U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 01-8929
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
__________________________________________________
(Exact name of small business issuer as specified in its charter)
Nevada 13-3432594
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1408 Pawnee Drive, Las Vegas, Nevada 89102
(Address of principal executive offices) (Zip Code)
(888) 355-8805
(Issuer's telephone number, including area code)
INTERNATIONAL SEMICONDUCTOR CORP.
2950 31st Street, Santa Monica, California 90405
(Former name, former address and former fiscal year,
if changed since last report)
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
The issuer's revenues for its most recent fiscal year were
$0.00. The aggregate market value of the voting stock held by
non-affiliates of the issuer was approximately $2,237,350 as of
October 31, 2000.
The aggregate number of shares outstanding of the Issuer's Common
Stock, its sole class of common equity, was 11,604,118 as of
October 31, 2000.
<PAGE>
PART I
Item 1. Description of Business
(a) Business Development
Sanitary Environmental Monitoring Labs, Inc. (formerly
International Semiconductor Corporation), is a development stage
corporation (the "Company"). The Company was incorporated on
March 13, 1987, under the name "Lewis Resources, Inc." On
September 28, 1993, the Company acquired from Lema Investments,
Ltd. all of the issued and outstanding shares of Gallium Arsenide
Industries, Ltd. ("Gallium Industries" or "GAI"), a development
stage Israeli company, by issuing 3,982,190 shares of its common
stock (after giving effect to the one-to-six reverse split
described below) to Lema Investments, Ltd. in exchange for the
stock of GAI. After sustaining large losses, GAI was
subsequently sold back to its former shareholders on July 1,
1995, primarily for assumption of existing debt. In connection
with the GAI and GAD acquisitions, the board of directors of the
Company increased the number of authorized common shares to
26,000,000, and changed the Company's name from Lewis Resources
to Israel Semiconductor Corp. (effective December 21, 1993), and
later to International Semiconductor Corporation (effective July,
1994). A reverse stock split (6 for 1) was effective for
shareholders of record as of November 30, 1993.
Also in September, 1993, the Company committed to invest in
shares of a newly-founded Israeli development stage company, GAD
Semiconductors, Ltd. ("GAD"). The commitment was in an amount of
up to $1,000,000 and the Company undertook to raise additional
funds by means of commercial banking loans, grants and special
loans which GAD was qualified to receive as a recognized Approved
Enterprise under the Israeli Encouragement of Capital
Investment-1959 Law. Together with the initial investment, the
total investment would aggregate approximately $3,100,000. In
return, GAD issued to the Company 60% of its common stock, par
value $2,033. The major part of the investment, up to the amount
which the Company invested in GAD's shares, was considered as
premium on the shares. In January, 1994, GAD was granted the
status of "Approved Enterprise" by the Israeli Investment Center
in accordance with the Law for the Encouragement of Capital
Investments - 1959. Under the approved capital investment
program, GAD received, during 1994, State guaranteed loans in the
amount of $1,172,962. During, 1995, the Company invested
approximately $860,000 in GAD, primarily in the form of share
capital, with an additional $182,000 tendered during the first
quarter of 1996. The total cumulative Company investment in GAD
was over $1,675,000. Based upon a failure of the minority
shareholders of GAD to meet their investment commitments, the
Company then took control of 80% of the shareholdings of GAD.
However, because of adverse business circumstances during
1996, revenues were not realized sufficient to continue to
operate GAD and to fill orders for the Gallium Arsenide diodes,
resulting in closure of the business in May, 1997. GAD was
placed in liquidation, in Israel, by the relevant authorities,
and all ownership interests of the parent company (its sole
remaining shareholder) were reduced to zero. This has been
accounted for as a relief from liability and caused the company
to record a profit on discontinued operations in 1997.
Also, in 1997, the company settled with its largest then-
existing creditor, Tweed Investments, by issuing 11,300,000
shares of restricted common stock. Subsequently, in March, 1999,
the company effected a 1-for-10 reverse of its issued and
outstanding common stock; in September, 1999, increased its
authorized share capital to 50,000,000 shares and amended its
articles of incorporation to change the company's name. In
April, 2000, the company filed an amendment to effect the change
of its name to "Sanitary Environmental Monitoring Labs, Inc.",
the current corporate name.
After a two-year period of inactivity, lasting until the
summer of 1999, the company's directors identified an opportunity
in the measuring and monitoring of bacterial presence in retail
food service establishments, utilizing testing equipment
manufactured by Merck Kga, of Darmstadt, Germany. This
equipment, marketed under the "Hy-Lite 1" and "Hy-Lite 2"
tradenames, utilizes the ATP (Adenosine TriphosPhate) measurement
technology to quantify the cleanliness of surfaces coming into
contact with food and food services equipment.
The company acquired the rights to the use of the tradename
"SemcoLABs" from a Florida corporation in exchange for 2,650,000
shares of its common stock, issued in February of 2000, and the
assumption of $200,000 in investor debt. The company then
acquired, in May, 2000, an exclusive license from Monaco
Investment Group, Ltd., the sole licensee under Merck's United
States distributor, EM Sciences, in exchange for a minimum sales
commitment during the ensuing 4-year period and the issuance of
4,000,000 shares of restricted stock. This contract is
renewable, at the option of the Company, so long as minimum sales
goals, described in the contract, are met.
Interim funding was acquired in two private placements, the
first, for $62,500 from Mesa, Inc. in February, 2000, by purchase
of 250,000 shares of restricted stock ($0.25 per share), and the
second, for $500,000, occurring June 23, 2000, with Girardi
Financial, for 2,000,000 shares of restricted stock ($0.25 per
share).
Technology Concept:
Existing Product
Equipment for the preparation and processing of foods should
be as clean as possible. If this is not the case, quality
problems or complaints may occur. Beyond this, statutory
requirements, such as the HACCP concept in the United States
("Hazardous Analysis of Critical Control Points"), created for
the NASA Space Program, or the European directive 93/43/EEC, are
also applicable in many countries. These regulations may include
a requirement for a method which allows a rapid examination and
which can verify and document the cleanliness of the equipment
(or the working surface) before the start of food production.
Visual examination may be insufficient because invisible food
residues are not detected. Classical microbiological methods
only provide evidence of micro-organisms and are too slow to
allow a reaction before the start of production or processing.
The Hy-Lite equipment invented by Merck was the first portable
ATP system with a single-shot pen test format. The Hy-Lite 2 is
the latest generation of this system. Measurements, with
results, can be taken in approximately 20 seconds, allowing the
monitoring system (human operator) to assess the cleanliness or
bacterial presence of the surface, utensil, liquid (such as iced
tea), or other test subjects in sufficient time to preclude high
levels of foodborne contamination if the problems are treated
immediately. Common measuring points may be filling equipment,
storage tanks, cutting tables, conveyor belts, rinse water
samples and all points with which the food product has direct
contact.
Evaluation of Measurements
The acceptable level of ATP (bacterial indicator) is
dependant on many factors, such as types of raw materials,
processes applied, material of the surfaces measured and the
"risk" associated with the product (will it be eaten "as is" or
cooked/reheated prior to eating). Will the consumers be healthy
adults or babies, geriatrics or immuno-compromised. Limits for
these various combinations have been determined by Merck and are
continually improved by assimilation of data at the customer's
facility and in other processing applications. The Hy-Lite has
programmed within it "Trend 2" data mining software to allow for
on-site regression analysis of statistical results achieved in
the field.
Manufacturing
The company does not manufacture any of the equipment or the
test tubes utilized in the tests. These are all purchased from
EM Sciences, Merck's distributor in the United States.
Marketing, Sales and Distribution
Business Concept. The marketing program for the company is
based on the concept of providing a service to the retail food
distribution industry. The service is the analysis or "audit" of
a client's bacterial safety, measured at various critical control
points established in concert with the client/customer, or in
compliance with existing monitoring programs already established
by regulatory agencies or self-initiated internal customer
programs. The Company provides comprehensive training and
education to client customers' employees and then provides a
system for measurement of the program's effectiveness.
