SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF
THE SECURITIES EXCHANGE ACT 1934
For the Fiscal Year Ended December 31, 1997
Commission File Number: 0-13738
RADIATION DISPOSAL SYSTEMS, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1426581
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(State of Incorporation) (I.R.S. Employer Identification No.)
1373 East Morehead St., Suite 48, Charlotte, North Carolina 28204
- ----------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 376-5350
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Securities registered pursuant to Section 12(b) of the Act: NONE
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Securities registered pursuant to Section 12(b) of the Act: Common Stock,
$.001 par value
----- --- -----
Indicate by check mark whether the registrant (1) has filed all reports required
to be files 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 registrant has included disclosure of delinquent filers pursuant to Item 405
of Regulation S-K.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of July 31, 1998 was $0.
The number of shares of the Registrant's Common Stock outstanding as of July 31,
1998 was 9,977,495
DOCUMENTS INCORPORATED BY REFERENCE: NONE
TOTAL NO. OF PAGES: 47
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EXHIBIT INDEX ON PAGE: 20
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PART I
ITEM 1. BUSINESS
BUSINESS
Radiation Disposal Systems, Inc. (the "Company") was incorporated in North
Carolina on January 10, 1984, under the name Chem-Waste Corporation, to acquire
a patented process for reducinq the volume of contaminated insoluble organic
solid resin materials; to develop and market machines to utilize such process
(the "Process") to treat a variety of radioactive waste, and to continue
development work in connection with the Process and machines to improve and
expand their commercial applications and uses.
The Company also developed waste and water treatment technologies ("Ozone
Technologies") to treat nonradioactive wastes and water using the basic
component of the Process, ozone, in conjunction with, in some applications, the
light pro6uced by high intensity discharge ("HID") lamps. The Ozone Technologies
may be used to treat various types of waste. In connection with any application
of the Ozone Technologies, a system may be customed-designed and fabricated to
meet the particular needs of the purchaser.
The Company has been unsuccessful in marketing either the Process or the Ozone
Technologies. To date, the Company has generated no significant revenues. During
1992, the Company substantially ceased operations and terminated all but two of
its employees. The Company had very limited operations consisting in 1997 of
transfer agent activities resulting in revenues of $2,087. Manuel E. Kane and
Albert D. Kane, while serving as officers and Directors and having employment
contracts with the Company, have confined their activities to administrative
functions including, but not limited to, answering inquires, performing the
duties as the Company's transfer agent, and dealing with matters involved with
winding down the Company's operations. At December 31, 1997, the Company had no
working capital or prospects for increased revenues. Because the Company has
been unable to generate revenues and has no other sources to fund operations, it
is unlikely that the Company will have any operations in the future. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION" and "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."
The Company did not hold an annual meeting of shareholders or include audited
financial statements in its filinq of this Form 10-K because the estimated
expense of doing so would exhaust the Company's remaining funds. The Company has
included internally generated and unaudited financial statements in this Form
10-K.
NARRATIVE DESCRIPTION OF BUSINESS
Generally. The Company has been unsuccessful in marketing either the
Process or the Ozone Technologies. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION" and "FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA."
Competition. The Company attributes its inability to market the Process and
the Ozone Technology to the fact that the use of ozone as a means of waste or
water treatment is not a widely accepted technology. Producers use other means
of waste disposal and/or treatment such as chemical
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and biological treatment, burial, and in certain cases, incineration. Therefore,
the market for the Process and Ozone Technology has not developed and, in the
opinion of Management, may never develop.
There are a number of other firms offering various application: of ozone
technology. Most of these firms have been in business for a longer period of
time, are better established and better capitalized. Management is aware of at
least two other companies, Ultrox International ("Ultrox") and Para Oxidation,
that offer waste treatment systems which utilize ozone, hydrogen peroxide and
conventional ultraviolet light to treat water and various types of wastes,
including radioactive wastes and other wastes. Ultrox, which has been in
existence since 1983, has been actively marketing and selling its waste
treatment system for several years. Any such waste treatment system is likely to
compete directly with the Ozone Technologies and/or the Process.
Management is aware of several firms including, but not limited to, Ultrox
International, Para Oxidation, PCI Ozone Corporation, Griffin Technics, Inc.,
Henkel Corporation and the successor company to Brown-Bovari, Inc. which
presently have available ozone-based waste and water treatment systems which
would compete with any system the Company might market.
Within this limited market, given its historical lack of sales, the Company
is of the opinion that its market position is negligible or nonexistent.
Marketing. Although the Company has several sales representation agreements
with various companies and individuals, as described below, these agreements
have not resulted in sales sufficient to support the continued operation of the
Company. The Company has no marketing outlets other than these sales
representation agreements, and does not intend to develop any. Therefore, the
Company currently is not actively marketing the Process or the Ozone
Technologies. The sales representatives are paid by commission only.
The Company has received relatively few inquiries as a result of the
efforts of the sales representatives and has had no sales as a result of these
sales representation agreements in the past three fiscal years, and has had no
sales during that period.
The Company entered into various sales representation agreements in 1988
through 1991, the majority of which have a three-year term, with one individual
who is authorized thereunder to represent the Company in marketing the Process
and/or certain of the Ozone Technologies to certain entities operating at
predetermined waste treatment sites. These agreements provide for the payment of
a commission based an a percentage of the sales price. No sales were made under
these agreements during 1995, 1996, and 1997. All these sales representation
agreements expired or were not renewed as of December 31, 1995.
In December, 1988, the Company entered into a three-year sales
representation agreement with Steven M. Kane, Inc., of which the principal owner
and officer is Steven Kane, a former Director of the Company and the son of
Manuel E. Kane and the nephew of Albert D. Kane. The agreement has been renewed
for four additional one-year periods. This agreement was not renewed as of
December 31, 1995. This agreement provided for a commission of up to lO% on
certain sales of the Company's products in the designated territory and/or to
designated companies. Historically, the Company has had four sales and leases of
machines and equipment utilizing the Ozone Technologies as result of this sales
representation agreement.
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In April, 1991, the Company entered into a three-year finder's agreement with
Steven M. Kane, Inc. This agreement provided for a commission of 10% of the
revenue collected for sales of the Company's products to a designated group of
four potential customers. No sales have been made under this agreement. This
Agreement was renewed for an additional one-year period. This agreement was not
renewed as of December 31, 1995.
Material and Production. The following discussion of materials and
production must be read in light of the fact that the Company has virtually no
operations. The Company does not employ, nor does it intend to employ,
sufficient personnel to produce any systems or machines which the Company could
sell or lease. While there are a number of outside fabricators that have the
capabilities to construct and assemble the systems and machines, the absence of
sales renders issues of production capability moot.
The Company does not presently inventory any equipment or component parts.
Although this dependence on suppliers for equipment and components could lead to
significant production delays, the absence of sales renders concerns about
delays moot.
The Company gained certain technology regarding the generation of ozone
pursuant to an agreement it entered into with Pillar Technologies, Inc.
("Pillar") in 1988. Pillar is presently the only source for the power supply
used in conjunction with the ozone generator in the systems and machines. No
purchases were made in 1997.
The Company entered into an agreement in November, 1989, pursuant to which
it received a license to use certain technology relating to the materials used
in and the construction of an essential component of the ozone generator.
Patents. On March 5, 1984, the Company obtained, by assignment from Gram
Research & Development Co., Inc. ("Gram"), all Gram's interest in and to a
patented process for a method of reducing the volume of contaminated insoluble
organic solid resin materials, and any U.S. or foreign letters patent issued
therefor. The Process is based upon the process described in this Patent. The
U.S. Patent and Trademark Office issued U.S. Patent No. 4,437,999 (the
"Patent"), dated March 20, 1984, for such patented process entitled "Method of
Treating Contaminated Insoluble Organic Solid Material", naming Sherman T. Mayne
as the inventor and Gram as assignee. An assignment of such patented process and
the aforedescribed U.S. Letters Patent from Gram to the Company was recorded in
the U.S. Patent and Trademark Office on March 29, 1984. The Patent expires March
20, 2001. During the year ended December 1995, the Company forwent the payment
of applicable annual renewal fees for the Patent because of the substantial
depletion of its financial resources, thereby allowing the Patent to lapse.
Due to insufficient funds, the Company forwent payment of the applicable
yearly renewal fees on its European, Australian and Norwegian patents, all of
which lapsed on March 19, 1991. The Company's Finnish and Japanese patent
applications were abandoned on August 14, 1990, and March, 1991, respectively.
In September, 1986, the Canadian Patent Office granted the Company a
patent for the Process, as described in the Patent, which expires September 16,
2003. The Company does not know if this Canadian patent remains in effect.
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Seasonality. The Company's business is not seasonal in nature.
Working Capital Items, Customer Dependence, Back Log Orders. Because the
Company's sales or other distributions of the systems and machines have been
have been insignificant, customer dependence and any backlog orders are not
germane to the Company's business. The Company maintains no inventory. See
"FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."
Research and Development. During the year ended December 31, 1997, the
Company incurred no expenses related to company-sponsored research and
development and engineering activities, which activities were principally
related to the engineering and design of systems for particular applications of
the Ozone Technologies. ( See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.") The Company incurred approximately $2,345
and $2,965 in expenses related to company-sponsored research and development and
engineering activities for the years ended December 31, 1996, and 1995,
respectively.
Environmental Compliance. Without sales of current systems designed to
apply the Ozone Technologies or machines designed to apply the Process, it is
difficult to evaluate the material effects of compliance with applicable
regulations of the various federal, state and local agencies, which have been
enacted or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment, will have upon the
capital expenditures, earnings and competitive position of the Company. If the
Company were ever to make such sales, which management views as unlikely,
environmental compliance could become a significant issue for the Company to
overcome in achieving successful operations.
To date, the systems designed to apply the Ozone Technologies have been
distributed through the sale or lease thereof. Under this plan of distribution,
it is anticipated that it will be primarily the purchasers and/or users of the
systems, and not the Company, that will be subject to environmental regulation
in connection with the use thereof.
With regard to the nachines designed to apply the Process, compliance with
any federal, state and local governmental regulations may be so burdensome for
the Company and/or users of such machines as to have a material adverse effect
upon the viability of the Process or will render the use in a commercial setting
of such machines unfeasible or impossible. It is possible, though not
anticipated, that certain of the radioactive materials remaining after
radioactive wastes have been treated with the Process may, under current or
future government regulations, be classified as "intermediate level" or "high
level" radioactive materials, the disposal of which is highly regulated, and
could be sufficiently costly as to diminish or offset any economic benefit of
the reduction of the radioactive wastes by treatment with the Process. In this
event, the Process would be uneconomical and therefore unmarketable.
It is possible that the Company will have to modify the design of the
system and/or machines for the Ozone Technologies or the Process in order for
the users thereof to meet regulatory standards. The Company is unable to
currently assess the extent or costs of any such modifications. The company has
insufficient assets to fund any modifications.
The Company anticipates that it will have no material capital
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expenditures for environmental control facilities for the remainder of its
current fiscal year. No assurance can be given that government regulations will
not be promulgated in the future which will have a material adverse effect on
the operations of the Company's business.
Employees. As of August 1, 1998, the Company had two employees. Mr. Manuel
E. Kane and Mr. Albert D. Kane, while serving as officers and Directors and
having employment contracts with the Company, have confined activities to
administrative functions including, but not limited to answering inquires and
dealing with matters involved with winding down the Company's operations. These
two employees are not sufficient to sustain operations.
Mr. Albert D. Kane is Chairman of the Board and Secretary of the Company.
Mr. Kane resides in Short Hills, New Jersey. Mr. Manuel E. Kane is President and
Treasurer of the Company.
