Nevada
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98-0440762
|
|
(State or other jurisdiction of
incorporation or organization)
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(IRS Employer Identification No.)
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Large accelerated filer
|
o
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Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
þ
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(Do not check if a smaller reporting company.)
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September 30,
2011
|
December 31,
2010
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$ | 264,312 | $ | 531,290 | ||||
Restricted cash
|
143,728 | 77,434 | ||||||
Accounts receivable, net
|
1,831,636 | 1,580,151 | ||||||
Inventories, net
|
1,663,956 | 731,032 | ||||||
Prepaid expenses and other current assets
|
91,733 | 157,356 | ||||||
Total current assets
|
3,995,365 | 3,077,263 | ||||||
Property and equipment, net of accumulated depreciation of $703,335 and $419,027, respectively
|
2,373,063 | 1,024,123 | ||||||
Intangible assets, net of amortization of $320,145 and $214,186, respectively
|
564,335 | 700,784 | ||||||
Other assets
|
33,883 | 43,731 | ||||||
Total assets
|
$ | 6,966,646 | $ | 4,845,901 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
|
$ | 1,891,961 | $ | 1,252,787 | ||||
Factoring payable
|
1,416,850 | 749,586 | ||||||
Accrued expenses
|
414,181 | 436,321 | ||||||
Due to related parties
|
58,114 | 58,139 | ||||||
Guarantee liability
|
120,000 | 120,000 | ||||||
Current maturities of long-term debt
|
574,826 | 357,696 | ||||||
Current portion of capital lease obligation
|
82,999 | 28,281 | ||||||
Total current liabilities
|
4,558,931 | 3,002,810 | ||||||
Long-term debt (less current maturities)
|
961,286 | 484,817 | ||||||
Capital lease obligations (less current maturities)
|
142,527 | 46,943 | ||||||
Contingent consideration payable for acquisition of Turf
|
361,437 | 350,000 | ||||||
Deferred lease cost
|
26,000 | 29,000 | ||||||
Total liabilities
|
6,050,181 | 3,913,570 | ||||||
STOCKHOLDERS' EQUITY
|
||||||||
Common stock - $0.001 par value, 350,000,000 shares authorized, 103,939,378 and 87,488,558 shares issued and outstanding, respectively
|
103,940 | 87,489 | ||||||
Preferred stock - $0.001 par value, 10,000,000 shares authorized in 2011, zero outstanding
|
- | - | ||||||
Additional paid-in capital
|
13,715,771 | 11,022,788 | ||||||
Subscription receivable
|
(1,000 | ) | (26,000 | ) | ||||
Accumulated deficit
|
(12,902,246 | ) | (10,151,946 | ) | ||||
Total stockholders' equity
|
916,465 | 932,331 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 6,966,646 | $ | 4,845,901 |
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
SALES, NET
|
$ | 3,425,518 | $ | 1,309,326 | $ | 7,535,739 | $ | 3,627,972 | ||||||||
COST OF GOODS SOLD
|
1,626,194 | 721,988 | 3,589,977 | 1,684,029 | ||||||||||||
GROSS PROFIT
|
1,799,324 | 587,338 | 3,945,762 | 1,943,943 | ||||||||||||
General and administrative
|
2,219,746 | 1,219,033 | 5,951,297 | 3,162,221 | ||||||||||||
Depreciation and amortization
|
182,030 | 90,308 | 472,659 | 245,543 | ||||||||||||
LOSS FROM OPERATIONS
|
(602,452 | ) | (722,003 | ) | (2,478,194 | ) | (1,463,821 | ) | ||||||||
OTHER EXPENSE
|
||||||||||||||||
Interest expense
|
(25,004 | ) | (28,349 | ) | (103,295 | ) | (135,984 | ) | ||||||||
Factoring fees
|
(70,268 | ) | (26,253 | ) | (159,760 | ) | (80,732 | ) | ||||||||
Amortization of debt discount
|
(5,224 | ) | - | (5,224 | ) | - | ||||||||||
Other income
|
- | 92 | - | 3,092 | ||||||||||||
Interest income
|
- | 39 | 57 | 72 | ||||||||||||
Loss on legal settlement
|
- | - | - | (60,000 | ) | |||||||||||
Other expense
|
(3,161 | ) | - | (3,884 | ) | - | ||||||||||
Total other expense
|
(103,657 | ) | (54,471 | ) | (272,106 | ) | (273,552 | ) | ||||||||
NET LOSS
|
$ | (706,109 | ) | $ | (776,474 | ) | $ | (2,750,300 | ) | $ | (1,737,373 | ) | ||||
NET LOSS PER SHARE (basic and diluted)
|
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.03 | ) | ||||
WEIGHTED AVERAGE SHARES OUTSTANDING
|
103,791,810 | 67,516,786 | 99,972,348 | 60,115,289 |
Common stock
|
Subscription
|
Accumulated
|
||||||||||||||||||||||
Number
|
Par Value
|
APIC
|
Receivable
|
Deficit
|
Total
|
|||||||||||||||||||
Balance, December 31, 2010
|
