-----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, US3Tz5DgGfAI59PZR4bEBGH0Gtxo/Olb4Ey4WiyLG1AOoTj6dvLIP0Bw/33sh0uy LI0dleCf62lPzyytQ13PEA== 0000950129-97-004643.txt : 19971114 0000950129-97-004643.hdr.sgml : 19971114 ACCESSION NUMBER: 0000950129-97-004643 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENVIRONMENTAL SAFEGUARDS INC/TX CENTRAL INDEX KEY: 0001017616 STANDARD INDUSTRIAL CLASSIFICATION: REFUSE SYSTEMS [4953] IRS NUMBER: 870429198 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-21953 FILM NUMBER: 97715052 BUSINESS ADDRESS: STREET 1: 2600 SOUTH LOOP WEST STREET 2: 445 CITY: HOUSTON STATE: TX ZIP: 77054 BUSINESS PHONE: 7136413838 MAIL ADDRESS: STREET 1: 2600 SOUTH LOOP WEST STREET 2: SUITE 445 CITY: HOUSTON STATE: TX ZIP: 77054 10QSB 1 ENVIRONMENTAL SAFEGUARDS, INC. - 09/30/97 1 - -------------------------------------------------------------------------------- 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: September 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-21953 ENVIRONMENTAL SAFEGUARDS, INC. (Exact name of registrant as specified in its charter) Nevada 87-0429198 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 2600 West Loop South, Suite 645 Houston, Texas 77054 (Address of principal executive offices, including zip code) (713) 641-3838 (Registrant's telephone number, including area code) ----------------- 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 [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS At November 10, 1997, 9,282,265 shares of common stock, $.001 par value, were outstanding. Transitional Small Business Disclosure Format (check one); Yes [ ] No [x] 2 ENVIRONMENTAL SAFEGUARDS, INC. CONTENTS
Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements 3 Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996 (unaudited) 4 Consolidated Statement of Operations for the three and nine months ended September 30, 1997 and 1996 (unaudited) 5 Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 1997 and 1996 (unaudited) 6 Notes to Consolidated Financial Statements (unaudited) 7-12 Item 2. Management's Discussion and Analysis of Financial Condition and 13-16 Results of Operations PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 17 Signature Page 18 EXHIBIT 27 - FINANCIAL DATA SCHEDULE
2 3 ENVIRONMENTAL SAFEGUARDS, INC. AND SUBSIDIARY ---------- CONSOLIDATED FINANCIAL STATEMENTS for the three and nine months ended September 30, 1997 and 1996 (Unaudited) 3 4 ENVIRONMENTAL SAFEGUARDS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS ----------
September 30, December 31, 1997 1996 ----------- ----------- ASSETS (Unaudited) (Note) Current assets: Cash and cash equivalents $ 2,287,009 $ 3,363,300 Accounts receivable from the Investee 76,766 57,306 ----------- ----------- Total current assets 2,363,775 3,420,606 Property and equipment, net 40,527 4,422 Investment in the Joint Venture 3,087,534 1,935,899 Other assets, net 22,177 120,060 ----------- ----------- Total assets $ 5,514,013 $ 5,480,987 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, trade $ 15,270 $ 10,405 Accounts payable to the Joint Venture 10,321 13,258 Accrued liabilities 71,898 41,946 ----------- ----------- Total current liabilities 97,489 65,609 Convertible debentures -- 1,154,000 Long-term debt, including accrued interest of $150,853 and $6,732 at September 30, 1997 and December 31, 1996, respectively 3,150,853 3,006,732 Deferred gain 194,330 199,666 ----------- ----------- Total liabilities 3,442,672 4,426,007 ----------- ----------- Commitments and contingencies Stockholders' equity: Common stock; $.001 par value, 50,000,000 shares authorized, 9,282,265 and 6,854,828 shares issued and outstanding at September 30, 1997 and December 31, 1996, respectively 9,282 6,855 Unissued common stock 56,252 812,585 Additional paid-in capital 5,718,086 3,692,548 Accumulated deficit (3,712,279) (3,457,008) ----------- ----------- Total stockholders' equity 2,071,341 1,054,980 ----------- ----------- Total liabilities and stockholders' equity $ 5,514,013 $ 5,480,987 =========== ===========
Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes. 4 5 ENVIRONMENTAL SAFEGUARDS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS ----------
