-----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, OAZVIR62Wj7HKA3N4jt+v3Zbsf9kR8XpGcFpVaG3nsQecLgq4c4MEWuLMSAK3itt oUd9vVXlMUkC5Jdw1vf9qw== 0000796960-95-000003.txt : 19951208 0000796960-95-000003.hdr.sgml : 19951208 ACCESSION NUMBER: 0000796960-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951115 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED ENVIRONMENTAL SYSTEMS INC CENTRAL INDEX KEY: 0000796960 STANDARD INDUSTRIAL CLASSIFICATION: 8741 IRS NUMBER: 841059226 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19013 FILM NUMBER: 95593216 BUSINESS ADDRESS: STREET 1: 730 17TH STREET STE 712 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3035715564 MAIL ADDRESS: STREET 1: 730 17TH STREET STREET 2: SUITE 712 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: NORTHWEST PASSAGE OF NORTH AMERICA INC DATE OF NAME CHANGE: 19901127 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 1995 Commission File Number 0-19013 ADVANCED ENVIRONMENTAL SYSTEMS, INC. (Exact name of registrant as specified in its charter) New York 84-1059226 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 730 17th Street, Suite 712 Denver, Colorado 80202 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (303) 571-5564 (Former name, former address and former fiscal year, if changed since last report.) Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) Yes X of the Securities Exchange Act of 1934 during the pre- ceding 12 months (or for such shorter period that the No registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares outstanding Class at October 31, 1995 Common stock, $.0001 par value 531,667,515 shares Form 10-Q 3rd Quarter INDEX PAGE PART I - FINANCIAL INFORMATION * ITEM 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets - September 30, 1995 and December 31, 1994 3 Condensed Consolidated Statements of Operations - For the Three Months and Nine Months Ended September 30, 1995 and 1994 4 Condensed Consolidated Statements of Cash Flows - For the Nine Months Ended September 30, 1995 and 1994 5 Notes to Condensed Consolidated Financial Statements 6 ITEM 2. Management's Discussion and Analysis 7 PART II - OTHER INFORMATION ITEMS 1 through 6. 10 Signature 11 * The accompanying financial statements are not covered by an independent auditor's report. ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS September 30, December 31, 1995 1994 CURRENT ASSETS: Cash and cash equivalents 93,000 $ 126,000 Trade accounts receivable, net of allowance for doubtful accounts of $40,000 912,000 2,497,000 Unbilled trade receivable 471,000 Prepaid expenses 235,000 197,000 Income tax receivable, net - 92,000 Total current assets $1,711,000 $3,101,000 PROPERTY, PLANT AND EQUIPMENT: Equipment 3,447,000 3,084,000 Furniture and fixtures 364,000 346,000 Transportation equipment 360,000 360,000 4,171,000 3,790,000 Accumulated depreciation (2,547,000) (2,238,000) 1,624,000 1,552,000 INTANGIBLES AND OTHER ASSETS: Goodwill and other intangibles, net of accumulated amortization of $531,000 and $461,000 1,048,000 1,058,000 Other 8,000 5,000 1,056,000 1,063,000 Total assets 4,391,000 $ 5,716,000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable, trade 302,000 928,000 Revolving loans 336,000 789,000 Current portion of long term debt - Financial institutions 437,000 248,000 Related parties 1,000 26,000 Accrued expenses and other liabilities 241,000 459,000 Income taxes payable - - Total current liabilities 1,317,000 2,450,000 LONG-TERM DEBT: Financial institutions 1,167,000 1,134,000 DEFERRED INCOME TAXES 208,000 181,000 SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK: $.0001 par value; 34,066,000 shares authorized; 34,066,000 and 43,616,000 issued and outstanding in 1995 and 1994, respectively; liquidation preference of $277,000 in 1995 and $355,000 in 1994 265,000 342,000 COMMON AND OTHER STOCKHOLDERS' EQUITY: Preferred stock, $.0001 par value, Convertible Series B; 100,000,000 shares authorized; 24,592,000 shares issued and outstanding; liquidation preference of $200,000 2,000 2,000 Common stock, $.0001 par value, 2,250,000,000 shares authorized; 531,667,515 issued and outstanding 53,000 53,000 Additional paid-in capital 548,000 548,000 Retained earnings 831,000 1,006,000 Total stockholders' equity 1,434,000 1,609,000 Total liabilities and stockholders' equity 4,391,000 $5,716,000 The accompanying notes are an integral part of these financial statements.
