<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB/A
No. 2
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarter Ended: March 31, 1999
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Transition Period from _____________ to ____________
Commission File Number 0-29838
-------
INDUSTRIAL ECOSYSTEMS, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
Utah 94-3200034
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
450 Dondee Way, Suite 10, Pacifica, California 94044
-----------------------------------------------------
(Address of principal executive offices and Zip Code)
(650) 355-4050
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (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.
(1) Yes X No (2) Yes No X
--- --- --- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, Par Value $0.001 33,000,905
- -------------------------------- ----------------------------
Title of Class Number of Shares Outstanding
as of March 31, 1999
<PAGE>
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDUSTRIAL ECOSYSTEMS, INC.
FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying financial statements have been prepared by the
Company, without audit, in accordance with the instructions to Form 10-QSB
pursuant to the rules and regulations of the Securities and Exchange
Commission and, therefore may not include all information and footnotes
necessary for a complete presentation of the financial position, results of
operations, cash flows, and stockholders' equity in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
(which include only normal recurring accruals) necessary to present fairly the
financial position and results of operations for the periods presented have
been made. These financial statements should be read in conjunction with the
accompanying notes, and with the historical financial information of the
Company.
INDEPENDENT ACCOUNTANTS' REPORT
The accompanying consolidated balance sheet of Industrial Ecosystems, Inc. and
Subsidiaries as of March 31, 1999 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
thereon dated February 19, 1999.
As discussed in Note 13 to the consolidated financial statements, an error
resulting in the overstatement of previously reported amounts in Additional
Paid-in Capital and Accumulated Deficit as of December 31, 1998 and in the
overstatement of previously reported net income for the three months ended
March 31, 1999, was discovered by management of the Company during the current
year. Accordingly, an adjustment has been made to the above-mentioned
accounts as of December 31, 1998 and for the three months ended March 31, 1999
to correct the error.
/S/ Jones, Jensen & Company
Salt Lake City, Utah
May 4, 1999
<PAGE>
<PAGE> 3
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
ASSETS
------
March 31, December 31,
1999 1998
------------ ------------
(Unaudited) (As Restated
See Note 13)
CURRENT ASSETS
Cash and cash equivalents $ 39,704 $ 12,552
Restricted cash (Note 1) 41,425 40,669
Accounts receivable (Note 1) 98,103 35,079
Prepaid expenses 43,529 -
------------ ------------
Total Current Assets 222,761 88,300
------------ ------------
PROPERTY AND EQUIPMENT (Net) (Notes 1 and 2) 270,141 275,973
------------ ------------
OTHER ASSETS
Investment in joint venture (Note 7) - -
Deposits 10,940 10,740
------------ ------------
Total Other Assets 10,940 10,740
------------ ------------
TOTAL ASSETS $ 503,842 $ 375,013
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 4
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
March 31, December 31,
1999 1998
------------ ------------
(Unaudited) (As Restated
See Note 13)
CURRENT LIABILITIES
Accounts payable $ 154,521 $ 356,890
Accrued expenses (Note 4) 374,509 323,755
Unearned revenue (Note 1) - 21,666
Due to related party (Note 3) 14,286 14,286
Notes payable, current portion (Note 5) 76,064 85,902
------------ ------------
Total Current Liabilities 619,380 802,499
------------ ------------
LONG-TERM DEBT
Note payable, related party (Note 6) 557,537 -
Notes payable (Note 5) 133,086 157,405
------------ ------------
Total Long-Term Debt 690,623 157,405
------------ ------------
Total Liabilities 1,310,003 959,904
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 8) 395,900 747,819
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; 100,000,000 shares authorized
of $0.001 par value, 33,000,905 and
33,000,905 shares issued and outstanding,
respectively 33,001 33,001
Additional paid-in capital 20,589,759 20,589,759
Other comprehensive income 41,767 38,419
Accumulated deficit (21,866,588) (21,993,889)
------------ ------------
Total Stockholders' Equity (Deficit) (1,202,061) (1,332,710)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 503,842 $ 375,013
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 5
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
For the Three
Months Ended
March 31, March 31,
1999 1998
---------- ----------
(As Restated
See Note 13)
REVENUES
Net sales $ 130,833 $ 175,628
Direct costs 86,717 104,975
---------- ----------
Gross Profit 44,116 70,653
---------- ----------
EXPENSES
General and administrative 236,066 827,937
Depreciation and amortization 24,663 27,943
---------- ----------
Total Expenses 260,729 855,880
---------- ----------
Loss From Operations (216,613) (785,227)
---------- ----------
OTHER INCOME (EXPENSE)
Other income 26,869 3,333
Interest income 112 121
Interest expense (9,024) (9,461)
Loss on investment - (39,059)
Loss on disposition of assets - (14,311)
---------- ----------
Total Other Income (Expense) 17,957 (59,377)
---------- ----------
NET LOSS BEFORE EXTRAORDINARY ITEMS (198,656) (844,604)
---------- ----------
EXTRAORDINARY ITEMS
Debt forgiveness (Note 8) 325,957 -
---------- ----------
Total Extraordinary Items 325,957 -
---------- ----------
NET INCOME (LOSS) $ 127,301 $ (844,604)
