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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________
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 September 30, 1997
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended to
----------------------- ----------------------
Commision 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 of (I.R.S. Employer Identification No.)
Incorporation or Organization)
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 Changes Since Last Report.
Indicate by 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 [ ]
<PAGE>
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 September 30, 1997, the Registrant had outstanding 21,142,188 shares
of its Common Stock, par value $.0001 per share.
FORWARD LOOKING STATEMENTS
Certain statements included in this Quarterly Report are not based on
historical facts, but are forward looking statements. These statements can be
identified by the use of forward looking terminology such as "believes",
"expects", "may", "will", "should", or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy. These statements reflect the Company's reasonable judgments with
respect to future events and are subject to risks and uncertainties that could
cause actual results to differ materially from those in the forward looking
statements. Such risks and uncertainties include, but are not limited to the
completion of an economically viable HTV system and the development and
marketing of additional systems. The Company must also generate additional
resources to enable it to continue the completion of an HTV system. Such
additional resources may be generated through the sale of additional equity
securities, the sale of an existing system, alliances, joint ventures or other
business transactions which would generated sufficient resources. Other factors
such as changes in business conditions and changes in regulations and laws may
also impact the outcome of forward looking statements.
<PAGE>
Seiler Pollution Control Systems, Inc.
Form 10-Q
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Item No. Page
- -------- ----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.................................. 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 9
Item 2. Changes in Securities................................ 9
Item 3. Defaults upon Senior Securities...................... 9
Item 4. Submission of Matters to a Vote of Security-Holders.. 9
Item 5. Other Information.................................... 9
Item 6. Exhibits and Reports on Form 8-K..................... 9
Signatures..............................................Signature
Page
Financial Data Schedule.................................Last Page
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
1
<PAGE>
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
-------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
<TABLE>
<CAPTION>
September 30, 1997
(Unaudited) March 31, 1997
--------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash $893,295 $4,188,278
Prepaid expenses and sundry receivables 630,366 207,066
--------------- -------------
Total Current Assets 1,523,661 4,395,344
--------------- -------------
HIGH TEMPERATURE VITRIFICATION SYSTEMS
Advances to supplier 11,917,971 9,518,246
Construction in progress 2,373,030 1,000,000
--------------- -------------
14,291,001 10,518,246
OTHER ASSETS
Licensing agreements, less accumulated amortization of
$1,336,716 and $1,178,048 at September 30, 1997 and
March 31, 1997, respectively 3,423,284 3,581,952
Advances to related party 512,589 516,832
Vetrotherm option 167,920 167,920
Deposits 121,315 27,776
--------------- -------------
4,225,108 4,294,480
--------------- -------------
PROPERTY AND EQUIPMENT - AT COST (net of
accumulated depreciation of $2,186 at
September 30, 1997 and March 31, 1997, respectively) 362,587 356,084
--------------- -------------
$20,402,357 $19,564,154
=============== =============
</TABLE>
See notes to financial statements.
LIABILITIES
<TABLE>
<CAPTION>
September 30, 1997
(Unaudited) March 31, 1997
------------- --------------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable - bank $2,172,133 $ -
Accounts payable 579,123 1,005,577
Accrued expenses 826,719 637,337
------------- -------------
Total Current Liabilities 3,577,975 1,642,914
LONG-TERM DEBT
Licensing agreements payable 1,977,250 1,977,250
Loans payable - stockholders 784,973 913,627
DEFERRED INCOME - GOVERNMENT SUBSIDY 1,813,585 -
MINORITY INTEREST 1,880,000 1,880,000
------------- -------------
10,033,783 6,413,791
------------- -------------
STOCKHOLDERS' EQUITY
COMMON STOCK
Common stock, $.0001 par value; authorized 25,000,000
shares, issued and outstanding 21,142,188 shares at
September 30, 1997 and March 31, 1997, respectively 2,115 2,115
ADDITIONAL PAID IN CAPITAL 26,538,439 26,538,439
ACCUMULATED DEFICIT (15,514,699) (12,906,183)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (657,281) (484,008)
------------- -------------
10,368,574 13,150,363
------------- -------------
$20,402,357 $19,564,154
============= ============
</TABLE>
2
<PAGE>
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
-------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30,
------------------------------- ---------------------------------
1997 1996 1997 1996
------------ -------------- --------------- ------------
<S> <C> <C> <C> <C>
REVENUE $104,488 $87,300 $ -- $29,427
------------ -------------- --------------- ------------
OPERATING EXPENSES
Research and development 875,000 199,525 875,000 119,448
Professional and other consulting fees 691,929 287,570 342,529 123,663
General and administrative 473,068 741,365 333,849 610,508
Salaries, wages and related fringe benefits 468,517 255,765 243,473 129,085
Depreciation and amortization 158,668 159,352 79,334 79,766
------------ -------------- --------------- ------------
2,667,182 1,643,577 1,874,185 1,062,470
------------ -------------- --------------- ------------
Loss From Operations (2,562,694) (1,556,277) (1,874,185) (1,033,043)
------------ -------------- --------------- ------------
OTHER (EXPENSE) INCOME
Miscellaneous (expense) income (16,851) 12,795 (16,851) 12,795
Interest income 8,244 -- 8,244 --
Interest expense (37,215) (1,385) (22,005) (1,371)
------------ -------------- --------------- ------------
(45,822) 11,410 (30,612) 11,424
------------ -------------- --------------- ------------
Net Loss $(2,608,516) $ (1,544,867) $ (1,904,797) $(1,021,619)
============ ============== ============== ============
Loss Per Common Share $ (0.12) $ (0.08) $ (0.09) $ (0.05)
============ ============== ============== ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,142,188 18,999,579 21,142,188 19,392,627
============= ============== ============== ============
</TABLE>
See notes to financial statements.
