-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TyTADq7xpFhiVZmG25ZjR0U5hlNOtK8xpbWZeCG97cjlLozfSH7pCFLPKpI1QEzm fiba7X9vjFTCHOoGtfXwSQ== 0001012870-99-003189.txt : 19990916 0001012870-99-003189.hdr.sgml : 19990916 ACCESSION NUMBER: 0001012870-99-003189 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990915 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATG INC CENTRAL INDEX KEY: 0001054000 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 942657762 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-23781 FILM NUMBER: 99712016 BUSINESS ADDRESS: STREET 1: 47375 FREMONT BLVD CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5104903008 MAIL ADDRESS: STREET 1: 47375 FREMONT BLVD CITY: FREMONT STATE: CA ZIP: 94538 10-K/A 1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 0549 FORM 10-K/A AMENDMENT NO. 1 [X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 1998. [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from ________ to _________. Commission File Number 0-23781 ATG INC. (Exact name of registrant as specified in its charter) California 94-2657762 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 47375 Fremont Boulevard Fremont, California 94538 (Address of principal executive offices) (510) 490-3008 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(g) of the Act: Common Stock, No par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days: Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K (Paragraph 229.405 of this Chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] On March 12, 1999, there were issued and outstanding 14,042,333 shares of Common Stock. The aggregate market value of Common Stock held by non-affiliates of the Registrant on that date was approximately $84,345,000 based on the closing sale price of the Common Stock, as reported by the NASDAQ National Market. Documents Incorporated By Reference Portions of the registrant's definitive proxy statement for its 1999 Annual Meeting of Shareholders are incorporated by reference into Part III hereof. INTRODUCTION ATG Inc. hereby amends its Form 10-K for the fiscal year ended December 31, 1998 by: adding to Part II, Item 6, Selected Consolidated Financial Data, the section entitled "Financial Results By Fiscal Quarter (Unaudited);" adding to Part II, Item 8, Consolidated Financial Statements And Supplementary Data, a fifth paragraph at the end of the section thereof entitled "Notes To Consolidated Financial Statements - Note 3 - Acquisition of MMT Assets;" and adding to Part IV, Item 14(b), Reports on Form 8-K, a second paragraph thereof in reference to Form 8-K/A, Amendment No. 1. PART II Item 6. Selected Consolidated Financial Data (In Thousands, Except Per Share Data) The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Years Ended December 31, ----------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Statement of Operations Data (1): Revenue.................................................. $35,900 $19,107 $18,235 $16,070 $11,723 Cost ofrevenue........................................... 19,816 11,172 11,082 9,659 7,194 ------- ------- ------- ------- ------- Gross profit............................................. 16,084 7,935 7,153 6,411 4,529 Sales, general and administrative expenses............... 7,952 7,020 6,656 6,202 4,876 ------- ------- ------- ------- ------- Operating income (loss).................................. 8,132 915 497 209 (347) Interest income (expense), net........................... 173 58 13 (141) (19) ------- ------- ------- ------- ------- Income (loss) before income taxes........................ 8,305 973 510 68 (366) Net Income tax expense(benefit).......................... 3,156 (45) 2 2 (2) ------- ------- ------- ------- ------- Net income (loss)........................................ $ 5,149 $ 1,018 $ 508 $ 66 $ (364) ======= ======= ======= ======= ======= Net income per share (2) Basic................................................. $ 0.40 $ 0.09 Diluted............................................... $ 0.38 $ 0.08 Weighted average shares outstanding (2) Basic................................................. 12,975 11,516 13,698 12,284 Diluted...............................................
December 31, ------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------- -------------- ------------ ------------ ------------ Balance Sheet Data (1): Working capital.......................................... $ 1,645 $ (151) $ 4,333 $ 3,903 $ 2,359 Total assets............................................. 79,569 37,227 26,976 21,182 15,699 Total long-term debt..................................... 11,246 6,202 2,930 4,080 4,007 Mandatorily redeemable preferred stock................... --- 19,416 16,319 9,403 5,444 Total shareholder's equity............................... 40,745 296 630 890 1,491
___________________________ (1) See Note 3 of Notes to Consolidated Financial Statements for a discussion of the acquisition of significant assets and businesses. The acquisition was completed December 1, 1998. (2) See Note 2 of Notes to Consolidated Financial Statements--Computation of Net Income Per Share. Historic net income (loss) per share and net income (loss) available to common shareholders have not been presented in Statement of Operations Data since such amounts are not deemed meaningful due to the automatic conversion immediately prior to the closing of the initial public offering of the Company's Common Stock in May 1998 of all shares of preferred stock issued by the Company and ATG Richland Corporation, a subsidiary of the Company. Historic net income (loss) per share for the fiscal years ended December 31, 1994, 1995, 1996 and 1997 was $(0.10), $(0.10), $(0.10) and $(0.06), respectively. Net income (loss) available to common shareholders for the fiscal years ended December 31, 1994, 1995, 1996 and 1997 was $(730), $(770), $(780) and $(451), respectively. Financial Results By Fiscal Quarter (Unaudited) (all dollar amounts in thousands, except per share data)
Three Months Ended ----------------------------------------------------------------------------------------- Mar. 31 Jun. 30 Sep. 30 Dec. 31 Mar. 31 Jun. 30 Sep. 30 Dec. 31 1997 1997 1997 1997 1998 1998 1998 1998 ----- ---- ---- ---- ---- ----- ---- ---- Revenue............................ $2,751 $3,581 $4,424 $8,351 $5,495 $6,773 $9,021 $14,612 Gross Profit....................... 1,332 1,565 2,633 2,404 2,865 3,426 4,226 5,567 Net income (loss).................. (266) 72 692 520 670 879 1,529 2,071 Net income (loss) per share........ Basic......................... (0.09) 0.01 0.06 0.05 0.05 0.07 0.11 0.15 Diluted........................... (0.09) 0.01 0.06 0.04 0.05 0.07 0.11 0.14
Item 8. Consolidated Financial Statements And Supplementary Data See pages 31 through 48. Next page is 31. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of ATG Inc. and Subsidiaries: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of ATG Inc. and its subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICEWATERHOUSECOOPERS LLP San Jose, California February 26, 1999 31 ATG INC. CONSOLIDATED BALANCE SHEETS (dollar amounts in thousands)
December 31, ------------ 1998 1997 ---- ---- ASSETS Current assets: Cash and cash equivalents.................................................. $ 3,789 $ 2,586 Accounts receivable, net of allowance for doubtful accounts of $305 at December 31, 1998 and $119 at December 31, 1997............................................. 22,561 5,935 Prepayments and other current assets....................................... 2,096 2,174 ------- ------- Total current assets................................................... 28,446 10,695 Property and equipment, net....................................................... 42,988 22,104 Other assets...................................................................... 8,135 4,428 ------- ------- Total assets..................................................... $ 79,569 $ 37,227 ======== ======== LIABILITIES Current liabilities: Short term borrowings...................................................... $ 6,750 $ 3,996 Current portion of long term debt and capitalized leases................... 4,733 1,380 Accounts payable........................................................... 6,096 3,246 Accrued liabilities........................................................ 9,222 944 Payable to related parties................................................. -- 1,280 ------- ------- Total current liabilities........................................ 