SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 22, 2001
SPACIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 000-26645 11-2602030
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
Brown Place and East 132nd Street
Bronx, New York 10454
(Address of principal executive offices) (Zip Code)
(718) 292-1920
(Registrant's telephone number, including area code)
Item 1. Changes In Control of Registrant.
Effective June 22, 2001 (the "Closing Date"), Spacial Corporation (the
"Company") entered into and closed a share exchange (the "Exchange") pursuant to
a Share Exchange Agreement (the "Exchange Agreement"), among the Company, Waste
Recovery Technology Corporation, a Delaware corporation ("WRT"), and the 10
stockholders of WRT (the "WRT Stockholders") wherein the Company issued
13,160,000 shares of common stock, par value $.001 per share (the "Common
Stock") to the WRT Stockholders in exchange for all of the issued and
outstanding of capital stock of WRT.
As a result of the Exchange, the WRT Stockholders hold approximately 91% of
the Company's Common Stock and now control the Company. Pursuant to the Exchange
Agreement, James J. Solano, Sr. was appointed as a member of the board of
directors on the Closing Date. James A. Prestiano, the sole director on the
Closing Date remained as the Company's other director. In addition, effective
July 9, 2001 (the "Board Change Date"), the end of the waiting period under
Securities & Exchange Commission Rule 14f-1 relating to the distribution of an
Information Statement concerning the Exchange, James A. Prestiano resigned as a
director, and Joseph R. MacDonald and Norman A. Ponder, were appointed as new
directors of the Company. New officers were appointed as of the Closing Date,
however, the appointment of Mr. MacDonald and Mr. Ponder as directors did not
take effect until the Board Change Date.
The details of this transaction, including all information required by Item
1 of this Current Report on Form 8-K (the "Report"), are set forth in "Item 2.
Acquisition or Disposition of Assets" below, the contents of which are
incorporated by reference herein.
Item 2. Acquisition or Disposition of Assets.
The information below is a summary description of the Exchange and is
qualified in its entirety by reference to the Exchange Agreement and related
documents that the Company filed as exhibits to this Report, and which are
available upon written request to the Company. The terms of the Exchange and
date of determination of the value and amount of consideration received by the
WRT Stockholders in the exchange were determined in good faith by the Company's
management prior to transaction, and in arms' length negotiations.
Effective at the Closing Date of the Exchange, James J. Solano, Sr. was
appointed to serve as a Director with Mr. Prestiano. In addition, Mr. Prestiano
resigned from all officer positions, and new officers took office as of the
Closing Date. The appointment of the two additional directors will take effect
on the Board Change Date. Under the terms of the Exchange Agreement, the
following transactions took place on the Closing Date, with the exception of the
change in the Board.
o 13,160,000 shares of Common Stock were issued to the 10 WRT
Stockholders in exchange for all of the outstanding common stock, no
par value, of WRT (the "WRT Stock").
2
o After the Closing Date and as of the date of the filing of this
Report, the Company has issued and outstanding 14,450,000 shares of
Common Stock.
o James A. Prestiano, the Company's sole board member and executive
officer, resigned from all positions as an officer of the Company at
the Closing Date, but remained a board member only until the Board
Change Date.
o Mr. Prestiano returned for cancellation an aggregate of 1,200,000
shares of Common Stock owned by him in exchange for a warrant to
purchase 150,000 shares of Common Stock (the "Prestiano Warrant
Shares") at an exercise price of $.50 per share, leaving Mr. Prestiano
with direct ownership of 800,000 shares of Common Stock, in addition
to the warrants to acquire the Prestiano Warrant Shares.
o James J. Solano, Sr. was appointed as a board member to serve with Mr.
Prestiano at the Closing Date. Joseph R. MacDonald and Norman A.
Ponder were appointed as additional board members and Mr. Prestiano
resigned effective as of the Board Change Date, leaving Messrs.
