SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 1996
(Unaudited) March 31, 1996
CURRENT ASSETS
Cash $ 30,135 $ 200,351
Prepaid expenses and sundry receivables 126,676 109,152
Total Current Assets 156,811 309,503
HIGH TEMPERATURE VITRIFICATION SYSTEMS 10,584,482 9,720,132
OTHER ASSETS
Licensing agreements, less accumulated amortization of
$1,019,380 and $860,712 at September 30, 1996 and
March 31, 1996, respectively 3,740,620 3,899,288
Advances to related party 594,014 624,902
Vetrotherm option 167,920 167,920
Deposits 43,831 36,103
4,546,385 4,728,213
PROPERTY AND EQUIPMENT - AT COST (net of
accumulated depreciation of $9,087 and $8,403 at
September 30, 1996 and March 31, 1996, respectively) 320,927 287,778
$15,608,605 $15,045,626
LIABILITIES
September 30, 1996
(Unaudited) March 31, 1996
CURRENT LIABILITIES
Accounts payable $ 291,476 $ 316,450
Accrued expenses 144,746 107,935
Total Current Liabilities 436,222 424,385
LONG-TERM DEBT
Licensing agreements payable 1,977,250 1,977,250
Loans payable - stockholders 1,844,910 1,238,134
3,822,160 3,215,384
STOCKHOLDERS' EQUITY
COMMON STOCK
Common stock, $.0001 par value; authorized 25,000,000
shares, issued and outstanding 19,392,627 and 18,525,569
shares at September 30, 1996 and March 31, 1996,
respectively 1,940 1,853
ADDITIONAL PAID IN CAPITAL 19,928,318 17,897,081
ACCUMULATED DEFICIT (8,894,550) (7,349,683)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 314,515 856,606
11,350,223 11,405,857
15,608,605 $15,045,626
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
REVENUE $87,300 $7,500 $ 29,427 0
OPERATING EXPENSES
General and administrative 741,365 181,572 610,508 44,578
Professional and other consultin 287,570 288,398 123,663 157,574
Salaries, wages and related frin 255,765 192,511 129,085 108,130
Research and development 199,525 99,417 119,448 43,055
Depreciation and amortization 159,352 160,188 79,766 80,529
1,643,577 922,086 1,062,470 433,866
Loss From Operations (1,556,277) (914,586) (1,033,043) (433,866)
OTHER INCOME (EXPENSE)
Miscellaneous income 12,795 12,795
Interest expense (1,385) (27,584) (1,371) (10,437)
11,410 (27,584) 11,424 (10,437)
Loss Before Minority Interest (1,544,867) (942,170) (1,021,619) (444,303)
Minority interest 0 10,171 0 6,321
Net Loss $(1,544,867)$(931,999) (1,021,619) $(437,982)
Loss Per Common Share $ (0.08)$ (0.06) $ (0.05) $ (0.03)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 18,999,579 16,167,236 19,392,627 16,425,569
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
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
PERIOD ENDED SEPTEMBER 30, 1995
Issuance of common shares under stock
option plan for cash 175,000 17 223,108 0 0 223,125
Issuance of common stock for cash 2,000,000 200 2,199,800 0 0 2,200,000
Foreign currency translation adjustment 0 0 0 0 (36,640) (36,640)
Net loss 0 0 0 (931,999) 0 (931,999)
BALANCE, SEPTEMBER 30, 1995
(Unaudited) 16,425,569 $1,642 $15,156,817 $(6,484,955) $1,099,735 $9,773,239
BALANCE, MARCH 31, 1996 18,525,569 $1,853 $17,897.081 $(7,349,683) $ 856,606 $11,405,857
PERIOD ENDED SEPTEMBER 30, 1996
Exercise of stock options under stock
option plans for cash 550,000 55 1,055,570 0 0 1,055,625
Issuance of common stock for cash 284,332 29 884,492 0 0 884,521
Issuance of common stock for legal fees 32,726 3 91,175 0 0 91,178
Foreign currency translation adjustment 0 0 0 0 (542,091) (542,091)
Net loss 0 0 0 (1,544,867) 0 (1,544,867)
BALANCE, SEPTEMBER 30, 1996
(Unaudited) 19,392,627 $1,940 $19,928,318 $(8,894,550) $ 314,515 $11,350,223
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,544,867) $ (931,999)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 159,352 160,188
Minority interest 0 (10,171)
Foreign currency translation (533,878) (34,203)
Changes in assets and liabilities:
Prepaid expenses and sundry receivables (17,524) 1,704
Deposits (7,728) (26,754)
Accounts payable 66,204 52,248
Accrued expenses 36,811 205,313
Net Cash Used In Operating Activities (1,841,630) (583,674)
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of property and equipment (33,833) (172,937)
Advances for High Temperature Vitrification Systems (864,350) (2,106,208)
Net Cash Used In Investing Activities (898,183) (2,279,145)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,940,146 2,423,125
Proceeds on loans payable - stockholder 606,776 403,401
Advances to related party 30,888 0
Net Cash Provided By Financing Activities 2,577,810 2,826,526
EFFECT OF EXCHANGE RATE CHANGES ON CASH (8,213) (2,437)
Net Decrease In Cash (170,216) (38,730)
CASH - BEGINNING OF PERIOD 200,351 89,220
CASH - END OF PERIOD $ 30,135 $ 50,490
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the period for interest $ 1,385 $ 12,516
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
The Company issued 32,726 shares of common stock in exchange for
legal services aggregating $91,178.
SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER, 1996 AND 1995
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been
included. Operating results for the six months ended
September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending March 31,
1997. The unaudited consolidated financial statements
should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended
March 31, 1996.
NOTE 2 - RESTATEMENT
The financial statements for the six month period ended
September 30, 1995 have been restated to expense research
and development costs of $99,417 that were previously
capitalized and to reclassify the foreign currency
translation of $4,357 as a reduction of stockholders' equity
rather than as an addition to the net loss for the period.
Management's Discussion & Analysis of Financial Condition and Results of
Operations
The Company experienced a net loss for the three months ended September 30,
1996, of $1,021,619 as compared to a net loss of $437,982 for the three
months ended September 30, 1995. The Company's net loss for the six months
ended September 30, 1996 was $1,544,867 as compared to a net loss of
$931,999 for the six months ended September 30, 1995. The change in
the net loss for these periods is primarily the result of additional
marketing and promotion expenses related to demonstrations and presentation
of the HTV systems as well as research and development costs related to these
systems.
The Company made payments aggregating $864,350 and $666,414 for the six
and three month periods ended September 30, 1996 related to the construction
of the HTV system. The Company funded these capital expenditures and
operating losses through the issuance of additional equity securities
aggregating $1,940,143 and $1,274,830 for the six and three month periods
ended September 30, 1996 and through loans from a stockholder (who is an
affliate of the Company) aggregating $606,776 and $381,777 for the same
periods.
The Company expects to incur substantial expenditures to complete the HTV
systems, including operations 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.
In October 1996, the Company, in conjunction with The Ohio State University
Department of Materials Science and Engineering ("OSU"), received $300,000
for Phase II of a project from the Edison Materials Technology Center
("EMTEC") under its candidate core technology program. This extends the
project until January 1997.
Under the EMTEC project, Seiler and OSU will develop glass/ceramic product
formulations from hazardous waste feedstocks using the Seiler HTV system,
and demonstrate on a bench and pilot scale, process and product performance
characteristics of the tested feedstocks. The Seiler/OSU team will also
assess the commercial viability of various recycled products produced during
the project. The project earlier provided $101,000 for Phase I which Seiler
completed in October 1996.
Seiler also received an extension from Radian International as subcontractor
on Radian's contract with the United States Air Force. Seiler will continue
work using the HTV system for processing hazardous wastes. The contract lays
the foundation for installation of the first vitrification facility in the
United States to be located at McClellan Air Force Base in Sacramento at a
cost between $2.5 and $3 million. The contract also call for Seiler to use
various waste streams generated at McClellan Air Force Base in Sacramento as
feedstock for Seiler's HTV system to determine their recycling suitability
as an abrasive blasting media substitute for garnet media.
McClellan is on the government's base closure list and the contract
represents a commitment to privatize base operations and lessen the economic
impact on the area. In this capacity, Seiler will work closely with regional
interest groups including the Sacramento Area Commerce & Trade Organization
and the Local Reuse Authority. While Seiler's primary responsibility will
center on its vitrification system, the Company will also be heavily involved
with Radian in site identification, obtaining a recycling exemption and
assistance with various required permits, variances and other documentation.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Also in October 1996, the Company received approval from the German
government for installation of its first industrial HTV system in Freiberg,
Germany. Construction is expected to begin in November on the facility which
will cost an estimated $12.7 million. When complete, the commercial HTV
system will have a processing capability of 10,000 tons of mixed waste a
year. The plant's capacity has been fully contracted by Envichem, a licensed
hazardous waste facility in Freiberg.
The project will be financed through arrangements with the German government
that secured a combination of grants and subsidies from the Dresdner Bank of
Germany. The Dresdner agreement calls for the bank to provide Seiler with a
long-term credit line of $6.8 million US (9.9 million DM) for installation,
construction, land purchase, site work and start-up costs. An additional
line of credit for $1.4 million US (2.1 million DM) will be subsequently
available, if needed. Coupled with the Dresdner credit, Seiler will receive
approximately $4.5 million US (6.6 million DM) in German government grant
monies for placing its environmentally sensitive, high temperature
vitrification recycling facility in Freiberg. The grants, which do not have
to be repaid, are given by the government in connection with stimulating and
encouraging investments from business, industry and the environmental sector
to generate new job opportunities for the area.