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 June 30, 1998
Commission File Number 33-3385
EARTH PRODUCTS AND TECHNOLOGIES, INC.
--------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 87-0430816
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(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
215 South State Street, Suite 1100, Salt Lake City, Utah 84111
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(801) 323-2394
--------------
(Issuer's telephone number including area code)
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 June 30, 1998, the Issuer had issued and outstanding an aggregate
of 12,507,004 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 June 30, 1998 are attached hereto
and incorporated by reference.
ITEM 2 PLAN OF OPERATION
-----------------
The Company is a holding company which owns two subsidiaries,
Environmental Water Systems, Inc., a Nevada corporation ("EWS"), and EPAT
Inc., a Delaware corporation ("EPAT"). In addition to directing the
activities of its subsidiaries, the Company is actively seeking to acquire
additional businesses involved in the environmental industry.
The Company has $0.00 in revenues from operations for the quarter ended
June 30, 1998 as compared to $0.00 in revenues for the previous quarter which
ended on March 31, 1998. It is hoped that revenues from EWS for the third
quarter will be sufficient to maintain that operation. It may be necessary,
however, to raise additional capital to complete the testing and evaluation of
the EPAT technology, and for the further operation of EWS, should their
marketing efforts not provide sufficient operating capital.
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's primary business is
providing turn-key waste water treatment systems. This turn-key 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.
EPAT, INC.
EPAT is continuing to document and engineer it's air purification system.
The EPAT Technology is an electro-mechanical system that has proven, in
monitored trials, that it is capable of reducing air pollutants from
commercial and industrial facility discharge systems by means of an electrical
field. The process uses non-thermal plasmas generated by electric arcs and
coronas that energize air stream molecules and remove pollutants by causing
them to undergo molecular changes. Research engineers retained by the Company
believe that the applications of this process have potential to be used by oil
refineries, steel production plants, public utility power plants, cogeneration
facilities, chemical producers, commercial printers, waste disposal
facilities, incinerators and other discharge facilities
The research engineers retained by EPAT have tested three prototype
configurations of the EPAT Technology. Tests of the EPAT Technology have
occurred, among others, on biomedical incineration and commercial printing
facilities. These tests were conducted by independent testing agencies that
measured removal rates of pollutants in industrial discharge. Such tests of
the EPAT prototype offer considerable promise for the development of the EPAT
Technology for numerous applications, although there can be no assurance that
such development will be successful.
Marketing Strategy
EPAT's short-term marketing strategy is to install a test/demonstration
unit at a host facility, which would agree to purchase a system from the
Company at such time as the unit demonstrates its effectiveness. It is
intended that a complete set of third party tests will by conducted at this
site to evaluate the capabilities and effectiveness of the EPAT Technology.
Other opportunities will be sought to install units for other applications
that are compatible with the current stage of development of the EPAT
Technology in an attempt to attain technical credibility for the systems.
Assuming the EPAT Technology is demonstrated to be successful in effectively
removing and reducing air pollutants, of which there can be no assurance, it
is anticipated that devices using the EPAT Technology will be manufactured in
various sizes. They would be capable of removing and reducing emissions of a
wide range of pollutants and compounds and of providing either primary or
secondary air stream treatment.
Competition
If EPAT is able to develop a product using the EPAT Technology that
is demonstrated to be effective in removing or reducing air pollutants, the
Company believes that the EPAT Technology can compete effectively with other
technologies currently available. These include, for example, scrubbers,
electrostatic precipitators, catalytic converters, carbon absorption systems,
filtration devices, thermal incinerators and other methods of controlling
emissions. If a system using the EPAT Technology is successfully developed,
of which there can be no assurance, the Company believes that such system will
compete favorably in a number of areas. The Company's system is intended to
reduce multiple pollutants in a single process, while most currently existing
systems are effective in reducing only one pollutant in the air stream and
require by-product removal and clean up. The Company believes that its system
will most likely compete favorably in the area of initial cost, the costs of
continued maintenance and effectiveness. The Company faces substantial
competition, however, from conventional environmental control methods and may
compete with companies that have more extensive research, marketing and
manufacturing capabilities and significantly greater financial, technical and
personnel resources than the Company.
Patent and Patent Applications
The Company has been issued a patent relating to the EPAT Technology from
the United States Patent and Trademark Office (Patent #5,366,701) and has
filed patent applications in several foreign jurisdictions. The Company may
seek additional patents with respect to the EPAT Technology in the United
States and internationally.
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
---------------------
In May 1998 the Company issued 100,000 common shares, at $0.10 per share,
to John W. Peters as consideration for his services as President of the
Company. In late May and early June 1998 the Company issued an aggregate of
5,100,000 common shares, at $0.10 per shares, to five creditors in
satisfaction of notes payable. On June 9, 1998, the Company issued 20,000
common shares, at $0.25 per shares, Rich Allen for services rendered to the
Company.
The above referenced common shares were initially issued by the Company
in separate and/or isolated transactions which did not involve a public
offering and are restricted securities as that term is defined in Reg.
230.144(a)(3) of the Securities Act of 1933. The issuance of these shares is
exempt from the registration requirements of Section 5 of the Securities Act
of 1933 by reasons of the provisions of Section 4(2) and the rules,
regulations and interpretative releases of the Securities and Exchange
Commission then in effect.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
ITEM 5 OTHER INFORMATION
-----------------
On June 9th, 1998 Benjamin Hoskins resigned as Director and Secretary
Treasurer. Anita Patterson was appointed to fill these vacancies until the
next annual meeting of shareholders. On July 7, 1998, Matt McLelland was
appointed to fill the vacancy on the Board of Directors caused by Mitch
Godfrey's resignation.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) The following exhibits are attached hereto and incorporated
herewith.
