##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the period ended October 31, 2009
 OR
 o
    
    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: 0-13667
 
 PDG Environmental, Inc.
  
 Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    22-2677298
(I.R.S. Employer
Identification No.)1386 Beulah Road, Building 801
Pittsburgh, Pennsylvania
(Address of principal executive offices)
    
    15235
(Zip Code)
 Registrants telephone number, including area code 412) 243-3200
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



PDG Environmental, Inc. and Subsidiaries
 Table of Contents
 Part I  Financial Information
    
    PageItem 1. Consolidated Financial Statements And Notes To Consolidated Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of October 31, 2009 (unaudited) and January 31, 2009
    
    
    3Consolidated Statements of Operations for the Three Months Ended October 31, 2009 and 2008 (unaudited)
    
    
    4Consolidated Statements of Operations for the Nine Months Ended October 31, 2009 and 2008 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2009 and 2008 (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
    
    
    16Item 3. Quantitative And Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls And Procedures
    
    
    19EX-31.1EX-31.2EX-32
  Part II  Other
InformationItem 1. Legal Proceedings
    
    
    20Item 6. Exhibits
    
    
    20Signatures
    
    
    21Exhibit Index
    
    
    22
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 PDG
ENVIRONMENTAL, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 October 31,
    
    
    January 31,2009
    
    
    2009(unaudited)ASSETSCurrent AssetsCash and Cash Equivalents
    
    $
    205,000
    
    
    $
    314,000Contracts Receivable, Net
    
    
    11,634,000
    
    
    
    20,677,000Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts
    
    
    2,194,000
    
    
    
    3,180,000Inventories
    
    
    610,000
    
    
    
    616,000Income Taxes Receivable
    
    
    84,000
    
    
    
    355,000Deferred Income Tax Asset
    
    
    983,000
    
    
    
    983,000Other Current Assets
    
    
    754,000
    
    
    
    344,000Total Current Assets
    
    
    16,464,000
    
    
    
    26,469,000Property, Plant and Equipment
    
    
    11,803,000
    
    
    
    12,431,000Less: Accumulated Depreciation
    
    
    (10,689,000
    )
    
    
    (10,786,000
    )1,114,000
    
    
    
    1,645,000Intangible Assets, Net
    
    
    3,559,000
    
    
    
    4,026,000Goodwill
    
    
    2,489,000
    
    
    
    2,489,000Deferred Income Tax Asset
    
    
    2,948,000
    
    
    
    2,948,000Contracts Receivable, Non Current
    
    
    1,200,000
    
    
    
    1,820,000Costs and
Estimated Earnings in Excess of Billings on Uncompleted Contracts, Non Current
    
    
    750,000
    
    
    
    1,630,000Other Assets
    
    
    298,000
    
    
    
    345,000Total Assets
    
    $
    28,822,000
    
    
    $
    41,372,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts Payable
    
    $
    7,131,000
    
    
    $
    9,411,000Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts
    
    
    1,257,000
    
    
    
    1,125,000Accrued Income Taxes
    
    
    
    
    
    
    44,000Accrued Liabilities
    
    
    2,584,000
    
    
    
    2,742,000Current Portion of Long-Term Debt
    
    
    12,870,000
    
    
    
    303,000Mandatorily Redeemable Cumulative Convertible Series C Preferred Stock
    
    
    
    
    
    
    137,000Total Current Liabilities
    
    
    23,842,000
    
    
    
    13,762,000Long-Term Debt
    
    
    253,000
    
    
    
    15,045,000Mandatorily Redeemable Cumulative Convertible Series C Preferred Stock
    
    
    
    
    
    
    4,372,000Total Liabilities
    
    
    24,095,000
    
    
    
    33,179,000Stockholders EquityCommon Stock
    
    
    418,000
    
    
    
    418,000Common Stock Warrants
    
    
    1,628,000
    
    
    
    1,628,000Paid-In Capital
    
    
    20,256,000
    
    
    
    20,111,000Accumulated Deficit
    
    
    (17,537,000
    )
    
    
    (13,926,000
    )Treasury Stock, at Cost
    
    
    (38,000
    )
    
    
    (38,000
    )Total Stockholders Equity
    
    
    4,727,000
    
    
    
    8,193,000Total Liabilities and Stockholders Equity
    
    $
    28,822,000
    
    
    $
    41,372,000
 See accompanying notes to consolidated financial statements.
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PDG ENVIRONMENTAL, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 For the Three Months Ended October 31,2009
    
