0000912057-95-006512.txt : 19950815 0000912057-95-006512.hdr.sgml : 19950815 ACCESSION NUMBER: 0000912057-95-006512 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREEN ISLE ENVIRONMENTAL SERVICES INC CENTRAL INDEX KEY: 0000083490 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 410780999 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-01561 FILM NUMBER: 95563371 BUSINESS ADDRESS: STREET 1: 410 11TH AVE SOUTH CITY: HOPKINS STATE: MN ZIP: 55343 BUSINESS PHONE: 6129357798 MAIL ADDRESS: STREET 1: 410 11TH AVENUE SOUTH CITY: HOPKINS STATE: MN ZIP: 55343 FORMER COMPANY: FORMER CONFORMED NAME: REUTER INC DATE OF NAME CHANGE: 19920703 10QSB 1 10-Q FORM 10-QSB U.S. 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 June 30, 1995 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ________ to ________ Commission File Number 0-1561 GREEN ISLE ENVIRONMENTAL SERVICES, INC. ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Minnesota 41-0780999 ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S.Employer Identification No.) incorporation or organization) 410 - 11th Avenue South, Hopkins, Minnesota 55343 --------------------------------------------- --------- (Address of principal executive offices) (Zip Code) 612/935-7798 -------------------------------------------------------------------------------- (Issuer's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during 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. . --- --- As of August 10, 1995 there were outstanding 3,191,520 shares of the registrant's common stock, par value $.18-3/4 per share. Traditional Small Business Disclosure Format (check one) Yes X . No. . --- --- 1 PART I. FINANCIAL INFORMATION. ------------------------------ ITEM 1. FINANCIAL STATEMENTS. ----------------------------- GREEN ISLE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended For the six months ended June 30, June 30, 1995 1994 1995 1994 ------------ ------------ ------------ ----------- Net sales $3,070,189 $3,134,195 $6,050,963 $6,865,479 Less: Cost of sales 2,389,218 2,268,319 4,608,430 5,264,275 Depreciation 149,309 151,430 298,479 305,030 ------------ ------------ ------------ ----------- GROSS PROFIT 531,662 714,446 1,144,054 1,296,174 Selling, general and administrative expenses 594,003 459,744 1,147,138 925,780 Depreciation 28,605 22,634 55,560 44,840 ------------ ------------ ------------ ----------- OPERATING INCOME (90,946) 232,068 (58,644) 325,554 Other income (expenses): Interest income 2,346 1,915 4,621 4,763 Interest expense (101,569) (97,078) (195,554) (186,632) Management fees 30,000 30,000 60,000 60,000 Other, net 15,165 14,984 41,777 (8,708) ------------ ------------ ------------ ----------- TOTAL OTHER EXPENSE (54,058) (50,179) (89,156) (130,577) ------------ ------------ ------------ ----------- INCOME (LOSS) FROM CONTINUING OPERATIONS (145,004) 181,889 (147,800) 194,977 ------------ ------------ ------------ ----------- Discontinued Operations: Loss from discontinued waste processing operations (539,270) (539,300) (1,077,678) (1,197,700) ------------ ------------ ------------ ----------- NET LOSS ($684,274) ($357,411) ($1,225,478) ($1,002,723) ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- Net loss per common share data: Income (loss) from continuing operations ($0.04) $0.06 ($0.04) $0.06 Loss from discontinued operations (0.17) (0.17) (0.34) (0.37) ------------ ------------ ------------ ----------- NET LOSS PER SHARE ($0.21) ($0.11) ($0.38) ($0.31) ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- Weighted average number of shares outstanding 3,191,520 3,191,520 3,191,520 3,191,520 ------------ ------------ ------------ ----------- ------------ ------------ ------------ -----------
The accompanying notes are an integral part of the consolidated financial statements. 2 GREEN ISLE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1995 1994 -------------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents ($3,205) $209,192 Investments, restricted 250,000 250,000 Accounts receivable, net of allowances of $7,862 at June 30, 1995 and $20,685 at December 31, 1994 1,446,262 1,387,124 Inventories 1,330,038 917,329 Other current assets 13,448 23,828 Other assets held for sale 50,000 50,000 -------------- ------------ TOTAL CURRENT ASSETS 3,086,543 2,837,473 Net property, plant and equipment 4,451,552 4,425,257 Other assets 485,683 -------------- ------------ TOTAL ASSETS $8,023,778 $7,262,730 -------------- ------------ -------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Debt of Eden Prairie facility guaranteed by parent company, including accrued interest of $2,195,393 and $1,117,716 at June 30, 1995 and December 