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
AccuTech, 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 achieve 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
retaining 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 AccuTech 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 aboveground 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 05/95) 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 Exercised
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: S/S GB MAITLAND
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 GB MAITLAND
Principal Accounting Officer: George B. Maitland
[Chief Financial Officer]
ENVIRONMENTAL TESTING TECHNOLOGIES, INC.
Consolidated Financial Statements
Years Ended May 31, 1995 and 1994
Environmental Testing
Technologies, Inc.
Contents
Page
Report of Independent Certified Public Accountants 19
Consolidated Balance Sheets 20-21
Consolidated Statements of Operations 22
Consolidated Statements of Stockholders' Deficit 23
Consolidated Statements of Cash Flows 24
Summary of Accounting Policies 25-26
Notes to Consolidated Financial Statements 27-35
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Environmental Testing Technologies, Inc.
(Formerly Peripheral Systems, Inc.)
Seattle, Washington
We have audited the accompanying consolidated balance sheets of
Environmental Testing Technologies, Inc., as of May 31, 1995 and 1994,
and the related statements of operations, stockholders' deficit and cash
flows for each of the two years in the period ended May 31, 1995. These
financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements
based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Environmental Testing Technologies, Inc. as of May 31, 1995 and 1994 and
the consolidated results of their operations and their cash flows for
each of the two years in the period ended May 31, 1995, in conformity
with generally accepted accounting principles.
The consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1,
Environmental Testing Technologies, Inc. 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 net loss
of $339,725 for the year ended May 31, 1995 and as of that date a
stockholders' deficit of $549,118 and a working capital deficit of
$1,012,722 raise substantial doubt about the Company's ability to
continue as a going concern. 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's
plans concerning these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
BDO SEIDMAN, LLP
November 10, 1995
$11,000,000 - $100,000 - $11,000,000
May 31, 1995 1994
- -------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $12,659 $316,585
Accounts receivable - trade,
net of allowances
for doubtful accounts of
$60,002 and $9,000 (Note 2) 535,299 351,773
Other receivables (Note 2) 186,413 --
Other current assets 39,157 22,664
========================================================================
Total Current Assets 773,528 691,022
- ------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT (Note 3)
Leasehold improvements 126,178 115,912
Machinery and equipment 2,205,328 1,686,641
Vehicles and office trailers 325,943 244,212
Furniture and fixtures 86,112 60,405
- ------------------------------------------------------------------------
2,743,561 2,107,170
Less accumulated depreciation
and amortization 1,735,668 1,500,645
Property, Plant and Equipment, net 1,007,893 606,525
- ------------------------------------------------------------------------
DEPOSITS 30,058 18,141
========================================================================
Total Assets $1,811,479 $1,315,688
ENVIRONMENTAL TESTING TECHNOLOGIES, INC.
Consolidated Balance Sheets
May 31, 1995 1994
- -------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Lines-of-credit (Note 2) $522,452 $155,653
Accounts payable 570,284 427,929
Accrued liabilities 164,473 99,863
Current portion of
long-term debt (Note 3) 529,041 243,412
========================================================================
Total Current Liabilities 1,786,250 926,857
- ------------------------------------------------------------------------
LONG-TERM DEBT (Note 3) 222,389 486,166
RESERVE FOR TAX ASSESSMENT (Note 4) 175,000 175,000
COMMITMENTS AND CONTINGENCIES -- --
========================================================================
Total Liabilities 2,183,639 1,588,023
- ------------------------------------------------------------------------
REDEEMABLE PREFERRED STOCK (Notes 1 and 11) 176,958 176,958
- ------------------------------------------------------------------------
STOCKHOLDERS' DEFICIT (Note 1)
Class B preferred stock,
1,800,000 shares authorized,
200,000 shares issued and
outstanding (Note 10) 200,000 --
Common stock; no par value;
10,000,000 shares authorized,
1,463,315 and 1,377,315 shares
issued and outstanding 608,557 568,657
Accumulated deficit (1,357,675) (1,017,950)
- -------------------------------------------------------------------------
Total Stockholders' Deficit (549,118) (449,293)
- -------------------------------------------------------------------------
Total Liabilities & Stockholders' Deficit $1,811,479 $1,315,688
- -------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to
consolidated financial statements.
ENVIRONMENTAL TESTING TECHNOLOGIES, INC.
Consolidated Statements of Stockholders' Deficit
Years Ended May 31, 1995 1994
- -------------------------------------------------------------------------
SALES $4,471,967 $2,338,323
COST OF SALES 3,238,638 1,533,078
=========================================================================
Gross Profit 1,233,329 805,245
- -------------------------------------------------------------------------
OPERATING EXPENSES
Selling, general and administrative 1,373,387 732,475
Research and development -- 102,994
=========================================================================
Total Operating Expenses 1,373,387 835,469
- -------------------------------------------------------------------------
OPERATING LOSS (140,058) (30,224)
- -------------------------------------------------------------------------
OTHER EXPENSE
Interest expense (177,674) (99,649)
Other (21,993) (28,795)
=========================================================================
Total Other Expense (199,667) (128,444)
- -------------------------------------------------------------------------
NET LOSS, before extraordinary item (339,725) (158,668)
EXTRAORDINARY ITEM
Gain on reorganization (Note 1) -- 452,202
=========================================================================
Net (Loss) Income $(339,725) $293,534
- -------------------------------------------------------------------------
NET (LOSS) INCOME PER SHARE
Loss before extraordinary item $(.24) $(.07)
Extraordinary item -- .20
========================================================================
Net (Loss) Income Per Share $(.24) $.13
- ------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING 1,416,148 2,271,653
See accompanying summary of accounting policies and notes to consolidated
financial statements.
ENVIRONMENTAL TESTING TECHNOLOGIES, INC.
Consolidated Statements of
Stockholders' Deficit
<TABLE>
Class B Additional Total
Preferred Stock Common Stock Paid In Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Deficit
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
June 1, 1993 -- -- 22,716,530 $13,078,790 $242,197 $(14,632,471) $(1,311,484)
Net income -- -- -- -- -- 293,534 293,534
REORGANIZATION ITEMS (Note 1)
Cancellation
of common
stock -- -- (22,716,530) (13,078,790) (242,197) 13,320,987
Sale of common
stock -- -- 13,773,149 568,657 -- -- 568,657
- ----------------------------------------------------------------------------------------------
BALANCE,
May 31, 1994 -- -- 13,773,149 568,657 -- (1,017,950) (449,293)
10 for 1 reverse
stock split -- -- (12,395,834) -- -- -- --
Net loss -- -- -- -- -- (339,725) (339,725)
Issuance of
preferred
stock 200,000 200,000 -- -- -- -- 200,000
Issuance of
common stock -- -- 86,000 39,900 -- -- 39,900
- ----------------------------------------------------------------------------------------------
BALANCE,
05/31/95 200,000 200,000 1,463,315 608,557 -- (1,357,675) (549,118)
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated
financial statements.
May 31, 1995 1994
- -----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(339,725) $293,534
Adjustments to reconcile net (loss) income to
cash provided by (used in) operating activities:
Depreciation 262,183 161,758
Gain on reorganization -- (452,202)
Professional fees paid on
reorganization services -- (78,670)
Issuance of common stock for
consulting services 39,900 --
Change in assets and liabilities
Accounts receivable (183,526) 12,414
Other current assets (20,331) 20,869
Accounts payable 142,355 171,699
Accrued liabilities 64,610 20,775
- -------------------------------------------------------------------------
Net Cash Provided by (Used in)
Operating Activities (34,534) 150,177
- -------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (170,222) (134,414)
(Increase) decrease in other receivables (186,413) 30,000
Increase in other assets -- (680)
- -------------------------------------------------------------------------
Net Cash Used in Investing Activities (356,635) (105,094)
- -------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 105,000 --
Increase (decrease) in line-of-credit 366,799 (67,887)
Sale of common stock -- 568,657
Decrease in notes payable to stockholders (36,000) (36,000)
Payments on long-term debt (161,740) (82,353)
Payments on capital leases (186,816) (115,004)
- -------------------------------------------------------------------------
Net Cash Provided by Financing Activities 87,243 267,413
- -------------------------------------------------------------------------
Increase (decrease) in Cash (303,926) 312,496
CASH, beginning of year 316,585 4,089
- -------------------------------------------------------------------------
CASH, end of year $12,659 $316,585
See accompanying summary of accounting policies and notes to
consolidated financial statements.
NATURE OF BUSINESS
Environmental Testing Technologies, Inc. (formerly Peripheral
Systems, Inc.) ("ETT" or "the Company") is engaged in nondestructive
testing of materials for customers primarily in the aerospace,
construction and petrochemical industries and provides condition
assessment services to owners of aboveground petrochemical storage
tanks, piping and pressure vessels. The Company's services are
marketed nationally.
As discussed further in Note 1 to the consolidated financial
statements, on August 10, 1993, the Company filed a voluntary
petition for reorganization under Chapter 11 of the Federal
Bankruptcy Code. The Company's plan of reorganization became
effective on May 31, 1994 and in conjunction with that plan
the Company changed its name to Environmental Testing
Technologies, Inc. and was reincorporated under the laws of
the state of Washington.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company, and it's wholly-owned subsidiaries: X-Ray, Inc.,
Tanktek, Inc., and Accu-Inspect, Inc. All intercompany accounts
and transactions have been eliminated in consolidation.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and is depreciated
using the straight-line method over estimated useful lives of 5 to
10 years for vehicles and equipment and 15 to 18 years for leasehold
improvements. Expenditures for repairs and maintenance which do not
extend the useful life of the related asset are expensed as incurred.