87,488,558 | $ | 87,489 | $ | 11,022,788 | $ | (26,000 | ) | $ | (10,151,946 | ) | $ | 932,331 | |||||||||||
Stock based compensation
|
2,940,000 | 2,940 | 1,723,394 | - | - | 1,726,334 | ||||||||||||||||||
Shares issued in connection with accounts payable conversion
|
1,086,111 | 1,086 | 147,324 | - | - | 148,410 | ||||||||||||||||||
Shares issued in connection with note payable
|
345,000 | 345 | 43,905 | 44,250 | ||||||||||||||||||||
Shares issued with private placement
|
12,079,709 | 12,080 | 778,360 | 25,000 | - | 815,440 | ||||||||||||||||||
Net loss
|
- | - | - | - | (2,750,300 | ) | (2,750,300 | ) | ||||||||||||||||
Balance September 30, 2011
|
103,939,378 | 103,940 | 13,715,771 | (1,000 | ) | (12,902,246 | ) | 916,465 |
For the nine months ended
|
||||||||
September 30,
|
||||||||
2011
|
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net loss
|
$ | (2,750,300 | ) | $ | (1,737,373 | ) | ||
Adjustments to reconcile net loss to net cash
|
||||||||
used in operating activities:
|
||||||||
Common shares issued for current year loss on settlement of contractual dispute
|
- | 15,000 | ||||||
Amortization of debt discount
|
5,224 | 75,000 | ||||||
Depreciation and amortization, including amounts included in cost of goods sold
|
531,274 | 267,204 | ||||||
Stock based compensation
|
1,726,334 | 1,105,179 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(251,485 | ) | (106,478 | ) | ||||
Inventory
|
(932,924 | ) | (494,747 | ) | ||||
Prepaid expenses and other current assets
|
65,623 | 128,910 | ||||||
Other assets
|
9,848 | (13,979 | ) | |||||
Accounts payable
|
639,172 | 299,983 | ||||||
Accrued expenses
|
126,271 | (27,933 | ) | |||||
Accrued salaries to related parties
|
- | 225,100 | ||||||
Accounts payable - related parties
|
(25 | ) | - | |||||
CASH USED IN OPERATING ACTIVITIES
|
(830,988 | ) | (264,134 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Restricted cash
|
(66,294 | ) | (23,648 | ) | ||||
Cash payment for acquisition of Turf
|
- | (263,700 | ) | |||||
Purchase of fixed assets
|
(769,983 | ) | (247,641 | ) | ||||
CASH USED IN INVESTING ACTIVITIES
|
(836,277 | ) | (534,989 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Borrowing on debt
|
233,799 | 4,082 | ||||||
Repayment of long term debt
|
(261,282 | ) | (108,747 | ) | ||||
Repayment of capital leases
|
(54,934 | ) | (11,854 | ) | ||||
Payments on insurance financing
|
- | (102,379 | ) | |||||
Net factoring advances
|
667,264 | 209,722 | ||||||
Proceeds from sales of units in private placement, net
|
765,440 | 905,499 | ||||||
Proceeds from sale of stock
|
25,000 | - | ||||||
Collection on subscription receivable
|
25,000 | |||||||
CASH PROVIDED BY FINANCING ACTIVITIES
|
1,400,287 | 896,323 | ||||||
NET INCREASE IN CASH
|
(266,978 | ) | 97,200 | |||||
CASH AT BEGINNING OF PERIOD
|
531,290 | 25,107 | ||||||
CASH AT END OF PERIOD
|
$ | 264,312 | $ | 122,307 | ||||
Supplemental Disclosures of Cash Flow Information
|
||||||||
Cash paid for interest
|
$ | 62,202 | $ | 49,231 | ||||
Non-cash investing and financing transactions:
|
||||||||
Forgiveness of debt from related party
|
$ | - | $ | 130,000 | ||||
Notes issued for purchase of property and equipment
|
864,248 | 63,467 | ||||||
Stock issued for accounts payable conversion
|
148,411 | - | ||||||
Assets returned and release of notes payable
|
59,463 | - | ||||||
Purchase capital lease
|
205,236 | - | ||||||
Discount recorded on note for shares issued
|
44,250 | - | ||||||
Trade-in of equipment
|
44,676 | |||||||
Stock issued for debt conversion
|
- | 76,330 | ||||||
Shares issued for prior year accrual of contractual dispute settlement
|
- | 115,000 |
Accounts
Receivable
|
Revenue
|
|||||||
Customer A
|
26
|
%
|
26
|
%
|
||||
Customer B
|
14
|
%
|
22
|
%
|
||||
Customer C
|
9
|
%
|
2
|
%
|
||||
Customer D
|
9 |
%
|
11 |
%
|
||||
Totals:
|
58
|
%
|
61
|
%
|
Accounts
Payable
|
Purchases
|
|||||||
Vendor A
|
53
|
%
|
38
|
%
|
||||
Vendor B
|
19
|
%
|
10
|
%
|
||||
Totals:
|
72
|
%
|
48
|
%
|
September 30,
2011
|
December 31,
2010
|
|||||||
Trade receivables
|
$
|
1,922,804
|
$
|
1,616,477
|
||||
Less: Allowance for doubtful accounts
|
91,168
|
36,326
|
||||||
Net accounts receivable
|
$
|
1,831,636
|
$
|
1,580,151
|
September 30,
2011
|
December 31,
2010
|
|||||||
Raw materials
|
$
|
857,800
|
$
|
536,351
|
||||
Finished goods
|
806,156
|
194,681
|
||||||
Total inventory
|
$
|
1,663,956
|
$
|
731,032
