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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1997
Commission File No. 0-23100
RECONVERSION TECHNOLOGIES, INC.
(Exact name of small business issuer in its charter)
DELAWARE 22-2649848
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 HENDERSONVILLE ROAD, SUITE E, ASHEVILLE, NORTH CAROLINA 28803
(Address of principal executive office) (Zip Code)
Issuer's telephone number - (704) 255-0307
Securities registered under Section 12 (b) of the Exchange Act:
COMMON STOCK, $0.0001 PAR VALUE
(Title of each class)
NOT APPLICABLE
(Name of each exchange on which registered)
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 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 registrant'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. /X/
State issuer's revenues for its most recent fiscal year. None
As of June 30, 1997, the registrant had outstanding 11,371,617 shares of its
Common Stock, par value of $0.0001, its only class of voting securities. The
aggregate market value of the shares of Common Stock of the registrant held by
non-affiliates on June 30, 1997, was approximately $578,463 based on the average
over the counter sales price on such date (See Item 5).
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DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference into this Report except those
Exhibits so incorporated as set forth in the Exhibit index.
Transitional Small Business Disclosure Format (Check one): Yes / /; No /X/.
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ITEM 1. DESCRIPTION OF BUSINESS
Reconversion Technologies, Inc. (formerly Horizon Capital Corp.) (the
"Company"), a Delaware corporation organized July 25, 1985, is a holding company
principally engaged in acquiring and developing businesses. The Company had two
wholly-owned subsidiaries; Reconversion Technologies of Texas, Inc., a Texas
Corporation, organized on February 24, 1992 ("RETEX"), a Texas Corporation, and
Reconversion Products, Inc. ("RPI"), formerly Thomas Engineering, Inc., a
Georgia Corporation organized on October 9, 1992.
On March 23, 1995, the Company voluntarily filed for bankruptcy
protection in the United States Bankruptcy Court for the Northern District of
Oklahoma. During the pendency of the bankruptcy, both RETEX and RPI's operations
were ceased with no expectation of reopening the businesses and are, therefore,
no longer subsidiaries of the Company.
On November 20, 1997, the Company was formally reorganized pursuant to
a confirmed Bankruptcy Plan of Reorganization. As a result, the Company acquired
100% of the issued and outstanding stock of Keystone Laboratories, Inc. ("KLI"),
a Delaware corporation organized on July 20, 1987. KLI is a forensic urine drug
screening and confirmatory testing laboratory.
KEYSTONE LABORATORIES, INC.
Due to the fact that the Company had no operations during the periods
covered by this report but subsequently acquired KLI, the following is a
description of the newly acquired company, KLI.
KLI is a forensic urine drug screening and confirmatory testing
laboratory located in Asheville, North Carolina. Urine laboratory tests are used
primarily by employers to detect the use of illegal substances by employees
and/or prospective employees. Tests of this nature are presently performed by
hospitals, physician-owned laboratories and independent laboratory companies.
KLI views the urine laboratory industry as highly fragmented at present with
many local, regional and national laboratory companies currently in operation.
LABORATORY TESTING OPERATIONS & SERVICES
KLI has one laboratory and one collection station which are both
located within the Asheville facility. In addition to in-house collection
services, KLI provides on-site collection as well as receipt from its customers
through independent couriers. At its facility, each urine specimen and related
test request form is checked for completeness and assigned an identification
number, which ensures that the results are attributed to the correct patient.
The test request forms are then sent to a data entry terminal where a file is
established for each test specimen and the necessary testing and billing
information is entered. Once such billing information is entered into the
system, the tests are performed and the results posted through a computer
interface. Test results are printed and prepared for distribution by services
representatives the same day that routine testing is performed. In addition,
written reports of the test results may be generated directly in the offices of
clients with computer printers. Clients who are tested before 1 p.m. who request
that the test results be communicated by
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telephone are so notified the same day while the remainder of the clients are
notified of the test results the following business day
QUALITY ASSURANCE
KLI considers the quality of its tests to be of critical importance to
its growth and retention of client accounts. Therefore, it has established a
comprehensive quality assurance program for its laboratory designed to help
assure accurate and timely test results. KLI's laboratory also participates in a
number of proficiency testing programs which generally involves the submission
of pre-tested samples to a laboratory to verify the laboratory test results
against a known proficiency test value. These proficiency programs are conducted
both independently by KLI and in conjunction with groups such as the College of
American Pathology ("CAP").
The CAP is an independent non-governmental organization of board
certified pathologists which offers an accreditation program to which
laboratories may voluntarily subscribe. The CAP accreditation program involves
both on-site inspections of the laboratory and participation in the CAP's
proficiency testing program for all categories in which the laboratory is
accredited by the CAP. A laboratory's receipt of accreditation by the CAP
satisfies the Medicare requirement for participation in a proficiency testing
program administered by an external source. In addition to these compulsory
external inspections and proficiency programs, KLI has adopted a number of
additional quality assurance checks. The laboratory is equipped with
sophisticated testing equipment which is checked daily in accordance with KLI's
preventive maintenance program. In addition, the laboratory is supervised by a
scientific director who possesses a Ph.D. in toxicology and is a fellow of the
American College of Toxicology as well as an inspector for forensic urine drug
testing for the CAP. The primary role of the scientific director is to ensure
the accuracy of the laboratory's tests.
MARKETS AND MARKETING
The potential customers for KLI's services are primarily small
manufacturing companies, local hospitals and drug abuse treatment centers. The
marketing of KLI's services is accomplished primarily through direct
solicitation by its salesmen who initially meet with each new potential client.
KLI believes that this one-on-one contact has proven invaluable in customer
satisfaction and, in turn, customer retention. At the end of Fiscal 1997, KLI
had one full-time employee engaged in sales, along with three outside
salespersons who are compensated on a commission only basis. KLI intends to
continue to selectively increase the size of its sales force by expansion in
existing markets as well as by entering into new geographic areas. KLI believes
that sales force productivity is primarily due to KLI's Client Service Program.
Through these coordinators, KLI continuously monitors client activities and
attempts to identify and resolve any potential client dissatisfaction at an
early stage.
KLI has found that the three primary concerns of clients are turnaround
time, price and accuracy. KLI provides rapid turnaround time for its written
reports--24 hours in the case of negative specimens and 48 hours for positive
specimens. KLI believes the price charged for its services is competitive. With
regard to accuracy, KLI routinely performs adulteration tests such as "ph" and
"specific gravity" tests on all specimens verifying that the urine specimens are
valid. Many
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laboratories either do not perform these tests or charge extra fees to clients
to perform such tests if they are requested. A lack of certification by the
National Institutes on Drug Abuse ("NIDA") prevents KLI from performing tests
for certain governmental agencies. However, KLI believes that the advantage of
NIDA certification would not generate enough additional revenues to offset the
significant additional expenses which would probably be incurred with NIDA
certification.
COMPETITION
The forensic urine drug testing business is characterized by intense
competition. KLI believes that there are several laboratory companies which
provide a broad range of laboratory testing services in the same markets
serviced by KLI. Among KLI's national competitors with larger name recognition
are Allied Clinical Laboratories, Inc., National Health Care Laboratories, Inc.,
MetPath Inc., Roche Biomedical Laboratories, Inc. and SmithKline Beecham
Clinical Laboratories, Inc. According to the Health Care Financing
Administration, over 12,000 federally regulated clinical laboratories are
currently operating in the United States. As mentioned above, competition is
based primarily on accuracy of testing, price and the time required to report
results. Finally, in addition to competition for customers, there is increasing
competition for qualified personnel.
SERVICES
CUSTOMERS
To date, KLI has focused its marketing efforts primarily on
manufacturing companies whose orders account for approximately 95% of its net
sales. The remaining 5% of net sales is derived from hospital reference testing,
nursing homes, clinics, referrals from other clinical laboratories and other
clients. The largest client of KLI accounts for approximately 5% of net sales.
KLI believes that the loss of any one client would not have an adverse effect on
its financial condition. Note that payments are made directly by the clients.
