-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VsUluz0nzr1GyHV6cGAJ6J0PzGmupGKXCd6D/b6u/+ysTbKVnVNXnLk1N8v1HkJE SVFgbSaLNZsPphcYFKy6Ug== 0001012895-96-000068.txt : 19961121 0001012895-96-000068.hdr.sgml : 19961121 ACCESSION NUMBER: 0001012895-96-000068 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961120 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAN DIEGO BANCORP CENTRAL INDEX KEY: 0000319124 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 95355578 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-10147 FILM NUMBER: 96669527 BUSINESS ADDRESS: STREET 1: 3335 SOUTH 900 EAST STREET 2: SUITE 230 CITY: SALT LAKE CITY STATE: UT ZIP: 84106 BUSINESS PHONE: 8014675339 MAIL ADDRESS: STREET 1: 3335 SOUTH 900 EAST STREET 2: SUITE 230 CITY: SALT LAKE CITY STATE: UT ZIP: 84106 FORMER COMPANY: FORMER CONFORMED NAME: SAN DIEGO BANCORP DATE OF NAME CHANGE: 19931124 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________. Commission file number: 0-10147 APPLIED EARTH TECHNOLOGIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) California 95-3555738 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3335 South 900 East, Suite 230, Salt Lake City, Utah 84106 - ---------------------------------------------------- --------- (Address of principal executive offices) (Zip Code) (801) 467-5339 ------------------------------------------------- Registrant's telephone number, including area code Not Applicable - ------------------------------------------------------------------------------ (Former name, former address, and former fiscal year, if changed since last report.) 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), Yes [X] No [ ] and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Class Outstanding as of September 30, 1996 -------------------------- ------------------------------------ Common Stock, No Par Value 15,998,354 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-QSB pursuant to the rules and regulations of the Securities and Exchange Commission and, therefore, do 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 considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. The unaudited balance sheet of the Company as of September 30, 1996, and the related audited balance sheet of the Company as of December 31, 1995, the unaudited related statements of operations and cash flows for the three and nine month periods ended September 30, 1996 and 1995, and the unaudited statement of stockholders' equity for the three month periods ended September 30, 1995 and 1996, are attached hereto and incorporated herein by this reference. Operating results for the quarter ended September 30, 1996, are not necessarily indicative of the results that can be expected for the year ending December 31, 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Applied Earth Technologies, Inc. (the "Company") (formerly San Diego Bancorp), was incorporated under the laws of the State of California on May 19, 1979, for the primary purpose of acting as a bank holding corporation for several subsidiaries, and the principal business was in the industrial loan market conducted through a subsidiary named El Camino Thrift and Loan Association. During several years preceding 1986, the Company incurred substantial losses and during 1986 management decided to discontinue all operating activities, and liquidate the remaining assets and liabilities. The Company became a "shell" corporation by December 31, 1986, and had no material operations until September, 1993. On September 21, 1993, the Company acquired 100% of the outstanding common stock of Enviro-Guard Corporation (a corporation incorporated in the State of Utah on May 30, 1991) from Enviro-Guard Holding Corporation (a corporation incorporated in the State of Colorado on June 10, 1987). This transaction was accounted for as a reverse acquisition whereby the acquired corporation (Enviro-Guard Corporation) gained controlling stockholder interest in the acquiring corporation (the Company). The financial statements of Enviro-Guard Corporation are presented on a continuous basis since inception in May of 1991. Enviro-Guard Corporation has developed a line of organically-based insecticide products made from natural compounds with the objective of achieving environmentally-friendly, yet effective results. In August of 1992, Enviro-Guard acquired 100% of the outstanding common stock of Diatect International, Inc. ("Diatect"), (incorporated in the State of Kansas in 1989). Diatect has developed and owns the rights to three EPA registered insecticides. Also in August of 1992, Enviro-Guard acquired 100% of the outstanding common stock of D.S.D., Inc. (incorporated in the State of Kansas in 1982). The principal business activity of D.S.D., Inc., is the manufacturing and sale of cattle dusters and mineral feeders as well as the blending and sale of various agricultural related insecticides. On December 18, 1992, Enviro-Guard Corporation completed negotiations to acquire 90.14% of the outstanding common stock (891,250 shares) of White Mountain Mining and Manufacturing, Inc. ("White Mountain") (an Idaho Corporation). White Mountain owns 83 unpatented BLM mining claims located in Malheur County, Oregon. The