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Delaware 22-2677298
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
300 Oxford Drive, Monroeville, Pennsylvania 15146
(Address of principal executive offices) (Zip 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
As of December 6, 1996, there were 5,923,868 shares of the registrant's common stock outstanding.
Part I. Financial Information Page
Item 1. Consolidated Financial Statements and Notes to Consolidated Financial Statements
(a) Condensed Consolidated Balance Sheets as of October 31, 1996 (unaudited) and January
31, 1996 3
(b) Consolidated Statements of Operations for the Three Months Ended October 31, 1996 and
1995 (unaudited) 4
(c) Consolidated Statements of Operations for the Nine Months Ended October 31, 1996 and
1995 (unaudited) 5
(d) Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 1996 and
1995 (unaudited) 6
(e) Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 10
Part II. Other Information
Item 1. Legal Proceedings 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
October 31, January 31,
1996 1996
(unaudited)
Assets
Current Assets
Cash and short-term investments $ 463,000 $ 273,000
Accounts receivable - net 3,823,000 3,221,000
Costs and estimated earnings in excess of billings on
uncompleted contracts 866,000 670,000
Inventory 199,000 181,000
Net assets of discontinued operations - 1,492,000
Other current assets 550,000 734,000
Total Current Assets 5,901,000 6,571,000
Property, Plant and Equipment 3,935,000 3,886,000
Less: accumulated depreciation 3,242,000 3,067,000
693,000 819,000
Other Assets 40,000 55,000
Total Assets $ 6,634,000 $ 7,445,000
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 1,948,000 $ 1,680,000
Short-term borrowings 1,500,000 -
Accrued liabilities 1,375,000 998,000
Billings in excess of costs and estimated earnings
on uncompleted contracts 938,000 607,000
Current portion of long-term debt 174,000 176,000
Total Current Liabilities 5,935,000 3,461,000
Long-Term Debt 216,000 2,766,000
Commitments and Contingencies
Stockholders' Equity
Cumulative convertible 2% preferred stock 444,000 444,000
Common stock 118,000 118,000
Additional paid-in capital 4,260,000 4,230,000
Deficit (4,339,000) (3,574,000)
Total Stockholders' Equity 483,000 1,218,000
Total Liabilities and Stockholders' Equity $ 6,634,000 $ 7,445,000
See accompanying notes to consolidated financial statements.
For the Three Months
Ended October 31,
1996 1995
Contract revenues $ 4,023,000 $ 5,269,000
Contract costs 3,305,000 4,689,000
Gross margin 718,000 580,000
Selling, general and administrative expenses 627,000 763,000
Income (loss) from operations 91,000 (183,000)
Other income (expense):
Interest expense (62,000) (113,000)
Interest income 1,000 4,000
Other income 21,000 -
(40,000) (109,000)
Income (loss) before income taxes and
discontinued operations 51,000 (292,000)
Income tax provision - -
Income (loss) before discontinued operations 51,000 (292,000)
Discontinued operations
Loss from operations - (292,000)
Loss on disposal (9,000) -
(9,000) (292,000)
Net income (loss) $ 42,000 $ (584,000)
Preferred stock dividend requirements $ - $ 12,000
Per share of common stock - primary:
Income (loss) before discontinued operations $ 0.01 $ (0.05)
Discontinued operations - (0.05)
Net income (loss) per common share $ 0.01 $ (0.10)
Average common shares and dilutive common
equivalents outstanding 5,911,000 5,704,000
See accompanying notes to consolidated financial statements.
For the Nine Months
Ended October 31,
1996 1995
Contract revenues $ 11,548,000 $ 13,255,000
Contract costs 9,996,000 11,532,000
Gross margin 1,552,000 1,723,000
Selling, general and administrative expenses 1,858,000 2,255,000
Loss from operations (306,000) (532,000)
Other income (expense):
Gain on sale of PDG Remediation, Inc. common stock - 1,354,000
Interest expense (230,000) (376,000)
Interest income 6,000 18,000
Other income 67,000 4,000
(157,000) 1,000,000
Income (loss) before income taxes and discontinued
operations (463,000) 468,000
Income tax provision - -
Income (loss) before discontinued operations (463,000) 468,000
Discontinued operations
Loss from operations (505,000) (737,000)
Gain on disposal 203,000 -
(302,000) (737,000)
Net loss $ (765,000) $ (269,000)
Preferred stock dividend requirements $ 27,000 $ 36,000
Per share of common stock - primary:
Income (loss) before discontinued operations $ (0.08) $ 0.07
Discontinued operations (0.05) (0.13)
Net income (loss) per common share $ (0.13) $ (0.06)
Average common shares and dilutive common
equivalents outstanding 5,910,000 5,522,000
See accompanying notes to consolidated financial statements.
