DARDADOG told me to post this tonight because his computer is down!
Itec Environmental Group, Inc (formerly Beechport Capital Corp.), incorporated in March 2000, develops and commercializes technologies that are economically and environmentally sound. The Company has developed a cleaning system utilizing liquid carbon dioxide for cleaning recyclable plastic, oil and pesticide containers called the ECO2 Environmental System. Itec has one wholly owned subsidiary, ECO2 Environmental Systems (collectively referred to as The Company or Itec). ECO2 Environmental Systems, Inc. only activities to date have been the application and receipt of the trademark ECO2.
The ECO2 System consists of a washing chamber, storage tank, distilling unit, compressor, refrigeration unit, pumps and compressors. Each system can process between 500 and 1,000 pounds of plastic per hour depending on the model purchased. Used oil containers, the one-quart size sold to consumers, were the first focus of the Company's use of this technology. However, additional scientific testing from third parties indicates that the technology may be profitably employed to recycle all plastics regardless of the contaminant. This statement refers to the end result of the tests being equal to or exceeding the normal results using water. The companies that provided this test data are Analytical Services Group located in Santa Clara, California and BSK Analytical Laboratories located in Fresno, California.
As of December 2002, the Company had arranged with Cool Clean Technologies, Inc. a company engaged in the utilization of CO2 technology, to manufacture the ECO2 Environmental System. During December 2002, Cool Clean has manufactured four ECO2 Systems at its facility in Burnsville, Minnesota. The four prototype systems are referred to as Generation One systems. In addition, Cool Clean has manufactured a Generation Two system in Europe and Itec delivered the Gen 2 to an Italian customer in January 2003. The Company has relocated two of the Gen 1's systems to Oakdale, California and has established a recycling facility where the Gen 1's can be operated to test new procedures, as well as demonstrate the process for prospective purchasers. While Cool Clean has produced all of Itec's systems to date there are other manufacturers who are capable of manufacturing this type of system using the technology and systems under the control of Itec.
Income Statement Get Income Statement for:
View: Annual Data | Quarterly Data All numbers in thousands
PERIOD ENDING 30-Jun-04 31-Mar-04 31-Dec-03 30-Sep-03
Total Revenue - 2 13 -
Cost of Revenue - - 9 -
Gross Profit - 2 4 -
Research Development 12 - - -
Selling General and Administrative 399 260 950 265
Non Recurring - - - -
Others 16 16 20 12
Total Operating Expenses - - - -
Operating Income or Loss (428) (274) (966) (277)
Income from Continuing Operations
Total Other Income/Expenses Net 32 (1) (0) -
Earnings Before Interest And Taxes (395) (275) (966) (277)
Interest Expense 137 65 8 9
Income Before Tax (532) (340) (974) (286)
Income Tax Expense - - 4 -
Minority Interest - - - -
Net Income From Continuing Ops (532) (340) (978) (286)
Discontinued Operations - - - -
Extraordinary Items - - - -
Effect Of Accounting Changes - - - -
Other Items - - - -
Net Income (532) (340) (978) (286)
Preferred Stock And Other Adjustments - - - -
Net Income Applicable To Common Shares ($532) ($340) ($978)
Insider Transactions Get Insider Transactions for:
NET SHARE PURCHASE ACTIVITY
Insider Purchases - Last 6 Months
Purchases N/A N/A
Sales 640,000 2
Net Shares Purchased
(Sold) (640,000) 2
Total Insider Shares Held 20.80M N/A
% Net Shares Purchased
(Sold) (3.0%) N/A
Net Institutional Purchases - Prior Qtr to Latest Qtr
Net Shares Purchased (Sold) N/A
% Change in Institutional Shares Held N/A
Itec Environmental Group, Inc. Receives Approval of a $2,000,000 Low Interest Loan from the California Integrated Waste Management Board's Recycle Market Development Zone Loan Program
Tuesday September 7, 7:00 am ET
OAKDALE, Calif.--(BUSINESS WIRE)--Sept. 7, 2004--Itec Environmental Group, Inc. (OTCBB:ITCV - News) today announced that it received approval for a $2,000,000 low-interest loan from the California Integrated Waste Management Board (CIWMB) through the Recycle Market Development Zone Loan (RMDZ) Program. The loan was approved at the August 17, 2004, monthly meeting of the CIWMB at the California EPA headquarters in Sacramento, California.
"We worked with the CIWMB for some time on this project. We are extremely pleased with the Board's approval of the loan and consider the fact that this loan was approved after a prior $256,000 research grant from the CIWMB to develop the ECO2(TM) Environmental System to be an exciting development. We believe this loan will enable Itec to build the first of what we hope to be many plants in the USA," stated Gary M. De Laurentiis, President of Itec Environmental Group, Inc.