GOVERNMENT REGULATION
KLI is subject to regulation under the Clinical Laboratory Improvement
Act. Under this Act, KLI is subject to periodic inspections of the aspects of
its operations relating to the quality of its laboratory testing results. In
addition, applicable federal and state certification and licensing programs
establish standards for the day-to-day operation of a medical laboratory,
including, but not limited to, personnel and quality control. Compliance with
such standards is verified by periodic inspections by inspectors employed by the
appropriate federal or state regulatory agency. In addition, regulatory
authorities require participation in a proficiency testing program provided by
an external source which involves actual testing of specimens that have been
specifically prepared by the regulatory authority for testing by the laboratory.
As mentioned above in "Quality Assurance", KLI participates in a number of such
programs.
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COMPLIANCE WITH ENVIRONMENTAL LAWS
Certain federal and state laws govern the handling and disposal of
infectious and hazardous wastes. Although KLI believes that it is currently in
compliance in all material respects with such federal and state laws, failure to
so comply could subject KLI to fines, criminal penalties and/or other
enforcement actions.
EMPLOYEES
As of June 30, 1997, KLI employed a total of 15 employees, all of whom
work full-time. KLI has no collective bargaining agreements with any unions and
believes that the overall relations with its employees are excellent.
ITEM 2. PROPERTIES
The Company and KLI lease 4,602 square feet at its operating facility
at 2 Hendersonville Road, Suite E, Asheville, North Carolina. The term of the
lease is 7 years beginning September 1, 1996 and expiring August 31, 2003.
ITEM 3. LEGAL PROCEEDINGS
1. GAIA TECHNOLOGIES, INC. VS. RECONVERSION TECHNOLOGIES, INC.,
RECONVERSION TECHNOLOGIES OF TEXAS, INC., RECYCLED PRODUCTS CORPORATION, JAMES
E. TURNER, BETTY ROSE TURNER, GLYN TURNER, PROGRESSIVE CAPITAL CORPORATION,
DAVID GORDON, IRA RIMER, JOEL HOLT AND RICHARD CLARK, PENDING IN THE UNITED
STATES DISTRICT COURT, SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, CASE NO.
H-93-3334, SUBSEQUENTLY RE-NUMBERED AS CASE NO. 94-CV-2256.
This lawsuit was filed on October 20, 1993, and alleges numerous causes
of action against the various defendants, including patent infringement,
trademark infringement, unfair competition, tortious interference with
contractual relations, conspiracy and RICO. The litigation stems from the
alleged misconduct of James E. Turner (Turner) concerning certain intellectual
property which plaintiff claims it bought from the bankruptcy estate of James E.
Turner and Turner's former company, Entek, in 1991. The Company has consistently
maintained the position that its own proprietary processes are demonstrably
distinct from those which plaintiff claims to have acquired in 1991, and that
its causes of action are baseless as it concerns the Company and its
subsidiaries. Plaintiff has entered an appearance in the lawsuit discussed at
Paragraph 2 above, and is attempting to assert similar claims in that forum as
well. In addition to monetary gains, Plaintiff seeks a permanent injunction
enjoining the Company from manufacturing products with its technologies.
On March 17, 1995, the Court found that the Company and RETEX as well
as Defendants Progressive Capital Corporation, David Gordon, Ira Rimer, Joel
Holt and Richard Clark were guilty
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of patent infringement, trademark infringement, unfair competition, and tortious
interference with contractual relations. A total amount of approximately $21.5
million in actual damages, pre-judgment interest and attorneys' fees was awarded
against the Company, RETEX and Progressive Capital Corporation. In addition,
punitive damages in the amount of $100,000 were awarded against David Gordon,
the former President of the Company.
The Company appealed the judgment to the United States Court of Appeals
for the Federal Circuit. The Federal Circuit reversed and vacated the judgment
and ordered the dismissal of GAIA's patent and trademark claims and also set
aside the state law claims. The Federal Circuit remanded the case back to the
District Court to determine if it had supplemental jurisdiction over the state
law claims.
Following remand, the District Court ruled over the Company's
objection, that it would assert supplemental jurisdiction over the state law
claims. On July 18, 1997, the District Court entered a judgment against the
Company for $4,475,000 plus pre-judgment interest and attorneys' fees. The
Company has appealed this judgment to the United States Court of Appeals for the
Fifth Circuit.
2. IN RE: RECONVERSION TECHNOLOGIES, INC., DEBTOR IN POSSESSION,
CHAPTER 11 PROCEEDING, UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT
OF OKLAHOMA, CASE NO. 95-00821-W.
The Company and its wholly-owned subsidiary, Reconversion Technologies
of Texas, Inc. each filed for Chapter 11 Bankruptcy protection in the United
States Bankruptcy Court for the Northern District of Oklahoma on March 23, 1995.
This action was precipitated by a $21.5 million judgment entered against the
Company and RETEX by the United States District Court for the Southern District
of Texas on March 16, 1995. In order to appeal the judgment, the Company had no
alternative but to seek protection in the Bankruptcy Court. The filing of the
bankruptcy petition allowed the Company to reorganize its affairs and pursue its
appeal. On November 20, 1997, the Company's Plan of Reorganization was confirmed
with all creditors of the Company being paid in either cash or by receipt of the
Company's common stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the year ended June 30, 1997, there were no matters submitted to
a vote of the security holders of the Company.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The Company's Common Stock was listed on the NASDAQ small-cap market on
February 22, 1994 under the symbol "RETK". Prior to its listing of the NASDAQ
small cap market, the Company traded on the NASDAQ over-the-counter market.
The following chart shows the quarterly high and low bid prices for the
Company's Common Stock for the last two fiscal years, as reported on the NASDAQ.
The prices represent quotations by dealers without adjustments for retail
mark-ups, mark-downs or commissions and may not represent actual transactions.
COMMON STOCK
<TABLE>
<CAPTION>
BID ASK
HIGH LOW HIGH LOW
---- --- ---- ---
Calendar
Quarters
<S> <C> <C> <C> <C> <C>
1995 Third Quarter .03 .02 .09 .07
1995 Fourth Quarter .03 .02 .07 .05
1996 First Quarter .03 .02 .06 .04
1996 Second Quarter .03 .03 .09 .04
1996 Third Quarter .03 .03 .13 .07
1996 Fourth Quarter .07 .03 .13 .09
1997 First Quarter .06 .04 .13 .10
1997 Second Quarter .05 .03 .13 .07
</TABLE>
HOLDERS
As of June 30, 1997, there were approximately 323 holders of record of
the Company's common stock, an undetermined number of which represent more than
one individual participant in securities positions with the Company.
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DIVIDENDS
The Company has never paid cash dividends on its common stock, and
intends to utilize current resources to expand its operations. Therefore, it is
not anticipated that cash dividends will be paid on the Company's common stock
in the foreseeable future.
The Company has not paid a cash dividend on its preferred stock since
its fiscal year ended June 30, 1995. Pursuant to the Bankruptcy Plan of
Reorganization, the outstanding preferred shares will be cancelled and new
common shares will be issued on 1.1 for 1 basis.
ITEM 6. MANAGEMENT'S PLAN OF OPERATION
This discussion concerns the consolidated Company for the period July
1, 1994 through June 30, 1997. The following discussion and analysis should be
read in conjunction with the Financial Statements and notes thereto appearing
elsewhere herein.
RESULTS OF OPERATIONS
Reconversion Technologies, Inc. (formerly Horizon Capital Corp.) (the
"Company"), a Delaware corporation organized July 25, 1985, was a holding
company principally engaged in acquiring and developing businesses related to
the recycling and waste management industries. The Company had three
wholly-owned subsidiaries; Reconversion Technologies of Texas, Inc., a Texas
corporation, organized on February 24, 1992 ("RETEX"), Reconversion Products,
Inc. ("RPI"), formerly Thomas Engineering, Inc., a Georgia corporation organized
on October 9, 1992 and Spectrum Recycling Technologies, Inc., ("Spectrum") a New
York corporation. Prior to the acquisition of RETEX, the Company had no
operations.
On September 28, 1992, the Company acquired 100% of the issued and
outstanding shares of RETEX. RETEX has developed a process whereby waste rubber,
post-consumer and post-industrial petro-chemically derived waste, and other
ingredients, are combined to produce a mixture used to manufacture wood and
concrete replacement products.
