000
Due to stockholders 57,000 57,000
Due to related parties (Note B) 129,000 2,000
Deposits received for distribution
fees 100,000 118,000
---------- ----------
Total current liabilities 1,313,000 2,394,000
---------- ----------
LONG-TERM DEBT (Note D) 495,000 2,000
---------- ----------
COMMITMENTS AND CONTINGENT
LIABILITIES (Note H) - -
---------- ----------
REDEEMABLE, PREFERRED STOCK 42,000 42,000
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Series A preferred stock 6,000 6,000
Common stock, $.01 par value;
20,000,000 shares authorized, 5,612,026
(1996) and 5,166,773 (1995) issued and
outstanding 56,000 52,000
Additional paid-in capital 3,907,000 3,120,000
Deficit accumulated during the
development stage (5,398,000) (5,257,000)
Note receivable - related party (Note B) - (110,000)
---------- ----------
Total stockholders' equity (deficiency) (1,429,000) (2,189,000)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 421,000 $ 249,000
========== ==========
<FN>
See Notes to Condensed Financial Statements.
3
</TABLE>
<PAGE>
<TABLE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended Period From
September 30, September 30, September 24,
--------------------- --------------------- 1991
(Inception),
Through
1996 1995 1996 1995 September 30,1996
--------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales of equipment $ 37,000 $ 525,000 $ 37,000 $2,075,000 $ 2,112,000
Interest and other
income - - - 12,000 18,000
Loss on sale of property
and equipment - - - (5,000) -
--------- ---------- ---------- ---------- --------------
Total revenues 37,000 525,000 37,000 2,082,000 2,130,000
--------- ---------- ---------- ---------- --------------
COSTS AND EXPENSES
Research and development (13,000) (6,000) (2,000) 338,000 4,519,000
General and administrative
- legal and accounting 81,000 2,000 206,000 76,000 1,210,000
General and administrative
- other 130,000 26,000 214,000 69,000 841,000
Salaries and benefits - 82,000 - 211,000 807,000
Operations and marketing (6,000) 1,000 10,000 4,000 468,000
Interest expense and
loan costs 8,000 14,000 36,000 55,000 332,000
--------- ---------- --------- ---------- --------------
Total expenses 200,000 119,000 464,000 753,000 8,177,000
--------- ---------- --------- ---------- --------------
INCOME (LOSS) BEFORE
INCOME TAXES (BENEFIT)
AND EXTRAORDINARY GAIN (163,000) 406,000 (427,000) 1,329,000 (6,047,000)
INCOME TAXES (BENEFIT) - - - - -
EXTRAORDINARY GAIN
(Note E) 21,000 - 287,000 - 666,000
--------- ---------- --------- ---------- --------------
NET INCOME (LOSS) $(142,000) $ 406,000 $(140,000) $1,329,000 $ (5,381,000)
========= ========== ========= ========== ==============
EARNINGS (LOSS) PER
COMMON SHARE
Income (loss) before
extraordinary item $ (0.03) $ 0.08 $ (0.08) $ 0.26 $ (1.49)
Extraordinary item - - 0.05 - 0.16
--------- ---------- --------- ---------- --------------
Net income (loss) $ (0.03) $ 0.08 $ (0.03) $ 0.26 $ (1.33)
========= ========== ========= ========== ==============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,537,550 5,119,923 5,492,912 5,113,935 4,146,023
========= ========== ========= ========== ==============
<FN>
See Notes to Condensed Financial Statements.
4
</TABLE>
<PAGE>
<TABLE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Period From
September 24,
1991
Nine Months Ended (Inception),
September 30, Through
---------------------- September 30,
1996 1995 1996
--------- ----------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating
activities $(190,000) $ (209,000) $ (3,459,000)
--------- ---------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (37,000) - (220,000)
Proceeds of sale of property and
equipment - 40,000 62,000
Loans to related parties - (56,000) (336,000)
Collection of loans to related
parties - 109,000 235,000
Patent costs (1,000) (5,000) (48,000)
Deposits paid (1,000) - (1,000)
Loans granted to distributors
and others - - (7,000)
Initial payments received for
distribution rights - - 198,000
--------- ---------- -------------
Net cash provided by (used in)
investing activities (39,000) 88,000 (117,000)
--------- ---------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of convertible debt
securities - - 565,000
Proceeds of common stock issues 110,000 19,000 986,000
Proceeds of preferred stock issues - - 1,024,000
Proceeds of loans from stockholders 128,000 140,000 689,000
Proceeds of notes - 20,000 520,000
Proceeds of Series A notes - - 105,000
Payments of convertible debt
securities - (5,000) -
Issue costs (12,000) - (33,000)
Purchase of treasury stock - - (24,000)
Payments of loans from stockholders - (43,000) (95,000)
Increase (decrease) in bank overdraft - (7,000) -
Payments of notes and debentures - - (155,000)
Other payments - (3,000) (4,000)
--------- ---------- -------------
Net cash provided by financing
activities 226,000 121,000 3,578,000
--------- ---------- -------------
Cash and cash equivalents
Net increase (decrease) during
the period (3,000) - 2,000
Balance at beginning of period 5,000 - -
--------- ---------- -------------
Balance at end of period $ 2,000 $ - $ 2,000
========= ========== =============
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Common stock issued for services rendered,
preferred stock conversion,
debt conversion, and loan costs $ 773,000 $ 38,000 $ 3,042,000
========= ========== =============
Capital lease obligation incurred to
purchase equipment $ - $ - $ 12,000
========= ========== =============
Deposit converted to stock $ 18,000 $ - $ 98,000
========= ========== =============
Debt issued for equipment and
services and loans collected
or exchanged for services $ - $ - $ 56,000
========= ========== =============
Provision for repurchase of stock
from stockholders who
accepted rescission offer $ - $ - $ 57,000
========= ========== =============
Company vehicle transferred to
officer as payment of loan $ - $ 13,000 $ -
========= ========== =============
Cancellation of lease obligation
and return of leased equipment $ 3,000 $ 5,000 $ -
========= ========== =============
Accrued salaries applied to related
party note $ - $ 150,000 $ -
========= ========== =============
No interest nor income taxes were paid in any period.
See Notes to Condensed Financial Statements.