|
Common stock
|
$
|
278,274
|
||
$0.0735 warrant
|
239,847
|
|||
$0.25 warrant
|
212,266
|
|||
$0.75 warrant
|
101,613
|
|||
Total Proceeds
|
$
|
832,000
|
Number of
Shares
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term (years)
|
||||||||||
Outstanding at December 31, 2010
|
12,000,000
|
$
|
0.15
|
9.98
|
||||||||
Granted
|
11,600,000
|
$
|
0.14
|
9.06
|
||||||||
Exercised
|
-
|
-
|
-
|
|||||||||
Expired/Forfeited
|
-
|
-
|
-
|
|||||||||
Outstanding at September 30, 2011
|
23,600,000
|
$
|
0.15
|
9.02
|
||||||||
Exercisable at September 30 2011
|
6,700,000
|
$
|
0.15
|
9.00
|
●
|
Surfactants that are highly effective in treating production and injection problems at the customer well- head;
|
●
|
Well completion and work-over chemicals that maximize productivity from new and existing wells;
|
●
|
Bactericides that kill water borne bacterial growth, thus preventing corrosion and plugging of the customer well-head and flowline;
|
●
|
Scale compounds that prevent or treat scale deposits;
|
●
|
Corrosion inhibitors, which are organic compounds that form a protective film on metal surfaces to insulate the metal from its corrosive environment;
|
●
|
Antifoams that provide safe economic means of controlling foaming problems;
|
●
|
Emulsion breakers, which are chemicals specially formulated for crude oils containing produced waters;
|
●
|
Paraffin chemicals that inhibit and/or dissolve paraffin to prevent buildup (their effectiveness is not diminished when used in conjunction with other chemicals); and
|
●
|
Water clarifiers that solve any and all of the problems associated with purifying effluent water and that improve appearance
|
●
|
Personalized service;
|
●
|
Expedited field analysis; and
|
●
|
Convenience and access to the best available market rates and products that we can produce and identify that are currently offered by our suppliers for our customers.
|
Nine Months Ended
September 30,
|
$
Increase
|
%
Increase
|
||||||||||||||
2011
|
2010
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Sales
|
$
|
7,535,739
|
$
|
3,627,972
|
$
|
3,907,767
|
108
|
%
|
||||||||
Cost of goods sold
|
3,589,977
|
1,684,029
|
1,905,948
|
113
|
%
|
|||||||||||
Gross profit
|
3,945,762
|
1,943,943
|
2,001,819
|
103
|
%
|
|||||||||||
Total general and administrative expenses
|
5,951,297
|
3,162,221
|
2,789,076
|
88
|
%
|
|||||||||||
Depreciation and amortization expense
|
472,659
|
245,543
|
227,116
|
92
|
%
|
|||||||||||
Loss from operations
|
(2,478,194
|
)
|
(1,463,821
|
)
|
1,014,37
|
3
|
69
|
%
|
||||||||
Total other income (expense)
|
(272,106
|
)
|
(273,552
|
)
|
(1,446)
|
(1
|
%)
|
|||||||||
Net loss
|
$
|
(2,750,300
|
)
|
$
|
(1,737,373
|
)
|
$
|
1,012,927
|
58
|
%
|
Three Months Ended
September 30,
|
$
Increase
|
%
Increase
|
||||||||||||||
2011
|
2010
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Sales
|
$
|
3,425,518
|
$
|
1,309,326
|
$
|
2,116,192
|
162
|
%
|
||||||||
Cost of goods sold
|
1,626,194
|
721,988
|
904,206
|
125
|
%
|
|||||||||||
Gross profit
|
1,799,324
|
587,338
|
1,211,986
|
206
|
%
|
|||||||||||
Total general and administrative expenses
|
2,219,746
|
1,219,033
|
1,000,713
|
82
|
%
|
|||||||||||
Depreciation and amortization expense
|
182,030
|
90,308
|
91,722
|
102
|
%
|
|||||||||||
Loss from operations
|
(602,452
|
)
|
(722,003
|
)
|
(119,551
|
)
|
(17
|
)%
|
||||||||
Total other income (expense)
|
(103,657
|
)
|
(54,471
|
)
|
49,186
|
90
|
%
|
|||||||||
Net loss
|
$
|
(706,109
|
)
|
$
|
(776,474
|
)
|
$
|
(70,365)
|
(9
|
)%
|
Three
Months
Ended
September 30,
2011
|
Three
Months
Ended
September 30,
2010
|
Nine
Months
Ended
September 30,
2011
|
Nine
Months
Ended
September 30,
2010
|
|||||||||||||
Net loss
|
$
|
(706,109
|
)
|
$
|
(776,474
|
)
|
$
|
(2,750,300
|
)
|
$
|
(1,737,373
|
)
|
||||
Add back interest expense, net of interest income
|
25,004
|
28,310
|
103,238
|
135,912
|
||||||||||||
Add back depreciation and amortization
|
182,030
|
90,308
|
472,659
|
245,543
|
||||||||||||
Add back stock-based compensation
|
532,448
|
705,349
|
1,726,334
|
1,105,179
|
||||||||||||
Modified EBITDA
|
$
|
33,373
|
$
|
47,493
|
$
|
(448,069
|
)
|
$
|
(250,739
|
)
|
Description
|
||
1.1
|
Licensing Agreement with Peter Hughes (incorporated by reference from our Registration Statement on Form SB-2 filed on April 18, 2006)
|
|
3.1
|
Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB-2 filed on April 18, 2006)
