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
<FN>
(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
<FN>
(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
<FN>
(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 $ - $ -
<FN>
(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