Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report 62 252K
2: EX-3.1 Certificate of Incorporation 6 25K
3: EX-3.2 Certificate for Renewal and Revival of Certificate 1 10K
of Incorporation
4: EX-3.3 Certificate of Amendment of Certificate of 1 10K
Incorporation
5: EX-3.4 Certificate of Amendment of Certificate of 2 11K
Incorporation
6: EX-3.5 By-Laws of World Imports - U.S.A., Inc. 7 30K
7: EX-10.1 License Agreement 20 49K
8: EX-10.2 License Agreement 20 49K
9: EX-10.3 Delivery Contract 14 30K
10: EX-10.4 Delivery Contract 15 31K
11: EX-10.5 Delivery Contract 15 32K
12: EX-10.6 1993 Non-Statutory Stock Option Plan 7 34K
13: EX-10.7 1994 Non-Statutory Stock Option Plan 7 34K
14: EX-10.8 1995 Non-Statutory Stock Option Plan 7 33K
15: EX-10.9 1996 Non-Statutory Stock Option Plan 7 33K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1996
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[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission file number 0-22630
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Seiler Pollution Control Systems, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 22-2448906
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 Metro Place North, Dublin, Ohio 43017
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(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code 614/791-3272
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.0001 per share.
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.
[x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.[ ] Yes [ ] No
Not Applicable
The number of shares outstanding of each of the Registrant's classes of
Common Stock, as of June 1, 1996 is 18,805,569 shares, all of one class of
$.0001 par value Common Stock. Of this number a total of 15,535,569 shares
having a market value of $89,329,521, based on the closing price of the
Registrant's common stock of $5.75 on June 13, 1996 as quoted on the NASDAQ
SmallCap market, were held by nonaffiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
None
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SEILER POLLUTION CONTROL SYSTEMS, INC.
Form 10-K
Fiscal Year Ended March 31, 1996
TABLE OF CONTENTS
Page No.
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PART I
Item 1. Business 1
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security-Holders 10
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 10
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 13
PART III
Item 10. Directors and Executive Officers of the Registrant 13
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial Owners
and Management 20
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Item 13. Certain Relationships and Related Transactions 22
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 23
SIGNATURES 25
SUPPLEMENTAL INFORMATION 26
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Part I
Item 1. Business
Business Overview
Seiler Pollution Control Systems, Inc. (hereafter, "Seiler," the
"Company," or the "Registrant") is an international environmental service and
equipment company. The Company began as an import/export firm incorporated in
1983 in the State of Delaware, under the name of World Imports - USA, Inc. and
was operational until 1989. The Company was inactive during the fiscal years
ended March 31, 1990 through 1993.
Following a change in control in June 1993, World Imports changed its name
to Seiler Pollution Control Systems, Inc. and commenced operations in the
environmental field. The Company is currently publicly traded in the NASDAQ
Small Capitalization Market under the stock symbol SEPC.
In July 1993, the Company formed a wholly-owned subsidiary, under the laws
of the State of Delaware, known as Seiler Pollution Control Systems
International, Inc. ("Seiler International"). This subsidiary holds the
exclusive European rights to a High Temperature Vitrification System ("HTV
System" or "System"). The HTV System was initially developed in Switzerland by
Seiler High Temperature Separating Systems Ltd. ("Seiler HTSS"), a company
controlled by Niklaus Seiler, currently a director of the Company, and his
family. The System was patented in 1992 in Switzerland. Seiler HTSS subsequently
transferred the European rights and worldwide rights to the System to Maxon
Finance & Trade Ltd. S.A. ("Maxon"), which, in turn, transferred the European
rights to Seiler International. The remaining exclusive worldwide rights to the
HTV System were acquired directly by the Company from Maxon under a separate
license agreement in July 1993.
In November 1993, the Company established a subsidiary, Seiler SEPC AG
("SEPC AG"), under the laws of Switzerland. SEPC AG was formed to conduct and
oversee all of the Company's European and Asian environmental operations and
sales as a wholly-owned subsidiary of the Company. Also in November of that
year, the Company opened an office in the United States in Dayton, Ohio, to
oversee North American operations and sales. In April 1994, the North American
office moved to Dublin, Ohio.
In February 1995, SEPC AG formed a subsidiary, Seiler Trenn Schmelzanlagen
Betreibs GmbH ("STSB"), under the laws of Germany. STSB was established to
conduct and oversee all of Seiler's German environmental operations and sales.
SEPC AG owns 90% of STSB. The remaining 10% is owned by Dr. Gerold Weser,
Seiler's current Vice President of European operations and President of STSB.
Unless specifically identified by their individual names, Seiler Pollution
Control Systems, Inc. and its three subsidiaries will hereafter be referred to
as the "Company," "Seiler," or the "Registrant."
Licensing Agreements
In July 1993, the Company entered into two separate licensing agreements
with Maxon, a corporation organized under the laws of Panama with offices in
Fribourg, Switzerland. Maxon was a principal shareholder of the Company when the
agreements were executed. As of June 1, 1996, Maxon owned 1.60% of Seiler's
outstanding stock. The licensing agreements, as amended, require the Company to
pay Maxon a licensing fee of $2.5 million for the European rights to the HTV
System and $2.5 million for the remaining worldwide rights. To date, $3,022,751
has been paid. The remaining sums due and owing are to be paid on a schedule as
reflected in Note 5 of the Company's financial statements (see Part IV).
These licensing agreements run for an indefinite term or until all of the
proprietary information becomes public knowledge and the patent rights expire.
The Technology
The HTV System is a high temperature vitrification process which
effectively processes and recycles a broad range of wastes including hazardous
wastes into non-toxic glass ceramics and other usable products. The HTV System
handles wastes generated by both government and industry. Processed materials
can be recycled back to the commercial marketplace or disposed in a
non-hazardous solid waste landfill.
The heart of the HTV System is a patented high temperature converter
melter. This component operates at approximately 2700 degrees F (1500 degrees C)
and supplies the energy necessary to provide the final chemical and physical
reactions that convert hazardous chemical compounds into inert nonhazardous
glass ceramics, metal oxides, and salts.
The HTV System operates with natural gas and air or oxygen as a primary
fuel source. In countries where natural gas is impractical to use, the System
can be operated with either fuel oil or propane. The dryer and preheater
components of the System enable processing of both wet and dry waste feedstocks.
Thus, the System can handle dry incinerator ash and asbestos as well as various
wet sludges, metal hydroxide filter cake, and wastewater treatment residues. The
System can also process organic/inorganic and mixed organic/inorganic waste
feedstocks. The organic residues are used to supplement the energy requirements
of the System and the inorganic residues are the primary components needed for
producing glass ceramic products and metal oxides.
The HTV System is adjustable and controllable and can process waste
feedstocks to reclaim metal oxides and salts and/or generate commercial grade
glass ceramics. Treatability tests have been conducted in Switzerland and the
United States on different waste streams to generate various types of glass
ceramics, metal oxides, and salts to evaluate product
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characteristics and commercial viability. Factors that affect commercial
feasibility of the glass ceramics generated by the System include: types of
wastes recycled, quality of materials available, system location, and quality of
the glass ceramics produced.
Commercial grade non-toxic glass ceramics are produced in the System by
binding the metal components in the waste feed into a glass ceramic matrix on a
molecular level. The metals provide color, hardness, toughness, structures and
other significant properties. If the waste feedstocks do not provide the proper
ratio needed to form the desired product characteristics, silica and other glass
ceramic forming materials may be added to the process. Glass ceramics generated
from the System are formulated to be inert, nonhazardous, and reusable. These
materials pass standardized governmental leachate tests such as the United
States Toxic Characteristic Leaching Procedure (TCLP) and its equivalent
European eluent test, with leaching characteristics that are orders of magnitude
below legal requirements.
Due to the System's unique exit mechanism, the glass ceramics generated
can be formed into many sizes and shapes. Depending on the waste feed and
additives used, the glass product characteristics can be altered to develop
different types of products.
The Pilot And High Temperature Vitrification Systems
The HTV Pilot System
Two HTV Pilot Systems have been constructed in the Zurich, Switzerland
area. One HTV pilot plant was initially constructed in 1988 by Niklaus Seiler in
Leibstadt, Switzerland and has been operational for many years. The second HTV
pilot plant, still under construction, is a redesigned System and is more than
40% complete. The Leibstadt operating pilot plant was designed as a test
facility with a capacity to process up to 600 tons of waste feedstocks per year
at a rate of 50-100 Kg of input waste per hour. Significant engineering and
structural changes were made in the Leibstadt System in the first four years;
electronics, linings, and controls were all replaced. Then in 1992, initial
waste testing began for different customers using waste feedstocks such as
incinerator ash, paint sludges, hydroxide sludges, sandblast residues, asbestos
and other transition metal laden residues.
Tests using the HTV Pilot System are ongoing. In February-March of 1996,
the Pilot System tested incinerator flyash and bottom ash for Martin Incinerator
Company, a large incinerator manufacturer and operator. In June 1996, the Pilot
System tested five different waste streams for the United States Air Force.
The HTV Pilot System is a significant step between the Company's
laboratory analysis and developing workable commercial systems. Through pilot
testing, the Company gathers important mass balance information which it uses to
design specific commercial scale systems for industrial and governmental
customers. Vital data such as mass balance show both customers and regulators
where all of the waste components go. This information is critical not only to
the Company's customers and governmental regulators, but also the community
where
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the System operates whose environmental concerns must be addressed. By
identifying and tracking all of the wastes constituents, the Company
demonstrates its commitment to resolve any potential pollution problems that
might arise. The Pilot System provides the Company with energy use data to
determine fuel consumption. Additionally, sufficient samples are produced by the
HTV Pilot System for product testing. Using this test data, the Company can then
formulate for commercial processing and accurately predict product
characteristics such as hardness, color and crystal structure. The Pilot System
also enables the Company to conduct air pollution control testing to determine
what air pollution control equipment is needed for commercial operations.
Preliminary air testing data is also used to facilitate permitting.
The HTV Commercial System
The HTV Commercial System has an input processing capacity of 2,000 -
4,000 tons of waste feedstocks per year. This equates to processing
approximately 250 - 500 Kg per hour. This commercial System will operate 24
hours per day, 7 days per week and will shut down only for scheduled or
emergency maintenance, or if waste feedstocks are unavailable. The HTV
Commercial System incorporates system refinements that are not incorporated in
the HTV Pilot System. Some of these refinements include extensive process
controls, a combustion air heat exchanger, a new flue gas quench system, and a
refined glass ceramic exit system that is easily maintained. Sophisticated air
pollution control components are also available with the Commercial System and
include a triple baghouse collector to capture particulates that may fume from
the vitrification converter or preheater; a catalytic denitrification system to
reduce or eliminate any potential nitrous oxide (Nox) emissions; an acid/gas wet
scrubber to reduce and/or eliminate sulfur dioxide (SO2), Hydrochloric Acid
(Hcl), and Hydrofluoric Acid (HF) emissions; an activated carbon filtration
system which will capture any potential remaining dioxins, furans, or other
volatile organics that may get through the system as well as any Mercury (Hg).
The Company promotes installation of the HTV commercial System at the site
where the waste feedstocks are generated. Since the generator no longer needs to
transport hazardous or other toxic wastes off-site for treatment/disposal, the
potential for costly and dangerous spills is eliminated. On-site treatment also
makes System permitting easier because the community is already aware of the
industrial or governmental facility located in their locale and the wastes they
may generate. These factors do not, however, preclude setting up HTV commercial
systems at regional centers to provide shared recycling services so smaller
generators could achieve economies of scale.
The HTV commercial system will require operating permits from the local,
state, and federal environmental regulators. Most of the permitting can be done
simultaneously. Because the HTV commercial system is a recycling process,
hazardous waste treatment permitting can be expedited and, in some cases,
avoided entirely. Permitting that could normally take two years or more to
accomplish can take less than six months to obtain. The Company will continue to
work very closely with the regulatory community to maintain the recycling
exemption. The HTV commercial system will require an air discharge permit (which
is standard industrial permitting) because of the air pollution control
equipment associated with the process.
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The Company's first operational HTV Commercial System is currently located
at Company warehouse facilities in Dottingen, Switzerland (near Zurich). The
System is undergoing a comprehensive review that entails examining and testing
each individual component and making any refinements necessary to maximize
complete system performance. The Company expects the review to be completed by
July-August of 1996. Then, the EMPA, an independent Swiss engineering testing
organization, in cooperation with the Swiss Institute Of Technology (ETH), will
test the HTV Commercial System for processing hazardous incinerator ash. The
EMPA and ETH have been contracted by and are acting on behalf of the Swiss BUVAL
(the Swiss federal environmental regulatory authority). The Swiss incinerator
ash test is expected to take approximately thirty days and cost approximately
$50,000 (US). Thereafter, the Company intends to disassemble the Dottingen HTV
Commercial System for shipment to and reassembly in Freiberg, Germany which will
be its permanent home.
Market Strategies and Business Development
The Company's strategy is to position Seiler's vitrification system as the
foremost technology for recycling hazardous wastes. The System's unique
recycling capability offers customers a viable alternative to traditional costly
methods of disposal and effectively solves environmental problems associated
with hazardous waste management. Besides the obvious environmental benefits of
Seiler vitrification, on-site hazardous waste processing also provides certain
economic advantages; transportation and storage costs are significantly reduced
as a result of the hazardous waste material being rendered nonhazardous. Further
savings are achieved with the sale of byproduct recyclables.