On January 28, 1994, the Company acquired 100% of the issued and
outstanding stock of RPI. RPI was an established business involved in the
design, manufacture, installation and sales of material recovery facilities,
conveyors and shredders. It was headquartered in Asheville, North Carolina. RPI
was the operator-manager of Ultra Steel, Inc. ("ULTRA"), a manufacturing company
in Travelers Rest, South Carolina, which builds and installs conveyor systems,
material recovery facilities and related heavy waste handling equipment. As part
of its agreement with ULTRA, RPI had an option to purchase ULTRA.
On July 27, 1994, the Company acquired 100% of the issued and
outstanding common stock of Spectrum, and substantially all of the assets of
Amplasco Technologies, Inc., a Virginia corporation ("Amplasco"). Spectrum was
an established business involved in the design, construction and processing of
recycled plastic cleansing operations.
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As a result of the GAIA litigation, the Company and RETEX filed for
protection under Chapter 11 of the Bankruptcy Code on March 23, 1995, by filing
a petition in the United States Bankruptcy Court for the Northern District of
Oklahoma. On February 20, 1995, three days after the jury verdict was rendered
against the Company and RETEX in the GAIA litigation, the Company was required
to suspend operations of RETEX at its Brenham, Texas plant. The only
subsidiaries of the Company which it continued to operate were RPI and Spectrum.
However, due to the bankruptcy filings, both RPI's and Spectrum's operations
were severely hampered, and both companies were required to cease all operations
and liquidate all their assets to pay creditors. By November 1995, neither the
Company nor any of its subsidiaries, had any operations.
On July 3, 1997, Richard T. Clark and Joel C. Holt filed a Disclosure
Statement and Plan of Reorganization ("Plan"). On November 13, 1997, the Plan
was confirmed pursuant to 11 U.S.C. Section 1126 and filed with the Securities
and Exchange Commission on form.
CONCEPT OF PLAN
This Plan is premised on the concept that the Claims and Interests of
Creditors and Equity Security Holders are best served by an orderly
reorganization of Debtor built around the acquisition by Debtor of Keystone
Laboratories, Inc. ("Keystone") and the establishment of a less expensive
procedure for resolutions of RETEK claims.
Keystone is engaged in the business of forensic drug testing.
Keystone's business affairs, history and financial data are more particularly in
the Disclosure Statement. Currently, all outstanding shares of Common Stock of
Keystone are owned by Richard T. Clark, Jr. and Joel C. Holt, Plan Proponents.
Under this Plan, Messrs. Holt and Clark will exchange their shares in Keystone
for 2,500,000 shares of New Common Stock in Reorganized Debtor. The shares of
New Common Stock issued for Keystone do not include other shares of New Common
Stock to be received by Messrs. Clark and Holt pursuant to this Plan in their
capacities as either Equity Security Holders of Common Stock and Preferred Stock
or as Creditors.
In addition to the acquisition of Keystone and the orderly collection
of RETEK Claims proposed herein, Reconversion Technologies of Texas, Inc.
("RETEX"), a subsidiary of Debtor, will be liquidated through a Liquidating Plan
and a RETEX Liquidating Trust in its pending Chapter 11 case. Debtor is the
principal secured creditor of RETEX. The principal asset of RETEX is the Brenham
Plant facility in Brenham, Texas ("Brenham Plant"). Pursuant to the Liquidating
Trust, the Brenham Plant would be sold. No sale is expected in the near future.
Debtor is the major secured creditor of RETEX, but under this Plan, Debtor will
agree to subordinate its allowed secured claim against RETEX in the amount of
$5,000,000 to the extent of up to $200,000 of the first dollars received from
the sale to permit payment of RETEX's allowed claims and administrative
expenses. The balance of all funds or assets of RETEX (after the lesser of the
amounts required to pay RETEX's allowed priority claims and allowed claims, or
$200,000) will be paid by the Liquidating Trust to Debtor in satisfaction of the
RETEX obligation to Debtor, and Debtor will retain such claim and enforce it
against RETEX for the benefit of Debtor's Creditors and Interest holders.
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Following the acquisition of Keystone and the liquidation of the
principal assets of RETEX through the RETEX Liquidating Trust and collection on
any RETEK claims. Debtor's only operating asset will be Keystone. Debtor will be
engaged solely in the business of forensic drug testing through Keystone unless
and until Debtor expands its business activities. Under this Plan:
(a) All Pre-Petition Shares of Common Stock will be subject to a
one-for-eight reverse stock split such that each holder of Pre-Petition shares
of Common Stock will receive the number of shares of New Common Stock equal to
the number of shares of Pre-Petition Common Stock held by the holder, divided by
eight;
(b) All Pre-Petition Shares of Preferred Stock will be reclassified as
New Common Stock and the holders of Preferred Stock will receive a pro rata
share of 1,274,172 shares of New Common Stock in exchange for Pre-Petition
Preferred Shares;
(c) Certain Creditor Claims may be converted into New Common Stock; and
(d) Warrants to purchase New Common Stock will be issued to certain
holders of interests.
This summary of the Plan, which has been filed in its entirety with the
Company's 8-K dated November 26, 1997. The Plan is binding on RETEK and all
creditors and shareholders of RETEK. The Plan provides for eleven (11) Classes
of Claims and Interests. The Plan provides for the following treatment of these
Claims and Interests:
SUMMARY OF THE PLAN
CLASS 1 CLAIMS: ALLOWED ADMINISTRATIVE CLAIMS: Allowed Claims under
Section 503(b) of the Bankruptcy Code. The Class 1 Claims include (i) allowed
but unpaid attorneys' fees on the Effective Date for Debtor's counsel, Riggs,
Abney, Neal, Turpen Orbison & Lewis, and (ii) allowed but unpaid professional
fees due to Neal Tomlins, Examiner, and his counsel, and fees and expenses not
yet presented for payment and, therefore, not yet approved.
CLASS 2 CLAIMS: ALLOWED PRIORITY CLAIMS: Allowed Unsecured Claims
entitled to priority pursuant to Section 507(a) of the Bankruptcy Code. The
Debtor has scheduled priority claims owing in unknown amounts to the Internal
Revenue Service and the Securities and Exchange Commission. The Plan Proponents
believe that there is no liability to either of the agencies included in this
Class.
CLASS 3: DISPUTED SECURED CLAIMS. This Class consists of Creditors who
assert a secured claim against Debtor and its assets. All of such secured claims
are disputed, and all underlying claims are disputed, as they do not arise from
obligations of Debtor but instead represent, if valid, obligations of Retex. It
is believed that the joint administration of the Debtor's case and the Retex
case may have created confusion among Retex creditors who assert secured status
in this case.
CLASS 4 CLAIM: CLAIM OF TRANSFER AGENTS AST AND DEPOSITORY TRUST CO.
The Class 4 claim consists of the pre-petition unsecured Claim of American
Securities Transfer ("AST") in the
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amount of $3,553.66 and of the pre-petition Unsecured Claim of Depository Trust
Co. in the amount of $1,050.00. Both Claims were incurred for stock transfer
services rendered to Debtor pre-petition.
CLASS 5 CLAIMS: ADMINISTRATIVE CONVENIENCE SMALL CLAIMS. Class 5 Claims
consist of all Allowed Unsecured Claims against Debtor to which no objection has
been interposed, which are $1,000 or less in amount, and shall include Class 6
Creditors who elect to reduce their claim for Class 5 participation.
CLASS 6 CLAIMS: UNSECURED CLAIMS. Class 6 Claims consist of Allowed
Unsecured Claims against Debtor to which no objection has been interposed and
total approximately $413,668.49. Disputed Claims which would otherwise be
included within this Class will not be Allowed until allowed by Final Order of
the Bankruptcy Court. The aggregate amount of Disputed Claims is $1,503, 824.19.
