U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ________ to _________
Commission FILE NO. 0-29834
ENVIRONMENTAL PRODUCTS GROUP, INC.
(Exact name of Small Business Issuer as specified in its charter)
DELAWARE 22-3639092
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
5230 South Service Road
Burlington, Ontario L7L 5K2 Canada
(Address of Principal Executive Offices)
(905) 332-3110
(Issuer's Telephone Number, including area code)
State whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such other 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 ____ No X
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 11,782,586
Transitional Small Business Disclosure Format (check one):
Yes ____ No X
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
ENVIRONMENTAL PRODUCTS GROUP, INC.
(Formerly VERSATECH ENVIRONMENT GROUP, INC.
and ENVIRONMENTAL SATELLITE CORPORATION)
A DEVELOPMENT STAGE COMPANY
UNAUDITED
FINANCIAL STATEMENTS
FEBRUARY 29, 2000
TABLE OF CONTENTS Page
Number
FINANCIAL STATEMENTS
STATEMENT 1 - BALANCE SHEET 1
2 - STATEMENTS OF OPERATIONS 2
3 - STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY 3
4 - STATEMENTS OF CASH FLOWS 4
NOTES TO FINANCIAL STATEMENTS 5-7
ENVIRONMENTAL PRODUCTS GROUP, INC.
(Formerly VERSATECH ENVIRONMENT GROUP, INC.
and ENVIRONMENTAL SATELLITE CORPORATION)
A DEVELOPMENT STAGE COMPANY
UNAUDITED
BALANCE SHEET
FEBRUARY 29, 2000
Info Only
FEB. 29, MAY 31,
ASSETS 2000 1999
CURRENT ASSETS
Cash in Bank $ 84,752 $ 1,912
OTHER ASSETS
Organization Costs (Note 3) $1,107,223 $ 689,563
TOTAL ASSETS $1,191,975 $ 691,475
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable/Accruals (Note 4) $ 21,464 $ 21,464
OTHER LIABILITIES
Loans/Advances due Shareholders (Note 5) $ 533,550 $ 33,050
TOTAL LIABILITIES $ 555,014 $ 54,514
STOCKHOLDERS' EQUITY
CAPITAL STOCK
Preferred Stock - None, Authorization of preferred
stock rescinded on October 21, 1998 (Note 1) $ -0- $ -0-
Common Stock - 20,000,000 Shares authorized at
$.001 per share; 11,782,586 shares issued and
outstanding at $.001 per share at May 31, 1999,
and February 29, 2000. (SEE NOTE 1) $ 11,782 $ 11,782
ADDITIONAL PAID-IN CAPITAL (SEE NOTE 1) $ 625,179 $ 625,179
TOTAL STOCKHOLDERS' EQUITY $ 636,961 $ 636,96
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,191,975 $ 691,475
========= =========
"SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS"
-1-
ENVIRONMENTAL PRODUCTS GROUP, INC.
Formerly VERSATECH ENVIRONMENT GROUP, INC.
and ENVIRONMENTAL SATELLITE CORPORATION)
A DEVELOPMENT STAGE COMPANY
UNAUDITED
STATEMENTS OF OPERATIONS
FOR THE FIRST QUARTER PERIOD ENDING FEBRUARY 29, 2000
ACCUMULATED EARNINGS (DEFICIT)
SINCE INCEPTION February 29, 2000
---------------------------------------------------
REVENUES $ -0-
---------------------------------------------------
EXPENSES $ -0-
---------------------------------------------------
NET INCOME (LOSS) $ -0-
===================================================
EARNINGS (LOSS)
PER SHARE $ -0-
"SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS"
-2-
ENVIRONMENTAL PRODUCTS GROUP, INC.
(FORMERLY VERSATECH ENVIRONMENT GROUP, INC.
and ENVIRONMENTAL SATELLITE CORPORATION)
A DEVELOPMENT STAGE COMPANY
UNAUDITED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE FIRST QUARTER PERIOD ENDING FEBRUARY 29, 2000
----------------------------------------------------
PREFERRED STOCK - No (0) Shares issued and outstand-
ing as preferred stock was rescinded on October 21,
1998. (See Note 1)
----------------------------------------------------
COMMON Common Stock Additional
STOCK No. of Paid-In
ONLY Shares Amount Capital Total
--------------------------------------------------------------------------------
Totals as of May 31,
1999
11,782,586 $ 11,782 $ 625,179 $ 636,961
========================================================
NO CHANGES FOR
PERIOD 6/1/99
TO 2/29/00 -0- -0- -0- -0-
--------------------------------------------------------------------------------
Totals as of Feb. 29,
2000
11,782,586 $ 11,782 $ 625,179 $ 636,961
================================================================================
"SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS"
-3-
ENVIRONMENTAL PRODUCTS GROUP, INC.
