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 March 31, 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 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 April 9, 1997
$.01 Par Value 6,465,134 Shares
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
Index
Part I. Financial Information
Item 1. Financial Statements (Unaudited) Page Number
Condensed Balance Sheets
March 31, 1997, and
December 31, 1996 . . . . . . . . . . . . . . . . . . . . 3
Condensed Statements of Operations
Three months ended March 31,
1997 and 1996, and
September 24, 1991 (Inception),
through March 31, 1997. . . . . . . . . . . . . . . . . . 4
Condensed Statements of Cash Flows
Three months ended March 31, 1997
and 1996, and September 24,
1991 (Inception), through
March 31, 1997. . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Financial Statements . . . . . . . . . 6-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . 10-12
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . .13
Item 3. Preferred Stock Dividends in Arrears. . . . . . . .14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 15
Signatures. . . . . . . . . . . . . . . . . . . . .16
Exhibit 11 - Computation of Earnings Per Share. . . . . . .17
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
ASSETS March 31, December 31,
1997 1996
----------- -------------
<C> <S> <S>
CURRENT ASSETS
Cash (Note B) $ 974,000 $ 32,000
Accounts receivable -
related party - 55,000
Prepaid expenses 82,000 59,000
----------- -------------
Total current assets 1,056,000 146,000
PROPERTY AND EQUIPMENT,
NET OF ACCUMULATED
DEPRECIATION (Note D) 116,000 86,000
OTHER ASSETS
Loans - related parties 117,000 117,000
Patent costs 51,000 51,000
Deferred tax assets,
net of valuation allowance - -
----------- -------------
TOTAL ASSETS $ 1,340,000 $ 400,000
=========== =============
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Notes payable (Note E) $ 51,000 $ 650,000
Accounts payable (Note F) 275,000 575,000
Accrued expenses (Note G) 121,000 24,000
Accrued wages and payroll
taxes 20,000 71,000
Deposits received for
equipment sales 5,000 80,000
Due to related party
(Note B) 34,000 -
Deposits received for
distribution fees (Note E) - 100,000
Deposits for equipment from
related party - 63,000
----------- -------------
Total current liabilities 506,000 1,563,000
----------- -------------
COMMITMENTS AND CONTINGENT
LIABILITIES (Note K) - -
----------- -------------
REDEEMABLE, CONVERTIBLE
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, 6,465,134 (1997)
and 5,966,026 (1996)issued
and outstanding 65,000 60,000
Additional paid-in capital 5,564,000 4,433,000
Deficit accumulated during
the development stage (4,838,000) (5,654,000)
Note receivable - related
parties (5,000) (50,000)
----------- -------------
Total stockholders'
equity (deficiency) 792,000 (1,205,000)
----------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIENCY) $ 1,340,000 $ 400,000
=========== =============
See Notes to Condensed Financial Statements.
3
</TABLE>
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
Three Months Period From
Ended September 24,
March 31, 1991
--------------------- (Inception),
Through
1997 1996 March 31, 1997
---------- --------- ---------------
<C> <S> <S> <S>
REVENUES
Sales revenues
(Note B) $1,338,000 $ - $ 3,450,000
Interest and
other income 2,000 - 20,000
---------- --------- ---------------
Total revenues 1,340,000 - 3,470,000
---------- --------- ---------------
COSTS AND EXPENSES
Research and
development 291,000 5,000 4,927,000
General and
administrative -
legal and accounting 118,000 47,000 1,393,000
General and
administrative -
other 85,000 27,000 977,000
Salaries and benefits - - 807,000
Operations and
marketing 140,000 - 626,000
Interest expense and
loan costs 6,000 15,000 344,000
--------- --------- ---------------
Total expenses 640,000 94,000 9,074,000
--------- --------- ---------------
LOSS BEFORE INCOME
TAXES (BENEFIT)
AND EXTRAORDINARY
GAIN 700,000 (94,000) (5,604,000)
INCOME TAXES (BENEFIT) - - -
EXTRAORDINARY GAIN
Restructuring of
debt 116,000 - 782,000
--------- --------- ---------------
NET INCOME (LOSS) $ 816,000 $ (94,000) $ (4,822,000)
========= ========= ===============
NET EARNINGS (LOSS)
PER COMMON SHARE
Primary
Earnings (loss)
before extraordinary
gain $ 0.10 $ (0.02) $ (1.34)
Extraordinary gain 0.02 - 0.18
--------- --------- ---------------
NET EARNINGS
(LOSS) PER
COMMON SHARE $ 0.12 $ (0.02) $ (1.16)
========= ========= ===============
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 6,857,108 5,172,784 4,285,229
========= ========= ===============
Fully diluted
Earnings (loss)
before extraordinary
gain $ 0.10 $ (0.02) $ (1.34)
Extraordinary gain 0.02 - 0.18
--------- --------- ---------------
NET EARNINGS
(LOSS) PER
COMMON SHARE $ 0.12 $ (0.02) $ (1.16)
========= ========= ===============
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 6,967,789 5,172,784 4,285,229
========= ========= ===============
See Notes to Condensed Financial Statements.