Included in property plant and equipment is $554,670 and $301,335 of
capitalized leased assets and $329,589 and $219,777 of related
accumulated amortization as of May 31, 1995 and 1994.
CREDIT RISK AND SIGNIFICANT CUSTOMERS
The Company performs credit evaluations of its customers and maintains
allowances for potential credit losses. Sales to a major customer were
$364,000 and $398,606 for the years ended May 31, 1995 and 1994,
respectively.
INCOME TAXES
Deferred taxes are provided for temporary differences in the
basis of assets and liabilities for book and income tax reporting
purposes. If it is more likely than not that some portion of a deferred
tax asset will not be realized, a valuation allowance is recognized.
Since the Company cannot determine that it is more likely than not that
the deferred tax asset will be realized, a 100% valuation allowance was
recorded.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
COMMON STOCK
In May 1995, the Company's Board of Directors authorized a 1 for 10
reverse stock split. This resulted in the cancellation of 12,395,834
common shares. All per share and weighted average share amounts have
been restated to reflect this reverse stock split. NET (LOSS) INCOME
PER SHARENet (loss) income per share is computed by dividing net (loss)
income by the weighted average number of shares outstanding. The
Company's outstanding options are not considered to be common stock
equivalents because their effect in net (loss) income per share
would be anti-dilutive.
NOTE 1:
Going Concern and Bankruptcy
The Company's financial statements have been presented on a going-
concern basis that contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
liquidity of the Company has been adversely affected by significant
losses from operations and the Company's funding of research and
development efforts, which have resulted in cash flow difficulties.
The Company has reported a loss of $339,725 for the year ended May 31,
1995, and as of that date a stockholders' deficit of $549,118 and a
working capital deficit of $1,012,722. These conditions raise
substantial doubt about the Company's ability to continue as a going
concern.
The Company filed a voluntary petition for reorganization under Chapter
11 of the Federal Bankruptcy Code in United States Bankruptcy Court on
August 10, 1993. Pursuant to a Plan of Reorganization (the Plan) which
became effective on 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 as of May 31, 1994 were
issued options to purchase 3,300,000 shares of new common stock for $.50
per share. The options expired on June 1, 1994. A total of 977,315
shares of common stock were issued for $478,657 and the Company's
president received 400,000 shares in exchange for equipment valued at
$90,000. In addition, a stockholder and certain members of management
were granted warrants for the purchase of 1,401,000 shares of common
stock for $.50 per share which expire on May 31, 1998.
Pursuant to the Plan, unsecured debt amounting to $707,830 was converted
to 176,958 shares of nonvoting preferred stock. The preferred stock
does not provide for dividends, however, redemption at $1 per share at
an annual rate equal to the greater of 5% of the Company's annual net
income or 12% of its initial face value is required. The preferred
stock is convertible into shares of common stock representing 51% of the
outstanding common stock of the Company in the event that the Company
fails to meet the mandatory redemption provisions (see Note 11).
Management's plans are summarized as follows:
Management has taken a number of actions to expand the Company's
services into the testing of aboveground tanks, primarily for the
petroleum industry. Management intends to seek new capital, both from
borrowings and new equity securities issuances that will provide funds
needed to make strategic acquisitions or fund internal growth and fully
implement its business plan of providing API 653 engineering services
and non-destructive testing services primarily to the petrochemical
industry. The Company's needs for new capital, working capital, and
equipment to continue to develop the petroleum engineering services
business contemplated in its business plan are significant. 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. Accordingly, the consolidated
financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
NOTE 2:
Line-of-Credit
The Company has a revolving line-of-credit with a bank, with interest at
18%. The agreement allows the Company to borrow up to the lesser of
$750,000 or 80% of eligible receivables. At May 31, 1995, $329,452 was
outstanding and $80,000 was available under this agreement. The
agreement is collateralized by accounts receivable.
In addition, the Company has a revolving line-of-credit with a financing
company, with interest at 30%. The agreement allows the Company to
borrow up to the lesser of $500,000 or 75% of eligible receivables. At
May 31, 1995, $193,000 was outstanding and no borrowings were available
under this agreement. The agreement is collateralized by accounts
receivable and a personal guarantee by an officer of the Company. The
agreement expired on October 19, 1995 and was paid in full as of that
date.
NOTE 3:
Long-term Debt
Long-term debt is as follows:
May 31, 1995
1994
- -------------------------------------------------------------------------
Note payable to bank, collateralized by
equipment, due in monthly installments of
$6,863, including interest at prime
(9.25% at May 31, 1995) plus 1.50%, due
August 31, 1996. $96,079
$178,431
Capital lease obligations, collateralized
by equipment, various amounts payable
monthly plus imputed interest ranging
from 11.9% to 34.03%. 356,575
313,355
Other notes payable, various amounts
payable monthly plus interest ranging
from 10% to 12%. 3,276
11,292
Note payable to preferred stockholder,
collateralized by the stock of X-Ray,
due in monthly installments of $3,000
plus accrued interest at 9%. 135,500
171,500
Note payable to a financing company,
collateralized by equipment, due in 24
monthly installments of $2,432, including
interest at 16%, with the remainder
due in a balloon payment. 100,000
- --
Note payable to a former officer,
unsecured and subordinated to the notes
payable to bank, due in monthly
installments of $2,500, including interest
at 10%, unsecured. 60,000
55,000
- -------------------------------------------------------------------------
751,430
729,578
Less amount due within one year 529,041
243,412
- -------------------------------------------------------------------------
$222,389
$486,166
Future scheduled principal payments on long-term debt and capital leases
during each of the years ending May 31, 1999 are as follows:
Year Ending Notes Capital
May 31, Payable Leases
- ---------------------------------------------------------------------
1996 $279,048 $279,462
1997 46,637 95,049
1998 69,170 16,196
1999 - 8,534
- ---------------------------------------------------------------------
Total minimum payments 394,855 399,241
Amount representing
imputed interest (42,666)
- ---------------------------------------------------------------------
Present value of net
minimum lease payments $356,575
The note payable to bank requires that the Company maintain certain net
worth and working capital amounts and ratios. As of May 31, 1995, the
Company was not in compliance with these covenants and was unable to
obtain a bank waiver for noncompliance, therefore the entire amount of
this debt is classified as current.
NOTE 4:
Reserve for Tax Assessment
Reserve for tax assessment at May 31, 1995 and 1994 arises from an
estimated tax liability related to a tax shelter investment made by X-
Ray prior to its acquisition by the Company. The Company has been
assessed taxes of approximately $143,000 through May 31, 1994. The
Company has accrued $175,000 in taxes, penalties and interest related to
this tax shelter and is in process of negotiating a settlement of this
assessment with the Internal Revenue Service. Management believes that
the ultimate settlement of this obligation will not exceed the accrued
amount.
NOTE 5:
Income Taxes
Deferred tax assets are comprised of the following:
1995 1994
- ----------------------------------------------------------------------
Reserve for bad debts $20,401 $3,060
Accrued vacation 19,162 13,300
Net operating loss
carryforwards 2,928,338 2,836,000
- ----------------------------------------------------------------------
2,967,901 2,852,360
Valuation allowance (2,967,901) (2,852,360)
- ----------------------------------------------------------------------
$ -- $ --
The Company has provided a 100% valuation allowance on deferred tax
assets since management could not determine that it was more likely than
not that they would be realized.
For 1994, the difference between the Company's effective income tax rate
and the federal statutory rate of 34% consists of the following:
1995 1994
- -----------------------------------------------------------------------
Tax (benefit) at statutory rate (115,507) 99,802
Utilization of net
operating loss carryforwards -- (99,972)
Increase in valuation allowance 115,541 --
Other (34) 170
- -----------------------------------------------------------------------
Tax at effective rate $ -- $ --
The Company has net operating loss carryforwards of approximately
$8,600,000 with expiration dates beginning in fiscal year 2000.
NOTE 6:
Warrants and Options
During 1995 and 1994 common stock purchase warrants consisted of the
following:
- ------------------------------------------------------------------------
BALANCE, June 1, 1993 275,600 $.10-20.00
Expiration of warrants (10,000) 20.00
Cancellation of warrants per
Plan of Reorganization (see Note 1) (265,600) .10-12.50
Issued pursuant to the Plan of
Reorganization 1,401,000 .50
- ------------------------------------------------------------------------
BALANCE, May 31, 1994 1,401,000 .50
Cancellation of options (385,000)
Exercise of options (76,000) .50
Issued 25,000 2.00-5.00
- ------------------------------------------------------------------------
BALANCE, May 31, 1995 965,000 .50-5.00
Pursuant to the Plan, effective May 31, 1994, warrants issued prior to
reorganization were cancelled and options to purchase 1,401,000 shares
of the Company's common stock at $.50 per share were granted. The
options vest immediately, are valued at the fair market value of the
common stock as of the date of grant and expire on May 31, 1998.
