<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 28, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -----------------------
Commission file number 0-25528
--------------
ENVIROQ CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 59 -3290346
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
3918 Montclair Road, Suite 206
Birmingham, Alabama 35213
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (205)870-0588
-------------
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, par value $0.01 1,009,377
----------------------------- ------------------
(Class) (Number of Shares)
Traditional Small Business Disclosure Format (Check one):
Yes [x] No [ ]
<PAGE> 2
ENVIROQ CORPORATION AND SUBSIDIARIES
FORM 10-QSB DECEMBER 28, 1996
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)-
DECEMBER 28, 1996 AND MARCH 30, 1996 3
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)-
THREE AND NINE MONTHS ENDED DECEMBER 28, 1996 AND DECEMBER 30,1995 5
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)-
NINE MONTHS ENDED DECEMBER 28, 1996 AND DECEMBER 30,1995 6
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION 13
SIGNATURES 15
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
ENVIROQ CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
- -----------------------------------------------------------------------------------------
Dec. 28, March 30,
1996 1996
------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,449,622 $ 3,628,990
Interest receivable - 7,890
Accounts receivable (no allowance considered necessary) 132,248 126,397
Notes receivable 30,577 -
License fees receivable 4,960 4,960
Inventories 116,371 118,390
Prepaid expenses and other assets 33,925 34,078
------------ -------------
Total current assets 2,767,703 3,920,705
------------ -------------
OTHER ASSETS:
Employee notes receivable 17,000 17,000
Other 4,497 17,989
------------ -------------
Total other assets 21,497 34,989
------------ -------------
PROPERTY, PLANT AND EQUIPMENT, at cost
Land 310,135 310,135
Operating equipment 25,563 25,563
Other equipment and vehicles 40,241 55,048
------------ -------------
375,939 390,746
Less accumulated depreciation (43,507) (56,402)
------------ -------------
Property, plant and equipment, net 332,432 334,344
------------ -------------
TOTAL ASSETS $ 3,121,632 $ 4,290,038
============ =============
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
3
<PAGE> 4
ENVIROQ CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
- -------------------------------------------------------------------------------
Dec. 28, March 30,
1996 1996
---------- -----------
[S] [C] [C]
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 41,738 $ 165,753
Salaries, wages and related taxes 7,647 9,814
Income taxes payable - 1,040,504
----------- -----------
Total liabilities 49,385 1,216,071
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY:
Common stock (par value $.01 per share), authorized
10,000,000 shares, issued and outstanding effective
April 18, 1995, 1,009,377 shares 10,094 10,094
Additional paid-in capital 6,190,647 6,190,647
Accumulated deficit (3,128,494) (3,126,774)
----------- -----------
Total stockholders' equity 3,072,247 3,073,967
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,121,632 $ 4,290,038
=========== ===========
See accompanying notes to unaudited consolidated condensed financial statements.
4
<PAGE> 5
<TABLE>
<CAPTION>
ENVIROQ CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ -----------------------
DEC. 28, DEC. 30, DEC. 28, DEC. 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES $ 304,289 $ 309,278 $ 939,969 $ 660,115
COST OF REVENUES 156,145 191,669 501,430 384,492
--------- --------- --------- ---------
GROSS PROFIT 148,144 117,609 438,539 275,623
--------- --------- --------- ---------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 207,993 147,059 539,044 579,403
--------- --------- --------- ---------
LOSS FROM OPERATIONS (59,849) (29,450) (100,506) (303,780)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE) NET 36,661 (3,276) 108,011 (4,638)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (23,188) (32,726) 7,505 (308,418)
--------- --------- --------- ---------
INCOME TAX (EXPENSE) BENEFIT (9,225) 10,000 (9,225) 95,000
--------- --------- --------- ---------
NET LOSS $ (32,413) $ (22,726) $ (1,720) $(213,418)
========= ========= ========= =========
NET LOSS PER
SHARE $ (0.03) $ (0.02) $ (0.00) $ (0.21)
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
5
<PAGE> 6
<TABLE>
<CAPTION>
ENVIROQ CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------------------------------------
NINE MONTHS ENDED
----------------------------
DEC. 28, 1996 DEC. 30, 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,720) $ (213,418)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 6,714 74,153
Amortization 13,492 64,876
Decrease in income taxed payable (1,040,504)
Changes in assets and liabilities provided (used) cash (152,547) (217,270)
----------- -----------
Net cash used in operating activities (1,174,565) (291,659)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in cash surrender value of
life insurance - 29,917
Decrease in other long-term liabilities - (46,833)
Additions to property, plant and equipment (4,803) (18,556)
----------- -----------
Net cash used in investing activities (4,803) (35,472)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES - -
----------- -----------
----------- -----------
NET DECREASE IN CASH AND
----------- -----------
CASH EQUIVALENTS (1,179,368) (327,131)
----------- -----------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,628,990 505,169
CASH AND CASH EQUIVALENTS ----------- -----------
AT END OF PERIOD $ 2,449,622 $ 178,038
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
6
<PAGE> 7
ENVIROQ CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - MANAGEMENT'S REPRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions for Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
These unaudited financial statements include all adjustments, consisting of
normal recurring accruals, which Enviroq Corporation considers necessary for a
fair presentation of the financial position and the results of operations for
these periods.