26,801 10,846 Long term debt and capitalized leases, net of current portion..................... 11,246 6,202 Deferred income taxes............................................................. 777 467 ------- ------- Total liabilities................................................ 38,824 17,515 ------- ------- Commitments and contingencies (Note 12) Mandatorily Redeemable Preferred Stock: Series A and ATG Richland Series A and B, no par value Authorized: 6,000,000 shares at December 31, 1997 Issued and outstanding 3,029,291 shares at December 31, 1997.......................................................... -- 19,416 ------- ------- SHAREHOLDERS' EQUITY Common Stock, no par value: Authorized: 20,000,000 shares. Issued and outstanding: 13,851,709 shares and 7,532,301 shares at December 31, 1998 and 1997, respectively................................................ 41,517 6,337 Deferred compensation............................................................. (152) (272) Accumulated deficit............................................................... (620) (5,769) ------- ------- Total common stock, deferred compensation and accumulated deficit.............................................. 40,745 296 ------- ------- Total liabilities and shareholders' equity....................... $79,569 $37,227 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 32 ATG INC. CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data)
For the Years Ended December 31, -------------------------------- 1998 1997 1996 ---- ---- ---- Revenue.......................................................... $ 35,900 $ 19,107 $ 18,235 Cost of revenue.................................................. 19,816 11,172 11,082 -------- -------- -------- Gross profit............................................. 16,084 7,935 7,153 Sales, general and administrative expenses....................... 7,832 6,903 6,487 Stock based compensation expense................................. 120 117 169 -------- -------- -------- Operating income......................................... 8,132 915 497 -------- -------- -------- Interest income (expense): Interest income.............................................. 188 58 142 Interest expense............................................. (15) -- (129) -------- -------- -------- Interest income, net..................................... 173 58 13 -------- -------- -------- Income before income taxes....................................... 8,305 973 510 Provision (benefit) for income taxes............................. 3,156 (45) 2 -------- -------- -------- Net income............................................... 5,149 1,018 508 Accretion of mandatorily redeemable preferred stock.............. -- (1,469) (1,288) -------- -------- -------- Net income (loss) available to common shareholders............... $ 5,149 $ (451) $ (780) ======== ======== ======== Net income (loss) per share Basic........................................................ $ 0.40 $ (0.06) $ (0.10) Diluted...................................................... $ 0.38 $ (0.06) $ (0.10) Shares used in calculating net income (loss) per share Basic........................................................ 12,975 7,532 7,532 Diluted...................................................... 13,698 7,532 7,532
The accompanying notes are an integral part of these consolidated financial statements. 33 ATG INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (amounts in thousands)
Total common stock, deferred Common Stock compensation ------------ Deferred Accumulated and accumulated Shares Amount Compensation Deficit deficit ------ ------ ------------ ----------- ---------------- Balance, January 1, 1996..................... 7,439 $ 5,598 $ (169) $ (4,538) $ 891 Issuance of common stock................ 93 350 -- -- 350 Accretion on redeemable preferred stock................................. -- -- -- (1,288) (1,288) Amortized deferred compensation......... -- -- 169 -- 169 Net income.............................. -- -- -- 508 508 ------- ------- ------ -------- ------- Balance, December 31, 1996................... 7,532 5,948 -- (5,318) 630 Accretion on redeemable preferred stock................................. -- -- -- (1,469) (1,469) Stock based compensation................ -- 389 (389) -- -- Amortized deferred compensation......... -- -- 117 -- 117 Net income.............................. -- -- -- 1,018 1,018 ------- ------- ------ -------- ------- Balance, December 31, 1997................... 7,532 6,337 (272) (5,769) 296 Conversion of redeemable preferred stock................................. 3,984 19,416 -- -- 19,416 Issuance of common stock, on initial public offering, net of expenses...... 2,185 15,658 -- -- 15,658 Exercise of stock options............... 147 83 -- -- 83 Issuance of common stock under Employee Stock Purchase Plan.......... 4 23 -- -- 23 Amortized deferred compensation......... -- -- 120 -- 120 Net income.............................. -- -- -- 5,149 5,149 ------- ------- ------ -------- ------- Balance, December 31, 1998................... 13,852 $41,517 $ (152) $ (620) $40,745 ======= ======= ====== ======== =======
The accompanying notes are an integral part of these consolidated financial statements. 34 ATG INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands)
For the Years Ended December 31, --------------------------------- 1998 1997 1996 ---- ---- ---- Cash flows from operating activities: Net income.................................................... $ 5,149 $ 1,018 $ 508 Adjustments to reconcile net income with cash flow from operations: Depreciation and amortization............................... 824 746 671 Provision for doubtful accounts............................. 210 73 6 Compensation expense for shares issued and options granted.......................................... 120 117 169 Income tax benefit.......................................... -- (45) -- Change in current assets and liabilities: Accounts receivable.................................... (16,836) 899 534 Prepayments and other current assets................... 78 (140) 230 Other assets........................................... -- -- 290 Accounts payable and accrued liabilities............... 11,128 1,085 455 Deferred income taxes.................................. 310 (230) -- -------- ------- ------- Net cash provided by operating activities................................. 983 3,523 2,863 -------- ------- ------- Cash flows from investing activities: Property and equipment acquisitions........................... (5,015) (3,505) (4,647) Acquisition of MMT assets..................................... (10,731) -- -- Other assets.................................................. (3,763) (3,710) (23) -------- ------- ------- Net cash used in investing activities....................... (19,509) (7,215) (4,670) -------- ------- ------- Cash flows from financing activities: Loans from (payments to) related parties...................... (1,280) 1,177 (61) Repayment of capital leases................................... (1,226) (461) (735) Borrowing (Repayment) of long term debt, net.................. 3,717 (196) (216) Short term borrowings, net of repayments...................... 2,754 1,160 48 Proceeds from issuance of preferred stock, net................ -- 1,629 5,627 Proceeds from issuance of common stock, net................... 15,764 -- -- -------- ------- ------- Net cash provided by financing activities................... 19,729 3,309 4,663 -------- ------- ------- Increase (decrease) in cash and cash equivalents................ 1,203 (383) 2,856 Cash and cash equivalents, beginning of period.................. 2,586 2,969 113 -------- ------- ------- Cash and cash equivalents, end of period........................ $ 3,789 $ 2,586 $ 2,969 ======== ======= ======= Supplemental Disclosures, of non cash investing and financing activities: Income taxes paid........................................... $ 64 $ 2 $ 2 ======== ======= ======= Interest paid, net of interest capitalized.................. $ 15 $ -- $ 622 ======== ======= ======= Acquisition of equipment with capital lease financing....... $ 906 $ 4,256 $ -- ======== ======= ======= Acquisition of MMT assets with long term debt............... $ 5,000 $ -- $ -- ======== ======= ======= Compensation expense for shares issued and options granted................................................... $ 120 $ 117 $ 169 ======== ======= ======= Conversion of notes payable to common stock................. $ -- $ -- $ 350 ======== ======= ======= Reclassification of machinery and equipment to inventory................................................. $ (475) $ -- $ -- ======== ======= ======= Conversion of redeemable prefered stock..................... $ 19,416 $ -- $ -- ======== ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 35 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (all dollar amounts in thousands, except per share data) -------------------- 1. Formation and Business of the Company ATG Inc. (the "Company" or "ATG") provides technical personnel and specialized services and products primarily to the U.S. government and the nuclear power industry throughout the United States. Services principally consist of compaction, reduction, decontamination, vitrification and disposal of low-level dry active nuclear and other hazardous waste, dewatering and thermal treatment of ion exchange resins and site remediation and construction projects. In May 1998, the Company completed an initial public offering of 1,900,000 shares of common stock and, in June 1998, sold an additional 285,000 shares of common stock at $8.50 per share. Total proceeds to the Company, net of underwriting discounts and other direct expenses, were approximately $15.7 million. 2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, ATG Richland Corporation ("ATG Richland") and ATG Nuclear Services LLC ("ATG Nuclear") and its majority owned subsidiary, ATG Catalytics LLC ("ATG Catalytics"). All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates include assessing the collectibility of accounts receivable, contracts in process and the recoverability of self- constructed assets and provisions for contingencies. Actual results could materially differ from the Company's estimates. Revenue Recognition Revenue includes fees for waste processing services and technology license fees. Revenue under cost plus fixed fee and fixed unit price contracts mainly relating to site remediation is recorded as costs are incurred or units are completed and includes estimated fees earned according to the terms of the contracts. Revenue from U.S. government contracts includes estimates of reimbursable overhead and general administrative expenses, which are subject to final determination by the U.S. federal government upon project completion. Revisions to costs and income resulting from contract settlements, which are due to differences between actual and budgeted performance, are recognized in the period in which the revisions are determined. Revenue from waste processing is generally recognized upon the substantial completion of the waste treatment process. Revenue from licensing or technology transfer agreements is recognized when received unless there are future commitments, in which case the revenues are recognized over the term of the agreement. Revenues of $1,975 were recognized pursuant to technology transfer agreements in 1997. Losses on contracts are charged to cost of revenue as soon as such losses become known. 36 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- Change orders are modifications of an original contract that effectively change the provisions of the contract. They may be initiated by either the Company or the customer. Claims for additional contract revenue resulting from change orders are recognized if it is probable that the claims will result in additional revenue and the amount can be reliably estimated. Change order work may be performed prior to approval of the change order by the customer. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost and are depreciated on the straight- line basis over the estimated useful lives of the assets, which range from three to forty years. Cost includes expenditures for major improvements and replacements and the net amount of interest costs related to qualifying construction projects. Expenditures for major renewals and betterments are capitalized and expenditures for maintenance and repair expenses are charged to expense as incurred. The Company's policy is to regularly review the carrying amount of specialized assets and to evaluate the remaining life and recoverability of such equipment in light of current market conditions. Risks and Uncertainties The Company operates its fixed facilities under regulations of, and permits issued by, various state and federal agencies. The Company, typically, is in the process of seeking new permits, renewals and/or expansion permits. There can be no assurance of the successful outcome of any permitting efforts. The permitting process is subject to regulatory approval, time delays, local opposition and potentially stricter governmental regulation. Substantial losses which would have a material adverse effect on the Company's consolidated financial position, could be incurred by the Company in the event a permit is not granted, if facility construction programs are delayed or changed, or if projects are otherwise abandonded. The Company reviews the status of permitting projects on a periodic basis to assess realizability of related asset values. As of December 31, 1998, management believes that assets which could currently be affected by permitting efforts are recoverable at their recorded values. The market for the Company's services is substantially dependent on state and federal legislation and regulations. The availability of new contracts depends significantly on government authorities. In order to build or retain its market share the Company must continue to successfully compete for new government and private sector contracts. Income Taxes The Company accounts for income taxes under the liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the 37 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Concentration of Credit Risk The majority of the Company's cash, cash equivalents and short-term investments are held with major banks in the United States. The Company's customers consist mainly of agencies of the U.S. government and large U.S. companies. The Company performs ongoing credit evaluation of its customers' financial condition. As of December 31, 1998, agencies of the U.S. government represented 51% of accounts receivable and 55% of total revenue for the year then ended. As of December 31, 1997, agencies of the U.S. government represented 47% of accounts receivable and 71% of total revenue for the year then ended. As of December 31, 1996, agencies of the U.S. government represented 70% of accounts receivable and 77% of total revenue for the year then ended. The Company generally does not require collateral. Computation of Net Income Per Share Basic income per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted income per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of the incremental common shares issuable upon the conversion of convertible preferred stock (using the "if converted" method) and exercise of stock options for all periods. Reclassifications Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the current year's presentation. 3. Acquisition of MMT Assets Effective December 1, 1998, the Company, through its wholly-owned subsidiary, ATG Nuclear, and through its 90% owned subsidiary, ATG Catalytics, acquired certain assets and business lines from the trustee ("Seller") for debtors of Molten Metal Technologies, Inc. or its affiliates, under Chapter 11 of the United States Bankruptcy Code (the "MMT Assets"). The assets acquired by ATG Nuclear include substantially all of the assets, contracts, licenses and permits associated with the Seller's wet waste business based in Oak Ridge, Tennessee, and a facility in Columbia, South Carolina. The assets acquired by ATG Catalytics include substantially all of the assets, contracts, licenses and permits associated with the Seller's catalytic extraction processing business conducted substantially in Oak Ridge, Tennessee. 