31, 1994, respectively $17,703,756 $16,626,079 Current maturities of long-term debt 170,301 151,981 Borrowings under line of credit 1,891,927 2,063,477 Accounts payable, trade 1,010,634 602,340 Accrued expenses 899,343 613,157 -------------- ------------ TOTAL CURRENT LIABILITIES 21,675,961 20,057,034 Long-term debt, less current maturities 389,620 267,385 Other long-term liabilities 488,373 243,009 STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock, par value $.01 per share; authorized 2,500,000 shares; none issued Common stock, par value $.1875 per share; authorized 9,000,000 shares; issued and outstanding: 3,191,520 shares at June 30, 1995 and December 31, 1994 598,410 598,410 Additional paid-in capital 13,710,596 13,710,596 Accumulated deficit (28,839,182) (27,613,704) -------------- ------------ TOTAL STOCKHOLDERS' DEFICIT (14,530,176) (13,304,698) -------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $8,023,778 $7,262,730 -------------- ------------ -------------- ------------
The accompanying notes are an integral part of the consolidated financial statements. 3 GREEN ISLE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------------------------- Increase (Decrease) in Cash and Cash Equivalents For the Six Months Ended June 30, --------------------------------------------------------------------------------------------------- 1995 1994 --------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($1,225,478) ($1,002,723) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization 393,356 349,870 Gain on sales of assets (10,204) (146,496) Provision for writedown of assets of discontinued operations held for sale and accrual of holding period costs 253,837 Provision for writedown of inventories / equipment 74,639 Changes in operating assets and liabilities: Accounts receivable (59,137) (469,916) Inventories (412,709) 466,029 Other assets (19,620) 45,189 Accounts payable 408,294 (276,619) Accrued expenses (primarily interest) 1,309,227 872,974 --------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 383,729 166,784 --------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment 35,000 279,450 Cash paid to purchase Sollami product line (195,000) Additions to property, plant and equipment (179,106) (103,419) --------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (339,106) 176,031 --------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long term debt (85,469) (60,800) Proceeds from short term borrowings 5,875,202 6,501,475 Repayment of short term borrowings (6,046,753) (6,737,188) --------------------------------------------------------------------------------------------------- Net Cash Used by Financing Activities (257,020) (296,513) --------------------------------------------------------------------------------------------------- Net Increase (decrease) in Cash and Cash Equivalents (212,397) 46,302 Cash and Cash Equivalents, Beginning of Period 209,192 321,963 --------------------------------------------------------------------------------------------------- Cash and Cash Equivalents, End of Period ($3,205) $368,265 --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- Supplemental disclosures of cash flow information: Cash paid for interest $192,970 $185,825 Noncash investing and financing activities: Purchase of equipment in exchange for notes payable $226,024
The accompanying notes are an integral part of the consolidated financial statements. 4 Green Isle Environmental Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) 1. FINANCIAL STATEMENTS: The unaudited consolidated financial statements of Green Isle Environmental Services, Inc., and Subsidiaries (the Company) for the three and six month periods ended June 30, 1995 and 1994 reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments except as described below) necessary to fairly state the results of the operations (including discontinued operations) for the interim period. The consolidated results of operations for any interim period are not necessarily indicative of results expected for the full year. The unaudited consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's 1994 Form 10-KSB. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. SELECTED BALANCE SHEET INFORMATION: Inventories:
June 30, December 31, 1995 1994 ----------- ------------ Raw material and supplies $ 324,400 $ 340,631 Work in process 1,005,638 576,698 ----------- ------------ $ 1,330,038 $ 917,329 Property, plant & equipment: Land and related improvements $ 206,995 $ 206,995 Building 3,044,442 2,980,608 Machinery and equipment 7,243,724 7,071,605 Office equipment 635,245 602,537 Molds, fixtures and tooling 31,869 Autos and trucks 42,112 42,112 ----------- ------------ Total $11,204,387 $10,903,857 Less: accumulated depreciation 6,752,835 6,478,600 ----------- ------------ $ 4,451,552 $ 4,425,257 ----------- ------------ ----------- ------------
