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, 1999
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)
525 South 300 East, Salt Lake City, Utah 84111
------------------------------------------------
(Address of principal executive offices) (Zip Code)
(801) 323-2395
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(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, 1999, the Issuer had issued and outstanding an aggregate
of 25,781,004 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, 1999 are attached hereto
and incorporated by reference.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Management's Discussion and Analysis contains forward-
looking statements that involve risks and uncertainties. The Company's actual
results could differ materially from those anticipated in these forward-
looking statements as a result of a number of factors discussed below.
Overview. During 1997, the Company shifted its focus of operations from a
research and development company to a holding company by acquisition of two
subsidiaries, EPAT, Inc. and Environmental Water Systems, Inc. ("EWS"). During
1998 the Company divested itself of both subsidiaries. The Company currently
has no commercial operations and has no full time employees. The Company plans
to seek, investigate and, if warranted, acquire one or more properties or
businesses, and to pursue other related activities intended to enhance
shareholder value.
At the present time the Company has not identified any business
opportunity that it plans to pursue, nor has the Company reached any agreement
or definitive understanding with any person concerning an acquisition. In
addition, there can be no assurance that the Company will be successful in
finding a desirable business opportunity. The Company expects to encounter
substantial competition in its efforts to locate attractive opportunities,
primarily from business development companies, venture capital partnerships
and corporations, venture capital affiliates of large industrial and financial
companies, small investments companies, and wealthy individuals.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
business analysis, the Company may not discover or adequately evaluate adverse
facts about the business opportunity to be acquired. Also, the Company intends
to concentrate its acquisition efforts on properties or businesses that it
believes to be undervalued or that it believes may realize a substantial
benefit from being publicly owned. Investors should expect that any
acquisition candidate may have little or no operating history, or a history of
losses or low profitability.
It is emphasized that management of the Company may effect transactions
having a potentially adverse impact upon the Company's shareholders pursuant
to the authority and discretion of the Company's management to complete
acquisitions without submitting any proposal to the stockholders for their
consideration.
Liquidity and Capital Resources. Since the Company's inception, it has
funded its cash requirements through debt and equity transactions. These funds
have been used for working capital, subsidiary acquisitions and development of
technology. During 1997 and 1998 the Company conducted limited offerings
pursuant to Regulation D of the Securities Act of 1933 and raised $90,000 and
$204,500, respectively. Such funds were used for business development.
As of June 30, 1999, the Company has current assets of $843,163 and total
current liabilities of $12,287 resulting in a positive net worth of $830,876.
However, $840,000 of those current assets is represented by an account
receivable. The Company believes that its current cash needs can be met with
the cash on hand for at least six months. However, should the Company obtain
a business opportunity, it may be necessary to raise additional capital. This
may be accomplished by selling common stock of the Company.
Management intends to actively seek business opportunities for the
Company during the next twelve months.
Results of Operations. The following table summarizes the results of
operations for the years ended December 31, 1997 and 1998 and for the interim
period ended June 30, 1999 and 1998.
<TABLE>
Interim Interim
Year ended Year ended Period Ended Period Ended
December 31, December 31, June 30, June 30,
1997 1998 1998 1999
------------ ------------ ------------ ------------
<C> <S> <S> <S> <S>
Revenues 0 0 0 0
General &
Administrative 52,820 196,513 54,053 4,662
Total
Operating
Expense 58,647 207,743 54,053 4,662
Operating
Income (Loss) (69,007) (207,743) (54,053) (4,662)
Other Income 395,723 576,727 (4,487) -
Net Profit (loss) (454,470) (724,470) (60,067) (4,662)
</TABLE>
During the six month period ended June 30, 1999, the Company has not
engaged in any significant operations. The Company's operating losses for
such period totaled $4,662. The Company has minimal cash available for its
operations and currently has no established source of revenues from
operations. For the current fiscal year, the Company anticipates incurring a
loss as a result of administrative expenses, which include expenses associated
with locating and evaluating business opportunities.
The Company is currently exploring several options for its future growth,
and intends to seek out and merge with or acquire a profitable operating
company or companies in order to bring revenues to the Company. However, there
can be no assurance that a merger or acquisition candidate will be found or
that the Company will have sufficient funds to effect such a merger or
acquisition.
Year 2000 Compliance. The Company has completed a review of its computer
systems and operations to determine the extent to which its business will be
vulnerable to potential errors and failures as a result of the "year 2000"
problem. The Company has concluded, based on the review of its operations and
computer systems, that its significant computer programs and operations will
not be materially affected by the Year 2000 problem, and that it can modify or
replace the programs that will be affected by the end of 1999 at a cost which
will not be significant. Under a reasonably likely worst case scenario,
however, the Company's computer systems and/or operations could be materially
affected by the Year 2000 problem.
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The Company is not a party to any proceedings or threatened proceedings.
ITEM 2 CHANGES IN SECURITIES
On June 1, 1999 the Board authorized the issuance of 600,000 common
shares to PHI Mutual Ventures, LLC and 240,000 shares to Mutual Ventures
Corporation to convert debts of $30,000 and $12,000, respectively.
In connection with such issuance, the Company believes that each
purchaser
(a) was aware that the securities had not been registered under federal
securities laws;
(b) acquired the securities for his/its own account for investment
purposes and not with a view to or for resale in connection with any
distribution for purposes of the federal securities laws;
(c) understood that the securities would need to be indefinitely held
unless registered or an exemption from registration applied to a proposed
disposition; and
(d) was aware that the certificate representing the securities would bear
a legend restricting their transfer.