38 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- The total purchase price of the MMT assets and business lines acquired was approximately $15.7 million. The purchase price was allocated as follows: property and equipment - $15.4 million; accounts receivable - $2.8 million; restricted cash and other assets - $2.7 million; accrued liabilities - $5.2 million. The Company paid $10.5 million in cash at closing, agreed to pay $1.0 million in cash one year from closing and agreed to make future payments of 5% of the earnings before interest, taxes, depreciation and amortization of ATG Catalytics, but not less than $800 annually for five years (minimum total of $4.0 million). The transaction has been accounted for as a purchase and accordingly, results of operations include the operations of the new businesses since the date of acquisition. The purchase price has been allocated to the assets acquired and will be amortized over the lives of those assets. There was no goodwill recorded in the transaction. The Company has prepared unaudited pro forma combined financial information for the year ended December 31, 1997 and the nine months ended September 30, 1998 reflecting the combined results of operations as if the transaction had been consumated at the beginning of the respective periods. The unaudited pro forma combined data for the year ended December 31, 1997 included revenue of $40.3 million, net loss of $12.2 million, and net loss per share of $1.62; and for the nine months ended September 30, 1998 included revenue of $39.0 million, net income of $290,000, and fully diluted net income per share of $0.02. The unaudited pro forma combined financial information does not purport to be indicative of the results of operations which would have actually been obtained if the acquisition had been consummated on the dates indicated or which may be achieved in the future. 4. Accounts Receivable
December 31, ------------------------------ 1998 1997 --------------- ------------- U.S. Government: Amounts billed........................................... $ 8,483 $3,142 Amounts unbilled......................................... 3,037 845 ------- ------ Total U.S. Government............................... 11,520 3,987 ------- ------ Commercial customers: Amounts billed........................................... 9,008 2,067 Amounts unbilled......................................... 2,338 -- ------- ------ Total commercial.................................... 11,346 2,067 ------- ------ Total accounts receivable................................ 22,866 6,054 Less: allowances for doubtful accounts........................ (305) (119) ------- ------ $22,561 $5,935 ======= ======
Recoverable costs and accrued profit on progress completed but not billed on U.S. government contracts is based on estimates of reimbursable overhead and general and administrative expenses calculated in accordance with contractually determined methods of calculation. These amounts are subject to final determination by the U.S. federal government after the contracts have been completed. As such, the actual recoverable amounts on these contracts may differ from these estimates. The U.S. federal government has reviewed and approved reimbursable expenses for contracts in progress through 1995. 5. Restricted Investments The Company owns several certificates of deposit, Treasury bills and bonds, which are collateral for performance bonds. The certificates of deposit, which are included in intangible and other assets, have an aggregate value of $223 at December 31, 1998 and $210 at December 31, 1997, respectively, bear interest at 5.1% per annum, and have an original maturity of twelve months. The Treasury bills, which are included in intangible and other assets, have an aggregate value of $254 at December 31, 1998 and 1997, bear interest at 5.8% and have an original maturity 39(1) ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- of twelve months. The bonds, which are included in prepayments and other current assets, have an aggregate value of $477 and $959 at December 31, 1998 and December 31, 1997, respectively, and have an original maturity of between one and five years. 6. Property and Equipment
December 31, ------------------------------ 1998 1997 -------------- -------------- Land.................................................................. $ 2,310 $ 761 Buildings and improvements............................................ 21,205 2,848 Machinery and equipment............................................... 14,876 5,183 Office furniture and equipment........................................ 1,470 1,427 ------- ------- Property and equipment at cost........................................ 39,861 10,219 Less: accumulated depreciation and amortization....................... (3,072) (2,840) ------- ------- 36,789 7,379 Construction-in-progress............................................... 6,199 14,725 ------- ------- $42,988 $22,104 ======= =======
Property and equipment costs include capitalized labor and overhead, including interest costs related to the construction of buildings, building improvements and equipment. Capitalized interest costs totaled $1,027, $891 and $446 in 1998, 1997 and 1996, respectively. All property and equipment serve as collateral to notes payable agreements to banks and other creditors. As of December 31, 1998 and 1997, machinery and equipment included assets acquired under capital leases with a capitalized cost of $6,876 and $7,256, respectively. Related accumulated amortization totaled $333 and $498 in 1998 and 1997, respectively. 7. Accrued Liabilities Accrued liabilities at December 31, 1998 and 1997 consisted of:
December 31, ------------------------------ 1998 1997 -------------- -------------- Income taxes payable.................................................. $ 2,647 $ - Legacy waste.......................................................... 2,788 - Other................................................................. 3,787 944 ------- ------- $ 9,222 $ 944 ======= =======
The legacy waste accrual arose out of the purchase of the assets and businesses described in Note 3--Acquisition of Tennessee Assets. 8. Payable to Related Parties The Company had a payable to its Chairman and Chief Executive Officer of $1,280 at December 31, 1997. The amount was repaid in 1998. 40 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- The Company has a payable to a former Director of $225 at December 31, 1998 and 1997. The amount is repayable on July 1, 2000 and is non-interest bearing. The amount is included in long term debt. 9. Short-Term Borrowings Under a line of credit facility with a bank, the Company may borrow up to $9,500. Borrowings under this credit agreement were $6,750 at December 31, 1998, bear interest equal to the bank's reference rate (7.75% at December 31, 1998) and are collateralized by accounts receivable, inventory and equipment. Borrowings under the credit agreement were $3,996 as of December 31, 1997, and bore interest at prime plus 0.50% (9.0% at December 31, 1997). The facility agreement expires June 30,1999. The credit agreement requires the Company to comply with certain covenants including capital asset acquisition limits, limits on additional debt, minimum levels of tangible net worth, dividend payment restrictions and maintenance of certain financial ratios. At December 31, 1998 and at various dates throughout the year the Company was in violation of certain covenants. The Company has obtained waivers in respect of these violations as of December 31, 1998. 10. Long Term Debt Long term debt consists of mortgage debt, notes payable and equipment notes payable. The mortgage debt bears interest at 9.5%, matures in 2001, and is collateralized by certain of the Company's buildings. The notes payable bear interest at annual rates between 8% and 10%, mature between 1999 and 2005, and are collateralized by certain of the Company's equipment. Equipment notes bear interest at annual rates between 0.9% and 9.6%, mature between 1999 and 2002, and are collateralized by specific equipment. Future minimum principal payments are as follows as of December 31, 1998:
Mortgage Notes Equipment Total Long Debt Payable Notes Term Debt ------------ ------------ ------------ ------------- 1999................................................ $ 159 $ 3,374 $ 26 $ 3,559 2000................................................ 128 2,186 19 2,333 2001................................................ 1,341 2,162 3 3,506 2002................................................ -- 826 2 828 2003................................................ -- 828 -- 828 Thereafter.......................................... -- 77 -- 77 ------ ------ ------ ------- 1,628 9,453 50 11,131 Less: current portion............................... 159 3,374 26 3,559 ------ ------ ------ ------- $1,469 $6,079 $ 24 $ 7,572 ====== ====== ====== =======