4
</TABLE>
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
Period From
September 24,
Three Months Ended 1991
March 31, (Inception)
------------------- Through
1997 1996 March 31, 1997
-------- --------- --------------
<C> <S> <S> <S>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net cash provided
by(used in)
operating activities $569,000 $ (59,000) $ (3,009,000)
-------- --------- --------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchases of property
and equipment (37,000) - (257,000)
Proceeds of sale of
property and
equipment - - 62,000
Loans to related
parties - - (336,000)
Collection of loans
to related parties - - 259,000
Patent costs - (1,000) (51,000)
Deposits paid - (1,000) -
Loans granted to
distributors - - (7,000)
Initial payments
received for
distribution rights - - 198,000
-------- --------- -------------
Net cash provided
by (used in)
investing activities (37,000) (2,000) (132,000)
-------- --------- -------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds of common
stock issues 415,000 80,000 1,671,000
Proceeds of preferred
stock issues - - 1,024,000
Proceeds of convertible
debt securities - - 565,000
Proceeds of loans from
stockholders - - 561,000
Proceeds of notes - - 520,000
Proceeds of Series
A notes - - 105,000
Payments of notes and
debentures - - (155,000)
Issue costs - - (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 (5,000) - (5,000)
-------- --------- -------------
Net cash provided
by financing
activities 410,000 80,000 4,115,000
-------- --------- -------------
Cash and cash
equivalents
Net increase (decrease)
during the period 942,000 19,000 974,000
Balance at beginning
of period 32,000 5,000 -
-------- --------- -------------
Balance at end
of period $974,000 $ 24,000 $ 974,000
======== ========= =============
SUPPLEMENTAL DISCLOSURES
OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Common stock issued
for services rendered,
preferred stock
conversion, debt
conversion, and loan
costs $666,000 $ 81,000 $ 3,961,000
======== ========= ============
Capital lease
obligation incurred
to purchase
equipment $ - $ - $ 12,000
======== ========= ============
Deposits converted
to common or
preferred stock $100,000 $ - $ 180,000
======== ========= ============
Debt issued for
equipment and
services and
loans collected
or exchanged
for services $ - $ - $ 56,000
======== ========= ============
No income taxes were paid in any period. $4,000 in interest
was paid during the three months ended March 31, 1997. No
interest was paid in the quarter ended March 31, 1996.
See Notes to Condensed Financial Statements.
5
</TABLE>
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The balance sheet as of March 31, 1997, the statements of operations
for the three months ended March 31, 1997 and 1996, and September 24,
1991 (inception), to March 31, 1997, and the statements of cash flows
for the three months ended March 31, 1997 and 1996, and September 24,
1991 (inception), to March 31, 1997, 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 ended March 31, 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 Company's distillation processing equipment(the Unit
or Units). The Company prepared the site, upgraded its prototype to a
Model #400, and installed the Unit on land the Company leases. The
sale was completed under the terms of the sales agreement, and the
ownership of the Unit was transferred to the Partnership on March 31,
1997. The purchase price including the Unit, auxiliary equipment,
site preparation, and installation was $1,338,000. Though the sale
is complete under the terms of the agreement between the Company and
the Partnership, some adjustments and modifications to the Unit are
still being made. The South Carolina Department of Health and
Environmental Control (DHEC) must approve the installation and
operation of the Unit.
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. The Company owes
$34,000 to the Partnership on March 31, 1997. All other amounts due
to or from the Partnership have been paid.
The Company issued warrants at no additional cost to the 30 purchasers
of the limited partnership interests. 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. The Company has assigned no value to the warrants, but has
reserved 450,000 shares of common stock to be issued upon their
exercise.
