-----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, P/uW7a+kgxJO26XIhmLykZFuUccRvlGAjxKSEy7i4WULQ7gZqwDQsswGuLW6CixN JFajD2sfsmw3vLK4A8l9lA== 0000950144-98-012208.txt : 19981111 0000950144-98-012208.hdr.sgml : 19981111 ACCESSION NUMBER: 0000950144-98-012208 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980926 FILED AS OF DATE: 19981110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENVIROQ CORP /DE/ CENTRAL INDEX KEY: 0000937256 STANDARD INDUSTRIAL CLASSIFICATION: SANITARY SERVICES [4950] IRS NUMBER: 593290346 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-25528 FILM NUMBER: 98741711 BUSINESS ADDRESS: STREET 1: 3918 MONTCLAIR ROAD STREET 2: SUITE 206 CITY: BIRMINGHAM STATE: AL ZIP: 35213 BUSINESS PHONE: 2058700588 MAIL ADDRESS: STREET 1: 3918 MONTCLAIR ROAD STREET 2: SUITE 206 CITY: BURMINGHAM STATE: AL ZIP: 35213 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENVIROQ CORP DATE OF NAME CHANGE: 19950811 10QSB 1 ENVIROQ CORPORATION 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 September 26, 1998 [ ] 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)
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] 2 ENVIROQ CORPORATION AND SUBSIDIARIES FORM 10-QSB SEPTEMBER 26, 1998
ITEM PAGE ---- ---- CONSOLIDATED CONDENSED BALANCE SHEETS - SEPTEMBER 26, 1998 AND MARCH 28, 1998 3 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - THREE AND SIX MONTHS ENDED SEPTEMBER 26, 1998 AND SEPTEMBER 27, 1997 5 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - SIX MONTHS ENDED SEPTEMBER 26, 1998 AND SEPTEMBER 27, 1997 6 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 7 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 PART II - OTHER INFORMATION 13 SIGNATURES 15
2 3 ENVIROQ CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
Sept. 26, March 28, 1998 1998 ---------- ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents $2,277,504 $2,545,100 Accounts receivable (no allowance considered necessary) 333,313 78,404 License fees receivable 930 - Inventories 115,264 168,184 Notes receivable 12,016 - Refundable income taxes 50,122 63,470 Prepaid expenses and other assets 24,037 36,884 ---------- ---------- Total current assets 2,813,186 2,892,042 ========== ========== OTHER ASSETS: Employee notes receivable 7,796 11,858 Deferred taxes 10,040 10,650 ---------- ---------- Total other assets 17,836 22,508 ========== ========== PROPERTY, PLANT AND EQUIPMENT, at cost Land 310,135 310,135 Leasehold improvements 9,075 - Operating equipment 38,136 44,160 Other equipment and vehicles 58,673 57,917 ---------- ---------- 416,019 412,212 Less accumulated depreciation (56,994) (53,279) ---------- ---------- Property, plant and equipment, net 359,025 358,933 ---------- ---------- TOTAL ASSETS $3,190,047 $3,273,483 ========== ==========
See accompanying notes to consolidated condensed financial statements. 3 4 ENVIROQ CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
SEPT. 26, MARCH 28, 1996 1998 ---------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses............ $ 15,113 $ 46,733 Salaries, wages and related taxes................ 6,793 25,203 Income taxes payable............................. 46,824 -- -------- ---------- Total current liabilities................ 68,729 71,936 --------- ----------- COMMITMENTS AND CONTINGENCIES (Note 3) STOCKHOLDERS' EQUITY Common stock (par value $.01 per share), authorized 10,000,000 shares, issued and outstanding 1,009,377 shares........................ 10,094 10,094 Additional paid-in capital.......................... 6,190,647 6,190,647 Accumulated deficit................................. (3,079,423) (2,999,194) --------- ----------- Total stockholders' equity.......................... 3,121,318 3,201,547 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $ 3,190,047 $ 3,273,483 =========== ===========
See accompanying notes to consolidated condensed financial statements. 4 5 ENVIROQ CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (ALL PERIODS UNAUDITED)
Three Months Ended Six Months Ended ------------------------- ------------------------- Sept. 26, Sept. 27 Sept. 28, Sept. 27 1998 1997 1998 1997 REVENUES Net revenues from sales and support $ 435,962 $ 302,204 $ 798,777 $ 535,690 Revenues from licenses - - - 80,000 ---------- ---------- ---------- ---------- Total Revenues 435,962 $ 302,204 $ 798,777 $ 615,690 COST OF REVENUES 216,622 127,766 396,931 328,957 ---------- ---------- ---------- ---------- GROSS PROFIT 219,340 174,438 401,846 286,733 NON-RECURRING MERGER EXPENSES (33,067) (160,737) - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 182,461 181,132 357,874 357,938 ---------- ---------- ---------- ---------- INCOME (LOST) FROM OPERATIONS 3,813 (6,694) (116,765) (71,205) OTHER INCOME 35,428 44,743 71,194 76,704 ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES 39,241 38,049 (45,571) 5,499 INCOME TAX EXPENSE (BENEFIT) 23,500 6,530 34,659 1,647 ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ 15,741 $ 31,519 $ (80,230) $ 3,852 ---------- ---------- ---------- ---------- BASIC AND DILUTED NET INCOME (LOSS) PER SHARE $ 0.02 $ 0.03 $ (0.08) $ 0.00 ---------- ---------- ---------- ---------- WEIGHTED AVERAGE SHARES OUTSTANDING 1,009,377 1,009,377 1,009,377 1,009,377
