UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark one)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended OCTOBER 31, 2003 or
[_] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .
Commission File No. 0-14443
DELAWARE 13-2842053
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5400 RIO GRANDE AVENUE, JACKSONVILLE, FLORIDA 32254
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (904) 355-5558
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.01
PAR VALUE PER SHARE
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PAST 12
MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH
REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90
DAYS: YES [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 THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB OR ANY AMENDMENT TO THIS FORM 10-KSB. [X]
STATE ISSUER'S REVENUES FOR ITS MOST RECENT FISCAL YEAR: $5,467,703
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES
(BASED ON THE CLOSING PRICE ON JANUARY 15, 2004 OF $.20): $ 627,270
STATE THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S .01 PAR VALUE COMMON STOCK AS OF THE CLOSE OF BUSINESS ON THE LATEST PRACTICABLE DATE (JANUARY 15, 2004): 5,516,349
DOCUMENTS INCORPORATED BY REFERENCE: NONE.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Waste Technology Corp. ("Waste Tech") was incorporated on September 10, 1975, in the State of Delaware under the name B.W. Energy Systems, Inc. Its name was changed to Waste Technology Corp. in August 1983. Waste Tech is a holding company and maintains its executive offices at 5400 Rio Grande Avenue, Jacksonville, Florida 32254 and its telephone number is (904) 355-5558. Unless the context otherwise requires, the term "Company" as used herein, refers to Waste Tech and its subsidiaries on a consolidated basis. The Company's fiscal year end is October 31.
Subsidiaries
International Baler Corp.
International Baler Corp. ("IBC"), has been engaged in business for over 50 years manufacturing balers under the name "International Baler". In September, 1986, Waste Tech acquired approximately 85% of the outstanding shares of IBC.
On June 24, 1997, IBC entered into an Agreement of Merger (the "Merger Agreement") with IBC Merger Corporation, a wholly owned subsidiary of the Corporation (formed for the purpose of the merger) which provides for the merger of IBC with and into IBC Merger Corporation. Subsequent to the merger, IBC Merger Corporation changed its name to International Baler Corporation ("IBC"). In accordance with the provisions of Section 228 of the Delaware General Corporation Law, the Merger Agreement was approved by the Board of Directors of IBC, IBC Merger Corporation, and the Company and consented to by the Company as the sole shareholder of IBC Merger Corporation and the owner of 85.3% of the outstanding and issued stock of IBC. The Merger became effective on June 27, 1997. The last minority shareholders' shares of IBC stock were acquired in January 1998. As a result, the Company is the sole shareholder of IBC.
IBC's office and manufacturing facility is located at 5400 Rio Grande Avenue, Jacksonville, Florida 32254 and its telephone number is (904) 358-3812.
Consolidated Baling Machine Company, Inc.
In February 1987, Waste Tech, through Consolidated Baling Machine Company, Inc. ("CBM"), a wholly-owned subsidiary, acquired
all of the assets of N&J Cavagnaro Machinery Corp., ("N&J) which, for more than 50 years, manufactured balers in Brooklyn, New York under the name of "Consolidated Baler". The acquisition also included the right to use and market products under the name "Consolidated Baler". N&J had specialized in manufacturing and selling, under the "Consolidated" name, rubber and medical waste balers which were produced by only a few other companies. Consolidated is a marketing company, which sells balers manufactured by, and purchased from, IBC.
Florida Waste Systems, Inc.
Florida Waste Systems, Inc. ("FWS") sells replacement parts to users of waste hauling equipment.
General
Since 1986 the Company's principal business has been the manufacture and sale of balers, which are machines used to compress and compact various waste materials. The Company manufactures approximately fifty (50) different types of balers for use with corrugated, paper, municipal waste, textiles, scrap metal, and other products. It is one of the leading manufacturers of balers designed to compact rubber, plastic, cotton mote and textile waste products.
Since charges for transportation of waste material are generally based upon the volume of waste, balers reduce volume substantially and therefore, reduce transportation costs. Increases in the quantity of waste produced, government restrictions on waste disposal, and mandated recycling of waste products have greatly increased the need for transportation of waste and hence, the need for balers.
Products
Balers utilize mechanical, hydraulic, and electrical mechanisms to compress a variety of materials into bales for easier and low cost handling, shipping, disposal, storage, and/or bulk sales for recycling. Materials commonly baled include scrap metal, corrugated boxes, newsprint, cans, plastic bottles, and other solid waste. More sophisticated applications include baling of textile waste and rubber.
The Company offers a wide variety of balers, certain ones that are
standardized and others that are designed to specific customer requirements. The
Company's products include (i) general purpose horizontal and vertical balers,
(ii) specialty balers, such as those used for low level radioactive waste,
fifty-five gallon drums, aluminum cans, and rubber and textile waste, and (iii)
accessory equipment such as conveyors, rufflers, bale tying machines, and
plastic bottle piercers (machines which puncture plastic bottles before
compaction for greater density).
General Purpose Balers
These balers are designed for general purpose compaction of waste materials. They are manufactured in either vertical or horizontal loading models, depending on available floor space and desired capacity. Typical materials that are handled by this equipment include paper, corrugated boxes, and miscellaneous solid waste materials. These balers range in bale weight capacity from approximately 300 to 2,000 pounds and range in price from approximately $5,000 to $250,000. General purpose baler sales constituted approximately 55% of sales on a consolidated basis for each of the fiscal years ended October 31, 2002 and 2003.
Specialty Balers
These balers are designed for specific applications which require modifications of the general baler configuration. The Company is attempting to shift the emphasis in its product composition from general purpose to specialty balers due to product profitability and broader geographic markets.
The scrap metal baler is designed to form a bale, referred to as a scrap metal "briquet" of specified size and weight. The rubber baler is designed to apply pressure in such a way as to compress the synthetic rubber into a self-contained bale that does not require tying. The drum crusher baler is capable of collapsing a standard fifty-five gallon drum into a "pancake" approximately four (4) to eight (8) inches high, which also serves to contain any remaining contents. The radioactive waste baler has a self- contained ventilation system designed to filter and contain toxic dust and particles released during compaction and baling. The textile baler is capable of compressing and baling loose fibers, which do not ordinarily adhere to each other under pressure. In addition, a double chamber baler has been designed for use by the clothing and textile industries.
Specialty balers range in price from approximately $3,000 to $275,000, and are less exposed to competitive pressures than are general purpose balers. Specialty baler sales constituted approximately 30% of sales on a consolidated basis for each of the fiscal years ended October 31, 2002 and 2003.
Accessory Equipment
The Company manufactures and markets a number of accessory equipment items in order to market a complete waste handling system. These include conveyors, which carry waste from floor level to the top of large horizontal balers; extended hoppers on such balers; rufflers, which break up material to improve bale compaction; electronic start/stop controls and hydraulic oil coolers and cleaners. At the present time accessory equipment does not represent a significant percentage of consolidated revenues.
Manufacturing
IBC manufactures its products, as well as products sold by Consolidated, in its facility in Jacksonville, Florida, where it maintains a fully equipped and staffed manufacturing plant. IBC purchases raw materials, such as steel sheets and beams and components such as hydraulic pumps, valves and cylinders, and certain controls and other electric equipment which are used in the fabrication of the balers. The Company has no long term supply agreements, and has not experienced unusual delay in obtaining raw materials or components.
The raw materials required by IBC to manufacture the balers, principally steel, motors, and hydraulic systems, are readily available from a number of sources and IBC is not dependent on any particular source. IBC is not dependent on any significant patents, trademarks, licenses, or franchises in connection with its manufacture of balers.
While IBC maintains an inventory of raw materials, most of it is intended for specific orders and inventory turnover is relatively rapid. Approximately 60% of its inventory turns over in 45 to 90 days and the balance, consisting of customized equipment, turns over in 3 to 6 months. Neither IBC's, or CBM's business is seasonal.
Sales and Marketing
IBC and CBM sell their products throughout the United States and to some extent in Europe, the Far East, and South America to manufacturers of synthetic rubber and polymers, plastic recycling facilities, power generating facilities, textile mills, paper mills, cotton gins, supermarkets and other retail outlets, paper recycling facilities, and municipalities.
Most of the sales of IBC and CBM are made by its sales force of four (4) employees who rely upon responses to advertising, personal visits, attendance at trade shows, referrals from existing customers and telephone calls to dealers and/or end users. Approximately twenty-five (25%) percent of sales are made through manufacturer's representatives and dealers. The Company's general purpose balers are sold primarily in the eastern United States to such end users as waste producing retailers (supermarkets and liquor stores, for example), restaurants, manufacturing and fabricating plants, bulk material producers, nuclear plants, and solid waste recycling facilities. Specialty balers are sold throughout the United States and to some extent in Europe, the Far East, and South America to manufacturers of rubber and polymers, plastic recycling facilities, paper recycling facilities, textile mills and power generating facilities. Both types of balers are sold abroad. During fiscal 2003, foreign sales amounted to $1,239,000 or approximately 23% of consolidated sales. In fiscal 2002, foreign sales amounted to $1,020,000, also approximately 20% of the Company sales.
