SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended March 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 0-24370
ECOLOGICAL SERVICES, INC.
(Exact name of small business issuer in its charter)
DELAWARE 33-0611748
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
1500 Quail Street, Suite 550
Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 660-1500
-------------------
Securities registered pursuant to Section 12(b) of the Act: None
----------------
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.001
Indicate by check mark whether the registrant (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 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 X NO
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is 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-K
or any amendment to this Form 10-K. [ X ]
State issuer's revenues for its most recent fiscal year: None
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 31, 1999 was not determinable since the Common
Stock was not traded.
The number of shares outstanding of the issuer's classes of Common
Stock as of March 31, 1999:
Common Stock, $.001 Par Value - 2,175,375 shares
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I
Item 1. DESCRIPTION OF BUSINESS
Background
Ecological Services, Inc. (formerly Plasmatronic Technologies, Inc.), a
Delaware corporation (the "Company") was incorporated on June 11, 1992. The
Company has no operating history other than organizational matters, and was
formed specifically to be a "clean public shell" and for the purpose of either
merging with or acquiring an operating company with operating history and
assets. The Securities and Exchange Commission has defined and designated these
types of companies as "blind pools" and "blank check" companies.
The primary activity of the Company will involve seeking merger or acquisition
candidates with whom it can either merge or acquire. The Company has not
selected any company for acquisition or merger and does not intend to limit
potential acquisition candidates to any particular field or industry, but does
retain the right to limit acquisition or merger candidates, if it so chooses, to
a particular field or industry. The Company's plans are in the conceptual stage
only.
In connection with a proposed acquisition of a company engaged in water
remediation, the Company changed its name in 1998 to Ecological Services, Inc.
and effected a 3.75-for-1 forward stock split. No agreement for the acquisition
was entered into, however. All per share amounts herein have been adjusted for
the forward split.
The executive offices of the Company are located at 1500 Quail Street, Suite
550, Newport Beach, California 92660. Its telephone number is (714) 660-1500.
Plan of Operation - General
The Company was organized for the purpose of creating a corporate vehicle to
seek, investigate and, if such investigation warrants, acquire an interest in
one or more business opportunities presented to it by persons or firms who or
which desire to seek the perceived advantages of a publicly held corporation. At
this time,the Company has no plan, proposal, agreement, understanding or
arrangement to acquire or merge with any specific business or company, and the
Company has not identified any specific business or company for investigation
and evaluation. No member of Management or promotor of the Company has had any
material discussions with any other company with respect to any acquisition of
that company. Although the Company's Common Stock is currently not freely
tradeable, it will eventually become so under exemptions such as Rule 144
promulgated under the Securities Act of 1933. See "Description of Securities."
The Company will not restrict its search to any specific business, industry or
geographical location, and the Company may participate in a business venture of
virtually any kind or nature. The discussion of the proposed business under this
caption and throughout this Registration Statement is purposefully general and
is not meant to be restrictive of the Company's virtually unlimited discretion
to search for and enter into potential business opportunities.
The Company intends to obtain funds in one or more private placements to
finance the operation of any acquired business. Persons purchasing securities in
these placements and other shareholders will likely not have the opportunity to
participate in the decision relating to any acquisition. The Company's proposed
business is sometimes referred to as a "blind pool" because any investors will
entrust their investment monies to the Company's management before they have a
chance to analyze any ultimate use to which their money may be put.
Consequently, the Company's potential success is heavily dependent on the
Company's management, which will have virtually unlimited discretion in
searching for and entering into a business opportunity. None of the officers and
directors of the Company has had any experience in the proposed business of the
Company. There can be no assurance that the Company will be able to raise any
funds in private placements. In any private placement, management may purchase
shares on the same terms as offered in the private placement. (See "Risk
Factors" and "Management").
Management anticipates that it will only participate in one potential business
venture. This lack of diversification should be considered a substantial risk in
investing in the Company because it will not permit the Company to offset
potential losses from one venture against gains from another (see "Risk
Factors").
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The Company may seek a business opportunity with a firm which only recently
commenced operations, or a developing company in need of additional funds for
expansion into new products or markets, or seeking to develop a new product or
service, or an established business which may be experiencing financial or
operating difficulties and is in the need for additional capital which is
perceived to be easier to raise by a public company. In some instances, a
business opportunity may involve the acquisition or merger with a corporation
which does not need substantial additional cash but which desires to establish a
public trading market for its common stock. The Company may purchase assets and
establish wholly owned subsidiaries in various business or purchase existing
businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in which
to participate will be complex and extremely risky. Because of general economic
conditions, rapid technological advances being made in some industries, and
shortages of available capital, management believes that there are numerous
firms seeking the benefits of a publicly traded corporation. Such perceived
benefits of a publicly traded corporation may include facilitating or improving
the terms on which additional equity financing may be sought, providing
liquidity for the principals of a business, creating a means for providing
incentive stock options or similar benefits to key employees, providing
liquidity (subject to restrictions of applicable statutes) for all shareholders,
and other factors. Potentially available business opportunities may occur in
many different industries and at various stages of development, all of which
will make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex.