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) Income: Income (loss) from investment in the Joint Venture $ 17,871 $ (89,811) $ 101,635 $ (43,427) Interest income 28,827 7,014 89,700 7,014 Other income 1,793 2,099 5,350 5,439 ----------- ----------- ----------- ----------- Total income 48,491 (80,698) 196,685 (30,974) ----------- ----------- ----------- ----------- Costs and expenses: Operational and general 97,286 353,181 262,516 501,096 Depreciation expenses 1,750 1,825 2,638 5,475 Interest expenses 58,058 60,597 186,802 63,524 ----------- ----------- ----------- ----------- Total costs and expenses 157,094 415,603 451,956 570,095 ----------- ----------- ----------- ----------- Loss before extraordinary gain on elimination of debt (108,603) (496,301) (255,271) (601,069) Extraordinary gain on elimination of debt, net - - - 74,035 ----------- ----------- ----------- ----------- Net loss $ (108,603) $ (496,301) $ (255,271) $ (527,034) =========== =========== =========== =========== Net loss per common share before extraordinary gain on elimination of debt $ (.01) $ (.08) $ (.03) $ (.10) Extraordinary gain - - - .01 ----------- ----------- ----------- ----------- Net loss per common share $ (.01) $ (0.08) $ (.03) $ (0.09) =========== =========== =========== =========== Weighted average shares outstanding 9,282,265 6,427,145 8,946,665 6,139,113 =========== =========== =========== ===========
See accompanying notes. 5 6 ENVIRONMENTAL SAFEGUARDS, INC. AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS for the three and nine months ended September 30, 1997 and 1996 ----------
Nine Months Ended September 30, 1997 1996 ----------- ----------- (Unaudited) Operating activities: Net loss $ (255,271) $ (527,034) Adjustment to reconcile net loss to net cash used in operating activities 72,651 278,491 ----------- ----------- Net cash used in operating activities (182,620) (248,543) ----------- ----------- Investing activities: Investment in the Joint Venture (1,050,000) (690,888) Purchase of property and equipment (38,743) -- Proceeds from sale of equipment -- 4,526 ----------- ----------- Net cash used in investing activities (1,088,743) (686,362) ----------- ----------- Financing activities: Repayment of notes payable -- (95,000) Proceeds from sale of convertible debentures -- 1,110,000 Payment of stock issuance costs (9,928) (54,749) Proceeds from sale of common stock 205,000 600,500 Repayment of long-term debt -- (26,013) ----------- ----------- Net cash provided by financing activities 195,072 1,534,738 ----------- ----------- Net change in cash and cash equivalents (1,076,291) 599,833 Cash and cash equivalents, beginning of period 3,363,300 194,388 ----------- ----------- Cash and cash equivalents, end of period $ 2,287,009 $ 794,221 =========== =========== Supplemental Disclosure of Cash Flow Information: Cash paid for interest expense $ - $ 4,989 ========== ==========
See accompanying notes. 6 7 ENVIRONMENTAL SAFEGUARDS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) SEPTEMBER 30, 1997 ---------- 1. Interim Financial Statements: The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended December 31, 1996. 2. Description of the Business: Environmental Safeguards, Inc. ("ESI") was incorporated under the laws of the state of Nevada on December 30, 1985 as Cape Cod Investment Company. The Company adopted its present name on May 17, 1993 concurrently with its reverse acquisition of National Fuel and Energy, Inc. ("NFE"), a Wyoming corporation. In these financial statements, the Company and its wholly owned subsidiary, NFE, are collectively referred to as the "Company". The Company is engaged in the business of developing, marketing and providing environmental reclamation/remediation technologies and services. To date, the primary service offered by the Company has been the reclamation/remediation of soil contaminated by oil based drilling mud, fuel spills, leaking underground storage tanks and other sources of hydrocarbon contamination. The Company's primary customers have generally been energy companies operating in the Western United States; however, the Company is making efforts to broaden the geographical scope of its operations and is now operating three reclamation/remediation units in South America, each under two year service contracts. Continued 7 8 ENVIRONMENTAL SAFEGUARDS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued SEPTEMBER 30, 1997 ---------- 3. Investment in Joint Venture Effective January 1, 1995, the Company entered into an exclusive marketing agreement with Parker Drilling Company ("PDC") under which PDC was appointed as the Company's sole marketing representative for the Company's Indirect Thermal Desorption ("ITD") services as they relate to reclamation of hydrocarbons from drill cuttings. The geographical scope of the exclusive marketing agreement extended to the continental United States and Alaska and many countries