5
</TABLE>
<PAGE>
<TABLE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The balance sheet as of September 30, 1996, the statements
of operations for the three months and nine months ended
September 30, 1996 and 1995, and September 24, 1991 (inception),
to September 30, 1996, and the statements of cash flows for the
nine months ended September 30, 1996 and 1995, and September 24,
1991 (inception), to September 30, 1996, have been prepared by
the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted as allowed by
the rules and regulations of the Securities and Exchange
Commission. In the preparation of the above described financial
statements, all adjustments of a normal and recurring nature have
been made. The Company believes that the accompanying unaudited
financial statements contain all adjustments necessary to present
fairly the results of operations and cash flows for the interim
periods presented. Further, management believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that the financial statements be read
in conjunction with the annual financial statements and notes
thereto. The results of operations for the three months and nine
months ended September 30, 1996, are not necessarily indicative of
the results to be expected for the year.
B. RELATED PARTY TRANSACTIONS
Chief Executive Officer. At December 31, 1995, a balance of
$110,000 remained from a note receivable for the purchase of
1,000,000 shares of common stock due from the Chief Executive
Officer for the exercise of a stock option granted in 1993.
Payments in cash of $110,000 during 1996 have paid the balance
in full. Also, the Chief Executive Officer loaned the Company
$127,000 to use for paying expenses during 1996; the total owed
him as of September 30, 1996, is $129,000.
Investment in Limited Partnership. The Company has become the
general partner in a South Carolina limited partnership known as
GOE Plant Partnership I, L.P. (the "Partnership") which was formed
on June 28, 1996. The purpose of the Partnership is to purchase
and operate the Company's distillation processing equipment which
was built as the prototype in 1993. The Company plans to sell the
prototype to the Partnership as soon as the Partnership is able to
sell limited partnership interests to raise the approximately
$1,200,000 purchase price. Partnership interests are offered for
sale through December 31, 1996. Though much of the cost of producing
the equipment has already been expensed as research and development
costs, certain improvements to the equipment are not complete, and
the Company expects to incur additional costs for the thermal oxidizer
and other items prior to the completion of the sale to the Partnership.
Also, the South Carolina Department of Health and Environmental Control
("DHEC") must approve the installation and operation of the distillation
plant. The Partnership will lease space from the Company on which to
construct and operate the plant.
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
B. RELATED PARTY TRANSACTIONS (CONTINUED)
Investment in Limited Partnership (Continued).
The Company's duties as general partner are to operate and maintain
the distillation plant and to perform all duties of general management.
The Company will receive 10% of the net income from the Partnership
while the limited partners will receive a 90% allocation of net income.
The Partnership has paid $37,000 for the purchase of equipment during
the third quarter of 1996 and has reimbursed the Company for $10,000
in expenses.
The Company will provide warrants at no additional cost to be sold with
the limited partnership interests. The warrants may be exercised to
purchase up to 15,000 shares of the Company's common stock and are
exercisable for 180 days at a price of $3.50 per share. The Company
will assign no value to the warrants when they are issued.
C. ISSUANCE OF COMMON STOCK
Debt Restructing. During 1996, the Company negotiated with
several of its creditors who were owed trade payables and legal fees.
The Company and the creditors agreed upon a conversion price of $2.50
to $3.15 per share and converted $496,000 in accounts payable to common
stock. The stock values agreed upon were the approximate average of
the market prices at the time of the agreements. Upon the issuance
of the stock certificates the market price of the stock had
fallen. Thus, at the time of consummation the Company
recognized an extraordinary gain on the restructuring of the debt
(Note E). Certain of the agreements contained provisions for the
issuance of additional shares of stock if market prices fall below a
floor amount for a three-month period of time.
Prepaid Expenses. The Company has recorded $18,000 in prepaid legal
fees from the issuance of common stock as of September 30, 1996. In
addition, the Company recorded $75,000 from the issuance of common
stock in prepaid consulting services in March 1996, of which $41,000
has been amortized as general and administrative expense. In the
third quarter of 1996, the Company has recorded prepaid engineering
fees of $63,000 related to the issuance of common stock in exchange
for future services to be provided by the engineering firm. The
Company recorded $13,000 in prepaid interest which is related to
agreements made with creditors prior to conversion of their debt
to either common stock or long-term noninterest-bearing notes. The
prepaid interest recorded will be expensed in the fourth quarter of
1996. The balance of $131,000 presented as prepaid expenses as of
September 30,1996, also includes $2,000 in prepaid rent.
Settlement of Lawsuit. The Company settled a lawsuit for approximately
$16,000 by issuing 7,500 shares of its common stock in full settlement
of all the claims of the petitioner.
Exercise of Stock Options. The holder of the $500,000 note which is in
default agreed to convert $250,000 of the debt to common stock at $2.50
per share pursuant to his stock option agreement during the second quarter.
Two noteholders owed a total of $20,000 converted their debt along with
$4,000 in accrued interest to common stock at the $1.00 per share conversion
price during the third quarter
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
D. LONG-TERM DEBT
Certain of the Company's creditors holding debt aggregating $405,000
accepted an offer from the Company to accept noninterest-bearing
notes payable in 36 equal installments over the next three years
beginning on September 30, 1996, in exchange for amounts owed by the
Company. The holder of the $250,000 note, which is in default, agreed
to accept this offer and also agreed to accept payments for the
accrued interest owed. Accrued interest of $120,000 was converted to
a three-year note. The Company executed the notes but has not been
able to make any of the payments agreed to in the notes as of
November 6, 1996. The amounts due after September 30, 1997 are
recorded as long-term debt. The debt schedule is as follows:
Year Amount
------ ---------
1996 $ 86,000
1997 258,000
1998 258,000
1999 173,000
---------
775,000
less current portion 280,000
---------
$ 495,000
=========
E. EXTRAORDINARY GAIN
A gain in the amount of $287,000 was recognized during 1996 from the
restructuring of debt. On June 27, 1996, 176,576 shares of common
stock were issued to settle $549,000 in trade payables, professional
fees, and a lawsuit. On August 21, 1996, trade payables in the amount
of $40,000 were settled by issuing 15,917 shares of common stock. The
difference between the negotiated settlements and the stock value on
the dates of the transfers of the equity interests to the creditors is
the amount recorded as gain.
F. STOCK OPTIONS
The Company has granted a stock option to its Chief Executive Officer
as compenstion for waiving payment of his salary for the last quarter
of 1995 and all of 1996. The option grants the right to purchase up
to 448,000 shares of common stock at $1.125 until the earlier of
August 14, 1999, or the date of termination of employment. The fair
value of $1.125 per share on the date of the agreement is the exercise
price. The Company recorded no compensation expense associated with
the option as it continues to use the intrinsic value method of
accounting for stock options.