As is customary in the industry, the Company may pay a finder's fee for
locating an acquisition prospect. If any such fee is paid, it will be approved
by the Company's Board of Directors and will be in accordance with the industry
standards. Such fees are customarily between 1% and 5% of the size of the
transaction, based upon a sliding scale of the amount involved. Such fees are
typically in the range of 5% on a $1,000,000 transaction ratably down to 1% in a
$4,000,000 transaction. Management has adopted a policy that such a finder's fee
or real estate brokerage fee could, in certain circumstances, be paid to any
employee, officer, director or 5% shareholder of the Company, if such person
plays a material role in bringing a transaction to the Company.
As part of any transaction, the acquired company may require that Management or
other stockholders of the Company sell all or a portion of their shares to the
acquired company, or to the principals of the acquired company. It is
anticipated that the sales price of such shares will be lower than the current
market price or anticipated market price of the Company's Common Stock. The
Company's funds are not expected to be used for purposes of any stock purchase
from insiders. The Company shareholders will not be provided the opportunity to
approve or consent to such sale. The opportunity to sell all or a portion of
their shares in connection with an acquisition may influence management's
decision to enter into a specific transaction. However, management believes that
since the anticipated sales price will be less than market value, that the
potential of a stock sale by management will be a material factor on their
decision to enter a specific transaction.
The above description of potential sales of management stock is not based upon
any corporate bylaw, shareholder or board resolution, or contract or agreement.
No other payments of cash or property are expected to be received by Management
in connection with any acquisition.
The Company has not formulated any policy regarding the use of consultants or
outside advisors, but does not anticipate that it will use the services of such
persons.
The Company has, and will continue to have, insufficient capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes the Company will offer owners of business
opportunities the opportunity to acquire a controlling ownership interest in a
public company at substantially less cost than is required to conduct an initial
public offering. The owners of the business opportunities will, however, incur
significant post-merger or acquisition registration costs in the event they wish
to register a portion of their shares for subsequent sale. The Company will also
incur significant legal and accounting costs in connection with the acquisition
of a business opportunity including the costs of preparing post-effective
amendments, Forms 8-K, agreements and related reports and documents
nevertheless, the officers and directors of the Company have not conducted
market research and are not aware of statistical data which would support the
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perceived benefits of a merger or acquisition transaction for the owners of a
business opportunity.
The Company does not intend to make any loans to any prospective merger or
acquisition candidates or to unaffiliated third parties.
Sources of Opportunities
The Company anticipates that business opportunities for possible acquisition
will be referred by various sources, including its officers and directors,
professional advisers, securities broker-dealers, venture capitalists, members
of the financial community, and others who may present unsolicited proposals.
The Company will seek a potential business opportunity from all known sources,
but will rely principally on personal contacts of its officers and directors as
well as indirect associations between them and other business and professional
people. It is not presently anticipated that the Company will engage
professional firms specializing in business acquisitions or reorganizations.
The officers and directors of the Company are currently employed in other
positions and will devote only a portion of their time (not more than one hour
per week) to the business affairs of the Company, until such time as an
acquisition has been determined to be highly favorable, at which time they
expect to spend full time in investigating and closing any acquisition for a
period of two weeks. In addition, in the face of competing demands for their
time, the officers and directors may grant priority to their full-time positions
rather than to the Company.
Evaluation of Opportunities
The analysis of new business opportunities will be undertaken by or under the
supervision of the officers and directors of the Company (see "Management").
Management intends to concentrate on identifying prospective business
opportunities which may be brought to its attention through present associations
with management. In analyzing prospective business opportunities, management
will consider such matters as the available technical, financial and managerial
resources; working capital and other financial requirements; history of
operation, if any; prospects for the future; present and expected competition;
the quality and experience of management services which may be available and the
depth of that management; the potential for further research, development or
exploration; specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company; the potential for
growth or expansion; the potential for profit; the perceived public recognition
or acceptance of products, services or trades; name identification; and other
relevant factors. Officers and directors of each Company will meet personally
with management and key personnel of the firm sponsoring the business
opportunity as part of their investigation. To the extent possible, the Company
intends to utilize written reports and personal investigation to evaluate the
above factors. The Company will not acquire or merge with any company for which
audited financial statements cannot be obtained.
It may be anticipated that any opportunity in which the Company participates
will present certain risks. Many of these risks cannot be adequately identified
prior to selection of the specific opportunity, and the Company's shareholders
must, therefore, depend on the ability of management to identify and evaluate
such risk. In the case of some of the opportunities available to the Company, it
may be anticipated that the promoters thereof have been unable to develop a
going concern or that such business is in its development stage in that it has
not generated significant revenues from its principal business activities prior
to the Company's participation. There is a risk, even after the Company's
participation in the activity and the related expenditure of the Company's
funds, that the combined enterprises will still be unable to become a going
concern or advance beyond the development stage. Many of the opportunities may
involve new and untested products, processes, or market strategies which may not
succeed. Such risks will be assumed by the Company and, therefore, its
shareholders.