See accompanying notes to consolidated condensed financial statements. 5 6 ENVIROQ CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (ALL PERIODS UNAUDITED)
SIX MONTHS ENDED ------------------------------- Sept. 28, 1998 Sept. 27, 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (80,230) $ 3,852 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation 3,715 3,717 Changes in assets and liabilities used cash (187,274) (62,663) -------------- -------------- Net cash used in operating activities (263,789) (55,094) -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (3,807) (10,839) -------------- -------------- Net cash used in investing activities (3,807) (10,839) -------------- -------------- NET DECREASE IN CASH AND -------------- -------------- CASH EQUIVALENTS (267,596) (65,933) -------------- -------------- CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,545,100 2,379,613 CASH AND CASH EQUIVALENTS -------------- -------------- AT END OF PERIOD $ 2,277,504 $ 2,313,680 ============== ==============
See accompanying notes to consolidated condensed financial statements. 6 7 ENVIROQ CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 -- MANAGEMENT'S REPRESENTATION Enviroq Corporation (the "Company") prepared the accompanying unaudited consolidated condensed financial statements 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 the Company 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 months ended September 26, 1998 are not necessarily indicative of results for the full year ending March 27, 1999. For further information, refer to the financial statements and footnotes thereto included in the Company's Form 10-KSB for the year ended March 28, 1998, as filed with the Securities and Exchange Commission. NOTE 2 - GENERAL A. COMPANY INFORMATION The Company was incorporated on February 9, 1995. Prior to April 18, 1995, the Company was named New Enviroq Corporation ("New Enviroq"). The Company was initially a wholly-owned subsidiary of a predecessor corporation which was named Enviroq Corporation ("Old 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 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's business principally includes the development, commercialization, formulation and marketing of spray-applied resinous products, and the treatment of municipal wastewater biosolids. The Company conducts its operations primarily through Sprayroq(R), Inc., a Florida corporation ("Sprayroq"), of which the Company owns 50% of the outstanding capital stock. Sprayroq's primary business includes the development, commercialization, manufacture and marketing of spray-applied resinous material. Synox(R) Corporation, a Delaware corporation and a wholly owned subsidiary of the Company ("Synox"), has been 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 has resulted from the operations of Sprayroq. While the Company intends to maintain Synox as a subsidiary, management does not expect any significant revenues or other activity for the foreseeable future, and intends to minimize expenses*. - -------------------------------------------------------------------------------- *See Safe Harbor Statement on Page 15. 7 8 B. BASIS OF PRESENTATION Principles of Consolidation - These consolidated financial statements include the accounts of the Company and its subsidiaries, Synox and Sprayroq. All significant intercompany transactions are eliminated in these consolidated financial statements. Although the Company owns 50% of the outstanding capital stock of Sprayroq, management has determined that Enviroq controls Sprayroq, and all of the operating results of Sprayroq have been included, without discount or reduction. There is no recognition of the minority interest in this subsidiary because of its accumulated deficit position. For further information, refer to "Enviroq Consolidation of Accounts of Sprayroq" on page 12. C. INCOME (LOSS) PER SHARE Income (loss) per share was computed by dividing net income (loss) by the 1,009,377 shares of common stock outstanding as of September 26, 1998, 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 granted an option to acquire additional territory on a payment of a prepaid royalty. The option rights expired on 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. The license agreement was amended on December 22, 1997 to change the expiration date of the license and to provide that no minimum royalty payment would be due on January 1, 1998, but that such minimum royalty payments would resume on January 1, 1999, in accordance with the following schedule.