For the Nine Months
Ended October 31,
1996 1995
Cash Flows from Operating Activities:
Net loss $ (765,000) $ (269,000)
Adjustments to Reconcile Net
Income to Cash Provided (Used) by Operating Activities:
Depreciation and amortization 282,000 369,000
Gain on sale of PDG Remediation, Inc. common stock (203,000) (1,354,000)
Total Cash Provided by Income (Loss) (686,000) (1,254,000)
Changes in Assets and Liabilities
Other than Cash:
Accounts receivable (602,000) (926,000)
Costs and estimated earnings in excess of billings
on uncompleted contracts (196,000) (171,000)
Inventory (18,000) 11,000
Net assets of discontinued operations 489,000 737,000
Prepaid income taxes (55,000) (61,000)
Other current assets 501,000 681,000
Accounts payable 15,000 (12,000)
Billings in excess of costs and estimated earnings
on uncompleted contracts 331,000 (233,000)
Accrued liabilities 377,000 217,000
Other (47,000) (5,000)
Total Adjustments in Assets and Liabilities 795,000 238,000
Net Cash Provided (Used) by Operating Activities 109,000 (1,016,000)
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (75,000) (301,000)
Proceeds from the sale of property, plant and equipment 2,000 1,000
Net Cash Used by Investing Activities (73,000) (300,000)
Cash Flows from Financing Activities:
Proceeds on sale of PDG Remediation, Inc. common stock - 1,435,000
Proceeds from debt 286,000 49,000
Principal payments on debt (132,000) (728,000)
Net Cash Provided by Financing Activities 154,000 756,000
Net Increase (Decrease) in Cash and Short-Term Investments 190,000 (560,000)
Cash and Short-Term Investments, Beginning of Period 273,000 673,000
Cash and Short-Term Investments, End of Period $ 463,000 $ 113,000
See accompanying notes to consolidated financial statements.
Additional Information:
The proceeds on the sale of PDG Remediation, Inc. common stock of $1,206,000 for the nine months ended October 31, 1996 were not received in the form of cash, but rather were a direct offset to the debt owed Drummond Financial Corporation.
NOTE 1 -- BASIS OF PRESENTATION
The consolidated financial statements include PDG Environmental, Inc. and its wholly-owned subsidiaries. The
accounts of ICHOR Corporation, formerly known as PDG Remediation, Inc. ("PDGR"), in which PDG Environmental,
Inc. maintained until July 31, 1996 a 59.5% ownership interest subsequent to the initial public offering of PDGR's
common stock and warrants on February 9, 1995 are reflected as a discontinued operation (see Note 3).
The accompanying financial statements of PDG Environmental, Inc. and subsidiaries (the "Corporation") are
unaudited. However, in the opinion of management, they include all adjustments necessary for a fair presentation
of financial position, results of operations and cash flows. All adjustments made during the three and nine months
ended October 31, 1996 were of a normal, recurring nature. The amounts presented for the three and nine months
ended October 31, 1996 are not necessarily indicative of results of operations for a full year. Additional information
is contained in the Annual Report on Form 10-K of the Corporation for the year ended January 31, 1996, as amended
by Form 10-K/A No. 1 dated May 31, 1996 and Quarterly Reports on Form 10-Q of the Corporation for the quarters
ended April 30, 1996 and July 31, 1996 dated June 14, 1996 and September 16, 1996, respectively, and should be
read in conjunction with this quarterly report.
The prior year financial statements have been reclassified to reflect the PDGR business as a discontinued operation.
NOTE 2 - FEDERAL INCOME TAXES
No income taxes have been provided for the three and nine months ended October 31, 1996 due to a loss for the
nine month period ending October 31, 1996 for financial reporting purposes.
Income taxes paid by the Corporation for the nine months ended October 31, 1996 and 1995 totaled approximately
$8,000 and $57,000, respectively.
NOTE 3 - ICHOR CORPORATION (FORMERLY KNOWN AS PDG REMEDIATION, INC.)