NOTE 7:
Employee Benefit Plan
X-Ray has a 401(k) employee benefit plan for those employees who meet
the eligibility requirements set forth in the plan. Eligible employees
may contribute up to 10% of their compensation to a maximum contribution
of $9,240. X-Ray provides a profit sharing contribution which is
determined at the option of the board of directors. An employee becomes
fully vested with respect to employer contributions after 5 years of
service. There were no employer contributions in 1995 and 1994.
NOTE 8:
Statement of Cash Flows
Supplemental disclosures of cash flows information:
1995 1994
- ------------------------------------------------------------------------
Cash paid during the year for:
Interest $175,225 $98,050
Income taxes $ -- $ --
Non-cash investing and financing activities:
Equipment purchases financed
by capital lease obligations $253,335 $7,046
Assets of Accu-Inspect acquired through:
Issuance of class B preferred stock $200,000 $ --
Assumption of secured debt $238,962 $ --
Common stock issued in
exchange for consulting services $39,900 $ --
- ------------------------------------------------------------------------
Pursuant to the Company's Plan of Reorganization, on May 31, 1994,
accounts payable of $707,830 was converted to preferred stock valued at
$176,958 and a gain of $452,202 was recognized.
NOTE 9:
Commitments and Contingencies
Future minimum rental payments which are required under an operating
lease with a remaining noncancelable lease term in excess of one year
are $21,410 per year through fiscal year 2001. Additionally, the
Company leases warehouse space in Washington under cancelable leases
with month-to-month terms. Rent expense related to these leases was
$49,902 and $50,925 for 1995 and 1994, respectively.
During the normal course of business, matters arise which may ultimately
subject the Company to claims and litigation. Management believes that
the resolutions to these matters will not have a material adverse effect
on the Company's financial position.
NOTE 10:
Accu-Inspect, Inc.
In August 1994, the Company formed Accu-Inspect, Inc. to acquire certain
assets consisting primarily of equipment and the customer list of Accu-
Tech, Inc., a nondestructive testing company located in New Jersey. The
assets were acquired by issuing 200,000 shares of class B preferred
stock valued at $1.00 per share and the assumption of $238,962 of
secured debt.
The preferred stock is convertible into common stock of the Company over
8 years at conversion rates which range from 2 shares of common stock
for each share of preferred stock to 1 share of common stock for each
share of preferred stock. The preferred stock includes dividends of 2%
for the first year and 6% thereafter. In addition, the selling
shareholders are entitled to 30% of the pretax profits derived from the
assets through August 1999.
In June 1995, the Company sold all of the assets of Accu-Inspect, Inc.
to a former owner of Accu-Tech, Inc. in exchange for 100,000 shares of
class B preferred stock issued to purchase the assets, $202,000 in notes
receivable and the assumption of $166,312 of accounts payable. The
Company realized a gain of approximately $44,000 on the sale.
If the assets of Accu-Tech, Inc. had not been acquired, for the year
ended May 31, 1995, sales would have decreased by $1,317,114, net loss
would have decreased by $260,588 and net loss per share would have
decreased by $.18.
NOTE 11:
Subsequent Event
In April 1995, the Company entered into a letter-of-intent to merge with
North American Inspection, Inc. (North American). Pending completion
of the merger, the Company obtained a $500,000 revolving line-of-credit
using North American's accounts receivable as collateral (see Note 3).
North American terminated the merger in July 1995 and subsequently all
of the receivables were collected and the credit line paid in full.ETT
has commenced legal action against North American and its officers and
stockholders seeking contractual damages resulting from the termination
of the merger. The ultimate outcome of this litigation is not known.
The Company elected not to make the first preferred stock redemption
payment amounting to $21,235 which became due on August 31, 1995 (see
Note 1).
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 the Company. The
preferred stockholders have not exercised their right to convert the
preferred stock and management intends to make the required redemption
payment when cash is available.
ENVIRONMENTAL TESTING TECHNOLOGIES , INC.
and
NORTH AMERICAN INSPECTION, INC.
MERGER AGREEMENT
This merger agreement is made as of April 4, 1995 by and among
Environmental Testing Technologies, Inc. ("ETT"), a Washington
corporation and North American Inspection, Inc. ("NAII"), a Pennsylvania
Corporation and Robert K. Shumway, Carl Dichler, and Don Shumway as
individuals ("Investors").
-- RECITALS --
A) ETT and NAII are merging to position the combined new operating
entity to provide more complete and locally focused engineering
and inspection services to the petrochemical industry.
B) ETT is duly authorized to issue Common Stock in exchange for all
issued and outstanding Common Stock of NAII.
C) ETT is a publicly owned corporation with approximately 375 shareholders
and is subject to the Securities and Exchange rules and regulations.
D) NAII is a privately owned corporation controlled by
Robert K. Shumway, an individual.
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Stock Exchange
1.1 ETT will issue 7,000,000 shares of Common Stock in exchange for
all issued and outstanding shares of NAII. ETT shares are
issued subject to SEC Section 144 rules and regulation and bear
will legends accordingly.
1.2 NAII's shareholders will receive ETT Common Stock for their
shares as follows: RobErt K. Shumway = 5,000,000 shares; Carl
Dichler = 1,000,000 shares; Don Shumway = 1,000,000 shares.
1.3 Employee stock options aggregating 3,000,000 of Common Stock
will be issued to Robert K. Shumway, Carl Dichler, and Don
Shumway, these Options are priced at $.50/share exercisable
beginning June 1, 1996 and expiring May 31, 1999. The options
issued are 1,000,000 to Robert K. Shumway, 1,000,000 to Don
Shumway, and 1,000,000 to Carl Dichler.
The stock options terms and conditions may be modified by the
Board of Directors.
These terms & condition adjustments possibility is under current
review and will be acted upon by the Board including the new Directors
named Herein.
1.4 Closing
The exchange of stock will take place automatically upon
completion of the following events:
a) Receipt of a letter from Boston Financial and Equity
Corporation Or equivalent that financing is available to
fund NAII's current Operating needs. This funding is
expected to come from Tanktek, Inc.(Tanktek), a wholly
owned subsidiary of ETT or another equivalent ETT
subsidiary..Plus..
b) ETT has replaced NAII's current financing arrangement
with First Valley Bank on terms & conditions
satisfactory to ETT. NAII will be satisfied as the
current loan must be replaced in total.
1.5 ETT will place 7,000,000 shares of stock in Escrow as
per 1.2 designation and NAII will place 2800 shares per
designation 3.12. These shares will be released from
escrow to the respected parties upon letters from ETT
acknowledging 1.4 (a) & 1.4 (b) having occurred. Should
the joint venture agreement (item 1.6) be terminated for
any reason, all shares of stock will be returned to their
original owners in full.
1.6 Joint Venture Agreement
a) ETT will market NAII services exclusivity through its
existing subsidiary, Tanktek, Inc. or equivalent. NAII
will cease to market its services except as a
Subcontractor to Tanktek. Tanktek agrees to subcontract
all nondestructive examination and
related work exclusively to NAII. Tanktek will
continue to market for its own account API 653 & related
services. These services may or may not be
subcontracted to NAII.
b) In the event of cancellation of this agreement caused by
NAII's inability to perform its subcontract service
obligations to Tanktek, NAII agrees to pay Tanktek, Inc.
or its assignee $500,000.00 in cancellation penalties.
This penalty is acknowledged as reasonable and equitable
by both parties given the marketing effort required by
Tanktek. This penalty is secured by a security interest
in all assets of NAII as included
by the Pennsylvania UCC filings.
This security interest protection shall terminate upon
the merger contemplated in the agreement.
2. Representations and Warranties of ETT
ETT hereby represents and warrants to the NAII shareholders,
that:
2.1 Organization, Good Standing and Qualification.
ETT is a corporation duly organized, validly existing and in
good standing under the laws of the State of Washington and has
all requisite corporate power and authority to carry on its
current or contemplated business. The Company is duly qualified
to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a
material adverse effect on its business or properties.
2.2 Authorized Capital. The number of shares of stock which the
corporation is authorized to issue is One Hundred Two Million
(102,000,000);of which One Hundred Million (100,000,000 shares
wll be Common Stock ("Common Stock") with no par value per share,
and Two Million (2,000,000) shares will be Preferred Stock
("Preferred Stock").
2.3 Preferred Stock. The Preferred Stock of the corporation will be
issued as Class A Preferred Stock and Class B Preferred Stock
with each class having the preferences, limitations and relative
rights set forth below.
2.3.1 Class A. Preferred Stock. The corporation will issue up
to 200,000 of shares Preferred Stock which will be
designated as Class A Preferred Stock ("Class A Stock").
The Class A stock will be issued at the direction of the
Board of Directors of the corporation for such purposes
as the Board of Directors considers appropriate and
shall have such voting powers, full or limited, and such
designations, preferences and relative, participating,
optional or other special rights and qualifications,
limitations or restrictions as the Board may establish
prior to the issuance of such shares.
2.3.2 Class B. Preferred Stock. The corporation shall issue
up to 1.8 Million (1,800,000) shares of Preferred Stock
which will be designated as Class B Preferred Stock
("Class B Stock"). The Class B Stock will be issued at
the direction of the Board of Directors, but will be
issued only in connection with the acquisition of
existing companies or locations from which it can
operate its business of nondestructive testing of
hazardous material tanks. The Class B Stock shall have
such voting powers, full or limited, and such
designations, preferences and relative, participating,
optional or other special rights and qualifications,
limitations or restrictions as the Board my establish
prior to the issuance of such shares.