|
|
3.2
|
Bylaws (incorporated by reference from our Registration Statement on Form SB-2 filed on April 18, 2006)
|
|
3.3
|
Articles of Merger filed with the Secretary of State of Nevada on September 19, 2007 and which is effective September 28, 2007 (incorporated by reference from our Current Report on Form 8-K filed on September 28, 2007)
|
|
3.4
|
Certificate of Change filed with the Secretary of State of Nevada on September 19, 2007 and which is effective September 28, 2007 (incorporated by reference from our Current Report on Form 8-K filed on September 28, 2007)
|
|
4.1
|
Regulation “S” Securities Subscription Agreement (incorporated by reference from our Registration Statement on Form SB-2 filed on April 18, 2006)
|
|
10.1
|
Share Purchase Agreement dated November 21, 2007 among our company, Pantera Oil and Gas PLC, Aurora Petroleos SA and Boreal Petroleos SA (incorporated by reference from our Current Report on Form 8-K filed on November 26, 2007)
|
|
10.2
|
Form of Advisory Board Agreement (incorporated by reference from our Current Report on Form 8-K filed on February 4, 2008)
|
|
10.3
|
Equity Financing Agreement dated February 12, 2008 with FTS Financial Investments Ltd. (incorporated by reference from our Current Report on Form 8-K filed on February 15, 2008)
|
|
10.4
|
Return to Treasury Agreement dated February 26, 2008 with Peter Hughes (incorporated by reference from our Current Report on Form 8-K filed on February 28, 2008)
|
|
10.5
|
Amending Agreement dated March 17, 2008 with Artemis Energy PLC, Aurora Petroleos SA and Boreal Petroleos SA (incorporated by reference from our Current Report on Form 8- K filed on March 19, 2008)
|
|
10.6
|
Subscription Agreement dated February 28, 2008 with Trius Energy, LLC (incorporated by reference from our Quarterly Report on Form 10-QSB filed on April 14, 2008)
|
|
10.7
|
Joint Venture Agreement dated February 24, 2008 with Trius Energy, LLC (incorporated by reference from our Quarterly Report on Form 10-QSB filed on April 14, 2008)
|
|
10.8
|
Second Amending Agreement dated July 30, 2008 among our company, Artemis Energy PLC (formerly Pantera Oil and Gas PLC), Aurora Petroleos SA and Boreal Petroleos SA (incorporated by reference from our Current Report on Form 8- K filed on August 5, 2008)
|
|
10.9
|
Amended and Restated Share Purchase Agreement dated September 9, 2008 among company, Artemis Energy PLC (formerly Pantera Oil and Gas PLC), Aurora Petroleos SA and Boreal Petroleos SA (incorporated by reference from our Annual Report on for 10-KSB filed on September 15, 2008)
|
|
10.10
|
Agreement dated October 31, 2008 with Lakehills Production, Inc. and a private equity drilling fund (incorporated by reference from our Current Report on Form 8-K filed on November 5, 2008)
|
|
14.1
|
Code of Ethics (incorporated by reference from our Annual Report on Form 10-KSB filed on August 28, 2007)
|
|
31.1*
|
Certification of Principal Executive Officer pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2*
|
Certification of Principal Financial Officer pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1*
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2*
|
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
ESP RESOURCES, INC.
|
|||
Date: November 14, 2011
|
By:
|
/s/ David Dugas
|
|
David Dugas
|
|||
Chief Executive Officer and Director
|
|||
(Principal Executive Officer and Principal Financial Officer)
|
ESP RESOURCES, INC.
|
|||
Date: November 14, 2011
|
By:
|
/s/ David Dugas
|
|
David Dugas
|
|||
Chief Executive Officer and Director
|
|||
(Principal Executive Officer and Principal Financial Officer)
|
|||
Date: November 14, 2011
|
By:
|
/s/ Tony Primeaux
|
|
Tony Primeaux
|
|||
Director
|
|||
Date: November 14, 2011
|
By:
|
/s/ William M Cox
|
|
William M. Cox
|
|||
Director
|
1.
|
I have reviewed this annual report on Form 10-Q for the quarter ended September 30, 2011 of ESP Resources, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 14, 2011
|
/s/ David Dugas
|
|
David Dugas
|
||
Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-Q for the quarter ended September 30, 2011 of ESP Resources, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 14, 2011
|
/s/ David Dugas
|
|
David Dugas
|
||
Chief Financial Officer
|
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER OF
|
ESP RESOURCES, INC.
