UNITED STATES
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 August 31, 1996.
Commission File No.: 0-24506
DELTA-OMEGA TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1100774
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
119 Ida Road, Broussard, Louisiana 70518
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(318) 837-3011
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK $.001 PAR VALUE
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ( ) No (X)
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B not contained in this form, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB. (X)
Revenues for the issuer's most recent fiscal year: $847,191
As of October 31, 1996 there were 12,745,320 shares of Common
Stock outstanding and the aggregate market value of the
Common Stock held by non-affiliates was approximately $5,067,535.
Documents incorporated by reference: The Definitive Proxy
Statement for the Annual Meeting of Shareholders will be filed
with the Commission within 120 days after the close of the fiscal
year is incorporated by reference into Part III.
Please see item 13 for the exhibit index.
Item 1. Business
GENERAL
Delta-Omega Technologies, Inc. (Delta-Omega) was organized under
the laws of the state of Colorado on December 22, 1988 as
Barclay's West, Inc. In November 1989, the Company acquired, via
a share exchange agreement, all of the outstanding securities of
Delta-Omega Technologies, Ltd. and on December 22, 1989, changed
its name from Barclay's West, Inc. to Delta-Omega Technologies,
Inc. to reflect the acquisition.
Prior to fiscal 1993, Delta-Omega was a development stage company
whose main objective was to conduct research and development.
The Company has essentially completed a majority of the research,
development and testing of its products and has now begun to
market them. In September 1992, the Company assumed an operating
status, began operations in September 1993 and in January of 1994
began to build its core staff of marketing, sales, financial and
administrative personnel.
SPECIALTY CHEMICALS
Delta-Omega Technologies, Ltd. is engaged in the development,
manufacture and marketing of environmentally safe specialty
chemicals for use in a variety of industrial and military
applications. These products are deemed to be environmentally
safe because they are water-based, non-toxic and biodegradable.
These products replace hazardous, flammable, toxic and ozone
depleting chemicals in a broad range of cleaning and emergency
response applications. Delta-Omega is developing proprietary
products that address large markets where there is limited
environmentally safe competition or little or no existing
products that provide effective performance.
Solvent Replacement Products
DOT 111/113 is a water-based, non-toxic, biodegradable,
patented cleaning solution for use on metal and other hard
surfaces. The product can replace chlorinated solvents
scheduled for elimination under the U.S. Clean Air Act and
other environmentally objectionable cleaning solvents in
specific cleaning applications. It is used to remove
hydrocarbon and other organic residue as well as inorganic
material from surfaces and is non-corrosive to a wide array
of metals, plastics, rubber and other materials. DOT
111/113 conforms to the requirements of MIL-C-87937B, Type
II which establishes the requirements for environmentally
safe cleaning for aircraft and aerospace equipment for the
U.S. Air Force. It conforms to NASA test protocol for use
in cleaning liquid oxygen systems and is accepted by the
U.S. Navy as a pre-cleaner for oxygen systems. It is also
used to clean outer surfaces of aircraft and bare metal
prior to painting among many other general uses.
In May 1996, the Company was awarded a one (1) year contract
with a two (2) year renewal option to supply an aircraft
cleaning compound to the Defense General Supply Center
(DGSC), a Department of Defense organization which is
headquartered in Richmond, Virginia. The contract is
estimated to generate revenues in excess of a half-million
dollars annually.
ATTAR is a newly developed series of water-based products
designed to address the needs of industry and the military
for a heavy-duty, biodegradable, environmentally safe
cleaner/degreaser. This product is designed to complement
the light to medium duty cleaner, DOT 111/113 , and is
designed to be a safe alternative to ozone-depleting
chemicals and flammable, hazardous solvents used to remove
heavy baked-on oils, synthetic lubricants and carbon
deposits.
The product is non-corrosive to a wide variety of metals,
metal alloys, painted surfaces, plastics and other similar
materials. The base formulation is highly versatile and can
be modified to meet specific cleaning requirements.
Institutional and Industrial Products
Omni-Clean SD is a multi-use product that is water-based,
non-toxic and biodegradable and designed to address the
specific needs of the institutional and industrial markets.
It creates no adverse health effects for users. Its uses
include cleaning pots and pans, floors, laundry as well as
general purpose cleaning. Omni-Clean SD can reduce chemical
use hazards (including associated liability) and increase
safety and efficiency while reducing costs. This product
has been USDA accepted for certain uses and is presently
being sold to hotels, restaurants, fast food chains, laundry
services, oilfield and janitorial service companies.
Omni-Clean SD is also used by the barge and tank industry to
clean various residuals from storage vessels. It
significantly reduces the amount of washwater used in the
cleaning process. Its unique cleaning properties displace
the contaminant from the vessel wall and phase invert them
allowing the waste to be skimmed from the surface and the
product reused. This product has no constituents reportable
under federal guidelines.
Omni-Clean EC is a newly developed proprietary surfactant
blend designed to ensure efficient oil removal and rapid
water-wetting of solids for a variety of oil-wet solids. It
can be used to clean petroleum industry oriented storage
vessels that are used to store or transport drilling muds,
drill cuttings and petroleum products.
EXCEL-95 was developed to compete with low-end oilfield
cleaners and degreasers. EXCEL-95 contains no reportable
quantities of regulated chemicals and does not produce oily
residues that dissolve into water which creates a potential
discharge problem. It is biodegradable, non-flammable and
has a high tolerance for metals usually found in oilfield
production water. It is clean-rinsing and is not harmful to
Personnel or equipment (painted and unpainted). EXCEL-95
can be applied in a broad spectrum of oilfield and maritime
uses, including removal of API modified pipe dope used in
drilling operations. It is also effective as a cuttings
washing compound for drilling operations.
