<PAGE> 1
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997
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 * 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 October 27, 1997
--------------------- -------------------------------
$01. Par Value 6,465,134 Shares
*The issuer voluntarily files periodic reports required to be filed by the
Securities Exchange Act of 1934 and has done so since November, 1993. The
issuer has filed all such reports required to be filed during the past 12
months.
<PAGE> 2
Green Oasis Environmental, Inc.
Index
<TABLE>
<CAPTION>
Part 1. Financial Information
Item 1. Financial Statements (Unaudited) Page Number
<S> <C>
CONDENSED BALANCE SHEETS
September 30, 1997, and
December 31, 1996....................................................................................... 3
CondensedStatements of Operations Three and nine months ended September 30,
1997 and 1996, and
September 24, 1991 (inception),
through September 30, 1997...............................................................................4
CondensedStatements of Cash Flows Nine months ended September 30, 1997 and
1996, and September 24, 1991 (inception), through
September 30, 1997.......................................................................................5
Notes to Condensed Financial Statements...........................................................................6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.....................................................................................11
Part II. Other Information
Item 1. Legal Proceedings..............................................................................17
Item 3. Preferred Stock Dividends in Arrears...........................................................17
Item 5. Other Information..............................................................................18
Item 6. Exhibits and Reports on Form 8-K...............................................................20
Signature......................................................................................21
</TABLE>
<PAGE> 3
Part 1. Financial Information
Item 1. Financial Statements
<PAGE> 4
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30,
Unaudited December 31,
1997 1996
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 48,000 $ 32,000
Accounts receivable-related party (Note B) - 55,000
Prepaid expenses 25,000 59,000
---------- ----------
Total current assets 73,000 146,000
PROPERTY AND EQUIPMENT, AT COST, NET OF
ACCUMULATED DEPRECIATION (Note C) 107,000 86,000
OTHER ASSETS
Loans-related parties 117,000 117,000
Patents costs 55,000 51,000
Deferred tax assets, net of valuation allowance - -
---------- ----------
TOTAL ASSETS $ 352,000 $ 400,000
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Notes payable (Note D) $ 51,000 $ 650,000
Accounts payable (Note E) 432,000 575,000
Accrued expenses (Note F) 65,000 17,000
Accrued wages and payroll taxes (Note F) 2,000 71,000
Due to stockholders - 7,000
Due to related party (Note E) 62,000 -
Deposits received for distribution fees (Note D) - 100,000
Deposits received for equipment sales (Note E) 5,000 80,000
Deposits for equipment from related party (Note B) - 63,000
---------- ----------
Total current liabilities 617,000 1,563,000
LONG-TERM DEBT - -
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (Note J) - -
---------- ----------
REDEEMABLE, CONVERTIBLE PREFERRED
STOCK ($1.00 par value, 9% cumulative, nonvoting, 1,000,000
shares authorized, 998,500 shares issued, 36,950 (1997)
and 46,950 (1996) shares outstanding) 37,000 42,000
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Series A preferred stock ($1.00 par value, 9% cumulative, nonvoting, 500,000
shares authorized, 104,900 shares issued,
7,500 shares outstanding) 6,000 6,000
Common stock, $.01 par value;
20,000,000 shares authorized, 6,465,134 (1997) and
5,966,026 (1996) issued and outstanding 65,000 60,000
Additional paid-in capital 5,569,000 4,433,000
Deficiency accumulated during the development stage (5,942,000) (5,654,000)
Note receivable-related parties - (50,000)
---------- ----------
Total stockholders' equity (deficiency) (302,000) (1,205,000)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 352,000 $ 400,000
========== ==========
</TABLE>
See Notes to Condensed Financial Statements
3
<PAGE> 5
GREEN OASIS ENVIRONMENTAL, INC.
(A Development State Enterprise)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Period
from
Sept. 24,
1991
(Inception)
Three Months Ended Nine Months Ended through
September 30, September 30, Sept. 30,
1997 1996 1997 1996 1997
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales of equipment $ - $ - $ - $ - $ 2,075,000
Sales of equipment-related party (Note B) - 37,000 1,338,000 37,000 1,375,000
Interest and other income 4,000 - 6,000 - 24,000
---------- ----------- ---------- ---------- -----------
Total revenues 4,000 37,000 1,344,000 37,000 3,474,000
---------- ----------- ---------- ---------- -----------
COSTS AND EXPENSES
Research and development 197,000 (13,000) 772,000 (2,000) 5,408,000
Legal and accounting 89,000 81,000 457,000 206,000 1,732,000
General and administrative 26,000 130,000 115,000 214,000 1,007,000
Salaries and benefits 35,000 - 75,000 - 882,000
Operations and marketing 25,000 (6,000) 175,000 10,000 661,000
Interest expense and loan costs - 8,000 11,000 36,000 349,000
Stockholder relations (3,000) - 143,000 - 143,000
----------- ----------- --------- ---------- -----------
Total expenses 369,000 200,000 1,748,000 464,000 10,182,000
---------- ----------- --------- ---------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES (BENEFIT) AND
EXTRAORDINARY GAIN (365,000) (163,000) (404,000) (427,000) (6,708,000)
INCOME TAXES (BENEFIT) - - - - -
EXTRAORDINARY GAIN
Restructuring of debt (Note E) - 21,000 116,000 287,000 782,000
---------- ----------- --------- ---------- -----------
NET INCOME (LOSS) $ (365,000) $ (142,000) $ (288,000) $ (140,000) $(5,926,000)
=========== =========== ========== ========== ===========
EARNINGS (LOSS) PER COMMON
SHARE
Earnings (loss) before
extraordinary gain $ (0.06) $ (0.03) $ (0.06) $ (0.08) $ (1.54)
Extraordinary gain - - 0.02 0.05 0.18
---------- ----------- ---------- ---------- -----------
Net income (loss) $ (0.06) $ (0.03) $ (0.04) $ (0.03) $ (1.36)
========== =========== ========== ========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 6,465,134 5,537,550 6,409,814 5,492,912 4,466,640
========== =========== ========== ========== ===========
</TABLE>
See Notes to Condensed Financial Statements
4
<PAGE> 6
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Period From
Nine Months Ended September 24, 1991
September 30, (Inception), through
1997 1996 September 30, 1997
---------- ---------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by (used in) operating activities $(411,000) $(190,000) $(3,991,000)
--------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (46,000) (37,000) (264,000)
