United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ___________
Commission file number : 0-29509
Environmental Oil Processing Technology Corporation
(Exact name of business issuer in its charter)
Utah 82-0520055
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2801 Brandt Avenue, Nampa, Idaho 83687
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (208)-463-0063 Fax: (208) 463-7601
- --------------------------------------------------------------------------------
(Former Address)
The number of shares of common stock outstanding as of March 31, 2001, is
73,520,116.
Transitional Small Business Disclosure Format. Yes ___, No _X_ .
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements are filed as part of this report:
The Consolidated Financial Statements of the Company for the three months
ended March 31, 2001, reviewed by HJ & Associates, certified public accountants.
Item 2. Management's Discussion and Plan of Operation:
Results of Operations:
During the first quarter of 2001 the Company focused its activities on
developing its co-generation of electricity operations through its Reno Project
which will be operated by its wholly owned subsidiary EOPT Power Group - Nevada,
Inc. The Company has acquired a 20 acre industrial site with plans to construct
two refining plants and three 10 megawatt electrical generators. The generators
have been ordered and are scheduled for delivery by the end of June, 2001, with
production scheduled to begin in August of this year. Fabrication of the
refining plants is tentatively scheduled for completion in the first part of
2002. Fuel for operating the generators will be obtained from the open market,
trucking from the Nampa refining plant, and eventually also from the refineries
on the Reno Project site. The Company is contracting with an electrical public
utility for the purchase of the electrical output through December 31, 2002. The
company's subsidiary PDI is engineering the project.
The company continues to make improvements on its pilot refining plant in Nampa.
Although the plant production meets specifications for diesel, naphtha and
residuum for asphalt, it is not yet fully operational due primarily to ongoing
refinements.
PDI has obtained several engineering contracts and continues to generate the
majority of its revenues from providing services to oil and gas companies. The
strength of the oil and gas exploration industry is expected to continue to
provide revenue growth for PDI in the forseeable future.
Operations in the first quarter of 2001 resulted in consolidated revenues of
$808,895 compared to $1,469,448 in the first quarter of 2000. The first quarter
revenues were generated $610,859 by PDI and $198,036 by EOPT. Consolidated
revenues declined by $660,553 from the first quarter of 2000. PDI also recorded
$495,708 in revenues for services provided to EOPT (which are discounted by 10%
on inter company services). These inter company revenues were eliminated in the
consolidation, however, had these services been provided to unrelated third
parties revenues would have declined by only $115,274.
The Company's largest expense is payroll. For the three months ended March 31,
2001 the Company had compensation expense of $10,077,877 compared to $934,068
for the quarter ended March 31, 2000. Included in compensation expense is
$9,372,000 which is the value of the 1,500,000 shares of common stock issued for
services. 6,564,999 shares were originally issued to a consultant for services
to be rendered to the Company. When management determined that the consultant
was not going to provide the promised services the Company canceled 5,364,999
shares by agreement with the consultant. The balance of the shares were left
with the consultant for services rendered to that
2
point. Without the value of the shares issued to the consultant, compensation
expense for the first quarter of 2001 would have decreased by $228,191 compared
to the same quarter of 2000. The decrease is due to the completion of the
development of the Nampa, Idaho facility. .
Liquidity and Capital Resources
The Company has entered into a funding agreement with a trust fund to borrow
$10,500,000 for the construction of its Reno, Nevada facility. These funds are
believed by management to be adequate to complete the construction of the
facility without requiring the Company to use its own funds. The Company will
pay approximately $500,000 to PDI for the engineering services it will provide.
PDI expects to use these funds to pay off its bank lines of credit. The balance
of the funds will go to third party suppliers including the seller of the real
property for the plant site. The first traunch of the funding was $5,500,000.
The Company received net proceeds of $1,629,278 in the first quarter of 2001 and
the balance of the traunch was received in the second quarter of 2001. The terms
of the contract allows the funding source to determine if it will provide the
additional $5,000,000 by August of 2001 based upon the Company meeting certain
completion and performance criteria. Through March 31, 2001 the Company had
incurred $1,151,468 for the cost of the Reno project.
The terms of the funding require the Company to repay the full amount borrowed
in 1 year from the date received. The Company believes that revenues from the
energy contract will be sufficient to provide for timely repayment of the debt.
However, if there are delays in the plant going on line or if projected revenues
are not received timely or in the amounts expected, the Company mayl have to
seek other financing to repay the obligation.