|
PURSUANT TO 18 U.S.C. SECTION 1350,
|
AS ADOPTED PURSUANT TO
|
§ 906 OF THE SARBANES-OXLEY ACT OF 2002
|
1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 14, 2011
|
/s/ David Dugas
|
|
David Dugas
|
||
Chief Executive Officer
|
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER OF
|
ESP RESOURCES, INC.
|
PURSUANT TO 18 U.S.C. SECTION 1350,
|
AS ADOPTED PURSUANT TO
|
§ 906 OF THE SARBANES-OXLEY ACT OF 2002
|
1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 14, 2011
|
/s/ David Dugas
|
|
David Dugas
|
||
Chief Financial Officer
|
Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
ASSETS: | ||
Accumulated Depreciation and Amortization | $ 1,023,480 | $ 633,213 |
STOCKHOLDER'S EQUITY: | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 350,000,000 | 1,200,000,000 |
Common stock shares issued | 103,939,378 | 87,488,558 |
Common stock shares outstanding | 103,939,378 | 87,488,558 |
Preferred stock, par value | $ 0.001 | $ 0 |
Preferred stock, shares authorized | 10,000,000 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Income Statement [Abstract] | ||||
SALES, NET | $ 3,425,518 | $ 1,309,326 | $ 7,535,739 | $ 3,627,972 |
COST OF GOODS SOLD | 1,626,194 | 721,988 | 3,589,977 | 1,684,029 |
GROSS PROFIT | 1,799,324 | 587,338 | 3,945,762 | 1,943,943 |
General and administrative | 2,219,746 | 1,219,033 | 5,951,297 | 3,162,221 |
Depreciation and amortization | 182,030 | 90,308 | 472,659 | 245,543 |
Loss from operations | (602,452) | (722,003) | (2,478,194) | (1,463,821) |
OTHER EXPENSE | ||||
Interest expense | (25,004) | (28,349) | (103,295) | (135,984) |
Factoring fees | (70,268) | (26,253) | (159,760) | (80,732) |
Amortization of debt discount | (5,224) | 0 | (5,224) | 0 |
Other income | 0 | 92 | 0 | 3,092 |
Interest income | 0 | 39 | 57 | 72 |
Loss on legal settlement | 0 | 0 | 0 | (60,000) |
Other expenses | (3,161) | 0 | (3,884) | 0 |
Total other expense | (103,657) | (54,471) | (272,106) | (273,552) |
NET INCOME (LOSS) | $ (706,109) | $ (776,474) | $ (2,750,300) | $ (1,737,373) |
NET LOSS PER SHARE (basic and diluted) | $ (0.01) | $ (0.01) | $ (0.03) | $ (0.03) |
WEIGHTED AVERAGE SHARES OUTSTANDING | 103,791,810 | 67,516,786 | 99,972,348 | 60,115,289 |
Document and Entity Information (USD $) | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Nov. 11, 2011 | |
Document And Entity Information | ||
Entity Registrant Name | ESP Resources, Inc. | |
Entity Central Index Key | 0001346526 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2011 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $ 8,609,670 | |
Entity Common Stock, Shares Outstanding | 108,859,378 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2011 |
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Related Party Transactions | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Notes to Financial Statements | |
Related Party Transactions |
Note 6 Related Party Transactions
As of December 31, 2010, ESP Resources owed shareholders and management a total of $58,139. As of September 30, 2011, the Company had balances due to shareholders and management a total of $58,114 |
Going Concern | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Notes to Financial Statements | |
Going Concern |
Note 2 Going Concern
The Company has net losses for the nine months ended September 30, 2011 as well as negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's ability to continue operations will likely require additional capital. This condition raises substantial doubt about the Companys ability to continue as a going concern. We expect cash flows from operating activities to improve, primarily as a result of an increase in revenue, although there can be no assurance thereof. The accompanying unaudited consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to modify, delay, or abandon some or all of our business and expansion plans. |
Subsequent Events | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Notes to Financial Statements | |
Subsequent Events |
Note 7 Subsequent Events
On October 1, 2011, the Company entered into new employment agreements with its president and CEO, David Dugas and with its vice-president Tony Primeaux. Both agreements provided for stock options at the discretion of the Board of Directors.
On October 1, 2011, the Company entered into a consulting agreement with a vendor and issued 2,500,000 common shares as consideration.
On October 1, 2011, the Company issued 2,540,000 shares and 2,000,000 options to officers and lenders.
