U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB/A
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[Fee Required]
For fiscal year ended May 31, 1995
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[No Fee Required]
Commission file number 1-10069
ENVIRONMENTAL TESTING TECHNOLOGIES, INC.
(formerly Peripheral Systems, Inc.)
Washington 93-0845837
(State of Incorporation) (IRS Employer ID No.)
7500 Perimeter Road South
Seattle, Washington 98108
(Address of Principal Executive Offices) (Zip Code)
(206) 763-1919
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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__
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $4,471,967.00
Aggregate market value of voting stock held by non-affiliates: $NONE
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
LAST FIVE YEARS
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes ______ No ___X___
The number of shares outstanding of each of the issuer's classes of common
equity, as of October 31, 1995: 1,481,315 shares.
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Format: Yes ______ No ___X___
PART I
Item 1 - Description of Business
GENERAL
Environmental Testing Technologies, Inc. ("ETT") (formerly Peripheral System,
Inc.) is a reincorporated Washington corporation which was originally organized
as an Oregon corporation in October, 1983. ETT was formed to conduct original
research and development projects designed to develop commercially realizable
products that could be sold for a profit. During the 1980's, ETT bought
interests in companies engaged in promising research and development projects.
During the year of operations ended May 31, 1994, X-Ray, Inc.,("X-Ray") was the
only active subsidiary of the Company producing revenue. During the year ended
May 31, 1995, TankTek, Inc. and Accu-Inspect, Inc. were additional revenue
producing subsidiaries of the Company. As discussed below, Accu-Inspect, Inc.
was sold in July 1995.
Bankruptcy Proceeding; Plan of Reorganization
ETT filed a voluntary petition in bankruptcy in the Federal Court, Seattle,
Washington in August 1993. The petition was filed because of the problem
caused by the debt, pending and threatening shareholder litigation, which
resulted from the Company's inability to complete the Nucell, Inc. battery
development program. With X-Ray, Inc., the only operating entity, having been
stripped of most of its assets to fight the actions mentioned above, the Company
had no ability to either fight or pay its obligations without a financial
restructuring, thus the voluntary petition in bankruptcy was filed. Under the
plan of reorganization, the Company refocused its interest to revenue producing
operations consisting of nondestructive testing.
Under the plan of reorganization, which was approved and put into place on
May 31, 1994, ETT's unsecured debts were converted into Redeemable Preferred
Stock at $.25 on the dollar payable out of future earnings with a minimum
annual redemption payment of $21,235. The preferred stock is convertible into
shares of common stock representing 51% of the Company's outstanding stock in
the event the Company fails to meet the mandatory redemption provisions. The
Company's common shares and outstanding warrants were canceled completely in
exchange for options to purchase new shares of Common Stock at $.05/share.
ETT raised $568,657 through the exercise of these options which expired June 1,
1994. In May 1995, the Company's Board of Directors authorized a 1 for 10
reverse stock split.
ETT elected not to make the first preferred stock redemption payment which
became due on August 31, 1995. Under terms of the preferred stock agreement,
upon 30 days notice the redeemable preferred stock is convertible into shares of
common stock representing 51% of the outstanding common stock of ETT. The
preferred stockholders have not excercised their right to convert the preferred
stock and management intends to make the required redemption payment when
cash is available.
X-Ray, Inc.
X-Ray performs nondestructive testing of metals and other materials for the
petrochemical, construction, aerospace, maritime and other industries.
X-Ray employs a variety of testing methods using radiographic, ultrasonic,
magnetic particle, liquid penetrant, eddy current and visual inspection
techniques. These services are generally performed on a bid basis and X-Ray
is qualified for major contracts with both the government and the private
sector. Inspections are performed on military projects and other government
projects for private contractors as well as the private sector itself.
X-Ray's revenues for the fiscal years ended May 31, 1995, and 1994 totaled
$2.194 million for 1995 and $2.338 million for 1994.
TankTek, Inc.
In May 1994, ETT activated a new subsidiary, TankTek, Inc. ("TankTek").
