SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 33-3385LA
EARTH PRODUCTS AND TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0430816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
525 South 300 East, Salt Lake City, Utah 84111
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code: (801) 323-2394
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Check whether the issuer (1) 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ x ]
State issuer's revenue for it most recent fiscal year: $ 0.00
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 18, 2000 was $2,383,654.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of the latest practicable date: 26,281,004 shares of common
stock were outstanding as of February 18, 2000.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
2
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In this annual report references to "Earth Products," "we," "us," and
"our" refer to Earth Products and Technologies, Inc.
FORWARD LOOKING STATEMENTS
This Form 10-KSB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10-KSB that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Earth Products's control. These factors include but are not limited to
economic conditions generally and in the industries in which Earth Products
may participate; competition within Earth Product's chosen industry,
including competition from much larger competitors; technological advances and
failure by Earth Products to successfully develop business relationships.
PART I
Item 1. Description of Business.
(a) Business Development.
Earth Products was incorporated in the state of Nevada in 1986 under the
name Mainstay Investments, Inc. The company's name was changed in 1987 to
Bio-Helix, Inc., in 1990 the name changed to Concept Gold, Inc., in 1992 the
name changed to Environmental Plasma Arc Technology, Inc. and in October 1997
we adopted our current name.
(b) Our Business.
Earth Products currently has no commercial operations and has no full
time employees. We plan to seek, investigate and, if warranted, acquire one
or more properties or businesses, and to pursue other related activities
intended to enhance shareholder value. Our actual results could differ
materially from our historical results of operations and those discussed in
the forward-looking statements. The forward-looking statements are based on
the beliefs of our management as well as assumptions made by and information
currently available to our management.
Our acquisition of a business opportunity may be made by purchase,
merger, exchange of stock or otherwise. At the present time we have not
identified any business opportunity that we plan to pursue, nor have we
reached any agreement or definitive understanding with any person concerning
an acquisition. In addition, there can be no assurance that we will be
successful in finding a desirable business opportunity, given the limited
capital available for an acquisition.
3
<PAGE>
Our officers and directors will make contacts within the field of
corporate finance to find potential acquisition candidates. We anticipate
that an acquisition would involve an entity that desires to become a fully
reporting company and one which wishes to establish a public trading market
for its securities. Our search will be directed toward a profitable operating
company which produce revenues. We anticipate that we will consider, among
other things, the following factors:
(1) Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
(2) Our perception of how any particular business opportunity will be
received by the investment community and by our stockholders;
(3) Capital requirements and anticipated availability of required
funds, to be provided by us or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;
(4) The extent to which the business opportunity can be advanced;
(5) Competitive position as compared to other companies of similar
size and experience within the industry segment as well as within the industry
as a whole;
(6) Strength and diversity of existing management, or management
prospects that are scheduled for recruitment;
(7) The cost of our participation as compared to the perceived
tangible and intangible values and potential; and,
(8) The accessibility of required management expertise, personnel,
raw materials, services, professional assistance, and other required items.
No one of the factors described above will be controlling in the
selection of a business opportunity, and our management will attempt to
analyze all factors appropriate to each opportunity, and a determination based
upon reasonable investigative measures and available data. Potential
investors must recognize that, because of our limited capital available for
investigation and management's limited experience in business analysis, we may
not discover or adequately evaluate adverse facts about the business
opportunity to be acquired.
Prior to making a decision to participate in a business opportunity, we
will generally request that we are provided with written materials regarding
the business opportunity containing such items as a description of products,
services and company history; management resumes; financial information;
available projections, with related assumptions upon which they are based; an
explanation of proprietary products and services; evidence of existing
patents, trademarks, or services marks, or rights thereto; present and
proposed forms of compensation to management; a description of transactions
between such company and its affiliates during relevant periods; a
4
<PAGE>
description of present and required facilities; an analysis of risks and
competitive conditions; a financial plan of operation and estimated capital
requirements; audited financial statements, or if they are not available,
unaudited financial statements, together with reasonable assurances that
audited financial statements would be able to be produced within a reasonable
period of time not to exceed 60 days following completion of a merger
transaction; and other information deemed relevant.
We anticipate that the business opportunities presented to us will:
(i) either be in the process of formation or, be recently organized with
limited operating history, or a history of losses attributable to under-
capitalization or other factors;
(ii) be experiencing financial or operating difficulties;
(iii) be in need of funds to develop a new product or service or to
expand into a new market;
(iv) be relying upon an untested product or marketing concept; or
(v) have a combination of the characteristics mentioned in (i) through
(iv).
We intend to concentrate our acquisition efforts on properties or
businesses that we believe to be undervalued or that we believe may realize a
substantial benefit from being publicly owned. Given the above factors,
investors should expect that any acquisition candidate may have little or no
operating history, or a history of losses or low profitability. Our
discretion in the selection of business opportunities is unrestricted, subject
to the availability of such opportunities, economic conditions and other
factors.
