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 June 30, 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 June 30, 2001, is
73,520,116.
Transitional Small Business Disclosure Format. Yes ___, No _X_.
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
and six months ended June 30, 2001, reviewed by HJ & Associates, certified
public accountants.
Item 2. Management's Discussion and Plan of Operation:
Results of Operations:
During the first six months 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 is acquiring 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 presently scheduled for delivery in September 2001,
with production scheduled to begin in the fourth quarter this year. EOPT is
presently FERC licensed to privately sell electrical power. Fabrication of the
refining plants is tentatively scheduled for completion in the second quarter of
2002. The power generators are designed to operate on either natural gas or
diesel fuel. Sources for natural gas have been secured to initially operate the
generators until such time as diesel from the on site refining plants will
provide the diesel fuel. To facilitate the gathering of used oil for the Reno
Project, the Company acquired Artesian Oil Recovery, Inc. in Oakland, California
during the second quarter of 2001 for the sum of $485,000. Pending the
completion of the refineries in the Reno Project, the used oil is being trucked
to Nampa for processing.
The pilot refining plant in Nampa became fully operational in the second quarter
of 2001. The plant production meets specifications for diesel, naphtha and
residuum for asphalt and the Company is selling all of its production to local
wholesalers. With the oil gathered by Artesian Oil Recovery, the Company has
sources for sufficient feed oil to supply the Nampa plant requirements.
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 second quarter of 2001 resulted in consolidated revenues of
$1,018,494 compared to $923,814 in the second quarter of 2000. The second
quarter revenues were generated $766,949 by PDI and $251,545 by EOPT.
Consolidated revenues increased by $94,680 from the second quarter of 2000. PDI
also recorded $152,874 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 for the period would have increased by
$247,354. The Company had cost of sales of $116,667 during the six months ended
June 30, 2001. These costs are for the used oil purchased, processed and sold at
the Nampa, Idaho and Artesian facilities beginning in 2001. EOPT had net sales
of $449,581 and PDI had net unrelated sales of $1,377,808 for the six months
ended June 30, 2001.EOPT's gross margin was 74% of sales. EOPT refines used oil
into diesel fuel, and other petroleum products. These
2
products have a higher sales price than used oil alone, which can only be used
as burner fuel or road base. PDI is an engineering service firm. Its costs are
primarily payroll related and are included in Selling, General and
Administrative Expenses (SG&A).
Consolidated revenues in the first six months of 2001 were $1,827,389 compared
to $2,393,262 in the first six months of 2000. The decline of $565,873 was the
result of PDI's involvement in the engineering of the Company's Reno Project.
Inter company billings of $648,382 were eliminated in the consolidation. If the
engineering services had been billed to an independent third party Company
revenues would have increased by $62,509 over the comparable six month period.
The Company's business is labor intensive and its largest expense is payroll.
For the six months ended June 30, 2001, the Company had compensation expense of
approximately $10,869,000 or 94% of SG&A compared to approximately $1,512,000 or
43% of SG&A for the six months ended June 30, 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, however, 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 point. Without the value of
the shares issued to the consultant, compensation expense for the first six
months of 2001 would have decreased by $15,000 compared to the same six months
of 2000. The decrease is due to the completion of the development of the Nampa,
Idaho facility.
The Company's cost cutting efforts and the Nampa facility going into production
have combined to decrease its net loss from $532,498 in the three months ended
June 30, 2000, to $35,891 in the same period of 2001. Excluding the value of the
shares issued to the consultant in January 2001, the Company's loss for the
first six months would have been $545,097 compared to $1,164,930 for the first
six months of 2000. The Company expects its loss to decline even further in the
third quarter of 2001 with a full three months of operations in Nampa and the
Artesian Oil Recovery Company. The Reno facility is not expected to contribute
significantly to operating results until the fourth quarter of 2001.
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 the electrical power production facility in
the Reno Project. These funds are believed by management to be adequate to
complete the construction of the power facility without requiring the Company to
use its own funds. The Company paid $500,000 to PDI for the engineering services
it provided. PDI used these funds to pay off its bank loans and lines of credit
totaling $533,206. The balance of the loan funds will go to third party
suppliers including the seller of the real property for the plant site. The
Company received net loan proceeds of $6,000,000 in the first six months of
2001. The terms of the contract allows the funding source to determine if it
will provide the additional $4,500,000 by August of 2001 based upon the Company
meeting certain completion and performance criteria. Through June 30, 2001 the
Company had incurred $4,464,069 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 first 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
3
going on line or if projected revenues are not received timely or in the amounts
expected, the Company may 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 $94,056 for its operations in the six months ended June
30, 2001 compared to $797,344 for the corresponding period in the prior year. At
the present rate of cash consumption the Company has funds on hand for two
additional quarters of operations, compared with only 1 quarter at the ending of
March 2001. 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.
The Company's accounts receivable increased by $165,020 from December 31, 2000,
to June 30, 2001. The increase was the result of the Company's expanded oil
gathering business with the purchase of Artesian Oil Recovery. The Company has
also begun to accumulate used oil for processing in the Nampa facility,
therefore inventory levels increased by $50,115 in the same period.
The Company paid $1,024,706 of debt, $491,500 to related parties and $533,206
was paid to bank lines of credit. Accrued expenses increased by $175,621
primarily due to the interest accrued on the trust fund loans in the amount of
$151,890. This interest has been capitalized in the cost of the Reno Project.
Accounts payable increased by $89,485 due to the expanded operations of the
Company in California through the purchase of Artesian Oil Recovery.
The Company is presently investigating, reviewing and considering additional
used oil gathering facilities as well as seeking additional financing to acquire
same. No agreements have been formalized as of this time.