which have significant energy-related industries. Effective August 1, 1995, the Company and PDC entered into a joint venture agreement (the "Agreement") to provide certain services previously provided under the exclusive marketing agreement described in the previous paragraph. Accordingly, Onsite Technology, L.L.C. (the "Joint Venture") was formed under the Oklahoma Limited Liability Company Act. Pursuant to the Agreement, as amended, the Company granted to the Joint Venture certain exclusive licenses to use the technologies included in the reclamation/remediation units and the proprietary processes for on location soil reclamation/remediation in the United States and in certain foreign countries. PDC has agreed to actively market and promote the services of the Joint Venture through specific actions described in the Agreement. Expenses associated with certain promotional activities were borne by PDC until July 31, 1996 and included in the operational and general expenses of the Joint Venture. The Company intends to conduct all of its future business operations, related to its ITD technology and related services through the Joint Venture. Under the terms of the Agreement the Company and PDC each own a 50% interest in the assets, liabilities, capital and profits of the Joint Venture. Each member initially made capital contributions of $1,000 to the Joint Venture and may have made additional contributions as needed to enable the Joint Venture to conduct its business. The Joint Venture will continue to operate until January 1, 2025, unless such date is changed as provided for in the Agreement. Following is summarized financial information of the Joint Venture as of September 30, 1997 and December 31, 1996 and for the three and nine months ended September 30, 1997 and 1996: Continued 8 9 ENVIRONMENTAL SAFEGUARDS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued SEPTEMBER 30, 1997 ---------- 3. Investment in Joint Venture, continued: BALANCE SHEET
September 30, December 31, 1997 1996 ---------- ---------- Assets Current assets: Cash $1,131,204 $ 58,013 Accounts receivable, trade -- 25,200 Accounts receivable from the Company 10,321 13,258 Accounts receivable from the Investee 101,834 78,062 Other current assets -- 12,850 ---------- ---------- Total current assets 1,243,359 187,383 Due from the Investee 1,077,882 950,000 Property and equipment, net 2,904,330 3,754,435 Investment in the Investee 1,020,478 80,639 ---------- ---------- Total assets $6,246,049 $4,972,457 ========== ========== Liabilities and Venturers' Capital Current liabilities: Accounts payable $ 45,983 $1,100,659 Accrued liabilities 24,999 -- ---------- ---------- Total current liabilities 70,982 1,100,659 Venturers' capital 6,175,067 3,871,798 ---------- ---------- Total liabilities and venturers' capital $6,246,049 $4,972,457 ========== ========== The Company's 50% share of the capital of the Joint Venture $3,087,534 $1,935,899 ========== ==========
Continued 9 10 ENVIRONMENTAL SAFEGUARDS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued SEPTEMBER 30, 1997 ---------- 3. Investment in Joint Venture, continued: STATEMENT OF OPERATIONS
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 --------- --------- --------- --------- Income: Service revenue $ -- $ 51,150 $ 245,700 $ 466,350 Income from investment in the Investee 205,720 -- 414,265 -- Interest income 34,052 -- 122,150 -- --------- --------- --------- --------- Total income 239,772 51,150 782,115 466,350 --------- --------- --------- --------- Costs and expenses: Operating and general expenses 164,788 193,594 462,331 443,526 Depreciation expense 39,243 37,178 116,515 109,678 --------- --------- --------- --------- Total costs and expenses 204,031 230,772 578,846 553,204 --------- --------- --------- --------- Net income (loss) $ 35,741 $(179,622) $ 203,269 $ (86,854) ========= ========= ========= ========= The Company's 50% equity in income (loss) of the Joint Venture $ 17,871 $ (89,811) $ 101,635 $ (43,427) ========= ========= ========= =========