In addition, the Company granted stock options for 125,000 shares to
employees under its Employee Stock Option Plan and 50,000 shares to
directors under its Director Stock Option Plan. These options are
exercisable at the fair value on the date of the grant, or $1.125
per share. The stock options are subject to all the terms and
conditions set forth in the Plans. No compensation expense has
been recorded by the Company.
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
G. UNCERTAINTY - GOING CONCERN
The Company's continued existence is dependent upon its ability to
obtain financing to allow further development of its products to meet
design specifications and regulatory requirements as well as to continue
production. Without fully operational products and the financing
necessary, there is substantial doubt about the Company's ability to
continue as a going concern. In addition, there are uncertainties
related to the outcome of matters in litigation that cannot presently
be determined.
Management continues to seek additional sources of financing from
private sources. There can be no assurance, however, that the
negotiations will be successful.
H. COMMITMENTS AND CONTINGENT LIABILITIES
At the end of March 1995, the Company ceased its research and
development activities and dismissed its production employees due
to the lack of money to continue its operations. The plant has
been closed since that time.
The Company is subject to a number of lawsuits and claims arising
out of the ordinary conduct of its business, including those
related to commercial transactions. Various suppliers have
obtained judgments against the Company for amounts owed to them for
products and services sold to the Company; the Company has recorded
as liabilities the amounts that it believes are due at settlement
of these obligations but has not yet paid such obligations.
On November 21, 1994, the Company extended a rescission offer which
expired on December 22, 1994, to all of its stockholders because
some of its securities were sold in violation of securities laws.
The rescission offer gave all stockholders the right to revoke and
rescind all purchases of the Company's stock and agreed to pay 12%
interest from the date of purchase by the stockholder to the date
of repurchase by the Company. Stockholders owning 20,000 shares
of common stock and 7,000 shares of preferred stock accepted the
rescission offer. As of November 6, 1996, the funds to repay the
$57,000 owed plus interest have not been available. However, the
amount has been recorded as a liability by the Company. On
February 23, 1996, pursuant to an Order of Judgment between the
Company and one stockholder, the Company agreed to pay $5,000 plus
interest at 12% per annum from April 23, 1993, and $1,000 in
attorney's fees. In connection with the sale of unregistered
securities, the South Carolina Secretary of State and the Company
executed a Consent Order on July 25, 1995, in which the Company
agreed to discontinue issuing, offering, and selling securities
in South Carolina until such securities are registered and also
to make a good faith effort to honor the rescission offer made to
the South Carolina investors.
During 1994, the Company was involved in discussions with DHEC
regarding environmental issues in order to obtain an operating
permit in the State of South Carolina for its waste oil processing
equipment. DHEC had suspended the Company's normal operation of
the equipment in November 1993 until an operating permit was
obtained. The Company completed an on-site operational test for
purposes of obtaining an operating permit and met with DHEC
officials in March 1994.
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
H. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
On July 27, 1994, the Company and DHEC signed a Consent Order
imposing a civil penalty in the amount of $20,000 for operation of
the unit without the necessary permits; the Company has paid the
penalty. DHEC subsequently denied an air construction permit after
having written a draft permit, and the Company was unable to
operate its equipment. On March 23, 1995, the Company and DHEC
signed a Consent Order following the Company's appeal of the denial
of the permit. The Consent Order allows the Company to test its
waste oil conversion equipment to demonstrate that air pollutant
emissions meet DHEC's standards. Successful demonstration of
compliance would result in the issuance of a final permit. Continuous
monitoring and other requirements regarding the operation
of the equipment as well as storage and disposal of fuel are imposed
by the Consent Order.
On July 19, 1995, a lawsuit was filed by LifeChoice International,
SA, a Greek company, which purchased two units of waste oil
conversion equipment manufactured by the Company. The suit alleges
breach of contract arising from the sale of the two units and asks
for unspecified damages. In addition, a related Antiguan company
filed suit on July 19, 1995, claiming that the Company defaulted
on payment of a $100,000 promissory note which the Company recognized
as sales revenue. The Company answered both complaints on
September 27, 1995. The Company has filed a counterclaim alleging
a breach of the plaintiff's agreement to purchase the European
distribution rights from the Company. Discovery commenced by
the plaintiff companies in 1995. On October 15, 1996, the Company
entered into two separate Court Orders with LifeChoice, SA and
LifeChoice International, Inc., whereby such companies agreed to
withdraw their claims against the Company, with leave to move,
within one year from the date of the Order, for restoration of
the case. If at the end of the one-year period, either LifeChoice,
SA or LifeChoice International, Inc. has not filed a motion requesting
that the case be restored to the docket, the appropriate action will
be dismissed with prejudice in favor of the Company. The Company's
counterclaims in these cases have been removed with the same permission
to refile. The final outcome is not known at this time.
A settlement was reached in a lawsuit with a supplier who claimed
that the Company owed $123,000. A Confession of Judgment was
signed on October 5, 1995, in which the Company agreed to pay
$85,000 to the supplier in four equal payments beginning 90 days
from the date of execution of the judgment. Said amount has been
recorded as a liability; however, no payments have been made as of
November 6, 1996.
On November 9, 1995, Environmental Oil Services, LLC, which
purchased one of the units manufactured by the Company, filed suit
in state court in Idaho, alleging breach of contract for failure
to manufacture and install equipment that conformed to the terms
and conditions of its purchase contract. The suit seeks a refund of
$525,000 paid to the Company and $1,475,000 in lost profits. On
December 14, 1995, the Company filed a notice of removal in U.S.
District Court to remove the case from the jurisdiction of the
state court to the federal court system. The case was removed to
the District Court of South Carolina in Charleston on February 1,
1996. An answer was filed on March 4, 1996, which asserted general
denials as well as other defenses including the destruction of the
equipment by the plaintiff. In addition, the Company asserted
a counterclaim against the plaintiff for misrepresentation of facts
to potential customers of the Company which interfered with its ability
to sell its equipment to these customers. The plaintiff filed an answer
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
H. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
to the counterclaim on March 28, 1996. To date no discovery has taken
place by either party; however, discovery is expected to commence by
both parties shortly. The Company intends to vigorously defend itself
and to avail itself of all rights and claims under the law; however, the
outcome is not determinable at the present time.