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 1994 SERVICE REVENUES $1,912,000 $1,817,000 COSTS AND EXPENSES: Service costs and expenses 1,357,000 1,557,000 Selling, general & administrative 668,000 549,000 Management fees, related party 24,000 24,000 Interest 55,000 43,000 Depreciation and amortization 107,000 154,000 2,211,000 2,327,000 INCOME (LOSS) BEFORE INCOME TAX EXPENSE (299,000) (510,000) INCOME TAX EXPENSE 144,000 (123,000) NET INCOME (LOSS) (443,000) (387,000) NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (211,000) $ (410,000) NET INCOME (LOSS) PER COMMON SHARE AND COMMON SHARE EQUIVALENT $ (*) $ (*) WEIGHTED AVERAGE SHARES OUTSTANDING $531,667,515 $531,667,515 *Less than $.0001 per share
FOR THE SIX MONTHS ENDED SEPTEMBER 30,
1995 1994 SERVICE REVENUES $ 8,060,000 $ 9,373,000 COSTS AND EXPENSES: Service costs and expenses 5,499,000 6,304,000 Selling, general & administrative 2,044,000 1,774,000 Management fees, related party 72,000 72,000 Interest 172,000 161,000 Depreciation and amortization 376,000 468,000 8,163,000 8,779,000 INCOME (LOSS) BEFORE INCOME TAX EXPENSE (103,000) 594,000 INCOME TAX EXPENSE 19,000 482,000 NET INCOME (LOSS) (122,000) 112,000 NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (175,000) $ 47,000 NET INCOME (LOSS) PER COMMON SHARE AND COMMON SHARE EQUIVALENT $ (*) $ (*) WEIGHTED AVERAGE SHARES OUTSTANDING $531,667,515 $531,667,515 *Less than $.0001 per share The accompanying notes are an integral part of these financial statements.
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30,
1995 1994 CASH FLOWS FORM OPERATING ACTIVITIES: Net income $ (122,000) $ 112,000 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 376,000 468,000 Deferred income taxes 27,000 (40,000) Decrease (increase) in - Trade accounts receivable 1,585,000 34,000 Unbilled trade receivables (282,000) - Prepaids and other assets 54,000 (95,000) Increase (decrease in - Accounts payable (626,000) 123,000 Accrued expenses (218,000) (92,000) Net cash provided by operating activities 794,000 510,000 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (318,000) (106,000) Proceeds form sale of property, plant and equipment - - Other (60,000) 4,000 Net cash used in investing activities (378,000) (102,000) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds form revolving lines of credit 2,120,000 6,812,000 Repayments of lines of credit (2,573,000) (6,683,000) Proceeds from notes payable 403,000 - Repayments of notes payable (269,000) (390,000) Redemption of Series A preferred stock (77,000) (67,000) Dividends declared (53,000) (65,000) Net cash used in financing activities (449,000) (393,000) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (33,000) 15,000 CASH AND CASH EQUIVALENTS, beginning of period 126,000 120,000 CASH AND CASH EQUIVALENTS, end of period $ 93,000 $ 135,000 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for income taxes $ 165,000 $ 282,000 Cash paid for interest $ 167,000 $ 149,000 The accompanying notes are an integral part of these financial statements.
ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. UNAUDITED FINANCIAL STATEMENTS In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all the normal recurring adjustments necessary to present fairly the financial position of the Company as of September 30, 1995, the results of its operations for the three and nine month periods ended September 30, 1995 and its cash flows for the nine month period ended September 30, 1995. Operating results for the three and nine month periods ended September 30, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. The consolidated balance sheet as of December 31, 1994 is derived from the audited financial statements, but does not include all disclosures required by generally accepted accounting principles. As a result, these financial statements should be read in conjunction with the Company's form 10-K for the fiscal period ended December 31, 1994. 2. RECLASSIFICATIONS Certain amounts in the prior period's statement of operations and cash flows have been reclassified to conform with the current period presentation. 3. CONTINGENCIES A customer is seeking indemnification from the Company in a personal injury case pursuant to the terms of the contract between this customer and the Company. This matter is being defended by the Company's insurer. A former independent contractor has filed a sexual harassment complaint with the Equal Employment Opportunity Commission against the Company. There has not been a review of the claim sufficient for an evaluation of its merits. The Company was recently named as a defendant in litigation brought by an employee of a sub-contractor for injuries allegedly sustained by him. This matter is being defended by the Company's insurer. A customer is seeking indemnification from the Company in a personal injury case pursuant to the terms of the contract between this customer and the Company. The Company and its insurer are denying indemnification. The customer has notified the Company that it is considering filing a cross-complaint against the Company. Three Company employees were injured on a customer's premises. The customer has notified the Company that it will seek indemnification as an additional insured under the Company's insurance policy and pursuant to contractual terms. The Company has notified the insurance carrier, but has not received a response. Based on information presently available to the Company which is preliminary and subject to change, management does not believe these matters will have a material adverse effect on the financial condition of the Company. The accompanying financial statements do not include any adjustments that might result from the outcome of the above matters. ADVANCED ENVIRONMENTAL SYSTEMS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION General - The Company, through its subsidiary, International Catalyst, Inc. (Incat), provides catalyst handling services to chemical and petrochemical refineries. Liquidity and Capital Resources - The Company's working capital decreased from $651,000 at December 31, 1994 to $394,000 at September 30, 1995. This decrease in working capital is primarily attributable to operating losses during the second and third quarter of 1995. Incat has had an annual revolving working capital credit facility with a financial institution since 1988, collateralized by its accounts receivable and other intangible property. The maximum amount which may be outstanding from time to time under the line is currently $1,400,000 and the next renewal date is July 31, 1996. At September 30, 1995 there was a $336,000 balance outstanding on this line-of-credit. Net worth decreased from $1,609,000 at December 31, 1994 to $1,434,000 at September 30, 1995. The $175,000 decrease in net worth is due to net losses of $122,000 for the nine months ended September 30, 1995, reduced by $53,000 in dividends declared on preferred stock for the period. The Company financed capital equipment expenditures with a $2,100,000 financial institution loan. The current balance outstanding on this loan is approximately $1,533,000. The loan is to be repaid in monthly installments of $46,000 with all unpaid interest and principal due December 31, 1997. The Company may replace some equipment in the fourth quarter and will finance this equipment with capital leases. Management believes that its liquidity requirements can be funded through cash generated from operations and through usage of the working capital credit facility as discussed above. RESULTS OF OPERATIONS Service revenues for the three months ended September 30, 1995 were $95,000 higher than for the corresponding period of the previous year. Excluding the impact of subcontractor pass-through revenues of $22,000 for the quarter ended September 30, 1995 and $80,000 for the quarter ended September 30, 