41 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- 11. Capital Lease Obligations As of December 31, 1998, future minimum lease payments under non-cancelable capital leases are as follows: 1999......................................................................................... $1,623 2000......................................................................................... 1,540 2001......................................................................................... 1,203 2002......................................................................................... 998 2003......................................................................................... 619 ------ Total minimum lease payments................................................................. 5,983 Less amount representing interest............................................................ 1,135 ------ Present value of future minimum lease payments............................................... 4,848 Less: current portion........................................................................ 1,174 ------ Total capital lease obligations, net of current portion...................................... $3,674 ======
12. Commitments and Contingencies In March 1998, two civil suits were filed against the Company and a Company subcontractor, among other persons, in connection with a contract under which the Company acted as prime contractor and the subcontractor acted as subcontractor to "surface clear" expended ordnance from a U.S. Army firing range at Fort Irwin, California. The suits arise out of an explosion which occurred in March 1997 on the premises of a scrap metal dealer which had in the past purchased military scrap metal from a number of military facilities, including Fort Irwin. One employee of the scrap metal dealer died in the accident, and three other persons have alleged physical injuries and emotional distress arising from this incident. One of the suits alleges wrongful death, seeking general damages of $3,000, special damages of $110, and exemplary damages of $5,000. In the other suit, the three persons alleging physical injuries and emotional distress are seeking general damages in the aggregate amount of $800, while reserving the right to seek punitive damages in the aggregate amount of $1,500. The Company has tendered the claims to its insurance carrier, and the insurance carrier has accepted defense of these claims. In addition, the Company intends to seek indemnification from its subcontractor for the full amount of costs, damages, and liabilities, if any, incurred by the Company as a results of these suits. The aforementioned claims are in various stages of discovery. Management believes that all claims asserted against the Company in each of the suits are without legal merit. If the Company were to be found liable in the aforementioned suits and the amount awarded exceeded available insurance limits and amounts recoverable from its subcontractors, it could have a material adverse effect on the Company's financial condition and results of operations. From time to time the Company is a party to litigation or administrative proceedings relating to claims arising from its operations in the normal course of business. Management of the Company, on the advice of counsel, believes that the ultimate resolution of litigation currently pending against the Company is unlikely, either individually or in the aggregate, to have a material adverse effect on the Company's business, financial condition or results of operations. 42 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- 13. Stock Based Compensation Plans 1994 Stock Option Plan ("1994 Plan") A total of 909,878 shares of common stock have been reserved for issuance under the 1994 Plan. Options granted under the 1994 Plan generally expire ten years from the date of grant. During 1998, the Company adopted new stock plans (see below); accordingly, the Company does not plan to issue further options to purchase common stock under the 1994 Plan. 1998 Stock Ownership Incentive Plan ("Incentive Plan") A total of 500,000 shares of common stock have been reserved for issuance under the Incentive Plan. The Board of Directors may grant incentive stock options or non-statutory stock options to employees at 100% of the fair market value of the stock on the date of grant. Vesting terms are to be determined by the Board of Directors (typically three years) and options generally expire ten years from the date of grant. 1998 Non-Employee Directors' Stock Option Plan ("Directors' Plan") A total of 200,000 shares of common stock has been reserved for issuance under the Directors' Plan. The Directors' Plan provides for an automatic grant of options to purchase 20,000 shares of common stock upon the date such person becomes a non-employee director. Twenty-five percent of the shares subject to the option are immediately vested and twenty-five percent vest each year thereafter. The exercise price of the options granted under the Directors' Plan must equal or exceed the fair market value of the Common Stock on the date of grant. All grants expire ten years from the date of grant. 1998 Consultants and Advisors Stock Option Plan ("Consultants Plan") A total of 200,000 shares of common stock has been reserved for issuance under the Consultants Plan. The Consultants Plan is administered by the Board of Directors who may grant options to purchase common stock to consultants and advisors to the Company at prices and upon terms as determined by the Board. 43 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- The following option activity occurred in all stock option plans in the three years ended December 31, 1998:
Weighted Options Average Available Outstanding Exercise Exercise for Grant Options Price Price ----------------- --------------- ----------- ----------- Balance, January 1, 1996....................... 630,000 440,000 $0.01-$7.50 $2.08 Granted.................................... (76,000) 76,000 $ 0.10 $0.10 -------- --------- Balance, December 31, 1996..................... 554,000 516,000 $0.01-$7.50 $1.79 Granted.................................... (554,000) 554,000 $1.00-$5.00 $2.10 -------- --------- Balance, December 31, 1997..................... - 1,070,000 $0.01-$7.50 $1.95 Authorized................................. 900,000 - Granted.................................... (607,500) 607,500 $5.00-$8.56 $6.55 Exercised.................................. - (147,122) $0.01-$1.00 $0.23 Terminated................................. - (13,000) $0.01-$5.00 $0.62 Cancelled.................................. 143,500 (143,500) $8.50-$8.56 $8.54 -------- --------- Balance, December 31, 1998 436,000 1,373,878 $0.01-$8.50 $3.49 ======== =========
As of December 31, 1998, options to purchase 419,457 shares of Common Stock at $0.01 to $8.50 per share were fully vested and exercisable under the Plans. During August 1998, the Company cancelled options granted to employees to acquire 125,500 shares of Common Stock with prices ranging from $8.50 to $8.56 and issued new options to acquire the same number of shares at a price of $6.375. In connection with the grant of options for the purchase of 554,000 shares of Common Stock to employees during the period from January 1, 1997 through December 31, 1997, the Company recorded aggregate deferred compensation expense of approximately $389 representing the difference between the deemed fair value of the Common Stock and the option exercise price at date of grant. Such deferred compensation will be amortized over the vesting period relating to these options, of which $120 and $117 has been amortized during the years ended December 31, 1998 and 1997, respectively, and is included in the statement of operations within the caption "Stock-based compensation expense". 44 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- Stock Compensation Effective January 1, 1996 the Company has adopted the disclosure-only provision of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). The Company, however, applies APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock-based compensation. Determination of compensation cost for stock-based compensation based on the fair value at the grant date for awards consistent with provisions of SFAS No. 123 would not result in a significant difference from the reported net income for the periods presented.