Marketplace. Proposed national standards, such as the HACCP
program enacted as part of the 1999 food code by the Federal
Government and "suggested" for implementation by the states,
require that food business proprietors comply with the following
obligations:
* have a written food safety program;
* ensure that all food handlers have skills and
competencies in food hygiene matters commensurate with
work activities;
* develop appropriate sanitation programs; and
* provide for the recall of unsafe food as appropriate.
These requirements provide the framework for the basic
services which the company provides: an analysis and testing of
compliance with these requirements. As necessary, the company
will also provide to a client the basic support and consulting
services to establish a program that will satisfy all four of the
requirements outlined above.
The initial target market for the company will be
restaurants, or food service facilities, but the identification
of the presence of bacteria can be of utility to other industries
and applications, such as monitoring cleaning operations for a
"before" and "after" measurement of results. The company has
received proposals, which are under study, to provide services to
firms working in the dairy clean-up market and to carpet cleaning
facilities.
Patent Applications
The company holds no patents and operates the equipment and
the test tube analyses under a license through EM Sciences/Merck.
The company does own the registered trademark "Semcolabs", and
several other uses of the word "Semco" in restaurant testing.
Employees
The company currently has 5 employees and 3 consultants.
Competition
The competition for food service industry compliance
documentation, such as establishment of a HACCP Plan, is intense,
and is not thought to be lucrative by the company's management.
There are numerous individuals and companies offering services in
this area and they are quite capable of timely and cost-effective
rendering of these services.
However, the competition for on-site testing and analysis of
compliance once the HACCP Plans are established, is not as well
entrenched. The company is not aware of any other company
offering monitoring services identical to the Hy-Lite 2 ATP
measurement program, although similar technologies will doubtless
be developed in the coming months and years. Current measurement
technologies generally require a several hour or even several day
delay in provision of results, since these technologies rely upon
laboratory tests at an off-site facility. This on-site, real-
time testing market is the primary target of the company.
Research and Development
The company is not and will not be conducting any research
on improvement of the Hy-Lite ATP technology, but is entitled, by
license, to any improvements made by EM Sciences or Merck, and
has already benefitted by the introduction of the Series 2
machine in replacement of the Series 1 units in the third quarter
of 2000.
Item 2. Description of Properties
The company leases facilities in Boca Raton, Florida, paying
$550.00 per month, on a month-to-month basis. The company also
leases approximately 1800 feet in Las Vegas, Nevada for its
corporate headquarters. As clients or customers are engaged in
certain central geographic areas, the company will lease
additional office space to be located in the vicinity of those
customers.
Item 3. Legal Proceedings
As of December 31, 1997, the Company was not involved in any
direct proceedings, however, GAD, its subsidiary, was in
receivership in Israel. This receivership resulted in total
liquidation of GAD, finally concluded on November 17, 1998.
As of October 31, 2000, the company was involved in a claim
filed by New Directions International, Inc. in Florida, in which
the Company disputed the plaintiff's claim for sums of money
invested in GAD, to be paid by the company (as parent). This is
vigorously disputed and is against the liquidated subsidiary.
The Company's primary exposure is continued legal fees through
trial of the matter on its merits.
Item 4. Submission of Matters to a Vote of Security Holders
During the year 1997, in October, a majority of the then-
existing shareholders voted to accept a compromise of debts with
Tweed Investments, Ltd., issuing 11,300,000 (pre-reverse) shares
in total satisfaction of all claims, at the time amounting to in
excess of $400,000 of funds loaned to the company.
In August of 1999, a majority of the shareholders
tentatively approved a corporate combination with SemcoLABs of
Florida, contemplating a reverse merger, which was later
rescinded for lack of adequate consideration supplied by the
Florida company. In compliance with the terms of this agreement,
the shareholders approved an increase of the authorized share
capital to 50,000,000, which was not rescinded with the reversal
of the merger transaction.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information
Since trading was activated in September, 1993, the
Company's common shares have been traded in the over-the-counter
market and have, until 1999, been quoted in the NASDAQ OTC
Bulletin Board under the symbol "ISSM", commencing October 13,
1993, and changing to "SLBI" on October 5, 1999. The Company's
shares currently trade on the National Quotation Board "pink
sheets", pending filing of current information. The Company's
securities are not publicly traded on any other market.
Set forth below are the high and low "bid" prices for the
Common Stock of the Company for each quarterly period commencing
January 1, 1996 through September 30, 2000:
Fiscal 1996:
First Quarter $0.563 $2.188
Second Quarter $1.125 $3.906
Third Quarter $1.375 $2,625
Fourth Quarter $0.375 $1.875
Fiscal 1997:
First Quarter $0.25 $0.563
Second Quarter $0.02 $0.437
Third Quarter $0.035 $0.16
Fourth Quarter $0.045 $0.145
Fiscal 1998:
First Quarter $0.04 $0.075
Second Quarter $0.03 $0.075
Third Quarter $0.025 $0.08
Fourth Quarter $0.0175 $0.09
Fiscal 1999:
***Reverse effective March 11, 1999 (1-for-10), is reflected
in Second Quarter prices
First Quarter $0.02 $0.02
Second Quarter $0.1875 $0.5625
Third Quarter $0.25 $1.11
Fourth Quarter $0.718 $0.75
Fiscal 2000:
First Quarter $0.125 $0.875
Second Quarter $0.125 $1.60
Third Quarter $0.25 $0.80
Such quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not necessarily
represent actual transactions.
(b) Holders
As of October 1, 2000 there were 596 holders of record and
an estimated 750 additional holders who were beneficial
shareholders of the Company's Common Stock.
(c) Dividends
The Company has not paid any dividends since its inception
and presently anticipates that no dividends will be declared in
the foreseeable future.
Item 6. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company
The Company, during the years 1993 through 1997, primarily
operated through its two subsidiaries, GAI and GAD, both of which
were either sold or liquidated as of second quarter, 1997.
Thereafter, there were no active operations of the company until
1999.
GAD Semiconductors, Ltd.:
The Company's only remaining subsidiary as of December 31,
1996, the beginning of the year covered by this filing, was GAD
Semiconductors, Ltd. ("GAD"), which was incorporated in August,
1993, by a scientist and his associates who had developed a
proprietary technology for a GaAs diode manufacturing process.
Under the agreement with ISC, this process was transferred to GAD
for certain financial assurances. Semtech, Ltd., initially
retained ownership of 40%, later reduced to 10%, of GAD as a
result of this transaction.
GAD was qualified for the Approved Enterprise program by the
Israeli Investment Center, in early 1994. An investment program
in the amount of $2.45 million was approved in favor of GAD by
the Israeli Investment Center in the combined grant and loan
program. GAD applied to the Chief Scientist's office of the MCI
for the qualification of its research and development program for
which the Company would be entitled to up to 60% in grants.
GAD began construction of its manufacturing plant in Migdal
Haemek in mid-1994, completing the facilities construction in
November, and the machinery installation and testing in late
December. When the company was unable to pay its debts in late
1996, the facilities landlord commenced action to have the
company placed in receivership. The on-site management of the
company, in anticipation of this dispute, surrendered the
facilities to the landlord, tendered all keys, and shut the
facilities down, pending distribution of any assets through the
liquidation process.
During the second quarter of 1997, GAD's assets and
liabilities were supervised by the liquidation process in Israel,
resulting in a total removal of GAD from the activities and
financial reporting for the Company (Sanitary Environmental
Monitoring Labs, Inc.).
RESULTS OF OPERATIONS
Sanitary Environmental Monitoring Labs, Inc. (formerly ISC)
has been a development stage Company since its inception and
has incurred general and administrative, financing, marketing and
start-up expenses in increasing amounts as GAI was attempting to
enter its production and selling phase prior to its sale in 1995,
and during GAD's construction of its production facility, test
runs and initial attempts to deliver product. Through December
of 1995 GAD had gross sales of $69,617, and in fiscal 1996, GAD
delivered an additional $21,906 in product. No product was
delivered in 1997.
During 1997, the Company incurred a loss of $233,128 in
actual operations, plus $144,817 in interest expense, and secured
a gain of $975,019 by discontinuing the operations of GAD and
therefore being relieved of the consolidated indebtedness.
