UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended August 31, 1998
Commission File No. 0-24506
DELTA-OMEGA TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Colorado 84-1100774
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
119 Ida Road
Broussard, Louisiana 70518
(Address of principal executive offices) (Zip code)
(318) 837-3011
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
$.001 par value common stock
Indicate by check mark whether the Company (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for 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 X No
Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and no
disclosure will 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 amendments to the Form 10-KSB. [X]
Company's revenues for its most recent fiscal year. $1,177,505
As of October 31, 1998, 14,996,589 shares of common stock, $.001 par value,
were outstanding, and the aggregate market value of the common stock held by
non-affiliates of Delta-Omega Technologies, Inc. was approximately $4,147,044
on that date.
Documents incorporated by reference:
The definitive proxy statement for the annual meeting of shareholders which
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.
PART I.
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 primary
products and has now begun to market them. The Company has continued to expend
research and development costs to further develop its primary products into
different markets.
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 and processes
that address large markets where there is limited environmentally safe
competition or few or no existing products that provide effective performance.
Solvent Replacement Products
DOT 111/113(TM) 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(TM)
conforms to the requirements of MIL-PRF-87937C, 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
Supply Center - Richmond (DSC-R), a Department of Defense organization
which is headquartered in Richmond, Virginia. The DSC-R exercised both one
year renewal options in accordance with the terms of the original contract.
As of August 31, 1998, revenue generated from the contract totaled
approximately $550,000. The majority of the revenues, approximately
$400,000, were generated in year one of the contract. The decline in
purchases during the second term of the contract is due primarily to the U.S.
Air Force phasing out the military specification to which the Company's
product is qualified.
ATTAR(TM) is a newly developed series of water-based products designed to
address the needs of the metalworking and the aviation industries for a heavy-
duty, biodegradable, environmentally safe cleaner/degreaser. This product is
designed to complement the light to medium duty cleaner, DOT 111/113(TM), 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.
Omni-Clean(TM)Renew is a product developed for cleaning concrete and marble
monuments, statues and building edifices. Omni-Clean(TM)Renew works like the
petroleum based or acid based products that it is designed to replace, but is
safe for use by cleaning personnel and is biodegradable. Early indications
from customers in the cemetery maintenance business are positive and the
Company expects this niche market to develop with more exposure to this
specialized cleaning segment. No revenue estimates are possible at this stage
of initial introduction.
Institutional and Industrial Products
Omni-Clean(TM) 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(TM)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(TM)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 separate 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(TM) 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.
DOT Degreaser was developed to compete with low-end oilfield cleaners and
degreasers. DOT Degreaser contains no reportable quantities of regulated
chemicals and does not produce oily residues that dissolve into water,
creating potential discharge problems. 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 or
unpainted). DOT Degreaser 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(TM) 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(TM) 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(TM) products do not. Two (2) Vulcan(TM)
firefighting foam concentrates earned Underwriters Laboratories (UL) listings
in December of 1995. In May of 1998, the Company earned UL listings for six
(6) more products in the Vulcan(TM) line. With the issuance of the new
listings, the Company now offers a complete selection of firefighting foam
concentrates to the emergency response community.
HazClean(TM)-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(TM)-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(TM)ER introduce no new contamination while promoting the natural
biological decay of hydrocarbons which lowers cleanup costs.
Soil Remediation Chemicals
CreoSolv(TM) 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(TM) 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.
HazClean(TM)-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(TM)-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 remediation of hydrocarbon contamination from soil,
limestone, gravel or other materials used in parking lots, access roads and
storage yards.
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 was for twelve (12) months with renewal options
for subsequent one year periods. On June 10, 1997, the Company was issued a
one year contract renewal with Allwaste. In late 1997, Allwaste Environmental
Services was purchased by Philips Services Corporation. The Company continues
to be the exclusive supplier for its chemical cleaning products on an open
account basis.
In June of 1998, the Company signed an agreement with SafeScience, Inc. for
furnishing a consumer product line planned for marketing into automotive and
household goods retailers. SafeScience is a NASDAQ listed corporation and has
introduced gardening oriented products at the national level previously. The
Company's main products proposed for introduction include an automobile wash
and wax concentrate, glass cleaner, engine degreaser and general purpose
cleaner. No revenue estimates are possible at this stage of the manufacturing
relationship.
MARKET SEGMENT DATA
Total product sales for the year ended August 31, 1998 were $1,177,505 as
compared with total product sales for the year ended August 31, 1997 of
$1,456,522.
<TABLE>
<CAPTION>
Product Sales For the Fiscal Years Ended August, 1994 through 1998
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Solvents & Cleaners $828,929 $1,243,657 $738,909 $296,761 $293,019
Firefighting &
Spill Response 279,779 203,276 106,688 82,099 175,728
Oilfield Products 72,797 9,589 1,594 36,309 35,070
Soil Washing (TVES)* - - - 11,008 -
_________ _________ ________ ________ _________
Total $1,177,505 $1,456,522 $847,191 $426,177 $503,817
========== ========== ========= ========= ========
</TABLE>
* - Letter of intent terminated on December 15, 1995.
MARKETS
Specialty Chemicals
The Company's products are marketed as a safe and economical replacement for
hazardous chemicals. Industries targeted are aviation, electronics,
automotive, marine, metal fabrication, food processing, janitorial, oilfield,
barge and tank cleaning, firefighting, hazardous spill response and soil
remediation.
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.
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.
The Company lowered the earning potential of its Soil Remediation Service
division after assessing recent adverse changes in the environmental
consulting and remediation business. Consequently, the Company recorded an
asset impairment of its soil washing equipment because future estimated
undiscounted cash flows from the equipment would be less than the carrying
value.
Oilfield Products
The Company recently introduced a line of products to serve the needs of the
oil, gas exploration and production industries. This line of products includes
degreasers, paraffin cutters, downhole tubing and casing cleaners and marine
transportation storage vessel cleaning compounds. The multi-functional
properties of these products allow the customer greater flexibility by
reducing cleaning time, minimizing storage requirements, enhancing worker
safety and lessening environmental liabilities.
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.
In September 1998, the Company, working on location in Colombia with M-I
Overseas Limited, successfully completed the first phase of its oil based mud
processing application. "Base Fluid Destruction" (BFD) is a version of MRP,
and was demonstrated for a major oil exploration and production company.
Based upon the success of this application, the potential customer has
requested the Company to expand its process to include the treatment of the
water/solids phase that remains after initial processing. No estimate of
revenues is possible at this stage of development because the results of this
technology have to be commercially explored.