Primary markets for Seiler's HTV System are governmental and industrial
waste generators. Seiler intends to strengthen its customer base by implementing
a two-fold marketing approach emphasizing the System's environmental and
economic benefits. Specifically, the Company will (1) focus attention on the
successful bench scale tests and pilot demonstrations performed during the past
year and (2) build and operate new commercial systems (on-site or off-site) for
waste generators.
The Company markets the HTV System in a variety of ways. Seiler offers a
full turnkey approach, whereby the Company plans and builds a full-scale
operating System to the customer's specifications from concept to start-up.
When operations begin, the Company receives a fee (price per ton) for all waste
processed through the System. The fee is based on amortized capital costs,
labor, utilities, materials, maintenance and profit.
The Company also can build and sell the System outright, then will charge
the customer separately for training, supervision, operation and maintenance.
Another option Seiler offers is to construct the System, then contract out to
third parties to provide services. In both cases, contracts are structured on a
take or pay basis over a five to seven year period. As a multinational company,
Seiler anticipates forming joint ventures.
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The final step in the HTV System produces a separate marketing opportunity
for Seiler. After vitrification, hazardous waste is converted into an inert,
usable recycled material. Seiler anticipates becoming more aggressive in
developing consumer markets for glass ceramics, metal oxides and metal salts
which result from the System.
Proposed Recycled Product Application Overview
Processed toxic waste materials tested are rendered inert, nontoxic, and
reusable. Results confirm that the glass ceramic products generated from the HTV
Pilot System met or exceeded United States Toxic Characteristic Leaching
Procedure standards (TCLP) as well as similar European eluent (leaching)
standards. Consistent glass ceramics produced from the pilot plant had
substantive hardness, toughness, color, and insulating properties for the
commercial marketplace. Other reclaimable products were also generated such as
metal oxides and salts. Flyash from incinerators tested were reduced in volume
30-40% and paint sludges processed in the Pilot System were reduced in volume
75%.
Ceramic and glass products are the recyclables created by the Seiler HTV
System. Ceramics include any of a class of inorganic, non-metallic products
which are subject to high temperatures during manufacturing or use. Silica-based
ceramics have a variety of applications and uses, for example as construction
materials. Glass products are part of the ceramic industry because they share
many of the same raw materials, unit operations, processes and technologies as
other ceramics. Some differences do exist, however, between ceramics and glass
products due to variances in heat treatment sequences.
The Company has initially targeted three commercial glass ceramic product
areas: (1) Architectural Applications, where the important product
characteristics are color and crystal structure. Products include wall tile,
floor tile, sinks, bathtubs, patio stone, mosaics, bricks, vanities and counter
tops; (2) Abrasive Applications, where the important product characteristics are
hardness, toughness, and crystal structure. Products include sandpaper, grinding
media, shot blast media, grinding wheels, glass beads, buffing compounds and
polishing compounds; and (3) Refractory Applications, where the important
product characteristics are insulating properties and crystal structure.
Products include fireproof wallboard, roofing media, filtration media, high
temperature specialty products and insulation.
Current Projects
Freiberg, Germany Project
The first Commercial HTV system, situated at Dottingen, Switzerland, will
be disassembled and moved from Dottingen to Freiberg, Germany. The Company
expects to complete this task in August or September 1996. Thereafter, it is
expected to take approximately 30-60 days to reassemble the System and begin
formal operations. The Freiberg System will be operated by the Company's German
subsidiary, STSB, as a regional recycling center which will handle a variety of
waste streams from both German industrial and
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governmental facilities. The Freiberg system is currently designed to handle
industrial paint and hydroxide sludges, industrial wastewater treatment sludges,
electroplating sludges, contaminated chemicals, petrochemicals, spent solvents,
oils, and pesticides, asbestos containing residuals, and mixed organic/inorganic
residuals.
The current Freiberg project calls for the construction and installation
of three dryers, two complete vitrification lines, and an air pollution control
system that will handle full operational production from both lines under
regulatory guidelines. To date, the three dryers, one vitrification line, and
the air pollution control system have been constructed. The second vitrification
line, which has already been engineered, is scheduled to be completed next year.
Services for the first Freiberg HTV System have already been completely sold,
and services for the second System have been partially sold. The Company expects
to have the working capacities of both systems sold prior to the second line
being completed.
Financing for the Freiberg Project comes from various sources. The German
Federal Ministry and the Ministry of Economics from the German State of Saxony
have provided this project with financial support through a combination of
grants and subsidies. The Dresdner Bank provided this project with a secured
long term letter of credit. The total financial package for this project exceeds
$12,000,000 U.S. Financing for this project was based on two conditions. The
first was a positive independent market and feasibility study commissioned by
the Dresdner Bank, and the second was the obtaining of an operational permit by
the German government. The Dresdner Bank hired DOWC Ost-West-Consult GmbH to
perform the independent market and feasibility study. The study determined
that the Seiler business concept represents a technically sophisticated
method of hazardous waste processing. A substantive list of industrial and other
generators who intend to use the System is also provided in the study. The
Company is presently going through the German operating permit process. All
application data has been timely submitted, and the Company has already
successfully gone through the public comment period. The German regulatory
authorities have indicated that the finalized operating permit will be issued
within eight to twelve weeks from the middle of June 1996.
The United States Air Force Project
The Company has been working on a project on behalf of the United States
Air Force since September 1995. This project is divided into three phases and
encompasses the evaluation and processing of five different waste streams
generated from Tinker and McClellan Air Force Bases. The first phase of this
project was laboratory testing, where the waste streams were analyzed,
characterized, and evaluated for their commercial product properties. Formulas
were generated to produce both abrasive and architectural product feedstocks. A
substantive report was generated detailing the laboratory findings. After Air
Force review, the Company was directed to commence Phase 2 operations. Phase 2
provided for representative samples of the five waste streams to be shipped to
the Seiler pilot facility in Leibstadt, Switzerland for pilot scale evaluation.
These field tests were successfully completed on June 13, 1996. The Company
expects results from the test data to be available by July or August 1996.
Thereafter
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a formal report will be written for the Air Force. Preliminary negotiations have
already begun for Phase 3, which encompasses the placement of a commercial
vitrification system at both Tinker and McCellan Air Force Bases. The Company
anticipates that the commercial system Air Force contracts will be long term
operational agreements with guaranteed minimum tonnage provided. Contracts for
providing both commercial systems to the Air Force are anticipated to be
completed by the end of 1996. The Company will maintain ownership of the
equipment. Phases 1 and 2 are valued at $100,000 in the aggregate. The projected
value of Phase 3 is a minimum of $4,000,000. Radian International Corporation is
acting as the general contractor for this project.
The Edison Materials Technology Center (EMTEC) Project
The EMTEC project officially commenced on October 1, 1995. EMTEC is funded
by the State of Ohio and has placed this project under their candidate core
technology program. The purpose of this project is to study and develop higher
end-use glass ceramics from waste feedstocks. Joining the Company in this effort
is a comprehensive team which includes The Ohio State University Department of
Materials Science and Engineering, General Motors Delphi Chassis Division,
Radian International Corporation, Armco Steel, Duriron, Columbia Gas Company,
East Ohio Gas Company, Allis Mineral Systems, Epro Tile Company, Cleveland Fluid
Systems, and the Orton Ceramic Foundation. Phase 1 laboratory work for this
project has been successful and has generated architectural feedstock media,
roofing granules, medium abrasives, and hard abrasives from different waste
formula combinations. Samples are currently being prepared for commercial
testing. Some of the waste feedstocks used include wastewater treatment sludges,
electric arc furnace dust, spent foundry sand, and electroplating sludges.
Toughness tests showed the products produced met or exceeded garnet and aluminum
oxide applications.
Phase 2 of the EMTEC project will begin in October 1996. The Company plans
to expand its testing and development on processing additional waste feeds and
their resultant products. The Company also plans on optimizing all of the Phase
1 work. Phase 2 will also encompass siting and permitting a pilot facility for
United States generator use, and funding preliminary engineering for this pilot
system. Phase 1 is currently valued at $100,000. Phase 2 is currently valued at
$200,000. The Company expects the parameters and funding for Phase 2 will be
expanded in July.
Future Projects
The Company anticipates, but cannot assure, constructing fifteen HTV
Systems within the next two years. These Systems are expected to be placed in
both North America and Europe including projects in Austria, France, Germany,
Italy, Mexico, Spain, Switzerland, and the United States. Some of these projects
include the following:
Austria. The Company is actively negotiating with an Austrian concern to
develop a joint venture. Seiler will control a majority interest of this joint
venture. It is anticipated that the first Austrian HTV System will be placed in
the city of Graz. This facility will operate as a
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regional center and will initially handle industrial wastewater sludges and
surface treatment residues. The Company believes that joint venture negotiations
will be complete by August or September 1996. It is anticipated also that
permitting will not be a problem for the Graz site.
Switzerland. Negotiations are ongoing with Vetrotherm. The Company intends
to form a joint venture and have majority control. Two sites have been
identified for this joint venture, one in Linthal and the other in Reichenburg.
Both of these sites already carry permits. In Linthal, the joint venture intends
to set up a regional center HTV System consisting of two converter lines and
three dryers. This regional processing center will be constructed to receive
hydroxide sludges, wastewater treatment sludges, paint sludges, incinerator ash,
and mixed organic and inorganic residues. The Reichenberg facility will
preliminarily consist of one converter and two dryers and will primarily be used
for incinerator flyash and slag. Both of these projects are tentatively expected
to begin by the beginning of 1997.
In July 1995 the Company announced that it entered into a joint venture in
Switzerland with Revalor AG (a wholly owned subsidiary of HCB Holderbank Cement)
and Amstutz Altoel AG, a Swiss waste management company. Due to differences in
strategic and economic issues, the Company has withdrawn from this joint
venture. Since the Company's withdrawal, Amstutz was acquired by Holderbank.
Holderbank has asked the Company if the Company would consider negotiating a new
agreement based on new conditions. The Company has agreed to consider this
potential new joint venture and has begun to negotiate. The Company anticipates
that these negotiations will not be complete before August or September 1996.
France. Negotiations with a French governmental agency and a leading
French conglomerate have continued over the past year. The Company is confident
that it will close these negotiations in the near future. Finishing the
commercial HTV System and showing its operational capabilities will speed French
negotiations considerably.
Mexico. The Company's vice president of North American operations, Mr.
Sarko, was invited to Monterey, Mexico for a series of meetings with potential
waste generators and joint venture partners. One group has presented the Company
with a joint venture offer to place two commercial HTV Systems in Monterey. The
Company is currently reviewing this offer.
United States. The Company is working on developing a regional center for
handling drums of electroplating residuals, wastewater treatment sludges, and
mixed organic and inorganic residues in the Pittsburgh, Pennsylvania area. This
is a joint venture negotiation with a waste handler which already has a
permitted site. Developing generators for this system and some preliminary
engineering for the Pittsburgh site is currently being evaluated. This
evaluation will be the basis for structuring the joint venture.
There are other United States projects that are being pursued, including
additional Department of Defense projects, Department of Energy projects, as
well as other private industrial projects. Glass ceramic product marketing is
also being actively pursued. Several
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new abrasive and architectural glass ceramic manufacturers and distributors have
begun testing the glass ceramics generated by the system.
Employees
Currently, the Company employs 17 full time and 12 part time personnel.
Seiler SEPC AG (Switzerland facility) has 11 full time and 6 part time staff
members. The Company's North American operations (U.S.A. executive offices)
employ 4 full time, 5 part time and 5 contract staff members. STSB GmbH (Germany
facility) has 2 full time and 1 part time staff. As needed, additional
technical, engineering, environmental and support staff are hired on a contract
basis.
The Company's intention is to continue hiring contract employees as and
when needed on a project based on the project's requirements.
Item 2. Properties
The Company currently maintains its executive offices at 555 Metro Place
North, Dublin, Ohio 43017 pursuant to a one-year lease. The Company's
wholly-owned Swiss subsidiary, Seiler SEPC AG, maintains its offices at
Bahnhofstr, 311, CH-4353, Leibstadt, Switzerland pursuant to a one-year lease,
while its 90% owned German subsidiary, STSB, maintains its offices at Am St.
Niclas, Schacht 13, D-09599, Freiberg, Germany, pursuant to a one-year lease.
Item 3. Legal Proceedings
The Company is not presently a party to any material litigation nor, to
the knowledge of management, is any material litigation threatened.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is omitted since no matters were submitted to a vote of
security-holders during the Company's fourth quarter.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
(a) Marketing Information. The Company's Common Stock is listed on the
Nasdaq SmallCap Market and its securities are traded under the symbol SEPC. The
following table sets forth for the periods indicated the range of high and low
bid prices on the dates indicated for the Company's Common Stock for each full
quarterly period within the two most recent fiscal years and any subsequent
interim period for which financial statements are included and/or required to be
included.
- 10 -
Fiscal Year Ended March 31, 1995 Quarterly Common Stock Price
By Quarter Ranges(1)
-------------------------------- ----------------------------
Quarter Date High Low
------- ---- ---- ---
1st June 30, 1994 $4.25 $2.25
2nd September 30, 1994 $4.00 $1.00
3rd December 31, 1994 $3.96875 $2.9375
4th March 31, 1995 $3.375 $1.125
Fiscal Year Ended March 31, 1996 Quarterly Common Stock Price
By Quarter Ranges(1)
-------------------------------- ----------------------------
Quarter Date High Low
------- ---- ---- ---
1st June 30, 1995 $3.50 $1.1875
2nd September 30, 1995 3.28125 1.3125
3rd December 31, 1995 2.4375 1.40625
4th March 31, 1996 5.6875 1.625
Fiscal Year Ending March 31, 1997 Quarterly Common Stock Price
By Quarter Ranges(1)
--------------------------------- ----------------------------
Quarter Date High Low
------- ---- ---- ---
1st through June 14, 1996 $6.5625 $4.75
------------------
(1) The over-the-counter market quotations indicated above reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
(b) Holders. As of June 1, 1996 the approximate number of stockholders of
the Company's Common Stock was 435.
