FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998
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 of I.R.S. Employer
incorporation or organization Identification No.
5115 Parkcenter Avenue, Suite 270, Dublin, Ohio 43017
(Address of Principal Executive Office) (Zip Code)
614-792-0400
(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
The number of shares of registrant's Common
Stock, $.0001 par value, outstanding as
of April 13, 1999 was 7,195,956 shares.
<PAGE>
SEILER POLLUTION CONTROL SYSTEMS, INC AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
Number
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements F1 - F7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 3 - 5
Item 3. Quantitative and Qualitative Disclosure
About Market Risk 6
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings 6 - 7
Item 2. Change in Securities and Use of Proceeds 7
Item 3. Defaults upon Senior Securities 7
Item 4. Submission of Matters to a Vote of
Security Holders 7 - 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8 - K 8
SIGNATURES 9
2
<PAGE>
SEILLER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
--------------------- ----------------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 136,995 $ 383,234
Accounts receivable 317,643 -
Prepaid expenses and sundry receivables 98,612 143,104
Inventories 2,395 -
--------------------- ----------------------
TOTAL CURRENT ASSETS 555,645 526,338
OTHER ASSETS
Licensing agreements, less accumulated amortization of
$1,654,052 and $1,495,384 3,105,951 3,264,619
Other assets 65,316 457,670
--------------------- ----------------------
3,171,267 3,722,289
--------------------- ----------------------
NET REALIZABLE ADVANCES FOR HIGH TEMPERATURE
VITRIFICATION SYSTEMS - 3,316,809
PROPERTY, PLANT, AND EQUIPMENT, net of accumulated depreciation
Equipment, Buildings and Land 4,507,852 3,861,664
High temperature vitrification systems 5,783,374 5,151,960
--------------------- ----------------------
10,291,226 9,013,624
--------------------- ----------------------
$ 14,018,138 $ 16,579,060
===================== ======================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 2,012,651 $ 1,270,396
Current portion of long - term debt 416,892 -
Accrued expenses 558,738 514,665
--------------------- ----------------------
TOTAL CURRENT LIABILITIES 2,988,281 1,785,061
--------------------- ----------------------
LICENSING AGREEMENT PAYABLE 1,977,250 1,977,250
LONG TERM DEBT - BANK 4,709,850 3,501,858
LOANS PAYABLE - STOCKHOLDERS 724,964 677,781
DEFERRED INCOME - GOVERNMENT SUBSIDIES 3,288,629 3,309,662
MINORITY INTEREST 2,369 88,098
CONVERTIBLE NOTES PAYABLE 400,000 -
STOCKHOLDERS' EQUITY:
Common stock, $0.0001 par value, authorized 35,000,000 shares,
issued and outstanding 3,943,418 394 394
Additional paid in capital 31,463,591 31,007,211
Accumulated deficit (27,807,072) (23,042,876)
Accumulated other comprehensive loss (3,730,118) (2,725,379)
--------------------- ----------------------
TOTAL STOCKHOLDERS' DEFICIT (73,205) 5,239,350
--------------------- ----------------------
$ 14,018,138 $ 16,579,060
===================== ======================
</TABLE>
F-1
<PAGE>
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended September 30, Six months ended September 30,
------------------------------------------ ------------------------------------------
1998 1997 1998 1997
------------------ ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
REVENUE $ 397,331 $ - $ 397,331 $ -
COST OF SALES 123,631 - 123,631 -
------------------ ------------------- ------------------- -------------------
273,700 - 273,700 -
OPERATING EXPENSES
Research and development - 875,000 15,144 875,000
Valuation adjustment of loans for
HTV Systems 519,732 - 3,897,323 -
Professional and other consulting fees 84,605 330,574 369,256 691,929
Salaries, wages and related
fringe benefits 254,726 243,473 400,353 468,517
General and administrative 181,324 333,849 415,574 473,068
Depreciation and amortization 191,332 79,334 365,532 158,668
------------------ ------------------- ------------------- -------------------
1,231,719 1,862,230 5,463,182 2,667,182