Proceeds of sale of property and equipment - - 62,000
Loans to related parties (186,000) - (522,000)
Collection of loans to related parties 186,000 (1,000) 445,000
Patent costs (4,000) (1,000) (55,000)
Loans granted to distributors - - (7,000)
Initial payments received for distribution rights - - 198,000
--------- --------- -----------
Net cash provided by (used in) investing activities (50,000) (39,000) (143,000)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of common stock issues 425,000 110,000 1,681,000
Proceeds of preferred stock issues - - 1,024,000
Proceeds of convertible debt securities - - 565,000
Proceeds of loans from stockholders 62,000 128,000 623,000
Proceeds of notes - - 520,000
Proceeds of Series A notes - - 105,000
Payments of notes and debentures - - (155,000)
Issue costs - (12,000) (21,000)
Purchase of treasury stock - - (24,000)
Payments of loans from stockholders - - (122,000)
Payments of capital leases - - (4,000)
Redemption of preferred stock (10,000) - (10,000)
--------- --------- -----------
Net cash provided by financing activities 477,000 226,000 4,182,000
--------- --------- -----------
Cash and cash equivalents
Net increase (decrease) during the period 16,000 (3,000) 48,000
Balance at beginning of period 32,000 5,000 -
--------- --------- -----------
Balance at end of period $ 48,000 $ 2,000 $ 48,000
========= ========= ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Common stock issued for services rendered,
preferred stock conversion,
debt conversion and loan costs $ 666,000 $ 773,000 $ 3,961,000
========= ========= ===========
Capital lease obligation incurred to
purchase equipment $ - $ - $ 12,000
========= ========= ===========
Deposits converted to common or preferred stock $ 100,000 $ 18,000 $ 180,000
========= ========= ===========
Debt issued for equipment and services and
loans collected or exchanged for services $ - $ - $ 56,000
========= ========= ===========
Cancellation of lease obligation and return of leased equipment
$ - $ 3,000 $ -
========= ========= ===========
</TABLE>
No income taxes were paid in any period. $6,000 in interest was paid during
the nine months ended September 30, 1997. No interest was paid in the nine
months ended September 30, 1996.
See Notes to Condensed Financial Statements
5
<PAGE> 7
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The balance sheet as of September 30, 1997, the statements of
operations for the three months and nine months ended September 30,
1997 and 1996, and September 24, 1991 (inception) to September 30,
1997, and the statements of cash flows for the nine months ended
September 30, 1997 and 1996, and September 24, 1991 (inception) to
September 30, 1997, have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). 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 SEC. 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, 1997, are not necessarily
indicative of the results to be expected for the year.
B. RELATED PARTY TRANSACTIONS
Investment in Limited Partnership. The Company is the general partner
in a South Carolina limited partnership known as GOE Plant Partnership
I, L.P. (the Partnership). The purpose of the Partnership is to own
and operate the prototype of the Company's distillation processing
equipment (the Unit or Units). The Company prepared the site, upgraded
the Unit to a Model 400, and installed the Unit on land the Company
leases. The sale was completed under the terms of the sales agreement
between the Company and the Partnership, and the ownership of the Unit
was transferred to the Partnership on March 31, 1997. The purchase
price to the Partnership for the Unit, auxiliary equipment, site
preparation and installation was $1,338,000. Although the sale is
complete under the terms of the agreement between the Company and the
Partnership, some adjustments and modifications to the Unit may be
made.
6
<PAGE> 8
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
The Company's duties as general partner are to operate and maintain
the Unit 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. All amounts due to or
from the Partnership during the period have been paid.
The Company issued warrants at no additional cost to the 30 limited
partners. Each warrant may be exercised to purchase up to 15,000
shares of the Company's common stock and is exercisable for 180 days
from March 31, 1997, at a price of $3.00 per share. In accordance with
the terms of such warrants, the warrants expired on September 30,
1997. The Company is considering whether to extend the exercise period
of such warrants. The Company has assigned no value to the warrants,
but has reserved 450,000 shares of common stock to be issued upon
their exercise.
The Company loaned the Chief Executive Officer ("CEO") $186,000 during
the second quarter of 1997. During the third quarter of 1997, the CEO
repaid the amount loaned to him in full and loaned the Company
$62,000. Such amount remains outstanding at September 30, 1997. In
addition, during the second and third quarters of 1997 the Company has
paid $184,000 in legal fees for its CEO and other directors. The legal
fees are related to the SEC investigation. (See Part II, Item 5.)
C. PROPERTY AND EQUIPMENT
The Company refurbished its offices and upgraded its plant facilities
during 1997 by purchasing furniture, office equipment, and leasehold
improvements totaling $46,000.
D. NOTES PAYABLE AND DEPOSITS FOR DISTRIBUTION FEES
During the quarter ended March 31, 1997, the Company and two note
holders agreed to convert the debts to common stock. One note holder
converted $250,000 or principal and accrued interest to 100,000 shares
of common stock at $2.50 per share. The second note holder agreed to
convert a debt of $356,000 to 71,108 shares of common stock at $5.00
per share on the condition that a registration statement permitting
the sale of these shares were filed with the SEC and became effective
on or before July 31, 1997. If such registration statement were not
filed and effective, the note holder has the option either to retain
the common stock or to exchange the stock for the Company's promissory
demand note for $356,000 with a 10%
7
<PAGE> 9
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
interest rate. The Company has not filed a registration statement to
date, nor has the note holder exercised its right to exchange such
stock for the Company's note. The Company also agreed to convert a
deposit paid by an individual for exclusive distribution rights to
common stock at $5.00 per share; the individual relinquished all
distribution rights.
E. GAIN ON RESTRUCTURING OF DEBT
During the first quarter of 1997, the Company paid certain of its
trade debts and settled certain outstanding judgments and claims
against it. Cash payments of $206,000 were paid to settle $317,000 of
trade accounts payable, and $75,000 of refund demands for deposits on
equipment were settled by the payment of $70,000 to certain customers.
