SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-22630
Seiler Pollution Control Systems, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 22-2448906
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
555 Metro Place North, Suite 100, Dublin, Ohio 43017
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 614/791-3272
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check x/ whether the registrant (1) has filed all reports
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 Yes /x/ No
APPLICABLE ONLY TO ISSUERS 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
As of August 1, 1996, the Registrant had outstanding 19,204,224 shares
of its Common Stock, par value $.0001 per share.
Seiler Pollution Control Systems, Inc.
Form 10-Q
TABLE OF CONTENTS
Item No. Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................... 1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 7
Item 2. Changes in Securities...................................... 7
Item 3. Defaults upon Senior Securities............................ 7
Item 4. Submission of Matters to a Vote of Security-Holders........ 7
Item 5. Other Information.......................................... 7
Item 6. Exhibits and Reports on Form 8-K........................... 7
Signatures.......................................................... Signature
Page
Financial Data Schedule............................................. Last Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 1996
(Unaudited) March 31, 1996
------------- --------------
CURRENT ASSETS
Cash $ 99,706 $ 200,351
Prepaid expenses and sundry receivables 146,854 109,152
----------- -----------
Total Current Assets 246,560 309,503
HIGH TEMPERATURE VITRIFICATION SYSTEMS 9,918,068 9,720,132
OTHER ASSETS
Licensing agreements, less accumulated amortization of
$940,046 and $860,712 at June 30, 1996 and
March 31, 1996, respectively 3,819,954 3,899,288
Advances to related party 594,014 624,902
Vetrotherm option 167,920 167,920
Deposits 40,915 36,103
----------- -----------
4,622,803 4,728,213
PROPERTY AND EQUIPMENT -- AT COST (net of
accumulated depreciation of $8,655 and $8,403 at
June 30, 1996 and March 31, 1996, respectively) 281,856 287,778
----------- -----------
$15,069,287 $15,045,626
=========== ===========
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 405,246 $ 316,450
Accrued expenses 151,318 107,935
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Total Current Liabilities 556,564 424,385
LONG-TERM DEBT
Licensing agreements payable 1,977,250 1,977,250
Loans payable -- stockholders 1,463,133 1,238,134
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3,440,383 3,215,384
STOCKHOLDERS' EQUITY
COMMON STOCK
Common stock, $.0001 par value; authorized
25,000,000 shares, issued and outstanding
18,725,569 and 18,525,569
shares at June 30, 1996 and
March 31, 1996, respectively 1,873 1,853
ADDITIONAL PAID IN CAPITAL 18,562,374 17,897,081
ACCUMULATED DEFICIT (7,872,931) (7,349,683)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 381,024 856,606
----------- -----------
11,072,340 11,405,857
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$15,069,287 $15,045,626
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SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
----- ----
REVENUE $ 57,873 $ 7,500
OPERATING EXPENSES
Professional and other consulting fees 163,907 130,824
General and administrative 130,857 136,994
Salaries, wages and related fringe benefits 126,680 84,381
Research and development 80,077 56,362
Depreciation and amortization 79,586 79,659
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581,107 488,220
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LOSS FROM OPERATIONS (523,234) (480,720)
Interest expense 14 17,147
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LOSS BEFORE MINORITY INTEREST (523,248) (497,867)
Minority interest -- 3,850
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NET LOSS $ (523,248) $ (494,017)
============ ============
LOSS PER COMMON SHARE $ (0.03) $ (0.03)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 18,717,236 15,908,902
============ ============
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SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
Foreign
Common Stock Additional Currency
--------------------- 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
Issuance of common shares
under stock option plan
for cash 175,000 17 223,108 -- -- 223,125
Issuance of common stock for cash 2,000,000 200 2,199,800 -- -- 2,200,000
Foreign currency translation adjustment -- -- -- -- (81,803) (81,803)
Net loss -- -- -- (494,017) -- (494,017)
---------- ------- ------------ ------------ ------------ ------------
BALANCE, JUNE 30, 1995 (Unaudited) 16,425,569 $ 1,642 $ 15,156,817 $ (6,046,973) $ 1,054,572 $ 10,166,058
========== ======= ============ ============ ============ ============
BALANCE, MARCH 31, 1996 18,525,569 $ 1,853 $ 17,897,081 $ (7,349,683) $ 856,606 $ 11,405,857
Exercise of stock options under the 1993
Non-Statutory Stock Option Plan 50,000 5 180,620 -- -- 180,625
Issuance of common stock for cash 150,000 15 484,673 -- -- 484,688
Foreign currency translation adjustment -- -- -- -- (475,582) (475,582)
Net loss -- -- -- (523,248) -- (523,248)
---------- ------- ------------ ------------ ------------ ------------
BALANCE, JUNE 30, 1996 (Unaudited) 18,725,569 $ 1,873 $ 18,562,374 $ (7,872,931) $ 381,024 $ 11,072,340
========== ======= ============ ============ ============ ============