During fiscal 2003, IBC and CBM had baler sales to more than 200 customers, one of which accounted for just over ten percent (10%) of their combined sales for the year. The Company anticipates that no one customer will account for more than 10% of revenues in fiscal year ending October 31, 2004.
The Company builds only a small quantity of balers for its inventory and generally builds based on booked orders. The Company's backlog of firm booked orders at December 31, 2003, was $1,584,000 as compared with $1,841,000 at December 31, 2002. The Company generally delivers its orders within four (4) months of the date booked.
IBC, on a contract basis, supplies FWS with parts and service which are provided by trained employees of IBC.
Warranties and Service
IBC and CBM typically warrant their products for one (1) year from the date of sale as to materials and six (6) months as to labor, and offer a service plan for other required repairs and maintenance. Service is rendered by repairing or replacing parts at IBC's Jacksonville, Florida, facility, and by on-site service provided by Company personnel who are based in Jacksonville, Florida, or by local service agents who are engaged as needed. Repair services and spare parts sales represented approximately 15% of the Company's consolidated sales for fiscal 2003 and 2002.
Competition
The potential market for the Company's balers is nationwide and overseas, but the majority of general purpose baler sales are in the eastern United States, primarily because of freight and service costs. The Company competes in these markets with approximately ten (10) companies, none of which are believed to be dominant, but some of which may have significantly greater sales and financial resources. It should be noted that the Company also faces competition from IPS Balers which purchased the assets of the Company's International press and Shear Corp. subsidiary in December 1999 and is geographically located in the same area as the Company and may be selling many of the same products as the Company. The Company is able to compete with these companies due to its reputation in the market place, its ability to service the balers it manufactures and sells, as well as its ability to custom design balers to a customer's particular needs. The Company experiences intense competition with respect to its lower priced or general purpose balers, based upon price, including freight, and based on performance. The Company experiences less competition with respect to its specialized baler equipment such as synthetic rubber, scrap metal, and textile balers.
Regulation
Machinery such as the Company's balers is subject to both federal and state regulation relating to safe design and operation. The Company complies with design requirements and its balers include interlocks to prevent operation while the loading door is open, and also include required printed safety warnings.
Research and Development
The Company has the broadest line of products in the baler industry and continues to provide its customers with new products and product improvements. The Company estimates that it has invested approximately $50,000 in each of the fiscal years ending October 31, 2003 and October 31, 2002on research and development of new products.
Compliance With Environmental Laws
The Company believes that it has complied with and is in compliance with all Federal, State, and Local environmental laws. The Company expenditures to remain in compliance are considered to be minimal.
Employees
As of December 31, 2003, the Company employed 50 persons as follows: 5 in management and supervision; 7 in sales and service; 32 in manufacturing; and 6 in administration.
Available Information
The Company is a reporting company, as that term is defined under the Securities Acts, and therefore, files reports, including, Quarterly Reports on Form 10-QSB and Annual Reports on Form 10-KSB and other information with the Securities and Exchange Commission (the "Commission"). In addition, the Company will provide, without charge to its stockholders, upon written or oral request by such stockholder, a copy of any information referred to herein that is incorporated by reference except exhibits to such information that are incorporated by reference unless the exhibits are themselves specifically incorporated by reference. All such requests should be directed to William E. Nielsen, at Waste Technology Corp., 5400 Rio Grande Avenue, Jacksonville, Florida 32254, telephone number (904) 358-3812.
The Company is an electronic filer. The Commission maintains a web site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission, including all of the Company's filings with the Commission. The address of such site is (http://www.sec.gov).
ITEM 2. DESCRIPTION OF PROPERTY
IBC is the owner of the building located at 5400 Rio Grande Avenue, Jacksonville, Florida. The building contains approximately 62,000 square feet and is situated on eight (8) acres. IBC manufactures all of the Company's products at this location. The property has no mortgage, however, the Company's primary lender, Presidential Financial Corporation, has a security interest in the property as part of the collateral for the line of credit which it provides to the Company. See Item 6, Financial Condition.
The Company has no plans for any material renovations or additions to its current facilities. The Company's buildings and property are well maintained and are adequately covered by insurance.
ITEM 3. LEGAL PROCEEDINGS
Except as described hereafter, the Company is not a party to any pending material legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company which would have a result materially adverse to the Company. To the knowledge of management, no director, executive officer or affiliate of the Company or owner of record or beneficially of more than 5% of the Company's common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.
On June 5, 1998, a judgment (the "Judgment") was rendered against the Company's former wholly owned subsidiary, Ram Coating Technology Corporation ("Ram"), and Transamerica Premier Insurance Corporation ("Transamerica") in the amount of $360,194 in favor of L & A Contracting Company in the 19th Judicial District Court of the State of Louisiana in the case of L & A Contracting Company v. Ram Industrial Coatings, Inc., et al., Case No. 382,924, Division F. Transamerica had issued a performance and payment bond (the "Bond") for Ram in connection with the contract which was the subject of the action and which was the basis of the Judgment against Ram. The Company had agreed to indemnify Transamerica for any payments it was required to make pursuant to the Bond. Transamerica has paid the Judgement as a result of the indemnification agreement and the Company is liable to Transamerica for the amount of the Judgment.
In July 2000, the Judgment was affirmed by the First Circuit Court of Appeal of the State of Louisiana. In December 2000, the Judgement was reaffirmed by the Supreme Court of the State of Louisiana. In February 2002, the Company has reached an agreement with Transamerica to settle the amount due on the Judgment for $280,500 payable in installments beginning in August 2002. The agreement was finalized in August, 2002 and the Company reversed the excess accrued expense of $321,500 in the fourth quarter of 2002. As of October 31, 2003 the balance due on the settlement was $57,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter ending October 31, 2003.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's stock is presently traded on the OTC Bulletin Board of the NASD under the symbol WTEK. As of December 31, 2003, the number of shareholders of record of the Company's Common Stock was approximately 500, and management believes that there are approximately 1,000 beneficial owners of Waste Tech's common stock.
The range of high and low bid quotations for the Company's common stock during the fiscal years ended October 31, 2002 and 2003, are set forth below.
Fiscal Year Ended October 31, 2002 High Low First Quarter $ 0.21 $ 0.14 Second Quarter 0.23 0.14 Third Quarter 0.18 0.14 Fourth Quarter 0.20 0.13 Fiscal Year Ended October 31, 2003 High Low First Quarter $ 0.30 $ 0.16 Second Quarter 0.25 0.17 Third Quarter 0.30 0.19 Fourth Quarter 0.31 0.22 |
The Company has paid no dividends since its inception. Other than the requirement of the Delaware Corporation law that dividends be paid out of capital surplus only, and that the declaration and payment of a dividend not render the Company insolvent, there are no restrictions on the Company's present or future ability to pay dividends.
The payment by the Company of dividends, if any, in the future, rests within the discretion of its Board of Directors and will depend, among other things, upon the Company's earnings, its capital requirements, its financial condition and other relevant factors. By reason of the Company's present financial status and its contemplated financial requirements, the Company does not anticipate paying any dividends on its common stock during the foreseeable future, but intends to retain any earnings for future expansion of its business.
Recent Sales of Unregistered Securities
During the past three years the Company has not sold any unregistered securities.
Purchases of Equity Securities
During the fiscal year ended October 31, 2003, the Company, nor anyone on its behalf, repurchased any of the Company securities.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the fiscal year ending October 31, 2003, consolidated sales were $5,460,147 compared to $5,125,717 in fiscal 2002, a 6.5% increase. The higher sales were the result of more aggressive sales efforts in a period of depressed economic conditions.
The Company had net loss of $397,540 in fiscal 2003 as compared to net income of $195,082 in fiscal 2002. The loss in 2003 versus the net income in 2002 is the result of lower gross margins due to changes in product mix and higher labor and overhead costs and the write-down in value of obsolete and slow moving inventory totaling $250,000. Gross profit margins declined from 27.5% in 2002 to 14.5% in 2003. Selling and administrative expenses, excluding deferred compensation payments, were higher by $63,259 in 2003, which was the result of adding a new Vice President of Sales and Marketing at the end of fiscal 2002.
Financial Condition
The Company's net working capital at October 31, 2003, was $767,504 as compared to $767,504 at October 31, 2002. In February 2002, the Company reached an agreement with Transamerica to settle the amount due on the Judgment for $280,500 payable in installments beginning in August 2002. The agreement was finalized in August, 2002 and the company reversed the excess accrued expense of $321,500 in the fourth quarter of fiscal 2002. The balance due on the settlement was $57,000 at October 31, 2003.
