10QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2000, or
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from October 1, 2000 tl December 31, 2000
Commission File Number 000-24877
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 77-0096608
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(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
(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 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 the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock, par value $.01
per share, as of December 31, 2000, was 9,202,437.
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000
Table of Contents
PAGE
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Item 1 Financial Statements
Balance sheet F-1
Statement of stockholders' equity F-2
Statement of operations F-3
Statement of comprehensive loss F-4
Statement of cash flows F-5 - F-6
Notes to financial statements F-7 - F-9
ENVIROMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30,
2000 2000
(Unaudited) (Audited)
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 67,919 $ 145,208
Marketable securities 1,354 10,332
Notes receivable, net of allowance of $200,000 -- --
Current portion of notes receivable, related
parties, net of allowance of $217,659 67,146 67,146
Interest receivable 60,814 45,787
Other 23,437 27,063
----------- -----------
Total current assets 220,670 295,536
----------- -----------
EQUIPMENT 28,865 26,274
----------- -----------
OTHER ASSETS
Notes receivable, related parties, net
of current portion -- 415
Deposits 3,220 3,220
Mining rights 5,000 5,000
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Total other assets 8,220 8,635
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TOTAL ASSETS $ 257,755 $ 330,445
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 251,464 $ 218,786
Accrued salaries 388,542 370,542
Accrued interest 20,834 6,667
Due to officers 38,606 16,856
----------- -----------
Total current liabilities 699,446 612,851
----------- -----------
Convertible note payable 700,000 500,000
----------- -----------
Total liabilities 1,399,446 1,112,851
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized
20,000,000 shares; issued and outstanding
9,202,437 shares 92,024 92,024
Preferred stock, $.01 par value,
authorized 20,000,000 shares; issued
and outstanding 3,000 shares 20 20
Additional paid-in capital 8,951,833 8,951,833
Deficit accumulated during
development stage (9,367,173) (9,016,866)
Accumulated deficit prior to
development stage (695,452) (695,452)
Accumulated other comprehensive income (loss) (122,943) (113,965)
----------- -----------
Total stockholders' equity (1,141,691) (782,406)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 257,755 $ 330,445
=========== ===========
See notes to financial statements
F-1
ENVIROMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 2000
(Unaudited)
Convertible
Common stock Preferred stock Additional
# of # of paid-in
Shares Amount Shares Amount Capital
---------- ---------- ---------- ---------- ----------
Balance at
September 30, 2000 9,202,437 $ 92,024 2,000 $ 20 $8,951,833
Common stockholder
loss for the period -- -- -- -- --
Unrealized loss on
marketable
securities -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Balance at
December 31, 2000 9,202,437 $ 92,024 2,000 $ 20 $8,951,833
========== ========== ========== ========== ==========
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, 2000 $(9,016,866) $ (695,452) $ (113,965) $ (782,406)
Common stockholder
loss for the period (350,307) -- -- (350,307)
Unrealized loss on
marketable
securities -- -- (8,978) (8,978)
----------- ----------- ----------- -----------
Balance at
December 31, 2000 $(9,367,173) $ (695,452) $ (122,943) $(1,141,691)
=========== =========== =========== ===========
See notes to financial statements
F-2
ENVIROMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE PERIODS
(Unauditied)
THREE MONTHS ENDED OCT 1, 1995
DECEMBER 31, to
2000 1999 DEC 31, 2000
---------- ---------- ----------
Operating expenses
Selling, general, and administrative 309,203 238,572 4,181,243
Research and development 41,969 39,356 1,166,625
Write-down of note receivable -- -- 200,000
Write-down of note receivable - -- -- 454,359
related party -- -- --
Write-down of investment -- -- 58,887
---------- ---------- ----------
Total operating expenses 351,172 277,928 6,061,114
---------- ---------- ----------
Loss from operations (351,172) (277,928) (6,061,114)
---------- ---------- ----------
Other income (expense)
Interest income 15,032 19,240 235,250
Interest expense (14,167) -- (44,147)
Loss on sale of marketable securities -- -- (200,961)
---------- ---------- ----------
Total other income(expense) 865 19,240 (9,858)
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Net loss before provision for income taxes (350,307) (258,688) (6,070,972)
Provision for taxes -- -- 4,799
---------- ---------- ----------
Loss before extraordinary item (350,307) (258,688) (6,075,771)
Extraordinary item
Gain on extinguishment of debt -- -- 64,208
---------- ---------- ----------
Net loss (350,307) (258,688) (6,011,563)
Preferred stock premium 0 0 (3,355,610)
---------- ---------- ----------
Net loss attributable to common shareholders (350,307) (258,688) (9,367,173)
========== ========== ==========
Net loss per common share $ 0.04 $ 0.03
========== ==========
Weighted-average common shares
outstanding 9,202,437 8,894,959
See notes to financial statements
F-3
ENVIROMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
FOR THE PERIODS
(Unaudited)
THREE MONTHS ENDED OCT 1, 1995
DECEMBER 31, to
2000 1999 DEC 31, 2000
----------- ----------- -----------
Net loss attributable to
common shareholders (350,307) (258,688) (9,367,173)
Other comprehensive loss,
Net of tax
Unrealized holding loss
on marketable securities (8,978) -- (122,943)
----------- ----------- -----------
Net unrealized gain (loss) (8,978) -- (122,943)
----------- ----------- -----------
Comprehensive loss $ (359,285) $ (258,688) $(9,490,116)
=========== =========== ===========
See notes to financial statements.