(c) Dividends. The Company has not paid or declared any cash dividends
upon its Common Stock since its inception and does not anticipate paying any
cash dividends in the foreseeable future. The payment by the Company of cash
dividends in the future rests within the discretion of its Board of Directors
and will depend, among other things, upon the Company's earnings, its capital
requirements and its financial condition, as well as other relevant factors.
- 11 -
Item 6. Selected Financial Data
The selected financial information set forth below is derived from the
Company's audited consolidated financial statements included herein in Item 8
hereof. The information set forth below should be read in conjunction with such
financial statements and notes thereto.
For the fiscal years
ended March 31,
---------------------------------------
1996 1995 1994
---------------------------------------
Statement of Operations
Revenue $ -0- $ -0- $ -0-
Net Loss (1,796,727) (1,967,813) (2,899,707)
Net Loss Per Share (.11) (.15) (.36)
For the fiscal years
ended March 31,
------------------------------------
1996 1995
------------------------------------
Balance Sheet
Total Assets $15,045,626 $ 11,053,587
Total Liabilities 3,639,769 2,734,833
Working Capital (114,882) 6,500,005
Accumulated Deficit (7,349,683) (5,552,955)
Total Stockholders' Equity 11,405,857 8,318,754
No dividends have been declared in any of the periods presented. See also
Item 5(c) Dividends.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - March 31, 1996 v. March 31, 1995
The Company's net loss for the year ended March 31, 1996 was $1,796,727 as
compared to $1,967,813 for the year ended March 31, 1995. The decrease in the
net loss is the result of decreases in professional and consulting fees and
salaries, wages and related fringe benefits. Increases in research and
development expenses mitigated the effects of the expense reductions.
The Company has made payments aggregating $3,226,377 for completion of its
High Temperature Vitrification (HTV) Systems during the year ended March 31,
1996. In addition, $261,048 was expended for the acquisition of property and
equipment. The Company has funded these capital expenditures and operating
losses through the issuance of additional equity securities and loans from
stockholders aggregating $5,163,600 and $827,098, respectively.
The Company expects to incur substantial expenditures to complete the HTV
Systems, including operational start-up costs, and to develop and market
additional Systems. Management's plans to generate additional resources include
consideration of the sale of additional equity securities, alliances or joint
venture agreements with entities interested in the Company's HTV Systems,
project financing agreements or other business transactions which would generate
sufficient resources to assure continuation of the Company's operations.
Results of Operations - March 31, 1995 v. March 31, 1994
--------------------------------------------------------
The Company has not had any revenues from operations in each of its
fiscal years ended March 31, 1995 and 1994. Customer deposits amounting
to $5,079,000 were utilized as advances to suppliers for and on its
behalf to the manufacturer/supplier of the System (referred to above in
Item 1). Such deposits were refunded in the year ended March 31, 1995.
The receipt of customer deposits (which are cash flow items) were not
revenues since the Company has not sold or delivered the System.
Net loss for the fiscal year ended March 31, 1995 was $2,098,031 as
compared to a net loss of $2,901,877 for the preceding fiscal year.
The principal differences between such losses (a decrease of $803,846)
relate to the facts that while the Company incurred increases of (a)
officers' salaries ($290,563), (b) advertising, promotional and selling
expenses ($200,141), (c) professional fees ($168,702) and (d)
amortization cost ($91,287), it had a considerable reduction in fiscal
1995 of consulting fees of $1,701,083. Additionally, employee welfare,
insurance, office expenses, rent, taxes and certain miscellaneous
expenses increased by an aggregate of $187,971 from the previous fiscal
year while travel and entertainment expenses were reduced by $18,393.
Further, while interest expense was reduced by $123,709, foreign
currency losses increased by $147,623.
Consulting fees ($2,007,936) for the fiscal year ended March 31, 1994
primarily related to services rendered regarding location of a corporate
shell and the subsequent revival of the Company as a business entity
engaged in its current activities. Such fees also included payments
made to the Studdert Companies ("SC"), whose president served on the
Company's Board of Directors until March 17, 1995. SC no longer had any
consulting agreements with the Company as of June 30, 1995. Management
of the Company does not currently anticipate that additional consulting
fees in the magnitude heretofore encountered will be incurred within the
foreseeable future; the Company has been able to reduce consulting fees
by approximately 85% for the fiscal year ended March 31, 1995. Monies
expended for professional services relate primarily to legal and
accounting services.
Item 8. Financial Statements and Supplementary Data
The following financial statements have been prepared in accordance with
the requirements of Regulation S-X and supplementary financial information
included herein, if any, has been prepared in accordance with Item 302 of
Regulation S-K.
- 12 -
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
Dublin, Ohio
Report on Audit of Consolidated Financial Statements
For the year ended March 31, 1996
CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet, March 31, 1996 2
Consolidated Statements for the year ended March 31, 1996:
Operations 3
Changes in Stockholders' Equity 4
Cash Flows 5
Notes to Consolidated Financial Statements 6 - 13
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Seiler Pollution Control Systems, Inc.
Dublin, Ohio
We have audited the accompanying consolidated balance sheet of Seiler Pollution
Control Systems, Inc. and Subsidiaries as of March 31, 1996 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. We did
not audit the financial statements of Seiler SEPC AG, a wholly owned subsidiary,
and Seiler AG's ninety percent owned subsidiary, Seiler Trenn-Schmeizanlagen
Betriebs GmbH, which statements reflect total assets of $11,039,195 and
operating expenses of $835,072. Those statements were audited by other auditors
whose report has been furnished to us and our opinion, in so far as it relates
to the amounts included for Seiler SEPC AG and its Subsidiary, is based solely
on the report of the other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Seiler Pollution Control Systems,
Inc. and Subsidiaries at March 31, 1996 and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements for 1996 have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's recurring losses from operations and limited
capital resources raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Schneider Downs & Co., Inc.
Columbus, Ohio
July 9, 1996
- 1 -
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
ASSETS
CURRENT ASSETS
Cash $ 200,351
Prepaid expenses and sundry receivables 109,152
-----------
Total Current Assets 309,503
HIGH TEMPERATURE VITRIFICATION SYSTEMS (Note 4) 9,720,132
OTHER ASSETS
Licensing agreements, less accumulated amortization of
$860,712 (Note 5) 3,899,288
Advances to related party (Note 3) 624,902
Vetrotherm option (Note 10) 167,920
Deposits 36,103
-----------
4,728,213
PROPERTY AND EQUIPMENT - AT COST (net of
accumulated depreciation of $8,403) 287,778
-----------
$15,045,626
===========
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 316,450
Accrued expenses 107,935
-----------
Total Current Liabilities 424,385
LONG-TERM DEBT
Licensing agreements payable (Note 5) 1,977,250
Loans payable - stockholders (Note 6) 1,238,134
-----------
3,215,384
STOCKHOLDERS' EQUITY
COMMON STOCK
Common stock, $.0001 par value; authorized 25,000,000
shares, issued and outstanding 18,525,569 shares 1,853
ADDITIONAL PAID IN CAPITAL 17,897,081
ACCUMULATED DEFICIT (7,349,683)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 856,606
-----------
11,405,857
-----------
$15,045,626
===========
See notes to consolidated financial statements.
- 2 -
SEILER POLLUTION CONTROL SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
OPERATING EXPENSES
Professional and other consulting fees $ 546,835
Salaries, wages and related fringe benefits 371,980
General and administrative 325,600
Depreciation and amortization (Note 5) 323,146
Research and development (Note 4) 181,281
-------------
LOSS FROM OPERATIONS 1,748,842
Interest income (2,573)
Interest expense (Note 5) 56,153
LOSS BEFORE MINORITY INTEREST 1,802,422
Minority interest (5,695)
-------------
NET LOSS $ 1,796,727
=============
LOSS PER COMMON SHARE
$ 0.11
=============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 16,927,652
=============
See notes to consolidated financial statements.
- 3 -
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED MARCH 31, 1996
[Enlarge/Download Table]
Foreign
Additional Currency
Common Stock Paid-in Accumulated Translation
Shares Amount Capital Deficit Adjustment Total
------ ------ ------- ------- ---------- -----
BALANCE, MARCH 31, 1995 14,250,569 $1,425 $12,733,909 $(5,552,956) $1,136,375 $ 8,318,753
Exercise of stock options under the
1993 Non-Statutory Stock Option Plan 25,000 3 46,097 - - 46,100
Exercise of stock options under the
1994 Non-Statutory Stock Option Plan 25,000 3 31,872 - - 31,875
Issuance of common stock for cash 4,225,000 422 5,085,203 - - 5,085,625
Foreign currency translation adjustment - - - - (279,769) (279,769)
Net loss
- - - (1,796,727) - (1,796,727)
---------- ------ ----------- ----------- ----------- -----------
BALANCE, MARCH 31, 1996 18,525,569 $1,853 $17,897,081 $(7,349,683) $ 856,606 $11,405,857
========== ====== =========== =========== =========== ===========
See notes to consolidated financial statements
4
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,796,727)
Adjustments to reconcile net loss to net
cash provided from operating activities:
Depreciation and amortization 323,146
Foreign currency translation (245,028)
Minority interest (10,171)
Changes in assets and liabilities:
Prepaid expenses and sundry receivables (73,637)
Deposits (18,090)
Accounts payable 236,504
Accrued expenses (9,439)
-------------
Net Cash Used In Operating Activities (1,593,442)
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of property and equipment (261,048)
Advances for High Temperature Vitrification Systems (3,226,377)
-------------
Net Cash Used In Investing Activities (3,487,425)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 5,163,600
Proceeds on loans payable - stockholder 827,098
Payments on loans payable - stockholder (139,057)
Advances to related party (624,902)
-------------
Net Cash Provided By Financing Activities 5,226,739
EFFECT OF EXCHANGE RATE CHANGES ON CASH (34,741)
-------------
Net Increase In Cash 111,131
CASH - BEGINNING OF YEAR 89,220
-------------
CASH - END OF YEAR $ 200,351
=============
See notes to consolidated financial statements.
- 5 -
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - NATURE OF BUSINESS AND LIQUIDITY
Seiler Pollution Control Systems, Inc. (the Company) was incorporated
under the laws of the State of Delaware in 1983 as World Imports - USA, Inc. The
Company's initial business plans were unsuccessful and the Company was inactive
during the fiscal years ended March 31, 1990 through 1993. Following a change of
control in 1993, World Imports changed its name to Seiler Pollution Control
Systems, Inc. (SPCS). The Company presently is an environmental service and
equipment company which acquired the rights to a technology called High
Temperature Vitrification (HTV) which treats a potentially wide variety of waste
products. The Vitrification process transforms hazardous waste into non-toxic
substances which can either be stored in a non-hazardous waste landfill or be
recycled.
The Company's financial statements for the year ended March 31, 1996
have been prepared on a going concern basis which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course
of business. The Company incurred a net loss of $1,796,727 for the year ended
March 31, 1996, and as of March 31, 1996 had an accumulated deficit of
$7,349,683. The Company expects to incur substantial expenditures to complete
the first commercial HTV Systems (including operational start up costs) and to
develop and market additional systems. The Company's financial position at March
31, 1996 plus limited revenue will not be sufficient to meet such objectives as
presently structured. Management recognizes that the Company must generate
additional resources to enable it to continue operations with available
resources. Management's plans include consideration of the sale of additional
equity securities, alliances or joint venture agreements with entities
interested in the Company's HTV Systems, project financing, or other business
transactions which would generate sufficient resources to assure continuation of
the Company's operations.
On April 29, 1996 the Company issued 150,000 shares at $3.75 per share
under the terms of a private placement distribution agreement. Management
expects to raise additional equity resources and/or borrow additional funds to
support operations. Although management expects that these efforts will result
in additional resources for the Company, no assurances can be given that the
Company will be successful in raising additional capital. Furthermore, there can
be no assurance assuming the Company successfully raises additional funds, that
the Company's first commercial HTV system will be economically viable and that
the Company will achieve overall profitability and positive cash flows.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include Seiler Pollution Control
Systems, Inc., and its wholly owned subsidiaries, Seiler Pollution Control
Systems International, Inc., (SPCSI) (incorporated in Delaware),and Seiler SEPC
AG (Seiler AG) (incorporated in Switzerland), and Seiler AG's majority, (90%),
owned subsidiary, Seiler Trenn-Schmeizanlagen Betriebs GmbH (Seiler TSB)
(incorporated in Germany). The statements reflect the financial position,
results of operations and cash flows of SPCS and its wholly owned and majority
owned subsidiaries as a single entity. All significant intercompany accounts and
transactions have been eliminated in consolidation.
- 6 -
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and equipment are recorded at cost. Depreciation is provided
for on the straight line method over estimated useful lives. Repairs and
maintenance which do not extend the lives of the applicable assets are charged
to expense as incurred. Profit or loss resulting from the retirement or other
disposition of assets is included in operations.
Licensing agreements are stated at cost, less accumulated amortization.