Due to the shortage of working capital, the Company has operated
without liability insurance coverage.
In September and October 1995, five stockholders who own an
aggregate of 40,854 shares of common stock filed suits alleging
various violations of state securities and other laws, arising from
the sale of the Company's stock to the plaintiffs. The plaintiffs
seek rescission and a return of the money paid for the stock of
$71,000 with attorneys' fees and statutory interest. One of the
suits was settled during the third quarter of 1996, when
the Company agreed with one of the plaintiffs to release its hold
on the stock, and the stockholder dismissed his suit. Thus, four
shareholders now seek the return of approximately $40,000. The
opinion of management and the Company's legal counsel is that South
Carolina securities laws prohibit these investors, who were offered
an opportunity to rescind their purchase of stock and refused the
offer, from suing to recover their investments. However, because
the suits involve other claims, the outcome is not determinable at
the present time.
On December 4, 1995, Caribe Environmental, Inc., and Caribbean
Sales Group filed suit alleging breach of contract. The claim is
that $50,000 was paid as a deposit on equipment to be furnished by
the Company. The suit seeks the return of the $50,000 deposit
which was received in 1995. The Company filed its answer setting
forth defenses to this claim. On January 30, 1996, an Order of
Attachment was authorized, and the equipment has been sealed;
however, it remains at the plant site. The Company acknowledges
that the deposit should be returned and has recorded the amount as
a liability.
On December 28, 1995, Pensacola Pollution Control, Inc. filed suit
against the Company seeking return of a $25,000 deposit paid toward
the purchase of a waste oil recycling unit. Prior to answering the
complaint, the parties entered a Confession of Judgment for the
amount of the debt and accrued interest and attorneys' fees of 10%.
The amount is recorded as a liability.
On January 4, 1996, the Company entered into a lease agreement for
office space in Charleston, South Carolina. The lease term is for
one year through January 1997 at $1,000 per month. The Company
moved its office to the new location during January 1996.
On April 15, 1996, the Company leased land for an assembly,
storage, and processing facility from Allied Terminals, Inc. in
Charleston, South Carolina. The lease is for an area of two acres
for ten years. The annual rent is $24,000 beginning six months
from the date of signing. Rent increases are based on the consumer
price index each year. A lease fee of $6,000 was due upon signing
the lease. No additional rents are due for the first six months.
The Company is designing a facility to be constructed at the site.
The plant was moved from Mount Pleasant, South Carolina, in April
1996.
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
H. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
On April 23, 1996, the Company and Approved Oil Services, Inc., a
waste-oil collection company in Denver, Colorado, signed a letter
of intent for the purchase of Approved Oil by the Company. The
purchase price will be paid in cash and securities of the Company.
The parties will negotiate the purchase price after completion of
due diligence.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following information should be read in conjunction with the
Condensed Financial Statements and the notes thereto included in Item 1
of this Quarterly Report, and the financial statements and the notes
thereto and Management's Discussion and Analysis of Financial Condition
and Results of Operations contained in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995.
Results of Operations for the Three Months and Nine Months Ended
September 30, 1996
Green Oasis is a development stage company which was organized as
a Florida corporation on September 24, 1991. Since its inception,
Green Oasis has been engaged principally in product design,
development, testing, production and patent application activities and
in the pursuit of selling distributorships for the exclusive right to
distribute its waste oil conversion equipment, known as
EnviroEconomics Systems, in various geographical areas of the United
States and other countries. It has also begun developing markets for
the EnviroEconomics Systems and had shipped three units to customers
by the end of 1994. For the period September 24, 1991 (inception),
to September 30, 1996, Green Oasis incurred a cumulative net loss of
$5,381,000. For the three-month and nine-month periods ended
September 30, 1996, the Company incurred a net loss before
extraordinary items of $163,000 and $427,000, respectively. For the
same period in 1995, the net income was $406,000 for the three months
ended September 30, 1995, and $1,329,000 for the nine months ended
September 30, 1995. Green Oasis' ability to fully utilize net
operating loss carryforwards for tax purposes is subject to certain
limitations.
The Company's revenues are derived from sales of waste oil conversion
equipment. The Company has generated no revenue in 1996 from the sale
of waste oil equipment. Storage tanks were sold to GOE Plant Partnership
during the third quarter of 1996 for $37,000. In the third quarter of
1995, the Company recognized revenue from the sale of a system in the
amount of $525,000. The Company has no current production; however,
as referenced in Note B to the Condensed Financial Statements, the
Company has agreed to sell the prototype unit which was constructed
in 1993 to the limited partnership and, if such sale is accomplished,
Green Oasis will generate revenue in the ensuing quarter. There can
be no assurance that the Company will be able to sell the prototype
or that the Company will be able to attain or sustain profitability.
As discussed in Note H to the Condensed Financial Statements, the
Company had exhausted its cash by the end of March 1995, and its
production and research and development activities ceased as of then.
Thus, the research and development costs recorded by Green Oasis for
the September 30, 1996, quarter are offset by the removal of
approximately $19,000 in liabilities due to an agreement with a vendor
that a previously recorded payable amount was not owed. Operations
and marketing expenses in the third quarter are minimal in both 1995
and 1996; the $6,000 credit amount for the third quarter 1996 is due
to reimbursement of expenses paid by the limited partnership. The
Company continues to incur legal fees for Corporate legal work and
for the defense of lawsuits for $69,000 in the third quarter of 1996;
accounting fees were $12,000 during the period. For the same period
of 1995, legal and accounting fees were $2,000. Other general and
administrative expenses recorded in the third quarter of 1996 include
$52,000 paid in common stock to consultants to secure market makers
for its common stock, $27,000 paid to an employee for relocation
expenses; travel, telephone, printing, office rent, and other office
expenses account for the remainder of the $130,000 account balance
for the quarter. In the third quarter of 1995, office rent,
insurance, travel, and office expenses comprise the $26,000 of expenses
incurred.
<PAGE>
Results of Operations for the Three Months and Nine Months Ended
September 30, 1996 (Continued)
Officer salary and benefits were not paid or accrued in the third
quarter of 1996; $82,000 was expensed in the same quarter of 1995.
The Company offered a stock option agreement to the Chief Executive
Officer as compensation for 1996. See Note F to the Condensed
Financial Statements. Interest costs of $8,000 were recorded in the
third quarter of 1996. Interest expense in the third quarter of
1995 was $14,000. The decrease in interest expense is due to the
conversion of debt to either common stock or long-term noninterest-
bearing notes.