F-4
ENVIROMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS
(unaudited)
THREE MONTHS ENDED OCT 1, 1995
DECEMBER 31, to
2000 1999 DEC 31, 2000
----------- ----------- -----------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (350,307) $ (258,688) $(6,011,563)
----------- ----------- -----------
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 2,766 8,694 73,528
Loss on sale of marketable securities -- -- 200,961
Write-down of interest receivable -- -- (45,037)
Write-down of notes receivable -- -- 200,000
Write-down of notes receivable - -- -- --
related parties -- -- 458,191
Write-down of investment -- -- 58,887
Loss on abandonment property -- -- --
and equipment -- -- 1,093
Write-down of mining rights -- -- 35,000
Gain of extinguishment of debt -- -- (64,208)
Non-cash research & development -- -- 131,250
Non-cash consulting fees -- -- 536,306
Non-cash executive compensation -- -- 23,460
Stock issued for services rendered -- -- 236,866
Stock issued fin connection with -- -- --
legal settlement -- -- 105,000
Stock issued for obtaining patent -- -- 45,000
(Increase) decrease in: -- -- --
Interest receivable (15,027) (18,521) (60,814)
Prepaid and other assets -- -- (23,438)
Other assets (3,626) -- (3,220)
Increase (decrease) in -- -- --
Accounts payable 32,678 92,588 246,205
Accrued salaries and benefits 18,000 24,000 445,430
Accrued interest 14,167 -- 28,154
Settlement payable -- -- 10,000
Due to officers 21,750 -- 25,328
----------- ----------- -----------
NET CASH USED IN -- -- --
OPERATING ACTIVITIES (272,347) (151,927) (3,347,621)
----------- ----------- -----------
See notes to financial statements.
F-5
ENVIROMENTAL PRODUCTS TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS
(unaudited)
THREE MONTHS ENDED OCT 1, 1995
DECEMBER 31, to
2000 1999 DEC 31, 2000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Invstment in related party -- -- (16,077)
Loans to related parties -- (900) (554,631)
Loans to unrelated parties -- (23,982) (216,800)
Purchase of equipment (5,357) -- (103,473)
Purchase of mining rights -- -- (40,000)
Purchase of marketable securities -- -- (604,785)
Proceeds from sale of marketable -- -- --
securities -- -- 279,514
Proceeds from loans 415 -- 1,411
----------- ----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (4,942) (24,882) (1,254,841)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible note payable 200,000 -- 700,000
Proceeds from exercise of warrants -- -- 532,812
Proceeds from sale of preferred stock -- -- 3,000,000
Proceeds from sale of common stock -- 80,083 820,100
Costs to raise capital -- -- (357,023)
Common stock redeemed -- -- (5,700)
Loan payments -- -- (22,000)
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES
200,000 80,083 4,668,189
----------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH (77,289) (96,726) 65,727
CASH, BEGINNING 145,208 105,058 2,192
----------- ----------- -----------
CASH, ENDING $ 67,919 $ 8,332 $ 67,919
=========== =========== ===========
See notes to financial statements.
F-6
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2000
(Unaudited)
1. Nature of Business
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 other than prototypes assembled for demonstration and testing purposes.
2. Summary of significant accounting policies
Financial statements
The balance sheet as of December 31, 2000, and the related statements of
stockholders' equity, operations and cash flows for the three months ended
December 31, 2000, and 1999, 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.
F-7
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, 2000, are not necessarily
indicative of the results that may be achieved for any other interim period or
for the fiscal year ending September 30, 2001. 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, 2000.
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.
Loss per share
The Company calculates loss per share in accordance with SFAS No. 128, "Earnings
per Share". Basic loss per share is computed by dividing loss available to
common shareholders by the weighted-average number of common shares outstanding.
Diluted loss per share is computed similar to basic loss per share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. For the three months ended
December 31, 2000 and 1999, the following potential common shares have been
excluded from the computation of diluted net loss per share for all periods
presented because the effort would have been anti-dilutive:
2000 1999
---- ----
Options outstanding under the Company's
stock option plans 50,000 50,000
Warrants issued for services rendered 325,000 325,000
Warrants issued with convertible note
payable 350,000 ---
F-8
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. Total comprehensive loss is shown in the Statement of
Comprehensive Loss.
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,
2000, 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.
3. Property and equipment
Property and equipment at December 31, 2000, consisted of the following:
Office equipment $ 30,335
Computer equipment 70,313
Leasehold improvements 1,732
---------
102,380
Less accumulated depreciation
And amortization 73,515
---------
Total $ 28,865
=========
F-9
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATION
COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 2000, AND 1999.
The Company generated no revenue for the three months ended December
31, 2000, and 1999. During each such quarter, the Company's efforts were
directed at researching, designing, developing and testing its Closed Loop
Management System.
Research and development expenses primarily consist of the cost of
personnel and equipment needed to conduct the Company's research and development
efforts. Research and development expenses for the three months ended December
31, 2000, increased by $2,613, or 7%, from $39,356 to $41,969. This increase 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 the three months ended December
31, 2000, increased by $ 70,631, or approximately 30% to $309,203, from $238,572
for the three months ended December 31, 2000. This increase in general and
administrative expenses was primarily the result of the increase in salaries,
travel, legal and professional expenses.
LIQUIDITY 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
December 1996, 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
1
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
corporate purpose. The Private Placement Warrants have an initial exercise price
of $3.875 per share and 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; and (ii) an
office lease that expires December 31, 2001.
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 anticipated levels of revenues and cash
flow are subject to many 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
2
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
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.
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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: February 14, 2000 By: /s/ Marvin Mears
- ------------------------ --------------------
Marvin Mears
Chief Executive Officer
4