2.4 Subsidiaries. ETT owns three operating subsidiaries (X-Ray,
Inc., Accu-Inspect, Inc., and TankTek, Inc.) and is the
controlling shareholder in a non-operating subsidiary (Nucell,
Inc.).
2.5 Outstanding shares of Common and Preferred Stocks are disclosed
in the exhibits attached, meaning the financial statements dated
5/31/94 and the 10-QSB statements dated 8/31/94. There have
been no material changes since 8/31/94 or 5/31/94 disclosures in
outstanding stocks (common and preferred).
2.6 Authorization. All corporate action on the part of ETT, its
officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the
other agreements and transactions contemplated herein, the
performance of all obligations of the Company hereunder and
thereunder and the authorization, issuance and delivery of the
Common Stock being transferred hereunder have been taken or will
be taken prior to the Closing, and this Agreement and the other
agreements contemplated herein constitute valid and legally
binding obligations of ETT, enforceable in accordance with it
and their terms.
2.7 Valid Issuance of Common Stock. The Common Stock, when issued,
sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued,
fully paid and nonassessable and free of any liens or
encumbrances created by the Company.
2.8 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any federal, regional, state or
local governmental authority on the part of ETT is required in
connection with the consummation of the transactions
contemplated by this Agreement, except for filings, if any,
required pursuant to applicable state securities laws, which
filings will be made within the required statutory period.
2.9 Litigation. There is no material action, suit, claim,
proceeding or investigation pending or currently threatened
against the Company nor is the Company aware that there is any
basis for the foregoing. The Company is not a party or subject
to the provisions of any order, write, injunction, judgment or
decree of any court or government agency or instrumentality that
could have a material adverse effect on its business or
properties.
2.10 Investment Intent. NAII shareholders are acquiring shares of
ETT Common to be issued to Shareholder pursuant to this
Agreement (the "shares") for investment for Shareholder's own
account and not with a view to, or for resale in connection
with, any distribution of the Shares, nor with any present
intention of distributing or elling the Shares. Shareholders
are not a party to any contract, undertaking, agreement, or
arrangement with any person to sell, transfer, or grant
participation to any such person or any third party with
respect to the Shares. No other person or entity not a
signatory to this Agreement has a beneficial interest in or a
right to acquire the Shares or any portion thereof.
2.11 Agreements and Due Diligence; Disclosure.
(a) ETT has fully provided NAII and its shareholders and
their counsel true and complete copies of or access to
all documents and information requested and such other
information that the shareholders have requested in
connection with their decision to merge into ETT.
(b) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon
or with respect to any class or series of its capital
stock, (ii) made any loans or advances to any person,
other than ordinary travel expenses in connection with
its business and reasonable moving allowances for its
employees, (iii) sold, exchanged or otherwise
disposed of any of its assets or rights, other than in
the ordinary course of business, (iv) redeemed or
obligated itself to redeem any of its capital stock.
(c) The Company is not a party to nor is it bound by any
contract, agreement, instrument, decree or
administrative order, or subject to any restriction
under its Articles of Incorporation or Bylaws, which
materially and adversely affects its business as now
conducted or as proposed to be conducted, its
properties or its financial condition.
2.12 Title to Property and Assets. ETT owns its property and assets
free and clear of all mortgages, liens, loans and encumbrances,
except liens which arise in the ordinary course of business and
do not materially impair ETT's ownership or use of such property
or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases in all material
respects and holds a valid leasehold interest free of any liens,
claims or encumbrances.
2.13 Licenses. ETT has all licenses and permits (federal, state,
foreign and local) necessary to conduct its business, and such
licenses and permits are in full force and effect. No
violations are or have been recorded in respect of such licenses
or permits and no proceeding is pending or threatened toward the
revocation or limitation of any of such licenses or permits.
The Company has complied with all laws, rules, regulations and
orders applicable to its business.
2.14 The Financial Statements dated 5/31/94 and 11/30/94 in the form
of the 11/30 10-Q are true and complete in all material
respects.
2.15 Undisclosed Liabilities. Except as and to the extent reflected
or reserved against in the Statement of Financial Position, the
Company did not have, as of such date, any material debts,
liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise and whether due or to become
due, including, without limitation, liabilities or obligations
on account of taxes or other governmental charges or penalties,
interest or fines thereon or in respect thereof. The Company
does not know and does not have any reasonable grounds to know
of any basis for any assertion against he Company of any
material debt, liability or obligation of any nature or in any
amount not fully reflected or reserved against in the
Statement of Financial Position.
2.16 Changes. Since the date of the financial statements in 2.14
above, there has not been:
a) Any change in the condition (financial or other) or
properties, assets, liabilities, business or general
economic or market conditions or prospects of the
Company, except changes in the ordinary course of
business, none of which has been materially adverse, and
all of which in the aggregate have not been materially
adverse, to ETT;
(b) Any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the properties,
assets or business of ETT;
(c) Any material increase in the compensation or rate of
compensation or commissions payable or to become payable
by ETT to any of its directors, officers salaried
employees, sales persons or agents, or any hiring of any
employee at a salary in excess of $75,000 per annum, or any
material change in any then existing bonus, profit-sharing,
retirement or other similar plan, agreement or arrangement or
any adoption of or entry into of any new bonus, profit-
sharing, group life or health insurance, or other similar
plan, agreement or arrangement;
(d) Any material change in the accounting methods or practices
followed by ETT;
(e) Any material debt obligation or liability (whether
absolute or contingent) incurred by ETT (whether or not
presently outstanding) except (i) current liabilities
incurred, and obligations under agreements entered into, in
the ordinary course of business and (ii) obligations or
liabilities entered into or incurred in connection with the
execution of this Agreement;
(f) Any sales, lease, abandonment or other disposition by
the Company of any real property or, other than in the
ordinary course of business, of any equipment or other
operating properties or any sale, assignment, transfer license
or other disposition by ETT of any Intellectual Property or
other intangible asset; or
(g) Any labor trouble, strike or any other occurrence, event
or condition of any similar character that materially and
adversely affects or may materially and adversely affect the
assets, properties, business or prospects of ETT.
2.17 Taxes. ETT has filed all tax returns (federal, state, foreign
and local) required to be filed by it, and, except as reflected on the
statement of Financial Position or Balance Sheet, all taxes shown to be
due and payable on such returns or on any assessments received by
the Company and all other taxes (federal, state, foreign and local) due
and payable by the Company on or before the date hereof have been paid.
There are no agreements, waivers or other arrangements providing for an
extension of time with respect to the assessment of any tax or deficiency
against the Company, nor are there any actions, suits, proceedings,
investigations or claims now pending against the Company in respect of any
tax or assessment, or, to the Company's knowledge, any matters under
discussion within any federal, state, foreign or local authority relating
to any taxes or assessments, or any claims for additional taxes or
assessments asserted by any such authority. The provisions made for taxes
on the Statement of Financial Position, are sufficient for the payment of a
ll unpaid federal, state, foreign and local taxes of ETT for all periods
prior to such date. ETT's subsidiary X-Ray, Inc. has been assessed
$568,000 in taxes, interest and penalties. This obligation is being
contested by X-Ray, Inc. and X-Ray, Inc. believes it will prevail in its
"Offer in Compromise" dated 3/9/95.
2.18 Labor Agreements and Actions. ETT is not bound by or subject to
any written or oral, express or implied, contract, commitment or
arrangement with any employee or labor union, and no labor union has
requested or, to the knowledge of ETT, has sought to represent any of
the employees, representatives or agents of ETT.
2.19 Brokers or Finders. ETT has not incurred and will not incur,
directly or indirectly, any liability for brokers' or finders' fees,
agents' commissions or other similar charges in connection with this
Agreement or the transactions contemplated hereby.
2.20 Transactions with Principals. No employee, shareholder, officer
or director of the Company is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee
credit) to any of them in any material aspect, except Boston Financial &
Equity has a loan appliication pending which will require at least one
personal guarantee. The Company previously has furnished the Investors
a copy of each agreement, instrument or other writing constituting legal
rights and obligations to which both the Company and any founder, officer,
director or principal security holder or company or organization directly
or indirectly controlled by such persons are parties.
2.21 Insurance. ETT has fire and casualty insurance policies, with
extended coverage sufficient in amount to allow it to replace any of its
properties which may be damaged or destroyed.
2.22 Voting Agreement. ETT has no obligation or commitment with
respect to the election of any individual or individuals to the Board,
and to the best of ETT's knowledge, there is no voting agreement or
other agreement among its shareholders with respect to the election of
any individual or individuals to the Board. Robert K. Shumway and
Don Shumway, and Carl Dichler are to become appointed members of the
ETT Board and Robert K. Shumway is to become President and Chief
Operating Officer of ETT and Carl Dichler is to become an ETT Executive
Vice President.
2.23 Subsequent Event. ETT in a prudent and business-like manner
will immediately begin a search both to provide new borrowings to
replace First Valley Bank as soon as possible and new equity
capital to continue the planned growth program. Prior to the
search, a forecast and a budget must be prepared to support this
effort.