It is emphasized that our management may effect transactions having a
potentially adverse impact upon our shareholders pursuant to the authority and
discretion of our management to complete acquisitions without submitting any
proposal to the stockholders for their consideration. Holders of our
securities should not anticipate that we necessarily will furnish such
holders, prior to any merger or acquisition, with financial statements, or any
other documentation, concerning a target company or its business. In some
instances, however, the proposed participation in a business opportunity may
be submitted to the stockholders for their consideration, either voluntarily
by our directors to seek the stockholders' advice and consent or because state
law so requires.
COMPETITION
We expect to encounter substantial competition in our 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. Many of these entities will have significantly greater
experience, resources and managerial capabilities than Earth Products and will
therefore be in a better position than we are to obtain access to attractive
business opportunities. We also will experience competition from other public
companies, many of which may have more funds available to them.
5
<PAGE>
Item 2. Properties.
We do not own or lease any real property. We use office space free of
charge in the office of our President, John Peters.
Item 3. Legal Proceedings.
We are not a party to any proceedings or threatened proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
We have not submitted a matter to a vote of our stockholders during the
fourth quarter of the year ended December 31, 1999.
Part II
Item 5. Market for Common Equity and Related Stockholder Matters.
a) Market for Common Equity
Our common stock is listed with the OTC Bulletin Board under the symbol
"EPAT". The following table shows the range of high and low trading prices
for the past two fiscal years as reported by the National Association of
Securities Dealers. Such quotations represent prices between dealers and do
not include retail markups, markdowns, or commissions and do not necessarily
represent actual transactions.
1998 Quarter Ended High Low
---- -------------- ---- ----
March 31st 1.5 .9375
June 30th 1.3125 .449
September 30th .6875 .3593
December 31st .46875 .16
1999 Quarter Ended High Low
----- -------------- ---- ----
March 31st .21 .13
June 30th .16 .13
September 30th .14 .11
December 31st .12 .07
As of February 18, 2000, we had approximately 680 holders of record of
our common stock.
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We have not paid any cash dividends on our outstanding shares of common
stock, and no cash dividends are contemplated to be paid in the foreseeable
future.
(b) Recent Sales of Unregistered Securities
We sold the following securities during the fourth quarter of the year
ended December 31, 1999:
On December 16, 1999 we sold 500,000 common shares, valued at $13,000, to
Mutual Ventures Corporation. Such issuance was exempt from the registration
requirements of the Securities Act of 1933 by reason of Section 4(2) as a
private transaction not involving a public distribution.
Item 6. Management's Discussion and Analysis or Plan of Operations
Plan of Operations.
- ------------------
We have no business operations nor established source of revenues
sufficient to cover any anticipated operating costs to allow us to continue as
a going concern. For the next twelve months management intends to find
additional capital funding and/or a profitable business venture to acquire or
merge. However, there can be no assurance that a merger or acquisition
candidate will be found or that we will have sufficient funds to effect such a
merger or acquisition.
We have no material commitments for the next twelve months and
management believes that our current cash needs can be met with the cash on
hand and loans from management or shareholders for at least twelve months.
However, should we obtain a business opportunity, it may be necessary to raise
additional capital. This may be accomplished by selling our common stock or
debt financing. If common stock is issued it will be issued pursuant to
available exemptions provided by federal and state securities laws.
Liquidity and Capital Resources.
- -------------------------------
Since our inception, we have funded our cash requirements through debt
and equity transactions. These funds have been used for working capital,
subsidiary acquisitions and development of technology.
As of December 31, 1999, we had working capital of $12,917 and recorded
$13,167 cash on hand. Our total assets decreased to $13,167 for the year
ended 1999 from $917,488 for the year ended 1998. This decrease in total
assets was primarily the result of the write off to bad debt of notes
receivable of $840,000 and $48,277. Our total current liabilities decreased
to $250 for 1999 from $31,909 for 1998. The conversion of a $30,000 note
payable to common stock
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<PAGE>
caused this decrease. For 1999 we posted $8,237 net cash used by operating
activities and a loss per share of $0.04.
Net cash provided by financing activities for 1999 was $25,000 compared
to $428,814 for 1998. During 1999 a shareholder advanced $25,000 to us,
which was subsequently converted to common shares. During 1998 we conducted a
limited offering pursuant to Regulation D of the Securities Act of 1933 and
raised $204,500 which was used for business development. In November of 1998
we sold 11,000,000 common shares for $110,000 cash in contemplation of
spin-off agreements.
During 1998 we sold or spun off both our subsidiaries. Management hoped
the spin off of EPAT, Inc. in September of 1998 would allow Earth Products to
more effectively focus on the operations of our remaining subsidiary,
Environmental Water Systems, Inc. (EWS), and seek more profitable business
opportunities.