December 31, --------------------------------------------------------- 1998 1997 1996 ---------------- ------------------ ------------------- Net income............................................. $5,149 $ 1,018 $ 508 Accretion on mandatorily redeemable preferred stock.... --- (1,469) (1,288) ------ ------- ------- Net income (loss) available to common shareholders..... 5,149 (451) (780) Net income (loss) FAS 123 adjusted..................... 4,917 (593) (780) Earnings per share as reported: Basic................................................ 0.40 (0.06) (0.10) Diluted.............................................. 0.38 (0.06) (0.10) Earnings per share-FAS 123 adjusted: Basic................................................ 0.38 (0.08) (0.10) Diluted.............................................. 0.36 (0.08) (0.10)
The fair value of each option grant under the Plans is estimated on the date of the grant using the Black-Scholes option-pricing model with weighted average risk free interest rates of 4.89%, 6.47%, and 6.16% at December 31, 1998, 1997 and 1996, respectively, and an expected life of 5 years, no dividends and 0% volatility in 1997 and 1996 and an expected life of 2.6 years, no dividends and 67.4 % volatility in 1998. The weighted average fair value at date of grant of the options granted during the years ended December 31, 1998 and 1997 was $3.17 and $2.80, respectively. The following table summarizes the stock options outstanding at December 31, 1998:
Options Outstanding Options Exercisable --------------------------- --------------------------------------- Weighted Weighted Average Average Weighted Weighted Fair Range of Remaining Average Average Value at Exercise Number Contractual Exercise Number Exercise Date of Prices Outstanding Life Price Exercisable Price Grant - --------- ------------- ------------ ------------ -------------- ---------- --------- $0.01 55,000 4.5 $0.01 45,000 $0.01 $0.01 $0.10 205,500 6.9 $0.10 136,355 $0.10 $0.10 $1.00 369,878 8.0 $1.00 41,644 $1.00 $2.00 $5.00-$6.50 581,500 9.3 $5.37 161,458 $5.11 $5.37 $6.75-$8.50 162,000 7.4 $7.86 35,000 $7.93 $7.86
45 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- Employee Stock Purchase Plan ("Purchase Plan") A total of 200,000 shares of common stock are reserved for issuance under the Purchase Plan. The Purchase Plan enables eligible employees to purchase common stock at the lower of 85% of the fair market value of the Company's common stock on the first or last day of each six-month offering period. The first offering period ended on October 31, 1998, whereupon 3,691 shares were purchased under the plan. The next offering period ends April 30, 1999. 14. Mandatorily Redeemable Preferred Stock ATG issued 900,000 shares of Series A Preferred Stock in 1994 at $5.00 per share. ATG Richland issued 860,000 shares of Series A Preferred Stock in 1995 at $5.00 per share and 990,355 and 278,936 shares of Series B Preferred Stock in 1996 and 1997, respectively, at $6.00 per share. All outstanding shares of the mandatorily redeemable preferred stock were automatically converted into 3,983,595 shares of common stock on the effective date of the Company's initial public offering. 15. Common Stock Warrants Warrants to purchase 190,000 shares of Common Stock were granted upon the completion of the Company's initial public stock offering. These warrants become exercisable in May 1999 and expire in May 2003. The warrant exercise price is $10.20 per share. 16. Income Taxes The components of income tax expense (benefit) are approximately as follows:
December 31, ---------------------------------------------------- 1998 1997 1996 ------------ ----------- ------------ Current Federal................................................... $2,439 $(383) $ __ State..................................................... 406 158 2 Deferred: Federal................................................... 304 214 __ State..................................................... 7 (34) __ -------------- ------------ ----------- Total................................................... $3,156 $ (45) $ 2 ============== ============ ===========
46 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- The Company's effective tax rate differs from the U.S. federal statutory tax rate, as follows:
December 31, ---------------------------------------------------- 1998 1997 1996 ---- ---- ---- Income tax provision at statutory rate......................... 34.0% 34.0% 34.0% State taxes, net of federal tax effect......................... 3.3 1.6 0.1 Non-deductible items........................................... 0.4 3.2 0.5 Net operating loss benefit..................................... __ (48.3) (29.5) Other.......................................................... 0.3 4.9 (4.8) ------- ------- ------- Effective tax rate............................................. 38.0% (4.6)% 0.3% ======= ======= =======
Components of the deferred income tax balance are as follows:
December 31, ---------------------------------------------------- 1998 1997 1996 ---- ---- ---- Deferred tax assets Net operating loss carryforwards.............................. $ __ $ 308 $ 569 Accrued expenses.............................................. 183 245 34 Tax credits................................................... __ 120 100 Other......................................................... __ 24 17 ------- ------- ------- Deferred tax assets........................................ $ 183 $ 697 $ 720 ======= ======= ======= Deferred tax liabilities Depreciation and amortization.............................. $ 473 $ 467 $ 310 ======= ======= ======= Valuation allowance............................................ __ __ (410) ------- ------- ------- Net deferred tax asset (liability)............................. $ (290) $ 230 $ __ ======= ======= =======
47 ATG INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (all dollar amounts in thousands, except per share data) -------------------- 17. Earnings per Share (EPS) In accordance with the disclosure requirements of SFAS 128, a reconciliation of the numerator and denominator of basic and diluted EPS is provided as follows:
For the Years Ended December 31, ------------------------------------------------ 1998 1997 1996 ----------- ------------ ------------ Numerator - Basic and Diluted EPS Net income........................................... $ 5,149 $ 1,018 $ 508 Accretion on mandatorily redeemable preferred stock...................................... __ (1,469) (1,288) ------------- ------------- ------------- Net income (loss) available to common shareholders.................................. $ 5,149 $ (451) $ (780) ============= ============= ============= Denominator - Basic EPS Common shares outstanding............................ 12,975 7,532 7,532 ------------- ------------- ------------- Basic earnings (loss) per share........................... $ 0.40 $ (0.06) $ (0.10) ============= ============= ============= Denominator - Diluted EPS Denominator - Basic EPS................................... 12,975 7,532 7,532 Effect of Dilutive Securities Common stock options................................. 723 __ __ ------------- ------------- ------------- 13,698 7,532 7,532 ------------- ------------- ------------- Diluted earnings (loss) per share......................... $ 0.38 $ (0.06) $ (0.10) ============= ============= =============