"Over the past 18 months we have been testing our Eco2 System technology which uses a environmental friendly co-solvent and CO2 to clean post-consumer plastics, instead of water, to remove dirt, labels, glue and contaminates from the containers from plastics. We've been focusing on recovering very high quality food grade flake from recyclable plastic containers that existing systems either avoid or must ship overseas. The test results proved that this state of the art Eco2 System will produce a finished, odor free product for 30% less than other systems. The fact that the Eco2 System uses absolutely no water, and discharges nothing into the environment, is of great significance when one considers that this is an industry that exists to reduce damage to the environment, not simply substitute one source of pollution with another," added De Laurentiis.
In March 2004, Itec entered into a five-year lease with a five-year option on a 51,394 sq ft steel frame building in a heavy industrial complex building in Riverbank, California. The lease includes an additional 3,500 sq ft of office space. All necessary infrastructures, including a rail siding, are in place.
The Company expects to start ordering equipment for the plant in mid-September., with installation of the equipment taking approximately four months. The Company is making every effort to ensure testing of the Eco2 System will commence in December 2004. At full capacity, the Company believes the plant will produce approximately 6,000 pounds per hour of post-consumer PET beverage containers and HDPE used oil containers and employ approximately 48 production personnel. We believe the plant will reach capacity early in its second year of operation. Expected revenues for the plant are approximately $15,000,000 per year.
About the Company
Itec Environmental Group offers many solutions to pressing environmental problems associated with recycling of plastics. Municipal, governmental and both public and private companies throughout the world face these problems.
Please visit our web site at http://www.iteceg.com. Any interested parties wishing to be included in Itec Environmental Group's mailing list, please email your request to firstname.lastname@example.org.
ITEM 2. Management's Discussion and Analysis or Plan of Operation
We use patented technology and proprietary equipment to design and sell worldwide oil and agricultural chemical container recycling equipment and related systems. Itec's initial marketing of the technology is concentrated in California and Italy.
We license environmental technology using a carbon dioxide cleaning process from Honeywell International, Inc. This new environmental technology, the System, is believed by management to be the only pollution reduction and recycling system on the market today that allows for the 100% recycling of plastic motor oil containers and the residual oil left inside each container. By using the carbon dioxide cleaning process, the Company can focus on environmental protection and environmental safety by creating no chemical waste disposal in the oil recycling and plastic recycling process.
We had revenue of $0 & $1,750 for the three and six months ended June 30, 2004 compared with $450,250 & $455,250 for the three & six months period ended June 30, 2003. All the revenues for 2003 consist of sales made to Italian customer.
Management has been pursuing a matching funds loan from the California Integrated Waste Management Board in the amount $2,000,000 for the purchase of equipment to allow the expansion of the plastic recycling operations. To that end, the management entered into a lease on a new facility in Riverbank, California and began moving its Oakdale plant to the new Riverbank plant. As a result, the Company's income producing operations have ceased for the short term. It is anticipated that the award of this loan from the State of California together with committed matching funds from Cornell Capital will result in the complete funding of the expanded and more efficient operations at the new Riverbank plant.
There were no cost of goods sold for the three and six months ended June 30, 2004 as compared with $201,200 for the same period in 2003. No cost of goods sold is a direct result of the no sales in 2004. The components that make up the cost of goods sold include the auxiliary parts, labor and purchased equipment. These sales were for granulated oil bottles and territory fees respectively and have no cost of goods components.
Operating expenses for the three and six months period ended June 30, 2004 were $427,586 & $703,446 increased by $41,161 & $85,206 from the same period in 2003. The increase of $85,206 is mainly attributable to increase of $52,226 in payroll, $64,916 in legal fees for corporate matter and litigation , $ 8,990 in rent as Company acquired a new plant facility in 2004, $11,761 in depreciation & amortization and which is offset by decrease of $20,344 in plant expenses and $ 32,343 in miscellaneous as compared with six months period ended June 30, 2003. In 2004, Company incurred fees in association with debt placement and developing a plan to raise additional debt capital.
Depreciation and amortization expense increased 0.61% & 57% to $16,231 & $32,436 for the three and six months ended June 30, 2004 compared to $16,133 & $20,675 for the same period in 2003. The increase is due to purchases of new plant and office equipment in the remainder of 2003 and to property and equipment being placed in service during 2003 which was purchased in earlier years.
