EAGLE ENVIRONMENTAL TECHNOLOGIES, LTD.
FOR THE YEARS ENDED
DECEMBER 31, 2008
AND
DECEMBER 31, 2007
Balance Sheet...................................................................................................................... 3
Statements of Operations.................................................................................................... 4
Statement of Changes in Stockholders’ Equity................................................................... 5
Statements of Cash Flows................................................................................................... 6
Notes to Financial Statements............................................................................................. 7
1.
Organization and Significant Accounting Policies
Business
Eagle Environmental Technologies, Ltd. Was
originally incorporated in the State of
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, with a par value of $0.001 per share. On or about February 11, 1988 by Amendment to the Articles of Incorporation the name of the corporation was changed Cholla Precious Metals, Inc.
On
In November of 1997, the Company’s shares of common stock underwent a 10 to1 reverse split. Accordingly, the number of the Company’s issuance and outstanding shares was reduced to 1,776,462.
The Company had
one subsidiary, Lone Eagle Technology Site, Inc. (“LETSI”). LETSI was a
On
On
Use of Estimates in
the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and
Cash Equivalents
For the purpose of the statements of cash flows, all highly liquid investments with maturities of three months or less are considered to be cash equivalents. There were no cash equivalents as of December 31, 2008.
Oil and Gas Properties
Investments in oil and gas properties are accounted for using the successful-efforts method of accounting. Under the successful-efforts method, costs such as geological and geophysical, exploratory dry holes and delay rentals are expensed as incurred. The successful-efforts method follows the guidance provided in Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, where the first measurement for impairment is to compare the net book value of the related asset to undiscounted cash flows using commodity prices consistent with management expectations.
All drilling and
completion costs that directly lead to the extraction and production of oil and
gas reserves and all development dry holes are capitalized. Capitalized costs are accumulated by cost
centers. For amortization purposes, the
cost center is the individual property or an aggregation of properties in the
same field or reservoir. The Company has
one cost center, the Siler lease property located in
Under the successful-efforts method, Costs associated with the capitalization of leases are capitalized as incurred. These consist of costs incurred in obtaining a mineral interest in a property, such as the costs of lease bonuses and options to lease, brokers’ fees, recording fees, legal cost, and other similar costs in acquiring property interests.
Oil and gas properties are amortized using the units-of –production method using estimates of proved reserve quantities.
Other Property
and Equipment
Depreciation of other office furniture and equipment and computer hardware and software is provided using the straight-line method based on estimated useful lives ranging from three to seven years.
Rights to
Technology
The Company amortizes intangible assets over the estimated useful period of benefit of the asset or the legal life, whichever is shorter. The Company evaluates the recoverability of intangible assets periodically, taking into account events or circumstances that warrant revised estimates of useful lives or that indicate possible impairment. Impairment losses are recognized in the period when impairment has occurred.
Fair Value of Financial Instruments
The carrying amount of financial instruments held by
the Company, which include cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities, approximate fair value due to their
short duration. The carrying amount of
the Company’s notes payable approximate their fair value based on incremental
borrowing rates for similar types of borrowing arrangements.
Income Taxes
The Company provides for income taxes under the provisions of Statements of Financial Accounting Standards (“SFAS”) No. 109 “Accounting for Income Taxes”. SFAS No. 109 requires an asset and liability based approach in accounting for income taxes.
Deferred income tax assets and liabilities are recorded to reflect the tax consequences in future years of temporary differences between revenue and expense items for financial statement and income tax purposes. Valuation allowances are provided against assets that are not likely to be realized. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Loss Per Share
The computation of basic and diluted earnings per common share
is based on the weighted average number of shares outstanding during the year,
plus the common stock equivalents.
Common stock equivalents are not included in the diluted loss per share
calculation when their effect is anti-dilutive.
Revenue Recognition
The Company recognizes oil revenue from its interest in producing wells as oil is produced and sold from those wells. Oil sold is not significantly different from the company’s share of production.
Principles of Consolidation
The Company has adopted the provisions of FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities”. The accompanying Consolidated Financial Statements include the accounts of Hohle Oil Services, Co. (a Nevada Corporation), a Variable Interest Entity, where we are deemed the primary beneficiary, regardless of our ownership percentage. All significant intercompany balances and transactions with the consolidated entity have been eliminated.
In April 2003 the Financial Accounting Standards Board (“FASB”) issued Statements of Financial Accounting Standards (“SFAS”) 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This statement, which amends and clarifies existing accounting pronouncements, addresses financial accounting and reporting for derivative or other hybrid instruments. This Statement requires that contracts with comparable characteristics be accounted for similarly. It is effective for contracts entered into or modified after September 30, 2003. The Company does not expect the adoption of SFAS 149 to have any impact on the financial statements.
