-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KcGRgGvQXY/ja2/+bJi8PNsANyHLgAJ1WpSEotCX9mqjnPgfe5CM+m2V6EcFSYBT eQR2AcQlh/AuocBzSxuKdA== 0000354278-98-000005.txt : 19980223 0000354278-98-000005.hdr.sgml : 19980223 ACCESSION NUMBER: 0000354278-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEMFIX TECHNOLOGIES INC CENTRAL INDEX KEY: 0000354278 STANDARD INDUSTRIAL CLASSIFICATION: 4953 IRS NUMBER: 720845259 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12258 FILM NUMBER: 98539790 BUSINESS ADDRESS: STREET 1: 3500 N CAUSEWAY BLVD STREET 2: SUITE 1280 CITY: METAIRIE STATE: LA ZIP: 70002 BUSINESS PHONE: 5048313600 MAIL ADDRESS: STREET 1: 3500 N CAUSEWAY BLVD STREET 2: SUITE 1280 CITY: METAIRIE STATE: LA ZIP: 70002 10-Q 1 Form 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-12258 CHEMFIX TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 72-0845259 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 3500 North Causeway Boulevard, Suite 1280, Metairie, Louisiana 70002 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (504) 831-3600 Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing require- ments for the past 90 days. Yes X No Indicated the number of shares outstanding of each of the issuer's classes of common stock, as of November 30, 1997. Common Stock, $0.01 par value 6,825,855 Class Number of Shares Outstanding CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES I N D E X Page Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - 3 - 4 November 30, 1997 and August 31, 1997 Consolidated Statements of Operations - 5 Three Months Ended November 30, 1997 and November 30, 1996 Consolidated Statements of Cash Flow - 6 Three Months Ended November 30, 1997 and November 30, 1996 Notes to Consolidated Financial Statements 7 - 13 Item 2. Management's Discussion and Analysis 14 - 16 of Financial Condition and Results of Operations Part II. Other Information Item 3. Defaults by the Company on its Senior Securities 17 Item 4. Submission of Matters to Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18 CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited) (Unaudited) November 30, August 31, 1997 1997 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,145 $ 107,005 Restricted cash 24,900 24,900 Accounts receivable: Trade receivables 54,340 210,078 Other receivables 10,488 5,235 Construction in progress 207,865 122,513 Total receivables, less allowance for uncollectible amounts of $73,634 at November 30, 1997 and $73,891 at August 31, 1997 272,693 337,826 Prepaid expenses 11,988 11,565 TOTAL CURRENT ASSETS 315,726 481,296 PROPERTY, PLANT AND EQUIPMENT: Transportation equipment 47,949 47,949 Machinery and equipment 1,192,196 1,192,196 Fixed processing facilities 1,954,735 1,954,735 3,194,880 3,194,880 Less accumulated depreciation and amortization (3,184,578) (3,182,127) 10,302 12,753 OTHER ASSETS: Excess of cost over fair value of net assets acquired 137,841 139,801 Deposits and other 19,412 19,592 157,253 159,393 $ 483,281 $ 653,442 (See Notes to Consolidated Financial Statements)
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited) (Unaudited) November 30, August 31, 1997 1997 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable, trade $ 1,920,195 $ 660,961 Other accrued liabilities 431,784 428,257 Excess billings over costs 60,000 4,000 Current maturities of long-term debt 490,035 873,596 Current obligations under capital leases 650,000 650,000 TOTAL CURRENT LIABILITIES 3,552,014 2,616,814 LIABILITIES SUBJECT TO COMPROMISE - - LONG-TERM DEBT, less current maturities 110,949 146,907 LONG-TERM OBLIGATIONS under capital leases, less current maturities - - COMMITMENTS AND CONTINGENCIES - - STOCKHOLDER'S EQUITY (DEFICIENCY IN ASSETS): Convertible Preferred stock, authorized 650,000 shares of $1 stated value, issued and outstanding 639,108 639,108 Common stock, authorized, 16,000,000 shares of $.01 par value, issued 8,790,895 at November 30, 1997 and August 31, 1997 87,909 87,909 Additional contributed capital 13,697,904 13,697,904 Accumulated deficit (17,598,677) (16,529,274) SUBTOTAL (3,173,756) (2,104,353) LESS: Treasury stock at cost, 2,118,426 shares at November 30, 1997 and August 31, 1997 (5,926) ( 5,926) (3,179,682) (2,110,279) $ 483,281 $ 653,442 (See Notes to Consolidated Financial Statements)