An extraordinary gain of $116,000 was recognized from these
transactions.
F. ACCRUED EXPENSES
As of September 30, 1997, the Company has accrued $50,000 of unbilled
fees for legal, engineering and consulting services. The Company paid
a tax lien and other payroll taxes amounting to $66,000 during the
first quarter of 1997.
G. STOCK ISSUANCES
On March 15, 1997, the Company issued 12,000 shares of common stock at
$5.00 per share to a public relations consulting firm, Microcap
Communications & Consulting, pursuant to an agreement to provide
consulting services for investor relations for a period of one year.
The Company terminated the agreement May 1, 1997 and the shares have
been returned to the Company. In addition to the common stock issued
in exchange for services and conversion of debt and deposits, the
Company sold 296,000 shares of common stock at $1.25 per share in a
private placement during the first quarter of 1997. Warrants
exercisable for three years at prices of $2.50 and $5.00 per share
were issued in conjunction with such stock.
H. STOCK OPTIONS
In exchange for the waiver of the payment of his salary for the first
quarter of 1997, the Board of Directors granted a stock option to the
Chief Executive Officer for 48,000 shares of common stock at $1.50 per
share. The option is exercisable for a period of two years from
January 1997.
8
<PAGE> 10
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
I. UNCERTAINTY - GOING CONCERN
The Company's continued existence is dependent upon its ability to
complete development of its products to meet design specifications and
regulatory requirements as well as to continue production. Without
fully operational products, adequate working capital, and regulatory
approvals, there is substantial doubt about the Company's ability to
continue as a going concern.
Management continues to modify and develop its products and to pursue
regulatory approval as well as to seek additional sources of
financing. However, there is not exact date determinable when either
completion of its products or regulatory approval will be achieved,
nor any assurance that additional financing will be available.
J. COMMITMENTS AND CONTINGENT LIABILITIES
The Company continues to be 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. Additionally, the SEC is conducting a formal
investigation of the Company, its officers and directors, and its
business practices. See further discussion of this matter at Part II,
Item 5 of this Report.
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 (the Consent Order), 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 a previous rescission offer made to the South Carolina
investors. During the first quarter of 1997, the Company paid
substantially all amounts owed to those remaining shareholders who had
accepted such rescission offer and had requested payment. Accordingly,
the Company believes that it has honored the terms of such offer. The
Company and the Securities Division of the Office of the Attorney
General recently entered into a letter agreement effectively amending
9
<PAGE> 11
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
the Consent Order. See Part II, Item 5 of this Report for
additional information.
During 1994, the Company was involved in discussions with the South
Carolina Department of health and Environmental Control (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. On July
27, 1994, the Company and DHEC signed a Consent Order imposing a civil
penalty on the Company 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 second
Consent Order following the Company's appeal of the denial of the
permit. The second Consent Order allowed the Company to test its waste
oil conversion equipment to demonstrate that air pollutant emissions
meet DHEC's standards. A 60 day period of operation for the purpose of
testing air emissions to meet DHEC's standards began in mid-March
1997. On June 4, 1997, the emissions test was conducted by a third
party testing lab, supervised by DHEC. The equipment passed the test
with an emission rate of .9 ppm of an Environmental Protection Agency
allowable rate of 20 ppm. Following a thirty-day public notice and
comment period, a final permit was issued, permitting operation of the
prototype Unit at an output rate of 200 gallons per hour. 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. See Part II, Item 5 -- Other Information.
On July 19, 1995, a lawsuit was filed by LifeChoice International,
S.A., a Greek company, which purchased two Units of waste oil
conversion equipment manufactured by the Company. The suit alleged
breach of contract arising from the sale of the two Units and asked
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 loan. The Company answered both complaints on September
27, 1995, and has filed a counterclaim alleging a breach of the
plaintiff's agreement to purchase the European distribution rights
from the Company. On October 15, 1996, the Company entered into two
separate Court Orders with
10
<PAGE> 12
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
LifeChoice International, S.A. and its related company, whereby such
companies agreed to withdraw their claims against the Company, with
leave to move for restoration of the case, within one year from the
date of the Order. If, at the end of the one-year period, neither
LifeChoice International, S.A. nor its related company has filed a
motion requesting that the case be restored to the docket, the cases
will be dismissed with prejudice in favor of the Company. The Company's
counterclaims in these cases have also been withdrawn with the same
permission to refile. Subsequent to the entry of such orders, the
parties settled both suits. Orders dismissing both suits with prejudice
were entered on April 9, 1997.
A settlement was reached in a lawsuit with a supplier who claimed 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 1, 1997.
On March 13, 1997, Jerry F. Everidge filed suit against the Company
alleging breach of a contract that he states he had with the Company
to manufacture and assemble Units for the Company. Mr. Everidge is
seeking unspecified damages. The Company has answered Mr. Everidge's
complaint, denying the existence of such a contract and asserting,
among other things, statute of limitations defense. The suit is in the
initial stages of discovery.
The Company has no liability insurance coverage.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
The Company is a development stage company which was organized as a
Florida corporation on September 21, 1991. Since its inception the
Company has been engaged principally in product design, development,
testing and production activities and in the marketing and
distribution of waste oil refining equipment (the Unit or the Units)
known as EnviroEconomics(R) Systems in various geographical areas of
the United States and other countries. It had shipped three Units to
its customers by the end of 1994. One additional Unit was sold in the
first quarter of 1997 to GOE Plant Partnership I, L.P. (the
11
<PAGE> 13
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Partnership), a South Carolina limited partnership whose general
partner is the Company.
There have been no sales of units in the three months ended September
30, 1997, nor in the third quarter of 1996. The Company reported other
revenue of $4,000 in the third quarter of 1997, and a sale of
auxillary equipment to the Partnership of $37,000 in the third quarter
of 1996.
For the nine months ended September 30, 1997, the Company reported a
net loss of $288,000 as compared to a net loss of $140,000 during the
nine months of 1996. For the period from September 24, 1991
(inception), to September 30, 1997, the Company has incurred a
cumulative net loss of $5,926,000. The Company's ability to fully
utilize net operating loss carry forwards is subject to certain
limitations.