The Company must bear its share of liabilities entered into by the Joint Venture and is subject to any liabilities that result from the operations of the Joint Venture. Failure to meet such liabilities would have a material adverse effect on the operations of the Company. Continued 10 11 f ENVIRONMENTAL SAFEGUARDS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited), Continued SEPTEMBER 30, 1997 ---------- 3. Investment in Joint Venture, continued: In November 1996, the Joint Venture entered into a joint venture, OnSite Colombia, Inc., (the "Investee") with a group of South American investors. The Investee was established to provide hydrocarbon contaminated soil reclamation/remediation services in Colombia. The Joint Venture owns a 50% interest in the assets, liabilities, capital and profits of the Investee and, accordingly, the Company ultimately participates on a 25% basis in the operations of the Investee. In December 1996, the Joint Venture sold an ITD unit to the Investee for $950,000 in a transaction that resulted in no gain or loss to the Joint Venture. In March 1997, the Investee entered into a sales leaseback transaction for this ITD unit and in April 1997 received $950,000 in cash proceeds from the sale. However, due to the terms of the leaseback transaction, no gain or loss was recognized on the sale. In April and May of 1997, the Joint Venture delivered two additional units to the Investee for a total cost of $2,155,764 in a transaction that again resulted in no gain or loss to the Joint Venture. 4. Stockholders' Equity In February 1997, the Company closed an exempt offering under Regulation D of the Securities Act of 1933. The Company collected cash proceeds of $833,500 for the issuance of 333,400 shares of common stock ($145,000 and $688,500 collected in 1997 and 1996, respectively). In February 1997, the Company also completed a public registration of 2,304,792 shares of its common stock. The company's 10% convertible debentures provide that they would be automatically converted into shares of the Company's common stock upon the effective registration by the Company of its common stock under the Securities Exchange Act of 1934 as amended. Of the 2,304,792 shares offered in the registration, 370,000 shares were outstanding at December 31, 1996 and the balance of 1,934,792 were issued in March 1997 pursuant to the conversion of the 10% debentures and payment of related accrued interest. Continued 11 12 ENVIRONMENTAL SAFEGUARDS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued SEPTEMBER 30, 1997 ---------- 4. Stockholders' Equity, continued In June 1997, the Company issued PDC 50,000 warrants to acquire shares of the Company's common stock at $2.50 per share. These warrants issued under the Credit Agreement with PDC expire December 31, 1998. In February 1997, the Financial Accounting Standards board issued Statement No. 128, "Earnings Per Share", which the Company will be required to adopt during the three-month period ending December 31, 1997. The adoption of this statement is not expected to have a material effect on the calculation of earnings per share. 5. Income Taxes: Income taxes are accounted for under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Cumulative losses since inception have created deferred tax assets of approximately $880,000. A valuation allowance was established for the full amount of these deferred tax assets because the future realization of the cumulative tax benefit is not assured. 12 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The results of operations for the three and nine months ended September 30, 1997 are not necessarily indicative of the results for future periods. The following discussion should be read in conjunction with the unaudited consolidated condensed interim financial statements and related notes thereto included in this quarterly report and the audited Consolidated Financial Statements and Managements Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's 10KSB for the year ended December 31, 1996. OVERVIEW Environmental Safeguards, Inc. is engaged in the development, production and sale of environmental reclamation/remediation technologies and services. Certain of the Company's technologies and services are provided through the Company's fifty percent owned joint venture, OnSite Technology, L.L.C. (the "Joint Venture") and the Company is devoting substantially all of its efforts to the development of markets for the Joint Venture's services. The Joint Venture is currently providing reclamation/remediation services to companies engaged in land based oil and gas exploration. Such exploration often produces significant quantities of petroleum contaminated drill cuttings from which the Company's indirect thermal desorption ("ITD") units extract and recover the hydrocarbons for further refining and produces soil which is remediated to acceptable levels. The Company intends to expand the activities of the Joint Venture to include use of ITD technology to address hydrocarbon contamination problems at both operating and abandoned oil and petrochemical refineries. However, management believes