SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 or 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1996
Commission File number: 0-18296
ENVIRONMENTAL MONITORING & TESTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 62-1265486
(State of Incorporation) (I.R.S. Employer Identification No.)
825 Main Street South, New Ellenton SC 29809
(Address of principal executive offices)
Registrant's telephone number, including area code: (803)652-2718
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value None
Indicated by check mark whether the registrant (1) has filed all report
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months and(2) has been subject to such filing
requirements for the past 90 days. Yes X No___
Indicated by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of the Company'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 )
Registrant's revenues for the year ended September 30, 1996 its most recent
fiscal year were $433,780.
The aggregate market value of the registrant's common stock held by non-
affiliates as of November 17, 1996 was approximately $208,173. The number of
shares of the registrant's common stock outstanding as of November 17, 1996 was
3,825,383.
Documents Incorporated by Reference: Definitive Proxy Statement for 1996 Annual
Meeting of Shareholders Incorporated into Part II and Part III of Form 10-KSB
and See Exhibit Index.
Page 1 of 26 Pages
Exhibit Index at Page 25
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . .6
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . .7
Item 4. Submission of Matters to a Vote of Security Holders. .8
PART II
Item 5. Market for Common Equity & Related Stockholder
Matters. . . . . . . . . . . . . . . . . . . . . . . .8
Item 6. Management's Discussion & Analysis or Plan of
Operation. . . . . . . . . . . . . . . . . . . . . . .9
Item 7. Financial Statements . . . . . . . . . . . . . . . . 12
Item 8. Changes in & Disagreements with Accountants on
Accounting & Financial Disclosure . . . . . . . . . 24
PART III
Item 9. Directors & Executives Officers, Promoters and Control
Persons; Compliance With Section 16(a)of the Exchange
Act. . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 10. Executive Compensation . . . . . . . . . . . . . . . 24
Item 11. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . .24
Item 12. Certain Relationships & Related Transactions . . . . 24
PART IV
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . . 25
<PAGE>
PART I
Item 1. Business
Introduction
Environmental Monitoring & Testing Corporation (the "Company") is a diversified
drilling company specializing in environmental drilling, industrial water
wells, recovery wells as related to environmental requirements, construction
drilling and grouting for piling,stabilization drilling and grouting core
drilling as well as angle coring drilling and grouting for dams and other
similar structures.
The Company is classified as a special trade contractor within the
construction industry. However, the Company is most often a subcontractor
rather than a prime or general contractor.
The Company presently operates one division located in New Ellenton, South
Carolina. See Item 2. "Properties".
The Company maintains its corporate offices at 825 Main Street South, New
Ellenton, SC 29809 and its telephone number is (803) 652-2718.
Environmental Drilling
Environmental drilling involves drilling for soil and water samples, drilling
and installation of ground water monitoring wells, drilling and installation
of recovery wells, primarily hydrocarbon wells, and drilling and installation
of water supply or production wells. The Company uses drilling rigs which
are drilling platforms attached to a truck, all terrain vehicle or other
stable platform to perform these services. See Item 2. "Properties".
The majority of the drilling services provided by the Company are to
facilitate the testing of ground water and related soil conditions.
A contract generally involves drilling a predetermined number of wells at
various points around a job site as identified by the customer. A job site
is usually under the control of a hydrologic or geologic engineering
department of the customer requiring such work. Wells drilled for the purpose
of testing ground water are typically relatively shallow, averaging
approximately 50 to 100 feet in depth. The time spent at a job site is more
a reflection of the decontamination procedures and sampling requirements,
rather than the depth of the wells. Since most jobs must be completed within
a specific time period, the Company must provide as many drilling rigs as
necessary to drill the required number of wells within that time. Also,
conditions may require having two types of drilling rigs on a project: an
auger drilling rig to drill through the softer overburden and a rotary or
hammer drilling rig for rock. As a result, the Company is limited in the
number of jobs which it can perform simultaneously. The Company believes
however, that it possesses an advantage over the smaller competitors because
of the number of rigs it owns.
The Company does not store or haul hazardous wastes. If containment,
collection and removal of development water, drilling mud, drill cuttings and
other hazardous waste is required, the Company places that waste in drums which
Company employees move to site storage areas. Thereafter, the supervising
engineer of the customer or other responsible party arranges for hauling and
disposal by an appropriate waste disposal and transportation firm.
Seasonal Effect
Although the Company's operations are not seasonal, the Company does
experience some loss of operational time due to occasional inclement weather
and less favorable ground conditions.
Working Capital
The Company's past expansion resulted in a need for increased working capital
and a change in its component parts. Since the Company is generally a
subcontractor, it is usually not paid upon completion of its work, but only
after the prime or general contractor is paid. This means that the Company
must maintain adequate cash to support its operations for a period of
approximately two to three months. See Item 6. "Management's Discussion and
Analysis".
Customers
Westinghouse Savannah River Company (WSRC) is a significant customer of the
Company. The Savannah River Site (Site) is a Department of Energy material
processing facility and because of the nature of its operations, it requires
constant environmental assessment of ground water contamination. One of the
methods of performing this assessment is through the installation of
environmental monitoring wells. The WSRC Site is located approximately two
miles from the Company's home office in New Ellenton, South Carolina.