========== ==========
OTHER COMPREHENSIVE INCOME
Foreign currency adjustments 3,348 -
---------- ----------
NET COMPREHENSIVE INCOME (LOSS) $ 130,649 $ (844,604)
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 6
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Continued)
(Unaudited)
For the Three
Months Ended
March 31,
1999 1998
---------- ----------
(As Restated
See Note 13)
BASIC EARNINGS (LOSS) PER SHARE
Before extraordinary items $ (0.01) $ (0.03)
Extraordinary items 0.03 -
---------- ----------
BASIC EARNINGS (LOSS) PER SHARE $ 0.02 $ (0.03)
========== ==========
FULLY DILUTED EARNINGS (LOSS) PER SHARE
Before extraordinary items $ (0.01) $ (0.03)
Extraordinary items 0.01 -
---------- ----------
FULLY DILUTED EARNINGS (LOSS) PER SHARE $ 0.00 $ (0.03)
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 7
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Additional Other
Common Stock Paid-In Comprehensive Accumulated
Shares Amount Capital Income Deficit
----------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997
(Previously reported) 25,289,876 $ 25,290 $ 18,880,552 $ 23,755 $ (20,626,747)
Correction of error (Note 13) (596,001) (596) (527,011) - 527,607
----------- -------- ------------ ----------- ------------
Restated balance,
December 31, 1997 24,693,875 24,694 18,353,541 23,755 (20,099,140)
Common stock issued for cash
at an average price of $0.35
per share 2,865,701 2,866 998,056 - -
Common stock issued in lieu
of debt at an average price
of $0.16 per share 5,341,330 5,341 830,726 - -
Common stock issued for
services rendered at an
average of $0.21 per share 99,999 100 21,325 - -
Additional capital contributed - - 386,111 - -
Currency translation adjustment - - - 14,664 -
Net loss for the year ended
December 31, 1998 - - - - (1,894,749)
----------- -------- ------------ ----------- ------------
Balance, December 31, 1998 33,000,905 33,001 20,589,759 38,419 (21,993,889)
Currency translation adjustment
(Unaudited) - - - 3,348 -
Net income for the three
months ended March 31, 1999
(Unaudited) - - - - 127,301
----------- -------- ------------ ----------- ------------
Balance, March 31, 1999
(Unaudited) 33,000,905 $ 33,001 $ 20,589,759 $ 41,767 $(21,866,588)
=========== ======== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 8
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the Three
Months Ended
March 31,
1999 1998
---------- ----------
(As Restated
See Note 13)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ 127,301 $ (844,604)
Adjustments to reconcile net income to net
cash (used) by operating activities:
Depreciation and amortization 24,663 27,943
Loss on investment in joint venture - 39,059
Loss on disposition of assets - 14,311
Debt forgiveness (325,957) -
(Increase) decrease in accounts receivable (63,024) 96,667
(Increase) decrease in deposits and prepaid
expenses (43,729) (114,306)
Increase (decrease) in accounts payable (199,777) (351,467)
Increase (decrease) in unearned revenue (21,666) -
Increase (decrease) in accrued expenses 50,754 (200,249)
Increase (decrease) in contingent liabilities (25,962) (130,907)
---------- ----------
Net Cash (Used) by Operating Activities (477,397) (1,463,553)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (18,831) (33,923)
---------- ----------
Net Cash (Used) by Investing Activities (18,831) (33,923)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash - 1,000,922
Additional capital contributed - 386,111
Principle payments on notes payable (34,157) -
Cash received from notes payable 557,537 96,070
---------- ----------
Net Cash Provided by Financing Activities 523,380 1,483,103
========== ==========
NET INCREASE (DECREASE) IN CASH 27,152 (14,373)
CASH AT BEGINNING OF PERIOD 12,552 14,459
---------- ----------
CASH AT END OF PERIOD $ 39,704 $ 86
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 9,024 $ 8,069
Income taxes $ - -
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 9
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1999 and December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The consolidated financial statements presented are those of Industrial
Ecosystems, Inc.(IEI) and its wholly-owned subsidiaries, Environmental
Protection Company (EPC), I.E.I. Canada, Inc. (IEI Canada) and 1297833
Ontario, Ltd. and 1303873 Ontario, Ltd. Collectively, they are referred to
herein as the "Company". IEI was incorporated in January, 1994 through the
acquisition of Agri World Development Corp., a dormant public company. Agri
World Development Corp. later changed its name to Industrial Ecosystems, Inc.
IEI is principally a holding company but pays operating expenses for the
bioremediation business.
In March 1994, IEI acquired 100% of EPC in exchange for 7,017,300 shares of
its outstanding common stock. At the time of this acquisition, IEI was
essentially inactive. Also, the exchange of IEI's common stock for the common
stock of EPC resulted in the former stockholders of EPC obtaining control of
IEI. Accordingly, EPC became the continuing entity for accounting purposes,
and the transaction was accounted for as a recapitalization of EPC with no
adjustment to the basis of EPC's assets acquired or liabilities assumed. For
legal purposes, IEI was the surviving entity. EPC is in the bioremediation
business and operates principally in New Mexico.
EPC held a minority interest in Analytica Environmental Laboratory. Analytica
Environmental Laboratory was later dissolved. Subsequently, EPC voluntarily
chose to satisfy some of the outstanding payroll liabilities of Analytica
Environmental Laboratory.
Effective June 30, 1994, IEI, through its wholly-owned subsidiary, IEI Canada,
Inc. (a Canadian Corporation) acquired 100% of I.T.E. Ecosystems, Inc., Amlin
Grain Roasting, Inc. and a minority interest in N-Viro Systems Canada, Inc.