Expressly excluded from Class 6 Claims are the Klenda, Gordon, & Getchell
Creditor Claim and the GAIA Claim, which are separately classed
CLASS 7 CLAIM: DISPUTED UNSECURED CLAIM OF GAIA. GAIA is the holder of
a disputed Unsecured Claim against Debtor. On March 17, 1995, GAIA obtained a
judgement against Debtor and certain individuals in the aggregate sum of $22
million dollars in the United States District Court for the Southern District of
Texas styled Gaia Technologies, Inc. v. Reconversion Technologies, Inc., et al.,
Case No. H-94-2258 and GAIA filed its Proof of Claim in this case for
$23,043,276.21. On August 19, 1996, the U.S. Court of Appeals for the Federal
Circuit reversed and vacated the judgment entirely and remanded the matter to
the U.S. District Court for the Southern District of Texas. A copy of the
Opinion of the Court of Appeals are on file in this case. The GAIA Claims is
disputed under this Plan. An objection to the GAIA claim was filed seeking a
determination of the value of the GAIA claim through the claim estimation
process pursuant to 11 U.S.C. Section 502(c). After the objection was filed, the
United States District Court for the Southern District of Texas (to which the
appeals court had remanded the matter after vacating and reversing the judgment)
entered judgment in favor of GAIA and against Debtor and others as follows:
(a) Judgment against Debtor, Retek, Progressive Capital Corporation,
David Gordon, Ira Rimer, Joel C. Holt and Richard T. Clark, Jr., jointly and
severally, for:
(i) $4,350,000;
(ii) pre-judgment interest of $2,130,192.79;
(b) Judgment against Debtor, Retex and Progressive Capital Corporation,
jointly and severally, for:
(i) $125,000;
(ii) pre-judgment interest of $61,212.42
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(c) Judgment against David Gordon, Ira Rimer, Joel C. Holt and Richard
T. Clark, Jr. for $100,000 each, in the nature of punitive damages;
(d) Attorney's fees of $450,000 against Debtor, Retex, Progressive
Capital Corporation, David Gordon, Ira Rimer, Joel C. Holt and Richard T. Clark,
Jr., jointly and severally; and
(e) Post-judgment interest after July 10, 1997, at 5.65%
The aggregate amount of the judgment against Debtor and other parties
is $7,116,405.21, exclusive of interest after July 10, 1997. Debtor and Plan
Proponents have initialized an appeal of the judgment, which it is believed was
rendered in contravention of the mandate from the Court of Appeals which vacated
the earlier judgment of $23,043,276.31. The appeal will be vigorously prosecuted
by Debtor and Plan Proponents.
Plan Proponents believe the value of the GAIA claim against the Estate
will ultimately be determined to be zero, and further that the Estate may have
claims against GAIA arising as a result of the GAIA litigation, which potential
claim is reserved pending analysis.
CLASS 8 CLAIM: TNRCC CLAIM: The TNRCC Claim against Debtor arises, if
at all, in connection with certain environmental claims which are asserted by
TNRCC against Retex from operation of the Retex plant in Brenham, Texas. TNRCC
has not filed a claim against Debtor. Debtor believes that TNRCC asserts its
claim against Retex, and as set forth in the Disclosure Statement, that Debtor
has no liability to TNRCC.
CLASS 9 CLAIM: KLENDA, GORDON & GETCHELL CREDITOR CLAIM: This Class
consists of the Claim of Klenda, Gordon & Getchell asserting an Unsecured Claim
in the amount of $128,439.37. The Estate asserted claims against Klenda, Gordon
& Getchell which on May 22, 1997, resulted in a judgment in favor of Debtor
against Klenda, Gordon & Getchell for $98,625 together with interest at 6.72%
from June 21, 1996, until paid.
CLASS 10 INTERESTS: PREFERRED STOCK: This Class consists of the
interests of the Equity Security Holders who own Pre-Petition Shares of
Preferred Stock. According to information available to Plan Proponents, there
were 1,104,081 Pre-Petition Shares of Preferred Stock issued by Debtor and held
by approximately forty-eight (48) entitles or individuals who are listed on
Exhibit E.
CLASS 11 INTERESTS: COMMON STOCK: This Class consists of the Interests
of the Equity Security Holders who own Pre-Petition Shares of Common Stock of
Debtor. According to information available to Plan Proponents, there are
outstanding 11,371,617 Pre-Petition Shares of Common Stock held by approximately
301 entities or individuals. The owners and their holdings of these shares, as
of November 17, 1994, according to the records of Debtor's stock transfer agent,
AST, are contained in "List of Equity Security Holders" filed in the office of
the United States Bankruptcy Court Clerk for the Northern District of Oklahoma
on or about April 19, 1995.
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ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Unaudited Financial Statements of Reconversion Technologies, Inc.
are set forth on pages F-1 through F-14 hereof (See Item 13) along with the
Monthly Operating Reports filed with the United States Bankruptcy Court for
Northern District of Oklahoma for the period July, 1995 to June, 1997.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
JOEL C. HOLT, age 67, was educated at the Medical College of Virginia
with B.S. Degrees in both Physical Therapy and Biology. Prior to attending the
Medical College of Virginia, Mr. Holt served a tour of duty in the U.S. Navy.
Mr. Holt was employed as a physical therapist for 2 years prior to joining a
major pharmaceutical company where he remained in sales and marketing for 30
years. He was instrumental in forming Keystone Laboratories, Inc. in 1987, and
has remained as president to date. He also served as Chairman of the Board for
Proactive Technologies, Inc. during 1995.
JOHN B. SAMS, age 49, has been Vice President of Sales and Marketing of
Keystone Laboratories, Inc. since 1995. He was educated at Montreat-Anderson
College with a B.A. Degree. He has an extensive background in the medical and
diagnostic field. Mr. Sams was employed in marketing and sales management with a
major clinical diagnostic corporation for 19 years. He also spent 4 years in the
pharmaceutical industry. He has served on the board of directors for Proactive
Technologies, Inc. and several other private corporations, and is active with
the American Diabetes Association.
W. LEO MORRIS, age 76, has a degree in Petroleum Engineering from Texas
Tech University. Mr. Morris. Mr. Morris has served as engineer and Production
Superintendent for Mobile Oil Corporation. He served for 22 years as Vice
President of Bank of Oklahoma and as an officer of various of banks in the
Oklahoma area, and has been engaged in the banking business for 40 years.
ROBERT GARNER, age 63, manages several family companies in the oil and
gas business and other areas as principal of Garner Energy, Inc., and serves as
President and Chief Executive Officer of Excelco Energy, Inc. Formerly, Mr.
Garner retired as Executive Vice President of Occidental Oil
14
<PAGE> 15
and Gas Corporation (1986-1990), Vice President of Cities Service Company from
1955-1980. Mr. Garner earned a Bachelor of Science Degree in Petroleum
Engineering from the University of Oklahoma in 1955 and has completed graduate
work on Emory University, Indiana University and the University Center at Tulsa.
J. CLARK BUNDREN, M.D., age 44 is a tenured Associate Professor of
Gynecology and Obstetrics in the College of Medicine at the University of
Oklahoma Health Sciences Center - Tulsa where he directs the division of
Reproductive Endocrinology and Infertility. He actively conducts medical
teaching, research and private practice. He is active in the Oklahoma oil and
gas industry with numerous working interests and is a member of the OIPA. He has
been an active shareholder since April 1996 in the Tulsa internet transaction
company of City Surf, Inc. doing business as BuyItNow. He has been an outside
director of Reconversion Technologies since November of 1997.
ITEM 10. EXECUTIVE COMPENSATION
The following table shows the cash compensation of each executive
officer and as to all executive officers as a group, during the fiscal year
ended June 30, 1997:
<TABLE>
<CAPTION>
Name and Fiscal Other All
Principal Year Annual Other
Position Ended Salary($) Bonus($) Compensation Compensation Note
-------- ----- --------- -------- ------------ ------------ ----
<S> <C> <C> <C> <C> <C> <C>
Joel C. Holt 6/30/95 0 0 0 0 0
President/ 6/30/96 0 0 0 0 0
Director 6/30/97 0 0 0 0 0
Since 1997
</TABLE>
There were no Option/SAR grants during the last fiscal year.
There were no Option/SAR exercises during the last fiscal year, and there were
no fiscal year-end Options/SAR's outstanding.
There were no long term incentive plan awards during the last fiscal year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates all persons who, as of June 30, 1997, or
the most recent practicable date, are known by the Company to own beneficially
more than 5% of any class of the Company's voting securities and all Directors
of the Company and all Officers who are not Directors of the Company, as a
group. Percent of class for all beneficial owners assumes that all options and
warrants have been exercised and the Preferred Stock has been converted.
