SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 18, 1999
SOLUCORP INDUSTRIES LTD.
(Exact Name of Registrant as Specified in its Charter)
Yukon 0-29664 N/A
(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification Number)
250 West Nyack Road, West Nyack, New York 10994
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (914) 623-2333
(Former Name or Former Address if Changed Since Last Report)
Item 5. Other Events.
As previously announced, on May 1, 1998, the Securities and
Exchange Commission suspended trading in the securities of Solucorp and
initiated an investigation into various matters concerning the Company. The
Company has cooperated fully with the SEC investigation, making available to the
SEC Staff all of the Company's documents, producing its personnel for sworn
testimony, waiving its attorney-client privilege, and directing its auditors and
attorneys to cooperate fully with the SEC Staff. The SEC has not yet concluded
its investigation. However, as a result of the questions posed by the SEC Staff,
Solucorp has determined to issue this statement repeating, updating and
clarifying certain disclosures previously made.
CURRENT MATERIAL CONTRACTS
At this time, the Company considers the following contracts to
be material to its business and operations:
As previously announced, the Company has a contract with Smart
International Ltd. ("Smart") for the production and supply of the prime
ingredient in the blend of chemical reagents which comprise the Company s MBS
remediation technology for hazardous metals ("Product"). Contracted supply of
Product has been in production since mid-1997, utilizing whichever of the three
facilities in China are deemed appropriate by Smart for meeting supply criteria.
To date, all North American requirements have been fully satisfied, and Smart
has stockpiled 2010 tons of Product for contemplated projects the United States,
Canada, Scotland and China which have the potential, in total, to require
thousands of tons of Product.
As previously announced, the Company also has granted Smart a
license to use the MBS technology for contemplated remediation projects in
China. Under the agreement, as amended, Smart is to compensate the Company with
an annual license fee of $2 million dollars (commencing in mid 1997) and also is
to compensate the Company with a royalty based upon the tonnage of soil actually
processed. Smart and the Company have been actively pursuing a number of
remediation projects but, at this time, no such projects are in operation or
have been contracted.
As previously announced, the Company entered into an agreement
in 1998 with Geomar Holdings Limited, a newly formed company, pursuant to which
Geomar is to obtain commitments for equity and debt financing in order to
acquire, remediate and develop certain properties (Brownfields) which require
remediation of contamination before they can be used. Under the agreement, among
other things, Solucorp will provide and manage the remediation effort and will
share in the revenues generated from the redevelopment effort. Geomar and the
Company are actively seeking and assessing potential Brownfield Projects.
As previously announced, the Company signed a joint marketing
and operations agreement with a major remediation company in 1996. Since then,
on-going support has been provided by both companies in the pursuit of metals
remediation projects for the Company s MBS technology. In July 1998, the first
contract was obtained for the remediation of up to 17,400 tons of lead
contaminated materials at Weldon Springs, Missouri. This sub-contract to the
Company, which should generate revenues of $325,000 if the full 17,400 tons is
remediated, is to be performed under the auspices of the Army Corp. of Engineers
(ACOE). Performance is currently scheduled to begin in April 1999, after being
delayed from the original September 1998 start date. The Company is currently
bidding through the major remediation company for another ACOE project at an
Army depot, contracts for which have been temporarily postponed by the ACOE due
to its funding delays. The Company and the major remediation company are
discussing other opportunities for bidding on metals remediation projects.
As previously announced, in 1995, Solucorp entered into an
exclusive licensing agreement for marketing MBS in the United Kingdom, with a
subsidiary of John Beech, Ltd., under which Beech pays a small license fee and
is to pay royalties based upon the amount of soil remediated. In order to
maintain exclusivity, however, Beech had to remediate soils to a value of $3
million US for the first year and $6 million thereafter. Subsequently, as
announced in 1997, Beech and the Company signed an agreement in principle, for
an exclusive license for the use of MBS in Europe, under which Beech will pay
$6.4 million per year for ten years. The European license agreement has not yet
been finalized. Beech and the Company have pursued and continue to pursue
various potential projects as announced by the Company but the licensing
agreement and the agreement in principle have not resulted in substantial
revenues to date.
As previously announced, the Company entered into a joint
marketing agreement with IDM Environmental Corp. ("IDM") in 1995 to jointly
pursue projects on which the MBS technology could be applied to remediate
hazardous metals contamination of soils or industrial wastes. Although this long
relationship with IDM has resulted in only one relatively small project, at
Egremont, Massachusetts in 1996, IDM was instrumental in establishing
negotiations for an MBS license in Italy, which the Company is actively
pursuing. The Company and IDM expect to continue seeking other projects.