Solano, MacDonald and Ponder as the Company's entire board.
o As of the Closing Date, the sole officers of the Company, were James
J. Solano, Sr., President, Chairman and Chief Executive Officer,
Norman A. Ponder, Vice President, and Joseph R. MacDonald, Executive
Vice President, and Chief Operating Officer.
o An aggregate of 1,000,000 shares (the "Escrow Shares") of Common Stock
that were issued to the Trust Under Agreement Dated 6/30/89 (the
"Trust") (848,536 shares) and to Mr. Solano (151,464 shares) under the
Exchange were deposited into escrow (the "Escrow") pending a
contemplated completion or termination of financing. Upon completion
of such financing, if any, up to all of such Escrow Shares will be
returned for cancellation to the Company. If and to the extent that
such financing does not occur, the Escrow Shares will be returned
proportionately to the Trust and Mr. Solano.
o All shares owned by Messrs. Solano, Ponder, Prestiano and the Trust,
including the Prestiano Warrant Shares, are subject to a one-year
lockup agreement (the "Lock-Up Agreement"), prohibiting the transfer
all shares owned by them at the Closing Date for six months after the
Closing Date, and prohibiting the transfer of 50% of their shares for
a period of six months thereafter. In addition, terms of the Lock-Up
Agreement provide that in the event so required as a condition to an
underwritten public financing, said parties will extend their lockup
provisions as and if required by an underwriter.
o The Company has consented to a limited release of the 8 initial
investors in the Company's private offering which closed in early
1999, from their lock-up agreements. These 8 investors, who acquired
an aggregate of 170,000 shares of Common Stock in such financing, had
originally agreed to restrict the resale of their
3
Common Stock for one year after the close of any merger or similar
transaction with the Company. These 8 private placement investors will
be restricted from selling one-half of their shares of Common Stock
for a period of 6 months after the Closing Date.
o As of the Closing Date, and the date of the filing of this Report,
Messrs. Solano, Ponder, MacDonald and the Trust now owned 1,785,000
(12.4%), 1,000,000 (6.9%),100,000 (under 1%) and 10,000,000 (69.2%)
shares of Common Stock, respectively (including Shares held in Escrow)
and have control of the Company. The remaining 6 WRT Stockholders own
a total of 275,000 shares constituting 1.9% of the Common Stock
outstanding.
Business Summary of WRT
WRT is a non-hazardous solid waste remediation and recycling company which
currently primarily remediates solid waste in the construction and demolition
industry ("C & D"). WRT is currently leasing its executive offices and storage
facilities at Brown Place and East 132nd Street, Bronx, New York 10454. It was
organized as a Delaware corporation in September 1998 and commenced operations
in March 1999. WRT is currently leasing its executive offices and storage
facilities at Brown Place and East l32nd Street, Bronx, New York 10454.
WRT is a provider of the following niche services in the waste
transportation and management industry:
o Environmental engineering services.
o Sale, lease and repair of new and used equipment in the waste and
construction industry.
o Construction and Demolition Services.
o Site remediation services.
The sale of new and used equipment along with repairs is generally handled
internally. Engineering services provided by WRT are usually handled internally
and are sometimes outsourced.
The Company intends to continue operation of WRT's business. Subject to
Delaware Law, the Company intends to change its name or otherwise transact
business under the name "Alliance Environmental Technologies, Inc."
4
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The audited balance sheets as of September 30, 2001 and 2000 and the
audited statements of income for the years ended September 30, 2001 and 2000 and
the unaudited statements of income for the nine and three months ended June 30,
2001 and 2001 are that of Waste Recovery Technology after giving effect to the
shares exchanged in the merger, which effectively for the purposes of the
financial statements took place as of June 30, 2001.
The unaudited consolidated balance sheet as of June 30, 2001 is that of
Spacial and Waste Recovery Technology Corporation. Spacial is a public shell
with minimal assets and liabilities.
The following financial statements of the Company accompany this Form
8-K/A.
Description Page(s)
- ----------- -------
Independent Auditors report 6
Balance Sheets As Of September 30, 2000 and June 30, 2001 7
Statements of Income for the Years Ended September 30, 2000 and 1999 and
for the Three and None Months Ended June 30, 2001 9
Statements of Shareholders' Equity For the Years Ended September 30, 2000
and 1999 and for the Nine Months Ended June 30, 2001 11
Statements of Cash Flows For the Years Ended September 30, 2000 and
1999 and for the Nine Months Ended June 30, 2001 and 2000 12
Notes to Financial Statements 14
(c) Exhibits.
Listed below are all exhibits to this Current Report on Form 8-K.
