SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED: June 30, 1998
COMMISSION FILE NUMBER: 0-13738
RADIATION DISPOSAL SYSTEMS, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1426581
-------------- -----------
(State of Incorporation) (I. R. S. Employer Identification No.)
1104 Nueces Street, Austin, Texas 78701-2128
- ---------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(512) 671.3858
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES NO X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1998
----- -----------------------------
Common Stock, $.001 par value 9,977,495
RADIATION DISPOSAL SYSTEMS, INC.
INDEX
PART I - FINANCIAL INFORMATION Page No.
ITEM 1. CONDENSED FINANCIAL STATEMENTS
BALANCE SHEETS 3
June 30, 1998 and December 31, 1997
STATEMENTS OF LOSS 4
Three months ended June 30, 1998 and 1997, and the
period from January 10, 1984 (inception) to June 30, 1998
STATEMENTS OF CASH FLOWS 6
Three months endedJune 30, 1998 and 1997, and the
period from January 10, 1984 (inception) to June 30, 1998
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY 7
Three months ended June 30, 1998 and the year ended
December 31, 1997, and the period from January 10, 1984
(inception) to June 30, 1998
NOTES TO CONDENSED FINANCIAL STATEMENTS 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 10
PART II - OTHER INFORMATION 10
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Balance Sheets (continued)
(Unaudited)
Liabilities and Stockholders' Equity
June 30, December 31,
1998 1997
Current liabilities
Accounts payable 12,612 9,497
Notes payable 52,280 44,231
Accrued interest payable 23,754 21,097
---------- ----------
Total current liabilities 89,246 74,825
Stockholders' equity
Convertible preferred stock - non-voting
non-cumulative, $.50 par value,
authorized 1,500,000 shares, issued
and subsequently converted to common
stock, 650,000 shares
Common stock, $.001 par value, authorized
20,000,000 shares, issued and
outstanding - 9,977,495 shares 9,977 9,977
Additional paid-in capital 3,451,590 3,451,590
Deficit accumulated during development stage (3,550,673) (3,536,233)
---------- ----------
(89,106) (74,666)
140 159
========== ==========
Page 2
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Balance Sheets
(Unaudited)
Assets
Assets
June 30, 1998 December 31, 1997
Assets
Cash $ 140.00 $ 159.00
--------------- ------------------
Total Assets $ 140.00 $ 159.00
=============== ==================
See notes to the financial statements.
Page 3
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Statements of Loss
Period from
3 months 6 months 3 months 6 months 01-10-1984 (inception)
ended ended ended ended to 06-30-1998
6/30/98 6/30/98 6/30/97 6/30/97 (memorandum only)
----------------------------------------- ----------------------
Sales - net $ - $ - $ - $ - $ 394,447
Cost of sales 0 0 0 0 330,606
----------------------------------------- -----------------
Gross margin 0 0 0 0 63,841
----------------------------------------- -----------------
Engineering, research and
development expenses
Engineering expenses 0 0 0 0 243,499
Consulting expenses 0 0 0 0 218,205
Materials and supplies 0 0 0 0 148,623
Depreciation 0 0 0 0 453,237
Amortization of improvements
to research facility 0 0 0 0 29,644
Labor and salaries 0 0 0 0 667,144
Service and use
agreement expense 0 0 0 0 14,065
Loss on abandoned property
and equipment 0 0 0 0 356,516
Taxes and licenses 0 0 0 0 42,824
----------------------------------------- -----------------
0 0 0 0 2,173,757
----------------------------------------- -----------------
Administrative expenses
Salaries 0 0 0 0 1,059,183
Consulting fees 0 3,115 0 0 201,388
Public relations 0 0 0 0 142,344
Professional fees 0 0 0 0 830,948
Depreciation 0 0 0 0 7,569
Amortization of patent and
organization expense 0 0 0 0 205,455
Rent 0 0 0 0 35,339
Travel and entertainment 0 0 0 0 214,845
Office expense 448 819 343 732 272,341
Group insurance 0 0 0 0 30,889
Insurance 0 0 0 0 85,837
Transfer agent fees 635 1,370 455 1,201 60,279
Taxes and licenses 0 0 0 0 67,004
Advertising 0 0 0 0 7,010
Commissions 0 0 0 0 31,145
Bad debt 0 0 0 0 24,096
Disposal fees 0 7,849 0 0 7,849
Other 0 0 0 0 51,665
----------------------------------------- -----------------
1123 13,153 798 1,933 3,336,309
----------------------------------------- -----------------
Loss from operations 1123 13,153 798 1,933 5,446,225
