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, 1997
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, 1997 its most recent
fiscal year were $274,092.
The aggregate market value of the registrant's common stock held by non-
affiliates as of November 30, 1997 was approximately $67,015. The number of
shares of the registrant's common stock outstanding as of November 30, 1997
was 3,975,383.
Documents Incorporated by Reference: Definitive Proxy Statement for 1997
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 core drilling.
The Company is classified as a special trade contractor within the c
onstruction 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
200 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 on-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
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 one
mile from the Company's home office in New Ellenton, South Carolina.
The Company derived approximately 85 percent and 98 percent of its revenue in
the fiscal years ended September 30, 1997 and 1996, 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 c
ontracts 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 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 30, 1997 the backlog of signed and verbal contracts totaled
approximately $80,000, 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
1997. 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 30, 1997 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 November, 1996 the Company's management identified four drill rigs that
were to be liquidated. During 1997, the Company sold these four drill rigs
and 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 four drilling rigs, including one auger rig
and three 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 sought unspecified actual and punitive damages.
In June 1997, the Company agreed to settle this legal action with prejudice
for a total cost of $131,755 which included the settlement plus legal
expenses. This action was taken in order to minimize the exorbitant costs of
litigating these types of claims and to avoid diverting the attentions of the
Company's officers from the operations of the Company. The Company did not
admit liability and maintains that this action was without merit.
Item 4. Submission of Matters to a Vote of Security Holders
None during the quarter ended September 30, 1997.
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>
Bid Prices (1)
<S> <C> <C>
Common Stock High Low
First Quarter Ending 12/31/96 $ 1/8 $ 1/16
Second Quarter Ending 3/31/97 $ 1/8 $ 1/16
Third Quarter Ending 6/30/97 $ 1/8 $ 1/16
Fourth Quarter Ending 9/30/97 $ 1/8 $ 1/16
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, 1997 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 employees. The Company
has continued its aggressive program of selling unproductive assets. During
the year the Company sold four drilling rigs and various tooling. These asset
sales resulted in a gain on sale of assets and an increase of positive cash
flow of $246,700. 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.
The Company has suffered recurring losses from operations which raise
substantial doubt about its ability to continue as a going concern.
Comparison of Fiscal Years 1997 and 1996
Contract revenue decreased approximately $160,000 or 37% in 1997 as compared
to 1996. The Company believes the declines in the revenue have been affected
by four factors: 1) Interruption of Federal and State 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.
Direct contract costs decreased $97,000 or 45%, and decreased 6.5% of revenue
for the year ended September 30, 1997. Of this $79,000 represents decreases
related to the decrease in revenues and are attributable to the following:
material costs decreased $8,000 and direct labor and travel related expenses
decreased $5,000 . Other costs decreased $5,000.
Indirect contract costs increased $43,000 or 36% and increased 32% as a
percent of revenue for the year ended September 30, 1997. The percentage
increase was a result of an increase in indirect labor for expenses incurred
to maintain a core drilling staff and expenses for repairing and refurbishing
equipment.
Selling, general and administrative expenses increased $32,000 or 17% and
increased 38% as a percent of revenue for the year ended September 30, 1997.
Salaries increased $46,000 because of the addition of another executive
officer. The percentage increase is also a result of fixed administrative
expenses being compared to reduced revenues in 1997.
Depreciation expense decreased $54,000 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 $583,707 and a net book
value of $105,827 was sold with cash proceeds of $247,600 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 proceeds of
$9,000 being realized and a partial recovery of $15,000 on a previously
uncollectible note. These were both recorded as other income.
Interest income is a result of the investment of cash in short term treasury
instruments.
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
$1,538,000 and $1,538,000 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 1997 and 1996, the Company generated its working capital and
capital expenditure requirements 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, 1997, the Company had working capital
of $96,600 and a current ratio of 3.5 to 1. At September 30, 1997, the total
indebtedness aggregated $39,000 and shareholders' equity was $450,175. At
September 30, 1997 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 State 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 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 1997 and 1996. 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".
The Company has incurred a net loss of approximately $272,000 in 1997. Over
the last few years sales, working capital, and shareholders' equity have
declined due to a weakness in the demand for services provided by the
Company. The Company has been able to survive by selling excess equipment. In
1997 it had tooling and equipment sales of $255,000. As of September 30, 1997,
the Company does not have significant excess equipment to sell to generate
adequate working capital. Although the Company has positive working capital of
$97,000 and shareholders equity of $450,000 and has been able to meet its
obligations in the normal course of business, if the Company does not obtain
sufficient sales to achieve profitable operating results, the Company may not
be able to meet its obligations in the future. These factors raise
substantial doubt as to the ability of the Company to continue as a going
concern. The company's ability to continue as a going concern depends upon
successfully achieving profitable operations and raising sufficient working
capital. Due to the weakness in the demand for services the Company provides, it
must diversify and pursue profitable acquisitions or mergers.