Exhibit
Number Description
- ------ -----------
4.1 Warrant certificate, evidencing warrants to purchase 150,000 shares of
the Common Stock of Spacial Corporation, registered in the name of
James A. Prestiano. *
10.1 Share Exchange Agreement, dated as of June 22, 2001, among Spacial
Corporation, Waste Recovery Technology Corporation and the
stockholders of Waste Recovery Technology Corporation. *
10.2 Stock Escrow Agreement, dated as of June 22, 2001, among Spacial
Corporation, James J. Solano, Sr. and The Trust Under Agreement dated
6/30/89, and Snow Becker Krauss P.C., as Escrow Agent. *
10.3 Lock-Up Agreement, dated as of June 22, 2001, by and among Spacial
Corporation, James A. Prestiano, James J. Solano, Sr., The Trust Under
Agreement Dated 6/30/89, and Norman A. Ponder.*
10.4 Registration Rights Agreement, dated as of June 22, 2001, between the
Spacial Corporation and James A. Prestiano. *
- -------------
* Previously Filed
Item 8. Change in Fiscal Year.
As of the Closing Date, the Company has determined to change the end of its
fiscal year from December 31 to September 30 for financial accounting purposes.
The company will file a report covering the transition period on a Quarterly
Report on Form 10-QSB, for the Period Ended June 30, 2001.
5
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders
Waste Recovery Technology Corporation
We have audited the accompanying balance sheet of Waste Recovery Technology
Corporation as of September 30, 2000, and the related statements of operations,
shareholders' equity (deficit), and cash flows for each of the two years in the
period ended September 30, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Waste Recovery Technology
Corporation as of September 30, 2000, and the results of its operations and its
cash flows for each of the two years in the period ended September 30, 2000 in
conformity with accounting principles generally accepted in the United States of
America.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
March 23, 2001
SPACIAL CORPORATION
BALANCE SHEETS
September 30, 2000 and June 30, 2001 (unaudited)
- -------------------------------------------------------------------------------------------------------------------
ASSETS
June 30, September 30,
2001 2000
--------------- ----------------
(unaudited)
Current assets
Cash $ 4,989 $ 1,390
Accounts receivable 128,058 28,000
Current portion of notes receivable 16,926 26,498
--------------- ----------------
Total current assets 149,973 55,888
Property and equipment, net 439,949 494,174
Notes receivable, net of current portion 17,130 17,130
Rent security deposit - 9,100
--------------- ----------------
Total assets $ 607,052 $ 576,292
=============== ================
The accompanying notes are an integral part of these financial statements.
1
SPACIAL CORPORATION
BALANCE SHEETS
September 30, 2000 and June 30, 2001 (unaudited)
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, September 30,
2001 2000
--------------- ----------------
(unaudited)
Current liabilities
Current portion of notes payable $ 62,676 $ 66,063
Accounts payable and accrued expenses 48,235 23,821
Accrued taxes 8,641 26,447
Due to shareholders 23,660 38,178
--------------- ----------------
Total current liabilities 143,212 154,509
Notes payable, net of current portion 151,055 206,922
Note payable - related party 167,187 167,187
--------------- ----------------
Total liabilities 461,464 528,618
--------------- ----------------
Commitments
Shareholders' equity
Preferred stock, $0.001 par value
5,000,000 shares authorized
no (unaudited) and no shares issued and outstanding - -
Common stock, $0.001 par value
40,000,000 shares authorized
14,450,000 (unaudited) and 13,160,000 shares issued
and outstanding 14,450 13,160
Additional paid-in capital 310,784 (13,147)
Retained earnings (accumulated deficit) (179,636) 47,661
--------------- ----------------
Total shareholders' equity 145,598 47,674
--------------- ----------------
Total liabilities and shareholders' equity $ 607,052 $ 576,292
=============== ================
The accompanying notes are an integral part of these financial statements.