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended November 30, November 30, 1997 1996 REVENUES: Processing service fees $ - $ 413,446 Construction revenues 486,344 317,869 486,344 731,315 OPERATING EXPENSES: Processing service costs 3,256 209,110 Construction costs 409,357 228,676 Selling, general and administrative: Processing 853 20,507 Construction 88,516 85,081 Corporate 67,035 109,510 569,017 652,884 OPERATING INCOME (LOSS) (82,673) 78,431 OTHER INCOME (EXPENSE) Interest income 225 45 Interest expense (18,044) (29,230) Other, net (20,655) (11,787) (38,474) (40,972) INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (121,147) 37,459 INCOME TAX BENEFIT - - NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEMS (121,147) 37,459 EXTRAORDINARY ITEMS (NOTE G) (948,256) 5,042,851 NET INCOME (LOSS) (1,069,403) 5,080,310 NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $(1,069,403) $ 5,080,310 NET INCOME (LOSS) PER COMMON SHARE Continuing $ (0.02) $ - Extraordinary items $ (0.14) $ 0.60 NET INCOME (LOSS) PER COMMON SHARE Primary and fully diluted $ (0.16) $ 0.60 (See Notes to Consolidated Financial Statements)
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) [CAPTION] Three Months Ended November 30, November 30, 1997 1996 [S] [C] [C] OPERATING ACTIVITIES: Net income (loss) $(1,069,403) $ 5,080,310 Adjustments to reconcile net income (loss) Debt relinquishment (reversal) 948,256 (5,042,851) Adjustment for treasury stock - 11,978 Depreciation and amortization of property and equipment 2,451 21,199 Loss (gain)on sale of accounts receivable, trade 20,655 11,787 Provision for bad debts (256) - Amortization of deferred contract costs - 1,035 Amortization of patent rights 180 180 Amortization of goodwill 1,960 2,028 Changes in operating assets and liabilities net of effect of acquisitions: Accounts receivable, trade (244,082) (581,158) Other receivables (90,605) (9,606) Prepaid expenses (415) 40,296 Accounts payable, trade and other (106,443) 137,103 Other accrued liabilities 3,520 10,314 Excess billings over costs 56,000 (21,898) [S] NET CASH PROVIDED BY OPERATING ACTIVITIES (478,182) (339,283) INVESTING ACTIVITIES: - - NET CASH USED IN INVESTING ACTIVITIES - - (Continued) CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FINANCING ACTIVITIES: Proceeds from trade receivables 379,421 321,389 Principal payments on capital lease obligations - (1,715) Principal payments on long-term debt (2,099) (2,000) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 377,322 317,674 NET DECREASE IN CASH (100,860) (21,609) CASH AND SHORT TERM INVESTMENTS AT BEGINNING OF YEAR 107,005 36,726 CASH AND SHORT TERM INVESTMENTS AT END OF QUARTER $ 6,145 $ 15,117 SUPPLEMENTAL DISCLOSURE: Interest paid $ 429 $ 1,099 Income taxes paid $ - $ - (See Notes to Consolidated Financial Statements)
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - RESTRICTED CASH At November 30, 1997 and August 31, 1997, the Company has cash which is restricted by the terms of certain contracts or regulatory agencies. NOTE B - NOTES PAYABLE AND LONG-TERM DEBT On November 12, 1997, the Company entered into an agreement whereby it sells its subsidiaries' accounts receivable to a factor. The factor's fees are 2% per month of gross receivables. The actual fee will vary depending on the timing of collections. The Company previously had a factor agreement in place where fees varied from 1.5% to 9% In the first three months of fiscal 1998, the Company received $379,000 from sales of receivables to the two factors. "Trade Receivables" are shown in the Consolidated Balance Sheets net of the $163,000 liability due the factor at November 30, 1997. For fiscal 1997, the Company received $981,000 from sales of receivables to the factor and had a liability due the factor of $177,000 at August 31, 1997. Details of notes payable and long-term debt at November 30, 1997 and at August 31, 1997 are as follows:
Nov. 30, August 31, 1997 1997 Description Notes payable to VenVirotek Class 2 tax liability claims; interest at 7%; quarterly payments of $3,318 beginning Dec. 18, 1995; maturing on Sept. 18, 2001. - 64,569 Notes payable to VenVirotek Class 3 claims; unsecured creditors owed $1,000 and less; quarterly payments of $10,000; no interest; maturing June 18, 1996. - 25,458 Note payable to VenVirotek Class 6 claim payable over one year. - 755 Notes payable to VenVirotek Class 7 claims; unsecured creditors owed more than $1,000; interest rate 8%; monthly payments of $8,955 beginning Sept. 18, 1995 and maturing Aug. 18, 2000. - 441,647 Notes payable to VenVirotek Class 9 municipality claim; $1,500 month Sept. 18, 1995 to Jan. 18, 1996, then $500 to Sept. 18, 1996; no interest. - 7,000 (Continued)
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE B - NOTES PAYABLE AND LONG-TERM DEBT (Continued) Nov. 30, August 31, 1997 1997 Description Note payable to VenVirotek Class 10 municipality claim; gross amount due $197,233; imputed interest rate 7%; monthly payments $4,109 beginning Sept. 18, 1995 maturing Aug. 18, 1999. - 168,485 Notes payable to Chemfix Technologies, Inc. Class 2 tax claims; interest at 7%; quarterly payments of $2,157 beginning May 21, 1997, maturing Feb. 13, 2003 36,662 38,761 Note payable to Chemfix Technologies, Inc. Class 4 claim; interest at 10.25%; monthly payments of $214 beginning Nov. 18, 1996, maturing Oct. 18, 2001. 9,872 9,872 Note payable to Ally Capital Corporation; interest at 12% and principal due on earlier of December 15, 1997 or borrower receiving a minimum of $2,000,000 of external financing. 20,000 20,000 Note payable to Ally Capital Corporation; pledged 845,000 shares of Chemfix common stock; upon payment of the note, Ally will return 422,500 shares of common stock, no interest due. 50,000 50,000 Note payable to Ally Capital Corporation; principal payable on demand, interest at 10% on unpaid balance beginning Nov. 1997. 60,000 60,000 Note payable to APT over a period no shorter than 3 years plus interest. 115,450 133,956 Note payable to corporation; interest at 10%; monthly payments $62,262 until maturity 84,000 - Note payable to individual unsecured, interest at 7%; monthly payments of $5,000 beginning April 1994 maturity March 1997 225,000 - 600,984 1,020,503 Less principal payments due within one year. (490,035) (873,596) $ 110,949 $ 146,907 (Continued)
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE B - NOTES PAYABLE AND LONG-TERM DEBT (Continued) Long-term debt outstanding at Nov. 30, 1997 matures as follows: Year Ending 1998 $ 490,035 1999 44,635 2000 49,092 2001 7,954 2002 8,121 Thereafter 1,147 $ 1,020,503 The Company filed a Chapter 11 Bankruptcy Plan of Reorganization for its VenVirotek subsidiary on October 26, 1994. The filing was made in the United States Bankruptcy Court for the Eastern District of Louisiana, Case No. 94-13614. On May 15, 1995, VenVirotek's Plan was confirmed, thereby emerging it from bankruptcy. In accordance with its debt restructuring plan, the first payments were due and paid on September 18, 1995. Due to the Company's financial condition, it has been unable to pay any subsequent payments. On September 24, 1997, a hearing was held in the United States Bankruptcy Court, Eastern District of Louisiana for VenVirotek"s failure to file a motion for final decree. On September 30, 1997, it was ordered that the voluntary petition for relief filed by VenVirotek under Chapter 11 Bankruptcy Code be dismissed. Consequently, all the long-term debt associated with VenVirotek's Reorganization Plan is reclassified as short-term debt under accounts payable. In connection with the purchase of Atlantic Petroleum Technologies, Inc.'s (APT) assets on July 7, 1995, the Company entered into a reimbursement agreement with APT in satisfaction of an IRS settlement up to, but not exceeding, $134,700, provided that such amount shall be reduced by any payments made to APT for obligations it owed prior to the closing date. To date, $19,250 of such payments were made, thereby reducing the reimbursement agreement to $115,450. The agreement further states that the repayment schedule cannot be shorter than equal monthly payments of principal plus interest over three years. Management anticipates a definitive agreement to be settled in the remaining nine months of fiscal 1998. Accordingly, the short-term and long-term portion of this debt is based on this information using an estimated rate of interest. NOTE C - INCOME TAXES The Company accounts for income taxes in accordance with the provisions ofStatement of Financial Accounting Standards No. 109 - "Accounting for Income Taxes" issued in February 1992. This standard requires, among other things, recognition of future tax benefits, measured by enacted tax rates, attributable to deductible temporary differences between financial statement and income tax bases of assets and liabilities, and net operating loss, tax credit and alternative minimum tax carryforwards to the extent that realization of such benefits is more likely than not to occur. (Continued)