purpose of this acquisition of the mining property is for Enviro-Guard Corporation to have a source of diatomite, which is an important organic ingredient for its environmentally-safe insecticides. On August 22, 1996, the Company changed its name from San Diego Bancorp to Applied Earth Technologies, Inc. to more accurately reflect the Company's business operations and to eliminate confusion as to the Company's business that was associated with the Company's prior name. Management Changes On September 18, 1996, Dennis P. Nielsen resigned as Secretary of the Company and as a member of the board of directors. Mr. Dale Christiansen, CFO and Treasurer of the Company, was elected as Secretary of the Company. Mr. Nielsen's board position will remain vacant until the Annual Stockholders Meeting expected to be held during the fourth quarter of 1996. Ability of the Company to Continue as a Going Concern For the nine-month period ended September 30, 1996, the Company has incurred a consolidated net loss of $528,193. In addition, at September 30, 1996, current liabilities exceeded current assets by $1,482,306. During the first nine months of 1996, the Company converted $506,751 in accrued salaries, marketing expenses and other liabilities to equity by offering 3,863,468 shares of common stock. In the future, management anticipates the conversion of an additional $500,000 in debt (principally notes payable and accruals) to equity during fiscal years 1996 and 1997. The Company also believes that without additional conversions of debt to equity and restructuring the payment terms of short-term debt, substantial doubt remains as to the Company's ability to meet its current obligations and continue in business. The Company has taken steps to address its insolvency problems by working with its creditors to keep them informed of the Company's progress in meeting outstanding liabilities. For the most part, the Company's creditors have been patient, waiting for payment at a future date. The Company must meet monthly operational expenses of approximately $85,000. Currently, the Company has average revenues from operations of approximately $75,000 which creates an operational shortfall of approximately $10,000 per month. However, management believes that additional revenue generated by increased marketing efforts will result in increased sales of the Company's products and ultimately alleviate a substantial portion of the shortfall. Until those revenues eventuate, the Company will be dependent upon outside funding to meet operating requirements. The Company is attempting to obtain additional working capital from several sources, including investment banking firms, private investors and state funding agencies interested in assisting growing companies within the agri-environmental sector. Management intends to seek equity financing through the sale of the Company's securities. Results from Operations During the fiscal quarter ended September 30, 1996, the Company had revenues of $90,331, cost of sales of $43,998, operating expenses of $337,771, other income of $4,559 and an income tax benefit of $39,286. These yielded a net loss of $247,599, compared to a net loss of $145,856 for the same period of 1995. The substantial portion of the third quarter 1996 loss was due to three factors: the seasonal downturn in agriculture related product sales, higher professional fees ($99,218) incurred in bringing the Company back into SEC compliance, and depreciation and amortization expense ($62,710). The Company does not expect professional fees in future reporting periods to be as high as those incurred during this reporting period. The Company believes that many of the operating and administrative expenses associated with the third quarter loss were due, in part, to insufficient cash flow and the illiquid nature of the Company's non-current assets. For the nine month period ended September 30, 1996, the company had consolidated revenues of $543,129. The net loss for the nine-month period totaled $528,193. Management is hopeful that once its products are in the marketplace, the losses from operations the Company currently suffers will be alleviated by increased sales revenue and profitability. Currently, the Company has not had the working capital to effectively market its products. Liquidity and Capital Resources The Company has a severe working capital deficit. As of September 30, 1996, the Company's working capital deficit totaled $1,482,306 compared with $1,502,455 at December 31, 1995. The Company has current liabilities totaling $1,641,829 and no long term debt at September 30, 1996, a decrease of $133,148 from the end of the prior quarter. At the end of 1995, current liabilities and long term debt were $1,688,297 and $200,000, respectively. The Company's working capital deficit continues to have a direct correlation with the Company's inability to expand and market its products effectively. If the Company is unable to obtain some funds in the near future, it will not be able to continue in business. The Company, therefore, continues to seek working capital from several sources, including equity markets and private investors. There is no assurance, however, that these efforts