Firefighting and Spill Response
Vulcan is a foam concentrate product line used to combat
flammable liquid and petroleum fires. These products are
non-toxic and non-corrosive and are successful in mitigating
the threat of fire and explosion while introducing no new
contaminants to the local environment. This is accomplished
through the formation of a lasting, stable, heat resistant
foam blanket which excludes oxygen from the burning
flammable liquids. The products have a low surface tension
which allows them to penetrate into cracks and crevices and
cling to surfaces, forming a thick foam blanket on vertical
curved and horizontal surfaces. These products can be used
effectively on petroleum, alcohol, and other flammable
liquid fires. Many, if not all, of the commercially
available firefighting foams dissolve significant amounts of
hydrocarbons into water, thereby enhancing the spread of
contaminants into the local environment which must then be
remediated at significant costs. Vulcan foams encapsulate
hydrocarbons thus preventing their spread. Most of the fire
fighting foams currently used today contain chemicals which
are reportable under federal guidelines while the Vulcan
products do not. Two (2) Vulcan firefighting foam
concentrates earned Underwriters Laboratories listings in
December of 1995. These listings enable the Company to
market the listed products to customers who require
qualified products.
HazClean -ER is a patented formulation listed on the U.S.
Environmental Protection Agency's National Contingency Plan.
It is accepted for use by the Louisiana Department of
Environmental Quality in responding to hydrocarbon spills
and contamination. The product mixes with hydrocarbons when
applied with water and suppresses dangerous vapors thus
mitigating the threat of fire and explosion. HazClean -ER
enhances the bioremediation of contacted hydrocarbon
contaminants which is generally the most cost effective
remediation practice for the low levels of hydrocarbons
typically encountered in post spill scenarios. The uses of
emergency response agents such as HazClean -ER introduce no
new contamination while promoting the natural biological
decay of hydrocarbons which lowers cleanup costs.
Soil Remediation Chemicals
CreoSolv is a newly developed patent pending product
designed to remove polynuclear aromatic hydrocarbons (like
creosote) and other similar hydrocarbons from most surfaces,
especially soil, and is used in conjunction with a
mechanical soil washing process. The CreoSolv solution is
mixed with the contaminated soil which solubilizes the
contaminant into the liquid solution. The liquid is
separated from the soil and the contaminant is recovered
from the liquid solution by chemical and physical means for
disposal or in some cases recycling. The cleaned soil can
be returned to the site. In September 1994, the Company
conducted extensive tests for a division of the
Environmental Protection Agency on an actual site
contaminated with creosote. This technology was evaluated
as an alternative for the remediation of creosote and
similar hydrocarbon contaminants from soil. Independent
laboratory results showed the soil to be cleaned to levels
at or below levels achieved using incineration.
HazClean -SR can be used in conjunction with a mechanical
soil washing process or in land farming techniques.
Currently, efforts to remediate hydrocarbon contamination
from soil include, among others, removal of polluted
materials to a "less sensitive" location and/or
incineration. These methods do not always eliminate
pollution permanently, may not be cost effective and may
result in undesirable side effects and potential future
liability.
HazClean -SR can be applied directly to the ground or tilled
soil. The product encapsulates the hydrocarbons thus
preventing their spread. The product contains nutrients
that enhance natural biodegradation. The Company's process
is designed for the remediation of hydrocarbon contamination
from soil, limestone, gravel or other materials used in
parking lots, storage yards and access roads. The process
may have secondary uses in the remediation of some forms of
hazardous wastes, pesticides or organics to the extent that
they are carried in an oil-based medium.
TUBOSCOPE VETCO ENVIRONMENTAL SERVICES, INC. (TVES)
Delta-Omega signed a letter of intent to acquire TVES on August
21, 1995. The letter of intent gave Delta-Omega a due diligence
period through December 18, 1995 during which time Delta-Omega
had the exclusive right to acquire a lease purchase agreement and
rights to use certain patents and equipment. The Company
terminated the letter of intent December 15, 1995.
SPECIAL SERVICES
In April of 1996, the Company signed a one (1) year contract with
Allwaste Environmental Services of Louisiana, a wholly-owned
subsidiary of Allwaste, Inc. which provides comprehensive
solutions for industrial America, including environmental,
maintenance, container, energy and waste water services. The
initial term of the contract is for twelve (12) months with
renewal options for subsequent one year periods and is expected
to generate annual revenues in excess of $400,000. The Company
will be the exclusive supplier to this subsidiary of Allwaste,
Inc. for its chemical cleaning products.
MARKET SEGMENT DATA
Total product sales for the year ended August 31, 1996 were
$847,191 as compared with total product sales for the year ended
August 31, 1995 of $426,177.
Product Sales For the Fiscal Years Ended
August, 1992 through 1996
1996 1995 1994 1993 1992
Solvents,
Cleaners &
Degreasers $738,909 $296,761 $293,019 $91,463 $77,756
Firefighting
& Spill
Response 106,688 82,099 175,728 32,127 39,015
Soil
Remediation 1,594 36,309 35,070 - -
Soil Washing
(TVES)* - 11,008 - - -
Total $847,191 $426,177 $503,817 $123,590 $116,771
* - Letter of intent terminated on December 15, 1995.
MARKETS
Specialty Chemicals
The Company markets its products through regional or nationally
recognized distribution organizations, via private label
arrangements and through direct customer contact with its own
sales force.
The Company prices its products competitively and, in some cases,
below the price of existing products and methods. The products
are also promoted as cost savers through the reduction of current
and future environmental liabilities and reducing, or in some
cases eliminating the health hazards to employees.
The Company's products have been gaining acceptance in markets
where governmental policy, public safety and economics are
mandating changes from presently used products and services. By
gaining regulatory agency acceptance for the use of the Company's
products in specialized fields where available products and
technology are limited and sometimes costly, the Company's
products and their uses are becoming more attractive to end-users
and to distributors for sales to end-users.
Soil Remediation Services
Soil washing is strictly a technological service performing pile
to pile soil remediation services. The Company will, on most
projects, team up with companies that perform all other aspects
of the project such as excavation, site preparation, sampling,
analytical, and reclamation. This is done through subcontracts
or joint ventures. Most of the large contracts are awarded to
large engineering-consulting firms that manage all aspects of the
project. The Company markets its technology to these E-C firms
either on a subcontract or joint venture basis offering a price
per ton of material treated.
Services can also be marketed directly to end-user clients on a
cost per ton basis. Services provided in this case also include
project management and subcontracting of excavation and various
other ancillary services.