The results of operations for the three and nine months ended December 28, 1996
are not necessarily indicative of the results to be expected for the full year
ending March 29, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's Form 10-KSB for the
year ended March 30, 1996, as filed with the Securities and Exchange
Commission.
NOTE 2 - GENERAL
A. COMPANY INFORMATION
Enviroq Corporation, a Delaware corporation (the "Company"), was
incorporated on February 9, 1995. At the time of its incorporation, the
Company was a wholly-owned subsidiary of a Delaware corporation formerly
named Enviroq Corporation ("Old Enviroq"). Prior to April 18, 1995, the
Company was named New Enviroq Corporation ("New Enviroq"). On April 18,
1995, Old Enviroq distributed all of the issued and outstanding capital
stock of New Enviroq to the holders of the common stock of Old Enviroq (the
"Distribution"). Following the Distribution, the Company changed its name
from New Enviroq Corporation to Enviroq Corporation. Also following the
Distribution, Old Enviroq merged with a subsidiary of Insituform
Mid-America, Inc. ("IMA") and changed its name to Insituform Southeast, Inc.
("Insituform Southeast").
The Company's principal executive office is located at 3918 Montclair Road,
Suite 206, Birmingham, Alabama 35213, and its telephone number is (205)
870-0588. The Company's mailing address is P. O. Box 130062, Birmingham,
Alabama 35213.
The Company is principally engaged in the development, commercialization,
formulation and marketing of spray-applied resinous products, and in the
treatment of municipal wastewater biosolids. The Company's operations are
conducted primarily through Sprayroq(R), Inc., a Florida corporation
("Sprayroq"), and through Synox(R) Corporation, a Delaware corporation and a
wholly-owned subsidiary of the Company ("Synox"). The Company owns 50% of
the outstanding capital stock of Sprayroq. Sprayroq is engaged in the
development, commercialization, manufacture and marketing of spray-applied
resinous materials. Synox is engaged in the research, development and
marketing of a process for the treatment of municipal wastewater biosolids.
To date, most of the revenue and operating income for the Company have
resulted from the operations of Sprayroq.
7
<PAGE> 8
B. BASIS OF PRESENTATION
Principles of Consolidation - The consolidated financial statements include
the accounts of Enviroq Corporation, Synox and Sprayroq. These financial
statements included the historical financial statements of Synox and
Sprayroq effective April 18, 1995, as if the operations included herein had
been operating as one entity for the periods presented. They include, at
their historical amounts, the assets, liabilities, revenues and expenses
directly related and those allocated to the businesses which comprise most
of the Company's operations. All significant intercompany transactions are
eliminated. Although the Company owns 50% of the outstanding capital stock
of Sprayroq, all of the operating results of Sprayroq have been included,
without discount or reduction.
C. NET LOSS PER SHARE
Net loss per share was computed by dividing net loss by the 1,009,377 shares
of common stock outstanding as of December 28, 1996, considering these
shares to be outstanding for all periods presented.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
Synox is the exclusive licensee of certain technology and know-how under a
license agreement with a company controlled by certain affiliates of the
Company. The agreement currently covers 15 states in the license territory and
grants an option to acquire additional territory on a payment of a prepaid
royalty. The option rights expire December 31, 1997.