Amortization is computed by the straight-line method over an estimated life of
fifteen years based upon management's expectations relating to the life of the
technology and current competitive market conditions. The estimated life is
reevaluated each year based upon changes in these factors.
Loss per common share is computed by dividing the net loss for the year
by the weighted average number of shares of common stock outstanding during the
year.
All costs incurred in connection with the sale of the Company's common
stock have been recorded as a reduction of additional paid in capital.
For subsidiaries whose functional currency is the local foreign
currency, balance sheet accounts are translated at exchange rates in effect at
the end of the year and the statement of operations is translated at average
exchange rates for the year. Translation gains and losses are included as a
separate component of stockholders' equity. Net foreign currency transaction
gains and losses are included in operations.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company acquired two licensing agreements from Maxon Finance and
Trade, Ltd., S.A. who owns 300,000 shares of the Company's outstanding shares of
common stock, representing an approximate 1.6% ownership interest. (See Note 5.)
The Company has a note payable to PTI Management AG, a stockholder
owning 3,480,000 shares of the Company's outstanding common stock, representing
an approximate 18.8% ownership interest. (See Note 6.)
The Company has advanced $624,902 to Seiler Hochtemperatur Trennanlagen AG
(Seiler HT). A majority of the outstanding shares of Seiler HT is owned by a
director of the Company. The advances have been presented as non-current in the
accompanying balance sheet. Realization of the advances is dependent upon the
successful completion of the Company's first commercial HTV system. (See Note
1.)
- 7 -
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)
The Company charged $96,000 to legal expense for legal services
rendered by a stockholder in the year ended March 31, 1996.
NOTE 4 -HIGH TEMPERATURE VITRIFICATION SYSTEM
The Company's wholly owned subsidiary, Seiler AG, entered into three
contracts with Seiler HT to develop HTV Systems.
The HTV system is a patented high temperature converter melter which
supplies the energy necessary to provide final chemical and physical reactions
that convert hazardous chemical compounds into inert nonhazardous glass
ceramics, metal oxides, and salts. Contract number one is for the construction
of a full scale commercial system, contract number two is for a second
production line for the system and contract number three is for the construction
of a pilot system that will ultimately be used in the United States for purposes
of testing and developing commercial systems.
The systems have been under construction since 1993 and have been
undergoing air pollution control testing to evaluate product characteristics and
commercial viability.
The following summarizes the activity under the contracts through March
31, 1996:
[GRAPHIC OMITTED]
Contract Contract Contract
One Two Three Total
---------- ---------- ---------- ----------
Contract Price $7,623,711 $5,420,248 $2,698,055 $15,742,014
Payment on Contracts
(Years ended March 31)
1994 2,079,941 1,554,578 - 3,634,519
1995 1,449,150 827,006 220,647 2,496,802
1996 3,012,485 - 576,326 3,588,811
---------- ---------- ---------- ----------
Total Payments 6,541,576 2,381,584 796,973 9,720,133
---------- ---------- ---------- ----------
Remaining Amounts Due $1,082,134 $3,038,664 $1,901,082 $6,021,880
========== ========== ========== ==========
- 8 -
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 4 -HIGH TEMPERATURE VITRIFICATION SYSTEM (Continued)
The system has been classified as long term in the accompanying
financial statements since it is management's intention, upon completion,
testing and permitting, to own and operate these systems to process waste on a
commercial basis in Germany. Amortization of the cost of these systems has not
been provided for in the accompanying financial statements since the systems are
still under construction and are not yet operating commercially.
Research and development costs associated with the development of these
systems amounted to $181,281 in the year ended March 31, 1996.
NOTE 5 - LICENSING AGREEMENTS
The Company entered into two separate licensing agreements in 1993 with
Maxon Finance and Trade Ltd., S.A., a stockholder of the Company, and a
corporation organized under the laws of Panama. The agreements, as amended in
March of 1994, are for an exclusive field-of-use license to use the proprietary
information, including the patent rights, worldwide for the High Temperature
Vitrification System. Licensing fees aggregating $5,000,000 are to be paid under
the terms of the agreements. These fees have been discounted at 7%, resulting in
a net capitalized cost of $4,760,000. These agreements are for an indefinite
term or until all of the proprietary information becomes public knowledge and
the patent rights expire. Amortization expense for the year ended March 31, 1996
was $317,334.
Maxon Finance and Trade Ltd., S.A. modified its note agreement terms
with the Company in February 1995 by extending the payment terms to December 31,
2000. Subsequent to March 31, 1996, the Company modified the terms of the
agreement again to begin payments in June 1998 extending through December 31,
2002. These modifications reduced the effective interest rate from 7%, per the
original agreement, to approximately 1%.
The aggregate annual principal payments due in years subsequent to
March 31, 1996 are payable as follows:
[GRAPHIC OMITTED]
Year Ended
March 31,
---------
1999 $ 312,880
2000 374,787
2001 380,826
2002 386,962
2003 521,795
------------
$ 1,977,250
============
- 9 -
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 6 - LOAN PAYABLE - STOCKHOLDERS
Werner Heim, President, Chairman of the Board of Directors and
stockholder, has made unsecured, non-interest bearing advances to the Company
which are payable upon future mutual agreement of the parties. The advances have
been presented as a long term liability in the accompanying balance sheet based
upon the parties intent to not repay the advances currently. The balance at
March 31, 1996 was $1,149,049. Interest expense paid to the stockholder was
$56,614 for the year ended March 31, 1996.
PTI Management AG, advanced $105,000 to the Company. The advances are
unsecured, non-interest bearing and due on December 31, 1997. The balance due to
PTI at March 31, 1996 is $89,085.
NOTE 7 - INCOME TAXES
For the year ended March 31, 1996 there was no provision for
current and deferred federal, state or foreign income taxes.
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Deferred income taxes recorded in the balance sheet at March 31, 1996
includes a deferred tax asset related to federal net operating loss
carryforwards of approximately $4,593,000 which have been fully offset by a
valuation allowance. The valuation allowance has been established equal to the
full amount of the deferred tax asset, as the Company is not assured that it is
more likely than not that these benefits will be realized. The loss
carryforwards expire through March 31, 2011 if not fully utilized.
A reconciliation between the statutory federal income tax rate and the
effective income tax rates based on continuing operations for the year ended
March 31, 1996 is as follows:
[GRAPHIC OMITTED]
Amount Percent
------ -------
Net Loss $ (1,796,727) 100.0%
============ =====
Statutory U.S. federal income tax benefit $ (611,000) 34.0%
Operating losses with no current tax benefits 327,600 18.2
Effect of foreign operations 283,400 15.8
------------ -----
Provision for Income Taxes $ - - %
============ =====
- 10 -
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 8 - PENSION PLAN
The Company adopted a Simplified Employee Pension Plan (SEP) for the
benefit of its eligible employees. The plan enables the employee to contribute
up to a maximum of 10% of their base salary through a salary reduction and
requires the Company to make a 5% contribution. For the year ended March 31,
1996, the Company charged $6,000 to operations for plan contributions.
NOTE 9 - STOCK OPTIONS
The Board of Directors has adopted Non-Statutory Stock Option Plans and
reserved 4,500,000 shares, for issuance to eligible full and part-time
employees, directors and consultants. Options are nontransferable and are
exercisable during a term of not more than ten (10) years from the grant date.
The options are issuable in such amounts and at such prices as determined by the
Board of Directors, except that each option price of each grant will not be less
than eighty-five percent of the fair market value of such shares on the date the
options are granted.
The following table summarizes Common Stock options outstanding as of
March 31, 1996:
[GRAPHIC OMITTED]
Price Per Shares Shares Shares
Date Granted Share Granted Exercised Outstanding
----------------------- --------- --------- ----------- -------------
1993 Stock Option Plan:
-----------------------
June 14, 1993 $ 2.00 345,000 338,000 7,000
June 30, 1993 $ 1.70 55,000 40,000 15,000
September 30, 1993 $ 3.61 600,000 - 600,000
--------- ---------- -------------
Total outstanding 1,000,000 378,000 622,000
========= ========== =============
1994 Stock Option Plan:
-----------------------
February 22, 1995 $1.275 175,000 - 175,000
March 29, 1995 $1.275 150,000 25,000 125,000
February 1, 1996 $ 2.10 100,000 - 100,000
--------- ---------- -------------
Total outstanding 425,000 25,000 400,000
========= ========== =============
1995 Stock Option Plan:
-----------------------
December 1, 1995 $1.65 200,000 - 200,000
February 1, 1996 $2.10 800,000 - 800,000
--------- ---------- -------------
Total outstanding 1,000,000 - 1,000,000
========= ========== =============
- 11 -
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 9 - STOCK OPTIONS (Continued)
Subsequent to March 31, 1996, the Company granted 650,000 shares of the
Company's common stock under the 1996 Non-Statutory Stock Option Plan with an
exercise price of $1.70 per share.
NOTE 10 - COMMITMENTS
On February 27, 1996, the Company obtained a credit line commitment
from the Dresdner Bank approximating $1,422,000 and a long term investment loan
in the amount of $6,703,000 for the fabrication, construction and installation
of a high temperature separating and melting facility on land located in Germany
acquired by the Company from the German State of Saxony. The commitments require
that the German government provide the Dresdner Bank with a surety bond covering
eighty-percent of the commitment, obtain the necessary approvals and permits and
meet certain financial covenants relating to working capital requirements and
debt to equity ratios. In connection with this financing package, the Company
will receive certain German governmental grants of approximately $4,469,000. The
grants do not have to be repaid and will be utilized by the Company to install
an HTV system in Freiberg, Germany.
The Company entered into a $100,000 contract with Radian Corporation on
September 27, 1995 to provide laboratory and pilot testing services. Radian's
prime contract with the United States Air Force is for the evaluation for the
construction of two Very High Temperature Vitrification Technology Systems. The
estimated period of performance was from September 5, 1995 through December 31,
1996.
The Company entered into a contract with the Edison Materials
Technology Center to produce and evaluate new glass and ceramic products
generated from waste materials from Ohio industry. Phase I of the contract in
the amount $100,000 provides for laboratory studies. Phase II of the contract in
the amount of $200,000 provides for continued evaluation, product optimization
and pilot studies.
The Company entered into written employment agreements with Werner
Heim, Alan B. Sarko (Vice President), Gerold Weser (Vice President) and Niklaus
Seiler. The agreements commenced January 1, 1996 and expire five years
thereafter and provide for base salaries of $150,000 per year as well as certain
additional bonuses based upon the Company reaching certain levels which have not
yet been attained. Mr. Heim, Mr. Sarko, Mr. Weser, and Mr. Seiler have also been
granted options to purchase up to 615,000; 300,000; 200,000 and 300,000 shares,
respectively of the Company's common stock in accordance with the terms and
conditions of the Company's Non-Statutory Stock Option Plans.
The Company purchased an option to acquire 100% of the registered
shares of Vetrotherm AG, Netstal. The option price of $167,920 was paid in 1994
and will be applied toward the final purchase price. The actual purchase of the
registered shares and related price is contingent upon a final valuation of the
shares and receipt of certain approvals by regulatory authorities.
The Company entered into management consulting agreements with the
three principals of the Studdert Companies, Messrs. Studdert, Murdock, and
Dudley. The agreements were to be for the period from April 1, 1995 through
March 31, 1996 (unless terminated on 30 day written notice) and provided for
aggregate annual compensation of $18,000 ($6,000 each) and further provided that
Messrs. Studdert, Murdock and Dudley be granted 70,000, 52,500 and 52,500
options, respectively, to purchase Company common stock in accordance with the
Company's 1994 Non-Statutory Stock Option Plan. The agreements were terminated
in June 1995 and the Company paid $1,500 through that date to each of the
individuals resulting in consulting fee expense of $4,500 for the year ended
March 31, 1996.
- 12 -
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 10 - COMMITMENTS (Continued)
The Company entered into a financial advisory services agreement with
Sands Brothers and Company, Ltd. whereby the Company issued five year warrants,
with certain registration rights, to purchase shares of the Company's common
stock. The demand to register the warrants cannot be requested prior to November
1, 1996.
The Company entered into a financial advisory service contract with
Ladenburg, Thalmann & Co., Inc. in February 1994 which expired January 31, 1995.
The Company was required to pay $5,000 towards out-of-pocket expenses and is
required to issue warrants to purchase 400,000 shares of the Company's common
stock at $6.50 per share which expire January 31, 1999.
The Company leases various office space in the United States,
Switzerland and Germany, all on a month-to-month basis. The total charges to
operations for the year ended March 31, 1996 was $35,446.
NOTE 11 - SEGMENT INFORMATION
The following table summarizes segment information by geographic area:
[GRAPHIC OMITTED]
United
States Switzerland Germany Consolidated
------ ----------- ------- ------------
Operating Loss for the
year ended March 31,
1996 $ 961,655 $ 706,210 $128,862 $ 1,796,727
========== =========== ======== ===========
Identifiable Assets as of
March 31, 1996 $4,006,431 $10,686,524 $352,671 $15,045,626
========== =========== ======== ===========
General corporate expenses, miscellaneous income and expense have not
been allocated in arriving at operating losses.
Identifiable assets are those assets of the Company which can be
identified with the operations of each geographic area.
- 13 -
SEILER POLLUTION CONTROL SYSTEMS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
SEILER POLLUTION CONTROL SYSTEMS, INC.
MARCH 31, 1995 AND 1994
CONTENTS
Page
Independent Auditors' Report 1
Consolidated Balance Sheets 2 - 3
Consolidated Statements of Operations 4
Consolidated Statements of Stockholders' Equity
(Deficiency) 5
Consolidated Statements of Cash Flows 6 - 7
Notes to Consolidated Financial Statements 8 - 17
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Seiler Pollution Control Systems, Inc.