In May 2003 the FASB
issued SFAS 150, “Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity,” which is effective at the
beginning of the first interim period beginning after
In December 2003 the FASB issued SFAS 132R, “Employers’ Disclosures about Pensions and Other Postretirement Benefits—an amendment of SFAS 87, 88, and 106”. This Statement revises employers’ disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by SFAS 87, “Employers’ Accounting for Pensions”, SFAS 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits”, and SFAS 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”. This Statement retains the disclosure requirements contained in SFAS 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, which it replaces. It requires additional disclosures to those in the original Statement 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The required information is required to be provided separately for pension plans and for other postretirement benefit plans. The Company has no Pension or Other Postretirement Benefits.
In November 2004, the FASB issued SFAS No.
151, “Inventory Costs, an amendment to Accounting Research Bulletin (“ARB”) No.
43, Chapter 4”. The amendments made by
SFAS No. 151 clarify that abnormal amounts of idle facility expense, freight,
handling costs and wasted materials (spoilage) should be recognized as
current-period charges. In addition,
SFAS No. 151 requires that allocation of fixed production overhead to inventory
be based on the normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs
incurred during fiscal years beginning after
In December 2004, the FASB issued SFAS No. 123 (revised 2004,
or “R”), “Share-Based Payment — a revision of FASB Statement No. 123
Accounting for Stock-Based Compensation”.
SFAS No. 123 supersedes APB Opinion No. 25, “Accounting
for Stock Issued to Employees”, and amends SFAS No. 95, “Statement of
Cash Flows”. SFAS No. 123(R)
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the income statement based on their fair
values. Pro forma disclosure is no
longer an alternative. The Company recognized stock option compensation expense
in the amount of $240,000 during the year ended December 31, 2005. The Company
recognized stock option compensation expense in the amount of $10,000 during
the year 2006. No further options have been issued for 2007.
2.
Acquisition of Oil & Gas Rights
Siler Lease Property
In December 2004, The Company entered into an agreement with B&B
Oil, Inc., a
|
Allocation
of Siler Purchase |
|
|
|
|
|
Oil & gas rights |
$ 419,950 |
|
Drilling and production equipment |
37,079 |
|
Wells |
12,471 |
|
|
|
|
Total Acquisition Cost |
$ 469,500 |
The transaction closed in January of 2005. At December 31, 2004, the Company had
recorded a deposit in the amount of $244,500 for the value of a note payable
and shares issued as of December 31, 2004.
Oilton & Hirsch Properties
In February 2005, the Company signed a Letter of Agreement with Omni Minerals, LLC, a Texas Limited Liability Company, for the purchase of oil and gas leases and equipment. In March 2005, the Company issued 2,500,000 shares of treasury 144 stock to Omni Minerals Inc. In July of 2005, the Company rescinded the agreement. At Which time Omni Minerals returned the 2,500,000 shares issued, to Buzzard Bait Transfer Co.
Energy 2000
In July of 2004, ZawTech International Inc. (“ZawTech”), a related
Company, entered into an exchange agreement with Energy 2000 (“E2000”) to
obtain oil producing land and equipment located in
Gordon Brothers Oil
In November 2004, the Company made a purchase offer in the amount of
$5,500,000 to Gordon Brothers Oil, Inc. for the purchase of oil producing land
and equipment in
Rights to Technology
The Company had previously capitalized amounts related to the
acquisition of a license for the Zawcad technology. During the year ended December 31, 2004,
management determined the Company no longer rights under the licensing
agreement. The Company recognized an
impairment loss of $220,000 during the year ended December 31, 2004, to write-off
the value of the asset.
3.
Variable Interest Entity
In February 2005, Hohle Oil Services Co. (“Hohle”), a related party
(See note 8), was formed to become the future field operator at the Company’s
Siler well site. Also in February of
2005, the Company entered into an operating agreement with Hohle, whereby the
Company agrees to provide cash deposits as required to maintain operations at
the Siler well site. As the Company is
the sole source of capital for Hohle, management determined the Company is
primary beneficiary, under FIN 46, which requires the Company to consolidate
the Variable Interest Entity, under such circumstances.
4.
Property and Equipment
The following is a summary of property and equipment at December 31, 2008, and 2007.:
|
|
2008 |
2007 |
|
Drilling and field equipment |
$ 448,104 |
$ 448,104 -0- |
|
|
|
|
|
Oil & Gas rights |
419,950 |
419,950 |
|
|
|
|
|
Wells |
211,016 |
211,016 |
|
|
|
|
|
Less: Accumulated depreciation / depletion |
(41,574) |
(41,574) |
|
|
|
|
|
Net oil & gas property & equipment |
1,037,496 |
1,037,496 |
|
|
|
|
|
Office Equipment |
38,675 |
38,675 |
|
|
|
|
|
Furniture |
1,547 |
1,547 |
|
|
|
|
|
Less: Accumulated depreciation |
(40,222) |
(40,222) |
|
|
|
|
|
Net Book Value |
$ 1,037,496 |
$1,037,496 |
5.