As previously announced, in February 1999, the Company
received a contract which will generate revenues of up to $1,000,000, to
stabilize soil on site at the Central Artery project in Boston. Remediation work
at the site is currently in progress. As also reported, Solucorp believes it has
positioned itself to seek and obtain additional work in the future on the
Central Artery project, which ranks as one of the largest, most complex and
expensive highway construction projects ever undertaken.
As previously announced, the Company entered into a three year
contract with the Doe Run Company, in August 1996, to establish an "in-line"
process to remediate hazardous lead slag as it is produced at Doe Run s
secondary lead smelting facility. This contract generated revenues for the
Company of approximately $700,000 during 1998.
As previously announced, the Company signed an agreement with
a mid-western landfill, in October 1998, to conduct a three months pilot test of
the Company s technology for remediating hazardous slag. The agreement states
that, upon successful completion of the pilot test, it will be converted to a
one year contract. Phase one of the pilot test was successfully completed in
December 1998, but subsequent phases have been delayed due to a disruption of
supplies of waste for processing resulting from the fact that the landfill's
supplier company has been acquired. The Company was verbally advised by the
landfill on March 2, 1999, that it expects the pilot phase of the agreement to
begin again in the very near future.
As previously announced, based on obtaining the first Special
Waste Protocol dispensation for a metals remediation technology from the British
Columbia Ministry of the Environment, the Company obtained a contract with a
multi-national steel company, in October 1998, to perform three aspects of the
remediation of a former manufacturing facility in British Columbia, for a total
value of $4,063,000 (Cdn). The first aspect involves the shipment by rail of
3000 tonnes of High Hazard Special Waste to another of the steel company's
facilities in Canada. A test shipment of 87 tonnes was made successfully in
February 1999, and production loading of the material for transport should
commence during March. The second aspect involves the on-site remediation of
47,000 tonnes of Special Waste contaminated by zinc, cadmium and lead. Site
preparation has begun for this aspect, and all heavy equipment is being readied
for transport to the site during the week of March 15, 1999. The third aspect,
transport and disposal of the remediated 47,000 tonnes to a Non-Special Waste
landfill, will conclude the contract.
As previously announced, the Company entered into a $1.1
million sub-contract with Environmental Waste Technology, Inc., in June 1998,
for lead and asbestos abatement and the demolition of buildings and storage
tanks on a site in Brooklyn, New York. Subsequent to the commencement of the
project in November 1998, additional work was identified which has increased the
value of the site work.
At this time, there are no other contracts entered into by the
Company which the Company believes to be material. The Company is actively
pursuing other projects, contracts and relationships which likely will be
material if consummated.
PRIOR CONTRACT DISCLOSURES
During 1995, Solucorp announced that it had signed a contract
with IEM/Sealand, Inc. to remediate a minimum of 15,000 tons of heavy metal
contaminated soils in Waterbury, Connecticut. The Company projected that the
total contract, including disposal, would generate $1.85 million Cdn. in
revenues. As a result of later decisions made by the site's general contractor,
the Company only remediated 3,800 tons of soil, was not allowed by IEM/Sealand
to handle the disposal, and generated revenues of $132,000 Cdn., as reported in
the Company's financial statements.
As noted above, during 1995, Solucorp announced that it had
entered into a joint marketing agreement with IDM pursuant to which both
companies undertook to generate a minimum of $20,000,000 per year in revenues
for 5 years, utilizing the Company's MBS remediation technology. The contract is
still in force and the Company and IDM are still pursuing certain projects but
the revenues generated to date have not been significant.
Subsequently in 1995, the Company announced that it had been
issued a $50,000,000 contract by IDM to use the Company's MBS technology at the
Los Alamos National Laboratory site in New Mexico. Thereafter, in various
disclosure documents, the Company listed the Los Alamos contract as one of its
material contracts. During the SEC investigation, the Company was advised that
the Basic Ordering Agreement issued for IDM for Los Alamos National Labs had
terminated. Accordingly, on August 11, 1998, the Company announced that it would
not be rendering its remediation services for Los Alamos under the Company's
contract with IDM.
In one disclosure document sent to shareholders, it was stated
that the Company had a $300 million contract with IDM. This statement does not
appear anywhere else or in any press release of the Company. The Company does
not know of any such $300 million contract. The same disclosure document
summarizes the facts, contained in an IDM release, which stated that IDM had
signed a letter of intent to provide treatment at a site in Massachusetts, using
the Company's MBS technology, and that revenues from the project could reach
$30,000,000. The Company assumes that the $300 million figure was a
typographical error made during drafting. The error was corrected by the
statement concerning the $30 million project. It appears, however, that both
statements remained in the final version of the document. With respect to the
project itself, IDM did not receive a contract.