On August 7, 2000, the Company entered into a line of credit agreement with Presidential Financial Corporation which allows the Company to borrow up to $500,000. The line of credit bears interest at the prime rate plus one percent (1%) plus certain service charges. This agreement has a one year term with an automatic renewal unless either of the parties to the agreement gives written notice to terminate the agreement at least sixty (60) days prior to the annual renewal date. The amount outstanding under the line of credit at October 31, 2003 was $89,430 and the additional available was $106,139.
The Company has no commitments for any material capital expenditures. Other than as set forth above, there are no unusual or infrequent events or transactions or significant economic changes which materially affect the amount of reported income from continuing operations. The Company believes that its cash, line of credit, and results of operations are sufficient to fund future operation.
The Company is unaware of any events or uncertainties which are reasonably likely to have a material impact on the Company's short-term or long-term liquidity or the net sales, revenues, or income from continuing operations.
The Company has no known or anticipated significant elements of income or loss that do not arise from the Company's continuing operations.
Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements.
Inflation
The costs of the Company and its subsidiaries are subject to the general inflationary trends existing in the general economy. The Company believes that expected pricing by its subsidiaries for balers will be able to include sufficient increases to offset any increase in costs due to inflation.
This "Management's Discussion and Analysis" contains forward-looking statements within the meaning of Section 21B of the Securities and Exchange Act of 1934, as amended. These forward-looking statements represent the Company's present expectations or beliefs concerning future events. The Company cautions that such statements are necessarily based on certain assumptions which are subject to risks and uncertainties, including, but not limited to, changes in general economic conditions and changing competition which could cause actual results to differ materially from those indicated.
ITEM 7. FINANCIAL STATEMENTS
The financial statements and supplementary data commence on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in, or disagreements with the Company's Independent Auditors, KPMG LLP, during the Company's past two fiscal years.
ITEM 8A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer with the participation of other members of senior management reviewed and evaluated the effectiveness of the design and operation of the Company's disclosure controls as of the end of the period covered by this annual report on Form 10-KSB. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer believes that:
The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and form of the Securities and Exchange Commission, and
The Company's disclosure controls and procedures were effective to ensure that material information was accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls
There were no significant changes in the Company's internal controls or in other factors that could significantly affect these internal controls subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the internal controls. As a result, no corrective actions were required or undertaken.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Identification of Directors and Officers
The current executive officers and directors of the Company are as follows:
NAME POSITION
---- --------
William E. Nielsen President, Chief Executive
Officer and Director
Morton S. Robson Executive Vice President,
Secretary, and Director
Ted C. Flood Director
Robert Roth Director
David B. Wilhelmy Vice President Sales & Marketing
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The Board of Directors is divided into three (3) classes of directors ("Class I", "Class II", and "Class III"), with each class having as nearly the same number of directors as practicable. Stockholders elect such class of directors, Class I, Class II, or Class III, as the case may be, to succeed such class directors whose terms are expiring, for a three (3) year term, and such class of directors shall serve until the successors are elected and qualify.
Officers of the Company serve at the pleasure of the Board of Directors.
Messrs, Nielsen, Robson and Roth are members of the Company's audit committee. Messrs, Robson and Roth are members of the compensation committee. The Company does not, at the present time, have an independent "financial expert", as that term is defined in the Sarbanes-Oxley Act of 2002, on the Board of Directors and the Audit Committee of the Company. As of the present time, Mr. Nielsen serves as the Company's financial expert. The Company has sought and continues to seek an appropriate individual to serve on the Board of Directors and the Audit Committee who will meet the requirements necessary to be an independent financial expert as well as to find other independent directors to serve on the Company's Board of Directors. The Company has been unable to find an independent financial expert and other independent directors because it does not have sufficient funds to obtain directors and officers insurance or compensate directors for their service.
During fiscal 2003 the Board of Directors did not meet.
There are no family relationships between executive officers or directors of the Company. However, Robert Roth is the husband of Patricia B. Roth, and father of Steven F. Roth, major shareholders of the Company. SEE Item 12, "Certain Relationships and Related Transactions".
For so long as Patricia Roth and Steven Roth are the owners of more than one percent (1%) of the number of outstanding shares of Common Stock, the Company has agreed to use its best efforts to cause the election of Robert Roth as a member of the Board of Directors.
Except as noted above, there is no understanding or arrangement between any director or any other persons pursuant to which such individual was or is to be selected as a director or nominee of the Company.
Background of Executive Officers and Directors
The following is a brief account of the experience, during the past five years, of each director and executive officer of the Company:
William E. Nielsen, age 56, joined the Company in June 1994 as its Chief Financial Officer and was elected a Director on November 20, 1997. He was elected President and Chief Executive Officer on May 8, 2001. Prior to joining the Company, Mr. Nielsen acted as a financial consultant to Fletcher Barnum Inc., a privately held manufacturing concern, from October 1993 through June 1994. From 1980 through July 1993, he was the Vice President, Administration and Finance at Unison Industries, Inc. Mr. Nielsen received a BBA in Finance and an M.B.A. at Western Illinois University in 1969 and 1970, respectively.
Ted C. Flood, age 73, was elected as a Director of the Company in May, 1989. From February 27, 1993, until May 8, 2001, he served as President and Chief Executive Officer of the Company and President and Chief Executive Officer of IBC and CBM, the Company's wholly owned subsidiaries. From 1960 to 1972, he was President of Peabody Solid Waste Management Company (EZ Pack). From 1972 to 1975, Mr. Flood was a corporate Vice-president of marketing for Browning Ferris Industries. During the period from 1977 to 1988, he was the principal shareholder and President of Solid Waste Recovery Systems.
Morton S. Robson, age 80, was elected a Director and the Secretary of the Company in 1989. On February 23, 1993, he was elected Executive Vice President of the Company. Mr. Robson is the senior partner of the law firm of Robson Ferber Frost Chan & Essner, LLP, which acts as general counsel to the Company. Mr. Robson obtained an LLB degree from St. John's University School of Law.
Robert Roth, age 78, was elected as a Director of the Company on October 12, 1993. He is the Chairman of the Board and Treasurer of Georgetowne Electric, Ltd., and a Director of Keystone Insurance Company, both publicly held companies. For more than the past five (5) years, in addition to being the Chairman of the Board and Treasurer of Georgetowne Electric, Ltd., he has been the President and Chief Executive Officer of Browning Weldon Corporation, a privately held financial company.
David B. Wilhelmy, age 49, joined the Company in September 2002 as Vice President of Sales and Marketing. Prior to joining the Company, Mr. Wilhelmy was Vice President/Sales and Acquisitions for Consolidated Packaging Systems. CPS was a joint venture with Gryphon Investors to consolidate the packaging systems distribution industry, from January 2000 through August 2002. Mr. Wilhelmy was the Southeast Regional Vice President of Sales and Marketing for Packaging for Unisource Distribution Company from 1993 to 2000. Mr. Wilhelmy was responsible for increasing sales of the packaging program from $8 million to $125 million in five years. Mr. Wilhelmy received a Bachelor Degree in Business Administration from Madison University.
Involvement in Certain Legal Proceedings
To the knowledge of the Company's management, during the past five years, no present or former director, executive officer, affiliate or person nominated to become a director or an executive officer of the Company:
(1) Filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he or she was a general partner at or within two years before the time of such filing, or any corporation or business association of which he or she was an executive officer at or within two years before the time of such filing;
(2) Was convicted in a criminal proceeding or named subject of pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) Was the subject of any order, judgment, or decree not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting his or her involvement in any type of business, securities, or banking activities;
(4) Was found by a court of competent jurisdiction in a civil action by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated any Federal or State Securities laws, and the judgment in such civil action of finding by the Securities and Exchange Commission has not been subsequently reversed, suspended, or vacated.
Beneficial Ownership Reporting Compliance-Section 16(a)
In fiscal 2003, the Company, its officers and directors, were not delinquent in filing of any of its Form 3, 4, and 5 reports.
Code of Ethics
The Company has adopted a code of business conduct and ethics for directors, officers (including the Company's principal executive officer, principal financial officer and controller) and employees, known as the Standards of Business Conduct. The Standards of Business Conduct are available on the Company's website at http://www.intl-baler.com. Stockholders may request a free copy of the Standards of Business Conduct from:
Waste Technology Corporation
Attention: William E. Nielsen
5400 Rio Grande Avenue
Jacksonville, Florida 32254
(904)358-3812
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation awarded to, earned by or paid to, the Company's Chief Executive Officer and each of the Company's executive officers whose compensation exceeded $100,000 per annum for services rendered in all capacities to the Company and its subsidiaries during fiscal years ended October 31, 2003, October 31, 2002, and October 31, 20011:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM AWARDS
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NAME AND OTHER ANNUAL NUMBER ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OF OPTIONS COMPENSATION
------------------ ---- --------- -------- --------------- ---------- ------------
William E. Nielsen 2003 92,854 -0- -0- -0- -0-
President & CEO 2002 80,021 -0- -0- 250,000 -0-
2001 80,730 -0- -0- -0- -0-
Ted C. Flood, 2003 -0- -0- 52,3222 -0- -0-
CEO and President 2002 -0- -0- -0- -0- -0-
of Company 2001 169,9113 -0- -0- -0- -0-
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2 Ted C. Flood, former president of the Company and former president of the Company's subsidiaries, received $52,322 in deferred compensation payments during the fiscal year ended October 31, 2003.