Exhibit # Description
- --------- -----------
1 Financial Data Schedule
No Reports on 8-K were filed during the quarter ended June 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 11th day of August, 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
June 30, 1998 (unaudited)
and
December 31, 1997
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 June 30, 1998 and the related statements
of operations, and cash flows for the six months ended June 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.
August 10, 1998
Earth Products and Technologies, Inc.
Consolidated Balance Sheets
ASSETS
-------
June 30 December 31
1998 1997
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CURRENT ASSETS (unaudited)
Cash and Cash Equivalents $ 7,704 $ 3,210
Accounts receivable, Net of Allowance
1997 $0; 1998 $0 23,861 40,161
Loans Receivables 370,000 -
Inventory 47,753 54,563
------------- -----------
Total Current Assets 449,318 97,934
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PROPERTY & EQUIPMENT 166,122 191,511
OTHER ASSETS
Goodwill 101,071 106,686
Work in Progress Inventory 381,143 381,143
------------- -----------
Net Other Assets 482,214 487,829
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TOTAL ASSETS $1,097,654 $ 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
------------------------------------
June 30 December 31
CURRENT LIABILITIES 1998 1997
------------- -----------
(unaudited)
Accounts payable $ 105,174 $ 230,516
Accrued and Withheld Payroll Taxes 120,072 121,594
Accrued expenses 18,882 32,578
Notes Payable - shareholders 13,586 223,836
Current portion of Notes Payable 7,684 7,684
------------- -----------
Total Current Liabilities 265,398 616,208
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LONG-TERM DEBT
Notes payable 138,200 30,359
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Total Liabilities 403,598 646,567
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STOCKHOLDERS' EQUITY
Common stock, $.001 Par Value,
Authorized 50,000,000 Shares;
issued and outstanding 12,507,004
and 7,287,004 shares, respectively 12,507 7,287
Additional Paid-In Capital 3,440,099 2,824,319
Retained earnings (2,758,550) (2,700,899)
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Total Stockholders' Equity 694,056 130,707
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TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,097,654 $ 777,274
============= ===========
The accompanying notes are an integral part of these financial statements
Earth Products and Technologies, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three For the three For the Six For the Six
months ended months ended months ended months ended
June 30 June 30 June 30 June 30
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $ - $ 23,991 $ - $ 23,991
COST OF GOODS SOLD - 5,871 - 5,871
------------ ------------ ------------ ------------
GROSS PROFIT - 18,120 - 18,120
------------ ------------ ------------ ------------
OPERATING EXPENSES
General And
Administrative Expenses 54,053 224,517 64,747 237,482
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 54,053 224,517 64,747 237,482
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (54,053) (206,395) (64,747) (219,362)
------------ ------------ ------------ ------------
OTHER INCOME AND (EXPENSES)
Minority Interest - 24,535 - 24,535
Other Income (4,487) 9,055
Interest Exp (1,527) (2,035) (1,823) (2,035)
------------ ------------ ------------ ------------
Total Other Income/
(Expense) (6,014) 22,500 7,252 22,500
------------ ------------ ------------ ------------
NET LOSS $(60,067) $ (183,895) $(57,515) $ (196,862)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
Earth Products and Technologies, Inc.
Consolidated Statements of Cash Flows
For the six For the six
months ended months ended
June 30 June 30
1998 1997
------------ ------------
Cash Flows From Operating Activities
Net income (loss) $ (57,515) $ (204,505)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Used in Operating Activities:
Depreciation 20,500 -
Amortization 5,615 -
Stock issued for services 15,000 -
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts Receivable 16,300 (12,085)
Other Receivables - (35,938)
Inventory 6,810 (39,403)
Increase/(decrease) in:
Accounts Payable (125,342) 34,941
Accrued Expenses (15,218) (1,248)
------------ ------------
Net Cash Provided (Used) by Operating
Activities (133,850) (294,238)
------------ ------------
Cash Flows from Investing Activities
Cash paid for Notes Receivable (370,000) -
Cash from sale of assets 4,753 -
Purchase of Property and Equipment - (27,689)
------------ ------------
Net Cash Provided (Used) by Investing
Activities (365,247) (27,689)
------------ ------------
Cash Flows from Financing Activities
Proceeds from debt financing 606,000 304,944
Cash received in acquisition - 17,178
Principal payments on debt financing (102,409) -
------------ ------------
Net Cash Provided (Used) by Financing
Activities 503,591 322,122
------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents 4,494 195
------------ ------------
Cash and Cash Equivalents
Beginning 3,210 6,714
------------ ------------
Ending $ 7,704 $ 6,909
============ ============
Supplemental Disclosures of Cash Flow
Information:
Cash payments for interest $ 1,823 $ 2,035
============ ============
Cash payments for income taxes $ - $ -
============ ============
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 six months
ended June 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 adjustments
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,704
<SECURITIES> 0
<RECEIVABLES> 393,861
<ALLOWANCES> 0
<INVENTORY> 47,753
<CURRENT-ASSETS> 449,318
<PP&E> 166,122
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,097,654
<CURRENT-LIABILITIES> 265,398
<BONDS> 0
0
0
<COMMON> 12,507
<OTHER-SE> 681,549
<TOTAL-LIABILITY-AND-EQUITY> 1,097,654
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 64,747
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,823
<INCOME-PRETAX> (57,515)
<INCOME-TAX> 0
<INCOME-CONTINUING> (57,515)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (57,515)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