The Company will not restrict its search for any specific kind of business, but
may acquire a venture which is in its preliminary or development stage, which is
already in operation, or in essentially any stage of its corporate life. It is
currently impossible to predict the status of any business in which the Company
may become engaged, in that such business may need additional capital, may
merely desire to have its shares publicly traded, or may seek
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other perceived advantages which the Company may offer.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, reorganization, joint venture,
franchise or licensing agreement with another corporation or entity. It may also
purchase stock or assets of an existing business. On the consummation of a
transaction, it is possible that the present management and shareholders of the
Company will not be in control of the Company. In addition, a majority or all of
the Company's officers and directors may, as part of the terms of the
acquisition transaction, resign and be replaced by new officers and directors
without a vote of the Company's shareholders.
It is anticipated that any securities issued in any such reorganization would
be issued in reliance on exemptions from registration under applicable Federal
and state securities laws. In some circumstances, however, as a negotiated
element of this transaction, the Company may agree to register such securities
either at the time the transaction is consummated, under certain conditions, or
at specified time thereafter. The issuance of substantial additional securities
and their potential sale into any trading market which may develop in the
Company's Common Stock may have a depressive effect on such market. While the
actual terms of a transaction to which the Company may be a party cannot be
predicted, it may be expected that the parties to the business transaction will
find it desirable to avoid the creation of a taxable event and thereby structure
the acquisition in a so called "tax free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code of 1986, as amended (the "Code").
In order to obtain tax free treatment under the Code, it may be necessary for
the owners of the acquired business to own 80% or more of the voting stock of
the surviving entity. In such event, the shareholders of the Company, including
investors in this offering, would retain less than 20% of the issued and
outstanding shares of the surviving entity, which could result in significant
dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors of the Company
will meet personally with management and key personnel, may visit and inspect
material facilities, obtain independent analysis or verification of certain
information provided, check reference of management and key personnel, and take
other reasonable investigative measures, to the extent of the Company's limited
financial resources and management expertise.
The manner in which each Company participates in an opportunity will depend on
the nature of the opportunity, the respective needs and desires of the Company
and other parties, the management of the opportunity, and the relative
negotiating strength of the Company and such other management.
With respect to any mergers or acquisitions, negotiations with target company
management will be expected to focus on the percentage of the Company which
target company shareholders would acquire in exchange for their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's shareholders will in all likelihood hold a
lesser percentage ownership interest in the Company following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event the Company acquires a target company with substantial assets. Any
merger or acquisition effected by the Company can be expected to have a
significant dilative effect on the percentage of shares held by the Company's
then shareholders, including purchasers in this offering. (See "Risk Factors.")
The Company will not have sufficient funds (unless it is able to raise funds in
a private placement) to undertake any significant development, marketing and
manufacturing of any products which may be acquired. Accordingly, following the
acquisition of any such product, the Company will, in all likelihood, be
required to either seek debt or equity financing or obtain funding from third
parties, in exchange for which the Company would probably be required to give up
a substantial portion of its interest in any acquired product. There is no
assurance that the Company will be able either to obtain additional financing or
interest third parties in providing funding for the further development,
marketing and manufacturing of any products acquired.
It is anticipated that the investigation of specific business opportunities and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate
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in a specific business opportunity the costs therefore incurred in the related
investigation would not be recoverable. Furthermore, even if an agreement is
reached for the participation in a specific business opportunity, the failure to
consummate that transaction may result in the loss of the Company of the related
costs incurred.
Management believes that the Company may be able to benefit from the use of
"leverage" in the acquisition of a business opportunity. Leveraging a
transaction involves the acquisition of a business through incurring significant
indebtedness for a large percentage of the purchase price for that business.
Through a leveraged transaction, the Company would be required to use less of
its available funds for acquiring the business opportunity and, therefore, could
commit those funds to the operations of the business opportunity, to acquisition
of other business opportunities or to other activities. The borrowing involved
in a leveraged transaction will ordinarily be secured by the assets of the
business opportunity to be acquired. If the business opportunity acquired is not
able to generate sufficient revenues to make payments on the debt incurred by
the Company to acquire that business opportunity, the lender would be able to
exercise the remedies provided by law or by contract. These leveraging
techniques, while reducing the amount of funds that the Company must commit to
acquiring a business opportunity, may correspondingly increase the risk of loss
to the Company. No assurance can be given as to the terms or the availability of
financing for any acquisition by the Company. No assurance can be given as to
the terms or the availability of financing for any acquisition by the Company.