The Company derived approximately 98 percent and 75 percent of its revenue in
the fiscal years ended September 30, 1996 and 1995, respectively, from WSRC
pursuant to its contracts for drilling services at the Site. On August 23,
l996 the Company entered into a new contract with WSRC, which allocates $1.7
million to be used for environmental drilling on the Site. The period of
performance is October 1, 1996 to October 1, 1998. The unit price paid for
labor under this contract is fixed and the unit price for materials can be
renegotiated by the Company, at the end of one year. This contract with WSRC
gives the Company the right to perform environmental drilling at the Site on
an as needed basis; however the dollar amount of this contract is not binding
or enforceable by the Company but is a framework for releases of job orders.
There can be no assurances that the work to be performed by the Company will
be equal to the $1.7 million contract.
The minority of the Company's revenues are generated from other engineering
and/or consulting firms responsible for evaluating the environmental concerns
of their clients. The Company is engaged by such engineering or consulting
firms because of their familiarity with the Company and its reputation and
prior performance record. Services are generally performed through contracts
obtained through competitive bidding. The Company is aggressively pursuing
contracts other than those with WSRC.
The Company has reduced its scope of operations but is striving to diversify
and market to customers other than WSRC. The Company is licensed to perform
drilling services in five states but has focused on performing such services
in three states. The Company would like to perform drilling services in
other states as opportunities arise and on a very selective basis, though
there can be no assurances that such diversification and expansion will be
achieved.
Backlog
As of November 17, 1996 the backlog of signed and verbal contracts totaled
approximately $30,000, of which 80% is attributable to the Site. Generally
the backlog of signed and verbal contracts are not canceled, though there can
be no assurances that such cancellations will not occur. This work is in
progress or scheduled to be substantially completed by the end of December
1996. Since most of the Company's work (except for the WSRC contract) is of
short to medium duration and awarded with little advance notice, the backlog
of signed contracts at any given time is generally not representative of how
well the Company is doing or will do over any particular time period.
Competition
The Company provides its services pursuant to contracts which are generally
obtained through competitive bidding. As noted above, with the exception of
the Company's contract with WSRC for the Site, such contracts are usually
small, the majority of which have a term of less than 30 days and are limited
to the drilling and installation of specific wells. Typically, there are
several bidders for such contracts and, as a result, varying levels of price
sensitivity. The Company's competitors in the bidding process generally have
been small local drilling companies with less drilling equipment and more
limited resources than the Company. Although the Company competes, to some
extent, with larger companies which have greater financial resources, the
Company believes that it owns comparable drilling machinery and related
equipment. Management expects to remain competitive because of its drilling
experience, performance record, continued safety training and equipment
availability and reliability.
Governmental Regulation
Drilling is a licensed occupation. All of the states in which the Company
operates require that the Company and/or its drilling supervisors obtain
licenses to drill and install wells. Such licenses are generally subject to
annual renewal. Neither the Company nor any of its drilling supervisors have
been unable to obtain renewal of their licenses. Although no assurances can
be given, the Company believes that it is in compliance with all current
licensing requirements for the states where it conducts business. The
expansion of division offices and/or operations into additional states may
require further licensing.
At present, the Company's business is not directly regulated, except for the
drilling licenses discussed above, however since the Company performs work on
governmental projects it falls under the regulation of the United States
Department of Energy, the Environmental Protection Agency and various state
environmental agencies. Any violations of such regulations could prevent the
Company from working on governmental projects.
Since the majority of its work relates to drilling and installing wells for
environmental monitoring and testing, the Company benefits from
environmental, health, safety and hazardous waste regulations. Governmental
regulation at both the Federal and State levels has increased and is becoming
more restrictive. It is not possible to predict whether the Company's
activities will become directly regulated as a result of the increase in
governmental regulation.
Management believes that the increased governmental regulation of industrial
wastes and pollution will create a greater demand for services offered by the
Company, though no assurances can be had that the Company will benefit from
this demand.
Employees
As of November 1, 1996 the Company employed a total of 10 employees. See
Item 1. "Business-Introduction".
Bonding
The majority of the Company's work is the result of competitive bidding,
primarily from engineering and consulting firms. Bonding is required on
occasion and the Company has been able to obtain bonding on a per job basis.
The bonding company has not established a bonding limit on a per job basis or
in the aggregate, and increased bonding limits, subject to the financial
strength of the Company, can generally be obtained by rendering a letter of
credit or a cash deposit equal to five per cent of the face value of the
bonding amount. The Company anticipates a continuing improvement in bonding
capacity in accordance with a continuing improvement in the financial
strength of the Company; however, no assurances can be given of any long term
surety commitment.