The Company recorded net interest expense of $137,136 & $202,240 for the three and six months ended June 30, 2004 for an increase of $132,912 and $158,187 for the comparable same period in 2003. The increase is attributed mainly to the amortization of loan origination fees of $164,214 associated with the new loan acquired in 2004 and accrual of 8% interest of $24,000 on MTI loan acquired in second half of 2003 offset by decrease in Glenwood Marketing interest accrual and interest stock discount element in issuances of stock for services received. For three and six month period ending June 30, 2004 there were no accruals of interest expense associated with Glenwood Marketing Associates, Inc. disputed note payable in the amount of $1,100,000. Our position is that we are no longer obligated under the terms of this note, and this matter is currently being litigated.
Our net losses increased 276% & 113% for the three and six months ended June 30, 2004 to $532,371 & $872,385 compared with $141,599 & $410,467 for the three and six months ended June 30, 2003. The increase is due to increases in legal and professional fees and interest expense and decrease in revenues.
At June 30, 2004 we have available approximately $7,823,801 and $500,125 in net operating loss carry-forwards from prior years and current year to date respectively available to offset future federal and state income taxes, respectively, which expire through 2021. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carry-forwards. A change of greater than 50% of the Company ownership could significantly reduce the availability of the tax credits. At December 31, 2003 we have provided a valuation allowance to reduce its net deferred tax asset to zero. The amount of deferred tax asset considered realizable, however, can be revised in the near term based upon future operating conditions during the carry-forwards period.
Liquidity and Capital Resources
Historically, our working capital needs have been satisfied primarily through private placement of our securities and other debt instruments, such as short and long-term notes with certain investors. We reasonably expect to continue to do so in the future, but cannot guarantee that such financing activities will be sufficient to fund our current and future projects and our ability to meet our cash and working capital needs.
At June 30, 2004, we had a working capital deficit of $3,178,266 compared to a working capital deficit of $2,624,051 at December 31, 2003, a net increase of $554,215 in working capital deficit. The 21% increase in our working capital deficit is primarily attributed to increase of $380,214 notes payable, $201,360 in accounts payable and accrued liabilities offset by $28,352 increase in accounts receivable.
Company has acquired new loan of $690,000 from Cornell Capital Partners, LP comprising of $500,000 cash and $190,000 as compensation debenture issued for loan origination fees. The agreement executed on February 24, & May 3, 2004, provides for putting 100 million shares of our Common Stock in escrow with the law firm of Butler Gonzales LLP. The outstanding balance as of June 30, 2004 consists of $275,000 of promissory note and $160,000 on the compensation debenture issued.
As of June 30, 2004, we had total assets of $878,655 and a total shareholder's holder's deficit of $3,596,495 compared with total assets of $775,116 and total stockholder's deficit of $3,123,604 at December 31, 2003. Total assets increased due to the increase in receivables, deposits and prepaid expenses. Total shareholders' deficit increased by 15% for the period ended June 30, 2004 due to the Company's additions of $872,385 net loss to accumulated deficit offset by $297,002 increase in paid in capital in 2004 as a result of issuing common stock for services and debt conversion.
For the six months ended June 30, 2004, cash used by operating activities increased to $500,125 from cash flows provided from operating activities of $372,062 for the comparable period ended June 30, 2003. This increase of $872,187 is attributed to the expansion in our development activities and operating expenses in 2004 which is reflected by an increase in net loss of the six months period of $872,385, plus the following : 1) increase in non cash operating expenses and revenue $29,436, amortization of loan fees of $164,214 , increase in shares issued for services and compensation $118,494, with an increase in accounts payable and accrued liabilities of $201,361 offset by increase in accounts receivable, prepaid expenses and other $141,245.
For the six months ended June 30, 2004, we realized $500,000 in aggregate proceeds from notes payables. For the comparable period in 2003, we had a reduction in notes payable of $368,768 and realized proceeds from the sale of common stock in the amount of $88,540.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements that have or are likely to have a material current or future effect on the Company's financial condition, or changes in financial condition, liquidity or capital resources or expenditures.
We have experienced cash flow shortages due to operating losses primarily attributable to development, marketing, administrative and other costs associated with our business. Cash flows from operations have not been sufficient to meet our obligations. Therefore, we have had to raise funds through several financing sources and transactions. At least until we reach breakeven volume in sales and/or acquire the capability to manufacture and sell our products profitably, or acquire other lines of business that will enable us to breakeven, we will continue to rely on cash from external financing sources. While we anticipate being able to utilize our current financing arrangements with Cornell Capital during the next 12 months as described in our prior SEC filings, there can be no assurance that these funds will be available or available in a timely manner.