However, EWS failed to perform as anticipated and in December of 1998 we
sold Environmental Water Systems, Inc. Earth Products entered into a stock
purchase agreement with EWS Services, Inc., a Nevada corporation, in which EWS
Services, Inc. agreed to purchase a majority of EWS's common shares. Pursuant
to the terms of the agreement we sold 4,000,000 shares of our total holdings
of 5,525,300 EWS shares to EWS Services, Inc. We received a promissory note
in the amount of $840,000 secured by the equipment and assets of EWS Services,
Inc. in consideration for the EWS shares, which was subsequently deemed
uncollectible and written off as bad debt.
Item 7. Financial Statements.
Our consolidated audited financial statements for the fiscal years ended
December 31, 1999 and 1998 are attached hereto.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
(a) Directors and Executive Officers.
Our executive officers and directors and their respective ages and
positions are set forth below. Biographical information for each of those
persons is also presented below. Our executive officers are chosen by our
Board of Directors and serve at its discretion. There are no existing family
relationships between or among any of our executive officers or directors.
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<PAGE>
Name Age Position
---------------------- ------ ---------------------
John W. Peters 48 President, Director
Anita Patterson 32 Secretary/Treasurer, Director
Matthew T. McLelland 22 Director
John W. Peters was appointed President and Chairman of the Board on June
9, 1997. He has served as our director from January 15, 1997. Previously he
was our Operations Manager from 1993 through 1995. He has served as president
and an executive officer of Certified Environmental Laboratories, Inc. and was
vice president of sales and marketing for Comco Communications Corp. in
California. Mr. Peters studied business administration at Long Beach
Community College and California Polytechnic State University in San Louis
Obispo, California.
Anita Patterson was appointed as our Secretary on June 9, 1998. She has
served as our Director since June of 1998. From 1996 to the present she has
worked as a paralegal specializing in corporate law for Principal Holdings,
Inc. In 1994 she received an Associate of Arts degree in the paralegal
program from Phillips Junior College. She attended Weber State University
during 1986 and 1987.
Matthew T. McLelland has served as our Director since July 7, 1998. From
1996 to the present he has been employed as a computer system engineer
researching, developing and selling internet, Web and software products for
various computer companies. He received a degree in 1995 from the Las Vegas
Academy of International Studies, Visual and Performing Arts Academy.
(b) Compliance with Section 16(a) of the Exchange Act.
We do not have a class of securities registered under the Securities
Exchange Act of 1934, and, therefore, our officers, directors and holders of
more than 10% of the outstanding shares of the Company are not subject to the
provisions of Section 16(a).
Item 10. Executive Compensation.
(a) Executive Compensation.
On May 8, 1998 we issued 100,000 restricted common shares, valued at
$103,000, to John W. Peters for services rendered as President in 1997. No
other compensation was given to any of the directors or executive officers of
the Company during the fiscal year ended December 31, 1998 and 1999.
We do not have any standard arrangement for compensation of our
directors.
(b) Employment Agreements.
None.
9
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the name and address of each person who is
known by us to be the beneficial owner of more than 5% of our outstanding
common stock and the beneficial ownership of our common stock by our directors
and executive officers. The percentage of beneficial ownership is based on
26,281,004 shares outstanding as of February 18, 2000.
MANAGEMENT
Name and Amount and Nature of Percent of Outstanding
Address Beneficial Owner Common Stock
- --------------- ------------------ ----------------------
John W. Peters 100,000 *
2554 West 4985 South
Taylorsville, Utah 84118
* Less than 1%.
CERTAIN BENEFICIAL OWNERS
PHI Mutual Ventures, LLC. 11,150,000 42.4%
1993 Dewer Lane #1-254
Rock Springs, Wyoming 82901
Mutual Ventures Corporation 1,530,010 5.8%
211 W. Cottage Avenue
Sandy, Utah 84070
Item 12. Certain Relationships and Related Transactions.
The following information summarizes certain transactions in excess of
$60,000 either we engaged in during the past two years or we propose to engage
in involving our executive officers, directors, 5% stockholders or immediate
family members of such persons.
On October 31, 1998 we received a demand for payment for a promissory
note, dated October 1, 1997, in the amount of $142,975. The original holder
of the note, Principal Holdings, Inc., had assigned the note to PHI Mutual
Ventures, LLC, a shareholder. On November 27, 1998 we issued 8,600,000
shares, valued at $86,000, to PHI Mutual Ventures, LLC to satisfy the note.
Six Way Inc., a shareholder, advanced funds to us on a short-term basis
during 1997 and on June 5, 1998 the debt was converted to 1,000,000 shares,
valued at $87,900.
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Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description Location
---------- ------------ ----------
3.1 Articles of Incorporation of Earth Products *
3.2 By-laws of Earth Products *
27 Financial Data Schedule See attached
* Incorporated by reference to Form S-18 registration statement,
File No. 33-3385-LA
(b) Reports on Form 8-K
None
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by
the undersigned, who are duly authorized.
EARTH PRODUCTS AND
TECHNOLOGIES, INC.
/s/ John W. Peters
Date: 3/30/00 By:________________________________
John W. Peters, President and Director
/s/ Anita Patterson
Date: 3/30/00 By: ________________________________
Anita Patterson, Secretary/Treasurer and
Director
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EARTH PRODUCTS AND TECHNOLOGIES, INC.