(continued)
Page 4
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Statements of Loss
Period from
3 months 6 months 3 months 6 months 01-10-1984 (inception)
ended ended ended ended to 06-30-1998
6/30/98 6/30/98 6/30/97 6/30/97 (memorandum only)
----------------------------------------- ----------------------
Other income (expense)
Interest $ - $ - $ - $ - $ 788,820
Other - net (principally
replacement part sales,
testing and rental income) 0 0 178,791
Transfer agent fees 635 1,370 485 1231 4,451
Cancellation of debt 0 0 0 0 945,974
Gain on sale of assets 0 0 0 0 1,789
Interest expense (1,333) (2,657) (1149) (2298) (24,273)
----------------------------------------------------------------------
(698) (1,287) (664) (1,067) 1,895,552
----------------------------------------------------------------------
Net loss 1,821 14,440 1462 4462 3,550,673
======================================================================
Weighted average shares
of common stock 9,977,495 9,977,495 9977495 9977495
===========================================
Net loss per share $ - $ 0.01 $ - $ -
Page 5
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaduited)
Period from
01-10-1984 (inception
Six months ended to 06-30-1998
June 30 (memorandum only)
1998 1997
Cash flows from operating activities
Net loss $ (114,400.00) $ (1,462.00) $ (3,550,673)
Adjustment to reconcile net loss
to net cash used by operating activities
Deprecation and amortization 0 0 695,906
Loss on abandoned property & equipment 0 0 356,516
Book value of machinery included
in cost of sales 0 0 6,236
(Increase) decrease in accounts receivable 0 0 0
(Increase) decrease in prepaid expenses 0 0 0
Increase (decrease) in accounts payable 3,115 0 12,612
Increase (decrease) in accrued liabilities 2,657 644 23,754
Net cash provided by (used by)
---------------------------------- ----------------
operating activities (8,668) (818) (2,455,549)
Cash flows from investing activities
Property and equipment additions 0 0 (853,202)
Costs incurred in connection with purchase
and protection of patent rights 0 0 (201,270)
Increase in organization expense 0 0 (4,185)
---------------------------------- ----------------
Net cash used in investing activities 0 0 (1,058,657)
Cash flows from financing activities
Proceeds from the issuance of common stock 0 0 4,171,841
Costs incurred in connection with the issuance
of common and convertible preferred stock,
including costs classified as deferred expense 0 0 (710,274)
Issuance of notes payable 8,049 800 127,476
Retirement of notes payable 0 0 (74,597)
---------------------------------- ----------------
Net cash provided (used) by financing activities 8,649 800 3,514,446
---------------------------------- ----------------
Net increase (decrease) in cash (19) (18) 140
Cash
Beginning 159 193 0
Ending $ 140.00 $ 175.00 $ 140.00
See notes to the financial statements.
Page 6
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Statements of Changes in Stockholders' equity
(Unaudited)
Three months ended June 30, 1998, the year ended December 31, 1997,
and the period from January 10, 1984 (Inception) to June 30, 1998
Convertible Accumulated
Common Stock Preferred Convertible Additional During
Number of Stock Preferred Paid-in Development
Shares Amount Subscribed Stock Capital Stage Total
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash 5,777.3873 $ 5,777 $ - $ - $ 532 $ - $ 6,309
Issuance of common stock under
patent assignment agreement 532.1077 532 0 0 0 0 532
Change in par value of common stock
$1.00 per share to $.001 per share 6,303,185.5050 0 0 0 0 0
Subscriptions received from
Convertible preferred stock
through private placement 325,000 0 0 0 325,000
Net loss for the initial period ended
December 31, 1984 0 0 0 (1,255) (1,255)
Issuance of convertible
preferred stock (325,000) 325,000 0 0 0
Issuance of common stock through
public offering 2,700,000.0000 2,700 0 0 3,372,300 0 3,375,000
Costs incurred in the issuance of
common and convertible preferred stock:
Reclassification of deferred
Expense at December 31, 1984 0.0000 0 0 0 (78,387) 0 (78,387)
Costs incurred subsequent to
December 31, 1984 0.0000 0 0 0 (558,492) 0 (558,492)
Net loss for the year ended
December 31, 1985 0.0000 0 0 0 0 (125,808) (125,808)
Net loss for the year ended
December 31, 1986 0.0000 0 0 0 0 (201,064) (201,064)
Conversion of convertible