Under the terms of its license agreement (as amended), Synox is subject to
minimum royalty provisions and to the maintenance of a $50,000 net worth and
the performance of other material provisions of the license agreement. Minimum
annual royalties (based upon retaining the 15 states currently under the
agreement) are due each January 1, for the ensuing calendar year through the
license expiration, according to the following schedule. On January 1, 1995, a
minimum royalty expense of $45,168 was paid. The license agreement was amended
on December 20, 1996 to change the expiration date of the license and to
provide that no minimum royalty payment would be due on January 1, 1997, but
that such minimum royalty payments would resume on January 1, 1998, in
accordance with the following schedule.
<TABLE>
<CAPTION>
DUE DATE AMOUNT
<S> <C>
January 1, 1998 $ 90,336
January 1, 1999 180,671
January 1, 2000 180,671
January 1, 2001 through 2008 225,839
</TABLE>
Pursuant to the merger agreement between Old Enviroq and Synox, the
stockholders of Synox at the time of the merger received Old Enviroq shares
valued at $672,000 in the aggregate plus the right to receive additional shares
of Old Enviroq, dependent on the earnings of Synox, up to a maximum value of
$2,017,000. In addition, the then existing obligations of Synox under
promissory notes to certain shareholders ($767,376 at December 30, 1991 plus
additional interest at 7.66%) shall become payable by Synox in cash only after
such time as (i) all the contingent shares have been issued and (ii)
accumulated retained earnings are available for such payment. Interest shall
become payable only to the extent of available net earnings. As a result of
the Distribution of Company shares referred to in Note 2.A above, the
obligation to issue contingent shares became an obligation of the Company to
issue its shares in lieu of Old Enviroq shares. To the extent additional,
contingent shares become issuable in the future or additional obligations
become payable in the future, such consideration will be recorded at that time
at its fair value and accounted for as additional intangible assets.
The Company and Replico Development Company, Inc. ("Replico") each own 50% of
the outstanding capital stock of Sprayroq, and pursuant to the Stockholder
Agreement dated as of March 25, 1992 between the Company (as successor to Old
Enviroq), Sprayroq and Replico, the parties agreed to vote their respective
shares
8
<PAGE> 9
to elect three directors designated by the Company and two directors designated
by Replico. Sprayroq has obtained its operating funds primarily from the
Company. Prior to October 15, 1996, the Company had made loans to Sprayroq to
fund the working capital and other needs of Sprayroq. On October 15, 1996,
the board of directors of Sprayroq voted to restructure and consolidate this
debt with the Company, and a Consolidated Note evidencing the restructured
debt was executed on October 21, 1996 by Sprayroq. As of December 28, 1996,
the principal amount of the debt was approximately $839,000. The rate of
interest on the debt is 7% per annum. The debt will be amortized over a
30-year period, with the balance of the principal due, in the form of a
"balloon" payment, on October 1, 2001.
* * * * *
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Revenue
For the three months ended December 28, 1996, the Company generated revenues
of approximately $304,000, as compared to approximately $309,000 for the
three months ended December 30, 1995, representing a decrease of
approximately 2%. For the nine months ended December 28, 1996, the Company
generated revenues of approximately $940,000, as compared to approximately
$660,000 for the nine months ended December 30, 1995, representing an
increase of approximately 42%. The decrease in revenues for the three-month
period is primarily attributable to differences in timing in the release of
orders for materials from Sprayroq's licensees, while the increase in
revenues for the nine-month period is primarily attributable to increased
sales by the Company's Sprayroq subsidiary.
Cost of Revenues / Gross Profit
Cost of revenues were approximately $156,000 for the three months ended
December 28, 1996, as compared to approximately $192,000 for the three
months ended December 30, 1995, representing a decrease of approximately
19%. Cost of revenues were approximately $501,000 for the nine months ended
December 28, 1996, as compared to approximately $384,000 for the nine months
ended December 30, 1995, representing an increase of approximately 23%.
Cost of revenues for the three-month period decreased primarily as a result
of decreased revenues and lower than expected costs associated with new
licenses. The increase in cost of revenues for the nine-month period is
primarily a result of increased revenues.