------------------ ------------------- ------------------- -------------------
LOSS FROM OPERATIONS 958,019 1,862,230 5,189,482 2,667,182
OTHER INCOME AND (EXPENSES):
Miscellaneous 60,754 (28,806) 217,898 87,637
Interest income 294,699 8,244 296,023 8,244
Interest expense (71,656) (22,005) (174,364) (37,215)
------------------ ------------------- ------------------- -------------------
TOTAL OTHER INCOME AND (EXPENSES) 283,797 (42,567) 339,557 58,666
------------------ ------------------- ------------------- -------------------
LOSS BEFORE MINORITY INTEREST 674,222 1,904,797 4,849,925 2,608,516
Minority interest 2,369 - (85,729) -
------------------ ------------------- ------------------- -------------------
NET LOSS $ 676,591 $ 1,904,797 $ 4,764,196 $ 2,608,516
================== =================== =================== ===================
NET LOSS PER SHARE - BASIC $ 0.1 $ 0.5 $ 1.21 $ 0.74
================== =================== =================== ===================
WEIGHTED SHARES USED IN COMPUTATION - BASIC 3,943,418 3,523,685 3,943,418 3,523,685
================== =================== =================== ===================
</TABLE>
F-2
<PAGE>
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended September 30,
-------------------------------------------------
1998 1997
----------------------- -----------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (4,764,196)$ (2,608,516)
----------------------- -----------------------
Valuation adjustment of loans for HTV Systems - -
Adjustments to reconcile net loss to net
cash used in operating activities:
Foreign currency translation - 215,556
Depreciation and amortization 365,532 158,668
Minority interest in net losses of subsidiaries - -
Changes in operating assets and liabilities:
Increase in accounts receivable - -
(Increase) decrease in prepaid expenses and sundry receivables - (423,300)
Increase in inventories - -
Increase in deposits - (93,539)
Decrease in other assets - -
Increase (decrease) in accounts payable - (426,434)
Increase in accrued expenses - 189,382
Decrease in Government subsidies - -
----------------------- -----------------------
365,532 (379,667)
----------------------- -----------------------
CASH USED IN OPERATING ACTIVITIES (4,398,664) (2,988,183)
----------------------- -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (853,052) (6,503)
Advances for High Temperature Vitrification Systems - (3,772,755)
----------------------- -----------------------
CASH USED IN INVESTING ACTIVITIES (853,052) (3,779,258)
----------------------- -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Government subsidies - 1,813,585
Issuance of convertible debentures -
Proceeds from convertible notes payable - -
Proceeds from bank loans - 2,172,133
Advances to related party - 4,243
Borrowings (payments) of debt to stockholder - (128,654)
----------------------- -----------------------
CASH PROVIDED BY FINANCING ACTIVITIES - 3,861,307
----------------------- -----------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS - (388,849)
----------------------- -----------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,251,716) (3,294,983)
CASH AND CASH EQUIVALENTS - beginning of period 383,234 4,188,278
----------------------- -----------------------
CASH AND CASH EQUIVALENTS - end of period $ (4,868,482)$ 893,295
======================= =======================
</TABLE>
F-3
<PAGE>
SEILER POLLUTION CONTROL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
of Seiler Pollution Control Systems, Inc. (the "Company") 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 considered necessary for a fair
presentation (consisting of normal recurring accruals) have been
included. The preparation of financial statements in conformity with
generally accepted accounting principles 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
revenues and expenses during the reporting period. Actual results could
differ from those estimates. Operating results for the six month period
ended September 30, 1998 are not necessarily indicative of the results
that may be expected for the year ending March 31, 1999. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K
for the year ended March 31, 1998.