The operations of I.T.E. Ecosystems, Inc. and Amlin Grain Roasting, Inc. were
discontinued during 1994. In September 1994, IEI incorporated three wholly-
owned subsidiaries called RFP Management & Development Corp., ROP Management &
Development Corp. and IEI Canada, Inc. In December of 1996, IEI incorporated
a separate wholly-owned subsidiary called ROP Liquid Feed Corp. In March
1998, IEI created an entity (merger company) for the purpose of merging IEI
Canada, Inc., ROP Liquid Feed Corp., ROP Management & Development Corp. and
RFP Management & Development Corp. into that entity. At the same time, the
merger company was merged into a new entity named IEI Canada, Inc. Certain
assets and certain liabilities of all of these companies were assumed by ROP
North America, LLC, a joint venture company formed in March, 1998 (see Note
7), and the companies operations were discontinued. The assets and liabilities
were transferred to the joint venture at the related companies' book value.
During 1998, IEI Canada, Inc. incorporated two separate wholly-owned
subsidiaries called 1297833 Ontario, Ltd. and 1303873 Ontario, Ltd. 1297833
Ontario, Ltd. was organized to be in the bioremediation business. Neither
1297833 Ontario, Ltd. or 1303873 Ontario, Ltd. have had operations.
b. Accounting Methods
The Company's consolidated financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31, year end.
<PAGE>
<PAGE> 10
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1999 and December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with maturities
of three months or less at the time of acquisition.
d. Basic and Fully Diluted Earnings (Loss) Per Share
The computations of basic earnings (loss) per share of common stock are based
on the weighted average number of common shares outstanding during the period
of the consolidated financial statements. Common stock equivalents,
consisting of stock options and the IEI Canada Inc. class A-special shares,
have been included in the fully diluted loss per share for the three months
ended March 31, 1999. Common Stock equivalents have not been included in the
calculation for the three months ended March 31, 1998, as the effect is
antidilutive.
e. Change in Accounting Principle
The Company adopted Statement of Financial Accounting Standards (
SFAS) No. 128, "Earnings Per Share" during the year ended December 31, 1998.
In accordance with SFAS No. 128, diluted earnings per share must be calculated
when an entity has convertible securities, warrants, options, and other
securities that represent potential common shares. The purpose of calculating
diluted earnings (loss) per share is to show (on a pro forma basis) per share
earnings or losses assuming the exercise or conversion of all securities that
are exercisable or convertible into common stock and that would either dilute
or not affect basis EPS. As permitted by SFAS No. 128, the Company has
retroactively applied the provisions of this new standard by showing the fully
diluted loss per common share for all years presented.
The Company also adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income" during the year ended December 31,
1998. SFAS No. 130 established standards for reporting and display of
comprehensive income (loss) and its components (revenues, expenses, gains and
losses) in a full set of general purpose financial statements. This statement
requires that an enterprise classify items of other comprehensive income by
their nature in a financial statement and display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a balance sheet. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. The Company has
retroactively applied the provisions of this new standard by showing the other
comprehensive income (loss) for all years presented.
f. Unearned Revenue
The Company entered into a one-year consulting agreement with the JV (see Note
7) whereby the Company would receive a total of $200,000 for management
consulting. During 1998, the Company received a payment of $100,000 under the
consulting agreement. The balance was payable based on meeting certain
performance standards. At December 31, 1998, the Company had not met the
performance standards and was not entitled to the additional $100,000 under
the consulting agreement. Because the term of the agreement went from March,
1998 to March, 1999, the Company had unearned revenue of $0 and $21,666 as of
March 31, 1999 and December 31, 1998, respectively.
<PAGE> 11
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1999 and December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Property and Equipment
Property and equipment is recorded at cost. Major additions and improvement
are capitalized. The cost and related accumulated depreciation of equipment
retired or sold are removed from the accounts and any differences between the
undepreciated amount and the proceeds from the sale are recorded as gain or
loss on sale of equipment. Depreciation is computed using the straight-line
method over the estimated useful life of the assets as follows:
Description Estimated Useful Life
------------------------ ---------------------
Furniture and fixtures 3 to 7 years
Machinery and equipment 5 to 7 years
Computers 5 years
Vehicles 5 years
Leasehold improvements 15 years
Buildings 15 years
h. Restricted Cash
The Company holds a certificate of deposit with a Canadian bank in the amount
of $41,425 and $40,669 as of March 31, 1999 and December 31, 1998,
respectively, which is being used as security and collateral on a demand note
with the same bank. The cash cannot be withdrawn from the CD until after the
demand note is paid in full.
i. Accounts Receivable
Accounts receivable consists almost entirely of amounts due from a major oil
company. Those outstanding invoices are considered to be fully collectible
and no allowance for doubtful accounts has been recorded.
j. Provision For Taxes
At December 31, 1998, the Company has an accumulated deficit of $21,993,889
which includes net operating loss carryforwards that may be offset against
future taxable income through 2013. No tax benefit has been reported in the
consolidated financial statements because the Company believes there is a 50%
or greater chance the net operating loss carryforwards will not be used.
Accordingly, the potential tax benefits of the net operating loss
carryforwards are offset by a valuation allowance of the same amount.
k. Principles of Consolidation
The consolidated financial statements include those of Industrial Ecosystems,
Inc. and its wholly-owned subsidiaries.
All material intercompany accounts and transactions have been eliminated.