The Company issued 1,500,000 shares of its common stock for services to
consultants. The shares were valued at the trading price of the shares on the
date of issue. The total value of the shares issued for the consulting services
was $9,477,000.
The Company used cash of $221,144 for its operations in the quarter ended March
31, 2001 compared to $407,659 for the corresponding period in the prior year. At
the present rate of cash consumption the Company only has funds for one
additional quarter of operations. It is management's intent to raise additional
capital, if necessary, through debt and/or equity financing. There is no
assurance that such funds will be available or that the terms for such funds
will be acceptable to the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
3
Item 5. Other Information. None
Item 6. Exhibits and Reports on form 8-K.
(a) No exhibits
(b) 8K Reports were filed as follows:
On January 31, 2001, Form 8K dated January 17, 2001 was filed on
Edgar, and reported
i) The alliance agreement with Emerson Performance
Solutions/PC & E, Inc. effective October 27, 2000.
ii) The agreement for EVOP to refine One Million gallons
of used lubricating oil per year from Ramos
Environmental Services of Sacramento, California,
effective January 17, 2001..
iii) The agreement to refine One Million gallons of used
lubricating oil per year from Reno Drain Oil of
Reno, Nevada, and to recycle 100,000 gallons of used
Antifreeze per year, effective December 29, 2000.
iv) The January 28, 2001, purchase order from Ash Grove
Cement Co. to purchase burner fuel product for
$458,640 to be delivered during calendar year 2001,
On March 29, 2001, Form 8K dated March 8, 2001, was filed and
reported:
i) EVOP announced the development of the Reno Project
with the opening of escrow to purchase 20 acres of
industrial property which will be used to locate
three 10MW power generators and two used-oil
refineries. The power generators are expected to be
delivered June 25, 2001, and the first refinery
after the end of the year.
ii) EVOP announced the issuing of a Purchase Order for
three 10MW simple cycle gas turbine power generator
sets, which was approved on March 8, 2001, for
delivery on June 25, 2001. The generators are
expected to be operational in August of 2001.
iii) The Company announced the settlement agreement with
consultant Steven Antebi under which he retained
1,200,000 shares and returned to the Company
5,364,999 shares of common stock.
4
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Environmental Oil Processing Technology Corporation
(Registrant)
Date: May 9, 2001 By /s/
_________________________________
N. Tod Tripple, President and CEO
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ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001 and December 31, 2000
CONTENTS
Consolidated Balance Sheets ................................................ 3
Consolidated Statements of Operations ...................................... 5
Consolidated Statements of Stockholders' Equity ............................ 6
Consolidated Statements of Cash Flows ...................................... 7
Notes to Consolidated Financial Statements ................................. 9
ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
Consolidated Balance Sheets
ASSETS
March 31, December 31,
2001 2000
------------ -----------
(Unaudited)
CURRENT ASSETS
Cash $ 240,559 $ 273,215
Trade accounts receivable, less allowance for
doubtful accounts of $23,000 and $23,000
respectively 438,390 403,998
Inventories 8,311 13,548
Loan proceeds 3,870,722 --
Other current assets 73,511 105,264
------------ -----------
Total Current Assets 4,631,493 796,025
------------ -----------
PROPERTY, PLANT AND EQUIPMENT 2,334,095 2,332,146
Less accumulated depreciation (316,725) (293,439)
------------ -----------
Property, Plant and Equipment, Net 2,017,370 2,038,707
------------ -----------
OTHER ASSETS
Construction in progress 1,151,468 --
Deposits 40 40
Goodwill, net 2,841,004 2,929,786
------------ -----------
Total Other Assets 3,992,512 2,929,826
------------ -----------
TOTAL ASSETS $ 10,641,375 $ 5,764,558
============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3
ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2001 2000
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Current portion of notes payable $ 5,500,000 $ 81,731
Accounts payable 199,914 136,544
Accrued expenses 539,901 534,740
Line of credit 384,343 387,367
Notes payable - related parties 733,328 239,838
Deferred revenue -- 135
------------ ------------
Total Current Liabilities 7,357,486 1,380,355
------------ ------------
LONG TERM DEBT
Notes payable - related parties -- 632,000
Notes payable -- 64,108
------------ ------------
Total Long-Term Debt -- 696,108
------------ ------------
Total Liabilities 7,357,486 2,076,463
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, no par value; 200,000,000
shares authorized; and 73,520,116 and 72,020,116
shares issued and outstanding, respectively 22,420,211 12,943,211