DUE DATE AMOUNT January 1, 1999 $ 90,336 January 1, 2000 180,671 January 1, 2001 180,671 January 1, 2002 through 2009 225,839
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. Synox stockholders also received rights to 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. - ------------------------------------------------------------------------------- *See Safe Harbor Statement on Page 15. 8 9 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. 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 to elect three directors designated by the Company and two directors designated by Replico. Since its inception, Sprayroq has obtained its operating funds primarily from the Company. Prior to October 15, 1996, the Company loaned funds to Sprayroq for 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 on October 21, 1996 Sprayroq executed a Consolidated Note evidencing the restructured debt. As of September 26, 1998, the principal amount of the debt was approximately $479,000. The rate of interest on the debt is 7% per annum. Terms of the debt include amortization over a 30-year period, with the balance of the principal due, in the form of a "balloon" payment, on October 1, 2001. NOTE 4 - PENDING MERGER On April 22, 1998, the Company entered into an Agreement and Plan of Reorganization (the "Merger Agreement") with Institutional Asset Management, Inc. ("IAM"), a Florida corporation, Capital Research Corporation ("CRC"), a Florida corporation, Intrepid Capital corporation ("Intrepid Capital"), a newly formed Delaware corporation and a subsidiary of the Company, and three wholly owned subsidiaries of Intrepid Capital formed to effect the transactions contemplated in the Merger Agreement. Subject to the terms and conditions of the Merger Agreement, including without limitation the approval of the stockholders of the Company, the Company will be merged into a wholly owned subsidiary of Intrepid Capital, which will occur simultaneously with similar mergers between wholly owned subsidiaries of Intrepid Capital and each of CRC and IAM. As a result of the simultaneous mergers, the Company, CRC, and IAM will become wholly owned subsidiaries of Intrepid Capital. On August 27, 1998, the Company, IAM, CRC and certain other entities entered into Amendment No. 1 to Agreement and Plan of Reorganization, pursuant to which the date before which the transaction referred to in the Merger Agreement must be consummated was extended from August 31, 1998 to October 31, 1998. * * * * * - -------------------------------------------------------------------------------- *See Safe Harbor Statement on Page 15. 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenue The Company generated revenues of approximately $436,000 for the three months ended September 26, 1998, representing an increase of approximately 44% as compared to approximately $302,000 for the three months ended September 27, 1997. Management attributes the increase in revenues for the three-month period primarily to an increase in orders for materials from Sprayroq's licensees. The Company generated revenues of approximately $799,000 for the six months ended September 26, 1998, representing an increase of approximately 49% as compared to approximately $536,000 for the six months ended September 27, 1997. Management attributes the increase in revenues for the six-month period primarily to an increase in orders for materials from Sprayroq's licensees. Cost of Revenues/Gross Profit Costs of revenues were approximately $217,000 for the three months ended September 26, 1998, representing an increase of approximately 70% as compared to approximately $128,000 for the three months ended September 27, 1997. Cost of revenues for the three-month period increased primarily as a result of an increase in revenues resulting from orders for materials from Sprayroq's licensees. Cost of revenues was approximately $397,000 for the six months ended September 26, 1998, representing an increase of approximately 21% as compared to approximately $329,000 for the six months ended September 27, 1997. Cost of revenues for the six-month period increased primarily as a result of an increase in revenues resulting from orders for materials from Sprayroq's licensees. Gross profit margin was approximately 50% for the three months ended September 26, 1998, as compared to approximately 49% for the three months ended September 27, 1997. Gross profit margin was approximately 50% for the six months ended September 26, 1998, as compared to approximately 54% for the six months ended September 27, 1997. Non-Recurring Merger Expenses The Company incurred expenses in connection with the Company's proposed merger of approximately $33,000 for the three months ended September 26, 1998, and approximately $161,000 for the six months ended September 26, 1998. Selling, General and Administrative Expenses Selling, general and administrative expenses ("S,G&A") for the three months ended September 26, 1998 were approximately $182,000, a increase of less than 1% as compared to approximately $181,000 for the three months ended September 27, 1997. S,G&A for the six months ended September 26, 1998 were approximately $358,000, essentially unchanged as compared to approximately $358,000 for the six months ended September 27, 1997. Other Income Other income was approximately $35,000 for the three months ended September 26, 1998, as compared to approximately $45,000 for the three months ended September 27, 1997. Other income was approximately $71,000 for the six months ended September 26, 1998, as compared to approximately - ------------------------------------------------------------------------------- *See Safe Harbor Statement on Page 15. 