15
<PAGE> 16
<TABLE>
<CAPTION>
NAME & ADDRESS AMOUNT & NATURE
TITLE OF BENEFICIAL OF BENEFICIAL %OF
OF CLASS OWNER OWNERSHIP IN NUMBER CLASS
<S> <C> <C> <C>
Common Joel C. Holt 416,517 3.66%
2 Hendersonville Rd. Ste. E
Asheville, NC 28803
Common John Sams 0
2 Hendersonville Rd. Ste. E
Asheville, NC 28803
Common W. Leo Morris 250,000 2.21%
5875 South Joplin
Tulsa, OK 74135
Common J. Clark Bundren 2,000 <1%
5555 E. 71st St., Ste. 6220
Corporate Oaks, Bldg. 6
Tulsa, OK 74136
Common Robert Garner 40,000 <1%
427 South Boston, Ste. 1207
Broken Arrow, OK 74103
Common Entek Bankruptcy Estate 1,210,094 10.64%
c/o John Flowers, Esq.
5810 Berkshire Lane
Dallas, TX 75209
Common Gaia Technologies, Inc. 1,189,250 10.46%
4710 Bellaire Blvd., Ste. 301
Bellaire, TX 77401
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS QUALIFYING TRANSACTIONS
INVOLVING INTERESTED PERSONS OR ENTITIES
None
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS. The following Financial Statements of
Reconversion Technologies, Inc. are included in PART II, ITEM 7:
Page
16
<PAGE> 17
Balance Sheets - June 30, 1997 F-2
Statements of Operations - Years Ended
June 30, 1997 and 1996 F-3
Statements of Stockholders' Equity -
Years Ended June 30, 1997 and 1996 F-4
Statements of Cash Flows - Years
Ended June 30, 1997 and 1996 F-5
Notes to Financial Statements - Years
Ended June 30, 1997 and 1996 F-6 through F-10
EXHIBITS See Exhibit Index at page 19.
(B) REPORTS ON FORM 8-K.
NONE
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RECONVERSION TECHNOLOGIES, INC.
Date: August 19, 1998 By /S/ JOEL C. HOLT
----------------
JOEL C. HOLT, PRESIDENT/
CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Date
/S/ JOEL C. HOLT August 19, 1998
JOEL C. HOLT
PRESIDENT
/S/ JOHN B. SAMS August 19, 1998
JOHN B. SAMS
DIRECTOR
/S/ W. LEO MORRIS August 19, 1998
W. LEO MORRIS
DIRECTOR
/S/ J. CLARK BUNDREN August 19, 1998
J. CLARK BUNDREN
DIRECTOR
/S/ ROBERT GARNER August 19, 1998
ROBERT GARNER
DIRECTOR
18
<PAGE> 19
EXHIBITS HAVE BEEN OMITTED FROM THIS COPY. COPIES OF EXHIBITS MAY BE OBTAINED
FROM RECONVERSION TECHNOLOGIES, INC., UPON REQUEST AND PAYMENT OF THE COSTS OF
FURNISHING SUCH COPIES. COPIES MAY ALSO BE OBTAINED FROM THE SECURITIES AND
EXCHANGE COMMISSION FOR A SLIGHT CHARGE.
(The foregoing is not applicable to the original(s) hereof.)
SECURITIES
AND EXCHANGE
COMMISSION
EXHIBIT NO. TYPE OF EXHIBIT PAGE NUMBER
2 Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession N/A
3 Articles of Incorporation and Bylaws - N/A
Certificate of Incorporation of the Company are
incorporated herein by reference to Form 10-K for
Fiscal year ended June 30, 1987, filed October 15,
1987.
4 Instruments defining the rights of security N/A
holders, including indentures
9 Voting Trust Agreement N/A
10 Material Contracts - N/A
11 Statement regarding Computation of Per N/A
Share Earnings
13 Annual Report to Security Holders N/A
16 Letter on Change in Certifying Accountant N/A
18 Letter regarding Change in Accounting N/A
Principles
21 Subsidiaries of the Registrant Item 1
19
<PAGE> 20
22 Published Report Regarding Matters N/A
Submitted to Vote of Security Holders
23 Consents of Experts and Counsel N/A
24 Power of Attorney N/A
27 Financial Data Schedule 33
28 Information from reports furnished to N/A
state insurance regulatory agencies
99 Examiner's Reports of Receipts & Disbursements 21
20
<PAGE> 21
RECONVERSION TECHNOLOGIES, INC.
INDEX
Page
No.
Financial Information
Balance Sheet - June 30, 1997 3
Statement of Operations - 4
Years Ended June 30, 1997 and 1996
Statement of Stockholders' Deficit - 5
Years Ended June 30, 1997 and 1996
Statements of Cash Flows - 6
Years Ended June 30, 1997 and 1996
Notes to Financial Statements - 7-10
Years Ended June 30, 1997 and 1996
F-1
<PAGE> 22
RECONVERSION TECHNOLOGIES, INC.
BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,900
------------
Total current assets 3,900
Due from Liquidating Trust of Reconversion Technologies of Texas, Inc. 100,000
------------
$ 103,900
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 371,923
Class 4 Claims - unsecured claims for transfer services 4,604
Class 5 Claims - administrative convenience small claims 3,247
Class 6 Claims - allowed unsecured claims 205,050
Class 6 Claims - disputed unsecured claims 652,523
Class 7 Claims - disputed unsecured claim of GAIA 1,670,000
------------
Total current liabilities 2,907,347
STOCKHOLDERS' DEFICIT
6% Series A nonvoting, cumulative, convertible preferred stock, $2.75 par value 3,036,223
Authorized 2,000,000 shares; issued and outstanding 1,104,081 shares
Common stock, $.0001 par value. Authorized 200,000,000 shares; issued and 1,137
outstanding 11,371,617 shares
Paid-in capital 10,252,819
Retained earnings (deficit) (16,093,626)
------------
Total stockholders' deficit (2,803,447)
------------
$ 103,900
============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 23
RECONVERSION TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
YEARS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
SALES AND REVENUES $ -- $ --
COST OF SALES -- --
------------ ------------
GROSS PROFIT -- --
OTHER EXPENSE (INCOME)
Selling, general and administrative expense 519,107 1,000
Interest and other income -- (22)
------------ ------------
519,107 978
------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES (519,107) (978)
INCOME TAX EXPENSE (BENEFIT) -- --
------------ ------------
NET EARNINGS (LOSS) (519,107) (978)
============ ============
NET EARNINGS (LOSS) PER SHARE $ (0.05) $ (0.00)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING (PRE REVERSE-SPLIT) 11,371,617 11,371,617
============ ============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 24
RECONVERSION TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
YEAR ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Paid-in Accumulated
Shares Par Value Shares Par Value Capital Deficit Total
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, July 1, 1995 1,104,081 $ 3,036,223 11,371,617 $ 1,137 $ 10,252,819 $(15,573,541) $ (2,283,362)
Net earnings (loss) (978) (978)
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE, June 30, 1996 1,104,081 3,036,223 11,371,617 1,137 10,252,819 (15,574,519) (2,284,340)
Net earnings (loss) (519,107) (519,107)
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE, June 30, 1997 1,104,081 $ 3,036,223 11,371,617 $ 1,137 $ 10,252,819 $(16,093,626) $ (2,803,447)
============ ============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
Shares are pre reverse-split amounts.
F-4
<PAGE> 25
RECONVERSION TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
YEARS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $(519,107) $ (978)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Proceeds from sale of marketable securities 19,039
Accounts payable and accrued liabilities 371,923 --
--------- --------
Net cash provided by (used in) operating activities (147,184) 18,061
--------- --------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Funds from Reconversion Technologies of Texas, Inc. 125,689 7,334
--------- --------
Net cash provided by (used in) investing activities 125,689 7,334
--------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
--------- --------
Net cash provided by (used in) financing activities -- --
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (21,495) 25,395
CASH AND CASH EQUIVALENTS, beginning of period 25,395 --
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 3,900 $ 25,395
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 26
RECONVERSION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statement of Reconversion Technologies, Inc. (the
"Company") includes only the accounts of Reconversion Technologies,
Inc., which is a holding company principally engaged in acquiring and
developing businesses. The Company had three wholly-owned subsidiaries:
Reconversion Technologies of Texas, Inc., a Texas Corporation,
organized on February 24, 1992 ("RETEX"), Reconversion Products, Inc.
