SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.20549
FORM 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from October 1, 1999 to December 31, 1999
Commission File Number 000-24877
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 77-0096608
-------- ----------
(State or other jurisdiction of (I.R.S. employer
Incorporation or Organization) Identification No.)
5380 NORTH STERLING CENTER DRIVE
WESTLAKE VILLAGE, CA 91361
- - --------------------------------------------------------------------------------
(Address of principal executive offices including zip code)
(818) 865-2205
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(Registrant's telephone number, including area code)
NOT APPLICABLE
- - --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 13(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X} No [ ]
the number of shares outstanding of the Issuer's Common Stock, par value $0.01
per share, as of December 31, 1999, was 8,894,959.
+
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
Table of Contents
PAGE
====
Item 1 Financial Statements
Balance sheet at December 31, 1999 (unaudited) 1
Statement of Stockholders' Equity 2
Statements of Operations for the three months ended
December 31, 1999 and 1998 (unaudited) 3
Statements of comprehensive loss 4
Statements of Cash Flows for the three months ended
December 31, 1999 and 1998 (unaudited) 5-6
Notes to Financial Statements (unaudited) 7-9
Item 2 Management's Discussion and Analysis of Plan
of Operations 10
General 10
Results of Operations 10
Liquidity and Capital Resources 11
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999
ENVIRONMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS
DECEMBER 31, SEPTEMBER 30,
1999 1999
(Unaudited) (Audited)
----------- ------------
CURRENT ASSETS
Cash $ 8,332 $ 105,058
Marketable securities 69,329 69,343
Notes receivable 13,093 14,296
Notes receivable, related parties 187,401 187,401
Interest receivable 35,087 16,575
Other 19,131 19,131
----------- ------------
Total current assets 332,373 411,804
----------- ------------
EQUIPMENT 35,096 43,790
----------- ------------
OTHER ASSETS
Notes receivable 1,297 1,508
Notes receivable, related parties 32,798 32,798
Deposits 3,220 3,220
Mining rights 5,000 5,000
----------- ------------
Total other assets 42,315 42,526
----------- ------------
TOTAL ASSETS $ 409,784 $ 498,120
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable $ 161,849 $ 16,297
Due to officers 8,950 8,950
Accrued salaries 175,000 151,000
----------- ------------
Total current liabilities 345,799 176,247
----------- ------------
STOCKHOLDERS' EQUITY
common stock, $.O1 par value, authorized
20,000,000 shares; issued and outstanding
8,567,148 shares 88,949 88,149
Preferred stock, $.01 par value,
authorized 20,000,000 shares; issued
and outstanding 3,000 shares 20 20
Additional paid-in capital 8,568,842 8,568,842
Deficit accumulated during
development stage (7,843,406) (7,584,718)
Accumulated deficit prior to
development stage (695,452) (695,452)
Accumulated other comprehensive income (loss) (54,968) (54,968)
----------- ------------
Total stockholders' equity 63,985 321,873
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 409,784 $ 498,120
=========== ===========
See notes to financial statements.
1
ENVIRONMENTAL PRODUCTS TECHNOLOGIES
CORPORATION
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
Common stock Preferred stock
------------------ --------------- Additional
# of # of paid-in
shares Amount shares Amount capital
------ ------ ------ ------ -------
Balance at
September 30,
1999 8,814,921 $ 88,149 2,000 $ 20 $ 8,568,842
--------- -------- ----- ---- -----------
Common stockholder
loss for The period - - - - -
Unrealized loss on
marketable
securities 80,038 800 - - -
Balance at
December31, 1999 8,894,959 88,949 2,000 20 8,568,842
========= ====== ===== == =========
Deficit Accumulated
accumulated deficit Accumulated
during the prior to the other Total
development development comprehensive stockholders
stage stage income (loss) equity
----- ----- ------------- ------
Balance at
September 30,
1999 $ (7,584,718) $ (695,452) $ (54,968) $ 321,873
Common stockholder
loss for the period (258,688) - - (258,688)
Unrealized loss on
marketable
securities - - - -
------------- ----------- ---------- ----------
Balance at
December 31, 1999 (7,843,406) (695,452) (54,968) (63,185)
============= =========== ========== ==========
See notes to financial statements.