preferred stock to common stock 650,000.0000 650 0 (325,000) 324,350 0 0
Net loss for the year ended
December 31,1987 0.0000 0 0 0 0 (427,685) (427,685)
Exercise of warrants held by
Underwriter 270,000.0000 270 0 0 404,730 0 405,000
(continued) Page 7
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Statements of Changes in Stockholders' equity
(Unaudited)
Three months ended June 30, 1998, the year ended December 31, 1997,
and the period from January 10, 1984 (Inception) to June 30, 1998
Convertible
Common Stock Preferred Convertible Additional
Number of Stock Preferred Paid-in
Shares Amount Subscribed Stock Capital
- ----------------------------------------------------------------------------------------------------------------
Costs incurred to register the
common stock underlying the warrants 0.0000 0.00 0 0 (73,395)
Exercise of common stock options 24,000.0000 24.00 0 0 29,976
Net loss for the year ended December 31, 1988 0.0000 0.00 0 0 0
Exercise of common stock options 24,000.0000 24.00 0 0 29,976
Net loss for the year ended December 31, 1989 0.0000 0.00 0 0 0
Net loss for the year ended December 31, 1990 0.0000 0.00 0 0 0
Net loss for the year ended December 31, 1991 0.0000 0.00 0 0 0
Net loss for the year ended December 31, 1992 0.0000 0.00 0 0 0
Balance, December 31, 1992 9,977,495.0000 $ 9,977 $ - $ - $ 3,451,590
Net loss for the year ended December 31, 1993 0.0000 0.00 0.00 0.00 0.00
Balance, December 31, 1993 9,977,495.0000 $ 9,977 $ - $ - $ 3,451,590
Net loss for the year ended December 31, 1994 0.0000 0.00 0.00 0.00 0.00
Balance, December 31, 1994 9,977,495.0000 $ 9,977 0.00 0.00 3,451,590
Net loss for the year ended December 31, 1995 0.0000 0.00 0.00 0.00 0.00
Balance, December 31, 1995 9,977,495.0000 $ 9,977 0.00 0.00 3,451,590
Net loss for the year ended December 31, 1996 0.0000 0.00 0.00 0.00 0.00
Balance, December 31, 1996 9,977,495.0000 $ 9,977 0.00 0.00 3,451,590
Net loss for the year ended December 31, 1997 0.0000 0.00 0.00 0.00 0.00
Balance, December 31, 1997 9,977,495.0000 $ 9,977 0.00 0.00 3,451,590
Net loss for the six months
ended June 30, 1998 0.0000 0.00 0.00 0.00 0.00
Balance, June 30, 1998 9,977,495.0000 $ 9,977 0.00 0.00 3,451,590
Deficit
Accumulated
During
Development
Stage Total
- -----------------------------------------------------------------------------------------------
Costs incurred to register the
common stock underlying the warrants 0 (73,395)
Exercise of common stock options 0 30,000
Net loss for the year ended December 31, 1988 (694,368) (694,368)
Exercise of common stock options 0 30,000
Net loss for the year ended December 31, 1989 (897,153) (897,153)
Net loss for the year ended December 31, 1990 (597,782) (597,782)
Net loss for the year ended December 31, 1991 (437,019) (437,019)
Net loss for the year ended December 31, 1992 (373,346) (373,346)
Balance, December 31, 1992 $ (3,755,480) $ (293,913)
Net loss for the year ended December 31, 1993 (318,269) (318269.00)
Balance, December 31, 1993 $ (4,073,749) $ (612,182)
Net loss for the year ended December 31, 1994 (197,861) (197,861)
Balance, December 31, 1994 (4,271,610) (810,043)
Net loss for the year ended December 31, 1995 741,198 741,198
Balance, December 31, 1995 (3,530,412) (68,845)
Net loss for the year ended December 31, 1996 (4,349) (4,349)
Balance, December 31, 1996 (3,534,761) (73,194)
Net loss for the year ended December 31, 1997 (1,472) (1,472)
Balance, December 31, 1997 (3,536,233) (74,666)
Net loss for the three months
ended June 30, 1998 (14,440) (14,440)
Balance, June 30, 1998 (3,550,673) (89,106)
Page 8
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Condensed Financial Statements
June 30 , 1998
(Unaudited)
Note 1 - Condensed financial statements
In the opinion of the Company, the accompanying unaudited condensed financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of June 30,
1998 and December 31,1997, the results of operations for the three and six
months ended June 30, 1998 and 1997, and for the period from January 10, 1984
(inception) to June 30, 1998, the changes in stockholders equity for the six
months ended June 30, 1998, the year ended December 31, 1997, and the period
from January 10, 1984 (inception) to June 30, 1998, and the cash flows for the
six months ended June 30, 1998 and 1997, and the period from January 10, 1984
(inception) to June 30, 1998.