2. ACQUISITION
In May 1998 APC Advanced Pollution Control AG ("APC")
(formerly SEPC AG) a wholly owned subsidiary of the Company acquired
100% of the issued and outstanding
common stock of Pyrec AG for approximately $210,000. The acquisition of
this company has been accounted for as a purchase and accordingly, the
assets acquired and liabilities assumed have been recorded at their
estimated fair values which approximated $37,000. The excess purchase
price of $173,000 was recorded as goodwill and was written off during
the quarter.
On June 2, 1998, the Company acquired an 80% interest in a
newly formed subsidiary called Seiler Abfallbehandlungs und
Dienstleistungs GmbH ("SABD") in return for certain future commitments
on behalf of the Company. The remaining 20% of the stock of SABD is
owned by Dr. Gerold Weser, the Company's president.
F-4
<PAGE>
3. WRITE-OFF OF NET REALIZABLE ADVANCES FOR HIGH TEMPERATURE
VITRIFICATION SYSTEMS
Due to the bankruptcy of Seiler Hochtemperatur-Trennanlagen AG
("SHT") on February 11, 1999 net realizable advances for high
temperature vitrification systems of
$3,862,323 as of September 30, 1998 have been written-off.
4. COMMITMENTS AND CONTINGENCIES
On March 30, 1998, Seiler Trenn-Schmelzanlagen Betriebs GmbH
("STSB"), a 50% owned subsidiary of Seiler SEPC AG, a 100% owned
subsidiary of the Company, entered into an agreement with AWU
Abfallwirtschaft und Recycling Berlin GmbH ("AWU"). The agreement
stipulates that STSB must purchase a chemical-physical liquid waste
treatment plant located in Berlin, Germany from AWU along with
laboratory equipment and instruments, vehicles and furniture and
fixtures for a price of $1.2 million German marks ($648,600 at March
31, 1998), and lease and operate the site for a period of 20 years.
In addition STSB must (i) invest $7.5 million German marks
($4,167,000 at June 30, 1998) by December 31, 1999 for the construction
of this new vitrification plant with a penalty of 80% of the shortfall
between the required investment and what was actually spent and (ii)
commit 1 million German marks for modernizing and enlarging of the
existing leased building with such payment for modernization due July
15, 1998. Such payment was not made and is now accruing interest at the
rate of 8% per year.
AWU must provide a financing commitment from a large German
Bank by September 30, 1998. Such commitment has not yet been provided.
STSB has the right to terminate this agreement if it does not
receive the necessary permits required for the construction of the
vitrification plant or the modernization of the existing liquid waste
treatment plant.
The lease portion of this agreement begins July 1, 1998 and
ends June 30, 2008 with automatic renewals for two periods of 5 years
each, unless written notice is given six months in advance. The monthly
rental for a period of 5 years is 7,256 German Marks ($4,031 at July 1,
1998). Effective January 1, 1999 the leased property was increased and
the minimum monthly rental became 19,568 German Marks ($11,717).
Beginning July 1, 2003 full fair market value rental will apply.
On July 1, 1998, STSB, SABD, and AWU executed an agreement
transferring the rights and obligations under the purchase agreement
and rental lease agreement from STSB to SABD. Accordingly the plant and
equipment valued at 1,200,000 German Marks ($718,560) was transferred
as well.
F-5
<PAGE>
LEGAL MATTERS
In March 1998 the Registrant was sued by Monoglas
Anlagenvertriebs, GmbH for 1,000,000 German Marks ($550,000) plus
interest since October 21, 1994 for payment of a consulting contract.
This action is considered to be in its early stage of arbitration but
it is the intention of the Company's management to contest this matter
vigorously and management believes that it has meritorious defenses to
this claim.
In June and November 1998, APC Advanced Pollution Control AG
("APC") (formerly SEPC AG) was sued by Meyers Consulting for tax
consulting and audit fees of 63,678 Swiss Francs ($44,000) and 60,639
Swiss Francs ($42,000) plus interest, respectively.
APC settled the first claim including interest in August 1998 and the
second claim excluding interest in February 1999. Meyers Consulting
currently works for the Company.