Item 7. Financial Statements
INDEX
Page
Reports of Sweeney, Gates & Co. Independent Auditors. . . . . . . . . 13
Balance Sheet as of September 30, 1997 . . . . . . . . . . . . . . . . 14
Statement of Operations for Years Ended September 30, 1997 and 1996. . 15
Statement of Changes in Stockholders' Equity for Years Ended
September 30, 1997 and 1996. . . . . . . . . . . . . . . . . . . . . . 16
Statement of Cash Flows for Years Ended September 30, 1997 and 1996. . 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, 1997, and the related statements 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, 1997 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.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations which raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters
are described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Sweeney, Gates & Co.
Fort Lauderdale, Florida
October 17, 1997
<PAGE>
ENVIRONMENTAL MONITORING & TESTING CORPORATION
BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 42,756
Accounts receivable 87,507
Inventories 2,500
Other current assets 2,700
_________
Total current assets 135,463
Property, plant and equipment, net 353,544
_________
$ 489,007
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,038
Accrued expenses 16,794
Total current liabilities 38,832
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 1,972,883
Accumulated deficit (1,387,221)
__________
647,102
Less: Cost of treasury stock, 2,168,617
shares held at September 30, 1997 (196,927)
Total stockholders' equity 450,175
__________
$ 489,007
</TABLE>
The accompanying notes are an integral part of these financial
statements.
ENVIRONMENTAL MONITORING & TESTING CORPORATION
STATEMENT OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<S> <C> <C>
1997 1996
____ ____
Contract revenue $ 274,092 $ 433,781
_________ _________
Contract costs and expenses:
Direct contract cost 118,217 214,988
Indirect contract cost 161,692 118,714
Selling, general and administrative expenses 235,259 193,646
Depreciation 64,161 118,159
(Gain) on sale of machinery and equipment (140,873) (61,689)
_________ _________
Total contract costs and expenses 438,456 583,818
Loss from operations (164,364) (150,037)
_________ _________
Other income (expenses):
Interest income 6,571 5,202
Settlement of litigation (131,755)
Loss on advances to Jansko, Inc. - (385,841)
Other, net 17,747 9,028
_________ _________
Total other income (expenses) (107,437) (371,611)
_________ _________
Net (loss) before income taxes (271,801) (521,648)
Income taxes - -
_________ _________
Net loss $(271,801) $(521,648)
========= =========
Net loss per common share $ (0.07) $ (0.14)
========= =========
Weighted average common shares outstanding 3,828,260 3,825,383
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
ENVIRONMENTAL MONITORING & TESTING CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
Capital
Common Treasury in excess Retained
Shares Amount Shares Amount of par (Deficit) Total
______ ______ ______ ______ __________ _________ _____
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
September 30, 1995 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,
September 30, 1996 6,144,000 61,440 (2,318,617) (196,927) 1,963,508 (1,115,420) 712,601
Issuance of common stock
to employees 150,000 9,375 9,375
Net (loss) - - - - - (271,801) (271,801)
_________ _________ _________ _________ _________ __________ ________
Balance,
September 30, 1997 6,144,000 $ 61,440 (2,168,617) $(196,927) $1,972,883$(1,387,221) $ 450,175
========= ========= ========= ========= ========== ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
ENVIRONMENTAL MONITORING & TESTING CORPORATION
STATEMENT OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<S> <C> <C>
1997 1996
____ ____
Cash flows from operating activities:
Net (loss) $ (271,801) $ (521,648)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 64,161 118,159
Gain from sale of machinery and equipment (140,873) (61,689)
Issuance of common stock for services 9,375 -
Losses on advances from Jansko, Inc. - 385,841
Changes in certain assets and liabilities:
Inventories 1,500 1,000
Accounts receivable 98,142 (136,643)
Other current assets 21,855 (16,880)
Accounts payable (11,428) 19,159
Other current liabilities (14,670 20,573
__________ __________
Net cash used in operating activities (243,739 (192,128)
__________ __________
Cash flows from investing activities:
Sale of machinery and equipment 246,700 61,750
Advances made to Jansko, Inc. (35,841)
__________ __________
Net cash used in investing activities 246,700 25,909
__________ __________
Net increase in cash and cash equivalents 2,961 (166,219)
Cash and cash equivalents, beginning of period 39,795 206,014
__________ __________
Cash and cash equivalents, end of period $ 42,756 $ 39,795
========== ==========
Supplemental disclosure :
Issuance of common stock for services $ 9,375 $ -
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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 principally in South Carolina and Georgia.
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, 1997.
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.
Recoverability of long-lived assets
The Company has adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of." The Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may
not be recoverable. The Company is not aware of any events or circumstances
which indicate the existence of an impairment which would be material to the
Company's 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.