ITEM 2. PROPERTIES
The Company subleases office space located at 1373 East Morehead Street,
Suite 48, Charlotte, North Carolina from Manuel E. Kane pursuant to a month-
to-month lease agreement. The Company does not pay rent under this lease
agreement.
The Company had an agreement with Pfeiffer College, located in Misenheimer,
North Carolina, under which it is used certain of Pfeiffer's laboratory
facilities for producing electrodes ordered by users of the Company's systems.
In addition, Pfeiffer agreed to provide the Company with storage facilities and
access to utilities and certain auxiliaries needed in connection with such
activities. As a consideration for Pfeiffer's performance under this agreement,
the Company agreed to transfer certain of its testing equipmnent to Pfeiffer
following the Company's use of such equipment. The Company transferred the
aforementioned equipment to Pfeiffer College during the year ended December 31,
1996.
The Company constructed a small pilot plant facility on the Pfeiffer campus
and had the exclusive right to use and occupy the facility for various
activities through October 12, 1996. Upon expiration of the agreement, the right
to use and occupy the building belonged to Pfeiffer College.
On October 12, 1996, Pfeiffer College took possession of the aforementioned
small pilot plant. At that time, the Company donated all its office and
laboratory equipment and its test and demonstration machinery and related
components to Pfeiffer College. The Company did not have the financial resources
to move and store the aforementioned equipment and machinery.
Presently, the Company has no insurance coverage of any kind in force at
December 31, 1997. The Company allowed its insurance coverages to expire after
July 7, 1993, and did not renew any of its policies.
ITEM 3. LEGAL PROCEEDINGS Thomas Publishing Co. filed a lawsuit against the
Company for collection
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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 cost of $1,179 plus interest of 8% per annum from the date of
Judgement until paid in full, and court costs. Because the Company did not have
the financial resources to pay this Judqment, it was not paid as of December 31,
1997.
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 interest in the
amount of $211, plus interest at 10% per annum from the date of Judgment until
paid in full. Because the Company did not have the financial resources to pay
this Judgment, it was not paid as of December 31, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders during
the fourth quarter of the year ended December 31, 1995, and during the years
ended December 31, 1996 and 1997.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades in the over-the-counter market. Due to
lack of trading, no bid and asked closing prices per share for the Company's
Common Stock for any quarterly period in 1997 or 1996 are available.
As of July 31, 1998, the Company had outstanding 9,977,495 shares of common
stock and approximately 1,095 shareholders of record. (The Company had the
option to repurchase a number of shares of the Company's stock held by three
individuals, which repurchase option expired on June 30, 1990. In June, 1990,
prior to the expiration of the repurchase option, the Company exercised its
option to repurchase with regard to a total of 34,418 shares of stock held by
these three individuals. As of the date hereof, the three individuals have not
executed all the necessary documents to effect the transfer of the shares to the
Company and consequently these shares remain outstanding.)
The Company has not been in a financial position to pay dividends
since its inception and because of the Company's continuing losses from
operations and the substantial depletion of its cash reserves, the Company has
no plans to pay dividends in the future.
ITEM 6. SELECTED FINANCIAL DATA
(Remainder of page left intentionally blank)
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<TABLE>
<CAPTION>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
SELECTED FINANCIAL DATA
At and for the Year ended December 31
---------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C>
SELECTED STATEMENT
OF INCOME (LOSS) DATA:
Sales $ - $ - $ - $ - $ - $ 18,725
Cost of sales - - - - - 41,557
---------- ---------- ---------- ---------- ---------- ----------
Gross margin - - - - - (22,832)
Engineering,
research and
development
expenses - 2,345 2,965 13,055 124,176 173,006
Administrative
expenses 4,568 7,017 194,643 194,283 201,605 183,325
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
operations (4,568) (9,362) (197,608) (207,338) (325,781) (379,163)
Interest and
other income 3,096 5,013 938,806 9,477 7,512 5,817
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ (1,472) $ (4,349) $ 741,198 $(197,861) $(318,269) $(373,346)
========== =========== ========== ========== ========== ==========
Weighted average
shares of
common stock 9,977,495 9,977,495 9,977,495 9,977,495 9,977,495 9,977,495
========== =========== ========== ========== ========== ==========
Net income (loss)
per share $ (.00) $ (.00) $ .07 $ (.02) $ (.03) $ (.04)
========== =========== ========== ========== ========== ==========
SELECTED BALANCE
SHEET DATA:
Current assets $ 159 $ 193 $ 17 $ 24,638 $ 25,150 $ 33,013
Current
liabilities 74,825 73,387 71,207 918,796 747,037 571,994
---------- ---------- ---------- ---------- ---------- ----------
Working capital
(deficit) $ (74,666) $ (73,194) $ (71,190) $(894,158) $(721,887) $(538,981)
========== ========== ========== ========== ========== ==========
Total assets $ 159 $ 193 $ 2,362 $ 108,753 $ 134,855 $ 278,081
========== ========== ========== ========== ========== ==========
Stockholders' equity
(deficit) $ 74,666 $ (73,194) $ (68,845) $ (810,043) $(612,182) $(293,913)
========== ========== ========== ========== ========== ==========
</TABLE>
(continued)
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<TABLE>
<CAPTION>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
SELECTED FINANCIAL DATA
At and for the Year ended December 31
----------------------------------------------------------------------
1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ----------
<S> <C>
SELECTED STATEMENT
OF INCOME (LOSS) DATA:
Sales $ 202,982 $ 172,740 $ - $ - $ -
Cost of sales 188,524 100,525 - - -
---------- ---------- ---------- ---------- ----------
Gross margin 14,458 72,215 - - -
Engineering,
research and
development
expenses 217,024 301,252 495,494 370,313 254,446
Administrative
expenses 291,681 436,815 522,132 465,490 344,853
---------- ---------- ---------- ---------- ----------
Income (loss)
from operations (494,247) (665,852) (1,017,626) (835,803) (599,299)
Interest and
other income 57,228 68,070 120,473 141,435 171,614
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (437,019) $(597,782) $ (897,153) $ (694,368) $ (427,685)
========== =========== ========== ========== ==========
Weighted average
shares of
common stock 9,977,495 9,977,495 9,968,355 9,754,646 9,262,646
========== =========== ========== ========== ==========
Net income (loss)
per share $ (.04) $ (.06) $ (.09) $ (.07) $ (.05)
========== =========== ========== ========== ==========
SELECTED BALANCE
SHEET DATA:
Current assets $ 159,198 $ 199,425 $ 706,825 $1,454,678 $1,874,892
Current
liabilities 419,184 151,567 57,689 76,830 96,514
---------- ---------- ---------- ---------- ----------
Working capital
(deficit) $(259,986) $ 47,858 $ 649,136 $1,377,848 $1,778,378
========== ========== ========== ========== ==========
Total assets $ 498,617 $ 668,019 $1,171,923 $2,058,217 $2,410,664
========== ========== ========== ========== ==========
Stockholders' equity
(deficit) $ 79,433 $ 516,452 $1,114,234 $1,981,387 $2,315,664
========== ========== ========== ========== ==========
</TABLE>
(continued)
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<TABLE>
<CAPTION>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
SELECTED FINANCIAL DATA (continued)
At and for the
Period from
January 10, 1984
(Inception) to
At and for the Year ended December 31 December 31
------------------------------------------ -------------
1986 1985 1984 1997
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
SELECTED STATEMENT
OF INCOME (LOSS) DATA:
Sales $ - $ - $ - $ 394,447
Cost of sales - - - 330,606
---------- ---------- ---------- -------------
Gross margin - - - 63,841
Engineering,
research and
development
expenses 94,875 124,806 - 2,173,757
Administrative
expenses 324,886 149,952 1,906 3,323,156
---------- ---------- ----------
Income (loss) from
operations (419,761) (274,758) (1,906) (5,433,072)
Interest and
other income 218,697 148,950 651 1,896,839
---------- ---------- ---------- -------------
Net income (loss) $ (201,064) $ (125,808) $ (1,255) $(3,536,233)
========== =========== ========== =============
Weighted average
shares of
common stock 9,009,495 7,818,525 2,795,118
========== =========== ==========
Net income (loss)
per share $ (.02) $ (.02) $ (.00)
========== =========== ==========
SELECTED BALANCE
SHEET DATA:
Current assets $2,417,502 $2,787,668 $ 289,469
Current
liabilities 96,267 35,198 44,822
---------- ---------- ----------
Working capital
(deficit) $2,321,235 $2,752,470 $ 244,647
========== ========== ==========
Total assets $2,838,102 $2,978,097 $ 375,408`
========== ========== ==========
Stockholders' equity
(deficit) $2,741,835 $2,942,899 $ 330,586
========== ========== ==========
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The Company had no net sales for the year ended December 31, 1997 and 1996,
and 1995.
Historically, the Company has had no sales of equipment using the Process,
and few sales of machines and equipment utilizing the Ozone Technologies. To
date, the Company has been unsuccessful in marketing machines and equipment that
utilize the Process or Ozone Technologies.
The Company has not been able to generate sales of its products, and,
consequently, the Company had incurred substantial losses and continues to incur
losses disregarding cancellation of debt income. The Company experienced a net
loss of $1,492 for the year ended December 31, 1997, compared to $4,349 for 1996
and net income of $741,198 for 1995 for a decrease of $2,857 as compared to 1996
and an increase of 9742,690 as compared to 1995. Disregarding cancellation of
debt income, the Company would have experienced a net loss of $7,077 for the
year ended December 31, 1997, compared to $11,746 for 1996 and of 8191,774 for
1995 for a decrease of $4,669 as compared to 1996, and $184,697 as compared to
1995. The Company continued to severely curtail its operations in 1997. The
decrease in the 1997 net loss disregarding cancellation of debt income as
compared to 1996 and 1995 was due, in large part, to the continued abatement of
the Company's operations.
For the year ended December 31, 1997, the Company had no engineering,
research and development expenses compared to $2,345 for 1996 and $2,965 for
1995.
All costs related to research and development, including costs for
drawings and testing, are expensed when incurred in accordance with Financial
Accounting Standards Board Statement No. 2.
For the year ended December 31, 1997, the Company incurred administrative
expenses of $4,568, compared to $7,017 for 1996 and $194,643 for 1995, for a
decrease of $2,449 as compared to 1996 of $190,075 as compared to 1995. The
significant components of 1997 administrative expenses together with comparative
data where significant change has occurred in relation to prior years, include
the following:
(a) The Company had no salary expense pursuant to employment agreements
with Albert D. Kane and Manuel E. Kane as officers of the Company, who both
are stockholders and Directors of the Company for 1997 and 1996, and
$75,000 for 1995. Pursuant to their employment contracts, the officers are
entitled to each receive annual salaries of $50,000. In December, 1995, the
officers agreed to perform the limited duties that the Company requires
without compensation until such time as the Company has sufficient
financial resources to pay salaries. In December, 1995, the officers
forgave all accrued salaries owed them by the Company because of the
Company's depleted financial resources and the Company's uncertain future.
In 1995, the Company recognized $579,167 in cancellation of debt income as
a result of this forgiveness of debt.
(b) The Company had no professional fees for 1997 and 1996 compared to
$4,006 for 1995. (See Item 3.--"LEGAL PROCEEDINGS").
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(c) Office expense of $2,512, compared to $3,962 for 1996 and $9,083 for
1995, for a decrease of 91,450 as compared to 1996 and of $6,571 as
compared to 1995. This decrease was due, in large part, to the Company's
severe curtailing of operations.
(d) The Company had no amortization of patent expense for 1997 and 1996
compared to $78,804 for 1995. During 1995, the Company forwent the payment
of applicable annual renewal fees for the Patent because of the substantial
depletion of its financial resources, thereby allowing the Patent to lapse.