DeMilitarization
The Company entered into an exclusive worldwide license agreement with
Gradient Technology, Inc., for a leading edge portfolio of patent pending
demil "conversion" technologies to address the U.S. Government's drive toward
"resource recovery and reuse" in demilitarization operations. Demilitarization
or "demil" is a term used to describe the removal of conventional munitions,
including bombs, rockets, torpedos and shells from the inventory of stored
ammunition. The blending of these licensed technologies with the Company's
highly advanced chemical process and separation know-how should position the
Company to offer cost efficient explosive conversion and/or recovery services
to the U.S. Government.
On November 10, 1998, the Company received notification from the Crane
Division of the Naval Surface Warfare Center that it and its partner Gradient
Technology were awarded a two part contract for demonstrating a mobile system
capable of producing higher order commercial products from ammonium picrate.
Ammonium picrate is a warhead explosive used in U.S. Navy conventional
ordinance. The contract is divided into two phases. In Phase One, the Company
and Gradient Technology are validating the proprietary technology that has
been exclusively licensed to the Company for converting unwanted excess
explosives to high value added specialty chemicals. Phase One, valued at
$97,000, will conclude in the second quarter of fiscal 1999. Phase Two will
generate over $1.5 million in revenue to the Company less a 5% commission
based on net revenues and a $200,000 research and development fee payable to
Gradient Technology. Phase Two is scheduled to begin on March 1, 1999 and is
expected to take not more than eighteen months to complete.
Industrial and Institutional Markets
The Company continues to expand its industrial and institutional cleaning
market. Specifically, the Company has entered the fleet maintenance market and
is now supplying products to Ryder-ATE, Houston Metro, Nalco Fleet Lines and
TexGas. Moreover, Trac Auto and Enterprise Tank Lines are in the evaluation
process with several of the Company's products. Also the Company entered the
concrete cleaning and stone restoration markets. These products have been
accepted by FMB Property Management Company, the Texas Medical Center and
several cemetery organizations. These materials are also being evaluated by
other property management companies as well as several international
organizations and cemetery conglomerates. The Company's materials offer safe,
effective alternatives to the solvent, caustic and acid based materials
currently being utilized in the marketplace.
RAW MATERIALS
Basic raw materials used by the Company in the formulation of finished
products include a wide variety of surfactants, acids, alkalines, salts and
solvents. Approximately sixty compounds are purchased from manufacturers or
distributors that supply the chemical industry. All raw materials used by the
Company are available on a worldwide basis and are not subject to shortage.
Raw materials and finished products are typically transported via truck and
rail.
BLENDING FACILITIES
The Company's blending facilities are located in a dedicated building, housing
raw material storage and blending tanks used in the mixing process. The
blending vessels are vats where the raw materials are pumped at the proper
weights to complete a blended compound. The Company presently has three
blending units with electric motor driven paddles. The largest unit is capable
of blending 1,100 gallons at one time, and the other two are 660 gallon
capacity. The blending units and associated piping are common sizes used by
many industries and are relatively inexpensive to procure, install and
operate. The Company performs 100% of its product blending, and no use of
outside manufacturing service is contemplated.
MAJOR CUSTOMERS
The majority of the Company's current product sales are dependent upon a few
customers. In fiscal year 1998, sales to the U.S. Air Force for an aircraft
cleaning compound accounted for approximately 14% of total sales. Another 23%
of the Company's total sales were generated from Philip Services of Louisiana,
a tank cleaning oilfield service contractor.
GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS
Any required government or military approvals related to principal products
have been submitted and obtained in accordance with written protocols.
PATENTS, TRADEMARKS AND LICENSES
The Company owns all rights to HazClean(TM)-EFFF for which U.S. Patent No.
5,061,383 was granted in October 1991. The Company owns all rights to DOT
111/113(TM) for which U.S. Patent No. 5,308,550 was granted in May 1994.
The Company has filed two patents with the United States Patent and Trademark
Office, a base fluid upgrading (BFU) application (Serial No. 918,597) and a
mud recycling process (MRP) (Serial No. 788,993). Both patent pending
applications are for treating drilling fluids used in the oil and gas
industry.
The Company is also in the process of filing two more patents, a wellbore
chemical cleaner and a continuation-in-part of co-pending MRP application
Serial No. 788,993.
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
Many chemicals used as solvents, cleaners and degreasers as well as
firefighting foams and spill response agents have been considered hazardous to
the environment by new federal and state guidelines. Regulations fueled by a
public awareness of the environment and the resulting political involvement
are causing most of these chemicals to be phased out.
The Company's chemical products are biodegradable, 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.
RESEARCH AND DEVELOPMENT
In fiscal year 1998, 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 on which the Company is focused are
the development of downhole chemicals used to clean tubing and casing in oil
and gas exploration, and a high performance product used for filter cake
reduction. The Company also focused on preparing six (6) more of its fire foam
products to undergo testing to receive Underwriters Laboratories (UL)
listings. The first two listings attained generated an increase of 82% in
revenues related to the Company's emergency response division. In May of 1998,
the Company earned UL listings for six (6) more products in the Vulcan(TM)
line. With the issuance of the new listings, the Company now offers a complete
selection of firefighting foam concentrates to the emergency response
community.
EMPLOYEES
The Company currently has 13 full-time non-union employees at the corporate
headquarters in Broussard, Louisiana. The Company periodically 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 requirements
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 and MRP operations, in most cases, require sub-contract
services to separate contaminants from soil or drilling mud and do not provide
for the disposal of those contaminants. The Company is therefore not exposed
to liabilities with respect to hazardous waste handling or disposal.
Hazardous waste handling is usually handled by 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 Crossroads Investments, L.L.C. at $6,000 per month with an
option to renew for an additional five years at an increase of $1,200 per
month.
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, 1998. Annual meetings of the shareholders of the
Company are held in accordance with Colorado law.
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, 1998, there were 11 market
makers in the Company's securities and the closing bid quotation was $.375.
The following table sets forth the high and low bid quotations for the
Company's Shares, as reported in the "Pink Sheets."