Liquidity and Capital Resources
Green Oasis has funded its operations from inception through
September 30, 1996, primarily through loans or sales of common stock
and preferred stock, in the aggregate amount of $4,910,000, and the
sale of three units of waste oil recycling equipment in the amount
of $2,075,000.
The decrease in accounts payable during the nine months ended
September 30, 1996, was due to exchanging trade payables and legal fees
for common stock of the Company and converting trade payables and legal
fees to noninterest-bearing notes payable over thirty-six months
beginning September 30, 1996. On June 27, 1996, the Company issued
176,576 shares of common at a market value of $1.60 per share for the
settlement of $476,000 of debt, $57,000 of prepaid legal fees, and a
$16,000 lawsuit. The Company negotiated the number of shares to be
issued for the settlement of the debts at $3.00 to $3.15 per share.
When the shares were issued, however, the stock value had decreased to
$1.60. On August 21, 1996, the Company issued 15,917 shares of common
stock at a market value of $1.125 per share for the settlement of
$39,000 of accounts payable. Also, trade payables of $51,000 and legal
fees of $354,000 were converted to noninterest-bearing notes payable in
equal installments over thirty-six months beginning September 30, 1996.
As of November 6, 1996, the Company has not made any payments on these
notes.
In addition, during the second quarter of 1996 the holder of the
$500,000 note exercised his option to convert the debt to stock by
converting half of the principal to 100,000 shares of common stock at
the $2.50 per share exercise price. The remaining $250,000 of the note
and $120,000 of accrued interest were replaced by a noninterest-bearing
note payable over three years in monthly installments of $10,000
beginning September 30, 1996. No payments have been made as of
November 6, 1996. Also, Green Oasis issued 24,000 shares of common
stock in exchange for $20,000 of notes payable and accrued interest.
The Chief Executive Officer paid the balance of $110,000 due on a note
for the exercise of a 1993 stock option during 1996 and loaned the
Company $128,000 to use for meeting the financial needs of the
Company, $68,000 of which was advanced in the third quarter.
Green Oasis is currently dependent upon the proceeds of debt and
equity financings and loans to complete market testing and to complete
the design, development, and testing of a commercial version of the
EnviroEconomics System. The proceeds must also fund Green Oasis'
working capital requirements, including the payment of employee salaries.
Additionally, the Company requires working capital to fund the work in
process inventory during the production of units for sale to customers.
As of September 30, 1996, Green Oasis had a net working capital deficit
of $1,180,000.
<PAGE>
Liquidity and Capital Resources (Continued)
Commercial production of the Company's products will require
additional work to complete the integration of the thermal oxidizer
into the waste oil conversion equipment. The thermal oxidizer was
added to the original design in 1994 based on recommendations of
engineering consultants and DHEC. The thermal oxidizer's purpose is
two-fold: to contain any air emissions and to supply heat for the
thermal cracking process. The use of the thermal oxidizer is not the
only technology available to accomplish these procedures, however, and
the Company can either continue to develop the units to accommodate
the thermal oxidizer or it can use an enclosed gas flare system which
it believes will simplify the process. Due to the lack of funds after
March 31, 1995, Green Oasis has not operated a production process nor
completed any significant further development of the design of the
system since that date. Consequently, the Company has not yet
completed all research and development for its waste oil conversion
equipment, and there can be no assurance that it will be able to
obtain the financing to complete the development of such equipment.
The Company is presently defending a number of lawsuits, most of
which are from various creditors, especially suppliers, who have not
been paid for their products and services. The Company has recorded
liabilities for the amounts that it believes can settle those
judgments and obligations. Two other suits involve the customers to
whom the three units were sold. These suits are being defended
vigorously by the Company which believes that it has meritorious
defenses and, in some instances, valid counterclaims. There can be
no assurances, however, as to the outcome of the lawsuits. See Note
H to the Condensed Financial Statements.
The Company and Approved Oil Services, Inc. of Denver, Colorado,
have signed a letter of intent for Green Oasis to purchase the waste
oil collector's operations. The purchase price is being negotiated
and will be paid in cash and securities of Green Oasis.
On June 28, 1996, the Company became the general partner in a South
Carolina limited partnership which has been formed to raise capital
through the sale of limited partnership interests. The Partnership
intends to purchase the Company's equipment for approximately
$1,200,000 and to operate a waste oil distillation plant. The Company's
management will also manage the Partnership. The sale of the equipment
will provide working capital to Green Oasis so that its research and
development activities can continue as well as manufacturing of
equipment for sale to customers. There can be no assurances, however,
that enough capital will be raised from the sale of the partnerhsip
interests to finance the equipment purchase. As of November 6, 1996,
two partnership units have been sold for $50,000 each. The offering
has been extended to December 31, 1996.
Green Oasis is continuing to negotiate with its creditors for
further reduction of its payables and notes.
During the third quarter of 1996, the Company purchased a vehicle
for $37,000. Green Oasis currently has no material commitments for
capital expenditures.
<PAGE>
Part II. Other Information
Item 3. Preferred Stock Dividends in Arrears
Amount of dividends in
Due date of arrears at
dividends November 6, 1996
----------- ----------------------
June 30, 1993 $ 10,451
December 31, 1993 32,772
June 30, 1994 43,436
December 31, 1994 50,479
June 30, 1995 3,080
December 31, 1995 3,080
June 30, 1996 3,080
----------
$ 146,378
==========
Item 6(a). Exhibits
The exhibits listed on the accompanying Index to Exhibits on page 18
are filed as part of this Report.
Item 6(b). Reports on Form 8-K
None
<PAGE>
SIGNATURE
In accordance with the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Green Oasis Environmental, Inc.
(Registrant)
Date: November 14, 1996 /s/ William D. Carraway
--------------------- -------------------------------------
William D. Carraway
President and Chief Executive Officer
(Chief Financial Officer)
<PAGE>
Index to Exhibits
Exhibit No. Description Page
10.26 Nonqualified Stock Option Agreement
Pursuant to 1994 Employee Stock
Option Plan ________
10.27 Stock Option Agreement between
William D. Carraway and Green
Oasis Environmental, Inc. ________
11 Statement of Computation of
Earnings per Share ________
27 Financial Data Schedule ________
<PAGE>
Item 6 Exhibits
GREEN OASIS ENVIRONMENTAL, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
PURSUANT TO
1994 EMPLOYEE STOCK OPTION PLAN
THIS AGREEMENT, made on the _______ day of September, 1996, by and between
GREEN OASIS ENVIRONMENTAL, INC. (hereinafter referred to as the "Company") and
William D. Carraway, (hereinafter referred to as "Optionee").