2
SPACIAL CORPORATION
STATEMENTS OF INCOME
For the Years Ended September 30, 2000 and 1999 and
for the Three and Nine Months Ended June 30, 2001 and 2000 (unaudited)
- -------------------------------------------------------------------------------------------------------------------
For the Three Months Ended For the Nine Months Ended For the Year Ended
June 30, June 30, September 30,
-------------------------- -------------------------- -------------------
2001 2000 2001 2000 2000 1999
---------- --------- ---------- --------- --------- ---------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues
Construction and engineering services $ 88,670 $ 42,600 $ 372,678 $ 244,100 $ 344,865 $ 4,442
Equipment sales 1,032 3,500 72,826 172,500 245,938 14,487
Sales and services 5,103 36,482 24,183 51,507 68,493 -
Waste hauling - - -
- 4,801 - - - 24,278
---------- --------- ---------- --------- --------- ---------
Total revenues 94,805 82,582 469,687 468,107 664,097 43,207
---------- --------- ---------- --------- --------- ---------
Cost of sales
Construction materials 26,986 13,519 64,735 55,990 104,724 17,746
Disposal fees - - 2,600 2,431 2,431 11,671
Equipment purchases - - 16,178 83,000 113,501 1,643
Equipment refurbishing 20 - 1,020 10,651 10,652 -
Materials - - 14,785 43,816 - -
Subcontracts 23,577 13,720 114,112 107,607 144,178 13,676
---------- --------- ---------- --------- --------- ---------
Total cost of sales 50,583 27,239 213,430 303,495 375,486 44,736
---------- --------- ---------- --------- --------- ---------
Gross profit (loss) 44,222 55,343 256,257 164,612 288,611 (1,529)
General and administrative expenses 67,199 40,065 493,831 121,376 167,745 21,234
---------- --------- ---------- --------- --------- ---------
Income (loss) from operations (22,977) 15,278 (237,574) 43,236 120,866 (22,763)
---------- --------- ---------- --------- --------- ---------
The accompanying notes are an integral part of these financial statements.
3
SPACIAL CORPORATION
STATEMENTS OF INCOME
For the Years Ended September 30, 2000 and 1999 and
for the Three and Nine Months Ended June 30, 2001 and 2000 (unaudited)
- -------------------------------------------------------------------------------------------------------------------
For the Three Months Ended For the Nine Months Ended For the Year Ended
June 30, June 30, September 30,
-------------------------- ------------------------- -----------------------
2001 2000 2001 2000 2000 1999
-------- -------- --------- -------- --------- ---------
(unaudited) (unaudited) (unaudited) (unaudited)
Other income (expense)
Interest income $ 278 $ 536 $ 1,110 $ 817 $ 2,357 $ -
Rental income 5,617 825 9,167 - 3,300 -
Interest expense - - - - (29,552) -
-------- -------- --------- -------- --------- ---------
Total other income (expense) 5,895 1,361 10,277 817 (23,895) -
-------- -------- --------- -------- --------- ---------
Income (loss) before provision for income
taxes (17,082) 16,639 (227,297) 44,053 96,971 (22,763)
Provision for income taxes - 2,496 - 6,971 26,547 -
-------- -------- --------- -------- --------- ---------
Net income (loss) $(17,082) $ 14,143 $(227,297) $ 37,082 $ 70,424 $ (22,763)
======== ======== ========= ======== ========= =========
Basic and diluted earnings (loss) per share $ - $ - $ 0.02 $ - $ 0.01 $ -
======== ======== ========= ======== ========= =========
Weighted-average common shares
outstanding
Basic and diluted 14,022,813 12,835,000 14,022,813 12,835,000 12,835,000 12,835,000
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
4
SPACIAL CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended September 30, 2000 and 1999 and
for the Nine Months Ended June 30, 2001 (unaudited)
- -------------------------------------------------------------------------------------------------------------------
Retained
Common Stock Additional Earnings
--------------------------------- Paid-in (Accumulated)
Shares Amount Capital Deficit) Total
--------------- --------------- ---------------- --------------- ----------------
Balance, September
30, 1998 12,835,000 $ 12,835 $ (12,822) $ $ 13
Net loss (22,763) (22,763)
--------------- --------------- ---------------- --------------- ----------------
Balance, September
30, 1999 12,835,000 12,835 (12,822) (22,763) (22,750)
Net income 70,424 70,424
--------------- --------------- ---------------- --------------- ----------------
Balance, September
30, 2000 12,835,000 12,835 (12,822) 47,661 47,674
Shares issued for
cash (unaudited) 150,000 150 149,850 150,000
Shares issued for
services (unaudited) 175,000 175 174,825 175,000
Changes due to
recapitalization
(unaudited) 1,290,000 1,290 (1,069) 221
Net income
(unaudited) (227,297) (227,297)
--------------- --------------- ---------------- --------------- ----------------
Balance, June 30,
2001 (unaudited) 14,450,000 $ 14,450 $ 310,784 $ (179,636) $ 145,598
=============== =============== ================ =============== ================
The accompanying notes are an integral part of these financial statements.