Dublin, Ohio
We have audited the accompanying consolidated balance sheets of
Seiler Pollution Control Systems, Inc. as of March 31, 1995 and
1994, and the related consolidated statements of operations,
stockholders' equity (deficiency) and cash flows for the years then
ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
based on our audits. The financial statements of Seiler Pollution
Control Systems, Inc. as of March 31, 1993 were audited by other
auditors who have ceased operations and whose report dated June 29,
1993 expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the 1995 and 1994 consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Seiler Pollution Control Systems, Inc. at
March 31, 1995 and 1994 and the results of its operations and its
cash flows for the years then ended, in conformity with generally
accepted accounting principles.
BEDERSON & COMPANY
June 28, 1995, except for Notes 1 and 3
to which the date is July 8, 1996
West Orange, New Jersey
(1)
SEILER POLLUTION CONTROL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND 1994
ASSETS
1995 1994
---- ----
CURRENT ASSETS:
Cash $ 89,220 $ 40,047
Advances to supplier - related party 6,661,676 7,971,197
Prepaid expenses and sundry receivables 35,514 31,797
---------- -----------
TOTAL CURRENT ASSETS 6,786,410 8,043,041
---------- -----------
PROPERTY AND EQUIPMENT, at cost:
Office furniture and equipment 35,133 11,188
Less: Accumulated depreciation 2,590 330
---------- -----------
NET PROPERTY AND EQUIPMENT 32,543 10,858
---------- -----------
OTHER ASSETS:
Licensing agreements, acquired from
stockholder, less accumulated amortization
of $543,379 (1995) and $226,046 (1994) 4,216,621 4,533,954
Deposits 18,013 -
Start up costs - 156,023
---------- -----------
TOTAL OTHER ASSETS 4,234,634 4,689,977
---------- -----------
TOTAL ASSETS $11,053,587 $12,743,876
========== ===========
The accompanying notes are an integral part of
these financial statements.
(2)
SEILER POLLUTION CONTROL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994
---- ----
CURRENT LIABILITIES:
Current portion of licensing agreement payable -
stockholder $ - $ 1,082,614
Loan payable - stockholder 89,085 29,085
Cash overdraft 11,271 -
Accounts payable 68,675 62,467
Payroll taxes payable 1,134 4,396
Customer deposits - 5,079,000
Accrued officers' salaries - 33,038
Accrued interest - stockholder 32,611 32,611
Accrued expenses 83,629 46,483
----------- -----------
TOTAL CURRENT LIABILITIES 286,405 6,369,694
----------- -----------
LONG-TERM DEBT:
Licensing agreement payable - stockholder,
net of current portion 1,977,249 894,635
Loan payable - officer 461,008 149,359
----------- -----------
TOTAL LONG-TERM DEBT 2,438,257 1,043,994
----------- -----------
MINORITY INTEREST 10,171 -
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value;
authorized 25,000,000 shares, issued
and outstanding 14,250,569 shares
at March 31, 1995 and 11,789,723 shares
at March 31, 1994 1,425 1,179
Additional paid-in capital 12,733,909 8,778,331
Accumulated deficit (5,552,955) (3,585,142)
Foreign currency translation adjustment 1,136,375 135,820
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 8,318,754 5,330,188
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,053,587 $12,743,876
=========== ===========
The accompanying notes are an integral part of
these financial statements.
(3)
SEILER POLLUTION CONTROL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
1995 1994 1993
---- ---- ----
REVENUE $ - $ - $ -
----------- ---------- --------
OPERATING EXPENSES:
Officers' salaries 416,056 125,493 21,250
Salaries - other - 14,546 -
Payroll taxes 15,155 4,338 -
Directors' compensation 8,000 8,000 -
Advertising, promotional and selling 206,701 6,560 -
Consulting fees 198,770 336,229 -
Consulting fees - related parties 108,083 1,671,707 -
Employee welfare 47,648 3,629 -
Insurance 26,966 501 -
Office expenses 53,551 13,582 -
Pension plan 8,415 1,875 -
Professional fees 133,073 65,494 3,000
Professional fees - related party 215,516 114,393 6,120
Public relations 22,968 74,095 -
Rent 28,354 1,848 -
Research and development cost 50,881 30,973 -
Taxes 30,809 792 -
Telephone 5,683 946 -
Travel and entertainment 36,558 54,951 -
Depreciation 2,260 330 -
Amortization 317,333 226,046 -
Miscellaneous 46,731 25,736 -
----------- ---------- --------
TOTAL OPERATING EXPENSES 1,979,511 2,782,064 30,370
----------- ---------- --------
LOSS BEFORE OTHER INCOME (EXPENSES)
AND PROVISION FOR INCOME TAXES (1,979,511) (2,782,064) (30,370)
----------- ---------- --------
OTHER INCOME (EXPENSES):
Interest income 73 6,399 -
Interest expense - related party - (123,709) -
Foreign currency loss - (333) -
----------- ---------- --------
TOTAL OTHER INCOME (EXPENSES) 73 (117,643) -
----------- ---------- --------
LOSS BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTEREST (1,979,438) (2,899,707) (30,370)
PROVISION FOR INCOME TAXES - - -
----------- ---------- --------
LOSS BEFORE MINORITY INTEREST (1,979,438) (2,899,707) (30,370)
MINORITY INTEREST 11,625 - -
----------- ---------- --------
NET LOSS $(1,967,813) $(2,899,707) $(30,370)
=========== =========== ========
LOSS PER COMMON SHARE $ (.15) $ (.36) $ (.04)
=========== =========== ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 13,065,659 8,098,573 770,734
========== ========== ========
The accompanying notes are an integral part of
these financial statements.
(4)
SEILER POLLUTION CONTROL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
[Enlarge/Download Table]
Foreign
Common Stock Additional Currency
------------------ Paid-in Accumulated Translation
Shares Amount Capital Deficit Adjustment Total
------ ------ ------- ------- ---------- -----
BALANCE, APRIL 1, 1992 700,023 $ 70 $12,733,909 $ (655,065) $ - $ (261,805)
YEAR ENDED MARCH 31, 1993:
Issuance of restricted shares of common stock
for accrued officer salary, rent and officer
advances 35,000 4 220,615 - - 220,619
Issuance of restricted shares of common stock
for accrued legal fees 50,000 5 24,995 - - 25,000
Issuance of restricted shares of common stock
for officer salary 35,000 3 21,247 - - 21,250
Net loss for the year - - - (30,370) - (30,370)
---------- ------ --------- ----------- ---------- ----------
BALANCE, MARCH 31, 1993 820,023 82 660,047 (685,435) - (25,306)
YEAR ENDED MARCH 31, 1994:
Issuance of restricted shares of common stock
for officers' and directors' salaries 35,000 3 27,997 - - 28,000
Issuance of restricted shares of common stock
for legal fees 40,000 4 24,302 - - 24,306
Issuance of common stock for cash 10,169,700 1,017 6,616,058 - - 6,617,075
Issuance of common shares under stock option
plan for consulting fees 315,000 32 629,968 - - 630,000
Issuance of common stock for consulting fee 410,000 41 819,959 - - 820,000
Foreign currency translation adjustment - - - - 135,820 135,820
Net loss for the year - - - (2,899,707) - (2,899,707)
---------- ------ ----------- ----------- ---------- ----------
BALANCE, MARCH 31, 1994 11,789,723 1,179 8,778,331 (3,585,142) 135,820 5,329,925
YEAR ENDED MARCH 31, 1995:
Issuance of common shares under stock
option plan for cash 38,000 4 67,896 - - 67,900
Issuance of common stock for cash 2,422,846 242 3,887,682 - - 3,887,924
Foreign currency translation adjustment - - - - 1,000,555 1,000,555
Net loss for the year - - - (1,967,813) - (1,967,813)
---------- ------ ----------- ----------- ---------- ----------
BALANCE, MARCH 31, 1995 14,250,569 $1,425 $12,733,909 $(5,552,955) $1,136,375 $8,318,754
========== ====== =========== =========== ========== ==========
The accompanying notes are an integral part of
these financial statements.
(5)
SEILER POLLUTION CONTROL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
1995 1994 1993
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,967,813) $(2,899,707) $ (30,370)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and amortization 319,593 226,376 -
Operating expenses through issuance
of restricted common stock -
related parties - 52,306 265,669
Operating expenses through issuance
of common stock - related parties - 1,450,000 -
Foreign currency translation 1,011,016 146,568 -
Minority interest 10,171 - -
(Increase) decrease in operating
assets:
Advances to supplier - related
party 1,309,521 (7,971,197) -
Prepaid expenses and sundry
receivables (3,717) (31,797) -
Deposits (18,013) - -
Start up costs 156,023 (156,023) -
Increase (decrease) in operating
liabilities:
Cash overdraft 11,271 - -
Accounts payable 6,208 37,161 (15,880)
Payroll taxes payable (3,262) 4,396 -
Customer deposits (5,079,000) 5,079,000 -
Accrued officers' salaries (33,038) 33,038 (24,425)
Accrued interest - stockholder - 32,611 -
Accrued expenses 37,146 46,483 (194,994)
---------- --------- ---------
NET CASH USED BY OPERATING
ACTIVITIES (4,243,894) (3,950,785) -
---------- --------- ---------
CASH FLOWS USED BY INVESTING
ACTIVITIES:
Acquisition of property and
equipment (23,945) (11,188) -
---------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments on long-term
borrowings - stockholder - (2,782,751) -
Proceeds from issuance of common
stock 3,955,824 6,617,075 -
Proceeds from stockholder loan 60,000 45,000 -
Principal payments of stockholder
loan - (15,915) -
Proceeds from officer loan 311,649 149,359 -
Decrease in related party loans - - (1,200)
Issuance of restricted common stock
for related party loan - - 1,200
---------- --------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 4,327,473 4,012,768 -
---------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH (10,461) (10,748) -
---------- --------- ---------
NET INCREASE IN CASH 49,173 40,047 -
CASH, beginning of year 40,047 - -
---------- --------- ---------
CASH, end of year $ 89,220 $ 40,047 $ -
========== ========= =========
The accompanying notes are an integral part of
these financial statements
(6)
SEILER POLLUTION CONTROL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
(Continued)
1995 1994 1993
---- ---- ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest - stockholder $ - $ 91,098 $ -
========== ========== ==========
Income taxes $ - $ - $ -
========== ========== ==========
NON-CASH OPERATING ACTIVITIES:
Issuance of restricted common stock
for officers and directors salaries $ - $ 28,000 $ 216,244
Issuance of restricted common stock for
rent - -
24,425
Issuance of restricted common stock
for legal fees - stockholder - 24,306 25,000
Issuance of common stock exercised
under stock option plan for
consulting fees - 630,000 -
Issuance of common stock for consulting
fees - 820,000 -
---------- ---------- ----------
TOTAL NON-CASH OPERATING ACTIVITIES $ - $1,502,306 $ 265,669
========== ========== ==========
NON-CASH FINANCING ACTIVITIES:
Issuance of restricted common stock for
related party loan $ - $ - $ 1,200
Acquisition of licensing agreements for
long-term notes payable - stockholder - 4,760,000
---------- ---------- ----------
-
----------
TOTAL NON-CASH OPERATING ACTIVITIES $ - $4,760,000 $ 1,200
========== ========== ==========
The accompanying notes are an integral part of
these financial statements.
(7)
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, 1994 AND 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The Company was incorporated under the laws of the State of
Delaware on April 11, 1983 as World Imports - USA, Inc.
The Company's initial business plans were unsuccessful, and
on July 1, 1993, it changed its name to Seiler Pollution
Control Systems, Inc. The Company presently is a toxic
waste disposal concern which acquired the rights to a
technology called High Temperature Vitrification which
treats a potentially wide variety of waste products. The
Vitrification process transforms hazardous waste into non-
toxic substances which can either be stored in a non-
hazardous waste landfill or be recycled.
Principles of Consolidation
The consolidated financial statements include Seiler
Pollution Control Systems, Inc., its wholly owned
subsidiary (incorporated in Delaware), Seiler Pollution
Control Systems International, Inc., the latter's wholly
owned subsidiary (incorporated in Switzerland), Seiler SEPC
AG, and it's majority (90%) owned subsidiary (incorporated
in Germany), Seiler Trenn-Schmeizanlagen Betriebs GmbH.
The statements reflect the financial position, results of
operations and cash flows of Seiler Pollution Control
Systems, Inc. and its wholly owned and majority owned
subsidiaries as a single entity. All significant
intercompany accounts and transactions have been eliminated
in consolidation.
Basis of Accounting
The Company maintains its records on the accrual basis of
accounting. Income is recorded when earned and expenses
are recorded when incurred.
Property and Equipment
Property and equipment are recorded at cost. Depreciation
of property and equipment is provided for over the
estimated useful lives of the respective assets.
Depreciation is recorded based on the straight-line method
over estimated useful lives of five (5) years.
Maintenance, repairs, and minor renewals are charged to
earnings when they are incurred. When assets are retired
or otherwise disposed of, the assets and related allowance
for depreciation and amortization are eliminated from
accounts and any resulting gain or loss is reflected in
income.
Licensing Agreements
Licensing agreements are stated at fair value (cost less
imputed interest) less accumulated amortization.
Amortization is computed by the straight-line method over
an estimated life of fifteen (15) years.