RECOGNITION OF REVENUE. Revenues were recognized in the first quarter
1997 in the amount of $1,338,000 from the sale of a Unit to the
Partnership under a sales agreement to sell an upgraded Model 400.
This Unit was sold to the Partnership for operation and will also be
used for demonstration purposes. The sale occurred on March 31, 1997,
when the Company transferred ownership of the Unit to the Partnership.
The sales agreement between the Company and the Partnership specifies
that the Partnership will purchase the Unit, and the Company may
continue to make improvements to it. The Company is responsible for
obtaining a final operation permit from the South Carolina Department
of Health and Environmental Control (DHEC) and for all costs
associated with making the Unit operational. See Note K to the
Condensed Financial Statements and Part II, Item 5--Other Information,
of this Report.
RESEARCH AND PRODUCT DEVELOPMENT. To date the Company has expensed all
the costs associated with designing and producing its equipment as
research and development costs. Such costs incurred in the first nine
months of 1997 in the amount of $772,000 include reconstructing a Unit
for the Partnership at a new location and adding a thermal oxidizer,
an enhanced computer system, and other improvements to the design and
operation of the Unit. Research and development costs for the same
period of 1996 were a credit amount of $2,000 due to recording refunds
or reductions of amounts previously recorded as expense. Research and
development costs during the third quarter of 1997 were $197,000 as
compared to a credit amount of $13,000 in the same quarter of 1996.
The increase was due to adding further improvements to the Unit to
prepare for and conduct the air emission tests required by DHEC and to
prepare
12
<PAGE> 14
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
for commercial operations. Costs in the third quarter 1997 include
$96,000 of materials, $50,000 of direct labor, $45,000 of consulting
engineers' fees, and $6,000 of other subcontract work. The reason for
the minimal amount of research and development in 1996 was a lack of
funds to continue such activities; the plant had closed in 1995 and
did not reopen until late 1996.
OPERATIONS AND MARKETING. Operating and marketing expense for the
three months ended September 30, 1997 was $25,000 as compared to a
credit amount of $6,000 in the corresponding quarter in 1996. The 1997
expense included utilities, depreciation, rent and promotional
expenses. The 1996 amount included a reduction of a previously
recorded expense for installation costs. Operations and marketing in
the first nine months of 1997 were $175,000 as compared to $10,000 in
the same period for 1996. The increase is primarily due to incurring
the operating costs mentioned above as well as spending $116,000 for
the sitework in the installation of the Unit purchased by the
Partnership. Only minimal operations and marketing occurred in 1996
until the fourth quarter.
SALARIES AND BENEFITS. The Company's officers waived the payment of
their salaries for the first quarter of 1997 and the entire year of
1996. The Chief Executive Officer was granted a stock option in lieu
of his first quarter 1997 and 1996 salary. The exercise price of each
stock option is the fair market value of the Company's common stock on
the date of the grant, and no compensation expense was recorded for
the difference between the value of the options and the exercise
price. Salaries and benefits in the third quarter of 1997 totaled
$35,000. The salary for the first nine months of 1997 was $75,000.
GENERAL AND ADMINISTRATIVE. For the three months ended September 30,
1997 and 1996, legal and accounting fees were $89,000 and $81,000,
respectively. The 1997 expenses were primarily for legal costs
associated with the SEC investigation while the 1996 expenses were for
routine corporate work and regulatory filings. (See Part II, Item 5--
Legal Proceedings.) The Company has incurred $457,000 of legal and
accounting fees in the first nine months of 1997 as compared to
$206,000 in the first nine months of 1996. The expenses for 1997 were
for the SEC investigation, regulatory filings, routine corporate and
shareholder activities, environmental disputes and litigation defense.
The expenses in 1996 were for regulatory filings and routine corporate
13
<PAGE> 15
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
work. The increase in 1997 was due to the legal work required in
connection with the SEC investigation, to settle creditors' claims
against the Company, and shareholder activities as well as meetings
and negotiations with DHEC in restarting the Unit for testing
purposes.
General and administrative expenses other than legal and accounting
were $23,000 and $130,000 for the three months ended September 30,
1997 and 1996, respectively. The higher costs in 1996 were due to
paying commissions of $71,000 and relocation expenses of $27,000. For
the nine months of 1997 and 1996, the expenses were $258,000 and
$214,000, respectively. The increase in 1997 is due to shareholder
relation expenses related to the annual meeting and the cost of the
stock issued for services of the Company's public relations firm,
Microcap Consulting & Communications (Microcap). When the 12,000
shares of common stock formerly issued to Microcap is formally retired
the Company will record a reduction in expense of $60,000 related to
the Microcap transaction.
LIQUIDITY AND CAPITAL RESOURCES
The Company is a development stage enterprise. The Company has funded
its operations from inception through September 30, 1997 primarily
through loans and sales or exchanges of common and preferred stock in
the aggregate amount of $5,501,000 and through revenues from the sale
of four Units of waste oil conversion equipment of $3,450,000.
During the period from December 31, 1996, to September 30, 1997, the
Company sold 296,000 shares of common stock for cash at $1.25 per
share. It collected $50,000 owed for the purchase of stock in December
1996. The Company also converted $250,000 of a note and accrued
interest to 100,000 shares of common stock. The Company issued common
stock at $5.00 per share in exchange for a note of $356,000 and for a
deposit for distribution rights of $100,000. The company also issued
stock in exchange for $60,000 in stockholder relation services to
Microcap. These services were terminated in the second quarter of
1997, and the stock has been returned to the Company.
During the first quarter of 1997 the Partnership paid $1,338,000 to
the Company for the purchase and installation of the Unit, site
preparation, and auxiliary equipment. The Partnership sold 30
partnership interests to individual investors. The proceeds of the
sale of the partnership
14
<PAGE> 16
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
interests were paid to the Company toward the purchase of the
equipment as the Partnership collected the funds. The receipt of the
funds from the Partnership provided the Company with a portion of its
operating capital for the first three quarters of 1997.