5 2. SELECTED BALANCE SHEET INFORMATION (cont'd): Other assets held for sale:
June 30, December 31, 1995 1994 ----------- ------------ Container manufacturing equipment $ 50,000 $ 50,000 Total $ 50,000 $ 50,000 ----------- ------------ ----------- ------------ Accrued Expenses: Interest, excluding accrued interest associated with Eden Prairie debt $ 30,827 $ 28,243 Payroll, benefits and related taxes 373,902 291,699 Legal and accounting 83,039 104,850 Accrued container warranty 136,195 140,000 Product acquisition expenses 115,760 Accrued retirement and consulting 60,504 38,496 Accrued real estate taxes 78,902 Other 20,214 9,869 ----------- ------------ Total $899,343 $613,157 ----------- ------------ ----------- ------------
3. DISCONTINUED OPERATIONS AND RELATED DEBT: As described in Notes 2 and 3 of the Notes to Consolidated Financial Statements in the 1994 Form 10-KSB, the Company ceased operations of its Eden Prairie facility (EPR) effective January 1, 1994 and has undertaken a formal plan to dispose of its other remaining waste processing operations. The loss from discontinued operations in the second quarter of 1995 includes accrued interest (including default rate interest) through June 30, 1995. The Company will continue to accrue interest in future periods through the date of a final settlement of the debt. The loss from discontinued operations for the three months ended June 30, 1995 consists of accrued interest of $539,270. As previously announced, the Company closed on the sale of all of the assets of EPR for $3.8 million on September 1, 1994. A gain of $1,914,534 on the sale of the EPR assets was recorded in the third quarter of 1994. The net proceeds of $3,768,809 from the sale have been used to repay a portion of the debt underlying the EPR facility. The Company has retained all liabilities of EPR, including the balance of the loan underlying the facility which is guaranteed by the Company. As previously announced, on September 12, 1994, the Company entered into a settlement agreement with the lender of the debt underlying EPR whereby the lender agrees not to pursue its rights against the Company under the parent guarantee of the EPR debt in return for the following: 6 1. A Senior Subordinated Secured Note to the lender for $2,750,000 with interest at 8% per year. Interest will be payable monthly on the principal balance from time to time remaining unpaid. Principal payments of $75,000 will be payable quarterly beginning in 1997 and ending on July 1, 1999, when all outstanding principal and interest is due. 2. A Junior Subordinated Secured Note to the lender for $1,000,000 with interest to accrue at 8% per year; principal and interest will be paid from excess cash flow from operations, if any, with all outstanding principal and accrued interest due on July 1, 1999. 3. A Net Operating Loss Sharing Agreement under which the Company will make annual payments to the lender of an amount equal to any tax savings related to use of up to $15,000,000 in net operating loss carryforwards. The Company has also preliminarily agreed to issue to the lender, a warrant to purchase 3,178,780 shares of Common Stock, exercisable only in the event of an "ownership change" with respect to the Company for purposes of Section 382(g) (1) of the Internal Revenue Code of 1986, as amended. The ownership change would effectively eliminate the net operating loss sharing Agreement obligation ((3) above) and result in the effective contribution of any remaining balance of the NOL Sharing Agreement obligation to contributed capital (shareholders' equity). Management is currently negotiating definitive agreements with the lender, although there can be no assurance that a definitive agreement will be reached. 4. ACQUISITION OF PRODUCT LINE: On January 9, 1995, the Company purchased the assets, inventory, patents and patent applications, trademarks and goodwill associated with the Rotary Vane Actuator business of The Sollami Company. The purchase price was $326,154 plus contingent payments equal to 8% of net sales made each month, for the 48 months beginning in February 1995, of rotary vane actuators and related parts. The total cumulative guaranteed minimum contingent payments are $295,000, with scheduled amounts due in each of the 4 years. To the extent cumulative monthly contingent payments do not equal the guaranteed minimum contingent payment for any 12 month period, the Company will be required to make an additional payment sufficient to achieve the guaranteed minimum payment for that year. The excess of acquisition cost over amounts assigned to the net identifiable assets acquired (goodwill) is being amortized on a straight line basis over fifteen years. Other identifiable intangible assets include value assigned to patents, and a covenant not to compete. Values assigned to patents are carried at cost less accumulated amortization calculated on a straight line basis over their estimated useful lives, which range from seven to fourteen years. The value assigned to the covenant not 7 to compete is being amortized on a straight line basis over seven years. 