Combined, the Company had a resultant financial income of
$1,145,058 ($0.75 per share) in 1997, compared to a loss of
$3,271,877 ($0.39 per share), during the operating period of
1996.
From the date of its inception to the end of 1997, the
Company had an accumulated loss of $7,777,260, causing a capital
deficit of the same amount.
CAPITAL RESOURCES AND LIQUIDITY
During the first and second quarters of 1997, funds were
obtained entirely from investment by shareholders in the amount
of $565,625, obtained through the issuance of convertible
promissory notes or actual common shares in satisfaction of
notes. These conversions eliminated the total outstanding
liability to Tweed Investments of $399,273.94, this debt being
converted into equity on October 1, 1997.
During the first quarter of 1997, Karlin Investments
converted $100,000 of its credit into 425,755 shares of common
stock of the company, and loaned the company an additional
$100,000 on February 20, 1997. This subsequent loan was
converted into 2,640,956 shares of common stock in the second
quarter of 1997, and a final $43,000 of Karlin's investment was
converted into 1,448,224 shares during the third quarter of 1997.
No Karlin debt remained.
On May 15, 1997, the Company formally adopted a plan to
discontinue its operations in Israel (the GAD activities), and
surrendered all assets, which consisted primarily of property and
equipment, to creditors. Based on the company's estimates, the
estimated gain on the disposal of GAD was $975,019, measured as
the balance of outstanding liabilities removed in excess of asset
values carried on the company's books.
During the period from January 1, 1997 through cessation of
operations on May 15, 1997, the Company had $0.00 in revenues.
The company reported income from discontinued operations after
writing off all operating assets and liabilities related to GAD
and expensing all advances made by the company on behalf of GAD.
Subsequent Events:
On March 11, 1999, a reverse stock split of 1-for-10 was
effected and all subsequent issuances of shares reflect that
change.
On February 8, 2000, the company issued 150,000 shares of
common stock to the company's attorney in settlement of
outstanding payables of $15,000. On February 10, 2000, the
company issued 2,650,000 shares of common stock in exchange for
all of the outstanding stock of Semco Bio-Vision, Inc. This
transaction was recorded using the purchase method of accounting.
On February 12, 2000, the company issued 500,000 option
rights for $0.25 per share, expiring in February 12, 2003, to
officers of the company. The company approved a private
placement offering for $250,000, ultimately raising only $62,500
by issuance of 250,000 shares ($0.25 per share) and 250,000
warrants to acquire further shares, exercisable at $1.00 per
share and expiring 3 years hence.
On February 12, 2000, the company entered into a deferred
compensation agreement with an officer of the company. The
agreement was a two-year contract for $12,000 per month in
compensation. The company modified this agreement on September
15, 2000 and the new agreement stipulates that the officer is to
receive $85,000 a year, $5,000 payable monthly and the remaining
$25,000 deferred to subsequent periods.
On February 15, 2000, the company agreed to a sub-license
agreement with Monaco Investment Group, Ltd., in exchange for
4,000,000 restricted common shares, for the exclusive U.S.
distribution rights to Hy-Lite 2 equipment. The agreement
requires the company to purchase a minimum dollar amount of Hy-
Lite machines and/or test tubes on an annual basis: in Year 1
the company is required to purchase $115,200; in Year 2,
$384,000; in Year 3, $768,000 and in Year 4, $1,536,000.
On February 24, 2000, the company granted an officer
1,000,000 option rights to purchase shares at $0.25 per share.
The vesting schedule permits the officer to acquire 40,000 shares
a month and the options expire after three years.
On June 23, 2000, the company entered into a subscription
agreement for 2,000,000 shares of common stock at $0.25 per
share. The agreement was tendered in the form of $150,000 cash
and $350,000 in secured promissory notes receivable which became
payable upon the completion of due diligence. That period
expired on October 15, 2000, at which point the company had
received all of the sums due.
CONTINGENCIES AND COMMITMENTS
The recent placement of $350,000 provided sufficient funding
for the company to act on its business plan for the foreseeable
12-month period. During September of 2000, the company entered
into contracts with WalMart for training of up to 1200 of its
management employees in SafeServe food safety certification.
Revenues from this contract should exceed the expenses incurred
for the remainder of the fourth quarter of 2000.
Item 7. Financial Statements
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(Formerly International Semiconductor Corp.)
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 1997
<PAGE>
CONTENTS
Balance Sheet
Statement of Operations
Statement of Changes in Shareholders' Equity
Statement of Cash Flows
Notes to the Financial Statements
Schedules for Audited Statements of 1997-1998
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(Formerly International Semiconductors Corp)
(A Development Stage Company)
AUDITED
CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996
Year Year
Ended Ended
December 31 December 31
1997 1996
Revenues
Sales $ 0 $ 21,906
Expenses
Start-up Expenses $ 0 $ 0
Research and Development 0 133,540
Marketing Expenses 0 301,604
General and Administrative 88,311 835,256
Financing and Expenses 144,817 101,356
Loss from Sale of Subsidiary 0 0
Total Expenses 233,128 1,371,756
Extraordinary Items:
Loss on Conversion of Debt 0 (1,922,027)
Income from disposed operations
of GAD (net of tax of $0) 79,701 0
Estimated gain on disposal of
GAD (net of tax of $0) 975,019 0
(Loss)/income before extra-
ordinary items 821,952 (3,271,877)
Gain on extinguishment of
debt (Note 8) 323,466 0
Net Income (loss) 1,145,058 (3,271,877)
Accumulated Deficit, Begin (8,988,692) (5,716,815)
Accumulated Deficit, Ending (7,843,634) (8,988,692)
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(Formerly International Semiconductors Corp)
(A Development Stage Company)
AUDITED
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Year
Ended Ended
December 31 December 31
1997 1996
Cash Flows from Operating Activities
Net (loss) $ 1,145,058 $(3,291,899)
Reconciliation of Net Loss to
Net Cash Used by Operating
Activities 1,269,176
Accounts Receivable 9,360
Other Receivables 10,000
Inventory 15,000
Prepaid expense 1.990
Increase (Decrease) in:
Accounts payable (74,000)
Due to related party 56,825
Severance payable (76,049)
Other payables (39,455)
Disposal of discontinued operations) (975,019)
Extraordinary Gain (323,466)
Net Cash Used by Operating Activities ( 249,486) (2,022,723)
Cash Flows From Investing Activities
Investment in Fixed Assets 0 ( 85,867)
Decrease (increase in Short-Term
Bank Deposit 0 0
Loans to Related Parties 0 ( 0)
Net Cash Used by Investing Activities 0 ( 85,867)
Cash Flows from Financing Activities
Issue of Shares 50,000 382,000
Receipt of Long-Term Loans 200,000 1,524,668
Repayment of Long-Term Loans 0 ( 7,145)
Receipt of Loans from Related Parties 0 209,274
Net Cash Provided by Financing Activities 250,000 2,108,797
Net increase (Decrease) in Cash and
Cash Equivalents 514 207
Cash and Cash Equivalents at
Beginning of period 207 0
Cash and Cash Equivalents at End
of Period 721 207
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(Formerly International Semiconductors Corp)
(A Development Stage Company)
AUDITED
CONSOLIDATED BALANCE SHEET
December 31 December 31
1997 1996
Note US Dollars
ASSETS
Current Assets
Cash and cash equivalents 721 207
Short-term bank deposits 0 0
Related parties (ITG) 0 29,869
Accounts Receivable 0 19,630
Inventories 0 15,000
Pre-paid expenses 0 1,990
Fixed Assets 3 721 1,699,745
(accumulated depreciation) (387,352)
Total Assets: 721 1,379,089
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Short-term credit from banks 0 611,424
Short-term loans from
related parties (Karlin) 5,9 26,956 100,000
Suppliers 0 184,272
Other accounts payable 11 14,601 88,601
41,557 984,297
Long-term Liabilities
Long-term loans 12 0 1,675,988
Accrued expenses (Tweed) 8 0 389,274
Liability for Severance pay 13 0 76,049
Commitments and Contingencies 0 2,141,311
Ordinary Shares - $.001 par value;
authorized - 26,000,000 shares and
26,000,000; issued and outstanding
9,723,333 shares and
2,553,827 shares (post-reverse) 25,538 9,723
Premium on Shares 7,777,260 7,232,450
Accumulated loss during
development stage (7,843,634) (8,988,692)
Total Stockholders deficit (40,836)
Total Liabilities and Equity 721 1,379,089
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(Formerly International Semiconductors Corp)
(A Development Stage Company)
UNAUDITED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
Share-
Ordinary shares Premium Accumulated Holders
Number Amount On Shares Loss Equity
US Dollars
Balance as of
December 31, 1994 5573911 5574 2915907 (2984490) ( 63009)
Issue of shares
in 1995 2890000 2890 1535235 0 1538125
Net loss for the
year ended
Dec 31, 1995 0 0 0 (2732325) (2732325)
Balance as of
December 31, 1995 8142390 8142 4451142 (5716815) (1257209)
Total for issue of
shares in 1996 1580943 1581 1310557 0 2782567
Net loss for year
ended 31 Dec 96 0 0 0 (3271877) (3271877)
Balance as of
December 31, 1996 9723333 9723 7232450 (8988692) (1746519)
Total for issue of
shares in 1997 1581494 15815 5448100
Net Income - 1997 0 0 0 1145058 1145058
Balance as of
December 31, 1997 2553827 25538 7777260 (7843634) ( 40836)
======= ==== ======= ======= =======
Restated to show
effect of 1-for-10
reverse (1999) 2553827 25538 7777260 (7843634) ( 40836)
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(FORMERLY INTERNATIONAL SEMICONDUCTOR CORP.)