The financial statements have been prepared assuming that the Company will
continue as a going concern. The Company has been in the development stage since
its inception (January 10, 1984) and as such has been devoting substantially all
its efforts in the areas of engineering and research and, in more recent years,
in developing markets for systems designed to apply the ozone technologies to
treat non-radioactive wastes and water. The Company has not generated
significant operating revenues, has incurred substantial losses, and has made
substantial investments in property and equipment and patent costs. Because of
continuing losses incurred during the development stage, the substantial
depletion of the Company's cash reserves and the uncertainty surrounding whether
additional debt or equity funds can be obtained, substantial doubt exists about
the Company's ability to continue as a going concern.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. While the Company believes that the disclosures
presented are adequate to make the information not misleading, it is suggested
that the condensed financial statements be read in conjunction with the
financial statements and notes included in the Company's Form 10-K, Annual
Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934,
for the Fiscal Year ended December 31, 1997, which was filed with the Securities
and Exchange Commission.
Because the Company is in the development stage, the results of operations for
the three month period are not necessarily indicative of the results for a full
year under normal operations.
Note 2 - Net loss per share
The net loss per share calculations are made using the weighted-average number
of common shares outstanding.
Note 3 - Notes Payable
During the second quarter of 1998, the former President and the Chairman of the
Board of Directors made loans to the Company totaling $600. Promissory notes,
payable on demand and secured by a vast majority of the Company's tangible and
intangible assets, were issued. The interest rate on the notes was the rate
publicly announced by NationsBank of North Carolina, N. A. in Charlotte, North
Carolina from time to time as its prime rate. Interest expense relating to those
notes was $1,118 for the three months ended June 30, 1998.
The total amounts of interest payable relating to notes payable, $17,765 and
$15,5538 at June 30, 1998, 1995, and December 31, 1997, respectively, are
included in other accrued liabilities in the accompanying balance sheets.
Note 4 - Litigation
Thomas Publishing Co. filed a lawsuit against the Company for collection of a
past due account in the total of $3,265, in the District Court of Western North
Carolina. On May 5, 1995, the Company settled the lawsuit by signing a Consent
Judgment providing that Thomas Publishing Co. have and recover Judgment against
the Company in the sum of $3,265, plus interest at 18% per annum and collection
costs of $1,179 plus interest of 8% per annum from the date of Judgment until
paid in full, and court costs. The Company has included collection costs of
$1,179 in accounts payable. For the three months ended June 30, 1998, the
amounts of $89, were included in interest expense. The amount of $3,265 was
included in accounts payable in the accompanying balance sheets.
McKinney & Moore, Inc. filed a lawsuit against the Company for collection of a
past due account in the total of $3,802, in the District Court of Henderson
County, Texas. On February 25, 1993, McKinney & Moore, Inc. received a Judgment
to recover the debt,
Page 9
attorney fees of $1,250, prejudgement in the amount of $211, plus interest at
10% per annum from the date of Judgment until paid in full. The Company has
included attorney fees of $1,250 in accounts payable. For the three months ended
June 30, 1998, the amount of $126, were included in interest expense. The amount
of $3,802 was included in accounts payable in the accompanying balance sheets.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The Company had no sales for the three months ended June 30, 1998, and
1997.
Historically, the Company has had few sales of machines and equipment
utilizing the application of waste and water treatment technologies ("Ozone
Technologies"), and, to date, the Company has been unsuccessful in marketing
machines and equipment that utilize the Ozone Technologies.
The Company has not been able to generate sales of its products, and,
consequently, the Company has incurred and continues to incur substantial
losses. The Company experienced a net loss of $1,123 for the three months ended
June 30, 1998, compared to $798 for the comparable period in 1997, for a
decrease in losses of $325. The decrease was due, in large part, to the down
sizing of the Company for lack of sales.