5
SPACIAL CORPORATION
STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2000 and 1999 and
for the Nine Months Ended June 30, 2001 and 2000 (unaudited)
- -------------------------------------------------------------------------------------------------------------------
For the Nine Months Ended For the Year Ended
June 30, September 30,
--------------------------------- ---------------------------------
2001 2000 2000 1999
--------------- ---------------- --------------- ----------------
(unaudited) (unaudited)
Cash flows from operating activities
Net income $ (227,297) $ 37,082 $ 70,424 $ (22,763)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities
Shares issued for services
rendered 175,000 - - -
Depreciation 54,225 20,250 27,374 -
Changes due to recapitalization 2,161 - - -
Increase in
Accounts receivable (100,058) - (28,000) -
Rent security deposit 9,100 (1,500) (1,500) (7,600)
Increase (decrease) in
Accounts payable and accrued
expenses 22,474 (1,883) (2,342) 26,163
Accrued taxes (17,806) 15,800 26,447 -
--------------- ---------------- --------------- ----------------
Net cash provided by (used in)
operating activities (82,201) 69,749 92,403 (4,200)
--------------- ---------------- --------------- ----------------
Cash flows from investing activities
Increase in notes receivable 9,572 (35,045) (43,628) -
Purchase of property and equipment - (421,844) (489,548) (32,000)
--------------- ---------------- --------------- ----------------
Net cash provided by (used in)
investing activities 9,572 (456,889) (533,176) (32,000)
--------------- ---------------- --------------- ----------------
The accompanying notes are an integral part of these financial statements.
6
SPACIAL CORPORATION
STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2000 and 1999 and
for the Nine Months Ended June 30, 2001 and 2000 (unaudited)
- -------------------------------------------------------------------------------------------------------------------
For the Nine Months Ended For the Year Ended
June 30, September 30,
--------------------------------- ---------------------------------
2001 2000 2000 1999
--------------- ---------------- --------------- ----------------
(unaudited) (unaudited)
Cash flows from financing activities
Proceeds received from notes
payable $ - $ 196,932 $ 272,985 $ -
Proceeds received from note
payable - related party - 167,187 167,187 -
Payments on notes payable (59,254) - - -
Increase (decrease) in due to
shareholders (14,518) 23,186 (4,636) 42,814
Proceeds from issuance of common
stock 150,000 - - 13
--------------- ---------------- --------------- ----------------
Net cash provided by financing
activities 76,228 387,305 435,536 42,827
--------------- ---------------- --------------- ----------------
Net increase (decrease) in cash 3,599 165 (5,237) 6,627
Cash, beginning of year 1,390 6,627 6,627 -
--------------- ---------------- --------------- ----------------
Cash, end of year $ 4,989 $ 6,792 $ 1,390 $ 6,627
=============== ================ =============== ================
Supplemental disclosures of cash flow information
Interest paid $ 19,049 $ 6,579 $ 14,231 $ -
=============== ================ =============== ================
The accompanying notes are an integral part of these financial statements.
7
SPACIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and June 30, 2001 (unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND LINE OF BUSINESS
Waste Recovery Technology Corp. ("WRT") was incorporated on September
22, 1998 in the state of Delaware and is engaged in construction and
engineering services and the sale of equipment. WRT principally sells
to companies throughout New York.
Effective June 22, 2001, WRT entered into a Share Exchange Agreement,
whereby the shareholders of WRT were issued an aggregate of 13,160,000
shares of common stock of Spacial Corporation ("Spacial") in exchange
for 1,316 shares of WRT, constituting all of the capital stock of WRT
and resulting in WRT becoming a wholly owned operating subsidiary of
Spacial. After the closing of the Share Exchange, a total of 14,450,000
shares of Spacial's common stock were issued and outstanding, resulting
in a transfer of control of Spacial to the former WRT shareholders.