2
ENVIRONMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE PERIODS
(Unaudited)
THREE MONTHS ENDED
-------------------------
DECEMBER 31,
-------------------------
1999 1998
---- ----
SALES $ - $ -
---------- ---------
EXPENSES
Consulting 39,191 26,016
Depreciation 8,694 8,694
Legal and professional 99,755 96,925
Liability insurance - -
Miscellaneous 3,523 13,180
Office supplies end expenses 983 8,424
Other expenses - -
Rent 6,169 8,328
Repairs and maintenance 385 454
Research and development 39,356 88,400
Salaries and payroll taxes 63,009 78,156
Telephone and utilities 2,533 4,470
Travel 14,330 37,257
Writedown of mining rights - -
---------- ---------
Total expenses 277,928 370,304
---------- ---------
LOSS FROM OPERATION (277,928) (370,304)
OTHER INCOME (EXPENSE)
Interest income 19,240 22,668
Interest expense - -
Loss on sale of marketable securities - (28,858)
---------- ---------
Total other Income (expense) 19,240 (6,190)
LOSS BEFORE EXTRAORDINARY ITEM (258,688) (376,494)
EXTRAORDINARY ITEM
Gain on extinguishment of debt - -
NET LOSS (256,688) (376,494)
PREFERRED STOCK DIVIDEND
NET LOSS ATTRIBUTABLE TO
COMMON SHAREHOLDERS $ (258,688) $ (376,494)
========== ==========
NET L0SS PER COMMON SHARE $ (0.03) $ (0.04)
========== ==========
see notes to financial statements.
3
ENVIRONMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
FOR THE PERIODS
(Unaudited)
THREE MONTHS ENDED
------------------
DECEMBER 31,
------------
1999 1998
---- ----
Net loss $ (258,688) $ (376,494)
Other comprehensive income:
Unrealized holding
gains arising - -
during the period
Add: Reclassification
adjustment for losses
included in net loss - -
---------- ----------
Net unrealized gain (loss) - -
---------- ----------
Comprehensive loss $ (258,688) $ (376,494)
=========== ==========
See notes to financial statements.
4
ENVIRONMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS
(Unaudited)
THREE MONTHS ENDED
-------------------
DECEMBER 31,
-------------------
1999 1998
---- ----
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (258,688) $ 376,494
----------- ----------
Adjustments to reconcile net loss
to net Cash used in operating
activities:
Depreciation and amortization 8,694 8,694
Loss on sale of marketable securities - 28,858
Loss on abandoned equipment - -
Write down of mining rights - -
Gain on extinguishment of debt - -
Noncash research & development - -
Noncash consulting fees - -
Noncash executive compensation - -
(Increase) decrease in operating assets:
Prepaid expenses - -
Interest receivable (18,521) (10,571)
Deposits - 10,000
Other - (8,400)
Increase (decrease) in operating
liabilities:
Accounts payable 92,588 (11,450)
Accrued salaries 24,000 24,000
Accrued interest - -
Settlement payable - -
----------- ----------
Total adjustments 106,761 41,131
NET CASH USED IN - -
----------- ----------
OPERATING ACTIVITIES (151,927) (335,363)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans to related parties (900) (485,000)
Loans to unrelated parties (23,982) -
Purchase of equipment - (25,049)
Purchase of mining rights - -
Purchase of marketable securities - (204,785)
Proceeds from sale of marketable - -
securities - 204,785
NET CASH USED IN - -
----------- ----------
INVESTING ACTIVITIES (24,882) (510,049)
----------- ----------
See notes to financial statements.
5
ENVIRONMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS
(Unaudited)
THREE MONTHS ENDED
------------------
DECEMBER 31,
------------------
1999 1998
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 80,083 -
Sale of preferred stock - -
Costs to raise capital - -
Loan payments
Common stock redeemed - -
NET CASH PROVIDED BY FINANCING
------------ -----------
ACTIVITIES 80,083 -
------------ -----------
NET INCREASE (DECREASE) IN CASH (96,726) (845,412)
CASH, BEGINNING 105,058 1,447,444
------------ -----------
CASH, ENDING $ 8,332 $ 602,032
============ ===========
See notes to financial statements.
6
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
1. Summary of significant accounting policies
Financial statements
The balance sheet as of December 31, 1999, and the related statements of
stockholders' equity, operations and cash flows for the three months ended
December 31, 1999 and 1998, are unaudited. Such unaudited financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial reporting and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and disclosures required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting of normal recurring
accruals considered necessary for a fair presentation, have been included.
Results for the three months ended December 31, 1999, are not necessarily
indicative of the results that may be achieved for any other interim period or
for the fiscal year ending September 30, 2000. These statements should be read
in conjunction with the financial statements and related notes included in the
Company's Annual Report on Form 10-KSB for the year ended September 30, 1999.
Fair market value of financial instruments
The fair market value of the notes receivable approximate cost based on current
borrowing rates. Equity securities held by the Company include available for
sale securities, which are reported at fair value. Unrealized holding gains and
losses for available for sale securities are excluded from earnings and reported
net of any income tax affect as a component of stockholders' equity. See Note 4
for further discussion.