Types of sites eligible for soil washing include CERCLA
(Superfund Sites), RCRA (Corrective Action), Department of
Defense Sites, Department of Energy sites (Radionuclide Volume
Reduction), Underground Storage Tank cleanup, Dredge Spoils,
Oilfield Drill Cuttings & NORM, Low Level Radioactive Sites
(Uranium Mining, etc.), PNAs, PCPs, PCBs, PAHs, etc., and Heavy
Metals.
Drilling Mud Recycling Process (MRP)
The Company has successfully field tested a unique technology for
recovering barite and oil from spent drilling muds. This process
technology utilizes a proprietary cleaning mixture which
separates the oil from the barite within an aqueous medium. The
process recovers more than 95% of the barite at high purity
levels. This material can be reused as a constituent in the
production of water or oil based drilling muds. The synthetic
oil recovered in this process can be sold or reused in mud
applications. The mud recycling process (MRP) offers significant
cost savings over current management practices involving spent
drilling muds. The market value of the recovered barite and
oils is expected to more than offset processing costs. The
Company is currently in contact with major drilling mud companies
to optimize the MRP technology to their specific needs and reuse
markets.
RAW MATERIALS
There have proven to be ample supplies of the raw materials
needed by the Company to manufacture its products and the Company
anticipates no raw material supply shortages in the foreseeable
future. Raw materials and finished products are typically
transported via truck and rail.
PATENTS, TRADEMARKS AND LICENSES
The Company owns all rights to HazClean -EFFF for which U.S.
Patent No. 5,061,383 was granted in October 1991. The Company
owns all rights to DOT 111/113 for which U.S. Patent No.
5,308,550 was granted in May 1994.
There are no ongoing royalty requirements borne by the Company in
the exploitation of its patents. The Company maintains the
formulations for its various products as a trade secret and no
one has access to the formulations who is not subject to a trade
secret and non-disclosure agreement.
REGULATION
The Company's chemical products are non-toxic, non-hazardous, and
therefore, non-reportable. Should the guidelines be amended to
affect the Company's products, Management believes the Company
has the capability to substitute the affected constituent. While
this may temporarily affect the "environmentally safe" marketing
aspect of the affected product, Management does not believe it
will have any long term impact.
The soil washing operations are subject to permits from the
appropriate state environmental regulatory authorities for
processing and reclaiming solid or hazardous waste. The Company
foresees no problems with obtaining these permits.
COMPETITION
Competition in the specialty chemical industry is provided by
numerous companies. Most of these companies have substantially
greater resources and marketing capabilities than Delta-Omega.
As a result, the Company's strategy is not to compete directly in
the marketplace against these large companies, but to do so
through distributors with large established markets. Other
competitive factors include price, performance and safety in use
with which the Company can effectively compete.
Soil washing to extract the most difficult hydrocarbons is a new
technology with few known competitors. The Company has
significant competitive advantage because it offers a technology
that can treat all soil types, including the fine clay and silt
fractions. This ability makes the Company's system more
economical since the fine soil components do not have to be
removed from the site for disposal or treatment as is generally
the case with competitor's systems.
Soil washing also competes with other remediation technologies,
predominantly landfilling. These other technologies have been
used in standard remediation practices and currently dominate the
soil remediation market.
RESEARCH AND DEVELOPMENT
In fiscal year 1996, Delta-Omega has focused its research and
development efforts primarily on projects related to drilling,
production and performance chemical applications that are unique
to the oil and gas industry. The Company has developed and
successfully tested a unique technology for recovering barite and
oil from spent drilling muds. This process technology utilizes a
proprietary cleaning mixture which separates the oil from the
barite within an aqueous medium.
Other research and development projects the Company focused on
was the development of its chemical product and soil washing
technology to remove hydrocarbons and other contamination from
the fine fractions of soil. The Company also focused on
preparing its fire foams to undergo testing to receive
Underwriters Laboratories (UL) listings. Confirmation of
successful completion of all but one of the UL tests was obtained
in September of 1995. The testing of the long term effects of
the foam products on the containers was completed on November 30,
1995. In-house testing has shown that the foams are compatible
with container materials. Two formal and final written UL
listings were received in December of 1995.
In the first quarter of fiscal year 1997, the Company expects to
hire additional technical personnel holding advanced chemical and
engineering degrees with the intention of the Company being able
to assemble the most capable working group possible.
The Company currently has 12 full-time non-union employees at the
corporate headquarters in Broussard, Louisiana. The Company also
retains the services of qualified consultants relative to
marketing projects, technical support and product development.
ENVIRONMENTAL COMPLIANCE AND ENVIRONMENTAL MATTERS
The Company's chemical business is subject to federal and state
regulations regulating the discharge of materials into the open
environment. These regulations affect the Company's competition
as well. Few of the Company's raw materials and none of the
Company's finished products are reportable under federal or state
guidelines. The cost of compliance with these regulations is
not considered material and no capital expenditures are
anticipated for compliance with regulations.
The soil washing operation, in most cases, provides sub-contract
services to separate contaminants from soil and does not provide
for the disposal of those contaminants. It is therefore not
exposed to liabilities with respect to hazardous waste handling
or disposal. Hazardous waste handling is usually handled by the
E-C firm acting as the prime contractor.
Item 2. Properties
The Company's consolidated executive office, blending and
warehouse facilities are located at 119 Ida Road, Broussard,
Louisiana 70518. The Company leases approximately 16,000 square
feet under a non-cancelable five year lease from C&M Land Account
at $6,000 per month with an option to renew for an additional
five years at an increase of $1,200 per month. Mr. Donald P.
Carlin, a director of the Company is an affiliate of C&M Land
Account, which is the lessor.
Item 3. Legal Proceedings.
There is no material, pending litigation significant to the
business to which the Company is a party or against any of its
Officers or Directors as a result of their capacities with the
Corporation.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders of the
Company during the quarter ending August 31, 1996. Annual
meetings of the shareholders of the Company are held in
accordance with Colorado law.<PAGE>
PART II
Item 5. Market for Company's Common Equity and Related
Stockholder Matters.
PRINCIPAL MARKET OR MARKETS
The Company's common stock is quoted in the "Pink Sheets"
maintained by National Quotation Bureau, Inc. On October 31,
1996, there were 13 market makers in the Company's securities and
the closing bid quotation was $ .63. The following table sets
forth the high and low bid quotations for the Company's Shares,
as reported in the "Pink Sheets."