During periods when interest rates are relatively high, the benefits of
leveraging are not as great as during periods of lower interest rates because
the investment in the business opportunity held on a leveraged basis will only
be profitable if it generates sufficient revenues to cover the related debt and
other costs of the financing. Lenders from which the Company may obtain funds
for purposes of a leveraged buy-out may impose restrictions on the future
borrowing, distribution, and operating policies of the Company. It is not
possible at this time to predict the restrictions, if any, which lenders may
impose or the impact thereof on the Company.
Competition
The Company is an insignificant participant among firms which engage in
business combinations with, or financing of, development stage enterprises.
There are many established management and financial consulting companies and
venture capital firms which have significantly greater financial and personnel
resources, technical expertise and experience than the Company. In view of the
Company's limited financial resources and management availability, the Company
will continue to be a significant competitive disadvantage vis-a-vis the
Company's competitors.
Regulation and Taxation
The Investment Company Act of 1940 defines an "investment company" as an issuer
which is or holds itself out as being engaged primarily in the business of
investing, reinvesting or trading of securities. While the Company does not
intend to engage in such activities, the Company could become subject to
regulation under the Investment Company Act of 1940 in the event the Company
obtains or continues to hold a minority interest in a number of development
stage enterprises. The Company could be expected to incur significant
registration and compliance costs if required to register under the Investment
Company Act of 1940. Accordingly, management will continue to review the
Company's activities from time to time with a view toward reducing the
likelihood the Company could be classified as an "investment company."
The Company intend to structure a merger or acquisition in such manner as to
minimize Federal and state tax consequences to the Company and to any target
company.
Employees
The Company's only employees at the present time are its officers and
directors, who will devote as much time as the Board of Directors determine is
necessary to carry out the affairs of the Company. (See "Management").
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Item 2. DESCRIPTION OF PROPERTY
The Company rents an executive suite on an as needed basis. The Company pays
its own charges for long distance telephone calls and other miscellaneous
secretarial, photocopying and similar expenses.
Item 3. LEGAL PROCEEDINGS
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 1999.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock has not traded. As of March 31, 1999, there
were 115 stockholders of
record.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Company has been recently formed and has not engaged in any
operations other than organizational matters. Its operating deficit is being
founded by an officer and director.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company required to be
included in Item 7 are set forth in the Financial Statements Index.
Its operating deficit is being funded by an officer and director.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
The members of the Board of Directors of the Company serve until the
next annual meeting of stockholders, or until their successors have been
elected. The officers serve at the pleasure of the Board of Directors.
Information as to the director and executive officer of the Company is as
follows.
Jehu Hand has been President and Secretary of the Company since its
inception and Chief Financial Officer since January 1, 1995. Mr. Hand has been
engaged in corporate and securities law practice and has been a partner of the
law firm of Hand & Hand since 1992. Hand & Hand incorporated as a law
corporation in May 1994. From January 1992 to December 1992 he was the Vice
President-Corporate Counsel and Secretary of Laser Medical Technology, Inc.,
which designs, manufactures and markets dental lasers and endodontics equipment.
He was a director of Laser Medical from February 1992 to February 1993. From
January to October, 1992 Mr. Hand was Of Counsel to the Law Firm of Lewis,
D'Amato, Brisbois & Bisgaard. From January 1991 to January 1992 he was a
shareholder of McKittrick, Jackson, DeMarco & Peckenpaugh, a law corporation.
From January to December 1990 he was a partner of Day, Campbell & Hand, and was
an associate of its predecessor law firm from July 1986 to December 1989. From
1984 to June 1986 Mr. Hand was an associate attorney with Schwartz, Kelm, Warren
& Rubenstein in Columbus, Ohio. Jehu Hand received a J.D. from New York
University School of Law and a B.A. from Brigham Young University.
Conflicts of Interest
Certain conflicts of interest now exist and will continue to exist
between the Company and its officers and directors due to the fact that each has
other business interests to which he devotes his primary attention. Each officer
and director may continue to do so notwithstanding the fact that management time
should be devoted to the business of the Company.
Certain conflicts of interest may exist between the Company and its
management, and conflicts may develop in the future. The Company has not
established policies or procedures for the resolution of current or potential
conflicts of interests between the Company, its officers and directors or
affiliated entities. There can be no assurance that management will resolve all
conflicts of interest in favor of the Company, and failure by management to
conduct the Company's business in the Company's best interest may result in
liability to the management. The officers and directors are accountable to the
Company as fiduciaries, which means that they are required to exercise good
faith and integrity in handling the Company's affairs. Shareholders who believe
that the Company has been harmed by failure of an officer or director to
appropriately resolve any conflict of interest may, subject to applicable rules
of civil procedure, be able to bring a class action or derivative suit to
enforce their rights and the Company's rights.
The Company has no arrangement, understanding or intention to enter
into any transaction for participating in any business opportunity with any
officer, director, or principal shareholder or with any firm or business
organization with which such persons are affiliated, whether by reason of stock
ownership, position as an officer or director, or otherwise.