For accounting purposes, the transaction has been treated as a
recapitalization of WRT, with WRT as the accounting acquirer (reverse
acquisition), and has been accounted for in a manner similar to a
pooling of interests. The operations of Spacial have been included with
those of WRT from the acquisition date. For periods prior to the
acquisition, the equity of the combined enterprise is the historical
equity of WRT, the accounting acquirer prior to the merger,
retroactively restated to reflect the number of shares received in the
business combination.
Spacial was incorporated on October 6, 1998 in the state of Delaware.
Spacial had minimal assets and liabilities at the date of the
acquisition and did not have significant operations prior to the
acquisition. Therefore, no pro forma information is presented.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage Enterprise
----------------------------
After the Share Exchange, Spacial Corporation, the surviving entity,
(the "Company") ceased to be a development stage company as defined in
Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting
and Reporting by Development Stage Enterprises." The Company's planned
principal operations have commenced, and there have been significant
revenues from those operations.
Cash Equivalents
----------------
For the purpose of the statements of cash flows, the Company considers
all highly liquid investments purchased with original maturity of three
months or less to be cash equivalents.
8
SPACIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and June 30, 2001 (unaudited)
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable
-------------------
The Company periodically reviews its accounts receivable for
uncollectible amounts. At September 30, 2000 and June 30, 2001, no
allowance was deemed necessary. The Company generally does not require
collateral from its customers.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is provided on
a straight-line basis over an estimated useful life of seven to 10
years. Expenditures for maintenance and repairs are charged to
operations as incurred while renewals and betterments are capitalized.
Revenue Recognition
-------------------
Amounts received for construction and engineering services are
recognized in accordance with the contract or upon completion of the
project. For sales of equipment, revenues are recognized upon delivery
of the equipment.
Comprehensive Income
--------------------
The Company utilizes SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting comprehensive income
and its components in a financial statement. Comprehensive income as
defined includes all changes in equity (net assets) during a period
from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include
foreign currency translation adjustments and unrealized gains and
losses on available-for-sale securities. Comprehensive income is not
presented in the Company's financial statements since the Company did
not have any of the items of comprehensive income in the period
presented.
Advertising Costs
-----------------
The Company expenses advertising costs as incurred. Advertising costs
for the nine months ended June 30, 2001 and 2000 were $200 and $120,
respectively.
Income Taxes
------------
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws
and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the
amount expected to be realized. The provision for income taxes
represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
9
SPACIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and June 30, 2001 (unaudited)
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates
---------
The preparation of financial statements 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
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Fair Value of Financial Instruments
-----------------------------------
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the
Company's financial instruments, including cash, accounts receivable,
notes receivable, and accounts payable and accrued expenses, the
carrying amounts approximate fair value due to their short maturities.
The amounts shown for notes payable and note payable - related party
also approximate fair value because the current interest rate offered
to the Company for debt of similar maturity is substantially the same.
Recently Issued Accounting Pronouncements
-----------------------------------------
In July 2001, the FASB issued SFAS No. 141, "Business Combinations."
This statement addresses financial accounting and reporting for
business combinations and supersedes Accounting Principles Bulletin
("APB") Opinion No. 16, "Business Combinations," and SFAS No. 38,
"Accounting for Pre-Acquisition Contingencies of Purchased
Enterprises." All business combinations in the scope of this statement
are to be accounted for using one method, the purchase method. The
provisions of this statement apply to all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method
for those business combinations is prohibited. This statement also
applies to all business combinations accounted for using the purchase
method for which the date of acquisition is July 1, 2001 or later.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." This statement addresses financial accounting and
reporting for acquired goodwill and other intangible assets and
supersedes APB Opinion No. 17, "Intangible Assets." It addresses how
intangible assets that are acquired individually or with a group of
other assets (but not those acquired in a business combination) should
be accounted for in financial statements upon their acquisition. This
statement also addresses how goodwill and other intangible assets
should be accounted for after they have been initially recognized in
the financial statements. It is effective for fiscal years beginning
after December 15, 2001. Early application is permitted for entities
with fiscal years beginning after March 15, 2001, provided that the
first interim financial statements have not been issued previously.