will be successful. The Company does feel that it will increase revenues from operations as it moves from the development stage of its products, which has included lengthy and costly time in obtaining EPA approval. With the Company's products in the marketplace and with adequate financial support, the Company anticipates revenues to offset on-gong expenses. The Company is uncertain, however, as to whether there will be sufficient revenues to cover prior years' obligations. As previously stated, the Company's lack of cash has affected its ability to effectively market Enviro-Guard's products. The marketing strategy will require funds to be fully effect. Accordingly, although the Company anticipates more revenue from its products then it has received in the past, it will not be as profitable as it could be with additional funding for full implementation of its marketing and promotional plans. Subsequent Events On October 24, 1996, the Company entered into a letter of commitment with Security National Land and Mortgage Corporation for a commercial $3 million loan. The proceeds of the loan are to be used for product and inventory development, marketing, plant facility development, repayment of short term notes and operating capital. The loan is to close approximately 30 days from the date of the letter of commitment. FINANCIAL STATEMENTS APPLIED EARTH TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Unaudited) December 31, Sept. 30, 1996 1995 -------------- -------------- ASSETS CURRENT ASSETS Cash $ 3,368 64,970 Accounts receivable 73,492 25,036 Inventories 82,663 95,836 ------------ ------------ Total Current Assets 159,523 185,842 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT Building 127,119 127,119 Mining property 4,318,346 4,370,390 Equipment 260,277 261,185 ------------ ------------ Total Property, Plant and Equipment 4,705,742 4,758,694 Less accumulated depreciation 207,912 195,672 ------------ ------------ Net Property, Plant and Equipment 4,497,830 4,563,022 ------------ ------------ OTHER ASSETS Investment in EPA labels, Net of amortization 3,288,887 3,509,807 Notes receivable 240,472 250,000 Deposits 1,117 967 Other assets 11,429 57,200 ------------ ------------ Total Other Assets 3,541,905 3,817,974 ------------ ------------ TOTAL ASSETS $ 8,199,258 $ 8,566,838 ============ ============
APPLIED EARTH TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Unaudited) December 31, Sept. 30, 1996 1995 -------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 261,009 $ 242,714 Interest payable 209,657 203,762 Income taxes payable 20,489 20,487 Other accrued liabilities 52,908 26,298 Notes payable 1,097,766 665,514 Current portion of long-term debt - 529,522 ----------- ----------- Total Current Liabilities 1,641,829 1,688,297 ----------- ----------- LONG-TERM LIABILITIES Long-Term debt, less current portion - 200,000 ----------- ----------- DEFERRED TAX LIABILITY 1,042,806 1,238,851 ----------- ----------- COMMITMENTS - - MINORITY INTEREST 339,397 339,397 ----------- ----------- STOCKHOLDERS' EQUITY Common stock, no par value; 20,000,000 shares authorized; 15,998,354 and 10,280,408 shares issued and outstanding, respectively 9,703,458 9,059,150 Common stock subscribed 335,564 376,746 Accumulated deficit (4,863,796) (4,335,603) ----------- ----------- Total Stockholder's Equity 5,175,226 5,100,293 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,199,258 $ 8,566,838 =========== ===========
APPLIED EARTH TECHNOLOGIES, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 1996 1995 1996 1995 (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------ ------------ ------------ ------------ REVENUES $ 90,331 $ 126,426 $ 543,129 $ 498,812 COST OF SALES 43,998 87,501 264,631 260,739 ---------- ---------- ---------- ---------- GROSS PROFIT 46,333 38,925 278,498 238,073 ---------- ---------- ---------- ---------- OPERATING EXPENSES Salaries, wages and benefits 59,850 67,761 180,887 214,758 Consulting 42,680 1,900 98,486 43,059 Travel 4,048 8,870 25,213 32,460 Rent 2,734 3,800 15,412 17,341 Interest 33,178 12,810 99,654 45,052 Utilities 3,500 3,100 10,871 9,122 Depreciation and amortization 62,710 60,754 188,118 184,131 Business Development and Promotion 8,781 3,424 33,048 90,277 Office 6,252 8,088 18,302 26,411 Taxes and licenses 8,550 16,882 13,656 21,325 Professional fees 99,218 4,196 218,651 119,753 Repairs and Maintenance 1,000 2,848 2,033 7,338 Miscellaneous 5,276 15,901 17,085 47,256 --------- ---------- ---------- ---------- Total Operating Expenses 337,777 210,334 921,416 858,283 --------- ---------- ---------- ---------- OPERATING (LOSS) (291,444) (171,409) (642,918) (620,210) OTHER INCOME (LOSS) Gain (loss) on sale of property - 1,473 - (107,859) Interest/Income 3,908 4,062 11,880 12,526 Royalties 650 - 1,963 - Miscellaneous 1 6,358 7,672 9,577 --------- ---------- ---------- ---------- Total Other Income (Loss) 4,559 11,893 21,515 (85,756) --------- ---------- ---------- ---------- (LOSS) BEFORE INCOME TAX BENEFIT (286,885) (159,516) (621,403) (705,966) INCOME TAX BENEFIT 39,286 13,660 93,210 100,889 --------- ---------- ---------- ---------- NET (LOSS) $(247,599) $ (145,856) $ (528,193) $ (605,077) ========= ========== ========== ========== NET (LOSS) PER SHARE (Primary) $ (.017) $ (.014) $ (.035) $ (.059) ========= ========== ========== =========
