SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
Commission File Number 33-3385
EARTH PRODUCTS AND TECHNOLOGIES, INC.
-------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 87-0430816
- ------ ----------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
525 South 300 East, Salt Lake City, Utah 84111
------------------------------------------------
(Address of principal executive offices) (Zip Code)
(801) 323-2395
--------------
(Issuer's telephone number including area code)
215 South State Street, Suite 1100, Salt Lake City, Utah 84111
--------------------------------------------------------------
(Former address, if changed since last report)
Indicate by check mark whether the issuer (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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of September 30, 1998, the Issuer had issued and outstanding an
aggregate of 12,702,004 common voting shares, par value $0.001
PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
--------------------
The unaudited financial statements of Earth Products and Technologies,
Inc. (the Company) for the quarter ended September 30, 1998 are attached
hereto and incorporated by reference.
ITEM 2 MANAGEMENT DISCUSSION & ANALYSIS OF PLAN OF OPERATION
-----------------------------------------------------
The Company is a holding company which owns one subsidiary, Environmental
Water Systems, Inc., a Nevada corporation (EWS). In addition to directing the
activities of its subsidiary, the Company is actively seeking to acquire
additional businesses involved in the environmental industry.
The Company has $3,473.00 in revenues from operations for the quarter
ended September 30, 1998 as compared to $0.00 in revenues for the previous
quarter which ended on June 30, 1998. It is hoped that revenues from EWS for
the fourth quarter will be sufficient to maintain that operation. It may be
necessary, however, to raise additional capital for the further operation of
EWS, should their marketing efforts not provide sufficient operating capital.
On September 10, 1998 the Board of Directors by unanimous vote, resolved
to distribute the Company's wholly owned subsidiary EPAT, Inc. to its
shareholders through a stock dividend distribution. This action established
EPAT, Inc. as an independent company, in the hope that Earth Products and
Technologies, Inc. will be able to more effectively focus on the operations of
EWS, and seek more profitable business opportunities. Shareholders of the
Company will receive one share of EPAT, Inc. for every ten shares of the
Company's stock held.
ENVIRONMENTAL WATER SYSTEMS, INC.
The Board of Directors of the Company approved a plan for the Company to
acquire substantially all of the issued and outstanding shares of
Environmental Water Systems, Inc. (EWS) on June 7, 1997. This Acquisition was
completed on July 21, 1997.
EWS was incorporated in 1995 in the State of Nevada and operates with
corporate headquarters in Denver, Colorado. EWS?' primary business is
providing turnkey wastewater treatment systems. This turnkey solution
includes marketing, designing, manufacturing, installation and maintenance of
its patented and proprietary industrial waste water systems. EWS initially
obtained a marketing and manufacturing license for a patented
electrocoagulation reaction chamber. Since obtaining this license, EWS has
further developed technology which, when combined with the aforementioned,
provides a complete wastewater treatment system for industries whose
wastewater contains heavy metals, emulsified oil and other organic and
inorganic matter (the EWS Treatment System). To date the EWS Treatment System
is in use by several businesses in Colorado, Mississippi, California and
Louisiana.
In addition to designing and manufacturing systems, EWS has a complete
water-testing laboratory to support the specific design of it's treatment
systems. EWS continues a very aggressive research and development program
which should open additional markets.
The EWS Technical Team is comprised of over 20 professionals that
specialize in different technologies used in the treatment of wastewater.
Many members of the Team have one or more Doctorate Degrees in the areas of
chemistry, metallurgy and electronics. In the customer evaluation process the
Team studies the specific needs of the customer and a customized wastewater
treatment system is designed utilizing the patented and proprietary systems
licensed and owned by EWS.
The Market
- ----------
In the past 20 years the United States government and other governments
throughout the world have enacted many environmental laws. The U.S.
Environmental Protection Agency (EPA) has established progressively stricter
discharge standards based on Best Demonstrated Available Technology, with the
ultimate goal being ZERO DISCHARGE and the restoration of ground water to
drinking water standards. Industry throughout the world is now being forced
by government regulation to clean up their discharge water. With these
mandates being enforced, there is a need for effective and economical
treatment systems. These systems must accommodate the most stringent water
users today and in the future.