<PAGE>
<PAGE> 12
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1998 and December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
l. Statement of Cash Flows
For the Company's foreign subsidiary, (IEI Canada and its subsidiaries), the
functional currency has been determined to be the local currency. Accordingly,
assets and liabilities are translated at year-end exchange rates, and
operating statement items are translated at average exchange rates prevailing
during the year. The resultant cumulative translation adjustments to the
assets and liabilities are recorded as a separate component of stockholders'
equity. Exchange adjustments resulting from foreign currency transactions are
included in the determination of net income (loss). Such amounts are
immaterial for all years presented.
In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," cash flows from the Company's foreign subsidiaries
are calculated based upon the local currencies. As a result, amounts related
to assets and liabilities reported on the consolidated statement of cash flows
will not necessarily agree with changes in the corresponding balances on the
balance sheets.
m. 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.
n. Advertising
The Company follows the policy of charging the costs of advertising to expense
as incurred.
o. Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements include all of
the adjustments which, in the opinion of management, are necessary for a fair
presentation. Such adjustments are of a normal, recurring nature.
<PAGE>
<PAGE> 13
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1999 and December 31, 1998
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
Furniture and fixtures $ 35,535 $ 35,535
Machinery and equipment 435,005 429,005
Computers 14,875 14,875
Vehicles 81,400 70,900
Leasehold improvements 4,033 10,340
Building 14,905 14,905
Land 40,199 31,561
------------ ------------
625,952 607,121
Accumulated depreciation (355,811) (331,148)
------------ ------------
Net property and equipment $ 270,141 $ 275,973
============ ============
Depreciation expense for the three months ended March 31, 1999 and 1998 was
$24,663 and $27,943, respectively.
NOTE 3 - RELATED PARTY TRANSACTIONS
As of March 31, 1999 and December 31, 1998, the Company owed $14,286 and
$14,286, respectively, to an employee of the joint venture. This amount
represents an advance made to the Company during 1996. The amount is non-
interest bearing and due on demand.
The Company also has been involved in a number of related party transactions.
The most significant of those transactions are summarized as follows:
The Company has made disbursements and issued shares of its common stock to
certain officers and directors of the Company, relatives of these officers and
directors and companies owned by these officers and directors, although those
individuals are no longer officers or directors of the Company. Most of these
funds have been paid for services rendered or for payments related to
construction of the Company's facilities and equipment. Any disbursements made
to the related parties for which there was no supporting documentation were
recorded by the Company as compensation to the related party.
The Company's president, from time to time, received payments in the form of
loans that have been repaid without interest. The Company's president also
advanced funds to the Company from time to time in order for the Company to
meet its ongoing needs. These advances were also repaid without interest.
The Company's transfer agent as of December 31, 1998, is controlled by a
minority shareholder who has received options recorded at their fair market
value on the date of issuance from the Company for consulting services. As of
March 31, 1999 and December 31, 1998, the Company owed its transfer agent a
total of $0 and $25,000, respectively. The minority shareholder has played a
significant role in obtaining professional consulting, accounting and legal
services for the Company in helping the Company try to become fully reporting
with the SEC.
<PAGE> 14
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1999 and December 31, 1998
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)
A former director of the Company has also controlled an entity that served as
the Company's transfer agent prior to the current transfer agent taking over.
NOTE 4 - ACCRUED EXPENSES
Accrued expenses as of March 31, 1999 and December 31, 1998 consist primarily
of accrued interest and unpaid payroll taxes, unemployment taxes, sales taxes
and gross receipts taxes due both the federal and state taxing authorities.
The Company has been delinquent on filing these tax forms and has unfiled
taxes for both the 1997 and 1998 tax years. Reasonable interest and penalties
have also been accrued as of March 31, 1999 and December 31, 1998.
Following is the breakout of accrued expenses as of March 31, 1999 and
December 31, 1998:
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
Accrued payroll $ 18,940 $ 12,411
Accrued payroll taxes, penalties and interest 198,282 198,282
Accrued interest 36,600 26,400
Other 120,687 86,662
------------ ------------
$ 374,509 $ 323,755
============ ============
NOTE 5 - NOTES PAYABLE
Notes payable consisted of the following:
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
Note payable to a bank, interest at prime + 3%
per annum, requires monthly payments of $1,860
plus interest, matures in December, 2005,
secured by machinery, equipment and certificate
of deposit. $ 139,809 $ 156,250
Note payable to a company, interest at 11.5% per
annum, principle and interest of $ 5,002 due
monthly, matures in June, 2000, secured by
equipment. 69,341 82,058
Other obligations - 4,999
------------ ------------
Total Notes Payable 209,150 243,307
Less: Current Portion (76,064) (85,902)
------------ ------------
Long-Term Notes Payable $ 133,086 $ 157,405
============ ============
<PAGE> 15
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1999 and December 31, 1998
The aggregate principal maturities of notes payable are as follows:
Year Ended
December 31, Amount
------------ ---------
1999 $ 85,902
2000 45,795
2001 22,320
2002 22,320
2003 22,320
2004 and thereafter 44,650
=======
Total $ 243,307
=======
NOTE 6 - NOTES PAYABLE - RELATED PARTY
During the three months ended March 31, 1999, the Company obtained a line-of-
credit with a related party for up to $750,000 at 6% interest per annum.
Withdrawals from the line-of-credit are to be authorized by an independent
credit committee on a case-by-case basis. Total advances from the line-of-
credit through March 31, 1999 was $557,537. The line-of-credit is secured by
the Company's interest in the JV and is due and payable in full by December
31, 2000.