(A Development Stage Company)
Financial Statements
December 31, 1999 and 1998
<PAGE> 13
CONTENTS
Independent Auditors' Report..........................................3
Balance Sheets .......................................................4
Statements of Operations..............................................6
Statements of Stockholders' Equity ...................................7
Statement of Cash Flows...............................................11
Notes to the Financial Statements.....................................14
<PAGE> 14
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 AUDITORS' REPORT
Board of Directors
Earth Products and Technologies, Inc.
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheets of Earth Products and
Technologies, Inc., (A Development Stage Company), as of December 31, 1999 and
1998, and the related statements of operations, stockholders' equity, and
cash flows for the years ended December 31, 1999, 1998 and 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Earth Products and
Technologies, Inc., (A Development Stage Company), as of December 31, 1999 and
1998, and the results of their operations and their cash flows for the years
ended December 31, 1999, 1998 and 1997 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters
are described in Note 4. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
March 27, 2000
<PAGE> 15
Earth Products and Technologies, Inc.
(A Development Stage Company)
Balance Sheets
ASSETS
December 31,
--------------------------
1999 1998
------------- -------------
CURRENT ASSETS
Cash $ 13,167 $ 2,483
Notes Receivable -current portion (Note 5) - 840,000
------------- -------------
Total Current Assets 13,167 842,483
------------- -------------
OTHER ASSETS
Notes Receivable (Note 5) - 48,277
Goodwill - (Note 1) - 26,728
------------- -------------
Total Other Assets - 75,005
------------- -------------
TOTAL ASSETS $ 13,167 $ 917,488
============= =============
The accompanying notes are an integral part of these financial statements.
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<PAGE> 16
Earth Products and Technologies, Inc.
(A Development Stage Company)
Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 31,
1999 1998
------------- -------------
CURRENT LIABILITIES
Accounts payable $ 250 $ 1,622
Accrued expenses - 287
Notes payable-related party - (Note 3) - 30,000
------------- -------------
Total Current Liabilities 250 31,909
------------- -------------
Total Liabilities 250 31,909
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 50,000,000
shares authorized, 26,281,004 and 24,941,004
shares issued and outstanding, respectively 26,281 24,941
Additional paid-in capital 3,866,126 3,800,466
Deficit accumulated during the development stage (3,879,490) (2,939,828)
------------- -------------
Total Stockholders' Equity 12,917 885,579
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,167 $ 917,488
============= =============
The accompanying notes are an integral part of these financial statements.
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<PAGE> 17
Earth Products and Technologies, Inc.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
From Inception
On February 10,
1986 to
For the Years Ended December 31, December 31,
1999 1998 1997 1999
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
REVENUE
Revenue $ - $ - $ - $ 50,000
Cost of goods sold - - - -
------------ ------------ ------------ -------------
Gross Profit - - - 50,000
------------ ------------ ------------ -------------
EXPENSES
Selling expense - - - 109,489
Depreciation and amortization 26,728 11,230 5,827 67,187
Research and development - - - 153,773
General and administrative 18,408 196,513 52,820 2,013,901
------------ ------------ ------------ -------------
Total Expenses 45,136 207,743 58,647 2,344,350
------------ ------------ ------------ -------------
OPERATING LOSS (45,136) (207,743) (58,647) (2,294,350)
------------ ------------ ------------ -------------
OTHER INCOME (EXPENSE)
Bad Debt (894,326) - - (894,326)
Gain on disposition of debt
(Note 2) - - 15,700 103,284
Interest Expense - (1,832) (12,640) (94,008)
Loss on disposal of assets - (313,450) - (525,281)
Discontinued operations - (231,397) (457,794) (689,191)
Income taxes (200) (130) (502) (1,241)
Minority Interest - 30,082 59,513 89,595
------------ ------------ ------------ -------------
Total Other Income(Expense) (894,526) (516,727) (395,723) (2,011,168)
------------ ------------ ------------ -------------
NET LOSS $ (939,662) $ (724,470) $ (454,370) $ (4,305,518)
============ =========== ============ =============
WEIGHTED AVERAGE LOSS
PER SHARE $ (0.04) $ (0.06) $ (0.10)
============ =========== ============
The accompanying notes are an integral part of these financial statements.