Research and Development
Cost associated with research, new product development, and
product cost improvements are treated as expense when
incurred. Research and development cost charged to
operations for the years ended March 31, 1995, 1994 and
1993 were $50,881, $30,973 and $-0-, respectively.
(8)
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, 1994 AND 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss Per Common Share
Loss per common share is computed by dividing the net loss
for the year by the weighted average number of shares of
Common Stock outstanding during the year.
Reclassifications
Certain reclassifications have been made to prior year's
financial statements to conform to the March 31, 1995
presentation.
Expenses Related to Sales and Issuance of Securities
All costs incurred in connection with the sale of the
Company's Common Stock have been capitalized and charged to
additional paid-in capital.
Foreign Currency Translation
Assets and liabilities of subsidiaries operating in foreign
countries are translated into U.S. dollars using the
exchange rate in effect at the balance sheet date. Results
of operations are translated using the average exchange
rates prevailing throughout the year. The effects of
exchange rate fluctuations on translating foreign currency
assets and liabilities into U.S. dollars are included in
stockholders' equity, while gains and losses resulting from
foreign currency transactions are included in operations.
Restatement
The 1995 and 1994 financial statements have been restated
due to a change in the Company's policy regarding
amortization of the licensing agreements, the
reclassification of certain research and development cost
and reclassification of foreign currency losses. The
Company has decided to amortize the licensing agreements
from date of acquisition rather than from the date of its
initial sale of its first system. Certain research and
development costs were previously capitalized rather than
charged to operations. Certain foreign translation
adjustments were previously charged to operations rather
than to stockholders' equity. The effect of these changes
increased the net loss by $187,115 in 1995 and $223,876 in
1994. Loss per common share increased by $.01 for 1995 and
$.03 for 1994.
NOTE 2 - ADVANCES TO SUPPLIERS
The Company has advanced, to it's sole supplier, Seiler
Hochtemperatur-Trennanlagen AG, a related party, the sum of
$5,139,084 directly and on it's behalf, $1,522,592 to other
unrelated suppliers towards the purchase of it's initial
High Temperature Vitrification System. A principal
stockholder of Seiler Hochtemperatur-Trennanlagen AG is a
member of the Company's Board of Directors.
(9)
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, 1994 AND 1993
NOTE 3 - LICENSING AGREEMENTS
The Company entered into two separate licensing agreements
in July of 1993 with Maxon Finance and Trade Ltd., S.A., a
stockholder of the Company, and a corporation organized
under the laws of Switzerland. The agreements, as amended
in March of 1994, are for an exclusive field-of-use license
to use the proprietary information, including the patent
rights, worldwide for the High Temperature Vitrification
System. The agreements required a one time licensing fee
of $5,000,000. This fee has been discounted at 7% for
imputed interest of $240,000 resulting in a net capitalized
cost of $4,760,000. These agreements are for an indefinite
term or until all of the proprietary information becomes
public knowledge and the patent rights expire.
Amortization expense for the years ended March 31, 1995 and
1994 were $317,333 and $226,046, respectively.
NOTE 4 - TROUBLED DEBT RESTRUCTURING
Maxon Finance and Trade Ltd., SA modified it's note
agreement terms with the Company in February 1995 (see
Notes 3 and 5) by extending the payment terms to December
31, 2000. This modification reduced the effective interest
rate from 7%, per the original agreement, to 1.6%.
NOTE 5 - LICENSING AGREEMENTS PAYABLE
Licensing agreements payable, Maxon Finance and Trade Ltd.,
S.A., a Swiss Corporation, due December 31, 2000 (See Notes
3 and 4), and require payments as follows:
June 30, 1996 $ 127,721
December 31, 1996 185,159
June 30, 1997 186,645
December 31, 1997 188,142
June 30, 1998 189,652
December 31, 1998 191,174
June 30, 1999 192,708
December 31, 1999 194,254
June 30, 2000 195,813
December 31, 2000 325,981
----------
TOTAL $1,977,249
==========
Annual maturities are as follows:
Year Ended
March 31,
1996 $ -
1997 312,880
1998 374,787
1999 380,826
2000 386,962
2001 521,794
----------
TOTAL $1,977,249
==========
(10)
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, 1994 AND 1993
NOTE 7 - LOAN PAYABLE - OFFICER
Werner Heim, President and Chairman of the Board of
Directors, has advanced the Company monies which are
unsecured, non-interest bearing loans payable upon future
mutual agreement of the parties. The balances at March 31,
1995 and 1994 were $461,008 and $149,359, respectively.
NOTE 8 - INCOME TAXES
The Company adopted Statement of Financial Accounting
Standard 109 ("SFAS). SFAS 109 provides for an asset and
liability approach to accounting for income taxes that
require the recognition of deferred tax assets and
liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial
statements or tax returns.
In estimating future consequences, SFAS 109 generally
considers all expected future events other than proposed
changes in the tax law or rates prior to enactment.
Deferred income taxes recorded in the balance sheets at
March 31, 1995 and 1994, after adoption of SFAS 109,
includes a deferred tax asset related to net operating loss
carryforwards of approximately $4,200,000 and $2,825,000,
respectively, which have been fully offset by a valuation
allowance. The valuation allowance has been established
equal to the full amount of the deferred tax asset, as the
Company is not assured that it is more likely than not that
these benefits will be realized.
For the years ended March 31, 1995, 1994 and 1993 there was
no provision for current and deferred federal, state or
foreign income taxes.
A reconciliation between the statutory federal income tax
rate (34%) and the effective income tax rates based on
continuing operations is as follows:
1995 1994 1993
---- ---- ----
Statutory federal income tax (benefit) $(468,684) $(960,698) $ (3,100)
Benefit not recognized on operating
loss - - 3,100
Valuation allowance 468,684 960,698 -
--------- --------- ---------
TOTAL TAX PROVISION $ - $ - $ -
========= ========= =========
The Company has unused Federal net operating loss
carryforwards at March 31, 1995 of approximately
$4,200,000, which expire through March 31, 2010, if not
fully utilized.
(11)
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, 1994 AND 1993
NOTE 9 - MINORITY INTEREST
Minority interest represents a 10% interest in Seiler
Trenn-Schmeizanlagen Betriebs GmbH, a subsidiary of Seiler
SEPC AG.
NOTE 10 - COMMON STOCK
On July 8, 1993 the Company effectuated a 1 for 100
reverse stock split to its then outstanding 84,002,000
shares of Common Stock so that immediately subsequent
thereto, the number of Company shares outstanding was
840,023 shares.
The accompanying financial statements reflect the
retroactive effect of the reverse stock split, where
applicable.
NOTE 11 - CERTIFICATE OF INCORPORATION
On October 31, 1994, the Company amended it's Certificate
of Incorporation, reducing the total number of shares of
Common Stock authorized from 250,000,000 to 25,000,000
shares.
NOTE 12 - ISSUANCE OF COMMON STOCK FOR CASH
The Company issued 2,460,846 shares of Common Stock for
$4,485,327 less commissions of $529,503 during the fiscal
year ended March 31, 1995, and 10,169,700 shares of Common
Stock for $6,842,500 less commissions of $225,425 during
the fiscal year ended March 31, 1994.
NOTE 13 - PENSION PLAN
The Company, on January 1, 1994, adopted a Simplified
Employee Pension Plan (SEP) for the benefit of its
eligible employees. The plan enables the employee to
contribute up to a maximum of 10% of their base salary
through a salary reduction and requires the Company to
make a 5% contribution. For the years ended March 31,
1995 and 1994, the Company has charged to operations
$8,415 and $1,875, respectively.
NOTE 14 - STOCK OPTIONS
In 1993 and 1994, the Board of Directors adopted Non-
Statutory Stock Option Plans and reserved 1,000,000 and
500,000 shares, respectively, for issuance to key
employees or consultants. Options are non-transferrable
and are for a term of not more than ten (10) years from
the grant date. The options are issuable in such amounts
and at such prices as determined by the Board of
Directors, except that each option price will not be less
than eighty-five (85%) percent of the fair market value of
such shares on the date the options are granted.
(12)
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, 1994 AND 1993
NOTE 14 - STOCK OPTIONS (Continued)
The following table summarizes Common Stock options
outstanding as at March 31, 1995:
Price Per Shares Shares Shares
Date Granted Share Granted Exercised Outstanding
------------ ----- ------- --------- -----------
1993 Stock Option Plan:
June 14, 1993 $ 2.00 345,000 326,000 19,000
June 30, 1993 $ 1.70 55,000 27,000 28,000
September 30, 1993 $ 3.61 600,000 - 600,000
--------- ------- -------
TOTAL OUTSTANDING 1,000,000 353,000 647,000
========= ======= =======
1994 Stock Option Plan:
March 1, 1995 $1.275 325,000 - 325,000
======= ======= =======
NOTE 15 - COMMITMENTS
The Company entered into a consulting agreement with
Rolcan Finance, Ltd. for a term of one year expiring June
20, 1994. The agreement required payment for services
rendered in the amount of 460,000 shares of the Company's
Common Stock. For the years ended March 31, 1995 and
1994, -0- and 410,000 shares, respectively, were issued
for services rendered.
The Company entered into a consulting agreement with
Berkshire International Finance, Inc. ("Berkshire) for a
term of one year, expiring June 11, 1994. The Company was
required to pay $630,000 plus $10,000 per month over the
terms of the agreement. The Company issued to Berkshire
International Finance, Inc. options to purchase 315,000
shares of the Company's Common Stock at $2.00 per share.
The option price will be applied against fees due
Berkshire upon the exercising of options. Berkshire
exercised all of its options to purchase 315,000 shares.
(See Note 14). The agreement required Berkshire to
provide certain business consulting services, maintain an
office at its facility in Jersey City, New Jersey, and
provide the necessary office services until such time as
new corporate offices are established and Berkshire's
services are concluded. The terms of this agreement were
amended effective January 1994 reducing the monthly fee
from $10,000 to $5,000 per month.
(13)
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, 1994 AND 1993
NOTE 15 - COMMITMENTS (Continued)
The Company entered into a written employment agreement
with Arthur J. Helmstetter, its Chief Executive Officer
and President, which agreement commenced December 1, 1993.
The agreement provides the Company's President with a base
annual salary of $150,000 as well as a five percent annual
cost of living increase and an annual bonus of 3% of
Company pre-tax profits and a further annual bonus of one-
fourth of one percent of Company gross revenues. The
Company's President has also been granted options to
purchase up to 200,000 shares of the Company's Common
Stock in accordance with the terms and conditions of the
Company's 1993 and 1994 Non-Statutory Stock Option Plan
(See Note 14). Mr. Helmstetter resigned his office on
February 28, 1995.
The Company entered into a written employment agreement
with Alan B. Sarko, Vice President, which agreement
commenced March 1, 1995 and expires two years thereafter.
The agreement provides for a base salary of $90,000 per
year as well as certain additional bonuses based upon the
Company reaching certain levels which have not yet been
attained. The Company's Vice-President has also been
granted options to purchase up to 100,000 shares of the
Company's Common Stock in accordance with the terms and
conditions of the Company's 1994 Non-Statutory Stock
Option Plan (See Note 14).
Seiler SEPC AG, the Company's wholly owned Swiss
subsidiary, entered into a written agreement with its
President, Paul Schmidhauser, pursuant to which Mr.
Schmidhauser is to receive Sfr. 15,000 per month (each
Sfr. currently being equivalent to approximately $1.13
U.S. dollars) as well as certain bonus provisions. Mr.
Schmidhauser has also been granted options to purchase up
to 150,000 shares of the Company's Common Stock at $3.6125
per share in accordance with the terms and conditions of
the Company's Non-Statutory Stock Option Plan (See Note
14). Mr. Schmidhauser resigned his office on January 1,
1995.
On October 6, 1993 the Company entered into a consulting
agreement with Sands Brothers & Co., Ltd., a member of the
New York Stock Exchange ("Sands Brothers") which agreement
provided for the engagement of Sands Brothers as the
Company's financial advisor and consultant with respect to
corporate finance, mergers and acquisitions and financial
service matters for a period of three (3) years. In
addition to providing for certain monetary compensation,
Sands Brothers was to receive (A) transaction fees and an
equity participation in the surviving entity of any
acquisition transaction, and (B) certain financial fees in
the event of the consummation of defined financing
transactions through any third party financing source
introduced by Sands Brothers. The agreement further
provides Sands Brothers with certain rights of first
refusal with respect to the underwriting or placement of
the Company's future public or private financing of debt
or equity securities and gives Sands Brothers the right to
designate a member to the Company's Board of Directors.
Further, the
(14)
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, 1994 AND 1993
NOTE 15 - COMMITMENTS (Continued)
agreement provided Sands Brothers with the potential for
an equity participation in the Company through the
proposed issuance to Sands Brothers of five (5) year
Warrants (with certain registration rights) to purchase
restricted shares of the Company's Common Stock. As a
result of certain disputes and differences that have
arisen between the Company and Sands Brothers, the
original agreement has been amended as of December 3,
1994, as follows:
a. The financial advisory and consulting
agreements were cancelled in exchange for a
$25,000 payment to Sands Brothers for full and
complete settlement thereof and,
b. The warrant agreements were modified and
amended so that demand rights to register
shares of the Company's Common Stock, which
underlie the Warrants, cannot be demanded prior
to November 1, 1996 nor may the Warrants be
exercised prior to November 1, 1995.