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
C. PREPAID EXPENSES
On March 15, 1997, the Company issued 12,000 shares of common stock at
$5.00 per share to a public relations consulting firm pursuant to an
agreement to provide consulting services for investor relations for a
period of one year. Engineering consulting services amounting to
$30,000 were expensed during the period.
D. PROPERTY AND EQUIPMENT
The Company refurbished its offices during 1997 by purchasing
furniture, office equipment, and leasehold improvements totaling
$37,000.
E. NOTES PAYABLE AND DEPOSITS FOR DISTRIBUTION FEES
The Company and two noteholders agreed to convert the debts to common
stock. One noteholder converted $250,000 of principal and accrued
interest to 100,000 shares of common stock at $2.50 per share. The
second noteholder 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 is filed
with the Securities and Exchange Commission and becomes effective on
or before July 31, 1997. If such registration statement is not filed
and effective, the noteholder has the option to either retain the
common stock or to exchange the stock for the Company's promissory
demand note for $356,000 with a 10% interest rate. 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.
F. GAIN ON RESTRUCTURING OF DEBT
The Company paid certain of its trade debts and settled some
outstanding judgments and claims against it during 1997. 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 the customers. An
extraordinary gain of $116,000 was recognized from these transactions.
G. ACCRUED EXPENSES
The Company accrued $50,000 as the estimated cost of the remaining
adjustments and modifications to be made to the Unit which was sold to
the Partnership on March 31, 1997; $58,000 of unbilled legal and
accounting fees were also accrued. The Company paid a tax lien and
other payroll taxes amounting to $66,000 during the first quarter.
H. STOCK ISSUANCES
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 transaction.
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
I. 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.
J. 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. However, there is no exact date determinable
when either will be achieved.
K. 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.
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 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 allows the Company to test its
waste oil conversion equipment to demonstrate that air pollutant
emissions meet DHEC's standards. Successful
<PAGE>
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
K. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
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.
A 60-day period of operation for the purpose of testing air emissions
to meet DHEC's standards began in mid-March 1997. If air quality
standards are met, a public notice period will be required, and a
final permit could be issued in 45 days. If DHEC's standards are not
met, the Company will be required to either further modify the Unit
or to resubmit an application for a draft permit and justify lower
standards.
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 promissory note which the Company recognized
as sales revenue. 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 LifeChoice, S.A. 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, S.A. or LifeChoice
International, Inc. has not 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 removed with the same permission to refile.
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 April 10, 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
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 (the Unit or the Units)
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. One additional Unit was sold in the
first quarter of 1997 to GOE Plant Partnership I, L.P. (the
Partnership), a South Carolina limited partnership whose general
partner is Green Oasis. There were no sales in the three months ended
March 31, 1996. The Company's net income for the three months ended
March 31, 1997, is $816,000, as compared to a net loss of $94,000 for
the same period of 1996. The losses in 1996 compared to the income in
1997 were directly attributable to the lack of sales in 1996. For the
period from September 24, 1991 (inception), to March 31, 1997, Green
Oasis has incurred a cumulative net loss of $4,838,000. Green Oasis'
ability to fully utilize net operating loss carryforwards is subject
to certain limitations.
Recognition of Revenue. Revenues were recognized in 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. The sale occurred
on March 31, 1997, when the Company transferred ownership of the Unit
to the Partnership. The sales agreement between Green Oasis and the
Partnership specifies that the Partnership will purchase the Unit, and
Green Oasis may continue to make improvements to it. Green Oasis is
responsible for obtaining a final operating permit from the South
Carolina Department of Health and Environmental Control (DHEC).
See Note K to the Condensed Financial Statements.
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
quarter of 1997 in the amount of $291,000 include reconstructing a
Unit at a new location and adding a thermal oxidizer, an enhanced
computer system, and other improvements to the design and operation of
the Unit. Of the research and development costs expensed during the
first quarter 1997, materials cost was $148,000, direct labor and
subcontract labor were $63,000, and consulting chemical engineers'
fees were $30,000. Management estimated the costs of further
adjustments and modifications to the Unit at $50,000 which was also
expensed in the period. This Unit was sold to the Partnership for
operation and will also be used for demonstration purposes. Research
and product development expenses were $5,000 for the first quarter of
1996. 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. Operations and marketing expenses were
$140,000 for the first quarter of 1997 as compared to none in the
prior corresponding quarter. The Company prepared the site for and
installed the Unit at a cost of $109,000. Green Oasis also paid rent
on the property, depreciated the equipment, and paid utilities and
other indirect costs in the amount of $15,000. Marketing expenses
included promotions, travel, and meals and entertainment totaling
$16,000. There were no operations or marketing activities in 1996
due to a lack of funds.
