U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997.
| | TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________ .
Commission File No. 0-24490
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AQUAGENIX, INC.
---------------
(Exact name of small business issuer as specified in its charter)
Delaware 65-0419263
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6500 Northwest 15th Avenue, Fort Lauderdale, Florida 33309
----------------------------------------------------------
(Address of principal executive offices)
(305) 975-7771
--------------
(Issuer's telephone number)
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 (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
|X| No | |
The number of shares outstanding of the issuer's Common Stock, $.01 Par Value,
as of July 31, 1997 was 4,463,624.
Transitional Small Business Disclosure Format: Yes | | No |X|
Page 1 of 15 Pages
<PAGE>
AQUAGENIX, INC.
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION PAGE
--------------------- ----
Item 1: Financial Statements
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 (unaudited) 3
Consolidated Statements of Operations for the three
months and six months ended June 30, 1997 and
June 30, 1996 (unaudited) 4
Consolidated Statements of Cash Flows for the three
months and six months ended June 30, 1997 and
June 30, 1996 (unaudited) 5
Notes to Consolidated Financial Statements 6-7
Item 2: Management's Discussion and Analysis or Plan of
Operation 8-13
PART II. OTHER INFORMATION 14
-----------------
SIGNATURES 15
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<PAGE>
AQUAGENIX, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,338,511 $ 890,731
Marketable securities 0 158,492
Accounts receivable, net of allowance for doubtful
accounts of $116,438 and $88,541, respectively 1,367,742 1,064,151
Inventories 793,610 339,114
Prepaid expenses and other 589,133 490,740
------------ ------------
Total current assets 4,088,996 2,943,228
Accounts receivable, non-current 1,269,909 1,269,909
Property and equipment, net 2,686,757 2,450,154
Intangible assets, net 4,881,901 4,946,027
Deferred financing costs, net 164,511 154,276
Other assets 306,019 267,233
------------ ------------
Total assets $ 13,398,093 $ 12,030,827
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowings - acquisitions $ 0 $ 200,000
Borrowings under credit agreement 0 404,415
Current maturities of long-term debt 329,463 166,168
Accounts payable 1,512,473 709,870
Net liabilities of discontinued operations 201,870 350,076
Other current liabilities 224,875 322,582
------------ ------------
Total current liabilities 2,268,681 2,153,111
Long-term debt, net of current maturities 5,891,668 5,326,769
------------ ------------
Total liabilities 8,160,349 7,479,880
------------ ------------
Stockholders' equity:
Preferred stock, par value $.01, 1,000,000 shares
authorized, no shares issued and outstanding 0 0
Common stock, par value $.01, 10,000,000 shares
authorized, 4,463,624 and 4,163,391 shares issued
and outstanding, respectively 44,636 41,634
Additional paid-in capital 14,183,224 12,671,620
Accumulated deficit (8,801,263) (7,938,330)
Unearned compensation (188,853) (230,058)
Unrealized gain on securities 0 6,081
------------ ------------
Total stockholders' equity 5,237,744 4,550,947
------------ ------------
Total liabilities and stockholders' equity $ 13,398,093 $ 12,030,827
============ ============
The accompanying notes are an integral part of the Consolidated Financial Statements
</TABLE>
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<PAGE>
AQUAGENIX, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues - Continuing operations $ 3,603,809 $ 2,840,138 $ 6,497,328 $ 5,242,730
----------- ----------- ----------- -----------
Costs and expenses:
Costs of services 2,138,851 1,521,741 3,758,597 2,748,992
Selling, general and administrative 1,514,934 799,349 2,761,722 1,503,193
Depreciation and amortization 234,497 164,042 461,039 306,306
----------- ----------- ----------- -----------
Total costs and expenses 3,888,282 2,485,132 6,981,358 4,558,491
----------- ----------- ----------- -----------
Operating (loss) income (284,473) 355,006 (484,030) 684,239
Interest income 13,552 1,982 18,982 43,293
Interest expense (194,274) (167,040) (397,885) (330,903)
----------- ----------- ----------- -----------
(Loss) income from continuing operations before income taxes (465,195) 189,948 (862,933) 396,629
Provision for income taxes 0 0 0 0
----------- ----------- ----------- -----------
(Loss) income from continuing operations (465,195) 189,948 (862,933) 396,629
Discontinued operations:
Change in allowance for estimated phase-out losses
from environmental remediation segment 0 (404,818) 0 464,689
----------- ----------- ----------- -----------