10 11 $77,000 for the six months ended September 27, 1997. For the three month period and the six month period ended September 26, 1998, most of the other income resulted from interest income and accrued interest receivable by the Company from its bank cash deposits, money market accounts, and other investments. Net Income (Loss) For the three months ended September 26, 1998, net income was approximately $16,000, as compared to net income of approximately $32,000 for the three months ended September 27, 1997. For the six months ended September 26, 1998, net loss was approximately $80,000, as compared to net income of approximately $4,000 for the six months ended September 27, 1997. The decrease in net income for the three months and the six months ended September 26, 1998 was primarily attributable to non-recurring expenses in connection with the Company's proposed merger, which offset increases in revenues and gross profit. Financial Condition For the six months ended September 26, 1998, stockholders' equity decreased as compared to the six months ended September 27, 1997, primarily as a result of non-recurring expenses in connection with the Company's proposed merger, which offset increases in revenues and gross profit. At September 26, 1998, the Company had approximately $2,758,000 in working capital and a current ratio of 64.7-to-1, as compared to working capital of approximately $2,820,000 and a current ratio of 40.2-to-1 at March 28, 1998. At September 26, 1998, the Company's cash and cash equivalents totaled approximately $2,278,000. In addition, accounts receivable totaled approximately $333,000. The Company used approximately $268,000 in cash from operating and investing activities during the six month period ended September 26, 1998, primarily as a result of non-recurring expenses in connection with the Company's proposed merger. Depreciation expense was approximately $4,000 for the six months ended September 26, 1998. Net fixed assets was essentially unchanged between March 28, 1998 and September 26, 1998. This resulted from the purchase of equipment offsetting the accumulated depreciation. 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*. 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 1999*. Year 2000 Issue Management of the Company has made an assessment of the Year 2000 compliance status of the Company's computer hardware, computer network equipment, and computer software. With respect to computer systems utilized within the Company, management believes that all key systems are currently Year 2000 compliant and should not pose significant operational problems, either to the Company or to third parties. The Company relies on third party vendors for its key computer system components and, as - ------------------------------------------------------------------------------- *See Safe Harbor Statement on Page 15. 11 12 a function of routine upgrades of such systems, has received assurance of Year 2000 compliance, consequently avoiding any expense directly related to Year 2000 compliance. In addition, the management of the Company expects to complete, by December 31, 1998, a survey with each key supplier and key customer to further assess the extent of Year 2000 problems for such companies and any potential impact upon the Company. The Company will evaluate the necessity of a contingency plan after reviewing the results of the survey. Although it is not possible to reasonably estimate the cost of compliance, based on management's assessment, the Company believes that the cost to resolve any third party issues will not have a material impact on earnings*. Despite these efforts, there can be no assurance that the systems of other companies, organizations or governmental agencies upon which the Company relies, will be addressed successfully or in a timely manner. While the Company has not identified any specific areas of risk, it is possible that Year 2000 problems, arising from sources beyond the control of the Company (including the systems of suppliers and customers), or from general market Year 2000 problems could result in a negative adverse impact on the Company and/or its operating results*. Enviroq Consolidation of Accounts of Sprayroq The Company has since the inception of Sprayroq consolidate the financial statements of Sprayroq with those of the Company for financial reporting purposes. The Company has done so because the Stockholder Agreement (the "Sprayroq Stockholder Agreement") between the Company, Sprayroq, and Replico Development Company, Inc. (the other 50% equity owner of Sprayroq) provides that during the time (the "Loan Period") for which debt remains outstanding from Sprayroq to the Company (which, at the current rate of earnings by Sprayroq, the Company estimates will not occur prior to the end of the fiscal year ending in March 2000), the Company will have certain rights with respect to Sprayroq, including, without limitation, (i) providing the management of Sprayroq; (ii) designating three of the five directors of Sprayroq; and (iii) voting (through a proxy from Replico) approximately 66% of the outstanding shares of Sprayroq. Because of these provisions, the Company has determined that it controls Sprayroq and accordingly has included in its consolidated financial reports the accounts of Sprayroq. The Company believes that generally accepted accounting principles permit the Company to continue such consolidation so long as the Company is deemed to be in control of Sprayroq. According to the Sprayroq Stockholder Agreement, following the Loan Period and until such time as Sprayroq accumulates an aggregate of $2,000,000 in retained earnings (after giving effect to dividends paid to its stockholders from such retained earnings), the Company will continue to have the right to vote approximately 55% of the shares of Sprayroq and will continue to have the right to designate three of the five directors of Sprayroq. Following the Loan Period, therefore, the Company will continue to vote a majority of the outstanding shares of Sprayroq and will be able to designate a majority of the five Sprayroq directors. Generally accepted accounting principles are unclear, however, regarding the ability of the Company to continue to consolidate the accounts of Sprayroq following the Loan Period because of the changes in the Company's rights under the Sprayroq Stockholder Agreement resulting from the repayment of such debt. While the Company expects to be able to consolidate the accounts of Sprayroq for the foreseeable future, there can be no assurance that the Company will be able to do so following the Loan Period. The Company is not able to determine the effect at this time on its financial statements were it to be unable to consolidate the financial statements of Sprayroq with its financial statements*. - ------------------------------------------------------------------------------- *See Safe Harbor Statement on Page 15. 