The Company, by resolution of its Board of Directors and
stockholders, adopted a 1992 Stock Option Plan (the "Plan") on June 11, 1992.
The Plan enables the Company to offer an incentive based compensation system to
employees, officers and directors and to employees of companies who do business
with the Company.
In the discretion of a committee comprised of non-employee directors
(the "Committee"), directors, officers, and key employees of the Company and its
subsidiaries or employees of companies with which the Company does business
become participants in the Plan upon receiving grants in the form of stock
options or restricted stock.
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A total of 2,000,000 shares are authorized for issuance under the Plan, of which
no shares are issuable. The Company does not intend to grant options until such
time as a merger or acquisition has been consummated. The Company may increase
the number of shares authorized for issuance under the Plan or may make other
material modifications to the Plan without shareholder approval. However, no
amendment may change the existing rights of any option holder.
Any shares which are subject to an award but are not used because
the terms and conditions of the award are not met, or any shares which are used
by participants to pay all or part of the purchase price of any option may again
be used for awards under the Plan. However, shares with respect to which a stock
appreciation right has been exercised may not again be made subject to an award.
Stock options may be granted as non-qualified stock options or
incentive stock options, but incentive stock options may not be granted at a
price less than 100% of the fair market value of the stock as of the date of
grant (110% as to any 10% shareholder at the time of grant); non-qualified stock
options may not be granted at a price less than 85% of fair market value of the
stock as of the date of grant. Restricted stock may not be granted under the
Plan in connection with incentive stock options.
Stock options may be exercised during a period of time fixed by the
Committee except that no stock option may be exercised more than ten years after
the date of grant or three years after death or disability, whichever is later.
In the discretion of the Committee, payment of the purchase price for the shares
of stock acquired through the exercise of a stock option may be made in cash,
shares of the Company's Common Stock or by delivery or recourse promissory notes
or a combination of notes, cash and shares of the Company's common stock or a
combination thereof. Incentive stock options may only be issued to directors,
officers and employees of the Company.
Stock options may be granted under the Plan may include the right to
acquire an Accelerated Ownership Non-Qualified Stock Option ("AO"). If an option
grant contains the AO feature and if a participant pays all or part of the
purchase price of the option with shares of the Company's common stock, then
upon exercise of the option the participant is granted an AO to purchase, at the
fair market value as of the date of the AO grant, the number of shares of common
stock the Company equal to the sum of the number of whole shares used by the
participant in payment of the purchase price and the number of whole shares, if
any, withheld by the Company as payment for withholding taxes. An AO may be
exercised between the date of grant and the date of expiration, which will be
the same as the date of expiration of the option to which the AO is related.
Stock appreciation rights and/or restricted stock may be granted in
conjunction with, or may be unrelated to stock options. A stock appreciation
right entitles a participant to receive a payment, in cash or common stock or a
combination thereof, in an amount equal to the excess of the fair market value
of the stock at the time of exercise over the fair market value as of the date
of grant. Stock appreciation rights may be exercised during a period of time
fixed by the Committee not to exceed ten years after the date of grant or three
years after death or disability, whichever is later. Restricted stock requires
the recipient to continue in service as an officer, director, employee or
consultant for a fixed period of time for ownership of the shares to vest. If
restricted shares or stock appreciation rights are issued in tandem with
options, the restricted stock or stock appreciation right is canceled upon
exercise of the option and the option will likewise terminate upon vesting of
the restricted shares.
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Item 10. EXECUTIVE COMPENSATION
No compensation is paid or anticipated to be paid by the Company
until an acquisition is made.
On acquisition of a business opportunity, current management may
resign and be replaced by persons associated with the business opportunity
acquired, particularly if the Company participates in a business opportunity by
effecting a reorganization, merger or consolidation. If any member of current
management remains after effecting a business opportunity acquisition, that
member's time commitment will likely be adjusted based on the nature and method
of the acquisition and location of the business which cannot be predicted.
Compensation of management will be determined by the new board of directors, and
shareholders of the Company will not have the opportunity to vote on or approve
such compensation.
Directors currently receive no compensation for their duties as
directors.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information relating to the beneficial
ownership of Company common stock by those persons beneficially holding more
than 5% of the Company capital stock, by the Company's directors and executive
officers, and by all of the Company's directors and executive officers as a
group, as of March 31, 1999.
As of March 31, 1999 there were 2,175,750 shares oustanding.
<TABLE>
<CAPTION>
Percentage
Name of Number of of Outstanding
Stockholder Shares Owned Common Stock
<S> <C> <C>
Jehu Hand (1) 920,625 42.3%
All officers and
directors as a group
(1 person) (1) 920,625 42.3%
</TABLE>
(1) The address of such person is care of the Company.