During 1995, the Company announced that it had signed a
contract with LCM corporation to remediate 4,000 tons of copper bottom ash in
West Virginia with projected revenues of $626,400 Cdn. Although the Company
believes that it actually remediated 1,500 tons, the weight was denied and
Solucorp had to accept payment for the 1,300 minimum tonnage specified in the
contract, resulting in revenues, as subsequently reported, of $111,000 Cdn.
During 1995, the Company announced that it had received a
contract from OENJ Corporation to provide on site remediation of 1,400 tons of
hazardous soil in Elizabeth, New Jersey projecting revenues of $349,650 Cdn. The
contract actually called for OENJ to provide Solucorp with hazardous disposal
air-space at its landfill which Solucorp estimated would generate the revenues
projected. During the SEC investigation, it was discovered that the 1,400 tons
of classified hazardous soil had been disposed of by OENJ. This was announced by
the Company on August 11, 1998.
During 1995, Solucorp announced a contract with NWECNC, Inc.
(Nature's Way) to remediate 4,000 tons of contaminated soil in Buffalo, NY,
projecting revenues of $270,000 Cdn.. Solucorp did remediate 3,900 tons and
billed Nature's Way but did not receive payment. Subsequently, upon advice of
its attorney, Solucorp settled the matter for $100,000 US as reported in the
Company's financial statements.
As set forth above, Solucorp has an exclusive licensing
agreement, for marketing MBS in the United Kingdom, with a subsidiary of John
Beech, Ltd., under which Beech pays a small license fee and is to pay royalties
based upon the amount of soil remediated. The Company billed John Beech $50,000
for license fees covered by the period October 1, 1997 to October 1, 1998.
However, because remediation projects under development in the U.K. are taking
longer to finalize than anticipated, Beech did not pay the Company's fee.
Accordingly, the Company has reserved 100% against this $50,000 receivable. The
license fee of $50,000 for the period October 1, 1998 to October 1, 1999 was due
on October 1, 1998. Even though the Company believes this fee is a valid
receivable, the Company has chosen not to treat this fee as income until Beech
pays the entire $100,000.
In 1996, the Company announced that, through Beech, it had
received a contract to perform remediation services in Glasgow Scotland, on a
test basis, with respect to a proposed project potentially involving millions of
tons of soil. The on site test was successfully concluded and the MBS technology
was recommended for the cleanup but the project has been repeatedly delayed by
the lack of funding available to Glasgow. Recently, however, as announced on
January 8, 1999, the Company/Beech were invited to attend a meeting in Scotland
to discuss a proposal to remediate and develop a specific site. The meeting was
held and discussions are continuing.
During 1996, Solucorp announced that Beech had received
confirmation from Bullen Consultants, consultants on a project in Portugal, that
Bullen had received a letter of intent from the government of Portugal for
initial study, design and testing for a substantial project in Portugal which
would include soil remediation. Bullen advised in 1996 that it had specified MBS
as the technology for the cleanup of the site's contaminated soils. The project
was delayed and, thereafter, Bullen was removed as the consultant for the
project. The Company has no current expectation of participating in this project
in Portugal.
During 1995, the Company announced it had received a contract
for $850,000, through its Puerto Rico office, with a San Juan School of
Engineers for training 2,000 students. The Company received only minimal
revenues prior to the time its Puerto Rico employee, who was to conduct the
training, absconded with all of the documents, equipment and other assets of the
Puerto Rico office. To date, the employee has not been located, Solucorp is
unable to find the contract, and the current management of the School has
expressed doubt that the contract existed. Solucorp is in the process of
reconstituting its Puerto Rico operation but does not expect to receive any
additional revenue from this contract.
During 1996, Solucorp announced that its MBS technology would
be used in a substantial UN sponsored hazardous waste cleanup in Poland. The
announcement stated that Solucorp's partner, AG Environmental, had advised
Solucorp that $345,000 had been budgeted to the Company for on site tests.
Actually, the $345,000 was budgeted for tests of three technologies, including
MBS. Tests were successfully concluded but the project was delayed.
Subsequently, Solucorp was invited to participate in a new pilot program with
respect to the proposed project (essentially a new test) but, in light of the
extensive costs involved, Solucorp decided not to participate. The Company has
no current expectation of participating in this project in Poland.
As noted above, during 1996, Solucorp announced that it had
signed a contract with the Doe Run Company to provide in line remediation
services at Doe Run's facility, which, at the time, would result in revenues of
$2.1 million over three years. Thereafter, in various disclosure documents, the
Company reported modifications to the contract and the expected revenues. In one
such release in 1996, the Company stated that the projected revenues being
reported would be realized "per year, for three years [emphasis added]." This
was a typographical error which does not appear anywhere else in the Company's
disclosure documents. The Doe Run contract is still in effect and the on line
remediation is ongoing. This contract generated revenues for the Company of
approximately $700,000 during 1998.