    
    2008Contract Revenues
    
    $
    11,548,000
    
    
    $
    28,134,000Contract Costs
    
    
    9,611,000
    
    
    
    23,770,000Gross Margin
    
    
    1,937,000
    
    
    
    4,364,000Gain on Sale of Fixed Assets
    
    
    55,000
    
    
    
    Selling, General and Administrative Expenses
    
    
    2,653,000
    
    
    
    3,180,000Income (Loss) from Operations
    
    
    (661,000
    )
    
    
    1,184,000Other Income (Expense):Interest Expense
    
    
    (219,000
    )
    
    
    (232,000
    )Non-Cash Interest Expense for Preferred Dividends and Accretion of Discount
    
    
    
    
    
    
    (271,000
    )Interest and Other Income
    
    
    5,000
    
    
    
    24,000(214,000
    )
    
    
    (479,000
    )Income (Loss) Before Income Taxes
    
    
    (875,000
    )
    
    
    705,000Income Tax Provision
    
    
    
    
    
    
    363,000Net Income (Loss)
    
    $
    (875,000
    )
    
    $
    342,000Earnings (Loss) Per Common Share  Basic:
    
    $
    (0.04
    )
    
    $
    0.02Earnings (Loss) Per Common Share  Diluted:
    
    $
    (0.04
    )
    
    $
    0.02Average Common Shares Outstanding
    
    
    20,875,000
    
    
    
    20,826,000Average Dilutive Common Stock Equivalents Outstanding
    
    
    
    
    
    
    30,000Average Common Shares and Dilutive Common Stock
Equivalents Outstanding
    
    
    20,875,000
    
    
    
    20,856,000
 See accompanying notes to consolidated financial statements.
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PDG ENVIRONMENTAL, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 For the Nine Months Ended October 31,2009
    
    
    2008Contract Revenues
    
    $
    36,935,000
    
    
    $
    69,056,000Contract Costs
    
    
    31,717,000
    
    
    
    59,405,000Gross Margin
    
    
    5,218,000
    
    
    
    9,651,000Gain (Loss) on Sale of Fixed Assets
    
    
    55,000
    
    
    
    (6,000
    )Selling, General and Administrative Expenses
    
    
    7,826,000
    
    
    
    10,255,000(Loss) from Operations
    
    
    (2,553,000
    )
    
    
    (610,000
    )Other Income (Expense):Interest Expense
    
    
    (629,000
    )
    
    
    (636,000
    )Non-Cash Interest Expense for Preferred Dividends and Accretion of Discount
    
    
    (484,000
    )
    
    
    (779,000
    )Interest and Other Income
    
    
    55,000
    
    
    
    61,000(1,058,000
    )
    
    
    (1,354,000
    )(Loss) Before Income Taxes
    
    
    (3,611,000
    )
    
    
    (1,964,000
    )Income Tax (Benefit)
    
    
    
    
    
    
    (431,000
    )Net (Loss)
    
    $
    (3,611,000
    )
    
    $
    (1,533,000
    )(Loss) Per Common Share  Basic:
    
    $
    (0.17
    )
    
    $
    (0.07
    )(Loss) Per Common Share  Diluted:
    
    $
    (0.17
    )
    
    $
    (0.07
    )Average Common Shares Outstanding
    
    
    20,875,000
    
    
    
    20,821,000Average Dilutive Common Stock Equivalents Outstanding
    
    
    
    
    
    
    Average Common Shares and Dilutive Common Stock
Equivalents Outstanding
    
    
    20,875,000
    
    
    
    20,821,000
 See accompanying notes to consolidated financial statements.
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PDG
ENVIRONMENTAL, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 For the Nine Months Ended October 31,2009
    
    
    2008Cash Flows From Operating Activities:Net (Loss)
    
    $
    (3,611,000
    )
    
    $
    (1,533,000
    )Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating
Activities:Depreciation and Amortization
    
    
    1,248,000
    
    
    
    1,353,000Deferred Income Taxes
    
    
    
    
    
    
    (391,000
    )Interest Expense for Series C Preferred Stock Dividends and Accretion of Discount
    
    
    484,000
    
    
    
    779,000Stock Based Compensation
    
    
    145,000
    
    
    