("RPI"), formerly Thomas Engineering, Inc., a Georgia Corporation
organized on October 9, 1992, and Spectrum Recycling Technologies, Inc.
("Spectrum"), a New York Corporation.
On March 23, 1995, the Company voluntarily filed for bankruptcy
protection in the United States Bankruptcy Court for the Northern
District of Oklahoma. During the pendency of the bankruptcy, RETEX,
Spectrum and RPI discontinued operations. Spectrum and RPI have been
liquidated and the remaining asset of RETEX, the Brenham Plant
facility, located in Brenham, Texas, is discussed in the Plan of
Reorganization.
On November 13, 1997, the Company was formally reorganized pursuant to
a confirmed Bankruptcy Plan of Reorganization. As a result, the Company
acquired 100% of the issued and outstanding common stock of Keystone
Laboratories, Inc. ("KLI"), a Delaware corporation organized on July
20, 1987. KLI is a forensic urine drug screening and confirmatory
testing laboratory.
B. SUMMARY OF PLAN OF REORGANIZATION
On July 3, 1997, Richard T. Clark and Joel C. Holt, shareholders and
creditors of the Company, filed a Disclosure Statement and Plan of
Reorganization ("Plan"). On November 13, 1997, the Plan was confirmed
pursuant to 11 U.S.C. Section 1126 and filed with the Securities and
Exchange Commission on Form 8-K dated November 13, 1997.
The Plan is premised on the concept that the Claims and Interests of
Creditors and Equity Security Holders are best served by an orderly
reorganization of the Company built around the acquisition by the
Company of Keystone Laboratories, Inc. and the establishment of a less
expensive procedure for resolutions of the claims of the Company.
KLI is engaged in the business of forensic drug testing. Currently,
Richard T. Clark, Jr. and Joel C. Holt, Plan Proponents own all
outstanding shares of Common Stock of KLI. Under this Plan, Messrs.
Holt and Clark will exchange their shares in KLI for 2,500,000 shares
of New Common Stock in Reorganized Debtor. The shares of New Common
Stock issued for KLI do not include other shares of New Common Stock to
be received by Messrs. Clark and Holt pursuant to this Plan in their
capacities as either Equity Security Holders of Common Stock and
Preferred Stock or as Creditors.
In addition to the acquisition of Keystone and the orderly collection
of claims of the Company proposed in the Plan, RETEX will be liquidated
through a Liquidating Plan and a RETEX Liquidating Trust in its pending
Chapter 11 case. The Company is the principal secured creditor of
RETEX. The principal asset of RETEX is the Brenham Plant facility in
Brenham, Texas ("Brenham Plant"). Pursuant to the Liquidating Trust,
the Brenham Plant would be sold. No sale is expected in the near
future. The Company is the major secured creditor of RETEX, but under
the Plan, the Company agreed to subordinate its allowed secured claim
against RETEX in the
F-6
<PAGE> 27
RECONVERSION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
amount of $5,000,000 to the extent of up to $200,000 of the first
dollars received from the sale to permit payment of RETEX's allowed
claims and administrative expenses. The balance of all funds or assets
of RETEX (after the lesser of the amounts required to pay RETEX's
allowed priority claims and allowed claims, or $200,000) will be paid
by the Liquidating Trust to the Company in satisfaction of the RETEX
obligation to the Company.
Following the acquisition of Keystone, the liquidation of the principal
assets of RETEX through the RETEX Liquidating Trust and the collection
of any claims of the Company, the Company's only operating asset will
be KLI. The Company will be engaged solely in the business of forensic
drug testing through Keystone unless and until the Company expands its
business activities. Under the Plan:
(a) All Pre-Petition shares of common stock will be
subject to a one-for-eight reverse stock split such
that each holder of Pre-Petition shares of common
stock will receive the number of shares of New Common
Stock equal to the number of shares of Pre-Petition
common stock held by the holder, divided by eight;
(b) All Pre-Petition shares of preferred stock will be
reclassified as New Common Stock and the holders of
preferred stock will receive a pro rata share of
1,274,172 shares of New Common Stock in exchange for
Pre-Petition preferred shares;
(c) Certain creditor claims may be converted into New
Common Stock; and
(d) Warrants to purchase New Common Stock will be issued
to certain holders of interests.
The Plan is binding on the Company and all creditors and shareholders
of the Company. The Plan provides for treatment of the following eleven
classes of claims and interest:
CLASS 1 CLAIMS: ALLOWED ADMINISTRATIVE CLAIMS. Allowed Claims
under Section 503(b) of the Bankruptcy Code. The Class 1
Claims include (I) allowed but unpaid attorneys' fees on the
Effective Date for the Company's counsel, Riggs, Abney, Neal,
Turpen, Orbison & Lewis, and (ii) allowed but unpaid
professional fees due to Neal Tomlins, Examiner, and his
counsel, and fees and expenses not yet presented for payment,
and therefore, not yet approved.
CLASS 2 CLAIMS: ALLOWED PRIORITY CLAIMS. Allowed Unsecured
Claims entitled to priority pursuant to Section 507(a) of the
Bankruptcy Code. The Company has scheduled priority claims
owing in unknown amounts to the Internal Revenue Service and
the Securities and Exchange Commission. The Plan Proponents
believe that there is no liability to either of the agencies
included in this Class.
CLASS 3 CLAIMS: DISPUTED SECURED CLAIMS. This Class consists
of Creditors who assert a secured claim against the Company
and its assets. All of such secured claims are disputed, and
all underlying claims are disputed, as they do not arise from
obligations of the Company but instead represent, if valid,
obligations of RETEX. It is believed that the joint
administration of the Company's case and the RETEX case may
have created confusion among RETEX creditors who asserted
secured status in the Company's case.
F-7
<PAGE> 28
RECONVERSION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
CLASS 4 CLAIM: CLAIM OF TRANSFER AGENTS AST AND DEPOSITORY
TRUST CO. This Class consists of the pre-petition unsecured
claim of American Securities Transfer ("AST") in the amount of
$3,553.66 and of the pre-petition unsecured claim of
Depository Trust Co. in the amount of $1,050.00. Both claims
were incurred for stock transfer services rendered to the
Company pre-petition.
CLASS 5 CLAIMS: ADMINISTRATIVE CONVENIENCE SMALL CLAIMS. This
class consists of all allowed unsecured claims against the
Company which are $1,000 or less in amount, and shall include
Class 6 creditors who elect to reduce their claim for Class 5
participation.
CLASS 6 CLAIMS: UNSECURED CLAIMS. Class 6 claims consist of
allowed unsecured claims against the Company to which no
objection has been interposed and total approximately $513,668
and disputed claims, which would otherwise be included within
this Class, but will not be allowed until allowed by Final
Order of the Bankruptcy Court. The aggregate amount of
disputed claims is $1,631,308. The allowed claims have been
valued at 40% of their face amount or $205,050 in the
accompanying balance sheet, based upon the amount to be paid
to settle the claims. The disputed claims have also been
valued at 40% of their face amount pending their ultimate
disposition.