3 Ted C. Flood, former President of the Company and President of the Company's subsidiaries, received $147,657 in compensation from IBC during the fiscal year ended October 31, 2001, and $22,254 from Consolidated during that period.
No Director of the Company received remuneration for services as a Director during fiscal 2003.
Option Grants in Last Fiscal Year
No options were granted or exercised during fiscal 2003 by the Company's Chief Executive Officer or any of the Company's most highly compensated executive officers whose compensation exceeded $100,000 for Fiscal 2003.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The following table sets forth certain information with respect to the ownership of the Company's Common Stock as of December 31, 2003 by (i) those persons known by the Company to be the beneficial owners of more than 5% of the total number of outstanding shares of Common Stock, (ii) each director and executive officer, and (iii) all officers and directors as a group as of December 31, 2003 with these computations based on 5,516,349 shares of common stock being outstanding at that time.
FIVE PERCENT STOCKHOLDERS
-------------------------
AMOUNT OF APPROXIMATE
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
Ted C. Flood 711,732(5) 12.9%
5400 Rio Grande Avenue
Jacksonville, Florida 32254
William E. Nielsen 577,676(6) 10.5%
5400 Rio Grande Avenue
Jacksonville, Florida 32254
Morton S. Robson 586,854(7) 10.6%
530 Fifth Avenue
New York, New York 10036
Robert Roth 318,638(8) 5.8%
Georgetown Electric, Ltd
Unit 17, 2501 W. Third Street
Wilmington, Delware 19805
Cosimo Tacopino 698,540(9) 12.7%
145 Connecticut Street
Staten Island, New York 10207
------------------------------------------------------
5 Consists of 711,732 shares held directly.
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6 Consists of 327,676 shares held directly and options to purchase 250,000 shares.
7 Consists of 78,454 shares held directly; 2400 shares held as custodian for his minor son; 505,000 shares held by Robson & Miller, of which Mr. Robson is the senior partner; and 1,000 shares held by the Robson & Miller pension plan. Excludes 89,728 shares held by Kenneth N. Miller, a partner of Mr. Robson who is the beneficial and record owner of such shares.
8 Includes shares owned by family members of Robert Roth as follows: his wife, Patricia B. Roth (114,182), his son, Steven F. Roth (83,968), his daughter, Kathie Cecile Roth (10,000), and his son Charles B. Roth and his wife Marta Roth (107,188).
9 Consists of 211,880 shares held directly; 475,660 shares owned jointly with his wife, Erma Tacopino, and 11,000 shares held directly by Erma Tacopino.
DIRECTORS AND OFFICERS
AMOUNT OF APPROXIMATE
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
William E. Nielsen 577,676(10) 10.5%
5400 Rio Grande Avenue
Jacksonville, Florida 32254
Ted C. Flood 711,732(11) 12.9%
5400 Rio Grande Avenue
Jacksonville, Florida 32254
Morton S. Robson 586,854(12) 10.6%
530 Fifth Avenue
New York, New York 10036
Robert Roth 318,638(13) 5.8%
Georgetown Electric, Ltd.
Unit 17, 2501 W. Third Street
Wilmington, Delaware 19805
David B. Wilhelmy 160,000 2.9%
5400 Rio Grande Ave.
Jacksonville, FL 32254
Waste Technology Corporation 256,339(14) 4.6%
Profit Sharing Trust
All Officers and Directors 2,611,239 47.3%
as a Group (5 persons)
|
10 Consists of 327,676 shares held directly and options to purchase 250,000 shares.
11 Consists of 711,732 shares held directly.
12 Consists of 78,454 shares held directly; 2,400 shares held as custodian for his minor son; 505,000 shares held by Robson & Miller, of which Mr. Robson is the senior partner; and 1,000 shares held by the Robson & Miller pension plan. Excludes 89,728 shares held by Kenneth N. Miller, a partner of Mr. Robson who is the beneficial and record owner of such shares.
13 Includes shares owned by family members of Robert Roth as follows: his wife, Patricia B. Roth (114,182), his son, Steven F. Roth (83,968), his daughter, Kathie Cecile Roth (10,000), and his son Charles B. Roth and his wife Marta Roth (107,188).
14 Employees' Profit Sharing Trust of which Messrs. Robson and Nielsen are Trustees.
Changes In Control
To the knowledge of the Company's management, there are no present arrangements or pledges of the Company's securities which may result in a change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
Loans to Officers and Directors
On December 29, 1995, the Company transferred a life insurance policy, covering the life of its President, to the President in exchange for a note receivable. The amount of the note receivable from the former president was equal to the amount of the cash surrender value of the policy at the time of the transfer. The former president also executed promissary notes to the Company for the subsequent premium payments on the policy which were made by the company. Interest on these notes accrued at 6% per annum. No principal or interest was due until proceeds from the policy were realized.
In March 2003, the Company reached an agreement with the former president of the Company for deferred compensation payments. The Company will make deferred compensation payments with an initial present value of $463,000 payable over a ten year period. In addition, the former president agreed to exchange the life insurance policy to settle the notes due from officer. In June 2003, the life insurance policy was transferred to the company and the company surrendered the policy for the cash value of $306,000. This amount was applied to the notes receivable from the former president.
As of the date of this report, Morton S. Robson, the Company's Executive Vice President and Secretary and a Director and Corporate Counsel, was indebted to the Company. The transaction giving rise to the obligations owed to the Company by Mr. Robson is described below.
On April 12, 1990, four individuals, including Leslie N. Erber, then Chairman of the Board and President of the Company, and Morton S. Robson entered into an agreement with a group of dissident shareholders to purchase an aggregate of 294,182 shares at a purchase price of $4.00 per share. Mr. Erber and Mr. Robson each purchased 134,951 shares of stock. The dissidents had previously filed Forms 14B with the Commission indicating their intention of seeking control of the Company through the solicitation of consents from shareholders to a reduction in the number of directors and the replacement of the present directors with directors nominated by the dissident group. As part of the agreement to purchase the shares, the dissident shareholders who were selling their shares agreed that, for a period of ten years, they would not seek to obtain control of the Company or solicit proxies in opposition to the Board of Directors on any matter.
Messrs. Erber and Robson and the two other persons borrowed the aggregate amount of $1,244,328 from the Company in 1990 and 1991 to purchase these shares. Most of the loan (91.5%) was made in equal amounts to the President and the Secretary. Those advances were secured by a lien on the 294,182 shares of Common Stock. In addition, Mr. Erber agreed to transfer to the Company as additional collateral, 156,000 shares of stock of the Company. Approximately one-half of this sum was advanced on April 12, 1990 and the balance during 1991. In April 1990, promissory notes evidencing the first half of the funds were executed by these persons bearing interest at the rate of 9% per annum and payable in three annual installments commencing on April 12, 1991. Thereafter, independent members of Waste Tech's Board of Directors unanimously extended the payment due date of each payment for one (1) year. New promissory notes to Waste Tech were thereafter executed for the full amount of the advance, payable in three annual installments commencing April 12, 1992. The notes were secured by a lien on all of these shares which were acquired. In June 1992, $200,000 of the principal amount of these loans was repaid to the Company through a sale of 100,000 of the acquired shares at $2.00 per share. Payment of the remainder of the principal due in 1993 and 1994, together with the accrued interest, was subsequently deferred for two years by the Company's Board of Directors, and deferred again until 2001.
Thereafter, Mr. Erber, in connection with his termination as President of the Company, turned in all of his stock in to the Company and IBC in full satisfaction of his obligation of $698,527.
As of the end of fiscal 2003, the Company owed Mr. Robson's law firm the sum of $580,639 for legal fees and accrued interest. The Company has acquired a security interest in the shares acquired by Robson & Miller by the exercise of the aforesaid option as collateral security for repayment of the outstanding loan of Mr. Robson. As of October 31,2003, Mr. Robson still owed the Company $427,364 together with accrued interest. The largest aggregate outstanding loan balance of Mr. Robson's during the past two (2) fiscal years was $950,498.
Legal Services
The law firm in which Morton S. Robson, the Secretary and a Director of the Company, is a partner have provided services to the Company in fiscal 2003. During fiscal 2003, Mr. Robson's law firm received $20,395 from Waste Tech as payment for legal services rendered. As of the end of fiscal 2003, accrued but unpaid legal fees and accrued interest due to Mr. Robson's law firm from the Company amounted to $570,706.
Conflicts of Interest
Each of Messrs. Nielsen and Robson are Directors of both Waste Tech and its wholly owned subsidiary, IBC. Conflicts of interest may arise for Messrs. Nielsen and Robson in transactions between Waste Tech and IBC. Additionally, Mr. Robson is the senior partner of the law firm which is counsel to the Company. Conflicts of interest may arise as the result of such relationships.