Net (loss) income $ (465,195) $ (214,870) $ (862,933) $ 861,318
=========== =========== =========== ===========
(Loss) income per weighted average common share:
Continuing operations $ (0.11) $ 0.06 $ (0.20) $ 0.12
Discontinued operations 0.00 (0.12) 0.00 0.14
=========== =========== =========== ===========
Net (loss) income (0.11) (0.06) $ (0.20) $ 0.26
=========== =========== =========== ===========
Weighted average common shares outstanding 4,352,880 3,417,299 4,270,144 3,363,087
=========== =========== =========== ===========
The accompanying notes are an integral part of the Consolidated Financial Statements
</TABLE>
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<PAGE>
AQUAGENIX, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (862,933) $ 861,318
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 461,039 306,306
Loss (gain) on sale of property and equipment 46,308 (9,312)
(Gain) on sale of securities (9,785) 0
Provision for doubtful accounts 57,502 50,942
Consulting fees 0 88,930
Discontinued operations (148,206) 129,173
Net change in operating assets and liabilities (247,872) (26,552)
----------- -----------
Net cash (used in) provided by operating activities (703,947) 1,400,805
----------- -----------
Cash flows from investing activities:
Proceeds from sale of marketable securities 162,196 624,187
Proceeds from sale of property and equipment 81,377 273,596
Proceeds from sale of assets of discontinued operations 0 2,667,973
Cash paid for acquisitions, net of cash acquired (69,664) (51,221)
Purchase of property and equipment (548,541) (590,326)
----------- -----------
Net cash (used in) provided by investing activities (374,632) 2,924,209
----------- -----------
Cash flows from financing activities:
Proceeds under credit agreements 869,302 0
Proceeds from other borrowings 756,090 309,211
Payment of credit agreements (1,273,717) (127,902)
Payment of notes payable and long-term debt (315,768) (631,835)
Payment of debt obligations of discontinued operations 0 (3,590,384)
Payment of financing costs (36,364) 0
Distribution to stockholder 0 (9,638)
Issuance of common stock 1,526,816 1,500,000
----------- -----------
Net cash provided by (used in) financing activities 1,526,359 (2,550,548)
----------- -----------
Cash and cash equivalents:
Increase 447,780 1,774,466
Beginning balance 890,731 720,888
----------- -----------
Ending balance $ 1,338,511 $ 2,495,354
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 290,767 $ 223,451
=========== ===========
Income taxes paid (refunded) $ 0 $ (605,951)
=========== ===========
The accompanying notes are an integral part of the Consolidated Financial Statements
</TABLE>
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<PAGE>
AQUAGENIX, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements, which are
for interim periods, do not include all disclosures provided in the
audited annual consolidated financial statements. These unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the footnotes thereto, together with
management's discussion and analysis of financial condition and results of
operations, contained in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996 of Aquagenix, Inc. (the "Company"), as
filed with the Securities and Exchange Commission. The December 31, 1996
financial statements were derived from audited consolidated financial
statements, but do not include all disclosures required by generally
accepted accounting principles. The accompanying financial statements have
been restated for the comparative period to include the accounts of Green
Pastures, Inc. which was acquired on December 31, 1996 and accounted for
as a pooling of interests.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial
position and results of operations. The results of operations for the
interim periods are not necessarily indicative of the results to be
expected for the full year.
2. Earnings Per Share
------------------
Earnings (loss) per common shares were computed by dividing net income
(loss) by the weighted average number of shares outstanding. Common share
equivalents resulting from options and warrants have not been included for
the loss per share computation for three months and six months ended June
30, 1997 since their effect would be anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"), which establishes new standards for computing and presenting
earnings per share ("EPS"). The statement replaces the current
presentation of primary EPS and will require dual presentation of basic
and diluted EPS on the face of the statement of operations. SFAS 128
requires restatement of all prior period EPS data presented and is
effective in the fourth quarter of 1997 for the Company. The Company does
not expect adoption of SFAS 128 to have a significant impact on the
Company's financial statements.