TankTek's business is providing engineering assessments and related testing
services to owners of aboveground storage tanks holding hazardous materials,
principally petroleum and chemical products. These services are marketed
nationally. X-Ray previously operated a division called TankTek that marketed
only nondestructive testing services. TankTek's business emphasis is on
providing engineering services which allow tank owners to continue using their
tanks in compliance with the American Petroleum Institute Standard 653
("API 653"). API 653 sets forth the industry standards for aboveground
storage tanks inspection, repair alteration and reconstruction needs. TankTek
employs certified API 653 inspectors which use standard industry equipment
manufactured by others to do the evaluation, plus TankTek has filed a patent
application on a high energy ultrasonic based floor scanner. TankTek has
one working scanner that does provide the accurate data required for engineers
to assess corrosion rates floor life expectations, but currently does not
acquire the data as fast as more conventional equipment. TankTek believes,
if this issue can be overcome, that the application of this floor inspection
technology will be the tank owners most reliable and complete means of
acquiring enough data to properly evaluate the corrosion rates, leak
detection possibilities and extent of repairs that may be required to bring
the tank into compliance and in turn back into service. The Company
has no current plans to continue research and development expenditures,
whether for engineering services or nondestructive testing. Expenditure for
research and development require funding for which the Company has no known
source of funding.
ETT spent no money on research and development in 1995 and $102,994.00 in
1994. The research and development expenditures led to the one working
scanner described above.
The need for these engineering evaluation services results from both API 653
and the United States Environmental Protection Agency ("EPA") underground
storage tanks ("UST") regulations which have not yet been applied to above-
ground storage tanks. Some states have already mandated that tank
owners comply with API 653, and more states are expected to mandate
compliance. The EPA may at sometime issue aboveground storage tank
regulations similar to underground storage tank regulations.
Accu-Inspect, Inc.
In August 1994, ETT acquired certain assets of Accu-Tech, Inc. a
nondestructive testing company with offices in two petroleum business
concentration centers: New Jersey and Northern California. The purpose of
the acquisition was to allow TankTek's access to Accu-Tech's customer base
with its API 653 certification program with a local base of operation.
TankTek, in turn, can market its newly acquired inspection services to its
existing customers in TankTek's market area. ETT formed a new subsidiary,
Accu-Inspect, Inc, ("Accu-Inspect") and acquired the customer base, the rights
to the Accu-Tech name, all equipment owned or leased by the seller in exchange
for issuance of 200,000 shares Convertible Preferred Class B valued at $1.00
a share, and the assumption of $238,962 in secured debt. The preferred stock
is convertible into Company stock over 8 years at conversion rates which range
from 10 to 1 shares of common stock for each share of preferred stock. The
preferred stock includes dividends of 2% for the first year and 6% thereafter.
The selling shareholders were also entitled to a 30% share of the pretax
profits from the assets of Accu-Inpsect through August 1999.
Accu-Inspect, Inc. revenues for the fiscal year ended May 31,1995, were
$1,317,114.00. In June 1995, ETT sold to one of the former owners of Accu-
Tech, Inc. all the operating assets of Accu-Inspect, Inc. in exchange for notes
and the return of 100,000 shares of convertible Preferred Class B Stock. ETT
recognized a gain of $43,000 on the sale in June and can realize as much as
$202,000 in additional gains as payments are received.
North American Inspection, Inc.
In April 1995, ETT agreed to merge with North American Inspection, Inc.
Pending completion of certain events by ETT, ETT provided North American
Inspection, Inc. with financial support until North American Inspection abruptly
terminated the merger in July 1995. All advances made by ETT have been repaid
and there is pending legal action against North American Inspection, Inc., its
officers and owners by ETT as Plaintiff seeking contractual damages associated
with the merger termination. The outcome of this litigation is unknown.
Patents, Licenses
TankTek, Inc. has an application pending on a patented ultrasonic floor scanner
device. The working system currently acquires the accurate data required for
engineers to access corrosion rates, but does not acquire the data in a cost
effective manner. The solution to this problem is known, but due to
funding limitations, the necessary action that would bring the system to full
utilization capability has been postponed. The Company has elected to use
more conventional means of data acquisition until this project is brought to
completion. TankTek signed an agreement with Millstrong,LTD of Great Britain
in 1995 granting TankTek exclusive distribution rights to the petrochemical
industry for Millstrong's patented equipment in exchange for a requirement to
purchase a certain number of units.