10
SPACIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and June 30, 2001 (unaudited)
- --------------------------------------------------------------------------------
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at September 30, 2000 and June 30, 2001 consisted of
the following:
June 30, September 30,
2001 2000
--------------- ----------------
(unaudited)
Automobiles $ 59,380 $ 59,380
Trucks 115,161 115,161
Machinery and equipment 347,007 347,007
--------------- ----------------
521,548 521,548
Less accumulated depreciation 81,599 27,374
--------------- ----------------
Total $ 439,949 $ 494,174
=============== ================
Depreciation expense was $27,374, $54,225 (unaudited), and $20,530
(unaudited) for the year ended September 30, 2000 and the nine months
ended June 30, 2001 and 2000, respectively.
NOTE 4 - NOTES PAYABLE
Notes payable at September 30, 2000 and June 30, 2001 consisted of the
following:
June 30, September 30,
2001 2000
----------- -------------
(unaudited)
Note payable, collateralized by equipment and guaranteed by a
shareholder, payable in 60 monthly installments of $2,149,
including interest at 11% per annum. $ 77,304 $ 89,595
Note payable, collateralized by equipment and guaranteed by a
shareholder, payable in 36 monthly installments of $1,207,
including interest at 13% per annum. 21,561 29,830
Note payable, collateralized by equipment and guaranteed by a
shareholder, payable in 60 monthly installments of $1,579,
including interest at 10% per annum. 58,337 66,447
11
SPACIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and June 30, 2001 (unaudited)
- --------------------------------------------------------------------------------
NOTE 4 - NOTES PAYABLE (Continued)
June 30, September 30,
2001 2000
----------- -------------
(unaudited)
Note payable, collateralized by equipment,
payable in 48 monthly installments of $614,
including interest at 13% per annum. $ 12,559 $ 22,421
Note payable, collateralized by an automobile,
payable in 60 monthly installments of $771,
including interest at 9% per annum. 27,915 35,358
Note payable, collateralized by an automobile,
payable in 36 monthly installments of $748,
including interest at 11% per annum. 16,055 21,834
Note payable dated April 10, 2000. Principal and $500
additional consideration due in 90 days.
The note was paid in full at June 30, 2001. - 7,500
----------- -----------
213,731 272,985
Less current portion 62,676 66,063
----------- -----------
Long-term portion $ 151,055 $ 206,922
=========== ===========
Future maturities of notes payable at June 30, 2001 were as follows:
12 Months
Ending
June 30,
2002 $ 62,676
2003 62,115
2004 41,512
2005 41,435
2006 5,993
-----------
Total $ 213,731
===========
12
SPACIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and June 30, 2001 (unaudited)
- --------------------------------------------------------------------------------
NOTE 5 - COMMITMENTS
The Company is obligated to a third party under a non-cancelable
operating lease for its showroom and office facilities, which expires
on December 31, 2001. The lease provides for monthly payments of
$4,950, plus certain operating expenses. Rent expense, including
operating expense escalations, amounted to $59,400, $26,700
(unaudited), and $42,900 (unaudited) for the year ended September 30,
2000 and the nine months ended June 30, 2001 and 2000, respectively.
In January 2001, the lease agreement was terminated by mutual consent,
which did not result in a loss to the Company.
NOTE 6 - SHAREHOLDERS' EQUITY
Common Stock
------------
On June 22, 2001, an aggregate of 13,160,000 shares of common stock
were issued to the shareholders of WRT in exchange for all of the
issued and outstanding capital stock of WRT. At such time, the former
founder and principal of Spacial returned for cancellation an aggregate
of 1,200,000 shares of common stock of Spacial.
Warrants
--------
On April 19, 1999, warrants to purchase 51,000 shares of the Company's
common stock, par value $0.001, were issued to the placement agent at
an exercise price of $0.255 per share. The shares vest immediately and
can be exercised within seven years from the date of issuance of the
warrants. The fair value of the warrants at the date of issuance was
$2,813 based on the fair value of the placement agent's services, less
cash paid. As of June 30, 2001, the warrants were outstanding.
On June 26, 2000, pursuant to a consulting agreement, warrants to
purchase a total of 150,000 shares of the Company's common stock, par
value $0.001, were issued to various consultants at an exercise price
of $0.01 per share. In September 2000, holders of these warrants
exchanged the warrants for 150,000 shares of common stock.
Consideration for the shares was $800 of services rendered and a cash
payment of $1,500.