CLASS 7 CLAIM: DISPUTED UNSECURED CLAIM OF GAIA. GAIA is the
holder of a disputed unsecured claim against the Company. On
March 17, 1995, GAIA obtained a judgment against the Company
and certain individuals in the aggregate sum of $22 million in
the United States District Court for the Southern District of
Texas styled Gaia Technologies, Inc. v. Reconversion
Technologies, Inc., et al., Case No. H-94-2258 and GAIA filed
its Proof of Claim in the case for $23,043,276.21. On August
19, 1996, the U.S. Court of Appeals for the Federal Circuit
reversed and vacated the judgment entirely and remanded the
matter to the U.S. District Court for the Southern District of
Texas. The GAIA claim is disputed under the Plan. An objection
to the GAIA claim was filed seeking a determination of the
value of the GAIA claim through the claim estimation process
pursuant to 11 U.S.C. Section 502(c). After the objection was
filed, the United States District Court for the Southern
District of Texas (to which the appeals court had remanded the
matter after vacating and reversing the judgment) entered
judgment in favor of GAIA and against the Company and others
as follows:
(a) Judgment against the Company, RETEX,
Progressive Capital Corporation, David
Gordon, Ira Rimer, Joel C. Holt and Richard
T. Clark, Jr., jointly and severally, for:
(i) $4,350,000;
(ii) pre-judgment interest of
$2,130,192.79;
(b) Judgment against the Company, RETEX and
Progressive Capital Corporation, jointly and
severally, for:
(i) $125,000;
(ii) pre-judgment interest of
$61,212.42;
(c) Judgment against David Gordon, Ira Rimer,
Joel C. Holt and Richard T. Clark, Jr. for
$100,000 each, in the nature of punitive
damages;
(d) Attorney's fees of $450,000 against the
Company, RETEX, Progressive Capital
Corporation, David Gordon, Ira Rimer, Joel
C. Holt and Richard T. Clark, Jr., jointly
and severally; and
(e) Post-judgment interest after July 10, 1997,
at 5.65%.
F-8
<PAGE> 29
RECONVERSION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The aggregate amount of the judgment against the Company and
the other parties if $7,116,405.21, exclusive of interest
after July 10, 1997. The Company and Plan Proponents have
initialized an appeal of the judgment, which it is believed
was rendered in contravention of the mandate from the Court of
Appeals, which vacated the earlier judgment of $23,043,276.31.
The Company and Plan Proponents will vigorously prosecute the
appeal.
Plan Proponents believe the value of the GAIA claim against
the Company will ultimately be determined to be zero, and
further that the Company may have claims against GAIA arising
as a result of the GAIA litigation, which potential claim is
reserved pending analysis. The claim has been valued at
$1,670,000 in the accompanying balance sheet.
CLASS 8 CLAIM: TNRCC CLAIM. The TNRCC claim against the
Company arises, if at all, in connection with certain
environmental claims, which are asserted by TNRCC against
RETEX from operation of the RETEX plant in Brenham, Texas.
TNRCC has not filed a claim against the Company. The Company
believes that if TNRCC asserts its claim against RETEX, and as
set forth in the Disclosure Statement, that the Company has no
liability to TNRCC.
CLASS 9 CLAIM: KLENDA, GORDON & GETCHELL CREDITOR CLAIM. This
Class consists of the Claim of Klenda, Gordon & Getchell
asserting an unsecured claim in the amount of $128,439.37. The
Company asserted claims against Klenda, Gordon & Getchell,
which on May 22, 1997, resulted in a judgment in favor of the
Company against Klenda, Gordon & Getchell for $98,625,
together with interest at 6.72% from June 21, 1996, until
paid.
CLASS 10 INTERESTS: PREFERRED STOCK. This Class consists of
the interest of the Equity Security Holders who own
Pre-Petition Shares of Preferred Stock. According to
information available to Plan Proponents, there were 1,145,250
Pre-Petition shares of preferred stock issued by the Company
and held by approximately forty-eight (48) entities or
individuals.
CLASS 11 INTERESTS: COMMON STOCK. This Class consists of the
interests of the Equity Security Holders who own Pre-Petition
shares of common stock of the Company. According to
information available to Plan Proponents, there were
outstanding 11,371,617 Pre-Petition shares of common stock
held by approximately 301 entities or individuals.
C. INCOME TAXES
The Company follows SFAS No. 109, "Accounting for Income Taxes".
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. SFAS No. 109 requires that a valuation allowance be
established to reduce deferred tax assets to the amount that is more
likely than not to be realized.
F-9
<PAGE> 30
RECONVERSION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Deferred income taxes result primarily from temporary differences in
recognizing net operating losses for tax and financial reporting
purposes.
D. SUBSEQUENT EVENTS
As discussed above, on November 13, 1997, the Company was formally
reorganized pursuant to a confirmed Bankruptcy Plan of Reorganization.
As a result, the Company acquired 100% of the issued and outstanding
common stock of Keystone Laboratories, Inc., a forensic urine drug
screening and confirmatory testing laboratory on December 3, 1997.
The acquisition of KLI will be accounted for as a reverse acquisition.
During its year ended June 30, 1997, KLI had revenues of $1,446,137 and
a net loss in the amount of $121,415. Net loss per share on a pre
reverse-split basis would not have changed.
F-10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS OF JUNE 30, 1997 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-KSB FOR THE YEAR ENDED JUNE 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,900
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,900
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 103,900
<CURRENT-LIABILITIES> 2,907,347
<BONDS> 0
0
3,036,223
<COMMON> 1,137
<OTHER-SE> (5,840,807)
<TOTAL-LIABILITY-AND-EQUITY> 103,900
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 519,107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (519,107)
<INCOME-TAX> 0
<INCOME-CONTINUING> (519,107)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (519,107)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
<PAGE> 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
IN RE: )
)
RECONVERSION TECHNOLOGIES, INC., ) Case No. 95-00821-W
) (Chapter 11)
Debtor. )
)
RECONVERSION TECHNOLOGIES ) (Administratively Consolidated)
OF TEXAS, INC., )
)
Debtor. )
EXAMINER'S SCHEDULE OF RECEIPTS AND DISBURSEMENTS
Neal Tomlins, Examiner for Reconversion Technologies, Inc. ("ReTech")
and Reconversion Technologies of Texas, Inc. ("ReTex"), hereby presents this
Schedule of Cash Receipts and Disbursements for the period November 17, 1995
through June 28, 1996 as follows:
1. ReTech
<TABLE>
<CAPTION>
Amount of Amount of
Date Receipt Disbursement Comment
---- --------- ------------ -------
<S> <C> <C> <C>
1/20/96 $2,624.30 Transfer from Debtor account and
checks provided by Debtor.
1/31/96 1.99 Interest
2/13/96 800.00 Checks provided by Debtor
2/29/96 6.92 Interest
3/20/96 $1,000.00 Rent on storage space
3/31/96 7.64 Interest
4/30/96 5.80 Interest
</TABLE>
-21-
<PAGE> 2
<TABLE>
<CAPTION>
Amount of Amount of
Date Receipt Disbursement Comment
---- ----------- ------------ -------
<S> <C> <C> <C>
5/6/96 3,859.62 Return of post-petition transfer
5/31/96 49.96 Interest
6/12/96 7,603.13 Sale of Proactive stock
6/14/96 11,435.87 Sale of Proactive stock
-----------------------------
Total $26,395.23 $1,000.00
========== =========
</TABLE>
2. ReTex
<TABLE>
<CAPTION>
Amount of Amount of
Date Receipt Disbursement Comment
---- ------------ ------------ -------
<S> <C> <C> <C>
5/6/96 $ 2,700.00 Sale of equipment to GAIA
Technologies, Inc.
5/6/96 17,675.00 Sale of equipment to Washington
County Tractor
6/21/96 22,995.00 Sale of equipment to The Lerio
Corporation
6/21/96 36,000.00 Sale of equipment to ThermaSave
6/21/96 400.00 Sale of equipment to Townsend
6/21/96 500.00 Sale of equipment to D&W Welding
-----------------------------
Total $80,270.00
==========
</TABLE>
3. The Examiner has established a bank account at F&M Bank and a
brokerage account at Merrill Lynch, both in the name of the Examiner.