Robert Roth
Members of the immediate family of Robert Roth, one of the Directors of the Company, own an aggregate of 6.2% of the Company's outstanding and issued stock. The shares of stock are owned by his wife, Patricia B. Roth (114,182), his son, Steven F. Roth (83,968), his daughter, Kathie Cecile Roth (10,000) and his son Charles B. Roth and his wife, Marta Roth (107,188). Pursuant to the terms of an agreement dated May 11, 1993 between Patricia Roth, Steven Roth and Robert Roth, so long as Patricia Roth and Steven Roth are the owners of more than one percent (1%) of the number of outstanding shares of Common Stock, the Company has agreed to use its best efforts to cause the election of Robert Roth as a member of the Board of Directors.
Parent Of Issuer
The Company has no parent.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits
1. Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
2. Financial Statement Schedules:
Schedule II - Accounts Receivable from Related Parties, Underwriters, Promoters, and Employees other than Related Parties
Schedule X - Supplementary Income Statement Information
3. The following exhibits are filed herewith:
Exhibit No. and Description
14 Code of Ethics
18 Letter on change in accounting principles
21 List of subsidiaries
31 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
32 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
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4. Exhibit Index.
(a) The following documents heretofore filed by the Company with the commission are hereby incorporated by reference herein:
(I) from the Registration Statement on Form S-18 filed with the Commission in April, 1985 (Registration No. 2-97045)
Exhibit No. and Description
3.0 Articles of Incorporation and by-laws and all
amendments thereto.
4.0 All instruments defining the rights of security
holders submitted as exhibits therewith:
10.1 Agreement between the Company and International Baler
Corp. dated September 8, 1986, relating to acquisition
of assets and stock.
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(II) Annual Report on Form 10-K for fiscal year ended October 31, 1987:
Exhibit No. and Description
10.2 Agreement dated February 3, 1987, between the Company
and N. J. Cavagnaro & Sons and Machine Corp., Nicholas
J. Cavagnaro Jr., George L. Cavagnaro, and Pauline L.
Cavagnaro together with the exhibits annexed thereto
for the acquisition of N. J. Cavagnaro & Sons Machine
Corp.
10.3 Non-Competition Agreement dated February 3, 1987
between the Company and N. J. Cavagnaro & Sons Machine
Corp., George L. Cavagnaro, Nicholas J. Cavagnaro, Jr.
and Pauline L. Cavagnaro.
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(III) Current Report on Form 8-K, Date of Report, June 1, 1989:
Exhibit No. and Description
10.6 Severance Agreement between International Baler
Corporation and Ted C. Flood dated May 17, 1989, and
agreed to June 3, 1989.
25
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10.7 Waste Technology Corp. Profit Sharing Plan including
Agreement of Trust.
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(IV) Current Report on Form 8-K, Date of Report, March 22, 1990:
Exhibit No. and Description
10.10 Agreement between Waste Technology Corp. and U.S.
Environmental, Inc. dated March 26, 1990.
(V) Current Report on Form 8-K, Date of Report, April 12, 1990:
Exhibit No. and Description
10.11 Stock Purchase Agreement dated April 12, 1990.
10.12 Standstill Agreement dated April 12, 1990.
(VI) Form 8 Amendment No. 1 to the Annual Report on Form 10-K for fiscal year ended October 31, 1989:
Exhibit No. and Description
3.3 Certificate of Incorporation of International Baler
Corporation f/k/a National Compactor & Technology
Systems, Inc. and all amendments thereto.
3.4 By-Laws of International Baler Corporation.
3.5 Certificate of Incorporation of Consolidated Baling
Machine Company, Inc. f/k/a Solid Waste Recovery Test
Center, Inc. and all amendments thereto.
3.6 By-Laws of Consolidated Baling Machine Company, Inc.
10.14 Plan and Agreement of Merger of American Baler Machine
Company, Inc. into National Compactor & Technology
Systems, Inc.
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(VII) Annual Report on Form 10-K for fiscal year ended October 31, 1990:
Exhibit No. and Description
3.7 Certificate of Incorporation of Waste Tech Real Estate
Corp.
3.8 Certificate of Incorporation of Consolidated Baler
Sales & Service, Inc.
10.19 Joint Venture Agreement between Waste Tech Real Estate
and Rock-Tech Corp.
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(VIII) Current Report on Form 8-K, Date of Report April 2, 1991:
Exhibit No. and Description
10.20 Agreement among Waste Technology Corp., Ram Industrial
Coating, Inc., Charles B. Roth and David Price dated
April 2, 1991.
10.21 Agreement among Waste Technology Corp., Ram Coating
Technology Corp., Eagle Tank Technology Corp., Ram
Industrial Coating, Inc., Eagle Tank Services, Inc.
Charles B. Roth and David C. Price dated April 2,
1991.
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(IX) Annual Report on Form 10K for the Fiscal Year ended October 31, 1991:
Exhibit No. and Description
3.1.1 Certificate of Amendment to Certificate of
Incorporation of Waste Technology Corp. as filed on
November 4, 1991.
3.1.2 Certificate of Amendment to Certificate of
Incorporation of Waste Technology Corp. as filed
November 21, 1991.
3.2 Revised and Restated By-Laws of Waste Technology Corp.
27
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3.2.1 Amendment to Revised and Restated By-Laws of Waste
Technology Corp.
3.11 Certificate of Incorporation of Solid Waste & Recovery
Systems, Inc.
10.22 Lease for 156 6th Street and 153 7th Street, Brooklyn,
New York.
10.24 Lease for 115 N. 5th Street, Brooklyn, New York.
10.25 Form of Deferred Compensation Agreement for Ted C.
Flood.
10.26 Working Agreement dated June 17, 1990 for Local Union
No. 164.
10.27 Industrial and Heavy Construction and Maintenance
Contract dated September 1, 1990.
10.28 Amended and Restated Revolving Credit Loan and
Security Agreement dated July 12, 1991.
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(X) Current Report on Form 8K, Date of Report September 2, 1992:
Exhibit No. and Description
10.30 Agreement between Waste Technology Corp. and Charles B. Roth, dated June 25, 1992.
(XI) Current Report on Form 8K, Date of Report May 7, 1993:
Exhibit No. and Description
10.31 Agreement between Waste Technology Corp.,
International Baler Corp. and Leslie N. Erber dated
February 23, 1993.
10.32 Agreement between Waste Technology Corp. and Charles
Roth dated May 7, 1993.
10.33 Agreement between Waste Technology Corp., Patricia
Roth, Steven Roth and Robert Roth dated May 10, 1993.
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(XII) Annual Report on Form 10K for the Fiscal Year ended October 31, 1994:
Exhibit No. and Description
10.34 Employment Agreement between International Baler
Corporation and Ted C. Flood dated as of September 1,
1993.
10.35.1 Term Loan and Security Agreement among Inter-national
Baler Corporation, Consolidated Baling Machine
Company, Inc., Waste Technology Corp. and SouthTrust
Bank of Northeast Florida dated as of September 8,
1994
10.35.2 Mortgage and Security Agreement between International
Baler Corporation and SouthTrust Bank of Northeast
Florida dated as of September 8, 1994
10.35.3 Promissory Note among International Baler Corporation,
Consolidated Baling Machine Company, Inc. and
SouthTrust Bank of Northeast Florida dated as of
September 8, 1994
10.35.4 Note Modification Agreement among Interna-tional Baler
Corporation, Consolidated Baling Machine Company, Inc.
and SouthTrust Bank of Northeast Florida dated
November 30, 1994
10.35.5 Unconditional Guaranty of Payment and Performance by
Waste Technology Corp. dated as of September 8, 1994
10.36.1 Business Loan Agreement between Ram Coating Technology
Corp. and Barnett Bank of Jacksonville, N.A., dated
September 15, 1994
10.36.2 Amended and Restated Mortgage between Ram Coating
Technology Corp. and Barnett Bank of Jacksonville,
N.A., dated September 15, 1994
10.36.3 Promissory Note between Ram Coating Technology Corp.
and Barnett Bank of Jacksonville, N.A., dated
September 15, 1994
29
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10.36.4 Continuing Unlimited Commercial Guaranty by
International Baler Corporation to Barnett Bank of
Jacksonville, N.A. dated September 15, 1994
10.36.5 Continuing Unlimited Commercial Guaranty by Waste
Technology Corp. to Barnett Bank of Jacksonville, N.A.
dated September 15, 1994
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(XIII) Annual Report on Form 10K for the Fiscal Year ended October 31, 1995:
Exhibit No. and Description
4.1 1995 Stock Option Plan
(XIV) Annual Report on Form 10K for the Fiscal Year ended October 31, 1996:
Exhibit No. and Description
10.37 Employment Agreement between Waste Technology Corp.
and Ted C. Flood dated as of September 15, 1996.