(FORMERLY VERSATECH ENVIRONMENT GROUP, INC.
and ENVIRONMENTAL SATELLITE CORPORATION)
A DEVELOPMENT STAGE COMPANY
UNAUDITED
STATEMENT OF CASH FLOWS
FOR THE FIRST QUARTER PERIOD ENDING FEBRUARY 29, 2000
February 29, 2000
224: -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ -0-
---------------------------------------------------------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES $ -0-
======================================================
CASH FLOWS FROM
INVESTING ACTIVITIES
Increase in organization costs $(417,660)
Decrease in Accounts Payable -0-
---------------------------------------------------------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES $(417,660)
=============================================================
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from:
Shareholder $ 500,050
---------------------------------------------------------------
NET CASH PROVIDED (USED)
FROM FINANCING ACTIVITIES $ 500,050
===============================================================
NET INCREASE
(DECREASE) IN CASH $ 82,840
CASH - BEGINNING OF YEAR $ 1,912
---------------------------------------------------------------
CASH - END OF PERIOD $ 84,752
===============================================================
"SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS"
===============================================================
-4-
ENVIRONMENTAL PRODUCTS GROUP, INC.
(Formerly VERSATECH ENVIRONMENT GROUP, INC.
and ENVIRONMENTAL SATELLITE CORPORATION
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 1. ORGANIZATION
The Company was incorporated on September 26, 1990 under the laws of the
State of Delaware. On November 19, 1990, the Company merged with District
Corporation, a company incorporated under the laws of the State of
Nevada, in a share
for share stock exchange wherein the shareholders of District
Corporation, exchanged
their shares of stock for those of Environmental Satellite
Corporation, leaving
Environmental Satellite Corporation as the surviving corporation.
This exchange was
accounted for as a tax-free reorganization under Section 368
(a) (1) (c), or 338H-10,
the Internal Revenue Service Code, 1986, as amended. This
method provides for a
tax-free exchange of assets, subject to liabilities, for common
stock. District Corporation
originally merged with Axelsen Advertising and Research, Inc.,
a Utah corporation
incorporated on December 1, 1976, on November 14, 1990.
On June 12, 1993, the shareholders consented to changing the Company's
name to VERSATECH ENVIRONMENT GROUP, INC. The Company also decided
that it will be in the business of the manufacture and sales of more
environmentally
friendly products for the construction and automobile industries.
On October 21, 1998, the Company changed its name to ENVIRONMENTAL
PRODUCTS GROUP, INC. On the same date, the Company amended its Certificate
of Incorporation to rescind the authorization to issue preferred shares
and to reduce
the number of authorized common shares it could issue from 200,000,000 with par
value of $0.001 per share to 20,000,000 shares with a par value of
$0.001 per share.
On November 20, 1998, the Company acquired all the outstanding shares
of Formulated Mouldings (Canada), Inc. (FMCI), Environmental Shelter Corporation
(ESC) and Environmental Fuel Technology, Inc. (EFT). These companies were
purchased by issuing 8,389,926 shares of the Company's common stock. The
foregoing shares issued by the Company were issued pursuant to an exemption
from registration (Section 4(2) under the Securities Act of 1933, as amended
("Act")
and Rule 504 promulgated under the Act. The shares cannot be sold or otherwise
transferred without a registration under the Act or an exemption from
registration.
Rule 144 promulgated under the Act requires among other things, a holding
period of one year from the date of receiving full consideration for the
shares.
On May 28, 1999, the Company sold the operations of FMCI for $100.00.
The sale did not include any of the right, title and interest in and to the
proprietary information and technology concerning production of extruded
plastic mouldings from scrap diaper and other material.
The Company is considered a development stage company, as defined
in Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development Stage Enterprises."
-5-
ENVIRONMENTAL PRODUCTS GROUP, INC.