WHEREAS, the Company has adopted a stock option plan known as the 1994 Employee
Stock Option Plan (hereinafter referred to as the "Plan") for the purpose of advancing
the interests of the Company and its shareholders by strengthening the ability of the
Company to attract and retain officers and key employees of training, experience,
ability, and to furnish an additional incentive to those officers and key
employees to the Company upon whose judgment, initiative and efforts the successful
conduct and growth of its and their business largely depends by encouraging officer
and key employees to have a material interest in the increase in value of, and
to become owners or increase their ownership of, the common stock, $.01 par
value, of the Company ("Common Stock"); and
WHEREAS, Optionee is now an officer or key employee of the Company, and the
Company desires to have Optionee remain as an officer or key employee and to afford
Optionee the opportunity to acquire or enlarge Optinee's stock ownership in the
Company, so that Optionee may have a direct proprietary interest in the Company's
success;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth herein,
the Company grants to Optionee a nonqualified stock option (the "Option") to purchase
from the Company all or any part of One Hundred Thousand (100,000) shares of Common
Stock ("Shares").
2. Term and Exercise of Option.
(a) The term of the Option granted herein shall commence as of September 10,
1996 and end on September 10, 2002 (the "Option Period").
(b) The option shall be exercisable during the Option Period according to
the following schedule:
20% beginning on the first anniversary of the date the option is granted;
20% beginning on the second anniversary date of the date of grant;
20% beginning on the third anniversary date of the date of grant;
<PAGE>
20% beginning on the fourth anniversary date of the date of grant; and
20% beginning on the fifth anniversary date of the date of grant.
An option which is exercisable that is not exercised in a year may be exercised in any
subsequent year during the Option Period.
(c) The Option hereby granted shall be exercised by Optionee delivering to the
President of the Company, from time to time, on any business day, written notice specifying the
number of Shares Optionee then desires to purchase and reaffirming that the representations
made in section 7 hereof are true and correct as of the date of exercising the option. A copy
of the form of written notice to be used is attached hereto as Exhibit A.
3. Exercise Price.
(a) Optinee must pay One and 12.5/100 Dollars ($1.125) per share (subject to
adjustment pursuant to Section 6 hereof) for the Shares acquired pursuant to this Agreement.
(b) Payment of the option price of the Shares shall be made in cash at the time an
Option is exercised.
4. Termination of Option.
(a) Except as otherwise provided below, the Option hereby granted shall terminate
and be of no force or effect upon the happening of the first of the following events:
(i) The expiration of the Option Period;
(ii) Termination of Optionee's employment or position as an employee
of the Company except in the case of Optionee's death or retirement with the consent of the
Company;
(iii) Three months after the first day of retirement with the consent of the
Company, unless Optionee dies during the three-month period.
(b) The Option evidenced hereby is nontransferable except as provided in
subsection (c) below with respect to the death of an Optionee and shall be exerciseable during the
lifetime of Optionee only by Optionee.
(c) If Optionee ceases to be an employee of the Company by reason of death or if
Optionee dies within three months of retirement with consent of the Company, any unexpired
portion of the option held by Optionee and not exercised may be exercised by a legatee or
legatees under Optionee's last will and testament or by his personal representative or
<PAGE>
representatives (to the extent the option would have been exercisable by Optionee) at any time
within one (1) year after the date of Optionee's death or the date of Optionee's retirement with
consent, whichever occurs first.
5. Rights As a Shareholder. Optionee shall have no rights as a shareholder of the
Company with respect to any Shares covered by this Option until the issuance of a stock
certificate to him for such Shares.
6. Change in Capitalization.
(a) As provided in Section 10 of the Plan, and upon the occurrence of any of the
conditions listed therein, the Committee in its sole discretion shall make any adjustments as may
be appropriate in the number and kind of Shares as to which this Option shall be exercisable and
in the option rights granted. These adjustments shall be made without change in the total price
applicable to the Option and with a corresponding adjustment in the option price per Share. Any
adjustment may provide for the elimination of fractional Shares.
7. Covenants and Representations of Optionee. Optionee represents, warrants, covenants
and agrees with the Company as follows:
(a) The Option is being received for Optionee's own account without the
participation of any other person, with the intent of holding the Option and the Shares issuable
pursuant thereto for investment and without the intent of participating, directly or indirectly, in
a distribution of the Shares and not with a view to, or for resale in connection with, any
distribution of the Shares or any portion thereof;
(b) Optionee is not acquiring the Option based upon any representation , oral or
written, by any person with respect to the future value of, or income from, the Shares subject
to this Option, but rather upon an independent examination and judgment as to the prospects of
the Company;
(c) Optionee has received a copy of the Plan and has had complete access to and
the opportunity to review and make copies of all material documents related to the business of
the Company; Optionee has examined all of these documents as he wished, is familiar with the
business and affairs of the Company, and realizes that the receipt of the Shares is a speculative
investment and that any possible profit therefrom is uncertain;
(d) Optionee has had the opportunity to ask questions of and receive answers from
the Company and any person acting on its behalf and to obtain all information available with
respect to the Plan, the Company and its affairs, and has received all information and data with
respect to the Plan and the Company that he has requested and which he has deemed relevant
in connection with his receipt of the Option and the Shares subject thereto;
<PAGE>
(e) Optionee is able to bear the economic risk of the investment, including the risk
of a complete loss of his investment, and Optionee acknowledges that he must continue to bear
the economic risk of the investment in the Shares received upon Option exercise for an indefinite
period;
(f) Optionee understands and agrees that the Shares subject to the Option may be
issued and sold to Optionee without registration under any state or federal law relating to the
registration of securities for sale and in that event will be issued and sold in reliance on
exemptions from registration under appropriate state and federal laws;
(g) The Shares issued to Optionee upon exercise of the option will not be offered
for sale, sold or transferred by Optionee other than pursuant to:
(i) an effective registration under applicable state securities laws or in a
transaction which is otherwise in compliance with those laws;
(ii) an effective registration under the Securities Act of 1933 (the "1933
Act"), or a transaction otherwise in compliance with the 1933 Act; and
(iii) evidence satisfactory to the Company of compliance with the applicable
securities laws. The Company shall be entitled to rely upon an opinion of counsel satisfactory
to it with respect to compliance with the foregoing laws;
(h) The Company will be under no obligation to register the Shares issuable
pursuant to the Option or to comply with any exemption available for sale of the Shares by the
Optionee without registration, and the Company is under no obligation to act in any manner so
as to make Rule 144 promulgated under the 1933 Act available with respect to sale of the Shares
by the Optionee;
(i) A legend indicating that the Shares issued pursuant to the Option has not been
registered under the applicable securities laws and referring to any applicable restrictions on
transferability and sale of the Shares may be placed on the certificate or certificates delivered to
Optionee and any transfer agent of the Company may be instructed to require compliance therewith;
(j) Optionee will notify the Company in writing at least sixty (60) days prior to
any sale of Shares;
(k) The agreements, representations, warranties, and covenants made by Optionee
herein with respect to the Option shall also extend to and apply to all of the Shares of the
Company issued to Optionee pursuant to this Option. Acceptance by Optionee of the certificate(s)
representing Shares shall constitute a confirmation by Optionee that all agreements,
representations, warranties and covenants made herein shall be true and correct at that time.