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SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (523,248) $ (494,017)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 79,586 79,659
Foreign currency translation (459,359) (81,413)
Minority interest -- (3,850)
Changes in assets and liabilities:
Prepaid expenses and sundry receivables (37,702) 13,849
Deposits 2,113 (38,833)
Accounts payable 88,796 (24,929)
Accrued expenses 43,383 7,622
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Net Cash Used In Operating Activities (806,431) (541,912)
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of property and equipment (1,255) (171,203)
Advances for High Temperature Vitrification Systems (197,936) (1,665,143)
----------- ---------
Net Cash Used In Investing Activities (199,191) (1,836,346)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 665,313 2,423,125
Proceeds on loans payable -- stockholder 224,999 (7,038)
Advances to related party 30,888 --
----------- ---------
Net Cash Provided by Financing Activities 921,200 2,416,087
EFFECT OF EXCHANGE RATE CHANGES ON CASH (16,223) (390)
----------- ---------
Net (Decrease) Increase In Cash (100,645) 37,439
CASH -- BEGINNING OF PERIOD 200,351 89,220
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CASH -- END OF PERIOD $ 99,706 $ 126,659
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SEILER POLLUTION CONTROL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 three months ended June 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 -- SUBSEQUENT EVENTS
In July 1996, the Company issued 500,000 shares of its common stock through the
exercise of stock options under the 1996 Non-Statutory Stock Option Plan. The
exercise price was $1.70 per share.
NOTE 3 -- RESTATEMENT
The financial statements for the three month period ended June 30, 1995 have
been restated to expense research and development costs of $56,362 that were
previously capitalized and to reclassify the foreign currency translation of
$33,256 as a reduction of stockholders' equity rather than as an addition to the
net loss for the period.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations -- June 30, 1996 vs. June 30, 1995
The Company's net loss for the three months ended June 30, 1996 was
$523,248 as compared to $494,017 for the three months ended June 30, 1995. The
change in the net loss is the result of increases in compensation and related
expenses and research and development expenditures relating to the High
Temperature Vitrification (HTV) Systems, as well as increases in professional
and other consulting fees, offset by additional consulting revenue.
The Company has made payments aggregating $197,936 for the completion
of its HTV Systems during the three months ended June 30, 1996. The Company
funded these capital expenditures and operating losses through the issuance of
additional equity securities and loans from stockholders aggregating $665,313
and $224,999, 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.
In June 1996, the Company successfully demonstrated the operation of
its first commercial vitrification system to more than 200 representatives of
the financial, industrial, and environmental communities at its fabricating
facility in Dottingen, Switzerland. This system will undergo a testing protocol
for approximately 90 days, after which, the system will be disassembled and
shipped to Freiberg, Germany. The operating capacities for this vitrification
system have been fully contracted.
Earlier in June, the Company also successfully completed a pilot test
on five different water streams for two United States Air Force Bases (Tinker &
McClellan). Final negotiations for building and operating two vitrification
systems for the Air Force are scheduled to begin in August/September 1996. This
time frame is on target with Seiler's Air Force project plan. The cost of these
vitrification systems are anticipated to be $2.5 - $3 million U.S. dollars for
each system.
A formal Phase 2 project presentation was presented by the Company
before the Edison Materials Technology Center's (EMTEC) technical steering
committee on July 11, 1996. The purpose of this project was to develop
commercially acceptable glass ceramic products from Ohio industrial waste
streams. Phase I of this project was extremely successful, and it was
recommended that this project continue to be funded for the next two years.
The Company plans to contract fifteen vitrification systems within the
next two years.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security-Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following exhibits are filed herewith:
10.1. Employment agreement dated June 29, 1996 between
Registrant and Werner Heim.
10.2. Employment agreement dated June 29, 1996 between
Registrant and Alan B. Sarko.
10.3. Employment agreement dated June 29, 1996 between
Registrant and Niklaus Seiler.
10.4. Employment agreement dated June 29, 1996 between
Registrant and Dr. Gerold Weser.
27 Financial Data Schedule. Submitted herewith.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter which ended June 30, 1996.
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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 thereunto duly authorized.
Date August 7, 1996 Seiler Pollution Control Systems, Inc.
----------------- --------------------------------------
(Registrant)
By: /s/ Alan B. Sarko
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Vice President and Chief Financial Officer