<TABLE>
BID
QUARTER LOW HIGH
ENDED
<S> <C> <C>
August 31, 1996 $ 5/8 $ 1 1/32
November 30, 1996 $ 3/8 $ 11/16
February 29, 1997 $ .47 $ 29/32
May 31, 1997 $ 7/16 $ 9/16
August 31, 1997 $ .51 $ 3/4
November 30, 1997 $ .66 $ 27/32
February 28, 1998 $ 3/8 $ 3/4
May 31, 1998 $ 7/16 $ 3/4
August 31, 1998 $ 1/4 $ .51
</TABLE>
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, 1998, there were 247 registered holders and approximately 1,300
beneficial owners of the Company's common stock held in street name at
brokerage houses. As of October 31, 1998, there were 17 holders of the
Company's series B preferred stock and 22 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
intend 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
This Annual Report on Form 10-KSB includes certain statements that may be
deemed to be "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of
historical facts, included in this Form 10-KSB that address activities, events
or developments that the Company expects, believes or anticipates will or may
occur in the future, including such matters as future capital, research and
development expenditures (including the amount and nature thereof), repayment
of debt, business strategies, expansion and growth to the Company's operations
and other such matters are forward-looking statements. These statements are
based on certain assumptions and analyses made, by the Company in light of its
experience and its perception of historical trends, current conditions,
expected future developments and other factors it believes are appropriate in
the circumstances. Such statements are subject to a number of assumptions,
risks and uncertainties, including general economic and business opportunities
(or lack thereof) that may be presented to and pursued by the Company, the
ability of the Company to fund continuing operations from cash flow or funds
raised through loans or equity financings, changes in laws or regulations and
other factors, many of which are beyond the control of the Company. Readers
are cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ materially from
those projected in the forward-looking statements.
RESULTS OF OPERATIONS
Fiscal 1998 Compared to Fiscal 1997
Net sales decreased $279,017 or 19%, from $1,456,522 to $1,177,505. The
decline was due primarily to a decrease in solvent replacement and cleaning
product sales relative to the U.S. Air Force contract. The U.S. Air Force Mil.
Spec. MIL-C-87937B, Type II to which the Company is qualified is being phased
out and replaced with MIL-PRF-87937C, Type IV, a product that qualifies to a
more rigid cleaning efficiency test. The Company has developed a product that
conforms to the Mil. Spec. MIL-PRF-87937C, Type IV and is in the final stages
of qualifying the product. Responses to quotations for Mil. Spec. MIL-PRF-
87937C, Type IV have been submitted to the military and the Company expects to
have an approved product by bid award dates.
During fiscal 1997, the Company introduced a line of chemicals and processes
that caters to the oil and gas industry. Although sales from the oilfield
products division increased from $9,589 to $72,797, the Company expects, due
to depressed conditions in the oil and gas industry, only marginal increases
in oilfield product sales generated in fiscal 1999.
Net sales of firefighting and spill response agents increased 38% to $279,779
from $203,276. Sales of firefighting products are expected to continue
increasing with the Company's establishment of marketing networks through
distributors in twenty-six (26) states in the continental United States. The
Company has also gained six (6) additional Underwriters Laboratories listings
in the third quarter of fiscal 1998. These listings are expected to generate
additional firefighting and spill response sales by allowing the Company to
pursue sales in market segments heretofore unavailable without these listings.
Cost of sales decreased $97,556 or 10%, from $947,665 to $850,109. As a
percentage of sales, cost of sales increased from 65% to 72%. The increase in
cost of sales as a percentage of sales relates directly to the decline in
sales to the U.S. Air Force, a high gross margin product. Although production
volume when measured in gallons remained constant, there was a higher
percentage of lower gross margin products produced and sold in fiscal 1998.
The Company expects to be operating its existing plant near full capacity by
the second quarter of fiscal 1999 with the introduction of the consumer
product line that the Company will manufacture for SafeScience, Inc. As the
Company's manufacturing facility approaches full capacity, cost of sales as a
percentage of sales will decrease until an optimum production level is
achieved.
Total operating expenses increased from $1,640,853 to $1,704,200, or 4%. The
increase in operating expenses includes a $121,757 write off of the Company's
soil washing equipment and associated capitalized patent costs. The Company
believes that these pieces of equipment have no future revenue generating
potential based upon recent significant adverse changes in the environmental
consulting and remediation business.
Notwithstanding the marginal increase in operating expenses, Research and
Development costs increased 70%, from $271,886 to $461,090. In fiscal year
1998, the Company focused its efforts and funds on the development of a
unique technology for recovering barite and oil from spent drilling muds (BFD)
and the acquisition of six (6) new Underwriter Laboratories listings for its
fire foam products. The Company has successfully completed the first phase of
the BFD process and met the criteria for the UL listings.
Net loss for fiscal 1998 was $1,375,532, a 24% increase from the net loss of
$1,106,149 incurred during fiscal 1997. The increased net loss was due
primarily to the increase in Research and Development costs and the decrease
in sales to the U.S. Air Force.
CAPITAL RESOURCES AND LIQUIDITY
The Company considers cash and cash equivalents as its principal measure of
liquidity. These items total $150,674 at August 31, 1998. The Company's short
term debt totals $22,100 with total debt being $61,809 or 12% of equity. The
Company's primary cash requirements are for operating expenses, particularly
Research and Development expenses, raw material purchases and capital
expenditures. Since the Company commenced operations, it has incurred
recurring losses and negative cash flows from operations. The Company does not
have sufficient working capital available as of August 31, 1998, to maintain
operations at their current levels. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The Company's
ability to continue as a going concern is dependent upon obtaining additional
capital investments or generation of adequate sales revenue and profitability
from operations.
To obtain additional capital, the Company has the option to sell 1 million
common shares at an undetermined price per share. These shares are remaining
from 2 million shares authorized for sale to accredited and sophisticated
investors by the Company's board of directors in January 1998. The Company is
also considering initiation of a private offering of Series D Convertible
Preferred Stock solely to accredited investors. For immediate capital
requirements, the Company expects to negotiate loans from board of director
members until sufficient funds are generated from operations or the financial
instruments discussed above are implemented. As of October 31, 1998, the
Company has a cash balance of $13,787 with which the Company expects to cover
operating expenses through mid November 1998. In November 1998, the Company
negotiated a loan of $50,000 from a member of the board of directors. The
$50,000 loan will allow the Company to continue its current operations for at
least one (1) month. In this time, if sufficient funds are not generated from
current operations or further financing can not be obtained, management
expects to reduce overhead and operating expenses to a level that can be
maintained by the current level of sales.
During the second quarter of fiscal year 1998, the Company's board of
directors authorized selling up to 2 million shares of common stock at the
best negotiated price. In April 1998, the Company completed a special private
placement solely to accredited and sophisticated investors at an offering
price of $.75 per share and raised approximately $740,000. Proceeds from this
offering were used to fund the recurring losses and negative cash flows and to
expand the Company's technical capabilities in the oilfield service sector.