Initial Public Offering
On February 9, 1995, PDGR sold in an initial public offering 1,000,000 shares of common stock and 1,000,000
redeemable warrants at a price of $5.00 per share of common stock and $0.10 per redeemable warrant. The
Corporation sold 400,000 shares of its PDGR common stock as part of the initial public offering and received net
proceeds of approximately $1.4 million, which resulted in a gain of approximately $1.4 million during the nine months
ended October 31, 1995. The Corporation recorded the sale effective as of February 1, 1995. PDGR sold 600,000
newly issued common shares plus 1,000,000 redeemable warrants and received net proceeds of approximately $2.3
million. The Corporation owned approximately 59.5% of PDGR common stock until July 31, 1996.
Discontinued Operations
On May 1, 1996, the Corporation made the decision to divest its remaining 59.5% ownership interest in PDGR. The
loss from discontinued operations in the Statements of Consolidated Operations represents the Corporation's 59.5%
portion of PDGR's loss. During the six month period ending July 31, 1996, PDGR had revenues of $2,479,000, and
during the three and nine month periods ending October 31, 1995, PDGR had revenue of $1,314,000 and
$4,874,000, respectively. See Note 4 for a discussion of the sale of PDGR.
NOTE 4 - LINES OF CREDIT
On July 31, 1996, the Corporation entered into a Loan Modification Agreement ("Modification Agreement") with
Drummond Financial Corporation ("Drummond") formerly CVD Financial Corporation. Pursuant to the Modification
Agreement, Drummond purchased all 1,470,320 shares of PDGR common stock held by the Corporation for $0.82
per share and the aggregate purchase price of $1,205,662 was utilized to reduce the outstanding balance on the
line of credit maintained by the Corporation with Drummond. This resulted in a $203,000 gain on the sale. After
application of the proceeds, the debt under the line of credit was reduced to $1,214,332 at July 31, 1996, and the
maximum allowable borrowings under the line of credit were capped at $1,500,000. The maturity date of the line
of credit and term loan agreements was extended until August 1, 1997. As of October 31, 1996, the Corporation was
fully borrowed on the $1.5 million line of credit.
The closing of the sale was subject to a number of conditions, including (a) the reincorporation of PDGR as a
Delaware corporation; (b) the reincorporation of PDGR resulting in no material liabilities to PDGR; and (c) not more
than five percent (5%) of the shareholders of PDGR exercising dissenters' rights in connection with the
reincorporation. PDGR satisfied all requirements for reincorporation and reincorporated in Delaware on November
13, 1996. No material liabilities to PDGR resulted from this reincorporation. The period for the exercise of
dissenters' rights expired on November 12, 1996, and no dissenters' rights were exercised.
On January 27, 1995, PDGR entered into a Master Funding and Indemnification Agreement with Sirrom
Environmental Funding, LLC, (the "Sirrom Agreement") which provides $750,000 of funding in connection with clean-up activities under the EDI Program. The Sirrom Agreement expires on January 27, 1997 and enables PDGR to fund
the amounts which PDGR bills under the EDI Program at the prime rate of interest, as defined, plus 2%. PDGR is
advanced 100% of amounts billed, and is required to deposit 10% into an escrow account to cover potential
disallowances. PDGR and the Corporation are guarantors on the Sirrom Agreement. The advances to PDGR are
fully secured by the accounts receivable and the escrow. As of October 31, 1996, PDGR was advanced
approximately $0.7 million under the Sirrom Agreement.
On August 21, 1995, PDGR entered into a second Master Funding and Indemnification Agreement with Sirrom
Environmental Funding, LLC (the "Second Sirrom Agreement"), which provides $4,000,000 of funding relative to
unbilled amounts under the EDI Program. The Second Sirrom Agreement, which expires on August 21, 1997,
enables PDGR to fund amounts billed under the EDI Program at the prime rate of interest, as defined, plus 3%.
Although PDGR will be advanced 100% of amounts billed, it is required to deposit 34% into an escrow account to
cover potential disallowances, future interest costs, and a commitment fee of 2% of the total funding provided. The
advances to PDGR are fully secured by the accounts receivable and the escrow. PDGR and the Corporation are
guarantors on the Second Sirrom Agreement. As of October 31, 1996, PDGR was advanced approximately $2.3
million under the Second Sirrom Agreement.
It is expected that the amounts under the aforementioned guarantees will decrease in the first half of calendar 1997
as the balances due PDGR from the EDI Program are remitted thereby allowing PDGR to reduce the amounts owed
Sirrom.
On October 31, 1996, the Corporation advised Sirrom that it would no longer guarantee future advances to PDGR
under either the Sirrom Agreement or the Second Sirrom Agreement.
The Corporation paid interest costs totaling approximately $176,000 and $375,000 during the nine months ended
October 31, 1996 and 1995, respectively.