1994, the increase in service revenues was $177,000. For the nine months ended September 30, 1995, service revenues decreased $1,313,000 from the same period ended September 30, 1994. Excluding the impact of subcontractor pass-through revenues of $607,000 and $763,000 for the nine month periods ended September 30, 1995 and 1994, respectively, the decrease in revenues was approximately $1,157,000. The reduction in service revenues for the nine months is attributable to slowing of scheduled customer shutdowns and work which did not materialize in Mexico due to extreme economic conditions in that country during the second quarter of 1995. Management plans to continue its sales and marketing programs in an effort to expand the Company's customer base. For the quarter ended September 30, 1995, the company has added four new customers in the Southern and Southwest Regions totaling $45,000 in revenue. For the nine months ended September 30, 1995, the Company has $285,000 in revenue from new customers. Cost of services as a percentage of service revenues was 71% and 86% for the quarters ended September 30, 1995 and 1994, respectively. Excluding low margin (5-10%) subcontractor pass-through revenues, service costs as a percentage of service revenues were approximately 70% for the quarter ended September 30, 1995 and 83% for the quarter ended September 30, 1994. This net decrease in the cost of services as a percentage of revenues for the quarter is attributable to a reduction in direct cost of 8.8% and a reduction of 2.6% in indirect cost. Direct cost as a percentage of revenue for the year through September 30, 1995 is down 2.6% for this same period in 1994 and is attributable to doing a better job of controlling direct job cost in the field. Cost of services as a percentage of service revenue was 68% and 67% for the nine months ended September 30, 1995 and 1994, respectively. Excluding low margin (5-10%) subcontractor pass-through revenues, service costs as a percentage of service revenues were approximately 65% and 64% for the nine months ended September 30, 1995 and 1994, respectively. Although service revenue volume is down for the nine month period ended September 30, 1995, service costs and expenses as a percentage of revenue are comparable to the prior year's because the decrease in direct costs more than offset increases in indirect costs for the nine month period ending September 30, 1995. The increase of $119,000 and $270,000 in selling, general and adminis- trative (SG&A) costs for the three months and nine month periods ended September 30, 1995 as compared to the same period in 1994 is due primarily to the opening of the Corpus Christi, Texas office. Expanding services into Corpus Christi has caused an escalation in fixed SG&A; however, management continues to focus efforts on controlling SG&A costs. Depreciation and amortization expense decreased for the three month and nine month periods ended September 30, 1995 as compared to the corresponding periods in the previous year due to some equipment being fully depreciated and some equipment not being depreciated due to it not being placed in service until the fourth quarter. The Company experienced a net loss of $443,000 and $122,000 for the three and nine month periods ended September 30, 1995 and net loss of $387,000 and net income of $112,000 for the three and nine month periods ended September 30, 1994. Overall net income has decreased due to a decline in the volume of service revenues. Management is projecting 1995 fiscal year service revenues to be down from 1994 by 17-20%. Major turnarounds originally scheduled for 1995 have been delayed due to extended runs and/or for economic reasons. Net income is anticipated to be less than 1994 fiscal year results primarily due to the decrease in volume and the continuing costs of developing the Corpus Christi, Texas office. PART II - OTHER INFORMATION Items 1 through 6. Not applicable. SIGNATURE Pursuant to the requirements of The Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ADVANCED ENVIRONMENTAL SYSTEMS, INC. (Registrant) DATE: November 14, 1995 BY: /s/Alfred O. Breher Alfred O. Brehmer, Director, Secretary and Treasurer SIGNATURE Pursuant to the requirements of The Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ADVANCED ENVIRONMENTAL SYSTEMS, INC. (Registrant) DATE: November 14, 1995 BY: /s/ Alfred O. Brehmer Alfred O. Brehmer, Director, Secretary and Treasurer EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER 30, 1995 UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 93,000 0 952,000 40,000 0 1,711,000 4,171,000 2,547,000 4,391,000 1,317,000 1,604,000 267,000 0 53,000 1,379,000 4,391,000 8,060,000 8,060,000 5,499,000 5,499,000 2,492,000 0 172,000 (103,000) 19,000 (122,000) 0 0 0 (122,000) 0 0
-----END PRIVACY-ENHANCED MESSAGE-----