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Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with organizing the Company, persons consisting of its
officers, directors, and other individuals paid an aggregate of $500 in cash to
purchase a total of 1,500,000 shares of Common Stock at an average sales price
of $.0003333 per share. In April 1993 Messrs. Hand and Anderson also contributed
$500.00 to the Company as a contribution to capital. Under Rule 405 promulgated
under the Securities Act of 1933, Messrs. Hand and Anderson may be deemed to be
promoters of the Company. No other persons are known to Management which would
be deemed to be promoters.
An officer of the Corporation has advanced certain expenses on behalf
of the Company. As of March 31, 1997, 1998 and 1999 such expenses totalled
$1,167, $1,277 and $0. On April 1, 1995 the Company gave the officer a demand
promissory note convertible into 583,125 shares of common stock at the officer's
option. This note was converted on July 1, 1999. Further expenses of $3,912 were
contributed to capital by this officer on March 31, 1999.
12
<PAGE>
PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits of the Company are included
herein.
Exhibit No. Document Description
3. Certificate of Incorporation and Bylaws
3.1. Certificate of Incorporation(1)
3.2 Bylaws(1)
3.3 1998 Amendment to Certificate of
Incorporation(3)
10. Material Contracts
10.1. 1992 Stock Option Plan(1)
10.2 Stock Option Agreement with Jehu Hand(1)
10.3 Stock Option Agreement with Eric Anderson(1)
10.4 Stock Option Agreement with Jehu Hand(2)
10.5 Demand Convertible Promissory Note from Jehu
Hand(2)
(1) Incorporated by reference to such exhibit as filed with the Company's
registration statement on Form 10-SB,
File No. 0-24370.
(2) Incorporated by reference to the Company's 1995 Annual Report.
(3) Filed herewith.
(b) Reports on Form 8-K.
Not Applicable.
13
<PAGE>
ECOLOGICAL SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1999 AND 1998
AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
<TABLE>
<CAPTION>
ECOLOGICAL SERVICES, INC.
(A Development Stage Company)
Table of Contents
<S> <C>
Independent Auditors= Report 1
Financial Statements
Statements of Financial Position 2
Statements of Operations 3
Statement of Changes in Stockholders= Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
563 WEST 500 SOUTH, SUITE 410, BOUNTIFUL, UTAH 84010
(801) 294-3155 FAX (801) 294-3190
THURMAN SHAW & CO., L.C.
James K. Thurman
Jeffrey L. Shaw
Justin R. Shaw
INDEPENDENT AUDITORS= REPORT
To the Board of Directors and Shareholders
Ecological Services, Inc.
We have audited the statements of financial position of Ecological Services,
Inc. ( a development stage company) as of March 31, 1999 and 1998, and the
related statements of operations, changes in stockholders= equity and cash flows
for the years then ended and cumulative for the period June 11, 1992 (date of
inception) through March 31, 1999. 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. The financial
statements of Ecological Services, Inc. from inception through March 31, 1994
(not presented herein), were audited by another auditor whose report, dated May
26, 1994, expressed an unqualified opinion on those statements. Our opinion, in
so far as it relates to the cumulative amounts for the period from inception
through March 31, 1994, is based solely on the report of the other auditor.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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 and the report of the other auditor provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditor, the
financial statements referred to above present fairly, in all material respects,
the financial position of Ecological Services, Inc. (a development stage
company) as of March 31, 1999 and 1998, and the results of its operations,
changes in stockholders= equity and cash flows for the period June 11, 1992
(date of inception) through March 31, 1999, in conformity with generally
accepted accounting principles.
THURMAN SHAW & CO., L.C.
Bountiful, Utah
June 30, 1999
<PAGE>
<TABLE>
<CAPTION>
ECOLOGICAL SERVICES, INC.
(A Development Stage Company)
Statements of Financial Position
March 31, 1999 and 1998
1999 1998
------------- ---------
<S> <C> <C>
ASSETS
Current assets-cash $ - $ -
------------- -----------
Other assets
Organization costs, net of accumulated
amortization of $263 - -
------------- -----------
Total assets $ - $ -
============= ===========
LIABILITIES AND STOCKHOLDERS= EQUITY
Current liabilities - accounts payable $ - $ 1,277
------------- --------------
Stockholders= equity
Preferred stock, $.001 par value; 1,000,000 shares
authorized; no shares issued and outstanding
Common stock, $.001 par value; 20,000,000 shares
authorized; 2,175,375 and 1,592,250 shares issued
and outstanding 2,175 1,592
Additional paid-in capital 4,260 (346)
Accumulated deficit during the development stage (6,435) (2,523)
------------- --------------
Total stockholders= equity - (1,277)
------------- --------------
Total liabilities and stockholders= equity $ - $ -
============= ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
ECOLOGICAL SERVICES, INC.