3. Loan Agreements
---------------
In April 1997, the Company entered into loan agreements with Capital Bank which
provided for borrowings under a revolving line of credit of up to an aggregate
of $750,000 and a three-year term loan of $250,000 which is collaterized by a
long-term receivable. Advances under the line of credit are based on certain
borrowing formula relating to eligible accounts receivable. Interest accrues at
the rates of 1- 1/4% above prime for the line of credit and 9.5% for the
three-year term loan. Substantially all of the Company's assets are pledged to
Capital Bank as collateral. This new line of credit replaced the line with
SunTrust and the amount outstanding under the SunTrust's revolving line of
credit was fully repaid in April 1997.
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<PAGE>
In June 1997, the Company entered into a four-year loan agreement, for a
principal amount of $500,000, with a commercial equipment financing
company to refinance certain capital expenditures relating to application
equipment and vehicles.
4. Issuance of Common Stock
------------------------
On May 2, 1997, the Company issued 100,000 shares of common stock to a
financial consultant resulting from the exercise of stock options granted
to them in 1996 as consideration for financial consulting services
rendered. The Company received an aggregate purchase price of $500,000.
On May 19, 1997, the Company issued 47,500 shares of common stock to one
of the directors of Aquagenix, Inc. (the "Company"), namely Mr. Fred S.
Katz, upon the exercise of options granted to him under the Company's
Directors Stock Option Plan. The aggregate purchase price was $200,200,
all of which has been received in cash by the Company.
On the same day, the Company completed an equity private placement of
83,333 shares (the "Shares") at $6.00 per share to Tarragona Fund, Inc.
("Tarragona") pursuant to the terms of a Subscription Agreement, dated as
of May 19, 1997, between the Company and Tarragona. The aggregate purchase
price was $500,000, all of which has been received in cash by the Company.
Since December 31, 1996, the Company has issued a total of 300,233 shares
of common stock resulting from the exercise of stock options by its
employees, directors, a financial consultant and two private placements,
thereby increasing its total stockholders' equity by $1,526,816, all of
which were cash proceeds.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
Aquagenix, Inc. (the "Company"), through its wholly-owned subsidiaries, provides
aquatic and industrial vegetation management services to both governmental and
commercial customers in Florida, Georgia, North and South Carolina, Arizona,
Alabama and Tennessee. The Company's continued emphasis on quality service,
internal growth and the selective acquisition of privately held waterway and
vegetation management companies in the Sunbelt region of the United States has
resulted in the Company becoming the largest provider of aquatic and industrial
vegetation management services in the United States with annual revenues of
approximately $11,500,000 for 1996. The Company's services consist primarily of
the control of aquatic weeds, algae and exotic plants, brush and noxious tree
control, wetland planting and restoration, installation of floating fountains
and aeration systems and the stocking of fish for game, plant and insect
control.
In April 1997, the Company established a new branch office in Birmingham,
Alabama as the Company has started to provide industrial vegetation management
services in that region. The expansion of its network of branches into Alabama
should help further develop alliances with the utility companies in that area
and increase the Company's ability to capitalize on the beginning of large-scale
outsourcing of non-core utility services by utility companies throughout the
country.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
- ------------ ------------------- --------------------------------------------
REVENUES. The Company's revenues increased by $763,671, or 26.9%, from
$2,840,138 during the three months ended June 30, 1996 to $3,603,809 during the
three months ended June 30, 1997. The increase in revenues was primarily
attributable to an increase in both aquatic and industrial vegetation management
contracts as a result of the acquisitions of Aquatic Dynamics, Inc. (the "ADI
Acquisition") in December 1996 and Aquatic and Right of Way Control, Inc. (the
"ARC Acquisition") in June 1996, the establishment of two new branch offices in
Georgia and Alabama and the intensive marketing efforts targeted at electric and
power utilities and governmental agencies.