The Company's accounts payable and accrued expenses as of September
30, 1997, decreased by $164,000. The decrease is primarily due to the
Company's settlement of certain of its debts by paying agreed-upon
amounts to creditors which were often less than the amounts recorded
as liabilities at December 31, 1996. A total of $317,000 of vendor
accounts payable were settled for payments in cash of $206,000. Two
customers' deposits were returned by paying $70,000 for deposits of
$75,000. The Company also paid a federal tax lien and other payroll
taxes amounting to $66,000. The Company has recorded accrued expenses
of $50,000 for attorneys' and engineers' fee as of September 30, 1997.
The Company purchased furniture and equipment and painted and
re-carpeted its offices during 1997. The cost of the project was
$46,000. The Company has not made any material commitments for capital
expenditures.
The Company sold certain of its securities under Regulation D of the
1933 Securities Act in January and early February of 1997. Each of the
37 "packages" of securities sold for $10,000 and contained 8,000
shares of common stock, an A warrant, and a B warrant. The A warrants
entitle the holders to purchase up to 8,000 shares each of common
stock at an exercise price of $2.50 per share for three years; the B
warrants entitle the holders to purchase up to 8,000 shares of common
stock at $5.00 per share for three years. The offering closed in early
February when the market price of the stock increased to levels above
the offering price. Monies raised from the offering were used to fund
operations.
The Company currently has a working capital deficit of $544,000. The
Company is and will continue to be dependent upon other financing
sources such as the proceeds of debt and equity financing and customer
deposits and loans to complete production of the EnviroEconomics(R)
System and to fund other working capital requirements.
Additional costs may be incurred for engineering consultants and
modeling to improve the Unit for commercial success. Consequently, the
Company has not completed all the research for its Units, and should
it be more extensive than now
15
<PAGE> 17
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
believed, there can be no assurance that it will be able to
successfully obtain the financing to complete the Units.
On September 15, 1997, the Company received construction permits and a
used oil processing facility permit from DHEC. Such permits are
subject to a number of specifications and conditions, and, in the case
of the construction permits, are not effective until fifteen calendar
days following the date of issue of such permits. The Company must
apply for an operating permit not later than fifteen days prior to
placing a new, increased or altered source in operation. See Part II,
Item 5--Other Information, of this Report for additional information.
The private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Some statements in this Report
are forward-looking and are subject to certain risks and
uncertainties. These include, but are not limited to, economic
conditions, changes in laws or regulations, demand for the products
and services of the Company, and the effects of competition. These
risks and uncertainties could significantly affect anticipated results
in the future and actual results may differ materially from any
forward-looking statements.
16
<PAGE> 18
Part II Other Information
Item 1. Legal Proceedings
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
(the "Consent Order"), in which the Company agreed to discontinue issuing,
offering and selling securities in South Carolina until such securities were
registered and also to make a good faith effort to honor a previous rescission
offer made to the South Carolina investors in 1994. During the first quarter of
1997, the Company paid all amount owed to those remaining shareholders who had
accepted such rescission offer and had requested payment. During October and
November 1997, the Company has been conducting informal discussions with the
Securities Division of the South Carolina Office of the Attorney General (the
"Securities Division") regarding the scope of the Consent Order (see Item 5 --
Other Information).
On March 13, 1997, Jerry F. Everidge filed suit against the Company alleging
breach of a contract that he states he had with the Company to manufacture and
assemble the Company's products. Mr. Everidge is seeking unspecified damages.
The Company answered Mr. Everidge's complaint, denying the existence of such a
contract and asserting, among other things, a statue of limitations defense.
The suit is in the initial stages of discovery.
Item 3.
Preferred Stock Dividends in Arrears
<TABLE>
<CAPTION>
Amount of
Dividends in
Due date of arrears at
Dividends October 1, 1997
----------------- ---------------
<S> <C>
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 2,450
December 31, 1996 2,450
June 30, 1997 2,000
September 30, 1997 2,000
</TABLE>
17
<PAGE> 19
Item 5.
Other Information
On March 18, 1997, the Securities and Exchange Commission (the "Commission" or
the "SEC") initiated an informal, nonpublic inquiry to determine whether any
violations of the federal securities laws had been committed by the Company. On
May 8, 1997, the SEC entered a Formal Order of Private Investigation with
respect to the Company and on May 9, 1997, ordered the temporary suspension of
over-the-counter trading of the Company's common stock, which suspension
remained in effect through May 22, 1997. On September 9, 1997, the Company was
advised by the staff of the Commission that it intended to recommend that the
Commission bring civil charges against the Company for alleged violations of
Sections 5(a) and (c) and 17(a) and (b) of the Securities Act of 1933 and
Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The staff advised the Company that it intended to recommend to the Commission
that the Commission seek a permanent injunction barring the Company from future
violations of such provisions, but did not intend to recommend that the
Commission seek economic sanctions against the Company. The Company has
commenced discussions with the staff of the Commission regarding settlement of
the matter by consenting to the entry of an order barring the Company
permanently from violating such provisions, without admitting or denying the
allegations. Although the Company believes that the staff of the Commission
will agree to settle the matter on such basis, there can be no assurance that
the staff will make such a recommendation or that the Commission will accept
such recommendation, if made.
In October, 1997, the Company became aware that Raymond C. O'Brien, who
beneficially owns more than five percent (5%) of the Company's common stock,
$.01 par value (the "Common Stock"), intends to sell 35,000 shares of Common
Stock on the open market pursuant to Rule 144.