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE C - INCOME TAXES (Continued) Management feels that since the Company has been operating under working capital deficits and net losses, that the deferred tax assets are not "more likely than not" to be realized in the foreseeable future. Therefore, a valuation allowance for such assets has been provided with the deferred tax asset/liability being fully reserved. As a result, there has been no effect to the financial statements for fiscal 1998 or 1997. The provision for federal income taxes consist of the following:
Three Months Ended November 30, November 30, 1997 1996 Current $ --- $ --- Deferred --- --- $ --- $ --- A reconciliation between the amount of reported income taxes and the amount computed by multiplying the income (loss) before income taxes by the statutory federal rates for the three months ended November 30 is as follows: Three Months Ended November 30, November 30, 1997 1996 Income taxes (benefit) at statutory federal rate of 34% $ (363,597) $ 1,727,305 Increases (reductions) in taxes resulting from: Change in valuation allowance 362,867 (1,707,705) Non-deductible expenses 730 1,400 Other items, net - (21,000) INCOME TAX (BENEFIT) EXPENSE $ - $ --- Deferred income taxes consist of future tax benefits attributable to: November 30, November 30, 1997 1996 Assets (Liabilities) Federal net operating loss carryforwards $2,161,000 $1,882,000 State net operating loss carryforwards 76,000 179,000 Tax credit carryforwards 178,000 189,000 Alternative minimum tax carryforwards 53,000 53,000 Capital loss carryforwards 200,000 - Non-deductible reserves 216,000 200,000 Depreciation 140,000 259,000 Total 2,863,800 2,762,000 Less valuation allowance (2,863,800) (2,762,000) Net Deferred Tax Assets $ --- $ --- (Continued)
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE C - INCOME TAXES, Continued As of November 30, 1997, the Company has, for tax purposes, a net operating loss carryforward of approximately $6.4 million expiring between 2001 and 2013 and approximately $178,000 of tax credit carryforwards expiring between 1998 and 2002. Additionally, the Company has a $53,000 alternative minimum tax credit available to offset future income taxes subject to certain limitations. Due to the dismissal of the VenVirotek Chapter 11 bankruptcy proceeding, the total asset and valuation allowance increased by the amount of debt reversal at applicable tax rates. This footnote is an estimate based on information currently available. NOTE D - LEGAL PROCEEDINGS The Company filed a Chapter 11 Bankruptcy Plan of Reorganization for its VenVirotek subsidiary on October 26, 1994. The filing was made in the United States Bankruptcy Court for the Eastern District of Louisiana, Case No. 94-13614. On May 15, 1995, VenVirotek's Plan was confirmed, thereby emerging it from bankruptcy. In accordance with its debt restructuring plan, the first payments were due and paid on September 18, 1995. Due to the Company's financial condition, it has been unable to pay any subsequent payments. On Sept. 24, 1997, a hearing was held in the United States Bankruptcy Court Eastern District of Louisiana for VenVirotek's failure to file a motion for final decree. On September 30, 1997, it was ordered that the voluntary petition for relief filed by VenVirotek under Chapter 11 Bankruptcy Code be dismissed. The Company filed Chapter 11 Plan of Reorganization for itself on August 11, 1995. The filing was made in the United States Bankruptcy Court for the Eastern District of Louisiana, Case No. 95-12954. On September 10, 1996, the Company's Plan of Reorganization was confirmed by the Court, thereby emerging it from bankruptcy. Generally, the Chapter 11 Plan of Reorganization involved the recapitalization of the Company, including the redistribution