(A Nevada Corporation)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 and 1996
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Company Organization
--------------------
Sanitary Environmental Monitoring Labs, Inc. (Formerly
SemcoLabs, Inc. and formerly International Semiconductor
Corp.) referred to as (the "Company") was organized in 1987,
initially as an inactive publicly held corporation pursuing
business acquisitions. In September 1993, the Company
invested in a newly founded Israeli development stage
company, G.A.D. Semiconductors Limited, hereinafter referred
to as ("GAD"). On May 15, 1997 the Company's board of
directors formally adopted a plan to abandon operations in
Israel and discontinued further financial support GAD. (See
Note 3 - Discontinued Operations) The Company continues to
pursue business acquisitions.
On September 10, 1999 the Company changed its name to
"SemcoLabs, Inc." and on April 10, 2000 the Company changed
its name to "Sanitary Environmental Monitoring Labs, Inc."
The effects of these changes were reflected in these
financial statements.
Accounting Method
-----------------
The Company maintains its books and records utilizing
accrual accounting. The accrual method recognizes income
when earned and expenses when incurred.
Principles of Consolidation
---------------------------
The Company prepares its financial statements consolidated
with subsidiaries if the Company owns 50% or more of the
subsidiary's outstanding voting stock. The Company will
prepare its financial statements on the equity method when
the interest is between 20% and 50%, or when the interest
exceeds 50%, but expectation for maintaining a controlling
interest is temporary. On investments of less than 20% the
Company will present the investment at cost.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments
purchased with original maturities of three months or less
to be cash equivalents.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires the
Company to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of
the financial statements and the reported revenues and
expenses during the reporting period. Actual results may
differ from those estimates.
Earnings/(Loss) Per Share
-------------------------
Earnings/(Loss) per share were computed by dividing income
or loss available to common stockholders by the
weighted-average number of shares outstanding during the
year.
NOTE 2 GOING CONCERN
-------------
The Company's continued existence is in doubt. The Company
had no operating revenues in 1997 or 1998 and as of December
31, 1997 the Company did not own any assets that would
generate operating revenues.
Management believes that the disposal of GAD, See Note 3 -
Discontinued Operations, will allow the Company to pursue
other business acquisitions that will result in operating
revenues and profit. The Company's plans for continuing as
a going concern rely on loans from and contributions of
capital by current shareholders and with issuances of
additional stock through private placements.
NOTE 3 DISCONTINUED OPERATIONS
-----------------------
On May 15, 1997, the Company formally adopted a plan to
discontinue its operations in Israel, GAD, and surrender all
assets, which consisted primarily of property and equipment,
to creditors. Based on the Company's estimates the estimated
gain on the disposal of GAD (net of income tax) is $975,019
because the Company sold GAD for $2,276,000 the balance of
the outstanding liabilities and this balance exceeded the
asset values on the date of disposal.
Operating results of GAD for the four and half months ended
May 15, 1997 were segregated from continuing operations and
are shown separately on the accompanying statement of
operations. During the period ended May 15, 1997 the
Company had $0 operating revenues. The Company reported
income from discontinued operations after writing off all
operating assets and liabilities related to GAD and
expensing all advances made by the Company on behalf of GAD.
As of the financial statement date all assets and
liabilities of GAD were eliminated from the balance sheet.
NOTE 4 INCOME TAXES
------------
The Company files its tax returns using the same accounting
method as it does for financial statement reporting. The
Company has unused net operating losses carried forward from
inception estimated at $9,000,000. Based on estimated future
income tax rates (30%) these NOL's would result in a
deferred tax benefit of $2,700,000. Management established a
valuation allowance equal to the potential benefit of NOL's
based on the likelihood that the carryforwards would expire
prior to utilization. Based on these assumptions a
provision of $0 for 1997 and 1998 is in included in these
statements. Subsequent to December 31, 1999 the Company was
involved in a merger (See Note 10 - Subsequent Events) The
merger created a change in control that may limit future
benefits.
NOTE 5 CONVERTIBLE DEBENTURES
----------------------
During 1996 and 1997 the Company issued $100,000 and
$200,000 respectively, in convertible debentures. During
1997, the Company converted the debt into 442,403 shares
(after giving effect to the 1-for-10 reverse in 1999) of
common stock valued at 75% of the current market prices and
no gain or loss was recognized in accordance with the
Company's election to implement early EITF 98-5, Accounting
for Convertible Securities With Beneficial Features or
Contingently Adjustable Conversion Ratios. The difference
of $100,000 was charged to interest expense in 1997.
NOTE 6 PRIVATE PLACEMENT OF COMMON STOCK
---------------------------------
On January 9, 1997 the Company board of directors authorized
and executed a private placement of 9,091 common shares at
$5.50 (post-reverse) per share. The stock issuance resulted
in an increase of $50,000 to common stock.
NOTE 7 SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
Supplemental cash flow information: 1998 1997
---- ----
Cash paid for income taxes $ 0 $ 0
==== ====
Cash paid for interest expense $ 0 $ 0
==== ====
Schedule of non-cash investing and financing activities:
In 1997, the Company issued 442,403 common shares in
exchange for $300,000 in previously issued convertible
debentures and $100,000 in accrued interest.
In 1997, the Company issued 1,130,000 shares of common
stock valued at $110,625 in exchange for $389,274 of
debt and $44,817 of accrued interest, resulting in an
extraordinary gain on extinguishment of debt (See Note
8 - Extraordinary Item).
NOTE 8 EXTRAORDINARY ITEM
------------------
During 1997, the Company extinguished $434,091 in Tweed
liabilities for 1,130,000 common shares valued at $110,625.
The transaction resulted in an extraordinary gain of
$323,466 $0.21 per share, net of income tax.
NOTE 9 RELATED PARTY TRANSACTIONS
--------------------------
The Company in 1997 and 1998 had accrued expenses of $53,956
and $26,956, respectively, due to a ITG a related entity,
30% owned by a shareholder and officer of the Company. The
Company leased office space from ITG during 1998 and 1999 on
a month to month basis. Monthly rent expense is $2,250 plus
overhead. Total office and overhead expenses charged by ITG
during 1998 and 1997 were $27,000 each year. Future minimum
lease payments as of December 31, 1998 for each of the next
five years is $27,000 each year
The Company converted $434,091 in debt and interest owed to
a shareholder of the Company into 1,130,000 common shares at
conversions rates below current market values, the Company
accounted for this transaction in accordance with FASB 15,
Accounting by Debtors and Creditors for Troubled Debt
Restructurings. The conversion resulted in an extraordinary
gain of $323,466 on the Company's statement of operations.