BID
QUARTER ENDED LOW HIGH
August 31, 1994 $ 7/8 $ 1 5/16
November 30, 1994 13/16 2 5/16
February 28, 1995 3/4 1 3/4
May 31, 1995 9/16 1 1/4
August 31, 1995 17/32 1 3/4
November 30, 1995 5/16 1
February 29, 1996 1/16 17/32
May 31, 1996 1/16 3/4
August 31, 1996 5/8 1 1/32
These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not represent actual
transactions.
APPROXIMATE NUMBER OF HOLDERS OF THE COMPANY'S SECURITIES
On October 31, 1996, there were 254 registered holders and
approximately 1,200 beneficial owners of the Company's common
stock held in street name at brokerage houses. As of October 31,
1996, there were 24 holders of the Company's series B preferred
stock and 23 holders of the Company's series C preferred stock.
DIVIDENDS
Holders of common stock are entitled to receive dividends
declared by the Company's Board of Directors. The Company has
not yet paid any dividends on the Company's common stock and the
Board of Directors of the Company presently intends to pursue a
policy of retaining earnings, if any, for use in the Company's
operations and to finance expansion of its business.
Holders of the Company's series B preferred stock are entitled to
a dividend of $.07 per share payable in cash or the Company's
common stock payable on June 30 of each year until June 30, 1999.
Holders of the Company's series C preferred stock are entitled to
a dividend of $.0525 per share payable in cash or the Company's
common stock payable on June 30 of each year until June 30, 2001.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
During fiscal 1996, Delta-Omega produced net sales of $847,191
which represents an increase of 99% compared to fiscal 1995 net
sales of $426,177. Fiscal 1996 sales of the Company's solvents,
cleaners and degreasers increased to $738,909 from $296,761 in
fiscal year 1995. Fiscal 1996 sales of firefighting and spill
response agents increased 30% to $106,688 from $82,099 for fiscal
1995. Sales of soil remediation chemicals for fiscal 1996
decreased from $36,309 in the prior year to $1,594. Sales of
solvent replacement products increased with the federally
mandated December 31, 1995 phase-out of chlorinated solvents and
the June 1, 1996 award of a supply contract to furnish an
aircraft cleaning compound for one (1) year. Sales of
firefighting products increased after two (2) fire fighting foam
concentrates earned Underwriters Laboratories listings in
December 1995. Sales of soil remediation chemicals decreased as
the Company focused its resources on its core chemical
businesses, solvent replacement and industrial cleaners. Sales
of industrial and institutional products increased with the award
of a contract to supply chemical cleaning products to a large
specialized waste handling and container cleaning company that
serves the oil industry in the Gulf Coast region.
Gross profits increased to $271,768 in fiscal 1996 from $163,126
in fiscal 1995 due to an increase in sales. Gross profit as a
percentage of sales decreased 6% to 32% in fiscal 1996 due to a
greater percentage of sales in 1996 being derived from
institutional and industrial products and military contracts.
Sales in these markets are more competitive and yield lower
margins.
Total operating expenses decreased during fiscal 1996 to
$1,304,667 from $1,647,073 in fiscal 1995. Of the $1,304,667
fiscal year 1996 expenses, $223,352 are non-recurring
expenditures incurred when the operations of Tuboscope Vetco
Environmental Services (TVES) were assumed on July 17, 1995. The
letter of intent for the Company to acquire the assets and assume
operations of TVES was terminated effective December 15, 1995.
Salaries during fiscal 1996 decreased $200,000 from fiscal 1995
because the Company reduced the number of employees in sales and
administration. Research and development costs decreased
$80,000 in fiscal 1996 from 1995 and lodging and travel expense
decreased $75,000 in fiscal 1996 from 1995 due to the stringent
spending controls instituted by management in the last half of
the fiscal year. Amortization expense increased $38,000 during
fiscal 1996 due to capitalized foreign patents the Company will
not prosecute and the associated costs were written off.
Net loss for fiscal 1996 was $1,051,632, a 27% reduction from net
losses of $1,439,021 incurred during fiscal 1995.
CAPITAL RESOURCES AND LIQUIDITY
The Company considers cash and cash equivalents as its principal
measure of liquidity. These items total $1,536,152 at August 31,
1996. The Company's short term debt totals $25,328 with total
debt being $67,058 or 3% of equity. Since the Company commenced
operations, substantial funds have been required to gain
appropriate certifications and accreditations for the respective
specialized areas served by the Company's products. This
resulted in recurring losses and negative cash flows from
operations. The Company has been successful in obtaining several
key certifications on its product line, while simultaneously
making initial sales and re-orders to potentially large
customers.
The Company enhanced its liquidity in the third quarter of fiscal
year 1996 by completing a private offering of Series C Preferred
Stock solely to accredited investors and raised approximately
$1.8 million. Proceeds from this offering are used to fund the
recurring losses and negative cash flows until the Company is
able to generate sufficient sales to become profitable. A
portion of the proceeds will be used to expand the Company's
technical capabilities, with the addition of advanced degreed
personnel and the purchase of specialized laboratory equipment.
Management believes that sales from a contract awarded to the
Company in April 1996 by a specialized cleaning company will
exceed $400,000 in fiscal year 1997. The Defense General Supply
Center contract awarded in May 1996 to furnish an aircraft
cleaning compound to the United States Air Force has the
potential to generate approximately $600,000 in fiscal year 1997.
With two of the Company's firefighting foam concentrates earning
UL listings, the Emergency Response Division is able to bid on
supplying these products to municipal and commercial firefighting
organizations that only entertain listed products. Sales of
industrial cleaners will improve as the environmental and worker
safety advantages of these products gain acceptance. One of the
Company's soil remediation products and a portion of its soil
remediation unit were included as integral parts of a bid on soil
washing submitted to a major aviation company by a recognized
remediation company. Product sales associated with this
contract, if awarded, could reach $350,000 in fiscal year 1997,
although the Company is not assured of being awarded the
contract.