There are many different technologies dealing with water treatment in the
market today. None of these use the same type of technology in the same
configuration as the patented and proprietary component of the EWS Treatment
System. Industry has typically used chemicals and forms of filtration devices
to clean its wastewater to date. EWS does not use these processes as its key
technology. Through the use of existing filtration systems and the EWS
patented and proprietary process, EWS's system results in significantly less
harmful particulate in the discharge water with lower overall operational
costs.
Competition
- -----------
The Company is aware of no other companies in the water purification
business using the same type of technology that makes up the basic component
of the proprietary EWS Treatment System. The industry has and currently is
using primarily chemicals and filtration as key parts of their systems to
clean discharge water. EWS can supply its customers with a complete treatment
system or can retrofit specific components to an existing treatment system,
often lowering overall system operating cost. EWS can combine its treatment
systems with the customer's existing treatment system resulting in a reduction
in overall operational costs and compliance with water discharge requirements.
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
-----------------
The Company is not a party to any proceedings or threatened proceedings
other than those discussed in its Report on Form 10-KSB for its year ended
December 31, 1997, which discussion, pursuant to Rule 12b-23, is incorporated
herein by this reference. There have been no material developments in any
legal proceedings reported on in the Form 10-KSB for the year ended December
31, 1997, nor are there any new proceedings or threatened proceedings to which
the Company is a party or threatened to be made a party.
ITEM 2 CHANGES IN SECURITIES
---------------------
On September 10, 1998, the Company's Board of Directors resolved to cause
a common stock dividend of the Company's wholly owned subsidiary EPAT, Inc.
Company shareholders of record at 5:00 p.m. MDT on September 15, 1998 will
receive one share of EPAT, Inc., par value $.001, for every ten shares held.
The Company intends to distribute an aggregate of 1,270,200 shares of EPAT,
Inc. to the Company's shareholders, with the distribution to be completed by
December 31, 1998. Shareholders eligible to receive fractional shares shall
be rounded up and receive one whole share.
In September of 1998, the Company issued an aggregate of 195,000 shares
of the Company's restricted common stock pursuant to a private offering
beginning on April 15, 1998. The securities were sold to accredited investors
and to not more than 35 unaccredited investors as those terms are defined
under Regulation D of the Securities Act of 1933, as amended (the 'Securities
Act'). The Company offered 50 units of 10,000 common shares at $.50 per share
for a total offering price of $250,000. A 10% commission was paid to licensed
broker/dealers or registered investment counselors. At the time of this
filing, the private offering remains open.
The Company claims exemption from the registration requirements of
Section 5 of the Securities Act pursuant to Regulation D. The securities were
sold to not more than 35 non-accredited investors. Each prospective purchaser
executed and delivered to the Company a Subscription Agreement and an Investor
Suitability Statement, which established: 1) whether the prospective
purchaser met the minimum suitability standards for an accredited investor as
defined by Rule 501(a) of the Securities Act; or whether the non-accredited
investor had sufficient knowledge to evaluate the merits and risks of an
investment in the securities, and 2) established the prospective purchasers'
investment intent, with no view toward the resale or distribution of the
securities. Prospective purchasers received a private offering memorandum
which provided the Company's non-financial and financial information as
required by Rule 502(b)(2) promulgated under the Securities Act. The Company
did not use general solicitation or advertising. The Company took reasonable
care to inform the purchaser that resale or distribution of the securities
would require registration under the Securities Act and/or state laws, and the
Company placed a restrictive legend on the certificates representing the
securities.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
ITEM 5 OTHER INFORMATION
-----------------
Subsequent Event: On October 20, 1998 the Company moved its
Corporate Headquarters to 525 South 300 East, Salt Lake City, UT 84111
Subsequent Event: In November of 1998, the Company issued an
additional 214,000 restricted common shares pursuant to a private offering
beginning on April 15, 1998 (see 'Changes in Securities'). The securities
were sold to accredited investors and to not more than 35 unaccredited
investors as those terms are defined under Regulation D of the Securities Act
of 1933
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
The following exhibits are attached hereto and incorporated herewith.