TankTek revised its basic business to include Millstrong equipment as a
principle technology advantage. Due to the complications of the North American
merger termination, TankTek was forced to abandon its exclusive relationship
with Millstrong in September 1995.
Business Strategy
As with most service-oriented business, local service is generally more
acceptable and less costly to the customer than long distance service calls.
Continued application of this strategy to the engineering/nondestructive
service business is ETT's basic business plan. ETT corporate objective is to
become the major provider of engineering services to the petro chemical
industry on a national and international scale in the specialized markets of
API 653 and API 570 Compliance. By having strategically located offices in
tank concentrated areas, ETT can become the most cost-effective supplier of
specialized services and hence the major provider.
The acquisitions of both Accu-Tech, Inc. and North American Inspection, Inc.
were directed at providing the local service concept described above using
acquisitions as the basis for growth.
As these two mergers did not achive the desired results, the company is
currently evaluating the best method for achieving these results - local
service. At this time internally generated new offices and strategic
acquisitions appear to be the best plan to achieve the objective. Currently
ETT operates only one office in Seattle, Washington.
Market Information
The market for non-destructive testing services is dominated by small regional
suppliers who compete with both price and service. Most work is acquired on
a time and material basis. The market for API-653 services is a growing
market with few suppliers and even fewer qualified suppliers. The competition
here is based upon quality service using qualified service personnel equipped
with advanced technology.
ETT's strategy is to provide unique API 653 services nationally and use the
natural relationship between nondestructive testing services and API 653 to
help penetrate the market.
This strategy is being executed in two ways - acquiring, training and retain-
ing personnel who can provide the services'and by keeping the Company's
technical capability on the leading edge.
ETT does not have a current customer that represents more than 10% of its
anticipated revenue.
Employees
ETT employs 26 technical, clerical, and managerial personnel, including 25
full time employees.
Item 2 - Description of Property
At May 31, 1995, ETT had the following properties under a long term lease:
Office and laboratory in Seattle, WA at annual rent of
$21,410.00 through 2001.
Management believes that the facility is adequate for the Company's needs.
Item 3 - Legal Proceedings
The Company is not a party to any material pending legal proceedings except
the litigation filed against North American Inspection, Inc., its Officers
and Owners.
Item 4 - Submission of Matters to a Vote of Security Holders
Since the vote required to approve the plan of reorganization (spring of 1994)
no matters have been submitted to the security holders for vote.
PART II
Item 5 - Market For Common Equity and Related Stockholder Matters
ETT Common Stock was quoted on NASDAQ under the symbol PSIX until
January 1992. ETT's stock trading was delisted at that time and the Company has
no knowledge of trading activities since that date.
The Company has never paid dividends on its Common Stock and does not
anticipate that it will do so in the foreseeable future. The future dividends
payments, if any, on the Common Stock is within the discretion of the
Board of Directors and will depend on the Company's earnings, its capital
requirements and financial condition. At October 31, 1995, there were
approximately 372 record holders of the Company's Common Stock.
Item 6 - Management's Discussion and Analysis or Plan of Operations
Overall Discussion.
As of May 31, 1995, the Company, composed of Environmental Testing
Technologies, Inc. and its three operating subsidiaries, was engaged in two
primary business segments: nondestructive testing and inspection of materials
and providing engineering condition assessment services to owners of aboveground
petrochemical storage tanks, piping and pressure vessels. During the year ended
May 31, 1994, the Company's only source of revenue was nondestructive testing
and engineering services provided through its principal subsidiary, X-Ray, Inc.
In May 1994, the Company formed a new subsidiary, TankTek, Inc., who's
primary business is providing engineering certification for aboveground
petrochemical tank owners in compliance with American Petroleum Institute
Standard 653. This new subsidiary began operations June 1, 1994. Prior to June
1, 1994, TankTek operated as a cost center of X-Ray, Inc. providing
nondestructive floor inspection services to the petrochemical industry using its
proprietary ultrasonic inspection equipment. During the year ended May 31,
1994, the Company abandoned the original ultrasonic scanner originally designed
by X-Ray, Inc. in favor of a newer design more closely related to the needs of
the petrochemical industry.