On October 28, 2011 the Company purchased certain vehicles and equipment by issuing debt of $120,000 with an annual interest rate of 10% and a term of 24 months. As part of the consideration for making the loan the Company issued 120,000 shares of its common stock with a value of $22,200 which has been treated as a debt discount to the loan and is being amortized over the term of the loan. |
Inventory | 9 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||
Inventory |
Note 3 Inventory
Inventory represents raw and blended chemicals and other items valued at the lower of cost or market with cost determined using the first-in first-out method, and with market defined as the lower of replacement cost or realizable value. Inventory consisted of the following as September 30, 2011 and December 31, 2010:
|
Long-Term Debt | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Notes to Financial Statements | |
Long-Term Debt |
Note 4 Long-Term Debt
On February 15, 2011, the Company purchased certain vehicles by issuing debt of $102,402 with an annual interest rate of 7.9% and a term of 48 months. On March 11, 2011 the Company purchased certain vehicles by issuing debt of $166,387 with an implied interest rate of 3.0% and a term of 48 months. On March 15, 2011 the Company purchased a vehicle by issuing debt of $62,067 with an implied interest rate of 3.0% and a term of 60 months.
In April, 2011the Company purchased certain vehicles by issuing debt of $118,792 with annual interest ranges of 3% to 7.9% and a term of 60 months. In September, 2011 the Company purchased vehicles by issuing debt of $95,074 with an annual interest rate of 3% and a term of 60 months.
In May 2011 the Company terminated an employee who was also a former shareholder in Turf. At that time the Company allowed the employee to retain certain vehicles which were acquired by the Company from Turf however the registration remained in the name of Turf. The associated bank loans on those vehicles also remained in the name of Turf. At the time of termination the Company canceled the remaining debt and recognized a contingent liability of approximately $11,000 for the difference between the fair value of the vehicles and the debt.
On June 3, 2011 the Company issued debt of $75,000 with an annual interest rate of 10% and a term of 24 months. The debt is secured by the specific assets acquired with the debt. As part of the consideration for making the loan the Company issued 225,000 shares of its common stock with a value of $29,250 which has been treated as a debt discount to the loan and is being amortized over the term of the loan.
On July 14, 2011 the Company purchased certain vehicles by issuing debt of $75,000 with an annual interest rate of 10% and a term of 24 months. The debt is secured by the specific assets acquire with the debt.
On July 15, 2011 the Company purchased certain vehicles by issuing debt of $75,000 with an annual interest rate of 10% and a term of 24 months. The debt is secured by the specific assets acquire with the debt.
On July 20, 2011 the Company purchased certain equipment by issuing debt of $31,690 with an annual interest rate ranges of 10.5% and 12.0% and a term of 36 months.
On July 28, 2011 the Company purchased certain vehicles by issuing debt of $116,416 with an annual interest rate of 6.74% and a term of 36 months.
On August 13, 2011 the Company purchased certain vehicles by issuing debt of $60,229 with an annual interest rate of 7.74% and a term of 60 months.
On September 13, 2011 the Company purchased certain vehicles and equipment by issuing debt of $120,000 with an annual interest rate of 10% and a term of 24 months. The debt is secured by the specific assets acquired with the debt. As part of the consideration for making the loan the Company issued 120,000 shares of its common stock with a value of $15,000 which has been treated as a debt discount to the loan and is being amortized over the term of the loan. |
Stockholders’ Equity | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ Equity |
Note 5 Stockholders Equity
Private Placement During the nine months ended September 30, 2011, we received proceeds of $765,440, net of $66,560 in cash placement costs, from the sale of 11,885,713 units in a private placement. Each unit consisted of one share of common stock, one warrant for the purchase of a share of common stock at an exercise price of $0.25 for a period of eighteen months, and one warrant for the purchase of a share of common stock at an exercise price of $0.75 for a period of one year beginning on the first anniversary of the issuance of the warrant. The warrants were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.05-$0.17; warrant term of 1-2 years; expected volatility of 156%-158% and discount rate of .33%-2.61%. We issued finder fee warrant of 1,721,905 with a fair value of $239,847. This warrant has an exercise price of $0.0735 and a term of 3 years. The warrant was valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.12; warrant term of 3 years; expected volatility of 158%; and discount rate of 0.22%. The proceeds were allocated as follows:
Common stock issued for services In May 2010, the Company issued a total of 8,500,000 shares of common stock for services. The shares were valued at $0.09, the trading price of the Companys stock on the grant date, and have a fair value of $765,000. These shares vest over the service period of 3 years. The Company has recognized compensation expense of $191,250 on these shares as of September 30, 2011. The fair value of the unvested shares is $573,750 as of September 30, 2011.
In March 2011, the Company issued 325,000 shares of its common stock to a vendor. The shares were valued at $51,750 and recorded as a release of the Companys accounts payable.
On June 1, 2011 the Company entered into a 3 year consulting agreement. Per the terms of the agreement, the Company is to pay $3,250 per month and issued 1,500,000 shares of common stock and 2,000,000 warrants. The shares had a fair value of $187,500 and the warrants had a fair value using the Black Sholes valuation model of $98,289 and have recognized these amount as stock based compensation expense.
On June 24, 2011 the Company entered into a 3 month consulting agreement. The company issued 230,000 shares of common stock with a fair value of $27,600 and has recognized this amount as stock based compensation expense
On June 27, 2011 the company entered into a 1 year consulting agreement. Per the terms of the agreement, the Company is to pay a monthly fee of $7,500 and issue 810,000 shares of common stock which are fair valued at $97,200. Of the 810,000 shares 405,000 shares vested immediately and the remaining shares will vest in December 2011. The Company has recognized compensation expense of $48,600 on these shares as of September 30, 2011.