Accumulated deficit (19,136,322) (9,255,116)
------------ ------------
Total Stockholders' Equity 3,283,889 3,688,095
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 10,641,375 $ 5,764,558
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
Page 4
ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
March 31,
---------------------------------
2001 2000
------------ ------------
NET SALES $ 808,895 $ 1,469,448
COST OF GOODS 49,100 --
------------ ------------
GROSS MARGIN 759,795 1,469,448
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 10,598,739 2,094,510
------------ ------------
LOSS FROM
OPERATIONS (9,838,944) (625,062)
------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (44,799) (18,506)
Interest income 2,537 11,136
------------ ------------
Total Other Income
(Expense) (42,262) (7,370)
------------ ------------
INCOME TAX EXPENSE -- --
------------ ------------
NET LOSS $ (9,881,206) $ (632,432)
============ ============
BASIC LOSS PER COMMON
SHARE $ (0.14) $ (0.01)
============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 73,170,116 69,683,870
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
Page 5
ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
Consolidated Statements of Stockholders' Equity
(Unaudited)
Additional Total
Common Stock Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
---------- ----------- --------- ------------ -----------
Balance,
December 31, 1999 69,683,870 $11,443,277 $(400,000) $ (7,296,319) $ 3,746,958
Performance on stock
subscription -- -- 400,000 -- 400,000
Fractional shares issued 116 -- -- -- --
Common stock issued for
cash 2,106,130 1,090,000 -- -- 1,090,000
Common stock issued for
services 230,000 230,000 -- -- 230,000
Forgiveness of note payable
as contribution of capital -- 179,934 -- -- 179,934
Net loss for the
year ended
December 31, 2000 -- -- -- (1,958,797) (1,958,797)
---------- ----------- --------- ------------ -----------
Balance,
December 31, 2000 72,020,116 12,943,211 -- (9,255,116) 3,688,095
---------- ----------- --------- ------------ -----------
Common stock
issued for services 1,500,000 9,477,000 -- -- 9,477,000
Net loss for the
three months ended
March 31, 2001 -- -- -- (9,881,206) (9,881,206)
---------- ----------- --------- ------------ -----------
Balance,
March 31, 2001 73,520,116 $22,420,211 $ -- $(19,136,322) $ 3,283,889
========== =========== ========= ============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
Page 6
ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
-------------------------
2001 2000
------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(9,881,206) $(632,432)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 112,068 174,252
Common stock issued for
services 9,477,000 --
Changes in operating assets and liabilities:
Accounts receivable (34,392) 22,979
Inventories 5,237 --
Other assets 31,753 (1,087)
Accounts payable and accrued
expenses 68,396 28,629
----------- ---------
Net Cash (Used) by Operating
Activities (221,144) (407,659)
----------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES
Construction in progress (1,151,468) --
Capital expenditures (1,949) (40,185)
----------- ---------
Net Cash (Used) by Investing
Activities (1,153,417) (40,185)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from related parties 84,990 548,970
Payments of related party debt (223,500) --
Borrowings of long-term debt 1,629,278 10,000
Payments on long-term debt (148,863) (7,510)
----------- ---------
Net Cash Provided
By Financing Activities $ 1,341,905 $ 551,460
----------- ---------
The accompanying notes are an integral part of these consolidated financial
statements.
Page 7
ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
-------------------------
2001 2000
--------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ (32,656) $103,616
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 273,215 193,007
--------- --------
CASH AND EQUIVALENTS,
END OF PERIOD $ 240,559 $296,623
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 44,799 $ 18,506
Cash paid for taxes $ -- $ --
SUPPLEMENTAL DISCLOSURE OF
NON-CASH FINANCING ACTIVITIES:
Year ended December 31, 2000
The President of the Company forgave a $179,934 note payable to him as a
contribution of capital to the Company.
The accompanying notes are an integral part of these consolidated financial
statements.
Page 8
ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
Notes to the Consolidated Financial Statements
March 31, 2001 and December 31, 2000
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared by
the Company without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments necessary to present
fairly the financial position, results of operations and cash flows at
March 31, 2001 and 2000 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's December 31, 2000 audited consolidated financial statements. The
results of operations for the periods ended March 31, 2001 and 2000 are not
necessarily indicative of the operating results for the full years.
Page 9