During the last two years, the Company invested funds in a unique technology
for recovering barite and oil from spent drilling mud. The Company, working on
location in Colombia with M-I Overseas Limited, successfully completed the
first phase of its oil based mud processing application. "Base Fluid
Destruction" (BFD) is a version of MRP, a proprietary process for recovering
barite and oil from spent drilling muds. BFD was demonstrated for a major oil
exploration and production company. Based upon the success of this
application, the Company was requested to expand its process to include the
treatment of the water/solids phase that remains after initial processing. No
estimate of revenues is possible at this stage of development because the
results of this technology have to be commercially explored.
The Company's current acquisition of six (6) additional UL listings for its
fire foam products gives the Company an opportunity to gain a significant
market share in the municipal fire sector and airport fire fighting markets.
The fire foams product line includes a unique UL listed 1% X 3% Alcohol
Resistant AFFF foam. This low viscosity foam can be used with all sizes of
foam eductors, thus lowering product use and reducing costs to the end user.
The Company also developed a Class "A" foam used for extinguishing wildland
and structural fires. The Company is in the process obtaining approval for use
in the forestry service market.
The Company has been contracted to furnish products to a corporation,
SafeScience, Inc., that is entering the automotive and household goods market.
Initial product introduction for the SafeScience line of cleaners is expected
to occur in the second quarter of fiscal 1999. This introduction will occur in
the international market and will require the Company to ship approximately
$500,000 worth of products to SafeScience Inc.'s overseas packagers. U.S.
introduction will occur after completing evaluation by the U.S. consumer
product safety commission and an independent consumer testing laboratory.
Management believes that the sources of funds and anticipated increases in
sales volume discussed above will enable the Company to sustain its current
operations and meet its short term obligations in fiscal 1999. As sales
volumes of the Company's fire foam product line and industrial chemicals
increase, the Company expects cash flow from operations in fiscal 1999 to
improve, although no assurances can be made.
During 1998, the Company developed a plan to upgrade its primary information
systems to be Year 2000 compliant. The Company does not expect the cost of the
upgrade to be material to its financial condition or business operations.
Through August 31, 1998, the Company has not incurred significant costs
associated with the Year 2000. The Company anticipates to have the necessary
upgrades by February 1, 1999.
The Company is in the process of evaluating compliance with the Year 2000 by
its primary suppliers and customers; however the Company does not believe its
business or operations would be adversely impacted if its suppliers or
customers were not Year 2000 compliant.
Item 7. Financial Statements and Supplementary Data.
The financial statements and schedules are filed as part of this annual report
beginning on page 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, 1998, 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 F-1
and C Convertible
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, 1998 F-3
Consolidated Statements of Operations for the years
ended August 31, 1998 and 1997 F-4
Consolidated Statements of Changes in
Shareholders' Equity for the years ended
August 31,1998 and 1997 F-5
Consolidated Statements of Cash Flows for the years
ended August 31, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders 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,
1998, 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, 1998. 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, 1998, and the results of its operations and cash flows
for each of the two years in the period ended August 31, 1998 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements the Company has experienced recurring losses and negative
cash flows since commencement of operations. As of August 31, 1998, the
Company does not have adequate working capital in place to support its current
level of operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans to secure
additional working capital and improve operating results are also described in
Note A. The financial statements do not include any adjustments relating to
the recoverability of asset carrying amounts or the amount and classification
of liabilities that might result should the Company be unable to continue as a
going concern.
New Orleans, Louisiana
October 22, 1998
F-2
<TABLE>
<CAPTION>
Delta-Omega Technologies, Inc. and Subsidiary
Consolidated Balance Sheet
ASSETS
August 31,
1998
<S> <C>
Current assets
Cash and equivalents $ 150,674
Accounts receivable
Trade, net of allowance for doubtful accounts 114,772
Employees 11,000
Inventories 210,002
Prepaid expenses 26,438
_______________
Total current assets 512,886
Property and equipment, net of
accumulated depreciation 269,688
Intangible assets, net of
accumulated amortization 105,852
Other assets 10,618
_______________
Total assets $ 899,044
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Outstanding checks in excess of bank balance $ 63,896
Accounts payable
Trade creditors 52,223
Others 75,085
Customer prepayments 78,527
Current maturities of long-term debt and leases 22,100
Accrued expenses 35,062
________________
Total current liabilities 326,893
Long-term debt and leases, net of
current maturities 39,709
________________
Total liabilities 366,602
Shareholders' equity
Convertible, 7 percent cumulative,
non-participating preferred stock, $.001 par
value, shares authorized, 40,000,000; issued
and outstanding 1,335,000 series B, 2,396,667
series C 3,732
Common stock, $.001 par value, shares authorized,
100,000,000; issued and outstanding, 14,996,589 14,996
Additional paid-in capital 11,580,522
Retained deficit (11,066,808)
_______________
Total shareholders' equity 532,442
_______________
Total liabilities and shareholders' equity $ 899,044
===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<TABLE>
<CAPTION>
Delta-Omega Technologies, Inc. and Subsidiary
Consolidated Statements of Operations
Years ended August 31,
1998 1997
<S> <C> <C>
Net product sales $1,177,505 $1,456,522
Cost of sales 850,109 947,665
_____________ _____________
Gross profit 327,396 508,857
Costs and expenses
Selling, general and administrative 1,121,353 1,323,938
Provision for doubtful accounts -0- 45,029
Research and development 461,090 271,886
Impairment of Long-Lived Assets 121,757 -0-
_____________ _____________
Operating loss (1,376,804) (1,131,996)
Other operating income, net 8,545 33,270
Interest expense (7,273) (7,423)
_____________ ______________
Net loss (1,375,532) (1,106,149)
Preferred dividend declared (234,112) (239,048)
_______________ ______________
Net loss available to common shareholders $(1,609,644) $(1,345,197)
=============== ===============
Weighted average shares outstanding 13,798,653 12,831,353
Basic and diluted earnings per
common share $ (.12) $ (.10)
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<TABLE>
<CAPTION>
Delta-Omega Technologies, Inc. and Subsidiary
Consolidated Statements of Changes in Shareholders' Equity
Additional
Common Preferred Paid in Retained
Stock Stock Capital Deficit
<S> <C> <C> <C> <C>
Balance at September
1, 1996 $12,705 $4,082 $10,311,511 $(8,111,967)
Issued dividend for
Series B & C Preferred 465 - 238,583 (239,048)
Issuance of common stock
for services rendered 40 - 12,548 -
Conversion of Convertible
Preferred Stock 20 (20) - -
Net loss - - - (1,106,149)
________ ________ ___________ ___________
Balance at August
31, 1997 13,230 4,062 10,562,642 (9,457,164)
Issuance of common
stock for services
rendered 73 - 45,318 -
Conversion of
Convertible Preferred
Stock 330 (330) - -
Issued dividend for
Series B & C Preferred 376 - 233,736 (234,112)
Issuance of common stock
for special private
placement 987 - 738,826 -