In November 1998 SHT sued APC for 4,327,218 Swiss Francs
($2,984,000) in respect of charges and expenses which SHT had invoiced
the Company in March 1998. Due to the bankruptcy of SHT (see Note 3)
the Administrator of SHT's estate can prosecute this claim. The
Company's management intends to contest this matter vigorously and
management believes that it has meritorious defenses to this claim.
In December 1998 APC was sued by Dresdner Management
Consulting, GmbH for 320,732 German Marks plus interest at 5% since
December 17, 1997 ($190,608) for unpaid consulting costs. The Company
will not contest this action and such amount has been accrued.
The World Wildlife Foundation filed a complaint against Pyrec
AG in Switzerland on March 12,1998 regarding environmental protection
aspects of a project that Pyrec is involved in concerning the treatment
of the remains of shredded scrapped automobiles. The Company is in the
process of seeking an out of court settlement.
5. CONVERTIBLE DEBENTURES - PROMISSORY NOTES
In June 1998, the Company received $220,000 from the sale of
7% cumulative convertible debentures pursuant to a registration under
Regulation D. Interest on the debentures is payable in cash or common
stock upon conversion, at the option of the Company. The holder may
convert the debentures into common stock at the lesser of (1) 120% of
the 5 day average bid price for the 5 trading days immediately
preceding the closing date or (2) 65% of the 5 day average closing bid
price for the 5 trading days immediately preceding the applicable
conversion date.
For purposes of the accompanying financial statements, the
convertible debentures are recorded as additional paid in capital since
the debenture agreement does not provide for repayment of the debenture
in cash and requires a mandatory conversion into common stock no later
than 36 months after issuance.
F-6
<PAGE>
In July 1998, the Company received $230,000 from the sale of
7% cumulative convertible debentures pursuant to a registration under
Regulation D. Interest on the debentures is payable in cash or common
stock upon conversion, at the option of the Company. The holder may
convert the debentures into common stock at the lesser of (1) 120% of
the 5 day average bid price for the 5 trading days immediately
preceding the closing date or (2) 65% of the 5 day average closing bid
price for the 5 trading days immediately preceding the applicable
conversion date.
For purposes of the accompanying financial statements, the
convertible debentures are recorded as additional paid in capital since
the debenture agreement does not provide for repayment of the debenture
in cash and requires a mandatory conversion into common stock no later
than 36 months after issuance.
In July 1998 the Company received gross proceeds of $250,000
and $150,000, from the issuance of unsecured convertible promissory
notes bearing interest at 8% per annum. The principal balance and all
unpaid interest thereon shall be due and payable on December 31, 1998
(the "Maturity Date"). On the Maturity Date the amount due shall be
payable in cash or, at the option of holder ,$.0001 par value per
share, of Company's common stock (the "Conversion Option"). In order to
receive common stock holder must exercise the Conversion Option prior
to December 17, 1998 by providing written notice of the intent to
receive common stock in lieu of cash on the Maturity Date. The number
of shares of common stock will be calculated at the rate of one share
of common stock for each $1.80 of the amount due. Holder may exercise
the Conversion Option in full or in part. If holder chooses to exercise
the Conversion Option in part the amount due which shall be converted
into shares shall be at least $25,000 or a multiple thereof.
6. STOCK SPLIT
On September 24, 1998, pursuant to a Special Meeting of
Shareholders, the Board authorized a 1 for 6 reverse stock split of the
Company's $.0001 par value common stock. All references in the
accompanying financial statements to the number of common shares and
all computations of per share amounts have been restated to reflect the
reverse stock split.
F-7
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE-MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE-MONTHS ENDED
SEPTEMBER 30, 1997
Revenues
The Company commenced operations during the quarter with the
completion of the recycling facility in Freiberg, Germany by the end of
August 1998, with one vitrification line active. In addition the
Company's subsidiary SABD has been operating a leased chemical/physical
treatment plant which is designed to treat liquid hazardous waste since
July 1, 1998. Accordingly, the Company has generated revenues of
$397,331 for the period.