3
<PAGE>
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
-------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
----------------------------------------------------
<TABLE>
<CAPTION>
Foreign
Common Stock Additional Currency
-------------------- Paid-in Accumulated Translation
Shares Amount Capital Deficit Adjustment Total
---------- -------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1996 18,525,569 $1,853 $17,897,081 $ (7,349,683) $ 856,606 $11,405,857
PERIOD ENDED SEPTEMBER 30, 1996
Issuance of common shares under
stock option plan for cash 550,000 55 1,055,570 - - 1,055,625
Issuance of common stock for cash 284,332 29 884,492 - - 884,521
Issuance of common stock for legal fees 32,726 3 91,175 - - 91,178
Foreign currency translation adjustment - - - - (542,091) (542,091)
Net loss - - - (1,544,867) - (1,544,867)
---------- ------ ----------- ------------- --------- -----------
BALANCE, SEPTEMBER 30, 1996 (Unaudited) 19,392,627 $1,940 $19,928,318 $ (8,894,550) $ 314,515 $11,350,223
========== ====== =========== ============ ========= ===========
BALANCE, MARCH 31, 1997 21,142,188 $2,115 $26,538,439 $(12,906,183) $(484,008) $13,150,363
PERIOD ENDED SEPTEMBER 30, 1997
Foreign currency translation adjustment - - - - (173,273) (173,273)
Net loss - - - (2,608,516) - (2,608,516)
---------- ------ ----------- ------------- --------- -----------
BALANCE, SEPTEMBER 30, 1997 (Unaudited) 21,142,188 $2,115 $26,538,439 $(15,514,699) $(657,281 $10,368,574
========== ====== =========== ============ ========= ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
-------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
----------------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($2,608,516) $ (1,544,867)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 158,668 159,352
Foreign currency translation 215,556 (533,878)
Changes in assets and liabilities:
Prepaid expenses and sundry receivables (423,300) (17,524)
Deposits (93,539) (7,728)
Accounts payable (426,434) 66,204
Accrued expenses 189,382 36,811
--------------- ---------------
Net Cash Used In Operating Activities (2,988,183) (1,841,630)
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of property and equipment (6,503) (33,833)
Advances for High Temperature Vitrification Systems (3,772,755) (864,350)
--------------- ---------------
Net Cash Used In Investing Activities (3,779,258) (898,183)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan payable - bank 2,172,133 -
Proceeds from Government subsidies 1,813,585 -
Proceeds from issuance of common stock - 1,940,146
(Payments) proceeds on loans payable - stockholder (128,654) 606,776
Advances to related party 4,243 30,888
--------------- ---------------
Net Cash Provided By Financing Activities 3,861,307 2,577,810
EFFECT OF EXCHANGE RATE CHANGES ON CASH (388,849) (8,213)
--------------- ---------------
Net Decrease In Cash (3,294,983) (170,216)
CASH - BEGINNING OF PERIOD 4,188,278 200,351
--------------- ---------------
CASH - END OF PERIOD $893,295 $30,135
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the period for interest $30,386 $1,385
============== ==============
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
The Company issued 32,726 shares of common stock in
exchange for legal services aggregating $91,178.
</TABLE>
See notes to financial statements.
5
<PAGE>
SEILER POLLUTION CONTROL SYSTEMS, INC.
