Eagle Environmental Technologies LTD
(A Development Stage Company)
Financial Statements
For the year ended December 31, 2001 and
2000
1155 West Fourth Street, Suite 225
Reno, Nevada
89503
Phone (775) 337-6001 Cell (775) 771-5129
Fax (775) 348-0872
email: danforbush@juno.com
To The Board
of Directors
Eagle
Environmental Technologies LTD
Reno, Nevada
I have audited the accompanying balance sheet of Eagle Environmental Technologies, LTD a development stage company, as of December 31, 2001, and the related statements of operations, changes in stockholders’ equity and cash flows for the year then ended in accordance with standards established by the American Institute of Certified Public Accountants. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on the financial statements based on my audit. The financial statements of the Company for the fiscal year ended December 31, 2000, were audited by other auditors whose report thereon dated April 5, 2001, expressed an unqualified opinion with an explanatory paragraph discussing its going-concern is depended upon the recovery of cost of the rights to the Chemstasis and the Zawcad Cryogenics System.
I have conducted my audit in accordance with generally accepted auditing standards in the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In our opinion, based on our audits, the financial statements referred to above present fairly, in all material respects, the financial position of Eagle Environmental Technologies, LTD as of December 31, 2001, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The consolidated financial statements of Eagle Environmental Technologies, LTD and subsidiaries as of December 31, 2000, and the results of their operations and their cash flows for the years then ended, included for comparative purposes, were audited by other auditors and their report follows this report.
The accompanying financial statements have been compiled assuming the Company will continue as a going concern. The Company is a development stage company and has not developed its market sufficiently to ensure that the cash flows from operations is sufficient to cover its expenses. Management funds current operations from personal assets and is anticipated to continue to do so while developing the markets for the Company’s services. Nevertheless, the Company’s recurring losses and net working capital deficiency raise substantial doubt about its ability to continue as a going concern.
Sincerely,
Forbush and Associates
December 6, 2002
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
The accompanying notes are an integral part of these financial statements.
(3)
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
The accompanying notes are
an integral part of these financial statements.
(4)
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
The accompanying notes are
an integral part of these financial statements.
(5)
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDER’S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
The accompanying notes are
an integral part of these financial statements.
(6)
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDER’S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
CONTINUED
The accompanying notes are
an integral part of these financial statements.
(7)
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
NOTE 1 – ORGANIZATION AND HISTORY
Eagle Environmental Technologies, Ltd. was originally incorporated in the State of Utah on February 28, 1978 under the name of Boshir Uranium and Development Company. The Company was originally incorporated to engage mainly in the acquisition, development, mining, milling, leasing and sale of mining properties. The Company was originally authorized to issue 50,000 shares of common stock with a par value of $1.00 per share. On December 17, 1984, the stockholders approved an amendment to the Articles of Incorporation, which changed the authorized capitalization to 50,000,000 shares with a par value of $0.001 per share. On February 21, 1986, the Company's Articles of Incorporation were amended to change the name of the corporation to The College of Physicians and Surgeons and to increase the authorized shares to 100,000,000, par value $0.001 per share. On or about the 11th day of February 1988 by Amendment to the Articles of Incorporation the name of the corporation was changed to Cholla Precious Metals, Inc. On July 12, 1991, Cholla Precious Metals, Inc. merged with Eagle Environmental Technologies, Inc., ("Eagle") a Nevada corporation, which was organized on June 15, 1990. . Prior to the merger, Cholla Precious Metals, Inc. liquidated its assets and liabilities under Chapter 7 of the U.S. Bankruptcy laws. As part of the merger, the existing outstanding shares of Cholla were reduced through a 3 for 1 reverse stock split and three million shares of the Company’s stock was issued to the shareholders of Eagle. Cholla subsequently changed its name to Eagle Environmental Technologies, Inc. The successor company’s capitalization consisted of 100,000,000 shares, par value $0.001 per share, divided into two classes: (1) Ten Million (10,000,000) shares of Convertible Preferred stock, with no voting rights; and Ninety Million (90,000,000) shares of voting common stock. In November of 1997, the Company's shares of common stock underwent a 10 to 1 reserve split. Accordingly, the number of the Company's issued and outstanding shares was reduced to 1,776,462.