FINANCIAL CONDITION AND LIQUIDITY
As of June 30, 1998, the Company's significant commitments which will
result in identifiable expenses in the immediate future were pursuant to
employment agreement with its two former officers. Under employment agreements
with the Company, Manuel E. Kane as President and Treasurer and Albert D. Kane
as Chairmen of the Board and Secretary each receive annual salaries of $50,000
subject to any increases, plus any bonuses approved by the Company's Board of
Directors. The Kane's employment continues for successive periods of one year
unless terminated by either party.
The Company settled a lawsuit by signing a Consent Judgment providing that
the Plaintiff have and recover Judgment against the Company in the sum of
$3,265, plus interest at 18% per annum from the date of Judgment until paid in
full, and court costs. The Company has included interest expense of $2,029 in
other accrued liabilities at September 30, 1995 (see the discussion under "LEGAL
PROCEEDINGS" in Part ii, Item 1.).
The Company has, to date, generated no significant revenues. Because the
Company's available remaining funds are extremely limited, Management is
operating the Company on a severely curtailed basis. However, at March 31, 1998
the Company's financial resources were almost completely exhausted. In the
absence of a capital infusion or the location of other sources of funds, which
Management believes unlikely, the Company will have insufficient funds to
continue operations beyond December, 1998. See Item 1.-"CONDENSED FINANCIAL".
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Thomas Publishing Co. filed a lawsuit against the Company for collection of a
past due account in the total of $3,265, in the District Court of Western North
Carolina. On May 5, 1995, the Company settled the lawsuit by signing a Consent
Judgment providing that Thomas Publishing Co. have and recover Judgment against
the Company in the sum of $3,265, plus interest at 18% per annum and collection
costs of $1,179 plus interest of 8% per annum from the date of Judgment until
paid in full, and court costs. The Company has included collection costs of
$1,179 in accounts payable. For the three months ended June 30, 1998, the
amounts of $89, were included in interest expense. The amount of $3,265 was
included in accounts payable in the accompanying balance sheets.
McKinney & Moore, Inc. filed a lawsuit against the Company for collection of a
past due account in the total of $3,802, in the District Court of Henderson
County, Texas. On February 25, 1993, McKinney & Moore, Inc. received a Judgment
to recover the debt, attorney fees of $1,250, prejudgement in the amount of
$211, plus interest at 10% per annum from the date of Judgment until paid in
full. The Company has included attorney fees of $1,250 in accounts payable. For
the three months ended June 30, 1998, the amount of $126, were included in
interest expense. The amount of $3,802 was included in accounts payable in the
accompanying balance sheets.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None
Page 10
ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
ITEM 7. SUBSEQUENT EVENTS
On September 21, 1998, the Company's Board of Directors approved the trade of
10,000,000 shares of Radiation Disposal Systems, Inc. for the 1,000,000
authorized shares of Asset Technology International, Inc. On such date Manuel E.
Kane resigned as President, Principal Executive Officer, Principal Financial and
Accounting Officer, Treasurer and Director and Rudy W. De La Garza was elected
as director by Albert D. Kane, the sole remaining director of the Company, until
his successor is elected, to fill the vacancy on the board resulting from Manuel
E. Kane's resignation. On such day Albert D. Kane resigned as Chairman of the
Board, Secretary and Director and Wayne Gronquist was elected as director by
Rudy W. De La Garza, the sole remaining director of the Company, until his
successor is elected, to fill the vacancy on the board resulting from Albert D.
Kane's resignation. Rudy W. De La Garza was elected by the Board as President
and Chief Executive Officer of the Company and Wayne Gronquist was elected by
the Board to the offices of Executive Vice President and Secretary. The
resignations of Manuel E. Kane and Albert D. Kane as directors and officers of
the Company was accepted. The transaction of the trade of shares resulted in the
transfer of an approximate 50.0056% controlling interest in the company to the
two single shareholders of Asset Technology International, Inc., namely, the
JonRuco Company and Wayne Gronquist, Trustee both owning equal shares of Asset
Technology International, Inc. prior to the trade.
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.
RADIATION DISPOSAL SYSTEMS, INC.
DATE: BY: /s/ Rudy W. De La Garza
--------------------------------
Rudy W. De La Garza - President & CEO
Page 11