On June 22, 2001, in connection with the Share Exchange Agreement,
warrants to purchase 150,000 shares (unaudited) of the Company's common
stock, par value $0.001, were issued to a former director of Spacial at
an exercise price of $0.50 (unaudited) per share in exchange for the
return and cancellation of certain shares of the Company. The shares
vest immediately and can be exercised within four years from the date
of issuance of the warrants.
13
SPACIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and June 30, 2001 (unaudited)
- --------------------------------------------------------------------------------
NOTE 7 - INCOME TAXES
Current income taxes for the year ended September 30, 2000 and the nine
months ended June 30, 2001 and 2000 consisted of the following:
For the Nine Months Ended For the
June 30, Year Ended
--------------------------------- September 30,
2001 2000 2000
---------------- --------------- ----------------
(unaudited) (unaudited)
State and city income taxes $ - $ - $ 17,253
Federal income taxes - 6,971 9,294
---------------- --------------- ----------------
Total $ - $ 6,971 $ 26,547
================ =============== ================
A reconciliation of the income tax computed at the federal statutory
rate to the tax provision in the financial statements for the year
ended September 30, 2000 and the nine months ended June 30, 2001 and
2000 is as follows:
For the Nine Months Ended For the
June 30, Year Ended
--------------------------------- September 30,
2001 2000 2000
---------------- --------------- ----------------
(unaudited) (unaudited)
Statutory regular federal income tax $ 33,000 $ 19,000 $ 32,970
State income taxes, net of federal
benefit 14,000 9,000 11,387
Benefit of net operating loss - - (7,664)
Benefit of graduated rates (12,000) (8,000) (10,146)
Other 1,000 - -
---------------- --------------- ----------------
Total $ 36,000 $ 20,000 $ 26,547
================ =============== ================
NOTE 8 - RELATED PARTY TRANSACTIONS
Subcontract Services
--------------------
During the year ended September 30, 2000 and the nine months ended June
30, 2001 and 2000, the Company paid a company owned by one of the
shareholders $21,000, $45,953 (unaudited), and $17,632 (unaudited),
respectively, for subcontract services rendered.
14
SPACIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and June 30, 2001 (unaudited)
- --------------------------------------------------------------------------------
NOTE 8 - RELATED PARTY TRANSACTIONS (Continued)
Trust Under Agreement Dated June 30, 1989, Bruce Caputo as Trustee
------------------------------------------------------------------
The Company bought equipment for $167,000 from the Trust, which is a
related party because of its ownership interest. Under the terms of the
agreement, the Company will pay $167,000 with simple interest at a rate
of 9% per annum. Interest is payable in equal installments of $10,800
on June 1, 2001, December 1, 2001, and June 1, 2002. On December 1,
2002, the entire principal amount and total accrued but unpaid interest
are payable in full.
Due to Shareholders
-------------------
As of September 30, 2000 and June 30, 2001, due to shareholders
represented non-interest-bearing amounts due to shareholders. The
amounts have no stated repayment terms.
Common Stock
------------
During the nine months ended June 30, 2001, the Company issued 175,000
shares of common stock to employees as compensation expense totaling
$175,000.
During the nine months ended June 30, 2001, the Company issued 150,000
shares of common stock for cash totaling $150,000.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 7, 2001
SPACIAL CORPORATION.
By: /s/ Norman A. Ponder
--------------------------------
Norman A. Ponder, Vice President
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
4.1 Warrant certificate, evidencing warrants to purchase 150,000 shares of
the Common Stock of Spacial Corporation, registered in the name of
James A. Prestiano.
10.1 Share Exchange Agreement, dated as of June 22, 2001, among Spacial
Corporation, Waste Recovery Technology Corporation and the
stockholders of Waste Recovery Technology Corporation.
10.2 Stock Escrow Agreement, dated as of June 22, 2001, among Spacial
Corporation, James J. Solano, Sr. and The Trust Under Agreement dated
6/30/89, and Snow Becker Krauss P.C., as Escrow Agent.
10.3 Lock-Up Agreement, dated as of June 22, 2001, by and among Spacial
Corporation, James A. Prestiano, James J. Solano, Sr., The Trust Under
Agreement Dated 6/30/89, and Norman A. Ponder.
10.4 Registration Rights Agreement, dated as of June 22, 2001, between the
Spacial Corporation and James A. Prestiano.
7