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
Item 5. Other Information. None
Item 6. Exhibits and Reports on form 8-K.
(a) No exhibits
4
(b) 8K Reports were filed as follows:
On May 18, 2001, Form 8KA dated May 18, 2001 was filed on Edgar, and
reported
A. EVOP through its subsidiary EOPT Power Group - Nevada, Inc. is
negotiating a purchased power contract with Sierra Pacific Power
Company, a public utility, for the electrical output of the first
phase of its Reno Project.
B. On May 14, 2001, EVOP acquired the assets of Artesian Oil
Recovery Company, a fully "permitted" used oil transfer facility
located in Oakland, California. EVOP paid $485,000 and took
possession May 14, 2001.
C. On April 24, 2001, EVOP formed its wholly owned subsidiary EOPT
Power Group - Nevada, Inc. to operate the power production
business in the Reno Project.
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: July 25, 2001 By /s/
---------------------------------------
N. Tod Tripple, President and CEO
5
ENVIRONMENTAL OIL PROCESSING TECHNOLOGY CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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
June 30, December 31,
2001 2000
------------ -----------
(Unaudited)
CURRENT ASSETS
Cash $ 191,208 $ 273,215
Trade accounts receivable, less allowance for
doubtful accounts of $23,000 and $23,000
respectively 569,018 403,998
Inventories 63,663 13,548
Loan proceeds 4,500,000 --
Other current assets 33,195 105,264
------------ -----------
Total Current Assets 5,357,084 796,025
------------ -----------
PROPERTY, PLANT AND EQUIPMENT 2,916,312 2,332,146
Less accumulated depreciation (340,011) (293,439)
------------ -----------
Property, Plant and Equipment, Net 2,576,301 2,038,707
------------ -----------
OTHER ASSETS
Construction in progress 4,464,069 --
Deposits 40 40
Goodwill, net 2,752,222 2,929,786
------------ -----------
Total Other Assets 7,216,331 2,929,826
------------ -----------
TOTAL ASSETS $ 15,149,716 $ 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
June 30, December 31,
2001 2000
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Current portion of notes payable $ 10,500,000 $ 81,731
Accounts payable 226,029 136,544
Accrued expenses 710,361 534,740
Line of credit -- 387,367
Notes payable - related parties 465,328 239,838
Deferred revenue -- 135
------------ ------------
Total Current Liabilities 11,901,718 1,380,355
------------ ------------
LONG TERM DEBT
Notes payable - related parties -- 632,000
Notes payable -- 64,108
------------ ------------
Total Long-Term Debt -- 696,108
------------ ------------
Total Liabilities 11,901,718 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 (19,172,213) (9,255,116)
------------ ------------
Total Stockholders' Equity 3,247,998 3,688,095
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 15,149,716 $ 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 For the Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
NET SALES $ 1,018,494 $ 923,814 $ 1,827,389 $ 2,393,262
COST OF GOODS 67,567 -- 116,667 --
------------ ------------ ------------ ------------
GROSS MARGIN 950,927 923,814 1,710,722 2,393,262
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 977,298 1,445,582 11,576,037 3,540,092
------------ ------------ ------------ ------------
LOSS FROM
OPERATIONS (26,371) (521,768) (9,865,315) (1,146,830)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (15,530) (10,740) (60,329) (29,246)
Interest income 6,010 10 8,547 11,146
------------ ------------ ------------ ------------
Total Other Income
(Expense) (9,520) (10,730) (51,782) (18,100)
------------ ------------ ------------ ------------
INCOME TAX
EXPENSE -- -- -- --
------------ ------------ ------------ ------------
NET LOSS $ (35,891) $ (532,498) $ (9,917,097) $ (1,164,930)
============ ============ ============ ============
BASIC LOSS PER COMMON
SHARE $ (0.00) $ (0.03) $ (0.14) $ (0.05)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 73,520,116 34,841,935 73,387,039 34,841,935
============ ============ ============ ============
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
six months ended
June 30, 2001 -- -- -- (9,917,097) (9,917,097)
------------ ------------ ------------ ------------ ------------
Balance,
June 30, 2001 73,520,116 $ 22,420,211 $ -- $(19,172,213) $ 3,247,998
============ ============ ============ ============ ============
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 Six Months Ended
June 30,
--------------------------
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(9,917,097) $(1,164,930)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 224,136 381,279
Common stock issued for
services 9,477,000 --
Changes in operating assets and liabilities:
Accounts receivable (165,020) (5,533)
Inventories (50,115) --
Other assets 72,069 (2,006)
Accounts payable and accrued
expenses 264,971 (6,154)
----------- -----------
Net Cash (Used) by Operating
Activities (94,056) (797,344)
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Construction in progress (4,464,069) --
Capital expenditures (584,166) (76,323)
----------- -----------
Net Cash (Used) by Investing
Activities (5,048,235) (76,323)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock -- 660,934
Borrowings from related parties 84,990 670,500
Payments of related party debt (491,500) --
Borrowings of long-term debt 6,000,000 --
Payments on long-term debt (533,206) (4,482)
----------- -----------
Net Cash Provided
By Financing Activities $ 5,060,284 $ 1,326,952
----------- -----------
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 Six Months Ended
June 30,
--------------------------
2001 2000
--------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ (82,007) $ 453,285
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 273,215 193,007
--------- ---------
CASH AND EQUIVALENTS,
END OF PERIOD $ 191,208 $ 646,292
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 60,329 $ 29,246
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
June 30, 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 June
30, 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 June 30, 2001 and 2000 are not
necessarily indicative of the operating results for the full years.
Page 9