The Company believes that, in light of the foregoing, the sale of the
securities to the respective acquirers did not constitute the sale of an
unregistered security in violation of the federal securities laws and
regulations by reason of the exemptions provided under Sections 3(b) and 4(2)
of the Securities Act of 1933, and the rules and regulations promulgated
thereunder.
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
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 March 31, 1999.
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 5th day of August 1999.
EARTH PRODUCTS AND TECHNOLOGIES, INC.
/s/ John Peters
By:________________
John W. Peters President and CEO
<PAGE>
Earth Products and Technologies, Inc.
Financial Statements
June 30, 1999 (unaudited)
and
December 31, 1998
<PAGE>
<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 June 30, 1999 and the related statements
of operations, and cash flows for the six months ended June 30, 1999 and 1998
were not audited by us and, accordingly, we do not express an opinion on them.
The accompanying balance sheet as of December 31, 1998 was audited by us and
we expressed an unqualified opinion on it in our report dated March 9, 1999.
/s/ Crouch, Bierwolf & Chisholm
July 28, 1999
<PAGE>
Earth Products and Technologies, Inc.
Balance Sheets
ASSETS
-------
June 30 December 31
1999 1998
------------ ------------
CURRENT ASSETS (unaudited)
Cash and Cash Equivalents $ 3,163 $ 2,483
Notes Receivable-current portion 840,000 840,000
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Total Current Assets 843,163 842,483
------------ ------------
OTHER ASSETS
Note Receivable 52,676 48,277
Goodwill 26,728 26,728
------------ ------------
Net Other Assets 79,404 75,005
------------ ------------
TOTAL ASSETS $ 922,567 $ 917,488
============ ============
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
Earth Products and Technologies, Inc.
Balance Sheets continued
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30 December 31
1999 1998
------------ ------------
(unaudited)
CURRENT LIABILITIES
Accounts payable $ - $ 1,622
Accrued expenses 287 287
Notes Payable -related party 12,000 30,000
------------ ------------
Total Current Liabilities 12,287 31,909
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STOCKHOLDERS' EQUITY
Common stock, $.001 Par Value,
Authorized 50,000,000 Shares;
issued and outstanding 25,541,004
and 24,941,004 shares, respectively 25,541 24,941
Additional Paid-In Capital 3,829,866 3,800,466
Retained earnings (2,945,127) (2,939,828)
------------ ------------
Total Stockholders' Equity 910,280 885,579
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 922,567 $ 917,488
============ ============
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
Earth Products and Technologies, Inc.
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
1999 1998 1999 1998
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
SALES $ - $ - $ - $ -
COST OF GOODS SOLD - - - -
------------- ------------- -------------- --------------
GROSS PROFIT - - -
------------- ------------- -------------- --------------
OPERATING EXPENSES
General And
Administrative Expenses 4,662 54,053 5,299 64,747
------------- ------------- -------------- --------------
TOTAL OPERATING EXPENSES 4,662 54,053 5,299 64,747
------------- ------------- -------------- --------------
OPERATING INCOME (LOSS) (4,662) (54,053) (5,299) (64,747)
------------- ------------- -------------- --------------
OTHER INCOME AND (EXPENSES)
Other Income - (4,487) - 9,055
Interest Expense - (1,527) - (1,823)
------------- ------------- -------------- --------------
Total Other Income/(Expense) - (6,014) - 7,252
------------- ------------- -------------- --------------
NET INCOME (LOSS) $ (4,662) $ (60,067) $ (5,299) $ (57,515)
============= ============= ============== ==============
The accompanying notes are an integral part of these financial statements.
-5-
</TABLE>
<PAGE>
Earth Products and Technologies, Inc.
Statements of Cash Flows
For the Six For the Six
months ended months ended
June 30 June 30
1999 1998
--------------- --------------
Cash Flows From Operating Activities
Net income (loss) $ (5,299) $ (57,515)
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
Inventory - 6,810
Increase/(decrease) in:
Accounts Payable (1,622) (125,342)
Accrued Expenses - (15,218)
Other Payable - -
--------------- -------------
Net Cash Provided (Used) by
Operating Activities (6,921) (133,850)
--------------- --------------
Cash Flows from Investing Activities
Cash paid for Notes Receivable (4,399) (370,000)
Cash from sale of assets - 4,753
--------------- --------------
Net Cash Provided (Used) by
Investing Activities (4,399) (365,247)
--------------- --------------
Cash Flows from Financing Activities
Proceeds from stock issuance 30,000 -
Proceeds from debt financing - 606,000
Principal payments of debt financing (18,000) (102,409)
--------------- --------------
Net Cash Provided (Used) by
Financing Activities 12,000 503,591
--------------- --------------
Net Increase (Decrease) in Cash and
Cash Equivalents 680 4,494
--------------- --------------
Cash and Cash Equivalents
Beginning 2,483 3,210
--------------- --------------
Ending $ 3,163 $ 7,704
=============== ==============
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest $ - $ 1,823
=============== ==============
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.
-6-
<PAGE>
Earth Products and Technologies, Inc.
Notes to the Financial Statements
June 30, 1999
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, 1999 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, 1998.
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,163
<SECURITIES> 0
<RECEIVABLES> 840,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 843,163
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 922,567
<CURRENT-LIABILITIES> 12,287
<BONDS> 0
0
0
<COMMON> 25,541
<OTHER-SE> 884,739
<TOTAL-LIABILITY-AND-EQUITY> 922,567
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,662
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,662)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,662)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,662)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
