SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended July 3, 1999.
[ ] 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 Identification No.)
incorporation or organization)
92 West Second Street, Morgan Hill, CA 95037
(Address of principal executive offices)(Zip code)
(408) 778-3465
(Registrants 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 July 3, 1999
Common Stock 666,192
PURUS, INC.
CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheets as of July 3, 1999 and January 2, 1999 3
Statements of Operations for the Three Months and Six
Months Ended July 3, 1999 and June 27, 1998 4
Statements of Cash Flows for the Six Months Ended
July 3, 1999 and June 27, 1998 5
Notes to Financial Statements 6
Item 2. ManagementAs Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8K 10
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS
July 3, 1999 and January 2, 1999
July 3, January 2,
Assets 1999 1999
(unaudited)
Current assets:
Cash and cash equivalents $139,728 $303,268
Other current assets 172,008 158,995
Total current assets 311,736 462,263
Notes receivable and accrued interest 4,319,328 4,183,000
Other assets 13,993 13,993
$ 4,645,057 $4,659,256
Liabilities and Shareholders Equity
Current liabilities:
Accounts payable $167,916 $178,639
Other liabilities
Accrued expenses 731,876 735,876
Total liabilities 899,792 914,515
Shareholders equity:
Common stock: 5,000,000 shares authorized; $.01 par value;
666,192 and 666,192 shares issued and outstanding at
July 3, 1999 and January 2, 1999, respectively 6,662 6,662
Additional paid-in capital 45,126,395 345,126,395
Accumulated deficit (41,387,792) (41,388,316)
Total shareholders equity 3,745,265 3,744,741
$ 4,645,057 $ 4,659,256
The accompanying notes are an integral
part of these financial statements.
3
STATEMENTS OF OPERATIONS
for the three and six months ended July 3, 1999 and June 27, 1998
(unaudited)
Three Months Ended Six months Ended
July 3 June 27 July 3 June 27
1999 1998 1999 1998
Operating income (expenses) of
continuing operations
General and Administrative $(58,512) $(34,920) $(124,106) $(135,765)
Interest Income 72,556 77,632 124,630 130,783
Income (loss) from
continuing operations 14,044 42,712 524 (4,982)
Income (loss) from
discontinued operations 0 17,210 0 33,875
Tax - - - -
Net income (loss) $14,044 $59,922 $524 $28,893
Net income (loss) from
continuing operations per share 0.02 0.06 0.00 (0.01)
Net income (loss) from
discontinued operations per share 0.00 0.03 0.00 0.05
Net income (loss) per share $0.02 $0.09 $0.00 $0.04
Weighted average common shares 666,193 666,193 666,193 666,193
The accompanying notes are an integral
part of these financial statements.
4
STATEMENTS OF CASH FLOWS
for the six months ended July 3, 1999 and June 27, 1998
(unaudited)
July 3, June 27,
1999 1998
Cash flows from operating activities:
Net Income (loss) $524 $28,893
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization - -
Changes in operating assets and liabilities:
Other current assets (30,341) 4,599,523
Interest on notes receivable (119,000) 40,640
Accounts payable and accrued expenses (10,723) 3,067
Accrued expenses (4,000) (207,265)
Net cash used in operating activities (163,540) 4,464,858
Cash flows from investing activities:
Purchases of short-term investments - (4,000,000)
Proceeds from sale/maturity of short-term investments - (60,328)
Purchases of property and equipment - -
Net cash provided by (used in) investing activities - (4,060,328)
Cash flows from financing activities:
Net proceeds from sale of common stock - -
Net cash provided by financing activities - -
Net increase (decrease) in cash (163,540) 404,530
Cash and cash equivalents, beginning of period 303,268 39,083
Cash and cash equivalents, end of period $139,728 $443,613
The accompanying notes are an integral
part of these financial statements.
5
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
Financial information for the three months and six months
ended July 3, 1999 and June 27, 1998 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 January 2, 1999. The results of operations
for the period ended July 3, 1999 are not necessarily
indicative of the results to be expected for any subsequent
quarter or for the entire year ending January 1, 2000.
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. Commitments and Contingencies
In July 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 1993 through March 1995. In April 1996, the Company
filed a motion to dismiss the complaint. In March 1997, the
Court issued an order granting the defendants' motion to
dismiss the complaint and granting the plaintiff 45 days leave
to amend. In May 1997, the suit was re-filed reasserting the
claims previously made, and in June 1997, the Company filed a
new motion to dismiss the re-filed complaint. In 1999, the
Court denied the Company's motion. 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 third parties. The Company intends to defend
the suit vigorously and cannot now predict the outcome of the
litigation.