The Company recognized the remaining unamortized cost ($78,804) as expense
in 1995.
(e) The Company had no bad debt expense for 1997 and 1996 compared to
$24,096 for 1995. In 1995, the Company was unable to collect the
outstanding debt due it from Chandler County, a municipality in Texas and
recognized bad debt expense.
The Company had other income of $3,096 for the year ended December 31,
1997, compared to $5,013 for 1996 and $938,806 for 1995, for an decrease of
$1,917 as compared to 1996 and of $935,710 as compared to 1995. The significant
components of 1997 other income together with comparative data where significant
change has occurred in relation to prior years, include the following:
(a) The Company no other income for the year ended December 31, 1997,
compared to $995 for 1996 and $12,669 for 1995. Other income represents net
proceeds (after deducting costs) from mainly miscellaneous replacement part
sales, machinery rental, and treatability testing activities.
(b) The Company had interest expense of $4,596 for the year ended December
31, 1997, compared to $4,373 in 1996 and $6,835 in 1995 for an increase of
$223 as compared to 1996 and a decrease of $2,239 as compared to 1995.
During 1997, the Company exhausted its cash reserves and was forced to
borrow funds from its two officers to finance its working capital needs.
(For additional information, see the discussion under "FINANCIAL CONDITION
AND LIQUIDITY" of this Item 7.) In 1997, 1996, and 1995, the Company
incurred interest expense involved with judgments against it which have not
been paid. (For additional information, see the discussion under ITEM 3. -
LEGAL PROCEEDINGS.
(c) Cancellation of debt income of $5,605, compared to $7,397 for 1996 and
$932,972 for 1995, for a decrease of $1,792 as compared to 1996 and of
$927,367 as compared to 1995. During the years ended December 31, 1997,
1996, and 1995, the time limit allowed by the Statute of Limitations for
vendors to collect certain of the Company's trade payables expired. Because
the Company does not have the financial resources to pay these debts and
the aforementioned Statute of Limitations bars their collection, the
Company included these amounts in cancellation of debt income. For the
years ended December 31, 1997, 1996, and 1995, the amounts of $5,605,
$7,397, and $147,923, respectively were included in cancellation of debt
income. In December, 1995, the officers forgave all accrued salaries owed
them by the Company because of the Company's depleted financial resources
and the Company's uncertain future. In 1995, the Company recognized
$579,167 in cancellation of debt income as a result of this forgiveness of
debt. In December, 1995, the individuals who is related to officers and
directors of the Company forgave the debt which totaled $201,164 because of
the Company's depleted cash reserves and the uncertainty of the Company's
11
<PAGE>
future. For the year ended December 31, 1995, the amount of $201,164 is
included in cancellation of debt income. In addition, the Company included
$4,718 of accrued payroll taxes related to the forgiven in cancellation of
debt income for the year ended December 31, 1995.
FINANCIAL CONDITION AND LIQUIDITY
The Company's cash decreased $34 for the year ended December 31, 1997 from
$193 at December 31, 1996 to $159 at December 31, 1997, compared to an increase
of $176 during 1996 and a decrease of $350 during 1995. The 1997 change in cash
was affected by the following:
(a) Operations used $2,481 in cash, which is comprised of the net loss of
$1,472 increased by the net change in other working capital accounts of
$1,009.
(b) Financing activities provided $2,447 which represents the issuance of
$9,447 of notes payable to officers and Directors of the Company reduced by
the retirement of $7,000 of notes payable. Management believes that it is
unlikely that the Company will be able to obtain financing of any nature in
the future other than nominal amounts lent by Management to fund nominal
operations.
The Company is unable to currently estimate the cost of any necessary
compliance with applicable government regulations.
As of its 1997 fiscal year end, the Company's significant commitments which
may result in identifiable expenses in the immediate future were pursuant to
employment agreements with its two officers. Under employment agreements with
the Company, Manuel E. Kane as President and Treasurer and Albert D. Kane as
Chairman 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 Kanes' employment continues for successive periods of one year
unless terminated by either party. In December, 1995, the officers agreed to
perform the limited duties that the Company requires without compensation until
such time as the Company has sufficient financial resources to pay salaries. 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
pay salaries in the near future.
Manuel E. Kane and Albert D. Kane, officers and Directors of the Company,
made certain loans to the Company totaling $9,447 to provide working capital
during the year ended December 31, 1997. In connection with such loans,
promissory notes, payable on demand, were executed by the Comnpany in favor of
Manuel E. Kane and Albert D. Kane. These notes were secured by all the Company's
account receivables, contract claims, choses in action, money and general
intangibles; inventory; other goods; and insurance and other proceeds. 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. Notes totaling 7,000 were retired during 1997.
There have been no significant expenditures for property or other
12
<PAGE>
equipment or assets since January 1, 1998.
During 1997, the Company continued to take steps to reduce its operating
expenses and to severely curtail its operations in an attempt to conserve its
remaining limited financial resources. However, at December 31, 1997, the
Company's financial resources were almost completely exhausted. Because of its
extremely weak financial condition, the Company did not hold an annual meeting
of meeting of shareholders in 1997 because the estimated cost of that meeting
would exhaust its remaining financial resources. In addition, the Company did
not include audited financial statements in this Form 10-K because the estimated
expense of such compliance with the Securities and Exchange Act of 1934 would
exhaust the Company's remaining financial resources. The Company has included
internally generated and unaudited financial statements in this Form 10-K.
The Company has, to date, generated no significant revenues. Because the
Company's available remaining funds are extremely limited, Management has taken
extreme steps to severely curtail the Company's operations including, but not
limited to, performing as its own transfer agent; allowing the insurance
policies to expire; including unaudited financial statements in this Form 10-K,
and not holding an annual meeting of stockholders. 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
August or September, 1998. See "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."
CAPITAL RESOURCES
Subsequent to December 31, 1997, and as of July 31, 1998, the Company has
had no expenditures for the purchase of materials, machinery and other testing
equipment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Because of its extremely weak financial condition, the Company did not
include audited financial statements in its filing of this Form 10-K because the
estimated expense of such compliance with the Securities and Exchange Act of
1934 would exhaust the Company's remaining financial resources. The Company has
included financial statements in this Form 10-K which were generated internally
and are unaudited.
The information required by this Item 8. is referenced in Item 14.(a) and
is included in pages F-1 through F-17 and pages S-1 through S-6 hereof, except
that the information included is unaudited.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Because of its extremely weak financial condition, the Company did not
include audited financial statements in its filing of this Form 10-K because
the estimated expense of such compliance with the Securities and Exchange Act
wou1d exhaust the Company's remaining financial resources. The Company has
included financial statements in this Form 10-K which were generated internally
and are unaudited. If the Company had had the financial resources, Cherry,
Bekaert and Holland, the principal accountants in the prior years, would have
been asked to issue a Report of Independent Certified
13
<PAGE>
Public. Accountants.
The principal accountant's report on the financial statements for the year
ended December 31, 1990, the last year for which a Report of Independent
Certified Public Accountants was issued, contained a qualified opinion as to the
uncertainty that the Company will continue as a going concern.
The Company and the principal accountant have had no disagreements on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure involved with the registrant's two most recent
fiscal years and all subsequent interim periods.
The Company has not engaged another principal accountant.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors and Executive Officers. The Directors and executive
officers of the Company, as of July 15, 1998, are as follows:
Name Age Position
---- --- --------
Albert D. Kane 82 Chairman of the Board,
Secretary & Director
Manuel E. Kane 78 President, Treasurer &
Director
All Directors are elected each year by the shareholders of the Company at
its annual meeting of shareholders normally held in June. Each of the Directors
holds office until his death, resignation, retirement, removal,
disqualification, or until his successor is elected and qualified. The officers
are elected by the Directors and each holds office, unless otherwise specified
by the Directors, until his death, resignation, retirement, removal,
disqualification, or until his successor is elected and qualified. All of the
Company's executive officers presently have employment agreements with the
Company.
During 1997, the Company continued to reduce its operating expenses and to
severely curtail its operations in an attempt to conserve its remaining limited
financial resources. However, at December 31, 1997, the Company's financial
resources were almost completely exhausted. Because of its extremely weak
financial condition, the Company did not hold an annual meeting of shareholders
in 1997 because the estimated cost of that meeting would exhaust its remaining
financial resources.
Effective July 5, 1994, Wachovia Bank of North Carolina, N. A. resigned as
the transfer agent of the Company. Because of its extremely weak financial
condition, the Company is acting as its own transfer agent.
Information as of July 15, 1998, relating to the business experience of the
present Directors and executive officers of the Company is set forth below.
MR. ALBERT D. KANE, together with his brother, Manuel E. Kane, founded the
Company in January 1984, and has served as a Director since January 17, 1984,
and as its Chairman of the Board and Secretary since October 12, 1987.
14
<PAGE>
Prior to October 12, 1987, Mr. Kane served as the President of the Company. For
a period of approximately 33 years, from 1942 until 1975, Mr. Kane was involved
in various areas of the textile business. For the majority of this time, Mr.
Kane worked with his brother, Manuel E. Kane. During this period, the Kanes
conducted their textile businesses through various companies owned by them.
In 1963, Mr. Kane and his brother, Manuel E. Kane, formed Kane Realty
Corp., which owned and managed real estate in Gaston County, North Carolina. In
1978, this Company sold its assets to Albert Kane/Manuel Kane Joint Venture (the
"Joint Venture"). In 1995, the Joint Venture was liquidated, and Mr. Kane's
interest in the Joint Venture was transferred to Albert D. Kane, L.L.C. This
industrial real estate was leased to the Kane's textile business until 1976 and
has been leased to unrelated parties since that date.
Mr. Kane graduated from Harvard University in 1937 having received a
Bachelor of Arts degree in Economics.
Mr. Kane has an employment agreement with the Company, under which he is
employed as the Company's Chairman of the Board and Secretary. Thereunder, Mr.
Kane agrees to devote as much time to the duties assigned to him by the Board of
Directors and to the business and affairs of the Company as is reasonably
necessary for the efficient performance and carrying on thereof. Mr. Kane's
employment by the Company under this agreement continues for successive periods
of one year unless terminated by either party as provided therein. In December,
1995, Mr. Kane agreed to perform the limited duties Company requires without
compensation until such time as the Company client financial resources to pay
salaries.
MR. MANUEL E. KANE, together with his brother, Albert D. Kane, founded the
Company in January, 1984, and has served as a Director since January 17, 1984,
and as its President and Treasurer since October 12, 1987. Prior to October 12,
1987, Mr. Kane served as the Vice President, Secretary and Treasurer of the
Company. From 1979 to 1983, Mr. Kane served as President and Treasurer of
Ultracept, Inc., a manufacturer of patented pollution control equipment to
reduce toxic waste discharged from industrial plants. From 1983 until the
commencement of his duties as Vice President, Secretary and Treasurer of the
Company, Mr. Kane was involved in the management of the industrial real estate
owned by Albert Kane/Manuel Kane Joint Venture.
From 1945 until 1975, Mr. Kane has been involved with his brother, Albert
D. Kane, in various areas of the textile business. Since 1963, Mr. Kane worked
and his brother, Albert D. Kane, in owning and managing industrial real estate
located in Gaston County, North Carolina. Upon the liquidation of the Joint
Venture, Mr. Kane's interest was transferred to Manuel E. Kane, L.L.C. For a
description of these business ventures, see the biography of Albert D. Kane,
above.
Mr. Kane was one of the founders of Carolina State Bank (now Southern
National Bank) and served as a member of its Board of Directors from 1969 to
1976. From June, 1987 until November, 1992, Mr. Kane served on the Board of
Directors of a public company, First Provident Group, Inc., located in
Charlotte, North Carolina.