Insurance
The Company carries a $1 Million general liability insurance policy which has
minimal coverage for environmental damage caused by negligence. In addition,
the Company has a $2 Million "umbrella" policy for a total of $3 Million of
general liability insurance. The liability insurance maintained by the
Company covers bodily injury and property damage. These policies are subject
to dollar limitations and other numerous exceptions and conditions. The
Company has workers' compensation insurance which covers employees exposed
to contaminant and toxic waste. The Company does not purchase additional
insurance for pollution liability or environmental impairment since virtually
all of the Company's drilling is performed on a subcontractor basis at the
direction of or under the supervision of various engineers or environmental
consultants retained by the customer, therefore the exposure for this type of
claim appears remote. Although the Company believes that its insurance
coverage is adequate, there can be no assurance that such insurance coverage
will be sufficient for all or any particular claim for which the Company may
be found liable. Moreover, there can be no assurance that the insurance
currently maintained by the Company will be available in the future or that
the cost of such insurance will not be prohibitive. A partially or completely
uninsured claim of sufficient magnitude could have a material adverse effect
on the business and financial condition the Company.
Item 2. Properties
The Company presently operates business from one location: its headquarters
and division office in South Carolina.
The Company headquarters and division office is located in New Ellenton,
South Carolina. The Company owns the facility, consisting of four buildings
on 4.83 acres fronting on South Carolina Highway 19. The four steel frame
and metal buildings consist of: a 3,600 square foot office building; 3,200
square feet of maintenance shops; 4,800 square feet of warehouse; and
approximately 4,200 square feet of other shops and storage. The balance
of the property is used to park vehicles and equipment when not being used on
a job site and while awaiting repair.
In July, 1996 the Company's management identified three drill rigs that were
to be liquidated. During 1996, the Company sold one of the drill rigs and
various support equipment and in November, 1996 the Company sold two drill
rigs and assorted tooling. As equipment is sold the proceeds have been used
enhance working capital. The Company does not consider this equipment to be
materially important to its operation since suitable equipment is available.
See Item 6. "Management's Discussion & Analysis" and Item 7."Financial
Statements".
The Company uses approximately seven drilling rigs, including three auger
rigs, one of which is an all terrain vehicle (ATV) rig, and four rotary rigs.
The Company also owns one pump pulling or service rig. Additionally, the
Company owns adequate support equipment such as water trucks, steam cleaners,
compressors, emergency trailers and safety equipment. The Company operates a
vehicle service facility, a welding shop, a paint shop and a machine shop on
the New Ellenton property, which enable the Company to modify, rebuild and
maintain its vehicles, drilling rigs and related equipment. From time to time
the Company may sell equipment if it believes the equipment is not required.
Item 3. Legal Proceedings
During 1995 the Company signed a letter of intent to merge with Jansko, Inc.
Jansko, Inc. was engaged in designing, manufacturing and marketing office
furniture including seating products, desks, tables, and credenzas. Since
the signing of the letter of intent the Company advanced $385,841 to Jansko,
Inc. in conjunction with the proposed merger of the two Companies.
The Company did not merge with Jansko, Inc., and on May 1, 1996 Mr. George J.
Georges, the Company's President and CEO, filed a petition in the Federal
District Court of Fort Lauderdale, Florida to move Jansko, Inc., into
Chapter 7 Liquidation of the Bankruptcy Act and it Amendments. On May 23,
1996 an Order For Relief was entered by the United States Bankruptcy Court,
Southern District of Florida in Fort Lauderdale, Florida. As a result of
these events and uncertainty of any recovery, the Company recorded a loss
during the quarter ended March 31, 1996 on all advances and loans to Jansko,
Inc.
A majority shareholder of the Company has filed various lawsuits against
certain officers and directors of Jansko, Inc. and related parties on behalf
of the Company and other parties seeking restitution of funds advanced. The
Company and other parties have assigned their rights to the majority
shareholder and will share in any awards less legal and other expenses, on a
pro rata basis. There can be no assurances that this litigation will result
in any recovery and as such no recovery has been recorded by the Company.
On August 7, 1996 the Company and an officer of the Company were named as
defendants in a sexual harassment and defamation suit filed by a former
female employee in the United States District Court for the District of South
Carolina. The suit seeks unspecified actual and punitive damages.
The Company is aggressively defending this action and alleges that this
action is malicious and without merit.
Item 4. Submission of Matters to a Vote of Security Holders
None during the quarter ended September 30, 1996.
PART II
Item 5. Market for the Common Equity and Related Stockholder
Matters
There has been an established public market for the Company's securities
since February 23, 1989. The Company's securities are traded in the "Over the
Counter" (OTC) market and were listed in the National Association of
Securities Dealers Automated Quotation (NASDAQ) System until August 26, 1992.
On August 27, 1992 the Company's securities were delisted from the NASD Small
Cap Market for failure to meet the minimum bid price requirement as forth in
Section 1(c)(4) of Part II of Schedule D of the NASD By-Laws. On August 27,
1992 the Company's securities were listed in the Over the Counter Bulletin
Board. The securities were listed under the trading symbol EMON but are now
listed under the trading symbol EVMT.
Shares of the Company's Common Stock $.01 par value.
The high and low bid quotations for the Company's securities as reported by
the Over the Counter Bulletin Board are set forth below. The prices set
forth below are not necessarily indicative of the depth of the trading market
in each of the Company's Securities.