<PAGE>
8. Compliance with Securities Laws. Anything in this agreement to the contrary
notwithstanding, if, at any time specified herein for the issuance of Shares to Optionee, any
federal or state securities law or any regulation or requirement of the Securities and Exchange
Commission or any other governmental authority having jurisdiction shall require either the
Company or Optionee to take any action in connection with the Shares then to be issued, the
issuance of the Shares shall be deferred until that action shall have been taken; however, the
Company shall be under no obligation to take action, and the Company shall have no liability
whatsoever as a result of the nonissuance of the Shares, except to refund to Optionee any
consideration tendered in respect of the exercise price.
9. Resolution of Disputes. Any dispute or disagreement which shall arise under, as a
result of, or pursuant to this agreement shall be determined by the President of the Company,
in his absolute and sole discretion, and any such determination or any other determination by the
President under or pursuant to this Agreement and any interpretation by the President of the
terms of this Agreement shall be final, binding and conclusive on all persons affected thereby;
provided, however, the Committee, as defined in the Plan, shall have the right, in its absolute
and sole discretion, to overrule or modify any determiantion or interpretation made by the
President, in which event any determination or interpretation by the Committee shall be final,
binding and conclusive on all persons affected thereby.
10. Notice. Any notice which either party hereto may be required or permitted to give
to the other shall be in writing, and may be delivered personally or by mail, postage prepaid,
addressed as follows: to the President of the Company, or to the Company (attention of the
President), at 184 East Bay Street, Suite 302, Charleston, SC 29401, or at any other address as
the Company, by notice to Optionee, may designate in writing from time to time; to Optionee,
at Optionee's address as shown on the records of the Company, or at any other address as
Optionee, by notice to the Company, may designate in writing from time to time.
11. Succesors. This Agreement shall be binding upon and inure to the benefit of the
heirs, legal representatives, successors and permitted assigns of the parties.
12. Severability. In the event that any one or more of the provisions or portion thereof
contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, the same shall not invalidate or otherwise affect any other provisions of this
Agreement, and this Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
13. Entire Agreement. Subject to the terms and conditions of the Plan, which is
incorporated herein by reference, this Agreement expresses the entire understanding and
agreement of the parties hereto. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and sealed this Incentive Stock
Option Agreement on the date and year set forth above.
GREEN OASIS ENVIRONMENTAL, INC.
ATTEST: By:____________________________
Title:___________________
_____________________
Title:_______________
[CORPORATE SEAL]
OPTIONEE:
__________________________(SEAL)
<PAGE>
EXHIBIT A
GREEN OASIS ENVIRONMENTAL, INC.
184 East Bay Street
Charleston, SC 29401
Attention: President
Re: Exercise of Incentive Stock Option under the GREEN OASIS
ENVIRONMENTAL, INC. 1994 Stock Option Plan
Dear Sir:
Pursuant to the terms and conditions of that certain Green Oasis Environmental, Inc.
Incentive Stock Option Agreement dated September _____, 1996 (the "Agreement"), I desire to
purchase 100,000 Shares of GREEN OASIS ENVIRONMENTAL, INC. and hereby tender
payment in full for such Shares in accordance with the terms of the Agreement.
I hereby reaffirm that the representations made in Section 7 of the Agreement are true
and correct as of the date of exercising this option.
Very truly yours,
__________________________________
William D. Carraway
<PAGE>
Item 6 Exhibits
STOCK OPTION AGREEMENT
Agreement made as of this 15th day of August, 1996 between William D.
Carraway, a resident of the state of South Carolina ("Carraway") and Green Oasis
Environmental, Inc., a corporation of the state of Florida ("Green Oasis").
WHEREAS, Green Oasis has employed Carraway as its President, and Mr.
Carraway has waived the payment of salary and other compensation for the period from
October through December in 1995 and all of 1996 in exchange for an option to
purchase shares of common stock of Green Oasis.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties hereby agree as follows:
1.
GRANT OF OPTION
Green Oasis hereby grants to Carraway the right, privilege and option (the
"Option")to purchase up to 448,000 shares (the "Option Shares") of its common stock at
a purchase price of $1.125 per share (the "Option Price") which is the fair market value
per share of Green Oasis common stock on the date of this Agreement. Such purchase
shall be in the manner and subject to the conditions hereinafter provided.
<PAGE>
2.
METHOD OF EXERCISE
The Option granted under this Agreement shall be exercised by written notice
directed to Green Oasis at its principal place of business, accompanied by a check in
payment of the Option Price for the number of shares specified and paid for. Green Oasis
shall make immediate delivery of such shares, provided, that if any law or regulation
requires Green Oasis to take any action with respect to the shares specified in such
notice before the issuances thereof, then the date of delivery of such shares shall be
extended for the period necessary to take such action.
3.
TERMINATION OF OPTION
While Carraway is alive, the Option and all rights granted by this Agreement, to
the extent those rights have not been exercised, will terminate and become null and void
on the earlier of (a) August 14, 1999, or (b) the day Carraway ceases to be in the
continuous employment of Green Oasis (whether by resignation, retirement, dismissal or
otherwise). If Carraway dies while employed by Green Oasis, the person or persons to
whom his rights under the Option shall pass, whether by will or by the applicable laws
of decent and distribution, may exercise such Option to the extent Carraway was entitled
to exercise it on the date of his death, for a period of six (6) months following his death.