The Company
had one subsidiary, Lone Eagle Technology Site, Inc. ("LETSI"). LETSI was a Nevada corporation incorporated
on December 1, 1995. The Company organized LETSI for the purpose of
establishing a technology development center for research, development and commercialization
of technologies to process hazardous waste.
Effective December 1, 2002 LETSI was dissolved and no longer exists.
Nature of Business:
The Company is in the process of developing, testing and obtaining patents for the most cost effective technologies for treatment of toxins and wastes in the environment. The Company currently controls the rights to three different technologies in this arena. They are 1) the Zawcad Cryogenics System 2) Chemstasis and 3). Plasma Energy systems. ZAWCAD Cryogenics SystemOn September 3, 1999, the President of Eagle Environmmental Technologies, LTD acquired Zawtech International, Inc. of Atlanta, Georgia for cash and stock. Zawtech has exclusive national licenses for the patented Cryogenic and Laser ZAWCAD (Zero Added Waste Cutting Abrading and Drilling) technologies from the U.S. Government Department of Energy, technology transfer program. Lockheed Martin Corporation, a participant in the technology development program and licensor of the ZAWCAD technology, is also a customer and overseas distributor for Zawtech. Cryogenic ZAWCAD's high velocity jets of liquefied low temperature nitrogen are precisely delivered for cutting and drilling operations, for surface coatings removal, and for hazardous and nuclear waste decontamination. A controversy between the buyer and Zawtech arose regarding representations made by (8)
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
NOTE 1 – CONTINUED Zawtech in connection with the transaction. The controversy was settled subsequent to the end of the year. Eagle Environmental Technologies has licensed the ZAWCAD Cryogenics System from Zawtech and anticipated commercial installations and sales during 2003. ChemstasisThe Company owns the rights to a "Chemstasis" process for disposing of toxic materials and solid waste products. The Company is in the process of completing the development of these intellectual properties through research, development and patenting of the processes. The Company would then license the processes to major toxic cleaning corporations, countries and franchisers. The Company does not plan to operate the plants directly. Conventional methods of waste treatment are based on extraction of toxins and their disposal through destruction or storage. Chemstasis converts the toxins to less toxic or non-toxic compounds. The cost savings achieved by the Chemstasis process, as well as the energy savings, are significant over the requirements for conventional processes. The Chemstasis process removes various contaminants from dilute water based solutions. The process also removes particulates, reduces emulsions, can enhance emulsifications, reduce organic halogens, room temperature catalysis and modify pesticides in water. By-products of the Chemstasis process will be non-toxic liquid waste as well as a non-toxic stream with yield results that come under the UPA Guidelines for discharge. The waste treatment industry has not been able to provide on all service for on-site treatment of liquid wastes except for pick up and transportation. The Chemstasis process can be performed on-site through a mobile plant. Plasma TechnologyThe Company has entered into a joint venture agreement with a Hungarian firm named Palota Environmental Protection, Ltd. Through this joint venture, the Company has acquired the right to sell waste elimination units which use plasma technology. The units are manufactured in Hungary. The involves the incineration of hazardous wastes.
This technology uses plasma, a partially ionized gas at atmospheric pressure, which operates at temperatures ranging from 7,200 to 36,000 degrees F. These temperatures are higher than those in conventional combustion flames. The high temperatures generated in this process reduce the presences of undesirable toxic organic compounds. While toxic elements such as arsenic, lead, mercury and cadmium will not be destroyed by this process, they often can be concentrated for economic recovery. Metals, slags, glasses or ashes produced by this system do not pose great problems because they have been subjected to high temperatures for long periods of time. Accordingly, volaties have been removed, organics decomposed and heavy metals may be rendered non-leachable through careful control of slag chemistry. The Company believes that is process is a significant advance in incinerating technology.