Mr. Kane graduated from Harvard University in 1943 having received a
Bachelor of Arts degree in Political Science.
Mr. Kane has an employment agreement with the Company, under which he is
employed as the Company's President and Treasurer. Mr. Kane is authorized
15
<PAGE>
under the agreement to act as the Company's chief operating officer. Mr.
Kane's employment by the Company under this agreement continues for successive
periods of one year unless terminated by either party. In December, 1995, Mr.
Kane agreed to perform the limited duties that the Company requires without
compensation until such time as the Company has sufficient financial resources
to pay salaries.
Executive Committee. The Company's Board of Directors has an Executive
Committee consisting of Albert D. Kane and Manuel E. Kane. This committee has
been granted all the authority allowable under North Carolina law to act for the
Board of Directors.
To the best of the Company's knowledge, no persons failed to file or were
delinquent in filing Forms 4 or 5, with the Securities and Exchange Commission
as required by Section 16(a) of the Securities and Exchange Act of 1934, to
report the transactions during the year ended December 31, 1997.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth certain information concerning the
compensation of the Directors and executive officers of the Company for the year
ended December 31, 1997.
Name of Individual or
Number in Group Capacities in which Served Cash Compensation
- ----------------------- -------------------------- -----------------
All executive officers All capacities $ -0-
as a group (2 persons)
None of the Company's executive officers received cash compensation in
excess of $60,000 for the year ended December 31, 1997. In December, 1995, the
officers agreed to perform the limited duties that the Company requires without
compensation until such time as the Company has sufficient financial resources
to pay salaries. All of such officers as a group (2 persons) were entitled to
receive aggregate compensation of $ -0- for the year ended December 31, 1997. In
December, 1995, the officers forgave all accrued salaries owed them by the
Company because of the Company's depleted financial resources and the Company's
uncertain future. In 1995, the Company recognized $579,167 in cancellation of
debt income as a result of this forgiveness of debt.
Pursuant to their employment agreements with the Company, Albert D. Kane
and Manuel E. Kane were entitled to reimbursement for expenses relating to the
business of the Company and the performance of their duties as officers of the
Company during 1997.
Other than as set forth herein, no remuneration of any nature has been paid
for or on account of services rendered by a Director in such capacity.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The fo11owing table sets forth as of July 15, a998, the number of shares of
the Company's outstanding Common Stock owned beneficially by (i) each person
known to the Company to be the beneficial owner of more than 5% of such stock,
(ii) each Director of the Company, and (iii) all officers and
16
<PAGE>
Directors of the Company as a group:
Name & Address of Amount and Nature of Percentage of Outstanding
Beneficial Owner Beneficial Ownership Common Stock
- ------------------ -------------------- -------------------------
(1)
Manuel E. Kane 200,000 2.00%
4252 Woodglen Lane
Charlotte, NC 28226
Albert D. Kane 200,000 2.00%
391 Hartshorn
Drive Short Hills, NJ 07078
--------- ---------
All directors and officers
as a group (2 persons) 400,000 4.00%
--------- ---------
Steven M. Kane 2,015,100 20.19%
4013 Walnut Clay Road
Austin, TX 78731-3934
Seth M. Kane 1,245,050 12.48%
23 Circle Drive
Belmont, NC 28012
Ross A. Kane 1,245,050 12.48%
6115 Hickory Forest Drive
Charlotte, NC 28277
(1) All shares are held directly.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under employment agreements with the Company, Manuel E. Kane as President
and Treasurer and Albert D. Kane as Chairman of the Board and Secretary, each is
entitled to receive annual salaries of $50,000 subject to any increases, plus
any bonuses approved by the Company's Board of Directors. In December, 1995, the
officers agreed to perform the limited duties that the Company requires without
compensation until such time as the Company has sufficient financial resources
to pay salaries. In December, 1995, the officers forgave all accrued salaries
owed them by the Company because of the Company's depleted financial resources
and the Company's uncertain future. The Kanes' employment pursuant to their
agreements continues for successive periods of one year unless terminated by
either party.
During 1994, Ross A. Kane, the son of Albert D. Kane, was hired to perform
accounting and administrative functions including, but not limited to, functions
involved with the filing of the Company's Form 10-K for the year ended December
31, 1993, and the Forms 10-Q for the year ended December 31, 1994. Mr. Kane
billed the Company a total of $120,000 for the services
17
<PAGE>
rendered in 1994 and 1993, but he agreed to defer payment of these fees due to
the depletion of the Company's cash reserves. The Company terminated the
employment of Ross A. Kane as a full-time employee of the Company effective
August 24, 1992. Since March, 1990, the Company had employed Mr. Kane on a
full-time basis. Mr. Kane was compensated in the amount of $56,001 for his
services in 1992. During 1992, $17,334 was paid to Mr. Kane, and $38,667 was
deferred because of the depletion of the Company's cash reserves. In December,
1995, Mr. Kane forgave the debt owed him by the Company which totaled $183,667
because of the Company's depleted cash reserves and the uncertainty of the
Company's future. Ross Kane received 1,245,050 shares of the Company's common
stock by gift from his father, Albert D. Kane; 75,000 shares on November 30,
1990, 200,000 shares on December 20, 1991, 200,000 shares on December 15, 1992,
and 770,050 shares on March 10, 1998. Ross Kane is the nephew of Manuel E. Kane.
In December, 1988, the Company entered into a three-year sales
representation agreement with Steven M. Kane, Inc., of which the principal owner
and officer is Steven Kane, a former Director of the Company and the son of
Manuel E. Kane and the nephew of Albert D. Kane. The agreement had been renewed
for five additional one-year periods. This agreement provided for a commission
of up to 10% on certain sales of the Company's products in the designated
territory and/or to designated companies. Commissions of $2,132 have been paid
under this agreement, and commissions of $17,497 had been accrued and were
unpaid at December 31, 1994. In April, 1991, the Company entered into a
three-year finder's agreement with Steven M. Kane, Inc. This agreement provided
for a commission of 10% of the revenue collected for sales of the Company's
products to a designated group of four potential customers. The agreement has
been renewed for an additional one-year period. No finder's fees have been paid
under this agreement. The Company reimbursed Steven Kane for only those
out-of-pocket expenses relating to services he performed on behalf of the
Company that are unrelated to Company sales activities in which he engages. In
December, 1995, Mr. Kane forgave the debt which totaled $17,497 because of the
Company's depleted cash reserves and the uncertainty of the Company's future. As
of December 31, 1995, this agreement was not renewed. Steven Kane received
2,015,100 shares of the Company's common stock by gift from his father, Manuel
E. Kane, 75,000 shares on November 30, 1990, 200,000 shares on December 20,
1991, 200,000 shares on December 15, 1992, and 1,540,100 shares on March 10,
1998. Steven Kane is the nephew of Albert D. Kane.
Michael Kane received 475,000 shares of the Company's common stock by gift from
his father, Manuel E. Kane, 75,000 shares on November 30, 1990, 200,000 shares
on December 20, 1991, 200,000 shares on December 15, 1992. Michael Kane is the
nephew of Albert D. Kane.
On March 10, 1998, Seth Kane received 1,245,050 shares of the Company's common
stock by gift from his father, Albert D. Kane. Seth Kane is the nephew of Manuel
E. Kane.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. The following Financial Statements are filed
herewith as required pursuant to Part I, Item 8 of this Form 10-K:
18
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC Page
ACCOUNTANTS (is not filed with this report because ----
the financial statements filed with this Form 10-K
were generated internally and unaudited.)
BALANCE SHEETS, December 31, 1997 and 1996 (Unaudited) F-1
STATEMENTS OF LOSS F-3
Years ended December 31, 1997, 1996, and 1995
and the period from January 10, 1984 (Inception
to December 31, 1997 (Unaudited)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY, F-5
Years ended December 31, 1997, 1996, and 1995
and the period from January 10, 1984 (Inception)
to December 31, 1997 (Unaudited)
STATEMENT OF CASH FLOWS, F-7
Years ended December 31, 1997, 1996, and 1995
and the period from January 10, 1984 (Inception)
to December 31, 1997 (Unaudited)
NOTES TO FINANCIAL STATEMENTS (Unaudited) F-8
2. Schedules. The following Financial Statement Schedules are filed
herewith:
INDEPENDENT AUDITOR'S REPORT ON SCHEDULES (is Page
not filed with this report because ----
the financial statements filed with this Form 10-K
were generated internally and unaudited.)
SCHEDULE V - Property, Plant and Equipment S-1
SCHEDULE VI - Accumulated Depreciation and amortization S-4
of Property and Equipment
3. Exhibits. The following exhibits are filed herewith pursuant to
the requirements of paragraph (c) of this Item 14 and Item 601 of Regulation
S-K:
(Remainder of page left intentionally blank)
19
<PAGE>
<TABLE>
Exhibit No. Document Method of Filing
- ---------- -------- ----------------
<S> <C>
3.1 Articles of Incorporation & Amendments Filed herewith and reference is made to
Exhibits 3.1, 3.2, 3.3 and 3.4 of the
Company's Form S-18 Registration Statement
(Registration No. 2-96567-A) effective date
May 14, 1985, which is hereby incorporated
herein and reference is made to Exhibit 3.1
of the Company's Form 10-K (Commission File
No. 0-13738) for the year ended December 31,
1990 which is hereby incorporated herein.
3.2 Bylaws as Amended Through September 21, 1990 Reference is made to Exhibit 3.2 of the
Company's Form 10-K (Commission File No.
0-013738) for the year ended December 31, 1990
which is hereby incorporated herein.
4.1 Specimen Certificate Reference is made to Exhibit 4.1 of the
Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31, 1985
which is hereby incorporated herein.
9 Voting trust agreement (Not applicable)
10.1 Employment agreement with Sherman T. Mayne** Reference is made to Exhibit 10.1 of the
Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31, 1990
which is hereby incorporated herein.
10.2 Employment agreement with Manuel E. Kane Reference is made to Exhibit 10.6 of the
Company's Form S-18 Post-Effective Amendment
No. 2 (Registration No. 2-96567-A) filed
January 5, 1988 which is hereby incorporated
herein.
10.3 Employment agreement with Albert D. Kane Reference is made to Exhibit 10.6 of the
Company's Form S-18 Post-Effective Amendment
No. 2 (Registration No. 2-96567-A) filed
January 5, 1988 which is hereby incorporated
herein.
10.4 Stock Repurchase Agreement between Gram Reference is made to Exhibit 10.7 of the
Research & Development Co. and Registrant Company's Form S-18 Registration Statement
(Registration No. 2-96567-A) effective date
May 14, 1985, which is hereby incorporated
herein.
10.5 Agreement with Pfeiffer College - 1985*** Reference is made to Exhibit 10.6 of the
Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1985 which is hereby incorporated herein.
10.6 Agreement with Pfeiffer College - 1986*** Reference is made to Exhibit 10.15 of the
Company's Form S-18 Post-Effective
Amendment No. 1 (Registration No. 2-96567-A)
filed February 13, 1987 which is hereby
incorporated herein.
10.7 Agreement with Pillar TEchnologies, Inc.* Reference is made to Exhibit 10.26 of the
Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1987 which is hereby incorporated herein.
10.8 Agreement with Excalibur Enterprises, Inc.* Reference is made to Exhibit 10.26 of the
Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1987 which is hereby incorporated herein.
10.9 Agreement with Rowe R. Motley, Doris B. Stith Reference is made to Exhibit 10.34 of the
and Sherman T. Mayne Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1988 which is hereby incorporated herein.
10.10 Consulting Agreement with Howard L. Cytryn Reference is made to Exhibit 10.13 of the
5/06/89-11/05/89*** Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1989 which is hereby incorporated herein.