3. Representations and Warranties of NAII and its shareholders
("Investors") NAII and its shareholders severally and jointly
represent and warrant that:
3.1 Authorization. All acts and conditions required by law to
authorize the execution and consummation of this Agreement by each
Investor have been duly performed and obtained, and this Agreement
constitutes a valid and legally binding obligation of the
Investors, enforceable in accordance with its terms. Each Investor
has full power and authority to execute, deliver and performed his,
her or its obligations under this Agreement and to own the ETT
Common Stock. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby by each Investor do not violate any provision of, or
constitute a material breach of or default under, any term,
condition or provision of any agreement, indenture or other
instrument to which the Investor is a party, or by which the
Investor or the Investor's properties or assets are bound, or of
any order, judgment or decree against or binding upon such
Investor.
3.2 Purchase Entirely for Own Account. This Agreement is made with
the Investors in reliance upon each Investor's representation to
ETT, which, by such Investor's execution of this Agreement, such
Investor hereby confirms, that the Common Stock to be received
by the Investors will be acquired for investment for such
Investors own account and not with a view to the distribution of
any part thereof, and that such Investor has no present
intention of selling, granting any participation in, or
otherwise distributing the same in a manner contrary to the
Securities Act of 1933, as amended (the "Act"), or applicable
state securities laws.
3.3 Due Diligence. Each Investor severally represents and
acknowledges that he or she has been solely responsible for his
or her own "due diligence" investigation of ETT and its
management and business, for his or her own analysis of the
merits and risks of this investment, and for his or her own
analysis of the fairness and desirability of the terms of the
investment; that in taking any action or performing any role
relative to the arranging of the proposed investment, the
Investor has acted solely in his or her own interest, and the
Investor has not acted as an agent, employee, partner or
fiduciary of any other person or as an agent of ETT, or as an
issuer, underwriter, broker, dealer or investment advisor
relative to any security involved in this investment. Each
Investor has been given the opportunity to ask questions of and
receive answers from ETT concerning the terms and conditions of
the Common Stock exchange and other matters pertaining to this
investment. The foregoing statements, however, do not limit or
modify the representations and warranties of ETT made herein.
3.4 Investment Experience. Each Investor is an investor in
securities of companies and acknowledges that the Securities are
a speculative risk. Each Investor is able to find for him/ her,
or itself in the transactions contemplated by this Agreement,
can bear the economic risk of his, her or its investment
(including possible complete loss of such investment) for an
indefinite period of time and has such knowledge and experience
in financial or business matters that such Investor is capable
of evaluating the merits and risks of the investment in the
Securities. Each Investor understands that the Securities have
not been registered under the Act, or under the securities laws
of any jurisdiction, by reason of reliance upon certain
exemptions, and that the reliance of ETT on such exemptions is
predicated upon the accuracy
of the Investors' representations and warranties in this Section
3. Each Investor severally represents that he, she or it is an
"accredited investor" as defined by the Securities and Exchange
Commission.
3.5 Restricted Securities. Each Investor understands that the
Securities are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired
from the Company in a transaction not involving a public
offering and that under such laws and applicable regulations
such securities may be resold without registration under the Act
only in certain limited circumstances and in accordance with the
terms and conditions set forth in the legend described in
Section 3.6 below. In this connection, each Investor
represents severally that he, she or it is familiar with SEC
Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act. Notwithstanding the
provisions above, no registration statement or opinion of
counsel shall be necessary for a transfer by an Investor to the
estate of such Investor or the transfer by gift, will or
interstate succession of an Investor to his or her spouse or
lineal descendants or ancestors, if the transferee agrees in
writing to be subject to the terms hereof to the same extent
as if he or she were the original Investor hereunder.
3.6 Legend. It is understood that the certificates evidencing the
securities may bear the following legend:
The securities evidenced by this certificate have not been
registered under the securities act of 1933, as amended (the
"Act"), or applicable state law, and no interest therein may be
sold, distributed, assigned, offered, pledged or otherwise
transferred unless (i) there is an effective registration
statement under the Act and applicable state securities laws
covering any such transaction involving said securities,
(ii) this corporation receives an opinion of legal counsel for
the holder of these securities satisfactory to this corporation
stating that such transaction is exempt from registration, or
(iii) this corporation otherwise satisfies itself that such
transaction is exempt from registration. At any date beginning
3 years from the date of closing, this legend will be cancelled,
and a certificate free from such legend issued to the holder
hereof upon compliance with the following conditions: (a)
surrender of this certificate to this corporation in the manner
and at the place designated for cancellation, (b) a
epresentation by the holder that it has beneficially held the
securities evidenced by this certificate for not less than three
years, and that it is not, and has not within the preceding 90
days been, an "affiliate" (as that term is defined for purposes
of rule 144 under the Act or any successor rule) of this
corporation, and (c) an understanding that if at any time the
holder shall again become an affiliate or otherwise cease to
enjoy free transferability of such securities under rule 144
either by reason of change of circumstance or amendment of rule
144, it shall forthwith surrender any unlegended certificate(s)
received by it in respect of the securities evidenced by this
certificate for imposition of any appropriate legend.
3.7 Residency. For purposes of the application of any relevant
state securities laws, the Investors are residents of the States
of Pennsylvania and Ohio.
3.8 NAII's Plan of Reorganization has been confirmed by the Federal
Bankruptcy Court. There are no known debts incurred prior to
the closing that have not been disclosed or accounted for in the
Plan of Reorganization or in the financial statements dated
1/31/95.
3.9 Changes. Since the date of the NAII financial statements
(12/31/94) there have not been:
(a) Any change in the condition (financial or other) or
properties, assets, liabilities, business or general
economic or market conditions or prospects of the
Company, except changes in the ordinary course of
business, none of which has been materially adverse, and
all of which in the aggregate have not been materially
adverse, to NAII;
(b) Any damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting the
properties, assets or business of NAII;
(c) Any material increase in the compensation or rate of
compensation or commissions payable or to become payable
by NAII to any of its directors, officers, salaried
employees, sales persons or agents, or any hiring of any
employee at a salary in excess of $60,000 per annum, or
any material change in any then existing bonus, profit-
sharing, retirement or other similar plan, agreement or
arrangement or any adoption of or entry into of any new
bonus, profit-sharing, group life or health insurance,
or other similar plan, agreement or arrangement;
(d) The compensation schedule for the officers, directors,
and key management personnel are as follows:
Annual Salary Other Compensations
- ------------------------------------------------------------------------
Robert K. Shumway $90,000.00
Carl Dichler $75,000.00 Normal Company benefit
program
Don Shumway $75,000.00 for employees applies to
all
George Maitland $75,000.00 personnel.
C. Rod Brashears $75,000.00
- ------------------------------------------------------------------------
(e) Any material change in the accounting methods or
practices followed by NAII;
(f) Any material debt obligation or liability (whether
absolute or contingent) incurred by NAII (whether or not
presently outstanding) except (i) current liabilities
incurred, and obligations under agreements entered into,
in the ordinary course of business and (ii) obligations
or liabilities entered into or incurred in connection
with the execution of this Agreement;
(g) Any sales, lease, abandonment or other disposition by
the Company of any real property or, other than in the
ordinary course of business, of any equipment or other
operating properties or any sale, assignment, transfer
license or other disposition by NAII of any
Intellectual Property or other intangible asset; or
(h) Any labor trouble, strike or any other occurrence,
event or condition of any similar character that
materially and adversely affects or may materially and
adversely affect the assets, properties, business or
prospects of NAII.
3.10 All pre-petition debts to Carl Dichler or his Company and Don
Shumway have been exchanged for shares of Common Stock of NAII
prior to the date of closing.
3.11 The exhibit attached Schedule H is the complete and total
agreement between NAII's principal lender and NAII.
3.12 Capitalization. The authorized capital of NAII consists of
10,000 shares of Common Stock of which 2,800 shares are issued
and outstanding, fully paid and non-assessable. There are no
stock options, warrants or equivalent outstanding that could
change the future ownership of NAII as of the date of closing.
a) Robert K. Shumway, Don Shumway, and Carl Dichler own all
issued and outstanding shares in the amounts of 2,000
shares, 400 shares, and 400 shares respectively.
3.13 Tax Advice. Investors are relying solely on the advice of their
own tax advisor with respect to the tax treatment of this
transaction and specially is not relying on tax advice from ETT
or its agents.
4. Miscellaneous.
4.1 This agreement shall be governed and construed in accordance
with the laws of the State of Washington.
4.2 The schedules and exhibits referred to in this agreement shall
be the scheduled listed below:
a) NAII amended Plan of Reorganization dated: 1-24-95.
b) NAII financial statement dated: 12-31-94.
c) NAII list of equipment.
d) NAII lease.
e) ETT financial statements dated: 5/31/94.
f) ETT financial statements dated: 11/30/94.
g) ETT Confirmed Plan of Reorganization dated: 4/16/94.
h) NAII loan agreement with First Valley Bank.
4.3 This agreement is the entire agreement of the parties and
supersedes any and all prior negotiations, correspondence,
understandings and agreements between the parties.
In witness thereof, the parties have executed this Agreement as of the
date of closing.
Environmental Testing
Technologies, Inc. ("ETT") by S/S GB Maitland
George B. Maitland, its
President
by S/S CB Brashears
C. Rod Brashears,
Vice President and Director
North American
Inspection, Inc. ("NAII") by S/S RK Shumway
Robert K. Shumway, its
President
by
, its Secretary
North American Inspection, Inc.