<PAGE>
Salaries and Benefits. The Company's officers waived the payment of
their salaries for the first quarter of both 1996 and 1997. The Chief
Executive Officer was granted a stock option in lieu of his 1996
salary. A second stock option was granted in January 1997 in exchange
for the waiver of salary in the first quarter of 1997. The exercise
price of each stock option was 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 in the value of the options and the
exercise price.
General and Administrative. Green Oasis has incurred $118,000 of
legal and accounting fees in the first quarter of 1997 as compared to
$47,000 in the first quarter of 1996. The expenses for 1997 were for
regulatory filings, routine corporate and shareholder activities,
environmental disputes, and litigation defense. The expenses in 1996
were for regulatory filings and routine corporate work. The increase
in 1997 was due to the legal work required 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
fees were $85,000 and $27,000 for the first quarter of 1997 and 1996,
respectively. The increase in 1997 is due to paying $10,000 in
liability insurance, $10,000 in consultant's fees for assistance with
environmental regulations, and $30,000 for stockholder relations.
Other small increases in office expenses, travel, and depreciation
accounted for the remaining increases.
Liquidity and Capital Resources
Green Oasis is a development stage enterprise. Green Oasis has funded
its operations from inception through March 31, 1997, primarily
through loans and sales or exchanges of common and preferred stock in
the aggregate amount of $5,470,000 and through revenues from the sale
of four Units of waste oil conversion equipment of $3,450,000.
During the first quarter of 1997, Green Oasis 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. Green Oasis 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.
Green Oasis' accounts payable and accrued expenses as of March 31,
1997, decreased by $300,000 because the Company settled some of its
debts by paying agreed-upon amounts to creditors which was often less
than the amounts recorded as liabilities. 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.
Green Oasis purchased office furniture and fixtures and painted and
recarpeted its offices during the first quarter of 1997. The cost of
the project was $37,000. The Company has not made any material
commitments for capital expenditures. It is searching for a
production facility to lease but has made no definite arrangements.
<PAGE>
During the first quarter of 1997 the Partnership paid $1,338,000 to
Green Oasis for the purchase and installation of the Unit, site
preparation, and auxiliary equipment. The Partnership sold 30
partnership interests for $50,000 each to individual investors. The
proceeds of the sale of the partnership interests were paid to Green
Oasis toward the purchase of the equipment as the Partnership
collected the funds. The receipt of the funds from the Partnership
is expected to provide the Company with operating capital for the
first half of 1997.
Green Oasis sold certain of its securities under Regulation D of the
1933 Securities Act in January and early February of 1997. The 37
"packages" of securities, each of which sold for $10,000, 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 will
be used to fund operations.
Green Oasis currently has $550,000 in working capital. Although this
amount is expected to fund operations for the immediate future, Green
Oasis 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 System and to fund
other working capital requirements.
Commercial production of the Company's products will require
additional work to increase the output capacity of the Units to a
quantity that is acceptable for profitable operations. Additional
costs may be incurred for engineering consultants and modeling to
improve the Unit for commercial success. Consequently, Green Oasis
has not completed all the research for its Units, and should it be
more extensive than now believed, there can be no assurance that
it will be able to successfully obtain the financing to complete the
Units.
The Company has thus far been denied a final operating permit by DHEC.
The present status of the permit is that a draft permit has been
written, and the Company is allowed to operate the Unit for a 60-day
period so that air emissions can be tested to determine that DHEC's
standards for air emissions are being met. The Company initiated the
60-day period in mid-March 1997 and will conduct the tests of the
equipment over the allowed period. The Company believes that DHEC is
requiring standards that exceed EPA regulations. The Company's
management and legal counsel are continuing negotiations with DHEC to
obtain the permit. Legal counsel expects a final permit to be issued
but believes that it is possible that the permit will not be effective
until September due to requirements for public comment periods and
other complications in issuing the permit.
The above statements are based on current expectations. These
statements are forward looking, and actual results may differ
materially.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
Environmental Oil Services, L.L.C. v. Green Oasis Environmental, Inc.,
Charleston County, South Carolina. 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 sought 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 the
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 to the counterclaim on March 28, 1996.
This case was dismissed in early 1997.