See Note 8 - Extraordinary Item
The Company converted $300,000 in convertible debentures and
interest owed to a shareholder into 442,403 common shares at
a conversion rate of 75% of market value. See Note 5 -
Convertible Debentures.
NOTE 10 SUBSEQUENT EVENTS
-----------------
The Company's board of directors authorized, on March 11,
1999, a reverse stock split of 10 for 1. The effect of this
change was recorded on these financial statements.
On February 8, 2000 the Company issued 150,000 shares of
common stock to the Company's attorney in settlement of
outstanding payables of $15,000.
On February 10, 2000 the Company issued 2,650,000 shares of
common stock in exchange for all the outstanding stock of
Semco Biovision, Inc. ("Biovision"). The transaction will
be recorded using the purchase method of accounting.
On February 12, 2000 the Company issued 500,000 option
rights for $0.25 per share, expiring in February 12, 2003 to
officers of the Company.
On February 12, 2000 the Company approved a private
placement offering for $250,000 by issuance of 1,000,000
shares of restricted stock with warrants to purchase an
additional 1,000,000 shares at $1.00 per share. The
warrants expire three years from the date of issue. As of
August 18, 2000 only 250,000 shares for $62,500 were issued.
The Company has now closed the offering.
On February 12, 2000 the Company entered into a deferred
compensation agreement with an officer of the Company. The
agreement was a two year contract for $12,000 a month in
compensation. The Company modified this agreement on
September 15, 2000 and the new agreement stipulates that the
officer is to receive $85,000 a year, $5,000 payable monthly
and the remaining $25,000 deferred to subsequent periods.
On February 15, 2000 the Company agreed to a sub-license
agreement with Monaco Investments Group, Ltd. in exchange
for 4,000,000 restricted common shares for the distribution
rights to Hy-Liter II, an environmental testing machine.
The agreement requires the Company to purchase a minimum
amount of Hy-Liters on an annual basis. In Year 1 the
Company is required to purchase $115,200, $384,000 in Year
2, $768,000 in Year 3, and $1,536,000 in Year 4.
On February 24, 2000 the Company granted an officer
1,000,000 option rights to purchase shares at $0.25 per
share. The vesting schedule permits the officer to acquire
40,000 shares a month and the options expire after three
years.
On June 23, 2000 the Company entered into a subscription
agreement for 2,000,000 shares of common stock at $0.25 per
share. The agreement was tendered in the form of $150,000
cash and a $350,000 note receivable which will become
payable upon the completion of due diligence. If the
Company does not meet the covenants of the agreement then
the note receivable will be voided and the issued shares
will remain issued and outstanding. As of October 31, 2000
all funds have been received.
NOTE 11 - OTHER ACCOUNTS PAYABLE
December 31,
1996
U.S. Dollars
Taxes Payable 2,370
Employees and provisions
for salary-related expenses 66,406
Other accounts payable 19,825
88,601
=======
NOTE 12 - LONG TERM LOANS
All items characterized as long term loans are from Israeli
banks, and are payable by GAD, not by the Company, and have
subsequently been eliminated with the liquidation of GAD by
the Israeli insolvency laws.
NOTE 13 - LIABILITY FOR SEVERANCE PAY
The liability of the Company and its subsidiaries for
severance pay to their employees, calculated at one month
salary per year of service, pursuant to Israeli laws, is
covered partly by premiums paid to an insurance company and
partly by accrual. The amounts maintained with the
insurance company are not under the control of the Company
and, accordingly, such amounts, and the liability they
cover, are not reflected in the financial statements.
<PAGE>
1997 - 1998 AUDITED MATERIALS
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
of Sanitary Environmental Monitoring Labs, Inc.
(Formerly International Semiconductor Corp.)
Long Beach, California
I have audited the accompanying balance sheets of Sanitary
Environmental Monitoring Labs, Inc. (Formerly International
Semiconductor Corp.) (A Nevada Corporation) as of December 31,
1998 and 1997 and the related statements of operations, cash
flows, and changes in stockholders' deficit for the years then
ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion
on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audits 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. I believe that my
audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to in the first
paragraph present fairly, in all material respects, the financial
position of Sanitary Environmental Monitoring Labs, Inc.
(Formerly International Semiconductor Corp.) as of December 31,
1998 and 1997 and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
The accompanying financial statements were prepared assuming the
Company will continue as a going concern. As discussed in Note 2
to the financial statements, the Company had no operating
revenues in 1998 or 1997 and as of December 31, 1998 did not own
any assets that could generate operating revenues. These
conditions raise substantial doubt about its ability to continue
as a going concern. Management's plans regarding those matters
are described in Note 2, Going Concern. The financial statements
do not include any adjustments that might result from the outcome
of this uncertainty.
SKEEHAN & COMPANY
Pasadena, California
August 18, 2000
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(FORMERLY INTERNATIONAL SEMICONDUCTOR CORP.)
(A Nevada Corporation)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
1998 1997
------------ ------------
Current Assets
Cash $ 721 $ 721
------------ ------------
Total Current Assets 721 721
------------ ------------
Total Assets $ 721 $ 721
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
1998 1997
------------ ------------
Current Liabilities
Accounts payable $ 20,354 14,601
Due to related party (Note 9) 53,956 26,956
------------ ------------
Total Current Liabilities 74,310 41,557
------------ ------------
Total Liabilities 74,310 41,557
------------ ------------
Stockholders' Deficit
Common stock, no par value,
authorized 50,000,000
shares, issued and
outstanding: 2,553,827
in 1998 and 1997. 25,538 25,538
Additional paid in capital 7,777,260 7,777,260
Accumulated deficit (7,876,387) (7,843,634)
------------ ------------
Total Stockholders' Deficit (73,589) (40,836)
------------ ------------
Total Liabilities and
Stockholders' Deficit $ 721 $ 721
============ ============
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(FORMERLY INTERNATIONAL SEMICONDUCTOR CORP.)
(A Nevada Corporation)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------- ------------
Revenues: $ 0 $ 0
Operating Expenses:
General and
administrative (Note 9) 32,753 88,311
------------- ------------
(Loss) from Operations (32,753) (88,311)
Other Expense:
Interest expense (Note 5) 0 (144,817)
------------- ------------
(Loss) Before Income Taxes (32,753) (233,128)
Provision for income
taxes (Note 4) 0 0
------------- ------------
(Loss) Before Discontinued
Operations (32,753) (233,128)
Discontinued Operations (Note 3):
Income from disposed operations of GAD
(Net of tax of $0) 0 79,701
Estimated gain on disposal of GAD
(Net of tax of $0) 0 975,019
------------- ------------
(Loss)/Income Before
Extraordinary Item (32,753) 821,592
Extraordinary item - gain on
extinguishment of debt
(net of tax of $0) (Note 8) 0 323,466
------------- ------------
Net (Loss)/Income $ (32,753) $ 1,145,058
============= ============
Earnings Per Common Share:
(Loss) From Operations Before
Discontinued Operations
and Extraordinary Item $ (0.01) $ (0.15)
Discontinued Operations 0.00 0.69
Extraordinary Item 0.00 0.21
------------- ------------
Net (Loss)/Income $ (0.01) $ 0.75
============= ============
Weighted-Average Number of Common Shares
Outstanding Used in Basic
EPS Calculation 2,553,827 1,520,718
============= ============
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(FORMERLY INTERNATIONAL SEMICONDUCTOR CORP.)