In June 2011, the Company issued 400,000 shares of its common stock to vendors and certain employees for services rendered. The shares were valued at $48,000 and recorded as stock compensation expense.
On July 6, 2011 the Company agreed with a vendor to convert $55,000 of payables by issuing 761,111 shares of the Company stock and incurring a loss on extinguishment of debt of $18,741, the fair value of the shares on conversion was $96,991.
Stock Option Awards On June 1, 2011, through the Board of Directors, the Company granted non-statutory options to purchase 5,000,000 shares each to two directors (one of whom is also the CEO of the Company). These options were granted with an exercise price equal to $0.14 per share. The stock price on the grant date was $0.125 per share. The options have a fair value of $1,183,300. The options were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.125; warrant term of 6 years; expected volatility of 158% and discount rate of 1.65%. These options vest 20% on the commencement date, 20% on December 1, 2011 and 20% on the remaining 2 years anniversary of the vesting commencement date.
On September 21, 2010, through the Board of Directors, the Company granted non-statutory options to purchase 6,000,000 shares each to two directors (one of whom is also the CEO of the Company). These options were granted with an exercise price equal to $0.15 per share. The stock price on the grant date was $0.12 per share. The options have a fair value of $1,344,228. The options were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.12; warrant term of 5.5 years; expected volatility of 158% and discount rate of 2.61%. These options vest 33.33% on the commencement date, 33.33% on the first anniversary of the vesting commencement date and 33.33% on the second anniversary of the vesting commencement date.
On June 25, 2011, through the Board of Directors, the Company granted non-statutory options to purchase 1,200,000 shares each to two employees. These options were granted with an exercise price equal to $0.15 per share. The options have a fair value of $128,912. The options were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.12; term of 5 years; expected volatility of 167% and discount rate of 0.57%. The stock price on the grant date was $0.12 per share. These options vest 25% each year on the anniversary of the grant date.
On July 29, 2011 the Board of Directors approved the issuance of 400,000 stock options to various employees of the Company. The stock options have an expiration of ten years from the grant date and an exercise price of $0.14 which was the market price of the Companys common stock on the grant date. The options have a fair value of $49,719 . The options were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.14; term of 10 years; expected volatility of 154% and discount rate of 2.82%. The stock price on the grant date was $0.14 per share. The options vest immediately.
The Company has recognized compensation expense of $1,125,095 on the stock options granted above and stock options granted in prior years that vested during the current period for the nine months ended September 30, 2011. The fair value of the unvested shares is $1,581,064 as of September 30, 2011.
Stock option activity summary covering options is presented in the table below:
LPC Agreement On September 16, 2010, the Company signed a $5 million purchase agreement with Lincoln Park Capital Fund, LLC (LPC), an Illinois limited liability company. Upon signing the agreement, we received $100,000 from LPC as an initial purchase under the $5 million commitment in exchange for 666,667 shares of our common stock and warrants to purchase 666,667 shares of our common stock at an exercise price of $0.20 per share. The Company also issued 1,181,102 of shares of common stock as a commitment fee valued at $159,449.
The Company also entered into a registration rights agreement with LPC whereby the Company agreed to file a registration statement related to the transaction with the U.S. Securities & Exchange Commission (SEC) covering the shares that may be issued to LPC under the purchase agreement. After the SEC had declared effective the registration statement related to the transaction on December 22, 2010, the Company has the right, in its sole discretion, over a 30-month period to sell its shares of common stock to LPC in amounts up to $500,000 per sale, depending on certain conditions as set forth in the purchase agreement, up to the aggregate commitment of $5 million.
There are no upper limits to the price LPC may pay to purchase the Companys common stock. The purchase price of the shares related to the $4.9 million of future funding will be based on the prevailing market prices of the Companys shares immediately preceding the time of sales without any fixed discount, and the Company will control the timing and amount of any future sales of shares to LPC. LPC shall not have the right or the obligation to purchase any shares of common stock on any business day that the price of ESP common stock is below $0.10. In addition, the Company will issue to LPC up to 1,181,102 shares pro rata as LPC purchases the remaining $4.9 million as additional consideration for entering into the purchase agreement. The purchase agreement may be terminated by the Company at any time at the Companys discretion without any cost to the Company. Except for a limitation on variable priced financings, there are no financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the agreement.