Exhibit # Description
- --------- -----------
27 Financial Data Schedule
No Reports on 8-K were filed during the quarter ended September 30, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report be signed on its behalf by the undersigned, thereunto duly
authorized.
DATED this 16th day of November, 1998.
EARTH PRODUCTS AND TECHNOLOGIES, INC.
By:/s/ John W. Peters
------------------
John W. Peters
President and CEO
Earth Products and Technologies, Inc.
Consolidated Financial Statements
September 30, 1998 (unaudited)
and
December 31, 1997
<Letterhead of Crouch, Bierwolf & Chisholm
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
Office (801) 363-1175
Fax (801) 363-0615>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Earth Products and Technologies, Inc.
Salt Lake City, Utah
The accompanying balance sheets as of September 30, 1998 and the related
statements of operations, and cash flows for the nine months ended September
30, 1998 and 1997 were not audited by us and, accordingly, we do not express an
opinion on them.
The accompanying balance sheet as of December 31, 1997 was audited by us and
we expressed an unqualified opinion on it in our report dated April 9, 1998.
/s/ Crouch, Bierwolf & Chisholm
November 10, 1998
Earth Products and Technologies, Inc.
Consolidated Balance Sheets
ASSETS
-------
September 30 December 31
1998 1997
------------ -----------
CURRENT ASSETS (unaudited)
Cash and Cash Equivalents $ 4,813 $ 3,210
Accounts receivable, Net of
Allowance 1997 $0; 1998 $0 27,334 40,161
Loans Receivables 469,000 -
Inventory 47,753 54,563
------------ -----------
Total Current Assets 548,900 97,934
------------ -----------
PROPERTY & EQUIPMENT 105,784 191,511
OTHER ASSETS
Goodwill 98,264 106,686
Work in Progress Inventory 381,143 381,143
------------ ------------
Net Other Assets 479,407 487,829
------------ ------------
TOTAL ASSETS $1,134,091 $777,274
============ ============
The accompanying notes are an integral
part of these financial statements
Earth Products and Technologies, Inc.
Consolidated Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30 December 31
1998 1997
------------ -----------
CURRENT LIABILITIES (unaudited)
Accounts payable $ 94,946 $ 230,516
Accrued and Withheld Payroll Taxes 116,168 121,594
Accrued expenses 18,628 32,578
Notes Payable - shareholders 16,836 223,836
Current portion of Notes Payable 7,684 7,684
------------ -----------
Total Current Liabilities 254,262 616,208
------------ -----------
LONG-TERM DEBT
Notes payable 188,339 30,359
------------ -----------
Total Liabilities 442,601 646,567
------------ -----------
STOCKHOLDERS' EQUITY
Common stock, $.001 Par Value,
Authorized 50,000,000 Shares;
issued and outstanding 12,702,004
and 7,287,004 shares, respectively 12,702 7,287
Additional Paid-In Capital 3,538,904 2,824,319
Retained earnings (2,860,116) (2,700,899)
------------ -----------
Total Stockholders' Equity 691,490 130,707
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,134,091 $ 777,274
============ ===========
The accompanying notes are an integral
part of these financial statements
Earth Products and Technologies, Inc.
