SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999 or
[ ] 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 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
(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 $0.01
per share, as of March 31, 1999, was 8,567,148.
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ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
THREE AND SIX MONTHS ENDED MARCH 31, 1999
TABLE OF CONTENTS
Page
<CAPTION>
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements:
Balance Sheets at March 31, 1999 (unaudited) 1
Statements of Stockholders' Equity, 3 and 6 months Ended March 31, 1999 (unaudited) 2-3
Statements of Operations, 3 and 6 months Ended March 31, 1999 (unaudited) 4
Statements of Comprehensive Loss, 3 and 6 months Ended March 31, 1999 (unaudited) 5
Statements of Cash Flows, 3 and 6 months Ended March 31, 1999 (unaudited) 6-7
Notes to Financial Statements 8-9
Item 2 Management's Discussion and Analysis or Plan of Operations 10
General 10
Results of Operations 11
Liquidity and Capital Resources 11-12
Inflation 13
Annual Stockholders' Meeting 13
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
Signature 14
Financial Data Schedule 15
</TABLE>
<PAGE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED MARCH 31, 1999
<PAGE>
<TABLE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 167,834 $ 1,447,444
Marketable securities 559,014 385,012
Notes receivable 485,900 --
Notes receivable, related parties 155,416 135,000
Interest receivable 30,529 1,446
Other 10,518 --
----------- -----------
Total current assets 1,409,211 1,968,902
----------- -----------
EQUIPMENT 97,015 77,581
----------- -----------
OTHER ASSETS
Notes receivable, related parties 24,515 31,631
Deposits 3,220 13,220
Mining rights 5,000 5,000
----------- -----------
Total other assets 32,735 49,851
----------- -----------
TOTAL ASSETS $ 1,538,961 $ 2,096,334
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -- $ 11,450
Accrued salaries 92,000 44,000
----------- -----------
Total current liabilities 92,000 55,450
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized
20,000,000 shares; issued and outstanding
8,567,148 shares 42,735 42,735
Preferred stock, $.01 par value,
authorized 20,000,000 shares; issued
and outstanding 3,000 shares 30 30
Additional paid-in capital 8,335,647 8,335,647
Deficit accumulated during
development stage (6,423,871) (5,627,088)
Accumulated deficit prior to
development stage (695,452) (695,452)
Accumulated other comprehensive income (loss) 187,872 (14,988)
----------- -----------
Total stockholders' equity 1,446,961 2,040,884
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,538,961 $ 2,096,334
=========== ===========
</TABLE>
See notes to financial statements.
1
<PAGE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
THREE AND SIX MONTHS ENDED MARCH 31, 1999
(Unaudited)
Common stock Preferred stock
------------------- ---------------- Additional
# of # of paid-in
shares Amount shares Amount capital
------ ------ ------ ------ -------
Balance at
September 30,
1998 8,567,148 $ 42,735 3,000 $ 30 $ 8,335,647
Common stockholder
loss for the period
Unrealized loss on
marketable
securities
------------------- ----------- -----------
Balance at
December 31, 1998 8,567,148 42,735 3,000 30 8,335,647
------------------- ----------- -----------
Common stockholder
loss for the period
Unrealized gain on
marketable
securities
------------------- ----------- -----------
Balance at
March 31, 1999 8,567,148 $ 42,735 3,000 $ 30 $ 8,335,647
=================== =========== ===========
See notes to financial statements.