NOTE 7 - INVESTMENT IN JOINT VENTURE
During March, 1998, IEI Canada, Inc., a wholly-owned subsidiary of IEI,
entered into a joint venture agreement with JFJ Ecosystems, Inc. to form ROP
North America, LLC (the JV). The JV created a wholly-owned subsidiary called
ROP North America, Inc. (an Ontario Corporation) which became the operating
entity. As of December 31, 1998, pursuant to a subsequent transaction, IEI
Canada, Inc. has a 50% equity interest in the JV but does not have management
control. The investment is being recorded under the equity method of
accounting. Because of a significant first year loss of the JV, the
investment is being recorded at $-0- as of December 31, 1998. The Company has
the right to acquire the remaining 50% interest in the JV on or prior to
December 31, 2000 conditional on meeting certain requirements established by
the JV.
The joint venture was established to transform organic by-product from
commercial waste streams into livestock feed. This process is accomplished in
part, through the joint venture's liquid feed system. The joint venture also
raises hogs under contract. In addition, the hog farm is a beta-site for the
joint venture's liquid feed products.
On March 20, 1998, the Company entered into an equipment lease agreement with
the JV whereby the JV has agreed to lease from the Company a certain liquid
feed distribution system for $4,414 per month for a term of seven years.
The Company also entered into an agreement with the JV on January 4, 1999,
whereby the joint venture partner received an immediate vesting of its 50%
membership interest in the JV and the termination of the Company's option to
reduce the joint venture partners membership interest to 19%. The joint
<PAGE> 16
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1999 and December 31, 1998
NOTE 7 - INVESTMENT IN JOINT VENTURE (CONTINUED)
venture partner was also granted certain rights, subject to certain
conditions, to exercise an option to exchange their membership interest in the
JV for that number of shares of the Company's common stock which would make
the joint venture partner a 33.3% owner of the total outstanding common shares
of the Company's stock issued and outstanding at the time of exercise.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
During 1997, the Company entered into a lease agreement for its office
facilities in Pacifica, California effective May 1, 1997 and expiring May 1,
2000. The monthly rental payment is $2,350.
The Company also has reserved and recorded contingent liabilities to
individuals who claim they are still owed although the Company issued shares
of common stock in payment of the debts. The Company has recorded a total of
contingent liabilities at March 31, 1999 and December 31, 1998 of $395,900 and
$747,819, respectively. During the three months ended March 31, 1999, $25,962
was paid by the Company and $325,957 of the contingent liabilities were
settled through a full release by the respective creditors. Corresponding
income from the debt forgiveness has been recorded in the accompanying
financial statements for the three months ended March 31, 1999. It is
currently uncertain as to whether or not the remaining amounts will be paid in
the future and management of the Company intends on vigorously contesting any
claim that is made. It is reasonably possible, however, that the Company will
have to pay the amounts and to be conservative, management has recorded these
possible debts as contingent liabilities.
The Company is involved in certain litigation with a New Mexico limited
liability company regarding an open account and a distribution agreement. A
complaint against the Company was filed in July 1997. The Company contends
that they had never ordered the product delivered and that the distribution
agreement was breached. As of the date of the report the case has been tried
and a decision is currently pending before the Court. The Company has
recorded a contingency of $30,000 (included in contingent liabilities) at
March 31, 1999 and December 31, 1998.
<PAGE>
<PAGE> 17
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1999 and December 31, 1998
NOTE 9 - CLASS A-SPECIAL SHARES
During 1997, the Company issued 2,163,917 shares of common stock in exchange
for the conversion of 2,163,917 shares of class-A special shares of IEI
Canada, Inc., a wholly owned subsidiary of the Company (by virtue of voting
rights and common stock shares). The class-A special shares were originally
issued in connection with a Global Share Purchase Agreement during 1994. Each
of the original shareholders of the class-A special shares received a warrant
permitting the exchange of the shares for an equal number of shares of the
Company at any time until 2015. A total of 4,000,000 class-A shares were
originally issued.
At March 31, 1999 and December 31, 1998, 324,390 class A-special shares remain
outstanding that are convertible at the holder's option into 254,573 shares of
the Company's common stock. These shares have been included in additional
paid-in capital of the Company until they are converted into IEI shares.
NOTE 10 - STOCK OPTIONS
On July 23, 1997, the Board of Directors agreed to issue an option to purchase
166,667 (post-split) shares of common stock at an exercise price of $0.15 per
share to an entity that provided a loan to the Company. At the time the
options were granted the exercise price was equal to or greater than the prior
10-day average trading price of the Company's shares.
On March 13, 1998, the Board of Directors agreed to issue options to various
individuals who have provided and may continue to provide consulting and other
services to the Company. Stock options for a total of 4,131,000 (post-split)
shares of common stock were granted at an exercise price of $0.225 per share.
At the time the options were granted, the exercise price was equal to or
greater than the prior 10 day average trading price of the Company's shares.
As of December 31, 1998, an aggregate of 4,297,667 options to purchase common
shares were outstanding with exercise prices ranging from $0.15 to $0.225 per
share. At the time the options were granted, the exercise price was equal to
or greater than the prior 10 day average trading price of the Company's
shares.
166,667 of the options will expire if not exercised by July 23, 2002 and
591,000 of the options will expire if not exercised by March 13, 2003. The
remaining 3,540,000 options are "cashless" options and will expire if not
exercised by March 13, 2005. 3,277,667 of the options were exercisable on
December 31, 1998 and the remaining 1,020,000 options became exercisable if
the Company successfully files Form 10SB with the Securities and Exchange
Commission prior to December 31, 1999.