20
<PAGE>
10.11 Employment Contract with Terry R. Denton** Reference is made to Exhibit 10.14 of the
Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1989 which is hereby incorporated herein.
10.12 Testing Services Agreement between Bechtel-KWU Reference is made to Exhibit 10.15 of the
Alliance and Registrant** Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1989 which is hereby incorporated herein.
10.13 Lease between Washington Power Supply** Reference is made to Exhibit 10.13 of the
Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1990 which is hereby incorporated herein.
10.14 Employment Contract with Rodney Webb** Reference is made to Exhibit 10.14 of the
Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1990 which is hereby incorporated herein.
10.15 Lease between Pfizer, Inc. and REgistrant** Reference is made to Exhibit 10.15 of the
Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1990 which is hereby incorporated herein.
10.16 Agreement between World Financial Network, Inc. Reference is made to Exhibit 10.16 of the
and Registrant* Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1990 which is hereby incorporated herein.
10.17 Agreement between Stone & Webster Engineering Reference is made to Exhibit 10.17 of the
and Registrant*** Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1990 which is hereby incorporated herein.
10.18 Agreement between Tracy Staller and Registrant* Reference is made to Exhibit 10.18 of the
Company's Form 10-K (Commission File No.
0-13738) for the year ended December 31,
1990 which is hereby incorporated herein.
11 Statement re computation of per share earnings (not applicable)
12 Statement re computation of ratios (not applicable)
13 Annual or Quarterly Report (Not applicable)
16 Letter re Change in Certifying Accountant (Not applicable)
18 Letter re change in accounting principles (Not applicable)
19 Previously unfiled documents (Not applicable)
22 Subsidiaries of the registrant (Not applicable)
23 Published report regarding matters submitted to
vote of security holders (Not applicable)
24 Contents (Not applicable)
25 Power of Attorney (Not applicable)
28.1 Patent Reference is made to Exhibit 28.1 of the
Company's Form S-18 Registration Statement
(Registration No. 2-96567-A0 effective date
May 14, 1985, which is hereby incorporated
herein.
28.2 Assignment of Patent Reference is made to Exhibit 28.2 of the
Company's Form S-18 Registration Statement
(Registration No. 2-96567-A) effective date
May 14, 1985, which is hereby incorporated
herein.
29 Information from reports furnished to state
insurance regulatory authorities (Not applicable)
</TABLE>
- -------------------------------
* Although this agreement has not been terminated, no joint activities are
expected to be conducted thereunder.
** This agreement has been terminated.
*** This agreement has expired.
21
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Balance Sheets
(Unaudited)
Assets
December 31
----------------------------
1997 1996
----------- -----------
Assets
Cash $ 159 $ 193
----------- -----------
Total Assets 159 193
=========== ===========
See notes to the financial statements.
(continued)
F-1
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Balance Sheets (continued)
(Unaudited)
Liabilities and Stockholders' Equity
December 31
----------------------------
1997 1996
----------- -----------
Current liabilities
Accounts payable $ 9,497 $ 15,102
Notes payable 44,231 41,783
Accrued interest payable 21,097 16,502
----------- -----------
Total current liabilities 74,825 73,387
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 (3,536,233) (3,534,761)
------------ -----------
(74,666) (73,194)
------------ -----------
$ 159 193
============ ===========
See notes to the financial statements.
F-2
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Delopment Stage Company)
Statements of Income
(Unaudited)
<TABLE>
<S> <C> <C>
Period from
January 10, 1984
Year ended December 31 (Inception) to
------------------------------------
1997 1996 1995 December 31, 1997
---------- ---------- ---------- -----------------
Sales - net $ - $ - $ - $ 394,447
Cost of sales - - - 330,606
---------- ---------- ---------- -----------------
Gross margin - - - 63,841
---------- ---------- ---------- -----------------
Engineering, research and development expenses
Engineering expenses - - - 243,499
Consulting expenses - - - 218,205
Materials and supplies - - - 148,623
Depreciation - - - 453,237
Amortization of improvements to research facility - 2,345 2,965 29,644
Labor and salaries - - - 667,144
Service and use agreement expense - - - 14,065
Loss on abandoned property and equipment - - - 356,516
Taxes and licenses - - - 42,824
---------- ---------- ---------- -----------------
- 2,345 2,965 2,173,757
---------- ---------- ---------- -----------------
Administrative expenses
Salaries - - 75,000 1,059,183
Consulting fees - - 2,079 198,273
Public relations - - - 142,344
Professional fees - - 4,006 830,948
Depreciation - - - 7,569
Amortization of patent and organization expense - - 78,804 205,455
Rent - - 525 35,339
Travel and entertainment - 1,628 524 214,845
Office expense 2,512 3,962 9,083 272,010
Group insurance - - - 30,889
Insurance - - - 85,837
Transfer agent fees 2,056 967 - 59,544
Taxes and licenses - 45 326 67,004
Advertising - - - 7,010
Commissions - - 200 31,145
Bad debt - - 24,096 24,096
Other - 415 - 51,665
---------- ---------- ---------- ----------------
4,568 7,017 194,643 3,323,156
---------- ---------- ---------- ----------------
Loss from operations 4,568 9,362 197,608 5,433,072
See notes to the financial statements.
</TABLE>
F-3
(continued)
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Delopment Stage Company)
Statements of Income (continued)
(Unaudited)
<TABLE>
<S> <C> <C>
Period from
January 10, 1984
Year ended Dcember 31 (Inception) to
------------------------------------
1997 1996 1995 December 31, 1997
---------- ---------- ---------- -----------------
Other income (expense)
Interest income $ - - $ - $ 788,820
Other - net (principally
replacement part sales,
testing and rental income) - 995 12,669 178,791
Transfer agent fees 2,087 994 - 3,081
Cancellation of debt 5,605 7,397 932,972 945,974
Gain on sale of capital assets - - - 1,789
Interest expense (4,596) (4,349) (6,835) (21,616)
---------- ---------- ---------- ------------------
3,096 5,013 938,806 1,896,839
---------- ---------- ---------- ------------------
Net Income (loss) $ (1,472) $ (4,349) $ 741,198 $ (3,536,233)
========== ========== ========== ==================
Weighted average shares
of common stock 9,977,495 9,997,495 9,997,495
========== ========== ==========
Net income (loss) per share $ (.00) $ (.00) $ .07
========== ========== ==========
</TABLE>
See notes to the financial statements.
F-4
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Statements of Changes in Stockholders' Equity
(Unaudited)
Years ended December 31, 1997, 1996, and 1995 and the period from
January 10, 1984 (Inception) to December 31, 1997
<TABLE>
<CAPTION>
Deficit
Common Stock Convertible Accumulated
Preferred Convertible Additional During
--------------------
Number of Stock Preferred Paid-in Development
Shares Amount Subscribed Stock Capital Stage Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 - - - - 532
Change in par value of common stock
$1.00 per share to $.001 per share 6,303,185.5050 - - - - - -
Subscriptions received from convertible
preferred stock through private placement - - 325,000 - - - 325,000
Net loss for the initial period ended
December 31, 1984 - - - - - (1,255) (1,255)
Issuance of convertible preferred stock - - (325,000) 325,000 - - -
Issuance of common stock through public
offering 2,7000,000.0000 2,700 - - 3,372,300 - 3,375,000
Costs incurred in the issuance of common
and convertible preferred stock:
Reclassification of deferred expense
at December 31, 1984 - - - - (78,387) - (78,387)
Costs incurred subsequent to
December 31, 1984 - - - - (558,492) - (558,492)
Net loss for the year ended December 31, 1985 - - - - - (125,808) (125,808)
Net loss for the year ended December 31, 1986 - - - - - (201,064) (201,064)
Conversion of convertible preferred stock
to common stock 650,000.0000 650 - (325,000) 324,350 - -
Net loss for the year ended December 31, 1987 - - - - - (427,685) (427,685)
Exercise of warrants held by underwriter 270,000.0000 270 - - 404,730 - 405,000
Costs incurred to register the common
stock underlying the warrants - - - - (73,395) - (73,395)
Exercise of common stock options 24,000.0000 24 - - 29,976 - 30,000
Net loss for the year ended December 31, 1988 - - - - - (694,368) (694,368)
Exercise of common stock options 24,000.0000 24 - - 29,976 - 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 9,977,495.0000 $9,977 $ - $ - $3,451,590 $(3,755,480) $(293,913)
------------------------------------------------------------------------------------
</TABLE>
(continued)
See notes to financial statements.
F-5
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Comapny)
Statements of Changes in Stockholder's Equity (continued)
(Unaudited)
Years ended December 31, 1997, 1996, and 1995, and the period from
January 10, 1984 (Inception) do December 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Deficit
Common Stock Convertible Accumulated
Preferred Convertible Additional During
--------------------
Number of Stock Preferred Paid-in Development
Shares Amount Subscribed Stock Capital Stage Total
-------------- ------- ------------ -------- --------- ------------ ----------
Net loss for the year ended December 31, 1993 - - - - - (318,269) (318,269)
-------------- ------- ----------- -------- ---------- ------------ ----------
Balance, December 31, 1993 9,977,495.0000 $ 9,977 $ - $ - $3,451,590 $(4,073,749) $(612,182)
-------------- ------- ----------- -------- ---------- ------------ ----------
Net loss for the year ended December 31, 1994 - - - - - (197,861) (197,861)
-------------- ------- ----------- -------- ---------- ------------ ----------
Balance, December 31, 1994 9,977,495.0000 $ 9,977 $ - $ - $3,451,590 $(4,271,610) $(810,043)
-------------- ------- ----------- -------- ---------- ------------ ----------
Net income for the year ended December 31, 1995 - - - - - 741,198 741,198
-------------- ------- ----------- -------- ---------- ------------ ----------
Balance, December 31, 1995 9,977,495.0000 $ 9,977 $ - $ - $3,451,590 $(3,530,412) $ (68,845)
-------------- ------- ----------- -------- ---------- ------------ ----------
Net loss for the year ended December 31, 1996 - - - - - (4,349) (4,349)
-------------- ------- ----------- -------- ---------- ------------ ----------
Balance, December 31, 1996 9,977,495.0000 $ 9,977 $ - $ - $3,451,59 $(3,534,761) $ (73,194)
-------------- ------- ----------- -------- ---------- ------------ ----------
Net loss for the year ended December 31, 1997 - - - - - (1,472) (1,472)
-------------- ------- ----------- -------- ---------- ------------ ----------
Balance, December 31, 1997 9,977,495.0000 $ 9,977 $ - $ - $3,451,590 $(3,536,233) $ (74,666)
============== ======= =========== ======== ========== ============ ==========
</TABLE>
See notes to the financial statements.