--------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 1997 AND 1996
---------------------------
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended September 30, 1997
are not necessarily indicative of the results that may be expected for the year
ending March 31, 1998. 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, 1997.
6
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations
- ----------
Results of Operations -- September 30, 1997 vs. September 30, 1996
- ------------------------------------------------------------------
The Company experienced a net loss for the three months ended
September 30, 1997 of $1,904,797 as compared to a net loss of $1,021,619 for
the three months ended September 30,1996. The Company's net loss for the six
months ended September 30, 1997 was $2,608,516 as compared to a net loss of
$1,544,867 for the six months ended September 30, 1996. The change in the net
loss for these periods is principally the result of additional consulting
expenses, research and development expenses related to the development of High
Temperature Vitrification (HTV) systems, salaries, wages, and related fringe
benefits.
The Company made payments aggregating $3,772,755 toward completion of
its HTV Systems during the six months ended September 30, 1997, of which
$1,808,976 were expended during the three months ended September 30, 1997. The
Company funded these capital expenditures and operating losses by drawing on the
line of credit provided by the Dresdner Bank and the subsidies provided by the
German government as well as from existing cash reserves.
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 financial
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 funding to assure continuation of the Company's
operations.
Since the groundbreaking in May, 1997 for the Company's commercial HTV
System in Freiberg, Germany, construction continues on schedule for the $12.7
million US (18.6 DM) project. Site preparation is finished and erection of the
building is continuing. Installation of the HTV System began in late 1997 with
operations anticipated to begin early in 1998.
In March, 1997, the Company acquired 60% of the issued stock of N.W.
Technology, Inc. that will utilize Seiler's technology to design and produce a
pilot plant to process low-level nuclear waste. Construction of the pilot
equipment in Leibstadt, Germany has advanced and testing begun on the modular
units that make up the system. Scientific research is being conducted on the
melting process at low temperatures. In October, 1997, N.W. Technology changed
its name to Seiler Nuclear Control, Inc.
7
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations (Continued)
- ----------
The Company announced in July 1997 the formation of a partnership
joining Seiler SEPC AG (a wholly owned subsidiary of Seiler Pollution Control
Systems, Inc.) with Swiss Steel AG, Hydrotest Ingenieurunternehmung AG and
Result Technology AG. The partnership will operate under the name PyRec and
wants to build and operate an auto waste recycling facility in Emmenbrucke,
Switzerland, to provide a safe, environmentally sound method to address the
growing disposal problem created by automobile wastes. Seiler SEPC AG would use
its vitrification technology to convert toxic auto shredder waste into reusable
nonhazardous materials. The success of this project is largely dependent on
support from the Swiss Car Importers Association Foundation (IGEA) which is
evaluating other competing technologies as well.
In July 1997, the Company also received a $150,000 grant from the Four
County Solid Waste District, including Coshocton, Ohio to build a pilot HTV
System and research laboratory in the city of Coshocton. Construction of the
pilot plant, the first Seiler facility to be built in the United States, began
in October 1997. Later plans include building a full-sized commercial HTV
System on the same site.
Notification was received in September 1997 from the California
Environmental Protection Agency's Department of Toxic Substance Control that
Seiler's patented HTV system produced recyclable materials from three different
waste feedstocks (steel mill dust, garnet blast media residual and industrial
wastewater treatment sludge) used in the production of glass and were exempt
from classification as "wastes." This determination allowed the company to
proceed with plans to build a commercial high temperature vitrification facility
in California.
8
<PAGE>
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 exhibit is filed herewith:
27. Financial Data Schedule.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter which ended September 30, 1997.
9
<PAGE>
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 November 13, 1997 Seiler Pollution Control Systems, Inc.
----------------- --------------------------------------
(Registrant)
By: /s/ Alan B. Sarko
--------------------------------------
Vice President and Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Seiler Pollution Control Systems, Inc. and
Subsidaries as of 9/30/97 and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the six months then ended,
and is qualified in its entirety by reference to such financial statement
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 893,295
<SECURITIES> 0
<RECEIVABLES> 630,366
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,523,661
<PP&E> 364,773
<DEPRECIATION> (2,186)
<TOTAL-ASSETS> 21,277,357
<CURRENT-LIABILITIES> 3,577,975
<BONDS> 1,997,250
0
0
<COMMON> 2,115
<OTHER-SE> 11,241,459
<TOTAL-LIABILITY-AND-EQUITY> 21,277,357
<SALES> 0
<TOTAL-REVENUES> 104,448
<CGS> 0
<TOTAL-COSTS> 1,792,182
<OTHER-EXPENSES> 45,822
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,733,516)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,733,516)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,733,516)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
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