Loss Per Share
Net losses per common share are computed by dividing net loss by the weighted
average number of common shares outstanding during the periods.
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 State 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. GOING CONCERN CONSIDERATIONS AND MANAGEMENT'S PLANS
The accompanying financial statements have been presented in accordance with
generally accepted accounting principles, which assume the continuity of
the Company as a going concern. However, as disclosed in the financial
statements, the Company has incurred a net loss of approximately $272,000 in
fiscal year 1997. The 1997 loss from operations was $164,364 and sales were
$274,000. Over the last few years sales, working capital, and shareholders'
equity have declined due to a weakness in the demand for services provided by
the Company. The Company has been able to survive by selling excess
equipment. In 1997 it had tooling and equipment sales of $255,000. As of
September 30, 1997, the Company does not have significant excess equipment
to sell in the future in order to generate adequate working capital. Although
the Company has positive working capital of $97,000 and shareholders equity of
$450,000 and has been able to meet its obligations in the normal course of
business, if the Company does not obtain sufficient sales to achieve
profitable operating results, the Company may not be able to meet its
obligations in the future. These factors raise substantial doubt as to the
ability of the Company to continue as a going concern.
The company's ability to continue as a going concern depends upon
successfully achieving profitable operations and raising sufficient working
capital. Due to the weakness in the demand for services the Company provides,
it must diversify and pursue profitable acquisitions or mergers.
4. PROPERTY, PLANT AND EQUIPMENT
At September 30, 1997, property, plant and equipment consisted of the following:
<TABLE>
<S> <C> <C>
Useful Lives
Years
____________
Land $ 109,617
Buildings and improvements 304,958 30
Drilling equipment and vehicles 410,603 2 - 7
Furniture and fixtures 9,460 3 - 5
___________
834,638
Less accumulated depreciation (481,094)
___________
Property, plant and equipment, net $ 353,544
===========
</TABLE>
5. LEASES
The Company rents equipment on an as needed basis for terms of one day to
several months. The Company also leased one vehicle under an operating lease
arrangement which expired in 1997. Rent expense for the years ended September
30, 1997 and 1996, was approximately $3,900 and $9,392 respectively.
6. 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.
As of September 30, 1997, there were no options issued under the plan.
7. INCOME TAXES
The Company accounts for income taxes 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, 1997 includes deferred tax assets and liabilities
attributable to the following items:
<TABLE>
<S> <C>
Deferred tax assets (liability):
Accrual to cash basis of accounting $ (16,977)
Depreciation (10,659)
Investment credit carry forwards 6,933
Net operating loss carry forwards 584,455
___________
Net deferred tax asset (liability) 563,752
Valuation allowance for deferred tax assets (563,752)
___________
Net deferred asset tax (liability) $ 0
===========
</TABLE>
As of September 30, 1997, the Company had available a cumulative federal net
operating loss carry forward of approximately $1,538,000 which expires as
follows: $198,000 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. 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.
8. STOCKHOLDERS' EQUITY
In September 1997 stock awards for 150,000 shares of restricted common stock
of the Company were authorized by the Board of Directors and awarded to an
officer and director of the Company. The restricted common shares issued
resulted in a $9,375 charge against current period income.
9. 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
pproximately 85 percent and 98 percent of its revenue in the years ended
September 30, 1997 and 1996, respectively, from a single customer, the
Westinghouse Savannah River Company, a material processing facility owned by
the United States Department of Energy.
10. 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 sought unspecified actual and punitive damages.
In June 1997, the Company agreed to settle this legal action with prejudice
for a total cost of $131,755 which included the settlement plus legal
expenses. This action was taken in order to minimize the exorbitant costs of
litigating these types of claims and to avoid diverting the attentions of the
Company's officers from the operations of the Company. The Company did not
admit liability and maintains that this action was without merit.
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, 1997.
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 and supplement thereto 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.
(b) Reports on Form 8-K in the Fourth quarter of fiscal year 1997: 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 29, 1997 By /s/George J. Georges
George J. Georges, Chairman,
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 Chairman, President, December 29, 1997
George J. Georges Chief Executive Officer
and Director
/s/ Michael Camino Director December 29, 1997
Michael Camino
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 42,756
<SECURITIES> 0
<RECEIVABLES> 87,507
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 135,463
<PP&E> 834,638
<DEPRECIATION> 481,094
<TOTAL-ASSETS> 489,007
<CURRENT-LIABILITIES> 38,832
<BONDS> 0
0
0
<COMMON> 1,837,396
<OTHER-SE> (1,387,221)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 489,007
<TOTAL-REVENUES> 274,092
<CGS> 344,070
<TOTAL-COSTS> 438,456
<OTHER-EXPENSES> (107,437)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (271,801)
<INCOME-TAX> 0
<INCOME-CONTINUING> (271,801)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (271,801)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