that hydrocarbon contamination problems inherent in oil and gas drilling activity continues to currently represent the most profitable application of ITD technology and will provide the Company and the Joint Venture increased market exposure and greater industry understanding and acceptance of its technology. QUARTERLY FLUCTUATIONS The Joint Venture's revenues from its six current ITD Units may be affected by the timing of deployment of ITD Units to customer drilling sites under existing contracts and to the timing of obtaining new contracts. Accordingly, the Company's quarterly results may fluctuate and the results of one fiscal quarter should not be deemed to be representative of the results of any other quarter or for the full fiscal year. RESULTS OF OPERATIONS Net Income The Company's net loss of $108,603 for the three months ended September 30, 1997 represents an improvement of $387,698 as compared to the net loss of $496,301 for the three months ended 13 14 September 30, 1996. The improvement is due primarily to the fact that the three months ended September 30, 1996 included a charge of $312,500 for compensation to a former contractor of the Company. The net loss for the nine months ended September 30, 1997 of $255,271 is an improvement of $271,763 versus the net loss of $527,034 for the nine months ended September 30, 1996, due primarily to the same reason, with the impact partially offset by an extraordinary gain on elimination of debt of $74,035 in 1996. INCOME The Company's income of $17,871 on its investment in OnSite Technology, L.L.C. (the "Joint Venture") during the three months ended September 30, 1997 represents an improvement of $107,682 as compared to a loss of $89,811 during the three months ended September 30, 1996. This improvement in results by the Joint Venture is due to improved income generated by OnSite Columbia, a venture in which the Joint Venture participates on a 50% basis, and due to the fact that in 1996 the Joint Venture was operating only one ITD unit at a single customer site that provided an inconsistent supply of soil for processing. The Joint Venture currently operates three units through OnSite Colombia and expects to experience more consistent earnings. The Company's earnings from the Joint Venture amounted to $101,635 during the nine months ended September 30, 1997, an improvement of $145,062 as compared to a loss of $43,427 for the nine months ended September 30, 1996 as a result of the additional units. Interest income of $28,827 and $89,700 during the three months and the nine months ended September 30, 1997, respectively, was due to the investment of proceeds from long-term debt of $3,000,000 received in the fourth quarter of 1996 and investment of net proceeds of approximately $800,000 from the Company's most recent Regulation D offering that closed in February 1997. During similar periods of 1996 the Company had no excess cash to invest. The proceeds from long-term debt and the Regulation D offering are now being used to fund the Company's continuing operations and are available to meet potential obligations for additional investment in the Joint Venture. EXPENSES Operating and general expenses of the Company were $97,286 during the three months ended September 30, 1997 as compared to $353,181 during the three months ended September 30, 1996. This $255,895 decrease is primarily due to the inclusion of a $312,500 charge for common stock issued as compensation to a former contractor for the Company in 1996, partially offset by additional personnel needed to manage the Company's investment in the Joint Venture and additional compensation for the Company's Chief Executive Officer. During the nine months ended September 30, 1997 interest expense increased by $123,278 as compared to the nine months ended September 30, 1996 due primarily to interest expense at the rate of 6.3% per annum on $3,000,000 of long term debt raised in December 1996. 14 15 EXTRAORDINARY ITEM The extraordinary gain on elimination of debt of $74,035 during the nine months ended September 30, 1996 represented the settlement of old trade payables of a nonrecurring nature and, accordingly, there was no similar item reported in 1997. OPERATIONS OF ONSITE TECHNOLOGY, L.L.C. The Joint Venture began operations in late November of 1995 and has had a significant impact on the composition of revenue, costs and expenses of the Company. As of September 30, 1997 the Joint Venture is operating three ITD units through the Joint Venture's 50% owned investment, OnSite Colombia, which began operations in November 1996.