NOTE 5 - COMPENSATION PLANS
The Corporation maintains a qualified incentive stock option plan (the "Plan") which provides for the grant of incentive
options to purchase shares of the common stock of the Corporation to certain officers and employees of the
Corporation and its subsidiaries. Options to purchase 1,055,000 and 115,000 shares of the Corporation's common
stock at an exercise price of $0.36 per share were granted under the Plan effective June 17, 1996 and November
1, 1996, respectively. Vesting of 50% of the options is contingent upon the individual offices, and in the case of
executive officers, the Corporation, meeting pre-established financial goals for the remainder of fiscal 1997. If
financial goals are exceeded by 25%, the remaining 50% of options for fiscal 1997 vest. If financial goals are not
achieved, the options do not vest and are returned to the Plan for future grants. Vesting for fiscal 1998 options are
identical to that of the fiscal 1997 options.
NOTE 6 - PREFERRED STOCK
Cumulative dividends in arrears on the Corporation's 2% Series A Preferred Stock were approximately $119,000 at
October 31, 1996. At October 31, 1996, there were 186,052 shares of Series A Preferred Stock outstanding. The
Series A Preferred Stock is convertible into four shares of the Corporation's common stock at the option of the
preferred stockholder.
The conversion rate on the Series A Preferred Stock is also subject to adjustment as a result of certain changes in
the Corporation's capital structure or distributions to common stockholders (except for cash dividends permissible
under law).
NOTE 7 - NET LOSS PER SHARE
The primary loss per common share for the three and nine months ended October 31, 1995 and the nine months
ended October 31, 1996 are computed by adjusting the net loss for the preferred dividend requirement of $12,000,
$36,000 and $27,000, respectively, and dividing this amount by the weighted average number of shares of common
stock outstanding during the respective period. The effects of assuming the conversion of preferred stock or the
exercise of stock options, stock warrants and common stock rights would be antidilutive for the three and nine
months ended October 31, 1995 and the nine months ended October 31, 1996.
Primary earnings per share for the three months ended October 31, 1996 are calculated by adjusting the net income
for the preferred dividend requirement of $9,000 and dividing this amount by the weighted average number of shares
of common shares outstanding during the quarter. The effects of assuming the conversion of preferred stock or the
exercise of stock options, stock warrants and common stock rights would be antidilutive for the three months ended
October 31, 1996.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
As discussed in further detail in Item 3. Legal Proceedings contained in the Corporation's Annual Report on Form
10-K for the year ended January 31, 1996, as amended by Form 10-K/A dated May 31, 1996, the Corporation and
PDGR have been named as a defendant in a purported class action involving the purchase by all persons and
entities of PDGR common stock from February 9, 1995 through May 23, 1995. The action alleges that defendants
violated certain federal securities laws.
The Corporation and PDGR believe that the allegations are without merit or that there are meritorious defenses to
the allegations, and intends to defend the action vigorously. If, however, the plaintiff is successful in its claims, a
judgment rendered against the Corporation and the other defendants would likely have a material adverse effect on
the business and operations of the Corporation.
RESULTS OF OPERATIONS
Three Months Ended October 31, 1996 and 1995
On February 9, 1995, the Corporation sold approximately 40.5% of its common stock interest in its wholly-owned
environmental services subsidiary, PDGR, in an initial public offering of PDGR's common stock. The Corporation
recorded the sale effective as of February 1, 1995. On May 1, 1996, the Corporation made a decision to divest its
remaining 59.5% interest in PDGR. Therefore, the Corporation accounted for its remaining 59.5% ownership interest
as a discontinued operation until July 31, 1996, at which time the Corporation's remaining ownership was sold to
Drummond Financial Corporation.
The Corporation's contract revenues decreased by approximately 24% to $4.0 million during the three months ended
October 31, 1996 compared to $5.3 million in the three months ended October 31, 1995.
The Corporation's gross margin increased to $0.7 million in the third quarter of fiscal 1997 compared to $0.6 million
in the third quarter of fiscal 1996 due to increased profit margin on contracts which more than offset the decline in
revenue.
Selling, general and administrative expenses decreased to $0.6 million in the three months ended October 31, 1996
compared to $0.8 million in the three months ended October 31, 1995. The decrease is primarily attributable to cost-saving measures implemented during the current year.
As a result of the factors described above, the Corporation reported income from operations of $0.1 million in the
current three month period compared to a loss from operations of $0.2 million for the same three months of the prior
fiscal year.