Notwithstanding anything in this Agreement to the contrary, the Option and all rights
granted by this Agreement shall in all events terminate and become null and void
on February 14, 2000.
<PAGE>
4.
LIMITATION UPON TRANSFER
The Option is nontransferable by Carraway except as herein otherwise provided
above, and during his lifetime is exerciseable only by him, and Carraway shall have no
rights as a shareholder in the Option Shares until payment of the Option Price and
delivery to him of such shares as herein provided. Any attempt to transfer, assign,
pledge, hypothecate, or otherwise dispose of this Option or of the rights contained herein
contrary to the provisions of this Agreement or upon the levy of any attachment or
similar process upon such Option or such rights, the Option and such rights shall
immediately become null and void.
5.
SHARES OF INVESTMENT
By accepting this Option, Carraway acknowledges for himself, his heirs and
legatees that any and all shares purchased under this Agreement shall be acquired for
investment and not for or with a view towards distribution, and upon the transfer of any
of the Option Shares hereunder, Carraway, or his heirs or legatees receiving such shares,
shall deliver to Green Oasis a representation in writing that such shares are being
acquired in good faith for investment and not for or with a view towards distribution.
In the event that Carraway disposes (whether by sale, exchange, gift or any other transfer)
of any of the Option Shares within six (6) months after the transfer of such shares to him
upon his exercise of the Option, he will notify the Company in writing within thirty (30)
days after such disposition.
<PAGE>
6.
RECLASSIFICATION, CONSOLIDATION, OR MERGER
In the event of any change in the common stock of Green Oasis subject to the
Option granted hereunder, through merger, consolidation, reorganization,
recapitalization, stock split, stock dividend or other change in corporate structure,
appropriate adjustment shall be made by Green Oasis in the number of shares subject
to such Option and the price per share; provided, however, that in accordance with the
provisions of Section 424 of the Internal Revenue Code a new Option may be substituted
for the Option granted hereunder or such Option may be assumed by an employer
corporation, or a parent or subsidiary of such corporation, in connection with any
transaction to which such Section is applicable. Upon the dissolution or liquidation of
Green Oasis, other than in connection with a transaction to which such Section is
applicable, the Option granted under this Agreement shall terminate and become null
and void.
7.
NOTICES
Any notice to be given under the terms of this Agreement shall be addressed to
Green Oasis in care of its Secretary at 184 East Bay Street, Suite 302, Charleston, South
Carolina, 29401, and any notice to be given to Carraway shall be addressed to him at 184
East Bay Street, Suite 302, Charleston, South Carolina 29401, or at such other address
as either party may hereafter designate in writing to the other. Such notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as
<PAGE>
herein required, certified and deposited (postage and certification fee prepaid), in a post
office or branch post office regularly maintained by the United States government.
8.
BINDING EFFECT
This Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
/S/ William D. Carraway
William D. Carraway
GREEN OASIS ENVIRONMENTAL, INC.
By: President
Title:
<PAGE>
Item 6 Exhibits
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Company)
EXHIBIT 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Period
From
September 24,
1991
Three Months Ended Nine Months Ended (Inception),
September 30, September 30, Through
---------------------- ---------------------- September 30,
1996 1995 1996 1995 1996
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
PRIMARY
Net income (loss) before
extraordinary gain $ (163,818) $ 404,658 $ (427,181) $1,327,924 $ (6,047,015)
Preferred dividends - - (3,080) (3,080) (146,378)
---------- ---------- ---------- ---------- ------------
(163,818) 404,658 (430,261) 1,324,844 (6,193,393)
Extraordinary gain 20,643 - 286,614 - 665,534
---------- ---------- ---------- ---------- ------------
Net income (loss) $ (143,175) $ 404,658 $ (143,647) $1,324,844 $ (5,527,859)
========== ========== ========== ========== ============
Weighted average number
of shares 5,537,550 5,119,923 5,492,912 5,113,935 4,148,023
========== ========== ========== ========== ============
Net income (loss) before
extraordinary gain $ (0.03) $ 0.08 $ (0.08) $ 0.26 $ (1.49)
Extraordinary gain - - 0.05 - 0.16
---------- ---------- ---------- ---------- ------------
Net income (loss) $ (0.03) $ 0.08 $ (0.03) $ 0.26 $ (1.33)
========== ========== ========== ========== ============
FULLY DILUTED N/A N/A N/A
Net income (loss) before
extraordinary gain $ 404,658 $1,327,924
Preferred dividends - -
Interest expense adjustment
for convertible
debentures 12,500 37,500
Adjustment for dividends
on convertible preferred - 878
Interest expense adjustments
for convertible debt 47 141
---------- ----------
417,205 1,366,443
Extraordinary gain - -
---------- ----------
Net income (loss) $ 417,205 $1,366,443
========== ==========
Weighted average common
shares outstanding 5,119,923 5,113,935
150,000 shares in stock
options (94 average
market price of $2.33<
$2.50 option price)
150,000 shares in stock
options (94 ending
market price of $4.00>
$2.50 option price) 60,000 60,000
Assume conversion beginning
of period, debenture 1,676 1,676
Assume conversion at
beginning of period-
convertible preferred
shares 7,800 7,800
Assume conversion at
6/10/95 of convertible
debt 200,000 200,000
Assume conversion of
interest accrued 21,194 11,194
---------- ----------
5,410,593 5,394,605
========== ==========
Income (loss) before
extraordinary gain $ 0.08 $ 0.25
Extraordinary gain - -
---------- ----------
Net income (loss) $ 0.08 $ 0.25*
========== ==========
* Presentation not required (less than 3% difference)
</TABLE>
<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-30-1996
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 133
<PP&E> 108
<DEPRECIATION> (21)
<TOTAL-ASSETS> 421
<CURRENT-LIABILITIES> 1313
<BONDS> 0
<COMMON> 56
42
6
<OTHER-SE> (1491)
<TOTAL-LIABILITY-AND-EQUITY> 421
<SALES> 37
<TOTAL-REVENUES> 37
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 428
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36
<INCOME-PRETAX> (427)
<INCOME-TAX> 0
<INCOME-CONTINUING> (427)
<DISCONTINUED> 0
<EXTRAORDINARY> 287
<CHANGES> 0
<NET-INCOME> (140)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