(A Nevada Corporation)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------- ------------
Operating Activities:
Net Loss/Income $ (32,753) $ 1,145,058
Adjustments to Reconcile Net Loss/Income to
Cash Used in Operating Activities:
(Increase) Decrease in:
Accounts receivable 0 9,630
Other receivables 0 10,000
Inventory 0 15,000
Prepaid expense 0 1,990
Increase (Decrease) in:
Accounts payable 5,753 (74,000)
Due to related party 27,000 56,825
Severance payable 0 (76,049)
Other payables 0 (39,455)
Disposal of discontinued operations 0 (975,019)
Extraordinary gain 0 (323,466)
------------- -------------
Cash Used in Operating Activities 0 (249,486)
------------- -------------
Financing Activities:
Proceeds from sale of common stock 0 50,000
Proceeds from loans 0 200,000
------------- -------------
Cash Provided By Financing Activities 0 250,000
------------- -------------
Net Increase in Cash 0 514
Beginning Cash 721 207
------------- -------------
Ending Cash $ 721 $ 721
============= =============
<PAGE>
<TABLE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(FORMERLY INTERNATIONAL SEMICONDUCTOR CORP.)
(A Nevada Corporation)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<S> <C> <C> <C> <C> <C>
Common Stock APIC Accumulated Stockholders'
Shares Amount Amount (Deficit) (Deficit)
------------ --------- ------------ ------------- --------------
Balance December
31, 1996 972,333 $ 9,723 $ 7,232,450 $(8,988,692) $(1,746,519)
Conversion of debt to
common shares 1,572,403 15,724 494,901 510,625
Sale of common shares 9,091 91 49,909 50,000
Net Income - 1997 1,145,058 1,145,058
------------ --------- ------------ ------------- --------------
Balance December
31, 1997 2,553,827 $ 25,538 $ 7,777,260 $(7,843,634) $ (40,836)
Net loss - 1998 (32,753) (32,753)
------------ --------- ------------ ------------- --------------
Balance December
31, 1998 2,553,827 $ 25,538 $ 7,777,260 $(7,876,387) $ (73,589)
============ ========= ============ ============= ==============
</TABLE>
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(FORMERLY INTERNATIONAL SEMICONDUCTOR CORP.)
(A Nevada Corporation)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Company Organization
--------------------
Sanitary Environmental Monitoring Labs, Inc. (Formerly
SemcoLabs, Inc. and formerly International Semiconductor
Corp.) hereinafter referred to as (the "Company") was
organized in 1987, initially as an inactive publicly held
corporation pursuing business acquisitions. In September
1993, the Company invested in a newly founded Israeli
development stage company, G.A.D. Semiconductors Limited,
hereinafter referred to as ("GAD"). On May 15, 1997 the
Company's board of directors formally adopted a plan to
abandon operations in Israel and discontinued further
financial support GAD. (See Note 3 - Discontinued
Operations) The Company continues to pursue business
acquisitions.
On September 10, 1999 the Company changed its name to
"SemcoLabs, Inc." and on April 10, 2000 the Company changed
its name to "Sanitary Environmental Monitoring Labs, Inc."
The effects of these changes were reflected in these
financial statements.
Accounting Method
-----------------
The Company maintains its books and records utilizing
accrual accounting. The accrual method recognizes income
when earned and expenses when incurred.
Principles of Consolidation
---------------------------
The Company prepares its financial statements consolidated
with subsidiaries if the Company owns 50% or more of the
subsidiary's outstanding voting stock. The Company will
prepare its financial statements on the equity method when
the interest is between 20% and 50%, or when the interest
exceeds 50%, but expectation for maintaining a controlling
interest is temporary. On investments of less than 20% the
Company will present the investment at cost.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments
purchased with original maturities of three months or less
to be cash equivalents.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires the
Company to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of
the financial statements and the reported revenues and
expenses during the reporting period. Actual results may
differ from those estimates.
Earnings/(Loss) Per Share
-------------------------
Earnings/(Loss) per share were computed by dividing income
or loss available to common stockholders by the
weighted-average number of shares outstanding during the
year.
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(FORMERLY INTERNATIONAL SEMICONDUCTOR CORP.)
(A Nevada Corporation)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 GOING CONCERN
-------------
The Company's continued existence is in doubt. The Company
had no operating revenues in 1997 or 1998 years and as of
December 31, 1998 the Company did not own any assets that
would generate operating revenues.
Management believes that the disposal of GAD, See Note 3 -
Discontinued Operations, will allow the Company to pursue
other business acquisitions that will result in operating
revenues and profit. The Company's plans for continuing as
a going concern rely on loans from and contributions of
capital by current shareholders and with issuances of
additional stock through private placements.
NOTE 3 DISCONTINUED OPERATIONS
-----------------------
On May 15, 1997, the Company formally adopted a plan to
discontinue its operations in Israel, GAD, and surrender all
assets, which consisted primarily of property and equipment,
to creditors. Based on the Company's estimates the estimated
gain on the disposal of GAD (net of income tax) is $975,019
because the Company sold GAD for $2,276,000 the balance of
the outstanding liabilities and this balance exceeded the
asset values on the date of disposal.
Operating results of GAD for the four and half months ended
May 15, 1997 were segregated from continuing operations and
are shown separately on the accompanying statement of
operations. During the period ended May 15, 1997 the
Company had $0 operating revenues. The Company reported
income from discontinued operations after writing off all
operating assets and liabilities related to GAD and
expensing all advances made by the Company on behalf of GAD.
As of the financial statement date all assets and
liabilities of GAD were eliminated from the balance sheet.
NOTE 4 INCOME TAXES
------------
The Company files its tax returns using the same accounting
method as it does for financial statement reporting. The
Company has unused net operating losses carried forward from
inception estimated at $9,000,000. Based on estimated future
income tax rates (30%) these NOL's would result in a
deferred tax benefit of $2,700,000. Management established a
valuation allowance equal to the potential benefit of NOL's
based on the likelihood that the carryforwards would expire
prior to utilization. Based on these assumptions a
provision of $0 for 1997 and 1998 is in included in these
statements. Subsequent to December 31, 1999 the Company was
involved in a merger (See Note 10 - Subsequent Events) The
merger created a change in control that may limit future
benefits.
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(FORMERLY INTERNATIONAL SEMICONDUCTOR CORP.)
(A Nevada Corporation)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 5 CONVERTIBLE DEBENTURES
----------------------
During 1996 and 1997 the Company issued $100,000 and
$200,000 respectively, in convertible debentures. During
1997, the Company converted the debt into 442,403 shares of
common stock valued at 75% of the current market prices and
no gain or loss was recognized in accordance with the
Company's election to implement early EITF 98-5, Accounting
for Convertible Securities With Beneficial Features or
Contingently Adjustable Conversion Ratios. The difference
of $100,000 was charged to interest expense in 1997.
NOTE 6 PRIVATE PLACEMENT OF COMMON STOCK
---------------------------------
On January 9, 1997 the Company board of directors authorized
and executed a private placement of 9,091 common shares at
$5.50 per share. The stock issuance resulted in an increase
of $50,000 to common stock.
NOTE 7 SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
Supplemental cash flow information: 1998 1997
---- ----
Cash paid for income taxes $ 0 $ 0
==== ====
Cash paid for interest expense $ 0 $ 0
==== ====
Schedule of non-cash investing and financing activities:
In 1997, the Company issued 442,403 common shares in
exchange for $300,000 in previously issued convertible
debentures and $100,000 in accrued interest.
In 1997, the Company issued 1,130,000 shares of common
stock valued at $110,625 in exchange for $389,274 of
debt and $44,817 of accrued interest, resulting in an
extraordinary gain on extinguishment of debt (See Note
8 - Extraordinary Item).
NOTE 8 EXTRAORDINARY ITEM
------------------
During 1997, the Company extinguished $434,091 in Tweed
liabilities for 1,130,000 common shares valued at $110,625.
The transaction resulted in an extraordinary gain of
$323,466 $0.21 per share, net of income tax.
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(FORMERLY INTERNATIONAL SEMICONDUCTOR CORP.)
(A Nevada Corporation)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 9 RELATED PARTY TRANSACTIONS
--------------------------
The Company in 1997 and 1998 had accrued expenses of $53,956
and $26,956, respectively, due to a ITG a related entity,
owned by a shareholder and officer of the Company. The
Company leased office space from ITG during 1998 and 1999 on
a month to month basis. Monthly rent expense is $2,250 plus
overhead. Total office and overhead expenses charged by ITG
during 1998 and 1997 were $27,000 each year. Future minimum
lease payments as of December 31, 1998 for each of the next
five years is $27,000 each year
The Company converted $434,091 in debt and interest owed to
a shareholder of the Company into 1,130,000 common shares at
conversions rates below current market values, the Company
accounted for this transaction in accordance with FASB 15,
Accounting by Debtors and Creditors for Troubled Debt
Restructurings. The conversion resulted in an extraordinary
gain of $323,466 on the Company's statement of operations.