The Corporation's reported interest expense decreased to $0.06 million for the current fiscal quarter from $0.11
million for the prior year fiscal quarter. The Corporation's interest expense decreased due to a significant reduction
in both the outstanding balance on the indebtedness to Drummond and the related interest rate.
No income taxes have been provided during the three months ended October 31, 1996 as the Corporation reported
a loss for financial reporting purposes during the nine months ended October 31, 1996.
The Corporation recorded its 59.5% interest in the losses of PDGR resulting in a $0.3 million loss for the quarter
ended October 31, 1995. The gain on disposal was decreased by $9,000 during the quarter ended October 31, 1996
as a result of legal billings related to the Modification Agreement with Drummond.
Nine Months Ended October 31, 1996 and 1995
The Corporation's contract revenues decreased by approximately 13% to $11.5 million for the nine months ended
October 31, 1996 compared to $13.3 million for the nine months ended October 31, 1995.
The gross margin reported by the Corporation in the nine months ended October 31, 1996 decreased to $1.6 million
compared to $1.7 million for the nine months ended October 31, 1995. The gross margin percentage, as compared
to revenue, increased slightly, therefore, the decrease in gross margin was primarily attributable to the decrease in
revenues.
Selling, general and administrative expenses reported by the Corporation for the nine months ended October 31,
1996 decreased to $1.9 million versus $2.3 million in the same nine month period of the prior fiscal year. The
decrease was due to cost-saving measures implemented during the current fiscal year.
The Corporation reported a loss from operations of $0.3 million in the nine months ended October 31, 1996 as a
result of the factors discussed above compared to a loss from operations of $0.5 million in the same nine month
period last year.
During the nine months ended October 31, 1995, the Corporation reported a net gain of approximately $1.4 million
from the initial public offering of common stock and warrants by PDGR since the basis of the Corporation's
investment was lower than the proceeds realized from the initial public offering. As a result of the sale, the
Corporation's ownership percentage in PDGR was reduced from 100% to 59.5%.
Interest expense decreased to $0.23 million in the current nine month period compared to $0.37 million in the nine
months ended October 31, 1995. The Corporation's interest expense decreased due to a significant reduction in
both the outstanding balance on the indebtedness to Drummond and the related interest rate.
The Corporation reported a loss for financial reporting purposes during the nine months ended October 31, 1996,
therefore, no income taxes have been provided.
The Corporation recorded its 59.5% interest in the losses of PDGR resulting in a $505,000 and $737,000 loss from
discontinued operations for the nine month period ended October 31, 1996 and 1995, respectively. The sale of the
PDGR shares to Drummond on July 31, 1996 resulted in a $203,000 gain.
Liquidity and Capital Resources
The Corporation's liquidity increased during the nine months ended October 31, 1996 as cash and short-term investments increased by $0.2 million to $0.5 million compared to a $0.6 million decrease in cash and short-term investments in the nine months ended October 31, 1995.
The increase in cash during the current nine month period is principally attributable to cash inflows associated with
operating activities of $0.1 million and financing activities of $0.2 million. These cash inflows were partially offset
by cash outflows for investing activities of $0.1 million.
Cash inflows provided by operating activities of $0.1 million in the nine months ended October 31, 1996 included
a $0.5 million reduction in other current assets, a $0.3 million increase in billings in excess of costs and estimated
earnings on uncompleted contracts related to the timing of certain contract activity, a $0.4 million increase in accrued
liabilities due to the timing of payments, and $0.3 million of depreciation and amortization. The aforementioned cash
inflows from operating activities were offset by a $0.6 million increase in accounts receivable, $0.2 million increase
in costs and estimated earnings in excess of billings on uncompleted contracts related to the timing of contracts, an
adjustment of $0.2 million due to the gain on the sale of PDGR common stock and $0.8 million as a result of the net
loss generated in the period.
Cash inflows associated with financing activities during the current nine months included $0.29 million advanced under the line of credit offset by $0.13 million of principal payments made on the Drummond term debt.
Additionally, $1.2 million of proceeds from the sale of PDGR stock to Drummond Financial Corporation was a direct
offset to reduce borrowings under the line of credit.
The Corporation's investing activities of $0.07 million in the nine months ended October 31, 1996 was for the
purchase of property, plant and equipment.
During the nine months ended October 31, 1995, the Corporation's liquidity decreased by $0.56 million to $0.13
million. Cash used by operating activities of $1.0 million and cash used by investing activities of $0.3 million were
offset by cash provided by financing activities of $0.76 million.