Gross profit on the above revenues was $273,700 or 68.9%.
Operating Expenses
Operating expenses were $1,231,719 for the three months ended
September 30,1998, compared to $1,862,230 for the three months ended
September 30, 1997. The principal items were research and development
expenses of $0 in the current period while the three months ended
September 30, 1997 had expenses of $875,000, valuation adjustments of
loans for High Temperature Vitrification Systems of $519,732 compared
to $0 for the three months ended September 30, 1997, salaries, wages
and related fringe benefits of $254,726 for the three months ended
September 30, 1998, compared to $243,373 for the prior years comparable
period, general and administrative expenses of $181,324 for the three
months ended September 30, 1998 compared to $333,849 for the three
months ended September 30, 1997, professional and other consulting fees
of $84,605 for the current three month period versus $330,574 for the
prior period and depreciation and amortization of $191,332 for the
three months ended September30, 1998 compared to $79,334 for the six
months ended September 30, 1997.
The increase in valuation adjustments of loans for High
Temperature Vitrification Systems of $519,732 is due to the write-off
of advances to the manufacturer of these systems who declared
bankruptcy in February 1999 (See Note 3).
Interest expense increased to $71,656 for the three months
ended September 30, 1998 compared to $8,244 for the three months ended
September 30, 1997 due to increased borrowings under the Dresdner Bank
Financing agreements and interest on convertible notes and debentures.
3
<PAGE>
SIX-MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO SIX-MONTHS ENDED
SEPTEMBER 30, 1997
Revenues
The Company commenced operations during the quarter with the
completion of the recycling facility in Freiberg, Germany by the end of
August 1998, with one vitrification line active. In addition the
Company's subsidiary SABD has been operating a leased chemical/physical
treatment plant which is designed to treat liquid hazardous waste since
July 1, 1998. Accordingly, the Company has generated revenues of
$397,331 for the period.
Gross profit on the above revenues was $273,700 or 68.9%.
.
Operating Expenses
Operating expenses increased by $2,796,000 or 105% to
$5,463,182 for the six months ended September 30,1998, compared to
$2,667,182 for the six months ended September 30, 1997. The principal
items were research and development expenses of $15,144 in the current
six month period while the six months ended September 30, 1997 had
expenses of $875,000, valuation adjustments of loans for High
Temperature Vitrification Systems of $3,897,323 compared to $0 for the
six months ended September 30, 1997, salaries, wages and related fringe
benefits of $400,353 for the six months ended September 30, 1998,
compared to $468,517 for the prior years comparable period, general and
administrative expenses of $415,574 for the six months ended September
30, 1998 compared to $473,068 for the six months ended September 30,
1997, professional and other consulting fees of $369,256 for the
current six month period versus $691,929 for the prior period and
depreciation and amortization of $365,532 for the six months ended
September30, 1998 compared to $158,668 for the six months ended
September 30, 1997.
The increase in valuation adjustments of loans for High
Temperature Vitrification Systems of $3,897,323 is due to the write-off
of advances to the manufacturer of these systems who declared
bankruptcy in February 1999 (See Note 3).
Interest expense increased to $174,364 for the six months
ended September 30, 1998 compared to $37,215 for the six months ended
September 30, 1997 due to increased borrowings under the Dresdner Bank
Financing agreements and interest on convertible debentures.
4
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company funds its capital requirements with a combination
of equity financing, government subsidies and debt financing. The
Company utilizes these sources of capital to construct HTV Systems,
perform research and development related to these systems, and meet the
daily requirements of operating the Company.
In June 1998, the Company received $220,000 from the sale of
7% cumulative convertible debentures pursuant to a registration under
Regulation D. Interest on the debentures is payable in cash or common
stock upon conversion, at the option of the Company. The holder may
convert the debentures into common stock at the lesser of (1) 120% of
the 5 day average bid price for the 5 trading days immediately
preceding the closing date or (2) 65% of the 5 day average closing bid
price for the 5 trading days immediately preceding the applicable
conversion date.