In September 1994, ETT acquired certain assets of Accu-Tech Evaluation
Services, Inc. ("Accu-Tech"). The purchase of this acquisition was to allow for
local service of API 653 services using Accu-Tech's customer base and TankTek's
advanced technological capabilities. This acquisition did not develop as
expected and resulted in the sale of Accu-Tech and its assets in June 1995. ETT
recognized a gain of $43,139 on the sale of the assets in June.
In April 1995, ETT entered into a merger agreement with North American
Inspection, Inc., on a common stock for common stock exchange basis, and
re-organized its management team to take advantage of the basic business
strategies and skill of the various people involved. In July 1995, North
American Inspection, Inc. terminated the merger agreement. ETT is the Plaintiff
in litigation against North American Inspection, Inc., seeking contractual
remedies,as per the merger agreement, available to ETT.
Both the Accu-Tech Services and North American Inspection mergers were
strategic alliances consistent with the Company's growth plans of establishing
base operations near petroleum industry centers of operation; while both mergers
resulted in failure, the basic business strategy remains managements' continuing
strategy.
The Company recognizes the need for new capital infusion and expects to actively
pursue additional sources of funding to further its corporate objectives as
explained in the Plan of Reorganization. See "Item 1 - Description of Business"
and Liquidity and Capital Resources following.
ETT filed a voluntary Chapter XI petition in Bankruptcy in the summer of 1993.
Pursuant to a plan of reorganization which was confirmed and became effective
May 31, 1994, all common stock issued and outstanding as well as outstanding
warrants for the purchase of common stock were canceled. Stockholders of record
were issued options to purchase 3,300,000 (after giving effect to the 10:1
reverse split authorized in May 1995) shares of new common stock for $.50 per
share. These options expired on June 1, 1994. A total of 1,353,315 shares of
common stock were issued, for $568,657 In addition, stockholders and certain
members of management were granted warrants for the purchase of 1,401,000
shares of common stock for $.50 per share which expired May 31, 1995. In
addition, unsecured debt was converted into 176,958 of mandatory redeemable
convertible preferred shares.
Results of Operations
FOR THE FISCAL YEAR ENDED 5/31/95 COMPARED TO FISCAL YEAR
ENDED 5/31/94.
OPERATING LOSS ANALYSIS
For the two years ended May 31, 1995 and 1994, operating losses were $140,058
and $30,224. The causes for the increase in losses are discussed separately by
the following comments under Revenue Analysis, Cost of Sales, Gross Profit
Analysis; Selling, General and Administrative Expenses; and Research and
Development Expense Analysis sections.
REVENUE ANALYSIS
Nondestructive testing is testing an object without destroying it. This allows
the item inspected to either pass or fail a given standard. The standard for
pass or fail is developed by the customers', management, engineering or
production departments.
Petroleum Engineering Services may use inspection data to evaluate pass or fail
tanks and piping, but is largely involved in making specific engineering
corrections or recommendations that allow the client to bring the tank or system
into compliance with the American Petroleum Institute Standards for its
continued use.
Revenues by lines of business for the years ended May 31, 1995 and 1994
consisted of the following.
Revenues 1995 1994
Nondestructive Testing $3,511,131 $1,967,030
Petroleum Engineering Services 960,836 371,293
TOTAL $4,471,967 $2,338,323
Nondestructive revenues increased from $1,967,030 in 1994 to $3,511,131 in
1995 for two principle reasons: X-Ray, Inc.'s 1995 revenues increased 6%
over 1994 levels and the revenues from Accu-Tech were $1,317,114 in 1995 and
none in 1994.Petroleum Engineering Services increased from $371,293 in 1994
to $960,836 in 1995. This increase was due to the marketing efforts by
TankTek and the operation's ability to provide services on an acceptable
basis to satisfied clients. This 259% increase was expected given the market
size and the local service capabilities acquired by ETT's acquisition of Accu-
Tech Evaluation Services, Inc. business in September 1994.