Net loss - - - (1,375,532)
___________ _________ ___________ ____________
Balance at August
31, 1998 $ 14,996 $ 3,732 $ 11,580,522 $(11,066,808)
============ ========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<TABLE>
<CAPTION>
Delta-Omega Technologies, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended August 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,375,532) $(1,106,149)
Adjustment to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 201,880 173,891
Loss on sale and disposal of
property and equipment 1,408 792
Bad debt expense 1,318 45,029
Issuance of common stock for
services 45,391 12,589
Asset impairment 121,757 70,000
(Increase) decrease in:
Accounts receivable 204,320 (147,297)
Inventories 8,974 (116,284)
Prepaid expenses (1,451) (17,579)
Other receivables 4,041 (14,790)
Other assets (175) (1,103)
Increase (decrease) in:
Accounts payable (88,623) (163,431)
Accrued liabilities (10,265) (6,175)
Other liabilities (63,121) 6,218
_______________ _____________
Total adjustments 425,454 168,722
_______________ _____________
Net cash used in operating
activities (950,078) (937,427)
Cash flows from investing activities:
Property acquisitions (53,333) (210,862)
Patent costs (2,000) (40,217)
Proceeds from sale of
property and equipment 2,500 800
______________ _____________
Net cash used in investing
activities (52,833) (250,279)
Cash flows from financing activities:
Increase in outstanding checks in
excess of bank balance 63,896 -
Proceeds from borrowing 21,650 23,094
Capital lease payments and
other notes (8,212) (16,291)
Principal payments of bank
notes payable (10,136) (8,675)
Proceeds from issuance of
preferred stock 739,813 -
Offering costs - -
____________ ____________
Net cash (used in) provided
by financing activities 807,011 (1,872)
Net increase (decrease) in cash
and cash equivalents (195,900) (1,189,578)
Cash and cash equivalents,
beginning of period 346,574 1,536,152
_________________ ______________
Cash and cash equivalents,
end of period $ 150,674 $ 346,574
================= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
Note A: Summary of Significant Accounting Policies
Nature of organization
The Company is involved in developing, manufacturing and marketing
environmentally safe specialty chemicals for a variety of industrial and
military uses. These patented, patent pending or proprietary products are
deemed to be environmentally safe because they are biodegradable and
formulated without chemicals considered hazardous under federal regulations.
The Company's 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 recently added a
patent pending product line of downhole chemicals for the cleaning of tubing
and casing required in the drilling of oil and natural gas wells. The
Company's sales are primarily concentrated in the southeastern United States.
Basis of presentation
Since the Company commenced operations, it has incurred recurring losses and
negative cash flows from operations. The Company does not have sufficient
working capital available as of August 31, 1998, to maintain operations at
their current levels. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The Company's ability to
continue as a going concern is dependent upon obtaining additional capital
investments or generation of adequate sales revenue and profitability from
operations. The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might result should the Company
be unable to continue as a going concern.
To obtain additional capital, the Company has the option to sell 1 million
common shares at an undetermined price per share. These shares are remaining
from 2 million shares authorized for sale to accredited and sophisticated
investors by the Company's board of directors in January 1998. The Company is
also considering initiation of a private offering of Series D Convertible
Preferred Stock solely to accredited investors. For immediate capital
requirements, the Company expects to negotiate loans from board of director
members until sufficient funds are generated from operations or the financial
instruments discussed above are implemented. As of October 31, 1998, the
Company has a cash balance of $13,787 with which the Company expects to cover
operating expenses through mid November 1998. In November 1998, the Company
negotiated a loan of $50,000 from a member of the board of directors. The
$50,000 loan will allow the Company to continue its current operations for at
least one (1) month. In this time, if sufficient funds are not generated from
current operations or further financing can not be obtained, management
expects to reduce overhead and operating expenses to a level that can be
maintained by the current level of sales.
During the second quarter of fiscal year 1998, the Company's board of
directors authorized selling up to 2 million shares of common stock at the
best negotiated price. In April 1998, the Company completed a special private
placement solely to accredited and sophisticated investors at an offering
price of $.75 per share and raised approximately $740,000. Proceeds from this
offering were used to fund the recurring losses and negative cash flows and to
expand the Company's technical capabilities in the oilfield service sector.
The Company anticipates improvements in cash flow from operations from
increasing sales of a group of products destined for marketing internationally
to the household goods and industrial sector by SafeScience, Inc. The Company
expects to begin furnishing SafeScience,
F-7
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
Inc. with substantial product quantities by the second quarter of fiscal year
1999, although there is no certainty as to whether these quantities will be
sold and generate revenues for the Company. U.S. introduction will occur after
completing evaluation by the U.S. consumer product safety commission and an
independent consumer testing laboratory.
Management believes that the sources of funds discussed above will enable the
Company to sustain its operations and meet its obligations, although there can
be no assurance that this will be done.
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. The Company periodically assesses the
recoverability of the unamortized balance based on expected future
profitability and undiscounted future cash flows related to the patents and
their contribution to overall operations of the Company.
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.
F-8
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
Shares issued for non-cash consideration
Stock and stock options issued for services are valued at the vendor's regular
billing rates or at the value of the stock issued, whichever is more clearly
determinable at date of issuance. 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.
Credit concentration
During fiscal years 1998 and 1997, one customer accounted for twenty-three
percent (23%) and twenty-eight (28%) percent of the Company's net sales
respectively. In addition, the U.S. Air Force contract to supply an aircraft
cleaning compound accounted for fourteen (14%) percent and twenty-two (22%)
percent of the Company's fiscal 1998 and 1997 net sales respectively.
Reclassifications
Certain prior year balances have been reclassified to conform with current
year presentation.
Accounting pronouncement
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share," SFAS No.
129, "Disclosure of Information about Capital Structure," SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 128, which is
effective for reporting periods ending after December 15, 1997, has been
adopted by the Company and the impact on the Company's earnings per share was
not material. SFAS No. 129, which is effective for reporting periods ending
after December 15, 1997, has been adopted, and all required disclosures are
presented in the Company's consolidated financial statements included herein.
SFAS No. 130 and SFAS No. 131 are effective for fiscal years beginning after
December 15, 1997. The Company plans to adopt SFAS No. 130 and SFAS No. 131 in
fiscal year 1999 and to include the required disclosures in its November 30,
1998 interim financial statements.