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 --------- --------- --------- --------- Income: Service revenue $ -- $ 51,150 $ 245,700 $ 466,350 Income from investment in OnSite Colombia 205,720 -- 414.265 -- Interest income 34,052 -- 122,150 -- --------- --------- --------- --------- Total income 239,772 51,150 782,115 466,350 --------- --------- --------- --------- Costs and expenses: Operational and general 164,788 193,594 462,331 443,526 Depreciation expenses 39,243 37,178 116,515 109,678 --------- --------- --------- --------- Total costs and expenses 204,031 230,772 578,846 553,204 --------- --------- --------- --------- Net income (loss) $ 35,741 $(179,622) $ 203,269 $ (86,854) ========= ========= ========= ========= The Company's 50% equity in income (loss) of the Joint Venture $ 17,871 $ (89,811) $ 101,635 $ (43,427) ========= ========= ========= =========
As shown by the results of the Joint Venture's operations, during the nine months ended September 30, 1997 the Joint Venture experienced a decrease in service revenue when its project in Lysite, Wyoming was completed. The Joint Venture expects to increase profitability through the additional deployment of its two new and one refurbished ITD Units under contracts now being negotiated, and through higher utilization rates on existing units. In November 1996, the Joint Venture entered into a venture, OnSite Colombia, with a group of South American investors. OnSite Colombia was established to provide hydrocarbon contaminated soil reclamation services to energy companies operating in Colombia. The Joint Venture owns a 50% interest in the assets, liabilities, capital and profits of OnSite Colombia and, accordingly, the Company ultimately participates on a 25% basis in the operations of OnSite Colombia. In December 1996, OnSite sold its newest ITD unit to OnSite Colombia for $950,000 in a transaction that resulted in no gain or loss to the Joint Venture. In April and May 1997, the Joint Venture sold OnSite Colombia two additional units for $2,155,765. In order to improve cash flow for the Joint Venture, OnSite Colombia negotiated a sales leaseback transaction with a bank in order to repay the Joint Venture for one unit and is currently negotiating a similar transaction for the second two units. The Joint Venture is charging OnSite Colombia interest at 12% per year until repayment of the purchase 15 16 price is received. Such interest charges account for the interest income in the three and nine months ended September 30, 1997. The three units employed in Colombia are under two year contracts. As these contracts progress, they should improve the operating results of OnSite Colombia and the Joint Venture. LIQUIDITY AND CAPITAL RESOURCES In the first quarter of 1997, the Company converted debt and related accrued interest totaling $1,262,021 to equity and completed a Regulation D offering of 333,400 shares of its common stock at $2.50 per share for proceeds of $833,500. These transactions, along with the $3,000,000 long-term debt proceeds received by the Company in December 1996, should be adequate to fund the Company's current operations and allow the Company to meet certain additional obligations arising from the Joint Venture. The Joint Venture currently has two new ITD units available for service, on which contracts are currently being negotiated. A third ITD unit is undergoing refurbishment after completing a service contract and should soon be ready for service. After these ITD units are employed, the Joint Venture anticipates contracting for the manufacture of additional units. If the Joint Venture contracts for a significant number of new ITD units, the Company may again be faced with the need to raise additional funds for its share of the cost. INFORMATION REGARDING FORWARD LOOKING STATEMENTS The Company is including the following cautionary statement in its Report on Form 10QSB to make applicable and take advantage of the safe harbor provision of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of the Company. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical facts. Certain statements contained herein are forward looking statements and, accordingly, involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company's expectations, beliefs and projects are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitations, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties, but there can be no assurance that management's expectation, beliefs or projections will result or be achieved or accomplished. In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in the view of the Company, could cause actual results to differ materially from those discussed in the forward-looking statements: the ability of the Company to attain widespread market acceptance of its technology; the ability of the Company to obtain acceptable forms and amounts of financing to fund planned expansion efforts; and the ability of the Company to maintain acceptable utilization rates on its equipment. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof. 16 17 PART II OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits required by Item 601 of Regulation SB (i) Exhibit 27. Financial Data Schedule (b) Reports on Form 8-K (i) On August 7, 1997 the Company filed a current report on Form 8-K relating to Item 5. Other Events. (ii) On September 19, 1997 the Company filed a current report on Form 8-K relating to Item 4. Changes in Registrant's Certifying Accountant. 17 18 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 hereunto duly authorized. ENVIRONMENTAL SAFEGUARDS, INC. Date: November 11, 1997 By: /s/ James S. Percell ---------------------------------- James S. Percell, President By: /s/ Ronald L. Bianco ---------------------------------- Ronald L. Bianco, Chief Financial Officer 18 19 INDEX TO EXHIBITS
Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 SEP-30-1997 2,287,009 0 76,766 0 0 2,363,775 47,609 7,082 5,514,013 97,489 3,150,853 0 0 9,282 2,062,059 5,514,013 0 196,685 0 0 265,154 0 186,802 255,271 0 255,271 0 0 0 255,271 (0.03) (0.03)
-----END PRIVACY-ENHANCED MESSAGE-----