NOTE 11 - GOING CONCERN
The Company's consolidated 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. The Company has historically incurred significant
losses which have resulted in an accumulated deficit of $21,993,889 at
December 31, 1998, a working capital deficit and limited internal financial
resources. These factors combined raise substantial doubt about the Company's
ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments relating to the
<PAGE> 18
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 1999 and December 31, 1998
NOTE 11 - GOING CONCERN (Continued)
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result from the outcome of this
uncertainty. The Company is in the process of trying to obtain new directors
and management and focusing on additional avenues of generating revenues
sufficient to cover the operating costs. It is the intent of management to
rely upon additional equity financing if required to sustain operations until
revenues are adequate to cover the costs. During 1998, the Company began to
effect measures to reduce cash outflows and increase working capital through
the issuance of additional shares of common stock for cash, services, and
conversion of debt. The Company has implemented a cash flow plan and has
developed an overall strategy and certain financing options to meet its
ongoing needs. It is the intent of management to rely upon additional equity
financing if required to sustain operations until revenues are adequate to
cover the costs.
NOTE 12 - SUBSEQUENT EVENTS
Subsequent to March 31, 1999, the Board of Directors of the Company agreed to
issue additional options to purchase a total of 945,000 shares of common stock
with exercise prices as follows:
Number of Options Exercise Price Expiration Date
----------------- -------------- ---------------
225,000 $1.00 May 31, 2003
720,000 $0.16 April 30, 2004
NOTE 13 - CORRECTION OF AN ERROR
Subsequent to the issuance of the December 31, 1998 consolidated financial
statements, the Company was able to recover a total of 596,001 shares of its
outstanding common stock that had originally been recorded by the Company
during 1995 and 1996 at a total cost of $527,607. The shares were determined
to have been issued in error and that no consideration was ever received for
the shares. The Company is treating these shares now as never having been
issued. Consequently, an adjustment has been made to correctly reflect the
total outstanding shares as of December 31, 1998 and to correctly reflect the
net income for the three months ended March 31, 1999.
<PAGE>
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-looking Statements
- ---------------------------------------------------------
This report may contain "forward-looking" statements. The Company is
including this cautionary statement for the express purpose of availing itself
of the protections of the safe harbor provided by the Private Securities
Litigation Reform Act of 1995 with respect to all such forward-looking
statements. Examples of forward-looking statements include, but are not
limited to: (a) projections of revenues, capital expenditures, growth,
prospects, dividends, capital structure and other financial matters; (b)
statements of plans and objectives of the Company or its management or Board
of Directors; (c) statements of future economic performance; (d) statements of
assumptions underlying other statements and statements about the Company and
its business relating to the future; and (e) any statements using the words
"anticipate," "expect," "may," "project," "intend" or similar expressions.
Year 2000 Disclosure
- --------------------
The Company is working to resolve the potential impact of the year 2000
on the ability of the Company's computerized information systems to accurately
process information that may be date-sensitive. Any of the Company's programs
that recognize a date using "00" as the year 1900 rather than the year 2000
could result in errors or system failures. The Company utilizes a minimum
number of computer programs in its operations. The Company has not completed
its assessment, but currently believes that costs of addressing this issue
will not have a material adverse impact on the Company's financial position.
However, if the Company and third parties upon which it relies are unable to
address this issue in a timely manner, it could result in a material financial
risk to the Company. In order to assure that this does not occur, the Company
plans to devote all resources required to resolve any significant year 2000
issues in a timely manner.
Results of Operations
- ---------------------
General
-------
The Company's revenues are generated primarily by its business operations
in the United States through its wholly owned subsidiary Environmental
Protection Company ("EPC"). Since March, 1998, the Company has pursued the
development of ROP North America, LLC ("ROP"), through the Company's wholly
owned Canadian subsidiary, IEI Canada, which at March 31, 1999, was still in
the development stage. The Company's results of operations include the costs
of its investment in ROP.
For the quarter ended March 31, 1999, the functional currency for the
Company's foreign subsidiary (IEI Canada and its subsidiaries) has been
determined to be the Canadian Dollar. Any applicable assets and liabilities
have been translated at period end exchange rates and operating statement
items are translated at average exchange rates prevailing during the period.
For the period ended March 31, 1999, the Company had a gain of $3,340 as a
result of foreign currency translation adjustment.
<PAGE> 20
Quarter ended March 31, 1999 compared to March 31, 1998
-------------------------------------------------------
Substantially all revenue during the quarter ended March 31, 1999 was
derived from EPC's operations, with total revenues being $130,833 and direct
costs associated therewith being $86,717 or approximately 66.3% of revenues.
Total revenues for the quarter ended March 31, 1998 were $175,628 and direct
costs associated therewith were $104,975, or approximately 59.8% of revenue.
The direct costs for the quarter ended March 31, 1999 as a percent of sales
was 6.5% higher than the direct costs as a percentage of sales realized by the
Company for the quarter ended March 31, 1998. The increase in direct costs as
a percent of revenues for the current period as compared to the prior
comparative period can be attributed in a 25% decrease in total revenues for
the period. EPC's bioremediation work for Amoco is allocated between routine
site maintenance and emergency clean-up, and, therefore, the Company cannot
predict what events or uncertainties may be reasonably expected to have a
material impact on the net sales revenues or income from continuing
operations. Amoco has recently completed a merger with British Petroleum
which could possibly affect the amount of work Amoco makes available to EPC,
although management has no indication, as yet, of any decline.