6
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Earth Products and Technologies, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated
Common Stock Additional During the
--------------------- Paid-in Development Treasury Minority
Shares Amount Capital Stage Stock Interest
---------- ---------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 10, 1986 - $ - $ - $ - $ - $ -
Shares issued to officers and
director at $0.25 per share 20,000 20 4,980 - - -
Net loss for the period ended
December 31, 1986 - - - (160) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1986 20,000 20 4,980 (160) - -
Shares issued through public
offering at $2.50 per share 40,000 40 99,960 - - -
Public offering costs - - (20,315) - - -
Shares issued in acquisition of
wholly-owned subsidiary 72,000 72 29,928 - - -
Shares issued through private
placement at $25 per share 1,000 1 24,999 - - -
Net loss for the year ended
December 31, 1987 - - - (36,112) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1987 133,000 133 139,552 (36,272) - -
Shares issued through private
placement at $25 per share 3,000 3 74,997 - - -
Net loss for the year ended
December 31, 1988 - - - (48,075) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1988 136,000 136 214,549 (84,347) - -
Net loss for the year ended
December 31, 1989 - - - (175,094) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1989 136,000 $ 136 $ 214,549 $ (259,441) $ - $ -
The accompanying notes are an integral part of these financial statements.
7
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION
Earth Products and Technologies, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated
Common Stock Additional During the
--------------------- Paid-in Development Treasury Minority
Shares Amount Capital Stage Stock Interest
---------- ---------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1989 136,000 $ 136 $ 214,549 $ (259,441) - -
Expenses paid on behalf of the
Company by stockholders - - 53,481 - - -
Shares issued for services
provided by stockholders
at $0.01 per share 17,000 17 (17) - - -
Net loss for the year ended
December 31, 1990 - - - (8,685) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1990 153,000 153 268,013 (268,126) - -
net loss for the year ended
December 31, 1991 - - - (41,701) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1991 153,000 153 268,013 (309,827) - -
Shares issued for cash and relief
of debt at $1.70 per share 47,000 47 80,793 - - -
Shares issued for marketing
and manufacturing rights at
$0.00 per share 1,400,000 1,400 (1,400) - - -
Shares issued for services
performed at $0.00 per share 200,000 200 (200) - - -
Shares issued through private
placement at $2.50 per share 200,000 200 455,492 - (192) -
Net loss for the year ended
December 31, 1992 - - - (387,200) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1992 2,000,000 2,000 802,698 (697,027) (192) -
The accompanying notes are an integral part of these financial statements.
8
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION
Earth Products and Technologies, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated
Common Stock Additional During the
--------------------- Paid-in Development Treasury Minority
Shares Amount Capital Stage Stock Interest
---------- ---------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 2,000,000 2,000 802,698 (697,027) (192) -
Shares issued through
private placement at $2.50
per share - - 47,808 - 192 -
Cancellation of shares
issued for private placement (200,000) (200) 200 - - -
Shares issued through private
placement at $5.00 per share 33,200 33 166,159 - - -
Capital contributed by
shareholder - - 80,826 - - -
Net loss for the year ended
December 31, 1993 - - - (855,206) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1993 1,833,200 1,833 1,097,691 (1,552,233) - -
Cancellation of shares (5,700) (6) 6 - - -
Capital contributed by
shareholders - - 598,565 - - -
Net loss for the year ended
December 31, 1994 - - - (383,792) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1994 1,827,500 1,827 1,696,262 (1,936,025) - -
Cancellation of shares (Note 5) (8,000) (8) (40,972) - - -
Capital contributed by
shareholders - - 40,665 - - -
Net loss for the year ended
December 31, 1995 - - - (56,897) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1995 1,819,500 1,819 1,695,955 (1,992,922) - -
The accompanying notes are an integral part of these financial statements.
9
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION
Earth Products and Technologies, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated
Common Stock Additional During the
-------------------- Paid-in Development Treasury Minority
Shares Amount Capital Stage Stock Interest
---------- ---------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,819,500 1,819 1,695,955 (1,992,922) - -
Shares issued to officers and
directors at $0.50 per share
for services rendered 233,620 234 116,576 - - -
Shares issued to officers and
directors at an average price
of approximately $0.50 per
share in settlement of related
party loans 891,900 892 396,029 - - -
Share issued to creditors at an
average price of approximately
$2.50 per share in settlement of
accounts payable 92,000 92 229,509 - - -
Net loss for the year ended
December 31, 1996 - - - (194,094) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1996 3,037,020 3,037 2,438,069 (2,187,016) - -
Shares issued for purchase of 87%
of EWSI stock (Note 5) 3,000,000 3,000 (3,000) - - -
Shares issued for payment
of notes to related parties 660,000 660 299,340 - - -
Shares issued for cash at
$1.00 per share 90,000 90 89,910 - - -
Shares issued for contract with
a public relations firm 500,000 500 - - - -
Net loss for the year ended
December 31, 1997 - - - (454,370) - (59,513)
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1997 7,287,020 7,287 2,824,319 (2,641,386) - (59,513)
The accompanying notes are an integral part of these financial statements.