Over the next 12 months, we intend to continue marketing our ECO2TM Environmental System on a world wide basis and open a plastic recycling plant in Stanislaus County, California.
In 2000 and 2001 we received funds from Italian investors who are also business owners or partners in companies that have signed purchase orders for equipment being sold by Itec. During 2003, $368,768 of the notes payable have been reclassified from debt to deferred revenue. An additional $200,917 may be reclassified from deferred revenue to revenue in 2004. The balance of $245,546 may be reclassified to revenue during 2005. However, no assurances can be given in this regard, to future activity.
The note holders are also customers of Itec to purchase ECO2 systems who have signed purchase orders. Knowing that the research and development schedule could last many months or years, Itec suggested that they instead receive a note receivable from Itec at a rate of 5% per annum until Itec was prepared to deliver their order for an ECO2 system. So instead of simply placing their deposits for systems in a deferred revenue account, Itec is showing this as a note payable. During 2003, Itec started its deliveries; these various notes are being converted to deferred revenue as the customers system moves through the assembly process. Then upon deliver and acceptance of the ECO2 system in Italy, Itec will then recognize the revenue from the sale.
Concurrently in the United States, we plan to both sell the ECO2 Environmental System and in California operate a full scale recycling plant. We have signed a two year lease on a 6,900 sq ft building and have purchased or leased all equipment necessary for the plastic recycling test plant in California. The recycling pilot plant opened for operations in June 2003 and is located in Oakdale, CA. with two full time employees being hired for this operation.
We currently have contacts in place for all needed raw product.
We continue to market 3 different sizes of Granulators to Cities, Counties and private businesses throughout California.
In March 2004 Itec completed a lease for a larger building to install a full production recycling operation in Stanislaus County, California. It is a five year lease with a five year option. It has a sliding scale rent structure starting at $4,000 per month in month 5 and reaching $18,370 in month 10, with CPI increases on an annual basis. This lease would be for a 50,000 sq ft steel frame building in a heavy industrial complex, and it would include approximately 3,500 sq ft of office space. All infrastructure including rail sidings are in place. Installation of equipment will take three months with the first testing of systems in June 2004. After completing the testing of the system, the start-up operational phase with take an additional two months. Employment would ramp up with the new recycling plant starting with four new employees, then adding an additional 18 employees. Itec will utilize both buildings, continuing to use the current location in Oakdale as our corporate offices and as a testing and research facility.
In addition to general administrative expenses, payroll and benefits, and legal and audit expenses, our cash needs for the next twelve months to implement portions of our business plan will require at least the following: Sales and marketing - approximately no less than $445,000 to fund both the European office and our US activities, brochures and trade show meetings, advertising and promotions. Research and development - approximately no less than $380,000 comprised of continuing research and testing in the use of bio-solvents and their effect on the cleaning process, testing of all samples of plastic for residue after the CO2 process, developing additional suppliers and manufactures of the ECO2 system and related equipment. Capital projects - approximately no less than $700,000 to start up the full scale recycling/processing plant in California.
Strategic Alliance Agreements
Itec continues to engage in discussions for the purpose of entering into manufacturing, technology and sales alliances. Such discussions are ongoing.
While the Company has not signed any definitive agreements, the Company is also actively seeking acquisitions or business opportunities to, among other things, increase revenues and improve stockholder value, which businesses or lines of business may or may not relate to the current core business of the Company.
Significant Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to reserves and intangible assets. Management bases its estimates and judgments on historical experiences and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of the Company's financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources, primarily allowance for doubtful accounts recovery of intangible assets. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in our Annual Report on Form l0-KSB for the fiscal year ended December 31, 2003.
Itec filed in June 2003 a SB-2 registration statement with the Securities and Exchange Commission seeking approval to issue up to 260,250,000 shares of its common stock for $5,000,000 of equity with Cornell Capital Partners, LP. On February 12, 2004 Itec received notice ordering declared effective that registration statement.
In addition to historical information, this Quarterly Report on Form 10-QSB contains forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section entitled "Management's Discussion and Analysis of Financial Position and Results of Operations--Risk Factors." When used in this report, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this Quarterly Report. We undertake no obligation to publicly release any revisions to the forward-looking statements after the date of this document. You should carefully review the risk factors described in other documents we file from time to time with the Securities and Exchange Commission, including the Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003 and the other Quarterly Reports on Form 10-QSB filed by us in our fiscal year 2004, which runs from January 1, 2004 to December 31, 2004.
The following risk factors should be considered carefully in addition to the other information presented in this report. This report contains forward looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward looking statements. Factors that might cause such differences include, but are not limited to, the following:
IF WE CANNOT OBTAIN ADDITIONAL FUNDS WHEN NEEDED, OR ACHIEVE PROFITABILITY WE MAY NOT BE ABLE TO CONTINUE AS A GOING CONCERN.