Corporate Expense. For the quarter ended March 31, 1999 total operating
expenses were $260,729, consisting of general and administrative expenses of
$236,066 and depreciation and amortization expenses of $24,663, resulting in a
loss from operations of $(216,613). For the quarter ended March 31, 1998 total
operating expenses were $855,880, consisting of general and administrative
expenses of $827,937 and depreciation and amortization expenses of $27,943,
resulting in a loss from operations of $(785,227). The operating expenses for
the quarter ended March 31, 1999 represent a substantial reduction in overall
operating expenses (approximately 69.5%) compared to the Company's operating
expenses incurred for the quarter ended March 31, 1998. The reduction in
operating expenses for the quarter just ended is a direct result of the
efforts the Company has undertaken to reduce cash outflows in non-revenue
producing areas.
Interest Expense. Interest expense for the quarter ended March 31, 1999
was $9,024, which is attributed to the line-of-credit obtained from a related
party (See Note 6 to the Financial Statements). Interest expense for the
quarter ended March 31, 1998 was $9,461, and is attributed to corporate
borrowing during the normal course of business.
Other Income. Other income for the quarter ended March 31, 1999 was
$26,869, of which, substantially all was represented by the balance of the
income derived from the one-year consulting agreement with ROP (see Note 1(f)
to the Financial Statements), which represents an increase over other income
of $3,333 for the quarter ended March 31, 1998. During the quarter ended March
31, 1998, the Company had expenses of $39,059 and $14,311, associated with
loss on investment in the joint venture and disposition of assets,
respectively, so that total other income (expense) for the prior year quarter
was $(59,377) compared to $17,957 for the current quarter.
Extraordinary Item. During the quarter ended March 31, 1999 the Company
recognized income from the forgiveness of $325,957 in debt by certain
creditors of the Company. (See Note 8 to the Financial Statements.) The
Company had no extraordinary items of income or expense during the quarter
ended March 31, 1998.
Including the extraordinary item the Company had net comprehensive income
of $130,649 for the quarter ended March 31, 1999. The basic loss per share
<PAGE> 21
for the quarter before extraordinary items was $(0.01), while the Company
experienced basic income per share of $0.01 after taking into account
extraordinary item. The fully diluted earnings per share was $0.00. For the
quarter ended March 31, 1998, the Company had a net comprehensive loss of
$(844,604).
Liquidity and Capital Resources
- -------------------------------
Historically, the issuance of common stock has been utilized by the
Company for working capital, conversion of debt, payment of professional
services, the expansion capital required by ROP and for the continued
development activities of the Company.
The Company had a working capital deficit of $(396,619), cash and cash
equivalents of $39,704 and restricted cash deposits of $41,425 at March 31,
1999. Cash used in operations for the quarter was $(477,397)and was derived
primarily from cash received from accounts receivable, borrowing against the
line-of-credit, the recovery of common stock previously issued and the
issuance of common stock for the conversion of debt.
Because the Company has an accumulated deficit of $(21,866,588), has a
working capital deficit and limited internal financial resources, the report
of the Company's auditor at December 31, 1998 contained a going concern
modification as to the ability of the Company to continue. During fiscal
1998, the Company began to effect measures to reduce cash outflows and
increase working capital thru the issuance of additional shares of common
stock for cash, services and conversion of debt. The Company is aware of its
ongoing cash requirements and has implemented a cash flow plan, including
continued reduction in its general and administrative expenses. Additionally,
the Company has developed an overall strategy and certain financing options to
meet its ongoing need through December 31, 1999.
Due to the need for working capital for both the Company, IEI Canada and
its JV partner, JFJ Ecosystems, Inc. ("JFJ") restructured the JV to provide
among other things, the establishment of a $750,000 line-of-credit for the
Company from JFJ. As a result of the restructuring, JFJ has an equal 50%
member of the JV with IEI Canada and IEI Canada's option to reduce JFJ's
membership interest to 19% was terminated. The line-of-credit bears interest
at 6% per annum until December 31, 2000, at which time all principal advanced
under the line of credit, and any interest accrued thereon, will be due and
payable in full. As security for the line of credit, the Company caused IEI
Canada to pledge as security IEI Canada's 50% membership interest in the JV.
If the line of credit is not timely repaid in full, IEI Canada's membership
interest in the JV shall be conveyed to JFJ in satisfaction of the line of
credit, thus making JFJ the 100% owner of the JV. All disbursements from the
line of credit are subject to the prior review of an independent Credit
Committee appointed by the Company's Board of Directors. At March 31, 1999,
the Co had utilized $557,537 of the line-of-credit.
<PAGE> 22
At March 31, 1999, the Company had recorded $374,509 in accrued expenses
consisting primarily of accrued interest and unpaid payroll taxes,
unemployment taxes, sales taxes and gross receipts taxes due both the federal
and state taxing authorities, including reasonable interest and penalties for
delinquent filings. During the quarter the Company extended a preliminary
settlement offer to the IRS. The settlement offer to the IRS was based on the
Company's anticipated need to raise additional working capital without
exposing such capital to potential seizure by the IRS. The terms of the
preliminary settlement offer are based on the trustee portion of tax due and
contingent on the IRS finalizing its examination confirming the financial
condition of the Company and the financial condition of those officers and
directors of the Company during the time that the tax liability arose (the
"Responsible Parties"). The trustee portion due is approximately $90,000 and
will require the Company to make payments to the IRS of approximately $5,000
per month over 24 months. Upon payment in full of the aggregate amount the IRS
will provide the Company and any Responsible Parties with a full release from
liability. Should the Company fail to maintain the monthly payments to the
IRS, the IRS will have the right to collect from the individual Responsible
Parties as well as the Company.
