10QSB 1 form10q-302.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 -------------- Commission File Number: 0-26322 ------- EAGLE BUILDING TECHNOLOGIES, INC. --------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) Nevada 88-0303769 ------------------------ ----------------------- (State of Incorporation) (IRS Employer I.D. No.) 225 N.E. Mizner Boulevard, Suite 502, Boca Raton, FL 33432 ---------------------------------------------------------- (Address of principal executive offices ) (561) 672-4800 ------------------------------------------------ (Issuer's telephone number, including area code) 20283 Powerline Road, Suite 213, Boca Raton, Florida 33498 ---------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report) Check whether the Issuer: (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS There were 7,794,771 shares of Common Stock, $.001 par value, issued and outstanding at March 31, 2002. EAGLE BUILDING TECHNOLOGIES, INC. INDEX PART I. CONSOLIDATED FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets - March 31, 2002 (Unaudited) and December 31, 2001 Consolidated Statements of Operations - Three months ended March 31, 2002 and 2001 (Unaudited). Consolidated Statements of Cash Flows - Three months ended March 31, 2002 and 2001 (Unaudited). Notes to Consolidated Financial Statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security-Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES -2- EAGLE BUILDING TECHNOLOGIES, INC. PART 1 - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements --------------------------------- -3- EAGLE BUILDING TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS ASSETS
March 31, December 31, 2002 2001 --------- ------------ (Unaudited) CURRENT ASSETS: Cash $ 487,273 $ 174,686 Accounts Receivable, net 570,357 758,365 Inventories 1,815,090 1,525,131 Prepaid expenses 25,152 25,152 ----------- ----------- TOTAL CURRENT ASSETS 2,897,872 2,483,334 ----------- ----------- PROPERTY AND EQUIPMENT, net 3,038,525 2,946,754 ----------- ----------- OTHER ASSETS - Deferred development costs 2,787,239 2,629,139 Investment in unconsolidated subsidiary 386,820 386,820 Intangible assets, net 7,359,163 7,430,350 ----------- ----------- TOTAL OTHER ASSETS 10,533,222 10,446,309 ----------- ----------- TOTAL ASSETS $16,469,619 $15,876,397 =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable and accrued expenses $ 5,433,610 $ 6,686,911 Notes payable 8,983,846 5,364,008 Deposits 934,716 550,485 ----------- ----------- TOTAL CURRENT LIABILITIES 15,352,172 12,601,404 ----------- ----------- LONG TERM LIABILITIES 5,363,588 6,352,849 ----------- ----------- REDEEMABLE COMMON STOCK, 155,834 shares issued and outstanding 1,168,748 1,168,748 ----------- ----------- SHAREHOLDERS' DEFICIT: Common Stock, $.001 par value 11,666,666 shares authorized 7,638,937 and 7,015,271 shares issued and outstanding at March 31, 2002 and December 31, 2001 7,639 7,015 Additional paid in capital 36,618,157 31,399,870 Accumulated deficit (42,040,685) (35,653,489) ----------- ----------- TOTAL STOCKHOLDERS' DEFICIT (5,414,889) (4,246,604) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $16,469,619 $15,876,397 =========== ===========
See accompanying notes to consolidated financial statements. -4- EAGLE BUILDING TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, March 31, 2002 2001 ----------- ----------- SALES $ 311,561 $ 611,144 COSTS OF SALES 189,099 484,944 ----------- ----------- GROSS PROFIT 122,462 126,200 ----------- ----------- SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 6,001,269 1,506,264 ----------- ----------- LOSS FROM OPERATIONS (5,878,807) (1,380,064) ----------- ----------- OTHER EXPENSES: Interest expense (508,389) (22,389) ----------- ----------- NET LOSS $(6,387,196) $(1,402,453) =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - Basic 7,650,000 4,490,000 - Diluted 7,650,000 4,490,000 NET LOSS PER COMMON SHARE - Basic (.83) (.31) ----------- ----------- - Diluted $ (.83) $ (.31) =========== ===========
See accompanying notes to consolidated financial statements. -5- EAGLE BUILDING TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, March 31, 2002 2001 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(6,387,196) $(1,402,453) Adjustments to reconcile net loss to net cash used in operating activities: Amortization 71,187 110,655 Stock issued for services and interest 4,232,730 580,212 Depreciation 50,440 22,247 Changes in operating assets and liabilities: Advances - 35,514 Accounts receivable 188,008 50,725 Inventories (289,959) (97,147) Prepaid expenses - (5,200) Deposits 384,231 729,232 Accounts payable and accrued expenses (1,253,301) (2,311,745) ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (3,003,860) (2,287,960) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in other assets (158,100) 100,000 Investment in subsidiaries (net of cash acquired) - (34,000) Purchase of property, plant and equipment (142,211) (246,906) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (300,311) (180,906) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash overdraft - (439) Net advances from officer - 11,500 Net proceeds from note payable 3,624,172 216,912 Payments on note payable (993,595) - Proceeds from issuance of stock 986,181 2,375,000 ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 3,616,758 2,602,973 ----------- ----------- NET INCREASE IN CASH 312,587 134,107 CASH AT BEGINNING OF PERIOD 174,686 - ----------- ----------- CASH AT END OF PERIOD $ 487,273 $ 134,107 ========== ===========