The Corporation's cash outflows of $1.0 million to fund operating activities principally included a $0.9 million increase
in accounts receivable and a $0.2 million increase in costs and estimated earnings in excess of billings on
uncompleted contracts which related to the higher sales levels experienced in the nine months ended October 31,
1995, and a $0.2 million decrease in billings in excess of costs and estimated earnings on uncompleted contracts,
an adjustment of $1.4 million due to the gain on the sale of PDGR common stock and $0.3 million as a result of the
net loss generated in the period. These cash outflows in operating activities were partially offset by an increase in
other current assets of $0.7 million and an increase in accrued liabilities of $0.2 million and $0.4 million of
depreciation and amortization.
During the nine months ended October 31, 1995, cash outflows associated with investing activities of $0.3 million
related to the purchase of property, plant and equipment.
The Corporation's cash inflows related to financing activities included $1.4 million from the sale of PDGR common
stock. This cash inflow was offset by principal payments on debt of $0.7 million.
At October 31, 1996, the Corporation's backlog associated with its asbestos abatement business totaled $15.5 million
($9.8 million on fixed fee contracts and $5.7 million on time and materials or unit price contracts). This is a significant
increase from the backlog of $11 million and $6.2 million at July 31, 1996 and April 30, 1996, respectively and reflects
the large number of contracts awarded to the Corporation during the second and third quarters.
The Corporation will continue to monitor closely its short-term and long-term liquidity requirements on an ongoing
basis and is prepared to implement any measures required to conserve cash to meet its needs and to satisfy its
obligations.
Prospective Information
The Corporation's current business consists principally of asbestos abatement contracting after the sale of its 59.5%
ownership interest in PDGR to Drummond on July 31, 1996.
The Corporation is exploring further options to increase liquidity and stockholders' equity, including a private
placement of the Corporation's equity securities and/or the consummation of a new credit facility.
As discussed in further detail in Item 1. Legal Proceedings contained in Part II located elsewhere herein, the Corporation has been named as a defendant in a purported class action involving the purchase by all persons and entities of PDGR common stock from February 9, 1995 through May 23, 1995. The action alleges that defendants violated certain federal securities laws. The Corporation believes that the allegations are without merit or that there are meritorious defenses to the allegations, and intends to defend the action vigorously. If, however, the plaintiff is successful in its claims, a judgment rendered against the Corporation and the other defendants would likely have a material adverse effect on the business and operations of the Corporation.
ITEM 1. LEGAL PROCEEDINGS
With respect to the action captioned Klein v. PDG Remediation, Inc., described in the registrant's Form 10-Q for the
quarter ended July 31, 1996, on September 1, 1995, an answer was filed on behalf of the registrant, its officers and
directors and PDGE which generally denied the plaintiff's claims.
By letter dated December 5, 1995, the plaintiff requested a pre-motion conference on a motion for class certification.
By letter dated December 6, 1995, the underwriter defendants requested a pre-motion conference on a motion to
dismiss the complaint. In September 1996, the motion to dismiss was denied, but the motion for class certification
is still pending. The action is still in the discovery stage.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The registrant is currently in arrears with respect to the payment of dividends on its Series A Preferred Stock. At
October 31, 1996, the cumulative dividends in arrears on the Series A Preferred Stock were approximately $119,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Annual Meeting of Stockholders
On October 16, 1996 the Annual Meeting of the Stockholders of PDG Environmental, Inc. was held in Pittsburgh,
PA. At the meeting all of management's nominees were elected directors of the Corporation. Ernst & Young LLP
was reelected as the Corporation's auditors with the following vote:
Votes For 6,262,670
Votes Against 7,272
Abstained 7,360
The Amendment to the Corporation's Incentive Stock Option Plan was approved as follows:
Votes For 3,643,262
Votes Against 652,599
Abstained 10,477
Not Voting 1,970,964
The Amendment to the Corporation's Stock Option Plan for Non-Employee Directors was approved as follows:
Votes For 6,170,531
Votes Against 79,526
Abstained 11,207
Not Voting 16,038
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Pages of Sequential
Numbering System
27 Financial Data Schedule
(b) The registrant did not file any current reports on Form 8-K during the three months
ended October 31, 1996.
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.
PDG ENVIRONMENTAL, INC.
By /s/John C. Regan
John C. Regan
Chairman and Chief Executive Officer
Date: December 11, 1996
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.
PDG ENVIRONMENTAL, INC.
By
John C. Regan
Chairman and Chief Executive Officer
Date: December 11, 1996