<TABLE>
<CAPTION>
Bid Prices (1)
Common Stock High Low
<S> <C> <C>
First Quarter Ending 12/31/94 $ 1/8 $ 3/32
Second Quarter Ending 3/31/95 $ 15/64 $ 3/32
Third Quarter Ending 6/30/95 $ 19/64 $ 1/8
Fourth Quarter Ending 9/30/95 $ 9/32 $ 3/16
First Quarter Ending 12/31/95 $ 3/16 $ 1/8
Second Quarter Ending 3/31/96 $ 3/16 $ 1/8
Third Quarter Ending 6/30/96 $ 3/16 $ 1/8
Fourth Quarter Ending 9/30/96 $ 3/16 $ 1/8
</TABLE>
(1) Such over-the-counter market quotations reflect in-dealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions.
As of September 30, 1996 there were approximately 125 shareholders of record
of the Company's common stock. The Company believes that there are in excess
of 250 beneficial owners of the common stocks.
The Company has never paid any dividends on its Common Stock and it is not
anticipated that any dividends will be paid in the foreseeable future. The
Board of Directors intends to follow a policy of retaining earnings, if any,
to finance the growth of the Company. The declaration and payment of
dividends in the future will be determined by the Board of Directors in the
light of conditions then existing, including the Company's earnings,
financial condition, capital requirements and other factors.
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
During fiscal year 1996, the Company continued the realignment of its
operations which was started in 1993 and re-focused the deployment and
evaluation of all its productive assets and reduced salaried and hourly
employees. The continued implementation of these programs resulted in a
reduction of selling, general and administrative expenses and depreciation
expense by approximately $164,000. The Company has continued its aggressive
program of selling unproductive assets. During the year the Company sold
five vehicles, three lift trucks, one drilling rig and various other tools
and support equipment. These asset sales resulted in a gain on sale of assets
and an increase of positive cash flow of $62,000. See Item 1. "Business-
Introduction", Item 2. "Properties", and Item 7. "Financial Statements".
Though no assurances can be made, the Company anticipates that this re-
focusing and realignment of equipment and energies will not reduce the
productive capacity of the Company but will reduce future capital
requirements and improve the utilization of drilling equipment and related
assets. Management is committed to monitoring the operating results and to
make decisions based upon those monitored results to maximize the return on
investment of the assets deployed by its operations.
Comparison of Fiscal Years 1996 and 1995
Contract revenue decreased approximately $527,000 or 54% in 1996 as compared
to 1995. The Company believes the declines in the revenue have been affected
by four factors: 1) Interruption of Federal funding for environmental work
resulting from concerns over the economy and a very conservative political
climate relative to environmental issues; 2) tight money supply and
recessionary pressures to reduce environmental expenditures; 3) increased
competition in the geographic areas serviced by the Company; 4) the focusing
on performing drilling services in South Carolina, Georgia, and Florida.
Direct contract costs decreased $183,000 or 46.0%, but increased 8.1% of
revenue for the year ended September 30, 1996. Of this $190,000 represents
decreases related to the decrease in revenues and are attributable to the
following: material costs decreased $66,000 and direct labor and travel
related expenses decreased $124,000. Other costs increased $7,000.
Indirect contract costs decreased $135,000 or 53.3% but increased 1.0% as a
percent of revenue for the year ended September 30, 1996. The percentage
increase was a result of an increase in insurance expense on rolling stock on
a greatly reduced revenues.
Selling, general and administrative expenses decreased $111,000 or 36.1% but
increased 12.9% as a percent of revenue for the year ended September 30,
1996. Salaries decreased $84,000 because of the elimination of employees.
Property and casualty insurance and employee benefits decreased $27,000 as a
result of the reduction of equipment and employees. The percentage increase
is a result of fixed administrative expenses being compared to reduced
revenues in 1996.
Depreciation expense decreased $53,000 because of the sale of drilling
equipment and drill rigs and as a direct result of the age of certain
equipment. See Item 7. "Financial Statements".
Property, plant and equipment with a cost basis of $166,000 and a net book
value of $61 was sold with cash proceeds of $62,000 being realized. The
amounts of the gains are recorded as a gain on the sale of machinery and
equipment. Miscellaneous equipment and supplies were sold with a proceeds of
$9,000 being realized as other income.
Interest income is a result of the investment of cash in short term treasury
instruments.
The loss on sale of marketable securities is the result of a decline in the
market price of NYSE listed securities that the Company purchased as a short
term investment and was recognized at the time of sale of these securities.
The Company has on occasion leased excess drilling equipment to other
drilling companies and records the proceeds as other income.
The income tax benefit (expense) is a result of the statutory rates of
federal income taxes and alternative minimum tax. The Company has taken a
very conservative approach and has not recorded any deferred tax benefits
associated with the net operating loss carry forwards. There currently are
net operating carry overs for federal income tax purposes of approximately
$1,563,000 and $1,560,000 for state income tax purposes. See Item 7.
"Financial Statements".