See Note 8 - Extraordinary Item
The Company converted $300,000 in convertible debentures and
interest owed to a shareholder into 442,403 common shares at
a conversion rate of 75% of market value. See Note 5 -
Convertible Debentures.
NOTE 10 SUBSEQUENT EVENTS
-----------------
The Company's board of directors authorized, on March 11,
1999, a reverse stock split of 10 for 1. The affect of this
change was recorded on these financial statements.
On February 8, 2000 the Company issued 150,000 shares of
common stock to the Company's attorney in settlement of
outstanding payables of $15,000.
On February 10, 2000 the Company issued 2,650,000 shares of
common stock in exchange for all the outstanding stock of
Semco Biovision, Inc. ("Biovision"). The transaction will
be recorded using the purchase method of accounting.
On February 12, 2000 the Company issued 500,000 option
rights for $0.25 per share, expiring in February 12, 2003 to
officers of the Company.
On February 12, 2000 the Company approved a private
placement offering for $250,000 by issuance of 1,000,000
shares of restricted stock with warrants to purchase an
additional 1,000,000 shares at $1.00 per share. The
warrants expire three years from the date of issue. As of
August 18, 2000 only 250,000 shares for $62,500 were issued.
The Company has now closed the offering.
On February 12, 2000 the Company entered into a deferred
compensation agreement with an officer of the Company. The
agreement was a two year contract for $12,000 a month in
compensation. The Company modified this agreement on
September 15, 2000 and the new agreement stipulates that the
officer is to receive $85,000 a year, $5,000 payable monthly
and the remaining $25,000 deferred to subsequent periods.
<PAGE>
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
(FORMERLY INTERNATIONAL SEMICONDUCTOR CORP.)
(A Nevada Corporation)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 10 SUBSEQUENT EVENTS CONTINUED
---------------------------
On February 15, 2000 the Company agreed to a sub-license
agreement with Monaco Investments Group, Ltd. in exchange
for 4,000,000 restricted common shares for the distribution
rights to Hy-Liter II, a environmental testing machine. The
agreement requires the Company to purchase a minimum amount
of Hy-Liters on an annual basis. In Year 1 the Company is
required to purchase $115,200, $384,000 in Year 2, $768,000
in Year 3, and $1,536,000 in Year 4.
On February 24, 2000 the Company granted an officer
1,000,000 option rights to purchase shares at $0.25 per
share. The vesting schedule permits the officer to acquire
40,000 shares a month and the options expire after three
years.
On June 23, 2000 the Company entered into a subscription
agreement for 2,000,000 shares of common stock at $0.25 per
share. The agreement was tendered in the form of $150,000
cash and a $350,000 note receivable which will become
payable upon the completion of due diligence. If the
Company does not meet the covenants of the agreement then
the note receivable will be voided and the issued shares
will remain issued and outstanding. As of the August 18,
2000 the transaction is still pending.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There are no current disagreements with the accountants
concerning the presentation of the financial information required
under U.S. financial reporting standards. The board of directors
selected the firm of Skeehan & Co. on September 24, 1996,
replacing BDO Bavly Milner & Co. (an Israeli firm), to be its
auditing firm, which was duly reported on Form 8-K. There were
no disagreements with the previous firm.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act
(a) Directors and Executive Officers of the Company
The following table provides information concerning each
executive officer and director of the Company:
Name Age Title
Robert M. Terry 70 Chairman of the Board/CEO
Toni Gales 54 Secretary
Thomas Hanson 68 President/Director
Gary Rosen 54 COO, Director
David Goldstein 54 Director
Meredith Russell 55 Director
Don Karas 60 Exec Vice President/Director
Paul McCann 65 CFO/Director
All directors hold office until their successors have been
elected.
Set forth below is certain information about the named
individuals.
Robert M. Terry, 70, has been Chairman of the Board of the
Company since January 1994, and Chief Executive Officer of the
Company since February 24, 1995. He has over 35 years of
finance, engineering-development and construction experience.
He has held the position of CEO of several private entities and
is listed in Who's Who in American Business, Who's Who in
Aviation and is a member of the President's Council of the
American Institute of Management as well as several other
professional organizations. Mr. Terry received his engineering
degree from New York University, School of Engineering, with
graduate studies at Columbia University.
Thomas Hanson, 68, is a director of the Company and has held
that position since June of 1999. He has also served as a
director during that same period. He has previously held
positions as Chief Deputy and Chief of Staff for a Los Angeles
City Council member, and as the Executive Director for the
Republican Party of Los Angeles. Prior to these activities, he
was the Director of Marketing at the Los Angeles Ambassador
Hotel, the President and CEO of Flash-R-Lite Corporation, the
Director of Government & Regulatory Relations for Pacific Air
Transport and the Executive Vice President and Chief
Administrative Officer of Intercontinental Technology Group.
Gary Rosen, 50, has been the Chief Operating Officer or
Treasurer of the Company since February 12, 2000. During the
year prior to that, he was an officer of Semcolabs, Inc., a
Florida corporation, that engaged in the early developmental
research leading to the sanitary monitoring business concept.
Mr. Rosen served for 17 years with the New York Police Department
as a detective in the fraud, homicide, organized crime and
special services bureaus. Following his retirement from the
NYPD, he worked for Aero Industries, Inc. as its director of
Security, and performed a similar function for Intercontinental
Technologies Group. Mr. Rosen oversees the day-to-day operations
of the Company and is directly involved in all personnel, sales,
purchase and human resources decisions.
Toni Gales, 54, corporate Secretary, has been office manager
for law firms for the past 15 years, and prior to that was the
operations manager for King Aviation Services, a 70-plane flight
school located on the Van Nuys, California airport. Ms. Gales
has also managed cellular phone and paging services.
David Goldstein, 54, is a director of the Company, having
held that position since March 1, 2000. Mr. Goldstein currently
owns and operates several healthcare facilities in New York and
Florida. Prior to these operations, he collaborated with Shelby
Williams Industries in designing and developing over 200
hospitals, nursing homes and psychiatric institutions located in
New York and Louisiana. Mr. Goldstein is currently a Branch and
Production Manager at CTX Mortgage Corporation and has held that
position for the previous 5 years.
Meredith Russell, 55, is a director of the Company, a
position which he has held since October 11, 2000. Mr. Russell
has spent over three decades as a commercial banker with major
lending institutions: Beverly Hills Bank, Capitstrano National
Bank and most recently, from 1995 through 1999, Comerica Bank (as
Senior Vice President). Since August, 1999, Mr. Russell has
served as the Chief Executive Officer of the Bicycle Casino in
Los Angeles, California.
Paul McCann, 60, is the Chief Financial Officer and a
director of the Company, and has primary experience in
international banking, corporate finance, marketing and business
development. He has previously served at the Inter-American Bank
as a loan officer, special projects evaluator and President of
the Loan Committee and was the President of the Liberian Bank for
Industrial Development and In vestment. As President of the
Korea Capital Corporation, he was instrumental in restoring
profitability to the company, which led to a profitable purchase
thereof by Daewoo Industries. Mr. McCann has also held the
position of Managing Director and Chairman of the Executive
committee of the Asian Euro-American Merchant Bank, where he was
able to implement measures which caused it to become a major
regional lender for industry and trade.
Don Karas, 68, has been engaged by the Company as Executive
Vice President, and director, responsible for expanding the
Company's marketing scope and development of the Company's client
base. He previously served as Chairman and CEO of Aldon
Communications, Klondike Ice Cream and Restaurant Business, Inc.