In July 1999, James Harris, a stockholder and former
officer of the Company, filed suit against the Company in the
United States District Court for the Northern District of
California. The lawsuit alleges that the Company failed to
pay certain payroll related amounts to Mr. Harris at the time
of the termination of his employment by Purus. The Company
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denies the validity of the claims and intends to vigorously
defend itself in this matter.
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.
Item 2. Managements 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 1998 Annual Report on Form 10-KSB.
On July 26, 1999, following the resignation of the
Company's former Chairman of the Board and Chief Executive
Officer, Adrian Leuenberger was appointed to the positions of
Chairman of the Board, Chief Executive Officer, Chief
Financial Officer, and Secretary by action of the Board of
Directors.
The Company has incurred a cumulative net loss of
approximately $41.4 million from inception to July 3, 1999.
The Company does not expect to report operating profits unless
and until such time as a new business, or technology, is
acquired and only then if such acquisition is successful.
There can be no assurance that the Company will achieve
profitability.
The Company has completed its risk assessment plan for
year 2000 compliance. Based on this assessment, the company
has determined that each system currently in use is fully
compliant.
Results of Continuing Operations
Three and Six Month periods Ended July 3, 1999 and June 27,
1998
The Company had no revenue from continuing operations for
the three and six month periods ended July 3, 1999 and June
27, 1998.
General and administrative expenses from continuing
operations for the three and six month periods ended July 3,
1999 and June 27, 1998 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
$58,512 and $34,920 for the three month periods ended July 3,
1999, and June 27, 1998, respectively; and $124,106 and
$135,765 for the six month periods ended July 3, 1999, and
June 27, 1998, respectively. General and administrative
expenses in the six month period ended June 27, 1998 were
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greater than in the six month period ended July 3, 1999
primarily due to the continuing program of expense reduction
in the Company.
The Company had no interest expense in the three and six
month periods ending July 3, 1999 or June 27, 1998. Interest
income in the three and six month periods ended July 3, 1999
and June 27, 1998, respectively, resulted from the loan to
Casa Solaz. Interest income was $72,556 and $77,632 in the
three month period ended July 3, 1999, and June 27, 1998,
respectively; and $124,630 and $130,783 for the six month
period ended July 3, 1999, and June 27, 1998, respectively.
As a result of the foregoing factors, the Company
recorded a net profit from continuing operations in the amount
of $14,044 for the three-month period ending July 3, 1999,
$42,712 for the three-month period ended June 27, 1998, and
$524 for the six-month period ended July 3, 1999. The Company
recorded a net loss from continuing operations of $4,982 for
the six month period ended June 27, 1998.
Results of Discontinued Operations
Three and Six Month periods Ended July 3, 1999 and June 27,
1998
Income from discontinued operations was zero for the
three and six month periods ended July 3, 1999, respectively
compared to $17,210 and $33,865 for the three and six month
periods ended June 27, 1998, respectively. Income from
discontinued operations consist of royalty payments and
inventory purchases by Thermatrix, and revenues from customer
services provided by the Company on PADRE systems not sold to
Thermatrix. 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 from both continuing and discontinued operations was a
profit of $14,044 and $524 for the three and six-month periods
ending July 3, 1999, respectively, and net income of $59,922
and $28,893 for the three and six-month periods ending June
27, 1998, respectively. Net income per share from both
continuing and discontinued operations was $0.02 and zero for
the three and six-month periods ended July 3, 1999,
respectively, and $0.06 and $0.04 for the three and six-month
periods ended June 27, 1998, respectively.
Liquidity and Capital Resources
At July 3, 1999, the Company had working capital of
approximately $144,000 as compared to $276,296 at January 2,
1999. Working capital as of both dates consisted
substantially of short-term investments, cash and cash
equivalents, accrued liabilities, and net liabilities from
discontinued operations. Net cash used in operating
activities was approximately $163,540 for the six months ended
July 3, 1999. A net cash gain of $404,530 was recorded for
8
the six months ended June 27, 1998. The reduction in working
capital results from continuing losses.
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 operations
through the next 12 months because of uncertainties related to
pending legal actions against the Company. The Company has no
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 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.
9
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Included only with the electronic filing of this report is
the Financial Data Schedule for the six-month period ended
July 3, 1999 (Exhibit Ref. No. 27).
(b) 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/Adrian Leuenberger, Chief Executive Officer
August 9, 1999
Date
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