10
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION
Earth Products and Technologies, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated
Common Stock Additional During the
--------------------- Paid-in Development Treasury Minority
Shares Amount Capital Stage Stock Interest
---------- ---------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 7,287,004 7,287 2,824,319 (2,641,386) - (59,513)
Shares issued for services
at $.10 per share 975,000 975 96,525 - - -
Shares issued for conversion
of notes 5,000,000 5,000 434,500 - - -
Shares issued in lieu of payment
for insurance coverage 250,000 250 24,885 - - -
Shares issued for services
at $.25 per share 20,000 20 4,980 - - -
Shares issued for cash at
$.50 per share 409,000 409 204,091 - - -
Shares issued for cash at
$.01 per share (Note 5) 11,000,000 11,000 99,000 - - -
Spin-off of Subsidiary
adjustment - - 112,166 426,028 - 89,595
Net loss for the year ended
December 31, 1998 - - - (724,470) - (30,082)
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1998 24,941,004 24,941 3,800,466 (2,939,828) - -
Shares issued for conversion
of Notes Payable 1,100,000 1,100 53,900 - - -
Shares issued for expenses and
services valued at $12,000 240,000 240 11,760 - - -
Net loss for the year ended
December 31, 1999 - - - (939,662) - -
---------- ---------- ------------- ------------- ------------ ------------
Balance, December 31, 1999 26,281,004 $ 26,281 $ 3,866,126 $ (3,879,490) $ - $ -
========== ========== ============= ============= ============ ============
The accompanying notes are an integral part of these financial statements.
11
</TABLE>
<PAGE> 23
Earth Products and Technologies, Inc.
(A Development Stage Company)
Statement of Cash Flows
<TABLE>
<CAPTION>
From Inception
On February 10,
1986 to
For the Years Ended December 31, December 31,
1999 1998 1997 1999
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss From Operations $ (939,662) $ (724,470) $ (454,370) $ (4,305,518)
Adjustments to Reconcile
Net Cash Provided by Operating
Activities:
Bad Debt 894,326 - - 894,326
Depreciation and amortization 26,728 11,230 31,949 93,309
Loss on disposal of assets - 313,450 - 350,281
Gain on disposition of assets - - (15,700) (103,284)
Common stock issued for
services rendered 12,000 127,635 500 256,945
Minority Interest - (30,082) (59,513) (89,595)
Changes in operating assets and
liabilities: (Net of effects of
purchase/Spin-off of EWSI)
(Increase) Decrease in:
Accounts receivable - (83,727) (15,076) (98,803)
Inventory - 51,209 (28,367) 22,842
Decrease in shareholder advances - - - 9,176
Increase (decrease) in accounts
payable, accrued expenses and
payroll taxes (1,659) (95,977) 166,152 583,829
-------------- ------------- ------------ -------------
Net Cash Used by Operating
Activities $ (8,267) $ (430,732) $ (374,425) $ (2,386,492)
-------------- ------------- ------------ -------------
The accompanying notes are an integral part of these financial statements.
12
</TABLE>
<PAGE> 24
Earth Products and Technologies, Inc.
(A Development Stage Company)
Statement of Cash Flows (Continued)
<TABLE>
<CAPTION>
From Inception
On February 10,
1986 to
For the Years Ended December 31, December 31,
1999 1998 1997 1999
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES
Cash acquired/(spun-off) in
acquisition of EWSI - 1,191 5,050 6,241
Cash advanced on note
receivable (6,049) - - (6,049)
Investment in inventory - - (15,000) (381,143)
Purchase of fixed assets - - (35,925) (121,743)
Payment of organization costs - - - (110)
Cash advanced to subsidiary
prior to acquisition - - (200,000) (200,000)
Cash from sale of assets - - - 1,970
-------------- ------------- ------------ -------------
Net Cash Used by Investing
Activities $ (6,049) $ 1,191 $ (245,875) $ (700,837)
============== ============= ============ =============
The accompanying notes are an integral part of these financial statements.
13
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
Earth Products and Technologies, Inc.
(A Development Stage Company)
Statement of Cash Flows (continued)
From Inception
On February 10,
1986 to
For the Years Ended December 31, December 31,
1999 1998 1997 1999
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Contribution by stockholders - - - 996,375
Payment to stockholder - - - (13,202)
Sale of common stock - 314,500 105,000 1,295,685
Cash received from debt
financing 25,000 625,000 521,500 1,581,384
Cash paid on debt financing - (510,686) - (759,749)
-------------- ------------- ------------ -------------
Net Cash Provided from
Financing Activities 25,000 428,814 616,796 3,100,493
-------------- ------------- ------------ -------------
NET INCREASE (DECREASE)
IN CASH 10,684 (727) (3,504) 13,167
CASH AT BEGINNING OF PERIOD 2,483 3,210 6,714 -
-------------- ------------- ------------ -------------
CASH AT ENDING OF PERIOD $ 13,167 $ 2,483 $ 3,210 $ 13,167
============== ============= ============ =============
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR
Interest $ - $ 6,806 $ - $ 19,972
Income taxes $ 200 $ 502 $ - $ 502
NON CASH FINANCING ACTIVITIES
Issuance of stock in
settlement of debt $ 55,000 $ 439,500 $ 611,522 $ 1,446,858
Capital contributed by
shareholders $ - $ - $ - $ 639,230
The accompanying notes are an integral part of these financial statements.