Management has recognized that the Company can not solely concentrate on
environmental drilling work and seeks to increase its marketing effort to
increase construction drilling and to solicit drilling of production or
supply wells. Management intends to continue these efforts and to be
selective in market areas and types of work contracted. Management continues
to search for companies that fit into related business segments, that can
contribute to the growth of the Company, benefit from the Company's expertise
and provide diversification in general and a more stable revenue flow, though
no assurances can be had that such acquisitions or ventures will be
undertaken. The Company is also seeking to diversify by evaluating other
sources of income including, investment opportunities and joint ventures.
Although inflation has slowed in recent years, it is still a factor in
bidding for long term contracts and the Company continues to seek ways to
cope with its impact. Since most of the Company's contracts are short term,
the Company is able to pass on any increased costs to the extent permitted by
competition. For the longer term and multi-year contracts which normally do
not allow price adjustments, the Company makes its best estimate of a
competitive inflation factor and absorbs any difference in cost.
Liquidity and Capital Resources
For fiscal 1996 and 1995, the Company generated its working capital and
capital expenditure requirements through positive operating activities and
through sales of excess equipment. The Company's capital expenditures are
generally needed for the replacement of equipment and the Company believes
that its liquidity is sufficient to handle such replacement. At September
30, 1996, the Company had working capital of $189,000 and a current ratio of
3.9 to 1. At September 30, 1996, the total indebtedness aggregated $65,000
and shareholders' equity was $713,000. At September 30, 1996 the debt to
equity ratio was .09 to 1.
During 1995 the Company signed a letter of intent to merge with Jansko, Inc.
Jansko, Inc. was engaged in designing, manufacturing and marketing office
furniture including seating products, desks, tables, and credenzas. Since
the signing of the letter of intent the Company advanced $385,841 to Jansko,
Inc. in conjunction with the proposed merger of the two Companies.
The Company did not merge with Jansko, Inc., and on May 1, 1996 Mr. George J.
Georges, the Company's President and CEO, filed a petition in the Federal
District Court of Fort Lauderdale, Florida to move Jansko, Inc., into
Chapter 7 Liquidation of the Bankruptcy Act and it Amendments. On May 23,
1996 an Order For Relief was entered by the United States Bankruptcy Court,
Southern District of Florida in Fort Lauderdale, Florida. As a result of
these events and uncertainty of any recovery, the Company recorded a loss
during the quarter ended March 31,1996 on all advances and loans to Jansko,
Inc.
A majority shareholder of the Company has filed various lawsuits against
certain officers and directors of Jansko, Inc. and related parties on behalf
of the Company and other parties seeking restitution of funds advanced. There
can be no assurances that this litigation will result in any recovery, as
such no recovery has been recorded by the Company. See Part 1, Item 3 "Legal
Proceedings" and Part II, Item 7 "Financial Statements".
The Company has identified, segregated and classified certain drill rigs for
sale. In November, 1996 the Company sold two drill rigs and assorted tooling
for $135,600 and realized a gain on the sale of $63,500. The Company also
has ongoing programs to generate greater revenue, reduce operating costs and
to increase accounts receivable turnover to consistently generate positive
cash flow. Although no assurances can be given, the Company believes that
these actions will result in adequate liquidity for the next fiscal year.
Capital expenditures were not incurred in 1996 and 1995. At present, the
Company has adequate levels of property and equipment to operate its business
and is continuing to evaluate equipment requirements. See Item 7.
"Financial Statements".
<PAGE>
Item 7. Financial Statements
INDEX
Page
Reports of Sweeney & Company, P. A. Independent Auditors . . . 13
Balance Sheet as of September 30, 1996 . . . . . . . . . . . . 14
Statement of Operations for Years Ended September 30, 1996 and
1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Statement of Changes in Stockholders' Equity for Years Ended
September 30, 1996 and 1995. . . . . . . . . . . . . . . . . . 16
Statement of Cash Flows for Years Ended September 30, 1996 and
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Notes to Financial Statements. . . . . . . . . . . . . . . . . 18
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable or have been omitted.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Environmental Monitoring &
Testing Corporation
New Ellenton, South Carolina
We have audited the accompanying balance sheet of Environmental Monitoring &
Testing Corporation as of September 30, 1996, and the related statement of
operations, changes in stockholders' equity and cash flow for the two years
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the September 30, 1996 financial statements referred to above
present fairly, in all material respects, the financial position of
Environmental Monitoring & Testing Corporation as of September 30, 1996 the
results of its operations and its cash flows for the two years then ended in
conformity with generally accepted accounting principles.
Sweeney & Company, P. A.