10.38 Agreement between International Baler Corporation and
Ted C. Flood dated as December 29, 1995.
10.38.1 Promissory Note made by Ted C. Flood to the order of
International Baler Corporation dated December 29,
1995.
10.38.2 Promissory Note made by Ted C. Flood to the order of
Waste Technology Corp. dated April 5, 1996.
10.38.3 Promissory Note made by Ted C. Flood to the order of
Waste Technology Corp. dated October 5, 1996.
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(XV) Current Report on Form 8-K, Date of Report, June 27, 1997:
Exhibit No. and Description
10.39 Agreement of Merger between International Baler
Corporation and IBC Merger Corporation dated June 24,
1997.
10.39.1 Certificate of Merger of International Baler
Corporation into IBC Merger Corporation.
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(XVI) Current Report on Form 8-KA, Date of Report, October 13, 1997:
Exhibit No. and Description
16.1 Letter dated October 30, 1997 from Morton S. Robson,
Esq. of Robson & Miller, LLP to James E. Newman of
Coopers & Lybrand.
16.2 Letter Dated November 5, 1997 from Coopers & Lybrand
L.L.P. to the Securities and Exchange Commission.
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(XVII) Annual Report on Form 10K for the Fiscal Year ended October 31, 1998:
Exhibit No. and Description
10.40 Agreement between Solid Waste Recovery Systems, Inc. and DryVac Environmental, Inc.
(XVIII) Current Report on Form 8-K, Date of Report, November 2, 1999:
Exhibit No. and Description
10.40a Memorandum of Intent between Waste Technology Corp.
and Sidney Wildes and Forrest H. Wildes dated November
2, 1999.
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(XIX) Current Report on Form 8-K, Date of Report, December 10, 1999:
Exhibit No. and Description
10.41 Asset Purchase Agreement between International Press
and Shear Corporation and IPS Balers Inc. together
with Exhibits.
31
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10.41.1 Assignment of Lease and Option between International
Press and Shear Corporation, IPS Balers Inc. and
Development Authority of Appling County.
10.41.2 Assignment of Equipment Warranties between
International Press and Shear Corporation and IPS
Balers Inc.
10.41.3 Assignment of Interest in Patent between International
Press and Shear Corporation, Waste Technology Corp.,
and IPS Balers Inc.
10.41.4 Seller's Compliance Certificate
10.41.5 Certificate of Resolution and Certification of
Incumbency of International Press and Shear
Corporation.
10.41.6 Certificate of Resolution and Certification of
Incumbency of Waste Technology Corp.
10.41.7 Affidavit of Title to Business and In Compliance with
Bulk Transfer Act.
10.41.8 Certificate Regarding Broker
10.41.9 Buyer's Compliance Certificate
10.41.10 Assignment and Assumption of Accounts between
International Press and Shear Corporation and IPS
Balers Inc.
10.41.11 Certification as to Payment of Taxes
10.41.12 Bill of Sale from International Press and Shear
Corporation to IPS Balers Inc.
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(B) No Reports on Form 8-K were covered during the last quarter of Fiscal 2003.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The principal accountant billed the Company $58,000 in both fiscal 2003 and 2002 for the audit of the Company's annual financial statements and the review of the financial statements included in the Company's form 10-QSB.
Audit-Related Fees
There were no other audit related fees in either of the last two fiscal years.
Tax Fees
The principal accountant billed the Company $11,000 in fiscal 2003 and fiscal 2002 for professional services related to taxes.
All Other Fees
There were no other fees billed to the Company by the principal accountant for any other services.
Pre-approved Policies and Procedures
The amount to be charged to the Company for normal audit and tax services is approved by the audit committee prior to the period of service. Additional charges, if any, are approved prior to the auditor undertaking those services.
All audit and audit related fees in the last two fiscal years were approved by the audit committee.
Work performed by persons other than the principal accountants.
No audit or audit related work was performed by anyone others than the principal accountants.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
WASTE TECHNOLOGY CORP.
(Registrant)
By: /s/ William E. Nielsen -------------------------------- William E. Nielsen, President Dated: February 13, 2004 |
Pursuant to the requirements of the Exchange Act this report has been signed below by the following persons on behalf of the registrant and in their capacities and on the dates indicated.
Signature Title Date /s/ William E. Nielsen Chief Executive Officer February 13, 2004 ----------------------- Principal Financial and William E. Nielsen Accounting Officer and Director /s/ Ted C. Flood Director February 13, 2004 ----------------------- Ted C. Flood /s/ Morton S. Robson Director February 13, 2004 ----------------------- Morton S. Robson /s/ Robert Roth Director February 13, 2004 ----------------------- Robert Roth |
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Consolidated Financial Statements
October 31, 2003 and 2002
(With Independent Auditors' Report Thereon)
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2003 and 2002
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Waste Technology Corp.:
We have audited the accompanying consolidated balance sheets of Waste Technology Corp. and Subsidiaries as of October 31, 2003 and 2002 and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Waste Technology Corp. and Subsidiaries as of October 31, 2003 and 2002 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Jacksonville, FL
December 19, 2003
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 2003 and 2002
ASSETS 2003 2002
------------ ------------
Current assets:
Cash and cash equivalents $ 99,495 160,630
Accounts receivable, net of allowance for doubtful
accounts of $40,000 for 2003 and 2002 654,624 549,784
Inventories (note 4) 1,287,647 1,537,648
Prepaid expenses and other current assets 58,519 14,604
------------ ------------
Total current assets 2,100,285 2,262,666
------------ ------------
Property, plant and equipment, at cost, net (note 5) 517,836 533,282
Other assets:
Due from officer (note 3) 90,768 411,809
Other assets 3,246 3,246
------------ ------------
Total other assets 94,014 415,055
------------ ------------
Total assets $ 2,712,135 3,211,003
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving promissory note (note 6) $ 89,430 48,159
Accounts payable 265,652 288,167
Accrued liabilities 384,502 433,534
Current portion of deferred compensation (note 3) 66,831 69,000
Accrued legal judgment (note 7) 57,000 171,000
Customer deposits 469,366 407,626
------------ ------------
Total current liabilities 1,332,781 1,417,486
------------ ------------
Deferred compensation, net of current portion (note 3) 389,928 394,000
Stockholders' equity (notes 3 and 9):
Common stock, $0.01 par value. Authorized 25,000,000 shares;
issued 6,179,875 shares in 2003 and 2002 61,799 61,799
Preferred stock, $0.0001 par value. Authorized 10,000,000
shares; issued none -- --
Additional paid-in capital 6,347,187 6,347,187
Accumulated deficit (4,620,462) (4,222,922)
------------ ------------
1,788,524 2,186,064
Less treasury stock, 663,526 shares in 2003 and 2002, at cost 419,306 419,306
Less notes receivable from stockholders, net (note 3) 379,792 367,241
------------ ------------
Total stockholders' equity 989,426 1,399,517
Commitments and contingencies (note 7)
------------ ------------
Total liabilities and stockholders' equity $ 2,712,135 3,211,003
============ ============
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See accompanying notes to consolidated financial statements.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended October 31, 2003 and 2002
2003 2002
------------ ------------
Net sales (note 11) $ 5,460,147 5,125,717
Cost of sales 4,670,290 3,714,301
------------ ------------
Gross profit 789,857 1,411,416
------------ ------------
Operating expenses:
Selling 535,710 441,110
General and administrative 596,645 616,127
Deferred compensation settlement (note 3) -- 463,000
------------ ------------
1,132,355 1,520,237
------------ ------------
Loss from operations (342,498) (108,821)
------------ ------------
Other income (expense):
Interest income (note 3) 18,459 32,698
Interest expense (66,319) (54,220)
Credit for legal judgment (note 7) -- 321,500
Other (7,182) 3,925
------------ ------------
(55,042) 303,903
------------ ------------
Income (loss) before income taxes (397,540) 195,082
------------ ------------
Income taxes (note 9) -- --
------------ ------------
Net income (loss) $ (397,540) 195,082
============ ============
Basic and diluted earnings (loss) per share $ (0.07) 0.04
Weighted average number of shares 5,516,349 5,516,349
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See accompanying notes to consolidated financial statements.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity Years ended October 31, 2003 and 2002
COMMON STOCK
PAR VALUE $0.01 AUTHORIZED
25,000,000 SHARES TREASURY STOCK
---------------------- ---------------------- NOTES
NUMBER ADDITIONAL NUMBER RECEIVABLE
OF SHARES PAR PAID-IN ACCUMULATED OF FROM
ISSUED ISSUED CAPITAL DEFICIT SHARES COST STOCKHOLDERS TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, October 31, 2001 6,179,875 $ 61,799 6,347,187 (4,418,004) 663,526 $ (419,306) (382,820) 1,188,856
Net increase of note receivable
from stockholders (note 3) -- -- -- -- -- -- 15,579 15,579
Net income -- -- -- 195,082 -- -- -- 195,082
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, October 31, 2002 6,179,875 61,799 6,347,187 (4,222,922) 663,526 (419,306) (367,241) 1,399,517
Net increase of note receivable
from stockholders (note 3) -- -- -- -- -- -- (12,551) (12,551)
Net loss -- -- -- (397,540) -- -- (397,540)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, October 31, 2003 6,179,875 $ 61,799 6,347,187 (4,620,462) 663,526 $ (419,306) (379,792) 989,426
========== ========== ========== ========== ========== ========== ========== ==========
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See accompanying notes to consolidated financial statements.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended October 31, 2003 and 2002
2003 2002
------------ ------------
Cash flows from operating activities:
Net (loss) income $ (397,540) 195,082
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 40,424 42,956
Changes in assets and liabilities:
Accounts receivable (104,840) (71,901)
Inventories 250,001 186,887
Prepaid expenses and other current assets (43,915) (13,561)
Other assets -- 1,086
Accounts payable (22,515) (239,786)
Accrued liabilities, deferred compensaton and accrued
legal judgement (169,273) 78,261
Customer deposits 61,740 225,766
------------ ------------
Net cash (used in) provided by operating activities (385,918) 404,790
------------ ------------
Cash flows from investing activities:
Net investment in notes receivable from stockholders 308,490 (2,765)
Purchases of property and equipment (24,978) (11,822)
------------ ------------
Net cash provided by (used in) investing activities 283,512 (14,587)
------------ ------------
Cash flows from financing activities:
Net drawings (payments) from revolving promissory note 41,271 (163,366)
Payments on long-term debt -- (90,277)
------------ ------------
Net cash provided by (used in) financing activities 41,271 (253,643)
------------ ------------
Net (decrease) increase in cash and cash equivalents (61,135) 136,560
Cash and cash equivalents at beginning of year 160,630 24,070
------------ ------------
Cash and cash equivalents at end of year $ 99,495 160,630
============ ============
Supplemental cash flow information:
Cash paid for interest $ 38,208 54,675
============ ============
|
See accompanying notes to consolidated financial statements.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2003 and 2002
(1) NATURE OF BUSINESS
Waste Technology Corp. and its wholly owned subsidiaries (the Company) manufacture baling equipment which utilize mechanical, hydraulic, and electrical mechanisms to compress a variety of materials into bales. The Company's customers include plastic recycling facilities, paper mills, textile mills, and paper recycling facilities throughout the United States, the Far East, and South America.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of Waste Technology Corp. and all of its wholly owned subsidiaries. Intercompany balances and significant intercompany transactions have been eliminated in consolidation.