-22-
<PAGE> 3
Respectfully submitted,
/s/ Neal Tomlins
-----------------------------------
Neal Tomlins, OBA No. 10499
TOMLINS & GOINS
A Professional Corporation
21 Centre Park
2642 East 21st Street, Suite 230
Tulsa, Oklahoma 74114
(918) 747-6500
Examiner
-23-
<PAGE> 4
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
IN RE: )
)
RECONVERSION TECHNOLOGIES, INC., ) Case No. 95-00821-W
) (Chapter 11)
Debtor. )
)
RECONVERSION TECHNOLOGIES ) (Administratively Consolidated)
OF TEXAS, INC., )
)
Debtor. )
EXAMINER'S SECOND SCHEDULE OF RECEIPTS AND DISBURSEMENTS
Neal Tomlins, Examiner for Reconversion Technologies, Inc. ("ReTech") and
Reconversion Technologies of Texas, Inc. ("ReTex"), hereby presents this
Schedule of Cash Receipts and Disbursements for the period June 29, 1996
through February 13, 1997 as follows:
1. ReTech
<TABLE>
<CAPTION>
Amount of Amount of
Date Receipt Disbursement Comment
---- --------- ------------ -------
<S> <C> <C> <C>
7/11/96 $ 156.00 Bond
7/24/96 25,785.48 Attorneys fees
9/10/96 $ 5.42 Miscellaneous
9/17/96 218.12 Interest on Merrill Lynch account
11/30/96 265.18 Interest
1/31/97 315.07 Interest
Prior Balance 26,395.23 1,000.00
---------- ----------
Total $27,199.02 $26,941.48
========== ==========
</TABLE>
-24-
<PAGE> 5
2. ReTex
<TABLE>
<CAPTION>
Amount of Amount of
Date Receipt Disbursement Comment
---- --------- ------------ -------
<S> <C> <C> <C>
6/30/96 $ 97.47 Interest
7/11/96 $ 1,000.00 Rent on storage space
7/24/96 $18,331.17 Attorneys fees
7/31/96 202.07 Interest
8/31/96 105.97 Interest
9/10/96 1,500.00 Sale of equipment to Cooper
9/10/96 6,000.00 Rent - Brenham
9/30/96 135.67 Interest
10/28/96 25,204.31 Auction proceeds
10/28/96 6,000.00 Rent - Brenham
10/31/96 191.37 Interest
11/15/96 6,000.00 Rent - Brenham
11/29/96 1,440.00 Real estate commission
11/29/96 1,250.00 Rent on storage space
12/20/96 2,000.00 Misc. sales of equipment
12/20/96 6,000.00 Rent - Brenham
12/30/96 6,000.00 Rent - Brenham
12/31/96 285.21 Interest
Prior
balance 80,320.00 0.00
-------------------------------
Total $140,042.07 $22,021.17
===============================
</TABLE>
-25-
<PAGE> 6
3. The Examiner has established a bank account at F&M Bank & Trust Company
and the balance in such account is $118,278.44. The examiner has closed a
brokerage account at Merrill Lynch.
Respectfully submitted,
-----------------------------------
Neal Tomlins, OBA No. 10499
TOMLINS & GOINS
A Professional Corporation
Utica Plaza Building
2100 South Utica Avenue, Suite 300
Tulsa, Oklahoma 74114
(918) 747-6500
Examiner
-26-
<PAGE> 7
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
IN RE:
RECONVERSION TECHNOLOGIES, INC., Case No. 95-00821-M
(Chapter 11)
Debtor.
RECONVERSION TECHNOLOGIES (Administratively Consolidated)
OF TEXAS, INC.,
Debtor.
EXAMINER'S THIRD SCHEDULE OF RECEIPTS AND DISBURSEMENTS
Neal Tomlins, Examiner for Reconversion Technologies, Inc.
("ReTech") and Reconversion Technologies of Texas, Inc. ("ReTex"), hereby
presents this Schedule of Cash Receipts and Disbursements for the period
February 13, 1997 through July 31, 1997 as follows:
1. RE-TECH
<TABLE>
<CAPTION>
Amount of Amount of
Date Receipt Disbursement Comment
---- --------- ------------ -------
<S> <C> <C> <C>
4/11/97 $3,642.17 Insurance Refund
Prior
Balance 257.54
---------
Total $3,899.71 $0.00
========= =====
</TABLE>
-27-
<PAGE> 8
2. ReTex
<TABLE>
<CAPTION>
Amount of Amount of
Date Receipt Disbursement Comment
<S> <C> <C> <C>
2/27/97 $ 6,000.00 Rent - Brenham
2/27/97 13,218.25 Settlement/Sale of Equipment
2/27/97 334.95 Sale of scrap material
2/28/97 287.50 Interest
3/3/97 $ 50,494.57 Attorneys fees/Tomlins & Goins
3/19/97 13.43 Check printing charge
3/31/97 247.48 Interest
3/31/97 2,500.00 Tom Negri - consulting fee
3/31/97 6,461.60 Committee Counsel Fees/Chris Heroux, PC
3/31/97 5,363.50 Attorney fees/Crowe & Dunlevy
4/11/97 4,280.00 Rent - Brenham (less charges paid by tenant)
4/30/97 211.31 Interest
5/23/97 38,035.92 Attorneys fees/Tomlins & Goins
5/31/97 187.33 Interest
6/20/97 6,211.20 Rent - Brenham
6/30/97 110.16 Interest
7/31/97 134.14 Interest
Prior
Balance 118,020.90
----------------------------
Total $149,243.22 $102,869.02
=========== ===========
</TABLE>
-28-
<PAGE> 9
3. The Examiner has established a bank account at F&M Bank & Trust Company
and the balance in such account as of July 31, 1997 is $50,273.91. The examiner
has closed a brokerage account at Merrill Lynch.
Respectfully submitted,
---------------------------------------
Neal Tomlins, OBA No. 10499
TOMLINS & GOINS
A Professional Corporation
Utica Plaza Building
2100 South Utica Avenue, Suite 300
Tulsa, Oklahoma 74114
(918) 747-6500
Examiner
-29-
<PAGE> 10
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
FILED
MAR 23 1998
AT_________M
DOROTHY A. EVANS, CLERK
U.S. BANKRUPTCY COURT
NORTHERN DISTRICT OF OKLAHOMA
IN RE: )
)
RECONVERSION TECHNOLOGIES, INC., ) Case No. 95-00821-M
) (Chapter 11)
Debtor. )
)
RECONVERSION TECHNOLOGIES ) (Administratively Consolidated)
OF TEXAS, INC., )
)
Debtor. )
EXAMINER'S FOURTH SCHEDULE
OF RECEIPTS AND DISBURSEMENTS
Neal Tomlins, Examiner for Reconversion Technologies, Inc. ("ReTech")
and Reconversion Technologies of Texas, Inc. ("ReTex"), hereby presents this
Schedule of Cash Receipts and Disbursements for the period July 31, 1997 through
March 15, 1998 as follows:
1. ReTech
<TABLE>
<CAPTION>
Amount of Amount of
Date Receipt Disbursement Comment
---- --------- ------------ -------
<S> <C> <C> <C>
8/4/97 $1,750.00 Rent - Tulsa Storage
8/4/97 250.00 Rent - Tulsa Storage
1/9/98 1,250.00 Rent - Tulsa Storage
3/5/98 $ 500.00 Sale of office furniture
--------- ---------
Prior Balance 3,899.71
--------- ---------
Total $4,399.71 $3,250.00
========= =========
</TABLE>
-30-
<PAGE> 11
2. ReTex
<TABLE>
<CAPTION>
Amount of Amount of
Date Receipt Disbursement Comment
- ---- --------- ------------ -------
<S> <C> <C> <C>
8/12/97 $ 3,000.00 Rent - Brenham
8/29/97 132.78 Interest
9/2/97 2,450.00 Sale of equipment
9/30/97 139.00 Interest
10/31/97 144.46 Interest
11/28/97 140.17 Interest
12/31/97 19,000.00 Attorney fees/Crowe & Dunlevy
12/31/97 143.43 Interest
1/2/98 3,450.00 Committee Counsel Fees/Chris Heroux, PC
1/12/98 27,000.00 Attorneys fees/Tomlins & Goins
1/23/98 3,000.00 Van Dyke & Rankin/Insurance on Brenham Property
1/30/98 32.14 Interest
---------- ----------
Prior balance 46,374.20
---------- ----------
Total $52,556.18 $52,450.00
========== ==========
</TABLE>
3. The Examiner has established a bank account at F&M Bank & Trust
Company and the balance in such account as of March 15, 1998 is $1,255.89. The
examiner has closed a brokerage account at Merrill Lynch.
-31-
<PAGE> 12
Respectfully submitted,
/s/ Neal Tomlins
---------------------------------
Neal Tomlins, OBA No. 10499
TOMLINS & GOINS
A Professional Corporation
Utica Plaza Building
2100 South Utica Avenue, Suite 300
Tulsa, Oklahoma 74114
(918) 747-6500
Examiner
-32-