(9)
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
Principals of
consolidation:
The accompanying financial statements for 2001 include the accounts of Eagle Environmental Technologies, LTD. The subsidiaries of the Company transferred its payables to its parent company
and it’s has been dissolved as of December 1, 2001. Therefore, the
financial statements for 2000 was prepared as consolidated financial statement
and all significant intercompany balances and transactions have been
eliminated.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates:
In order to prepare the financial statements in conformity with generally accepted accounting principles, management must make estimates and assumptions that affect certain reported account balances and disclosures. Actual results could differ from these estimates.
Cash and cash equivalents:
Cash and cash equivalents consisted bank accounts and investment
securities with maturities less than 90 days.
There is no cash and cash equivalents as of December 31, 2001 and bank
overdraft of $143 as of December 31, 2000.
Inventory:
Inventory is valued at the lower of cost or market. As of December 31, 2001 and 2000 there are zero and $3,771, respectively in inventory.
Equipment and vehicles:
Equipment is stated at cost. Depreciation is calculated on a straight-line basis over a period commensurate with the useful lives of the equipment ranging from 5 years to 7 years. Expenditures for maintenance and repairs are charged to expense as incurred. Upon retirement or disposal of assets, the cost and accumulated depreciation are eliminated from the accounts and any resulting gain or loss is included in the income statement. During the year, the Company cancelled their lease on the copy machine cost $36,182 and returned it back to the vendor. On the disposal date, the Company owed $14,042 on the machine with fair market value of $3,620. The Company is recognizing gain of $10,422 from disposal of asset as of December 31, 2001.
Intangible Properties:
The Company
issued stocks to purchase rights to technology for $256,655 and license to
market Plasma Technology for $391,417.
These assets are capitalized but not being amortized during the
year. Upon commercialization of these
technologies, the Company will amortize the asset over the useful life of the
technology not to exceed 17 years. See Note 3 and 4 for detail.
Earnings per share:
The earnings per share
calculations were based on the weighted average number of shares outstanding
during the period. Fully diluted
earnings per share are not reflected because they are anti-dilutive.
(10)
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 2001 AND 2000
NOTE 2 - CONTINUED
Income Tax:
The Company currently recognized as a Subchapter C Corporation by the Internal Revenue Service and to pay income taxes. Therefore, the losses sustained since inception is available for use as an offset against future earnings.
Revenue Recognition:
Revenue is recognized when products or services are sold. The Company earned $21,536 and $36,260 during 2001 and 2000.
NOTE 3 – RIGHTS TO TECHNOLOGY
The merger with Cholla Precious Metals, Inc. included total rights to Chemstais Technology. The technology is to enable the Company to economically and easily destroy undesirable toxic and hazardous waste materials. The Company licensed the rights to manufacture high-pressure liquid Nitrogen cutting and drilling system call Zawcad Cryogencis Systems.
NOTE 4 – JOINT VENTURES AND AGREEMENTS
The Company entered into a
joint venture with Research Institute Of The Electrical Industry, the largest
research institute in Hungary to form Plasma Environmental Technologies, Inc.
(a US Corporation) to sell waste elimination systems throughout America. The waste eliminating system use the Plasma
Technology to destroy highly toxic wastes by the application of high
temperatures. The units using the
Plasma Technology System are manufactured by EPOS, one of the largest
manufacturers in Hungary.
The Company entered into an agreement with Plasma Environmental Technologies, Inc. to market the Plasma Technology. Pursuant to the agreements, the Company implemented a regional licensing program whereby Canada and the United States are divided into 10 regions for marketing purposed. The Company intends to license specific companies to service each regions in return for a fee and a minority interest.
A licensing
agreement has been signed with JAB Enterprises, Inc. a related company who
purchased the rights to manufacture and sell the Zawcad Cryogenics
Systems. ZawTech INTERNATIONAL, INC.
has received R&D Magazine's 100 award for its commercial development of the
ZawCAD (Zero Added Waste Cutting, Abrading and Drilling) technologies. As part
of the U.S. government initiative to transfer cogent technologies to the
private sector, ZawTech, through the government's transfer agency, Lockheed
Martin, acquired exclusive, national licenses for the manufacture and sales of
the patented ZawCAD technologies (including first right of refusal for over 200
countries). ZawTech's proven technologies address nuclear waste remediation,
military decommissioning and decontamination, and other hazardous clean up
issues, by not adding additional waste to the clean up process. These
technologies are the Cryogenic ZawCAD and the Laser ZawCAD. The Company issued 1,779,167 shares to JAB
Enterprises, Inc. to purchase license rights to manufacture and sell the Zawcad
Cryogenics System in 1999.