(FORMERLY VERSATECH ENVIRONMENT GROUP, INC.
and ENVIRONMENTAL SATELLITE CORPORATION)
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
293: A. The accrual method of accounting is employed to meet generally
accepted accounting principles (GAAP).
B. Organization Costs (See Note 3) - Organization costs will be
amortized over sixty (60) months using the straight line method of
amortization,
upon commencement of operations.
The Company is presently considered a "Development Stage
Company", per SFAS No. 7.
C. Income Taxes - No provision for income taxes has been made
because the Company had not commenced operations as of this report date.
D. Accounts Payable/Accruals (See Note 4)
E. Loans/Advances due Shareholders (See Note 5)
F. Capital Stock/Additional Paid-In Capital (See Statement of Changes
in Stockholders' Equity (See Note 1)
G. Contingencies (See Note 6)
H. Commitments (See Note 7)
I. Litigation - There is no pending litigation as represented by the
corporation's management.
NOTE 3. ORGANIZATION COSTS
Organization costs are made up of the following items:
Info
Only
Feb. 29, May 31,
2000 1999
Incorporation, filings, etc. $ 19,000 $ 19,000
FCN Financial Services, Inc.
- Merger Fees 36,000 36,000
United Stock Transfer
- Transfer Agent 4,514 4,514
Audit and accounting fees 21,500 21,500
Standard and Poor's - Listing Fees 2,080 2,080
2,750 2,750
Miscellaneous Costs 722 722
Technology and information rights 602,997 602,997
Research and Development Costs 417,660 -0-
------- -------
Total - Organization Costs $1,107,223 $689,563
-6-
ENVIRONMENTAL PRODUCTS GROUP, INC.
(FORMERLY VERSATECH ENVIRONMENT GROUP, INC.
and ENVIRONMENTAL SATELLITE CORPORATION)
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 2000
NOTE 4. ACCOUNTS PAYABLE/ACCRUALS
Accounts payable/accruals are made up of the following items:
Info
Only
Aug. 31, May 31,
1999 1999
Accounting/Audit Fees $ 4,500 $ 4,500
Legal Fees 2,000 2,000
Filing Fees 11,200 11,200
Stock Transfer Agent Fees 3,764 3,764
------ ------
Total - Accounts Payable/Accruals $21,464 $21,464
NOTE 5. LOANS/ADVANCES DUE SHAREHOLDERS
A shareholder has advanced a series of loans to the Company from
1993 through this reporting period, totaling $533,550. No terms of repayment
or interest has been established as of the report date.
NOTE 6. CONTINGENCIES
These financial statements have been prepared on the basis
of accounting principles applicable to a going concern. The ability of
the Company to continue is dependent on its ability to raise working
capital and realize profitable operations.
NOTE 7. COMMITMENTS
Stock options for 400,000 shares of common stock, held by
shareholders and directors, exercisable at $.50 (fifty cents) per share,
will expire on November 30, 1999. All restricted common stock issued
has expired, except for the shares issued pursuant to the acquisition of
FMCI, ESC AND EFT (See Note 1). The stock options expired and no
shares were issued. The Company had no other commitments as of the
report date.
-7-
Item 2. Management's Discussion and Analysis or Plan of Operation.
The Company is preparing the statistical and promotional material
needed for a Canadian license for the manufacture and distribution of its
plastic trim line. Once said materials are completed, the Company can
then address the actual sale of a license for the Canadian market place for
its trim products.
During this period and for the ensuing year the Company anticipates
that it will need to raise some additional capital primarily through debt.
A major
shareholder and officer has agreed to lend the necessary operational funds
required during the ensuing year. If any funds are received as a result of
the
license program, such funds will be used to either repay the debt or used for
working capital. The Company believes that the funds available to it from the
officer will be sufficient to allow it to operate over the next twelve months.
Staff will be limited to a maximum of five key employees during this period.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved and has not been involved in any litigation and, to
the best of its knowledge, is not aware of any facts that would likely lead to
litigation. Further, management is not aware of any threatened litigation.
Item 2. Changes in Securities and Use of Proceeds.
The Company has not changed any of the terms or rights associated with
any class of registered securities.