Consolidated Statements of Operations
For the three For the three For the Nine For the Nine
months ended months ended months ended months ended
September 30 September 30 September 30 September 30
1998 1997 1998 1997
------------ ------------- ------------ ------------
SALES $ 3,473 $ 27,492 $ 3,473 $ 51,483
COST OF GOODS SOLD - 90,016 - 95,887
------------ ------------- ------------ ------------
GROSS PROFIT 3,473 (62,524) 3,473 (44,404)
------------ ------------- ------------ ------------
OPERATING EXPENSES
General And
Administrative
Expenses 92,047 227,356 156,794 464,838
------------ ------------- ------------ ------------
TOTAL OPERATING
EXPENSES 92,047 227,356 156,794 464,838
------------ ------------- ------------ ------------
OPERATING INCOME
(LOSS) (88,574) (289,980) (156,794) (509,242)
------------ ------------- ------------ ------------
OTHER INCOME AND
(EXPENSES)
Minority Interest - - - 24,535
Other Expense (12,173) - (3,118) -
Interest Expense (819) (284) (2,642) (2,319)
------------ ------------- ------------ ------------
Total Other
Income/(Expense) (12,992) (284) (5,760) 22,216
------------ ------------- ------------ ------------
NET LOSS $ (101,566) $ (290,164) $ (159,081) $ (487,026)
============ ============= ============ ============
The accompanying notes are an integral
part of these financial statements
Earth Products and Technologies, Inc.
Consolidated Statements of Cash Flows
For the Nine For the Nine
months ended months ended
September 30 September 30
1998 1997
------------ ------------
Cash Flows From Operating Activities
Net income (loss) $ (159,081) $ (494,669)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Used in Operating Activities:
Depreciation 30,750 -
Amortization 8,423 -
Stock issued for services 15,000 -
Loss on sales 12,043 -
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts Receivable 12,827 (13,135)
Other Receivables - (35,938)
Inventory 6,810 (78,234)
Increase/(decrease) in:
Accounts Payable (135,570) 102,397
Accrued Expenses (19,376) 35,258
Other Payable 72,194 -
------------ -----------
Net Cash Provided (Used) by
Operating Activities (155,980) (484,321)
------------ -----------
Cash Flows from Investing Activities
Cash paid for Notes Receivable (469,000) -
Cash from sale of assets 4,753 -
Purchase of Property and Equipment - (57,217)
------------ -----------
Net Cash Provided (Used) by Investing
Activities (464,247) (57,217)
------------ -----------
Cash Flows from Financing Activities
Proceeds from debt financing 626,000 431,579
Cash received in acquisition - 17,178
Principal payments on debt financing (103,170) -
Proceeds from stock subscriptions 99,000 125,000
------------ -----------
Net Cash Provided (Used) by
Financing Activities 621,830 573,757
------------ -----------
Net Increase (Decrease) in Cash and Cash
Equivalents 1,603 32,219
------------ -----------
Cash and Cash Equivalents
Beginning 3,210 6,714
------------ -----------
Ending $ 4,813 $ 38,933
=========== ============
Supplemental Disclosures of Cash Flow
Information:
Cash payments for interest $ 2,642 $ 2,319
============ ============
Cash payments for income taxes $ 130 $ -
============ ============
Supplemental Schedule of Noncash
Investing and Financing Activities
Conversion of Debt to equity $ 660,000 $ -
============= ============
The accompanying notes are an integral
part of these financial statements
GENERAL
- -------
Earth Products and Technologies, Inc. (the Company) has elected to omit
substantially all footnotes to the financial statements for the nine months
ended September 30, 1998 since there have been no material changes (other than
indicated in other footnotes) to the information previously reported by the
Company in their Annual Report filed on the Form 10-KSB for the fiscal year
ended December 31, 1997.
UNAUDITED INFORMATION
- ---------------------
The information furnished herein was taken from the books and records of the
Company without audit. However, such information reflects all adjustment
which are, in the opinion of management, necessary to properly reflect the
results of the interim period presented. The information presented is not
necessarily indicative of the results from operations expected for the full
fiscal year.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,813
<SECURITIES> 0
<RECEIVABLES> 496,334
<ALLOWANCES> 0
<INVENTORY> 47,753
<CURRENT-ASSETS> 548,900
<PP&E> 105,784
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,134,091
<CURRENT-LIABILITIES> 254,262
<BONDS> 0
0
0
<COMMON> 12,702
<OTHER-SE> 678,788
<TOTAL-LIABILITY-AND-EQUITY> 1,134,091
<SALES> 3,473
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 156,794
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,642
<INCOME-PRETAX> (159,081)
<INCOME-TAX> 0
<INCOME-CONTINUING> (159,081)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (159,081)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