F-6
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Period from
January 10, 1984
Year ended December 31 (Inception) to
------------------------------------
1997 1996 1995 December 31, 1994
--------- ----------- ----------- -----------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $(1,472) $(4,349) $ 741,198 $(3,536,233)
Adjustment to reconcile net loss to net
cash used by operating activities
Depreciation and amortization - 2,345 81,770 695,906
Loss on abandoned property
and equipment - - - 356,516
Book value of machinery included
in cost of sales - - - 6,236
(Increase) decrease in accounts receivable - - 24,096 -
(Increase) decrease in prepaid expenses - - 175 -
Increase (decrease) in accounts payable (5,605) (7,397) (281,502) 9,497
Increase (decrease) in accrued liabilities 4,596 4,374 (565,667) 21,097
--------- ----------- ----------- -----------------
Net cash provided by (used by)
operating activities (2,481) (5,027) 70 (2,446,981)
--------- ----------- ----------- -----------------
Cash flows from investing activities
Property and equipment additions - - - (853,202)
Costs incurred in connection with purchase
and protection of patent rights - - - (201,270)
Increase in organization expense - - - (4,185)
--------- ----------- ----------- -----------------
Net Cash used in investing activities - - - (1,058,657)
--------- ----------- ----------- -----------------
Cash flows from financing activities
Proceeds from the issuance of common stock,
including the conversion of proferred stock - - - 4,171,841
Costs incurred in connection with the issuance
of common and convertible preferred stock,
including costs classified as deferred expense - - - (710,274)
Issuance of notes payable 9,447 5,700 14,180 118,827
Retirement of notes payable (7,000) (497) (14,600) (74,597)
--------- ----------- ----------- -----------------
Net cash provided (used) by financing activities 2,447 5,203 (420) 3,505,797
--------- ----------- ----------- -----------------
Net increase (decrease) in cash (34) 176 (350) 159
Cash
Beginning 193 17 367 -
--------- ----------- ----------- -----------------
Ending $ 159 $ 193 $ 17 $ 159
========= =========== =========== =================
</TABLE>
See notes to the financial statements.
F-7
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10 1984 (Inception) to December 31, 1997
(Unaudited)
Note 1 - Omission of Report of Independent Public Accountants
Due to its severe curtailing of its operations and its lack of remaining
financial resources, the Company was not audited by its Independent Public
Accountants. The financial statements presented in the Form 10-K are unaudited.
----------
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position as of December 31, 1997 and
1996, the results of operations, the changes in stockholders' equity, and its
cash flows for the years ended December 31, 1997, 1996, and 1995, and the period
from January 10, 1984 (inception) to December 31, 1997.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed more fully in Note 2 to the financial
statements, the Company has been in the development stage since its inception
(January 10, 1984) and as such devoted substantially all its efforts in the
areas of engineering and research and in developing markets for systems designed
to apply the ozone technologies to treat 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 the Company's cash reserves are substantially depleted, substantial
doubt exists about the Company's ability to continue as a going concern. The
Company has extremely curtailed its operations.
Note 2 - Accounting policies
Organization
The Company was incorporated on January 10, 1984, with its principal purpose to
design, manufacture, sell, and service equipment and systems for the treatment
of contaminated insoluble organic solid materials. Because the Company has been
unsuccessful in its efforts to market the equipment and systems for treatment of
radioactive wastes, it devoted a significant amount of activity in the
development and application of ozone technologies to treat nonradioactive wastes
and water. The Company has been unsuccessful in its efforts to market the ozone
technologies to treat nonradioactive wastes and water.
Since its inception (January 10, 1984), the Company has been in the development
stage. Although operations have commenced and the Company has generated sales of
equipment and systems, the operating revenue received by the Company has not
been significant. Development stage activities to date consisted in the early
years of testing and engineering the machinery to treat the organic solid
materials referred to in the preceding paragraph and
F-8
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10, 1984 (Inception) to December 31, 1997
(Unaudited)
Note 2 - Accounting policies (continued)
testing the application of the method referred to in Note 4, to treat certain
insoluble radioactive materials. In later years, these development stage
activities have consisted of developing and marketing the ozone technologies
referred to in the preceding paragraph. During this development stage, the
Company has incurred significant operating losses and has made substantial
investments 1n property and equipment and patent costs.
Because of the significant losses referred to on the preceding page, the
substantial depletion of the Company's cash reserves and the uncertainty
surrounding whether additional debt or equity funds can be obtained, the Company
may be unable to continue as a going concern.
Property and equipment
Property and equipment included the historical costs incurred to acquire
components of and assemble the laboratory and demonstration models of certain
systems used to apply the technologies referred to on the preceding page. These
costs had been capitalized because of management's intention to utilize such
models in alternative engineering activities and to assist in the marketing
process. The carrying value of machinery and components which are no longer used
in the testing and marketing processes and which have been permanently removed
from the models is charged to loss on abandoned property and equipment in the
year the components are abandoned. As of December 31, 1997, all of the
carrying value of the aforementioned machinery and components has been charged
to loss on abandoned property and equipment.
Depreciation
Depreciation on equipment was computed using principally the straight-line
method over seven years, the estimated useful life of the equipment.
Depreciation on office equipment was computed using principally the
straight-line method over five years.
Warranty costs
Because sales of machinery and equipment have not been significant, the Company
has been unable to establish any historical experience with respect to warranty
costs. Accordingly, no provision for warranty costs has been made in the
accompanying financial statements. Research and development costs Research and
development costs are expensed as incurred.
F-9
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10, 1984 (Inception) to December 31, l997
(Unaudited)
Note 2 - Accounting policies (continued)
PATENT
The Company's patent, originally granted to Gram Research and Development Co.,
Inc. (Gram) on March 20, 1984, is being amortized on a straight-1ine basis over
190 months beginning June, 1985. The Company forwent the payment of applicable
annual renewal fees for all foreign patents, except the Canadian patent. During
the year ended December 31, 1995, the Company forwent the payment of applicable
annual renewal fees for the United States patent because of the substantial
depletion of its cash reserves. The remaining patent costs in the amount of
$78,804 was included in amortization expense in the year ended December 31,
1995.
Net loss per share
Net loss per share calculations are based on the
weighted-average number of common shares outstanding.
Note 3 - Improvements to research facility
Under a ten-year agreement with Pfeiffer College entered into in October 1986,
the Company had exclusive right to use and occupy a building for any research
purpose which does not involve radioactive materials. Such use was without
payment of consideration for seven years and for payment of $1 annually for
three years. Upon expiration of the agreement, and the right to use and occupy
the building belonged to Pfeiffer College. The Company's costs in connection
with the construction of the building were amortized using the straight-line
method over ten years, the term of the agreement. In October, 1996, Pfeiffer
College took possession of the building. In the year ended December 31, 1996,
the Company retired the asset but did not recognize any loss on retirement.
Note 4 - Patent
1n March, 1984, the Company obtained a patent through
assignment from Gram for a method of treating contaminated insoluble organic
solid materials. In connection therewith, the Company gave Gram and/or its
stockholders a continuing 9% ownership of all present and future outstanding
voting and nonvoting common stock and voting preferred stock of the Company (see
Note 5), and upon the successful completion of the public offering (see Note 5),
the Company paid Gram $170,000. In December, 1988, Gram transferred its right of
continuing ownership to its stockholders. The amount stated in the accompany1ng
balance sheet includes legal fees incurred in the assignment and
F-10
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10, 1984 (Inception) to December 31, l997
(Unaudited)
Note 4 - Patent (continued)
additional legal costs to register foreign patents.
Note 5 - Capital stock
Preferred stock
In September, 1984, the stockholders of the Company authorized the amendment of
the Company's Articles of Incorporation to allow the issuance of up to 1,500,000
shares of $.50 par value, non-voting preferred stock, such amendment and
issuance to be in such amount and at such time as deemed appropriate. These
shares had a 10% non-cumulative dividend, were callable at 105% of par value and
were convertible into common stock on a share-for-share basis. In December,
1984, the Company received through a private placement $325,000 in subscriptions
for 650,000 shares of convertible preferred stock, and in January, 1985,
subsequent to the amendment of the Company's Article of Incorporation described
above, 650,000 shares of this stock were issued. In connection with this issue,
the Company incurred $75,450 in legal, accounting and brokerage expenses which
were charged to additional paid-in capital in January, 1985.
In June and August, 1987, the holders of 100,000 and 550,000, respectively, of
convertible preferred stock exercised their right to convert such preferred
stock into common stock on a share-for-share basis.
Public offering In June, 1985, the Company conducted a
public offering of 2,700,000 shares of common stock for $1.25 per share. The
underwriter received a sales commission of $337,500 (10% of the gross offering
proceeds), a non-accountable expense allowance of $85,000 and warrants, which
were exercisable over a four-year period which began in June, 1986, entitling
the underwriter to purchase 270,000 shares of the Company's common stock for
$1.50 per share (see below).
In connection with the public offering, legal, accounting, and brokerage
expenses of $561,429 were incurred, including the underwriter's sales
commissions and expense allowance described above. These costs were charged to
additional paid-in capital.
Warrants
The Company filed two post-effective amendments to the registration statement
filed in connection with the initial public offering of its common stock. The
amendments were filed on behalf of the warrant holders referred above, who
exercised their right to require, at the expense of the Company, a one-
F-11
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10, 1984 (Inception) to December 31, 1997 (Unaudited)
Note 5 - Capital stock (continued)
time registration of the 270,000 shares of common stock underlying the warrants.
In July and September, 1988, the warrants were exercised, whereupon the Company
received $405,000 ($1.50 per share exercised), In connection with the filings
referred to above, the Company incurred legal and accounting fees of $73,395,
which were charged to additional paid-in capital upon exercise of the warrants.
Stock options
The Company has granted stock options to Rowe Motley, an officer, director and
stockholder of Gram, and George Robinson, an officer, director and stockholder
of Gram prior to March, 1983, in partial consideration for technical consulting
services rendered to the Company. Options were also granted to Murray Frank and
Anthony J. Forte in exchange for consulting services rendered in connection with
the initial conceptualization of the Company and the exploitation of the method
described in Note 4. Each of these options was granted to purchase 24,000 shares
of common stock at $1.25 per share, the same price as the common stock was
offered in the initial public offering. The options for Robinson and Frank have
expired. In 1988, the Company received $30,000 for the exercise of the options
held by Mr. Forte and in 1989, the Company received $30,000 for the exercise of:
the options held by Mr. Motley.
In addition, the Company agreed to give Gram's stockholders (see Note 4) a
continuing 9% ownership of all present and future outstanding voting and
nonvoting common stock and voting preferred stock of the Company (see Note 4),
and the Company retained the right to repurchase any shares held by the
stockholders at $.001 a share as long as such purchase would not reduce the
ownership below 9%. Prior to June 30, 1990, the Company exercised its right to
repurchase a total of 34,418 shares, but as of December 31, 1997, the necessary
documents to effect the transfer of shares have not been fully executed;
consequently, the shares remain outstanding at December 31, 1997. The continuing
9% ownership right is reduced by the percentage decrease in the stockholders'
interest occurring by reason of their sale or assignment of the Company's stock.
Note 6 - Income taxes
At December 31, 1997, the Company has available for tax purposes net operating
loss carryforwards of approximately $3,556,000 which have been generated since
inception and may be applied against future taxable income. Such carryforwards
began expiring in 1989 for state income tax purposes (approximately $2,433,000
have expired at December 31, 1997) and 1999 for federal tax purposes. For
financial reporting purposes, the Company's net operating loss carryovers are
approximately $3,465,000 which differ from
F-12
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10, 1984 (Inception) to December 31, 1997 (Unaudited)
(Unaudited)
Note 6 - Income taxes (continued)
those available for income tax purposes because of timing differences in
reporting loss on abandoned property and equipment. At December 31, 1997 and
1996, no deferred income taxes are applicable to those timing differences.
Additionally, the Company has available research and development credit
carryforwards of approximately $103,000 which are available to reduce future
income tax expense and which begin to expire in the year ending December 31,
2000. No income tax benefit is provided for the effect of operating loss and
credit carryforwards since at December 31, 1997, 1996, and 1995, future
utilization of the operating loss is not certain and no deferred tax liabilities
exist for which the credit carryforward can offset.