As previously announced and as noted above, Solucorp has
several contracts with Smart International, Ltd. (in China) pursuant to which:
(1) Smart produces for Solucorp a key component of the chemicals used
("Product"), and (ii) Smart has an exclusive license for remediation projects in
China pursuant to which Smart is to compensate the Company with a license fee of
$2 million per year and also is to compensate the Company with royalties based
upon tons of soil remediated. In several instances, Solucorp announced that it
had been advised by Smart that certain projects were about to be contracted or
to commence. The Company has been advised by Smart, however, that two announced
projects - Nan Yang Iron Co., now named Pacific Tinplate, and Guang Zhou
Reservoir- have been delayed until further notice by Chinese authorities due to
funding difficulties which have resulted from China s fiscal and currency
crisis. Other projects which have been the subject of negotiations by Smart are
similarly affected. Thus, no royalties have yet been paid as no projects have
been started in China although Smart is still actively pursuing potential
projects.
With respect to the Smart license fees, as reported in the
Company's financial statements, certain amounts have been paid in cash, and
certain larger amounts have been paid by offsets against money owed to Smart for
production of Product, some of which has been used in areas outside of China and
some of which is in storage in China and elsewhere. In light of the fact that
Solucorp has recently begun operations on several significant projects and is
involved in negotiations for others, Solucorp had been, and expects to continue,
shipping and using more of the Product. The remaining accrued license fees from
Smart are considered by Solucorp to be a valid receivable which the Company is
confident will be paid in cash or additional offsets against Product costs as
such Product is manufactured and used. PERSONNEL - JOSEPH S. KEMPROWSKI
PERSONNEL - JOSEPH S. KEMPROWSKI
Joseph S. Kemprowski is a full time consultant to Solucorp and
works out of facilities provided to him by the Company at the Company's main
offices in West Nyack, New York. He is the husband of Arle Pierro, a
vice-president and director of Solucorp, and the brother-in-law of Peter R.
Mantia, President and a director of Solucorp (Ms. Pierro and Mr. Mantia's wife
are sisters).
During the early 1990s, when prior management was forced to
leave Solucorp, Mr. Kemprowski became Chairman and CEO of the Company. At that
time, the Company had minimal operations and the MBS technology was in the early
process of development. Mr. Kemprowski and Ms. Pierro essentially operated the
Company during that time period and, as a result, have been recognized by the
Company as "founders" of the Company in its present form. Mr. Kemprowski and Ms.
Pierro both use the title "Founder" in addition to their other titles (Ms.
Pierro - Vice-President and Director; Mr. Kemprowski - Consultant).
During the middle 1990s, Mr. Kemprowski stepped down from his
positions with Solucorp but continued as President of EPS Environmental, a
wholly owned subsidiary of Solucorp through which almost all of Solucorp's
business is conducted. In late 1996, he gave up his positions with EPS and
assumed his positions as Founder and Consultant with Solucorp.
Mr. Kemprowski is a key member of Solucorp's personnel. He is
not an officer or director of Solucorp or any of its subsidiaries, and does not
exercise any control in that regard, but he is available to senior management to
render advice on a wide variety of matters as requested, particularly with
respect to his knowledge of the events which occurred during his tenure as an
officer and director. He undertakes such projects as may be assigned by senior
management or as he may conceive on his own with the concurrence of senior
management. With respect to such projects, he often acts as the leader of the
Solucorp effort. His activities as a consultant have been significant factors in
the development by Solucorp of many of its key relationships and projects
including the relationships with Smart and with Geomar and the current Solucorp
efforts to develop and commercialize its patent pending Integrated Fixation
System.
On December 8, 1994, in a matter unrelated to Solucorp, Mr.
Kemprowski consented, without admitting or denying the allegations, to the entry
of an order in an SEC administrative proceeding making findings and imposing
sanctions [KEMPROWSKI, et al.; SEC Rel. No. 34-35058 (12/8/94)]. The order found
that during the period from 1988 to 1990, Mr. Kemprowski, and a company with
which he was associated, in recommending the purchase of securities of a
particular issuer, acted as brokers without being registered as such,
disseminated false and misleading information prepared by the issuer, and made
their recommendation without having a reasonable basis for such. The order
barred Mr. Kemprowski from being associated with a company engaged in the
securities industry but provided that, after five years, he could apply to
become so associated. The order did not bar Mr. Kemprowski from being an officer
or director or otherwise associated with any public company not in the
securities industry such as Solucorp.
SIGNATURE
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, thereto duly authorized.
Date: March 18, 1999
SOLUCORP INDUSTRIES LTD.
By: /s/
Peter Mantia, President