Shareholders ("Investors") by Robert K. Shumway
by Don B. Shumway
by Carl R. Dichler
SPECIFIC ASSET PURCHASE AGREEMENT
AGREEMENT between and among ENVIRONMENTAL TESTING TECHNOLOGIES, INC.
(formerly Peripheral Systems, Inc.), a Washington Corporation, located
at 7500 Perimeter Road South, Seattle, Washington 98108 (hereinafter
"ETT"); ACCU-TECH EVALUATION SERVICES, INC., a New Jersey Corporation,
located at 1410 Pinewood Street, Rahway, New Jersey 07065 and 917
Alhambra Avenue, Suite D, Martinez, California 94553 (hereinafter "Accu-
Tech") and the shareholders of Accu-Tech, ANTON S. KURTZ and MARY ELLEN
KURTZ both of 525 North Terry Lane, Jamesburg, New Jersey 08831; RICHARD
KURTZ, 140 Cedar Run Road, Bayville, New Jersey 08721, and JOSEPH S.
FERENC and JULIE A. FERENC both of 904 Capstan Drive, Forked River, New
Jersey 08753 (hereinafter collectively the "Shareholders").
RECITALS
The Shareholders of Accu-Tech are, together, the owners of all the
issued and outstanding capital stock of Accu-Tech. ETT is a holding
Company owning two businesses, X-RAY, INC. and TANKTEK, INC., that are
engaged in above-ground storage tank certifications and nondestructive
inspection services.
Accu-Tech is an "S" corporation operating nondestructive inspection
laboratories in both New Jersey ad California.
ETT is desirous of purchasing certain specific assets of Accu-Tech.
The Shareholders are desirous of joining the ETT organization and
selling certain assets of Accu-Tech to ETT.
AGREEMENT
I. THE TRANSACTION
A. Accordingly, ETT, Accu-Tech and its Shareholders
(the "Parties") agree to the following:
1. ETT has formed a new 100% owned subsidiary
incorporated in New Jersey., Such subsidiary
will purchase the specific assets of Accu-Tech.
The Accu-Tech assets (the "Assets") to be
purchased by ETT's subsidiary are:
a. rights to the name Accu-Tech;
b. all customer lists and contracts to
provide services to customers;
c. all equipment owned nd/or used in Accu-
Tech's business;
d. work in progress; and
e. the NRC license held by Accu-Tech
permitting the use of certain testing
equipment which emits radiation, as well
as all other licenses and permits used
by Accu-Tech in its business.
2. In addition, ETT shall require a covenant not to
compete from Accu-Tech and the Shareholders (for
a period of two (2) years after the termination
of their employment with Accu-Tech or any ETT
affiliate) as set forth in a separate non-
competitive agreement to be executed at Closing; and
B. ETT will purchase the Assets by issuing TWO HUNDRED
THOUSAND (200,000) shares of Class B non-voting
convertible Preferred Stock with value of ONE DOLLAR
($1.00) per share for a total value of TWO HUNDRED
THOUSAND DOLLARS ($200,000.00). Thus, the Purchase
Value of each share of stock is ONE DOLLAR ($1.00)
("Share Purchase Value"). This convertible Preferred
Stock is convertible into ETT common Stock at the option
of the Shareholders for a period of eight (8) years from
Closing as follows:
1. Until the third anniversary of the Closing, one
(1) share of Class B Preferred Stock can be
converted into two (2) shares of ETT Common
Stock.
2. From the third anniversary until the fourth
anniversary of closing, one (1) share of Class B
Preferred stock can be converted into one and a
half (1-1/2) shares of ETT Common Stock.
3. From the fifth anniversary until the eighth
anniversary of Closing, one (1) share of Class B
Preferred Stock can be converted into one (1)
share of ETT Common Stock.
4. Thereafter, the Preferred Stock may not be
redeemed.
C. While outstanding, the Preferred Stock shall carry
dividend rights as follows:
1. First year, TWO PERCENT (2%) of Share Purchase
Value.
2. Second year through the eighth year, SIX PERCENT
(6%) of Share Purchase Value.
3. After the eighth year, none.
Such dividend shall be paid to the holders of Preferred
Stock on the anniversary of the Closing each year.
D. Distribution of the ETT Preferred Stock is the
responsibility of Accu-Tech. Accu-Tech has elected to
distribute the Preferred Stock as outlined in Schedule B
(attached) and hereby directs ETT to distribute the
Convertible Preferred Stock due to Accu-Tech pursuant
hereto in accordance with Schedule B.
E. Accu-Tech has provided ETT complete listings and agings
of its payables and receivable. ETT's new subsidiary
specifically is not purchasing Accu-Tech's trade
receivable nor receivables from stockholders on any
other receivable created prior to the date
of closing. Nonetheless, ETT shall, on and after
Closing, collect trade receivables on behalf of Accu-
Tech. ETT shall be entitled to pay any payables of
Accu-Tech, including any tax liabilities, which survive
the Closing if such liabilities, including tax
liabilities, constitute an actual or potential
lien or encumbrance upon the Assets ("Critical
Payables").
F. ETT is assuming no liabilities of Accu-Tech other than
those shown on Schedule C (attached).
G. ETT specifically is not assuming any of Accu-Tech's
trade payable obligations or payroll obligations, such
as employee wages or payroll taxes, unpaid vacation,
unpaid sick leave, medical insurance or similar
obligations which were incurred prior to the date of
Closing.
H. Accu-Tech hereby agrees to indemnify and hold harmless
ETT and the officers, agents and affiliates of ETT from
and against any trade payables, payroll obligations or
any other liability of Accu-Tech arising before the
Closing Date, whether or not such liability has been
disclosed to ETT, unless such liability has expressly
been assumed by ETT pursuant to Schedule C hereof.
I. Accu-Tech assumes responsibility for collection of the
receivables and payment of all the pre-closing liabilities,
and covenants to cooperate with ETT in ETT's efforts to collect
such receivables. ETT's new subsidiary will deposit all funds
collected from pre-closing receivables into a bank account
("Payables Account") upon which ETT and Accu-Tech have check
signing authority. ETT may use its check signing authority to
pay Critical Payables at any time. ETT will be reimbursed at
the end of each month FIVE PERCENT (5%) of funds collected to
cover the administrative costs of its efforts. ETT may draw a
check in the Payables Account each month for the purpose of
making this payment. Accu-Tech may use its check
signing authority only to pay Accu-Tech's payables,
including taxes, until such time as all payables are
paid in full and shall make no payments to Shareholders.
J. ETT shall be free to hire the employees of Accu-Tech
upon Accu-Tech's termination of business on the
scheduled Closing Date. Employees who are hired by ETT
will thereafter receive benefits comparable to those
afforded to employees of TankTek, Inc.
K. The scheduled Closing Date for completion of this
transaction is August 31, 1994, but may occur on another
date as agreed by the parties and confirmed in writing.
The Closing will take place in Rahway, New Jersey or at
any other mutually agreeable location.
II. ADDITIONAL COMPENSATION
A. Accu-Tech Shareholders Anton Kurtz ad Richard Kurtz are planning
on continued involvement in ETT's new subsidiary's operations.
Anton Kurtz shall be engaged as a consultant. Richard Kurtz
shall be hired as an employee. Joseph Ferenc will be
engaged by ETT or its new subsidiary in a management position.
His continued involvement is considered critical to the
successful operation of the Accu-Tech business by ETT and his
agreement to be employed by ETT or its subsidiary is a condition
precedent to the Closing of this transaction. In recognition of
Joseph Ferenc's ongoing contributions, the Shareholders are
entitled to receive in the aggregate, in cash, THIRTY PERCENT (30%)
of the pre-tax profits generated by ETT's new subsidiary (the
"Profit Incentive") for that portion of the five (5) year period
ending August 5, 1999, during which Mr. Ferenc, richard Kurtz
and Joseph Ferenc may be terminated only for "good cause".
B. Cash payments reflecting the Profit Incentive will be
make annually after the closing of the books and records and
annual audit; provided, however, that no payment shall be made
for any period after the termination of employment of Joseph
Ferenc; provided, however, that the Shareholders shall be
entitled to receive the Profit Incentive payment throughout the
five (5) year period in the event such termination is the result
of Mr. Ferenc's death, disability or illness.
C. ETT's year end is May 31st. Payments due will be made
no later than July 30th.
D. Schedule A outlines the distribution of the incentive earnings
to the individual Shareholders.
III. REPRESENTATIONS & WARRANTIES OF ACCU-TECH AND ITS SHAREHOLDERS
A. Accu-Tech is a New Jersey corporation duly organized and
validly existing. It is in good standing under the laws of New
Jersey, and is properly authorized to do business in California.
It is not required to be authorized to do business in any
other state. Accu-Tech has all requisite power and authority to
own its properties, assets and carry on its business as now
conducted.
B. Accu-Tech and its Shareholders have the power and authority to
execute and deliver this agreement. The Shareholders are,
together, the owners of all the issued and outstanding shares of
Accu-Tech and no person, including the Shareholders, has any
other interest nor has any warrant or right in any
shares of Accu-Tech. This agreement is valid, binding and
enforceable against the parties in accordance with its terms,
except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditor's
rights. Accu-Tech will assist in and facilitate ETT's needs in
filing all legal notices required to transfer the assets.