The Company has successfully demonstrated a new technology for
recovering barite and oil from spent drilling muds. This unique
technology has commercial potential for the oil and gas
exploration business. Negotiations are underway with leading
service companies to form an alliance consisting of their
equipment combined with the Company's product and technical
support. The Company expects to have an alliance structured and
operational in fiscal year 1997. No estimate of revenues are
possible in this early stage of development because the results
of this technology have to be commercially explored. All
indications to this point, however, are positive and major oil
companies are awaiting demonstrations and briefings from the
alliance.
Management believes, although no assurances can be made, sales
will continue to increase and cash flows from operations will
improve in fiscal year 1997.
Except for historical information contained herein, statements in
this discussion are forward looking statements. Forward looking
statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to
differ materially from forecast results.
Item 7. Financial Statements and Supplementary Data.
The financial statements and schedules are filed as part of this
annual report beginning on F-1.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
In connection with the audits of the fiscal years ended August
31, 1990 through August 31, 1996, there were no disagreements
with its auditors on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to their
satisfaction would have caused them to make reference
in connection with their opinion to the subject matter of the
disagreement.
Part III
Item 9. Directors, Executive Officers, Promoters and Control
Persons of the Company
Information concerning the Directors and Executive Officers of
the Company is hereby incorporated by reference to the Company's
definitive proxy statement which will be filed with the
Commission within 120 days after the close of the fiscal year.
Item 10. Executive Compensation
Information concerning management remuneration is hereby
incorporated by reference to the Company's definitive proxy
statement which will be filed with the Commission within 120 days
after the close of the fiscal year.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
Information concerning security ownership of certain beneficial
owners and management is hereby incorporated by reference to the
Company's definitive proxy statement which will be filed with the
Commission within 120 days after the close of the fiscal year.
Item 12. Certain Relationships and Related Party Transactions
Information concerning certain relationships and related party
transactions is hereby incorporated by reference to the Company's
definitive proxy statement which will be filed with the
Commission within 120 days after the close of the fiscal year.
PART IV
Item 13. Exhibits
(a) The following documents are filed as part of this report:
1. Financial Statements
The consolidated financial statements filed as part of this
report are as listed in the Index to Financial Statements on
page F-1 which immediately precedes such statements.
2. Listing of Exhibits.
Exhibit
No. Description Location
3 Articles of Incorporation Incorporated by
and Bylaws reference to
Exhibit No. 3
to the
Company's
Registration
Statement
(No. 0-24506)
4 Designation of Series B Page Number
and C Convertible E-1
Preferred Stock
(b) No Reports on Form 8-K were filed during the last
quarter of the period covered by this Report.
Delta-Omega Technologies, Inc. and Subsidiary
Index to Consolidated Financial Statements
Independent Auditors' Report . . . . . . . . . . . . . . . . .F-2
Consolidated Balance Sheet, August 31, 1996. . . . . . . . . .F-3
Consolidated Statements of Operations for the years
ended August 31, 1996 and 1995 . . . . . . . . . . . . . . . .F-4
Consolidated Statements of Changes in
Shareholders' Equity from September 1, 1994
through August 31,1996 . . . . . . . . . . . . . . . . . . . .F-5
Consolidated Statements of Cash Flows for the years
ended August 31, 1996 and 1995 . . . . . . . . . . . . . . . .F-6
Notes to Consolidated Financial Statements . . . . . . . . . .F-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Delta-Omega
Technologies, Inc.:
We have audited the accompanying consolidated balance sheet of
Delta-Omega Technologies, Inc. (a Colorado corporation) and
subsidiary as of August 31, 1996, and the related consolidated
statements of operations, changes in shareholders' equity and
cash flows for each of the two years ended in the period ended
August 31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Delta-Omega Technologies, Inc. as of August 31, 1996,
and the results of its operations and cash flows for each of the
two years in the period ended August 31, 1996 in conformity with
generally accepted accounting principles.
\s\ Arthur Andersen LLP
New Orleans, Louisiana,
October 2, 1996
<PAGE>
Delta-Omega Technologies, Inc. and Subsidiary
Consolidated Balance Sheet
ASSETS
August 31,1996
Current assets
Cash and equivalents $ 1,536,152
Accounts and notes receivable
Trade 109,614
Related parties (Note B)
Employees 251
Notes receivable (Note C) 90,000
Allowance for doubtful receivables (30,000)
Inventories (Note D) 102,692
Prepaid expenses 7,408
Total current assets 1,816,117
Property and equipment, net of
accumulated depreciation (Note E) 502,527
Intangible assets, net of
accumulated amortization (Note F) 114,254
Other assets 9,340
Total assets $ 2,442,238
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable
Trade creditors $ 105,206
Others 2,141
Current maturities of long-term
debt and leases (Note G) 25,328
Accrued expenses 51,502
Total current liabilities 184,177
Long-term debt (Note G)
Long-term debt and leases,
net of current maturities 41,730
Total liabilities 225,907
Shareholders' equity (Note H)
Convertible, 7 percent cumulative,
non-participating preferred stock,
$.001 par value, shares authorized,
40,000,000; issued and outstanding
1,610,000 series B, 2,471,667
series C 4,082
Common stock, $.001 par value,
shares authorized, 100,000,000;
issued and outstanding, 12,704,980 12,705
Additional paid-in capital 10,311,511
Retained deficit (8,111,967)
Total shareholders' equity 2,216,331
Total liabilities and
shareholders' equity $ 2,442,238
See accompanying notes to consolidated financial statements.
Delta-Omega Technologies, Inc. and Subsidiary
Consolidated Statements of Operations
Years Ended August 31,
1996 1995
Net sales
Net product sales 846,541 413,102
Net product sales,
related party (Note B) 650 2,067
Service 0 11,008
847,191 426,177
Cost of Sales
Product 575,423 256,415
Service 0 6,636
575,423 263,051
Gross Profit 271,768 163,126
Costs and Expenses
Related party (Note B) 548 0
Selling, general and
administrative 1,197,574 1,490,103
Provision for uncollectible
receivables 30,000 0
Research and development 76,545 156,970
1,304,667 1,647,073
Operating loss (1,032,899) (1,483,947)
Other Operating Losses, net (12,775) 52,415
Interest Expense (5,958) (7,489)
Net loss (1,051,632) (1,439,021)
Preferred dividend declared (112,700) (100,504)
Net loss available to common
shareholders $(1,164,332) $(1,539,525)
Weighted average shares
outstanding 12,514,503 11,969,378
Loss per common share $ (.09) $ (.13)
See accompanying notes to consolidated financial statements.
