SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended October 3, 1998.
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: 0-22408
PURUS, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0234694
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
605 Tennant Avenue, Suite B, Morgan Hill, CA 95037-5529
(Address of principal executive offices)(Zip code)
(408) 778-3465
(Registrant's telephone number, including area code)
Indicate by check mark 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
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date.
Class Shares Outstanding as of October 3, 1998
Common Stock 666,192
PURUS, INC.
CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheets as of October 3, 1998 and December 27, 1997 3
Statements of Operations for the Three Months and Nine
Months Ended October 3, 1998 and September 27, 1997 4
Statements of Cash Flows for the Nine Months Ended October
3, 1998 and September 27, 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8K 10
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
October 3, 1998 and December 27, 1997
October 3, December 27,
Assets 1998 1997
Current assets:
Cash and cash equivalents $ 200,530 $ 172,881
Short-term investments 177,712 4,508,594
Other current assets 191,203 175,874
Total current assets 569,445 4,857,349
Other assets 4,144,971 10,745
$ 4,714,416 $ 4,868,094
Liabilities and Shareholders Equity
Current liabilities:
Accounts payable $ 189,081 $ 81,619
Accrued legal expenses 711,184 1,016,095
Total current liabilities 900,265 1,097,714
Shareholders equity:
Common stock: 5,000,000 shares authorized;
$.01 par value; 666,193 shares issued
and outstanding 6,662 6,662
Additional paid-in capital 45,126,395 45,126,395
Accumulated deficit (41,318,906) (41,362,677)
Total shareholders equity 3,814,151 3,770,380
$ 4,714,416 $ 4,868,094
The accompanying notes are an integral
part of these financial statements.
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STATEMENTS OF OPERATIONS (Unaudited)
for the three and nine months ended October 3, 1998 and
September 27, 1997
Three Months Ended Nine months Ended
October 3, September 27, October 3, September 27,
1998 1997 1998 1997
Operating income (expenses) of
continuing operations
General and Administrative $ (22,768) $ (68,703) $ (196,393) $(1,203,441)
Interest Income 75,373 72,048 205,273 176,470
Income (loss) from continuing
operations 52,605 3,345 8,880 (1,026,971)
Income (loss) from
discontinued operations 133 0 34,891 1,058,752
Net income (loss) $ 52,738 $ 3,345 $ 43,771 $ 31,781
Net income (loss) from
continuing operations per share 0.08 0.01 0.02 (1.54)
Net income (loss) from
discontinued operations per share 0.00 0.00 0.05 1.59
Net income per share $ 0.08 $ 0.01 $ 0.07 $ 0.05
Weighted average common shares 666,193 666,193 666,193 666,193
Note: Per share amounts represent both basic and diluted amounts.
The accompanying notes are an integral
part of these financial statements.
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STATEMENTS OF CASH FLOWS (Unaudited)
for the nine months ended October 3, 1998 and September 27, 1997
October 3, September 27,
1998 1997
Cash flows from operating activities:
Net Income $ 43,771 $ 31,781
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization - 651
Accrued Interest Income (94,475) -
Changes in operating assets and liabilities:
Accounts receivable - (39,765)
Other current assets (51,183) (58,290)
Accounts payable 107,462 23,970
Accrued expenses (304,911) 552,958
Net liabilities - discontinued operations - (988,716)
Net cash used in operating activities (299,336) (477,411)
Cash flows from investing activities:
Issuance of Notes Receivable (4,000,000) -
Purchases of short-term investments - (4,704,500)
Proceeds from sale/maturity of
short-term investments 4,330,882 4,800,000
Purchases of property and equipment (3,897) -
Net cash provided by investing activities 326,985 95,500
Net Increase (Decrease) in cash 27,649 (381,911)
Cash and cash equivalents, beginning of period 172,881 494,201
Cash and cash equivalents, end of period $ 200,530 $ 112,290
The accompanying notes are an integral
part of these financial statements.
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NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
Financial information for the three months and nine months
ended October 3, 1998 and September 27, 1997 is unaudited but
has been prepared on the same basis as the audited financial
statements and, in the opinion of management, includes all
adjustments (consisting of only normal recurring adjustments)
necessary to present fairly operating results and cash flows
for those periods. This Quarterly Report on Form 10-QSB should
be read in conjunction with the financial statements and notes
thereto included in the Companies Annual Report on Form 10-KSB
for the fiscal year ended December 27, 1997. The results of
operations for the period ended October 3, 1998 are not
necessarily indicative of the results to be expected for any
subsequent quarter or for the entire year ending January 2,
1999.
In 1995 the Company converted to a reporting calendar in which
quarters end on the Saturday closest to March 31, June 30,
September 30 and December 31.
2. Net Income/(Loss) per Share
Net income/(loss) per share is computed using the weighted
average number of shares of common stock outstanding.