COST OF SERVICES. Cost of services increased by $617,110, or 40.6%, from
$1,521,741 during the three months ended June 30, 1996 to $2,138,851 during the
three months ended June 30, 1997. The increase in cost of services was mainly
attributable to increased chemical, labor, subcontracting and vehicle
maintenance costs which was directly a result of the Company's expanding
operations. As a percentage of revenues, cost of services have increased from
53.6% in the second quarter of 1996 to 59.3% in the second quarter of 1997. The
reduced gross margin was mainly attributable to higher chemical and
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<PAGE>
subcontracting costs as a result of a higher mix of industrial vegetation
management contracts in the second quarter of 1997 as compared to the
corresponding quarter of 1996. For the three months ended June 30, 1997 and
1996, industrial vegetation management services accounted for approximately
27.8% and 17.9%, respectively, of the Company's total revenues. Gross margins
from industrial vegetation management contracts are generally lower than the
aquatic vegetation management contracts as they involve a higher usage of
chemicals and in some cases, subcontractors have to be used when aerial chemical
application using helicopters is required.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expense
increased by $715,585, or 89.5%, from $799,349 during the three months ended
June 30, 1996 to $1,514,934 during the three months ended June 30, 1997. The
increase in selling, general and administrative expenses was due mainly to the
expansion of the Company's sales and marketing arm directed at penetrating the
utility, governmental and wetland development markets, assimilation of the
operations of the three businesses acquired in 1996, increased payroll and
recruitment costs, higher travel, business promotion expenses and increased
corporate expenses associated with the sourcing of potential financing
arrangements and private placements which included travel expenses, legal and
professional fees. Payroll costs have increased substantially mainly due to the
building of a larger managerial team which included the recruitment of a
President for the Company's largest subsidiary, a chief compliance officer for
training of technical staff and monitoring of compliance with environmental
regulations, a regional manager for utility and industrial sales, a management
information systems manager and a controller. The operating expenses of the
three new offices in Georgia, Arizona and Alabama accounted for approximately
$344,000 of the increase in selling, general and administrative expenses. As a
percentage of revenues, such expenses have increased from 28.1% for the three
months ended June 30, 1996 to 42.0% for the corresponding period in 1997. This
was mainly attributable to the increased level of infrastructure spending.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
from $164,042 in the second quarter of 1996 to $234,497 in the second quarter of
1997. Such expense as a percentage of revenues increased from 5.8% for the
quarter ended June 30, 1996 to 6.5% for the corresponding quarter in 1997. This
increase reflected the additional depreciation of application equipment
purchased during the three months ended June 30, 1997. In addition, amortization
expenses have also increased due to the additional intangibles acquired from the
ADI and ARC acquisitions.
INTEREST INCOME. Interest income increased by $11,570 from $1,982 for the second
quarter of 1996 to $13,552 for the corresponding quarter of 1997. The increase
in interest income was due to higher cash balances held during the second
quarter of 1997 resulting from the proceeds of the issuance of common stock
during the second quarter of 1997.
INTEREST EXPENSE. Interest expense increased by $27,234 from $167,040 during the
three months ended June 30, 1996 to $194,274 during the three months ended June
30, 1997 primarily as a result of increased bank borrowings.
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<PAGE>
QUARTERLY RESULTS. The net loss of $465,195 incurred by the Company for the
three months ended June 30, 1997 was mainly attributable to additions to senior
management and the expansion of both the production and sales and marketing
teams so as to establish the necessary personnel infrastructure to manage and
grow the Company's operations. Additional corporate expenses were also incurred
to evaluate and seek potential financing arrangements and private placements
which were required to finance the expansion of the Company's operations.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
- -------------------------------------------------------------------------
REVENUES. The Company's revenues increased by $1,254,598, or 23.9%, from
$5,242,730 during the six months ended June 30, 1996 to $6,497,328 during the
six months ended June 30, 1997. The increase in revenues was primarily
attributable to an increase in both aquatic and industrial vegetation management
contracts as a result of the acquisitions of Aquatic Dynamics, Inc. (the "ADI
Acquisition") in December 1996 and Aquatic and Right of Way Control, Inc. (the
"ARC Acquisition") in June 1996, the establishment of two new branch offices in
Georgia and Alabama and the intensive marketing efforts targeted at electric and
power utilities and governmental agencies.
COST OF SERVICES. Cost of services increased by $1,009,605, or 36.7%, from
$2,748,992 during the six months ended June 30, 1996 to $3,758,597 during the
six months ended June 30, 1997. The increase in cost of services was mainly
attributable to increased chemical, labor, fuel, subcontracting, vehicle leasing
and maintenance costs which was directly a result of the Company's expanding
operations. As a percentage of revenues, cost of services have increased from
52.4% for the six months ended June 30, 1996 to 57.8% for the six months ended
June 30 ,1997. The reduced gross margin was mainly attributable to higher
chemical and subcontracting costs as a result of a higher mix of industrial
vegetation management contracts for the six months ended June 30 ,1997 as
compared to the corresponding period of 1996. For the six months ended June 30,
1997 and 1996, industrial vegetation management services accounted for
approximately 19.1% and 13.4%, respectively, of the Company's total revenues.