Options and warrants to purchase 352,000 shares of Common Stock at exercise prices in excess of the average market price of the Company's Common Stock were excluded from the computation of diluted earnings per share as their effect would be anti-dilutive. 18. Employee Retirement Plan The Company maintains a Qualified Retirement Plan (401(k) Plan) which covers substantially all employees. Eligible employees may contribute up to 15% of their annual compensation, as defined, to this plan. The Company may also make a discretionary contribution. To date the Company has not made contributions to the 401(k) Plan. 19. Business Segments Effective December 31, 1998, the Company adopted SFAS No. 131, " Disclosures about Segments of an Enterprise and Related Information." Statement 131 requires enterprises to report information about operating segments in annual financial statements and selected information about reportable segments in interim financial reports issued to shareholders. ATG manages its operations within two business segments: waste processing, conducted by its Fixed Facilities Group (FFG); and field services, conducted by its Field Engineering Group (FEG). FFG processes customer waste utilizing the Company's thermal and non-thermal technologies. FEG performs remediation, construction or various engineering services for customers under long-term contracts. Prior to 1998, the Company evaluated its operations as one business unit. Thermal processing of large volumes of waste began in 1998 and the Company commenced evaluating its business as two business segments in the fourth quarter of the year. The Company segregates revenue and gross profit by business segment. Selling, general and administrative expenses are not allocated to the business segments. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies. Information about business segments in 1998: FFG FEG OTHER TOTAL ------- ------ ----- ------- Revenue $ 18,889 $ 17,011 - $ 35,900 Gross profit 11,082 5,002 - 16,084 Sales, General and Administrative expenses 7,832 Stock-based compensation 120 Interest income, net 173 Provision for income taxes 3,156 ------- Net income $ 5,149 ======= Segment assets 42,030 650 3,380 $ 46,060 ======= Expenditures for long - lived assets 21,490 40 120 $ 21,650 ======= Substantially all of the segment revenues in 1998 were from customers in North America, denominated in U.S.dollars. 48 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following documents are filed as part of this report: 1. Financial Statements. The following Consolidated Financial Statements of ATG Inc. and Report of Independent Accountants are filed as part of this report:
Page ---- Report of Independent Accountants....................................................... 31 Consolidated Balance Sheets--As of December 31, 1997 and 1998........................... 32 Consolidated Statements of Operations--For the Three Years Ended December 31, 1998........................................................................ 33 Consolidated Statements of Shareholders' Equity--For the Three Years Ended December 31, 1998...................................................................... 34 Consolidated Statements of Cash Flows--For the Three Years Ended December 31, 1998........................................................................ 35 Notes to Consolidated Financial Statements............................................... 36-48 2. Financial Statement Schedules. For years ended December 31, 1998, 1997 and 1996: Schedule II. Valuation and Qualifying Accounts.......................................... 50
All other schedules are omitted because they are not applicable or the required information has been included in the consolidated financial statements or notes thereto. 3. Exhibits 2.1 Final bankruptcy court bid dated November 13, 1998** 2.2 Form of letter agreement dated December 1, 1998 among the purchasers and the Trustee** 3.1 Articles of Incorporation of the Company* 3.2 Bylaws of the Company* 3.3 Certificate of Amendment of Articles of Incorporation* 4.1 Specimen Common Stock Certificate* 9.1 Voting Trust Agreement* 10.1 Assumption Agreement, dated September 2, 1992, between the Company, as transferee, Tippett-Richardson, as transferor, and Confederation Life Insurance Company, as lender* 10.2 Deed of Trust (Non-Construction) & Assignment of Rents, dated September 18, 1997, between the Company, as trustor, First Bancorp, as trustee, and Sanwa Bank California, as beneficiary* 10.3 Deed of Trust, dated August 5, 1993, between the Company and ATG Richland, collectively as trustor, Chicago Title Insurance Company, as trustee, and West One Bank, as beneficiary* 10.4 Term Loan Agreement, dated September 18, 1997, between the Company and Sanwa Bank California* 10.5 Letter from the Company to Steve Guerrettaz, dated December 2, 1997, regarding terms of employment* 10.6 Letter from the Company to Fred Feizollahi, dated February 20, 1995, regarding terms of employment* 10.7 Consultant Agreement, dated as of July 1, 1992, between the Company and Edward Vinecour* 10.8 Non-Competition Agreement, dated as of July 1, 1992, between the Company and Edward Vinecour* 10.9 Collective Bargaining Agreement between the Company and the International Union of Operating Engineers No. 280* 10.10 Form of Stock Purchase Agreement* 10.11 Continuing Guaranty, dated as of April 19, 1996, provided by Doreen Chiu in favor of Sanwa Bank* 10.12 Continuing Guaranty, dated as of April 19, 1996, provided by Frank Chiu in favor of Sanwa Bank* 10.13 Continuing Guaranty, dated as of May 20, 1997, provided by Doreen Chiu in favor of Safeco Credit Company, Inc.* 10.14 Continuing Guaranty, dated as of May 20, 1997, provided by Frank Chiu in favor of Safeco Credit Company, Inc.* 10.15 Small Business Administration (SBA) Guaranty, dated August 6, 1993, provided by Doreen Chiu and Frank Chiu in favor of West One Bank* 10.16 Guaranty Agreement, dated September 1, 1994, provided by Doreen Chiu and Frank Chiu in favor of Great Western Leasing* 10.17 Guaranty, dated January 13, 1994, provided by Doreen Chiu and Frank Chiu in favor of The CIT Group/Equipment Financing Inc.* 10.18 Guaranty of Commercial Lease Agreement, dated December 20, 1994, provided by Doreen Chiu and Frank Chiu in favor of California Thrift & Loan* 10.19 Contract No. MGK-SBB-A26602, dated September 5, 1997, awarded to the Company by Waste Management Federal Services of Hanford, Inc.