The Company entered into a financial advisory service
contract with Ladenburg, Thalmann & Co., Inc. in February
1994. The effective date of this contract was February 1,
1994 and expired January 31, 1995. The Company was
required to pay $5,000 towards out-of-pocket expenses and
is required to issue Warrants to purchase 400,000 shares
of the Company's Common Stock at $6.50 per share. These
Warrants will expire January 31, 1999.
The Company leases various office space in the United
States, Switzerland and Germany, all on a month-to-month
basis. The total charges to operations for the years
ended March 31, 1995 and 1994 were $28,354 and $1,848,
respectively.
NOTE 16 - RELATED PARTY TRANSACTIONS
The Company's past President converted accrued rent,
salaries, and cash advances due him for 70,000 shares of
the Company's restricted common stock during the fiscal
year ended March 31, 1993.
Dates
May 6, 1992 December 17, 1992 Total
----------- ----------------- -----
Accrued rent $ 24,425 $ - $ 24,425
Accrued salary 194,994 21,250 216,244
Advances 1,200 - 1,200
-------- -------- --------
$220,619 $ 21,250 $241,869
======== ======== ========
The Company acquired two licensing agreements for
$5,000,000 including imputed interest (see Note 4) from
Maxon Finance and Trade Ltd., S.A. who owns 2,000,000
shares of the Company's outstanding shares of Common
Stock, representing an approximate 17% ownership interest.
The Company has paid $2,871,405 of which $121,255 has been
charged to operations, and $2,128,595 remains outstanding
at March 31, 1995 including imputed interest.
(15)
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, 1994 AND 1993
NOTE 16 - RELATED PARTY TRANSACTIONS (Continued)
Certain former officers of the Company received
restricted Common Stock in July 1993 for services rendered
as follows:
Shares Amount
------ ------
Michael Castoro 15,000 $ 12,000
John Posteraro 10,000 8,000
Kathleen Histon 10,000 8,000
------ --------
TOTAL 35,000 $ 28,000
====== ========
The former officers indicated above are/or were employees
of Berkshire International Finance, Inc. (See Note 15).
The Company has charged to operations, for the years ended
March 31, 1995 and 1994, $20,000 and $720,000,
respectively, for consulting services.
In October 1993 the Company entered into a written
management consulting agreement with the Studdert
Companies ("SC"), whose President, Stephen M. Studdert,
formerly served on the Company's Board of Directors as
Vice Chairman (resigned March 17, 1995). In accordance
with the terms of the agreement SC is required to provide
and has been providing consulting services to the Company
in the areas of marketing strategies, governmental affairs
and regulation and general corporate matters. The Company
paid SC a retainer fee upon execution of the agreement and
is obligated to pay a monthly retainer fee of $10,000. The
Company has charged to operations for the years ended
March 31, 1995 and 1994 $88,083 and $75,000, respectively,
for consulting services. The management consulting
agreement was terminated and replaced with three (3)
separate consulting agreements, each dated March 1, 1995,
with the three (3) principal's of the Studdert Companies,
Messrs. Studdert, Murdock and Dudley. Such new agreements
which were to be for the period April 1, 1995 through
March 31, 1996 (unless terminated on 30 day written
notice) provided for aggregate annual compensation of
$18,000 ($6,000 each) and further provided that Messrs.
Studdert, Murdock and Dudley be granted 70,000, 52,500 and
52,500 options, respectively, to purchase Company Common
Stock in accordance with the Company's 1994 Non-Statutory
Stock Option Plan.
The Company charged to operations $215,516, $114,393 and
$6,120 in legal fees in 1995, 1994 and 1993, respectively,
for services rendered by a stockholder.
The Company charged to operations in 1994 $123,709,
representing interest in connection with the licensing
agreement with Maxon Finance and Trade Ltd., S.A. (See
Note 3).
(16)
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, 1994 AND 1993
NOTE 17 - SUBSEQUENT EVENTS
On April 6, 1995, the Company sold 800,000 shares of its
Common Stock for $880,000.
On May 15, 1995, the Company sold 1,200,000 shares of its
Common Stock for $1,320,000.
In June 1995, 175,000 options were exercised under the
1994 Non-Statutory Stock Option Plan with the Company
receiving an aggregate of $230,000.
On May 11, 1995, Paul Schmidhauser (former President of
the Company's wholly-owned Swiss subsidiary, Seiler SEPC
AG) waived all rights granted to him with respect to the
Company's 1993 Non-Statutory Stock Option Plan and the
150,000 options previously granted to him, thereunder.
(17)
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Bederson & Company LLP, the Company's independent auditors for the
Company's fiscal years ended March 31, 1995 and 1994, resigned as the Company's
auditors on May 10, 1996. The report of Bederson & Company LLP on the Company's
financial statements for the fiscal years ended March 31, 1995 and 1994 did not
contain an adverse opinion or a disclaimer of opinion nor were the opinions
qualified or modified as to uncertainty, audit scope, or accounting principles.
During the Company's fiscal years ended March 31, 1996 and 1995 and the interim
period preceding the resignation of Bederson & Company LLP, there were no
disagreements between the Company and Bederson & Company LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope procedure.
The Company on May 10, 1996 retained Schneider Downs & Co., Inc. as the
Company's independent auditors for the fiscal year ended March 31, 1996.
Part III
Item 10. Directors and Executive Officers of the Company
The Directors and Executive Officers of the Company, as of March 31, 1996,
were as follows:
Name and Address Position(s) Held Age
--------------------------------------------------------------------------------
Werner Heim Chairman of the Board, 63
Witikoenstrasse 311B President, and Secretary
CH-8053
Zurich, Switzerland
- 13 -
Alan B. Sarko Vice President - North 48
Seiler Pollution Control American Operations,
Systems, Inc. Chief Accounting
555 Metro Place North Officer, Director
Dublin, Ohio 43017
Ulrich Ernst Treasurer, Chief 49
P. O. Box 13 Financial Officer
CH 8954 Geroldswil and Director
Switzerland
Niklaus Seiler Director 58
c/o Seiler Patent AG
Steiacher
CH-5316
Leuggern, Switzerland
Dr. Gerold Weser Vice President - European 50
c/o Seiler TSB GmbH Operations, President -
Dorfstrasse 12 STSB
Jersbek, Germany D-22941
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and have qualified.
Werner Heim has been Chairman of the Board of the Company since June 1993 and
President since March 1995. Mr. Heim currently serves as President of SEPC AG, a
position he has held since its inception in November 1993. Mr. Heim was also
Secretary of the Company from August 1994 until May 1996. Mr. Heim's experience
in international business development covers some 30 years working with high
technology industries such as computer systems, biotechnology, microfiltration
and environmental waste processing. From 1963 to 1971 Mr. Heim was Branch
Manager before becoming Vice President of Friden Computer which merged into
Singer Corporation. In 1971 Mr. Heim founded Swimex, a Swiss company engaged in
supplying building materials and consulting services. Swimex was sold to
management in 1978. That same year, Mr. Heim founded Petrotech Holding AG, a
holding company for firms engaged in enhancement of oil recovery and microbial
waste processing. During the same time period, Mr. Heim was also a principal in
MBR Bioreactor. He continued with both companies until 1988. From 1988 until
1991, Mr. Heim served as Chairman of Biopore, a United States based company
engaged in a joint venture with the French government and others involved in
- 14 -
microfiltration research and development. Mr. Heim served as an Industrial
Consultant/Business Development from 1991 to 1993 for the following companies:
(1) Clearwater Ltd., a firm engaged in biological clean-up of oil spills; (2)
Seiler SHT, a firm engaged in high temperature waste vitrification; (3) Set AG,
a firm specializing in insulating, security and high temperature (bullet proof)
glass production; and (4) ASI Artificial Sensing Instruments, a firm engaged in
bioprocess control and related activities.
In May 1995, Mr. Heim became director of Swissray International, Inc., a
public company trading under the symbol SRMI and engaged (through its wholly
owned subsidiary SR-Medical, AG) in the diagnostic x-ray medical equipment
market. Mr. Heim is a Swiss national. He received a Diploma from Economic
Studies in 1956 from School of Economics, St. Gallen and engaged in
post-graduate studies in 1957 at HEC, Paris. Subsequently, Mr. Heim served as
Assistant at Institute of Economics in Switzerland, then was appointed a full
time member of the Planning Board of the University of Zurich. Mr. Heim
currently devotes a substantial portion of his business time to the ongoing
business affairs of Seiler and intends to continue active involvement on a daily
basis for the foreseeable future.
Alan B. Sarko has been Vice President of the Company in charge of North American
operations since March 1995. He also became a Director the same year. In May
1996, Mr. Sarko was named Secretary, Treasurer, and Chief Financial Officer of
Seiler. Mr. Sarko joined the Company in February 1994 in the position of
Director of Marketing. From June 1984 until he joined Seiler Mr. Sarko served as
Director of Marketing and Environmental Compliance for Inorganic Recycling
Corporation and its subsidiaries. From January 1973 until June 1984, Mr. Sarko
was Chief Executive Officer and Administrator of Sarko Equipment, Inc., a
Midwestern industrial demolition contractor. Utilizing his 20 years of
experience with hazardous waste management and recycling, Mr. Sarko directs,
manages and coordinates various environmental recycling projects for Seiler with
oversight responsibility for the Company's laboratory and pilot scale
treatability studies and analyses. Based on Mr. Sarko's vast knowledge of
environmental statutory requirements (federal, state and local) regarding
handling, managing, disposing and recycling of hazardous wastes, he is primarily
responsible for corporate regulatory oversight. Because of Mr. Sarko's expertise
in waste recycling with particular emphasis on vitrification technology, he has
been a guest lecturer at numerous symposiums and published several articles
related to hazardous waste vitrification. Mr. Sarko received his Bachelor of
Arts degree from Michigan State University in 1969 and his Juris Doctorate from
Detroit College of Law in 1972. He also obtained various Certificates of
Completion in post graduate courses related to hazardous waste management. Mr.
Sarko devotes his full time and best efforts to the Company's business
activities.
Ulrich Ernst was Treasurer and Chief Financial Officer for the fiscal year ended
March 31, 1996 and until May 1996, and is currently a director. Mr. Ernst has
had approximately 21 years of experience in international business development
in different industries with a background primarily in management consulting,
financial advisory services and rendering advice to new growth business
ventures. Mr. Ernst was a founder of the following firms in the years indicated,
each of which firms continue to occupy a portion of his business time and
efforts:
- 15 -
(a) Ernst Treuhand and Unternehmensberatung (1973) engaged in financial and
management consulting services, (b) Steinhalden AG (1965) engaged as an
international property holding company, and (c) B&T Beteiligungs and
Immobilienanlagen AG (1992) a holding company. Mr. Ernst received his Diploma in
Economic Studies in 1968 from the School of Economics and received the MBA
Master degree of Business Administration in 1973 from the University of Zurich.
Mr. Ernst is fluent in four languages and is the author of Geldanlage and Europe
(Investment in Europe) published in 1993 in Germany. Since May 1995 Mr. Ernst
has served as Chairman of the Board of Directors of SWISSRAY International, Inc.
(see also biographical material as same relates to Werner Heim regarding further
summary information with respect to SWISSRAY International, Inc.). Mr. Ernst
devotes such time as he deems necessary to the Company in his capacity as its
chief financial officer and director.
Niklaus Seiler has been a Director of the Company since 1984. With over 30 years
of technical experience with mechanical and thermochemical systems, Mr. Seiler
has personally developed sludge pumping systems, contact dryers and incineration
equipment. Mr. Seiler has been associated with and served in various leadership
capacities for the following companies: (1) Seiler HT AG, founder (1993) and
Director; (2) N & H Seiler Pumpenbau, (1974-1993) founder; and (3) Seiler
Montageunternehmon (1969-1974), founder. Mr. Seiler currently serves as
president and chief executive officer of Seiler Patent AG which is actively
engaged in vitrification systems development and operations for waste
processing. As the founder of companies involved in the development and
construction of waste management processing systems to treat organic and
inorganic materials, Mr. Seiler's range of technical expertise includes (a)
production and maintenance of chemical production lines for glycerin, explosive
goods and other chemical products; (b) development of a dual piston pump for
handling hydrocarbon sludges and cement; and (c) systems development of waste
melting equipment to recycle lead from car batteries, aluminum from Bottle caps
and produce glass products from industrial wastes. Mr. Seiler holds Swiss Patent
#680656, October 15, 1992, High Temperature Vitrification System, which is the
basis for the proprietary Seiler System. Mr. Seiler currently devotes such time
as he deems reasonable and necessary to the Company's business affairs,
primarily in his capacity as a Director.
Dr. Gerold Weser has been Vice President of the Company in charge of European
Operations since January 1996. Dr. Weser's employment with Seiler began in
January 1995. From 1993 until he joined the Company, Dr. Weser served as chief
executive officer and administrator of Dr. Weser & Partner. From August 1990
until July 1993, Dr. Weser was managing director of Centralsug,
Hamburg/Stockholm, Sweden. Dr. Weser received Vordiploma (B.A.) in Chemistry and
Physics from Technical University of Karlsruhe in 1969. Subsequently, he
attended the University of Oxford, England, and the University of Marburg,
Germany, where he received Diplomas in Chemistry and Physics, respectively. In
1978, he received his Dr. Rer. natl. (Ph.D.) from the Institute for Physical
Chemistry, University of Marburg. Since then, Dr. Weser has worked for companies
in the field of environmental processing and handling and has planned,
coordinated and implemented many recycling projects, such as recycling of
refrigerators (FHC) and electronic waste. Dr. Weser has vast experience in waste
water treatment and air pollution control systems, as well. He has built a
full-scale automatic waste
- 16 -
collection, transport and sorting plant and developed integrated compost plants
(aerobic and anaerobic) to recycle paper, metals and similar materials out of
household waste. Dr. Weser was involved in developing a complete waste
management program for the new Munich Airport. Additionally, Dr. Weser has
amassed expertise with major analytical laboratory equipment. Specifically, in
his scientific work, he has used Elemental Analyzers, AAS, ICP, Thermal
Analyzers, MS/GC, Infrared and UV Spectrometers, Atomic Analyzers, Absorption
Spectrophotometers. Dr. Weser is accustomed to European, German, federal and
local permitting procedures (BlmSchG, TVA, etc.). He is also familiar with the
logistics and handling of hazardous waste recycling including radioactive waste.