3. Discontinued Operations
During the fourth quarter of 1995, when the Company
discontinued its operations, it provided provisions for the
write down of inventory and fixed assets, for the costs of
employee termination, and for anticipated warranty expenditures
over the remaining life of PADRE installations, and for the
operating losses of the discontinued operations. A summary of
operating results of the discontinued operations for the nine
months ended October 3, 1998 and the year ended December 27,
1997 follows:
October 3, December 27,
1998 1997
Revenue $ 34,891 $ 174,720
Reversal of warranty provision - 915,384
Income from discontinued operations 34,891 1,090,104
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4. Commitments and Contingencies
On or about July, 27, 1995, Aron Parnes, a stockholder of the
Company, filed suit against the Company and five of its current
or former employees, officers, and directors in the United
States District Court for the Northern District of California.
The lawsuit alleges violations of the federal securities laws,
and purports to seek damages on behalf of a class of
stockholders who purchased the Company's common stock during
the period November 9, 1993 through March 8, 1995. On April 16,
1996, the Company filed a motion to dismiss the complaint. On
or about March 31, 1997, the Court issued an order granting the
defendants' motion to dismiss the complaint and granting the
plaintiff 45 days leave to amend. On or about May 15, 1997, the
suit was re-filed reasserting the claims previously made. On
June 30, 1997, the Company filed a new motion to dismiss the re-
filed complaint. If the action is not dismissed with
prejudice, the Company intends to litigate it vigorously. The
Company and other defendants have obtained discovery regarding
the propriety of plaintiff's named class representative through
document and interrogatory requests. The plaintiffs have begun
to pursue formal discovery, including requesting documents from
the Company and from third parties.
In July 1995, eight former employees of the AT&T Multi Language
Center filed suit against the Company and AT&T in Santa Clara
County Superior Court. The lawsuit alleges that plaintiffs
were exposed to an unspecified toxic substance while working at
the AT&T facility, previously located next door to the
Company's former San Jose, California facility. The Company
has filed an answer denying all liability. The parties have
engaged in discovery through document procedure requests,
interrogatories and depositions.
The Company is not a party to any other pending legal
proceedings which it believes will materially affect its
financial condition or results of operations.
5. Loan Transactions
In February 1998, the Company made a loan of $1,800,000, which
bears interest at 6% per annum, to Casa Solaz, Inc. (a Nevada
corporation, "CSI"). CSI is not a related party to the Company
or its management. CSI through its foreign subsidiaries
manufactures prefabricated housing, primarily in South America.
The proceeds of the loan will be used to acquire production
equipment and facilities for CSI's foreign operations. The
principal and any accrued and unpaid interest is due on
December 31, 1999. The loan is collateralized by all of the
assets of CSI, including the stock of the CSI subsidiaries.
The loan is convertible into 450,000 shares of 8% preferred
stock of CSI. As consideration for making the loan, the
Company received a warrant to purchase 550,000 shares of 8%
preferred stock of CSI at $4.00 per share. Each share of 8%
preferred stock is convertible into one share of common stock
of CSI. In April 1998, the Company made an additional 6% loan
of $2,200,000 to CSI, collateralized in the same way as the
first loan.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The following information should be read in conjunction with
the unaudited interim financial statements and the notes
thereto included in Item 1 of this Quarterly Report on Form 10-
QSB and the Company's 1997 Annual Report on Form 10-KSB.
On January 8, 1998, following the resignation of the Company's
former Chairman of the Board and Chief Executive Officer,
Reinhard Siegrist was appointed to the position of Chairman of
the Board and Peter Friedli was appointed to the position of
Chief Executive officer by action of the Board of Directors.
The Company is not engaged in active business operations or any
other activity dependent on computers. Accordingly, the issue
of year 2000 compliance is not material to the Company.
Results of Continuing Operations
Three and Nine Month periods Ended October 3, 1998 and September 27, 1997
Other than interest income, the Company had no revenue from
continuing operations for the three and nine month periods
ended October 3, 1998 and September 27, 1997.
General and administrative expenses from continuing operations
for the three and nine month periods ended October 3, 1998 and
September 27, 1997 consisted of general corporate
administration, legal and professional expenses, accounting and
auditing costs, public company costs, directors and officers
insurance, and similar items. These expenses were $22,768 and
$68,703 for the three month period ended October 3, 1998, and
September 27, 1997, respectively; and $196,393 and $1,202,733
for the nine month period ended October 3, 1998, and September
27, 1997, respectively. General and administrative expenses in
the nine month period ended September 27, 1997 were greater
than in the nine month period ended October 3, 1998 primarily
due to increases in the reserves for legal expenses during the
earlier period. General and administrative expenses in the
three month period ended September 27, 1997 were greater than
in the three month period ended October 3, 1998 primarily due
to the reversal of a charge in the amount of approximately
$39,000 previously made in 1997 during the later period.