Note B: Related party transactions
1998 and 1997
The Company is leasing its present facilities from a company controlled by a
former member of the Company's board of directors. The lease is 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.
Accrued Expenses
Accrued Expenses includes a $15,000 balance due to the Chairman of the Board
for expenses incurred during fund raising efforts in fiscal 1997. The $15,000
balance due will be paid in the form of common shares. The number of common
shares to be issued will be calculated using the average stock price during
the time that the expenses were incurred. The expenses incurred are reflected
in the selling, general and administrative section in the accompanying
consolidated statements of operations.
Note C: Accounts and notes receivable
During the fourth quarter of fiscal 1997, the Company negotiated with
Tuboscope Vetco International Environmental Services, Inc. for the recovery of
the "fines treatment unit" in
F-9
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
exchange for the note receivable recorded in 1996. A mutual release of all
claims between the two parties was signed and the Company has taken possession
of the major components of the "fines treatment unit" valued at $30,000 which
is reflected in the property and equipment section in the accompanying
financial statements. The remaining balance of the note receivable was
expensed to bad debt.
Trade receivables are shown net of an allowance for doubtful accounts of
$10,000.
Note D: Inventories
<TABLE>
Inventories at August 31, 1998 consisted of the following:
<S> <C>
Raw materials $125,539
Finished goods 46,336
Containers and labels 18,137
Consigned inventory 19,990
_____________
Total $210,002
=============
</TABLE>
Note E: Property and equipment
Major classes of property and equipment at August 31, 1998 consisted of:
<TABLE>
<S> <C>
Furniture and equipment $600,899
Leasehold improvements 27,870
_______________
Total property and equipment 628,769
Less: accumulated depreciation (359,081)
_______________
$ 269,688
===============
</TABLE>
Depreciation expense was $168,957 and $156,537 for years ended August 31, 1998
and 1997, respectively.
During fiscal year ended August 31, 1998, the Company recorded a $121,757
impairment write-down of its soil washing equipment and fines treatment unit
in accordance with Statement of Financial Accounting Standards (SFAS) No. 121.
The Company wrote-down these pieces of equipment since they appeared to have
no revenue generating potential based upon recent significant adverse changes
in the environmental consulting and remediation business. Therefore, the
Company estimated no future undiscounted cash flows from the soil washing
equipment and fines treatment unit. Thus, as prescribed by SFAS 121, the
carrying value of these pieces of equipment was reduced to the estimated
discounted future cash flows which is zero.
The charge for impairment is included in the selling, general and
administrative expense section in the fiscal year 1998 accompanying
consolidated statements of operations.
Note F: Intangible assets
Intangible assets at August 31, 1998 consisted of the following:
<TABLE>
<S> <C>
Patent costs $141,294
Less: accumulated amortization (35,442)
______________
Net Intangible assets $ 105,852
=================
</TABLE>
F-10
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
Amortization expense was $33,265 and $17,354 for the years ended August 31,
1998 and 1997, respectively. Fiscal year 1998 and 1997 amortization expense
includes $22,556 and $12,000, respectively, of capitalized patent costs
written off that relate to the Company's soil washing process.
Note G: Long-term debt and lease obligations
<TABLE>
<S> <C>
Long-term debt at August 31, 1998, consisted of the following:
Note payable to a bank; principal and interest due in monthly
installments at interest rates varying from 7.75% to 9.95% $31,291
Notes and capital leases payable to a corporation; principal
and interest due in monthly installments at interest rates
varying from 8.70 % to 14.00% 30,518
_____________
Total debt 61,809
Less: current portion (22,100)
_____________
Long-term debt $39,709
=============
</TABLE>
Principal repayments on notes payable and capital leases required for the next
five years are as follows:
<TABLE>
<S> <C>
1999 $22,100
2000 12,372
2001 13,802
2002 5,717
2003 4,208
Thereafter 3,610
______________
Total debt $61,809
==============
</TABLE>
As of August 31, 1998, equipment under capital lease and the related
accumulated amortization totaled $44,944 and $17,205, respectively.
Amortization of assets recorded is included in depreciation and amortization
expense.
Note H: Shareholders' equity
In January 1998, the Company's board of directors authorized selling up to 2
million shares of common stock at the best negotiated price. In March 1998,
the Company completed a special private placement solely to accredited and
sophisticated investors at an offering price of $.75 per share. The Company
sold 986,413 shares of common stock and raised approximately $740,000.
The Company issued 33,333 shares of common stock at the special private
placement offering price of $.75 per share to Global Strategy & Associates,
James A. Wylie, Jr. in lieu of cash for consulting services rendered during
the months of January, February and March, 1998.
In the first quarter of fiscal 1998, the Company issued Baer & Company, L.L.C.
39,996 shares of $.001 par value common stock for expenses incurred from July
1996 through November 1997 while raising funds on behalf of the Company.
27,370 shares were issued at a price of $.43775 per share. The remaining
12,626 shares were issued at a price of $.6661 per share. The prices per share
are based on the average of the bid and last trade value of the Company's
stock during the period in which the fund raising expenses were incurred.
Expenses for the fair value of the services provided were expensed as
incurred.
F-11
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
Stock-based Incentive Compensation Plans
In October 1995, Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock Based Compensation," was issued effective in
fiscal year 1997 for the Company. Under SFAS 123, companies could either adopt
a "fair valued based method" of accounting for stock-based incentive
compensation plans, as defined, or may continue to use accounting methods as
prescribed by APB Opinion No. 25. The Company has elected to continue
accounting for its plan under APB Opinion No. 25.
The Company's policy is to grant options to purchase common stock to
directors, officers or key employees as part of an incentive program or to
individuals as compensation for services rendered in lieu of cash. On January
17, 1991, the Company established a non-qualified stock option plan (the 1991
Plan) under which 1 million options to purchase common stock were made
available. In fiscal year 1994, the Company amended the 1991 non-qualified
stock option plan to authorize the issuance of an additional 600,000 options.
All options are non-compensatory and are issued at or above the market price
on the date the option is granted.
The Company's Compensation and Options Committee determines the term of each
grant and when it becomes exercisable. No compensation expense has been
recorded in connection with stock options as the exercise price of all options
granted exceeded market price of the shares on the dates of the grants. The
options expire three years from the date of grant.