When Dr. Weser began working on a scientific project "The Lifetime of Packing
Materials for Radioactive Waste," he had his initial contact with vitrification
and high temperature techniques.
Item 11. Executive Compensation
Board of Directors Fees
Except as stated below, for the fiscal year ended March 31, 1996, members
of the Board of Directors did not receive any fees for attending meetings of the
Board of Directors. The Company's policy is to reimburse Board members for their
expenses incurred to attend Board meetings. Officers of the Company, who are
also Directors, do not receive any fees.
Executive Compensation
The following table sets forth information concerning the chief executive
officer of the Company and the Company's executive officers whose total annual
salary and bonus exceeded $100,000 for the fiscal year ended March 31, 1996.
SUMMARY COMPENSATION TABLE
[Enlarge/Download Table]
Long Term Compensation
Annual Compensation Awards
------------------------- ---------------------------
Securities
Name and Other Annual Underlying All Other
Principal Position Year(1) Salary Compensation(4) Options(#) Compensation(5)
--------------------------------------------------------------------------------------------
Werner Heim, Chairman, CEO, 1996 $150,000 300,000 $
President(2) 1995 121,002 --
1994 23,747 315,000
Alan B. Sarko, Vice 1996 105,000 200,000 $5,250
President, Secretary(3)
------------------
(1) For the fiscal year ended March 31 of the year listed below.
- 17 -
(2) Became an executive officer in August, 1994.
(3) Joined the Company in February 1994. Became an executive officer in March
1995.
(4) Individual amounts are not material.
(5) Pension benefits.
Option Grants Information
The following table presents information concerning grants of stock
options made during the fiscal year ended March 31, 1996 to each executive
officer named in the Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value At Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (2)
--------------------------------------------------------------------------------
# of
Securities % of Total
Underlying Options Granted Exercise
Options to Employees Price Expiration
Name Granted(1) in Fiscal Year ($/Sh) Date 5% 10%
---- ---------- --------------- -------- ---------- -------- --------
Werner Heim 300,000 21.4% $2.10 12/31/2002 $256,473 $597,692
Alan B. Sarko 200,000 14.3% $2.10 12/31/2002 $170,982 $389,461
------------------
(1) Non-qualified options were granted at 85% of fair market value on the
date of grant.
(2) The potential realizable value of each grant of options, assuming that the
market price of the underlying security appreciates in value from the date
of grant to the end of the option term, is presented at the indicated
annualized rates. The assumed growth rates in price in the Company's stock
are not necessarily indicative of actual performance that may be expected.
The amounts are net of the cost by the executive to exercise such options.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table presents information concerning the exercise of stock
options during the fiscal year ended March 31, 1996 by each executive officer
named in the Summary Compensation Table above, and the value at March 31, 1996,
of unexercised options.
- 18 -
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
[Enlarge/Download Table]
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End at FY-End(2)
---------------------- --------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized(1) Unexercisable Unexercisable
---- ----------- ----------- ------------- -------------
Werner Heim - - 615,000/-0- $1,460,672/-0-
Alan B. Sarko - - 300,000/-0- 1,013,438/-0-
------------------
(1) Represents the difference between the fair market value of the securities
underlying the options and the exercise price of the options on the date
of exercise.
(2) Represents the difference between the fair market value of the securities
underlying the options and the exercise price of the options at March 31,
1996. The average of the high and low trading price on March 29, 1996 was
$5.203125.
Retirement Plan
On January 1, 1994 the Company adopted a Simplified Employee Pension Plan
("SEP") for the benefit of eligible employees. The SEP enables the employee to
contribute up to a maximum of 10% of base salary through a salary reduction and
requires the Company to make a contribution equal to 5% of the employee's base
salary. See the Summary Compensation Table above for amounts contributed by the
Company to officers of the Company under the SEP.
Employment Contracts, Termination of Employment, and Change in Control
Agreements
The only employment contract between the Company and any person named in
the Summary Compensation Table above is as follows. Pursuant to a two-year
employment agreement commencing March 1, 1995, Alan B. Sarko serves as vice
president with a base annual salary of $90,000 plus bonuses based upon the
Company's reaching certain performance levels. Effective January 1, 1996,
Mr. Sarko's base salary was increased to $150,000. Earned bonuses will range
from 5% to 10% of Mr. Sarko's salary with respect to each item of specified
performance criteria, including the profitability of the Company, expanding
sales of Company products to the U.S. market, and obtaining an exemption from
the U.S. Environmental Protection Agency.
Compensation Committee Interlocks and Insider Participation
The Company has no compensation committee; rather the Company's Board of
Directors performs the functions that would otherwise be performed by a
compensation committee. Mr. Heim, chairman of the board and president of the
Company, Mr. Ernst, treasurer and chief
- 19 -
financial officer of the Company, Mr. Sarko, vice president and secretary of the
Company, and Mr. Seiler serve on the Company's Board of Directors. As members of
the Company's Board of Directors and in view of the fact that the Company does
not have a compensation committee, Messrs. Heim, Ernst, Sarko and Seiler
participate in deliberations concerning executive officer compensation. Mr. Heim
has loaned the Company, as of March 31, 1996, the sum of $1,149,049 on an
interest-free basis with the understanding that such amounts are to be repaid on
a mutually agreeable future date.
Stock Option Plans
The Board of Directors has adopted non-statutory stock option plans (the
1993 Non-Statutory Stock Option Plan, the 1994 Non-Statutory Stock Option Plan,
the 1995 Non-Statutory Stock Option Plan, and the 1996 Non-Statutory Stock
Option Plan) and has reserved 1,000,000, 500,000, 1,000,000, and 2,000,000
shares under the plans, respectively, for issuance to key employees, directors,
and consultants. Options are nontransferable and are exercisable during a term
of not more than ten years from the date of grant. The options are issuable in
such amounts and at such prices as determined by the Board of Directors, except
that the option price of each grant will not be less than 85% percent of the
fair market value of such shares on the date the options are granted. As of the
record date, all options under the 1993 Plan have been granted, including a
total of 315,000 options to Mr. Heim. A total of 425,000 options has been
granted pursuant to the 1994 Plan, including 100,000 to Mr. Sarko. All of the
options have been granted under the 1995 Plan, including 100,000 options to Mr.
Ernst, 300,000 to Mr. Seiler, and 200,000 options to each of Messrs. Heim,
Sarko, and Weser. A total of 650,000 options have been granted pursuant to the
1996 Plan, none to affiliates of the Company. See the Summary Compensation Table
and the accompanying stock option tables presented above.
Related Party Transactions
See Item 13 below.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners. The following persons
are known to the Company to be the beneficial owners of more than 5% of the
18,805,569 shares of the Company's outstanding $.0001 par value Common Stock as
of June 1, 1996. Each person has beneficial ownership of the shares and has sole
voting power and sole investment power with respect to the number of shares
beneficially owned.
- 20 -
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
--------------------------------------------------------------------
PTI Management AG (1) 3,270,000 17.39%
Witikoenstrasse 311B
CH-8053
Zurich, Switzerland
Cede & Co. (2) 14,493,336 77.07%
P.O. Box 20
Bowling Green Station
New York, New York 10004
------------------
(1) PTI Management AG is a Swiss corporation whose shares are issued solely in
bearer name. Mr. Heim is a control person of PTI management AG, but he
disclaims beneficial ownership of any such shares.
(2) A nominee of the Depository Trust Company, which held such shares of
record on behalf of various of its customers. The names of the beneficial
owners of the shares held by those stockholders are unknown to management.
(b) Security Ownership of Management. The number and percentage of shares
of Common Stock owned of record and beneficially by each current officer and
director of the Company and by all current officers and directors of the Company
as a group, are as follows as of June 30, 1996. Each individual has beneficial
ownership of the shares and sole voting power and sole investment power with
respect to the number of shares beneficially owned.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class (2)
------------------------------------------------------------------------
Werner Heim (3) 615,500 3.17%
Witikoenstrasse 311B
CH-8053
Zurich, Switzerland
Alan B. Sarko (2) 300,000 1.57%
Seiler Pollution Control
Systems, Inc.
555 Metro Place North
Dublin, Ohio 43017
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Ulrich Ernst 100,000 0.53%
P.O. Box 13
CH-8954
Geroldswil, Switzerland
Niklaus Seiler 300,000 1.57%
c/o Seiler Patent AG
Steiacher
CH-5316
Leuggern, Switzerland
Dr. Gerold Weser 200,000 1.05%
c/o Seiler TSB GmbH
Dorfstrasse 12
D-22941
Jersbek, Germany
All Officers and Directors 1,515,500 7.46%
as a Group (4 persons)
------------------
(1) Except for 500 shares owned by Mr. Heim, the shares represented below are
in the form of options to purchase shares of Seiler Common Stock. The
options are presently exercisable but are not transferable. The options
were granted pursuant to the Company's 1993 Non-Statutory Stock Option
Plan, 1994 Non-Statutory Stock Option Plan, or 1995 Non-Statutory Stock
Option Plan.
(2) The percentage shown has been determined by dividing the number of option
shares held by the named person divided by the sum of the 18,805,569
outstanding shares and the option shares held by the above referenced
persons.
(3) Mr. Heim is a control person of PTI Management AG, but he disclaims
beneficial ownership of any such shares.
The Company does not know of any arrangement or pledge of its securities
by persons now considered in control of the Company that might result in a
change of control.
Item 13. Certain Relationships and Related Transactions
PTI Management AG, a principal stockholder of the Company and a firm in
which Mr. Heim, the Company's Chairman of the Board of Directors and President,
is a control person
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has, from time to time, loaned the Company sums of money on an interest-free
basis. The principal sum due and outstanding, as of March 31, 1996 was $89,085.
These monies are due and payable December 31, 1997.
Additionally, Mr. Heim has individually loaned funds to the Company; as of
March 31, 1996 the sum of $1,149,049 was outstanding on an interest-free basis
with the understanding that the loan is to be repaid to Mr. Heim on a future
mutually agreeable date.
The Company has paid during the year ended March 31, 1996, to its sole
supplier, Seiler HT AG, a total of $9,720,132 towards the purchase of its
initial High Temperature Vitrification System. Seiler HT on behalf of the
Company constructs System plants, tests the System, and performs research and
development services on an ongoing basis. Mr. Niklaus Seiler, a director of the
Company, is the founder and a director of Seiler HT AG.
Part IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on 8-K
(a) Reference is herewith made to the reports on audits of consolidated
financial statements.
(b) During the last quarter of the Company's fiscal year ended March 31, 1996,
the Company did not file any reports on Form 8-K.
(c) Exhibits.
No. Description
--- -----------
3.1 Certificate of Incorporation of World Imports - U.S.A., Inc.
(Predecessor to Seiler), dated April 5, 1983.
3.2 Certificate for Renewal and Revival of Certificate of
Incorporation of World Imports - U.S.A., Inc., dated June 29,
1993.
3.3 Certificate of Amendment of Certificate of Incorporation of World
Imports - U.S.A., Inc., dated June 29, 1993.
3.4 Certificate of Amendment of Certificate of Incorporation of Seiler
Pollution Control Systems, Inc., dated October 13, 1994.
3.5 By-laws of World Imports - U.S.A. Inc.
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10.1 License Agreement dated July 15, 1993, between Maxon Finance
& Trade Ltd. SA and Seiler Pollution Control Systems, Inc.
10.2 License Agreement dated July 15, 1993, between Maxon Finance
& Trade Ltd. SA and Seiler Pollution Control Systems
International, Inc.
10.3 Delivery Contract dated July 16, 1993, between Seiler Pollution
Control AG ("SEPC") and Seiler H-T AG.
10.4 Delivery Contract dated July 16, 1993 between SEPC and Seiler
H-T.
10.5 Delivery Contract dated July 16, 1993 between SEPC and Seiler
H-T.
10.6 1993 Non-Statutory Stock Option Plan of World Imports - U.S.A.
10.7 1994 Non-Statutory Stock Option Plan of Seiler.
10.8 1995 Non-Statutory Stock Option Plan of Seiler.
10.9 1996 Non-Statutory Stock Option Plan of Seiler.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SEILER POLLUTION CONTROL SYSTEMS, INC.
Dated: June 29, 1996 By /s/ Alan B. Sarko
______________________________
Alan B. Sarko, Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Werner Heim Chairman of the Dated: June 29, 1996
___________________________ Board of Directors
Werner Heim and President
/s/ Alan B. Sarko Vice President, Dated: June 29, 1996
___________________________ Treasurer, Secretary,
Alan B. Sarko Chief Financial
Officer, Director
Director
___________________________ Dated: _______, 1996
Ulrich Ernst
/s/ Niklaus Seiler Director Dated: June 29, 1996
___________________________
Niklaus Seiler
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Supplemental Information
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
Not Applicable.
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Dates Referenced Herein and Documents Incorporated by Reference
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