Gross margins from industrial vegetation management contracts are generally
lower than the aquatic vegetation management contracts as they involve a higher
usage of chemicals and in some cases, subcontractors have to be used when aerial
chemical application using helicopters is required.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expense
increased by $1,258,529, or 83.7%, from $1,503,193 during the six months ended
June 30, 1996 to $2,761,722 during the six months ended June 30, 1997. The
increase in selling, general and administrative expenses was due mainly to the
expanded sales force and business development costs, the assimilation of the
operations of the three businesses acquired in 1996, increased payroll and
recruitment costs, higher travel and increased corporate expenses associated
with the sourcing of potential financing arrangements and private placements
which included travel expenses, legal and professional fees. Payroll costs have
increased substantially mainly due to the building of a larger managerial team
which included the recruitment of a President for the Company's largest
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<PAGE>
subsidiary, a chief compliance officer for training of technical staff and
monitoring of compliance with environmental regulations, a regional manager for
utility and industrial sales, a management information systems manager and a
controller. The operating expenses of the three new offices in Georgia, Arizona
and Alabama accounted for approximately $527,000 of the total increase in
selling, general and administrative expenses. As a percentage of revenues, such
expenses have increased from 28.7% for the six months ended June 30, 1996 to
42.5% for the corresponding period in 1997. This was mainly attributable to the
increased level of infrastructure spending and the costs associated with the
sourcing of financing arrangements and private placements.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
from $306,306 for the six months ended June 30, 1996 to $461,039 for the
corresponding period in 1997. Such expense as a percentage of revenues increased
from 5.8% for the six months ended June 30, 1996 to 7.1% for the six months
ended June 30, 1997. This increase reflected the additional depreciation of
application equipment and computer equipment purchased during the six months
ended June 30, 1997. In addition, there was an increase in amortization relating
to intangibles acquired from the ADI and ARC acquisitions.
INTEREST INCOME. Interest income decreased by $24,311 from $43,293 for the six
months ended June 30, 1996 to $18,982 for the corresponding period of 1997. The
decrease in interest income was consistent with the lower average cash balances
in 1997 as compared to 1996.
INTEREST EXPENSE. Interest expense increased by $66,982 from $330,903 during the
six months ended June 30, 1996 to $397,885 during the six months ended June 30,
1997 primarily as a result of increased bank borrowings.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL. Working capital (excluding net liabilities of discontinued
operations), which consists principally of cash and accounts receivable , was
$1,140,193 at December 31, 1996, compared to $2,022,185 at June 30, 1997. The
increase in working capital was mainly attributable to the cash proceeds from
the issuance of common stock and the reduction in borrowings under the credit
agreement with Capital Bank.
Of the Company's accounts receivable outstanding at December 31, 1996 and June
30, 1997, approximately $336,000 (31.6%) and $414,000 (30.3%) were due from five
customers, respectively. The increase was primarily due to more industrial
vegetation contracts undertaken during the second quarter of 1997 which are
typically larger in value. At June 30, 1997, the Company's allowance for
doubtful debts was $116,438 which the Company believes is currently adequate to
cover anticipated losses. The average collection period for accounts receivable
was approximately 34 days as of June 30, 1997 as compared to 32 days at December
31, 1996.
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<PAGE>
Inventories have increased from $339,114 as of December 31, 1996 to $793,610 as
of June 30, 1997 primarily as a result of bulk purchases of chemicals to take
advantage of quantity discounts and extended payment terms which also resulted
in an increase in accounts payable for the same comparative periods.
At June 30, 1997, the Company has loan agreements with Capital Bank which
provide for borrowings under a revolving line of credit of up to an aggregate of
$750,000 and a three-year term loan of $250,000 which is collaterized by a
long-term receivable. Advances under the line of credit are based on a certain
borrowing formula relating to eligible accounts receivable. Interest accrues at
the rates of 1-1/4% above prime for the line of credit and 9.5% for the
three-year term loan. Substantially all of the Company's assets are pledged to
Capital Bank as collateral. As of June 30, 1997, $242,742 was outstanding under
the three-year term loan and there was none outstanding under the line of
credit. Availability under the line of credit at June 30, 1997 amounted to
$750,000.