14
</TABLE>
<PAGE> 26
Earth Products and Technologies, Inc.
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The financial statements presented are those of Earth Products and
Technologies, Inc. (The Company). The Company was incorporated under the laws
of the State of Nevada on February 10, 1986 as Mainstay Investments, Inc. The
Company was organized for the purpose of searching out and acquiring or
participating in a business or business opportunity. In 1987, the Company
changed its name to Bio-Helix, Inc. On July 13, 1990, the Company's name was
changed to Concept Gold, Inc., and on September 30, 1992, the name was changed
to Environmental Plasma Arc Technology, Inc. At such time, the Company
resolved to issue stock for an agreement between Nu-Arc Scientific, Inc.,
Edward Taylor and Carole Taylor, which gave the Company exclusive marketing
and manufacturing rights of certain patented air purification systems for
internal combustion engines and other applications.
In June 1997 the board approved a transfer of the Plasma Arch equipment, fixed
assets and debt of the Company to EPAT, Inc. a wholly owned subsidiary of the
Company. Then in November 1998, the board approved a stock dividend of EPAT,
Inc. to be issued to the shareholders of the Company, thus spinning out EPAT,
Inc. from the consolidated company.
In June of 1997 the Company acquired 87% of the stock of Environmental Water
Systems, Inc. (EWSI) in a share for share exchange accounted for by the
purchase method of a business combination. EWSI is in the business of
constructing water purification systems for commercial manufacturers. On
October 20, 1997 the company changed it's name to Earth Products and
Technologies, Inc. On December 31, 1998, the Company sold 4,000,000 shares of
its total 5,525,300 shares of EWSI to EWS Services, Inc. This transaction
left the Company with 23% of the total issued and outstanding stock of EWSI
and eliminated EWSI from the consolidated company. The investment in EWSI
will be accounted for using the equity method beginning January 1, 1999. The
operations of EWSI for the 1998 year are included in these financial
statements at December 31, 1998. The Company has divested itself of all
operating activities and is currently inactive. At December 31, 1999 the
Company has no subsidiaries to consolidate with. Accordingly, the Company is
classified as a development stage company as defined in SFAS No. 7.
b. Consolidation
The consolidated financial statements for December 31, 1997 include those of
Earth Products and Technologies, Inc., and its subsidiaries, EPAT, Inc. and
Environmental Water Systems, Inc. All intercompany accounts have been
eliminated in the consolidation. At December 31, 1998 and 1999 no
subsidiaries exist and the financial statements are not consolidated.
15
<PAGE> 27
Earth Products and Technologies, Inc.
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c. Cash
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
d. Income Taxes
No federal income taxes have been accrued due to net operating losses in each
year presented. The Company has net operating loss carryforwards of
approximately $3,800,000 which begin to expire in 2007 through 2014. No tax
benefit has been reported in the consolidated financial statements for the net
operating loss carryforward because of the uncertainty that sufficient future
income will be generated to offset the losses. The valuation allowance of the
losses carryforwards offsets any potential tax benefit. These NOL's may also
be limited to use due to the change in ownership.
e. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
f. Goodwill
The Company recorded $112,301 of goodwill in conection with the acquisition of
EWSI, due to the negative net equity position of EWSI at the time of
acquisition. Goodwill is being amortized over a 10 year life on the straight
line method. 72% of the Goodwill was eliminated upon the sale of 72% of the
Companies investment in EWSI during 1998, and the remainder was eliminated
during 1999, when the investment was deemed worthless.
g. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
Fully diluted earnings per share has not been presented because it is
anti-dilutive.
h. Fair Value of Financial Instruments
Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments (none of which are held for
trading purposes) approximate the carrying values of such amounts.
16
<PAGE> 28
Earth Products and Technologies, Inc.
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
i. Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the related
assets. Depreciation expense for the years ended December 31, 1997 and 1998
was $26,334 and $0, respectively.
NOTE 2 - RELATED PARTY TRANSACTIONS AND NOTES PAYABLE - SHAREHOLDERS
All of the original common shares issued were "restricted" shares and not to
be resold except in compliance with the provisions of Rule 144 promulgated by
the Securities and Exchange Commission.
Various shareholders advanced funds to the Company on a short-term basis as
needed. During 1997, shareholders advanced $516,500, of which $300,000 was
converted to equity for 660,000 shares. The balances owed to the shareholders
at December 31, 1997 and 1998 were $223,836 and $30,000 respectively. During
1999, the shareholders advanced $25,000 to the Company and converted the
balance of $55,000 for 1,100,000 shares of common stock.
NOTE 3 - STOCKHOLDER TRANSACTIONS
On September 25, 1992, stockholders ratified an agreement dated August 10,
1992, to purchase the manufacturing and marketing rights of air purification
systems held by Nu-Arc Scientific, Inc., Edward Taylor and Carole Taylor. The
agreement provided that 70% of the total issued and outstanding stock would be
owned by Nu-Arc Scientific, Inc. and the Taylors, 10% would be held by the
shareholders of Concept Gold, Inc.