12 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 July 14, 1998, the Company entered into an Agreement for Sale and Purchase of Property with L.J. Development Group, Inc. for the sale of the Company's real property located on Phillips Highway in Jacksonville, Florida (the "Land Agreement"). As of November 2, 1998, the closing of this sale has not occurred and, in accordance with its terms, the Land Agreement has terminated. - ------------------------------------------------------------------------------ *See Safe Harbor Statement on Page 15. 13 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:
Description of Exhibits Item *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). *4.04 Stock Agreement, dated April 22, 1998, by and among certain shareholders of the Company, Institutional Asset Management, Inc., and Capital Research Corporation. Exhibit 4 to the Report on form 8-K, dated April 23, 1998, is incorporated herein by reference (Commission File No. 0-25528). *10.26 Agreement and Plan of Reorganization by and among Intrepid Capital Corporation, the Company, Freedom Holdings of Alabama, Inc., Institutional Asset Management, Inc., IAM Merger Sub, Inc. Capital Research Corporation, and CRC Merger Sub, Inc. dated as of April 22, 1998. Exhibit 2 to the Report on Form 8-K, dated April 23, 1998, is incorporated herein by reference (Commission File No. 0-25528). *10.27 Amendment No. 1 to Agreement and Plan of Reorganization by and among the Company, Institutional Asset Management, Inc., Capital Research Corporation and certain other entities, dated as of August 27, 1998. Exhibit 2 to the Report on Form 8-K, dated August 27, 1998, is incorporated herein by reference (Commission File No. 0-25528). 27 Financial Data Schedule (for SEC use only).
* Exhibits incorporated by reference. 14 15 (b) Reports on Form 8K filed during the period: August 28, 1998. The Company filed a Current Report on Form 8-K with the Securities and Exchange Commission. In this Form 8-K, the Company disclosed, pursuant to Item 5, that the Company had executed Amendment No. 1 to Agreement and Plan of Reorganization, dated as of August 27, 1998, by and among the Company, Institutional Asset Management, Inc., Capital Research Corporation and certain other entities, pursuant to which the date before the transaction referred to in the Agreement and Plan of Reorganization must be consummated was extended from August 31, 1998 to October 31, 1998. 15 16 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical factual information, the matters and statements discussed, made or incorporated by reference in this Quarterly Report on Form 10-QSB (including statements regarding trends in the industry and the business and growth and financing strategies of the Company), as well as those statements specifically designated with an asterisk (*), constitute forward-looking statements, contain the words "estimates," "projects," "intends," "believes," "anticipates," "expects," and words of similar import, are based upon current expectations and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements and words involve known and unknown assumptions, risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results performance, or achievements expressed or implied by such forward-looking statements or words. Such assumptions, risks, uncertainties and factors include those associated with general economic and business conditions; industry trends, cyclicality and seasonality; litigation arising in the course of the Company's business; dependence on key personnel and favorable relationships with employees; relationships with and dependence on customers, and suppliers; changes in the business strategy or development plans of the Company; the availability, terms and deployment of capital; changes in or the failure to comply with government regulations; and the inability or failure to identify or consummate successfully acquisitions or to assimilate the operations of any acquired businesses with those of the Company; and other assumptions, risks, uncertainties and factors reflected from time to time in the Company's filings with the Securities and Exchange Commission. The Company expressly disclaims any obligation to update any forward-looking statements as a result of developments occurring after the filing of this report. 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: November 10, 1998 By: /s/William J. Long ------------------ William J. Long, President and Chief Executive Officer (Principal Financial and Accounting Officer) 16 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 26, 1998 UNAUDITED FINANCIAL STATEMENTS OF ENVIROQ CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. DOLLARS 6-MOS MAR-27-1999 MAR-29-1998 SEP-26-1998 1 2,277,504 0 333,313 0 115,264 2,813,186 416,019 56,994 3,190,047 68,729 0 0 0 10,094 3,121,318 3,190,047 798,777 798,777 396,931 518,611 0 0 (71,194) (45,571) 34,659 (80,230) 0 0 0 (80,230) (0.08) (0.08)
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