of ownership, whereby original shareholders were be diluted 90%, with present creditors, management, and new investors becoming significant equity holders. Unsecured creditors had the choice of receiving one share of common stock for every $3.00 of debt, or one share of Convertible Preferred Debenture for every $4.00 of debt. The Convertible Preferred Debenture has a 4% dividend payable quarterly in kind and is convertible into common, share for share, at a rate of 20% per year. As a result, the Plan converted $6.2 million of debt into $650,000 of Long-term Obligation Under Capital Leases, with the balance being restructured into some form of equity. Detailed information regarding the Company's Chapter 11 Plan of Reorganization and Disclosure Statement is available by contacting the United States Bankruptcy Court for the Eastern District of Louisiana. (Continued)
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE E - COMMON STOCK AND CONVERTIBLE PREFERRED STOCK In accordance with the Registrant's Plan of Reorganization, existing shareholders received one share of common stock for every ten shares held. In addition, creditors received one share of common stock for $3.00 of debt, or one share of convertible preferred stock for $4.00 of debt. NOTE F - OTHER TRANSACTIONS The Registrant's confirmed Chapter 11 Plan of Reorganization on September 10, 1996 enabled the Registrant to restructure part of its $924,000 leases payable plus $394,000 of accrued interest into $650,000 of leases payable at 10.25%, with principal payments varying over the next five years until fully paid, and a $10,000 note payable at 10.25% also maturing in five years. For the forgiveness of debt, the lessor also received 20% of the outstanding stock, approximately 1.7 million shares, of the newly organized Company. This creditor holds as collateral the stock of the VenVirotek subsidiary, the equipment at the VenVirotek facility, and a second right on its receivables. In February 1997, Ally Capital placed VenVirotek in default for non-payment of the leases payable. Consequently, Ally is pursuing options to sell the equipment at VenVirotek's idled California processing facility. During 1990, the Company entered into an agreement with a supplier of raw materials used in its production process, whereby the Company would purchase specified quantities of the raw materials, as needed in production, from this supplier through fiscal year 2000 in exchange for Series C Preferred Stock up to $2 million. As of August 31, 1996, the Company had issued 18,000 of Series C Preferred Stock out of 20,000 shares to be issued under the terms of the agreement. Beginning in fiscal 1994, the supplier required cash-on- delivery terms with the Company and would no longer exchange raw material for stock. Dividends declared and unpaid on the redeemable preferred stock were $548,541 at August 31, 1996. In addition to the dividends and redeemable preferred stock, the creditor was also owed approximately $208,000 in trade debt for a total due this creditor of $2.6 million. In accordance with the Registrant's confirmed Plan of Reorganization, this creditor subsequently elected to receive one share of convertible preferred stock for $4.00 of debt. Each share of convertible preferred stock is convertible into one share of common stock at a rate of 20% per year and will be paid a dividend of 4% per year payable quarterly in kind beginning in October 1997. The first issuance of stock of 153,386 shares was issued to this creditor on November 20, 1997. On April 3, 1997, the Company entered into a $100,000 Guarantee and Loan Agreement with Ally Capital (Ally) whereby Ally loaned the Company $50,000 for working capital and pledged an additional $50,000 to the ACSTAR Insurance Company to secure a $300,000 bonding line for the Company. The Company issued and pledged 1,690,000 shares to Ally Capital as security for the bond line guarantee. (Continued)
