SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [ X ] QUARTERLY REPORT UNDER SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1996. [ ] TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM DECEMBER 1, 1996 TO FEBRUARY 28, 1996. Commission File Number: 0-13041 ------- ENVIRONMENTAL PLUS, INCORPORATED - ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Texas 75-1939021 - ----------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization Indentification No.) Route 1, Box 41, Overton, Texas 75684 - ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (903) 834-6965 - ----------------------------------------------------------------- (Registrant's telephone number, including area code) - ----------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act 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 requirements for the past 90 days. Yes [ X ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: 40,371,873 shares of Common Stock, no par value - ----------------------------------------------------------------- (The number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date) PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Balance Sheets Six Months Ended February 28, 1997 August 31, 1996 ASSETS CURRENT Cash $ 17,235 $ 10,561 Accounts receivable - trade 41,700 47,250 Note receivable 208,936 201,369 Inventory 21,777 43,256 Other 2,461 16,833 --------- --------- Total current assets 292,109 319,269 NOTE RECEIVABLE 76,000 76,000 PROPERTY, PLANT AND EQUIPMENT 138,251 144,586 Other Goodwill and organization costs- net 54,350 57,168 --------- --------- $ 560,710 $ 597,023 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 31,615 $ 31,771 Accrued liabilities 1,616 --- Line of Credit 33,000 33,000 Notes payable 18,000 18,000 --------- --------- Total current liabilities $84,231 $82,771 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, (100,000,000 authorized; $1.00 par, 1,024,000 shares outstanding respectively) 466,600 466,600 Common stock (100,000,000 shares authorized, $.001 par, 40,329,136 and 37,735,285 shares issued and outstanding respectively) 40,328 40,328 Paid in capital 666,886 610,224 Deficit (697,335) (602,900) --------- --------- Total Stockholders' Equity $ 476,479 $ 514,252 --------- --------- $560,710 $597,023 Statements of Operations Three Months Ended Six Months Ended February 28, February 28, February 28, February 28, 1997 1996 1997 1996 REVENUE Sales $ 20,054 $ --- $ 241,807 $ --- Interest 8,611 --- 16,111 --- Total 28,665 257,918 --- COST OF SALES (4,616) 205,860 --- GENERAL AND ADMINISTRATIVE Depreciation and Amortization 4,669 --- 9,153 --- Advertisement --- --- 900 --- Interest and bank charges 2,120 --- 3,143 --- Supplies 80 --- 684 --- Accounting and auditing 22,600 --- 23,500 --- Legal 31,343 --- 31,343 --- Utilities and Telephone 465 --- 1,840 --- Salaries - officers 37,500 --- 75,000 --- Travel --- --- 683 --- Sales Tax 9 --- 246 --- Other administrative expenses --- $ 4,000 --- 4,000 ----------- ----------- ---------- ---------- TOTAL GENERAL AND ADMINISTRATIVE $ 98,786 $ 4,000 $ 146,492 $ 4,000 NET INCOME (LOSS) BEFORE INCOME (65,506) (4,000) (94,435) (4,000) TAXES AND EXTRAORDINARY ITEM INCOME TAXES --- --- --- --- NET INCOME (LOSS) BEFORE (65,506) (4,000) (94,435) (4,000) EXTRAORDINARY ITEM EXTRAORDINARY ITEM - FORGIVENESS --- 4,603 --- 4,603 OF DEBT NET INCOME (LOSS) (65,506) 603 (94,435) 603 PER SHARE DATA Net income (loss) per share --- --- --- --- Weighted average shares outstanding 40,371,873 38,247,785 38,378,609 38,247,785 Statements of Cash Flows Three Months Ended Six Months Ended February 28, February 28, February 28, February 28, 1997 1996 1997 1996 Cash Flows from Operating Activities: Income (Loss) from operations $ (65,506) $ 603 $ (94,435) $ 603 Adjustments to reconcile income (loss) from operations to cash provided by (used in) operating activities: Depreciation and amoritization 4,669 --- 9,153 --- Imputed Officers' Salaries 19,162 --- 56,662 --- Change in assets and liabilities: Increase in accounts receivable - trade 204,416 --- 5,550 --- Decrease in inventory (21,777) --- 21,479 --- Decrease in other assets 11,872 --- 14,372 --- Increase in accounts payable (138,472) (8,524) 1,460 (8,524) ---------- ---------- ---------- ---------- Net Cash Flows Provided by (used in) Operating Activities $ 14,364 $ (7,921) $ 14,241 $ (7,921) CASH FLOWS FROM INVESTING ACTIVITIES --- --- --- --- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common shares --- 7,500 --- 7,500 Collection of note receivable 2,433 --- 2,433 --- Loan on note receivable (10,000) --- (10,000) --- Net Cash Flows Provided by (used in) Financing Activities (7,567) 7,500 (7,567) 7,500 INCREASE (DECREASE) IN CASH 6,797 (421) 6,674 (421) Cash at beginning of period 10,438 421 10,561 421 CASH AT END OF PERIOD $ 17,235 $ --- $ 17,235 $ --- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS: GENERAL The Company's results of operations for the quarter ended February 28, 1997 and the six month period ended February 28, 1997 were significantly affected by the Company's