5. ASSET-BASED SHORT-TERM FINANCING ARRANGEMENT: In January 1995, the Company amended its loan and security agreement with its asset based lender. The key elements to the amendment include reducing the short-term demand line of credit to $4,500,000, increasing interest on borrowings to prime plus 3.75%, and increasing available borrowing by $125,000 by increasing the advance rate on the certificate of deposit which partially collateralizes borrowings under the line of credit. Funds available to the Company pursuant to terms of the line of credit agreement are dependent upon the level of eligible accounts receivable and plant and equipment, as defined. The Company is in violation of certain financial and technical covenants of this agreement and a cross-default covenant due to the defaults described in Notes 6 and 6(a) of the Notes to the Consolidated Financial Statements in the Company's 1994 Form 10-KSB. As a result of these default conditions, the lender may, at its sole discretion declare the Company in default, discontinue making advances to the Company and demand immediate repayment of borrowings under the line of credit. If the lender will continue making advances to the Company, additional borrowing capacity under this line of credit is approximately $54,000 at August 8, 1995. 6. AGREEMENT TO SELL REUTER RECYCLING OF FLORIDA, INC.: Effective June 1, 1995, the Company entered into an agreement to sell all of its stock of Reuter Recycling of Florida, Inc., which had been pledged by the Company to the construction lender of Reuter Recycling of Florida, Inc., to an unrelated third party. As discussed in Note 4 to the Consolidated Financial Statements contained in the 1994 Form 10-KSB, because Reuter Recycling of Florida, Inc. had previously been deconsolidated from the Company's consolidated financial statements and the Company will receive no proceeds from the sale, the transaction will have no impact on the Company's financial position or results of operations. The management agreement between Green Isle and Reuter Recycling of Florida, Inc. will be terminated upon the close of the sale. 7. RECLASSIFICATION: Certain reclassifications have been made to the 1994 consolidated financial statements in order to conform with the June 30, 1995 presentation. These reclassifications did not change the Company's previously reported financial position or results of operations. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS CONTINUING MANUFACTURING OPERATIONS: Continuing operations consist primarily of the precision machining business, which is primarily the manufacture of certain medical products and other precision machined parts on a contract basis. The Company has sold most of the equipment used in its plastics manufacturing operations and substantially all plastics manufacturing ceased effective August, 1994. The Company's net revenues from continuing operations for the second quarter of 1995 decreased by approximately 2% from the same period in 1994. The Company's net revenues for the six months ended June 30, 1995 were $6,050,963 compared to $6,865,479 for the same period in 1994, a decrease of approximately 12%. The decrease in both periods was due primarily to the elimination of sales to Seagate Technology, Inc. ("Seagate"), which effectively ceased after the first quarter of 1994 coupled with reduced sales from the plastics manufacturing operations which effectively ceased in August 1994. Gross profit was 17.3% of net sales for the second quarter of 1995 compared to 22.8% of net sales for the second quarter of 1994. Gross profit was 18.9% for the six month periods ending June 30, 1995 and June 30, 1994, respectively. The lower gross profit for the quarter ending June 30,1995 was primarily due to additional staffing requirements to enhance the development of the Company's proprietary products along with increases in manufacturing supplies used in the production of industrial and proprietary products. The gross margin for the six months ending June 30, 1995 and June 