APPLIED EARTH TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
Common Stock Common Stock Accumulated Shares Amount Subscribed Deficit Total ----------- ----------- ------------ ----------- ----------- Balances as of June 30, 1995 10,280,408 $ 8,925,950 $ 83,500 $(3,478,342) $ 5,531,108 Common stock subscribed for accrued salaries, wages and marketing expenses - - 145,819 - 145,819 Net (Loss) - - - (145,856) (145,856) ---------- ---------- ---------- ---------- ---------- Balances as of September 30, 1995 10,280,408 $ 8,925,950 229,319 (3,624,198) $ 5,531,071 ========== =========== ========== ========== ========== Balances as of June 30, 1996 14,135,164 $ 9,422,396 $ 308,039 $(4,616,197) $ 5,114,238 Conversion of common stock subscribed 544,650 136,213 (136,213) - - Common stock issued for services at $.25 per share 187,752 46,938 - - 46,938 Common stock issued for consulting and debt reduction at $.06 per share 1,130,788 97,911 - - 97,911 Common stock subscribed for debt conversion - - 163,738 - 163,738 Net (Loss) - - - (247,599) (247,599) ---------- ---------- ---------- ----------- ---------- Balances as of September 30, 1996 15,998,354 $9,703,458 $ 335,564 $(4,863,796) $ 5,175,226 ========== =========== ========== ========== ==========
APPLIED EARTH TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 31, 1996 AND 1995
FOR THE FOR THE THREE MONTHS ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30, 1996 1995 1996 1995 (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (247,599) $ (145,856) $(528,193) $(605,076) Add items not requiring the use of cash: Depreciation, amortization and non-cash expenses 62,710 60,754 181,370 160,580 (Decrease) increase in accounts receivable 42,953 25,408 (48,456) (65,774) (Increase) decrease in advances - - - (120) (Increase) in inventories 11,852 (7,509) 13,173 (27,509) (Increase) decrease in deposits - (200) (150) 2,939 (Increase) decrease in prepaid expenses - - - (6,500) Increase (decrease) in accounts payable (25,749) (9,989) 18,295 783 (Decrease) in deferred tax liability (72,513) (48,465) (196,045) (205,305) Increase (decrease) in interest payable (31,701) 12,788 5,895 2,404 Increase (decrease) in other accrued liabilities 7,873 (83,478) 26,612 24,117 ---------- ---------- ---------- --------- NET CASH FLOWS USED FROM OPERATING ACTIVITIES (252,174) (196,547) (527,499) (719,461) ---------- ---------- ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Reduction in property, plant and equipment 16,968 17,536 52,952 339,711 Decrease in other assets (6,935) - 45,765 - Decrease in notes receivable 3,227 - 9,528 150 Reduction of intangibles 17,266 17,266 51,796 51,798 ---------- ---------- ---------- --------- NET CASH FLOWS PROVIDED (USED) FROM INVESTING ACTIVITIES 30,526 34,802 160,041 391,659 ---------- ---------- ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Capital contributions 308,587 145,819 603,126 407,679 Net proceeds (reductions) from notes payable (83,106) 10,000 117,730 140,343 Reduction in long term debt - - (415,000) (208,038) ---------- ---------- ---------- --------- NET CASH FLOWS PROVIDED (USED) FROM FINANCING ACTIVITIES 225,481 155,819 305,856 339,984 ---------- ---------- ---------- --------- TOTAL INCREASE (DECREASE) IN CASH 3,833 (5,926) (61,602) 12,182 CASH AT BEGINNING OF PERIOD (465) 16,261 64,970 (1,847) ---------- ---------- ---------- --------- CASH AT END OF PERIOD $ 3,368 $ 10,335 $ 3,368 $ 10,335 ========== ========== ========== =========
APPLIED EARTH TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIALS STATEMENTS The condensed consolidated financial statements of Applied Earth Technologies, Inc. included herein have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although, certain information normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted, Applied Earth Technologies, Inc. believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in Applied Earth Technologies, Inc.'s annual report on Form 10-KSB for the fiscal year ended December 31, 1996. The condensed consolidated financial statements included herein reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair representation. The results for interim periods are not necessarily indicative of trends or of results to be expected for a full year. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Applied Earth Technologies, Inc.'s annual report on Form 10-KSB for the fiscal year ended December 31, 1995. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Financial Data Schedule, See Exhibit 27 (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 report to be signed on its behalf by the undersigned thereunto duly authorized. APPLIED EARTH TECHNOLOGIES, INC. (Registrant) Dated: November 19, 1996 By /s/ Dale H Christiansen Chief Financial Officer EX-27 2
5 0000319124 APPLIED EARTH TECHNOLOGIES, INC. 9-MOS DEC-31-1996 SEP-30-1996 3,368 0 73,492 0 82,663 159,523 4,705,742 207,912 8,199,258 1,641,829 0 0 0 9,703,458 (4,528,232) 8,199,258 543,129 564,644 264,631 821,762 0 0 99,654 (621,403) (93,210) 0 0 0 0 (528,193) (0.035) (0.035)
-----END PRIVACY-ENHANCED MESSAGE-----