(11)
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
NOTE 5 – NOTE RECEIVABLE
The Company received a $7,000 note with 7% from selling water purification system to Tri-Valley Water Services on December 11, 2001. Beginning January 2002, monthly payment of $500 will be due from Tri-Valley until the balance gets paid off or October of 2002, which ever is earlier. The Company also has two related party 12% receivable from Zawtech International in the amount of $19,169 and $18,566 dated January 1, 2001 and 2000, respectively. According to the promissory note, 20% of the royalty fee due to Zawtech International from any Zawcad unit sold by the Company needs to be applied against the related party receivables. As of December 31, 2001, the Company had not sold any Zawcad units and therefore, no payments had been applied against related party receivables. Interest income of $8,449 had been accrued on these related party receivables.
NOTE 6 – ACCRUED EXPENSE
The Company owes sales taxes of $2,353 from sale in
2001 to Department of Taxation. No
salaries and wages are payable as of December 31, 2001 since the Company has no
employees during the year.
NOTE 7 – CAPITAL LEASES
The Company was not able to make payments on the
leased asset and had to return the equipment back to the vendor in order to get
released from the lease agreement. The
Company has no capital lease as of December 31, 2001.
NOTE 8 – EMPLOYMENT CONTRACTS AND STOCK OPTIONS
The Company signed employment agreements with several individuals and corporate entities to act as chairman, corporate treasurer and marketing officer, president, executive and contractor for compensation totaling $1,120,000 per year. A pool of compensation is to be set aside equal to 25% of net cash flow or net pre tax profits, whichever is lesser, as incentive bonuses to be paid to the above entities. The entities have elected to not be compensated on these contracts until the Company has a positive cash flow from operations, therefore the Company did not accrue liabilities on these contracts during the years from 1994 to 2001. The employment agreements also contain stock options in lieu of part of their salaries at a purchase price equal to 79% of then current market value. The Company’s pays $200 to Buzzard Bait Transfer Co. for services provided by its CEO Brian Wilmot. As of December 31, 2001, the compensation for Brian D. Wilmot is included in ‘Contract services.’
NOTE 9 – RELATED PARTY TRANSACTIONS
The Company does significant amount of transactions with Buzzard Bait Transfer Co., Zawtech International and JAB Enterprises since its inception. The Company is related these companies by its CEO, Brian D. Wilmot, who is also the vice president with full authority of Buzzard Bait Transfer Co. and the owner of Zawtech International. JAB Enterprises is a subsidiary of Buzzard Bait Transfer Co.
In 1999, the Company licensed the rights to sell and market the Zawcad Cryogenics Systems by issuing 1,779.167 shares of common stock from Zawtech International, Inc. a company wholly owned by the President and Chairman of Eagle.
(12)
EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 2001 AND 2000
NOTE 9 – RELATED PARTY TRANSACTIONS (cont’d)
Buzzard Bait
Transfer Co. and Jab Enterprises pays for expenses on behalf of the
Company. These expenses are treated as
payable during the year and the board members of Buzzard Bait Transfer Co. and
Jab Enterprises decide whether to receive the Company’s stock or a promissory
note in the amount of total payable outstanding at the end the year.
As of December 31,
2001, the Company owes $202,963 to JAB Enterprises. $369,098 owed to Buzzard
Bait Transfer Co. classified as additional paid-in capital since the Company is
not expected to make payment on this payable in the future.
NOTE 9 – CONTINUED
The Company rents office
space from Jab Enterprises, Inc. for $960 per month.
NOTE 10 – NET OPERATING LOSSES
As of December
31, 2001, the Company has following net operating loss carryforward available
to offset against future taxable income as follows:
NOTE 11 – SUBSEQUENT EVENTS
The Company cancelled 3,000,000 shares of common stock returned from Carl Dunn in 2002 as a part of the settlement of the controversy between the Company and Zawtech International, Inc.
(13)