* 10.20 Purchase Order No. MW6-SBV-357079, dated November 3, 1995, issued to the Company by Westinghouse Hanford Company* 10.21 Contract No. DE-AC06-95RL13129, dated January 4, 1995, among the U.S. Department of Energy, as the procuring agency, the U.S. Small Business Administration, as contractor, and the Company, as subcontractor* 10.22 Gasification Vitrification Chamber Purchase and License Agreement, dated August 1997, between the Company and Integrated Environmental Technologies, LLC* 10.23 Purchase Agreement between the Company and Integrated Environmental Technologies, LLC* 10.24 Technology Transfer Purchase and Royalty Fee Agreement, dated September 30, 1997, between the Company and Regent Star Ltd.* 10.25 Technology Transfer and Purchase Agreement, dated June 28, 1997, between the Company and Pacific Trading Company* 10.26 Contract No. DACW05-98-C-0001, dated September 24, 1997, awarded to the Company by the U.S. Army Corps of Engineers, Sacremento District* 10.27 Contract No. DAKF04-92-D-0007, dated February 8, 1991, among the Fort Irwin Directorate of Contracting, as the procuring agency, the U.S. Small Business Administration, as contractor, and the Company, as subcontractor* 10.28 Promissory Note, dated December 31, 1997, provided by the Company to Doreen M. Chiu* 10.29 1998 Stock Ownership Incentive Plan* 10.30 Employee Stock Purchase Plan* 10.31 1998 Non-Employee Directors Stock Option Plan* 10.32 Letter of Credit Agreement, dated March 6, 1998, between the Company and Sanwa Bank California* 10.33 Continuing Guaranty, dated as of March 6, 1998, provided by Doreen M. Chiu in favor of Sanwa Bank California* 10.34 Continuing Guaranty, dated as of March 6, 1998, provided by Frank Y. Chiu in favor of Sanwa Bank California* 10.35 Indemnity Agreement, dated August 12, 1992, made and entered into by Doreen M. Chiu, Frank Y. Chiu, the Company and National Safety Consultants, Inc. in favor of ACTSTAR Insurance Company* 10.36 Continuing Agreement of Idemnity--Contractors' Form, dated March 19, 1998, made and entered into by Doreen M. Chiu, Frank Y. Chiu and the Company for the benefit of Reliance Insurance Company, United Pacific Insurance Company, Reliance National Indemnity Company and Reliance Surety Company* 10.37 Purchase Order, dated February 10, 1996, issued by the Company to ToxGon Corporation* 10.38 Amendments to Letter of Credit Agreement*** 10.39 Line of Credit Agreement*** 10.40 Amendment to Line of Credit Agreement**** 10.41 Term Loan Agreement Sanwa Bank California**** 10.42 ATG Catalytics L.L.C. Operating Agreement**** 21.1 List of Subsidiaries of Registrant**** 23.1 Consent of PricewaterhouseCoopers LLP 27.1 Financial Data Schedule**** - ----------------------- (*) Incorporated by reference to exhibits filed with the Registrant's Registration Statement on Form S-1 (No. 333-46107) which became effective May 6, 1998. (**) Incorporated by reference to exhibits filed with the Registrant's Form 8-K dated December 1, 1998 (***) Incorporated by reference to exhibits filed with the Registrant's Form 10-Q for the quarter ended June 30, 1998. (****) Incorporated by reference to exhibits filed with the Registrant's Form 10-K for the year ended December 31, 1998. 49 (b) Reports on Form 8-K A report on Form 8-K, dated December 1, 1998, was filed during the last quarter of 1998, covering the acquisition of certain assets and business lines from the trustee for debtors in bankruptcy. The assets and business lines were formerly owned by Molten Metal Technologies, Inc. A report on Form 8-K/A, Amendment No. 1, was subsequently filed on August 4, 1999, providing pro forma financial information and certain audited financial statements of the business acquired. REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Shareholders of ATG Inc., and its Subsidiaries: In connection with our audits of the consolidated financial statements of ATG Inc. and its subsidiaries as of December 31, 1998 and 1997, and for each of the three years in the period ended December 31, 1998, which financial statements are included in this Form 10-K, we have also audited the financial statement schedule listed in Item 14(a) herein. In our opinion, this financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. PRICEWATERHOUSECOOPERS LLP San Jose, California February 26, 1999 Schedule II ATG INC. VALUATION AND QUALIFYING ACCOUNTS --------------------------------- (in thousands)
Additions Balance at Charged to Balance Beginning of Costs and at End of Description Period Expenses Deductions(1) Period ----------- ------------ ----------- ------------- ---------- Year ended December 31,1996............. Allowance for doubtful accounts $ 40 $ 6 $ -- $ 46 Year ended December 31, 1997............ Allowance for doubtful accounts $ 46 $ 73 $ -- $119 Year ended December 31, 1998............ Allowance for doubtful accounts $119 $210 $ (24) $305
- ---------------------- (1) Deductions represent accounts receivable amounts that were considered doubtful and previously reserved for that became uncollectible and were written off in the year. 50 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ATG INC. By: /s/ Doreen M. Chiu ------------------ Doreen M. Chiu Chairman of the Board President and CEO Date: September 15, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Chairman, President and Chief September 15, 1999 /s/ Doreen M. Chiu Executive Officer - ---------------------------------------- Doreen M. Chiu Executive Vice-President September 15, 1999 /s/ Frank Y. Chiu Director - ---------------------------------------- Frank Y. Chiu President-Waste Mgmt. Services September 15, 1999 /s/ William M. Hewitt Director - ---------------------------------------- William M. Hewitt Chief Financial Officer September 15, 1999 /s/ Steven J. Guerrettaz Director (Principal Financial and - ---------------------------------------- Chief Accounting Officer) Steven J. Guerrettaz Director September 15, 1999 /s/ Earl E. Gjelde - ---------------------------------------- Earl E. Gjelde Director September 15, 1999 /s/ Andrew C. Kadak - ---------------------------------------- Andrew C. Kadak Director September 15, 1999 /s/ George Doubleday II - ---------------------------------------- George Doubleday II
51(1) EX-23.1 2 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of ATG Inc. on Form S-8 (file No. 333-72349 and File No. 333-62963) of our reports dated February 26, 1999, on our audits of the consolidated financial statements of ATG Inc. and subsidiaries as of December 31, 1998 and 1997, and for each of the three years in the period ended December 31, 1998 on our audit of the consolidated financial statement schedule, both of which reports are included in this Annual Report on Form 10-K/A. /s/ PricewaterhouseCoopers LLP San Jose, California September 10, 1999 -----END PRIVACY-ENHANCED MESSAGE-----