In July 1998, the Company received $230,000 from the sale of
7% cumulative convertible debentures pursuant to a registration under
Regulation D. Interest on the debentures is payable in cash or common
stock upon conversion, at the option of the Company. The holder may
convert the debentures into common stock at the lesser of (1) 120% of
the 5 day average bid price for the 5 trading days immediately
preceding the closing date or (2) 65% of the 5 day average closing bid
price for the 5 trading days immediately preceding the applicable
conversion date.
In July 1998 the Company received gross proceeds of $250,000
and $150,000, from the issuance of unsecured convertible promissory
notes bearing interest at 8% per annum. The principal balance and all
unpaid interest thereon shall be due and payable on December 31, 1998
(the "Maturity Date"). On the Maturity Date the amount due shall be
payable in cash or, at the option of holder ,$.0001 par value per
share, of Company's common stock (the "Conversion Option"). In order to
receive common stock holder must exercise the Conversion Option prior
to December 17, 1998 by providing written notice of the intent to
receive common stock in lieu of cash on the Maturity Date. The number
of shares of common stock will be calculated at the rate of one share
of common stock for each $1.80 of the amount due. Holder may exercise
the Conversion Option in full or in part. If holder chooses to exercise
the Conversion Option in part the amount due which shall be converted
into shares shall be at least $25,000 or a multiple thereof.
EFFECT OF CURRENCY ON RESULTS OF OPERATIONS
The results of operations and the financial position of the
Company's subsidiaries outside the United States is reported in the
relevant foreign currency (primarily Swiss Francs and German Marks) and
then translated into US dollars at the applicable foreign exchange rate
for inclusion in the Company's consolidated financial statements.
Accordingly, the results of operations of such subsidiaries as reported
in US dollars can vary significantly as a result of changes in currency
exchange rates (in particular, the exchange rates between the Swiss
Franc, the German Mark and the US dollar).
5
<PAGE>
Item 3.
Quantitative and Qualitative Disclosure About Market Risk
Not Applicable
PART II - Other Information
Item 1.
Legal Proceedings
In March 1998 the Registrant was sued for by Monoglas Anlagenvertriebs,
GmbH for 1,000,000 German Marks ($550,000) plus interest since October
21, 1994 for payment of a consulting contract. This action is
considered to be in its early stage of arbitration but it is the
intention of the Company's management to contest this matter vigorously
and management believes that it has meritorious defenses to this claim.
The World Wildlife Foundation filed a complaint against Pyrec AG in
Switzerland on March 12,1998 regarding environmental protection aspects
of a project that Pyrec is involved in concerning the treatment of the
remains of shredded scrapped automobiles. The Company is in the process
of seeking an out of court settlement.
In June and November 1998, APC Advanced Pollution Control AG ("APC")
(formerly SEPC AG) was sued by Meyers Consulting for tax consulting and
audit fees of 63,678 Swiss Francs ($44,000) and 60,639 Swiss Francs
($42,000) plus interest, respectively. APC settled the first claim
including interest in August 1998 and the second claim excluding
interest in February 1999.
Meyers Consulting currently works for the Company.
In November 1998 a Baylord Consulting AG, consulting firm initiated
debt collection proceedings against APC to collect fees for technical
and engineering services in the amount of 65,823 Swiss Francs ($45,000)
plus interest. APC countersued in December 1998 saying such consulting
contract did not exist. This action was settled by APC paying 40,000
Swiss Francs ($28,000) in February 1999.
In November 1998 Seiler Hochtemperatur-Trennanlagen AG ("SHT") sued APC
for 4,327,218 Swiss Francs ($2,984,000) in respect of charges and
expenses which SHT had invoiced the Company in March 1998. Due to the
bankruptcy of SHT (see Note 3) the Administrator of SHT's estate can
prosecute this claim. The Company's management intends to contest this
matter vigorously and management believes that it has meritorious
defenses to this claim. In December 1998 an individual sued APC for
consulting services of 132,307 Swiss Francs ($96,000) plus interest at
5% since July 1, 1998. APC countersued to set such action aside. This
action was settled in February 1999 with APC promising to pay $55,000
by March 15, 1999. Such payment has not yet been made.