COST OF SALES/GROSS PROFIT ANALYSIS
Cost of sales and resulting gross profit for the year ended 5/31/95 were
$3,238,638 and $1,233,329, or a gross profit 28% of revenue. For the year
ended 5/31/94, cost of sales and the resulting gross profit were $1,533,078
and $805,245, or a gross profit of 34% on revenue.
The gross profit percentage loss of 6%, from 34% in 1994 to 28% in 1995, was
directly attributable to TankTek and Accu-Tech, as X-Ray's gross profit
increased from 34% in 1994 to 38% in 1995. TankTek's gross profit was 26% and
was low because TankTek absorbed significant travel expenses which would be
eliminated with a local service base. Accu-Inspect gross profit was 13% and
is directly attributable to a large contract that was completed on a negative
gross profit basis.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES ANALYSIS
Selling, general and administrative expenses increased from $732,475 in 1994
to $1,373,387 in 1995, and remained a consistent 31% of sales for both years.
For both years payroll and directly related costs amounted to 61% of the
selling general and administrative expenses with depreciation, insurance,
rent, utilities accounting for 23% and the balance 16% general operating costs.
All categories increased in 1995 when compared to 1994 in direct portion to
the sales increase as most of the costs are directly proportional to revenue.
RESEARCH AND DEVELOPMENT EXPENSES ANALYSIS
In 1994, all development funds were spent on development of a redefined floor
scanner instrument. In 1995, no funds were expended on research and
development activities.
OTHER EXPENSE ANALYSIS
Other operating expenses of $128,444 in 1994 increased 55% to $199,667 in 1995.
This increase was due principally to interest expense.
Interest expense increased significantly due to (1) increased sales volume
(2) new equipment purchases necessary to the growth plans the Company
entertains.
The Company has no knowledge of known trends, events, or uncertainties which
could reasonably be expected to adversely effect revenues, costs or profits
in the future except for the sale of Accu-Inspect assets. The sale of Accu-
Inspect reduces future revenues while increasing profits by elimination of
Accu-Inspects 1995 operating loss.
On a performa basis, assuming the Accu-Inspect, Inc. acquisition had not been
made in August 1995, the 1995 operations results would have changed
substantially as set forth in the following summary table:
1995 STATEMENT OF OPERATION
Actual Results Eliminate Proforma
Accu-Inspect Results
Sales $4,471,967 $(1,317,114) $3,154,853
Gross Margin 1,233,329 ( 169,539) 1,063,790
Selling, Gen
& Admin 1,373,387 ( 442,856) 930,531
Other Income
Expense 199,667 ( 7,271) 192,396
(Net Loss) 339,725 280,588 (59,137)
(Loss) per Share (.24) (.20) (.04)
CASH FLOW ANALYSIS
Net changes in cash provided (used) in operating activities were $150,177 in
1994 and ($34,534) in 1995. The most significant component of this $184,711
change was the increase of net loss from a $293,534 profit in 1994 to a net loss
of $339,725 in 1995. Additionally a gain on reorganization of the company of
$452,202 was recognized in 1994.
Net cash (used in) investing activities increased from ($105,094) in 1994 to
$(356,635) in 1995. The increase is due primarily to equipment acquisitions
associated with TankTek's business together with providing financing for the
defunct merger agreement with North American Inspection, Inc.
Net cash provided by financing activities were reduced from $267,413 in 1994
to $87,243 in 1995, with the reduction being principally attributable to
reduce sales of common stock in 1995 when compared to 1994. This was offset
by short term borrowing increases from $67,887 in 1994 to $366,799 in 1995.
This increase is directly attributable to volume increase and loans to North
American Inspection, Inc.
LIQUIDITY AND CAPITAL RESOURCES
The working capital position of the Company has been under heavy pressure for
several years. The working capital has been negative for each of the last two
years.