The Company had no interest expense in the three and nine month
periods ending October 3, 1998 or September 27, 1997. Interest
income in the three and nine month periods ended October 3,
1998 and September 27, 1997, respectively, resulted from the
investment of the Company's cash. Interest income was $75,373
and $72,048 in the three month period ended October 3, 1998,
and September 27, 1997, respectively; and $205,273 and $176,470
for the nine month period ended October 3, 1998, and September
27, 1997, respectively. Interest income in the three and nine
month periods ended October 3, 1998 is higher than in the three
and nine month periods ended September 27, 1997 due to interest
income recognized on the CSI loan.
As a result of the foregoing factors, the Company realized a
net income from continuing operations of $52,605 for the three
month period ended October 3, 1998 compared to a net income of
$3,345 for the three month period ended September 27, 1997, and
a net income of $8,880 for the nine month period ended October
3, 1998 compared to a net loss of $1,026,263 for the nine month
period ended September 27, 1997.
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Results of Discontinued Operations
Three and Nine Month periods Ended September 27, 1997 and September 28, 1996
Income from discontinued operations was $133 and $34,891 for
the three and nine month periods ended October 3, 1998,
respectively compared to zero and $1,058,745 for the three and
nine month periods ended September 27, 1997, respectively.
The Company expects that the amount of such revenues will be
insignificant in the future.
Net Income/Net Loss from Continuing and Discontinued Operations
As a result of the foregoing factors, the Company's net income
was $52,738 and $43,771 for the three and nine month periods
ended October 3, 1998, respectively and $3,345 and $31,781 for
the three and nine month periods ended September 27, 1997,
respectively. Net income per share from both continuing and
discontinued operations was $0.08 and $0.07 for the three and
nine month periods ended October 3, 1998, respectively and
$0.01 and $0.05 for the three and nine month periods ended
September 27, 1997, respectively.
Liquidity and Capital Resources
At October 3, 1998, the Company had working capital deficit of
approximately $(330,820) as compared to working capital of
$3,759,635 at December 27, 1997. Working capital as of both
dates consisted substantially of short-term investments, cash
and cash equivalents, accrued liabilities, and net liabilities
from discontinued operations. The change in working capital in
the amount of approximately $4,000,000 is the result of loans
made to CSI. Net cash used in operating activities was
approximately $299,336 for the nine month period ended October
3, 1998, and $477,411 for the nine month period ended September
27, 1998. There can be no assurances that any investment made
by the Company will not result in losses.
The reduction in working capital results from two loans made to
Casa Solaz, Inc. ("CSI") in February of 1998 in the amount of
$1,800,000 ("February Loan") and in April of 1998 in the amount
of $2,200,000.. CSI is a private Nevada corporation which
recently commenced the business of manufacturing, marketing,
and installing prefabricated housing units in South America.
Both loans bear interest at the rate of 6% per annum, and all
principal and interest is due December 31, 1999. The loans are
secured by all of the assets of CSI, including all of the
capital stock of its Venezuelan subsidiaries conducting
operations in South America. The February Loan is convertible
at the option of the Company at any time prior to maturity into
450,000 shares of the Series A Convertible Preferred Stock of
CSI. As a negotiated element of the transaction, CSI granted
to Purus a warrant to purchase 550,000 additional shares of
Series A Convertible Preferred Stock at a price of $4.00 per
share exercisable on or before December 31, 1998. The Series A
Convertible Preferred Stock provides for a cumulative dividend
at the rate of 8% per annum and is convertible to common stock
of CSI at the rate of one share of common for one share of
preferred.
Management is uncertain as to whether the Company has
sufficient cash and short-term investments to meet the
anticipated needs of the Company's continuing and discontinued
operations through the next twelve (12) months because of
uncertainties related to pending legal actions against the
Company. There can be no assurances because the Company has no
assurance of significant revenues and is subject to contingent
liabilities which could result in the depletion of its capital,
including, without limitation, any damages awarded and/or costs
and expenses incurred by it in connection with pending
litigation against the Company. Judgments or settlements
against the Company in connection with such litigation could
exceed the Company's insurance coverage and require the Company
to use its limited capital resources in satisfaction thereof.
In addition, the Company may require outside advisors to assist
management in seeking and evaluating potential acquisitions, in
consummating such transactions and/or in managing the resulting
enterprises. In the
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event that the Company has not reserved
sufficient cash for costs and expenses relating to pending or
threatened litigation or the acquisition of a particular
business, product or technology, the Company may require
additional financing. There can be no assurance that such
financing would be available to the Company on acceptable terms
or at all. The Company does not presently have a line of
credit or other bank credit facility.
PART II OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits: Included only with the electronic filing of this
report is the Financial Data Schedule for the nine month period
ended October 3, 1998 (Exhibit Ref. No. 27).
Reports On Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Purus, Inc.
By: /s/ Peter Friedli
Chief Executive Officer
Date: November 12, 1998
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