acquisition in July 1996 of substantially all of the assets of Gulf Coast Cooling Tower Services, Inc. ("GCCTS"), a company engaged in the industrial cooling tower services business and to a lesser degree, the acquisition on or about June 1, 1996 of all of the issued and outstanding shares of common stock of Fire Zap, Inc. ("FZI"), a company engaged in the business of developing and marketing fire retardent products. Virtually all of the Company's revenues for the quarter ended February 28, 1997 or the six month period ended February 28, 1997 were derived from operations resulting from the GCCTS acquisition. Because Kinlaw Oil Corporation ("KOC"), the main source of Company revenue during fiscal 1995, ceased operations in June 1995, the Company had no revenue during the quarter ended February 29, 1996. LIQUIDITY AND CAPITAL RESOURCES Working capital at February 28, 1997 was $207,878 compared to 0 at February 28, 1996. Cash and cash equivalent had increased to $17,235.00 during the six months ended February 28, 1997, reflecting the new course of the Company's business. Cash and cash equivalent for the six month period ended February 28, 1996 were $421. During the quarter ended February 28, 1997, cash was used to fund normal working capital requirements, including efforts to market FZI products and GCCTS activities. The trade accounts receivable for the period ended February 28, 1997 were $41,700.00 compared to $0 for the quarter ended February 28, 1996. The Company had $21,777 in inventory during the quarter ended February 28, 1997 compared to $0 for the quarter ended February 28, 1996. Trade accounts payable for the quarter ended February 28, 1997 were $31,615 compared to $10,336 for the quarter ended February 28, 1996. The increase was due primarily to payment of accrued expenses during the three month period. The Company made no capital acquisitions or improvement expenditures during the three month period ended February 28, 1997. While the Company is not anticipating any capital expenditures over the next two quarters, any funding for unexpected capital expenditures or improvements will be paid from cash flows generated through operating activities. No significant disposition of equipment occurred during the three month period ended February 28, 1997 and none is planned during the next three month period. Based upon current operations and internally generated cash flows, management believes that adequate resources will be available to meet current and future requirements. RESULTS OF OPERATIONS Gulf Coast Towers, Inc., a wholly owned subsidiary of the Company ("GCT"), has utilized the assets from GCCTS to continue with its business. GCT is currently generating revenues pursuant to a maintenance contract it entered into with a Texas public utility company which continues through December 30, 1997. FZI experienced some activity in the six months ending February 28, 1997 and contributed $18,443 in sales toward the Company's revenue for the quarter. Revenue and sales from other sources for the quarter ended February 28, 1997 was $20,054 and $8,611 respectively and $241,807 and $16,111 respectively for the six month period ended February 28, 1997 respectively compared to $0 for the same periods of the last fiscal year. The Company received no revenue from management fees during the second quarter of fiscal 1996 or the second quarter of fiscal 1995. The sales revenue for the quarter ended February 28, 1997 as well as the six month period ended February 28, 1997 reflects the Company's acquisition of the assets of GCCTS and FZI. The cost of sales for the quarter ended February 28, 1997 was <$4,616> due to an inventory adjustment, as compared to $0 the second quarter of fiscal 1995. The cost of sales for the six month period ended February 28, 1997 was $205,860 as compared to $0 during the first six months of fiscal 1995. During 1996 the officers of the Company determined that they would not take a salary until cash flow from operations permitted them to pay each of the three (3) officers $50,000. Therefore no salaries were paid in 1996 and none have been paid in 1997. Salaries and benefits for the quarter ended February 28, 1997 were an imputed $37,500 compared to $0 in the same quarter of the last fiscal year, and for the six month period ended February 28, 1997 they are an imputed $75,000 as compared to $0 for the same six month period for the last fiscal year. The SEC staff has determined that the historical statement of operations should reflect all costs of doing business. Accordingly, officers' salaries were imputed based upon the actual months in operation in fiscal 1996. The Company has no material commitments for capital expenditures as of the end of its latest fiscal period. The Company intends to continue its efforts to engage in a merger or acquisition with another company. PART II No "other" information required. 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 thereunto duly authorized. ENVIRONMENTAL PLUS, INCORPORATED /s/ J. D. Davenport -------------------------------- J.D. DAVENPORT, President