Gross profit margin was approximately 49% for the three months ended
December 28, 1996, as compared to approximately 38% for the three months
ended December 30, 1995. Gross profit margin was 47% for the nine months
ended December 28, 1996, as compared to approximately 42% for the nine
months ended December 30, 1995.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("S,G&A") for the three months
ended December 28, 1996 were approximately $208,000, as compared to
approximately $147,000 for the three months ended December 30, 1995, an
increase of 41%. S,G&A for the nine months ended December 28, 1996 were
approximately $539,000, as compared to approximately $579,000 for the nine
months ended December 30, 1995, a decrease of 14%. The increase in S,G&A
for the three-month period is primarily a result of increased legal expenses
relating primarily to the consolidation of the debt associated with
Sprayroq. The decrease in S,G&A for the nine-month period is primarily
attributable to a reduction in expenses at the Company's Synox subsidiary.
10
<PAGE> 11
Other Income (Expense) - Net
Other Income (Expense) - Net was approximately $37,000 in income for the
three months ended December 28, 1996, as compared to approximately ($3,000)
for the three months ended December 30, 1995. Other Income (Expense) - Net
was approximately $108,000 in income for the nine months ended December 28,
1996, as compared to approximately ($5,000) for the nine months ended
December 30, 1995. For the three-month period and the nine-month period
ended December 28, 1996, most of the other income resulted from interest
income to the Company from its bank cash deposits, money market
accounts, and other investments. For the three-month period and the
nine-month period ended December 30, 1995, most of the expense resulted from
increases in expenses, which were not offset by corresponding interest
income.
Net Loss
For the three months ended December 28, 1996, the net loss was approximately
$32,000, as compared to net loss of approximately $23,000 as of December 30,
1995. For the nine months ended December 28, 1996, net loss was
approximately $2,000, as compared to a net loss of approximately $213,000 as
of December 30, 1995. The net loss for the three months ended December 28,
1996 was primarily attributable to increases in legal expenses, while the
net loss for the three months ended December 30, 1995, was primarily
attributable to losses at the Company's Synox and Sprayroq subsidiaries.
The net loss for the nine-month period ended December 28, 1996 was primarily
attributable to increases in or changes in the timing of legal, insurance
and audit expenses, which offset increases in revenue and gross profit. The
net loss for the nine-month period ended December 30, 1995 was primarily
attributable to losses at the Company's Synox and Sprayroq subsidiaries.
Financial Condition
For the three months ended December 28, 1996, stockholders' equity decreased
as compared to the preceding quarter ended September 28, 1996, primarily as
a result of the associated net loss. For the nine months ended December 28,
1996, stockholders' equity decreased as compared to the fiscal year ended
March 30, 1996, primarily as a result of the net loss of the quarter ended
December 28, 1996.
At December 28, 1996, the Company had approximately $2,718,000 in working
capital and a current ratio of 56.0-to-1, as compared to working capital of
approximately $2,705,000 and a current ratio of 3.2-to-1 at March 30, 1996.
The change in current ratio resulted primarily from the reduction in income
taxes payable.
At December 28, 1996, the Company's cash and cash equivalents totaled
approximately $2,450,000. In addition, accounts receivable totaled
approximately $132,000. The Company used cash of approximately $1,179,000
for the nine months ended December 28, 1996, primarily as a result of the
payment of income taxes during the quarter ended June 29, 1996 and, to a
lesser extent, as a result of increased inventories, accounts receivable and
prepaid expenses.
Depreciation and amortization expense was approximately $20,000 for the nine
months ended December 28, 1996. Net fixed assets decreased approximately
$2,000 between March 30, 1996 and December 28, 1996. This decrease is
attributable to the accumulated depreciation as well as adjustments relating
to the abandonment of obsolete assets, which offset purchases of equipment.
The Company does not believe that there is any appreciable seasonal impact
on the business of the Company, although extreme cold weather may impair
installation of spray-applied materials which may result in decreased resin
sales by Sprayroq.
11
<PAGE> 12
The Company's undeveloped property in Jacksonville, Florida (approximately
10.6 acres) is currently being offered for sale, which may result in an
increase in the Company's cash.