Delta-Omega Technologies, Inc. and Subsidiary
Consolidated Statements of Changes in Shareholders' Equity
Add'l
Common Preferred Paid-In Retained
Stock Stock Capital Deficit
Balance at
September 1, 1994 $11,936 $ 660 $7,055,889 $(5,418,781)
Issuance of Series
B Preferred Stock - 1,340 1,132,645 -
Conversion of
Series B Conver-
tible Preferred
Stock 390 (390) - -
Issued common stock
for services at cost 3 - 3,497 -
Issued options
for services - - 26,170 -
Net loss - - - (1,439,021)
12,329 1,610 8,218,201 (6,857,802)
Balance at
August 31, 1995
Issued dividend
for Series B
Preferred 90 - 89,743 (89,833)
Issued common stock
for services at cost 128 - 95,872 -
Issued dividend for
Series B Preferred 158 - 112,542 (112,700)
Issuance of Series C
Preferred Stock 2,472 1,795,153
Net loss - - - (1,051,632)
Balance at August
31, 1996 $12,705 $ 4,082 $10,311,511 $(8,111,967)
See accompanying notes to consolidated financial statements.
Delta-Omega Technologies, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended
August 31,
1996 1995
Cash flows from operating
activities:
Net loss $(1,051,632) $(1,439,021)
Adjustment to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization 183,298 140,608
Loss on disposal of property
and equipment 25,123 -
Loss on sale of property
and equipment 1,732 -
Bad debt expense 30,000 -
Issuance of common stock
for services 96,000 3,500
(Increase) decrease in:
Accounts receivable 36,507 38,393
Inventories (16,966) 36,384
Prepaid expenses 5,128 (5,829)
Other receivables (86,310) 5,248
Other assets 8,479 -
Increase (decrease) in:
Accounts payable 38,815 (53,832)
Accrued liabilities (49,746) 26,623
Other liabilities 861 (9,980)
Total adjustments 272,921 181,115
Net cash used in operating
activities (778,711) (1,257,906)
Cash flows from
investing activities:
Property acquisitions (104,569) (20,224)
Patent costs (8,800) (7,426)
Proceeds from sale of
property and equipment 10,000 -
Deposits 480 7,026
Net cash used in
investing activities (102,889) (20,624)
Cash flows from financing
activities:
Proceeds from borrowing 42,500 -
Capital lease payments (10,155) (37,314)
Principal payments of notes payable (636) (423)
Proceeds from issuance of
preferred stock 1,818,750 1,160,155
Offering costs (21,125) -
Net cash provided by
financing activities 1,829,334 1,122,418
Net increase (decrease) in
cash and cash equivalents 947,734 (156,112)
Cash and cash equivalents,
beginning of period 588,418 744,530
Cash and cash equivalents,
end of period $1,536,152 $588,418
See accompanying notes to consolidated financial statements.
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1996
Note A: Summary of Significant Accounting Policies
Nature of organization
The Company is involved in developing, manufacturing and
marketing environmentally safe specialty chemicals for use in a
variety of industrial and military applications. These patented,
patent pending or proprietary products are deemed to be
environmentally safe because they are non-toxic, biodegradable
and formulated without chemicals considered hazardous under
federal regulations. Our products replace hazardous, flammable,
toxic and ozone-depleting chemicals in a broad range of
applications serving Industrial, Institutional, Emergency
Response and Soil Remediation markets. The Company's sales are
concentrated in the southeastern United States.
Revenue recognition
Revenue for sales of specialty chemicals is recognized when title
to the finished product has passed and billing for the product
has occurred.
Inventories
Inventories consist of raw materials, finished goods and
containers and are stated at the lower of cost or market using
the first-in, first-out (FIFO) method of accounting.
Property, equipment and depreciation
Property and equipment is stated at cost and depreciated using
the straight-line method over their useful lives which is 3 to 7
years for furniture and equipment and 5 years for vehicles.
Intangible assets and amortization
The Company's policy is to amortize its licensing rights to its
patented products over a 5-year period. Patent costs are
capitalized and amortized over the life of the patent when
granted.
Income taxes
Income taxes are accounted for in accordance with the provisions
of SFAS No. 109 "Accounting for Income Taxes". Under this
statement, deferred income taxes are provided for by the asset
and liability method.
Loss per common share
The net loss per common share has been computed on the basis of
the weighted average number of shares outstanding during each
period. Common stock equivalents outstanding were not considered
in the computation of loss per share because their effect would
be antidilutive.
Cash equivalents
The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents.
The use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Shares issued for non-cash consideration
Stock issued for services is valued at the vendor's regular
billing rates. Stock issued for property is valued at the fair
market value of the stock issued or the fair market value of the
property, whichever is more readily determinable. Property
acquired from affiliates is valued at predecessor costs.
Credit Concentration
During the year ended August 31, 1996, one customer accounted for
twelve percent (12%) of the Company's net sales. No one customer
accounted for more than ten percent (10%) of net sales during
the year ended August 31, 1995.
Note B: Related party transactions
The Company had an affiliate construct storage tanks for its
facility for $12,000. The Company negotiated a short term
promissory note with the affiliate for the $12,000. The
promissory note bears an interest rate of 7% per annum. The cost
of the construction is reflected in property, plant and equipment
in the accompanying consolidated financial statements. The note
payable is reflected in the current liability section in the
accompanying consolidated financial statements. The affiliate is
owned by a director of the Company.
The Company received an advance of $125,000 from two (2) members
of its board of directors. The Company converted substantially
all of the $125,000 to units of the private placement (See Note
H).
The amount not converted to units of the private placement is
reflected in the current liability section in the accompanying
consolidated financial statements.