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE F - OTHER TRANSACTIONS (Continued) Additionally, the Company issued and pledged 845,000 shares as collateral for the $50,000 of working capital. When the loan is totally repaid, Ally will return 50% of these shares, or 422,500 shares to the Company, and retain the remaining shares in their account. The 2,112,500 shares of stock pledged to Ally Capital for the $100,000 Guarantee and Loan Agreement would be forfeited to Ally in the event of default. In August 1997, Ally loaned the Company $60,000 for working capital. Monthly interest payments based on 10% per annum of the unpaid principal balance were due to start on November 1997. The Company has been unable to make any of these payments due to its current financial condition. On September 17, 1997, the Board of Directors adopted a Resolution to terminate the Company's 401(k) Plan. With only three employees in the Plan, it was decided that the Company could no longer afford to keep the Plan. On November 10, 1997, the Company entered into a 120-day agreement with Primary Systems, LLC to factor the receivables of Atlantic Petroleum Technologies of Louisiana, Inc. (APTL), the Company's primary operating subsidiary. As part of the agreement, the Company is seeking shareholder approval to sell substantially all of the assets of APTL. The Company is currently in the process of preparing a proxy for a Special Shareholders Meeting for the purpose of securing shareholder approval for this sale. If the asset sale is approved by the shareholders, Management cannot provide any assurances that the Company will be able to continue as an ongoing concern. NOTE G - EXTRAORDINARY ITEMS During the three months of fiscal 1997, the Company recorded extraordinary loss totalling $948,000. This loss was due to the dismissal of the VenVirotek Reorganization Plan in September 1997 thereby reversing previous relinquishment of debt from the previously approved Plan of Reorganization. Of the $948,000 debt reversal, $639,000 was reclassified from notes payable to accounts payable. The balance totalling $308,000 remained in notes payable.
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONSOLIDATED RESULTS OF OPERATIONS A. Three Months Ended November 30, 1997 vs. Three Months Ended November 30, 1996 Revenues Consolidated revenues decreased by $244,971, or 33%, comparing the quarter ended November 30, 1997 to the quarter ended November 30, 1996. The reduction in consolidated revenues is the direct result of the VenVirotek facility being shut down in early December 1996. The current quarter did not contain any processing fee revenues whereas the prior period quarter had $413,000 of revenues associated with processing fees. Partially offsetting the loss of processing fee revenues was an increase in construction revenues. Construction revenues increased by $168,475, or 53%, as a result of the Company's construction subsidiary's business increasing substantially over the prior period quarter. Cost of Service Total processing service costs decreased to $3,250 from $209,111 when comparing the quarters ended November 30, 1997 to the quarter ended November 30,1996. These costs were minimal due to the previously discussed shutdown of the VenVirotek operation in fiscal year 1997. For the first quarter of fiscal 1998, construction costs increased to 84% of construction revenues compared to 72% of construction revenues in the first quarter of fiscal year 1997. This increase was primarily due to inefficiencies caused by delays in purchasing materials necessary to complete projects which were caused by a shortage of cash during the first quarter. Management expects the cost of service to be back in its normal range for the second quarter due to the recent completion of a new factor line in November 1997. Selling, General and Administrative Total selling, general and administrative expense decreased to $156,400 in the first quarter of fiscal year 1998 from $215,000 in the first quarter of fiscal 1997. This decrease is partially due to the reduction in labor and associated costs at the VenVirotek facility. Additionally, corporate selling, general and administrative expenses decreased by $42,000. Consequently, selling, general and administrative expenses were reduced by 27% for the comparative periods. Due to the elimination of processing revenues for the quarter, total selling, general and administrative costs as a percentage of revenues were 32%8 for the first quarter of fiscal 1998 as compared to 29% of fiscal 1997. (Continued) CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (CONTINUED) CONSOLIDATED