1995 1994
Current Assets 77,528 691,022
Current Liabilities 1,786,250 926,857
Negative Working Capital <1,012,722> <275,835>
As discussed in Note 1 to the consolidated financial statements, the Company
filed a voluntary petition of reorganization under Chapter 11 of the Federal
Bankruptcy Code in United States Bankruptcy Court on August 10, 1993. This
event and the resulting operating losses of $339,725 in 1995 and $158,668 in
1994 and as of May 31, 1995, a stockholders deficit of $549,118 and a working
capital deficit of $1,012,722 raises substantial doubt about the Company's
ability to continue as a going concern.
Although the Company's plan of reorganization was confirmed on April 16, 1994,
and became effective May 31, 1994, the continuation of the Company as a going
concern is contingent upon, among other things, the ability to achieve
satisfactory levels of future earnings and liquidity. Management has taken a
number of actions to expand the Company's services into the testing of above-
ground tank, primarily for the petroleum industry.
The Company's first two acquisitions were both failures and currently the
Company has curtailed its acquisition activities while continuing service
from its Seattle home base while assessing the best way to continue its
strategic plan for growth.
Management believes that the continued execution of its plans for strategic
acquisitions and internal growth will provide sufficient liquidity for the
Company to continue as a going concern. There are no assurances that these
objectives can be attained, or that the Company will be able to meet the
conditions of the plan for reorganization. Accordingly, the attached
consolidated financial statements do not include any adjustments related to
the recoverability that might be necessary should the Company be unable to
continue as a going concern.
The Company intends on seeking new capital, both from borrowings and new
equity securities issuances that will provide funds needed to fully implement
its business plan and objectives of providing API 653 engineering services
and non-destructive testing services to the national petrochemical industry.
The Company needs for new capital, working capital, and for equipment are
significant particularly to continue to develop the Petroleum engineering
services business contemplated in its business plan.
While the Company has shown substantial liquidity depletion over the past
year, the Company recognizes it needs additional funds to fully implement
its business plan and fully intends on securing new debt and equity financings.
If adequate capital is not available on a timely basis, the Company will not be
able to pursue its corporate objectives, and may be required to reduce its
operations.
Item 7 - Financial Statements
The consolidated financial statements for the years ended May 31, 1995 and
1994 are filed as part of this Annual Report on Form 10-KSB.
Item 8 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
The following table sets forth certain information concerning the directors
and executive officers of ETT.
Principal Occupation
During Past Five Years
Name and Age Positions Held and Certain Other
Directors (3) Directorships
- -------------------------------------------------------------------------------
Gene Basile, 60 Director, ETT
Gene Basile became a director of ETT in January 1994, and chairman of the board
& CEO in May 1995. From 1992-1993, Mr. Basile served as Senior Consultant
for Professional Services Industries, Inc., as well as serving as Chairman of
the Board of Associated Testing from June 1992 through January 1994. Since
January 1994 Mr. Basile has also served on the Board of Directors of
Professional Engineering and Inspection Company, a materials inspection company.
Between 1971 - 1991, Mr. Basile held various positions with U.S Testing, Inc.,
including the position of CEO from 1987 - 1991. Each of these companies
performed nondestructive testing services similar to X-Ray, except on a national
basis. Mr. Basile achieved a BS and MBA degree in Engineering in 1960 and 1964,
respectively.
C. Rod Brashears, 38 Director, ETT
V.P. Operations, ETT
V.P. Operations, TankTek
C. Rod Brashears became a director and Vice President of Operations of ETT late
1993. He C. Rod Brashears became a director and Vice President of Operations
of ETT late 1993. He is also Vice-President of Operations for TankTek. Mr.
Brashears is API 653 certified and worked as a professional engineer for the
American Inspection Company, Inc. from 1991 - 1993 and for PSI/Jammal and
Associates Division from 1987 - 1991. Mr. Brashears resigned all positions with
ETT in August 1995.
Lee G. Connel, 70 Director, ETT
President/Director, X-Ray
Lee G. Connel was reappointed President of X-Ray in 1993. Prior to that time,
Mr. Connel held the office of Vice-President of X-Ray beginning 1991 and from
1965 to 1991 served as President of X-Ray. Mr. Connel also serves of the Board
of Directors of X-Ray. In addition to his position with X-Ray, Mr. Connel has
managed his own business as a professional consulting engineer from 1965 to the
present.