On October 29, 1997, the Company became aware that on October 27, 1997, the
Securities Division of the Office of the Attorney General for the State of
South Carolina (the "Securities Division") had entered an Amended Order to
Cease and Desist from Offering, Issuing or Selling Unregistered Securities and
Notice of Right to a Hearing (the "Cease and Desist Order") against William
Carraway and the Company. In the Findings of Fact included in the Cease and
Desist Order, the Securities Division stated that the Company had committed at
least eighteen violations of the terms of the Consent Order dated July 25, 1995
(the "Consent Order"). Since entry of the Cease and Desist Order, the Company
has met informally with the Securities Division to resolve the issues raise in
the Cease and Desist Order. The Securities Division has determined to dismiss
the Company from the Cease and Desist Order, provided that the following
conditions are met:
18
<PAGE> 20
1. The Company agrees to register any future offerings of securities
to South Carolina residents and to make offerings to non-South
Carolina residents only in states in which exemptions from
registration are available (and in accordance with such exemptions)
and only to investors who are accredited under the standards of such
states;
2. The Company must disclose in any such offering that the Company's
Quarterly Report on Form 10-QSB for the Quarter Ended June 30, 1997
(the "2nd Quarter 10-QSB") is available and to make the 2nd Quarter
10-QSB available to all such offerees;
3. If any offering of the Company's securities are made over the
Internet, that the Company agrees to follow and comply with the
Securities Division's Policy Statement Number 96-3 regarding Internet
offerings;
4. If the Company sponsors a web site on the Internet's World Wide Web
that references investing, that it will advise potential investors
that, as with any company, investors should not make an investment in
the Company without reviewing all available information, including the
2nd Quarter 10-QSB and provide a method on such web site for potential
investors to obtain such information; and
5. The Company agrees to abide by all state "blue sky" or other
securities laws in any securities-related activities in which it
engages in the future.
The Company has agreed to such conditions, and, based upon such agreement, the
Securities Division has agreed to dismiss the Company from the Cease and Desist
Order.
Mr. Carraway is continuing discussions with the Securities Division
regarding his dismissal from the Cease and Desist Order. No
assurances can be given that Mr. Carraway will be dismissed from
the Cease and Desist Order.
On November 14, 1997, the Company announced that it had commenced operations of
the Partnership's Unit at its current permitted operating capacity of 250
gallons of waste oil processed per hour. Continuous operation of the
Partnership Unit may not occur until installation of alternate pumps, due to be
delivered in mid-November.
19
<PAGE> 21
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Computation of Earnings Per Share
27 Financial Data Schedule (for SEC use only)
99.1 Amended Order to Cease and Desist from Offering,
Issuing or Selling Unregistered Securities and
Notice of Right to a Hearing
99.2 Letter dated November 10, 1997, from the Securities
Division of the Office of the Attorney General for
the State of South Carolina
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period.
20
<PAGE> 22
SIGNATURE
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Green Oasis Environmental, Inc.
(Registrant)
November 17, 1997 /s/ William D. Carraway
-----------------------------
William D. Carraway
President and Chief Executive
Officer
(Chief Financial Officer)
21
<PAGE> 1
GREEN OASIS ENVIRONMENTAL, INC.
(A Development State Enterprise)
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Period
from
Sept. 24,
1991
(Inception)
Three Months Ended Nine Months Ended through
September 30, September 30, Sept. 30,
1997 1996 1997 1996 1997
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
INCOME (LOSS)
Net loss before extraordinary items $ (365,239) $ (163,818) $ (403,322) $ (427,181) $(6,706,861)
Dividends on preferred shares 0 - 2,000 3,080 150,198
----------- ---------- ---------- ---------- -----------
(365,239) (163,818) (405,322) (430,261) (6,857,059)
Extraordinary gain - 20,643 115,577 286,614 781,111
----------- ---------- ---------- ---------- -----------
Loss applicable to common stock $ (365,239) $ (143,175) $ (289,745) $ (143,647) $(6,075,948)
=========== ========== ========== ========== ===========
PRIMARY
INCOME (LOSS) PER SHARE
Net income (loss) before
extraordinary gain $ (0.06) $ (0.03) $ (0.06) $ (0.08) $ (1.54)
Extraordinary gain - - 0.02 0.05 0.18
----------- ---------- ---------- ---------- -----------
Primary income (loss) per
common share $ (0.06) $ (0.03) $ (0.04) $ (0.03) $ (1.36)
=========== ========== ========== ========== ===========
Shares
Weighted average number of common
shares outstanding 6,465,134 5,537,550 6,409,814 5,492,912 4,466,640
=========== ========== ========== ========== ===========
FULLY DILUTED
INCOME (LOSS) PER SHARE N/A N/A N/A N/A N/A
</TABLE>
Computation of fully diluted earnings per share is antidilutive, and
presentation is omitted.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GREEN OASIS ENVIRONMENTAL FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 48,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 73,000
<PP&E> 154,000
<DEPRECIATION> 47,000
<TOTAL-ASSETS> 352,000
<CURRENT-LIABILITIES> 617,000
<BONDS> 0
65,000
37,000
<COMMON> 6,000
<OTHER-SE> (373,000)
<TOTAL-LIABILITY-AND-EQUITY> 352,000
<SALES> 1,338,000
<TOTAL-REVENUES> 1,344,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,737,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,000
<INCOME-PRETAX> (404,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (404,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 116,000
<CHANGES> 0
<NET-INCOME> (288,000)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
STATE OF SOUTH CAROLINA
OFFICE OF THE ATTORNEY GENERAL
SECURITIES DIVISION
IN THE MATTER OF: ) ADMINISTRATIVE
PROCEEDING
)
WILLIAM CARRAWAY AND ) AMENDED ORDER TO CEASE
) AND DESIST FROM OFFERING,
GREEN OASIS ENVIRONMENTAL, INC., ) ISSUING OR SELLING
) UNREGISTERED SECURITIES
AND
) NOTICE OF RIGHT TO A
HEARING
)
Respondents. ) Case Number 97062
- ----------------------------------------------
TO: William Carraway and Green Oasis Environmental, Inc.
The South Carolina Securities Division of the Office of the Attorney
General, under the authority of the South Carolina Uniform Securities Act,
South Carolina Code Section 35-1-10, et. seq., issues the following Order and
notice of right to a public hearing.
FINDINGS OF FACT
1. Green Oasis Environmental, Inc. is a Florida Corporation with its executive
offices and primary place of business at 184 East Bay Street, Suite 302,
Charleston, SC 29401.
2. The Chief Executive Officer (as of October 15, 1997) is William D. Carraway
("Carraway"). Carraway has held this position since at least January 1995.
3. The Board of Directors of the Company (as of October 1, 1997) consists of
Carraway, Mary Ann A. Carraway and Larry S. King.
4. On or around April 20, 1995, the Securities Division issued a Cease and
Desist Order against Respondents William Carraway and Green Oasis
Environmental, Inc. The April 20, 1995 Cease and Desist Order, a copy of which
is attached hereto and incorporated by reference, alleged the Respondents both
sold unregistered securities and committed fraud in the sale of securities in
connection with an offering made in this State.