The following table summarizes the activity related to stock options:
<TABLE>
Number Number of Range of Weighted
of Options Options Exercise Average
Issued under Issued outside Prices Exercise
the Plan the Plan Price
<S> <C> <C> <C> <C>
Outstanding at
August 31, 1996 509,000 1,443,007 $.34 - $3.00 $0.93
Granted - 329,697 $.51 - $1.00 $0.70
Exercised - - - -
Forfeited - (33,333) $2.00 $2.00
__________ ___________
Outstanding at
August 31, 1997 509,000 1,739,371 $.34 - $3.00 $0.89
Granted - - - -
Exercised - - - -
Forfeited - (102,619) $2.10 - $3.00 $2.46
_________ ____________
Outstanding at
August 31, 1998 509,000 1,636,752 $.34 - $2.50 $0.80
</TABLE>
F-12
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
The following table summarizes information about stock options outstanding at
August 31, 1998:
<TABLE>
Options Outstanding Options Exercisable
Wgtd. Avg. Wgtd.
Range of Number Remaining Avg. Number Wgtd. Avg.
Exercise Outstanding Contractual Exercise Exercisable Exercise
Price at 8/31/98 Life Price At 8/31/98 Price
<S> <C> <C> <C> <C> <C>
$0.34 - $0.99 1,645,567 3.4 years $0.59 1,470,567 $0.58
$1.00 - $1.99 286,518 0.71 years $1.07 286,518 $1.07
$2.00 - $2.50 213,667 1.1 years $2.12 213,667 $2.12
</TABLE>
The options exercisable at August 31, 1998 and 1997, respectively, were
1,970,752 and 2,073,371 with weighted-average exercises prices of $.82 and
$.92, respectively.
Stock Options Granted, Exercised and Forfeited
1998
During fiscal year 1998, 102,619 stock options outside of the Company's Stock
Option Plan expired. The exercise prices for these options ranged from $2.10
to $3.00 per share.
In December 1997, the Company's Board of Directors extended the expiration
date for 40,000 stock options granted in April 1991 to a financial consultant
for services rendered. The exercise period was extended for an additional
three (3) years from the expiration date.
1997
The Company granted to employees 158,130 common stock options with exercise
prices equal to or greater than the market price of the stock on the grant
date. These options were issued in accordance with agreements entered into by
the Company and each employee.
The Company granted 53,130 stock options currently exercisable with an
exercise price of $1.00 per share for technical services rendered during the
period May 1, 1996 through June 30, 1997. These options expire during the
period from January 31, 2000 through June 30, 2000.
The Company granted 5,000 stock options currently exercisable with an exercise
price of $1.00 per share in accordance with the terms of certain employment
agreements. These options expire March 10, 2000.
The Company granted 100,000 stock options not currently exercisable with an
exercise price of $0.75 per share in accordance with the terms of certain
employment agreements. The stock options become exercisable when certain
performance parameters are met. The options expire June 30, 2001.
No compensation expense was recorded upon issuance of the 158,130 options to
employees in fiscal 1997 because the exercise price exceeded the market prices
of the Company's common stock on the measurement date. No employee options
were granted in fiscal year 1998.
F-13
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
The Company granted to non-employees 171,567 common stock options with
exercise prices equal to or greater than the market price of the stock on the
grant date.
The Company granted 100,000 stock options, of which 25,000 are currently
exercisable, with an exercise price of $0.51 per share pursuant to the terms
of a consulting agreement. The 75,000 stock options currently non-exercisable
become exercisable when certain performance milestones are achieved. None of
the milestones in accordance with the terms of the agreement were achieved in
fiscal 1998. These options expire June 30, 2001.
The Company granted 66,667 stock options currently exercisable with an
exercise price of $0.65 in lieu of cash for consulting services rendered in
accordance with the terms of a settlement agreement dated April 10, 1997. In
connection with this grant, one director forfeited 33,333 options with an
exercise price of $2.00 per share previously granted to him. The options
expire July 28, 2000.
The Company granted 4,900 stock options currently exercisable with an exercise
price of $0.75 in lieu of cash for marketing services rendered. The options
expire January 31, 2000.
The Company will continue to use stock option arrangements when possible to
conserve its cash. The compensation costs for the related awards have been
recognized in the period for which they were granted. Accordingly, since no
instruments were issued, there is no pro forma information below.
Had compensation cost for the Company's 1997 grants for stock-based employee
compensation plans been determined consistent with SFAS 123, the Company's net
loss, net loss applicable to common share owners, and net loss per common
share for 1997 would approximate the pro forma amounts below:
<TABLE>
1997
___________________________________________________________________________
As Reported Pro forma
<S> <C> <C>
Net loss $(1,106,149) $(1,169,793)
Net loss applicable to
common share owners $(1,345,197) $(1,408,841)
Net loss per common share $ (.10) $ (.11)
___________________________________________________________________________
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997: a) no dividend yield, b) risk-free
interest rate of 6.39%, c) expected contractual life of 3.4 years, d)
expected volatility of 101%. No assumptions were necessary in 1998 as no
options were granted.
Based on the above assumptions, the weighted-average grant-date fair value of
each option granted during fiscal 1997 was $.40.
F-14
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
1996
The Company granted 757,555 common stock options with exercise prices that
exceeds the market price of the stock on the grant date. These options were
issued in accordance with terms of three agreements entered into by the
Company. The first of these agreements granted the Company's Chairman of the
Board a option to purchase 600,000 shares of common stock at an exercise price
of $.34 per share in lieu cash compensation for services to be rendered. In
connection with this agreement, 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
forfeited to the Company's 1991 non-qualified stock option plan. Another
option agreement granted 150,055 stock options with an exercise price of $1.00
per share for technical consulting services rendered in lieu of cash
compensation. The third option agreement granted 7,500 stock options with an
exercise price of $1.00 per share in accordance with the terms an employment
agreement. There was no compensation expense recorded upon issuance of these
options in fiscal 1996 because the exercise prices exceeded the market prices
of the Company's common shares on the measurement date.
1995
The Company granted 497,000 common stock options with exercise prices that
exceeds the market price of the stock on the grant date. These options were
issued in accordance with terms of agreements entered by the Company and the
Company's 1991 non qualified stock option plan. The Company granted an
affiliate, controlled by a member of the Company's Board of Directors, options
to purchase 137,000 shares of common stock at an exercise price of $2.00 per
share in lieu cash for the first two (2) years of a lease for the Company's
facility. In another agreement the Company granted options to purchase 155,000
shares of common stock at exercise prices ranging from $.65 to $2.00 per share
in lieu of cash compensation for professional consulting services rendered.
The Company also granted 205,000 stock options with exercise prices ranging
from $.65 to $2.00 in accordance with the Company's 1991 Stock Option Plan.