Finalizing the settlement offer with the IRS will require the Company to
provide the IRS with a narrative description of the Company's current plan of
business operations and a logical reason for the compromise. In addition, the
IRS will conduct an investigation of the assets of the Responsible Parties to
determine whether or not the Responsible Parties have sufficient liquid assets
to satisfy the trustee portion of the tax due.
The Company has reserved and recorded possible contingent liabilities to
individuals who claim they are still owed money by the Company although the
Company has issued shares of its common stock to such individuals as payment
or such debts or because the Company is uncertain as the whether the creditors
are holding the Company responsible to certain debts incurred by former
officers and directors of the Company. At March 31, 1999, the Company has
recorded total contingent liabilities of $395,900, a reduction from $747,819
recognized at December 31, 1998.
Impact of Inflation
-------------------
The Company does not anticipate that inflation will have a material
impact on its current or proposed operations.
Seasonality
-----------
The Company's bioremediation business operations tend to have varying
degrees of seasonality. A majority of the Company's bioremediation jobs are
done on sites in and around Farmington, New Mexico, during the warm weather
months. Since many of the clean-up sites are located in rural areas and
accessible only over dirt or unimproved roads, the Company's ability to
excavate and remove contaminated soil can be restricted during inclement
weather. In addition, soil is difficult or impracticable to dig and turn when
the ground is frozen, the bioremediation process requires above freezing
temperatures to be effective.
<PAGE>
<PAGE> 23
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. LEGAL PROCEEDINGS
The Company is involved in litigation with 54GO Products, a New Mexico
limited liability company ("54GO"), regarding an open account and a
distribution agreement between 54GO and the Company's subsidiary Environmental
Protection Company, a New Mexico corporation ("EPC"). 54GO filed a complaint
in July 1997 in the Eleventh District Court of San Juan County, New Mexico,
alleging that the Company owed money on an open account for products delivered
by 54GO to EPC, and also for products to be delivered pursuant to the
distribution agreement. In August 1997, the Company filed an answer to the
complaint in which the Company contends that the products delivered by 54GO
were not ordered by EPC, that EPC specifically requested the products not be
delivered, and that 54GO refused to take the products back. The Company also
contends that the distribution agreement was breached by 54GO before it became
operational and that any obligation to purchase products under the agreement
was negated by the failure of conditions precedent. The case has been tried
and a decision is now pending before the Court. The Company has recorded a
contingent liability of $30,000 at March 31, 1999, in connection with the
litigation.
On March 17, 1999, the Company received a letter from Canadian counsel
threatening litigation on behalf of Diamond Measure, Inc., a Canadian
corporation with which the Company engaged in discussions about a possible
acquisition during 1994. The negotiations were never consummated, and no
contract was ever signed. The letter of March 17, 1999 refers to a potential
suit for performance under a contract or, alternatively, an action for breach
of contract and detrimental reliance. Because no agreement was ever reached
and no written contract signed, the Company believes that the threatened
action is without merit. As of the date of this filing, the Company has not
received notice of any action. Therefore, the Company cannot speculate about
the potential amount of the claim, which, in any case, the Company believes
will be promptly dismissed.
On April 13, 1999, ROP received a letter from Canadian counsel
representing Middlemarch Farms, Ltd., a Canadian company ("Middlemarch"),
claiming a security interest in certain property transferred to ROP from IEI
Canada in March 1998 as part of the transaction creating the JV. This claimed
security interest was purportedly created in 1992, in connection with a loan
transaction between Middlemarch and a precursor company to a former IEI Canada
subsidiary.
The claim is apparently based on the premise that there are monies owing
to Middlemarch. The Company believes that the debt was fully satisfied in
April 1996 through an agreement between the Company and Middlemarch converting
debt to equity, represented by the Company's issuance to Middlemarch of
400,000 shares of the Company's common stock, plus cash payment of all
outstanding interest.
If Middlemarch proceeds with its claim, the Company may be involved in
litigation in regards to the circumstances surrounding the creation of the
claimed security interest and the payment of the debt. To date, the Company
has seen no evidence of such security interest.
<PAGE> 24
The Company believes that the debt on which the claimed security interest
is based has been fully satisfied. In addition, the Company has seen no
evidence that such a security interest was ever created. Therefore, the
Company believes that this threatened claim has no merit.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the period
covered by this report, through the solicitation of proxies or otherwise.
However, on March 31, 1999, the Company mailed a notice of special meeting and
related proxy statement to shareholders of record as of March 19, 1999, for
the purpose of (1) ratifying and approving certain agreements between the
Company, IEI Canada and JFJ, (2) electing directors, (3) approving the
Company's 1999 Stock Option and Award Plan, (4) approving certain modernizing
changes to the Company's articles of incorporation, (5) ratifying the
appointment of its independent auditors, and (6) transacting such other
business that may properly come before the special meeting.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
---------
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K.
--------------------
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by
the undersigned thereunto duly authorized.
INDUSTRIAL ECOSYSTEMS, INC.
[Registrant]
Dated: November 5, 1999 By/S/Tom Jarnagin, President and
Director
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<PERIOD-END> MAR-31-1999
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<RECEIVABLES> 98,103
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