Loss per share
The computations of loss per share of common stock are based on the weighted
average number of shares outstanding of 8,894,959 (1999), 8,567,148 (1998) and
7,563,515 (cumulative period).
7
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
1. Summary of significant accounting policies (continued)
Comprehensive net loss
On October 1, 1998, the Company adopted FASB No. 130, Reporting Comprehensive
Income. Statement No. 130 requires the reporting of comprehensive income/loss in
addition to net income/loss from operations. Comprehensive income/loss requires
the inclusion of certain financial information not recognized in the calculation
of net income/loss, including unrealized holding gains and losses on available
for sale of securities.
Concentration of credit risk
The Company primarily transactions its business with two financial institutions
and may maintain deposits in excess of federally insured limits. At December 31,
1999, the Company has not experienced any losses in such accounts and believes
it is not exposed to any significant credit risk on cash and cash equivalents.
2. Notes receivable
At December 31, 1999, notes receivable consist of the following:
Note receivable, interest at
10% per year, collateralized
by interest in a mining company,
due by March 15, 2000 $185,000
Note receivable, interest at
12% per year, collateralized
by equipment and common stock,
due by February 25, 2000 $135,000
Note receivable, interest at
10% per year, uncollateralized
due by February 25, 2000 $100,000
--------
$420,000
========
8
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
3. Stock options and warrants outstanding
Options Exercise Exercise date
Warrants Price
-------- ----- -------------
Options granted 280,000 $0.1875 July 16, 1999 to
September 30, 2006
Options granted 50,000 0.1875 Up to September 30, 2006
Warrants issued 300,000 2.0000 Up to January 21, 2001
Warrants issued 300,000 3.8750 Up to April 2003
--------------
Options/warrants
Outstanding at
December 31, 1999 930,000
==============
Options/warrants
Exercisable at
December 31, 1999 850,000
==============
9
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The company was incorporated in 1983 as CCRS, III, Inc. In 1989, the
Company changed its name to Central Corporate Reports Services, Inc., merged
with Information Bureau Inc. and operated in the financial public relations
business until March 1990 when the Company became inactive. In 1990 the Company
changed its name back to Combined Assets, Inc. and in 1991 changed its name to
ACP International, Inc. and in 1994 changed its name back to Combined Assets,
Inc. In January 1995, the Company's name was changed to Environmental Products &
Technologies Corporation. At the end of 1995, the Company commenced development
of a waste management system to control odors and solid stream waste in the
farming industry. In addition, the company is developing organic based
insecticides for agricultural, commercial and residential use.
The Company is currently in the development stage of operations and, to
this time, has devoted its time to rising capital, product and supplier
development and marketing future products. No product has been assembled
manufactured or marketed at this time, except that the Company has assembled a
prototype Closed- Loop Waste Management System or demonstration purpose and
three prototype systems for operation by various universities.
The Company has projected expense of $ 850,000 through June 2000. As of
September 30,1999, the Company had approximately $ 174,000 of cash and cash
equivalents. The Company is in the process of raising additional funds which
will allow the Company to operate even is the Company generates no revenue
during this period.
The Company intends to continue product development with the test of
three full-scale systems to be operated at Utah State University, Cal Poly -
Pomona and the University of Wisconsin. The portable units will be employed for
continued demonstrations and sales activity. The goal of such tests is to refine
the process from a batch load to a continuous feed system. At the same time the
development of an input/ feed conveyor system and a variable discharge rate
screw mechanism to load the bioreactor needs to be completed. In addition, a
solid waste process will also need to be developed.
RESULTS OF OPERATION
COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998.
The Company generated no revenue for the three months ended December 31
1999 and 1998. During each such quarter, the Company's efforts were directed at
researching, designing, developing and testing its Closed Loop Management
System.
10
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
Research and development expenses for three months ended December 31,
1999 decreased by $49,044, to $39,356 from $88,400, for the three months ended
December 31 1998. This decrease in research and development expenses reflects
expenses associated with the research, design and development of the Company's
Closed -Loop Waste Management System.
General and administrative expenses for three months ended December 31,
1999, decreased by 43,332, or approximately 15% to $238,572, from $281,904 for
the three months ended December 31 1998. This decrease in general and
administrative expenses was primarily the result of the decrease in salaries and
travel that was partially offset by increase in consulting and other expenses.
LIQUIDTY AND CAPITAL RESOURCES
The Company's primary capital needs have been to fund the design and
development of its prototype Closed-Loop Waste Management System. The Company's
primary sources of liquidity have been private placements of equity and debt
securities and loans from officers/ stockholders on an as needed basis.