Fort Lauderdale, Florida
October 22, 1996
<PAGE>
ENVIRONMENTAL MONITORING & TESTING CORPORATION
BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 39,795
Accounts receivable 185,649
Inventories 4,000
Other current assets 24,555
--------
Total current assets 253,999
Property, plant and equipment, net 523,532
--------
$ 777,531
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,466
Accrued expenses 31,464
--------
Total current liabilities 64,930
--------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized and none issued
Common stock, $.01 par value, 30,000,000 shares
authorized and 6,144,000 shares issued 61,440
Capital-in-excess of par 1,963,508
Accumulated deficit (1,115,420)
---------
909,528
Less: Cost of treasury stock, 2,318,617
shares held at September 30, 1996 (196,927)
-------
Total stockholders' equity 712,601
-------
$ 777,531
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ENVIRONMENTAL MONITORING & TESTING CORPORATION
<PAGE>
STATEMENT OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Contract revenue $ 433,781 $ 960,860
------- -------
Contract costs and expenses:
Direct contract cost 214,988 397,957
Indirect contract cost 118,714 253,471
Selling, general and administrative
expenses 193,646 304,571
Depreciation 118,159 170,834
(Gain) on sale of machinery and
equipment (61,689) (50,900)
------ ------
Total contract costs and expenses 583,818 1,075,933
------- --------
Loss from operations (150,037) (115,073)
------- -------
Other income (expenses):
Gain on equipment held for sale - 29,272
Interest income 5,202 8,464
Loss on sale of marketable securities - (22,744)
Loss on advances to Jansko, Inc. (385,841) -
Other, net 9,028 -
Equipment lease income - 29,411
------- ------
Total other income (expenses) (371,611) 44,403
------- ------
Net (loss) before income taxes (521,648) (70,670)
Income taxes - (5,300)
------- ------
Net (loss) $ (521,648) $ (75,970)
========== ==========
Net (loss) per common share $ (0.14) $ (0.02)
========== ==========
Weighted average common shares
outstanding 3,825,383 4,192,339
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ENVIRONMENTAL MONITORING & TESTING CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
Capital
Common Treasury in excess Retained
Shares Amount Shares Amount of par (Deficit) Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, 9/30/94 6,144,000 $ 61,440 (874,295) $ $1,956,458 $ (517,802) $1,500,096
Issuance of common
stock to employees 70,500 7,050 7,050
Purchase of treasury
stock (1,514,822) (196,927) (196,927)
Net (loss) - - - - - (75,970) (75,970)
-------- -------- -------- -------- --------- -------- --------
Balance, 9/30/95 6,144,000 61,440 (2,318,617) (196,927) 1,963,508 (593,772) 1,234,249
Net (loss) - - - - - (521,648) (521,648)
Balance, 9/30/96 6,144,000 $ 61,440 (2,318,617) $(196,927) $1,963,508 $(1,115,420) $ 712,601
>/TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ENVIRONMENTAL MONITORING & TESTING CORPORATION
STATEMENT OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
</TABLE>
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (521,648) $ (75,970)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 118,159 170,834
Gain from sale of machinery and equipment (61,689) (80,172)
Issuance of common stock for services - 7,050
Losses on advances from Jansko, Inc. 385,841 -
Changes in certain assets and liabilities:
Inventories 1,000 3,676
Accounts receivable (136,643) 235,489
Advances receivable from Jansko, Inc. - (350,000)
Other current assets (16,880) 19,225
Accounts payable 19,159 (60,360)
Other current liabilities 20,573 (21,594)
------- -------
Net cash used in operating activities (192,128) (151,822)
------- -------
Cash flows from investing activities:
Sale of machinery and equipment 61,750 496,405
Purchase of Treasury stock - (196,927)
Advances made to Jansko, Inc. (35,841) -
------ -------
Net cash used in investing activities 25,909 299,478
------ -------
Cash flows from financing activities:
Principal payments - (111,173)
------ -------
Net cash provided by(used in)
financing activities - (111,173)
------ -------
Net increase in cash and cash equivalents (166,219) 36,483
Cash and cash equivalents, beginning of period 206,014 169,531
------- -------
Cash and cash equivalents, end of period $ 39,795 $ 206,014
======= ========
Supplemental disclosure:
Interest paid in cash $ - $ 2,025
======= ========
Issuance of common stock for services $ - $ 7,050
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ENVIRONMENTAL MONITORING & TESTING CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Environmental Monitoring & Testing Corporation (the "Company") is a Delaware
corporation, incorporated on May 10, 1988. The Company is engaged in the
business of drilling wells, primarily for the purpose of environmental
monitoring and testing.
Cash equivalents
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Accounts receivable
Accounts receivable are reported at their net realizable value. An allowance
for doubtful accounts is recognized when the Company does not expect to
collect the full amount of its accounts receivable. The Company considers
accounts receivable to be fully collectible at September 30, 1996.
Inventories
Inventories are recorded at the lower of cost (measured on a first-in, first-
out basis) or market. Inventories consist solely of supplies, such as pipe,
sand, cement, bentonite, pumps, etc., which are used in the construction of
various types of wells.
Property, plant and equipment
Property, plant and equipment are recorded at cost, less accumulated
depreciation. For financial reporting purposes, depreciation is computed on
the straight-line method over the useful lives of the assets. Accelerated
methods of depreciation are used for income tax purposes. Expenditures for
renewals and betterments, which increase the estimated useful life or
capacity of assets, are capitalized. Expenditures for repairs and
maintenance are charged to expense as incurred.