Our independent auditors have included an explanatory paragraph in their 2003 audit report referring to our recurring operating losses and a substantial doubt about our ability to continue as a going concern. We have sufficient cash for the next twelve months ended March 31, 2005. However, there can be no assurance that we will be able to raise additional funds or achieve planned sales volumes. If we do not secure additional funding, we will be unable to conduct all of our product development efforts as planned, and we may need to cease operations or sell assets. In addition, the existence of the explanatory paragraph in the audit report may in and of itself cause our stock price to decline as certain investors may be restricted or precluded from investing in companies that have received this notice in an audit report.
Our management has implemented plans designed to reduce our cash requirements through reductions in operating expenditures and reductions in development activities should collaborative partners or additional funding not be secured. However, there can be no assurance that we will be able to successfully implement these plans or that we will be able to do so without significantly harming our business, financial condition or results of operations.
WE DO NOT HAVE A LONG OPERATING HISTORY, WHICH MAKES IT DIFFICULT FOR YOU TO EVALUATE OUR BUSINESS.
Because limited historical information is available on our revenue trends and operations, it will be difficult for you to evaluate our business. Our prospects must be considered in light of the substantial risks, expenses, uncertainties and difficulties encountered by any emerging technology.
WE HAVE A HISTORY OF LOSSES.
We have never been profitable, and we have had operating losses since our inception. To date, we have engaged primarily in research and development efforts. The further development and commercialization of our products will require substantial development, regulatory, sales and marketing, manufacturing and other expenditures. We have only generated limited revenues from product sales. Our accumulated deficit was about $8.1 million at March 31, 2004.
IF WE CANNOT OBTAIN ADDITIONAL FUNDS WHEN NEEDED, WE WILL NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN.
We will require substantial additional capital to develop our products, beginning and scaling up manufacturing, and marketing our products. We have historically funded a significant portion of our activities through stock issuance. We are seeking additional equity investment through various sources. If we are not able to secure additional equity investment or lines of credit it may seriously limit our ability to execute our business plan.
Key Statistics Get Key Statistics for:
Data provided by Reuters, except where noted.
Market Cap (intraday): 553.61K
Enterprise Value (3-Oct-04)³: 3.08M
Trailing P/E (ttm, intraday): N/A
Forward P/E (fye 31-Dec-05)¹: N/A
PEG Ratio (5 yr expected)¹: N/A
Price/Sales (ttm): 32.44
Price/Book (mrq): N/A
Enterprise Value/Revenue (ttm)³: 192.44
Enterprise Value/EBITDA (ttm)³: N/A
Fiscal Year Ends: 31-Dec
Most Recent Quarter (mrq): 30-Jun-04
Profit Margin (ttm): N/A
Operating Margin (ttm): N/A
Return on Assets (ttm): -151.15%
Return on Equity (ttm): N/A
Revenue (ttm): 16.00K
Revenue Per Share (ttm): 0
Revenue Growth (lfy)³: 1848.60%
Gross Profit (ttm)²: 258.02K
EBITDA (ttm): -1.89M
Net Income Avl to Common (ttm): -2.26M
Diluted EPS (ttm): -0.027
Earnings Growth (lfy)³: N/A
Total Cash (mrq): N/A
Total Cash Per Share (mrq): 0
Total Debt (mrq)²: 2.56M
Total Debt/Equity (mrq): N/A
Current Ratio (mrq): 0.1
Book Value Per Share (mrq): -0.021
Cash Flow Statement
From Operations (ttm)³: -972.90K
Free Cashflow (ttm)³: N/A
Stock Price History
52-Week Change: -91.43%
52-Week Change (relative to S&P500): -92.20%
52-Week High (13-Apr-04): 0.12
52-Week Low (29-Sep-04): 0.0015
50-Day Moving Average: N/A
200-Day Moving Average: 0.03
Average Volume (3 month): 4,026,545
Average Volume (10 day): 14,821,000
Shares Outstanding: 173.00M
% Held by Insiders: 12.02%
% Held by Institutions: 0.00%
Shares Short : N/A
Daily Volume : N/A
Short Ratio : N/A
Short % of Float : N/A
Shares Short (prior month): N/A
Dividends & Splits
Annual Dividend: N/A
Dividend Yield: 0.00%
Dividend Date: 26-Aug-99
Ex-Dividend Date: 27-Aug-99
Last Split Factor (new per old)²: 27:20
Last Split Date: 27-Aug-99