Michael B. LaVigne, 38 Director, ETT
Michael B. LaVigne has served as a Director of ETT since December 1991. From
April 1993 to the present, Mr. LaVigne served as President of Merchant Pacific
Capital, Inc. and investment banking company. From 1991 - 1993, Mr. LaVigne
was self-employed as a business consultant. During 1991, Mr. LaVigne was also
President of Cohig and Associates and from 1983 has served as President of the
securities broker-dealer firm Northwest, Inc.
Michael C. McPherson, 43 Director, ETT
Michael C McPherson has served as director of ETT since November 1991. From
1991 to the present, Mr. McPherson has served as a principal with The Investment
Co. in San Francisco, California, dealing in financial and investment
consultation. Prior to 1991, Mr. McPherson served as Senior Vice President and
member of the Executive Committee and Board of Director of Fidelity Investment
Corp.
George B. Maitland, 58 Vice-President/Director, ETT
Secretary/Treasurer/
George B. Maitland has served in the position of President, Chief Executive
Officer and Director of ETT since December 1991 to May 1995. In May 1995 Mr.
Maitland became the CFO for ETT and all its operating companies. Mr. Maitland
also holds the office of Treasurer, Director, X-Ray Secretary, as well as
serving on the Board of Directors of X-Ray. Prior to joining ETT, Mr. Maitland
owned and operated American Entertainment Centers.
___________
(3) Board of Directors
As set forth in the Bylaws of the Company, the Board consists of not
less than three (3) nor more than eleven members, the exact number to be
fixed by the Board of Directors. The Board currently consists of Six
(6) directors who will serve until the next annual meeting.
Item 10 - Executive Compensation
The following table sets forth a summary of certain information concerning
compensation awarded to or paid by ETT for services rendered in all capacities,
during the last three fiscal years, to the Chief Executive Officer. There were
no executive officers with compensation exceeding $100,000.00.
Summary Compensation Table
Annual Compensation
- -------------------------------------------------------------------------------
Name and
Principal Position Year Salary Bonus Compensation Options
- -------------------------------------------------------------------------------
Gene Basile, CEO - ETT 1995 $36,000 0 0 0
George B. Maitland, 1995 $60,000 0 0 0
V.P. Finance
(CEO - ETT thru May 1995) 1994 $55,000 0 0 0
================================================================================
Long-Term Compensation
- --------------------------------------------------------------------------------
Awards Payouts
---------------------
LTIP All Other
Name Year Options Payouts Compensation
- --------------------------------------------------------------------------------
Gene Basile, CEO - ETT 1995 0 0 0
George B. Maitland, 1995 0 0 0
V.P. Finance
(CEO - ETT thru May 1995)
================================================================================
Stock Options
The following table sets forth certain information concerning exercises of
stock options pursuant to ETT's stock option plans by the named executive
officers during the year ended May 31, 1995, and stock options held at year
end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
<TABLE>
Number of Value of
Shares Unexercised Unexercised
Acquired on Value Options at Options at
Name Exercise Realized Year End Year End (1)
(1)(2) --------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gene Basile 72,000 0 190,000 0 0 0
Lee G. Connel 0 0 300,000 0 0 0
C. Rod Brashears 0 0 300,000 0 0 0
Michael McPherson 0 0 20,000 0 0 0
Michael LaVigne 0 0 20,000 0 0 0
</TABLE>
(1) On May 31, 1995, the Company's Common Stock was not trading. For
purposes of the table, the value was considered the value of the Stock
Options of $.50 per share. As defined the Plan of Reorganization market
price the same value. (The shares reflects the 10:1 reverse split approved
in May 1995).
(2) The potential realizable value portion of the foregoing table represents
the difference between the shares sold at $.50 per share to all other
shareholders as part of the Plan of Reorganization and Mr. Maitland's
option price.