Note 7 - Related party transactions
The Company has paid compensation to an individual who was a director of the
Company and who is related to officers and directors of the Company. Such
compensation paid to this individual amounted to $17,497 for the year ended
December 31, 1992. In December, 1995, this individual forgave the debt which the
Company owed him totaling $17,497 because of the Company's depleted cash
reserves and the uncertainty of the Company's future. The Company has accrued
professional services of $120,000 for the years ended December 31, 1994 and
1993, and has accrued compensation of $38,667 and $25,000 for the years ended
December 31, 1992 and 1991, respectively, to an individual who is related to
officers and directors of the Company. This individual agreed to defer
collection of the professional fees and compensation because of the Company's
depletion in its cash reserves. In December, 1995, this individual forgave the
debt which the Company owed him totaling $183,667 because of the Company's
depleted cash reserves and the uncertainty of the Company's future. For the year
ended December 31, 1995, the amount of $201,164 is included in cancellation of
debt income, In addition, the Company included $4,718 of accrued payroll taxes
related to the forg1ven salaries in cancellation of debt income for the year
ended December 31, 1995.
Note 8 - Commitments
Employment agreements The Company
entered into five-year employment agreements with two stockholders, who are
also officers and directors, providing for compensation of $50,000 each
annually. These agreements were scheduled to expire in December, 1989, but were
automatica11y renewed for additional one-year periods. The individuals covered
under these agreements also agreed to defer
F-13
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10, 1984 (Inception) to December 31, 1997 (Unaudited)
(Unaudited)
Note 8 - Commitments (continued)
collection of the compensation because of the Company's depletion in its cash
reserves. In December, 1995, the two shareholders forgave the debt owed them by
the Company which totaled $579,167 because of the Company's depleted cash
reserves and the uncertainty of the Company's future. In December, 1995, the
officers agreed to perform the limited duties that the Company requires without
compensation until such time as the Company has sufficient financial resources
to pay salaries. For the year ended December 31, 1995, the amount of $579,157 is
included in cancellation of debt income.
Sales and finders agreements
In December, 1988, January, 1989, and March, 1989, the Company entered into six
separate three-year finders agreements with an individual. Each agreement
provides for a 10't commission of revenue collected on all sales by the
individual to certain customers operating at specific sites, as defined in each
separate agreement. In addition, in August, 1988, the Company entered into a
five-year finders agreement with an individual which provides for a commission
of 5% of revenue collected on all sales to a certain customer as defined in the
agreement. Total commissions during the term of the agreement are limited to
$50,000. No sales activity is presently being conducted under these agreements.
These agreements were no longer in force at December 31, 1995.
In December, 1988, the Company entered into a three-year sales representative
agreement with a corporation, of which the principal owner and officer was a
director of the Company and is related to the Company's ma3ority stockholders by
reason of family membership. The agreement provided for a commission not to
exceed 10% of the net amount, as defined, received by the Company on any sale
made by the corporation of such products and in such territory specified. This
agreement was renewed for four additional one-year periods. Commissions expense
of $19,629 has been incurred by the Company in connection with this agreement.
(See Note 7 -Related Parties)
Also, in April, 1991, the Company entered into a three-year finder's agreement
with a corporation, of which the principal owner and officer was a director of
the Company and is related to the Company's majority stockholders by reason of
family membership. This agreement provides for a commission of 10% of the
revenue collected, as defined, for sales of the Company's products to a
designated group of four potential customers. This agreement was renewed an
additional one-year period, No sales activity has occurred as a result of this
agreement.
In January, 1991, the Company entered into a three-year agreement with an
engineering firm. This agreement provides for the engineering firm to have the
exclusive right to promote, market and/or sublicense certain of the Company's
ozone technologies in conjunction, with systems designed to utilize
F-14
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10, 1984 (Inception) to December 31, 1997 (Unaudited)
(Unaudited)
Note 8 - Commitments (continued)
such technologies or components thereof, to petroleum refineries and
petrochemical plants in the United States and a designated group of three
potential firms in India. No sales activity has occurred as a result of this
agreement. This agreement expired prior to December 31, 1995.
Research assistance agreement
The Company has entered into an agreement with Pfeiffer College for the use of
laboratory facilities and personnel necessary to test the prototype system
utilizing the process to treat insoluble organic solid materials.
In consideration of the College's performance and upon the completion of such
testing, the Company transferred to the College title to certain testing
equipment, with a cost to the Company estimated to be between $30,000 and
$35,000.
Lease
Through May, 1986, the Company subleased its office facilities from a
corporation owned by a principal stockholder for $125 monthly under a month-
to-month sublease. Effective June, 1986, the Company began leasing its office
facilities for $139 a month under a one-year noncancellable operating lease,
which was renewed in June, 1988, for $144 a month through May, 1989, and renewed
again in June, 1989, for $152 a month through May, 1990. The Company leased
expanded facilities under an extension of this lease for $483 a month until
September, 1996. Effective October, 1996, the Company subleased its facilities
from an individual who is a stockholder, director, and officer of the Company
for $175 monthly under a month-to-month sublease. Effective April 1, 1995, the
Company subleased office space from Manuel E. Kane pursuant to a month-to-month
lease agreement. The Company does not pay rent under this lease agreement.
Development and consulting agreement
In January, 1988, the Company entered into an agreement with Excalibur
Enterprises, Inc. (Excalibur) and Lucas Boeve, the sole stockholder of and
president of Excalibur, for the joint development and construction of machines
and processes that utilize ozone, ultraviolet light and ultrasonic sound to
treat wastes and to purify water. The agreement, which expires in January, 1998,
provides certain market restr1ctions for both the Company and Excalibur, subject
to a payment by the protected party equal to ten percent (10%) of the profits,
as defined, derived from the protected sales activity. Profits derived from
sales in joint (unrestricted) areas will be shared equally by the Company and
Excalibur. In addition, the agreement provided that Excalibur would receive
$3,000 a week for thirteen weeks, commencing in
F-15
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10 1984 (Inception) to December 31, 1997
(Unaudited)
Note 8 - Commitments (continued)
January, 1989, in connection with consulting services related to the machines
and processes; however, this amount is to be deducted from any amounts owed
Excalibur for its share of profits described above during the agreement term.
Currently, there are no joint activities being conducted under this agreement.
No expense was incurred in connection with this agreement for the years ended
December 31, 1997, 1996, or 1995.
Development and sales agreement
In January, 1988, the Company entered into an agreement with Pillar
Technologies, Inc. (Pillar) to jointly develop and patent an electrode assembly
used for generating ozone. This agreement provided that, for the period
commencing in January, 1988, and ending with the date upon which the patent
referred to above is issued, the Company will sell to Pillar all ozone
generators of five pounds or greater that the Company manufactures at a price
not to exceed the best price offered to any original equipment manufacturer for
the same or similar product. No patent has been issued arising from this
agreement. Also, no joint activities are be1ng conducted under this agreement,
and future activities are not expected.
Note 9 - Accounts receivable
For the year ended December 31, 1995, the Company included the amount of $24,096
in bad debt expense. The Company was unable to collect the outstanding debt due
it from Chandler County, a municipality in Texas.
Note 10 - Notes payable
During 1997, the President and the Chairman of the Board of Directors loaned the
Company $9,447. 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. The amount of $7,000 of these notes were retired during the year
ended December 31, 1997.
During 1996, the President and the Cha1rman of the Board of Directors loaned the
Company $5,700. 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. The amount of $497 of these notes were retired during the year
ended December 31, 1996.
During 1995, the President and the Chairman of the Board of Directors loaned the
Company $14,180. Promissory notes, payable on demand and secured by a
F-16
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10 1984 (Inception) to December 31, 1997
(Unaudited)
Note 10 - Note payable (continued)
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. The entire amount of these notes, $14,180, and the amount of $420 of
promissory notes issued in previous years were retired during the year ended
December 31, 1995.
For the year ended December 31, 1997 and 1996, the amounts of $15,538 and
$11,804, respectively, of interest payable relating to the notes payable to
officers are included in other accrued interest payable in the accompanying
balance sheets.
Note 11 - Accounts payable
During the years ended December 31, 1997, 1996, and 1995, the time limit allowed
by the Statute of Limitations for vendors to collect certain of the Company's
trade payables expired. Because the Company does not have the financial
resources to pay these debts and the aforementioned Statute of Limitations bars
their collection, the Company included these amounts in cancellation of debt
income. For the years ended December 31, 1997, 1996, and 1995, the amounts of
$5,206, $7,397, and $147,923 respectively were included in cancellation of debt
income.
Note 12 - 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 Nay 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 year ended December 31, 1997, 1996, and
1995, the amounts of $356, $356, and $2,168, respectively, 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 1n the total of $3,802, in the District Court of Henderson
County, Texas. On February 25, 1993, McKinney 6 Moore, Inc. received a Judgment
to recover the debt, attorney fees of $1,250, prejudgement in the amount of
$211, plus interest at lO% 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 year ended December 31, 1997, 1996, and 1995, the amounts of $505, $505, and
$1,668, respectively, were included in interest expense. The amount of $3,802
was included in accounts payable in the accompanying balance sheets.
F-17
<PAGE>
RADIATION DISPOSAL SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1997, 1996, and 1995, and the period from
January 10, 1984 (Inception) to December 31, 1997 (Unaudited)
(Unaudited)
Note 11 - Contingent liabilities
During the year ended December 31, 1997, the Company contracted to have all its
unused chemicals and other waste materials removed from the Pfeiffer College
campus by a company licensed to dispose of hazardous waste materials. Although
the invoice for the removal of the aforementioned chemicals and waste materials
was paid, a contingent liability of up to $5,000 relating to consulting services
involved with the waste disposal still exists. The Company did not include this
amount in accrued liabilities in the accompanying balance sheet nor in its net
loss for the year ended December 31, 1997.
F-18
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
RADIATION DISPOSAL SYSTEMS, INC.
(Unaudited)
<S> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Balance at Balance at
Beginning Additions Other End of
Classification of Period at Cost Abandonments Changes Period
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Year ended December 31, 1997:
Office equipment $ - $ - $ - $ - $ -
Laboratory equipment - - - - -
Improvements to research facility - - - - -
Test and demonstration machinery - - - - -
------------ ------------ ------------ ------------ -----------
Total $ - $ - $ - $ - $ -
============ ============ ============ ============ ===========
Year ended December 31, 1996:
Office equipment $ 7,570 $ - $ - $ (7,570) $ -
Laboratory equipment 51,587 - - (51,587) -
Improvements to research facility 29,644 - - (29,644) -
Test and demonstration machinery 10,678 - - (10,678) -
------------ ------------ ------------ ------------ -----------
Total $ 99,479 $ - - (99,479) $ -
============ ============ ============ ============ ===========
Year ended December 31, 1995:
Office equipment $ 7,570 $ - $ - $ - $ 7,570
Laboratory equipment 51,587 - - - 51,587
Improvements to research facility 29,644 - - - 29,644
Test and demonstration machinery 10,678 - - - 10,678
------------ ------------ ------------ ------------ -----------
Total $ 99,479 $ - $ - $ - $ 99,479
============ ============ ============ ============ ===========
Year ended December 31, 1994:
Office equipment $ 7,570 $ - $ - $ - $ 7,570
Laboratory equipment 51,587 - - - 51,587
Inprovements to research facility 29,644 - - - 29,644
Text and demonstration machinery 52,409 - 41,730 - 10,678
------------ ------------ ------------ ------------ -----------
Total $ 141,209 $ - $ 41,730 $ - 99,479
============ ============ ============ ============ ===========
Year ended December 31, 1993:
Office equipment $ 7,570 $ - $ - $ - $ 7,570
Laboratory equipment 51,587 - - - 51,587
Improvements to research facility 29,644 - - - 29,644
Test and demonstration machinery 380,206 - 327,798 - 52,408
------------ ------------ ------------ ------------ -----------
Total $ 469,007 $ - $ 327,798 $ - $ 141,209
============ ============ ============ ============ ===========
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (continued)
RADIATION DISPOSAL SYSTEMS, INC.