<PAGE> 2
5. On or around July 25, 1995, the proceeding above was resolved by consent
order. A copy of the consent order resolving the proceedings is attached hereto
and incorporated by reference.
6. In the Consent Order, specific factual findings were agreed to by all
parties. These findings were: (1) unregistered securities had previously been
sold by Respondents in this State and (2) Respondents had breached certain
recision offers later made in connection with the sale of unregistered
securities.
7. Pursuant to the Consent Order, Respondents were not to, and had agreed not
to, issue, offer or sell securities to persons in South Carolina until any
securities offered were properly registered.
8. The Consent Order also prohibited Respondents or anyone acting on their
behalf from making or causing to be made to any person in South Carolina an
offer of securities made by use of a false statement or fraudulent sales
practice.
9. In or around September 1997, it came to the Division's attention that shares
of Green Oasis Environmental, Inc. had previously been traded on the "Bulletin
Board," such trading having occurred during the period March 1996 until at
least May 1997.
10. The securities were offered pursuant to a request signed on behalf of
Respondent Company by Respondent Carraway.
11. Both Respondent Carraway and Respondent Green Oasis stood to benefit by
having company shares trade on the Bulletin Board.
12. The securities offered were not at the time of trading, registered for
offer or issuance in this State.
13. On or around September 24 , 1997, a representative of the Division formally
requested information of Carraway concerning the trading of Green Oasis
securities in this State. A date of Tuesday, September 30, 1997 was set as a
reply date to the Division's inquiry. The Division's name and address and a
contact person was provided Respondent by the letter. The letter was returned
by the United States Post Office and was stamped "Forwarding time expired
return to sender."
14. On or about October 8, 1997, a Cease and Desist Order was issued against
Respondent GOE and Carraway. The basis for the Order was sale of unregistered
securities by Respondents.
15. On or around October 10, 1997, GOE and Carraway's attorney, along with
Christopher Holmes, a Charleston attorney, contacted Division Staff. The
attorneys indicated the Division's earlier letter had not been received. The
attorneys further indicated the company's desire to answer questions and
quickly resolve the matter. Among the representations made in conversation with
the attorneys and was that no stock continues to be
<PAGE> 3
issued by the company, and the stock trades only in the pink sheets now. (The
company makes no market.)
16. Green Oasis noted the reason the firm wanted the matter resolved quickly
was to avoid having to amend a 10-Q filed the same day as the Division's Cease
and Desist Order issued October 10, 1997. The attorney further agreed to fax to
Division Staff a copy of the 10-Q filed.
17. The 10-Q received on October 10, 1997 disclosed at least eighteen
violations of the Division's previous consent order with Respondents.
18. The violations of the July 25, 1995 consent order include but may not be
limited to the following:
a. On or about June 28, 1996, Carraway, as chairman of GOE, and
GOE, as General Partner of the GOE Plant Partnership I L.P.
("the Partnership"), commenced a purported private offering
of "partnership interests" in the Partnership. On or about
August 13, 1996, Carraway and GOE, sold the first partnership
interest to an undisclosed investor. The number of
partnership interests subsequently sold by Carraway and GOE
has not been disclosed, but is believed to number
approximately thirty.
b. On or about March 31, 1997, GOE issued unregistered warrants
to the thirty limited partners of GOE Plant Partnership I
L.P. Each warrant was exercisable for the purchase of up to
15,000 shares of GOE common stock at $3.00 per share, for
thirty days.
c. During the period of December 31, 1996 to June 30, 1997,
Carraway and GOE issued $60,000 worth of common stock in
exchange for "stockholder relation services." Specifically,
on or about March 15, 1997, Carraway, and GOE issued 12,000
shares of unregistered common stock at $5.00 per share to
MicroCap [aka "MicroCorp"] Communications Consulting, a
public relations firm.
d. During the quarter ending March 31, 1997, Carraway and GOE
satisfied a $250,000 debt of the company by exchanging
100,000 shares of common stock of the company at a value of
$2.50 per share for the debt.
e. During the quarter ending March 31, 1997, Carraway and GOE
satisfied a $356,000 debt of the company by exchanging 71,108
shares of common stock of the company at a value of $5.00 per
share for the debt.
f. During the first quarter of 1997, Carraway and GOE sold
approximately 37 "packages" of unregistered securities, each
consisting of 8,000 shares of common stock, an "A" warrant
and a "B" warrant. Each package sold for $10,000, enabling
the company to raise $370,000 for the purpose of funding
<PAGE> 4
operations. The packages collectively involved 296,000 shares
of unregistered common stock being sold for $1.25 a share in
an alleged private placement. Warrants exercisable at $2.50
and $5.00 per share were also issued in conjunction with the
sale of the shares.
g. During the first quarter of 1997, GOE authorized the issuance
of a two year stock option for 48,000 shares to GOE's CEO,
William Carraway, in exchange for Carraway's waiving payment
of his salary.
h. On or about April 1996, Carraway and GOE issued unregistered
shares of common stock to various creditors in order to
satisfy debts of approximately $187,000.
i. On or about June 27, 1996, Carraway and GOE issued
unregistered common stock for satisfaction of the following
debts:
1. $476,000 to an undisclosed creditor;
2. $57,000 in liabilities for prepaid expenses; and
3. $16,000 incurred in the settlement of a lawsuit.
j. During the third quarter of 1996, Carraway and GOE issued
$40,000 worth of GOE common stock to a creditor in exchange
for the satisfaction of a debt termed "trade payables".
k. On or about August 1996, GOE agreed to issue 448,000 shares of
common stock to Carraway upon his exercise of that option.
l. On or about September 1996, GOE agreed to issue 20,000 shares
of common stock to Carraway upon his exercise of that option.
m. On or about January 1997, GOE agreed to issue 48,000 shares of
common stock to Carraway upon his exercise of that option.
n. On or about September 1996, GOE agreed to issue 5,000 shares
of common stock to Mary Ann A. Carraway, a Director of GOE,
upon her exercise of that option.
o. On or about September 1996, GOE agreed to issue 5,000 shares
of common stock to Larry S. King, a director of GOE, upon his
exercise of that option.
p. On or about August 30, 1996, Carraway and GOE sold 35,000
shares of common stock to Raymond C. O'Brien in a private
transaction for $52,500.
q. On or about December 1996, Carraway and GOE sold 120,000
shares of common stock to Raymond C. O'Brien for $1.25 per
share.