2
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<TABLE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
THREE AND SIX MONTHS ENDED MARCH 31, 1999
(Unaudited)
<CAPTION>
Deficit Accumulated
accumulated deficit Accumulated
during the prior to the other Total
development development comprehensive stockholders'
stage stage income (loss) equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at
September 30,
1998 $(5,627,088) $ (695,452) $ (14,988) $ 2,040,884
Common stockholder
loss for the period (376,494) (376,494)
Unrealized loss on
marketable
securities (133,896) (133,896)
----------- ----------- ----------- -----------
Balance at
December 31, 1998 (6,003,582) (695,452) (148,884) 1,530,494
----------- ----------- ----------- -----------
Common stockholder
loss for the period (420,289) (420,289)
Unrealized gain on
marketable
securities 336,756 336,756
----------- ----------- ----------- -----------
Balance at
March 31, 1999 $(6,423,871) $ (695,452) $ 187,872 $ 1,446,961
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE>
<TABLE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE PERIODS
(Unaudited)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED OCT 1, 1995
---------------------------- ----------------------------
MARCH 31, MARCH 31, to
---------------------------- ----------------------------
1999 1998 1999 1998 MAR 31, 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SALES $ - $ - $ - $ - $ -
----------- ----------- ----------- ----------- -----------
EXPENSES
Consulting 32,316 239,028 58,332 246,414 776,087
Depreciation 8,694 796 17,388 796 35,845
Legal and professional 87,268 23,787 184,193 36,153 439,923
Liability insurance -- -- -- 92 13,501
Miscellaneous -- 4,608 13,180 5,364 65,410
Office supplies and expenses 57,904 6,244 66,328 15,186 104,704
Other expenses 9,910 -- 9,910 -- 54,134
Rent 11,623 7,888 19,951 10,408 115,514
Repairs and maintenance 1,457 -- 1,911 -- 6,591
Research and development 119,747 34,092 208,147 247,996 662,747
Salaries and payroll taxes 71,647 19,307 149,803 38,615 389,417
Telephone and utilities 4,716 1,160 9,186 1,276 25,266
Travel 36,728 1,000 73,985 7,324 160,292
Writedown of mining rights -- -- -- -- 35,000
----------- ----------- ----------- ----------- -----------
Total expenses 442,010 337,910 812,314 609,624 2,884,431
----------- ----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (442,010) (337,910) (812,314) (609,624) (2,884,431)
OTHER INCOME (EXPENSE)
Interest income 21,721 784 44,389 2,583 101,156
Interest expense -- (3,090) -- (6,180) (23,313)
Loss on sale of marketable securities -- -- (28,858) -- (28,858)
----------- ----------- ----------- ----------- -----------
Total other income (expense) 21,721 (2,306) 15,531 (3,597) 48,985
LOSS BEFORE EXTRAORDINARY ITEM (420,289) (340,216) (796,783) (613,221) (2,835,446)
EXTRAORDINARY ITEM
Gain on extinguishment of debt 64,208
NET LOSS (420,289) (340,216) (796,783) (613,221) (2,771,238)
PREFERRED STOCK DIVIDEND (3,295,610)
NET LOSS ATTRIBUTABLE TO
COMMON SHAREHOLDERS $ (420,289) $ (340,216) $ (796,783) $ (613,221) $(6,066,848)
=========== =========== =========== =========== ===========
NET LOSS PER COMMON SHARE $ (0.05) $ (0.04) $ (0.09) $ (0.08) $ (0.82)
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
FOR THE PERIODS
(Unaudited)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED OCT 1, 1995
---------------------------- ----------------------------
MARCH 31, MARCH 31, to
---------------------------- ----------------------------
1999 1998 1999 1998 MAR 31, 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net loss $ (420,289) $ (340,216) $ (796,783) $ (613,221) $(2,771,238)
Other comprehensive income:
Unrealized holding
gains arising 336,756 -- 174,002 -- 174,002
during the period
Add: Reclassification
adjustment for losses
included in net loss -- -- 28,858 -- 28,858
----------- ----------- ----------- ----------- -----------
Net unrealized gain 336,756 -- 202,860 -- 202,860
----------- ----------- ----------- ----------- -----------
Comprehensive loss $ (83,533) $ (340,216) $ (593,923) $ (613,221) $(2,568,378)
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE>
<TABLE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS
(Unaudited)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED OCT 1, 1995
---------------------------- ----------------------------
MARCH 31, MARCH 31, to
---------------------------- ----------------------------
1999 1998 1999 1998 MAR 31, 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (420,289) $ (340,216) $ (796,783) $ (613,221) $(2,771,238)
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 8,694 796 17,388 796 35,845
Loss on sale of marketable securities -- -- 28,858 -- 28,858
Loss on abandoned equipment -- -- -- -- 1,093
Write down of mining rights -- -- -- -- 35,000
Gain on extinguishment of debt -- -- -- -- (64,208)
Noncash research & development -- -- -- 131,250 131,250
Noncash consulting fees -- 178,428 -- 185,282 536,306
Noncash executive compensation -- 5,737 -- 25,383 23,460
(Increase) decrease in operating assets:
Prepaid expenses -- -- -- -- --
Interest receivable (21,721) (784) (32,292) (1,568) (33,738)
Deposits -- -- 10,000 (2,520) (3,220)
Other -- -- (8,400) -- (8,400)
Increase (decrease) in operating liabilities:
Accounts payable -- -- (11,450) (6,078) (5,258)
Accrued salaries 24,000 34,000 48,000 36,308 148,888
Accrued interest -- -- -- (1,910) 7,320
Settlement payable -- -- -- (17,005) 10,000
----------- ----------- ----------- ----------- -----------
Total adjustments 10,973 218,177 52,104 349,938 843,196
NET CASH USED IN
----------- ----------- ----------- ----------- -----------
OPERATING ACTIVITIES (409,316) (122,039) (744,679) (263,283) (1,928,042)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans to related parties (900) -- (485,900) (12,116) (755,531)
Loans to unrelated parties (23,982) -- (23,982) (23,982)
Purchase of equipment -- -- (25,049) -- (122,180)
Purchase of mining rights -- -- -- (35,000) (40,000)
Purchase of marketable securities -- -- (204,785) -- (604,785)
Proceeds from sale of marketable --
securities -- -- 204,785 -- 204,785
NET CASH USED IN
----------- ----------- ----------- ----------- -----------
INVESTING ACTIVITIES (24,882) -- (534,931) (47,116) (1,341,693)
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements.