Accounting estimates
Management of the Company occasionally uses accounting estimates in
determining certain revenues and expenses. Estimates are based on subjective
as well as objective factors and, as a result, judgment is required to
estimate certain amounts at the date of the financial statements.
Contract revenue and costs
The Company recognizes revenues on contracts based upon direct labor hours
worked and services completed and accepted by the customer. Contract costs
and expenses are recorded as incurred.
Income taxes
Deferred income taxes in the accompanying financial statements reflect
temporary differences in reporting results of operations for income tax and
financial accounting purposes. The principal timing differences in
recognition of income taxes result from using the cash basis of accounting
for income tax purposes and the accrual basis for financial reporting
purposes, and the difference in book and tax basis of property, plant and
equipment.
Net Income (Loss) Per Common Share
The Company has both dilutive common stock equivalents and anti-dilutive
common stock equivalents; however, the effect of these common stock
equivalents on earnings per share is less than 3 percent. Accordingly,
earnings are presented based on weighted average common shares outstanding.
2. LOSS ON ADVANCES TO JANSKO, INC.
During 1995 the Company signed a letter of intent to merge with Jansko, Inc.
Jansko, Inc. was engaged in designing, manufacturing and marketing office
furniture including seating products, desks, tables, and credenzas. Since
the signing of the letter of intent the Company advanced $385,841 to Jansko,
Inc. in conjunction with the proposed merger of the two Companies.
The Company did not merge with Jansko, Inc., and on May 1, 1996 Mr. George J.
Georges, the Company's President and CEO, filed a petition in the Federal
District Court of Fort Lauderdale, Florida to move Jansko, Inc., into Chapter
7 Liquidation of the Bankruptcy Act and its Amendments. On May 23, 1996 an
Order For Relief was entered by the United States Bankruptcy Court, Southern
District of Florida in Fort Lauderdale, Florida. As a result of these events
and uncertainty of any recovery, the Company recorded a loss during the
quarter ended March 31, 1996 on all advances and loans to Jansko, Inc.
A majority shareholder of the Company has filed various lawsuits against
certain officers and directors of Jansko, Inc. and related parties on behalf
of the Company and other parties seeking restitution of funds advanced. There
can be no assurances that this litigation will result in any recovery, as such
no recovery has been recorded by the Company.
3. PROPERTY, PLANT AND EQUIPMENT
At September 30, 1996, property, plant and equipment consisted of the
following:
<TABLE>
<CAPTION>
Useful
Lives
(Years)
<S> <C> <C>
Land $ 109,617
Buildings and improvements 304,958 30
Less accumulated depreciation (81,470)
-------
Net book value of real estate 333,105
-------
Machinery and equipment 58,086 5 - 7
Drilling equipment and vehicles 930,681 2 - 7
Less accumulated depreciation (798,340)
-------
Net book value of equipment 190,427
-------
Furniture and fixtures 15,002 3 - 5
Less accumulated depreciation (15,002)
-------
Net book value of furniture and fixtures -
-------
Property, plant and equipment, net $ 523,532
=======
</TABLE>
4. LEASES
The Company rents equipment on an as needed basis for terms of one day to
several months. The Company also leases two vehicles under an operating lease
arrangement which expires in 1997. The 1997 future minimum lease payments on
the two vehicles total $3,650. Rent expense for the years ended September 30,
1996 and 1995, was approximately $9,392 and $21,839 respectively.
5. INCOME TAXES
The Company accounts for income tax according to Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
The net deferred tax asset (liability) in the accompanying balance sheet as
of September 30, 1996 includes deferred tax assets and liabilities
attributable to the following items:
<TABLE>
<S> <C>
Deferred tax assets (liability):
Accrual to cash basis of accounting $ (42,866)
Depreciation (70,657)
Investment credit carry forwards 6,933
Net operating loss carry forwards 594,433
-------
Net deferred tax asset (liability) 487,443
Valuation allowance for deferred tax assets (487,443)
-------
Net deferred asset tax (liability) $ 0
=======
</TABLE>
The Company's 1995 income tax provision of $5,300 represents alternative
minimum tax calculated on the Company's alternative minimum taxable income.
As of September 30, 1996, the Company had available a cumulative federal net
operating loss carry forward of approximately $1,563,000 which expires as
follows: $223,000 in 2005, $407,000 in 2006, $394,000 in 2007, $539,000 in
2008, and a capital loss carryover of approximately $24,000 which expires in
2000. Pursuant to the Tax Reform Act of 1986, the use of loss carry forwards
may result in the payment of alternative minimum tax. In addition, the Company
has available an investment tax credit carry forward of $6,933 which expires
in 2002.
6. STOCKHOLDERS' EQUITY
In November 1994 stock awards for 70,500 shares of restricted common stock of
the Company were authorized by the Board of Directors and awarded to
employees and a consultant of the Company. The restricted common shares
issued resulted in a $7,050 charge against current period income. In January
1995, the Company purchased for treasury 1,514,822 shares of common stock
held by the Department of Insurance of the State of Florida for $196,927.
7. STOCK OPTION PLANS
In November, 1992 the Company's Board of Directors adopted the 1992 Stock
Option Plan (the "Plan") which was approved by the Shareholders at the 1992
Annual Meeting on January 8, 1993.