30, 1994 were the same and mostly volume related. Medical product sales from the Company's two principal customers accounted for over 68% of net sales in the second quarter of 1995 compared to 65% of net sales in the second quarter of 1994. For the six months ended June 30, 1995, medical product sales accounted for 70% of net sales compared to 50% of net sales for the same period in 1994. Selling, general and administrative expenses were $622,608 for the second quarter of 1995 compared to $482,378 for the same period in 1994. Selling, general and administrative expenses for the six months ended June 30, 1995, were $1,202,698 compared to $970,620 for the same period in 1994. The increase in these expenses is primarily due to higher selling expenses related to marketing of proprietary products (primarily oil centrifuge units) and legal and accounting costs related to pursuing restructuring of the debt underlying the EPR facility. 9 Other income (expense) did not change significantly for the quarters ending June 30, 1995 and June 30, 1994, respectively. Other expense for the six months ending June 30 1995 was $89,156 compared to $130,577 for the six months ending June 30, 1994. The decrease was attributable to the Company renting excess warehouse space beginning in 1995 and also gains on the sale of some assets sold during 1995. The Company had no taxable income, and accordingly, recorded no provision for income taxes during the quarters ended June 30, 1995 and 1994. During the second quarter of 1995, the Company's loss from continuing operations was $145,004 or $.04 per share compared to income from continuing operations of $181,889 or $.06 per share for the same period in 1994. For the six months ended June 30, 1995, loss from continuing operations was $147,800 or $.04 per share compared to income from continuing operations of $194,977 or $.06 per share for the same period in 1994. The loss from continuing operations for the first six months of 1995 compared to the income in 1994 has been due to revenue reductions (phaseout of revenues from Seagate and reduced plastics revenues), staffing increases to enhance development and marketing of proprietary products (oil centrifuges and rotary vane actuators), and substantial professional expenses related to the continuing troubled debt restructuring of the debt underlying the Eden Prairie facility that is guaranteed by the Company. 10 DISCONTINUED WASTE PROCESSING OPERATIONS: As described in Notes 2 and 3 of the Notes to Consolidated Financial Statements in the Company's 1994 Form 10-KSB, the Company undertook a formal plan to dispose of its remaining waste processing and recycling operation located in Eden Prairie, Minnesota during the fourth quarter of 1993. The Company wrote-down the carrying value of this facility to its estimated net realizable value, which resulted in a charge against earnings of $10,800,000 in 1993. The Eden Prairie facility ceased operations effective January 1, 1994 and on September 1, 1994 the Company closed on the sale of all of the assets of EPR, Inc., a wholly owned subsidiary of the Company ("EPR") for approximately $3.8 million. The proceeds from the sale of the assets of EPR have been used to repay a portion of the debt originally underlying the EPR facility. The Company retained all liabilities of EPR, including the balance of the loan underlying the facility (the "EPR loan") which is guaranteed by the Company. The loss from discontinued operations during the second quarter of 1995 consists of continuing interest accruals of $539,270 related to the underlying debt. This accrual does not include an accrual for estimated interest that will be incurred on the debt underlying the EPR loan between July 1, 1995 and the date of final settlement, due to uncertainty of the timing of the ultimate settlement. As described in Note 3 "Discontinued Operations and Related Debt" in this Form 10-QSB, the Company entered into a preliminary settlement agreement with the lender of the debt underlying EPR on September 12, 1994. Management is currently negotiating definitive agreements with the lender, although there can be no assurance that a definitive agreement will be reached. If final settlement cannot be reached, management may elect to seek protection under U.S. bankruptcy laws. LIQUIDITY AND CAPITAL RESOURCES: The Company currently has negative working capital and is in payment and technical default of terms of the EPR loan and is in violation of certain covenants of its demand line of credit agreement. The Company had a working capital deficit of $18,589,418 at June 30, 1995, compared to a working capital deficit of $17,219,561 at December 31, 1994. The