The Company is leasing its present facilities from an affiliate
for five years at $6,000 per month commencing on March 1, 1996
with a renewal option for five additional years at $7,200 per
month. This agreement supersedes the October 1, 1993 lease
agreement for five years at $4,000 per month with a renewal
option for five additional years at $4,400 per month. The terms
of the October 1, 1993 agreement were amended and transferred
when the Company's facilities were relocated. In a separate
agreement, the Company issued 64,000 shares of common stock per
year in lieu of cash for the first two years rent under the
October 1, 1993 lease term. The remaining term of the October 1,
1993 lease agreement was paid in cash. The affiliate is
controlled by a member of the Company's board of directors.
The Company entered into an agreement on January 12, 1996 with
its Chairman of the Board granting him options to purchase
600,000 shares of common stock and warrants to purchase 600,000
shares of common stock in lieu of cash compensation for services
to be rendered. The warrants allow the acquisition of 600,000
shares of the Company's common stock at an exercise price of
$2.00 per share. Each option allows the acquisition of one share
of the Company's common stock at an exercise price of $.34 which
represented the underlying stock price on the date of issuance
of the options. In connection with these grants, two directors
returned a total of 686,000 options previously outstanding.
The Company negotiated a short term promissory note with an
affiliate in the amount of $40,000. The promissory note is
effective March 1, 1996 and is payable on demand. The promissory
note bears an interest rate of 12% per annum. The note was paid
in full during the fourth quarter of fiscal year 1996.
The affiliate is controlled by the President and Chief Executive
Officer of the Company.
During the fiscal year ended August 31, 1996, the Company sold
products totaling $650 to a company owned by a shareholder. As
of August 31, 1996, the balance due from the affiliate for
products sold was $0. The affiliate is owned by a director of
the Company.
During the fiscal year ended August 31, 1996, the Company
purchased services totaling $548 from a company owned by a
shareholder and director. This amount is reflected as equipment
repair and maintenance in the accompanying consolidated financial
statements.
1995
The Company paid to an affiliate $11,308 for the construction of
warehouse equipment. The cost of the construction is reflected
in property and equipment in the accompanying consolidated
financial statements. The affiliate is owned by a director of
the Company.
During the year ended August 31, 1995, the Company paid $4,000
per month for the lease of its facilities. The Company issued to
the affiliate 64,000 shares of common stock in lieu of cash for
the year's rent. The affiliate is owned by a director of the
Company.
During the year ended August 31, 1995, the Company sold products
totaling $2,113 to a company owned by a director of the Company.
As of August 31, 1995, $2,000 was due from the affiliate for
products sold. This amount is reflected as accounts receivable
related parties in the accompanying financial statements.
Note C: Accounts and notes receivable
The note receivable is an amount due from Tuboscope Vetco
Environmental Services, Inc. (TVES). During the fourth quarter
of fiscal 1995, the Company entered into an agreement to acquire
the assets of TVES. The Company terminated the letter of intent
on December 15, 1995. With the termination of the letter of
intent, TVES agreed that it will reimburse the Company for the
capital expenditures incurred during the construction of a "fines
treatment unit" and will retain the title to that equipment.
The initial amount to be recovered was $102,658 and has since
been adjusted to $90,000, per negotiations between the Company
and TVES. After further negotiations relative to full
satisfaction of this acknowledged debt, the Company reserved
$30,000 in an allowance account.
Notes receivable $ 90,000
Less: Allowance for
doubtful receivables ( 30,000)
Total $ 60,000
Note D: Inventories
Inventories at August 31, 1996 consisted of the following:
Raw materials $ 31,081
Finished goods 42,528
Containers and labels 19,592
Consigned inventory 9,491
Total $102,692
Note E: Property and equipment
Major classes of property and equipment at August 31, 1996
consisted of:
Furniture and equipment $ 393,487
Machinery, primarily
soil washing equipment 483,257
Leasehold improvements 14,678
Total property and equipment 891,422
Less: accumulated depreciation (388,895)
$ 502,527
Depreciation expense was $138,546 and $133,624 for years ended
August 31, 1996 and 1995, respectively.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", which is required to be
adopted by the Company no later than the fiscal year ended August
31, 1997. In management's opinion, the effect of adopting SFAS
No. 121 will not be material to the Company's financial position
or results of operations.
Note F: Intangible assets
Intangible assets at August 31, 1996 consisted of the following:
Patent costs $ 133,632
Less: accumulated amortization (19,378)
Net Intangible assets $ 114,254
Amortization expense was $44,752 and $6,984 for the years ended
August 31, 1996 and 1995, respectively. Approximately $37,878 of
the 1996 amortization expense is related to capitalized foreign
patents that the Company will not prosecute and associated costs
were written off.
Note G: Long-term debt and lease obligations
Long-term debt at August 31, 1996, consisted of the following:
Note payable to a bank;
principal and interest due in
monthly installments at an
interest rate of 7.75% $ 28,451
Notes and capital leases
payable to a corporation;
principal and interest due in
monthly installments at interest
rates varying from 10.08 % to 13.91% 38,607
Total debt 67,058
Less: current portion (25,328)
Long-term debt $ 41,730
Principal repayments on notes payable and capital leases
required for the next five years are as follows:
1997 $ 25,328
1998 15,471
1999 14,612
2000 4,685
2001 6,962
Total debt $ 67,058
As of August 31, 1996, equipment under capital lease and the
related accumulated amortization totaled $13,890 and $5,828,
respectively. Amortization of assets recorded is included in
depreciation expense.
Note H: Shareholders' equity
Stock option plans - The Company's policy is to grant options to
purchase common stock to directors, officers, key employees and
individuals at or above the market price on the date the option
is granted. All options are non-compensatory.
The Company's non-qualified stock option plan which was
established on January 17, 1991 (the 1991 Plan), makes options to
purchase common stock available to directors, officers and key
employees. On August 31, 1993, the Company issued 1 million
options under the 1991 Plan with an exercise price of $.75 per
share. The options are currently exercisable and expire on
January 17, 2001. In fiscal year 1994, the Company amended the
1991 non-qualified stock option plan to authorize the issuance of
an additional 600,000 options with an exercise price of $2.00 per
share. These options are currently exercisable and expire on
January 16, 2001. On July 31, 1995, 205,000 options were issued
under the amended plan. On January 12, 1996 536,000 options with
an exercise price of $.75 per share and 160,000 options with an
exercise price of $2.00 per share were returned to the Company's
non-qualified stock option plan in connection with the option
agreement discussed below.