Operating cash flow combined with available cash and cash equivalents are
currently expected to be sufficient in amount to provide resources to the
Company's working capital needs during fiscal year 1997.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
None.
ITEM 2 - Changes in Securities
None.
ITEM 3 - Defaults upon Senior Securities
None.
ITEM 4 - Submission of Matters to a Vote of Security Holders
None.
ITEM 5 - Other Information
On November 26, 1996, Fidelity and Deposit Company of Maryland ("F&D")
foreclosed on certain shares of Company common stock that were owned by SCE,
Incorporated ("SCE") and Sullivan, Long & Hagerty, Inc.("SLH"). Prior to the
foreclosure, SCE owned 9,318 shares of Company common stock, and SLH owned
294,900 shares of Company common stock (collectively, the "Shares"). A
security interest had been granted previously to F&D by SCE and SLH in most of
the property of SCE and SLH (including the Shares) pursuant to a Financial
Assistance Agreement dated December 22, 1995 by and among F&D, SCE and SLH.
William J. Long subsequently purchased from F&D a portion of the Shares that
were foreclosed upon, bringing the aggregate number of shares of Company common
stock owned beneficially by Mr. Long to 263,389, or 26% of the outstanding
common stock of the Company. These transactions have been reported previously
in a series of Schedule 13Ds and amendments thereto filed on behalf of SCE, SLH
and Mr. Long.
13
<PAGE> 14
ITEM 6 - Exhibits and Reports on Form 8-K
(a) The following exhibits are included or are incorporated by reference into
this Form 10-QSB:
<TABLE>
<CAPTION>
Description of Exhibits
- -----------------------
Item
----
<S> <C>
3.01 Certificate of Incorporation of New Enviroq Corporation. Exhibit
3.01 to the Company's Registration Statement on Form 10-SB/A2 dated
April 12, 1995, is incorporated herein by reference (Commission
File No. 0-25528).
3.02 Certificate of Amendment to Certificate of Incorporation of New
Enviroq Corporation. Exhibit 3.02 to the Company's Registration
Statement on Form 10-SB/A2 dated April 12, 1995, is incorporated
herein by reference (Commission File No. 0-25528).
3.03 Bylaws of New Enviroq Corporation. Exhibit 3.03 to the Company's
Registration Statement on Form 10-SB/A2 dated April 12, 1995, is
incorporated herein by reference (Commission File No. 0-25528).
4.01 Certificate of Designation of Rights and Preferences of Series A
Preferred Stock. Exhibit 4.01 to the Company's Registration
Statement on Form 10-SB/A2 dated April 12, 1995 , is incorporated
herein by reference (Commission File No. 0-25528).
4.02 Form of Certificate of Common Stock. Exhibit 4.02 to the
Company's Registration Statement on Form 10-SB/A2 dated April 12,
1995, is incorporated herein by reference (Commission File No.
0-25528).
4.03 Form of Certificate of Series A Preferred Stock. Exhibit 4.03 to
the Company's Registration Statement on Form 10-SB/A2 dated April
12, 1995, is incorporated herein by reference (Commission File No.
0-25528).
10.01 Further Amended Agreement as of December 20, 1996 by and between
Long Enterprises, Inc. and Synox Corporation.
27.00 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8K filed during the period:
None.
14
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ENVIROQ CORPORATION
Date: February 11, 1997 By: /s/ William J. Long
----------------------------
William J. Long, President
and Chief Executive Officer
(Principal Financial and
Accounting Officer)
15
<PAGE> 1
EXHIBIT 10.01
FURTHER AMENDED AGREEMENT AS OF DECEMBER 20, 1996
FURTHER AMENDMENT dated December 20, 1996 to that certain License
Agreement made and entered into as of the 27th day of May, 1986, as amended by
that certain Further Amended Agreement dated October 4, 1994 (together
hereinafter referred to as the "License Agreement") by and between Long
Enterprises, Inc., a corporation organized and existing under the laws of the
State of Alabama, hereinafter referred to as "Long," and Synox Corporation, a
Delaware corporation, having its principal place of business at 3918 Montclair
Road, Suite 206, Birmingham, Alabama 35213, hereinafter referred to as "Synox."