current ratio was .14 and .14 at June 30, 1995 and December 31, 1994, respectively. The working capital deficit includes the Eden Prairie debt because the entire remaining balance of this loan has been classified as a short-term liability as a result of the payment, technical and other defaults described in Notes 2 and 6 of the Notes to the Consolidated Financial Statements included in the Company's 1994 Form 10-KSB. Until the restructuring agreement with the lender to EPR is finalized, under the terms of the original loan agreement, and as a result of the payment and technical defaults, the lender has the right to demand repayment of the entire outstanding balance of 11 the loan. In addition, the lender can demand payment of the default interest rate which is 2% higher than the stated interest rate of 11.85%. Interest accruals reflecting the incremental charge for the higher default rate have been established since 1992. The Company has a $4.5 million line of credit arrangement with an asset based lender which is collateralized by assets associated with the manufacturing operations. The Company is in violation of certain financial and technical covenants contained in this line of credit agreement, which could result in the lender discontinuing advances and demanding repayment of all outstanding borrowings. Due to the default conditions discussed above and borrowing limits related to available collateral, it is possible that the Company will not be able to borrow sufficient amounts against this line to meet all the operating cash needs of the Company. In addition, there can be no assurance that the asset based lender will continue to disregard these covenant violations in the future. If the lender takes any action to reduce the availability of funds to the Company, there may not be sufficient liquidity to continue operations. As of August 8, 1995, the Company had borrowed approximately $2,393,000 and had additional availability of approximately $54,000 under this line. The Company had positive cash flow from operations for the six months ending June 30, 1995 and June 30, 1994. However, its ability to meet its continuing manufacturing operations cash flow requirements during the remainder of 1995 and beyond, is dependent on continuing adequate sales and margins in the manufacturing business. Management expects a need for capital expenditures to support equipment upgrading and growth in the Manufacturing Division. Any future expenditures will depend on cash availability. In addition to cash flow generation from operations, the Company expects to raise needed capital through vendor or other asset based lending arrangements. In summary, the Company currently has negative working capital and is in default under the terms of two outstanding loan agreements. Either of these two lenders could, at any time, demand full payment of the underlying debt, which the Company would be unable to satisfy. The Company's cash flow from operations may not be sufficient to meet the Company's general operating needs. In the event that the Company cannot generate sufficient cash flow to meet its commitments, it may be forced to seek protection under U.S. Bankruptcy laws. 12 PART II - OTHER INFORMATION Item 3. Defaults upon Senior Security See Footnote 3 to Notes to the Consolidated Financial Statements and Management's Discussion and Analysis, included in Item 1 and 2 of this report 10-QSB, for a description of the status of the defaults on the loan underlying the Eden Prairie facility and the Company's line of credit, which is incorporated herein by reference. Arrearage (interest and principal) on the Eden Prairie debt as of August 8, 1995, was approximately $6,000,000. As of August 8, 1995, the Company had borrowed approximately $2,393,000 and had additional availability of approximately $54,000 under its line of credit agreement. 13 SIGNATURES ---------- 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. GREEN ISLE ENVIRONMENTAL SERVICES, INC. --------------------------------------- (Registrant) Date: August 11, 1995 By: /s/ James W. Taylor --------------- ------------------- James W. Taylor President, Chief Executive Officer and Chief Financial Officer (principal executive and financial officer) Date: August 11, 1995 By: /s/ William H. Johnson --------------- ---------------------- William H. Johnson Controller (principal accounting officer) 14 EX-27 2 EXHIBIT 27
5 6-MOS DEC-31-1995 JUN-30-1995 (3,205) 0 1,446,262 0 1,330,038 3,086,543 11,204,387 6,752,835 8,023,778 21,675,961 0 598,410 0 0 13,710,596 8,023,778 6,050,963 6,050,963 4,906,909 6,109,607 89,156 0 195,554 (1,225,478) 0 (147,800) (1,077,678) 0 0 (1,225,478) (.38) (.38)