(A Development Stage Company)
Statements of Operations
Years Ended March 31, 1999 and 1998
and Cumulative from Inception to March 31, 1999
Cumulative
From
Inception
(June 11, 1992)
to March 31,
1999 1998 1999
-------------- ------------- ---------
<S> <C> <C> <C>
Revenues $ - $ - $ -
--------- --------- ------
Operating expenses
General and administrative 3,912 110 6,172
Amortization - - 263
-------------- ------------- --------------
Total operating expenses 3,912 110 6,435
-------------- ------------- --------------
Net (loss) $ (3,912) $ (110) $ (6,435)
============== ============= ==============
Net (loss) per share $ - $ - $ -
============== ============= ===========
Weighted average number of
shares outstanding 2,028,396 1,592,250 1,638,660
============== ============= ==============
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
ECOLOGICAL SERVICES, INC.
(A Development Stage Company)
Statement of Changes in Stockholders= Equity
From Inception (June 11, 1992) Through March 31, 1999
Accumulated
Deficit
Common Stock Additional During the
Paid-In Development
Shares Amount Capital Stage Total
Issuance of common stock
<S> <C> <C> <C> <C> <C>
for cash 1,500,000 $ 1,500 $ (1,000) $ - $ 500
Net (loss) - - - (269)
------------- ------------- ------------- -------------
(269)
Balances at March 31, 1993 1,500,000 1,500 (1,000) (269) 231
Net (loss) - - - (221)
(221)
Contribution to capital - - 500 - 500
Sale of shares in private placement
on September 30, 1993 92,250 92 154 - 246
------------- ------------- ------------- ------------- -------------
Balances at March 31, 1994 1,592,250 1,592 (346) (490) 756
Net (loss) - - - (1,596)
------------- ------------- ------------- -------------
(1,596)
Balances at March 31, 1995 1,592,250 1,592 (346) (2,086) (840)
Net (loss) - - - (164)
------------- ------------- ------------- -------------
(164)
Balances at March 31, 1996 1,592,250 1,592 (346) (2,250) (1,004)
Net (loss) - - - (163)
------------- ------------- ------------- -------------
(163)
Balances at March 31, 1997 1,592,250 1,592 (346) (2,413) (1,167)
Net (loss) - - - (110)
------------- ------------- ------------- -------------
(110)
Balances at March 31, 1998 1,592,250 1,592 (346) (2,523) (1,277)
Conversion of note payable,
July 1, 1998, $.001 per share 583,125 583 694 - 1,277
Contribution to capital, forgiveness
of debt, March 31, 1999 - - 3,912 - 3,912
Net (loss) - - - (3,912)
------------- ------------- ------------- -------------
(3,912)
Balances at March 31, 1999 2,175,375 $ 2,175 $ 4,260 $ (6,435) $ -
============= ============= ============= ============= ==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
ECOLOGICAL SERVICES, INC.
(A Development Stage Company)
Statements of Cash Flows
Years Ended March 31, 1999 and 1998
and Cumulative from Inception to March 31, 1999
Cumulative
From
Inception
(June 11, 1992)
to March 31,
1999 1998 1999
------------- ------------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) $ (3,912) $ (110) $ (6,435)
Add item not requiring the use
of cash - amortization - - 263
Increase in accounts payable (1,277) 110 -
------------- ------------- ----------
Net cash flows from operating activities (5,189) - (6,172)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs - - (263)
------------- ------------- -------------
Net cash flows from investing activities - - (263)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution to capital 3,912 - 4,260
Sale of common stock 1,277 - 2,175
------------- ------------- -------------
Net cash flows from financing activities 5,189 - 6,435
------------- ------------- -------------
Net decrease in cash - - -
Cash balance at beginning of period - - -
------------- ------------- ----------
Cash balance at end of period $ - $ - $ -
============= ============= ==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
ECOLOGICAL SERVICES, INC.
(A Development Stage Company)
Notes to Financial Statements
Years Ended March 31, 1999 and 1998
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated under the laws of the State of Delaware on
June 11, 1992, for the purpose of seeking out business opportunities,
including acquisitions. The Company is in the development stage and
will be very dependent on the skills, talents, and abilities of
management to successfully implement its business plan. Due to the
Company=s lack of capital, it is likely that the Company will not be
able to compete with larger and more experienced entities for business
opportunities which are lower risk and are more attractive for such
entities. Business opportunities in which the Company may participate
will likely be highly risky and speculative. Since inception, the
Company=s activities have been limited to organizational matters.
Organizational costs are amortized on a straight-line basis over five
years.
On May 28, 1998, the company changed its name from Plasmatronic
Technologies, Inc. to Ecological Services, Inc.
2. CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.
3. RELATED PARTY TRANSACTIONS
The officer and director of the Company currently serves without
compensation.
An officer of the Corporation has advanced certain expenses on behalf
of the Company. As of March 31, 1998, such expenses totaled $1,277. The
Company has given the officer a demand promissory note convertible into
583,125 shares of common stock at the officer=s option, which was
included in accounts payable at March 31, 1998. The note was converted
into 583,125 shares on July 1, 1998. Additional expenses advanced by
the officer of $3,912 were forgiven by him on March 31, 1999.