6
<PAGE>
<TABLE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS
(Unaudited)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED OCT 1, 1995
---------------------------- ----------------------------
MARCH 31, MARCH 31, to
---------------------------- ----------------------------
1999 1998 1999 1998 MAR 31, 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock -- -- -- 90,625 820,100
Sale of preferred stock -- -- -- -- 3,000,000
Costs to raise capital -- (25,000) -- (25,000) (357,023)
Loan payments -- -- -- 500 (22,000)
Common stock redeemed -- -- -- -- (5,700)
NET CASH PROVIDED BY FINANCING
----------- ----------- ----------- ----------- -----------
ACTIVITIES -- (25,000) -- 66,125 3,435,377
----------- ----------- ----------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH (434,198) (147,039) (1,279,610) (244,274) 165,642
CASH, BEGINNING 602,032 174,125 1,447,444 271,360 2,192
----------- ----------- ----------- ----------- -----------
CASH, ENDING $ 167,834 $ 27,086 $ 167,834 $ 27,086 $ 167,834
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
7
<PAGE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED MARCH 31, 1999
(Unaudited)
1. Summary of significant accounting policies
Financial statements
The balance sheet as of March 31, 1999, and the related statements of
stockholders' equity, operations and cash flows for the three and six months
ended March 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 and six months ended March 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, 1999. 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,
1998.
Fair market value of financial instruments
The fair market value of the notes receivable approximates cost bases 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 affected as a component of stockholders' equity.
Loss per share
The computations of loss per share of common stock on the weighted average
number of shares outstanding of 8,567,148 (1999), 7,949,648 (1998) and 7,389,917
(cumulative period).
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 securities.
8
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Concentration of credit risk
The Company primarily transacts its business with two financial institutions and
may maintain deposits in excess of federally insured limits. At March 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 March 31, 1999, notes receivable consist of the following:
Note receivable, interest at
10% per year, collateralized
by interest in a mining
company, due by June 24, 1999 $185,900
Note receivable, collateralized
By equipment and common stock,
Interest at 12% per year, due
May 27, 1999. 100,000
Note receivable, uncollateralized,
Interest at 10% per year, due by
June 1, 1999 200,000
--------
$485,900
========
3. Stock options and warrants outstanding
Options Exercise
Warrants Price Exercise date
-------- ----- -------------
Options granted 280,000 $ .1875 July 16, 1999 to
September 30, 2006
Options granted 50,000 .1875 Up to
September 30, 2006
Warrants issued 300,000 2.000 Up to
January 21, 2001
Warrants issued 300,000 3.875 Up to April, 2003
-------
Options/warrants
Outstanding at
March 31, 1999 930,000
=======
Options/warrants
Exercisable at
March 31, 1999 650,000
=======
9
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Item 2 Management's Discussion and Analysis or Plan of Operations
The following discussion should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this quarterly
report on Form 10-QSB for the quarter and six months ended March 31, 1999 (the
"Form 10-QSB"). In addition to historical information, this Form 10-QSB contains
forward-looking statements. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reflected in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in the section entitled "Management's Discussion and Analysis or
Plan of Operations." Readers are cautioned not to place undue reliance on these
forward-looking comments, which reflect management's analysis only as of the
date hereof. Environmental Products & Technologies Corporation (the "Company")
undertakes no obligation to publicly revise these forward-looking comments, or
to reflect events or circumstances that arise after the date thereof. Readers
should carefully review the risk factors described in the other documents that
the Company has filed and will continue to file from time to time with the
Securities and Exchange Commission.