CAPITAL COMMITMENTS. As of June 30, 1997, the Company has capital commitments to
purchase 30 specialized application equipment known as "Spra-Buggies" over the
next 16 months at a purchase price of approximately $27,000 per equipment.
CASH FLOWS FROM OPERATING ACTIVITIES. For the six months ended June 30, 1997,
the Company's cash flows used in operations was $703,947 as compared to cash
generated from operations of $1,400,805 for the six months ended June 30, 1996.
Of the net cash used in operating activities for the six months ended June 30,
1997, $555,741 were used in continuing operations as compared to net cash
generated from operations of $806,943 for the six months ended June 30, 1996.
The decrease in cash flows generated from continuing operations was primarily
attributable to the net loss incurred for the six months ended June 30, 1997.
CASH FLOWS FROM INVESTING ACTIVITIES. For the six months ended June 30, 1997,
purchases of application and computer equipment amounted to $548,541. This was
partly offset by some proceeds from the sale of marketable securities and
equipment, resulting in net cash used in investing activities of $374,632. Net
cash provided by investing activities for the six months ended June 30, 1996 of
$2,924,209 was derived mainly from the sale of marketable securities and certain
assets of discontinued operations.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash provided by financing activities
for the six months ended June 30, 1997 of $1,526,359 was derived primarily from
the issuance of common stock resulting from an equity private placement of
83,333 shares at $6.00 per share and the exercise of stock options by employees,
directors and a financial consultant. The Company also had additional borrowings
of $756,090 during six months ended June 30, 1997 which included the three-year
term loan of $250,000 from Capital Bank and an equipment loan of $500,000 from a
commercial equipment financing company. The Company repaid a net total of
$720,183 of its debts which included the installment note of $200,000 relating
to the ADI Acquisition and a net payment of $404,415 under its credit
agreements.
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<PAGE>
DISCONTINUED OPERATIONS. Net liabilities of discontinued operations decreased
from $350,076 as of December 31, 1996 to $201,870 as of June 30, 1997. This
decrease was mainly due to the settlement of certain accounts payable and the
utilization of the provision for phase-out losses relating to legal fees
incurred for the collection of accounts receivable of the discontinued
operations and amounts paid to an ex-employee under a settlement agreement
entered into in 1996.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit Description
------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended June 30, 1997, the registrant filed
the following reports on Form 8-K:
(i) Current Report on Form 8-K dated May 20, 1997 (filed on
May 20, 1997) which reported the Company's completion of
an equity private placement with Tarragona Fund, Inc.
and the net increase in the Company's total
stockholders' equity.
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<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AQUAGENIX, INC.
Date: August 14, 1997 By: /s/ Andrew P. Chesler
----------------------
Andrew P. Chesler,
Chairman of the Board,
Chief Executive Officer,
President and Treasurer
(Principal Executive Officer)
Date: August 14 , 1997 By: /s/ Helen Chia
--------------
Helen Chia,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
- 15 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCEHDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
FINANCIAL STATEMENTS AS OF JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,338,511
<SECURITIES> 0
<RECEIVABLES> 1,484,180
<ALLOWANCES> 116,438
<INVENTORY> 793,610
<CURRENT-ASSETS> 4,088,996
<PP&E> 4,083,306
<DEPRECIATION> 1,396,549
<TOTAL-ASSETS> 13,398,093
<CURRENT-LIABILITIES> 2,268,681
<BONDS> 0
0
0
<COMMON> 44,636
<OTHER-SE> 5,193,108
<TOTAL-LIABILITY-AND-EQUITY> 13,398,093
<SALES> 0
<TOTAL-REVENUES> 6,497,328
<CGS> 0
<TOTAL-COSTS> 3,758,597
<OTHER-EXPENSES> 3,165,259
<LOSS-PROVISION> 57,502
<INTEREST-EXPENSE> 378,903
<INCOME-PRETAX> (862,933)
<INCOME-TAX> 0
<INCOME-CONTINUING> (862,933)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (862,933)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