Caribbean Environment, Inc. a/k/a Caribe Environmental, Inc. and
Carribbean Sales Group v. Green Oasis Environmental, Inc., Charleston
County, South Carolina. On December 4, 1995, Caribe Environmental,
Inc., and Caribbean Sales Group filed suit alleging breach of
contract, demanding that $50,000 paid as a deposit on equipment to be
furnished by the Company be returned. The parties mutually agreed to
cancel the contract, and the Company paid the claim in March 1997.
Pensacola Pollution Control, Inc. v. Green Oasis Environmental, Inc.
and William D. Carraway, Charleston County, South Carolina. 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%. A
settlement of this claim was paid in March 1997.
<PAGE>
Part II. Other Information
Item 3. Preferred Stock Dividends in Arrears
<TABLE>
Amount of
dividends in
Due date of arrears at
dividends April 10, 1997
------------------- ------------------------
<C> <S>
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
-------------
$ 148,198
=============
</TABLE>
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(A) EXHIBITS
Exhibit 11 Computation of Earnings per Share
(B) REPORTS ON FORM 8-K
None
<PAGE>
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)
Date: April 14, 1997 /s/ William D. Carraway
----------------- -----------------------------
William D. Carraway
President and Chief Executive
Officer
(Chief Financial Officer)
<PAGE>
Item 6 Exhibits
GREEN OASIS ENVIRONMENTAL, INC.
(A Development Stage Company)
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
Period
From
September 24,
1991
Three Months Ended (Inception),
March 31, Through
----------------------- March 31,
1997 1996 1997
----------- ---------- ---------------
<S> <C> <C> <C>
INCOME (LOSS)
Net income(loss)
before extraordinary
items $ 701,446 $ (94,418) $ (5,602,093)
Add dividends on
preferred shares - - (148,198)
----------- ---------- ---------------
701,446 (94,418) (5,750,291)
Extraordinary gain 115,577 - 781,111
----------- ---------- ---------------
Income (Loss)
applicable
to common stock $ 817,023 $ (94,418) $ (4,969,180)
=========== ========== ===============
PRIMARY
INCOME (LOSS)
PER SHARE
Net income (loss)
before extraordinary
gain $ 0.10 $ (0.02) $ (1.34)
Extraordinary
gain 0.02 - 0.18
----------- ---------- ---------------
Primary income
(loss) per
common share $ 0.12 $ (0.02) $ (1.16)
=========== ========== ===============
Shares (1)
Weighted average
number of
common shares
outstanding 6,857,108 5,172,784 4,285,229
=========== ========== ===============
FULLY DILUTED
INCOME (LOSS)
PER SHARE
Net income (loss)
before extraordinary
gain $ 0.10
Extraordinary
gain 0.02
-----------
Fully diluted
income (loss)
per common
share $ 0.12
===========
Shares(2)
Weighted average
number of
common shares
outstanding 6,967,789 NA(3) NA(3)
===========
(1) Weighted average number of
shares outstanding 6,297,329
----------
Common stock equivalents
Assume conversion of
stock options and warrants,
whose exercise price is
less than average market
price, are exercised 1,204,133
Less assumed shares
reacquired under Treasury
Stock Method 644,354
----------
Incremental number of
shares 559,779
----------
Denominator for primary
earnings per share
calculation 6,857,108
==========
(2) Weighted average number of
shares outstanding 6,297,329
----------
Common stock equivalents
Assume conversion of
stock options and warrants
whose exercise price is
less than the greater of
average market price or
end period price,
are exercised 1,264,133
Less assumed shares
reacquired under Treasury
Stock Method 593,673
----------
Incremental number of
shares 670,460
----------
Denominator for fully
diluted earnings per
share calculation 6,967,789
==========
(3) Computation of fully
diluted earnings per
share is antidilutive;
thus, the presentation
is omitted.
17
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<CASH> 974
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1056
<PP&E> 145
<DEPRECIATION> (29)
<TOTAL-ASSETS> 1340
<CURRENT-LIABILITIES> 506
<BONDS> 0
<COMMON> 65
42
6
<OTHER-SE> 721
<TOTAL-LIABILITY-AND-EQUITY> 1340
<SALES> 1338
<TOTAL-REVENUES> 1340
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 634
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 700
<INCOME-TAX> 0
<INCOME-CONTINUING> 700
<DISCONTINUED> 0
<EXTRAORDINARY> 116
<CHANGES> 0
<NET-INCOME> 816
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