C. Schedule D describes all pending legal actions or proceedings
existing or known to be threatened against Accu-Tech.
D. Accu-Tech has good and marketable title to all of the Assets as
shown on Schedule E and the Assets are free and clear of all
mortgages, pledges, liens, security interests, conditional sales
contracts, charges, encumbrances and claims, except those shown
on Schedule C.
E. Certain Shareholders are acquiring, via the conversion right,
the Common Stock of ETT. They will acquire such common stock
for investment and not with the view to or for immediate resale
as the Shareholders understand the shares being offered are
unregistered securities under the Securities Act of 1933. The
shares are "restricted" securities within the meaning of Rule
144 of the Securities and Exchange Commission and may not
be sold or disposed of other than pursuant to Rule 144.
F. Accu-Tech and the Shareholders will, at any time or from time to
time after the Closing Date, upon the request of ETT, execute,
acknowledge and deliver, all such further bills of sale,
assignments, checks endorsements or other instruments of
transfer and conveyance as may be reasonably required to
confirm or better effectuate the sale, transfer, assignment or
delivery of the Assets to ETT.
G. Accu-Tech has provided to ETT unaudited financial statements of
Accu-Tech for the period ending December 31,1993 and April 30,
1994. Such statements are true, accurate, complete and correct
and fairly set forth the financial condition of Accu-Tech as of
the dates specified (attached hereto as Schedule F).
H. Attached hereto and made a part hereof as Schedule E is a brief
description of all leases of real property to which Accu-Tech is
now or will be a party at the Closing Date. Accu-Tech owns free
and clear of any lien, mortgage, pledge, claim, encumbrance or
charge or leases all of the fixtures and equipment in the
structures located on such leased premises.
I. No complaints that Accu-Tech is in violation of any federal,
state or local statute, law, ordinance, regulation, rule or
order in the operation of its business, have been received by
Accu-Tech or Shareholders and, to the best of their knowledge,
none are threatened.
J. Accu-Tech has all material permits, licenses, registrations,
franchises and approvals of and from all governmental
authorities necessary for the operation of its business and
no governmental approval is required for the sale of the Assets
contemplated herein.
K. No notice, notification, demand, request for information,
citation, summons, complaint or order has been issued or filed,
no penalty has been assessed and no investigation or review is
known by Accu-Tech or Shareholders to be pending or
threatened by any governmental entity or agency (i) with
respect to any alleged violation of any law, ordinance,
rule, regulation or order of any governmental entity in
connection with the conduct of the business of Accu-Tech
and relating to a Hazardous Substance (as hereinafter
defined) or (ii) with respect to any alleged failure to
have any permit, certificate, license, approval,
registration or authorization required in connection
with the conduct of the business of Accu-Tech and
relating to a Hazardous substance or (iii) with respect
to any generation, treatment, storage, recycling,
transportation, disposal or release of any toxic,
caustic or otherwise hazardous substance,
including petroleum, its derivatives, by-products and
other hydrocarbons, whether or not regulated under
federal, state or local environmental statutes,
ordinances, rules, regulations or orders ("Hazardous
Substance") used in connection with the business of
Accu-Tech.
Accu-Tech has not handled any Hazardous Substance and mon are present
on any property now or previously owned or leased by Accu-Tech, nor has
Accu-Tech allowed any release thereof nor transported or allowed
transport thereof to any location. There are no underground storage
tanks, currently in use or abandoned, at any property now or previously
owned or leased by Accu-Tech which have been used to store or have
contained a Hazardous Substance.
No Oral or written notification of a release of a Hazardous Substance
has been made or filed by or on behalf of Accu-Tech and no property now
or previously owned or leased by Accu-Tech is listed, or proposed for
listing, on the National Priorities List promulgated pursuant to any
federal or state list of sites requiring investigation or clean-up.
There are no environmental liens on any Asset of Accu-Tech and to the
best of Accu-Tech's and Shareholders' knowledge, no government actions
have been taken or are in process which could subject any of such assets
to such liens.
To the best of Accu-Tech's and Shareholders' knowledge, there have been
no environmental investigations, studies, audits, tests, reviews or
other analyses conducted by or which are in the possession of Accu-Tech
in relation to any property or facility now or previously owned or
leased by Accu-Tech.
L. Accu-Tech shall provide to ETT, prior to Closing, a summary
description (including agent, carrier, limits, deductibles,
premium dates in force and nature of coverage) of all policies
of insurance held by Accu-Tech, including but not limited to,
those concerning fire, theft, casualty and liability, as well
as all self-insurance programs, including but not limited to,
those concerning employee medical plans, workers compensation,
disability, fire, theft, casualty and liability.
M. Accu-Tech represents and warrants that it has used the name
"Accu-Tech" in connection with its services and business.
Accu-Tech and Shareholders have no knowledge of any patents,
trademarks, service marks, trade name, rights, copyrights or
publication rights of others which materially adversely
affect use of this name.
N. No broker, agent, finder or other party has been
retained by Accu-Tech and none is entitled to payment in
connection with the transactions contemplated by this
Agreement or the origin, negotiation, execution or
consummation thereof.
IV. ETT REPRESENTATIONS AND WARRANTIES
A. ETT is a Washington corporation duly organized, validly existing
and in good standing under the laws of the State of Washington
and has all the requisite corporate power and authority to own
its own properties and carry on its business as now being
conducted.
B. ETT has the power and authority to execute and deliver this
agreement and the agreement is valid, binding and enforceable
against ETT in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relative to or affecting
enforcement of creditors rights and except as enforceability
may be limited by rules of equity governing specific
performance, injunctive relief, other equitable
remedies.
C. ETT is providing Accu-Tech and its Shareholders, the unaudited
financials of ETT as of May 31, 1994 (Schedule G), and the
disclosure statement dated March 9, 1994 (Schedule G).
V. CONDITIONS OF CLOSING
There have been no material adverse change or any development involving
a prospective material adverse change in the business and/or financial
condition of Accu-Tech since May 1, 1994, or of ETT since June 1, 1994.
VI. MISCELLANEOUS
A. Further Assurances - Each party will, on request of the
other, execute and deliver all instruments and documents of
further assurance or otherwise necessary and perform all
acts and things that may be required to carry out its
obligations hereunder and to consummate and complete the
transaction contemplated by this Agreement.
B. Notices - Any notice, request, instruction or other
document to be given hereunder by any party hereto shall be
in writing and shall be delivered personally or sent by
registered or certified mail postage prepaid, to the
Shareholders of Accu-Tech addressed to them at the address
set forth on Schedule A of this Agreement. If to ETT, such
notice shall be addressed to George Maitland, at the address
set forth on Page 1 of the Agreement or such other addresses
as any party may designate by written notice to the other.
C. Governing Law - This Agreement shall be governed and
construed in accordance with the laws of Washington State.
D. Parties-in-Interest - This Agreement shall be binding on
and insure to the benefit of the Parties hereto, their
respective heirs, administrators, executors, successors and
assigns; provided, however, that this Agreement may no be
assigned by any of the Parties hereto.
E. Entire Agreement - This Agreement is the entire agreement of
the Parties and supersedes ny and all prior negotiations,
correspondence, understandings and agreements between the
Parties respecting the subject matter hereof.
F. Waiver - Any of the terms and conditions of this Agreement
and any inaccuracies in any of the representations or
warranties contained herein may be waived at any time and
from time to time, in writing, by the parties entitled to
the benefit of such terms, conditions, warranties, or
representations. Such waiver shall not constitute or be
deemed a waiver of any other terms, conditions or
inaccuracies.
G. Amendment - This Agreement may be amended but only by an
instrument in writing executed by the Parties.
H. Attorneys' Fees - If suit or action is filed by any
party to enforce this Agreement or otherwise with respect
to the subject matter of this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys'
fees incurred in preparation for and prosecution of such
suit or action as fixed by the trial court, and if any
appeal is taken from the decision of the trail court,
reasonable attorneys' fees as fixed by the appellate court.
J. Counterparts - This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same
instrument.
K. Schedules - The schedules referred to in this Agreement
shall be the schedules described in such, initialed by the
Parties and attached to this Agreement and its execution and
delivery.
L. Integrated Agreement - The schedules which are attached
hereto are hereby incorporated into this Agreement of this
Reference.
SCHEDULES DESCRIPTION
A Incentive Earnings Distribution
B Convertible Preferred Stock Distribution
C Assumed Liabilities
D Pending Litigation
E Assets Being Purchased
F Accu-Tech Financials
G ETT Financials and Disclosure Statement
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first indicated.
ENVIRONMENTAL TESTING TECHNOLOGIES, INC.
DATED: August , 1994 BY: George B. Maitland, President
ACCU-TECH EVALUATION SERVICES, INC.
DATED: August , 1994 BY: Julie Ferenc
ACCU-TECH EVALUATION SERVICES, INC.