Notes Payable
The Company’s notes payable consist of the following at December 31, 2008 and 2007:
|
|
|
|
|
Notes Payable |
2008 |
2007 |
|
Note payable to a financial institution: non-interest bearing note; monthly principal payments of $1,958; note matures July 2008 |
$ 39,158 |
$39,158 |
|
|
|
|
|
Note payable to an individuals, non interest bearing; principal due January 2008 |
2,000 |
2,000 |
|
|
|
|
|
Notes Payable to corporations 12% interest bearing; principal due December 31, 2008 |
$1,114,784 |
1,114,784 |
|
|
|
|
|
Total Notes Payable |
$1,155,942 |
$1,155,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All notes payable are classified as current, as amounts are due within a year.
7.
Settlement
Liability
None
8.
Related Party Transactions
Since its inception, the
Company has done a number of significant transactions with Buzzard Transfer
Co., JAB Enterprises, Plasma Energy Processes, Inc. (“PEPI”), Zawtech
International, and Company CEO
The following table summarizes amounts owed to the respective related parties at December 31, 2008, and 2007.
|
Due To Related Parties |
2008 |
2007 |
|
|
|
|
|
Buzzard Bait Transfer Company, Inc |
$917,779 |
$ 917,779 |
|
JAB Enterprises, Inc. |
4,005 |
4,005 |
|
Plasma Energy Processes, Inc. |
46,009 |
46,009 |
|
Company Officer |
31,000 |
31,000 |
|
|
|
|
|
Due To / (From) related parties |
$ 998,793 |
$ 998,793 |
Buzzard Bait Transfer Company, Inc.
Company CEO
|
Due To / (From) Buzzard Bait |
2008 |
2007 |
|
|
|
|
|
Eagle expenses paid |
103,880 |
$ 103,880 |
|
Contract expenses |
813,899 |
813,899 |
|
Total Due to Buzzard Bait |
$917,779 |
917,779 |
|
|
|
|
During 2008 and 2007, no additional shares have been issued to Buzzard Bait in exchange for payment of contracts or expenses.
Eagle Expenses paid by
Buzzard Bait
Buzzard Bait Transfer Co. paid $6,573 on behalf of the Company for expenses incurred during 2007, and $55,394 for expenses incurred during 2008. During 2007, the Company paid cash reimbursements in the amount of $15,000 to Buzzard Bait. No amounts were repaid to Buzzard Bait for expenses incurred during the year ended December 31, 2007. The balance due for Company expenses paid by Buzzard Bait was $118,195 at December 31, 2008.
Buzzard Bait Management
Contract
The Company maintains an
agreement with Buzzard Bait Transfer Co., for the services of Company CEO
Buzzard Bait Note and
Interest Payable
The Company has made no payments in cash or stock for 2007 or 2008.
JAB Enterprises, Inc.
Company CEO
No payment activities were conducted in 2007 or 2008.
Plasma Energy Processes, Inc.
Company CEO
The Company made no payments on the balance due in 2006 or 2007.
Zawtech International, Inc.
Company CEO
Hohle Oil Services Co.
Company CEO
9.
Commitments
and Contingencies
NONE
10.
Income Taxes
The significant components of the Company’s
deferred tax assets are as follows:
|
|
2008
|
2007
|
|
Deferred tax assets: Net
operating loss carryforwards |
$ 11,199,638 |
$11,199,638 |
|
Valuation allowance |
|
|
|
Net deferred tax assets |
$ 11,199,638 |
$11,199,638 |
11.
Stock-Based Compensation
The Company has adopted the disclosure provision for stock-based compensation
of SFAS No. 123R, “Accounting for Stock-Based Compensation” as revised in
December of 2004. The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options, which have no
vesting restrictions and are fully transferable. In addition, option valuation models require
the input of highly subjective assumptions including the expected stock price
volatility. Because the Company’s
employee stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate.
The Company grants stock options to its directors, officers, and
consultants. All options vest immediately upon granting.
12.
Subsequent Events
In June of 2009, Mark Wayne announced his resignation as President. Immediately thereafter, Blair White became the new officer and director. Directors, Gary Hill, Randy Nordloff, Ed Carver, David Lindgren and Mark Wayne resigned as directors.
13.
Going
Concern
The financial statements of the Company have been prepared assuming the Company will continue as a going concern. The Company’s continued existence is dependant upon its ability to resolve its liquidity problems, principally by obtaining an infusion of capital from other sources outside the entity or the management that currently funds its operations. This situation raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.