Employment Agreements
None
Compliance with Section 16(a) of the Securities Exchange Act
Under the federal securities laws, the Company's directors and executive
officers, and any persons holding more than 10% of the Company's Common Stock
are required to report their initial ownership of the Common Stock and any
subsequent changes in that ownership to the Securities and Exchange Commission
(the "Commission"). Specific due dates for these reports have been established
and the Company is required to disclose in this Annual Report on Form 10-KSB any
failure to file by these dates. To the Company's knowledge, none of the people
owning 10% or more of the Company's outstanding Common Stock have reported their
initial ownership of the Common Stock. The Company is not aware of any
subsequent changes in that ownership. The Company has informed each of the
following named individuals of their obligation to file the require report.
Mr. George B Maitland and Mr. Floyd Hambleton are the only shareholders with 10%
or more in actual ownership. Mr. Gene Basile, Mr. C Rod Brashears, Mr. Lee G.
Connel, and Mr. Raymond Hand could each own 10% or more of the outstanding
Common Stock if they exercise their stock options. In making these disclosures,
the Company has relied solely on written representations of its directors and
executive officers in copies of the reports that they have filed with the
Commission.
Item 11 - Security ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding ownership of Common
Stock of the Company as of October 31, 1995 by (i) each director of the Company,
(ii) each named executive officer, (iii) each person known by the Company to be
the beneficial owner of more than 5% of the outstanding Common Stock of the
Company, and (iv) all directors and executive officers as a group. Where
beneficial ownership was less than one percent the percentage is not
reflected in the table.
Share of Common Stock
and % of Class Beneficially
Directors Owned on October 31, 1995(1)(2)
- --------------------------------------------------------------------------------
George B. Maitland,
Director & Vice President
of Finance 403,620 (16.3%)
Gene Basile, Director and CEO 300,000 (12.1%)
Lee G. Connel, Director &
President, X-Ray, Inc. 400,000 (16.1%)
C. Rod Brashears, Director
& Vice President 300,000 (12.1%)
Michael LaVigne, Director 20,000 ( .8%)
Michael McPherson, Director 95,000 ( 3.8%)
5% Shareholders
Floyd Hambleton 140,000 ( 5.6%)
Raymond Hand 300,200 (12.1%)
All Directors and Officers as a Group 1,608,620 (64.9%)
(1) Unless otherwise indicated, beneficial ownership reflects sole voting power
and sale disposition power and options exercised within 60 days.
(2) Assumes all directors and executive officers options are exercised for a
total outstanding shares of 2,478,315.
Item 12 - Certain Relationships and Related Transactions
During 1991, the Company borrowed $250,000 from a stockholder. The note was
collateralized by the stock of X-Ray, bore interest at the prime rate plus 1%
and was due on demand. The note agreement granted the stockholder the option to
purchase 400,000 shares of an inactive subsidiary Nucell, Inc. which is 51%
owned by the Company at $.01 per share.
With the occurrence of certain events, the agreement further granted the
stockholder the right to require the Company to purchase that option for
$400,000. During 1992, those conditions were met, and accordingly, the Company
recorded a payable to the stockholder of $400,000.
In 1994, with the confirmation of the Plan, the payable was converted to
preferred stock. Additionally, the debt was converted to a term note which
bears interest at 9% and is payable at $3,000 per month plus accrued interest.
At May 31, 1995 the balance due on the stockholder note was $135,500.
Item 13 - Exhibits and Reports on Form 8-K
(a) Exhibits:
10.3 Asset Purchase Agreement dated 8/25/94, between
Environmental Testing Technologies, Inc. and Accu-Tech
Evaluation Services, Inc. and its shareholders.
10.4 Merger Agreement dated April 1995 between Environmental
Technologies, Inc. and North American Inspection, Inc.
(b) Reports on Form 8-K
No reports were filed during the last quarter of the period
covered by this report.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 1 day of November 25, 1995.
ENVIRONMENTAL TESTING TECHNOLOGIES, INC.
By:_______________________________________________
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on
this 1 day of November 25, 1995.
Signature Title
Principal Financial Officer and ___________________________________________
Principal Accounting Officer: George B. Maitland [Chief Financial Officer]
j:\c04109\m14182\10k.001