WITNESSETH
WHEREAS Synox and Long have entered into the aforesaid License Agreement;
and
WHEREAS the parties desire to extend and restate the option terms in this
Amendment, superseding all conflicting provisions of the License Agreement; and
WHEREAS Long has acquired or developed improved know-how, trade secrets
and has acquired United States Patent Number 4,487,699, Sewage Sludge Treatment
with Gas Injection, expiring September 28, 2010, which along with the know-how,
trade secrets, and the patents and patent application listed in the License
Agreement is collectively referred to herein as the "Improvements," and desires
to conform the licensing of same to Synox pursuant to the License Agreement as
hereby amended and to confirm that the aforesaid option terms also relate to
the Improvements; and
WHEREAS the parties mutually desire to amend certain other information and
grant certain waivers on account of changed circumstances.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and undertakings set forth herein and for other good and valuable
consideration, the receipt and sufficiency whereof is acknowledged, the parties
hereto agree as follows:
1. Subparagraph I of Section I of the License Agreement is hereby amended to
read as follows:
I. "LONG LICENSE EXPIRATION" shall mean September 28, 2010 or
the later date of termination of the last to expire of any patent
issued pursuant to the patent applications and continuations-in-part
in existence on May 16, 1991 and thereafter prosecuted by Long or
its assignor, Charles A. Long, Jr.
2. Long confirms that its grant to Synox of license and rights set forth in
Section II of the License Agreement shall extend to the Improvements
defined above and the Patent Rights, as used in the License Agreement,
shall be deemed to include the Improvements.
3. The provisions of Section XIV of the License Agreement are retained,
except that the addresses for Long and for Synox, respectively, are
amended as follows:
<PAGE> 2
For Long:
Charles A. Long, Jr.
P.O. Box 130062
Birmingham, Alabama 35213
For Synox:
Synox Corporation
Attn: William J. Long
3918 Montclair Road, Suite 203
Birmingham, Alabama 35213
4. With respect to Schedule D to the License Agreement, all provisions are
retained except that the section titled Minimum Royalty is amended as
follows:
<TABLE>
<CAPTION>
PER
TERRITORY CAPITA ANNUAL
PERIOD POPULATION RATE ROYALTY
------- ---------- ---- -------
<S> <C> <C> <C>
January 1, 1997 - December 1, 1997 90,335,511 .001 $ 0.00
January 1, 1998 - December 1, 1998 90,335,511 .001 $ 90,335.51
January 1, 1999 - December 1, 1999 90,335,511 .002 $180,671.02
January 1, 2000 - December 1, 2000 90,335,511 .002 $180,671.02
January 1, 1997 - Long License Expiration 90,335,511 .0025 $225,838.77
</TABLE>
IN WITNESS WHEREOF, the parties hereto have executed and sealed this Agreement
as of December 20, 1996.
ATTEST: LONG ENTERPRISES, INC.
/s/ William J. Long By: /s/ Charles A. Long Jr.
- -------------------------------- --------------------------------
Its President
ATTEST: SYNOX CORPORATION
/s/ Faye B. Johnston By: /s/ William J. Long
- -------------------------------- --------------------------------
Its President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR ENVIROQ CORPORATION
FOR THE PERIOD ENDED DECEMBER 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000937256
<NAME> ENVIROQ CORP
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-START> MAR-31-1996
<PERIOD-END> DEC-28-1996
<EXCHANGE-RATE> 1
<CASH> 2,449,622
<SECURITIES> 0
<RECEIVABLES> 132,248
<ALLOWANCES> 0
<INVENTORY> 116,371
<CURRENT-ASSETS> 2,767,703
<PP&E> 375,939
<DEPRECIATION> 43,507
<TOTAL-ASSETS> 3,121,632
<CURRENT-LIABILITIES> 49,386
<BONDS> 0
0
0
<COMMON> 10,094
<OTHER-SE> 3,072,247
<TOTAL-LIABILITY-AND-EQUITY> 3,121,632
<SALES> 939,969
<TOTAL-REVENUES> 939,969
<CGS> 501,430
<TOTAL-COSTS> 539,044
<OTHER-EXPENSES> (108,011)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,720)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,720)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