(b) USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.
(c) CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash on hand, bank demand accounts and money market accounts having original maturities of less than three months.
(d) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by a method that approximates the first-in, first-out method.
(e) DEPRECIATION
The cost of property, plant, and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed on the double-declining balance and straight-line methods over the estimated lives of 5-7 years for machinery and equipment and 31 years for buildings.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell, and depreciation ceases.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2003 and 2002
(f) INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
(g) REVENUE RECOGNITION
The Company recognizes revenue when products are shipped and the customer takes ownership and assumes risk of loss.
(h) EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is calculated using the weighted average number of common shares outstanding during each year. Diluted earnings (loss) per share includes the net number of shares that would be issued upon the exercise of stock options using the treasury stock method. Options are not considered in loss years as they would be antidilutive.
(i) STOCK-BASED COMPENSATION
The Company accounted for its stock option plans in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.
The weighted average fair value of options granted during fiscal 2002 was $.04. This amount was estimated on the date of grant using the Black-Scholes option pricing model under the following assumptions: risk-free interest rate of 5%; useful life of 10 years; 30% volatility and no dividend yield.
The Company has adopted the disclosure only provisions of SFAS No.
123. As such, had compensation expense for the Company's stock
plan been determined based on fair value at the date of grant, the
Company's net income would have been as follows:
2003 2002
---------- ----------
Net (loss) income $ (159,984) 195,802
Proforma compensation expense -- (10,000)
---------- ----------
Proforma net (loss) income $ (159,984) 185,802
========== ==========
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WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2003 and 2002
(j) BUSINESS REPORTING SEGMENTS
Based on the information monitored by the Company's operating decision makers to manage the business, the Company has identified that its operations are within one reportable segment. Accordingly, financial information on industry segments is omitted because, apart from the principal business of manufacturing baling machines, the Company has no other reportable segments.
(3) RELATED PARTY LOAN AND NOTES RECEIVABLE
On April 12, 1990, four individuals, including the former chairman of the board and executive vice president, general counsel, secretary and director of the Company, entered into an agreement with a group of dissident shareholders to purchase an aggregate of 294,182 shares of the Company's common stock at a purchase price of $4 per share. The former chairman and the general counsel each purchased 134,591 shares of common stock and the other two individuals purchased an aggregate of 25,000 shares.
On July 15, 1991, the purchase of shares was finalized by the payment to the selling shareholders of the balance of the purchase price plus accrued interest. The financing of the transactions was paid with funds borrowed from the Company with the unanimous approval of the Company's board of directors. The four individuals executed promissory notes in favor of the Company, originally payable in three annual installments due July 15, 1992-1994 plus accrued interest from July 15, 1991 at the rate of 9% per annum. The former chairman's promissory note was satisfied in 1993. The Company extended the initial installment date for the general counsel to begin on July 15, 1997. No payments were made during the years ended October 31, 2003 and 2002. The debt is collateralized by a lien on the 134,591 shares of the Company's common stock and a personal guarantee and the guarantee of general counsel's law firm to the extent of his loan. On June 13, 1995, the general counsel and his law firm exercised their option to purchase 250,000 shares of Waste Technology Corp. common stock at $1.00 per share, whereby, the Company reduced the legal fees payable to the law firm in lieu of cash. These shares are also being held as collateral for the note receivable from the general counsel.
During 1997, the general counsel and his law firm authorized the Company to offset accrued legal fees against the note receivable from the general counsel at such time as the board of directors shall determine. Accordingly, notes receivable from the general counsel, net of accrued legal fees of $379,792 and $367,241, are presented as a reduction of stockholders' equity at October 31, 2003 and 2002, respectively.
On December 29, 1995, the Company transferred a life insurance policy, covering the life of its former president, in exchange for a note receivable. The amount of the note receivable from the former president is equal to the amount of the cash surrender value of the policy at the time of the transfer. Interest accrued at the rate of 6% per annum. For 2002, no principal or interest was due until proceeds from the policy were realized. During 2003, the former president signed over the life insurance policy to the Company, which then cashed in the policy and used the proceeds to reduce the note receivable from the former president. The note receivable from the president was $105,134 and $411,809 at October 31, 2003 and 2002, respectively.
The Company has a deferred compensation agreement with the former president of the Company for deferred compensation payments. The Company will make deferred compensation payments with a present value of $456,759, payable over the next nine years, a portion of the deferred compensation payments will be used to repay the outstanding note receivable discussed above.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2003 and 2002
The consolidated statements of operations includes interest income on officer and director notes receivable of $43,351 and $56,806 for fiscal 2003 and 2002. Legal expenses to the general counsel and his law firm were $20,395 and $19,997 for fiscal 2003 and 2002, respectively.
(4) INVENTORIES
Inventories consisted of the following:
2003 2002
---------- ----------
Finished products $ 219,627 124,627
Work in process 569,474 555,473
Raw materials 498,546 857,548
---------- ----------
$1,287,647 1,537,648
========== ==========
|
During the year ended October 31, 2003, the Company identified and wrote-off approximately $250,000 of slow moving and obsolete inventory. This inventory is no longer used in the company's current manufactured models.
(5) PROPERTY, PLANT, AND EQUIPMENT
The following is a summary of property, plant, and equipment, at cost, less accumulated depreciation and amortization:
2003 2002
---------- ----------
Land $ 77,304 77,304
Buildings and improvements 911,158 905,539
Machinery and equipment 793,421 774,061
Vehicles 95,327 104,024
---------- ----------
1,877,210 1,860,928
Less accumulated depreciation 1,359,374 1,327,646
---------- ----------
$ 517,836 533,282
========== ==========
|
Depreciation and amortization expense was $40,424 and $42,956 in fiscal 2003 and 2002, respectively.
(6) REVOLVING PROMISSORY NOTE
In August 2000, the Company entered into a line of credit agreement which allows the Company to borrow up to the lesser of 80% of eligible receivables or $500,000. The line of credit bears interest at prime plus 1% (5.75% at October 31, 2003) plus certain service charges and expires in August 2004. The line of credit had an outstanding balance of $89,430 and $48,159 at October 31, 2003 and 2002, respectively. The unused line of credit at October 31, 2003 was approximately $106,000.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2003 and 2002
(7) COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the ordinary course of business, some of which are substantial. While any litigation contains an element of uncertainty, management, based upon the opinion of the Company's general counsel and other attorneys acting on behalf of the Company, presently believes, except for the legal judgment discussed below, that the outcome or cost of defending such proceedings or claims individually and in the aggregate, which are pending or threatened, will not have a material adverse effect on the Company's financial condition, results of operations, or cash flows.