RESULTS OF OPERATIONS, (Continued) A. Three Months Ended November 30, 1997 vs. Three Months Ended November 30, 1996, (Continued) Selling, General and Administrative (Continued) Total interest expense decreased by $18,000 from $29,000 for the three months ended November 30, 1997 in comparison to the same period last year. Since the Company has been unable to pay its bankruptcy payments in the first quarter of fiscal 1997 and 1998, most of this interest expense is accrued but not paid. Interest income was negligible since the only interest income received is based on the amount held in restricted cash. "Other Income (Expense)" in the Consolidated Statements of Operations totaling $21,000 and $12,000 for the periods ending November 1997 and 1996 respectively, consist mainly of fees incurred in connection with the sale of receivables to the factoring company. Extraordinary Items During the three months ended November 30, 1997, the Company recorded an extraordinary loss of $948,256. This loss was as a result of the dismissal of the VenVirotek bankruptcy on September 30, 1997. Consequently, $639,000 of debt that had previously been relinquished due to the Reorganization Plan approval in 1995, was now reinstated as a accounts payable. The difference, $309,256, remained classified as notes payable. At November 30, 1996, the Company recorded extraordinary income of approximately $5.0 million. This gain was made up of a combination of the Company filing Chapter 7 Plan of Dissolution for two of its subsidiaries, CeTech Resources, Inc. and BTC Environmental Incorporated, as well as confirmation of the Registrant's Chapter 11 Plan of Reorganization on September 10, 1996. (Continued) CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, (CONTINUED) CONSOLIDATED RESULTS OF OPERATIONS, (Continued) B. Liquidity and Capital Commitments At November 30, 1997, the Company was operating under a working capital deficit of $3.2 million, compared to a deficit of $2,199,000 at August 31, 1997. This deficit increase is primarily attributed to the $948,000 of debt reversal that was recorded on the books upon the dismissal of the Company's VenVirotek subsidiary's Chapter 11 dismissal in September 1997. On November 10, 1997, the Company entered into a 120-day agreement to secure accounts receivable financing with a factoring company on a subsidiary's accounts receivable. This agreement is part of an intended asset sale of the Company's primary operating subsidiary to an affiliated company of the factor company. As of November 30, 1997, the Company had borrowed $202,700 from the factor to fund ongoing operations. The Company is currently in the process of preparing a proxy for a Special Shareholders Meeting for the purpose of securing shareholder approval for the sale of substantially all of the assets of the Company, which comprises the last operating entity of the Company. Once the asset sale is approved by the shareholders, management cannot provide any assurances that the Company will be able to continue operations. CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES Part II - Other Information ITEM 3. DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES
a. Nature of Principal Interest Total Description Default In Arrears In Arrears In Arrears Notes Payable Non-payment $ 331,000 $ 77,000 $ 408,000 Due to the financial condition of the Company, substantially all of the Company's notes, mainly VenVirotek's bankruptcy payments, are in default due to nonpayment. At present, principal and interest amounts in arrears on notes payable are $331,000 and $77,000, respectively, totalling $408,000 in arrears. The Company was in arrears in principal and interest on its leases payable by $32,000 and $82,870, respectively. As a result, the total in arrears on leases payable is $114,870. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS There have been no matters submitted to a vote of security holders during the three months ended November 30, 1997. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits - None b. Reports on Form 8-K - None
CHEMFIX TECHNOLOGIES, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized. CHEMFIX TECHNOLOGIES, INC. February 13, 1998 Date David L. Donaldson President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----