He was the founder and publisher of several magazines, including
Restaurant Business, Restaurant & Hotel Design, Food Service
Executive, Institutional Distribution and the Karas Executive
Report. Mr. Karas was the founder of ACA Joe, a popular line of
clothing and retail stores, which he sold at a profit to
concentrate on the food services arena. He currently serves on
the Board of Directors of Wolfgang Puck Company and A&B Gourmet
Bakery. He is also the Chairman of the Santa Fe Steakhouse
company.
(b) Significant Employees
Set forth below is certain information for the individual
expected to make a significant contribution to the Company's
business: none.
(c) Family Relationships
There are no family relationships among the Company's
directors, executive officers or any of the named significant
persons.
(d) Involvement in Certain Legal Proceedings. None of the
Company's directors, executive officers or named significant
persons, and none of its promoters or control persons, during the
past five years:
(1) has had any bankruptcy petition filed by or
against any business of which such person was a general partner
or executive officer either at the time of the bankruptcy or
within two years prior to that time;
(2) has had any conviction in a criminal proceeding or
was subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) has been subject to any order, judgment or decree
of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting
such person's involvement in any type of business, securities or
banking activities; nor
(4) has been found by a court of competent
jurisdiction (in a civil action), the Securities and Exchange
Commission or the Commodities Futures Trading Commission to have
violated a federal or state securities or commodities law, and
the judgment has not been reversed, suspended or vacated.
Compliance with Section 16(a) of the Securities Exchange Act of
1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers,
directors and greater than ten-percent shareholders are required
by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished
to the Company, or written representations that no Form 5 filings
were required, the Company believes that during the year ended
December 31, 1996, all Section 16(a) filing requirements
applicable to its officers, directors and
greater-than-ten-percent beneficial owners were complied with.
At the end of fiscal 1999, Tweed Investments, Ltd., owning
approximately 42% of the company at that time, would have shown
as a greater-than-10% shareholder were the filings by the company
made in a timely manner.
Item 10. Executive Compensation
In respect of services rendered to the Company in, 1997,
1998 and 1999, the Company did not pay to any executive officer
of the Company, GAD or GAI total annual salary and bonus
aggregating in excess of $60,000. Set forth below is information
regarding the compensation of Robert M. Terry, the only officer
to earn deferred compensation during those years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Name and Principal Position Year Salary
Robert M. Terry, Chairman 1995 $60,000 -0-
1996 $60,000 -0-
1997 $60,000 Deferred
1998 $60,000 Deferred
1999 $60,000 Deferred
Mr. Terry has fully vested options to acquire 150,000 shares of
the Company's stock at an exercise price of $0.25 per share. The
salary compensation due Mr. Terry has been deferred until
suitable financial resources allow for its payment.
Compensation of Directors
Non-employee directors of the Company do not receive any
compensation for attending meetings of the Board of Directors.
In the years 1995 through 1999, none of the Company's
directors received any compensation for services provided as a
director, whether pursuant to any consulting contracts, business
agreements or otherwise.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information regarding
the number and percentage of shares of Common Stock beneficially
owned by each named executive officer and director, any person
(including any "group" as that term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934) known by the Company to
own 5% or more of the Common Stock of the Company, and all
officers and directors as a group, as of the date of this Form
10-KSB:
Name and Address Amount and Nature of
of Beneficial Owners Beneficial Owners1 Percent of
Class
Robert M. Terry 150,000* 1.29
5374 Village Road
Long Beach, California 90808
Gary Rosen 1,150,000* 9.91
9045 La Fontana, C-7A
Boca Raton, Florida 33434
Thomas Hanson 150,000* 1.29
5374 Village Road
Long Beach, California 90808
Toni Gales 20,000* 0.17
11300 W. Olympic, #800
Los Angeles, California 90064
Paul McCann 100,000* 0.86
5374 Village Road
Long Beach, California 90808
Don Karas 150,000** 1.29
3651 Turtle Run Boulevard #824
Coral Springs, Florida 88067
All Executive Officers and
Directors as a group 1,720,000* 13.53
(4 persons)
Tweed Investments, Ltd. 1,130,000 9.74
71-73 Regent Street
London, England
Monaco Investment Group, Ltd. 4,000,000 34.47
Parliament Street
Nassau, Bahamas
Girardi Financial, Inc. 2,000,000 17.24
10100 Santa Monica Blvd, #1600
Los Angeles, California
_____________________________
Unless otherwise indicated, the Company has been advised
that all holders listed have the sole power to vote and dispose
of the number of shares set forth opposite their names.
* all of the asterisked securities are options, having similar
terms, such that all are exercisable at $0.25 per share, and all
are vested, except for Rosen's, of which 1,000,000 are vesting
over a 24-month period, at the rate of 1/24 per month.
** the Karas options are at $0.50 per share, and are conditioned
upon achieving certain sales goals.
Item 12. Certain Relationships and Related Transactions
The Company has not directly or indirectly acquired any
assets from any of its directors, or the executive officers,
significant employees or security holders named in Items 9 or 11
above.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
2 Agreement, dated September 28, 1993, with Lema
Investments Ltd.(1)
3.1 Certificate of Incorporation, as amended(2)
3.2 By-Laws(2)
3.3 Amendment to Articles of Incorporation (Change of
Name), July 5, 1994(3)
3.4 Amendment to Articles of Incorporation (Reverse of 1-
for-10), dated March 4, 1999
3.5 Amendment to Articles of Incorporation (Change of
Name), and increase authorized capital to
50,000,000 shares, dated September 28, 1999 (4)
3.6 Amendment to Articles of Incorporation (Change of Name
to Sanitary Environmental Monitoring Labs, Inc.),
filed April 10, 2000 (4)
10.1 Agreement, dated July 5, 1992, with Electroterm
Electric & Metal Industries Ltd. and Mesana SA(2)
10.2 Memorandum of Understanding, dated December 23, 1993,
with Jaber Corporation and Spanish Dagger, Inc.(2)
10.3 Guarantee Agreement, dated November 17, 1993, with
Messrs. Younisian and Korman(2)
10.4 Loan Agreement, dated November 23, 1993, with Kaner
Sherotei Geviya, Ltd.(2)
10.5 Loan Agreement, dated November 10, 1993, with GAD
Semiconductors, Ltd.(2)
10.6 Agreement between GAD, Semtech Ltd. and Messers,
Aschkenazi, Gerschfeld, Nathan and Slonim(2)
10.7 Stock Sale and Purchase Agreement with Tweed
International, dated October 3, 1994(3)
10.8 Agreement for Acquisition of Semco Bio-Vision, dated
February 12, 2000 (4)
10.9 License and Distributorship Agreement between Monaco
Investment, Ltd. and the Company, dated May 24,
2000 (4)
10.10 Subscription Agreement and Promissory Note between
Company and Girardi Financial, dated June 23, 2000
(4)
21 Subsidiaries of the Registrant(1), Semco Bio-Vision
_____________
(1) Incorporated by Reference to Registrant's Form
8-K dated October 5, 1993.
(2) Incorporated by Reference to Registrant's Form
10-KSB dated May 3, 1994.
(3) Incorporated by Reference to Registrant's Form
10-KSB dated March 31, 1995.
(4) Incorporated by Reference to Registrant's Form
10-KSB dated October 24, 2000
(b) Reports on Form 8-K
None
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.
SANITARY ENVIRONMENTAL MONITORING LABS, INC.
By: /s/ Robert Terry
Robert M. Terry, Chairman
Date: October 31, 2000
IN ACCORDANCE WITH THE EXCHANGE ACT, THIS REPORT HAS BEEN
SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date
/s/ Robert Terry Principal Executive October 31, 2000
Robert M. Terry Officer and Director
/s/ Thomas Hanson Director October 31, 2000
Thomas Hanson
/s/ Gary Rosen Operating Officer/ October 31, 2000
Gary Rosen and Director
/s/ Toni J. Gales Secretary October 31, 2000
Toni J. Gales
/s/ David Goldstein Director October 31, 2000
David Goldstein
/s/ Meredith Russell Director October 31, 2000
Meredith Russell
/s/ Paul McCann Chief Financial Officer October 31, 2000
Paul McCann Director
/s/ Don Karas Executive Vice President October 31, 2000
Don Karas Director