The Company and its insurance carrier were defendants in a suit against its former subsidiary, RAM Coating Technology Corporation (RAM), claiming breach of contract. In September 1998, a judgment against the Company and RAM's former insurance carrier, was given in the amount of approximately $250,000 in damages, $110,000 in attorney's fees, all costs of proceedings, plus interest. In July 2000, the judgment was reaffirmed by the First Circuit Court of Appeals and in December 2000 by the Supreme Court of the State of Louisiana. The legal judgment was paid by the Company's insurance carrier during 2001.
In August 2002, the Company reached an agreement with the insurance carrier to settle the amount due on the judgment for the sum of $280,000 payable in installments. The first installment payment was made in August 2002, and as of October 31, 2003, the Company was current in making such installment payments and the balance due under the terms of the settlement agreement with the carrier at October 31, 2003 and 2002 was $57,000 and $171,000, respectively. The Company will make its final payment, under the agreement, in April 2004.
(8) INCOME TAXES
The differences between income taxes as provided at the federal statutory tax rate of 34% and the Company's effective rate are as follows:
2003 2002
---------- ----------
Expected federal income tax (benefit)
expense at statutory rate $ (142,000) 66,000
State income tax (benefit) expense,
net federal income tax effect (15,000) 7,000
Change in valuation allowance, net
of correction to prior years'
deferred taxes 157,000 (73,000)
---------- ----------
Income taxes $ -- --
========== ==========
|
The Company files consolidated federal and state income tax returns with its subsidiaries. The net change in the total valuation allowance for the years ended October 31, 2003 and 2002 an increase of $157,000 and a decrease of $73,000, respectively. Realization of net deferred tax assets is dependent on generating sufficient taxable income in the future. Based on current and anticipated future economic conditions, management cannot ascertain when it will become more likely than not that any portion of the net deferred tax asset will be realized.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2003 and 2002
The significant components of the net deferred income tax assets at October 31, 2003 and 2002 are as follows:
2003 2002
---------- ----------
Reserves and allowances $ 130,000 136,000
Property, plant, and equipment 85,000 95,000
General business credit carryforwards 15,000 15,000
Net operating loss carryforwards 1,529,000 1,348,000
Other 60,000 68,000
---------- ----------
1,819,000 1,662,000
Less valuation allowance 1,819,000 1,662,000
---------- ----------
Net deferred income taxes $ -- --
========== ==========
|
Net federal operating loss carryforwards for income tax purposes are approximately $4,000,000 and expire in years 2007 through 2023. The Company has an alternative minimum tax credit carryforward of approximately $30,000.
(9) STOCK OPTIONS
In March 1994 and February 1993, the board of directors issued 550,000 and 700,000 nonqualified stock options, respectively, to purchase 550,000 and 700,000 shares, respectively, of the Company's common stock at $0.50 per share. The options or shares purchased thereunder may be registered pursuant to the Securities Act of 1933.
A summary of the status of the Company's stock options is presented below:
Weighted
average
exercise
Shares price
---------- ----------
Outstanding, October 31, 2001 290,000 0.5345
Cancelled (40,000) 0.7500
Issued 250,000 0.3000
----------
Outstanding, October 31, 2002 500,000 0.4000
Cancelled (200,000) 0.5000
Issued -- --
----------
Outstanding, October 31, 2003 300,000 0.3000
----------
Shares exercisable 300,000
==========
|
The outstanding stock options at October 31, 2003, have an exercise price of $0.30 per share and a remaining contractual term ranging from one to nine years.
WASTE TECHNOLOGY CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 2003 and 2002
(10) EMPLOYEES' BENEFIT PLAN
The Company has a defined contribution plan and profit sharing program for its employees. The Company made no contributions to the plan in 2003 or 2002.
(11) EXPORT SALES
Export sales were approximately 23% and 20% for the years ended October 31, 2003 and 2002, respectively. The principal international markets served by the Company, include Canada, China, United Kingdom, India, Korea, Japan, Russia and Brazil. In 2003, the Company had a percentage of total sales of over 11% to Brazil. In 2002 no sales in one geographic region exceeded 10.
July 2003
WASTE TECHNOLOGY CORPORATION
CODE OF ETHICS
The Company has its Business Conduct, which is a code of business conduct and ethics applicable to all directors and employees of the Company. The Company also has adopted this Code of Ethics specifically for its chief executive officer ("CEO") and all financial officers and executives (collectively, the "Financial Officers and Executives"), including the chief financial officer and controller. The Financial Officers and Executives subject to this Code of Ethics will be designated and informed of such designation by the Company.
The CEO and the Financial Officers and Executives are subject to the following specific policies:
1. In carrying out their duties, the CEO and the Financial Officers and Executives will promote full, fair, accurate, timely and understandable disclosure in all reports and other documents the Company files with, or furnishes or submits, to the Securities and Exchange Commission, as well as other public communications made by the Company. Accordingly, the CEO and each Financial Officer and Executive shall promptly bring to the attention of the Board of Directors any material information of which she or he may become aware that affects the disclosures made by the Company in the public filings, if such information is not already being adequately addressed in public filings being prepared for the Company.
2. The CEO and each Financial Officer and Executive shall promptly bring to the attention of the Board of Directors
any information she or he may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's financial reporting, disclosures or internal controls.
3. In carrying out their duties, the CEO and each Financial Officer and Executive shall endeavor to comply, and to cause the Company to comply, with all applicable governmental laws, rules and regulations.
4. The CEO shall promptly bring to the attention of the Board of Directors
and each Financial Officer and Executive shall promptly bring to the
attention of the CEO any information she or he may have concerning any
(a) unethical behavior or dishonest or illegal acts in involving any
management or other employee who has a significant role in the
Company's financial reporting, disclosures or internal controls or (b)
violation of this Code of Ethics, including any actual or apparent
conflicts of interest between personal and professional relationships.
If any of the matters described in the preceding sentence involves the
CEO, the Financial Officer or Executive shall promptly bring the matter
to the attention of the Board of Directors.
5. The CEO shall promptly bring to the attention of the Board of Directors and each Financial Officer and Executive shall promptly bring to the attention of the CEO any evidence she or he may have concerning any (a) material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof or (b) material violation by the CEO or any Financial Officer or Executive of the Code of Ethics. If any violation described in the preceding sentence involves the CEO, the Financial Officer or Executive shall bring the matter to the attention of the Board of Directors. If the CEO or any Financial Officer or Executive reports such evidence in accordance with this paragraph and believes or has reason to believe the matter reported is not being or has not been adequately addressed by the Company, she or he shall report such matter to the Board of Directors.
6. The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of the Code of Ethics by the CEO or any Financial Officer or Executive. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to the Code of Ethics. The Company shall at least annually report violations and the actions taken by the Board of Directors.
January 22, 2004
Securities and Exchange Commission
Washington, DC 20549
Re: Waste Technology Corporation
Form 10-KSB, October 31, 2003
Dear Sir/Madam:
Enclosed is form 10-KSB for Waste Technology Corporation for the period ending October 31, 2003.
There has been no change in fiscal 2003 from fiscal 2002 in any accounting principles or practices or in the methods of application of those principles or practices.
Sincerely,
WASTE TECHNOLOGY CORPORATION
William E. Nielsen
President & CEO
WEN:nm
List of Subsidiaries
NAME STATE OF INCORPORATION
International Baler Corporation Delaware Waste Technology Leasing Corp. Delaware Waste Technology Acquisitions Corp. Delaware Consolidated Baling Machine Co., Inc. Florida Florida Waste Systems, Inc. Florida Waste Tech Real Estate Corp. New York International Press & Shear Corp. Georgia |
I, William E. Nielsen, certify pursuant to section 302 of the Sarbanes-Oxley Act of 2002 that:
1. I have reviewed this annual report on Form 10-KSB of Waste Technology Corp.
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in the annual report;
4. As the Registrant's sole certifying officers, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Registrant and I have:
(a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under my supervision to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made know to me by others within those entities, particularly during the period in which this annual report is being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. As the Registrant's other certifying officers, I have disclosed, based on our most recent evaluation of internal control over financial reporting to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent function);
(a) All significant deficiencies in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material that involves the management or other employees who have a significant role in the Registrant's internal control over financial reporting.
Dated: January 23, 2004
/s/ William E. Nielsen
----------------------------
William E. Nielsen
Chief Executive Officer
Chief Financial Officer
|
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I hereby certify that:
(A) I have reviewed the Annual Report on Form 10-KSB:
(B) To the best of my knowledge this annual report on Form 10-KSB (I) fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m (a) or 78o (d); and, (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Waste Technology Corporation and Subsidiaries during the period covered by the Report.
Dated: January 23, 2004
/s/William E. Nielsen
---------------------------
William E. Nielsen
President, CEO and
|
Chief Financial Officer