See accompanying notes to consolidated financial statements. -6- EAGLE BUILDING TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATMENTS MARCH 31, 2002 NOTE 1 - BASIS OF PRESENTATION --------------------- The accompanying interim consolidated financial statements of Eagle Building Technologies, Inc. are unaudited, but in the opinion of management reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results for such periods. The results of operations for any interim period are not necessarily indicative of the results for the respective full year. These condensed financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's annual report on Form 10-KSB for the year ended December 31, 2001 as filed with the Securities and Exchange Commission. NOTE 2 - STOCKHOLDERS' EQUITY -------------------- Changes in Stockholders' Equity - The following represents the changes in stockholders' equity from January 1, 2002 through March 31, 2002:
Additional Common Paid In Shares Amount Capital --------- -------- ----------- Balance - Jan. 1, 2002 7,015,271 $ 7,015 $31,399,870 Common stock sold for cash 110,333 110 986,071 Issuance of Common Stock for services and interest 513,333 514 4,232,216 ---------- ------- ----------- Balance - March 31, 2002 7,638,937 $ 7,639 $36,618,157 ========== ======= ===========
NOTE 3 - WEIGHTED AVERAGE SHARES ----------------------- Loss per common share is computed using the weighted average number of common shares outstanding. Common equivalent shares consist of the companies stock options and warrants and are considered to be anti-dilutive common stock equivalents, determined by using the treasury stock method. -7- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS The analysis of the Company's financial condition, liquidity, capital resources and results of operations should be viewed in conjunction with the accompanying financial statements including the notes thereto. Financial Condition At March 31, 2002, the Company had total assets of $16,469,619, as compared to total assets of $15,876,397 at December 31, 2001; and total liabilities[1] of $20,715,760 at March 31, 2002, as compared to total liabilities of $18,954,253 at December 31, 2001; and stockholders' deficit at March 31, 2002 of $(5,414,889), as compared to $(4,246,604) at December 31, 2001. Liquidity and Capital Resources As of March 31, 2002, the Company's cash totaled $487,273 as compared to $174,686 at December 31, 2001. Net cash used in operations was $3,003,860 for the quarter ended March 31, 2002, compared to $2,287,960 in the same quarter ended March 31, 2001. The Company has no present additional commitment that is likely to result in its liquidity increasing or decreasing in any significant way. In addition, the Company knows of no trend, additional demand, event or uncertainty that will result in, or that are reasonably likely to result in the Company's liquidity increasing or decreasing in any material way. Results of Operations Sales for the three months ended March 31, 2002 were $311,561 compared with sales of $611,144 in the quarter ended March 31, 2001. The Company recorded a net loss of $6,387,196 for the quarter ended March 31, 2002, compared to a net loss of $1,402,453 for the quarter ended March 31, 2001. Included in the loss for the quarter ended March 31, 2002 were expenses of $4,232,730 recorded as a result of the issuance of 513,333 shares of the Company's common stock for services and interest. ----------------------------- [1] As a result of the Company's investigation in connection with the restatement of its 2000 and 2001 financials, the Company believes that there may be third parties to whom Anthony D'Amato, the Company's former Chairman and CEO, has obligated, or made representations purporting to obligate, the Company, or to issue equity in the Company without the knowledge or authorization of the Company's Board of Directors. The Company will continue to investigate and determine the validity of any such third party claims on a case by case basis. At the time of this filing, the Company cannot determine the financial impact, if any, to the Company as a result of Mr. D'Amato's actions. -8- FORWARD LOOKING STATEMENTS Statements made in this Management's Discussion and Analysis and elsewhere in this Annual Report that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future contain forward looking statements. Such forward looking statements include, without limitation, statements regarding the Company's planned capital expenditure requirements, cash and working capital requirements, the Company's expectations regarding the adequacy of current financing arrangements, product demand and market growth, other statements regarding future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. It should be noted that the Company's actual results could differ materially from those contained in such forward looking statements mentioned above due to adverse changes in any number of factors that affect the Company's business including, without limitation, risks associated with investing in and the marketing of IMSI's Wall System, risks concerning the protection of IMSI's patents, reliance upon distributors, regulatory risks, risks of expansion, product liability and other risks described herein. -9- PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS See information contained in Item 3 - Legal Proceedings in the Company's Form 10-KSB for the year ended December 31, 2001 filed on August 20, 2002. Item 2. CHANGE IN SECURITIES Not Applicable Item 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable Item 5. OTHER INFORMATION See information contained in Item 9 - Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act in the Company's Form 10-KSB for the year ended December 31, 2001 filed on August 20, 2002. In March, 2002, the Board of Directors of the Company approved the formation of an Executive Committee to negotiate a settlement with the SEC as well as address issues arising out of the civil actions involving the events at issue in the SEC action; investigate and initiate legal proceedings against parties involved in the events arising out of the SEC action; and to negotiate the terms and conditions of financing for the Company (subject to final Board approval). Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) There are no exhibits required to be filed for the period covered by this Report. (b) (1) On or about January 22, 2002, the Company filed a Report on Form 8-K announcing the appointment of Dan H. Curlee as Chief Operating Officer and Ron G. Lakey as Treasurer and Chief Financial Officer. (2) On or about February 14, 2002, the Company filed a Report on Form 8-K announcing that the Company had contacted the Securities and Exchange Commission and has requested that trading in the Company's common stock be suspended because the Company believes that its financial statements will have to be restated for at least the past two (2) years. -10- (3) On or about March 1, 2002, the Company filed a Report on Form 8-K announcing the following: (a) Eagle Building Technologies, Inc. ("EGBT") has consented to the entry of a preliminary injunction lawsuit brought against it by the Securities and Exchange Commission ("SEC") in the U.S. District Court for the District of Columbia. The Complaint alleges violations of certain provisions of the Securities Exchange Act of 1934 and certain rules and regulations thereunder, resulting from the company's annual and quarterly reports filed for the periods from December 31, 2000 to September 30, 2001 and certain press releases issued during the fall of 2001. (b) On February 14, 2002 the SEC entered an order directing private investigation and designating officers to take testimony in connection with the company's foreign operations and certain post- September 11th security measures marketed by EGBT, including an airport security system, mail sterilization technology and money laundering detection software. The Company has been cooperating with the SEC in its investigation. (c) Effective February 27, 2002, EGBT's President, Chief Executive Officer, and Chairman of the Board of Directors, Anthony M. Damato, resigned his officer and board positions. In addition, on February 18, 2002, EGBT's outside auditors, Tanner & Co., withdrew their report on the December 31, 2000 financial statements and any assurances rendered associated with the financial statements filed in 2000 and 2001. (d) EGBT has recently discovered that its earnings from operations in India for the years 2000-2001 were intentionally fabricated by Mr. Damato. Preliminary indications are that no earnings from such operations existed. In addition, it appears that certain press releases issued by EGBT in the fall of 2001 regarding post-September 11th security measures marketed by EGBT may have been false and misleading. "The company is taking appropriate steps to address these issues and will take whatever future action is necessary based on the results of a comprehensive investigation," according to EGBT Board member Meyer Berman. (e) EGBT has retained the law firm of Fulbright & Jaworski L.L.P., which has engaged the services of Deloitte & Touche LLP to conduct an investigation of business practices and financial accounting controls and identify opportunities for improvement in EGBT's accounting practices. -12- (f) EGBT is currently in discussions with potential investors to provide additional financing for the company. (4) On or about March 18, 2002, the Company filed a Report on Form 8-K announcing the following changes to the make-up of its board of directors: Charles Gargano, Robert Kornahrens and Ralph Thomson have resigned and Howard Ash and Bruce P. Mauldin have been added to the board. Mr. Ash is the Chairman of Claridge Management and a former Chief Financial Officer of Ives Motors Corporation and Chief Operating Officer of BioCard Corporation. Mr. Mauldin is the President and Chief Executive Officer of Texas Airways, Inc., a Texas holding company and consulting group. EGBT also announced that its board of directors has made the following appointments: board member Meyer Berman has been named Acting Chairman of the Board, board member and Chief Operating Officer Dan Curlee has been named to the additional position of President, and board member and Secretary Don Pollock has been named to the additional position of Treasurer. In addition, Ron Lakey has resigned as Chief Financial Officer. Finally, EGBT announced that it is proceeding with the development of residential housing in Puerto Rico using the IMSI building system. -12- SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EAGLE BUILDING TECHNOLOGIES, INC. August 29, 2002 By:/S/Dan Curlee ------------------------------ Dan Curlee, President and CEO CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERS PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the accompanying quarterly Report on Form 10-QSB of Eagle Building Technologies, Inc. for the period ended March 31, 2002, Dan Curlee, President and Chief Executive Officer, and Meyer Berman, Acting Chief Financial Officer and and Director of Eagle Building Technologies, Inc. hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that: (a) such quarterly Report on Form 10-QSB for the period ended March 31, 2002, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (b) the information contained in such quarterly Report on Form 10-QSB for the period ended March 31, 2002, fairly presents, in all material respects, the financial condition and results of operations of Eagle Building Technologies, Inc. EAGLE BUILDING TECHNOLOGIES, INC. Dated: August 29, 2002 By:/s/Dan Curlee -------------------------------- Dan Curlee, President and CEO Dated: August 29, 2002 By:/s/Meyer Berman -------------------------------- Chairman, Acting Chief Financial Officer and Director -13-