On April 20, 2011, pursuant to the LPC agreement described herein, the Company delivered a regular purchase notice to LPC to purchase $25,000 of the Companys common stock, or 193,996 shares. Subsequent to this transaction, there are remaining 14,812,030 additional shares that the Company may sell to LPC, 1,181,102 shares already issued as a commitment fee, and 1,175,076 additional commitment shares that the Company may issue on a pro rata basis as up to an additional $4,875,000 of the Companys stock is purchased by LPC. |
Basis of Presentation and Significant Accounting Policies | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Significant Accounting Policies |
Note 1 Basis of Presentation, Nature of Operations and Significant Accounting Policies
Basis of Presentation ESP Resources, Inc. (ESP Resources, and collectively with its subsidiaries, we, our or the Company) was incorporated in the State of Nevada on October 27, 2004. The accompanying unaudited condensed consolidated financial statements include the accounts of ESP Resources, Inc. and its wholly owned subsidiaries, ESP Petrochemicals, Inc. (ESP Petrochemicals) and ESP Resources, Inc. of Delaware (ESP Delaware). ESP Petrochemicals also owns certain assets and liabilities of Turf Chemistry Inc. (Turf), a Texas corporation. On September 7, 2011 the Company became a 49% partner in a new entity. The Company management will direct the operations of the business and the Company will receive 80% of the Profits. All significant inter-company balances and transactions have been eliminated in the consolidation. The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America. Any reference herein to ESP Resources, the Company, we, our or us is intended to mean ESP Resources, Inc. including the wholly-owned subsidiaries indicated above, unless otherwise indicated.
Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Interim Financial Statements The condensed unaudited consolidated financial statements presented herein have been prepared by the Company in accordance with U.S. generally accepted accounting principles (GAAP) and the accounting policies set forth in its audited consolidated financial statements for the period ended December 31, 2010 as filed with the Securities and Exchange Commission (the SEC) in the Companys Annual Report on Form 10-K and should be read in conjunction with the notes thereto. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The results of operations presented for the three and nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the year. These condensed consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2010.
Concentrations The Company has four major customers that together account for 58% of accounts receivable at September 30, 2011 and 61% of the total revenues earned for the nine months ended September 30, 2011 as follows:
The Company has two vendors that accounted for 72% of chemical purchases during the nine months ended September 30, 2011 and 48% of the ending accounts payable at September 30, 2011 as follows:
Revenue and Cost Recognition The Company is a custom formulator of petrochemicals for the oil & gas industry. Since the products are specific to each location, the receipt of an order or purchase order starts the production process. Once the blending takes place, the order is delivered to the land site or dock. When the containers of blended petrochemicals are off-loaded at the dock, or they are stored on the land site, a delivery ticket is obtained, an invoice is generated and Company recognizes revenue. The invoice is generated based on the credit agreement with the customer at the agreed-upon price.
Revenue is recognized when title and risk of loss have transferred to the customer and when contractual terms have been fulfilled. Transfer of title and risk of loss occurs when the product is delivered in accordance with the contractual shipping terms, generally to a land site or dock. Revenue is recognized based on the credit agreement with the customer at the agreed upon price.
Rent On February 28, 2011 the Company canceled its lease for its Southeast Texas facility and initiated a new lease for approximately 6,000 square feet of office and warehouse space for its Southeast Texas facility. The lease is $2,400 per month with an initial term of 3 years.
On September 20, 2011 the Company initiated a new lease in Dubai, UAE for approximately 1,564 square feet of office space for its international operations, the lease is $3,549 per month with an initial term of 1 year.
Basic and Diluted Loss Per Share Basic and diluted earnings or loss per share (EPS) amounts in the consolidated financial statements are computed in accordance Accounting Standard Codification (ASC) 260 10 Earnings per Share, which establishes the requirements for presenting EPS. Basic EPS is based on the weighted average number of common shares outstanding. Diluted EPS is based on the weighted average number of common shares outstanding and dilutive common stock equivalents. Basic EPS is computed by dividing net income or loss available to common stockholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Potentially dilutive securities were excluded from the calculation of diluted loss per share, because their effect would be anti-dilutive.
Accounts Receivable and Allowance for Doubtful Accounts The Company generally does not require collateral, and the majority of its trade receivables are unsecured. The Companys credit terms generally require payment within 30 days from the date of the sale. The carrying amount for accounts receivable approximates fair value.
Accounts receivable consisted of the following as of September 30, 2011 and December 31, 2010:
Purchase of Turf Chemistry, Inc by ESP Resources on November 1, 2009 On November 1, 2009, ESP Resources purchased certain assets and liabilities of Turf Chemistry Inc. (Turf), a Texas corporation. The assets and liabilities acquired related to Turfs activities in the United States. Turf operates in the same industry as ESP Resources. The details of the acquisition were disclosed in the Form 10K for December 31, 2010. As part of the acquisition agreement, there was an earn-out provision that required ESP Resources to issue additional common shares if Turf meets certain sale targets for the periods from January 1, 2010 to December 31, 2012. The Company estimated the fair value of the earn-out provision to be $350,000 at acquisition date and recorded it as contingent liability as of December 31, 2009. The minimum sale target for the period January 1, 2011 through December 31, 2011 was $1,500,000. As of September 30, 2011, Turf has not reached the target and the contingent liability remained at $350,000.
Intangible assets Intangible assets relate to the customer list acquired with the acquisition of Turf described above. Intangible assets are being amortized over their estimated life of five years. The Company recognized amortization expense of $136,449 and $137,246 for the nine months ended September 30, 2011 and 2010, respectively.
Recently Issued Accounting Pronouncements The Company does not expect that the adoption of recently issued accounting pronouncements will have a material impact on its financial position, results of operations, or cash flows. |