GENERAL
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 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. The Company is currently in the development stage of operations and,
to this time, has devoted its time to raising capital, product and supplier
development, and marketing future products. No products have been assembled,
manufactured or marketed at this time, except that the Company has assembled one
prototype Closed-Loop Waste Management System for demonstration purposes and
three prototype systems for operation by various universities. As of March 31,
1999, the Company had a deficit accumulated during the development stage of
$6,423,871 and an accumulated deficit prior to the development stage of
$695,452.
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. These units well be employed for
continued demonstrations and sales activity. While the development of an
input/feed conveyor system has been completed, a variable discharge mechanism to
load and unload the Bioreactor needs to be completed. In addition, a liquids
waste process has been developed but needs to have its testing completed.
10
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THE THREE AND SIX MONTHS ENDED MARCH 31, 1999 AND 1998.
The Company recognized no revenue for the three and six months ended
March 31, 1999, and for the three and six months ended March 31, 1998. During
each such period, the Company's efforts were directed at researching, designing,
developing and testing its Closed-Loop Waste 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 March 31,
1999 increased approximately 251% or $85,655, to $119,747 from $34,092 for the
three-month period ended March 31, 1998. For the six-month period ended March
31, 1999 and 1998, the Company's research and development expenses were $208,147
and $247,996, respectively, which represent a decrease of $39,849, or
approximately 16%. During each such period the Company continued research and
development work on the Closed-Loop Waste Management System.
General and administrative expenses primarily consist of general and
administrative costs related to the salaries of the Company's administrative
personnel and associated costs, including legal and consulting fees. General and
administrative expenses for the three months ended March 31, 1999, increased by
$18,445 or six percent to $322,263 from $303,818 for the three-month period
ended March 31, 1998. For the six months ended March 31, 1999, expenses
increased by $242,539, or 67%, to $604,167 from $361,628 for the six-month
period ended March 31, 1998. This is due to increased spending for legal and
professional fees, salaries and travel.
The Company's loss from operations for the three months ended March 31,
1999, increased by $104,100, or 31%, to $442,010 from $337,910 for the
three-month period ended March 31, 1998. The Company's loss from operations for
the six months ended March 31, 1999, increased by $202,690, or 33%, to $812,314
from $609,624 for the three-month period ended March 31, 1998. This increase in
loss from operations is mainly attributed to increased research and development,
salaries, legal and professional fees, and travel, partially offset by reduced
consulting 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
March 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
11
<PAGE>
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
this 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 continued research and development, working capital, and general
corporate purposes. The Private Placement Warrants have an initial exercise
price of $3.875 per share. The 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, reorganizations, reclassifications, consolidations, certain
dilutive sales of securities for which the Private Placement Warrants are
exercisable 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 to
the Company; and (iii) an office lease that expires December 31, 1999.
Based on its current operating plan, the Company foresees the need to
raise additional capital in order to continue to pursue its business strategy
and is currently seeking external funding. 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
limitation, the extent and timing of sales of the Company's waste management
system, future product costs, the timing and costs 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 that 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 debt or equity financing.
There can be no assurance that, if and when needed, additional financing will be
available, or available on acceptable
12
<PAGE>
terms. The inability to obtain additional financing or generate sufficient cash
from operations could require the Company to reduce or eliminate expenditures
for capital equipment, research and development, production or marketing of its
products, or otherwise curtail or discontinue its operations, which could have a
material adverse affect 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.
ANNUAL STOCKHOLDERS' MEETING
The annual stockholders' meeting was held April 19, 1999. The
stockholders elected three directors, R. Marvin Mears, Charles M. Vance, and
Gerald G. Nordstrom. The proposals to adopt a 1999 stock incentive plan, 1999
incentive compensation plan, and 1999 non-employee director restricted stock
plan, as well as appointment of the auditors, were all approved.
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) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K.
None.
13
<PAGE>
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: May 10, 1999 By: /s/Marvin Mears
Marvin Mears
Chief Executive Officer
14
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