<PAGE> 5
r. On or about December 1996, Carraway and GOE issued warrants
for the purchase of 250.000 shares of common stock to Raymond
C. O'Brien. Such warrants were exercisable at $1.375 per
share, and were issued in consideration of O'Brien's services
to GOE.
19. The offers of securities above all originated from this State.
20. None of the shares of stock issued above, nor any of the warrants or
options, were registered in the State of South Carolina prior to offer.
21. Pursuant to South Carolina Code Sections 35-1-180 and 35-1-810 and the July
25, 1995 Consent Order with the Division, all securities offered above should
have been registered prior to offer in this State.
22. Section 35-1-20(12) defines "security." Pursuant to the Act, "security"
means "any note, stock, treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any profit-sharing
agreement, collateral-trust certificate, preorganization certificate of
subscription, transferable share, investment contract, voting-trust
certificate, certificate of deposit for a security, certificate of interest or
participation in an oil, gas or mining title or lease or in payments out of
production under such a title or lease or, in general, any interest or
instrument commonly known as a "security", or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, or warrant or right to subscribe to or purchase, any of the foregoing."
23. The warrants, notes, options and shares of stock offered, sold or issued
(as detailed above) constitute securities under South Carolina law.
24. The warrants, notes, options, and shares of stock traded, to the extent
each was, constitute securities under South Carolina law.
25. Section 35-1-180 defines acts making the South Carolina Uniform Securities
Act applicable. Pursuant to Section 35-1-180(3), an offer to buy or to sell is
made in South Carolina "when the offer (a) originates from this State ..."
26. Section 35-1-810 makes it unlawful for any person to offer or sell any
security in South Carolina unless it is registered, is a federal covered
security, or meets certain limited exemptions, none of which apply to the
Carraway and Green Oasis transactions.
27. Pursuant to the July 25, 1997 Consent Order with the Division, no exemption
was available to Carraway or Green Oasis; the parties agreed to register any
future offerings prior to offer or sale in South Carolina.
<PAGE> 6
ORDER
IT IS ORDERED that Respondents, any successors thereof, or any person
or entity directly or indirectly controlled, influenced or compensated by or on
behalf of Respondents, Cease and Desist from issuing, offering or selling
securities in South Carolina.
South Carolina Code Section 35-1-1590 provides that any wilful
violation of this Order, upon conviction, may be punished by imprisonment of
not more than three (3) years and/or a fine not exceeding $50,000.00.
IT IS FURTHER ORDERED that Respondents are afforded an opportunity for
a hearing. If a written request for a hearing is filed with the Securities
Division within thirty (30) days of your receipt of this Order, then the matter
will be set for a hearing. After the hearing, a final Order may be entered.
This Order will stand as entered, unless amended by the Securities Division or
the Commissioner as to any Respondent who does not request a hearing within the
thirty (30) day period.
BY:
--------------------------------------
Tracy A. Meyers
Assistant Attorney General
Post Office Box 11549
Rembert C. Dennis Building
Columbia, SC 29201
(803) 734-4731
Columbia, South Carolina
, 1997
- ---------------
<PAGE> 1
EXHIBIT 99.2
THE STATE OF SOUTH CAROLINA
OFFICE OF THE ATTORNEY GENERAL
November 10, 1997
VIA FACSIMILE/HARD COPY TO FOLLOW
(404) 525-2224
Mr. Michael Rosenzweig, Esquire
Rogers & Hardin
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, GA 30303-1601
RE: Green Oasis Environmental, Inc.
Dear Michael:
In discussing the recent Orders the South Carolina Securities Division
had issued against Green Oasis, the question came up of what Green Oasis could
do to resolve the Orders. As we previously discussed, the original Cease and
Desist Order, dated October 7, 1997 was vacated October 31, 1997. The Amended
Cease and Desist Order, dated October 27, 1997 remains in effect. David and I
spoke with you last week to discuss the conditions under which we would be
willing to vacate the October 27, 1997 Order. These are:
1. The company must agree to register any future offering of
securities to South Carolina residents and would agree it
would make offerings to non-South Carolina residents only in
states in which exemptions are available (and pursuant to
those exemptions) and to investors who are accredited under
the standards in that state,
2. The availability of the company's 10-Q must be disclosed and
the 10-Q must be made available to potential investors,
3. In making offerings on the Internet, the company must agree to
follow the Division's Policy Statement, Number 96-3, referring
to Internet Offerings,
<PAGE> 2
Mr. Michael Rosenzweig, Esquire
November 10, 1997
Page 2
4. If the company's web site references investing, it must
advise potential investors that, as with any company, they
should not invest without reviewing disclosure documents
(including the 10-Q) and it must provide a method to obtain
them, and
5. The company must agree to abide by all state securities laws
in any securities related activities it engages in in the
future.
I understand you have now had a chance to review the terms above with
your client, Green Oasis, and Green Oasis agrees to abide by each of the
conditions above. If this is correct, please have an appropriate representative
of the company sign below binding the company to the conditions. Upon my
acceptance of the company's undertaking, Green Oasis will be dismissed from the
October 27, 1997 Cease and Desist Order currently outstanding.
Sincerely,
Tracy A. Meyers
Assistant Attorney General
I, __________________, holding the position of ______________, and
being an appropriate person to execute this document on behalf of Green Oasis
Environmental, Inc., agree Green Oasis will abide by each and every one of the
five conditions above. I and Green Oasis understand that the five conditions
specifically are conditions precedent to Green Oasis' dismissal from the
Division's October 27, 1997 Cease and Desist Order.
Signed _________________________
Date _________________________
On behalf of the Division, I accept the representations of Green Oasis
Environmental made above and agree to dismiss Green Oasis Environmental from
the Division's October 27, 1997 Cease and Desist Order.
--------------------------
Tracy A. Meyers
Securities Division