In November 1998 the Company, through a number of transactions, acquired
Formulated Mouldings (Canada) Inc. ("FMCI"), Environmental Shelter Corporation
Inc. ("ESC") and Environmental Fuel Technology, Inc. ("EFT"). In addition, the
Company also purchased a promissory note of FMCI from The Reclamation (US)
Corporation and also issued common stock to FMCI employees. The terms and
conditions of these transactions are as set forth below.
EFT owned all right, title and interest in and to proprietary information
concerning the production of fuel from scrap containerboard waste and other
material. The Company acquired that know-how by way of an agreement and plan of
reorganization (the "EFT Plan"). Under the terms of the EFT Plan, the Company
issued 544,500 shares of its voting common stock to the shareholders of EFT in
exchange for all of the outstanding shares of EFT common stock. The book value
of EFT was $544.50. The shares were issued based upon Rule 504 promulgated
under the Securities Act of 1933 as amended as well as Section 4(2) of said act.
ESC owned all right, title and interest in and to proprietary technology and
know-how regarding the production of extruded plastic sheeting from scrap
diaper
and other materials. These materials were then designed to be used
in connection
with plastic shelters. The Company acquired this technology by way of an
agreement and plan of reorganization (the "ESC Plan"). Under the ESC Plan, the
Company issued 665,000 voting common shares in exchange for all of the
outstanding common stock of ESC. The book value of ESC was $665.00. The shares
were issued based upon Rule 504 promulgated under the Securities Act of 1933 as
amended as well as Section 4(2) of said act.
FMCI owned all right, title and interest in and to proprietary information
concerning the production of extruded plastic moldings from scrap diaper and
other material. The Company acquired that know-how by way of an agreement and
plan of reorganization (the "FMCI Plan"). Under the terms of the FMCI Plan, the
Company issued 7,180,426 shares of its voting common stock to the shareholders
of FMCI in exchange for all of the outstanding shares of FMCI common stock. The
book value of FMCI was $324,281.25 Canadian or $214,025.63 (US).
The shares were
issued based upon Rule 504 promulgated under the Securities Act of 1933 as
amended as well as Section 4(2) of said act.
The Company also purchased a promissory note made by FMCI in the principal
amount of $885,636.12 (Canadian) ($584,519.76 (US)). FMCI borrowed this money
from The Reclamation (US) Corporation for a variety of purposes, including
without limitation, working capital and research and development of its
extruded
plastic molding products. The Company issued 2,859,878 shares of its voting
common stock to purchase the promissory note and later extinguished the note in
exchange for the transfer of technology from FMCI as security for the note. The
shares were issued based upon Rule 504 promulgated under the Securities Act of
1933 as amended as well as Section 4(2) of said act.
Finally, the Company issued 472,000 shares of common stock to employees
of FMCI. These shares were issued to acknowledge loyal, good and faithful
service on the part of those employees. The shares were issued based upon Rule
504 promulgated under the Securities Act of 1933 as amended as well as Section
4(2) of said act.
Item 3. Defaults Upon Senior Securities.
There has been no default in the payment of debt service or any other
material default on any indebtedness of the Company exceeding 5% of the total
assets of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no items submitted to a vote of security holders during the
three months ended February 29, 2000.
Item 5. Other Information.
The Company has no other information to report.
Item 6. Exhibits and Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended
February 29, 2000.
INDEX TO EXHIBITS
The exhibits to be filed with this Form 10-QSB are hereby
incorporated by reference from the exhibits filed with issuer's
filing on Form 10-SB, as follows:
2 (i)
A. Certificate of Incorporation of the Company, as amended
B. Certificate of Incorporation of FMCI, as amended
C. Certificate of Incorporation of EFT, as amended
D. Certificate of Incorporation of ESC, as amended
2. (ii)
E. Bylaws of the Company
F. Bylaws of FMCI
G. Bylaws of EFT
H. Bylaws of ESC
3.
I. Specimen Common Stock Certificate
6.
J. Lease Agreement dated May 1997 by and between Fairgate Centre Ltd. and The
Reclamation (US) Corporation.
K. Agreement and Plan of Reorganization between the Company and FMCI dated
November 20, 1998
L. Agreement and Plan of Reorganization between the Company and EFT dated
November 20, 1998
M. Agreement and Plan of Reorganization between the Company and ESC dated
November 20, 1998
SIGNATURES
In accordance with the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
ENVIRONMENTAL PRODUCTS GROUP, INC.
By:BLAINE C. FROATS
Blaine C. Froats, Chairman/CEO