Between October and December 1995, the Company sold 100,000 shares of
Common Stock for an aggregate of $10,000, or $.10 per share. Between January and
March1996, the Company sold 400,000 shares of Common Stock for an aggregate of
$189,650, or approximately $.47 per share. Between April and June 1996, the
Company sold 40,000 shares of Common Stock for an aggregate of $35,000, or $.87
per share. Between July and September 1996, the Company sold 480,000 shares of
Common Stock for an aggregate of $149,200, or approximately $.31 per share.
Between June and September 1997, the Company sold 550,000 shares of Common Stock
for an aggregate of $337,925, or approximately $.614 per share. The figures in
the paragraph do not give effect to the two-for-one forward stock split that was
effected by the Company in May 1998.
In April 1998, the Company sold 3,000 shares of Series A preferred
Stock together with warrants (the "Private Placement Warrants") to purchase
300,000 shares of Common Stock (the "1998 Private Placement") for gross proceeds
of $3,000,000. The net proceeds to the Company of approximately $2,675,000 will
be used for continue research and development, working capital and general
11
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
corporate purpose. The Private Placement Warrants have an initial exercise price
of $3.875 per share. Private Placement Warrants expire on March 31,2003. The
Private Placement Warrants contain provisions for the adjustment of the exercise
price and the aggregate number of shares issuable upon exercise under certain
circumstances, including without limitation, stock dividends, stock splits,
reorganization, reclassification, consolidations, certain dilutive sales of
securities for which the Private Placements Warrants are exercise able below the
then existing Market Price (as defined) and failure to maintain a sufficient
number of authorized shares of Common Stock for issuance and delivery upon
exercise of the Private Placement Warrants.
The Company also has commitments under (I) an employment agreement with
Marvin Mears, the Company's President and Chief Executive Officer; (ii) a
consulting agreement with Strategic Planning Consultants, Inc., a consultant of
the Company; and (iii) an officer lease that expires December 31,1999.
Based on its current operating plan, the Company anticipates that
additional financing will be required to finance its operations and capital
expenditures. The Company's currently anticipates levels of revenues and cash
flow are subject to any uncertainties and cannot be assured. Further, the
Company's business plan may change, or unforeseen events may occur, requiring
the Company to raise additional funds. The amount of funds required by the
Company will depend upon many factors, including without limitations, the extent
and timing of sales of the Company's waste management system, future product
cost, the timing and cost associated with the establishment and / or expansion,
as appropriate, of the Company's manufacturing, development, engineering and
customer support capabilities, the timing and cost of the Company's product
development and enhancement activities and the Company's operating results.
Until the Company generates cash flow from operations, which will be sufficient
to satisfy its cash requirements, the Company will need to seek alternative
means for financing its operations and capital expenditures and / or postpone or
eliminate certain investments or expenditures. Potential alternative means for
12
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
financing may include leasing capital equipment, obtaining a line of credit, or
obtaining additional, or available on acceptable terms. The inability to obtain
additional financing or generate sufficient cash form operations could require
the Company to reduce or eliminate expenditures for capital equipment, research
and development, production or marketing of its product, or otherwise curtail or
discontinue its operations, which could have a material adverse effect on the
Company's business, financial condition and results of operations. Furthermore,
if the Company raises funds through the sale of additional equity securities,
the Common Stock currently outstanding may be further diluted.
INFLATION
Although certain of the Company's expenses increase with general
inflation in the economy, inflation has not had a material impact on the
Company's financial results to date.
YEAR 2000 COMPLIANCE
We have completed a comprehensive review of our computer systems to
identify all software applications that could be affected by the inability of
many existing computer systems to process time-sensitive data accurately beyond
the year 1999 (referred to as the "Year 2000" issue). We are also continuing to
monitor our computer systems and we are monitoring the adequacy of the processes
and progress of third-party vendors of systems that may be affected by the Year
2000 issue. We are dependent on third-party computer systems applications,
particularly with respect to such critical tasks as accounting, billing and
buying. We also rely on our own computer systems. EPTC expects to its complete
its Year 2000 compliance program by mid-1999 and anticipates that its total
expenditures on such programs will not exceed $20,000. However, we may
experience cost overturns or delays, in the future, which could have material
adverse effect on our business, results of operations and financial condition.
While we believe our procedures are designed to be successful, because of the
complexity of the Year 2000 issue and the interdependence of organizations using
computer systems, our efforts, or those of third-parties with whom we interact,
may not be satisfactorily completed in a timely fashion. If we fail to
satisfactorily address the Year 2000 issue, then our business, results of
operations and financial condition could be materially adversely affected.
13
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunder
duly authorized.
ENVIRONMENTAL PRODUCTS &
TECHNOLOGIES CORPORATION
Dated: March 24, 2000 By:/s/Marvin Mears
-------------- ------------------
Marvin Mears
Chief Executive Officer