In November of 1992, the Company issued 1,400,000 shares for the marketing and
manufacturing rights to the "Plasma Arc Technology." The value of the rights
was recorded at predecessor cost which was $-0-.
Also in November of 1992, the Company issued 200,000 shares to an investor
group for services performed and 200,000 shares were issued and kept in
treasury for the private placement. 180,800 shares were sold for cash of
$455,550 with the remaining 19,200 shares remaining in treasury at December
31, 1992. During 1993, the remaining 19,200 shares were sold for cash at
$2.50 per share.
In June of 1993, the board of directors approved the cancellation of 200,000
shares issued to Nu-Arc Scientific, Inc.
In July of 1993, the Company issued 33,200 shares of common stock for cash at
$5.00 per share.
17
<PAGE> 29
Earth Products and Technologies, Inc.
(A Development Stage Company)
Notes to the Financial Statements
NOTE 3 - STOCKHOLDER TRANSACTIONS (Continued)
As mentioned in Note 3, Nu-Arc Scientific, Inc. sold some of its stock in the
Company to pay liabilities incurred by the Company, with the remainder being
contributed to capital.
During 1993, Edward Taylor and Carole Taylor, major shareholders of the
Company, filed for bankruptcy. Their stock was sold at a sheriff's sale to a
group of investors and certain shareholders of the Company, thus changing the
majority control of the Company. In 1994, some of these shares were used to
settle debts of the Company (see Note 8).
During 1994, the board of directors approved the cancellation of 5,700 shares
issued to Nu-Arc Scientific, Inc.
During 1995, 8,000 shares issued to a vendor in lieu of payment were returned
to the Company and were canceled. The corresponding liability was added back
to accounts payable.
As described in Note 1, the Company issued 3,000,000 shares of common stock
for 87% of the shares of EWSI, effective June 30, 1997. Due to the negative
book value of EWSI, goodwill was recorded and the value of the transaction
totals $-0-.
The Company also issued 660,000 shares for relief of notes in the amount of
$300,000 to shareholders.
During 1997 the Company sold 90,000 shares at $1.00 for cash in a private
placement, and 500,000 shares to a public relation firm as an incentive to
accept the company as a client.
During 1997 the Board of Directors authorized a 1 for 10 reverse stock split.
All per share information in these financial statements have been
retroactively restated to reflect the stock split.
During 1998 the Company issued stock for the following:
On May 8, 1998, June 9, 1998 and November 23, 1998, the Company issued 995,000
shares for services valued at $97,500.
On May 29, and June 5, 1998 the Company issued 5,000,000 shares for conversion
of debt to related parties in the amount of $439,500.
The Company issued shares for insurance coverage valued at $25,135 on June 4,
and November 27, 1998.
During September and November 1998, the Company issued 409,000 shares for cash
at $.50 per share.
During November 1998, the Company issued 11,000,000 shares for cash of
$110,000, in contemplation of the spin-off agreements.
18
<PAGE> 30
Earth Products and Technologies, Inc.
(A Development Stage Company)
Notes to the Financial Statements
NOTE 3 - STOCKHOLDER TRANSACTIONS (Continued)
In December 1998, an adjustment to Paid in Capital and retained earnings was
necessary to remove the accumulated losses of the subsidiaries and the equity
in those subsidiaries from the books of the Company to reflect a
non-consolidated financial statement for the Company.
During 1999, a shareholder of the Company converted a $55,000 note payable for
1,100,000 shares of common stock, and received 240,000 shares of stock for
$12,000 in expenses and services rendered to the Company.
NOTE 4 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. Currently, the Company has no established source of revenues
sufficient to cover any anticipated operating costs to allow it to continue as
a going concern. It is the intent of the Company to find additional capital
funding and/or a profitable business venture to acquire or merge.
NOTE 5 - NOTES RECEIVABLE
In 1998, pursuant to the spin-off agreement wherein the Company distributed
its interest in EPAT, Inc, a receivable from EPAT, Inc. of $96,554 exists.
Because EPAT, Inc. currently has no liquid assets or operations, the
collectability of this receivable is questionable. An allowance for doubtful
collection of $48,277 has been established for the year ended December 31,
1998 and the remainder of the receivable was written off in 1999.
Pursuant to the Sale agreement wherein the Company sold 72% of it's interest
in EWSI, a Note Receivable of $840,000 was received. The note accrues
interest at 10%, and all principal and interest was due December 31, 1999.
This note was written off to bad debt expense at December 31, 1999, due to the
lack of collectability.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 13,167
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,167
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,167
<CURRENT-LIABILITIES> 250
<BONDS> 0
0
0
<COMMON> 26,281
<OTHER-SE> (13,364)
<TOTAL-LIABILITY-AND-EQUITY> 13,167
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 45,136
<OTHER-EXPENSES> 894,526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (939,662)
<INCOME-TAX> 0
<INCOME-CONTINUING> (939,662)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (939,662)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