4. INCOME TAXES
The fiscal year end of the Company is March 31st and an income tax
return has not been filed. However, if an income tax return had been
filed, the Company would have a net operating loss carry forward of
$6,435 that would begin expiring in the year 2010.
STOCK SLPIT
On May 28, 1998, the Company effected a 3.75-for-1 forward stock split.
All equity accounts have been revised since inception.
<PAGE>
Notes (continued)
6. STOCK OPTION PLAN
The Company has stock option plans for directors, officers, employees,
advisors, and employees of companies that do business with the Company,
which provide for non-qualified and qualified stock options. The Stock
Option Committee of the Board determines the option price which cannot
be less than the fair market value at the date of the grant or 110% of
the fair market value if the Optionee holds 10% or more of the
Company=s common stock. The price per share of shares subject to a
Non-Qualified Option shall not be less than 85% of the fair market
value at the date of the grant. Options generally expire either three
months after termination of employment, or ten years after date of
grant (five years if the optionee holds 10% or more of the Company=s
common stock at the time of grant).
<TABLE>
<CAPTION>
Options outstanding:
<S> <C>
Shares allocated 2,000,000
Option price $ .50
================
Balance at inception -
Granted 40,000
Balance outstanding at March 31, 1993 40,000
-------------
Granted -
Balance outstanding at March 31, 1994 40,000
-------------
Granted 20,000
Lapsed (20,000)
Balance outstanding at March 31, 1995 40,000
-------------
Granted -
Lapsed -
Balance outstanding at March 31, 1996 40,000
-------------
Granted -
Lapsed -
Balance outstanding at March 31, 1997 40,000
=============
Granted -
Lapsed 40,000
Balance outstanding at March 31, 1998 -
==========
Exerciseable in 1998 -
==========
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on July 14, 1999.
ECOLOGICAL SERVICES, INC.
By: /s/ Jehu Hand
Jehu Hand
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on July 14, 1999.
By: /s/ Jehu Hand President, Secretary, Chief Financial Officer and Director
Jehu Hand
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
PLASMATRONIC TECHNOLOGIES, INC.
(a Delaware corporation)
PLASMATRONIC TECHNOLOGIES, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware:
DOES HEREBY CERTIFY:
1. The following resolution has been unanimously adopted by the board
of directors and a majority of the stockholders of the Corporation in accordance
with Section 242 of the Delaware General Corporation Law for the purpose of
amending the corporation's Certificate of Incorporation. The resolution setting
forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the
Corporation be amended by changing the Articles thereof numbered
"FIRST" and "FOURTH" so that, as amended, said Articles shall be and
read as follows:
FIRST: The name of the corporation is Ecological Services, Inc.
FOURTH: The total number of shares of all classes which the Corporation
is authorized to have outstanding is Twenty One Million (21,000,000)
shares of which stock Twenty Million (20,000,000) shares in the par
value of $.001 each, amounting in the aggregate of Twenty Thousand
Dollars ($20,000) shall be common stock and of which One Million
(1,000,000) shares in the par value of $.001 each, amounting in the
aggregate to One Thousand Dollars ($1,000) shall be preferred stock.
Effective on May 25, 1998, or upon filing of this amendment with the
Delaware Secretary of State, whichever is sooner, the common stock
shall be reconstituted such that 3.75 new shares of common stock shall
be issued in exchange for each one outstanding share. Any fractional
shares otherwise required to be issued shall be rounded to the nearest
whole share. The board of directors is authorized, subject to
limitations prescribed by law, to provide for the issuance of the
authorized shares of preferred stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each
such series and the qualifications, limitations or restrictions
thereof. The authority of the board with respect to each series shall
include, but not be limited to, determination of the following:
<PAGE>
(a) The number of shares constituting that series and the
distinctive designation of that
series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment
of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of
such voting rights;
(d) Whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events
as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be
redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions,
and at different redemption rates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so,
the terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding
up of the corporation, and the relative rights of priority, if
any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that
series, unless otherwise provided by the certificate of
determination.
2
<PAGE>
FURTHER RESOLVED, that the capital of said Corporation shall
be revised by reason of said amendment to transfer from surplus to
capital an amount equal to the number of new common shares issued in
the recapitalization times their par value.
2. That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, PLASMATRONIC TECHNOLOGIES, INC. has caused this
certificate to be signed by its duly authorized officer, this 16th day of May,
1998.
PLASMATRONIC TECHNOLOGIES, INC.
Jehu Hand, President and Secretary
3
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE STATEMENTS FOR THE YEAR ENDED MARCH 31, 1999 AND AS OF
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000925661
<NAME> ECOLOGICAL SERVICES, INC.
<MULTIPLIER> 1
<CURRENCY> US dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Mar-31-1999
<PERIOD-START> Apr-01-1998
<PERIOD-END> Mar-31-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 2,175
<OTHER-SE> (4,260)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 3,912
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,912)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,912)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,912)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