SHAREHOLDERS
DATED: August , 1994 BY: Joseph S. Ferenc
DATED: August , 1994 BY: Richard Kurtz
DATED: August , 1994 BY: Anton Kurtz
DATED: August , 1994 BY: Julie Ferenc
DATED: August , 1994 BY: MaryEllen Kurtz
MaryEllen Kurtz Personally Appeared
Before Me this Date, August 26, 1994
James M. Rixey
Notary Public of New Jersey
My Commission Expires June 13, 1998
TABLE OF CONTENTS
1. SPECIFIED ASSET PURCHASE AGREEMENT]
2. SCHEDULE A (Incentive Earnings Distribution Schedule) through
SCHEDULE E
3. ACCU-TECH EVALUATION SERVICES, INC. FINANCIAL REPORT (SCHEDULEG)
4. ENVIRONMENTAL TESTING TECHNOLOGIES, INC.
Income Statement - June 1994 (SCHEDULE G)
5. UNANIMOUS WRITTEN CONSENT OF DIRECTORS TO ACTION WITHOUT A
MEETING DATED AS OF AUGUST 24, 1994
6. UNANIMOUS WRITTEN CONSENT OF SHAREHOLDERS TO ACTION WITHOUT
A MEETING DATED AS OF AUGUST 23, 1994
7. UNANIMOUS WRITTEN CONSENT OF DIRECTORS TO ACTION WITHOUT A
MEETING DATED AS OF AUGUST 17, 1994
8. UNANIMOUS WRITTEN CONSENT OF SHAREHOLDERS TO ACTION WITHOUT
A MEETING DATED AS OF AUGUST 15, 1994
9. BILL OF SALE
SCHEDULE A
INCENTIVE EARNINGS DISTRIBUTION SCHEDULE
The following employees or consultants are participants in the incentive
pool on the following basis;
Names 1995 1996 1997 1998 1999
Anton Kurtz 30% 30% 30% 30% 30%
Richard Kurtz 20% 20% 20% 20% 20%
Joseph Ferenc 50% 50% 50% 50% 50%
Total 100% 100% 100% 100% 100%
SCHEDULE B
CONVERTIBLE PREFERRED STOCK DISTRIBUTION
Number of Shares Dollar Value
To: Anton Kurtz 60,000 $60,000.00
TO: Richard Kurtz 40,000 $40,000.00
To: Joseph Ferenc 100,000 $100,000.00
Total 200,000 $200,000.00
ACCU-TECH OFFICE EQUIPMENT SCHEDULE E - 1 OF 8
1. 2-486 DX 2-50 Computer
2. 1-386 25 Computer
3. 1-HP Ink Jet Color Printer
4. 2-Laser Jet II P B/W Printer
5. 1-HP Ink Jet B/W Printer
6. 1-HP DOT Matrix Printer
7. 10- Desks
8. 4-Fire Proof File Cabinets
9. 20-Regular File Cabinets
10. 1-Blue Print File Cabinet
11. 2-Equipment Cabinets
12. 20-Chairs
13. 1-19" Color TV/VHS Combo
14. 1-1992 Savin Copier
15. 1-Phone System W/9 Phones
16. Books, Codes, Procedures
17. 5-Bookcases
18. 1-Blue Print Copier
ACCU-TECH MAGNETIC PARTICLE EQUIPMENT SCHEDULE E - 2 of 8
1. 1-Magnaflux ANQ 4845-AC 4000 amp Stationary Unit
2. 1-Magnaflux KCH-3D 3000 amp Job Site Unit
3. 2-P-90 Magnaflux Portable Units
4. 10- Parker AC/DC ADJ Probes
5. 5-Blacks Lights
ACCU-TECH FIBER OPTIC EQUIPMENT SCHEDULE E - 3 OF 8
1. 3- Complete Welch Allyn fiber Optic - lease 9/93 - 9/94
Video Inspection Systems w/20'x6mm Probes - 9/93 - 9/94
2. 1-Welch allyn 25'x6mm Probe
3. 1-Complete Olympus Fiber Optic Video - lease 1994-1997
Inspection System w/12' Probe
4. 2-Spare 13" Monitors
5. 3-Rolling Cabinets
6. 1-8' Schott Boroscope - bought in 1994 T.C.
7. 1-15' Schott Boroscope - bought in 1994 T.C.
The parties agree to keep the physical Olympus Systems currently in
their possession, but X-Ray, Inc. agrees to assume two leases per
Schedule E identification. June 18, 1995 (signed by George B.
Maitland)
ACCUTECH RADIOGRAPHIC EQUIPMENT SCHEDULE E - 4 of 8
1. 7-Amersham 660 Cameras
2. 10-Sets of Amersham Crank Assemblies
3. 8-Fully Equipped Dark Rooms (7 mobile - 1 shop)
1 in 1994, 2 in 1992, 2 in 1993
4. 28-Survey Meters
5. 6-Dosimeters
ACCU-TECH INVENTORY OF EQUIPMENT for SCHEDULE E - 5 OF 8
ACCU-TECH EVALUATION SERVICES, INC.
RAHWAY, NJ and MARTINEZ, CA
JUNE 1, 1994
VEHICLES
1. 1-1984 Chevy Cube Van-Dark Room
2. 1-1985 Ford Cube Van-Dark Room
3. 1-1986 Ford Cube Van-Dark Room
4. 1-1987 Ford 1-ton P/U w/ Dark Room
5. 1-1978 Ford 1-ton P/U w/ Dark Room
6. 1-1971 Ford 1-ton P/U w/ Dark Room
7. 1-1993 1-ton Chevy Diesel P/U w/ Dark Room
8. 1-1994 1-ton Chevy Diesel P/U w/ Dark Room
9. 1-1989 GMC P/U S-15
10. 1-1990 1/2-ton Chevy P/U
11. 1-1991 Oldsmobile Van
12. 1-1991 Nissan Pathfinder
13. 1-1992 Chevy S-10 P/U
14. 1-1993 Chevy S-10 P/U
15. 1-1994 Chevy S-10 P/U Extended Cab
ACCU-TECH ULTRASONIC EQUIPMENT SCHEDULE E - 6 OF 8
1. 1-Rohbeck "B" Scan Unit
2. 2-KBI USK-7 UT Units
3. 4-KBI USK-6 UT Units
4. 1-KBI USL-32 UT Unit
5. 1-KBI 303B UT Unit
6. 3-Panometric DL 2+
7. 3-Stress Tel T-Mike
8. 1-Sonotest "D" Meter
9. 1-Nova "D" Meter
10. 60-Various Size Transducers
11. 4-IIW Steel Blocks
12. 1-IIW Aluminum Blocks
13. 2-DSC Aluminum Blocks
14. 4-DSC Steel Blocks
15. 1-Set Titanium MIL-STD Blocks
16. 2-Sets Aluminum MIL-STD Blocks
17. 2-Sets Steel MIL-STD Blocks
18. 1-Navships Cal Block
19. Various Size and Mat Step Wedges
ACCU-TECH SAFETY EQUIPMENT SCHEDULE E - 7 OF 8
1. 12-Harnesses
2. 2-Sniffer for Tanks
3. 10-Fire Extinguishers
4. 6-Respirators
5. 4- Ladders
6. 12-Safety Belts w/ Lanyards
7. 24-Nomex Suits
8. 12-Quartz Lights
ACCU-TECH SHOP EQUIPMENT SCHEDULE E - 8 OF 8
1. 1-Shop Dark Room
2. 1-Band Saw
3. 1-Miller ARC Welder
4. 1-Miller MIG Welder
5. 5-Matabo Power Grinders
6. 2-Granite Lab Tables
7. 1-Snap-on Rolling Tool Box
8. Various Hand Tools
9. Various Air Tools
10. Various Vehicle Maintenance Tools & Equipment
SCHEDULE C
ASSUMED LIABILITIES
Leases Amt/Mo. Pay-off Date Pay-off @
7/31/94
1990 Chevy P/U $395.00 6/95
1991 Olds Silhouette Van 407.21 1/95
1991 Nissan Pathfinder 398.89 7/95
1992 Chevy S-10 P/U 280.36 8/96
1993 Chevy S-10 P/U 288.20 7/97
1992 Chevy Diesel P/U 603.73 11/96
1994 Chevy Diesel P/U 552.80 2/98
1994 Chevy S-10 P/U
Olympus Video Probe System 1,018.00 12/96
Olympus Video Probe System 1,361.00 1/97
Olympus Video Probe 1,024.08 3/96
Welch Allyn Video 3,558.99 11/94
Probe Systems
Buy Out Date
Computer - $114.02/Mo. 9/95
Computer - $124.77/Mo. 6/96
Telephone System - $113.60/Mo. 3/97
Summit Equipment Loan - Balance $18,333.35
$555.55/Mo. Plus Interest
Copier - $145.10/Mo. 7/97
Radios - $201.00/Mo. 4/96
The Company has facility leases that are assignable to the new
Companies. The New Jersey lease expires May 15, 1997 and has a fixed
monthly lease payment of $2,436.10.
The California lease expires January 6, 1995 and has a fixed monthly
lease payment of $400.00.
Copies of the leases are attached.
SCHEDULE D
PENDING LITIGATION AGAINST ACCU-TECH
None.
BY: August 25, 1994
Joseph Ferenc
BY: August 25, 1994
Richard Kurtz
BY: August 25, 1994
Anton S. Kurtz
Julie Ferenc
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<PERIOD-END> MAY-31-1995
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<RECEIVABLES> 595,301
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<INTEREST-EXPENSE> 177,674
<INCOME-PRETAX> (339,725)
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<INCOME-CONTINUING> (339,725)
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<EXTRAORDINARY> 0
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<NET-INCOME> (339,725)
<EPS-PRIMARY> 0
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</TABLE>