There was no compensation expense recorded upon issuance of these options in
fiscal 1995 because the exercise prices exceeded the market prices of the
Company's common shares on the measurement date.
1994, 1993, 1992 and 1991
The Company granted 1,333,452 common stock options with exercise prices that
exceeds the market price of the stock on the grant date. These options were
issued in accordance with terms of agreements entered by the Company and the
Company's 1991 non qualified stock option plan. The Company granted options to
purchase 333,452 shares of common stock at exercise prices ranging from $.90
to $3.00 per share in lieu cash compensation for professional consulting
services rendered. The Company also granted 1,000,000 stock options with an
exercise price of $.75 per share in accordance with the Company's 1991 Stock
Option Plan. There was no compensation expense recorded upon issuance of these
options because the exercise prices exceeded the market prices of the
Company's common shares on the measurement date.
Common Stock Purchase Warrants
The Company's Class D Common Stock Purchase Warrants expired on December 15,
1993. The Company issued Class E Common Stock Purchase Warrants for every two
Class D warrants that were outstanding on December 15, 1993. 1,062,917 Class E
Common Stock
F-15
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
Purchase Warrants were outstanding at August 31, 1997, each exercisable at
$1.50 into one share of Common Stock until June 15, 1999. The Class E Common
Stock Purchase Warrants are callable by the Company upon 30 days written
notice to the holders. On January 8, 1998, the Company's board of directors
authorized lowering the exercise price of the Class "E" Warrants to $.75 per
share, and that a Warrant call be issued effective immediately. The holders
had 30 days to respond and if the holders did not convert, the warrants
expired after the 30 day period. None of the Class "E" Warrants were exercised
during the conversion period, and the warrants expired on February 14, 1998.
The Company issued 100,000 Placement Agent Common Stock Purchase Warrants to
Gilford Securities, Inc. and 100,000 Placement Agent Common Stock Purchase
Warrants to FBB Corp pursuant to Warrant Agreements dated December 2, 1994.
Each Placement Agent Common Stock Purchase 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. There is no provision for the call
or redemption of the Placement Agent Common Stock Purchase Warrants.
The Company issued Class Z Common Stock Purchase 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, 1997, each
exercisable at $.75 into one share of $.001 Common Stock until June 30, 2001.
The Class Z Common Stock Purchase Warrants are callable by the company upon
thirty days written notice at any time on or after July 1, 2000 and at any
time, notwithstanding the date, that the common stock of the company has a
closing bid price on ten consecutive trading days of $2.00 per share or more.
In January 1996, the Company issued a Warrant to purchase 600,000 shares of
common stock to the Chairman of the Board as remuneration for services
rendered while holding that position. This Warrant may be exercised any time
on or after January 2, 1996 but prior to the earlier to occur of (I) December
31, 2000, or (ii) a sale of substantially all of the stock or assets of the
Company in a transaction in which it is not the surviving corporation. The
exercise price is $2.00per share of common stock.
The Company assigns no value to the Common Stock Purchase Warrants in the
consolidated financial statements due to the immaterial value associated
therewith.
Stock Dividends - Series B and C
The Series B and C Convertible Exchangeable Preferred Stock $.001 par per
share has an established declared dividend of $.07 per annum per share, due on
the 30th day of June of each year. The dividend accumulates if not paid when
due. The dividend may be paid in cash or in stock at the sole discretion of
the Board of Directors. If paid in stock, the common shares issued will be
valued at the average bid price for the 30 days preceding the June 30 payment
date. Once the price per share of common stock is determined, a number of
common shares equal to the dollar value of the dividend which was to be paid
on June 30, will be issued with any fractional shares of the common stock
dividend rounded up.
F-16
Delta-Omega Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
August 31, 1998
Note I: Income taxes
<TABLE>
<S> <C>
At August 31, 1998, deferred taxes consisted of the following:
Deferred tax assets, net operating loss
carry forward $ 3,427,995
Deferred tax liabilities, excess of
book over tax depreciation (23,031)
Valuation allowance (3,404,964)
_________________
Net deferred taxes $ 0
=================
</TABLE>
The valuation allowance for deferred tax assets as of September 1, 1997 was
$2,928,587. The net change in the valuation allowance for the year ended
August 31, 1998 was an increase of $476,377. The Company has net operating
loss carryforwards of $10,062,290 available for federal income tax purposes
which are available to offset taxable income through 2011. The Company has
alternative minimum tax net operating loss credit carryforwards of
approximately $4 million available for future periods. A valuation allowance
of 100% of net operating loss carryforwards is maintained due to uncertainty
in the Company's ability to generate income.
Note J: Employee compensation plan
The Company presently offers no post-employment/post-retirement benefits which
would be required to be reflected in its financial statements by SFAS No. 112
and SFAS No. 106, respectively.
The Board of Directors has 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, 1998, 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 with a renewal option for five additional years at $7,200 per month. The
facility is rented from a company controlled by a former member of the
Company's board of directors. 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:
<TABLE>
Year ending August 31, Payable in
Cash
<S> <C>
1999 $ 72,000
2000 72,000
2001* 36,000
______________
$ 180,000
==============
</TABLE>
*The term of the operating lease expires February 28, 2001.
F-17
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 25, 1998 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 25, 1998
Larry G. Schafran
/s/ James V. Janes, III Chief Executive Officer, November 25, 1998
James V. Janes, III President
/s/ Marian A. Bourque Chief Financial Officer, November 25, 1998
Marian A. Bourque Secretary and Treasurer
/s/ Richard A. Brown Director November 25, 1998
Richard A. Brown
/s/ David H. Peipers Director November 25, 1998
David H. Peipers
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DELTA-OMEGA TECHNOLOGIES, INC. FINANCIAL STATEMENTS FOR THE YEAR ENDED AUGUST
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<CASH> 150,674
<SECURITIES> 0
<RECEIVABLES> 124,772
<ALLOWANCES> 10,000
<INVENTORY> 210,002
<CURRENT-ASSETS> 512,886
<PP&E> 628,769
<DEPRECIATION> 359,081
<TOTAL-ASSETS> 899,044
<CURRENT-LIABILITIES> 326,893
<BONDS> 39,709
0
3,732
<COMMON> 14,996
<OTHER-SE> 513,714
<TOTAL-LIABILITY-AND-EQUITY> 899,044
<SALES> 1,177,505
<TOTAL-REVENUES> 1,177,505
<CGS> 850,109
<TOTAL-COSTS> 850,109
<OTHER-EXPENSES> 1,704,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,273
<INCOME-PRETAX> (1,375,532)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,375,532)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,375,532)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