6
<PAGE>
The Administrator of the Seiler Hochtemperatur-Trennanlagen AG ("SHT")
bankruptcy estate has sued APC for 722,847 Swiss Francs ($499,000) plus
interest since April 1, 1998 for asserted performances of SHT. This
action is considered to be in its early stage of arbitration but it is
the Company's management's intention to contest this matter vigorously
and management believes that has meritorious defenses to this claim.
In December 1998 APC was sued by DMC Dresdner Management Consulting
GmbH for 320,732 German Marks plus interest at 5% since December 17,
1997 ($190,608) for unpaid consulting costs. The Company will not
contest this action and such amount has been accrued in the financial
statements.
Item 2.
Changes in Securities and Use of Proceeds
Not Applicable
Item 3.
Defaults Upon Senior Securities
The Company sold certain convertible debentures during October 1997 and
June 1998. Such debentures and/or one or more related documents contain
various Company warranties and representations which if not adhered to
in full can create a default which must be cured within the grace
period allotted therefore. A default occurred by virtue of the fact
that the Company's securities ceased trading on a recognized exchange
as a result of NASDAQ delisting which occurred on October 13, 1998.
Such default if not cured in a timely manner or if not waived by the
debenture holders can cause the entire balance of the principal
indebtedness to become due immediately. By agreement, each of the
debenture holders agreed to and did waive any and all existing defaults
for a period of one year. Such waiver of default is exclusive of and
does not pertain to any monetary penalties as are due and payable or
may become due and payable to such debenture holders by virtue of
Company delays in obtaining an effective date from the SEC with respect
to applicable Registration Statement (s) required to be filed pursuant
to Registration Rights Agreement (s) which accompanied the above
referenced convertible debentures.
Item 4.
Submission of Matters to a Vote of Security Holders
On September 24, 1998, the Company held a Special meeting of
Shareholders for the purpose of authorizing the Company's Board of
Directors to effectuate, in their discretion a reverse stock split of
all issued and outstanding Company common stock on the basis of no less
than 1 for 4 and no greater than 1 for 10. The shareholders
overwhelmingly approved the reverse stock split with
7
<PAGE>
approximately 99% of the voting quorum voting in favor. Based upon the
shareholder approval, the Board authorized a reverse stock split on the
basis of 1 for 6 effective October 1, 1998.
Item 5.
Other Information
Not Applicable
Item 6.
Exhibit and Reports on Form 8-K
A. Exhibits None
B. Reports on Form 8-K and 8-K/A
with date of report of February 12, 1999
filed February 23, 1999 and March 9,1999
indicating change of auditor
8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SEILER POLLUTION CONTROL SYSTEMS, INC.
Dated: By:
Alan B. Sarko
Vice President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000718827
<NAME> SEILER POLLUTION CONTROL SYSTEMS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 136,995
<SECURITIES> 0
<RECEIVABLES> 317,643
<ALLOWANCES> 0
<INVENTORY> 2,395
<CURRENT-ASSETS> 555,645
<PP&E> 10,491,226
<DEPRECIATION> 200,000
<TOTAL-ASSETS> 14,018,138
<CURRENT-LIABILITIES> 2,988,281
<BONDS> 6,687,100
0
0
<COMMON> 394
<OTHER-SE> (73,599)
<TOTAL-LIABILITY-AND-EQUITY> 14,018,138
<SALES> 397,331
<TOTAL-REVENUES> 397,331
<CGS> 123,631
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,231,719
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,656
<INCOME-PRETAX> (676,591)
<INCOME-TAX> 0
<INCOME-CONTINUING> (676,591)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (676,591)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