The Company entered into an agreement on January 12, 1996 with
its Chairman of the Board granting him options to purchase
600,000 shares of common stock in
lieu of cash compensation for services to
be rendered. Each option allows the acquisition of one
share of the Company's stock at an exercise
price of $.34.
At August 31, 1996, 1,443,007 options to purchase common
shares not related to the stock option plan were outstanding with
exercise prices ranging from $.65 to $3.00. These options are
currently exercisable and expire through 2001.
In October 1995, SFAS No. 123 --- "Accounting for
Stock-Based Compensation" was issued and required to be adopted
by the Company no later than the fiscal year ended August 31,
1997. SFAS No. 123 encourages, but does not require, the
adoption of a fair value-based method of accounting for employee
stock options. Entities electing to continue to measure
compensation costs using the intrinsic value-based method
accounting prescribed by APB Opinion 25--- "Accounting for Stock
Issued to Employees" must make pro forma disclosures of net
income and earnings per share as if the fair value-based method
of accounting had been applied. The Company plans to continue to
account for its employee stock options in accordance with the
provisions of APB Opinion 25 and will provide the necessary pro
forma disclosures.
Common stock warrants - The Company's Class D warrants expired on
December 15, 1993. The Company issued Class E warrants for every
two Class D warrants that were outstanding on December 15, 1993.
1,062,917 Class E warrants are outstanding at August 31, 1996,
each exercisable at $1.50 into one share of Common Stock until
June 15, 1999.
The Company issued 100,000 Placement Agent Warrants to Gilford
Securities, Inc. and 100,000 Placement Agent Warrants to FBB Corp
pursuant to Warrant Agreements dated December 2, 1994. Each
Placement Agent Warrant entitles the holder to purchase one share
of the Company's common stock at the price of $1.00 per share, at
any time until October 15, 1999.
The Company issued Class Z warrants on September 11, 1996 as
part of the June 1996 private stock offering made solely to
accredited investors. 2,471,667 Class Z warrants are outstanding
at August 31, 1996, each exercisable at $.75 into one share of
$.001 Common Stock until June 30, 2001.
Private stock offerings - Beginning June 15, 1994, the Company,
through a private placement, offered 2,000,000 shares of $.001
par value Series B Convertible Exchangeable Voting Preferred
Stock carrying a 7% dividend for $1.00 per share. The stock may
be converted to one share of $.001 common stock at any time until
June 30, 1999. 2,000,000 shares were subscribed on October 11,
1994 and the stock was issued on November 17, 1994. The
Company's net proceeds were approximately $1.8 million.
In June 1996, the Company, through a private placement, offered
2,000,000 units consisting of one (1) share of $.001 par value
Series C Convertible Voting Preferred Stock and one (1) Common
Stock Purchase Warrant for $.75 per unit. The private placement
was amended in August 1996 and the number of units offered was
increased by 471,667 units. Each share of the Series C
Convertible Voting Preferred Stock can be converted to one share
of $.001 Common Stock at any time until June 30, 2001 and carries
a 7% dividend. 2,471,667 Units of Series C Preferred Stock and
Warrants were subscribed on August 31, 1996 and the stock was
issued on September 11, 1996. The Company's new proceeds were
approximately $1.8 million.
Note I: Income taxes
At August 31, 1996, deferred taxes consisted of the following:
Deferred tax assets,
net operating loss carry forward $ 2,584,223
Deferred tax liabilities,
excess of tax over book depreciation (34,490)
Valuation allowance (2,549,733)
Net deferred taxes $ 0
The valuation allowance for deferred tax assets as of September
1, 1995 was $2,195,945. The net change in the valuation
allowance for the year ended August 31, 1996 was an increase of
$353,788. The Company has net operating loss carryforwards of
$7,600,657 available for federal income tax purposes which are
available to offset taxable income through 2010. The Company has
alternative minimum tax net operating loss credit carryforwards
of approximately $4 million available for future periods.
Note J: Employee compensation plan
In December 1990, Statements of Financial Accounting Standards
No. 106, "Employer's Accounting for Post-Retirement Benefits
Other Than Pensions" ("SFAS 106"), was issued and required to be
adopted by the Company no later than the fiscal year ending
August 31, 1994. The Company presently offers no post-retirement
benefits which would be required to be reflected in its financial
statements by SFAS 106. In November 1992, Statement of Financial
Accounting Standards No. 112, "Employer's Accounting for
Post-Employment Benefits" ("SFAS 112"), was issued and required
to be adopted by the Company no later than the fiscal year ending
August 31, 1995. The Company presently offers no post-employment
benefits which would be required to be reflected in its financial
statements by SFAS 112.
The Board of Directors have approved a management bonus
pool which is based upon 12 percent of gross profits before taxes
in excess of $500,000 annually. Bonuses are to be paid to
persons filling designated positions. As of August 31, 1996, no
bonuses had been paid under this plan.
Note K: Commitments
The Company is committed to renting its office space under
a non-cancelable operating lease until February 28, 2001. Rental
expense for the leased premise is $6,000 per month payable in
cash from March 1, 1996 through February 28, 2001. The space is
rented from an affiliate of the Company. This rental agreement
supersedes the original agreement dated October 1, 1993 that was
amended November 19, 1993 and October 15, 1994.
Future minimum rental payments, payable in cash, under the
lease are as follows:
<PAGE>
Year ending August 31, Payable in Cash
1997 $ 72,000
1998 72,000
1999 72,000
$216,000
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DELTA-OMEGA TECHNOLOGIES, INC.
Dated: November 26, 1996 By:/s/ Marian A. Bourque
Marian A. Bourque
Chief Financial Officer
(Principal Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Act of 1934, this
Report has been signed below by the following persons on behalf
of the Company and in the capacities and on the dates indicated.
Signatures Titles
Date
/s/ Larry G. Schafran Chairman of the Board
November 22, 1996
/s/ James V. Janes, III Chief Executive Officer
November 22, 1996
/s/ Marian A. Bourque Chief Financial Officer,
November 22, 1996
/s/ Richard A. Brown Director
November 22, 1996
/s/ David H. Peipers Director
November 22, 1996
/s/ Donald P. Carlin Director
November 22, 1996
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