    312,000Loss (Gain) on Sale of Fixed Assets
    
    
    (55,000
    )
    
    
    6,000Provision for Receivable Allowance
    
    
    114,000
    
    
    
    1,307,000(1,675,000
    )
    
    
    1,833,000Changes in Operating Assets and Liabilities:Contracts Receivable
    
    
    9,549,000
    
    
    
    (8,185,000
    )Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts
    
    
    1,866,000
    
    
    
    (1,795,000
    )Inventories
    
    
    6,000
    
    
    
    54,000Accrued Income Taxes
    
    
    (128,000
    )
    
    
    (249,000
    )Other Current Assets
    
    
    2,675,000
    
    
    
    1,017,000Accounts Payable
    
    
    (2,280,000
    )
    
    
    2,838,000Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts
    
    
    132,000
    
    
    
    1,320,000Accrued Liabilities
    
    
    (411,000
    )
    
    
    (528,000
    )Total Changes
    
    
    11,409,000
    
    
    
    (5,528,000
    )Net Cash Provided by (Used in) Operating Activities
    
    
    9,734,000
    
    
    
    (3,695,000
    )Cash Flows From Investing Activities:Purchase of Property, Plant and Equipment
    
    
    (136,000
    )
    
    
    (275,000
    )Proceeds from Sale of Fixed Assets
    
    
    91,000
    
    
    
    4,000Payment of Accrued Earnout Liability
    
    
    
    
    
    
    (100,000
    )Changes in Other Assets
    
    
    (103,000
    )
    
    
    (107,000
    )Net Cash (Used in) Investing Activities
    
    
    (148,000
    )
    
    
    (478,000
    )Cash Flows From Financing Activities:Proceeds from Debt
    
    
    
    
    
    
    5,549,000Proceeds from Exercise of Stock Options
    
    
    
    
    
    
    2,000Payment of Premium Financing Liability
    
    
    (2,477,000
    )
    
    
    (1,090,000
    )Principal Payments on Debt
    
    
    (7,218,000
    )
    
    
    (304,000
    )Net Cash Provided by (Used in) Financing Activities
    
    
    (9,695,000
    )
    
    
    4,157,000Net (Decrease) in Cash and Cash Equivalents
    
    
    (109,000
    )
    
    
    (16,000
    )Cash and Cash Equivalents, Beginning of Year
    
    
    314,000
    
    
    
    90,000Cash and Cash Equivalents, End of Period
    
    $
    205,000
    
    
    $
    74,000Supplementary Disclosure of Non-Cash Investing and Financing Activity:Decrease in Goodwill and Accrued Liabilities for Earnout Liability
    
    $
    
    
    
    $
    (126,000
    )Financing of Annual Insurance Premium
    
    $
    2,730,000
    
    
    $
    1,313,000Non-Cash Purchase of Fixed Assets Financed Through Capital Leases
    
    $
    
    
    
    $
    27,000
 See accompanying notes to consolidated financial statements.
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PDG
ENVIRONMENTAL, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 AS OF AND FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2009
 (UNAUDITED
 NOTE 1  BASIS OF PRESENTATION
     NOTE 2  CONTRACTS RECEIVABLE
  October 31, 2009
    
    
    January 31, 2009Billed Completed Contracts
    
    $
    4,360,000
    
    
    $
    5,092,000Contracts in Progress
    
    
    9,369,000
    
    
    
    18,484,00013,729,000
    
    
    
    23,576,000Less Allowance for Uncollectible Accounts
    
    
    (895,000
    )
    
    
    (1,079,000
    )Net Contracts Receivable
    
    $
    12,834,000
    
    
    $
    22,497,000
    NOTE 3  INCOME TAXES
  7




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NOTE 4  TERM DEBT
     NOTE 5  NET EARNINGS (LOSS) PER COMMON SHARE
  For the Three MonthsEnded October 31,2009
    
    
    2008Numerator:Net Income (Loss)  Numerator for basic earnings per share  income
available to common stockholders
    
    $
    (875,000
    )
    
    $
    342,000Effect of dilutive securities:Preferred stock dividends and accretion of discount
    
    
    
    
    
    
    Numerator for diluted earnings per share  income available to
common stock after assumed conversions
    
    $
    (875,000
    )
    
    $
    342,000Denominator:Denominator for basic earnings per share  weighted average shares
    