The purpose of the Plan is to encourage and enable employees, directors and
other persons upon whose judgment, initiative and efforts the Company largely
depends to acquire a proprietary interest in the Company. Under the Plan,
the Board of Directors, or a Stock Option Committee appointed by the Board of
Directors, may grant stock purchase options ("Options") relating to a maximum
of 1,000,000 shares of Common Stock (subject to adjustment due to certain
recapitalizations, reorganizations or other corporate events). The Board of
Directors or the Company's Stock Option Committee shall have discretion to
determine which of this amount may be granted as incentive stock options
("ISO's") and non-statutory options. If any Option expires, terminates or is
canceled without having been exercised, the shares subject to that option will
again be available for issuance under the Plan.
In July, 1993 the Company's Board of Directors adopted the 1993 stock plan
(the "Stock Plan"). The stock plan is not exempt from Section 16(b) of the
Securities Exchange Act of 1934. The purpose of the Stock Plan is to provide
incentives to directors, officers, employees and consultants of the Company
by providing them with awards of stock and authorizations to make direct
purchases of stock in the Company. Under the Stock Plan, the Board of
Directors, or a Stock/Option Committee appointed by the Board of Directors
may grant awards or authorizations (collectively referred to as "Stock
Rights") relating to a maximum of 400,000 shares of Common Stock (subject to
adjustment under certain conditions). The Board of Directors or the Company's
Stock/Option Committee is responsible for designating the individuals
eligibility to participate in the Stock Plan, the type, date, terms, number
and conditions of each Stock Right. Stock Rights may be granted under the
Plan prior to July 13, 2003.
As of September 30, 1996, there were no options issued under either plan.
8. OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT
The Company's financial instruments subject to credit risk are primarily trade
accounts receivable. Generally, the Company does not require collateral or
other security to support customer receivables. The Company derived
approximately 98 percent and 75 percent of its revenue in the years ended
September 30, 1996 and 1995, respectively, from a single customer,the
Savannah River Site, a material processing facility owned by the United
States Department of Energy.
9. COMMITMENTS AND CONTINGENCIES
On August 7, 1996 the Company and an officer of the Company were named as
defendants in a sexual harassment and defamation suit filed by a former
female employee in the United States District Court for the District of
South Carolina. The suit seeks unspecified actual and punitive damages.
The Company is aggressively defending this action and alleges that this
action is malicious and without merit.
<PAGE>
Item 8. Changes in and Disagreements with Accountant on Accounting and
Financial Disclosure
None
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance With Section 16(a)of the Exchange Act
Directors, Executive Officers, Promoters and Control Persons
The information requested by this item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed pursuant to
Regulation 14C no later than 120 days after the Company's fiscal year end.
Compliance With Section 16(a) of the Exchange Act
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations from reporting
persons that no reports were required for those persons, during the fiscal
year ended September 30, 1996.
Item 10. Executive Compensation
The information requested by this item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed pursuant to
Regulation 14C no later than 120 days after the Company's fiscal year end.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The information requested by this item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed pursuant to
Regulation 14C no later than 120 days after the Company's fiscal year end.
Item 12. Certain Relationships and Related Transactions
Compensation and Employee Agreements
The information requested by this item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed pursuant to
Regulation 14C no later than 120 days after the Company's fiscal year end.
Related Party Transactions
The information requested by this item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed pursuant to
Regulation 14C no later than 120 days after the Company's fiscal year end.
Options
The information requested by this item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed pursuant to
Regulation 14C no later than 120 days after the Company's fiscal year end.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits Incorporated by Reference
The following exhibits which are on file with the Securities and Exchange
Commission are incorporated herein by reference as exhibits hereto.
Exhibit No. Description
3.i Articles of Incorporation of the Company**
3.ii By-laws of the Company**
4 Specimen Share Certificate*
22 Published report regarding matters submitted to vote
- Definitive Proxy***
* Incorporated by reference to registrant's Amendment No. 2 to
Registration Statement on Form S-18 as filed on January 25, 1989.
** Incorporated by reference to the registrant's Registration Statement on
Form S-18 as filed November 16, 1989.
*** Incorpored by reference to DEF 14A as filed by the registrant on
December 12, 1996.
(b) Reports on Form 8-K in the Fourth quarter of fiscal year 1996: None
Note: Copies of Exhibits to Form 10-KSB will be furnished upon the written
request of any shareholder of the Company at a charge of $.25 per page plus
postage or shipping.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by
undersigned, thereunto duly authorized.
Environmental Monitoring & Testing Corporation
Date December 1, 1996 By /s/ George J. Georges
George J. Georges, President and CEO
In accordance with 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 date indicated.
Signature Capacity Date
/s/ George J. Georges President and Chief December 1,1996
George J. Georges Executive Officer and
Director
/s/ Stephen A. Lassak Director and Executive December 1,1996
Stephen A. Lassak Vice President and Chief
Financial Officer
/s/Rebecca Del Medico Director December 1, 1996
Rebecca Del Medico