(Unaudited)
<S> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Balance at Balance at
Beginning Additions Other End of
Classification of Period at Cost Abandonments Changes Period
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Year ended December 31, 1992:
Office equipment $ 7,570 $ - $ - $ - $ 7,570
Laboratory equipment 83,272 - - (31,685) 51,587
Improvements to research facility 29,644 - - - 29,644
Test and demonstration machinery 380,206 - - - 380,206
------------ ------------ ------------ ------------ -----------
Total $ 500,692 $ - $ - $ (31,685) $ 469,007
============ ============ ============ ============ ===========
Year ended December 31, 1991:
Office equipment $ 7,570 $ - $ - $ - $ 7,570
Laboratory equipment 83,272 - - - 83,272
Improvements to research facility 29,644 - - - 29,644
Test and demonstration machinery 410,970 4,031 54,261 19,466 380,206
Equipment held for rent 24,851 - - (24,851) -
------------ ------------ ------------ ------------ -----------
Total $ 556,307 $ 4,031 54,261 (5,385) $ 500,692
============ ============ ============ ============ ===========
Year ended December 31, 1990:
Office equipment $ 5,246 $ 2,324 $ - $ - $ 7,570
Laboratory equipment 83,272 - - - 83,272
Improvements to research facility 29,644 - - - 29,644
Test and demonstration machinery 353,564 91,958 - (34,552) 410,970
Equipment held for rent - - - 24,851 -
------------ ------------ ------------ ------------ -----------
Total $ 471,726 $ 94,282 $ - $ (9,701) $ 556,307
============ ============ ============ ============ ===========
Year ended December 31, 1989:
Office equipment $ 5,246 $ - $ - $ - $ 5,246
Laboratory equipment 83,272 - - - 83,272
Inprovements to research facility 29,644 - - - 29,644
Text and demonstration machinery 440,511 83,361 170,308 - 353,564
------------ ------------ ------------ ------------ -----------
Total $ 558,673 $ 83,361 $ 170,308 $ - 471,726
============ ============ ============ ============ ===========
Year ended December 31, 1988:
Office equipment $ 4,215 $ 1,031 $ - $ - $ 5,246
Laboratory equipment 69,925 19,668 6,321 - 83,272
Improvements to research facility 29,644 - - - 29,644
Test and demonstration machinery 272,544 251,485 83,518 - 440,511
------------ ------------ ------------ ------------ -----------
Total $ 376,328 $ 272,184 $ 89,839 $ - $ 558,673
============ ============ ============ ============ ===========
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (continued)
RADIATION DISPOSAL SYSTEMS, INC.
(Unaudited)
<S> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Balance at Balance at
Beginning Additions Other End of
Classification of Period at Cost Abandonments Changes Period
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Year ended December 31, 1987:
Office equipment $ 919 $ 3,296 $ - $ - $ 4,215
Laboratory equipment 69,925 - - - 69,925
Improvements to research facility 25,777 3,867 - - 29,644
Test and demonstration machinery 152,813 193,594 73,863 - 272,544
------------ ------------ ------------ ------------ -----------
Total $ 249,434 $ 200,757 $ 73,863 $ - $ 376,328
============ ============ ============ ============ ===========
Year ended December 31, 1986:
Office equipment $ 808 $ 111 $ - $ - $ 919
Laboratory equipment 14,006 55,919 - - 69,925
Improvements to research facility - 25,777 - - 25,777
Test and demonstration machinery - 152,813 - - 152,813
------------ ------------ ------------ ------------ -----------
Total $ 14,814 $ 234,620 - - $ 249,434
============ ============ ============ ============ ===========
Year ended December 31, 1985:
Office equipment $ - $ 808 $ - $ - $ 808
Laboratory equipment - 14,006 - - 14,006
Improvements to research facility - - - - -
Test and demonstration machinery - - - - -
------------ ------------ ------------ ------------ -----------
Total $ - $ 14,814 $ - $ - $ 14,814
============ ============ ============ ============ ===========
</TABLE>
Methods and rates used in computing depreciation and amortization:
Description Method Life
- ---------------------- ----------- --------
Office equipment Strait line 5 years
Laboratory equipment Strait line 7 years
Improvements to research facility Strait line 10 years
Test and demonstration machinary Strait line 7 years
S-3
<PAGE>
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATIN OF PROPERTY AND EQUIPMENT
RADIATION DISPOSAL SYSTEMS, INC.
(Unaudited)
<TABLE>
<S> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Balance at Balance at
Beginning Other End of
Classification of Period Depreciation Abandonments Changes Period
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Year ended December 31, 1997:
Office equipment $ - $ - $ - $ - $ -
Laboratory equipment - - - - -
Improvements to research facility - - - - -
Test and demonstration machinery - - - - -
------------ ------------ ------------ ------------ -----------
Total $ - $ - $ - $ - $ -
============ ============ ============ ============ ===========
Year ended December 31, 1996:
Office equipment $ 7,570 $ - $ - $ (7,570) $ -
Laboratory equipment 51,587 - - (51,587) -
Improvements to research facility 27,299 2,345 - (29,644) -
Test and demonstration machinery 10,678 - - (10,678) -
------------ ------------ ------------ ------------ -----------
Total $ 97,134 $ 2,345 $ - $ (99,479) $ -
============ ============ ============ ============ ===========
Year ended December 31, 1995:
Office equipment $ 7,570 $ - $ - $ - $ 7,570
Laboratory equipment 51,587 - - - 51,587
Improvements to research facility 24,335 2,964 - - 27,299
Test and demonstration machinery 10,678 - - - 10,678
------------ ------------ ------------ ------------ -----------
Total $ 94,170 $ 2,964 $ - $ - $ 97,134
============ ============ ============ ============ ===========
Year ended December 31, 1994:
Office equipment $ 7,398 $ 170 $ - $ 2 $ 7,570
Laboratory equipment 51,587 - - - 51,587
Inprovements to research facility 21,370 2,965 - - 24,335
Text and demonstration machinery 42,732 323 32,377 - 10,678
------------ ------------ ------------ ------------ -----------
Total $ 123,087 $ 3,458 $ 32,377 $ 2 94,170
============ ============ ============ ============ ===========
Year ended December 31, 1993:
Office equipment $ 6,949 $ 449 $ - $ - $ 7,398
Laboratory equipment 49,869 8,739 - (7,021) 51,587
Improvements to research facility 18,405 2,965 - - 21,370
Test and demonstration machinery 253,078 45,516 262,883 7,021 42,732
------------ ------------ ------------ ------------ -----------
Total $ 328,301 $ 57,669 $ 262,883 $ - $ 123,087
============ ============ ============ ============ ===========
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATIN OF PROPERTY AND EQUIPMENT
RADIATION DISPOSAL SYSTEMS, INC.
(Unaudited)
<S> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Balance at Balance at
Beginning Other End of
Classification of Period Depreciation Abandonments Changes Period
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Year ended December 31, 1992:
Office equipment $ 5,619 $ 1,330 $ - $ - $ 6,949
Laboratory equipment 58,452 12,641 - (21,224) 49,869
Improvements to research facility 15,440 2,965 - - 18,405
Test and demonstration machinery 198,903 54,175 - - 253,078
------------ ------------ ------------ ------------ -----------
Total $ 278,414 $ 71,111 $ - $ (21,224) $ 328,301
============ ============ ============ ============ ===========
Year ended December 31, 1991:
Office equipment $ 4,289 $ 1,330 $ - $ - $ 5,619
Laboratory equipment 46,557 11,895 - - 58,452
Improvements to research facility 12,475 2,965 - - 15,440
Test and demonstration machinery 147,460 58,575 15,974 8,842 198,903
Equipment held for rent 6,179 2,663 - (8,842) -
------------ ------------ ------------ ------------ -----------
Total $ 216,960 $ 77,428 $ 15,974 $ - $ 278,414
============ ============ ============ ============ ===========
Year ended December 31, 1990:
Office equipment $ 3,284 $ 1,005 $ - $ - $ 4,289
Laboratory equipment 34,662 11,895 - - 46,557
Improvements to research facility 9,511 2,964 - - 12,475
Test and demonstration machinery 99,338 55,281 - (7,159) 147,460
Equipment held for rent - 2,483 - 3,696 6,179
------------ ------------ ------------ ------------ -----------
Total $ 146,795 $ 73,628 $ - $ (3,463) $ 216,960
============ ============ ============ ============ ===========
Year ended December 31, 1989:
Office equipment $ 2,226 $ 1,058 $ - $ - $ 3,284
Laboratory equipment 22,766 11,896 - - 34,662
Inprovements to research facility 6,547 2,964 - - 9,511
Text and demonstration machinery 73,747 56,720 31,129 - 99,338
------------ ------------ ------------ ------------ -----------
Total $ 105,286 $ 65,897 $ 31,129 $ - 146,795
============ ============ ============ ============ ===========
Year ended December 31, 1988:
Office equipment $ 1,168 $ 1,058 $ - $ - $ 2,226
Laboratory equipment 14,984 9,588 1,806 - 22,766
Improvements to research facility 3,582 2,965 - - 6,547
Test and demonstration machinery 37,583 52,286 16,122 - 73,747
------------ ------------ ------------ ------------ -----------
Total $ 57,317 $ 65,897 $ 17,928 $ - $ 105,286
============ ============ ============ ============ ===========
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATIN OF PROPERTY AND EQUIPMENT
RADIATION DISPOSAL SYSTEMS, INC.
(Unaudited)
<S> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Balance at Balance at
Beginning Other End of
Classification of Period Depreciation Abandonments Changes Period
- ---------------------------------------------- ------------ ------------ ------------ ------------ -----------
Year ended December 31, 1987:
Office equipment $ 315 $ 853 $ - $ - $ 1,168
Laboratory equipment 4,995 9,989 - - 14,984
Improvements to research facility 767 2,815 - - 3,582
Test and demonstration machinery 10,914 32,662 5,993 - 37,583
------------ ------------ ------------ ------------ -----------
Total $ 16,991 $ 46,319 $ 5,993 $ - $ 57,317
============ ============ ============ ============ ===========
Year ended December 31, 1986:
Office equipment $ 121 $ 194 $ - $ - $ 315
Laboratory equipment - 4,995 - - 4,995
Improvements to research facility - 767 - - 767
Test and demonstration machinery - 10,914 - - 10,914
------------ ------------ ------------ ------------ -----------
Total $ 121 $ 16,870 - - $ 16,991
============ ============ ============ ============ ===========
Year ended December 31, 1985:
Office equipment $ - $ 121 $ - $ - $ 121
Laboratory equipment - - - - -
Improvements to research facility - - - - -
Test and demonstration machinery - - - - -
------------ ------------ ------------ ------------ -----------
Total $ - $ 121 $ - $ - $ 121
============ ============ ============ ============ ===========
</TABLE>
S-6
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the securities
Exchange Act of 1934, the Reqistrant has duly caused this report to be signed on
its behalf by the undrsigned, thereunto duly authorized.
RADIATION DISPOSAL SYSTEMS, INC.
DATE: August 6, 1998 By: /s/ Manuel E. Kane
---------------------------------------
Manuel E. Kane, Principal Executive
Officer and Principal Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Manuel E. Kane President, Treasurer August 6, 1998
- -----------------
Manuel E. Kane & Director
/s/Albert D. Kane Chairman of the Board, August 6, 1998
- -----------------
Albert D. Kane Secretary & Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000758256
<NAME> Radiation Disposal Systems, Inc.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Dec-31-1997
<EXCHANGE-RATE> 1
<CASH> 159
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 159
<CURRENT-LIABILITIES> 74,825
<BONDS> 0
0
0
<COMMON> 9,977,495
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (74,666)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 7,664
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,596
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,472)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