    $
    20,875,000
    
    
    $
    20,826,000Effect of dilutive securities:Convertible Preferred Stock and related accrued dividends
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    Employee Stock Options
    
    
    
    
    
    
    30,000Denominator for diluted earnings per share  adjusted
weighted-average shares and assumed conversions
    
    $
    20,875,000
    
    
    $
    20,856,000Basic earnings (loss) per share
    
    $
    (0.04
    )
    
    $
    0.02Diluted earnings (loss) per share
    
    $
    (0.04
    )
    
    $
    0.02
 8




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For the Nine MonthsEnded October 31,2009
    
    
    2008Numerator:Net (Loss)  Numerator for basic earnings per share  income
available to common stockholders
    
    $
    (3,611,000
    )
    
    $
    (1,533,000
    )Effect of dilutive securities:Preferred stock dividends and accretion of discount
    
    
    
    
    
    
    Numerator for diluted earnings per share  income available to
common stock after assumed conversions
    
    $
    (3,611,000
    )
    
    $
    (1,533,000
    )Denominator:Denominator for basic earnings per share  weighted average shares
    
    $
    20,875,000
    
    
    $
    20,821,000Effect of dilutive securities:Convertible Preferred Stock and related accrued dividends
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    Employee Stock Options
    
    
    
    
    
    
    Denominator for diluted earnings per share  adjusted
weighted  average shares and assumed conversions
    
    $
    20,875,000
    
    
    $
    20,821,000Basic (loss) per share
    
    $
    (0.17
    )
    
    $
    (0.07
    )Diluted (loss) per share
    
    $
    (0.17
    )
    
    $
    (0.07
    )
  NOTE 6  STOCK OPTIONS
    NOTE 7  PRIVATE PLACEMENT OF SECURITIES  JULY 2005
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Common Private Placement
 Securities Purchase Agreement
  Common Warrants
    Preferred Private Placement
 Securities Purchase Agreement
  10




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Preferred Warrants
    Terms of the Preferred Stock
   11




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Exchange of Series C Preferred
Stock
 Over-Allotment Warrants
    12




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Registration Rights Agreements
  Warrant Derivative Liability
  Conversion of Preferred Stock to Common Stock
  Exercise of Warrants for Common Stock
  Exchange of Series C Preferred Stock
    13




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NOTE 8  GOODWILL AND OTHER INTANGIBLE ASSETS
    NOTE 9  NEW ACCOUNTING PRONOUNCEMENTS
 Business
Combinations
 Consolidation
 Derivatives and Hedging
 Subsequent Events.
 Transfers and Servicing.
 14




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Consolidation,
 Generally Accepted Accounting Principles
    15




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion should be read in conjunction with the Unaudited Condensed Consolidated
Financial Statements and Notes thereto appearing elsewhere in this report.
   OVERVIEW
    16




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CRITICAL ACCOUNTING POLICIES
  RESULTS OF OPERATIONS
 Three Months Ended October 31, 2009 Compared to Three Months Ended October 31, 2008
       Nine months ended October 31, 2009 Compared to Nine months ended October 31, 2008
  17




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FINANCIAL CONDITION
 Liquidity and Capital Resources
      18




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Exchange of Series C Preferred
Stock
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
   19




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 6. EXHIBITS
  ExhibitNumber
    
    Description31.1
    
    Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended,
and Section 302 of The Sarbanes-Oxley Act of 2002, filed herewith.31.2
    
    Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended,
and Section 302 of The Sarbanes-Oxley Act of 2002, filed herewith.32
    
    Certification Pursuant to 18 U.S.C. Section 1350, as amended, pursuant to Section 906 of The
Sarbanes-Oxley Act of 2002, filed herewith.
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SIGNATURES
  PDG ENVIRONMENTAL, INC.By

    /s/ John C. ReganJohn C. ReganChief Executive OfficerBy
    /s/ John F. KellyJohn F. KellyChief Financial Officer  21




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EXHIBIT INDEX
Exhibit No. and Description
 Exhibit 31.1
    
    Certification Pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended, and Section 302 of The
Sarbanes-Oxley Act of 2002, filed herewith.Exhibit 31.2
    
    Certification Pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended, and Section 302 of The
Sarbanes-Oxley Act of 2002, filed herewith.Exhibit 32
    
    Certification Pursuant to 18 U.S.C. Section 1350, as amended, pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002, filed herewith.
 22